10-Q 1 foxf-20211001.htm 10-Q foxf-20211001
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 001-36040
Fox Factory Holding Corp.
(Exact Name of Registrant as Specified in Its Charter)
Delaware26-1647258
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
2055 Sugarloaf Circle, Suite 300, Duluth GA 30097
(Address of Principal Executive Offices) (Zip Code)
(831) 274-6500
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per shareFOXFThe NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerEmerging growth company
Non-accelerated filerSmaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of November 2, 2021, there were 42,103,983 shares of the registrant’s common stock outstanding.

1


Fox Factory Holding Corp.
FORM 10-Q
Table of Contents
 
Page 
Unaudited Condensed Consolidated Balance Sheets as of October 1, 2021 and January 1, 2021
Unaudited Condensed Consolidated Statements of Income for the Three and Nine Months Ended October 1, 2021 and October 2, 2020
Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended October 1, 2021 and October 2, 2020
Unaudited Condensed Consolidated Statements of Stockholders' Equity and Redeemable Non-controlling Interest for the Three and Nine Months Ended October 1, 2021 and October 2, 2020
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 1, 2021 and October 2, 2020
Notes to Unaudited Condensed Consolidated Financial Statements

2

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FOX FACTORY HOLDING CORP.
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
As of As of
October 1,January 1,
20212021
(unaudited) 
Assets
Current assets:
Cash and cash equivalents$319,342 $245,764 
Accounts receivable (net of allowances of $929 and $663 at October 1, 2021 and January 1, 2021, respectively)
159,456 121,194 
Inventory246,185 127,091 
Prepaids and other current assets53,962 87,920 
Total current assets778,945 581,969 
Property, plant and equipment, net183,695 163,288 
Lease right-of-use assets34,976 26,148 
Deferred tax assets18,667 19,362 
Goodwill299,802 289,349 
Intangibles, net195,252 204,491 
Other assets2,192 1,954 
Total assets$1,513,529 $1,286,561 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$156,504 $92,403 
Accrued expenses98,384 59,391 
Reserve for uncertain tax positions 1,095 
Current portion of long-term debt15,000 12,500 
Total current liabilities269,888 165,389 
Line of credit  
Long-term debt, less current portion365,615 377,088 
Other liabilities27,986 24,913 
Total liabilities663,489 567,390 
Commitments and contingencies (Refer to Note 9 - Commitments and Contingencies)
Stockholders’ equity
Preferred stock, $0.001 par value — 10,000 authorized and no shares issued or outstanding as of October 1, 2021 and January 1, 2021
  
Common stock, $0.001 par value — 90,000 authorized; 42,994 shares issued and 42,104 outstanding as of October 1, 2021; 42,692 shares issued and 41,802 outstanding as of January 1, 2021
42 42 
Additional paid-in capital340,468 336,834 
Treasury stock, at cost; 890 common shares as of October 1, 2021 and January 1, 2021
(13,754)(13,754)
Accumulated other comprehensive income2,219 1,068 
Retained earnings521,065 394,981 
Total stockholders’ equity850,040 719,171 
Total liabilities and stockholders’ equity$1,513,529 $1,286,561 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3

FOX FACTORY HOLDING CORP.
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited) 
For the three months endedFor the nine months ended
October 1,October 2,October 1,October 2,
2021202020212020
Sales$347,435 $260,700 $956,735 $628,163 
Cost of sales231,417 171,226 631,705 422,088 
Gross profit116,018 89,474 325,030 206,075 
Operating expenses:
Sales and marketing17,517 13,667 52,215 38,291 
Research and development12,318 8,514 33,410 24,779 
General and administrative25,614 16,463 70,209 53,443 
Amortization of purchased intangibles5,320 5,277 15,368 13,084 
Total operating expenses60,769 43,921 171,202 129,597 
Income from operations55,249 45,553 153,828 76,478 
Interest and other expense, net:
Interest expense1,849 2,291 6,351 7,030 
Other (income) expense(187)(189)855 (57)
Interest and other expense, net1,662 2,102 7,206 6,973 
Income before income taxes53,587 43,451 146,622 69,505 
Provision for income taxes9,764 5,431 20,538 9,555 
Net income43,823 38,020 126,084 59,950 
Less: net income attributable to non-controlling interest   1,072 
Net income attributable to FOX stockholders$43,823 $38,020 $126,084 $58,878 
Earnings per share:
Basic$1.04 $0.91 $3.00 $1.48 
Diluted$1.03 $0.90 $2.98 $1.46 
Weighted-average shares used to compute earnings per share:
Basic42,097 41,616 41,992 39,726 
Diluted42,363 42,206 42,357 40,314 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4

