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What changed in FOX FACTORY HOLDING CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FOX FACTORY HOLDING CORP's 2022 and 2023 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 2023 report.

+333 added−326 removedSource: 10-K (2023-02-23) vs 10-K (2022-02-24)

Top changes in FOX FACTORY HOLDING CORP's 2023 10-K

333 paragraphs added · 326 removed · 258 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

60 edited+19 added−9 removed75 unchanged
Biggest changeThis technology is currently in use UTVs, Trucks, and mountain bikes; • 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; • The GRIP2 fork damper, which is our next-evolution sealed cartridge FIT system, our highest performing gravity-focused damper.
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.
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, road bikes, and e-bikes.
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.
Our products for powered vehicles are used primarily on side-by-sides, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications including military, motorcycles, and commercial trucks.
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.
Leverage technology and brand to expand into new categories and end-markets We believe innovation is the foundation of our company. As we continue to leverage latest technology to develop a diverse portfolio of performance-defining products, our Powered Vehicle Group facility extends our ability to not only scale to newer levels but also do it efficiently.
Leverage technology and brand to expand into new categories and end-markets We believe innovation is the foundation of our company. As we continue to leverage the latest technology to develop a diverse portfolio of performance-defining products, our Powered Vehicle Group facility extends our ability to not only scale to newer levels but also do it efficiently.
Due to our experience in suspension engineering and design in multiple markets and with a variety of vehicles, solutions we develop for use in one market can ultimately be deployed across multiple markets. For example, we believe that our success in the high-end ATV category led to the widespread adoption of our suspension technology in the Side-by-Side market.
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.
Our products have also been used on limited quantities of off-road military vehicles and other small-scale select military applications. Our aftermarket truck suspension component products in the powered vehicles category range from two-inch aluminum bolt-on shocks to our patented position sensitive internal bypass shocks.
Our products have also been used on limited quantities of off-road military vehicles and other small-scale select military applications. Our aftermarket truck suspension component products in the powered vehicles category range from two-inch bolt-on shocks to our patented position sensitive internal bypass shocks.
Specialty Sports Our bike product offerings are used on a wide range of performance mountain bikes and road bikes under the FOX, Race Face, Easton Cycling and Marzocchi brands.
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.
" Property, Plant and Equipment, net " of the "Notes to Consolidated Financial Statements" in this Annual Report on Form 10-K. 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. 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.
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, specialty vehicles and applications, motorcycles, and commercial trucks.
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.
In the ATV and Side-by-Side markets, outside of vertically-integrated OEMs, we compete with ZF Sachs (ZF Friedrichshafen AG), Polaris, and Walker Evans Racing for OEM business and Elka Suspension Inc., Öhlins Racing AB, Works Performance Products, and Penske Racing Shocks / Custom Axis, Inc. for aftermarket business.
In the ATV and side-by-sides markets, outside of vertically-integrated OEMs, we compete with ZF Sachs (ZF Friedrichshafen AG), and Walker Evans Racing for OEM business and Elka Suspension Inc., Öhlins Racing AB, Works Performance Products, and Penske Racing Shocks / Custom Axis, Inc. for aftermarket business.
Our premium brand, performance-defining products and systems are used primarily on bicycles ("bikes"), side-by-side vehicles ("side-by-sides"), on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, all-terrain vehicles ("ATVs"), snowmobiles, specialty vehicles and applications, motorcycles and commercial trucks.
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.
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%, 36% and 44% of our sales in fiscal years 2021, 2020 and 2019, 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. 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.
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. 6 Table of Contents Research and development Research and development is at the core of our product innovation and market leadership strategy.
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.
In addition to our web properties and traditional marketing channels, such as print advertising and tradeshows, we maintain an active social media presence, including an Instagram feed, Facebook page, YouTube channel, Vimeo channel and Twitter feed to increase brand awareness, foster loyalty and build a community of users.
In addition to our websites and traditional marketing channels, such as print advertising and tradeshows, we maintain an active social media presence, including an Instagram feed, Facebook page, YouTube channel, Vimeo channel and Twitter feed to increase brand awareness, foster loyalty and build a community of users.
We believe that the performance of our products has been demonstrated by, and our brand benefits from, the success of professional athletes who use our products in elite competitive events, such as the Union Cycliste Internationale Mountain Bike World Cup and the X Games.
We believe that the performance of our products has been demonstrated by, and our brand benefits from, the success of professional athletes who use our products in elite competitive events, such as the Olympic Games, the Union Cycliste Internationale Mountain Bike World Cup, the X Games and the Baja 1000.
We believe the performance of our products has been demonstrated by, and our brands benefit from, the success of professional athletes who use our products in elite competitive events such as the Union Cycliste Internationale Mountain Bike World Cup and the X Games.
We believe the performance of our products has been demonstrated by, and our brands benefit from, the success of professional athletes who use our products in elite competitive events such as the Olympic Games, the Union Cycliste Internationale Mountain Bike World Cup, the X Games and the Baja 1000.
As strategies and marketing plans are developed for our products, our internal marketing and communications group works to ensure brand cohesion and consistency. 8 Table of Contents Manufacturing and backlog We manufacture and complete final assembly on most of our products.
As strategies and marketing plans are developed for our products, our internal marketing and communications group works to ensure brand cohesion and consistency. Manufacturing and backlog We manufacture and complete final assembly on most of our products.
Many of our OEM customers, including Giant, Merida, Orbea, Kenstone Metal, Canyon Bicycles, Santa Cruz Bicycles, and Yeti Cycles in Specialty Sports and BRP, Ford, Polaris, Toyota, 4 Wheel Parts, Kawasaki, Yamaha, and Honda in Powered Vehicles, are among the market leaders in their respective product categories, and help shape, as well as respond to, consumer trends in their respective categories.
Many of our OEM customers, including Specialized, Trek Bicycles, Giant, Orbea, Canyon Bicycles, Santa Cruz Bicycles, and Yeti Cycles in Specialty Sports and BRP, Ford, Polaris, Toyota, 4 Wheel Parts, Kawasaki, Yamaha, and Honda in Powered Vehicles, are among the market leaders in their respective product categories, and help shape, as well as respond to, consumer trends in their respective categories.
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 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.
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.
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.
In each of the years ended December 31, 2021, January 1, 2021 and January 3, 2020, approximately 45%, 41% and 40%, respectively, of our sales were attributable to sales of bike-related products. 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 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.
The Kashima Agreement does not contain minimum purchase obligations. Human Capital Resources Employee Overview As of December 31, 2021, we had approximately 4,100 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 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.
Intellectual property Intellectual property is an important aspect of our business. We rely upon a combination of patents, trademarks, trade names, licensing arrangements, trade secrets, know-how and proprietary technology and we secure and protect our intellectual property rights. Our intellectual property counsel diligently protects our new technologies with patents and trademarks and defends against patent infringement allegations.
We rely upon a combination of patents, trademarks, trade names, licensing arrangements, trade secrets, know-how and proprietary technology and we secure and protect our intellectual property rights. Our intellectual property counsel diligently protects our new technologies with patents and trademarks and defends against patent infringement allegations.
Our international sales totaled $487.8 million, $297.3 million and $248.8 million or 38%, 33% and 33% of our total sales in fiscal years 2021, 2020 and 2019, respectively. Sales attributable to countries outside the U.S. are based on shipment location.
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.
In the market for up-fitted vehicles, we compete with Roush Performance and DSI Custom Vehicles. 5 Table of Contents Specialty Sports Within the market for bike suspension components, we compete with several companies that manufacture front and rear suspension products, including RockShox (a subsidiary of SRAM Corp.), X-Fusion Shox (a wholly owned subsidiary of A-Pro), Manitou (a subsidiary of HB Performance Systems), SR Suntour, DT Swiss (a subsidiary of Vereinigte Drahtwerke AG), Cane Creek Cycling, DVO Suspension, Bos-Mountain Bike Suspensions, and Öhlins Racing AB.
Specialty Sports Within the market for bike suspension components, we compete with several companies that manufacture front and rear suspension products, including RockShox (a subsidiary of SRAM Corp.), X-Fusion Shox (a wholly owned subsidiary of A-Pro), Manitou (a subsidiary of HB Performance Systems), SR Suntour, DT Swiss (a subsidiary of Vereinigte Drahtwerke AG), Cane Creek Cycling, DVO Suspension, Bos-Mountain Bike Suspensions, and Öhlins Racing AB.
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 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 each of the years ended December 31, 2021, January 1, 2021 and January 3, 2020, approximately 55%, 59% and 60%, respectively, of our sales were attributable to sales of powered vehicles related products. Products for these vehicles are designed for use on roads, for trail riding, in racing, and to help provide performance and comfort.
In each of the years ended December 30, 2022, December 31, 2021 and January 1, 2021, approximately 58%, 55% and 59%, respectively, of our sales were attributable to sales of powered vehicles related products. Products for these vehicles are designed for use on roads, trail riding, racing, and to help maximize performance and comfort.
Furthermore, manufacturing our own products enables us to adjust our labor and production inputs to meet seasonal demands and the customized requirements of some of our customers. We recently completed the Hall County Facility to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.
Furthermore, manufacturing our own products enables us to adjust our labor and production inputs to meet seasonal demands and the customized requirements of some of our customers. In the fourth quarter of 2021, we completed the construction of our Gainesville Facility to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.
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. 7 Table of Contents Our North American sales totaled $811.3 million, $593.3 million, and $502.3 million, or 62%, 67% and 67%, of our total sales in 2021, 2020 and 2019, 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. 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.
We will continue to make our employees a priority. 9 Table of Contents Inclusion, Diversity and Engagement At FOX, we believe that our people are our greatest asset. Therefore, we are committed to building and maintaining an inclusive workplace in which all employees feel they belong, are empowered to be their best, and inspired to deliver maximum performance.
Inclusion, Diversity and Engagement At FOX, we believe that people are our greatest asset. Therefore, we are committed to building and maintaining an inclusive workplace in which all employees feel they belong, are empowered to be their best, and inspired to deliver maximum performance.
We currently sell to approximately 150 OEMs and distribute our products to more than 5,000 retail dealers and distributors worldwide. In 2021, 55% of our sales resulted from sales to OEM customers and 45% 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 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.
Premium brand with strong consumer loyalty We believe that we have developed a reputation for performance-defining products and that we own and license established trademarks, such as FOX ® , FOX RACING SHOX ® , and RACE FACE ® which are perceived as premium brands. As such, our performance-defining products are generally sold at premium prices.
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.
Within the market for off-road and specialty vehicle suspension components, we compete with ThyssenKrupp Bilstein Suspension GmbH (commonly known as Bilstein), and King Shock Technology, Inc. (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").
While price fluctuations have not materially impacted 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 are actively monitoring the current market conditions and price trends. We also have OEM partners that supply vehicle chassis used in our upfitting operations.
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.
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.
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.
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.
We take great effort to maintain our brands in the eyes of consumers. For instance, our FOX ® logo is prominently displayed on our FOX ® branded products used on bikes and powered vehicles sold by our OEM customers, which helps further reinforce our brand image. We believe that our brands have achieved strong loyalty from our consumers.
As such, our performance-defining products are generally sold at premium prices. We take great effort to maintain our brands in the eyes of consumers. For instance, our FOX ® logo is prominently displayed on our FOX ® branded products used on bikes and powered vehicles sold by our OEM customers, which helps further reinforce our brand image.
" Management’s Discussion and Analysis of Financial Condition " and " Results of Operations ," and to the " Consolidated Statements of Cash Flows " within Item 8 of this Annual Report on Form 10-K.
Information about the Company’s working capital is incorporated herein by reference to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations , and to the Consolidated Statements of Cash Flows within Item 8 of this Annual Report on Form 10-K.
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 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.
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.
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.
We also are continually nurturing and developing relationships with our existing and new OEMs, as the powered vehicles market continues to grow. After incorporating our products on their powered vehicles, OEMs typically sell their powered vehicles to independent dealers, which then sell directly to consumers. In the aftermarket, we typically sell to dealers and distributors, both domestically and internationally.
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.
These competitors can be divided into the following categories: Powered Vehicles Within the market for powered vehicle suspension components, we compete with several companies in different submarkets.
Within the market for powered vehicle suspension components, we compete with several companies in different submarkets.
While the pricing of competing products is always a factor, we believe the performance of our products helps justify our premium pricing. Within our markets, we compete with several large companies and numerous small companies that provide branded and unbranded products across many of our product lines.
Within our markets, we compete with several large companies and numerous small companies that provide branded and unbranded products across many of our product lines.
In March 2020, we acquired substantially all the issued and outstanding capital stock of SCA Performing Holdings, Inc. ("SCA"), a leading OEM authorized specialty vehicle manufacturer for light duty trucks and sport utility vehicles. In May 2021, through our wholly owned subsidiary, SCA Performance, Inc.
("SCA"), 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.
Our testing center collects data and tests products prior to and after commercial introduction. Suspension products undergo a variety of rigorous performance and accelerated life tests before they are introduced into the market. Research and development expenses totaled approximately $46.6 million, $34.3 million and $31.8 million in fiscal years 2021, 2020 and 2019, respectively.
Our testing center collects data and tests products prior to and after commercial introduction. Suspension products undergo a variety of rigorous performance and accelerated life tests before they are introduced into the market.
We are currently transitioning out of our Watsonville, California facility and relocating our powered vehicles suspension manufacturing to the Hall County Facility. 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.
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.
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.
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.
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.
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.
Some of our competitors may have greater financial, research and development or marketing resources than we do. Competition in the high-end segment of the performance-defining market revolves around technical features, performance, product design, innovation, reliability and durability, brand, time to market, customer service and reliable order execution.
Competition in the high-end segment of the performance-defining market revolves around technical features, performance, product design, innovation, reliability and durability, brand, time to market, customer service and reliable order execution. While the pricing of competing products is always a factor, we believe the performance of our products helps justify our premium pricing.
Our dealers sell directly to consumers. When we sell to our distributors, they sell to independent dealers, which then sell directly to consumers. Specialty Sports We sell our bike suspension and components products to a broad network of domestic and international bike OEMs, including Giant, Merida, Orbea, Kenstone Metal, Canyon Bicycles, Santa Cruz Bicycles, and Yeti Cycles.
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.
Financial information about segments and geographic areas We operate in one reportable segment: manufacturing, sale and service of performance-defining products. Additional information about our product segment and certain geographic information is available in Note 2. " Revenues " and Note 5.
Additional information about our product segment and certain geographic information is available in Note 2. Revenues and Note 5.
We have great relations with our OEM and Aftermarket partners and given our key distinct strengths, we believe we have and will continue to win more applications. Leveraging our technology and scale, we have successfully expanded into commercial/RV and street car applications with a lot of room to penetrate and plan to grow those channels with more pioneering product applications.
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.
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. Information about the Company’s working capital is incorporated herein by reference to Item 7.
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.
Competition The markets for performance-defining products, including suspension components, wheels, and cranks, 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.
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 recently completed the construction of an approximately 336,000 square foot state-of-the-art facility in Hall County, Georgia (the "Hall County Facility") to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group. The Hall County Facility is being used for manufacturing, warehousing, distribution and office space.
We 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.
Our acquisition of SCA in March 2020 has increased the portion of our sales related to upfitting. In addition, we manufacture suspension systems that enhance the handling and ride quality of muscle cars, trucks, sports cars and hot rods.
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.
For additional information, see Item 1A." Risk Factors " below. 10 Table of Contents Government contracts 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.
Government contracts 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. Financial information about segments and geographic areas We operate in one reportable segment: manufacturing, sale and service of performance-defining products.
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 have completed acquisitions that we believe enhance our business and strategically expand our product offerings.
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.
The Hall County Facility is being used for manufacturing, warehousing, distribution and office space. We are currently transitioning out of our Watsonville, California facility and relocating our powered vehicles suspension manufacturing to the Hall County Facility. We had approximately $223.5 million and $128.5 million in firm backlog orders at December 31, 2021 and January 1, 2021, respectively.
The 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 increase in 2021 backlog, as compared to 2020, was due to growth in sales, growing market share, and backfilling order that were delayed in prior year due to chassis shortages. Suppliers and raw materials The primary raw materials used in the production of our products are aluminum, magnesium, carbon and steel.
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.
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On a 3.0 internal bypass platform, it is the longest rear UTV shock to date with 15.6” of stroke; • 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; 2 Table of Contents • Electronically adjustable rear suspension pre-load allowing a user to easily compensate for the additional weight and bring a vehicle back to optimal ride height; • Position sensitive spiral technology uses internal grooves placed in the shock body to improve small bump comfort and bottom out control, providing the performance of position sensitive damping at a lower price point; • Ridetech RidePro E5 Air Suspension Control System, improving comfort and performance to your vehicle; • Ridetech 62-67 Nova Suspension System (Coil-Over & Air), bringing today's performance to your vintage vehicle; • Market leading 3-4” Bronco suspension lift products that are custom designed to each model configuration and that utilize a combination of strut and pre-load spacers for a more balanced performance; • LIVE Valve, our proprietary semi-active, electronic suspension that processes data from multiple vehicle sensors to adjust the suspension virtually instantaneously to the demands of changing terrain.
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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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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; • X2 technology used in our Factory Series FLOAT and DH rear shocks, which allows the rider to independently tune high- and low-speed compression and high- and low-speed rebound; • Rhythm series fork products developed to address a lower price point offering without compromising proven FOX performance; • Race Face Vault Hub, a new 120-point high-engagement mountain bike hubset featuring tool-free end caps that simplify conversion among all major axle standards and is approved for e-bike applications; and • Easton EC90 SL Crankset, a versatile road bike crankset that allows quick conversion between 1x and 2x road and gravel chainring configurations.
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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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("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.
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This technology has been adopted at the top tier of trucks and SUVs in the U.S.; • Electronically adjustable rear suspension pre-load allowing a user to easily compensate for the additional weight and bring a vehicle back to optimal ride height.
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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.
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This technology is currently in use on select motorcycles to adapt to added passenger and luggage weight without using tools; • Ridetech RidePro E5 Air Suspension Control System, improving comfort and performance to your vehicle.
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Improve operating and supply chain efficiencies In 2019, we completed the process of relocating our Specialty Sports Group’s U.S. aftermarket bike products distribution, sales, and service operations to Sparks, Nevada.
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This technology is used widely across all brands of mountain bikes or as aftermarket upgrades to replace lower performing suspension; • The GRIP2 fork damper, which is our next-evolution sealed cartridge FIT system, our highest performing gravity-focused damper.
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Our suspension products are assembled according to precise specifications throughout the assembly process to create consistently high-performance levels and customer satisfaction.
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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.
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We also offer lift kits and components with our shock products and aftermarket accessory packages for use in trucks. We up-fit trucks to be off-road capable, on-road vehicles with components and products such as lift kits, shock products, superchargers, interior accessories, wheel, tires, lighting, and body enhancements.
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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.
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In 2021 and 2020 no single customer represented 10% or more of our sales. Our sales to Ford, a powered vehicles OEM, accounted for approximately 11% in 2019.
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This technology is found on a wide range of electric bikes; • Race Face Vault Hub, a 120-point high-engagement mountain bike hubset featuring tool-free end caps that simplify conversion among all major axle standards and is approved for e-bike applications.
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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.
Added
This technology is found in select Race Face mountain bike wheels; and • Easton EC90 SL Crankset, a versatile road bike crankset that allows quick conversion between 1x and 2x road and gravel chainring configurations.
Added
Leveraging our technology and scale, we have successfully expanded into recreational vehicles and street car applications, and we believe there are opportunities to further penetrate these markets and grow with more pioneering product applications. Additionally, to grow our end user base, we are now looking at ways to explore international opportunities with some of our applications.
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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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn 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; • 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; • geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war and other political uncertainty; • political, economic, or other actions from China could impact Taiwan and its economy, and may adversely affect our operations in Taiwan, our customers, and our supply chain; • changes in tariffs, quotas, trade barriers and other similar restrictions on sales; • 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.
Biggest changeIn 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.
We define a single-source supplier as a supplier from which we purchase all of a particular raw material or input used in our manufacturing operations, although other suppliers are available from which to purchase the same raw material or input or an equivalent substitute.
We define a single-source supplier as a supplier from which we purchase all of a particular raw material or input used in our manufacturing operations, although other suppliers are available from which to purchase the same raw material or input of an equivalent substitute.
Foreign Corrupt Practices Act, local international environmental, health and safety laws, and increasingly complex regulations relating to the conduct of international commerce; • increased difficulty in controlling and monitoring foreign operations from the U.S., including increased difficulty in identifying and recruiting qualified personnel for our foreign operations; and • increased difficulty in staffing and managing foreign operations or international sales.
Foreign Corrupt Practices Act, local and international environmental, health and safety laws, and increasingly complex regulations relating to the conduct of international commerce; • increased difficulty in controlling and monitoring foreign operations from the U.S., including increased difficulty in identifying and recruiting qualified personnel for our foreign operations; and • increased difficulty in staffing and managing foreign operations or international sales.
We have been and may become subject to intellectual property disputes that could cause us to incur significant costs or pay significant damages or that could prohibit us from selling our products.
We have been and may become subject to intellectual property disputes that could cause us to incur significant costs or pay significant damages or prohibit us from selling our products.
GENERAL RISK FACTORS Failure of our internal controls over financial reporting could adversely affect our business and financial results. Our management is responsible for establishing and maintaining effective internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act").
GENERAL RISK FACTORS Failure of our internal controls over financial reporting could adversely affect our business and financial results. Our management is responsible for establishing and maintaining effective internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, as amended.
These impacts include, but are not limited to: • significant reductions in demand or significant future volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, store closures, financial hardship, shifts in demand away from one or more of our more discretionary or higher-priced products, supply chain and shipping constraints, reduced options for marketing and promotion of products or other restrictions in connection with the COVID-19 pandemic; if prolonged, such impacts can further increase the difficulty of operating our business, including accurately planning and forecasting, planning for operations and may adversely impact our results; • inability to meet our current or future demand due to disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw materials, truck chassis, or other components, transportation, workforce, or other manufacturing and distribution capability; • failure of third parties on which we rely, including our suppliers, contract manufacturers, distributors, contractors, commercial banks, and external business partners, to meet their obligations to the Company or to timely meet those obligations, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties and may adversely impact our operations; • significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including additional or expanded quarantines, governmental or regulatory actions, closures or other restrictions that further limit or close our operating and manufacturing facilities, restrict our employees’ ability to travel or perform necessary business functions, restrict or prevent consumers from having access to our products, or otherwise prevent our third-party partners, dealers, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of our products, which could adversely impact our results; and • increased difficulty in determining the fair value of the Company’s goodwill and other assets for accounting purposes given the level of judgment and estimation that is inherently higher in the current environment considering the uncertainty created by the COVID-19 pandemic, which could result in estimates and assumptions made in valuing goodwill and other Company assets proving to be inaccurate in the future.
These impacts include, but are not limited to: • significant reductions in demand or significant future volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, store closures, financial hardship, shifts in demand away from one or more of our more discretionary or higher-priced products, supply chain and shipping constraints, reduced options for marketing and promotion of products or other restrictions in connection with the COVID-19 pandemic; if prolonged, such impacts can further increase the difficulty of operating our business, including accurately planning and forecasting, planning for operations and may adversely impact our results; • inability to meet our current or future demand due to disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw materials, vehicle chassis, or other components, transportation, workforce, or other manufacturing and distribution capability; • failure of third parties on which we rely, including our suppliers, contract manufacturers, distributors, contractors, commercial banks, and external business partners, to meet their obligations to the Company or to timely meet those obligations, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties and may adversely impact our operations; • significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including additional or expanded quarantines, governmental or regulatory actions, closures or other restrictions that further limit or close our operating and manufacturing facilities, restrict our employees’ ability to travel or perform necessary business functions, restrict or prevent consumers from having access to our products, or otherwise prevent our third-party partners, dealers, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of our products, which could adversely impact our results; and • increased difficulty in determining the fair value of the Company’s goodwill and other assets for accounting purposes given the level of judgment and estimation that is inherently higher in the current environment considering the uncertainty created by the COVID-19 pandemic, which could result in estimates and assumptions made in valuing goodwill and other Company assets proving to be inaccurate in the future.
Among other things, these provisions: • authorize the issuance of "blank check" preferred stock that could be issued by our Board of Directors to discourage a takeover attempt; • establish a classified Board of Directors, as a result of which the successors to the directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following their election; • require that directors be removed from office only for cause; • provide that vacancies on our Board of Directors, including newly created directorships, may be filled only by a majority vote of directors then in office; • provide that no action be taken by stockholders by written consent; • provide that special meetings of our stockholders may be called only by our Board of Directors, our Chairperson of the Board of Directors, our Lead Director (if we do not have a Chairperson or the Chairperson is disabled), our Chief Executive Officer or our President (in the absence of a Chief Executive Officer); • require supermajority stockholder voting for our stockholders to effect certain amendments to our Charter Documents; and • establish advance notice requirements for nominations for elections to our Board of Directors or for proposing other matters that can be acted upon by stockholders at stockholder meetings. 31 Table of Contents In addition, we are subject to Section 203 of the General Corporation Law of the State of Delaware ("DGCL"), which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with a stockholder owning 15% or more of such corporation’s outstanding voting stock for a period of three years following the date on which such stockholder became an "interested" stockholder.
Among other things, these provisions: • authorize the issuance of "blank check" preferred stock that could be issued by our Board of Directors to discourage a takeover attempt; • establish a classified Board of Directors, as a result of which the successors to the directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following their election; • require that directors be removed from office only for cause; • provide that vacancies on our Board of Directors, including newly created directorships, may be filled only by a majority vote of directors then in office; • provide that no action be taken by stockholders by written consent; • provide that special meetings of our stockholders may be called only by our Board of Directors, our Chairperson of the Board of Directors, our Lead Director (if we do not have a Chairperson or the Chairperson is disabled), our Chief Executive Officer or our President (in the absence of a Chief Executive Officer); • require supermajority stockholder voting for our stockholders to effect certain amendments to our Charter Documents; and • establish advance notice requirements for nominations for elections to our Board of Directors or for proposing other matters that can be acted upon by stockholders at stockholder meetings. 32 Table of Contents In addition, we are subject to Section 203 of the General Corporation Law of the State of Delaware ("DGCL"), which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with a stockholder owning 15% or more of such corporation’s outstanding voting stock for a period of three years following the date on which such stockholder became an "interested" stockholder.
The loss of all or a substantial portion of our sales to any of these OEM customers, whether through the temporary or permanent discontinuation of their products which incorporate our products or otherwise, the loss of market share by these customers, manufacturing or other problems, including disruptions related to COVID-19, could have a material impact on our business, financial condition or results of operations.
The loss of all or a substantial portion of our sales to any of these OEM customers, whether through the temporary or permanent discontinuation of their products which incorporate our products or otherwise, the loss of market share by these customers, manufacturing or other problems, including disruptions related to the COVID-19 pandemic, could have a material impact on our business, financial condition or results of operations.
In order to continue to enhance our brand image, we will need to maintain our position in the performance-defining products industry, continue to provide high-quality products and services, and preserve our reputation. The rising popularity of social media and other consumer-oriented technologies creates new risks and challenges that could cause damage to our brands and reputation.
In order to continue to enhance the image of our brands, we will need to maintain our position in the performance-defining products industry, continue to provide high-quality products and services, and preserve our reputation. The rising popularity of social media and other consumer-oriented technologies creates new risks and challenges that could cause damage to our brands and reputation.
For example, in San Mateo County, California, mountain bikes are not allowed on county trails, and ATV and Side-by-Side riding is not allowed in Zion National Park, among many other national and state parks. In addition, recreational snowmobiling has been restricted in some national parks and federal lands in Canada, the U.S. and other countries.
For example, in San Mateo County, California, mountain bikes are not allowed on county trails, and ATV and side-by-sides riding is not allowed in Zion National Park, among many other national and state parks. In addition, recreational snowmobiling has been restricted in some national parks and federal lands in Canada, the U.S. and other countries.
The loss of all or a substantial portion of our sales to any of these customers could have a material adverse impact on us and our results of operations; • our international operations are exposed to risks associated with conducting business globally, including currency exchange rate fluctuations and policies related to global trade and tariffs; • if we are unable to enforce our intellectual property rights, our reputation and sales could be adversely affected, while intellectual property disputes could lead to significant costs or the inability to sell products; • if we inaccurately forecast demand for our products, we may manufacture insufficient or excess quantities or our manufacturing costs could increase, which could adversely affect our business; • 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; • an adverse determination in any material product liability claim against us could adversely affect our operating results or financial condition; • we are subject to certain risks in our manufacturing and in the testing of our products; • fuel shortages, or high prices for fuel, could have a negative effect on the use of powered vehicles that use our products; • we rely on increasingly complex information systems for management of our manufacturing, distribution, sales and other functions.
The loss of all or a substantial portion of our sales to any of these customers could have a material adverse impact on us and our results of operations; • our international operations are exposed to risks associated with conducting business globally, including currency exchange rate fluctuations and policies related to global trade and tariffs; • if we are unable to enforce our intellectual property rights, our reputation and sales could be adversely affected, while intellectual property disputes could lead to significant costs or the inability to sell products; • if we inaccurately forecast demand for our products, we may manufacture insufficient or excess quantities or our manufacturing costs could increase, which could adversely affect our business; • 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; • an adverse determination in any material product liability claim against us could adversely affect our operating results or financial condition; • we are subject to certain risks in our manufacturing and in the testing of our products; • fuel shortages, or high prices for fuel, could have a negative effect on the use of powered vehicles that use our products; 12 Table of Contents • we rely on increasingly complex information systems for management of our manufacturing, distribution, sales and other functions.
If we are unable to comply with the covenants contained in the Credit Facility, it could constitute an event of default and our lenders could declare all borrowings outstanding, together with accrued and unpaid interest, to be immediately due and payable.
If we are unable to comply with the covenants contained in the 2022 Credit Facility, it could constitute an event of default and our lenders could declare all borrowings outstanding, together with accrued and unpaid interest, to be immediately due and payable.
A significant 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 as well as our Fox Taiwan facility into the U.S. largely through ports on the West Coast.
Our outstanding indebtedness under the Credit Facility bears interest at a variable rate, which makes us more vulnerable to increases in interest rates and could cause our interest expense to increase and decrease cash available for operations and other purposes.
Our outstanding indebtedness under the 2022 Credit Facility bears interest at a variable rate, which makes us more vulnerable to increases in interest rates and could cause our interest expense to increase and decrease cash available for operations and other purposes.
The issuance of additional shares of our common stock, such as the follow-on offering of 2.8 million shares of common stock that we completed in June 2020, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock.
The issuance of additional shares of our common stock, such as the follow-on offering of approximately 2.8 million shares of common stock that we completed in June 2020, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock.
In the future, we and our subsidiaries may be able to incur substantial additional debt from amendments to the Credit Facility, additional lending sources subject to the restrictions contained in the Credit Facility, or because of certain debt instruments we may issue.
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.
Borrowings under the Credit Facility bear interest on a variable rate, which increases and decreases based upon changes in the underlying interest rate and/or our leverage ratio. Any such increases in the interest rate or increases of our borrowings under the Credit Facility will increase our interest expense.
Borrowings under the 2022 Credit Facility bear interest on a variable rate, which increases and decreases based upon changes in the underlying interest rate and/or our leverage ratio. Any such increases in the interest rate or increases of our borrowings under the 2022 Credit Facility will increase our interest expense.
If we are unable to repay or otherwise refinance these borrowings when due, our lenders could sell the collateral securing the Credit Facility, which constitutes substantially all of our assets.
If we are unable to repay or otherwise refinance these borrowings when due, our lenders could sell the collateral securing the 2022 Credit Facility, which constitutes substantially all of our assets.
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 • 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 and/or less restrictive debt; and 27 Table of Contents • subjecting us to additional restrictive financial and other covenants.
Moreover, certain of our product offerings require us to comply with the rules and regulations of various standards of standard-setting organizations, such as the CPSC, the NHTSA, and the European Committee for Standardization ("CEN").
Moreover, certain of our product offerings require us to comply with the rules and regulations of various standards of standard-setting organizations, such as the CPSC, the NHTSA, and the European Committee for Standardization.
If we are not able to educate our dealers and distributors so that they may effectively sell our products as part of a positive buying experience, or if they fail to implement effective retail sales initiatives, focus selling efforts on our competitors’ products, reduce the quantity of our products that they sell or reduce their operations due to financial difficulties or otherwise, our brand and business could suffer.
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.
Unforeseen difficulties in our Georgia expansion project and future expansion projects, whatever the cause, could have a material adverse effect on our business, customer relationships, financial condition, operating results, cash flow, and liquidity. 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, delays in deliveries or catastrophic loss at any of our facilities could lead to production or service disruptions, curtailments or shutdowns.
Any of these effects could negatively affect our business, financial condition or results of operations. If we are unable to maintain our premium brand image, our business may suffer. OEMs dealers and distributors select our products in part because of the premium brand reputation we hold with them and our end users.
Any of these effects could negatively affect our business, financial condition or results of operations. If we are unable to maintain our premium brand image, our business may suffer. OEM dealers and distributors select our products in part because of the premium brand reputation we hold with them and our end users.
If our products are defective or used incorrectly by our customers, bodily injury, property damage or other injury, including death, may result in, and could give rise to product liability claims against us, which could adversely affect our brand image or reputation.
If our products are defective or used incorrectly by our customers, bodily injury, property damage or other injury, including death, may result in, and could give rise to product liability claims against us, which could adversely affect our brands' image or reputation.
The products in our powered vehicles line are used in vehicles that are subject to numerous federal, state, local, foreign and international laws and regulations relating to noise and air pollution. Powered vehicles, and even bikes, have become subject to laws and regulations prohibiting their use on certain lands and trails.
The products in our powered vehicles category are used in vehicles that are subject to numerous federal, state, local, foreign and international laws and regulations relating to noise and air pollution. Powered vehicles, and even bikes, have become subject to laws and regulations prohibiting their use on certain lands and trails.
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 an athlete that we sponsor); • negative publicity regarding our brand or our sponsored athletes, which could be amplified on social media; • high-profile injury or death to one of our sponsored athletes; • inconsistent uses of our brand and our other intellectual property assets, as well as failure to protect our intellectual property; • 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, 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.
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. 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. 28 Table of Contents Unpredictability in the adoption, implementation and enforcement of increasingly stringent emission standards by multiple jurisdictions could adversely affect our business.
Government in March 2020 and has resulted in over five and a half million deaths worldwide, as of the date of filing this Annual Report, and it continues to spread in major markets in which we operate.
Government in March 2020 and has resulted in over six and a half million deaths worldwide, as of the date of filing this Annual Report, and it continues to spread in major markets in which we operate.
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; 12 Table of Contents • 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; Risks Related to Our Indebtedness and Liquidity • our 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, 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.
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.
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.
Social media platforms make it easy for anyone to provide public feedback that can influence perceptions of our brands, and social media platforms can also accelerate and potentially amplify the scope of negative publicity. 16 Table of Contents There can be no assurance that we will be able to maintain or enhance the strength of our brands in the future.
Social media platforms make it easy for anyone to provide public feedback that can influence perceptions of our brands, and social media platforms can also accelerate and potentially amplify the scope of negative publicity. There can be no assurance that we will be able to maintain or enhance the strength of our brands in the future.
We believe that the top nine members of our senior management team are key to establishing our focus and executing our corporate strategies as they have extensive knowledge of our systems and processes.
We believe that the top eight members of our senior management team are key to establishing our focus and executing our corporate strategies as they have extensive knowledge of our systems and processes.
We may incur losses on interest rate swap and hedging arrangements. We may periodically enter into agreements to reduce the risks associated with increases in interest rates, such as our August 2020 interest rate swap agreement. Although these agreements may partially protect against rising interest rates, they also may reduce the benefits to us if interest rates decline.
We may incur losses on interest rate swap and hedging arrangements. We may periodically enter into agreements to reduce the risks associated with increases in interest rates, such as our 2022 Swap Agreement. Although these agreements may partially protect against rising interest rates, they also may reduce the benefits to us if interest rates decline.
Any losses that we may suffer from any product liability claims, and the effect that any product liability litigation may have upon the reputation and marketability of our products, may have a negative impact on our business, financial condition or results of operations. 22 Table of Contents We are subject to certain risks in our manufacturing and in the testing of our products.
Any losses that we may suffer from product liability claims, and the effect that any product liability litigation may have upon the reputation and marketability of our products, may have a negative impact on our business, financial condition or results of operations. We are subject to certain risks in our manufacturing and in the testing of our products.
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 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.
An adverse change in any of these conditions could have a negative effect upon our business, financial condition or results of operations. 20 Table of Contents 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 into the specialty bike component market.
Our failure to adequately address any of these issues could have a material adverse effect on our business, operating results and financial condition. 18 Table of Contents 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.
Our failure to adequately address any of these issues could have a material adverse effect on our business, operating results and financial condition. 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.
In addition, losses in market share individually or a decline in the overall market of our OEM customers or the discontinuance by our OEM customers of their products which incorporate our products could negatively impact our business, financial condition or results of operations. 19 Table of Contents A relatively small number of customers account for a substantial portion of our sales.
In addition, losses in market share individually or a decline in the overall market of our OEM customers or the discontinuance by our OEM customers of their products which incorporate our products could negatively impact our business, financial condition or results of operations. A relatively small number of customers account for a substantial portion of our sales.
A lawsuit filed against us, regardless of its merits or outcome, could cause us to incur substantial costs and could divert management’s attention. 30 Table of Contents Future issuances and sales of our shares, or the perception that such sales may occur, could cause our stock price to decline.
A lawsuit filed against us, regardless of its merits or outcome, could cause us to incur substantial costs and could divert management’s attention. Future issuances and sales of our shares, or the perception that such sales may occur, could cause our stock price to decline.
As a result, our products may not be able to compete successfully with our competitors’ products, which could negatively affect our business, financial condition or results of operations. Our business is sensitive to economic conditions that impact consumer spending.
As a result, our products may not be able to compete successfully with our competitors’ products, which could negatively affect our business, financial condition or results of operations. 16 Table of Contents Our business is sensitive to economic conditions that impact consumer spending.
Summary 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; • 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.
Summary 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.
Such market growth includes the creation of new classes of vehicles that can benefit from our products, such as trucks that are up-fitted with products to enhance their off-road capability, and our ability to create products for these vehicles.
Such market growth includes the creation of new classes of vehicles that can benefit from our products, such as trucks that are upfitted with products to enhance their off-road capability, and our ability to create products for these vehicles.
A significant portion of our sales are highly dependent on the demand for high-end bikes and a material decline in the demand for these bikes or their suspension components could have a material adverse effect on our business or results of operations. During 2021, approximately 45% of our sales were generated from the sale of bike products.
A significant portion of our sales are highly dependent on the demand for high-end bikes and a material decline in the demand for these bikes or their suspension components could have a material adverse effect on our business or results of operations. During 2022, approximately 42% of our sales were generated from the sale of bike products.
Such recall events could also adversely affect our brand image and have a negative effect on our relationships with our OEMs, sponsored athletes and race teams, or otherwise have a negative effect on our business, financial condition or results of operations.
Such recall events could also adversely affect the image of our brands and have a negative effect on our relationships with our OEMs, sponsored athletes and race teams, or otherwise have a negative effect on our business, financial condition or results of operations.
The CCPA has been amended several times, including by the California Privacy Rights Act (the "CPRA"), a California ballot initiative that passed in November 2020, and takes effect on January 1, 2023, which, among other things, significantly modifies the CCPA, including by expanding consumers' rights with respect to certain personal information and creating a new state agency to oversee implementation and enforcement efforts.
The CCPA has been amended several times, including by the California Privacy Rights Act ("CPRA"), a California ballot initiative that passed in November 2020, and took effect in most material aspects on January 1, 2023, which, among other things, significantly modifies the CCPA, including by expanding consumers' rights with respect to certain personal information and creating a new state agency to oversee implementation and enforcement efforts.
We may incur significant expenses to comply with privacy, consumer protection, and security standards and protocols imposed by law, regulation, industry standards or contractual obligations. 29 Table of Contents Our vendors and any potential commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.
We may incur significant expenses to comply with privacy, consumer protection, and security standards and protocols imposed by law, regulation, industry standards or contractual obligations. Our vendors and any potential commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.
Sales attributable to our five largest OEM customers, which can vary from year to year, collectively accounted for approximately 24%, 23%, and 32% of our sales in fiscal years 2021, 2020 and 2019.
Sales attributable to our five largest OEM customers, which can vary from year to year, collectively accounted for approximately 23%, 24%, and 23% of our sales in fiscal years 2022, 2021 and 2020.
Any adverse impact on our brand could in turn negatively affect our business, financial condition or results of operations. Our growth in the powered vehicle category is dependent upon our continued ability to expand our product sales into powered vehicles that require performance-defining products and the continued expansion of the market for these powered vehicles.
Any adverse impact on our brands could in turn negatively affect our business, financial condition or results of operations. 17 Table of Contents Our growth in the powered vehicle category is dependent upon our continued ability to expand our product sales into powered vehicles that require performance-defining products and the continued expansion of the market for these powered vehicles.
Any significant delay in deliveries to our customers could lead to increased returns or cancellations, expose us to damage claims from our customers or damage our brand and, in turn, negatively affect our business, financial condition or results of operations. Work stoppages or other disruptions at seaports could adversely affect our operating results.
Any significant delay in deliveries to our customers could lead to increased returns or cancellations, expose us to damage claims from our customers or damage our brands and, in turn, negatively affect our business, financial condition or results of operations. 18 Table of Contents Work stoppages or other disruptions at seaports could adversely affect our operating results.
After our IPO in 2013, we filed a registration statement under the Securities Act to register shares of our common stock that we may issue under our equity plans. As a result, all such shares can be freely sold in the public market upon issuance, subject to any vesting or contractual lock-up agreements.
After our IPO in 2013 and, more recently, in May 2022, we filed registration statements under the Securities Act to register shares of our common stock that we may issue under our equity plans. As a result, all such shares can be freely sold in the public market upon issuance, subject to any vesting or contractual lock-up agreements.
Factors affecting the trading price of our common stock could include: • variations in our operating results or those of our competitors; • new product or other significant announcements by us or our competitors; • changes in our product mix; • changes in consumer preferences; • fluctuations in currency exchange rates; • the gain or loss of significant customers; • recruitment or departure of key personnel; • changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock; • changes in general economic conditions as well as conditions affecting our industry in particular; and • sales of our common stock by us, our significant stockholders or our directors or executive officers.
Factors affecting the trading price of our common stock could include: • variations in our operating results or those of our competitors; • new product or other significant announcements by us or our competitors; • changes in our product mix; • changes in consumer preferences; • fluctuations in currency exchange rates; • the gain or loss of significant customers; • recruitment or departure of key personnel; • changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock; • changes in general economic conditions as well as conditions affecting our industry in particular; and • sales of our common stock by us, our significant stockholders or our directors or executive officers. 31 Table of Contents In addition, in recent years, the stock market has experienced significant price fluctuations.
Additionally, with our acquisitions of SCA Performance, Tuscany, Outside Van, and Shock Therapy, a growing portion of our sales are expected to be generated from providing up-fitting solutions.
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.
We recently completed the construction of the Hall County Facility to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group. The Hall County Facility is being used for manufacturing, warehousing, distribution and office space.
In the fourth quarter of 2021, we completed the construction of the Gainesville Facility in Hall County Georgia to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group. The Gainesville Facility is being used for manufacturing, warehousing, distribution and office space.
Our information systems are vulnerable to damage or interruption from, among other things: • earthquake, fire, flood, hurricane and other natural disasters; • power loss, computer systems failure, internet and telecommunications or data network failure; and • hackers, computer viruses, software bugs or glitches.
Our information systems are vulnerable to damage or interruption from, among other things: • earthquake, fire, flood, hurricane and other natural disasters; • power loss, computer systems failure, internet and telecommunications or data network failure; and • hackers, computer viruses, software bugs, implementing new functions or releases of software.
Our Amended and Restated Certificate of Incorporation authorizes us to issue 90,000,000 shares of common stock, 42,119,956 of which shares were outstanding as of December 31, 2021. In the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with financings, acquisitions, registration statements or otherwise.
Our Amended and Restated Certificate of Incorporation authorizes us to issue 90,000,000 shares of common stock, 42,269,840 of which shares were outstanding as of December 30, 2022. In the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with financings, acquisitions, registration statements or otherwise.
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. 28 Table of Contents We are subject to environmental laws and regulation and potential exposure for environmental costs and liabilities.
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.
As of December 31, 2021, we employed approximately 4,100 employees worldwide, a large percentage of which work at our manufacturing facilities. Our business involves complex manufacturing processes that can be inherently dangerous.
As of December 30, 2022, we employed approximately 4,400 employees worldwide, a large percentage of which work at our manufacturing facilities. Our business involves complex manufacturing processes that can be inherently dangerous.
Accordingly, competitive products that our OEM customers can purchase in other currencies may become more attractive, and we could lose sales as these OEMs seek to replace our products with cheaper alternatives. In addition, should the U.S.
Dollar appreciates against these foreign currencies, our products will become relatively more expensive for these OEMs. Accordingly, competitive products that our OEM customers can purchase in other currencies may become more attractive, and we could lose sales as these OEMs seek to replace our products with cheaper alternatives. In addition, should the U.S.
We depend on our relationships with dealers and distributors and their ability to sell and service our products. Any disruption in these relationships could harm our sales. We sell our aftermarket products to dealers and distributors, and we depend on their willingness and ability to market and sell our products to consumers and provide customer and product service as needed.
Any disruption in these relationships could harm our sales. We sell our aftermarket products to dealers and distributors, and we depend on their willingness and ability to market and sell our products to consumers and provide customer and product service as needed. We also rely on our dealers and distributors to be knowledgeable about our products and their features.
Our operating profitability could be negatively impacted as a result of changes in the exchange rate between the U.S. Dollar and the Canadian Dollar. Our international operations are exposed to risks associated with conducting business globally. As a result of our international presence, we are exposed to increased risks inherent in conducting business outside of the U.S.
Our operating profitability could be negatively impacted as a result of changes in the exchange rate between the U.S. Dollar and the Canadian Dollar. 20 Table of Contents Our international operations are exposed to risks associated with conducting business globally.
Our products and items where our products are incorporated as original equipment on the purchased item are frequently subject to regulation by various agencies, including, for example, the National Highway Traffic Safety Administration ("NHTSA"), the Consumer Product Safety Commission ("CPSC") and/or similar state and international regulatory authorities.
Our products and items where our products are incorporated as original equipment on the purchased item are frequently subject to regulation by various agencies, including, for example, the NHTSA, the CPSC and/or similar state and international regulatory authorities.
We depend on a limited number of suppliers for certain components. If our current suppliers, in particular the minority of those that are "single-source" suppliers, are unable to timely fulfill orders, or if we are required to transition to other suppliers, we could experience significant production delays or disruption to our business.
If our current suppliers, in particular the minority of those that are "single-source" suppliers, are unable to timely fulfill orders, or if we are required to transition to other suppliers, we could experience significant production delays or disruption to our business.
Climate change and related regulatory responses may adversely impact our business. 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 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.
Growth by acquisitions involves risks, and we may not be able to effectively integrate businesses we acquire or we may not be able to identify or consummate any future acquisitions on favorable terms, or at all.
We have grown and may continue to grow in the future through acquisitions. Growth by acquisitions involves risks, and we may not be able to effectively integrate businesses we acquire or we may not be able to identify or consummate any future acquisitions on favorable terms, or at all.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data, or inappropriate disclosure of confidential or propriety information, we could be subject to litigation and reputational harm, which could materially adversely affect our financial condition, business or results of operations. 24 Table of Contents We have grown and may continue to grow in the future through acquisitions.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data, or inappropriate disclosure of confidential or propriety information, we could be subject to litigation and reputational harm, which could materially adversely affect our financial condition, business or results of operations.
Based on the $182.5 million of variable interest rate indebtedness that was outstanding as of December 31, 2021, after giving effect to our interest rate swap, a hypothetical 100 basis point increase or decrease in the interest rate would have resulted in an approximately $1.8 million increase or decrease in interest expense for the year ended December 31, 2021, respectively.
Based on the $100.0 million of variable interest rate indebtedness that was outstanding under the 2022 Credit Facility as of December 30, 2022, after giving effect to our interest rate swap, a hypothetical 100 basis point increase or decrease in the interest rate would have resulted in an approximately $1.0 million increase or decrease in interest expense for the year ended December 30, 2022, respectively.
Accordingly, we may experience material increases in our interest expense as a result of increases in interest rate levels generally. Refer to Note 11. " Derivatives and Hedging " for additional information regarding the interest rate swap arrangement. 26 Table of Contents As of December 31, 2021, we had $382.5 million of indebtedness outstanding under the Credit Facility.
Accordingly, we may experience material increases in our interest expense as a result of increases in interest rate levels generally. Refer to Note 11. Derivatives and Hedging for additional information regarding the interest rate swap arrangement. As of December 30, 2022, we had $200.0 million of indebtedness outstanding under the 2022 Credit Facility.
If we are unable to maintain our current relationships with these professional athletes and race teams, these professional athletes and race teams are no longer popular, our sponsored athletes and race teams fail to have success or we are unable to continue to attract the endorsement of new professional athletes and race teams in the future, the value of our brands and our sales could decline.
If we are unable to maintain our current relationships with these professional athletes and race teams, these professional athletes and race teams are no longer popular, our sponsored athletes and race teams fail to have success or we are unable to continue to attract the endorsement of new professional athletes and race teams in the future, the value of our brands and our sales could decline. 19 Table of Contents We depend on our relationships with dealers and distributors and their ability to sell and service our products.
We grew our sales from approximately $890.6 million in 2020 to approximately $1,299.1 million in 2021. This growth rate may be unsustainable.
We grew our sales from approximately $1,299.1 million in 2021 to approximately $1,602.5 million in 2022. This growth rate may be unsustainable.
Any damage or significant disruption in the operation of such systems or the failure of our information systems to perform as expected could disrupt our operations, reduce our efficiency, delay our fulfillment of customer orders or require significant unanticipated expenditures to correct, and thereby have a negative effect on our business, financial condition or results of operations. 23 Table of Contents In 2015, we began the process of implementing a global enterprise resource planning system ("ERP").
Any damage or significant disruption in the operation of such systems or the failure of our information systems to perform as expected could disrupt our operations, reduce our efficiency, delay our fulfillment of customer orders or require significant unanticipated expenditures to correct, and thereby have a negative effect on our business, financial condition or results of operations.
Any such transformation involves risks inherent in the conversion to a new computer system, including loss of information and potential disruption to our normal operations.
Any such future transformation, due to acquisition integration or business growth and consolidation, involves risks inherent in the conversion to a new computer system, including loss of information and potential disruption to our normal operations.
Our operations, facilities and properties are subject to a variety of foreign, federal, state and local laws and regulations relating to health, safety and the protection of the environment.
We are subject to environmental laws and regulation and potential exposure for environmental costs and liabilities. Our operations, facilities and properties are subject to a variety of foreign, federal, state and local laws and regulations relating to health, safety and the protection of the environment.
While the West Coast ports labor agreement has been extended until July 2022, the 2015 strike lasted longer than we forecasted, and any similar labor dispute in the future could potentially have a negative effect on both our financial condition and results of operations.
The 2015 strike lasted longer than we forecasted, and any similar labor dispute in the future could potentially have a negative effect on both our financial condition and results of operations.
The main commodity items purchased for production include aluminum, magnesium, steel and carbon. Historically, price fluctuations for these components and raw materials have not had a material impact on our business.
The main commodity items purchased for production include aluminum, magnesium, steel and carbon. Historically, we have effectively mitigated the impacts of price fluctuations for these components and raw materials on our business.
We may face disqualification as a supplier for customers and reputational challenges if our due diligence procedures do not enable us to verify the origins for all conflict minerals used in our products or to determine if such conflict minerals are conflict-free. Accordingly, these rules could have a material adverse effect on our business, results of operations or financial condition.
We may face disqualification as a supplier for customers and reputational challenges if our due diligence procedures do not enable us to verify the origins for all conflict minerals used in our products or to determine if such conflict minerals are conflict-free.
As of December 31, 2021, we had $378.5 million of indebtedness, net of loan fees, and $235.0 million in revolving credit available to borrow under the Credit Facility. Our ability to borrow under the Credit Facility fluctuates from time to time due to, among other factors, our borrowings under the Credit Facility.
As of December 30, 2022, we had $200.0 million of indebtedness, and $450.0 million in revolving credit available to borrow under the 2022 Credit Facility. Our ability to borrow under the 2022 Credit Facility fluctuates from time to time due to, among other factors, our borrowings under the 2022 Credit Facility.
Any conduct or actions that our suppliers could take could reduce demand for our products, harm our ability to meet demand or harm our reputation, brand image, business, financial condition or results of operations. We may incur higher employee costs in the future. We are subject to government-mandated wage and benefit laws and regulations in many varying countries and jurisdictions.
Any conduct or actions that our suppliers take could reduce demand for our products, harm our ability to meet demand or harm our reputation, brand image, business, financial condition or results of operations. 23 Table of Contents 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. We collect personal information for various purposes and through various methods, including from third parties and directly from consumers through our website, at events and sales, and via telephone and email.
We collect personal information for various purposes and through various methods, including from third parties and directly from consumers through our website, at events and sales, and via telephone and email.
The pilot phase of the new ERP was completed in fiscal year 2016 and additional phases were completed in 2018, 2019 and 2021. ERP implementations are complex and time-consuming projects that involve substantial expenditures on system software and implementation activities. ERP implementations also require transformation of business and financial processes in order to reap the benefits of the ERP system.
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.
The failure of any of the information technology systems to perform as anticipated could disrupt our business and could result in transaction errors, processing inefficiencies and the loss of sales and customers, which could materially adversely affect our business, financial condition, or results of operations. 25 Table of Contents RISKS RELATED TO OUR INDEBTEDNESS AND LIQUIDITY The Credit Facility places operating restrictions on us and creates default risks.
The failure of any of the information technology systems to perform as anticipated could disrupt our business and could result in transaction errors, processing inefficiencies and the loss of sales and customers, which could materially adversely affect our business, financial condition, or results of operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES At December 31, 2021, we occupied the following square footage by location: U.S. Other Countries Total Leased facilities 823,572 401,468 1,225,040 Owned facilities 914,327 42,900 957,227 Total 1,737,899 444,368 2,182,267 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 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFrom time to time, the Company is involved in other legal proceedings that arise in the ordinary course of business.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, the Company is involved in legal proceedings that arise in the ordinary course of business.
Although the Company cannot assure the outcome of 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.
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.
Removed
ITEM 3. LEGAL PROCEEDINGS SRAM, LLC (“SRAM”) filed (i) a lawsuit on December 17, 2015 in the U.S. District Court, Northern District of Illinois, against RFE Holding (Canada) Corp. (“RFE Canada”), a wholly-owned subsidiary of Fox Factory Holding Corp. (“Fox Factory”), alleging patent infringement of U.S.
Removed
Patent number 9,182,027 (“027 Patent”) and violation of the Lanham Act, and (ii) a second lawsuit on May 16, 2016 in the same court against RFE Canada alleging patent infringement of U.S. Patent number 9,291,250 (“250 Patent” and, together with 027 Patent, the “Applicable SRAM Chainring Patents”). In addition, Fox Factory, Inc.
Removed
(a wholly owned subsidiary of Fox Factory) filed (i) a lawsuit on January 29, 2016 in the U.S. District Court, Northern District of California against SRAM alleging SRAM’s infringement of two separate Fox Factory, Inc. owned patents, specifically U.S. Patent number 6,135,434, and (ii) a second lawsuit on July 1, 2016 in the U.S.
Removed
District Court, Northern District of California against SRAM alleging infringement of Fox Factory, Inc.’s U.S. Patent numbers 8,226,172 and 8,974,009 (collectively, the “Applicable Fox Axle Patents”) (which actions were later moved to U.S. District Court, District of Colorado).
Removed
As previously disclosed on December 22, 2021, Fox Factory entered into a Settlement and License Agreement with SRAM that, among other things, provides (i) all claims amongst the parties in the aforementioned complaints shall be dismissed with prejudice, without any admission of liability or fault by any party, (ii) SRAM granted Fox Factory a non-exclusive license to make and use products and services covered by the Applicable SRAM Chainring Patents under the FOX brand in exchange for specified royalty rates, (iii) Fox Factory granted SRAM a non-exclusive, royalty-free license to make and use products and services covered by the Applicable Fox Axle Patents under the SRAM brand, and (iv) the exchange of mutual releases by the parties.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStockholders As of January 31, 2022, there were approximately 15 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Biggest changeThe actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
See " Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Credit Facility " for additional information.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Credit Facility for additional information.
We do not intend to pay dividends in the foreseeable future. Equity Compensation Plan Information For equity compensation plan information, refer to Item 12.
We do not intend to pay dividends in the foreseeable future. Equity Compensation Plan Information For equity compensation plan information, refer to
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Dividend Policy We did not declare or pay any dividends in the years ended December 31, 2021 and January 1, 2021. In addition, our Credit Facility contains covenants limiting our ability to pay dividends to our stockholders.
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.
Prior to that date, there was no public trading market for our common stock. The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock as reported on the NASDAQ Global Select Market.
Prior 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.
Removed
High Low Year Ending January 1, 2021 Quarter ended April 3, 2020 $ 79.19 $ 34.58 Quarter ended July 3, 2020 91.84 37.40 Quarter ended October 2, 2020 113.41 69.95 Quarter ended January 1, 2021 108.89 78.20 Year Ending December 31, 2021 Quarter ended April 2, 2021 $ 144.26 $ 101.82 Quarter ended July 2, 2021 166.88 128.25 Quarter ended October 1, 2021 172.25 137.43 Quarter ended December 31, 2021 190.29 142.40 On February 22, 2022, the closing price per share of our common stock as reported on the NASDAQ Global Select Market was $120.90 per share.
Removed
" Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters " of this Annual Report on Form 10-K. 34 Table of Contents Performance Graph The following graph shows a comparison from August 8, 2013 (the date our common stock commenced trading on the NASDAQ) through December 31, 2021 of the total cumulative return of our common stock with the total cumulative return of the NASDAQ Composite Index (the "NASDAQ Composite") and S&P 500 Index ("S&P 500").
Removed
The figures represented below assume an investment of $100 in our common stock at the closing price of $18.61 on August 8, 2013 and in the NASDAQ Composite and S&P 500. Data for the NASDAQ Composite and S&P 500 assume reinvestment of dividends.
Removed
The comparisons in the graph are historical and are not intended to forecast or be indicative of possible future performance of our common stock.
Removed
This performance graph shall not be deemed to be "soliciting material" or "filed" or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act except as shall be expressly set forth by specific reference in such filing.
Removed
Issuer Purchases of Equity Securities The table below sets forth information regarding repurchases of our common stock by us during the quarter ended December 31, 2021: Period Total Number of Shares Purchased (1) Weighted Average Price Paid per Share 10/2-11/5 1,436 $ 161.03 11/6-12/3 435 175.35 12/4-12/31 975 158.90 Total 2,846 $ 162.49 (1) Includes shares acquired from holders of restricted stock unit awards and option exercises to satisfy tax withholding obligations.

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. 39 Table of Contents Results of operations The table below summarizes our results of operations for the fiscal years ended December 31, 2021, January 1, 2021, and January 3, 2020: For the fiscal years ended December 31 January 1 January 3 (in thousands) 2021 2021 2020 Sales $ 1,299,064 $ 890,554 $ 751,020 Cost of sales 866,732 601,007 508,285 Gross profit 432,332 289,547 242,735 Operating expenses: Sales and marketing 70,925 52,214 42,794 Research and development 46,567 34,292 31,789 General and administrative 97,241 71,309 48,999 Amortization of purchased intangibles 20,685 17,583 6,344 Total operating expenses 235,418 175,398 129,926 Income from operations 196,914 114,149 112,809 Interest and other expense, net: Interest expense 8,162 9,294 3,173 Other expense, net 371 325 1,067 Total interest and other expense, net 8,533 9,619 4,240 Income before income taxes 188,381 104,530 108,569 Provision for income taxes 24,563 12,784 14,099 Net income 163,818 91,746 94,470 Less: net income attributable to non-controlling interest — 1,072 1,437 Net income attributable to FOX stockholders $ 163,818 $ 90,674 $ 93,033 40 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 31 January 1 January 3 2021 2021 2020 Sales 100.0 % 100.0 % 100.0 % Cost of sales 66.7 67.5 67.7 Gross profit 33.3 32.5 32.3 Operating expenses: Sales and marketing 5.5 5.9 5.7 Research and development 3.6 3.9 4.2 General and administrative 7.5 8.0 6.5 Amortization of purchased intangibles 1.6 2.0 0.8 Total operating expenses 18.1 19.7 17.3 Income from operations 15.2 12.8 15.0 Interest and other expense, net: Interest expense 0.6 1.0 0.4 Other expense, net — — 0.1 Interest and other expense, net 0.7 1.1 0.6 Income before income taxes 14.5 11.7 14.5 Provision for income taxes 1.9 1.4 1.9 Net income 12.6 10.3 12.6 Less: net income attributable to non-controlling interest — 0.1 0.2 Net income attributable to FOX stockholders 12.6 % 10.2 % 12.4 % *Percentages may not foot due to rounding. 41 Table of Contents Fiscal year ended December 31, 2021 compared to fiscal year ended January 1, 2021 Sales For the fiscal years ended (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.
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 $303.5 million, or 23.4%, compared to the year ended December 31, 2021.
Other significant sales and marketing expenses include race support and sponsorships of events and athletes, advertising and promotions related to trade shows, travel and entertainment, commissions paid to outside sales representatives, promotional materials and products and our sales office costs.
Other significant sales and marketing expenses include commissions paid to outside sales representatives, promotional materials and products, our sales office costs, race support and sponsorships of events and athletes, advertising and promotions related to trade shows, and travel and entertainment.
Cost of sales For the fiscal years ended (in millions) 2021 2020 Change ($) Change (%) Cost of sales $ 866.7 $ 601.0 $ 265.7 44.2 % Cost of sales for the year ended December 31, 2021 increased approximately $265.7 million, or 44.2%, compared to the year ended January 1, 2021.
Cost of sales For the fiscal years (in millions) 2021 2020 Change ($) Change (%) Cost of sales $ 866.7 $ 601.0 $ 265.7 44.2 % Cost of sales for the year ended December 31, 2021 increased approximately $265.7 million, or 44.2%, compared to the year ended January 1, 2021.
Operating expenses For the fiscal years ended (in millions) 2021 2020 Change ($) 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 $60.0 million, or 34.2%, over the comparable period in 2020.
Operating expenses For the fiscal years (in millions) 2021 2020 Change ($) 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 $60.0 million, or 34.2%, over the comparable period in 2020.
Interest and other expense, net For the fiscal years ended (in millions) 2021 2020 Change ($) 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 $9.6 million for the year ended January 1, 2021.
Interest and other expense, net For the fiscal years (in millions) 2021 2020 Change ($) 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.
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 $34.2 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 $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.
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 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.
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.
The adoption of ASU 2020-10 did not have a material impact on the Company's condensed consolidated financial statements and related disclosures. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.
The adoption of ASU 2020-10 did not have a material impact on the Company's consolidated financial statements and related disclosures. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.
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 year. The increase in Specialty Sports product sales reflects higher demand primarily in the OEM channel.
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.
Non-cash items and other adjustments consisted primarily of depreciation and amortization of $33.9 million, stock-based compensation of $8.6 million, and amortization of loan fees of $1.5 million, offset by a $14.1 million change in deferred taxes.
Non-cash items and other adjustments consisted primarily of depreciation and amortization of $33.9 million, stock-based compensation of $8.6 million, and amortization of loan fees of $1.5 million, offset by a $14.3 million change in deferred taxes.
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 others.
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.
Refer to Note 15. " Income Taxes " for further details. 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. 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.
We completed our most recent annual impairment test in the third quarter of 2021 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 2022 at which time we had a single reporting unit for purposes of assessing goodwill impairment. No impairment charges have been incurred to date.
Changes in the expectations regarding the realization of deferred tax assets could materially impact income tax expense in future periods. 48 Table of Contents Additionally, our judgments, assumptions, and estimates relative to the provision for income taxes take into account enacted tax laws, regulations, administrative practices, interpretations in various jurisdictions and possible outcomes of current and future audits conducted by tax authorities.
Changes in the expectations regarding the realization of deferred tax assets could materially impact income tax expense in future periods. Additionally, our judgments, assumptions, and estimates relative to the provision for income taxes take into account enacted tax laws, regulations, administrative practices, interpretations in various jurisdictions and possible outcomes of current and future audits conducted by tax authorities.
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. 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 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.
Stock-based compensation expenses are classified in the statements of income based on the department to which the related employee reports. Our stock-based awards subsequent to our IPO have been comprised principally of restricted stock unit awards. 50 Table of Contents Revenue recognition Revenue is measured based on the consideration specified in a contract with a customer.
Stock-based compensation expenses are classified in the statements of income based on the department to which the related employee reports. Our stock-based awards subsequent to our IPO have been comprised principally of restricted stock unit awards. Revenue recognition Revenue is measured based on the consideration specified in a contract with a customer.
Under ASU 2021-08, an acquirer must recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. The Company expects to early adopt this guidance in the first quarter of 2022.
Under ASU 2021-08, an acquirer must recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. The Company adopted this guidance in the first quarter of 2022.
Other expense, net, consists of foreign currency transaction gains and losses, gains and losses on the disposal of fixed assets, and other miscellaneous items. 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. 39 Table of Contents Income taxes We are subject to income taxes in the U.S. (federal and state) and various other foreign jurisdictions.
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 31, 2021, January 1, 2021 and January 3, 2020.
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.
Amortization of purchased intangible assets for the year ended December 31, 2021 increased by approximately $3.1 million as compared to the year ended January 1, 2021, due to the amortization of SCA and Outside Van's intangible assets. 42 Table of Contents Income from operations For the fiscal years ended (in millions) 2021 2020 Change ($) 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 $83.0 million, or 72.6%, compared to income from operations in the same period in 2020.
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 $82.8 million, or 72.6%, compared to income from operations in the year ended January 1, 2021.
The Credit Facility is secured by substantially all of the Company’s assets, restricts the Company's ability to make certain payments and engage in certain transactions, and requires that the Company satisfy customary financial ratios. The Company was in compliance with the covenants as of December 31, 2021.
The 2022 Credit Facility is secured by substantially all of the Company’s assets, restricts the Company's ability to make certain payments and engage in certain transactions, and requires that the Company satisfy customary financial ratios. The Company was in compliance with the covenants as of December 30, 2022.
Income taxes For the fiscal years ended (in millions) 2021 2020 Change ($) 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 $12.8 million in the same period in 2020.
Income taxes For the fiscal years (in millions) 2021 2020 Change ($) 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.
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, and a decrease in inventory of $7.9 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.
In addition, we received $198.2 million from our June 2020 issuance of common stock. These inflows were partially offset by $4.3 million to repurchase shares of our common stock as part of our stock-based compensation program and $6.6 million in installment payments related to the purchase of the Tuscany non-controlling interest. Refer to Note 12.
In addition, we received $198.2 million from our June 2020 issuance of common stock. These inflows were partially offset by $4.3 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 $6.6 million in installment payments related to the purchase of the Tuscany non-controlling interest.
Non-cash items and other adjustments consisted primarily of depreciation and amortization of $45.1 million, stock-based compensation of $13.9 million, and amortization of loan fees of $1.6 million, offset by a $17.1 million change in deferred taxes.
Non-cash items and other adjustments consisted primarily of depreciation and amortization of $43.4 million, stock-based compensation of $13.9 million, and amortization of loan fees of $1.6 million, offset by a $17.1 million change in deferred taxes and various others.
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.
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.
In the fiscal year ended December 31, 2021, cash used in investing activities was $106.7 million which primarily consisted of $54.8 million in property and equipment additions and $51.9 million of cash consideration for our acquisitions of Outside Van, Sola Sport and Shock Therapy.
In the fiscal year ended December 31, 2021, cash used in investing activities was $104.9 million, which primarily consisted of $54.8 million in property and equipment additions and $51.9 million of cash consideration for our acquisitions of Outside Van, Sola Sport and Shock Therapy, partially offset by $1.8 million in proceeds for the sale of property and equipment.
In accordance with ASC 815, Derivatives and Hedging Interest rate swap contract is recognized as an asset or liability on the consolidated balance sheets and is measured at fair value. The fair value was calculated utilizing Level 2 inputs.
Refer to Note 11. Derivatives and Hedging for additional details of the agreement. In accordance with ASC 815, an interest rate swap contract is recognized as an asset or liability on the Consolidated Balance Sheets and is measured at fair value. The fair value was calculated utilizing Level 2 inputs.
In the fiscal year ended December 31, 2021, cash provided by operating activities was $65.3 million and consisted of net income of $163.8 million plus non-cash items and other adjustments totaling $43.5 million less changes in operating assets and liabilities totaling $142.0 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.
" Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Contractual obligations and commitments " 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 sales Sales from: • Product sales: consist of sales of performance-defining products and systems to customers worldwide.
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 $8,568 and $4,471 as of December 31, 2021 and January 1, 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 $8.7 million and $8.6 million as of December 30, 2022 and December 31, 2021, respectively.
For the year ended January 1, 2021, the difference between our effective tax rate and the 21% federal statutory rate resulted from the decrease in pre-tax profit, as well as, 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 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.
As of December 31, 2021, we held $44.5 million of our $179.7 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 foreign currency hedge against U.S. dollar-denominated trade receivable balances held by our Taiwan location.
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.
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 January 1, 2021, our gross margin was 32.5% compared to 32.3% for the year ended January 3, 2020.
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.
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 $15,510 and $9,835 as of December 31, 2021 and January 1, 2021, respectively. Refer to Note 8.
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.
This allowance is based upon estimates of the projected returns in future periods based on our experience with returns recorded in previous periods. Sales returns have not been significant to date.
This allowance is based upon estimates of the projected returns in future periods based on our experience with returns recorded in previous periods.
In the fiscal year ended December 31, 2021, net cash used in financing activities was $24.1 million, which consisted primarily of $12.5 million in payments on our term debt, $7.1 million to repurchase shares of our common stock as part of our stock-based compensation program and $4.6 million in installment payments related to the purchase of the Tuscany non-controlling interest.
In the fiscal year ended December 31, 2021, net cash used in financing activities was $23.8 million, which primarily consisted of $12.5 million in payments on our term debt, $7.0 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 $4.6 million in installment payments related to the purchase of the Tuscany non-controlling interest, partially offset by $0.3 million in proceeds received from the termination of our 2020 Swap Agreement.
These 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. 37 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. 38 Table of Contents Gross profit/gross margin Our gross profit equals our sales minus cost of sales.
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. 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).
Net income For the fiscal years ended (in millions) 2020 2019 Change ($) Change (%) Net income $ 91.7 $ 94.5 $ (2.8) (3.0) % As a result of the factors described above, our net income decreased $2.8 million, or 3.0%, to $91.7 million in the fiscal year ended January 1, 2021 from $94.5 million for the year ended January 3, 2020. 45 Table of Contents Liquidity and Capital Resources Our primary cash needs are to support working capital, capital expenditures, acquisitions and acquisition-related compensation, and debt repayments.
Net income For the fiscal years (in millions) 2021 2020 Change ($) 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.
On an annual basis, the Company performs a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill.
Goodwill, intangible assets and long-lived assets Goodwill Goodwill represents the excess of purchase price over the fair value of the net assets of businesses acquired. On an annual basis, the Company performs a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill.
Cash invested in operating assets and liabilities is primarily the result of increases in inventory of $17.0 million, and accounts receivable of $12.1 million, decreases in net income taxes payable of $3.6 million and accrued expenses of $2.3 million, partially offset by a decrease in prepaids and other assets of $1.7 million.
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.
Stock-based compensation was $13,914, $8,618 and $6,864 for the fiscal years ended December 31, 2021, January 1, 2021 and January 3, 2020, 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. The Company does not estimate forfeitures in recognizing stock-based compensation expense.
Stock-based compensation was $16.4 million, $13.9 million and $8.6 million for the fiscal years ended December 30, 2022, December 31, 2021 and January 1, 2021, respectively. Refer to Note 13. Stockholders’ Equity for further details. The fair value of each stock option granted is estimated using the Black-Scholes option-pricing model.
Prior to the consummation of the stock purchase, the non-controlling interest was measured at fair value using Level 3 inputs. 51 Table of Contents Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which helps simplify how entities account for income taxes by removing various exceptions related to the recognition of deferred tax liabilities and updating other tax computation requirements.
Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which helps simplify how entities account for income taxes by removing various exceptions related to the recognition of deferred tax liabilities and updating other tax computation requirements.
Interest and other expense, net For the fiscal years ended (in millions) 2020 2019 Change ($) Change (%) Interest and other expense, net: Interest expense $ 9.3 $ 3.2 $ 6.1 190.6 % Other expense, net 0.3 1.0 (0.7) (70.0) % Interest and other expense, net $ 9.6 $ 4.2 $ 5.4 128.6 % Interest and other expense, net for the year ended January 1, 2021 increased by approximately $5.4 million to $9.6 million compared to $4.2 million for the year ended January 3, 2020.
Interest and other expense, net For the fiscal years (in millions) 2022 2021 Change ($) 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.
In the fiscal year ended January 1, 2021, cash provided by operating activities was $82.7 million and consisted of net income of $91.7 million plus non-cash items and other adjustments totaling $30.0 million less changes in operating assets and liabilities totaling $39.0 million.
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.
On June 11, 2021 the Company entered into an interest rate swap agreement to mitigate the cash flow risk associated with changes in interest rates on its variable rate debt. Refer to Note 11. " Derivatives and Hedging " for additional details of the 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").
A summary of our operating, investing and financing activities are shown in the following table: For the years ended December 31 January 1 January 3 (in thousands) 2021 2021 2020 Net cash provided by operating activities $ 65,290 $ 82,715 $ 74,830 Net cash used in investing activities (106,727) (388,525) (60,330) Net (used in) provided by financing activities (24,100) 506,722 859 Effect of exchange rate changes on cash and cash equivalents (541) 1,116 419 (Decrease) increase in cash and cash equivalents $ (66,078) $ 202,028 $ 15,778 We expect that cash on hand, cash flow from operations and availability under our 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.
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.
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.
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.
Net income For the fiscal years ended (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 $91.7 million for the same period in 2020. 43 Table of Contents Fiscal year ended January 1, 2021 compared to fiscal year ended January 3, 2020 Sales For the fiscal years ended (in millions) 2020 2019 Change ($) Change (%) Sales $ 890.6 $ 751.0 $ 139.6 18.6 % Sales for the year ended January 1, 2021 increased approximately $139.6 million, or 18.6%, compared to the year ended January 3, 2020.
Net income For the fiscal years (in millions) 2022 2021 Change ($) 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.
The increase in prepaids and other current assets is primarily due to deposits on chassis and acquisition-related compensation payments held in escrow, both related to our acquired SCA subsidiary.
The increase in prepaids and other current assets is primarily due to deposits on chassis and acquisition-related compensation payments held in escrow, both related to our acquired SCA subsidiary. The changes in inventory, accounts receivable, accounts payable and accrued expenses reflect business growth as well as timing of vendor payments.
We have generally financed our historical needs with operating cash flows and borrowings under our credit facilities. These sources of liquidity may be impacted by various factors, including demand for our products, investments made by us in acquired businesses, our plant and equipment and other capital expenditures, and expenditures on general infrastructure and information technology.
These sources of liquidity may be impacted by various factors, including demand for our products, impacts of the COVID-19 pandemic, investments made by us in acquired businesses, our plant and equipment and other capital expenditures, and expenditures on general infrastructure and information technology.
Credit Facility In June 2019, the Company entered into a credit facility with Bank of America and other named lenders, which has been periodically amended and restated and/or amended.
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").
For the years ended December 31, 2021, January 1, 2021 and January 3, 2020, we had effective tax rates of 13.0%, 12.2% and 13%, respectively.
The effective tax rates were 12.2% and 13.0% for the years ended December 30, 2022 and December 31, 2021, respectively.
For the year ended January 3, 2020, the difference between our effective tax rate and the 21% federal statutory rate resulted primarily from the benefit of excess deductions on stock-based compensation, and the benefit of a lower tax rate on U.S. foreign derived earnings, partially offset by non-deductible executive compensation and state taxes.
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.
Material Cash Requirements As of December 31, 2021, 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 $ 382,500 $ 17,500 $ 40,000 $ 325,000 $ — Operating lease obligations 40,189 9,866 16,596 9,310 4,417 Purchase obligations and other 3,564 3,055 509 — — Total $ 426,253 $ 30,421 $ 57,105 $ 334,310 $ 4,417 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 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.
The changes in inventory, accounts receivable, accounts payable and accrued expenses reflect business growth as well as timing of vendor payments. 46 Table of Contents In the fiscal year ended January 3, 2020, cash provided by operating activities was $74.8 million and consisted of net income of $94.5 million plus non-cash items and other adjustments totaling $14.5 million less changes in operating assets and liabilities totaling $34.2 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. 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.
Amortization of purchased intangible assets for the year ended January 1, 2021 increased by approximately $11.3 million as compared to the year ended January 3, 2020, due to the amortization of SCA's intangible assets. 44 Table of Contents Income from operations For the fiscal years ended (in millions) 2020 2019 Change ($) Change (%) Income from operations $ 114.1 $ 112.8 $ 1.3 1.2 % As a result of the factors discussed above, income from operations for the year ended January 1, 2021 increased approximately $1.3 million, or 1.2%, compared to income from operations in the same period in the year ended January 3, 2020.
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 $49.8 million, or 25.3%, compared to the year ended December 31, 2021.
We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our income tax liabilities and expense. Should actual events or results differ from our current expectations, charges or credits to our income tax expense may become necessary.
Should actual events or results differ from our current expectations, charges or credits to our income tax expense may become necessary.
Income taxes For the fiscal years ended (in millions) 2020 2019 Change ($) Change (%) Provision for income taxes $ 12.8 $ 14.1 $ (1.3) (9.2) % Income tax expense for the year ended January 1, 2021 decreased by approximately $1.3 million to $12.8 million compared to income tax expense of $14.1 million in the year ended January 3, 2020.
Income taxes For the fiscal years (in millions) 2022 2021 Change ($) 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 $24.6 million for the year ended December 31, 2021.
Operating expenses For the fiscal years ended (in millions) 2020 2019 Change ($) Change (%) Operating expenses: Sales and marketing $ 52.2 $ 42.8 $ 9.4 22.0 % Research and development 34.3 31.8 2.5 7.9 % General and administrative 71.3 49.0 22.3 45.5 % Amortization of purchased intangibles 17.6 6.3 11.3 179.4 % Total operating expenses $ 175.4 $ 129.9 $ 45.5 35.0 % Total operating expenses for the year ended January 1, 2021 increased approximately $45.5 million, or 35.0%, over the year ended January 3, 2020.
Operating expenses For the fiscal years (in millions) 2022 2021 Change ($) 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.
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. 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.
The Credit Facility, which matures on March 11, 2025, provides a senior secured revolving line of credit with a borrowing capacity of $250.0 million and a term loan of $400.0 million. The term loan is subject to quarterly amortization payments.
The Prior Credit Facility (which was terminated on April 5, 2022 and replaced with the 2022 Credit Facility (as discussed below)), would have matured on March 11, 2025, and provided a senior secured revolving line of credit with a borrowing capacity of $250.0 million and a term loan of $400.0 million.
Cost of sales For the fiscal years ended (in millions) 2020 2019 Change ($) Change (%) Cost of sales $ 601.0 $ 508.3 $ 92.7 18.2 % Cost of sales for the year ended January 1, 2021 increased approximately $92.7 million, or 18.2%, compared to the year ended January 3, 2020.
Cost of sales For the fiscal years (in millions) 2022 2021 Change ($) Change (%) Cost of sales $ 1,071.1 $ 866.7 $ 204.4 23.6 % Cost of sales for the year ended December 30, 2022 increased approximately $204.4 million, or 23.6%, compared to the year ended December 31, 2021.
The decrease in expense resulted from the decrease in pre-tax profit, as well as from the benefits of excess deductions on stock-based compensation and the benefit of a lower tax rate on U.S. foreign derived earnings. The effective tax rates were 12.2% and 13.0% for the years ended January 1, 2021 and January 3, 2020, respectively.
The increase in expense resulted from an increase in pre-tax profit and decreased benefits from stock-based compensation deductions, partially offset by the release of the valuation allocation for foreign tax credits and the benefit of a lower tax rate on U.S. foreign derived earnings.
In the fiscal year ended January 3, 2020, cash used in investing activities was $60.3 million which primarily consisted of $53.5 million in property and equipment additions and $6.8 million of cash consideration for our acquisition of Ridetech.
In the fiscal year ended December 30, 2022, cash used in investing activities was $44.7 million, which primarily consisted of $43.7 million in property and equipment additions, $3.5 million in cash consideration for our purchase of intellectual property assets, and $0.7 million in cash consideration to finalize our acquisition of Shock Therapy, partially offset by $3.2 million in proceeds from the sale of property and equipment.
General and administrative expenses increased approximately $22.3 million due to acquisition-related costs of approximately $14.1 million and the inclusion of SCA operating costs of $5.9 million, and higher headcount costs including incentive compensation, partially offset by lower patent-related legal costs.
General and administrative expenses increased approximately $18.9 million due to higher headcount and employee benefit-related costs of $11.7 million and higher insurance and facility-related costs of $11.1 million. These increases were partially offset by lower acquisition-related compensation and decreases in other miscellaneous costs.
Non-cash items and other adjustments consisted primarily of depreciation and amortization of $17.7 million, stock-based compensation of $6.9 million, and loss on the extinguishment of debt of $0.5 million, offset by a $10.6 million change in deferred taxes.
Non-cash items and other adjustments consisted primarily of depreciation and amortization of $49.2 million, stock-based compensation of $16.4 million, the write off of unamortized loan origination fees of $1.9 million, and the amortization of loan fees of $1.1 million, partially offset by a $18.4 million change in deferred taxes, the amortization of deferred gains on swap agreements of $3.2 million and gains of $1.7 million related to disposals of property, plant and equipment.
The increase in prepaids and other current assets is the result of increased chassis deposits. 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.
The increase in prepaids and other current assets is the result of increased chassis deposits.
As of December 31, 2021, our deferred tax assets included foreign tax credits of approximately $48.3 million, which begin to expire in 2025 unless utilized. 38 Table of Contents Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
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.
When expressed as a percentage of sales, operating expenses increased to 19.7% of sales for the year ended January 1, 2021 compared to 17.3% of sales in the year ended January 3, 2020. Within operating expenses, our sales and marketing expense increased by approximately $9.4 million primarily due to costs related to SCA of $8.5 million.
Within operating expenses, our sales and marketing expense increased by approximately $19.9 million primarily due to higher commissions costs of $9.7 million, higher headcount and employee-benefit related costs of $5.8 million, higher marketing-related costs of $4.0 million and various others. Research and development expenses increased approximately $9.6 million primarily due to headcount investments to support future growth.
The increase in interest and other expense, net is primarily due to interest expense on additional borrowings in connection with our acquisition of SCA.
The increase in interest and other expense, net is primarily due to higher foreign currency losses, as well as increasing interest rates.
In the fiscal year ended January 3, 2020, net cash provided by financing activities was $0.9 million, which consisted primarily of $7.7 million in net proceeds from our credit facility offset by $6.8 million in payments to repurchase shares to cover tax withholding related to the vesting of restricted stock awards, net of proceeds from the exercise of stock options.
In the fiscal year ended December 30, 2022, net cash used in financing activities was $179.1 million, which primarily consisted of $404.3 million in payments on our line of credit, $382.5 million in payments on our term debt, $4.3 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 $2.7 million in installment payments related to the purchase of the Tuscany non-controlling interest.
The difference between the deferred tax asset and the actual tax deduction for stock-based compensation is recorded as a component of our income tax expense. Our effective tax rate will vary based on such differences. We are subject to examination of our income tax returns by the U.S. Internal Revenue Service ("IRS") and other tax authorities.
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.
The Company paid $7.6 million in debt issuance costs, of which $6.5 million were allocated to the term debt and $1.2 million were allocated to the line of credit.
To the extent not previously paid, all then-outstanding amounts under the 2022 Credit Facility are due and payable on the maturity date. The Company paid $2.0 million in debt issuance costs in connection with the 2022 Credit Facility, which were allocated to the line of credit and amortized on a straight-line basis over the term of the facility.
The sales increase reflects a 22.4% increase in Specialty Sports products as well as a 16.1% growth in Powered Vehicle products for the year ended January 1, 2021 compared to the prior year. The increase in Specialty Sports product sales reflects higher demand in both OEM and aftermarket channels.
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 Credit Facility provides for interest at a rate either based on the London Interbank Offered Rate, or LIBOR, plus a margin ranging from 1.00% to 2.25%, with a floor rate of 0.0%, or based on the base rate offered by Bank of America plus a margin ranging from 0.00% to 1.25%.
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%.
Removed
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. This discussion contains forward-looking statements that involve risks and uncertainties.
Added
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.
Removed
Our actual results could differ materially from those discussed below.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeHowever, we may be exposed to greater exchange rate sensitivity in the future. Currently, we do not hedge our foreign currency exposure; however, we may consider strategies to mitigate our foreign currency exposure in the future if deemed necessary.
Biggest changeHowever, we may be exposed to greater exchange rate sensitivity in the future. Currently, we enter into short-term foreign currency swap contracts to mitigate our foreign currency exposure; however, we may consider strategies to mitigate our foreign currency exposure further in the future if deemed necessary.
To manage our exposure to such risks, we perform ongoing credit evaluations of our customers and maintain an allowance for potential credit losses. We do not currently hedge our exposure to increases in the prices for our primary raw materials. 52 Table of Contents
To manage our exposure to such risks, we perform ongoing credit evaluations of our customers and maintain an allowance for potential credit losses. We do not currently hedge our exposure to increases in the prices for our primary raw materials.
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 31, 2021, 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 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.
Based on the $182.5 million of variable interest rate indebtedness that was outstanding as of December 31, 2021, after giving effect to our interest rate swap, a hypothetical 100 basis point increase or decrease in the interest rate would have resulted in an approximately $1.8 million increase or decrease in interest expense for the year ended December 31, 2021, respectively.
Based on the $100.0 million of variable interest rate indebtedness that was outstanding 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.
Exchange rate sensitivity As of December 31, 2021, we are exposed to changes in foreign currency exchange rates.
Exchange rate sensitivity As of December 30, 2022, we are exposed to changes in foreign currency exchange rates.
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 31, 2021, we had $382.5 million of indebtedness outstanding under our 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 30, 2022, we had $200.0 million of indebtedness outstanding under our 2022 Credit Facility.

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