What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-03 compared with 2023-08-04 · 154 added, 113 removed, 411 unchanged (39% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

June 30, 2023 December 30, 2022

September 29, 2023 December 30, 2022

Current assets:

Cash and cash equivalents $ 90,631 $ 145,250

Accounts receivable (net of allowances of $ 962 and $ 443 at June 30, 2023 and December 30, 2022, respectively)

Accounts receivable (net of allowances of $ 1,374 and $ 443 at September 29, 2023 and December 30, 2022, respectively)

149,989 200,440

19 unchanged sentences

Stockholders’ equity

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of June 30, 2023 and December 30, 2022

Preferred stock, $ 0.001 par value — 10,000 authorized and no shares issued or outstanding as of September 29, 2023 and December 30, 2022

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

43,244 shares issued and 42,354 outstanding as of June 30, 2023;

43,270 shares issued and 42,380 outstanding as of September 29, 2023;

43,160 shares issued and 42,270 outstanding as of December 30, 2022

1 unchanged sentence

Treasury stock, at cost;

890 common shares as of June 30, 2023 and December 30, 2022

890 common shares as of September 29, 2023 and December 30, 2022

( 13,754 ) ( 13,754 )

7 unchanged sentences

(in thousands, except per share data)

For the three months ended For the six months ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

For the three months ended For the nine months ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Net sales $ 331,117 $ 409,168 $ 1,131,683 $ 1,193,850

9 unchanged sentences

Interest expense 3,466 2,667 11,405 6,341

Other expense, net 536 2,816 560 4,508

Other (income) expense, net ( 878 ) ( 1,441 ) ( 318 ) 3,067

Income before income taxes 38,777 64,136 137,752 180,584

11 unchanged sentences

(in thousands)

For the three months ended For the six months ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

For the three months ended For the nine months ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Net income $ 35,293 $ 50,771 $ 116,795 $ 152,319

Other comprehensive income (loss)

Other comprehensive (loss) income

Interest rate swap, net of tax effects ( 281 ) 2,563 ( 2,219 ) 9,296

Foreign currency translation adjustments ( 2,423 ) ( 4,091 ) ( 2,538 ) ( 7,847 )

Other comprehensive income (loss) 399 ( 1,766 ) ( 2,053 ) 2,977

Other comprehensive (loss) income ( 2,704 ) ( 1,528 ) ( 4,757 ) 1,449

Comprehensive income $ 32,589 $ 49,243 $ 112,038 $ 153,768

3 unchanged sentences

(in thousands)

Common Stock Treasury Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total stockholders ’ equity

Common Stock Treasury Additional paid-in capital Accumulated other comprehensive income Retained earnings Total stockholders ’ equity

Shares Amount Shares Amount

10 unchanged sentences

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

Common Stock Treasury Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total stockholders’ equity

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 financial statements.

Common Stock Treasury Additional paid-in capital Accumulated other comprehensive income Retained earnings Total stockholders’ equity

Shares Amount Shares Amount

10 unchanged sentences

Balance - June 30, 2023 43,244 $ 42 890 $ ( 13,754 ) $ 361,205 $ 12,729 $ 845,579 $ 1,205,801

Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding 26 — — — ( 945 ) — — ( 945 )

Stock-based compensation expense — — — — 3,858 — — 3,858

Other comprehensive loss — — — — — ( 2,704 ) — ( 2,704 )

Net income — — — — — — 35,293 35,293

Balance - September 29, 2023 43,270 $ 42 890 $ ( 13,754 ) $ 364,118 $ 10,025 $ 880,872 $ 1,241,303

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

2 unchanged sentences

(in thousands)

For the six months ended

June 30, 2023 July 1, 2022

For the nine months ended

September 29, 2023 September 30, 2022

OPERATING ACTIVITIES:

Net income $ 116,795 $ 152,319

Adjustments to reconcile net income to net cash used in operating activities:

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

Depreciation and amortization 43,519 36,813

4 unchanged sentences

Amortization of inventory fair value step-up 9,903 —

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

Deferred taxes ( 512 ) ( 12,515 )

6 unchanged sentences

Accrued expenses and other liabilities ( 7,265 ) 22,410

Net cash used in operating activities ( 3,308 ) ( 85,400 )

Net cash provided by operating activities 126,685 57,035

INVESTING ACTIVITIES:

Acquisitions of businesses ( 130,918 ) —

Acquisition of other assets ( 2,364 ) —

Acquisitions of businesses, net of cash acquired ( 130,918 ) —

Acquisition of other assets, net of cash acquired ( 2,432 ) —

Purchases of property and equipment ( 32,048 ) ( 35,559 )

Proceeds from sale of property and equipment — 3,180

Net cash used in investing activities ( 165,398 ) ( 32,379 )

6 unchanged sentences

Proceeds from termination of swap agreement — 12,270

Net cash provided by financing activities 119,782 32,220

Net cash used in financing activities ( 16,163 ) ( 54,004 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 257 2,799

6 unchanged sentences

(in thousands)

For the six months ended

For the nine months ended

SUPPLEMENTAL CASH FLOW INFORMATION:

June 30, 2023 July 1, 2022

September 29, 2023 September 30, 2022

Cash paid during the period for:

6 unchanged sentences

Capital expenditures included in accounts payable $ 756 $ 1,698

(1) New leases executed in the U.S.

(1) Includes new leases executed in the United States of America “U.S.”.

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

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

(in thousands, except per share data)

Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies - Fox Factory Holding Corp.

15 unchanged sentences

The twelve month periods ended December 29, 2023 and December 30, 2022, will include or have included 52 weeks.

The three and six month periods ended June 30, 2023 and July 1, 2022 each included 13 weeks and 26 weeks, respectively.

The three and nine month periods ended September 29, 2023 and September 30, 2022 each included 13 weeks and 26 weeks, respectively.

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

14 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

(in thousands, except per share data)

Segments - The Company has determined that it has a single operating and reportable segment:

6 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 1, 2022 to conform to our current year presentation.

Reclassifications - We have reclassified certain prior period amounts within our Note 2 - Revenues for the three and nine months ended September 30, 2022 to conform to our current period presentation.

The reclassifications did not have any impact on net income or other major financial statement line items.

5 unchanged sentences

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

Recent Accounting Pronouncements - In October 2021, the FASB issued accounting standards update (“ASU”) 2021-08, Business Combinations (Topic 805):

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

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

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

The Company adopted this guidance in the first quarter of 2022.

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):

Recent Accounting Pronouncements

In September 2022, the FASB issued accounting standards update (“ASU”) 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405):

Disclosure of Supplier Finance Program Obligations.

7 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

In the second quarter of fiscal year 2023, the Company realigned Powered Vehicles Group into Powered Vehicles Group and Aftermarket Applications Group to be more aligned with the Company’s end customers and drive additional focus on product development .

All prior-period amounts have been recast to conform with current period presentation.

(in thousands, except per share data)

In the second quarter of fiscal year 2023, the Company realigned its Powered Vehicles Group into the Powered Vehicles Group and the Aftermarket Applications Group to be more aligned with the Company’s end customers and drive additional focus on product development.

The new Powered Vehicles Group is comprised of sales to original equipment off-road and power sports manufacturers and aftermarket businesses that sell shocks directly to dealers and distributors.

The Aftermarket Applications Group is comprised of aftermarket businesses that offer custom vehicle shock, tuning, suspension, lift kit, upfitting, and wheel and tire solutions for automotive and power sports enthusiasts.

All prior-period amounts have been recast to conform with the current period presentation.

The following table summarizes total net sales by product group:

For the three months ended For the six months ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

For the three months ended For the nine months ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Powered Vehicles Group $ 123,076 $ 109,467 $ 405,519 $ 299,831

3 unchanged sentences

The following table summarizes total net sales by sales channel:

For the three months ended For the six months ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

For the three months ended For the nine months ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

OEM $ 155,632 $ 238,078 $ 570,550 $ 662,453

2 unchanged sentences

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

For the three months ended For the six months ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

For the three months ended For the nine months ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

North America $ 268,703 $ 255,424 $ 864,612 $ 746,566

3 unchanged sentences

Total net sales $ 331,117 $ 409,168 $ 1,131,683 $ 1,193,850

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

Inventory consisted of the following:

June 30, 2023 December 30, 2022

September 29, 2023 December 30, 2022

Raw materials $ 234,049 $ 247,441

2 unchanged sentences

Total inventory $ 341,209 $ 350,620

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

Prepaids and Other Current Assets

Prepaids and other current assets consisted of the following:

June 30, 2023 December 30, 2022

September 29, 2023 December 30, 2022

Prepaid chassis deposits $ 119,666 $ 74,013

4 unchanged sentences

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

June 30, 2023 December 30, 2022

September 29, 2023 December 30, 2022

Machinery and manufacturing equipment $ 138,047 $ 122,748

Building and building improvements 76,097 73,594

Information systems, office equipment and furniture 24,399 21,655

Internal-use computer software 32,956 30,290

Land and land improvements 14,542 14,493

Information systems, office equipment and furniture 24,924 21,655

Leasehold improvements 24,415 20,078

Machinery and manufacturing equipment 133,648 122,748

Transportation equipment 14,683 12,450

Land and land improvements 14,538 14,493

Total property, plant and equipment 325,660 295,308

2 unchanged sentences

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

June 30, 2023 December 30, 2022

September 29, 2023 December 30, 2022

United States $ 172,938 $ 166,544

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

(in thousands, except per share data)

Accrued Expenses

Accrued expenses consisted of the following:

June 30, 2023 December 30, 2022

September 29, 2023 December 30, 2022

Payroll and related expenses $ 23,424 $ 38,193

5 unchanged sentences

Total $ 103,201 $ 127,729

The Company generally provides a limited warranty for products for a one, two or three-year period beginning on:

(i) in the case of OEM sales, the date the bike or powered vehicle is purchased from an authorized OEM where the product is incorporated as original equipment on the purchased bike or powered vehicle;

(ii) in the case of aftermarket sales, the date the product is originally purchased from an authorized dealer;

or (iii) in the case of upfitting sales, the date of the retail sale to an end customer.

Activity related to warranties is as follows:

For the three months ended For the six months ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

For the three months ended For the nine months ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Beginning warranty liability $ 19,751 $ 16,088 $ 17,071 $ 15,510

3 unchanged sentences

Ending warranty liability $ 20,041 $ 16,241 $ 20,041 $ 16,241

*All changes to warranty liability were within normal course of business.

Prior Credit Facility

9 unchanged sentences

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

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

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

1 unchanged sentence

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

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

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

2 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 June 30, 2023, the one-month SOFR and three-month SOFR rates were 5.07 % and 4.99 %, respectively.

At June 30, 2023, our weighted-average interest rate on outstanding borrowing was 5.56 %.

At September 29, 2023, the one-month SOFR and three-month SOFR rates were 5.32 % and 5.27 %, respectively.

At September 29, 2023, our weighted-average interest rate on outstanding borrowing was 5.31 %.

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 June 30, 2023.

The Company was in compliance with the covenants as of September 29, 2023.

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

June 30, 2023 December 30, 2022

September 29, 2023 December 30, 2022

Amount outstanding $ 190,000 $ 200,000

7 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

(in thousands, except per share data)

Commitments and Contingencies

11 unchanged sentences

Interest payments made to manufacturer-affiliated finance companies are classified as operating activities in the condensed consolidated statements of cash flows.

At June 30, 2023 and December 30, 2022, the Company had utilized $ 4,907 and $ 2,634 , respectively, out of a maximum of $ 26,200 of Ford allocation of chassis and $ 53,468 and $ 67,149 , respectively, out of a maximum of $ 100,000 GM allocation of chassis.

The company paid $ 2,169 and $ 3,570 of interest expense related to chassis on hand during the three and six months ended June 30, 2023, respectively.

At September 29, 2023 and December 30, 2022, the Company had utilized $ 21,228 and $ 2,634 out of a maximum of $ 43,600 and $ 26,200 of Ford allocation of chassis, respectively, and $ 11,259 and $ 67,149 , respectively, out of a maximum of $ 100,000 GM allocation of chassis.

The company incurred $ 740 and $ 4,310 of interest expense related to chassis on hand during the three and nine months ended September 29, 2023, respectively.

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

6 unchanged sentences

The cash portion 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 $ 1,800 during the three and six months ended July 1, 2022, respectively.

The Company had no remaining liability as of June 30, 2023.

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

The Company had no remaining liability as of September 29, 2023.

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 39 shares of stock during the three and six months ended July 1, 2022, respectively.

The Company had no remaining shares to be released as of June 30, 2023.

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

The Company had no remaining shares to be released as of September 29, 2023.

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

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

(in thousands, except per share data)

Derivatives and Hedging

3 unchanged sentences

Interest rate swaps involve the receipt of floating-rate amounts in exchange for fixed-rate interest payments based on the SOFR over the lives of the agreements without an exchange of the underlying principal amounts.

As of June 30, 2023 and December 30, 2022, the Company had the following interest rate swap contracts:

June 30, 2023 December 30, 2022

As of September 29, 2023 and December 30, 2022, the Company had the following interest rate swap contracts:

September 29, 2023 December 30, 2022

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

11 unchanged sentences

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 effective portion of derivative instruments designated as cash flow hedges recognized in other comprehensive income for the three and six months ended June 30, 2023 were a gain of $ 1,125 and a loss of $ 1,938 , respectively;

and for the three and six months ended July 1, 2022 were a gain of $ 922 and $ 6,733 , respectively.

The gains and losses, net of tax, related to the effective portion of derivative instruments designated as cash flow hedges recognized in other comprehensive income for the three and nine months ended September 29, 2023 were a loss of $ 281 and $ 2,219 , respectively;

and for the three and nine months ended September 30, 2022 were a gain of $ 2,563 and $ 9,296 , respectively.

Over the next twelve months, the Company expects to recognize $ 7,167 of the $ 12,677 of unrealized gains included in accumulated other comprehensive income related to the interest rate swap contracts.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

(in thousands, except per share data)

Fair Value Measurements and Financial Instruments

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

June 30, 2023 December 30, 2022

September 29, 2023 December 30, 2022

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

1 unchanged sentence

Total assets measured at fair value $ — $ 6,497 $ — $ 6,497 $ — $ 5,087 $ — $ 5,087

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 periods ended June 30, 2023.

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 periods ended September 29, 2023.

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

5 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

(in thousands, except per share data)

Stockholders’ Equity

1 unchanged sentence

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

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

For the three months ended For the nine months ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Cost of sales $ 330 $ 292 $ 903 $ 701

3 unchanged sentences

Total $ 3,858 $ 4,289 $ 14,042 $ 11,379

The following table summarizes the activity for the Company’s unvested restricted stock units (“RSUs”) for the six months ended June 30, 2023:

The following table summarizes the activity for the Company’s unvested restricted stock units (“RSUs”) for the nine months ended September 29, 2023:

Unvested RSUs

4 unchanged sentences

Vested ( 139 ) $ 83.85

Unvested at June 30, 2023 296 $ 98.75

As of June 30, 2023, the Company had approximately $ 24,148 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 2.15 years.

During the six months ended June 30, 2023, the Company issued performance share units (“PSUs”) to certain executives that represent shares potentially issuable in the future.

Unvested at September 29, 2023 261 $ 111.00

As of September 29, 2023, the Company had approximately $ 19,744 of unrecognized stock-based compensation expense related to RSUs, which will be recognized over the remaining weighted-average vesting period of approximately 1.92 years.

During the nine months ended September 29, 2023, 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 3 year performance period, on certain measures including return on invested capital and free cash flow.

1 unchanged sentence

The fair value of PSUs is calculated based on the stock price on the date of grant assuming the performance goals will be achieved.

The following table summarizes the activity for the Company’s unvested PSUs for the six months ended June 30, 2023:

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share data)

The following table summarizes the activity for the Company’s unvested PSUs for the nine months ended September 29, 2023:

Unvested PSUs

2 unchanged sentences

Granted 44 $ 115.70

Unvested at June 30, 2023 92 $ 121.41

Canceled ( 9 ) $ 119.93

Unvested at September 29, 2023 83 $ 139.95

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 1.70 years.

FOX FACTORY HOLDING CORP.

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

For the three months ended For the six months ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

For the three months ended For the nine months ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Provision for income taxes $ 3,484 $ 13,365 $ 20,957 $ 28,265

Effective tax rates 9.0 % 20.8 % 15.2 % 15.7 %

For the three months ended June 30, 2023, the difference between the Company’s effective tax rate of 16.9 % and the 21 % federal statutory rate was due to a lower tax rate on foreign derived intangible income and excess benefit related to stock-based compensation.

This benefit was partially offset by state and foreign withholding taxes.

For the six months ended June 30, 2023, 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.

This benefit was partially offset by state and foreign withholding taxes.

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 29, 2023, the difference between the Company’s effective tax rate of 9.0 % and the 21 % federal statutory rate was due to a benefit from the U.S.

research and development tax credit related to multiple periods and lower tax rate on foreign derived intangible income.

These benefits were partially offset by other non-deductible expenses and state taxes.

For the nine months ended September 29, 2023, 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 benefit from the U.S.

research and development tax credit related to multiple periods.

These benefits were partially offset by other non-deductible expenses and state taxes.

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 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.

2 unchanged sentences

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 data)

Related Party Transactions

3 unchanged sentences

Refer to Note 8 - 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 February 17, 2023 the Company entered into a Securities Purchase Agreement with CWH Holdco, LLC (“CWH”), CWH Blocker Corp., (“Blocker”), Thompson Street Capital Partners V, L.P., and each other member of CWH to purchase all of the outstanding equity of Blocker, and thereafter Blocker acquired all of the outstanding equity interest of CWH.

5 unchanged sentences

The purchase price of Custom Wheel House has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated respective fair values as of March 3, 2023 with the excess purchase price allocated to goodwill.

The Company’s valuation is preliminary and subject to the Company’s validation of the valuation of intangible assets, related deferred taxes and working capital.

The Company’s valuation is preliminary and subject to the Company’s validation of deferred taxes.

The Company expects to amortize the acquired trade name, customer relationship and core technology assets over their expected useful lives that range between two and seven years .

The acquired goodwill represents the value of combining operations of Custom Wheel House and the Company, and is expected to be partially deductible for tax purposes.

During the three months ended June 30, 2023, the Company updated the purchase price allocation and recorded adjustments to net assets of $ 756 , identified intangible assets of $ 4,337 , and goodwill of $ 5,093 .

During the nine months ended September 29, 2023, the Company updated the purchase price allocation and recorded adjustments to net assets of $ 745 , identified intangible assets of $ 4,337 , and goodwill of $ 5,082 .

The Company’s allocation of the purchase price to the net tangible and intangible assets acquired and liabilities assumed is as follows:

4 unchanged sentences

Inventory $ 23,266

Other current and non-current assets 4,233

Other current assets 4,243

Property, plant and equipment 3,529

10 unchanged sentences

Notes to Condensed Consolidated Financial Statements

(in thousands, except per share amounts)

The Company incurred $ 38 and $ 925 of transaction costs related to the acquisition of Custom Wheel House during the three and six months ended June 30, 2023.

(in thousands, except per share data)

The Company incurred $ 929 of transaction costs related to the acquisition of Custom Wheel House during the nine months ended September 29, 2023.

These costs are classified as general and administrative expenses in the accompanying condensed consolidated statements of income.

The results of operations for Custom Wheel House have been included in the Company's condensed consolidated statements of income since the closing date of the acquisition on March 3, 2023.

The total revenue and net loss from operations for Custom Wheel House for the three months ended June 30, 2023 amounted to $ 19,748 and $ 4,509 , respectively.

The total revenue and net loss from operations for Custom Wheel House for the six months ended June 30, 2023 amounted to $ 26,685 and $ 6,548 , respectively.

Pro-forma financial information of the combined entities is not presented due to the immaterial impact of the financial results of the acquired entity on our consol1idated financial statements.

The total revenue and net income from operations for Custom Wheel House for the three months ended September 29, 2023 amounted to $ 19,331 and $ 1,296 , respectively.

The total revenue and net loss from operations for Custom Wheel House for the nine months ended September 29, 2023 amounted to $ 46,016 and $ 5,252 , respectively.

Pro-forma financial information of the combined entities is not presented due to the immaterial impact of the financial results of the acquired entity on our consolidated financial statements.

Subsequent Events

Marucci Sports, LLC (“Marucci”) Transaction

On November 1, 2023 the Company’s subsidiary, Fox Factory, Inc., entered into an Agreement and Plan of Merger (the “Marucci Merger Agreement”) by and among Fox Factory, Inc., Marucci Merger Sub, Inc., a wholly-owned subsidiary of Fox Factory, Inc.

(“Merger Sub), Wheelhouse Holdings Inc.

(“Wheelhouse) and Compass Group Diversified Holdings LLC, as representative of the Wheelhouse equity holders.

Pursuant to the Marucci Merger Agreement, the Merger Sub will merge with and into Wheelhouse with Wheelhouse surviving as a wholly-owned subsidiary of Fox Factory, Inc.

(the “Marucci Merger”).

Pursuant to the Marucci Merger, Fox Factory, Inc.

will acquire substantially all the issued and outstanding capital stock of Wheelhouse Holdings, Inc., the parent company of Marucci, at an enterprise value of $ 572,000 , subject to various adjustments described in the Marucci Merger Agreement.

Marucci, based in Baton Rouge, Louisiana, is a leading designer, manufacturer, and marketer of highly engineered premium wood, aluminum and composite baseball bats as well as other diamond sports products.

The Company believes that this transaction will be complementary to its technology innovation and brand value and will help to expand its product offerings.

The transaction, which is subject to various closing conditions, is expected to close in the fourth quarter of 2023.

The transaction will be financed through a term loan from an amendment to the 2022 Credit Facility.

Amendment to 2022 Credit Facility

On November 1, 2023, the Company entered into a commitment letter (the “Debt Commitment Letter”) with certain lenders party to the 2022 Credit Facility (collectively, the “Commitment Parties”) pursuant to which the Commitment Parties have agreed to provide the Company with a term loan in an amount not to exceed $ 400,000 and a delayed draw term loan in an amount not to exceed $ 200,000 (collectively, the “Incremental Term Loans”), each of which are permitted under the 2022 Credit Facility.

The Incremental Term Loans will support the Company’s capital allocation strategy, including funding a portion of the acquisition consideration owed under the Marucci transaction.

The funding of the Incremental Term Loans provided for in the Debt Commitment Letter are contingent on satisfaction of customary conditions, including, among other things, (i) the execution and delivery of the amendment to the 2022 Credit Facility and (ii) the consummation of the Marucci transaction.

The amendment to the 2022 Credit Facility will be effective on the closing date of the Marucci transaction and has not been finalized;

accordingly, the actual terms may differ from the description of such terms in the Debt Commitment Letter.

Share Repurchase Plan

On November 1, 2023, the Company’s Board of Directors authorized a share repurchase plan for up to $ 300,000 in shares of the Company’s common stock, par value $ 0.001 per share.

The share repurchase program is scheduled to expire on November 1, 2028.

Repurchases of shares of Common Stock under the stock repurchase plan will be made in accordance with applicable securities laws and may be made under a variety of methods, which may include open market purchases.

The stock repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be suspended or terminated at any time at the Company’s discretion.

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