Blue Bird Corp 10-Q

Item 1. Financial Statements (Unaudited) BLUE BIRD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands of dollars, except for share data) June 28, 2025 September 28, 2024 Assets Current assets Cash and cash equivalents $ 173,066 $ 127,687 Accounts receivable, net 21,108 59,099 Inventories 151,042 127,798 Other current assets 15,457 8,795 Total current assets $ 360,673 $ 323,379 Property, plant and equipment, net $ 103,837 $ 97,322 Goodwill 18,825 18,825 Intangible assets, net 42,152 43,554 Equity investment in affiliates 35,913 32,089 Deferred tax assets 5,008 2,399 Finance lease right-of-use assets — 332 Pension 7,070 4,649 Other assets 1,972 2,345 Total assets $ 575,450 $ 524,894 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 150,158 $ 143,156 Warranty 7,190 7,166 Accrued expenses 45,391 55,775 Deferred warranty income 10,801 9,421 Finance lease obligations — 975 Other current liabilities 10,039 14,480 Current portion of long-term debt 5,000 5,000 Total current liabilities $ 228,579 $ 235,973 Long-term liabilities Revolving credit facility $ — $ — Long-term debt 86,493 89,994 Warranty 9,384 9,013 Deferred warranty income 20,988 18,541 Deferred tax liabilities — 2,783 Finance lease obligations — 6 Other liabilities 8,159 9,020 Total long-term liabilities $ 125,024 $ 129,357 Guarantees, commitments and contingencies (Note 6) Stockholders' equity Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized, 0 shares outstanding at June 28, 2025 and September 28, 2024 $ — $ — Common stock, $ 0.0001 par value, 100,000,000 shares authorized, 31,480,251 and 32,268,022 shares issued and outstanding at June 28, 2025 and September 28, 2024, respectively 3 3 Additional paid-in capital 195,872 185,977 Retained earnings 52,230 — Accumulated other comprehensive loss ( 26,258 ) ( 26,416 ) Total stockholders' equity $ 221,847 $ 159,564 Total liabilities and stockholders' equity $ 575,450 $ 524,894 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 BLUE BIRD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended (in thousands of dollars except for share data) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Net sales $ 398,011 $ 333,367 $ 1,070,734 $ 996,942 Cost of goods sold 312,083 264,014 853,635 800,392 Gross profit $ 85,928 $ 69,353 $ 217,099 $ 196,550 Operating expenses Selling, general and administrative expenses 35,859 29,625 100,277 82,798 Operating profit $ 50,069 $ 39,728 $ 116,822 $ 113,752 Interest expense ( 1,738 ) ( 2,107 ) ( 5,466 ) ( 8,550 ) Interest income 1,483 990 4,309 3,132 Other (expense) income, net ( 580 ) ( 2,729 ) 2,780 ( 5,918 ) Loss on debt refinancing — — — ( 1,558 ) Income before income taxes $ 49,234 $ 35,882 $ 118,445 $ 100,858 Income tax expense ( 12,375 ) ( 9,938 ) ( 30,197 ) ( 26,645 ) Equity in net (loss) income of non-consolidated affiliates ( 404 ) 2,767 2,975 6,671 Net income $ 36,455 $ 28,711 $ 91,223 $ 80,884 Earnings per share: Basic weighted average shares outstanding 31,556,312 32,305,396 31,899,623 32,238,805 Diluted weighted average shares outstanding 32,581,820 33,653,447 33,023,743 33,222,354 Basic earnings per share $ 1.16 $ 0.89 $ 2.86 $ 2.51 Diluted earnings per share $ 1.12 $ 0.85 $ 2.76 $ 2.43 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 BLUE BIRD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended Nine Months Ended (in thousands of dollars) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Net income $ 36,455 $ 28,711 $ 91,223 $ 80,884 Other comprehensive income, net of tax: Net change in defined benefit pension plan 53 131 158 393 Total other comprehensive income $ 53 $ 131 $ 158 $ 393 Comprehensive income $ 36,508 $ 28,842 $ 91,381 $ 81,277 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 BLUE BIRD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended (in thousands of dollars) June 28, 2025 June 29, 2024 Cash flows from operating activities Net income $ 91,223 $ 80,884 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 11,671 10,913 Non-cash interest expense 249 305 Share-based compensation expense 12,910 7,017 Equity in net income of non-consolidated affiliates ( 2,975 ) ( 6,671 ) Dividend from equity investment in affiliates — 2,991 Loss on disposal of fixed assets 316 33 Deferred income tax (benefit) expense ( 5,442 ) 4,165 Amortization of deferred actuarial pension losses 209 516 Loss on debt refinancing — 1,558 Changes in assets and liabilities: Accounts receivable 37,991 ( 21,432 ) Inventories ( 23,244 ) ( 9,251 ) Other assets ( 8,709 ) 680 Accounts payable 7,305 ( 9,961 ) Accrued expenses, pension and other liabilities ( 10,408 ) ( 5,987 ) Total adjustments $ 19,873 $ ( 25,124 ) Total cash provided by operating activities $ 111,096 $ 55,760 Cash flows from investing activities Cash paid for fixed assets $ ( 18,215 ) $ ( 10,137 ) Equity investment in affiliates (Note 12) ( 850 ) — Total cash used in investing activities $ ( 19,065 ) $ ( 10,137 ) Cash flows from financing activities Revolving credit facility borrowings $ — $ 36,220 Revolving credit facility repayments — ( 36,220 ) Term loan borrowings — 100,000 Term loan repayments ( 3,750 ) ( 134,300 ) Principal payments on finance leases ( 981 ) ( 440 ) Cash paid for debt costs — ( 3,128 ) Repurchase of common stock in connection with repurchase program (Note 13) ( 38,993 ) — Repurchase of common stock in connection with stock award exercises ( 4,412 ) ( 301 ) Cash received from stock option exercises 1,484 1,974 Total cash used in financing activities $ ( 46,652 ) $ ( 36,195 ) Change in cash and cash equivalents 45,379 9,428 Cash and cash equivalents at beginning of period 127,687 78,988 Cash and cash equivalents at end of period $ 173,066 $ 88,416 5 Nine Months Ended (in thousands of dollars) June 28, 2025 June 29, 2024 Supplemental disclosures of cash flow information Cash paid or received during the period: Interest paid $ 5,710 $ 7,856 Interest received ( 4,132 ) ( 3,131 ) Income tax paid, net of tax refunds 43,594 18,856 Non-cash investing and financing activities: Changes in accounts payable for capital additions to property, plant and equipment $ 1,573 $ 2,336 Warrants issued for equity investment in affiliate (note 12) — 7,416 Right-of-use assets obtained in exchange for operating lease obligations — 1,682 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 BLUE BIRD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) Three Months Ended (in thousands of dollars, except for share data) Common Stock Convertible Preferred Stock Treasury Stock Shares Par Value Additional Paid-In-Capital Shares Amount Accumulated Other Comprehensive Loss Retained Earnings (Accumulated Deficit) Shares Amount Total Stockholders' Equity Balance, March 29, 2025 31,674,003 $ 3 $ 191,985 — $ — $ ( 26,311 ) $ 24,715 — $ — $ 190,392 Stock option activity 51,497 — 916 — — — — — — 916 Share-based compensation expense — — 2,971 — — — — — — 2,971 Share repurchases (Note 13) ( 245,249 ) — — — — — ( 8,940 ) — — ( 8,940 ) Net income — — — — — — 36,455 — — 36,455 Other comprehensive income, net of tax — — — — — 53 — — — 53 Balance, June 28, 2025 31,480,251 $ 3 $ 195,872 — $ — $ ( 26,258 ) $ 52,230 — $ — $ 221,847 Balance, March 30, 2024 32,299,065 $ 3 $ 191,216 — $ — $ ( 31,622 ) $ ( 3,527 ) 1,782,568 $ ( 50,282 ) $ 105,788 Restricted stock activity 18,896 — — — — — — — — — Stock option activity 13,200 — 223 — — — — — — 223 Share-based compensation expense — — 2,430 — — — — — — 2,430 Net income — — — — — — 28,711 — — 28,711 Other comprehensive income, net of tax — — — — — 131 — — — 131 Balance, June 29, 2024 32,331,161 $ 3 $ 193,869 — $ — $ ( 31,491 ) $ 25,184 1,782,568 $ ( 50,282 ) $ 137,283 7 Nine Months Ended (in thousands of dollars, except for share data) Common Stock Convertible Preferred Stock Treasury Stock Shares Par Value Additional Paid-In-Capital Shares Amount Accumulated Other Comprehensive Loss Retained Earnings (Accumulated Deficit) Shares Amount Total Stockholders' Equity Balance, September 28, 2024 32,268,022 $ 3 $ 185,977 — $ — $ ( 26,416 ) $ — — $ — $ 159,564 Restricted stock activity 168,852 — ( 4,412 ) — — — — — — ( 4,412 ) Stock option activity 91,428 — 1,484 — — — — — — 1,484 Share-based compensation expense — — 12,823 — — — — — — 12,823 Share repurchases (Note 13) ( 1,048,051 ) — — — — — ( 38,993 ) — — ( 38,993 ) Net income — — — — — — 91,223 — — 91,223 Other comprehensive income, net of tax — — — — — 158 — — — 158 Balance, June 28, 2025 31,480,251 $ 3 $ 195,872 — $ — $ ( 26,258 ) $ 52,230 — $ — $ 221,847 Balance, September 30, 2023 32,165,225 $ 3 $ 177,861 $ ( 31,884 ) $ ( 55,700 ) 1,782,568 $ ( 50,282 ) $ 39,998 Issuance of warrants (Note 12) — — 7,416 — — — — — — 7,416 Restricted stock activity 41,011 — ( 301 ) — — — — — — ( 301 ) Stock option activity 124,925 — 1,974 — — — — — — 1,974 Share-based compensation expense — — 6,919 — — — — — — 6,919 Net income — — — — — — 80,884 — — 80,884 Other comprehensive income, net of tax — — — — — 393 — — — 393 Balance, June 29, 2024 32,331,161 $ 3 $ 193,869 — $ — $ ( 31,491 ) $ 25,184 1,782,568 $ ( 50,282 ) $ 137,283 The accompanying notes are an integral part of these consolidated financial statements. 8 BLUE BIRD CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Nature of Business and Basis of Presentation Nature of Business Blue Bird Body Company ("BBBC"), a wholly-owned subsidiary of Blue Bird Corporation, was incorporated in 1958 and has manufactured, assembled and sold school buses to a variety of municipal, federal and commercial customers since 1927. The majority of BBBC’s sales are made to an independent dealer network, which in turn sells buses to ultimate end users. References in these notes to condensed consolidated financial statements to “Blue Bird,” the “Company,” “we,” “our,” or “us” relate to Blue Bird Corporation and its wholly-owned subsidiaries, unless the context specifically indicates otherwise. We are headquartered in Macon, Georgia. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and accounts have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting and Article 10 of Regulation S-X. The Company’s fiscal year ends on the Saturday closest to September 30 with its quarters consisting of thirteen weeks in most years. The fiscal years ending September 27, 2025 ("fiscal 2025") and ended September 28, 2024 ("fiscal 2024") consist or consisted of 52 weeks. The third quarters of fiscal 2025 and fiscal 2024 both included 13 weeks. The nine month periods in fiscal 2025 and 2024 both included 39 weeks. In the opinion of management, all adjustments considered necessary for a fair presentation of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Operating results for any interim period are not necessarily indicative of the results that may be expected for the entire year. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The Condensed Consolidated Balance Sheet data as of September 28, 2024 was derived from the Company’s audited financial statements but does not include all disclosures required by U.S. GAAP. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes as of and for the fiscal year ended September 28, 2024 as set forth in the Company's fiscal 2024 Form 10-K filed with the Securities and Exchange Commission ("SEC") on November 25, 2024. Impacts of Supply Chain Constraints on Our Business The global automotive industry supply chain constraints that arose subsequent to the novel coronavirus pandemic known as "COVID-19" and that were further exacerbated by additional stress resulting from Russia’s invasion of Ukraine in February 2022 continued to impact our business and operations during the third quarters of fiscal 2024 and 2025. Specifically, they continued to result in higher purchasing costs, including freight costs incurred to deliver critical components, to procure the raw materials inventory needed to produce buses to fulfill sales orders. Additionally, there were still occasional shortages of certain critical components that limited the number and/or mix of school buses that we could produce and sell. Nonetheless, ongoing improvements in manufacturing operations that have resulted in the consistent production of buses, when coupled with periodic pricing actions taken to ensure that the increased sales prices charged for buses keep pace with increased costs to procure inventory to produce buses, have resulted in the Company reporting gross profit and gross margin in the third quarters of fiscal 2025 and 2024 that exceeded those reported in pre-pandemic fiscal years. Significant uncertainty still exists concerning the magnitude and duration of the ongoing supply chain constraints and accordingly, precludes any prediction as to the ultimate severity of the adverse impacts on our business, financial condition, results of operations, and liquidity. Use of Estimates and Assumptions The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions. At the date of the financial statements, these estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities, and during the reporting period, these estimates and assumptions affect the reported 9 amounts of revenues and expenses. For example, significant management judgments are required in determining excess, obsolete, or unsalable inventory; the allowance for doubtful accounts; 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. Future events, including the extent and duration of continued supply chain constraints and their related economic impacts, 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 condensed 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 and may employ outside experts to assist in the Company’s evaluations. Actual results could differ from the estimates that the Company has used. 2. Summary of Significant Accounting Policies and Recently Issued Accounting Standards The Company’s significant accounting policies are described in the consolidated financial statements included in the Company’s fiscal 2024 Form 10-K, filed with the SEC on November 25, 2024. Our senior management has reviewed these significant accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies in the nine months ended June 28, 2025. Recently Issued Accounting Standards ASU 2023-07 On November 27, 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires public business entities ("PBEs") to disclose information about their reportable segments’ significant expenses on an interim and annual basis. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with early adoption permitted. ASU 2023-09 On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires entities to disclose more detailed information in their reconciliation of their statutory tax rate to their effective tax rate. PBEs are required to provide this incremental detail in a numerical, tabular format. The ASU also requires entities to disclose more detailed information about income taxes paid, including by jurisdiction; pretax income (or loss) from continuing operations; and income tax expense (or benefit). The ASU is effective for PBEs in fiscal years beginning after December 15, 2024, with early adoption permitted. ASUs 2024-03 & 2025-01 On November 4, 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires PBEs to disclose disaggregated information about certain income statement expense line items. On January 6, 2025, the FASB issued ASU 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date , to clarify the effective date of ASU 2024-03, which is for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. The new ASUs will not impact amounts recorded in the financial statements but instead, will require more detailed disclosures in the footnotes to the financial statements. The Company plans to provide the updated disclosures required by the ASUs in the periods in which they are effective. 3. Supplemental Financial Information Inventories The following table presents the components of inventories at the dates indicated: (in thousands of dollars) June 28, 2025 September 28, 2024 Raw materials $ 80,486 $ 83,027 Work in process 38,231 32,556 Finished goods 32,325 12,215 Total inventories $ 151,042 $ 127,798 10 Product Warranties The following table reflects activity in accrued warranty cost (current and long-term portions combined) for the periods presented: Three Months Ended Nine Months Ended (in thousands of dollars) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Balance at beginning of period $ 16,345 $ 15,476 $ 16,179 $ 15,434 Add current period accruals 2,856 2,414 8,092 7,267 Current period reductions of accrual ( 2,627 ) ( 2,394 ) ( 7,697 ) ( 7,205 ) Balance at end of period $ 16,574 $ 15,496 $ 16,574 $ 15,496 Extended Warranties The following table reflects activity in deferred warranty income (current and long-term portions combined), for the sale of extended warranties of two to five years , for the periods presented: Three Months Ended Nine Months Ended (in thousands of dollars) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Balance at beginning of period $ 30,448 $ 25,563 $ 27,962 $ 23,123 Add current period deferred income 3,861 3,547 11,127 10,107 Current period recognition of income ( 2,520 ) ( 2,057 ) ( 7,300 ) ( 6,177 ) Balance at end of period $ 31,789 $ 27,053 $ 31,789 $ 27,053 The outstanding balance of deferred warranty income in the table above is considered a "contract liability," and represents a performance obligation of the Company that we satisfy over the term of the arrangement but for which we have been paid in full at the time the warranty was sold. We expect to recognize $ 2.7 million of the outstanding contract liability during the remainder of fiscal 2025, $ 10.3 million in fiscal 2026, and the remaining balance thereafter. Self-Insurance The following table reflects our total accrued self-insurance liability, comprised of workers' compensation and health insurance related claims, at the dates indicated: (in thousands of dollars) June 28, 2025 September 28, 2024 Current portion $ 4,981 $ 5,008 Long-term portion 2,419 2,248 Total accrued self-insurance $ 7,400 $ 7,256 The current and long-term portions of the accrued self-insurance liability are reflected in accrued expenses and other liabilities, respectively, on the Condensed Consolidated Balance Sheets. Shipping and Handling Revenues Shipping and handling revenues were $ 6.9 million and $ 5.9 million for the three months ended June 28, 2025 and June 29, 2024, respectively, and $ 17.2 million and $ 15.6 million for the nine months ended June 28, 2025 and June 29, 2024, respectively. The related cost of goods sold was $ 6.1 million and $ 5.5 million for the three months ended June 28, 2025 and June 29, 2024, respectively, and $ 15.4 million and $ 14.2 million for the nine months ended June 28, 2025 and June 29, 2024, respectively. 11 Pension (Income) Expense Components of net periodic pension benefit (income) expense were as follows for the periods presented: Three Months Ended Nine Months Ended (in thousands of dollars) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Interest cost $ 1,312 $ 1,484 $ 3,936 $ 4,452 Expected return on plan assets ( 1,819 ) ( 1,620 ) ( 5,457 ) ( 4,860 ) Amortization of prior loss 70 172 209 516 Net periodic pension benefit (income) expense $ ( 437 ) $ 36 $ ( 1,312 ) $ 108 Amortization of prior loss, recognized in other comprehensive income ( 70 ) ( 172 ) ( 209 ) ( 516 ) Total recognized in net periodic pension benefit (income) expense and other comprehensive income $ ( 507 ) $ ( 136 ) $ ( 1,521 ) $ ( 408 ) 4. Debt Term loan borrowings consisted of the following at the dates indicated: (in thousands of dollars) June 28, 2025 September 28, 2024 Term loan borrowings, net of deferred financing costs of $ 1,007 and $ 1,256 , respectively $ 91,493 $ 94,994 Less: current portion of long-term debt 5,000 5,000 Long-term debt, net of current portion $ 86,493 $ 89,994 Term loan borrowings are recognized on the Condensed Consolidated Balance Sheets at the unpaid principal balance, and are not subject to fair value measurement; however, given the variable rates on the loans, the Company estimates that the unpaid principal balance approximates fair value. If measured at fair value in the financial statements, the term loans would be classified as Level 2 in the fair value hierarchy. At June 28, 2025 and September 28, 2024, $ 92.5 million and $ 96.3 million, respectively, were outstanding on the term loans. At June 28, 2025 and September 28, 2024, the stated interest rates on the term loans were 6.1 % and 6.9 %, respectively. At June 28, 2025 and September 28, 2024, the weighted-average annual effective interest rates for the term loans were 6.6 % and 8.2 %, respectively, which include amortization of the deferred financing costs. At June 28, 2025, $ 8.3 million of letters of credit were outstanding, which reduces the availability on the revolving line of credit. There were no borrowings outstanding on the Revolving Credit Facility; therefore, the Company would have been able to borrow $ 141.7 million on the revolving line of credit. Interest expense on all indebtedness was $ 1.7 million and $ 2.1 million for the three months ended June 28, 2025 and June 29, 2024, respectively, and $ 5.5 million and $ 8.6 million for the nine months ended June 28, 2025 and June 29, 2024, respectively. The schedule of remaining principal payments through maturity for the term loans is as follows: (in thousands of dollars) Fiscal Year Principal Payments 2025 $ 1,250 2026 5,000 2027 5,000 2028 5,000 2029 76,250 Total remaining principal payments $ 92,500 12 5. Income Taxes Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items that are required to be discretely recognized within the current interim period. The effective tax rates in the periods presented are largely based upon the annual forecasted pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business, primarily in the United States of America ("U.S."). In periods where our pre-tax income approximates or is equal to break-even, the effective tax rates for quarter-to-date and full-year periods may not be meaningful due to discrete period items. Three Months The effective tax rate for the three months ended June 28, 2025 was 25.1 % 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 June 29, 2024 was 27.7 % and differed from the statutory federal income tax rate of 21 %. The increase was primarily due to the impacts from state taxes and certain permanent items on the federal rate, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the quarter. Nine Months The effective tax rate for the nine months ended June 28, 2025 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 period. The effective tax rate for the nine months ended June 29, 2024 was 26.4 % and differed from the statutory federal income tax rate of 21 %. The 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. 6. Guarantees, Commitments and Contingencies Litigation At June 28, 2025, the Company had a number of product liability and other cases pending. Management believes that, considering the Company’s insurance coverage and its intention to vigorously defend its positions, the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial statements. Environmental The Company is subject to a variety of environmental regulations relating to the use, storage, discharge and disposal of hazardous materials used in its manufacturing processes. Failure by the Company to comply with present and future regulations could subject it to future liabilities. In addition, such regulations could require the Company to acquire costly equipment or to incur other significant expenses to comply with environmental regulations. The Company is currently not involved in any material environmental proceedings and therefore, management believes that the resolution of pending environmental matters will not have a material adverse effect on the Company’s financial statements. 13 7. Segment Information We manage our business in two operating segments: (i) the Bus segment, which includes the manufacturing and assembly of buses to be sold to a variety of customers across the U.S., Canada and in certain limited international markets; and (ii) the Parts segment, which consists primarily of the purchase of parts from third parties to be sold to dealers within the Company’s network and certain large fleet customers. Management evaluates the segments based primarily upon revenues and gross profit, which are reflected in the tables below for the periods presented: Net sales Three Months Ended Nine Months Ended (in thousands of dollars) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Bus (1) $ 372,240 $ 308,037 $ 993,099 $ 919,433 Parts (1) 25,771 25,330 77,635 77,509 Segment net sales $ 398,011 $ 333,367 $ 1,070,734 $ 996,942 (1) Parts segment revenue includes $ 1.6 million and $ 2.6 million for the three months ended June 28, 2025 and June 29, 2024, respectively, and $ 5.4 million and $ 6.9 million for the nine months ended June 28, 2025 and June 29, 2024, respectively, related to inter-segment sales of parts that was eliminated by the Bus segment upon consolidation. Gross profit Three Months Ended Nine Months Ended (in thousands of dollars) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Bus $ 73,211 $ 56,545 $ 178,017 $ 157,428 Parts 12,717 12,808 39,082 39,122 Segment gross profit $ 85,928 $ 69,353 $ 217,099 $ 196,550 The following table is a reconciliation of segment gross profit to consolidated income before income taxes for the periods presented: Three Months Ended Nine Months Ended (in thousands of dollars) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Segment gross profit $ 85,928 $ 69,353 $ 217,099 $ 196,550 Adjustments: Selling, general and administrative expenses ( 35,859 ) ( 29,625 ) ( 100,277 ) ( 82,798 ) Interest expense ( 1,738 ) ( 2,107 ) ( 5,466 ) ( 8,550 ) Interest income 1,483 990 4,309 3,132 Other (expense) income, net ( 580 ) ( 2,729 ) 2,780 ( 5,918 ) Loss on debt refinancing — — — ( 1,558 ) Income before income taxes $ 49,234 $ 35,882 $ 118,445 $ 100,858 Sales are attributable to geographic areas based on customer location and were as follows for the periods presented: Three Months Ended Nine Months Ended (in thousands of dollars) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 U.S. $ 352,715 $ 291,374 $ 939,946 $ 910,489 Canada 45,022 41,804 129,096 85,981 Rest of world 274 189 1,692 472 Total net sales $ 398,011 $ 333,367 $ 1,070,734 $ 996,942 14 8. Revenue The following table disaggregates revenue by product category for the periods presented: Three Months Ended Nine Months Ended (in thousands of dollars) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Diesel buses $ 125,872 $ 109,797 $ 367,855 $ 318,239 Alternative power buses (1) 234,373 185,453 582,757 560,944 Other (2) 12,699 13,393 44,471 42,081 Parts 25,067 24,724 75,651 75,678 Net sales $ 398,011 $ 333,367 $ 1,070,734 $ 996,942 (1) Includes buses sold with any power source other than diesel (e.g., gasoline, propane, compressed natural gas ("CNG") or electric). (2) Includes shipping and handling revenue, extended warranty income, surcharges and chassis and bus shell sales . 9. Earnings Per Share The following table presents the earnings per share computation for the periods presented: Three Months Ended Nine Months Ended (in thousands except for share data) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Numerator: Net income $ 36,455 $ 28,711 $ 91,223 $ 80,884 Denominator: Weighted-average common shares outstanding 31,556,312 32,305,396 31,899,623 32,238,805 Weighted-average dilutive securities, restricted stock 471,039 533,789 535,117 382,523 Weighted-average dilutive securities, stock options 214,028 357,124 231,895 277,468 Weighted-average dilutive securities, warrants 340,441 457,138 357,108 323,558 Weighted-average shares and dilutive potential common shares (1) 32,581,820 33,653,447 33,023,743 33,222,354 Earnings per share: Basic earnings per share $ 1.16 $ 0.89 $ 2.86 $ 2.51 Diluted earnings per share $ 1.12 $ 0.85 $ 2.76 $ 2.43 (1) There were no potentially dilutive securities excluded from the computation of diluted earnings per share for the each of three months and nine months ended June 28, 2025 and June 29, 2024, respectively, because their effect was antidilutive. 15 10. Accumulated Other Comprehensive Loss The following table provides information on changes in accumulated other comprehensive loss ("AOCL") for the periods presented: Three Months Ended Nine Months Ended (in thousands of dollars) Defined Benefit Pension Plan Total AOCL Defined Benefit Pension Plan Total AOCL June 28, 2025 Beginning Balance $ ( 26,311 ) $ ( 26,311 ) $ ( 26,416 ) $ ( 26,416 ) Amounts reclassified and included in earnings 70 70 209 209 Total before taxes 70 70 209 209 Income taxes ( 17 ) ( 17 ) ( 51 ) ( 51 ) Ending Balance June 28, 2025 $ ( 26,258 ) $ ( 26,258 ) $ ( 26,258 ) $ ( 26,258 ) June 29, 2024 Beginning Balance $ ( 31,622 ) $ ( 31,622 ) $ ( 31,884 ) $ ( 31,884 ) Amounts reclassified and included in earnings 172 172 516 516 Total before taxes 172 172 516 516 Income taxes ( 41 ) ( 41 ) ( 123 ) ( 123 ) Ending Balance June 29, 2024 $ ( 31,491 ) $ ( 31,491 ) $ ( 31,491 ) $ ( 31,491 ) 11. Stockholder Transaction Costs 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 Offerings were conducted pursuant to prospectus supplements, dated December 14, 2023 and February 15, 2024, respectively, 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 nine months ended June 29, 2024. The $ 3.2 million of expense is included within other (expense) income, net on the Condensed Consolidated Statements of Operations for the nine months ended June 29, 2024. No such expense was incurred in the nine months ended June 28, 2025. 12. Equity Investment in Affiliates The Company has made investments in the below entities and utilizes the equity method of accounting to record its interest in them as it does not have control to direct the activities that most significantly impact their financial performance based on the shared powers of the venture partners. The carrying amount of the equity method investments is adjusted for any contribution that the Company makes to them as well as for the Company’s proportionate share of net earnings or losses and any dividends received. Micro Bird Holdings, Inc. The Company holds a 50 % equity interest in Micro Bird Holdings, Inc. ("Micro Bird"), our unconsolidated Canadian joint venture that produces Blue Bird Micro Bird by Girardin Type A buses in Drummondville, Quebec. In recognizing the Company’s 50 % portion of Micro Bird's net income or loss, the Company recorded equity in net (loss) income of non-consolidated affiliates on the Condensed Consolidated Statements of Operations totaling approximately zero and $ 2.8 million for 16 the three months ended June 28, 2025 and June 29, 2024, respectively, and $ 4.1 million and $ 6.7 million for the nine months ended June 28, 2025 and June 29, 2024, respectively. In December 2023, Micro Bird paid dividends to all common stockholders, with the Company's proportionate share totaling $ 3.0 million, gross of required withholding taxes. The dividend was recorded as a reduction in the balance of equity investment in affiliates on the Condensed Consolidated Balance Sheets and is presented as a cash inflow in the operating section of the Condensed Consolidated Statements of Cash Flows. No dividends were paid in the nine months ended June 28, 2025. At June 28, 2025 and September 28, 2024, the carrying value of the Company's investment in Micro Bird included within equity investment in affiliates on the Condensed Consolidated Balance Sheets was $ 28.5 million and $ 24.4 million, respectively. Clean Bus Solutions, LLC The Company holds a 50 % equity interest in Clean Bus Solutions, LLC ("CBS"), our unconsolidated joint venture that provides a fleet-as-a-service ("FaaS") offering using electric school buses manufactured and sold by the Company. The service is offered to qualified customers of the Company by providing them with turnkey electrification solutions, including a wide product range consisting of, among others, electric school buses, financing of electric buses and supporting charging infrastructure, project planning and management, and fleet optimization. During the three and nine months ended June 28, 2025, the Company made $ 0.4 million and $ 0.9 million of cash contributions to CBS, respectively, and during the nine months ended June 29, 2024, the Company recorded the $ 7.4 million fair value of warrants it issued to the joint venture partner as its initial investment in CBS, both of which increased the balance of equity investment in affiliates on the Condensed Consolidated Balance Sheets. In recognizing the Company’s 50 % portion of CBS' net income or loss, the Company recorded $( 0.4 ) million and $( 1.1 ) million in equity in net (loss) income of non-consolidated affiliates on the Condensed Consolidated Statements of Operations for the three and nine months ended June 28, 2025, respectively, while no amount was recorded in the nine months ended June 29, 2024. CBS paid no dividends in any period. At June 28, 2025 and September 28, 2024, the carrying value of the Company's investment in CBS included within equity investment in affiliates on the Condensed Consolidated Balance Sheets was $ 7.4 million and $ 7.7 million, respectively. 13. Stockholders’ Equity Share Repurchase Program and Common 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. During the three and nine months ended June 28, 2025, the Company repurchased 245,249 and 1,048,051 shares of its common stock, respectively, for $ 8.9 million and $ 39.0 million, respectively, pursuant to the share repurchase plan. The Company constructively retired these shares immediately after repurchase, with the $ 8.9 million and $ 39.0 million amount paid in excess of the $ 0.0001 par value of each share recorded as a reduction in retained earnings. No such repurchases were made during the nine months ended June 29, 2024. The total remaining authorization for future common stock repurchases under the Company's share repurchase program was $ 11.1 million as of June 28, 2025. 14. Subsequent Events On July 4, 2025, Public Law No. 119-21, the One Big Beautiful Bill Act ("Act"), was signed into law. The Act includes comprehensive legislation addressing budget and spending matters that is intended, among others, to reduce taxes; reduce or increase spending, as applicable, for certain federal programs; increase the statutory debt limit and otherwise address certain agencies and programs throughout the federal government. The Act permanently extends, with modifications, certain tax provisions that were enacted as part of the Tax Cut and Jobs Act ("TCJA") that became effective on January 1, 2018, but that were set to change or expire at the end of 2025. The Act also features certain modified and new tax relief measures for businesses. Additionally, it includes various revenue-raising measures, including 17 changes to certain Inflation Reduction Act ("IRA") clean energy tax credits and various limits on business tax deductions, that are intended to offset part of the cost of the new legislation.  The provisions of Accounting Standards Codification Topic 740, Income Taxes ("ASC 740"), require that the effects of changes in tax laws and rates be recognized in the period in which the new legislation is enacted, which represents the date that it is signed into law. Since the enactment date of the Act occurred subsequent to the June 28, 2025 Condensed Consolidated Balance Sheet date, the Company is required to recognize the impact of the Act on its accounting for income taxes in its fourth quarter of fiscal 2025. Given the recent enactment date, when coupled with the comprehensive nature of the Act and the fact that the Treasury Department will be developing additional interpretive guidance to consider and apply to comply with certain provisions included within the Act, the Company is evaluating the potential impact on its accounting for income taxes. Accordingly, the Company is currently unable to provide an estimate of the potential impact of the Act on its fiscal 2025 consolidated financial statements.