What changed in this filing

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Item 1A. Risk Factors

2021-02-25 compared with 2020-03-03 · 152 added, 95 removed, 457 unchanged (35% of the section changed)

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In that event, the trading price of our common stock could decline.

Summary of Risk Factors

The risks described below include, but are not limited to, the following:

• our business, financial condition and results of operations have been and may continue to be adversely impacted by global public health epidemics or pandemics, including the current COVID-19 pandemic;

• failure to effectively compete against competitors, enhance existing products and develop, manufacture and market new products that respond to consumer needs and preferences and achieve market acceptance may harm our business and financial results;

• our performance-defining products, and the vehicles into which they are incorporated, are discretionary purchases and may be adversely impacted by changes in the economy;

• our growth in the powered vehicle category is dependent upon our continued ability to expand product sales into powered vehicles that require performance-defining products and the continued expansion of the market for these powered vehicles;

• a significant portion of our sales are highly dependent on the demand for high-end bikes and a material decline in the demand for these bikes or their suspension components could have a material adverse effect on our business or results of operations;

• changes in our customer, channel and product mix could place demands that are more rigorous on our infrastructure and cause our profitability percentages to fluctuate;

• a disruption in the operations of our facilities, or delays in our planned expansion of certain facilities, could have a negative effect on our business, financial condition or results of operations;

• work stoppages or other disruptions at seaports could adversely affect our operating results;

• our business depends substantially on our ability to attract and retain experienced and qualified talent, including our senior management team;

• we may not be able to sustain our past growth or successfully implement our growth strategy, which may have a negative effect on our business, financial condition or results of operations;

• the loss of the support of professional athletes for our products, the inability to attract new professional athletes or disruption in relationships with dealers and distributors may harm our business;

• our business is dependent largely on the orders we receive from our OEM customers and from their success.

The loss of all or a substantial portion of our sales to any of these customers could have a material adverse impact on us and our results of operations;

• our international operations are exposed to risks associated with conducting business globally, including currency exchange rate fluctuations and policies related to global trade and tariffs;

• we have been and may become subject to intellectual property disputes that could cause us to incur significant costs or pay significant damages or that could prohibit us from selling our products;

• if we are unable to enforce our intellectual property rights, our reputation and sales could be adversely affected;

• if we inaccurately forecast demand for our products, we may manufacture insufficient or excess quantities or our manufacturing costs could increase, which could adversely affect our business;

• product recalls, and significant product repair and/or replacement due to product warranty costs and claims have had, and in the future, could have, a material adverse impact on our business;

• an adverse determination in any material product liability claim against us could adversely affect our operating results or financial condition;

• our credit facility places operating restrictions on us and creates default risks, and the variable rate makes us more vulnerable to increases in interest rates;

• we will continue to have the ability to incur debt and our levels of debt may affect our operations and our ability to pay the principal of and interest on our debt and we may incur losses on interest rate swap and hedging arrangements;

• changes in tax laws and regulations or other factors could cause our income tax obligations to increase, potentially reducing our net income and adversely affecting our cash flows;

• we are subject to certain risks in our manufacturing and in the testing of our products and unpredictability in the adoption, implementation and enforcement of increasingly stringent emission standards by multiple jurisdictions could adversely affect our business;

• we are subject to extensive U.S.

federal and state, foreign and international safety, environmental, employment practices and other government regulations that may require us to incur expenses or modify product offerings in order to maintain compliance with such regulation, which could have a negative effect on our business and results of operations;

• increasing focus on environmental, social and governance responsibility, including climate change, may impose additional costs on us and expose us to new risks;

• we are subject to employment practice laws and regulations, and, as such, are exposed to litigation risks and we may incur higher employee costs in the future;

• federal, state, local, foreign and international laws and regulations relating to environmental matters, land-use, and noise and air pollution may have a negative impact on our future sales and results of operations;

• fuel shortages, or high prices for fuel, could have a negative effect on the use of powered vehicles that use our products;

• we do not control our suppliers, OEMs, other customers or partners, or require them to comply with a formal code of conduct, and actions that they might take could harm our reputation and sales;

• we depend on a limited number of suppliers for our materials and component parts for some of our products, including bike components, and the loss of any of these suppliers or an increase in cost of raw materials, particularly with respect to bike component could harm our business;

• regulations related to conflict minerals may force us to continue to incur additional expenses and otherwise adversely impact our business;

• we rely on increasingly complex information systems for management of our manufacturing, distribution, sales and other functions.

If our information systems fail to perform these functions adequately, if we experience an interruption in our operations, or if we are impacted by cybersecurity attacks our business could suffer;

• our vendors’ and commercial partners’ information technology systems may fail or suffer security breaches, which could result in a material disruption of our operations;

• we retain certain personal information about individuals and are subject to various privacy and consumer protection laws;

• our vendors and any potential commercial partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements;

• we have grown and may continue to grow in the future through acquisitions and we may not be able to effectively integrate businesses we acquire or to identify or consummate any future acquisitions on favorable terms, or at all;

• our operating results are subject to quarterly variations in our sales, which could make our operating results difficult to predict and could adversely affect the price of our common stock;

• failure of our internal control over financial reporting could adversely affect our business and financial results;

• the trading price of our common stock may be volatile, and you might not be able to sell your shares at or above the price you pay for the shares;

• future issuances and sales of our shares, or the perception that such sales may occur, could cause our stock price to decline;

• if securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline;

• anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our Company;

• our Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Risks related to our business

Our business, financial condition and results of operations have been and may continue to be adversely affected by global public health epidemics or pandemics, including the recent COVID-19 pandemic.

We face various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the recent coronavirus (“COVID-19”) pandemic.

The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S.

Government in March 2020.

The impact of the COVID-19 pandemic, including changes in consumer behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity.

There have been extraordinary actions taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world, including travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

These government-mandated closures, “shelter-in-place” directives, and an outbreak among, or quarantine of, the employees in any of our facilities, have caused and could continue cause significant interruptions to, or temporary closures of our operations.

These impacts include, but are not limited to:

• significant reductions in demand or significant future volatility in demand for one or more of our products, which may be caused by, among other things:

the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, store closures, or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products, supply chain and shipping constraints, reduced options for marketing and promotion of products or other restrictions in connection with the COVID-19 pandemic;

if prolonged, such impacts can further increase the difficulty of operating our business, including accurately planning and forecasting, planning for operations and may adversely impact our results;

• inability to meet our current or future demand due to disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw materials, truck chassis, or other components, transportation, workforce, or other manufacturing and distribution capability;

• failure of third parties on which we rely, including our suppliers, contract manufacturers, distributors, contractors, commercial banks, and external business partners, to meet their obligations to the Company or to timely meet those obligations, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties and may adversely impact our operations;

• significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including additional or expanded quarantines, governmental or regulatory actions, closures or other restrictions that further limit or close our operating and manufacturing facilities, restrict our employees’ ability to travel or perform necessary business functions, restrict or prevent consumers from having access to our products, or otherwise prevent our third-party partners, dealers, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of our products, which could adversely impact our results;

• increased difficulty in determining the fair value of the Company’s goodwill and other assets for accounting purposes given the level of judgment and estimation that is inherently higher in the current environment considering the uncertainty created by the COVID-19 pandemic, which could result in estimates and assumptions made in valuing goodwill and other Company assets proving to be inaccurate in the future.

These impacts have had and could continue to have a negative effect on our business, financial condition, results of operations and cash flows, as well as the trading price of our securities.

Furthermore, the COVID-19 pandemic has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, interest rates, and liquidity.

The recent volatility in capital markets has also increased the cost of capital and adversely impacted access to capital.

We have modified, and might further modify, our business practices in response to the COVID-19 pandemic, related third-party responses, including from government authorities and our suppliers, customers and distributors, and the economic and social ramifications of the disease and societal responses across the markets in which the Company operates.

Despite our efforts to manage and remedy these impacts to the Company, the ultimate impact and the extent to which the COVID-19 pandemic will continue to affect our business, results of operation and financial condition is difficult to predict and depends on numerous evolving factors outside our control including:

the duration and scope of the pandemic;

government, social, business and other actions that have been and will be taken in response to the pandemic;

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

If we are unable to continue to enhance existing products and develop, manufacture and market new products that respond to consumer needs and preferences and achieve market acceptance, we may experience a decrease in demand for our products, and our business and financial results could suffer.

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Our business depends substantially on global economic and market conditions.

In particular, we believe that currently a significant majority of the end users of our products live in the United States and countries in Europe.

In particular, we believe that currently a significant majority of the end users of our products live in the U.S.

and countries in Europe.

These areas have historically experienced recessions, disruptions in banking and/or financial systems, economic weakness and uncertainty.

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For example, we sponsor a number of professional athletes and professional race teams.

In order to continue to enhance our brand image, we will need to maintain our position in the performance-defining products industry and continue to provide high-quality products and services.

In addition, we will need to continue to invest in sponsorships, marketing and public relations.

There can be no assurance, however, that we will be able to maintain or enhance the strength of our brands in the future.

In order to continue to enhance our brand image, we will need to maintain our position in the performance-defining products industry, continue to provide high-quality products and services, and preserve our reputation.

The rising popularity of social media and other consumer-oriented technologies creates new risks and challenges that could cause damage to our brands and reputation.

Social media platforms make it easy for anyone to provide public feedback that can influence perceptions of our brands, and social media platforms can also accelerate and potentially amplify the scope of negative publicity.

There can be no assurance that we will be able to maintain or enhance the strength of our brands in the future.

Our brands could be adversely impacted by, among other things:

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• high profile component failures (such as a component failure during a race on a mountain bike ridden by an athlete that we sponsor);

• negative publicity regarding our sponsored athletes;

• negative publicity regarding our brand or our sponsored athletes, which could be amplified on social media;

• high profile injury or death to one of our sponsored athletes;

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• changes in consumer trends and perceptions.

• lack of investment in sponsorships, marketing and public relations.

Any adverse impact on our brand could in turn negatively affect our business, financial condition or results of operations.

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Our growth in the powered vehicle category is in part attributable to the expansion of the market for powered vehicles that require performance-defining products.

Such market growth includes the creation of new classes of vehicles that need our products, such as trucks that are up-fitted to be off-road capable, and our ability to create products for these vehicles.

In the event these markets stopped expanding or contracted, or we are unsuccessful in creating new products for these markets or other competitors successfully enter into these markets, we may fail to achieve future growth or our sales could decrease, and our business, financial condition or results of operations could be negatively affected.

Such market growth includes the creation of new classes of vehicles that can benefit from our products, such as trucks that are up-fitted with products to enhance their off-road capability, and our ability to create products for these vehicles.

Additionally, with our acquisitions of SCA Performance and Tuscany, a growing portion of our sales are expected to be generated from providing up-fitting solutions.

In the event these markets stop expanding or contract due to economic factors, changes in consumer preferences or other reasons, or we are unsuccessful in creating new products for these markets or other competitors successfully enter into these markets, we may fail to achieve future growth or our sales could decrease, and our business, financial condition or results of operations could be negatively affected.

A significant portion of our sales are highly dependent on the demand for high-end bikes and a material decline in the demand for these bikes or their suspension components could have a material adverse effect on our business or results of operations.

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Changes in our customer, channel and product mix could place demands that are more rigorous on our infrastructure and cause our profitability percentages to fluctuate.

From time to time, we may experience changes in our customer, channel and product mix from changes in demands from existing customers due to shifts in their products and markets.

We may experience changes in our customer, channel and product mix from time to time as a result of changes in demands from existing customers due to shifts in their products and markets.

Additionally, the Company may pursue new customers and markets.

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In connection with this move, we are utilizing, and expect to continue to use, suppliers who are located closer to our facility in Taichung, Taiwan for a number of materials and components.

With the transition of our entire bike suspension component manufacturing to Taichung, Taiwan, we converted the Watsonville manufacturing facility to be a powered vehicle suspension products manufacturing location exclusively.

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.

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.

In the future, we may move additional manufacturing operations as we re-balance existing facilities or expand to new manufacturing locations.

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Any significant delay in deliveries to our customers could lead to increased returns or cancellations, expose us to damage claims from our customers or damage our brand and, in turn, negatively affect our business, financial condition or results of operations.

Our facilities or operations could be adversely affected by events outside of our control, such as natural disasters, wars or health epidemics.

We may be impacted by natural disasters, wars, health epidemics or other events outside of our control.

For example, we have facilities located in seismically active regions in Northern California and Nevada, and our bike suspension manufacturing is located in Taiwan, which is prone to typhoons.

If major disasters such as earthquakes, typhoons or other events occur, our facilities or those of our suppliers or customers may be seriously damaged, which could result in the disruption of our production and shipment of our products.

In addition, beginning in late 2019, the media has reported a public health epidemic originating in China, prompting precautionary government-imposed closures of certain travel and business.

It is unknown whether and how global supply chains may be affected if such an epidemic persists for an extended period of time.

We may incur additional expenses, production delays, or reductions in customer orders relating to such events outside of our control, which could have a material adverse impact on our business, operating results and financial condition.

Work stoppages or other disruptions at seaports could adversely affect our operating results.

A significant portion of our goods move through ports on the Western Coast of the United States.

We have a global supply chain and we import products from our third-party vendors as well as our Fox Taiwan facility into the United States largely through ports on the West Coast.

Longshoremen, none of whom are our employees, must offload freight from ships arriving at West Coast ports.

A significant portion of our goods move through ports on the Western Coast of the U.S.

We have a global supply chain and we import products from our third-party vendors as well as our Fox Taiwan facility into the U.S.

largely through ports on the West Coast.

Dockworkers, none of whom are our employees, must offload freight from ships arriving at West Coast ports.

We do not control the activities of these employees or seaports and we could suffer supply chain disruptions due to any disputes, capacity shortages, slowdowns or shutdowns that may occur, as was experienced in February 2015, in relation to certain West Coast ports.

While the West Coast ports labor dispute ended with a five-year agreement, it lasted longer than we forecasted, and any similar labor dispute in the future could potentially have a negative effect on both our financial condition and results of operations.

While the West Coast ports labor agreement has been extended until July 2022, the 2015 strike lasted longer than we forecasted, and any similar labor dispute in the future could potentially have a negative effect on both our financial condition and results of operations.

Furthermore, the ongoing coronavirus pandemic has only increased uncertainty for global supply chains.

Our business depends substantially on our ability to attract and retain experienced and qualified talent, including our senior management team.

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Dennison or any other key employees.

We believe that the top nine members of our senior management team are key to establishing our focus and executing our corporate strategies as they have extensive knowledge of our systems and processes.

We believe that the top ten members of our senior management team are key to establishing our focus and executing our corporate strategies as they have extensive knowledge of our systems and processes.

Given our senior management team’s knowledge of our industry and the limited number of direct competitors in the industry, we believe that it could be difficult to find replacements should any of the members of our senior management team leave.

For example, our former Chief Financial Officer, Zvi Glasman, resigned effective November 1, 2019, and, although we have named an interim replacement, we have not yet designated a permanent replacement for Mr.

If we are unable to designate a permanent Chief Financial Officer in a timely manner, there may be an adverse effect on our financial reporting processes, our financial controls and procedures and our ability to raise additional capital.

We could also be adversely affected if we fail to attract and retain talent throughout our organization.

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As a supplier to OEM customers, we are dependent in large part on the success of the business of our OEM customers.

Model year changes by our OEM customers may adversely impact our sales or cause our sales to vary from quarter to quarter.

Model year changes by our OEM customers or production disruptions or hiatuses may adversely impact our sales or cause our sales to vary from quarter to quarter.

In addition, losses in market share individually or a decline in the overall market of our OEM customers or the discontinuance by our OEM customers of their products which incorporate our products could negatively impact our business, financial condition or results of operations.

For example, if our bike producing OEM customers reduce production of their high-end bikes, their orders to us for our products would in turn be reduced, which could negatively affect our business, financial condition or results of operations.

A relatively small number of customers account for a substantial portion of our sales.

The loss of all or a substantial portion of our sales to any of these customers, whether through the temporary or permanent discontinuation of their products which incorporate our products or otherwise, or the loss of market share by these customers could have a material adverse impact on us and our results of operations.

Sales attributable to our five largest OEM customers, which can vary from year to year, collectively accounted for approximately 32% of our sales in fiscal years 2019, 2018 and 2017.

The loss of all or a substantial portion of our sales to any of these OEM customers, whether through the temporary or permanent discontinuation of their products which incorporate our products or otherwise, or the loss of market share by these customers could have a material adverse impact on our business, financial condition or results of operations.

In particular, sales to Ford, a powered vehicles OEM, accounted for approximately 11%, 8% and 8% in 2019, 2018 and 2017, respectively.

In the event that Ford were to experience manufacturing or other problems, or were to fail to pay us, it could have a material impact on our business, financial condition or results of operations.

Sales attributable to our five largest OEM customers, which can vary from year to year, collectively accounted for approximately 23%, 32%, and 32% of our sales in fiscal years 2020, 2019 and 2018.

The loss of all or a substantial portion of our sales to any of these OEM customers, whether through the temporary or permanent discontinuation of their products which incorporate our products or otherwise, the loss of market share by these customers, manufacturing or other problems, including disruptions related to COVID-19, could have a material impact on our business, financial condition or results of operations.

Currency exchange rate fluctuations could impact gross margins and expenses.

Foreign currency fluctuations could in the future have an adverse effect on our business, financial condition or results of operations.

We sell our products inside and outside of the United States primarily in U.S.

We sell our products inside and outside of the U.S.

primarily in U.S.

Dollars and New Taiwan Dollars.

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Our international operations are exposed to risks associated with conducting business globally.

As a result of our international presence, we are exposed to increased risks inherent in conducting business outside of the United States.

As a result of our international presence, we are exposed to increased risks inherent in conducting business outside of the U.S.

In addition to foreign currency risks, these risks include:

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Foreign Corrupt Practices Act, local international environmental, health and safety laws, and increasingly complex regulations relating to the conduct of international commerce;

• increased difficulty in controlling and monitoring foreign operations from the United States, including increased difficulty in identifying and recruiting qualified personnel for our foreign operations;

• increased difficulty in controlling and monitoring foreign operations from the U.S., including increased difficulty in identifying and recruiting qualified personnel for our foreign operations;

• increased difficulty in staffing and managing foreign operations or international sales.

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imposed tariffs of 25 percent on steel and 10 percent on aluminum, with only a handful of countries exempt from the increase.

Since the beginning of the Trump Administration, the United States and China have imposed a variety of tariffs on most goods traded between the two countries, though a recent trade deal has lessened the threat of further escalation.

The United States has imposed tariffs on products from the European Union as a result of a dispute at the World Trade Organization.

Plans by the United States to impose tariffs on global imports of automobiles and auto parts appear to be on hold for now.

Throughout the Trump Administration, the U.S.

and China imposed a variety of tariffs on most goods traded between the two countries.

and the European Union also imposed tariffs on each other's products stemming from a dispute at the World Trade Organization related to aircraft.

The Biden Administration is reviewing all of these tariffs, and it could decide to reduce, expand, or otherwise modify these actions, although a timeline for doing so has not been announced.

While we have limited exposure to implemented tariffs at this time, any expansion in the types of tariffs implemented has the potential to negatively impact our supply chain costs as well as the operating performance of our customers, thus negatively affecting our sales, gross margin and operating performance.

Additionally, there is a risk that the U.S.

Additionally, there is a risk that continued U.S.

tariffs on imports could be met with additional retaliatory tariffs on U.S.

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and various foreign patent offices.

Additionally, we have registered or have applied for trademarks and service marks with the United States Patent and Trademark Office and a number of foreign countries, including the marks FOX ® , FOX RACING SHOX ® , RACE FACE ® and REDEFINE YOUR LIMITS ® , to be used with certain goods and services.

Additionally, we have registered or have applied for trademarks and service marks with the U.S.

Patent and Trademark Office and a number of foreign countries, including the marks FOX ® , FOX RACING SHOX ® , RACE FACE ® and REDEFINE YOUR LIMITS ® , to be used with certain goods and services.

When appropriate, we may from time to time assert our rights against those who infringe on our patents, trademarks, trade dress, or other intellectual property.

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If our efforts to develop and enforce our intellectual property are unsuccessful, or if a third party misappropriates our rights, this may adversely affect our business, financial condition or results of operations.

Additionally, intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the United States, and it may be more difficult for us to successfully challenge the use of our proprietary rights by other parties in these countries.

Additionally, intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the U.S., and it may be more difficult for us to successfully challenge the use of our proprietary rights by other parties in these countries.

Furthermore, other competitors may be able to successfully produce products that imitate certain of our products without infringing upon any of our patents, trademarks or trade dress.

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If we incorrectly forecast demand, we may incur capacity issues in our manufacturing plant and supply chain, increased material costs, increased freight costs, additional overtime, and costs associated with excess inventory, all of which in turn adversely impact our cost of sales and our gross margin.

Economic weakness and uncertainty in the United States, Europe and other countries may make accurate forecasting particularly challenging.

Economic weakness and uncertainty in the U.S., Europe and other countries may make accurate forecasting particularly challenging.

In the future, if actual demand for our products exceeds forecasted demand, the margins on our incremental sales in excess of anticipated sales may be lower due to temporary higher costs, which could result in a decrease in our overall margins.

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In the ordinary course of business, we incur warranty costs and reserve against such costs in our financial statements.

However, there is a risk that we could become aware of an underperforming product and be forced to adjust our warranty reserves or incur costs in excess of these reserves, which could adversely affect our results of operations.

However, there is a risk that a product could underperform and require us to adjust our warranty reserves or incur costs in excess of these reserves, which could adversely affect our results of operations.

If any of our products are or are alleged to be defective, we may be required to participate in a recall involving such products.

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We have had in the past, and may have in the future, recalls (both voluntary and involuntary) of our products or of items that incorporate our products.

For example, in October 2016, we initiated a voluntary recall of certain bicycle Float X2 shock absorber products.

Most recently, in May 2017, we announced a voluntary recall of approximately 2,500 of FOX's Harley Davidson specific aftermarket motorcycle shock absorbers.

In the case of OEM sales, each manufacturer has its own practices regarding product recalls and other product liability actions that could involve its suppliers.

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We will continue to have the ability to incur debt and our levels of debt may affect our operations and our ability to pay the principal of and interest on our debt.

In the future, we and our subsidiaries may be able to incur substantial additional debt from amendments to our credit facility with Bank of America and other named lenders (the "Credit Facility"), additional lending sources subject to the restrictions contained in the Credit Facility, or because of certain debt instruments we may issue.

As of January 3, 2020, we had $68.0 million of indebtedness and $177.0 million in revolving credit available to borrow under the Credit Facility.

Our ability to borrow under the Credit Facility fluctuates from time to time due to, among other factors, our borrowings under the Credit Facility.

In the future, we and our subsidiaries may be able to incur substantial additional debt from amendments to our credit facility with Bank of America and other named lenders (the "First Amended and Restated Credit Facility"), additional lending sources subject to the restrictions contained in the First Amended and Restated Credit Facility, or because of certain debt instruments we may issue.

As of January 1, 2021, we had $395.0 million of indebtedness, excluding loan fees, and $235.0 million in revolving credit available to borrow under the First Amended and Restated Credit Facility.

Our ability to borrow under the First Amended and Restated Credit Facility fluctuates from time to time due to, among other factors, our borrowings under the First Amended and Restated Credit Facility.

Our indebtedness could be costly or have adverse consequences, such as:

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If we incur substantial additional indebtedness in the future, these higher levels of indebtedness may affect our ability to pay the principal of and interest on existing indebtedness and our creditworthiness generally.

Our outstanding indebtedness under the Credit Facility bears interest at a variable rate, which makes us more vulnerable to increases in interest rates and could cause our interest expense to increase and decrease cash available for operations and other purposes.

Borrowings under our Credit Facility bear interest on a variable rate, which increases and decreases based upon changes in the underlying interest rate and/or our leverage ratio.

Any such increases in the interest rate or increases of our borrowings under the Credit Facility will increase our interest expense.

As of January 3, 2020, we had $68.0 million of indebtedness, bearing interest at a variable rate, outstanding under the Credit Facility.

Recent interest rates in the United States have been at historically low levels, and any increase in these rates would increase our interest expense and reduce our funds available for operations and other purposes.

Although from time to time we may enter into agreements to hedge a portion of our interest rate exposure, these agreements may be costly and may not protect against all interest rate fluctuations.

Our outstanding indebtedness under the First Amended and Restated Credit Facility bears interest at a variable rate, which makes us more vulnerable to increases in interest rates and could cause our interest expense to increase and decrease cash available for operations and other purposes.

Borrowings under our First Amended and Restated Credit Facility bear interest on a variable rate, which increases and decreases based upon changes in the underlying interest rate and/or our leverage ratio.

Any such increases in the interest rate or increases of our borrowings under the First Amended and Restated Credit Facility will increase our interest expense.

Recent interest rates in the U.S.

have been at historically low levels, and any increase in these rates would increase our interest expense and reduce our funds available for operations and other purposes.

Although from time to time we may enter into agreements to hedge a portion of our interest rate exposure, such as the interest rate swap entered into in August 2020, these agreements may be costly and may not protect against all interest rate fluctuations.

Accordingly, we may experience material increases in our interest expense as a result of increases in interest rate levels generally.

Based on the $68.0 million of variable interest rate indebtedness that was outstanding as of January 3, 2020, a hypothetical 100 basis point increase or decrease in the interest rate would have resulted in an approximately $0.7 million change to our interest expense for the year ended January 3, 2020.

Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our financial performance.

Recently enacted U.S.

tax legislation has significantly changed the U.S.

federal income taxation of U.S.

corporations by reducing the U.S.

corporate income tax rate, adopting elements of a territorial tax system, imposing a one-time transition tax (or "deemed repatriation tax") on all undistributed earnings and profits of certain U.S.

owned foreign corporations, revising the rules governing net operating losses and the rules governing foreign tax credits, repealing the performance-based compensation exception to the $1 million deduction limit on executive compensation and expanding the scope of employees to whom the limit applies, eliminating the deductibility of certain fringe benefits, permitting immediate expensing of certain capital expenditures, limiting interest deductions, modifying the tax treatment of like kind exchanges, and introducing new anti-base erosion provisions.

Many of these changes were effective immediately upon the passage of the legislation, without any transition periods or grandfathering for existing transactions.

The legislation is unclear in many respects and will continue to be subject to potential amendments and technical corrections, as well as notices, interpretations and implementation of regulations by the Treasury and IRS, any of which could lessen or increase certain adverse impacts of the legislation.

For example, the interpretation the IRS Notice regarding the deduction limitation on executive compensation resulted in a $1.4 million increase in our tax provision in the third quarter of 2018.

Likewise, regulations regarding the deduction for foreign derived intangible income and our estimates of amounts deductible resulted in a $1.5 million decrease in our tax provision in the third quarter of 2019 and a $1.8 million reduction of tax expense in the fourth quarter of 2019 related to such deduction in our 2018 tax returns.

In addition, it remains unclear in some cases how these U.S.

federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities, or how foreign governments will view the changes.

Our analysis and interpretation of this legislation is ongoing.

We asserted permanent reinvestment of the earnings of certain of our foreign subsidiaries in 2016 and 2017, and discontinued this assertion as a result of the December 2017 changes in legislation.

As a result, the deemed repatriation tax, the accrual of state income and foreign withholding taxes on unremitted earnings, and certain other changes to U.S.

taxation of amounts earned abroad have impacted our financial statements.

Additionally, the reduction in the U.S.

corporate tax rate, the revision of rules governing foreign tax credits, and changes in the rules regarding the sourcing of income are expected to have an impact on our ability to utilize our existing and future foreign tax credits, and as such, we have provided a partial valuation allowance on these tax assets.

A full valuation allowance was avoided primarily due to the decision to implement a prudent and feasible tax planning strategy to restructure business functions.

However, there can be no assurance that we will be able to implement such a plan.

Changes in our estimates regarding our ability to utilize our foreign tax credits could have a material impact on our tax provision, net income and cash flows.

There may be other material adverse effects resulting from the legislation that will become apparent as regulations are issued, and practice evolves through interpretation and case law.

While some of the changes made by the tax legislation may adversely affect the Company in one or more reporting periods and prospectively, other changes may be beneficial.

We continue to work with our tax advisors to determine the full impact that the recent tax legislation as a whole will have on us.

We are subject to income and other taxes in the United States and numerous foreign jurisdictions.

Our tax liabilities in the United States and abroad are affected by the amounts we charge in intercompany transactions for inventory, services, licenses, funding and other items.

We are subject to ongoing tax audits in various jurisdictions.

Tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing or other matters, and may assess additional taxes as a result.

We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision.

However, there can be no assurance that we will accurately predict the outcomes of these audits, and the amounts ultimately paid upon resolution of audits could be materially different from the amounts previously included in our income tax expense and therefore could have a material impact on our tax provision, net income and cash flows.

Refer to Note 10 - D e rivatives and Hedging for additional information regarding the interest rate swap arrangement.

As of January 1, 2021, we had $395.0 million of indebtedness outstanding under the First Amended and Restated Credit Facility.

Based on the $195.0 million of variable interest rate indebtedness that was outstanding as of January 1, 2021, after giving effect to our interest rate swap, a hypothetical 100 basis point increase in the interest rate would have resulted in an approximately $2.0 million increase in interest expense for the year ended January 1, 2021.

A hypothetical 100 basis point decrease in the interest rate would not impact interest expense given that the current borrowing rate reflects the floor rate of 0.5%.

We may incur losses on interest rate swap and hedging arrangement

We may periodically enter into agreements to reduce the risks associated with increases in interest rates, such as our August 2020 interest rate swap agreement.

Although these agreements may partially protect against rising interest rates, they also may reduce the benefits to us if interest rates decline.

Changes in tax laws and regulations or other factors could cause our income tax obligations to increase, potentially reducing our net income and adversely affecting our cash flows.

We are subject to income tax requirements in various jurisdictions in the U.S and internationally.

In preparing our financial statements, we provide for income taxes based on current tax laws and regulations and the estimated taxable income within each of these jurisdictions.

Our income tax obligations may be higher due to numerous factors.

Changes to tax laws or interpretations, modifications to the U.S.

tax reform enacted in December 2017, revisions to estimates regarding our ability to utilize foreign tax credits, increases in applicable tax rates, and actions by tax authorities in jurisdictions in which we operate could have a material impact on our net income and cash flows.

We are subject to certain risks in our manufacturing and in the testing of our products.

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As a result, the costs to defend any action or the potential liability resulting from any such accident or death or arising out of any other litigation, and any negative publicity associated therewith, could have a negative effect on our business, financial condition or results of operations.

We are subject to extensive United States federal and state, foreign and international safety, environmental, employment practices and other government regulations that may require us to incur expenses or modify product offerings in order to maintain compliance with such regulation, which could have a negative effect on our business and results of operations.

We are subject to extensive laws and regulations relating to safety, environmental, and other laws and regulations promulgated by the United States federal and state governments, as well as foreign and international regulatory authorities.

We are subject to extensive U.S.

We are subject to extensive laws and regulations relating to safety, environmental, and other laws and regulations promulgated by the U.S.

federal and state governments, as well as foreign and international regulatory authorities.

Although we believe that our products, policies and processes comply with applicable safety, environmental, and other standards and related regulations, future regulations may require additional safety standards that would require additional expenses and/or modification of product offerings in order to maintain such compliance.

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Complying with such laws and regulations, and defending against allegations of our failure to comply (including meritless allegations), can be expensive and time consuming.

We believe that our policies and processes comply with applicable employment standards and related regulations, however, we are subject to risks of litigation by employees and others that might involve allegations of illegal, unfair or inconsistent employment practices, including wage and hour violations and employment discrimination, misclassification of independent contractors as employees, wrongful termination and other concerns, which could require additional expenditures.

We believe that our policies and processes comply with applicable employment standards and related regulations;

however, we are subject to risks of litigation by employees and others that might involve allegations of illegal, unfair or inconsistent employment practices, including wage and hour violations and employment discrimination, misclassification of independent contractors as employees, wrongful termination and other concerns, which could require additional expenditures.

We are subject to environmental laws and regulation and potential exposure for environmental costs and liabilities.

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For example, in San Mateo County, California, mountain bikes are not allowed on county trails, and ATV and Side-by-Side riding is not allowed in Zion National Park, among many other national and state parks.

In addition, recreational snowmobiling has been restricted in some national parks and federal lands in Canada, the United States and other countries.

In addition, recreational snowmobiling has been restricted in some national parks and federal lands in Canada, the U.S.

and other countries.

If more of these laws and regulations are passed and the users of our products lose convenient locations to ride their mountain bikes and powered vehicles, our sales could decrease and our business, financial condition or results of operations could suffer.

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Furthermore, such suppliers could experience difficulties in providing us with some or all of the materials we require, which could result in disruptions in our manufacturing operations.

If we experience difficulties with our suppliers or manufacturing delays caused by our suppliers, whether in connection with our manufacturing operations in the United States or in Taiwan, our business, financial condition or results of operations could be materially and adversely impacted.

Our business, financial condition or results of operations could be materially and adversely impacted if we experience difficulties with our suppliers or manufacturing delays caused by our suppliers, whether in connection with our manufacturing operations in the U.S.

or in Taiwan.

We also purchase various raw materials in order to manufacture our products.

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The need to replace the Kashima coating could temporarily disrupt our business and harm our business, financial condition or results of operations.

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

An OEM may encounter difficulties and may be unable to deliver chassis according to our production needs, or an OEM may choose to discontinue supplying chassis for other reasons.

Any interruption or discontinuation in the availability of chassis may result in increased production costs, delays in the delivery of our products, and lost sales, which could have an adverse effect on our business and financial condition.

Regulations related to conflict minerals may force us to continue to incur additional expenses and otherwise adversely impact our business.

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Increases in the mandated wage in any or all of the jurisdictions in which we operate could subject us to increased costs, thereby impacting our business, financial condition, or results of operations.

We maintain a self-insured healthcare plan for our employees based in the United States.

We maintain a self-insured healthcare plan for our employees based in the U.S.

We have insurance coverage in place for individual claims above a specified amount in any year.

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Certain individuals may object to the processing of this data, request the deletion of this data, or opt out of the sharing of this data, any of which may negatively impact our ability to provide effective customer service or otherwise impact our operations.

Collection and use of personal information in conducting our business may be subject to federal and/or state laws and regulations in the United States and foreign jurisdictions including, in particular, various jurisdictions in Europe, and such laws and regulations may restrict our processing of such personal information and may hinder our ability to attract new customers or market to existing customers.

Collection and use of personal information in conducting our business may be subject to federal and/or state laws and regulations in the U.S.

and foreign jurisdictions including, in particular, various jurisdictions in Europe, and such laws and regulations may restrict our processing of such personal information and may hinder our ability to attract new customers or market to existing customers.

We may incur significant expenses to comply with privacy, consumer protection, and security standards and protocols imposed by law, regulation, industry standards or contractual obligations.

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Our vendors and any potential commercial partners expose us to the risk of fraud or other misconduct.

Misconduct by these parties could include intentional, reckless, and/or negligent conduct or disclosure of unauthorized activities to us that violate federal and/or state data privacy, security, and consumer protection laws and regulations in the United States and abroad.

Such misconduct could result in regulatory sanctions and cause serious harm to our reputation.

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Growth by acquisitions involves risks and we may not be able to effectively integrate businesses we acquire or we may not be able to identify or consummate any future acquisitions on favorable terms, or at all.

We intend to selectively evaluate additional acquisitions in the future.

Any acquisitions that we might make are subject to various risks and uncertainties and could have a negative impact on our business, financial condition or results of operations.

We have completed several acquisitions over the past several years, including our most recent acquisition of SCA in March 2020.

Additionally, we intend to selectively evaluate additional acquisitions in the future.

Any acquisitions that we have made and might make are subject to various risks and uncertainties and could have a negative impact on our business, financial condition or results of operations.

These risks include the inability to integrate effectively the operations, products, technologies and personnel of the acquired companies (some of which may be spread out in different geographic regions), the inability to achieve anticipated cost savings or operating synergies, the earn-outs we may contractually obligate ourselves to pay, and the risk we may not be able to effectively manage our operations at an increased scale of operations resulting from such acquisitions.

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Future issuances and sales of our shares, or the perception that such sales may occur, could cause our stock price to decline.

The issuance of additional shares of our common stock could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock.

The issuance of additional shares of our common stock, such as the secondary offering of 2.8 million shares of common stock that we completed in June 2020, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock.

Our Amended and Restated Certificate of Incorporation authorizes us to issue 90,000,000 shares of common stock, 41,802,254 of which shares were outstanding as of January 1, 2021.

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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 1A. Risk Factors