What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 158 added, 164 removed, 410 unchanged (44% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

April 1, December 31,

July 1, December 31,

Current assets:

Cash and cash equivalents $ 108,637 $ 179,686

Accounts receivable (net of allowances of $ 512 and $ 410 at April 1, 2022 and December 31, 2021, respectively)

Accounts receivable (net of allowances of $ 322 and $ 410 at July 1, 2022 and December 31, 2021, respectively)

195,449 142,040

21 unchanged sentences

Stockholders’ equity

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of April 1, 2022 and December 31, 2021

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of July 1, 2022 and December 31, 2021

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

43,039 shares issued and 42,149 outstanding as of April 1, 2022;

43,153 shares issued and 42,263 outstanding as of July 1, 2022;

43,010 shares issued and 42,120 outstanding as of December 31, 2021

1 unchanged sentence

Treasury stock, at cost;

890 common shares as of April 1, 2022 and December 31, 2021

890 common shares as of July 1, 2022 and December 31, 2021

( 13,754 ) ( 13,754 )

7 unchanged sentences

(in thousands, except per share data)

For the three months ended

April 1, April 2,

For the three months ended For the six months ended

July 1, July 2, July 1, July 2,

2022 2021 2022 2021

Sales $ 406,705 $ 328,164 $ 784,682 $ 609,300

25 unchanged sentences

(in thousands)

For the three months ended

April 1, April 2,

For the three months ended For the six months ended

July 1, July 2, July 1, July 2,

2022 2021 2022 2021

Net income $ 53,498 $ 44,275 $ 101,548 $ 82,261

Other comprehensive income

Other comprehensive (loss) income

Interest rate swap, net of tax effects 922 ( 525 ) 6,733 1,620

Foreign currency translation adjustments, net of tax effects ( 2,688 ) 656 ( 3,756 ) 132

Other comprehensive income 4,743 1,621

Other comprehensive (loss) income ( 1,766 ) 131 2,977 1,752

Comprehensive income $ 51,732 $ 44,406 $ 104,525 $ 84,013

11 unchanged sentences

Balance - April 2, 2021 42,854 $ 42 890 $ ( 13,754 ) $ 340,347 $ 2,689 $ 432,967 $ 762,291

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 118 — — — ( 5,702 ) — — ( 5,702 )

Stock-based compensation expense — — — — 3,374 — — 3,374

Other comprehensive income — — — — — 131 — 131

Net income — — — — — — 44,275 44,275

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

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

FOX FACTORY HOLDING CORP.

9 unchanged sentences

Balance - April 1, 2022 43,039 $ 42 890 $ ( 13,754 ) $ 346,328 $ 9,619 $ 606,849 $ 949,084

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 114 — — — ( 2,950 ) — — ( 2,950 )

Stock-based compensation expense — — — — 4,061 — — 4,061

Other comprehensive loss — — — — — ( 1,766 ) — ( 1,766 )

Net income — — — — — — 53,498 53,498

Balance - July 1, 2022 43,153 $ 42 890 $ ( 13,754 ) $ 347,439 $ 7,853 $ 660,347 $ 1,001,927

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

2 unchanged sentences

(in thousands)

For the three months ended

April 1, 2022 April 2, 2021

For the six months ended

July 1, 2022 July 2, 2021

OPERATING ACTIVITIES:

3 unchanged sentences

Stock-based compensation 7,090 5,868

Deferred taxes and uncertain tax positions ( 10,083 ) ( 438 )

Write off of unamortized loan origination fees 1,927 —

Amortization of loan fees 634 820

Amortization of swap settlements ( 1,050 ) ( 5 )

Change in fair value of interest rate swap, net of taxes ( 1,923 ) ( 502 )

Deferred taxes and uncertain tax positions ( 9,361 ) ( 578 )

Changes in operating assets and liabilities:

8 unchanged sentences

Purchases of property and equipment ( 19,912 ) ( 27,648 )

Acquisition of businesses, net of cash acquired — ( 15,625 )

Net cash used in investing activities ( 19,912 ) ( 43,273 )

FINANCING ACTIVITIES:

Proceeds from line of credit 109,336 8,480

Proceeds from line of credit, net of origination fees of $1,980

582,356 17,093

Payments on line of credit ( 174,336 ) ( 13,855 )

Repayment of debt ( 2,500 ) ( 2,500 )

Repayment of term debt upon refinancing of Prior Credit Facility ( 382,500 ) ( 5,000 )

Proceeds from termination of swap agreement 12,270 324

Installment on purchase of non-controlling interest ( 1,800 ) ( 2,750 )

(Repurchases) proceeds from stock compensation program, net ( 820 ) 598

Repurchases from stock compensation program, net ( 3,770 ) ( 5,104 )

Net cash provided by (used in) financing activities 32,220 ( 9,292 )

3 unchanged sentences

CASH AND CASH EQUIVALENTS—End of period $ 108,637 $ 274,976

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

FOX FACTORY HOLDING CORP.

1 unchanged sentence

(in thousands)

For the three months ended

For the six months ended

SUPPLEMENTAL CASH FLOW INFORMATION:

April 1, 2022 April 2, 2021

July 1, 2022 July 2, 2021

Cash paid during the period for:

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(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.

Our premium brand, performance-defining products and systems are used primarily for bicycles ("bikes"), on-road vehicles with and without off-road capabilities, side-by-side vehicles ("Side-by-Sides"), 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.

12 unchanged sentences

The twelve month periods ended December 30, 2022 and December 31, 2021, will include or have included 52 weeks.

The three month periods ended April 1, 2022 and April 2, 2021 each included 13 weeks.

The three and six month periods ended July 1, 2022 and July 2, 2021 each included 13 weeks and 26 weeks, respectively.

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

3 unchanged sentences

The Company’s performance-defining products and systems are solutions that improve performance of powered vehicles and bikes.

Powered vehicles include Side-by-Sides, on-road vehicles with off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, and motorcycles.

Powered vehicles include on-road vehicles with off-road capabilities, Side-by-Sides, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, and motorcycles.

Revenue is measured based on the consideration specified in a contract with a customer.

18 unchanged sentences

therefore, actual results could differ from management’s estimates.

Reclassifications - We have reclassified certain prior period amounts within our condensed consolidated statement of cash flows for the six months ended July 2, 2021 to conform to our current year presentation.

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.

8 unchanged sentences

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

In addition, heightened political tensions between China and Taiwan, could negatively impact our business and operations.

For example, our bike suspension manufacturing is located in Taiwan.

We cannot assure you that any contentious situation between Taiwan and China will always resolve in maintaining the current status quo or remain peaceful.

Relations between Taiwan and China, potential confrontations between the United States and China and other factors affecting military, political, social or economic conditions in Taiwan could have a material adverse effect on our business, our supply chain and our operations.

Furthermore, during the first quarter of 2022, Russia commenced a military invasion of Ukraine, and the ensuing conflict has created disruption in the region and around the world.

5 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).

The carrying amounts of the Company's financial instruments, including cash, receivables, accounts payable, and accrued liabilities approximate their fair values due to their short-term nature.

Amounts owed under the Company's Prior Credit Facility (as defined in Note 8 - Debt below) approximate fair value due to the variable interest rate features embedded in both the line of credit and the term debt.

FOX FACTORY HOLDING CORP.

1 unchanged sentence

(in thousands, except per share amounts)

The carrying amounts of the Company's financial instruments, including cash, receivables, accounts payable, accrued liabilities and line of credit approximate their fair values due to their short-term nature.

Amounts owed under the Company's Prior Credit Facility (as defined in Note 8 - Debt below) approximated fair value due to the variable interest rate features embedded in the term debt.

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.

17 unchanged sentences

The following table summarizes total sales by product category:

For the three months ended

April 1, 2022 April 2, 2021

For the three months ended For the six months ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

Powered Vehicles $ 229,032 $ 189,419 $ 437,139 $ 352,166

2 unchanged sentences

The following table summarizes total sales by sales channel:

For the three months ended

April 1, 2022 April 2, 2021

For the three months ended For the six months ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

OEM $ 223,110 $ 172,547 $ 424,375 $ 324,027

5 unchanged sentences

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

For the three months ended

April 1, 2022 April 2, 2021

For the three months ended For the six months ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

North America $ 257,183 $ 217,695 $ 491,142 $ 398,178

3 unchanged sentences

Total sales $ 406,705 $ 328,164 $ 784,682 $ 609,300

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

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

Revenue expected to be recognized from remaining performance obligations as of July 1, 2022 for contracts with a duration more than one year was approximately $5,999, all of which is expected to be recognized during fiscal years 2023 to 2027.

Inventory consisted of the following:

April 1, December 31,

July 1, December 31,

Raw materials $ 247,358 $ 200,460

4 unchanged sentences

Prepaids and other current assets consisted of the following:

April 1, December 31,

July 1, December 31,

Prepaid chassis deposits $ 235,362 $ 98,618

7 unchanged sentences

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

April 1, December 31,

July 1, December 31,

Building and building improvements $ 72,701 $ 72,088

8 unchanged sentences

Property, plant and equipment, net $ 194,601 $ 192,003

At the end of March 2022, the Company retired approximately $6,717 in assets that were fully depreciated in response to the shutdown of our Watsonville, California facility.

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

April 1, December 31,

July 1, December 31,

United States $ 163,955 $ 161,451

5 unchanged sentences

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 nine 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.

2 unchanged sentences

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

The weighted-average remaining lease term for the Company's operating leases was 5.16 years and the weighted-average incremental borrowing rate was 2.11 % as of April 1, 2022.

The weighted-average remaining lease term for the Company's operating leases was 5.21 years and the weighted-average incremental borrowing rate was 2.06 % as of July 1, 2022.

Operating lease costs consisted of the following:

For the three months ended

April 1, 2022 April 2, 2021

For the three months ended For the six months ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

Operating lease cost $ 2,832 $ 1,983 $ 5,655 $ 4,053

4 unchanged sentences

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

Balance Sheet Classification April 1, 2022

Balance Sheet Classification July 1, 2022

Operating lease right-of-use assets Lease right-of-use assets $ 42,606

3 unchanged sentences

For fiscal year Total future payments

2022 (remaining nine months) $ 7,972

2022 (remaining six months) $ 5,198

Thereafter 7,788

9 unchanged sentences

Accrued expenses consisted of the following:

April 1, December 31,

July 1, December 31,

Payroll and related expenses $ 27,922 $ 32,968

7 unchanged sentences

Activity related to warranties is as follows:

For the three months ended

April 1, 2022 April 2, 2021

For the three months ended For the six months ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

Beginning warranty liability $ 15,993 $ 11,521 $ 15,510 $ 9,835

Charge to cost of sales 2,322 4,070 5,449 7,331

Fair value of warranty assumed in acquisition — 150 — 150

Costs incurred ( 2,227 ) ( 2,091 ) ( 4,871 ) ( 3,666 )

2 unchanged sentences

In June 2019, the Company entered into a credit facility with Bank of America and other named lenders, which was 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, and June 11, 2021 (as amended to date, the "Prior Credit Facility").

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

The Prior Credit Facility (which was terminated on April 5, 2022 and replaced with the 2022 Credit Facility (as discussed below)), would have matured on March 11, 2025, and provided a senior secured revolving line of credit with a borrowing capacity of $250,000 and a term loan of $ 400,000 .

The term loan was 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.

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

Loan fees allocated to the term debt were amortized using the interest method and loan fees allocated to the line of credit were amortized on a straight-line basis over the term of the Prior Credit Facility.

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

At April 1, 2022, the one-month LIBOR and prime rates were 0.44 % and 3.50 %, respectively.

At April 1, 2022, our weighted-average interest rate on outstanding borrowing was 1.68 %.

The Prior Credit Facility was secured by substantially all of the Company’s assets, restricted the Company's ability to make certain payments and engage in certain transactions, and required that the Company satisfy customary financial ratios.

The Company was in compliance with the covenants as of April 1, 2022.

The Prior Credit Facility permitted 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 April 1, 2022.

2022 Credit Facility

On April 5, 2022, the Company entered into a new credit agreement with Wells Fargo Bank, National Association, and other named lenders (the "2022 Credit Facility"), and concurrently repaid in full and terminated the Prior Credit Facility.

The 2022 Credit Facility, which matures on April 5, 2027, provides for revolving loans, swingline loans and letters of credit up to an aggregate amount of $ 650,000 .

On April 5, 2022, the Company borrowed $ 475,000 under the 2022 Credit Facility, which was used to repay all outstanding amounts owed under the Prior Credit Facility and for general corporate purposes.

Future advances under the 2022 Credit Facility will be used to finance working capital, capital expenditures and other general corporate purposes of the Company.

To the extent not previously paid, all then-outstanding amounts under the 2022 Credit Facility are due and payable on the maturity date.

FOX FACTORY HOLDING CORP.

1 unchanged sentence

(in thousands, except per share amounts)

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

April 1, December 31,

The Company paid $ 1,980 in debt issuance costs in connection with the 2022 Credit Facility, which were allocated to the line of credit and amortized on a straight-line basis over the term of the facility.

Additionally, the Company had $ 4,473 of remaining unamortized debt issuance costs related to the Prior Credit Facility.

The Company expensed $1,927 of the remaining unamortized debt issuance costs and allocated $2,546 to the 2022 Credit Facility.

The Company may borrow, prepay and re-borrow principal under the 2022 Credit Facility during its term.

Advances under the 2022 Credit Facility can be either Adjusted Term Secured Overnight Financing Rate ("SOFR") loans or base rate loans.

SOFR rate revolving loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum equal to Term SOFR for such calculation plus 0.10 % plus a margin ranging from 1.00 % to 2.00 %.

Base rate revolving loans bear interest on the outstanding principal amount thereof at a rate per annum equal to the highest of (i) Federal Funds Rate plus 0.50 %, (ii) the rate of interest in effect for such day as publicly announced from time to time by the lender as its “prime rate”, and (iii) Adjusted Term SOFR rate for a one-month tenor plus 1.00 %, subject to the interest rate floors set forth therein, plus a margin ranging from 0.00 % to 1.00 %.

At July 1, 2022, the one-month SOFR and three-month SOFR rates were 1.11 % and 0.71%, respectively.

At July 1, 2022, our weighted-average interest rate on outstanding borrowing was 2.54 %.

The 2022 Credit Facility is secured by substantially all of the Company’s assets, restricts the Company's ability to make certain payments and engage in certain transactions, and requires that the Company satisfy customary financial ratios.

The Company was in compliance with the covenants as of July 1, 2022.

The following table summarizes the line of credit under the 2022 Credit Facility:

Amount outstanding $ 410,000

2 unchanged sentences

Total borrowing capacity $ 650,000

Maturity date March 11, 2025

In June 2021, the Company entered into a swap agreement (the "2021 Swap Agreement") to obtain a more favorable interest rate and to manage interest rate risk exposure.

Maturity date April 5, 2027

On June 11, 2021, the Company entered into a swap agreement (the "2021 Swap Agreement") to obtain a more favorable interest rate and to manage interest rate risk exposure.

On April 5, 2022, the Company terminated its 2021 Swap Agreement and entered into a new interest rate swap agreement (the "2022 Swap Agreement").

Through the 2022 Swap Agreement, the Company hedges the variability of cash flows in interest payments associated with $ 100,000 of its variable rate debt.

Refer to Note 16 - Subsequent Events for further details of this agreement.

As of April 1, 2022, future principal payments for long-term debt, including the current portion, are summarized as follows:

For fiscal year

2022 (remaining nine months) $ 15,000

Total 380,000

Debt issuance cost ( 3,712 )

Long-term debt, net of issuance cost 376,288

current portion ( 20,000 )

Long-term debt less current portion $ 356,288

2022 Credit Facility

On April 5, 2022, the Company entered into the a new credit agreement with Wells Fargo Bank, National Association, and other named lenders (the "2022 Credit Facility"), and concurrently repaid in full and terminated the Prior Credit Facility.

The 2022 Credit Facility, which matures on April 5, 2027, provides for revolving loans, swingline loans and letters of credit up to an aggregate amount of $ 650,000 .

Refer to Note 1 6 - Subsequent Events for further details of the 2022 Credit Facility.

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

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

Commitments and Contingencies

4 unchanged sentences

Although the Company cannot assure the outcome of any such legal proceedings, based on information currently available, management does not believe that the ultimate resolution of any pending matters will have a material adverse effect on the Company's financial condition, results of operations or cash flows.

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

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

The Company paid $ 900 and $ 1,850 during the three months ended April 1, 2022 and April 2, 2021, respectively.

The Company had a remaining liability of $ 1,800 as of April 1, 2022.

The Company paid $ 900 and $1,800 during the three and six months ended July 1, 2022 and $ 900 and $2,750 during the three and six months ended July 2, 2021, respectively.

The Company had a remaining liability of $ 900 as of July 1, 2022.

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

The Company released 19 shares of stock during each of the three months ended April 1, 2022 and April 2, 2021.

The Company released 19 and 39 shares of stock during the three and six months ended July 1, 2022 and 19 and 39 shares of stock during the three and six months ended July 2, 2021, respectively.

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

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

Supreme Court (the “Court”) decided South Dakota v.

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

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 April 1, 2022.

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 Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

Derivatives and Hedging

2 unchanged sentences

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 April 1, 2022 and December 31, 2021, the Company had the following interest rate swap contracts:

April 1, 2022 December 31, 2021

Interest rate swaps involve the receipt of floating-rate amounts in exchange for fixed-rate interest payments based on the one-month London Interbank Offered Rate ("LIBOR") or SOFR over the lives of the agreements without an exchange of the underlying principal amounts.

As of July 1, 2022 and December 31, 2021, the Company had the following interest rate swap contracts:

July 1, 2022 December 31, 2021

Effective Date Termination Date Notional Amount Unrealized Gain in AOCI Unrealized Gain in AOCI

September 2, 2020 June 11, 2021 $ 200,000 $ 233 $ 276

July 2, 2021 March 11, 2025 $ 200,000 11,068 3,583

July 2, 2021 April 5, 2022 $ 200,000 11,263 3,583

April 5, 2022 April 5, 2027 $100,000 1,018 —

Total $ 12,514 $ 3,859

On June 11, 2021, the Company terminated its existing swap agreement and entered into an interest rate swap agreement (the "2021 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.

The 2021 Swap Agreement 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 ("ASC 815"), and is recorded in other assets on the Condensed Consolidated Balance Sheet.

Refer to Note 11 - 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 Condensed 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 three months ended April 1, 2022 and April 2, 2021 were a gain of $ 5,811 and $ 2,145 , respectively.

Unrealized gain of $ 4,203 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.

2022 Swap Agreement

On April 5, 2022, the Company terminated its 2021 Swap Agreement and entered into a new 2022 Swap Agreement with a notional amount of $ 100,000 .

Refer to Note 16 - Subsequent Events for further details of the 2022 Swap Agreement.

On June 11, 2021, the Company terminated its existing swap agreement (the "2020 Swap Agreement") and entered into an interest rate swap agreement (the "2021 Swap Agreement") with a notional amount of $ 200,000 .

On April 5, 2022, the Company terminated its 2021 Swap Agreement and entered into a new interest rate swap agreement (the "2022 Swap Agreement") with a notional amount of $ 100,000 .

The terminated 2020 and 2021 Swap Agreements resulted in unrealized gains of $ 324 and $12,270, respectively, at the termination dates 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.

1 unchanged sentence

(in thousands, except per share amounts)

The 2022 Swap Agreement has a maturity date of April 5, 2027 and is indexed to a three-month Term SOFR (as defined in the 2022 Swap Agreement).

The 2022 Swap Agreement met the criteria for cash flow hedges under ASC 815, Derivatives and Hedging ("ASC 815"), and will be recorded to other assets or other liabilities on the Condensed Consolidated Balance Sheet.

Refer to Note 11 - Fair Value Measurements and Financial Instruments for additional information on determining the fair value.

The unrealized gains or losses, after tax, will be recorded in accumulated other comprehensive income, a component of equity, and are expected to be reclassified into interest expense on the Condensed Consolidated Statement of Income when the forecasted transactions affect earnings.

As required under ASC 815, the interest rate swap contracts’ effectiveness will be assessed on a quarterly basis using a quantitative regression analysis.

The gains and losses, net of tax, related to the derivative instruments designated as cash flow hedges recognized in accumulated other comprehensive income for the three and six months ended July 1, 2022 were a gain of $ 922 and $ 6,732 , respectively;

and for the three and six months ended July 2, 2021 were a loss of $525 and a gain of $1,620, respectively.

Over the next twelve months, the Company expects to recognize $ 4,252 of the $ 12,514 of unrealized gains included in accumulated other comprehensive income related to the interest rate swap contracts.

Fair Value Measurements and Financial Instruments

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

April 1, 2022 December 31, 2021

July 1, 2022 December 31, 2021

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

3 unchanged sentences

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

There were no transfers of assets or liabilities between Level 1, Level 2, and Level 3 categories of the fair value hierarchy during the three month period ended April 1, 2022.

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

The Company believes the carrying amount of the Prior Credit Facility approximates the fair value at April 1, 2022 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.

There were no transfers of assets or liabilities between Level 1, Level 2, and Level 3 categories of the fair value hierarchy during the three and six month period ended July 1, 2022.

As of December 31, 2021, the carrying amount of the principal under the Company’s Prior Credit Facility approximated fair value because it had a variable interest rate that reflected market changes in interest rates and changes in the Company’s net leverage ratio.

The Prior Credit Facility was terminated on April 5, 2022 and replaced with the revolving 2022 Credit Facility.

On June 11, 2021, the Company entered into the 2021 Swap Agreement to mitigate the cash flow risk associated with changes in interest rates on its variable rate debt.

On April 5, 2022, the Company terminated its 2021 Swap Agreement and entered into the 2022 Swap Agreement.

Refer to N ote 10 - Derivatives and Hedging for additional details of the agreement.

7 unchanged sentences

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

For the three months ended

April 1, 2022 April 2, 2021

For the three months ended For the six months ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

Cost of sales $ 231 $ 190 $ 409 $ 311

4 unchanged sentences

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

This amount was recognized as additional paid in capital during the three months ended April 2, 2021 upon the issuance of the underlying restricted stock units ("RSUs").

The following table summarizes the activity for the Company's unvested RSUs for the three months ended April 1, 2022:

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

The following table summarizes the activity for the Company's unvested RSUs for the six months ended July 1, 2022:

Unvested RSUs

4 unchanged sentences

Vested ( 154 ) $ 72.81

Unvested at April 1, 2022 340 $ 79.57

As of April 1, 2022, the Company had approximately $ 19,408 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 2.15 years.

Unvested at July 1, 2022 316 $ 86.24

As of July 1, 2022, the Company had approximately $ 24,281 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 2.23 years.

During the six months ended July 1, 2022, 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 Company considered it probable that the performance goals would be achieved, therefore the fair value of PSUs is calculated based on the stock price on the date of grant.

FOX FACTORY HOLDING CORP.

1 unchanged sentence

(in thousands, except per share amounts)

During the three months ended April 1, 2022, 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 fair value of PSUs is calculated based on the stock price on the date of grant.

The following table summarizes the activity for the Company's unvested PSUs for the three months ended April 1, 2022:

The following table summarizes the activity for the Company's unvested PSUs for the six months ended July 1, 2022:

Unvested PSUs

2 unchanged sentences

Granted 37 $ 120.90

Unvested at April 1, 2022 66 $ 129.94

Unvested at July 1, 2022 66 $ 129.94

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

1 unchanged sentence

The unrecognized stock-based compensation expense is expected to be recognized over a weighted average period of 2.02 years.

For the three months ended April 1, 2022, the Company had 3 unvested RSUs and PSUs outstanding which were excluded from the calculation of dilutive earnings per share because the effect would be anti-dilutive.

During the three months ended April 1, 2022, no shares of common stock were issued due to the exercise of stock options and no options to purchase common stock expired or were forfeited.

As of April 1, 2022, stock-based compensation expense related to stock options has been fully recognized.

For the three months ended

April 1, 2022 April 2, 2021

For the six months ended July 1, 2022, the Company had 152 unvested RSUs and PSUs outstanding which were excluded from the calculation of dilutive earnings per share because the effect would be anti-dilutive.

During the six months ended July 1, 2022, 33 shares of common stock were issued due to the exercise of stock options.

As of July 1, 2022, stock-based compensation expense related to stock options has been fully recognized and there are no outstanding options to purchase common stock.

For the three months ended For the six months ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

Provision for income taxes $ 12,464 $ 6,767 $ 14,900 $ 10,774

Effective tax rates 18.9 % 13.3 % 12.8 % 11.6 %

For the three months ended April 1, 2022, the difference between the Company's effective tax rate of 4.8 % and the 21 % federal statutory rate resulted primarily from the impact of the recently finalized U.S.

tax regulations published by the U.S Treasury and Internal Revenue Service on January 4, 2022.

These regulations limit the amount of newly generated foreign taxes that are creditable against U.S income taxes which resulted in a release of the Company’s valuation allowance against foreign tax credits due to the Company's ability to use foreign tax credit carryforwards that had previously been reserved against.

This benefit was partially offset by state taxes and other nondeductible expenses.

For the three months ended April 2, 2021, the difference between the Company's effective tax rate of 9.5 % and the 21 % federal statutory rate resulted primarily from windfall on stock-based compensation, the recognition of uncertain tax positions due to the conclusion of an audit and a lower tax rate on foreign-derived intangible income.

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

For the three months ended July 1, 2022, the difference between the Company's effective tax rate of 18.9 % and the 21 % federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income and excess benefits related to stock-based compensation.

The benefits were partially offset by withholding and state taxes.

For the six months ended July 1, 2022, the difference between the Company's effective tax rate and the 21 % federal statutory rate resulted primarily from the impact of the recently finalized U.S.

tax regulations published by the U.S.

Treasury and Internal Revenue Service on January 4, 2022 and from a lower tax rate on foreign derived intangible income.

These regulations limit the amount of newly generated foreign taxes that are creditable against U.S.

income taxes, which resulted in a release of the Company’s valuation allowance against foreign tax credits due to the Company's ability to use foreign tax credit carryforwards that had previously been reserved against.

These benefits were partially offset by withholding and state taxes.

For the three months ended July 2, 2021, the difference between the Company's effective tax rate of 13.3 % and the 21% federal statutory rate resulted primarily from excess benefits related to stock-based compensation, and a lower tax rate on foreign derived intangible income.

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

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

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

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

5 unchanged sentences

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 $ 281 and $ 202 of parts and vehicles and sold approximately $ 457 and $ 120 of upfit packages to the dealership during the three months ended April 1, 2022 and April 2, 2021, respectively.

As of April 1, 2022, the Company had $ 17 and $ 85 in accounts payable and accounts receivable, respectively, related to this dealership.

As of April 2, 2021, the Company had $ 27 and $ 88 in accounts payable and accounts receivable, respectively, related to this dealership.

The Company purchased approximately $ 339 and $620 of parts and vehicles and sold approximately $ 253 and $710 of upfit packages to the dealership during the three and six months ended July 1, 2022, respectively.

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

The Company had $ 37 and $ 40 in accounts payable and accounts receivable as of July 1, 2022, respectively, and $ 143 and $ 8 in accounts payable and accounts receivable as of July 2, 2021, respectively, related to this dealership.

On July 22, 2020, the Company, pursuant to a stock purchase agreement with Flagship, Inc., purchased the remaining 20 % interest of FF US Holding Corp.

5 unchanged sentences

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, d/b/a Outside Van ("Outside Van") a custom van conversion company.

The total purchase price of $ 15,275 , net of cash acquired, was 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 purchase price was allocated to the net liabilities assumed of $ 1,057 , $ 5,560 in identifiable intangible assets and goodwill acquired of $ 10,772 .

The total purchase price of $ 15,275 , net of cash acquired, was allocated to the net liabilities assumed of $ 1,057 , identifiable intangible assets of $ 5,560 and goodwill acquired of $ 10,772 , based on their respective fair values as of May 25, 2021, with the excess purchase price allocated to goodwill.

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

2 unchanged sentences

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 one and ten years , respectively.

The purchase price of STS is allocated to the net assets assumed of $ 5,244 , identifiable intangible assets of $ 7,086 and goodwill acquired of $ 24,504 , based on their respective fair values as of December 30, 2021, with the excess purchase price allocated to goodwill.

The Company will amortize the acquired non-compete and trade name assets over their expected useful lives of five and ten 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.

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

Subsequent Events

2022 Credit Facility

The 2022 Credit Facility, which matures on April 5, 2027, provides for revolving loans, swingline loans and letters of credit up to an aggregate amount of $ 650,000 .

Future advances under the 2022 Credit Facility will be used to finance working capital, capital expenditures and other general corporate purposes of the Company.

To the extent not previously paid, all then-outstanding amounts under the 2022 Credit Facility are due and payable on the maturity date.

The Company paid $ 1,980 in debt issuance costs in connection with the 2022 Credit Facility, which will be allocated to the line of credit and amortized on a straight-line basis over the term of the facility.

Additionally, the Company had $ 4,473 of remaining unamortized debt issuance costs related to the Prior Credit Facility.

The Company expects to expense a portion of the remaining unamortized debt issuance costs and allocate a portion to the 2022 Credit Facility.

The Company may borrow, prepay and re-borrow principal under the 2022 Credit Facility during its term.

Advances under the 2022 Credit Facility can be either Adjusted Term Secured Overnight Financing Rate ("SOFR") loans or base rate loans.

2022 Swap Agreement

On April 5, 2022, the Company terminated its 2021 Swap Agreement and entered into a new interest rate swap agreement (the "2022 Swap Agreement") with a notional amount of $ 100,000 .

The 2022 Swap Agreement has a maturity date of April 5, 2027 and is indexed to a three-month Term SOFR.

The 2022 Swap Agreement met the criteria for cash flow hedges under ASC 815, and will be recorded to other assets or other liabilities on the Condensed Consolidated Balance Sheet.

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

This purchase was accounted for as a business combination and was not material to the Company's financial statements.

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

What changed 10-Q

Item 1. Financial Statements