10-Q 1 blbd-20220702.htm 10-Q blbd-20220702
000158952610/12022Q3FALSEP2Y9100015895262021-10-032022-07-0200015895262022-08-08xbrli:shares00015895262022-07-02iso4217:USD00015895262021-10-02iso4217:USDxbrli:shares00015895262022-04-032022-07-0200015895262021-04-042021-07-0300015895262020-10-042021-07-0300015895262020-10-0300015895262021-07-030001589526us-gaap:CommonStockMember2022-04-020001589526us-gaap:AdditionalPaidInCapitalMember2022-04-020001589526us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-020001589526us-gaap:RetainedEarningsMember2022-04-020001589526us-gaap:TreasuryStockMember2022-04-0200015895262022-04-020001589526us-gaap:AdditionalPaidInCapitalMember2022-04-032022-07-020001589526us-gaap:RetainedEarningsMember2022-04-032022-07-020001589526us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-032022-07-020001589526us-gaap:CommonStockMember2022-07-020001589526us-gaap:AdditionalPaidInCapitalMember2022-07-020001589526us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-020001589526us-gaap:RetainedEarningsMember2022-07-020001589526us-gaap:TreasuryStockMember2022-07-020001589526us-gaap:CommonStockMember2021-04-030001589526us-gaap:AdditionalPaidInCapitalMember2021-04-030001589526us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-030001589526us-gaap:RetainedEarningsMember2021-04-030001589526us-gaap:TreasuryStockMember2021-04-0300015895262021-04-030001589526us-gaap:CommonStockMember2021-04-042021-07-030001589526us-gaap:AdditionalPaidInCapitalMember2021-04-042021-07-030001589526us-gaap:RetainedEarningsMember2021-04-042021-07-030001589526us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-042021-07-030001589526us-gaap:CommonStockMember2021-07-030001589526us-gaap:AdditionalPaidInCapitalMember2021-07-030001589526us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-030001589526us-gaap:RetainedEarningsMember2021-07-030001589526us-gaap:TreasuryStockMember2021-07-030001589526us-gaap:CommonStockMember2021-10-020001589526us-gaap:AdditionalPaidInCapitalMember2021-10-020001589526us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-10-020001589526us-gaap:RetainedEarningsMember2021-10-020001589526us-gaap:TreasuryStockMember2021-10-020001589526us-gaap:CommonStockMember2021-10-032022-07-020001589526us-gaap:AdditionalPaidInCapitalMember2021-10-032022-07-020001589526us-gaap:RetainedEarningsMember2021-10-032022-07-020001589526us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-10-032022-07-020001589526us-gaap:CommonStockMember2020-10-030001589526us-gaap:AdditionalPaidInCapitalMember2020-10-030001589526us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-10-030001589526us-gaap:RetainedEarningsMember2020-10-030001589526us-gaap:TreasuryStockMember2020-10-030001589526us-gaap:CommonStockMember2020-10-042021-07-030001589526us-gaap:AdditionalPaidInCapitalMember2020-10-042021-07-030001589526us-gaap:RetainedEarningsMember2020-10-042021-07-030001589526us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-10-042021-07-030001589526srt:MinimumMember2021-10-032022-07-020001589526srt:MaximumMember2021-10-032022-07-0200015895262022-04-032022-07-0200015895262023-10-022022-07-020001589526us-gaap:ShippingAndHandlingMember2022-04-032022-07-020001589526us-gaap:ShippingAndHandlingMember2021-04-042021-07-030001589526us-gaap:ShippingAndHandlingMember2021-10-032022-07-020001589526us-gaap:ShippingAndHandlingMember2020-10-042021-07-0300015895262018-11-302018-11-3000015895262018-11-30xbrli:pure0001589526blbd:InterestRateCollarMember2022-04-032022-07-020001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodOneMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-242021-11-240001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodTwoMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-242021-11-240001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodThreeMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-242021-11-240001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodFourMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-242021-11-240001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodOneMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-240001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodTwoMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-240001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodThreeMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-240001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodFourMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-240001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodFiveMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-240001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodSixMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-240001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodSevenMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-240001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodEightMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-240001589526us-gaap:LineOfCreditMemberblbd:LimitedAvailabilityPeriodNineMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-240001589526blbd:LimitedAvailabilityPeriodTenMemberus-gaap:LineOfCreditMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-240001589526blbd:LimitedAvailabilityPeriodElevenMemberus-gaap:LineOfCreditMemberblbd:FourthAmendmentToCreditAgreementMember2021-11-240001589526us-gaap:MediumTermNotesMemberblbd:LeverageRatioLessthan2.00Memberblbd:AlternateBaseRateMemberblbd:CreditAgreementMember2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberblbd:LeverageRatioLessthan2.00Memberus-gaap:EurodollarMemberblbd:CreditAgreementMember2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberblbd:AlternateBaseRateMemberblbd:LeverageRatioGreaterthanorEqualto2.00andLessthan2.50Memberblbd:CreditAgreementMember2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberus-gaap:EurodollarMemberblbd:LeverageRatioGreaterthanorEqualto2.00andLessthan2.50Memberblbd:CreditAgreementMember2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberblbd:AlternateBaseRateMemberblbd:LeverageRatioGreaterthanorEqualto2.50andLessthan3.00Memberblbd:CreditAgreementMember2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberus-gaap:EurodollarMemberblbd:LeverageRatioGreaterthanorEqualto2.50andLessthan3.00Memberblbd:CreditAgreementMember2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberblbd:AlternateBaseRateMemberblbd:CreditAgreementMemberblbd:LeverageRatioGreaterThanOrEqualTo300AndLessThan350Member2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberus-gaap:EurodollarMemberblbd:CreditAgreementMemberblbd:LeverageRatioGreaterThanOrEqualTo300AndLessThan350Member2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberblbd:AlternateBaseRateMemberblbd:LeverageRatioGreaterThanOrEqualTo325AndLessThan350Memberblbd:CreditAgreementMember2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberus-gaap:EurodollarMemberblbd:LeverageRatioGreaterThanOrEqualTo325AndLessThan350Memberblbd:CreditAgreementMember2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberblbd:AlternateBaseRateMemberblbd:CreditAgreementMemberblbd:LeverageRatioGreaterThanOrEqualTo350AndLessThan450Member2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberus-gaap:EurodollarMemberblbd:CreditAgreementMemberblbd:LeverageRatioGreaterThanOrEqualTo350AndLessThan450Member2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberblbd:LeverageRatioGreaterThanOrEqualTo450AndLessThan500Memberblbd:AlternateBaseRateMemberblbd:CreditAgreementMember2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberblbd:LeverageRatioGreaterThanOrEqualTo450AndLessThan500Memberus-gaap:EurodollarMemberblbd:CreditAgreementMember2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberblbd:AlternateBaseRateMemberblbd:LeverageRatioGreaterThan500xMemberblbd:CreditAgreementMember2021-11-242021-11-240001589526us-gaap:MediumTermNotesMemberus-gaap:EurodollarMemberblbd:LeverageRatioGreaterThan500xMemberblbd:CreditAgreementMember2021-11-242021-11-2400015895262021-12-152021-12-150001589526us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberblbd:ThirdAmendmenttotheCreditAgreementMember2021-11-240001589526us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:OtherNoncurrentAssetsMemberblbd:ThirdAmendmenttotheCreditAgreementMember2021-11-240001589526us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberblbd:SeniorNotesNoncurrentMemberblbd:ThirdAmendmenttotheCreditAgreementMember2021-11-240001589526us-gaap:RevolvingCreditFacilityMemberblbd:GainLossOExtinguishmentOfDebtMemberus-gaap:LineOfCreditMemberblbd:ThirdAmendmenttotheCreditAgreementMember2021-11-240001589526us-gaap:RevolvingCreditFacilityMemberblbd:SecondAmendmentToCreditAgreementMemberblbd:GainLossOExtinguishmentOfDebtMemberus-gaap:LineOfCreditMember2021-11-240001589526us-gaap:SeniorNotesMemberblbd:TermLoanFacilityMember2022-07-020001589526us-gaap:SeniorNotesMemberblbd:TermLoanFacilityMember2021-10-020001589526us-gaap:SeniorNotesMemberblbd:SeniorCreditFacilityMember2022-07-020001589526us-gaap:SeniorNotesMemberblbd:SeniorCreditFacilityMember2021-10-020001589526us-gaap:LineOfCreditMemberblbd:SeniorRevolvingCreditFacilityMemberus-gaap:LetterOfCreditMember2022-07-020001589526us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberblbd:SeniorRevolvingCreditFacilityMember2022-07-02blbd:segment0001589526blbd:BusMemberus-gaap:OperatingSegmentsMember2022-04-032022-07-020001589526blbd:BusMemberus-gaap:OperatingSegmentsMember2021-04-042021-07-030001589526blbd:BusMemberus-gaap:OperatingSegmentsMember2021-10-032022-07-020001589526blbd:BusMemberus-gaap:OperatingSegmentsMember2020-10-042021-07-030001589526blbd:PartsMemberus-gaap:OperatingSegmentsMember2022-04-032022-07-020001589526blbd:PartsMemberus-gaap:OperatingSegmentsMember2021-04-042021-07-030001589526blbd:PartsMemberus-gaap:OperatingSegmentsMember2021-10-032022-07-020001589526blbd:PartsMemberus-gaap:OperatingSegmentsMember2020-10-042021-07-030001589526blbd:PartsMemberus-gaap:IntersegmentEliminationMember2022-04-032022-07-020001589526blbd:PartsMemberus-gaap:IntersegmentEliminationMember2021-04-042021-07-030001589526blbd:PartsMemberus-gaap:IntersegmentEliminationMember2021-10-032022-07-020001589526blbd:PartsMemberus-gaap:IntersegmentEliminationMember2020-10-042021-07-030001589526us-gaap:OperatingSegmentsMember2022-04-032022-07-020001589526us-gaap:OperatingSegmentsMember2021-04-042021-07-030001589526us-gaap:OperatingSegmentsMember2021-10-032022-07-020001589526us-gaap:OperatingSegmentsMember2020-10-042021-07-030001589526us-gaap:MaterialReconcilingItemsMember2022-04-032022-07-020001589526us-gaap:MaterialReconcilingItemsMember2021-04-042021-07-030001589526us-gaap:MaterialReconcilingItemsMember2021-10-032022-07-020001589526us-gaap:MaterialReconcilingItemsMember2020-10-042021-07-030001589526country:US2022-04-032022-07-020001589526country:US2021-04-042021-07-030001589526country:US2021-10-032022-07-020001589526country:US2020-10-042021-07-030001589526country:CA2022-04-032022-07-020001589526country:CA2021-04-042021-07-030001589526country:CA2021-10-032022-07-020001589526country:CA2020-10-042021-07-030001589526blbd:RestofWorldMember2022-04-032022-07-020001589526blbd:RestofWorldMember2021-04-042021-07-030001589526blbd:RestofWorldMember2021-10-032022-07-020001589526blbd:RestofWorldMember2020-10-042021-07-030001589526blbd:DieselBusesMember2022-04-032022-07-020001589526blbd:DieselBusesMember2021-04-042021-07-030001589526blbd:DieselBusesMember2021-10-032022-07-020001589526blbd:DieselBusesMember2020-10-042021-07-030001589526blbd:AlternativeFuelBusesMember2022-04-032022-07-020001589526blbd:AlternativeFuelBusesMember2021-04-042021-07-030001589526blbd:AlternativeFuelBusesMember2021-10-032022-07-020001589526blbd:AlternativeFuelBusesMember2020-10-042021-07-030001589526us-gaap:ProductAndServiceOtherMember2022-04-032022-07-020001589526us-gaap:ProductAndServiceOtherMember2021-04-042021-07-030001589526us-gaap:ProductAndServiceOtherMember2021-10-032022-07-020001589526us-gaap:ProductAndServiceOtherMember2020-10-042021-07-030001589526blbd:PartsMember2022-04-032022-07-020001589526blbd:PartsMember2021-04-042021-07-030001589526blbd:PartsMember2021-10-032022-07-020001589526blbd:PartsMember2020-10-042021-07-030001589526us-gaap:RestrictedStockMember2022-04-032022-07-020001589526us-gaap:RestrictedStockMember2021-04-042021-07-030001589526us-gaap:RestrictedStockMember2021-10-032022-07-020001589526us-gaap:RestrictedStockMember2020-10-042021-07-030001589526us-gaap:EmployeeStockOptionMember2022-04-032022-07-020001589526us-gaap:EmployeeStockOptionMember2021-04-042021-07-030001589526us-gaap:EmployeeStockOptionMember2021-10-032022-07-020001589526us-gaap:EmployeeStockOptionMember2020-10-042021-07-030001589526us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-04-020001589526us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-10-020001589526us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-04-032022-07-020001589526us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-10-032022-07-020001589526us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-07-020001589526us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-04-030001589526us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-10-030001589526us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-04-042021-07-030001589526us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-10-042021-07-030001589526us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-07-030001589526us-gaap:PrivatePlacementMember2021-12-152021-12-150001589526us-gaap:PrivatePlacementMember2021-12-150001589526blbd:ColiseumMember2021-12-152021-12-15

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 2, 2022

OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ................................ to ...............................................

Commission File Number 001-36267

BLUE BIRD CORPORATION
(Exact name of registrant as specified in its charter)


Delaware                         46-3891989
(State or other jurisdiction of incorporation or organization)                (I.R.S. Employer Identification No.)

        
3920 Arkwright Road, 2nd Floor, Macon, Georgia 31210
(Address of principal executive offices and zip code)

(478) 822-2801
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.0001 par valueBLBDNASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes No
    

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated Filer
Non-accelerated filer Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

At August 8, 2022, 32,024,911 shares of the registrant’s common stock, $0.0001 par value, were outstanding.



BLUE BIRD CORPORATION
FORM 10-Q

TABLE OF CONTENTS









PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

BLUE BIRD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of dollars, except for share data)July 2, 2022October 2, 2021
Assets
Current assets
Cash and cash equivalents$26,509 $11,709 
Accounts receivable, net13,004 9,967 
Inventories216,725 125,206 
Other current assets9,901 9,191 
Total current assets$266,139 $156,073 
Property, plant and equipment, net102,124 105,482 
Goodwill18,825 18,825 
Intangible assets, net47,936 49,443 
Equity investment in affiliate11,312 14,817 
Deferred tax assets10,706 4,413 
Finance lease right-of-use assets4,363 5,486 
Other assets1,765 1,481 
Total assets$463,170 $356,020 
Liabilities and Stockholders' Equity (Deficit)
Current liabilities
Accounts payable$129,911 $72,270 
Warranty6,637 7,385 
Accrued expenses18,472 12,267 
Deferred warranty income7,152 7,832 
Finance lease obligations1,366 1,327 
Other current liabilities4,626 8,851 
Current portion of long-term debt18,563 14,850 
Total current liabilities$186,727 $124,782 
Long-term liabilities
Revolving credit facility$60,000 $45,000 
Long-term debt135,035 149,573 
Warranty9,507 11,165 
Deferred warranty income10,986 12,312 
Deferred tax liabilities3,883 3,673 
Finance lease obligations3,506 4,538 
Other liabilities11,880 14,882 
Pension19,659 22,751 
Total long-term liabilities$254,456 $263,894 
Guarantees, commitments and contingencies (Note 6)
Stockholders' equity (deficit)
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares outstanding at July 2, 2022 and October 2, 2021
$ $ 
Common stock, $0.0001 par value, 100,000,000 shares authorized, 31,990,860 and 27,205,269 shares outstanding at July 2, 2022 and October 2, 2021, respectively
3 3 
Additional paid-in capital172,814 96,170 
Accumulated deficit(56,417)(33,753)
Accumulated other comprehensive loss(44,131)(44,794)
Treasury stock, at cost, 1,782,568 shares at July 2, 2022 and October 2, 2021
(50,282)(50,282)
Total stockholders' equity (deficit)$21,987 $(32,656)
Total liabilities and stockholders' equity (deficit)$463,170 $356,020 

The accompanying notes are an integral part of these condensed consolidated financial statements.
2


BLUE BIRD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months EndedNine Months Ended
(in thousands of dollars except for share data)July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Net sales$206,083 $196,659 $542,965 $491,791 
Cost of goods sold184,490 170,500 502,018 432,671 
Gross profit$21,593 $26,159 $40,947 $59,120 
Operating expenses
Selling, general and administrative expenses20,505 18,073 58,596 50,124 
Operating profit (loss)$1,088 $8,086 $(17,649)$8,996 
Interest expense(3,908)(2,805)(9,481)(7,069)
Interest income   1 
Other income, net735 426 2,215 1,491 
Loss on debt modification  (561)(598)
(Loss) income before income taxes$(2,085)$5,707 $(25,476)$2,821 
Income tax (expense) benefit(2,860)(1,892)6,317 (888)
Equity in net (loss) income of non-consolidated affiliate(1,490)517 (3,505)166 
Net (loss) income$(6,435)$4,332 $(22,664)$2,099 
(Loss) earnings per share:
Basic weighted average shares outstanding31,990,860 27,172,162 30,687,406 27,116,915 
Diluted weighted average shares outstanding31,990,860 27,428,877 30,687,406 27,337,360 
Basic (loss) earnings per share$(0.20)$0.16 $(0.74)$0.08 
Diluted (loss) earnings per share$(0.20)$0.16 $(0.74)$0.08 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3


BLUE BIRD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
Three Months EndedNine Months Ended
(in thousands of dollars)July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Net (loss) income$(6,435)$4,332 $(22,664)$2,099 
Other comprehensive income, net of tax:
Net change in defined benefit pension plan221 354 663 1,061 
Total other comprehensive income$221 $354 $663 $1,061 
Comprehensive (loss) income$(6,214)$4,686 $(22,001)$3,160 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


BLUE BIRD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
(in thousands of dollars)July 2, 2022July 3, 2021
Cash flows from operating activities
Net (loss) income$(22,664)$2,099 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization10,089 10,145 
Non-cash interest expense3,084 2,219 
Share-based compensation 3,153 1,923 
Equity in net loss (income) of non-consolidated affiliate3,505 (166)
Loss (gain) on disposal of fixed assets12 (681)
Impairment of fixed assets1,354  
Deferred taxes(6,293)350 
Amortization of deferred actuarial pension losses872 1,397 
Loss on debt modification561 598 
Changes in assets and liabilities:
Accounts receivable(3,037)(2,828)
Inventories(91,519)(77,017)
Other assets80 1,682 
Accounts payable56,280 55,150 
Accrued expenses, pension and other liabilities(9,928)(9,109)
Total adjustments$(31,787)$(16,337)
Total cash used in operating activities$(54,451)$(14,238)
Cash flows from investing activities
Cash paid for fixed assets$(4,748)$(10,304)
Proceeds from sale of fixed assets 901 
Total cash used in investing activities$(4,748)$(9,403)
Cash flows from financing activities
Revolving credit facility borrowings$15,000 $ 
Principal payments of senior term loan borrowings(11,138)(7,425)
Principal payments of finance lease borrowings(993)(1,147)
Cash paid for debt costs(2,468)(2,476)
Proceeds from Private Placement (Note 11)75,000  
Cash paid for stock issuance costs(202) 
Cash paid for repurchases of common stock in connection with employee stock award exercises(1,503)(518)
Cash received from employee stock option exercises303 1,923 
Total cash provided by (used in) financing activities$73,999 $(9,643)
Change in cash and cash equivalents14,800 (33,284)
Cash and cash equivalents, beginning of period11,709 44,507 
Cash and cash equivalents, end of period$26,509 $11,223 
Supplemental disclosures of cash flow information
Cash paid or received during the period:
Interest paid, net of interest received$10,408 $8,855 
Income tax paid, net of tax refunds48 52 
Non-cash investing and financing activities:
Changes in accounts payable for capital additions to property, plant and equipment$1,718 $400 
Right-of-use assets obtained in exchange for operating lease obligations 107 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5


BLUE BIRD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
Three Months Ended
(in thousands of dollars, except for share data)Common StockConvertible Preferred StockTreasury Stock
 SharesPar ValueAdditional Paid-In-CapitalSharesAmountAccumulated Other Comprehensive LossAccumulated DeficitSharesAmountTotal Stockholders' Equity (Deficit)
Balance, April 2, 202231,990,860 $3 $172,191 — $— $(44,352)$(49,982)1,782,568 $(50,282)$27,578 
Share-based compensation expense— — 623 — — — — — — 623 
Net loss— — — — — — (6,435)— — (6,435)
Other comprehensive income, net of tax— — — — — 221 — — — 221 
Balance, July 2, 202231,990,860 $3 $172,814 — $— $(44,131)$(56,417)1,782,568 $(50,282)$21,987 
Balance, April 3, 202127,153,872 $3 $91,078 — $— $(57,690)$(35,697)1,782,568 $(50,282)$(52,588)
Stock option activity50,563 — 794 — — — — — — 794 
Share-based compensation expense— — 297 — — — — — — 297 
Net income— — — — — — 4,332 — — 4,332 
Other comprehensive income, net of tax— — — — — 354 — — — 354 
Balance, July 3, 202127,204,435 $3 $92,169 — $— $(57,336)$(31,365)1,782,568 $(50,282)$(46,811)















6


Nine Months Ended
(in thousands of dollars, except for share data)Common StockConvertible Preferred StockTreasury Stock
 SharesPar ValueAdditional Paid-In-CapitalSharesAmountAccumulated Other Comprehensive LossAccumulated DeficitSharesAmountTotal Stockholders' Equity (Deficit)
Balance, October 2, 202127,205,269 $3 $96,170 — $— $(44,794)$(33,753)1,782,568 $(50,282)$(32,656)
Private Placement (Note 11)4,687,500 — 74,798 — — — — — — 74,798 
Restricted stock activity82,505 — (1,484)— — — — — — (1,484)
Stock option activity15,586 — 284 — — — — — — 284 
Share-based compensation expense— — 3,046 — — — — — — 3,046 
Net loss— — — — — — (22,664)— — (22,664)
Other comprehensive income, net of tax— — — — — 663 — — — 663 
Balance, July 2, 202231,990,860 $3 $172,814 — $— $(44,131)$(56,417)1,782,568 $(50,282)$21,987 
Balance, October 3, 202027,048,404 $3 $88,910 — $— $(58,397)$(33,464)1,782,568 $(50,282)$(53,230)
Restricted stock activity36,404 — (517)— — — — — — (517)
Stock option activity119,627 — 1,922 — — — — — — 1,922 
Share-based compensation expense— — 1,854 — — — — — — 1,854 
Net income— — — — — — 2,099 — — 2,099 
Other comprehensive income, net of tax— — — — — 1,061 — — — 1,061 
Balance, July 3, 202127,204,435 $3 $92,169 — $— $(57,336)$(31,365)1,782,568 $(50,282)$(46,811)

The accompanying notes are an integral part of these consolidated financial statements.
7


BLUE BIRD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Nature of Business and Basis of Presentation

Nature of Business

Blue Bird Body Company ("BBBC"), a wholly-owned subsidiary of Blue Bird Corporation, was incorporated in 1958 and has manufactured, assembled and sold school buses to a variety of municipal, federal and commercial customers since 1927. The majority of BBBC’s sales are made to an independent dealer network, which in turn sells buses to ultimate end users. References in these notes to condensed consolidated financial statements to “Blue Bird,” the “Company,” “we,” “our,” or “us” relate to Blue Bird Corporation and its wholly-owned subsidiaries, unless the context specifically indicates otherwise. We are headquartered in Macon, Georgia.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and accounts have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting and Article 8 of Regulation S-X. The Company’s fiscal year ends on the Saturday closest to September 30 with its quarters consisting of thirteen weeks in most years. The fiscal years ending October 1, 2022 ("fiscal 2022") and ended October 2, 2021 ("fiscal 2021") consist or consisted of 52 weeks. The third quarters of fiscal 2022 and fiscal 2021 both included 13 weeks. The nine month periods in fiscal 2022 and 2021 both included 39 weeks.

In the opinion of management, all adjustments considered necessary for a fair presentation of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Operating results for any interim period are not necessarily indicative of the results that may be expected for the entire year. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

The Condensed Consolidated Balance Sheet data as of October 2, 2021 was derived from the Company’s audited financial statements but does not include all disclosures required by U.S. GAAP. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes as of and for the fiscal year ended October 2, 2021 as set forth in the Company's fiscal 2021 Form 10-K filed on December 15, 2021.

Impacts of COVID-19 and Russia's Invasion of Ukraine on our Business

Towards the end of our second quarter of the fiscal year that ended October 3, 2020 ("fiscal 2020") and continuing through the third quarter of fiscal 2022, the novel coronavirus known as "COVID-19" spread throughout the world, resulting in a global pandemic. The pandemic has significantly impacted our financial results from the second half of fiscal 2020, continuing through the third quarter of fiscal 2022, causing, among other matters, reduced demand for school buses and major supply chain disruptions during portions of this period of time.

Additionally, Russian military forces launched a large-scale invasion of Ukraine on February 24, 2022. While the Company has no assets or customers in either of these countries, this military conflict significantly impacted our financial results during the third quarter of fiscal 2022, primarily in an indirect manner since the Company does not sell to customers located in, or source goods directly from, either country. Specifically, it has contributed to increased a) costs charged by suppliers for the purchase of inventory that is at least partially dependent on resources originating from either of the countries and b) freight costs, both of which negatively impacted the gross profit recognized on sales during the third quarter of fiscal 2022.

The continuing development and fluidity of the pandemic and military conflict in Ukraine and their trailing impacts preclude any prediction as to the ultimate severity of the adverse impacts on our business, financial condition, results of operations, and liquidity.

Use of Estimates and Assumptions

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions. At the date of the financial statements, these estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities, and during the reporting period, these estimates and assumptions affect the reported
8


amounts of revenues and expenses. For example, significant management judgments are required in determining excess, obsolete, or unsalable inventory; the allowance for doubtful accounts; potential impairment of long-lived assets, goodwill and intangible assets; and the accounting for self-insurance reserves, warranty reserves, pension obligations, income taxes, environmental liabilities and contingencies. Future events, including the extent and duration of COVID-19 related economic impacts, and their effects cannot be predicted with certainty, and, accordingly, the Company’s accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the Company’s condensed consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. The Company evaluates and updates its assumptions and estimates on an ongoing basis and may employ outside experts to assist in the Company’s evaluations. Actual results could differ from the estimates that the Company has used.

2. Summary of Significant Accounting Policies and Recently Issued Accounting Standards

The Company’s significant accounting policies are described in the Company’s fiscal 2021 Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on December 15, 2021. Our senior management has reviewed these significant accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies in the nine months ended July 2, 2022.

Recently Issued Accounting Standards

ASU 2020-04 On March 12, 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, providing temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of LIBOR (defined below), which was initially expected to occur on December 31, 2021. The amendments in ASU 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued.

ASU 2021-01 On January 7, 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which refines the scope of Accounting Standards Codification Topic ("ASC") 848, Reference Rate Reform, and clarifies some of its guidance as part of the FASB’s ongoing monitoring of global reference rate reform activities. The ASU permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements, and calculating price alignment interest in connection with reference rate reform activities under way in global financial markets.

The above amendments are effective for all entities from March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments to contract modifications on a (i) full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or (ii) prospective basis from any date within an interim period that includes or is subsequent to March 12, 2020 through the date that the interim financial statements are issued or available to be issued.

On March 5, 2021, the Intercontinental Exchange, Inc. ("ICE") Benchmark Administration ("IBA"), the administrator of the United States Dollar London Interbank Offering Rate ("LIBOR"), issued a statement, following the completion of a formal consultation process, reaffirming the preliminary announcement it made on November 30, 2020, to cease publication of (i) 1 week and 2 month LIBOR subsequent to December 31, 2021 and (ii) the overnight and 1, 3, 6 and 12 month LIBOR tenors subsequent to June 30, 2023. The IBA’s statement regarding such cessation dates primarily resulted from a majority of LIBOR panel banks communicating to the IBA that they would be unwilling to continue contributing to the relevant LIBOR settings after such dates. As a result, the IBA determined that it would be unable to publish the relevant LIBOR settings on a representative basis after such dates. The United Kingdom Financial Conduct Authority ("FCA"), which regulates the IBA, confirmed that, based on information it received from LIBOR panel banks, it does not expect that any LIBOR settings will become unrepresentative before the announced cessation dates summarized above.

Currently, the Company’s interest rate collar, which is not designated in a hedge accounting relationship, and Amended Credit Agreement (defined below) are the only contracts that reference an interest rate index (i.e., 3 month LIBOR) that is subject to the reference rate reform guidance included in the above amendments. While the termination date of the interest rate collar, September 30, 2022, occurs prior to the July 1, 2023 date on which the IBA will no longer publish 3 month LIBOR, the Amended Credit Agreement matures on September 13, 2023, approximately 2.5 months subsequent to such cessation date. However, as management does not currently forecast that the Company will have sufficient cash to fund the term loan borrowings that are expected to be outstanding under the terms of the Amended Credit Agreement upon maturity, it is expecting to refinance such borrowings prior to maturity, with such refinancing likely to occur before the July 1, 2023 LIBOR cessation date. Therefore, it is likely that neither the interest rate collar nor Amended Credit Agreement will be modified to reflect the discontinuation of 3 month LIBOR effective July 1, 2023 and accordingly, the Company will not be required to decide whether or not to elect to adopt such amendments prior to or on December 31, 2022 (i.e., the last effective date for adopting the amendments). However, to the extent that either or both of the contracts are
9


modified prior to December 31, 2022, the Company plans to adopt the amendments on a prospective basis by adjusting the derivative fair value and/or debt effective interest rate, as applicable, neither of which is expected to have a material impact on the consolidated financial statements.


3. Supplemental Financial Information

Inventories

The following table presents the components of inventories at the dates indicated:
(in thousands of dollars)July 2, 2022October 2, 2021
Raw materials$152,191 $74,862 
Work in process59,832 41,257 
Finished goods4,702 9,087 
Total inventories$216,725 $125,206 

Product Warranties

The following table reflects activity in accrued warranty cost (current and long-term portions combined) for the periods presented:
Three Months EndedNine Months Ended
(in thousands of dollars)July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Balance at beginning of period$16,985 $19,181 $18,550 $21,374 
Add current period accruals1,894 2,040 5,181 4,932 
Current period reductions of accrual(2,735)(2,441)(7,587)(7,526)
Balance at end of period$16,144 $18,780 $16,144 $18,780 
Extended Warranties
The following table reflects activity in deferred warranty income (current and long-term portions combined), for the sale of extended warranties of two to five years, for the periods presented:
Three Months EndedNine Months Ended
(in thousands of dollars)July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Balance at beginning of period$18,414 $20,724 $20,144 $22,588 
Add current period deferred income1,908 1,921 4,268 4,421 
Current period recognition of income(2,184)(2,137)(6,274)(6,501)
Balance at end of period$18,138 $20,508 $18,138 $20,508 

The outstanding balance of deferred warranty income in the table above is considered a "contract liability," and represents a performance obligation of the Company that we satisfy over the term of the arrangement but for which we have been paid in full at the time the warranty was sold. We expect to recognize $2.0 million of the outstanding contract liability during the remainder of fiscal 2022, $6.5 million in fiscal 2023, and the remaining balance thereafter.

Self-Insurance

The following table reflects our total accrued self-insurance liability, comprised of workers' compensation and health insurance related claims, at the dates indicated:
(in thousands of dollars)July 2, 2022October 2, 2021
Current portion$3,876 $2,781 
Long-term portion1,805 1,732 
Total accrued self-insurance$5,681 $4,513 

The current and long-term portions of the accrued self-insurance liability are reflected in accrued expenses and other liabilities, respectively, on the Condensed Consolidated Balance Sheets.
10



Shipping and Handling Revenues

Shipping and handling revenues were $4.2 million and $3.3 million for the three months ended July 2, 2022 and July 3, 2021, respectively, and $11.1 million and $9.2 million for the nine months ended July 2, 2022 and July 3, 2021, respectively. The related cost of goods sold was $3.7 million and $2.9 million for the three months ended July 2, 2022 and July 3, 2021, respectively, and $9.9 million and $8.0 million for the nine months ended July 2, 2022 and July 3, 2021, respectively.

Pension Expense

Components of net periodic pension benefit (income) expense were as follows for the periods presented:
Three Months EndedNine Months Ended
(in thousands of dollars)July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Interest cost$1,092 $1,057 $3,276 $3,171 
Expected return on plan assets(2,122)(1,944)(6,366)(5,832)
Amortization of prior loss291 466 873 1,397 
Net periodic benefit income$(739)$(421)$(2,217)$(1,264)
Amortization of prior loss, recognized in other comprehensive income(291)(466)(873)(1,397)
Total recognized in net periodic pension benefit income and other comprehensive income$(1,030)$(887)$(3,090)$(2,661)

Derivative Instruments

We are charged variable rates of interest on our indebtedness outstanding under the Amended Credit Agreement (defined below) which exposes us to fluctuations in interest rates. On October 24, 2018, the Company entered into a four-year interest rate collar with a $150.0 million notional value with an effective date of November 30, 2018. The collar was entered into in order to partially mitigate our exposure to interest rate fluctuations on our variable rate debt. The collar establishes a range whereby we will pay the counterparty if the three month LIBOR rate falls below the established floor rate of 1.5%, and the counterparty will pay us if the three month LIBOR rate exceeds the ceiling rate of 3.3%. The collar settles quarterly through the termination date of September 30, 2022. No payments or receipts are exchanged on the interest rate collar contract unless interest rates rise above or fall below the contracted ceiling or floor rates. During the nine months ended July 2, 2022, the three month LIBOR rate fell below the established floor, which required us to make $1.2 million in total cash payments to the counterparty.

Changes in the interest rate collar fair value are recorded in interest expense as the collar does not qualify for hedge accounting. At July 2, 2022, the fair value of the interest rate collar contract was $0. The fair value of the interest rate collar is a Level 2 fair value measurement, based on quoted prices of similar items in active markets.

4. Debt

On November 24, 2021, the Company executed a fourth amendment to the Credit Agreement, dated as of December 12, 2016; as amended by the first amendment to the Credit Agreement, dated as of September 13, 2018 (the "First Amended Credit Agreement"), the second amendment to the Credit Agreement, dated as of May 7, 2020 (the "Second Amended Credit Agreement"), and the third amendment to the Credit Agreement, dated as of December 4, 2020 (the "Third Amended Credit Agreement"); and as further amended by the fourth amendment (the "Fourth Amended Credit Agreement" and collectively, the "Amended Credit Agreement"). The Fourth Amended Credit Agreement, among other things, provides for certain temporary amendments to the Credit Agreement from the third amendment effective date through and including (a) April 1, 2023 (the “Amended Limited Availability Period”) or (b) the first date on which BBBC (the "Borrower") elects to terminate the Amended Limited Availability Period, in each case, subject to (x) the absence of a default or event of default and (y) pro forma compliance with the financial covenant performance covenants under the Fourth Amended Credit Agreement.

With respect to the financial performance covenants, during the Amended Limited Availability Period for the fiscal quarters ending January 1, 2022 through October 1, 2022, the Total Net Leverage Ratio ("TNLR") requirement is not applicable, although it continues to impact the interest rate that is charged on outstanding borrowings as discussed below. Instead, the minimum consolidated EBITDA that the Company is required to maintain during the Amended Limited Availability Period was updated to include fiscal 2022 as set forth in the table below (in millions):

11


PeriodMinimum Consolidated EBITDA
Fiscal quarter ending January 1, 2022$14.5
Fiscal quarter ending April 2, 2022$(4.5)
Fiscal quarter ending July 2, 2022$(6.8)
Fiscal quarter ending October 1, 2022$20.0

However, in the event that Borrower elects to terminate the Amended Limited Availability Period in fiscal 2022, the maximum TNLR permitted is 3.50x.

The minimum liquidity (in the form of undrawn availability under the revolving credit facility and unrestricted cash and cash equivalents) that the Company must maintain during the Amended Limited Availability Period was amended as set forth in the table below (in millions):

PeriodMinimum Liquidity
Fourth amendment effective date through January 1, 2022$10.0
January 2, 2022 through April 2, 2022$5.0
April 3, 2022 through July 2, 2022$15.0
Thereafter$20.0

Additionally, a new financial performance covenant was added in the Fourth Amended Credit Agreement, requiring that school bus units manufactured by the Company (“Units”) not fall below the pre-set thresholds set forth in the table below on a three month trailing basis (“Units Covenant”). The Units Covenant is triggered only if the Company’s liquidity for the most-recently ended fiscal month is less than $50 million during the Amended Limited Availability Period:

PeriodMinimum Units Manufactured
Three month period ending November 27, 20211,128
Three month period ending January 1, 2022776
Three month period ending January 29, 2022748
Three month period ending February 26, 2022727
Three month period ending April 2, 2022763
Three month period ending April 30, 20221,111
Three month period ending May 28, 20221,525
Three month period ending July 2, 20222,053
Three month period ending July30, 20222,072
Three month period ending August 27, 20222,199
Three month period ending October 1, 20222,306

If the Units during any three fiscal month period set forth above is less than the minimum required by the Units Covenant, Borrower may elect to carry forward up to 50% of certain applicable excess Units to satisfy the Units Covenant requirement. However, Borrower may not make such election in two consecutive three fiscal month periods.

The pricing grid in the Fourth Amended Credit Agreement, which is based on the TNLR, is determined in accordance with the amended pricing matrix set forth below:

12


LevelTotal Net Leverage RatioABR LoansEurodollar Loans
ILess than 2.00x0.75%1.75%
IIGreater than or equal to 2.00x and less than 2.50x1.00%2.00%
IIIGreater than or equal to 2.50x and less than 3.00x1.25%2.25%
IVGreater than or equal to 3.00x and less than 3.25x1.50%2.50%
VGreater than or equal to 3.25x and less than 3.50x1.75%2.75%
VIGreater than or equal to 3.50x and less than 4.50x2.00%3.00%
VIIGreater than or equal to 4.50x and less than 5.00x3.25%4.25%
VIIIGreater than 5.00x4.25%5.25%

During the Amended Limited Availability Period, the applicable rate for outstanding revolving loans is the sum of the rate determined by the administrative agent in accordance with the pricing grid set forth above, plus 0.50%.

Additional allowances were made in the Fourth Amended Credit Agreement for the Company to issue or incur up to $100.0 million of qualified equity interests issued by the Company, unsecured subordinated indebtedness or unsecured convertible indebtedness (collectively, “Junior Capital”). Upon the issuance or incurrence of any Junior Capital, the Company is required to prepay the outstanding revolving loans (with no permanent reduction in the revolving commitments) in an amount equal to the lesser of (a) 100% of the net proceeds from such Junior Capital and (b) the aggregate of revolving exposures then outstanding. Prior to the initial issuance or incurrence of any Junior Capital, any issuance, amendment, renewal, or extension of credit during the Amended Limited Availability Period may not cause the aggregate outstanding Revolving Credit Facility principal to exceed $110.0 million (“Availability Cap”). Following the issuance and sale of $75.0 million of common stock in a private placement transaction on December 15, 2021 (see Note 11 for further details), the Availability Cap was permanently reduced to $100.0 million.

For the duration of the Amended Limited Availability Period, the Fourth Amended Credit Agreement sets forth additional monthly reporting requirements in connection with the manufactured school bus units required by the financial performance covenants, when applicable.

The Company incurred approximately $2.5 million in lender fees and other issuance costs relating to the fourth amendment. Of such total, approximately $1.1 million and $0.8 million was capitalized within other assets and long-term debt (as a contra-balance), respectively, on the Condensed Consolidated Balance Sheets and will be amortized as an adjustment to interest expense on a straight-line basis and utilizing the effective interest method, respectively, until maturity of the Amended Credit Agreement. The remaining approximate $0.5 million was recorded to loss on debt modification on the Condensed Consolidated Statements of Operations.

In conjunction with executing the fourth amendment, previously capitalized lender fees and other issuance costs incurred in prior periods totaling approximately $0.1 million were also expensed to loss on debt modification on the Condensed Consolidated Statements of Operations.

Term debt consisted of the following at the dates indicated:
(in thousands of dollars)July 2, 2022October 2, 2021
2023 term loan, net of deferred financing costs of $1,715 and $2,027, respectively
$153,598 $164,423 
Less: current portion of long-term debt18,563 14,850 
Long-term debt, net of current portion$135,035 $149,573 

Term loans are recognized on the Condensed Consolidated Balance Sheets at the unpaid principal balance, and are not subject to fair value measurement; however, given the variable rates on the loans, the Company estimates that the unpaid principal balance approximates fair value. If measured at fair value in the financial statements, the term loans would be classified as Level 2 in the fair value hierarchy. At July 2, 2022 and October 2, 2021, $155.3 million and $166.5 million, respectively, were outstanding on the term loans.

At July 2, 2022 and October 2, 2021, the stated interest rates on the term loans were 7.9% and 4.0%, respectively. At July 2, 2022 and October 2, 2021, the weighted-average annual effective interest rates for the term loans were 7.7% and 6.0%, respectively, which includes amortization of the deferred financing costs and interest relating to the interest rate collar, as applicable.

At July 2, 2022, $6.3 million of letters of credit were outstanding, which reduces the availability on the revolving line of credit. There were $60.0 million in borrowings outstanding on the revolving credit facility; therefore, the Company would have been able to borrow $33.7 million on the revolving line of credit.

13


Interest expense on all indebtedness was $3.9 million and $2.8 million for the three months ended July 2, 2022 and July 3, 2021, respectively, and $9.5 million and $7.1 million for the nine months ended July 2, 2022 and July 3, 2021, respectively.

The schedule of remaining principal payments through maturity for the term loans is as follows:
(in thousands of dollars)
Fiscal YearPrincipal Payments
2022$3,713 
2023151,600 
Total remaining principal payments$155,313 

5. Income Taxes

Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items that are required to be discretely recognized within the current interim period. The effective tax rates in the periods presented are largely based upon the annual forecasted pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business, primarily in the United States of America ("U.S."). In periods where our operating income approximates or is equal to break-even, the effective tax rates for quarter-to-date and full-year periods may not be meaningful due to discrete period items.

Three Months

The effective tax rate for the three months ended July 2, 2022 was (137.2)%, which differed from the statutory federal income tax rate of 21%. In addition, the amount recorded represents income tax expense in a three month period in which the Company recorded loss before income taxes. This unusual relationship exists as the amount recorded was necessary to adjust the income tax benefit for the nine months ended July 2, 2022, discussed below, to reflect the Company's revised estimated annual income tax rate, including the effects of discrete period tax items.

The effective tax rate for the three months ended July 3, 2021 was 33.2%, which differed from the statutory federal tax rate of 21%. The difference is mainly due to normal tax rate items, including impacts from state taxes, net non-deductible compensation expenses and other tax adjustments. The effective tax rate was also impacted by discrete period tax expense resulting from recording a liability for uncertain tax positions ("UTPs"), including accrued interest and penalties, that was partially offset by discrete period tax benefits resulting from share-based compensation expenses and prior year tax return adjustments.

Nine Months

The effective tax rate for the nine months ended July 2, 2022 was 24.8% and differed from the statutory federal tax rate of 21%. The difference is mainly due to normal tax rate items, including impacts from state taxes and federal and state tax credits (net of valuation allowances), which was partially offset by discrete period tax expense resulting from net non-deductible compensation expenses and other tax adjustments.

The effective tax rate for the nine months ended July 3, 2021 was 31.5% and differed from the statutory federal income tax rate of 21%. The difference is mainly due to normal tax rate items, including impacts from state taxes, net non-deductible compensation expenses and other tax adjustments. The effective tax rate was also impacted by discrete period tax expense resulting from recording a liability for UTPs, including accrued interest and penalties, that was partially offset by discrete period tax benefits resulting from share-based compensation expenses and prior year tax return adjustments.

6. Guarantees, Commitments and Contingencies

Litigation

At July 2, 2022, the Company had a number of product liability and other cases pending. Management believes that, considering the Company’s insurance coverage and its intention to vigorously defend its positions, the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial statements.

14


Environmental

The Company is subject to a variety of environmental regulations relating to the use, storage, discharge and disposal of hazardous materials used in its manufacturing processes. Failure by the Company to comply with present and future regulations could subject it to future liabilities. In addition, such regulations could require the Company to acquire costly equipment or to incur other significant expenses to comply with environmental regulations. The Company is currently not involved in any material environmental proceedings and therefore, management believes that the resolution of pending environmental matters will not have a material adverse effect on the Company’s financial statements.

Guarantees

In the ordinary course of business, we may provide guarantees for certain transactions entered into by our dealers. At July 2, 2022, we had a $3.0 million guarantee outstanding that relates to a guarantee of dealer indebtedness for a term loan with remaining maturity up to 0.5 years. The $3.0 million represents the estimated maximum amount we would be required to pay upon default of all guaranteed indebtedness, and we believe the likelihood of required performance to be remote. At July 2, 2022, $0.1 million was included in other current liabilities on our Condensed Consolidated Balance Sheets for the estimated fair value of the guarantee.    

7. Segment Information

We manage our business in two operating segments: (i) the Bus segment, which includes the manufacturing and assembly of buses to be sold to a variety of customers across the U.S., Canada and in international markets; and (ii) the Parts segment, which consists primarily of the purchase of parts from third parties to be sold to dealers within the Company’s network. The tables below present segment net sales and gross profit for the periods presented:

Net sales
Three Months EndedNine Months Ended
(in thousands of dollars)July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Bus (1)$186,631 $181,735 $487,552 $449,876 
Parts (1)19,452 14,924 55,413 41,915 
Segment net sales$206,083 $196,659 $542,965 $491,791 
(1) Parts segment revenue includes $0.7 million and $0.9 million for the three months ended July 2, 2022 and July 3, 2021, respectively, and $2.6 million and $2.9 million for the nine months ended July 2, 2022 and July 3, 2021, respectively, related to inter-segment sales of parts that were eliminated by the Bus segment upon consolidation.

Gross profit
Three Months EndedNine Months Ended
(in thousands of dollars)July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Bus$13,632 $20,471 $19,290 $43,265 
Parts7,961 5,688 21,657 15,855 
Segment gross profit$21,593 $26,159 $40,947 $59,120 

15


The following table is a reconciliation of segment gross profit to consolidated (loss) income before income taxes for the periods presented:
Three Months EndedNine Months Ended
(in thousands of dollars)July 2, 2022July 3, 2021July 2, 2022July 3, 2021
Segment gross profit$21,593 $26,159 $40,947 $59,120 
Adjustments:
Selling, general and administrative expenses(20,505)(18,073)(58,596)(50,124)
Interest expense(3,908)(2,805)(9,481)(7,069)
Interest income   1 
Other income, net735 426 2,215 1,491 
Loss on debt modification  (561)(598)
(Loss) income before income taxes$(2,085)$5,707 $(25,476)$2,821 

Sales are attributable to geographic areas based on customer location and were as follows for the periods presented:
Three Months EndedNine Months Ended
(in thousands of dollars)July 2, 2022July 3, 2021July 2, 2022July 3, 2021
United States$193,571 $179,850 $488,363 $436,286 
Canada12,009 15,072 50,506 49,257 
Rest of world503 1,737 4,096 6,248 
Total net sales$206,083 $196,659 $542,965 $491,791 

8. Revenue

The following table disaggregates revenue by product category for the periods presented: