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YoY shift: Lean -
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.29pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.00pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.57pp
Lean -
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
interruptions+4
delay+2
breaches+2
severity+2
limitations+2
Positive rising
opportunity+1
Risk Factors (Item 1A)
16,352 words
ITEM 1A. RISK FACTORS
Our business, financial condition, operating results and prospects could be materially and adversely affected by various risks and uncertainties that are described herein. In addition to the risks and uncertainties discussed elsewhere in this Annual Report on Form 10-K, you should carefully consider the risks and uncertainties described below. If any of these risks actually occur, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline.
Summary of Risk Factors
The risks described below include, but are not limited to, the following:
Risks Related to Our Business and Operations
• the impact of the risks associated with international geopolitical conflicts is uncertain, but may prove to negatively impact our business and operations;
• our dependency on a limited number of suppliers for materials, component parts, and products could lead to an increase in material costs, disruptions in our supply chain, or reputational costs;
• failure to effectively compete competitors, effectively to the presented by new technological applications, existing products or develop, manufacture and market new products that respond to consumer needs and preferences and market acceptance could result in a decrease in demand for our products and impact our business and financial results;
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
impairment+34
loss+22
impairments+5
adverse+4
decline+2
Positive rising
effective+2
opportunities+1
gains+1
improved+1
highest+1
MD&A (Item 7)
10,973 words
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, generally, as of and for fiscal years 2025 and 2024 should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. For discussion related to the results of operations and changes in financial condition for fiscal year 2024 compared to fiscal year 2023 refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our fiscal year 2024 Form 10-K, which was filed with the SEC on February 28, 2025. The purpose of this discussion is to focus on information concerning our financial condition and results of operations that is not readily apparent from our consolidated financial statements and related notes. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. You should review the “Risk Factors” and “Special Note Regarding Forward-Looking Statements” sections of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We design, engineer, manufacture and market performance-defining products and systems for customers worldwide. Our premium brands on performance-defining products and systems are used primarily on bikes, side-by-sides, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, motorcycles, all terrain vehicles (“ATVs”), snowmobiles, and specialty vehicles and applications. In addition, we also offer premium baseball and softball gear and equipment. Virtually all of our revenue was from our product sales. Miscellaneous sources of revenue such as service-related repair work and the associated sale of parts represented less than 2% of our sales in each of the years ended January 2, 2026, January 3, 2025 and December 29, 2023.
• our performance-defining products, and the bikes and powered vehicles into which many of them are incorporated, are discretionary purchases and may be adversely impacted by changes in the economy;
• our business, financial condition and results of operations have been and may continue to be adversely affected by global public health epidemics or pandemics;
• our business depends substantially on our ability to maintain our premium brand image, the continued expansion of the market and demand for our products, and to attract and retain experienced and qualified talent;
• changes in our customer, channel and product mix could place demands that are more rigorous on our infrastructure and cause our profitability percentages to fluctuate;
• a disruption in the operations of our facilities or along our global supply chain, such as labor or supply chain issues or infrastructure constraints, could have a negative effect on our business, financial condition or results of operations;
• we may not be able to sustain our past growth or successfully implement our growth strategy, which may have a negative effect on our business, financial condition or results of operations;
• our cost optimization efforts may not succeed or may be significantly delayed;
• our business is dependent in large part on our relationships with dealers and distributors and their success and the orders we receive from our OEM customers and from their success. The loss of all or a substantial portion of our sales to any of these customers, including a group of relatively small number of customers that account for a substantial portion of our sales, 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;
• our sales could be impacted by the disruption of sales by other manufacturers or if other manufacturers enter into the specialty markets in which we operate;
• 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 or inaccurately predict destocking and restocking cycles and production schedules, we may manufacture insufficient or excess quantities or our manufacturing costs could increase;
• product recalls and significant product repair and/or replacement due to product warranty costs and claims, including any material product liability claims, may have a material adverse impact on our business;
• we and our employees 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 do not control our suppliers, athletic programs, OEMs, other customers, or partners, or require them to comply with a formal code of conduct, and actions that they might take could harm our reputation and sales;
• we rely on increasingly complex information systems for management of our various functions. If our information systems fail to perform these functions adequately, if we or our vendors or partners experience an interruption in our operations, or if we are impacted by cybersecurity attacks or data privacy issues, our business could suffer;
• we have grown and may continue to grow through acquisitions, and we may not be able to effectively integrate businesses we acquire, or we may not be able to identify or complete 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;
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• qualitative data and limited sources support our beliefs regarding the future growth of the performance-defining product market and may not be reliable;
• the current inflation and changes in interest rates in response, could harm us in the future;
Risks Related to Our Indebtedness and Liquidity
• our amended credit agreement with Wells Fargo Bank, National Association, and other named lenders (“2022 Credit Facility”) places operating restrictions on us and creates default risks, and the variable rate makes us more vulnerable to increases in interest rates;
• we continue to have the ability to incur debt, and our levels of debt may affect our operations and our ability to pay the principal of and interest on our debt;
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 regulations, 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;
• we are subject to environmental laws and regulations and potential exposure, costs and liabilities due to laws and regulations regarding conflict minerals, environmental matters, land-use, and noise and air pollution may have a negative impact on our future sales and results of operations;
• we retain certain personal data about individuals and are subject to various privacy and consumer protection laws;
• U.S. policies related to global trade and tariffs could have a material adverse effect on our results of operations;
• we are, and may in the future be, subject to legal proceedings, which could have a negative effect on our business and results of operations if the outcomes of these proceedings are adverse to us;
Risks Related to Ownership of Our Common Stock
• potential volatility in our trading price, publications by securities or industry analysts, and future issuances, sales, and the perception of such could cause our stock price and trading volume to decline;
• anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our Company;
• we cannot guarantee that our share repurchase program will be fully consummated or that it will enhance stockholder value, and the volatility of the price of our common stock could increase;
• our Second Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain actions and proceedings 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 employees; and
General Risk Factors
• failure of our internal control over financial reporting could adversely affect our business and financial results.
RISKS RELATED TO OUR BUSINESS AND OPERATIONS
The impact of the risks associated with international geopolitical conflicts—including, among others, the continuing tensions between Taiwan and China—on the global economy, energy supplies, and raw materials is uncertain, and may prove to negatively impact our business and operations.
In recent years, diplomatic and trade relationships between the U.S. and China have become increasingly frayed, and the threat of a takeover of Taiwan by China has increased. Since we have manufacturing in Taiwan and source products globally, our business, operations, and supply chains could be materially and adversely impacted by political, economic or other actions from China, or changes in China-Taiwan relations that impact Taiwan and its economy. In addition, we continue to monitor other geopolitical tensions or conflicts that have or may have an adverse impact on the global economy, our business and operations, and our suppliers and customers. To the extent that continuing political tensions may adversely affect our business, it may heighten many of the other risks described in our risk factors, such as those relating to data security, supply chain, volatility of price inputs, and market conditions; any of which could negatively affect our business and financial condition.
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We depend on a limited number of suppliers for some of our materials, component parts, and products. The loss of any of these suppliers or an increase in the cost of raw materials could harm our business.
We depend on a limited number of suppliers for certain products and components. If our current suppliers—particularly, the minority of those that are “single-source” suppliers—cannot timely fulfill orders, or if we are required to transition to other suppliers, we could experience significant production delays or disruption to our business. 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. For the majority of our products, we do not maintain long-term supply contracts with our suppliers and instead purchase these components on a purchase-order basis. As a result, we cannot force suppliers to sell us the necessary components we use to manufacture our products, and we could face significant supply disruptions should they refuse to do so. As the majority of our bike-component manufacturing occurs in Taiwan, we could experience difficulties locating qualified suppliers geographically closer to these facilities. Furthermore, such suppliers could experience difficulties in providing us with some or all of the materials we require, which could result in disruptions to our manufacturing operations. Similarly, all non-wood products sold by Marucci and wheels sold by Custom Wheel House are sourced from third-party suppliers, which could risk supply-chain challenges if those third-party suppliers are unable to fulfill production quotas. Our business, financial condition or results of operations could be materially and adversely impacted if we experience difficulties with our suppliers or manufacturing delays caused by our suppliers.
Our products require various raw materials (e.g., aluminum, magnesium, steel, carbon, and timber) for production output and manufacturing purposes. Historically, we effectively mitigated the impacts of price fluctuations for these components and raw materials on our business. However, if we experience material price increases of these components or raw materials in the future and are unable to pass on those increases to our customers, it could negatively affect our business, financial condition or operation results.
If we are unable to continue to enhance existing products and develop, manufacture and market new products that respond to consumer needs and preferences and achieve market acceptance, we may experience a decrease in demand for our products, and our business and financial results could suffer.
Our growth strategy involves the continuous development of innovative performance-defining products. We may not be able to compete as effectively with our competitors and ultimately satisfy the needs and preferences of our customers and the end users of our products, unless we continue to enhance existing products and develop new, innovative products in the global markets in which we compete. In addition, we must continuously compete not only for end users who purchase our products through the dealers and distributors who are our customers, but also for the OEMs, which incorporate our products into their bikes and powered vehicles. These OEMs regularly evaluate our products against those of our competitors to determine if they are allowing the OEMs to achieve higher sales and market share on a cost-effective basis. Should one or more of our OEM customers determine that they could achieve overall better financial results by incorporating a competitor’s new or existing product, they would likely do so, which could harm our business, financial condition, or results of operations.
Product development requires significant financial, technological, and other resources. While we expended approximately $69.4 million, $60.3 million and $53.2 million for our research and development efforts in fiscal years 2025, 2024 and 2023, respectively, there can be no assurance that this level of investment in research and development will be sufficient in the future to maintain our competitive advantage in product innovation, which could cause our business, financial condition or results of operations to suffer.
We face intense competition in all product lines, including from some competitors that have greater financial and marketing resources. Failure to compete effectively against competitors would negatively impact our business and operating results.
The industries in which we operate are highly competitive. We compete with a number of other manufacturers that produce and sell performance-defining products to OEMs and aftermarket dealers and distributors, including OEMs that produce their own lines of products for their own use. Our continued success depends on our ability to compete effectively against our competitors, some of which have significantly greater financial, marketing and other resources than we have. Several of our competitors offer broader product lines to OEMs, which they may sell in connection with suspension products as part of a package offering. In addition, some of our subsidiaries compete in marketplaces that heavily rely on industry-specific brand awareness and distribution channels, and our past performance reaching consumers is not indicative of future results. As a result, our products may be unable to compete successfully with our competitors’ products, which could negatively affect our business, financial condition, or results of operations.
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If we are unable to anticipate and respond effectively to the threat of, and the opportunity presented by, new technological applications, such as artificial intelligence, machine learning, robotics, blockchain or other new approaches to data mining, we may be exposed to competitive risks related to the adoption and application of such technology.
New products and technologies are important to operating our business. We may encounter competitive risks related to the adoption and application of new technology, such as artificial intelligence, by our competitors and other established market participants (for example, through disintermediation), start-up companies and others. We must consider developing and implementing technology solutions and technical expertise among our employees that anticipate and keep pace with rapid changes in technology, industry standards, client preferences and control standards. We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis, and our ideas may not be accepted in the marketplace. Additionally, the effort to gain technological expertise and develop new technologies in our business may require us to incur significant expenses. Our technological development projects may also not deliver the benefits we expect once they are completed or may be replaced or become obsolete more quickly than expected, which could result in the accelerated recognition of expenses. If we are unable to develop or implement new technologies as quickly as our competitors, or if our competitors develop more cost-effective technologies or product offerings, we could experience a material adverse effect on our business, financial condition or results of operations.
Our business is sensitive to economic conditions that impact consumer spending. Our performance-defining products, including the bikes and powered vehicles into which many of them are incorporated, are discretionary purchases and may be adversely impacted by changes in the economy.
Our business depends substantially on global economic and market conditions. In particular, we believe that currently, a significant majority of the end users of our products live in North American and European countries. These areas historically experienced recessions, disruptions in banking and/or financial systems, and economic weakness and uncertainty. The risks associated with a U.S. or global recession and higher inflation could negatively impact our business. The severity and occurrence of these risks depend on a number of factors, including, among others, those related to geopolitical events, fluctuating energy costs, global supply chain disruptions, changing interest rates, and other economic changes. In addition, many of our products are recreational in nature and are generally discretionary purchases by consumers. Consumers are usually more willing to make discretionary purchases during periods of favorable general economic conditions and high consumer confidence. Discretionary spending may also be affected by many other factors, including interest rates, gas prices, the availability of consumer credit, taxes, and consumer confidence in future economic conditions. During periods of unfavorable economic conditions or periods when other negative market factors exist, consumer discretionary spending is typically reduced, which in turn could reduce our product sales and negatively affect our business, financial condition, or results of operations.
There could also be a number of secondary effects resulting from an economic downturn, such as insolvency of our suppliers resulting in product delays, an inability of our OEM, distributor and dealer customers to obtain credit to finance purchases of our products, customers delaying payment to us for the purchase of our products due to financial hardship or an increase in bad debt expense. Any of these effects could negatively affect our business, financial condition, or results of operations.
Our business, financial condition, and results of operations could be impacted by public health issues and related business interruptions.
Public health issues, including epidemics, pandemics (such as the COVID-19 pandemic), and other outbreaks adversely affected, and could in the future materially adversely affect, our business, financial condition, and results of operations. The impacts of public health issues, including changes in consumer demand and behavior; pandemic fears and market downturns; the imposition of protective public safety measures, such as stringent travel restrictions, limitations on freight services and the movement of products between regions, quarantine requirements or precautions, and related governmental actions; economic volatility and reduced economic activity; and disruptions to our supply chain and distribution channels have also adversely affected, and could in the future materially adversely affect, our business and the businesses of our third-party vendors and business partners.
If we are unable to maintain our premium brand image, our business may suffer as a result of brand degradation.
Dealers, distributors, and customers select our products in part because of our premium brand reputation. Therefore, our success depends on our ability to maintain and build the image of our brands. We focus on building our brands through producing products or acquiring businesses that produce products that we believe are innovative, high in performance, and highly reliable. In addition, some of our brands benefit from our strong relationships with our OEM customers, dealers, and distributors and through marketing programs aimed at bike and powered vehicle enthusiasts in various media and other channels. For example, we sponsor a number of professional athletes, professional race teams, top college programs, and franchise clubs.
In order to continue to enhance the image of our brands, we need to maintain our position in the performance-defining products industry, continue to provide high-quality products and services, and preserve our reputation. Social media and other consumer-oriented technologies pose risks and challenges that could cause damage to our brands and reputation. Social media may also increase the likelihood, speed, and magnitude of negative publicity.
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Any adverse impact on our brands could negatively affect our business, financial condition, or results of operations.
Our growth in PVG and AAG depends on 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.
Our growth in PVG and AAG is in part attributable to the expansion of the market for powered vehicles that require performance-defining products. Such market growth includes the creation of new classes of vehicles that benefit from our products, such as trucks that are upfitted with products to enhance their on-road and off-road capability, and our ability to create products for these vehicles. In the event these markets stop expanding or contract due to economic factors, changes in consumer preferences, or other reasons, or we are unsuccessful in creating new products for these markets or other competitors successfully enter into these markets, we may fail to achieve future growth or our sales could decrease, and our business, financial condition or results of operations could be negatively affected.
A significant portion of SSG’s sales is highly dependent on the demand for high-end bikes and Marucci products. A material decline in the demand for these bikes, bike suspension components, or Marucci products could have a material adverse effect on our business or results of operations.
During 2025, approximately 22% of our net sales were generated from the sale of bike products. Part of our success is attributed to the growth in the high-end bike industry, including increases in average retail sales prices, as better-performing product designs and technologies have been incorporated into these products. If the popularity of high-end or premium-priced bikes does not increase or declines; the number of bike enthusiasts seeking such bikes or premium-priced suspension products, wheels, cranks and other specialty components for their bikes does not increase or declines; or the average price point of these bikes declines; we may fail to achieve future growth or our sales could decrease, and our business, financial condition or results of operations could be negatively affected. In addition, if current bike enthusiasts stop purchasing our products due to changes in preferences, we may fail to achieve future growth or our sales could be decreased, and our business, financial condition or results of operations could be negatively affected.
Additionally, in the fourth quarter of 2023, SSG expanded and diversified with the acquisition of Marucci. Part of Marucci’s success derives from the demand for high-performing products, notably within the baseball and softball industry. If professional athletes and performance enthusiasts no longer demand Marucci’s products, we could experience slower or declining growth or sales, which may adversely affect our business. Similarly, if overall demand for sporting products declines, Marucci sales could decrease and reduce future growth opportunities. A material decline in the demand for Marucci products may adversely impact our business, financial condition, or operation results.
Our business depends substantially on our ability to attract and retain experienced and qualified talent, including our senior management team.
We depend upon the contributions, talent, and leadership of our senior management team, particularly our Chief Executive Officer, Michael C. Dennison. We do not have a “key person” life insurance policy on Mr. Dennison or any other key employees. We believe that the top seven members of our senior management team are crucial to establishing our focus and executing our corporate strategies, as they have extensive knowledge of our business, systems and processes. Given our senior management team’s knowledge of our industry and the limited number of direct competitors in the industry, we believe that it could be difficult to find replacements should any of the members of our senior management team leave and could have a material adverse effect on our business, operating results, and financial condition.
Changes in our customer base, marketing and distribution channels, or product mix could place demands that are more rigorous on our infrastructure and cause our profitability percentages to fluctuate.
We may encounter changes to our customer base as a result of product alterations or market shifts. Additionally, we may pursue new customers, target different distribution channels, or penetrate new markets. Our product mix may encounter fluctuations depending on our customers’ purchasing behavior. Moreover, if we develop new products or discontinue products, our product mix may change. We may leverage new or experimental sales channels to drive growth within our business. Any such changes to our customers, marketing and distribution channels, or product mix may place demands on our business that require more rigorous infrastructure and supply chain solutions. Our overall profitability and profitability percentages may fluctuate as adapt to any changes. For instance, if customers begin to require more lower-margin products from us and fewer higher-margin products, or place demands on our performance that increase our costs, our business, results of operations, and financial condition may be adversely affected.
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A disruption in the operations of our facilities could have a negative effect on our business, financial condition, or results of operations.
Equipment failures, delivery delays, or catastrophicloss at any of our facilities could lead to production or service disruptions, curtailments, or shutdowns. In the event of a stoppage in production or a slowdown in production due to high employee turnover or a labor dispute at any of our facilities, even if only temporary, or if we experience delays as a result of events that are beyond our control, delivery times to our customers could be severely affected. If there was a manufacturing disruption in any of our manufacturing facilities, we might be unable to meet product delivery requirements and our business, financial condition or results of operations could be negatively affected, even if the disruption was covered in whole or in part by our business interruption insurance. Any significant delay in deliveries to our customers could lead to increased returns or cancellations, expose us to damageclaims from our customers or damage our brands, and, in turn, negatively affect our business, financial condition, or results of operations.
Interruptions in operations, infrastructure constraints, labor issues, supply chain issues, or other disruptions, including those affecting our suppliers or customers, could adversely affect our business, financial condition, and results of operations.
Our operations depend on complex global supply chains; transportation networks, including the infrastructure and logistics of certain seaports; manufacturing facilities; and third-party service providers that are subject to labor disputes, capacity constraints, infrastructure limitations or failures, accidents, natural disasters, and other events that are beyond our control. Disruptions to our business or operations may occur as a result of such events impacting our suppliers, customers, or markets in which we operate. Labor disputes, production interruptions, supply chain issues, and other operational challenges faced by our customers could also reduce demand for our products, delay purchasing decisions, or negatively impact our business. For example, some of our automotive OEM customers have been impacted by, and in the future could be subject to, strikes, work stoppages, or other interruptions due to negotiations with their employees represented by the United Auto Workers Union.
The effects of such disruptions may continue once the underlying event is resolved. Moreover, the timing, severity, and duration of these disruptions are typically unpredictable and beyond our control. We may not be able to prevent or mitigate the adverse effects of such events, which could adversely affect our business, financial condition, and results of operations.
We may not be able to sustain our past growth or successfully implement our growth strategy, which may have a negative effect on our business, financial condition, or results of operations.
Our future growth will depend upon various factors, including the strength of our brands, our ability to continue to produce innovative performance-defining products, consumer acceptance of our products, competitive conditions in the marketplace, our ability to make strategic acquisitions, the growth in emerging baseball and softball markets for Marucci products, the growth in emerging markets for products requiring high-end suspension products, and, in general, the continued growth of the high-end bike and powered vehicle markets. Our beliefs regarding the future growth of markets for high-end suspension products and sporting equipment are based largely on qualitative judgments and limited sources, which may be unreliable. If we are unable to sustain our past growth or successfully implement our growth strategy, our business, financial condition, or results of operations could be negatively affected.
Our cost optimization efforts may not succeed or may be significantly delayed, which may impact our ability to deliver improved margins.
Due to challenges in the OEM market and broader market conditions impacting discretionary consumer spending, we implemented (and are continuing to implement) certain immediate and longer-term actions to strengthen our business, including aggressive cost management and strategic operational improvements. We developed a plan to adjust our business structure to operate efficiently in a number of demand environments intended to protect margins and drive significant, and consistent, free cash flow to de-lever our balance sheet. However, our cost optimization strategy relies on a number of factors and may distract management, slowimprovements to our products and services, and limit our ability to increase production quickly if demand accelerates in the future. We may not achieve the expected benefits of the cost optimization measures on our anticipated timeline, or at all. Failure to achieve our cost optimization targets could have a material adverse effect on our results of operations, liquidity and financial condition.
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We depend on our relationships with dealers, distributors, and retailers and their ability to sell and service our products. Any disruption in these relationships could harm our sales.
We sell many of our products to dealers, distributors, and retailers, 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, distributors, and retailers to be knowledgeable about our products and their features. If we are not able to educate our dealers, distributors, and retailers so that they may effectively sell our products as part of a positive buying experience, or if they fail to implement effective retail sales initiatives, focus selling efforts on our competitors’ products, reduce the quantity of our products that they sell or reduce their operations due to financial difficulties or otherwise, our brands and business could suffer.
We do not control our dealers, distributors, or retailers, and many of our contracts allow these entities to offer our competitors’ products. Our competitors may incentivize our dealers, distributors, and retailers, to favor their products. In addition, we do not have long-term contracts with a majority of our dealers, distributors, and retailers, and our dealers, distributors, and retailers are not obligated to purchase specified amounts of our products. Consequently, with little or no notice, many of these dealers, distributors, and retailers may terminate their relationships with us or materially reduce their purchases of our products. If we were to lose one or more of our dealers, distributors, or retailers we would need to obtain a new dealer, distributor, or retailer, as applicable, to cover the particular location or product line, which may not be possible on favorable terms or at all.
We are a supplier in the high-end bike and powered vehicles markets, and our business largely depends on the orders we receive from our OEM customers and on their success.
As a supplier to OEM customers, we largely depend on the success of our OEM customers’ businesses. Model year changes by our OEM customers, production disruptions or hiatuses, or other barriers impacting our OEM customers’ ability or choice to conduct their operations may adversely impact our sales or cause our sales to vary from quarter to quarter. 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. The loss of all or a significant portion of our sales to any of these customers, including but not limited to the losses as a result of (i) the temporary or permanent discontinuation of customer products which incorporate or otherwise relate to our products or (ii) the loss of market share by these customers could have a material adverse impact on us and our results of operations.
Net sales attributable to our five largest customers, which can vary from year to year, collectively accounted for approximately 26%, 28%, and 27% of our net sales in fiscal years 2025, 2024 and 2023. Because our products are complementary in nature to, or reliant on the continued production of, certain products produced by these customers, (i) a temporary or permanent discontinuation of those customers’ products that incorporate or otherwise relate to our products or (ii) the loss of market share by these customers due to manufacturing challenges or other problems, including disruptions related to labor strikes, may result in the loss of all or a substantial portion of our sales to these customers, which in turn, could have a material impact on our business, financial condition, or results of operations.
Currency exchange rate fluctuations could impact our gross margins and expenses.
Foreign currency fluctuations could have an adverse effect on our business, financial condition, or results of operations. U.S. government policy—including changes in interest rates by the Federal Reserve—may impact the exchange rate between the U.S. Dollar and foreign currencies. We sell our products inside and outside of the U.S., primarily in U.S. Dollars and New Taiwan Dollars. However, some of the OEMs purchasing products from us sell their products in Europe and other foreign markets using the Euro and other foreign currencies. As a result, as 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. Dollar depreciate significantly, this could have the effect of decreasing our gross margins and adversely impact our business, financial condition, or results of operations.
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. In addition to foreign currency risks, these risks include:
• difficulty in transporting materials internationally, including labor disputes or other interruptions at seaports that handle a large amount of our products;
• political, economic, or other actions from China or changes in China-Taiwan relations could impact Taiwan and its economy, which may adversely affect our operations in Taiwan, our customers, and our supply chain;
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• geopolitical regional conflicts, including the impact of the Russian war in Ukraine, the Israel-Palestine conflict, and the conflict over nuclear facilities between the U.S. and Iran 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 (including import bans and other orders issued by the U.S. Customs and Border Protection), 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. 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.
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 manufacturers or if other manufacturers enter the specialty markets in which we operate.
Most bikes that incorporate our suspension products are built using products and components manufactured by other bike component manufacturers. We face similar concerns with manufacturers in our other lines of business. If those other manufacturers stopped selling or producing the products and components for which our products depend on, our sales may be adversely affected. Similarly, if those other manufacturers experience sales disruptions, lose their competitive position in the marketplace, or face reputational damage, customers could migrate to complementary products, some of which may be incompatible with our suspension products or directly compete with our products. Moreover, other manufacturers could begin manufacturing products such as bike suspension products, wheels, or cranks, or bundle their components with competitors’ products. In any of these scenarios, our sales could decline, which may negatively impact our business, financial condition, or results of operation.
We have been and may become subject to intellectual property disputes that could cause us to incur significant costs, pay significant damages, or prohibit us from selling our products.
As we develop new products or attempt to use our brands in connection with new products, we seek to avoid infringing upon our competitors’ valid patents and other intellectual property rights. However, from time to time, third parties alleged, or may allege in the future, that our products or trademarks infringe upon their proprietary rights. We evaluate any such claims and, where appropriate, may obtain or seek to obtain licenses or other business arrangements. To date, there have been no significant interruptions in our business as a result of any claims of infringement, and we do not hold patent infringement insurance. Any claim, regardless of its merit, could be expensive and time-consuming to defend and distract management from our business. Moreover, if our products or brands are found to infringe third-party intellectual property rights, we may be unable to obtain a license to use such technology or associated intellectual property rights on acceptable terms. A court determination that our brands, products, or manufacturing processes infringe the intellectual property rights of others could result in significant liability and/or require us to make material changes to our products and/or manufacturing processes or preclude our ability to use certain brands. In most circumstances, we are not indemnified for our use of a licensor’s intellectual property if such intellectual property is found to be infringing. Any of the foregoing results could require us to redesign our products or defend legal actions, which could cause us to incur substantial costs that could negatively affect our business, financial condition, or results of operations.
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If we are unable to enforce our intellectual property rights, our reputation and sales could be adversely affected.
Intellectual property is an important component of our business. We patent our proprietary technologies related to vehicle suspension and other products in the U.S. and various foreign patent offices. Additionally, we registered or applied for trademarks and service marks with the U.S. Patent and Trademark Office and a number of foreign countries. When appropriate, we may assert our rights against those who infringe on our patents, trademarks, trade dress, or other intellectual property. However, we may not be successful in enforcing our patents or asserting trademark, trade name or trade dress protection with respect to our brand names and our product designs, and third parties may seek to oppose or challenge our patents or trademark registrations. If our efforts to develop and enforce our intellectual property are unsuccessful, or if a third party misappropriates our rights, this may adversely affect our business, financial condition, or results of operations. Additionally, intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the U.S., and it may be more difficult for us to successfullychallenge the use of our proprietary rights by other parties in these countries. The failure to prevent or limit infringements and imitations could have a permanent negative impact on the pricing of our products or reduce our product sales and product margins, even if we are ultimately successful in limiting the distribution of a product that infringes our rights, which in turn may affect our business, financial condition, or results of operations.
If we inaccurately forecast demand for our products or inaccurately predict OEM and dealer destocking and restocking cycles and production schedules, we may manufacture insufficient or excess quantities or our manufacturing costs could increase, which could adversely affect our business.
We plan our manufacturing capacity based on forecasted demand for our products. In the OEM channel, our forecasts are largely based on the number of our product specifications for new bikes and powered vehicles and projections from our OEM customers. In the aftermarket channel, our forecasts are based partially on discussions with our dealers and distributors as well as our own assessment of markets. Our forecasts are also dependent on OEM and dealer destocking and restocking cycles and OEM production schedules, which are subject to change. In the baseball industry, our production of products is dependent on the demand for and popularity of items. If we cannot keep up with the increased demand, we may lose customers to our competitors who have more resources. If we incorrectly forecast demand, we may incur capacity issues in our manufacturing plant and supply chain, increased material costs, increased freight costs, additional overtime, and costs associated with excess inventory—all of which, in turn, adversely impact our cost of sales and our gross margin. Economic weakness and uncertainty in the U.S., Europe, and other international markets may make accurate forecasting particularly challenging.
Product recalls, and significant product repair and/or replacement due to product warranty costs and claims, including material product liability claims, may have a material adverse impact on our business.
The use of our products by consumers, often under extreme conditions, exposes us to risks associated with product liability claims. 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 claimsagainst us, which could adversely affect our brands’ image or reputation. We encountered product liability claims in the past and carry product liability insurance to help protect us against the costs of such claims, although our insurance may be insufficient to cover all losses.
Unless otherwise required by law, we generally provide a limited warranty for our products for a one-, two- or three-year period beginning on: (i) in the case of OEM sales, the date the bike or powered vehicle is purchased from an authorized OEM where our product is incorporated as original equipment on the purchased bike or powered vehicle; (ii) in the case of aftermarket/non-OEM sales, the date the product is originally purchased from an authorized dealer; or (iii) in the case of upfitting sales, the date of the retail sale to an end customer. From time to time, our customers may negotiate for longer or different warranty coverage. In the ordinary course of business, we incur warranty costs and reserve against such costs in our financial statements. 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. 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. In the past, we had product recalls and may have additional recalls in the future, whether voluntary or involuntary, involving our products or products that incorporate or relate to our products. Although we carry product liability and product recall insurance, no assurance can be made that such insurance will provide adequate coverage against any potential claims, such insurance is available in the appropriate markets or that we will be able to obtain such insurance on acceptable terms in the future. In addition to the direct costs related to these or other recalls, our aftermarket and OEM sales could be adversely affected if we do not have a ready replacement product for such recalled products. Such recall events could also adversely affect 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.
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We and our employees are subject to certain risks in our manufacturing and in the testing of our products.
As of January 2, 2026, we employed approximately 3,700 employees worldwide, a large percentage of which work at our manufacturing facilities. Our business involves complex manufacturing processes that can be inherently dangerous. Although we employ safety procedures in the design and operation of our facilities, there is a risk that an accident or death could occur in one of our facilities. In addition, prior to the introduction of new products, our employees test the products under rigorous conditions, which involve the risk of injury or death. Any accident could result in manufacturing or product delays, which could negatively affect our business, financial condition or results of operations. The outcome of litigation is difficult to assess or quantify, and the cost to defendlitigation can be significant. As a result, the costs to defend any action or the potential liability resulting from any such accident or death or arising out of any other litigation, and any negative publicity associated therewith, could have a negative effect on our business, financial condition, or results of operations.
Fuel shortages, or high fuel prices, could have a negative effect on the use of powered vehicles that use our products.
Gasoline or diesel fuel is required to operate most powered vehicles that use our products. There can be no assurance that the supply of these fuels will continue uninterrupted, that rationing will not be imposed, or that the price of or tax on these petroleum products will not significantly increase. Future shortages of gasoline and diesel fuel and substantial increases in the price of fuel could have a material adverse effect on our powered vehicle product category, which could have a negative effect on our business, financial condition, or results of operations.
We do not control our suppliers, athletic programs, OEMs, other customers, or partners, or require them to comply with a formal code of conduct, and actions that they might take could harm our reputation and sales.
We do not control our suppliers, athletic programs, OEMs, other customers or partners, or their labor, environmental, or other practices. A violation of labor, environmental, intellectual property or other laws by our suppliers, OEMs, other customers or partners, or a failure of these parties to follow generally accepted ethical business practices, could create negative publicity and harm our reputation. In addition, we may be required to seek alternative suppliers or partners if these violations or failures were to occur. We do not inspect or audit compliance of our suppliers, athletic programs, OEMs, customers, or partners with these laws or practices, and we do not require our suppliers, OEMs, customers or partners to comply with a formal code of conduct. 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.
We rely on increasingly complex information systems to manage our manufacturing, distribution, sales, and other functions. If our information systems fail to perform these functions adequately or if we experience an interruption in our operations, our business could suffer.
All of our major operations, including manufacturing, distribution, sales, and accounting, depend on our complex information systems. 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.
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.
Enterprise Resource Planning (“ERP”) implementations are complex and time-consuming projects that involve substantial expenditures on system software and implementation activities. ERP implementations also require transformation of business and financial processes in order to reap the benefits of the ERP system. 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 business and results of operations may be adversely affected if we experience operating problems or cost overruns during the ERP implementation process, or if the ERP system and the associated process changes do not give rise to the benefits that we expect.
Additionally, if we do not effectively implement the ERP system as planned or the system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected.
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Our operations may be impaired if our technology systems fail to perform adequately, and we could be negatively impacted by cybersecurity attacks.
Information technology systems are critically important to operating our business. We rely on information technology systems to manage business data, communications, supply chain, order entry and fulfillment, and other business processes. 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.
Information technology systems are also vulnerable to unauthorized access, computer viruses, ransomware attacks and other similar types of malicious activities and cyber-attacks, including attempts by others to gain access to our proprietary or sensitive information, and range from individual attempts to advanced persistentthreats. To alleviate the financial, operational, and reputational impact of a ransomware attack, it may be preferable to make extortion payments, but we may be unwilling or unable to do so, including, for example, if applicable laws or regulations prohibit such payments. Given the persistent and advanced nature of cybersecurity threats, we continue to invest in upgraded programs, implement advanced features, and establish adequate controls designed to stop or curtail these threats. However, investing in upgraded programs, advanced programs and adequate controls is expensive and an ongoing, rapidly changing challenge and the procedures and controls we use to monitor these threats and mitigate our exposure may not be sufficient to prevent cybersecurity incidents. Data and security breaches can also occur as a result of non-technical issues, including intentional or inadvertentbreaches by our employees or by persons with whom we have commercial relationships.
The results of these incidents could include misstated financial data, theft of trade secrets or other intellectual property, liability for disclosure of confidential customer, supplier or employee information, increased costs arising from the implementation of additional security protective measures, litigation and reputational damage, which could materially adversely affect our financial condition, business or results of operations. Any remedial costs or other liabilities related to cybersecurity incidents may not be fully insured or indemnified by other means.
We are subject to evolving privacy laws in the U.S. and other jurisdictions that could adversely impact our business and require that we incur substantial costs.
The use of personal data by our business is highly regulated. We are subject to various laws and regulations that are continuously evolving and developing regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data. The European Union’s General Data Protection Regulation (as amended, the “GDPR”), and similar regulations implemented in other non-U.S. geographies, add a broad array of requirements with respect to personal data, including the public disclosure of significant data breaches, and imposes substantial penalties for noncompliance. The California Consumer Privacy Act (as amended, the “CCPA”) imposes additional obligations and consumer privacy rights with respect to the personal data of California residents. The CCPA provides civil penalties for violations, as well as a private right of action for certain data breaches. Furthermore, there is a trend toward more stringent privacy legislation in the U.S., as a number of states across the country enacted privacy laws of broad applicability and others are considering and proposing similar laws.
If we, our third-party service providers, or those with whom we share personal data fail to comply with such laws and regulations, such as the GDPR and the CCPA, our reputation could be damaged, possibly resulting in lost business, and we could be subjected to additional legal risk or financial losses as a result of non-compliance.
Our vendors’ and commercial partners’ information technology systems may fail or suffer security breaches, which could result in a material disruption of our operations.
Despite the implementation of security measures, our vendors' or commercial partners' information technology systems are vulnerable to damage from computer viruses, ransomware software viruses and other similar types of malicious activities, unauthorized access, natural disasters, and electrical failures. Such events could cause disruptions in our operations. 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 proprietary information, we could be subject to litigation and reputational harm, which could materially adversely affect our financial condition, business, or results of operations.
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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.
We have opportunistically expanded our business platform through acquisitions. Additionally, we intend to selectively evaluate additional acquisitions in the future. Acquisitions are subject to various risks and uncertainties and could have a negative impact on our business, financial condition, or results of operations. These risks include the inability to integrate effectively the operations, products, technologies, and personnel of the acquired companies (some of which may be spread out in different geographic regions), the inability to achieve anticipated cost savings or operating synergies, the earn-outs we may contractually obligate ourselves to pay, and the risk we may not be able to effectively manage our operations at an increased scale of operations resulting from such acquisitions. In the event we complete acquisitions in the future, such acquisitions could affect our cash flows and net income as we expend funds, increase indebtedness, and incur additional expenses in connection with pursuing acquisitions. We may also issue shares of our common stock or other securities from time to time as consideration for future acquisitions and investments. 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 experienced, and expect to continue to experience, substantial quarterly variations in our sales and net income. Our quarterly results of operations fluctuate, in some cases significantly, as a result of a variety of factors, including, among other things:
• the timing of new product releases or other significant announcements by us or our competitors;
• new advertising initiatives;
• fluctuations in raw materials and component costs; and
• changes in our practices with respect to building inventory.
As a result of these quarterly fluctuations, comparisons of our operating results between different quarters within a single year are not necessarily meaningful and may not be accurate indicators of our future performance. Any future quarterly fluctuations that we report may differ from the expectations of market analysts and investors, which could cause the price of our common stock to fluctuate significantly.
Qualitative data and limited sources support our beliefs regarding the future growth of the performance-defining product market and may not be reliable.
We generate virtually all of our revenues from sales of performance-defining products. Our beliefs regarding the outlook of the performance-defining product market come from qualitative data and limited sources, which may be unreliable. If our beliefs regarding the opportunities in the market for our products are incorrect or the number of consumers who we believe are willing to pay premium prices for well-designed, performance-oriented equipment in the markets in which we sell our products does not increase or declines, we may fail to achieve future growth and our business, financial condition, or results of operations could be negatively affected.
Because of the current inflation affecting the economy and the Federal Reserve’s changes in interest rates in response, we may be harmed in the future.
We believe inflation, and actions taken by the Federal Reserve in response, currently pose a risk to us in a number of ways. General inflation in the U.S. has risen to levels not experienced in recent decades, including rising energy prices, prices for consumer goods, interest rates, wages, and currency volatility and downgrades by rating agencies to the U.S. government’s credit rating or concerns about its credit and deficit levels in general, could cause interest rates and borrowing costs to rise. These increases and any fiscal or other policy interventions by the U.S. government in reaction to such events could negatively impact our business by increasing our operating costs and our borrowing costs as well as decreasing capital. The Federal Reserve reduced benchmark interest rates in 2025 and could enact further reduction(s) to benchmark interest rates in 2026, which could lead to an increase in inflation and the overall cost of goods and services across the U.S.
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The raw materials and other supplies we use to produce our products experienced increasing prices during recent periods as a result of inflation. In response, we increased the prices we charge customers for our products. These price adjustments could have a negative effect on sales and continued increases in inflation rates may result in a reduction of customers or sales volumes. Additionally, if the Federal Reserve raises interest rates in the future, the result could be a recession, which could slow demand for our products, hinder our sales growth, or cause sales to decline in future periods. As of the date of this Annual Report, we cannot predict how extensive the inflation or the effects of the Federal Reserve’s responses thereto will be, its duration, or the ultimate impact on us. Additionally, the U.S. government’s credit and deficitconcerns, the European sovereign debt crisis, and the trade war with China and other countries, could further cause interest rates to be volatile, which may negatively impact our ability to access the debt markets on favorable terms.
