FOX FACTORY HOLDING CORP

Previous wording

This Quarterly Report on Form 10-Q includes forward-looking statements, which are subject to the “safe harbor” created by Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may make forward-looking statements in our SEC filings, press releases, news articles, earnings presentations and when we are speaking on behalf of the Company. Forward-looking statements generally relate to future events or our future financial or operating performance that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “likely,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to numerous risks and uncertainties, including but not limited to risks related to:

Current wording

This Quarterly Report on Form 10-Q includes forward-looking statements, which are subject to the “safe harbor” created by Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may make forward-looking statements in our SEC filings, press releases, news articles, earnings presentations and when we are speaking on behalf of the Company. Forward-looking statements generally relate to future events or our future financial or operating performance that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “likely,” “potential”, “remain” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to numerous risks and uncertainties, including but not limited to risks related to:

Previous wording

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects and the outcomes of any of the events described in any forward-looking statements are subject to risks, uncertainties, and other factors. In addition to the risks, uncertainties and other factors discussed above and elsewhere in this Quarterly Report on Form 10-Q, the risks, uncertainties and other factors expressed or implied in Part I, Item 1A. “Risk Factors” of our 2023 Annual Report on Form 10-K, as filed with the SEC on February 23, 2024, could cause or contribute to actual results differing materially from those set forth in any forward-looking statement. Moreover, we operate in a very competitive and challenging environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur and you should not place undue reliance on our forward-looking statements. Actual results, events, or circumstances could differ materially from those contemplated by, set forth in, or underlying any forward-looking statements. For all of these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements in Section 27A of the Securities Act and Section 21E of the Exchange Act.

Current wording

You should not rely upon forward-looking statements as predictions of future events. We based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects and the outcomes of any of the events described in any forward-looking statements are subject to risks, uncertainties, and other factors. In addition to the risks, uncertainties and other factors discussed above and elsewhere in this Quarterly Report on Form 10-Q, the risks, uncertainties and other factors expressed or implied in Part I, Item 1A. “Risk Factors” of our 2023 Annual Report on Form 10-K, as filed with the SEC on February 23, 2024, could cause or contribute to actual results differing materially from those set forth in any forward-looking statement. Moreover, we operate in a very competitive and challenging environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur and you should not place undue reliance on our forward-looking statements. Actual results, events, or circumstances could differ materially from those contemplated by, set forth in, or underlying any forward-looking statements. For all of these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements in Section 27A of the Securities Act and Section 21E of the Exchange Act.

Previous wording

There have been no changes to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, as filed with the SEC on February 23, 2024, that have had a material impact on our condensed consolidated financial statements and related notes.

Current wording

There have been no changes to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, as filed with the SEC on February 23, 2024, that had a material impact on our condensed consolidated financial statements and related notes.

Previous wording

Total net sales for the three months ended March 29, 2024 decreased $66.3 million, or 16.6%, compared to the three months ended March 31, 2023. The decrease in net sales is primarily due to product mix and higher interest rates impacting industry and consumer demands and the ongoing Bike channel inventory recalibration, offset by the inclusion of $59.6 million in net sales from Marucci that was acquired in November 2023.

Current wording

Total net sales for the three months ended June 28, 2024 decreased $52.2 million, or 13.0%, compared to the three months ended June 30, 2023. The decrease in net sales is primarily due to product mix and higher interest rates impacting industry and consumer demands and the ongoing bike channel inventory recalibration, offset by the inclusion of $41.6 million in net sales from Marucci that was acquired in November 2023.

Previous wording

As a result of the factors discussed above, income from operations for the three months ended March 29, 2024 decreased $45.8 million, or 83.7%, compared to income from operations for the three months ended March 31, 2023.

Current wording

As a result of the factors discussed above, income from operations for the three months ended June 28, 2024 decreased $34.2 million, or 64.8%, compared to income from operations for the three months ended June 30, 2023.

Previous wording

Interest and other expense, net for the three months ended March 29, 2024 increased by $10.1 million to $13.6 million compared to $3.5 million for the three months ended March 31, 2023. Interest expense increased by $9.8 million due to additional debt and higher interest rates.

Current wording

Interest and other expense, net for the three months ended June 28, 2024 increased by $8.7 million to $13.6 million, compared to $4.9 million for the three months ended June 30, 2023. Interest expense increased by $9.5 million due to additional debt and higher interest rates.

Previous wording

The effective tax rates were 26.6% and 18.3% for the three month periods ended March 29, 2024 and March 31, 2023, respectively.

Current wording

The effective tax rates were (7.4)% and 16.9% for the three month periods ended June 28, 2024 and June 30, 2023, respectively.

Previous wording

For the three months ended March 29, 2024, the difference between the Company’s effective tax rate of 26.6% and the 21% federal statutory rate was due to the impact of discrete items and pre-tax loss.

Current wording

For the three months ended June 28, 2024, the difference between the Company’s effective tax rate of (7.4)% and the 21% federal statutory rate was primarily due to the favorable impact of discrete items in proportion to lower levels of pre-tax income.

Previous wording

For the three months ended March 31, 2023, the difference between our effective tax rate of 18.3% and the 21% federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income and excess benefits related to stock-based compensation. The benefits were partially offset by withholding and state taxes.

Current wording

For the three months ended June 30, 2023, the difference between our effective tax rate of 16.9% and the 21% federal statutory rate resulted primarily from a lower tax rate on foreign derived intangible income and excess benefit related to stock-based compensation. This benefit was partially offset by state and foreign withholding taxes.

Previous wording

As a result of the factors described above, our net income decreased $45.3 million, or 108.4%, to $3.5 million in the three months ended March 29, 2024 from $41.8 million for the three months ended March 31, 2023.

Current wording

As a result of the factors described above, our net income decreased $34.3 million, or 86.4%, to $5.4 million in the three months ended June 28, 2024 from $39.7 million for the three months ended June 30, 2023.

Previous wording

Powered Vehicles Group net sales decreased by $24.1 million, or 16.9%, due to lower industry demand in Power Sports because of higher interest rates.

Current wording

Powered Vehicles Group net sales decreased by $22.4 million, or 16.0%, due to lower industry demand in Power Sports because of higher interest rates.

Previous wording

Powered Vehicles Group adjusted EBITDA decreased by $1.8 million, or 10.2%, driven by a decrease in gross profit, partially offset by reductions across operating expenses from our cost control efforts.

Current wording

Powered Vehicles Group adjusted EBITDA decreased by $8.0 million, or 33.5%, driven by a decrease in gross profit, partially offset by reductions across operating expenses from our cost control efforts.

Previous wording

Aftermarket Applications Group net sales decreased by $36.8 million, or 26.5%, driven by lower upfitting sales due to product mix and higher interest rates impacting industry dealers and consumers.

Current wording

Aftermarket Applications Group net sales decreased by $48.5 million, or 31.2%, driven by lower upfitting sales due to product mix, chassis availability, and higher interest rates impacting industry dealers and consumers.

Previous wording

Aftermarket Applications Group adjusted EBITDA decreased by $21.4 million, or 59.0%, mainly due to lower gross profit driven by high interest rates, product mix shift, and reduced operating leverage on lower volume.

Current wording

Aftermarket Applications Group adjusted EBITDA decreased by $23.6 million, or 62.4%, mainly due to lower gross profit and reduced operating leverage on lower volume.

Previous wording

Specialty Sports Group net sales decreased by $5.4 million, or 4.5%, primarily due to a reduction in Bike sales of $65.0 million because of the ongoing Bike channel inventory recalibration, offset by the inclusion of $59.6 million in net sales from Marucci which we acquired in November 2023.

Current wording

Specialty Sports Group net sales increased by $18.7 million, or 17.8%, primarily due to the inclusion of $41.6 million in net sales from Marucci which we acquired in November 2023, partially offset by a reduction in bike sales of $22.9 million because of the ongoing bike channel inventory recalibration and to a lesser extent, lower end consumer demand.

Previous wording

Specialty Sports Group adjusted EBITDA decreased by $16.7 million, or 40.9%, primarily due to a decline in gross profit driven by the ongoing Bike channel inventory recalibration, to a lesser extent, lower end consumer demand, and reduced operating leverage on lower volume, offset by the inclusion of Marucci which grew year over year.

Current wording

Specialty Sports Group adjusted EBITDA decreased by $4.9 million, or 14.4%, primarily due to a decline in gross profit driven by the ongoing bike channel inventory recalibration, to a lesser extent, lower end consumer demand, and reduced operating leverage on lower volume, offset by the inclusion of Marucci which grew year over year.

Previous wording

Unallocated corporate expenses decreased by $2.2 million, or 13.3%, driven by cost containment measures.

Current wording

Unallocated corporate expenses decreased by $1.3 million, or 7.9%, driven by cost containment measures.

Previous wording

Cost of sales for the three months ended March 29, 2024 decreased $36.3 million, or 13.6%, compared to the three months ended March 31, 2023. The decrease in cost of sales was primarily due to our decreased sales. Our gross margin decreased 240 basis points to 30.9% for the three months ended March 29, 2024 as compared to the same prior fiscal year period primarily due to a shift in our product line mix and operating leverage on lower volume.

Current wording

Cost of sales for the six months ended June 28, 2024 decreased $67.4 million, or 12.6%, compared to the three months ended June 30, 2023. The decrease in cost of sales was primarily due to our decreased sales. Our gross margin decreased by 170 basis points to 31.4% for the six months ended June 28, 2024 as compared to the same prior fiscal year period primarily due to a shift in our product line mix and operating leverage on lower volume.

Previous wording

Total operating expenses for the three months ended March 29, 2024 were $94.3 million compared to $78.6 million for the three months ended March 31, 2023. Sales and marketing expenses increased $7.5 million and general and administrative expenses increased $3.7 million primarily due to the inclusion of Marucci operating expenses and a full fiscal quarter of Custom Wheel House operating expenses. Amortization of purchased intangibles increased by $5.3 million mainly due to amortization of additional acquired intangibles.

Current wording

Total operating expenses for the six months ended June 28, 2024 were $186.7 million, compared to $157.9 million for the six months ended June 30, 2023. Sales and marketing expenses increased $10.5 million and general and administrative expenses increased $10.4 million primarily due to the inclusion of Marucci operating expenses and a full six months of Custom Wheel House operating expenses. Amortization of purchased intangibles increased by $9.1 million mainly due to amortization of additional acquired intangibles.

Previous wording

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 generally financed our liquidity needs with operating cash flows, borrowings under our Prior Credit Facility and our 2022 Credit Facility, and the issuance of common stock. These sources of liquidity may be impacted by events described in Cautionary Note Regarding Forward-Looking Statements and Item 1A. Risk Factors.

Current wording

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 generally financed our liquidity needs with operating cash flows, borrowings under our Prior Credit Facility and our 2022 Credit Facility, and the issuance of common stock. These sources of liquidity may be impacted by events described in Cautionary Note Regarding Forward-Looking Statements and Part II, Item 1A. Risk Factors.

Previous wording

As of March 29, 2024, we held $16.8 million of our $69.6 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.

Current wording

As of June 28, 2024, we held $17.8 million of our $82.2 million of cash and cash equivalents in accounts of our subsidiaries outside of the U.S., which we may repatriate.

Previous wording

In the three months ended March 29, 2024, net cash provided by operating activities was $9.4 million. Our investment in operating assets and liabilities is a result of an increase in prepaids and other assets of $36.5 million and decreases in accounts payable of $2.4 million, accrued expenses and other liabilities of $1.2 million, and income taxes payable of $0.8 million, partially offset by decreases in inventory of $20.0 million and accounts receivable of $5.3 million. The increase in prepaids and other assets is primarily due to carrying new model year chassis to meet current year production needs for the upfitting product lines and, to a lesser degree, slowing sales of older model years. The change in our accounts receivable reflects 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 settlements of sales rebate accruals. The decrease in inventory reflects our continued efforts to optimize inventory levels.

Current wording

In the six months ended June 28, 2024, net cash provided by operating activities was $36.0 million. Our investment in operating assets and liabilities is a result of an increase in prepaids and other assets of $35.7 million, a decrease in income taxes payable of $23.2 million, and an increase in inventory of $7.8 million, partially offset by an increase in accounts payable of $34.6 million, a decrease in accounts receivable of $12.0 million, and an increase in accrued expenses and other liabilities of $2.9 million. The increase in prepaids and other assets is primarily due to carrying new model year chassis to meet current year production needs for the upfitting product lines and, to a lesser degree, slowing sales of older model years. The decrease in income taxes payable is mainly due to our income tax payments. The change in our accounts payable is driven by timing of inventory purchases and vendor payments. The change in our accounts receivable reflects a decrease in our sales and the timing of customer collections.

Previous wording

In the three months ended March 31, 2023, net cash used in operating activities was $66.8 million. Our investment in operating assets and liabilities is a result of increases in prepaids and other assets of $112.2 million, inventory of $11.5 million, and decreases in accrued expenses and other liabilities of $7.8 million, accounts payable of $6.7 million and income taxes payable of $4.0 million, partially offset by a decrease in accounts receivable of $9.4 million. The change in prepaids and other assets is primarily due to a higher supply of chassis as we ramp up to meet current year production needs for our upfitting product line. The increase in inventory is primarily due to our acquisition of Custom Wheel House in February 2023. The change in accrued expenses and other liabilities is primarily due to payments made for compensation and tax related accruals in the first quarter. The changes in accounts payable and account receivable reflect the timing of customer collections and vendor payments.

Current wording

In the six months ended June 30, 2023, net cash used in operating activities was $3.3 million. Our investment in operating assets and liabilities is a result of increases in prepaids and other assets of $112.2 million primarily due to carrying more chassis to meet current year production needs for the upfitting product lines, and decreases in accounts payable of $41.6 million, income taxes payable of $16.4 million and accrued expenses and other liabilities of $6.5 million, partially offset by decreases in accounts receivable of $32.7 million and inventory of $13.1 million. The change in our accounts receivable reflects a shift in our product line mix. 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. The decrease in inventory reflects our continued efforts to optimize inventory levels.

Previous wording

In the three months ended March 29, 2024 and March 31, 2023, net cash used in investing activities consisted of $15.3 million and $144.3 million, respectively. Investing activities for the three months ended March 29, 2024 consisted of $9.9 million of property and equipment additions, $5.0 million of cash consideration for our acquisitions and $0.4 million of cash consideration for our acquisition of other assets. Investing activities for the three months ended March 31, 2023 consisted of $130.9 million of cash consideration for our purchase of Custom Wheel House, $11.1 million of property and equipment additions and $2.3 million in cash consideration for our purchase of other assets.

Current wording

In the six months ended June 28, 2024 and June 30, 2023, net cash used in investing activities consisted of $26.6 million and $156.5 million, respectively. Investing activities for the six months ended June 28, 2024 consisted of $21.2 million of property and equipment additions, $5.0 million of cash consideration for our acquisitions and $0.4 million of cash consideration for our acquisition of other assets. Investing activities for the six months ended June 30, 2023 consisted of $130.9 million of cash consideration for our purchase of Custom Wheel House, $23.2 million of property and equipment additions and $2.4 million in cash consideration for our purchase of other assets.

Previous wording

In the three months ended March 29, 2024, net cash used in financing activities was $7.9 million, and consisted of the proceeds from our 2022 Credit Facility of $70.0 million that were used to support our working capital, offset by payments of $48.0 million to reduce the revolver borrowings, $3.6 million quarterly repayment on our Term A Loan, $25.0 million to repurchase shares of our common stock for retirement, and payments of $1.3 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

Current wording

In the six months ended June 28, 2024, net cash used in financing activities was $10.7 million, and consisted of the proceeds from our 2022 Credit Facility revolver of $119.0 million and draw from the Delayed Draw Term Loan of $200.0 million that were used to support our working capital, offset by payments of $295.0 million to reduce the revolver borrowings, $7.1 million repayments on our Term A Loan, $25.0 million to repurchase shares of our common stock for retirement, and payments of $2.5 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

Previous wording

In the three months ended March 31, 2023, net cash provided by financing activities was $157.8 million, and consisted of the net proceeds from our 2022 Credit Facility of $160.0 million that were used to finance our purchase of Custom Wheel House, partially offset by payments of $2.2 million to repurchase shares of our common stock from our stock-based compensation program.

Current wording

In the six months ended June 30, 2023, net cash provided by financing activities was $119.8 million, and consisted of the proceeds from our 2022 Credit Facility of $210.0 million that were used to support our working capital and the purchase of Custom Wheel House, partially offset by payments of $85.0 million to reduce the revolver borrowings and payments of $5.2 million to repurchase shares of our common stock to cover withholding taxes from our stock-based compensation program.

Previous wording

The Company may borrow, prepay and re-borrow principal under the 2022 Credit Facility during its term. Advances under the 2022 Credit Facility can be either Adjusted Term SOFR loans or base rate loans. SOFR rate revolving loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum equal to Term SOFR for such calculation plus 0.10% plus a margin ranging from 1.00% to 2.00%. 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%. At March 29, 2024, the one-month SOFR and three-month SOFR rates were 5.32% and 5.35%, respectively. At March 29, 2024, our weighted-average interest rate on outstanding borrowing was 6.93%.

Current wording

The Company may borrow, prepay and re-borrow principal under the 2022 Credit Facility during its term. Advances under the 2022 Credit Facility can be either Adjusted Term SOFR loans or base rate loans. SOFR rate revolving loans bear interest on the outstanding principal amount thereof for each interest period at a rate per annum equal to Term SOFR for such calculation plus 0.10% plus a margin ranging from 1.00% to 2.00%. 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%. At June 28, 2024, the one-month SOFR and three-month SOFR rates were 5.34% and 5.35%, respectively. At June 28, 2024, our weighted-average interest rate on outstanding borrowing was 7.07%.

Previous wording

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 “Amendment:) amending the 2022 Credit Facility. The Amendment provided the Company with the Incremental Term A Loan in an amount of $400.0 million and the Delayed Draw Term Loan in an amount of $200.0 million, each of which are permitted under the 2022 Credit Facility, 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 is available to the Company for up to six months commencing on December 6, 2023, until the earlier of (a) May 14, 2024 and (b) the date on which the Delayed Draw Term 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 2022 Credit Facility.

Current wording

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 “Amendment:) amending the 2022 Credit Facility. The Amendment provided the Company with the Incremental Term A Loan in an amount of $400.0 million and the Delayed Draw Term Loan in an amount of $200.0 million, each of which are permitted under the 2022 Credit Facility, 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 for up to six months commencing on December 6, 2023, until the earlier of (a) May 14, 2024 and (b) the date on which the Delayed Draw Term 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 2022 Credit Facility.

Previous wording

The Company paid $10.1 million in debt issuance costs, of which $6.7 million were allocated to the Term A Loan and $3.4 million were allocated to the Delayed Draw Term Loan. Loan fees allocated to the Term A Loan are amortized using the interest method over the term of the Credit Facility. Loan fees allocated to the Delayed Draw Term Loan were deferred as an asset until the debt is drawn. Upon the drawing of the Delayed Draw Term Loan, the fees will be reclassified to a contra-liability account and amortized over the term of the drawn debt using the interest method.

Current wording

The Company paid $10.1 million in debt issuance costs, of which $6.7 million were allocated to the Term A Loan and $3.4 million were allocated to the Delayed Draw Term Loan. Loan fees allocated to the Term A Loan are amortized using the interest method over the term of the Credit Facility. Loan fees allocated to the Delayed Draw Term Loan were deferred as an asset until the debt is drawn.