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Item 7. Management’s Discussion and Analysis

2024-11-25 compared with 2023-12-11 · 207 added, 385 removed, 383 unchanged (61% 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 the Company should be read in conjunction with the Company’s audited financial statements for the fiscal years ended September 30, 2023, October 1, 2022 and October 2, 2021 and related notes appearing elsewhere in this Report.

The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with the Company’s audited financial statements for the fiscal years ended September 28, 2024, September 30, 2023 and October 1, 2022 and related notes appearing elsewhere in this Report.

Our actual results may not be indicative of future performance.

This discussion

and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those discussed or incorporated by reference in the sections of this Report titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements.

This discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those discussed or incorporated by reference in the sections of this Report titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements.

Certain monetary amounts, percentages and other figures included in this Report have been subjected to rounding adjustments.

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We distinguish ourselves from our principal competitors by dedicating our focus to the design, engineering, manufacture and sale of school buses, and related parts.

As the principal manufacturer of chassis and body production specifically designed for school bus applications in the U.S., Blue Bird is recognized as an industry leader for school bus innovation, safety, product quality/reliability/durability and, during more normal times, efficiency and lower operating costs.

In addition, Blue Bird is the market leader in alternative powered product offerings with its propane, gasoline and electric powered school buses.

In addition, Blue Bird is the market leader in alternative powered product offerings with its propane powered, gasoline powered, and all-electric powered school buses.

Blue Bird sells its buses and parts through an extensive network of U.S.

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government, state governments, and authorized dealers in certain limited foreign countries.

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

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

The pandemic triggered a significant downturn in global commerce as early as February 2020 and the challenging market conditions continued into the early months of calendar year 2021.

Countermeasures taken to address the COVID-19 pandemic included virtual and hybrid schooling in many jurisdictions throughout the U.S.

The uncertainty of when and how schools would open materially affected demand within the Type C and Type D school bus industry in the second half of the Company's fiscal 2020.

While demand for school buses remained suppressed during the first half of fiscal 2021 as a result of the continuing impact of the COVID-19 pandemic, it strengthened substantially during the second half of the fiscal year as COVID-19 vaccines were administered and many jurisdictions began preparing for a return to in-person learning environments for the new school year that began in mid-August to early September 2021.

However, during the second half of fiscal 2021, the Company, and automotive industry as a whole, began experiencing significant supply chain constraints resulting from, among others, labor shortages due to the ‘great resignation;’ the lack of maintenance on, and acquisition of, capital assets during the extended COVID-19 global lockdowns;

Impact of Supply Chain Constraints on Our Business

During the second half of our fiscal year that ended October 3, 2020 ("fiscal 2020") and first half of our fiscal year that ended on October 2, 2021 ("fiscal 2021"), COVID-19 materially affected demand for new buses and replacement/maintenance parts, 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 resulting from, among others, labor shortages due to the ‘great resignation;’ the lack of maintenance on, and acquisition of, capital assets during the extended COVID-19 global lockdowns;

significant increased demand for consumer products containing certain materials required for the production of vehicles, such as microchips, as consumers spent stimulus and other funds on items for their homes;

These supply chain disruptions had a significant adverse impact our operations and results 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 primarily during the latter half of fiscal 2021 and most of fiscal 2022.

Specifically, management estimates that the sale of approximately 2,000 units was deferred from fiscal 2021 into fiscal 2022 as a result of the shortage of critical components that prevented the Company from initiating or completing, as applicable, the production process for certain units that were otherwise scheduled to be delivered to customers during the year.

Including these units, the Company's backlog exceeded 4,200 units as of October 2, 2021.

Although there were pockets of COVID-19 outbreaks in the U.S.

throughout fiscal 2022, most school systems maintained partial or full in-person learning environments for the entirety of the school year.

Accordingly, new bus orders during fiscal 2022 remained extremely robust, primarily due to pent-up demand resulting from the cumulative effect of the COVID-19 pandemic when many school systems conducted virtual learning (i.e., approximately January 2020 through June 2021).

This strong demand, when coupled with an already challenged global supply chain for automotive parts that continued from fiscal 2021 but that 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) and several complete shutdowns in China as a result of widespread COVID-19 outbreaks, resulted in the Company’s order backlog continuing to grow during fiscal 2022, exceeding 5,000 units as of October 1, 2022 (only minimal sales orders were canceled during the fiscal year as a result of continued delays in our production process).

Shortages of key components during the second half of fiscal 2021 and most of fiscal 2022 hindered the Company's ability to complete the production of buses to fulfill sales orders, which had a significant, adverse impact on the Company's revenues during these periods.

The Company also experienced significant increased purchase costs for many of its raw materials as a result of supply chain disruptions over these same periods and continuing, to a lesser extent, into fiscal 2023 that have negatively impacted the gross profit it recognized on sales.

In response, beginning in July 2021 and continuing throughout fiscal 2022, the Company announced a number of

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.

Additionally, during fiscal 2022, the Company began including price escalation provisions when bidding on contracts so that it could consider economic fluctuations between the bid date and the contract date to determine whether increased costs should be passed along to customers.

Most of these price increases were generally not realized in the first half of fiscal 2022 as sales recorded during such quarters related to the backlog of orders that existed prior, and therefore were not subject, to the price increases.

While they began to impact sales and gross profit in the latter half of fiscal 2022, such impact did not offset the significant continued increase in the Company's production costs, resulting in further deterioration of the Company's gross profit during the second half of fiscal 2022 and continuing into the first quarter of fiscal 2023 as it produced and sold the oldest units included in the backlog as of the end of fiscal 2022.

However, they had a 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 and (ii) that were taken during fiscal 2023, both of which contained most or all of the cumulative sales price increases that have been announced since July 2021.

New bus orders during fiscal 2023 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 during the latter half of fiscal 2021 and most of fiscal 2022.

Accordingly, the Company's backlog remained strong at approximately 4,600 units as of September 30, 2023 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.

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).

Towards the end of fiscal 2022 and continuing into fiscal 2023, there were slight improvements in the supply chain's ability to deliver the parts and components necessary to support our production operations, resulting in increased (i) manufacturing efficiencies and (ii) production of buses to fulfill sales orders during fiscal 2023.

However, the higher costs charged by suppliers to procure inventory that continued into fiscal 2023 had a significant adverse impact on our operations and results.

Specifically, such cost increases outpaced the increases in sales prices that we charged for the buses that were sold during the first quarter of fiscal 2023, many of which were included in the backlog of fixed price sales orders originating in fiscal 2021 and the early months of fiscal 2022 that carried forward into fiscal 2023.

During the remainder of fiscal 2023, the buses that were sold were generally included in the backlog of fixed price sales orders originating more recently (i.e., the latter months of fiscal 2022 and in fiscal 2023), with the cumulative increases in sales prices we charged for those buses generally outpacing the higher costs we paid to procure inventory, resulting in gross profit during the quarters.

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 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 profits and gross margins throughout 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 during the latter half of fiscal 2021 and continuing through fiscal 2024.

Accordingly, the Company's backlog remained strong at approximately 4,600 units and 4,800 units as of September 30, 2023 and September 28, 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 9,000 units in 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.

Additionally, although 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.

The COVID-19 pandemic and subsequent supply chain constraints have resulted, and could continue to result, in significant economic disruption and have adversely affected our business.

They could adversely impact our business in fiscal 2024 and perhaps beyond.

Significant uncertainty exists concerning the magnitude of the impact and duration of any future COVID-19 outbreaks and their potential impact on the overall economy, both within the U.S and globally.

Accordingly, the magnitude and duration of any demand reductions, production and supply chain disruptions, and related financial impacts on our business cannot be estimated at this time.

The impacts from the COVID-19 pandemic and subsequent supply chain constraints on the Company's business and operations during the second half of fiscal 2020 and continuing into fiscal 2023 negatively affected our revenues, gross profit, income and cash flows.

We continue to monitor and assess the level of future customer demand, the ability of school boards to maintain normal in-person learning in the foreseeable future, the ability of suppliers to maintain operations and to provide parts and supplies in sufficient quantities to meet our production needs, the ability of our employees to continue to work, and our ability to maintain continuous production.

They have resulted, and could continue to result, in significant economic disruption and have adversely affected our business.

Significant uncertainty exists concerning the magnitude of the impact and duration of ongoing supply chain constraints and their potential impact on the overall economy, both within the U.S and globally.

Accordingly, the magnitude and duration of any production and supply chain disruptions and their related financial impacts on our business cannot be estimated at this time.

The impacts from supply chain constraints on the Company's business and operations beginning during the second half of fiscal 2021 and continuing into fiscal 2024 negatively affected our inventory procurement costs, gross profit, income and cash flows.

We continue to monitor and assess the ability of suppliers to maintain operations and to provide parts and supplies in sufficient quantities to meet our production needs and our ability to maintain continuous production in future periods.

See PART I, Item 1A.

"Risk Factors," of this Report for a discussion of the material risks we believe we face particularly related to the COVID-19 pandemic.

"Risk Factors," of this Report for a discussion of the material risks we believe we face particularly related to supply chain disruptions and related constraints.

Impact of Russia’s Invasion of Ukraine on Our Business

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 during fiscal 2022 and continuing into fiscal 2023, 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 resulted in a significant increase in the price of steel from $1,057 per ton the third week of February 2022 to as high as $1,492 per ton the third week of April 2022 before finally decreasing to an average of $1,078 per ton the last two weeks of June 2022 and continuing to decline to $791 per ton the last week in September 2022.

During fiscal 2023, the decrease in the price of steel continued during the first quarter to $664 per ton the last week in December 2022 but began to increase significantly during the second quarter to $1,152 per ton the last week in March 2023 before slowly decreasing during the third and fourth quarters to $878 and $666 per ton the last weeks in June 2023 and September 2023, respectively (source for all per ton prices:

sheet prices published by the CRU Index every Wednesday that provide price benchmarking in North America for U.S.

Midwest Domestic Hot-Rolled Coil Steel).

While the Company has generally mitigated its direct exposure to steel prices by executing fixed price purchase contracts (generally purchased up to four quarters in advance) for the majority of the significant amount of steel used in the manufacture of school bus bodies, many suppliers from which the Company purchases components containing steel increased the price that they charge the Company to acquire such inventory, primarily on a lagged basis, during the latter half of fiscal 2022 and into

fiscal 2023, as applicable.