RISKS RELATED TO OUR INDEBTEDNESS AND LIQUIDITY
The Amended Credit Agreement places operating restrictions on us and creates default risks.
The Amended Credit Agreement with Wells Fargo Bank, National Association, and other named lenders contains covenants that restrict our operating activities. These covenants, among other things, limit our ability to:
• pay dividends or make distributions to our stockholders or redeem our stock;
• incur additional indebtedness or permit additional encumbrances on our assets; and
• make acquisitions, complete mergers or sales of assets, or engage in new businesses.
These restrictions may interfere with our ability to obtain financing or engage in other business activities, which may have a material adverse effect on our business, financial condition, or results of operations.
If we are unable to comply with the covenants contained in the Amended Credit Agreement, 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 repay or otherwise refinance these borrowings when due, our lenders could sell the collateral securing the Amended Credit Agreement, which constitutes substantially all of our assets.
We continue to have the ability to incur debt, and our levels of debt may affect our operations and our ability to pay the principal of and interest on our debt.
In the future, we may be able to incur substantial additional debt from amendments to the Amended Credit Agreement, additional lending sources subject to the restrictions contained in the Amended Credit Agreement, or because of certain debt instruments we may issue.
As of January 2, 2026, we had $673.5 million of indebtedness and $349.8 million in revolving credit available to borrow under the Amended Credit Agreement. Our ability to borrow under the Amended Credit Agreement fluctuates from time to time due to, among other factors, our borrowings under the Amended Credit Agreement.
Our indebtedness could be costly or have adverse consequences, such as:
• requiring us to dedicate a substantial portion of our cash flows from operations to payments on our debt;
• limiting our ability to obtain future financing for working capital, capital expenditures, acquisitions, debt obligations and other general corporate requirements;
• making us more vulnerable to adverse conditions in the general economy or our industry and to fluctuations in our operating results, including affecting our ability to comply with and maintain any financial tests and ratios required under our indebtedness;
• limiting our flexibility to engage in certain transactions or to plan for, or react to, changes in our business and industry;
• putting us at a disadvantage compared to competitors that have less relative or less restrictive debt; and
• subjecting us to additional restrictive financial and other covenants.
If we incur substantial additional indebtedness in the future, these higher levels of indebtedness may affect our ability to pay the principal of and interest on existing indebtedness and our creditworthiness generally.
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Our outstanding indebtedness under the Amended Credit Agreement 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.
Borrowings under the Amended Credit Agreement 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 Amended Credit Agreement will increase our interest expense.
While the Federal Reserve decreased benchmark interest rates multiple times in 2025, interest rates remain subject to change in 2026. Any future increases in these rates increase our interest expense and reduce our funds available for operations and other purposes. Although from time to time we may enter into agreements to hedge a portion of our interest rate exposure, such as the 2022 Interest Rate Swap Agreement, these agreements may be costly and may not protect against all interest rate fluctuations. 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 January 2, 2026, we had $680.8 million of interest-bearing indebtedness outstanding under the Amended Credit Agreement. Based on the $180.8 million of variable interest rate indebtedness that was outstanding under the Amended Credit Agreement as of January 2, 2026, after giving effect to our interest rate swaps, 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 January 2, 2026, respectively.
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 income tax requirements in various jurisdictions in the U.S. and internationally. In preparing our financial statements, we provide for income taxes based on current tax laws and regulations and the estimated taxable income within each of these jurisdictions. Our income tax obligations may be higher, which could materially impact our net income and cash flows due to numerous factors, such as:
• changes to tax laws or interpretations proposed by the current administration in the U.S.;
• modifications to the U.S. tax reform enacted in December 2017;
• revisions to estimates regarding our ability to utilize foreign tax credits, particularly increases in revenues generated in Taiwan or changes in the export potential from Taiwan;
• increases in applicable tax rates; and
• actions by tax authorities in jurisdictions in which we operate.
We are subject to extensive U.S. federal and state, foreign and international safety, environmental, employment practices, and other government regulations that may require us to incur expenses or modify product offerings to maintain compliance with such regulations, which could have a negative effect on our business and results of operations.
We are subject to extensive laws and regulations relating to safety, environmental, and other laws and regulations promulgated by the U.S. federal and state governments, as well as foreign and international regulatory authorities. Future regulations may require additional safety standards that would require additional expenses and/or modification of product offerings to maintain such compliance. Failure to comply with applicable regulations could result in fines, increased expenses to modify our products, and reputational harm, all of which could have an adverse effect on our business, financial condition, or results of operations.
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. 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.
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Unpredictability in the adoption, implementation, and enforcement of increasingly stringent emission standards by multiple jurisdictions could adversely affect our business.
A portion of our products are subject to extensive statutory and regulatory requirements governing emission and noise, including standards imposed by the Environmental Protection Agency, the European Union, state regulatory agencies (such as the California Air Resources Board (“CARB”)), and other regulatory agencies around the world. We made, and continue to make, capital and research expenditures to ensure certain of our products comply with these emission standards. Developing products to meet numerous changing government regulatory requirements, with different implementation timelines and emission requirements, makes developing products efficiently for multiple markets complicated and could result in additional costs that may be difficult to recover in certain markets. In some cases, we may be required to develop new products to comply with new regulations, particularly those relating to air emissions. We work cooperatively with consultants and CARB to comply with current CARB regulations that may apply to our modified vehicles. Depending on the results of modified vehicle emissions testing, we could be limited in types of modifications and products sold into California or have to adjust our business model for California sales in a way that makes such modified vehicles uneconomical and/or unachievable. The successful development and introduction of new and enhanced products in order to comply with new regulatory requirements are subject to other risks, such as delays in product development, cost overruns, and unanticipated technical and manufacturing difficulties.
In addition to these risks, the nature and timing of government implementation and enforcement of increasingly stringent emission standards is unpredictable. Any delays in implementation or enforcement could result in the products we developed or modified to comply with these standards becoming unnecessary or becoming necessary later than expected, which in turn could delay, diminish, or eliminate the expected return and may adversely affect our business.
Increasing focus on environmental, social, and governance responsibility may impose additional costs on us and expose us to new risks.
Regulators, stockholders, and other interested constituencies focus increasingly on the environmental, social, and governance practices of companies. For example, in March 2024, the SEC adopted new rules for extensive and prescriptive climate-related disclosure in annual reports and registration statements, which would also require the inclusion of certain climate-related financial metrics in a note to companies’ audited financial statements. Following a number of challenges to the rules by federal courts and prior statements that the SEC would vigorously defend the validity of the rule, the SEC, under new administration, changed course in February 2025, stating that it would no longer defend the rules and the rules would be removed under new leadership. While we may no longer face the stringent reporting requirements under SEC rules, our customers may require us to implement environmental, social, or governance responsibility procedures or standards before conducting business with us. Additionally, we may face reputational challenges in the event that our environmental, social, or governance responsibility procedures or standards do not meet the standards set by certain constituencies. The occurrence of any of the foregoing could have a material adverse effect on the price of our shares and our business, financial condition, and results of operations.
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 the increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Changes in weather patterns and an increased frequency, intensity, and duration of extreme weather conditions could, among other things, (a) disrupt the operation of our supply chain since our bike suspension manufacturing is entirely located in Taiwan, which is prone to typhoons, (b) increase our product costs and impact the types and amounts of products that consumers purchase since the majority of our products are used in outdoor recreation, and (c) affect Marucci’s wood bat production since our timber supply could be impacted by adverse weather conditions. In addition, a number of our facilities are located in California, a state that frequently experiences earthquakes and has recently experienced increasingly frequent and severe wildfires, flooding, and landslides. As a result, the effects of climate change could have a long-term adverse impact on our business and results of operations.
Laws, regulations, and policies addressing concerns regarding climate change, greenhouse gases, air quality, and other concerns related to the environment continue to develop or be enacted in areas in which we operate. These laws, regulations, and policies may differ by global region, country, and within national boundaries. Regulators can also propose and enact different standards on short notice. As this regulatory landscape evolves, it could have the potential to impact our operations directly or indirectly as a result of required compliance by our suppliers and us. In addition, we may choose to take voluntary steps to mitigate our impact on climate change. As a result, we may experience increases in energy, production, transportation, raw material costs, capital expenditures, or insurance premiums and deductibles. Inconsistency of legislation and regulations among jurisdictions may also affect the costs of compliance with such laws and regulations. Any assessment of the potential impact of future climate change legislation, regulations, or industry standards, as well as any international treaties and accords, is uncertain given the scope of potential regulatory change in the countries in which we operate.
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We are subject to employment practice laws and regulations. As such, we are exposed to litigation risks and may incur higher employee costs in the future.
We are subject to extensive laws and regulations relating to employment practices, including wage and hour, wrongfultermination, and discrimination. Complying with such laws and regulations, and defendingagainstallegations of our failure to comply (including meritless allegations), can be expensive and time-consuming. We believe that our policies and processes comply with applicable employment standards and related regulations; however, we are subject to risks of litigation by employees and others that might involve allegations of illegal, unfair, or inconsistent employment practices, including wage and hour violations, employment discrimination, misclassification of independent contractors as employees, wrongfultermination, and other concerns, which could require additional expenditures.
As we expand internationally, we are also subject to applicable laws in each such jurisdiction. Increases in the mandated wage in any or all of the jurisdictions in which we operate could subject us to increased costs, thereby impacting our business, financial condition, or results of operations. Further, the evolving labor market and increased ability for employees in our industry and other industries to work from home or have remote work arrangements may impact the turnover of our employees, potentially making it more difficult for us to compete.
We maintain a self-insured healthcare plan for our employees based in the U.S. We have insurance coverage in place for individual claims above a specified amount in any year. Inflation in healthcare costs, as well as additional costs we may incur as a result of current or future federal or state healthcare legislation and regulations, could significantly increase our employee healthcare costs in the future. Continued increases in our employee costs could adversely affect our earnings, financial condition, and liquidity.
We are subject to environmental laws and regulations 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. These environmental laws and regulations include those relating to the use, generation, storage, handling, transportation, treatment, and disposal of solid and hazardous materials and wastes, emissions to air, discharges to waters and the investigation and remediation of contamination. Many of these laws impose strict, retroactive, joint and several liability upon owners and operators of properties, including with respect to environmental matters that occurred prior to the time the party became an owner or operator. In addition, we may have liability with respect to third-party sites to which we send waste for disposal. Failure to comply with such laws and regulations can result in significant fines, penalties, costs, liabilities, or restrictions on operations that could negatively affect our business, financial condition, or results of operations. From time to time, we have been involved in administrative or legal proceedings relating to environmental, health, or safety matters and incurred expenditures relating to such matters in the past.
Environmental issues relating to presently known or unknown matters could give rise to currently unanticipatedinvestigation, assessment, or expenditures. Compliance with laws or regulations that are more stringent, as well as different interpretations of existing laws, more vigorous enforcement by regulators or unanticipated events, could require additional expenditures that may materially affect our business, financial condition, or results of operations.
Federal, state, local, foreign, and international laws and regulations relating to environmental matters, land-use, and noise and air pollution may have a negative impact on our future sales and results of operations.
Our PVG products 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. 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. If more of these laws and regulations are passed and the users of our products lose convenient locations to ride their mountain bikes and powered vehicles, our sales could decrease, and our business, financial condition, or results of operations could suffer.
We retain certain personal data about individuals and are subject to various privacy and consumer protection laws.
We collect personal data 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. Certain individuals may object to the processing of this data, request the deletion of this data, or opt out of the sharing of this data, any of which may negatively impact our ability to provide effective customer service or otherwise impact our operations. Collection and use of personal data in conducting our business may be subject to federal and/or state laws and regulations in the U.S. and foreign jurisdictions including, in particular, various jurisdictions in Europe, and such laws and regulations may restrict our processing of such personal data and may hinder our ability to attract new customers or market to existing customers. 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.
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U.S. policies related to global trade and tariffs could have a material adverse effect on our results of operations.
The current domestic and international political environment, including existing and potential changes to U.S. policies related to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy. In 2018, the U.S. imposed tariffs of 25% on steel and 10% on aluminum, with only a handful of countries exempt from the increase. The new Trump administration enhanced these measures beginning in 2025 by increasing the tariffs on aluminum and steel to 50% for all countries except the United Kingdom, expanding the products on which the tariffs will be assessed to include derivative products containing steel or aluminum, and terminating all countrywide exemptions and the product specific exemption process. There is an inclusion process through which domestic industry can request the U.S. include new derivative steel and aluminum products that will be subject to the increased tariffs.
Since taking office, the new Trump administration implemented various new strategies regarding tariffs. President Trump invoked the International Emergency Economic Powers Act (“IEEPA”) to impose 25% tariffs on products from Mexico and 25% tariffs on products from Canada (with a lower 10% tariff on Canadian energy and energy resources) but exempted from the tariffs those products that are entitled to preferential treatment under the United States-Mexico-Canada Agreement. President Trump also imposed a 20% tariff on all imports from China and Hong Kong under the International Emergency Economic Powers Act. Acting on an investigation concluded during the first Trump administration, the current Trump administration-imposed tariffs of 25% on certain passenger vehicles and light trucks and parts for those vehicles.
In April 2024, the Trump administration imposed a universal “reciprocal” tariff of at least 10% on all countries and higher rates for certain countries, which took effect on August 1, 2025. On February 20, 2026, the U.S. Supreme Court issued a decision finding that IEEPA does not authorize the President to impose tariffs. The Company continues to evaluate the potential ramifications of the U.S. Supreme Court’s ruling and any impacts on the Company from that ruling, including refunds from the government, and any contractual obligations arising from such refunds. Responding to that ruling, President Trump rescinded the tariff actions based on IEEPA and signed a new proclamation imposing, effective February 24, 2026, a 10% global tariff (to be increased to 15%) under Section 122 of the Trade Act of 1974 (“Section 122”). There are various exemptions to this Section 122 tariff, and, by statute, the tariff will remain in effect for only 150 days, unless extended by the Congress. The Trump administration also announced that it will conduct additional investigations on an expedited basis under Section 301 of the Trade Act of 1974, while President Trump also cited taking actions using authorities already enacted by Congress.
The tariff actions by the U.S. may result in a decrease of global trade volumes due to uncertainty, may create an administrative burden and will cause retailers to make difficult decisions as to how to pay the tariff or absorb the cost into their profit margins.
While we have exposure to implemented tariffs at this time, in regard to our supply chain and end-user demand, any expansion in the types of tariffs implemented has the potential to negatively impact our supply chain costs and the operating performance of our customers, which in turn may negatively affect our sales, gross margin, and operating performance. Additionally, there is a risk that continued U.S. tariffs on imports could be met with additional retaliatory tariffs on U.S.-produced exports and that the broader trade uncertainty could intensify. This has the potential to significantly impact global trade and economic conditions in many of the regions where we do business and have a material adverse effect on our results of operations.
In addition, with respect to sourcing products and raw materials from third-party suppliers in other countries, our ability to timely or successfully import such products or those made with such raw materials may be adversely affected by changes in U.S. laws. As a result, products we import into the U.S. could be held for inspection by U.S. Customs and Border Patrol (“U.S. CBP”) based on a suspicion of noncompliance. Additionally, the Uyghur Forced Labor Prevention Act (“UFLPA”) empowers the U.S. CBP to withhold release of items produced in whole or in part in countries or by companies included on the UFLPA entities list, creating a presumption that such goods were produced using forced labor. In January 2025, the Department of Homeland Security added to the UFLPA entity list, marking the largest single expansion of the list to date, and including a large supplier of critical minerals and one of the world’s largest textile manufacturers, both linked to forced labor practices in the People’s Republic of China. Although we do not believe that our suppliers source materials from entities included on the UFLPA for the products they sell to us or use to manufacture our products and we could be subject to penalties, fines or sanctions if any of the suppliers from which we purchase goods is found to have dealings, directly or indirectly, with entities on the ULFPA entities list. We are committed to complying with the UFLPA and have taken significant steps to assess and mitigate risks within our supply chain. Given the complexity and multi-tiered nature of global supply chains, achieving full traceability for every supplier and sub-supplier presents substantial challenges. However, we are continuously working to enhance our due diligence processes, leveraging available data and supplier engagement to ensure compliance to the fullest extent possible.
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Recently, in September 2025, the U.S. CBP issued a Withhold Release Order against bicycles, bicycle parts, and accessories manufactured in Taiwan by Giant Manufacturing Co. Ltd., based on information of possible forced labor use. The similarity in product offerings and our company’s products being associated with Giant Manufacturing Co. Ltd. may subject our Taiwan-based or other operations to increased scrutiny and review, which could result in compliance and reporting costs and hinder or delay the importation and delivery of our products manufactured in Taiwan. With the majority of our manufacturing operations for our bike products occurring in Taiwan, any adverse order issued by the U.S. CBP on our company or other manufacturers of bicycles, bicycle parts, and related accessories could negatively affect our business, financial condition or results of operations.
We are, and may in the future be, subject to legal proceedings. If the outcomes of these proceedings are adverse to us, it could have a material adverse effect on our business, financial condition and results of operations.
We are subject to various litigation matters from time to time, the outcome of which could have a material adverse effect on our business, financial condition and results of operations. Regardless of merit, these litigation matters and any potential future claimsagainst the Company may be both time-consuming and disruptive to the Company's operations and cause significant expense, increased insurance costs, reputational harm and diversion of management attention. Claims arising out of actual or allegedviolations of law could be asserted against us by individuals, either individually or through class actions, by governmental entities in civil or criminalinvestigations and proceedings or by other entities. These actions could expose us to adverse publicity and to substantial monetary damages and legal defense costs, injunctive relief and criminal and civil fines and penalties, including but not limited to suspension or revocation of licenses to conduct business.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
The trading price of our common stock may be volatile, and you might be unable to sell your shares at or above the price you pay for the shares.
The trading price of our common stock could be volatile, and investors could lose all or part of their investment in our common stock. For example, from December 31, 2022 through January 2, 2026, our stock price fluctuated between $127.54 and $13.08 per share, and such volatility may continue in the future. Factors affecting the trading price of our common stock could include, among others:
• 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.
In addition, in recent years, the stock market experienced significant price fluctuations. Fluctuations in the overall stock market generally or with respect to companies in our industry could cause the trading price of our common stock to fluctuate for reasons unrelated to our business, operating results, or financial condition. Further, some companies with volatile market prices for their securities had securities class actions filed against them. A lawsuit filed against us, regardless of its merits or outcome, could cause us to incur substantial costs and 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.
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.
Our Second Amended and Restated Certificate of Incorporation authorizes us to issue 90,000,000 shares of common stock, 41,802,023 of which shares were outstanding as of January 2, 2026. 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.
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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.
We also have a number of institutional stockholders that own significant blocks of our common stock. If one or more of these stockholders were to sell large portions of their holdings in a relatively short time, for liquidity or other reasons, the prevailing price of shares of our common stock could be negatively affected.
If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about our business or us. If one or more of the analysts who cover us downgrades our stock or publishes unfavorable research about our business or our industry, our stock price would likely decline. If one or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.
Anti-takeover provisions in our charter documents and Delaware law could discourage, delay, or prevent a change in control of our Company.
Our Second Amended and Restated Certificate of Incorporation and Second Amended and Restated Bylaws (together, our “Charter Documents”), as well as Delaware law, contain provisions that may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. 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.
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. In order for us to consummate a business combination with an interested stockholder within three years of the date on which the stockholder became interested, either: (i) the business combination or the transaction that resulted in the stockholder becoming interested must be approved by our Board of Directors prior to the date the stockholder became interested; (ii) the interested stockholder must own at least 85% of our outstanding voting stock at the time the transaction commences (excluding voting stock owned by directors who are also officers and certain employee stock plans); or (iii) the business combination must be approved by our Board of Directors and authorized by at least two-thirds of our stockholders (excluding the interested stockholder) at a special or annual meeting (not by written consent). This provision could have the effect of delaying or preventing a change in control, whether or not it is desired by or beneficial to our stockholders. Any delay or prevention of a change in control transaction or changes in our Board of Directors and management could deter potential acquirers or prevent the completion of a transaction in which our stockholders could receive a substantial premium over the then-current market price for their shares of our common stock.
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We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value, and share repurchases could increase the volatility of the price of our common stock.
Pursuant to the share repurchase program authorized by our Board of Directors on November 1, 2023, we are authorized to repurchase up to $300.0 million of outstanding shares of our common stock through various methods, including, but not limited to, open market, privately negotiated, or accelerated share repurchase transactions. This program will expire on November 1, 2028, and may be suspended or discontinued at any time. We are not obligated to repurchase a specified number or dollar of shares, and the timing, manner, price, and actual amount of share repurchases will be made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. The program does not obligate the Company to acquire a minimum amount of shares. The timing of repurchases pursuant to our share repurchase program could affect our stock price and increase its volatility. We cannot guarantee that we will repurchase shares, and there can be no assurance that any repurchases pursuant to our stock repurchase program will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchase such shares. In addition, there is no guarantee that our stock repurchases in the past or in the future will be able to successfully mitigate the dilutive effect of recent and future employee stock option exercises and restricted stock unit vesting. The amounts and timing of the repurchases may also be influenced by general market conditions, regulatory developments (including recent legislative actions which, subject to certain conditions, imposed an excise tax of 1% on our stock repurchases), and the prevailing price and trading volumes of our common stock. If our financial condition deteriorates or we decide to use our cash for other purposes, we may suspend repurchase activity at any time.
Our Second 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.
Our Second Amended and Restated Certificate of Incorporation provides that, with certain limited exceptions, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of our Company owed to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our Charter Documents; (iv) any action to interpret, apply, enforce or determine the validity of our Charter Documents; or (v) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have received notice of and consented to the foregoing provisions. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and employees. Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
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. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with generally accepted accounting principles in the United States (“GAAP”). Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud. The identification of a material weakness could indicate a lack of controls adequate to generate accurate financial statements that, in turn, could cause a loss of investor confidence and a decline in the market price of our common stock. We cannot assure you that we will be able to timely remediate any material weaknesses that may be identified in future periods or maintain all of the controls necessary for continued compliance. Likewise, we cannot assure you that we will be able to retain sufficient skilled finance and accounting personnel, especially in light of the increased demand for such personnel among publicly traded companies.
We determined that we operate in three reportable segments: PVG, AAG, and SSG. Our products fall into the following three categories:
• powered vehicles, including side-by-sides, certain on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, including military, motorcycles, and commercial trucks;
• aftermarket applications, mainly consisting of products for off-road vehicles and trucks, side-by-sides, on-road vehicles with or without off-road capabilities, specialty vehicles and applications as well as lift kits and components with our shock products and aftermarket accessory packages; and
• specialty sports products, which consist primarily of bike suspension, component products, and gear and equipment for baseball and softball.
The following table summarizes percentages of net sales by segment:
For the fiscal years ended
January 2, 2026
January 3, 2025
December 29, 2023
Powered Vehicles Group
Aftermarket Applications Group
Specialty Sports Group
Sales attributable to countries outside the U.S. are based on shipment location. Our international sales, however, do not necessarily reflect the location of the end users of our products as many of our products are incorporated into bikes that are assembled at international locations and then shipped back to the U.S.
For the fiscal years ended
January 2, 2026
January 3, 2025
December 29, 2023
North America
International
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Opportunities, challenges and risks
We intend to focus on generating sales of our performance-defining products through OEMs, aftermarket, retail, and direct-to-consumer channels. To do this, we intend to continue to develop and introduce new and innovative products in our current end-markets and we intend to selectively develop products for applications and end-markets in which we do not currently participate. Currently, the majority of our sales are dependent on the demand for performance-defining products.
As a supplier to OEM customers, we are largely dependent on the success of the business of our OEM customers. Model year changes by our OEM customers may adversely impact our sales or cause our sales to vary from quarter to quarter. Losses in market share or a decline in the overall market of our OEM customers or the discontinuance by our OEM customers of their products that incorporate our products could negatively impact our business and our results of operations. See “Risks Related to Our Business and Operations” within Item 1A. Risk Factors .
Our aftermarket distribution network currently consists of more than 9,600 retail dealers and distributors worldwide. To further penetrate the aftermarket channel, we intend to selectively add additional dealers and distributors in certain geographic markets, expand our internal sales force and strategically increase the number of aftermarket specific products and services that we offer for existing vehicle platforms.
From time to time, we have experienced, and may continue to experience, inventory risks, including excess, obsolete, or slow-moving inventory, as well as warranty costs and claims relating to our products. In the ordinary course of business, we reserve for these matters in our financial statements. There is a risk, however, that in the future we will experience higher than expected inventory adjustments or write-downs, warranty costs and claims, as well as other related costs. Please read “Risks Related to Our Business and Operations - If we inaccurately forecast demand for our products or inaccurately predict OEM and dealer destocking and restocking cycles and production schedules, we may manufacture insufficient or excess quantities or our manufacturing costs could increase, which could adversely affect our business ” and “ Product recalls, and significant product repair and/or replacement due to product warranty costs and claims have had, and in the future, could have, a material adverse impact on our business ” within Item 1A. Risk Factors of this Annual Report on Form 10-K.
From time to time, we evaluate our portfolio of businesses and may pursue divestitures of non‑core or underperforming operations as part of our strategy to focus on higher‑growth, higher‑margin areas. Divestitures may result in transitional costs, potential loss of revenue, and other financial impacts during and after the separation, including possible gains or losses on disposal depending on the structure and timing of the transaction. These transactions can also create operational risks, including disruption to employees and customers and reliance on transition services arrangements for a period of time. We continue to assess opportunities to streamline our portfolio and allocate capital and management attention to areas that best support our strategic objectives.
We intend to evaluate selective potential acquisition opportunities for performance-defining products and technologies that we believe will help us extend our performance-defining product platform. Any acquisitions that we might make are subject to various risks and uncertainties and could have a negative impact on our results of operations. In addition, we may contractually obligate ourselves to contingent consideration or acquisition-related compensation payments in conjunction with such acquisitions, which could have a negative impact on our cash flow and results of operations. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Material Cash Requirements for additional information.
Our operations and supply chain are directly impacted by evolving U.S. trade policies and global tariffs. The current presidential administration expanded tariffs on steel, aluminum, and derivative products, imposed new tariffs on imports from China, Hong Kong, Mexico, and Canada, and proposed a shift toward reciprocal tariffs. These changes create uncertainty in global trade, potentially increasing our material costs, disrupting our supply chain, and affecting our pricing strategies. As tariffs continue to evolve, we may need to adjust our sourcing, production, and pricing to remain competitive and mitigate financial and operational risks. Please read “Risks Related to Laws and Regulations - U.S. policies related to global trade and tariffs could have a material adverse effect on our results of operations ” within Item 1A. Risk Factors of this Annual Report on Form 10-K.
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Basis of presentation
Composition of net sales
Sales from:
• Product sales: consist of sales of performance-defining products and systems to customers worldwide. Sales are measured based on the consideration specified in a contract with a customer. We recognize sales when a performance obligation is satisfied by transferring control of a product to a customer, generally at the time of shipment for most products and over the time it takes to complete certain Outside Van upfit packages. Contracts are generally in the form of purchase orders and are governed by standard terms and conditions. For larger OEMs, dealers and retailers, we may also enter into master agreements;
• Service sales: consist of revenue generated from maintenance, repair, installation, and other support services provided to customers. These services are typically recognized as revenue when the service is performed;
• Tariff surcharges: consist of amounts billed to customers to recover tariff costs and are recorded as revenue when the associated products are recognized as revenue; and
• Shipping and handling fees: consists of shipping and handling fees billed to customers.
Net of:
• Rebates: consists of incentives we provide to customers based on sales of eligible products; and
• Sales returns allowances: consists of an estimate of our sales returns. 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.
Cost of sales
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 goods or 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;
• tariffs;
• warranty costs associated with the repair or replacement of products under warranty; and
• reductions in the carrying value of inventory to its net realizable value, if required, for estimated excess, obsolescence or impaired balances.
Gross profit/gross margin
Our gross profit equals our net sales minus cost of sales. Our gross margin measures our gross profit as a percentage of net sales.
Our gross margins fluctuate based on production volumes, product, customer and channel mix and overall supply chain and manufacturing efficiencies. Generally, we earn higher gross margins on our products sold to the aftermarket/non-OEM channel.
Operating expenses
Our operating expenses consist of the following:
• goodwill impairment;
• sales and marketing;
• research and development;
• general and administrative;
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• amortization of purchased intangibles; and
• intangible and long-lived asset impairment.
Our goodwill impairment expense reflects non-cash charges recognized when the carrying value of goodwill exceeds its estimated fair value. We perform a goodwill impairment assessment at least annually but may perform interim assessments in the event of a triggering event that may indicate the fair value of a reporting unit decreased below its carrying value. During the year ended January 2, 2026, we recorded $557.3 million goodwill impairment charges as a result of our assessments. No goodwill impairments were identified in the years ended January 3, 2025 and December 29, 2023.
Our sales and marketing expenses include costs related to our net sales, customer service and marketing personnel, including their wages, employee benefits and related stock-based compensation, and occupancy-related expenses. Other significant sales and marketing expenses include commissions paid to outside sales representatives, promotional materials and products, our sales office costs, third-party marketing spend, race support and sponsorships of events and athletes, advertising and promotions related to trade shows, and travel and entertainment.
Our research and development expenses consist primarily of salaries and personnel costs, including wages, employee benefits and related stock-based compensation for our engineering, research and development teams, occupancy-related expenses, fees for third party consultants, service fees, and expenses for prototype tooling and materials, travel, and supplies. We expense research and development costs as incurred and such costs are included as research and development expenses on our consolidated statements of operations.
Our general and administrative expenses include costs related to our executive, finance, legal, information technology, business development, human resources and administrative personnel, including wages, employee benefits and related stock-based compensation expenses. We record professional and contract service expenses, occupancy-related expenses associated with corporate locations and equipment, and legal expenses in general and administrative expenses.
Our amortization of purchased intangibles includes amortization over their respective useful lives of our purchased intangible assets, such as customer lists, trade names, and our core technology. 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. In the year ended January 2, 2026, we recognized $8.0 million impairments of intangible assets. No impairments of intangible assets were identified in the years ended January 3, 2025 and December 29, 2023.
Our intangible and long-lived asset impairment expense includes non-cash charges recognized when the carrying value of intangible and other long-lived assets is not recoverable. When indicators of impairment are present, we assess the asset’s recoverability and, if necessary, write it down to its estimated fair value. In the year ended January 2, 2026, we recorded total intangible and long-lived asset impairments of $13.5 million, inclusive of the $8.0 million intangible asset impairments described above. No impairments of long-lived assets were identified in the years ended January 3, 2025 and December 29, 2023.
Income from operations
We define income from operations as gross profit less our operating expenses.
Interest and other expense, net
Interest expense consists of interest charged to us under our credit facility, changes related to our interest rate swap, and interest on supplier-financed chassis.
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. Our effective tax rate could be affected by numerous factors such as changes in our business operations, acquisitions, investments, entry into new businesses and geographies, intercompany transactions, the relative amount of our foreign earnings, losses incurred in jurisdictions for which we are not able to realize related tax benefits, changes in our deferred tax assets and liabilities and their valuation, changes in the laws, regulations, administrative practices, principles, and interpretations related to tax, including changes to the global tax framework and other laws and accounting rules in various jurisdictions.
For the years ended January 2, 2026, January 3, 2025 and December 29, 2023, we had effective tax rates of 5.5%, (543.5)% and 12.8%, respectively.
As of January 2, 2026, our deferred tax assets included foreign tax credits of approximately $45.4 million, which begin to expire in 2028 unless utilized.
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Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company is implementing tax planning strategies and operational measures to support the realizability of its general category foreign tax credits and to mitigate valuation allowance risk. As of January 2, 2026, the Company determined a valuation allowance was needed for branch foreign tax credits. 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.
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. Should actual events or results differ from our current expectations, charges or credits to our income tax expense may become necessary. Any such adjustments could have a significant impact on our effective tax rate.
Non-controlling interests (“NCI”)
Non-controlling interests represent the portion of income or loss and the corresponding equity attributable to third-party equity holders in certain consolidated subsidiaries that are not 100% owned by us. NCI are presented as separate components in our consolidated statements of operations to clearly differentiate between our interests and the economic interests of third parties in those entities. Net (loss) income attributable to FOX stockholders, as reported in the consolidated statements of operations, is presented net of the portion of net income (loss) attributable to non-controlling interests.
In May 2024, the Company formed a joint venture, The Stable JV, LLC, whereby the Company owns a 51% membership interest. The joint venture was created with the purpose of offering specialized training programs to high performance athletes, as well as the development of training apparel and other products.
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Results of operations
The table below summarizes our results of operations for the fiscal years ended January 2, 2026, January 3, 2025, and December 29, 2023:
For the fiscal years ended
(in millions)
January 2, 2026
January 3, 2025
December 29, 2023
Net sales
Cost of sales
Gross profit
Operating expenses:
Goodwill impairment
General and administrative
Sales and marketing
Research and development
Amortization of purchased intangibles
Intangible and long-lived asset impairment
Total operating expenses
(Loss) income from operations
Interest expense
Other (income) expense, net
(Loss) income before income taxes
(Benefit) provision for income taxes
Net (loss) income
Less: net loss attributable to non-controlling interest
Net (loss) income attributable to FOX stockholders
*Amounts may not foot due to rounding.
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The following table sets forth statement of operations data as a percentage of net sales for the years indicated:
For the fiscal years ended
January 2, 2026
January 3, 2025
December 29, 2023
Net sales
Cost of sales
Gross profit
Operating expenses:
Goodwill impairment
General and administrative
Sales and marketing
Research and development
Amortization of purchased intangibles
Intangible and long-lived asset impairment
Total operating expenses
(Loss) income from operations
Interest expense
Other (income) expense, net
(Loss) income before income taxes
(Benefit) provision for income taxes
Net (loss) income
Less: net loss attributable to non-controlling interest
Net (loss) income attributable to FOX stockholders
*Percentages may not foot due to rounding.
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Fiscal year ended January 2, 2026 compared to fiscal year ended January 3, 2025
Net sales
For the fiscal years ended
(in millions)
January 2, 2026
January 3, 2025
Change ($)
Change (%)
Net sales
Net sales for the year ended January 2, 2026 increased approximately $73.4 million, or 5.3%, compared to the year ended January 3, 2025. The increase in net sales is primarily due to increased demand for aftermarket applications, improved performance in our upfitting product lines, and the market share gain in powersports, which offset lower industry demand in the automotive OE product lines. Although net sales increased, high interest rates impacting industry and consumer demands, high vehicle costs, and macro-economic conditions remain headwinds.
Cost of sales
For the fiscal years ended
(in millions)
January 2, 2026
January 3, 2025
Change ($)
Change (%)
Cost of sales
Cost of sales for the year ended January 2, 2026 increased approximately $53.8 million, or 5.5%, compared to the year ended January 3, 2025. The increase in cost of sales was mainly due to our increased sales and the impact of tariffs.
For the year ended January 2, 2026, our gross margin was 30.2% compared to 30.4% for the year ended January 3, 2025. The decrease in gross margin for the fiscal year 2025 was primarily due to the shifts in our product line mix and the impact of tariffs.
Operating expenses
For the fiscal years ended
(in millions)
January 2, 2026
January 3, 2025
Change ($)
Change (%)
Operating expenses:
Goodwill impairment
General and administrative
Sales and marketing
Research and development
Amortization of purchased intangibles
Intangible and long-lived asset impairment
Total operating expenses
Total operating expenses for the year ended January 2, 2026 increased approximately $600.2 million, or 164.0%, over the comparable period in 2024. When expressed as a percentage of net sales, operating expenses increased to 65.8% of net sales for the year ended January 2, 2026, compared to 26.3% of net sales for the fiscal year ended January 3, 2025.
During the fiscal year 2025, we recognized goodwill impairment charges of $557.3 million and intangible and long-lived asset impairment charges of $13.5 million as a result of our quantitative assessments on goodwill and long-lived assets triggered by adverse changes in U.S. tariff policies, new and expanded tariffs enacted by the current presidential administration, and resulting sustained decline in our stock price. General and administrative expenses increased by approximately $11.9 million primarily due to o rganizational restructuring. Sales and marketing expenses and research and development expenses increased approximately $10.9 million and $9.1 million, respectively, driven by higher investments to support future growth and product innovation. Amortization of purchased intangible assets for the year ended January 2, 2026 decreased by approximately $2.5 million, as compared to the year ended January 3, 2025, primarily due to certain intangible assets becoming fully amortized early in the year.
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(Loss) income from operations
For the fiscal years ended
(in millions)
January 2, 2026
January 3, 2025
Change ($)
Change (%)
(Loss) income from operations
As a result of the factors discussed above, (loss) income from operations for the year ended January 2, 2026 decreased approximately $580.6 million compared to the year ended January 3, 2025.
Interest and other expense, net
For the fiscal years ended
(in millions)
January 2, 2026
January 3, 2025
Change ($)
Change (%)
Interest expense
Other (income) expense, net
Interest and other expense, net
Interest and other expense, net for the year ended January 2, 2026 decreased by approximately $3.2 million to $53.4 million, compared to $56.6 million for the year ended January 3, 2025. Interest expense decreased by $1.2 million due to lower debt and interest rates.
Income taxes
For the fiscal years ended
(in millions)
January 2, 2026
January 3, 2025
Change ($)
Change (%)
Benefit from income taxes
Income tax benefit for the year ended January 2, 2026 increased by approximately $26.1 million to a benefit of $31.6 million compared to $5.5 million for the year ended January 3, 2025. The increase primarily resulted from the impairment impact of non-deductible goodwill recognized during the year.
The effective tax rates were 5.5% and (543.5)% for the years ended January 2, 2026 and January 3, 2025, respectively.
For the year ended January 2, 2026, the difference between our effective tax rate and the 21% federal statutory rate resulted primarily from the impairment impact of non-deductible goodwill recognized during the year.
For the year ended January 3, 2025, the difference between our effective tax rate and the 21% federal statutory rate resulted primarily from a benefit from the U.S. research and development tax credit.
Net (loss) income
For the fiscal years ended
(in millions)
January 2, 2026
January 3, 2025
Change ($)
Change (%)
Net (loss) income
As a result of the factors described above, our net income decreased $551.2 million to $544.7 million net loss in the fiscal year ended January 2, 2026 from $6.5 million net income for the fiscal year ended January 3, 2025.
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Net (loss) income attributable to FOX stockholders
For the fiscal years ended
(in millions)
January 2, 2026
January 3, 2025
Change ($)
Change (%)
Net (loss) income attributable to FOX stockholders
As a result of factors described above, our net income attributable to FOX stockholders decreased $551.2 million to $544.6 million net loss in the fiscal year ended January 2, 2026 from $6.6 million net income for the fiscal year ended January 3, 2025.
Segment Review
For additional financial information related to our operating segments including the reconciliation of segment adjusted EBITDA to (loss) income before income taxes, see Note 20. Segment Information .
The following table summarizes consolidated net sales and adjusted EBITDA by segment:
For the fiscal years ended
(in millions)
January 2, 2026
January 3, 2025
Change ($)
Change (%)
Net sales
Powered Vehicles Group
Aftermarket Applications Group
Specialty Sports Group
Net sales
Adjusted EBITDA
Powered Vehicles Group
Aftermarket Applications Group
Specialty Sports Group
Powered Vehicles Group
Powered Vehicles Group net sales increased by approximately $26.7 million, or 5.8%, due to higher sales in powersports and aftermarket applications, which offset lower industry demand in automotive OE product lines.
Powered Vehicles Group adjusted EBITDA increased by approximately $8.5 million or 15.8%, mainly due to an increase in gross profit.
Aftermarket Applications Group
Aftermarket Applications Group net sales increased by approximately $48.6 million, or 11.5%, driven by increased demand for aftermarket products and higher upfitting sales; however, high interest rates, high vehicle costs, and macro-economic conditions impacting dealers and consumers continue to pose challenges.
Aftermarket Applications Group adjusted EBITDA increased by approximately $4.1 million, or 7.9%, mainly due to higher gross profit.
Specialty Sports Group
Specialty Sports Group net sales decreased by approximately $1.9 million, or 0.4%, primarily due to lower diamond sports product sales partially offset by higher bike sales.
Specialty Sports Group adjusted EBITDA decreased by approximately $10.2 million, or 8.7%, primarily due to a decrease in gross profit.
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Liquidity and Capital Resources
Our primary cash needs are to support working capital, interest on debt, employee compensation, capital expenditures, acquisitions, debt repayments, and other general corporate purposes. Historically, we have generally financed our liquidity needs with operating cash flows, borrowings under our Amended Credit Agreement, and the issuance of common stock. These sources of liquidity may be impacted by factors and events described in Special Note Regarding Forward-Looking Statements and Item 1A. Risk Factors .
As of January 2, 2026, we held $8.9 million of our $58.0 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.
A summary of our operating, investing and financing activities is shown in the following table:
For the years ended
(in millions)
January 2, 2026
January 3, 2025
December 29, 2023
Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Decrease in cash and cash equivalents
*Amounts may not foot due to rounding.
We expect that cash on hand, cash flow from operations and availability under our Amended Credit Agreement will be sufficient to fund our operations during the next 12 months from the date of this Annual Report on Form 10-K and beyond.
Operating activities
In the fiscal year ended January 2, 2026, net cash provided by operating activities was $60.9 million. The change in our operating assets and liabilities is a result of an increase in prepaids and other current assets of $27.1 million, an increase in accounts receivable of $23.5 million, a decrease in accrued expenses and other liabilities of $7.3 million, and a decrease in income taxes payable of $1.9 million, partially offset by a decrease in inventory of $18.0 million, and an increase in accounts payable of $1.2 million. The increase in prepaids and other current assets is primarily due to an increase in prepaid chassis deposits to meet next year upfitting production needs. The increase in our accounts receivable reflects higher sales and the timing of customer collections. The decrease in our accounts payable is driven by timing of inventory purchases and vendor payments. The decrease in income taxes payable is mainly due to lower pre-tax income and tax payments. The decrease in inventory is driven by strong execution of continuous improvement efforts to optimize inventory levels across the organization, particularly within PVG, which offset some of the impact from higher tariffs.
In the fiscal year ended January 3, 2025, net cash provided by operating activities was $131.8 million. The change in our operating assets and liabilities is a result of a decrease in prepaids and other current assets of $48.5 million, an increase in accounts payable of $15.0 million, a decrease in accounts receivable of $10.4 million, and an increase in accrued expenses and other liabilities of $5.4 million, partially offset by an increase in inventory of $26.5 million, and a decrease in income taxes payable of $11.2 million. The decrease in prepaids and other current assets is primarily due to lower prepaid chassis deposits driven by the sale of 2023 and 2024 model year chassis. The change in our accounts payable is driven by timing of inventory purchases and vendor payments. The change in our accounts receivable reflects a shift in our product line mix and the timing of customer collections. The increase in inventory excluding acquired inventory reflects an imbalance between expected and realized orders. The change in income taxes payable is mainly due to lower pre-tax income.
In the fiscal year ended December 29, 2023, cash provided by operating activities was $178.7 million. Our investment in operating assets and liabilities is a result of an increase in prepaids and other current assets of $38.2 million primarily due to carrying more chassis to meet current year production needs for the upfitting product lines, and decreases in accounts payable of $44.0 million, accrued expenses and other liabilities of $21.4 million, and income taxes payable of $19.1 million, partially offset by decreases in accounts receivable of $64.5 million and inventory of $31.6 million. The change in our accounts receivable reflects a shift in our product line mix and the timing of customer collections. The change in our accounts payable is driven by timing of inventory purchases and vendor payments. The change in accrued expenses and other liabilities is primarily due to payments made for compensation and tax-related accruals and our cost control measures, partially offset by acquired accrued expenses. The decrease in inventory excluding acquired inventory reflects our continued efforts to optimize inventory levels.
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Investing activities
In the fiscal year ended January 2, 2026, cash used in investing activities consisted of $34.0 million in property and equipment additions.
In the fiscal year ended January 3, 2025, cash used in investing activities was $76.3 million, which primarily consisted of $44.0 million in property and equipment additions, $25.8 million in cash considerations for our acquisitions including the acquisition of Marzocchi, $5.4 million in cash consideration for our purchase of other assets, and $1.1 million paid for acquisition foreign exchange hedge settlement related to the acquisition of Marzocchi.
In the fiscal year ended December 29, 2023, cash used in investing activities was $750.4 million, which primarily consisted of $701.1 million in cash consideration for our acquisitions of Marucci and Custom Wheel House, $46.9 million in property and equipment additions, and $2.4 million in cash consideration for our purchase of other assets.
Financing activities
In the fiscal year ended January 2, 2026, net cash used in financing activities was $40.0 million, which primarily consisted of $567.4 million in repayments on our Incremental Term Loans (as defined below), $282.0 million in payments on our revolver, $2.9 million in deferred fees for debt modifications, and payments of $1.3 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program, partially offset by $534.6 million proceeds from the Term Loan and $279.0 million proceeds from the Revolving Credit Facility (as defined below) issued under the Amended Credit Agreement (as defined below), which were used to repay all outstanding amounts owed under the Credit Agreement (as defined below) and for general corporate purposes.
In the fiscal year ended January 3, 2025, net cash provided by financing activities was $67.3 million, which primarily consisted of $406.0 million in payments on our revolver, $25.0 million to repurchase shares of our common stock, $19.3 million in repayments on our Incremental Term Loans (as defined below), $3.4 million in deferred fees for debt modifications, $2.6 million net of proceeds from the exercise of stock options, as part of our stock-based compensation program, partially offset by $200.0 million proceeds from the Delayed Draw Term Loan (as defined below) and $189.0 million proceeds from the revolver, which were used to support our working capital and the acquisition of Marzocchi.
In the fiscal year ended December 29, 2023, net cash provided by financing activities was $509.0 million, which primarily consisted of proceeds from our Credit Agreement (as defined below) of $793.5 million, which was used to support our working capital and the purchases of Marucci and Custom Wheel House, partially offset by $230.0 million in payments on our revolver, $20.0 million in prepayments on our Term A Loan (as defined below), $25.0 million to repurchase shares of our common stock, $6.2 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program, and $3.4 million in deferred debt issuance costs.
Credit Agreement
On April 5, 2022, the Company entered into a new credit agreement with Wells Fargo Bank, National Association, and other named lenders (the “Credit Agreement”). The Credit Agreement, which matures on April 5, 2027, provides for revolving loans, swingline loans and letters of credit up to an aggregate amount of $650.0 million.
The Company may borrow, prepay and re-borrow principal under the Credit Agreement during its term. Advances under the Credit Agreement can be either Adjusted Term 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 2.25%. Base rate revolving loans bear interest on the outstanding principal amount thereof at a rate per annum equal to the highest of (i) Federal Funds Rate plus 0.50%, (ii) the rate of interest in effect for such day as publicly announced from time to time by the lender as its “prime rate”, and (iii) Adjusted Term SOFR rate for a one-month tenor plus 1.00%, subject to the interest rate floors set forth therein, plus a margin ranging from 0.00% to 1.00%.
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On November 14, 2023, in connection and concurrently with the closing of the Marucci acquisition, the Company entered into the First Incremental Facility Amendment (the “First Amendment”) amending the Credit Agreement. The Amendment provided the Company with a term loan in an amount of $400.0 million (the “Incremental Term A Loan”) and a delayed draw term loan in an amount of $200.0 million (the “Delayed Draw Term Loan” and, together with the Incremental Term A Loan, the “Incremental Terms Loans”), each of which are permitted under the Credit Agreement, subject to satisfaction of certain conditions. The Incremental Term A Loan was fully funded on November 14, 2023 and used to fund a portion of the consideration owed under the Marucci acquisition. The Delayed Draw Term Loan was available to the Company from and including December 6, 2023, until the earlier of May 14, 2024 and the date on which the Delayed Draw Term Loan commitments have been terminated. Each Incremental Term Loan is subject to quarterly amortization payments of principal at a rate of 5.00% per annum. The Incremental Term Loans are in the form of term SOFR loans and base rate loans, at the option of the Company, and have an applicable margin ranging from 0.50% to 1.50% for base rate loans and 1.50% to 2.50% for term SOFR loans, subject to adjustment provisions. Each Incremental Term Loan has a maturity date of April 5, 2027, consistent with the Credit Agreement.
The Company paid $10.1 million in debt issuance costs, of which $6.7 million were allocated to the Incremental Term A Loan and $3.4 million were allocated to the Delayed Draw Term Loan. Loan fees allocated to the Incremental Term A Loan are amortized using the interest method over the term of the Credit Agreement. Loan fees allocated to the Delayed Draw Term Loan were deferred as an asset until the debt was drawn.
On May 13, 2024, the Company borrowed the full amount of $200.0 million of the Delayed Draw Term Loan. The fees were reclassified to a contra-liability account and amortized over the term of the drawn debt using the interest method.
On July 31, 2024 and December 20, 2024, the Company entered into the Third and Fourth Amendments to the Credit Agreement, respectively, to secure an improved covenant profile on its capital structure to provide more flexibility given the uncertain macro environment. The Company paid $3.5 million in loan fees for the Third and Fourth Amendments, of which $3.4 million were allocated among the revolver and the Incremental Term Loans to be amortized over the remaining term of the Credit Agreement.
Amended Credit Agreement
On October 24, 2025, the Company entered into the Fifth Amendment to the Credit Agreement and Second Amendment to Guaranty and Security Agreement (the “Fifth Amendment”) among the Company, certain subsidiaries of the Company, Wells Fargo Bank, National Association, as administrative agent, swingline lender and L/C issuer (the “Agent”), and a group of lenders party thereto. The Fifth Amendment amends the Credit Agreement, dated as of April 5, 2022 (as amended prior to the Fifth Amendment, the “Credit Agreement” and, as amended by the Fifth Amendment, the “Amended Credit Agreement”), and the Guaranty and Security Agreement, dated as of April 5, 2022, as amended prior to the Fifth Amendment, which secures the obligations under the Credit Agreement in favor of the Agent for the benefit of the lenders and other secured parties. Terms not otherwise defined below will have the meaning as set forth in the Amended Credit Agreement.
The Fifth Amendment, among other things, amends the Credit Agreement to replace the existing loans provided under the Credit Agreement with (i) a term loan in the aggregate outstanding amount of $537.5 million (the “Term Loan”), which will be repaid by the Company in quarterly installments in the amount of $6.7 million, (ii) revolving loans in an aggregate amount of up to $500.0 million, with sub-facilities for swing line loans in an aggregate amount of up to $25.0 million and letters of credit in an aggregate amount of up to $25.0 million (the “Revolving Credit Facility”), and (iii) an incremental loan facility, subject to additional terms set forth in the Amended Credit Agreement, in an aggregate amount of up to $175.0 million plus an unlimited amount so long as after giving effect to the incurrence of such incremental loans, on a pro forma basis, the Consolidated Net Leverage Ratio is less than 3.25. To the extent not previously paid, all then-outstanding amounts under the Term Loan and the Revolving Credit Facility are due and payable on October 24, 2030.
The Term Loan and advances under the Revolving Credit Facility can be either SOFR loans or base rate loans. SOFR loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum equal to the term SOFR for such calculation plus a margin ranging from 1.00% to 2.50%. Base rate loans bear interest on the outstanding principal amount thereof at a rate per annum equal to the highest of (i) Federal Funds Rate plus 0.50%, (ii) the rate of interest in effect for such day as publicly announced from time to time by the Agent as its “prime rate,” and (iii) term SOFR rate for a one-month tenor plus 1.00%, subject to the interest rate floors set forth in the Amended Credit Agreement, plus a margin ranging from 0.00% to 1.50%.
In connection with the Fifth Amendment, the Company borrowed $710.0 million under the Amended Credit Agreement consisting of the $537.5 million Term Loan and $172.5 million under the Revolving Credit Facility, which was used to repay all outstanding amounts owed under the Credit Agreement prior to the Fifth Amendment and for general corporate purposes.
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The Company paid $6.0 million in debt issuance costs in connection with the Fifth Amendment, of which $5.8 million was allocated between the Term Loan and the Revolving Credit Facility to be amortized over the term of the Amended Credit Agreement. Additionally, the Company had $8.1 million of remaining unamortized debt issuance costs related to the Credit Agreement, of which $6.3 million were carried forward to the Amended Credit Agreement and $1.8 million were written off as a loss on debt extinguishment.
The Amended Credit Agreement is secured by substantially all of the Company’s assets, restricts the Company’s ability to make certain payments and engage in certain transactions, and requires that the Company satisfy customary financial ratios. The Company was in compliance with the covenants as of January 2, 2026.
At January 2, 2026, the one-month SOFR and three-month SOFR rates were 3.78% and 4.00%, respectively. At January 2, 2026, our weighted-average interest rate on outstanding borrowing was 6.05%.
Material Cash Requirements
As of January 2, 2026, we had the following material cash requirements related to commitments or contractual obligations (in millions):
Payments due by period
Total
Less than 1 year
1-3 years
4-5 years
More than 5 years
Long-term borrowings
Operating lease obligations
Other obligations
Total
*Amounts may not foot due to rounding.
Seasonality
Certain portions of our business are seasonal; we believe this seasonality is due to the delivery of new products. As we have diversified our product offerings and our product launch cycles, seasonal fluctuations are becoming less material.
Inflation
Historically, inflation has not had a material effect on our results of operations. However, significant increases in inflation, particularly those related to wages and increases in the cost of raw materials have and could continue to have an adverse impact on our business, financial condition and results of operations.
Interest Rates
Interest rate volatility can impact our borrowing costs and overall financial condition. While fluctuations in interest rates have not historically had a material effect on our results of operations, significant increases could lead to higher interest expense on our variable-rate debt. To mitigate this risk and enhance predictability, we utilize interest rate swaps to manage our exposure to interest rate fluctuations.
Recent Developments
Global Trade Actions and Tariffs - New and expanded tariffs announced under the current administration and triggered retaliatory actions by certain affected countries, and other foreign governments have introduced additional costs and uncertainty into our supply chain, which impact our cost structure and working capital needs in the near term. We are evaluating the potential effect on our supply chain and sourcing strategies, and while we expect some volatility in cash flows as we adjust, we believe our existing liquidity and access to the Amended Credit Agreement provide sufficient flexibility to manage these developments. Please read “ U.S. policies related to global trade and tariffs could have a material adverse effect on our results of operations ” within Item 1A. Risk Factors of this Annually Report on Form 10-K.
One Big Beautiful Bill Act (“OBBBA”) - On July 4, 2025, the OBBBA was enacted in the U.S. This legislation introduces several significant tax provisions, including the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, changes to the international tax framework, and the reinstatement of favorable tax treatment for select business provisions. The OBBBA includes multiple effective dates, with certain provisions taking effect in 2025 and others phased in through 2027. We reviewed the enacted legislation and determined that these provisions do not affect the measurement of our deferred tax assets and liabilities as of January 2, 2026. We will continue to assess the impact on the effective tax rate for future periods.
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Critical Accounting Policies and Estimates
We adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are described in Note 1. Description of the Business, Basis of Presentation and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments or estimates. An accounting estimate is considered to be critical if it is made in accordance with GAAP and it meets both of the following criteria: (i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur may have a material impact on our financial condition or results of operations. The significant accounting policies that management believes are critical to the understanding and evaluating our reported financial results include the following: income taxes, inventory, warranty, goodwill and intangible assets, stock-based compensation, revenue recognition, provision for credit losses and fair value measurement. For further information see Note 1. Description of the Business, Basis of Presentation and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Critical Accounting Policies
Income taxes
We are subject to income taxes in the U.S. (federal and state) and foreign jurisdictions. We compute our provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using the currently enacted tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. The income tax effects of these differences are classified as long-term deferred tax assets and liabilities in our consolidated balance sheets.
Significant judgments are required in order to determine the realizability of these deferred tax assets. In assessing the need for a valuation allowance, we evaluate all significant available positive and negative evidence, including but not limited to, historical operating results, forecasted earnings, estimates of future taxable income of a character necessary to realize the deferred asset, relative proportions of revenue and pre-tax income in the various domestic and jurisdictions in which we operate, and the existence of prudent and feasible tax planning strategies. 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. Our effective tax rates could be affected by numerous factors, such as changes in our business operations, acquisitions, investments, entry into new businesses and geographies, intercompany transactions, the relative amount of our foreign earnings, losses incurred in jurisdictions for which we are not able to realize related tax benefits, changes in our deferred tax assets and liabilities and their valuation, changes in the laws, regulations, administrative practices, principles, and interpretations related to tax, including changes to the global tax framework and other laws and accounting rules in various jurisdictions.
We utilize a two-step approach to recognizing and measuring uncertain income tax positions. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We consider many factors when evaluating tax positions such as the closing of a tax audit, the refinement of estimates, and the expiration of a statute of limitations that may require periodic adjustments that impact our tax provision in our consolidated statements of operations. Interest and penalties associated with income taxes are recorded as income tax expense. Refer to Note 15. Income Taxes for further details.
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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. Net realizable value is based on current replacement cost for raw materials and on a net realizable value for finished goods. Adjustments to reduce the cost of inventory to its net realizable value are made, if required, for estimated excess, obsolete or impaired balances.
We regularly monitor inventory quantities on hand and on order and record write-downs for excess and obsolete inventories based on our estimate of the demand for our products, potential obsolescence of technology, product life cycles, and when pricing trends or forecasts indicate that the carrying value of inventory exceeds our estimated selling price. These factors are affected by market and economic conditions, technology changes, and new product introductions and require estimates that may include elements that are uncertain. Actual demand may differ from forecasted demand and may have a material effect on our gross margin. If inventory is written down, a new cost basis will be established at the end of that fiscal period that cannot be increased in future periods.
Warranty
Unless otherwise required by law, the Company generally offers limited warranties on its products for a one, two or three-year period. We accrue estimated costs related to warranty activities as a component of cost of sales upon product shipment or when information becomes available indicating that an adjustment to the warranty reserves is appropriate. Management estimates are based upon historical and projected product failure rates and historical costs incurred in correcting product failures. The warranty reserve is assessed from time to time for adequacy and adjusted as necessary for specifically identified warranty exposures. Actual warranty expenses are charged against our estimated warranty liability when incurred. Factors that affect our liability include the number of units, historical and anticipated rates of warranty claims, and the cost per claim. 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 $15.2 million and $21.6 million as of January 2, 2026 and January 3, 2025, respectively. Refer to Note 8. Accrued Expenses for further details.
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. If the Company determines that the fair value of the reporting unit is less than its carrying amount, it will perform a quantitative analysis; otherwise, no further evaluation is necessary.
For the quantitative impairment test, the Company compares the fair value of the reporting unit to its carrying value, including goodwill. The Company determines the fair value of the reporting unit based on a weighting of income and market approaches. The income approach employs a discounted cash flow model, projecting revenue and cash flows over a multi-year period. These projections are based on management’s estimates, historical performance trends, and industry outlooks. These cash flows, along with a terminal value, are discounted to their present value using a weighted-average cost of capital (“WACC”) that reflects a market rate appropriate for each reporting unit. The market approach employs multiples for public companies that reasonably compare to the reporting units. Sensitivity analyses are performed to assess the impact of changes in key assumptions. As a reasonableness check, the impairment assessment also includes a comparison of the aggregate estimated fair value of the reporting units to the Company’s total market capitalization.
If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and no further testing is performed. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company will recognize a loss equal to the excess, limited to the total amount of goodwill allocated to that reporting unit. Impairments, if any, are charged directly to earnings.
In early fiscal year 2025, the Company recognized a non-cash goodwill impairment charge of $262.1 million within operating expenses, which impacted all reporting units. The impairment resulted from a triggering event related to adverse changes in U.S. tariff policies, new and expanded tariffs enacted by the current presidential administration, and resulting sustained decline in our stock price. The impairment charge reflects the amount by which the carrying values of the reporting units exceeded their estimated fair values. In the second quarter, the Company conducted a qualitative assessment and concluded that no additional impairment existed as of July 4, 2025. The annual impairment assessment was performed in the third quarter, and the Company concluded that it was not more likely than not that the fair values of the reporting units were less than the carrying values. In the fourth quarter, the Company conducted another quantitative impairment assessment due to a further sustained decrease in our stock price and recorded another non-cash goodwill impairment charge of $295.2 million within operating expenses.
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The Company’s goodwill impairment assessment is subject to significant estimates and assumptions. Adverse changes in key assumptions, including projected revenue growth rates, the terminal growth rate, or the WACC could result in additional goodwill impairment charges. As of January 2, 2026, SSG was the only reporting unit with a remaining goodwill balance following the recorded goodwill impairment charges. Based on the most recent quantitative assessment, and for purposes of this sensitivity analysis assuming a 100% weighting to the income approach, a 1.5% increase in the WACC would result in a full future impairment of SSG’s remaining goodwill.
Indefinite-lived intangible assets
Certain trademarks and trade names, including FOX and others from certain subsidiaries, are considered to be indefinite life intangibles, and are not amortized but are subject to testing for impairment annually. Due to the triggering events as described above, the indefinite-lived intangible assets were also assessed for impairment. The Company concluded that no impairment existed as of April 4, 2025. A qualitative assessment performed in the second quarter reached the same conclusion as of July 4, 2025. The annual impairment assessment conducted in the third quarter and the quantitative assessment performed in the fourth quarter also indicated no impairment.
Finite-lived intangible assets and other long-lived assets
We assess the recoverability of identifiable finite-lived intangible assets whenever events or changes in circumstances indicate that an asset or asset group’s carrying amount may be impaired. Impairment of certain finite-lived intangible assets, particularly customer relationships, certain trade names and core technology, is measured by comparing the carrying amount of the asset group to which the assets are assigned to the sum of the undiscounted estimated future cash flows the asset group is expected to generate. 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.
The Company reviews other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset is impaired or the estimated useful lives are no longer appropriate. If indicators of impairment exist and the undiscounted projected cash flows associated with such assets are less than the carrying amount of the assets, an impairmentloss is recorded to write the assets down to their estimated fair values. Fair value is estimated based on discounted future cash flows.
During the fourth quarter of fiscal 2025, due to lower expected cash flows, the Company performed a recoverability test and related quantitative impairment assessment for its finite‑lived intangible assets and other long‑lived assets. As a result, the Company recorded $13.5 of intangible and long-lived asset impairment in operating expenses.
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 estimates used in assessing the fair value for the assets acquired include projected future cash flows, associated discount rates used to calculate present value, asset life cycles, customer retention rates and royalty rates. The fair value calculated for indefinite-lived intangible assets such as certain trade names, in addition to intangible assets that are definite-lived such as customer relationships and other technology-based assets may change during the finalization of the purchase price allocation, due to the significant estimates used in determining their fair value. As a result, the Company may make adjustments to the provisional amounts recorded for certain items as part of the purchase price allocation subsequent to the acquisition, not to exceed one year after the acquisition date, until the purchase accounting allocation is finalized.
Stock-based compensation
The Company measures stock-based compensation for all stock-based awards, including stock options and restricted stock units (“RSUs”), based on their estimated fair values on the date of the grant and recognizes the stock-based compensation cost for time-vested awards on a straight-line basis over the requisite service period. For performance-based RSUs, the number of shares ultimately expected to vest is estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. To the extent shares are expected to vest, the stock-based compensation cost is recognized on a straight-line basis over the requisite service period. Stock-based compensation was $14.3 million, $9.6 million and $16.5 million for the fiscal years ended January 2, 2026, January 3, 2025 and December 29, 2023, respectively. Refer to Note 13. Stockholders’ Equity for further details. The Company does not estimate forfeitures in recognizing stock-based compensation expense.
The determination of the grant date fair value of options using an option-pricing model is affected by our common stock fair value as well as assumptions including our expected stock price volatility over the expected term of the options, stock option exercise and cancellation behaviors, risk-free interest rates and expected dividends.
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Stock-based compensation expenses are classified in the statements of operations based on the department to which the related employee reports. Our stock-based awards subsequent to our IPO have been comprised principally of RSU awards.
Revenue recognition
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 over 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, dealers and retailers, the Company may also enter into master agreements. Revenues generated from upfit packages generally do not include the vehicle chassis, as the Company is not the principal in this arrangement and the automotive dealer purchases the chassis directly from the OEM. The Company is required to place a deposit on all Stellantis chassis, which we record as a prepaid asset, however that deposit is refunded when the chassis is sold through to the end customer. For other chassis, the Company entered into floorplan financing agreements, in which the Company pays interest expense based on the duration of time the chassis stay on the Company's premises. Revenues generated from upfit packages from our Outside Van and Upfit UTV generally include the vehicle chassis, of which the Company has the risks and rewards of ownership.
We elected as a practical expedient to not capitalize the incremental costs to obtain contracts with customers because the amortization period would have been one year or less.
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 $7.0 million, $7.9 million, and $11.9 million as of January 2, 2026, January 3, 2025, and December 29, 2023, respectively. Sales returns allowances have historically been immaterial to the financial statements.
Allowance for credit losses
We record an allowance for credit losses deemed not collectible using the aging method. The allowance is based on how long a receivable has been outstanding, taking into account the historical credit loss rate and adjusting for both current conditions and reasonable and supportable forecasts of future economic conditions that may impact collectability. Our methodology reflects the expected credit loss model, which does not solely rely on past events or incurred losses but also considers forward-looking information to estimate potential credit deterioration. 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 reassess our estimates and determine whether the recoverability of the amounts due could be reduced by a material amount.
Fair value measurement and financial instruments
Accounting Standards Codification (“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).
We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between reasonable market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that reasonable market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk.
As of January 2, 2026, the carrying amount of the principal under the Company’s Credit Agreement - Incremental Term Loans and Revolver approximated fair value because they had variable interest rates that reflected market changes in interest rates and changes in the Company’s net leverage ratio.
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The Company mitigates the cash flow risk associated with changes in interest rates on its variable rate debt through interest rate swap agreements. Refer to Note 11. Derivatives and Hedging for additional details of the agreements. In accordance with ASC 815, interest rate swap contracts are recognized as assets or liabilities on the consolidated balance sheets and are measured at fair values. The fair values were estimated based on expected cash flows over the life of the swaps. These expected cash flows were determined using a pricing model that incorporated reasonable assumptions and available market data.
The Company invests in marketable securities to mitigate the risk associated with the investment return on the non-qualified deferred compensation plan provided to executives and non-employee directors. The investments are recorded as cash and cash equivalents at their quoted market price.
Recent Accounting Pronouncements
See Note 1 - Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies within the accompanying Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further details regarding this topic.
