Blue Bird Corp 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of financial condition and results of operations of Blue Bird Corporation (the "Company," "Blue Bird," "we," "our," or "us") should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of and for the three and six months ended March 29, 2025 and March 30, 2024 and related notes appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q ("Report"). Our actual results may not be indicative of future performance. 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 entitled “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 subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated, may not be the arithmetic aggregation of the percentages that precede them. Special Note Regarding Forward-Looking Statements This Report contains forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Except as otherwise indicated by the context, references in this Report to “we,” “us” and “our” are to the consolidated business of the Company. All statements in this Report, including those made by the management of the Company, other than statements of historical fact, are forward-looking statements. These forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof and include the assumptions that underlie such statements. Forward-looking statements may contain words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “estimate,” “project,” “forecast,” “seek,” “target,” “anticipate,” “believe,” “predict,” “potential” and “continue,” the negative of these terms, or other comparable terminology. Examples of forward-looking statements include statements regarding the Company’s future financial results, research and development results, regulatory approvals, operating results, business strategies, projected costs, products, competitive positions, management’s plans and objectives for future operations, and industry trends. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements may include statements relating to: • the future financial performance of the Company; • negative changes in the market for Blue Bird products; • expansion plans and opportunities; • challenges or unexpected costs related to manufacturing; • future impacts from pandemics, epidemics or similar widespread disease or illness outbreaks (collectively, "public health crises") on capital markets, manufacturing and supply chain abilities, consumer and customer demand, school system operations, workplace conditions, and any other unexpected impacts, which include or could include, among other effects: ◦ disruption in global financial and credit markets; ◦ supply shortages and supplier financial risk, especially from our single-source suppliers impacted by public health crises; ◦ negative impacts to manufacturing operations or the supply chain from shutdowns or other disruptions in operations; ◦ negative impacts on capacity and/or production in response to changes in demand due to public health crises, including possible cost containment actions; ◦ financial difficulties of our customers impacted by public health crises; ◦ reductions in market demand for our products due to public health crises; and ◦ potential negative impacts of various actions taken by federal, state and/or local governments in response to public health crises. • future impacts resulting from current and/or future military conflicts, which include or could include, among other effects: ◦ disruption in global commodity and other markets; ◦ supply shortages and supplier financial risk, especially from suppliers providing inventory that is dependent on resources originating from countries impacted by military conflicts; and ◦ negative impacts to manufacturing operations resulting from inventory cost volatility or the supply chain due to shutdowns or other disruptions in operations. • future impacts resulting from changes in governmental policies, programs, regulations and/or laws, which include or could include, among other effects: ◦ the imposition of new and/or revised trade policies and tariffs, which could increase the cost of components we and/or our suppliers purchase that would impact our cost to produce buses and purchase parts for resale; increase the prices we charge for our products to pass along part or all of our increased purchase costs; and/or impact the purchasing decisions of our customers that could result in them buying less, or none. of our products in future periods; 18 ◦ reductions in governmental grants, subsidies and/or other incentives, which would result in a decrease in funds that are used by school districts and fleet customers to partially, or fully, offset the higher price of alternative powered school buses and could impact the purchasing decisions of our customers that elect to buy less, or none. of our products in future periods; and ◦ changes in current or future emissions regulations, which could increase the costs of powertrain components that we purchase from major suppliers and would impact our cost to produce buses and purchase parts for resale; increase the prices we charge for our products to pass along part or all of our increased purchase costs; and/or impact the purchasing decisions of our customers that could result in them buying less, or none. of our products in future periods. These forward-looking statements are based on information available as of the date of this Report (or, in the case of forward-looking statements incorporated herein by reference, as of the date of the applicable filed document), and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different than those expressed or implied by these forward-looking statements. Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in the reports we file with the Securities and Exchange Commission (“SEC”), specifically the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s fiscal year 2024 Form 10-K, filed with the SEC on November 25, 2024. Other risks and uncertainties are and will be disclosed in the Company’s prior and future SEC filings. The following information should be read in conjunction with the financial statements included in the Company’s fiscal year 2024 Form 10-K, filed with the SEC on November 25, 2024. Available Information We are subject to the reporting and information requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as a result are obligated to file or furnish, as applicable, annual, quarterly, and current reports, proxy statements, and other information with the SEC. We make these documents available free of charge on our website (http://www.blue-bird.com) as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. Information on our website does not constitute part of this Report. In addition, the SEC maintains a website (http://www.sec.gov) that contains our annual, quarterly, and current reports, proxy and information statements, and other information we electronically file with, or furnish to, the SEC. Executive Overview Blue Bird is the leading independent designer and manufacturer of school buses. Our longevity and reputation in the school bus industry have made Blue Bird an iconic American brand. 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 only principal manufacturer of chassis and body production specifically designed for school bus applications in the United States of America ("U.S."), Blue Bird is recognized as an industry leader for school bus innovation, safety, product quality/reliability/durability, efficiency, and lower operating costs. 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. and Canadian dealers that, in their territories, are exclusive to Blue Bird on Type C and Type D school buses. Blue Bird also sells directly to major fleet operators, the U.S. Government, state governments, and authorized dealers in certain limited foreign countries. Throughout this Report, we refer to the fiscal year ending September 27, 2025 as "fiscal 2025," the fiscal year ended September 28, 2024 as "fiscal 2024," the fiscal year ended September 30, 2023 as "fiscal 2023," the fiscal year ended October 1, 2022 as “fiscal 2022” and the fiscal year ended October 2, 2021 as "fiscal 2021." There will be or were 52 weeks in fiscal 2025 and fiscal 2024. The three and six month periods of fiscal 2025 and fiscal 2024 both included 13 weeks and 26 weeks, respectively. Impacts of Supply Chain Constraints on Our Business During the second half of fiscal 2021, the Company, and automotive industry as a whole, began experiencing significant supply chain constraints that arose subsequent to the novel coronavirus pandemic known as "COVID-19." Additionally, the already challenged global supply chain for automotive parts was further impacted, including continuing escalating inventory purchase costs, by additional stress resulting from Russia’s invasion of Ukraine in February 2022. These supply chain disruptions had a significant adverse impact 19 on our operations and results during the second half of fiscal 2021 and all of fiscal 2022. Specifically, they resulted in 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, that outpaced the sales prices that we charged for the buses we sold during these periods. During fiscal 2023 and fiscal 2024, 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. However, the higher costs charged by suppliers to procure inventory continued over these same periods and adversely impacted our operations and results. However, the cumulative increases in sales prices we charged for our buses outpaced the higher costs we paid to procure inventory, resulting in gross profit and gross margin in fiscal 2023 and fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic. Supply chain disruptions continued into the first half of fiscal 2025 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 and/or mix 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 to 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 keep pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin that are materially consistent with those reported in fiscal 2024. New bus orders during fiscal 2024 and continuing into fiscal 2025 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 as discussed previously above. Accordingly, the Company's backlog remained strong at approximately 4,900 units and 4,400 units as of September 28, 2024 and March 29, 2025, respectively, despite it selling 9,000 units in fiscal 2024 and over 4,400 units in the first half of fiscal 2025. In general, management believes that supply chain disruptions, including those resulting from current or future military conflicts, 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. They have resulted, and could continue to result, in significant economic disruption and have adversely affected our business. They could adversely impact our business for the remainder of fiscal 2025 and perhaps beyond. 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 2025 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 during the remainder of fiscal 2025 and beyond. See PART I, Item 1.A. "Risk Factors," of our fiscal 2024 Form 10-K, filed with the SEC on November 25, 2024, for a discussion of the material risks we believe we face particularly related to supply chain disruptions and related constraints. Impacts of Governmental Policies, Programs, Regulations and/or Laws on Our Business Although changes in trade policies and tariffs did not materially impact our operations during the first half of fiscal 2025, they could materially impact our results in future periods if we are unable to (i) mitigate the increased cost of (a) procuring inventory to produce buses and (b) purchasing parts for resale and/or (ii) increase the sales prices we charge for our products to partially or fully offset these cost increases. Actions we have taken, and/or are taking, to mitigate the impact from changes in trade policies and tariffs include increasing the volume of steel we purchase at fixed prices up to four quarters in advance, working with our suppliers to identify alternative supply chain sources to minimize the increase in inventory costs and proactively announcing price increases to partially or fully offset our increased costs to produce buses. In addition to supply chain constraints discussed previously above, the deferral of funds relating to governmental grants, subsidies and/or other incentives that are intended to partially, or fully, offset the higher price of alternative powered school buses impacted, to a lesser extent, the mix of school buses that we produced and sold during the fist half of fiscal 2025. Although we noted an increase in the flow of government grant money towards the end of the three months ended March 29, 2025, the timing of such payments occurred too late in the quarter to adjust our production schedule to build and sell more higher priced alternative powered school buses. However, such funding should positively impact subsequent quarters in fiscal 2025 and/or our 2026 fiscal year. Nonetheless, 20 any future decrease in such funds could impact the purchasing decisions of our customers that elect to buy less, or none, of our products in future periods. Management believes that changes in governmental policies, programs, regulations and/or laws could materially impact our results in future periods as described previously above. They could result in significant economic disruption and adversely impact our business during the remainder of fiscal 2025 and perhaps beyond. Significant uncertainty exists concerning the magnitude of the impact and duration of changes in governmental policies, programs, regulations and/or laws and their potential impact on the overall economy, both within the U.S and globally. Accordingly, the magnitude and duration of such changes and their related financial impacts on our business cannot be estimated at this time. Critical Accounting Policies and Estimates, Recent Accounting Pronouncements The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Blue Bird evaluates its estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. The Company’s accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in the Company’s fiscal 2024 Form 10-K, filed with the SEC on November 25, 2024, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates,” which description is incorporated herein by reference. Our senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies during the six months ended March 29, 2025. Recent Accounting Pronouncements See Note 2 of Notes to Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this Report for a discussion of new and/or recently adopted accounting pronouncements, as applicable. Factors Affecting Our Revenues Our revenues are driven primarily by the following factors: • Property tax revenues . Property tax revenues are one of the major sources of funding for school districts, and therefore new school buses. Property tax revenues are a function of land and building prices, relying on assessments of property value by state or county assessors and millage rates voted by the local electorate. • Student enrollment and delivery mechanisms for learning. Increases or decreases in the number of school bus riders have a direct impact on school district demand. Evolving protocols for public health concerns and/or continued technological advancements could shift the future form of educational delivery away from in-person learning on a more permanent basis, with increased remote learning reasonably expected to decrease the number of school bus riders. • Revenue mix . We are able to charge more for certain of our products (e.g., Type C propane powered school buses, electric powered buses, Type D buses, and buses with higher option content) than other products. The mix of products sold in any fiscal period can directly impact our revenues for the period. • Strength of the dealer network . We rely on our dealers, as well as a small number of major fleet operators, to be the direct point of contact with school districts and their purchasing agents. An effective dealer is capable of expanding revenues within a given school district by matching that district’s needs to our capabilities, offering options that would not otherwise be provided to the district. • Pricing . Our products are sold to school districts throughout the U.S. and Canada. Each state and each Canadian province has its own set of regulations that governs the purchase of products, including school buses, by their school districts. We and our dealers must navigate these regulations, purchasing procedures, and the districts’ specifications in order to reach mutually acceptable price terms. Pricing may or may not be favorable to us, depending upon a number of factors impacting purchasing decisions. Additionally, in certain cases, prices originally quoted with dealers and school districts may have become less favorable, or more unfavorable, to us given increasing inventory costs between the time the sales order was contractually agreed upon and the bus is built and delivered as a result of ongoing supply chain disruptions, general inflationary pressure and the imposition of new and/or revised trade policies and tariffs, among other factors. 21 • Buying patterns of major fleets . Major fleets regularly compete against one another for existing accounts. Fleets are also continuously trying to win the business of school districts that operate their own transportation services. These activities can have either a positive or negative impact on our sales, depending on the brand preference of the fleet that wins the business. Major fleets also periodically review their fleet sizes and replacement patterns due to funding availability as well as the profitability of existing routes. These actions can impact total purchases by fleets in a given year. • Seasonality. In the fiscal 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. Since 2020, 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 as discussed previously above, seasonality has become unpredictable. Seasonality and variations from historical seasonality have impacted the comparison of results between fiscal periods. • Inflation. 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 deliver critical components, reflected in cost of goods sold during all of fiscal 2022 and continuing, to a lesser extent, into fiscal 2023, fiscal 2024 and the first half of fiscal 2025. In response, the Company announced a number of sales price increases over this same period that applied to new sales orders and, in one limited circumstance, partially applied to backlog orders that were both intended to mitigate the impact of rising purchase costs on our operations and results. These cumulative price increases have had a significant, positive impact on sales and gross profit during fiscal 2023, fiscal 2024 and continuing into the first half of fiscal 2025. • Governmental grants, subsidies and/or other incentives. Funds provided by federal, state and/or local governments are often times targeted to partially, or fully, offset the higher price of alternative powered school buses. The deferral and/or elimination of such funds can impact the buying decisions of school districts and fleet customers, including impacting the volume, mix and/or timing of school bus purchases that can directly impact our revenues during a fiscal period. Factors Affecting Our Expenses and Other Items Our expenses and other line items on our Condensed Consolidated Statements of Operations are principally driven by the following factors: • Cost of goods sold . The components of our cost of goods sold consist of material costs (principally powertrain components, steel and rubber, as well as aluminum and copper) including freight costs, labor expense, and overhead. Our cost of goods sold may vary from period to period due to changes in sales volume and/or mix, efforts by certain suppliers to pass through the economics associated with key commodities as well as changes in trade policies and tariffs, fluctuations in freight costs, design changes with respect to specific components, design changes with respect to specific bus models, wage increases for plant labor, productivity of plant labor, delays in receiving materials and other logistical problems, and the impact of overhead items such as utilities. • Selling, general and administrative expenses . Our selling, general and administrative expenses include costs associated with our selling and marketing efforts, engineering, centralized finance, human resources, purchasing, information technology services, along with other administrative matters and functions. In most instances, other than direct costs associated with sales and marketing programs, the principal component of these costs is salary expense. Changes from period to period are typically driven by the number of our employees, as well as by merit increases provided to experienced personnel. • Interest expense . Our interest expense relates to costs associated with our debt instruments and reflects both the amount of indebtedness and the interest rate that we are required to pay on our debt. Interest expense also includes unrealized gains or losses from interest rate hedges, if any, and changes in the fair value of interest rate derivatives not designated in hedge accounting relationships, if any, as well as expenses related to debt guarantees, if any. • Income taxes . We make estimates of the amounts to recognize for income taxes in each tax jurisdiction in which we operate. In addition, provisions are established for withholding taxes related to the transfer of cash between jurisdictions and for uncertain tax positions taken, if any. • Other expense/income, net. This balance includes net periodic pension expense or income as well as gains or losses on foreign currency, if any. Other amounts not associated with operating expenses may also be included in this balance. • Equity in net income or loss of non-consolidated affiliates . We include in this line item our 50% share of net income or loss from our investments in Micro Bird Holdings, Inc. and Clean Bus Solutions, LLC, our unconsolidated joint ventures. 22 Key Non-GAAP Financial Measures We Use to Evaluate Our Performance The condensed consolidated financial statements included in this Report in Item 1. "Financial Statements (Unaudited)" are prepared in conformity with U.S. GAAP. 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, 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. Adjusted EBITDA is defined as net income or loss prior to interest income; interest expense including the component of operating lease expense (which is presented as a single operating expense in selling, general and administrative expenses in our U.S. GAAP financial statements) that represents interest expense on lease liabilities; income taxes; and depreciation and amortization including the component of operating lease expense (which is presented as a single operating expense in selling, general and administrative expenses in our U.S. GAAP financial statements) that represents amortization charges on right-of-use lease assets; as adjusted for certain non-cash charges or credits that we may record on a recurring basis such as share-based compensation expense and unrealized gains or losses on certain derivative financial instruments as well as certain charges such as (i) transaction related costs or (ii) discrete expenses related to major cost cutting and/or operational transformation initiatives. While certain of the charges that are added back in the Adjusted EBITDA calculation, such as transaction related costs and major cost cutting and/or operational transformation 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. Accordingly, we believe that these, as well as the other credits and charges that comprise the amounts utilized in the determination of Adjusted EBITDA described above, should not be used in evaluating the Company’s ongoing annual operating performance. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net sales. Adjusted EBITDA and Adjusted EBITDA Margin are not measures of performance defined in accordance with U.S. GAAP. The measures are used as a supplement to U.S. GAAP results in evaluating certain aspects of our business, as described below. We believe that Adjusted EBITDA and Adjusted EBITDA Margin are useful to investors in evaluating our performance because the measures consider the performance of our ongoing operations, excluding decisions made with respect to capital investment, financing, and certain other significant initiatives or transactions as outlined in the preceding paragraphs. We believe the non-GAAP measures offer additional financial metrics that, when coupled with the U.S. GAAP results and the reconciliation to U.S. GAAP results, provide a more complete understanding of our results of operations and the factors and trends affecting our business. Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as alternatives to net income or loss as an indicator of our performance or as alternatives to any other measure prescribed by U.S. GAAP as there are limitations to using such non-GAAP measures. Although we believe that Adjusted EBITDA and Adjusted EBITDA Margin may enhance an evaluation of our operating performance based on recent revenue generation and product/overhead cost control because they exclude the impact of prior decisions made about capital investment, financing, and certain other significant initiatives or transactions, (i) other companies in Blue Bird’s industry may define Adjusted EBITDA and Adjusted EBITDA Margin differently than we do and, as a result, they may not be comparable to similarly titled measures used by other companies in Blue Bird’s industry, and (ii) Adjusted EBITDA and Adjusted EBITDA Margin exclude certain financial information that some may consider important in evaluating our performance. We compensate for these limitations by providing disclosure of the differences between Adjusted EBITDA and U.S. GAAP results, including providing a reconciliation to U.S. GAAP results, to enable investors to perform their own analysis of our ongoing operating results. Our measure of Free Cash Flow is used in addition to and in conjunction with results presented in accordance with U.S. GAAP and it should not be relied upon to the exclusion of U.S. GAAP financial measures. Free Cash Flow reflects an additional way of evaluating our liquidity that, when viewed with our U.S. GAAP results, provides a more complete understanding of factors and trends affecting our cash flows. We strongly encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. 23 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 manufacturing operations. Accordingly, we expect Free Cash Flow to be less than operating cash flows. Our Segments We manage our business in two operating segments, which are also our reportable segments: (i) the Bus segment, which involves the design, engineering, manufacture and sale of school buses and extended warranties; and (ii) the Parts segment, which includes the sale of replacement bus parts. 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 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 Three Months Ended March 29, 2025 and March 30, 2024: Three Months Ended (in thousands of dollars) March 29, 2025 March 30, 2024 Net sales $ 358,851 $ 345,915 Cost of goods sold 287,997 282,276 Gross profit $ 70,854 $ 63,639 Operating expenses Selling, general and administrative expenses 37,143 27,571 Operating profit $ 33,711 $ 36,068 Interest expense (1,813) (2,812) Interest income 1,258 1,054 Other income (expense), net 444 (1,968) Income before income taxes $ 33,600 $ 32,342 Income tax expense (9,129) (8,261) Equity in net income of non-consolidated affiliates 1,575 1,942 Net income $ 26,046 $ 26,023 Other financial data: Adjusted EBITDA $ 49,206 $ 45,751 Adjusted EBITDA margin 13.7 % 13.2 % The following provides the results of operations of Blue Bird’s two reportable segments: (in thousands of dollars) Three Months Ended Net Sales by Segment March 29, 2025 March 30, 2024 Bus $ 332,712 $ 317,959 Parts 26,139 27,956 Total $ 358,851 $ 345,915 Gross Profit (Loss) by Segment Bus $ 57,634 $ 49,589 Parts 13,220 14,050 Total $ 70,854 $ 63,639 Net sales . Net sales were $358.9 million for the second quarter of fiscal 2025, an increase of $12.9 million, or 3.7%, compared to $345.9 million for the second quarter of fiscal 2024. The increase in net sales is primarily due to a small increase in Bus unit bookings as well as Bus customer and product mix changes that were partially offset by a small decrease in Parts sales. 24 Bus sales increased $14.8 million, or 4.6%, reflecting a 1.8% increase in unit bookings and a 2.8% increase in average sales price per unit. In the second quarter of fiscal 2025, 2,295 units booked compared to 2,254 units booked for the same period in fiscal 2024. The small increase in unit price for the second quarter of fiscal 2025 compared to the same period in fiscal 2024 was primarily due to customer and product mix changes, although both quarters were negatively impacted by supply chain constraints that limited the Company's ability to produce and deliver buses due to shortages of critical components. Parts sales decreased $1.8 million, or 6.5%, for the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024. This decrease is primarily attributed to slight variations due to product and channel mix. Cost of goods sold . Total cost of goods sold was $288.0 million for the second quarter of fiscal 2025, an increase of $5.7 million, or 2.0%, compared to $282.3 million for the second quarter of fiscal 2024. As a percentage of net sales, total cost of goods sold improved from 81.6% to 80.3%, primarily due to the impact of ongoing pricing actions taken by management that exceeded the impact of increasing costs resulting from inflationary pressures relating to the procurement of inventory as well as finalizing the union contract in May 2024, which increased the labor costs for our covered production and supply chain employees. The improvement was also impacted by product and customer mix changes. Bus segment cost of goods sold increased $6.7 million, or 2.5%, for the second quarter of fiscal 2025 compared to the same period in fiscal 2024. The increase was primarily driven by the 1.8% increase in units booked discussed above as well as the 0.7% increase in the average cost of goods sold per unit for the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024. This increase primarily resulted from increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures, b) ongoing supply chain disruptions that resulted in higher purchase costs for components and c) higher labor costs resulting from finalizing the union contract in May 2024. The increase was also impacted by customer and product mix changes. The $1.0 million, or 7.1%, decrease in Parts segment cost of goods sold for the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024 was primarily attributable to slight variations due to product and channel mix. Operating profit . Operating profit was $33.7 million for the second quarter of fiscal 2025, a decrease of $2.4 million compared to operating profit of $36.1 million for the second quarter of fiscal 2024. Profitability was positively impacted by an increase of $7.2 million in gross profit as outlined in the revenue and cost of goods sold discussions above. However, it was negatively impacted by an increase of $9.6 million in selling, general and administrative expenses, primarily due to an increase in a) share-based compensation expense recorded in the second quarter of fiscal 2025 relating to the retirement of our former President and Chief Executive Officer and b) labor costs. Interest expense . Interest expense was $1.8 million for the second quarter of fiscal 2025, a decrease of $1.0 million, or 35.5%, compared to $2.8 million for the second quarter of fiscal 2024. The decrease was primarily attributable to a decrease in the stated term loan interest rate from 7.2% at March 30, 2024 to 6.2% at March 29, 2025, as well as lower outstanding borrowings in the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024. Other income (expense), net. Other income, net was $0.4 million for the second quarter of fiscal 2025, an increase of $2.4 million, or 122.6%, compared to $2.0 million of other expense, net for the same period in fiscal 2024. During the second quarter of fiscal 2025, the Company recorded net periodic pension income of approximately $0.4 million compared with net periodic pension expense of less than $0.1 million for the same period in fiscal 2024. Additionally, on February 15, 2024, the Company entered into an underwriting agreement with Barclays Capital Inc., as representative of the several underwriters and American Securities LLC ("Selling Stockholder"), pursuant to which Selling Stockholder agreed to sell 4,042,650 shares of common stock at a purchase price of $32.90 per share (“February Offering”). The February Offering was conducted pursuant to a prospectus supplement, dated February 15, 2024, to the prospectus, dated December 22, 2021, included in the Company’s registration statement on Form S-3 (File No. 333-261858) that was initially filed with the SEC on December 23, 2021. The February Offering closed on February 21, 2024. Although the Company did not sell any shares or receive any proceeds from the February Offering, it was required to pay certain expenses in connection with the February Offering that totaled approximately $1.9 million for the three months ended March 30, 2024. No such expense was incurred in the three months ended March 29, 2025. 25 Income taxes . Income tax expense was $9.1 million for the second quarter of fiscal 2025 compared to $8.3 million for the same period in fiscal 2024. The effective tax rate for the three months ended March 29, 2025 was 27.2% and differed from the statutory federal income tax rate of 21%. The increase was primarily due to the impacts from state taxes and certain permanent items on the federal rate, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the quarter. The effective tax rate for the three months ended March 30, 2024 was 25.5% and differed from the statutory federal income tax rate of 21%. The increase was primarily due to the impacts from state taxes and certain permanent items on the federal rate, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the quarter. Adjusted EBITDA . Adjusted EBITDA was $49.2 million, or 13.7% of net sales, for the second quarter of fiscal 2025, an increase of $3.5 million, or 7.6%, compared to $45.8 million, or 13.2% of net sales, for the second quarter of fiscal 2024. The increase primarily relates to the $7.2 million increase in gross profit as outlined in the revenue and cost of goods sold discussions above, which was partially offset by a smaller increase in selling, general and administrative expenses, when adjusted for the impact of share-based compensation expense that is excluded in calculating Adjusted EBITDA, as discussed above. The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods presented: Three Months Ended (in thousands of dollars) March 29, 2025 March 30, 2024 Net income $ 26,046 $ 26,023 Adjustments: Interest expense, net (1) 633 1,860 Income tax expense 9,129 8,261 Depreciation, amortization and disposals (2) 4,251 3,988 Share-based compensation expense 7,434 2,492 Stockholder transaction costs — 1,933 Micro Bird Holdings, Inc. total interest expense, net; income tax expense or benefit; depreciation expense and amortization expense 1,713 1,195 Other — (1) Adjusted EBITDA $ 49,206 $ 45,751 Adjusted EBITDA margin (percentage of net sales) 13.7 % 13.2 % (1) Includes $0.1 million for both fiscal periods, representing interest expense on operating lease liabilities, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations. (2) Includes $0.4 million and $0.3 million for the three months ended March 29, 2025 and March 30, 2024, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations. 26 Consolidated Results of Operations for the Six Months Ended March 29, 2025 and March 30, 2024: Six Months Ended (in thousands of dollars) March 29, 2025 March 30, 2024 Net sales $ 672,723 $ 663,575 Cost of goods sold 541,552 536,378 Gross profit $ 131,171 $ 127,197 Operating expenses Selling, general and administrative expenses 64,418 53,173 Operating profit $ 66,753 $ 74,024 Interest expense (3,728) (6,443) Interest income 2,826 2,142 Other income (expense), net 3,360 (3,189) Loss on debt refinancing — (1,558) Income before income taxes $ 69,211 $ 64,976 Income tax expense (17,822) (16,707) Equity in net income of non-consolidated affiliates 3,379 3,904 Net income $ 54,768 $ 52,173 Other financial data: Adjusted EBITDA $ 94,959 $ 93,355 Adjusted EBITDA margin 14.1 % 14.1 % The following provides the results of operations of Blue Bird’s two reportable segments: (in thousands of dollars) Six Months Ended Net Sales by Segment March 29, 2025 March 30, 2024 Bus $ 620,859 $ 611,396 Parts 51,864 52,179 Total $ 672,723 $ 663,575 Gross Profit by Segment Bus $ 104,806 $ 100,883 Parts 26,365 26,314 Total $ 131,171 $ 127,197 Net sales . Net sales were $672.7 million for the six months ended March 29, 2025, an increase of $9.1 million, or 1.4%, compared to $663.6 million for the six months ended March 30, 2024. The increase in net sales is primarily due to a small increase in Bus unit bookings as well as Bus customer and product mix changes that were partially offset by a small decrease in Parts sales. Bus sales increased $9.5 million, or 1.5%, reflecting a 1.0% increase in units booked and a 0.6% increase in average sales price per unit. 4,425 units booked in the six months ended March 29, 2025 compared with 4,383 units booked during the same period in fiscal 2024. The small increase in unit price for the first six months of fiscal 2025 compared to the same period in fiscal 2024 was primarily due to customer and product mix changes, although both periods were negatively impacted by supply chain constraints that limited the Company's ability to produce and deliver buses due to shortages of critical components. Parts sales decreased $0.3 million, or 0.6%, for the six months ended March 29, 2025 compared to the six months ended March 30, 2024. This small decrease is primarily attributed to slight variations due to product and channel mix. Cost of goods sold . Total cost of goods sold was $541.6 million for the six months ended March 29, 2025, an increase of $5.2 million, or 1.0%, compared to $536.4 million for the six months ended March 30, 2024. As a percentage of net sales, total cost of goods sold improved from 80.8% to 80.5%, primarily due to the impact of ongoing pricing actions taken by management that exceeded the impact of increasing costs resulting from inflationary pressures relating to the procurement of inventory as well as finalizing the union contract in May 2024, which increased the labor costs for our covered production and supply chain employees. The improvement was also impacted by product and customer mix changes. 27 Bus segment cost of goods sold increased $5.5 million, or 1.1%, for the six months ended March 29, 2025 compared to the six months ended March 30, 2024. The increase was primarily driven by the 1.0% increase in units booked discussed above as well as the 0.1% increase in the average cost of goods sold per unit in the six months ended March 29, 2025 compared to the same period in fiscal 2024. This increase primarily resulted from increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures, b) ongoing supply chain disruptions that resulted in higher purchase costs for components and c) higher labor costs resulting from finalizing the union contract in May 2024. The increase was also impacted by customer and product mix changes. The $0.4 million, or 1.4%, decrease in parts segment cost of goods sold for the six months ended March 29, 2025 compared to the six months ended March 30, 2024 was primarily attributable to slight variations due to product and channel mix. Operating profit . Operating profit was $66.8 million for the six months ended March 29, 2025, a decrease of $7.3 million compared to operating profit of $74.0 million for the six months ended March 30, 2024. Profitability was positively impacted by an increase of $4.0 million in gross profit as outlined in the revenue and cost of goods sold discussions. However, it was negatively impacted by an increase of $11.2 million in selling, general and administrative expenses, primarily due to an increase in a) share-based compensation expense recorded in the second quarter of fiscal 2025 relating to the retirement of our former President and Chief Executive Officer and b) labor costs. Interest expense . Interest expense was $3.7 million for the six months ended March 29, 2025, a decrease of $2.7 million, or 42.1%, compared to $6.4 million for the six months ended March 30, 2024. The decrease was primarily attributable to a decrease in the stated term loan interest rate from 7.2% at March 30, 2024 to 6.2% at March 29, 2025, as well as lower outstanding borrowings in the first six months of fiscal 2025 compared to the first six months of fiscal 2024. Other income (expense), net. Other income, net was $3.4 million for the six months ended March 29, 2025, an increase of $6.5 million, or 205.4%, compared to $3.2 million of other expense, net for the six months ended March 30, 2024. The Company recorded $0.9 million of net periodic pension income during the six months ended March 29, 2025 when compared with $0.1 million of net periodic pension expense recorded during the six months ended March 30, 2024. Additionally, during the first quarter of fiscal 2025, the Company sold certain state emissions credits that it was not projecting to use for approximately $2.6 million, with no similar income recorded during the the first six months of fiscal 2024. The proceeds from this sale were recorded in other income (expense), net in the Condensed Consolidated Statements of Operations as this transaction is not indicative of our normal revenue generating activities. Finally, 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 ("Selling Stockholder"), pursuant to which Selling Stockholder agreed to sell 2,500,000 shares of common stock at a purchase price of $25.10 per share ("December Offering"). On February 15, 2024, the Company entered into an underwriting agreement with Barclays Capital Inc., as representative of the several underwriters and Selling Stockholder, pursuant to which Selling Stockholder agreed to sell 4,042,650 shares of common stock at a purchase price of $32.90 per share ("February Offering," and collectively with the December Offering, "Offerings"). The December Offering was conducted pursuant to a prospectus supplement, dated December 14, 2023, and the February Offering was conducted pursuant to a prospectus supplement, dated February 15, 2024, both to the prospectus dated December 22, 2021 included in the Company’s registration statement on Form S-3 (File No. 333-261858) that was initially filed with the SEC on December 23, 2021. The December Offering closed on December 19, 2023 and the February Offering closed on February 21, 2024. Although the Company did not sell any shares or receive any proceeds from the Offerings, it was required to pay certain expenses in connection with the Offerings that totaled approximately $3.2 million for the six months ended March 30, 2024. No such expense was incurred in the six months ended March 29, 2025. Income taxes . Income tax expense was $17.8 million for the six months ended March 29, 2025 compared to $16.7 million for the six months ended March 30, 2024. The effective tax rate for the six months ended March 29, 2025 was 25.8% and differed from the statutory federal income tax rate of 21%. The increase was primarily due to the impacts from state taxes and certain permanent items on the federal rate, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the period. 28 The effective tax rate for the six months ended March 30, 2024 was 25.7% and differed from the statutory federal income tax rate of 21%. The increase was primarily due to the impacts from state taxes and certain permanent items on the federal rate, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the period. Adjusted EBITDA . Adjusted EBITDA was $95.0 million, or 14.1% of net sales, for the six months ended March 29, 2025, an increase of $1.6 million, or 1.7%, compared to $93.4 million, or 14.1% of net sales, for the six months ended March 30, 2024. The increase primarily relates to the a) $4.0 million increase in gross profit as outlined in the revenue and cost of goods sold discussions above and b) $2.6 million sale of certain state emissions credits included in the other income (expense), net discussion above, both of which were partially offset by a smaller increase in selling, general and administrative expenses, when adjusting for the impact of share-based compensation expense that is excluded in calculating Adjusted EBITDA, as discussed above. The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods presented: Six Months Ended (in thousands of dollars) March 29, 2025 March 30, 2024 Net income $ 54,768 $ 52,173 Adjustments: Interest expense, net (1) 1,066 4,515 Income tax expense 17,822 16,707 Depreciation, amortization and disposals (2) 8,494 8,198 Loss on debt refinancing — 1,558 Share-based compensation expense 9,940 4,543 Stockholder transaction costs — 3,154 Micro Bird Holdings, Inc. total interest expense, net; income tax expense or benefit; depreciation expense and amortization expense 2,869 2,590 Other — (83) Adjusted EBITDA $ 94,959 $ 93,355 Adjusted EBITDA margin (percentage of net sales) 14.1 % 14.1 % (1) Includes $0.2 million for both six month periods, representing interest expense on operating lease liabilities, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations. (2) Includes $0.8 million and $0.9 million for the six months ended March 29, 2025 and March 30, 2024, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations Liquidity and Capital Resources The Company’s primary sources of liquidity are cash generated from its operations, available cash and cash equivalents and borrowings under its revolving credit facility. At March 29, 2025, the Company had $130.7 million of available cash (net of outstanding checks) and $143.3 million of additional borrowings available under the revolving line of credit portion of its credit facility. The Company’s revolving line of credit is available for working capital requirements, capital expenditures and other general corporate purposes. Credit Agreement On November 17, 2023 (the “Closing Date”), Blue Bird Body Company ("Borrower"), a wholly-owned subsidiary of Blue Bird Corporation, 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; and a syndicate of other lenders (the "Credit Agreement"). The credit facilities provided for under the Credit Agreement consist of a term loan facility in an aggregate initial principal amount of $100.0 million (the “Term Loan Facility”) and a revolving credit facility with aggregate commitments of $150.0 million. The revolving credit facility includes a $25.0 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”). 29 A minimum of $100.0 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 existing lenders or from new lenders. Borrower has the right to prepay the loans outstanding under the Credit Facilities without premium or penalty (subject to customary breakage costs, if applicable). 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 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 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 Credit Agreement"), (ii) interest and commitment fees accrued under the Amended Credit Agreement through the Closing Date and (iii) transaction costs associated with the consummation of the Credit Agreement. 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 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: Level TNLR ABR Loans SOFR Loans I Less than 1.00x 0.75% 1.75% II Greater than or equal to 1.00x and less than 1.50x 1.50% 2.50% III Greater than or equal to 1.50x and less than 2.25x 2.00% 3.00% IV Greater than or equal to 2.25x 2.25% 3.25% Pricing on the Closing Date was set at Level III until receipt of the financial information and related compliance certificate for the first fiscal quarter ending after the Closing Date, with pricing as of March 29, 2025 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. The Credit Agreement also includes a requirement that the Company comply with the following financial covenants on the last day of each fiscal quarter through maturity: (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. Detailed descriptions of the Amended Credit Agreement are set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2024, filed with the SEC on November 25, 2024. At March 29, 2025, 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 Facilities, as applicable, and our ability to fund planned capital expenditures will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions. Based on the current level of operations, we believe that our 30 existing cash balances and expected cash flows from operations will be sufficient to meet our operating requirements for at least the next 12 months. 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. Seasonality Historically, our business has been highly seasonal with school districts buying their new school buses so that they will be available for use on the first day of the school year, typically in mid-August to early September. This has, in fiscal years prior to the COVID-19 pandemic, resulted in our third and fourth fiscal quarters representing our two busiest quarters from a sales and production perspective, the latter ending on the Saturday closest to September 30. Our quarterly results of operations, cash flows, and liquidity have historically been, and are likely to be in future periods, impacted by seasonal patterns. Working capital has historically been a significant use of cash during the first fiscal quarter due to planned shutdowns and a significant source of cash generation in the fourth fiscal quarter. With the COVID-19 pandemic and subsequent supply chain constraints, seasonality and working capital trends have become unpredictable. Seasonality and variations from historical seasonality have impacted the comparison of working capital and liquidity results between fiscal periods. Cash Flows The following table sets forth general information derived from our Condensed Consolidated Statements of Cash Flows: Six Months Ended (in thousands of dollars) March 29, 2025 March 30, 2024 Cash, cash equivalents and restricted cash at beginning of period $ 127,687 $ 78,988 Total cash provided by operating activities 54,180 54,771 Total cash used in investing activities (14,116) (5,643) Total cash used in financing activities (37,002) (35,020) Change in cash, cash equivalents and restricted cash $ 3,062 $ 14,108 Cash, cash equivalents and restricted cash at end of period $ 130,749 $ 93,096 Total cash provided by operating activities Cash flows provided by operating activities totaled $54.2 million for the six months ended March 29, 2025, consistent with the $54.8 million of cash flows provided by operating activities during the six months ended March 30, 2024. Total cash used in investing activities Cash flows used in investing activities totaled $14.1 million for the six months ended March 29, 2025 as compared to $5.6 million for the six months ended March 30, 2024. The $8.5 million increase was primarily due to an increase in spending on fixed assets, as increasing recent profitability has allowed for more capital spending. Total cash used in financing activities Cash flows used in financing activities totaled $37.0 million for the six months ended March 29, 2025 as compared to $35.0 million for the six months ended March 30, 2024, resulting in a $2.0 million increase between fiscal periods. During the first six months of fiscal 2025, the Company purchased $30.1 million of common stock in connection with its share repurchase program with no similar activity in the same period in fiscal 2024. Additionally, there was a $4.1 million increase in purchases of Company common stock in connection with stock award exercises in the six months ended March 29, 2025 when compared with the six months ended March 30, 2024. During the first six months of fiscal 2024, primarily as a result of executing the Credit Agreement during this period, there was a $30.6 million increase in net term loan repayments when compared with the same period in fiscal 2025. Additionally, we paid $3.1 million of costs in completing the debt refinancing in the six months ended March 30, 2024 with no similar activity in the six months ended March 29, 2025. These cash disbursements were partially offset by a $1.2 million increase in cash received from stock option exercises in the six months ended March 30, 2024 when compared with the six months ended March 29, 2025. 31 Free cash flow Management believes the non-GAAP measurement of Free Cash Flow, defined as net cash provided by operating activities less cash paid for fixed assets and acquired intangible assets, fairly represents the Company’s ability to generate surplus cash that could fund activities not in the ordinary course of business. See “Key Non-GAAP Financial Measures We Use to Evaluate Our Performance” for further discussion. The following table sets forth the calculation of Free Cash Flow for the periods presented: Six Months Ended (in thousands of dollars) March 29, 2025 March 30, 2024 Net cash provided by operating activities $ 54,180 $ 54,771 Cash paid for fixed assets (13,616) (5,643) Free Cash Flow $ 40,564 $ 49,128 Free Cash Flow for the six months ended March 29, 2025 was $8.6 million lower than for the six months ended March 30, 2024 due to a $0.6 million decrease in net cash provided by operating activities and an $8.0 million increase in cash paid for fixed assets, both as discussed above. Off-Balance Sheet Arrangements We had outstanding letters of credit totaling $6.7 million at March 29, 2025, the majority of which secure our self-insured workers compensation program, the collateral for which is regulated by the State of Georgia. Item 3. Quantitative and Qualitative Disclosures About Mar ket Risk. There have not been any material changes to our interest rate, commodity or currency risks previously disclosed in Part II, Item 7A of the Company’s fiscal 2024 Form 10-K.