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Item 2. Management’s Discussion and Analysis

2026-05-06 compared with 2026-02-04 · 186 added, 84 removed, 304 unchanged (47% of the section changed)

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

The following discussion and analysis of financial condition and results of operations of Blue Bird Corporation (the "Company," "Blue Bird," "we," "our," or "us") should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of and for the three months ended December 27, 2025 and December 28, 2024 and related notes appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q ("Report").

The following discussion and analysis of financial condition and results of operations of Blue Bird Corporation (the "Company," "Blue Bird," "we," "our," or "us") should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of and for the three and six months ended March 28, 2026 and March 29, 2025 and related notes appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q ("Report").

Our actual results may not be indicative of future performance.

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Throughout this Report, we refer to the fiscal year ending October 3, 2026 as "fiscal 2026," the fiscal year ended September 27, 2025 as "fiscal 2025," and the fiscal year ended September 28, 2024 as "fiscal 2024." There will be 53 weeks in fiscal 2026 and were 52 weeks in fiscal 2025.

The first quarters of fiscal 2026 and fiscal 2025 both included 13 weeks.

The second quarters of fiscal 2026 and fiscal 2025 both included 13 weeks.

The six month periods in fiscal 2026 and 2025 both included 26 weeks.

Business Update

The global supply chain constraints for automotive parts that arose subsequent to the novel coronavirus pandemic known as "COVID-19" and that were further impacted by additional stress resulting from Russia’s invasion of Ukraine in February 2022, continued to impact our business and operations in the first quarters of both fiscal 2025 and 2026.

Specifically, there were occasional shortages of certain critical components that impacted our manufacturing production schedule and related operational efficiencies, while increasing costs charged by suppliers to procure inventory continued during both periods.

Both of these factors 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.

Both of these factors 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 several years allowed the Company to continue navigating these supply chain challenges to consistently produce buses to fulfill sales orders.

Such actions included, among others, sourcing inventory purchases from alternative suppliers and strategically acquiring larger quantities of certain critical components that have longer lead times that could impact our production schedule if not manufactured by our suppliers and delivered to us in a timely manner.

In addition to periodic inventory shortages and general inflationary pressures resulting from the global supply chain constraints discussed above, changes in trade policies and tariffs began to impact our business and operations in the second half of fiscal 2025 and continuing into the first quarter of fiscal 2026 by increasing our procurement costs for certain imported inventory.

In addition to periodic inventory shortages and general inflationary pressures resulting from the global supply chain constraints discussed above, changes in trade policies and tariffs began to impact our business and operations in the second half of fiscal 2025 and continuing into the first half of fiscal 2026 by increasing our procurement costs for certain imported inventory.

Actions we have taken, and are continuing to take, 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 and working with our suppliers to identify alternative supply chain sources to minimize the increase in inventory costs.

However, the higher inventory purchase costs that we incurred in producing and selling buses during the first quarters of fiscal 2025 and fiscal 2026 resulting from general inflationary pressures caused by global supply chain constraints as well as changes in trade policies and tariffs, as applicable, did not negatively impact our operating results or cash flows during these periods as such impacts were largely offset by proactive increases in the sales prices we charged for our products.

However, the higher inventory purchase costs that we incurred in producing and selling buses during the first half of fiscal 2025 and fiscal 2026 resulting from general inflationary pressures caused by global supply chain constraints as well as changes in trade policies and tariffs, as applicable, did not negatively impact our operating results or cash flows during these periods as such impacts were largely offset by proactive 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.

Additionally, although new bus orders during the majority of fiscal 2025 remained strong, management believes that the uncertainty in bus pricing resulting from changing tariffs temporarily impacted bus orders during the latter part of fiscal 2025 and, to a lesser extent, continuing into the first quarter of fiscal 2026.

Specifically, 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 in the years subsequent to the COVID-19 pandemic, the Company’s backlog approximated 4,400 units as of December 28, 2024.

Given the strong backlog in the overall school bus industry that resulted in long time lags between customers ordering and taking delivery of a school bus, when coupled with the uncertainty regarding the pricing of a school bus resulting from the inclusion of actual tariff charges in the final sales price, management believes that many customers elected to temporarily defer the purchase of buses towards the end of our fiscal 2025.

As a result, the Company’s backlog decreased to approximately 3,070 units as of September 27, 2025.

However, due to the Company’s proactive communications with our dealers and customers and committing to a tariff pricing strategy that significantly addressed the volatility in bus pricing for customers, we experienced an increase in orders during the first quarter that increased the backlog to approximately 3,370 units as of December 27, 2025, which included over 850 electric powered units.

However, due to the Company’s proactive communications with our dealers and customers and committing to a tariff pricing strategy that significantly addressed the volatility in bus pricing for customers, we experienced an increase in orders during the first half of fiscal 2026 that increased the backlog to approximately 3,560 units as of March 28, 2026, which included over 900 electric powered units.

Due to the age of school bus fleets in the U.S.

and Canada, which is at least partially attributable to supply chain disruptions in recent years that have left school districts with meaningful replacement needs, and the strong overall fundamentals in the school bus industry, management believes that this slowdown in orders is temporary in nature not indicative of a broader decrease in current or future market demand.

Finally, 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 latter part of fiscal 2025 and continuing into the first quarter of fiscal 2026.

Although we noted that government grant money continued to flow during this period, the timing of some of these payments occurred too late to adjust our production schedule to build and sell more higher priced alternative powered school buses.

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Accordingly, the magnitude and duration of such matters and their related financial impacts on our business cannot be estimated at this time.

We continue to monitor and assess the ability of suppliers to maintain operations and to provide parts and supplies in sufficient quantities and at acceptable costs to meet our production needs, including our ability to maintain continuous production during the

remainder of fiscal 2026 and beyond, and price our products at amounts that are attractive to our customers.

See PART I, Item 1.A.

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The Company’s accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in the Company’s fiscal 2025 Form 10-K, filed with the SEC on November 24, 2025, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates,” which description is incorporated herein by reference.

Our senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies during the three months ended December 27, 2025.

Recent Accounting Pronouncements

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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 deliver critical components, reflected in cost of goods sold during fiscal 2025 and continuing into the first three months of fiscal 2026.

Additionally, the imposition of tariffs on certain imported inventory that became effective during the second half of fiscal 2025 and continued into the first three months of fiscal 2026 has further increased our inventory purchase costs.

Additionally, the imposition of tariffs on certain imported inventory that became effective during the second half of fiscal 2025 and continued into the first half of fiscal 2026 has further increased our inventory purchase costs.

In response, the Company announced a number of sales price increases that applied to new sales orders that were 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 2025 and continuing into the first three months of fiscal 2026.

These cumulative price increases have had a significant, positive impact on sales and gross profit during fiscal 2025 and continuing into the first half of fiscal 2026.

• Governmental grants, subsidies and/or other incentives.

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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.

("Micro Bird) and Clean Bus Solutions, LLC, our unconsolidated joint ventures.

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

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GAAP ("non-GAAP"):

annual cash bonus payouts, if any, to be made to certain employees based upon the terms of the Company’s Management Incentive Plan, and (b) whether the performance criteria have been met for the vesting of certain equity awards granted annually to certain members of management based upon the terms of the Company’s Omnibus Equity Incentive Plan.

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

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

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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.

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

Consolidated Results of Operations for the Three Months Ended December 27, 2025 and December 28, 2024:

Consolidated Results of Operations for the Three Months Ended March 28, 2026 and March 29, 2025:

Three Months Ended

(in thousands of dollars) December 27, 2025 December 28, 2024

(in thousands of dollars) March 28, 2026 March 29, 2025

$ 352,635 $ 358,851

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Net Sales by Segment

December 27, 2025 December 28, 2024

March 28, 2026 March 29, 2025

$ 325,087 $ 332,712

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$ 70,647 $ 70,854

Net sales were $333.1 million for the first quarter of fiscal 2026, an increase of $19.2 million, or 6.1%, compared to $313.9 million for the first quarter of fiscal 2025.

The increase in net sales is primarily due to 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 beginning during the second half of fiscal 2025 and continuing into the first quarter of fiscal 2026, which were partially offset by a small decrease in Parts sales.

Bus sales increased $19.5 million, or 6.8%, reflecting a 0.2% increase in unit bookings and a 6.5% increase in average sales price per unit.

In the first quarter of fiscal 2026, 2,135 units booked compared to 2,130 units booked for the same period in fiscal 2025.

The increase in unit price for the first quarter of fiscal 2026 compared to the same period in fiscal 2025 was primarily due to customer and product mix changes as well as price increases implemented to offset increases in inventory costs.

Parts sales decreased $0.3 million, or 1.2%, for the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025.

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.

Net sales were $352.6 million for the second quarter of fiscal 2026, a decrease of $6.2 million, or 1.7%, compared to $358.9 million for the second quarter of fiscal 2025.

The decrease in net sales is primarily due to a 6.4% decrease in units sold resulting from a 6.7% decrease in the number of production days in the second quarter of fiscal 2026 when compared with the same period in fiscal 2025, which primarily resulted from the timing of holidays, and our corresponding plant shutdown, in our production calendar.

As a result of producing fewer buses, we had fewer units that were available to sell.

However, the decrease resulting from selling fewer units was partially offset by 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 beginning during the second half of fiscal 2025 and continuing into the first half of fiscal 2026, as well as an increase in Parts sales.

Bus sales decreased $7.6 million, or 2.3%, reflecting a 6.4% decrease in unit bookings that was partially offset by a 4.4% increase in average sales price per unit.

In the second quarter of fiscal 2026, 2,148 units booked compared to 2,295 units booked for the same period in fiscal 2025.

The increase in unit price for the second quarter of fiscal 2026 compared to the same period in fiscal 2025 was primarily due to customer and product mix changes as well as price increases implemented to offset increases in inventory costs.

Parts sales increased $1.4 million, or 5.4%, for the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025.

This increase is primarily attributed to price increases that were implemented to offset increases in inventory costs 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 $261.9 million for the first quarter of fiscal 2026, an increase of $8.3 million, or 3.3%, compared to $253.6 million for the first quarter of fiscal 2025.

Total cost of goods sold was $282.0 million for the second quarter of fiscal 2026, a decrease of $6.0 million, or 2.1%, compared to $288.0 million for the second quarter of fiscal 2025.

As a percentage of net sales, total cost of goods sold improved from 80.3% to 80.0%, 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.

The improvement was also impacted by product and customer mix changes.

Bus segment cost of goods sold increased $8.4 million, or 3.5%, for the first quarter of fiscal 2026 compared to the same period in fiscal 2025.

The increase was primarily driven by a 3.3% increase in the average cost of goods sold per unit for the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025, as well as the 0.2% increase in units booked.

Bus segment cost of goods sold decreased $7.2 million, or 2.6%, for the second quarter of fiscal 2026 compared to the same period in fiscal 2025.

The decrease was primarily driven by the 6.4% decrease in units booked, which was partially offset by a 4.0% increase in the average cost of goods sold per unit for the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025.

The increase in average cost of goods sold per unit primarily resulted from increases in manufacturing costs attributable to (a) increased raw materials costs resulting from ongoing inflationary pressures and the imposition of tariffs beginning during the second half of fiscal 2025 and (b) ongoing supply chain disruptions that resulted in higher purchase costs for components.

The increase was also impacted by customer and product mix changes.

The $0.1 million, or 1.0%, decrease in Parts segment cost of goods sold for the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025 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.

The $1.2 million, or 9.6%, increase in Parts segment cost of goods sold for the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025 was primarily due increased product costs driven by inflationary pressures and tariffs as well as slight variations due to product and channel mix.

Operating profit .

Operating profit was $37.7 million for the first quarter of fiscal 2026, an increase of $4.6 million compared to operating profit of $33.0 million for the first quarter of fiscal 2025.

Profitability was positively impacted by an increase of $10.9 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 $6.3 million in selling, general and administrative expenses, primarily due to an increase in (a) research and development expense and (b) labor costs.

Operating profit was $39.1 million for the second quarter of fiscal 2026, an increase of $5.4 million compared to operating profit of $33.7 million for the second quarter of fiscal 2025.

Profitability was positively impacted by a decrease of $5.6 million in selling, general and administrative expenses, primarily due to the significant amount of share-based compensation expense recorded in the second quarter of fiscal 2025 resulting from the retirement of our former President and Chief Executive Officer, with no similar significant expense recorded for the acceleration of vesting of stock awards in the second quarter of fiscal 2026.

However, profitability was negatively impacted by a decrease of $0.2 million in gross profit as outlined in the revenue and cost of goods sold discussions above.

Interest expense .

Interest expense was $1.6 million for the first quarter of fiscal 2026, a decrease of $0.3 million, or 18.2%, compared to $1.9 million for the first quarter of fiscal 2025.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 6.4% at December 28, 2024 to 5.9% at December 27, 2025, as well as lower outstanding borrowings in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025.

Interest expense was $1.5 million for the second quarter of fiscal 2026, a decrease of $0.3 million, or 14.8%, compared to $1.8 million for the second quarter of fiscal 2025.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 6.2% at March 29, 2025 to 5.5% at March 28, 2026, as well as lower outstanding borrowings in the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025.

Other (expense) income, net.

Other expense, net was $0.2 million for the first quarter of fiscal 2026, a decrease of $3.1 million, or 107.2%, compared to $2.9 million of other income, net for the same period in fiscal 2025.

During the first quarter of fiscal 2026, the Company recorded net periodic pension expense of approximately $0.2 million compared with net periodic pension income of $0.4 million for the same period in fiscal 2025.

Additionally, during the first quarter of fiscal 2025, the Company sold certain state emissions credits that it was not projecting to use for approximately $2.6 million, with no such sales during the first quarter of fiscal 2026.

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

Other expense, net was $2.9 million for the second quarter of fiscal 2026, a decrease of $3.4 million, or 758.1%, compared to $0.4 million of other income, net for the same period in fiscal 2025.

During the second quarter of fiscal 2026, the Company recorded net periodic pension expense of approximately $0.2 million compared with net periodic pension income of $0.4 million for the same period in fiscal 2025.

Additionally, during the second quarter of fiscal 2026, the Company incurred approximately $2.7 million of pretax costs relating to the acquisition of the remaining 50% of the outstanding common stock of Micro Bird effective April 1, 2026, with no such costs incurred during the second quarter of fiscal 2025.

The costs incurred relating to this transaction were recorded in other expense, net as they are not indicative of our normal operating activities.

See Note 13 of Notes to Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this Report for a more detailed discussion of this transaction.

Income taxes .

Income tax expense was $9.1 million for the first quarter of fiscal 2026 compared to $8.7 million for the same period in fiscal 2025.

The effective tax rate for the three months ended December 27, 2025 was 24.1% and differed from the statutory federal income tax rate of 21%.

Income tax expense was $9.1 million for both the second quarter of fiscal 2026 and the same period in fiscal 2025.

The effective tax rate for the three months ended March 28, 2026 was 24.9% and differed from the statutory federal income tax rate of 21%.

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

The effective tax rate for the three months ended December 28, 2024 was 24.4% and differed from the statutory federal income tax rate of 21%.

The effective tax rate for the three months ended March 29, 2025 was 27.2% and differed from the statutory federal income tax rate of 21%.

Adjusted EBITDA .

Adjusted EBITDA was $50.1 million, or 15.0% of net sales, for the first quarter of fiscal 2026, an increase of $4.3 million, or 9.4%, compared to $45.8 million, or 14.6% of net sales, for the first quarter of fiscal 2025.

The increase primarily relates to the 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, that was 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.

Adjusted EBITDA was $50.8 million, or 14.4% of net sales, for the second quarter of fiscal 2026, an increase of $1.6 million, or 3.3%, compared to $49.2 million, or 13.7% of net sales, for the second quarter of fiscal 2025.

The increase primarily relates to the increase in Micro Bird earnings, when adjusted for the impact of expenses that are excluded in calculating Adjusted EBITDA as outlined in the table below, that was partially offset by a decrease in other income, net, when adjusted 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 periods presented:

Three Months Ended

(in thousands of dollars) December 27, 2025 December 28, 2024

(in thousands of dollars) March 28, 2026 March 29, 2025

Net income $ 29,301 $ 26,046

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Depreciation, amortization and disposals (2)

Micro Bird acquisition costs

Share-based compensation expense

Micro Bird Holdings, Inc.

total interest expense, net;

Micro Bird total interest expense, net;

income tax expense or benefit;

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14.4 % 13.7 %

(1) Includes $0.2 million and $0.1 million for the three months ended December 27, 2025 and December 28, 2024, respectively, representing interest expense on operating lease liabilities, which are a component of lease expense and presented within cost of goods sold or selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2) Includes $0.6 million and $0.4 million for the three months ended December 27, 2025 and December 28, 2024, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented within cost of goods sold or selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(1) Includes $0.2 million and $0.1 million for the three months ended March 28, 2026 and March 29, 2025, respectively, representing interest expense on operating lease liabilities, which are a component of lease expense and presented within cost of goods sold or selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2) Includes $0.6 million and $0.4 million for the three months ended March 28, 2026 and March 29, 2025, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented within cost of goods sold or selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

Consolidated Results of Operations for the Six Months Ended March 28, 2026 and March 29, 2025:

Six Months Ended

(in thousands of dollars) March 28, 2026 March 29, 2025

$ 685,719 $ 672,723

Cost of goods sold

543,843 541,552

$ 141,876 $ 131,171

Operating expenses

Selling, general and administrative expenses

65,081 64,418

Operating profit $ 76,795 $ 66,753

Interest expense (3,111) (3,728)

Interest income 3,910 2,826

Other (expense) income, net (3,133) 3,360

Income before income taxes $ 74,461 $ 69,211

Income tax expense (18,221) (17,822)

Equity in net income of non-consolidated affiliates 3,817 3,379

Net income $ 60,057 $ 54,768

Other financial data:

Adjusted EBITDA

$ 100,872 $ 94,959

Adjusted EBITDA margin

14.7 % 14.1 %

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

(in thousands of dollars) Six Months Ended

Net Sales by Segment March 28, 2026 March 29, 2025

$ 632,749 $ 620,859

52,970 51,864

Total $ 685,719 $ 672,723

Gross Profit by Segment

$ 115,514 $ 104,806

26,362 26,365

$ 141,876 $ 131,171

Net sales were $685.7 million for the six months ended March 28, 2026, an increase of $13.0 million, or 1.9%, compared to $672.7 million for the six months ended March 29, 2025.

The increase in net sales is primarily due to 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 beginning during the second half of fiscal 2025 and continuing into the first half of fiscal 2026, as well as an increase in Parts sales.

The Bus increases described above were partially offset by a decrease in Bus units sold resulting from a 4.3% decrease in the number of production days during the six months ended March 28, 2026 when compared with the same period in fiscal 2025, which primarily resulted from the timing of holidays, and our corresponding plant shutdown, in our production calendar.

As a result of producing fewer buses, we had fewer units that were available to sell.

Bus sales increased $11.9 million, or 1.9%, reflecting a 5.3% increase in average sales price per unit that was partially offset by a 3.2% decrease in units booked.

The increase in unit price for the first six months of fiscal 2026 compared to the same period in fiscal 2025 was primarily due to customer and product mix changes as well as price increases implemented to offset increases in inventory costs.

This increase was partially offset by the impact of booking 4,283 units in the six months ended March 28, 2026 compared with 4,425 units during the same period in fiscal 2025.

Parts sales increased $1.1 million, or 2.1%, for the six months ended March 28, 2026 compared to the six months ended March 29, 2025.

Cost of goods sold .

Total cost of goods sold was $543.8 million for the six months ended March 28, 2026, an increase of $2.3 million, or 0.4%, compared to $541.6 million for the six months ended March 29, 2025.

As a percentage of net sales, total cost of goods sold improved from 80.5% to 79.3%, 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.

The improvement was also impacted by product and customer mix changes.

Bus segment cost of goods sold increased $1.2 million, or 0.2%, for the six months ended March 28, 2026 compared to the six months ended March 29, 2025.

The increase was primarily driven by the 3.5% increase in the average cost of goods sold per unit in the six months ended March 28, 2026 compared to the same period in fiscal 2025.

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 beginning during the second half of fiscal 2025 and b) ongoing supply chain disruptions that resulted in higher purchase costs for components.

The increase was also impacted by customer and product mix changes.

However, it was partially offset by the 3.2% decrease in units booked as discussed above.

The $1.1 million, or 4.3%, increase in parts segment cost of goods sold for the six months ended March 28, 2026 compared to the six months ended March 29, 2025 was primarily attributable to increased product costs due to inflationary pressures and tariffs as well as slight variations due to product and channel mix.

Operating profit .

Operating profit was $76.8 million for the six months ended March 28, 2026, an increase of $10.0 million compared to operating profit of $66.8 million for the six months ended March 29, 2025.

Profitability was positively impacted by an increase of $10.7 million in gross profit as outlined in the revenue and cost of goods sold discussions.

However, it was negatively impacted by an increase of $0.7 million in selling, general and administrative expenses during the first six months of fiscal 2026 when compared with the same period in fiscal 2025, primarily due to an increase in (a) research and development expense and (b) labor costs.

However, such increases were partially offset by a significant decrease in share-based compensation expense recorded in the second quarter of fiscal 2025 resulting from the retirement of our former President and Chief Executive Officer, with no similar significant expense recorded for the acceleration of vesting of stock awards in the second quarter of fiscal 2026.

Interest expense .

Interest expense was $3.1 million for the six months ended March 28, 2026, a decrease of $0.6 million, or 16.6%, compared to $3.7 million for the six months ended March 29, 2025.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 6.2% at March 29, 2025 to 5.5% at March 28, 2026, as well as lower outstanding borrowings in the first six months of fiscal 2026 compared to the first six months of fiscal 2025.

Other income (expense), net.

Other expense, net was $3.1 million for the six months ended March 28, 2026, an increase of $6.5 million, or 193.2%, compared to $3.4 million of other income, net for the six months ended March 29, 2025.

The Company recorded $0.5 million of net periodic pension expense during the six months ended March 28, 2026 when compared with $0.9 million of net periodic pension income recorded during the six months ended March 29, 2025.

The costs incurred relating to this transaction were recorded in other expense, net as they are not indicative of our normal operating activities.

See Note 13 of Notes to Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this Report for a more detailed discussion of this transaction.

Finally, during the first quarter of fiscal 2025, the Company sold certain state emissions credits that it was not projecting to use for approximately $2.6 million, with no similar income recorded during the the first six months of fiscal 2026.

The proceeds from this sale were recorded in other income, net as this transaction is not indicative of our normal revenue generating activities.

Income taxes .

Income tax expense was $18.2 million for the six months ended March 28, 2026 compared to $17.8 million for the six months ended March 29, 2025.

The effective tax rate for the six months ended March 28, 2026 was 24.5% and differed from the statutory federal income tax rate of 21%.

The effective tax rate for the six months ended March 29, 2025 was 25.8% and differed from the statutory federal income tax rate of 21%.

Adjusted EBITDA .

Adjusted EBITDA was $100.9 million, or 14.7% of net sales, for the six months ended March 28, 2026, an increase of $5.9 million, or 6.2%, compared to $95.0 million, or 14.1% of net sales, for the six months ended March 29, 2025.

The increase primarily relates to the increase in (i) gross profit, when adjusted 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 (ii) Micro Bird earnings, when adjusted for the impact of expenses that are excluded in calculating Adjusted EBITDA as outlined in the table below, that were partially offset by (iii) an increase in selling, general and administrative expenses, when adjusting for the impact of expenses that are excluded in calculating Adjusted EBITDA, as discussed above and (iv) a decrease in other income, net, when adjusted 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 periods presented:

Six Months Ended

(in thousands of dollars) March 28, 2026 March 29, 2025

Net income $ 60,057 $ 54,768

Interest (income) expense, net (1)

Income tax expense 18,221 17,822

Depreciation, amortization and disposals (2)

Micro Bird acquisition costs

Share-based compensation expense

Micro Bird total interest expense, net;

income tax expense or benefit;

depreciation expense and amortization expense

Adjusted EBITDA $ 100,872 $ 94,959

Adjusted EBITDA margin (percentage of net sales) 14.7 % 14.1 %

(1) Includes $0.3 million and $0.2 million for the six months ended March 28, 2026 and March 29, 2025, respectively, representing interest expense on operating lease liabilities, which are a component of lease expense and presented within cost of goods sold or selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2) Includes $1.2 million and $0.8 million for the six months ended March 28, 2026 and March 29, 2025, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented within cost of goods sold or selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

Liquidity and Capital Resources

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

At December 27, 2025, the Company had $241.7 million of available cash (net of outstanding checks) and $141.7 million of additional borrowings available under the revolving line of credit portion of its credit facility.

At March 28, 2026, the Company had $275.9 million of available cash (net of outstanding checks) and $141.7 million of additional borrowings available under the revolving line of credit portion of its credit facility.

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

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

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

The 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 that 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.

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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IV Greater than or equal to 2.25x

Pricing on the Closing Date was set at Level III until receipt of the financial information and related compliance certificate for the first fiscal quarter ending after the Closing Date, with pricing as of December 27, 2025 set at Level I.

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

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

At December 27, 2025, Borrower and the guarantors under the Credit Agreement were in compliance with all covenants.

At March 28, 2026, Borrower and the guarantors under the Credit Agreement were in compliance with all covenants.

First Amended Credit Agreement

On March 31, 2026, in anticipation of the Micro Bird acquisition closing on the following day (see Note 13 of Notes to Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this Report for a more detailed discussion of this transaction), BBBC executed an amendment to the Credit Agreement (the "First Amended Credit Agreement"), by and among BBBC, the Company and Bank of Montreal, acting as administrative agent, together with the other lenders.

The First Amended Credit Agreement primarily provides for an increase in the letter of credit sub-facility component of the Revolving Credit Facility from $25.0 million to $60.0 million, although it did not change the $150.0 million aggregate commitments limitation for the Revolving Credit Facility.

It also designates certain revolving credit facility indebtedness that may be incurred by Micro Bird outside of the terms of the First Amended Credit Agreement as permitted indebtedness, although the maximum amount of such indebtedness is initially capped at $50.0 million but decreases to $30.0 million upon the completion of certain pre-specified conditions that generally must be finalized within 90 days following the closing of the acquisition.

The Micro Bird revolving credit facility generally exists to support the financing of certain of its inventory purchases, with the increase in the letter of credit sub-facility component of the Company's Revolving Credit Facility securing Micro Bird's obligations under the terms of its revolving credit facility.

Subsequent to the Company repaying all of Micro Bird's bank debt obligations in connection with the closing of the acquisition, there were no amounts outstanding on its revolving credit facility on April 1, 2026.

Under the terms of the First Amended Credit Agreement, Micro Bird's Canadian legal entities will not become parties thereto.

However, the Credit Facilities are required to be secured by a security agreement that pledges a lien on 65% of the value of their issued and outstanding capital stock entitled to vote that generally must be finalized within 90 days following the closing of the acquisition.

None of the other significant terms of the Credit Agreement discussed above were modified in connection with executing the First Amended Credit Agreement.

Short-Term and Long-Term Liquidity Requirements

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

Three Months Ended

(in thousands of dollars) December 27, 2025 December 28, 2024

Six Months Ended

(in thousands of dollars) March 28, 2026 March 29, 2025

Cash and cash equivalents at beginning of period

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Total cash provided by operating activities

Cash flows provided by operating activities totaled $36.6 million for the three months ended December 27, 2025, an increase of $10.2 million from the $26.4 million of cash flows provided by operating activities during the three months ended December 28, 2024.

The increase primarily resulted from (i) the $2.0 million increase in net income and (ii) the effect of net changes in operating assets and liabilities that positively impacted operating cash flows by $3.4 million, both during the three months ended December 27, 2025 when compared with the three months ended December 28, 2024.

The primary drivers in the changes in operations assets and liabilities were favorable changes in inventories and accrued expenses, pension and other liabilities of $33.9 million and $28.9 million, respectively, that were partially offset by an unfavorable changes in accounts receivable and accounts payable of $35.2 million and $23.6 million, respectively, as follows:

• We had a larger increase in the balance of our inventory during the first quarter of fiscal 2025 when compared with the first quarter of fiscal 2026 (that resulted in a significant decrease in the use of cash when comparing periods).

Specifically, the bus orders that we produced during the first quarter of fiscal 2025 contained a larger mix of units for certain customers, primarily fleet and specific governmental customers, for which the sales cycle is longer when compared with sales to dealers, resulting in increases in all categories of inventories (raw material, work in process and finished goods) as of December 28, 2024 when compared with December 27, 2025.

Additionally, at the end of the first quarter 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 when compared with similar activity in the first quarter of fiscal 2026.

• There was a larger increase in accrued expenses, pension and other liabilities (that resulted in a significant increase in a source of cash) during the first quarter of fiscal 2026 when compared with the first quarter of fiscal 2025.

This increase was primarily driven by a $42.8 million advanced payment made by a customer in the first quarter of fiscal 2026, with no similar activity in the first quarter of fiscal 2025.

This increase was partially offset by a $17.8 million decrease in accrued income taxes in the first quarter of fiscal 2026 when compared with the similar period in 2025, primarily due to the timing of income tax payments that impacted the balances at the end of each quarter.

Cash flows provided by operating activities totaled $84.3 million for the six months ended March 28, 2026, an increase of $30.2 million from the $54.2 million of cash flows provided by operating activities during the six months ended March 29, 2025.

The increase primarily resulted from (i) the $5.3 million increase in net income and (ii) the effect of net changes in operating assets and liabilities that positively impacted operating cash flows by $21.7 million, both during the six months ended March 28, 2026 when compared with the six months ended March 29, 2025.

The primary drivers in the changes in operating assets and liabilities were favorable changes in inventories and accrued expenses, pension and other liabilities of $30.7 million and $60.9 million, respectively, that were partially offset by unfavorable changes in accounts receivable and accounts payable of $35.6 million and $35.0 million, respectively, as follows:

• We had a larger increase in the balance of our inventory during the first half of fiscal 2025 when compared with the first half of fiscal 2026 (that resulted in a significant decrease in the use of cash when comparing periods).

Specifically, the bus orders that we produced during the first half of fiscal 2025 contained a larger mix of units for certain customers, primarily fleet and specific governmental customers, for which the sales cycle is longer when compared with sales to dealers, resulting in significant increases in work in process and finished goods inventories as of March 29, 2025 when compared with March 28, 2026.

Additionally, during the first 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 when compared with similar activity in the first half of fiscal 2026.

• There was a large increase in accrued expenses, pension and other liabilities (that resulted in a significant source of cash) during the first half of fiscal 2026 when compared with a large decrease (that resulted in a significant use of cash) during the first half of fiscal 2025.

The increase in fiscal 2026 was primarily driven by a $42.8 million advanced payment made by a customer in the first half of fiscal 2026, with no similar activity in the first quarter of fiscal 2025.

The decrease in fiscal 2025 primarily resulted from a decrease in accrued income taxes, primarily due to the timing of income tax payments that impacted the balances at the end of the second quarter of fiscal 2025 when compared with the comparable period in fiscal 2026.

• A shift in our customer mix resulted in an increase in the accounts receivable balance towards the end of fiscal 2024, when compared with the end of fiscal 2025.

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 the three months ended December 28, 2024, the accounts receivable balances relating to fiscal 2024 fleet revenue were collected, representing a significant cash inflow.

As the accounts receivable balance at the end of fiscal 2025 was significantly lower than the balance at the end of fiscal 2024 due to a significant reduction in sales we made on credit at the end of each respective period, the amount of accounts receivable collected during the three months ended December 27, 2025 was significantly lower when compared with the same period in fiscal 2025.

• There was a larger decrease in accounts payable (that resulted in a significant increase in the use of cash) during the first quarter of fiscal 2026 when compared with the the first quarter of fiscal 2025.

This decrease primarily resulted from decreases in (i) our production volume and (ii) our strategic acquisition of certain critical components during the first quarter of fiscal 2026 when compared with the first quarter of fiscal 2025 as described previously above.

During the six months ended March 29, 2025, the accounts receivable balances relating to fiscal 2024 fleet revenue were collected, representing a significant cash inflow.

As the accounts receivable balance at the end of fiscal 2025 was significantly lower than the balance at the end of fiscal 2024 due to a significant reduction in sales we made on credit at the end of each respective period, the amount of accounts receivable collected during the six months ended March 28, 2026 was significantly lower when compared with the same period in fiscal 2025.

• There was a net decrease in accounts payable (that resulted in a significant increase in the use of cash) during the first half of fiscal 2026 when compared with the the first half of fiscal 2025.

This decrease primarily resulted from decreases in (i) our production volume and (ii) our strategic acquisition of certain critical components, both during the the six months ended March 28, 2026 when compared with the six months ended March 29, 2025 as described previously above.

Total cash used in investing activities

Cash flows used in investing activities totaled $5.7 million for the three months ended December 27, 2025 as compared to $5.1 million for the three months ended December 28, 2024.

The $0.6 million increase was primarily due to an increase in spending on fixed assets, as increasing recent profitability has allowed for more capital spending.

Cash flows used in investing activities totaled $13.5 million for the six months ended March 28, 2026 as compared to $14.1 million for the six months ended March 29, 2025.

Total cash used in financing activities

Cash flows used in financing activities totaled $18.5 million for the three months ended December 27, 2025 as compared to $12.9 million for the three months ended December 28, 2024, resulting in a $5.6 million increase between fiscal periods.

During the first three months of fiscal 2026, the Company purchased an incremental $4.9 million of common stock in connection with its share repurchase programs when compared with the same period in fiscal 2025.

Additionally, there was a $0.9 million increase in purchases of Company common stock in connection with stock award exercises in the three months ended December 27, 2025 when compared with the three months ended December 28, 2024.

These increases were partially offset by a $0.5 million decrease in principal payments on financing leases, which expired in fiscal 2025 and accordingly, there was no similar activity in the three months ended December 27, 2025.

Cash flows used in financing activities totaled $24.3 million for the six months ended March 28, 2026 as compared to $37.0 million for the six months ended March 29, 2025, resulting in a $12.8 million decrease between fiscal periods.

During the six months ended March 28, 2026, the Company purchased $10.1 million less common stock in connection with its share repurchase programs than it did during the same period ended March 29, 2025.

Additionally, there was a $1.8 million decrease in purchases of Company common stock in connection with stock award exercises during the six months ended March 28, 2026 when compared with the same period ended March 29, 2025.

Finally, there was a $0.6 million decrease in principal payments on financing leases, which expired in fiscal 2025 and accordingly, there was no similar activity in the six months ended March 28, 2026.

Free cash flow

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

Three Months Ended

(in thousands of dollars) December 27, 2025 December 28, 2024

Six Months Ended

(in thousands of dollars) March 28, 2026 March 29, 2025

Net cash provided by operating activities $ 84,340 $ 54,180

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$ 71,021 $ 40,564

Free Cash Flow for the three months ended December 27, 2025 was $9.3 million higher than for the three months ended December 28, 2024 due to a $10.2 million increase in net cash provided by operating activities that was partially offset by an $0.9 million increase in cash paid for fixed assets, both as discussed above.

Free Cash Flow for the six months ended March 28, 2026 was $30.5 million higher than for the six months ended March 29, 2025 due to a $30.2 million increase in net cash provided by operating activities and a $0.3 million decrease in cash paid for fixed assets, both as discussed above.

Off-Balance Sheet Arrangements

We had outstanding letters of credit totaling $8.3 million at December 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.

We had outstanding letters of credit totaling $8.3 million at March 28, 2026 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.

Quantitative and Qualitative Disclosures About Mar ket Risk.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis