FOX FACTORY HOLDING CORP 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2026, as filed with the SEC on February 27, 2026, and our other reports and registration statements that we file with the SEC from time to time. In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section included in Part II, Item 1A. Unless the context otherwise requires, the terms “FOX,” the “Company,” “we,” “us,” and “our” in this Quarterly Report on Form 10-Q refer to Fox Factory Holding Corp. and its operating subsidiaries on a consolidated basis. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements, which are subject to the “safe harbor” created by Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may make forward-looking statements in our SEC filings, press releases, news articles, earnings presentations and when we are speaking on behalf of the Company. Forward-looking statements generally relate to future events or our future financial or operating performance that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “could,” “can,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “likely,” “potential”, “remain”, or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to numerous risks and uncertainties, including but not limited to risks related to: • changes in general economic conditions, including, among others, market and macro-economic disruptions resulting from escalating tensions between China and Taiwan, the war in Iran, or similar events, due to inflation, higher interest rates, or tariffs, or due to the spread of infectious or contagious disease or public health issues; • our dependency on a limited number of suppliers for materials, component parts, and product could lead to an increase in material costs, disruptions in our supply chain, or reputational costs; • our ability to develop new and innovative products in our current end-markets; • our ability to leverage our technologies and brand to expand into new categories and end-markets; • our ability to increase our aftermarket penetration; • our ability to accelerate international growth; • our exposure to currency exchange rate fluctuations; • the loss of key customers; • our ability to accurately forecast demand for our products; • our ability to improve operating and supply chain efficiencies; • changes in commodity, freight, and tariff costs (including tariff relief or our ability to mitigate tariffs, particularly in light of the policies of the current presidential administration and retaliatory actions in response thereto); • our ability to mitigate increasing input costs through pricing or other measures; • economic conditions that impact consumer spending or consumer credit, including changes in inflation or interest rates; • our ability to enforce our intellectual property rights; • our future financial performance, including our net sales, cost of sales, gross profit or gross margins, operating expenses, ability to generate positive cash flow, ability to maintain our profitability, and ability to remain in compliance with financial covenants; • our ability to maintain our premium brand image and high-performance products; 29 Table of Contents • our ability to execute our cost optimization efforts and identify and capitalize on other strategic initiatives, including possible divestitures, sales, or related transactions involving one or more of our businesses or assets and any other actions we take related to our strategic review of our portfolio; • our decision and ability to market and execute potential strategic transactions, which depend on, among other factors, third-party interest, valuation considerations and regulatory requirements; • our ability to maintain relationships with the professional athletes and race teams we sponsor; • our ability to selectively add additional dealers and distributors in certain geographic markets; • the growth of the markets in which we compete, our expectations regarding consumer preferences, and our ability to respond to changes in consumer preferences and effectively compete against competitors; • changes in demand for performance-defining products; • the loss of key personnel, management, and skilled engineers; • our ability to successfully identify, evaluate and manage potential or completed acquisitions and to benefit from such acquisitions; • the outcome of pending litigation; • future disruptions in the operations of our manufacturing facilities; • our ability to adapt our business model to mitigate the impact of certain changes in tax laws, tariffs, international trade policies, and other regulatory matters; • our ability to assess and monitor the effects of new technological applications, such as artificial intelligence, on our business and operations; • changes in the relative proportion of profit earned in the numerous jurisdictions in which we do business and in tax legislation, case law and other authoritative guidance in those jurisdictions; • product recalls and product liability claims; and • future economic or market conditions. You should not rely upon forward-looking statements as predictions of future events. We based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects and the outcomes of any of the events described in any forward-looking statements are subject to risks, uncertainties, and other factors. In addition to the risks, uncertainties, and other factors discussed above and elsewhere in this Quarterly Report on Form 10-Q, the risks, uncertainties, and other factors expressed or implied in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 2, 2026, as filed with the SEC on February 27, 2026, could cause or contribute to actual results differing materially from those set forth in any forward-looking statement. Moreover, we operate in a very competitive and challenging environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur and you should not place undue reliance on our forward-looking statements. Actual results, events, or circumstances could differ materially from those contemplated by, set forth in, or underlying any forward-looking statements. For all of these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements in Section 27A of the Securities Act and Section 21E of the Exchange Act. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information, the occurrence of unanticipated events or otherwise, except as required by law. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make or choose not to make. Critical Accounting Policies and Estimates There have been no changes to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended January 2, 2026, as filed with the SEC on February 27, 2026, that had a material impact on our unaudited condensed consolidated financial statements and related notes. 30 Table of Contents Recent Accounting Pronouncements See Note 1 - Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies to the accompanying notes to unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further details regarding this topic. Results of Operations The table below summarizes our results of operations: For the three months ended (in millions) April 3, 2026 April 4, 2025 Net sales $ 368.7 $ 355.0 Cost of sales 262.3 245.4 Gross profit 106.4 109.7 Operating expenses: Goodwill impairment — 262.1 General and administrative 38.6 37.3 Sales and marketing 33.3 32.8 Research and development 18.5 17.0 Amortization of purchased intangibles 10.0 10.9 Total operating expenses 100.4 360.3 Income (loss) from operations 6.0 (250.6) Interest expense 11.9 12.9 Other expense (income), net 9.6 (0.2) Loss before income taxes (15.6) (263.4) Benefit from income taxes (0.6) (3.6) Net loss $ (15.0) $ (259.7) Less: net loss attributable to non-controlling interest — — Net loss attributable to FOX stockholders $ (15.0) $ (259.7) *Amounts may not foot due to rounding. 31 Table of Contents The following table sets forth selected statement of income data as a percentage of net sales for the periods indicated: For the three months ended April 3, 2026 April 4, 2025 Net sales 100.0 % 100.0 % Cost of sales 71.1 69.1 Gross profit 28.9 30.9 Operating expenses: Goodwill impairment — 73.8 General and administrative 10.5 10.5 Sales and marketing 9.0 9.3 Research and development 5.0 4.8 Amortization of purchased intangibles 2.7 3.1 Total operating expenses 27.2 101.5 Income (loss) from operations 1.6 (70.6) Interest expense 3.2 3.6 Other expense (income), net 2.6 — Loss before income taxes (4.2) (74.2) Benefit from income taxes (0.2) (1.0) Net loss (4.1) % (73.2) % Less: net loss attributable to non-controlling interest — — Net loss attributable to FOX stockholders (4.1) % (73.1) % *Percentages may not foot due to rounding. Three months ended April 3, 2026 compared to three months ended April 4, 2025 Net sales For the three months ended (in millions) April 3, 2026 April 4, 2025 Change ($) Change (%) Net sales $ 368.7 $ 355.0 $ 13.7 3.9 % Total net sales for the three months ended April 3, 2026 increased $13.7 million, or 3.9%, compared to the three months ended April 4, 2025. The increase in net sales is driven by strengthening demand across powersports, automotive aftermarket, and upfitting product lines, as well as stable aftermarket product sales, which more than offset distributors and dealers reducing inventory levels in response to market-wide economic conditions. Cost of sales For the three months ended (in millions) April 3, 2026 April 4, 2025 Change ($) Change (%) Cost of sales $ 262.3 $ 245.4 $ 16.9 6.9 % Cost of sales for the three months ended April 3, 2026 increased $16.9 million, or 6.9%, compared to the three months ended April 4, 2025. The increase in cost of sales is mainly due to our increased sales and impact of tariffs. Our gross margin decreased 200 basis points to 28.9% for the three months ended April 3, 2026, as compared to the same prior fiscal year period, primarily due to the net impact of tariffs and shifts in our product line mix. 32 Table of Contents Operating expenses For the three months ended (in millions) April 3, 2026 April 4, 2025 Change ($) Change (%) Operating expenses: Goodwill impairment $ — $ 262.1 $ (262.1) (100.0) % General and administrative 38.6 37.3 1.3 3.5 Sales and marketing 33.3 32.9 0.4 1.2 Research and development 18.5 17.1 1.4 8.2 Amortization of purchased intangibles 10.0 10.9 (0.9) (8.3) Total operating expenses $ 100.4 $ 360.3 $ (259.9) (72.1) % Total operating expenses for the three months ended April 3, 2026 were $100.4 million, compared to $360.3 million for the three months ended April 4, 2025. During the three months ended April 4, 2025, we recognized an impairment charge of $262.1 million as a result of a quantitative assessment on goodwill. Research and development expenses increased $1.4 million, mainly due to investments to support product innovation. General and administrative expenses increased $1.3 million driven by our strategic transformation initiatives. Income (loss) from operations For the three months ended (in millions) April 3, 2026 April 4, 2025 Change ($) Change (%) Income (loss) from operations $ 6.0 $ (250.6) $ 256.6 102.4 % As a result of the factors discussed above, income from operations for the three months ended April 3, 2026 increased $256.6 million, or 102.4%, compared to loss from operations for the three months ended April 4, 2025. Interest and other expense, net For the three months ended (in millions) April 3, 2026 April 4, 2025 Change ($) Change (%) Interest expense $ 11.9 $ 12.9 $ (1.0) (7.8) % Other expense (income), net 9.6 (0.2) 9.8 4,900.0 Interest and other expense, net $ 21.5 $ 12.7 $ 8.8 69.3 % Interest and other expense, net for the three months ended April 3, 2026 increased by $8.8 million to $21.5 million, compared to $12.7 million for the three months ended April 4, 2025 mainly due to a loss on divestiture of $10.0 million. Income taxes For the three months ended (in millions) April 3, 2026 April 4, 2025 Change ($) Change (%) Benefit from income taxes $ (0.6) $ (3.6) $ 3.0 83.3 % The effective tax rates were 3.9% and 1.4% for the three months ended April 3, 2026 and April 4, 2025, respectively. For the three months ended April 3, 2026, the difference between the Company’s effective tax rate of 3.9% and the 21% federal statutory rate was primarily due to lower pre‑tax earnings for the quarter and the tax effects recognized in connection with the sale of our Phoenix, Arizona AAG operations, including Shock Therapy, Upfit UTV, and Geiser businesses. For the three months ended April 4, 2025, the difference between our effective tax rate of 1.4% and the 21% federal statutory rate was due to the impairment impact of the non-deductible goodwill recognized during the same period. 33 Table of Contents Net loss For the three months ended (in millions) April 3, 2026 April 4, 2025 Change ($) Change (%) Net loss $ (15.0) $ (259.7) $ 244.7 94.2 % As a result of the factors described above, our net loss decreased $244.7 million, or 94.2%, to $15.0 million in the three months ended April 3, 2026 from $259.7 million for the three months ended April 4, 2025. Segment Review We manage our activities based on three operating segments: PVG, AAG, and SSG. For additional financial information related to our operating segments including the reconciliation of consolidated net (loss) income to adjusted EBITDA, see Note 14 – Segment Information . The following table summarizes consolidated net sales and adjusted EBITDA by segment: For the three months ended (in millions) April 3, 2026 April 4, 2025 Change ($) Change (%) Net sales Powered Vehicles Group $ 143.4 $ 122.1 $ 21.3 17.4 % Aftermarket Applications Group 114.8 111.9 2.9 2.6 Specialty Sports Group 110.5 121.0 (10.5) (8.7) Net sales $ 368.7 $ 355.0 $ 13.7 3.9 % Adjusted EBITDA Powered Vehicles Group $ 22.6 $ 14.4 $ 8.2 56.9 % Aftermarket Applications Group 11.4 17.0 (5.6) (32.9) Specialty Sports Group 17.5 23.4 (5.9) (25.2) Powered Vehicles Group Powered Vehicles Group net sales increased by $21.3 million, or 17.4%, mainly due to strengthening demand in powersports and continued momentum in the automotive aftermarket. Powered Vehicles Group adjusted EBITDA increased by $8.2 million, or 56.9%, primarily due to higher gross profit driven by shifts in product line mix, partially offset by unfavorable tariff impacts. Aftermarket Applications Group Aftermarket Applications Group net sales increased by $2.9 million, or 2.6%, driven by improved performance in our upfitting product lines and stable aftermarket product sales. Aftermarket Applications Group adjusted EBITDA decreased by $5.6 million, or 32.9%, mainly due to lower gross profit driven by shifts in product line mix and unfavorable tariff impacts. Specialty Sports Group Specialty Sports Group net sales decreased by $10.5 million, or 8.7%, primarily due to distributors and dealers reducing inventory levels in response to market-wide economic conditions. Specialty Sports Group adjusted EBITDA decreased by $5.9 million, or 25.2%, primarily due to a decrease in gross profit driven by unfavorable tariff impacts. 34 Table of Contents Liquidity and Capital Resources Our primary cash needs are to support working capital, research and development, interest on debt, employee compensation, capital expenditures, acquisitions, debt repayments, and other general corporate purposes. Historically, we generally financed our liquidity needs with operating cash flows, borrowings under our Credit Agreement, and the issuance of common stock. These sources of liquidity may be impacted by events described in Cautionary Note Regarding Forward-Looking Statements and Part II, Item 1A. Risk Factors . As of April 3, 2026, we held $9.8 million of our $53.9 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate. A summary of our operating, investing, and financing activities is shown in the following table: For the three months ended (in millions) April 3, 2026 April 4, 2025 Net cash (used in) provided by operating activities $ (16.1) $ 0.7 Net cash used in investing activities (0.4) (7.2) Net cash provided by financing activities 13.1 3.3 Effect of exchange rate changes on cash and cash equivalents (0.7) 0.1 Change in cash and cash equivalents $ (4.1) $ (3.1) *Amounts may not foot due to rounding. We expect that cash on hand, cash flows from operations and availability under our Credit Agreement will be sufficient to fund our operations during the next 12 months from the date of this Form 10-Q and beyond. Operating activities In the three months ended April 3, 2026, net cash used in operating activities was $16.1 million. Our investment in operating assets and liabilities is mainly a result of an increase in accounts receivable of $23.1 million, an increase in inventory of $7.9 million, and a decrease in accrued expenses and other liabilities of $7.0 million, partially offset by a an increase in accounts payable of $2.5 million, excluding the impact of divestiture. The change in our accounts receivable reflects an increase in our sales and the timing of customer collections. Inventory increased primarily due to planned inventory builds to support anticipated demand. The decrease in accrued expenses and other liabilities is driven by lower payroll accruals mainly due to timing of payroll and a decrease in headcount. The change in accounts payable reflects the timing of vendor payments. In the three months ended April 4, 2025, net cash provided by operating activities was $0.7 million. Our investment in operating assets and liabilities is a result of a decrease in accrued expenses and other liabilities of $17.2 million, a decrease in accounts payable of $16.9 million, an increase in accounts receivable of $11.3 million, an increase in inventory of $4.9 million, and a decrease in income taxes payable of $1.9 million partially offset by a decrease in prepaids and other assets of $25.7 million. The change in our accounts payable is driven by timing of inventory purchases and vendor payments. The change in our accounts receivable reflects an increase in our sales and the timing of customer collections. The decrease in accrued expenses and other liabilities is mainly due to a decrease in warranty reserve, a decrease in lease liabilities due to lease terminations, and payments for various accruals. The decrease in income taxes payable is mainly due to our income tax payments. The decrease in prepaids and other assets is primarily due to lower chassis deposits driven by working capital optimization efforts. Investing activities In the three months ended April 3, 2026 and April 4, 2025, net cash used in investing activities was $0.4 million and $7.2 million, respectively. Investing activities for the three months ended April 3, 2026 consisted of $5.4 million of property and equipment additions, partially offset by $5.0 million proceed from a divestiture. Investing activities for the three months ended April 4, 2025 consisted of $7.2 million of property and equipment additions. 35 Table of Contents Financing activities In the three months ended April 3, 2026, net cash provided by financing activities was $13.1 million, and consisted of the proceeds from our Credit Agreement revolver of $67.0 million that were used to support our working capital, offset by payments of $41.0 million to reduce the revolver borrowings, $11.7 million repayments on our term loans, and payments of $1.2 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program. In the three months ended April 4, 2025, net cash provided by financing activities was $3.3 million, and consisted of the proceeds from our Credit Agreement revolver of $37.0 million that were used to support our working capital, offset by payments of $27.0 million to reduce the revolver borrowings, $6.1 million quarterly repayment on our Term A Loan, and payments of $0.6 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program. Credit Agreement On April 5, 2022, the Company entered into a new credit agreement with Wells Fargo Bank, National Association, and other named lenders. The Credit Agreement, which matures on April 5, 2027, provides for revolving loans, swingline loans and letters of credit up to an aggregate amount of $650.0 million. The Company may borrow, prepay, and re-borrow principal under the Credit Agreement during its term. Advances under the Credit Agreement can be either Adjusted Term SOFR loans or base rate loans. SOFR rate revolving loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum equal to Term SOFR for such calculation plus 0.10% plus a margin ranging from 1.00% to 2.25%. 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 April 3, 2026, the one-month SOFR and three-month SOFR rates were 3.65% and 3.67%, respectively. At April 3, 2026, our weighted-average interest rate on outstanding borrowing was 6.04%. On November 14, 2023, in connection and concurrently with the closing of the Marucci acquisition, the Company entered into the First Incremental Facility Amendment (the “First Amendment”) amending the Credit Agreement. The First Amendment provided the Company with the Incremental Term A Loan in an amount of $400.0 million and the Delayed Draw Term Loan in an amount of $200.0 million, each of which are permitted under the Credit Agreement, subject to satisfaction of certain conditions. The Incremental Term A Loan was fully funded on November 14, 2023 and used to fund a portion of the consideration owed under the Marucci acquisition. The Delayed Draw Term Loan was available to the Company for up to six months commencing on December 6, 2023, until the earlier of (a) May 14, 2024 and (b) the date on which the Delayed Draw Term commitments have been terminated. Each Incremental Term Loan is subject to quarterly amortization payments of principal at a rate of 5.00% per annum. The Incremental Term Loans are in the form of term SOFR loans and base rate loans, at the option of the Company, and have an applicable margin ranging from 0.50% to 1.50% for base rate loans and 1.50% to 2.50% for term SOFR loans, subject to adjustment provisions. Each Incremental Term Loan has a maturity date of April 5, 2027, consistent with the Credit Agreement. The Company paid $10.1 million in debt issuance costs, of which $6.7 million were allocated to the Term A Loan and $3.4 million were allocated to the Delayed Draw Term Loan. Loan fees allocated to the Term A Loan are amortized using the interest method over the term of the Credit Facility. Loan fees allocated to the Delayed Draw Term Loan were deferred as an asset until the debt is drawn. On May 13, 2024, the Company borrowed the full amount of $200.0 million of the Delayed Draw Term Loan. The fees were reclassified to a contra-liability account and amortized over the term of the drawn debt using the interest method. On July 31, 2024 and December 20, 2024, the Company entered into the Third and Fourth Amendment to the Credit Facility, respectively to secure an improved covenant profile on its capital structure to provide more flexibility given the uncertain macro environment. Amended Credit Agreement On October 24, 2025, the Company entered into the Fifth Amendment among the Company, certain subsidiaries of the Company, Wells Fargo Bank, National Association, as administrative agent, swingline lender and L/C issuer, and certain lenders named therein. The Fifth Amendment amends the Credit Agreement, dated as of April 5, 2022, and the Guaranty and Security Agreement, dated as of April 5, 2022, as amended prior to the Fifth Amendment, which secures the obligations under the Credit Agreement in favor of the Agent for the benefit of the lenders and other secured parties. Terms not otherwise defined below will have the meaning as set forth in the Amended Credit Agreement. 36 Table of Contents The Fifth Amendment, among other things, amends the Credit Agreement to replace the existing loans provided under the Credit Agreement with (i) the Term Loan in the aggregate outstanding amount of $537.5 million, which will be repaid by the Company in quarterly installments in the amount of $6.7 million, (ii) the Revolving Credit Facility in an aggregate amount of up to $500.0 million, with sub-facilities for swing line loans in an aggregate amount of up to $25.0 million and letters of credit in an aggregate amount of up to $25.0 million, and (iii) an incremental loan facility, subject to additional terms set forth in the Amended Credit Agreement, in an aggregate amount of up to $175.0 million plus an unlimited amount so long as after giving effect to the incurrence of such incremental loans, on a pro forma basis, the Consolidated Net Leverage Ratio is less than 3.25. To the extent not previously paid, all then-outstanding amounts under the Term Loan and the Revolving Credit Facility are due and payable on October 24, 2030. The Term Loan and advances under the Revolving Credit Facility can be either SOFR loans or base rate loans. SOFR loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum equal to the term SOFR for such calculation plus a margin ranging from 1.00% to 2.50%. Base rate 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 Agent as its “prime rate,” and (iii) term SOFR rate for a one-month tenor plus 1.00%, subject to the interest rate floors set forth in the Amended Credit Agreement, plus a margin ranging from 0.00% to 1.50%. In connection with the Fifth Amendment, the Company borrowed $710.0 million under the Amended Credit Agreement consisting of the $537.5 million Term Loan and $172.5 million under the Revolving Credit Facility, which was used to repay all outstanding amounts owed under the Credit Agreement prior to the Fifth Amendment and for general corporate purposes. Debt issuance costs related to the Term Loan are presented as a direct deduction from the carrying amount of long-term debt on the consolidated balance sheet and are amortized using the effective interest method over the term of the Term Loan. Debt issuance costs related to the Revolving Credit Facility are presented in other non-current assets and are amortized on a straight-line basis over the term of the Revolving Credit Facility. The Amended Credit Agreement 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 April 3, 2026. At April 3, 2026, the one-month SOFR and three-month SOFR rates were 3.65% and 3.67%, respectively. At April 3, 2026, our weighted-average interest rate on outstanding borrowing was 6.04%. 37 Table of Contents Recent Developments Global Trade Actions and Tariffs - New and expanded tariffs announced under the Trump administration and triggered retaliatory actions by certain affected countries, and other foreign governments have introduced additional costs and uncertainty into our supply chain, which may impact our cost structure and working capital needs. In February 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the Trump administration were unlawful, and U.S. Customs and Border Protection has subsequently implemented a process through which eligible importers may apply for refunds of tariffs previously paid. While we are evaluating our eligibility and the potential recoverability and timing of any such refunds, the process is subject to administrative requirements and uncertainty, and any refunds are not assured. We continue to assess the potential effects of these developments on our supply chain and sourcing strategies as well as our future operating results, cash flows, and working capital. Although we may experience volatility in cash flows as trade policies and refund mechanisms evolve, we believe our existing liquidity and access to the Amended Credit Agreement provide sufficient flexibility to manage these developments. Material Cash Requirements There have been no material changes to the information in our material cash requirements related to commitments or contractual obligations from those reported in our Annual Report on Form 10-K for the fiscal year ended January 2, 2026, as filed with the SEC on February 27, 2026. Inflation Significant increases in inflation, particularly those related to wages and increases in the cost of raw materials, have and could continue to have an adverse impact on our business, financial condition, and results of operations. Interest Rates Interest rate volatility can impact our borrowing costs and overall financial condition. Significant increases could lead to higher interest expense on our variable-rate debt. To mitigate this risk and enhance predictability, we utilize interest rate swaps to manage our exposure to interest rate fluctuations. 38 Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes to the disclosures discussed in the section “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended January 2, 2026, as filed with the SEC on February 27, 2026.