What changed in this filing

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Item 1. Business

2021-02-25 compared with 2020-03-03 · 82 added, 45 removed, 264 unchanged (32% of the section changed)

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We design our products for, and market our products to, some of the world’s leading cycling and automotive OEMs and to consumers through the aftermarket channel.

Many of our OEM customers, including Giant, Pivot, Santa Cruz Bicycles, Specialized, Scott, Trek, Yeti Cycles and YT in Specialty Sports and BRP, Ford, Honda, Jeep, Kawasaki, Polaris, Toyota, Triumph, and Yamaha in Powered Vehicles, are among the market leaders in their respective product categories, and help shape, as well as respond to, consumer trends in their respective categories.

Many of our OEM customers, including Giant, Pivot, Santa Cruz Bicycles, Specialized, Scott, Trek, Yeti Cycles and YT in Specialty Sports and BRP, Ford, Honda, Jeep, Kawasaki, Polaris, Toyota, Triumph, Textron and Yamaha in Powered Vehicles, are among the market leaders in their respective product categories, and help shape, as well as respond to, consumer trends in their respective categories.

We believe that OEMs often prominently display and incorporate our products to improve the marketability and consumer demand for their performance models, which reinforces our brand image.

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Today, our products for bicycles are primarily for mountain bikes, road bikes, and e-bikes.

Our products for powered vehicles are used primarily on Side-by-Sides, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, motorcycles, and commercial trucks.

We focus on premium-priced products within each of these categories, which we consider to be the high-end segment because of their higher retail sale prices, where we believe consumers prefer well-designed, performance-oriented equipment.

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• continuing product cycle innovation, which we have observed often motivates consumers to upgrade and purchase new products for enhanced performance;

• increased sales opportunities for high-end bikes and powered vehicles in international markets.

As vehicles in our end-markets evolve and grow more capable, performance-defining products and systems have become, and we believe will continue to become, increasingly more important for improved performance and control.

• increasing sales opportunities for high-end bikes and powered vehicles in international markets.

As vehicles in our end-markets evolve and grow more capable, performance-defining products and systems have become, and we believe will continue to be, increasingly more important for improved performance and control.

Additionally, we believe there are opportunities to continue to leverage our technical know-how of suspension products to provide solutions beyond our current applications and end-markets.

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Over the past several years, we have developed multiple new products, such as:

• PODIUM Internal Bypass, introduced into the utility task vehicle ("UTV") market, which through its internal bypass technology, allows the vehicle to be plush on small bumps and deliver excellent chassis control while providing progressive bottoming resistance with each increment of travel used;

• X2 technology used in our 2.5 PODIUM shocks for UTVs that feature high- and low-speed rebound adjustment, high- and low-speed compression adjustment, and a dual-rate spring for the rear shocks to allow drivers to tune for many different terrain types and driving styles;

• Aluminum bodied derivatives of Internal Bypass and X2 that allow for up to 10 pounds of weight loss per vehicle and improve corrosion resistance;

• A new hydraulic top out system, released on Jeep and Ford, that is instrumental in controlling the high corner weights of trucks during off road maneuvers;

• The first original equipment ("OE") capable hydraulic bump stop, currently used on the new Jeep Mojave, which allows for bottoming resistance never before available from the factory;

• Our new motorcycle fork cartridge uses bicycle damper technology and allows us to sell both front and rear suspension solutions to the motorcycle aftermarket;

• Our new iQS modal electronic suspension control system, current in use on UTVs, Snowmobiles, and Trucks, allows for easy aftermarket fitment and cheaper OE fitments;

• Our ultra-light weight coil and air snowmobile shock platforms offer the same dominant FOX performance features at a new class leading weight;

• LIVE Valve, our proprietary semi-active, electronic suspension that processes data from multiple vehicle sensors to adjust the suspension virtually instantaneously to the demands of changing terrain.

This technology is currently in use on Side-by-Sides, off-road capable, on-road trucks, and mountain bikes;

This technology is currently in use UTVs, Trucks, and mountain bikes;

• Our new main piston LIVE technology has a low hysteresis design that speeds response time and allows for position sensitive algorithms;

• 32, 34 and 36 Factory Series FLOAT FIT4, which reduces overall fork weight, provides external adjustability with our fourth-generation FOX Isolated Technology (FIT) closed-cartridge damper, and includes the self-adjusting negative chamber air spring for quieter operation and ease of adjustment;

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• Rhythm series fork products developed to address a lower price point offering without compromising proven FOX performance;

• PODIUM Internal Bypass, introduced into the Side-by-Side market, which through its internal bypass technology, allows the vehicle to be plush on small bumps and deliver excellent chassis control while providing progressive bottoming resistance with each increment of travel used;

• X2 technology used in our 2.5 PODIUM shocks for side-by-sides that feature high- and low-speed rebound adjustment, high- and low-speed compression adjustment, and a dual-rate spring for the rear shocks to allow drivers to tune for many different terrain types and driving styles;

• Race Face Vault Hub, a new 120-point high-engagement mountain bike hubset featuring tool-free end caps that simplify conversion among all major axle standards and is approved for e-bike applications;

• Race Face Next R31 Carbon Wheels featuring a single spoke length throughout and an offset rim design for improved spoke balance and strength;

• Easton EC90 SL Crankset with Cinch Power Meter spindle, a versatile road bike crankset that allows quick conversion between 1x and 2x road and gravel chainring configurations.

The Cinch Power Meter spindle, through a one-time connection to a smart phone, automatically works with ride-recording and power-measurement applications.

• Race Face Next R36 Carbon Wheels featuring a 36mm wide carbon rim for increase tire volume and traction, a single spoke length throughout and an offset rim design for improved spoke balance and strength;

• Easton EC90 SL Crankset, a versatile road bike crankset that allows quick conversion between 1x and 2x road and gravel chainring configurations.

Strategic brand for OEMs, dealers and distributors

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Leverage technology and brand to expand into new categories and end-markets

We believe we have developed a reputation as a leader in performance-defining products and that our reputation combined with our ability to improve vehicle performance by incorporating performance suspension products and other components results in us frequently being approached by OEM product development teams, athletes and others looking to improve the performance of their vehicles, including in end-markets in which we have not previously offered products.

We believe our performance-defining technologies have applications in end-markets in which we do not currently participate in a meaningful way, and we intend to selectively develop products for and forge relationships with customers in additional markets.

These markets may include military, recreational vehicles (RVs), and "performance street" cars.

We believe innovation is the foundation of our company.

As we continue to leverage latest technology to develop a diverse portfolio of performance-defining products, our new Powered Vehicle Group facility extends our ability to not only scale to newer levels but also do it efficiently.

We have great relations with our OEM and Aftermarket partners and given our key distinct strengths, we believe we have and will continue to win more applications.

Leveraging our technology and scale, we have successfully expanded into commercial/RV and street car applications with a lot of room to penetrate and plan to grow those channels with more pioneering product applications.

Additionally, to grow our end user base, we are now looking at ways to explore international opportunities with some of our applications.

Opportunistically expand our business platform through acquisitions

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d/b/a Tuscany Motor Company ("Tuscany") we acquired the majority interest in the business of Flagship, Inc., a designer, manufacturer and distributor of premium aftermarket powered vehicle performance packages and personal-use specialty vehicles based on OEM vehicle chassis.

We purchased the remaining interest in July 2020.

In May 2019, we acquired substantially all of the assets of Air Ride Technologies, Inc., d/b/a Ridetech, a manufacturer of suspension systems that enhance the handling and ride quality of muscle cars, trucks, sports cars and hot rods.

The Company believes that this acquisition aligns with its focus on improving vehicle performance and provides it with an opportunity to enter the street performance market.

In March 2020, we acquired substantially all the issued and outstanding capital stock of SCA Performing Holdings, Inc.

("SCA"), a leading OEM authorized specialty vehicle manufacturer for light duty trucks and sport utility vehicles.

The Company expects this acquisition to expand its North American geographic manufacturing footprint and broaden its product offerings in the automotive industry.

We also believe that our passionate customer base has a desire for other types of performance products beyond those that attach to a vehicle or bike.

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Accelerate international growth

While a significant percentage of our current sales are to OEMs and dealers and distributors located outside the United States, we believe international expansion represents a significant opportunity for us and we have, and intend to continue to, selectively increase infrastructure investments and focus on identified geographic regions.

While a significant percentage of our current sales are to OEMs and dealers and distributors located outside the U.S., we believe international expansion represents a significant opportunity for us and we have, and intend to continue to, selectively increase infrastructure investments and focus on identified geographic regions.

We believe that rising consumer discretionary income in a number of developing markets and increasing consumer preferences for premium, performance bikes and powered vehicles should contribute to increasing demand for our products.

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This transition has shortened production lead times to our bike OEM customers, improved supply chain efficiencies, and reduced manufacturing costs.

With the transition of all of our bike suspension component manufacturing to Taichung, Taiwan, we have converted the Watsonville, California manufacturing facility to exclusively manufacture powered vehicle suspension products.

And during 2019, we also completed the process of relocating our Specialty Sports Group’s U.S.

aftermarket bike products distribution, sales, and service operations to Reno, Nevada.

In addition, we are currently constructing an approximately 336,000 square foot state-of-the-art facility in Hall County, Georgia to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.

With the transition of all of our bike suspension component manufacturing to Taichung, Taiwan, we converted the Watsonville, California manufacturing facility to exclusively manufacture powered vehicle suspension products.

In 2019, we completed the process of relocating our Specialty Sports Group’s U.S.

aftermarket bike products distribution, sales, and service operations to Sparks, Nevada.

In 2020, we substantially completed the first phase of construction of an approximately 336,000 square foot state-of-the-art facility in Hall County, Georgia to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.

The first phase will be used for manufacturing, warehousing, distribution and office space.

Certain portions of our business are seasonal;

we believe this seasonality is due to the delivery of new products.

Generally, our quarterly sales have been the lowest in the first quarter and highest in the third quarter of the year.

For example, our sales in our first and third quarters of 2019 represented 22% and 28% of our total sales for the year, respectively.

As we have diversified our product offerings and our product launch cycles, seasonal fluctuations are becoming less material.

The markets for performance-defining products, including suspension components, wheels, and cranks, are highly competitive.

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(commonly known as King Shocks), Icon Vehicle Dynamics, Sway-A-Way, Pro Comp USA Suspension, and Rancho (Tenneco).

In the market for suspension systems, or lift kits, we compete with TransAmerican Wholesale/Pro Comp USA, Rough Country Suspension Systems, TeraFlex, ReadyLIFT Suspension, Tuff Country EZ-Ride Suspension, and Rusty’s Off-Road.

In the market for up-fitted vehicles, we compete with SCA Performance, Rocky Ridge Trucks, and DSI Custom Vehicles.

In the market for suspension systems, or

lift kits, we compete with TransAmerican Wholesale/Pro Comp USA, Rough Country Suspension Systems, TeraFlex, Falcon, ReadyLIFT Suspension, Tuff Country EZ-Ride Suspension, and Rusty’s Off-Road.

In the market for up-fitted vehicles, we compete with Roush Performance and DSI Custom Vehicles.

Specialty Sports

Within the market for bike suspension components, we compete with several companies that manufacture front and rear suspension products, including RockShox (a subsidiary of SRAM Corp.), X-Fusion Shox (a wholly owned subsidiary of A-Pro), Manitou (a subsidiary of HB Performance Systems), SR Suntour, DT Swiss (a subsidiary of Vereinigte Drahtwerke AG), Cane Creek Cycling, DVO Suspension, Bos-Mountain Bike Suspensions, and Öhlins Racing AB.

In the market for other bike components, we compete with SRAM, Truvativ and Zipp (all subsidiaries of SRAM Corp.), DT Swiss (a subsidiary of Vereinigte Drahtwerke AG), Mavic (a subsidiary of Amer Sports Corp.), and Shimano.

We design and manufacture performance-defining products, of which a significant portion is suspension products.

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Powered Vehicles

In our powered vehicle product categories, we offer premium products under the FOX, BDS Suspension, Zone Offroad, JKS Manufacturing, RT Pro UTV, 4x4 Posi-Lok, Tuscany, and Ridetech brands for Side-by-Sides, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, motorcycles, and commercial trucks.

In each of the years ended January 3, 2020, December 28, 2018 and December 29, 2017, approximately 60%, 54% and 48%, respectively, of our sales were attributable to sales of powered vehicles related products.

In our powered vehicle product categories, we offer premium products under the FOX, BDS Suspension, Zone Offroad, JKS Manufacturing, RT Pro UTV, 4x4 Posi-Lok, Ridetech, Tuscany, and SCA brands for Side-by-Sides, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, motorcycles, and commercial trucks.

In each of the years ended January 1, 2021, January 3, 2020 and December 28, 2018, approximately 59%, 60% and 54%, respectively, of our sales were attributable to sales of powered vehicles related products.

Products for these vehicles are designed for use on roads, for trail riding, in racing, and to help provide performance and comfort.

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We up-fit trucks to be off-road capable, on-road vehicles with components and products such as lift kits, shock products, superchargers, interior accessories, wheel, tires, lighting, and body enhancements.

Our acquisition of SCA in March 2020 has increased the portion of our sales related to upfitting.

In addition, we manufacture suspension systems that enhance the handling and ride quality of muscle cars, trucks, sports cars and hot rods.

Specialty Sports

As a result of our acquisitions in recent years, our bike product offerings have expanded and are used on a wide range of performance mountain bikes and road bikes under the FOX, Race Face, Easton Cycling and Marzocchi brands.

Given this wide range of bike products and brands, as well as the potential to expand our offerings to include other types of performance-defining products, we have changed the name of the group from Bike Division to Specialty Sports Group.

In each of the years ended January 3, 2020, December 28, 2018 and December 29, 2017, approximately 40%, 46% and 52%, respectively, of our sales were attributable to sales of bike-related products.

Our bike product offerings are used on a wide range of performance mountain bikes and road bikes under the FOX, Race Face, Easton Cycling and Marzocchi brands.

Given this wide range of bike products and brands, as well as the potential to expand our offerings to include other types of performance-defining products, we changed the name of the group from Bike Division to Specialty Sports Group.

In each of the years ended January 1, 2021, January 3, 2020 and December 28, 2018, approximately 41%, 40% and 46%, respectively, of our sales were attributable to sales of bike-related products.

Primarily for the mountain bike market, we offer mid-end and high-end front fork and rear suspension products designed for cross-country, trail, all-mountain, free-ride and downhill riding.

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In addition, consumers select our performance-defining products in the aftermarket channel, where we market through a global network of dealers and distributors.

We currently sell to more than 200 OEMs and distribute our products to more than 5,000 retail dealers and distributors worldwide.

We currently sell to approximately 150 OEMs and distribute our products to more than 5,000 retail dealers and distributors worldwide.

In 2020, 55% of our sales resulted from sales to OEM customers and 45% resulted from sales to dealers and distributors for resale in the aftermarket channel.

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Sales attributable to our 10 largest OEM customers, which can vary from year-to-year, collectively accounted for approximately 36%, 44% and 43% of our sales in 2020, 2019 and 2018.

In 2020, no single customer represented 10% or more of our sales.

Our sales to Ford, a powered vehicles OEM, accounted for approximately 11% and 8% in 2019 and 2018, respectively.

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Our international sales totaled $297.3 million, $248.8 million and $230.5 million or 33%, 33% and 37% of our total sales in 2020, 2019 and 2018, respectively.

Sales attributable to countries outside the United States are based on shipment location.

Our international sales, however, do not necessarily reflect the location of the end users of our products, as many of our products are incorporated into bikes and powered vehicles that are assembled at international locations and then shipped back to the United States.

Sales attributable to countries outside the U.S.

are based on shipment location.

Additional information about our product revenues and certain geographical information is available in Note 2 - Revenues of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

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Powered Vehicles

We sell our powered vehicle-suspension products to OEMs, including Arctic Cat, BRP, Ford, Honda, Indian Motorcycles, Jeep, Kawasaki, Polaris, Toyota, and Yamaha.

We sell our powered vehicle-suspension products to OEMs, including BRP, Ford, Honda, Jeep, Kawasaki, Polaris, Toyota, Triumph, Textron and Yamaha.

We also are continually nurturing and developing relationships with our existing and new OEMs, as the powered vehicles market continues to grow.

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Specialty Sports

We sell our bike suspension and components products to a broad network of domestic and international bike OEMs, including Cannondale, Canyon, Cube, Giant, Lapierre, Merida, Pivot, Santa Cruz Bicycles, Scott, Specialized, Trek, Yeti Cycles and YT.

We sell our bike suspension and components products to a broad network of domestic and international bike OEMs, including Giant, Pivot, Santa Cruz Bicycles, Specialized, Scott, Trek, Yeti Cycles and YT.

We have long-standing relationships with many of the top bike OEMs.

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Furthermore, manufacturing our own products enables us to adjust our labor and production inputs to meet seasonal demands and the customized requirements of some of our customers.

During 2018, we moved our corporate headquarters from Scotts Valley, California to our offices in Braselton, Georgia.

We are also currently constructing an approximately 336,000 square foot state-of-the-art facility in Hall County, Georgia to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.

The first phase of the Hall County, Georgia project is expected to be completed late in the second quarter of 2020 and will be used for manufacturing, warehousing, distribution and office space.

Our Scotts Valley, California location will remain an essential shared services facility housing certain corporate functions.

We had approximately $65.1 million and $72.9 million in firm backlog orders at January 3, 2020 and December 28, 2018, respectively.

The decrease in 2019 backlog, as compared to 2018, was due to changes in the seasonality and timing of order placement.

The first phase will be used for manufacturing, warehousing, distribution and office space.

We had approximately $128.5 million and $65.1 million in firm backlog orders at January 1, 2021 and January 3, 2020, respectively.

The increase in 2020 backlog, as compared to 2019, was due to growth in sales, growing market share, and shortage of non FOX components at the OEMs, affecting the application of FOX components.

Suppliers and raw materials

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Prices for our raw materials fluctuate from time to time, but historically, price fluctuations have not materially impacted our business.

We also have OEM partners that supply vehicle chassis used in our upfitting operations.

Our operations could be negatively impacted if we are not able to receive vehicle chassis according to our production needs, or if an OEM decides to discontinue supplying chassis for other reasons.

We work closely with our supply base, and depend upon certain suppliers to provide raw inputs, such as forgings, castings and molded polymers that have been optimized for weight, structural integrity, wear and cost.

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The Kashima Agreement does not contain minimum purchase obligations.

As of January 3, 2020, we had approximately 2,600 full-time employees in the United States, Canada, Europe and Taiwan.

We also use part-time employees at our manufacturing facilities to help us meet seasonal demands.

Human Capital Resources

Employee Overview

As of January 1, 2021, we had approximately 3,000 full-time employees in the U.S., Canada, Europe and Taiwan.

Our employees are primarily located in the U.S.

We also use part-time and temporary employees at our manufacturing facilities to help us meet seasonal demands.

None of our employees are subject to collective bargaining agreements.

Health and Safety

Employee health and safety in the workplace is one of our top priorities.

In response to the COVID-19 pandemic, we have been working to keep our employees safe and healthy from this outbreak.

Using guidance from the Centers for Disease Control ("CDC") and the World Health Organization ("WHO"), we have taken a number of measures to keep employees safe.

Employees are offered paid sick leave or paid time off to cover sickness and absences.

We will continue to make our employees a priority.

Inclusion, Diversity and Engagement

At FOX, we believe that our people are our greatest asset.

Therefore, we are committed to building and maintaining an inclusive workplace in which all employees feel they belong, are empowered to be their best, and inspired to deliver maximum performance.

Our employees have diverse skills, experiences and unique perspectives that collectively contribute to greater opportunities for engagement, innovation and business growth.

Our commitment to Inclusion, Diversity, and Engagement aligns with our values of Leadership, Trust, Service, Agility, Ingenuity, and Collaboration and is a critical component of being a purpose-led organization.

The Inclusion, Diversity, and Engagement strategy is sponsored by the entire Executive Leadership Team and is centered on the following objectives:

• build a globally diverse, high-performing workforce that mirrors the populations around us;

• foster an inclusive workplace culture where all feel like they are heard, welcomed, valued, and empowered;

• engage our people in making an impact in the marketplace where we live, work, and play.

Employee Benefits

Our employee benefits are designed to attract and retain our employees and include medical, health and dental insurance, short-term and long-term disability insurance, accidental death and disability insurance, voluntary supplemental coverages, discount programs, and our 401(k) Plan.

As part of the 401(k) Plan, FOX matches 50 percent of the first 6 percent of compensation contributed by the employee into the 401(k) Plan.

Practices related to working capital items

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Environmental

Our manufacturing operations, facilities and properties in the United States, Canada and Taiwan are subject to evolving foreign, international, federal, state and local environmental and occupational health and safety laws and regulations, including those governing air emissions, wastewater discharge and the storage and handling of chemicals and hazardous substances.

Our manufacturing operations, facilities and properties in the U.S., Europe, Canada, and Taiwan are subject to evolving foreign, international, federal, state and local environmental and occupational health and safety laws and regulations, including those governing air emissions, wastewater discharge and the storage and handling of chemicals and hazardous substances.

If we fail to comply with such laws and regulations, we could be subject to significant fines, penalties, costs, liabilities or restrictions on operations, which could negatively affect our financial condition.

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Consumer safety

We are subject to the jurisdiction of the United States Consumer Product Safety Commission ("CPSC"), and other federal, state and foreign regulatory bodies including the National Highway Traffic Safety Administration ("NHTSA"), which enforces the Federal Motor Vehicle Safety standards.

We are subject to the jurisdiction of the U.S.

Consumer Product Safety Commission ("CPSC"), and other federal, state and foreign regulatory bodies including the National Highway Traffic Safety Administration ("NHTSA"), which enforces the Federal Motor Vehicle Safety standards.

Under CPSC regulations, a manufacturer of consumer goods is obligated to notify the CPSC, if, among other things, the manufacturer becomes aware that one of its products has a defect that could create a substantial risk of injury.

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manufacturing, sale and service of performance-defining products.

Additional information about our product segment and certain geographic information is available in Note 2 - Revenues of the "Notes to Consolidated Financial Statements" in this Annual Report on Form 10-K.

Additional information about our product segment and certain geographic information is available in Note 2 - Revenues and Note 5 - Property, Plant and Equipment, net of the "Notes to Consolidated Financial Statements" in this Annual Report on Form 10-K.

Corporate and available information

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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-K

Item 1. Business