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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-08 · 147 added, 119 removed, 377 unchanged (41% of the section changed)

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

The following discussion and analysis of financial condition and results of operations of Blue Bird Corporation (the "Company," "Blue Bird," "we," "our," or "us") should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of and for the three and six months ended March 30, 2024 and April 1, 2023 and related notes appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q ("Report").

The following discussion and analysis of financial condition and results of operations of Blue Bird Corporation (the "Company," "Blue Bird," "we," "our," or "us") should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of and for the three and nine months ended June 29, 2024 and July 1, 2023 and related notes appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q ("Report").

Our actual results may not be indicative of future performance.

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As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different than those expressed or implied by these forward-looking statements.

Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in the reports we file with the Securities and Exchange Commission (“SEC”), specifically the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s fiscal 2023 Form 10-K, filed with the SEC on December 11, 2023.

Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in the reports we file with the Securities and Exchange Commission (“SEC”), specifically the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s fiscal year 2023 Form 10-K, filed with the SEC on December 11, 2023.

Other risks and uncertainties are and will be disclosed in the Company’s prior and future SEC filings.

The following information should be read in conjunction with the financial statements included in the Company’s 2023 Form 10-K, filed with the SEC on December 11, 2023.

The following information should be read in conjunction with the financial statements included in the Company’s fiscal year 2023 Form 10-K, filed with the SEC on December 11, 2023.

Available Information

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Throughout this Report, we refer to the fiscal year ending September 28, 2024 as "fiscal 2024," the fiscal year ended September 30, 2023 as "fiscal 2023," the fiscal year ended October 1, 2022 as "fiscal 2022," the fiscal year ended October 2, 2021 as “fiscal 2021” and the fiscal year ended October 3, 2020 as "fiscal 2020." There will be or were 52 weeks in fiscal 2024, fiscal 2023 and fiscal 2022.

The second quarters of fiscal 2024 and fiscal 2023 both included 13 weeks.

The six month periods in fiscal 2024 and 2023 both included 26 weeks.

The third quarters of fiscal 2024 and fiscal 2023 both included 13 weeks.

The nine month periods in fiscal 2024 and 2023 both included 39 weeks.

Impacts of COVID-19 and Subsequent Supply Chain Constraints on Our Business

As discussed in detail in the fiscal 2023 Form 10-K filed with the SEC on December 11, 2023, the novel coronavirus known as "COVID-19" materially affected demand for new buses and replacement/maintenance parts during the second half of fiscal 2020 and first half of fiscal 2021, significantly impacting our business and operations.

Although demand for school buses strengthened

substantially during the second half of fiscal 2021, the Company, and automotive industry as a whole, began experiencing significant supply chain constraints around this same period of time.

first half of fiscal 2021, significantly impacting our business and operations.

Although demand for school buses strengthened substantially during the second half of fiscal 2021, the Company, and automotive industry as a whole, began experiencing significant supply chain constraints around this same period of time.

Additionally, the already challenged global supply chain for automotive parts that began in fiscal 2021 was further impacted, including continuing escalating inventory purchase costs, by additional stress resulting from Russia’s invasion of Ukraine in February 2022 (see further discussion below).

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While the gross margin on bus sales during the second quarter of fiscal 2023 lagged the historical gross margin reported prior to the COVID-19 pandemic, it returned to more normal historical levels during the latter half of fiscal 2023.

Supply chain disruptions continued into the first half of fiscal 2024 as there were still occasional shortages of certain critical components as well as ongoing increases in raw materials costs, both of which impacted our business and operations by limiting the number of school buses that we could produce and sell as well as increasing the costs to manufacture buses.

Supply chain disruptions continued into the first nine months of fiscal 2024 as there were still occasional shortages of certain critical components as well as ongoing increases in raw materials costs, both of which impacted our business and operations by limiting the number of school buses that we could produce and sell as well as increasing the costs to manufacture buses.

Nonetheless, the lessons learned, and resulting actions taken, by management over the past three fiscal years allowed the Company to better navigate these supply chain challenges and consistently produce buses to fulfill sales orders.

Ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses kept pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin during the first half of fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic.

New bus orders during fiscal 2023 and continuing into fiscal 2024 remained robust, primarily due to a combination of (i) pent-up demand resulting from the cumulative effect of the COVID-19 pandemic when many school systems conducted virtual learning and (ii) the challenged global supply chain for automotive parts that hindered the school bus industry's ability to produce and sell buses that began during the latter half of fiscal 2021 and continued through the second quarter of fiscal 2024.

Accordingly, the Company's backlog remained strong at approximately 4,600 units and 5,900 units as of September 30, 2023 and March 30, 2024 despite it selling over 8,500 units during fiscal 2023, the majority of which were included in the backlog that existed as of October 1, 2022, and almost 4,400 units in the first half of fiscal 2024.

Ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses kept pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin during the first nine months of fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic.

Accordingly, the Company's backlog remained strong at approximately 4,600 units and 5,200 units as of September 30, 2023 and June 29, 2024, respectively, despite it selling over 8,500 units during fiscal 2023, the majority of which were included in the backlog that existed as of October 1, 2022, and over 6,500 units in the first nine months of fiscal 2024.

In general, management believes that supply chain disruptions could continue in future periods and could materially impact our results if we are unable to i) obtain parts and supplies in sufficient quantities to meet our production needs and/or ii) pass along rising costs to our customers.

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On February 24, 2022, Russian military forces launched a large-scale invasion of Ukraine.

While the Company has no assets or customers in either of these countries, this military conflict has had a significant negative impact on the Company’s operations, cash flows and results beginning in fiscal 2022 and continuing into fiscal 2024, primarily in an indirect manner since the Company does not sell to customers located in, or source goods directly from, either country.

While the Company has no assets or customers in either of these countries, this military conflict has had a significant negative impact on the Company’s operations, cash

flows and results beginning in fiscal 2022 and continuing into fiscal 2024, primarily in an indirect manner since the Company does not sell to customers located in, or source goods directly from, either country.

Specifically, Ukraine has historically been a large exporter of ferroalloy materials used in the manufacture of steel and the disruption in the supply of these minerals has resulted in significant volatility in the price of steel.

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The Company’s accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in the Company’s fiscal 2023 Form 10-K, filed with the SEC on December 11, 2023, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates,” which description is incorporated herein by reference.

Our senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies during the six months ended March 30, 2024.

Recent Accounting Pronouncements

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As discussed previously above, supply chain disruptions developing subsequent to the COVID-19 pandemic and Russia's invasion of Ukraine have significantly increased our inventory purchase costs, including freight costs incurred to expedite receipt of critical components, reflected in cost of goods sold during the latter half of fiscal 2021, all of fiscal 2022 and continuing, to a lesser extent, into fiscal 2023 and fiscal 2024.

In response, beginning in July 2021, the Company has announced several sales price increases that apply to new sales orders and partially applied to backlog orders that were both intended to mitigate the impact of rising purchase costs on our operations and results.

In response, beginning in July 2021, the Company announced several sales price increases that applied to new sales orders and partially applied to backlog orders that were both intended to mitigate the impact of rising purchase costs on our operations and results.

Most of these price increases only began to marginally impact sales and gross profit in the latter half of fiscal 2022.

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However, they began to have a more significant, positive impact on sales and gross profit during the remainder of fiscal 2023, as the Company fulfilled sales orders (i) from the backlog existing as of the end of fiscal 2022 that originated more recently (i.e., during the latter months of fiscal 2022) and (ii) that were taken during fiscal 2023, both of which contained most or all of the cumulative sales prices increases that have been announced.

These cumulative price increases also continued to have a significant, positive impact on sales and gross profit during the first half of fiscal 2024.

These cumulative price increases also continued to have a significant, positive impact on sales and gross profit during the first nine months of fiscal 2024.

Factors Affecting Our Expenses and Other Items

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GAAP ("non-GAAP"):

“Adjusted EBITDA;” “Adjusted EBITDA Margin;” and “Free Cash Flow.” Adjusted EBITDA and Free Cash Flow are financial metrics that are utilized by management and the board of directors to determine (a) the annual cash bonus payouts, if any, to be made to certain employees based upon the terms of the Company’s Management Incentive Plan, and (b) whether the performance criteria have been met for the vesting of certain equity awards granted annually to certain members of management based upon the terms of the Company’s Omnibus Equity Incentive Plan.

“Adjusted EBITDA;” “Adjusted EBITDA Margin;” and “Free Cash Flow.” Adjusted EBITDA and Free Cash Flow are financial metrics that are utilized by management and the board of directors, as and when applicable, to determine (a) the annual cash bonus payouts, if any, to be made to certain employees based upon the terms of the Company’s Management Incentive Plan, and (b) whether the performance criteria have been met for the vesting of certain equity awards granted annually to certain members of management based upon the terms of the Company’s Omnibus Equity Incentive Plan.

Additionally, consolidated EBITDA, which is an adjusted EBITDA metric defined by our Credit Agreement (defined below) that could differ from Adjusted EBITDA discussed above as the adjustments to the calculations are not uniform, is used to determine the Company's ongoing compliance with several financial covenant requirements, including being utilized in the denominator of the calculation of the Total Net Leverage Ratio ("TNLR"), which is also utilized in determining the interest rate we pay on borrowings under our Credit Agreement (defined below).

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Management evaluates the segments based primarily upon revenues and gross profit.

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

Consolidated Results of Operations for the Three Months Ended June 29, 2024 and July 1, 2023:

Three Months Ended

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

(in thousands of dollars) June 29, 2024 July 1, 2023

$ 333,367 $ 294,284

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Adjusted EBITDA margin

14.5 % 10.1 %

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

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Net Sales by Segment

March 30, 2024 April 1, 2023

June 29, 2024 July 1, 2023

$ 308,037 $ 270,282

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$ 69,353 $ 45,750

Net sales were $345.9 million for the second quarter of fiscal 2024, an increase of $46.1 million, or 15.4%, compared to $299.8 million for the second quarter of fiscal 2023.

The increase in net sales is primarily due to product and mix changes, as well as pricing actions taken by management in response to increased inventory purchase costs, all of which were partially offset by a small decrease in unit bookings.

Bus sales increased $44.5 million, or 16.3%, reflecting an 18.8% increase in average sales price per unit that was partially offset by a 2.2% decrease in units booked.

In the second quarter of fiscal 2024, 2,254 units were booked compared to 2,304 units booked for the same period in fiscal 2023.

The small decrease in units sold was primarily due to product mix changes as well as a slight increase in supply chain constraints impacting the Company's ability to produce and deliver buses due to shortages of critical components during the second quarter of 2024 relative to the second quarter of fiscal 2023.

The increase in unit price for the second quarter of fiscal 2024 compared to the same period in fiscal 2023 reflects pricing actions taken by management as well as product and customer mix changes.

Parts sales increased $1.6 million, or 6.1%, for the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023.

Net sales were $333.4 million for the third quarter of fiscal 2024, an increase of $39.1 million, or 13.3%, compared to $294.3 million for the third quarter of fiscal 2023.

The increase in net sales is primarily due to product and mix changes, pricing actions taken by management in response to increased inventory purchase costs and a small increase in unit bookings.

Bus sales increased $37.8 million, or 14.0%, reflecting an 13.2% increase in average sales price per unit and a 0.7% increase in units booked.

In the third quarter of fiscal 2024, 2,151 units were booked compared to 2,137 units booked for the same period in fiscal 2023.

The small increase in units sold was primarily due to customer and product mix changes, although both quarters were negatively impacted by supply chain constraints that limited the Company's ability to produce and deliver buses due to shortages of critical components.

The increase in unit price for the third quarter of fiscal 2024 compared to the same period in fiscal 2023 reflects pricing actions taken by management as well as product and customer mix changes.

Parts sales increased $1.3 million, or 5.5%, for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023.

This increase is primarily attributed to price increases, driven by ongoing inflationary pressures, as well as higher fulfillment volumes and slight variations due to product and channel mix.

Cost of goods sold .

Total cost of goods sold was $282.3 million for the second quarter of fiscal 2024, an increase of $18.1 million, or 6.9%, compared to $264.2 million for the second quarter of fiscal 2023.

As a percentage of net sales, total cost of goods sold improved from 88.1% to 81.6%, primarily due to the pricing actions discussed above taking effect.

Bus segment cost of goods sold increased $18.0 million, or 7.2%, for the second quarter of fiscal 2024 compared to the same period in fiscal 2023.

The increase was primarily driven by increased inventory costs, as the average cost of goods sold per unit for the second quarter of fiscal 2024 was 9.6% higher compared to the second quarter of fiscal 2023, primarily due to increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures and b) ongoing supply chain disruptions that resulted in higher purchase costs for components.

The increase in inventory costs was partially offset by a 2.2% decrease in units booked in the second quarter of fiscal 2024 compared to the same period in fiscal 2023.

The $0.1 million, or 0.8%, increase in parts segment cost of goods sold for the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023 was primarily due to increased purchased parts costs, driven by ongoing inflationary pressures and supply chain disruptions, as well as slight variations due to product and channel mix.

Total cost of goods sold was $264.0 million for the third quarter of fiscal 2024, an increase of $15.5 million, or 6.2%, compared to $248.5 million for the third quarter of fiscal 2023.

As a percentage of net sales, total cost of goods sold improved from 84.5% to 79.2%, primarily due to the pricing actions discussed above.

Bus segment cost of goods sold increased $15.4 million, or 6.5%, for the third quarter of fiscal 2024 compared to the same period in fiscal 2023.

The increase was primarily driven by increased inventory costs, as the average cost of goods sold per unit for the third quarter of fiscal 2024 was 5.8% higher compared to the third quarter of fiscal 2023, primarily due to product and mix changes as well as increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures and b) ongoing supply chain disruptions that resulted in higher purchase costs for components.

The increase also partially resulted from the 0.7% increase in units booked in the third quarter of fiscal 2024 compared to the same period in fiscal 2023.

The $0.1 million, or 0.8%, increase in parts segment cost of goods sold for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 was primarily due to increased purchased parts costs, driven by ongoing inflationary pressures and supply chain disruptions, as well as slight variations due to product and channel mix.

Operating profit .

Operating profit was $36.1 million for the second quarter of fiscal 2024, an increase of $23.6 million, compared to operating profit of $12.4 million for the second quarter of fiscal 2023.

Operating profit was $39.7 million for the third quarter of fiscal 2024, an increase of $20.3 million, compared to operating profit of $19.4 million for the third quarter of fiscal 2023.

Profitability was primarily impacted by an increase of $23.6 million in gross profit as outlined in the revenue and cost of goods sold discussions above.

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Interest expense .

Interest expense was $2.8 million for the second quarter of fiscal 2024, a decrease of $2.4 million, or 45.8%, compared to $5.2 million for the second quarter of fiscal 2023.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 10.5% at April 1, 2023 to 7.2% at March 30, 2024, as well as lower outstanding borrowings in the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023.

Interest expense was $2.1 million for the third quarter of fiscal 2024, a decrease of $2.4 million, or 53.3%, compared to $4.5 million for the third quarter of fiscal 2023.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 11.1% at July 1, 2023 to 7.2% at June 29, 2024, as well as lower outstanding borrowings in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023.

Other expense, net.

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

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

The February Offering was conducted pursuant to a prospectus supplement, dated February 15, 2024, to the prospectus, dated December 22, 2021, included in the Company’s registration statement on Form S-3 (File No.

Other expense, net was $2.7 million for the third quarter of fiscal 2024, a decrease of $3.7 million, or 57.5%, compared to $6.4 million of other expense, net for the same period in fiscal 2023.

On May 23, 2024, eligible members of the United Steelworkers Union (“USW”) voted to ratify a three-year collective bargaining agreement (“CBA”) with Blue Bird Body Company ("BBBC"), a wholly-owned subsidiary of Blue Bird Corporation.

Among other items, the CBA required the payment of a $750 signing bonus to the approximate 1,500 covered production workers in our Fort Valley and Perry, Georgia facilities as well as a lump-sum payment to certain employees who were not eligible for the approximate 12%, on average, year one wage increase because their current hourly wage rate exceeded the rate required by the terms of the CBA.

During the third quarter of fiscal 2024, the Company paid the above amounts to those employees covered by the CBA as well as similar amounts to a small number of hourly employees not covered by the CBA so that their total compensation is competitive with that of unionized employees performing comparable job functions.

These payments totaled $2.7 million for the three months ended June 29, 2024 and were recorded in other expense, net because such compensation is not reflective of wages paid for services provided by the direct and indirect employees who support our operating activities and is expensed within cost of goods sold.

There was no similar expense recorded during the three months ended July 1, 2023.

Additionally, on June 7, 2023, the Company entered into an underwriting agreement with BofA Securities, Inc.

and Barclays Capital Inc., as representatives of the several underwriters and American Securities LLC, Coliseum Capital Partners, L.P., and Blackwell Partners LLC – Series A ("2023 Selling Stockholders"), pursuant to which the 2023 Selling Stockholders agreed to sell 5,175,000 shares of common stock, including the sale of 675,000 shares pursuant to the underwriters’ exercise of their over-allotment option, at a purchase price of $20.00 per share (“2023 Offering”).

The 2023 Offering was conducted pursuant to a prospectus supplement, dated June 7, 2023, to the prospectus, dated December 22, 2021, included in the Company’s registration statement on Form S-3 (File No.

333-261858) that was initially filed with the SEC on December 23, 2021.

The February Offering closed on February 21, 2024.

Although the Company did not sell any shares or receive any proceeds from the February Offering, it was required to pay certain expenses in connection with the February Offering that totaled approximately $1.9 million for the three month period ended March 30, 2024, with $0.7 million of similar expense recorded during the three month period ended April 1, 2023.

However, the $0.7 million of expense was included within selling, general and administrative expenses for the three month period ended April 1, 2023, but was subsequently reclassified to other expense, net, during the third quarter of fiscal 2023.

The 2023 Offering closed on June 12, 2023.

Although the Company did not sell any shares or receive any proceeds from the 2023 Offering.

it was required to pay certain expenses in connection with the 2023 Offering that totaled $6.3 million (approximately $0.7 million of which were expensed in the second quarter of fiscal 2023 within selling, general and administrative expenses and reclassified to other expense, net during the third quarter of fiscal 2023), with no similar expense recorded during the same period of fiscal 2024.

Income taxes .

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

The effective tax rate for the three months ended March 30, 2024 was 25.5% and differed from the statutory federal income tax rate of 21%.

Income tax expense was $9.9 million for the third quarter of fiscal 2024 compared to $1.9 million for the same period in fiscal 2023.

The effective tax rate for the three months ended June 29, 2024 was 27.7% and differed from the statutory federal income tax rate of 21%.

The increase was primarily due to the impacts from state taxes and certain permanent items on the federal rate, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the quarter.

The effective tax rate for the three months ended April 1, 2023 was 20.1%, which aligned with the statutory federal income tax rate of 21% and was comprised of normal tax rate items, including impacts from state taxes and federal and state tax credits (net of valuation allowances), with discrete period items having a nominal impact on the effective rate during the quarter.

The effective tax rate for the three months ended July 1, 2023 was 21.6%, which aligned with the statutory federal income tax rate of 21% and was comprised of normal tax rate items, including impacts from state taxes, federal and state tax credits (net of valuation allowances) and permanent differences, which were partially offset by the impact of discrete period items during the quarter.

Adjusted EBITDA .

Adjusted EBITDA was $45.8 million, or 13.2% of net sales, for the second quarter of fiscal 2024, an increase of $24.7 million, or 117.0%, compared to $21.1 million, or 7.0% of net sales, for the second quarter of fiscal 2023.

The increase is primarily the result of the $18.9 million increase in net income as a result of the factors discussed above as well as the $6.9 million corresponding increase in income tax expense.

Adjusted EBITDA was $48.2 million, or 14.5% of net sales, for the third quarter of fiscal 2024, an increase of $18.6 million, or 62.6%, compared to $29.7 million, or 10.1% of net sales, for the third quarter of fiscal 2023.

The increase is primarily the result of the $19.4 million increase in net income as a result of the factors discussed above.

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

Three Months Ended

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

(in thousands of dollars) June 29, 2024 July 1, 2023

Net income $ 28,711 $ 9,358

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Stockholder transaction costs — 5,509

Other (1) 281

Subtotal (Adjusted EBITDA as previously presented) $ 46,394 $ 28,015

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Adjusted EBITDA margin (percentage of net sales)

14.5 % 10.1 %

(1) Includes $0.1 million for both fiscal periods, representing interest expense on operating lease liabilities, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2) Includes $0.3 million and $0.4 million for the three months ended March 30, 2024 and April 1, 2023, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

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

Six Months Ended

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

(2) Includes $0.3 million and $0.5 million for the three months ended June 29, 2024 and July 1, 2023, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

Consolidated Results of Operations for the Nine Months Ended June 29, 2024 and July 1, 2023:

Nine Months Ended

(in thousands of dollars) June 29, 2024 July 1, 2023

$ 996,942 $ 829,830

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Other expense, net (5,918) (6,999)

Loss on debt modification (1,558) (537)

Income (loss) before income taxes $ 64,976 $ (7,422)

Income tax (expense) benefit (16,707) 1,592

Loss on debt refinancing or modification

(1,558) (537)

Income before income taxes $ 100,858 $ 1,318

Income tax expense (26,645) (292)

Equity in net income of non-consolidated affiliate 6,671 4,168

Net income (loss) $ 52,173 $ (4,164)

Net income $ 80,884 $ 5,194

Other financial data:

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

(in thousands of dollars) Six Months Ended

Net Sales by Segment March 30, 2024 April 1, 2023

(in thousands of dollars) Nine Months Ended

Net Sales by Segment June 29, 2024 July 1, 2023

$ 919,433 $ 757,003

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$ 196,550 $ 88,856

Net sales were $663.6 million for the six months ended March 30, 2024, an increase of $128.0 million, or 23.9%, compared to $535.5 million for the six months ended April 1, 2023.

Net sales were $996.9 million for the nine months ended June 29, 2024, an increase of $167.1 million, or 20.1%, compared to $829.8 million for the nine months ended July 1, 2023.

The increase in net sales is primarily due to increased unit bookings, product and mix changes, as well as pricing actions taken by management in response to increased inventory purchase costs.

Bus sales increased $162.4 million, or 21.5%, reflecting a 2.1% increase in units booked and a 18.9% increase in average sales price per unit.

4,383 units booked in the six months ended March 30, 2024 compared with 4,261 units booked during the same period in fiscal 2023.

The increase in units sold was primarily due to slight improvements in supply chain constraints impacting the Company's ability to produce and deliver buses due to shortages of critical components during the first half of fiscal 2024 relative to the same period in fiscal 2023.

The increase in unit price for the first half of fiscal 2024 compared to the same period in fiscal 2023 reflects pricing actions taken by management as well as product and customer mix changes.

Parts sales increased $3.4 million, or 6.9%, for the six months ended March 30, 2024 compared to the six months ended April 1, 2023.

6,534 units booked in the nine months ended June 29, 2024 compared with 6,398 units booked during the same period in fiscal 2023.

The increase in units sold was primarily due to slight improvements in supply chain constraints impacting the Company's ability to produce and deliver buses due to shortages of critical components during the first nine months of fiscal 2024 relative to the same period in fiscal 2023.

The increase in unit price for the first nine months of fiscal 2024 compared to the same period in fiscal 2023 reflects pricing actions taken by management as well as product and customer mix changes.

Parts sales increased $4.7 million, or 6.4%, for the nine months ended June 29, 2024 compared to the nine months ended July 1, 2023.

This increase is primarily attributed to price increases, driven by ongoing inflationary pressures, as well as higher fulfillment volumes and slight variations due to product and channel mix.

Cost of goods sold .

Total cost of goods sold was $536.4 million for the six months ended March 30, 2024, an increase of $43.9 million, or 8.9%, compared to $492.4 million for the six months ended April 1, 2023.

Total cost of goods sold was $800.4 million for the nine months ended June 29, 2024, an increase of $59.4 million, or 8.0%, compared to $741.0 million for the nine months ended July 1, 2023.

As a percentage of net sales, total cost of goods sold improved from 89.3% to 80.3%.

Bus segment cost of goods sold increased $43.2 million, or 9.2%, for the six months ended March 30, 2024 compared to the six months ended April 1, 2023.

The increase was partially attributable to the 2.9% increase in units booked in the six months ended March 30, 2024 compared to the same period in fiscal 2023.

Also contributing was increased inventory costs, as the average cost of goods sold per unit for the six months ended March 30, 2024 was 6.2% higher compared to the six months ended April 1, 2023, primarily due to increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures and b) ongoing supply chain disruptions that resulted in higher purchase costs for components.

The $0.8 million, or 3.1%, increase in parts segment cost of goods sold for the six months ended March 30, 2024 compared to the six months ended April 1, 2023 was primarily due to increased purchased parts costs, driven by ongoing inflationary pressures and supply chain disruptions, as well as slight variations due to product and channel mix.

Bus segment cost of goods sold increased $58.5 million, or 8.3%, for the nine months ended June 29, 2024 compared to the nine months ended July 1, 2023.

The increase was partially attributable to the 2.1% increase in units booked in the nine months ended June 29, 2024 compared to the same period in fiscal 2023.

Also contributing was increased inventory costs, as the average cost of goods sold per unit for the nine months ended June 29, 2024 was 6.1% higher compared to the nine months ended July 1, 2023, primarily due to product and mix changes as well as increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures and b) ongoing supply chain disruptions that resulted in higher purchase costs for components.

The $0.9 million, or 2.3%, increase in parts segment cost of goods sold for the nine months ended June 29, 2024 compared to the nine months ended July 1, 2023 was primarily due to increased purchased parts costs, driven by ongoing inflationary pressures and supply chain disruptions, as well as slight variations due to product and channel mix.

Operating profit .

Operating profit was $74.0 million for the six months ended March 30, 2024, an increase of $71.0 million compared to operating profit of $3.1 million for the six months ended April 1, 2023.

Operating profit was $113.8 million for the nine months ended June 29, 2024, an increase of $91.3 million compared to operating profit of $22.5 million for the nine months ended July 1, 2023.

Profitability was primarily impacted by an increase of $107.7 million in gross profit as outlined in the revenue and cost of goods sold discussions.

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Interest expense .

Interest expense was $6.4 million for the six months ended March 30, 2024, a decrease of $2.9 million, or 31.4%, compared to $9.4 million for the six months ended April 1, 2023.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 10.5% at April 1, 2023 to 7.2% at March 30, 2024, as well as lower outstanding borrowings in the first half of fiscal 2024 compared to the first half of fiscal 2023.

Interest expense was $8.6 million for the nine months ended June 29, 2024, a decrease of $5.3 million, or 38.5%, compared to $13.9 million for the nine months ended July 1, 2023.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 11.1% at July 1, 2023 to 7.2% at June 29, 2024, as well as lower outstanding borrowings in the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023.

Other expense, net.

Other expense, net, was $3.2 million for the six months ended March 30, 2024, an increase of $2.6 million, or 451.7%, compared to $0.6 million for the six months ended April 1, 2023.

We recorded $0.1 million of net periodic pension expense during the six months ended March 30, 2024 when compared with $0.4 million recorded during the six months ended April 1, 2023.

Other expense, net was $5.9 million for the nine months ended June 29, 2024, a decrease of $1.1 million, or 15.4%, compared to $7.0 million for the nine months ended July 1, 2023.

We recorded $0.1 million of net periodic pension expense during the nine months ended June 29, 2024 when compared with $0.5 million recorded during the nine months ended July 1, 2023.

On May 23, 2024, eligible members of the USW voted to ratify a three-year CBA with BBBC.

These payments totaled $2.7 million for the nine months ended June 29, 2024 and were recorded in other expense, net because such compensation is not reflective of wages paid for services provided by the direct and indirect employees who support our operating activities and is expensed within cost of goods sold.

There was no similar expense recorded during the nine months ended July 1, 2023.

Additionally, on December 14, 2023, the Company entered into an underwriting agreement with BofA Securities, Inc.

and Barclays Capital Inc., as representatives of the several underwriters and the Selling Stockholder, pursuant to which the Selling Stockholder agreed to sell 2,500,000 shares of common stock at a purchase price of $25.10 per share (“December Offering” and collectively with the February Offering, “Offerings”).

The December Offering was conducted pursuant to a prospectus supplement, dated December 14, 2023, to the prospectus dated December 22, 2021 included in the Company’s registration statement on Form S-3 (File No.

and Barclays Capital Inc., as representatives of the several underwriters and American Securities LLC ("Selling Stockholder"), pursuant to which the Selling Stockholder agreed to sell 2,500,000 shares of common stock at a purchase price of $25.10 per share ("December Offering").

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

The December Offering was conducted pursuant to a prospectus supplement, dated December 14, 2023, and the February Offering was conducted pursuant to a prospectus supplement, dated February 15, 2024, both to the prospectus dated December 22, 2021 included in the Company’s registration statement on Form S-3 (File No.

333-261858) that was initially filed with the SEC on December 23, 2021.

The December Offering closed on December 19, 2023.

Although the Company did not sell any shares or receive any proceeds from the Offerings, it was required to pay certain expenses in connection with the Offerings that totaled approximately $3.2 million for the six month period ended March 30, 2024, with $0.7 million of similar expense recorded during the six month period ended April 1, 2023.

However, the $0.7 million of expense was included within selling, general and administrative expenses for the six month period ended April 1, 2023, but was subsequently reclassified to other expense, net, during the third quarter of fiscal 2023.

The December Offering closed on December 19, 2023 and the February Offering closed on February 21, 2024.

Although the Company did not sell any shares or receive any proceeds from the Offerings, it was required to pay certain expenses in connection with the Offerings that totaled approximately $3.2 million for the nine months ended June 29, 2024, with $6.3 million of similar expense recorded for the nine months ended July 1, 2023.

However, approximately $0.7 million of the $6.3 million of expense recorded for the nine months ended July 1, 2023 was initially recorded within selling, general and administrative expenses during the second quarter of fiscal 2023 and reclassified to other expense, net during the third quarter of fiscal 2023.

Income taxes .

Income tax expense was $16.7 million for the six months ended March 30, 2024 compared to income tax benefit of $1.6 million for the six months ended April 1, 2023.

The effective tax rate for the six months ended March 30, 2024 was 25.7% and differed from the statutory federal income tax rate of 21%.

Income tax expense was $26.6 million for the nine months ended June 29, 2024 compared to $0.3 million for the nine months ended July 1, 2023.

The effective tax rate for the nine months ended June 29, 2024 was 26.4% and differed from the statutory federal income tax rate of 21%.

The effective tax rate for the six months ended April 1, 2023 was 21.4%, which aligned with the statutory federal income tax rate of 21% and is comprised of normal tax rate items, including impacts from state taxes and federal and state tax credits (net of valuation allowances), with discrete period items having a nominal impact on the effective rate during the period.

The effective tax rate for the nine months ended July 1, 2023 was 22.2%, which aligned with the statutory federal income tax rate of 21% and is comprised of normal tax rate items, including impacts from state taxes, federal and state tax credits (net of valuation allowances) and permanent differences, which were partially offset by the impact of discrete period items during the period.

Adjusted EBITDA .

Adjusted EBITDA was $93.4 million, or 14.1% of net sales, for the six months ended March 30, 2024, an increase of $75.8 million, or 431.9%, compared to $17.6 million, or 3.3% of net sales, for the six months ended April 1, 2023.

Adjusted EBITDA was $141.6 million, or 14.2% of net sales, for the nine months ended June 29, 2024, an increase of $94.4 million, or 199.9%, compared to $47.2 million, or 5.7% of net sales, for the nine months ended July 1, 2023.

The increase in Adjusted EBITDA is primarily the result of the $75.7 million increase in net income as a result of the factors discussed above as well as the $26.4 million corresponding increase in income tax expense.

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

Six Months Ended

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

Net income (loss) $ 52,173 $ (4,164)

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

Nine Months Ended

(in thousands of dollars) June 29, 2024 July 1, 2023

Net income $ 80,884 $ 5,194

Interest expense, net (1) 5,729 13,923

Income tax expense (benefit) 16,707 (1,592)

Income tax expense 26,645 292

Depreciation, amortization, and disposals (2) 12,253 13,477

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Adjusted EBITDA margin (percentage of net sales) 14.2 % 5.7 %

(1) Includes $0.2 million for both six month periods, representing interest expense on operating lease liabilities, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2) Includes $0.9 million for both six month periods, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(1) Includes $0.3 million for both nine month periods, representing interest expense on operating lease liabilities, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2) Includes $1.3 million for both nine month periods, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

Liquidity and Capital Resources

The Company’s primary sources of liquidity are cash generated from its operations, available cash and cash equivalents and borrowings under its revolving credit facility.

At March 30, 2024, the Company had $93.1 million of available cash (net of outstanding checks) and $143.3 million of additional borrowings available under the revolving line of credit portion of its credit facility.

The Company’s revolving line of credit is available for working capital requirements, capital expenditures and other general corporate purposes.

At June 29, 2024, the Company had $88.4 million of available cash (net of outstanding checks) and $143.3 million of additional borrowings available under the revolving line of credit portion of its credit facility.

Company’s revolving line of credit is available for working capital requirements, capital expenditures and other general corporate purposes.

Credit Agreement

On November 17, 2023 (the “Closing Date”), Blue Bird Body Company ("Borrower") executed a $250.0 million five-year credit agreement with Bank of Montreal, acting as administrative agent and an issuing bank;

On November 17, 2023 (the “Closing Date”), BBBC ("Borrower") executed a $250.0 million five-year credit agreement with Bank of Montreal, acting as administrative agent and an issuing bank;

several joint lead arranger partners and issuing banks, including Bank of America;

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IV Greater than or equal to 2.25x

Pricing on the Closing Date was set at Level III until receipt of the financial information and related compliance certificate for the first fiscal quarter ending after the Closing Date, with pricing as of March 30, 2024 set at Level I.

Borrower is also required to pay lenders an unused commitment fee of between 0.25% and 0.45% per annum on the undrawn commitments under the Revolving Credit Facility, depending on the TNLR, quarterly in arrears.

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Detailed descriptions of the Amended Credit Agreement are set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the SEC on December 11, 2023.

At March 30, 2024, Borrower and the guarantors under the Credit Agreement were in compliance with all covenants.

At June 29, 2024, Borrower and the guarantors under the Credit Agreement were in compliance with all covenants.

Short-Term and Long-Term Liquidity Requirements

Our ability to make principal and interest payments on borrowings under our Credit Facility\ies and our ability to fund planned capital expenditures will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions.

Our ability to make principal and interest payments on borrowings under our Credit Facilities, as applicable, and our ability to fund planned capital expenditures will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions.

The adverse impacts from ongoing supply chain disruptions materially impacted our operations and results during the second half of fiscal 2021 and all of fiscal 2022 due to higher purchasing costs, including freight costs incurred to expedite receipt of critical components, increased manufacturing inefficiencies and our inability to complete the production of buses to fulfill sales orders.

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Nonetheless, ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses kept pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin during the first half of fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic.

Nonetheless, ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses kept pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin during the first nine months of fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic.

The development and fluidity of ongoing or future supply chain constraints preclude any prediction as to the ultimate severity of the adverse impacts on our business, financial condition, results of operations, and liquidity.

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If we are not able to comply with covenants, we may need to seek amendment for covenant relief or even refinance the debt to a "covenant lite" or "no covenant" structure.

We can offer no

assurance that we would be successful in amending or refinancing the existing debt.

We can offer no assurance that we would be successful in amending or refinancing the existing debt.

An amendment or refinancing of our existing debt could lead to higher interest rates and possible up-front expenses not included in our historical financial statements.

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This has, in fiscal years prior to the COVID-19 pandemic, resulted in our third and fourth fiscal quarters representing our two busiest quarters from a sales and production perspective, the latter ending on the Saturday closest to September 30.

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

Our quarterly results of operations, cash flows, and liquidity have

historically been, and are likely to be in future periods, impacted by seasonal patterns.

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

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The following table sets forth general information derived from our Condensed Consolidated Statements of Cash Flows:

Six Months Ended

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

Nine Months Ended

(in thousands of dollars) June 29, 2024 July 1, 2023

Cash, cash equivalents and restricted cash at beginning of period $ 78,988 $ 10,479

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Total cash provided by operating activities

Cash flows provided by operating activities totaled $54.8 million for the six months ended March 30, 2024, an increase of $10.1 million from the $44.7 million of cash flows provided by operating activities during the six months ended April 1, 2023.

The increase was primarily attributable to a $56.3 million increase in net income and a $3.0 million increase in the dividend received from our unconsolidated Canadian joint venture during the first half of fiscal 2024 when compared with the corresponding period in fiscal 2023.

However, these increases werre partially offset by the effect of net changes in operating assets and liabilities that negatively impacted operating cash flows by $54.1 million during the six months ended March 30, 2024 when compared with the six months ended April 1, 2023.

The primary drivers in this category were unfavorable changes in inventory and accounts payable of $23.9 million and $25.8 million, respectively.

At the end of fiscal 2022 and during the first half of fiscal 2023, inflationary pressures and supply chain disruptions significantly increased our purchase costs for components and freight, which, when coupled with increased production and sales volumes during the first half of fiscal 2023, resulted in a significant increase in the accounts payable balance (a net source of cash) when compared with a small increase in the accounts payable balance during the first half of fiscal 2024 (a net source of cash).

Additionally, we became more efficient at managing supply chain disruptions, and thus building and selling buses, during the the first half of fiscal 2023.

These efficiencies resulted in us consuming more inventory in production, which resulted in a significant decrease in the inventory balance at the end of the second quarter of fiscal 2023 (a net source of cash).

In comparison, we had an increase in the inventory balance at the end of the second quarter of fiscal 2024 (a net use of cash) as we elected to strategically acquire larger quantities of certain components (i) that have longer lead times and could impact our production schedule if not manufactured by our suppliers and delivered to us in a timely manner and (ii) in anticipation of model year changeovers by some of our larger suppliers that are expected to decrease the availability of such inventory later in fiscal 2024.

Cash flows provided by operating activities totaled $55.8 million for the nine months ended June 29, 2024, a decrease of $28.4 million from the $84.1 million of cash flows provided by operating activities during the nine months ended July 1, 2023.

The net decrease primarily resulted from the effect of net changes in operating assets and liabilities that negatively impacted operating cash flows by $111.7 million during the nine months ended June 29, 2024 when compared with the nine months ended July 1, 2023.

The primary drivers in this category were unfavorable changes in accounts receivable;

accounts payable and accrued expenses, pension and other liabilities of $22.5 million, $23.1 million, $37.9 million and $29.1 million, respectively, as follows:

• A shift in our customer mix resulted in increases in the accounts receivable and inventory balances (a net use of cash) at the end of the third quarter of fiscal 2024 when compared with the corresponding period in fiscal 2023.

Specifically, we had a significant increase in fleet orders during fiscal 2024 when compared with fiscal 2023, with the delivery of many of the buses scheduled to occur in the months leading up to the beginning of the school year.