FOX FACTORY HOLDING CORP.
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited) 
For the three months endedFor the nine months ended
October 1,October 2,October 1,October 2,
2021202020212020
Net income$43,823 $38,020 $126,084 $59,950 
Other comprehensive (loss) income
Interest rate swap, net of tax effects(45)(801)1,575 (801)
Foreign currency translation adjustments, net of tax effects(556)636 (424)619 
Other comprehensive (loss) income(601)(165)1,151 (182)
Comprehensive income43,222 37,855 127,235 59,768 
Less: comprehensive income attributable to non-controlling interest   1,072 
Comprehensive income attributable to FOX stockholders$43,222 $37,855 $127,235 $58,696 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5

FOX FACTORY HOLDING CORP.
Condensed Consolidated Statements of Stockholders' Equity and Redeemable Non-controlling Interest
(in thousands)
(unaudited)
Common StockTreasuryAdditional paid-in capitalAccumulated other comprehensive income (loss)Retained earningsTotal stockholders' equityRedeemable non-controlling interest
SharesAmountSharesAmount
Balance - January 3, 202039,448 $39 890 $(13,754)$123,274 $150 $312,491 $422,200 $15,719 
Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding45 — — — (2,047)— — (2,047)— 
Issuance of stock for business acquisition— — — — 322 — — 322 
Stock-based compensation expense— — — — 1,921 — — 1,921 — 
Other comprehensive loss— — — — — (940)— (940)— 
Net income— — — — — — 8,250 8,250 488 
Balance - April 3, 202039,493 $39 890 $(13,754)$123,470 $(790)$320,741 $429,706 $16,207 
Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding74 — — — (2,301)— — (2,301)— 
Issuance of common stock, net2,760 2 — — 198,234 — — 198,236 — 
Adjustment to the fair value of non-controlling interest— — — — — — (8,184)(8,184)8,184 
Stock-based compensation expense— — — — 2,076 — — 2,076 — 
Other comprehensive income— — — — — 923 — 923 — 
Net income— — — — — 12,608 12,608 584 
Balance - July 3, 202042,327 $41 890 $(13,754)$321,479 $133 $325,165 $633,064 $24,975 
Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding138 1 — — (254)— — (253)— 
Redeemable non-controlling interest136 — — — 11,169 — — 11,169 (24,975)
Stock-based compensation expense— — — — 2,092 — — 2,092 — 
Other comprehensive loss— — — — — (165)— (165)— 
Net income— — — — — — 38,020 38,020  
Balance - October 2, 202042,601 $42 890 $(13,754)$334,486 $(32)$363,185 $683,927 $ 
The accompanying notes are an integral part of these condensed consolidated statements.

6


FOX FACTORY HOLDING CORP.
Condensed Consolidated Statements of Stockholders' Equity and Redeemable Non-controlling Interest
(in thousands)
(unaudited)
Common StockTreasuryAdditional paid-in capitalAccumulated other comprehensive incomeRetained earningsTotal stockholders' equityRedeemable non-controlling interest
SharesAmountSharesAmount
Balance - January 1, 202142,692 $42 890 $(13,754)$336,834 $1,068 $394,981 $719,171 $ 
Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding162 — — — 598 — — 598 — 
Stock-based compensation expense— — — — 2,915 — — 2,915 — 
Other comprehensive income— — — — — 1,621 — 1,621 — 
Net income— — — — — — 37,986 37,986  
Balance - April 2, 202142,854 $42 890 $(13,754)$340,347 $2,689 $432,967 $762,291 $ 
Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding118 — — — (5,702)— — (5,702)— 
Stock-based compensation expense— — — — 3,374 — — 3,374 — 
Other comprehensive income— — — — — 131 — 131 — 
Net income— — — — — 44,275 44,275  
Balance - July 2, 202142,972 $42 890 $(13,754)$338,019 $2,820 $477,242 $804,369 $ 
Issuance of common stock under equity compensation plans, net of shares repurchased for income tax withholding22  — — (1,537)— — (1,537)— 
Stock-based compensation expense— — — — 3,986 — — 3,986 — 
Other comprehensive loss— — — — — (601)— (601)— 
Net income— — — — — — 43,823 43,823 — 
Balance - October 1, 202142,994 $42 890 $(13,754)$340,468 $2,219 $521,065 $850,040 $ 
The accompanying notes are an integral part of these condensed consolidated statements.


7

FOX FACTORY HOLDING CORP.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
For the nine months ended
October 1, 2021October 2, 2020
OPERATING ACTIVITIES:
Net income$126,084 $59,950 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization32,321 24,762 
Stock-based compensation9,854 6,360 
Deferred taxes and uncertain tax positions(1,218)(11,857)
Amortization of loan fees1,227 1,129 
Changes in operating assets and liabilities, net of acquisition of business:
Accounts receivable(37,867)(12,610)
Inventory(116,791)(579)
Income taxes8,257 3,218 
Prepaids and other assets35,468 (14,737)
Accounts payable66,099 36,712 
Accrued expenses and other liabilities25,875 7,453 
Net cash provided by operating activities149,309 99,801 
INVESTING ACTIVITIES:
Purchases of property and equipment(39,983)(45,983)
Acquisition of businesses, net of cash acquired(15,625)(329,176)
Acquisition of other assets (250)
Net cash used in investing activities(55,608)(375,409)
FINANCING ACTIVITIES:
Proceeds from line of credit17,093 204,131 
Payments on line of credit(17,093)(272,131)
Proceeds from issuance of debt, net of origination fees of $7,615 392,385 
Repayment of debt(10,000)(5,000)
Installment on purchase of non-controlling interest(3,650)(3,000)
Proceeds from sale of common stock, net 198,236 
Repurchases from stock compensation program, net (6,641)(4,602)
Net cash (used in) provided by financing activities(20,291)510,019 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS168 99 
CHANGE IN CASH AND CASH EQUIVALENTS73,578 234,510 
CASH AND CASH EQUIVALENTS—Beginning of period245,764 43,736 
CASH AND CASH EQUIVALENTS—End of period$319,342 $278,246 


8

FOX FACTORY HOLDING CORP.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
For the nine months ended
SUPPLEMENTAL CASH FLOW INFORMATION:October 1, 2021October 2, 2020
Cash paid during the period for:
Income taxes$13,899 $17,484 
Cash paid for interest, net of capitalized interest$5,184 $5,946 
Cash paid for amounts included in the measurement of lease liabilities$6,276 $5,267 
Non-cash operating activities:
Right-of-use assets obtained in exchange for lease obligations$14,276 $12,293 
Non-cash investing activities:
Acquisition of non-controlling interest in exchange for equity and installment payments$ $21,975 
Capital expenditures included in accounts payable$4,428 $6,530 
The accompanying notes are an integral part of these condensed consolidated financial statements.

9

FOX FACTORY HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
(unaudited)
1. Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies - Fox Factory Holding Corp. (the "Company") designs, engineers, manufactures, and markets performance-defining products and systems for customers worldwide. Our premium brand, performance-defining products and systems are used primarily for 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. Some of our products are specifically designed and marketed to the leading cycling and powered vehicle original equipment manufacturers ("OEMs"), while others are distributed to consumers through a global network of dealers and distributors.
Throughout this Form 10-Q, unless stated otherwise or as the context otherwise requires, the "Company," "FOX," "Fox Factory," "we," "us," "our," and "ours" refer to Fox Factory Holding Corp. and its operating subsidiaries on a consolidated basis.
Basis of Presentation - The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States of America ("U.S." or "United States") and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended January 1, 2021 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 25, 2021. In management’s opinion, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal and recurring nature, that are necessary for a fair presentation of financial results for the interim periods presented. Operating results for any quarter are not necessarily indicative of the results for the full fiscal year.
Fiscal Year Calendar - The Company operates on a 52-53 week fiscal year calendar. For 2021 and 2020, the Company's fiscal year will end or has ended on December 31, 2021 and January 1, 2021, respectively. The twelve month periods ended December 31, 2021 and January 1, 2021, will include or have included 52 weeks. The three and nine month periods ended October 1, 2021 and October 2, 2020 each included 13 weeks and 39 weeks, respectively.
Principles of Consolidation - These condensed consolidated financial statements include the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Summary of Significant Accounting Policies - There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended January 1, 2021, as filed with the SEC on February 25, 2021 that have had a material impact on our condensed consolidated financial statements and related notes.
Revenue Recognition - Revenues are generated from the sale of performance-defining products and systems to customers worldwide. The Company’s performance-defining products and systems are solutions that improve performance of powered vehicles and bikes. Powered vehicles include Side-by-Sides, on-road vehicles with off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, and motorcycles.
Revenue is measured based on the consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product to a customer, generally at the time of shipment. Contracts are generally in the form of purchase orders and are governed by standard terms and conditions. For larger OEMs, the Company may also enter into master agreements. Sales tax and other similar taxes are excluded from revenues.
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. Certain pricing provisions that provide the customer with future discounts are considered a material right. Such material rights result in the deferral of revenues that are recognized when the rights are exercised by the customer. Measuring the material rights requires judgments including forecasts of future sales and product mix.

10

FOX FACTORY HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
(unaudited)
Segments - The Company has determined that it has a single operating and reportable segment: manufacturing, sale and service of performance-defining products. The Company considers operating segments to be components of the Company in which separate financial information is available that is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance. The chief operating decision maker for the Company is the Chief Executive Officer. The Chief Executive Officer reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.
Use of Estimates - The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from management’s estimates.
Certain Significant Risks and Uncertainties - The Company is subject to those risks common in manufacturing-driven markets, including, but not limited to, competitive forces, dependence on key personnel, customer demand for its products, the successful protection of its proprietary technologies, compliance with government regulations, and the possibility of not being able to obtain additional financing when needed. Additionally, the Company has been impacted by the ongoing coronavirus (“COVID-19”) pandemic. The global outbreak of COVID-19 has negatively affected the U.S. and global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. Despite the Company’s efforts to manage and remedy these impacts to the Company, the ultimate impact and the extent to which the COVID-19 pandemic will continue to affect the business, results of operation and financial condition is difficult to predict and depends on numerous evolving factors outside of the Company’s control, including: the duration and scope of the COVID-19 pandemic; government, social, business and other actions that have been and will be taken in response to the COVID-19 pandemic; increases in COVID-19 case counts; any additional waves of the virus, availability and ultimate efficacy of the vaccine on the new variants of the virus, including the Delta variant; and the effect of the COVID-19 pandemic on short- and long-term general economic conditions.
Fair Value Measurements and Financial Instruments - The Financial Accounting Standards Board ("FASB") has issued Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures, that 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).
The carrying amounts of the Company's financial instruments, including cash, receivables, accounts payable, and accrued liabilities approximate their fair values due to their short-term nature. Amounts owed under the Company's Credit Facility (as defined in Note 8 - Debt below) approximate fair value due to the variable interest rate features embedded in both the line of credit and the term debt.

11

FOX FACTORY HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
(unaudited)
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. This standard is effective for fiscal years beginning after December 15, 2020 and early adoption is permitted. The Company adopted ASU 2019-12 effective in the first quarter of fiscal year 2021. The adoption of ASU 2019-12 did not have a material impact on the Company's condensed consolidated financial statements.
In October 2020, the FASB issued ASU 2020-10, Codification Improvements. The amendments in ASU 2020-10 contain improvements to the Codification to ensure consistency by including disclosure guidance in the appropriate Disclosure Section. This guidance includes an option for an entity to provide certain information either on the face of the financial statements or in the notes. ASU 2020-10 amends the Codification to include this language in the appropriate disclosure section. The ASU also provides clarification to various codification topics to improve consistency in guidance application. The amendments are effective for interim and annual reporting periods in fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU 2020-10 effective in the first quarter of fiscal year 2021. The adoption of ASU 2020-10 did not have a material impact on the Company's condensed consolidated financial statements and related disclosures.


12

FOX FACTORY HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
(unaudited)
2. Revenues
The following table summarizes total sales by product category:
For the three months endedFor the nine months ended
October 1, 2021October 2, 2020October 1, 2021October 2, 2020
Powered Vehicles$187,998 $153,031 $540,164 $372,081 
Specialty Sports159,437 107,669 416,571 256,082 
Total sales$347,435 $260,700 $956,735 $628,163 

The following table summarizes total sales by sales channel:
For the three months endedFor the nine months ended
October 1, 2021October 2, 2020October 1, 2021October 2, 2020
OEM $198,782 $143,687 $522,809 $335,295 
Aftermarket148,653 117,013 433,926 292,868 
Total sales$347,435 $260,700 $956,735 $628,163 

The following table summarizes total sales generated by geographic location of the customer:
For the three months endedFor the nine months ended
October 1, 2021October 2, 2020October 1, 2021October 2, 2020
North America$210,623 $175,486 $608,800 $423,078 
Asia65,873 41,609 177,974 97,872 
Europe65,141 41,004 157,698 101,223 
Rest of the world5,798 2,601 12,263 5,990 
Total sales$347,435 $260,700 $956,735 $628,163 
Remaining performance obligations represent the transaction price of contracts, generally considered to be the customer's purchase order, for which work has not been performed or has been partially performed. The Company has elected to exclude disclosure of remaining performance obligations with an original expected duration of one year or less. Revenue expected to be recognized from remaining performance obligations as of October 1, 2021 for contracts with a duration of more than one year was approximately $191,216, all of which is expected to be recognized during fiscal years 2022 and 2023. The increase from prior quarter is due the timing of model year releases.


13

FOX FACTORY HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
(unaudited)
3. Inventory
Inventory consisted of the following:
October 1,January 1,
20212021
Raw materials$166,708 $87,503 
Work-in-process16,239 5,306 
Finished goods63,238 34,282 
Total inventory$246,185 $127,091 

4. Prepaids and Other Current Assets
Prepaids and other current assets consisted of the following:
October 1,January 1,
20212021
Prepaid chassis deposits$29,765 $66,812 
Advanced payments and prepaid contracts10,983 8,683 
Current portion of acquisition-related compensation held in escrow1,970 4,518 
Other current assets11,244 7,907 
Total$53,962 $87,920 


14

FOX FACTORY HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
(unaudited)
5. Property, Plant and Equipment, net
Property, plant and equipment, net consisted of the following:
October 1,January 1,
20212021
Building and building improvements$73,370 $75,753 
Information systems, office equipment and furniture19,499 14,176 
Internal-use computer software23,231 19,853 
Land and land improvements15,429 9,698 
Leasehold improvements18,810 15,075 
Machinery and manufacturing equipment100,897 81,281 
Transportation equipment6,729 6,187 
Total257,965 222,023 
Less: accumulated depreciation and amortization(74,270)(58,735)
Property, plant and equipment, net$183,695 $163,288 
During the nine months ended October 1, 2021, the Company reclassified certain assets from buildings to land and land improvements to better depict the nature of the assets.
The Company’s long-lived assets by geographic location are as follows:
October 1,January 1,
20212021
United States$158,116 $144,529 
International25,579 18,759 
Total long-lived assets$183,695 $163,288 


15

FOX FACTORY HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
(unaudited)
6. Leases
The Company has operating lease agreements for administrative, research and development, manufacturing, and sales and marketing facilities. These leases have remaining lease terms ranging from 1 to 10 years, some of which include options to extend the lease term for up to 5 years, and some of which include options to terminate the leases within 1 year. Certain leases are subject to annual escalations as specified in the lease agreements. The Company considered these options in determining the lease term used to establish its right-of-use assets and lease liabilities. These lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As most of the Company's leases do not provide an interest rate, the Company used the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The weighted-average remaining lease term for the Company's operating leases was 5.09 years and the weighted-average incremental borrowing rate was 2.47% as of October 1, 2021.
Operating lease costs consisted of the following:
For the three months endedFor the nine months ended
October 1, 2021October 2, 2020October 1, 2021October 2, 2020
Operating lease cost$2,387 $1,835 $6,440 $5,209 
Other lease costs (1)339 214 961 733 
Total$2,726 $2,049 $7,401 $5,942 
(1) Includes short-term leases and variable lease costs. The Company elected a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the right-of-use assets and lease liabilities.
Supplemental balance sheet information related to the Company's operating leases is as follows:
Balance Sheet ClassificationOctober 1, 2021
Operating lease right-of-use assetsLease right-of-use assets$34,976 
Current lease liabilitiesAccrued expenses$8,110 
Non-current lease liabilitiesOther liabilities$26,072 
Maturities of lease liabilities by fiscal year for the Company's operating leases are as follows:
For fiscal yearTotal future payments
2021 (excluding the 9 months ended October 1, 2021)$2,327 
20228,576 
20237,608 
20246,049 
20254,660 
Thereafter7,122 
Total lease payments36,342 
Less: imputed interest(2,160)
Present value of lease liabilities34,182 
Less: current portion(8,110)
Lease liabilities less current portion$26,072 


16

FOX FACTORY HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
(unaudited)
7. Accrued Expenses
Accrued expenses consisted of the following:
October 1,January 1,
20212021
Payroll and related expenses$34,560 $22,407 
Current portion of lease liabilities8,110 6,754 
Warranty15,549 9,835 
Income tax payable16,313 7,595 
Accrued sales rebate11,684 4,471 
Other accrued expenses12,168 8,329 
Total$98,384 $59,391 
Activity related to warranties is as follows:
For the three months endedFor the nine months ended
October 1, 2021October 2, 2020October 1, 2021October 2, 2020
Beginning warranty liability$13,650 $8,915 $9,835 $5,649 
Charge to cost of sales4,422 2,181 11,753 4,987 
Fair value of warranty assumed in acquisition  150 3,158 
Costs incurred(2,523)(1,611)(6,189)(4,309)
Ending warranty liability$15,549 $9,485 $15,549 $9,485 


17

FOX FACTORY HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
(unaudited)
8. Debt
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. The credit facility was amended and restated on March 11, 2020, and further amended on June 19, 2020, and June 11, 2021 (as amended to date, the "Credit Facility"). The Credit Facility, which matures on March 11, 2025, provides a senior secured revolving line of credit with a borrowing capacity of $250,000 and a term loan of $400,000. The term loan is subject to quarterly amortization payments.
The Company paid $7,615 in debt issuance costs, of which $6,458 were allocated to the term debt and $1,157 were allocated to the line of credit. Additionally, the Company had $434 of remaining unamortized debt issuance costs. The Company expensed $277 of the remaining unamortized debt issuance costs, which are included in interest and other expense, net in the Condensed Consolidated Statements of Income for the nine months ended October 2, 2020. The remaining $157 were allocated to the line of credit. Loan fees allocated to the term debt will be amortized using the interest method and loan fees allocated to the line of credit will be amortized on a straight-line basis over the term of the Credit Facility.
The Credit Facility provides for interest at a rate either based on the London Interbank Offered Rate ("LIBOR"), plus a margin ranging from 1.00% to 2.25%, with a floor rate of 0.00%, or based on the base rate offered by Bank of America plus a margin ranging from 0.00% to 1.25%. At October 1, 2021, the one-month LIBOR and prime rates were 0.08% and 3.25%, respectively. At October 1, 2021, our weighted-average interest rate on outstanding borrowing was 1.30%. 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 October 1, 2021.
On June 11, 2021, the Company terminated its existing swap agreement and entered into a new interest rate swap agreement to obtain a more favorable interest rate and to manage interest rate risk exposure, which was effective July 2, 2021. Through the interest rate swap agreement, the Company hedges the variability of cash flows in interest payments associated with $200,000 of its variable rate term debt. Refer to Note 10 - Derivatives and Hedging for further details of this agreement.
The Credit Facility permits up to $25,000 of the aggregate revolving commitment to be used by the Company for issuance of letters of credit, of which $15,000 was outstanding at October 1, 2021.
The following table summarizes the line of credit under the Credit Facility:
October 1,
2021
Amount outstanding$ 
Standby letters of credit15,000 
Available borrowing capacity235,000 
Total borrowing capacity$250,000 
Maturity dateMarch 11, 2025

18

FOX FACTORY HOLDING CORP.
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share amounts)
(unaudited)
As of October 1, 2021, future principal payments for long-term debt, including the current portion, are summarized as follows:
October 1,
2021
For fiscal year
2021 (remaining 3 months)$