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What changed in FOX FACTORY HOLDING CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FOX FACTORY HOLDING CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+447 added−424 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-23)

Top changes in FOX FACTORY HOLDING CORP's 2024 10-K

447 paragraphs added · 424 removed · 351 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

75 edited+21 added−15 removed64 unchanged
Biggest changeThis technology is currently being used in many classic muscle car and truck applications; • Ridetech 62-67 Nova Suspension System (Coil-Over & Air), complete suspension upgrades with either coil or air sprung adjustable shocks that bring modern performance to vintage and classic muscle cars; • Market leading 3-4” Bronco suspension lift products that are custom designed to each model configuration and that range from load spacers and coil-overs, to remote adjustable shocks for increased off-road performance, comfort and control; • 32, 34 and 36 Factory Series FLOAT FIT4, which reduces overall fork weight, provides external adjustability with our fourth-generation FOX Isolated Technology ("FIT") closed-cartridge damper, and includes the self-adjusting negative chamber air spring for quieter operation and ease of adjustment.
Biggest changeOver the past several years, we have developed multiple new products, such as: • Semi-active Dual Live Valve shocks with compression and rebound control, for ultimate confidence and control, which such technology is currently being used in UTVs and the top tier of off-road performance trucks; • Live Valve, our proprietary semi-active, electronic suspension that processes data from multiple vehicle sensors to adjust the suspension virtually instantaneously to the demands of changing terrain, which such technology is currently in use UTVs, trucks, and mountain bikes; • The next generation of Live Valve combined with a 3.1-inch diameter anodized aluminum shock body, specifically designed to withstand the higher internal pressures created by the new valve’s wider dynamic range, which such technology has been adopted at the top tier of trucks in the U.S.; • Electronically adjustable rear suspension pre-load allowing a user to easily compensate for the additional weight and bring a vehicle back to optimal ride height, which such technology is currently in use on select motorcycles to adapt to added passenger and luggage weight without using tools; • Ridetech RidePro E5 Air Suspension Control System, improving comfort and performance to your vehicle, which such technology is currently being used in many classic muscle car and truck applications; • Ridetech 62-67 Nova Suspension System (Coil-Over & Air), complete suspension upgrades with either coil or air sprung adjustable shocks that bring modern performance to vintage and classic muscle cars; • Market leading 3-4” Bronco suspension lift products that are custom designed to each model configuration and that range from load spacers and coil-overs, to remote adjustable shocks for increased off-road performance, comfort and control; • 32, 34 and 36 Factory Series FLOAT FIT4, which reduces overall fork weight, provides external adjustability with our fourth-generation FOX Isolated Technology (“IT”) closed-cartridge damper, and includes the self-adjusting negative chamber air spring for quieter operation and ease of adjustment, which such technology is used widely across all brands of mountain bikes or as aftermarket upgrades to replace lower performing suspension; • The GRIP2 fork damper, which is our next-evolution sealed cartridge FIT system, our highest performing gravity-focused damper.
Property, Plant and Equipment, net of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. 10 Table of Contents Corporate and available information Our principal executive offices are located at 2055 Sugarloaf Circle, Suite 300, Duluth, GA 30097, and our telephone number is (831) 274-6500. Our website address is www.ridefox.com.
Property, Plant and Equipment, net of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. 11 Table of Contents Corporate and available information Our principal executive offices are located at 2055 Sugarloaf Circle, Suite 300, Duluth, GA 30097, and our telephone number is (831) 274-6500. Our website address is www.ridefox.com.
Due to our experience in suspension engineering and design in multiple markets and with a variety of vehicles, solutions we develop for use in one market can ultimately be deployed across multiple markets. For example, we believe that our success in the high-end ATV category led to the widespread adoption of our suspension technology in the side-by-sides market.
Due to our experience in suspension engineering and design in multiple markets and with a variety of vehicles, solutions we develop for use in one market can ultimately be deployed across multiple markets. For example, we believe our success in the high-end ATV category led to the widespread adoption of our suspension technology in the side-by-sides market.
We believe that our brands have achieved strong loyalty from our consumers. To support our brands, we introduce new products that we believe feature innovative technologies designed to improve vehicle performance and enhance our brand loyalty with consumers. Track record of innovation and new product introductions Innovation, including new product development, is a key component of our growth strategy.
We believe that our brands achieved strong loyalty from our consumers. To support our brands, we introduce new products that we believe feature innovative technologies designed to improve vehicle performance and enhance our brand loyalty with consumers. Track record of innovation and new product introductions Innovation, including new product development, is a key component of our growth strategy.
We believe that the performance of our products has been demonstrated by, and our brand benefits from, the success of professional athletes who use our products in elite competitive events, such as the Olympic Games, the Union Cycliste Internationale Mountain Bike World Cup, the X Games and the Baja 1000.
We believe that the performance of our products has been demonstrated by, and our brand benefits from, the success of professional athletes who use our products in elite competitive events, such as the Olympic Games, the Union Cycliste Internationale Mountain Bike World Cup, the X Games, the Baja 1000, and professional baseball.
Seasonality Certain portions of our business are seasonal; we believe this seasonality is due to the delivery of new products. As we have diversified our product offerings and our product launch cycles, seasonal fluctuations are becoming less material. Competition The markets for performance-defining products are highly competitive.
Seasonality Certain portions of our business are seasonal; we believe this seasonality is due to the delivery of new products. As we diversified our product offerings and our product launch cycles, seasonal fluctuations are becoming less material. Competition The markets for performance-defining products are highly competitive.
We compete with other companies that produce products for sale to OEMs, dealers and distributors, as well as with OEMs that produce their own line of products for their own use. Some of our competitors may have greater financial, research and development or marketing resources than we do.
We compete with other companies that produce products for sale to OEMs, dealers and distributors, and retailers as well as with OEMs that produce their own line of products for their own use. Some of our competitors may have greater financial, research and development or marketing resources than we do.
Strategic brand for OEMs, dealers and distributors Through our strategic relationships, we are often sought out by our OEM customers and work closely with them to develop and design new products and product enhancements. We believe our collaborative approach and product development processes strengthen our relationships with our OEM customers.
Strategic brand for OEMs, dealers and distributors, and retailers Through our strategic relationships, we are often sought out by our OEM customers and work closely with them to develop and design new products and product enhancements. We believe our collaborative approach and product development processes strengthen our relationships with our OEM customers.
Our innovative product development and speed to market are supported by: • our racing culture, including on-site technical race support of professional athletes, which provides us with unique real-time insights as to the evolving performance-defining product needs of those participating in challenging world-class events and is an integral part of our research and development efforts; • ongoing research and development through a team of full-time engineers and numerous other technicians and employees who spend at least part of their time testing and using our products and helping develop engineering-based solutions to enhance our product offerings; • feedback from professional athletes, race teams, enthusiasts and other consumers who use our products; • strategic and collaborative relationships with OEM customers, which furthers our ability to extend technologies and applications across end-markets; and • our integrated manufacturing facilities and performance testing centers, which allow us to quickly move from concept to product.
Our innovative product development and speed to market are supported by: • our racing culture, including on-site technical race support of professional athletes, which provides us with unique real-time insights as to the evolving performance-defining product needs of those participating in challenging world-class events and is an integral part of our research and development efforts; • ongoing research and development through a team of full-time engineers and numerous other technicians and employees who spend at least part of their time testing and using our products and helping develop engineering-based solutions to enhance our product offerings; • feedback from professional athletes, race teams, enthusiasts and other consumers who use our products; 2 Table of Contents • strategic and collaborative relationships with OEM customers, which furthers our ability to extend technologies and applications across end-markets; and • our integrated manufacturing facilities and performance testing centers, which allow us to quickly move from concept to product.
We have never experienced a material work stoppage or disruption to our business relating to employee matters. We believe that our relationship with our employees is good. Consumer safety We are subject to the jurisdiction of the U.S.
We never experienced a material work stoppage or disruption to our business relating to employee matters. We believe that our relationship with our employees is good. Consumer safety We are subject to the jurisdiction of the U.S.
Many of our OEM customers, including Specialized, Trek Bicycles, Giant, Orbea, Canyon Bicycles, Santa Cruz Bicycles, and Yeti Cycles in Specialty Sports and BRP, Ford, Polaris, Toyota, 4 Wheel Parts, Kawasaki, Yamaha, and Honda in Powered Vehicles, are among the market leaders in their respective product categories, and help shape, as well as respond to, consumer trends in their respective categories.
Many of our OEM customers, including Specialized, Trek Bicycles, Giant, Orbea, Canyon Bicycles, Santa Cruz Bicycles, and Yeti Cycles in Specialty Sports and BRP, Ford, Polaris, Toyota, 4 Wheel Parts, Kawasaki, Yamaha, and Honda in Powered Vehicles and Aftermarket Applications, are among the market leaders in their respective product categories, and help shape, as well as respond to, consumer trends in their respective categories.
As part of our agreement with Miyaki, or the Kashima Agreement, we have been granted the exclusive right to use the trademark "KASHIMACOAT" on products comprising the aluminum finished parts for suspension components (e.g., tubes) and on related sales and marketing material worldwide, subject to a minimum model year order and certain other exclusions.
As part of our agreement with Miyaki, or the Kashima Agreement, we have been granted the exclusive right to use the trademark “KASHIMACOAT” on products comprising the aluminum finished parts for suspension components (e.g., tubes) and on related sales and marketing material worldwide, subject to a minimum model year order and certain other exclusions.
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 11 Table of Contents
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 12 Table of Contents
In our upfitting product category, we sell to a broad network of automotive dealerships. 7 Table of Contents Specialty Sports We sell our bike suspension and components products to a broad network of domestic and international bike OEMs, including Specialized, Trek Bicycles, Giant, Orbea, Canyon Bicycles, Santa Cruz Bicycles, and Yeti Cycles.
In our upfitting product category, we sell to a broad network of automotive dealerships. 8 Table of Contents Specialty Sports We sell our bike suspension and components products to a broad network of domestic and international bike OEMs, including Specialized, Trek Bicycles, Giant, Orbea, Canyon Bicycles, Santa Cruz Bicycles, and Yeti Cycles.
We believe there is opportunity to expand our total available market by broadening our acquisition focus to include a more diverse range of performance products that add to or increase our customers' enjoyment of their activities of choice.
We believe there is opportunity to expand our total available market by broadening our acquisition focus to include a more diverse range of performance products that add to or improve our customers’ enjoyment of their activities of choice.
As part of the 401(k) Plan, FOX matches 50 percent of the first 6 percent of compensation contributed by the employee into the 401(k) Plan. 9 Table of Contents Practices related to working capital items The Company does not believe that it, or the industry in general, has any special practices or special conditions affecting working capital items that are material to understanding our business.
As part of the 401(k) Plan, FOX matches 50% of the first 6% of compensation contributed by the employee into the 401(k) Plan. 10 Table of Contents Practices related to working capital items The Company does not believe that it, or the industry in general, has any special practices or special conditions affecting working capital items that are material to understanding our business.
If the manufacturer has not already undertaken to do so, the CPSC may require a manufacturer to recall a product, which may involve product repair, replacement or refund. During the past three years, we initiated two voluntary product recalls. For additional information, see Item 1A. Risk Factors in this Annual Report on Form 10-K.
If the manufacturer has not already undertaken to do so, the CPSC may require a manufacturer to recall a product, which may involve product repair, replacement or refund. During the past three years, we initiated one voluntary product recall. For additional information, see Item 1A. Risk Factors in this Annual Report on Form 10-K.
Our upfitting category leverages our strong partnerships with Ford, General Motors, Jeep, Nissan and RAM, enabling us to obtain truck, van and sports utility vehicle ("SUV") chassis directly from the manufacturers' facilities.
Our upfitting category leverages our strong partnerships with Ford, General Motors, Jeep, Nissan and RAM, enabling us to obtain truck, van and sports utility vehicle (“SUV”) chassis directly from the manufacturers’ facilities.
Specialty Sports Our bike product offerings are used on a wide range of performance mountain bikes, e-bikes and road bikes under the FOX, Race Face, Easton Cycling and Marzocchi brands.
Specialty Sports Our bike product offerings are used on a wide range of performance mountain bikes, e-bikes and gravel bikes under the FOX, Race Face, Easton Cycling and Marzocchi brands.
Risk Factors – Risks Related to Our Business and Operations - "We depend on a limited number of suppliers for our materials and component parts for some of our products, and the loss of any of these suppliers or an increase in cost of raw materials could harm our business." In addition, prices for our raw materials fluctuate.
Risk Factors – Risks Related to Our Business and Operations - “We depend on a limited number of suppliers for our materials and component parts for some of our products, and the loss of any of these suppliers or an increase in cost of raw materials could harm our business.” In addition, prices for our raw materials fluctuate.
We work closely with our supply base, and depend upon certain suppliers to provide raw inputs, such as forgings, castings and molded polymers that have been optimized for weight, structural integrity, wear and cost. In certain circumstances, we depend upon a limited number of suppliers for such raw inputs.
We work closely with our supply base, and depend upon certain suppliers to provide raw inputs, such as forgings, castings and molded polymers optimized for weight, structural integrity, wear and cost. In certain circumstances, we depend upon a limited number of suppliers for such raw inputs.
We believe our products offer innovative design, performance, durability and reliability. Our brand is associated with high-performance and technologically advanced products, by which we generally mean products that provide users with improved control and comfort while riding over rough terrain in varied environments, or providing improved control and responsiveness for on-road only vehicles.
We believe our products offer innovative design, performance, durability and reliability. Our brand is associated with high-performance and technologically advanced products, by which we generally mean products that provide users with improved control and comfort while riding over rough terrain in varied environments or providing improved control and responsiveness for on-road only vehicles or out on a ball field .
While we have been able to mitigate the impacts of price fluctuations on our business historically, we are actively monitoring the current market conditions and price trends. We also have OEM partners that supply vehicle chassis used in our upfitting operations.
While we have been able to mitigate the impacts of price fluctuations on our business historically, we actively monitor the current market conditions and price trends. We also have OEM partners that supply vehicle chassis used in our upfitting operations.
The Gainesville Facility is being used for manufacturing, warehousing, distribution and office space. Additionally, we completed the transition of our Watsonville, California facility (the "Watsonville Facility") and the relocation of our powered vehicles suspension manufacturing to the Gainesville Facility in the first quarter of 2022.
The Gainesville Facility is used for manufacturing, warehousing, distribution and office space. Additionally, we completed the transition of our Watsonville, California facility (the “Watsonville Facility”) and the relocation of our powered vehicles suspension manufacturing to the Gainesville Facility in the first quarter of 2022.
No material portion of our business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the U.S. government. Sales attributable to our 10 largest OEM customers, which can vary from year-to-year, collectively accounted for approximately 35%, 35% and 36% of our sales in fiscal years 2022, 2021 and 2020, respectively.
No material portion of our business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the U.S. government. Net sales attributable to our 10 largest OEM customers, which can vary from year-to-year, collectively accounted for approximately 35% of our net sales in fiscal years 2023, 2022 and 2021.
We have long-standing relationships with many of the top bike OEMs. After incorporating our products on their bikes, OEMs typically sell their bikes to independent dealers, which then sell directly to consumers. In the aftermarket, we typically sell to U.S. dealers and through distributors internationally. Our dealers sell directly to aftermarket consumers.
We have long-standing relationships with many of the top bike OEMs. After incorporating our products on their bikes, OEMs typically sell their bikes to independent dealers, which then sell directly to consumers. In the aftermarket, we typically sell to North American dealers and through distributors internationally. Our dealers sell directly to aftermarket consumers.
We believe our reputation for performance-defining products is reinforced by the successful finishes in world class competitive events by athletes incorporating our products in their vehicles.
We believe our reputation for performance-defining products is reinforced by the successful finishes in world class competitive events by athletes incorporating our products in their vehicles, gear and equipment.
The Kashima Agreement does not contain minimum purchase obligations. Human Capital Resources Employee Overview As of December 30, 2022, we had approximately 4,400 employees in the U.S., Canada, Europe, Taiwan and Australia. Our employees are primarily located in the U.S. We also use temporary employees at our manufacturing facilities to help us meet seasonal demands.
The Kashima Agreement does not contain minimum purchase obligations. Human Capital Resources Employee Overview As of December 29, 2023, we had approximately 4,300 employees in the U.S., Canada, Europe, Taiwan and Australia. Our employees are primarily located in the U.S. We also use temporary employees at our manufacturing facilities to help us meet seasonal demands.
These competitors can be divided into the following categories: Powered Vehicles Within the market for off-road and specialty vehicle suspension components, we compete with ThyssenKrupp Bilstein Suspension GmbH (commonly known as Bilstein), King Shock Technology, Inc. (commonly known as King Shocks), Icon Vehicle Dynamics, Sway-A-Way, Pro Comp USA Suspension, and Rancho ("Tenneco").
These competitors can be divided into the following categories: Powered Vehicles Within the market for off-road and specialty vehicle suspension components, we compete with ThyssenKrupp Bilstein Suspension GmbH (commonly known as “Bilstein”), King Shock Technology, Inc. (commonly known as “King Shocks”), Icon Vehicle Dynamics, Sway-A-Way, Pro Comp USA Suspension, and Rancho (“Tenneco”).
