What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-24 compared with 2021-02-25 · 365 added, 439 removed, 917 unchanged (47% 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 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.

Based on the evaluation of our disclosure controls and procedures as of December 31, 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

6 unchanged sentences

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended January 1, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

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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.

Not applicable.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

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 2021 Annual Meeting of Stockholders (the "Proxy Statement") entitled "Election of Class II 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 2022 Annual Meeting of Stockholders (the "Proxy Statement") entitled "Election of Class III 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."

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Management’s Report on Internal Control Over Financial Reporting 61

Reports of Independent Registered Public Accounting Firm

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

Reports of Independent Registered Public Accounting Firm (PCAOB ID Number:

Consolidated Balance Sheets as of December 31, 2021 and January 1, 2021 66

Consolidated Statements of Income for the years ended December 31, 2021, January 1, 2021 and January 3, 2020 67

Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, January 1, 2021 and January 3, 2020 68

Consolidated Statements of Stockholders' Equity for the years ended December 31, 2021, January 1, 2021 and January 3, 2020 69

Consolidated Statements of Cash Flows for the years ended December 31, 2021, January 1, 2021 and January 3, 2020 70

Notes to Consolidated Financial Statements 72

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

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

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

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

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

and Wes Allinger 10-Q 001-36040 May 2, 2018

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

and Chris Tutton 10-K 001-36040 February 26, 2019

3 unchanged sentences

Amended and Restated Employment Agreement, dated June 26, 2019, by and between Fox Factory Holding Corp.

Enterline 8-K 001-36040 July 1, 2019

Amended and Restated Employment Agreement, dated June 26, 2019, by and between Fox Factory Holding Corp.

and Michael C.

Dennison 8-K 001-36040 July 1, 2019

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

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

Employment Agreement, by and between Fox Factory Holding Corp.

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

10-K 001-36040 February 25, 2021

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

10-K 001-36040 February 25, 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 (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.

and Sammie Rae Abitbol, LLC, and related addendum S-1 333-189841 July 8, 2013

Air Commercial Real Estate Association Standard Industrial / Commercial Single-Tenant Lease-Gross, dated March 24, 2010, by and between Fox Factory, Inc.

and Scarborough Gilbert Partners, and related addenda S-1 333-189841 July 8, 2013

Air Commercial Real Estate Association Standard Industrial / Commercial Multi-Tenant Lease – Net, dated April 19, 2012, by and between Fox Factory, Inc.

and North Johnson Vernon Property, LLC, and related addendum S-1 333-189841 July 8, 2013

Asset Purchase and Contribution Agreement, by and among FF US Acquisition Corp., FF US Holding Corp., Flagship, Inc.

d/b/a Tuscany, and Michael Graber and Jeff Burttschell, dated November 30, 2017 8-K 001-36040 December 4, 2017

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

and the other financial institutions party thereto, dated June 3, 2019 8-K 001-36040 June 4, 2019

Form of Restricted Stock Unit Award Agreement under 2013 Omnibus Plan (U.S.) 10-K 001-36040 February 25, 2021

Form of Restricted Stock Unit Award Agreement under 2013 Omnibus Plan (Canada) 10-K 001-36040 February 25, 2021

Form of Restricted Stock Unit Award Agreement under 2013 Omnibus Plan (Taiwan) 10-K 001-36040 February 25, 2021

Form of Performance Stock Unit Award Agreement under 2013 Omnibus Plan 10-K 001-36040 February 25, 2021

Standard Form of Agreement between Owner and Design-Builder, dated July 24, 2019 (the “Standard Form of Agreement”), by and between Fox Factory, Inc.

6 unchanged sentences

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 10-K 001-36040 March 3, 2020

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

8 unchanged sentences

8-K 001-36040 June 16, 2020

Amendment No.

1 to Lease Agreement between the Gainesville and Hall County Development Authority and Fox Factory, Inc., dated December 31, 2020.

Amendment No.

2 to Lease Agreement between the Gainesville and Hall County Development Authority and Fox Factory, Inc., dated December 31, 2021.

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

7 unchanged sentences

8-K 001-36040 June 17, 2020

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

and other financial institutions party thereto, dated June 11, 2021.

10-Q 001-36040 August 5, 2021

Third 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 December 16, 2021.

8-K 001-36040 December 17, 2021

Deferred Compensation Plan, effective June 30, 2021

S-8 001-36040 June 29, 2021

List of Subsidiaries X

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† Management contract or compensatory plan.

X Filed herewith

* In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos.

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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/ Dudley W.

Mendenhall Lead Independent Director February 24, 2022

/s/ Tom Duncan Director February 24, 2022

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Fetter Director February 24, 2022

/s/ Jean Hlay Director February 25, 2021

/s/ Ted Waitman Director February 25, 2021

Hlay Director February 24, 2022

Waitman Director February 24, 2022

/s/ Sidney Johnson Director February 24, 2022

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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 1, 2021, management has excluded SCA which was acquired in March 2020.

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

The acquired business represented approximately 28% of the Company's consolidated total assets as of January 1, 2021 and approximately 9% of the Company's consolidated net sales for the year ended January 1, 2021.

In making its assessment of internal control over financial reporting, management used criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

Based on the evaluation, our management concluded that its internal control over financial reporting was effective as of January 1, 2021.

Based on the evaluation, our management concluded that its internal control over financial reporting was effective as of December 31, 2021.

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.

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

(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.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021 and January 1, 2021, 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 December 31, 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 December 31, 2021 and January 1, 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 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 December 31, 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 24, 2022 expressed an unqualified opinion.

Basis for opinion

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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.

The demand estimate is subjective and requires the Company to consider significant assumptions such as economic conditions, consumer and pricing trends, product acceptance and competition, all of which are subject to significant uncertainty and therefore require significant auditor judgement.

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

The demand estimate is subjective and requires the Company to consider significant assumptions such as economic conditions, consumer trends, product acceptance and competition, all of which are subject to significant uncertainty and therefore require significant auditor judgement.

Our audit procedures related to the net realizable value of inventory included the following, among others:

• 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, and general ledger balances.

This included, among other inputs, forecasted 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 compared selected 2022 estimated demand to actual customer sales orders 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.

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

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

Realizability of Deferred Tax Assets

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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 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.

We identified the realizability of deferred tax assets relating to the Company’s foreign tax credits as a critical audit matter.

The principal considerations for our determination that the realizability of deferred tax assets relating to the Company’s foreign tax credits 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.

1 unchanged sentence

As a result, significant auditor judgment is necessary to audit management’s judgments and assumptions.

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

Our audit procedures related to the realizability of deferred tax assets relating to the Company’s foreign tax credits included the following, among others:

• 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.

3 unchanged sentences

• We evaluated management’s assumptions with respect to anticipated relief from withholding on intercompany charges paid by selected jurisdictions for consistency and credibility.

• 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.

• 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 relating to the Company’s foreign tax credits.

/s/ GRANT THORNTON LLP

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We have audited the internal control over financial reporting of Fox Factory Holding Corp.

(a Delaware corporation) and subsidiaries (the “Company”) 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”).

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 1, 2021, and our report dated February 25, 2021 expressed an unqualified opinion on those financial statements.

(a Delaware corporation) (and subsidiaries) (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 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 December 31, 2021, and our report dated February 24, 2022 expressed an unqualified opinion on those financial statements.

Basis for opinion

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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

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(in thousands, except par value)

January 1, January 3,

December 31, January 1,

Current assets:

Cash and cash equivalents $ 179,686 $ 245,764

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

Accounts receivable (net of allowances of $ 410 and $ 663 at December 31, 2021 and January 1, 2021, respectively)

142,040 121,194

16 unchanged sentences

Total current liabilities 229,862 165,389

Line of credit — 68,000

Long-term debt, less current portion 360,953 377,088

1 unchanged sentence

Total liabilities 621,647 567,390

Commitments and contingencies (Refer to Note 1 2 - Commitments and Contingencies )

Redeemable non-controlling interest — 15,719

Commitments and contingencies (Refer to Note 12.

" Commitments and Contingencies ")

Stockholders’ equity

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

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of December 31, 2021 and January 1, 2021

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

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

43,010 shares issued and 42,120 outstanding as of December 31, 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 January 1, 2021 and January 3, 2020

890 common shares as of December 31, 2021 and January 1, 2021

( 13,754 ) ( 13,754 )

2 unchanged sentences

Total stockholders’ equity 894,082 719,171

Total liabilities, redeemable non-controlling interest and stockholders’ equity $ 1,286,561 $ 609,316

Total liabilities and stockholders’ equity $ 1,515,729 $ 1,286,561

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

3 unchanged sentences

For the fiscal years ended

January 1 January 3 December 28

December 31 January 1 January 3

2021 2021 2020

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Interest expense 8,162 9,294 3,173

Other expense 325 1,067 583

Other expense, net 371 325 1,067

Interest and other expense, net 8,533 9,619 4,240

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For the fiscal years ended

January 1, January 3, December 28,

December 31, January 1, January 3,

2021 2021 2020

Net income $ 163,818 $ 91,746 $ 94,470

Other comprehensive (loss) income

Other comprehensive income

Interest rate swap, net of tax effects 3,644 ( 699 ) —

Foreign currency translation adjustments, net of tax effects 164 1,617 934

Other comprehensive (loss) income 918 934 ( 616 )

Other comprehensive income 3,808 918 934

Comprehensive income 167,626 92,664 95,404

9 unchanged sentences

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

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

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

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

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

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

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 —

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Balance - January 1, 2021 42,692 $ 42 890 $ ( 13,754 ) $ 336,834 $ 1,068 $ 394,981 $ 719,171 $ —

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 318 — — — ( 7,050 ) — — ( 7,050 ) —

Stock-based compensation expense — — — — 14,335 — — 14,335 —

Other comprehensive income — — — — — 3,808 — 3,808 —

Net income — — — — — — 163,818 163,818 —

Balance - December 31, 2021 43,010 $ 42 890 $ ( 13,754 ) $ 344,119 $ 4,876 $ 558,799 $ 894,082 $ —

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

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For the fiscal years ended

January 1, January 3, December 28,

December 31, January 1, January 3,

2021 2021 2020

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Repayment of debt ( 12,500 ) ( 5,000 ) ( 2,813 )

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

Proceeds from stock compensation program, net ( 7,050 ) ( 4,343 ) ( 6,775 )

Installment on purchase of non-controlling interest ( 4,550 ) ( 6,556 ) —

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

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

Net (used in) provided by financing activities ( 24,100 ) 506,722 859

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 541 ) 1,116 419

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For the fiscal years ended

January 1, January 3, December 28,

December 31, January 1, January 3,

SUPPLEMENTAL CASH FLOW INFORMATION:

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Capital expenditures included in accounts payable $ 3,491 $ 6,997 $ 1,718

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

Refinancing of the Credit Facility $ — $ — $ 88,875

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

1 unchanged sentence

Notes to Consolidated Financial Statements

January 3, 2020

December 31, 2021

(in thousands, except per share amounts)

1 unchanged sentence

Fox Factory Holding Corp.

(the "Company") designs and manufactures performance-defining products primarily for bicycles ("bikes"), side-by-side vehicles ("Side-by-Sides"), on-road and off-road vehicles and trucks, all-terrain vehicles, or ATVs, snowmobiles, specialty vehicles and applications, motorcycles and commercial trucks.

The Company is a direct supplier to leading power vehicle original equipment manufacturers ("OEMs") and provides aftermarket products to retailers, dealerships, and distributors.

Additionally, the Company supplies top bicycle OEMs and their current contract manufacturers, and provides aftermarket products to retailers and distributors.

(the "Company") designs, engineers, manufactures and markets performance-defining products and systems for customers worldwide.

Our premium brand, performance-defining products and systems are used primarily for bicycles ("bikes"), side-by-side vehicles ("side-by-sides"), on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, all-terrain vehicles ("ATVs"), snowmobiles, specialty vehicles and applications, motorcycles and commercial trucks.

Some of our products are specifically designed and marketed to the leading cycling and powered vehicle original equipment manufacturers ("OEMs"), while others are distributed to consumers through a global network of dealers and distributors.

Throughout this Annual Report on Form 10-K, unless stated otherwise or as the context otherwise requires, the "Company," "FOX," "Fox Factory," "we," "us," "our," and "ours" refer to Fox Factory Holding Corp.

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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 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.

For the fiscal years 2021, 2020 and 2019, the Company's fiscal year ended on December 31, 2021, January 1, 2021 and January 3, 2020 and had 52, 52 and 53 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 $ 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.

Foreign currency transaction losses of $ 455 , $ 396 , and $ 881 for the years ended December 31, 2021, January 1, 2021 and January 3, 2020, 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.

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The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of amounts that may not be collected.

All accounts or portions thereof deemed to be uncollectible or that may require an excessive collection cost are written off to the allowance for doubtful accounts.

All accounts or portions thereof deemed to be uncollectible or that may require an excessive collection cost are written off to the allowance for credit losses.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(in thousands, except per share amounts)

Concentration of Credit Risk - Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist primarily of cash and accounts receivable.

As of January 1, 2021 the Company held $ 223,321 in cash at U.S.

As of December 31, 2021 the Company held $ 135,142 in cash at U.S.

subsidiaries and $ 44,544 at subsidiaries outside the U.S.

4 unchanged sentences

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

January 1, January 3,

December 31, January 1,

Customer A 11 % 12 %

Customer B 10 % 11 %

Customer C 4 % 11 %

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.

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

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

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.

The Company purchased 32 %, 28 %, and 35 % of its product components for the years ended December 31, 2021, January 1, 2021 and January 3, 2020, respectively, from ten vendors.

As of December 31, 2021 and January 1, 2021, amounts due to these vendors represented 10 % and 17 % of accounts payable, respectively.

Allowance for Credit Losses - The Company records a provision for credit losses based on historical experience and a detailed assessment of the collectability of its accounts receivable.

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.

The following table presents the activity in the allowance for doubtful accounts:

The following table presents the activity in the allowance for credit losses:

For the fiscal years ended

Allowance for doubtful accounts:

Allowance for credit losses:

2021 2020 2019

Balance, beginning of year $ 663 $ 810 $ 600

bad debt expense 103 335 189

bad debt (benefit) expense ( 14 ) 103 335

write-offs, net of recoveries ( 239 ) ( 250 ) ( 125 )

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Inventories - Inventories are stated at the lower of actual cost (or standard cost which generally approximates actual costs on a first-in first-out basis) or net realizable value.

Cost includes raw materials, as well as direct labor and manufacturing overhead for products we manufacture.

Cost includes raw materials and inbound freight, as well as direct labor and manufacturing overhead for products we manufacture.

Net realizable value is based on current replacement cost for raw materials and on a net realizable value for finished goods.

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Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(in thousands, except per share amounts)

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Internal-use computer software 10 years

Machinery and equipment 10 - 15 years

Manufacturing equipment 5 - 10 years

Land improvements 15 years

Machinery and manufacturing equipment 5 - 15 years

Transportation equipment 3 - 5 years

2 unchanged sentences

Capitalized costs are included in property and equipment and are amortized on a straight-line basis over the estimated useful life of the software beginning when the software project is substantially complete and placed in service.

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

The Company capitalized $ 5,847 in internal use computer software costs during the year ended December 31, 2021.

Costs incurred during the preliminary project stage and costs for training, data conversion, and maintenance are expensed as incurred.

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Fair value is estimated based on discounted future cash flows.

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

No impairment charges were recorded during the years ended December 31, 2021, January 1, 2021 and January 3, 2020.

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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Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(in thousands, except per share amounts)

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No impairment charges have been incurred to date.

Intangible assets include customer relationships and the Company’s core technology, are subject to amortization over their respective useful lives, and are classified in intangibles, net in the accompanying consolidated balance sheet.

Intangible assets including customer relationships, certain trademarks, and the Company’s core technology, are subject to amortization over their respective useful lives, and are classified in intangibles, net in the accompanying consolidated balance sheet.

These intangibles are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be fully recoverable.

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If an asset is found to be impaired, the impairment charge will be measured as the amount by which the carrying amount of an entity exceeds its fair value.

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 1, 2021, January 3, 2020 and December 28, 2018.

Certain 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 December 31, 2021, January 1, 2021 and January 3, 2020.

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 1, 2021 and January 3, 2020 are $ 1,472 and $ 842 respectively, and are recorded within accrued expenses on the consolidated balance sheets.

The estimates for unpaid claims incurred as of December 31, 2021 and January 1, 2021 are $ 1,754 and $ 1,472 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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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.

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Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(in thousands, except per share amounts)

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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 1, 2021 was fully offset by foreign tax credits associated with the income.

The net GILTI inclusion for the year ended December 31, 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.

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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.

Costs incurred for advertising totaled $ 2,741 , $ 2,188 , and $ 1,413 for the years ended December 31, 2021, January 1, 2021 and January 3, 2020, respectively.

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

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Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(in thousands, except per share amounts)

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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.

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

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

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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.

This standard outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.

The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods and services in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods and services.

In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

The Company adopted this guidance as of the beginning of the first quarter of fiscal year 2018 using the modified retrospective implementation method.

The Company applied the guidance to all open contracts at the date of initial application.

Additionally, the Company used the practical expedient to omit the disclosure of remaining performance obligations for contracts with an original expected duration of one year or less.

The primary impact of adopting the standard resulted from certain pricing provisions within contracts that provide the customer with a material right.

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 fiscal year 2018 opening balance of retained earnings as to reflect the cumulative effect of the adoption of the standard.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

(in thousands, except per share amounts)

In February 2016, the FASB issued ASU 2016-02, Leases, which supersedes the existing guidance for lease accounting.

To meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases, this ASU requires lessees to recognize most leases on the balance sheet as right-of-use assets and lease liabilities.

The Company adopted this guidance as of the beginning of the first quarter of fiscal year 2019, with a cumulative effect adjustment to the opening balance of retained earnings at December 29, 2018 with no restatement of comparative periods’ financial information ("current-period adjustment method").

Additionally, the Company adopted this guidance using practical expedients with respect to the assessment of embedded leases, lease classification, and initial indirect costs for expired and existing leases.

The Company also elected the practical expedient related to treating lease and non-lease components as a single lease component for all of its leases and 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.

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 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.

In June 2016, the FASB issue ASU 2016-13, Financial Instruments:

Credit Losses, which adds an impairment model that is based on expected losses rather than incurred losses.

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.

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.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement, which modifies the disclosure requirements of fair value measurements in Topic 820.

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

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.

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.

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.

Recent Accounting Pronouncements - 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.

The Company adopted ASU 2019-12 effective in the first quarter of fiscal year 2021.

The adoption of ASU 2021-12 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.

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

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.

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.

The Company adopted ASU 2020-10 effective in the first quarter of fiscal year 2021.

The adoption of ASU 2020-10 did not have a material impact on the Company's condensed consolidated financial statements and related disclosures.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(in thousands, except per share amounts)

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

Under ASU 2021-08, an acquirer must recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

The guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted.

The Company expects to early adopt this guidance in the first quarter of 2022.

This adoption is not expected to have a material impact on our financial statements.

The following table summarizes total sales by product category:

18 unchanged sentences

Total sales $ 1,299,064 $ 890,554 $ 751,020

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 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 December 31, 2021 for contracts with a duration of more than one year was approximately $ 1,752 , all of which is expected to be recognized during fiscal year 2023.

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

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

December 31, 2021

(in thousands, except per share amounts)

Inventory consisted of the following:

January 1, January 3,

December 31, January 1,

Raw materials $ 200,460 $ 87,503

2 unchanged sentences

Total inventory $ 279,837 $ 127,091

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

(in thousands, except per share amounts)

Prepaids and Other Current Assets

Prepaids and other current assets consisted of the following:

January 1, January 3

December 31, January 1

Prepaid chassis deposits $ 98,618 $ 66,812

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Property, plant and equipment consisted of the following:

January 1, January 3,

December 31, January 1,

Building and building improvements $ 72,088 $ 75,753

1 unchanged sentence

Internal-use computer software 25,700 19,853

Land 9,698 5,414

Land and land improvements 15,663 9,698

Leasehold improvements 22,835 15,075

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Property, plant and equipment, net $ 192,003 $ 163,288

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.

During the year ended December 31, 2021, the Company reclassified certain assets from buildings to land and land improvements to better depict the nature of the assets.

Depreciation expense was $ 22,741 , $ 16,341 , and $ 11,261 for the years ended December 31, 2021, January 1, 2021 and January 3, 2020, respectively, including $ 2,492 , $ 2,250 , and $ 1,861 of internal-use software amortization for the years ended December 31, 2021, January 1, 2021 and January 3, 2020, respectively.

The Company capitalized $ 5,847 in internal use computer software costs during the year ended December 31, 2021.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

December 31, 2021

(in thousands, except per share amounts)

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

6 unchanged sentences

Total $ 22,741 $ 16,341 $ 11,261

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

(in thousands, except per share amounts)

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

January 1, January 3,

December 31, January 1,

United States $ 161,451 $ 144,529

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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 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 .

These leases have remaining lease terms ranging from one to ten 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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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 4.62 years and the weighted-average incremental borrowing rate was 3.21 % as of January 1, 2021.

The weighted-average remaining lease term for the Company's operating leases was 4.90 years and the weighted-average incremental borrowing rate was 2.30 % as of December 31, 2021.

Operating lease costs consisted of the following:

For the fiscal year ended

For the fiscal years ended

2021 2020 2019

Operating lease cost $ 9,124 $ 7,201 $ 5,706

3 unchanged sentences

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 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:

Balance Sheet Classification January 1, 2021

Balance Sheet Classification December 31, 2021

Operating lease right-of-use assets Lease right-of-use assets $ 38,752

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Non-current lease liabilities Other liabilities $ 28,919

Supplemental cash flow information related to the Company's operating leases is as follows:

For the fiscal year ended

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

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

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(in thousands, except per share amounts)

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Lease liabilities less current portion $ 28,919

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

In January 2021, the Company signed a lease contract to expand its principal executive offices, which has not commenced as of December 31, 2021.

The Company is actively involved in the design and construction of the expanded space.

Based on the present value of the lease payments, the estimated right-of-use asset and lease liability related to this contract is approximately $ 2,676 and $ 2,707 , 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

Intangible assets, excluding goodwill, are comprised of the following:

January 01, 2021

December 31, 2021

Customer relationships $ 195,910 $ ( 66,240 ) $ 129,670 10

Core technology 35,795 ( 33,989 ) 1,806 8

Patents 1,859 ( 1,535 ) 324 4

Trademarks and brands, subject to amortization 12,443 ( 2,468 ) 9,975 9

Total $ 244,148 $ ( 102,697 ) 141,451

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Core technology 34,625 ( 33,678 ) 947 8

Patents 1,859 ( 1,430 ) 429 4

Trademarks and brands, subject to amortization 1,859 ( 1,535 ) 324 4

Total $ 231,434 $ ( 82,013 ) 149,421

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Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(in thousands, except per share amounts)

Goodwill activity consisted of the following:

Balance as of January 3, 2020 $ 93,527

Acquisitions (Refer to Note 1 8 - Acquisitions )

Currency translation and other adjustments 68

Balance as of January 1, 2021 $ 289,349

Future amortization expense for finite-lived intangibles as of January 1, 2021 is as follows:

Future amortization expense for finite-lived intangibles as of December 31, 2021 is as follows:

For fiscal year:

3 unchanged sentences

Total expected future amortization $ 141,451

Goodwill activity consisted of the following:

Balance as of January 1, 2021 $ 289,349

Acquisitions (Refer to Note 18.

" Acquisitions ")

Purchase price adjustments (Refer to Note 18.

" Acquisitions ")

Currency translation and other adjustments ( 46 )

Balance as of December 31, 2021 $ 323,299

Accrued Expenses

Accrued expenses consisted of the following:

January 1, January 3,

December 31, January 1,

Payroll and related expenses $ 32,968 $ 22,407

2 unchanged sentences

Income tax payable 34,845 7,595

Accrued sales rebate 8,568 4,471

NCI buyout liability 2,700 4,550

1 unchanged sentence

Total $ 112,378 $ 59,391

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 $ 15,510 $ 9,835 $ 5,649

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

December 31, 2021

(in thousands, except per share amounts)

Related Party Transactions

On May 3, 2019, the Company acquired 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").

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

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

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

Rent expense under this lease was $ 192 for the years ended December 31, 2021 and January 1, 2021.

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

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.

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.

The Company purchased approximately $ 1,206 and $ 1,172 in parts and vehicles, and sold approximately $ 538 and $ 404 of upfit packages to the dealership during the years ended December 31, 2021 and January 1, 2021, respectively.

The Company had $ 105 and $ 1,014 in accounts payable, and $ 50 and $ 404 in accounts receivable, related to this dealership for the years ended December 31, 2021 and January 1, 2021, respectively.

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.

1 unchanged sentence

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

In August 2013, the Company entered into a credit facility with SunTrust Bank, N.A.

and other named lenders, which was periodically amended and restated (the "Second Amended and Restated Credit Facility").

The Company paid off the Second Amended and Restated Credit Facility in June 2019 upon entering into the new credit facility with Bank of America, N.A.

("Bank of America").

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 .

Refer to Note 12.

" Commitments and Contingencies " for additional details of this agreement.

On December 30, 2021, the Company acquired substantially all the assets of Shock Therapy LLC ("Shock Therapy").

Shock Therapy has building leases for its manufacturing, service, sales and marketing, and office facilities, which are located in Phoenix, Arizona.

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

The leases are effective from December 30, 2021 through February 13, 2027, and December 30, 2021 through December 30, 2026, with monthly rent payments of $ 14 and $ 11 , respectively.

No rent expense was incurred under these lease agreements for the year ended December 31, 2021.

Credit Facility

In June 2019, the Company entered into a credit facility with Bank of America and other named lenders, which has been periodically amended and restated and/or amended.

The credit facility was amended and restated on March 11, 2020, and further amended on June 19, 2020, June 11, 2021 and December 16, 2021 (as amended to date, the "Credit Facility").

The 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.

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 0.0%, or based on the base rate offered by Bank of America plus a margin ranging from 0.00 % to 1.25 %.

At December 31, 2021, the one-month LIBOR and prime rates were 0.10 % and 3.25 %, respectively.

At December 31, 2021 and January 1, 2021, our weighted average interest rates on outstanding borrowing were 1.31 % and 1.62 %, respectively.

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 December 31, 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.

Through the interest rate swap agreement, the Company hedges the variability of cash flows in interest payments associated with $ 200,000 of its variable rate term debt.

Refer to Note 11.

" 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 December 31, 2021.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 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 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.

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,

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

December 31, January 1,

Amount outstanding $ — $ —

Standby letter of credit $ 15,000 $ 5,000

Standby letters of credit $ 15,000 $ 15,000

Available borrowing capacity $ 235,000 $ 235,000

Maximum borrowing capacity $ 250,000 $ 250,000

Total borrowing capacity $ 250,000 $ 250,000

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:

As of December 31, 2021, future principal payments for long-term debt, including the current portion, as summarized as follows:

For fiscal year

5 unchanged sentences

Long-term debt less current portion $ 360,953

Derivatives and Hedging

The Company is exposed to certain risks relating to its ongoing business operations.

The primary risk managed by using derivative instruments is interest rate risk.

The Company utilizes interest rate swaps to limit its exposure to interest rate risk by converting a portion of its floating-rate debt to a fixed-rate basis, thus reducing the impact of interest rate changes on future interest expense.

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 December 31, 2021 and January 1, 2021, the Company had the following interest rate swap contracts:

December 31, 2021 January 1, 2021

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

September 2, 2020 June 11, 2021 $ 200,000 $ 276 $ ( 915 )

July 2, 2021 March 11, 2025 $ 200,000 3,583 —

Total $ 3,859 $ ( 915 )

On June 11, 2021, the Company terminated its existing swap agreement and entered into a new interest rate swap agreement with a notional amount of $ 200,000 .

The terminated swap resulted in an unrealized gain of $ 324 at the termination date that will continue to be accounted for in accumulated other comprehensive income and amortized into earnings over the term of the associated debt instrument.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(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.

The new swap agreement (the "Interest Rate Swap") has a maturity date of March 11, 2025 and is indexed to a one-month LIBOR with a fixed leg of 0.50 %.

The Interest Rate Swap met the criteria for cash flow hedges under ASC 815, Derivatives and Hedging, and is recorded in other assets on the Consolidated Balance Sheet.

Refer to Note 16.

" Fair Value Measurements and Financial Instruments " for additional information on determining the fair value.

The unrealized gains or losses, after tax, are recorded in Accumulated Other Comprehensive Income, a component of equity, and are expected to be reclassified into interest expense on the Consolidated Statement of Income when the forecasted transactions affect earnings.

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 years ended December 31, 2021 and January 1, 2021 were a gain of $ 3,645 and a loss of $ 699 , respectively.

The gains and losses, related to the effective portion of derivative instruments designated as cash flow hedges recognized in Interest Expense for the years ended December 31, 2021 and January 1, 2021 were losses of $ 600 and $ 115 , respectively.

Unrealized losses of $ 814 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.

Commitments and Contingencies

2 unchanged sentences

While the outcome of these matters cannot be predicted with certainty, the Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on the Company’s results of operations, financial position or liquidity.

Legal Proceedings - A lawsuit was filed on December 17, 2015 by SRAM Corporation (“SRAM”) in the U.S.

District Court, Northern District of Illinois, against the Company’s wholly-owned subsidiary, RFE Canada Holding Corp.

(“RFE Canada”).

The lawsuit alleges patent infringement of U.S.

Patent number 9,182,027 ("027 Patent") and violation of the Lanham Act.

SRAM filed a second lawsuit in the same court against RFE Canada on May 16, 2016, alleging patent infringement of U.S Patent number 9,291,250 ("'250 Patent").

The Company believes that the lawsuits are without merit and intends vigorously to defend itself.

As such, the Company has filed, before the U.

Patent and Trademark Appeals Board ("PTAB"), for Interparties Reviews ("IPR") of the '027 Patent and separately the same for the '250 Patent.

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 ("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.

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.

Legal Proceedings - SRAM, LLC (“SRAM”) filed (i) a lawsuit on December 17, 2015 in the U.S.

District Court, Northern District of Illinois, against RFE Holding (Canada) Corp.

(“RFE Canada”), a wholly-owned subsidiary of Fox Factory Holding Corp.

(“Fox Factory”), alleging patent infringement of U.S.

Patent number 9,182,027 (“027 Patent”) and violation of the Lanham Act, and (ii) a second lawsuit on May 16, 2016 in the same court against RFE Canada alleging patent infringement of U.S.

Patent number 9,291,250 (“250 Patent” and, together with 027 Patent, the “Applicable SRAM Chainring Patents”).

In addition, Fox Factory, Inc.

(a wholly owned subsidiary of Fox Factory) filed (i) a lawsuit on January 29, 2016 in the U.S.

District Court, Northern District of California against SRAM alleging SRAM’s infringement of two separate Fox Factory, Inc.

owned patents, specifically U.S.

Patent number 6,135,434, and (ii) a second lawsuit on July 1, 2016 in the U.S.

District Court, Northern District of California against SRAM alleging infringement of Fox Factory, Inc.’s U.S.

Patent numbers 8,226,172 and 8,974,009 (collectively, the “Applicable Fox Axle Patents”) (which actions were later moved to U.S.

District Court, District of Colorado).

As previously disclosed on December 22, 2021, Fox Factory entered into a Settlement and License Agreement with SRAM that, among other things, provides (i) all claims amongst the parties in the aforementioned complaints shall be dismissed with prejudice, without any admission of liability or fault by any party, (ii) SRAM granted Fox Factory a non-exclusive license to make and use products and services covered by the Applicable SRAM Chainring Patents under the FOX brand in exchange for specified royalty rates, (iii) Fox Factory granted SRAM a non-exclusive, royalty-free license to make and use products and services covered by the Applicable Fox Axle Patents under the SRAM brand, and (iv) the exchange of mutual releases by the parties.

From time to time, the Company is involved in other legal proceedings that arise in the ordinary course of business.

Although the Company cannot assure the outcome of such legal proceedings, based on information currently available, management does not believe that the ultimate resolution of any pending matters, either individually or in the aggregate, 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 1, 2021

December 31, 2021

(in thousands, except per share amounts)

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

District Court, Northern District of California against SRAM.

That lawsuit alleges SRAM’s infringement of two separate Company owned patents, specifically U.S.

Patent numbers 6,135,434 and 6,557,674.

The Company filed a second lawsuit on July 1, 2016 in the U.S.

District Court, Northern District of California against SRAM alleging infringement of the Company’s U.S.

Patent numbers 8,226,172 and 8,974,009.

These lawsuits have been moved to U.S.

District Court, District of Colorado and are otherwise proceeding.

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.

Accordingly, no amounts have been recorded in the consolidated financial statements for the settlement of these matters.

Were an unfavorable ruling to occur, or if factors indicate that a loss is probable and reasonably estimable, the Company's business, financial condition or results of operations could be materially and adversely affected.

The Company is involved in other legal matters that arise in the ordinary course of business.

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

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

6 unchanged sentences

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 Company paid $ 4,550 during the year ended December 31, 2021.

The stock portion of 136 shares held in escrow is released quarterly as of January 2021 through July 2022.

The Company released 78 during the year ended December 31, 2021.

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 January 1, 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 December 31, 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.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

(in thousands, except per share amounts)

Stockholders' Equity

Secondary Stock Offering

S econdary 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 .

2 unchanged sentences

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.

The Company did not incur any expenses related to secondary offerings during the fiscal years ended December 31, 2021 and January 3, 2020.

Equity Incentive Plans

5 unchanged sentences

Options granted under the plans have vesting periods ranging from one to five years and expire no later than 10 years from the date of grant.

RSUs generally vest over a four -year period with 25 % vesting at the end of one year and the remaining vesting annually thereafter.

RSUs generally vest over a three to four-year period with equal annual installments beginning at the end of one year and the remaining vesting annually thereafter.

In addition to time-based vesting criteria, certain of our RSUs include performance-based vesting criteria.

As of January 1, 2021, there were 2,067 shares reserved for issuance under the Company's equity incentive plans and 1,422 shares available for grant under the 2013 Plan.

As of December 31, 2021, there were 1,712 shares reserved for issuance under the Company's equity incentive plans and 1,298 shares available for grant under the 2013 Plan.

The Company generally issues new shares in connection with awards under its equity incentive plans.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

December 31, 2021

(in thousands, except per share amounts)

Stock-Based Compensation

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.

Compensation expense related to the Company's share-based awards for the fiscal years ended December 31, 2021, January 1, 2021, and January 3, 2020 was $ 13,914 , $ 8,618 , and $ 6,864 , respectively, all of which related to RSUs.

No compensation expense related to stock options was incurred during the fiscal years ended December 31, 2021, January 1, 2021, and January 3, 2020.

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

6 unchanged sentences

Total $ 13,914 $ 8,618 $ 6,864

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.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

(in thousands, except per share amounts)

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

This amount was recognized as additional paid in capital during the year ended December 31, 2021 upon the issuance of the underlying restricted stock units.

Stock-based compensation expense capitalized to inventory was not material for the years ended December 31, 2021, January 1, 2021 and January 3, 2020.

Restricted Stock Units

3 unchanged sentences

The recognition of compensation expense associated with performance-based stock awards requires defined criteria for assessing achievement and judgment in assessing the probability of meeting the performance goals.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

December 31, 2021

(in thousands, except per share amounts)

The following table summarizes RSU activity:

5 unchanged sentences

Vested ( 292 ) 26.06

Unvested at December 28, 2018 655 29.34

Unvested at January 3, 2020 427 44.98

Granted 260 47.46

5 unchanged sentences

Vested ( 177 ) 49.17

Unvested at January 1, 2021 450 $ 50.12

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.

Unvested at December 31, 2021 338 $ 76.30

The fair value of vested RSUs was $ 27,213 , $ 15,625 and $ 21,793 for the years ended December 31, 2021, January 1, 2021 and January 3, 2020, respectively.

As of December 31, 2021, the Company had approximately $ 17,585 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 2.05 years.

Performance Stock Units

During the year ended December 31, 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.

The PSUs vest only upon the achievement of the applicable performance goals for the performance period, and, depending on the actual achievement on the performance goals, the grantee may earn between 0 % and 200 % of the target PSUs.

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

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(in thousands, except per share amounts)

The following table summarizes the activity for the Company's unvested PSUs for the year ended December 31, 2021:

Unvested PSUs

Number of shares outstanding Weighted-average grant date fair value

Unvested at January 1, 2021 — $ —

Granted 29 $ 141.46

Unvested at December 31, 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.

Future stock-based compensation expense for unvested performance-based awards could reach a maximum of $ 5,528 assuming achievement at the maximum level.

The unrecognized stock-based compensation expense is expected to be recognized over a weighted average period of 1.56 years.

Stock Options

3 unchanged sentences

Options exercised ( 289 ) 5.03 17,422

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

Options exercised ( 289 ) 5.03 17,422

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

1 unchanged sentence

Balance at January 1, 2021 225 5.37 2 22,593

Options vested and expected to vest - January 1, 2021 225 5.37 2 22,593

Options exercisable - January 1, 2021 225 5.37 2 22,593

Options exercised ( 192 ) 5.41 25,751

Balance at December 31, 2021 33 5.16 1 5,389

Options vested and expected to vest - December 31, 2021 33 5.16 1 5,389

Options exercisable - December 31, 2021 33 5.16 1 5,389

Aggregate intrinsic value represents the difference between the closing price of the Company's common stock on NASDAQ and the exercise price of outstanding, in-the-money options.

No options vested during the year ended January 1, 2021.

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

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.

No options vested during the year ended December 31, 2021.

As of December 31, 2021, stock-based compensation expense related to stock options has been fully recognized.

During the years ended December 31, 2021, January 1, 2021 and January 3, 2020, 192 , 206 , and 289 shares of common stock, respectively, were issued due to the exercise of stock options, resulting in proceeds to the Company of approximately $ 1,042 , $ 1,063 , and $ 1,451 , respectively.

As of December 31, 2021, stock-based compensation expense related to stock options has been fully recognized.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

December 31, 2021

(in thousands, except per share amounts)

Earnings Per Share

13 unchanged sentences

Diluted $ 3.87 $ 2.22 $ 2.38

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)

The Company excluded some potentially dilutive shares from the calculation of diluted earnings per share for the year ended December 31, 2021, as these shares would have been antidilutive.

No potentially dilutive shares were excluded from the calculation of diluted earnings per share for the years ended January 1, 2021 and January 3, 2020.

Provision for Income Taxes

11 unchanged sentences

Provision for income taxes $ 24,563 $ 12,784 $ 14,099

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

December 31, 2021

(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:

14 unchanged sentences

Change in liability for unrecognized tax benefits ( 1.4 ) 0.6 0.2

Valuation allowance on foreign tax credits 1.1 0.7 0.2

Other 1.1 ( 0.9 ) ( 1.3 )

2 unchanged sentences

Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(in thousands, except per share amounts)

Deferred Income Taxes

January 1, January 3,

December 31, January 1,

Deferred tax assets:

Foreign tax credits, including amounts associated with accrued charges $ 48,329 $ 41,187

Lease liability 5,966 4,304

Accrued liabilities 4,973 2,862

Inventory 5,452 4,386

Capitalized research and development 3,360 —

Accrued Liabilities 9,319 4,973

Lease Liability 3,646 5,966

Capitalized Research & Development 5,880 3,360

Stock-based compensation 2,254 1,168

Research and development tax credits 2,721 1,851

11 unchanged sentences

Net deferred tax asset $ 34,998 $ 19,362

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.

The federal research and development credits begin to expire in 2036 unless previously utilized, and the state research credits do not expire.

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 of December 31, 2021, the Company had foreign tax credits of 48,329 that begin to expire in 2025, unless previously utilized.

As of December 31, 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 $ 7,172 as of January 1, 2021.

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.

For the year ended December 31, 2021, the valuation allowance increased by $ 2,051 , due to a generation of additional foreign tax credits from the foreign derived earnings.

The valuation allowance for foreign tax credits was $ 9,161 as of December 31, 2021.

Other components of the valuation allowance were not significant.

2 unchanged sentences

Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(in thousands, except per share amounts)

6 unchanged sentences

Decrease related to prior year tax positions ( 2,923 ) — —

Decrease due to expiration of statute of limitations ( 1 ) ( 566 ) ( 171 )

Increase (decrease) due to expiration of statute of limitations 1 ( 1 ) ( 566 )

Balance - end of period $ 228 $ 3,150 $ 2,300

As of January 1, 2021, the Company had $ 3,150 of unrecognized tax benefits, of which approximately $ 2,479 , if recognized, would favorably impact the effective tax rate.

As of December 31, 2021, the Company had $ 228 of unrecognized tax benefits.

The Company regularly engages in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions.

In 2018, the Company received a no change letter from the Internal Revenue Service ("IRS") related to the audit of the Company's 2015 federal tax return.

Additionally, the IRS and the Company entered into a closing agreement that resolved the uncertainty about the deductibility of amortization and depreciation arising from the acquisition of the Company in 2008 for all open tax years.

The favorable conclusion resulted in a decrease in the unrecognized tax benefits of $ 6,198 , of which $ 5,648 favorably impacted the effective tax rate.

Including the reversal of the amounts presented net of deferred tax assets and accrued interest and penalties, the favorable conclusion resulted in a benefit of $ 9,838 to the provision for income tax for the year ended December 28, 2018.

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

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.

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.

The Company's 2018 and 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.

Due to a favorable conclusion of a state audit in the first quarter of 2021, the Company released $ 2,923 of uncertain tax positions, of which $ 2,608 favorably impacts the effective tax rate.

Fair Value Measurement and Financial Instruments

3 unchanged sentences

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).

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

(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

December 31, 2021 January 1, 2021

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

Interest Rate Swap — 3,583 — 3,583 — — — —

Total assets measured at fair value $ — $ 3,583 $ — $ 3,583 $ — $ — $ — $ —

Credit Facility $ — $ 378,453 $ — $ 378,453 $ — $ 389,588 $ — $ 389,588

Interest Rate Swap — — — — — 915 — 915

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

Total liabilities measured at fair value $ — $ 378,453 $ — $ 378,453 $ — $ 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 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.

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 December 31, 2021, and January 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 December 31, 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.

FOX FACTORY HOLDING CORP.

Notes to Consolidated Financial Statements - Continued

December 31, 2021

(in thousands, except per share amounts)

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.

Refer to Note 11.

" 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 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 $ —

Retirement Plan

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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 $ 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.

Notes to Consolidated Financial Statements - Continued

January 1, 2021

(in thousands, except per share amounts)

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.

The Company made matching contributions of $ 2,655 , $ 2,078 , and $ 1,153 for each of the years ended December 31, 2021, January 1, 2021 and January 3, 2020, respectively.

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

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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 recognized $ 4,680 and $ 4,211 in costs associated with such retention incentives during the years ended December 31, 2021 and January 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:

Acquisition consideration

Cash consideration $ 331,531

Non-cash consideration 322

Total consideration at closing $ 331,853

Fair market values

Other current assets $ 16,350

Property, plant and equipment 8,300

Lease right-of-use assets 4,027

Customer relationships 124,400

Trademarks and brand 15,500

Tangible assets acquired $ 28,678

Liabilities assumed ( 32,479 )

Intangible assets 139,900

Goodwill 195,754

Total assets acquired $ 364,331

Accounts payable and accrued expenses 7,678

Lease liabilities 4,027

Deferred taxes 20,773

Total liabilities assumed 32,478

Purchase price allocation $ 331,853

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 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.

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

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Notes to Consolidated Financial Statements - Continued

January 1, 2021

December 31, 2021

(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

On May 21, 2021, the Company, through its wholly owned subsidiary, Fox Factory Australia Pty Ltd., acquired substantially all the assets of Sola Sport Pty Ltd.

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

On May 25, 2021, the Company, through its wholly owned subsidiary, SCA Performance, Inc., acquired 100 % of the issued and outstanding stock of Manifest Joy LLC, dba Outside van ("Outside Van") for $ 15,275 , net of cash acquired.

Outside Van is a custom van conversion company that designs and custom engineers recreational vehicles with headquarters in Portland, Oregon.

This purchase was accounted for as a business combination.

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 $ 10,772 , is preliminary and subject to the completion of the Company's validation of working capital and deferred taxes, with the assistance of specialists.

The Company will amortize the acquired customer relationship and trade name assets over their expected useful lives of 1 and 10 years, respectively.

The acquired goodwill represents the value of synergies from combining operations of Outside Van and the Company, and is expected to be deductible for tax purposes.

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

On December 30, 2021, the Company, through its wholly owned subsidiary, Shock Therapy Suspension, Inc., acquired substantially all the assets of Shock Therapy LLC ("STS"), for $ 36,120 , net of cash acquired.

STS is a premier suspension tuning company in the off-road industry, with headquarters in Phoenix, Arizona.

This purchase was accounted for as a business combination.

The purchase price of STS is allocated to the assets acquired and liabilities assumed based on their estimated respective fair values as of December 30, 2021, with the excess purchase price allocated to goodwill.

The allocation of the purchase price to the net assets assumed of $ 5,244 , $ 7,086 in identifiable intangible assets and goodwill acquired of $ 23,790 , is preliminary and subject to the completion of the Company's validation of working capital, valuation of intangible assets and deferred taxes, with the assistance of specialists.

The Company will amortize the acquired non-compete and trade name assets over their expected useful lives of 1 and 10 years, respectively.

The acquired goodwill represents the value of combining operations of STS and the company and is expected to be deductible for tax purposes.

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

Selected Quarterly Financial Data (Unaudited)

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Quarter Ended

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

Dec 31, Oct 1, Jul 2, April 2, Jan 1, Oct 2 Jul 3 April 3,

2021 2021 2021 2021 2021 2020 2020 2020

8 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-K

Item 9A. Controls and Procedures