Business Context and Reporting Period
Company: Fox Factory Holding Corp.
Filing Type: Form 8-K (Current Report)
Date of Report: December 4, 2017 (Event Date: November 30, 2017)
Context: The Company entered into a Material Definitive Agreement to acquire assets from Flagship, Inc. (d/b/a Tuscany), a designer and manufacturer of personal-use specialty vehicles based on OEM chassis. The Company is classified as an emerging growth company.
Key Financial Metrics and Transaction Details
- Total Consideration: $66.25 million gross.
- Payment Structure:
- Cash: $53.35 million (subject to reductions for debt repayment, escrows, insurance premiums, and working capital adjustments).
- Equity: $12.9 million worth of Buyer Parent common stock (representing 20% of Buyer Parent).
- Ownership Stake: Fox Factory Holding Corp. owns 80% of the acquired business (Buyer Parent) immediately following the transaction.
- Debt and Liquidity: The Company amended its Credit Agreement to permit the transaction, including provisions for outside financing for the acquired business. Specific debt balances or liquidity ratios are not provided in this filing.
Material Changes and Future Obligations
The primary material change is the acquisition of Tuscany's assets and the assumption of certain liabilities. Key future obligations include:
- Call Option: Fox Factory and Buyer Parent have the right to purchase the remaining 20% of Buyer Parent from the Seller between the second and seventh anniversaries of the transaction.
- Put Option: Following the seventh anniversary, the Seller has the right to require Fox Factory or Buyer Parent to purchase the remaining 20% interest for a 180-day window, subject to Credit Agreement terms.
- Credit Agreement Amendment: Negative covenants were modified to allow for the equity issuance and the transaction structure.
Guidance, Risks, and Contingencies
Management Commentary: The filing confirms the execution of the Asset Purchase and Contribution Agreement and the necessary Credit Agreement amendments. No specific financial guidance or outlook for the acquired business is provided in this text.
Risks and Contingencies:
- The cash portion of the purchase price is subject to a working capital adjustment.
- Indemnification escrows and a representation and warranty insurance policy have been established to mitigate risks regarding breaches of Seller's representations.
- Future financing for the acquired business is permitted under the amended Credit Agreement.
Investor Verification Checklist
- Verify the final purchase price after working capital adjustments and debt repayments.
- Review the full text of the Asset Purchase Agreement (Exhibit 10.1) for specific liabilities assumed.
- Examine the Third Amendment to the Credit Agreement (Exhibit 10.2) for new covenants or restrictions.
- Confirm the valuation of the 20% equity stake issued to the Seller.
- Monitor the timeline for the potential exercise of the call/put options for the remaining 20% interest.