In each of the years ended December 30, 2022, December 31, 2021 and January 1, 2021, approximately 42%, 45% and 41%, respectively, of our sales were attributable to sales of bike-related products. Primarily for the mountain bike market, we offer mid-end and high-end front fork and rear suspension products designed for cross-country, trail, all-mountain, free-ride and downhill riding.
In each of the years ended December 29, 2023, December 30, 2022 and December 31, 2021, approximately 27%, 42% and 45%, respectively, of our net sales were attributable to net sales of bike-related products. Primarily for the mountain bike market, we offer mid-end and high-end front fork and rear suspension products designed for cross-country, trail, all-mountain, free-ride and downhill riding.
Using guidance from the Centers for Disease Control ("CDC"), the World Health Organization ("WHO"), and the various states and counties in which we operate, we have taken a number of measures to keep employees safe. Employees are offered paid sick leave or paid time off to cover sickness and absences. We will continue to make our employees a priority.
Using guidance from the Centers for Disease Control (“CDC”), the World Health Organization (“WHO”), and the various states and counties in which we operate, we took a number of measures to keep employees safe. Employees are offered paid sick leave or paid time off to cover sickness and absences. We will continue to make our employees a priority.
In addition, we believe the inclusion of our products on high-end bikes and powered vehicles reinforces our premium brand image which helps to drive our sales in the aftermarket channel where dealers and distributors sell our products to consumers. Experienced management team We have an experienced senior management team led by Michael C. Dennison, our Chief Executive Officer.
In addition, we believe the inclusion of our products on high-end bikes and powered vehicles reinforces our premium brand image which helps to drive our sales in the aftermarket channel where dealers and distributors sell our products to consumers. 3 Table of Contents Experienced management team We have an experienced senior management team led by Michael C.
Consumer Product Safety Commission ("CPSC"), and other federal, state and foreign regulatory bodies including the National Highway Traffic Safety Administration ("NHTSA"), which enforces the Federal Motor Vehicle Safety standards.
Consumer Product Safety Commission (“CPSC”), and other federal, state and foreign regulatory bodies including the National Highway Traffic Safety Administration (“NHTSA”), which enforces the Federal Motor Vehicle Safety standards.
We currently sell to approximately 100 OEMs and distribute our products to more than 5,000 retail dealers and distributors worldwide. In 2022, 57% of our sales resulted from sales to OEM customers and 43% resulted from sales to dealers and distributors for resale in the aftermarket channel.
We currently sell to approximately 100 OEMs and distribute our products to more than 5,000 retail dealers and distributors worldwide. In 2023, 50% of our net sales resulted from net sales to OEM customers and 50% resulted from net sales to dealers and distributors for resale in the aftermarket channel.
Our common stock is traded on the NASDAQ Global Select Market (the "NASDAQ") under the symbol "FOXF." Description of our business We are a designer, manufacturer and marketer of performance-defining products and systems used primarily on bikes, side-by-sides, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, and specialty vehicles and applications.
Our common stock is traded on the NASDAQ Global Select Market (the “NASDAQ”) under the symbol “FOXF.” Description of our business We are a designer, manufacturer and marketer of performance-defining products and systems used primarily on bikes, off-road vehicles and trucks, side-by-sides, on-road vehicles with and without off-road capabilities, ATVs, snowmobiles, and specialty vehicles and applications, and premium baseball and softball gear and equipment.
Research and development expenses totaled approximately $56.2 million, $46.6 million and $34.3 million in fiscal years 2022, 2021 and 2020, respectively. 6 Table of Contents Intellectual property Intellectual property is an important aspect of our business.
Research and development expenses totaled approximately $53.2 million, $56.2 million and $46.6 million in fiscal years 2023, 2022 and 2021, respectively. 7 Table of Contents Intellectual property Intellectual property is an important aspect of our business.
Please read "Risks Related to Laws and Regulations - Increasing focus on environmental, social and governance responsibility may impose additional costs on us and expose us to new risks" within Item 1A. Risk Factor s .
Please read “Risks Related to Laws and Regulations - Increasing focus on environmental, social and governance responsibility may impose additional costs on us and expose us to new risks” within Item 1A. Risk Factors .
Industry We participate in large global markets for bikes and powered vehicles used by recreational and professional users. Today, our products for bicycles are primarily for mountain bikes, e-bikes and road bikes.
Industry We participate in large global markets for bikes, powered vehicles, and baseball equipment used by recreational and professional consumers. Today, our products for bicycles are primarily for mountain bikes, e-bikes and gravel bikes.
Premium brand with strong consumer loyalty We believe that we have developed a reputation for performance-defining products and that we own and license established trademarks, such as FOX ® , FOX RACING SHOX ® , BLACK WIDOW ® , ROCKY RIDGE ®, RACE FACE ® which are perceived as premium brands.
Premium brand with strong consumer loyalty We believe that we developed a reputation for performance-defining products and that we own and license established trademarks, such as FOX ® , FOX RACING SHOX ® , BLACK WIDOW ® , ROCKY RIDGE ® , RACE FACE ® , MARZOCCHI ® , MARUCCI ® , VICTUS ® , BAUM BAT ® , LIZARD SKINS ® , and BASEBALL PERFORMANCE LAB ® , which are perceived as premium brands.
In each of the years ended December 30, 2022, December 31, 2021 and January 1, 2021, approximately 58%, 55% and 59%, respectively, of our sales were attributable to sales of powered vehicles related products. Products for these vehicles are designed for use on roads, trail riding, racing, and to help maximize performance and comfort.
In each of the years ended December 29, 2023, December 30, 2022 and December 31, 2021, approximately 36%, 27% and 28%, respectively, of our net sales were attributable to net sales of powered vehicles related products. Products for these vehicles are designed for use on roads, trail riding, racing, and to help maximize performance and comfort.
Some of our products are specifically designed and marketed to some of the leading cycling and powered vehicle original equipment manufacturers ("OEMs"), while others are distributed to consumers through a global network of dealers and distributors. Fox Factory, Inc., our operating subsidiary, was incorporated in California in 1978. Fox Factory Holding Corp. was incorporated in Delaware on December 28, 2007.
Some of our products are specifically designed and marketed to some of the leading cycling and powered vehicle original equipment manufacturers (“OEMs”). while others are distributed to consumers through a global network of dealers and distributors and through direct-to-consumer channels. Fox Factory, Inc., our operating subsidiary, was incorporated in California in 1978.
We had approximately $116.7 million and $223.5 million in firm backlog orders at December 30, 2022 and December 31, 2021, respectively.
We had approximately $30.7 million and $116.7 million in firm backlog orders at December 29, 2023 and December 30, 2022, respectively.
In the market for other bike components, we compete with SRAM, Truvativ and Zipp (all subsidiaries of SRAM Corp.), DT Swiss (a subsidiary of Vereinigte Drahtwerke AG), Mavic (a subsidiary of Bourrelier), and Shimano. Our products We design and manufacture performance-defining products, of which a significant portion is suspension products.
In the market for other bike components, we compete with SRAM, Truvativ and Zipp (all subsidiaries of SRAM Corp.), DT Swiss (a subsidiary of Vereinigte Drahtwerke AG), Mavic (a subsidiary of Bourrelier), and Shimano.
The decrease in 2022 backlog, as compared to 2021, is due to many factors including the normalization of supply chain shortages that were experienced in 2021, the realignment of production forecasts with some of our large OEM customers, and increased production at our Gainesville Facility. 8 Table of Contents Suppliers and raw materials The primary raw materials used in the production of our products are aluminum, magnesium, carbon and steel.
The decrease in 2023 backlog, as compared to 2022, is due to many factors including the normalization of supply chain shortages we experienced in 2021 and 2022, the realignment of production forecasts with some of our large OEM customers, our effort to make space for newer model year chassis, and increased production and efficiency at our Powered Vehicles Group facilities. 9 Table of Contents Suppliers and raw materials The primary raw materials used in the production of our products are aluminum, magnesium, carbon and steel.
After incorporating our products on their powered vehicles, OEMs typically sell their powered vehicles to independent dealers, which then sell directly to consumers. In the aftermarket, we typically sell suspension products to dealers and distributors, both domestically and internationally. Our dealers sell directly to consumers.
Aftermarket Applications In the aftermarket, we typically sell suspension products to dealers and distributors, both domestically and internationally. Our dealers sell directly to consumers. When we sell to our distributors, they sell to independent dealers, which then sell directly to consumers.
("SCA"), a leading OEM authorized specialty vehicle manufacturer for light duty trucks and sport utility vehicles. In May 2021, through our wholly owned subsidiary, SCA, we acquired all of the issued and outstanding stock of Manifest Joy LLC ("Outside Van), a custom van conversion company that designs and custom engineers recreational vehicles.
In May 2021, through our wholly owned subsidiary, SCA, we acquired all of the issued and outstanding stock of Manifest Joy LLC (“Outside Van”), a custom van conversion company that designs and custom engineers recreational vehicles.
We also offer mountain and road bike wheels and other performance-defining cycling components under the Race Face and Easton Cycling brands including cranks, chainrings, pedals, bars, stems, and seat posts. Research and development Research and development is at the core of our product innovation and market leadership strategy.
We also offer mountain and gravel bike wheels and other performance-defining cycling components under the Race Face and Easton Cycling brands including cranks, chainrings, pedals, bars, stems, and seat posts.
In 2022, 2021 and 2020, no single customer represented 10% or more of our sales. Although we refer to the branded bike OEMs that use our products throughout this document as "our customers," "our OEM customers" or "our bike OEM customers," branded bike OEMs often use contract manufacturers to manufacture and assemble their bikes.
Although we refer to the branded bike OEMs that use our products throughout this document as “our customers,” “our OEM customers” or “our bike OEM customers,” branded bike OEMs often use contract manufacturers to manufacture and assemble their bikes.
In October 2018, we announced the relocation of our business headquarters from Scotts Valley, California to Braselton, Georgia, which was effective on December 31, 2018. In June 2021, we established a principal executive office in Duluth, Georgia. In August 2013, we completed an initial public offering ("IPO") of our common stock.
Fox Factory Holding Corp. was incorporated in Delaware on December 28, 2007. In October 2018, we announced the relocation of our business headquarters from Scotts Valley, California to Braselton, Georgia, which was effective on December 31, 2018. In June 2021, we established a principal executive office in Duluth, Georgia.
We believe that performance-defining products, which include suspension systems, as well as wheels, cranks, and other components, are critical to the performance of the bikes and powered vehicles in the product categories in which we focus and that technical features, component performance, product design, durability, reliability, and brand recognition strongly influence consumer-purchasing decisions. 1 Table of Contents We believe the high-end segments in which we participate are well positioned for growth due to several factors, including: • increasing consumer appetite for performance-defining products; • increasing average retail sales prices, which we believe are driven by differentiated and feature-rich products with advanced technologies; • continuing product cycle innovation, which we have observed often motivates consumers to upgrade and purchase new products for enhanced performance; and • increasing sales opportunities for high-end bikes and powered vehicles in international markets.
We believe the high-end segments in which we participate are well positioned for growth due to several factors, including: • increasing consumer appetite for performance-defining products; • increasing average retail sales prices, which we believe are driven by differentiated and feature-rich products with advanced technologies; • continuing product cycle innovation, which we observed often motivates consumers to upgrade and purchase new products for enhanced performance; and • increasing sales opportunities for high-end bikes, powered vehicles, and premium baseball equipment in international markets.
Our international sales, however, do not necessarily reflect the location of the end users of our products, as many of our products are incorporated into bikes and powered vehicles that are assembled at international locations and then shipped back to the U.S. Additional information about our product revenues and certain geographical information is available in Note 2.
Net sales attributable to countries outside the U.S. are based on shipment location. Our international net sales, however, do not necessarily reflect the location of the end users of our products, as many of our products are incorporated into bikes and powered vehicles that are assembled at international locations and then shipped back to the U.S.
We strongly believe that providing a high level of service to our end customers is essential to maintaining our reputational excellence in the marketplace. Our sales professionals receive training on the brands' latest products and technologies and attend trade shows and events to increase their market knowledge. Our marketing strategy focuses on strengthening and promoting our brands in the marketplace.
Our sales professionals receive training on the brands’ latest products and technologies and attend trade shows and events to increase their market knowledge. Our marketing strategy focuses on strengthening and promoting our brands in the marketplace.
Our premium brand, performance-defining products and systems are used primarily on bicycles ("bikes"), side-by-side vehicles ("side-by-sides"), on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, all-terrain vehicles ("ATVs"), snowmobiles, and specialty vehicles and applications.
Our premium brand, performance-defining products and systems are used primarily on bicycles (“bikes”), side-by-side vehicles (“side-by-sides”), on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, all-terrain vehicles (“ATVs”), snowmobiles, and specialty vehicles and applications. In addition, we also offer premium baseball and softball gear and equipment.
In December 2021, through our wholly owned subsidiary, Shock Therapy Suspension, Inc., we acquired substantially all the assets of Shock Therapy LLC ("Shock Therapy"), a premier suspension tuning company in the off-road industry. The Company expects these acquisitions to expand its North American geographic manufacturing footprint and broaden its product offerings in the automotive industry.
In December 2021, through our wholly owned subsidiary, Shock Therapy Suspension, Inc., we acquired substantially all the assets of Shock Therapy LLC (“Shock Therapy”), a premier suspension tuning company in the off-road industry.
We intend to leverage the recognition of our brands to capitalize on these trends by globally increasing our sales to both OEMs and dealers and distributors, particularly in markets where we perceive significant opportunities. 4 Table of Contents Improve operating and supply chain efficiencies In the fourth quarter of 2021, we completed the construction of an approximately 336,000 square foot state-of-the-art facility in Hall County, Georgia (the "Gainesville Facility") to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.
Improve operating and supply chain efficiencies In the fourth quarter of 2021, we completed the construction of an approximately 336,000 square foot state-of-the-art facility in Hall County, Georgia (the “Gainesville Facility”) to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.
Revenues of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Powered Vehicles We sell our powered vehicle suspension products to OEMs, including BRP, Ford, Polaris, Toyota, Kawasaki, Yamaha, and Honda. We also are continually nurturing and developing relationships with our existing and new OEMs, as the powered vehicles market continues to grow.
Additional information about our product revenues and certain geographical information is available in Note 2. Revenues of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. Powered Vehicles We sell our powered vehicle suspension products to OEMs, including BRP, Ford, Polaris, Toyota, Kawasaki, Yamaha, and Honda.
Our products for powered vehicles are used primarily on on-road vehicles with and without off-road capabilities, side-by-sides, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, including military, motorcycles, and commercial trucks.
Powered Vehicles In our powered vehicle product categories, we offer premium products under the FOX brand for off-road vehicles and trucks, side-by-sides, on-road vehicles with and without off-road capabilities, ATVs, snowmobiles, specialty vehicles and applications, motorcycles, and commercial trucks.
As a result, even though we typically negotiate price and volume requirements directly with our bike OEM customers, the contract manufacturer may place the purchase order and therefore assumes the payment responsibilities. Our North American sales totaled $1,009.2 million, $811.3 million, and $593.3 million, or 63%, 62% and 67%, of our total sales in 2022, 2021 and 2020, respectively.
As a result, even though we typically negotiate price and volume requirements directly with our bike OEM customers, the contract manufacturer may place the purchase order and therefore assumes the payment responsibilities.
We intend to further penetrate the aftermarket channel by selectively adding dealers and distributors in certain geographic markets, increasing our internal sales force and strategically expanding aftermarket-specific products and services to existing vehicle platforms.
We intend to further penetrate the aftermarket channel by selectively adding dealers and distributors in certain geographic markets, increasing our internal sales force and strategically expanding aftermarket-specific products and services to existing vehicle platforms. 4 Table of Contents Accelerate international growth We believe international expansion represents a significant opportunity for us and we have, and intend to continue to, selectively increase infrastructure investments and focus on identified geographic regions.
Our overseas distributors sell to independent dealers, which then sell directly to consumers. Sales and marketing We employ specialized and dedicated sales professionals. Each sales professional is fully responsible for servicing either OEM or aftermarket customers within our product categories, which ensures that our customers are in contact with capable and knowledgeable sales professionals to address their specific needs.
Each sales professional is fully responsible for servicing either OEM or aftermarket customers within our product categories, which ensures that our customers are in contact with capable and knowledgeable sales professionals to address their specific needs. We strongly believe that providing a high level of service to our end customers is essential to maintaining our reputational excellence in the marketplace.
We focus on premium-priced products within each of these categories, which we consider to be the high-end segment because of their higher retail sale prices, where we believe consumers prefer well-designed, performance-oriented equipment.
Our products for powered vehicles are used primarily on off-road vehicles and trucks, on-road vehicles with and without off-road capabilities, side-by-sides, ATVs, snowmobiles, specialty vehicles and applications, including military, motorcycles, and commercial trucks. 1 Table of Contents We focus on premium-priced products within each of these categories, which we consider to be the high-end segment because of their higher retail sale prices, where we believe consumers prefer well-designed, performance-oriented equipment.
Leveraging our technology and scale, we have successfully expanded into recreational vehicles and street car applications, and we believe there are opportunities to further penetrate these markets and grow with more pioneering product applications. Additionally, to grow our end user base, we are now looking at ways to explore international opportunities with some of our applications.
We have great relations with our OEM and aftermarket partners and given our key distinct strengths, we believe we have and will continue to win more applications. Leveraging our technology and scale, we successfully expanded into recreational vehicles and street car applications, and we believe there are opportunities to further penetrate these markets and grow with more pioneering product applications.
In the snowmobile market, we compete with KYB (Kayaba Industry Co., Ltd.), Öhlins Racing AB (a wholly-owned subsidiary of Tenneco), Walker Evans Racing, Works Performance Products, Inc., and Penske Racing Shocks / Custom Axis, Inc.
In the snowmobile market, we compete with KYB (Kayaba Industry Co., Ltd.), Öhlins Racing AB (a wholly-owned subsidiary of Tenneco), Walker Evans Racing, Works Performance Products, Inc., and Penske Racing Shocks / Custom Axis, Inc. 5 Table of Contents Aftermarket Applications In the market for suspension systems, or lift kits, we compete with TransAmerican Wholesale/Pro Comp USA, Rough Country Suspension Systems, TeraFlex, Falcon, ReadyLIFT Suspension, Tuff Country EZ-Ride Suspension, and Rusty’s Off-Road.
We are able to attract and retain highly trained and specialized employees who enhance our Company culture and serve as strong brand advocates. 3 Table of Contents Our strategy Our goal is to expand our leadership position as a designer, manufacturer and marketer of performance-defining products designed to enhance ride dynamics and performance.
Our strategy Our goal is to expand our leadership position as a designer, manufacturer and marketer of performance-defining products designed to enhance ride dynamics and performance.
Our suspension products are assembled according to precise specifications throughout the assembly process to create consistently high-performance levels and customer satisfaction. 5 Table of Contents Powered Vehicles In our powered vehicle product categories, we offer premium products under the FOX, BDS Suspension, Zone Offroad, JKS Manufacturing, RT Pro UTV, 4x4 Posi-Lok, Ridetech, Tuscany, Outside Van, and SCA brands for side-by-sides, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, motorcycles, and commercial trucks.
Aftermarket Applications Our range of aftermarket applications products includes premium products under the BDS Suspension, Zone Offroad, JKS Manufacturing, RT Pro UTV, 4x4 Posi-Lok, Ridetech, Tuscany, Outside Van, SCA, and Custom Wheel House brands designed for off-road vehicles and trucks, side-by-sides, on-road vehicles with or without off-road capabilities, specialty vehicles and applications, and commercial trucks.
Many members of our management team and many of our employees are avid users of our products, which further extends their knowledge of, and expertise in, our products and end-markets.
Dennison, our Chief Executive Officer. Many members of our management team and many of our employees are avid users of our products, which further extends their knowledge of, and expertise in, our products and end-markets. We are able to attract and retain highly trained and specialized employees who enhance our Company culture and serve as strong brand advocates.
Our products use adjustable suspension, position-sensitive damping, electronically controllable damping, multiple air spring technologies, low weight and structural rigidity, all of which improve user control for greater performance. We use high-grade materials in our products and have developed a number of sophisticated assembly processes to maintain quality across all product lines.
Suspension products allow wheels or skis (in the case of snowmobiles) to move up and down to absorb bumps and shocks while maintaining contact with the ground for better control. Our products use adjustable suspension, position-sensitive damping, electronically controllable damping, multiple air spring technologies, low weight and structural rigidity, all of which improve user control for greater performance.
We also offer lift kits and components with our shock products and aftermarket accessory packages for use in trucks. In addition, we manufacture suspension systems that enhance the handling and ride quality of muscle cars, trucks, sports cars and hot rods. With the recent acquisition of Shock Therapy in December 2021, we added suspension tuning services to the portfolio.
In addition, we manufacture suspension systems that enhance the handling and ride quality of muscle cars, trucks, sports cars and hot rods.
This technology is used widely across all brands of mountain bikes or as aftermarket upgrades to replace lower performing suspension; • Rhythm series fork products developed to address a lower price point offering without compromising proven FOX performance; • FOX AWL suspension fork for the growing electronic sports utility vehicle ("eSUV") commuter and e-mobility segment combining the confidence and stability of off-road capable suspension with the convenience of direct mount compatibility with full wrap fenders, lights, and anti-lock braking systems.
GRIP2 shares its roots with the original GRIP architecture, but has been enhanced with all-new technology: four-way adjustability, VVC high-speed rebound circuit, high-performance mid-valve, and overall friction-reducing treatments, which such technology is used widely across all brands of mountain bikes or as aftermarket upgrades to replace lower performing suspension; • Rhythm series fork products developed to address a lower price point offering without compromising proven FOX performance; • FOX AWL suspension fork for the growing electronic sports utility vehicle (“eSUV”) commuter and e-mobility segment combining the confidence and stability of off-road capable suspension with the convenience of direct mount compatibility with full wrap fenders, lights, and anti-lock braking system, which such technology is found on a wide range of electric bikes; • Race Face Vault Hub, a 120-point high-engagement mountain bike hubset featuring tool-free end caps that simplify conversion among all major axle standards and is approved for e-bike applications, which such technology is found in select Race Face mountain bike wheels and as standalone hubs; and • Easton EC90 SL Crankset, a versatile and ultralight gravel road bike crankset that allows quick conversion between 1x and 2x chainring configurations.
We also believe that our passionate customer base has a desire for other types of performance products beyond those that attach to a vehicle or bike. Our business development group is responsible for identifying and assessing inorganic and organic potential growth opportunities of our ride dynamics platform and other specialty sports technology platforms.
We also believe that our passionate customer base has a desire for other types of performance products beyond those that attach to a vehicle or bike. Increase our aftermarket penetration We currently have a broad aftermarket distribution network of thousands of retail dealers and distributors worldwide.
ITEM 1. BUSINESS Our company, Fox Factory Holding Corp., designs, engineers, manufactures and markets performance-defining products and systems for customers worldwide. Fox Factory Holding Corp. is the holding company of Fox Factory, Inc. As used herein, "Fox Factory," "FOX," the "Company," "we," "our," and similar terms refer to Fox Factory Holding Corp. and its subsidiaries, unless the context indicates otherwise.
As used herein, “Fox Factory,” “FOX,” the “Company,” “we,” “our,” and similar terms refer to Fox Factory Holding Corp. and its subsidiaries, unless the context indicates otherwise.
Our international sales totaled $593.3 million, $487.8 million and $297.3 million or 37%, 38% and 33% of our total sales in fiscal years 2022, 2021 and 2020, respectively. Sales attributable to countries outside the U.S. are based on shipment location.
Our North American net sales totaled $1,127.6 million, $1,009.2 million, and $811.3 million, or 77%, 63% and 62%, of our total net sales in 2023, 2022 and 2021, respectively. Our international net sales totaled $336.6 million, $593.3 million and $487.8 million or 23%, 37% and 38% of our total net sales in fiscal years 2023, 2022 and 2021, respectively.
Opportunistically expand our business platform through acquisitions Over the past several years, we have completed acquisitions that we believe enhance our business and strategically expand our product offerings. In March 2020, we acquired substantially all the issued and outstanding capital stock of SCA Performance Holdings, Inc.
Additionally, to grow our end user base, we are now looking at ways to explore international opportunities with some of our applications. Opportunistically expand our business platform through acquisitions Over the past several years, we completed acquisitions that we believe enhance our business and strategically expand our product offerings.
In the market for suspension systems, or lift kits, we compete with TransAmerican Wholesale/Pro Comp USA, Rough Country Suspension Systems, TeraFlex, Falcon, ReadyLIFT Suspension, Tuff Country EZ-Ride Suspension, and Rusty’s Off-Road. In the market for upfitted vehicles, we compete with Roush Performance and DSI Custom Vehicles.
In the market for upfitted vehicles, we compete with Roush Performance and DSI Custom Vehicles.
These suspension products dissipate the energy and force generated by bikes and powered vehicles while they are in motion. Suspension products allow wheels or skis (in the case of snowmobiles) to move up and down to absorb bumps and shocks while maintaining contact with the ground for better control.
Our products We design and manufacture performance-defining products, of which a significant portion is suspension products. These suspension products dissipate the energy and force generated by bikes and powered vehicles while they are in motion.
Removed
Over the past several years, we have developed multiple new products, such as: • The first independently controlled compression and rebound, semi-active Live Valve X2 shock.
Added
ITEM 1. BUSINESS Our company, Fox Factory Holding Corp., is a global leader in the design, engineering, manufacturing and marketing of premium products and systems that deliver championship-level performance for customers worldwide. Fox Factory Holding Corp. is the holding company of Fox Factory, Inc.
Removed
This technology is currently being used in UTVs; 2 Table of Contents • Live Valve, our proprietary semi-active, electronic suspension that processes data from multiple vehicle sensors to adjust the suspension virtually instantaneously to the demands of changing terrain.
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In August 2013, we completed an initial public offering (“IPO”) of our common stock.
Removed
This technology is currently in use UTVs, trucks, and mountain bikes; • The next generation of Live Valve combined with a 3.1-inch diameter anodized aluminum shock body, specifically designed to withstand the higher internal pressures created by the new valve’s wider dynamic range.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSummary of Risk Factors The risks described below include, but are not limited to, the following: Risks Related to Our Business and Operations • 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; • failure to effectively compete against competitors, enhance existing products or develop, manufacture and market new products that respond to consumer needs and preferences and achieve market acceptance could result in a decrease in demand for our products and negatively impact our business and financial results; • our performance-defining products, and the bike and powered vehicles into which they are incorporated, are discretionary purchases and may be adversely impacted by changes in the economy, a shrinking market for these powered vehicles, or a material decline in demand for the high-end bikes that make up a significant portion of our sales; • changes in our customer, channel and product mix could place demands that are more rigorous on our infrastructure and cause our profitability percentages to fluctuate; • a disruption in the operations of our facilities, such as work stoppages, or delays in our planned expansion of certain facilities, could have a negative effect on our business, financial condition or results of operations; • our business depends substantially on our ability to attract and retain experienced and qualified talent, including our senior management team; • we may not be able to sustain our past growth or successfully implement our growth strategy, which may have a negative effect on our business, financial condition or results of operations; • the loss of the support of professional athletes for our products, or the inability to attract new professional athletes or disruption in relationships with dealers and distributors may harm our business; • our business is dependent in large part on the orders we receive from our OEM customers and from their success.
Biggest changeSummary of Risk Factors The risks described below include, but are not limited to, the following: Risks Related to Our Business and Operations • the impact of the risks associated with international geopolitical conflicts, including continuing tensions between Taiwan and China, the Russian invasion of Ukraine, and the Israel-Palestine conflict 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, component parts, and vehicle chassis could lead to an increase in material costs, disruptions in our supply chain, or reputational costs; • failure to effectively compete against competitors, enhance existing products or develop, manufacture and market new products, such as artificial intelligence, machine learning, robotics, blockchain or other new approaches to data mining, that respond to consumer needs and preferences and achieve market acceptance could result in a decrease in demand for our products and negatively impact our business and financial results; • our performance-defining products, and the bikes and powered vehicles into which many of them are incorporated, are discretionary purchases and may be adversely impacted by changes in the economy, a shrinking market for these powered vehicles, or a material decline in demand for the high-end bikes that make up a significant portion of our sales; • 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 effects of the COVID-19 pandemic; • our business depends substantially on our ability to maintain our premium brand image and to attract and retain experienced and qualified talent, including our senior management team; • changes in our customer, channel and product mix could place demands that are more rigorous on our infrastructure and cause our profitability percentages to fluctuate; • a disruption in the operations of our facilities or along our global supply chain, such as work stoppages, or delays in our planned expansion of certain facilities, including labor strikes, could have a negative effect on our business, financial condition or results of operations; • we may not be able to sustain our past growth or successfully implement our growth strategy, which may have a negative effect on our business, financial condition or results of operations; • the loss of the support of professional athletes for our products, or the inability to attract new professional athletes or disruption in relationships with dealers and distributors may harm our business; • our business is dependent in large part on our relationships with dealers and distributors and their success and the orders we receive from our OEM customers and from their success.
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. We depend on a limited number of suppliers for certain components.
We depend on a limited number of suppliers for some of our materials, component parts, and products. The loss of any of these suppliers or an increase in the cost of raw materials could harm our business. We depend on a limited number of suppliers for certain products and components.
In addition, we must continuously compete for not only end users who purchase our products through the dealers and distributors who are our customers, but also for the OEMs, which incorporate our products into their bikes and powered vehicles.
In addition, we must continuously compete not only for end users who purchase our products through the dealers and distributors who are our customers, but also for the OEMs, which incorporate our products into their bikes and powered vehicles.
Any claim, regardless of its merit, could be expensive, time consuming to defend and distract management from our business. Moreover, if our products or brands are found to infringe third-party intellectual property rights, we may be unable to obtain a license to use such technology or associated intellectual property rights on acceptable terms.
Any claim, regardless of its merit, could be expensive and time-consuming to defend and distract management from our business. Moreover, if our products or brands are found to infringe third-party intellectual property rights, we may be unable to obtain a license to use such technology or associated intellectual property rights on acceptable terms.
If our efforts to protect our intellectual property are unsuccessful, or if a third party misappropriates our rights, our business may be adversely affected. Defending our intellectual property rights can be very expensive and time consuming, and there is no assurance that we will be successful.
If our efforts to protect our intellectual property are unsuccessful or a third party misappropriates our rights, our business may be adversely affected. Defending our intellectual property rights can be very expensive and time-consuming, and there is no assurance that we will be successful.
These covenants, among other things, limit our ability to: • pay dividends or make distributions to our stockholders or redeem our stock; • incur additional indebtedness or permit additional encumbrances on our assets; and • make acquisitions or complete mergers or sales of assets, or engage in new businesses.
These covenants, among other things, limit our ability to: • pay dividends or make distributions to our stockholders or redeem our stock; • incur additional indebtedness or permit additional encumbrances on our assets; and • make acquisitions, complete mergers or sales of assets, or engage in new businesses.
These restrictions may interfere with our ability to obtain financing or to engage in other business activities, which may have a material adverse effect on our business, financial condition or results of operations.
These restrictions may interfere with our ability to obtain financing or engage in other business activities, which may have a material adverse effect on our business, financial condition, or results of operations.
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.
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 Interest Rate Swap Agreement, these agreements may be costly and may not protect against all interest rate fluctuations.
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.
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 the inclusion of certain climate-related financial metrics in a note to companies’ audited financial statements.
There is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters.
There is increasing concern that a gradual increase in global average temperatures due to the increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters.
In addition, we may choose to take voluntary steps to mitigate our impact on climate change. As a result, we may experience increases in energy, production, transportation and raw material costs, capital expenditures or insurance premiums and deductibles. Inconsistency of legislation and regulations among jurisdictions may also affect the costs of compliance with such laws and regulations.
In addition, we may choose to take voluntary steps to mitigate our impact on climate change. As a result, we may experience increases in energy, production, transportation, raw material costs, capital expenditures, or insurance premiums and deductibles. Inconsistency of legislation and regulations among jurisdictions may also affect the costs of compliance with such laws and regulations.
We believe that our policies and processes comply with applicable employment standards and related regulations; however, we are subject to risks of litigation by employees and others that might involve allegations of illegal, unfair or inconsistent employment practices, including wage and hour violations and employment discrimination, misclassification of independent contractors as employees, wrongful termination and other concerns, which could require additional expenditures.
We believe that our policies and processes comply with applicable employment standards and related regulations; however, we are subject to risks of litigation by employees and others that might involve allegations of illegal, unfair, or inconsistent employment practices, including wage and hour violations, employment discrimination, misclassification of independent contractors as employees, wrongful termination, and other concerns, which could require additional expenditures.
From time to time, we have been involved in administrative or legal proceedings relating to environmental, health or safety matters and have incurred expenditures relating to such matters in the past. We believe that our operations are in substantial compliance with applicable environmental laws and regulations.
From time to time, we have been involved in administrative or legal proceedings relating to environmental, health, or safety matters and incurred expenditures relating to such matters in the past. We believe that our operations are in substantial compliance with applicable environmental laws and regulations.
The effect of such rules on customer, supplier and/or consumer behavior could adversely affect the sourcing, supply and pricing of materials used in our products. As a result, we may also incur costs with respect to potential changes to products, processes or sources of supply.
The effect of such rules on customer, supplier, or consumer behavior could adversely affect the sourcing, supply, and pricing of materials used in our products. As a result, we may also incur costs with respect to potential changes to products, processes, or sources of supply.
The identification of a material weakness could indicate a lack of controls adequate to generate accurate financial statements that, in turn, could cause a loss of investor confidence and decline in the market price of our common stock.
The identification of a material weakness could indicate a lack of controls adequate to generate accurate financial statements that, in turn, could cause a loss of investor confidence and a decline in the market price of our common stock.
Our brands could be adversely impacted by, among other things: • failure to develop new products that are innovative, performance-oriented, and reliable; • internal product quality control issues; • product quality issues on the bikes and powered vehicles on which our products are installed; • product recalls; • 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 brands and our other intellectual property assets, as well as failure to protect our intellectual property; • changes in consumer trends and perceptions; and • lack of investment in sponsorships, marketing and public relations.
Our brands could be adversely impacted by, among other things: • failure to develop new products that are innovative, performance-oriented, and reliable; • internal product quality control issues; • product quality issues on the bikes and powered vehicles on which our products are installed; • product recalls; • 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 or organizations, which could be amplified on social media; • high-profile injury or death to one of our sponsored athletes; • 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; and • lack of investment in sponsorships, marketing, and public relations.
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 brands and business could suffer.
If we are not able to educate our dealers, distributors, and retailers 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 brands and business could suffer.
A reduction or lack of continued growth in the popularity of high-end bikes, bikes or powered vehicles or in the number of consumers who are willing to pay premium prices for well-designed, performance-oriented equipment in the markets in which we sell our products could adversely affect our product sales and profits, financial condition or results of operations.
A reduction or lack of continued growth in the popularity of high-end bikes, powered vehicles, baseball, or in the number of consumers who are willing to pay premium prices for well-designed, performance-oriented equipment in the markets in which we sell our products could adversely affect our product sales and profits, financial condition, or results of operations.
Our continued success depends on our ability to continue to compete effectively against our competitors, some of which have significantly greater financial, marketing and other resources than we have. In addition, several of our competitors offer broader product lines to OEMs, which they may sell in connection with suspension products as part of a package offering.
Our continued success depends on our ability to continue to compete effectively against our competitors, some of which have significantly greater financial, marketing and other resources than we have. Several of our competitors offer broader product lines to OEMs, which they may sell in connection with suspension products as part of a package offering.
The SEC rules regarding disclosure of the use of tin, tantalum, tungsten and gold, known as conflict minerals, in products manufactured by public companies require ongoing due diligence to determine whether such minerals originated from the Democratic Republic of Congo ("DRC"), or an adjoining country and whether such minerals helped finance the armed conflict in the DRC.
The SEC rules regarding disclosure of the use of tin, tantalum, tungsten, and gold, known as conflict minerals, in products manufactured by public companies require ongoing due diligence to determine whether such minerals originated from the Democratic Republic of Congo (“DRC”), or an adjoining country and whether such minerals helped finance the armed conflict in the DRC.
The current domestic and international political environment, including existing and potential changes to U.S. policies related to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy. In 2018, the U.S. imposed tariffs of 25 percent on steel and 10 percent on aluminum, with only a handful of countries exempt from the increase.
The current domestic and international political environment, including existing and potential changes to U.S. policies related to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy. In 2018, the U.S. imposed tariffs of 25% on steel and 10% on aluminum, with only a handful of countries exempt from the increase.
In addition to foreign currency risks, these risks include: • 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; • changes in tax laws and the interpretation of those laws; • exposure to local economic conditions; • unexpected government action or changes in legal or regulatory requirements; • changes in tariffs, quotas, trade barriers and other similar restrictions on sales; • the effects of any anti-American sentiments on our brands or sales of our products; • 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.
In addition to foreign currency risks, these risks include: • 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, which 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 and the Israel-Palestine conflict 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; • changes in tax laws and the interpretation of those laws; • exposure to local economic conditions; • unexpected government action or changes in legal or regulatory requirements; • changes in tariffs, quotas, trade barriers, and other similar restrictions on sales; • the effects of any anti-American sentiments on our brands or sales of our products; • 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.
As the majority of our bike component manufacturing occurs in Taiwan, we could experience difficulties locating qualified suppliers geographically located closer to these facilities. Furthermore, such suppliers could experience difficulties in providing us with some or all of the materials we require, which could result in disruptions in our manufacturing operations.
As the majority of our bike component manufacturing occurs in Taiwan, we could experience difficulties locating qualified suppliers geographically closer to these facilities. Furthermore, such suppliers could experience difficulties in providing us with some or all of the materials we require, which could result in disruptions in our manufacturing operations.
An adverse change in any of these conditions could have a negative effect upon our business, financial condition or results of operations. Our sales could be adversely impacted by the disruption or cessation of sales by other bike component manufacturers or if other bike component manufacturers enter into the specialty bike component market.
An adverse change in any of these conditions could have a negative effect upon our business, financial condition, or results of operations. Our sales could be adversely impacted by the disruption or cessation of sales by other bike component manufacturers or if other bike component manufacturers enter the specialty bike component market.
Our competitors’ new products may beat our products to market, be more effective and/or less expensive than our products, obtain better market acceptance or render our products obsolete. Any new products that we develop may not receive market acceptance or otherwise generate any meaningful sales or profits for us relative to our expectations.
Our competitors’ new products may beat our products to market, be more effective and/or less expensive than our products, obtain better market acceptance, or render our products less desirable or obsolete. Any new products that we develop may not receive market acceptance or otherwise generate any meaningful sales or profits for us relative to our expectations.
While we generally manufacture our products upon receipt of customer orders, if actual demand is less than the forecasted demand for our products and we have already manufactured the products or committed to purchase materials in support of forecasted demand, we could be forced to hold excess inventories.
While we generally manufacture our products upon receipt of customer orders, if actual demand is less than the forecasted demand for our products and we already manufactured the products or committed to purchase materials in support of forecasted demand, we could be forced to hold excess inventories.
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. In the case of OEM sales, each manufacturer has its own practices regarding product recalls and other product liability actions that could involve its suppliers.
We have in the past, and may have in the future, recalls (both voluntary and involuntary) of our products or of items that incorporate our products. In the case of OEM sales, each manufacturer has its own practices regarding product recalls and other product liability actions that could involve its suppliers.
For instance, we rely on skilled and well-trained engineers for the design and production of our products, as well as in our research and development functions. Competition for such individuals is intense, particularly in California and Georgia where several of our facilities are located.
For instance, we rely on skilled and well-trained engineers for the design and production of our products, as well as in our research and development functions. Competition for such individuals is intense, particularly in Taiwan, California, and Georgia, where several of our facilities are located.
In addition, we do not have long-term contracts with a majority of our dealers and distributors, and our dealers and distributors are not obligated to purchase specified amounts of our products. In fact, the majority of our dealers and distributors buy from us on a purchase order basis.
In addition, we do not have long-term contracts with a majority of our dealers, distributors, and retailers, and our dealers, distributors, and retailers are not obligated to purchase specified amounts of our products. In fact, the majority of our dealers, distributors, and retailers buy from us on a purchase-order basis.
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.
For example, there have been significant increases in gasoline and diesel fuel prices 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.
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.
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, created significant volatility in the global economy and led to reduced economic activity.
These government-mandated closures, “shelter-in-place” directives, and an outbreak among, or quarantine of, the employees in any of our facilities, have caused and could continue to cause significant interruptions to, or temporary closures of our operations.
These government-mandated closures, “shelter-in-place” directives, and an outbreak among, or quarantine of, the employees in any of our facilities caused and could continue to cause significant interruptions to, or temporary closures, of our operations.
Our indebtedness could be costly or have adverse consequences, such as: • requiring us to dedicate a substantial portion of our cash flows from operations to payments on our debt; • limiting our ability to obtain future financing for working capital, capital expenditures, acquisitions, debt obligations and other general corporate requirements; • making us more vulnerable to adverse conditions in the general economy or our industry and to fluctuations in our operating results, including affecting our ability to comply with and maintain any financial tests and ratios required under our indebtedness; • limiting our flexibility to engage in certain transactions or to plan for, or react to, changes in our business and industry; • putting us at a disadvantage compared to competitors that have less relative and/or less restrictive debt; and 27 Table of Contents • subjecting us to additional restrictive financial and other covenants.
Our indebtedness could be costly or have adverse consequences, such as: • requiring us to dedicate a substantial portion of our cash flows from operations to payments on our debt; • limiting our ability to obtain future financing for working capital, capital expenditures, acquisitions, debt obligations and other general corporate requirements; • making us more vulnerable to adverse conditions in the general economy or our industry and to fluctuations in our operating results, including affecting our ability to comply with and maintain any financial tests and ratios required under our indebtedness; • limiting our flexibility to engage in certain transactions or to plan for, or react to, changes in our business and industry; • putting us at a disadvantage compared to competitors that have less relative or less restrictive debt; and • subjecting us to additional restrictive financial and other covenants.
We do not control our dealers or distributors, and many of our contracts allow these entities to offer our competitors’ products. Our competitors may incentivize our dealers and distributors to favor their products.
We do not control our dealers, distributors, or retailers, and many of our contracts allow these entities to offer our competitors’ products. Our competitors may incentivize our dealers, distributors, and retailers, to favor their products.
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. 28 Table of Contents Unpredictability in the adoption, implementation and enforcement of increasingly stringent emission standards by multiple jurisdictions could adversely affect our business.
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. 29 Table of Contents Unpredictability in the adoption, implementation, and enforcement of increasingly stringent emission standards by multiple jurisdictions could adversely affect our business.
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.
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, delivery delays, or catastrophic loss at any of our facilities could lead to production or service disruptions, curtailments, or shutdowns.
Consequently, with little or no notice, many of these dealers and distributors may terminate their relationships with us or materially reduce their purchases of our products.
Consequently, with little or no notice, many of these dealers, distributors, and retailers may terminate their relationships with us or materially reduce their purchases of our products.
We will continue to have the ability to incur debt and our levels of debt may affect our operations and our ability to pay the principal of and interest on our debt.
We continue to have the ability to incur debt and our levels of debt may affect our operations and our ability to pay the principal of and interest on our debt.
The loss of all or a substantial portion of our sales to any of these customers, whether through the temporary or permanent discontinuation of their products which incorporate our products or otherwise, or the loss of market share by these customers could have a material adverse impact on us and our results of operations.
The loss of all or a significant portion of our sales to any of these customers, whether through the temporary or permanent discontinuation of their products which incorporate our products or otherwise, or the loss of market share by these customers could have a material adverse impact on us and our results of operations.
Accordingly, these rules could have a material adverse effect on our business, results of operations or financial condition. 30 Table of Contents We retain certain personal information about individuals and are subject to various privacy and consumer protection laws.
Accordingly, these rules could have a material adverse effect on our business, results of operations, or financial condition. 31 Table of Contents We retain certain personal information about individuals and are subject to various privacy and consumer protection laws.
We do not control our suppliers, OEMs, other customers or partners, or require them to comply with a formal code of conduct, and actions that they might take could harm our reputation and sales. We do not control our suppliers, OEMs, other customers or partners, or their labor, environmental or other practices.
We do not control our suppliers, athletic programs, OEMs, other customers, or partners, or require them to comply with a formal code of conduct, and actions that they might take could harm our reputation and sales. We do not control our suppliers, athletic programs, OEMs, other customers or partners, or their labor, environmental, or other practices.
Although we believe that our products, policies and processes comply with applicable safety, environmental, and other standards and related regulations, future regulations may require additional safety standards that would require additional expenses and/or modification of product offerings in order to maintain such compliance.
Although we believe that our products, policies, and processes comply with applicable safety, environmental, and other standards and related regulations, future regulations may require additional safety standards that would require additional expenses and/or modification of product offerings to maintain such compliance.
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. largely through ports on the West Coast.
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 and our Fox Taiwan facility into the U.S. largely through ports on the West Coast.
Although we believe we could obtain other coatings of comparable utility from other sources if necessary, we could no longer obtain this specific Kashima coating or use the trademark "KASHIMACOAT" if Miyaki were to stop supplying us with this coating.
Although we believe we could obtain other coatings of comparable utility from other sources if necessary, we could no longer obtain this specific Kashima coating or use the trademark “KASHIMACOAT” if Miyaki were to stop supplying us with this coating.
RISKS RELATED TO OUR INDEBTEDNESS AND LIQUIDITY The 2022 Credit Facility places operating restrictions on us and creates default risks. The 2022 Credit Facility with Wells Fargo Bank, National Association and other named lenders contains covenants that place restrictions on our operating activities.
RISKS RELATED TO OUR INDEBTEDNESS AND LIQUIDITY The 2022 Credit Facility places operating restrictions on us and creates default risks. The 2022 Credit Facility with Wells Fargo Bank, National Association, and other named lenders contains covenants that restrict our operating activities.
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.
Failure to comply with applicable regulations could result in fines, increased expenses to modify our products, and reputational harm, all of which could have an adverse effect on our business, financial condition, or results of operations.
We have experienced, and expect to continue to experience, substantial quarterly variations in our sales and net income.
We experienced, and expect to continue to experience, substantial quarterly variations in our sales and net income.
We are subject to extensive U.S. federal and state, foreign and international safety, environmental, employment practices and other government regulations that may require us to incur expenses or modify product offerings in order to maintain compliance with such regulation, which could have a negative effect on our business and results of operations.
We are subject to extensive U.S. federal and state, foreign and international safety, environmental, employment practices, and other government regulations that may require us to incur expenses or modify product offerings to maintain compliance with such regulations, which could have a negative effect on our business and results of operations.
If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline. Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our Company.
If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline. 33 Table of Contents Anti-takeover provisions in our charter documents and Delaware law could discourage, delay, or prevent a change in control of our Company.
However, there is a risk that a product could underperform and require us to adjust our warranty reserves or incur costs in excess of these reserves, which could adversely affect our results of operations. 22 Table of Contents If any of our products are or are alleged to be defective, we may be required to participate in a recall involving such products.
However, there is a risk that a product could underperform and require us to adjust our warranty reserves or incur costs in excess of these reserves, which could adversely affect our results of operations. If any of our products are, or are alleged to be, defective, we may be required to participate in a recall involving such products.
The professional athletes and race teams who use our products are an important aspect of the image of our brands. The loss of the support of professional athletes for our products or the inability to attract new professional athletes may harm our business.
The professional athletes, athletic programs, and race teams who use our products are an important aspect of the image of our brands. The loss of the support of professional athletes for our products or the inability to attract new professional athletes may harm our business.
Patent and Trademark Office and a number of foreign countries, including the marks FOX ® and RACE FACE ® , to be used with certain goods and services. When appropriate, we may from time to time assert our rights against those who infringe on our patents, trademarks, trade dress, or other intellectual property.
Patent and Trademark Office and a number of foreign countries—including the marks FOX®,RACE FACE®, and MARUCCI®—to be used with certain goods and services. When appropriate, we may assert our rights against those who infringe on our patents, trademarks, trade dress, or other intellectual property.
However, we may not be successful in enforcing our patents or asserting trademark, trade name or trade dress protection with respect to our brand names and our product designs, and third parties may seek to oppose or challenge our patents or trademark registrations. Further, these legal efforts may not be successful in reducing sales of suspension products by those infringing.
However, we may not be successful in enforcing our patents or asserting trademark, trade name or trade dress protection with respect to our brand names and our product designs, and third parties may seek to oppose or challenge our patents or trademark registrations. Further, these legal efforts may not successfully reduce sales of suspension products by those infringing.
In some cases, we may be required to develop new products to comply with new regulations, particularly those relating to air emissions. The successful development and introduction of new and enhanced products in order to comply with new regulatory requirements are subject to other risks, such as delays in product development, cost over-runs and unanticipated technical and manufacturing difficulties.
In some cases, we may be required to develop new products to comply with new regulations, particularly those relating to air emissions. The successful development and introduction of new and enhanced products in order to comply with new regulatory requirements are subject to other risks, such as delays in product development, cost overruns, and unanticipated technical and manufacturing difficulties.
Increasing focus on environmental, social and governance responsibility may impose additional costs on us and expose us to new risks. Regulators, stockholders and other interested constituencies have focused increasingly on the environmental, social and governance practices of companies.
Increasing focus on environmental, social, and governance responsibility may impose additional costs on us and expose us to new risks. Regulators, stockholders, and other interested constituencies focus increasingly on the environmental, social, and governance practices of companies.
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.
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 costs associated with some duplication of facilities, equipment and personnel, the amount of which could vary materially from our projections.
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. U.S. government policy, including continued interest rate increases by the Federal Reserve, may impact the exchange rate between the U.S. dollar and foreign currencies.
Currency exchange rate fluctuations could impact gross margins and expenses. Foreign currency fluctuations could have an adverse effect on our business, financial condition, or results of operations. U.S. government policy—including interest rate increases by the Federal Reserve—may impact the exchange rate between the U.S. Dollar and foreign currencies.
We may not be able to identify or consummate any future acquisitions on favorable terms, or at all. 25 Table of Contents Our operating results are subject to quarterly variations in our sales, which could make our operating results difficult to predict and could adversely affect the price of our common stock.
We may not be able to identify or consummate any future acquisitions on favorable terms, or at all. Our operating results are subject to quarterly variations in our sales, which could make our operating results difficult to predict and could adversely affect the price of our common stock.
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.
We do not inspect or audit compliance of our suppliers, athletic programs, 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.
