Key Non-GAAP Financial Measures We Use to Evaluate Our Performance<\/span><\/b><\/p>\n\nThis press release includes the following non-GAAP financial measures \u201cAdjusted EBITDA,\u201d “Adjusted EBITDA Margin,” “Adjusted Net Income,” “Adjusted Diluted Earnings per Share,” \u201cFree Cash Flow\u201d and \u201cAdjusted Free Cash Flow\u201d. Adjusted EBITDA and Free Cash Flow are financial metrics that are utilized by management and the board of directors, as and when applicable, to determine (a) the annual cash bonus payouts, if any, to be made to certain employees based upon the terms of the Company\u2019s Management Incentive Plan, and (b) whether the performance criteria have been met for the vesting of certain equity awards granted annually to certain members of management based upon the terms of the Company\u2019s Omnibus Equity Incentive Plan. Additionally, consolidated EBITDA, which is an adjusted EBITDA metric defined by our Credit Agreement that could differ from Adjusted EBITDA discussed above as the adjustments to the calculations are not uniform, is used to determine the Company’s ongoing compliance with several financial covenant requirements, including being utilized in the denominator of the calculation of the Total Net Leverage Ratio. Accordingly, management views these non-GAAP financial metrics as key for the above purposes and as a useful way to evaluate the performance of our operations as discussed further below.<\/p>\n
\nAdjusted EBITDA is defined as net income or loss prior to interest income; interest expense including the component of operating lease expense (which is presented as a single operating expense within cost of goods sold or selling, general and administrative expenses in our U.S. GAAP financial statements) that represents interest expense on lease liabilities; income taxes; and depreciation and amortization including the component of operating lease expense (which is presented as a single operating expense within cost of goods sold or selling, general and administrative expenses in our U.S. GAAP financial statements) that represents amortization charges on right-of-use lease assets; as adjusted for certain non-cash charges or credits that we may record on a recurring basis such as share-based compensation expense and unrealized gains or losses on certain derivative financial instruments as well as certain charges such as (i) transaction related costs or (ii) discrete expenses related to major cost cutting and\/or operational transformation initiatives. While certain of the charges that are added back in the Adjusted EBITDA calculation, such as transaction related costs and major cost cutting and\/or operational transformation initiatives, represent operating expenses that may be recorded in more than one annual period, the significant project or transaction giving rise to such expenses is not considered to be indicative of the Company\u2019s normal operations. Accordingly, we believe that these, as well as the other credits and charges that comprise the amounts utilized in the determination of Adjusted EBITDA described above, should not be used in evaluating the Company\u2019s ongoing annual operating performance.<\/p>\n
\nWe define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net sales. Adjusted EBITDA and Adjusted EBITDA Margin are not measures of performance defined in accordance with U.S. GAAP. The measures are used as a supplement to U.S. GAAP results in evaluating certain aspects of our business, as described below.<\/p>\n
\nWe believe that Adjusted EBITDA and Adjusted EBITDA Margin are useful to investors in evaluating our performance because the measures consider the performance of our ongoing operations, excluding decisions made with respect to capital investment, financing, and certain other significant initiatives or transactions as outlined in the preceding paragraphs. We believe the non-GAAP measures offer additional financial metrics that, when coupled with the U.S. GAAP results and the reconciliation to U.S. GAAP results, provide a more complete understanding of our results of operations and the factors and trends affecting our business.<\/p>\n
\nAdjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted Diluted Earnings per Share should not be considered as alternatives to net income or GAAP earnings per share as an indicator of our performance or as alternatives to any other measure prescribed by GAAP as there are limitations to using such non-GAAP measures. Although we believe the non-GAAP measures may enhance an evaluation of our operating performance because they exclude the impact of prior decisions made about capital investment, financing, and other expenses, (i) other companies in Blue Bird\u2019s industry may define Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Diluted Earnings per Share differently than we do and, as a result, they may not be comparable to similarly titled measures used by other companies in Blue Bird\u2019s industry, and (ii) Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Diluted Earnings per Share exclude certain financial information that some may consider important in evaluating our performance.<\/p>\n
\nWe compensate for these limitations by providing disclosure of the differences between Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Diluted Earnings per Share and GAAP results, including providing a reconciliation to GAAP results, to enable investors to perform their own analysis of our operating results.<\/p>\n
\nOur measures of \u201cFree Cash Flow\u201d and “Adjusted Free Cash Flow” are used in addition to and in conjunction with results presented in accordance with GAAP and Free Cash Flow and Adjusted Free Cash Flow should not be relied upon to the exclusion of GAAP financial measures. Free Cash Flow and Adjusted Free Cash Flow reflect an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows. We strongly encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.<\/p>\n
\nWe define Free Cash Flow as total cash provided by\/used in operating activities as adjusted for net cash paid for the acquisition of fixed assets and intangible assets. We use Free Cash Flow, and ratios based on Free Cash Flow, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it is a more conservative measure of cash flow since purchases of fixed assets and intangible assets are a necessary component of ongoing manufacturing operations. Accordingly, we expect Free Cash Flow to be less than operating cash flows.<\/p>\n
Forward Looking Statements<\/span><\/b><\/p>\n\nThis press release includes forward-looking statements within the meaning of the \u201csafe harbor\u201d provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements include statements in this press release regarding guidance, seasonality, product mix and gross profits and may include statements relating to:<\/p>\n
\n- \nInherent limitations of internal controls impacting financial statements<\/p>\n<\/li>\n
- \nGrowth opportunities<\/p>\n<\/li>\n
- \nFuture profitability<\/p>\n<\/li>\n
- \nAbility to expand market share<\/p>\n<\/li>\n
- \nCustomer demand for certain products<\/p>\n<\/li>\n
- \nEconomic conditions (including tariffs) that could affect fuel costs, commodity costs, industry size and financial conditions of our dealers and suppliers<\/p>\n<\/li>\n
- \nLabor or other constraints on the Company\u2019s ability to maintain a competitive cost structure<\/p>\n<\/li>\n
- \nVolatility in the tax base and other funding sources that support the purchase of buses by our end customers<\/p>\n<\/li>\n
- \nLower or higher than anticipated market acceptance for our products<\/p>\n<\/li>\n
- \nOther statements preceded by, followed by or that include the words \u201cestimate,\u201d \u201cplan,\u201d \u201cproject,\u201d \u201cforecast,\u201d \u201cintend,\u201d \u201cexpect,\u201d \u201canticipate,\u201d \u201cbelieve,\u201d \u201cseek,\u201d \u201ctarget\u201d or similar expressions<\/p>\n<\/li>\n<\/ul>\n
\nThese forward-looking statements are based on information available as of the date of this press release, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. The factors described above, as well as risk factors described in reports filed with the SEC by us (available at www.sec.gov<\/a>), could cause our actual results to differ materially from estimates or expectations reflected in such forward-looking statements.<\/p>\n
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