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Item 7. Management’s Discussion and Analysis

2025-11-24 compared with 2024-11-25 · 211 added, 209 removed, 381 unchanged (52% of the section changed)

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

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

The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with the Company’s audited financial statements for the fiscal years ended September 27, 2025, September 28, 2024 and September 30, 2023 and related notes appearing elsewhere in this Report.

Our actual results may not be indicative of future performance.

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

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

As the only manufacturer of chassis and body production specifically designed for school bus applications in the U.S., Blue Bird is recognized as an industry leader for school bus innovation, safety, product quality/reliability/durability, 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.

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Impact of Supply Chain Constraints on Our Business

During the second half of our fiscal year that ended October 3, 2020 ("fiscal 2020") and first half of our fiscal year that ended on October 2, 2021 ("fiscal 2021"), COVID-19 materially affected demand for new buses and replacement/maintenance parts, significantly impacting our business and operations.

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

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

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

These supply chain disruptions had a significant adverse impact our operations and results due to higher purchasing costs, including freight costs incurred to expedite receipt of critical components, increased manufacturing inefficiencies and our inability to complete the production of buses to fulfill sales orders during most of fiscal 2022.

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

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

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

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

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

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

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

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

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

Accordingly, the Company's backlog remained strong at approximately 4,600 units and 4,800 units as of September 30, 2023 and September 28, 2024, respectively, despite it selling over 8,500 units during fiscal 2023, the majority of which were included in the backlog that existed as of October 1, 2022, and 9,000 units in fiscal 2024.

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

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 COVID-19 pandemic.

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 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 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 were better than 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 4,800 units and 3,070 units as of September 28, 2024 and September 27, 2025, respectively, despite selling 9,000 units in fiscal 2024 and over 9,400 units in 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.

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

Impact of Russia’s Invasion of Ukraine on Our Business

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

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

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

While the Company has generally mitigated its direct exposure to steel prices by executing fixed price purchase contracts (generally purchased up to four quarters in advance) for the majority of the significant amount of steel used in the manufacture of school bus bodies, many suppliers from which the Company purchases components containing steel increased the price that they charge the Company to acquire such inventory, primarily on a lagged basis, starting from the latter half of fiscal 2022 and continuing into fiscal 2024, as applicable.

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

Additionally, Russia has historically been a large global exporter of oil and many countries have ceased buying Russian oil in protest of the invasion and to comply with sanctions imposed by the U.S.

and many European countries.

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

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

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

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

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

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

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

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

and globally.

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

Impacts of Governmental Policies, Programs, Regulations and/or Laws on Our Business

Changes in trade policies and tariffs began to materially impact our procurement costs for certain imported inventory during the second half of fiscal 2025.

However, such higher inventory purchase costs did not negatively impact our operating results or cash flows during this same period as such impact was offset by increases in the sales prices we charged for our products.

However, they could materially impact our operating results and cash flows 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 first nine months of fiscal 2025.

Although we noted an increase in the flow of government grant money during the second half of fiscal 2025, the timing of some of these payments occurred too late in the year 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 2026 and perhaps beyond.

Nonetheless, 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 future periods.

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.

See PART I, Item 1A.

"Risk Factors," of this Report for a discussion of the material risks we believe we face particularly related to governmental policies, programs, regulations and/or laws.

Factors Affecting Our Revenues

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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 and general inflationary pressures.

• Buying patterns of major fleets .

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• Seasonality.

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

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.

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

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.

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

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

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

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

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

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

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 fiscal 2025.

Additionally, the imposition of tariffs on certain imported inventory that became effective during the second half of fiscal 2025 has further increased our inventory purchase costs.

In response, the Company announced a number of sales price increases over this same period that applied to new sales orders and, in limited circumstances, to backlog orders that were both intended to mitigate the impact of rising purchase costs on our operations, results and cash flows.

These cumulative price increases have had a significant, positive impact on sales and gross profit during fiscal 2023, fiscal 2024 and continuing into 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.

F actors Affecting Our Expenses and Other Items

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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, efforts by certain suppliers to pass through the economics associated with key commodities, 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 challenges, and the impact of overhead items such as utilities.

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 challenges, 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, and 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.

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 compensation 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.

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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.

• Other income/expense, net .

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 periodic pension expense or income as well as gains or losses on foreign currency, if any.

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

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

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.

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

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“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).

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.

interest expense including the component of operating lease expense (which is presented as a single operating expense within cost of goods sold or 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.

and depreciation and amortization including the component of operating lease expense (which is presented as a single operating expense within cost of goods sold or selling, general and administrative expenses in our U.S.

GAAP financial statements) that represents amortization charges on right-of-use lease assets;

net gains or losses on the disposal of assets as well as certain charges such as (i) significant product design changes;

(ii) transaction related costs;

(iii) 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 operational transformation and major product redesign initiatives, represent operating expenses that may be recorded in more than one annual period, the significant project or transaction giving rise to such expenses is not considered to be indicative of the Company’s normal operations.

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.

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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 paragraph.

We believe the non-GAAP measures offer additional financial metrics that, when coupled with the U.S.

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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.

Although we believe that Adjusted EBITDA and Adjusted EBITDA Margin may enhance an evaluation of our operating performance 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.

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

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

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

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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.

Financial information is reported on the basis that it is used internally by the CODM in evaluating segment

performance and deciding how to allocate resources to segments.

The President and CEO of the Company has been identified as the CODM.

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

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Interest income 6,194 4,136

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

Other income (expense), net 3,406 (4,394)

Loss on debt refinancing or modification

(1,558) (537)

Income before income taxes

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Adjusted EBITDA Margin

15.0 % 13.6 %

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

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Net sales were $1,480.1 million for fiscal 2025, an increase of $132.9 million, or 9.9%, compared to $1,347.2 million for fiscal 2024.

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

The increase in net sales is primarily due to an increase in Bus unit bookings, Bus customer and product mix changes and cumulative Bus price increases, including increases that were intended to mitigate the impact of increased procurement costs for certain of our imported inventory as a result of the imposition of tariffs during the second half of fiscal 2025, which were partially offset by a small decrease in Parts sales.

Bus sales increased $134.2 million, or 10.8%, reflecting a 4.5% increase in units booked and a 6.0% increase in average sales price per unit.

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The increase in units sold was primarily due to product and customer mix changes as well as slight improvements in supply chain constraints impacting the Company's ability to produce and deliver buses due to shortages of critical components during fiscal 2025 compared to fiscal 2024.

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

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

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

The increase in average unit sales price was primarily due to customer and product mix changes as well as price increases implemented to offset increases in inventory costs.

Parts sales decreased $1.3 million, or 1.2%, for fiscal 2025 compared to fiscal 2024.

This small decrease is primarily attributed to slight variations due to product and channel mix that were slightly larger than price increases that were implemented to offset increases in inventory costs.

Cost of goods sold .

Total cost of goods sold was $1,176.6 million for fiscal 2025, an increase of $85.6 million, or 7.8%, compared to $1,091.0 million for fiscal 2024.

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

As a percentage of net sales, total cost of goods sold decreased from 81.0% to 79.5%, primarily due to the impact of ongoing pricing actions taken by management that exceeded the impact of increasing costs resulting from inflationary pressures and the imposition of tariffs 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 $86.3 million, or 8.3%, for fiscal 2025 compared to fiscal 2024.

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

Also contributing was increased inventory costs, as the average cost of goods sold per unit for fiscal 2024 was 4.2% higher compared to fiscal 2023, primarily due to product and mix changes as well as increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures and b) ongoing supply chain disruptions that resulted in higher purchase costs for components.

The $1.6 million, or 3.1%, increase in parts segment cost of goods sold for fiscal 2024 compared to fiscal 2023 was primarily due to increased purchased parts costs, driven by ongoing inflationary pressures and supply chain disruptions, as well as slight variations due to product and channel mix.

The increase was primarily attributable to the 4.5% increase in units booked discussed above as well as the 3.6% increase in the average cost of goods sold per unit in fiscal 2025 compared to fiscal 2024.

This increase primarily resulted from increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures and the imposition of tariffs during the second half of fiscal 2025, 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 $0.7 million, or 1.3%, decrease in parts segment cost of goods sold for fiscal 2025 compared to fiscal 2024 was primarily due to slight variations due to product and channel mix that were slightly larger than increased product costs driven by inflationary pressures and tariffs.

Operating profit .

Operating profit was $167.2 million for fiscal 2025, an increase of $27.8 million, or 20.0%, compared to $139.3 million for fiscal 2024.

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

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

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

Profitability was positively impacted by an increase of $47.4 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 $19.5 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 CEO, b) labor costs and c) research and development expense.

Interest expense .

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Other expense/income, net.

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

We recorded $0.1 million of net periodic pension expense during fiscal 2024 when compared with $0.7 million recorded during fiscal 2023.

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

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

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

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

The 2023 Offerings were conducted pursuant to prospectus supplements, dated June 7, 2023 and September 11, 2023, respectively, to the prospectus, dated December 22, 2021, included in the Company’s registration statement on Form S-3 (File No.

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

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

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

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

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

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

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

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

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

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

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

These payments totaled $2.7 million in fiscal 2024 and were recorded in other (expense) income, net in the Consolidated Statements of Operations because such compensation is not reflective of wages paid for services provided by the direct and indirect employees who support our operating activities and is expensed within cost of goods sold.

There was no similar expense recorded during fiscal 2023.

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

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

Other income, net, was $3.4 million for fiscal 2025, an increase of $7.8 million, or 177.5%, compared to $4.4 million of other expense, net, in fiscal 2024.

We recorded $1.7 million of net periodic pension income during fiscal 2025 when compared with $0.1 million of net periodic pension expense recorded during fiscal 2024.

Also, during fiscal 2025 and fiscal 2024, the Company sold certain state emissions credits that it was not projecting to use for approximately $2.6 million and $1.5 million, respectively.

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

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

Among other items, the CBA requires the payment of a (i) lump-sum payment to certain employees who are not eligible for an annual wage increase because their hourly wage rate exceeds the rate required by the terms of the CBA as well as (ii) one-time $750 signing bonus to the approximate 1,500 covered production workers in our Fort Valley and Macon, Georgia facilities at the time the CBA was executed.

During the third quarters of both fiscal 2025 and 2024, the Company paid the above applicable amounts to those employees covered by the CBA as well as similar amounts to a small number of hourly employees not covered by the CBA so that their total compensation was competitive with that of unionized employees performing comparable job functions.

These payments totaled $1.1 million and $2.7 million during fiscal 2025 and fiscal 2024, respectively, and were recorded in other income (expense), net in the Consolidated Statements of Operations because such compensation is not reflective of wages paid for services provided by the direct and indirect employees who support our operating activities and is expensed within cost of goods sold.

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

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 ("December 2021 Prospectus").

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 2024 Offerings, it was required to pay certain expenses in connection with these transactions that totaled approximately $3.2 million in fiscal 2024.

No similar expense was recorded during fiscal 2025.

Income taxes .

Income tax expense was $43.9 million for fiscal 2025 and $33.2 million for fiscal 2024.

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

The increase in the effective tax rate to 26.2% was primarily due to the impacts of state taxes and certain permanent items on the federal rate, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items.

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

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

The effective tax rate for fiscal 2025 was 25.9% and differed from the statutory Federal income tax rate of 21.0%.

The increase was primarily due to the impacts of state taxes and certain permanent items on the federal rate, which were partially offset by the impacts from discrete period items.

The effective tax rate for fiscal 2024 was 26.2% and differed from the statutory Federal income tax rate of 21.0%.

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

Adjusted EBITDA .

Adjusted EBITDA was $221.3 million, or 15.0% of net sales, for fiscal 2025, an increase of $38.4 million, or 21.0%, compared to $182.9 million, or 13.6% of net sales, for fiscal 2024.

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

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

The increase primarily results from the a) increase in gross profit, when adjusting for the impact of expenses that are excluded in calculating Adjusted EBITDA, as outlined in the revenue and cost of goods sold discussions above and b) $1.1 million increase in the 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 expenses that are excluded in calculating Adjusted EBITDA, as discussed above.

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

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Income tax expense

43,926 33,228

Depreciation, amortization, and disposals (2)

17,223 16,736

Operational transformation initiatives

Loss on debt refinancing or modification

Share-based compensation expense 14,785 8,609

Clean Bus Solutions impairment

Stockholder transaction costs

5 unchanged sentences

Adjusted EBITDA Margin (percentage of net sales)

(1) Includes $0.4 million for both fiscal 2024 and 2023, representing interest expense on operating lease liabilities, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Consolidated Statements of Operations.

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

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

15.0 % 13.6 %

(1) Includes $0.3 million and $0.4 million for fiscal 2025 and fiscal 2024, respectively, representing interest expense on operating lease liabilities, which are a component of lease expense and presented as a single operating expense within cost of goods sold or selling, general and administrative expenses on our Consolidated Statements of Operations.

(2) Includes $1.6 million for both fiscal 2025 and fiscal 2024, representing amortization charges on right-of-use operating lease assets, which are a component of lease expense and presented as a single operating expense within cost of goods sold or selling, general and administrative expenses on our Consolidated Statements of Operations.

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

(in thousands) 2024 2023

4 unchanged sentences

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

Operating profit (loss)

Operating profit

$ 139,331 $ 51,657

1 unchanged sentence

Interest income 4,136 1,004

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

Loss on debt modification

Income (loss) before income taxes

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

Loss on debt refinancing or modification

(1,558) (537)

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

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

Income before income taxes

$ 126,936 $ 25,805

Net income (loss)

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

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

$ 105,547 $ 23,812

3 unchanged sentences

Adjusted EBITDA Margin

7.8 % (1.8) %

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

10 unchanged sentences

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

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

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

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

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

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

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

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

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

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

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

Cost of goods sold .

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

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

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

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

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

Also contributing was increased inventory costs, as the average cost of goods sold per unit for fiscal 2023 was 5.2% higher compared to fiscal 2022, primarily due to increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures and b) ongoing supply chain disruptions that resulted in higher purchase costs for components and freight.

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

Also contributing was increased

inventory costs, as the average cost of goods sold per unit for fiscal 2024 was 4.2% higher compared to fiscal 2023, primarily due to product and mix changes as well as increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures and b) ongoing supply chain disruptions that resulted in higher purchase costs for components.

Operating profit .

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

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

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

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

Interest expense .

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

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

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

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

Other expense/income, net.

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

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

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

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

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

We recorded $0.1 million of net periodic pension expense during fiscal 2024 when compared with $0.7 million recorded during fiscal 2023.

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

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

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

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

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

These payments totaled $2.7 million in fiscal 2024 and were recorded in other income (expense), net in the Consolidated Statements of Operations because such compensation is not reflective of wages paid for services provided by the direct and indirect employees who support our operating activities and is expensed within cost of goods sold.

There was no similar expense recorded during fiscal 2023.

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

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

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

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

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

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

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

The 2023 Offerings were conducted pursuant to prospectus supplements, dated June 7, 2023 and September 11, 2023, respectively, to the December 2021 Prospectus.

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

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

Income taxes .

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

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

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

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

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

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

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

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

Adjusted EBITDA .

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

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

income tax expense or benefit;

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

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

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

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

(in thousands) 2024 2023

Net income (loss)

$ 105,547 $ 23,812

Interest expense, net (1)

17,380 14,973

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

Income tax expense 33,228 8,953

Depreciation, amortization, and disposals (2)

1 unchanged sentence

Operational transformation initiatives

Loss on debt modification 537 632

Loss on debt refinancing or modification

Share-based compensation expense 8,609 4,173

Product redesign initiatives

Stockholder transaction costs

5 unchanged sentences

Adjusted EBITDA Margin (percentage of net sales)

7.8 % (1.8) %

(1) Includes $0.4 million and $0.3 million for fiscal 2023 and 2022, respectively, representing interest expense on operating lease liabilities, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Consolidated Statements of Operations.

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

(1) Includes $0.4 million for both fiscal 2024 and fiscal 2023, representing interest expense on operating lease liabilities, which are a component of lease expense and presented as a single operating expense within cost of goods sold or selling, general and administrative expenses on our Consolidated Statements of Operations.

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

Liquidity and Capital Resources

15 unchanged sentences

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 2016 Credit Agreement"), which was also the amount outstanding as of September 30, 2023 (there were no amounts outstanding on the revolving credit facility portion of the Amended 2016 Credit Agreement on either date), (ii) interest and commitment fees accrued under the Amended 2016 Credit Agreement through the Closing Date and (iii) transaction costs associated with the consummation of the Credit Agreement.

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

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, which was also the amount outstanding as of September 28, 2024 (there were no amounts outstanding on the revolving credit facility portion of the previous credit agreement on either date), (ii) interest and commitment fees accrued under the previous credit agreement through the Closing Date and (iii) transaction costs associated with the consummation of the Credit Agreement.

During fiscal 2025 and fiscal 2024, we used cash generated from operations to make (i) $5.0 million of required quarterly principal payments on the Term Loan Facility and (ii) $3.8 million of required quarterly principal payments on the Term Loan Facility and repay all $36.2 million of Revolving Credit Facility borrowings from the Closing Date, respectively.

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).

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Short-Term and Long-Term Liquidity Requirements

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

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 existing cash and cash equivalent balances and expected cash flows from operations will be sufficient to meet our operating requirements for at least the next 12 months.

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

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

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

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

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

Our leases have remaining lease terms ranging from 0.5 years to 5.0 years, with the option to extend certain leases for up to 1.0 year, and total payments of approximately $7.1 million, of which approximately $2.6 million is due in fiscal 2026.

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

At September 27, 2025, total purchase commitments were $107.0 million, of which $106.5 million is expected to be paid in fiscal 2026.

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.

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

9 unchanged sentences

$ 127,687 $ 78,988 $ 10,479

Total cash provided by (used in) operating activities

Total cash provided by operating activities

176,214 111,112 119,928

1 unchanged sentence

(23,872) (15,815) (8,520)

Total cash (used in) provided by financing activities

Total cash used in financing activities

(50,716) (46,598) (42,899)

3 unchanged sentences

$ 229,313 $ 127,687 $ 78,988

Total cash provided by (used in) operating activities

Total cash provided by operating activities

Cash provided by operating activities totaled $176.2 million for fiscal 2025 and $111.1 million for fiscal 2024.

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

The primary drivers of the $65.1 million increase were as follows:

The increase primarily resulted from the a) $22.2 million increase in net income and b) effect of net changes in operating assets and liabilities that positively impacted operating cash flows by $28.9 million during fiscal 2025 when compared with fiscal 2024.

The primary drivers in this category were favorable changes in accounts receivable and accounts payable of $85.0 million and $1.4 million, respectively, that were partially offset by unfavorable changes in inventory, other assets and accrued expenses, pension and other liabilities of $19.2 million, $16.8 million, and $21.5 million, respectively, as follows:

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

Specifically, we had a significant increase in fleet revenue towards the end of fiscal 2024 relating to school buses that were delivered to coincide with the start of the new school year, with such revenue representing the majority of sales we make on credit.

During fiscal 2025, the accounts receivable balances relating to fiscal 2024 fleet revenue were collected, representing a significant cash inflow.

There were no similar significant collections of fiscal 2023 accounts receivable balances during fiscal 2024.

• There was a larger increase in accounts payable (a source of cash) and a larger net increase in inventory (a use of cash) during fiscal 2025 when compared to fiscal 2024.

These changes were driven by an increase in the volume of buses we produced in fiscal 2025 when compared with fiscal 2024, as well as an increase in the cost of procuring inventory that is attributable to inflationary pressures resulting from ongoing supply chain disruptions and the imposition of tariffs beginning during the second half of fiscal 2025.

Finally, during the second half of fiscal 2025, we elected to strategically acquire larger quantities of certain critical components that have longer lead times and could impact our production schedule in future periods if not manufactured by our suppliers and delivered to us in a timely manner, with no similar activity in fiscal 2024.

• There was an increase in other assets (a use of cash) during fiscal 2025 when compared to fiscal 2024.

Such change primarily relates to federal and state income taxes paid in excess of our obligations at the end of fiscal 2025 as well as an increase in our prepaid insurance at the end of fiscal 2025 when compared with fiscal 2024 as a result of increases in our insurance premiums between years.

• Accrued expenses, pension and other liabilities increased during fiscal 2024 (a source of cash) while decreasing minimally during fiscal 2025 (a use of cash).

The increase in fiscal 2024 primarily resulted from an increases in the bonus accrual and our federal and state income tax obligations in fiscal 2024 when compared with fiscal 2023, both due to the significant increase in profitability between fiscal years.

In fiscal 2025, our federal and state income tax position flipped to a prepaid asset, as discussed above, from an obligation, resulting in a decrease in the accrued balances between fiscal years.

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

The primary drivers of the $8.8 million decrease were as follows:

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

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EPA in administering the CSBP that were recorded as unearned revenue within other current liabilities (which is included within accrued expenses, pension and other liabilities).

As we built and sold the underlying buses during fiscal 2024, we recognized

this amount in revenue.

As we built and sold the underlying buses during fiscal 2024, we recognized this amount in revenue.

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

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

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

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

• A year over year increase of $69.6 million in net income.

• The effect of net changes in operating assets and liabilities positively impacted fiscal 2023 operating cash flows by $79.0 million compared to fiscal 2022.

The primary drivers in this category were favorable changes in accounts receivable, inventory, and accrued expenses, pension and other liabilities of $2.5 million, $34.2 million, and $50.1 million respectively.

These favorable changes were partially offset by unfavorable changes in accounts payable and other assets of $6.4 million and $1.5 million, respectively.

At the end of fiscal 2022 and continuing into fiscal 2023, we became more efficient at managing supply chain disruptions, and thus building and selling buses.

These efficiencies resulted in us consuming more inventory in production, which resulted in a decrease in the inventory balance at the end of fiscal 2023 (a net source of cash) when compared with an increase in the inventory balance at the end of fiscal 2022 (a net use of cash).

The accounts payable balance is significantly influenced by the purchase of inventory that is required to produce buses during the last few weeks of each fiscal year.

However, the supply chain disruptions that we experienced during fiscal 2022 resulted in us purchasing inventory (and therefore, increasing accounts payable) that was not consumed in the production process as we were missing certain critical components that prevented us from building and selling buses.

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

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

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

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

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

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

Total cash used in investing activities

Cash used in investing activities totaled $23.9 million and $15.8 million for fiscal 2025 and fiscal 2024, respectively.

The $8.1 million increase in cash used was primarily due to an increase in spending on fixed assets, as increased profitability in fiscal 2025 and fiscal 2024 has allowed for more capital spending.

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

The $7.3 million increase in cash used was primarily due to an increase in spending on fixed assets, as increased profitability in fiscal 2024 when compared fiscal 2023 allowed for more capital spending.

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

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

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

During fiscal 2022, capital spending was reduced to lower than normal amounts in an effort to mitigate the impact of supply chain constraints on our operations, financial results and cash flows.

Total cash (used in) provided by financing activities

Total cash used in financing activities

Cash used in financing activities totaled $50.7 million for fiscal 2025 and $46.6 million for fiscal 2024.

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

This was partially offset by $100.0 million of proceeds received from term loan borrowings under the Credit Agreement, a $20.0 million net increase in revolving line of credit borrowings, and a $2.7 million increase in cash received from stock option exercises.

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

In fiscal 2022, the private placement sale of our common stock provided $74.8 million of net cash proceeds, with no similar activity in fiscal 2023.

Also contributing to the increase in cash used was a $5.0 million increase in term loan repayments in fiscal 2023 compared to fiscal 2022.

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

The $4.1 million increase in cash used was primarily attributable to a $38.3 million increase in the purchase of common stock in connection with the Company's repurchase programs and stock award exercises in fiscal 2025 when compared with fiscal 2024.

This increase was partially offset by a $30.6 million decrease in net term loan repayments during fiscal 2025 when compared with fiscal 2024, primarily as a result of executing the Credit Agreement in the prior year.

Additionally, there was a $3.1 million decrease resulting from debt costs paid in executing the Credit Agreement in fiscal 2024, with no similar activity in fiscal 2025.

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

The $3.7 million increase in cash used was primarily attributable to a $115.8 million increase in term loan repayments and $9.9 million increase in purchases of Company stock in fiscal 2024 when compared with fiscal 2023.

These increases were partially offset by $100.0 million of proceeds received from term loan borrowings under the Credit Agreement, a $20.0 million net increase in revolving line of credit borrowings, and a $2.7 million increase in cash received from stock option exercises in fiscal 2024 when compared with fiscal 2023.

Free cash flow

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(in thousands) 2025 2024 2023

Total cash provided by (used in) operating activities

Total cash provided by operating activities

$ 176,214 $ 111,112 $ 119,928

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$ 153,342 $ 95,849 $ 111,408

Free Cash Flow for fiscal 2025 was $57.5 million higher than for fiscal 2024, due to a $65.1 million increase in cash provided by operating activities, which was partially offset by a $7.6 million increase in cash paid for fixed assets, both as discussed above.

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

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

Off-Balance Sheet arrangements

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

We had outstanding letters of credit totaling $8.3 million at September 27, 2025 that secure our a) self-insured workers compensation program and b) performance obligations relating to certain environmental matters, the collateral for both of which is regulated by the State of Georgia.

Share Repurchase Program and Treasury Stock Retirement

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

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

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

No such repurchases were made in fiscal 2023.

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

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

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

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

On August 5, 2025, the Board of Directors of the Company authorized and approved a second share repurchase program for up to $100 million of outstanding shares of the Company’s common stock, expiring January 1, 2028.

Under both share repurchase programs, 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 Exchange Act.

Pursuant to the share repurchase plans, the Company repurchased 1,060,438 shares of its common stock for $39.5 million in fiscal 2025 and 201,818 shares of its common stock for $9.9 million in fiscal 2024.

The total remaining authorization for future common stock repurchases under the Company's share repurchase programs was $110.5 million as of September 27, 2025.

In fiscal 2025 and fiscal 2024, the Company constructively retired the shares of common stock it repurchased by recording the $39.5 million and $9.9 million paid in excess of the $0.0001 par value of each share, respectively, as a reduction in retained earnings.

In fiscal 2024, the Company also retired the shares of common stock that had previously been reflected as treasury stock within its historical consolidated financial statements by recording the amount paid in excess of the $0.0001 par value of each share as a $39.9 million reduction in retained earnings, which reduced the value in this account to zero, with the remaining $10.4 million recorded as a reduction in additional paid-in capital.

Critical Accounting Policies and Estimates

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

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

contingencies.

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

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

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In the evaluation of goodwill for impairment, we have the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a reporting unit to its carrying amount, including goodwill.

Under the qualitative assessment, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

qualitative assessment, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

If under the quantitative assessment the fair value of a reporting unit is less than its carrying amount, then the amount of the impairment loss, if any, must be measured under step two of the impairment analysis.

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

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

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

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

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

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We review and update these assumptions on an annual basis at the beginning of each fiscal year.

We are required to consider current market conditions, including changes in interest rates, in making these assumptions.

We are required to consider current market conditions, including changes in interest rates, as well as changes in other facts and circumstances in making these assumptions.

Effective January 1, 2006, the benefit plan was frozen to all participants.

No accrual of future benefits is earned or calculated beyond this date.

Accordingly, our obligation estimate is based on benefits earned at that time discounted using an estimate of the single equivalent discount rate determined by matching the plan’s future expected cash flows to spot rates from a yield curve comprised of high-quality corporate bond rates of various durations.

The expected long-term rate of return on plan assets reflects the average rate of earnings expected on the funds invested, or to be invested, to provide for the pension benefit obligation.

In estimating that rate, appropriate consideration is given to the returns being earned by the plan assets in the fund and rates of return expected to be available for reinvestment and we consider asset allocations, input from an external pension investment adviser, and risks and other factors adjusted for our specific investment strategy.

The focus is on long-term trends and provides for the consideration of recent plan performance.

During the latter part of fiscal 2025, the Company initiated actions to terminate the pension plan, which is expected to be completed in the latter half of fiscal 2026.

A pension plan termination does not impact the pension benefits earned by participants as amounts due to participants are settled either via (i) lump-sum cash payments, as applicable, or (ii) the transfer of the pension obligations to an insurance company via the purchase of group annuity contracts.

Subsequent to such settlements, the pension plan will cease to exist for the Company.

As a result of the pending pension plan termination, the significant assumptions utilized in determining the benefit obligation due to participants as of September 27, 2025 were amended.

Specifically, the obligation estimate is based on benefits earned as of January 1, 2006, the date the plan was frozen as discussed above, discounted using (i) a required regulatory interest rate for our estimate of those participants who will elect a lump-sum cash payment and (ii) the estimated interest rate inherent in the group annuity contracts for our estimate of those participants whose benefit obligations will be transferred to an insurance company.

Additionally, in connection with initiation of the pension plan termination, all assets in the plan were converted to a money market fund comprised of high quality, highly liquid investments, primarily issued by the U.S.

government, having maturities of less than one year to minimize the risk of significant fluctuations in the balance of the assets due to market volatility.

Accordingly, the expected rate of return on plan assets was adjusted to reflect the average rate of earnings expected on the funds invested, or to be invested, to provide for the settlement of the pension benefit obligations during fiscal 2026.

In estimating that rate, appropriate consideration was given to the returns being earned by the plan assets as well as input from an external pension investment adviser.

The actuarial assumptions that we use may differ materially from actual results due to changing market and economic conditions as well as longer or shorter life spans of participants.

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At September 27, 2025 and September 28, 2024, deferred tax liabilities totaled approximately $26.4 million and $22.4 million, respectively, while deferred tax assets totaled approximately $23.7 million and $22.0 million, respectively.

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

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

Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis