What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-04 · 127 added, 98 removed, 470 unchanged (32% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

July 1, December 31,

September 30, December 31,

Current assets:

Cash and cash equivalents $ 153,137 $ 179,686

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

Accounts receivable (net of allowances of $ 455 and $ 410 at September 30, 2022 and December 31, 2021, respectively)

194,422 142,040

21 unchanged sentences

Stockholders’ equity

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

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of September 30, 2022 and December 31, 2021

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

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

43,157 shares issued and 42,267 outstanding as of September 30, 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 July 1, 2022 and December 31, 2021

890 common shares as of September 30, 2022 and December 31, 2021

( 13,754 ) ( 13,754 )

7 unchanged sentences

(in thousands, except per share data)

For the three months ended For the six months ended

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

For the three months ended For the nine months ended

September 30, October 1, September 30, October 1,

2022 2021 2022 2021

9 unchanged sentences

Income from operations 65,362 55,249 189,992 153,828

Interest and other expense, net:

Interest and other (income) expense, net:

Interest expense 2,667 1,849 6,341 6,351

Other expense, net 2,816 83 4,508 1,042

Interest and other expense, net 4,513 1,681 8,182 5,544

Other (income) expense, net ( 1,441 ) ( 187 ) 3,067 855

Interest and other (income) expense, net 1,226 1,662 9,408 7,206

Income before income taxes 64,136 53,587 180,584 146,622

11 unchanged sentences

(in thousands)

For the three months ended For the six months ended

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

For the three months ended For the nine months ended

September 30, October 1, September 30, October 1,

2022 2021 2022 2021

22 unchanged sentences

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

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

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

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

Net income — — — — — — 43,823 43,823

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

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

15 unchanged sentences

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

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 4 — — — ( 325 ) — — ( 325 )

Stock-based compensation expense — — — — 4,289 — — 4,289

Other comprehensive loss — — — — — ( 1,528 ) — ( 1,528 )

Net income — — — — — — 50,771 50,771

Balance - September 30, 2022 43,157 $ 42 890 $ ( 13,754 ) $ 351,403 $ 6,325 $ 711,118 $ 1,055,134

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

2 unchanged sentences

(in thousands)

For the six months ended

July 1, 2022 July 2, 2021

For the nine months ended

September 30, 2022 October 1, 2021

OPERATING ACTIVITIES:

Net income $ 152,319 $ 126,084

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 36,813 31,906

2 unchanged sentences

Amortization of loan fees 860 1,227

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

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

Amortization of deferred gains on prior swap agreements ( 2,113 ) ( 27 )

(Gain) loss on disposal of property and equipment ( 1,845 ) 414

Deferred taxes and uncertain tax positions ( 12,515 ) ( 1,218 )

6 unchanged sentences

Accrued expenses and other liabilities 22,410 25,875

Net cash (used in) provided by operating activities ( 85,400 ) 81,366

Net cash provided by operating activities 57,035 148,983

INVESTING ACTIVITIES:

1 unchanged sentence

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

Proceeds from sale of property and equipment 3,180 49

Net cash used in investing activities ( 32,379 ) ( 55,559 )

7 unchanged sentences

Repurchases from stock compensation program, net ( 4,094 ) ( 6,641 )

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

Net cash used in financing activities ( 54,004 ) ( 19,967 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 2,799 121

6 unchanged sentences

(in thousands)

For the six months ended

For the nine months ended

SUPPLEMENTAL CASH FLOW INFORMATION:

July 1, 2022 July 2, 2021

September 30, 2022 October 1, 2021

Cash paid during the period for:

27 unchanged sentences

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

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

The three and nine month periods ended September 30, 2022 and October 1, 2021 each included 13 weeks and 39 weeks, respectively.

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

24 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.

Reclassifications - We have reclassified certain prior period amounts within our condensed consolidated statement of cash flows for the nine months ended October 1, 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.

24 unchanged sentences

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.

Recent Accounting Pronouncements - In December 2019, the FASB issued Accounting Standards Update ("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.

15 unchanged sentences

This adoption did not have a material impact on our financial statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405):

Disclosure of Supplier Finance Program Obligations.

Under ASU 2022-04, the buyer in a supplier finance program is required to disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented.

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

The Company will adopt this guidance in the first quarter of 2023.

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

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

The following table summarizes total sales by product category:

For the three months ended For the six months ended

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

For the three months ended For the nine months ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Powered Vehicles $ 235,196 $ 187,998 $ 672,335 $ 540,164

2 unchanged sentences

The following table summarizes total sales by sales channel:

For the three months ended For the six months ended

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

For the three months ended For the nine months ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

OEM $ 238,078 $ 198,782 $ 662,453 $ 522,809

1 unchanged sentence

Total sales $ 409,168 $ 347,435 $ 1,193,850 $ 956,735

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

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

For the three months ended For the six months ended

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

For the three months ended For the nine months ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

North America $ 255,424 $ 210,623 $ 746,566 $ 608,800

5 unchanged sentences

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.

Revenue expected to be recognized from remaining performance obligations as of September 30, 2022 for contracts with a duration of more than one year was approximately $743, all of which is expected to be recognized during fiscal years 2023 to 2025.

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

Inventory consisted of the following:

July 1, December 31,

September 30, December 31,

Raw materials $ 250,029 $ 200,460

4 unchanged sentences

Prepaids and other current assets consisted of the following:

July 1, December 31,

September 30, December 31,

Prepaid chassis deposits $ 145,482 $ 98,618

7 unchanged sentences

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

July 1, December 31,

September 30, December 31,

Building and building improvements $ 72,670 $ 72,088

10 unchanged sentences

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

July 1, December 31,

September 30, December 31,

United States $ 167,206 $ 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 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 .

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 ten 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 5.21 years and the weighted-average incremental borrowing rate was 2.06 % as of July 1, 2022.

The weighted-average remaining lease term for the Company's operating leases was 5.12 years and the weighted-average incremental borrowing rate was 2.15 % as of September 30, 2022.

Operating lease costs consisted of the following:

For the three months ended For the six months ended

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

For the three months ended For the nine months ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Operating lease cost $ 2,689 $ 2,387 $ 8,344 $ 6,440

4 unchanged sentences

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

Balance Sheet Classification July 1, 2022

Balance Sheet Classification September 30, 2022

Operating lease right-of-use assets Lease right-of-use assets $ 41,524

3 unchanged sentences

For fiscal year Total future payments

2022 (remaining six months) $ 5,198

2022 (remaining three months) $ 2,636

Thereafter 8,588

9 unchanged sentences

Accrued expenses consisted of the following:

July 1, December 31,

September 30, December 31,

Payroll and related expenses $ 35,953 $ 32,968

7 unchanged sentences

Activity related to warranties is as follows:

For the three months ended For the six months ended

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

For the three months ended For the nine months ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Beginning warranty liability $ 16,088 $ 13,650 $ 15,510 $ 9,835

24 unchanged sentences

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 %.

At September 30, 2022, the one-month SOFR and three-month SOFR rates were 2.47 % and 2.13%, respectively.

At September 30, 2022, our weighted-average interest rate on outstanding borrowing was 3.72 %.

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 Company was in compliance with the covenants as of September 30, 2022.

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

September 30,

Amount outstanding $ 325,000

7 unchanged sentences

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

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

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.

5 unchanged sentences

On July 22, 2020, the Company exercised the Call Option and, pursuant to a stock purchase agreement with Flagship, Inc., the Company purchased the remaining 20 % interest for $ 24,975 payable in a combination of stock and cash.

The cash portion 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 $1,800 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 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 cash portion was settled in quarterly installment payments beginning in July 2020 through July 2022, which amounted to $ 6,556 , $ 4,550 and $ 2,700 in 2020, 2021 and 2022, respectively.

The Company paid $ 900 and $2,700 during the three and nine months ended September 30, 2022 and $ 900 and $3,650 during the three and nine months ended October 1, 2021, respectively.

The Company had no remaining liability as of September 30, 2022.

The stock portion of 136 shares were released from escrow on a quarterly basis starting January 2021 through July 2022.

The Company released 19 and 58 shares of stock during the three and nine months ended September 30, 2022 and 19 and 58 shares of stock during the three and nine months ended October 1, 2021, respectively.

The Company had no remaining shares to be released as of September 30, 2022.

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

4 unchanged sentences

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

As of September 30, 2022 and December 31, 2021, the Company had the following interest rate swap contracts:

September 30, 2022 December 31, 2021

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

3 unchanged sentences

Total $ 15,828 $ 3,859

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)

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.

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.

The 2022 Swap Agreement met the criteria as a cash flow hedge under ASC 815, Derivatives and Hedging ("ASC 815"), and is recorded to other assets or other liabilities on the Condensed Consolidated Balance Sheets.

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.

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 Statements 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.

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 nine months ended September 30, 2022 were a gain of $ 2,563 and $ 9,296 , respectively;

and for the three and nine months ended October 1, 2021 were a loss of $ 45 and a gain of $ 1,575 , respectively.

Over the next twelve months, the Company expects to recognize $ 3,256 of the $ 15,828 of unrealized gains included in accumulated other comprehensive income related to the interest rate swap contracts.

1 unchanged sentence

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

July 1, 2022 December 31, 2021

September 30, 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 and six month period ended July 1, 2022.

There were no transfers of assets or liabilities between Level 1, Level 2, and Level 3 categories of the fair value hierarchy during the three and nine month period ended September 30, 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.

11 unchanged sentences

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

For the three months ended For the six months ended

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

For the three months ended For the nine months ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Cost of sales $ 292 $ 203 $ 701 $ 514

4 unchanged sentences

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

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

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

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

The following table summarizes the activity for the Company's unvested RSUs for the nine months ended September 30, 2022:

Unvested RSUs

4 unchanged sentences

Vested ( 162 ) $ 73.11

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.

Unvested at September 30, 2022 302 $ 86.88

As of September 30, 2022, the Company had approximately $ 20,719 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 1.96 years.

During the nine months ended September 30, 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.

4 unchanged sentences

(in thousands, except per share amounts)

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

The following table summarizes the activity for the Company's unvested PSUs for the nine months ended September 30, 2022:

Unvested PSUs

2 unchanged sentences

Granted 37 $ 120.90

Unvested at July 1, 2022 66 $ 129.94

Canceled (4) $ 126.73

Unvested at September 30, 2022 62 $ 130.14

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

1 unchanged sentence

The unrecognized stock-based compensation expense is expected to be recognized over a weighted average period of 1.83 years.

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

For the nine months ended September 30, 2022, the Company had 153 unvested RSUs and PSUs outstanding which were excluded from the calculation of dilutive earnings per share because the effect would be anti-dilutive.

During the nine months ended September 30, 2022, 33 shares of common stock were issued due to the exercise of stock options.

As of September 30, 2022, stock-based compensation expense related to stock options has been fully recognized and there are no outstanding options to purchase common stock.

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

For the three months ended For the nine months ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Provision for income taxes $ 13,365 $ 9,764 $ 28,265 $ 20,538

Effective tax rates 20.8 % 18.2 % 15.7 % 14.0 %

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.

For the three months ended September 30, 2022, the difference between the Company's effective tax rate of 20.8 % and the 21 % federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income, partially offset by withholding and state taxes.

For the nine months ended September 30, 2022, the difference between the Company's effective tax rate and the 21 % federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income, and 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.

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.

1 unchanged sentence

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.

For the three months ended October 1, 2021, the difference between the Company's effective tax rate of 18.2 % 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 state taxes, an increase in the valuation allowance for foreign tax credits and non-deductible expenses.

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

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

On August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law in the U.S.

Among other changes, the IRA introduced a corporate minimum tax on certain corporations with average adjusted financial statement income over a three-tax year period in excess of $1.0 billion and an excise tax on certain stock repurchases by certain covered corporations for taxable years beginning after December 31, 2022 and several tax incentives to promote clean energy.

Based on our current analysis and pending future guidance to be issued by the U.S.

Treasury and Internal Revenue Service, we do not believe these provisions will have a material impact on our consolidated financial statements.

Related Party Transactions

1 unchanged sentence

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 $ 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.

The Company purchased approximately $ 469 and $1,089 of parts and vehicles and sold approximately $ 130 and $840 of upfit packages to the dealership during the three and nine months ended September 30, 2022, respectively.

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

The Company had $ 24 and $ 49 in accounts payable and accounts receivable as of September 30, 2022, respectively, and $ 123 and $ 57 in accounts payable and accounts receivable as of October 1, 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.

for $ 24,975 payable in a combination of stock and cash.

The cash portion will be settled in quarterly installment payments through July 2022.

The cash portion was settled in quarterly installment payments through July 2022.

Refer to Note 9 - Commitments and Contingencies for additional details of this agreement.

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

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.

6 unchanged sentences

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

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.

2 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements