ZAGG Inc - FORM 8-K - EX-99.1 - March 11, 2020

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8-K - 8-K - ZAGG Inczagg-20200311.htm
EX-99.4 - EX-99.4 - ZAGG Inca201912318-kex994.htm
EX-99.3 - EX-99.3 - ZAGG Inca201912318-kex993.htm
EX-99.2 - EX-99.2 - ZAGG Inca201912318-kex992.htm

ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value amounts)
(Unaudited)
December 31, 2019December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents$17,801  $15,793  
Accounts receivable, net of allowances of $1,143 and $885
142,804  156,667  
Income tax receivable  —  375  
Inventories144,944  82,919  
Prepaid expenses and other current assets  6,124  5,473  
Total current assets311,673  261,227  
Property and equipment, net of accumulated depreciation of $14,159 and $11,844
18,019  16,118  
Intangible assets, net of accumulated amortization of $95,632 and $78,627
63,110  52,054  
Deferred income tax assets22,657  19,403  
Operating lease right of use assets  9,636  —  
Goodwill  43,569  27,638  
Other assets567  1,571  
Total assets$469,231  $378,011  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$87,303  $80,908  
Income tax payable  5,266  —  
Sales returns liability  43,853  54,432  
Accrued wages and wage related expenses  6,328  6,624  
Accrued liabilities15,164  13,723  
Current portion of operating lease liabilities  2,099  —  
Total current liabilities160,013  155,687  
Line of credit107,140  58,363  
Operating lease liabilities10,599  —  
Other long-term liabilities—  5,470  
Total liabilities277,752  219,520  
Stockholders’ equity:
Common stock, $0.001 par value; 100,000 shares authorized; 36,610 and 34,457 shares issued
37  34  
Treasury stock, 7,055 and 6,983 common shares at cost
(50,455) (49,733) 
Additional paid-in capital116,533  96,486  
Accumulated other comprehensive loss(1,631) (1,410) 
Retained earnings126,995  113,114  
Total stockholders’ equity191,479  158,491  
Total liabilities and stockholders’ equity$469,231  $378,011  



ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
For the Three Months EndedFor the Years Ended
December 31, 2019December 31, 2018December 31, 2019December 31, 2018
Net sales$189,888  $166,513  $521,922  $538,231  
Cost of sales122,445  108,062  338,553  352,358  
Gross profit67,443  58,451  183,369  185,873  
Operating expenses:
Advertising and marketing5,955  3,672  19,183  11,994  
Selling, general and administrative34,901  29,931  135,039  108,623  
Transaction costs762  1,042  1,930  1,678  
Amortization of intangible assets3,992  3,478  17,005  11,882  
Total operating expenses45,610  38,123  173,157  134,177  
Income from operations21,833  20,328  10,212  51,696  
Other income (expense):
Interest expense(1,576) (552) (4,910) (1,684) 
Other income (expenses)351  (121) 565  (483) 
Total other expenses(1,225) (673) (4,345) (2,167) 
Income before provision for income taxes20,608  19,655  5,867  49,529  
Income tax benefit (provision)4,390  (5,337) 8,053  (10,340) 
Net income$24,998  $14,318  $13,920  $39,189  
Earnings per share attributable to stockholders:
Basic earnings per share$0.86  $0.52  $0.48  $1.40  
Diluted earnings per share$0.85  $0.52  $0.48  $1.38  



ZAGG INC AND SUBSIDIARIES
RECONCILIATION OF NON-U.S. GAAP FINANCIAL INFORMATION TO U.S. GAAP
(Amounts in thousands)
(Unaudited)
UNAUDITED SUPPLEMENTAL DATA
The following information are not financial measures prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In addition, they should not be construed as an alternative to any other measures of performance determined in accordance with U.S. GAAP, or as an indicator of our operating performance, liquidity, or cash flows generated by operating, investing, and financing activities as there may be significant factors or trends that it fails to address. We present this financial information because we believe that these measures are helpful to some investors as a measure of our operations. We caution investors that non-U.S. GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our results with our results from other reporting periods and with the results of other companies.
ADJUSTED EBITDA RECONCILIATIONFor the Three Months EndedFor the Years Ended
December 31, 2019December 31, 2018December 31, 2019December 31, 2018
Net income in accordance with U.S. GAAP$24,998  $14,318  $13,920  $39,189  
Adjustments:
a.Stock-based compensation expense731  844  4,022  3,009  
b.Depreciation and amortization5,896  4,959  23,903  18,288  
c.Other expense, net1,225  673  4,345  2,167  
d.Inventory step-up amount in connection with acquisitions in 2018 and 2019—  108  589  179  
e.Transaction costs762  1,042  1,930  1,678  
f.BRAVEN employee retention bonus—  77  93  77  
g.Former CFO retention bonus—  366  110  366  
h.CEO signing bonus—  400  —  400  
i.Consulting fees to former CEO—  —  —  700  
j.Restructuring expenses—  —  2,225  —  
k.Adjustment to fair value of acquisition contingent consideration560  —  915  —  
l.Legal settlements750  —  750  —  
m.Income tax (benefit) provision(4,390) 5,337  (8,053) 10,340  
Total Adjustments5,534  13,806  30,829  37,204  
Adjusted EBITDA$30,532  $28,124  $44,749  $76,393  



ZAGG INC AND SUBSIDIARIES
RECONCILIATION OF NON-U.S. GAAP FINANCIAL INFORMATION TO U.S. GAAP
(Amounts in thousands, except per share amounts)
(Unaudited)

DILUTED OPERATING EARNINGS PER SHARE RECONCILIATIONFor the Three Months EndedFor the Years Ended
December 31, 2019December 31, 2018December 31, 2019December 31, 2018
Net income in accordance with U.S. GAAP$24,998  $14,318  $13,920  $39,189  
Adjustments:
a.Amortization expense related to 2018 and 2019 acquisitions  1,975  705  7,901  792  
b.Transaction costs  762  1,042  1,930  1,678  
c.Inventory step-up amount in connection with acquisitions in 2018 and 2019  —  108  589  179  
d.BRAVEN employee retention bonus  —  —  93  77  
e.Restructuring expenses  —  —  2,225  —  
f.Stock-based compensation issued as retention  332  —  1,363  —  
g.Adjustment to fair value of acquisition contingent consideration560  —  915  —  
Total adjustments before tax3,629  1,855  15,016  2,726  
Tax effect 1
(981) (502) (4,060) (737) 
Adjustments, net of tax  2,648  1,353  10,956  1,989  
Adjusted net income$27,646  $15,671  $24,876  $41,178  
Diluted shares outstanding29,379  28,258  29,242  28,500  
Diluted operating earnings per share$0.94  $0.55  $0.85  $1.44  
1 Income tax effect calculated using the estimated 2019 statutory rate of 27.04%

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