Our future growth will depend upon various factors, including the strength of the image of our brands, our ability to continue to produce innovative performance-defining products, consumer acceptance of our products, competitive conditions in the marketplace, our ability to make strategic acquisitions, the growth in emerging markets for products requiring high-end suspension products and, in general, the continued growth of the high-end bike and powered vehicle markets into which we sell our products.
Our future growth will depend upon various factors, including the strength of the image of our brands, our ability to continue to produce innovative performance-defining products, consumer acceptance of our products, competitive conditions in the marketplace, our ability to make strategic acquisitions, the growth in emerging baseball and softball markets for Marucci products, the growth in emerging markets for products requiring high-end suspension products, and, in general, the continued growth of the high-end bike and powered vehicle markets into which we sell the majority of our products.
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.
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 lingering effects of the COVID-19 pandemic or labor strikes, could have a material impact on our business, financial condition, or results of operations.
Certain of our products are subject to extensive statutory and regulatory requirements governing emission and noise, including standards imposed by the Environmental Protection Agency, the European Union, state regulatory agencies (such as the California Air Resources Board) and other regulatory agencies around the world.
A portion of our products are subject to extensive statutory and regulatory requirements governing emission and noise, including standards imposed by the Environmental Protection Agency, the European Union, state regulatory agencies (such as the California Air Resources Board), and other regulatory agencies around the world.
In the OEM channel, our forecasts are based in large part on the number of our product specifications for new bikes and powered vehicles and on projections from our OEM customers. In the aftermarket channel, our forecasts are based partially on discussions with our dealers and distributors as well as our own assessment of markets.
In the OEM channel, our forecasts are largely based on the number of our product specifications for new bikes and powered vehicles and on projections from our OEM customers. In the aftermarket channel, our forecasts are based partially on discussions with our dealers and distributors as well as our own assessment of markets.
If current or future professional athletes and race teams do not use our products, our brands could lose value and our sales could decline.
If current or future professional athletes, athletic programs, and race teams do not use our products, our brands could lose value and our sales could decline.
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. However, from time to time, third parties have alleged, or may allege in the future, that our products and/or trademarks infringe upon their proprietary rights.
As we develop new products or attempt to use our brands in connection with new products, we seek to avoid infringing upon our competitors’ valid patents and other intellectual property rights. However, from time to time, third parties alleged, or may allege in the future, that our products or trademarks infringe upon their proprietary rights.
Despite the implementation of security measures, the information technology systems of our vendors or commercial partners are vulnerable to damage from computer viruses, ransomware software viruses and other similar types of malicious activities, unauthorized access, natural disasters, and electrical failures. Such events could cause disruptions in our operations.
Despite the implementation of security measures, our vendors' or commercial partners' information technology systems are vulnerable to damage from computer viruses, ransomware software viruses and other similar types of malicious activities, unauthorized access, natural disasters, and electrical failures. Such events could cause disruptions in our operations.
Continued increases in our employee costs could adversely affect our earnings, financial condition and liquidity. We rely on increasingly complex information systems for management of our manufacturing, distribution, sales and other functions. If our information systems fail to perform these functions adequately or if we experience an interruption in our operations, our business could suffer.
Continued increases in our employee costs could adversely affect our earnings, financial condition, and liquidity. We rely on increasingly complex information systems to manage our manufacturing, distribution, sales, and other functions. If our information systems fail to perform these functions adequately or if we experience an interruption in our operations, our business could suffer.
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.
In the future, we 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.
We generate virtually all of our revenues from sales of performance-defining products. Our beliefs regarding the outlook of the performance-defining product market come from qualitative data and limited sources, which may not be reliable.
We generate virtually all of our revenues from sales of performance-defining products. Our beliefs regarding the outlook of the performance-defining product market come from qualitative data and limited sources, which may be unreliable.
If our information systems fail to perform these functions adequately, if we or our vendors or commercial partners experience an interruption in our operations, or if we are impacted by cybersecurity attacks, our business could suffer; • we have grown and may continue to grow in the future through acquisitions, and we may not be able to effectively integrate businesses we acquire or we may not be able to identify or complete any future acquisitions on favorable terms, or at all; • our operating results are subject to quarterly variations in our sales, which could make our operating results difficult to predict and could adversely affect the price of our common stock; • 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 • our 2022 Credit Facility places operating restrictions on us and creates default risks, and the variable rate makes us more vulnerable to increases in interest rates; • we will continue to have the ability to incur debt and our levels of debt may affect our operations and our ability to pay the principal of and interest on our debt; • we may incur losses on interest rate swap and hedging arrangements; Risks Related to Laws and Regulations • changes in tax laws and regulations or other factors could cause our income tax obligations to increase, potentially reducing our net income and adversely affecting our cash flows; • we are subject to extensive U.S. federal and state, foreign and international safety, environmental, employment practices and other government regulations that may require us to incur expenses or modify product offerings in order to maintain compliance with such regulation, which could have a negative effect on our business and results of operations; • unpredictability in increasingly stringent emission standards and increasing focus on environmental, social and governance responsibility, including climate change, may impose additional costs and new risks on us; • we are subject to employment practice laws and regulations, and, as such, are exposed to litigation risks, and we may incur higher employee costs in the future; • we retain certain personal information about individuals and are subject to various privacy and consumer protection laws; • our vendors and any potential commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements; Risks Related to Ownership of Our Common Stock • potential volatility in our trading price, publications by securities or industry analysts, and future issuances, sales, and the perception of such could cause our stock price and trading volume to decline; • anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our Company; • our Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees; and General Risk Factors • failure of our internal control over financial reporting could adversely affect our business and financial results. 13 Table of Contents RISKS RELATED TO OUR BUSINESS AND OPERATIONS 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.
If our information systems fail to perform these functions adequately, if we or our vendors or commercial partners experience an interruption in our operations, or if we are impacted by cybersecurity attacks or data privacy issues, our business could suffer; • we have grown and may continue to grow in the future through acquisitions, and we may not be able to effectively integrate businesses we acquire, or we may not be able to identify or complete any future acquisitions on favorable terms, or at all; • our operating results are subject to quarterly variations in our sales, which could make our operating results difficult to predict and could adversely affect the price of our common stock; • 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 • our 2022 Credit Facility places operating restrictions on us and creates default risks, and the variable rate makes us more vulnerable to increases in interest rates; • we continue to have the ability to incur debt and our levels of debt may affect our operations and our ability to pay the principal of and interest on our debt; • we may incur losses on interest rate swap and hedging arrangements; Risks Related to Laws and Regulations • changes in tax laws and regulations or other factors could cause our income tax obligations to increase, potentially reducing our net income and adversely affecting our cash flows; • we are subject to extensive U.S. federal and state, foreign and international safety, environmental, employment practices and other government regulations that may require us to incur expenses or modify product offerings in order to maintain compliance with such regulation, which could have a negative effect on our business and results of operations; • unpredictability in increasingly stringent emission standards and increasing focus on environmental, social and governance responsibility, including climate change, may impose additional costs and new risks on us; • we are subject to employment practice laws and regulations, and, as such, are exposed to litigation risks, and we may incur higher employee costs in the future; • we retain certain personal information about individuals and are subject to various privacy and consumer protection laws; • our vendors and any potential commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements; • we are, and may in the future be, subject to legal proceedings, which could have a negative effect on our business and results of operations if the outcomes of these proceedings are adverse to us; Risks Related to Ownership of Our Common Stock • potential volatility in our trading price, publications by securities or industry analysts, and future issuances, sales, and the perception of such could cause our stock price and trading volume to decline; • anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our Company; • our Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees; • we cannot guarantee that our share repurchase program will be fully consummated or that it will enhance stockholder value, and the volatility of the price of our common stock could increase; and 14 Table of Contents General Risk Factors • failure of our internal control over financial reporting could adversely affect our business and financial results.
If we were to lose one or more of our dealers or distributors, we would need to obtain a new dealer or distributor to cover the particular location or product line, which may not be possible on favorable terms or at all.
If we were to lose one or more of our dealers, distributors, or retailers we would need to obtain a new dealer, distributor, or retailer, as applicable, to cover the particular location or product line, which may not be possible on favorable terms or at all.
There have been extraordinary actions taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world, including travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.
There have been extraordinary actions taken by international, federal, state, and local public health and governmental authorities, most of which are no longer in effect, to contain and combat the outbreak and spread of COVID-19 in regions throughout the world, including travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.
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.
Additionally, with our acquisitions of SCA, Tuscany, Outside Van, Shock Therapy, and Custom Wheel House, a growing portion of our sales are expected to be generated from providing upfitting solutions.
In many of the countries in which we operate, governmental bodies are increasingly enacting legislation and regulations in response to the potential impacts of climate change. For example, many nations have agreed to limit emissions of greenhouse gas pursuant to the United Nations Framework Convention on Climate Change, also known as the "Kyoto Protocol" and other initiatives.
In many of the countries in which we operate, governmental bodies are increasingly enacting legislation and regulations in response to the potential impacts of climate change. For example, many nations agreed to limit greenhouse gas emissions pursuant to the United Nations Framework Convention on Climate Change, also known as the “Kyoto Protocol” and other initiatives.
Part of our success has been attributable to the growth in the high-end bike industry, including increases in average retail sales prices, as better-performing product designs and technologies have been incorporated into these products.
Part of our success is attributed to the growth in the high-end bike industry, including increases in average retail sales prices, as better-performing product designs and technologies have been incorporated into these products.
Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws (together, our "Charter Documents"), as well as Delaware law, contain provisions that may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable.
Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws (together, our “Charter Documents”), as well as Delaware law, contain provisions that may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable.
Alternatively, we could use our own sales force to replace such a dealer or distributor, but expanding our sales force into new locations takes a significant amount of time and resources and may not be successful. Further, many of our international distribution contracts contain exclusivity arrangements, which may prevent us from replacing or supplementing our current distributors under certain circumstances.
Alternatively, we could use our own sales force to replace a dealer, distributor, or retailer, but expanding our sales force into new locations takes significant time and resources and may be unsuccessful. Further, many of our international distribution contracts contain exclusivity arrangements, which may prevent us from replacing or supplementing our current distributors under certain circumstances.
In addition, our brands benefit from our strong relationships with our OEM customers and dealers and distributors and through marketing programs aimed at bike and powered vehicle enthusiasts in various media and other channels. For example, we sponsor a number of professional athletes and professional race teams.
In addition, some of our brands benefit from our strong relationships with our OEM customers and dealers and distributors and through marketing programs aimed at bike and powered vehicle enthusiasts in various media and other channels. For example, we sponsor a number of professional athletes, professional race teams, top college programs, and franchise clubs.
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.
Enterprise Resource Planning (“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.
While we expended approximately $56.2 million, $46.6 million and $34.3 million for our research and development efforts in 2022, 2021 and 2020, respectively, there can be no assurance that this level of investment in research and development will be sufficient in the future to maintain our competitive advantage in product innovation, which could cause our business, financial condition or results of operations to suffer.
While we expended approximately $53.2 million, $56.2 million and $46.6 million for our research and development efforts in fiscal years 2023, 2022 and 2021, respectively, there can be no assurance that this level of investment in research and development will be sufficient in the future to maintain our competitive advantage in product innovation, which could cause our business, financial condition or results of operations to suffer.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES At December 30, 2022, we occupied the following square footage by location: U.S. Other Countries Total Leased facilities 790,645 421,269 1,211,914 Owned facilities 914,327 42,900 957,227 Total 1,704,972 464,169 2,169,141 Certain administrative, research and development and manufacturing operations are located in California and Georgia. We also manufacture in the U.S.
Biggest changeITEM 2. PROPERTIES At December 29, 2023, we occupied the following square footage by location: U.S. Other Countries Total Leased facilities 2,680,286 405,115 3,085,401 Owned facilities 829,363 178,842 1,008,205 Total 3,509,649 583,957 4,093,606 Certain administrative, research and development and manufacturing operations are located in California and Georgia. We also manufacture in the U.S.
States of Michigan, Colorado, Indiana, Alabama and Oregon, and internationally in Taiwan and Canada, and maintain sales and service offices in the U.S. and Europe. We believe that our properties are generally suitable to meet our needs for the foreseeable future.
States of Michigan, Colorado, Indiana, Alabama, Pennsylvania, Louisiana, Utah and Oregon, and internationally in Taiwan and Canada, and maintain sales and service offices in the U.S. and Europe. We believe that our properties are generally suitable to meet our needs for the foreseeable future.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS From time to time, the Company is involved in legal proceedings that arise in the ordinary course of business.
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ITEM 3. LEGAL PROCEEDINGS On February 20, 2024, a complaint alleging violations of federal securities laws and seeking certification as a class action was filed against the Company and certain of its current and former officers in the United States District Court for the Northern District of Georgia in Atlanta. The complaint has not yet been served.
Removed
Although the Company cannot assure the outcome of any such legal proceedings, based on information currently available, management does not believe that the ultimate resolution of any pending matters, either individually or in the aggregate, will have a material adverse effect on the Company's financial condition, results of operations or cash flows.
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The complaint purports to seek damages on behalf of a putative class of persons who purchased the Company’s common stock between May 6, 2021 and November 2, 2023.
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The complaint asserts claims under Sections 10(b) and 20 of the Securities Exchange Act and alleges that the Company made material misstatements and omissions to investors regarding demand for the Company’s products and inventory levels. The complaint generally seeks money damages, interest, attorneys’ fees, and other costs.
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The Company denies all allegations of wrongdoing, believes the plaintiffs' positions are without merit, and intends to vigorously defend itself.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePrior to that date, there was no public trading market for our common stock. On February 16, 2023, the closing price per share of our common stock as reported on the NASDAQ Global Select Market was $122.66 per share. Stockholders As of January 31, 2023, there were approximately 8 holders of record of our common stock.
Biggest changePrior to that date, there was no public trading market for our common stock. On February 15, 2024, the closing price per share of our common stock as reported on the NASDAQ Global Select Market was $68.30 per share. Stockholders As of January 31, 2024, there were approximately 7 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock has been listed on the NASDAQ Global Select Market under the symbol "FOXF" since August 8, 2013. Our IPO was priced at $15.00 per share on August 8, 2013.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock has been listed on the NASDAQ Global Select Market under the symbol “FOXF” since August 8, 2013. Our IPO was priced at $15.00 per share on August 8, 2013.
Dividend Policy We did not declare or pay any dividends in the years ended December 30, 2022 and December 31, 2021. In addition, our 2022 Credit Facility contains covenants limiting our ability to pay dividends to our stockholders. See Item 7.
Dividend Policy We did not declare or pay any dividends in the years ended December 29, 2023 and December 30, 2022. In addition, our 2022 Credit Facility contains covenants limiting our ability to pay dividends to our stockholders. See Item 7.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeOur products fall into the following two categories: • powered vehicles, including side-by-sides, certain on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, including military, motorcycles, and commercial trucks; • specialty sports products, which consist primarily of bike suspension and component products.
Biggest changeOur products fall into the following three categories: • powered vehicles, including side-by-sides, certain on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, including military, motorcycles, and commercial trucks; • aftermarket applications, mainly consisting of products for off-road vehicles and trucks, side-by-sides, on-road vehicles with or without off-road capabilities, specialty vehicles and applications as well as lift kits and components with our shock products and aftermarket accessory packages for use in trucks; and • specialty sports products, which consist primarily of bike suspension, component products, and gear and equipment for baseball and softball.
ITEM 6. RESERVED 36 Table of Contents ITEM 7. 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 the consolidated financial statements and related notes thereto included elsewhere in this Annual Report in Form 10-K.
ITEM 6. RESERVED 40 Table of Contents ITEM 7. 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 the consolidated financial statements and related notes thereto included elsewhere in this Annual Report in Form 10-K.
Virtually all of our revenues were from our product sales; miscellaneous sources of revenue such as royalty income and service related repair work and the associated sale of parts represented less than 1% of our sales in each of the years ended December 30, 2022, December 31, 2021 and January 1, 2021.
Virtually all of our revenues were from our product sales; miscellaneous sources of revenue such as royalty income and service related repair work and the associated sale of parts represented less than 1% of our sales in each of the years ended December 29, 2023, December 30, 2022 and December 31, 2021.
Losses in market share or a decline in the overall market of our OEM customers or the discontinuance by our OEM customers of their products that incorporate our products could negatively impact our business and our results of operations. 37 Table of Contents In the fourth quarter of 2021, we completed the construction of an approximately 336,000 square foot state-of-the-art facility in Hall County, Georgia (the "Gainesville Facility"), to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.
Losses in market share or a decline in the overall market of our OEM customers or the discontinuance by our OEM customers of their products that incorporate our products could negatively impact our business and our results of operations. 41 Table of Contents In the fourth quarter of 2021, we completed the construction of an approximately 336,000 square foot state-of-the-art facility in Hall County, Georgia (the “Gainesville Facility”), to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.
Please read "Risks Related to Our Business and Operations - Product recalls, and significant product repair and/or replacement due to product warranty costs and claims have had, and in the future, could have, a material adverse impact on our business" within Item 1A. Risk Factors .
Please read “Risks Related to Our Business and Operations - Product recalls, and significant product repair and/or replacement due to product warranty costs and claims have had, and in the future, could have, a material adverse impact on our business” within Item 1A. Risk Factors .
We estimate, based on our internal projections and assumptions, that approximately one-third of the end users of our bike products are located outside the U.S. Opportunities, challenges and risks We intend to focus on generating sales of our performance-defining products through OEMs and in the aftermarket channel.
We estimate, based on our internal projections and assumptions, that approximately one-third of the end users of our bike products are located outside the U.S. Opportunities, challenges and risks We intend to focus on generating sales of our performance-defining products through OEMs, aftermarket, and retail channels.
You should review the "Risk Factors" and "Special Note Regarding Forward-Looking Statements" sections of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
You should review the “Risk Factors” and “Special Note Regarding Forward-Looking Statements” sections of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Sales attributable to countries outside the U.S. are based on shipment location. Our international sales, however, do not necessarily reflect the location of the end users of our products as many of our products are incorporated into bikes that are assembled at international locations and then shipped back to the U.S.
Our international sales, however, do not necessarily reflect the location of the end users of our products as many of our products are incorporated into bikes that are assembled at international locations and then shipped back to the U.S.
Overview We design, engineer, manufacture and market performance-defining products and systems for customers worldwide. Our premium brand, performance-defining products and systems are used primarily on bikes, side-by-sides, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, and specialty vehicles and applications.
Overview We design, engineer, manufacture and market performance-defining products and systems for customers worldwide. Our premium brand, performance-defining products and systems are used primarily on bikes, side-by-sides, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, and specialty vehicles and applications. In addition, we also offer premium baseball and softball gear and equipment.
In the ordinary course of business, we reserve for such costs and claims in our financial statements. There is a risk, however, that in the future we will experience higher than expected warranty costs and claims, as well as other related costs.
There is a risk, however, that in the future we will experience higher than expected warranty costs and claims, as well as other related costs.
The Gainesville Facility is being used for manufacturing, warehousing, distribution and office space. Additionally, we completed the transition of our Watsonville Facility and relocation of our powered vehicles suspension manufacturing to the Gainesville Facility in the first quarter of 2022. From time to time, we have experienced, and may continue to experience, warranty costs and claims relating to our products.
The Gainesville Facility is being used for manufacturing, warehousing, distribution and office space. From time to time, we have experienced, and may continue to experience, warranty costs and claims relating to our products. In the ordinary course of business, we reserve for such costs and claims in our financial statements.
In each of the years ended December 30, 2022, December 31, 2021 and January 1, 2021, approximately 58%, 55% and 59%, respectively, of our sales were attributable to sales of products for powered vehicles and approximately 42%, 45% and 41%, respectively, of our sales were attributable to sales of specialty sports products.
In each of the years ended December 29, 2023, December 30, 2022 and December 31, 2021, approximately 36%, 27% and 28%, respectively, of our net sales were attributable to net sales of powered vehicles products; approximately 38%, 31%, and 28%, respectively, of our net sales were attributable to net sales of aftermarket application products and approximately 27%, 42% and 45%, respectively, of our net sales were attributable to sales of specialty sports products.
Our North American sales totaled $1,009.2 million, $811.3 million and $593.3 million, or 63%, 62% and 67% of our total sales in fiscal years 2022, 2021 and 2020, respectively. Our international sales totaled $593.3 million, $487.8 million and $297.3 million, or 37%, 38% and 33% of our total sales in fiscal years 2022, 2021 and 2020, respectively.
Our North American net sales totaled $1,127.6 million, $1,009.2 million and $811.3 million, or 77%, 63% and 62% of our total net sales in fiscal years 2023, 2022 and 2021, respectively.
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Our international net sales totaled $336.6 million, $593.3 million and $487.8 million, or 23%, 37% and 38% of our total net sales in fiscal years 2023, 2022 and 2021, respectively. Sales attributable to countries outside the U.S. are based on shipment location.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAny such adjustments could have a significant impact on our effective tax rate. 40 Table of Contents Results of operations The table below summarizes our results of operations for the fiscal years ended December 30, 2022, December 31, 2021, and January 1, 2021: For the fiscal years ended December 30 December 31 January 1 (in thousands) 2022 2021 2021 Sales $ 1,602,491 $ 1,299,064 $ 890,554 Cost of sales 1,071,148 866,732 601,007 Gross profit 531,343 432,332 289,547 Operating expenses: Sales and marketing 90,801 70,925 52,214 Research and development 56,205 46,567 34,292 General and administrative 116,103 97,241 71,309 Amortization of purchased intangibles 21,537 20,685 17,583 Total operating expenses 284,646 235,418 175,398 Income from operations 246,697 196,914 114,149 Interest and other expense, net: Interest expense 8,939 8,162 9,294 Other expense, net 3,994 371 325 Total interest and other expense, net 12,933 8,533 9,619 Income before income taxes 233,764 188,381 104,530 Provision for income taxes 28,486 24,563 12,784 Net income 205,278 163,818 91,746 Less: net income attributable to non-controlling interest — — 1,072 Net income attributable to FOX stockholders $ 205,278 $ 163,818 $ 90,674 41 Table of Contents The following table sets forth statement of income data as a percentage of sales for the years indicated: For the fiscal years ended December 30 December 31 January 1 2022 2021 2021 Sales 100.0 % 100.0 % 100.0 % Cost of sales 66.8 66.7 67.5 Gross profit 33.2 33.3 32.5 Operating expenses: Sales and marketing 5.7 5.5 5.9 Research and development 3.5 3.6 3.9 General and administrative 7.2 7.5 8.0 Amortization of purchased intangibles 1.3 1.6 2.0 Total operating expenses 17.8 18.1 19.7 Income from operations 15.4 15.2 12.8 Interest and other expense, net: Interest expense 0.6 0.6 1.0 Other expense, net 0.2 — — Interest and other expense, net 0.8 0.7 1.1 Income before income taxes 14.6 14.5 11.7 Provision for income taxes 1.8 1.9 1.4 Net income 12.8 12.6 10.3 Less: net income attributable to non-controlling interest — — 0.1 Net income attributable to FOX stockholders 12.8 % 12.6 % 10.2 % *Percentages may not foot due to rounding. 42 Table of Contents Fiscal year ended December 30, 2022 compared to fiscal year ended December 31, 2021 Sales For the fiscal years (in millions) 2022 2021 Change ($) Change (%) Powered Vehicle products $ 921.5 $ 720.0 $ 201.5 28.0 % Specialty Sports products 681.0 579.0 102.0 17.6 Total sales $ 1,602.5 $ 1,299.0 $ 303.5 23.4 % Sales for the year ended December 30, 2022 increased approximately $303.5 million, or 23.4%, compared to the year ended December 31, 2021.
Biggest changeAny such adjustments could have a significant impact on our effective tax rate. 44 Table of Contents Results of operations The table below summarizes our results of operations for the fiscal years ended December 29, 2023, December 30, 2022, and December 31, 2021: For the fiscal years ended (in millions) December 29, 2023 December 30, 2022 December 31, 2021 Net sales $ 1,464.2 $ 1,602.5 $ 1,299.1 Cost of sales 999.4 1,071.1 866.7 Gross profit 464.8 531.3 432.3 Operating expenses: General and administrative 124.6 116.1 97.2 Sales and marketing 100.5 90.8 70.9 Research and development 53.2 56.2 46.6 Amortization of purchased intangibles 26.5 21.5 20.7 Total operating expenses 304.7 284.6 235.4 Income from operations 160.1 246.7 196.9 Interest expense 19.3 8.9 8.2 Other expense, net 2.1 4.0 0.4 Income before income taxes 138.7 233.8 188.4 Provision for income taxes 17.8 28.5 24.6 Net income $ 120.8 $ 205.3 $ 163.8 *Amounts may not foot due to rounding.
Operating expenses For the fiscal years (in millions) 2022 2021 Change ($) Change (%) Operating expenses: Sales and marketing $ 90.8 $ 70.9 $ 19.9 28.1 % Research and development 56.2 46.6 9.6 20.6 General and administrative 116.1 97.2 18.9 19.4 Amortization of purchased intangibles 21.5 20.7 0.8 3.9 Total operating expenses $ 284.6 $ 235.4 $ 49.2 20.9 % Total operating expenses for the year ended December 30, 2022 increased approximately $49.2 million, or 20.9%, over the comparable period in 2021.
Operating expenses For the fiscal years (in millions) 2022 2021 Change ($) Change (%) Operating expenses: General and administrative $ 116.1 $ 97.2 $ 18.9 19.4 % Sales and marketing 90.8 70.9 19.9 28.1 Research and development 56.2 46.6 9.6 20.6 Amortization of purchased intangibles 21.5 20.7 0.8 3.9 Total operating expenses $ 284.6 $ 235.4 $ 49.2 20.9 % Total operating expenses for the year ended December 30, 2022 increased approximately $49.2 million, or 20.9%, over the comparable period in 2021.
Interest and other expense, net For the fiscal years (in millions) 2022 2021 Change ($) Change (%) Interest and other expense, net: Interest expense $ 8.9 $ 8.2 $ 0.7 8.5 % Other expense, net 4.0 0.3 3.7 1,233.3 Interest and other expense, net $ 12.9 $ 8.5 $ 4.4 51.8 % Interest and other expense, net for the year ended December 30, 2022 increased by approximately $4.4 million to $12.9 million, compared to $8.5 million for the year ended December 31, 2021.
Interest and other expense, net For the fiscal years (in millions) 2022 2021 Change ($) Change (%) Interest expense $ 8.9 $ 8.2 $ 0.7 8.5 % Other expense, net 4.0 0.3 3.7 1,233.3 Interest and other expense, net $ 12.9 $ 8.5 $ 4.4 51.8 % Interest and other expense, net for the year ended December 30, 2022 increased by approximately $4.4 million to $12.9 million, compared to $8.5 million for the year ended December 31, 2021.
If circumstances change, such as higher-than-expected defaults or an unexpected material adverse change in a major customer’s ability to meet its financial obligations, we estimate if the recoverability of the amounts due could be reduced by a material amount. 52 Table of Contents Fair value measurement and financial instruments ASC 820, Fair Value Measurements and Disclosures , requires the valuation of assets and liabilities required or permitted to be either recorded or disclosed at fair value based on hierarchy of available inputs as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
If circumstances change, such as higher-than-expected defaults or an unexpected material adverse change in a major customer’s ability to meet its financial obligations, we estimate if the recoverability of the amounts due could be reduced by a material amount. 56 Table of Contents Fair value measurement and financial instruments ASC 820, Fair Value Measurements and Disclosures , requires the valuation of assets and liabilities required or permitted to be either recorded or disclosed at fair value based on hierarchy of available inputs as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
Advances under the 2022 Credit Facility can be either Adjusted Term Secured Overnight Financing Rate ("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 2.00%.
Advances under the 2022 Credit Facility can be either Adjusted Term Secured Overnight Financing Rate (“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 2.00%.
Cost of sales The cost of sales includes the cost of purchased parts and manufactured products (raw materials consumed, the cost to procure materials, labor costs, including wages, and employee benefits, and factory overhead to produce finished good products), including: • the costs to inspect and repair products; • shipping costs associated with inbound freight (such costs are capitalized as part of inventory and included in cost of sales as the inventory is sold); • royalty expenses, including payments to certain parties for our use of licensed technology incorporated into our products; • freight expenses incurred for certain shipments to customers; • warranty costs associated with the repair or replacement of products under warranty; and • reductions in the cost of inventory to its net realizable value, if required, for estimated excess, obsolescence or impaired balances. 38 Table of Contents Gross profit/gross margin Our gross profit equals our sales minus cost of sales.
Cost of sales The cost of sales includes the cost of purchased parts and manufactured products (raw materials consumed, the cost to procure materials, labor costs, including wages, and employee benefits, and factory overhead to produce finished good products), including: • the costs to inspect and repair products; • shipping costs associated with inbound freight (such costs are capitalized as part of inventory and included in cost of sales as the inventory is sold); • royalty expenses, including payments to certain parties for our use of licensed technology incorporated into our products; • freight expenses incurred for certain shipments to customers; • warranty costs associated with the repair or replacement of products under warranty; and • reductions in the cost of inventory to its net realizable value, if required, for estimated excess, obsolescence or impaired balances. 42 Table of Contents Gross profit/gross margin Our gross profit equals our net sales minus cost of sales.
Our gross margin measures our gross profit as a percentage of sales. Our gross margins fluctuate based on production volumes, product, customer and channel mix and overall supply chain and manufacturing efficiencies. Generally, we earn higher gross margins on our products sold to the aftermarket channel.
Our gross margin measures our gross profit as a percentage of net sales. Our gross margins fluctuate based on production volumes, product, customer and channel mix and overall supply chain and manufacturing efficiencies. Generally, we earn higher gross margins on our products sold to the aftermarket channel.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Material Cash Requirements for additional information. Basis of presentation Composition of sales Sales from: • Product sales: consist of sales of performance-defining products and systems to customers worldwide.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Material Cash Requirements for additional information. Basis of presentation Composition of net sales Sales from: • Product sales: consist of sales of performance-defining products and systems to customers worldwide.
Operating expenses Our operating expenses consist of the following: • sales and marketing; • research and development; • general and administrative; and • amortization of purchased intangibles. Our sales and marketing expenses include costs related to our sales, customer service and marketing personnel, including their wages, employee benefits and related stock-based compensation, and occupancy related expenses.
Operating expenses Our operating expenses consist of the following: • sales and marketing; • research and development; • general and administrative; and • amortization of purchased intangibles. Our sales and marketing expenses include costs related to our net sales, customer service and marketing personnel, including their wages, employee benefits and related stock-based compensation, and occupancy related expenses.
Our significant accounting policies are described in Note 1. Description of the Business, Basis of Presentation and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments or estimates.
GAAP. Our significant accounting policies are described in Note 1. Description of the Business, Basis of Presentation and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments or estimates.
Refer to Note 15. Income Taxes for further details. 50 Table of Contents Inventories Inventories are stated at the lower of actual cost (or standard cost which generally approximates actual costs on a first-in first-out basis) or net realizable value. Cost includes raw materials and inbound freight, as well as direct labor and manufacturing overhead for products we manufacture.
Refer to Note 15. Income Taxes for further details. 54 Table of Contents Inventories Inventories are stated at the lower of actual cost (or standard cost which generally approximates actual costs on a first-in first-out basis) or net realizable value. Cost includes raw materials and inbound freight, as well as direct labor and manufacturing overhead for products we manufacture.
If the asset or asset group is considered to be impaired, the amount of such impairment would be measured by the difference between the carrying amount of the asset and its fair value. 51 Table of Contents Acquisition of certain identifiable definite-lived and indefinite-lived assets In conjunction with an acquisition of a business, the Company records identifiable definite-lived and indefinite-lived intangible assets acquired at their respective fair values as of the date of acquisition.
If the asset or asset group is considered to be impaired, the amount of such impairment would be measured by the difference between the carrying amount of the asset and its fair value. 55 Table of Contents Acquisition of certain identifiable definite-lived and indefinite-lived assets In conjunction with an acquisition of a business, the Company records identifiable definite-lived and indefinite-lived intangible assets acquired at their respective fair values as of the date of acquisition.
If inventory is written down, a new cost basis will be established that cannot be increased in future periods. Warranty Unless otherwise required by law, the Company generally offers limited warranties on its products for one to two years.
If inventory is written down, a new cost basis will be established that cannot be increased in future periods. Warranty Unless otherwise required by law, the Company generally offers limited warranties on its products for one to three years.
Prior Credit Facility In June 2019, the Company entered into a credit facility with Bank of America and other named lenders, which was periodically amended and restated and/or amended. The credit facility was amended and restated on March 11, 2020, and further amended on June 19, 2020, June 11, 2021 and December 16, 2021 (as amended, the "Prior Credit Facility").
Prior Credit Facility In June 2019, the Company entered into a credit facility with Bank of America and other named lenders, which was periodically amended and restated and/or amended. The credit facility was amended and restated on March 11, 2020, and further amended on June 19, 2020, June 11, 2021 and December 16, 2021 (as amended, the “Prior Credit Facility”).
An accounting estimate is considered to be critical if it meets both of the following criteria: (i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur may have a material impact on our financial condition or results of operations.
An accounting estimate is considered to be critical if it is made in accordance with GAAP and it meets both of the following criteria: (i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur may have a material impact on our financial condition or results of operations.
Stock-based compensation The Company measures stock-based compensation for all stock-based awards, including stock options and restricted stock units ("RSUs"), based on their estimated fair values on the date of the grant and recognizes the stock-based compensation cost for time-vested awards on a straight-line basis over the requisite service period.
Stock-based compensation The Company measures stock-based compensation for all stock-based awards, including stock options and restricted stock units (“RSUs”), based on their estimated fair values on the date of the grant and recognizes the stock-based compensation cost for time-vested awards on a straight-line basis over the requisite service period.
Other expense, net, consists of foreign currency transaction gains and losses, gains and losses on the disposal of fixed assets, and other miscellaneous items. 39 Table of Contents Income taxes We are subject to income taxes in the U.S. (federal and state) and various other foreign jurisdictions.
Other expense, net, consists of foreign currency transaction gains and losses, gains and losses on the disposal of fixed assets, and other miscellaneous items. 43 Table of Contents Income taxes We are subject to income taxes in the U.S. (federal and state) and various other foreign jurisdictions.
We completed our most recent annual impairment test in the third quarter of 2022 at which time we had a single reporting unit for purposes of assessing goodwill impairment. No impairment charges have been incurred to date.
We completed our most recent annual impairment test in the third quarter of 2023 at which time we had a single reporting unit for purposes of assessing goodwill impairment. No impairment charges have been incurred to date.
Cash invested in operating assets and liabilities is primarily the result of increases in inventory of $78.5 million and accounts receivable of $64.0 million, partially offset by a decrease in prepaids and other current assets of $18.1 million, and increases in accounts payable of $40.5 million, accrued expenses of $11.7 million and income taxes payable of $8.7 million.
Cash invested in operating assets and liabilities is primarily the result of increases in inventory of $87.4 million and accounts receivable of $64.0 million, partially offset by a decrease in prepaids and other current assets of $18.1 million, and increases in accounts payable of $40.5 million, accrued expenses of $11.7 million and income taxes payable of $8.7 million.
The increase in cost of sales was driven primarily by an increase in product sales, as well as certain business factors affecting gross margin, which are discussed below. For the year ended December 30, 2022, our gross margin was 33.2% compared to 33.3% for the year ended December 31, 2021.
The increase in cost of sales was driven primarily by an increase in product sales, as well as certain business factors affecting gross margin, which are discussed below. 48 Table of Contents For the year ended December 30, 2022, our gross margin was 33.2% compared to 33.3% for the year ended December 31, 2021.
Cash invested in operating assets and liabilities is primarily the result of increases in inventory of $146.5 million, prepaids and other current assets of $34.5 million, and accounts receivable of $20.2 million, offset by increases in net income taxes payable of $26.8 million, accrued expenses of $21.8 million, and accounts payable of $10.3 million.
Cash invested in operating assets and liabilities is primarily the result of increases in inventory of $150.4 million, prepaids and other current assets of $34.5 million, and accounts receivable of $20.2 million, offset by increases in net income taxes payable of $26.8 million, accrued expenses of $21.8 million, and accounts payable of $10.3 million.
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 December 30, 2022.
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 December 29, 2023.
Additionally, the Company had $4.5 million of remaining unamortized debt issuance costs related to the Prior Credit Facility. The Company expensed $1.9 million of the remaining unamortized debt issuance costs and allocated $2.5 million to the 2022 Credit Facility. The Company may borrow, prepay and re-borrow principal under the 2022 Credit Facility during its term.
Additionally, the Company had $4.5 million of remaining unamortized debt issuance costs related to the Prior Credit Facility. The Company expensed $1.9 million of the remaining unamortized debt issuance costs and allocated $2.5 million to the 2022 Credit Facility. 52 Table of Contents The Company may borrow, prepay and re-borrow principal under the 2022 Credit Facility during its term.
However, significant increases in inflation, particularly those related to wages and increases in the cost of raw materials could have an adverse impact on our business, financial condition and results of operations. 49 Table of Contents Critical Accounting Policies and Estimates We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP.
However, 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. 53 Table of Contents Critical Accounting Policies and Estimates We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S.
On June 11, 2021, the Company entered into an interest rate swap agreement (the "2021 Swap Agreement") to mitigate the cash flow risk associated with changes in interest rates on its variable rate debt. On April 5, 2022, the Company terminated its 2021 Swap Agreement and entered into a new interest rate swap agreement (the "2022 Swap Agreement").
On June 11, 2021, the Company entered into an interest rate swap agreement (the “2021 Swap Agreement”) to mitigate the cash flow risk associated with changes in interest rates on its variable rate debt. On April 5, 2022, the Company terminated its 2021 Swap Agreement and entered into a new interest rate swap agreement (the “2022 Swap Agreement”).
Our intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be fully recoverable. No impairments of intangible assets were identified in the years ended December 30, 2022, December 31, 2021 and January 1, 2021.
Our intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be fully recoverable. No impairments of intangible assets were identified in the years ended December 29, 2023, December 30, 2022 and December 31, 2021.
For the years ended December 30, 2022, December 31, 2021 and January 1, 2021, we had effective tax rates of 12.2%, 13.0% and 12.2%, respectively. As of December 30, 2022, our deferred tax assets included foreign tax credits of approximately $47.8 million, which begin to expire in 2026 unless utilized.
For the years ended December 29, 2023, December 30, 2022 and December 31, 2021, we had effective tax rates of 12.8%, 12.2% and 13.0%, respectively. As of December 29, 2023, our deferred tax assets included foreign tax credits of approximately $51.2 million, which begin to expire in 2026 unless utilized.
The term loan was subject to quarterly amortization payments. 48 Table of Contents 2022 Credit Facility On April 5, 2022, the Company entered into a new credit agreement with Wells Fargo Bank, National Association, and other named lenders (the "2022 Credit Facility"), and concurrently repaid in full and terminated the Prior Credit Facility.
The term loan was subject to quarterly amortization payments. 2022 Credit Facility On April 5, 2022, the Company entered into a new credit agreement with Wells Fargo Bank, National Association, and other named lenders (the “2022 Credit Facility”), and concurrently repaid in full and terminated the Prior Credit Facility.
Stock-based compensation was $16.4 million, $13.9 million and $8.6 million for the fiscal years ended December 30, 2022, December 31, 2021 and January 1, 2021, respectively. Refer to Note 13. Stockholders’ Equity for further details. The fair value of each stock option granted is estimated using the Black-Scholes option-pricing model.
Stock-based compensation was $16.5 million, $16.4 million and $13.9 million for the fiscal years ended December 29, 2023, December 30, 2022 and December 31, 2021, respectively. Refer to Note 13. Stockholders’ Equity for further details. The fair value of each stock option granted is estimated using the Black-Scholes option-pricing model.
An increase in warranty claims or the related costs associated with satisfying these warranty obligations could increase our cost of sales and negatively affect our operating results. Total accrued warranty liabilities were approximately $17.1 million and $15.5 million as of December 30, 2022 and December 31, 2021, respectively. Refer to Note 8. Accrued Expenses for further details.
An increase in warranty claims or the related costs associated with satisfying these warranty obligations could increase our cost of sales and negatively affect our operating results. Total accrued warranty liabilities were approximately $20.0 million and $17.1 million as of December 29, 2023 and December 30, 2022, respectively. Refer to Note 8. Accrued Expenses for further details.
Provisions for discounts, rebates, sales incentives, returns, and other adjustments are generally provided for in the period the related sales are recorded, based on management’s assessment of historical trends and projection of future results. Accrued sales rebates were $8.7 million and $8.6 million as of December 30, 2022 and December 31, 2021, respectively.
Provisions for discounts, rebates, sales incentives, returns, and other adjustments are generally provided for in the period the related sales are recorded, based on management’s assessment of historical trends and projection of future results. Accrued sales rebates were $11.9 million and $8.7 million as of December 29, 2023 and December 30, 2022, respectively.
Allowance for credit losses We record a provision for credit losses deemed not collectible using the aging method. The provision is based on how long a receivable has been outstanding, taking into account the historical credit loss rate and adjusting for both current conditions and forecasts of economic conditions into that expected credit loss rate.
The provision is based on how long a receivable has been outstanding, taking into account the historical credit loss rate and adjusting for both current conditions and forecasts of economic conditions into that expected credit loss rate.
Amortization of purchased intangible assets for the year ended December 30, 2022 increased by approximately $0.8 million as compared to the year ended December 31, 2021, primarily due to the amortization of Shock Therapy intangible assets. 43 Table of Contents Income from operations For the fiscal years (in millions) 2022 2021 Change ($) Change (%) Income from operations $ 246.7 $ 196.9 $ 49.8 25.3 % As a result of the factors discussed above, income from operations for the year ended December 30, 2022 increased approximately $49.8 million, or 25.3%, compared to the year ended December 31, 2021.
Income from operations For the fiscal years (in millions) 2022 2021 Change ($) Change (%) Income from operations $ 246.7 $ 196.9 $ 49.8 25.3 % As a result of the factors discussed above, income from operations for the year ended December 30, 2022 increased approximately $49.8 million, or 25.3%, compared to the year ended December 31, 2021.
The sales increase reflects an increase of 28.0% and 17.6% in Powered Vehicle products and Specialty Sports products sales, respectively, for the year ended December 30, 2022 compared to the prior fiscal year. The increase in Powered Vehicle product sales was primarily due to strong performance from our upfitting product lines and increased demand in the OEM channel.
The net sales increase reflects an increase of 36.1%, 19.9% and 17.6% in Aftermarket Applications Group, Powered Vehicle Group and Specialty Sports Group net sales, respectively, for the year ended December 30, 2022 compared to the prior fiscal year. The increase in Aftermarket Applications Group net sales was primarily due to strong performance from our upfitting product lines.
As we have diversified our product offerings and our product launch cycles, seasonal fluctuations are becoming less material. Inflation Historically, inflation has not had a material effect on our results of operations.
Seasonality Certain portions of our business are seasonal; we believe this seasonality is due to the delivery of new products. As we have diversified our product offerings and our product launch cycles, seasonal fluctuations are becoming less material. Inflation Historically, inflation has not had a material effect on our results of operations.
As of December 31, 2021, the carrying amount of the principal under the Company’s Prior Credit Facility approximated fair value because it had a variable interest rate that reflected market changes in interest rates and changes in the Company’s net leverage ratio. The Prior Credit Facility was terminated on April 5, 2022 and replaced with the revolving 2022 Credit Facility.
As of December 29, 2023, the carrying amount of the principal under the Company’s 2022 Credit Facility - Incremental Term A Loan approximated fair value because it had a variable interest rate that reflected market changes in interest rates and changes in the Company’s net leverage ratio.
The increase in Specialty Sports product sales reflects higher demand primarily in the OEM channel.
The increase in Powered Vehicle product net sales was driven by increased demand in the OEM channel. The increase in Specialty Sports product net sales reflects higher demand primarily in the OEM channel.
Net income For the fiscal years (in millions) 2021 2020 Change ($) Change (%) Net income $ 163.8 $ 91.7 $ 72.1 78.6 % As a result of the factors described above, our net income increased $72.1 million, or 78.6%, to $163.8 million in the fiscal year ended December 31, 2021 from $91.7 million for the fiscal year ended January 1, 2021. 46 Table of Contents Liquidity and Capital Resources Our primary cash needs are to support working capital, capital expenditures, acquisitions, and debt repayments.
Net income For the fiscal years (in millions) 2022 2021 Change ($) Change (%) Net income $ 205.3 $ 163.8 $ 41.5 25.3 % As a result of the factors described above, our net income increased $41.5 million, or 25.3%, to $205.3 million in the fiscal year ended December 30, 2022 from $163.8 million for the fiscal year ended December 31, 2021. 50 Table of Contents Liquidity and Capital Resources Our primary cash needs are to support working capital, interest on debt, employee compensation, capital expenditures, acquisitions, debt repayments, and other general corporate purposes.
Income taxes For the fiscal years (in millions) 2022 2021 Change ($) Change (%) Provision for income taxes $ 28.5 $ 24.6 $ 3.9 15.9 % Income tax expense for the year ended December 30, 2022 increased by approximately $3.9 million to $28.5 million compared to income tax expense of $24.6 million for the year ended December 31, 2021.
The increase in interest and other expense, net is primarily due to higher foreign currency losses, as well as increasing interest rates. 49 Table of Contents Income taxes For the fiscal years (in millions) 2022 2021 Change ($) Change (%) Provision for income taxes $ 28.5 $ 24.6 $ 3.9 15.9 % Income tax expense for the year ended December 30, 2022 increased by approximately $3.9 million to $28.5 million compared to income tax expense of $24.6 million for the year ended December 31, 2021.
Sales are measured based on the consideration specified in a contract with a customer. We recognize sales when a performance obligation is satisfied by transferring control of a product to a customer, generally at the time of shipment. Contracts are generally in the form of purchase orders and are governed by standard terms and conditions.
Sales are measured based on the consideration specified in a contract with a customer. We recognize sales when a performance obligation is satisfied by transferring control of a product to a customer, generally at the time of shipment for most products and over the time it takes to complete certain upfit packages.
For the year ended December 31, 2021, the difference between our effective tax rate and the 21% federal statutory rate resulted from a lower tax rate on U.S. foreign derived earnings and the benefit of excess stock based compensation deductions.
For the year ended December 29, 2023, the difference between our effective tax rate and the 21% federal statutory rate resulted from a lower tax rate on foreign derived intangible income and benefit from the U.S. research and development tax credit.
Revenues generated from upfit packages generally do not include the vehicle chassis, as the Company is not the principal in this arrangement and the automotive dealer purchases the chassis directly from the OEM.
Revenues generated from upfit packages generally do not include the vehicle chassis, as the Company is not the principal in this arrangement and the automotive dealer purchases the chassis directly from the OEM. The Company is required to place a deposit on all Stellantis chassis, however that deposit is refunded when the chassis is sold through to the end customer.
Interest and other expense, net For the fiscal years (in millions) 2021 2020 Change ($) Change (%) Interest and other expense, net: Interest expense $ 8.2 $ 9.3 $ (1.1) (11.8) % Other expense, net 0.3 0.3 — — Interest and other expense, net $ 8.5 $ 9.6 $ (1.1) (11.5) % Interest and other expense, net for the year ended December 31, 2021 decreased by approximately $1.1 million to $8.5 million, compared to $9.6 million for the year ended January 1, 2021.
Interest and other expense, net For the fiscal years (in millions) 2023 2022 Change ($) Change (%) Interest expense $ 19.3 $ 8.9 $ 10.4 116.9 % Other expense, net 2.1 4.0 (1.9) (47.5) Interest and other expense, net $ 21.4 $ 12.9 $ 8.5 65.9 % Interest and other expense, net for the year ended December 29, 2023 increased by approximately $8.5 million to $21.4 million, compared to $12.9 million for the year ended December 30, 2022.
This allowance is based upon estimates of the projected returns in future periods based on our experience with returns recorded in previous periods.
Net of: • Rebates: consists of incentives we provide to customers based on sales of eligible products; and • Sales returns allowances: consists of an estimate of our sales returns. This allowance is based upon estimates of the projected returns in future periods based on our experience with returns recorded in previous periods.
Should actual events or results differ from our current expectations, charges or credits to our income tax expense may become necessary.
We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our income tax liabilities and expense. Should actual events or results differ from our current expectations, charges or credits to our income tax expense may become necessary.
Historically, we have generally financed our liquidity needs with operating cash flows, borrowings under our Prior Credit Facility and our 2022 Credit Facility, and the issuance of common stock.
Historically, we have generally financed our liquidity needs with operating cash flows, borrowings under our Prior Credit Facility and our 2022 Credit Facility, and the issuance of common stock. These sources of liquidity may be impacted by factors and events described in Special Note Regarding Forward-Looking Statement s and Item 1A. Risk Factors .
Net income For the fiscal years (in millions) 2022 2021 Change ($) Change (%) Net income $ 205.3 $ 163.8 $ 41.5 25.3 % As a result of the factors described above, our net income increased $41.5 million, or 25.3%, to $205.3 million in the fiscal year ended December 30, 2022 from $163.8 million for the fiscal year ended December 31, 2021. 44 Table of Contents Fiscal year ended December 31, 2021 compared to fiscal year ended January 1, 2021 Sales For the fiscal years (in millions) 2021 2020 Change ($) Change (%) Sales $ 1,299.1 $ 890.6 $ 408.5 45.9 % Sales for the year ended December 31, 2021 increased approximately $408.5 million, or 45.9%, compared to the year ended January 1, 2021.
Net income For the fiscal years (in millions) 2023 2022 Change ($) Change (%) Net income $ 120.8 $ 205.3 $ (84.5) (41.2) % As a result of the factors described above, our net income decreased $84.5 million, or 41.2%, to $120.8 million in the fiscal year ended December 29, 2023 from $205.3 million for the fiscal year ended December 30, 2022.
The increase in cost of sales was driven primarily by an increase in product sales, as well as certain business factors affecting gross margin, which are discussed below. For the year ended December 31, 2021, our gross margin was 33.3% compared to 32.5% for the year ended January 1, 2021.
The decrease in cost of sales was due to our decreased sales partially offset by certain business factors affecting gross margin, which are discussed below. For the year ended December 29, 2023, our gross margin was 31.7% compared to 33.2% for the year ended December 30, 2022.
In the future, our effective tax rate could vary as we update our assessment of valuation allowances for our deferred tax assets, including those associated with credit carryforwards. It is reasonably possible that we could record a material adjustment to the valuation allowance in the next 12 months.
Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. As of December 29, 2023, the Company determined a valuation allowance was not needed. In the future, our effective tax rate could vary as we update our assessment of valuation allowances for our deferred tax assets, including those associated with credit carryforwards.
For the year ended January 1, 2021, the difference between our effective tax rate and the 21% federal statutory rate resulted from the benefit of excess deductions on stock-based compensation and the benefit of a lower tax rate on U.S. foreign derived earnings.
For the year ended December 30, 2022, the difference between our effective tax rate and the 21% federal statutory rate resulted from a lower tax rate on U.S. foreign derived earnings and the release of the valuation allocation for foreign tax credits, partially offset by other non-deductible expenses and state taxes.
Cost of sales For the fiscal years (in millions) 2021 2020 Change ($) Change (%) Cost of sales $ 866.7 $ 601.0 $ 265.7 44.2 % Cost of sales for the year ended December 31, 2021 increased approximately $265.7 million, or 44.2%, compared to the year ended January 1, 2021.
Cost of sales For the fiscal years (in millions) 2023 2022 Change ($) Change (%) Cost of sales $ 999.4 $ 1,071.1 $ (71.7) (6.7) % Cost of sales for the year ended December 29, 2023 decreased approximately $71.7 million, or 6.7%, compared to the year ended December 30, 2022.
The increase in expense resulted from the increase in pre-tax profit, partially offset by the benefit of a lower tax rate on U.S. foreign derived earnings. The effective tax rates were 13.0% and 12.2% for the years ended December 31, 2021 and January 1, 2021, respectively.
The decrease in expense primarily resulted from a decrease in pre-tax profit, partially offset by the release of the valuation allowance for foreign tax credits in the prior year. The effective tax rates were 12.8% and 12.2% for the years ended December 29, 2023 and December 30, 2022, respectively.
The increases in net income taxes payable, accrued expenses, accounts receivable and accounts payable are the result of normal business growth and the timing of vendor and tax payments. 47 Table of Contents In the fiscal year ended January 1, 2021, cash provided by operating activities was $82.4 million and consisted of net income of $91.7 million plus non-cash items and other adjustments totaling $29.7 million, less changes in operating assets and liabilities totaling $39.1 million.
The increases in net income taxes payable, accrued expenses, accounts receivable and accounts payable are the result of normal business growth and the timing of vendor and tax payments. 51 Table of Contents Investing activities In the fiscal year ended December 29, 2023, cash used in investing activities was $750.4 million, which primarily consisted of $701.1 million in cash consideration for our acquisitions of Marucci and Custom Wheel House, $46.9 million in property and equipment additions, and $2.4 million in cash consideration for our purchase of other assets.
In the fiscal year ended December 30, 2022, cash provided by operating activities was $187.1 million and consisted of net income of $205.3 million plus non-cash items and other adjustments totaling $45.3 million, less changes in operating assets and liabilities totaling $63.5 million.
In the fiscal year ended December 30, 2022, cash provided by operating activities was $187.1 million.
In the fiscal year ended December 31, 2021, cash provided by operating activities was $63.2 million and consisted of net income of $163.8 million plus non-cash items and other adjustments totaling $41.6 million, less changes in operating assets and liabilities totaling $142.2 million.
In the fiscal year ended December 31, 2021, cash provided by operating activities was $63.2 million.
Cash invested in operating assets and liabilities is primarily the result of increases in prepaids and other current assets of $66.4 million and accounts receivable of $18.8 million, partially offset by increases in accounts payable and accrued expenses of $25.9 million and $11.2 million, respectively, an increase in income taxes payable of $1.2 million and a decrease in inventory of $7.8 million.
Our investment in operating assets and liabilities is a result of an increase in prepaids and other current assets of $38.2 million primarily due to carrying more chassis to meet current year production needs for the upfitting product lines, and decreases in accounts payable of $44.0 million, accrued expenses and other liabilities of $21.4 million, and income taxes payable of $19.1 million, partially offset by decreases in accounts receivable of $64.5 million and inventory of $31.6 million.
Amortization of purchased intangible assets for the year ended December 31, 2021 increased by approximately $3.1 million as compared to the year ended January 1, 2021, due to the amortization of SCA and Outside Van's intangible assets. 45 Table of Contents Income from operations For the fiscal years (in millions) 2021 2020 Change ($) Change (%) Income from operations $ 196.9 $ 114.1 $ 82.8 72.6 % As a result of the factors discussed above, income from operations for the year ended December 31, 2021 increased approximately $82.8 million, or 72.6%, compared to income from operations in the year ended January 1, 2021.
Income from operations For the fiscal years (in millions) 2023 2022 Change ($) Change (%) Income from operations $ 160.1 $ 246.7 $ (86.6) (35.1) % As a result of the factors discussed above, income from operations for the year ended December 29, 2023 decreased approximately $86.6 million, or 35.1%, compared to the year ended December 30, 2022.
A summary of our operating, investing and financing activities are shown in the following table: For the years ended December 30 December 31 January 1 (in thousands) 2022 2021 2021 Net cash provided by operating activities $ 187,094 $ 63,184 $ 82,499 Net cash used in investing activities (44,735) (104,946) (388,525) Net cash (used in) provided by financing activities (179,141) (23,776) 506,722 Effect of exchange rate changes on cash and cash equivalents 2,346 (540) 1,332 (Decrease) increase in cash and cash equivalents $ (34,436) $ (66,078) $ 202,028 We expect that cash on hand, cash flow from operations and availability under our 2022 Credit Facility will be sufficient to fund our operations during the next 12 months from the date of this Annual Report on Form 10-K and beyond.
We expect that cash on hand, cash flow from operations and availability under our 2022 Credit Facility will be sufficient to fund our operations during the next 12 months from the date of this Annual Report on Form 10-K and beyond. Operating activities In the fiscal year ended December 29, 2023, net cash provided by operating activities was $178.7 million.
Material Cash Requirements As of December 30, 2022, we had the following material cash requirements related to commitments or contractual obligations (in thousands): Payments due by period Total Less than 1 year 1-3 years 4-5 years More than 5 years Long-term borrowings $ 200,000 $ — $ — $ 200,000 $ — Operating lease obligations 51,073 11,376 18,603 11,445 9,649 Purchase obligations and other 3,357 3,357 — — — Total $ 254,430 $ 14,733 $ 18,603 $ 211,445 $ 9,649 Seasonality Certain portions of our business are seasonal; we believe this seasonality is due to the delivery of new products.
Material Cash Requirements As of December 29, 2023, we had the following material cash requirements related to commitments or contractual obligations (in millions): Payments due by period Total Less than 1 year 1-3 years 4-5 years More than 5 years Long-term borrowings $ 750.0 $ — $ 40.0 $ 710.0 $ — Operating lease obligations 101.0 16.6 25.4 16.5 42.4 Purchase obligations and other 11.6 6.8 4.7 — — Total $ 862.6 $ 23.4 $ 70.2 $ 726.5 $ 42.4 *Amounts may not foot due to rounding.
Operating expenses For the fiscal years (in millions) 2021 2020 Change ($) Change (%) Operating expenses: Sales and marketing $ 70.9 $ 52.2 $ 18.7 35.8 % Research and development 46.6 34.3 12.3 35.9 General and administrative 97.2 71.3 25.9 36.3 Amortization of purchased intangibles 20.7 17.6 3.1 17.6 Total operating expenses $ 235.4 $ 175.4 $ 60.0 34.2 % Total operating expenses for the year ended December 31, 2021 increased approximately $60.0 million, or 34.2%, over the comparable period in 2020.
The decrease in gross margin for the fiscal year 2023 was primarily due to a shift in our product line mix and amortization of acquired inventory valuation markups, offset by increased efficiencies at our North American facilities. 46 Table of Contents Operating expenses For the fiscal years (in millions) 2023 2022 Change ($) Change (%) Operating expenses: General and administrative $ 124.6 $ 116.1 $ 8.5 7.3 % Sales and marketing 100.4 90.8 9.6 10.6 Research and development 53.2 56.2 (3.0) (5.3) Amortization of purchased intangibles 26.5 21.5 5.0 23.3 Total operating expenses $ 304.7 $ 284.6 $ 20.1 7.1 % Total operating expenses for the year ended December 29, 2023 increased approximately $20.1 million, or 7.1%, over the comparable period in 2022.
For larger OEMs, we may also enter into master agreements; and • Shipping and handling fees: consists of shipping and handling fees billed to customers. Net of: • Rebates: consists of incentives we provide to customers based on sales of eligible products; and • Sales returns allowances: consists of an estimate of our sales returns.
Contracts are generally in the form of purchase orders and are governed by standard terms and conditions. For larger OEMs, we may also enter into master agreements; and • Shipping and handling fees: consists of shipping and handling fees billed to customers.
In the fiscal year ended January 1, 2021, net cash provided by financing activities was $506.7 million, which consisted primarily of $392.4 million in proceeds, net of issuance costs, from our Prior Credit Facility, which was amended and restated in connection with our acquisition of SCA, partially offset by net payments of $68.0 million on our line of credit and payments on our term debt of $5.0 million.
Financing activities In the fiscal year ended December 29, 2023, net cash provided by financing activities was $509.0 million, which primarily consisted of proceeds from our 2022 Credit Facility of $793.5 million, which was used to support our working capital and the purchases of Marucci and Custom Wheel House, partially offset by $230.0 million in payments on our line of credit, $20.0 million in prepayments on our Term A Loan, $25.0 million to repurchase shares of our common stock, net of proceeds from the exercise of stock options, as part of our stock-based compensation program, and $6.2 million and $3.4 million in deferred debt issuance costs.
We are subject to examination of our income tax returns by the U.S. Internal Revenue Service ("IRS") and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our income tax liabilities and expense.
It is reasonably possible that we could record a material adjustment to the valuation allowance in the next 12 months. We are subject to examination of our income tax returns by the U.S. Internal Revenue Service (“IRS”) and other tax authorities.
Income taxes For the fiscal years (in millions) 2021 2020 Change ($) Change (%) Provision for income taxes $ 24.6 $ 12.8 $ 11.8 92.2 % Income tax expense for the year ended December 31, 2021 increased by approximately $11.8 million to $24.6 million, compared to income tax expense of $12.8 million in the year ended January 1, 2021.
Other expense, net decreased $1.9 million primarily due lower losses on foreign currency transactions. 47 Table of Contents Income taxes For the fiscal years (in millions) 2023 2022 Change ($) Change (%) Provision for income taxes $ 17.8 $ 28.5 $ (10.7) (37.5) % Income tax expense for the year ended December 29, 2023 decreased by approximately $10.7 million to $17.8 million compared to $28.5 million for the year ended December 30, 2022.
As of December 30, 2022, we held $80.4 million of our $145.3 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate. We manage our foreign cash, intercompany payables and intercompany debt to provide a natural foreign currency hedge against U.S. dollar-denominated trade receivable balances held by our Taiwan location.
As of December 29, 2023, we held $24.7 million of our $83.6 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.
The increase in Powered Vehicle product sales was primarily due to strong performance from our upfitting product lines, the inclusion of a full year of SCA's results and increased demand in the aftermarket channel.
The increase in Powered Vehicle Group net sales was primarily due to strong demand in the OEM channel, partially offset by the impact of the UAW strike and the effects of macroeconomic environment.
The sales increase reflects a 57.8% increase in Specialty Sports products as well as a 37.5% growth in Powered Vehicle products for the year ended December 31, 2021 compared to the prior fiscal year. The increase in Specialty Sports product sales reflects higher demand primarily in the OEM channel.
The net sales decrease reflects a decrease of 42.8% in Specialty Sports Group net sales and increases of 21.2% and 59.7% Powered Vehicle Group and Aftermarket Applications Group net sales, respectively, for the year ended December 29, 2023 compared to the prior fiscal year.
At December 30, 2022, the one-month SOFR and three-month SOFR rates were 4.06% and 3.62%, respectively. At December 30, 2022, our weighted-average interest rate on outstanding borrowing was 4.38%.
Upon the drawing of the Delayed Draw Term Loan, the fees will be reclassified to a contra-liability account and amortized over the term of the drawn debt using the interest method. At December 29, 2023, the one-month SOFR and three-month SOFR rates were 5.34% and 5.36%, respectively. At December 29, 2023, our weighted-average interest rate on outstanding borrowing was 6.97%.
Removed
Sales returns have not been significant to date; and We attribute our past growth in sales predominantly to continued higher demand for on and off-road suspension products, acquisitions, and the success of our current product lines including new products within those lines.
Added
Sales returns have not been significant to date.
Removed
Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. As of December 30, 2022, we reduced the valuation allowance against Foreign Tax Credits by $9.2 million. U.S. tax regulations proposed by the U.S.
Added
The following table sets forth statement of income data as a percentage of net sales for the years indicated: For the fiscal years ended December 29, 2023 December 30, 2022 December 31, 2021 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 68.3 66.8 66.7 Gross profit 31.7 33.2 33.3 Operating expenses: General and administrative 8.5 7.2 7.5 Sales and marketing 6.9 5.7 5.5 Research and development 3.6 3.5 3.6 Amortization of purchased intangibles 1.8 1.3 1.6 Total operating expenses 20.8 17.8 18.1 Income from operations 10.9 15.4 15.2 Interest expense 1.3 0.6 0.6 Other expense, net 0.1 0.2 — Income before income taxes 9.5 14.6 14.5 Provision for income taxes 1.2 1.8 1.9 Net income 8.3 % 12.8 % 12.6 % *Percentages may not foot due to rounding. 45 Table of Contents Fiscal year ended December 29, 2023 compared to fiscal year ended December 30, 2022 Net Sales For the fiscal years (in millions) 2023 2022 Change ($) Change (%) Powered Vehicle Group $ 523.9 $ 432.4 $ 91.5 21.2 % Aftermarket Applications Group 551.1 489.1 (291.8) (59.7) Specialty Sports Group 389.2 681.0 (42.8) Total net sales $ 1,464.2 $ 1,602.5 $ (138.3) (8.6) % Net sales for the year ended December 29, 2023 decreased approximately $138.3 million, or 8.6%, compared to the year ended December 30, 2022.
Removed
Treasury and Internal Revenue Service on November 22, 2022, which were early adopted by the Company, provided clarification to earlier guidance and resulted in the Company's ability to utilize certain foreign tax credits related to royalties. As a result, the Company determined a valuation allowance was not needed.
Added
The decrease in Specialty Sports Group net sales is primarily related to channel inventory recalibration and to a lesser extent lower end consumer demand, partially offset by the inclusion of $16.8 million net sales from our Marucci subsidiary that was acquired in November 2023.
Removed
The increase in interest and other expense, net is primarily due to higher foreign currency losses, as well as increasing interest rates.
Added
The increase in Aftermarket Applications Group net sales was mainly attributed to the inclusion of $65.6 million net sales from our Custom Wheel House subsidiary, which was acquired in March 2023, partially offset by a decrease in upfitting sales due to a change in product mix as a result of the UAW strike and higher interest rates impacting floor plan financing resulting in dealers taking a more conservative approach to inventory.
Removed
The increase in gross margin for the fiscal year 2021 was primarily due to higher volume sales in our Specialty Sports Group and the strong performance of our upfitting product lines, as well as favorable product and channel mix. Additionally, our gross margin for the prior fiscal year period was negatively impacted by incremental costs related to the COVID-19 pandemic.
Added
When expressed as a percentage of net sales, operating expenses increased to 20.8% of net sales for the year ended December 29, 2023, compared to 17.8% of net sales for the fiscal year ended December 30, 2022.
Removed
When expressed as a percentage of sales, operating expenses decreased to 18.1% of sales for the year ended December 31, 2021 compared to 19.7% of sales in 2020. Within operating expenses, our sales and marketing expense increased by approximately $18.7 million primarily due to higher commissions of $11.8 million, higher employee related expenses of $1.5 million, and various other expenses.
Added
Within operating expenses, our sales and marketing expense increased by approximately $9.6 million primarily due to the inclusion of $10.6 million and $2.7 million Custom Wheel House and Marucci expenses, respectively, offset by cost controls.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed7 unchanged
Biggest changeBased on the $100.0 million of variable interest rate indebtedness that was outstanding 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.
Biggest changeBased on the $650.0 million of variable interest rate indebtedness that was outstanding as of December 29, 2023, 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 $6.5 million increase or decrease in interest expense for the year ended December 29, 2023.
Credit and other risks We are exposed to credit risk associated with cash and cash equivalents, interest rate swap agreement and trade receivables. As of December 30, 2022, the majority of our cash and cash equivalents consisted of cash balances in non-interest bearing checking accounts which significantly exceed the insurance coverage provided on such deposits.
Credit and other risks We are exposed to credit risk associated with cash and cash equivalents, interest rate swap agreement and trade receivables. As of December 29, 2023, the majority of our cash and cash equivalents consisted of cash balances in non-interest bearing checking accounts which significantly exceed the insurance coverage provided on such deposits.
We have established policies and procedures governing our management of market risks and the use of financial instruments to manage exposure to such risks. As of December 30, 2022, we had $200.0 million of indebtedness outstanding under our 2022 Credit Facility.
We have established policies and procedures governing our management of market risks and the use of financial instruments to manage exposure to such risks. As of December 29, 2023, we had $750.0 million of interest bearing indebtedness outstanding under our 2022 Credit Facility.
Exchange rate sensitivity As of December 30, 2022, we are exposed to changes in foreign currency exchange rates.
Exchange rate sensitivity As of December 29, 2023, we are exposed to changes in foreign currency exchange rates.

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