Fox Factory Holding Corp. (NASDAQ: FOXF) (“FOX”) announced the strategic acquisition of Flagship Inc., dba Tuscany Motor Company (“Tuscany”) in an asset deal. Tuscany is a designer, manufacturer and distributor of premium aftermarket powered vehicle performance packages.
FOX acquired 80% of the business for $53.4 million in cash financed through a combination of its existing credit facility and cash on hand. The assets acquired by the Company include a small tuck-in acquisition completed by Tuscany on June 28, 2017 for $6 million in cash. The agreement includes a provision for FOX to acquire the remaining 20% of the business in the future. Additionally, FOX expects to amortize a substantial portion of the purchase price for tax purposes.
“We are excited to announce the acquisition of the Tuscany business, which we believe presents a significant opportunity for FOX to further expand its performance defining aftermarket solutions,” stated Larry L. Enterline, FOX’s Chief Executive Officer. “We look forward to further accelerating our off-road capable, on-road truck product category growth.”
Tuscany generated approximately $40.8 million in unaudited sales and $7.4 million in unaudited adjusted EBITDA for the twelve months ended June 30, 2017. The Company expects the financial benefit to fourth quarter fiscal 2017 sales and earnings to be negligible and accordingly FOX is not updating its fourth quarter fiscal 2017 and full year 2017 guidance.
While the Company is not providing formal fiscal 2018 guidance at this time, it expects 2018 sales contribution from Tuscany of approximately $41 million which reflects the impact of intercompany sales eliminations that will offset growth in the business. The Company expects EBITDA margin to be consistent with Tuscany historic margins. The Company expects non-GAAP adjusted earnings per diluted share contribution from Tuscany of approximately $0.07 for fiscal 2018 which assumes incremental interest expense of $1.2 million to finance the transaction and also assumes combined marginal federal and state tax rates for the Tuscany business of approximately 39% as their business is predominantly domestically based.
Non-GAAP adjusted earnings per diluted share exclude the following items net of applicable tax: amortization of purchased intangibles, contingent consideration valuation adjustment, acquisition-related compensation expense including related foreign currency transaction gains and losses, certain acquisition-related adjustments and expenses, litigation-related expenses and offering expenses. Additionally, non-GAAP adjusted earnings per diluted share excludes the tax benefit related to the resolution of audits by taxing authorities. A quantitative reconciliation of non-GAAP adjusted earnings per diluted share contribution from Tuscany is not available without unreasonable efforts because management cannot predict, with sufficient certainty, all of the elements necessary to provide such a reconciliation.Click here for reuse options!
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