Fox(FOXF) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company presents unaudited financial statements showing decreased sales and net income, alongside details of recent and planned acquisitions Unaudited Condensed Consolidated Balance Sheets Total assets grew to $1.67 billion driven by acquisitions, while total liabilities decreased to $433.1 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 29, 2023 | December 30, 2022 | | :--- | :--- | :--- | | Total Current Assets | $737,223 | $797,674 | | Inventory | $341,209 | $350,620 | | Goodwill | $386,139 | $323,978 | | Total Assets | $1,674,358 | $1,618,336 | | Total Current Liabilities | $191,677 | $258,889 | | Line of credit | $190,000 | $200,000 | | Total Liabilities | $433,055 | $496,950 | | Total Stockholders' Equity | $1,241,303 | $1,121,386 | Unaudited Condensed Consolidated Statements of Income Net sales and net income declined for both the third quarter and the first nine months of 2023 compared to the prior year Consolidated Statements of Income (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $331,117 | $409,168 | $1,131,683 | $1,193,850 | | Gross profit | $107,227 | $137,267 | $372,551 | $400,471 | | Income from operations | $41,365 | $65,362 | $148,839 | $189,992 | | Net income | $35,293 | $50,771 | $116,795 | $152,319 | | Diluted EPS | $0.83 | $1.20 | $2.75 | $3.59 | Unaudited Condensed Consolidated Statements of Cash Flows Operating cash flow increased significantly, while investing activities for an acquisition led to a lower year-end cash balance Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 29, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $126,685 | $57,035 | | Net cash used in investing activities | ($165,398) | ($32,379) | | Net cash used in financing activities | ($16,163) | ($54,004) | | Change in Cash and Cash Equivalents | ($54,619) | ($26,549) | | Cash and Cash Equivalents - End of period | $90,631 | $153,137 | - Cash used in investing activities for the nine months of 2023 included $130.9 million for the acquisition of Custom Wheel House and $32.0 million for property and equipment purchases[22][140] Notes to Unaudited Condensed Consolidated Financial Statements Notes detail revenue breakdowns, acquisitions, credit facilities, and significant subsequent events like a major acquisition and share repurchase plan Net Sales by Product Group (in thousands) | Product Group | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Powered Vehicles Group | $123,076 | $109,467 | $405,519 | $299,831 | | Aftermarket Applications Group | $136,039 | $125,729 | $430,391 | $372,504 | | Specialty Sports Group | $72,002 | $173,972 | $295,773 | $521,515 | | Total net sales | $331,117 | $409,168 | $1,131,683 | $1,193,850 | - On March 3, 2023, the Company acquired Custom Wheel House for cash consideration of $130.9 million[91][92] - Subsequent to the quarter end, the Company entered an agreement to acquire Marucci Sports for $572 million and authorized a new $300 million share repurchase plan[97][100] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes a Q3 sales decline driven by the Specialty Sports Group and the UAW strike, alongside a lower gross margin - The United Auto Workers (UAW) strike had an undesirable impact on Q3 sales and is expected to continue to affect the business[110] Results of Operations Q3 net sales fell 19.1% due to a sharp decline in the Specialty Sports Group, leading to lower gross margin and net income Q3 2023 vs Q3 2022 Net Sales Change (in millions) | Product Group | Q3 2023 | Q3 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Powered Vehicle Group | $123.1 | $109.5 | $13.6 | 12.4% | | Aftermarket Applications Group | $136.0 | $125.7 | $10.3 | 8.2% | | Specialty Sports Group | $72.0 | $174.0 | ($102.0) | (58.6)% | | Total net sales | $331.1 | $409.2 | ($78.1) | (19.1)% | - Gross margin for Q3 2023 decreased by 110 basis points to 32.4%, primarily due to a shift in product mix and costs from the UAW strike[116] Nine Months 2023 vs 2022 Net Sales Change (in millions) | Product Group | 9M 2023 | 9M 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Powered Vehicle Group | $405.5 | $299.8 | $105.7 | 35.4% | | Aftermarket Applications Group | $430.4 | $372.5 | $57.9 | 15.5% | | Specialty Sports Group | $295.8 | $521.5 | ($225.7) | (43.3)% | | Total net sales | $1,131.7 | $1,193.8 | ($62.1) | (5.2)% | Liquidity and Capital Resources The company maintains strong liquidity with $90.6 million in cash and $460.0 million in credit availability to fund future operations Cash Flow Summary (in millions) | Activity | Nine Months Ended Sep 29, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $126.7 | $57.0 | | Net cash used in investing activities | ($165.4) | ($32.4) | | Net cash used in financing activities | ($16.2) | ($54.0) | | Change in cash and cash equivalents | ($54.6) | ($26.5) | - As of September 29, 2023, the company had $190.0 million outstanding on its line of credit, with $460.0 million in available borrowing capacity[61][237] - The company believes that current liquidity is sufficient to fund operations for the next 12 months and beyond[137] Item 3. Quantitative and Qualitative Disclosures About Market Risk There were no material changes to the company's market risk disclosures from the prior fiscal year-end - There have been no material changes to the market risk disclosures in the company's 2022 Annual Report on Form 10-K[151] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 29, 2023[153] - No material changes in internal control over financial reporting occurred during the quarter[154] PART II. OTHER INFORMATION Item 1. Legal Proceedings Pending legal proceedings are not expected to have a material adverse effect on the company's financial condition or results - Management believes pending legal proceedings will have no material adverse effect on the Company's financial condition or operations[157] Item 1A. Risk Factors The company faces significant risks from supplier dependency, OEM reliance, supply chain disruptions, and economic conditions - The business could be materially impacted by geopolitical tensions in Taiwan and Ukraine, affecting the economy and raw material supplies[166] - The company depends on a limited number of suppliers, including a sole-source supplier, Miyaki Corporation, for its exclusive Kashima coating[167][169] - Work stoppages, such as the UAW strike, can adversely affect operating results by idling customer production facilities[190] - Sales to the five largest OEM customers accounted for approximately 23% of sales in fiscal 2022, representing a concentration risk[200] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 8,377 shares during Q3 2023 to satisfy tax-withholding obligations on employee stock awards Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Number of Shares Purchased | Weighted-average Price Paid per Share | | :--- | :--- | :--- | | 7/1-8/4 | 8,046 | $108.99 | | 8/5-9/1 | 331 | $110.20 | | 9/2-9/29 | — | $— | | Total | 8,377 | $109.03 | - All shares repurchased during the quarter were acquired from holders of restricted stock unit awards to satisfy tax-withholding obligations[275] Item 5. Other Information No officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No officers or directors adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the third quarter[278] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including required officer certifications and XBRL data