ZAGG Inc - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - ZAGG INC FORM 8-K - ZAGG Inc	form8k.htm
EX-99.2 - EXHIBIT 99.2 - ZAGG Inc	ex992.htm

Exhibit 99.1

ZAGG INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

(Unaudited)

	December 31,			December 31,
	2012			2011

ASSETS

Current assets
Cash and cash equivalents	$	20,177		$	26,433
Accounts receivable, net of allowances of $2,974 in 2012 and $2,070 in 2011		54,561			45,450
Inventories		39,988			29,622
Prepaid expenses and other current assets		9,547			1,593
Deferred income tax assets		7,846			5,132

Total current assets		132,119			108,230

Investment in HzO		2,013			4,879

Property and equipment, net of accumulated depreciation at $3,317 in 2012 and $1,857 in 2011		4,862			4,162

Goodwill		1,484			6,925

Intangible assets, net of accumulated amortization at $13,790 in 2012 and $3,989 in 2011		57,905			73,691

Deferred income tax assets		5,662			82

Note receivable		583			1,349

Other assets		1,457			3,010

Total assets	$	206,085		$	202,328

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable	$	19,027		$	16,013
Income taxes payable		3,062			4,294
Accrued liabilities		3,754			3,886
Accrued wages and wage related expenses		2,554			1,468
Deferred revenue		722			320
Current portion of note payable		6,000			2,372
Sales returns liability		6,697			5,387

Total current liabilities		41,816			33,740

Revolving line of credit		22,173			23,332

Noncurrent portion of note payable		18,000			42,628

Total liabilities		81,989			99,700

Stockholders' equity
Common stock, $0.001 par value; 100,000 shares authorized;
31,215 and 29,782 shares issued and outstanding, respectively		31			30
Additional paid-in capital		77,234			70,248
Accumulated other comprehensive income		(57	)		(33	)
Note receivable collateralized by stock		(566	)		(566	)
Retained earnings		47,454			32,949

Total stockholders' equity		124,096			102,628

Total liabilities and stockholders' equity	$	206,085		$	202,328

ZAGG INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended						Twelve Months Ended
	December 31, 2012			December 31, 2011			December 31, 2012			December 31, 2011


Net sales	$	87,482		$	67,492		$	264,425		$	179,125
Cost of sales		48,900			36,122			143,880			97,201

Gross profit		38,582			31,370			120,545			81,924

Operating expenses:
Advertising and marketing		4,312			2,367			12,495			10,246
Selling, general and administrative		15,095			12,539			53,330			39,592
Impairment of goodwill and intangibles		11,497			-			11,497			-
Amortization of definite-lived intangibles		2,418			2,085			9,732			3,949

Total operating expenses		33,322			16,991			87,054			53,787

Income from operations		5,260			14,379			33,491			28,137

Other income (expense):
Interest expense		(2,802	)		(1,452	)		(6,321	)		(3,022	)
Loss from equity method investment in HzO		(1,385	)		-			(2,866	)		-
Gain on deconsolidation of HzO		-			1,906			-			1,906
Other income and (expense)		(170	)		(123	)		(407	)		(19	)

Total other expense		(4,357	)		331			(9,594	)		(1,135	)

Income before provision for income taxes		903			14,710			23,897			27,002

Income tax provision		(710	)		(5,083	)		(9,393	)		(9,418	)

Net income		193			9,627			14,504			17,584

Net loss attributable to noncontrolling interest		-			319			-			664

Net income attributable to stockholders	$	193		$	9,946		$	14,504		$	18,248

Earnings per share attributable to stockholders:

Basic earnings per share	$	0.01		$	0.34		$	0.48		$	0.67

Diluted earnings per share	$	0.01		$	0.32		$	0.46		$	0.63

ZAGG INC AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP

(Unaudited)

Unaudited Supplemental Data

The following information is not a financial measure under generally accepted accounting principals (GAAP). In addition, it should not be construed as an alternative to any other measures of performance determined in accordance with 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 it is helpful to some investors as a measure of our operations. We caution investors that non-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 Reconciliation				Three months ended						Twelve months ended
				December 31, 2012			December 31, 2011			December 31, 2012			December 31, 2011


Net income attributable to stockholders in accordance with GAAP				$	193		$	9,946		$	14,504		$	18,248

		Adjustments:

		a.	Stock based compensation expense		1,096			584			6,018			3,258
		b.	Impairment of goodwill and intangibles		11,497			-			11,497			-
		c.	Depreciation and amortization		3,059			2,463			11,561			5,926
		d.	iFrogz acquisition expenses		-			-			-			1,947
		e.	iFrogz inventory fair value write up		-			864			-			4,506
		f.	Impairment of note receivable		-			418			-			1,489
		g.	Other expense		4,357			(331	)		9,594			1,135
		h.	Provision for income taxes		710			5,083			9,393			9,418
		i.	Noncontrolling interest		-			(319	)		-			(664	)

Adjusted EBITDA				$	20,912		$	18,708		$	62,567		$	45,263


Pro forma Net Income Reconciliation - Three and Twelve Months Ended December 31, 2012				Three months ended						Twelve months ended
				December 31, 2012			December 31, 2011			December 31, 2012			December 31, 2011


Net income attributable to stockholders in accordance with GAAP				$	193		$	9,946		$	14,504		$	18,248

		Adjustments:

		a.	Stock based compensation expense		1,096			584			6,018			3,258
		b.	Impairment of goodwill and intangibles		11,497			-			11,497			-
		c.	Amortization of intangibles		2,439			2,085			9,801			4,931
		d.	iFrogz acquisition expenses		-			-			-			1,947
		e.	iFrogz inventory fair value write up		-			864			-			4,506
		f.	Impairment of note receivable		-			418			-			1,489
		g.	Other expense excluding cash interest expense and loss on equity method investment		170			(1,750	)		407			(1,887	)
		h.	Non-cash deferred loan costs charge		1,509			-			1,509			-
		i.	Noncontrolling interest		-			(319	)		-			(664	)
		j.	CEO departure expense		-			-			910			-
		k.	Loss on equity method investment		1,385			-			2,866			-
		l.	Income tax effects		(6,392	) *		(720	) *		(11,529	) *		(5,194	) *

Pro forma net income attributable to stockholders				$	11,897		$	11,108		$	35,983		$	26,634

Pro forma EPS attributable to stockholders				$	0.37		$	0.35		$	1.14		$	0.92

Weighted average number of shares outstanding - diluted					31,735			31,378			31,656			29,082

*	For comparative purposes, we applied an annualized statutory tax rate of 38.5%

Pro forma Net Income Reconciliation - Three and Nine Months Ended September 30, 2012				Three months ended						Nine months ended
				September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011


Net income attributable to stockholders in accordance with GAAP				$	3,388		$	2,248		$	14,311		$	8,302

		Adjustments:

		a.	Stock based compensation expense		2,086			406			4,922			2,674
		b.	Impairment of goodwill and intangibles		-			-			-			-
		c.	Amortization of intangibles		2,439			2,086			7,362			2,846
		d.	iFrogz acquisition expenses		-			122			-			1,947
		e.	iFrogz inventory fair value write up		-			3,063			-			3,642
		f.	Impairment of note receivable		-			1,071			-			1,071
		g.	Other expense excluding cash interest expense and loss on equity method investment		215			(129	)		237			(137	)
		h.	Non-cash deferred loan costs charge		-			-			-			-
		i.	Noncontrolling interest		-			(149	)		-			(345	)
		j.	CEO departure expense		910			-			910			-
		j.	Loss on equity method investment		545			-			1,481
		l.	Income tax effects		(2,161	) *		(2,475	) *		(5,137	) *		(4,474	) *

Pro forma net income attributable to stockholders				$	7,422		$	6,243		$	24,086		$	15,526

Pro forma EPS attributable to stockholders				$	0.23		$	0.20		$	0.76		$	0.55

Weighted average number of shares outstanding - diluted					31,734			31,375			31,647			28,308


*	For comparative purposes, we applied an annualized statutory tax rate of 38.5%

Pro forma Net Income Reconciliation - Three and Six Months Ended June 30, 2012				Three months ended						Six months ended
				June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011


Net income attributable to stockholders in accordance with GAAP				$	5,812		$	2,743		$	10,923		$	6,053

		Adjustments:

		a.	Stock based compensation expense		1,494			1,962			2,836			2,268
		b.	Impairment of goodwill and intangibles		-			-			-			-
		c.	Amortization of intangibles		2,488			710			4,923			760
		d.	iFrogz acquisition expenses		-			1,816			-			1,825
		e.	iFrogz inventory fair value write up		-			579			-			579
		f.	Impairment of note receivable		-			-			-			-
		g.	Other expense excluding cash interest expense and loss on equity method investment		(224	)		(8	)		22			(8	)
		h.	Non-cash deferred loan costs charge		-			-			-			-
		i.	Noncontrolling interest		-			(145	)		-			(196	)
		j.	CEO departure expense		-			-			-			-
		k.	Loss on equity method investment		473			-			936			-
		l.	Income tax effects		(1,437	) *		(1,880	) *		(2,976	) *		(2,000	) *

Pro forma net income attributable to stockholders				$	8,606		$	5,777		$	16,664		$	9,281

Pro forma EPS attributable to stockholders				$	0.27		$	0.21		$	0.53		$	0.35

Weighted average number of shares outstanding - diluted					31,738			27,279			31,577			26,749

*	For comparative purposes, we applied an annualized statutory tax rate of 38.5%

Pro forma Net Income Reconciliation - Three Months Ended March 31, 2012				Three months ended
					March 30, 2012			March 30, 2011


Net income attributable to stockholders in accordance with GAAP				$	5,112		$	3,310

		Adjustments:

		a.	Stock based compensation expense		1,342			306
		b.	Impairment of goodwill and intangibles		-			-
		c.	Amortization of intangibles		2,435			50
		d.	iFrogz acquisition expenses		-			9
		e.	iFrogz inventory fair value write up		-			-
		f.	Impairment of note receivable		-			-
		g.	Other expense excluding cash interest expense and loss on equity method investment		246			-
		h.	Non-cash deferred loan costs charge		-			-
		i.	Noncontrolling interest		-			(51	)
		j.	CEO departure expense		-			-
		k.	Loss on equity method investment		463			-
		l.	Income tax effects		(1,539	) *		(120	) *

Pro forma net income attributable to stockholders				$	8,059		$	3,504

Pro forma EPS attributable to stockholders				$	0.26		$	0.13

Weighted average number of shares outstanding - diluted					31,417			26,216

*	For comparative purposes, we applied an annualized statutory tax rate of 38.5%

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