We built many of these units during the third quarter of fiscal 2024, a portion of which were booked in the latter part of the quarter that resulted in an increase in accounts receivable, with the remainder to be booked in the early part of the fourth quarter that resulted in an increase in finished goods inventory, at the end of the third quarter of fiscal 2024 when compared with the corresponding period in fiscal 2023.

In comparison, we became more efficient at managing supply chain disruptions, and thus building and selling buses, during the first nine months of fiscal 2023 when compared with the corresponding period in fiscal 2022.

These efficiencies resulted in us consuming more inventory in production, which resulted in a significant decrease in the inventory balance at the end of the third quarter of fiscal 2023 (a net source of cash).

• At the end of fiscal 2022 and during the first nine months of fiscal 2023, inflationary pressures and supply chain disruptions significantly increased our purchase costs for components and freight, which, when coupled with increased production and sales volumes during the first nine months of fiscal 2023, resulted in a significant increase in the accounts payable balance (a net source of cash).

Although inflationary pressures continued during the first nine months of fiscal 2024, they were smaller when compared with the corresponding period of fiscal 2023.

This factor, when coupled with our production and sales volumes largely stabilizing during the first nine months of fiscal 2024, resulted in a decrease in the accounts payable balance during the first nine months of fiscal 2024 (a net use of cash).

• Our profitability increased significantly during the first nine months of fiscal 2024 when compared with the corresponding period in fiscal 2023.

Because we were able to utilize net operating loss carryforwards generated in fiscal 2021 and fiscal 2022 to offset federal and state income tax obligations relating to the income we generated in the first nine months of fiscal 2023, we made no estimated tax payments during this period.

Because of our significant profitability and due to the fact that we primarily utilized available net operating loss carryforwards during fiscal 2023, we made $18.9 million of estimated federal and state income tax payments during the first nine months of fiscal 2024, resulting in a significant use of cash impacting other current liabilities (which is included within accrued expenses, pension and other liabilities) during this period.

Additionally, as of the end of the third quarter of fiscal 2023, we had received approximately $13.2 million of advanced funds awarded by the U.S.

Environmental Protection Agency in administering the U.S.

Infrastructure Investment and Jobs Act

("IIJA") that were recorded as unearned revenue within other current liabilities (which is included within accrued expenses, pension and other liabilities).

As we built and sold the underlying buses in subsequent quarters, we recognized this amount in revenue and had no corresponding balance as of the end of the third quarter of fiscal 2024, representing a net use of cash when comparing the two periods.

The above decreases were partially offset by a $75.7 million increase in net income and a $3.0 million increase in the dividend received from our unconsolidated Canadian joint venture during the first nine months of fiscal 2024 when compared with the corresponding period in fiscal 2023.

Total cash used in investing activities

Cash flows used in investing activities totaled $5.6 million for the six months ended March 30, 2024 as compared to $3.7 million for the six months ended April 1, 2023.

The $1.9 million increase was primarily due to an increase in spending on fixed assets, as increased profitability in the first half of fiscal 2024 when compared with the same period in fiscal 2023 allowed for more capital spending.

Cash flows used in investing activities totaled $10.1 million for the nine months ended June 29, 2024 as compared to $6.4 million for the nine months ended July 1, 2023.

The $3.7 million increase was primarily due to an increase in spending on fixed assets, as increased profitability in the first nine months of fiscal 2024 when compared with the same period in fiscal 2023 allowed for more capital spending.

During the first half of fiscal 2023, capital spending was reduced to lower than normal amounts in an effort to mitigate the impact of supply chain constraints on our operations, financial results and cash flows.

Total cash used in financing activities

Cash flows used in financing activities totaled $35.0 million for the six months ended March 30, 2024 as compared to $33.4 million for the six months ended April 1, 2023.

The $1.6 million increase between fiscal periods was primarily attributable to a $123.2 million increase in term loan principal repayments, which was partially offset by $100.0 million of proceeds received from term loan borrowings under the Credit Agreement, a $20.0 million net increase in revolving line of credit borrowings and a $1.7 million increase in cash received from stock option exercises.

Cash flows used in financing activities totaled $36.2 million for the nine months ended June 29, 2024 as compared to $37.5 million for the nine months ended July 1, 2023.

The $1.3 million decrease between fiscal periods was primarily attributable to $100.0 million of proceeds received from term loan borrowings under the Credit Agreement, a $20.0 million net increase in revolving line of credit borrowings and a $0.9 million increase in cash received from stock option exercises, which were partially offset by a $119.5 million increase in term loan principal repayments.

Free cash flow

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The following table sets forth the calculation of Free Cash Flow for the periods presented:

Six Months Ended

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

Nine Months Ended

(in thousands of dollars) June 29, 2024 July 1, 2023

Net cash provided by operating activities $ 55,760 $ 84,131

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$ 45,623 $ 77,741

Free Cash Flow for the six months ended March 30, 2024 was $8.2 million higher than for the six months ended April 1, 2023 due to a $10.1 million increase in net cash provided by operating activities that was partially offset by a $1.9 million increase in cash paid for fixed assets, both as discussed above.

Free Cash Flow for the nine months ended June 29, 2024 was $32.1 million lower than for the nine months ended July 1, 2023 due to a $28.4 million decrease in net cash provided by operating activities and a $3.7 million increase in cash paid for fixed assets, both as discussed above.

Off-Balance Sheet Arrangements

We had outstanding letters of credit totaling $6.7 million at March 30, 2024, the majority of which secure our self-insured workers compensation program, the collateral for which is regulated by the State of Georgia.

We had outstanding letters of credit totaling $6.7 million at June 29, 2024, the majority of which secure our self-insured workers compensation program, the collateral for which is regulated by the State of Georgia.

Quantitative and Qualitative Disclosures About Mar ket Risk.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis