Blue Bird Corp

Previous wording

The following discussion and analysis of financial condition and results of operations of Blue Bird Corporation (the "Company," "Blue Bird," "we," "our," or "us") should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of and for the three months ended December 30, 2023 and December 31, 2022 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. This discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those discussed or incorporated by reference in the sections of this Report entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements. Certain monetary amounts, percentages and other figures included in this Report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated, may not be the arithmetic aggregation of the percentages that precede them.

Current wording

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 30, 2024 and April 1, 2023 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. This discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those discussed or incorporated by reference in the sections of this Report entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements. Certain monetary amounts, percentages and other figures included in this Report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated, may not be the arithmetic aggregation of the percentages that precede them.

Previous wording

Throughout this Report, we refer to the fiscal year ending September 28, 2024 as "fiscal 2024," the fiscal year ended September 30, 2023 as "fiscal 2023," the fiscal year ended October 1, 2022 as "fiscal 2022," the fiscal year ended October 2, 2021 as “fiscal 2021” and the fiscal year ended October 3, 2020 as "fiscal 2020." There will be or were 52 weeks in fiscal 2024, fiscal 2023 and fiscal 2022. The first quarters of fiscal 2024 and fiscal 2023 both included 13 weeks.

Current wording

Throughout this Report, we refer to the fiscal year ending September 28, 2024 as "fiscal 2024," the fiscal year ended September 30, 2023 as "fiscal 2023," the fiscal year ended October 1, 2022 as "fiscal 2022," the fiscal year ended October 2, 2021 as “fiscal 2021” and the fiscal year ended October 3, 2020 as "fiscal 2020." There will be or were 52 weeks in fiscal 2024, fiscal 2023 and fiscal 2022. The second quarters of fiscal 2024 and fiscal 2023 both included 13 weeks. The six month periods in fiscal 2024 and 2023 both included 26 weeks.

Previous wording

Supply chain disruptions continued into the first quarter of fiscal 2024 as there were still occasional shortages of certain critical components as well as ongoing increases in raw materials costs, both of which impacted our business and operations by limiting the number of school buses that we could produce and sell as well as increasing the costs to manufacture buses. Nonetheless, the lessons learned, and resulting actions taken, by management over the past three fiscal years allowed the Company to better navigate these supply chain challenges and consistently produce buses to fulfill sales orders. Ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses kept pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin during the first quarter of fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic.

Current wording

Supply chain disruptions continued into the first half of fiscal 2024 as there were still occasional shortages of certain critical components as well as ongoing increases in raw materials costs, both of which impacted our business and operations by limiting the number of school buses that we could produce and sell as well as increasing the costs to manufacture buses. Nonetheless, the lessons learned, and resulting actions taken, by management over the past three fiscal years allowed the Company to better navigate these supply chain challenges and consistently produce buses to fulfill sales orders. Ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses kept pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin during the first half of fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic.

Previous wording

New bus orders during fiscal 2023 and continuing into fiscal 2024 remained robust, primarily due to a combination of (i) pent-up demand resulting from the cumulative effect of the COVID-19 pandemic when many school systems conducted virtual learning and (ii) the challenged global supply chain for automotive parts that hindered the school bus industry's ability to produce and sell buses that began during the latter half of fiscal 2021 and continued through the first quarter of fiscal 2024. Accordingly, the Company's backlog remained strong at approximately 4,600 units and as of both September 30, 2023 and December 30, 2023 despite it selling over 8,500 units during fiscal 2023, the majority of which were included in the backlog that existed as of October 1, 2022, and 2,100 units in the first quarter of fiscal 2024.

Current wording

New bus orders during fiscal 2023 and continuing into fiscal 2024 remained robust, primarily due to a combination of (i) pent-up demand resulting from the cumulative effect of the COVID-19 pandemic when many school systems conducted virtual learning and (ii) the challenged global supply chain for automotive parts that hindered the school bus industry's ability to produce and sell buses that began during the latter half of fiscal 2021 and continued through the second quarter of fiscal 2024. Accordingly, the Company's backlog remained strong at approximately 4,600 units and 5,900 units as of September 30, 2023 and March 30, 2024 despite it selling over 8,500 units during fiscal 2023, the majority of which were included in the backlog that existed as of October 1, 2022, and almost 4,400 units in the first half of fiscal 2024.

Previous wording

In general, management believes that supply chain disruptions could continue in future periods and could materially impact our results if we are unable to i) obtain parts and supplies in sufficient quantities to meet our production needs and/or ii) pass along rising costs to our customers. They have resulted, and could to continue to result, in significant economic disruption and have adversely affected our business. They could adversely impact our business for the remainder of fiscal 2024 and perhaps beyond. Significant uncertainty exists concerning the magnitude of the impact and duration of ongoing supply chain constraints and their potential impact on the overall economy, both within the U.S and globally. Accordingly, the magnitude and duration of any production and supply chain disruptions and their related financial impacts on our business cannot be estimated at this time.

Current wording

In general, management believes that supply chain disruptions could continue in future periods and could materially impact our results if we are unable to i) obtain parts and supplies in sufficient quantities to meet our production needs and/or ii) pass along rising costs to our customers. They have resulted, and could continue to result, in significant economic disruption and have adversely affected our business. They could adversely impact our business for the remainder of fiscal 2024 and perhaps beyond. Significant uncertainty exists concerning the magnitude of the impact and duration of ongoing supply chain constraints and their potential impact on the overall economy, both within the U.S and globally. Accordingly, the magnitude and duration of any production and supply chain disruptions and their related financial impacts on our business cannot be estimated at this time.

Previous wording

The impacts from supply chain constraints on the Company's business and operations during the second half of fiscal 2021 and continuing into fiscal 2024 negatively affected our inventory procurement costs, gross profit, income and cash flows. We continue to monitor and assess the ability of suppliers to maintain operations and to provide parts and supplies in sufficient quantities to meet our production needs and our ability to maintain continuous production during the remainder of fiscal 2024 and beyond. See PART I, Item 1.A. "Risk Factors," of our fiscal 2023 Form 10-K, filed with the SEC on December 11, 2023, for a discussion of the material risks we believe we face particularly related to supply chain disruptions and related constraints.

Current wording

The impacts from supply chain constraints on the Company's business and operations beginning during the second half of fiscal 2021 and continuing into fiscal 2024 negatively affected our inventory procurement costs, gross profit, income and cash flows. We continue to monitor and assess the ability of suppliers to maintain operations and to provide parts and supplies in sufficient quantities to meet our production needs and our ability to maintain continuous production during the remainder of fiscal 2024 and beyond. See PART I, Item 1.A. "Risk Factors," of our fiscal 2023 Form 10-K, filed with the SEC on December 11, 2023, for a discussion of the material risks we believe we face particularly related to supply chain disruptions and related constraints.

Previous wording

On February 24, 2022, Russian military forces launched a large-scale invasion of Ukraine. While the Company has no assets or customers in either of these countries, this military conflict has had a significant negative impact on the Company’s operations, cash flows and results during fiscal 2022 and continuing into fiscal 2024, primarily in an indirect manner since the Company does not sell to customers located in, or source goods directly from, either country.

Current wording

On February 24, 2022, Russian military forces launched a large-scale invasion of Ukraine. While the Company has no assets or customers in either of these countries, this military conflict has had a significant negative impact on the Company’s operations, cash flows and results beginning in fiscal 2022 and continuing into fiscal 2024, primarily in an indirect manner since the Company does not sell to customers located in, or source goods directly from, either country.

Previous wording

Russia’s invasion of Ukraine has resulted, and is likely to continue to result, in significant economic disruption and has adversely affected our business. Specifically, it has contributed to higher inventory purchase costs, including freight costs, that negatively impacted the gross profit recognized on sales during the latter part of fiscal 2022 and continuing into fiscal 2024. Because peace negotiations do not appear to be productive and because Russia has recently intensified its military operations in Ukraine, we currently believe that this matter will continue to adversely impact our business for the remainder of fiscal 2024 and perhaps beyond. Significant uncertainty exists concerning the magnitude of the impact and duration of the ongoing military conflict and its impact on the overall economy, both within the U.S. and globally. Accordingly, the duration of any production and supply chain disruptions, and related financial impacts, cannot be estimated at this time.

