Edgar Filing: FOX FACTORY HOLDING CORP

Form S-1/A Registration Statement

As filed with the Securities and Exchange Commission on July 7, 2014

Registration No. 333-196945

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1 to

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Fox Factory Holding Corp.

(Exact name of Registrant as Specified in its Charter)



Delaware	3751	26-1647258
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

915 Disc Drive

Scotts Valley, California 95066

(831) 274-6500

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Larry L. Enterline

Chief Executive Officer

Fox Factory Holding Corp.

915 Disc Drive

Scotts Valley, California 95066

(831) 274-6500

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:
Stephen C. Mahon, Esq.	David Haugen, Esq.	Kevin P. Kennedy, Esq.
Toby D. Merchant, Esq.	Fox Factory Holding Corp.	Simpson Thacher & Bartlett LLP
Squire Patton Boggs (US) LLP	915 Disc Drive	2475 Hanover Street
221 E. Fourth Street, Suite 2900	Scotts Valley, California 95066	Palo Alto, California 94304
Cincinnati, Ohio 45202	(831) 274-6500	(650) 251-5000
(513) 361-1200

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



	¨	Large accelerated filer
	¨	Accelerated filer
	þ	Non-accelerated filer (do not check if a smaller reporting company)
	¨	Smaller reporting company

CALCULATION OF REGISTRATION FEE



Title of each class of securities to be registered	Amount to be registered⁽¹⁾	Proposed maximum aggregate offering price per share⁽²⁾	Proposed maximum aggregate offering price⁽¹⁾⁽²⁾	Amount of registration fee⁽³⁾
Common Stock, $0.001 par value per share	7,475,000	$17.73	$132,531,750	$17,070


(1)	Includes shares or offering price of shares that the underwriters have the option to purchase. See “Underwriting”.


(2)	Estimated solely for the purpose of calculating the registration fee based on the average of the high and low prices for the registrant’s common stock on the NASDAQ Global Select Market on July 1, 2014, pursuant to Rule 457(c) under the Securities Act of 1933, as amended.


(3)	Of this fee, $14,812 was previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and neither we nor the selling stockholders are soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to completion, dated July 7, 2014

Prospectus

6,500,000 shares

Fox Factory Holding Corp.

Common stock

The selling stockholders identified in this prospectus are selling 6,500,000 shares of common stock. We will not receive any of the proceeds from the sale of the shares by the selling stockholders.

Our common stock is listed on the NASDAQ Global Select Market under the symbol “FOXF.” On July 3, 2014, the last sale price of our common stock as reported on the Nasdaq Global Select Market was $17.98 per share.

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and, as such, are subject to reduced public company reporting requirements.



	Per share	Total

Public offering price	$	$

Underwriting discounts and commissions(1)	$	$

Proceeds to selling stockholders, before expenses	$	$


(1)	We have agreed to reimburse the underwriters for certain FINRA-related expenses. See “Underwriting”.

Delivery of the shares of common stock is expected to be made on or about , 2014. The selling stockholders identified in this prospectus have granted the underwriters an option for a period of 30 days to purchase, on the same terms and conditions as set forth above, up to an additional 975,000 shares of our common stock. We will not receive any of the proceeds from the sale of shares by these selling stockholders if the underwriters exercise their option to purchase additional shares of common stock.

Investing in our common stock involves substantial risk. Please read “Risk factors” beginning on page 12.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.



BofA Merrill Lynch		Baird
William Blair	Piper Jaffray	SunTrust Robinson Humphrey
	CJS Securities

The date of this prospectus is , 2014



TABLE OF CONTENTS
Prospectus
	Page

Prospectus Summary	1
The Offering	7
Summary Consolidated Financial Data	8
Risk Factors	12
Special Note Regarding Forward-Looking Statements	28
Use of Proceeds	29
Market Price of our Common Stock	29
Dividend Policy	29
Capitalization	30
Selected Consolidated Financial Data	30
Management's Discussion and Analysis of Financial Condition and Results of Operations	33
Business	53
Management	64
Certain Relationships and Related Party Transactions	67
Principal and Selling Stockholders	71
Description of Capital Stock	73
Shares Eligible for Future Sale	77
Material U.S. Federal Income Tax Consequences to Non-U.S. holders	78
Underwriting	81
Legal Matters	87
Experts	87
Additional Information	87
Incorporation by Reference	88

Neither we, the selling stockholders, nor any of the underwriters have authorized anyone to provide any information or to make any representations other than as contained or incorporated by reference in this prospectus or in any free writing prospectuses we have prepared. We do not, and the selling stockholders and underwriters do not, take responsibility for, and provide no assurance as to, the reliability of any information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date, regardless of the time of delivery of this prospectus or of any sale of the common stock.

This prospectus incorporates by reference important information. You should read this prospectus and the information incorporated by reference before deciding to invest in shares of our common stock. You may obtain this information without charge by following the instructions under “Additional Information” and “Incorporation by Reference.” To the extent there is a conflict between the information contained in this prospectus and the information contained in any document incorporated by reference herein filed prior to the date of this prospectus, you should rely on the information in this prospectus; provided that if any statement in one of these documents is inconsistent with a statement in another document having a later date - for example, a document incorporated by reference in the prospectus - the statement in the document having the later date modifies or supersedes the earlier statement.

Prospectus summary

This summary highlights selected information that is presented in greater detail elsewhere in this prospectus or incorporated by reference into this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including our consolidated financial statements and the related notes incorporated by reference in this prospectus and the information set forth under the sections entitled “Risk factors,” “Management’s discussion and analysis of financial condition and results of operations” and “Business” in this prospectus, before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, the terms “FOX,” the “Company” or “company,” “we,” “us,” and “our” in this prospectus refer to Fox Factory Holding Corp. and its subsidiaries, on a consolidated basis, and this “offering” refers to the offering contemplated in this prospectus.

Our company

We are a designer, manufacturer and marketer of high-performance suspension products used primarily on mountain bikes, side-by-side vehicles ("Side-by-Sides"), on-road vehicles with off-road capabilities, off-road vehicles and trucks, all-terrain vehicles ("ATVs"), snowmobiles, specialty vehicles and applications, and motorcycles. We believe our products offer innovative design, performance, durability and reliability. Through our products we enhance ride dynamics, which we define as the interplay between the rider, the vehicle and the terrain, by improving performance and control. Our brand is associated with high-performance and technologically advanced products, by which we generally mean products that provide users with improved control and a smoother ride while riding over rough terrain in varied environments. We believe that the performance of our products has been demonstrated by, and our brand benefits from, the success of professional athletes who use our products in elite competitive events, such as the Union Cycliste Internationale Mountain Bike World Cup and the X Games. We believe the exposure our products receive when used by successful professional athletes positively influences the purchasing habits of enthusiasts and other consumers seeking high-performance products. We believe that our strategic focus on the performance and racing segments in our markets influences many aspiring and enthusiast consumers who we believe seek to emulate the performance of professional and other elite athletes. We believe our products are generally sold at premium prices, which to us means manufacturer suggested retail sale prices that are generally in the upper quartile of their respective product categories.

We design our products for, and market our products to, some of the world’s leading original equipment manufacturers, or OEMs, in our markets, and to consumers through the aftermarket channel. Many of our OEM customers, including Giant, Scott, Specialized and Trek in mountain bikes and BRP, Ford and Polaris in powered vehicles, are among the market leaders in their respective product categories, and help shape, as well as respond to, consumer trends in their respective categories. We believe that OEMs often prominently display and incorporate our products to improve the marketability and consumer demand for their high-performance models, which reinforces our brand image. In addition, consumers select our products in the aftermarket channel where we market through a global network of dealers and distributors. We currently sell to more than 150 OEMs and distribute our products to more than 2,500 retail dealers and distributors worldwide. In 2013, 81% of our sales resulted from sales to OEM customers and 19% resulted from sales to dealers and distributors for resale in the aftermarket channel.

We have experienced strong sales and profit growth over the past several years. Our sales increased from approximately $121.5 million in 2009 to $272.7 million in 2013. Over the same period, our net income increased from approximately $5.0 million to $24.1 million. Our Adjusted EBITDA increased from approximately $30.7 million in 2011 to $49.6 million in 2013. See “Summary consolidated financial data-Non-GAAP financial measures” for the definition of Adjusted EBITDA and the reconciliation from net income to Adjusted EBITDA.

Market opportunity

We participate in the large global markets for mountain bikes and powered vehicles used by recreational and professional users. Today, our products for powered vehicles are used primarily on Side-by-Sides, on-road vehicles with off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, and motorcycles.

We focus on premium priced products within each of these categories, which we consider to be the high-end segment because of their higher retail sale prices, where we believe consumers have a preference for well-designed, performance-oriented equipment. We believe that suspension systems are critical to the performance of the mountain bikes and powered vehicles in the product categories in which we focus and that technical features, component performance, product design, durability, reliability and brand recognition strongly influence the purchasing decisions of consumers. Over the past decade, there have been significant technological advances in

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materials and features that have increased product functionality and performance, allowing high-end suspension products to be adapted for use in additional end-markets and in the mountain bike and powered vehicle categories.

We believe the high-end segments in which we participate are well positioned for growth due to several factors, including:


•	increasing average retail sales prices, which we believe are driven by differentiated and feature-rich products with advanced technologies;


•	continuing product cycle innovation, which we have observed often motivates consumers to upgrade and purchase new products for enhanced performance; and


•	increased sales opportunities for high-end mountain bikes and powered vehicles in international markets.

As vehicles in our end-markets evolve and grow more capable, suspension products and components have become, and we believe will continue to become, increasingly more important for improved performance and control. Additionally, we believe there are opportunities to continue to leverage our technical know-how in suspension products to provide solutions beyond our current end-markets.

Our competitive strengths

Broad offering of high-performance products across multiple consumer markets

Our suspension products enhance ride dynamics across multiple consumer markets. Through the use of adjustable suspension, position sensitive damping, multiple air spring technologies, lightweight and rigid materials, and other technologies and methods, our products improve the performance and control of the vehicles used by our consumers. We believe our reputation for high-performance products is reinforced by the successful finishes in world class competitive events by athletes incorporating our products in their vehicles.

Premium brand with strong consumer loyalty

We believe that we have developed a reputation for high-performance products and that we have established trademarks, such as FOX, and FOX RACING SHOX, as premium brands, as our high-performance suspension products are generally sold at premium prices. Our FOX logo is prominently displayed on our products used on mountain bikes and powered vehicles sold by our OEM customers, which helps further reinforce our brand image. We believe that our brand has achieved strong loyalty from our consumers. To support our brand, we introduce new products that we believe feature innovative technologies designed to improve vehicle performance and enhance our brand loyalty with consumers. For instance, according to a 2013 independent survey conducted by Bike Germany Magazine, a leading European mountain bike magazine, 79% of consumers surveyed who purchased a FOX suspension fork stated that they would buy a FOX suspension fork again, and in a 2013 Audience Survey by Vital MTB, a popular mountain bike website: (i) of the 38.8% of survey respondents that stated they would buy a mountain bike suspension fork within 12 months, 36.7% of these respondents, the highest percentage of all brands included, stated that they would buy a FOX suspension fork; and (ii) of the 20.6% of survey respondents that stated they would buy a rear mountain bike shock within 12 months, 39.6% of these respondents, the highest percentage of all brands included, stated that they would buy a FOX rear shock.

Track record of innovation and new product introductions

Innovation, including new product development, is a key component of our growth strategy. Due to our experience in suspension engineering and design in multiple markets and with a variety of vehicles, we are able to bring unique ride dynamics solutions to our customers, often developed for use in one market and ultimately deployed across multiple markets. For example, our success in the high-end ATV category led to the widespread adoption of our suspension technology in the Side-by-Side market, which was our second largest product category by sales in 2013. Our innovative product development and speed to market are supported by:


•	our racing culture, including on-site technical race support of professional athletes, which provides us with unique real-time insights as to the evolving ride dynamic needs of those participating in world-class events;


•	ongoing research and development through a team of full-time engineers and numerous other technicians and employees who spend at least part of their time testing and using our products and helping develop engineering-based solutions to enhance our product offerings;


•	feedback from professional athletes, race teams, enthusiasts and other consumers seeking to improve the performance and control of their vehicles through our products;

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•	strategic and collaborative relationships with OEM customers, which furthers our ability to extend technologies and applications across end-markets; and


•	our integrated manufacturing facilities and performance testing center, which allow us to quickly move from concept to product.

Over the last year we have developed multiple new products and generated more than 70% of our sales from products introduced by us during the last three years, such as the:


•	Podium RC3, which provides external adjustment that allows the shock to easily be tuned for different rider skill, terrain, and racing type without having to be disassembled;


•	Float X Evol, which allows the rider to tune the spring characteristics of the shock via an air pump without having to remove the shock;


•	ECS Shock, which has an external cooling system that significantly lowers shock temperatures, allowing powered vehicles to operate at higher speeds for extended periods without sacrificing driver control, particularly in extreme environments; and


•	Float iCD, which provides riders the ability to adjust modes for different skills, terrains and activity levels on mountain bikes, resulting in increased utilization of the modes and an overall more efficient ride dynamics experience.

Strategic brand for OEMs, dealers and distributors

Through our strategic relationships, we are often sought out by our OEM customers and work closely with them to develop and design new products and product enhancements. We believe our collaborative approach and product development processes strengthen our relationships with our OEM customers. We believe consumers value our branded suspension products when selecting high-performance mountain bikes and powered vehicles, and as a result, OEMs purchase and incorporate our products in their mountain bikes and powered vehicles in order to increase the sales of their premium priced products. In addition, we believe the inclusion of our products on high-end mountain bikes and powered vehicles reinforces our premium brand image which helps to drive our sales in the aftermarket channel where dealers and distributors sell our products to consumers.

Experienced management team

We have an experienced senior management team led by Larry L. Enterline, our Chief Executive Officer. Collectively, our eleven-member senior management team has an average tenure at FOX of approximately 9.6 years per person. In addition, many members of our management team and many of our employees are avid users of our products, which further extends their knowledge of, and expertise in, our products and end-markets. We are able to attract and retain highly trained and specialized employees who enhance our company culture and serve as strong brand advocates.

Our strategy

Our goal is to expand our leadership position as a designer, manufacturer and marketer of high-performance products designed to enhance ride dynamics. We intend to focus on the following key strategies in pursuit of this goal:

Continue to develop new and innovative products in current end-markets

We intend to continue to develop and introduce new and innovative products in our current end-markets to improve ride dynamics for our consumers. For example, our patented position-sensitive damping systems provide terrain optimized ride characteristics across many of our product lines. We believe that high-performance and control are important to a large portion of our consumer base, and that our frequent introduction of products with innovative and improved technologies increases both OEM and aftermarket demand as consumers seek out components for their vehicles that can deliver these characteristics. We also believe evolving market trends, such as changing mountain bike wheel sizes and increasing adoption rates of Side-by-Side vehicles, should increase demand for vehicles in our end-markets, which, in turn, should increase demand for our suspension products.

Leverage technology and brand to expand into new categories and end-markets

We believe that we have developed a reputation as a leader in ride dynamics, and that our reputation combined with our ability to improve the performance of vehicles by incorporating high-performance suspension products, results in us frequently being approached by OEM product development teams, athletes and others looking to improve the performance of their vehicles, including in end-markets in which we have not previously offered

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products. We believe that our ride dynamics technologies have applications in end-markets in which we do not currently participate in a meaningful way, and we intend to selectively develop products for and forge relationships with customers in additional markets. These markets may include military, recreational vehicles (RVs), on-road motorcycles, commercial trucks and “performance street” cars.

Opportunistically expand our ride dynamics platform through acquisitions

We intend to continue to expand and strengthen our position in the marketplace. For example, we have recently completed two acquisitions. In the fourth quarter of 2013, we acquired the business of Toxoholics GmbH, our third party Germany-based distributor and service center, for approximately $2.3 million. In the first quarter of 2014, we also acquired the business of Sport Truck USA, Inc., or Sport Truck, a full service distributor of aftermarket suspension solutions, for approximately $40.9 million plus any amounts that may be earned pursuant to an earn-out, as further described in footnote 2 in "Summary consolidated financial data" on page 9. Sport Truck designs, markets, and distributes lift kit solutions primarily through its brands, BDS Suspension and Zone Offroad Products. A lift kit solution is an aftermarket vehicle modification that lifts the vehicle to raise the ride height. Lift kits are commonly installed to allow for the installation of larger tires and new suspension systems. To facilitate these and similar transactions, we have created a business development group, which is responsible for identifying and assessing inorganic and organic potential growth opportunities of our ride dynamics platform. Specifically, our business development group: (i) identifies and assesses potential acquisition opportunities; (ii) aids the business in analyzing growth alternatives; and (iii) manages critical projects and programs as determined by senior management.

Increase our aftermarket penetration

We currently have a broad aftermarket distribution network of more than 2,500 retail dealers and distributors worldwide. We intend to further penetrate the aftermarket channel by selectively adding dealers and distributors in certain geographic markets, increasing our internal sales force and strategically expanding aftermarket-specific products and services to existing vehicle platforms.

Accelerate international growth

While a significant percentage of our current sales are to OEMs and dealers and distributors located outside the United States, we believe international expansion represents a significant opportunity for us and we intend to selectively increase infrastructure investments and focus on identified geographic regions. We believe that rising consumer discretionary income in a number of developing markets and increasing consumer preferences for premium, high-performance mountain bikes and powered vehicles, should contribute to increasing demand for our products. In addition, we believe increasing international viewership of racing and extreme sports and other outdoor events, such as the X Games, is contributing to growing international participation in activities in which our products are used. We intend to leverage our brand recognition to capitalize on these trends by increasing our sales to both OEMs and dealers and distributors globally, particularly in markets where we perceive significant opportunities. Our areas of greatest interest include Asia-Pacific (particularly China, South Korea and Australia) and South America (particularly Brazil, Argentina and Chile).

Improve operating and supply chain efficiencies

We intend to improve operating margins in the medium term by enhancing our design and production processes to increase efficiencies, reducing new product time to market and lowering production costs. Specifically, since we began the process of moving a majority of the manufacturing of our mountain bike products to Taiwan through May 31, 2014, we have manufactured approximately 1.2 million subassemblies and other components and approximately 38,000 completed forks at our new facility in Taiwan. We expect to complete the process of transitioning our mountain bike product manufacturing to our Taiwan facility in 2015. We believe this transition, once completed, will shorten production lead times to our mountain bike OEM customers, improve supply chain efficiencies and reduce manufacturing costs.

Risks related to our business

Our business is subject to numerous risks and uncertainties, including those highlighted in the section entitled “Risk factors,” which you should read carefully before making a decision to invest in our common stock. Some of these risks include:


•	we may not be able to continue to enhance existing products and develop and market new products that respond to consumer needs and preferences and achieve market acceptance;

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•	we face intense competition across all product lines and may be unable to effectively compete against our competitors, which would harm our business and operating results;


•	our suspension products, and the products into which they are incorporated, are discretionary purchases and may be adversely impacted by changes in the economy and economic conditions that impact consumer spending;


•	if we are unable to maintain our premium brand image, our business may suffer;


•	our dependence on the demand for high-end mountain bikes and their suspension components to maintain and foster sales;


•	our dependence upon the expansion of the market for powered vehicles that require high-performance suspension systems to continue our growth in this product category;


•	a disruption in our operations or manufacturing facilities, including any disruption in connection with the transition of a majority of the manufacturing of our mountain bike products to Taiwan, would adversely affect our business, financial condition and results of operations;


•	we depend on the continuing efforts of our senior management and skilled engineers, and our business may be severely disrupted and adversely impacted if we lose their services; and


•	we depend on a relatively small number of customers for a substantial portion of our sales.

Our history

Robert C. Fox, Jr. began developing suspension products in 1974 when, having participated in motocross racing, he sought to create a racing suspension shock that performed better than existing coil spring shocks. Working in a friend’s garage, Mr. Fox created the “Fox AirShox.” The product was successful, and went into production in 1975. The next year, in 1976, Fox AirShox was used by the rider who won the AMA 500cc National Motocross Championship.

Sales of Fox AirShox grew rapidly and, in 1978, our operating subsidiary, Fox Factory, Inc., was incorporated in California. From 1978 to 1983, FOX suspension users won numerous major races including 500cc Grand Prix races (motocross), Baja 1000 races (off-road), AMA SuperBike races (motorcycle road racing), and the Indianapolis 500 race (auto racing), generating greater market awareness of the FOX brand among enthusiasts.

As FOX grew, we applied many of the same core suspension technologies developed for motocross racing to other categories. For example, in 1987 we started selling high-performance suspension products for snowmobiles. By 1991, we began supplying the mountain bike industry with rear shocks and we entered the ATV and other off-road vehicle markets in the mid-1990s. Starting in 2001, we began offering front fork suspension products for mountain bikes.

Fox Factory Holding Corp., the registrant of this offering, is the holding company of Fox Factory, Inc. Fox Factory Holding Corp. was incorporated in Delaware on December 28, 2007 by Compass Group Diversified Holdings LLC, or our Sponsor. Our Sponsor purchased a controlling interest in us on January 4, 2008.

In August 2013, we completed an initial public offering, or IPO, after which our common stock has been listed on the NASDAQ Global Select Market under the symbol “FOXF.” As of May 31, 2014, our Sponsor beneficially owned approximately 53.4% of our outstanding common stock.

For clarification, we are not affiliated with Fox Head, Inc., or Fox Head, an action sports apparel company, although we have entered into an agreement with Fox Head clarifying the parties’ respective use of ”Fox” tradenames and service marks.

Corporate information

Our principal executive offices are located at 915 Disc Drive, Scotts Valley, CA 95066, and our telephone number is (831) 274-6500. Our website address is www.ridefox.com. In addition, we maintain a Facebook page at www.facebook.com/fox, a YouTube channel at www.youtube.com/foxracingshox1, a Vimeo page at www.vimeo.com/foxracingshox and a Twitter feed at www.twitter.com/foxracingshox. Information contained on, or that can be accessed through, our website, Facebook page, YouTube channel, Vimeo page or Twitter feed does not constitute part of this prospectus and inclusions of our website address, Facebook page address, YouTube channel address, Vimeo page address and Twitter feed address in this prospectus are inactive textual references only.

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We have a number of registered marks, including, without limitation, FOX, FOX RACING SHOX, and REDEFINE YOUR LIMITS in several jurisdictions, including the United States, and we have also applied to register a number of other marks in various jurisdictions. This prospectus includes trademarks and trade names of other companies. All trademarks and trade names appearing in this prospectus are the property of their respective holders. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or any endorsement or sponsorship of us by, these other companies.

Emerging growth company status

We are an “emerging growth company,” as that term is defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we qualify as an emerging growth company, we have taken, and may continue to take, advantage of certain exemptions from various reporting requirements that are applicable to other public companies that do not qualify as emerging growth companies, including, without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations relating to executive compensation and exemptions from the requirements of holding advisory “say-on-pay,” “say-when-on-pay” and “golden parachute” executive compensation votes.

Under the JOBS Act, we will remain an emerging growth company until the earliest of:


•	the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;


•	the last day of the fiscal year following the fifth anniversary of our IPO in August 2013;


•	the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; or


•	the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the Exchange Act (i.e., the first day of the fiscal year after we have (i) more than $700 million in outstanding common equity held by our non-affiliates, measured each year on the last day of our second fiscal quarter, and (ii) been public for at least 12 months).

The JOBS Act also provides that an emerging growth company can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. However, we have chosen to “opt out” of such extended transition period, and, as a result, we have been complying, and will continue to comply, with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

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The offering



	Common stock offered by the selling stockholders		6,500,000 shares

	Common stock to be outstanding after this offering		36,657,826 shares. This offering will have no effect on the number of share of our common stock outstanding

	Underwriters option to purchase additional shares		The underwriters have an option, exercisable for 30 days after the date of this prospectus, to purchase up to an additional 975,000 shares from the selling stockholders.

	Use of proceeds		We will not receive any proceeds from the sale of shares by the selling stockholders.

	Concentration of ownership		Upon completion of this offering, our executive officers and directors, and their affiliates, will beneficially own, in the aggregate, approximately 50.7% of our outstanding shares of common stock, and our Sponsor will own approximately 39.5% of our outstanding shares of common stock.

	Dividend policy		Currently, we do not anticipate paying cash dividends.

	NASDAQ Global Select Market symbol		“FOXF”

The number of shares of common stock that will be outstanding after this offering is based on 36,657,826 shares outstanding as of May 31, 2014, and excludes:

•2,129,986 shares of common stock issuable upon the exercise of options to purchase common stock that were outstanding as of May 31, 2014, with a weighted average exercise price of $4.98 per share; and

•3,650,289 shares of common stock issuable under our 2013 Omnibus Plan, which include (i) 3,631,709 shares initially reserved for issuance under our 2013 Omnibus Plan, and (ii) an additional 18,580 shares that may be granted under our 2013 Omnibus Plan as a result of the forfeiture of options previously granted under our 2008 Stock Option Plan and 2008 Non-Statutory Stock Option Plan. Of these shares of common stock, 895,019 shares were issuable upon the vesting of restricted stock units granted to our directors, officers and other employees as of May 31, 2014.

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Summary consolidated financial data

The following table sets forth our summary consolidated financial data as of the dates and for the periods indicated. We have derived the summary statements of income data for the years ended December 31, 2011, 2012 and 2013 from our audited consolidated financial statements included in our 2013 Form 10-K, which is incorporated by reference in this prospectus. The summary statements of income for the three months ended March 31, 2013 and 2014, and the selected consolidated balance sheet data as of March 31, 2014 are derived from our unaudited consolidated financial statements included in our 2014 first quarter Form 10-Q, which is incorporated by reference into this prospectus. The unaudited consolidated financial statements were prepared on a basis consistent with our audited consolidated financial statements and include, in the opinion of management, all adjustments necessary for the fair presentation of the financial information set forth in those statements.

The historical results presented below are not necessarily indicative of the results to be expected for any future period, and the results for any interim period may not necessarily be indicative of the results for the full year. The following summaries of our consolidated financial data for the periods presented should be read in conjunction with “Risk factors,” “Selected consolidated financial data,” “Capitalization” and “Management’s discussion and analysis of financial condition and results of operations,” which are included elsewhere in this prospectus, and our consolidated financial statements and the related notes included in our 2013 Form 10-K and 2014 first quarter Form 10-Q, which are incorporated by reference in this prospectus.



	For the years ended December 31,							For the three months ended March 31,

(in thousands, except shares and per share data)	2011		2012		2013			2013			2014
								(unaudited)

Sales	$	197,739	$	235,869	$	272,746		$	54,878		$	56,108
Cost of sales(1)	140,849		173,040		192,617			39,163			39,091
Gross profit	56,890		62,829		80,129			15,715			17,017
Operating expenses:
Sales and marketing(1)	11,748		12,570		14,153			3,284			3,844
Research and development(1)	9,750		9,727		10,409			2,355			3,135
General and administrative(1)(2)	7,588		9,063		11,408			2,673			3,930
Amortization of purchased intangibles	5,217		5,315		5,378			1,341			1,361
Total operating expenses	34,303		36,675		41,348			9,653			12,270
Income from operations	22,587		26,154		38,781			6,062			4,747
Other expense, net:
Interest expense	1,982		3,486		4,125			957			110
Other expense (income), net	13		277		(12		)	(34		)	(32		)
Total other expense, net	1,995		3,763		4,113			923			78
Income before income taxes	20,592		22,391		34,668			5,139			4,669
Provision for income taxes	7,054		8,181		10,566			1,590			1,728
Net income	$	13,538	$	14,210	$	24,102		$	3,549		$	2,941
Earnings per share:
Basic	$	0.45	$	0.44	$	0.70		$	0.11		$	0.08
Diluted	$	0.42	$	0.44	$	0.68		$	0.10		$	0.08

Weighted average common shares used to compute net income per share:
Basic	30,030		32,059		34,571			33,460			36,419
Diluted	32,295		32,515		35,705			34,149			37,566
Dividends per share	$	—	$	2.00	$	—		$	—		$	—

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(1)	Includes stock-based compensation (excluding tax effect) as follows:

		For the years ended December 31,						For the three months ended March 31,

	(in thousands)	2011		2012		2013		2013		2014
								(unaudited)

	Cost of sales	$	—	$	—	$	23	$	—	$	8
	Sales and marketing	78		160		158		33		35
	Research and development	12		29		53		17		12
	General and administrative	940		1,959		2,266		652		766
	Total	$	1,030	$	2,148	$	2,500	$	702	$	821


(2)	As of March 31, 2014, our contingent consideration liability arising from our acquisition of the business of Sport Truck, which is associated with the potential earnout payments based on achievement of EBITDA (as defined in the acquisition agreement) targets of the acquired business, was approximately $19.0 million. Under the acquisition agreement, if the EBITDA of the acquired business for the fiscal years ending December 31, 2014, 2015 and 2016 exceeds approximately $8.4 million, $10.8 million and $13.5 million, respectively, we will be obligated to make earnout payments up to a maximum amount of approximately $8.1 million, $9.9 million and $11.3 million for each respective year, with an aggregate of approximately $29.3 million. The contingent consideration liability was estimated by applying a Black-Scholes model to our financial projection. If, in the future, management's estimation techniques indicate an increase or decrease of the earnout liability, or if lower or higher EBITDA for any period is actually achieved, we will need to adjust the contingent consideration liability. Such adjustment will be reflected in the general and administrative expenses.

The following table presents our summary unaudited consolidated balance sheet data as of March 31, 2014.



As of March 31, 2014 (in thousands)

Consolidated balance sheet data:
Cash and cash equivalents	$	2,002
Inventory	58,387
Working capital	52,736
Property and equipment, net	18,135
Total assets	223,775
Total debt, including current portion	50,000
Total stockholders’ equity	$	98,277

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Non-GAAP financial measures

Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. We define Adjusted EBITDA as net income adjusted for interest expense, other (income) expense, net, provision for income taxes, depreciation and amortization, stock-based compensation, acquisition related expenses and the management fee payable to an affiliate of our Sponsor (which fee was discontinued upon completion of our IPO). Below, we have provided a reconciliation of Adjusted EBITDA to our net income, the most directly comparable financial measure calculated and presented in accordance with GAAP. Adjusted EBITDA should not be considered as an alternative to net income or any other measure of financial performance calculated and presented in accordance with GAAP. We include Adjusted EBITDA in this prospectus because we believe it allows investors to understand and evaluate our core operating performance and trends. In particular, the exclusion of certain expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business.

Our use of Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are:


•	Adjusted EBITDA does not include the impact of equity-based compensation;


•	although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect capital expenditure requirements for such replacements;


•	Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;


•	Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;


•	Adjusted EBITDA does not include other income or expense such as gain or loss on the disposal of fixed assets, foreign currency transaction gain or loss and other miscellaneous items;


•	Adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to us;


•	Adjusted EBITDA does not reflect costs incurred in connection with our business acquisitions;


•	Adjusted EBITDA does not reflect the cash fees which we paid to our Sponsor and;


•	other companies, including companies in our industry, may calculate Adjusted EBITDA measures differently, which reduces its usefulness as a comparative measure.

In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider Adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP results.

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The following table presents a reconciliation of Adjusted EBITDA to our net income, the most comparable GAAP measure, for each of the periods indicated:




	For the years ended December 31,							For the three months ended March 31,

(in thousands)	2011		2012		2013			2013			2014

Reconciliation of net income to Adjusted EBITDA
Net income	$	13,538	$	14,210	$	24,102		$	3,549		$	2,941
Interest expense	1,982		3,486		4,125			957			110
Other (income) expense, net(1)	13		277		(12		)	(34		)	(32		)
Provision for income taxes	7,054		8,181		10,566			1,590			1,728
Depreciation and amortization	6,598		7,204		7,759			1,885			2,038
Stock-based compensation(2)	1,030		2,148		2,500			702			821
Acquisition related expenses (3)	—		—		297			—			1,025
Management fee paid(4)	500		500		308			125			—
Adjusted EBITDA	$	30,715	$	36,006	$	49,645		$	8,774		$	8,631



(1)	Other (income) expense, net includes gain or loss on the disposal of fixed assets, foreign currency transaction gain or loss, and other miscellaneous items.



(2)	Represents non-cash, stock-based compensation (before tax effect).



(3)	Represents costs incurred in connection with the acquisition of certain assets of Toxoholics GmbH and Sport Truck.



(4)	Represents management fees paid to an affiliate of our Sponsor pursuant to a management services agreement that terminated in August 2013 upon the consummation of our IPO. We have not paid any management fees since the termination of the management services agreement and the consummation of our IPO.

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Risk factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information contained or incorporated by reference in this prospectus, before making a decision to invest in our common stock. If any of the risks actually occur, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose part or all of your investment.

Risks related to our business

If we are unable to continue to enhance existing products and develop and market new products that respond to consumer needs and preferences and achieve market acceptance, we may experience a decrease in demand for our products, and our business and financial results could suffer.

Our growth strategy involves the continuous development of innovative high-performance products. For instance, during 2013, we generated more than 70% of our sales from products that we introduced during the last three years. We may not be able to compete as effectively with our competitors, and ultimately satisfy the needs and preferences of our customers and the end users of our products, unless we can continue to enhance existing products and develop new, innovative products in the global markets in which we compete. In addition, we must continuously compete not only for end users who purchase our products through the dealers and distributors who are our customers, but also for the OEMs, which incorporate our products into their mountain bikes and powered vehicles. These OEMs regularly evaluate our products against those of our competitors to determine if they are allowing the OEMs to achieve higher sales and market share on a cost-effective basis. Should one or more of our OEM customers determine that they could achieve overall better financial results by incorporating a competitor’s new or existing product, they would likely do so, which could harm our business, financial condition or results of operations.

Product development requires significant financial, technological and other resources. While we expended approximately $9.8 million, $9.7 million and $10.4 million for our research and development efforts in 2011, 2012 and 2013, respectively, there can be no assurance that this level of investment in research and development will be sufficient in the future to maintain our competitive advantage in product innovation, which could cause our business, financial condition or results of operations to suffer.

Product improvements and new product introductions require significant planning, design, development and testing at the technological, product and manufacturing process levels, and we may experience unanticipated delays in our introduction of product improvements or new products. Our competitors’ new products may beat our products to market, be more effective and/or less expensive than our products, obtain better market acceptance or render our products obsolete. Any new products that we develop may not receive market acceptance or otherwise generate any meaningful sales or profits for us relative to our expectations. In addition, one of our competitors could develop an unforeseen and entirely new product or technology that renders our products less desirable or obsolete, which could negatively affect our business, financial condition or results of operations.

We face intense competition in all product lines, including from some competitors that may have greater financial and marketing resources. Failure to compete effectively against competitors would negatively impact our business and operating results.

The suspension industry is highly competitive. We compete with a number of other manufacturers that produce and sell suspension products to OEMs and aftermarket dealers and distributors, including OEMs that produce their own line of suspension products for their own use. Our continued success depends on our ability to continue to compete effectively against our competitors, some of which have significantly greater financial, marketing and other resources than we have. Also, several of our competitors offer broader product lines to OEMs, which they may sell in connection with suspension products as part of a package offering. In the future, our competitors may be able to maintain and grow brand strength and market share more effectively or quickly than we do by anticipating the course of market developments more accurately than we do, developing products that are superior to our products, creating manufacturing or distribution capabilities that are superior to ours, producing similar products at a lower cost than we can or adapting more quickly than we do to new technologies or evolving regulatory, industry or customer requirements, among other possibilities. In addition, we may encounter increased competition if our current competitors broaden their product offerings by beginning to produce additional types of suspension products or through competitor consolidations. We could also face competition from well-capitalized entrants into the high-

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performance suspension product market, as well as aggressive pricing tactics by other manufacturers trying to gain market share. As a result, our products may not be able to compete successfully with our competitors’ products, which could negatively affect our business, financial condition or results of operations.

Our business is sensitive to economic conditions that impact consumer spending. Our suspension products, and the mountain bikes and powered vehicles into which they are incorporated, are discretionary purchases and may be adversely impacted by changes in the economy.

Our business depends substantially on global economic and market conditions. In particular, we believe that currently a significant majority of the end users of our products live in the United States and countries in Europe. These areas are either in the process of recovering from recession or, in some cases, are still struggling with recession, disruption in banking and/or financial systems, economic weakness and uncertainty. In addition, our products are recreational in nature and are generally discretionary purchases by consumers. Consumers are usually more willing to make discretionary purchases during periods of favorable general economic conditions and high consumer confidence. Discretionary spending may also be affected by many other factors, including interest rates, the availability of consumer credit, taxes and consumer confidence in future economic conditions. During periods of unfavorable economic conditions, or periods when other negative market factors exist, consumer discretionary spending is typically reduced, which in turn could reduce our product sales and have a negative effect on our business, financial condition or results of operations.

There could also be a number of secondary effects resulting from an economic downturn, such as insolvency of our suppliers resulting in product delays, an inability of our OEM and distributor and dealer customers to obtain credit to finance purchases of our products, customers delaying payment to us for the purchase of our products due to financial hardship or an increase in bad debt expense. Any of these effects could negatively affect our business, financial condition or results of operations.

If we are unable to maintain our premium brand image, our business may suffer.

Our products are selected by both OEMs and dealers and distributors in part because of the premium brand reputation we hold with them and our end users. Therefore, our success depends on our ability to maintain and build our brand image. We have focused on building our brand through producing products that we believe are innovative, high in performance and highly reliable. In addition, our brand benefits from our strong relationships with our OEM customers and dealers and distributors and through marketing programs aimed at mountain bike and powered vehicle enthusiasts in various media and other channels. For example, we sponsor a number of professional athletes and professional race teams. In order to continue to enhance our brand image, we will need to maintain our position in the suspension products industry and continue to provide high quality products and services. Also, we will need to continue to invest in sponsorships, marketing and public relations.

There can be no assurance, however, that we will be able to maintain or enhance the strength of our brand in the future. Our brand could be adversely impacted by, among other things:


•	failure to develop new products that are innovative, high-performance and reliable;


•	internal product quality control issues;


•	product quality issues on the mountain bikes and powered vehicles on which our products are installed;


•	product recalls;


•	high profile component failures (such as a component failure during a race on a mountain bike ridden by an athlete that we sponsor);


•	negative publicity regarding our sponsored athletes;


•	high profile injury or death to one of our sponsored athletes;


•	inconsistent uses of our brand and our other intellectual property assets, as well as failure to protect our intellectual property; and


•	changes in consumer trends and perceptions.

Any adverse impact on our brand could in turn negatively affect our business, financial condition or results of operations.

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A significant portion of our sales are highly dependent on the demand for high-end mountain bikes and their suspension components and a material decline in the demand for these bikes or their suspension components could have a material adverse effect on our business or results of operations.

During 2013, approximately 66% of our sales were generated from the sale of suspension products for high-end mountain bikes. Part of our success has been attributable to the growth in the high-end mountain bike industry, including increases in average retail sales prices, as better-performing product designs and technologies have been incorporated into these products. If the popularity of high-end or premium-priced mountain bikes does not increase or declines, the number of mountain bike enthusiasts seeking such mountain bikes or premium priced suspension products for their mountain bikes does not increase or declines, or the average price point of these bikes declines, we may fail to achieve future growth or our sales could decrease, and our business, financial condition or results of operations could be negatively affected. In addition, if current mountain bike enthusiasts stop purchasing our products due to changes in preferences, we may fail to achieve future growth or our sales could be decreased, and our business, financial condition or results of operations could be negatively affected.

Our growth in the powered vehicle category is dependent upon our continued ability to expand our product sales into powered vehicles that require high-performance suspension and the continued expansion of the market for these powered vehicles.

Our growth in the powered vehicle category is in part attributable to the expansion of the market for powered vehicles that require high-performance suspension products. Such market growth includes the creation of new classes of vehicles that need our products, such as Side-by-Sides, and our ability to create products for these vehicles. In the event these markets stopped expanding or contracted, or we are unsuccessful in creating new products for these markets or other competitors successfully enter into these markets, we may fail to achieve future growth or our sales could decrease, and our business, financial condition or results of operations could be negatively affected.

A disruption in the operations of our manufacturing facilities, including any disruption in connection with moving a majority of the manufacturing of our mountain bike products to our new facility in Taiwan, could have a negative effect on our business, financial condition or results of operations.

During 2013, the sale of mountain bike suspension products accounted for approximately 66% of our sales. We are in the process of transitioning the majority of our mountain bike products manufacturing operations to our new facility in Taichung, Taiwan. We contemplate that this transition will continue through 2015, at which time we anticipate that the majority of the manufacturing of our mountain bike products will be completed in Taiwan. During our transition process, we will incur some duplication of facilities, equipment and personnel, the amount of which could vary materially from our projections. Also, the transition process could cause manufacturing problems and give rise to execution risks, including disruptions to employees, negative impact on employee morale and retention, delays in recognizing efficiencies or increased costs of manufacturing, and adverse impacts on our product quality and delivery times. In addition, we could encounter unforeseen difficulties resulting from the distance and time zone differences between our main operations in California and our new Taiwan manufacturing facility. Should any of these problems occur, our business, financial condition or results of operations could be negatively affected.

Equipment failures, delays in deliveries or catastrophic loss at any of our facilities could lead to production or service disruptions, curtailments or shutdowns. In the event of a stoppage in production or a slowdown in production due to high employee turnover or a labor dispute at any of our facilities, even if only temporary, or if we experience delays as a result of events that are beyond our control, delivery times to our customers could be severely affected. If there was a manufacturing disruption in any of our manufacturing facilities, we might be unable to meet product delivery requirements and our business, financial condition or results of operations could be negatively affected, even if the disruption was covered in whole or in part by our business interruption insurance. Any significant delay in deliveries to our customers could lead to increased returns or cancellations, expose us to damage claims from our customers or damage our brand and, in turn, negatively affect our business, financial condition or results of operations.

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Our business depends substantially on the continuing efforts of our senior management, and our business may be severely disrupted if we lose their services.

We are heavily dependent upon the contributions, talent and leadership of our senior management team, particularly our Chief Executive Officer, Larry L. Enterline. We do not have a “key person” life insurance policy on Mr. Enterline or any other key employees. We believe that the top eleven members of our senior management team are key to establishing our focus and executing our corporate strategies as they have extensive knowledge of our systems and processes. Given our senior management team’s knowledge of the suspension products industry and the limited number of direct competitors in the industry, we believe that it could be difficult to find replacements should any of the members of our senior management team leave. Our inability to find suitable replacements for any of the members of our senior management team could negatively affect our business, financial condition or results of operations.

We depend on skilled engineers to develop and create our products, and the failure to attract and retain such individuals could adversely affect our business.

We rely on skilled and well-trained engineers for the design and production of our products, as well as in our research and development functions. Competition for such individuals is intense, particularly in Silicon Valley near where our headquarters are located. Our inability to attract or retain qualified employees in our design, production or research and development functions or elsewhere in our company could result in diminished quality of our products and delinquent production schedules, impede our ability to develop new products and harm our business, financial condition or results of operations.

We may not be able to sustain our past growth or successfully implement our growth strategy, which may have a negative effect on our business, financial condition or results of operations.

We grew our sales from approximately $197.7 million in 2011 to approximately $272.7 million in 2013. This growth rate may be unsustainable. Our future growth will depend upon various factors, including the strength of our brand image, our ability to continue to produce innovative suspension products, consumer acceptance of our products, competitive conditions in the marketplace, the growth in emerging markets for products requiring high-end suspension products and, in general, the continued growth of the high-end mountain bike and powered vehicle markets into which we sell our products. Our beliefs regarding the future growth of markets for high-end suspension products are based largely on qualitative judgments and limited sources and may not be reliable. If we are unable to sustain our past growth or successfully implement our growth strategy, our business, financial condition or results of operations could be negatively affected.

The professional athletes and race teams who use our products are an important aspect of our brand image. The loss of the support of professional athletes for our products or the inability to attract new professional athletes may harm our business.

If our products are not used by current or future professional athletes and race teams, our brand could lose value and our sales could decline. While our sponsorship agreements typically restrict our sponsored athletes and race teams from promoting, endorsing or using competitors’ products that compete directly within our product categories during the term of the sponsorship agreements, we do not typically have long-term contracts with any of the athletes or race teams whom we sponsor.

If we are unable to maintain our current relationships with these professional athletes and race teams, if these professional athletes and race teams are no longer popular, if our sponsored athletes and race teams fail to have success or if we are unable to continue to attract the endorsement of new professional athletes and race teams in the future, the value of our brand and our sales could decline.

We depend on our relationships with dealers and distributors and their ability to sell and service our products. Any disruption in these relationships could harm our sales.

We sell our aftermarket products to dealers and distributors, and we depend on their willingness and ability to market and sell our products to consumers and provide customer and product service as needed. We also rely on our dealers and distributors to be knowledgeable about our products and their features. If we are not able to educate our dealers and distributors so that they may effectively sell our products as part of a positive buying experience, or if they fail to implement effective retail sales initiatives, focus selling efforts on our competitors’

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products, reduce the quantity of our products that they sell or reduce their operations due to financial difficulties or otherwise, our brand and business could suffer.

We do not control our dealers or distributors and many of our contracts allow these entities to offer our competitors’ products. Our competitors may incentivize our dealers and distributors to favor their products. In addition, we do not have long-term contracts with a majority of our dealers and distributors, and our dealers and distributors are not obligated to purchase specified amounts of our products. In fact, the majority of our dealers and distributors buy from us on a purchase order basis. Consequently, with little or no notice, many of these dealers and distributors may terminate their relationships with us or materially reduce their purchases of our products. If we were to lose one or more of our dealers or distributors, we would need to obtain a new dealer or distributor to cover the particular location or product line, which may not be possible on favorable terms or at all. Alternatively, we could use our own sales force to replace such a dealer or distributor, but expanding our sales force into new locations takes a significant amount of time and resources and may not be successful. Further, many of our international distribution contracts contain exclusivity arrangements, which may prevent us from replacing or supplementing our current distributors under certain circumstances.

We are a supplier in the high-end mountain bike and powered vehicles markets, and our business is dependent in large part on the orders we receive from our OEM customers and from their success.

As a supplier to OEM customers, we are dependent in large part on the success of the business of our OEM customers. Model year changes by our OEM customers may adversely impact our sales or cause our sales to vary from quarter to quarter. In addition, losses in market share individually or a decline in the overall market of our OEM customers or the discontinuance by our OEM customers of their products which incorporate our products could negatively impact our business, financial condition or results of operations. For example, if our mountain bike producing OEM customers reduce production of their high-end mountain bikes, their orders to us for our products would in turn be reduced, which could negatively affect our business, financial condition or results of operations.

A relatively small number of customers account for a substantial portion of our sales. The loss of all or a substantial portion of our sales to any of these customers, whether through the temporary or permanent discontinuation of their products which incorporate our products or otherwise, or the loss of market share by these customers could have a material adverse impact on us and our results of operations.

Sales attributable to our five largest OEM customers, which can vary from year to year, collectively accounted for approximately 39%, 40% and 42% of our sales in 2011, 2012 and 2013, respectively. The loss of all or a substantial portion of our sales to any of these OEM customers, whether through the temporary or permanent discontinuation of their products which incorporate our products or otherwise, or the loss of market share by these customers could have a material adverse impact on our business, financial condition or results of operations. For example, our fourth largest OEM customer based upon our sales in 2013 has notified us that it will temporarily suspend purchases of our products in the second half of 2014 due to a planned changeover in its product models. While we expect that an updated model incorporating our suspension products will eventually be re-launched there is no assurance when, or if, that will occur. A longer than anticipated loss of sales to this customer or any similar issues with our other OEM customers could negatively impact our business and results of operations.

Although we refer to the branded mountain bike OEMs that use our products throughout this document as “our customers,” “our OEM customers” or “our mountain bike OEM customers,” branded mountain bike OEMs often use contract manufacturers to manufacture and assemble their bikes. As a result, even though we typically negotiate price and volume requirements directly with our mountain bike OEM customers, it is the contract manufacturers that frequently place the purchase orders with us and are responsible for paying us (rather than the branded mountain bike OEMs). Giant is an OEM and contract manufacturer used by certain of our mountain bike OEM customers. Sales to Giant accounted for approximately 12%, 13% and 17% of our sales in 2011, 2012 and 2013, respectively. In the event Giant were to experience manufacturing or other problems, or were to fail to pay us, it could have a material adverse impact on our business, financial condition or results of operations.

Currency exchange rate fluctuations could result in decreased gross margins.

Foreign currency fluctuations could in the future have an adverse effect on our business, financial condition or results of operations. We sell our products inside and outside of the United States in U.S. Dollars. As the majority of our expenses are also in U.S. Dollars, we are somewhat insulated from currency fluctuations. However, some of the OEMs purchasing products from us sell their products in Europe and other foreign markets using the Euro and

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other foreign currencies. As a result, as the U.S. Dollar appreciates against these foreign currencies, our products will become relatively more expensive for these OEMs. Accordingly, competitive products that our OEM customers can purchase in other currencies may become more attractive and we could lose sales as these OEMs seek to replace our products with cheaper alternatives. In addition, should the U.S. Dollar depreciate significantly, this could have the effect of decreasing our gross margins and adversely impact our business, financial condition or results of operations. Furthermore, as we transfer a majority of our manufacturing operations for our mountain bike products to our new facility in Taiwan, we anticipate that a growing percentage of our expenses will be denominated in the New Taiwan Dollar. Should the New Taiwan Dollar appreciate against the U.S. Dollar, this could have the effect of decreasing our gross margins.

Our international operations are exposed to risks associated with conducting business globally.

As a result of our international presence, we are exposed to increased risks inherent in conducting business outside of the United States. In addition to foreign currency risks, these risks include:


•	increased difficulty in protecting our intellectual property rights and trade secrets;


•	changes in tax laws and the interpretation of those laws;


•	exposure to local economic conditions;


•	unexpected government action or changes in legal or regulatory requirements;


•	geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war and other political uncertainty;


•	changes in tariffs, quotas, trade barriers and other similar restrictions on sales;


•	the effects of any anti-American sentiments on our brands or sales of our products;


•	increased difficulty in ensuring compliance by employees, agents and contractors with our policies as well as with the laws of multiple jurisdictions, including but not limited to the U.S. Foreign Corrupt Practices Act, local international environmental, health and safety laws, and increasingly complex regulations relating to the conduct of international commerce;


•	increased difficulty in controlling and monitoring foreign operations from the United States, including increased difficulty in identifying and recruiting qualified personnel for our foreign operations; and


•	increased difficulty in staffing and managing foreign operations or international sales.

An adverse change in any of these conditions could have a negative effect upon our business, financial condition or results of operations.

Our sales could be adversely impacted by the disruption or cessation of sales by other bike component manufacturers or if other mountain bike component manufacturers enter into the suspension market.

Most of the mountain bikes incorporating our suspension products also utilize products and components manufactured by other mountain bike component manufacturers. If such component manufacturers were to cease selling their products and components on a stand-alone basis, their sales are disrupted, or their competitive market position or reputation is diminished, customers could migrate to competitors that sell both suspension and other complementary mountain bike products which we do not sell. Moreover, such mountain bike component manufacturers could begin manufacturing mountain bike suspension products or bundle their bike components with suspension products manufactured by competitors. If any of the foregoing were to occur, our sales could decrease and our business, financial condition or results of operations could suffer.

We have been and may become subject to intellectual property disputes that could cause us to incur significant costs or pay significant damages or that could prohibit us from selling our products.

As we develop new products or attempt to utilize our brands in connection with new products, we seek to avoid infringing the valid patents and other intellectual property rights of our competitors. However, from time to time, third parties have alleged, or may allege in the future, that our products and/or trademarks infringe upon their proprietary rights. We will evaluate any such claims and, where appropriate, may obtain or seek to obtain licenses or other business arrangements. To date, there have been no significant interruptions in our business as a result of any claims of infringement, and we do not hold patent infringement insurance. Any claim, regardless of its merit, could be expensive, time consuming to defend and distract management from our business. Moreover, if our products or brands are found to infringe third-party intellectual property rights, we may be unable to obtain a license to use such technology or associated intellectual property rights on acceptable terms. A court determination that our brands, products or manufacturing processes infringe the intellectual property rights of others could result in significant

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liability and/or require us to make material changes to our products and/or manufacturing processes or preclude our ability to use certain brands. In most circumstances, we are not indemnified for our use of a licensor’s intellectual property, if such intellectual property is found to be infringing. Any of the foregoing results could cause us to, and we could incur substantial costs to, redesign our products or defend legal actions, and such costs could negatively affect our business, financial condition or results of operations.

If we are unable to enforce our intellectual property rights, our reputation and sales could be adversely affected.

Intellectual property is an important component of our business. As of June 5, 2014, we had 50 patents and had approximately 94 patents pending on file in the U.S. and various foreign patent offices. Additionally, we have registered or have applied for trademarks and service marks with the United States Patent and Trademark Office and a number of foreign countries, including the marks FOX, FOX RACING SHOX, and REDEFINE YOUR LIMITS, to be utilized with certain goods and services. When appropriate, we may from time to time assert our rights against those who infringe on our patents, trademarks, trade dress, or other intellectual property. We may not, however, be successful in enforcing our patents or asserting trademark, trade name or trade dress protection with respect to our brand names and our product designs, and third parties may seek to oppose or challenge our patents or trademark registrations. Further, these legal efforts may not be successful in reducing sales of suspension products by those infringing. In addition, our pending patent applications may not result in the issuance of patents, and even issued patents may be contested, circumvented or invalidated and may not provide us with proprietary protection or competitive advantages. If our efforts to develop and enforce our intellectual property are unsuccessful, or if a third party misappropriates our rights, this may adversely affect our business, financial condition or results of operations. Additionally, intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the United States, and it may be more difficult for us to successfully challenge the use of our proprietary rights by other parties in these countries. Furthermore, other competitors may be able to successfully produce products which imitate certain of our products without infringing upon any of our patents, trademarks or trade dress. The failure to prevent or limit infringements and imitations, could have a permanent negative impact on the pricing of our products or reduce our product sales and product margins, even if we are ultimately successful in limiting the distribution of a product that infringes our rights, which in turn may affect our business, financial condition or results of operations.

Although we enter into non-disclosure agreements with employees, OEMs, distributors and others to protect our confidential information and trade secrets, we may be unable to prevent such parties from breaching these agreements with us and using our intellectual property in an unauthorized manner. If our efforts to protect our intellectual property are unsuccessful, or if a third party misappropriates our rights this may adversely affect our business. Defending our intellectual property rights can be very expensive and time consuming, and there is no assurance that we will be successful.

If we inaccurately forecast demand for our products, we may manufacture insufficient or excess quantities or our manufacturing costs could increase, which could adversely affect our business.

We plan our manufacturing capacity based upon the forecasted demand for our products. In the OEM channel, our forecasts are based in large part on the number of our product specifications for new mountain bikes and powered vehicles and on projections from our OEM customers. In the aftermarket channel, our forecasts are based partially on discussions with our dealers and distributors as well as our own assessment of markets. If we incorrectly forecast demand we may incur capacity issues in our manufacturing plant and supply chain, increased material costs, increased freight costs and additional overtime, all of which in turn adversely impact our cost of sales and our gross margin. For example, due to increased demand for our products beyond what was forecasted, our 2012 production exceeded our budgeted production, which resulted in increased expedited freight costs. The current continuing economic weakness and uncertainty in the United States, Europe and other countries has made, and may continue to make, accurate forecasting particularly challenging.

In the future, if actual demand for our products exceeds forecasted demand, the margins on our incremental sales in excess of anticipated sales may be lower due to temporary higher costs, which could result in a decrease in our overall margins. While we generally manufacture our products upon receipt of customer orders, if actual demand is less than the forecasted demand for our products and we have already manufactured the products or committed to purchase materials in support of forecasted demand, we could be forced to hold excess inventories. In short, either excess or insufficient production due to inaccurate forecasting could have a negative effect on our business, financial condition or results of operations.

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Product recalls, and significant product repair and/or replacement due to product warranty costs and claims have had, and in the future could have, a material adverse impact on our business.

Unless otherwise required by law, we generally provide a limited warranty for our products for a one or two year period beginning on: (i) in the case of OEM sales, the date the mountain bike or powered vehicle is purchased from an authorized OEM where our product is incorporated as original equipment on the purchased mountain bike or powered vehicle; or (ii) in the case of aftermarket sales, the date the product is originally purchased from an authorized dealer. From time to time, our customers may negotiate for longer or different warranty coverage. In the ordinary course of business, we incur warranty costs and reserve against such costs in our financial statements. However, there is a risk that we could experience higher than expected warranty costs if we become aware of an underperforming product. For example, in 2012 we increased our reserve and included additional costs of approximately $1.8 million to reflect the costs of repairing or replacing certain dampers in our suspension products and experienced other related costs of approximately $1.0 million. We may in the future encounter similar situations and be forced to make other adjustments to our warranty reserves or incur costs in excess of these reserves which could adversely affect our results of operations.

We may also be required to or voluntarily participate in recalls involving our products or components if any prove to be defective. For example, during calendar year 2013, we initiated a voluntary recall of certain model year 2013 32 and 34 Evolution Series suspension forks having 120 mm - 160 mm of travel with certain dampers manufactured by us between March 1, 2012 and November 30, 2012. In addition to the direct costs related to this or other recalls we may be forced to undertake in the future, such events could adversely affect our brand image and have a negative effect on our relationships with our OEMs, sponsored athletes and race teams, or otherwise have a negative effect on our business, financial condition and results of operations

An adverse determination in any material product liability claim against us could adversely affect our operating results or financial condition.

The use of our products by consumers, often under extreme conditions, exposes us to risks associated with product liability claims. If our products are defective or used incorrectly by our customers, bodily injury, property damage or other injury, including death, may result and could give rise to product liability claims against us, which could adversely affect our brand image or reputation. We have encountered product liability claims in the past and carry product liability insurance to help protect us against the costs of such claims, although our insurance may not be sufficient to cover all losses. Any losses that we may suffer from any liability claims, and the effect that any product liability litigation may have upon the reputation and marketability of our products, may have a negative impact on our business, financial condition or results of operations.

Our Amended and Restated 2013 Credit Facility places operating restrictions on us and creates default risks.

We entered into a credit facility with a third-party lender in connection with our IPO, which we refer to as the 2013 Credit Facility. In connection with our purchase of the business of Sport Truck in March 2014, the 2013 Credit Facility was amended and restated and is referred to herein as the Amended and Restated 2013 Credit Facility. The Amended and Restated 2013 Credit Facility contains covenants that place restrictions on our operating activities. These covenants, among other things, limit our ability to:


•	pay dividends or make distributions to our stockholders or redeem our stock;


•	incur additional indebtedness or permit additional encumbrances on our assets; and


•	make acquisitions or complete mergers or sales of assets, or engage in new businesses.

These restrictions may interfere with our ability to obtain financing or to engage in other business activities, which may have a material adverse effect on our business, financial condition or results of operations.

If we are unable to comply with the covenants contained in our Amended and Restated 2013 Credit Facility, it could constitute an event of default and our lenders could declare all borrowings outstanding, together with accrued and unpaid interest, to be immediately due and payable. If we are unable to repay or otherwise refinance these borrowings when due, our lenders could sell the collateral securing our credit facilities, which constitutes substantially all of our assets.

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Our outstanding indebtedness under our secured credit facility bears interest at a variable rate, which makes us more vulnerable to increases in interest rates and could cause our interest expense to increase and decrease cash available for operations and other purposes.

In connection with our purchase of the business of Sport Truck in March 2014, we entered into the Amended and Restated 2013 Credit Facility, which provides a maturing secured term loan in the principal amount of $50.0 million, subject to quarterly amortization payments, and extended the term of the 2013 Credit Facility through March 31, 2019. Borrowings under our Amended and Restated 2013 Credit Facility bear interest on a variable rate which increases and decreases based upon changes in the underlying interest rate and/or our leverage ratio. Any such increases in the interest rate or increases of our borrowings under the Amended and Restated 2013 Credit Facility will increase our interest expense.

As of March 31, 2014, we had $50.0 million of indebtedness, bearing interest at a variable rate, outstanding under the Amended and Restated 2013 Credit Facility. Recent interest rates in the United States have been at historically low levels, and any increase in these rates would increase our interest expense and reduce our funds available for operations and other purposes. Although from time to time we may enter into agreements to hedge a portion of our interest rate exposure, these agreements may be costly and may not protect against all interest rate fluctuations. Accordingly, we may experience material increases in our interest expense as a result of increases in interest rate levels generally. Based on the $50.0 million of variable interest rate indebtedness that was outstanding as of March 31, 2014, a hypothetical 100 basis point increase or decrease in the interest rate on our variable rate debt would have resulted in an approximately $0.5 million change to our interest expense for fiscal 2013.

We are subject to certain risks in our manufacturing and in the testing of our products.

As of March 31, 2014, we employed approximately 815 full-time employees worldwide, a large percentage of which work at our manufacturing facilities. Our business involves complex manufacturing processes that can be inherently dangerous. Although we employ safety procedures in the design and operation of our facilities, there is a risk that an accident or death could occur in one of our facilities. Also, prior to the introduction of new products, our employees test the products under rigorous conditions, which involve the risk of injury or death. Any accident could result in manufacturing or product delays, which could negatively affect our business, financial condition or results of operations. The outcome of litigation is difficult to assess or quantify and the cost to defend litigation can be significant. As a result, the costs to defend any action or the potential liability resulting from any such accident or death or arising out of any other litigation, and any negative publicity associated therewith, could have a negative effect on our business, financial condition or results of operations.

We are subject to extensive United States federal and state, foreign and international safety, environmental, employment practices and other government regulations that may require us to incur expenses or modify product offerings in order to maintain compliance with such regulation, which could have a negative effect on our business and results of operations.

We are subject to extensive laws and regulations relating to safety, environmental, and other laws and regulations promulgated by the United States federal and state governments, as well as foreign and international regulatory authorities. Although we believe that our products, policies and processes comply with applicable safety, environmental, and other standards and related regulations, future regulations may require additional safety standards that would require additional expenses and/or modification of product offerings in order to maintain such compliance. Failure to comply with applicable regulations could result in fines, increased expenses to modify our products and harm to our reputation, all of which could have an adverse effect on our business, financial condition or results of operations.

Moreover, certain of our customer contracts require us to comply with the standards of voluntary standard-setting organizations, such as the United States Consumer Product Safety Commission and European Committee for Standardization (CEN). Failure to comply with the voluntary requirements of such organizations could result in the loss of certain customer contracts, which could have an adverse effect on our business, financial condition or results of operations.

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We are subject to employment practice laws and regulations and as such are exposed to litigation risks.

We are subject to extensive laws and regulations relating employment practices, including wage and hour, wrongful termination and discrimination. Complying with such laws and regulations, and defending against allegations of our failure to comply (including meritless allegations), can be expensive and time consuming. We believe that our policies and processes comply with applicable employment standards and related regulations, however, we are subject to risks of litigation by employees and others which might involve allegations of illegal, unfair or inconsistent employment practices, including wage and hour violations and employment discrimination, misclassification of independent contractors as employees, wrongful termination and other concerns, which could require additional expenditures.

We are subject to environmental laws and regulation and potential exposure for environmental costs and liabilities.

Our operations, facilities and properties are subject to a variety of foreign, federal, state and local laws and regulations relating to health, safety and the protection of the environment. These environmental laws and regulations include those relating to the use, generation, storage, handling, transportation, treatment and disposal of solid and hazardous materials and wastes, emissions to air, discharges to waters and the investigation and remediation of contamination. Many of these laws impose strict, retroactive, joint and several liability upon owners and operators of properties, including with respect to environmental matters that occurred prior to the time the party became an owner or operator. In addition, we may have liability with respect to third party sites to which we send waste for disposal. Failure to comply with such laws and regulations can result in significant fines, penalties, costs, liabilities or restrictions on operations that could negatively affect our business, financial condition or results of operations. From time to time, we have been involved in administrative or legal proceedings relating to environmental, health or safety matters and have in the past incurred expenditures relating to such matters.

We believe that our operations are in substantial compliance with applicable environmental laws and regulations. However, additional environmental issues relating to presently known or unknown matters could give rise to currently unanticipated investigation, assessment or expenditures. Compliance with more stringent laws or regulations, as well as different interpretations of existing laws, more vigorous enforcement by regulators or unanticipated events, could require additional expenditures that may materially affect our business, financial condition or results of operations.

Federal, state, local, foreign and international laws and regulations relating to land-use, noise and air pollution may have a negative impact on our future sales and results of operations.

The products in our powered vehicles line are used in vehicles which are subject to numerous federal, state, local, foreign and international laws and regulations relating to noise and air-pollution. Powered vehicles, and even mountain bikes, have also become subject to laws and regulations prohibiting their use on certain lands and trails. For example, in San Mateo County, California, mountain bikes are not allowed on county trails, and ATV and Side-by-Side riding is not allowed in Zion National Park, among many other national and state parks. In addition, recreational snowmobiling has been restricted in some national parks and federal lands in Canada, the United States and other countries. If more of these laws and regulations are passed and the users of our products lose convenient locations to ride their mountain bikes and powered vehicles, our sales could decrease and our business, financial condition or results of operations could suffer.

Fuel shortages, or high prices for fuel, could have a negative effect on the use of powered vehicles that use our products.

Gasoline or diesel fuel is required for the operation of the powered vehicles that use our products. There can be no assurance that the supply of these fuels will continue uninterrupted, that rationing will not be imposed or that the price of or tax on these petroleum products will not significantly increase in the future. Shortages of gasoline and diesel fuel and substantial increases in the price of fuel could have a material adverse effect on our powered vehicle product category in the future, which could have a negative effect on our business, financial condition or results of operations.

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We do not control our suppliers or OEMs, or require them to comply with a formal code of conduct, and actions that they might take could harm our reputation and sales.

We do not control our suppliers or OEMs or their labor, environmental or other practices. A violation of labor, environmental, intellectual property or other laws by our suppliers or OEMs, or a failure of these parties to follow generally accepted ethical business practices, could create negative publicity and harm our reputation. In addition, we may be required to seek alternative suppliers or OEMs if these violations or failures were to occur. We do not inspect or audit compliance by our suppliers or OEMs with these laws or practices, and we do not require our suppliers or OEMs or licensees to comply with a formal code of conduct. Any conduct or actions that our suppliers could take could reduce demand for our products, harm our ability to meet demand or harm our reputation, brand image, business, financial condition or results of operations.

We depend on a limited number of suppliers for our materials and component parts for some of our products, and the loss of any of these suppliers or an increase in cost of raw materials could harm our business.

We depend on a limited number of suppliers for certain components. If our current suppliers, in particular the minority of those which are “single-source” suppliers, are unable to timely fulfill orders, or if we are required to transition to other suppliers, we could experience significant production delays or disruption to our business. We define a single-source supplier as a supplier from which we purchase all of a particular raw material or input used in our manufacturing operations, although other suppliers are available from which to purchase the same raw material or input or an equivalent substitute. We do not maintain long term supply contracts with any of our suppliers and instead purchase these components on a purchase order basis. As a result, we cannot force any supplier to sell us the necessary components we use in creating our products and we could face significant supply disruptions should they refuse to do so. In connection with the transfer of a majority of the manufacturing of our mountain bike products to Taiwan, we could experience difficulties locating new qualified suppliers geographically located closer to these facilities. Furthermore, such new suppliers could experience difficulties in providing us with some or all of the materials we require, which could result in disruptions in our manufacturing operations. If we experience difficulties with our suppliers or manufacturing delays caused by our suppliers, whether in connection with our manufacturing operations in the United States or in Taiwan, our business, financial condition and results of operations could be materially and adversely impacted.

In addition, we purchase various raw materials in order to manufacture our products. The main commodity items purchased for production include aluminum, magnesium and steel. Historically, price fluctuations for these components and raw materials have not had a material impact on our business. In the future, however, if we experience material increases in the price of components or raw materials and are unable to pass on those increases to our customers, or there are shortages in the availability of such component parts or raw materials, it could negatively affect our business, financial condition or results of operations.

In addition to our various single-source suppliers, we also rely on one “sole-source” supplier, Miyaki Corporation, or Miyaki. We define a sole-source supplier as a supplier of a raw material or input for which there is no other supplier of the same product or an equivalent substitute. Miyaki is the exclusive producer of the Kashima coating for our suspension component tubes. As part of our agreement with Miyaki, we have been granted the exclusive right to use the trademark “KASHIMACOAT” on products comprising the aluminum finished parts for suspension components (e.g., tubes) and on related sales and marketing material worldwide, subject to certain exclusions. Although we believe we could obtain other coatings of comparable utility from other sources if necessary, we could no longer obtain this specific Kashima coating or use the trademark “KASHIMACOAT” if Miyaki were to stop supplying us with this coating. The need to replace the Kashima coating could temporarily disrupt our business and harm our business, financial condition or results of operations.

New regulations related to conflict minerals may force us to incur additional expenses and otherwise adversely impact our business.

The U.S. Securities and Exchange Commission, or the SEC, has promulgated final rules mandated by the Dodd-Frank Act regarding disclosure of the use of tin, tantalum, tungsten and gold, known as conflict minerals, in products manufactured by public companies. These new rules require ongoing due diligence to determine whether such minerals originated from the Democratic Republic of Congo, or the DRC, or an adjoining country and whether such minerals helped finance the armed conflict in the DRC. Reporting obligations for the rule begin May 31, 2014 and are required annually thereafter. As a new public company, we will be required to comply with the reporting

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obligations beginning with our fiscal year ended December 31, 2015. There will be costs associated with complying with these disclosure requirements, including costs to determine the origin of conflict minerals in our products. The implementation of these rules and their effect on customer, supplier and/or consumer behavior could adversely affect the sourcing, supply and pricing of materials used in our products. As a result, we may also incur costs with respect to potential changes to products, processes or sources of supply. We may face disqualification as a supplier for customers and reputational challenges if the due diligence procedures we implement do not enable us to verify the origins for all conflict minerals used in our products or to determine if such conflict minerals are conflict-free. Accordingly, the implementation of these rules could have a material adverse effect on our business, results of operations and/or financial condition.

The transition of a majority of the manufacturing of our mountain bike products to our new facility in Taiwan may negatively impact our brand image and consumer loyalty, which in turn could have a material adverse impact on our business and results of operations.

As we transition the majority of the manufacturing of our mountain bike products to our new facility in Taiwan, no assurances can be given that consumers may not be adversely influenced by the fact that such products will no longer be manufactured in the United States or that consumers and OEM customers may not otherwise perceive that the quality of our products is lowered as a result of the fact that they will be manufactured overseas. Such perceptions could adversely impact our business, financial condition or results of operations.

Federal health care reform legislation could increase our expenses and adversely impact our results of operations.

In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were signed into law in the United States. These health care reform laws require employers such as us to provide health insurance for all qualifying employees or pay penalties for not providing coverage. We are unable at this time to accurately predict the impact that these laws will have on our future health care benefit and insurance premium costs and our costs for temporary employees that we obtain through agencies. If these costs increase and we are unable to raise the prices we charge our customers to cover these increased expenses, such increases in costs could adversely impact our business, financial condition or results of operations.

We rely on increasingly complex information systems for management of our manufacturing, distribution, sales and other functions. If our information systems fail to perform these functions adequately or if we experience an interruption in our operations, our business could suffer.

All of our major operations, including manufacturing, distribution, sales and accounting, are dependent upon our complex information systems. Our information systems are vulnerable to damage or interruption from, among other things:


•	earthquake, fire, flood, hurricane and other natural disasters;


•	power loss, computer systems failure, internet and telecommunications or data network failure; and


•	hackers, computer viruses, software bugs or glitches.

Any damage or significant disruption in the operation of such systems or the failure of our information systems to perform as expected could disrupt our operations, reduce our efficiency, delay our fulfillment of customer orders or require significant unanticipated expenditures to correct, and thereby have a negative effect on our business, financial condition or results of operations.

We may grow in the future through acquisitions. Growth by acquisitions involves risks and we may not be able to effectively integrate businesses we acquire or we may not be able to identify or consummate any future acquisitions on favorable terms, or at all.

In the first quarter of 2014, we acquired certain assets of Sport Truck, a full service distributor of aftermarket suspension solutions, and, in the fourth quarter of 2013, we acquired certain assets of Toxoholics GmbH, our third party Germany-based distributor and service center. We intend to selectively evaluate additional acquisitions in the future. Any acquisitions that we might make are subject to various risks and uncertainties and could have a negative impact on our business, financial condition or results of operations. These risks include the inability to integrate effectively the operations, products, technologies and personnel of the acquired companies (some of which may be spread out in different geographic regions), the inability to achieve anticipated cost savings or operating synergies,

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the earnouts we may contractually obligate ourselves to pay, and the risk we may not be able to effectively manage our operations at an increased scale of operations resulting from such acquisitions. In the event we do complete acquisitions in the future, such acquisitions could affect our cash flows and net income as we expend funds, increase indebtedness and incur additional expenses in connection with pursuing acquisitions. We may also issue shares of our common stock or other securities from time to time as consideration for future acquisitions and investments. We may not be able to identify or consummate any future acquisitions on favorable terms, or at all.

We have a significant contingent earnout liability relating to the acquisition of the business of Sport Truck, which may adversely affect our liquidity and financial condition and results of operations.

On March 31, 2014, we acquired the business of Sport Truck for approximately $40.9 million. Under the terms of the asset purchase agreement for the acquisition, we will be obligated to make additional earnout payments up to an aggregate of approximately $29.3 million if the EBITDA of the acquired business for the fiscal years ending December 31, 2014, 2015 and 2016 exceeds approximately $8.4 million, $10.8 million and $13.5 million, respectively, subject to a maximum amount of approximately $8.1 million, $9.9 million and $11.3 million for each respective year. As of March 31, 2013, we had accrued approximately $19.0 million for such potential earnout payments based on the application of the Black-Scholes model to management’s financial projections. If, in the future, management's estimation techniques indicate an increase to the earnout liability or if higher EBITDA (as defined in the acquisition agreement) for any period is actually achieved, we will need to accrue additional amounts. Such additional accrual could adversely impact our liquidity, financial condition and results of operations.

Our operating results are subject to quarterly variations in our sales, which could make our operating results difficult to predict and could adversely affect the price of our common stock.

We have experienced, and expect to continue to experience, substantial quarterly variations in our sales and net income. Our quarterly results of operations fluctuate, in some cases significantly, as a result of a variety of other factors, including, among other things:


•	the timing of new product releases or other significant announcements by us or our competitors;


•	new advertising initiatives;


•	fluctuations in raw materials and component costs; and


•	changes in our practices with respect to building inventory.

As a result of these quarterly fluctuations, comparisons of our operating results between different quarters within a single year are not necessarily meaningful and may not be accurate indicators of our future performance. Any quarterly fluctuations that we report in the future may differ from the expectations of market analysts and investors, which could cause the price of our common stock to fluctuate significantly. We also believe that the seasonal nature of our business may have been overshadowed over each of the past few years due to the rapid growth in sales we have experienced during the same period.

Our beliefs regarding the future growth of the high-performance suspension product market are supported by qualitative data and limited sources and may not be reliable. A reduction or lack of continued growth in the popularity of high-end mountain bikes or powered vehicles or in the number of consumers who are willing to pay premium prices for well-designed performance-oriented equipment in the markets in which we sell our products could adversely affect our product sales and profits, financial condition or results of operations.

We generate virtually all of our revenues from sales of high-performance suspension products. Our beliefs regarding the outlook of the high-performance suspension product market come from qualitative data and limited sources, which may not be reliable. If our beliefs regarding the opportunities in the market for our products are incorrect or the number of consumers who we believe are willing to pay premium prices for well-designed performance-oriented equipment in the markets in which we sell our products does not increase, or declines, we may fail to achieve future growth and our business, financial condition or results of operations could be negatively affected.

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Risks related to this offering and ownership of our common stock

The trading price of our common stock may be volatile, and you might not be able to sell your shares at or above the price you pay for the shares.

The trading price of our common stock could be volatile, and you could lose all or part of your investment in our common stock. Since our IPO in 2013, our stock price has fluctuated between $20.75 and $14.33 per share and such volatility may continue in the future. Factors affecting the trading price of our common stock could include:


•	variations in our operating results or those of our competitors;


•	new product or other significant announcements by us or our competitors;


•	changes in our product mix;


•	changes in consumer preferences;


•	fluctuations in currency exchange rates;


•	the gain or loss of significant customers;


•	recruitment or departure of key personnel;


•	changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock;


•	changes in general economic conditions as well as conditions affecting our industry in particular;


•	sales of our common stock by us, our significant stockholders or our directors or executive officers; and


•	the expiration of contractual lock-up agreements.

In addition, in recent years, the stock market has experienced significant price fluctuations. Fluctuations in the stock market generally or with respect to companies in our industry could cause the trading price of our common stock to fluctuate for reasons unrelated to our business, operating results or financial condition. Some companies that have had volatile market prices for their securities have had securities class actions filed against them. A suit filed against us, regardless of its merits or outcome, could cause us to incur substantial costs and could divert management’s attention.

Future sales of our shares, or the perception that such sales may occur, could cause our stock price to decline.

If our existing stockholders sell substantial amounts of our common stock in the public market, or are perceived by the public market as intending to sell, the trading price of our common stock could decline. As of May 31, 2014, we had 36,657,826 shares of common stock outstanding, 12,531,143 of which are freely tradable, without restriction, in the public market. Our executive officers, directors and the selling stockholders have entered into contractual lock-up agreements with the underwriters pursuant to which they have agreed, subject to certain exceptions, not to sell or otherwise transfer any of their common stock or securities convertible into or exchangeable for shares of common stock for a period through the date 90 days after the date of the final prospectus for this offering. As of May 31, 2014, 24,126,683 shares of common stock outstanding were held by directors, executive officers and other affiliates and are subject to volume and manner of sale limitations under Rule 144 under the Securities Act. Certain of our existing stockholders have demand and piggyback rights to require us to register with the SEC up to approximately 21,245,658 shares of our common stock, excluding the shares of our common stock being offering in this prospectus. See “Description of Capital Stock - Registration Rights” for more information. If we register any of these shares of common stock, those stockholders would be able to sell those shares freely in the public market.

After our IPO, we filed a registration statement under the Securities Act to register shares of our common stock that we may issue under our equity plans. As a result, all such shares can be freely sold in the public market upon issuance, subject to any vesting or contractual lock-up agreements.

In addition, our Amended and Restated Certificate of Incorporation authorizes us to issue 90,000,000 shares of common stock, of which 36,657,826 shares were outstanding as of May 31, 2014. In the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition or otherwise.

If any of these additional shares described are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline. For additional information, see “Shares eligible for future sale.”

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We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we are an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding advisory “say-on-pay” and “say-when-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the completion of our IPO; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.

We cannot predict if investors will find our common stock less attractive to the extent we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes unfavorable research about our business or our industry, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Our Sponsor and our directors and officers and insiders will continue to have substantial control over us after this offering and will be able to influence corporate matters.

Upon completion of this offering, our Sponsor will beneficially own approximately 39.5% of our outstanding common stock (or approximately 37.2% if the underwriters exercise their option to purchase additional shares from the selling stockholders in full), and our directors and executive officers and their affiliates will beneficially own, in the aggregate, approximately 50.7% of our outstanding common stock (or approximately 48.1% if the underwriters exercise their option to purchase additional shares from the selling stockholders in full). As a result, these stockholders will continue to be able to exercise significant influence over all matters requiring stockholder approval, including the election of directors, amendment of our Amended and Restated Certificate of Incorporation, and approval of any merger, consolidation, or sale of all, or substantially all, of our assets or other significant corporate transactions. In addition, our Sponsor will continue to have input on all matters before our board of directors because our director Elias Sabo is affiliated with our Sponsor. Our Sponsor may also delay or prevent a change of control or otherwise discourage a potential acquirer from attempting to obtain control of us, even if such a change of control would benefit our other stockholders. So long as our Sponsor or any of its affiliates continue to indirectly own a significant amount of our outstanding common stock, they will continue to be able to significantly influence our decisions.

In addition, our Sponsor is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that may compete directly or indirectly with us. Our Sponsor may also pursue acquisition opportunities that are complementary to our business and, as a result, those acquisition opportunities may not be available to us. For information regarding the ownership of our outstanding stock by our Sponsor and our executive officers and directors and their affiliates, see “Principal and selling stockholders.”

Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our company.

Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, or our Charter Documents, as well as Delaware law, contain provisions that may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. Among other things, these provisions:


•	authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to discourage a takeover attempt;

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•	establish a classified board of directors, as a result of which the successors to the directors whose terms have expired will be elected to serve from the time of election and qualification until the third annual meeting following their election;


•	require that directors be removed from office only for cause;


•	provide that vacancies on our board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office;

•

from and after the date that our Sponsor and its affiliates no longer collectively beneficially own (as determined pursuant to Rule 13d-3 under the Exchange Act), directly or indirectly, at least a majority of the voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors, or the Trigger Date, prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders;


•	provide that special meetings of our stockholders may be called only by our board of directors, our Chairperson of the board of directors, our Lead Director (if we do not have a Chairperson or the Chairperson is disabled), our Chief Executive Officer or our President (in the absence of a Chief Executive Officer) or, until the Trigger Date, our Sponsor;


•	from and after the Trigger Date, require supermajority stockholder voting for our stockholders to effect certain amendments to our Charter Documents; and


•	establish advance notice requirements for nominations for elections to our board of directors or for proposing other matters that can be acted upon by stockholders at stockholder meetings.

In addition, we are subject to Section 203 of the General Corporation Law of the State of Delaware, or DGCL, which generally prohibits a Delaware corporation from engaging in any broad range of business combinations with a stockholder owning 15% or more of such corporation’s outstanding voting stock for a period of three years following the date on which such stockholder became an “interested” stockholder. In order for us to consummate a business combination with an interested stockholder within three years of the date on which the stockholder became interested, either (i) the business combination or the transaction that resulted in the stockholder becoming interested must be approved by our board of directors prior to the date the stockholder became interested, (ii) the interested stockholder must own at least 85% of our outstanding voting stock at the time the transaction commences (excluding voting stock owned by directors who are also officers and certain employee stock plans) or (iii) the business combination must be approved by our board of directors and authorized by at least two-thirds of our stockholders (excluding the interested stockholder) at a special or annual meeting (not by written consent). This provision could have the effect of delaying or preventing a change in control, whether or not it is desired by or beneficial to our stockholders. Any delay or prevention of a change in control transaction or changes in our board of directors and management could deter potential acquirers or prevent the completion of a transaction in which our stockholders could receive a substantial premium over the then-current market price for their shares of our common stock. For more information regarding these and other provisions, see “Description of capital stock-Anti-takeover provisions.”

Our Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our Amended and Restated Certificate of Incorporation provides that, with certain limited exceptions, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of our company owed to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our Charter Documents, (iv) any action to interpret, apply, enforce or determine the validity of our Charter Documents, or (v) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have received notice of and consented to the foregoing provisions. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

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Special note regarding forward-looking statements

This prospectus and the documents incorporated by reference in this prospectus contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. 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 prospectus include, but are not limited to, statements about:


•	our ability to develop new and innovative products in our current end-markets;


•	our ability to leverage our technologies and brand to expand into new categories and end-markets;


•	our ability to increase our aftermarket penetration;


•	our ability to accelerate international growth;


•	our ability to improve operating and supply chain efficiencies;


•	our future financial performance, including our sales, cost of sales, gross profit or gross margins, operating expenses, ability to generate positive cash flow and ability to maintain our profitability;


•	our ability to maintain our premium brand image and high-performance products;


•	our ability to maintain relationships with the professional athletes and race teams we sponsor;


•	our transition of the majority of our mountain bike manufacturing operations to Taiwan and our expectations related to such transition;


•	our ability to selectively add additional dealers and distributors in certain geographic markets;


•	the growth of the markets in which we compete, our expectations regarding consumer preferences and our ability to respond to changes in consumer preferences;


•	changes in demand for high-end suspension and ride dynamics products;


•	our ability to successfully identify, evaluate and manage potential acquisitions and to benefit from such acquisitions; and


•	future economic or market conditions.

We caution you that the forward-looking statements highlighted above do not encompass all of the forward-looking statements made in this prospectus.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus 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. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section entitled “Risk factors” and elsewhere in this prospectus and the documents incorporated by reference in this prospectus. 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 prospectus. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this prospectus or the documents incorporated by reference in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this prospectus or the documents incorporated by reference in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

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This prospectus and the documents incorporated by reference in this prospectus also contain statistical data, estimates, and forecasts that are based on independent industry publications or other publicly available information, as well as other information based on our internal sources. Although we believe that the third-party sources referred to in this prospectus are reliable, neither we nor the underwriters have independently verified the information provided by these third parties. While we are not aware of any misstatements regarding any third-party information presented in this prospectus, their estimates in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under the section entitled “Risk factors” and elsewhere in this prospectus and the documents incorporated by reference in this prospectus.

Use of proceeds

All of the shares of our common stock offered by this prospectus will be sold by the selling stockholders. We will not receive any proceeds from the sale of shares by the selling stockholders.

Market price of our common stock

Our common stock has been listed on the NASDAQ Global Select Market under the symbol “FOXF” since August 8, 2013. Our IPO was priced at $15.00 per share on August 8, 2013. Prior to that date, there was no public trading market for our common stock.

The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock as reported on the NASDAQ Global Select Market.



	High		Low
Fiscal Year Ended December 31, 2013
Quarter ended September 30, 2013 (beginning August 8, 2013)	$	20.75	$	16.36
Quarter ended December 31, 2013	$	20.17	$	15.65
Fiscal Year Ending December 31, 2014
Quarter ended March 31, 2014	$	19.05	$	14.33
Quarter ended June 30, 2014 (through June 19, 2014)	$	18.98	$	16.19

On July 3, 2014, the closing price per share of our common stock as reported on the NASDAQ Global Select Market was $17.98 per share.

As of May 31, 2014, there were approximately 13 holders of record of our common stock, which does not reflect holders who beneficially own our common stock held in nominee or street name or stockholders whose shares may be held in trust by other entities.

Dividend policy

In June 2012, in connection with our recapitalization, we paid a cash dividend to our stockholders equal to an aggregate of $67.0 million. See “Certain relationships and related party transactions-Recapitalization” for additional information. We did not declare or pay any dividends in the years ended December 31, 2011 and 2013. Although we declared a cash dividend on our common stock in June 2012 in connection with our recapitalization, we intend to retain any future earnings upon completion of this offering and do not expect to pay any dividends in the foreseeable future. In addition, our Amended and Restated Credit Facility contains covenants limiting our ability to pay dividends to our stockholders. See “Management’s discussion and analysis of financial condition and results of operations-Credit facility.” Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and any other factors that our board of directors may deem relevant.

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Capitalization

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2014. The information in this table should be read in conjunction with “Selected consolidated financial data” and “Management’s discussion and analysis of financial condition and results of operations” in this prospectus and our consolidated financial statements and related notes included in our 2013 Form 10-K and 2014 first quarter Form 10-Q, which are incorporated by reference in this prospectus.



As of March 31, 2014 (in thousands, except share and per share data)
Cash and cash equivalents	$	2,002

Long-term debt, less current portion	$	47,500

Stockholders’ equity:
Preferred stock, $0.001 par value per share, 10,000,000 shares authorized, no shares issued and outstanding	—
Common stock, $0.001 par value per share, 90,000,000 shares authorized, 36,582,581 shares issued and outstanding	36
Additional paid-in capital	90,826
Accumulated other comprehensive income	(9		)
Retained earnings	7,424

Total stockholders’ equity	98,277

Total capitalization	$	145,777

The number of shares of common stock that will be outstanding after this offering is based on 36,582,581 shares outstanding as of March 31, 2014, and excludes:


•	2,245,681 shares of common stock issuable upon the exercise of options to purchase common stock that were outstanding as of March 31, 2014, with a weighted average exercise price of $4.94 per share; and


•	3,631,709 shares of common stock reserved for issuance under our 2013 Omnibus Plan, of which 516,269 shares were issuable upon the vesting of restricted stock units granted to our directors, officers and other employees as of March 31, 2014.

Selected consolidated financial data

The following selected consolidated statements of income data for each of the years ended December 31, 2011, 2012 and 2013, and the consolidated balance sheet data as of December 31, 2012 and 2013, have been derived from our audited consolidated financial statements included in our 2013 Form 10-K, which is incorporated by reference in this prospectus. The selected consolidated statement of income data for each of the years ended December 31, 2009 and 2010, and the selected consolidated balance sheet data as of December 31, 2009, 2010 and 2011, have been derived from our audited consolidated financial statements which are not included in this prospectus. The selected consolidated statements of income for the three months ended March 31, 2013 and 2014 and the selected consolidated balance sheet data as of March 31, 2014, are derived from our unaudited consolidated financial statements included in our 2014 first quarter Form 10-Q, which is incorporated by reference in this prospectus. The unaudited consolidated financial statements were prepared on a basis consistent with our audited consolidated financial statements and include, in the opinion of management, all adjustments necessary for the fair presentation of the financial information set forth in those statements.

You should read the selected consolidated financial and operating data for the periods presented in conjunction with “Risk factors,” “Capitalization” and “Management’s discussion and analysis of financial condition and results of operations,” which are included elsewhere in this prospectus, and our consolidated financial statements and the related notes included in our 2013 Form 10-K and 2014 first quarter Form 10-Q, which are incorporated by reference in this prospectus.

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		For the years ended December 31,													For the three months ended March 31,

(in thousands, except shares and per share data)		2009			2010			2011		2012		2013			2013			2014
															(unaudited)

Sales		$	121,519		$	170,983		$	197,739	$	235,869	$	272,746		$	54,878		$	56,108
Cost of sales(1)		87,038			122,373			140,849		173,040		192,617			39,163			39,091
Gross profit		34,481			48,610			56,890		62,829		80,129			15,715			17,017
Operating expenses:
Sales and marketing(1)		8,269			10,293			11,748		12,570		14,153			3,284			3,844
Research and development(1)		5,545			7,321			9,750		9,727		10,409			2,355			3,135
General and administrative(1)(2)		4,792			6,202			7,588		9,063		11,408			2,673			3,930
Amortization of purchased intangibles		5,217			5,217			5,217		5,315		5,378			1,341			1,361
Total operating expenses		23,823			29,033			34,303		36,675		41,348			9,653			12,270
Income from operations		10,658			19,577			22,587		26,154		38,781			6,062			4,747
Other expense, net:
Interest expense		3,089			2,637			1,982		3,486		4,125			957			110
Other expense (income), net		(44		)	(39		)	13		277		(12		)	(34		)	(32		)
Total other expense, net		3,045			2,598			1,995		3,763		4,113			923			78
Income before income taxes		7,613			16,979			20,592		22,391		34,668			5,139			4,669
Provision for income taxes		2,585			6,210			7,054		8,181		10,566			1,590			1,728
Net income		$	5,028		$	10,769		$	13,538	$	14,210	$	24,102		$	3,549		$	2,941
Earnings per share:
Basic		$	0.17		$	0.36		$	0.45	$	0.44	$	0.70		$	0.11		$	0.08
Diluted		$	0.16		$	0.34		$	0.42	$	0.44	$	0.68		$	0.10		$	0.08
Weighted average common shares used to compute net income per share:
Basic		30,123			30,118			30,030		32,059		34,571			33,460			36,419
Diluted		31,286			31,828			32,295		32,515		35,705			34,149			37,566
Dividends per share		$	—		$	—		$	—	$	2.00	$	—		$	—		$	—

(1)	Includes stock-based compensation (excluding tax effect) as follows:

		For the years ended December 31,													For the three months ended March 31,

	(in thousands)	2009			2010			2011		2012		2013			2013			2014
															(unaudited)

	Cost of sales	$	—		$	—		$	—	$	—	$	23		$	—		$	8
	Sales and marketing	27			40			78		160		158			33			35
	Research and development	12			12			12		29		53			17			12
	General and administrative	385			472			940		1,959		2,266			652			766
	Total	$	424		$	524		$	1,030	$	2,148	$	2,500		$	702		$	821

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(2)

As of March 31, 2014, our contingent consideration liability arising from our acquisition of the business of Sport Truck, which is associated with the potential earnout payments based on achievement of EBITDA (as defined in the acquisition agreement) targets of the acquired business, was approximately $19.0 million. Under the acquisition agreement, if the EBITDA of the acquired business for the fiscal years ending December 31, 2014, 2015 and 2016 exceeds approximately $8.4 million, $10.8 million and $13.5 million, respectively, we will be obligated to make earnout payments up to a maximum amount of approximately $8.1 million, $9.9 million and $11.3 million for each respective year, with an aggregate of approximately $29.3 million. The contingent consideration liability was estimated by applying a Black-Scholes model to our financial projection. If, in the future, management's estimation techniques indicate an increase or decrease of the earnout liability, or if lower or higher EBITDA for any period is actually achieved, we will need to adjust the contingent consideration liability. Such adjustment will be reflected in the general and administrative expenses.

Our consolidated balance sheet data is as follows:



	As of December 31,					As of March 31,
	2012			2013		2014
(in thousands)						(unaudited)

Consolidated balance sheet data:
Cash and cash equivalents	$	15		$	1,683	$	2,002
Inventory	34,255			42,783		58,387
Working capital	25,142			39,884		52,736
Property and equipment, net	11,789			13,418		18,135
Total assets	142,120			157,729		223,775
Total debt, including current portion (1)	59,250			8,000		50,000
Total stockholders’ equity	$	29,584	(2)	$	92,292	$	98,277

(1)

Concurrently with the closing of our IPO in August 2013, we used the net proceeds that we received from the IPO to repay a portion of our then outstanding indebtedness. On March 31, 2014, in connection with our acquisition of the business of Sport Truck, we amended and restated our 2013 Credit Facility. The Amended and Restated 2013 Credit Facility provides a secured term loan in the principal amount of $50.0 million.


(2)	In June 2012, we paid a $67.0 million cash dividend as part of our recapitalization. See “Related party transactions-Recapitalization.”

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Management’s discussion and analysis of financial condition and results of operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the section entitled “Selected consolidated financial data” included elsewhere in this prospectus and the consolidated financial statements and related notes included in our 2013 Form 10-K and 2014 first quarter Form 10-Q, which are incorporated by reference in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. You should review the “Risk factors” and “Special note regarding forwarding-looking statements” sections of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a designer, manufacturer and marketer of high-performance suspension products used primarily on mountain bikes, side-by-side vehicles, or Side-by-Sides, on-road vehicles with off-road capabilities, off-road vehicles and trucks, all-terrain vehicles, or ATVs, snowmobiles, specialty vehicles and applications, and motorcycles. We currently sell to over 150 OEMs and distribute our products to more than 2,500 retail dealers and distributors worldwide. In each of the years ended December 31, 2011, 2012 and 2013, approximately 80%, 81% and 81%, respectively, of our sales were attributable to sales made to our OEM customers. The remaining sales were to our aftermarket customers. Virtually all of our revenues were from our product sales; miscellaneous sources of revenue such as royalty income and service related repair work and the associated sale of components represented less than 1% of our sales in each of the years ended December 31, 2011, 2012 and 2013.

We have determined that we operate in one reportable segment, which is the manufacturing, sale and service of ride dynamics products. Our products fall into the following two categories:


•	mountain bikes; and


•	powered vehicles, including Side-by-Sides, on-road vehicles with off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, and motorcycles.

A significant portion of our sales are dependent on the demand for high-end or premium-priced mountain bikes and their suspension components. In each of the years ended December 31, 2011, 2012 and 2013, approximately 69%, 67% and 66%, respectively, of our sales were attributable to sales of suspension products for mountain bikes and approximately 31%, 33% and 34%, respectively, of our sales were attributable to sales of suspension products for powered vehicles.

Our domestic sales totaled $65.8 million, $84.3 million and $96.1 million, or 33%, 36% and 35% of our total sales in 2011, 2012 and 2013, respectively. Our international sales totaled $132.0 million, $151.6 million and $176.6 million, or 67%, 64% and 65% of our total sales in each of the years ended December 31, 2011, 2012 and 2013, respectively. Sales attributable to countries outside the United States are based on shipment location. Our international sales, however, do not necessarily reflect the location of the end users of our products as many of our products are incorporated into mountain bikes that are assembled at international locations and then shipped back to the United States. We estimate, based on our internal projections, that approximately one-third of the end users of our products are located outside the United States.

Opportunities, challenges and risks

We intend to focus on generating sales of our high-performance suspension products through OEMs and in the aftermarket channel. To do this, we intend to continue to develop and introduce new and innovative products in our current end-markets and we intend to selectively develop products for applications and end-markets in which we do not currently participate. Currently, virtually all of our sales are dependent on the demand for high-performance suspension products. While we have recently introduced a new non-suspension product (our adjustable seat post for mountain bikes), this product comprised less than 1% of our sales in 2013. We may not achieve the desired level of sales for this product or for other new products that we introduce in the future.

Our aftermarket distribution network currently consists of more than 2,500 retail dealers and distributors worldwide. To further penetrate the aftermarket channel, we intend to selectively add additional dealers and distributors in certain geographic markets, expand our internal sales force and strategically increase the number of aftermarket specific products and services which we offer for existing vehicle platforms. In addition, we believe international expansion

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represents a significant opportunity for us and we intend to selectively increase infrastructure investments and focus on identified geographic regions.

As a supplier to OEM customers, we are largely dependent on the success of the business of our OEM customers. Model year changes by our OEM customers may adversely impact our sales or cause our sales to vary from quarter to quarter. Losses in market share or a decline in the overall market of our OEM customers or the discontinuance by our OEM customers of their products which incorporate our products could negatively impact our business and our results of operations.

We have begun the process of transitioning a majority of the manufacturing of our mountain bike products to our facility in Taiwan and we contemplate that this transition will continue through 2015. We anticipate that this transition, when completed, will enable us to shorten production lead times to our mountain bike OEM customers, improve supply chain efficiencies and reduce our manufacturing costs. We also believe that this transition, once completed, will improve operating margins in the medium to long term. However, in the short term during this transition process we expect to incur some duplication of facilities, equipment and personnel which will increase our costs and could vary materially from our projections. In addition, this transition process could cause manufacturing problems and give rise to execution risks which could negatively impact our business, financial condition or results of operations.

From time to time we have experienced, and may continue to experience, warranty costs and claims relating to our products. In the ordinary course of business we reserve against such costs and claims in our financial statements. There is a risk, however, that in the future we will experience higher than expected warranty costs and claims, as well as other related costs.

We intend to evaluate selective potential acquisition opportunities for high-performance products and technologies that we believe will help us extend our ride dynamics product platform. Any acquisitions that we might make are subject to various risks and uncertainties and could have a negative impact on our results of operations. In addition, we may contractually obligate ourselves to earnouts in conjunction with such acquisitions, which could have a negative impact on our cash flow and results of operations. See “Management’s discussion and analysis of financial condition and results of operations-Contractual obligations and Commitments.”

Basis of presentation

Sales are comprised of:

Sales from:


•	Product sales: consists of sales of products sold primarily to our OEM and aftermarket customers. We recognize revenue when products are shipped, title has transferred, collection of the receivable is probable, persuasive evidence of an arrangement exists, and the sales price to our customers is fixed or determinable;


•	Service sales: consists of sales of service related repair work and the associated sale of products. We recognize revenue when service products are shipped, title has transferred, collection of the receivable is probable, persuasive evidence of an arrangement exists, and the sales price to our customers is fixed or determinable;


•	Royalty income: consists of licensing fees and royalties earned by us from contractual relationships we have with third parties that allow them to use our intellectual property in return for fees. We recognize royalty income when collection of the receivable is probable, persuasive evidence of an arrangement exists, and generally upon the reporting of royalties by the licensee; and


•	Shipping and handling fees: we include shipping and handling fees billed to customers in sales.

Net of:


•	Sales returns allowances: consists of an estimate of our sales returns. This allowance is based upon estimates of the projected returns in future periods based on our experience with returns recorded in previous periods; and


•	Rebates: consists of incentives we provide to customers based on sales of eligible products.

We attribute our past growth in sales predominantly to increases in the number of units sold to our OEM customers in both our mountain bike and powered vehicle product categories. To a lesser degree, increases in our average sales prices have also contributed to our past sales growth, as we have introduced innovations to and improved the functionality of many of our products, which enabled us, in many cases, to increase our sale prices for such products.

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Cost of sales

The cost of sales includes the cost of manufactured products (raw materials consumed, the cost to procure materials, labor costs, including wages, and employee benefits, and factory overhead to produce finished good products), including:


•	the cost to inspect and repair products;


•	shipping costs associated with inbound freight. These costs are capitalized as part of inventory and included in cost of sales as the inventory is sold;


•	royalty expenses, including payments to certain parties for our use of licensed technology incorporated into our products;


•	freight expense incurred for certain shipments to customers, excluding customers who pay for their own freight;


•	warranty costs associated with the repair or replacement of products under warranty; and


•	reductions in the cost of inventory to its net realizable value, if required, for estimated excess, obsolescence or impaired balances.

Gross profit/gross margin

Our gross profit equals our sales minus cost of sales. Our gross margin measures our gross profit as a percentage of sales.

Our gross margins fluctuate based on product, customer and channel mix as certain of our products are sold at higher gross margins than others. Generally, we earn higher gross margins on our products sold to the aftermarket channel and we typically earn lower gross margins on the products we sell to OEMs. In the near term, we anticipate our gross margins will be generally in line with our historical results. We anticipate that the improvements we are pursuing from our cost initiatives, which are designed to improve our operating efficiencies, will be offset in the short term by duplicative costs we expect to incur as a result of our planned transition of a majority of the manufacturing of our mountain bike products to our operations in Taiwan. In the medium to long term, we anticipate that this transition should benefit our gross margins.

Operating expenses

Our operating expenses consist of the following:


•	sales and marketing;


•	research and development;


•	general and administrative; and


•	amortization of purchased intangibles.

Our sales and marketing expenses include costs related to our sales, customer service and marketing personnel, including their wages, employee benefits and related stock-based compensation, and occupancy related expenses. Other significant sales and marketing expenses include race support and sponsorships of events and athletes, advertising and promotions related to trade shows, travel and entertainment, and promotional materials, products and our sales offices costs.

Our research and development expenses consist primarily of salaries and personnel costs, including wages, employee benefits and related stock-based compensation for our engineering, research and development teams, occupancy related expenses, fees for third party consultants, service fees, and expenses for prototype tooling and materials, travel, and supplies. We expense research and development costs as incurred and such costs are included as research and development expenses on our consolidated statements of income.

Our general and administrative expenses include costs related to our executive, finance, information technology, human resources and administrative personnel, including wages, employee benefits and related stock-based compensation expenses. We record professional and contract service expenses, occupancy related expenses associated with corporate locations and equipment, and legal expenses in general and administrative expenses. Prior to our IPO, we paid annual management fees of $0.5 million to Compass Group Management LLC, or CGM, which were paid quarterly in arrears and were included as part of general and administrative expenses. These fees discontinued upon the closing of the IPO. The elimination of these management fees following the IPO offsets a portion of the additional legal, insurance, and accounting costs we are incurring related to compliance and other public company expenses.

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Our amortization of intangibles includes amortization over their respective useful lives of our purchased intangible assets, such as customer lists and our core technology. Our intangible assets, the substantial majority of which were established as a result of our Sponsor’s acquisition of us in 2008, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be fully recoverable. No impairments of intangible assets were identified in the years ended December 31, 2011, 2012 and 2013, respectively.

In the near term, we anticipate that our sales and marketing and general and administrative expenses will increase, both in terms of absolute dollars and when expressed as a percentage of sales as we incur additional expenses including those associated with being a public company and those added from our recent acquisitions. We generally anticipate research and development expenses will increase in terms of absolute dollars, but we anticipate these expenses, excluding stock-based compensation expenses, should remain relatively constant when expressed as a percentage of our sales. In the long term we anticipate our operating expenses, in aggregate, to increase in terms of absolute dollars, but remain relatively constant when expressed as a percent of sales. We can give no assurance that these expectations will be realized.

Income from operations

We define income from operations as gross profit less our operating expenses. We use income from operations as an indicator of the profitability of our business and our ability to manage costs.

Other expense, net

Other expense, net consists of interest expense and other expense (income), net. Interest expense consists of interest charged to us under our credit facilities.

Other expense (income), net consists of gains and losses on the disposal of fixed assets, foreign currency transaction gains and losses, forgiveness of indebtedness under our loan with the Redevelopment Agency of the City of Watsonville, and other miscellaneous items.

Income taxes

We are subject to income taxes in the United States and various other foreign jurisdictions in which we do business. Some of these foreign jurisdictions have higher statutory tax rates than those in the United States, and certain of our international earnings are also taxable in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S. income and absorption of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities and changes in tax laws. In addition, we are subject to examination of our income tax returns by the U.S. Internal Revenue Service, or IRS, and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our income tax liabilities and expense. Should actual events or results differ from our current expectations, charges or credits to our income tax liabilities and income tax expense may become necessary. Any such adjustments could have a significant impact on our results of operations.

Under U.S. generally accepted accounting principles, or GAAP, an uncertain income tax position will not be recognized unless it has a greater than 50% likelihood (i.e., more-likely-than-not) of being sustained and then, measured only to the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. We established liabilities for uncertain tax positions and deferred taxes associated with the deductibility of certain amortization and depreciation expenses. The liability for uncertain income tax positions represents the amount of tax we would be required to pay if certain tax deductions previously claimed on tax returns were not allowed upon examination by the taxing authorities. The liability for deferred taxes represents additional taxes that would be payable in future periods because of the potential non-deductibility of future amortization and depreciation expenses.

As of March 31, 2014, our balance sheet reflected a liability for unrecognized tax benefits of $7.8 million. The unrecognized tax benefits are primarily due to the uncertainty of the deductibility of amortization and depreciation expenses which were incurred as a result of our Sponsor’s acquisition of us in 2008. In addition, as of March 31, 2014, our balance sheet reflected a related deferred tax liability of $10.3 million based on the difference between the financial statement and tax basis of certain assets, which represents the amount of tax we would be required to pay in the future based on the current enacted tax rates if the tax deductions associated with this amortization and depreciation were not claimed and allowed on our income tax returns. This deferred tax liability will decrease each year we expense the associated amortization and depreciation for accounting purposes. However, this reduction is not anticipated to be associated with actual cash payments. We expect to decrease our liability for unrecognized tax benefits and recognize a reduction in income tax expense (and an increase in net income) because of the expiration of statutes of limitations in the amount of approximately $1.6 million in the third quarter of 2014. However, reductions in the related deferred

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tax liability will over time be associated with offsetting increases to our liability for unrecognized tax benefits. We generally expect to recognize a reduction in income tax expense (and an increase in net income) through the expiration of statutes of limitations in the amount of approximately $1.4 to $1.5 million in each third quarter from 2014 through 2027 and approximately $0.1 to $0.3 million in each fourth quarter from 2014 through 2028. These annual reductions in our income tax expense will cease if it is determined upon examination of the tax authorities that the deductions are not valid and the liabilities for the uncertain income tax position and the associated deferred tax liability will have to be settled for cash. If we subsequently determine that we have met the more-likely-than-not threshold that these deductions will be sustained, the balance of the liability for unrecognized tax benefits that would be recognized as a reduction of income tax expense, except for approximately $1.0 million, which would increase the deferred tax liability to the extent of taxes associated with tax amortization of intangibles with indeterminate lives, and the related unamortized deferred tax liabilities will be recognized as a one-time income tax benefit.

Income taxes are computed using the asset and liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. As of March 31, 2014, we did not have any valuation allowances recorded as we expect to fully utilize all of our deferred tax assets and we did not have any net operating loss or tax credit carry-forwards. For the years ended December 31, 2011, 2012 and 2013, we had effective tax rates of 34.3%, 36.5% and 30.5%, respectively. We anticipate that our effective tax rate in 2014 will be slightly more than our effective tax rate for 2013 and that in the medium term our effective annual tax rates should be approximately 34% to 36%, however our actual effective annual tax rates will vary based on several factors, including the geographic mix of our sales, changes in future tax rates, and the treatment of the unrecognized tax benefits mentioned above.

Results of operations

The table below summarizes our results of operations for the fiscal years ended December 31, 2011, 2012 and 2013 and for the three months ended March 31, 2013 and 2014.



	Years Ended December 31,							For the three months ended March 31,

(in thousands)	2011		2012		2013			2013			2014
								(unaudited)

Sales	$	197,739	$	235,869	$	272,746		$	54,878		$	56,108
Cost of sales	140,849		173,040		192,617			39,163			39,091
Gross profit	56,890		62,829		80,129			15,715			17,017
Operating expenses:
Sales and marketing	11,748		12,570		14,153			3,284			3,844
Research and development	9,750		9,727		10,409			2,355			3,135
General and administrative	7,588		9,063		11,408			2,673			3,930
Amortization of purchased intangibles	5,217		5,315		5,378			1,341			1,361
Total operating expenses	34,303		36,675		41,348			9,653			12,270
Income from operations	22,587		26,154		38,781			6,062			4,747
Other expense, net:
Interest expense	1,982		3,486		4,125			957			110
Other expense (income), net	13		277		(12		)	(34		)	(32		)
Total other expense, net	1,995		3,763		4,113			923			78
Income before income taxes	20,592		22,391		34,668			5,139			4,669
Provision for income taxes	7,054		8,181		10,566			1,590			1,728
Net income	$	13,538	$	14,210	$	24,102		$	3,549		$	2,941

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The following table sets forth our gross profit as well as our operating and other income and expenses and other information for the periods presented, expressed as a percentage of total revenues.



	Years Ended December 31,						For the three months ended March 31,
(as a percentage of revenue)	2011		2012		2013		2013		2014
							(unaudited)
Sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	71.2		73.4		70.6		71.4		69.7
Gross profit	28.8		26.6		29.4		28.6		30.3
Operating expenses:
Sales and marketing	6.0		5.3		5.2		6.0		6.9
Research and development	4.9		4.1		3.8		4.3		5.6
General and administrative	3.8		3.8		4.2		4.9		7.0
Amortization of purchased intangibles	2.6		2.3		2.0		2.4		2.4
Total operating expenses	17.3		15.5		15.2		17.6		21.9
Income from operations	11.5		11.1		14.2		11.0		8.4
Other expense, net:
Interest expense	1.0		1.6		1.5		1.7		0.2
Other expense (income), net	*		*		*		(0.1	)	(0.1	)
Total other expense, net	1.0		1.6		1.5		1.6		0.1
Income before income taxes	10.5		9.5		12.7		9.4		8.3
Provision for income taxes	3.6		3.5		3.9		2.9		3.1
Net income	6.9	%	6.0	%	8.8	%	6.5	%	5.2	%

*Represents less than 0.1%

Three months ended March 31, 2014 compared to three months ended March 31, 2013

Sales

Sales for the three months ended March 31, 2014 increased approximately $1.2 million, or 2.2%, compared to the same period in 2013. Sales of mountain bike products decreased 4.4%, while sales of powered vehicle products increased 14.1% for the three months ended March 31, 2014 compared to the same prior year period. The decline in sales from our mountain bike products was primarily driven by a planned shutdown of our factory in early January 2014 which caused some sales, which were previously planned for the first quarter of 2014, to be shipped in the fourth quarter of 2013. We did not have a similar shutdown in the first quarter of 2013. Sales growth was primarily driven by an increase of $2.1 million in sales to aftermarket customers in the three months ended March 31, 2014 compared to the same period in 2013. The increase in sales to aftermarket customers was primarily due to higher end user demand for our products. Partially offsetting this growth was a decline in sales to our OEMs of $0.9 million to $42.8 million during the three months ended March 31, 2014 compared to $43.7 million for the same period in 2013. The decrease in sales to OEMs was largely driven by the aforementioned planned factory shutdown.

Cost of sales

Cost of sales for the three months ended March 31, 2014 remained essentially flat at $39.1 million as compared to the same period in 2013. Our ability to maintain flat costs on higher sales reflects the company’s continued focus on cost initiatives which are targeted at improving factory and supply chain efficiencies, as well as continued execution of our overall product design for manufacturability program. For the three months ended March 31, 2014, our gross margin was 30.3% compared to 28.6% for the same period in 2013. The 1.7% improvement in our gross profit margin was due to the continued execution of these cost initiatives.

Operating expenses

Operating expenses for the three months ended March 31, 2014 increased approximately $2.6 million, or 27.1%, over the same period in 2013. Approximately $1.0 million of the increase was due to transaction-related expenses incurred in connection with the acquisition of the business of Sport Truck, and approximately $0.5 million of the increase was

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due to the additional costs of being a public company, with the balance of the increase due to additional investments in infrastructure, brand, and technology.

When expressed as a percentage of sales, operating expenses increased to 21.9% of sales for the three months ended March 31, 2014 compared to 17.6% of sales in the same period in 2013.

Within operating expenses, our sales and marketing expenses increased in the three months ended March 31, 2014 by approximately $0.5 million to $3.8 million from $3.3 million in the same period in 2013 primarily due to increases in personnel related expenditures of approximately $0.1 million and an increase of approximately $0.2 million in outside services and promotional expenses as we continue to promote our company and brand along with public company costs.

Our research and development expenses increased in the three months ended March 31, 2014 by approximately $0.7 million to $3.1 million from $2.4 million in the same period in 2013. The increase was primarily due to an increase of approximately $0.2 million for personnel related expenditures and an additional $0.2 million of proto-type products as we continue to invest in new and innovative technology.

Our general and administrative expenses increased in the three months ended March 31, 2014 by approximately $1.2 million to $3.9 million from $2.7 million in the same period in 2013. The increase was primarily due to transaction-related expenditures of approximately $1.0 million resulting from the acquisition of the business of Sport Truck and $0.4 million of public company costs which were partially offset by decreases in other miscellaneous areas of general and administrative expenses.

Amortization of purchased intangible assets in the three months ended March 31, 2014 was consistent with the same period in 2013.

Income from operations

Income from operations for the three months ended March 31, 2014 decreased approximately $1.3 million, or 21.7%, compared to income from operations in the same period in 2013. The decrease in income from operations was the result of higher operating expenses primarily driven by expenditures relating to the acquisition of the business of Sport Truck along with the additional costs of being a public company, which exceeded the increase in gross profit derived from operations.

Other expense, net

Other expense, net for the three months ended March 31, 2014 decreased by approximately $0.8 million to $0.1 million in the three months ended March 31, 2014 compared to $0.9 million in the same period in 2013 due to decreased interest expense. Within other expense, net, interest expense decreased in the three months ended March 31, 2014 by $0.8 million due to a decrease in average borrowings and a more favorable borrowing rate under our 2013 Credit Facility. Other expense (income), net for the three months ended March 31, 2014 was consistent with the same period in 2013.

Provision from income taxes

Income tax expense for the three months ended March 31, 2014 remained relatively flat, increasing by approximately $0.1 million to $1.7 million compared to income tax expense of $1.6 million in the same period in 2013. Effective tax rates were 37.0% and 30.9% for the three months ended March 31, 2014 and 2013, respectively. On January 3, 2013, the American Taxpayer Relief Act of 2012 was signed into law reinstating the federal research and development credit for the 2012 and 2013 years. Accordingly, the benefit related to the 2012 federal research and development credit of approximately $0.4 million was recorded in the first quarter of 2013 as a discrete item. The benefit related to 2013 research activities was included in the full year effective tax rate. There was no such federal research and development credit for the three months ended March 31, 2014.

As of March 31, 2014, we had $7.8 million of unrecognized tax benefits, of which approximately $5 million, if recognized, would favorably impact the effective tax rate. We regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. We believe it is reasonably possible that certain federal, foreign, and state tax matters may be concluded in the next 12 months. Specific positions that may be resolved include issues involving the deductibility of amortization and depreciation deductions which were incurred as a result of the acquisition of us by our Sponsor in 2008. We estimate that it is reasonably possible that the unrecognized tax benefits at March 31, 2014 could be reduced by approximately $1.6 million in the remaining nine months of 2014.

Net income

As a result of the factors described above, our net income decreased $0.6 million, or 17.1%, to $2.9 million in the three months ended March 31, 2014 from $3.5 million for the same period in 2013.

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Year ended December 31, 2013 compared to year ended December 31, 2012

Sales

Sales for 2013 increased approximately $36.9 million, or 15.6%, compared to 2012. Sales of mountain bike and powered vehicle products increased 14.4% and 18.2%, respectively, for 2013 compared to 2012. Sales growth was primarily driven by sales to OEMs which increased $30.0 million to $219.9 million for 2013 compared to $189.9 million for 2012. The increase in sales to OEMs was largely driven by increased specification, or spec, positions with our OEM customers. The remaining increase in sales totaling $6.9 million reflects increased sales to aftermarket customers in 2013 compared to 2012. The increase in sales to aftermarket customers was primarily due to higher end user demand for our products.

Cost of sales

Cost of sales for 2013 increased by $19.6 million, or 11.3% compared to the same period in 2012. The increase in cost of sales was primarily due to increased sales in 2013 when compared to 2012. For 2013 our gross margin was 29.4% compared to 26.6% for the same period in 2012. We attributed 1.6% of the improvement in our gross profit margin to our cost initiatives designed to improve our operating efficiencies. The remaining 1.2% of the improvement was largely due to additional warranty and other related costs in 2012 to upgrade certain dampers contained in our suspension products which costs did not recur in 2013.

Operating expenses

Operating expenses for 2013 increased by $4.7 million, or 12.7%, compared to 2012. When expressed as a percentage of sales, operating expenses declined to 15.2% of sales for 2013 compared to 15.5 % of sales in 2012.

Within operating expenses, our sales and marketing expenses increased by $1.6 million from $12.6 million in 2012 to $14.2 million in 2013 primarily due to increases of personnel related expenditures of $1.0 million and other marketing related expenses of $0.6 million. Our sales and marketing goal is to expand our brand image which largely focuses on additional race sponsorships and corporate media.

Our research and development expenses increased by $0.7 million from $9.7 million in 2012 to $10.4 million in 2013. This is primarily the result of an increase of $0.6 million due to bringing on board talented and innovative personnel and other expenses of $0.2 million, partially offset by a decrease in other product development expenses of $0.1 million.

Our general and administrative expenses increased by $2.3 million from $9.1 million in 2012 to $11.4 million in 2013. The increase was primarily related to employee compensation of $1.1 million due to an increase in personnel and the additional costs we incurred as a result of being a public company. Stock compensation expenses increased by $0.4 million, $0.3 million of additional expenses related to the acquisition and integration of our third party Germany-based distributor and service center and an increase of $0.5 million of other general and administrative expenses.

Amortization of purchased intangible assets increased by $0.1 million in 2013 compared to 2012 due to the intangible assets from recently acquired intellectual property.

Income from operations

Income from operations for 2013 increased $12.6 million, or 48.3%, compared to income from operations in 2012. The increase in income from operations was primarily the result of our increase in gross profit of $17.3 million, partially offset by our increases in operating expenses of $4.7 million.

Other expense, net

Other expense, net for 2013 increased by $0.3 million to $4.1 million in 2013 compared to $3.8 million in 2012. Within Other expense, net, interest expense increased in 2013 by $0.6 million primarily due to a $1.4 million non-cash charge for unamortized loan origination costs in connection with the termination of our Prior Credit Facility, offset by decreased average borrowings under our credit facilities. Other expense (income), net for 2013 decreased approximately $0.3 million from 2012 due to the loss on the disposition of fixed assets in 2012, which did not recur in 2013.

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Income tax expense

Income tax expense for 2013 increased by $2.4 million to $10.6 million compared to income tax expense of $8.2 million in 2012. Effective tax rates were 30.5% and 36.5% for 2013 and 2012, respectively. The decrease in the effective tax rates for 2013 was caused by the expiration of the statute of limitations that allowed us to release a liability for unrecognized tax benefits relating to the uncertainty of amortization and depreciation expenses which were a result of our Sponsor’s acquisition of us in 2008 and also was a result of a reinstatement of the federal research and development credit that had lapsed in 2012.

Net income

As a result of the factors discussed above, our net income increased $9.9 million, or 69.6%, to $24.1 million in 2013 from $14.2 million in 2012.

Year ended December 31, 2012 compared to year ended December 31, 2011

Sales

Sales for the year ended December 31, 2012 increased approximately $38.1 million, or 19.3%, compared to 2011. Sales of mountain bike and powered vehicle products increased 16.2% and 26.1%, respectively, in 2012 compared to 2011. Sales growth was primarily driven by sales to OEMs which increased $32.0 million to $189.9 million during the year ended December 31, 2012 compared to $157.9 million for the same period in 2011. The increase in sales to OEMs was largely driven by increased specification, or spec, positions with our OEM customers and, to a lesser degree, by increased sales on vehicle models where our products had previously been specified in prior years. The remaining increase in sales totaling $6.1 million reflects increased sales to aftermarket customers in the year ended December 31, 2012 compared to 2011. The increase in sales to aftermarket customers is due to higher end user demand for our products.

Cost of sales

Cost of sales for the year ended December 31, 2012 increased approximately $32.2 million, or 22.9% compared to 2011. The increase in cost of sales in absolute dollars was primarily due to increased sales during 2012 when compared to the prior year. For the year ended December 31, 2012 our gross margin was 26.6% compared to 28.8% for the same period in 2011. Several factors contributed to the 2.2% decrease in gross margin in 2012, including an aggregate of $2.8 million in the year for higher warranty related costs for upgrades to our dampers contained in our suspension products, which costs included a $1.8 million increase in our warranty reserve to replace these dampers and approximately $1.0 million in other warranty related costs. In addition, due to increases in customer orders above the amounts forecasted, we incurred $1.7 million of incremental expedited in-bound freight costs related to products sold to customers. The other material factors contributing to the margin decrease in 2012 included increased overhead costs of approximately $0.9 million associated with consolidating our Watsonville operations and increased costs of approximately $1.1 million associated with expanding our operations in Taiwan.

Operating expenses

Operating expenses for the year ended December 31, 2012 increased approximately $2.4 million, or 6.9%, over 2011. When expressed as a percentage of sales, operating expenses declined to 15.5% of sales for the year ended December 31, 2012 compared to 17.3% of sales in 2011.

Within operating expenses, our sales and marketing expenses increased in 2012 by $0.8 million to $12.6 million from $11.7 million in 2011 primarily due to increases of personnel related expenditures for new hires of approximately $0.6 million, and increased expenditures for marketing and business travel and supplies, equipment and services of approximately $0.2 million.

Our research and development expenses were essentially unchanged in 2012 compared to 2011 as increases in personnel related expenses for additional employees of approximately $0.2 million and additional expenses for projects and prototypes and other expenses of approximately $0.3 million were offset by a reduction of approximately $0.5 million in third party consulting fees.

Our general and administrative expenses increased in 2012 by $1.5 million to $9.1 million from $7.6 million in 2011, primarily due to increased levels of personnel related expenses of approximately $1.4 million, which was primarily due

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to stock compensation expenses of approximately $1.0 million. In addition, there were increases in general corporate overhead in 2012 of approximately $0.1 million.

Amortization of purchased intangible assets increased by $0.1 million due to the acquisition of intellectual property.

Income from operations

Income from operations for the year ended December 31, 2012 increased approximately $3.6 million, or 15.8%, compared to income from operations in 2011. The increase in income from operations was primarily the result of our increased sales in 2012 compared to 2011, which was partially offset by the increases in cost of sales and operating expenses described above.

Other expense, net

Other expense, net for the year ended December 31, 2012 increased by approximately $1.8 million to $3.8 million in 2012 compared to $2.0 million of other expense, net in 2011. Within other expense, net, interest expense increased in 2012 by $1.5 million due primarily to increased average borrowings under our Existing Credit Facility. In addition, other expenses (income), net increased in 2012 by $0.3 million primarily due to a loss on the disposal of assets which were no longer needed.

Income tax expense

Income tax expense for the year ended December 31, 2012 increased by approximately $1.1 million to $8.2 million compared to income tax expense of $7.1 million in 2011. Effective tax rates were 36.5% and 34.3% for 2012 and 2011, respectively. The increase in the effective tax rates for 2012 was primarily caused by the December 31, 2011 expiration of the ability to generate additional federal research and development credit. As of December 31, 2012, this credit had lapsed, although it has been subsequently extended.

Net income

As a result of the factors discussed above, our net income increased $0.7 million, or 5.2%, to $14.2 million in 2012 from $13.5 million for 2011.

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Quarterly Results of Operations

The following tables set forth our unaudited quarterly consolidated statements of operations data and our unaudited statement of operations data as a percentage of total revenue for each of the nine quarters in the period ended March 31, 2014. The unaudited quarterly consolidated statements of operation data were prepared on a basis consistent with the audited consolidated financial statements included in our 2013 Form 10-K, which is incorporated by reference in this prospectus. In the opinion of management, the quarterly financial information reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data. This information should be read in conjunction with our consolidated financial statements and related notes included in our 2013 Form 10-K and 2014 first quarter Form 10-Q, which are incorporated by reference in this prospectus. The historical results presented below are not necessarily indicative of the results to be expected for any future period, and the results for any interim period may not necessarily indicative of the results of operations for a full year.



	Three Months Ended
(in thousands, except shares and per share data)	Mar. 31,		June 30,		Sept. 30,			Dec. 31,			Mar. 31,			June 30,		Sept. 30,			Dec. 31,		Mar. 31,
	2012		2012		2012			2012			2013			2013		2013			2013		2014
Sales	$	45,671	$	60,721	$	72,864		$	56,613		$	54,878		$	70,316	$	82,293		$	65,259	$	56,108
Cost of sales	32,572		44,275		52,745			43,448			39,163			49,951		56,960			46,543		39,091
Gross profit	13,099		16,446		20,119			13,165			15,715			20,365		25,333			18,716		17,017
Operating expenses:
Sales and marketing	3,177		2,961		3,150			3,282			3,284			3,478		3,621			3,771		3,844
Research and development	2,376		2,393		2,427			2,531			2,355			2,588		2,500			2,967		3,135
General and administrative	1,951		2,895		2,223			1,994			2,673			2,815		3,098			2,820		3,930
Amortization of purchased intangibles	1,304		1,329		1,341			1,341			1,341			1,341		1,341			1,355		1,361
Total operating expenses	8,808		9,578		9,141			9,148			9,653			10,222		10,560			10,913		12,270
Income from operations	4,291		6,868		10,978			4,017			6,062			10,143		14,773			7,803		4,747
Other expense, net:
Interest expense	233		637		1,424			1,192			957			997		2,015			157		110
Other expense (income), net	46		255		(14		)	(10		)	(34		)	52		(38		)	7		(32		)
Total other expense, net	279		892		1,410			1,182			923			1,049		1,977			164		78
Income before income taxes	4,012		5,976		9,568			2,835			5,139			9,094		12,796			7,639		4,669
Provision for income taxes	1,373		1,659		4,099			1,050			1,590			3,373		2,872			2,732		1,728
Net income	$	2,639	$	4,317	$	5,469		$	1,785		$	3,549		$	5,721	$	9,924		$	4,907	$	2,941
Earnings per share:
Basic	$	0.09	$	0.14	$	0.16		$	0.05		$	0.11		$	0.17	$	0.28		$	0.14	$	0.08
Diluted	$	0.08	$	0.14	$	0.16		$	0.05		$	0.10		$	0.17	$	0.27		$	0.13	$	0.08

Weighted average common shares used to compute net income per share:
Basic	30,334		30,946		33,465			33,463			33,460			33,460		35,013			36,317		36,419
Diluted	32,562		31,153		33,718			33,962			34,149			34,667		36,423			37,612		37,566

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	Three Months Ended
	Mar. 31,		June 30,		Sept. 30,		Dec. 31,		Mar. 31,		June 30,		Sept. 30,		Dec. 31,		Mar. 31,
(as a percentage of revenue)	2012		2012		2012		2012		2013		2013		2013		2013		2014
Sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	71.3		72.9		72.4		76.7		71.4		71.0		69.2		71.3		69.7
Gross profit	28.7		27.1		27.6		23.3		28.6		29.0		30.8		28.7		30.3
Operating expenses:
Sales and marketing	7.0		4.9		4.3		5.8		6.0		4.9		4.4		5.8		6.9
Research and development	5.2		3.9		3.3		4.5		4.3		3.7		3.0		4.5		5.6
General and administrative	4.3		4.8		3.1		3.5		4.9		4.0		3.8		4.3		7.0
Amortization of purchased intangibles	2.9		2.2		1.8		2.4		2.4		1.9		1.6		2.1		2.4
Total operating expenses	19.4		15.8		12.5		16.2		17.6		14.5		12.8		16.7		21.9
Income from operations	9.3		11.3		15.1		7.1		11.0		14.5		18.0		12.0		8.4
Other expense, net:
Interest expense	0.5		1.0		2.0		2.1		1.7		1.4		2.4		0.2		0.2
Other expense (income), net	0.1		0.4		*		*		(0.1	)	0.1		*		*		(0.1	)
Total other expense, net	0.6		1.4		2.0		2.1		1.6		1.5		2.4		0.2		0.1
Income before income taxes	8.7		9.9		13.1		5.0		9.4		13.0		15.6		11.8		8.3
Provision for income taxes	3.0		2.7		5.6		1.9		2.9		4.8		3.5		4.2		3.1
Net income	5.7	%	7.2	%	7.5	%	3.1	%	6.5	%	8.2	%	12.1	%	7.6	%	5.2	%

*Represents less than 0.1%

Liquidity and capital resources

Our primary cash needs are to support working capital and capital expenditures. We have generally financed our historical needs with operating cash flows and borrowings under our credit facilities. These sources of liquidity may be impacted by fluctuations in various matters, including demand for our products, investments made by us in our plant and equipment and other capital expenditures, and expenditures on general infrastructure and intellectual technology. A summary of our operating, investing and financing activities are shown in the following table:



	For the year ended December 31,									For the three months ended March 31,
(in thousands)	2011			2012			2013			2013			2014
Net cash (used in) provided by operating activities	$	21,038		$	17,367		$	22,619		$	7,376		$	(396	)
Net cash used in investing activities	(3,056		)	(5,761		)	(5,042		)	(854		)	(43,230		)
Net cash provided by (used in) financing activities	(18,370		)	(11,705		)	(15,907		)	(6,400		)	43,939
Effect of exchange rate changes on cash	—						(2		)	(4		)	6
Increase (decrease) in cash and cash equivalents	$	(388	)	$	(99	)	$	1,668		$	118		$	319

We expect that cash on hand, cash flow from operations and availability under our credit facilities will be sufficient to fund our operations for at least the next 18 months from the date of this prospectus.

Net cash provided by operating activities

Cash provided by operating activities primarily consists of net income, adjusted for certain non-cash items including provision for doubtful accounts receivable (including product returns and cash discounts), depreciation and amortization, stock-based compensation, deferred income taxes, amortization of loan costs and the effect of changes in working capital and other activities.

In the three months ended March 31, 2014, cash used in operating activities was $0.4 million and consisted of net income of $2.9 million plus non-cash items totaling $1.3 million less changes in operating assets and liabilities and

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other adjustments totaling $4.6 million. Non-cash items and other adjustments consisted primarily of depreciation and amortization of $2.0 million, stock-based compensation of $0.8 million, offset by an excess tax benefit from the exercise of stock options of $1.1 million and a $0.5 million change in deferred taxes. Cash used related to operating assets and liabilities consisted primarily of an increase in inventory of $7.0 million, and a decrease in accrued expenses of $3.4 million, partially offset by a decrease in accounts receivable of $5.1 million and an increase in accounts payable of $2.4 million, primarily driven by normal growth of our business and the acquisition of the business of Sport Truck. Additionally, there was an increase in prepaid expenses and other current assets of $1.8 million, resulting primarily from prepaid compensation expense related to amounts paid for Sport Truck and recurring payments made under our corporate insurance programs. Approximately $1.1 million in cash was provided by an increase in income tax payable.

In the three months ended March 31, 2013, cash provided by operating activities was $7.4 million and consisted of net income of $3.5 million plus non-cash items totaling $2.3 million plus changes in operating assets and liabilities and other adjustments totaling $1.6 million. Non-cash items and other adjustments consisted primarily of depreciation and amortization of $1.9 million and stock-based compensation of $0.7 million, partially offset by a $0.5 million change in deferred taxes. Cash provided in operating assets and liabilities consisted primarily of an increase in accounts payable of $8.2 million, and a decrease in accounts receivable of $2.3 million, partially offset by an increase in inventory of $8.5 million and a decrease in accrued expenses of $0.9 million.

In 2013, cash provided by operating activities was $22.6 million and consisted of net income of $24.1 million plus non-cash items totaling $8.7 million less changes in operating assets and liabilities and other adjustments totaling $10.2 million. Non-cash items and other adjustments consisted primarily of depreciation and amortization of $7.8 million, stock-based compensation of $2.5 million, a write-off of unamortized loan origination costs of $1.4 million, a $3.2 million change in deferred taxes and amortization of loan fees of $0.3 million. Cash used related to operating assets and liabilities consisted primarily of an increase in accounts receivable of $8.5 million, an increase in inventory of $7.4 million, partially offset by an increase in accounts payable of $3.6 million and an increase in accrued expenses of $2.3 million, primarily due to the increase level of business. Additionally, there was an increase in prepaid expenses and other current assets of $0.4 million and $0.5 million in income tax receivable.

In 2012, cash provided by operating activities was $17.4 million and consisted of net income of $14.2 million plus non-cash items totaling $1.1 million plus changes in operating assets and liabilities and other adjustments totaling $2.0 million. Non-cash items and other adjustments consisted primarily of depreciation and amortization of $7.2 million, stock-based compensation of $2.1 million, amortization of loan fees of $0.4 million and loss on sale of assets of $0.3 million, partially offset by the excess tax benefit from the exercise of stock options of $5.8 million and a deferred income tax benefit of $3.2 million. Cash used in operating assets and liabilities consisted primarily of an increase in accounts receivable of $7.0 million as a result of increased sales volume, an increase in prepaid expenses and other current assets of $0.5 million, and an increase in inventory of $4.7 million related to increased sales and components for new products, partially offset by an increase in accounts payable of $3.0 million, an increase in accrued expenses of $2.8 million, in each case largely related to the increase in sales, and an increase in income taxes receivable and deferred rent of $7.9 million and $0.7 million, respectively.

In 2011, cash provided by operating activities was $21.0 million and consisted of net income of $13.5 million plus non-cash items totaling $5.5 million plus changes in operating assets and liabilities and other adjustments totaling $2.0 million. Non-cash items and other adjustments consisted primarily of depreciation and amortization of $6.6 million and stock-based compensation of $1.0 million, and amortization of loan fees of $2.0 million, partially offset by a deferred income tax benefit of $2.4 million. Cash used in operating assets and liabilities consisted primarily of increases in accounts receivable of $1.2 million, prepaid expenses and other current assets of $0.8 million and an increase in inventory of $1.5 million, partially offset by an increase in accounts payable of $0.6 million, an increase in accrued expenses of $2.1 million and an increase in income taxes receivable of $2.7 million.

Net cash used in investing activities

Cash used in investing activities primarily relates to acquisitions, purchases of property and equipment and investments in our manufacturing and general infrastructure.

In the three months ended March 31, 2014, cash used in investing activities was $43.2 million, which consisted of primarily $40.9 million paid for the acquisition of the business of Sport Truck and $1.4 million in consideration paid for our 2013 acquisition of Toxoholics GmbH.

In the three months ended March 31, 2013, cash used in investing activities was $0.9 million, which consisted of purchases of property and equipment.

In 2011, 2012 and 2013, cash used in investing activities was $3.1 million, $5.8 million and $5.0 million, respectively. In 2013, cash used in investing activities consisted primarily of purchases of property and equipment of $3.9 million

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and the cash paid at closing of $1.1 million related to our acquisition of our third party distributor. In 2012, cash used in investing activities consisted primarily of purchases of property and equipment of $4.9 million, and an acquisition of an intangible asset consisting of patents related to bicycle suspension technology for $0.8 million. In 2011, cash used in investing activities consisted primarily of purchases of property and equipment. We estimate that our capital expenditures for 2014 will be approximately $5.8 million to $6.8 million, primarily related to investments in our manufacturing and general infrastructure and expenditures for our operations in Taiwan.

Net cash used in financing activities

In the three months ended March 31, 2014, net cash provided by financing activities was $43.9 million, which consisted primarily of proceeds from issuance of debt of $49.7 million net of origination fees and net repayments of $8.0 million all under the 2013 Amended and Restated Credit Facility, and $2.2 million from the exercise of stock options. In the three months ended March 31, 2013, net cash used by financing activities was $6.4 million, which consisted primarily of payments under our credit facility.

In 2013, net cash used in financing activities was $15.9 million, which consisted primarily of net payments on the Prior Credit Facility of $59.3 million partially offset by net proceeds from the IPO of $36.1 million and net borrowings of $7.2 million from the 2013 Credit Facility. Net cash used in financing activities was $11.7 million in 2012 compared to $18.4 million in 2011. The decrease in net cash used in financing activities was partially attributable to our recapitalization in 2012.

Credit facility

Concurrently with the closing of our IPO in August 2013, we used the net proceeds that we received from the IPO to repay a portion of the then outstanding indebtedness under our Prior Credit Facility. In addition, in connection with the IPO in August 2013, we entered into our 2013 Credit Facility with SunTrust Bank and other named lenders and borrowed $28.5 million thereunder. Of such borrowings, $21.6 million was used to repay our remaining indebtedness that was then due under the Prior Credit Facility and the Prior Credit Facility was terminated, and the remaining amount of such borrowings was used to pay IPO related fees and expenses and to provide additional working capital.

On March 31, 2014, in connection with our asset purchase of Sport Truck, we amended and restated the 2013 Credit Facility. The Amended and Restated 2013 Credit Facility provides a maturing secured term loan in the principal amount of $50.0 million, subject to quarterly amortization payments, and extends the term of the 2013 Credit Facility through March 31, 2019. The proceeds of the term loan were used, in part, to fund the acquisition of Sport Truck and to pay down the revolving line of credit provided under the 2013 Credit Facility. The Amended and Restated 2013 Credit Facility provides for interest at either a rate based on the London Interbank Offered Rate, or LIBOR, plus a margin ranging from 1.50% to 2.50%, or based on the prime rate offered by SunTrust Bank plus a margin ranging from 0.50% to 1.50%. The Amended and Restated 2013 Credit Facility is secured by substantially all of our assets, restricts our ability to make certain payments and engage in certain transactions, and also requires that we satisfy customary financial ratios. We were in compliance with the covenants as of March 31, 2014.

Contractual obligations and commitments

As of December 31, 2013, we had the following contractual obligations (in thousands):



Payments due by period	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Long-term borrowings	$	8,000	$	—	$	—	$	8,000	$	—
Operating lease obligations	10,999		3,030		5,315		2,654		—
Purchase obligations and other	3,458		3,458		—		—		—
Total	$	22,457	$