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 the second half 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.

These inventory costs impact gross profit when school buses are sold and cash flows when the related invoices are paid.

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and many European countries.

Accordingly, the disruption in the supply of oil has significantly impacted the price of goods refined from oil, such as diesel fuel, which increased from $4.055 per gallon the week ending February 21, 2022 to as high as $5.810 per gallon the week ending June 20, 2022, before decreasing slightly throughout the remainder of our fiscal 2022 to $4.889 per gallon the week ending September 26, 2022 and fluctuating within a range from $5.341 and $3.767 per gallon during fiscal 2023 (source:

U.S Energy Information Administration - Weekly U.S.

No 2 Diesel Retail Prices).

These increases have significantly impacted the Company both as a result of the price that suppliers charge the Company to acquire inventory (since diesel fuel impacts their cost of acquiring the inventory used in producing their goods) and the price that the Company pays for freight to deliver the inventory that it acquires.

Accordingly, the disruption in the supply of oil has significantly impacted the price of goods refined from oil, such as diesel fuel, the price of which has been volatile and has remained high since the latter half of fiscal 2022.

These higher costs significantly impacted the Company both as a result of the price that suppliers charge the Company to acquire inventory (since diesel fuel impacts their cost of acquiring the inventory used in producing their goods) and the price that the Company pays for freight to deliver the inventory that it acquires.

Additionally, such increases are generally implemented with very little lag so that they impact the purchase cost of inventory and cash flows on an almost real-time basis.

Finally, both countries have large quantities of other minerals that impact commodity costs, such as rubber and resin, among others, and the disruption caused by the ongoing military conflict has increased the cost and/or decreased the supply of components containing these materials, further impacting an already challenged global supply chain for automotive parts.

Finally, both countries have large quantities of other minerals that impact commodity costs, such as rubber and resin, among others, and the disruption caused by the ongoing military conflict increased the cost and/or decreased the supply of components containing these materials, further impacting an already challenged global supply chain for automotive parts.

Russia’s invasion of Ukraine has resulted, and is likely to continue to result, in significant economic disruption and has adversely affected our business.

Specifically, it has contributed to higher inventory purchase costs, including freight costs, that negatively impacted the gross profit recognized on sales during the latter part of fiscal 2022 and continuing into fiscal 2023.

Because peace negotiations do not appear to be productive and because Russia has announced its intention to continue military operations in Ukraine in the immediate term, we currently believe that this matter will continue to adversely impact our business into fiscal 2024 and perhaps beyond.

Specifically, it has contributed to higher inventory purchase costs, including freight costs, that negatively impacted the gross profit recognized on sales beginning during the latter part of fiscal 2022 and continuing into fiscal 2024.

Because peace negotiations do not appear to be productive and because Russia has continued to intensify its military operations in Ukraine, we currently believe that this matter will continue to adversely impact our business in future periods.

Significant uncertainty exists concerning the magnitude of the impact and duration of the ongoing military conflict and its impact on the overall economy, both within the U.S.

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• Seasonality.

Historically, our sales have been subject to seasonal variation based on the school calendar with the peak season during our third and fourth fiscal quarters.

Sales during the third and fourth fiscal quarters are typically greater than the first and second fiscal quarters due to the desire of municipalities to have any new buses that they order available to them at the beginning of the new school year.

In the years preceding the 2020 COVID-19 pandemic, our sales were subject to seasonal variation based on the school calendar with the peak season during our third and fourth fiscal quarters.

Sales during the third and fourth fiscal quarters were typically greater than the first and second fiscal quarters due to the desire of municipalities to have any new buses that they ordered available to them at the beginning of the new school year.

With the COVID-19 pandemic impacting the demand for Company products and the impact of the subsequent supply chain constraints hindering the Company's ability to produce and sell buses, seasonality has become unpredictable.

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

As discussed previously above, supply chain disruptions developing subsequent to the COVID-19 pandemic and, more recently, 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, throughout fiscal 2023.

In response, the Company announced a number of 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.

However, they had a 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 price increases that have been announced since July 2021.

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 all of fiscal 2022, and continuing, to a lesser extent, into fiscal 2023 and fiscal 2024.

In response, beginning in July 2021, the Company announced a number of 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.

Specifically, they did not offset the significant continued increase in the Company's production costs, resulting in further deterioration of the Company's gross profit during the second half of fiscal 2022 and continuing into the first quarter of fiscal 2023 as it produced and sold the oldest units included in the backlog as of the end of fiscal 2022.

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 fiscal 2024.

F actors Affecting Our Expenses and Other Items

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Other amounts not associated with operating expenses may also be included in this balance.

• Equity in net income or loss of non-consolidated affiliate .

We include in this line item our 50% share of net income or loss from our investment in Micro Bird, our unconsolidated Canadian joint venture.

• Equity in net income or loss of non-consolidated affiliate(s) .

We include in this line item our 50% share of net income or loss from our investments in Micro Bird and Clean Bus Solutions, our unconsolidated joint ventures.

Key Non-GAAP Financial Measures We Use to Evaluate Our Performance

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"Financial Statements and Supplementary Data" are prepared in conformity with accounting principles generally accepted in the U.S.

This Report also includes the following

financial measures that are not prepared in accordance with U.S.

This Report also includes the following financial measures that are not prepared in accordance with U.S.

GAAP ("non-GAAP"):

“Adjusted EBITDA,” “Adjusted EBITDA Margin,” and “Free Cash Flow.” Adjusted EBITDA and Free Cash Flow are financial metrics that are utilized by management and the Board of Directors to determine (a) the annual cash bonus payouts, if any, to be made to certain members of management 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 Amended 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 TNLR, as and when applicable, which is also utilized in determining the interest rate we pay on borrowings under our Amended Credit Agreement or 2023 Credit Agreement, as applicable (both defined below).

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

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

Accordingly, management views these non-GAAP financial metrics as key for the above purposes and as a useful way to evaluate the performance of our operations as discussed further below.

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(iii) discrete expenses related to major cost cutting and/or operational transformation initiatives.

or (iv) costs directly attributed to the COVID-19 pandemic.

While certain of the charges that are added back in the Adjusted EBITDA calculation, such as transaction related costs and operational transformation and major product redesign initiatives, represent operating expenses that may be recorded in more than one annual period, the significant project or transaction giving rise to such expenses is not considered to be indicative of the Company’s normal operations.

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We define Free Cash Flow as total cash provided by/used in operating activities as adjusted for net cash paid for the acquisition of fixed assets and intangible assets.

We use Free Cash Flow, and ratios based on Free Cash Flow, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it is a more conservative measure of cash flow since purchases

of fixed assets and intangible assets are a necessary component of ongoing operations.

Accordingly, we expect Free Cash Flow to be less than operating cash flows.

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Financial information is reported on the basis that it is used internally by the chief operating decision maker (“CODM”) in evaluating segment performance and deciding how to allocate resources to segments.

The Chief Executive Officer of the Company has been identified as the CODM.

The President and Chief Executive Officer of the Company has been identified as the CODM.

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

Consolidated Results of Operations for the fiscal years ended September 30, 2023 and October 1, 2022:

Consolidated Results of Operations for the fiscal years ended September 28, 2024 and September 30, 2023:

(in thousands) 2024 2023

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Selling, general and administrative expenses 116,825 87,193

Operating profit (loss)

Operating profit

$ 139,331 $ 51,657

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Interest income 4,136 1,004

Other (expense) income, net (8,307) 2,947

Loss on debt modification (537) (632)

Income (loss) before income taxes

Other expense, net (4,394) (8,307)

Loss on debt refinancing or modification

(1,558) (537)

Income tax (expense) benefit (8,953) 11,451

Equity in net income (loss) of non-consolidated affiliate

Income before income taxes

$ 126,936 $ 25,805

Net income (loss)

Income tax expense (33,228) (8,953)

Equity in net income of non-consolidated affiliate(s)

$ 105,547 $ 23,812

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Adjusted EBITDA Margin

7.8 % (1.8) %

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

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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.

Significant supply chain disruptions began limiting the availability of certain critical components primarily beginning towards the end of the third quarter of fiscal 2021 and continuing throughout fiscal 2022.

However, during fiscal 2023, supply chain constraints began to improve slightly, allowing for increased production during fiscal 2023 compared to fiscal 2022.

Bus sales increased $311.1 million, or 43.0%, reflecting an increase in units booked and a 14.6% increase in average sales price per unit.

Bus sales increased $208.3 million, or 20.1%, reflecting a 5.7% increase in units booked and a 13.6% increase in average sales price per unit.

In fiscal 2024, 9,000 units were booked compared to 8,514 units booked for fiscal 2023.

The increase in units sold was primarily due to constraints in the Company's ability to produce and deliver buses due to shortages of critical components in fiscal 2022.

The 14.6% increase in average sales price per unit reflects pricing actions taken by management as well as product and customer mix changes.

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

The increase in average unit sales price reflects pricing actions taken by management as well as product and customer mix changes.

Parts sales increased $6.1 million, or 6.2%, for fiscal 2024 compared to fiscal 2023.

This increase is primarily attributed to pricing actions taken by management to offset increases in purchased parts costs and increased inventory availability as supply chain constraints began to improve during fiscal 2023 relative to fiscal 2022.

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 $1,091.0 million for fiscal 2024, an increase of $97.1 million, or 9.8%, compared to $993.9 million for fiscal 2023.

As a percentage of net sales, total cost of goods sold decreased from 95.4% to 87.7%.

As a percentage of net sales, total cost of goods sold decreased from 87.7% to 81.0%, primarily due to the pricing actions discussed above.

Bus segment cost of goods sold increased $95.5 million, or 10.1%, for fiscal 2024 compared to fiscal 2023.

The increase was primarily driven by the 24.8% increase in units booked during fiscal 2023 compared to fiscal 2022.

Also contributing was increased inventory costs, as the average cost of goods sold per unit for fiscal 2023 was 5.2% higher compared to fiscal 2022, 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 and freight.

The increase was partially attributable to the 5.7% increase in units booked during fiscal 2024 compared to fiscal 2023.

Also contributing was increased inventory costs, as the average cost of goods sold per unit for fiscal 2024 was 4.2% higher compared to 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 $1.6 million, or 3.1%, increase in parts segment cost of goods sold for fiscal 2024 compared to 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 (loss) .

Operating profit was $51.7 million for fiscal 2023, an increase of $92.4 million, or 226.9%, compared to $40.7 million of operating loss for fiscal 2022.

Operating profit .

Operating profit was $139.3 million for fiscal 2024, an increase of $87.7 million, or 169.7%, compared to $51.7 million for fiscal 2023.

Profitability was primarily impacted by an increase of $117.3 million in gross profit, as outlined in the revenue and cost of goods sold discussions above.

The increase in gross profit was partially offset by an increase of $29.6 million in selling, general and administrative expenses, primarily due to an increase in labor costs.

Additionally, selling, general and administrative expenses during the first quarter of fiscal 2023 benefited from actions taken by management to reduce labor costs and certain discretionary spending to mitigate the significant adverse impact of ongoing supply chain constraints on the Company's operations and results.

Interest expense .

Interest expense was $18.0 million for fiscal 2023, an increase of $3.3 million, or 22.7%, compared to $14.7 million for fiscal 2022.

The increase was primarily attributable to an increase in the stated term loan interest rate from 7.9% at October 1, 2022 to 10.0% at September 30, 2023 (which was higher for much of fiscal 2023 due to the spread we pay above the market rate, which is dependent on our TNLR at the end of each fiscal quarter), which was partially offset by lower borrowings during fiscal 2023 when compared with fiscal 2022.

Interest expense was $10.6 million for fiscal 2024, a decrease of $7.4 million, or 41.3%, compared to $18.0 million for fiscal 2023.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 10.0% at September 30, 2023 to 6.9% at September 28, 2024, as well as lower outstanding borrowings during fiscal 2024 when compared with fiscal 2023.

Other expense/income, net.

Other expense, net, was $8.3 million for fiscal 2023, a change of $11.3 million, or 381.9%, compared to $2.9 million of other income, net, in fiscal 2022.

We recorded $0.7 million of net periodic pension expense during fiscal 2023 when compared with $3.0 million of net periodic pension income recorded during the fiscal 2022.

Other expense, net, was $4.4 million for fiscal 2024, a decrease of $3.9 million, or 47.1%, compared to $8.3 million of other expense, net, in fiscal 2023.

We recorded $0.1 million of net periodic pension expense during fiscal 2024 when compared with $0.7 million recorded during fiscal 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.

On September 11, 2023, the Company entered into another underwriting agreement with Barclays Capital, Inc., and the Selling Stockholders, pursuant to which the Selling Stockholders agreed to sell 2,500,000 shares of common stock, at a purchase price of $21.00 per share (collectively, "Offerings").

On September 11, 2023, the Company entered into another underwriting agreement with Barclays Capital, Inc.

and the 2023 Selling Stockholders, pursuant to which the 2023 Selling Stockholders agreed to sell 2,500,000 shares of common stock, at a purchase price of $21.00 per share (collectively, the "2023 Offerings").

The 2023 Offerings were conducted pursuant to prospectus supplements, dated June 7, 2023 and September 11, 2023, respectively, 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.

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

The 2023 Offerings closed on June 12, 2023 and September 14, 2023, respectively.

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, which totaled $7.4 million during fiscal 2023, with no similar expense recorded during fiscal 2022.

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

and Barclays Capital Inc., as representatives of the several underwriters and American Securities LLC ("2024 Selling Stockholder"), pursuant to which the 2024 Selling Stockholder agreed to sell 2,500,000 shares of common stock at a purchase price of $25.10 per share.

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

The 2024 Offerings were conducted pursuant to prospectus supplements, dated December 14, 2023 and February 15, 2024, respectively, to the December 2021 Prospectus.

The 2024 Offerings closed on December 19, 2023 and February 21, 2024, respectively.

Although the Company did not sell any shares or receive any proceeds from the 2023 Offerings or 2024 Offerings, it was required to pay certain expenses in connection with these transactions that totaled approximately $7.4 million and $3.2 million in fiscal 2023 and fiscal 2024, respectively.

Also, on May 23, 2024, eligible members of the USW voted to ratify a three-year CBA with Blue Bird Body Company ("BBBC"), a subsidiary of the Company.

Among other items, the CBA required the payment of a $750 signing bonus to the approximate 1,500 covered 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 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 in fiscal 2024 and were recorded in other (expense) income, net in the Consolidated Statements of Operations 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 fiscal 2023.

Finally, during fiscal 2024, the Company sold certain state emissions credits that it was not projecting to use for approximately $1.5 million, with no similar income recorded during fiscal 2023.

The proceeds from this sale were recorded in other (expense) income, net in the Consolidated Statements of Operations as this transaction is not indicative of our normal revenue generating activities.

Income taxes .

Income tax expense was $9.0 million for fiscal 2023 compared to a benefit of $11.5 million for fiscal 2022.

Income tax expense was $33.2 million for fiscal 2024 and $9.0 million for fiscal 2023.

The effective tax rate for fiscal 2024 differed from the statutory Federal income tax rate of 21.0%.

The increase in the effective tax rate to 34.7% was primarily due to the impacts of state taxes and certain permanent items on the Federal rate

The increase in the effective tax rate to 26.2% was primarily due to the impacts of 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.

The effective tax rate for fiscal 2023 differed from the statutory Federal income tax rate of 21.0%.

The increase in the effective tax rate to 21.6% was primarily due to the impacts of state taxes on the Federal rate.

This increase was partially offset by an increase in the valuation allowance.

The increase in the effective tax rate to 34.7% was primarily due to the impacts of state taxes and certain permanent items on the federal rate.

Adjusted EBITDA .

Adjusted EBITDA was $182.9 million, or 13.6% of net sales, for fiscal 2024, an increase of $95.0 million, or 108.0%, compared to $87.9 million, or 7.8% of net sales, for fiscal 2023.

The increase in Adjusted EBITDA is primarily the result of a $69.6 million increase in net income, as a result of the factors discussed above, the corresponding $20.4 million increase in income tax expense, the $7.4 million in stockholder transaction costs that were incurred in fiscal 2023 with no similar costs incurred in fiscal 2022 and the $5.5 million increase in Micro Bird's total interest expense, net;

income tax expense or benefit;

depreciation expense and amortization expense, which primarily resulted from a $4.2 million increase in income tax expense as a result of Micro Bird reporting net income during fiscal 2023 and a net loss in fiscal 2022.

The following table sets forth a reconciliation of net income (loss) to Adjusted EBITDA for the fiscal years presented (note that the fiscal 2022 column has been recast to include our proportionate share of Micro Bird's interest expense, net;

income tax expense or benefit;

depreciation expense and amortization expense to conform with (i) similar adjustments made relating to the Company's operating results and (ii) the fiscal 2023 presentation included below):

The increase in Adjusted EBITDA is primarily the result of the $81.7 million increase in net income, as a result of the factors discussed above, as well as the corresponding $24.3 million increase in income tax expense.

Among other smaller offsetting items, these increases were partially offset by the $10.5 million decrease in interest expense, net as a result of the factors discussed above.

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

(in thousands) 2024 2023

Net income (loss)

$ 105,547 $ 23,812

Interest expense, net (1)

17,380 14,973

Income tax expense (benefit)

8,953 (11,451)

Income tax expense

Depreciation, amortization, and disposals (2)

1 unchanged sentence

Operational transformation initiatives

Loss on debt modification 537 632

Loss on debt refinancing or modification

Share-based compensation expense 8,609 4,173

Product redesign initiatives

Stockholder transaction costs

Subtotal (Adjusted EBITDA as previously presented)

$ 82,471 $ (14,656)

Micro Bird total interest expense, net;

4 unchanged sentences

Adjusted EBITDA Margin (percentage of net sales)

7.8 % (1.8) %

(1) Includes $0.4 million and $0.3 million for fiscal 2023 and 2022, respectively, 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 Consolidated Statements of Operations.

(1) Includes $0.4 million for both fiscal 2024 and 2023, 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 Consolidated Statements of Operations.

(2) Includes $1.6 million and $1.8 million for fiscal 2024 and 2023, respectively, representing amortization on right-of-use operating lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Consolidated Statements of Operations.

Consolidated Results of Operations for the fiscal years ended October 1, 2022 and October 2, 2021:

Consolidated Results of Operations for the fiscal years ended September 30, 2023 and October 1, 2022:

(in thousands) 2023 2022

4 unchanged sentences

Selling, general and administrative expenses 87,193 77,246

Operating (loss) profit

Operating profit (loss)

$ 51,657 $ (40,700)

1 unchanged sentence

Interest income 1,004 9

Other income, net 2,947 1,776

Loss on debt extinguishment

Loss before income taxes

Other (expense) income, net (8,307) 2,947

Loss on debt modification

Income (loss) before income taxes

$ 25,805 $ (53,051)

Income tax benefit 11,451 1,191

Equity in net (loss) income of non-consolidated affiliate

Income tax (expense) benefit (8,953) 11,451

Equity in net income (loss) of non-consolidated affiliate(s)

6,960 (4,159)

Net income (loss)

$ 23,812 $ (45,759)

Other financial data:

14 unchanged sentences

Net sales were $1,132.8 million for fiscal 2023, an increase of $332.2 million, or 41.5%, compared to $800.6 million for fiscal 2022.

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.

During the first half of fiscal 2021, the COVID-19 pandemic caused many schools to shut down in-person learning, decreasing the demand for buses and related maintenance and replacement parts.

However, by the third quarter of fiscal 2021, many schools began signaling a return to in-person learning by the beginning of the 2021/2022 school year (i.e., August and September 2021), resulting in a significant increase in the demand for buses and a corresponding increase in our net sales during the second half of fiscal 2021.

Although schools generally continued to conduct in-person learning and demand for buses and related parts remained strong as indicated by our sales backlog, significant supply chain disruptions began limiting the availability of certain critical components primarily beginning towards the end of the third quarter of fiscal 2021 and continuing throughout fiscal 2022.

Accordingly, such shortages limited the number of buses the Company could produce and deliver during this time period.

Bus sales increased $98.3 million, or 15.7%, reflecting a small increase in units booked and a 13.3% increase in average sales price per unit resulting from pricing actions taken by management to partially offset increases in inventory purchase costs as well as product and customer mix change.

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.

However, during fiscal 2023, supply chain constraints began to improve slightly, allowing for increased production during fiscal 2023 compared to fiscal 2022.

Bus sales increased $311.1 million, or 43.0%, reflecting a 24.8% increase in units booked and a 14.6% increase in average sales price per unit.

In fiscal 2023, 8,514 units were booked compared to 6,822 units booked for fiscal 2022.

The increase in units sold was primarily due to constraints in the Company's ability to produce and deliver buses due to shortages of critical components in fiscal 2022.

The 14.6% increase in average sales price per unit reflects pricing actions taken by management as well as product and customer mix changes.

Parts sales increased $21.0 million, or 27.3%, for fiscal 2023 compared to fiscal 2022.

This increase is primarily attributed to (a) more schools offering in-person learning during the 2021/2022 school year when compared with the 2020/2021 school year, which increased school bus units in operation and thus increased bus repair and maintenance activities and (b) pricing actions taken by management to offset increases in purchased parts costs.

Cost of goods sold .

Total cost of goods sold was $993.9 million for fiscal 2023, an increase of $229.9 million, or 30.1%, compared to $764.1 million for fiscal 2022.

As a percentage of net sales, total cost of goods sold increased from 89.5% to 95.4%.

As a percentage of net sales, total cost of goods sold decreased from 95.4% to 87.7%.

Bus segment cost of goods sold increased $225.2 million, or 31.3%, for fiscal 2023 compared to fiscal 2022.

The increase was primarily driven by increasing inventory costs as the average cost of goods sold per unit for fiscal 2022 was 22.4% higher compared to fiscal 2021.

This increase was primarily due to increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures, b) supply chain disruptions that resulted in higher purchase costs for components and freight and c) increased manufacturing inefficiencies resulting from the shortage of certain critical components that required more off-line labor to produce buses.

As a result, at October 1, 2022, certain Bus segment inventory had an approximate $8.8 million cumulative cost in excess of net realizable value that was recognized as a loss in fiscal 2022 with no similar activity in fiscal 2021.

The $8.6 million, or 23.2%, increase in parts segment cost of goods sold for fiscal 2022 compared to fiscal 2021 largely aligned with the increase in sales volume noted above, with slight variations due to product and channel mix.

Operating (loss) profit .

Operating loss was $40.7 million for fiscal 2022, a decrease of $47.2 million, or 724.0%, compared to $6.5 million of operating profit for fiscal 2021.

Profitability was negatively impacted by a decrease of $35.6 million in gross profit, as outlined in the revenue and cost of goods sold discussions above, as well as an increase of $11.6 million in selling, general and administrative expenses, primarily due to a $7.5 million increase in professional services, largely relating to several cost cutting and operational transformation initiatives, a $1.2 million increase in research and development expense, and a $1.1 million increase in payroll, largely resulting from merit increases for all Company employees that were effective at the beginning of fiscal 2022 and were intended to partially mitigate the impact of increasing inflation.

Additionally, selling, general and administrative expenses during the first half of fiscal 2021 benefited from actions taken by management to reduce labor costs and certain discretionary spending during the early months of the pandemic with similar actions taken to reduce labor costs only during the fourth quarter of fiscal 2022 given the competitiveness of the overall labor market primarily resulting from continuing labor shortages.

The increase was primarily driven by the 24.8% increase in units booked during fiscal 2023 compared to fiscal 2022.

The $4.7 million, or 10.2%, increase in parts segment cost of goods sold for fiscal 2023 compared to fiscal 2022 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 $51.7 million for fiscal 2023, an increase of $92.4 million, or 226.9%, compared to $40.7 million of operating loss for fiscal 2022.

Profitability was primarily impacted by an increase of $102.3 million in gross profit, as outlined in the revenue and cost of goods sold discussions above.

The increase in gross profit was partially offset by an increase of $9.9 million in selling, general and administrative expenses, primarily due to an increase in labor costs..

Interest expense .

Interest expense was $18.0 million for fiscal 2023, an increase of $3.3 million, or 22.7%, compared to $14.7 million for fiscal 2022.

The increase was primarily attributable to an increase in the stated term loan interest rate from 4.0% at October 2, 2021 to 7.9% at October 1, 2022, as well as increased revolving credit facility borrowings outstanding during fiscal 2022 when compared with fiscal 2021.

Other expense/income, net.

Other expense, net, was $8.3 million for fiscal 2023, a change of $11.3 million, or 381.9%, compared to $2.9 million of other income, net, in fiscal 2022.

We recorded $0.7 million of net periodic pension expense during fiscal 2023 when compared with $3.0 million of net periodic pension income recorded during the fiscal 2022.

Additionally, during fiscal 2023, the Company completed the 2023 Offerings.

Although the Company did not sell any shares or receive any proceeds from the 2023 Offerings, it was required to pay certain expenses in connection with these transactions that totaled $7.4 million, with no similar expense recorded during fiscal 2022.

Income taxes .

We recorded income tax benefit of $11.5 million and $1.2 million for fiscal 2022 and fiscal 2021, respectively.

This fluctuation was primarily attributable to an increase in taxable loss in fiscal 2022 due primarily to the ongoing impacts of supply chain constraints on our operations as discussed above.

Income tax expense was $9.0 million for fiscal 2023 compared to a benefit of $11.5 million for fiscal 2022.

The effective tax rate for fiscal 2023 differed from the statutory Federal income tax rate of 21.0%.

The increase in the effective tax rate to 34.7% was primarily due to the impacts of state taxes and certain permanent items on the Federal rate.

The effective tax rate for fiscal 2022 differed from the statutory Federal income tax rate of 21.0%.

The increase in the effective tax rate to 21.6% was primarily due to the impacts of state taxes on the Federal rate.

This increase was partially offset by an increase in the valuation allowance.

The effective tax rate for fiscal 2021 was 60.2%, which differed from the statutory Federal income tax rate of 21.0%.

There were several items that increased the effective tax rate, including the impacts of tax credits, return to accrual adjustments, and state taxes on the Federal rate.

These increases were partially offset by a change in uncertain tax positions.

Adjusted EBITDA .

Adjusted EBITDA was $(14.7) million, or (1.8)% of net sales, for fiscal 2022, a decrease of $50.0 million, or 141.9%, compared to $35.2 million, or 5.1% of net sales, for fiscal 2021.

The decrease in Adjusted EBITDA is primarily the result of a $45.5 million increase in net loss, as a result of the factors discussed above, and a decrease in share-based compensation expense of $2.2 million as the expense recorded in fiscal 2021 was impacted by the retirement of two members of the executive team with no similar activity in fiscal 2022.

The following table sets forth a reconciliation of net loss to Adjusted EBITDA for the fiscal years presented (note that both columns in the below table have been recast to include our proportionate share of Micro Bird's interest expense, net;

Adjusted EBITDA was $87.9 million, or 7.8% of net sales, for fiscal 2023, an increase of $102.7 million, or 696.3%, compared to $(14.7) million, or (1.8)% of net sales, for fiscal 2022.

income tax expense or benefit;

depreciation expense and amortization expense to conform with (i) similar adjustments made relating to the Company's operating results and (ii) the fiscal 2023 presentation included previously above):

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

(in thousands) 2023 2022

Net income (loss)

$ 23,812 $ (45,759)

1 unchanged sentence

17,380 14,973

Income tax benefit (11,451) (1,191)

Income tax expense (benefit) 8,953 (11,451)

Depreciation, amortization, and disposals (2)

4 unchanged sentences

Product redesign initiatives

Subtotal (Adjusted EBITDA as previously presented)

$ (14,656) $ 34,103

Stockholder transaction costs

Micro Bird total interest expense, net;

5 unchanged sentences

7.8 % (1.8) %

(1) Includes $0.3 million for both fiscal 2022 and 2021, 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 Consolidated Statements of Operations.

(2) Includes $1.8 million and $1.1 million for fiscal 2023 and 2022, respectively, representing amortization on right-of-use operating lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Consolidated Statements of Operations.

Liquidity and Capital Resources

The Company's primary sources of liquidity are cash generated from operations, available cash, and borrowings under the Amended Credit Agreement (defined below).

At September 30, 2023, the Company had $79.0 million of available cash and cash equivalents (net of outstanding checks) and $83.7 million of additional borrowings available under the Revolving Credit Facility (defined below).

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 September 28, 2024, the Company had $127.7 million of available cash and cash equivalents (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.

Credit Agreement

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

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

The revolving credit facility included a $15.0 million letter of credit sub-facility and $5.0 million swingline sub-facility (the “Revolving Credit Facility,” and together with the Term Loan Facility, each a “Credit Facility” and collectively, the “Credit Facilities”).

The borrowings under the Term Loan Facility, which were made at the Closing Date, may not be re-borrowed once they are repaid.

The borrowings under the Revolving Credit Facility may be repaid and reborrowed from time to time at our election.

The proceeds of the loans under the Credit Facilities that were borrowed on the Closing Date were used to finance in part, together with available cash on hand, (i) the repayment of certain existing indebtedness of the Company and its subsidiaries, and (ii) transaction costs associated with the consummation of the Credit Facilities.

The obligations under the Credit Agreement and the related loan documents (including without limitation, the borrowings under the Credit Facilities (including the Incremental Term Loan discussed below) and obligations in respect of certain cash management and hedging obligations owing to the agents, the lenders or their affiliates), are, in each case, secured by a lien on and security interest in substantially all of the assets of the Company and its subsidiaries (including the Borrower), with certain exclusions as set forth in a collateral agreement entered into on December 12, 2016.

Up to $75.0 million of additional term loans and/or revolving credit commitments may be incurred under the Credit Agreement, subject to certain limitations as set forth in the Credit Agreement, and which additional loans and/or commitments would require further commitments from the existing lenders or from new lenders.

The Credit Agreement contains negative and affirmative covenants affecting the Company and its subsidiaries including the Borrower, with certain exceptions set forth in the Credit Agreement.

The negative covenants and restrictions include, among others:

limitations on liens, dispositions of assets, consolidations and mergers, loans and investments, indebtedness, transactions with affiliates (including management fees and compensation), dividends, distributions and other restricted payments, change in fiscal year, fundamental changes, amendments to and subordinated indebtedness, restrictive agreements, sale and leaseback transactions and certain permitted acquisitions.

Dividends, distributions, and other restricted payments were permitted in certain circumstances under the Credit Agreement, generally based upon our levels of excess Free Cash Flow and unrestricted cash (as defined in the Credit Agreement) and maintenance of specified TNLRs.

First Amended Credit Agreement

On September 13, 2018, the Company executed an amendment to the Credit Agreement (the "First Amended Credit Agreement"), by and among the Company, the Borrower, and Bank of Montreal, acting as administrative agent together with other lenders.

The First Amended Credit Agreement provided for an aggregate lender commitment of $50.0 million in additional term loan borrowings (the “Incremental Term Loan”) that was intended to finance a portion of a tender offer up to $50.0 million, which transaction closed in October 2018.

After giving effect to the First Amended Credit Agreement, the initial $160.0 million Term Loan Facility, with a balance of $146.2 million at September 29, 2018, increased $50.0 million, and the initial $75.0 million Revolving Credit Facility increased $25.0 million.

The amended Credit Facilities each mature on September 13, 2023, the fifth anniversary of the effective date of the First Amended Credit Agreement.

After giving effect to the First Amended Credit Agreement, the interest payable with respect to the Term Loan Facility was (i) from the first amendment effective date until the first quarter ended on or about September 30, 2018, the U.S.

Dollar London Interbank Offering Rate ("LIBOR") plus 2.25% and (ii) commencing with the fiscal quarter ended on or about September 30, 2018 and thereafter, dependent on the TNLR of the Company, an election of either base rate or LIBOR pursuant to the table below.

The Company's TNLR is defined as the ratio of (a) consolidated net debt to (b) 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.

Level Total Net Leverage Ratio ABR Loans Eurodollar Loans

I Less than 2.00x 0.75% 1.75%

II Greater than or equal to 2.00x and less than 2.50x 1.00% 2.00%

III Greater than or equal to 2.50x and less than 3.00x 1.25% 2.25%

IV Greater than or equal to 3.00x and less than 3.25x 1.50% 2.50%

V Greater than or equal to 3.25x and less than 3.50x 1.75% 2.75%

VI Greater than 3.50x 2.00% 3.00%

Under the First Amended Credit Agreement, the principal of the Term Loan Facility must be paid in quarterly installments on the last day of each fiscal quarter, in an amount equal to:

• $2,475,000 per quarter beginning on the last day of the Company’s first fiscal quarter of 2019 through the last day of the Company’s third fiscal quarter in 2021;

• $3,712,500 per quarter beginning on the last day of the Company’s fourth fiscal quarter in 2021 through the last day of the Company’s third fiscal quarter in 2022;

• $4,950,000 per quarter beginning on the last day of the Company’s fourth fiscal quarter in 2022 through the last day of the Company’s second fiscal quarter in 2023, with the remaining principal amount due at maturity.

There are customary events of default under the First Amended Credit Agreement, including, among other things, events of default resulting from (i) failure to pay obligations when due under the First Amended Credit Agreement, (ii) insolvency of the Company or its material subsidiaries, (iii) defaults under other material debt, (iv) judgments against the Company or its subsidiaries, (v) failure to comply with certain financial maintenance covenants (as set forth in the First Amended Credit Agreement), or (vi) a change of control of the Company, in each case subject to limitations and exceptions as set forth in the First Amended Credit Agreement.

The First Amended Credit Agreement contained customary covenants and warranties including, among other things, an amended TNLR financial maintenance covenant which required compliance as follows:

Period Maximum Total

Net Leverage Ratio

September 13, 2018 through the second quarter of the 2019 fiscal year 4.00:1.00

Second quarter of the 2019 fiscal year through the fourth quarter of the 2021 fiscal year 3.75:1.00

Fourth quarter of the 2021 fiscal year and thereafter 3.50:1.00

Second Amended Credit Agreement

On May 7, 2020, the Company entered into a second amendment to the Credit Agreement and First Amended Credit Agreement (the "Second Amended Credit Agreement").

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

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

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

Third Amended Credit Agreement

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

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

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

Amendments to the financial performance covenants provided that during the Limited Availability Period, a higher maximum TNLR was permitted, and required the Company to maintain liquidity (in the form of undrawn availability under the Revolving Credit Facility and unrestricted cash and cash equivalents) of at least $15.0 million.

For the duration between the fiscal quarter ended on or around December 31, 2020 and the fiscal quarter ended on or around September 30, 2021 that fell within the Limited Availability Period, a quarterly minimum consolidated EBITDA covenant applied instead of a maximum TNLR.

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

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

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

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

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

For the duration of the Limited Availability Period, the Third Amended Credit Agreement set forth additional monthly reporting requirements, and required subordination agreements and intercreditor arrangements for certain other indebtedness and liens subject to administrative agent approval.

Fourth Amended Credit Agreement

On November 24, 2021, the Company executed a fourth amendment to the Credit Agreement, First Amended Credit Agreement, Second Amended Credit Agreement and Third Amended Credit Agreement (the "Fourth Amended Credit Agreement").

Amended Credit Agreement, among other things, provided for certain temporary amendments to the Credit Agreement from the third amendment effective date through and including (a) April 1, 2023 (the “Amended Limited Availability Period”), or (b) the first date on which Borrower elected to terminate the Amended Limited Availability Period, in each case, subject to (x) the absence of a default or event of default and (y) pro forma compliance with the financial covenant performance covenants under the Amended Credit Agreement.

With respect to the financial performance covenants, during the Amended Limited Availability Period for the fiscal quarters ending January 1, 2022 through October 1, 2022, the TNLR requirement was not applicable, although it continued to impact the interest rate that was charged on outstanding borrowings as discussed below.

Instead, the minimum consolidated EBITDA that the Company was required to maintain during the Amended Limited Availability Period was updated to include fiscal 2022 as set forth in the table below (in millions):

Period Minimum Consolidated EBITDA

Fiscal quarter ending January 1, 2022 $14.5

Fiscal quarter ending April 2, 2022 $(4.5)

Fiscal quarter ending July 2, 2022 $(6.8)

Fiscal quarter ending October 1, 2022 $20.0

However, in the event that Borrower elected to terminate the Amended Limited Availability Period in fiscal 2022, the maximum TNLR permitted was 3.50x.

The minimum liquidity (in the form of undrawn availability under the Revolving Credit Facility and unrestricted cash and cash equivalents) that the Company was required to maintain during the Amended Limited Availability Period was amended as set forth in the table below (in millions):

Period Minimum Liquidity

Fourth amendment effective date through January 1, 2022 $10.0

January 2, 2022 through April 2, 2022 $5.0

April 3, 2022 through July 2, 2022 $15.0

Thereafter $20.0

Additionally, a new financial performance covenant was added in the Fourth Amended Credit Agreement, requiring that school bus units manufactured by the Company (“Units”) not fall below the pre-set thresholds set forth in the table below on a three month trailing basis (“Units Covenant”).

The Units Covenant was triggered only if the Company’s liquidity for the most-recently ended fiscal month was less than $50.0 million during the Amended Limited Availability Period:

Period Minimum Units Manufactured

Three month period ending November 27, 2021 1,128

Three month period ending January 1, 2022 776

Three month period ending January 29, 2022 748

Three month period ending February 26, 2022 727

Three month period ending April 2, 2022 763

Three month period ending April 30, 2022 1,111

Three month period ending May 28, 2022 1,525

Three month period ending July 2, 2022 2,053

Three month period ending July30, 2022 2,072

Three month period ending August 27, 2022 2,199

Three month period ending October 1, 2022 2,306

If the Units during any three fiscal month period set forth above was less than the minimum required by the Units Covenant, Borrower could elect to carry forward up to 50% of certain applicable excess Units to satisfy the Units Covenant requirement.

However, Borrower could not make such election in two consecutive three fiscal month periods.

The pricing grid in the Amended Credit Agreement, which was based on the TNLR, was determined in accordance with the amended pricing matrix set forth below:

Level Total Net Leverage Ratio ABR Loans Eurodollar Loans

I Less than 2.00x 0.75% 1.75%

II Greater than or equal to 2.00x and less than 2.50x 1.00% 2.00%

III Greater than or equal to 2.50x and less than 3.00x 1.25% 2.25%

IV Greater than or equal to 3.00x and less than 3.25x 1.50% 2.50%

V Greater than or equal to 3.25x and less than 3.50x 1.75% 2.75%

VI Greater than or equal to 3.50x and less than 4.50x 2.00% 3.00%

VII Greater than or equal to 4.50x and less than 5.00x 3.25% 4.25%

VIII Greater than 5.00x 4.25% 5.25%

During the Amended Limited Availability Period (notwithstanding the pricing grid set forth above), the applicable rate was (a) solely to the extent that the aggregate revolving exposures exceeded $100.0 million, 5.75% with respect to such excess and (b) with respect to all other revolving exposures, the sum of the rate determined by the administrative agent in accordance with the pricing grid set forth above, plus 0.50%.

Additional allowances were made in the Fourth Amended Credit Agreement for the Company to issue or incur up to $100.0 million of qualified equity interests issued by the Company, unsecured subordinated indebtedness or unsecured convertible indebtedness (collectively, “Junior Capital”).

Upon the issuance or incurrence of any Junior Capital, the Company was required to prepay the outstanding revolving loans (with no permanent reduction in the revolving commitments) in an amount equal to the lesser of (a) 100% of the net proceeds from such Junior Capital and (b) the aggregate of revolving exposures then outstanding.

Prior to the initial issuance or incurrence of any Junior Capital, any issuance, amendment, renewal, or extension of credit during the Amended Limited Availability Period could not cause the aggregate outstanding Revolving Credit Facility principal to exceed $110.0 million (“Availability Cap”).

Following the issuance and sale of $75.0 million of common stock in a private placement transaction on December 15, 2021 (see the section entitled "Short-Term and Long-Term Liquidity Requirements" below for further details), the Availability Cap was permanently reduced to $100.0 million.

For the duration of the Amended Limited Availability Period, the Fourth Amended Credit Agreement set forth additional monthly reporting requirements in connection with the manufactured school bus units required by the financial performance covenants, when applicable.

Fifth Amended Credit Agreement

On September 2, 2022, the Company executed a fifth amendment and limited waiver to the Credit Agreement, First Amended Credit Agreement, Second Amended Credit Agreement, Third Amended Credit Agreement and Fourth Amended Credit Agreement ("Fifth Amended Credit Agreement").

The Fifth Amended Credit Agreement, among other things, resulted in Borrower and administrative agent jointly electing an early opt-in to change one of the market interest rate indices that Borrower can elect to accrue interest on outstanding borrowings from LIBOR, which was discontinued subsequent to June 30, 2023, to the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (“SOFR”).

Such change became effective at the end of the applicable interest period for any LIBOR borrowings outstanding on the fifth amendment effective date.

The Fifth Amended Credit Agreement also provided covenant relief, through December 31, 2022, via a waiver of the $20.0 million minimum consolidated EBITDA covenant calculated on a four quarter trailing basis for the fiscal quarter ended October 1, 2022 and the 2,306 minimum Units Covenant calculated on a three fiscal month trailing basis for the fiscal month ended October 1, 2022.

The Company requested such covenant relief given the supply chain disruptions that continued to challenge the Company throughout fiscal 2022.

Finally, the Fifth Amended Credit Agreement requires the Company to provide a rolling thirteen week cash flow forecast to the administrative agent, on a monthly basis, beginning with the fiscal month ended August 27, 2022 and ending with the fiscal month ending April 1, 2023.

Sixth Amended Credit Agreement

On November 21, 2022, the Company executed a sixth amendment to the Credit Agreement, First Amended Credit Agreement, Second Amended Credit Agreement, Third Amended Credit Agreement, Fourth Amended Credit Agreement and Fifth Amended Credit Agreement ("Sixth Amended Credit Agreement" and collectively, the "Amended Credit Agreement").

The Sixth Amended Credit Agreement, among other things, extends the maturity date for both the Term Loan Facility and Revolving Credit Facility from September 13, 2023 to December 31, 2024.

The total Revolving Credit Facility commitment is reduced to an aggregate principal

amount of $90.0 million, of which $80.0 million is available for Borrower to draw, with the remaining $10.0 million subject to written approval from the lenders, which, once obtained, will be irrevocable.

There was no change in the Term Loan Facility commitment;

however, the Sixth Amended Credit Agreement requires principal repayments approximating $5.0 million on a quarterly basis through September 30, 2024, with the remaining balance due upon maturity.

There were $151.6 million of term loan borrowings outstanding on the sixth amendment effective date.

The Sixth Amended Credit Agreement also provides for temporary amendments to certain financial performance covenants during the Amended Limited Availability Period, which will terminate on the date on which the Company’s TNLR for the two fiscal quarters most recently ended is each less than 4.00x and no default or event of default has occurred and is continuing.

However, the Amended Limited Available Period can re-occur upon a default or event of default or if the TNLR for the immediately preceding fiscal quarter is equal to or greater than 4.00x.

The minimum consolidated EBITDA that the Company is required to maintain during the Amended Limited Availability Period is updated as set forth in the table below (in millions):

Period Minimum Consolidated EBITDA

Fiscal quarter ending July 1, 2023 $50.0

Fiscal quarter ending September 30, 2023 $60.0

For purposes of complying with the above minimum consolidated EBITDA covenant, the Company’s consolidated EBITDA for the (i) two fiscal quarter period ending July 1, 2023 is multiplied by 2 and (ii) three fiscal quarter period ending September 30, 2023 is multiplied by 4/3

The minimum liquidity (in the form of undrawn availability under the Revolving Credit Facility and unrestricted cash and cash equivalents) that the Company is required to maintain at the end of each fiscal month during the Amended Limited Availability Period is amended as set forth in the table below (in millions):

Period Minimum Liquidity

Sixth amendment effective date through December 30, 2023 $30.0

Additionally, the Units Covenant is amended for Units to be calculated at the end of each applicable fiscal month on a cumulative basis, with the minimum cumulative threshold that the Company is required to maintain during the Amended Limited Availability Period amended as set forth in the table below.

The Units Covenant is triggered only if the Company’s liquidity for the most-recently ended fiscal month is less than $50.0 million during the Amended Limited Availability Period:

Period Minimum Units Manufactured

Period from October 2, 2022 and ending October 29, 2022 450

Period from October 2, 2022 and ending November 26, 2022 900

Period from October 2, 2022 and ending December 31, 2022 1,400

Period from October 2, 2022 and ending January 28, 2023 1,900

Period from October 2, 2022 and ending February 25, 2023 2,400

Period from October 2, 2022 and ending April 1, 2023 3,000

The Company is not required to comply with a maximum TNLR financial maintenance covenant for any fiscal quarters from the sixth amendment effective date through September 30, 2023, with the maximum threshold amended thereafter as follows :

Period Maximum Total

Net Leverage Ratio

Fiscal Quarter ending December 30, 2023 through the fiscal quarter ending March 30, 2024 4.00:1.00

Fiscal quarter ending June 29, 2024 and thereafter 3.50:1.00

The pricing grid in the Amended Credit Agreement, which is based on the TNLR, is applicable to both term loan and revolving borrowings and is determined in accordance with the amended pricing matrix set forth below:

Level Total Net Leverage Ratio ABR Loans SOFR Loans

I Less than 2.00x 0.75% 1.75%

II Greater than or equal to 2.00x and less than 2.50x 1.00% 2.00%

III Greater than or equal to 2.50x and less than 3.00x 1.25% 2.25%

IV Greater than or equal to 3.00x and less than 3.25x 1.50% 2.50%

V Greater than or equal to 3.25x and less than 3.50x 1.75% 2.75%

VI Greater than or equal to 3.50x and less than 4.00x 2.00% 3.00%

VII Greater than or equal to 4.00x and less than 4.50x 2.75% 3.75%

VIII Greater than or equal to 4.50x and less than 5.00x 3.75% 4.75%

IX Greater than 5.00x 4.75% 5.75%

Further, the pricing margins for levels VII though IX above are each increased (x) by 0.25% if the aggregate revolving borrowings are equal to or greater than $50.0 million and less than or equal to $80.0 million and (y) by 0.50% if the aggregate revolving borrowings are greater than $80.0 million.

On the sixth amendment effective date, the interest rate was set at SOFR plus 5.75% and was adjusted, as applicable, in future fiscal quarters in accordance with the amended pricing grid set forth above.

Finally, the Company is required to deliver to the administrative agent, on a quarterly basis, a projected consolidated balance sheet and consolidated statements of projected operations and cash flows for the next four fiscal quarter period.

At September 30, 2023, the Borrower and the guarantors under the Amended Credit Agreement were in compliance with all covenants.

2023 Credit Agreement

On November 17, 2023 (the “2023 Closing Date”), 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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Additionally, proceeds from asset sales, condemnation, casualty insurance and/or debt issuances (in certain circumstances) are required to be used to prepay borrowings outstanding under the Credit Facilities.

Borrowings under the 2023 Term Loan Facility, which were made at the 2023 Closing Date, may not be re-borrowed once they are repaid while borrowings under the 2023 Revolving Credit Facility may be repaid and reborrowed from time to time at our election.

The 2023 Term Loan Facility is subject to amortization of principal, payable in equal quarterly installments on the last day of each fiscal quarter, commencing on March 30, 2024, with 5.0% of the $100.0 million aggregate principal amount of all initial term loans outstanding at the 2023 Closing Date payable each year prior to the maturity date of the 2023 Term Loan Facility.

Borrowings under the Term Loan Facility, which were made at the Closing Date, may not be reborrowed once they are repaid while borrowings under the Revolving Credit Facility may be repaid and reborrowed from time to time at our election.

The Term Loan Facility is subject to amortization of principal, payable in equal quarterly installments on the last day of each fiscal quarter, which commenced on March 30, 2024, with 5.0% of the $100.0 million aggregate principal amount of all initial term loans outstanding at the Closing Date payable each year prior to the maturity date of the Term Loan Facility.

The remaining initial aggregate principal amount outstanding under the Term Loan Facility, as well as any outstanding borrowings under the Revolving Credit Facility, will be payable on the November 17, 2028 maturity date of the Credit Agreement.

The Credit Facilities are guaranteed by all of the Company’s wholly-owned domestic restricted subsidiaries (subject to customary exceptions) and are secured by a security agreement which pledges a lien on virtually all of the assets of Borrower, the Company and the Company’s other wholly-owned domestic restricted subsidiaries, other than any owned or leased real property and subject to customary exceptions.

The $100.0 million of 2023 Term Loan Facility proceeds and $36.2 million of 2023 Revolving Credit Facility proceeds that were borrowed on the 2023 Closing Date were used to pay (i) the $131.8 million of Term Loan Facility indebtedness outstanding under the

Amended Credit Agreement (ii) interest and commitment fees accrued under the Amended Credit Agreement through the 2023 Closing Date and (iii) transaction costs associated with the consummation of the 2023 Credit Agreement.

The $100.0 million of Term Loan Facility proceeds and $36.2 million of Revolving Credit Facility proceeds that were borrowed on the Closing Date were used to pay (i) the $131.8 million of term loan indebtedness outstanding under the previous credit agreement ("Amended 2016 Credit Agreement"), which was also the amount outstanding as of September 30, 2023 (there were no amounts outstanding on the revolving credit facility portion of the Amended 2016 Credit Agreement on either date), (ii) interest and commitment fees accrued under the Amended 2016 Credit Agreement through the Closing Date and (iii) transaction costs associated with the consummation of the Credit Agreement.

During fiscal 2024, we used cash generated from operations to make $3.8 million of required quarterly principal payments on the Term Loan Facility and repay all $36.2 million of Revolving Credit Facility borrowings from the Closing Date.

Under the terms of the Credit Agreement, Borrower, the Company and the Company’s other wholly-owned domestic restricted subsidiaries are subject to customary affirmative and negative covenants and events of default for facilities of this type (with customary grace periods, as applicable, and lender remedies).

Borrowings under the 2023 Credit Facilities bear interest, at our option, at (i) base rate or (ii) SOFR plus 0.10%, plus an applicable margin depending on the TNLR of the Company as follows:

Level Total Net Leverage Ratio ABR Loans SOFR Loans

Borrowings under the Credit Facilities bear interest, at our option, at (i) base rate ("ABR") or (ii) the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York ("SOFR") plus 0.10%, plus an applicable margin depending on the TNLR (which is defined in the Credit Agreement as the ratio of consolidated net debt to consolidated EBITDA on a trailing four quarter basis) of the Company as follows:

ABR Loans SOFR Loans

I Less than 1.00x

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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 2023 Closing Date.

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 September 28, 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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(i) a pro forma TNLR of not greater than 3.00:1.00 and (ii) a pro forma fixed charge coverage ratio (as defined in the Credit Agreement) of not less than 1.20:1.00.

At September 28, 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 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, which were further exacerbated by Russia's invasion of Ukraine in February 2022, 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.

However, the higher costs charged by suppliers to procure inventory that continued into fiscal 2023 had a significant adverse impact on our operations and results.

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.

Also see "Impacts of COVID-19 and Subsequent Supply Chain Constraints on our Business" and "Impact of Russia's Invasion of Ukraine on Our Business" contained in this Item 7.

for further discussion.

Future COVID-19 outbreaks and/or continuing supply chain constraints could cause a more severe contraction in our profits and/or liquidity which could lead to issues complying with our 2023 Credit Agreement covenants.

Beginning in fiscal 2024 and thereafter, our primary financial covenants are a (i) pro forma TNLR, defined as the ratio of consolidated net debt to 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) on a trailing four quarter basis, of not greater than 3.00:1.00 and (ii) pro forma fixed charge coverage ratio (as defined in the 2023 Credit Agreement) of not less than 1.20:1.00.

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

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

An amendment or refinancing of our debt could lead to higher interest rates and possible up-front expenses than included in our historical financial statements.

Under the revised terms of the Sixth Amendment to the Credit Agreement, $19.8 million in principal payments were required to be repaid in fiscal 2024 with the remaining $112.0 million due in fiscal 2025.

However, with the successful refinancing of our debt in November 2023 via the execution of the 2023 Credit Agreement, $3.8 million in principal payments are due in fiscal 2024, with $5.0 million in principal payments due in each of fiscal 2025 through 2028 and the remaining $76.2 million due upon maturity in fiscal 2029.

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

Our leases have remaining lease terms ranging from 0.3 years to 5.9 years with the option to extend leases for up to 0.3 years.

Finance leases run through fiscal 2025 and have total payments of approximately $1.6 million, approximately $0.6 million of which is due in fiscal 2024.

Operating leases have remaining terms up to 5.9 years and total payments of approximately $5.9 million, approximately $1.9 million of which is due in fiscal 2024.

Our ability to make principal and interest payments on borrowings under our Credit Facilities 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.

Based on the current level of operations, we believe that our existing cash and cash equivalent balances and expected cash flows from operations will be sufficient to meet our operating requirements for at least the next 12 months.

We have operating leases for office and warehouse space and finance leases for equipment.

Our leases have remaining lease terms ranging from 0.2 years to 5.7 years with the option to extend certain leases for up to 1.0 year year.

Finance leases run through fiscal 2025 and have total payments of approximately $1.0 million, all of which is due in fiscal 2025.

Operating leases have remaining terms up to 5.7 years and total payments of approximately $5.4 million, of which approximately $2.1 million is due in fiscal 2025.

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

At September 30, 2023, total purchase commitments were $109.2 million, of which all is expected to be paid in fiscal 2024.

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

The approximate $74.8 million of net proceeds that we received from this transaction were used to repay outstanding revolving borrowings as required by the terms of the Credit Agreement, which increased the available borrowing capacity of the Revolving Credit Facility that could be used for working capital and other general corporate purposes, including acquisitions, investments in technologies or businesses, operating expenses and capital expenditures.

Refer to Note 13, Stockholders' (Deficit) Equity , to the Company’s consolidated financial statements for additional information regarding this transaction.

At September 28, 2024, total purchase commitments were $136.1 million, of which $134.1 million is expected to be paid in fiscal 2025.

To increase our liquidity in future periods, we could pursue raising additional capital via an equity or debt offering utilizing a currently effective "shelf" registration statement.

However, we can offer no assurance that we would be successful in raising this additional capital, which could also lead to increased expense and larger up-front fees when compared with our historical financial statements.

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

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

In the years preceding the 2020 COVID-19 pandemic, our business was highly seasonal with school districts buying their new school buses so that they would be available for use on the first day of the school year, typically in mid-August to early September.

This historically 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.

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Total cash provided by (used in) operating activities

Cash flows provided by (used in) operating activities totaled $119.9 million for fiscal 2023 and $(24.4) million for fiscal 2022.

Cash provided by operating activities totaled $111.1 million for fiscal 2024 and $119.9 million for fiscal 2023.

The primary drivers of the $8.8 million decrease were the following:

The net decrease primarily resulted from the effect of net changes in operating assets and liabilities that negatively impacted operating cash flows by $84.1 million during fiscal 2024 when compared with fiscal 2023.

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

accounts payable;

and accrued expenses, pension and other liabilities of $46.5 million, $22.0 million, and 15.9 million, respectively, as follows:

• A shift in our customer mix resulted in an increase in the accounts receivable balance (a net use of cash) at the end of the fiscal 2024 when compared with fiscal 2023.

Specifically, we had a significant increase in fleet orders, which make up the majority of orders on credit, during fiscal 2024 when compared with fiscal 2023.

• At the end of fiscal 2022 and during 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 fiscal 2023, resulted in a significant increase in the accounts payable balance (a net source of cash).

Although inflationary pressures continued during fiscal 2024, they were smaller when compared to fiscal 2023.

This factor, when coupled with our production and sales volumes largely stabilizing during fiscal 2024, resulted in a smaller increase in the accounts payable balance during fiscal 2024 compared to fiscal 2023 (a smaller net source of cash).

• As of the end of fiscal 2023, we had received approximately $18.5 million of advanced funds awarded by the U.S.

EPA in administering the CSBP 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 during fiscal 2024, we recognized

this amount in revenue.

As of the end of fiscal 2024, we had a corresponding balance of $2.2 million, representing a $16.3 million net use of cash when comparing the two periods.

The above decreases were partially offset by the $81.7 million increase in net income during fiscal 2024 when compared to fiscal 2023.

Cash provided by (used in) operating activities totaled $119.9 million for fiscal 2023 and $(24.4) million for fiscal 2022.

The primary drivers of the $144.4 million increase were the following:

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Accordingly, the increase in the accounts payable balance (a net source of cash) was higher in fiscal 2022 than in fiscal 2023, which had an unfavorable impact on cash flows.

Finally, in fiscal 2023 we began receiving deposits for school buses ordered under the terms the Clean School Bus Rebate Program, which provided a net source of cash year over year as there was no similar activity in fiscal 2022.

Finally, in fiscal 2023 we began receiving deposits for school buses ordered under the terms the CSBP, which provided a net source of cash year over year as there was no similar activity in fiscal 2022.

• The impact of non-cash items (net source of cash) was $4.2 million lower in fiscal 2023 compared to fiscal 2022.

Non-cash items impact net income or loss but do not have direct cash flows associated with them.

The significant differences relate to the impact of an $8.8 million lower of cost or net realizable value loss and $1.4 million fixed assets impairment, both present in fiscal 2022, with no similar losses in fiscal 2023, as well as an $11.1 million increase in equity in net income of non-consolidated affiliate, a $2.6 million decrease in amortization of deferred actuarial pension losses and a $1.9 million decrease in non-cash interest expense, in fiscal 2023 compared to fiscal 2022.

The significant differences relate to the impact of an $8.8 million lower of cost or net realizable value loss and $1.4 million fixed assets impairment, both present in fiscal 2022, with no similar losses in fiscal 2023, as well as an $11.1 million increase in equity in net income of non-consolidated affiliate(s), a $2.6 million decrease in amortization of deferred actuarial pension losses and a $1.9 million decrease in non-cash interest expense, in fiscal 2023 compared to fiscal 2022.

These decreases were partially offset by a $19.1 million increase in deferred income tax expense and a $1.9 million increase in depreciation and amortization expense, in fiscal 2023 compared to fiscal 2022.

Cash flows used in operating activities totaled $24.4 million for fiscal 2022 and $54.2 million for fiscal 2021.

The primary drivers of the $29.8 million decrease were the following:

• A year over year increase of $45.5 million in net loss.

• The effect of net changes in operating assets and liabilities positively impacted fiscal 2022 operating cash flows by $69.0 million compared to fiscal 2021.

The primary drivers in this category were favorable changes in inventory, other assets, accounts payables, and accrued expenses of $42.2 million, $2.3 million, $21.0 million, and $3.8 million respectively.

These favorable changes were partially offset by an unfavorable change in accounts receivable of $0.2 million.

At the end of fiscal 2022, inflationary pressures and supply chain disruptions significantly increased our purchase costs for components and freight, which resulted in a significant increase in the accounts payable balance when compared with the end fiscal 2021 (a net source of cash).

However, we became more efficient at managing supply chain disruptions, and thus building and selling buses, during the latter months of fiscal 2022 when compared with the same months in fiscal 2021.

These efficiencies resulted in us consuming more inventory in production, which resulted in a significant, but smaller, increase in the inventory balance at the end of fiscal 2022 when compared with fiscal 2021 (a net source of cash).

• The impact of non-cash items (net source of cash) was $6.3 million higher in fiscal 2022 compared to fiscal 2021.

Non-cash items impact net income or loss but do not have direct cash flows associated with them.

The significant differences relate to the impact of an $8.8 million increase in lower of cost or net realizable value loss, $4.7 million increase in equity in net loss of non-consolidated affiliate, $1.9 million increase in amortization of deferred actuarial pension losses, $1.4 million increase in fixed assets impairment, $0.6 million increase in depreciation and amortization expense, $0.6 million increase in non-cash interest expense, and $0.7 million decrease in gain on disposal of fixed assets, in fiscal 2022 compared to fiscal 2021.

These increases were partially offset by a $2.2 million decrease in share-based compensation expense and a $10.1 million increase in deferred tax benefit, in fiscal 2022 compared to fiscal 2021.

Total cash used in investing activities

Cash flows used in investing activities totaled $8.5 million and $6.5 million for fiscal 2023 and fiscal 2022, respectively.

The $2.1 million increase in cash used was primarily due to increased spending on fixed assets in fiscal 2023 as compared to fiscal 2022, as increased profitability in fiscal 2023 compared to fiscal 2022 allowed for more capital spending.

Cash used in investing activities totaled $15.8 million and $8.5 million for fiscal 2024 and fiscal 2023, respectively.

The $7.3 million increase in cash used was primarily due to an increase in spending on fixed assets, as increased profitability in fiscal 2024 when compared 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.

Cash used in investing activities totaled $8.5 million and $6.5 million for fiscal 2023 and fiscal 2022, respectively.

During fiscal 2022, 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.

Cash flows used in investing activities totaled $6.5 million and $11.3 million for fiscal 2022 and fiscal 2021, respectively.

The $4.9 million decrease in cash used was primarily due to decreased spending on fixed assets in fiscal 2022 as compared to fiscal 2021.

Total cash (used in) provided by financing activities

Cash used in financing activities totaled $46.6 million for fiscal 2024 and $42.9 million for fiscal 2023.

The $3.7 million increase in cash used was primarily attributable to a $115.8 million increase in term loan repayments and $9.9 million in purchases of Company stock.

This 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 $2.7 million increase in cash received from stock option exercises.

Cash (used in) provided by financing activities totaled $(42.9) million for fiscal 2023 and $29.7 million for fiscal 2022.

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These were partially offset by a $5.0 million decrease in net revolving credit facility repayments, and a $1.3 million decrease in cash paid for the repurchase of shares of our common stock in connection with employee stock award exercises, in fiscal 2023 compared to fiscal 2022.

Cash provided by financing activities totaled $29.7 million for fiscal 2022 and $32.8 million for fiscal 2021.

In fiscal 2022, the private placement sale of our common stock provided $74.8 million of net cash proceeds, with no similar activity in fiscal 2021.

This source of cash was offset by a $70.0 million decrease in net revolving credit facility borrowings, a $5.0 million increase in term loan repayments, a $1.2 million increase in cash paid for the repurchase of shares of our common stock in connection with employee stock award exercises, a $1.6 million decrease in cash received for employee stock option exercises, and a $0.3 million increase in cash paid for debt costs, in fiscal 2022 compared to fiscal 2021.

Free cash flow

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$ 95,849 $ 111,408 $ (30,890)

Free Cash Flow for fiscal 2024 was $15.6 million lower than for fiscal 2023, due to an $8.8 million decrease in cash provided by operating activities, as well as a $6.7 million increase in cash paid for fixed assets, both as discussed above.

Free Cash Flow for fiscal 2023 was $142.3 million higher than for fiscal 2022, due to a $144.4 million increase in cash provided by (used in) operating activities, which was partially offset by a $2.1 million increase in cash paid for fixed assets, both as discussed above.

Free Cash Flow for fiscal 2022 was $35.6 million higher than for fiscal 2021 due to a $29.8 million decrease in cash used in operating activities as discussed above and a reduction of $5.8 million in cash paid for fixed assets in fiscal 2022 compared to fiscal 2021 as we limited capital expenditures in fiscal 2022 to further mitigate the ongoing impact of supply chain constraints on our operations, financial results and cash flows.

Off-Balance Sheet arrangements

We had outstanding letters of credit totaling $6.7 million at September 28, 2024, the majority of which secure our self-insured workers compensation program, the collateral for which is regulated by the State of Georgia.

Share Repurchase Program and Treasury Stock Retirement

On January 31, 2024, the Board of Directors of the Company authorized and approved a share repurchase program for up to $60 million of outstanding shares of the Company’s common stock over a period of 24 months, expiring January 31, 2026.

Under the share repurchase program, the Company may repurchase shares through open market purchases, privately negotiated transactions, accelerated share repurchase transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

In the latter part of August and first half of September 2024, the Company repurchased 201,818 shares of its common stock for $9.9 million, pursuant to the share repurchase plan.

No such repurchases were made in fiscal 2023.

The total remaining authorization for future common stock repurchases under the Company's share repurchase program was $50.1 million as of September 28, 2024.

Because of the timing of these share repurchases, they had no material impact on earnings per share for fiscal 2024.

In mid-September 2024, the Company constructively retired the shares of common stock it had recently repurchased by recording the $9.9 million paid in excess of the $0.0001 par value of each share as a reduction in retained earnings.

Later that same month, the Company retired the shares of common stock that had previously been reflected as treasury stock within its historical consolidated financial statements by recording the amount paid in excess of the $0.0001 par value of each share as a $39.9 million reduction in retained earnings, which reduced the value in this account to zero, with the remaining $10.4 million recorded as a reduction in additional paid-in capital.

Critical Accounting Policies and Estimates

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potential impairment of long-lived assets, goodwill and intangible assets;

and the accounting for self-insurance reserves, warranty reserves, pension obligations, income taxes, environmental liabilities and contingencies.

and the accounting for self-insurance reserves, warranty reserves, pension obligations, income taxes, environmental liabilities and

contingencies.

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

The accounting estimates used in the preparation of the Company’s consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes.

The Company evaluates and updates its assumptions and estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, and may

employ outside experts to assist in the Company’s evaluations.

Management has discussed the development, selection, and disclosure of accounting estimates with the Audit Committee of our Board of Directors.

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Self-insurance losses for claims filed and claims incurred but not reported are accrued based upon estimates of the aggregate liability for uninsured claims using loss development factors and actuarial assumptions followed in the insurance industry and historical loss development experience.

The establishment of the reserves utilizing such estimates and assumptions is based on the premise that historical claims experience is indicative of current or future expected activity, which could differ significantly.

At September 30, 2023 and October 1, 2022, reserves totaled approximately $6.2 million and $5.8 million, respectively.

The establishment of the reserves utilizing such estimates and assumptions is based on the premise that historical claims experience, both in terms of the volume of claims activity and related cost, is indicative of current or future expected activity, which could differ significantly.

At September 28, 2024 and September 30, 2023, reserves totaled approximately $7.3 million and $6.2 million, respectively.

Goodwill and Intangible Assets

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If a qualitative assessment is not performed or if a quantitative assessment is otherwise required, then the entity compares the fair value of an asset to its carrying amount and the amount of the impairment loss, if any, is the difference between fair value and carrying value.

The fair value of our trade name is derived by using the relief from royalty method, which discounts the estimated cash savings we realize by owning the name instead of otherwise having to license or lease it.

The fair value of our trade name is derived by using the relief from

royalty method, which discounts the estimated cash savings we realize by owning the name instead of otherwise having to license or lease it.

During the fourth quarter of each fiscal year presented, we performed our annual impairment assessment of our trade name that did not indicate that an impairment existed.

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No impairments have been recorded.

The recorded balances for goodwill were $15.1 million and $3.7 million for the Bus and Parts segments, respectively, at both September 30, 2023 and October 1, 2022.

The recorded balances for intangible assets were $45.4 million and $47.4 million at September 30, 2023 and October 1, 2022, respectively.

The recorded balances for goodwill were $15.1 million and $3.7 million for the Bus and Parts segments, respectively, at both September 28, 2024 and September 30, 2023.

The recorded balances for intangible assets were $43.6 million and $45.4 million at September 28, 2024 and September 30, 2023, respectively.

We have pension benefit costs and obligations, which are developed from actuarial valuations.

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For example, at September 28, 2024, a one-half percent increase in the discount rate would reduce the projected benefit obligation of our pension plans by approximately $4.9 million, while a one-half percent decrease in the discount rate would increase the projected benefit obligation of our pension plans by approximately $5.3 million.

The projected benefit obligation for the pension plan was $108.4 million and $122.6 million at September 30, 2023 and October 1, 2022, respectively.

The projected benefit obligation for the pension plan was $113.6 million and $108.4 million at September 28, 2024 and September 30, 2023, respectively.

Product Warranty Costs

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For example, at September 28, 2024, a 5% increase or decrease in the average lifetime historical warranty claims by body type, by month would increase or decrease accrued product warranty costs by approximately $0.8 million.

At September 30, 2023 and October 1, 2022, accrued product warranty costs totaled approximately $15.4 million and $16.0 million, respectively.

The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires an asset and liability approach to financial accounting and reporting for income taxes.

At September 28, 2024 and September 30, 2023, accrued product warranty costs totaled approximately $16.2 million and $15.4 million, respectively.

The Company accounts for income taxes in accordance with the provisions of ASC 740, Income Taxes (“ASC 740”), which requires an asset and liability approach to financial accounting and reporting for income taxes.

Under this approach, deferred income taxes represent the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities.

The Company evaluates its ability, based on the weight of evidence available, to realize future tax benefits from deferred tax assets and establishes a valuation allowance to reduce a deferred tax asset to a level which, more likely than not, will be realized in future years.

At September 30, 2023 and October 1, 2022, deferred tax liabilities totaled approximately $22.9 million and $22.0 million, respectively, while deferred tax assets totaled approximately $22.6 million and $32.9 million, respectively.

At September 28, 2024 and September 30, 2023, deferred tax liabilities totaled approximately $22.4 million and $22.9 million, respectively, while deferred tax assets totaled approximately $22.0 million and $22.6 million, respectively.

The Company recognizes uncertain tax positions based on a cumulative probability assessment if it is more likely than not that the tax position will be sustained upon examination by an appropriate tax authority with full knowledge of all information.

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The Company records interest and penalties related to unrecognized tax benefits in income tax expense.

There was no liability for uncertain tax positions at September 30, 2023 and $0.1 million at October 1, 2022.

There was no liability for uncertain tax positions at September 28, 2024 or September 30, 2023.

Recent Accounting Pronouncements

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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.

What changed 10-K

Item 7. Management’s Discussion and Analysis