What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-02-25 compared with 2020-03-03 · 418 added, 309 removed, 938 unchanged (44% of the section changed)

3 unchanged sentences

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management, under the direction and with the participation of our Chief Executive Officer and our Interim Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of January 3, 2020.

Based on the evaluation of our disclosure controls and procedures as of January 3, 2020, our Chief Executive Officer and Interim Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Our management, under the direction and with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of January 1, 2021.

Based on the evaluation of our disclosure controls and procedures as of January 1, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control Over Financial Reporting

8 unchanged sentences

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Interim Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level.

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level.

However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.

8 unchanged sentences

OTHER INFORMATION

On February 23, 2021, the Compensation Committee of the Board of Directors of Fox Factory Holding Corp.

adopted a form of performance share unit award agreement (the “Form of PSU Agreement”) for use in connection with the 2013 Omnibus Plan.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information required by this Item regarding our directors and executive officers is incorporated by reference to the sections of our proxy statement to be filed with the SEC in connection with our 2020 Annual Meeting of Stockholders (the "Proxy Statement") entitled "Election of Class I Directors" and "Corporate Governance."

Information required by this Item regarding our directors and executive officers is incorporated by reference to the sections of our proxy statement to be filed with the SEC in connection with our 2021 Annual Meeting of Stockholders (the "Proxy Statement") entitled "Election of Class II Directors" and "Corporate Governance."

Information required by this Item regarding our corporate governance, including our audit committee and code of ethics, is incorporated by reference to the sections of the Proxy Statement entitled "Corporate Governance" and "The Board of Directors."

13 unchanged sentences

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of January 3, 2020 and December 28, 2018 67

Consolidated Statements of Income for the years ended January 3, 2020, December 28, 2018 and December 29, 2017 68

Consolidated Statements of Comprehensive Income for the years ended January 3, 2020, December 28, 2018 and December 29, 2017 69

Consolidated Statements of Stockholders' Equity for the years ended January 3, 2020, December 28, 2018 and December 29, 2017 70

Consolidated Statements of Cash Flows for the years ended January 3, 2020, December 28, 2018 and December 29, 2017 71

Consolidated Balance Sheets as of January 1, 2021 and January 3, 2020 70

Consolidated Statements of Income for the years ended January 1, 2021, January 3, 2020 and December 28, 2018 71

Consolidated Statements of Comprehensive Income for the years ended January 1, 2021, January 3, 2020 and December 28, 2018 72

Consolidated Statements of Stockholders' Equity for the years ended January 1, 2021, January 3, 2020 and December 28, 2018 73

Consolidated Statements of Cash Flows for the years ended January 1, 2021, January 3, 2020 and December 28, 2018 74

Notes to Consolidated Financial Statements 76

9 unchanged sentences

Form of Indenture S-3 333-203146 March 31, 2015

Description of Securities X

Description of Securities 10-K 001-36040 March 3, 2020

Employment Agreement, dated July 22, 2013, by and between Fox Factory Holding Corp.

Enterline S-1/A 333-189841 July 25, 2013

Employment Agreement, dated July 22, 2013, by and between Fox Factory Holding Corp.

and Zvi Glasman S-1/A 333-189841 July 25, 2013

Employment Agreement, dated August 29, 2013, by and between Fox Factory

Holding Corp.

Employment Agreement, dated August 29, 2013, by and between Fox Factory Holding Corp.

and Wes Allinger 10-Q 001-36040 May 4, 2016

1 unchanged sentence

and Larry Enterline 10-Q 001-36040 August 3, 2016

Amendment, dated May 2, 2016, to the Employment Agreement, dated July 22, 2013, by and between Fox Factory Holding Corp.

and Zvi Glasman 10-Q 001-36040 August 3, 2016

Employment Agreement, dated May 1, 2018, by and between Fox Factory Holding Corp.

10 unchanged sentences

Dennison 8-K 001-36040 July 1, 2019

Transition Services, Separation and Release Agreement, dated October 2, 2019, by and between Fox Factory Holding Corp.

and Zvi Glasman 8-K 001-36040 October 10, 2019

Employment Agreement, dated December 2, 2019, by and between Fox Factory Holding Corp.

Blocher 8-K/A 001-36040 December 3, 2019

Non-Employee Director Compensation Policy S-1/A 333-189841 July 25, 2013

Employment Agreement, by and between Fox Factory Holding Corp.

and Scott Humphrey, dated August 4, 2020.

8-K 001-36040 August 5, 2020

Employment Agreement by and between Fox Factory, Inc.

and Richard T.

Winters, dated June 29, 2019.

8-K 001-36040 August 10, 2020

Amendment to the Amended and Restated Employment Agreement, by and between Fox Factory Holding Corp.

and Michael C.

Dennison, dated August 5, 2020.

8-K 001-36040 August 10, 2020

Amendment to the Amended and Restated Employment Agreement, by and between Fox Factory, Inc.

and Richard T.

Winters, dated August 5, 2020.

8-K 001-36040 August 10, 2020

Amendment to the Amended and Restated Employment Agreement, by and between Fox Factory, Inc.

and Christopher J.

Tutton, dated August 5, 2020.

8-K 001-36040 August 10, 2020

Fourth Amended and Restated Non-Employee Director Compensation Policy, effective March 2, 2020.

Fifth Amended and Restated Non-Employee Director Compensation Policy, effective January 2, 2021.

Form of Indemnification Agreement, by and between Fox Factory Holding Corp.

4 unchanged sentences

2013 Omnibus Plan, as amended by the First Amendment, approved by stockholders on May 4, 2017 8-K 001-36040 May 8, 2017

Form of Restricted Stock Unit Award Agreement under 2013 Omnibus Plan S-1/A 333-189841 July 25, 2013

Form of Restricted Stock Unit Award Agreement under 2013 Omnibus Plan (U.S.) X

Form of Restricted Stock Unit Award Agreement under 2013 Omnibus Plan (Canada) X

Form of Restricted Stock Unit Award Agreement under 2013 Omnibus Plan (Taiwan) X

Form of Performance Stock Unit Award Agreement under 2013 Omnibus Plan X

Air Commercial Real Estate Association Standard Industrial / Commercial Single-Tenant Lease – Gross, dated October 31, 2011, by and between Fox Factory, Inc.

12 unchanged sentences

1 to the Standard Form of Agreement, dated December 23, 2019 8-K 001-36040 December 30, 2019

Stock Purchase Agreement, by and among Fox Factory, Inc., Southern Rocky Holdings, LLC, and SCA Performance Holdings, Inc., dated February 11, 2019 X

Amendment No.

2 to the Standard Form of Agreement between Owner and Design-Builder, dated December 21, 2020.

8-K 001-36040 December 23, 2020

Stock Purchase Agreement, by and among Fox Factory, Inc., Southern Rocky Holdings, LLC, and SCA Performance Holdings, Inc., dated February 11, 2019 10-K 001-36040 March 3, 2020

Commitment Letter, among Fox Factory Holding Corp., Bank of America, N.A.

and BofA Securities, Inc., dated February 11, 2019 X

and BofA Securities, Inc., dated February 11, 2019 10-K 001-36040 March 3, 2020

Amended and Restated Credit Agreement, among Fox Factory Holding Corp., Bank of America, N.A.

and other financial institutions party thereto, dated March 11, 2020 8-K 001-36040 March 16, 2020

Pilot Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020.

8-K 001-36040 June 16, 2020

Bond Purchase Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020.

8-K 001-36040 June 16, 2020

Financing Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020.

8-K 001-36040 June 16, 2020

Lease Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020.

8-K 001-36040 June 16, 2020

Deed to Secure Debt and Security Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020.

8-K 001-36040 June 16, 2020

Assignment of Lease Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020.

8-K 001-36040 June 16, 2020

Direct Payment Agreement, between the Gainesville and Hall County Development Authority and Fox Factory, Inc., effective June 12, 2020.

8-K 001-36040 June 16, 2020

First Amendment to the Amended and Restated Credit Agreement, among Fox Factory Holding Corp., Bank of America, N.A.

and other financial institutions party thereto, dated June 19, 2020.

8-K 001-36040 June 17, 2020

List of Subsidiaries X

19 unchanged sentences

Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

Pursuant to the requirements of Section of 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FOX FACTORY HOLDING CORP.

March 3, 2020 John E.

Blocher, Interim Chief Financial Officer and Interim Treasurer

(Interim Principal Financial and Accounting Officer & Duly Authorized Signatory)

February 25, 2021 Scott R.

Humphrey, Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer & Duly Authorized Signatory)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John E.

Blocher and Michael C.

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Scott R.

Humphrey and Michael C.

Dennison, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution for him or her, and in his or her name in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the U.S.

3 unchanged sentences

/s/ Michael C.

Dennison Chief Executive Officer and Director March 3, 2020

Dennison Chief Executive Officer and Director February 25, 2021

Dennison ( Principal Executive Officer )

Blocher Interim Chief Financial Officer and Interim Treasurer March 3, 2020

Blocher (Interim Principal Financial and Interim Accounting Officer)

Enterline Executive Chairman of the Board March 3, 2020

/s/ Dudley Mendenhall Lead Independent Director March 3, 2020

Humphrey Chief Financial Officer and Treasurer February 25, 2021

Humphrey (Principal Financial and Accounting Officer)

Enterline Executive Chairman of the Board February 25, 2021

/s/ Dudley Mendenhall Lead Independent Director February 25, 2021

Dudley Mendenhall

/s/ Tom Duncan Director March 3, 2020

/s/ Tom Duncan Director February 25, 2021

/s/ Elizabeth A.

Fetter Director March 3, 2020

/s/ Jean Hlay Director March 3, 2020

/s/ Ted Waitman Director March 3, 2020

Fetter Director February 25, 2021

/s/ Jean Hlay Director February 25, 2021

/s/ Ted Waitman Director February 25, 2021

/s/ Sidney Johnson Director February 25, 2021

Sidney Johnson

Management’s Report on Internal Control Over Financial Reporting

1 unchanged sentence

Fox’s internal control over financial reporting is a process designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation and fair presentation of financial statements issued for external purposes in accordance with accounting principles generally accepted in the United States of America (GAAP).

Under the supervision of our management, including our Chief Executive Officer and Interim Chief Financial Officer, Fox conducted an evaluation of the effectiveness of our internal control over financial reporting.

Under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, Fox conducted an evaluation of the effectiveness of our internal control over financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In making its assessment of internal control over financial reporting as of January 3, 2020, management has excluded RT Acquisition Corp.

("Ridetech"), which was formed in May 2019 to acquire the business of Air Ride Technologies, Inc.

d/b/a Ridetech.

In making its assessment of internal control over financial reporting as of January 1, 2021, management has excluded SCA which was acquired in March 2020.

The Company is currently assessing the control environment of the acquired business.

3 unchanged sentences

Grant Thornton LLP, the independent registered public accounting firm that audited the Company's consolidated financial statements, has issued an attestation report on the Company's internal control over financial reporting, which is included elsewhere in this Annual Report on Form 10-K.

March 3, 2020

February 25, 2021

/s/ Michael C.

Chief Executive Officer

Interim Chief Financial Officer and Interim Treasurer

Chief Financial Officer and Treasurer

Report of Independent Registered Public Accounting Firm

3 unchanged sentences

We have audited the accompanying consolidated balance sheets of Fox Factory Holding Corp.

(a Delaware corporation) and subsidiaries (the “Company”) as of January 3, 2020 and December 28, 2018, the related consolidated statements of income, comprehensive income, stockholders’ equity and redeemable non-controlling interest, and cash flows for each of the three years in the period ended January 3, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 3, 2020 and December 28, 2018, and the results of its operations and its cash flows for each of the three years in the period ended January 3, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of January 3, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 3, 2020 expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 1 - Description of the Business, Basis of Presentation and Summary of Significant Accounting Policies to the consolidated financial statements, the Company has changed its method of accounting for leases due to the adoption of the Accounting Standards Update (“ASU”) No.

2016 – 02, Leases.

The Company adopted this new standard on December 29, 2018.

(a Delaware corporation) and subsidiaries (the “Company”) as of January 1, 2021 and January 3, 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity and redeemable non-controlling interest, and cash flows for each of the three years in the period ended January 1, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 1, 2021 and January 3, 2020, and the results of its operations and its cash flows for each of the three years in the period ended January 1, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of January 1, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 25, 2021 expressed an unqualified opinion.

Basis for opinion

6 unchanged sentences

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

5 unchanged sentences

Net realizable value of inventory

As discussed in Note 1 - Description of the Business, Basis of Presentation and Summary of Significant Accounting Policies , adjustments are made to reduce the cost of inventory to its net realizable value, if required, for estimated excess, obsolete or impaired balances.

As discussed in Note 1 to the consolidated financial statements, adjustments are made to reduce the cost of inventory to its net realizable value, if required, for estimated excess, obsolete or impaired balances.

Management monitors inventory quantities on hand and on order and records write-downs for estimated excess or obsolescence based on estimated demand for products, obsolescence of technology, product life cycles, and when pricing trends or forecasts indicate that the carrying value of inventory exceeds estimated selling price.

We identified the net realizable value of inventory as a critical audit matter.

We identified the net realizable value of inventory for certain product categories as a critical audit matter.

The principal considerations for our determination that the net realizable value of inventory represents a critical audit matter are that the assessment of the valuation of inventory is complex and includes an estimate of forecast demand.

2 unchanged sentences

• We obtained management’s analysis of parts in inventory and expected customer demand, recalculated inputs into the analysis and tested for completeness.

This included, among other inputs, forecast demand, age, and general ledger balances.

• We tested selected inventory items by making inquiries of management and evaluating the appropriateness of judgments, assumptions and documentation supporting adjustments to the reserve estimate.

• We compared selected 2020 forecast information to actual sales orders and demand information as provided by customers in order to test the accuracy of demand information included in the calculation.

• We obtained historic sales invoices in order to test the accuracy of past selling data included in the analysis for selected items.

• We inquired with management and various staff members outside of the finance team including members of the Supply Chain team, Production Planners, Product Innovation team and Plant Managers to obtain support for selected forecast demand inputs as well as to understand macroeconomic and customer specific trends.

• We tested the design and operating effectiveness of controls related to the forecast demand for the Company’s products as well as management’s review of the reserve estimate.

This included, among other inputs, forecast demand, and general ledger balances.

• We tested selected inventory items by making inquiries of management and evaluating the appropriateness of judgments, assumptions and documentation supporting adjustments to the net realizable value of inventory.

• We compared selected 2021 estimated demand to actual sales orders as provided by customers and forecasted demand information as provided by the sales and operations team in order to test the accuracy of demand information included in the calculation.

• We performed a retrospective review by comparing previous demand forecasts to actual usage during the year for a sample of items.

• We inquired with management and various staff members outside of the finance team to obtain support for selected forecast demand inputs as well as to understand macroeconomic and customer specific trends.

• We tested the design and operating effectiveness of controls related to the forecast demand for the Company’s products as well as management’s review of the net realizable value of inventory.

Realizability of Deferred Tax Assets

As discussed in Note 1 to the financial statements, deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income.

As discussed in Note 1 to the consolidated financial statements, deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income.

Valuation allowances are provided when necessary to reduce net deferred tax assets to an amount that is more likely than not to be realized.

We identified the realizability of deferred tax assets as a critical audit matter.

The principal considerations for our determination that the realizability of deferred tax assets represents a critical audit matter are the significance of the Company’s foreign tax credits and the use of forecasted profitability by jurisdiction and source.

The principal considerations for our determination that the realizability of deferred tax assets represent a critical audit matter are the significance of the Company’s foreign tax credits and the use of forecasted profitability by jurisdiction and source.

The forecasts, including future sales and expenses by jurisdiction, are subject to a high level of estimation uncertainty and subjectivity.

2 unchanged sentences

Our audit procedures related to the realizability of deferred tax assets included the following, among others:

• Our tax specialists evaluated the cross border arrangements within the Company’s corporate structure to determine whether they complied with local laws and requirements.

• We considered the applicability of the Company’s international transfer pricing arrangements as it relates to the Company’s ability to utilize foreign tax credits.

• We tested the accuracy of the underlying data used in the forecasts by agreeing the baseline 2020 results for selected jurisdictions to general ledger balances.

3 unchanged sentences

• We tested the design and operating effectiveness of controls related to the generation of the forecasts and assumptions that underpin the assessment of the realizability of deferred tax assets.

Valuation of acquired intangible assets from the acquisition of SCA Performance Holdings, Inc.

As described further in Note 1 and Note 18 to the consolidated financial statements, the Company completed the acquisition of SCA Performance Holdings, Inc.

for a total cash consideration of approximately $331.9 million, net of cash acquired and exclusive of vehicle floorplan inventory.

Management disclosed that assessing the fair value of identifiable definite-lived and indefinite-lived intangible assets acquired involved the use of significant estimates and assumptions, including projected future cash flows, associated discount rates used to calculate present value, asset life cycles, customer retention rates and royalty rates.

We identified the Company’s assessment of the fair value of acquired intangible assets as a critical audit matter.

The principal considerations for our determination that the Company’s assessment of the fair value of acquired intangible assets represents a critical audit matter is that the judgements and assumptions made in assessing the fair value of the intangible assets are complex and subjective.

Assumptions utilized to determine the fair value, including projected future cash flows, associated discount rates used to calculate present value, customer attrition rates, and royalty rates, are subject

to high levels of estimation uncertainty.

Assessing these assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals with specialized skills.

Our audit procedures related to the valuation of acquired intangible assets from the acquisition of SCA Performance Holdings, Inc.

included the following, among others:

• We inspected the purchase agreement and tested management’s process for identifying and estimating the fair value of intangible assets acquired.

• Our testing of management’s process involved evaluating the reasonableness of key assumptions including the projected future cash flows, customer attrition rates, royalty rates, and others, comparing to industry trends, historical data, strategic business plans and the past performance of a similar acquired business.

• Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the Company’s selection of valuation methodology and certain significant assumptions.

• We tested the design and operating effectiveness of internal controls over management’s valuation of the acquired identifiable intangible assets, including controls over the development of the significant assumptions described above.

/s/ GRANT THORNTON LLP

1 unchanged sentence

San Francisco, California

March 3, 2020

February 25, 2021

Report of Independent Registered Public Accounting Firm

5 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended January 3, 2020, and our report dated March 3, 2020 expressed an unqualified opinion on those financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended January 1, 2021, and our report dated February 25, 2021 expressed an unqualified opinion on those financial statements.

Basis for opinion

7 unchanged sentences

We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of SCA Performance Holdings, Inc., a wholly-owned subsidiary, whose financial statements reflect total assets and net sales constituting 28 and 9 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended January 1, 2021.

As indicated in Management’s Report, SCA Performance Holdings, Inc.

was acquired during 2020.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of SCA Performance Holdings, Inc.

Definition and limitations of internal control over financial reporting

7 unchanged sentences

San Francisco, California

March 3, 2020

February 25, 2021

FOX FACTORY HOLDING CORP.

1 unchanged sentence

(in thousands, except par value)

January 3, December 28,

January 1, January 3,

Current assets:

Cash and cash equivalents $ 245,764 $ 43,736

Accounts receivable (net of allowances of $ 810 and $ 600 at January 3, 2020 and December 28, 2018, respectively)

Accounts receivable (net of allowances of $ 663 and $ 810 at January 1, 2021 and January 3, 2020, respectively)

121,194 91,632

23 unchanged sentences

Stockholders’ equity

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of January 3, 2020 and December 28, 2018

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of January 1, 2021 and January 3, 2020

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

42,692 shares issued and 41,802 outstanding as of January 1, 2021;

38,881 shares issued and 37,991 outstanding as of December 28, 2018

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

Additional paid-in capital 336,834 123,274

Treasury stock, at cost;

890 common shares as of January 3, 2020 and December 28, 2018

890 common shares as of January 1, 2021 and January 3, 2020

( 13,754 ) ( 13,754 )

Accumulated other comprehensive income (loss) 150 ( 784 )

Accumulated other comprehensive income 1,068 150

Retained earnings 394,981 312,491

6 unchanged sentences

For the fiscal years ended

January 3, December 28, December 29,

January 1 January 3 December 28

2021 2020 2018

7 unchanged sentences

Amortization of purchased intangibles 17,583 6,344 6,065

Fair value adjustment of contingent consideration and acquisition-related compensation — — 1,447

Total operating expenses 175,398 129,926 110,964

Income from operations 114,149 112,809 94,532

Other expense, net:

Interest and other expense, net:

Interest expense 9,294 3,173 3,059

Other expense 325 1,067 583

Other expense, net 4,240 3,642 2,756

Interest and other expense, net 9,619 4,240 3,642

Income before income taxes 104,530 108,569 90,890

14 unchanged sentences

For the fiscal years ended

January 3, December 28, December 29,

January 1, January 3, December 28,

2021 2020 2018

Net income $ 91,746 $ 94,470 $ 85,367

Other comprehensive income (loss)

Other comprehensive (loss) income

Interest rate swap, net of tax effects ( 699 ) — —

Foreign currency translation adjustments, net of tax effects 1,617 934 ( 616 )

Other comprehensive income (loss) 934 ( 616 ) 2,025

Other comprehensive (loss) income 918 934 ( 616 )

Comprehensive income 92,664 95,404 84,751

9 unchanged sentences

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 384 — — — ( 4,096 ) — — ( 4,096 ) —

716 1 — — ( 3,983 ) — — ( 3,982 ) —

Acquisition of redeemable non-controlling interest — — — — — — — — 12,900

Stock-based compensation expense — — — — 7,322 — — 7,322 —

Foreign currency translation adjustment — — — — — 2,025 — 2,025 —

Other comprehensive income — — — — — ( 616 ) — ( 616 ) —

Adoption of new accounting standard, net of taxes — — — — — — ( 280 ) ( 280 ) —

Net income — — — — — — 84,040 84,040 1,327

1 unchanged sentence

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 469 $ 1 — $ — $ ( 6,776 ) $ — $ — $ ( 6,775 ) $ —

Issuance of stock for business acquisition 98 — — — 7,167 — — 7,167 —

Stock-based compensation expense — — — — 6,864 — — 6,864 —

Foreign currency translation adjustment — — — — — ( 616 ) — ( 616 ) —

Other comprehensive income — — — — — 934 — 934 —

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

Net income — — — — — — 93,033 93,033 1,437

Balance - December 28, 2018 38,881 $ 38 890 $ ( 13,754 ) $ 116,019 $ ( 784 ) $ 219,686 $ 321,205 $ 14,282

Balance - January 3, 2020 39,448 $ 39 890 $ ( 13,754 ) $ 123,274 $ 150 $ 312,491 $ 422,200 $ 15,719

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 348 1 — — ( 4,342 ) — — ( 4,341 ) —

Issuance of common stock, net 2,760 2 — — 198,233 — — 198,235 —

Issuance of stock for business acquisition — — — — 322 — — 322 —

Adjustment to the fair value of non-controlling interest — — — — — — ( 8,184 ) ( 8,184 ) 8,184

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

Stock-based compensation expense — — — — 8,178 — — 8,178 —

Foreign currency translation adjustment — — — — — 934 — 934 —

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

Other comprehensive income — — — — — 918 — 918 —

Net income — — — — — — 90,674 90,674 1,072

5 unchanged sentences

For the fiscal years ended

January 3, December 28, December 29,

January 1, January 3, December 28,

2021 2020 2018

5 unchanged sentences

Deferred taxes and uncertain tax positions ( 14,075 ) ( 10,615 ) ( 19,286 )

Change in fair value of contingent consideration — — ( 150 )

Amortization of loan fees 1,543 171 275

Loss on extinguishment of debt — 516 —

8 unchanged sentences

INVESTING ACTIVITIES:

Acquisition of businesses ( 6,804 ) — ( 53,592 )

Acquisition of businesses, net of cash acquired ( 331,531 ) ( 6,804 ) —

Acquisition of other assets ( 250 ) — —

Purchases of property and equipment ( 56,744 ) ( 53,526 ) ( 30,203 )

3 unchanged sentences

Payments on line of credit ( 293,125 ) ( 57,053 ) ( 60,585 )

Payment of contingent consideration liability — — ( 5,382 )

Proceeds from issuance of debt, net of origination fees 392,385 — —

Repayment of debt ( 5,000 ) ( 2,813 ) ( 3,750 )

Cash from stock compensation program, net ( 4,343 ) ( 6,775 ) ( 4,096 )

Installment on purchase of non-controlling interest ( 6,556 ) — —

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

Net cash provided by (used in) financing activities 506,722 859 ( 43,431 )

3 unchanged sentences

CASH AND CASH EQUIVALENTS—End of year $ 245,764 $ 43,736 $ 27,958

FOX FACTORY HOLDING CORP.

Consolidated Statements of Cash Flows

(in thousands)

For the fiscal years ended

January 1, January 3, December 28,

SUPPLEMENTAL CASH FLOW INFORMATION:

2021 2020 2018

Cash paid during the period for:

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Cash paid for interest, net of capitalized interest $ 7,171 $ 2,762 $ 2,756

Cash paid for amounts included in the measurement of lease liabilities $ 7,095 $ 5,630 $ —

Non-cash operating activities:

Right-of-use assets obtained in exchange for lease obligations $ 14,178 $ 8,691 $ —

Non-cash investing and financing activities:

Acquisition of business in exchange for equity $ — $ 7,167 $ —

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

Acquisition of non-controlling interest in exchange for equity and installment payments $ 18,419 $ — $ —

Capital expenditures included in accounts payable $ 6,997 $ 1,718 $ 1,557

Non-controlling interests in acquired business $ — $ — $ 12,900

Debt assumed in acquisition of Tuscany $ — $ — $ 465

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

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

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Therefore, the financial results of certain fiscal years and quarters, which will contain 53 and 14 weeks, respectively, will not be exactly comparable to the prior and subsequent fiscal years and quarters, which contain 52 and 13 weeks, respectively.

For the fiscal years 2019, 2018 and 2017, the Company's fiscal year ended on January 3, 2020, December 28, 2018 and December 29, 2017 and had 53, 52 and 52 weeks, respectively.

For the fiscal years 2020, 2019 and 2018, the Company's fiscal year ended on January 1, 2021, January 3, 2020 and December 28, 2018 and had 52, 53 and 52 weeks, respectively.

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

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The effects of these translation adjustments are a component of other comprehensive income.

Foreign currency transaction losses of $ 881 , $ 420 , and $ 181 for the years ended January 3, 2020, December 28, 2018 and December 29, 2017, respectively, are included as a component of other income or expense.

Cash and Cash Equivalents - Cash consists of cash maintained in a checking account.

Foreign currency transaction losses of $ 396 , $ 881 , and $ 420 for the years ended January 1, 2021, January 3, 2020 and December 28, 2018, respectively, are included as a component of other income or expense.

Cash and Cash Equivalents - Cash consists of cash maintained in checking or money market accounts.

All highly liquid investments purchased with an original maturity date of 90 days or less at the date of purchase are considered to be cash equivalents.

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The following customers accounted for 10% or more of the Company's accounts receivable balance:

January 3, December 28,

January 1, January 3,

Customer A 12 % 6 %

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Customer C 4 % 11 %

During the years ended January 3, 2020, December 28, 2018 and December 29, 2017, Customer A from the table above represented 11 %, 8 %, and 8 % of sales, respectively.

During the year ended January 1, 2021, no customer from the table above represented more than 10% of sales.

For the year ended January 3, 2020, Customer C from the table above represented 11 % of sales.

No other customers were individually significant in any of these periods.

The Company depends on a limited number of vendors to supply component parts for its products.

The Company purchased 35 %, 30 %, and 35 % of its product components for the years ended January 3, 2020, December 28, 2018 and December 29, 2017, respectively, from ten vendors.

As of January 3, 2020 and December 28, 2018, amounts due to these vendors represented 29 % and 23 % of accounts payable, respectively.

The Company purchased 28 %, 35 %, and 30 % of its product components for the years ended January 1, 2021, January 3, 2020 and December 28, 2018, respectively, from ten vendors.

As of January 1, 2021 and January 3, 2020, amounts due to these vendors represented 17 % and 29 % of accounts payable, respectively.

Allowance for Doubtful Accounts - The Company records a provision for doubtful accounts based on historical experience and a detailed assessment of the collectability of its accounts receivable.

In estimating the allowance for doubtful accounts, management considers, among other factors, the aging of the accounts receivable, historical write-offs, and the credit-worthiness of each customer.

The provision is based on how long a receivable has been outstanding, taking into account the historical credit loss rate and adjusting for both current conditions and forecasts of economic conditions into that expected credit loss rate.

If circumstances change, such as higher-than-expected defaults or an unexpected material adverse change in a major customer’s ability to meet its financial obligations, the Company’s estimate of the recoverability of the amounts due could be reduced by a material amount.

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Fair value is estimated based on discounted future cash flows.

No impairment charges were recorded during the years ended January 3, 2020, December 28, 2018 and December 29, 2017.

No impairment charges were recorded during the years ended January 1, 2021, January 3, 2020 and December 28, 2018.

Business Combinations - The Company accounts for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations.

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Trademarks and brands are considered to be indefinite life intangibles, and are not amortized but are subject to testing for impairment annually.

No impairments of intangible assets were identified in the years ended January 3, 2020, December 28, 2018 and December 29, 2017.

No impairments of intangible assets were identified in the years ended January 1, 2021, January 3, 2020 and December 28, 2018.

Self-Insurance - The Company is partially self-insured for its U.S.

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The Company has third-party insurance coverage to limit exposure for individually significant claims.

The estimates for unpaid claims incurred as of January 3, 2020 and December 28, 2018 are $ 842 and $ 801 respectively, and are recorded within accrued expenses on the consolidated balance sheets.

The estimates for unpaid claims incurred as of January 1, 2021 and January 3, 2020 are $ 1,472 and $ 842 respectively, and are recorded within accrued expenses on the consolidated balance sheets.

Revenue Recognition - Revenues are generated from the sale of performance-defining products and systems to customers worldwide.

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

At January 3, 2020, the balance of deferred revenue related to pricing provisions was $ 172 .

These amounts are expected to be recognized over the next 12 months.

Revenues exclude sales tax.

Cost of Sales - Cost of sales primarily consists of materials and labor expense in the manufacturing of the Company’s products sold to customers.

1 unchanged sentence

Additionally, it includes stock-based compensation for personnel directly involved with manufacturing the Company’s product offerings.

Shipping and Handling Fees and Costs - The Company includes shipping and handling fees billed to customers in sales.

Shipping costs associated with inbound freight are capitalized as part of inventory and included in cost of sales as products are sold.

FOX FACTORY HOLDING CORP.

2 unchanged sentences

(in thousands, except per share amounts)

Shipping and Handling Fees and Costs - The Company includes shipping and handling fees billed to customers in sales.

Shipping costs associated with inbound freight are capitalized as part of inventory and included in cost of sales as products are sold.

Sales and Marketing - Sales and marketing expenses include costs related to sales, customer service and marketing personnel, including their wages, employee benefits and related stock-based compensation, and occupancy related expenses.

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The Company has elected to account for global intangible low-taxed income ("GILTI") in the year the tax is incurred, rather than recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years.

The net GILTI inclusion for the year ended January 3, 2020 was partially offset by foreign tax credits associated with the income and resulted in a net tax charge of $ 316 .

The net GILTI inclusion for the year ended January 1, 2021 was fully offset by foreign tax credits associated with the income.

The Company recognizes the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely on its technical merits as of the reporting date and then only in an amount more likely than not to be sustained upon review by the tax authorities.

The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

Advertising - Advertising costs are expensed as incurred and recognized as sales and marketing expenses on our Consolidated Statements of Income.

Costs incurred for advertising totaled $ 1,413 , $ 902 , and $ 1,070 for the years ended January 3, 2020, December 28, 2018 and December 29, 2017, respectively.

Warranties - The Company offers limited warranties on its products generally for one to four years .

Advertising - Advertising costs are expensed as incurred and recorded as sales and marketing expenses on our Consolidated Statements of Income.

Costs incurred for advertising totaled $ 2,188 , $ 1,413 , and $ 902 for the years ended January 1, 2021, January 3, 2020 and December 28, 2018, respectively.

Warranties - The Company offers limited warranties on its products generally for one to two years .

The Company recognizes estimated costs related to warranty activities as a component of cost of sales upon product shipment.

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

manufacturing, sale and service of performance-defining products.

The Company considers operating segments to be components of the Company in 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.

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Certain Significant Risks and Uncertainties - The Company is subject to those risks common in manufacturing-driven markets, including, but not limited to, competitive forces, dependence on key personnel, customer demand for its products, the successful protection of its proprietary technologies, compliance with government regulations, and the possibility of not being able to obtain additional financing when needed.

Additionally, the Company has been impacted by the recent coronavirus (“COVID-19”) outbreak.

The global outbreak of COVID-19 has negatively affected the U.S.

and global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets.

Despite the Company’s 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 the business, results of operation and financial condition is difficult to predict and depends on numerous evolving factors outside of the Company’s 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.

Recent Accounting Pronouncements - In May 2014, the FASB and International Accounting Standards Board issued their converged standard on revenue recognition, ASU 2014-09, updated December 2016 with the release of ASU 2016-20.

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Under the new standard, revenue attributed to such pricing provisions is deferred and recognized when the right is exercised by the customer.

The Company recorded a cumulative effect adjustment of $ 368 gross and $ 281 net of taxes to the opening balance of retained earnings to reflect the cumulative effect of the adoption of the standard.

The Company recorded a cumulative effect adjustment of $ 368 gross and $ 281 net of taxes to the fiscal year 2018 opening balance of retained earnings as to reflect the cumulative effect of the adoption of the standard.

FOX FACTORY HOLDING CORP.

8 unchanged sentences

The Company did not use the hindsight practical expedient to adopt this guidance.

The Company recorded a cumulative effect adjustment of $ 13,637 to operating lease right-of-use assets, $ 13,937 to operating lease liabilities, and $ 300 gross ($ 228 net of taxes) to the opening balance of the Company's retained earnings to reflect the cumulative effect of the adoption of the standard.

The Company recorded a cumulative effect adjustment of $ 13,637 to operating lease right-of-use assets, $ 13,937 to operating lease liabilities, and $ 300 gross ($ 228 net of taxes) to the fiscal year 2019 opening balance of the Company's retained earnings to reflect the cumulative effect of the adoption of the standard.

This standard did not have a material impact on our consolidated income statements.

2 unchanged sentences

Under this standard, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses.

This standard is effective for public companies for fiscal years beginning after December 15, 2019, including interim reporting periods within those years and early adoption is permitted.

The Company does not expect the impact of this adoption to be material.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows:

Classification of Certain Cash Receipts and Cash Payments, which clarifies the presentation of certain transactions, including but not limited to contingent consideration payments made after a business combination and debt prepayment and extinguishment costs in the cash flow statement.

The Company adopted ASU 2016-16 effective in the first quarter of fiscal year 2019.

The Company adopted ASU 2016-13 effective in the first quarter of fiscal year 2020 using the aging method, which calculates the allowance based on how long a receivable has been outstanding, taking into account the historical credit loss rate and adjusting for both current conditions and forecasts of economic conditions into that expected credit loss rate.

The adoption of ASU 2016-13 did not have a material impact on the Company's consolidated financial statements.

1 unchanged sentence

This standard is effective for fiscal years beginning after December 15, 2019.

The Company is currently assessing the impact this guidance will have on its consolidated financial statements.

The Company adopted ASU 2018-13 effective in the first quarter of fiscal year 2020.

The adoption of ASU 2018-13 did not have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other:

Internal-Use Software, which helps simplify how entities evaluate the accounting for costs paid by a customer in a cloud computing arrangement that is a service contract.

This standard is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted.

The Company is currently assessing the impact this guidance will have on its consolidated financial statements.

This standard is effective for fiscal years beginning after December 15, 2019.

The Company adopted ASU 2018-15 effective in the first quarter of fiscal year 2020.

The adoption of ASU 2018-15 did not have a material impact on the Company's consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which helps simplify how entities account for income taxes by removing various exceptions related to the recognition of deferred tax liabilities and updating other tax computation requirements.

This standard is effective for fiscal years beginning after December 15, 2020 and early adoption is permitted.

This standard is effective for fiscal years beginning after December 15, 2020.

The Company is currently assessing the impact this guidance will have on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Facilitation of Effects of Reference Rate Reform on Financial Reporting, which was created in response to concerns about structural risks of interbank offered rates ("IBORs") and the risk of cessation of the London Interbank Offered Rate ("LIBOR").

This standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.

This standard is effective for all entities as of March 12, 2020 through December 31, 2022.

The Company adopted ASU 2020-04 effective in the first quarter of fiscal year 2020.

The adoption of ASU 2020-04 did not have a material impact on the Company's consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements ("ASU 2020-10").

The amendments in ASU 2020-10 contain improvements to the Codification by including disclosure guidance in appropriate disclosure and ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the Disclosure Section of the Codification.

The ASU also provides clarification to various codification topics to improve consistency in guidance application.

The amendments are effective for interim and annual reporting periods in fiscal years beginning after December 15, 2020, with early adoption permitted.

The Company is currently evaluating ASU 2020-10 and expects no material impact to our consolidated financial statements and related disclosures as a result of adoption.

FOX FACTORY HOLDING CORP.

23 unchanged sentences

Inventory consisted of the following:

January 3, December 28,

January 1, January 3,

Raw materials $ 87,503 $ 87,779

6 unchanged sentences

(in thousands, except per share amounts)

Prepaids and Other Current Assets

Prepaids and other current assets consisted of the following:

January 1, January 3

Prepaid chassis deposits $ 66,812 $ 6,701

Advanced payments and prepaid contracts 8,683 5,774

Current portion of acquisition-related compensation held in escrow 4,518 —

Other current assets 7,907 5,465

Total $ 87,920 $ 17,940

Property, Plant and Equipment, net

Property, plant and equipment consisted of the following:

January 3, December 28,

January 1, January 3,

Building and building improvements $ 75,753 $ 42,343

8 unchanged sentences

Property, plant and equipment, net $ 163,288 $ 108,379

Depreciation expense was $ 11,261 , $ 8,143 , and $ 6,923 for the years ended January 3, 2020, December 28, 2018 and December 29, 2017, respectively, including $ 1,861 , $ 869 , and $ 565 of internal-use software amortization for the years ended January 3, 2020, December 28, 2018 and December 29, 2017, respectively.

Depreciation expense was $ 16,341 , $ 11,261 , and $ 8,143 for the years ended January 1, 2021, January 3, 2020 and December 28, 2018, respectively, including $ 2,250 , $ 1,861 , and $ 869 of internal-use software amortization for the years ended January 1, 2021, January 3, 2020 and December 28, 2018, respectively.

The Company capitalized $ 2,994 in internal use computer software costs during the year ended January 1, 2021.

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

January 3, December 28,

United States $ 100,508 $ 59,056

International 7,871 5,732

Total long-lived assets $ 108,379 $ 64,788

The following table summarizes the allocation of depreciation expense in the accompanying consolidated statements of income:

For the fiscal years ended

2020 2019 2018

Cost of sales $ 9,266 $ 6,263 $ 4,519

Sales and marketing $ 163 $ 154 $ 235

Research and development $ 2,044 $ 1,176 $ 822

General and administrative $ 4,868 $ 3,668 $ 2,567

Total $ 16,341 $ 11,261 $ 8,143

FOX FACTORY HOLDING CORP.

2 unchanged sentences

(in thousands, except per share amounts)

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

January 1, January 3,

United States $ 144,529 $ 100,508

International 18,759 7,871

Total long-lived assets $ 163,288 $ 108,379

The Company has operating lease agreements for administrative, research and development, manufacturing, and sales and marketing facilities.

These leases have remaining lease terms ranging from one to eight years, some of which include options to extend the lease term for up to five years, and some of which include options to terminate the leases within one year.

These leases have remaining lease terms ranging from one to seven years , some of which include options to extend the lease term for up to five years , and some of which include options to terminate the leases within one year .

Certain leases are subject to annual escalations as specified in the lease agreements.

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The Company elected a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the right-of-use assets and lease liabilities.

Lease costs for the twelve months ended December 28, 2018 and December 29, 2017 were $ 6,445 and $ 6,040 , respectively.

Lease costs for the twelve months ended January 3, 2020 and December 28, 2018 were $ 7,195 and $ 6,445 , respectively.

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

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Lease liabilities less current portion $ 19,115

In December 2020, the Company signed a lease contract which has not commenced as of January 1, 2021.

Based on the present value of the lease payments, the estimated right-of -use-asset and lease liability related to this contract is approximately $ 3,878 and $ 3,545 , respectively.

In addition, subsequent to January 1, 2021, the Company entered into a lease amendment that extended the lease term of an existing lease and is expected to result in an additional right-of -use-asset and lease liability of approximately $ 1,160 .

Goodwill and Intangible Assets

7 unchanged sentences

Total $ 204,491

December 28, 2018

January 3, 2020

Customer relationships $ 70,473 $ ( 30,114 ) $ 40,359 11

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Goodwill activity consisted of the following:

Balance as of December 28, 2018 $ 88,850

Balance as of January 3, 2020 $ 93,527

Acquisitions (Refer to Note 1 8 - Acquisitions )

4 unchanged sentences

Amortization Expense

2021 $ 19,860

Thereafter 55,699

2 unchanged sentences

Accrued expenses consisted of the following:

January 3, December 28,

January 1, January 3,

Payroll and related expenses $ 22,407 $ 14,595

2 unchanged sentences

Income tax payable 7,595 4,295

NCI buyout liability 4,550 —

Other accrued expenses 8,250 4,963

Total $ 59,391 $ 35,744

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

(in thousands, except per share amounts)

Activity related to warranties is as follows:

6 unchanged sentences

Ending warranty liability $ 9,835 $ 5,649 $ 6,433

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 3, 2020

(in thousands, except per share amounts)

Related Party Transactions

On May 3, 2019, the Company acquired the substantially all the assets of Air Ride Technologies, Inc., d/b/a Ridetech.

On May 3, 2019, the Company acquired substantially all the assets of Air Ride Technologies, Inc., d/b/a Ridetech.

Ridetech has a building lease for its manufacturing and office facilities in Jasper, Indiana.

The buildings are owned by the former owner of Ridetech, who is now an employee of the Company.

Rent expense under this lease was $ 125 for the year ended January 3, 2020.

The lease is effective from May 3, 2019 through April 1, 2024, with monthly rent payments of $ 16 .

Fox Factory, Inc.

has a triple-net building lease for its manufacturing and office facilities in Watsonville, California.

The building is owned by a former member of our Board of Directors who retired on August 28, 2018.

Payments made under this lease were $ 656 and $ 715 for the years ended December 28, 2018 and December 29, 2017, respectively.

On September 28, 2018, the Company purchased Tuscany's facilities from certain non-controlling interest stockholders who are also employees of the Company.

The total purchase price was $ 3,750 .

The Company leased these properties prior to being purchased.

Rent expense under these leases was $ 257 and $ 29 for the years ended December 28, 2018 and December 29, 2017, respectively.

Rent expense under this lease was $ 192 and $ 125 for the years ended January 1, 2021 and January 3, 2020, respectively.

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

Refer to Note 18 - Acquisitions for further details of this acquisition.

The Company has transactions with an automotive dealership owned by a former owner of SCA, who is now an employee of the Company.

The Company purchased approximately $ 1,172 of parts and vehicles and sold approximately $ 404 of upfit packages to the dealership during the year ended January 1, 2021.

As of January 1, 2021, the Company had $ 1,014 and $ 404 in accounts payable and accounts receivable, respectively, related to this dealership.

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 1 2 - Commitments and Contingencies for additional details of this agreement.

Former Second Amended and Restated Credit Facility

3 unchanged sentences

("Bank of America").

The Company expensed $ 516 of remaining debt issuance costs, which are included in other expense, net on the Consolidated Statements of Income .

New Credit Facility

In June 2019, the Company entered into a credit facility with Bank of America and other named lenders (the "Credit Facility").

The Credit Facility, which matures on June 3, 2024, provides a senior secured revolving line of credit with a maximum borrowing capacity of $ 250,000 .

The Company paid $ 510 in loan costs that will be deferred and amortized on a straight-line basis over the term of the Credit Facility.

The 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 1.50 %, or based on the base rate offered by Bank of America plus a margin ranging from 0.00 % to 0.50 %.

First Amended and Restated Credit Facility

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 term loan of $ 400,000 .

The term loan is subject to quarterly amortization payments.

The Company paid $ 7,615 in debt issuance costs, of which $ 6,458 were allocated to the term debt and $ 1,157 were allocated to the line of credit.

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 interest and other expense, net in the condensed consolidated statements of income for the year ended January 1, 2021 and 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.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

(in thousands, except per share amounts)

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 0.5%, or based on the base rate offered by Bank of America plus a margin ranging from 0.00 % to 1.25 %.

At January 1, 2021, the one-month LIBOR and prime rates were 0.14 % and 3.25 %, respectively.

At January 1, 2021, our weighted average interest rate on outstanding borrowing was 1.62 %.

The 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 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 January 1, 2021.

The Credit Facility permits up to $ 15,000 of the aggregate revolving commitment to be used by the Company for issuance of letters of credit, of which $ 5,000 was outstanding at January 3, 2020.

The following table summarizes our line of credit:

January 3, December 28,

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 1 1 - Derivatives and Hedging for further details of this agreement.

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 January 1, 2021.

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

January 1, January 3,

Amount outstanding $ — $ 68,000

2 unchanged sentences

Maximum borrowing capacity $ 250,000 $ 250,000

Maturity date June 3, 2024

Maturity date March 11, 2025

As of January 1, 2021, future principal payments for long-term debt, including the current portion, as summarized as follows:

For fiscal year

2021 $ 12,500

Total 395,000

Debt issuance cost ( 5,412 )

Long-term debt, net of issuance cost 389,588

current portion ( 12,500 )

Long-term debt less current portion $ 377,088

FOX FACTORY HOLDING CORP.

2 unchanged sentences

(in thousands, except per share amounts)

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 10 - 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 January 1, 2021 was a liability of $ 915 .

Refer to Note 1 6 - Fair Value Measurements and Financial 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 January 1, 2021, the interest rate swap was considered highly effective and accordingly, the $ 915 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.

Commitments and Contingencies

12 unchanged sentences

In April 2018, the PTAB issued opinions in the ‘027 Patent petition cases stating that the Company has not shown the claims of the ‘027 Patent to be obvious.

Regarding the PTAB ‘027 opinions, the Company has filed an Appeal to the Court of Appeals for the Federal Circuit.

Regarding the PTAB ‘027 opinions, the Company has filed an Appeal to the Court of Appeals for the Federal Circuit ("CAFC").

The CAFC found in favor of the Company and has vacated and remanded all of the PTAB findings with the exception of their finding that the ‘027 patent met the prima facia test for obviousness, which was affirmed.

SRAM has appealed to the CAFC to rehear the case en banc and that appeal is pending.

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

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 appeal cert before the Supreme Court of the United States, cert was denied and that 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.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

(in thousands, except per share amounts)

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 lifted the stay of the SRAM lawsuits against the Company.

The Company filed and SRAM filed lawsuits are now moving forward in the respective courts.

Due to the inherent uncertainties of litigation, the Company is not able to predict either the outcome or a range of reasonably possible losses, if any, at this time.

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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.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 3, 2020

(in thousands, except per share amounts)

Other Commitments - On November 30, 2017, the Company acquired an 80 % interest in Tuscany.

The stockholders' agreement provides the Company with a call option (the "Call Option") to acquire the remaining 20 % of Tuscany any time from November 30, 2019 through November 30, 2024 at a value that approximates fair market value.

In addition, if the Call Option has not been exercised as of November 30, 2024, the non-controlling owners shall be entitled to exercise a put option (the "Put Option") on November 30, 2024 and for a 180 -day period thereafter, which would require the Company to purchase all of the remaining shares held by the non-controlling owners at a price that approximates fair market value.

See Note 16 - Acquisitions of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for additional information on this commitment.

On July 24, 2019 the Company entered into a Standard Form of Agreement between 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 Design-Build Agreement contains several design and construction milestone dates that began in June 2019.

The Company expects to pay a total of approximately $36.5 million for the Design-Builder’s performance of the Design-Build 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 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.

A stockholders' agreement with Flagship, Inc.

provided the Company with a call option (the "Call Option") to acquire the remaining 20 % of FF US Holding Corp.

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

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 $ 6,556 during the year ended January 1, 2021.

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.

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

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Wayfair, Inc., et al., holding that internet retailers do not have to maintain a physical presence in a state in order to be required to collect the state’s sales and use tax.

Ultimately, the Court remanded the case to the South Dakota Supreme Court on the question of “whether some other principle in the Court’s Commerce Clause doctrine might invalidate the Act,” which may delay federal legislation on the issue.

However, as a result of the Court’s decision, additional states may now begin requiring all remote sellers, primarily those engaged in e-commerce, to register, collect and remit sales and use taxes on transactions with in-state customers.

Numerous states have either enacted legislation or informally indicated that they will not assert liability for uncollected taxes on a retroactive basis.

Nevertheless, 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 January 3, 2020.

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.

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 January 1, 2021.

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.

FOX FACTORY HOLDING CORP.

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Stockholders' Equity

Secondary Stock Offerings and Share Repurchase Program

In March 2017, the Company closed a secondary offering, whereby the selling stockholders, including Compass Group Diversified Holdings LLC ("Compass"), sold 5,574 shares of the Company's common stock at a price of $ 26.65 per share, less underwriting discounts and commissions.

The total shares sold included 466 shares, which were also sold by certain selling stockholders, in connection with the underwriters' option to purchase additional shares.

The Company did not sell shares or receive any proceeds from the sales of shares by the selling stockholders.

As a result of the March 2017 secondary offering, Compass no longer holds any equity interest in the Company.

The Company incurred approximately $ 113 of expenses in connection with the secondary offerings during the fiscal years ended December 29, 2017.

Secondary Stock Offering

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 $ 198,233 .

The total shares sold included 360 shares that were sold in connection with the underwriters' option to purchase additional shares.

This offering was made pursuant to the Company's registration statement on Form S-3.

The Company did not incur any expenses related to secondary offerings during the fiscal years ended January 3, 2020 and December 28, 2018.

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Stock-Based Compensation

Compensation expense related to the Company's share-based awards for the fiscal years ended January 3, 2020 and December 28, 2018 was $ 6,864 and $ 7,322 , respectively, all of which related to RSUs.

No compensation expense related to stock options was incurred during the fiscal years ended January 3, 2020 and December 28, 2018.

Compensation expense related to the Company's share-based awards for the year ended December 29, 2017 was $ 8,727 , of which $ 8,641 related to RSUs and $ 86 related to stock options.

Compensation expense related to the Company's share-based awards for the fiscal years ended January 1, 2021, January 3, 2020, and December 28, 2018 was $ 8,618 , $ 6,864 , and $ 7,322 , respectively, all of which related to RSUs.

No compensation expense related to stock options was incurred during the fiscal years ended January 1, 2021, January 3, 2020, and December 28, 2018.

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

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Total $ 8,618 $ 6,864 $ 7,322

Stock-based compensation expense capitalized to inventory was not material for the years ended January 3, 2020, December 28, 2018 and December 29, 2017.

As of January 1, 2021, $ 440 of stock-based compensation expense related to our executive bonus plan is included in Accrued Expenses on the Consolidated Balance Sheets.

Stock-based compensation expense capitalized to inventory was not material for the years ended January 1, 2021, January 3, 2020 and December 28, 2018.

FOX FACTORY HOLDING CORP.

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Vested ( 292 ) 26.06

Unvested at December 28, 2018 655 29.34

Unvested at January 3, 2020 427 44.98

Granted 260 47.46

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Unvested at January 1, 2021 450 $ 50.12

The fair value of vested RSUs was $ 21,793 , $ 13,874 and $ 12,587 for the years ended January 3, 2020, December 28, 2018 and December 29, 2017, respectively.

The fair value of vested RSUs was $ 15,625 , $ 21,793 and $ 13,874 for the years ended January 1, 2021, January 3, 2020 and December 28, 2018, respectively.

As of January 1, 2021, the Company had approximately $ 17,398 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 2.57 years.

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Options exercised ( 166 ) 5.25 9,384

Options forfeited ( 14 ) 6.20 —

Options expired ( 9 ) 6.38 —

Balance at December 28, 2018 720 5.17 3 39,403

Options exercised ( 289 ) 5.03 17,422

Balance at December 28, 2018 720 5.17 3 39,403

Balance at January 3, 2020 431 5.27 2 27,814

Options exercised ( 206 ) 5.16 19,724

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As of January 1, 2021, stock-based compensation expense related to stock options has been fully recognized.

During the years ended January 3, 2020, December 28, 2018 and December 29, 2017, 289 , 166 , and 541 shares of common stock, respectively, were issued due to the exercise of stock options, resulting in proceeds to the Company of approximately $ 1,451 , $ 875 , and $ 2,981 , respectively.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 3, 2020

(in thousands, except per share amounts)

During the years ended January 1, 2021, January 3, 2020 and December 28, 2018, 206 , 289 , and 166 shares of common stock, respectively, were issued due to the exercise of stock options, resulting in proceeds to the Company of approximately $ 1,063 , $ 1,451 , and $ 875 , respectively.

Earnings Per Share

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Diluted $ 2.22 $ 2.38 $ 2.16

The Company did not exclude any potentially dilutive shares from the calculation of diluted earnings per share for the years ended January 3, 2020, December 28, 2018 and December 29, 2017, as none of these shares would have been antidilutive.

The Company did not exclude any potentially dilutive shares from the calculation of diluted earnings per share for the years ended January 1, 2021, January 3, 2020 and December 28, 2018, as none of these shares would have been antidilutive.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

(in thousands, except per share amounts)

Provision for Income Taxes

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Provision for income taxes $ 12,784 $ 14,099 $ 5,523

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 3, 2020

(in thousands, except per share amounts)

The Company's income before provision for income taxes was subject to taxes in the following jurisdictions for the following periods:

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State taxes, net of federal benefit 1.8 1.8 1.8

Change in liability for unrecognized tax benefits 0.2 ( 10.8 ) ( 1.7 )

Stock-based compensation ( 5.9 ) ( 6.3 ) ( 3.8 )

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Research and development tax credit ( 0.9 ) ( 0.8 ) ( 1.2 )

Change in tax rates — ( 0.8 ) ( 3.8 )

California business development tax credit — ( 0.8 ) —

Executive compensation deduction limitation 0.8 1.2 2.2

Foreign rate differential — 0.4 ( 4.6 )

Valuation allowance on deferred tax assets 0.2 0.4 9.4

Tax on unremitted foreign earnings 0.3 0.4 8.9

Change in liability for unrecognized tax benefits 0.6 0.2 ( 10.8 )

Other ( 0.2 ) ( 1.1 ) ( 1.5 )

Total provision 12.2 % 13.0 % 6.1 %

The Tax Cuts and Jobs Act (the "TCJA") was enacted on December 22, 2017.

The TCJA reduced the U.S.

federal corporate tax rate from 35% to 21%, required companies to pay a one-time transition tax on unremitted earnings of certain foreign subsidiaries that were previously tax deferred, created a new minimum tax on certain foreign earnings, and provided incentives for U.S.

companies to sell and license goods and services abroad, among other changes.

In 2017, the Company recorded provisional amounts for certain enactment-date effects of the Act by applying the guidance of the SEC's Staff Accounting Bulletin 118 ("SAB 118") because the enactment-date accounting for these effects had not yet been completed.

Effective January 1, 2016, the Company sold the net assets of its Taiwan branch operations and its shares of Fox Factory IP Holding Corp.

to Fox Factory Switzerland GmbH.

The Company’s Taiwan operations were, as a result, organized as a branch of the Swiss entity (together, "Fox Switzerland").

Fox Switzerland generates earnings that prior to the enactment of the TCJA, were not subject to payment of U.S.

income taxes or accrual of deferred tax expense because the Company asserted that such earnings were permanently invested outside the U.S.

The unremitted earnings of Fox Switzerland through 2017 became subject to U.S.

tax as a result of the one-time transition tax, which approximated $ 3,706 .

As a result of the change in U.S.

taxation, the Company no longer considers the unremitted earnings of Fox Switzerland to be permanently reinvested, and as such recorded a deferred withholding tax liability of approximately $ 2,026 in 2017.

In 2018, the Company restructured its foreign operations to provide operational and treasury management efficiencies, while potentially permitting relief from dividend withholding on profits earned in 2018 forward.

The Company has obtained tax incentives in Switzerland that are effective on a formal basis through March 2019, and indefinitely on a statutory basis, as long as the Company's operations meet specified criteria.

The effect of the tax incentive was not material to the Company's income tax provision for the years ended December 28, 2018 and December 29, 2017.

During the year ended December 28, 2018, the Company met certain in-state growth requirements in order to earn the final three tranches of a four-year, $ 1,700 tax credit from the State of California for a benefit of $ 950 , or $ 751 net of federal income tax.

The Company did not recognize any benefit for the year ended December 29, 2017.

FOX FACTORY HOLDING CORP.

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Deferred Income Taxes

January 3, December 28,

January 1, January 3,

Deferred tax assets:

Foreign tax credits, including amounts associated with accrued charges $ 41,187 $ 33,320

Inventory 3,542 3,086

Accrued liabilities 2,862 2,815

Lease liability 5,966 4,304

Accrued liabilities 4,973 2,862

Inventory 4,386 3,542

Capitalized research and development 3,360 —

Research and development tax credits 1,851 4,369

Stock-based compensation 961 1,067

Other 2,587 1,936

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Deferred tax liabilities:

Intangible assets ( 24,262 ) ( 4,283 )

Depreciation ( 6,912 ) ( 6,924 )

Accrued withholding tax on unremitted foreign dividends ( 2,318 ) ( 2,164 )

Lease right-of-use asset ( 6,024 ) ( 4,215 )

Intangible assets ( 4,283 ) ( 2,220 )

Accrued withholding tax on unremitted foreign dividends ( 213 ) ( 2,318 )

Other ( 365 ) ( 320 )

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Net deferred tax asset $ 19,362 $ 25,725

As of January 3, 2020, the Company had foreign tax credits of $ 33,320 that begin to expire in 2025, unless previously utilized, and foreign net operating loss carryforwards of $ 3,036 , of which $ 2,940 begin to expire in 2025 if not utilized and $ 96 which do not expire.

As of January 1, 2021, the Company had foreign tax credits of $ 41,187 that begin to expire in 2025, unless previously utilized, and foreign net operating loss carryforwards of $ 1,370 , of which $ 1,370 begin to expire in 2037 if not utilized.

The Company also had federal and state research and development credit carryforwards of approximately $ 1,334 and $ 2,321 respectively.

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As of January 1, 2021, the Company assessed the realizability of deferred tax assets and evaluated the need for a valuation allowance for deferred tax assets for each jurisdiction based on the framework of ASC 740.

As a result of the TCJA, the Company believes that it is more likely than not that a portion of its foreign tax credits will not be realizable, and as such, provided an allowance of $ 6,287 as of December 28, 2018.

For the year ended January 3, 2020, the valuation allowance decreased by $ 61 , due to a release of the valuation allowance against the Company's Canadian subsidiary.

For the year ended January 1, 2021, the valuation allowance increased by $ 624 , due to a generation of additional foreign tax credits from the foreign derived earnings.

The valuation allowance for foreign tax credits was $ 7,161 as of January 1, 2021.

It is reasonably possible that the Company could record a material adjustment to the valuation allowance in the next twelve months as management assesses the progress and outcome of its restructuring activities.

Additionally, based on available evidence, it was concluded on a more likely than not basis that deferred tax assets of the Company's UK subsidiary and Austrian branch are not realizable.

Accordingly, a valuation allowance of $ 82 has been recorded to offset the deferred tax assets in these jurisdictions, which includes a partial valuation allowance for Switzerland.

Other components of the valuation allowance were not significant.

FOX FACTORY HOLDING CORP.

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The deductibility of acquisition-related amortization and depreciation for state tax purposes remains uncertain.

The Company believes that it is reasonably possible that unrecognized tax benefits at January 3, 2020 could be reduced by an additional $ 340 in the next twelve months as a result of expiration of statute of limitations.

As of January 3, 2020 and December 28, 2018, the Company had approximately $ 36 and $ 73 , respectively, of cumulative interest and penalties related to the uncertain tax positions, and has elected to treat interest and penalties as a component of income tax expense.

As of January 1, 2021 and January 3, 2020, the Company had approximately $ 57 and $ 36 , respectively, of cumulative interest and penalties related to the uncertain tax positions, and has elected to treat interest and penalties as a component of income tax expense.

The Company's 2018 forward federal tax returns, state tax returns from 2016 and forward, and foreign tax returns from 2018 and forward are subject to examination by tax authorities.

There are ongoing U.S.

state audits covering fiscal years 2015-2017.

We do not expect the results from any ongoing income tax audit to have a material impact on our consolidated financial condition, results of operations, or cash flows.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 3, 2020

(in thousands, except per share amounts)

Due to a favorable conclusion of a state audit in the first quarter of 2021, the company expects to release $ 2,718 of uncertain tax positions, of which $ 2,243 favorably impacts the effective tax rate.

Fair Value Measurement and Financial Instruments

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Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

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

January 3, 2020 December 28, 2018

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

Term debt $ — $ — $ — $ — $ — $ 59,426 $ — $ 59,426

Non-controlling interest subject to put provisions — — 15,719 15,719 — — 14,282 14,282

Total liabilities measured at fair value $ — $ — $ 15,719 $ 15,719 $ — $ 59,426 $ 14,282 $ 73,708

There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 categories of the fair value hierarchy during the years ended January 3, 2020, and December 28, 2018.

As of December 28, 2018, the carrying amount of the principal under the Company’s Second 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.

The Company paid off the Second Amended and Restated Credit Facility in June 2019 upon entering into the new revolving Credit Facility with Bank of America.

The Company has potential obligations to purchase the non-controlling interests held by third parties in the Tuscany subsidiary.

These obligations are in the form of put provisions and are exercisable at the third-party owners' discretion within the specified periods outlined in the put provision within the Tuscany stockholders' agreement (see Note 16 - Acquisitions of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K).

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 January 3, 2020, the estimated fair value was lower than the carrying value and in accordance with applicable guidance, the non-controlling interest has been adjusted to the carrying value.

The estimated fair values of the non-controlling interests subject to put provisions can fluctuate and the implicit multiple of earnings at which these non-controlling interest obligations may ultimately be settled could vary significantly from our future estimates depending upon market conditions.

FOX FACTORY HOLDING CORP.

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(in thousands, except per share amounts)

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:

January 1, 2021 January 3, 2020

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

Credit Facility $ — $ 389,588 $ — $ 389,588 $ — $ 68,000 $ — $ 68,000

Interest Rate Swap — 915 — 915 — — — —

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

Total liabilities measured at fair value $ — $ 390,503 $ — $ 390,503 $ — $ 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 years ended January 1, 2021, and January 3, 2020.

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

The Company believes the carrying amount of its First Amended and Restated Credit Facility approximates the fair value at January 1, 2021 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 1 1 - 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 1 2 - Commitments and Contingencies for additional details of this agreement.

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 obligations measured at fair value using Level 3 inputs:

Obligations (measured with level 3 inputs)

Balance at December 28, 2018 $ 14,282

Balance at January 3, 2020 $ 15,719

Net income ascribed to non-controlling interest 1,072

Change in fair value 8,184

Purchase of non-controlling interest ( 24,975 )

Balance at January 1, 2021 $ —

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Participants may make voluntary contributions to the 401(k) plan, limited by certain IRS restrictions.

The Company made matching contributions of $ 1,153 , $ 850 , and $ 437 for each of the years ended January 3, 2020, December 28, 2018 and December 29, 2017, respectively.

On May 3, 2019, the Company 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 in an asset purchase accounted for as a business combination.

In connection with the acquisition, the Company paid approximately $ 13,971 , of which $ 6,804 was cash on hand and $ 7,167 was from newly issued unregistered shares of common stock.

During the year ended January 3, 2020, the Company finalized the allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated respective fair values as of May 3, 2019, with the excess purchase price allocated to goodwill.

Identifiable intangible assets were valued at $ 4,320 .

The Company will amortize the acquired customer relationships asset of $ 2,850 over its expected useful life of 8 years, the core technologies assets of $ 1,000 over a weighted average expected useful life of 6 years and the trademarks and brand name asset of $ 470 over an expected useful life of 5 years.

The goodwill of $ 4,692 is expected to have an indefinite life and will be subject to impairment testing.

The acquired goodwill is expected to be deductible for income tax purposes.

The acquisition was not material to the Company's financial statements.

On November 30, 2017, the Company acquired an 80 % interest in Tuscany, a designer, manufacturer and distributor of premium aftermarket powered vehicle performance packages in an asset purchase accounted for as a business combination, pursuant to ASC 805.

In connection with the acquisition, the Company paid $ 53,350 in cash financed through a combination of its existing credit facility and cash on hand.

This purchase included $ 242 in intercompany accounts payable, resulting in a total purchase price of $ 53,592 .

The stockholders' agreement executed in association with the acquisition provides the Company with a call option to acquire the remaining 20 % of Tuscany any time from November 30, 2019 through November 30, 2024 at a value that approximates fair market value as defined in the purchase agreement.

In addition, if the call option has not been exercised as of November 30, 2024, the non-controlling owners shall be entitled to exercise a put option on November 30, 2024 and for a 180 -day period thereafter, which would require the Company to purchase all of the remaining shares held by the non-controlling owners at a price that approximates fair market value as defined in the purchase agreement.

In accordance with ASC 805, the Company recognized a non-controlling interest in Tuscany and measured the non-controlling interest at fair value on the acquisition date.

The Company concluded that the put feature embedded in the agreement causes the non-controlling interest to be redeemable, pursuant to ASC 480, because the put option requires cash settlement.

Therefore, the Company has classified the non-controlling interest as temporary (mezzanine) equity in the consolidated balance sheets.

The Company made matching contributions of $ 2,078 , $ 1,153 , and $ 850 for each of the years ended January 1, 2021, January 3, 2020 and December 28, 2018, respectively.

FOX FACTORY HOLDING CORP.

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(in thousands, except per share amounts)

The purchase price of Tuscany is allocated to the assets acquired and liabilities assumed based on their estimated respective fair values as of November 30, 2017, with the excess purchase price allocated to goodwill.

During the year ended, December 28, 2018, the Company finalized the allocation of the purchase price and recorded adjustments to Goodwill of $ 440 related to the completion of the Company's validation of working capital, intangible valuation procedures, and analysis of opening warranty provisions.

Goodwill represents the value of synergies from combining operations Tuscany and the Company, as well as intangibles that do not qualify for separate recognition.

Intangibles and goodwill related to the Company's 80 % interest are deductible for tax purposes.

The Company incurred $ 900 of transaction costs in conjunction with the Tuscany acquisition for the year ended December 29, 2017, which is included in general and administrative expense in the accompanying consolidated statement of income.

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

("SCA") from Southern Rocky Holdings, LLC for $ 331,853 , net of cash acquired and exclusive of vehicle inventory.

SCA is a leading OEM authorized specialty vehicle manufacturer for light duty trucks and SUVs with headquarters in Trussville, Alabama.

SCA operates under three aftermarket brands:

SCA Performance, Rocky Ridge Trucks, and Rocky Mountain Truckworks.

The Company believes the acquisition will be complementary to FOX’s Tuscany business, expanding its North American geographic manufacturing footprint and broadening its product offering in a growing segment of the automotive industry.

This transaction was accounted for as a business combination.

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 $ 4,211 in costs associated with such retention incentives during the year ended January 1, 2021.

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

The purchase price of SCA is allocated to the assets acquired and liabilities assumed based on their estimated respective fair values as of March 11, 2020 with the excess purchase price allocated to goodwill.

During the year ended January 1, 2021, the Company finalized the allocation of purchase price and recorded adjustments to Goodwill of $ 3,539 related to the completion of valuation of working capital, real estate, intangible assets and related deferred tax liabilities.

The Company’s allocation of the purchase price to the net tangible and intangible assets acquired and liabilities assumed is as follows:

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Cash consideration $ 331,531

Settlement of pre-existing accounts 242

Non-cash consideration 322

Total consideration at closing $ 331,853

Fair market values

Other current and non-current assets $ 5,966

Other current assets $ 16,350

Property, plant and equipment 8,300

Lease right-of-use assets 4,027

Customer relationships 124,400

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Accounts payable and accrued expenses 7,678

Debt assumed in acquisition 465

Deferred tax liability for tax free rollover of non-controlling interest 2,588

Lease liabilities 4,027

Deferred taxes 20,773

Total liabilities assumed 32,478

Redeemable non-controlling interest 12,900

Purchase price allocation $ 331,853

The Company incurred $ 10,582 of acquisition costs in conjunction with the SCA acquisition, including $ 1,750 of transaction compensation during the year ended January 1, 2021 and $ 602 of transaction costs during the year ended January 3, 2020.

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

Additional debt issuance costs of $ 6,622 were incurred in association with financing the transaction and will be amortized over the term of the First Amended and Restated Credit Facility.

Refer to Note 10 - Debt for further details.

The values assigned to the identifiable intangible assets were determined by discounting the estimated future cash flows associated with these assets to their present value.

The goodwill of $ 195,754 reflects the strategic fit of SCA with the Company’s operations.

The Company will amortize the acquired customer relationships assets over their expected useful lives of 5 - 10 years.

Trademarks, brand names and goodwill are expected to have an indefinite life, and will be subject to impairment testing.

The goodwill is not deductible for income tax purposes.

SCA previously purchased intangibles in asset acquisitions with a remaining net tax basis approximating $ 77,989 , which the Company may deduct for income tax purposes.

FOX FACTORY HOLDING CORP.

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(in thousands, except per share amounts)

The following unaudited pro forma financial information shows the combined results of operations of the Company and SCA, as if the acquisition had occurred as of the beginning of the periods presented.

The pro forma results include the effects of the amortization of purchased intangible assets and acquired inventory valuation step-up, interest expense on the term debt secured to finance the acquisition, and the net tax benefit of the above adjustments calculated at the statutory federal tax rate of 21%.

SCA was operated as a C Corporation for federal taxation purposes.

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 year ended January 1, 2021 exclude transaction costs associated with the acquisition and the results for the year ended January 3, 2020 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 years ended

January 1, 2021 January 3, 2020

Pro forma sales $ 909,903 $ 842,701

Pro forma net income attributable to FOX stockholders $ 89,480 $ 78,577

Pro forma basic earnings per share $ 2.45 $ 2.05

Pro forma diluted earnings per share $ 2.41 $ 2.01

Total SCA revenues included in the consolidated statements of income $ 76,648

Total SCA pre-tax income included in the consolidated statements of income $ 7,555

Selected Quarterly Financial Data (Unaudited)

1 unchanged sentence

Quarter Ended

Jan 3, Sep 27, Jun 28, Mar 29, Dec 28, Sep 28, Jun 29, Mar 30,

Jan 1, Oct 2 Jul 3 April 3, Jan 3, Sep 27, Jun 28, Mar 29,

2021 2020 2020 2020 2020 2019 2019 2019

7 unchanged sentences

Subsequent Events

On February 11, 2020 the Company entered into an agreement to acquire substantially all the issued and outstanding capital stock of SCA Performance Holdings, Inc.

("SCA") from Southern Rocky Holdings, LLC for $ 328,000 , exclusive of vehicle inventory.

SCA is a leading OEM authorized specialty vehicle manufacturer (“SVM”) for light duty trucks and sports utility vehicles with headquarters in Trussville, Alabama.

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

The transaction will be financed through an expanded and syndicated Credit Facility led by Bank of America.

The Company also agreed to an additional $ 13,000 of contingent, performance-based retention incentives for key SCA management payable over the next two years.

The transaction is expected to close late in the first quarter of fiscal 2020.

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 9A. Controls and Procedures