What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 108 added, 91 removed, 528 unchanged (27% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

July 2, January 1,

October 1, January 1,

Current assets:

Cash and cash equivalents $ 319,342 $ 245,764

Accounts receivable (net of allowances of $ 974 and $ 663 at July 2, 2021 and January 1, 2021, respectively)

Accounts receivable (net of allowances of $ 929 and $ 663 at October 1, 2021 and January 1, 2021, respectively)

159,456 121,194

22 unchanged sentences

Stockholders’ equity

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of July 2, 2021 and January 1, 2021

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

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

42,972 shares issued and 42,083 outstanding as of July 2, 2021;

42,994 shares issued and 42,104 outstanding as of October 1, 2021;

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

1 unchanged sentence

Treasury stock, at cost;

890 common shares as of July 2, 2021 and January 1, 2021

890 common shares as of October 1, 2021 and January 1, 2021

( 13,754 ) ( 13,754 )

7 unchanged sentences

(in thousands, except per share data)

For the three months ended For the six months ended

July 2, July 3, July 2, July 3,

For the three months ended For the nine months ended

October 1, October 2, October 1, October 2,

2021 2020 2021 2020

11 unchanged sentences

Interest expense 1,849 2,291 6,351 7,030

Other expense 83 71 1,042 133

Other (income) expense ( 187 ) ( 189 ) 855 ( 57 )

Interest and other expense, net 1,662 2,102 7,206 6,973

14 unchanged sentences

(in thousands)

For the three months ended For the six months ended

July 2, July 3, July 2, July 3,

For the three months ended For the nine months ended

October 1, October 2, October 1, October 2,

2021 2020 2021 2020

Net income $ 43,823 $ 38,020 $ 126,084 $ 59,950

Other comprehensive income (loss)

Other comprehensive (loss) income

Interest rate swap, net of tax effects ( 45 ) ( 801 ) 1,575 ( 801 )

Foreign currency translation adjustments, net of tax effects ( 556 ) 636 ( 424 ) 619

Other comprehensive income (loss) 131 923 1,752 ( 17 )

Other comprehensive (loss) income ( 601 ) ( 165 ) 1,151 ( 182 )

Comprehensive income 43,222 37,855 127,235 59,768

21 unchanged sentences

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

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

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

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

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

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

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

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

15 unchanged sentences

Balance - July 2, 2021 42,972 $ 42 890 $ ( 13,754 ) $ 338,019 $ 2,820 $ 477,242 $ 804,369 $ —

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 22 — — — ( 1,537 ) — — ( 1,537 ) —

Stock-based compensation expense — — — — 3,986 — — 3,986 —

Other comprehensive loss — — — — — ( 601 ) — ( 601 ) —

Net income — — — — — — 43,823 43,823 —

Balance - October 1, 2021 42,994 $ 42 890 $ ( 13,754 ) $ 340,468 $ 2,219 $ 521,065 $ 850,040 $ —

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

2 unchanged sentences

(in thousands)

For the six months ended

July 2, 2021 July 3, 2020

For the nine months ended

October 1, 2021 October 2, 2020

OPERATING ACTIVITIES:

16 unchanged sentences

Acquisition of businesses, net of cash acquired ( 15,625 ) ( 329,176 )

Acquisition of other assets — ( 250 )

Net cash used in investing activities ( 55,608 ) ( 375,409 )

6 unchanged sentences

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

Proceeds (repurchases) from stock compensation program, net ( 5,104 ) ( 4,348 )

Repurchases from stock compensation program, net ( 6,641 ) ( 4,602 )

Net cash (used in) provided by financing activities ( 20,291 ) 510,019

6 unchanged sentences

(in thousands)

For the six months ended

For the nine months ended

SUPPLEMENTAL CASH FLOW INFORMATION:

July 2, 2021 July 3, 2020

October 1, 2021 October 2, 2020

Cash paid during the period for:

5 unchanged sentences

Non-cash investing activities:

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

Capital expenditures included in accounts payable $ 4,428 $ 6,530

20 unchanged sentences

The twelve month periods ended December 31, 2021 and January 1, 2021, will include or have included 52 weeks.

The three and six month periods ended July 2, 2021 and July 3, 2020 each included 13 weeks and 26 weeks, respectively.

The three and nine month periods ended October 1, 2021 and October 2, 2020 each included 13 weeks and 39 weeks, respectively.

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

8 unchanged sentences

For larger OEMs, the Company may also enter into master agreements.

Sales tax and other similar taxes are excluded from revenues.

Provisions for discounts, rebates, sales incentives, returns, and other adjustments are generally provided for in the period the related sales are recorded, based on management’s assessment of historical trends and projection of future results.

Certain pricing provisions that provide the customer with future discounts are considered a material right.

Such material rights result in the deferral of revenue that are recognized when the rights are exercised by the customer.

Such material rights result in the deferral of revenues that are recognized when the rights are exercised by the customer.

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

11 unchanged sentences

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 ongoing coronavirus (“COVID-19”) outbreak.

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

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

1 unchanged sentence

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;

the duration and scope of the COVID-19 pandemic;

government, social, business and other actions that have been and will be taken in response to the COVID-19 pandemic;

increases in COVID-19 case counts;

any additional waves of the virus, availability and ultimate efficacy of the vaccine on the new variants of the virus;

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

any additional waves of the virus, availability and ultimate efficacy of the vaccine on the new variants of the virus, including the Delta variant;

and the effect of the COVID-19 pandemic on short- and long-term general economic conditions.

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

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

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 amendments in ASU 2020-10 contain improvements to the Codification to ensure consistency by including disclosure guidance in the appropriate Disclosure Section.

This guidance includes an option for an entity to provide certain information either on the face of the financial statements or in the notes.

ASU 2020-10 amends the Codification to include this language in the appropriate disclosure section.

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

6 unchanged sentences

The following table summarizes total sales by product category:

For the three months ended For the six months ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

For the three months ended For the nine months ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Powered Vehicles $ 187,998 $ 153,031 $ 540,164 $ 372,081

2 unchanged sentences

The following table summarizes total sales by sales channel:

For the three months ended For the six months ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

For the three months ended For the nine months ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

OEM $ 198,782 $ 143,687 $ 522,809 $ 335,295

2 unchanged sentences

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

For the three months ended For the six months ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

For the three months ended For the nine months ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

North America $ 210,623 $ 175,486 $ 608,800 $ 423,078

4 unchanged sentences

Remaining performance obligations represent the transaction price of contracts, generally considered to be the customer's purchase order, for which work has not been performed or has been partially performed.

The Company has elected to exclude remaining performance obligations with an original expected duration of one year or less.

Revenue expected to be recognized from remaining performance obligations as of July 2, 2021 for contracts with a duration more than one year was approximately $ 10,040 , all of which is expected to be recognized during fiscal year 2022.

The Company has elected to exclude disclosure of remaining performance obligations with an original expected duration of one year or less.

Revenue expected to be recognized from remaining performance obligations as of October 1, 2021 for contracts with a duration of more than one year was approximately $ 191,216 , all of which is expected to be recognized during fiscal years 2022 and 2023.

The increase from prior quarter is due the timing of model year releases.

FOX FACTORY HOLDING CORP.

2 unchanged sentences

Inventory consisted of the following:

July 2, January 1,

October 1, January 1,

Raw materials $ 166,708 $ 87,503

4 unchanged sentences

Prepaids and other current assets consisted of the following:

July 2, January 1,

October 1, January 1,

Prepaid chassis deposits $ 29,765 $ 66,812

8 unchanged sentences

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

July 2, January 1,

October 1, January 1,

Building and building improvements $ 73,370 $ 75,753

8 unchanged sentences

Property, plant and equipment, net $ 183,695 $ 163,288

During the six months ended July 2, 2021, the Company reclassified certain assets from buildings to land and land improvements to better depict the nature of the assets.

During the nine months ended October 1, 2021, the Company reclassified certain assets from buildings to land and land improvements to better depict the nature of the assets.

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

July 2, January 1,

October 1, January 1,

United States $ 158,116 $ 144,529

10 unchanged sentences

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

The weighted-average remaining lease term for the Company's operating leases was 4.71 years and the weighted-average incremental borrowing rate was 2.77 % as of July 2, 2021.

The weighted-average remaining lease term for the Company's operating leases was 5.09 years and the weighted-average incremental borrowing rate was 2.47 % as of October 1, 2021.

Operating lease costs consisted of the following:

For the three months ended For the six months ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

For the three months ended For the nine months ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Operating lease cost $ 2,387 $ 1,835 $ 6,440 $ 5,209

4 unchanged sentences

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

Balance Sheet Classification July 2, 2021

Balance Sheet Classification October 1, 2021

Operating lease right-of-use assets Lease right-of-use assets $ 34,976

3 unchanged sentences

For fiscal year Total future payments

2021 (excluding the 6 months ended July 2, 2021) $ 4,375

2021 (excluding the 9 months ended October 1, 2021) $ 2,327

Thereafter 7,122

9 unchanged sentences

Accrued expenses consisted of the following:

July 2, January 1,

October 1, January 1,

Payroll and related expenses $ 34,560 $ 22,407

6 unchanged sentences

Activity related to warranties is as follows:

For the three months ended For the six months ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

For the three months ended For the nine months ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Beginning warranty liability $ 13,650 $ 8,915 $ 9,835 $ 5,649

13 unchanged sentences

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 six months ended July 3, 2020.

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

Loan fees allocated to the term debt will be amortized using the interest method and loan fees allocated to the line of credit will be amortized on a straight-line basis over the term of the 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 2.25 %, with a floor rate of 0.00%, or based on the base rate offered by Bank of America plus a margin ranging from 0.00 % to 1.25 %.

At July 2, 2021, the one-month LIBOR and prime rates were 0.10 % and 3.25 %, respectively.

At July 2, 2021, our weighted-average interest rate on outstanding borrowing was 1.32 %.

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

At October 1, 2021, the one-month LIBOR and prime rates were 0.08 % and 3.25 %, respectively.

At October 1, 2021, our weighted-average interest rate on outstanding borrowing was 1.30 %.

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 Company was in compliance with the covenants as of July 2, 2021.

The Company was in compliance with the covenants as of October 1, 2021.

On June 11, 2021, the Company terminated its existing swap agreement and entered into a new interest rate swap agreement to obtain a more favorable interest rate and to manage interest rate risk exposure, which was effective July 2, 2021.

1 unchanged sentence

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

The Credit Facility permits up to $ 25,000 of the aggregate revolving commitment to be used by the Company for issuance of letters of credit, of which $ 15,000 was outstanding at July 2, 2021.

The 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 October 1, 2021.

The following table summarizes the line of credit under the Credit Facility:

7 unchanged sentences

(in thousands, except per share amounts)

As of July 2, 2021, future principal payments for long-term debt, including the current portion, as summarized as follows:

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

For fiscal year

46 unchanged sentences

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

The Company paid $ 900 and $ 2,750 during the three and six months ended July 2, 2021.

The Company paid $ 900 and $ 3,650 during the three and nine months ended October 1, 2021, respectively.

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

The Company released 19 and 39 shares of stock during the three and six months ended July 2, 2021.

The Company released 19 and 58 shares of stock during the three and nine months ended October 1, 2021, respectively.

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

3 unchanged sentences

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

The Company believes that it is possible that it will incur a liability for uncollected sales tax on some portion of its e-commerce sales through July 2, 2021.

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

7 unchanged sentences

Interest rate swaps involve the receipt of floating-rate amounts in exchange for fixed-rate interest payments based on the one-month LIBOR over the lives of the agreements without an exchange of the underlying principal amounts.

As of July 2, 2021 and January 1, 2021 the Company had the following open interest rate swap contracts:

July 2, 2021 January 1, 2021

As of October 1, 2021 and January 1, 2021, the Company had the following interest rate swap contracts:

October 1, 2021 January 1, 2021

Effective Date Termination Date Notional Amount Unrealized Gain (Loss) in AOCI Unrealized Gain (Loss) in AOCI

9 unchanged sentences

As required under ASC 815, the Interest Rate Swap’s effectiveness will be assessed on a quarterly basis using a quantitative regression analysis.

The gains and losses, net of tax, related to the effective portion of derivative instruments designated as cash flow hedges recognized in accumulated other comprehensive income for the three and six months ended July 2, 2021 were a loss of $ 525 and a gain of $ 1,620 , respectively.

No gains or losses were incurred for the three and six months ended July 3, 2020.

The gains and losses, net of tax, related to the effective portion of derivative instruments designated as cash flow hedges recognized in accumulated other comprehensive income for the three and nine months ended October 1, 2021 were a loss of $ 45 and a gain of $ 1,575 , respectively.

No gains or losses were incurred for the three and nine months ended October 2, 2020.

Unrealized losses of $ 864 included in accumulated other comprehensive income related to the Interest Rate Swap are expected to be recognized in interest expense over the next twelve months.

4 unchanged sentences

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:

July 2, 2021 January 1, 2021

October 1, 2021 January 1, 2021

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

4 unchanged sentences

Total liabilities measured at fair value $ — $ 380,615 $ — $ 380,615 $ — $ 390,503 $ — $ 390,503

There were no transfers of assets or liabilities between Level 1, Level 2, and Level 3 categories of the fair value hierarchy during the three and six month period ended July 2, 2021.

There were no transfers of assets or liabilities between Level 1, Level 2, and Level 3 categories of the fair value hierarchy during the three and nine month period ended October 1, 2021.

The Company used Level 2 inputs to determine the fair value of the Credit Facility.

The Company believes the carrying amount of its Credit Facility approximates the fair value at July 2, 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.

The Company believes the carrying amount of its Credit Facility approximates the fair value at October 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 June 11, 2021, 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.

8 unchanged sentences

In June 2020, the Company completed a follow-on 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 net proceeds to the Company were $ 198,233 after underwriters' discounts and commissions of $ 11,015 and offering costs of $ 511 .

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

2 unchanged sentences

The following table summarizes the allocation of stock-based compensation in the accompanying Condensed Consolidated Statements of Income:

For the three months ended For the six months ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

For the three months ended For the nine months ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Cost of sales $ 203 $ 191 $ 514 467

4 unchanged sentences

As of January 1, 2021, $ 421 of stock-based compensation expense related to our executive bonus plan is included in Accrued Expenses on the Condensed Consolidated Balance Sheets.

This amount was recognized as additional paid in capital during the six months ended July 2, 2021 upon the issuance of the underlying restricted stock units.

The following table summarizes the activity for the Company's unvested restricted stock units ("RSU") for the six months ended July 2, 2021:

This amount was recognized as additional paid in capital during the nine months ended October 1, 2021 upon the issuance of the underlying restricted stock units.

The following table summarizes the activity for the Company's unvested restricted stock units ("RSU") for the nine months ended October 1, 2021:

Unvested RSUs

4 unchanged sentences

Vested ( 169 ) $ 48.93

Unvested at July 2, 2021 387 $ 72.47

As of July 2, 2021, the Company had approximately $ 23,982 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 2.39 years.

Unvested at October 1, 2021 347 $ 75.64

As of October 1, 2021, the Company had approximately $ 20,625 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 2.22 years.

FOX FACTORY HOLDING CORP.

1 unchanged sentence

(in thousands, except per share amounts)

During the six months ended July 2, 2021, the Company issued performance share units (“PSUs”) to certain executives that represent shares potentially issuable in the future.

During the nine months ended October 1, 2021, the Company issued performance share units (“PSUs”) to certain executives that represent shares potentially issuable in the future.

Issuance is based upon the Company's performance, over a 2 - 3 year performance period, on certain measures including return on invested capital and free cash flow.

1 unchanged sentence

The fair value of performance share units is calculated based on the stock price on the date of grant.

The following table summarizes the activity for the Company's unvested PSUs for the six months ended July 2, 2021:

The following table summarizes the activity for the Company's unvested PSUs for the nine months ended October 1, 2021:

Unvested PSUs

2 unchanged sentences

Granted 29 $ 141.46

Unvested at July 2, 2021 29 $ 141.46

Unvested at October 1, 2021 29 $ 141.46

The stock-based compensation expense recognized each period is dependent upon our estimate of the number of shares that will ultimately vest based on the achievement of certain performance conditions.

1 unchanged sentence

The unrecognized stock-based compensation expense is expected to be recognized over a weighted average period of 1.78 years.

For the six months ended July 2, 2021, the Company had 53 unvested RSUs and PSUs outstanding which were excluded from the calculation of dilutive earnings per share because the effect would be anti-dilutive.

During the six months ended July 2, 2021, 180 shares of common stock were issued due to the exercise of stock options and no options to purchase common stock expired or were forfeited.

As of July 2, 2021, stock-based compensation expense related to stock options has been fully recognized.

For the nine months ended October 1, 2021, the Company had 3 unvested RSUs and PSUs outstanding which were excluded from the calculation of dilutive earnings per share because the effect would be anti-dilutive.

During the nine months ended October 1, 2021, 182 shares of common stock were issued due to the exercise of stock options and no options to purchase common stock expired or were forfeited.

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

FOX FACTORY HOLDING CORP.

1 unchanged sentence

(in thousands, except per share amounts)

For the three months ended For the six months ended

July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020

For the three months ended For the nine months ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Provision for income taxes $ 9,764 $ 5,431 $ 20,538 $ 9,555

Effective tax rates 18.2 % 12.5 % 14.0 % 13.7 %

For the three months ended July 2, 2021, the difference between the Company's effective tax rate and the 21 % federal statutory rate resulted primarily from excess benefits related to stock-based compensation, and a lower tax rate on foreign derived intangible income.

These benefits were partially offset by an increase in the valuation allowance for foreign tax credits, state taxes and non-deductible expenses.

For the six months ended July 2, 2021, the difference between the Company’s effective tax rate and the 21 % federal statutory rate resulted primarily from excess benefits related to stock-based compensation, a lower tax rate on foreign derived intangible income and the recognition of uncertain tax positions due to the conclusion of an audit.

These benefits were partially offset by an increase in the valuation allowance for foreign tax credits, state taxes and non-deductible expenses.

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

For the three months ended October 1, 2021, the difference between the Company's effective tax rate and the 21 % federal statutory rate resulted primarily from a lower tax rate on foreign-derived intangible income and a windfall of stock-based compensation.

These benefits were partially offset by other non-deductible expenses and state taxes.

For the nine months ended October 1, 2021, the difference between the Company’s effective tax rate and the 21 % federal statutory rate resulted primarily from a lower tax rate on foreign-derived intangible income and a windfall on stock-based compensation.

These benefits were partially offset by an increase in the valuation allowance for foreign tax credits and state taxes.

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

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

For the six months ended July 3, 2020, the difference between the Company's effective tax rate and the 21 % federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income, research and development credits, a negotiated reduction of Switzerland withholding tax on prior year earnings, and excess tax benefits related to stock-based compensation.

For the nine months ended October 2, 2020, the difference between the Company's effective tax rate and the 21 % federal statutory rate resulted primarily from a lower tax rate on foreign-derived intangible income, research and development credits, a negotiated reduction of Switzerland's withholding tax on prior year earnings, and excess tax benefits related to stock-based compensation.

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

1 unchanged sentence

Related Party Transactions

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

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

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

1 unchanged sentence

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

Rent expense under this lease was $ 48 and $ 96 for the three and six months ended July 2, 2021.

Rent expense under this lease was $ 48 and $ 144 for the three and nine months ended October 1, 2021, respectively.

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

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 $ 262 and $ 464 of parts and vehicles and sold approximately $ 130 and $ 250 of upfit packages to the dealership during the three and six ended July 2, 2021.

As of July 2, 2021, the Company had $ 143 and $ 8 in accounts payable and accounts receivable, respectively, related to this dealership.

The Company purchased approximately $ 392 and $ 856 of parts and vehicles and sold approximately $ 217 and $ 467 of upfit packages to the dealership during the three and nine months ended October 1, 2021, respectively.

As of October 1, 2021, the Company had $ 123 and $ 57 in accounts payable and accounts receivable, respectively, related to this dealership.

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

12 unchanged sentences

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

The Company recognized $ 1,130 and $ 2,419 in costs associated with such retention incentives during the three and six months ended July 2, 2021.

The Company recognized $ 1,130 and $ 3,550 in costs associated with such retention incentives during the three and nine months ended October 1, 2021, respectively.

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

5 unchanged sentences

Total $ 331,853

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

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

These costs are classified as general and administrative expenses in the accompanying Condensed Consolidated Statements of Income.

9 unchanged sentences

The purchase price of Outside Van is allocated to the assets acquired and liabilities assumed based on their estimated respective fair values as of May 25, 2021, with the excess purchase price allocated to goodwill.

The allocation of the purchase price to the net liabilities assumed of $ 1,057 , $ 5,560 in identifiable intangible assets and goodwill acquired of $ 10,636 , is preliminary and subject to the completion of the Company's validation of working capital and its intangible valuation procedures, with the assistance of specialists.

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

2 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements