What changed in this filing

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Item 1. Financial Statements

2020-11-10 compared with 2020-08-05 · 134 added, 99 removed, 541 unchanged (30% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

July 3, January 3

October 2, January 3

Current assets:

Cash and cash equivalents $ 278,246 $ 43,736

Accounts receivable (net of allowances of $ 1,212 and $ 810 at July 3, 2020 and January 3, 2020, respectively)

Accounts receivable (net of allowances of $ 837 and $ 810 at October 2, 2020 and January 3, 2020, respectively)

114,097 91,632

23 unchanged sentences

Stockholders’ equity

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of July 3, 2020 and January 3, 2020

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of October 2, 2020 and January 3, 2020

Common stock, $ 0.001 par value — 90,000 authorized;

42,327 shares issued and 41,438 outstanding as of July 3, 2020;

42,601 shares issued and 41,712 outstanding as of October 2, 2020;

39,448 shares issued and 38,559 outstanding as of January 3, 2020

1 unchanged sentence

Treasury stock, at cost;

890 common shares as of July 3, 2020 and January 3, 2020

890 common shares as of October 2, 2020 and January 3, 2020

( 13,754 ) ( 13,754 )

Accumulated other comprehensive income 133 150

Accumulated other comprehensive (loss) income ( 32 ) 150

Retained earnings 363,185 312,491

5 unchanged sentences

(in thousands, except per share data)

For the three months ended For the six months ended

July 3, June 28, July 3, June 28,

For the three months ended For the nine months ended

October 2, September 27, October 2, September 27,

2020 2019 2020 2019

11 unchanged sentences

Interest expense 2,291 748 7,030 2,582

Other expense 71 582 133 569

Other (income) expense ( 189 ) ( 37 ) ( 57 ) 532

Other expense, net 2,102 711 6,973 3,114

14 unchanged sentences

(in thousands)

For the three months ended For the six months ended

July 3, June 28, July 3, June 28,

For the three months ended For the nine months ended

October 2, September 27, October 2, September 27,

2020 2019 2020 2019

Net income $ 38,020 $ 30,176 $ 59,950 $ 71,940

Other comprehensive income (loss)

Other comprehensive (loss) income

Interest rate swap, net of tax effects ( 801 ) — ( 801 ) —

Foreign currency translation adjustments, net of tax effects 636 ( 352 ) 619 ( 197 )

Other comprehensive income (loss) 923 314 ( 17 ) 155

Other comprehensive (loss) income ( 165 ) ( 352 ) ( 182 ) ( 197 )

Comprehensive income 37,855 29,824 59,768 71,743

10 unchanged sentences

Stock-based compensation expense — — — — 1,729 — — 1,729 —

Foreign currency translation adjustment — — — — — ( 159 ) — ( 159 ) —

Other comprehensive (loss) income — — — — — ( 159 ) — ( 159 ) —

Adoption of new accounting standard, net of taxes — — — — — — ( 228 ) ( 228 ) —

4 unchanged sentences

Stock-based compensation expense — — — — 1,621 — — 1,621 —

Foreign currency translation adjustment — — — — — 314 — 314 —

Other comprehensive (loss) income — — — — — 314 — 314 —

Net income — — — — — 22,921 22,921 441

Balance - June 28, 2019 39,274 $ 38 890 $ ( 13,754 ) $ 123,043 $ ( 629 ) $ 260,482 $ 369,180 $ 15,022

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 140 — — — ( 3,300 ) — — ( 3,300 ) —

Stock-based compensation expense — — — — 1,605 — — 1,605 —

Other comprehensive (loss) income — — — — — ( 352 ) — ( 352 ) —

Net income — — — — — — 29,487 29,487 689

Balance - September 27, 2019 39,414 $ 38 890 $ ( 13,754 ) $ 121,348 $ ( 981 ) $ 289,969 $ 396,620 $ 15,711

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

8 unchanged sentences

Stock-based compensation expense — — — — 1,921 — — 1,921 —

Foreign currency translation adjustment — — — — — ( 940 ) — ( 940 ) —

Other comprehensive (loss) income — — — — — ( 940 ) — ( 940 ) —

Net income — — — — — — 8,250 8,250 488

4 unchanged sentences

Stock-based compensation expense — — — — 2,076 — — 2,076 —

Foreign currency translation adjustment — — — — — 923 — 923 —

Other comprehensive (loss) income — — — — — 923 — 923 —

Net income — — — — — 12,608 12,608 584

Balance - July 3, 2020 42,327 $ 41 890 $ ( 13,754 ) $ 321,479 $ 133 $ 325,165 $ 633,064 $ 24,975

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 138 1 — — ( 254 ) — — ( 253 ) —

Redeemable non-controlling interest 136 — — — 11,169 — — 11,169 ( 24,975 )

Stock-based compensation expense — — — — 2,092 — — 2,092 —

Other comprehensive (loss) income — — — — — ( 165 ) — ( 165 ) —

Net income — — — — — — 38,020 38,020 —

Balance - October 2, 2020 42,601 $ 42 890 $ ( 13,754 ) $ 334,486 $ ( 32 ) $ 363,185 $ 683,927 $ —

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

2 unchanged sentences

(in thousands)

For the six months ended

July 3, 2020 June 28, 2019

For the nine months ended

October 2, 2020 September 27, 2019

OPERATING ACTIVITIES:

17 unchanged sentences

Acquisition of businesses, net of cash acquired ( 329,176 ) ( 6,804 )

Acquisition of other assets ( 250 ) —

Net cash used in investing activities ( 375,409 ) ( 32,707 )

4 unchanged sentences

Repayment of debt ( 5,000 ) ( 2,813 )

Installment on purchase of non-controlling interest ( 3,000 ) —

Proceeds from sale of common stock, net 198,236 —

8 unchanged sentences

(in thousands)

For the six months ended

For the nine months ended

SUPPLEMENTAL CASH FLOW INFORMATION:

July 3, 2020 June 28, 2019

October 2, 2020 September 27, 2019

Cash paid during the period for:

3 unchanged sentences

Non-cash operating activities:

Refinancing of the Second Amended and Restated Credit Facility $ — $ 88,875

Right-of-use assets obtained in exchange for lease obligations $ 12,293 $ 8,565

2 unchanged sentences

Capital expenditures included in accounts payable $ 6,530 $ 868

Acquisition of non-controlling interest in exchange for equity and installment payments $ 21,975 $ —

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

19 unchanged sentences

The twelve month periods ended January 1, 2021 and January 3, 2020, will include or have included 52 and 53 weeks, respectively.

The three and six month periods ended July 3, 2020 and June 28, 2019 each included 13 weeks and 26 weeks, respectively.

The three and nine month periods ended October 2, 2020 and September 27, 2019 each included 13 weeks and 39 weeks, respectively.

Principles of Consolidation - These condensed consolidated financial statements include the Company and its subsidiaries.

16 unchanged sentences

Measuring the material rights requires judgments including forecasts of future sales and product mix.

At July 3, 2020, the balance of deferred revenue related to pricing provisions was $ 0 as such arrangements containing these pricing provisions had expired.

At January 3, 2020, the balance of deferred revenue related to pricing provisions was $ 172 which was recognized as revenue during the nine months ended October 2, 2020.

Segments - The Company has determined that it has a single operating and reportable segment.

The Company considers operating segments to be components of the Company for which separate financial information is available, that is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company considers an operating segment to be a component of the Company for which separate financial information is available, that is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance.

The chief operating decision maker for the Company is the Chief Executive Officer.

13 unchanged sentences

and the effect of the pandemic on short and long-term general economic conditions.

Fair Value Measurements and Financial Instruments - The Financial Accounting Standards Board ("FASB") has issued Accounting Standards Codification 820, Fair Value Measurements and Disclosures, that requires the valuation of assets and liabilities required or permitted to be either recorded or disclosed at fair value based on hierarchy of available inputs as follows:

Fair Value Measurements and Financial Instruments - The Financial Accounting Standards Board ("FASB") has issued Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures, that requires the valuation of assets and liabilities required or permitted to be either recorded or disclosed at fair value based on hierarchy of available inputs as follows:

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

44 unchanged sentences

The following table summarizes total sales by product category:

For the three months ended For the six months ended

July 3, 2020 June 28, 2019 July 3, 2020 June 28, 2019

For the three months ended For the nine months ended

October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019

Powered Vehicles $ 153,031 $ 130,022 $ 372,081 $ 341,976

2 unchanged sentences

The following table summarizes total sales by sales channel:

For the three months ended For the six months ended

July 3, 2020 June 28, 2019 July 3, 2020 June 28, 2019

For the three months ended For the nine months ended

October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019

OEM $ 143,687 $ 131,678 $ 335,295 $ 349,504

2 unchanged sentences

The following table summarizes total sales generated by geographic location of the customer:

For the three months ended For the six months ended

July 3, 2020 June 28, 2019 July 3, 2020 June 28, 2019

For the three months ended For the nine months ended

October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019

North America $ 175,486 $ 142,624 $ 423,078 $ 383,414

4 unchanged sentences

Inventory consisted of the following:

July 3, January 3

October 2, January 3

Raw materials $ 90,674 $ 87,779

7 unchanged sentences

Prepaids and other current assets consisted of the following:

July 3, January 3

October 2, January 3

Prepaid chassis deposits $ 12,424 $ 6,701

5 unchanged sentences

Property, plant and equipment, net consisted of the following:

July 3, January 3

October 2, January 3

Building and building improvements $ 74,434 $ 42,343

9 unchanged sentences

The Company’s long-lived assets by geographic location are as follows:

July 3, January 3

October 2, January 3

United States $ 142,369 $ 100,508

10 unchanged sentences

As most of the Company's leases do not provide an interest rate, the Company used the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The weighted-average remaining lease term for the Company's operating leases was 4.29 years and the weighted-average incremental borrowing rate was 3.54 % as of July 3, 2020.

The weighted-average remaining lease term for the Company's operating leases was 4.71 years and the weighted-average incremental borrowing rate was 3.24 % as of October 2, 2020.

Operating lease costs consisted of the following:

For the three months ended For the six months ended

July 3, 2020 June 28, 2019 July 3, 2020 June 28, 2019

For the three months ended For the nine months ended

October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019

Operating lease cost $ 1,835 $ 1,581 $ 5,209 $ 4,550

4 unchanged sentences

Supplemental balance sheet information related to the Company's operating leases is as follows:

Balance Sheet Classification July 3, 2020

Balance Sheet Classification October 2, 2020

Operating lease right-of-use assets Lease right-of-use assets $ 25,695

3 unchanged sentences

For fiscal year Total future payments

2020 (excluding the 6 months ended July 3, 2020) $ 3,476

2020 (excluding the 9 months ended October 2, 2020) $ 1,856

Thereafter 4,875

9 unchanged sentences

Accrued expenses consisted of the following:

July 3, January 3

October 2, January 3

Payroll and related expenses $ 17,442 $ 14,595

2 unchanged sentences

Income tax payable 9,573 4,295

Current portion of non-controlling interest buyout liability 7,206 —

Other accrued expenses 11,169 4,963

1 unchanged sentence

Activity related to warranties is as follows:

For the three months ended For the six months ended

July 3, 2020 June 28, 2019 July 3, 2020 June 28, 2019

For the three months ended For the nine months ended

October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019

Beginning warranty liability $ 8,915 $ 6,208 $ 5,649 $ 6,433

13 unchanged sentences

In June 2019, the Company entered into a credit facility with Bank of America and other named lenders, which was amended and restated on March 11, 2020 and June 19, 2020 (as most recently amended and restated as the "First Amended and Restated Credit Facility").

The First Amended and Restated Credit Facility, which matures on March 11, 2025, provides a senior secured revolving line of credit with a borrowing capacity of $ 250,000 and a maturing secured term loan of $ 400,000 .

The First Amended and Restated Credit Facility, which matures on March 11, 2025, provides a senior secured revolving line of credit with a borrowing capacity of $ 250,000 and a term loan of $ 400,000 .

The term loan is subject to quarterly amortization payments.

1 unchanged sentence

Additionally, the Company had $ 434 of remaining unamortized debt issuance costs.

The Company expensed $ 277 of the remaining unamortized debt issuance costs, which are included in other expense, net on the Condensed Consolidated Statements of Income for the six months ended July 3, 2020 and the remaining $ 157 were allocated to the line of credit.

The Company expensed $ 277 of the remaining unamortized debt issuance costs, which are included in other expense, net in the condensed consolidated statements of income for the nine months ended October 2, 2020.

The remaining $ 157 were allocated to the line of credit.

Loan fees allocated to the term debt will be amortized using the interest method and loan fees allocated to the line of credit will be amortized on a straight-line basis over the term of the First Amended and Restated Credit Facility.

The First Amended and Restated Credit Facility provides for interest at a rate either based on the London Interbank Offered Rate, or LIBOR, plus a margin ranging from 1.00 % to 2.25 %, or based on the base rate offered by Bank of America plus a margin ranging from 0.00 % to 1.25 %.

At July 3, 2020, the one-month LIBOR and prime rates were 0.17 % and 3.25 %, respectively.

At July 3, 2020, our weighted-average interest rate on outstanding borrowing was 2.05 %.

The First Amended and Restated Credit Facility provides for interest at a rate either based on the London Interbank Offered Rate, or LIBOR, plus a margin ranging from 1.00 % to 2.25 %, with a floor rate of 0.50%, or based on the base rate offered by Bank of America plus a margin ranging from 0.00 % to 1.25 %.

At October 2, 2020, the one-month LIBOR and prime rates were 0.14 % and 3.25 %, respectively.

At October 2, 2020, our weighted-average interest rate on outstanding borrowing was 1.87 %.

The First Amended and Restated Credit Facility is secured by substantially all of the Company’s assets, restricts the Company's ability to make certain payments and engage in certain transactions, and requires that the Company satisfy customary financial ratios.

The Company was in compliance with the covenants as of July 3, 2020.

The First Amended and Restated Credit Facility permits up to $ 25,000 of the aggregate revolving commitment to be used by the Company for issuance of letters of credit, of which $ 15,000 was outstanding at July 3, 2020.

The Company was in compliance with the covenants as of October 2, 2020.

In August 2020, the Company entered into an interest rate swap agreement to hedge the variability of cash flows in interest payments associated with $ 200,000 of its variable rate term debt.

Refer to Note 10 - Derivatives and Hedging for further details of this agreement.

The following table summarizes the line of credit under the First Amended and Restated Credit Facility:

7 unchanged sentences

(in thousands, except per share amounts)

As of July 3, 2020, future principal payments for long-term debt, including the current portion, as summarized as follows:

As of October 2, 2020, future principal payments for long-term debt, including the current portion, as summarized as follows:

For fiscal year

2020 (remaining six months) $ 5,000

2020 (remaining three months) $ 2,500

Thereafter 325,000

21 unchanged sentences

The CAFC has declined to rehear the case and has issued the final remand order sending the case back to the PTAB.

SRAM filed ‘027 writ of certiorari before the Supreme Court of the United States, the writ of certiorari was denied and the case is before the PTAB on remand.

The PTAB has issued an opinion in the ‘250 Patent case stating that the Company has not shown the claims of the ‘250 Patent to be obvious.

The Company has appealed that PTAB opinion to the CAFC and the CAFC has affirmed the PTAB opinion.

District Court, Northern District of Illinois, has again stayed the SRAM lawsuits against the Company pending outcome of the remanded ‘027 PTAB issue.

In a separate action, the Company filed a lawsuit on January 29, 2016 in the U.S.

7 unchanged sentences

District Court, District of Colorado and are otherwise proceeding.

District Court, Northern District of Illinois, has again stayed the SRAM lawsuits against the Company pending outcome of the remanded ‘027 PTAB issue.

FOX FACTORY HOLDING CORP.

6 unchanged sentences

Based on information currently available, management does not believe that the ultimate resolution of these matters will have a material adverse effect on the Company's financial condition, results of operations or cash flows.

Other Commitments - On November 30, 2017, the Company through FF US Holding Corp., acquired the assets of Flagship, Inc., d/b/a Tuscany and issued a 20% interest in FF US Holding Corp.

Other Commitments - On November 30, 2017, the Company through FF US Holding Corp., acquired the assets of Flagship, Inc.

d/b/a Tuscany and issued a 20% interest in FF US Holding Corp.

to Flagship, Inc.

2 unchanged sentences

at any time from November 30, 2019 through November 30, 2024 at a value that approximates fair market value.

On July 22, 2020, subsequent to its second fiscal quarter, the Company exercised the Call Option and entered into a stock purchase agreement with Flagship, Inc.

whereby the Company agreed to purchase the remaining 20 % interest for $ 24,975 payable in a combination of stock and cash.

On July 22, 2020, the Company exercised the Call Option and, pursuant to a stock purchase agreement with Flagship, Inc., the Company purchased the remaining 20 % interest for $ 24,975 payable in a combination of stock and cash.

The cash portion will be settled in quarterly installment payments through July 2022, which amount to $ 6,556 , $ 4,550 and $ 2,700 in 2020, 2021 and 2022, respectively.

The Company paid $ 3,000 during the nine months ended October 2, 2020.

The stock portion of 136 shares held in escrow will be released quarterly starting January 2021 through July 2022.

The exercise of the Call Option effectively canceled the put option held by Flagship, Inc.

On July 24, 2019, the Company entered into a standard form of agreement with design-builder Carroll Daniel Construction Company to provide design and construction services related to an approximately 336,000 square foot facility located in Gainesville, Georgia.

The Company plans to use the facility for the manufacture of its products including vehicle shock absorbers.

This agreement was amended on December 23, 2019.

The agreement contains several design and construction milestone dates that began in June 2019.

The Company expects to pay a total of approximately $ 36,500 under the terms of this agreement.

Any additional costs will be addressed as they arise until the completion of the facility, which is currently expected to occur on or around August 31, 2020.

Other Contingencies - On June 21, 2018, the U.S.

2 unchanged sentences

As a result of the Court’s decision, most states enacted legislation to require sellers who meet economic nexus thresholds to register, collect and remit sales and use taxes on transactions with out-of-state customers.

The Company believes that it is possible that it will incur a liability for uncollected sales tax on some portion of its e-commerce sales through July 3, 2020.

The Company believes that it is possible that it will incur a liability for uncollected sales tax on some portion of its e-commerce sales through October 2, 2020.

Based on information currently available, any retroactively imposed liability is not expected to be material to the Company’s results of operations or financial position because direct end-user sales in states where the Company is not registered comprise a small portion of total revenues.

Derivatives and Hedging

On August 17, 2020 the Company entered into a Swap to mitigate the cash flow risk associated with changes in interest rates on $ 200,000 of its variable rate debt.

Refer to Note 8 - Debt for further details of the Company's variable rate debt.

The Swap matures on March 11, 2025.

The Company pays a base fixed rate of 0.73 % and in return receives the greater of (1) 1-month LIBOR, or (2) 0.50 %.

The Company accounts for interest rate swap contracts in accordance with ASC 815, Derivatives and Hedging, which requires all derivatives, including derivatives designated as accounting hedges, to be recorded on the balance sheet at fair value.

The swap has been designated and accounted for as a cash flow hedge of the forecasted interest payments on the Company’s debt.

As long as the swap continues to be a highly effective hedge of the designated interest rate risk, changes in the fair value of the swap are recorded in accumulated other comprehensive income (loss), a component of equity.

Any ineffective portion of a change in the fair value of a hedge is recorded in earnings.

The fair value of the Swap on October 2, 2020 was a liability of $ 1,038 .

Refer to Note 11 - Fair Value Measurement s and Finan cial Instruments for information on determining the fair value.

The liability is included in other liabilities in the consolidated balance sheets.

At both the inception of the Swap and at October 2, 2020, the interest rate swap was considered highly effective and accordingly, the $ 1,038 change in fair value incurred from inception was deferred and recorded in other comprehensive income (loss), net of taxes.

As required under ASC 815, the Swap’s effectiveness will be assessed on a quarterly basis.

The Company’s derivative counterparty is an investment grade financial institution.

The Company does not have any collateral arrangements with its derivative counterparty and the derivative contract does not contain credit risk related contingent features.

FOX FACTORY HOLDING CORP.

3 unchanged sentences

The following table presents the Company's hierarchy for its assets, liabilities and redeemable non-controlling interest measured at fair value on a recurring basis as of the following periods:

July 3, 2020 January 3, 2020

October 2, 2020 January 3, 2020

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Credit Facility $ — $ 389,242 $ — $ 389,242 $ — $ 68,000 $ — $ 68,000

Interest Rate Swap — 1,038 — 1,038 — — — —

Non-controlling interest subject to put provisions — — — — — — 15,719 15,719

Total liabilities measured at fair value $ — $ 390,280 $ — $ 390,280 $ — $ 68,000 $ 15,719 $ 83,719

There were no transfers of assets or liabilities between Level 1, Level 2, and Level 3 categories of the fair value hierarchy during the three and six month period ended July 3, 2020.

There were no transfers of assets or liabilities between Level 1, Level 2, and Level 3 categories of the fair value hierarchy during the three and nine month period ended October 2, 2020.

The Company used Level 2 inputs to determine the fair value of its First Amended and Restated Credit Facility.

As of July 3, 2020, the carrying amount of the principal under the Company’s First Amended and Restated Credit Facility approximated fair value because it had a variable interest rate that reflected market changes in interest rates and changes in the Company’s net leverage ratio.

As of July 3, 2020, the Company had potential obligations to purchase the non-controlling interests held by third parties in the Tuscany subsidiary.

These obligations were in the form of put provisions and were exercisable at the third-party owners' discretion within the specified periods outlined in the put provision within the Tuscany stockholders' agreement.

If these put provisions were exercised, the Company would be required to purchase the third-party owners' non-controlling interests at the appraised fair value.

The initial non-controlling interest value was implicit in the purchase price and is revalued each quarter, with the adjustment being recorded directly as a component of retained earnings.

The methodology the Company uses to estimate the fair value of the non-controlling interests subject to these put provisions is based on an average multiple of earnings before income taxes, depreciation and amortization ("EBITDA"), taking into consideration historical earnings and other factors.

The estimated fair value is then compared to the carrying value based on the initial valuation and the cumulative net earnings attributable to the non-controlling interest.

At July 3, 2020, the estimated fair value was adjusted based on the agreement between the Company and the non-controlling interest holders executed on July 22, 2020.

The Company believes the carrying amount of its First Amended and Restated Credit Facility approximates the fair value at October 2, 2020 because, while subject to a minimum LIBOR floor rate, the interest rate approximates current market rates of debt with similar terms and comparable credit risk.

On August 17, 2020 the Company entered into an interest rate swap agreement to mitigate the cash flow risk associated with changes in interest rates on its variable rate debt.

Refer to N ote 10 - Derivatives and Hedging for additional details of the agreement.

In accordance with ASC 815, Derivatives and Hedging Interest rate swap contract is recognized as an asset or liability on the consolidated balance sheets and is measured at fair value.

The fair value was calculated utilizing Level 2 inputs.

On July 22, 2020, the Company, pursuant to a stock purchase agreement with Flagship, Inc., dated as of the same date, purchased the remaining 20 % interest of FF US Holding Corp.

for $ 24,975 payable in a combination of stock and cash.

Refer to Note 9 - Commitments and Contingencies for additional details of this agreement.

The following table provides a reconciliation of the beginning and ending balances for the Company's redeemable non-controlling interest measured at fair value using Level 3 inputs:

Prior to the consummation of the stock purchase, the non-controlling interest was measured at fair value using Level 3 inputs.

The following table provides a reconciliation of the beginning and ending balances for the Company's redeemable non-controlling interest:

Redeemable Non-Controlling Interest (Level 3 measurement)

2 unchanged sentences

Change in fair value 8,184

Balance at July 3, 2020 $ 24,975

Purchase of non-controlling interest (24,975)

Balance at October 2, 2020 $ —

FOX FACTORY HOLDING CORP.

3 unchanged sentences

Secondary Stock Offerings

In June 2020, the Company closed a secondary offering whereby it sold 2,760 shares of its common stock at a price of $ 76.00 per share for gross proceeds of $ 209,760 .

In June 2020, the Company completed a secondary offering whereby it sold 2,760 shares of its common stock at a price of $ 76.00 per share for gross proceeds of $ 209,760 .

The net proceeds to the Company after underwriters' discounts and commissions of $ 11,015 and $ 511 of offering costs was $ 198,234 .

3 unchanged sentences

The following table summarizes the allocation of stock-based compensation in the accompanying consolidated statements of income:

For the three months ended For the six months ended

July 3, 2020 June 28, 2019 July 3, 2020 June 28, 2019

For the three months ended For the nine months ended

October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019

Cost of sales $ 191 $ 107 $ 467 350

3 unchanged sentences

Total $ 2,363 $ 1,605 $ 6,360 4,955

The following table summarizes the activity for the Company's unvested restricted stock units ("RSU") for the six months ended July 3, 2020:

The following table summarizes the activity for the Company's unvested restricted stock units ("RSU") for the nine months ended October 2, 2020:

Unvested RSUs

4 unchanged sentences

Vested ( 217 ) $ 37.18

Unvested at July 3, 2020 474 $ 48.20

As of July 3, 2020, the Company had approximately $ 20,523 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 2.89 years.

During the six months ended July 3, 2020, no shares of common stock were issued due to the exercise of stock options and no options to purchase common stock expired or were forfeited.

As of July 3, 2020, stock-based compensation expense related to stock options has been fully recognized.

Unvested at October 2, 2020 457 $ 49.81

As of October 2, 2020, the Company had approximately $ 19,447 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 2.74 years.

During the nine months ended October 2, 2020, 120 shares of common stock were issued due to the exercise of stock options and no options to purchase common stock expired or were forfeited.

As of October 2, 2020, stock-based compensation expense related to stock options has been fully recognized.

FOX FACTORY HOLDING CORP.

1 unchanged sentence

(in thousands, except per share amounts)

For the three months ended For the six months ended

July 3, 2020 June 28, 2019 July 3, 2020 June 28, 2019

For the three months ended For the nine months ended

October 2, 2020 September 27, 2019 October 2, 2020 September 27, 2019

Provision for income taxes $ 5,431 $ 4,473 $ 9,555 $ 11,596

Effective tax rates 12.5 % 12.9 % 13.7 % 13.9 %

For the three and six months ended July 3, 2020, the difference between the Company's effective tax rate and the 21 % federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income, research and development credits, and $ 646 and $ 686 in excess benefits related to stock-based compensation, respectively.

For the three and nine months ended October 2, 2020, the difference between the Company's effective tax rate and the 21 % federal statutory rate resulted primarily from lower foreign tax rates, a lower tax rate on foreign derived intangible income, research and development credits, realization of foreign tax credits, and $ 3,107 and $ 3,793 in excess benefits related to stock-based compensation, respectively.

For the three months ended April 3, 2020, the Company benefited from a negotiated reduction of Switzerland withholding tax on prior year earnings.

These benefits were partially offset by state taxes, global low-tax intangible income tax and non-deductible expenses.

For the three and six months ended June 28, 2019, the difference between the Company's effective tax rate and the 21 % federal statutory rate resulted primarily from lower foreign tax rates, a lower tax rate on foreign derived intangible income, research and development credits, and $ 1,808 and $ 3,635 from excess benefits related to stock-based compensation, respectively.

For the three and nine months ended September 27, 2019, the difference between the Company's effective tax rate and the 21 % federal statutory rate resulted primarily from lower foreign tax rates, lower effective federal rates on foreign derived intangible income, research and development credits, and $ 1,873 and $ 5,508 in excess benefits related to stock-based compensation, respectively.

In the three months ended September 27, 2019, the Company refined its 2019 estimated deduction for foreign derived intangible income, resulting in a 4 % benefit to the effective tax rate.

These benefits were partially offset by state taxes, foreign withholding taxes and the impact of non-deductible expenses.

4 unchanged sentences

The lease is effective through April 1, 2024, with monthly rent payments of $ 16 .

Rent expense under this lease was $ 48 and $ 96 for the three and six months ended July 3, 2020.

Rent expense under this lease was $ 48 and $ 144 for the three and nine months ended October 2, 2020.

On March 11, 2020, the Company acquired 100% of the issued and outstanding stock of SCA Performance Holdings, Inc.

2 unchanged sentences

The lease is effective through April 13, 2028, with monthly rent payments of $ 28 .

Rent expense under this lease was $ 84 and $ 112 for the three and six months ended July 3, 2020.

Rent expense under this lease was $ 84 and $ 196 for the three and nine months ended October 2, 2020.

Refer to Note 15 - Acquisitions for further details of this acquisition.

On July 22, 2020 the Company, pursuant to a stock purchase agreement with Flagship, Inc., purchased the remaining 20 % interest of FF US Holding Corp.

for $ 24,975 payable in a combination of stock and cash.

The cash portion will be settled in quarterly installment payments through July 2022.

Refer to Note 9 - Commitments and Contingencies for additional details of this agreement.

FOX FACTORY HOLDING CORP.

9 unchanged sentences

The Company also agreed to an additional $ 10,589 of contingent retention incentives for key SCA management, of which $ 9,283 is cash and $ 1,306 is stock, to be held in escrow and payable over the next two years.

The Company recognized $ 1,350 and $ 1,493 in costs associated with such retention incentives during the three and six months ended July 3, 2020.

The Company recognized $ 1,429 and $ 2,921 in costs associated with such retention incentives during the three and nine months ended October 2, 2020.

Additionally, the Company paid $ 1,750 in transaction compensation to key SCA management concurrently with the closing.

18 unchanged sentences

Purchase price allocation $ 329,531

The Company incurred $ 10,582 of acquisition costs in conjunction with the SCA acquisition, including $ 1,750 of transaction compensation during the six months ended July 3, 2020 and $ 602 of transaction costs during the three months ended January 3, 2020.

The Company incurred $ 10,582 of acquisition costs in conjunction with the SCA acquisition, including $ 1,750 of transaction compensation during the nine months ended October 2, 2020 and $ 602 of transaction costs during the three months ended January 3, 2020.

These costs are classified as general and administrative expenses in the accompanying condensed consolidated statements of income.

18 unchanged sentences

A pro forma adjustment has been made to reflect the income taxes that would have been recorded at the federal statutory rate based on SCA’s net income.

The pro forma results for the six months ended July 3, 2020 exclude transaction costs associated with the acquisition and the results for the six months ended June 28, 2019 have been adjusted to include these charges.

The pro forma results for the nine months ended October 2, 2020 exclude transaction costs associated with the acquisition and the results for the nine months ended September 27, 2019 have been adjusted to include these charges.

This pro forma data is presented for informational purposes only and does not purport to be indicative of the results of future operations or of the results that would have occurred had the acquisition taken place in the periods noted below.

For the six months ended

July 3, 2020 June 28, 2019

For the nine months ended

October 2, 2020 September 27, 2019

Pro forma sales $ 647,512 $ 632,848

4 unchanged sentences

Total SCA pre-tax income included in the condensed consolidated statements of income $ 2,950

Subsequent Events

On July 22, 2020 the Company entered into a stock purchase agreement with Flagship, Inc.

whereby the Company agreed to purchase the remaining 20 % interest of FF US Holding Corp.

for $ 24,975 payable in a combination of stock and cash.

The cash portion will be settled in quarterly installment payments through July 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements