Greetings and welcome to the Fox Factory fourth quarter 2014 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now hand the conference over to Mr. David Haugen, General Counsel. Thank you. Mr. Haugen, you may now begin.

Thank you. Good afternoon and welcome to Fox Factory's fourth quarter and fiscal year 2014 earnings conference call. On the call today are Larry Enterline, Chief Executive Officer, Mario Galasso, President Business Divisions and Zvi Glasman, Chief Financial Officer. By now, everyone should have access to the fourth quarter and fiscal year 2014 earnings release, which went out today at approximately 04:05 P.M. Eastern Time. If you have not had a chance to review the release, it's available on the Investor Relations portion of our website at www.ridefox.com. Please note that throughout this call, we will refer to Fox factory as Fox or the company. Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside the company's control and can cause future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks detailed in the company's earnings release and annual report on Form 10-K filed with the Securities & Exchange Commission. Except as required by law, the company undertakes no obligation to update any forward-looking or other statements herein, whether as a result of new information, future events or otherwise. In addition, within our earnings release and in today's prepared remarks, non-GAAP adjusted net income, non-GAAP adjusted earnings per diluted share, adjusted EBITDA and adjusted EBITDA margin percent are referenced. It is important to note that these are non-GAAP financial measures. A reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures are included in the company's press release which has also been posted on our website. And with that, it is my pleasure to turn the call over to our CEO, Mr. Larry Enterline.

Thank you, David. Good afternoon everyone and thank you for joining us today. On today's call, I will provide a brief overview of our fourth quarter and full-year results, an overview of our industry and progress on our ongoing strategic initiatives. Mario will then discuss recent highlights from each of our businesses. Zvi will review the financial results in more detail and discuss our guidance. After that, we will open up the call for any questions that you may have. We finished the year on a positive note and we are pleased to report sales, gross margin, adjusted EBITDA and adjusted EPS growth for both the fourth quarter and full-year 2014. Our top line increased 13.6% in the fourth quarter to $74.1 million. This growth was driven by strong demand for our powered vehicle products which increased 34% in the fourth quarter and reflects solid growth in side-by-side, truck and on road motorcycle sales. While we are very pleased that our mountain bike sales increased 2.3% in the fourth quarter, we believe competitive pressure will continue to hamper our current model year sales through early in the second quarter. We are looking forward to the launch of our model year 2016 product line in the spring. Our Factory 36 all-mountain suspension fork, which we believe has been very well received by our customers as well as the trade media continues to give us confidence that we are well positioned to see improvements in our mountain bike business when our model year 2016 begins shipping in volume. Mario will provide some color on this during his remarks. For the full-year, our consolidated sales grew 12.5% to $306.7 million. We continued to make progress on our key operational initiatives targeted at improving manufacturing and supply chain efficiencies and execution on our product…

Thank you Larry and good afternoon everyone. During my remarks, I would like to discuss some of our recent business and industry highlights. In the bike business, we are currently hosting our Annual International Distributor Meeting. Each year, we kick off our aftermarket sales efforts by bringing and distributors from around the world to our corporate headquarters in preparation for the new model year selling season. The meeting started off on a great note with positive feedback and enthusiasm for our model year 2016 line. This echoes the positive reactions by our OEMs as the spec selling cycle lines down over the next couple of months. As mentioned on our previous calls, we have ratcheted up our marketing communications timeline by exposing the global media to model year 2016 via Racing Applications Development program or R.A.D. program for short by allowing the media to write our sponsored athletes bikes as they were raised with model year 2016 precursor features and technologies. The result of this timeline shift has been and will be third-party print and web testimonials prior to the Sea Otter Classic, which is the typical industry season kickoff held in Monterey, California in April each year. With positive feedback from the media, the international aftermarket distributors and global OEM customers, we feel well positioned for a solid model year 2016. Model year 16 will begin to impact our results in the second quarter, despite what appear to be spec gains made through this cycle as we saw in model year 2015, sell-through of the bikes were specced on another macro factors can affect results. We will be working closely with our OEM customers to align their forecasts with our production capacity through the early part of the model year 2016 delivery cycle. Looking ahead, our development efforts for…

Thanks, Mario. Good afternoon, everyone. I will primarily focus on our fourth-quarter results, briefly recap our annual results and then review our guidance. Sales for the fourth quarter of 2014 were $74.1 million, an increase of 13.6% versus sales of $65.3 million in the fourth quarter of 2013. As previously mentioned by Larry, the sales increase reflects 34% growth in powered vehicle products and 2.3% increase in mountain bike product sales in the fourth quarter of 2014 as compared to the fourth quarter of 2013. Our powered vehicle growth was positively impacted by our Sport Truck acquisition as well as growing demand for Fox branded products. While our bike product sales were up year-over-year, we expect a headwind for bike in fiscal Q1 as we close out the model year and deal with the lingering repercussions of the labor dispute at the West Coast ports. Gross margin was 29.6% for the fourth quarter of 2014, a 90 basis point increase from gross margin of 28.7% in the prior-year period. The improvement in gross margin reflects the successful execution of our operational initiatives targeted at improving manufacturing and supply chain efficiencies along with continued execution of our overall product design for manufacturability program. It's important to note that excluding inventory value adjustments for our 2014 acquisitions, our gross margin improvement would have been 120 basis points for the quarter and 170 basis points for the year, which is in line with our previously communicated gross margin improvement targets. Total operating expenses were $17.7 million or 23.9% of sales in the fourth quarter of 2014, compared to $10.9 million or 16.7% of sales in the fourth quarter of the prior year. The increase in operating expense reflects the inclusion of Sport Truck's operating expenses in our consolidated results, $1.2 million of acquisition…

Thank you, Zvi. With that, we would like to open the call for any questions you may have. Operator?

[Operator Instructions]. Our first question is from Jon Berg of Piper Jaffray. Please go ahead.

Great. Thanks a lot for taking our question, guys and congratulations too on winning back the Raptor business.

Thank you.

Yes. My first question is actually on the Ford Raptor business. I know you said you guys aren't expecting that to flow in until the second half of 2016. Given the popularity that the vehicle's last generation saw, do you have any indication yet on if volumes are going to be any higher than they were for the last model?

Well, we can't comment specifically on volumes, but we found that the last Raptor was a pretty popular vehicle. The new one has a lot more capabilities. We are expecting similar popularity.

Okay, great. Thank you. And then, in just trying to assess the opportunity a little more with your most recent acquisition, can you give us your current view on the potential road bike component industry versus the mountain bike component industry and what the sizes for each and how quickly each is growing?

Let me start it off and then maybe Larry or Mario could take the rest of the question. I think when we announced the acquisition, we announced that we thought that the business could grow in the high single digits. We have no reason to change that view. We are pretty excited about the business. One thing to keep in mind, as you are putting your models together is, of course, at the time we announced the acquisition, the Canadian dollar was a lot stronger than it is today and so we have taken that into account on our guidance, but if you just translated their sales on today's value based on what it was when we acquired it, I think the currency may be down almost as much as 10%. So keep that in mind and with that.

Yes, Jon. Let me just comment and I will let Mario come in with some detail. But when we got Race Face/Easton, we were excited on a couple different levels. One certainly, it is going to help our mountain bike offering as we go forward. As you noted though, it does take us into road which is something we have wanted to get some experience on to expand the universal things we can work on. Additionally, Race Face and Easton have some other ancillary products that while they are not of prime strategic interest, are things that we do think we can fit in your ride dynamics solution as we go forward.

Yes and I would add to that, Jon, this is Mario, that you have seen in sort of our core legacy business in powered vehicles where we have taken our sort of off-road in the dirt expertise and crossed over nicely into road going vehicles and circle track and things like this we feel like there are ride dynamics opportunities in road bicycles that we are excited about.

Great. Thanks a lot, guys. Good luck in 2015.

Thank you.

Thank you.

Thank you. The next question is from Larry Solow of CJS. Please go ahead.

Hi. Thanks. Good afternoon guys. Just a couple of quickies. On terms of the guidance, can you give us any more color, maybe not segment by segment or line item by line item, but do you expect organic growth in your mountain bikes was basically flat this year. And do you expect some improvement? Do you expect growth? And could that be near historical or longer term targets?

Yes. I think what we would say is, we have noted that there is a Q1 headwinds, both in terms of the competitive pressures and in terms of the West port issues. When we get to the new model year that begins shipping in larger volumes towards the very end of Q2, we believe that the bike business can grow at our stated target of mid-to high single digits. Remember, we had mentioned that the high single-digit part of the business, what happened with things such as the lower price point fork, we are not really introducing until next year and so we would tell you that the target for this year would be mid-single-digit growth for bike, which is consistent with our longer-term view of the business.

Got you and that mid single-digit growth would be, I guess, ex the impact of the strike or assuming with it?

Well, I think we have mentioned, we hit an air pocket with the growth in bike through last year and we mentioned that that headwind would continue through Q1 as we wrap upped the model year. So once we are beyond that and the strike really impacts the old model year, we believe that on a model year business, the bike business is well-positioned.

Got you and is the strike, it sounds like obviously bike is still a greater percentage of your business, but it sounds like the strike is impacting, I realize there is much more components and it sounds like it is impacting the bike industry proportionally much more on your sales than it would have on the powered vehicle side? Is that a fair statement?

I don't think so. I think it's impacting all elements of our business.

We source a lot of our parts and components from the Far East for both of our businesses. Clearly things would have been worse had we not have some of our manufacturing for bike in Taiwan already. However it still does impact it because we are just in the beginning stages of manufacturing rear shocks and as you can appreciate, if you can't get a guy a rear shock he might not want the fork at the same time. So it does have a disproportionate impact. I think we are looking forward to getting the ports cleared out here and getting on into the second quarter and upward and onward for the year.

Right, and I realize your guidance has widened because of this sort of uncertainty. Does the high end of guidance assume that the losses are pretty short term or the impact is done by Q2? And net of it all, even at the high-end, you are still assuming that there is some impact, right? I mean, it's not like you are making up all of this impact because it's lost sales, I guess? Is that fair to say?

Well, yes. I mean, again, we are going to have impact, as you can see, in the first quarter that we can't avoid and I think we factored that into the guidance range. Again, it puts a lot of variability into it because some of those sales could be lost sales, particularly as we transition out of a model year in bike.

Got you. Great. Okay. Thanks. I appreciate it.

Thank you. The next question is from Mike Swartz of SunTrust. Please go ahead.

Hi, guys. Good afternoon. Maybe just touching on the powered vehicle business. I know you don't break it out, per se, in the press release but could you give us a feeling for how the core business is growing excluding the Sport Truck acquisition? I think it's been up mid-teens of late in the last couple of quarters. And then maybe how you think about that going into 2015?

Yes. First of all, we do break out. As we have mentioned in some previous calls, that Sport Truck did about $10 million in sales in the quarter. But as we mentioned, they used to be our largest truck aftermarket distributors and some of those sales would have shown up in our sales prior. Additionally, one of the things we have got with them and again as we have mentioned in some previous calls as well, is they have a very healthy distribution channel and one of the thing we have availed ourselves is on that channel. So it's sales that might have otherwise shown up in our results would show up in theirs. I think the best way to think about it is that we have been saying solid double-digit growth for powered vehicles and not beyond that, right. Remember this year, we have got some of the headwinds because Ford stopped shipping in the back half of this year and so -- I am sorry, in 2014 and we now have headwinds again for all of 2015 as well. But we feel very confident that the core legacy Fox business when you strip out the one-time issues like this can be a solid double-digit grower and we feel the same way about Sport Truck acquisition as well. We feel that it can grow double-digit as well.

Yes. I think, Mike, if you at some of the wins that were announced in January. The Raptor, we know it's coming back now. We know the timeframe. That's obviously very important to us. I think, as Mario mentioned, we were pretty pleased to get on some new Polaris vehicles that, I think, are going to help us as we go forward. So I think we feel pretty confident about the growth rates Zvi was telling you about.

Thanks for the color on that. And then just two quick follow-ups. Just in terms of the Race Face/Easton business, did that had anything to the fourth quarter?

Keep in mind, we bought them, we closed in mid-December right around Christmas. So you can imagine, it wasn't too much in sales. For competitive reasons, we just do not want to break the numbers out, but de minimis is what I would say.

Okay. That's fair. And then finally, just I know announced, I think it was the third quarter the share buyback program. One, did you buy back shares in the quarter? And then two, do you have any share repurchases baked in the guidance for 2015?

We bought a small amount of shares by the end of the year, which is disclosed in our 10-K. We have not baked any buybacks into our guidance because as you know, there is all sort of restrictions about how quickly you can buy shares and what amounts of it you are able to buy. And so we will update guidance as we actually buy the shares, but it's not our intention to forecast those and include those forecast in our guidance.

All right. Great. Thanks.

Thank you. The next question is from Jon Anderson with William Blair. Please go ahead.

Hi. Good afternoon, guys.

Hi, John.

Hi, John.

I will start on mountain bikes. The question I have there is, it sounds like you are more constructive at this point. I think you used the word confident that the business will improve in 2015, based on the response to model year 2016. I think in calendar 2014, there were also point-of-sale issue that you brought up and then also a supplier disruption issue. I am wondering if you can just talk a little bit about those two aspects and how they may influence 2015? In other words, is the supplier disruption issue in your rearview mirror at this point? What gives you confidence of that? And then with respect to point-of-sale, do you think you have been specced on bikes that you were looking to be specced on such that the sell-through market could come through at a stronger pace in the year ahead?

Yes. Hi, Jon. This is Mario. So service supplier. The supply chain issue that we referenced in the last couple of quarters, we believe is in our rearview mirror. As I touched on in my portion of the call, we are pleased with our model year 2016 spec placements at this point. But there are factors that are outside of our control like this previous supply chain issue and we can't really speak to anticipating anything like that for this year and for model year 2016. We have gotten a good response from a fair amount of industry experts, media, OEs and distributors about model year 2016 and we think we made some progress versus model year 2015 and we will have to see how all that plays out.

Okay and then sticking with that, Mario. The comment you hade done on fat tire bikes or large tire bike, I guess you indicated that that should be a mid mid-to long-term positive for the industry. What are the implications nearer term? The bikes with this type of equipment, do they have suspensions on them? Will they have suspensions in the future in your estimation, if they don't today? I am just trying to again understand, both the near-term and the longer term implication?

Sure. So when 29ers first started to show up at Interbike's OutDoor Demo portion of the tradeshow, they were non-suspended single speed, very niche thing. And as we have all experienced, they have become a mainstay and front suspension and full suspension mountain bikes going forward. And so the fat tire bike has started the same way. It was the non-suspended bike that was geared really towards deep sand and winter snow riding and we are seeing that those are being developed into full suspension bikes and evolving just like the 29er did. So I expect that that will continue. And the slightly smaller tire size, the 27.5 plus, it's being called that will immediately cater to the current enthusiast. So like 29 and like 27.5 have been good drivers for the last several years, we think these fat bikes and 27.5 plus/semi fat will be similar drivers going forward.

Okay. That's really helpful. The last one for me is just, Zvi you talked about currency. Could you talk a little bit more about how that might affect the P&L in 2015? Is this an issue of not being as price competitive in Europe? Or are there margin pressures that this creates? If you could just help us understand a little bit more about how that could influence either demand or the P&L on various lines?

Yes. So for the most part, we sell most of our products in U.S. dollars. The only exception of that Race Face/Easton, which have some sales in Canadian. We have a small amount of sales in Taiwan NT as well. And so for the most part, we don't have the same issues that the multinationals have, where they just literally translate in earnings at a different currency rate and have less dollars as a result. That's not our issue. I think the one thing that we are keeping an eye on is our sales to our European customers and to U.S. customers that sell bikes in Europe are made in USD. So what that means is that our components are more expensive when put on a bike being sold to the European customers. And I guess that can manifest itself in a number of different ways. Number one, it can create margin pressures on those OEMs, which could affect their ability or willingness to spec Fox, because we are more expensive. That would be one way. Another way would be that those bikes, if they are going to pass along those price increases to end customers, those bikes could become more expensive to an end customer and could affect the sell-through. That's another way. And I guess the only other piece on our P&L is, we retranslate the balance sheet and whatnot at the end of the day through our foreign operations and so a retranslation is minor stuff. When we retranslate, some of that shows up as currency gain or loss. So we are going to keep an eye on it and clearly it is more competitive pressure on us when our things being sold to foreign customers go up in cost. It's not a good thing. But we have been through cycles like this in the past and they kind of work themselves out.

Thanks a lot, guys. Good luck.

Thank you.

Thank you. The next question is from Rafe Jadrosich of Bank of America Merrill Lynch. Please go ahead.

Hi. Thanks for taking my question. Can you talk a little more about what you are seeing in Europe now in terms of inventory levels? And maybe that the sell-through rates? Then maybe remind us how much of your end bike consumers is over there?

As far as the end consumer, we will tell you that it's probably on a blended basis pro forma for our entire company now, after giving effect for Race Face and for Sport Truck, it's around 35%, 36% in Europe now. And that is, of course, because a larger portion -- our powered vehicles business is more North American-based. As for the inventory question, let me hand that one off to Mario.

Rafe, we believe that inventory levels are in good shape globally.

All right. Thank you. That's helpful. And then, as you look at the range in your guidance for revenue, can you just talk about what could go right for you guys to hit the high end of the guidance and what's sort of baked in to the low-end? And then any color you can give on what the organic trend is, if you exclude the Race Face acquisition, might be helpful as well?

I will let Zvi give you the trend rate, but let me comment on what could go right and what could go wrong. I think the lower end says we have trouble getting things out of the port this quarter, if you look at both the quarter and the year range and a lot of that translates into lost sales and that we wouldn't recover this year. I think that might be toward the lower end. I think what could go right is better sell-through on both bike and powered vehicles.

And the second part of the question about the growth rates, could you ask that again, Rafe?

So excluding the Race Face acquisition, what would be the trend?-I think are you expecting Race Face to grow from that $24 million from last year?

Yes, right. That was the part that I answered earlier for Mike here, I think. So we think that the bike other than Q1 which faces headwinds, we think it can achieve our longer-term targets of mid-to-high single digits with this being more like a mid-year because we don't have the new fork suspension, et cetera. As for Race Face, yes, when we announced it, we indicated that it would grow in the high single digits which we still believe. But you have to take into account the fact now that adjusted for the currency, it's going to be a little lower because now we translate those sales back on a Canadian dollar sales base that's, I want to say close to 10% lower than when we bought the company.

All right. Thank you.

Thank you. The next question is from David Kelley of BB&T Capital. Please go ahead.

Good afternoon, gentlemen. Thanks for taking my questions. And most of mine have been answered. I have a couple quick follow-ups on the prior question here on the lower price point forks, if you could just give us any additional color on the timeline there? Are we looking at a aftermarket for 2016 launch or early 2017? Just any additional color would be greatly appreciated.

Yes. David. This is Mario. So we may see some aftermarket contribution here towards was the very tail end of fiscal 2015. The impact that we are really looking for is in model year 2017, which starts to impact Q2 of fiscal year 2016.

Okay. Great. Thank you. And then I had a follow-up also on the powered vehicle side. I think you mentioned motorcycles a driver of the segment growth in the fourth quarter. Just on a high level then, what are your expectations for that business line for you over the next couple of years here? And any additional color on the Harley-Davidson initiative would be greatly appreciated as well.

Yes. David, I think our expectation is for that business to get bigger. We are just getting going with Harley just around this quarter. I think it was received well by the channel. We are going to look at that sell-through and how we get better at that. We would look to cover more Harley models in the future in the aftermarket. I think that's something that we are working on. We have been very pleased with our work with Polaris and the Indian relaunch. I think that that motorcycle seems to be selling well and in well received and I think it's important to note there and I am a long time road bike rider, that it's being sold on ride quality which we feel pretty good about being a part of that.

All right. Great. Thank you. I appreciate the color.

Sure.

Thank you. The next question is from Jim Duffy of Stifel. Please go ahead.

Thanks. Hello, everyone.

Hi, Jim.

I hope you guys are doing well. On the topic of FX in Europe, isn't the dynamic the same for many of the major competitors? Or have you seen some of those competitors make adjustments to pricing?

I think I guess the point is, Jim, that if bikes are more expensive, even if they are more expensive for us and our competitor, that's going to affect sell-through. That's really, I guess, the main point.

Got it and then, Zvi, can you explain the fair value of contingent consideration adjustment? Why the adjustment? Had you not been accruing for that?

We actually had. When we did the deal to acquire Sport Truck, you have to fair value the expected earnout payment. So there is a maximum earnout payment and then you have to probability where you apply that back shares to get an expected amount. The business has been performing very well, better than the assumptions when we initially laid it out and as a consequence of that, each quarter we evaluate, we restate that fair value and we restated it up because they are doing better and which will require likely and hopefully a bigger payment for them.

Okay.

Does that make sense, Jim?

It does makes sense. I am just wondering why excluded then? It seems that business is performing there.

Because it's a part of the acquisition.

You are getting better earnings from it.

Well, the reason is, it's an acquisition cost, right. We bought the company, part of what we bought was, a part of the purchase price was structured as an earnout, right, which was an intentional way we structured the deal. And so valuing up and down, first of all, it's non-cash, right. It's a valuation that could change tomorrow or the next week, right, as you assess the probability. So number one, it's non-cash. We know that it will convert to cash. And number two, it's associated with the acquisition of an entity as we considered an acquisition cost. It's purchase price.

And then last question. I know it's small on a relative basis, what's the influence of Race Face/Easton on the margins as that consolidates in?

If you looked at the historical numbers, it was $4.3 million on $23.6 million of revenue. But we made sure to indicate in the press release when we announced the deal that we were going to be investing in the infrastructure. So we think that, as you guys know, we are planning on growing the gross margin. We are not planning on growing the Rae Face/Easton gross margin. We think we have to continue to invest in that business. They had an infrastructure that wasn't appropriate for being part of a public company. So are going to put the appropriate level of infrastructure and so it will be a drag versus what we were planning on getting on the rest of the business.

Okay. Thanks for that. That's all I have, guys.

Okay, Jim. Thanks.

Thank you. The next question is from Craig Kennison of Robert W. Baird. Pease go ahead.

Good afternoon. Thanks for taking my questions as well. You have addressed most of them, but on the port issue, getting back to that. Did you incur any higher expenses in the fourth quarter or in the first quarter to work around that issue?

We did a little bit in Q4, but we thought it was largely immaterial. This things, really the slowdown started in November, but we were pretty able to easily work around, it did cost us a little in efficiency. It's really when it started getting worse in January and a lot worse in February that it really impacted us. So we did spend -- it impacted us two ways, I would say, Craig. Certainly we had to spend money, extra money on freight to try to mitigate it in terms of airing things and bringing things into different ports and trucking them in. It's logistically was a challenge. The other way that it, I think, will impact us this quarter is inefficiency. When you have to idle a line this week because you don't have parts and then work it overtime next week because you are trying to hit the customer commitment and that does, in an operation, create a lot of inefficiency that we will have to deal with. But that is envisioned in the guidance we gave you.

Got it. That's helpful. And then just in terms of sell-through, at what point do get visibility into sell-through, especially in Europe, given your products and I guess the products on which your products are sold are going to be higher in price? There is a real chance that volume suffer from that. And at what point will you get that information from your channel partners?

Yes. Craig, this is Mario. So as we saw with model year 2015 and fiscal 2014, because of, the short answer is, we will see it sort of towards the end of the summer and to the beginning of the fall as we cycle through the tradeshows.

Got it.

For the bike business.

Yes. We obviously keep close tabs on it and try to get as much real time and obviously we spend a lot of time talking to our customers, but I think where the rubber hits the road, as Mario says, is when the stuff gets out there and people are taking money out of their wallets. And that's out toward the end of the summer.

And that's for the bigger global oriented brands. Some of the more boutique domestic ones are real time. And we also have relationships with dealers. We are monitoring that ourselves, separate from what we are hearing from the OEs, but the real solid information starts to come in around tradeshow times.

Got it and then I think you mentioned this, but could you remind us to what extent you expect this issue to impact guidance? In other words, if you look at your guidance, does it bake in any impact from the strong U.S. dollar and the impact on volume?

I think the guidance we put out there envisions we don't see a lot of the impact. In other words, we have kind of a normalized sell-through that the market doesn't completely erode and the indications in the forecast that we are looking at today do support that. It's like, does our guidance anticipate a recession? No. Right? So certainly that would be something that could happen that would be a negative, but right now I think that would be difficult to forecast, nor do we have data that would support that.

That make sense. Great. Thanks so much.

Thank you.

Thank you. And our final question is a follow-up from Larry Solow of CJS. Please go ahead.

All right. Just a couple of quickies. Just on a pro forma basis, Race Face by itself, I think when you acquired you thought it would be modestly accretive to non-GAAP EPS in this year, I think. Does that still hold true? Or is it more of a flat impact in 2015 and growing beyond that?

No. It's modest. As I mentioned, we are going to invest in that platform, because we feel pretty excited about the long-term, but it's modestly accretive.

Okay and I know margins were, I think, looked close to 20% last year. It sounds like that the net margin maybe absolute EBITDA goes up a little bit as sales go up a little bit but bottomline margin maybe even goes down a little bit as you invest. Is that a good way to look at it?

I think that's right. I mean they ran that as a very small closely held company and now they are a new subsidiary of a public company, which entails a higher cost structure. As well, we think investing in that business when they were more capital constrained than we are, we think investing in that business can hopefully accelerate the growth some future year when we think there is opportunities to do that. So we are planning on running that business for the long haul and making the appropriate level of investments.

Got it and then just lastly Taiwan. It sounds like it's progressing on schedule and nicely. Ballpark, basically the impact on gross margin in 2014, was it about a neutral? Was it a little bit of a drag? And how about for 2015? Thanks.

No. It's now turned around. It's now positive. It's going to continue to be a positive going forward. We are quite pleased with the progress in Taiwan.

And do you think that positive impact or the growing positive impact last for several years out?

Well, we have mentioned that we think we can get to mid-30s gross margin by 2017.

Legacy business.

Legacy, right.

Part of that comes from Taiwan.

Okay. Great. Thanks. I appreciate it.

Thank you. That is all the time we have for questions. I would like to turn the floor back over to management for any closing remarks.

Thank you operator and thank you all for your questions and your interest in Fox. We look forward to continuing to execute our plans and updating you on our progress as we go forward with these quarterly earnings calls. I am also thankful for the support of our customers and suppliers and the hard work of our great group of enthusiastic employees, all keys to our continued success. Thank you and have a good day.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. And thank you for your participation.