What changed in this filing

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Item 1A. Risk Factors

2023-02-23 compared with 2022-02-24 · 85 added, 59 removed, 575 unchanged (20% of the section changed)

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• our business, financial condition and results of operations have been and may continue to be adversely affected by global public health epidemics or pandemics, including the ongoing COVID-19 pandemic;

• the impact of the risks associated with international geopolitical conflicts, including continuing tensions between Taiwan and China, and the Russian invasion of Ukraine on the global economy, energy supplies and raw materials are uncertain, but may prove to negatively impact our business and operations;

• our dependency on a limited number of suppliers for materials, product parts, and vehicle chassis could lead to an increase in material costs, disruptions in our supply chain, or reputational costs;

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• growth in our sales and the mix of domestic versus export shipments from Taiwan could cause additional foreign tax credits to not be realizable, potentially reducing our income and adversely affecting our cash flows;

• the current inflation affecting the economy and the Federal Reserve's repeated interest rate increases in response, could negatively impact our cash flows due to higher debt costs or negatively impact our customers' ability to finance powered vehicles or bikes that include our products;

Risks Related to Our Indebtedness and Liquidity

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The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S.

Government in March 2020 and has resulted in over five and a half million deaths worldwide, as of the date of filing this Annual Report, and it continues to spread in major markets in which we operate.

Government in March 2020 and has resulted in over six and a half million deaths worldwide, as of the date of filing this Annual Report, and it continues to spread in major markets in which we operate.

The impact of the COVID-19 pandemic, including changes in consumer behavior, COVID-19 pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity.

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if prolonged, such impacts can further increase the difficulty of operating our business, including accurately planning and forecasting, planning for operations and may adversely impact our results;

• inability to meet our current or future demand due to disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw materials, truck chassis, or other components, transportation, workforce, or other manufacturing and distribution capability;

• inability to meet our current or future demand due to disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw materials, vehicle chassis, or other components, transportation, workforce, or other manufacturing and distribution capability;

• failure of third parties on which we rely, including our suppliers, contract manufacturers, distributors, contractors, commercial banks, and external business partners, to meet their obligations to the Company or to timely meet those obligations, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties and may adversely impact our operations;

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any additional waves or resurgences of the virus;

availability and ultimate efficacy of the vaccine on new variants of the virus, including the Omicron variant;

availability and ultimate efficacy of the vaccine on new variants of the virus;

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

The impact of the risks associated with international geopolitical conflicts, including continuing tensions between Taiwan and China, and the Russian invasion of Ukraine on the global economy, energy supplies and raw materials are uncertain, but may prove to negatively impact our business and operations.

In recent years, diplomatic and trade relationships between the U.S.

government and China have become increasingly frayed and the threat of a takeover of Taiwan by China has increased.

Since our bike suspension manufacturing occurs in Taiwan, our business, our operations and our supply chain could be materially and adversely impacted by political, economic or other actions from China, or changes in China-Taiwan relations that impact Taiwan and its economy.

In addition, we continue to monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the United States and several European and Asian countries may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and customers.

For example, a prolonged conflict may result in ongoing increased inflation, escalating energy prices and constrained availability, and thus increasing costs, of raw materials.

To the extent that continuing political tensions between China and Taiwan or the war in Ukraine may adversely affect our business, it may also have the effect of heightening many of the other risks described in our risk factors, such as those relating to data security, supply chain, volatility in prices of inputs, and market conditions, any of which could negatively affect our business and financial condition.

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.

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If our current suppliers, in particular the minority of those that are "single-source" suppliers, are unable to timely fulfill orders, or if we are required to transition to other suppliers, we could experience significant production delays or disruption to our business.

We define a single-source supplier as a supplier from which we purchase all of a particular raw material or input used in our manufacturing operations, although other suppliers are available from which to purchase the same raw material or input or an equivalent substitute.

We do not maintain long-term supply contracts with any of our suppliers and instead purchase these components on a purchase order basis.

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The main commodity items purchased for production include aluminum, magnesium, steel and carbon.

Historically, price fluctuations for these components and raw materials have not had a material impact on our business.

Historically, we have effectively mitigated the impacts of price fluctuations for these components and raw materials on our business.

In the future, however, if we experience material increases in the price of components or raw materials and are unable to pass on those increases to our customers, or there are shortages in the availability of such component parts or raw materials, or there are rising prices due to overall inflationary pressures, it could negatively affect our business, financial condition or results of operations.

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and countries in Europe.

These areas have historically experienced recessions, disruptions in banking and/or financial systems, economic weakness and uncertainty.

In addition, our products are recreational in nature and are generally discretionary purchases by consumers.

These areas have historically experienced recessions, disruptions in banking and/or financial systems, economic weakness and uncertainty, and there appears to be an increasing risk of recessions or inflationary economic impacts related to the global COVID-19 pandemic, the Russian invasion of Ukraine, escalating energy costs, global supply chain disruptions, rising interest rates and other economic changes.

In addition, many of our products are recreational in nature and are generally discretionary purchases by consumers.

Consumers are usually more willing to make discretionary purchases during periods of favorable general economic conditions and high consumer confidence.

Discretionary spending may also be affected by many other factors, including interest rates, the availability of consumer credit, taxes and consumer confidence in future economic conditions.

Discretionary spending may also be affected by many other factors, including interest rates, gas prices, the availability of consumer credit, taxes and consumer confidence in future economic conditions.

During periods of unfavorable economic conditions, or periods when other negative market factors exist, consumer discretionary spending is typically reduced, which in turn could reduce our product sales and have a negative effect on our business, financial condition or results of operations.

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If we are unable to maintain our premium brand image, our business may suffer.

OEMs dealers and distributors select our products in part because of the premium brand reputation we hold with them and our end users.

OEM dealers and distributors select our products in part because of the premium brand reputation we hold with them and our end users.

Therefore, our success depends on our ability to maintain and build the image of our brands.

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For example, we sponsor a number of professional athletes and professional race teams.

In order to continue to enhance our brand image, we will need to maintain our position in the performance-defining products industry, continue to provide high-quality products and services, and preserve our reputation.

In order to continue to enhance the image of our brands, we will need to maintain our position in the performance-defining products industry, continue to provide high-quality products and services, and preserve our reputation.

The rising popularity of social media and other consumer-oriented technologies creates new risks and challenges that could cause damage to our brands and reputation.

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• product recalls;

• high-profile component failures (such as a component failure during a race on a mountain bike ridden by an athlete that we sponsor);

• negative publicity regarding our brand or our sponsored athletes, which could be amplified on social media;

• high-profile component failures (such as a component failure during a race on a mountain bike ridden by one of our sponsored athletes);

• negative publicity regarding our brands or our sponsored athletes, which could be amplified on social media;

• high-profile injury or death to one of our sponsored athletes;

• inconsistent uses of our brand and our other intellectual property assets, as well as failure to protect our intellectual property;

• inconsistent uses of our brands and our other intellectual property assets, as well as failure to protect our intellectual property;

• changes in consumer trends and perceptions;

• lack of investment in sponsorships, marketing and public relations.

Any adverse impact on our brand could in turn negatively affect our business, financial condition or results of operations.

Any adverse impact on our brands could in turn negatively affect our business, financial condition or results of operations.

Our growth in the powered vehicle category is dependent upon our continued ability to expand our product sales into powered vehicles that require performance-defining products and the continued expansion of the market for these powered vehicles.

Our growth in the powered vehicle category is in part attributable to the expansion of the market for powered vehicles that require performance-defining products.

Such market growth includes the creation of new classes of vehicles that can benefit from our products, such as trucks that are up-fitted with products to enhance their off-road capability, and our ability to create products for these vehicles.

Additionally, with our acquisitions of SCA Performance, Tuscany, Outside Van, and Shock Therapy, a growing portion of our sales are expected to be generated from providing up-fitting solutions.

Such market growth includes the creation of new classes of vehicles that can benefit from our products, such as trucks that are upfitted with products to enhance their off-road capability, and our ability to create products for these vehicles.

Additionally, with our acquisitions of SCA, Tuscany, Outside Van and Shock Therapy, a growing portion of our sales are expected to be generated from providing upfitting solutions.

In the event these markets stop expanding or contract due to economic factors, changes in consumer preferences or other reasons, or we are unsuccessful in creating new products for these markets or other competitors successfully enter into these markets, we may fail to achieve future growth or our sales could decrease, and our business, financial condition or results of operations could be negatively affected.

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A disruption in the operations of our facilities, or delays in our planned expansion of certain facilities, could have a negative effect on our business, financial condition or results of operations.

We recently completed the construction of 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.

As a result, we have incurred, and expect to continue to incur, costs associated with some duplication of facilities, equipment and personnel, the amount of which could vary materially from our projections.

Unforeseen difficulties in our Georgia expansion project and future expansion projects, whatever the cause, could have a material adverse effect on our business, customer relationships, financial condition, operating results, cash flow, and liquidity.

In the fourth quarter of 2021, we completed the construction of the Gainesville Facility in Hall County Georgia 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.

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

As a result, we have incurred, and may continue to incur, costs associated with some duplication of facilities, equipment and personnel, the amount of which could vary materially from our projections.

Unforeseen difficulties in future expansion projects, whatever the cause, could have a material adverse effect on our business, customer relationships, financial condition, operating results, cash flow, and liquidity.

Equipment failures, delays in deliveries or catastrophic loss at any of our facilities could lead to production or service disruptions, curtailments or shutdowns.

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If there was a manufacturing disruption in any of our manufacturing facilities, we might be unable to meet product delivery requirements and our business, financial condition or results of operations could be negatively affected, even if the disruption was covered in whole or in part by our business interruption insurance.

Any significant delay in deliveries to our customers could lead to increased returns or cancellations, expose us to damage claims from our customers or damage our brand and, in turn, negatively affect our business, financial condition or results of operations.

Any significant delay in deliveries to our customers could lead to increased returns or cancellations, expose us to damage claims from our customers or damage our brands and, in turn, negatively affect our business, financial condition or results of operations.

Work stoppages or other disruptions at seaports could adversely affect our operating results.

A significant portion of our goods move through ports on the Western Coast of the U.S.

A portion of our goods move through ports on the Western Coast of the U.S.

We have a global supply chain and we import products from our third-party vendors as well as our Fox Taiwan facility into the U.S.

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We do not control the activities of these employees or seaports and we could suffer supply chain disruptions due to any disputes, capacity shortages, slowdowns or shutdowns that may occur, as was experienced in February 2015, in relation to certain West Coast ports.

While the West Coast ports labor agreement has been extended until July 2022, the 2015 strike lasted longer than we forecasted, and any similar labor dispute in the future could potentially have a negative effect on both our financial condition and results of operations.

The 2015 strike lasted longer than we forecasted, and any similar labor dispute in the future could potentially have a negative effect on both our financial condition and results of operations.

Furthermore, the ongoing COVID-19 pandemic has only increased uncertainty for global supply chains, as port congestion and shipping container shortages have become exacerbated, which could adversely affect our operating results.

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Dennison or any other key employees.

We believe that the top nine members of our senior management team are key to establishing our focus and executing our corporate strategies as they have extensive knowledge of our systems and processes.

We believe that the top eight members of our senior management team are key to establishing our focus and executing our corporate strategies as they have extensive knowledge of our systems and processes.

Given our senior management team’s knowledge of our industry and the limited number of direct competitors in the industry, we believe that it could be difficult to find replacements should any of the members of our senior management team leave.

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We also rely on our dealers and distributors to be knowledgeable about our products and their features.

If we are not able to educate our dealers and distributors so that they may effectively sell our products as part of a positive buying experience, or if they fail to implement effective retail sales initiatives, focus selling efforts on our competitors’ products, reduce the quantity of our products that they sell or reduce their operations due to financial difficulties or otherwise, our brand and business could suffer.

We do not control our dealers or distributors, and many of our contracts allow these entities to offer our competitors’ products.

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Sales attributable to our five largest OEM customers, which can vary from year to year, collectively accounted for approximately 23%, 24%, and 23% of our sales in fiscal years 2022, 2021 and 2020.

The loss of all or a substantial portion of our sales to any of these OEM customers, whether through the temporary or permanent discontinuation of their products which incorporate our products or otherwise, the loss of market share by these customers, manufacturing or other problems, including disruptions related to COVID-19, could have a material impact on our business, financial condition or results of operations.

The loss of all or a substantial portion of our sales to any of these OEM customers, whether through the temporary or permanent discontinuation of their products which incorporate our products or otherwise, the loss of market share by these customers, manufacturing or other problems, including disruptions related to the COVID-19 pandemic, could have a material impact on our business, financial condition or results of operations.

Currency exchange rate fluctuations could impact gross margins and expenses.

Foreign currency fluctuations could in the future have an adverse effect on our business, financial condition or results of operations.

government policy, including continued interest rate increases by the Federal Reserve, may impact the exchange rate between the U.S.

dollar and foreign currencies.

We sell our products inside and outside of the U.S.

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• difficulty in transporting materials internationally, including labor disputes at West Coast ports, which handle a large amount of our products;

• political, economic, or other actions from China or changes in China-Taiwan relations could impact Taiwan and its economy, and may adversely affect our operations in Taiwan, our customers, and our supply chain;

• geopolitical regional conflicts, including the impact of the Russian invasion of Ukraine on the global economy, energy supplies and raw materials, terrorist activity, political unrest, civil strife, acts of war and other political uncertainty;

• increased difficulty in protecting our intellectual property rights and trade secrets;

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• unexpected government action or changes in legal or regulatory requirements;

• geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war and other political uncertainty;

• political, economic, or other actions from China could impact Taiwan and its economy, and may adversely affect our operations in Taiwan, our customers, and our supply chain;

• changes in tariffs, quotas, trade barriers and other similar restrictions on sales;

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• increased difficulty in ensuring compliance by employees, agents and contractors with our policies as well as with the laws of multiple jurisdictions, including but not limited to the U.S.

Foreign Corrupt Practices Act, local international environmental, health and safety laws, and increasingly complex regulations relating to the conduct of international commerce;

Foreign Corrupt Practices Act, local and international environmental, health and safety laws, and increasingly complex regulations relating to the conduct of international commerce;

• increased difficulty in controlling and monitoring foreign operations from the U.S., including increased difficulty in identifying and recruiting qualified personnel for our foreign operations;

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If any of the foregoing were to occur, our sales could decrease and our business, financial condition or results of operations could suffer.

We have been and may become subject to intellectual property disputes that could cause us to incur significant costs or pay significant damages or that could prohibit us from selling our products.

We have been and may become subject to intellectual property disputes that could cause us to incur significant costs or pay significant damages or prohibit us from selling our products.

As we develop new products or attempt to use our brands in connection with new products, we seek to avoid infringing the valid patents and other intellectual property rights of our competitors.

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If any of our products are or are alleged to be defective, we may be required to participate in a recall involving such products.

Our products and items where our products are incorporated as original equipment on the purchased item are frequently subject to regulation by various agencies, including, for example, the National Highway Traffic Safety Administration ("NHTSA"), the Consumer Product Safety Commission ("CPSC") and/or similar state and international regulatory authorities.

Our products and items where our products are incorporated as original equipment on the purchased item are frequently subject to regulation by various agencies, including, for example, the NHTSA, the CPSC and/or similar state and international regulatory authorities.

We have had in the past, and may have in the future, recalls (both voluntary and involuntary) of our products or of items that incorporate our products.

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In addition to the direct costs related to these or other recalls, our aftermarket and OEM sales could be adversely affected if we do not have a ready replacement product for such recalled products.

Such recall events could also adversely affect our brand image and have a negative effect on our relationships with our OEMs, sponsored athletes and race teams, or otherwise have a negative effect on our business, financial condition or results of operations.

Such recall events could also adversely affect the image of our brands and have a negative effect on our relationships with our OEMs, sponsored athletes and race teams, or otherwise have a negative effect on our business, financial condition or results of operations.

An adverse determination in any material product liability claim against us could adversely affect our operating results or financial condition.

The use of our products by consumers, often under extreme conditions, exposes us to risks associated with product liability claims.

If our products are defective or used incorrectly by our customers, bodily injury, property damage or other injury, including death, may result in, and could give rise to product liability claims against us, which could adversely affect our brand image or reputation.

We have encountered product liability claims in the past and carry product liability insurance to help protect us against the costs of such claims, although our insurance may not be sufficient to cover all losses.

Any losses that we may suffer from any product liability claims, and the effect that any product liability litigation may have upon the reputation and marketability of our products, may have a negative impact on our business, financial condition or results of operations.

Any losses that we may suffer from product liability claims, and the effect that any product liability litigation may have upon the reputation and marketability of our products, may have a negative impact on our business, financial condition or results of operations.

We are subject to certain risks in our manufacturing and in the testing of our products.

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There can be no assurance that the supply of these fuels will continue uninterrupted, that rationing will not be imposed or that the price of or tax on these petroleum products will not significantly increase in the future.

For example, there have been significant increases in the price of gasoline and diesel fuel due to geopolitical developments, including the impacts resulting from the Russian invasion of Ukraine, and there are heightened uncertainties regarding the future price and availability of gasoline and diesel fuel.

Future shortages of gasoline and diesel fuel and substantial increases in the price of fuel could have a material adverse effect on our powered vehicle product category, which could have a negative effect on our business, financial condition or results of operations.

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We do not inspect or audit compliance of our suppliers, OEMs, customers or partners with these laws or practices, and we do not require our suppliers, OEMs, customers or partners to comply with a formal code of conduct.

Any conduct or actions that our suppliers could take could reduce demand for our products, harm our ability to meet demand or harm our reputation, brand image, business, financial condition or results of operations.

Any conduct or actions that our suppliers take could reduce demand for our products, harm our ability to meet demand or harm our reputation, brand image, business, financial condition or results of operations.

We may incur higher employee costs in the future.

We are subject to government-mandated wage and benefit laws and regulations in many varying countries and jurisdictions.

For example, the State of California, where a substantial number of our employees are located, increased the statewide minimum wage to $15.00 per hour, effective as of January 1, 2022.

Additionally, the U.S.

Congress is considering whether to pass national minimum wage legislation.

As we expand internationally, we are also subject to applicable laws in each such jurisdiction.

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• power loss, computer systems failure, internet and telecommunications or data network failure;

• hackers, computer viruses, software bugs or glitches.

• hackers, computer viruses, software bugs, implementing new functions or releases of software.

Any damage or significant disruption in the operation of such systems or the failure of our information systems to perform as expected could disrupt our operations, reduce our efficiency, delay our fulfillment of customer orders or require significant unanticipated expenditures to correct, and thereby have a negative effect on our business, financial condition or results of operations.

In 2015, we began the process of implementing a global enterprise resource planning system ("ERP").

The pilot phase of the new ERP was completed in fiscal year 2016 and additional phases were completed in 2018, 2019 and 2021.

ERP implementations are complex and time-consuming projects that involve substantial expenditures on system software and implementation activities.

ERP implementations also require transformation of business and financial processes in order to reap the benefits of the ERP system.

Any such transformation involves risks inherent in the conversion to a new computer system, including loss of information and potential disruption to our normal operations.

Any such future transformation, due to acquisition integration or business growth and consolidation, involves risks inherent in the conversion to a new computer system, including loss of information and potential disruption to our normal operations.

Our business and results of operations may be adversely affected if we experience operating problems or cost overruns during the ERP implementation process, or if the ERP system and the associated process changes do not give rise to the benefits that we expect.

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It also provides a new private right of action for data breaches.

The CCPA has been amended several times, including by the California Privacy Rights Act (the "CPRA"), a California ballot initiative that passed in November 2020, and takes effect on January 1, 2023, which, among other things, significantly modifies the CCPA, including by expanding consumers' rights with respect to certain personal information and creating a new state agency to oversee implementation and enforcement efforts.

The CCPA has been amended several times, including by the California Privacy Rights Act ("CPRA"), a California ballot initiative that passed in November 2020, and took effect in most material aspects on January 1, 2023, which, among other things, significantly modifies the CCPA, including by expanding consumers' rights with respect to certain personal information and creating a new state agency to oversee implementation and enforcement efforts.

Failure to meet GDPR, CCPA and CPRA requirements could result in financial penalties.

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The failure of any of the information technology systems to perform as anticipated could disrupt our business and could result in transaction errors, processing inefficiencies and the loss of sales and customers, which could materially adversely affect our business, financial condition, or results of operations.

We carry cyber insurance policies to protect and offset a portion of potential costs incurred from a security breach.

Additionally, we currently have cyber insurance policies to provide supplemental coverage above the coverage carried by our other third-party insurance managers.

Despite various precautionary steps to protect our business from losses resulting from cyber-attacks, any cyber-attack occurrence could still result in losses, which could affect our results of operations.

We are not aware of any cyber incidents that we believe to be material or that could have a material adverse effect on our business, financial condition and results of operations

Because of the current inflation affecting the economy and the Federal Reserve's interest rate increases in response, we may be harmed in the future.

We believe inflation, and actions taken by the Federal Reserve in response, currently pose a risk to us in a number of ways.

General inflation in the United States has risen to levels not experienced in recent decades, including rising energy prices, prices for consumer goods, interest rates, wages, and currency volatility and downgrades by rating agencies to the U.S.

government's credit rating or concerns about its credit and deficit levels in general, could cause interest rates and borrowing costs to rise.

These increases and any fiscal or other policy interventions by the U.S.

government in reaction to such events could negatively impact our business by increasing our operating costs and our borrowing costs as well as decreasing capital.

Specifically, the Federal Reserve increased benchmark interest rates multiple times in 2022, has already increased benchmark interest rates in 2023, and has indicated its intention to continue to raise benchmark interest rates in 2023 in an effort to curb the upward inflationary pressure on the cost of goods and services across the U.S.

The raw materials and other supplies we use to produce our products have experienced increasing prices during recent periods as a result of inflation.

In response, we have increased the prices we charge customers for our products.

While these price adjustments have not caused a reduction in sales thus far, continued increases in inflation rates may result in a reduction of customers or sales volumes.

Additionally, as the Federal Reserve begins to increase interest rates, the result could be a recession which would slow demand for our products and hinder our sales growth, or cause sales to decline in future periods.

As of the date of this Annual Report, we cannot predict how extensive the inflation or the effects of the Federal Reserve's responses thereto will be, its duration or the ultimate impact on us.

Additionally, the U.S.

government's credit and deficit concerns, the European sovereign debt crisis, and the potential trade war with China, could further cause interest rates to be volatile, which may negatively impact our ability to access the debt markets on favorable terms.

RISKS RELATED TO OUR INDEBTEDNESS AND LIQUIDITY

The 2022 Credit Facility places operating restrictions on us and creates default risks.

The Credit Facility with Bank of America and other named lenders contains covenants that place restrictions on our operating activities.

The 2022 Credit Facility with Wells Fargo Bank, National Association and other named lenders contains covenants that place restrictions on our operating activities.

These covenants, among other things, limit our ability to:

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In the future, we and our subsidiaries may be able to incur substantial additional debt from amendments to the 2022 Credit Facility, additional lending sources subject to the restrictions contained in the 2022 Credit Facility, or because of certain debt instruments we may issue.

As of December 31, 2021, we had $378.5 million of indebtedness, net of loan fees, and $235.0 million in revolving credit available to borrow under the Credit Facility.

As of December 30, 2022, we had $200.0 million of indebtedness, and $450.0 million in revolving credit available to borrow under the 2022 Credit Facility.

Our ability to borrow under the 2022 Credit Facility fluctuates from time to time due to, among other factors, our borrowings under the 2022 Credit Facility.

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Any such increases in the interest rate or increases of our borrowings under the 2022 Credit Facility will increase our interest expense.

Recent interest rates in the U.S.

have been at historically low levels, and any increase in these rates would increase our interest expense and reduce our funds available for operations and other purposes.

Although from time to time we may enter into agreements to hedge a portion of our interest rate exposure, such as the interest rate swap entered into in August 2020, these agreements may be costly and may not protect against all interest rate fluctuations.

The Federal Reserve increased benchmark interest rates multiple times in 2022, has already increased benchmark interest rates in 2023, and has indicated its intention to continue to raise benchmark interest rates in 2023 in an effort to curb the upward inflationary pressure on the cost of goods and services across the U.S..

Increases in these rates increase our interest expense and reduce our funds available for operations and other purposes.

Although from time to time we may enter into agreements to hedge a portion of our interest rate exposure, such as the 2022 Swap Agreement, these agreements may be costly and may not protect against all interest rate fluctuations.

Accordingly, we may experience material increases in our interest expense as a result of increases in interest rate levels generally.

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As of December 30, 2022, we had $200.0 million of indebtedness outstanding under the 2022 Credit Facility.

Based on the $182.5 million of variable interest rate indebtedness that was outstanding as of December 31, 2021, after giving effect to our interest rate swap, a hypothetical 100 basis point increase or decrease in the interest rate would have resulted in an approximately $1.8 million increase or decrease in interest expense for the year ended December 31, 2021, respectively.

Based on the $100.0 million of variable interest rate indebtedness that was outstanding under the 2022 Credit Facility as of December 30, 2022, after giving effect to our interest rate swap, a hypothetical 100 basis point increase or decrease in the interest rate would have resulted in an approximately $1.0 million increase or decrease in interest expense for the year ended December 30, 2022, respectively.

We may incur losses on interest rate swap and hedging arrangements.

We may periodically enter into agreements to reduce the risks associated with increases in interest rates, such as our August 2020 interest rate swap agreement.

We may periodically enter into agreements to reduce the risks associated with increases in interest rates, such as our 2022 Swap Agreement.

Although these agreements may partially protect against rising interest rates, they also may reduce the benefits to us if interest rates decline.

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Failure to comply with applicable regulations could result in fines, increased expenses to modify our products and harm to our reputation, all of which could have an adverse effect on our business, financial condition or results of operations.

Moreover, certain of our product offerings require us to comply with the rules and regulations of various standards of standard-setting organizations, such as the CPSC, the NHTSA, and the European Committee for Standardization ("CEN").

Failure to comply with the requirements of such organizations could result in the loss of certain customer contracts, fines and penalties, or both, which could have an adverse effect on our business, financial condition or results of operations.

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Regulators, stockholders and other interested constituencies have focused increasingly on the environmental, social and governance practices of companies.

Our customers may require us to implement environmental, social or governance responsibility procedures or standards before they will continue to do business with us.

For example, in March 2022, the SEC proposed new rules for extensive and prescriptive climate-related disclosure 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.

Further, our customers may require us to implement environmental, social or governance responsibility procedures or standards before they will continue to do business with us.

Additionally, we may face reputational challenges in the event our environmental, social or governance responsibility procedures or standards do not meet the standards set by certain constituencies.

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Federal, state, local, foreign and international laws and regulations relating to environmental matters, land-use, and noise and air pollution may have a negative impact on our future sales and results of operations.

The products in our powered vehicles line are used in vehicles that are subject to numerous federal, state, local, foreign and international laws and regulations relating to noise and air pollution.

The products in our powered vehicles category are used in vehicles that are subject to numerous federal, state, local, foreign and international laws and regulations relating to noise and air pollution.

Powered vehicles, and even bikes, have become subject to laws and regulations prohibiting their use on certain lands and trails.

For example, in San Mateo County, California, mountain bikes are not allowed on county trails, and ATV and Side-by-Side riding is not allowed in Zion National Park, among many other national and state parks.

For example, in San Mateo County, California, mountain bikes are not allowed on county trails, and ATV and side-by-sides riding is not allowed in Zion National Park, among many other national and state parks.

In addition, recreational snowmobiling has been restricted in some national parks and federal lands in Canada, the U.S.

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The trading price of our common stock could be volatile, and you could lose all or part of your investment in our common stock.

Since our IPO in 2013, our stock price has fluctuated between $190.29 and $13.35 per share and such volatility may continue in the future.

For example, from January 4, 2020 through December 30, 2022, our stock price has fluctuated between $190.29 and $34.58 per share and such volatility may continue in the future.

Factors affecting the trading price of our common stock could include:

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Future issuances and sales of our shares, or the perception that such sales may occur, could cause our stock price to decline.

The issuance of additional shares of our common stock, such as the follow-on offering of 2.8 million shares of common stock that we completed in June 2020, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock.

The issuance of additional shares of our common stock, such as the follow-on offering of approximately 2.8 million shares of common stock that we completed in June 2020, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock.

Our Amended and Restated Certificate of Incorporation authorizes us to issue 90,000,000 shares of common stock, 42,269,840 of which shares were outstanding as of December 30, 2022.

In the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with financings, acquisitions, registration statements or otherwise.

After our IPO in 2013, we filed a registration statement under the Securities Act to register shares of our common stock that we may issue under our equity plans.

After our IPO in 2013 and, more recently, in May 2022, we filed registration statements under the Securities Act to register shares of our common stock that we may issue under our equity plans.

As a result, all such shares can be freely sold in the public market upon issuance, subject to any vesting or contractual lock-up agreements.

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Failure of our internal controls over financial reporting could adversely affect our business and financial results.

Our management is responsible for establishing and maintaining effective internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act").

Our management is responsible for establishing and maintaining effective internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, as amended.

Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with GAAP.

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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 1A. Risk Factors