Current wording

Russia’s invasion of Ukraine has resulted, and is likely to continue to result, in significant economic disruption and has adversely affected our business. Specifically, it has contributed to higher inventory purchase costs, including freight costs, that negatively impacted the gross profit recognized on sales beginning during the latter part of fiscal 2022 and continuing into fiscal 2024. Because peace negotiations do not appear to be productive and because Russia has continued to intensify its military operations in Ukraine, we currently believe that this matter will continue to adversely impact our business for the remainder of fiscal 2024 and perhaps beyond. Significant uncertainty exists concerning the magnitude of the impact and duration of the ongoing military conflict and its impact on the overall economy, both within the U.S. and globally. Accordingly, the duration of any production and supply chain disruptions, and related financial impacts, cannot be estimated at this time.

Previous wording

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 2023 Form 10-K, filed with the SEC on December 11, 2023, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates,” which description is incorporated herein by reference. Our senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies during the three months ended December 30, 2023.

Current wording

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 2023 Form 10-K, filed with the SEC on December 11, 2023, 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 30, 2024.

Previous wording

•Inflation. As discussed previously above, supply chain disruptions developing subsequent to the COVID-19 pandemic and Russia's invasion of Ukraine have significantly increased our inventory purchase costs, including freight costs incurred to expedite receipt of critical components, reflected in cost of goods sold during the latter half of fiscal 2021, all of fiscal 2022 and continuing, to a lesser extent, into fiscal 2023 and fiscal 2024. In response, beginning in July 2021, the Company has announced several sales price increases that apply to new sales orders and partially applied to backlog orders that were both intended to mitigate the impact of rising purchase costs on our operations and results. Most of these price increases only began to marginally impact sales and gross profit in the latter half of fiscal 2022. Specifically, they did not offset the significant continued increase in the Company's production costs, resulting in further deterioration of the Company's gross profit during the second half of fiscal 2022 and continuing into the first quarter of fiscal 2023 as it produced and sold the oldest units included in the backlog as of the end of fiscal 2022. However, they began to have a more significant, positive impact on sales and gross profit during the remainder of fiscal 2023, as the Company fulfilled sales orders (i) from the backlog existing as of the end of fiscal 2022 that originated more recently (i.e., during the latter months of fiscal 2022) and (ii) that were taken during fiscal 2023, both of which contained most or all of the cumulative sales prices increases that have been announced. These cumulative price increases also continued to have a significant, positive impact on sales and gross profit during the first quarter of fiscal 2024.

Current wording

•Inflation. As discussed previously above, supply chain disruptions developing subsequent to the COVID-19 pandemic and Russia's invasion of Ukraine have significantly increased our inventory purchase costs, including freight costs incurred to expedite receipt of critical components, reflected in cost of goods sold during the latter half of fiscal 2021, all of fiscal 2022 and continuing, to a lesser extent, into fiscal 2023 and fiscal 2024. In response, beginning in July 2021, the Company has announced several sales price increases that apply to new sales orders and partially applied to backlog orders that were both intended to mitigate the impact of rising purchase costs on our operations and results. Most of these price increases only began to marginally impact sales and gross profit in the latter half of fiscal 2022. Specifically, they did not offset the significant continued increase in the Company's production costs, resulting in further deterioration of the Company's gross profit during the second half of fiscal 2022 and continuing into the first quarter of fiscal 2023 as it produced and sold the oldest units included in the backlog as of the end of fiscal 2022. However, they began to have a more significant, positive impact on sales and gross profit during the remainder of fiscal 2023, as the Company fulfilled sales orders (i) from the backlog existing as of the end of fiscal 2022 that originated more recently (i.e., during the latter months of fiscal 2022) and (ii) that were taken during fiscal 2023, both of which contained most or all of the cumulative sales prices increases that have been announced. These cumulative price increases also continued to have a significant, positive impact on sales and gross profit during the first half of fiscal 2024.

Previous wording

We define Free Cash Flow as total cash provided by/used in operating activities as adjusted for cash paid for the acquisition of fixed assets and intangible assets. We use Free Cash Flow, and ratios based on Free Cash Flow, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it is a more conservative measure of cash flow since purchases of fixed assets and intangible assets are a necessary component of ongoing operations. Accordingly, Free Cash Flow will be less than operating cash flows.

Current wording

We define Free Cash Flow as total cash provided by/used in operating activities as adjusted for cash paid for the acquisition of fixed assets and intangible assets. We use Free Cash Flow, and ratios based on Free Cash Flow, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it is a more conservative measure of cash flow since purchases of fixed assets and intangible assets are a necessary component of ongoing manufacturing operations. Accordingly, Free Cash Flow will be less than operating cash flows.

Previous wording

Net sales. Net sales were $317.7 million for the first quarter of fiscal 2024, an increase of $81.9 million, or 34.8%, compared to $235.7 million for the first quarter of fiscal 2023. The increase in net sales is primarily due to increased unit bookings, product and mix changes, as well as pricing actions taken by management in response to increased inventory purchase costs.

Current wording

Net sales. Net sales were $345.9 million for the second quarter of fiscal 2024, an increase of $46.1 million, or 15.4%, compared to $299.8 million for the second quarter of fiscal 2023. The increase in net sales is primarily due to product and mix changes, as well as pricing actions taken by management in response to increased inventory purchase costs, all of which were partially offset by a small decrease in unit bookings.

Previous wording

Parts sales increased $1.7 million, or 7.7%, for the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023. This increase is primarily attributed to price increases, driven by ongoing inflationary pressures, as well as higher fulfillment volumes and slight variations due to product and channel mix.

Current wording

Parts sales increased $1.6 million, or 6.1%, for the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023. This increase is primarily attributed to price increases, driven by ongoing inflationary pressures, as well as higher fulfillment volumes and slight variations due to product and channel mix.

Previous wording

Cost of goods sold. Total cost of goods sold was $254.1 million for the first quarter of fiscal 2024, an increase of $25.8 million, or 11.3%, compared to $228.3 million for the first quarter of fiscal 2023. As a percentage of net sales, total cost of goods sold improved from 96.8% to 80.0%, primarily due to the pricing actions discussed above taking effect.

Current wording

Cost of goods sold. Total cost of goods sold was $282.3 million for the second quarter of fiscal 2024, an increase of $18.1 million, or 6.9%, compared to $264.2 million for the second quarter of fiscal 2023. As a percentage of net sales, total cost of goods sold improved from 88.1% to 81.6%, primarily due to the pricing actions discussed above taking effect.

Previous wording

Bus segment cost of goods sold increased $25.2 million, or 11.6%, for the first quarter of fiscal 2024 compared to the same period in fiscal 2023. The increase was primarily driven by the 8.8% increase in units booked in the first quarter of fiscal 2024 compared to the same period in fiscal 2023. Also contributing was increased inventory costs, as the average cost of goods sold per unit for the first quarter of fiscal 2024 was 2.6% higher compared to the first quarter of fiscal 2023, primarily due to increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures and b) ongoing supply chain disruptions that resulted in higher purchase costs for components.

Current wording

Bus segment cost of goods sold increased $18.0 million, or 7.2%, for the second quarter of fiscal 2024 compared to the same period in fiscal 2023. The increase was primarily driven by increased inventory costs, as the average cost of goods sold per unit for the second quarter of fiscal 2024 was 9.6% higher compared to the second quarter of fiscal 2023, primarily due to increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures and b) ongoing supply chain disruptions that resulted in higher purchase costs for components. The increase in inventory costs was partially offset by a 2.2% decrease in units booked in the second quarter of fiscal 2024 compared to the same period in fiscal 2023.

Previous wording

The $0.7 million, or 5.9%, increase in parts segment cost of goods sold for the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 was primarily due to increased purchased parts costs, driven by ongoing inflationary pressures and supply chain disruptions, as well as slight variations due to product and channel mix.

Current wording

The $0.1 million, or 0.8%, increase in parts segment cost of goods sold for the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023 was primarily due to increased purchased parts costs, driven by ongoing inflationary pressures and supply chain disruptions, as well as slight variations due to product and channel mix.

Previous wording

Interest expense. Interest expense was $3.6 million for the first quarter of fiscal 2024, a decrease of $0.6 million, or 13.5%, compared to $4.2 million for the first quarter of fiscal 2023. The decrease was primarily attributable to a decrease in the stated term loan interest rate from 10.5% at December 31, 2022 to 8.5% at December 30, 2023, as well as lower outstanding borrowings in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023.

Current wording

Interest expense. Interest expense was $2.8 million for the second quarter of fiscal 2024, a decrease of $2.4 million, or 45.8%, compared to $5.2 million for the second quarter of fiscal 2023. The decrease was primarily attributable to a decrease in the stated term loan interest rate from 10.5% at April 1, 2023 to 7.2% at March 30, 2024, as well as lower outstanding borrowings in the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023.

Previous wording

Other expense, net. Other expense, net, was $1.2 million for the first quarter of fiscal 2024, an increase of $1.0 million, or 417.4%, compared to $0.2 million of other expense, net, for the same period in fiscal 2023.

Current wording

Other expense, net. Other expense, net, was $2.0 million for the second quarter of fiscal 2024, an increase of $1.6 million, or 475.4%, compared to $0.3 million of other expense, net, for the same period in fiscal 2023.

Previous wording

The Offering was conducted pursuant to a prospectus supplement, dated December 14, 2023, to the prospectus, dated December 22, 2021, included in the Company’s registration statement on Form S-3 (File No. 333-261858) that was initially filed with the SEC on December 23, 2021.

Current wording

The February Offering was conducted pursuant to a prospectus supplement, dated February 15, 2024, to the prospectus, dated December 22, 2021, included in the Company’s registration statement on Form S-3 (File No. 333-261858) that was initially filed with the SEC on December 23, 2021.

Previous wording

The Offering closed on December 19, 2023. Although the Company did not sell any shares or receive any proceeds from the Offering, it was required to pay certain expenses in connection with the Offering that totaled approximately $1.2 million for the three month period ending December 30, 2023, with no similar expense recorded during the same period of fiscal 2023.

Current wording

The February Offering closed on February 21, 2024. Although the Company did not sell any shares or receive any proceeds from the February Offering, it was required to pay certain expenses in connection with the February Offering that totaled approximately $1.9 million for the three month period ended March 30, 2024, with $0.7 million of similar expense recorded during the three month period ended April 1, 2023. However, the $0.7 million of expense was included within selling, general and administrative expenses for the three month period ended April 1, 2023, but was subsequently reclassified to other expense, net, during the third quarter of fiscal 2023.

Previous wording

Income taxes. Income tax expense was $8.4 million for the first quarter of fiscal 2024 compared to income tax benefit of $3.0 million for the same period in fiscal 2023.

Current wording

Income taxes. Income tax expense was $8.3 million for the second quarter of fiscal 2024 compared to $1.4 million for the same period in fiscal 2023.

Previous wording

The effective tax rate for the three months ended December 30, 2023 was 25.9% 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.

Current wording

The effective tax rate for the three months ended March 30, 2024 was 25.5% and differed from the statutory federal income tax rate of 21%. The increase was primarily due to the impacts from state taxes and certain permanent items on the federal rate, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the quarter.

Previous wording

The effective tax rate for the three months ended December 31, 2022 was 20.8%, which aligned with the statutory federal income tax rate of 21% and is comprised of normal tax rate items, including impacts from state taxes and federal and state tax credits (net of valuation allowances), with discrete period items having a nominal impact on the effective rate during the quarter.

Current wording

The effective tax rate for the three months ended April 1, 2023 was 20.1%, which aligned with the statutory federal income tax rate of 21% and was comprised of normal tax rate items, including impacts from state taxes and federal and state tax credits (net of valuation allowances), with discrete period items having a nominal impact on the effective rate during the quarter.

Previous wording

Adjusted EBITDA. Adjusted EBITDA was $47.6 million, or 15.0% of net sales, for the first quarter of fiscal 2024, an increase of $51.1 million, or 1,446.3%, compared to $(3.5) million, or (1.5)% of net sales, for the first quarter of fiscal 2023. The increase is primarily the result of the $37.4 million increase in net income as a result of the factors discussed above as well as the $11.4 million corresponding increase in income tax expense.

Current wording

Adjusted EBITDA. Adjusted EBITDA was $45.8 million, or 13.2% of net sales, for the second quarter of fiscal 2024, an increase of $24.7 million, or 117.0%, compared to $21.1 million, or 7.0% of net sales, for the second quarter of fiscal 2023. The increase is primarily the result of the $18.9 million increase in net income as a result of the factors discussed above as well as the $6.9 million corresponding increase in income tax expense.

Previous wording

(2) Includes $0.6 million and $0.4 million for the three months ended December 30, 2023 and December 31, 2022, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

Current wording

(2) Includes $0.3 million and $0.4 million for the three months ended March 30, 2024 and April 1, 2023, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

Previous wording

Bus sales increased $80.2 million, or 37.6%, reflecting a 8.8% increase in units booked and a 26.5% increase in average sales price per unit. In the first quarter of fiscal 2024, 2,129 units were booked compared to 1,957 units booked for the same period in fiscal 2023. The increase in units sold was primarily due to slight improvements in supply chain constraints impacting the Company's ability to produce and deliver buses due to shortages of critical components during the first quarter of 2024 relative to the first quarter of fiscal 2023. The increase in unit price for the first quarter of fiscal 2024 compared to the same period in fiscal 2023 reflects pricing actions taken by management as well as product and customer mix changes.

Current wording

Bus sales increased $124.7 million, or 25.6%, reflecting a 2.9% increase in units booked and a 22.1% increase in average sales price per unit. 4,383 units booked in the six months ended March 30, 2024 compared with 4,261 units booked during the same period in fiscal 2023. The increase in units sold was primarily due to slight improvements in supply chain constraints impacting the Company's ability to produce and deliver buses due to shortages of critical components during the first half of fiscal 2024 relative to the same period in fiscal 2023. The increase in unit price for the first half of fiscal 2024 compared to the same period in fiscal 2023 reflects pricing actions taken by management as well as product and customer mix changes.

Previous wording

Operating profit (loss). Operating profit was $38.0 million for the first quarter of fiscal 2024, an increase of $47.3 million, compared to operating loss of $9.4 million for the first quarter of fiscal 2023. Profitability was primarily impacted by an increase of $56.1 million in gross profit as outlined in the revenue and cost of goods sold discussions above. The increase in gross profit was partially offset by an increase of $8.8 million in selling, general and administrative expenses, primarily due to an increase in labor costs. Additionally, selling, general and administrative expenses during the first quarter of fiscal 2023 benefited from actions taken by management to reduce labor costs and certain discretionary spending to mitigate the significant adverse impact of ongoing supply chain constraints on the Company's operations and results.

Current wording

Operating profit. Operating profit was $74.0 million for the six months ended March 30, 2024, an increase of $71.0 million compared to operating profit of $3.1 million for the six months ended April 1, 2023. Profitability was primarily impacted by an increase of $84.1 million in gross profit as outlined in the revenue and cost of goods sold discussions. The increase in gross profit was partially offset by an increase of $13.1 million in selling, general and administrative expenses, primarily due to an increase in labor costs. Additionally, selling, general and administrative expenses during the first quarter of fiscal 2023 benefited from actions taken by management to reduce labor costs and certain discretionary spending to mitigate the significant adverse impact of ongoing supply chain constraints on the Company's operations and results.

Previous wording

On December 14, 2023, the Company entered into an underwriting agreement with BofA Securities, Inc. and Barclays Capital Inc., as representatives of the several underwriters and American Securities LLC ("Selling Stockholder"), pursuant to which the Selling Stockholder agreed to sell 2,500,000 shares of common stock at a purchase price of $25.10 per share (“Offering”).

Current wording

Additionally, on December 14, 2023, the Company entered into an underwriting agreement with BofA Securities, Inc. and Barclays Capital Inc., as representatives of the several underwriters and the Selling Stockholder, pursuant to which the Selling Stockholder agreed to sell 2,500,000 shares of common stock at a purchase price of $25.10 per share (“December Offering” and collectively with the February Offering, “Offerings”).

Previous wording

The Company’s primary sources of liquidity are cash generated from its operations, available cash and cash equivalents and borrowings under its revolving credit facility. At December 30, 2023, the Company had $77.3 million of available cash (net of outstanding checks) and $107.1 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.

Current wording

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 30, 2024, the Company had $93.1 million of available cash (net of outstanding checks) and $143.3 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.

Previous wording

The Term Loan Facility is subject to amortization of principal, payable in equal quarterly installments on the last day of each fiscal quarter, commencing on March 30, 2024, with 5.0% of the $100.0 million aggregate principal amount of all initial term loans outstanding at the Closing Date payable each year prior to the maturity date of the Term Loan Facility. The remaining initial aggregate principal amount outstanding under the Term Loan Facility, as well as any outstanding borrowings under the Revolving Credit Facility, will be payable on the November 17, 2028 maturity date of the Credit Agreement.

Current wording

The Term Loan Facility is subject to amortization of principal, payable in equal quarterly installments on the last day of each fiscal quarter, which commenced on March 30, 2024, with 5.0% of the $100.0 million aggregate principal amount of all initial term loans outstanding at the Closing Date payable each year prior to the maturity date of the Term Loan Facility. The remaining initial aggregate principal amount outstanding under the Term Loan Facility, as well as any outstanding borrowings under the Revolving Credit Facility, will be payable on the November 17, 2028 maturity date of the Credit Agreement.

Previous wording

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.

Current wording

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 30, 2024 set at Level I.

Previous wording

Supply chain disruptions continued into the first quarter of fiscal 2024 as there were still occasional shortages of certain critical components as well as ongoing increases in raw materials costs, both of which impacted our business and operations by limiting the number of school buses that we could produce and sell as well as increasing the costs to manufacture buses. Nonetheless, ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses kept pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin during the first quarter of fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic.

Current wording

Supply chain disruptions continued into the first half of fiscal 2024 as there were still occasional shortages of certain critical components as well as ongoing increases in raw materials costs, both of which impacted our business and operations by limiting the number of school buses that we could produce and sell as well as increasing the costs to manufacture buses. Nonetheless, ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses kept pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin during the first half of fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic.

Previous wording

Cash flows provided by operating activities totaled $0.2 million for the three months ended December 30, 2023, a decrease of $19.7 million from the $19.9 million of cash flows provided by operating activities during the three months ended December 31, 2022.

Current wording

Cash flows provided by operating activities totaled $54.8 million for the six months ended March 30, 2024, an increase of $10.1 million from the $44.7 million of cash flows provided by operating activities during the six months ended April 1, 2023. The increase was primarily attributable to a $56.3 million increase in net income and a $3.0 million increase in the dividend received from our unconsolidated Canadian joint venture during the first half of fiscal 2024 when compared with the corresponding period in fiscal 2023.

Previous wording

The effect of net changes in operating assets and liabilities negatively impacted operating cash flows by $64.7 million during the three months ended December 30, 2023 compared to the three months ended December 31, 2022. The primary drivers in this category were unfavorable changes in inventory and accounts payable of $21.0 million and $39.7 million, respectively. At the end of fiscal 2022 and during the first quarter of fiscal 2023, inflationary pressures and supply chain disruptions significantly increased our purchase costs for components and freight, which, when coupled with increased production and sales volumes during the first quarter of fiscal 2023, resulted in a significant increase in the accounts payable balance (a net source of cash) when compared with a significant decrease in the accounts payable balance at the end of the first quarter of fiscal 2024 (a net use of cash). Additionally, we became more efficient at managing supply chain disruptions, and thus building and selling buses, during the the first quarter of fiscal 2023. These efficiencies resulted in us consuming more inventory in production, which resulted in a significant decrease in the inventory balance at the end of the first quarter of fiscal 2023 (a net source of cash). In comparison, we had a marginal increase in the inventory balance at the end of the first quarter of fiscal 2024 (a net use of cash) as we elected to strategically acquire larger quantities of certain components (i) that have longer lead times and could impact our production schedule if not manufactured by our suppliers and delivered to us in a timely manner and (ii) in anticipation of model year changeovers by some of our larger suppliers that are expected to decrease the availability of such inventory later in fiscal 2024.

Current wording

However, these increases werre partially offset by the effect of net changes in operating assets and liabilities that negatively impacted operating cash flows by $54.1 million during the six months ended March 30, 2024 when compared with the six months ended April 1, 2023. The primary drivers in this category were unfavorable changes in inventory and accounts payable of $23.9 million and $25.8 million, respectively. At the end of fiscal 2022 and during the first half of fiscal 2023, inflationary pressures and supply chain disruptions significantly increased our purchase costs for components and freight, which, when coupled with increased production and sales volumes during the first half of fiscal 2023, resulted in a significant increase in the accounts payable balance (a net source of cash) when compared with a small increase in the accounts payable balance during the first half of fiscal 2024 (a net source of cash). Additionally, we became more efficient at managing supply chain disruptions, and thus building and selling buses, during the the first half of fiscal 2023. These efficiencies resulted in us consuming more inventory in production, which resulted in a significant decrease in the inventory balance at the end of the second quarter of fiscal 2023 (a net source of cash). In comparison, we had an increase in the inventory balance at the end of the second quarter of fiscal 2024 (a net use of cash) as we elected to strategically acquire larger quantities of certain components (i) that have longer lead times and could impact our production schedule if not manufactured by our suppliers and delivered to us in a timely manner and (ii) in anticipation of model year changeovers by some of our larger suppliers that are expected to decrease the availability of such inventory later in fiscal 2024.

Previous wording

Cash flows used in investing activities totaled $2.9 million for the three months ended December 30, 2023, as compared to $1.1 million for the three months ended December 31, 2022. The $1.8 million increase was primarily due to an increase in spending on fixed assets, as increased profitability in the first quarter of fiscal 2024 when compared to the same period in fiscal 2023 allowed for more capital spending. During the first quarter of fiscal 2023, capital spending was reduced to lower than normal amounts in an effort to mitigate the impact of supply chain constraints on our operations, financial results and cash flows.

Current wording

Cash flows used in investing activities totaled $5.6 million for the six months ended March 30, 2024 as compared to $3.7 million for the six months ended April 1, 2023. The $1.9 million increase was primarily due to an increase in spending on fixed assets, as increased profitability in the first half of fiscal 2024 when compared with the same period in fiscal 2023 allowed for more capital spending. During the first half of fiscal 2023, capital spending was reduced to lower than normal amounts in an effort to mitigate the impact of supply chain constraints on our operations, financial results and cash flows.

Previous wording

Total cash provided by (used in) financing activities

Current wording

Total cash used in financing activities

Previous wording

Cash flows provided by financing activities totaled $1.0 million for the three months ended December 30, 2023 as compared to $23.4 million of cash flows used in financing activities for the three months ended December 31, 2022. The $24.4 million increase between fiscal periods was primarily attributable to $100.0 million of proceeds received from term loan borrowings under the Credit Agreement as well as a $51.2 million net increase in revolving line of credit borrowings, which were partially offset by a $126.9 million net decrease in term loan principal repayments under the previous credit agreement.

Current wording

Cash flows used in financing activities totaled $35.0 million for the six months ended March 30, 2024 as compared to $33.4 million for the six months ended April 1, 2023. The $1.6 million increase between fiscal periods was primarily attributable to a $123.2 million increase in term loan principal repayments, which was partially offset by $100.0 million of proceeds received from term loan borrowings under the Credit Agreement, a $20.0 million net increase in revolving line of credit borrowings and a $1.7 million increase in cash received from stock option exercises.

Previous wording

Free Cash Flow for the three months ended December 30, 2023 was $21.5 million lower than for the three months ended December 31, 2022 due to a $19.7 million decrease in net cash provided by operating activities as well as an increase of $1.8 million in cash paid for fixed assets, both as discussed above.

Current wording

Free Cash Flow for the six months ended March 30, 2024 was $8.2 million higher than for the six months ended April 1, 2023 due to a $10.1 million increase in net cash provided by operating activities that was partially offset by a $1.9 million increase in cash paid for fixed assets, both as discussed above.