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Item 2. Management’s Discussion and Analysis

2026-08-05 compared with 2026-05-06 · 190 added, 145 removed, 345 unchanged (49% 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 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").

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 nine months ended June 27, 2026 and June 28, 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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and/or impact the purchasing decisions of our customers that could result in them buying less, or none, of our products in future periods;

◦ reductions in governmental grants, subsidies and/or other incentives, which would result in a decrease in funds that are used by school districts and fleet customers to partially, or fully, offset the higher price of alternative powered school buses and could impact the purchasing decisions of our customers that elect to buy less, or none.

of our products in future periods;

◦ changes in current or future emissions regulations, which could increase the costs of powertrain components that we purchase from major suppliers and would impact our cost to produce buses and purchase parts for resale;

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

and Canadian dealers that, in their territories, are exclusive to Blue Bird on Type C and Type D school buses.

and Canadian dealers that, in their territories, are exclusive to Blue Bird on Type A, C and D school buses.

Blue Bird also sells directly to major fleet operators, the U.S.

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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 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.

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

The nine month periods in fiscal 2026 and 2025 both included 39 weeks.

Recent Acquisition

On April 1, 2026, Blue Bird Body Company ("BBBC"), a wholly-owned subsidiary of Blue Bird Corporation, completed its acquisition of the remaining 50% of the outstanding voting common stock of Micro Bird Holdings, Inc.

("Micro Bird"), which was previously an unconsolidated Canadian joint venture.

Micro Bird produces Type A school buses in Drummondville, Quebec, and since September 2025, has been producing small and mid-sized commercial buses and a small number of Type A school buses at a newly opened facility in Plattsburgh, New York.

The acquisition of the remaining 50% of the outstanding voting common stock of Micro Bird resulted in it becoming a wholly-owned subsidiary at the beginning of the third quarter of fiscal 2026 and subsequently.

See Notes 11, Equity Investment in Affiliates , and 13, Micro Bird Acquisition , of Notes to Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this Report for further discussion.

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 half of both fiscal 2025 and 2026.

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 various global military conflicts continued to impact our business and operations in the first nine months 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.

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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 half 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 nine months 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 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, the higher inventory purchase costs that we incurred in producing and selling buses during the first nine months 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 half 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 March 29, 2025.

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 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.

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

months of fiscal 2026 that increased the backlog to approximately 3,570 Type C and D units and 1,290 Type A and small and mid-sized commercial units as of June 27, 2026, which included almost 780 electric powered units across all bus types.

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 half of fiscal 2026.

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 and not indicative of a broader decrease in current or future market demand.

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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They could result in significant economic disruption and adversely impact our business during the remainder of fiscal 2026 and perhaps beyond.

Significant uncertainty exists concerning the magnitude of the impact and duration of (i) ongoing supply chain constraints and (ii) 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 matters and their related financial impacts on our business cannot be estimated at this time.

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GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Blue Bird evaluates its estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

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

Application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

The Company’s accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in the Company’s fiscal 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 six months ended March 28, 2026.

Recent Accounting Pronouncements

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• Revenue mix .

We are able to charge more for certain of our products (e.g., Type C propane powered school buses, electric powered buses, Type D buses, and buses with higher option content) than other products.

We are able to charge more for certain of our products (e.g., propane powered buses, electric powered buses, Type D buses, and buses with higher option content) than other products.

The mix of products sold in any fiscal period can directly impact our revenues for the period.

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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 half 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 half of fiscal 2026 has further increased our inventory purchase costs.

As discussed previously above, supply chain disruptions developing (i) subsequent to the COVID-19 pandemic and (ii) as a result of global military conflicts 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 nine 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 nine months 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 half 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 nine months of fiscal 2026.

• Governmental grants, subsidies and/or other incentives.

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

We include in this line item our 50% share of net income or loss from our investments in Micro Bird Holdings, Inc.

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

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

However, as a result of (i) our acquisition of of the remaining 50% of the outstanding voting common stock of Micro Bird on April 1, 2026 and (ii) CBS nearing the completion of winding down and terminating its business, we expect minimal, immaterial activity in this account, if any, in periods subsequent to June 27, 2026.

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

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income taxes;

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

and depreciation and amortization expense including the component of operating lease expense (which is presented 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;

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.

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 or credits such as (i) transaction related costs or gains 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 certain 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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and (ii) the Parts segment, which includes the sale of replacement bus parts.

As a result of the Micro Bird acquisition effective April 1, 2026, its financial results are included within the Bus segment for the the three and nine months ended June 27, 2026.

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.

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

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

Consolidated Results of Operations for the Three Months Ended June 27, 2026 and June 28, 2025:

Three Months Ended

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

(in thousands of dollars) June 27, 2026 June 28, 2025

$ 517,160 $ 398,011

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Interest income 627 1,483

Other (expense) income, net (2,922) 444

Other income (expense), net 135,690 (580)

Income before income taxes $ 197,021 $ 49,234

Income tax expense (10,173) (12,375)

Equity in net income of non-consolidated affiliates 1,823 1,575

Equity in net loss of non-consolidated affiliates (1,593) (404)

Net income $ 185,255 $ 36,455

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Net Sales by Segment

March 28, 2026 March 29, 2025

June 27, 2026 June 28, 2025

$ 491,696 $ 372,240

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$ 103,374 $ 85,928

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.

Net sales were $517.2 million for the third quarter of fiscal 2026, an increase of $119.1 million, or 29.9%, compared to $398.0 million for the third quarter of fiscal 2025.

Micro Bird contributed $122.9 million of net sales during the third quarter of fiscal 2026.

The $3.8 million, or 1.0%, decrease in net sales for the legacy Blue Bird operations is primarily due to a 7.2% decrease in units sold resulting from timing due to a customer mix change as we produced a large number of units for certain customers that we will recognize as revenue in the fourth quarter of fiscal 2026 when the units are delivered to coincide with school resuming.

Many of these units contributed to the significant increase in finished goods inventory at June 27, 2026.

Bus sales increased $119.5 million, or 32.1%, for the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025, which included the $122.9 million of net sales that Micro Bird contributed during the third quarter of fiscal 2026.

Bus sales for the legacy Blue Bird operations decreased $3.5 million, or 0.9%, reflecting a 7.2% decrease in unit bookings that was partially offset by a 6.7% increase in average sales price per unit.

In the third quarter of fiscal 2026, 2,290 legacy Blue Bird units booked compared to 2,467 units that booked during the same period in fiscal 2025.

The increase in legacy Blue Bird unit price for the third 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 third quarter of fiscal 2026 compared to the third quarter of fiscal 2025.

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

Cost of goods sold .

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.

Total cost of goods sold was $413.8 million for the third quarter of fiscal 2026, an increase of $101.7 million, or 32.6%, compared to $312.1 million for the third quarter of fiscal 2025.

Micro Bird's cost of goods sold totaled $105.7 million during the third quarter of fiscal 2026.

As a percentage of net sales, legacy Blue Bird total cost of goods sold improved slightly from 78.4% to 78.2%, 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 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.

Bus segment cost of goods sold increased $101.6 million, or 34.0%, for the third quarter of fiscal 2026 compared to the same period in fiscal 2025, which included the $105.7 million of Micro Bird cost of sales during the third quarter of fiscal 2026.

The $4.1 million, or 1.4%, decrease in legacy Blue Bird cost of sales was primarily driven by the 7.2% decrease in units booked, which was partially offset by a 6.3% increase in the average cost of goods sold per unit for the third quarter of fiscal 2026 compared to the third 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 $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.

The $0.1 million, or 0.8%, increase in Parts segment cost of goods sold for the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025 primarily resulted from increased product costs driven by inflationary pressures and tariffs as well as slight variations due to product and channel mix, which was partially offset by the decrease in sales during the quarter.

Operating profit .

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.

Operating profit was $62.7 million for the third quarter of fiscal 2026, an increase of $12.6 million compared to operating profit of $50.1 million for the third quarter of fiscal 2025.

Micro Bird contributed $11.4 million of operating profit during the third quarter of fiscal 2026.

Profitability for legacy Blue Bird operations was positively impacted by a small decrease of $1.0 million, or 2.9%, in selling, general and administrative expenses as well as a small increase of $0.2 million, or 0.2%, in gross profit as outlined in the revenue and cost of goods sold discussions above.

Interest expense .

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 $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.

Interest expense was $2.0 million for the third quarter of fiscal 2026, an increase of $0.2 million, or 13.0%, compared to $1.7 million for the third quarter of fiscal 2025.

Micro Bird incurred $0.5 million of interest expense during the third quarter of fiscal 2026.

The $0.3 million decrease in interest expense for the legacy Blue Bird operations was primarily attributable to a decrease in the stated term loan interest rate from 6.1% at June 28, 2025 to 5.6% at June 27, 2026, as well as lower outstanding borrowings in the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025.

Other income (expense), net.

Other income, net was $135.7 million for the third quarter of fiscal 2026, an increase of $136.3 million, or 23,494.8%, compared to $0.6 million of other expense, net for the same period in fiscal 2025.

Micro Bird incurred $0.6 million of other expense, net during the third quarter of fiscal 2026, $0.4 million of which represented pretax costs resulting from Blue Bird's acquisition of the remaining 50% of the outstanding voting common stock of Micro Bird effective April 1, 2026.

During the third quarter of fiscal 2026, the legacy Blue Bird operations recorded net periodic pension expense of approximately $0.1 million compared with net periodic pension income of $0.4 million for the same period in fiscal 2025.

During the third quarter of fiscal 2026, the legacy Blue Bird operations also recorded a $19.6 million loss resulting from the settlement of the pension benefits earned by the majority of pension plan participants with no similar loss recorded in the corresponding period of the prior year.

See Note 14 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.

Also, on May 23, 2024, eligible members of the United Steelworkers Union ("USW") voted to ratify a three-year collective bargaining agreement ("CBA") with BBBC.

Among other items, the CBA requires the payment of a (i) lump-sum payment to certain employees who were not eligible for an annual wage increase because their hourly wage rate exceeded 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 Perry, Georgia facilities at the time the CBA was executed.

During the third quarters of both fiscal 2026 and 2025, the legacy Blue Bird operations 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 $0.5 million and $1.1 million for the three months ended June 27, 2026 and June 28, 2025, respectively, and were recorded in other expense, net because such compensation is not reflective of wages paid for services provided by the direct and indirect employees who support our operating activities and are expensed within cost of goods sold.

Additionally, during the third quarter of fiscal 2026, the legacy Blue Bird operations incurred approximately $4.5 million of pretax costs relating to the acquisition of the remaining 50% of the outstanding voting common stock of Micro Bird effective April 1, 2026, with no such costs incurred during the third 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.

However, the legacy Blue Bird operations also recorded a $160.5 million gain during the third quarter of fiscal 2026 resulting from remeasuring the value of the previously held 50% equity investment to its acquisition date fair value in connection with the Micro Bird acquisition, with no such gain recorded during the third quarter of fiscal 2025.

This gain is reported within other income, net because it is not indicative of the Company's normal earnings 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 description of both of the above discussed transactions.

Finally, during the third quarter of fiscal 2026, the legacy Blue Bird operations sold certain state emissions credits that were not projected to be used for approximately $0.4 million, with no similar income recorded during the third quarter of fiscal 2025.

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 $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 March 29, 2025 was 27.2% and differed from the statutory federal income tax rate of 21%.

Income tax expense was $10.2 million for the three months ended June 27, 2026 compared to $12.4 million for the three months ended June 28, 2025.

The effective tax rate for the three months ended June 27, 2026 was 5.2% due to the impact of the $160.5 million non-taxable gain from the acquisition of Micro Bird that was recognized during the third quarter of fiscal 2026.

When excluding this non-taxable gain, the effective tax rate for the three months ended June 27, 2026 was 27.9% 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 as well as the impact from foreign taxes relating to Micro Bird's Canadian pretax earnings during the three months ended June 27, 2026, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the quarter.

The effective tax rate for the three months ended June 28, 2025 was 25.1% and differed from the statutory federal income tax rate of 21%.

Adjusted EBITDA .

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.

Adjusted EBITDA was $71.4 million, or 13.8% of net sales, for the third quarter of fiscal 2026, an increase of $12.9 million, or 22.1%, compared to $58.5 million, or 14.7% of net sales, for the third quarter of fiscal 2025.

Micro Bird contributed $16.5 million of Adjusted EBITDA during the third quarter of fiscal 2026.

The $3.6 million decrease in Adjusted EBITDA for the legacy Blue Bird operations primarily relates to the (i) $1.2 million increase in equity in net loss of non-consolidated affiliates and (ii) $3.0 million decrease in Micro Bird total interest expense, net;

income tax expense or benefit;

depreciation expense and amortization expense that is included in calculating Adjusted EBITDA as reflected in the table below, both during the third quarter of fiscal 2026 when compared with corresponding period in fiscal 2025.

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

Three Months Ended

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

(in thousands of dollars) June 27, 2026 June 28, 2025

Net income $ 185,255 $ 36,455

Interest (income) expense, net (1)

Interest expense, net (1) 1,532 326

Income tax expense 10,173 12,375

2 unchanged sentences

Share-based compensation expense

Gain from Micro Bird acquisition (160,522) —

Pension plan settlement loss 19,562 —

Micro Bird total interest expense, net;

1 unchanged sentence

depreciation expense and amortization expense

(1,018) 1,989

Adjusted EBITDA

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13.8 % 14.7 %

(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

(1) Includes $0.2 million and $0.1 million for the three months ended June 27, 2026 and June 28, 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 $0.4 million for the three months ended June 27, 2026 and June 28, 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 Nine Months Ended June 27, 2026 and June 28, 2025:

Nine Months Ended

(in thousands of dollars) June 27, 2026 June 28, 2025

$ 1,202,879 $ 1,070,734

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Interest income 4,537 4,309

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

Other income, net 132,557 2,780

Income before income taxes $ 271,482 $ 118,445

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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

(in thousands of dollars) Nine Months Ended

Net Sales by Segment June 27, 2026 June 28, 2025

$ 1,124,445 $ 993,099

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$ 245,250 $ 217,099

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.

Net sales were $1,202.9 million for the nine months ended June 27, 2026, an increase of $132.1 million, or 12.3%, compared to $1,070.7 million for the nine months ended June 28, 2025.

Micro Bird contributed $122.9 million of net sales during the nine months ended June 27, 2026.

The $9.2 million, or 0.9%, increase in net sales for the legacy Blue Bird operations 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 three quarters of fiscal 2026.

The legacy Blue Bird Bus increases described above were partially offset by a decrease in Bus units sold resulting from timing due to a customer mix change as we produced a large number of units for certain customers that we will recognize as revenue in the fourth quarter of fiscal 2026 when the units are delivered to coincide with school resuming.

Many of these units contributed to the significant increase in finished goods inventory at June 27, 2026.

Bus sales increased $131.3 million, or 13.2%, for the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025, which included the $122.9 million of net sales that Micro Bird contributed during the nine months ended June 27, 2026.

Bus sales for the legacy Blue Bird operations increased $8.4 million, or 0.8%, reflecting a 5.7% increase in average sales price per unit that was partially offset by a 4.6% decrease in units booked.

The increase in unit price for the first nine 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 6,573 units in the nine months ended June 27, 2026 compared with 6,892 units during the same period in fiscal 2025.

Parts sales increased $0.8 million, or 1.0%, for the nine months ended June 27, 2026 compared to the nine months ended June 28, 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.

Total cost of goods sold was $957.6 million for the nine months ended June 27, 2026, an increase of $104.0 million, or 12.2%, compared to $853.6 million for the nine months ended June 28, 2025.

Micro Bird's cost of goods sold totaled $105.7 million for the nine months ended June 27, 2026.

As a percentage of net sales, legacy Blue Bird total cost of goods sold improved from 79.7% to 78.9%, 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.

Bus segment cost of goods sold increased $102.8 million, or 12.6%, for the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025, which included the $105.7 million of Micro Bird cost of sales during the nine months ended June 27, 2026.

The $2.9 million, or 0.4%, decrease in legacy Blue Bird cost of sales was primarily driven by the 4.6% decrease in units booked as discussed above, which was partially offset by the 4.5% increase in the average cost of goods sold per unit in the nine months ended June 27, 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.

The $1.2 million, or 3.2%, increase in Parts segment cost of goods sold for the nine months ended June 27, 2026 compared to the nine months ended June 28, 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.

Operating profit was $139.5 million for the nine months ended June 27, 2026, an increase of $22.6 million compared to operating profit of $116.8 million for the nine months ended June 28, 2025.

Micro Bird contributed $11.4 million of operating profit during the nine months ended June 27, 2026.

Profitability for legacy Blue Bird operations was positively impacted by an increase of

$10.9 million in gross profit as outlined in the revenue and cost of goods sold discussions as well as a $0.4 million decrease in selling, general and administrative expenses during the first nine months of fiscal 2026 when compared with the same period in fiscal 2025.

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.

Interest expense was $5.1 million for the nine months ended June 27, 2026, a decrease of $0.4 million, or 7.2%, compared to $5.5 million for the nine months ended June 28, 2025.

Micro Bird incurred $0.5 million of interest expense during the nine months ended June 27, 2026.

The $0.9 million decrease in interest expense for the legacy Blue Bird operations was primarily attributable to a decrease in the stated term loan interest rate from 6.1% at June 28, 2025 to 5.6% at June 27, 2026, as well as lower outstanding borrowings in the first nine months of fiscal 2026 compared to the first nine 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.

Other income, net was $132.6 million for the nine months ended June 27, 2026, an increase of $129.8 million, or 4,668.2%, compared to $2.8 million of other income, net for the nine months ended June 28, 2025.

Micro Bird incurred $0.6 million of other expense, net during the nine months ended June 27, 2026, $0.4 million of which represented pretax costs resulting from Blue Bird's acquisition of the remaining 50% of the outstanding voting common stock of Micro Bird effective April 1, 2026.

The legacy Blue Bird operations recorded $0.6 million of net periodic pension expense during the nine months ended June 27, 2026 when compared with $1.3 million of net periodic pension income recorded during the nine months ended June 28, 2025.

During the nine months ended June 27, 2026, the legacy Blue Bird operations also recorded a $19.6 million loss resulting from the settlement of the pension benefits earned by the majority of pension plan participants, with no similar loss recorded in the corresponding period of the prior year.

See Note 14 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.

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

During the nine months ended June 27, 2026 and June 28, 2025, the legacy Blue Bird operations 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 $0.5 million and $1.1 million for the nine months ended June 27, 2026 and June 28, 2025, respectively, and were recorded in other expense, net because such compensation is not reflective of wages paid for services provided by the direct and indirect employees who support our operating activities and are expensed within cost of goods sold.

Additionally, during the nine months ended June 27, 2026, the legacy Blue Bird operations incurred approximately $7.2 million of pretax costs relating to the acquisition of the remaining 50% of the outstanding voting common stock of Micro Bird effective April 1, 2026, with no such costs incurred during the nine months ended June 28, 2025.

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

However, the legacy Blue Bird operations also recorded a $160.5 million gain during the nine months ended June 27, 2026 resulting from remeasuring the value of the previously held 50% equity investment to its acquisition date fair value in connection with the Micro Bird acquisition, with no such gain recorded during the nine months ended June 28, 2025.

This gain is reported within other income, net because it is not indicative of the Company's normal earnings 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 description of both of the above discussed transactions.

Finally, during the nine months ended June 27, 2026 and June 28, 2025, the legacy Blue Bird operations sold certain state emissions credits that were not projected to be used for approximately $0.4 million and $2.6 million, respectively.

The proceeds from these sales were recorded in other income, net as these transaction are 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%.

Income tax expense was $28.4 million for the nine months ended June 27, 2026 compared to $30.2 million for the nine months ended June 28, 2025.

The effective tax rate for the nine months ended June 27, 2026 was 10.5% due to the impact of the $160.5 million non-taxable gain from the acquisition of Micro Bird that was recognized during the third quarter of fiscal 2026.

When excluding this non-taxable gain, the effective tax rate for the nine months ended June 27, 2026 was 25.6% 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 as well as the impact from foreign taxes relating to Micro Bird's Canadian pretax earnings during the nine months ended June 27, 2026, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the period.

The effective tax rate for the nine months ended June 28, 2025 was 25.5% 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.

Adjusted EBITDA was $172.3 million, or 14.3% of net sales, for the nine months ended June 27, 2026, an increase of $18.8 million, or 12.3%, compared to $153.4 million, or 14.3% of net sales, for the nine months ended June 28, 2025.

Micro Bird contributed $16.5 million of Adjusted EBITDA during the nine months ended June 27, 2026.

The $2.3 million increase in Adjusted EBITDA for the legacy Blue Bird operations primarily relates to the $11.7 million increase in 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, that was partially offset by the (i) $6.4 million increase in selling, general and administrative expenses, when adjusting for the impact of expenses that are excluded in calculating Adjusted EBITDA, and (ii) $3.4 million decrease in other income, net, when adjusted for the impact of income and expense amounts that are excluded in calculating Adjusted EBITDA as discussed above, all during the the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025.

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

Nine Months Ended

(in thousands of dollars) June 27, 2026 June 28, 2025

Net income $ 245,312 $ 91,223

Interest (income) expense, net (1)

Interest expense, net (1) 1,046 1,392

Income tax expense 28,394 30,197

Depreciation, amortization and disposals (2)

19,218 12,858

Micro Bird acquisition costs

Share-based compensation expense

Gain from Micro Bird acquisition (160,522) —

Pension plan settlement loss 19,562 —

Micro Bird total interest expense, net;

3 unchanged sentences

Adjusted EBITDA margin (percentage of net sales) 14.3 % 14.3 %

(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.

(1) Includes $0.5 million and $0.2 million for the nine months ended June 27, 2026 and June 28, 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 $2.4 million and $1.1 million for the nine months ended June 27, 2026 and June 28, 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 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 primary sources of liquidity are cash generated from its operations, available cash and cash equivalents and borrowings under its revolving credit facilities.

At June 27, 2026, the Company had $116.8 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.

At June 27, 2026, Micro Bird also maintained a separate revolving credit facility having a maximum borrowing capacity of $50.0 million, all of which was available as there were no outstanding borrowings during the three months ended June 27, 2026 following the repayment of the balance existing on the April 1, 2026 acquisition closing date.

This revolving credit facility is also available for working capital requirements, capital expenditures and other general purposes.

Credit Agreement

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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 March 28, 2026 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.

1 unchanged sentence

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

At June 27, 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.

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 conditions that generally must be finalized within a specified period 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.

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

Six Months Ended

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

Nine Months Ended

(in thousands of dollars) June 27, 2026 June 28, 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 $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 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.

Cash flows provided by operating activities totaled $115.4 million for the nine months ended June 27, 2026, an increase of $4.3 million from the $111.1 million of cash flows provided by operating activities during the nine months ended June 28, 2025.

The increase primarily resulted from the $154.1 million increase in net income adjusted for the impacts of the non-cash pretax $160.5 million gain from acquisition of joint venture and $19.6 million pension plan settlement loss recognized during the nine months ended June 27, 2026 as well as the $3.9 million total net increase in all other non-cash adjustments impacting operating cash flows during the nine months ended June 27, 2026 when compared with the nine months ended June 28, 2025.

This net increase was further impacted by net changes in operating assets and liabilities that unfavorably impacted operating cash flows by $12.7 million during the nine months ended June 27, 2026 when compared with the nine months ended June 28, 2025.

The largest drivers in the changes in operating assets and liabilities resulted from an unfavorable change in accounts receivable of $70.8 million that was partially offset by a favorable change in accrued expenses, pension and other liabilities of $46.8 million, as follows:

• A shift in our customer mix resulted in an increase in the accounts receivable balance towards the end of fiscal 2024 and again at June 27, 2026, when compared with the end of fiscal 2025 and June 28, 2025, respectively.

Specifically, we had a significant increase in fleet revenue towards the end of fiscal 2024 and again towards the end of the third quarter of fiscal 2026 relating to school buses that were delivered to closely coincide with the start of the new school year, with such revenue representing the majority of sales we make on credit.

During the nine months ended June 28, 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 nine months ended June 27, 2026 was significantly lower when compared with the same period in fiscal 2025.

Additionally, towards the end of the third quarter of fiscal 2026, we had a significant increase in fleet credit sales that resulted in an increase in the accounts receivable balance (that resulted in a significant use of cash) at June 27, 2026 with no similar significant activity impacting the accounts receivable balance at June 28, 2025.

• There was a large increase in accrued expenses, pension and other liabilities (that resulted in a significant source of cash) during the nine months ended June 27, 2026 when compared with a large decrease (that resulted in a significant use of cash) during the nine months ended June 28, 2025.

The increase during fiscal 2026 was primarily driven by a $29.4 million advanced payment made by a customer, with no similar activity during 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 June 28, 2025 when compared with June 27, 2026.

Total cash used in investing activities

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.

Cash flows used in investing activities totaled $72.5 million for the nine months ended June 27, 2026, an increase of $53.5 million when compared to the $19.1 million of cash flows used in investing activities for the nine months ended June 28, 2025.

The increase primarily resulted from the $49.6 million cash consideration paid in the Micro Bird acquisition, net of the cash acquired.

Total cash used in financing activities

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.

Cash flows used in financing activities totaled $155.3 million for the nine months ended June 27, 2026 as compared to $46.7 million for the nine months ended June 28, 2025, resulting in a $108.7 million increase between fiscal periods.

The increase primarily resulted from the $129.6 million of Micro Bird debt that was repaid in connection with the closing of the acquisition on April 1, 2026, that was partially offset by a $19.0 million reduction in common stock acquired in connection with the Company's share repurchase programs during the nine months ended June 27, 2026 when compared with the same period ended June 28, 2025.

Free cash flow

Management believes the non-GAAP measurement of Free Cash Flow, defined as net cash provided by operating activities less cash paid for fixed assets and acquired intangible assets, fairly represents the Company’s ability to generate surplus cash that could fund activities not in the ordinary course of business.

Management believes the non-GAAP measurement Free Cash Flow, defined as net cash provided by operating activities less cash paid for fixed assets and acquired intangible assets, fairly represents the Company’s ability to generate surplus cash that could fund activities not in the ordinary course of business.

See “Key Non-GAAP Financial Measures We Use to Evaluate Our Performance” for further discussion.

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

Six Months Ended

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

Nine Months Ended

(in thousands of dollars) June 27, 2026 June 28, 2025

Net cash provided by operating activities $ 115,377 $ 111,096

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$ 92,682 $ 92,881

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.

Free Cash Flow for the nine months ended June 27, 2026 was $0.2 million lower than for the nine months ended June 28, 2025 due to a $4.3 million increase in net cash provided by operating activities as discussed above that was offset by a $4.5 million increase in cash paid for fixed assets.

Off-Balance Sheet Arrangements

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.

We had outstanding letters of credit totaling $8.3 million at June 27, 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