What changed in this filing

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Item 1. Business

2023-02-23 compared with 2022-02-24 · 64 added, 54 removed, 284 unchanged (29% of the section changed)

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and its subsidiaries, unless the context indicates otherwise.

Our premium brand, performance-defining products and systems are used primarily on 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 some of the leading cycling and powered vehicle original equipment manufacturers ("OEMs"), while others are distributed to consumers through a global network of dealers and distributors.

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Description of our business

We are a designer, manufacturer and marketer of performance-defining products and systems used primarily on bikes, side-by-sides, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, motorcycles, and commercial trucks.

We believe our products offer innovative design, performance, durability and reliability.

Our brand is associated with high-performance and technologically advanced products, by which we generally mean products that provide users with improved control and comfort while riding over rough terrain in varied environments, or providing improved control and responsiveness for on-road only vehicles.

We believe that the performance of our products has been demonstrated by, and our brand benefits from, the success of professional athletes who use our products in elite competitive events, such as the Union Cycliste Internationale Mountain Bike World Cup and the X Games.

We believe that the performance of our products has been demonstrated by, and our brand benefits from, the success of professional athletes who use our products in elite competitive events, such as the Olympic Games, the Union Cycliste Internationale Mountain Bike World Cup, the X Games and the Baja 1000.

We believe the exposure our products receive when used by successful professional athletes positively influences the purchasing habits of enthusiasts and other consumers seeking high-performance products.

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We design our products for, and market our products to, some of the world’s leading cycling and automotive OEMs and to consumers through the aftermarket channel.

Many of our OEM customers, including Giant, Merida, Orbea, Kenstone Metal, Canyon Bicycles, Santa Cruz Bicycles, and Yeti Cycles in Specialty Sports and BRP, Ford, Polaris, Toyota, 4 Wheel Parts, Kawasaki, Yamaha, and Honda in Powered Vehicles, are among the market leaders in their respective product categories, and help shape, as well as respond to, consumer trends in their respective categories.

Many of our OEM customers, including Specialized, Trek Bicycles, Giant, Orbea, Canyon Bicycles, Santa Cruz Bicycles, and Yeti Cycles in Specialty Sports and BRP, Ford, Polaris, Toyota, 4 Wheel Parts, Kawasaki, Yamaha, and Honda in Powered Vehicles, are among the market leaders in their respective product categories, and help shape, as well as respond to, consumer trends in their respective categories.

We believe that OEMs often prominently display and incorporate our products to improve the marketability and consumer demand for their performance models, which reinforces our brand image.

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We participate in large global markets for bikes and powered vehicles used by recreational and professional users.

Today, our products for bicycles are primarily for mountain bikes, road bikes, and e-bikes.

Our products for powered vehicles are used primarily on side-by-sides, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications including military, motorcycles, and commercial trucks.

Today, our products for bicycles are primarily for mountain bikes, e-bikes and road bikes.

Our products for powered vehicles are used primarily on on-road vehicles with and without off-road capabilities, side-by-sides, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, including military, motorcycles, and commercial trucks.

We focus on premium-priced products within each of these categories, which we consider to be the high-end segment because of their higher retail sale prices, where we believe consumers prefer well-designed, performance-oriented equipment.

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Premium brand with strong consumer loyalty

We believe that we have developed a reputation for performance-defining products and that we own and license established trademarks, such as FOX ® , FOX RACING SHOX ® , and RACE FACE ® which are perceived as premium brands.

We believe that we have developed a reputation for performance-defining products and that we own and license established trademarks, such as FOX ® , FOX RACING SHOX ® , BLACK WIDOW ® , ROCKY RIDGE ®, RACE FACE ® which are perceived as premium brands.

As such, our performance-defining products are generally sold at premium prices.

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Due to our experience in suspension engineering and design in multiple markets and with a variety of vehicles, solutions we develop for use in one market can ultimately be deployed across multiple markets.

For example, we believe that our success in the high-end ATV category led to the widespread adoption of our suspension technology in the Side-by-Side market.

For example, we believe that our success in the high-end ATV category led to the widespread adoption of our suspension technology in the side-by-sides market.

Our innovative product development and speed to market are supported by:

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• The first independently controlled compression and rebound, semi-active Live Valve X2 shock.

On a 3.0 internal bypass platform, it is the longest rear UTV shock to date with 15.6” of stroke;

This technology is currently being used in UTVs;

• Live Valve, our proprietary semi-active, electronic suspension that processes data from multiple vehicle sensors to adjust the suspension virtually instantaneously to the demands of changing terrain.

This technology is currently in use UTVs, trucks, and mountain bikes;

• The next generation of Live Valve combined with a 3.1-inch diameter anodized aluminum shock body, specifically designed to withstand the higher internal pressures created by the new valve’s wider dynamic range.

This technology has been adopted at the top tier of trucks and SUVs in the U.S.;

• Electronically adjustable rear suspension pre-load allowing a user to easily compensate for the additional weight and bring a vehicle back to optimal ride height.

• Position sensitive spiral technology uses internal grooves placed in the shock body to improve small bump comfort and bottom out control, providing the performance of position sensitive damping at a lower price point;

This technology is currently in use on select motorcycles to adapt to added passenger and luggage weight without using tools;

• Ridetech RidePro E5 Air Suspension Control System, improving comfort and performance to your vehicle.

• Ridetech 62-67 Nova Suspension System (Coil-Over & Air), bringing today's performance to your vintage vehicle;

• Market leading 3-4” Bronco suspension lift products that are custom designed to each model configuration and that utilize a combination of strut and pre-load spacers for a more balanced performance;

• LIVE Valve, our proprietary semi-active, electronic suspension that processes data from multiple vehicle sensors to adjust the suspension virtually instantaneously to the demands of changing terrain.

This technology is currently in use UTVs, Trucks, and mountain bikes;

This technology is currently being used in many classic muscle car and truck applications;

• Ridetech 62-67 Nova Suspension System (Coil-Over & Air), complete suspension upgrades with either coil or air sprung adjustable shocks that bring modern performance to vintage and classic muscle cars;

• Market leading 3-4” Bronco suspension lift products that are custom designed to each model configuration and that range from load spacers and coil-overs, to remote adjustable shocks for increased off-road performance, comfort and control;

• 32, 34 and 36 Factory Series FLOAT FIT4, which reduces overall fork weight, provides external adjustability with our fourth-generation FOX Isolated Technology ("FIT") closed-cartridge damper, and includes the self-adjusting negative chamber air spring for quieter operation and ease of adjustment.

This technology is used widely across all brands of mountain bikes or as aftermarket upgrades to replace lower performing suspension;

• The GRIP2 fork damper, which is our next-evolution sealed cartridge FIT system, our highest performing gravity-focused damper.

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four-way adjustability, VVC high-speed rebound circuit, high-performance mid-valve, and overall friction-reducing treatments.

• X2 technology used in our Factory Series FLOAT and DH rear shocks, which allows the rider to independently tune high- and low-speed compression and high- and low-speed rebound;

This technology is used widely across all brands of mountain bikes or as aftermarket upgrades to replace lower performing suspension;

• Rhythm series fork products developed to address a lower price point offering without compromising proven FOX performance;

• Race Face Vault Hub, a new 120-point high-engagement mountain bike hubset featuring tool-free end caps that simplify conversion among all major axle standards and is approved for e-bike applications;

• FOX AWL suspension fork for the growing electronic sports utility vehicle ("eSUV") commuter and e-mobility segment combining the confidence and stability of off-road capable suspension with the convenience of direct mount compatibility with full wrap fenders, lights, and anti-lock braking systems.

This technology is found on a wide range of electric bikes;

• Race Face Vault Hub, a 120-point high-engagement mountain bike hubset featuring tool-free end caps that simplify conversion among all major axle standards and is approved for e-bike applications.

This technology is found in select Race Face mountain bike wheels;

• Easton EC90 SL Crankset, a versatile road bike crankset that allows quick conversion between 1x and 2x road and gravel chainring configurations.

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We believe innovation is the foundation of our company.

As we continue to leverage latest technology to develop a diverse portfolio of performance-defining products, our Powered Vehicle Group facility extends our ability to not only scale to newer levels but also do it efficiently.

As we continue to leverage the latest technology to develop a diverse portfolio of performance-defining products, our Powered Vehicle Group facility extends our ability to not only scale to newer levels but also do it efficiently.

We have great relations with our OEM and aftermarket partners and given our key distinct strengths, we believe we have and will continue to win more applications.

Leveraging our technology and scale, we have successfully expanded into commercial/RV and street car applications with a lot of room to penetrate and plan to grow those channels with more pioneering product applications.

Leveraging our technology and scale, we have successfully expanded into recreational vehicles and street car applications, and we believe there are opportunities to further penetrate these markets and grow with more pioneering product applications.

Additionally, to grow our end user base, we are now looking at ways to explore international opportunities with some of our applications.

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Over the past several years, we have completed acquisitions that we believe enhance our business and strategically expand our product offerings.

In March 2020, we acquired substantially all the issued and outstanding capital stock of SCA Performing Holdings, Inc.

In March 2020, we acquired substantially all the issued and outstanding capital stock of SCA Performance Holdings, Inc.

("SCA"), a leading OEM authorized specialty vehicle manufacturer for light duty trucks and sport utility vehicles.

In May 2021, through our wholly owned subsidiary, SCA Performance, Inc.

("SCA"), we acquired all of the issued and outstanding stock of Manifest Joy LLC ("Outside Van), a custom van conversion company that designs and custom engineers recreational vehicles.

In May 2021, through our wholly owned subsidiary, SCA, we acquired all of the issued and outstanding stock of Manifest Joy LLC ("Outside Van), a custom van conversion company that designs and custom engineers recreational vehicles.

In December 2021, through our wholly owned subsidiary, Shock Therapy Suspension, Inc., we acquired substantially all the assets of Shock Therapy LLC ("Shock Therapy"), a premier suspension tuning company in the off-road industry.

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Improve operating and supply chain efficiencies

In 2019, we completed the process of relocating our Specialty Sports Group’s U.S.

aftermarket bike products distribution, sales, and service operations to Sparks, Nevada.

We recently completed the construction of an approximately 336,000 square foot state-of-the-art facility in Hall County, Georgia (the "Hall County Facility") to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.

The Hall County Facility is being used for manufacturing, warehousing, distribution and office space.

We are currently transitioning out of our Watsonville, California facility and relocating our powered vehicles suspension manufacturing to the Hall County Facility.

In the fourth quarter of 2021, we completed the construction of an approximately 336,000 square foot state-of-the-art facility in Hall County, Georgia (the "Gainesville Facility") to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.

The Gainesville Facility is being used for manufacturing, warehousing, distribution and office space.

Additionally, we completed the transition of our Watsonville, California facility (the "Watsonville Facility") and the relocation of our powered vehicles suspension manufacturing to the Gainesville Facility in the first quarter of 2022.

Certain portions of our business are seasonal;

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As we have diversified our product offerings and our product launch cycles, seasonal fluctuations are becoming less material.

The markets for performance-defining products, including suspension components, wheels, and cranks, are highly competitive.

The markets for performance-defining products are highly competitive.

We compete with other companies that produce products for sale to OEMs, dealers and distributors, as well as with OEMs that produce their own line of products for their own use.

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Powered Vehicles

Within the market for powered vehicle suspension components, we compete with several companies in different submarkets.

In the snowmobile market we compete with KYB (Kayaba Industry Co., Ltd.), Öhlins Racing AB (a wholly-owned subsidiary of Tenneco), Walker Evans Racing, Works Performance Products, Inc., and Penske Racing Shocks / Custom Axis, Inc.

In the ATV and Side-by-Side markets, outside of vertically-integrated OEMs, we compete with ZF Sachs (ZF Friedrichshafen AG), Polaris, and Walker Evans Racing for OEM business and Elka Suspension Inc., Öhlins Racing AB, Works Performance Products, and Penske Racing Shocks / Custom Axis, Inc.

for aftermarket business.

Within the market for off-road and specialty vehicle suspension components, we compete with ThyssenKrupp Bilstein Suspension GmbH (commonly known as Bilstein), and King Shock Technology, Inc.

Within the market for off-road and specialty vehicle suspension components, we compete with ThyssenKrupp Bilstein Suspension GmbH (commonly known as Bilstein), King Shock Technology, Inc.

(commonly known as King Shocks), Icon Vehicle Dynamics, Sway-A-Way, Pro Comp USA Suspension, and Rancho ("Tenneco").

In the market for suspension systems, or lift kits, we compete with TransAmerican Wholesale/Pro Comp USA, Rough Country Suspension Systems, TeraFlex, Falcon, ReadyLIFT Suspension, Tuff Country EZ-Ride Suspension, and Rusty’s Off-Road.

In the market for up-fitted vehicles, we compete with Roush Performance and DSI Custom Vehicles.

In the market for upfitted vehicles, we compete with Roush Performance and DSI Custom Vehicles.

Within the market for powered vehicle suspension components, we compete with several companies in different submarkets.

In the ATV and side-by-sides markets, outside of vertically-integrated OEMs, we compete with ZF Sachs (ZF Friedrichshafen AG), and Walker Evans Racing for OEM business and Elka Suspension Inc., Öhlins Racing AB, Works Performance Products, and Penske Racing Shocks / Custom Axis, Inc.

for aftermarket business.

In the snowmobile market, we compete with KYB (Kayaba Industry Co., Ltd.), Öhlins Racing AB (a wholly-owned subsidiary of Tenneco), Walker Evans Racing, Works Performance Products, Inc., and Penske Racing Shocks / Custom Axis, Inc.

Specialty Sports

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In our powered vehicle product categories, we offer premium products under the FOX, BDS Suspension, Zone Offroad, JKS Manufacturing, RT Pro UTV, 4x4 Posi-Lok, Ridetech, Tuscany, Outside Van, and SCA brands for side-by-sides, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, motorcycles, and commercial trucks.

In each of the years ended December 31, 2021, January 1, 2021 and January 3, 2020, approximately 55%, 59% and 60%, respectively, of our sales were attributable to sales of powered vehicles related products.

Products for these vehicles are designed for use on roads, for trail riding, in racing, and to help provide performance and comfort.

In each of the years ended December 30, 2022, December 31, 2021 and January 1, 2021, approximately 58%, 55% and 59%, respectively, of our sales were attributable to sales of powered vehicles related products.

Products for these vehicles are designed for use on roads, trail riding, racing, and to help maximize performance and comfort.

Our products have also been used on limited quantities of off-road military vehicles and other small-scale select military applications.

Our aftermarket truck suspension component products in the powered vehicles category range from two-inch aluminum bolt-on shocks to our patented position sensitive internal bypass shocks.

Our aftermarket truck suspension component products in the powered vehicles category range from two-inch bolt-on shocks to our patented position sensitive internal bypass shocks.

We also offer lift kits and components with our shock products and aftermarket accessory packages for use in trucks.

We up-fit trucks to be off-road capable, on-road vehicles with components and products such as lift kits, shock products, superchargers, interior accessories, wheel, tires, lighting, and body enhancements.

Our acquisition of SCA in March 2020 has increased the portion of our sales related to upfitting.

In addition, we manufacture suspension systems that enhance the handling and ride quality of muscle cars, trucks, sports cars and hot rods.

With the recent acquisition of Shock Therapy in December 2021, we added suspension tuning services to the portfolio.

Our upfitting category leverages our strong partnerships with Ford, General Motors, Jeep, Nissan and RAM, enabling us to obtain truck, van and sports utility vehicle ("SUV") chassis directly from the manufacturers' facilities.

We seek to improve each vehicle's capability with high quality, proprietary components and products, such as lift kits, shock products, superchargers, interior accessories, wheels, tires, lighting, and body enhancements, while still maintaining the factory warranty and safety standards that our customers expect.

Our upfitting category includes brands such as Black Widow, Rocky Ridge, Badlander, Black Ops, Harley-Davidson and Shelby American.

Specialty Sports

Our bike product offerings are used on a wide range of performance mountain bikes and road bikes under the FOX, Race Face, Easton Cycling and Marzocchi brands.

Our bike product offerings are used on a wide range of performance mountain bikes, e-bikes and road bikes under the FOX, Race Face, Easton Cycling and Marzocchi brands.

Given this wide range of bike products and brands, as well as the potential to expand our offerings to include other types of performance-defining products, we changed the name of the group from Bike Division to Specialty Sports Group.

In each of the years ended December 31, 2021, January 1, 2021 and January 3, 2020, approximately 45%, 41% and 40%, respectively, of our sales were attributable to sales of bike-related products.

In each of the years ended December 30, 2022, December 31, 2021 and January 1, 2021, approximately 42%, 45% and 41%, respectively, of our sales were attributable to sales of bike-related products.

Primarily for the mountain bike market, we offer mid-end and high-end front fork and rear suspension products designed for cross-country, trail, all-mountain, free-ride and downhill riding.

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In 2022, 2021 and 2020, no single customer represented 10% or more of our sales.

Our sales to Ford, a powered vehicles OEM, accounted for approximately 11% in 2019.

Although we refer to the branded bike OEMs that use our products throughout this document as "our customers," "our OEM customers" or "our bike OEM customers," branded bike OEMs often use contract manufacturers to manufacture and assemble their bikes.

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Our international sales, however, do not necessarily reflect the location of the end users of our products, as many of our products are incorporated into bikes and powered vehicles that are assembled at international locations and then shipped back to the U.S.

Additional information about our product revenues and certain geographical information is available in Note 2 - Revenues of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

Additional information about our product revenues and certain geographical information is available in Note 2.

Revenues of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

Powered Vehicles

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After incorporating our products on their powered vehicles, OEMs typically sell their powered vehicles to independent dealers, which then sell directly to consumers.

In the aftermarket, we typically sell to dealers and distributors, both domestically and internationally.

In the aftermarket, we typically sell suspension products to dealers and distributors, both domestically and internationally.

Our dealers sell directly to consumers.

When we sell to our distributors, they sell to independent dealers, which then sell directly to consumers.

In our upfitting product category, we sell to a broad network of automotive dealerships.

Specialty Sports

We sell our bike suspension and components products to a broad network of domestic and international bike OEMs, including Giant, Merida, Orbea, Kenstone Metal, Canyon Bicycles, Santa Cruz Bicycles, and Yeti Cycles.

We sell our bike suspension and components products to a broad network of domestic and international bike OEMs, including Specialized, Trek Bicycles, Giant, Orbea, Canyon Bicycles, Santa Cruz Bicycles, and Yeti Cycles.

We have long-standing relationships with many of the top bike OEMs.

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We strategically focus our marketing efforts on enthusiasts seeking high-end, performance-defining products and systems through promotions at destination riding locations and individual and team sponsorships.

We believe the performance of our products has been demonstrated by, and our brands benefit from, the success of professional athletes who use our products in elite competitive events such as the Union Cycliste Internationale Mountain Bike World Cup and the X Games.

We believe the performance of our products has been demonstrated by, and our brands benefit from, the success of professional athletes who use our products in elite competitive events such as the Olympic Games, the Union Cycliste Internationale Mountain Bike World Cup, the X Games and the Baja 1000.

We also believe these successes positively influence the purchasing habits of enthusiasts and other consumers seeking performance-defining products.

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Our reputation for performance-defining products plays a critical role in our aftermarket sales to consumers.

In addition to our web properties and traditional marketing channels, such as print advertising and tradeshows, we maintain an active social media presence, including an Instagram feed, Facebook page, YouTube channel, Vimeo channel and Twitter feed to increase brand awareness, foster loyalty and build a community of users.

In addition to our websites and traditional marketing channels, such as print advertising and tradeshows, we maintain an active social media presence, including an Instagram feed, Facebook page, YouTube channel, Vimeo channel and Twitter feed to increase brand awareness, foster loyalty and build a community of users.

As strategies and marketing plans are developed for our products, our internal marketing and communications group works to ensure brand cohesion and consistency.

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Furthermore, manufacturing our own products enables us to adjust our labor and production inputs to meet seasonal demands and the customized requirements of some of our customers.

We recently completed the Hall County Facility to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.

The Hall County Facility is being used for manufacturing, warehousing, distribution and office space.

We are currently transitioning out of our Watsonville, California facility and relocating our powered vehicles suspension manufacturing to the Hall County Facility.

We had approximately $223.5 million and $128.5 million in firm backlog orders at December 31, 2021 and January 1, 2021, respectively.

The increase in 2021 backlog, as compared to 2020, was due to growth in sales, growing market share, and backfilling order that were delayed in prior year due to chassis shortages.

In the fourth quarter of 2021, we completed the construction of our Gainesville Facility to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.

The Gainesville Facility is being used for manufacturing, warehousing, distribution and office space.

Additionally, we completed the transition of our Watsonville Facility and relocation of our powered vehicles suspension manufacturing to the Gainesville Facility in the first quarter of 2022.

We had approximately $116.7 million and $223.5 million in firm backlog orders at December 30, 2022 and December 31, 2021, respectively.

The decrease in 2022 backlog, as compared to 2021, is due to many factors including the normalization of supply chain shortages that were experienced in 2021, the realignment of production forecasts with some of our large OEM customers, and increased production at our Gainesville Facility.

Suppliers and raw materials

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Risk Factors – Risks Related to Our Business and Operations - "We depend on a limited number of suppliers for our materials and component parts for some of our products, and the loss of any of these suppliers or an increase in cost of raw materials could harm our business." In addition, prices for our raw materials fluctuate.

While price fluctuations have not materially impacted our business historically, we are actively monitoring the current market conditions and price trends.

While we have been able to mitigate the impacts of price fluctuations on our business historically, we are actively monitoring the current market conditions and price trends.

We also have OEM partners that supply vehicle chassis used in our upfitting operations.

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Inclusion, Diversity and Engagement

At FOX, we believe that our people are our greatest asset.

At FOX, we believe that people are our greatest asset.

Therefore, we are committed to building and maintaining an inclusive workplace in which all employees feel they belong, are empowered to be their best, and inspired to deliver maximum performance.

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However, new requirements, more stringent application of existing requirements or the discovery of previously unknown environmental conditions could result in material environmental related expenditures in the future.

For example, in March 2022, the SEC proposed new rules for extensive and prescriptive climate-related disclosures in annual reports and registration statements, which would also require inclusion of certain climate-related financial metrics in a note to companies’ audited financial statements.

Please read "Risks Related to Laws and Regulations - Increasing focus on environmental, social and governance responsibility may impose additional costs on us and expose us to new risks" within Item 1A.

Risk Factor s .

We are subject to numerous foreign, federal, state and local government laws and regulations governing our relationships with our employees, including those relating to minimum wage, overtime, working conditions, hiring and firing, non-discrimination, work permits and employee benefits.

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During the past three years, we initiated two voluntary product recalls.

For additional information, see Item 1A." Risk Factors " below.

For additional information, see Item 1A.

Risk Factors in this Annual Report on Form 10-K.

Government contracts

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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 1. Business