Fox Factory Holding Corp 8-K, filed Jun 17, 2020
Fox Factory Holding Corp (FOXF)
8-K
2020-06-17
For: 2020-06-17
View Original
Added on
July 07, 2026
About this 8-K
Fox Factory Holding Corp filed this 8-K on June 17, 2020.
Items reported
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): June 17, 2020
(Exact name of Registrant as Specified in its Charter)
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) | ||||||||||||
(Address of Principal Executive Offices) (Zip Code)
(831 ) 274-6500
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 8.01 Other Events.
On May 26, 2020, Fox Factory Holding Corp. (the "Company") filed a Form 8-K/A, amending the Current Report on Form 8-K on March 16, 2020 reporting the completion of its acquisition of all of the outstanding equity interests of SCA Performance Holdings, Inc., a Delaware corporation ("SCA") by Fox Factory, Inc., a California corporation and wholly-owned subsidiary of the Company. The sole purpose of this Current Report on Form 8-K is to file additional pro forma financial information for the Company as set forth in Exhibit 99.1 attached hereto, to incorporate by reference such information into one or more registration statements filed or to be filed by the Company.
Item 9.01 Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The unaudited Pro Forma Combined Condensed Statement of Income and explanatory notes related to the acquisition of SCA for the three months ended April 3, 2020 are filed as Exhibit 99.1 to this Current Report on Form 8-K.
The unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of what the actual results of operations would have been had the transactions taken place on the assumed date; nor is it indicative of the future consolidated results of operations or financial position of the combined companies.
(d) Exhibits
The following exhibits are furnished herewith:
| Exhibit Number | Description | ||||
| Unaudited Pro Forma Combined Condensed Statement of Income and explanatory notes for the three months ended April 3, 2020. | |||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Fox Factory Holding Corp. | |||||||||||||||||
| Date: | June 17, 2020 | By: | /s/ Michael C. Dennison | ||||||||||||||
| Michael C. Dennison | |||||||||||||||||
| Chief Executive Officer | |||||||||||||||||
Exhibit 99.1
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
OF FOX FACTORY HOLDING CORP. AND SCA PERFORMANCE, INC.
On March 11, 2020, Fox Factory Holding Corp. (the “Company” or “FOX”), through Fox Factory, Inc., acquired 100% of the issued and outstanding stock of SCA Performance Holdings, Inc. ("SCA") from Southern Rocky Holdings, LLC, a Subchapter C Corporation under the Internal Revenue Code. This transaction was accounted for as a business combination.
The accompanying unaudited pro forma combined condensed income statement is presented in accordance with Article 11 of Regulation S-X. The unaudited pro forma combined condensed income statement for the three months ended April 3, 2020 is based on the historical consolidated financial statements of FOX and SCA after giving effect to the acquisition as if it had been completed on the first day of the Company’s fiscal year, January 4, 2020, and based on the assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined condensed income statement. A pro forma combined condensed balance sheet reflecting the acquisition of SCA is not required since the acquisition is included in the Company's consolidated balance sheet included in its Form 10-Q for the three months ended April 3, 2020 filed with the Securities and Exchange Commission on May 6, 2020.
The historical financial information has been adjusted to give effect to pro forma events that are (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results of FOX and SCA. The unaudited pro forma combined condensed income statement does not reflect any operating efficiencies, cost savings or revenue enhancements that may be achieved by the combined companies. In addition, the Company will incur certain non-recurring charges within the first twelve month period following the acquisition that have not been included in the unaudited pro forma combined condensed income statement.
The pro forma adjustments are based on information available as of the date of this report. There were no material differences from the harmonization of accounting policies. Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes. Certain assumptions and estimates are subject to change as the Company finalizes the fair value of net assets acquired in connection with the acquisition. Such final valuations are dependent upon procedures and other studies that are not complete. Any subsequent measurement period changes to the purchase price and the allocation of the purchase price that result in material changes to our consolidated financial statements will be adjusted retrospectively.
The unaudited pro forma combined condensed income statement is provided for informational purposes only and is not necessarily indicative of what the actual results of operations would have been had the acquisition taken place on the date indicated, nor is it indicative of the future consolidated results of operations of the combined companies. It should be read in conjunction with the historical consolidated financial statements and notes thereto of FOX included in its Quarterly Report on Form 10-Q for the three months ended April 3, 2020.
1
Fox Factory Holding Corp. and SCA Performance, Inc.
Unaudited Pro Forma Combined Condensed Income Statement
Three months ended April 3, 2020
(in thousands, except per share data)
| Historical | Pro Forma Adjustments | Combined Pro Forma | ||||||||||||||||||||||||||||||
| Fox Factory Holding Corp. | SCA Performance, Inc. | Note 2 | ||||||||||||||||||||||||||||||
| Sales | $ | 184,361 | $ | 19,348 | $ | — | $ | 203,709 | ||||||||||||||||||||||||
| Cost of sales | 127,746 | 9,825 | (60) | a. | 137,511 | |||||||||||||||||||||||||||
| Gross profit | 56,615 | 9,523 | 60 | 66,198 | ||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||
| Sales and marketing | 12,063 | 2,792 | — | 14,855 | ||||||||||||||||||||||||||||
| Research and development | 8,029 | — | — | 8,029 | ||||||||||||||||||||||||||||
| General and administrative | 22,413 | 7,247 | (10,579) | b. | 14,396 | |||||||||||||||||||||||||||
| (3,818) | c. | |||||||||||||||||||||||||||||||
| (1,856) | d. | |||||||||||||||||||||||||||||||
| 989 | e. | |||||||||||||||||||||||||||||||
| Amortization of purchased intangibles | 2,543 | 1,281 | 1,557 | f. | 5,381 | |||||||||||||||||||||||||||
| Total operating expenses | 45,048 | 11,320 | (13,707) | 42,661 | ||||||||||||||||||||||||||||
| Income from operations | 11,567 | (1,797) | 13,767 | 23,537 | ||||||||||||||||||||||||||||
| Other expense, net: | ||||||||||||||||||||||||||||||||
| Interest expense | 1,847 | 2,725 | (2,072) | g. | 4,093 | |||||||||||||||||||||||||||
| 1,593 | h. | |||||||||||||||||||||||||||||||
| Other expense | 62 | 17 | — | 79 | ||||||||||||||||||||||||||||
| Other expense, net | 1,909 | 2,742 | (479) | 4,172 | ||||||||||||||||||||||||||||
| Income before income taxes | 9,658 | (4,539) | 14,246 | 19,365 | ||||||||||||||||||||||||||||
| Provision for income taxes | 920 | (1,091) | 2,992 | i. | 2,821 | |||||||||||||||||||||||||||
| Net income | 8,738 | (3,448) | 11,254 | 16,544 | ||||||||||||||||||||||||||||
| Less: net income attributable to non-controlling interest | 488 | — | — | 488 | ||||||||||||||||||||||||||||
| Net income attributable to FOX stockholders | $ | 8,250 | $ | (3,448) | $ | 11,254 | $ | 16,056 | ||||||||||||||||||||||||
| Earnings per share: | ||||||||||||||||||||||||||||||||
| Basic | $ | 0.21 | $ | 0.42 | ||||||||||||||||||||||||||||
| Diluted | $ | 0.21 | $ | 0.41 | ||||||||||||||||||||||||||||
| Weighted average shares used to compute earnings per share: | ||||||||||||||||||||||||||||||||
| Basic | 38,571 | 22 | j. | 38,593 | ||||||||||||||||||||||||||||
| Diluted | 39,151 | 22 | j. | 39,173 | ||||||||||||||||||||||||||||
See accompanying notes to unaudited pro forma combined condensed financial information.
2
Fox Factory Holding Corp. and SCA Performance, Inc.
Notes to Unaudited Pro Forma Combined Condensed Income Statement
1. Basis of pro forma presentation
On March 11, 2020, the Company, through Fox Factory, Inc., acquired 100% of the issued and outstanding stock of SCA from Southern Rocky Holdings, LLC for $329.5 million, net of cash acquired and exclusive of vehicle inventory. The Company’s historical results include the results of SCA from the date of acquisition. The transaction was financed with an expanded, syndicated credit facility led by Bank of America. SCA is a leading OEM authorized specialty vehicle manufacturer for light duty trucks and SUVs with headquarters in Trussville, Alabama. SCA operates under three aftermarket brands: SCA Performance, Rocky Ridge Trucks, and Rocky Mountain Truckworks. The Company believes the acquisition will be complementary to FOX’s Tuscany business, expanding its North American geographic manufacturing footprint and broadening its product offering in a growing segment of the automotive industry. This transaction was accounted for as a business combination.
The Company also agreed to an additional $10.6 million of contingent retention incentives for key SCA management, of which $9.3 million is cash and $1.3 million is stock, to be held in escrow and payable over the next two years. Additionally, the Company agreed to pay $1.8 million in transaction compensation to key SCA management concurrently with the closing.
The purchase price of SCA has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated respective fair values as of March 11, 2020 with the excess purchase price allocated to goodwill. The Company’s allocation of the purchase price to the net tangible and intangible assets acquired and liabilities assumed is as follows (in thousands):
| Acquisition consideration | |||||
| Cash consideration | $ | 329,209 | |||
| Non-cash consideration | 322 | ||||
| Total consideration at closing | $ | 329,531 | |||
| Fair market values | |||||
| Other current assets | $ | 15,556 | |||
| Property, plant and equipment | 9,953 | ||||
| Lease right-of-use assets | 4,027 | ||||
| Customer relationships | 129,000 | ||||
| Trademarks and brand | 11,500 | ||||
| Goodwill | 192,215 | ||||
| Total assets acquired | $ | 362,251 | |||
| Accounts payable and accrued expenses | $ | 9,454 | |||
| Lease liabilities | 4,027 | ||||
| Deferred taxes | 19,239 | ||||
| Total liabilities assumed | 32,720 | ||||
| Purchase price allocation | $ | 329,531 | |||
The primary areas of the preliminary purchase price allocations that have not been finalized relate to the finalization of working capital and the valuation of real estate, intangible assets and related deferred tax liabilities. Upon completion of the fair value assessment, the Company anticipates that the ultimate intangible assets may differ from the preliminary assessment outlined above. Any change in the finalization of working capital will reduce or increase the cash consideration. Any changes to the preliminary estimates of the fair value of the real estate and intangible assets will be adjusted to goodwill during the measurement period, with subsequent changes in estimates recorded in the statement of operations.
3
Fox Factory Holding Corp. and SCA Performance, Inc.
Notes to Unaudited Pro Forma Combined Condensed Income Statement
The preliminarily values assigned to the identifiable intangible assets were determined by discounting the estimated future cash flows associated with these assets to their present value. The goodwill of $192.2 million reflects the strategic fit of SCA with the Company’s operations. The Company will amortize the acquired customer relationships assets over their expected useful lives of 5-10 years. Trademarks, brand names and goodwill are expected to have an indefinite life, and will be subject to impairment testing. The goodwill is not deductible for income tax purposes. SCA previously purchased intangibles and goodwill in asset acquisitions with a remaining net tax basis approximating $78.0 million which the Company may deduct for income tax purposes.
2. Pro forma adjustments
Pro forma adjustments in the unaudited pro forma combined condensed income statement are necessary to reflect (i) compensation expense related to retention incentives included in employment contracts executed concurrent with the acquisition, (ii) amortization expense related to the acquired amortizable intangible assets, (iii) the additional interest expense, including amortization of debt issuance costs, for new debt issued to finance the acquisition, and (iv) the income tax effect related to the pro forma adjustments. The pro forma combined condensed income statement does not include non-recurring charges of $0.1 million associated with the valuation step-up of acquired finished good inventories, acquisition costs of $10.6 million and $1.9 million incurred by FOX and SCA respectively, in the three months ended April 3, 2020, or management fees of $3.8 million incurred by SCA.
The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had FOX and SCA filed consolidated income tax returns during the periods presented.
The pro forma adjustments included in the unaudited pro forma combined condensed income statement are as follows:
a. To eliminate amortization of the finished goods inventory valuation adjustment included in the results for the three months ended April 3, 2020.
b. To eliminate $10.6 million of transaction costs incurred by FOX, including $1.8 million related to transaction compensation.
c. To eliminate management fees charged by the former majority owner of SCA, including $0.4 million incurred for the period from January 4, 2020 to March 11, 2020 and $3.4 million of termination fees associated with a service agreement between the parties.
d. To eliminate $1.9 million of transaction costs incurred by SCA.
e. To record compensation expense related to retention incentives included in escrow agreements executed concurrent with the acquisition and in effect over a two year period, to the extent not captured in the actual results for the three months ended April 3, 2020.
f. To eliminate $1.3 million of amortization expense related to purchased intangible assets recorded by SCA prior to the transaction, and to record an incremental $2.9 million of amortization expense for acquired intangible assets based on the expected economic lives of those assets.
g. To eliminate historical SCA interest expense related to long-term debt that was repaid by the seller in the transaction, including $0.7 million for the write-off of deferred financing costs.
h. To record interest expense, including amortization of debt issuance costs, for $329.2 million of new long-term debt that financed the cash portion of the purchase price. This amount is calculated based on an effective interest rate of 2.30% as of March 11, 2020, and assumes debt issue costs of $5.9 million are recognized over the five year term of the debt. The debt bears interest at a variable rate, and represents interest for the period from January 4, 2020 to March 11, 2020. A 1/8% change in the assumed interest rate would change interest expense by approximately $0.1 million for the three months ended April 3, 2020.
i. To record an income tax benefit relative to the net pro forma adjustments at the federal statutory rate of 21%.
j. The denominator used to calculate basic and diluted earnings per share has been adjusted to reflect shares issued in connection with compensatory arrangements described in note e.
4