10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

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

For the quarterly period ended July 2, 2016

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.)

402 Blue Bird Boulevard, Fort Valley, Georgia 31030

(Address of principal executive offices)

(Zip Code)

(478) 822-2801

(Registrant’s telephone number, including area code)

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 filings requirements for the past 90 days.

Yes X No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes X No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No X

As of August 15, 2016, there were issued and outstanding 22,334,378 shares of the registrant’s common stock, $0.0001 par value.

BLUE BIRD CORPORATION

FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	2
Item 1. Financial Statements (Unaudited).	2
Condensed Consolidated Balance Sheets	2
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	3
Condensed Consolidated Statements of Cash Flows	4
Notes to Condensed Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	37
Item 4. Controls and Procedures.	38
PART II – OTHER INFORMATION	39
Item 1. Legal Proceedings.	39
Item 1A. Risk Factors.	39
Item 6. Exhibits.	40
SIGNATURES	42

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) of Blue Bird Corporation (“Blue Bird” or the “Company”) contains forward-looking statements. Except as otherwise indicated by the context, references in this Report to “we,” “us” and “our” are to the consolidated business of the Company. All statements in this Report, including those made by the management of the Company, other than statements of historical fact, are forward-looking statements. These forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof and include the assumptions that underlie such statements. Forward-looking statements may contain words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “estimate,” “project,” “forecast,” “seek,” “target,” “anticipate,” “believe,” “estimate,” “predict,” “potential” and “continue,” the negative of these terms, or other comparable terminology. Examples of forward-looking statements include statements regarding the Company’s future financial results, research and trial results, regulatory approvals, operating results, business strategies, projected costs, products, competitive positions, management’s plans and objectives for future operations, and industry trends. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements may include statements relating to:

• the benefits of the Business Combination (as defined herein);

• the future financial performance of the Company;

• changes in the market for Blue Bird products; and

• expansion plans and opportunities.

These forward-looking statements are based on information available as of the date of this Report (or, in the case of forward-looking statements incorporated herein by reference, as of the date of the applicable filed document), 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. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different than those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

• the risk that the anticipated benefits of the Business Combination may not be realized, which may be affected by, among other things, competition and the ability of management to grow the business and manage growth profitably;

• the outcome of any legal proceedings that may be instituted against us;

• changes in applicable laws or regulations; and

• the possibility that we may be adversely affected by other economic, business, and/or competitive factors.

Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in the reports we file with the Securities and Exchange Commission (the “SEC”), specifically the sections titled “Risk Factors” and “Blue Bird Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2015 Form 10-K , filed with the SEC on December 15, 2015. Other risks and uncertainties are and will be disclosed in the Company’s prior and future SEC filings. The following information should be read in conjunction with the financial statements included in the Company’s 2015 Form 10-K, filed with the SEC on December 15, 2015.

Available Information

We are subject to the reporting and information requirements of the Securities Exchange Act of 1934, as amended, and as a result are obligated to file annual, quarterly, and current reports, proxy statements, and other information with the SEC. We make these filings available free of charge on our website (http://www.blue-bird.com) as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. Information on our website does not constitute part of this Quarterly Report on Form 10-Q. In addition, the SEC maintains a website (http://www.sec.gov) that contains our annual, quarterly, and current reports, proxy and information statements, and other information we electronically file with, or furnish to, the SEC. Any materials we file with, or furnish to, the SEC may also be read and/or copied at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except for share data)	July 2, 2016			October 3, 2015
	(unaudited)			(unaudited)
Assets
Current assets
Cash and cash equivalents	$	42,702		$	52,861
Accounts receivable, net	19,754			13,746
Inventories	101,412			49,180
Other current assets	9,006			3,960
Deferred tax asset	7,381			9,150
Total current assets	$	180,255		$	128,897
Property, plant and equipment, net	30,672			28,933
Goodwill	18,825			18,825
Intangible assets, net	58,976			60,378
Equity investment in affiliate	11,561			12,505
Deferred tax asset	7,377			15,466
Other assets	2,586			1,721
Total assets	$	310,252		$	266,725
Liabilities and Stockholder’s Deficit
Current liabilities
Accounts payable	$	129,445		$	79,333
Accrued warranty costs—current portion	7,586			7,418
Accrued expenses	25,214			22,980
Deferred warranty income—current portion	5,467			4,862
Other current liabilities	8,364			7,072
Current portion of senior term debt	11,750			11,750
Total current liabilities	$	187,826		$	133,415
Long-term liabilities
Long-term debt	$	142,577		$	175,418
Accrued warranty costs	10,917			10,243
Deferred warranty income	10,284			9,283
Other liabilities	15,067			13,169
Accrued pension liability	42,632			46,427
Total long-term liabilities	$	221,477		$	254,540
Guarantees, commitments and contingencies (Note 6)
Stockholder’s deficit
Preferred stock, $0.0001 par value, 10,000,000 shares authorized 500,000 issued and liquidation preference of $50,000	$	50,000		$	50,000
Common stock, $0.0001 par value, 100,000,000 shares authorized, 21,449,954 and 20,874,882 issued and outstanding at July 2, 2016 and October 3, 2015, respectively	2			2
Additional paid-in capital	40,297			15,887
Accumulated deficit	(139,633		)	(135,345		)
Accumulated other comprehensive loss	(49,717		)	(51,774		)
Total stockholder’s deficit	$	(99,051	)	$	(121,230	)
Total liabilities and stockholder’s deficit	$	310,252		$	266,725

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

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BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	Three Months Ended						Nine Months Ended
(in thousands except for share data)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net sales	$	323,055		$	262,653		$	645,596		$	611,504
Cost of goods sold	276,247			225,991			554,921			532,334
Gross profit	$	46,808		$	36,662		$	90,675		$	79,170
Operating expenses
Selling, general and administrative expenses	45,505			17,404			81,329			66,813
Operating profit	$	1,303		$	19,258		$	9,346		$	12,357
Interest expense	(4,040		)	(4,577		)	(12,736		)	(14,473		)
Interest income	7			5			118			39
Other income (expense), net	—			(33		)	16			—
(Loss) income before income taxes	$	(2,730	)	$	14,653		$	(3,256	)	$	(2,077	)
Income tax expense	(887		)	(4,513		)	(2,069		)	(8		)
Equity in net income of non-consolidated affiliate	696			543			1,494			1,049
Net (loss) income from continuing operations	$	(2,921	)	$	10,683		$	(3,831	)	$	(1,036	)
Loss from discontinued operations, net of tax	(13		)	—			(46		)	(4		)
Net (loss) income	$	(2,934	)	$	10,683		$	(3,877	)	$	(1,040	)
Defined benefit pension plan gain, net of tax expense of $419, $320, $1,257 and $959, respectively	777			593			2,333			1,780
Cash flow hedge loss, net of tax benefit of $33, $0, $149 and $0, respectively	(60		)	—			(276		)	—
Comprehensive (loss) income	$	(2,217	)	$	11,276		$	(1,820	)	$	740
Net (loss) income (from above)	$	(2,934	)	$	10,683		$	(3,877	)	$	(1,040	)
Preferred stock dividend	964			1,027			2,915			1,440
Net (loss) income available to common stockholders	$	(3,898	)	$	9,656		$	(6,792	)	$	(2,480	)
Earnings per share:
Basic weighted average shares outstanding	21,084,878			20,712,860			20,989,737			21,306,118
Basic earnings (loss) per share	$	(0.18	)	$	0.47		$	(0.32	)	$	(0.12	)
Diluted weighted average shares outstanding	21,084,878			25,385,884			20,989,737			21,306,118
Diluted earnings (loss) per share	$	(0.18	)	$	0.42		$	(0.32	)	$	(0.12	)

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

3

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015
	(unaudited)			(unaudited)
Cash flows from operating activities
Net loss	$	(3,877	)	$	(1,040	)
Loss from discontinued operations, net of tax	46			4
Adjustments to reconcile net loss to net cash provided by (used in) continuing operations
Depreciation and amortization	6,025			6,646
Amortization of debt costs	2,232			2,283
Share-based compensation	12,717			526
Unfunded portion of Phantom Equity Plan	1,355			—
Equity in net income of affiliate	(1,494		)	(1,049		)
Loss on disposal of fixed assets	29			495
Deferred taxes	8,461			(4,096		)
Provision for bad debt	(5		)	134
Amortization of deferred actuarial pension losses	3,590			2,739
Changes in assets and liabilities:
Accounts receivable	(6,003		)	(12,734		)
Inventories	(52,232		)	(35,220		)
Other assets	(6,055		)	(592		)
Accounts payable	50,332			24,049
Accrued expenses, pension and other liabilities	3,870			(13,778		)
Cash dividend from equity investment in affiliate	2,316			—
Total adjustments	$	25,138		$	(30,597	)
Net cash provided by (used in) continuing operations	$	21,307		$	(31,633	)
Net cash used in discontinued operations	(46		)	(4		)
Total cash provided by (used in) operating activities	$	21,261		$	(31,637	)
Cash flows from investing activities
Cash paid for fixed assets	(6,511		)	(3,427		)
Total cash used in investing activities	$	(6,511	)	$	(3,427	)
Cash flows from financing activities
Repayments under the senior term loan	(33,812		)	(8,813		)
Cash paid for capital leases	(168		)	(114		)
Cash paid for debt costs	(1,117		)	(2,872		)
Contributions from former majority stockholder	15,616			13,550
Payment of dividends on preferred stock	(1,917		)	—
Cash paid for employee taxes on vested restricted shares	(3,511		)	—
Total cash (used in) provided by financing activities	$	(24,909	)	$	1,751
Change in cash and cash equivalents	(10,159		)	(33,313		)
Cash and cash equivalents at beginning of period	52,861			61,137
Cash and cash equivalents at end of period	$	42,702		$	27,824
Non-cash investing and financing activity
Capital expenditures funded by capital lease borrowings	100			—
Change in accounts payable for capital additions to property, plant and equipment	(220		)	248
Common stock dividend on Series A preferred stock (market value of common shares)	998			1,239
Non-cash reverse merger activity
Issuance of Common Stock	—			25,000
Issuance of Series A Preferred Stock	—			50,000
Shares assumed by legal acquirer	—			42,492
Repurchase of Common Stock from Traxis	—			100,000

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

4

BLUE BIRD CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Basis of Presentation

Nature of Business

On February 24, 2015, Hennessy Capital Acquisition Corp. ("HCAC") consummated its business combination (the “Business Combination”), pursuant to which HCAC acquired all of the outstanding capital stock of School Bus Holdings, Inc. (“SBH”) from The Traxis Group B.V. (the “Seller” or "Traxis"). SBH operates its business of designing and manufacturing school buses through subsidiaries and under the Blue Bird Corporation (“Blue Bird”) name. In the Business Combination, the total purchase price was paid in a combination of cash ($100 million) and in shares of HCAC’s Common Stock (12,000,000 shares valued at a total of $120 million). In connection with the closing of the Business Combination, we changed our name from Hennessy Capital Acquisition Corp. to Blue Bird Corporation. Upon consummation of the Business Combination, SBH became a wholly-owned subsidiary of Blue Bird Corporation and SBH’s direct and indirect subsidiaries became indirect subsidiaries of our parent corporation.

Pursuant to, and subject to the terms of, a Purchase and Sale Agreement, dated as of May 26, 2016 (the “Purchase Agreement”), by and among Traxis, ASP BB Holdings LLC, a Delaware limited liability company (“ASP”), and the Company, Traxis agreed to sell and ASP agreed to purchase all of the 12,000,000 shares of common stock, par value $0.0001 (the “Common Stock”), of the Company owned by Traxis (the “Transaction Shares”). Subject to the terms and conditions set forth in the Purchase Agreement, ASP acquired 7,000,000 Transaction Shares at an initial closing on June 3, 2016 for an amount in cash equal to $10.10 per share and 5,000,000 Transaction Shares at a second closing on June 8, 2016 for an amount in cash equal to $11.00 per share, for an aggregate purchase price of $125.7 million. There were no proceeds to the Company from this transaction. The sale of Transaction Shares triggered a phantom equity compensation payment as further discussed in Note 12. This payment was primarily funded by Traxis and not by the Company.

Blue Bird Body Company, a wholly-owned subsidiary of Blue Bird, 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 Blue Bird’s sales are made to an independent distributor network, which in turn sells buses to ultimate end users. We are headquartered in Fort Valley, Georgia. References in these notes to financial statements to “Blue Bird”, the “Company,” “we,” “our,” or “us” refer to Blue Bird Corporation and its wholly-owned subsidiaries, unless the context specifically indicates otherwise.

Basis of Presentation

The accompanying 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 Company uses the equity method to account for its investment in an entity that is not controlled, and where the Company has the ability to exercise significant influence over operating and financial policies. Consolidated net (loss) income includes the Company’s share of net income in this entity. The difference between consolidation and the equity method impacts certain of the Company’s financial ratios because of the presentation of the detailed line items reported in the condensed consolidated financial statements for consolidated entities, compared to a two-line presentation of “Equity investment in affiliate” on the Consolidated Balance Sheets and “Equity in net income of non-consolidated affiliate” on the Consolidated Statements of Operations and Comprehensive Income (Loss). The third quarter 2015 presentation of Equity in net income of non-consolidated affiliate has been reclassified from the previous presentation to conform to the current year presentation. The previous presentation showed the amounts in the three and nine months ended July 4, 2015 net of tax expense of $0.2 million and $0.4 million, respectively. Those tax amounts are now included in "income tax expense" on our Consolidated Statement of Operations and Comprehensive Income (Loss).

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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. In fiscal year 2016 there are a total of 52 weeks. For fiscal year 2016 the three and nine months ended were 13 weeks and 39 weeks, respectively. For fiscal year 2015 the three and nine months ended were 13 weeks and 40 weeks, respectively.

In the opinion of management, all adjustments considered necessary for a fair statement 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

5

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 generally accepted accounting principles for complete financial statements.

The Condensed Consolidated Balance Sheet data as of October 3, 2015 was derived from the Company’s audited financial statements but do not include all disclosures required by generally accepted accounting principles. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes for the fiscal year ended October 3, 2015 as set forth in the Company's 2015 Form 10-K filed on December 15, 2015.

The Business Combination was accounted for as a reverse acquisition since immediately following completion of the transaction the sole stockholder of SBH immediately prior to the Business Combination maintained effective control of Blue Bird Corporation, the post-combination company.  For accounting purposes, SBH is deemed the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of SBH (i.e., a capital transaction involving the issuance of stock and payment of cash by HCAC for the stock of SBH). Accordingly, the consolidated assets, liabilities and results of operations of SBH are the historical financial statements of Blue Bird Corporation, and HCAC assets, liabilities and results of operations are consolidated with SBH beginning on the acquisition date. No step-up in basis of intangible assets or goodwill was recorded in this transaction.  We have effected this treatment through opening stockholders' deficit by adjusting the number of our common shares outstanding.  Other than transaction costs paid and a contribution from our majority stockholder for payment of management incentive compensation related to the transaction, the transaction was primarily non-cash and involved exchanges of consideration and equity between our majority stockholder and HCAC and its related entities.

Please see Note 11 for discussion of a revision to previously reported earnings per share.

Use of Estimates and Assumptions

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“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 amounts of revenues and expenses. For example, significant management judgments are required in determining excess, obsolete, or unsalable inventory, allowance for doubtful accounts, potential impairment of long-lived assets, goodwill and intangibles, the accounting for self-insurance reserves, warranty reserves, pension obligations, income taxes, environmental liabilities and contingencies. Future events 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.

6

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

The Company’s significant accounting policies are described in the Company’s Form 10-K, filed with the SEC on December 15, 2015.

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, 2016 other than those described below.

Derivative Instruments

We utilize derivative instruments to manage certain exposures to changes in foreign currency exchange rates. The fair values of all derivative instruments are recognized as assets or liabilities at the balance sheet date. Changes in the fair value of these derivative instruments are recognized in our operating results or included in other comprehensive income (loss), depending on whether the derivative instrument is a fair value or cash flow hedge and whether it qualifies for hedge accounting treatment.

If realized, gains and losses on derivative instruments are recognized in our Consolidated Statement of Operations in the line item that reflects the underlying exposure that was hedged. The exchange of cash, if any, associated with derivative transactions is classified in the Consolidated Statements of Cash Flows in the same category as the cash flows from the items subject to the economic hedging relationships.

Recently Issued Accounting Standards

ASU 2016-13 — In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for losses. The guidance is effective for fiscal years beginning after December 15, 2019 with early adoption permitted with fiscal years beginning after December 15, 2018 and is not expected to have a significant impact on the Company's financial position, results of operations, or disclosures.

ASU 2016-12 & 2016-10 — In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, and in April 2016 issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, both of which provide further clarification to be considered when implementing ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The ASUs are effective concurrently with ASU 2014-09, which is effective for the Company in fiscal 2019. The Company is currently evaluating the impact this guidance will have on the financial statements and related disclosures.

ASU 2016-09 — In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies the accounting for some aspects of share-based payment transactions, including the income tax treatment of excess tax benefits and deficiencies, forfeitures, classification of share-based awards as either equity or liabilities, and classification in the statement of cash flows for certain share-based transactions related to tax benefits and payments. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods, and early adoption is permitted. The Company has elected to early adopt ASU 2016-09 beginning with the second quarter ended April 2, 2016, resulting in windfall and shortfall taxes from vested awards to be recorded as income tax expense or benefit in the income statement as well as classified with income tax transactions in the operating section of the cash flow statement. Additionally, employee taxes paid on shares withheld for tax-withholding purposes were recognized as a financing activity in the cash flow statement.

ASU 2015-17— In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities to be classified as non-current on the balance sheet. The standard is effective for public companies for annual reporting periods beginning after December 15, 2016, and interim periods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. At July 2, 2016, the adoption of this ASU would result in the reclassification of approximately $7.4 million from current assets to non-current assets. Future impact will be driven by the composition of our deferred tax accounts.

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3. Supplemental Financial Information

Inventory

The Company values inventories at the lower of cost or market value. The Company uses a standard costing methodology, which approximates cost on a first-in, first-out basis. The Company reviews the standard costs of raw materials, work-in-process and finished goods inventory on a periodic basis to ensure that its inventories approximate current actual costs. Manufacturing cost includes raw materials, direct labor and manufacturing overhead. The following table presents the components of inventory at the dates indicated:

(in thousands of dollars)	July 2, 2016		October 3, 2015
Raw materials	$	67,714	$	43,471
Work in process	30,369		2,658
Finished goods	3,329		3,051
Total inventory	$	101,412	$	49,180

Product Warranties

The Company’s products are generally warranted against defects in material and workmanship for a period of one to five years. A provision for estimated warranty costs is recorded in the year the unit is sold. The methodology to determine warranty reserve calculates average expected warranty claims using warranty claims by body type, by month, over the life of the bus, which is then multiplied by remaining months under warranty, by warranty type. Management believes the methodology provides for accuracy in addressing reserve requirements. Actual claims incurred could differ from the original estimates, requiring future adjustments.

The Company also sells extended warranties related to its products. Revenue related to these contracts is recognized on a straight-line basis over the contract period and costs thereunder are expensed as incurred. All warranty expenses are recorded in the cost of goods sold line in the Consolidated Statements of Operations and Comprehensive Income (Loss). The current methodology to determine short-term extended warranty income reserve is based on twelve months of the remaining warranty value for each effective extended warranty at the balance sheet date.

The following table reflects activity in accrued warranty cost (current and long-term portion combined) for the periods presented:

	Three Months Ended						Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Balance at beginning of period	$	16,768		$	15,262		$	17,661		$	15,559
Add current period accruals	3,691			3,014			7,195			6,936
Current period reductions of accrual	(1,956		)	(1,993		)	(6,353		)	(6,212		)
Balance at end of period	$	18,503		$	16,283		$	18,503		$	16,283

Extended Warranty Income

The following table reflects activity in deferred warranty income, for the sale of extended warranties of two to five years, for the periods presented:

	Three Months Ended						Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Balance at beginning of period	$	14,060		$	12,340		$	14,145		$	12,003
Add current period deferred income	2,952			1,939			5,446			4,445
Current period recognition of income	(1,261		)	(1,085		)	(3,840		)	(3,254		)
Balance at end of period	$	15,751		$	13,194		$	15,751		$	13,194

8

Self-Insurance

The following table reflects total accrued self-insurance liability, comprised of workers compensation and health insurance related claims, at the dates indicated:

(in thousands of dollars)	July 2, 2016		October 3, 2015
Current portion	$	3,444	$	3,534
Long-term portion	2,884		2,786
Total accrued self-insurance	$	6,328	$	6,320

The current and long term portions of the accrued self-insurance liability are reflected in accrued expenses and other liabilities, respectively, on the balance sheet.

Shipping and Handling Revenues

Shipping and handling revenues represent costs billed to customers and are presented as net sales. Shipping and handling costs incurred are included in cost of goods sold. Shipping and handling revenues were $6.2 million and $4.5 million for the three months ended July 2, 2016 and July 4, 2015, respectively, and $11.5 million and $10.6 million for the nine months ended July 2, 2016 and July 4, 2015, respectively. The related cost of goods sold was $5.7 million and $4.0 million for the three months ended July 2, 2016 and July 4, 2015, respectively, and $10.1 million and $9.4 million for the nine months ended July 2, 2016 and July 4, 2015, respectively.

Pension Expense

Components of net periodic pension benefit cost were as follows for the periods presented:

	Three Months Ended						Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Interest cost	$	1,411		$	1,426		$	4,232		$	4,280
Expected return on plan assets	(1,528		)	(1,599		)	(4,584		)	(4,798		)
Amortization of prior loss	1,196			913			3,590			2,739
Net periodic benefit cost	$	1,079		$	740		$	3,238		$	2,221
Amortization of prior loss, recognized in other comprehensive income	1,196			913			3,590			2,739
Total recognized in net periodic pension benefit cost and other comprehensive income	$	(117	)	$	(173	)	$	(352	)	$	(518	)

Equity Investment in Affiliate

The Company holds a 50% equity interest in Micro Bird Holdings, Inc. (“Micro Bird”), and accounts for Micro Bird under the equity method of accounting. The carrying amount of the equity method investment is adjusted for the Company’s proportionate share of net earnings and losses and any dividends received. At July 2, 2016 and October 3, 2015, the Company had an investment of $11.6 million and $12.5 million, respectively. In the third quarter of 2016, Micro Bird paid a dividend to all common stockholders and the Company received $2.3 million as a result of this distribution, which was net of required withholding taxes. The dividend reduced the carrying value of our investment and is presented as a cash inflow in the operating section of our Condensed Consolidated Statement of Cash Flows.

9

In recognizing the Company’s 50% portion of Micro Bird net income, the Company recorded $1.5 million and $1.0 million in Equity in net income of non-consolidated affiliate for the nine months ended July 2, 2016 and July 4, 2015, respectively. Summarized unaudited financial information for these periods for Micro Bird is as follows:

	Nine Months Ended
(in thousands of dollars)	July 2, 2016		July 4, 2015
Revenues	$	64,931	$	51,126
Gross profit	9,407		7,067
Operating income	4,273		3,162
Net income	3,034		2,385

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4. Debt

In June 2014, Blue Bird Body Company, a wholly-owned subsidiary of the Company, executed a $235.0 millionsix year senior term loan provided by Societe Generale (the “Senior Credit Facility”), which acts as the administrative agent, SG Americas Securities LLC, Macquarie Capital (USA) INC., and Fifth Third Bank as joint book runners and Joint Lead Arrangers. The Senior Credit Facility amortizes at 5% per annum payable quarterly which started on January 3, 2015. The interest rate on the Senior Credit Facility is an election of either base rate plus 450 basis points or LIBOR (floor of 1 point) plus 550 basis points, and was 6.5% at both July 2, 2016 and October 3, 2015. Blue Bird also has access to a $60.0 million revolving senior credit facility provided by Societe Generale (the “Senior Revolving Credit Facility”), which acts as the administrative agent, SG Americas Securities LLC and Macquarie Capital (USA) INC. The Senior Revolving Credit Facility carries an elective interest rate of either the base rate plus 450 basis points or LIBOR plus 550 basis points.Blue Bird may request letters of credit through its Senior Revolving Credit Facility up to a $15.0 million sub limit. The commitment fee on unused amounts of the Senior Revolving Credit Facility is 0.5%.

The Senior Credit Facility and the Senior Revolving Credit Facility were executed on June 27, 2014, amended on September 28, 2015, and further amended on June 6, 2016. The Senior Credit Facility has a six year term and the Senior Revolving Credit Facility originally had a five year term but was amended to a six year term in September 2015. The Senior Credit Facility was also amended in September 2015 to permit the Company to pay its preferred share dividends in cash, to permit the Company to tender cash for its existing warrants from available amounts (as further defined in the credit agreement), to amend the definition of consolidated EBITDA to allow an add back of third party expenses related to being a public company, to add Blue Bird Corporation as a guarantor, and to otherwise amend various restricted payment requirements. An amendment in June 2016 changed the definition of Sponsor, as defined in the Credit Agreement, contingent upon a change in control. With the June 2016 amendment, the Company incurred $1.1 million in lender fees which were capitalized to the debt and will be amortized to interest expense over the remaining life of the loan, resulting in an increase in the weighted-average annual effective interest rate.

Debt consisted of the following at the dates indicated:

(in thousands of dollars)	July 2, 2016		October 3, 2015
2020 senior term loan, net of discount of $10,111 and $11,082, respectively	$	154,327	$	187,168
Less: Current portion of long-term debt	11,750		11,750
Long-term debt, net of current portion	$	142,577	$	175,418

At July 2, 2016 and October 3, 2015, $164.4 million and $198.3 million, respectively, were outstanding on this indebtedness. On June 30, 2016, the Company made a voluntary $25.0 million prepayment of principal in addition to the regular payments due.

At July 2, 2016 and October 3, 2015, the Senior Credit Facility's weighted-average annual effective interest rate was 8.3% and 7.8%, respectively, which includes amortization of the discount and deferred charges.

Our term loan is recognized on the Company’s balance sheet at its unpaid principal balance, and is not subject to fair value measurement; however, given that the loan carries a variable rate, the Company estimates that the unpaid principal balance of the term loan would approximate its fair value. If measured at fair value in the financial statements, the Company’s term loan would be classified as Level 2 in the fair value hierarchy.

No borrowings were outstanding on the Senior Revolving Credit Facility at July 2, 2016; however, since there were $5.1 million of Letters of Credit outstanding on July 2, 2016, the Company would have been able to borrow $54.9 million on the revolving line of credit.

Interest expense on all indebtedness was $4.0 million and $4.6 million for the three months ended July 2, 2016 and July 4, 2015, respectively, and $12.7 million and $14.5 million for the nine months ended July 2, 2016 and July 4, 2015, respectively.

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The schedules of remaining principal maturities for the Senior Credit Facility and the Senior Revolving Credit Facility for the next five fiscal years are as follows:

(in thousands of dollars)
Year	Principal Payments
2016	2,938
2017	11,750
2018	11,750
2019	11,750
2020	126,250
Total remaining principal payments	$	164,438

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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 which are required to be discretely recognized within the current interim period. The effective tax rates in the periods presented are largely based upon the forecast pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business, primarily the United States.

As a result of the Business Combination a change in the ownership of the Company occurred which, pursuant to the Internal Revenue Code, will limit on an annual basis the Company's ability to utilize its U.S. Federal NOLs and U.S. Federal tax credits. The Company's NOLs and credits will continue to be available to offset taxable income and tax liabilities (until such NOLs and credits are either used or expire) subject to the Section 382 annual limitation. If the annual limitation amount is not fully utilized in a particular tax year, then the unused portion from that particular tax year will be added to the annual limitation in subsequent years.

The effective tax rate for the three month period ended July 2, 2016 was (32.5)%, which differed from the statutory federal income tax rate of 35%, primarily from discrete items in the period, including interest and penalties on uncertain tax positions and a net tax shortfall from the vesting of share-based compensation awards pursuant to the adoption of ASU 2016-09 (refer to Note 2), which were partially offset by the benefit from current period operating losses. The effective tax rate for the three month period ended July 4, 2015 was 30.8% and differed from the statutory federal income tax rate of 35%, primarily as a result of the benefit from the domestic production activities deduction and partially offset by an uncertain tax position for state tax expense.

The effective tax rate for the nine month period ended July 2, 2016 was (63.5)% and differed from the statutory federal income tax rate of 35% primarily from discrete items increasing tax expense in the year to date period, including a change in investor tax on our non-consolidated affiliate income, the application of tax credits claimed as offsets against our payroll tax liabilities, interest and penalties on uncertain tax positions, the vesting of share-based compensation awards pursuant to the adoption of ASU 2016-09 (refer to Note 2), partially offset by recording the impact of new tax legislation. These discrete items were partially offset by the benefit from current period operating losses. The effective tax rate for the nine month period ended July 4, 2015 was (0.4)% and differed from the statutory federal income tax rate of 35% primarily as a result of the benefit from the domestic production activities deduction, state tax items and other permanent items and offset in part by interest and penalties on uncertain tax positions and transaction costs.

Of the total amount of gross unrecognized tax benefits at July 2, 2016 and October 3, 2015, $6.4 million and $6.4 million, respectively, would affect the Company’s effective tax rate if realized. The Company’s liability arising from uncertain tax positions is recorded in other non-current liabilities in the Condensed Consolidated Balance Sheets.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. The accrued interest and penalties for the nine months ended July 2, 2016 and July 4, 2015, were $0.9 million and $0.8 million, respectively.

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6. Guarantees, Commitments and Contingencies

Litigation

At July 2, 2016, 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.

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 environmental matters will not have a material adverse effect on the Company’s financial statements.

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7. Segment Information

We manage our business in two operating segments, which are also our reportable segments. The Bus segment includes the manufacturing and assembly of school buses to be sold to a variety of customers across the United States, Canada and in international markets. The Parts segment consists primarily of the purchase of parts from third parties to be sold to dealers within the Company’s network. Financial information is reported on the basis that it is used internally by the chief operating decision maker (the “CODM”) in evaluating segment performance and deciding how to allocate resources. The Chief Executive Officer of the Company has been identified as the CODM. Management evaluates the segments based primarily upon revenues and gross profit. A measure of assets is not applicable, as segment assets are not regularly reviewed by the CODM for evaluating performance or allocating resources. The tables below present segment net sales and gross profit for the periods presented:

Net sales

	Three Months Ended				Nine Months Ended
(in thousands of dollars)	July 2, 2016		July 4, 2015		July 2, 2016		July 4, 2015
Bus	$	309,432	$	248,487	$	604,832	$	569,693
Parts	13,623		14,166		40,764		41,811
Segment net sales	$	323,055	$	262,653	$	645,596	$	611,504

Gross profit

	Three Months Ended				Nine Months Ended
(in thousands of dollars)	July 2, 2016		July 4, 2015		July 2, 2016		July 4, 2015
Bus	$	41,594	$	31,670	$	75,108	$	63,915
Parts	5,214		4,992		15,567		15,255
Segment gross profit	$	46,808	$	36,662	$	90,675	$	79,170

The following table is a reconciliation of segment gross profit to consolidated income (loss) before income taxes for the periods presented:

	Three Months Ended						Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Segment gross profit	$	46,808		$	36,662		$	90,675		$	79,170
Adjustments:
Selling, general and administrative expenses	(45,505		)	(17,404		)	(81,329		)	(66,813		)
Interest expense	(4,040		)	(4,577		)	(12,736		)	(14,473		)
Interest income	7			5			118			39
Other income, net	—			(33		)	16			—
(Loss) income before income taxes	$	(2,730	)	$	14,653		$	(3,256	)	$	(2,077	)

Sales are attributable to geographic areas based on customer location and were as follows for the periods presented:

	Three Months Ended				Nine Months Ended
(in thousands of dollars)	July 2, 2016		July 4, 2015		July 2, 2016		July 4, 2015
United States	$	298,532	$	257,522	$	591,549	$	565,854
Canada	21,642		4,585		46,261		42,032
Rest of world	2,881		546		7,786		3,618
Total net sales	$	323,055	$	262,653	$	645,596	$	611,504

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8. Business Combination

Background and Summary

Blue Bird Corporation was originally formed in September 2013 as a special purpose acquisition company, or SPAC, under the name Hennessy Capital Acquisition Corp. (“HCAC” or “Hennessy Capital”) for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving HCAC and one or more businesses. As a SPAC, HCAC was a shell (blank check) company that had no operations and whose purpose was to go public with the intention of merging with or acquiring a company with the proceeds of the SPAC’s initial public offering (IPO). Until the consummation of the Business Combination (as defined below), HCAC’s securities were traded on The NASDAQ Stock Market (“Nasdaq”) under the ticker symbols “HCAC,” “HCACU” and “HCACW”.

On September 21, 2014, Hennessy Capital Partners I LLC (the “HCAC Sponsor”) signed a purchase agreement (the “Purchase Agreement”) with the The Traxis Group B.V. ("Seller") to acquire all outstanding stock of School Bus Holdings, Inc ("SBH"). The material terms and conditions of the Purchase Agreement were described in Hennessy Capital’s definitive proxy statement filed with the SEC on January 20, 2015, which was supplemented in additional proxy statement materials filed with the SEC on February 10, 2015.

On February 24, 2015, HCAC consummated its business combination (the “Business Combination”), pursuant to which HCAC acquired all of the outstanding capital stock of SBH from the Seller. SBH operates its business of designing and manufacturing school buses through subsidiaries and under the “Blue Bird” name. In the Business Combination, the total purchase price was paid in a combination of cash ($100 million) and shares of HCAC’s Common Stock (12,000,000 shares valued at a total of $120 million). In connection with the closing of the Business Combination, we changed our name from Hennessy Capital Acquisition Corp. to Blue Bird Corporation.

The cash purchase price in the Business Combination was funded through amounts that remained in HCAC’s trust after the redemption of all shares that were offered for redemption pursuant to HCAC’s certificate of incorporation, together with $75 million of funds invested through private placements of Common Stock and Series A Convertible Preferred Stock that occurred simultaneously with the consummation of the Business Combination.

Preferred Stock Subscription Agreement

Pursuant to a preferred stock subscription agreement entered into in February 2015, an investor agreed to purchase from Hennessy Capital, concurrent with the consummation of the closing of the Business Combination, 400,000 shares of Series A Convertible Preferred Stock for gross proceeds of approximately $40 million, subject to a possible increase to up to 500,000 shares or approximately $50 million (the “PIPE Investment”).

Also in February 2015, Hennessy Capital entered into a subscription agreement with four funds managed by Coliseum Capital Management, LLC (the “Common/Preferred Investor”) pursuant to which the Common/Preferred Investor agreed to purchase $25 million worth of shares of Hennessy Capital common stock, through (i) open market or privately negotiated transactions with third parties, at a purchase price of up to $10.00 per share, (ii) a private placement with consummation to occur concurrently with that of the Business Combination at a purchase price of $10.00 per share or (iii) a combination thereof, and further agreed to purchase 100,000 shares of Series A Convertible Preferred Stock pursuant to a private placement for gross proceeds of approximately $10.0 million to occur concurrently with that of the Business Combination.

Business Combination Approval and Consummation

On February 23, 2015, the Business Combination was approved by Hennessy Capital’s stockholders. On February 24, 2015, the parties consummated the Business Combination. The total purchase price was paid in a combination of cash ($100 million) and shares of the registrant’s common stock (12,000,000 shares valued at a total of $120 million). In connection with the closing of the Business Combination, the Company redeemed a total of 7,494,700 shares of its common stock pursuant to the terms of the Company’s amended and restated certificate of incorporation, resulting in a total cash payment from Hennessy Capital’s trust account to redeeming stockholders of $75 million.

On February 24, 2015, at the closing of the Business Combination, the PIPE Investment investor purchased 400,000 shares of the Company’s Series A Convertible Preferred Stock from the Company for aggregate gross proceeds of approximately $40 million and the Common/Preferred Investor purchased 100,000 shares of the Company’s Series A Convertible Preferred Stock from the Company for aggregate gross proceeds of approximately $10 million. In addition, at the closing, the Company issued to another investor 102,750 shares referenced in the Purchase Agreement as “Utilization Fee Shares”, and the Common/Preferred Investor purchased 2,500,000 shares of the Company’s common stock from the Company for aggregate gross proceeds of $25 million.

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Registration Rights Agreement

On February 24, 2015, the Company entered into a registration rights agreement with the Seller and other investors (the “Registration Rights Agreement”). The parties were granted registration rights that obligate Blue Bird Corporation to register for resale, among other shares, all or any portion of the shares of the Company’s capital stock that were issued by the Company in connection with the Business Combination (including the shares of common stock underlying the Series A Preferred Stock).

Under the Registration Rights Agreement, the parties also hold “piggyback” registration rights exercisable at any time that allow them to include the shares of Blue Bird Corporation common stock that they own in any public offering of equity securities initiated by us (other than those public offerings pursuant to registration statements on forms that do not permit registration for resale by them). The “piggyback” registration rights are subject to proportional cutbacks based on the manner of such offering and the identity of the party initiating such offering.

Blue Bird Corporation will pay all expenses incidental to its obligations under the Registration Rights Agreement, including any underwriting discounts and commissions payable by the parties to that agreement in connection with the sale of their shares under the Registration Rights Agreement.

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9. Stockholders’ Deficit

Authorized and Outstanding Stock

Our charter authorizes the issuance of 110 million shares, consisting of 100 million shares of common stock, $0.0001 par value per share, and 10 million shares of preferred stock, $0.0001 par value, 2 million of which have been designated as Series A Convertible Preferred Stock (“Preferred” or "Convertible Preferred Stock") and the remaining 8 million of which are undesignated. The outstanding shares of our Series A Convertible Preferred Stock and common stock are duly authorized, validly issued, fully paid and non-assessable.

Common Stock

On February 24, 2015, we sold 2,500,000 shares of common stock at $10.00 per share in a private placement. Proceeds from the sale were part of the consideration received by our majority owner as part of a recapitalization and reverse acquisition completed in the Business Combination. We also issued (i) 12,000,000 shares of common stock to the Seller upon consummation of the Business Combination, and (ii) 102,750 shares of common stock as a utilization fee to another investor. Please see Note 8 for a further discussion of these transactions.

Convertible Preferred Stock

By the filing of a Certificate of Designations (the “Certificate of Designations”) on February 24, 2015, we have designated 2.0 million shares of preferred stock as Series A Convertible Preferred Stock and, on February 24, 2015, we issued 500,000 shares of such series. Proceeds from the sale were part of the consideration received by our majority owner as part of a recapitalization and reverse acquisition completed in the Business Combination. Please see Note 8 for a further discussion of the transaction.

Each share of Series A Convertible Preferred Stock is convertible, at the holder’s option at any time, initially into 8.6 shares of our common stock (which is equivalent to an initial conversion price of approximately $11.59 per share), subject to specified adjustments as set forth in the Certificate of Designations. A Fundamental Change, as defined in the Certificate of Designations, was triggered on June 8, 2016 in connection with the Second Closing of the Transaction Shares which allowed the preferred holders to convert on an adjusted basis for a designated conversion period. None of the Preferred shareholders elected to convert within the designated conversion period. In addition, beginning on or after the third anniversary of the initial issuance date, we have the right, at our option, to cause all outstanding shares of the Series A Convertible Preferred Stock to be automatically converted into shares of common stock under certain circumstances and, if our Company undergoes certain fundamental changes, the Series A Convertible Preferred Stock will automatically be converted into common stock on the effective date of such fundamental change.

Holders of Series A Convertible Preferred Stock are entitled to receive when, as and if declared by the Board, dividends which are payable at a rate of 7.625% per annum. Unless prohibited by applicable law, the Board shall not fail to declare such dividends on the Series A Convertible Preferred Stock. Dividends accrue for all fiscal periods the Series A Convertible Preferred Stock is outstanding. The dividends are payable in cash, common shares, preferred shares, or any combination thereof. The form of dividend payment is in the sole discretion of the Company. During 2016, we issued a common stock dividend totaling 95,934 shares of common in the first quarter and paid cash dividends in our second and third fiscal quarters to the holders of our Series A Convertible Preferred Stock. As we are in an accumulated deficit position, we reduce Additional paid-in capital for dividend payments made in shares of common stock at the same amount that we record Additional paid-in capital for the issuance of the common stock, which results in no net change to our Stockholders' Deficit. The fair value of all dividends are reflected as deductions from net loss to calculate net loss available to common stockholders in our Condensed Consolidated Statement of Operations.

In the event of any liquidation, winding-up or dissolution of the Company, whether voluntary or involuntary, each holder of shares of Series A Convertible Preferred Stock shall be entitled to receive and to be paid out of the assets of the Company available for distribution to its stockholders the Liquidation Preference ($100.00 per share) plus all accumulated and unpaid dividends in respect of the Series A Convertible Preferred Stock (whether or not declared) to the date fixed for liquidation, winding-up or dissolution in preference to the holders of, and before any payment or distribution is made, on any other class of stock.

Warrants

At July 2, 2016, there were a total of 11,500,000 warrants outstanding.

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Public Warrants

The Company has issued warrants to purchase its common stock which were originally issued as part of units in Hennessy Capital’s initial public offering (the “Public Warrants”). Each Public Warrant entitles the registered holder to purchase one-half of one share of our common stock at a price of $5.75 per one-half of one share ($11.50 per whole share), subject to adjustment. Public Warrants may be exercised only for a whole number of shares of our Common Stock. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will expire on February 24, 2020, five years after the completion of the Business Combination, or earlier upon redemption or liquidation. We may call the Public Warrants for redemption if, and only if, the reported last sale price of our common stock equals or exceeds $24.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date we send the notice of redemption to the Warrant holders. The Public Warrants are listed on the OTCQB market under the symbol "BLBDW."

Placement Warrants

The Company issued warrants to purchase its common stock in connection with a private placement which occurred concurrently with Hennessy Capital’s initial public offering (the “Placement Warrants”). The Placement Warrants are identical to the Public Warrants sold in the initial public offering, except that, if held by the HCAC Sponsor or its permitted assignees, they (a) may be exercised for cash or on a cashless basis; and (b) are not subject to being called for redemption. Each such warrant entitles the holder to purchase one-half of one share of our Common Stock at a price of $5.75 per one-half of one share ($11.50 per whole share), subject to adjustment.

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10. Foreign Exchange Contracts

During the second quarter of fiscal 2016, we entered into a foreign exchange swap as an economic hedge of anticipated cash flows denominated in Canadian Dollars. The contract was entered into to protect against the risk that the eventual cash flows resulting from certain transactions would be affected by changes in exchange rates between the U.S. Dollar and the Canadian Dollar. The notional amount of the swap entered into was $10.8 million, and it matures on January 31, 2017. The foreign exchange contract qualifies for hedge accounting and has been designated as a cash flow hedge with the effective portion of the gain or loss on the derivative instrument recorded in other comprehensive income until the underlying transaction occurs. Once the anticipated transaction occurs, the gain or loss on the swap is recorded in current period earnings on the Consolidated Statements of Operations and Comprehensive Income (Loss).

The fair value of the foreign exchange contract is based on the forward contract rate, which classifies as a Level 2 fair value measurement. At July 2, 2016, the fair value of the foreign exchange contract was $(0.4) million and is included in "other current liabilities" on the Consolidated Balance Sheet. The loss recorded through accumulated other comprehensive income was $(0.1) million and $(0.4) million for the three and nine months ended July 2, 2016, respectively.

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11. Earnings Per Share

We incurred a net loss for the three and nine months ended July 2, 2016 and the nine months ended July 4, 2015. As a result, basic and diluted shares outstanding are equal to each other for those periods due to the exclusion of potentially dilutive shares from the calculation of earnings per share as the effect would be anti-dilutive. For the three and nine months ended July 2, 2016, potentially dilutive shares excluded from the calculation were 4,417,141 and 4,356,032, respectively, and 4,314,064 for the nine months ended July 4, 2015.

The following table presents the earnings per share computation for the period presented when there are dilutive shares:

	Three Months Ended
(in thousands except for share data)	July 4, 2015
Numerator:
Net income	$	10,683
Less: convertible preferred stock dividend	1,027
Net income available to common stockholders	$	9,656
Basic net income per share computation:
Net income available to common stockholders	$	9,656
Weighted average common shares outstanding	20,712,860
Basic net income per share	$	0.47
Diluted net income per share computation:
Net income	$	10,683
Weighted average common shares outstanding	20,712,860
Weighted average dilutive securities, convertible preferred stock	4,314,064
Weighted average dilutive securities, restricted stock	10
Weighted average dilutive securities, warrants	358,950
Weighted average shares and dilutive potential common shares	25,385,884
Diluted net income per share	$	0.42

Immaterial Correction of Earnings Per Share

In connection with the preparation of the consolidated financial statements for the three and six months ended April 2, 2016, an error in the computation and disclosure of basic and diluted earnings per share was identified. Per ASC 260-10-45-11, income per share available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock and the dividends accumulated for the period on cumulative preferred stock from income from continuing operations and from net income. The error resulted from not deducting the amount of cumulative dividends earned, on an accrual basis, by preferred stockholders in the second quarter of 2015 and adjusting for the rollover impact, if any, of cumulative dividends earned in the subsequent periods through the end of fiscal 2015.

We evaluated the materiality of the error in accordance with SEC Staff Accounting Bulletin No. 99, Materiality, SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements, and Accounting Standards Codification 250, Accounting for Changes and Error Corrections, and concluded the error was immaterial to all prior periods impacted. While the adjustments were immaterial, as previously disclosed, the Company has elected to revise its previously reported basic and diluted earnings per share for the comparable periods in fiscal 2015 as presented in the following table:

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	July 4, 2015
	Three Months Ended							Nine Months Ended
(in thousands except for share data)	Previous		Adjustment			Corrected		Previous			Adjustment			Corrected
Net income (loss)	$	10,683	$	—		$	10,683	$	(1,040	)	$	—		$	(1,040	)
Preferred stock dividend	1,239		(212		)	1,027		1,239			201			1,440
Net income (loss) available to common shareholders	9,444		212			9,656		(2,279		)	(201		)	(2,480		)
Basic earnings (loss) per share	0.46		0.01			0.47		(0.11		)	(0.01		)	(0.12		)
Diluted earnings (loss) per share	$	0.42	$	—		$	0.42	$	(0.11	)	$	(0.01	)	$	(0.12	)

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12. Share-Based Compensation

All outstanding share-based compensation awards vested upon the change in control which took place on June 8, 2016. Concurrent with the change in control, certain awards not considered as granted under GAAP due to 2017 and 2018 performance criteria which had not been established, were granted and immediately vested with the change in control. Refer to Note 1 for more information on the change in control.

Restricted Stock Awards

The following table summarizes the Company's restricted stock ("RSAs") and restricted stock units ("RSUs") award activity for the period presented:

	Nine Months Ended   July 2, 2016
Restricted Stock Activity	Number of Shares		Weighted-Average Grant Date Fair Value
Balance, beginning of period	521,707		$	13.18
Granted	245,793		10.82
Vested	(767,500	)	12.43
Balance, end of period	—		$	—

Compensation expense, recognized in selling, general and administrative expenses on consolidated statements of operations, for the restricted stock awards was $8.7 million for the nine months ended July 2, 2016. At July 2, 2016, there was no unrecognized compensation cost related to RSA and RSU awards.

Stock Option Awards

The following table summarizes the Company's stock option activity for the period presented:

	Nine Months Ended   July 2, 2016
Stock Option Award Activity	Number of Options	Weighted Average Exercise Price per Share ($)		Weighted Average Contractual Remaining Term (Years)	Aggregate Intrinsic Value ($000)
Outstanding options, beginning of period	1,004,000	$	10.05	9.48	$	197
Granted	143,754	10.27		9.47	234
Outstanding options, end of period (1)	1,147,754	10.08		8.82	1,959
Fully vested and exercisable options, end of period	1,147,754	$	10.08	8.82	$	1,959

(1) There were no stock option forfeitures or exercises during the nine months ended July 2, 2016.

Compensation expense, recognized in selling, general and administrative expenses on consolidated statements of operations, for stock option awards was $4.0 million for the nine months ended July 2, 2016. At July 2, 2016, there was no unrecognized compensation cost related to stock option awards.

The weighted-average grant date fair value of an option award granted during the nine months ended July 2, 2016 was $4.03. The fair value of each option award on the grant date was estimated using the Black-Scholes option pricing model with the following assumptions:

Dividend Yield	0	%
Risk-Free Interest Rate	1.7	%
Expected Volatility	34.0	%
Expected Term (Years)	4.7

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Phantom Award

In June 2016, in conjunction with the change in control of the Company's major stockholder, Phantom Award Plan participants earned $17.1 million in compensation which was expensed during the nine month period ended July 2, 2016, of which the participants were paid $15.8 million and was primarily funded by a $15.6 million contribution from our former major stockholder. The additional $1.4 million remains due but unpaid and will also be funded by a contribution from our former majority stockholder.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with the Company’s unaudited financial statements for the three and nine months ended July 2, 2016 and July 4, 2015 and related notes appearing elsewhere in this 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 titled “Cautionary 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.

We refer to the fiscal year ended October 3, 2015 as “fiscal 2015”. We refer to the quarter ended July 2, 2016 as the “third quarter of fiscal 2016” and we refer to the quarter ended July 4, 2015 as the “third quarter of fiscal 2015”. There were 13 weeks in the third quarter of fiscal 2015 and the third quarter of fiscal 2016. For fiscal 2016, the nine months ended included 39 weeks and for fiscal 2015, the nine months ended included 40 weeks.

Introductory Note

On February 24, 2015, the Company consummated the previously announced business combination (the “Business Combination”), pursuant to which the Company acquired all of the outstanding capital stock of School Bus Holdings Inc. (“School Bus Holdings” or “SBH”) from The Traxis Group, B.V. (the “Seller”), in accordance with the purchase agreement, dated as of September 21, 2014, by and among the Company, the Seller and, solely for purposes of Section 10.01(a) thereof, Hennessy Capital Partners I LLC (the “HCAC Sponsor”), as amended on February 10, 2015 and February 18, 2015 (as so amended, the “Purchase Agreement”). Pursuant to the Purchase Agreement, the total purchase price was paid in a combination of cash in the amount of $100 million and in shares of the Company’s common stock (12,000,000 shares valued at a total of $120 million).

In connection with the closing of the Business Combination, the Company changed its name from Hennessy Capital Acquisition Corp. to Blue Bird Corporation. Unless expressly stated otherwise in this Report, Blue Bird Corporation shall be referred to as “Blue Bird” or the “Company,” and includes its consolidated subsidiaries.

Pursuant to, and subject to the terms of, a Purchase and Sale Agreement, dated as of May 26, 2016 (the “Purchase Agreement”), by and among Traxis, ASP BB Holdings LLC, a Delaware limited liability company (“ASP”), and the Company, Traxis agreed to sell and ASP agreed to purchase all of the 12,000,000 shares of common stock, par value $0.0001 (the “Common Stock”), of the Company owned by Traxis (the “Transaction Shares”). Subject to the terms and conditions set forth in the Purchase Agreement, ASP acquired 7,000,000 Transaction Shares at an initial closing on June 3, 2016 for an amount in cash equal to $10.10 per share and 5,000,000 Transaction Shares at a second closing on June 8, 2016 for an amount in cash equal to $11.00 per share, for an aggregate purchase price of $125,700,000. There were no proceeds to the Company from this transaction. The sale of Transaction Shares triggered a phantom equity compensation payment as further discussed in Note 12 of the accompanying condensed consolidated financial statements. This payment was primarily funded by Traxis and not by the Company.

Executive Overview

Blue Bird is the leading independent designer and manufacturer of school buses. Our longevity and reputation in the school bus industry have made Blue Bird an iconic American brand. We distinguish ourselves from our principal competitors by dedicating our focus to the design, engineering, manufacture and sale of school buses and related parts. As the only principal manufacturer of chassis and body production specifically designed for school bus applications, Blue Bird is recognized as an industry leader for school bus innovation, safety, product quality/reliability/durability, efficiency, and lower operating costs. In addition, Blue Bird is the market leader in alternative fuel applications with its propane-powered and compressed natural gas (“CNG”)-powered school buses.

Blue Bird sells its buses and aftermarket parts through an extensive network of United States and Canadian dealers that, in their territories, are exclusive to Blue Bird on Type C and D school buses. Blue Bird also sells directly to major fleet operators, the United States government, state governments and authorized dealers in a number of foreign countries.

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Critical Accounting Policies and Estimates, Recent Accounting Pronouncements

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Blue Bird evaluates its estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

The Company’s accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in the Company’s Form10-K, filed with the SEC on December 15, 2015 under the caption “Blue Bird 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 in the nine months ended July 2, 2016.

Recent Accounting Pronouncements

See discussion in Note 2 of Notes to Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this Report for a discussion of new and recently adopted accounting pronouncements.

Factors Affecting Our Revenues

Our revenues are driven primarily by the following factors:

• Property tax revenues. Property tax revenues are one of the major sources of funding for new school buses. Property tax revenues are a function of land and building prices, relying on assessments of property value by state or county assessors and millage rates voted by the local electorate.

• Student enrollment. Increases or decreases in the number of school bus riders has a direct impact on school district demand.

• Revenue mix. We are able to charge more for certain of our products (e.g., Type C propane-powered school buses, Type D buses and buses with higher option content) than other products. The mix of products sold in any fiscal period can directly impact our revenues for the period.

• Strength of the dealer network. We rely on our dealers, as well as a small number of major fleet operators, to be the direct point of contact with school districts and their purchasing agents. An effective dealer is capable of expanding revenues within a given school district by matching that district’s needs to our capabilities, offering options that would not otherwise be provided to the district.

• Pricing. Our products are sold to school districts throughout the United States and Canada. Each state and each Canadian province has its own set of regulations that govern the purchase of products, including school buses, by their school districts. We and our dealers must navigate these regulations, purchasing procedures and the districts’ specifications in order to reach mutually acceptable price terms. Pricing may or may not be favorable to us, depending upon a number of factors impacting purchasing decisions.

• Buying patterns of major fleets. Major fleets regularly compete against one another for existing accounts. Fleets are also continuously trying to win the business of school districts that operate their own transportation services. These activities can have either a positive or negative impact on our sales, depending on the brand preference of the fleet that wins the business. Major fleets also periodically review their fleet sizes and replacement patterns due to funding availability as well as the profitability of existing routes. These actions can impact total purchases by fleets in a given year.

• Seasonality. Our sales are subject to seasonal variation based on the school calendar. The peak season has historically been during our third and fourth fiscal quarters. Sales during the third and fourth fiscal quarters are typically greater than the first and second fiscal quarters due to the desire of municipalities to have any new buses that they order available to them at the beginning of the new school year. There are, however, variations in the seasonal demands from year to year depending in large part upon municipal budgets, distinct replacement cycles and student enrollment. This seasonality and annual variations of this seasonality could impact the ability to compare results between fiscal periods.

Factors Affecting Our Expenses and Other Items

Our expenses and other line items in our condensed consolidated statement of operations are principally driven by the following factors:

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• Cost of goods sold. The components of our cost of goods sold consist of material costs (principally powertrain components, steel and rubber, as well as aluminum and copper), labor expense and overhead. Our cost of goods sold may vary from period to period in part due to changes in sales volume and in part due to efforts by certain suppliers to pass through the economics associated with key commodities, design changes with respect to specific components, design changes with respect to specific bus models, wage increases for plant labor, the productivity of plant labor, delays in receiving materials and other logistical problems and the impact of overhead items such as utilities.

• Selling, general and administrative expenses. Our selling, general and administrative expenses include costs associated with our selling and marketing efforts, engineering, centralized finance, human resources, purchasing and information technology services, as well as other administrative matters and functions. In most instances, other than direct costs associated with sales and marketing programs, the principal component of these costs is salary expense. Changes from period to period are typically driven by the number of our employees, as well as by merit increases provided to experienced personnel.

As a result of the consummation of the Business Combination, we must comply with laws, regulations and requirements for public companies, including certain provisions of the Sarbanes-Oxley Act and related SEC regulations, as well as Nasdaq listing requirements. Compliance with the requirements of being a public company require us to increase operating expenses in order to pay employees, legal counsel and accountants to assist us in, among other things, external reporting, instituting and monitoring a more comprehensive compliance and board governance function, establishing and maintaining internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, and preparing and distributing periodic public reports in compliance with our obligations under the federal securities laws. In addition, being a public company will make it more expensive for us to obtain director and officer liability insurance. We estimate that incremental annual public company costs (excluding share based compensation expense) will be at least $2.0 million per fiscal year.

• Interest expense. Our interest expense relates to costs associated with our debt instruments and reflects both the amount of indebtedness and the interest rate that we are required to pay on our debt. Blue Bird refinanced its senior debt in June 2014, entering into a $235.0 million first lien credit agreement and a $60.0 million revolving credit agreement. Proceeds of the refinancing were used to repay existing indebtedness and to finance a dividend payment to our sole stockholder at that time.

• Income taxes. We make estimates of the amounts to recognize for income taxes in each tax jurisdiction in which we operate. In addition, provisions are established for withholding taxes related to the transfer of cash between jurisdictions and for uncertain tax positions taken.

• Equity in net income of non-consolidated affiliate. We include in this line item our share of income or loss from our investment in Micro Bird, our unconsolidated 50/50 Canadian joint venture.

Key Measures We Use to Evaluate Our Performance

Adjusted EBITDA and Adjusted EBITDA margin are included in this Report because management views these metrics as a useful way to look at the performance of our operations between periods and to exclude decisions on capital investment and financing that might otherwise impact the review of profitability of the business based on present market conditions.

We define Adjusted EBITDA as net income before interest, taxes, depreciation and amortization, as adjusted to add back restructuring costs, certain management incentive compensation expenses and special expenses incurred outside the ordinary course of business. We 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 GAAP. Our Adjusted EBITDA and Adjusted EBITDA margin are used as a supplement to GAAP results in evaluating certain aspects of our business, as described below.

We believe that Adjusted EBITDA and Adjusted EBITDA margin are useful to investors in evaluating our performance because Adjusted EBITDA and Adjusted EBITDA margin consider the performance of our operations, excluding decisions made with respect to capital investment and financing and other expenses. We believe that the disclosure of Adjusted EBITDA and Adjusted EBITDA margin offer additional financial metrics that, when coupled with the GAAP results and the reconciliation to GAAP results, provide a more complete understanding of our results of operations and the factors and trends affecting our business.

Adjusted EBITDA and Adjusted EBITDA margin should not be considered as alternatives to net income (loss) as an indicator of our performance or as alternatives to any other measure prescribed by GAAP. There are limitations to using non-GAAP measures such as Adjusted EBITDA and Adjusted EBITDA margin. Although we believe that Adjusted EBITDA and Adjusted EBITDA margin may enhance an evaluation of our operating performance based on recent revenue generation and product/overhead cost control because they exclude the impact of prior decisions made about capital investment, financing and other expenses (i) other companies in Blue Bird’s industry may define Adjusted EBITDA and Adjusted EBITDA margin differently than we do and, as a result, they may not be comparable to similarly titled measures used by other companies in Blue Bird’s industry, and (ii) Adjusted EBITDA and Adjusted EBITDA margin exclude certain financial information that some may consider important in evaluating our performance.

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We compensate for these limitations by providing disclosure of the differences between Adjusted EBITDA and GAAP results, including providing a reconciliation to GAAP results, to enable investors to perform their own analysis of our operating results. Because of these limitations, Adjusted EBITDA and Adjusted EBITDA margin should not be considered as alternatives to net income (loss) as an indicator of our performance, as an alternative to net cash provided by operating activities as a measure of liquidity, or as an alternative to any other measure prescribed by GAAP. Our management compensates for these limitations by analyzing both our GAAP results and non-GAAP measures and using Adjusted EBITDA and Adjusted EBITDA margin as supplemental financial metrics for evaluation of our operating performance. See our condensed consolidated statements of operations and condensed consolidated statements of cash flows included elsewhere in this Report.

Our measure of “free cash flow” is a non-GAAP financial measure. Free cash flow is used in addition to and in conjunction with results presented in accordance with GAAP and free cash flow should not be relied upon to the exclusion of GAAP financial measures. Free cash flow reflects 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.

We define free cash flow as net cash provided in continuing operations less cash paid for fixed assets. We use free cash flow, and ratios based on it, 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 are a necessary component of ongoing operations. In limited circumstances in which proceeds from sales of fixed assets exceed purchases, free cash flow would exceed cash flow from operations. However, since we do not anticipate being a net seller of fixed assets, we expect free cash flow to be less than operating cash flows. See “Short-Term and Long-Term Liquidity Requirements" below.

Our Segments

We manage our business in two operating segments, which are also our reportable segments: (i) the Bus segment, which involves the design, engineering, manufacture and sales of school buses and extended warranties; and (ii) the Parts segment, which includes the sales of replacement bus parts. Financial information is reported on the basis that it is used internally by the chief operating decision maker (“CODM”) in evaluating segment performance and deciding how to allocate resources to segments. The Chief Executive Officer of the Company has been identified as the CODM. Management evaluates the segments based primarily upon revenues and gross profit.

Consolidated Results of Operations for the Three Months Ended July 2, 2016 and July 4, 2015:

	Three Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015
Net sales	$	323,055		$	262,653
Cost of goods sold	276,247			225,991
Gross profit	$	46,808		$	36,662
Operating expenses
Selling, general and administrative expenses	45,505			17,404
Operating profit	$	1,303		$	19,258
Interest expense	(4,040		)	(4,577		)
Interest income	7			5
Other expense, net	—			(33		)
(Loss) income before income taxes	$	(2,730	)	$	14,653
Income tax expense	(887		)	(4,513		)
Equity in net income of non-consolidated affiliate	696			543
Net (loss) income from continuing operations	$	(2,921	)	$	10,683
Loss from discontinued operations, net of tax	(13		)	—
Net (loss) income	$	(2,934	)	$	10,683
Other financial data:
Adjusted EBITDA	$	32,479		$	23,350
Adjusted EBITDA margin	10.1		%	8.9		%

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

	Three Months Ended
	July 2, 2016		July 4, 2015
Net Sales by Segment
Bus	$	309,432	$	248,487
Parts	13,623		14,166
Total	$	323,055	$	262,653
Gross Profit by Segment
Bus	$	41,594	$	31,670
Parts	5,214		4,992
Total	$	46,808	$	36,662

Net sales. Total net sales were $323.1 million for the third quarter of fiscal 2016, an increase of $60.4 million, or 23.0%, compared to $262.7 million for the third quarter of fiscal 2015, reflecting an increase in units booked which were 3,768 units for the third quarter of fiscal 2016, compared to 2,993 units for the third quarter of fiscal 2015.

For the bus segment, the average net sales price per unit for the third quarter of fiscal 2016 was 1.1%lower than the price per unit for the third quarter of fiscal 2015. This decrease in unit price reflects mainly product and customer mix changes.

Parts sales decreased year over year by $0.5 million due to decreased parts volume.

Cost of goods sold. Total cost of goods sold was $276.2 million for the third quarter of fiscal 2016, an increase of $50.3 million, or 22.2%, compared to $226.0 million for the third quarter of fiscal 2015, reflecting increased bus segment cost ofgoods sold of $51.0 million or 23.5%, and decreased parts segment cost of goods sold of $0.8 million or 8.3%. As a percentage of net sales, total cost of goods sold decreased from 86.0% in the third quarter of fiscal 2015 to 85.5% in the third quarter of fiscal 2016.

For the bus segment, the average cost of goods sold per unit for the third quarter of fiscal 2016decreased by 1.9% compared to the average cost of goods sold per unit for the third quarter of fiscal 2015. This primarily reflects a change in product and customer mix.

The $0.8 milliondecrease in parts segment cost of goods sold primarily reflects a decrease in volume.

Operating profit. Total operating profit was $1.3 million for the third quarter of fiscal 2016, a decrease of $18.0 million, compared to an operating profit of $19.3 million for the third quarter of fiscal 2015. Profitability was positively impacted by a $10.1 millionincrease in gross profit, which was offset by a $28.1 millionincrease in selling, general and administrative expenses, due primarily to expenses incurred from the change in control of our former majority stockholder in June of 2016, including a special compensation payment, share-based compensation, and other transaction expenses.

Interest income and expense, net. Interest income and expense, net was $4.0 million for the third quarter of fiscal 2016, a decrease of $0.5 million compared to $4.6 million for the third quarter of fiscal 2015. The decrease is attributable to lower average borrowing levels.

Income taxes. Income tax expense was $0.9 million for the third quarter of fiscal 2016, compared to an income tax expense of $4.5 million for the third quarter of fiscal 2015. The $3.6 million decrease in income tax expense is explained in the following paragraph.

The effective tax rate for the three month period ended July 2, 2016 was (32.5)%, which differed from the statutory federal income tax rate of 35%, primarily from discrete items in the period, including interest and penalties on uncertain tax positions and a net tax shortfall from the vesting of share-based compensation awards pursuant to the adoption of ASU 2016-09 (refer to Note 2 of our condensed consolidated financial statements), which were partially offset by the benefit from current period operating losses. The effective tax rate for the three month period ended July 4, 2015 was 30.8% and differed from the statutory federal income tax rate of 35%, primarily as a result of the benefit from the domestic production activities deduction and partially offset by an uncertain tax position for state tax expense.

Net (loss) income from continuing operations. Net loss from continuing operations was $2.9 million for the third quarter of fiscal 2016, a decrease of $13.6 million compared to net profit from continuing operations of $10.7 million for the third quarter of fiscal 2015. The decrease primarily reflects a decrease in operating profit of $18.0 million, which was partially offset by a decrease in tax expense of $3.6 million and a decrease of $0.5 million in interest income and expense, net.

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Discontinued operations. In 2007, Blue Bird sold its entire coach business to an unrelated third-party. Results of operations for this disposed business have been classified as discontinued operations since 2007. Activities from discontinued operations are related primarily to legal expenses.

Adjusted EBITDA. Adjusted EBITDA was $32.5 million or 10.1% of net sales for the third quarter of fiscal 2016, an increase of $9.1 million, or 39.1%, compared to $23.4 million or 8.9% of net sales for the third quarter of fiscal 2015. The increase in adjusted EBITDA is primarily the result of increased gross profit.

The following table sets forth a reconciliation of net income (loss) to adjusted EBITDA for periods presented:

	Three Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015
Net income (loss)	$	(2,934	)	$	10,683
Loss from discontinued operations, net of tax	(13		)	—
Income (loss) from continuing operations	$	(2,921	)	$	10,683
Interest expense	4,040			4,577
Interest income	(7		)	(5		)
Income tax expense	887			4,513
Depreciation and amortization	2,017			2,081
Special compensation payment (1)	17,112			—
Public company expenses, non-recurring	—			812
Business combination expenses	185			218
One-time post-retirement benefit adjustment	896			—
Share-based compensation	10,270			471
Adjusted EBITDA	$	32,479		$	23,350
Adjusted EBITDA margin (percentage of net sales)	10.1		%	8.9		%

(1) The special compensation payment was primarily funded by a contribution from our former majority shareholder concurrent with the change in control. An additional $1.4 million payment remains due, which will also be funded by a contribution from our former major stockholder.

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Consolidated Results of Operations for the Nine Months EndedJuly 2, 2016 and July 4, 2015:

	Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015
Net sales	$	645,596		$	611,504
Cost of goods sold	554,921			532,334
Gross profit	$	90,675		$	79,170
Operating expenses
Selling, general and administrative expenses	81,329			66,813
Operating profit	$	9,346		$	12,357
Interest expense	(12,736		)	(14,473		)
Interest income	118			39
Other income, net	16			—
Loss before income taxes	$	(3,256	)	$	(2,077	)
Income tax expense	(2,069		)	(8		)
Equity in net income of non-consolidated affiliate	1,494			1,049
Net loss from continuing operations	$	(3,831	)	$	(1,036	)
Loss from discontinued operations, net of tax	(46		)	(4		)
Net loss	$	(3,877	)	$	(1,040	)
Other financial data:
Adjusted EBITDA	$	47,845		$	40,853
Adjusted EBITDA margin	7.4		%	6.7		%

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

	Nine Months Ended
	July 2, 2016		July 4, 2015
Net Sales by Segment
Bus	$	604,832	$	569,693
Parts	40,764		41,811
Total	$	645,596	$	611,504
Gross Profit by Segment
Bus	$	75,108	$	63,915
Parts	15,567		15,255
Total	$	90,675	$	79,170

Net sales. Total net sales were $645.6 million for the nine months ended July 2, 2016, an increase of $34.1 million, or 5.6%, compared to $611.5 million for the nine months ended July 4, 2015, reflecting an increase in units booked, which were 7,308 units for the nine months ended July 2, 2016 compared to 6,910 units for the nine months ended July 4, 2015.

For the bus segment, the average net sales price per unit for the nine months ended July 2, 2016 was 0.4%higher than the price per unit for the nine months ended July 4, 2015. This increase in unit price reflects mainly customer mix changes.

Parts sales for the nine months ended July 2, 2016 were $40.8 million, a decrease of $1.0 million, or 2.5%, compared with sales of $41.8 million for the nine months ended July 4, 2015 due primarily to lower volume.

Cost of goods sold. Total cost of goods sold were $554.9 million for the nine months ended July 2, 2016, an increase of $22.6 million, or 4.2%, compared to $532.3 million for the nine months ended July 4, 2015, reflecting increased bus segment cost of goods sold of $23.9 million, or 4.7%, and decreased parts segment cost of goods sold of $1.4 million, or 5.1%.

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For the bus segment, the average cost of goods sold per unit for the nine months ended July 2, 2016decreased by 1.0% compared to the average cost of goods sold per unit for the nine months ended July 4, 2015, primarily due to favorable material costs.

The $1.4 milliondecrease in parts segment cost of goods sold primarily reflects a decrease in volume.

Operating profit. Total operating profit was $9.3 million for the nine months ended July 2, 2016, a decrease of $3.0 million, compared to an operating profit of $12.4 million for the nine months ended July 4, 2015. The decrease in operating profit is primarily due to the $12.2 million increase in share-based compensation, partially offset by an increase in gross profit of $11.5 million.

Interest income and expense, net. Interest income and expense, net was $12.6 million for the nine months ended July 2, 2016, a decrease of $1.8 million compared to $14.4 million for the nine months ended July 4, 2015. The decrease was attributable to lower average borrowing levels.

Income taxes. Income tax expense was $2.1 million for the nine months ended July 2, 2016, compared to expense of $0.0 million for the same period in fiscal 2015. The $2.1 million increase in income tax expense is explained in the following paragraph.

The effective tax rate for the nine month period ended July 2, 2016 was (63.5)% and differed from the statutory federal income tax rate of 35% primarily from discrete items increasing tax expense in the year to date period, including a change in investor tax on our non-consolidated affiliate income, the application of tax credits claimed as offsets against our payroll tax liabilities, interest and penalties on uncertain tax positions, the vesting of share-based compensation awards pursuant to the adoption of ASU 2016-09 (refer to Note 2 of our condensed consolidated financial statements), partially offset by recording the impact of new tax legislation. These discrete items were partially offset by the benefit from current period operating losses. The effective tax rate for the nine month period ended July 4, 2015 was (0.4)% and differed from the statutory federal income tax rate of 35% primarily as a result of the benefit from the domestic production activities deduction, state tax items and other permanent items and offset in part by interest and penalties on uncertain tax positions and transaction costs.

Net loss from continuing operations. Net loss from continuing operations was $3.8 million for the nine months ended July 2, 2016, a decrease of $2.8 million compared to a net loss from continuing operations of $1.0 million for the nine months ended July 4, 2015. The decrease reflects a decrease in operating profit of $3.0 million and an increase of $2.1 million in income tax expense, which were partially offset by an increase in equity in net income of non-consolidated affiliate of $0.4 million and a $1.8 milliondecrease in interest income and expense, net.

Discontinued operations. In 2007, Blue Bird sold its entire coach business to an unrelated third-party. Results of operations for this disposed business have been classified as discontinued operations since 2007. Activities from discontinued operations are related primarily to legal expenses.

Adjusted EBITDA. Adjusted EBITDA was $47.8 million or 7.4% of net sales for the nine months ended July 2, 2016, an increase of $7.0 million, or 17.1%, compared to $40.9 million or 6.7% of net sales for the nine months ended July 4, 2015. The increase in adjusted EBITDA is primarily the result of higher gross profit, partially offset by increased adjusted selling, general and administrative expenses.

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The following table sets forth a reconciliation of net income (loss) to adjusted EBITDA for the periods presented:

	Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015
Net income (loss)	$	(3,877	)	$	(1,040	)
Loss from discontinued operations, net of tax	(46		)	(4		)
Loss from continuing operations	$	(3,831	)	$	(1,036	)
Interest expense	12,736			14,473
Interest income	(118		)	(39		)
Income tax expense	2,069			8
Depreciation and amortization	6,025			6,646
Special compensation payment (1)	17,112			13,788
Public company expenses, non-recurring	—			2,654
Business combination expenses	239			3,364
Loss on disposal of fixed assets	—			469
One-time post-retirement benefit adjustment	896			—
Share-based compensation	12,717			526
Adjusted EBITDA	$	47,845		$	40,853
Adjusted EBITDA margin (percentage of net sales)	7.4		%	6.7		%

(1) The special compensation payments for fiscal 2016 and 2015 were primarily funded by a contribution from our former majority stockholder concurrent with the June 2016 change in control and 2015 Business Combination, respectively. An additional $1.4 million payment remains due, which will also be funded by a contribution from our former major stockholder.

Liquidity and Capital Resources

Background. The Company’s primary sources of liquidity are cash generated from its operations, available cash and borrowings under its credit facility. As of July 2, 2016, the Company had $42.7 million of available cash (net of outstanding checks) and $54.9 million of additional borrowings available under the revolving line of credit portion of its senior secured credit facilities. The Company’s revolving line of credit is available for working capital requirements, capital expenditures and other general corporate purposes.

Indebtedness. On June 27, 2014, SBH and certain of its subsidiaries and affiliates entered into a credit agreement ( the "Credit Agreement"), by and among (i) Blue Bird Body Company, as the borrower, (ii) SBH, Peach County Holdings, Inc. (“Peach”) and Blue Bird Global Corporation (formerly, Blue Bird Corporation) (collectively with SBH and Peach, the “Parents”), as guarantors and (iii) Societe Generale which acts as the administrative agent, SG Americas Securities LLC, Macquarie Capital (USA) INC., and Fifth Third Bank as joint book runners and joint lead arrangers. The credit facility provided for under the Credit Agreement consists of a term loan facility with an aggregate initial principal amount of $235.0 million (the “Term Loan Facility”) and a revolving credit facility with aggregate commitments of $60.0 million, which revolving credit facility includes a $15.0 million letter of credit sub-facility and $5.0 million swingline sub-facility (the “Revolving Credit Facility,” and together with the Term Loan Facility, each a “Credit Facility” and collectively, the “Credit Facilities”). The borrowings under the Term Loan Facility, which were made at the initial closing under the Term Loan Facility, may not be re-borrowed once they are repaid. The borrowings under the Revolving Credit Facility may be repaid and reborrowed from time to time at our election. The proceeds of the Term Loan Facility were used to finance in part, together with available cash on hand, (i) the June 2014 payment of a one-time special cash dividend payment to the sole stockholder of SBH at that time, (ii) the repayment of certain existing indebtedness of SBH and its subsidiaries and (iii) transaction costs associated with the consummation of the Credit Facilities.

The Term Loan Facility matures on June 27, 2020, which is the sixth anniversary of the effective date of the Credit Agreement. The Revolving Credit Facility originally matured on June 27, 2019, but was amended in September of 2015 to a June 27, 2020 maturity date. The Credit Facility was also amended to permit the Company to pay preferred share dividends in cash, to permit the Company to tender cash for its existing warrants from available amounts (as further defined in the Credit Agreement), to amend the definition of consolidated EBITDA to allow an add back of third party expenses related to being a public company, to add Blue Bird Corporation as a guarantor, and to otherwise amend various restricted payment requirements. On June 16, 2016, we amended the definition of Sponsor, as defined in the Credit Agreement, contingent upon a change in control as previously reported by the Company in its Current Reports on Form 8-K filed with the Securities and Exchange Commission on May 27, 2016, June 1, 2016, June 3, 2016 and June 8, 2016.

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The interest rate on the Term Loan Facility is an election of either base rate plus 450 basis points or LIBOR (floor of 1 point) plus 550 basis points, and was 6.5% at July 2, 2016. Under the Credit Agreement, the principal of the initial Term Loan Facility must be paid in quarterly installments equal to $2.9 million beginning on January 3, 2015, with the remaining principal amount due at maturity. The loans under the Credit Facility may be prepaid without penalty. Certain mandatory prepayments in respect of the Term Loan Facility are required, including prepayments from the proceeds of certain dispositions and the incurrence of certain debt obligations, as well as prepayments based on the annual excess cash flow of SBH and its subsidiaries.

The obligations under the Credit Agreement and the related loan documents (including without limitation, the borrowings under the Credit Facilities and obligations in respect of certain cash management and hedging obligations owing to the agents, the lenders or their affiliates), are, in each case, secured by a lien on and security interest in substantially all of the assets of the Company and each of the guarantors, with certain exclusions as set forth in a Collateral Agreement entered into by the Company and each guarantor.

Up to $60.0 million of additional term loans and/or revolving credit commitments may be incurred under the Credit Agreement (the “Incremental Facility”), subject to certain limitations and reductions in the size of the available Incremental Facility as set forth in the Credit Agreement. The Incremental Facility is not a committed facility, and would require further commitment from the lenders.

There are customary events of default under the Credit Agreement, including, among other things, events of default resulting from (i) failure to pay obligations when due under the Credit Agreement and in respect of other material debt, (ii) insolvency of the Company or any of its material subsidiaries, (iii) defaults under other material debt, (iv) judgments against the Company or its subsidiaries, (v) failure to comply with certain financial maintenance covenants (as set forth in the Credit Agreement) or (vi) a change of control of the Company with different minimum levels of ownership required after the consummation of the Business Combination, in each case subject to limitations and exceptions as set forth in the Credit Agreement.

The Credit Agreement contains negative and affirmative covenants affecting the Parents and their existing and future restricted subsidiaries, with certain exceptions set forth in the Credit Agreement. The negative covenants and restrictions include, among others: limitations on liens, dispositions of assets, consolidations and mergers, loans and investments, indebtedness, transactions with affiliates (including management fees and compensation), dividends, distributions and other restricted payments, change in fiscal year, fundamental changes, amendments to and subordinated indebtedness, restrictive agreements, and certain permitted acquisitions. Dividends, distributions, and other restricted payments are permitted in certain circumstances under the Credit Agreement, provided that there is not a continuing default and the Company maintains a Total Net Leverage Ratio (as defined below) of less than or equal to 2.75 to 1.0, in an amount up to the cumulative available amount of excess free cash flow that is not required to be used to prepay the outstanding loans under the Credit Agreement, subject to certain adjustments.

SBH must also maintain a Total Net Leverage Ratio, defined as the ratio of (a) consolidated net debt to (b) consolidated EBITDA (which includes certain add-backs that are not reflected in the definition of Adjusted EBITDA appearing elsewhere in this Report, consisting of losses or gains on asset dispositions, non-cash losses or gains on swap agreements, third party expenses stemming from being a public company and management fees payable to Cerberus Operations and Advisory Company, as defined in the Credit Agreement) at the end of each fiscal quarter for the consecutive four fiscal quarter period most recently then ending. Current and future Total Net Leverage Ratio requirements are as follows:

Test Period	Maximum Total Net Leverage Ratio
September 27, 2014 through July 4, 2015	4.75:1.00
October 3, 2015 through July 2, 2016	4.50:1.00
October 1, 2016	4.00:1.00
December 31, 2016 through June 30, 2018	3.50:1.00
September 29, 2018 through June 29, 2019	3.00:1.00
September 28, 2019 and thereafter	2.75:1.00

As of July 2, 2016, the borrower and the guarantors were in compliance with all covenants in the Credit Agreement.

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Seasonality and Working Capital

We use a non-GAAP measure called “net operating working capital (NOWC)”, which we define as the sum of trade accounts receivable and inventories less trade accounts payable. This is one measure of assessing the financial performance of the Company, and this may differ from the definition used by other companies. The components that are used to calculate NOWC are GAAP measures taken directly from the Condensed Consolidated Balance Sheet (Unaudited). We believe that NOWC information is useful for investors because it measures our short-term working capital position which may vary from period to period. This non-GAAP measure should not be considered a substitute for, or superior to, other measures of liquidity or working capital under GAAP. NOWC at the dates indicated was:

(in thousands of dollars)	July 2, 2016			October 3, 2015
Accounts receivable, net	$	19,754		$	13,746
Inventories	101,412			49,180
Accounts payable	(129,445		)	(79,333		)
NOWC	$	(8,279	)	$	(16,407	)

In overall dollar terms, NOWC is generally lower at the end of the fiscal year due to reduced production activity reflecting the start of the new school year. NOWC typically peaks at the end of the second and third fiscal quarters as we ramp up for high seasonal demand from our dealers. There are, however, variations in the seasonal demands from year to year depending in part on large direct sales to major fleet customers.

We pay our main suppliers based on credit terms that generally range from 30 to 90 days. We did not experience any significant bad debts on accounts receivable during the first nine months of fiscal 2016 or 2015, which we believe is the result of disciplined credit and collection policies and our strong customer base. With the exception of direct major fleet sales, sales to the General Services Administration and parts sales, buses are typically held in inventory until payment is received from the customer.

Inventory increased by $52.2 million from October 3, 2015 to July 2, 2016 due to a $27.7 millionincrease in work in process inventory, a $24.2 millionincrease in raw materials inventory, and a $0.3 millionincrease in finished goods inventory. The overall increase in inventory reflects the seasonal nature of the business as the Company ramps up production for the summer months.

Short-Term and Long-Term Liquidity Requirements

Our ability to make principal and interest payments on borrowings under the Credit Facilities and our ability to fund planned capital expenditures will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions. Based on the current level of operations, we believe that our existing cash balances and expected cash flows from operations will be sufficient to meet our operating requirements for at least the next 12 months.

Annual capital expenditures have historically been less than 1% of annual sales.

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Cash Flows

The following table sets forth general information derived from our statement of cash flows:

	Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015
Cash and cash equivalents at beginning of period	52,861			61,137
Total cash provided by (used in) operating activities	$	21,261		$	(31,637	)
Total cash used in investing activities	(6,511		)	(3,427		)
Total cash (used in) provided by financing activities	(24,909		)	1,751
Change in cash and cash equivalents	(10,159		)	(33,313		)
Cash and cash equivalents at end of period	42,702			27,824
Depreciation and amortization	6,025			6,646
Capital expenditures	6,511			3,427

Total cash provided by (used in) operating activities

Cash flows provided by operating activities totaled $21.3 million for the nine months ended July 2, 2016, as compared with $31.6 million of cash flows used in operating activities for the nine months ended July 4, 2015. The $52.9 millionincrease in cash provided by operating activities was primarily attributed to $16.0 million of improvements in working capital changes mainly driven by accounts payable, a $12.2 million increase in non-cash share-based compensation, a $2.3 million dividend received from our Micro Bird joint venture, and $24.7 million in increased accrued expenses, deferred taxes, and other assets, of which $12.5 million was attributed to Business Combination expenses in 2015.

Total cash used in investing activities

Cash flows used in investing activities totaled $6.5 million for the nine months ended July 2, 2016, as compared with $3.4 million of cash flows used in investing activities during the nine months ended July 4, 2015. The $3.1 millionincrease in cash used was cash paid for fixed assets.

Total cash (used in) provided by financing activities

Cash flows used in financing activities totaled $24.9 million for the nine months ended July 2, 2016, as compared with $1.8 million of cash provided by financing activities during the nine months ended July 4, 2015. The $26.7 millionincrease in cash used was primarily attributable to a $25.0 million voluntary prepayment on the Senior Credit Facility.

Depreciation and amortization

Depreciation and amortization totaled $6.0 million and $6.6 million for the nine months ended July 2, 2016 and July 4, 2015, respectively. The $0.6 milliondecrease was primarily caused by lower depreciation of fixed assets due to certain fixed assets being fully depreciated.

Free cash flow

Management believes the non-GAAP measurement of free cash flow, defined as net cash provided by continuing operations less cash paid for fixed assets, fairly represents the Company’s ability to generate surplus moneys that could fund activities not in the ordinary course of business. See “Key Measures We Use to Evaluate Our Performance”. The following table sets forth the calculation of free cash flow for the periods presented:

	Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015
Net cash provided by (used in) continuing operations	$	21,307		$	(31,633	)
Cash paid for fixed assets	(6,511		)	(3,427		)
Free cash flow	$	14,796		$	(35,060	)

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Free cash flow for the nine months ended July 2, 2016 was $49.9 millionhigher than the nine months ended July 4, 2015 primarily due to $16.0 million of improvements in working capital changes mainly driven by accounts payable, a $12.2 million increase in non-cash share-based compensation, a $2.3 million dividend received from our Micro Bird joint venture, and $24.7 million in increased accrued expenses, deferred taxes, and other assets, of which $12.5 million was attributed to Business Combination expenses in 2015. The free cash flow increase was partially offset by an increase in cash paid for fixed assets from prior year totaling $3.1 million.

Off-Balance Sheet Arrangements

We lease an office building and fork lifts for use in our operations on an operating lease basis.

We had outstanding letters of credit totaling $5.1 million at July 2, 2016, the majority of which secure our self-insured workers compensation program, the collateral for which is regulated by the State of Georgia.

At July 2, 2016, there were 5.8 million shares of common stock issuable upon exercise of outstanding warrants.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have not been any material changes to the disclosures about our interest rate risk or commodity risk market risk factors previously disclosed in Part II, Item 7A of the Company’s 2015 Form 10-K. The updated currency risk disclosure is as follows:

Currency Risk

The Company transacts substantially all of its sales in United States Dollars. Our foreign customers have exposure to risks related to changes in foreign currency exchange rates on our sales in that region. Foreign currency exchange rates can have material adverse effects on our foreign customers' ability to purchase our products. We utilize derivative instruments to hedge changes in foreign currency exchange rates for certain transactions with our customers. For non-hedged customer transactions, we are not exposed to foreign currency risks.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Quarterly report on Form 10-Q, the Company carried out an evaluation under the supervision of and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial officer, as of July 2, 2016, on the effectiveness of the design and operation of our disclosure controls and procedures, as defined under Exchange Act Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"), as of the end of the period covered by this Report.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of July 2, 2016, due to the identification of material weaknesses in our internal control over financial reporting, as further described below, our disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act, and the rules promulgated thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Based on our evaluation outlined above, we determined that we did not maintain effective internal control that restricts access to key financial systems and records to appropriate users and ensures that appropriate segregation of duties is maintained.  As a result, we did not properly assign and limit authority and responsibilities of certain management and supervisory personnel and did not appropriately design monitoring of the activities performed by these personnel. These control deficiencies could result in the recording of inappropriate or unauthorized transactions in our financial statements.  Given the nature of these deficiencies and their potential to result in a material misstatement, our audit committee and management team assessed these deficiencies as a material weaknesses.  These material weaknesses were present as of our previous fiscal year ended October 3, 2015. 

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the fiscal quarter ended July 2, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Items required under Part II not specifically shown below are not applicable.

Item 1. Legal Proceedings.

Blue Bird is engaged in legal proceedings in the ordinary course of its business. Although no assurances can be given about the final outcome of pending legal proceedings, at the present time management does not believe that the resolution or outcome of any of Blue Bird’s pending legal proceedings will have a material adverse effect on its financial condition, liquidity or results of operations.

Item 1A. Risk Factors.

In addition to the other information set forth in this Report, you should carefully consider the risk factors discussed in Part I, Item 1A of the Company's 2015 Form 10-K, and Quarterly Report on Form 10-Q for the quarter ended January 2, 2016. Such risk factors are expressly incorporated herein by reference, and could materially affect our business, financial condition, cash flows or future results. The risks described in the 2015 Form 10-K and first quarter Form 10-Q are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect the business, financial condition, cash flows and/or operating results of the Company.

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Item 6. Exhibits.

The following Exhibits are filed with this Report:

Exhibit No.Description                                                

2.1† Purchase Agreement, dated as of September 21, 2014, by and among the registrant, Hennessy Capital Partners I LLC (solely for purposes of Section 10.01(a) thereof) and The Traxis Group B.V. (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on September 24, 2014).

2.2 Amendment No. 1 to Purchase Agreement, dated as of February 10, 2015, by and among the registrant, Hennessy Capital Partners I LLC (solely for purposes of Section 10.01(a) thereof) and The Traxis Group B.V. (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on February 11, 2015).

2.3 Amendment No. 2 to Purchase Agreement, dated as of February 18, 2015, by and among the registrant, Hennessy Capital Partners I LLC (solely for purposes of Section 10.01(a) thereof) and The Traxis Group B.V. (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on February 19, 2015).

3.1 The registrant’s Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on February 26, 2015).

3.2 The registrant’s Certificate of Designations establishing its Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on February 26, 2015).

3.3 Bylaws of Blue Bird Corporation (incorporated by reference to the Company’s Form S-1, filed with the SEC on December 20, 2013).

4.1 Specimen stock certificate for the registrant’s Series A Convertible Preferred Stock (incorporated by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on March 2, 2015).

4.2 The registrant’s Certificate of Designations establishing its Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on February 26, 2015).

4.3 Credit agreement, dated as of June 27, 2014, by and among Blue Bird Body Company, as borrower, School Bus Holdings Inc., certain other subsidiaries of School Bus Holdings Inc., the joint book runners and joint lead arrangers parties thereto, the co-syndication agents parties thereto and Societe Generale, as administrative agent (incorporated by reference to Exhibit 10.5 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on March 2, 2015).

4.4 First Amendment to Credit Agreement, dated as of September 28, 2015, by and among Blue Bird Body Company, as borrower, School Bus Holdings Inc., certain other subsidiaries of School Bus Holdings Inc., the joint book runners and joint lead arrangers parties thereto, the co-syndication agents parties thereto and Societe Generale, as administrative agent (incorporated by reference to Exhibit 4.6 to the registrant's 2015Annual Report on Form 10-K filed by the registrant on December 15, 2015).

4.5 Second Amendment to Credit Agreement, dated as of June 6, 2016, by and among Blue Bird Corporation, Blue Bird Body Company as borrower, School Bus Holdings Inc., certain other subsidiaries of School Bus Holdings Inc., the joint book runners and joint lead arrangers parties thereto, the co-syndication agents parties thereto and Societe Generale, as administrative agent (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on June 8, 2016).

10.1 Purchase and Sale Agreement dated May 26, 2016, by and among The Traxis Group B.V., Blue Bird Corporation and ASP BB Holdings LLC (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on May 27, 2016).

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10.2 Letter Agreement dated May 26, 2016, by and among American Securities LLC, ASP BB Holdings LLC and Blue Bird Corporation (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on May 27, 2016).    

31.1* Chief Executive Officer’s Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2* Chief Financial Officer’s Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1* Chief Executive Officer and Chief Financial Officer joint Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*^ XBRL Instance Document.

101.SCH*^ XBRL Taxonomy Extension Schema Document.

101.CAL*^ XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*^ XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*^ XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*^ XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

† The exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Registrant agrees to furnish supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request.

^ In accordance with Regulation S-T, XBRL (Extensible Business Reporting Language) related information in Exhibit No. (101) to this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Blue Bird Corporation
Dated:	August 16, 2016	/s/ Philip Horlock
		Philip Horlock
		Chief Executive Officer
Dated:	August 16, 2016	/s/ Phillip Tighe
		Phillip Tighe
		Chief Financial Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Philip Horlock, the Chief Executive Officer of Blue Bird Corporation (the “registrant”), certify that:

(1) I have reviewed this quarterly report on Form 10-Q of Blue Bird Corporation;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	August 16, 2016	/s/ Philip Horlock
		Philip Horlock
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Phillip Tighe, the Chief Financial Officer of Blue Bird Corporation (the “registrant”), certify that:

(1) I have reviewed this quarterly report on Form 10-Q of Blue Bird Corporation;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	August 16, 2016	/s/ Phillip Tighe
		Phillip Tighe
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Blue Bird Corporation (the “Company”) on Form 10-Q for the quarterly period ended July 2, 2016, as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Philip Horlock, Chief Executive Officer of the Company, and Phillip Tighe, Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)    The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	August 16, 2016	/s/ Philip Horlock
		Philip Horlock
		Chief Executive Officer
Dated:	August 16, 2016	/s/ Phillip Tighe
		Phillip Tighe
		Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Jul. 02, 2016	Aug. 15, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	Blue Bird Corp
Entity Central Index Key	0001589526
Current Fiscal Year End Date	--10-01
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Jul. 02, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		22,334,378

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 02, 2016	Oct. 03, 2015
Current assets
Cash and cash equivalents	$ 42,702	$ 52,861
Accounts receivable, net	19,754	13,746
Inventories	101,412	49,180
Other current assets	9,006	3,960
Deferred tax asset	7,381	9,150
Total current assets	180,255	128,897
Property, plant and equipment, net	30,672	28,933
Goodwill	18,825	18,825
Intangible assets, net	58,976	60,378
Equity investment in affiliate	11,561	12,505
Deferred tax asset	7,377	15,466
Other assets	2,586	1,721
Total assets	310,252	266,725
Current liabilities
Accounts payable	129,445	79,333
Accrued warranty costs—current portion	7,586	7,418
Accrued expenses	25,214	22,980
Deferred warranty income—current portion	5,467	4,862
Other current liabilities	8,364	7,072
Current portion of senior term debt	11,750	11,750
Total current liabilities	187,826	133,415
Long-term liabilities
Long-term debt	142,577	175,418
Accrued warranty costs	10,917	10,243
Deferred warranty income	10,284	9,283
Other liabilities	15,067	13,169
Accrued pension liability	42,632	46,427
Total long-term liabilities	221,477	254,540
Guarantees, commitments and contingencies (Note 6)
Stockholder’s deficit
Preferred stock, $0.0001 par value, 10,000,000 shares authorized 500,000 issued and liquidation preference of $50,000	50,000	50,000
Common stock, $0.0001 par value, 100,000,000 shares authorized, 21,449,954 and 20,874,882 issued and outstanding at July 2, 2016 and October 3, 2015, respectively	2	2
Additional paid-in capital	40,297	15,887
Accumulated deficit	(139,633)	(135,345)
Accumulated other comprehensive loss	(49,717)	(51,774)
Total stockholder’s deficit	(99,051)	(121,230)
Total liabilities and stockholder’s deficit	$ 310,252	$ 266,725

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Jul. 02, 2016	Oct. 03, 2015
Statement of Financial Position [Abstract]
Preferred Stock, Par Value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Issued	500,000	500,000
Preferred Stock, Liquidation Preference, Value	$ 50,000,000	$ 50,000,000
Common Stock, Par Value (in dollars per share)	$ 0.0001	$ 0.0001
Common Stock, Shares Authorized	100,000,000	100,000,000
Common Stock, Shares Issued	21,449,954	20,874,882
Common Stock, Shares Outstanding	21,449,954	20,874,882

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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Income Statement [Abstract]
Net sales	$ 323,055	$ 262,653	$ 645,596	$ 611,504
Cost of goods sold	276,247	225,991	554,921	532,334
Gross profit	46,808	36,662	90,675	79,170
Operating expenses
Selling, general and administrative expenses	45,505	17,404	81,329	66,813
Operating profit	1,303	19,258	9,346	12,357
Interest expense	(4,040)	(4,577)	(12,736)	(14,473)
Interest income	7	5	118	39
Other income (expense), net	0	(33)	16	0
(Loss) income before income taxes	(2,730)	14,653	(3,256)	(2,077)
Income tax expense	(887)	(4,513)	(2,069)	(8)
Equity in net income of non-consolidated affiliate	696	543	1,494	1,049
Net (loss) income from continuing operations	(2,921)	10,683	(3,831)	(1,036)
Loss from discontinued operations, net of tax	(13)	0	(46)	(4)
Net (loss) income	(2,934)	10,683	(3,877)	(1,040)
Defined benefit pension plan gain, net of tax expense of $419, $320, $1,257 and $959, respectively	777	593	2,333	1,780
Cash flow hedge loss, net of tax benefit of $33, $0, $149 and $0, respectively	(60)	0	(276)	0
Comprehensive (loss) income	(2,217)	11,276	(1,820)	740
Net income (loss)	(2,934)	10,683	(3,877)	(1,040)
Preferred stock dividend	964	1,027	2,915	1,440
Net (loss) income available to common stockholders	$ (3,898)	$ 9,656	$ (6,792)	$ (2,480)
Earnings per share:
Basic weighted average shares outstanding	21,084,878	20,712,860	20,989,737	21,306,118
Basic earnings (loss) per share (in dollars per share)	$ (0.18)	$ 0.47	$ (0.32)	$ (0.12)
Diluted weighted average shares outstanding	21,084,878	25,385,884	20,989,737	21,306,118
Diluted earnings (loss) per share (in dollars per share)	$ (0.18)	$ 0.42	$ (0.32)	$ (0.12)

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Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Income Statement [Abstract]
Defined benefit pension plan gain, net of tax expense of $419, $320, $1,257 and $959, respectively	$ 419	$ 320	$ 1,257	$ 959
Cash flow hedge loss, net of tax benefit of $33, $0, $149 and $0, respectively	$ 33	$ 0	$ 149	$ 0

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Jul. 02, 2016	Jul. 04, 2015
Cash flows from operating activities
Net loss	$ (3,877)	$ (1,040)
Loss from discontinued operations, net of tax	46	4
Adjustments to reconcile net loss to net cash provided by (used in) continuing operations
Depreciation and amortization	6,025	6,646
Amortization of debt costs	2,232	2,283
Share-based compensation	12,717	526
Unfunded portion of Phantom Equity Plan	1,355	0
Equity in net income of affiliate	(1,494)	(1,049)
Loss on disposal of fixed assets	29	495
Deferred taxes	8,461	(4,096)
Provision for bad debt	(5)	134
Amortization of deferred actuarial pension losses	3,590	2,739
Changes in assets and liabilities:
Accounts receivable	(6,003)	(12,734)
Inventories	(52,232)	(35,220)
Other assets	(6,055)	(592)
Accounts payable	50,332	24,049
Accrued expenses, pension and other liabilities	3,870	(13,778)
Cash dividend from equity investment in affiliate	2,316	0
Total adjustments	25,138	(30,597)
Net cash provided by (used in) continuing operations	21,307	(31,633)
Net cash used in discontinued operations	(46)	(4)
Total cash provided by (used in) operating activities	21,261	(31,637)
Cash flows from investing activities
Cash paid for fixed assets	(6,511)	(3,427)
Total cash used in investing activities	(6,511)	(3,427)
Cash flows from financing activities
Repayments under the senior term loan	(33,812)	(8,813)
Cash paid for capital leases	(168)	(114)
Cash paid for debt costs	(1,117)	(2,872)
Contributions from former majority stockholder	15,616	13,550
Payment of dividends on preferred stock	(1,917)	0
Cash paid for employee taxes on vested restricted shares	(3,511)	0
Total cash (used in) provided by financing activities	(24,909)	1,751
Change in cash and cash equivalents	(10,159)	(33,313)
Cash and cash equivalents at beginning of period	52,861	61,137
Cash and cash equivalents at end of period	42,702	27,824
Non-cash investing and financing activity
Capital expenditures funded by capital lease borrowings	100	0
Change in accounts payable for capital additions to property, plant and equipment	(220)	248
Common stock dividend on Series A preferred stock (market value of common shares)	998	1,239
Non-cash reverse merger activity
Issuance of Common Stock	0	25,000
Issuance of Series A Preferred Stock	0	50,000
Shares assumed by legal acquirer	0	42,492
Repurchase of Common Stock from Traxis	$ 0	$ 100,000

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Nature of Business and Basis of Presentation

9 Months Ended

Jul. 02, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business and Basis of Presentation

1. Nature of Business and Basis of Presentation

Nature of Business

On February 24, 2015, Hennessy Capital Acquisition Corp. ("HCAC") consummated its business combination (the “Business Combination”), pursuant to which HCAC acquired all of the outstanding capital stock of School Bus Holdings, Inc. (“SBH”) from The Traxis Group B.V. (the “Seller” or "Traxis"). SBH operates its business of designing and manufacturing school buses through subsidiaries and under the Blue Bird Corporation (“Blue Bird”) name. In the Business Combination, the total purchase price was paid in a combination of cash ($100 million) and in shares of HCAC’s Common Stock (12,000,000 shares valued at a total of $120 million). In connection with the closing of the Business Combination, we changed our name from Hennessy Capital Acquisition Corp. to Blue Bird Corporation. Upon consummation of the Business Combination, SBH became a wholly-owned subsidiary of Blue Bird Corporation and SBH’s direct and indirect subsidiaries became indirect subsidiaries of our parent corporation.

Pursuant to, and subject to the terms of, a Purchase and Sale Agreement, dated as of May 26, 2016 (the “Purchase Agreement”), by and among Traxis, ASP BB Holdings LLC, a Delaware limited liability company (“ASP”), and the Company, Traxis agreed to sell and ASP agreed to purchase all of the 12,000,000 shares of common stock, par value $0.0001 (the “Common Stock”), of the Company owned by Traxis (the “Transaction Shares”). Subject to the terms and conditions set forth in the Purchase Agreement, ASP acquired 7,000,000 Transaction Shares at an initial closing on June 3, 2016 for an amount in cash equal to $10.10 per share and 5,000,000 Transaction Shares at a second closing on June 8, 2016 for an amount in cash equal to $11.00 per share, for an aggregate purchase price of $125.7 million. There were no proceeds to the Company from this transaction. The sale of Transaction Shares triggered a phantom equity compensation payment as further discussed in Note 12. This payment was primarily funded by Traxis and not by the Company.

Blue Bird Body Company, a wholly-owned subsidiary of Blue Bird, 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 Blue Bird’s sales are made to an independent distributor network, which in turn sells buses to ultimate end users. We are headquartered in Fort Valley, Georgia. References in these notes to financial statements to “Blue Bird”, the “Company,” “we,” “our,” or “us” refer to Blue Bird Corporation and its wholly-owned subsidiaries, unless the context specifically indicates otherwise.

Basis of Presentation

The accompanying 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 Company uses the equity method to account for its investment in an entity that is not controlled, and where the Company has the ability to exercise significant influence over operating and financial policies. Consolidated net (loss) income includes the Company’s share of net income in this entity. The difference between consolidation and the equity method impacts certain of the Company’s financial ratios because of the presentation of the detailed line items reported in the condensed consolidated financial statements for consolidated entities, compared to a two-line presentation of “Equity investment in affiliate” on the Consolidated Balance Sheets and “Equity in net income of non-consolidated affiliate” on the Consolidated Statements of Operations and Comprehensive Income (Loss). The third quarter 2015 presentation of Equity in net income of non-consolidated affiliate has been reclassified from the previous presentation to conform to the current year presentation. The previous presentation showed the amounts in the three and nine months ended July 4, 2015 net of tax expense of $0.2 million and $0.4 million, respectively. Those tax amounts are now included in "income tax expense" on our Consolidated Statement of Operations and Comprehensive Income (Loss).

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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. In fiscal year 2016 there are a total of 52 weeks. For fiscal year 2016 the three and nine months ended were 13 weeks and 39 weeks, respectively. For fiscal year 2015 the three and nine months ended were 13 weeks and 40 weeks, respectively.

In the opinion of management, all adjustments considered necessary for a fair statement 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 generally accepted accounting principles for complete financial statements.

The Condensed Consolidated Balance Sheet data as of October 3, 2015 was derived from the Company’s audited financial statements but do not include all disclosures required by generally accepted accounting principles. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes for the fiscal year ended October 3, 2015 as set forth in the Company's 2015 Form 10-K filed on December 15, 2015.

The Business Combination was accounted for as a reverse acquisition since immediately following completion of the transaction the sole stockholder of SBH immediately prior to the Business Combination maintained effective control of Blue Bird Corporation, the post-combination company.  For accounting purposes, SBH is deemed the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of SBH (i.e., a capital transaction involving the issuance of stock and payment of cash by HCAC for the stock of SBH). Accordingly, the consolidated assets, liabilities and results of operations of SBH are the historical financial statements of Blue Bird Corporation, and HCAC assets, liabilities and results of operations are consolidated with SBH beginning on the acquisition date. No step-up in basis of intangible assets or goodwill was recorded in this transaction.  We have effected this treatment through opening stockholders' deficit by adjusting the number of our common shares outstanding.  Other than transaction costs paid and a contribution from our majority stockholder for payment of management incentive compensation related to the transaction, the transaction was primarily non-cash and involved exchanges of consideration and equity between our majority stockholder and HCAC and its related entities.

Please see Note 11 for discussion of a revision to previously reported earnings per share.

Use of Estimates and Assumptions

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“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 amounts of revenues and expenses. For example, significant management judgments are required in determining excess, obsolete, or unsalable inventory, allowance for doubtful accounts, potential impairment of long-lived assets, goodwill and intangibles, the accounting for self-insurance reserves, warranty reserves, pension obligations, income taxes, environmental liabilities and contingencies. Future events 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.

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Summary of Significant Accounting Policies and Recently Issued Accounting Standards

9 Months Ended

Jul. 02, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies and Recently Issued Accounting Standards

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

The Company’s significant accounting policies are described in the Company’s Form 10-K, filed with the SEC on December 15, 2015.

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, 2016 other than those described below.

Derivative Instruments

We utilize derivative instruments to manage certain exposures to changes in foreign currency exchange rates. The fair values of all derivative instruments are recognized as assets or liabilities at the balance sheet date. Changes in the fair value of these derivative instruments are recognized in our operating results or included in other comprehensive income (loss), depending on whether the derivative instrument is a fair value or cash flow hedge and whether it qualifies for hedge accounting treatment.

If realized, gains and losses on derivative instruments are recognized in our Consolidated Statement of Operations in the line item that reflects the underlying exposure that was hedged. The exchange of cash, if any, associated with derivative transactions is classified in the Consolidated Statements of Cash Flows in the same category as the cash flows from the items subject to the economic hedging relationships.

Recently Issued Accounting Standards

ASU 2016-13 — In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for losses. The guidance is effective for fiscal years beginning after December 15, 2019 with early adoption permitted with fiscal years beginning after December 15, 2018 and is not expected to have a significant impact on the Company's financial position, results of operations, or disclosures.

ASU 2016-12 & 2016-10 — In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, and in April 2016 issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, both of which provide further clarification to be considered when implementing ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The ASUs are effective concurrently with ASU 2014-09, which is effective for the Company in fiscal 2019. The Company is currently evaluating the impact this guidance will have on the financial statements and related disclosures.

ASU 2016-09 — In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies the accounting for some aspects of share-based payment transactions, including the income tax treatment of excess tax benefits and deficiencies, forfeitures, classification of share-based awards as either equity or liabilities, and classification in the statement of cash flows for certain share-based transactions related to tax benefits and payments. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods, and early adoption is permitted. The Company has elected to early adopt ASU 2016-09 beginning with the second quarter ended April 2, 2016, resulting in windfall and shortfall taxes from vested awards to be recorded as income tax expense or benefit in the income statement as well as classified with income tax transactions in the operating section of the cash flow statement. Additionally, employee taxes paid on shares withheld for tax-withholding purposes were recognized as a financing activity in the cash flow statement.

ASU 2015-17— In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities to be classified as non-current on the balance sheet. The standard is effective for public companies for annual reporting periods beginning after December 15, 2016, and interim periods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. At July 2, 2016, the adoption of this ASU would result in the reclassification of approximately $7.4 million from current assets to non-current assets. Future impact will be driven by the composition of our deferred tax accounts.

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Supplemental Financial Information

9 Months Ended

Jul. 02, 2016

Condensed Financial Information [Abstract]

Supplemental Financial Information

3. Supplemental Financial Information

Inventory

The Company values inventories at the lower of cost or market value. The Company uses a standard costing methodology, which approximates cost on a first-in, first-out basis. The Company reviews the standard costs of raw materials, work-in-process and finished goods inventory on a periodic basis to ensure that its inventories approximate current actual costs. Manufacturing cost includes raw materials, direct labor and manufacturing overhead. The following table presents the components of inventory at the dates indicated:

(in thousands of dollars)	July 2, 2016		October 3, 2015
Raw materials	$	67,714	$	43,471
Work in process	30,369		2,658
Finished goods	3,329		3,051
Total inventory	$	101,412	$	49,180

Product Warranties

The Company’s products are generally warranted against defects in material and workmanship for a period of one to five years. A provision for estimated warranty costs is recorded in the year the unit is sold. The methodology to determine warranty reserve calculates average expected warranty claims using warranty claims by body type, by month, over the life of the bus, which is then multiplied by remaining months under warranty, by warranty type. Management believes the methodology provides for accuracy in addressing reserve requirements. Actual claims incurred could differ from the original estimates, requiring future adjustments.

The Company also sells extended warranties related to its products. Revenue related to these contracts is recognized on a straight-line basis over the contract period and costs thereunder are expensed as incurred. All warranty expenses are recorded in the cost of goods sold line in the Consolidated Statements of Operations and Comprehensive Income (Loss). The current methodology to determine short-term extended warranty income reserve is based on twelve months of the remaining warranty value for each effective extended warranty at the balance sheet date.

The following table reflects activity in accrued warranty cost (current and long-term portion combined) for the periods presented:

	Three Months Ended						Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Balance at beginning of period	$	16,768		$	15,262		$	17,661		$	15,559
Add current period accruals	3,691			3,014			7,195			6,936
Current period reductions of accrual	(1,956		)	(1,993		)	(6,353		)	(6,212		)
Balance at end of period	$	18,503		$	16,283		$	18,503		$	16,283

Extended Warranty Income

The following table reflects activity in deferred warranty income, for the sale of extended warranties of two to five years, for the periods presented:

	Three Months Ended						Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Balance at beginning of period	$	14,060		$	12,340		$	14,145		$	12,003
Add current period deferred income	2,952			1,939			5,446			4,445
Current period recognition of income	(1,261		)	(1,085		)	(3,840		)	(3,254		)
Balance at end of period	$	15,751		$	13,194		$	15,751		$	13,194

Self-Insurance

The following table reflects total accrued self-insurance liability, comprised of workers compensation and health insurance related claims, at the dates indicated:

(in thousands of dollars)	July 2, 2016		October 3, 2015
Current portion	$	3,444	$	3,534
Long-term portion	2,884		2,786
Total accrued self-insurance	$	6,328	$	6,320

The current and long term portions of the accrued self-insurance liability are reflected in accrued expenses and other liabilities, respectively, on the balance sheet.

Shipping and Handling Revenues

Shipping and handling revenues represent costs billed to customers and are presented as net sales. Shipping and handling costs incurred are included in cost of goods sold. Shipping and handling revenues were $6.2 million and $4.5 million for the three months ended July 2, 2016 and July 4, 2015, respectively, and $11.5 million and $10.6 million for the nine months ended July 2, 2016 and July 4, 2015, respectively. The related cost of goods sold was $5.7 million and $4.0 million for the three months ended July 2, 2016 and July 4, 2015, respectively, and $10.1 million and $9.4 million for the nine months ended July 2, 2016 and July 4, 2015, respectively.

Pension Expense

Components of net periodic pension benefit cost were as follows for the periods presented:

	Three Months Ended						Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Interest cost	$	1,411		$	1,426		$	4,232		$	4,280
Expected return on plan assets	(1,528		)	(1,599		)	(4,584		)	(4,798		)
Amortization of prior loss	1,196			913			3,590			2,739
Net periodic benefit cost	$	1,079		$	740		$	3,238		$	2,221
Amortization of prior loss, recognized in other comprehensive income	1,196			913			3,590			2,739
Total recognized in net periodic pension benefit cost and other comprehensive income	$	(117	)	$	(173	)	$	(352	)	$	(518	)

Equity Investment in Affiliate

The Company holds a 50% equity interest in Micro Bird Holdings, Inc. (“Micro Bird”), and accounts for Micro Bird under the equity method of accounting. The carrying amount of the equity method investment is adjusted for the Company’s proportionate share of net earnings and losses and any dividends received. At July 2, 2016 and October 3, 2015, the Company had an investment of $11.6 million and $12.5 million, respectively. In the third quarter of 2016, Micro Bird paid a dividend to all common stockholders and the Company received $2.3 million as a result of this distribution, which was net of required withholding taxes. The dividend reduced the carrying value of our investment and is presented as a cash inflow in the operating section of our Condensed Consolidated Statement of Cash Flows.

In recognizing the Company’s 50% portion of Micro Bird net income, the Company recorded $1.5 million and $1.0 million in Equity in net income of non-consolidated affiliate for the nine months ended July 2, 2016 and July 4, 2015, respectively. Summarized unaudited financial information for these periods for Micro Bird is as follows:

	Nine Months Ended
(in thousands of dollars)	July 2, 2016		July 4, 2015
Revenues	$	64,931	$	51,126
Gross profit	9,407		7,067
Operating income	4,273		3,162
Net income	3,034		2,385

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Debt

9 Months Ended

Jul. 02, 2016

Debt Disclosure [Abstract]

Debt

4. Debt

In June 2014, Blue Bird Body Company, a wholly-owned subsidiary of the Company, executed a $235.0 millionsix year senior term loan provided by Societe Generale (the “Senior Credit Facility”), which acts as the administrative agent, SG Americas Securities LLC, Macquarie Capital (USA) INC., and Fifth Third Bank as joint book runners and Joint Lead Arrangers. The Senior Credit Facility amortizes at 5% per annum payable quarterly which started on January 3, 2015. The interest rate on the Senior Credit Facility is an election of either base rate plus 450 basis points or LIBOR (floor of 1 point) plus 550 basis points, and was 6.5% at both July 2, 2016 and October 3, 2015. Blue Bird also has access to a $60.0 million revolving senior credit facility provided by Societe Generale (the “Senior Revolving Credit Facility”), which acts as the administrative agent, SG Americas Securities LLC and Macquarie Capital (USA) INC. The Senior Revolving Credit Facility carries an elective interest rate of either the base rate plus 450 basis points or LIBOR plus 550 basis points.Blue Bird may request letters of credit through its Senior Revolving Credit Facility up to a $15.0 million sub limit. The commitment fee on unused amounts of the Senior Revolving Credit Facility is 0.5%.

The Senior Credit Facility and the Senior Revolving Credit Facility were executed on June 27, 2014, amended on September 28, 2015, and further amended on June 6, 2016. The Senior Credit Facility has a six year term and the Senior Revolving Credit Facility originally had a five year term but was amended to a six year term in September 2015. The Senior Credit Facility was also amended in September 2015 to permit the Company to pay its preferred share dividends in cash, to permit the Company to tender cash for its existing warrants from available amounts (as further defined in the credit agreement), to amend the definition of consolidated EBITDA to allow an add back of third party expenses related to being a public company, to add Blue Bird Corporation as a guarantor, and to otherwise amend various restricted payment requirements. An amendment in June 2016 changed the definition of Sponsor, as defined in the Credit Agreement, contingent upon a change in control. With the June 2016 amendment, the Company incurred $1.1 million in lender fees which were capitalized to the debt and will be amortized to interest expense over the remaining life of the loan, resulting in an increase in the weighted-average annual effective interest rate.

Debt consisted of the following at the dates indicated:

(in thousands of dollars)	July 2, 2016		October 3, 2015
2020 senior term loan, net of discount of $10,111 and $11,082, respectively	$	154,327	$	187,168
Less: Current portion of long-term debt	11,750		11,750
Long-term debt, net of current portion	$	142,577	$	175,418

At July 2, 2016 and October 3, 2015, $164.4 million and $198.3 million, respectively, were outstanding on this indebtedness. On June 30, 2016, the Company made a voluntary $25.0 million prepayment of principal in addition to the regular payments due.

At July 2, 2016 and October 3, 2015, the Senior Credit Facility's weighted-average annual effective interest rate was 8.3% and 7.8%, respectively, which includes amortization of the discount and deferred charges.

Our term loan is recognized on the Company’s balance sheet at its unpaid principal balance, and is not subject to fair value measurement; however, given that the loan carries a variable rate, the Company estimates that the unpaid principal balance of the term loan would approximate its fair value. If measured at fair value in the financial statements, the Company’s term loan would be classified as Level 2 in the fair value hierarchy.

No borrowings were outstanding on the Senior Revolving Credit Facility at July 2, 2016; however, since there were $5.1 million of Letters of Credit outstanding on July 2, 2016, the Company would have been able to borrow $54.9 million on the revolving line of credit.

Interest expense on all indebtedness was $4.0 million and $4.6 million for the three months ended July 2, 2016 and July 4, 2015, respectively, and $12.7 million and $14.5 million for the nine months ended July 2, 2016 and July 4, 2015, respectively.

The schedules of remaining principal maturities for the Senior Credit Facility and the Senior Revolving Credit Facility for the next five fiscal years are as follows:

(in thousands of dollars)
Year	Principal Payments
2016	2,938
2017	11,750
2018	11,750
2019	11,750
2020	126,250
Total remaining principal payments	$	164,438

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Income Taxes

9 Months Ended

Jul. 02, 2016

Income Tax Disclosure [Abstract]

Income Taxes

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 which are required to be discretely recognized within the current interim period. The effective tax rates in the periods presented are largely based upon the forecast pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business, primarily the United States.

As a result of the Business Combination a change in the ownership of the Company occurred which, pursuant to the Internal Revenue Code, will limit on an annual basis the Company's ability to utilize its U.S. Federal NOLs and U.S. Federal tax credits. The Company's NOLs and credits will continue to be available to offset taxable income and tax liabilities (until such NOLs and credits are either used or expire) subject to the Section 382 annual limitation. If the annual limitation amount is not fully utilized in a particular tax year, then the unused portion from that particular tax year will be added to the annual limitation in subsequent years.

The effective tax rate for the three month period ended July 2, 2016 was (32.5)%, which differed from the statutory federal income tax rate of 35%, primarily from discrete items in the period, including interest and penalties on uncertain tax positions and a net tax shortfall from the vesting of share-based compensation awards pursuant to the adoption of ASU 2016-09 (refer to Note 2), which were partially offset by the benefit from current period operating losses. The effective tax rate for the three month period ended July 4, 2015 was 30.8% and differed from the statutory federal income tax rate of 35%, primarily as a result of the benefit from the domestic production activities deduction and partially offset by an uncertain tax position for state tax expense.

The effective tax rate for the nine month period ended July 2, 2016 was (63.5)% and differed from the statutory federal income tax rate of 35% primarily from discrete items increasing tax expense in the year to date period, including a change in investor tax on our non-consolidated affiliate income, the application of tax credits claimed as offsets against our payroll tax liabilities, interest and penalties on uncertain tax positions, the vesting of share-based compensation awards pursuant to the adoption of ASU 2016-09 (refer to Note 2), partially offset by recording the impact of new tax legislation. These discrete items were partially offset by the benefit from current period operating losses. The effective tax rate for the nine month period ended July 4, 2015 was (0.4)% and differed from the statutory federal income tax rate of 35% primarily as a result of the benefit from the domestic production activities deduction, state tax items and other permanent items and offset in part by interest and penalties on uncertain tax positions and transaction costs.

Of the total amount of gross unrecognized tax benefits at July 2, 2016 and October 3, 2015, $6.4 million and $6.4 million, respectively, would affect the Company’s effective tax rate if realized. The Company’s liability arising from uncertain tax positions is recorded in other non-current liabilities in the Condensed Consolidated Balance Sheets.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. The accrued interest and penalties for the nine months ended July 2, 2016 and July 4, 2015, were $0.9 million and $0.8 million, respectively.

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Guarantees, Commitments and Contingencies

9 Months Ended

Jul. 02, 2016

Commitments and Contingencies Disclosure [Abstract]

Guarantees, Commitments and Contingencies

6. Guarantees, Commitments and Contingencies

Litigation

At July 2, 2016, 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.

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 environmental matters will not have a material adverse effect on the Company’s financial statements.

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Segment Information

9 Months Ended

Jul. 02, 2016

Segment Reporting [Abstract]

Segment Information

7. Segment Information

We manage our business in two operating segments, which are also our reportable segments. The Bus segment includes the manufacturing and assembly of school buses to be sold to a variety of customers across the United States, Canada and in international markets. The Parts segment consists primarily of the purchase of parts from third parties to be sold to dealers within the Company’s network. Financial information is reported on the basis that it is used internally by the chief operating decision maker (the “CODM”) in evaluating segment performance and deciding how to allocate resources. The Chief Executive Officer of the Company has been identified as the CODM. Management evaluates the segments based primarily upon revenues and gross profit. A measure of assets is not applicable, as segment assets are not regularly reviewed by the CODM for evaluating performance or allocating resources. The tables below present segment net sales and gross profit for the periods presented:

Net sales

	Three Months Ended				Nine Months Ended
(in thousands of dollars)	July 2, 2016		July 4, 2015		July 2, 2016		July 4, 2015
Bus	$	309,432	$	248,487	$	604,832	$	569,693
Parts	13,623		14,166		40,764		41,811
Segment net sales	$	323,055	$	262,653	$	645,596	$	611,504

Gross profit

	Three Months Ended				Nine Months Ended
(in thousands of dollars)	July 2, 2016		July 4, 2015		July 2, 2016		July 4, 2015
Bus	$	41,594	$	31,670	$	75,108	$	63,915
Parts	5,214		4,992		15,567		15,255
Segment gross profit	$	46,808	$	36,662	$	90,675	$	79,170

The following table is a reconciliation of segment gross profit to consolidated income (loss) before income taxes for the periods presented:

	Three Months Ended						Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Segment gross profit	$	46,808		$	36,662		$	90,675		$	79,170
Adjustments:
Selling, general and administrative expenses	(45,505		)	(17,404		)	(81,329		)	(66,813		)
Interest expense	(4,040		)	(4,577		)	(12,736		)	(14,473		)
Interest income	7			5			118			39
Other income, net	—			(33		)	16			—
(Loss) income before income taxes	$	(2,730	)	$	14,653		$	(3,256	)	$	(2,077	)

Sales are attributable to geographic areas based on customer location and were as follows for the periods presented:

	Three Months Ended				Nine Months Ended
(in thousands of dollars)	July 2, 2016		July 4, 2015		July 2, 2016		July 4, 2015
United States	$	298,532	$	257,522	$	591,549	$	565,854
Canada	21,642		4,585		46,261		42,032
Rest of world	2,881		546		7,786		3,618
Total net sales	$	323,055	$	262,653	$	645,596	$	611,504

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Business Combination

9 Months Ended

Jul. 02, 2016

Business Combinations [Abstract]

Business Combination

8. Business Combination

Background and Summary

Blue Bird Corporation was originally formed in September 2013 as a special purpose acquisition company, or SPAC, under the name Hennessy Capital Acquisition Corp. (“HCAC” or “Hennessy Capital”) for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving HCAC and one or more businesses. As a SPAC, HCAC was a shell (blank check) company that had no operations and whose purpose was to go public with the intention of merging with or acquiring a company with the proceeds of the SPAC’s initial public offering (IPO). Until the consummation of the Business Combination (as defined below), HCAC’s securities were traded on The NASDAQ Stock Market (“Nasdaq”) under the ticker symbols “HCAC,” “HCACU” and “HCACW”.

On September 21, 2014, Hennessy Capital Partners I LLC (the “HCAC Sponsor”) signed a purchase agreement (the “Purchase Agreement”) with the The Traxis Group B.V. ("Seller") to acquire all outstanding stock of School Bus Holdings, Inc ("SBH"). The material terms and conditions of the Purchase Agreement were described in Hennessy Capital’s definitive proxy statement filed with the SEC on January 20, 2015, which was supplemented in additional proxy statement materials filed with the SEC on February 10, 2015.

On February 24, 2015, HCAC consummated its business combination (the “Business Combination”), pursuant to which HCAC acquired all of the outstanding capital stock of SBH from the Seller. SBH operates its business of designing and manufacturing school buses through subsidiaries and under the “Blue Bird” name. In the Business Combination, the total purchase price was paid in a combination of cash ($100 million) and shares of HCAC’s Common Stock (12,000,000 shares valued at a total of $120 million). In connection with the closing of the Business Combination, we changed our name from Hennessy Capital Acquisition Corp. to Blue Bird Corporation.

The cash purchase price in the Business Combination was funded through amounts that remained in HCAC’s trust after the redemption of all shares that were offered for redemption pursuant to HCAC’s certificate of incorporation, together with $75 million of funds invested through private placements of Common Stock and Series A Convertible Preferred Stock that occurred simultaneously with the consummation of the Business Combination.

Preferred Stock Subscription Agreement

Pursuant to a preferred stock subscription agreement entered into in February 2015, an investor agreed to purchase from Hennessy Capital, concurrent with the consummation of the closing of the Business Combination, 400,000 shares of Series A Convertible Preferred Stock for gross proceeds of approximately $40 million, subject to a possible increase to up to 500,000 shares or approximately $50 million (the “PIPE Investment”).

Also in February 2015, Hennessy Capital entered into a subscription agreement with four funds managed by Coliseum Capital Management, LLC (the “Common/Preferred Investor”) pursuant to which the Common/Preferred Investor agreed to purchase $25 million worth of shares of Hennessy Capital common stock, through (i) open market or privately negotiated transactions with third parties, at a purchase price of up to $10.00 per share, (ii) a private placement with consummation to occur concurrently with that of the Business Combination at a purchase price of $10.00 per share or (iii) a combination thereof, and further agreed to purchase 100,000 shares of Series A Convertible Preferred Stock pursuant to a private placement for gross proceeds of approximately $10.0 million to occur concurrently with that of the Business Combination.

Business Combination Approval and Consummation

On February 23, 2015, the Business Combination was approved by Hennessy Capital’s stockholders. On February 24, 2015, the parties consummated the Business Combination. The total purchase price was paid in a combination of cash ($100 million) and shares of the registrant’s common stock (12,000,000 shares valued at a total of $120 million). In connection with the closing of the Business Combination, the Company redeemed a total of 7,494,700 shares of its common stock pursuant to the terms of the Company’s amended and restated certificate of incorporation, resulting in a total cash payment from Hennessy Capital’s trust account to redeeming stockholders of $75 million.

On February 24, 2015, at the closing of the Business Combination, the PIPE Investment investor purchased 400,000 shares of the Company’s Series A Convertible Preferred Stock from the Company for aggregate gross proceeds of approximately $40 million and the Common/Preferred Investor purchased 100,000 shares of the Company’s Series A Convertible Preferred Stock from the Company for aggregate gross proceeds of approximately $10 million. In addition, at the closing, the Company issued to another investor 102,750 shares referenced in the Purchase Agreement as “Utilization Fee Shares”, and the Common/Preferred Investor purchased 2,500,000 shares of the Company’s common stock from the Company for aggregate gross proceeds of $25 million.

Registration Rights Agreement

On February 24, 2015, the Company entered into a registration rights agreement with the Seller and other investors (the “Registration Rights Agreement”). The parties were granted registration rights that obligate Blue Bird Corporation to register for resale, among other shares, all or any portion of the shares of the Company’s capital stock that were issued by the Company in connection with the Business Combination (including the shares of common stock underlying the Series A Preferred Stock).

Under the Registration Rights Agreement, the parties also hold “piggyback” registration rights exercisable at any time that allow them to include the shares of Blue Bird Corporation common stock that they own in any public offering of equity securities initiated by us (other than those public offerings pursuant to registration statements on forms that do not permit registration for resale by them). The “piggyback” registration rights are subject to proportional cutbacks based on the manner of such offering and the identity of the party initiating such offering.

Blue Bird Corporation will pay all expenses incidental to its obligations under the Registration Rights Agreement, including any underwriting discounts and commissions payable by the parties to that agreement in connection with the sale of their shares under the Registration Rights Agreement.

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Stockholders' Deficit

9 Months Ended

Jul. 02, 2016

Equity [Abstract]

Stockholders' Deficit

9. Stockholders’ Deficit

Authorized and Outstanding Stock

Our charter authorizes the issuance of 110 million shares, consisting of 100 million shares of common stock, $0.0001 par value per share, and 10 million shares of preferred stock, $0.0001 par value, 2 million of which have been designated as Series A Convertible Preferred Stock (“Preferred” or "Convertible Preferred Stock") and the remaining 8 million of which are undesignated. The outstanding shares of our Series A Convertible Preferred Stock and common stock are duly authorized, validly issued, fully paid and non-assessable.

Common Stock

On February 24, 2015, we sold 2,500,000 shares of common stock at $10.00 per share in a private placement. Proceeds from the sale were part of the consideration received by our majority owner as part of a recapitalization and reverse acquisition completed in the Business Combination. We also issued (i) 12,000,000 shares of common stock to the Seller upon consummation of the Business Combination, and (ii) 102,750 shares of common stock as a utilization fee to another investor. Please see Note 8 for a further discussion of these transactions.

Convertible Preferred Stock

By the filing of a Certificate of Designations (the “Certificate of Designations”) on February 24, 2015, we have designated 2.0 million shares of preferred stock as Series A Convertible Preferred Stock and, on February 24, 2015, we issued 500,000 shares of such series. Proceeds from the sale were part of the consideration received by our majority owner as part of a recapitalization and reverse acquisition completed in the Business Combination. Please see Note 8 for a further discussion of the transaction.

Each share of Series A Convertible Preferred Stock is convertible, at the holder’s option at any time, initially into 8.6 shares of our common stock (which is equivalent to an initial conversion price of approximately $11.59 per share), subject to specified adjustments as set forth in the Certificate of Designations. A Fundamental Change, as defined in the Certificate of Designations, was triggered on June 8, 2016 in connection with the Second Closing of the Transaction Shares which allowed the preferred holders to convert on an adjusted basis for a designated conversion period. None of the Preferred shareholders elected to convert within the designated conversion period. In addition, beginning on or after the third anniversary of the initial issuance date, we have the right, at our option, to cause all outstanding shares of the Series A Convertible Preferred Stock to be automatically converted into shares of common stock under certain circumstances and, if our Company undergoes certain fundamental changes, the Series A Convertible Preferred Stock will automatically be converted into common stock on the effective date of such fundamental change.

Holders of Series A Convertible Preferred Stock are entitled to receive when, as and if declared by the Board, dividends which are payable at a rate of 7.625% per annum. Unless prohibited by applicable law, the Board shall not fail to declare such dividends on the Series A Convertible Preferred Stock. Dividends accrue for all fiscal periods the Series A Convertible Preferred Stock is outstanding. The dividends are payable in cash, common shares, preferred shares, or any combination thereof. The form of dividend payment is in the sole discretion of the Company. During 2016, we issued a common stock dividend totaling 95,934 shares of common in the first quarter and paid cash dividends in our second and third fiscal quarters to the holders of our Series A Convertible Preferred Stock. As we are in an accumulated deficit position, we reduce Additional paid-in capital for dividend payments made in shares of common stock at the same amount that we record Additional paid-in capital for the issuance of the common stock, which results in no net change to our Stockholders' Deficit. The fair value of all dividends are reflected as deductions from net loss to calculate net loss available to common stockholders in our Condensed Consolidated Statement of Operations.

In the event of any liquidation, winding-up or dissolution of the Company, whether voluntary or involuntary, each holder of shares of Series A Convertible Preferred Stock shall be entitled to receive and to be paid out of the assets of the Company available for distribution to its stockholders the Liquidation Preference ($100.00 per share) plus all accumulated and unpaid dividends in respect of the Series A Convertible Preferred Stock (whether or not declared) to the date fixed for liquidation, winding-up or dissolution in preference to the holders of, and before any payment or distribution is made, on any other class of stock.

Warrants

At July 2, 2016, there were a total of 11,500,000 warrants outstanding.

Public Warrants

The Company has issued warrants to purchase its common stock which were originally issued as part of units in Hennessy Capital’s initial public offering (the “Public Warrants”). Each Public Warrant entitles the registered holder to purchase one-half of one share of our common stock at a price of $5.75 per one-half of one share ($11.50 per whole share), subject to adjustment. Public Warrants may be exercised only for a whole number of shares of our Common Stock. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will expire on February 24, 2020, five years after the completion of the Business Combination, or earlier upon redemption or liquidation. We may call the Public Warrants for redemption if, and only if, the reported last sale price of our common stock equals or exceeds $24.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date we send the notice of redemption to the Warrant holders. The Public Warrants are listed on the OTCQB market under the symbol "BLBDW."

Placement Warrants

The Company issued warrants to purchase its common stock in connection with a private placement which occurred concurrently with Hennessy Capital’s initial public offering (the “Placement Warrants”). The Placement Warrants are identical to the Public Warrants sold in the initial public offering, except that, if held by the HCAC Sponsor or its permitted assignees, they (a) may be exercised for cash or on a cashless basis; and (b) are not subject to being called for redemption. Each such warrant entitles the holder to purchase one-half of one share of our Common Stock at a price of $5.75 per one-half of one share ($11.50 per whole share), subject to adjustment.

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Foreign Exchange Contracts

9 Months Ended

Jul. 02, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Foreign Exchange Contracts

10. Foreign Exchange Contracts

During the second quarter of fiscal 2016, we entered into a foreign exchange swap as an economic hedge of anticipated cash flows denominated in Canadian Dollars. The contract was entered into to protect against the risk that the eventual cash flows resulting from certain transactions would be affected by changes in exchange rates between the U.S. Dollar and the Canadian Dollar. The notional amount of the swap entered into was $10.8 million, and it matures on January 31, 2017. The foreign exchange contract qualifies for hedge accounting and has been designated as a cash flow hedge with the effective portion of the gain or loss on the derivative instrument recorded in other comprehensive income until the underlying transaction occurs. Once the anticipated transaction occurs, the gain or loss on the swap is recorded in current period earnings on the Consolidated Statements of Operations and Comprehensive Income (Loss).

The fair value of the foreign exchange contract is based on the forward contract rate, which classifies as a Level 2 fair value measurement. At July 2, 2016, the fair value of the foreign exchange contract was $(0.4) million and is included in "other current liabilities" on the Consolidated Balance Sheet. The loss recorded through accumulated other comprehensive income was $(0.1) million and $(0.4) million for the three and nine months ended July 2, 2016, respectively.

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Earnings Per Share

9 Months Ended

Jul. 02, 2016

Earnings Per Share [Abstract]

Earnings Per Share

11. Earnings Per Share

We incurred a net loss for the three and nine months ended July 2, 2016 and the nine months ended July 4, 2015. As a result, basic and diluted shares outstanding are equal to each other for those periods due to the exclusion of potentially dilutive shares from the calculation of earnings per share as the effect would be anti-dilutive. For the three and nine months ended July 2, 2016, potentially dilutive shares excluded from the calculation were 4,417,141 and 4,356,032, respectively, and 4,314,064 for the nine months ended July 4, 2015.

The following table presents the earnings per share computation for the period presented when there are dilutive shares:

	Three Months Ended
(in thousands except for share data)	July 4, 2015
Numerator:
Net income	$	10,683
Less: convertible preferred stock dividend	1,027
Net income available to common stockholders	$	9,656
Basic net income per share computation:
Net income available to common stockholders	$	9,656
Weighted average common shares outstanding	20,712,860
Basic net income per share	$	0.47
Diluted net income per share computation:
Net income	$	10,683
Weighted average common shares outstanding	20,712,860
Weighted average dilutive securities, convertible preferred stock	4,314,064
Weighted average dilutive securities, restricted stock	10
Weighted average dilutive securities, warrants	358,950
Weighted average shares and dilutive potential common shares	25,385,884
Diluted net income per share	$	0.42

Immaterial Correction of Earnings Per Share

In connection with the preparation of the consolidated financial statements for the three and six months ended April 2, 2016, an error in the computation and disclosure of basic and diluted earnings per share was identified. Per ASC 260-10-45-11, income per share available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock and the dividends accumulated for the period on cumulative preferred stock from income from continuing operations and from net income. The error resulted from not deducting the amount of cumulative dividends earned, on an accrual basis, by preferred stockholders in the second quarter of 2015 and adjusting for the rollover impact, if any, of cumulative dividends earned in the subsequent periods through the end of fiscal 2015.

We evaluated the materiality of the error in accordance with SEC Staff Accounting Bulletin No. 99, Materiality, SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements, and Accounting Standards Codification 250, Accounting for Changes and Error Corrections, and concluded the error was immaterial to all prior periods impacted. While the adjustments were immaterial, as previously disclosed, the Company has elected to revise its previously reported basic and diluted earnings per share for the comparable periods in fiscal 2015 as presented in the following table:

	July 4, 2015
	Three Months Ended							Nine Months Ended
(in thousands except for share data)	Previous		Adjustment			Corrected		Previous			Adjustment			Corrected
Net income (loss)	$	10,683	$	—		$	10,683	$	(1,040	)	$	—		$	(1,040	)
Preferred stock dividend	1,239		(212		)	1,027		1,239			201			1,440
Net income (loss) available to common shareholders	9,444		212			9,656		(2,279		)	(201		)	(2,480		)
Basic earnings (loss) per share	0.46		0.01			0.47		(0.11		)	(0.01		)	(0.12		)
Diluted earnings (loss) per share	$	0.42	$	—		$	0.42	$	(0.11	)	$	(0.01	)	$	(0.12	)

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Share Based Compensation

9 Months Ended

Jul. 02, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share Based Compensation

12. Share-Based Compensation

All outstanding share-based compensation awards vested upon the change in control which took place on June 8, 2016. Concurrent with the change in control, certain awards not considered as granted under GAAP due to 2017 and 2018 performance criteria which had not been established, were granted and immediately vested with the change in control. Refer to Note 1 for more information on the change in control.

Restricted Stock Awards

The following table summarizes the Company's restricted stock ("RSAs") and restricted stock units ("RSUs") award activity for the period presented:

	Nine Months Ended   July 2, 2016
Restricted Stock Activity	Number of Shares		Weighted-Average Grant Date Fair Value
Balance, beginning of period	521,707		$	13.18
Granted	245,793		10.82
Vested	(767,500	)	12.43
Balance, end of period	—		$	—

Compensation expense, recognized in selling, general and administrative expenses on consolidated statements of operations, for the restricted stock awards was $8.7 million for the nine months ended July 2, 2016. At July 2, 2016, there was no unrecognized compensation cost related to RSA and RSU awards.

Stock Option Awards

The following table summarizes the Company's stock option activity for the period presented:

	Nine Months Ended   July 2, 2016
Stock Option Award Activity	Number of Options	Weighted Average Exercise Price per Share ($)		Weighted Average Contractual Remaining Term (Years)	Aggregate Intrinsic Value ($000)
Outstanding options, beginning of period	1,004,000	$	10.05	9.48	$	197
Granted	143,754	10.27		9.47	234
Outstanding options, end of period (1)	1,147,754	10.08		8.82	1,959
Fully vested and exercisable options, end of period	1,147,754	$	10.08	8.82	$	1,959

(1) There were no stock option forfeitures or exercises during the nine months ended July 2, 2016.

Compensation expense, recognized in selling, general and administrative expenses on consolidated statements of operations, for stock option awards was $4.0 million for the nine months ended July 2, 2016. At July 2, 2016, there was no unrecognized compensation cost related to stock option awards.

The weighted-average grant date fair value of an option award granted during the nine months ended July 2, 2016 was $4.03. The fair value of each option award on the grant date was estimated using the Black-Scholes option pricing model with the following assumptions:

Dividend Yield	0	%
Risk-Free Interest Rate	1.7	%
Expected Volatility	34.0	%
Expected Term (Years)	4.7

Phantom Award

In June 2016, in conjunction with the change in control of the Company's major stockholder, Phantom Award Plan participants earned $17.1 million in compensation which was expensed during the nine month period ended July 2, 2016, of which the participants were paid $15.8 million and was primarily funded by a $15.6 million contribution from our former major stockholder. The additional $1.4 million remains due but unpaid and will also be funded by a contribution from our former majority stockholder.

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Nature of Business and Basis of Presentation (Policies)

9 Months Ended

Jul. 02, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying 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 Company uses the equity method to account for its investment in an entity that is not controlled, and where the Company has the ability to exercise significant influence over operating and financial policies. Consolidated net (loss) income includes the Company’s share of net income in this entity. The difference between consolidation and the equity method impacts certain of the Company’s financial ratios because of the presentation of the detailed line items reported in the condensed consolidated financial statements for consolidated entities, compared to a two-line presentation of “Equity investment in affiliate” on the Consolidated Balance Sheets and “Equity in net income of non-consolidated affiliate” on the Consolidated Statements of Operations and Comprehensive Income (Loss). The third quarter 2015 presentation of Equity in net income of non-consolidated affiliate has been reclassified from the previous presentation to conform to the current year presentation. The previous presentation showed the amounts in the three and nine months ended July 4, 2015 net of tax expense of $0.2 million and $0.4 million, respectively. Those tax amounts are now included in "income tax expense" on our Consolidated Statement of Operations and Comprehensive Income (Loss).

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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. In fiscal year 2016 there are a total of 52 weeks. For fiscal year 2016 the three and nine months ended were 13 weeks and 39 weeks, respectively. For fiscal year 2015 the three and nine months ended were 13 weeks and 40 weeks, respectively.

In the opinion of management, all adjustments considered necessary for a fair statement 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 generally accepted accounting principles for complete financial statements.

The Condensed Consolidated Balance Sheet data as of October 3, 2015 was derived from the Company’s audited financial statements but do not include all disclosures required by generally accepted accounting principles. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes for the fiscal year ended October 3, 2015 as set forth in the Company's 2015 Form 10-K filed on December 15, 2015.

The Business Combination was accounted for as a reverse acquisition since immediately following completion of the transaction the sole stockholder of SBH immediately prior to the Business Combination maintained effective control of Blue Bird Corporation, the post-combination company.  For accounting purposes, SBH is deemed the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of SBH (i.e., a capital transaction involving the issuance of stock and payment of cash by HCAC for the stock of SBH). Accordingly, the consolidated assets, liabilities and results of operations of SBH are the historical financial statements of Blue Bird Corporation, and HCAC assets, liabilities and results of operations are consolidated with SBH beginning on the acquisition date. No step-up in basis of intangible assets or goodwill was recorded in this transaction.  We have effected this treatment through opening stockholders' deficit by adjusting the number of our common shares outstanding.  Other than transaction costs paid and a contribution from our majority stockholder for payment of management incentive compensation related to the transaction, the transaction was primarily non-cash and involved exchanges of consideration and equity between our majority stockholder and HCAC and its related entities.

Use of Estimates and Assumptions

Use of Estimates and Assumptions

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“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 amounts of revenues and expenses. For example, significant management judgments are required in determining excess, obsolete, or unsalable inventory, allowance for doubtful accounts, potential impairment of long-lived assets, goodwill and intangibles, the accounting for self-insurance reserves, warranty reserves, pension obligations, income taxes, environmental liabilities and contingencies. Future events 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.

Derivative Instruments

Derivative Instruments

We utilize derivative instruments to manage certain exposures to changes in foreign currency exchange rates. The fair values of all derivative instruments are recognized as assets or liabilities at the balance sheet date. Changes in the fair value of these derivative instruments are recognized in our operating results or included in other comprehensive income (loss), depending on whether the derivative instrument is a fair value or cash flow hedge and whether it qualifies for hedge accounting treatment.

If realized, gains and losses on derivative instruments are recognized in our Consolidated Statement of Operations in the line item that reflects the underlying exposure that was hedged. The exchange of cash, if any, associated with derivative transactions is classified in the Consolidated Statements of Cash Flows in the same category as the cash flows from the items subject to the economic hedging relationships.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

ASU 2016-13 — In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for losses. The guidance is effective for fiscal years beginning after December 15, 2019 with early adoption permitted with fiscal years beginning after December 15, 2018 and is not expected to have a significant impact on the Company's financial position, results of operations, or disclosures.

ASU 2016-12 & 2016-10 — In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, and in April 2016 issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, both of which provide further clarification to be considered when implementing ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The ASUs are effective concurrently with ASU 2014-09, which is effective for the Company in fiscal 2019. The Company is currently evaluating the impact this guidance will have on the financial statements and related disclosures.

ASU 2016-09 — In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies the accounting for some aspects of share-based payment transactions, including the income tax treatment of excess tax benefits and deficiencies, forfeitures, classification of share-based awards as either equity or liabilities, and classification in the statement of cash flows for certain share-based transactions related to tax benefits and payments. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods, and early adoption is permitted. The Company has elected to early adopt ASU 2016-09 beginning with the second quarter ended April 2, 2016, resulting in windfall and shortfall taxes from vested awards to be recorded as income tax expense or benefit in the income statement as well as classified with income tax transactions in the operating section of the cash flow statement. Additionally, employee taxes paid on shares withheld for tax-withholding purposes were recognized as a financing activity in the cash flow statement.

ASU 2015-17— In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities to be classified as non-current on the balance sheet. The standard is effective for public companies for annual reporting periods beginning after December 15, 2016, and interim periods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. At July 2, 2016, the adoption of this ASU would result in the reclassification of approximately $7.4 million from current assets to non-current assets. Future impact will be driven by the composition of our deferred tax accounts.

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Supplemental Financial Information (Tables)

9 Months Ended

Jul. 02, 2016

Condensed Financial Information [Abstract]

Schedule of Inventory, Current

Manufacturing cost includes raw materials, direct labor and manufacturing overhead. The following table presents the components of inventory at the dates indicated:

(in thousands of dollars)	July 2, 2016		October 3, 2015
Raw materials	$	67,714	$	43,471
Work in process	30,369		2,658
Finished goods	3,329		3,051
Total inventory	$	101,412	$	49,180

Schedule of Product Warranty Liability

The following table reflects activity in accrued warranty cost (current and long-term portion combined) for the periods presented:

	Three Months Ended						Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Balance at beginning of period	$	16,768		$	15,262		$	17,661		$	15,559
Add current period accruals	3,691			3,014			7,195			6,936
Current period reductions of accrual	(1,956		)	(1,993		)	(6,353		)	(6,212		)
Balance at end of period	$	18,503		$	16,283		$	18,503		$	16,283

Extended Warranty Income

The following table reflects activity in deferred warranty income, for the sale of extended warranties of two to five years, for the periods presented:

	Three Months Ended						Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Balance at beginning of period	$	14,060		$	12,340		$	14,145		$	12,003
Add current period deferred income	2,952			1,939			5,446			4,445
Current period recognition of income	(1,261		)	(1,085		)	(3,840		)	(3,254		)
Balance at end of period	$	15,751		$	13,194		$	15,751		$	13,194

Schedule of Self Insurance Reserve

The following table reflects total accrued self-insurance liability, comprised of workers compensation and health insurance related claims, at the dates indicated:

(in thousands of dollars)	July 2, 2016		October 3, 2015
Current portion	$	3,444	$	3,534
Long-term portion	2,884		2,786
Total accrued self-insurance	$	6,328	$	6,320

Schedule of Defined Benefit Plans Disclosures

Components of net periodic pension benefit cost were as follows for the periods presented:

	Three Months Ended						Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Interest cost	$	1,411		$	1,426		$	4,232		$	4,280
Expected return on plan assets	(1,528		)	(1,599		)	(4,584		)	(4,798		)
Amortization of prior loss	1,196			913			3,590			2,739
Net periodic benefit cost	$	1,079		$	740		$	3,238		$	2,221
Amortization of prior loss, recognized in other comprehensive income	1,196			913			3,590			2,739
Total recognized in net periodic pension benefit cost and other comprehensive income	$	(117	)	$	(173	)	$	(352	)	$	(518	)

Equity Method Investments

Summarized unaudited financial information for these periods for Micro Bird is as follows:

	Nine Months Ended
(in thousands of dollars)	July 2, 2016		July 4, 2015
Revenues	$	64,931	$	51,126
Gross profit	9,407		7,067
Operating income	4,273		3,162
Net income	3,034		2,385

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Debt (Tables)

9 Months Ended

Jul. 02, 2016

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

Debt consisted of the following at the dates indicated:

(in thousands of dollars)	July 2, 2016		October 3, 2015
2020 senior term loan, net of discount of $10,111 and $11,082, respectively	$	154,327	$	187,168
Less: Current portion of long-term debt	11,750		11,750
Long-term debt, net of current portion	$	142,577	$	175,418

Schedule of Maturities of Long-term Debt

The schedules of remaining principal maturities for the Senior Credit Facility and the Senior Revolving Credit Facility for the next five fiscal years are as follows:

(in thousands of dollars)
Year	Principal Payments
2016	2,938
2017	11,750
2018	11,750
2019	11,750
2020	126,250
Total remaining principal payments	$	164,438

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Segment Information (Tables)

9 Months Ended

Jul. 02, 2016

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

The tables below present segment net sales and gross profit for the periods presented:

Net sales

	Three Months Ended				Nine Months Ended
(in thousands of dollars)	July 2, 2016		July 4, 2015		July 2, 2016		July 4, 2015
Bus	$	309,432	$	248,487	$	604,832	$	569,693
Parts	13,623		14,166		40,764		41,811
Segment net sales	$	323,055	$	262,653	$	645,596	$	611,504

Gross profit

	Three Months Ended				Nine Months Ended
(in thousands of dollars)	July 2, 2016		July 4, 2015		July 2, 2016		July 4, 2015
Bus	$	41,594	$	31,670	$	75,108	$	63,915
Parts	5,214		4,992		15,567		15,255
Segment gross profit	$	46,808	$	36,662	$	90,675	$	79,170

Reconciliation of Operating Profit (Loss) from Segments to Consolidated

The following table is a reconciliation of segment gross profit to consolidated income (loss) before income taxes for the periods presented:

	Three Months Ended						Nine Months Ended
(in thousands of dollars)	July 2, 2016			July 4, 2015			July 2, 2016			July 4, 2015
Segment gross profit	$	46,808		$	36,662		$	90,675		$	79,170
Adjustments:
Selling, general and administrative expenses	(45,505		)	(17,404		)	(81,329		)	(66,813		)
Interest expense	(4,040		)	(4,577		)	(12,736		)	(14,473		)
Interest income	7			5			118			39
Other income, net	—			(33		)	16			—
(Loss) income before income taxes	$	(2,730	)	$	14,653		$	(3,256	)	$	(2,077	)

Revenue from External Customers by Geographic Areas

Sales are attributable to geographic areas based on customer location and were as follows for the periods presented:

	Three Months Ended				Nine Months Ended
(in thousands of dollars)	July 2, 2016		July 4, 2015		July 2, 2016		July 4, 2015
United States	$	298,532	$	257,522	$	591,549	$	565,854
Canada	21,642		4,585		46,261		42,032
Rest of world	2,881		546		7,786		3,618
Total net sales	$	323,055	$	262,653	$	645,596	$	611,504

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Earnings Per Share (Tables)

9 Months Ended

Jul. 02, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table presents the earnings per share computation for the period presented when there are dilutive shares:

	Three Months Ended
(in thousands except for share data)	July 4, 2015
Numerator:
Net income	$	10,683
Less: convertible preferred stock dividend	1,027
Net income available to common stockholders	$	9,656
Basic net income per share computation:
Net income available to common stockholders	$	9,656
Weighted average common shares outstanding	20,712,860
Basic net income per share	$	0.47
Diluted net income per share computation:
Net income	$	10,683
Weighted average common shares outstanding	20,712,860
Weighted average dilutive securities, convertible preferred stock	4,314,064
Weighted average dilutive securities, restricted stock	10
Weighted average dilutive securities, warrants	358,950
Weighted average shares and dilutive potential common shares	25,385,884
Diluted net income per share	$	0.42

Schedule of Error Corrections and Prior Period Adjustments

While the adjustments were immaterial, as previously disclosed, the Company has elected to revise its previously reported basic and diluted earnings per share for the comparable periods in fiscal 2015 as presented in the following table:

	July 4, 2015
	Three Months Ended							Nine Months Ended
(in thousands except for share data)	Previous		Adjustment			Corrected		Previous			Adjustment			Corrected
Net income (loss)	$	10,683	$	—		$	10,683	$	(1,040	)	$	—		$	(1,040	)
Preferred stock dividend	1,239		(212		)	1,027		1,239			201			1,440
Net income (loss) available to common shareholders	9,444		212			9,656		(2,279		)	(201		)	(2,480		)
Basic earnings (loss) per share	0.46		0.01			0.47		(0.11		)	(0.01		)	(0.12		)
Diluted earnings (loss) per share	$	0.42	$	—		$	0.42	$	(0.11	)	$	(0.01	)	$	(0.12	)

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Share Based Compensation (Tables)

9 Months Ended

Jul. 02, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity

The following table summarizes the Company's restricted stock ("RSAs") and restricted stock units ("RSUs") award activity for the period presented:

	Nine Months Ended   July 2, 2016
Restricted Stock Activity	Number of Shares		Weighted-Average Grant Date Fair Value
Balance, beginning of period	521,707		$	13.18
Granted	245,793		10.82
Vested	(767,500	)	12.43
Balance, end of period	—		$	—

Schedule of Share-based Compensation, Stock Options, Activity

The following table summarizes the Company's stock option activity for the period presented:

	Nine Months Ended   July 2, 2016
Stock Option Award Activity	Number of Options	Weighted Average Exercise Price per Share ($)		Weighted Average Contractual Remaining Term (Years)	Aggregate Intrinsic Value ($000)
Outstanding options, beginning of period	1,004,000	$	10.05	9.48	$	197
Granted	143,754	10.27		9.47	234
Outstanding options, end of period (1)	1,147,754	10.08		8.82	1,959
Fully vested and exercisable options, end of period	1,147,754	$	10.08	8.82	$	1,959

(1) There were no stock option forfeitures or exercises during the nine months ended July 2, 2016.

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The fair value of each option award on the grant date was estimated using the Black-Scholes option pricing model with the following assumptions:

Dividend Yield	0	%
Risk-Free Interest Rate	1.7	%
Expected Volatility	34.0	%
Expected Term (Years)	4.7

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Summary of Significant Accounting Policies and Recently Issued Accounting Standards - Narrative (Details) - USD ($) $ in Thousands	Jul. 02, 2016	Oct. 03, 2015
New Accounting Pronouncement, Early Adoption [Line Items]
Reclassification from deferred tax asset, current	$ (7,381)	$ (9,150)
Reclassification to deferred tax asset, non-current	7,377	$ 15,466
New Accounting Pronouncement, Early Adoption, Effect
New Accounting Pronouncement, Early Adoption [Line Items]
Reclassification from deferred tax asset, current	7,400
Reclassification to deferred tax asset, non-current	$ 7,400

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Nature of Business and Basis of Presentation - Narrative (Details) - USD ($)					3 Months Ended	9 Months Ended
	Jun. 08, 2016	Jun. 08, 2016	Jun. 03, 2016	Feb. 24, 2015	Jul. 04, 2015	Jul. 04, 2015	Jul. 02, 2016	May 26, 2016	Oct. 03, 2015
Business Combination, Separately Recognized Transactions [Line Items]
Common stock, par value (in dollars per share)							$ 0.0001		$ 0.0001
School Bus Holdings, Inc.
Business Combination, Separately Recognized Transactions [Line Items]
Cash paid				$ 100,000,000
Shares issued for acquisition (in shares)				12,000,000
Shares issued for acquisition, value				$ 120,000,000
Scenario, Previously Reported
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Equity in net income of equity method investments, tax expense					$ 200,000	$ 400,000
The Traxis Group B.V. | ASP BB Holdings LLC | Blue Bird Corporation
Business Combination, Separately Recognized Transactions [Line Items]
Cash paid		$ 125,700,000
Number of shares acquired	5,000,000	12,000,000	7,000,000
Common stock, par value (in dollars per share)								$ 0.0001
Price per share acquired (in dollars per share)	$ 11.00	$ 11.00	$ 10.10

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Supplemental Financial Information - Inventory (Details) - USD ($) $ in Thousands	Jul. 02, 2016	Oct. 03, 2015
Condensed Financial Information [Abstract]
Raw materials	$ 67,714	$ 43,471
Work in process	30,369	2,658
Finished goods	3,329	3,051
Total inventory	$ 101,412	$ 49,180

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Supplemental Financial Information - Product Warranty Rollforward (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Movement in Standard Product Warranty Accrual [Roll Forward]
Balance at beginning of period	$ 16,768	$ 15,262	$ 17,661	$ 15,559
Add current period accruals	3,691	3,014	7,195	6,936
Current period reductions of accrual	(1,956)	(1,993)	(6,353)	(6,212)
Balance at end of period	$ 18,503	$ 16,283	$ 18,503	$ 16,283

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Supplemental Financial Information - Extended Warranty Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Movement in Extended Product Warranty Accrual [Roll Forward]
Balance at beginning of period	$ 14,060	$ 12,340	$ 14,145	$ 12,003
Add current period deferred income	2,952	1,939	5,446	4,445
Current period recognition of income	(1,261)	(1,085)	(3,840)	(3,254)
Balance at end of period	$ 15,751	$ 13,194	$ 15,751	$ 13,194

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Supplemental Financial Information - Self Insurance (Details) - USD ($) $ in Thousands	Jul. 02, 2016	Oct. 03, 2015
Condensed Financial Information [Abstract]
Current portion	$ 3,444	$ 3,534
Long-term portion	2,884	2,786
Total accrued self-insurance	$ 6,328	$ 6,320

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Supplemental Financial Information - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Product Warranty Liability [Line Items]
Shipping and handling revenue	$ 6.2	$ 4.5	$ 11.5	$ 10.6
Shipping and handling costs	$ 5.7	$ 4.0	$ 10.1	$ 9.4
Minimum
Product Warranty Liability [Line Items]
Standard product warranty, period			1 year
Extended product warranty, period			2 years
Maximum
Product Warranty Liability [Line Items]
Standard product warranty, period			5 years
Extended product warranty, period			5 years

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Supplemental Financial Information - Pension Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Condensed Financial Information [Abstract]
Interest cost	$ 1,411	$ 1,426	$ 4,232	$ 4,280
Expected return on plan assets	(1,528)	(1,599)	(4,584)	(4,798)
Amortization of prior loss	1,196	913	3,590	2,739
Net periodic benefit cost	1,079	740	3,238	2,221
Amortization of prior loss, recognized in other comprehensive income	1,196	913	3,590	2,739
Total recognized in net periodic pension benefit cost and other comprehensive income	$ (117)	$ (173)	$ (352)	$ (518)

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Supplemental Financial Information - Equity Method Investments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015	Oct. 03, 2015
Schedule of Equity Method Investments [Line Items]
Equity investment in affiliate	$ 11,561		$ 11,561		$ 12,505
Equity in net income of non-consolidated affiliates	$ 696	$ 543	$ 1,494	$ 1,049
Micro Bird Holdings, Inc. [Member]
Schedule of Equity Method Investments [Line Items]
Equity interest in equity method investment (as a percent)	50.00%		50.00%
Equity investment in affiliate	$ 11,600		$ 11,600		$ 12,500
Dividend from Equity Method Investment in Affiliate	$ 2,300
Equity Method Investment, Summarized Financial Information [Abstract]
Revenues			64,931	51,126
Gross profit			9,407	7,067
Operating income			4,273	3,162
Net income			$ 3,034	$ 2,385

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Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands	Jul. 02, 2016	Oct. 03, 2015
Debt Instrument [Line Items]
Current portion of senior term debt	$ 11,750	$ 11,750
Long-term debt	142,577	175,418
Senior Term Loan | 2020 Senior Term Loan
Debt Instrument [Line Items]
Total debt	154,327	187,168
Senior term loan, discount (XBRL)	$ 10,111	$ 11,082

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Debt - Narrative (Details) - USD ($)		1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2014	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015	Oct. 03, 2015
Debt Instrument [Line Items]
Debt issuance cost paid to lenders					$ 1,100,000
Interest expense			$ 4,000,000	$ 4,600,000	$ 12,700,000	$ 14,500,000
Senior Term Loan | Senior Credit Facility
Debt Instrument [Line Items]
Face amount		$ 235,000,000.0
Debt term		6 years
Stated interest rate (as a percent)				5.00%		5.00%
Effective interest rate (as a percent)			6.50%		6.50%		6.50%
Long-term line of credit			$ 164,400,000		$ 164,400,000		$ 198,300,000
Voluntary Prepayment	$ 25,000,000
Weighted average interest rate (as a percent)			8.00%		8.00%		7.80%
Base Rate | Senior Term Loan | Senior Credit Facility
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)					4.50%		4.50%
LIBOR | Senior Term Loan | Senior Credit Facility
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)					5.50%		5.50%
Variable rate floor (as a percent)					0.01%		0.01%
Revolving Credit Facility | Credit Facility | Senior Revolving Credit Facility
Debt Instrument [Line Items]
Debt term					5 years
Maximum borrowing capacity			$ 60,000,000.0		$ 60,000,000.0
Commitment fee (as a percent)					0.50%
Long-term line of credit			0		$ 0		$ 0
Revolving Credit Facility | Base Rate | Credit Facility | Senior Revolving Credit Facility
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)					4.50%		4.50%
Revolving Credit Facility | LIBOR | Credit Facility | Senior Revolving Credit Facility
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)					5.50%		5.50%
Letters of Credit | Credit Facility | Senior Revolving Credit Facility
Debt Instrument [Line Items]
Maximum borrowing capacity			15,000,000.0		$ 15,000,000.0
Letters of credit, amount outstanding			5,100,000		5,100,000
Line of Credit Facility, Remaining Borrowing Capacity			$ 54,900,000		$ 54,900,000

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Debt - Maturity Schedule (Details) $ in Thousands	Jul. 02, 2016 USD ($)
Long-term Debt, Fiscal Year Maturity
2016	$ 2,938
2017	11,750
2018	11,750
2019	11,750
2020	126,250
Total debt	$ 164,438

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended			6 Months Ended		9 Months Ended
	Jul. 02, 2016	Apr. 02, 2016	Apr. 04, 2015	Apr. 02, 2016	Apr. 04, 2015	Jul. 02, 2016	Jul. 04, 2015	Oct. 03, 2015
Income Tax Disclosure [Abstract]
Effective tax rate (as a percent)		(32.50%)	30.80%	(63.50%)	(0.40%)
Statutory Federal income tax rate (as a percent)	35.00%		35.00%			35.00%	35.00%
Unrecognized tax benefits	$ 6.4					$ 6.4		$ 6.4
Accrued interest and penalties		$ 0.9	$ 0.8	$ 0.9	$ 0.8

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Segment Information (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2016 USD ($)	Jul. 04, 2015 USD ($)	Jul. 02, 2016 USD ($) segment	Jul. 04, 2015 USD ($)
Segment Reporting Information [Line Items]
Number of Operating Segments | segment			2
Net sales	$ 323,055	$ 262,653	$ 645,596	$ 611,504
Gross profit	46,808	36,662	90,675	79,170
United States
Segment Reporting Information [Line Items]
Net sales	298,532	257,522	591,549	565,854
Canada
Segment Reporting Information [Line Items]
Net sales	21,642	4,585	46,261	42,032
Rest of world
Segment Reporting Information [Line Items]
Net sales	2,881	546	7,786	3,618
Operating Segments
Segment Reporting Information [Line Items]
Gross profit	46,808	36,662	90,675	79,170
Operating Segments | Bus
Segment Reporting Information [Line Items]
Net sales	309,432	248,487	604,832	569,693
Gross profit	41,594	31,670	75,108	63,915
Operating Segments | Parts
Segment Reporting Information [Line Items]
Net sales	13,623	14,166	40,764	41,811
Gross profit	$ 5,214	$ 4,992	$ 15,567	$ 15,255

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Segment Information - Reconciliation of Segment Gross Profit (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Segment gross profit	$ 46,808	$ 36,662	$ 90,675	$ 79,170
Selling, general and administrative expenses	(45,505)	(17,404)	(81,329)	(66,813)
Interest expense	(4,040)	(4,577)	(12,736)	(14,473)
Interest income	7	5	118	39
Other income (expense), net	0	(33)	16	0
(Loss) income before income taxes	(2,730)	14,653	(3,256)	(2,077)
Operating Segments
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Segment gross profit	46,808	36,662	90,675	79,170
Segment Reconciling Items
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Selling, general and administrative expenses	(45,505)	(17,404)	(81,329)	(66,813)
Interest expense	(4,040)	(4,577)	(12,736)	(14,473)
Interest income	7	5	118	39
Other income (expense), net	$ 0	$ (33)	$ 16	$ 0

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Business Combination (Details)		1 Months Ended
	Feb. 24, 2015 USD ($) shares	Feb. 28, 2015 USD ($) fund $ / shares shares
Business Acquisition [Line Items]
Number of managed funds | fund		4
School Bus Holdings, Inc.
Business Acquisition [Line Items]
Cash paid	$ 100,000,000
Shares issued for acquisition (in shares) | shares	12,000,000
Shares issued for acquisition, value	$ 120,000,000
School Bus Holdings, Inc. | Common Class A and Series A Convertible Preferred Stock
Business Acquisition [Line Items]
Proceeds from private placement of Common Stock and Series A Convertible Preferred Stock	$ 75,000,000
Backstop Commitment Investor | Hennessy Capital | Common Shares
Business Acquisition [Line Items]
Shares acquired (in shares) | shares	102,750
PIPE Investment | Hennessy Capital | Common Shares
Business Acquisition [Line Items]
Cash paid	$ 40,000,000
Shares acquired (in shares) | shares	400,000
PIPE Investment | Hennessy Capital | Series A Convertible Preferred Stock
Business Acquisition [Line Items]
Subscription agreement purchase amount (in shares) | shares		400,000
Subscription agreement purchase amount		$ 40,000,000
Subscription agreement, possible increased amount (in shares) | shares		500,000
Subscription agreement, possible increased amount		$ 50,000,000
Common/Preferred Investor | Hennessy Capital | Common Shares
Business Acquisition [Line Items]
Cash paid	$ 25,000,000
Backstop purchase agreement, maximum purchase amount		$ 25,000,000.0
Backstop purchase agreement, maximum purchase amount (in dollars per share) | $ / shares		$ 10.00
Backstop private placement, price per share (in dollars per share) | $ / shares		$ 10.00
Shares acquired (in shares) | shares	2,500,000
Common/Preferred Investor | Hennessy Capital | Series A Convertible Preferred Stock
Business Acquisition [Line Items]
Cash paid	$ 10,000,000
Backstop private placement (in shares) | shares		100,000
Backstop private placement		$ 10,000,000
Shares acquired (in shares) | shares	100,000
Hennessy Capital | Common Shares
Business Acquisition [Line Items]
Shares redeemed (in shares) | shares	7,494,700
Shares redeemed, value	$ 75,000,000

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Stockholders' Deficit - Common and Preferred Stock (Details) - $ / shares		9 Months Ended
	Feb. 24, 2015	Jul. 02, 2016	Oct. 03, 2015
Class of Stock [Line Items]
Shares authorized		110,000,000.0
Common stock, shares authorized		100,000,000	100,000,000
Common stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
Preferred stock, shares authorized		10,000,000	10,000,000
Preferred stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
Common stock, shares issued		21,449,954	20,874,882
Common stock, shares outstanding		21,449,954	20,874,882
Common Shares
Class of Stock [Line Items]
Common stock, shares authorized		100,000,000.0
Common stock, par value (in dollars per share)		$ 0.0001
Common shares sold in private placement (in shares)	2,500,000
Shares issued in private placement, price per share (in dollars per share)	$ 10.00
Common stock, shares issued		21,449,954
Common stock, shares outstanding		21,449,954
Preferred Shares
Class of Stock [Line Items]
Preferred stock, shares authorized		10,000,000.0
Preferred stock, par value (in dollars per share)		$ 0.0001
Issuance of stock (in shares)	500,000
Liquidation preference per share (in dollars per share)		$ 100.00
Series A Convertible Preferred Stock
Class of Stock [Line Items]
Preferred stock, shares authorized	2,000,000.0	2,000,000.0
Shares of common stock issued upon conversion		8.6
Conversion price (in dollars per share)		$ 11.59
Dividend rate (as a percent)		7.625%
Undesignated Preferred Stock
Class of Stock [Line Items]
Preferred stock, shares authorized		8,000,000
School Bus Holdings, Inc.
Class of Stock [Line Items]
Shares issued for acquisition (in shares)	12,000,000
Hennessy Capital | Common Shares | Backstop Commitment Investor
Class of Stock [Line Items]
Shares acquired (in shares)	102,750
Common Shares
Class of Stock [Line Items]
Series A Preferred Stock dividend - Common Stock (in shares)		95,934

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Stockholders' Deficit - Warrants (Details)	9 Months Ended
	Jul. 02, 2016 $ / shares $ / warrant shares
Warrants
Class of Warrant or Right [Line Items]
Warrants outstanding (in shares) | shares	11,500,000
Public Warrants
Class of Warrant or Right [Line Items]
Number of shares received from exercise of each warrant (in shares) | shares	0.5
Exercise price of warrant (in dollars per warrant) | $ / warrant	5.75
Exercise price of warrant (in dollars per share) | $ / shares	$ 11.50
Expiration period	5 years
Common stock trigger price (in dollars per share) | $ / shares	$ 24.00
Threshold trading days	20 days
Threshold consecutive trading days	30 days
Placement Warrants
Class of Warrant or Right [Line Items]
Number of shares received from exercise of each warrant (in shares) | shares	0.5
Exercise price of warrant (in dollars per warrant) | $ / warrant	5.75
Exercise price of warrant (in dollars per share) | $ / shares	$ 11.50

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Foreign Exchange Contracts - Narrative (Details) $ in Millions	3 Months Ended	9 Months Ended
	Jul. 02, 2016 USD ($)	Jul. 02, 2016 USD ($)
Foreign Exchange Swap
Derivative [Line Items]
Derivative, notional amount	$ 10.8	$ 10.8
Other Current Liabilities | Foreign Exchange Swap
Derivative [Line Items]
Fair value of foreign exchange contract, net	(0.4)	(0.4)
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent
Derivative [Line Items]
Other comprehensive income (loss)	$ (0.1)	$ (0.4)

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Earnings Per Share Narrative (Details) - shares	3 Months Ended	9 Months Ended
	Jul. 02, 2016	Jul. 02, 2016	Jul. 04, 2015
Earnings Per Share [Abstract]
Anti-dilutive securities excluded from computation of earnings per share (in shares)	4,417,141	4,356,032	4,314,064

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Earnings Per Share Summary of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Earnings Per Share [Abstract]
Net income (loss)	$ (2,934)	$ 10,683	$ (3,877)	$ (1,040)
Less: convertible preferred stock dividend	964	1,027	2,915	1,440
Net (loss) income available to common stockholders	$ (3,898)	$ 9,656	$ (6,792)	$ (2,480)
Weighted average common shares outstanding (in shares)	21,084,878	20,712,860	20,989,737	21,306,118
Basic net income per share (in dollars per share)	$ (0.18)	$ 0.47	$ (0.32)	$ (0.12)
Net Income		$ 10,683
Basic weighted average shares outstanding	21,084,878	20,712,860	20,989,737	21,306,118
Weighted average dilutive securities, convertible preferred stock (in shares)		4,314,064
Weighted average dilutive securities, restricted stock (in shares)		10
Weighted average dilutive securities, warrants (in shares)		358,950
Weighted average shares and dilutive potential common shares	21,084,878	25,385,884	20,989,737	21,306,118
Diluted net income per share (in dollars per share)	$ (0.18)	$ 0.42	$ (0.32)	$ (0.12)

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Earnings Per Share Summary of Immaterial Error Correction (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2016	Jul. 04, 2015	Jul. 02, 2016	Jul. 04, 2015
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Net income (loss)	$ (2,934)	$ 10,683	$ (3,877)	$ (1,040)
Preferred stock dividend	964	1,027	2,915	1,440
Net (loss) income available to common stockholders	$ (3,898)	$ 9,656	$ (6,792)	$ (2,480)
Basic earnings (loss) per share (in dollars per share)	$ (0.18)	$ 0.47	$ (0.32)	$ (0.12)
Diluted earnings (loss) per share (in dollars per share)	$ (0.18)	$ 0.42	$ (0.32)	$ (0.12)
Previous
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Net income (loss)		$ 10,683		$ (1,040)
Preferred stock dividend		1,239		1,239
Net (loss) income available to common stockholders		$ 9,444		$ (2,279)
Basic earnings (loss) per share (in dollars per share)		$ 0.46		$ (0.11)
Diluted earnings (loss) per share (in dollars per share)		$ 0.42		$ (0.11)
Adjustment
Error Corrections and Prior Period Adjustments Restatement [Line Items]
Net income (loss)		$ 0		$ 0
Preferred stock dividend		(212)		201
Net (loss) income available to common stockholders		$ 212		$ (201)
Basic earnings (loss) per share (in dollars per share)		$ 0.01		$ (0.01)
Diluted earnings (loss) per share (in dollars per share)		$ 0.00		$ (0.01)

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Share Based Compensation - Restricted Stock and Unit Activity (Details) - Restricted Stock and Restricted Stock Units (RSUs)	9 Months Ended
	Jul. 02, 2016 USD ($) $ / shares shares
Number of Shares
Balance, beginning of period (in shares) | shares	521,707
Granted (in shares) | shares	245,793
Vested (in shares) | shares	(767,500)
Balance, end of period (in shares) | shares	0
Weighted-Average Grant Date Fair Value
Balance, beginning of period (in dollars per share) | $ / shares	$ 13.18
Granted (in dollars per share) | $ / shares	10.82
Vested (in dollars per share) | $ / shares	12.43
Balance, end of period (in dollars per share) | $ / shares	$ 0.00
Share-based compensation | $	$ 8,700,000
Unrecognized compensation cost | $	$ 0

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Share Based Compensation - Stock Option Activity (Details) - Options - USD ($)	9 Months Ended	12 Months Ended
	Jul. 02, 2016	Oct. 03, 2015
Number of Shares
Outstanding options, beginning of period (in shares)	1,004,000
Granted (in shares)	143,754
Outstanding options, end of period (in shares)	1,147,754	1,004,000
Fully vested and exercisable options, end of period (in shares)	1,147,754
Weighted Average Exercise Price per Share
Outstanding options, beginning of period (in dollars per share)	$ 10.05
Granted (in dollars per share)	10.27
Outstanding options, end of period (in dollars per share)	10.08	$ 10.05
Fully vested and exercisable options, end of period (in dollars per share)	$ 10.08
Outstanding options, Weighted Average Contractual Remaining Term	8 years 9 months 26 days	9 years 5 months 23 days
Granted, Weighted Average Contractual Remaining Term	9 years 5 months 19 days
Fully vested and exercisable options, end of period, Weighted Average Contractual Remaining Term	8 years 9 months 26 days
Outstanding options, Aggregate Intrinsic Value	$ 1,959,000	$ 197,000
Granted, Aggregate Intrinsic Value	234,000
Fully vested and exercisable options, end of period, Aggregate Intrinsic Value	$ 1,959,000
Forfeited (in shares)	0
Share-based compensation	$ 4,000,000
Unrecognized compensation cost	$ 0

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Share Based Compensation - Fair Value Assumptions (Details) - Options	9 Months Ended
	Jul. 02, 2016 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average grant date fair value of an option award granted in period (in dollars per share)	$ 4.03
Dividend Yield	0.00%
Risk-Free Interest Rate	1.70%
Expected Volatility	34.00%
Expected Term	4 years 8 months 12 days

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Share Based Compensation - Phantom Award (Details) - USD ($) $ in Thousands	9 Months Ended
	Jul. 02, 2016	Jul. 04, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Contribution from former major stockholder for Phantom Award Plan	$ 15,616	$ 13,550
Phantom award
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation	17,100
Phantom Award Plan paid to participants	15,800
Contribution from former major stockholder for Phantom Award Plan	15,600
Payable due to Phantom Award Plan participants	$ 1,400