Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Oct. 31, 2016 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | ZAGG Inc | |
Entity Central Index Key | 1,296,205 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 28,131,836 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 8,955 | $ 13,002 |
Accounts receivable, net of allowances of $537 in 2016 and $568 in 2015 | 83,086 | 57,647 |
Inventories | 66,204 | 45,912 |
Prepaid expenses and other current assets | 3,348 | 3,142 |
Income tax receivable | 446 | 1,158 |
Deferred income tax assets | 28,771 | 10,840 |
Total current assets | 190,810 | 131,701 |
Property and equipment, net of accumulated depreciation at $16,079 in 2016 and $10,539 in 2015 | 18,799 | 8,309 |
Goodwill | 12,791 | |
Intangible assets, net of accumulated amortization at $51,792 in 2016 and $41,803 in 2015 | 56,868 | 23,045 |
Deferred income tax assets | 22,617 | 15,386 |
Other assets | 2,480 | 1,100 |
Total assets | 304,365 | 179,541 |
Current liabilities | ||
Accounts payable | 73,168 | 33,846 |
Accrued liabilities | 10,725 | 5,085 |
Contingent payments | 12,139 | |
Accrued wages and wage related expenses | 4,838 | 2,244 |
Sales returns liability | 28,289 | 7,849 |
Current portion of long-term debt, net of deferred loan costs of $65 in 2016 | 6,185 | |
Revolving line of credit | 30,195 | |
Total current liabilities | 165,539 | 49,024 |
Noncurrent portion of long-term debt, net of deferred loan costs of $157 in 2016 | 15,468 | |
Other noncurrent liabilities | 513 | |
Total liabilities | 181,520 | 49,024 |
Commitments and contingencies (Note 13) | ||
Stockholders' equity | ||
Common stock, $0.001 par value; 100,000 shares authorized; 33,825 and 33,219 shares issued in 2016 and 2015, respectively | 34 | 33 |
Additional paid-in capital | 92,660 | 88,983 |
Accumulated other comprehensive loss | (1,505) | (1,597) |
Treasury stock, 5,679 common shares in 2016 and 2015, at cost | (35,194) | (35,194) |
Retained earnings | 66,850 | 78,292 |
Total stockholders' equity | 122,845 | 130,517 |
Total liabilities and stockholders' equity | $ 304,365 | $ 179,541 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) shares in Thousands, $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Balance Sheets [Abstract] | ||
Allowances for doubtful accounts | $ 537 | $ 568 |
Accumulated depreciation on property and equipment | 16,079 | 10,539 |
Accumulated amortization on Intangible assets | 51,792 | $ 41,803 |
Deferred loan costs, Current | 65 | |
Deferred loan costs, Non current | $ 157 | |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000 | 100,000 |
Common stock, shares issued | 33,825 | 33,219 |
Treasury stock | 5,679 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Statement of Operations [Abstract] | ||||
Net sales | $ 124,662 | $ 66,774 | $ 286,928 | $ 190,679 |
Cost of sales | 81,516 | 41,903 | 189,180 | 117,894 |
Gross profit | 43,146 | 24,871 | 97,748 | 72,785 |
Operating expenses: | ||||
Advertising and marketing | 3,389 | 2,759 | 8,578 | 7,450 |
Selling, general and administrative | 25,607 | 13,750 | 70,243 | 41,014 |
Loss on disputed mophie purchase price | 24,317 | 24,317 | ||
Transaction costs | 145 | 2,467 | ||
Amortization of long-lived intangibles | 2,398 | 2,134 | 9,909 | 6,403 |
Total operating expenses | 55,856 | 18,643 | 115,514 | 54,867 |
Income (loss) from operations | (12,710) | 6,228 | (17,766) | 17,918 |
Other expense: | ||||
Interest expense | (575) | (26) | (1,367) | (79) |
Other expense | (81) | (76) | (272) | (53) |
Total other expense, net | (656) | (102) | (1,639) | (132) |
Income (loss) before provision for income taxes | (13,366) | 6,126 | (19,405) | 17,786 |
Income tax benefit (provision) | 6,261 | (2,387) | 7,963 | (7,155) |
Net (loss) income | $ (7,105) | $ 3,739 | $ (11,442) | $ 10,631 |
Earnings (loss) per share: | ||||
Basic earnings (loss) per share | $ (0.25) | $ 0.13 | $ (0.41) | $ 0.36 |
Diluted earnings (loss) per share | $ (0.25) | $ 0.13 | $ (0.41) | $ 0.36 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Statement of Other Comprehensive Income [Abstract] | ||||
Net (loss) income | $ (7,105) | $ 3,739 | $ (11,442) | $ 10,631 |
Other comprehensive (loss) income, net of tax: | ||||
Foreign currency translation (loss) gain | 57 | 156 | 92 | (337) |
Total other comprehensive (loss) gain | 57 | 156 | 92 | (337) |
Comprehensive (loss) income | $ (7,048) | $ 3,895 | $ (11,350) | $ 10,294 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities | ||
Net (loss) income | $ (11,442) | $ 10,631 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
Stock-based compensation | 3,675 | 2,708 |
Excess tax benefits related to share-based payments | (569) | (199) |
Depreciation and amortization | 19,108 | 9,551 |
Reversal of reserve on note receivable | (639) | |
Deferred income taxes | (9,512) | (913) |
Amortization of deferred loan costs | 141 | 49 |
Loss on disputed mophie purchase price | 24,317 | |
Changes in operating assets and liabilities, net of acquisition | ||
Accounts receivable, net | (10,496) | 22,476 |
Inventories | 2,132 | 2,730 |
Prepaid expenses and other current assets | 500 | (563) |
Income tax receivable | 12,899 | (6,189) |
Other assets | (227) | 60 |
Accounts payable | 1,981 | (11,919) |
Accrued liabilities | 1,759 | (1,589) |
Accrued wages and wage related expenses | 802 | (424) |
Sales returns liability | (9,152) | (3,494) |
Net cash provided by operating activities | 25,916 | 22,276 |
Cash flows from investing activities | ||
Purchase of property and equipment | (6,135) | (3,009) |
Purchase of mophie, net of cash acquired | (74,743) | |
Net cash used in investing activities | (80,878) | (3,009) |
Cash flows from financing activities | ||
Payment of debt issuance costs | (1,144) | |
Proceeds from revolving credit facility | 230,117 | 9,871 |
Payments on revolving credit facility | (199,922) | (9,871) |
Proceeds from term loan facility | 25,000 | |
Payments on term loan facility | (3,125) | |
Purchase of treasury stock | (13,331) | |
Payment of withholdings on restricted stock units | (621) | (718) |
Proceeds from exercise of warrants and options | 54 | 206 |
Excess tax benefits related to share-based payments | 569 | 199 |
Net cash provided by (used in) financing activities | 50,928 | (13,644) |
Effect of foreign currency exchange rates on cash and cash equivalents | (13) | (127) |
Net (decrease) increase in cash and cash equivalents | (4,047) | 5,496 |
Cash and cash equivalents at beginning of the period | 13,002 | 9,461 |
Cash and cash equivalents at end of the period | 8,955 | 14,957 |
Supplemental disclosure of cash flow information | ||
Cash paid during the period for interest | 1,106 | 37 |
Cash paid (refunded) during the period for ZAGG taxes, net | (597) | 14,171 |
Cash (refunded) during the period for mophie taxes, net | (11,021) | |
Supplemental schedule of noncash investing and financing activities | ||
Purchase of mophie financed through contingent payments | 12,139 | |
Purchase of fixed assets financed through accounts payable and accrued liabilities | 1,342 | 763 |
Foreclosure on real property | 1,099 | |
Foreclosure on the Company's common stock value | 688 | |
Purchase of treasury stock financed through accounts payable | $ 563 |
Nature of Operations and Basis
Nature of Operations and Basis of Presentation | 9 Months Ended |
Sep. 30, 2016 | |
Nature of Operations and Basis of Presentation [Abstract] | |
NATURE OF OPERATIONS AND BASIS OF PRESENTATION | (1) NATURE OF OPERATIONS AND BASIS OF PRESENTATION ZAGG Inc and its subsidiaries (“we,” “us,” “our,” “ZAGG,” or the “Company”) are innovation leaders in mobile tech accessories for smartphones and tablets. For over 10 years, ZAGG has developed creative product solutions that enhance and protect mobile devices for consumers around the world. The Company has an award-winning product portfolio that includes screen protection, power cases, power management, personal audio, mobile keyboards, cases, and social tech sold under the ZAGG, InvisibleShield®, mophie®, and iFrogz® brands. The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the financial position, the results of operations, and cash flows of the Company for the periods presented. These consist of normal recurring adjustments and adjustments related to the acquisition disclosed in Note 2. The Company suggests that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s 2015 Annual Report on Form 10-K. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year. The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On March 3, 2016 the Company acquired mophie inc. ("mophie") for gross up-front cash consideration of $100,000, subject to a preliminary working capital adjustment of $23,478. Upon completion of procedures to determine the final working capital adjustment, the Company concluded that the final working capital adjustment should have been $49,795. The results of operations of mophie are included in the Company's results of operations beginning on March 3, 2016. Based on the manner in which the Company manages, evaluates, and internally reports its operations, the Company determined that mophie will be reported as a separate reportable segment. See Notes 2 and 14 for additional details on the acquisition and the Company's segments. The condensed consolidated financial statements include the accounts of ZAGG Inc and its wholly owned subsidiaries ZAGG International Distribution Limited (“ZAGG International”); Patriot Corporation; ZAGG Intellectual Property Holding Co, Inc. (“ZAGG IP”); ZAGG Retail, Inc; mophie inc.; mophie LLC, mophie Technology Development Co., Ltd; mophie Netherlands Coöperatie U.A.; and mophie Limited. All intercompany transactions and balances have been eliminated in consolidation. Significant Accounting Policies The Company’s significant accounting policies are described in Note 1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. In addition to these policies, the Company has adopted a significant accounting policy relating to business combinations and accounting for goodwill as a result of the acquisition of mophie, as described below. Also, in connection with the acquisition of mophie, the Company changed its operating segments, as described in Note 14. Business Combinations Significant estimates in valuing certain intangible assets include but are not limited to: future expected cash flows related to each individual asset, market position of the tradenames, as well as assumptions about cash flow savings from the tradenames, determination of useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Goodwill At least annually and when events and circumstances warrant an evaluation, we perform our impairment assessment of goodwill. This assessment initially permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it would not need to perform the two-step impairment test for the reporting unit. However, if it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the two step analysis is performed, which incorporates a fair-value based approach. We determine the fair value of our reporting unit based on discounted cash flows and market approach analyses as considered necessary. We consider factors such as the economy, reduced expectations for future cash flows coupled with a decline in the market price of our stock and market capitalization for a sustained period as indicators for potential goodwill impairment. If the reporting unit’s carrying amount exceeds its estimated fair value, a second step must be performed to measure the amount of the goodwill impairment loss, if any. The second step compares the implied fair value of the reporting unit’s goodwill, determined in the same manner as the amount of goodwill recognized in a business combination, with the carrying amount of such goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” This ASU includes a five-step process by which entities will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which an entity expects to be entitled in exchange for those goods or services. The ASU also will require enhanced disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The ASU may be adopted utilizing one of two methods. The first method is to adopt the ASU by recording the effect of the guidance in the ASU retrospectively to each prior period presented in the period of adoption. The second method is to adopt the ASU by recording the effect of the guidance in the ASU retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application. On July 9, 2015, the FASB voted to approve a one-year deferral of the effective date of this ASU. This deferral was issued by the FASB in ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date”. As a result of ASU No. 2015-14 the Company expects that it will apply the new revenue standard to annual and interim reporting periods beginning after December 15, 2017. In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606) – Narrow-Scope Improvements and Practical Expedients”. The amendments and practical expedients presented in the ASU aim to simplify the transition to the new standard, to provide practical expedients for transition and sales taxes, and to clarify certain aspects of the standard. The Company is currently evaluating the impact these ASU will have on its consolidated financial statements, including the method of adoption that will be utilized. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory.” This ASU provides guidance to entities that measure inventory using a method other than last-in, first-out (LIFO) or the retail inventory method. For entities using first-in, first-out (FIFO) or average cost, the measurement principle for their inventory changes from the lower of cost or market to lower of cost and net realizable value. Current U.S. GAAP requires, at each financial statement date, that entities measure inventory at the lower of cost or market. The measurement of market is commonly the current replacement cost. However, entities also need to consider net realizable value and net realizable value less an approximately normal profit margin in their measurement. For entities using a method other than LIFO or the retail inventory method, the ASU replaces market with net realizable value. This ASU requires prospective adoption for inventory measurement for annual and interim periods beginning after December 15, 2016 for public business entities. The Company has concluded that this ASU will not have a significant impact on our financial position or results of operations. In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes,” which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent. The amendments in the ASU may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The ASU is effective for public business entities for interim and annual periods in fiscal years beginning after December 15, 2016. The Company has determined that it will adopt the ASU using the retrospective approach and has concluded that the adoption of this ASU will result in recording deferred tax assets as non-current and will not impact our results of operations. In February 2016, the FASB issued its new lease accounting standard, Topic 842, which requires lessees to recognize most leases, including operating leases, on-balance sheet via a right of use asset and lease liability. Lessees are allowed to account for short-term leases (i.e., leases with a term of 12 months or less) off-balance sheet, consistent with current operating lease accounting. A number of other significant changes to lease accounting have been effected through the issuance of this standard. The requirements of the new standard for leases shall be recognized and measured at the beginning of the earliest comparative period presented. When adopted, the Company will be required to adjust equity at the beginning of the earliest comparative period presented, and the other comparative amounts disclosed for each prior period presented in the financial statements, as if the requirements of the new standard had always been applied. The new standard also contains practical expedients which the Company may elect to follow. The new standard is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements, including whether to elect the practical expedients outlined in the new standard. In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which simplified accounting for share-based payments. The ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those years for public business entities. Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted. Amendments in the ASU related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares should be applied retrospectively. Amendments requiring the recognition of excess tax benefits and tax deficiencies in the income statement should be applied prospectively. The amendments related to the presentation of excess tax benefits on the statement of cash flows may be applied using either a prospective or retrospective transition method. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements, including, where applicable, determining the method of adoption. In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments,” which addresses eight classification issues related to the statement of cash flows: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon bonds; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. The ASU is effective for public companies for fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The amendments in the ASU should be applied using a retrospective transition method to each period presented. If it is impracticable for the amendments to be applied retrospectively for some of the issues, the amendments for those issues may be applied prospectively as of the earliest date practicable. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements, including the method of adoption. |
Acquisition of Mophie Inc.
Acquisition of Mophie Inc. | 9 Months Ended |
Sep. 30, 2016 | |
Acquisition of Mophie Inc [Abstract] | |
ACQUISITION OF MOPHIE INC. | (2) ACQUISITION OF MOPHIE INC. On February 2, 2016, ZAGG and ZM Acquisition, Inc. (“Merger Sub”), a Delaware corporation and wholly-owned subsidiary of the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with mophie, a California corporation, the principal shareholders of mophie named therein (the “Principal Shareholders”), and Daniel Huang as representative of the mophie shareholders, warrant holders, and option holders, pursuant to which Merger Sub agreed to merge with and into mophie, with mophie continuing as the surviving corporation (the “Merger”). On March 3, 2016 (the “Acquisition Date”), the Company completed the Merger. The combination of ZAGG and mophie creates a diversified market leader in multiple mobile accessories categories. The Company purchased mophie for total gross up-front consideration of $100,000 in cash, subject to an adjustment based on the estimated and actual net working capital of mophie as of the Acquisition Date. The Merger Agreement includes an earn-out provision whereby additional consideration could be paid based on whether mophie’s 12-month Adjusted EBITDA (as defined in the Merger Agreement) from April 1, 2016 to March 31, 2017 (the “Earnout Period”) exceeds $20,000, subject to certain tax adjustment as provided in the Merger Agreement. For every dollar in Adjusted EBITDA generated during the Earnout Period that exceeds $20,000, the Company will pay additional consideration at a five times multiple (“Earnout Consideration”), subject to certain tax adjustment as provided in the Merger Agreement, and the deposit of 10% of the Earnout Consideration into an indemnity escrow account. Any Earnout Consideration will initially be paid by the issuance of up to $5,000 in shares of the Company’s common stock valued as of February 2, 2016 (the day prior to the public announcement of the definitive agreement on February 3, 2016). In addition to the Earnout Consideration, the Merger Agreement identifies three other contingent payments to be remitted to the Principal Shareholders upon receipt of such funds by ZAGG after the Acquisition Date, subject to any applicable offset rights of ZAGG under the Merger Agreement: ● Federal and state tax refunds due to the Company related to 2012 and 2013 tax years; ● Customs and duties refunds for pre-closing overpayments of customs and duties amounts to governmental agencies; and ● Proceeds from the sale of real property located in Kalamazoo, Michigan. $2,000 of the cash consideration paid to the Principal Shareholders was placed in an escrow account to cover any net working capital shortfall and indemnification claims of ZAGG. ZAGG and the Principal Shareholders also jointly purchased a $10,000 insurance policy covering breaches by mophie and the Principal Shareholders of representations and warranties set forth in the Merger Agreement. At the Acquisition Date, mophie’s estimated closing balance sheet reflected negative working capital of $23,478. Upon completion of the procedures to evaluate the working capital account, ZAGG has determined that the closing balance sheet reflected actual closing negative working capital of $49,795, resulting in an additional actual closing working capital deficit of $26,317. ZAGG has submitted to the Principal Shareholders a closing adjustment statement seeking the release to ZAGG of the $2,000 placed in escrow based on the portion of the overall net working capital deficit that ZAGG has determined to be recoverable under Section 2.16 of the Merger Agreement. Mr. Huang, as the Representative of the Shareholders, submitted a dispute notice in which he, on behalf of all Shareholders, disputed ZAGG’s closing adjustment statement, asserted that there is no working capital deficit, and demanded release of the $2,000 escrow fund to the Principal Shareholders. The Company is continuing to pursue its claims related to the net working capital deficit, which efforts may require the Company to resort to the independent accountant dispute resolution mechanism provided in the Merger Agreement in order to obtain the $2,000 placed in escrow. ZAGG has engaged in discussions with the Principal Shareholders and Mr. Huang to seek recovery against the contingent payments described above and otherwise to be made whole with respect to such balance of the working capital deficit. However, as of September 30, 2016, there had been no resolution of either of such amounts and a total of $26,317 was in dispute between the parties. Thus, the Company has recorded a loss on the mophie purchase price of $24,317 during the three and nine months ended September 30, 2016, representing the disputed $26,317 partially offset by the $2,000 cash consideration placed in escrow, the recovery of which the Company believes to be likely. The Company is exploring all options to recover the amounts related to the aggregate net working capital deficit including (1) pursuing collection of the $2,000 escrow amount, (2) submitting claims under the $10,000 representation and warranty insurance policy put in place at the Acquisition Date, and (3) pursuing any and all offset rights granted under the Merger Agreement with respect to the contingent payments that would have been paid to the Principal Shareholders. On October 21, 2016, Mr. Huang, on behalf of the mophie Shareholders and himself filed a lawsuit in the Chancery Court of the State of Delaware alleging that the Company has breached the Merger Agreement by failing to pay certain of the contingent payments described above related to tax refunds and customs duties and claims damages in the amount of no less than $11,420. The following summarizes the components of the purchase consideration as of March 3, 2016: Adjustments to Preliminary Allocation Working Revised Allocation March 3, and March 3, Cash consideration $ 100,000 $ - $ 100,000 Negative working capital at Acquisition Date (23,478 ) - (23,478 ) Additional negative working capital deficit - (26,317 ) (26,317 ) Contingent payments 11,283 856 12,139 Total purchase price $ 87,805 $ (25,461 ) $ 62,344 The total purchase price of $62,344 has been preliminarily allocated to identifiable assets acquired and liabilities assumed based on their respective preliminary fair values. The total preliminary purchase price has been adjusted because of (1) additional information related to the working capital reflected in the closing balance sheet and estimate of fair value of the assets acquired and liabilities assumed and (2) the determination that the fair value of the Earnout Consideration is insignificant. The excess of the purchase price over the fair value of tangible and intangible assets acquired and liabilities assumed is recorded as goodwill. The allocation of goodwill to reportable segments has not yet been completed. The Company has completed its final analysis related to the calculation of the additional negative working capital as of the Acquisition Date and contingent payments, as these items relate to purchase accounting under U.S. GAAP. The Company is still evaluating the preliminary amounts assigned to intangible assets and amounts recorded for income taxes, as these valuations have not yet been completed. Because of the dispute between the Company and the Principal Shareholders, the Company has recorded a net charge of $24,317 during the quarter ended September 30, 2016. The final resolution of these items could result in a material adjustment the allocation of purchase price to identifiable assets acquired and liabilities assumed. The following table summarizes the revised estimates of the fair values of the identifiable assets acquired and liabilities assumed as of the Acquisition Date. The revised estimates of the fair value of identifiable assets acquired and liabilities assumed are based on estimates and assumptions and are subject to revisions, which may result in adjustments to the values presented below, when management’s estimates with respect to intangible assets and amounts recorded for income taxes are finalized: Cash and cash equivalents $ 1,779 Trade receivables (gross contractual receivables of $12,824) 12,823 Inventories 24,911 Prepaid expenses and other assets 1,073 Income tax receivable 11,814 Deferred tax assets 15,649 Property and equipment 10,191 Land held for sale 325 Amortizable identifiable intangible assets 43,812 Goodwill 12,791 Accounts payable (37,359 ) Income tax payable (196 ) Accrued liabilities (5,163 ) Deferred revenue (9 ) Sales returns liability (29,584 ) Other noncurrent liabilities (513 ) Total $ 62,344 The following table summarizes the purchase price allocation as of March 3, 2016: Preliminary Purchase Adjustments to Revised Purchase Price Working Price March 3, and March 3, Cash and cash equivalents $ 1,779 $ - $ 1,779 Trade receivables 13,483 (660 ) 12,823 Inventories 32,335 (10,011 ) 22,325 Inventory step-up 6,937 (4,351 ) 2,586 Prepaid expenses 485 215 700 Other assets 200 173 373 Income tax receivable 10,958 856 11,814 Deferred tax assets 24,925 (9,276 ) 15,649 Property and equipment 10,191 - 10,191 Land held for sale 325 - 325 Amortizable identifiable intangible assets 45,463 (1,651 ) 43,812 Goodwill 14,092 (1,301 ) 12,791 Accounts payable (34,228 ) (3,131 ) (37,359 ) Income tax payable (196 ) - (196 ) Accrued liabilities (5,185 ) 22 (5,163 ) Deferred revenue (800 ) 791 (9 ) Sales returns liability (14,468 ) (15,116 ) (29,584 ) Deferred tax liabilities (17,978 ) 17,978 - Other noncurrent liabilities (513 ) - (513 ) Total $ 87,805 $ (25,461 ) $ 62,344 The adjustments to working capital represented in the table above consist of (1) the additional actual closing working capital deficit of $26,317 and (2) adjustments to fair value of $856. Because the acquisition of mophie occurred in an interim period and in light of the magnitude of the transaction and existing uncertainties, the Company’s fair value estimates for the purchase price, intangible assets and amounts recorded for income taxes are preliminary and may change during the allowable measurement period. The allowable measurement period continues to the date the Company obtains and analyzes all relevant information that existed as of the date of the acquisition necessary to determine the fair values of the assets acquired and liabilities assumed, but in no case is to exceed one year from the date of acquisition (March 3, 2017). The Company is analyzing information to verify assets acquired and liabilities assumed, specifically the fair value of the acquired intangible assets and the tax accounts related to purchase accounting. As part of the acquisition of mophie, the Company incurred legal, accounting, investment banking and other due diligence fees that were expensed when incurred. Total fees incurred related to the acquisition of mophie for the three and nine months ended September 30, 2016 were $145 and $2,467, respectively, which are included as a component of operating expenses on the condensed consolidated statements of operations. Identifiable Intangible Assets Classes of acquired intangible assets include tradenames, patents and technology, customer relationships, non-compete agreements, and backlog. The fair value of the identifiable intangible assets was determined using various valuation methods, including the income and market approaches. For assets valued under the income approach, the estimate of the present value of expected future cash flows for each identifiable asset was based on discount rates which incorporate a risk premium to take into account the risks inherent in those expected cash flows. The expected cash flows were estimated using available historical data adjusted based on the Company’s historical experience and the expectations of market participants. The market approach was utilized to determine appropriate royalty rates applied to the valuation of the trademarks and technology. The preliminary amounts assigned to each class of intangible asset and the related preliminary weighted average amortization periods are as follows: Intangible asset class Weighted-average amortization period Tradenames $ 18,348 10.0 years Patents and technology 15,225 7.5 years Customer relationships 8,200 5.0 years Non-compete agreements 1,796 5.0 years Backlog 243 0.3 years Total $ 43,812 Goodwill Goodwill represents the excess of the mophie purchase price over the fair value of the assets acquired and liabilities assumed. The Company believes that the primary factors supporting the amount of goodwill recognized are the significant growth opportunities and expected synergies of the combined entity. Results of Operations The results of operations of mophie are included in the Company’s results of operations beginning on March 3, 2016. For the three months ended September 30, 2016, mophie generated net sales of $39,731 and had a net loss before tax of $3,305. For the period March 3, 2016, through September 30, 2016, mophie generated net sales of $79,390 and had a net loss before tax of $17,030. Pro forma Results from Operations The following unaudited pro-forma results of operations for the three months ended September 30, 2016 and 2015 and the nine months ended September 30, 2016, and 2015 give pro forma effect as if the acquisition and borrowings used to finance the acquisition had occurred on January 1, 2015, after giving effect to certain adjustments including the amortization of intangible assets, interest expense, tax adjustments, specific transaction related expenses incurred prior to the execution date, and assumes the purchase price was allocated to the assets purchased and liabilities assumed based on their fair market values at the date of purchase. 3 Months Ended September 30, Net sales $ 108,614 Net loss $ (8,592 ) Basic earnings per share $ (0.30 ) Diluted earnings per share $ (0.30 ) 9 Months Ended September 30, September 30, Net sales $ 304,254 $ 343,675 Net loss $ (15,432 ) $ (9,002 ) Basic loss per share $ (0.55 ) $ (0.31 ) Diluted loss per share $ (0.55 ) $ (0.31 ) The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred had the transaction been consummated as of January 1, 2015. Furthermore, such unaudited pro forma information is not necessarily indicative of future operating results of the combined companies, due to changes in operating activities following the purchase, and should not be construed as representative of the operating results of the combined companies for any future dates or periods. For the three months ended September 30, 2015, pro forma net loss includes pro forma amortization expense of $1,818. In addition, the Company included interest from the new credit facility and amortization of debt issuance costs for the three months ended September 30, 2015 of $536. Material non-recurring adjustments excluded from the pro forma financial information above consists of the $2,586 step up of mophie inventory to its fair value, which has been recorded as an unfavorable adjustment to cost of goods sold during the six months following the acquisition date. For the nine months ended September 30, 2016 and 2015, pro forma net loss includes projected amortization expense of $5,076 and $5,698, respectively. In addition, the Company included interest from the new credit facility and amortization of debt issuance costs for the nine months ended September 30, 2016 and 2015 of $1,508 and $1,622, respectively. The unaudited pro forma results do not reflect events that either have occurred or may occur after the Merger, including, but not limited to, the anticipated realization of ongoing savings from operating synergies in subsequent periods. |
Debt and Letters of Credit
Debt and Letters of Credit | 9 Months Ended |
Sep. 30, 2016 | |
Debt and Letters of Credit [Abstract] | |
DEBT AND LETTERS OF CREDIT | (3) DEBT AND LETTERS OF CREDIT Concurrent with the close of the Merger on March 3, 2016, the Company entered into a Credit and Security Agreement with KeyBank National Association (“KeyBank”), acting as administrative agent and swing line lender; KeyBanc Capital Markets Inc., acting as joint lead arranger and sole book runner; Zions Bank (“Zions”), as joint lead arranger; and JP Morgan Chase, as a member of the bank syndicate (“Credit and Security Agreement”). The Credit and Security Agreement replaces the prior credit agreement with Wells Fargo, which was terminated upon signing the Credit and Security Agreement. The Credit and Security Agreement provides an $85,000 revolving credit commitment (“Line of Credit”). Borrowings and repayments under the Line of Credit may occur from time to time in the Company’s ordinary course of business through the maturity date of March 2, 2021, at which time any amounts outstanding are to be paid in full (60-month term). All borrowings under the Line of Credit are subject to a borrowing base limit, which is calculated from outstanding accounts receivable and inventory, and reported to the administrative agent monthly. Interest on the Line of Credit will accrue at the base rate plus 0.50% or LIBOR plus 1.50%. The Line of Credit is subject to an unused line fee calculated as 0.20% multiplied by the average unused amount of the Line of Credit. The Credit and Security Agreement also provides a $25,000 term loan commitment (“Term Loan”). Principal and interest payments on the Term Loan are to be made in consecutive monthly installments of $521 commencing on April 1, 2016 and continuing until the Term Loan is paid in full on March 2, 2020 (48-month term). Interest on the Term Loan will accrue at the base rate plus 1.0% or at a rate of LIBOR plus 2.0%. The Credit and Security Agreement also provides for letters of credit with a fronting fee of 0.125% (paid per annum) for all issued and outstanding letters of credit. The Credit and Security Agreement provides for a lockbox and cash collateral account that is maintained with KeyBank. The Credit and Security Agreement is collateralized by substantially all of the assets of the Company. The Credit and Security Agreement establishes two financial debt covenants that are measured on a quarterly basis starting with the quarter-ended June 30, 2016: ● Maximum Leverage Ratio ● Minimum Fixed Charge Coverage Ratio In connection with the establishment of the Credit and Security Agreement, the Company incurred and capitalized $1,144 of direct costs; $884 of the costs are related to the line of credit and as such are reflected as a component of other assets, and $260 was reflected as an offset to long-term debt in the condensed consolidated balance sheet. For the three and nine months ended September 30, 2016, the Company amortized $60 and $141, respectively, of these loan costs, which are included as a component of interest expense in the condensed consolidated statements of operations. For the three and nine months ended September 30, 2015, the Company amortized $16 and $49, respectively, of capitalized costs related to the Wells Fargo credit agreement, which are included as a component of interest expense in the condensed consolidated statements of operations. All costs capitalized associated with the Wells Fargo credit agreement were fully amortized at December 31, 2015. For the three and nine months ended September 30, 2016, $18 and $40, respectively, in unused line fees were incurred and included as a component of interest expense in the condensed consolidated statements of operations. For the three and nine months ended September 30, 2015, $10 and $28, respectively, in unused line fees were incurred and included as a component of interest expense in the condensed consolidated statements of operations. At September 30, 2016, the weighted average interest rate on all outstanding borrowings under the revolving line of credit was 2.03%. At September 30, 2016, the effective interest rate on the Term Loan was 3.05%. Contractual future payments under the Credit and Security Agreement are as follows: Line of Credit Term Loan Total Remaining 2016 $ — $ 1,563 $ 1,563 2017 — 6,250 6,250 2018 — 6,250 6,250 2019 — 6,250 6,250 2020 — 1,562 1,562 Thereafter 30,195 — 30,195 Total $ 30,195 $ 21,875 $ 52,070 |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2016 | |
Intangible Assets [Abstract] | |
INTANGIBLE ASSETS | (4) INTANGIBLE ASSETS Amortizable intangibles as of September 30, 2016, and December 31, 2015, were as follows: As of September 30, 2016 Gross Carrying Amount Acquisitions Accumulated Amortization Net Carrying Amount Weighted Average Amortization Period Customer relationships $ 41,500 $ 8,200 $ (33,535 ) $ 16,165 7.5 years Tradenames 12,921 18,348 (8,790 ) 22,479 9.8 years Patents and technology 6,003 15,225 (4,615 ) 16,613 8.8 years Non-compete agreements 4,100 1,796 (4,310 ) 1,586 4.9 years Other 324 243 (542 ) 25 2.4 years Total amortizable assets $ 64,848 $ 43,812 $ (51,792 ) $ 56,868 8.2 years As of December 31, 2015 Gross Carrying Amount Acquisitions Accumulated Amortization Net Carrying Amount Weighted Average Amortization Period Customer relationships $ 41,500 $ — $ (29,150 ) $ 12,350 8.0 years Tradenames 12,921 — (6,253 ) 6,668 9.5 years Patents and technology 5,805 198 (2,381 ) 3,622 11.9 years Non-compete agreements 4,100 — (3,729 ) 371 4.8 years Other 324 — (290 ) 34 4.1 years Total amortizable assets $ 64,650 $ 198 $ (41,803 ) $ 23,045 8.4 years Customer relationships, tradenames, and other intangibles are amortized on an accelerated basis consistent with their expected future cash flows over their estimated useful life, which results in accelerated amortization. The remaining amortizable intangible assets are amortized using the straight-line method over their estimated useful life. For the three and nine months ended September 30, 2016, amortization expense was $2,426 and $9,989, respectively. Amortization expense is primarily recorded as a component of operating expense. However, amortization expense related to acquired technology for the three and nine months ended September 30, 2016, of $28 and $80, respectively, is recorded as a component of cost of sales. For the three and nine months ended September 30, 2016 amortization expense included $740 and $4,485, respectively, of amortization expense recognized for the preliminary amounts assigned to the acquired mophie intangible assets as described in Note 2. As further described in Note 2, there was an adjustment to the preliminary amounts allocated for working capital and fair value. As a result of the adjustment to the preliminary amounts, a reduction in amortization expense and accumulated amortization of $1,078 relating to the previous quarter was recognized during the three months ended September 30, 2016. For the three and nine months ended September 30, 2015, amortization expense was $2,160 and $6,478, respectively. Amortization expense related to acquired technology for the three and nine months ended September 30, 2015, of $26 and $75, respectively, was recorded as a component of cost of sales. Estimated future amortization expense is as follows: Remaining 2016 $ 3,506 2017 12,387 2018 11,351 2019 9,267 2020 6,653 Thereafter 13,704 Total $ 56,868 |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2016 | |
Inventories [Abstract] | |
INVENTORIES | (5) INVENTORIES At September 30, 2016, and December 31, 2015, inventories consisted of the following: September 30, December 31, Finished goods $ 64,925 $ 44,764 Raw materials 1,279 1,148 Total inventories $ 66,204 $ 45,912 In addition, included in prepaid expenses and other current assets were inventory deposits with third-party manufacturers at September 30, 2016 and December 31, 2015 of $736 and $813, respectively. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2016 | |
Stock-Based Compensation [Abstract] | |
STOCK-BASED COMPENSATION | (6) STOCK-BASED COMPENSATION During the three and nine months ended September 30, 2016, the Company granted 163 and 876 restricted stock units, respectively. During the three and nine months ended September 30, 2015, the Company granted 24 and 569 restricted stock units, respectively. The restricted stock units granted during the three and nine months ended September 30, 2016, were estimated to have a weighted-average fair value per share of $6.41 and $8.17, respectively. The restricted stock units granted during the three and nine months ended September 30, 2015, were estimated to have a weighted-average fair value per share of $8.24 and $6.58, respectively. The fair value of restricted stock units granted is based on the closing share price of the Company’s common stock on the date of grant. The restricted stock units vest annually on a straight-line basis over a nine-month (annual board of directors’ grant) to three-year vesting term, depending on the terms of the individual grant. As part of the 876 and 569 grants discussed above, during the first nine months of 2016 and 2015, the Company granted 575 and 289 restricted stock units, respectively, to certain executives and employees of the Company where vesting is linked to specific performance criteria. The shares of restricted stock units granted in 2016 only vest upon the Company’s achievement of specified thresholds of net sales, Adjusted EBITDA (as defined in the grant), or specific goals for the individual executive. The shares of restricted stock units granted in 2015 only vested upon the achievement of specified thresholds of net sales, Adjusted EBITDA, and earnings per share. As of September 30, 2016 the Company believes it is probable that it will achieve the targets for 497 shares of restricted stock granted in the first nine months of 2016. Of the 289 restricted stock units granted in 2015, 244 shares vested (including 7 shares granted in excess of the original grant due to the Company exceeding the operating thresholds) and 52 shares were forfeited. As part of the 569 shares of restricted stock units granted during the first nine months of 2015, the Company granted 213 shares of restricted stock to its chief executive officer. These restricted stock units only vest upon the following performance conditions being met for the year 2015: (1) the Company’s achievement of a gross profit margin equal to or in excess of 31.9%, (2) the Company’s achievement of certain cost savings initiatives within cost of sales specified by the compensation committee of the board of directors, and (3) the chief executive officer’s continued employment. Of the 213 shares of restricted stock units granted to the chief executive officer, 213 shares vested. The Company records share-based compensation expense only for those restricted stock units that are expected to vest. The estimated fair value of restricted stock units is recognized on a straight-line basis over the requisite service period of the award, which is generally the vesting term of the award. During the three and nine months ended September 30, 2016, the Company recorded equity-based compensation expense related to restricted stock units of $1,384 and $3,675, respectively, which is included as a component of selling, general and administrative expense. During the three and nine months ended September 30, 2015, the Company recorded equity-based compensation expense related to restricted stock units of $898 and $2,708, respectively, which is included as a component of selling, general and administrative expense. During the nine months ended September 30, 2016 and 2015, certain ZAGG employees elected to receive a net amount of shares upon the vesting of a restricted stock unit grant in exchange for the Company paying the minimum statutory withholding amount of the employees’ tax liabilities for the fair value of the award on the vesting date. This resulted in the Company paying $621 and $718, respectively, which is reflected as a reduction of additional paid-in capital. During the nine months ended September 30, 2015, the Company incurred incremental expense related to the departure of its former chief financial officer. Expenses incurred during the period include separation pay of $117 related to the acceleration of vesting on 15 restricted stock units that were previously scheduled to vest during the first quarter of 2016. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Taxes [Abstract] | |
INCOME TAXES | (7) INCOME TAXES During the three and nine months ended September 30, 2016, the Company’s effective tax rate was 47% and 41%, respectively. During the three and nine months ended September 30, 2015, the Company’s effective tax rate was 39% and 40%, respectively. The change in the effective tax rate for three- and nine-month periods ended September 30, 2016, is primarily due to a decrease in the domestic manufacturing deduction, and permanent differences related to the acquisition of mophie. The Company’s effective tax rate will generally differ from the U.S. Federal Statutory rate of 35% due to foreign and state taxes, permanent items, and the Company’s global tax strategy. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | (8) EARNINGS PER SHARE Basic earnings per common share excludes dilution and is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share reflects the potential dilution that could occur if stock options and restricted stock, or other common stock equivalents were exercised or converted into common stock. The dilutive effect of stock options or other common stock equivalents is calculated using the treasury stock method. The following is a reconciliation of the numerator and denominator used to calculate basic earnings per share and diluted earnings per share for the three and nine months ended September 30, 2016 and 2015: Three months ended September 30, September 30, Net (loss) income $ (7,105 ) $ 3,739 Weighted average shares outstanding: Basic 28,125 28,734 Dilutive effect of stock options, restricted stock units, and warrants — 196 Diluted 28,125 28,930 Earnings (loss) per share: Basic $ (0.25 ) $ 0.13 Diluted $ (0.25 ) $ 0.13 Nine months ended September 30, September 30, Net (loss) income $ (11,442 ) $ 10,631 Weighted average shares outstanding: Basic 27,987 29,209 Dilutive effect of stock options, restricted stock units, and warrants — 242 Diluted 27,987 29,451 Earnings (loss) per share: Basic $ (0.41 ) $ 0.36 Diluted $ (0.41 ) $ 0.36 For the three months ended September 30, 2016 1,001 restricted stock units and 50 warrants to purchase shares of common stock were not considered in calculating diluted earnings per share as their effect would have been anti-dilutive. For the three months ended September 30, 2015, warrants and restricted stock units to purchase 443 shares of common stock were not considered in calculating diluted earnings per share because the warrant or stock option exercise prices or the total expected proceeds under the treasury stock method for the warrants, restricted stock units, or stock options was greater than the average market price of common shares during the period and, therefore, the effect would be anti-dilutive. Also excluded from the calculation of diluted earnings per share for the three months ended September 30, 2015 were 452 restricted stock units granted that were not yet vested as the performance conditions were not met (see further discussion in Note 6). For the nine months ended September 30, 2016 1,001 restricted stock units and 50 warrants to purchase shares of common stock were not considered in calculating diluted earnings per share as their effect would have been anti-dilutive. For the nine months ended September 30, 2015 warrants and restricted stock units to purchase 328 shares of common stock were not considered in calculating diluted earnings per share because the warrant or stock option exercise prices or the total expected proceeds under the treasury stock method for the warrants, restricted stock units, or stock options was greater than the average market price of common shares during the period and, therefore, the effect would be anti-dilutive. Also excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2015 were 452 restricted stock units granted that were not yet vested as the performance conditions were not met (see further discussion in Note 6). |
Treasury Stock
Treasury Stock | 9 Months Ended |
Sep. 30, 2016 | |
Treasury Stock [Abstract] | |
TREASURY STOCK | (9) TREASURY STOCK During the fourth quarter of 2015, the Company’s board of directors authorized the repurchase of up to $20,000 of the Company’s outstanding common stock with no expiration date. The Company’s board of directors also authorized the Company to enter into a Rule 10b5-1 plan when appropriate. For the three and nine months ended September 30, 2016, no purchases of treasury stock occurred. For the three and nine months ended September 30, 2015 the Company purchased 1,844 and 1,886, respectively, shares of ZAGG Inc common stock for consideration of $13,570 and $13,894, respectively, which included commissions paid to brokers of $55 and $56, respectively. Stock purchased in the three and nine months ended September 30, 2015 had a weighted average price per share of $7.32 and $7.33, respectively. The consideration paid has been recorded within stockholders’ equity in the condensed consolidated balance sheets. In addition, during the third quarter of 2015, the Company foreclosed on 80 shares of ZAGG Inc common stock linked to the full recourse note receivable described in Note 10. The Company foreclosed on these shares at a price per share of $8.59 and a total value of $688. These shares are currently being held by the Company as treasury stock. |
Note Receivable
Note Receivable | 9 Months Ended |
Sep. 30, 2016 | |
Note Receivable [Abstract] | |
NOTE RECEIVABLE | (10) NOTE RECEIVABLE In June 2008, Lorence Harmer became a member of the Company’s board of directors and in December 2009, was appointed as the chairman of the audit committee. Mr. Harmer introduced the Company to a consumer electronics product, which became known as the ZAGGbox. The Company subsequently entered into negotiations with Teleportall, LLC (“Teleportall”), the owner of the technology used in the ZAGGbox, regarding production and distribution of the ZAGGbox. In 2009 and 2010 the Company entered into various agreements with Teleportall, including agreements appointing the Company as the exclusive distributor for the ZAGGbox in North America, issued purchase orders for ZAGGbox units in the aggregate amount of $3,500 and advanced to Teleportall a total of $3,900 against the total purchase price for the units ordered by the Company. Additionally, in May 2010, the Company entered into an agreement with Harmer Holdings, LLC (“Holdings”), an affiliate of Mr. Harmer, under which Holdings agreed to repurchase unsold ZAGGboxes under certain circumstances. In late 2010 the Company determined that the ZAGGbox product would not be ready to market and sell during the 2010 Christmas season and the Company commenced discussions to restructure its agreements with Teleportall. As a result of the foregoing, the Company entered into an agreement with Teleportall, Mr. Harmer and several entities owned or controlled by Mr. Harmer (the “Harmer Agreement”), dated March 23, 2011, but subject to further negotiations and ratification through April 5, 2011. Pursuant to the Harmer Agreement, the parties agreed to terminate the prior agreements and convey all ZAGG rights in the ZAGGbox to Teleportall on the following terms: ● Mr. Harmer, Teleportall, and certain of their affiliates delivered a promissory note (the “Note”) dated March 23, 2011, to the Company in the original principal amount of $4,126 which accrued interest at the rate of LIBOR plus 4% per annum (adjusted quarterly) payable as follows: (i) interest only payments (a) on September 23, 2011, and (b) thereafter on or before the last day of each calendar quarter, (ii) 50% of the net profits of each ZAGGbox sale by Teleportall and its affiliates, and (iii) the unpaid balance of principal and interest due in full on March 23, 2013. The Note was secured by certain real property, interests in entities that own real property and restricted and free-trading securities. ● In exchange for a license fee to the Company, Teleportall and the Company entered into a License Agreement under which the Company licensed to Teleportall the use of certain ZAGG names and trademarks to sell and distribute the ZAGGbox product. ● In exchange for commissions to be paid by the Company, Teleportall and ZAGG entered into a non-exclusive, two-year Commission Agreement on March 23, 2011, under which Teleportall could make introductions of many ZAGG products in all countries where ZAGG did not then have exclusive dealing agreements in respect of the marketing, distribution or sale of its products. No revenue has been recognized from Teleportall. The Note was originally accounted for under the cost recovery method and was originally included in the consolidated balance sheet at $3,900 which was the value of the ZAGGbox inventory advances. The original face value of the Note of $4,126 was for reimbursement of the inventory advances and other costs associated with the ZAGGbox and approximated fair value at March 23, 2011, as the variable interest rate on the Note approximated market rates. On September 20, 2011, and prior to the due date of the first interest-only payment due on the Note, Mr. Harmer and two of his affiliates, Holdings and Teleportall, filed a lawsuit in Utah state court (the “Court”) against the Company, its then CEO and CFO and KPMG LLP (ZAGG’s independent registered public accounting firm). KPMG LLP and the former CEO and CFO were subsequently dismissed from the lawsuit. In their lawsuit, the plaintiffs allege that the defendants defamed Mr. Harmer, breached the Harmer Agreement and interfered with other rights of the plaintiffs. Mr. Harmer failed to make the required interest-only payment to the Company due on September 23, 2011. Thereafter, the Company filed counterclaims against Mr. Harmer, Holdings and Teleportall to collect the balance due under the Note. Also, ZAGG commenced foreclosure on the collateral securing the Note, which consisted of real property, interests in entities that own real property, and restricted and free-trading securities, which included shares of ZAGG Inc common stock. On May 21, 2015, the Court issued a final judgment whereby all claims brought by Harmer were disposed of in favor of ZAGG and dismissed with prejudice. In addition, the Court granted summary judgment in favor of ZAGG on all counterclaims against Harmer, Holdings and Teleportall and ZAGG was awarded judgment in the amount of $4,735 with interest at 12% per annum until paid in full and reasonable attorney fees. Following the final judgment, the Company began the foreclosure process on all remaining collateral securing the Note. On June 29, 2015, the Company foreclosed on certain real property securing the Note, which was valued by an independent appraiser and determined to have a current fair value of $1,099. In conjunction with the foreclosure, the Company reclassified $801 of the Note previously collateralized by the foreclosed real property and included in other assets, and $298 of the Note collateralized by ZAGG Inc stock, as a $1,099 asset held for sale and presented it as a component of other assets in the condensed consolidated balance sheets. After this reclassification, the remaining balance of the Note was $50. On July 13, 2015, the Company foreclosed on 80 shares of ZAGG Inc common stock that were determined by the Company to have a fair value of $688 on the date of foreclosure. At the time of the foreclosure, the Note receivable balance totaled $50 and was reduced to $0. The $638 excess in value of the common stock over the book value of the Note was recorded by the Company as a recovery of a previously established reserve in selling, general and administrative expense in the consolidated statement of operations, which is the same financial statement line item in which the Company previously recorded write-downs of the Note. As of December 31, 2015, management determined that the estimated fair value of the remaining underlying collateral was between $135 and $270, consisting of real property investments. Since the Note became collateral dependent in October 2011, management has (1) foreclosed on and sold 45 shares of ZAGG Inc common stock for $496 (December 2011); (2) foreclosed on real property valued at $250 (January 2012); (3) foreclosed on stock and warrants in a private company of $516 (May 2012); (4) foreclosed on real property valued at $1,099 as discussed above; and (5) foreclosed on 80 shares of ZAGG Inc common stock for $688. These foreclosures were recorded as a reduction to the Note in the period in which the foreclosure occurred. Management continues to actively pursue the foreclosure of all remaining collateral and execution on other assets of Harmer, Holdings, and Teleportall. At September 30, 2016 and December 31, 2015, the entire unpaid balance on the note receivable was fully reserved. The total unpaid principal balance, including accrued interest, late fees, attorney fees, and costs incurred in collection, totaled $5,158 and $4,836, respectively. The increase to the reserve during the nine months ended September 30, 2016 consisted of accrued interest of $324. |
Fair Value Measures
Fair Value Measures | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Measures [Abstract] | |
FAIR VALUE MEASURES | (11) FAIR VALUE MEASURES Fair Value of Financial Instruments At September 30, 2016, the Company’s financial instruments included cash and cash equivalents, accounts receivable, accounts payable, a line of credit, and a term loan. The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturities of these financial instruments. The carrying value of the debt balances approximate fair value because the variable interest rates reflect current market rates and terms. Fair Value Measurements The Company measures at fair value certain financial and non-financial assets by using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price, based on the highest and best use of the asset or liability. The levels of the fair value hierarchy are: Level 1 — Quoted market prices in active markets for identical assets or liabilities; Level 2 — Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs); and Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting unit to develop its own assumptions. At September 30, 2016, and December 31, 2015, the following assets were measured at fair value on a recurring basis using the level of inputs shown: Fair Value Measurements Using: September 30, Level 1 Inputs Level 2 Inputs Level 3 Inputs Money market funds included in cash equivalents $ 5 $ 5 — — Fair Value Measurements Using: December 31, Level 1 Inputs Level 2 Inputs Level 3 Inputs Money market funds included in cash equivalents $ 375 $ 375 — — |
Concentrations
Concentrations | 9 Months Ended |
Sep. 30, 2016 | |
Concentrations [Abstract] | |
CONCENTRATIONS | (12) CONCENTRATIONS Concentration of credit risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company places its cash with high credit quality financial institutions. The Company maintains its cash in bank deposit accounts, which, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts through September 30, 2016. At September 30, 2016 the balance of accounts receivable from three separate customers exceeded 10%. At December 31, 2015, the balance of accounts receivable from two separate customers exceeded 10%: September 30, December 31, Customer A 14 % 29 % Customer B 38 % 31 % Customer C 11 % 5 % No other customer account balances were more than 10% of accounts receivable at September 30, 2016 or December 31, 2015. If one or more of the Company’s significant customers were to become insolvent or were otherwise unable to pay for the products provided, it would have a material adverse effect on the Company’s financial condition and results of operations. Concentration of supplier We do not directly manufacture any of our products, rather we employ various third party manufacturing partners in the United States and Asia to perform these services on our behalf. The services employed by these third parties include the selection of sub-suppliers that provide raw materials and other components used in the manufacturing process. We have endeavored to use common components and readily available raw materials in the design of our products that can be sourced from multiple sub-suppliers. However, raw film used in our InvisibleShield film and InvisibleShield On-Demand (“ISOD”) products has been produced by a single supplier for the last nine years. Our film supplier has contractually agreed to not sell the raw materials to any of our competitors. If any of our supplier relationships are terminated or interrupted, we could experience an immediate or long-term supply shortage, which could have a material adverse effect on our business. Concentration of sales For each of the three months ended September 30, 2016 and 2015, Superior Communications (“Superior”) and Best Buy individually accounted for over 10% of the quarterly revenues in each respective quarter: Three months ended September 30, Three months ended September 30, Superior Communications 30 % 17 % Best Buy 10 % 18 % For each of the three months ended September 30, 2016 and 2015 one other customer accounted for more than 10% of the quarterly revenues in each respective quarter. Other than Superior and Best Buy, those customers with over 10% of net sales in a given period tend to change from year-to-year. For the ZAGG segment, Superior is a pass-through distributor through which products are sold to Verizon (no other customers purchase through Superior). For the mophie segment, several retailers, including Best Buy, purchase mophie products through Superior. Although we have contracts in place governing our relationships with customers, the contracts are not long-term and all of our retailers purchase from us on a purchase order basis. As a result, these retailers may, with little or no notice or penalty, cease ordering and selling our products, or materially reduce their orders. If any of these retailers cease selling our products, slow their rate of purchase of our products, or decrease the number of products they purchase, our results of operations could be adversely affected. For each of the nine months ended September 30, 2016 and 2015, Superior and Best Buy individually accounted for over 10% of the quarterly revenues in each respective period: Nine months ended September 30, Nine months ended September 30, Superior Communications 27 % 13 % Best Buy 10 % 20 % For each of the nine months ended September 30, 2016 and 2015 one other customer accounted for more than 10% of the quarterly revenues in each respective quarter. Other than Superior and Best Buy, those customers with over 10% of net sales in a given period tend to change from year-to-year. The percentage of sales by geographic region for the three months ended September 30, 2016 and 2015, was approximately: Three months ended September 30, Three months ended September 30, United States 87 % 89 % Europe 8 % 9 % Other 5 % 2 % The percentage of sales by geographic region for the nine months ended September 30, 2016 and 2015, was approximately: Nine months ended September 30, Nine months ended September 30, United States 89 % 91 % Europe 7 % 8 % Other 4 % 1 % |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies [Abstract] | |
COMMITMENTS AND CONTINGENCIES | (13) COMMITMENTS AND CONTINGENCIES Operating leases The Company leases office and warehouse space, office equipment, and mall cart locations under operating leases that expire through 2023. Future minimum rental payments required under the operating leases at September 30, 2016 are as follows: Remaining 2016 $ 623 2017 2,661 2018 1,890 2019 1,453 2020 1,484 Thereafter 4,030 Total $ 12,141 For the three months ended September 30, 2016 and 2015, rent expense was $793 and $391, respectively, and is included in selling, general and administrative expense in the condensed consolidated statements of operations. For the nine months ended September 30, 2016 and 2015, rent expense was $2,450 and $1,182, respectively, and is included in selling, general and administrative expense in the condensed consolidated statements of operations. Commercial Litigation Daniel Huang, individually and as shareholder representative v. ZAGG INC, Court of Chancery of the State of Delaware, C.A. No. 12842. Lorence A. Harmer, et al. v. ZAGG Inc et al., Third Judicial District Court, Salt Lake County, State of Utah, Civil No. 110917687 Peter Kravitz v. ZAGG Inc., U.S. Bankruptcy Court, District of Delaware, Adv. Pro. No. 15-51558(BLS). Patent/Trademark Litigation I nter Partes Review of Patent No. 8,567,596 B1 in the United States Patent and Trademark Office, Patent Trial and Appeal Board (“PTAB”), Case IPR2014-01262. SEC Investigation In the fourth quarter of 2012, the Company received requests to provide documentation and information to the staff of the SEC in connection with an investigation being conducted by the SEC’s Salt Lake City office. The Company believes the investigation includes a review of the facts and circumstances surrounding former-Chief Executive Officer Robert Pedersen’s pledge and subsequent sale of Company shares and the fact that such pledges and sales were not disclosed in the Company’s 2011 10-K filed on March 15, 2012 or 2012 Proxy filed on April 27, 2012. The Company responded to these requests and is cooperating with the staff although there has been no resolution to date. Other Litigation The Company is not a party to any other material litigation or claims at this time. While the Company currently believes that the amount of any ultimate potential loss for known matters would not be material to the Company’s financial condition, the outcome of these actions is inherently difficult to predict. In the event of an adverse outcome, the ultimate potential loss could have a material adverse effect on the Company’s financial condition or results of operations in a particular period. The Company records a liability when a particular contingency is probable and estimable. Other than those discussed above, the Company has not accrued for any loss at September 30, 2016 in the condensed consolidated financial statements as the Company does not consider a loss to be probable or estimable. The Company faces contingencies that are reasonably possible to occur; however, the reasonably possible exposure to losses cannot currently be estimated. |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | (14) SEGMENT REPORTING The Company designs, produces, and distributes professional and premium creative product solutions in domestic and international markets. The Company’s operations are conducted in two reporting business segments: ZAGG and mophie. The Company defines its segments as those operations whose results its chief operating decision maker regularly reviews to analyze performance and allocate resources. The results of operations of mophie are included in the Company’s results of operations beginning on March 3, 2016. The ZAGG segment designs and distributes screen protection, keyboards for tablet computers and other mobile devices, earbuds, headphones, Bluetooth speakers, mobile power, cables, and cases under the ZAGG, InvisibleShield, and IFROGZ brands. Domestic operations are headquartered in Midvale, Utah, while international operations are directed from Shannon, Ireland. The mophie segment designs and distributes power cases, mobile power, cases, and cables under the mophie brand. Worldwide operations are headquartered in Tustin, California. The Company measures the results of its segments using, among other measures, each segment's net sales, gross profit, and operating income (loss). Net sales by segment are as follows: Three months ended September 30, Three months ended September 30, ZAGG segment $ 84,931 $ 66,774 mophie segment 39,731 — Net sales $ 124,662 $ 66,774 Nine months ended September 30, Nine months ended September 30, ZAGG segment $ 207,538 $ 190,679 mophie segment 79,390 — Net sales $ 286,928 $ 190,679 Gross profit by segment is as follows: Three months ended September 30, Three months ended September 30, ZAGG segment $ 35,420 $ 24,871 mophie segment 7,726 — Gross profit $ 43,146 $ 24,871 Nine months ended September 30, Nine months ended September 30, ZAGG segment $ 84,885 $ 72,785 mophie segment 12,863 — Gross profit $ 97,748 $ 72,785 Income (loss) from operations by segment is as follows: Three months ended September 30, Three months ended September 30, ZAGG segment $ (9,405 ) $ 6,228 mophie segment (3,305 ) — Income (loss) from operations $ (12,710 ) $ 6,228 Nine months ended September 30, Nine months ended September 30, ZAGG segment $ (704 ) $ 17,918 mophie segment (17,062 ) — Income (loss) from operations $ (17,766 ) $ 17,918 Total assets by segment are as follows: September 30, 2016 December 31, 2015 ZAGG segment $ 154,018 $ 179,541 mophie segment 150,347 — Total assets $ 304,365 $ 179,541 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | (15) SUBSEQUENT EVENTS As is described above in Notes 2 and 13, on October 21, 2016, Daniel Huang as the representative of the shareholders of mophie, inc. under the Merger Agreement dated February 2, 2016, by and among the Company, ZM Acquisition, Inc. and mophie, inc., filed a lawsuit against the Company alleging that the Company breached the Merger Agreement by failing to pay certain contingent payments related to tax refunds and customs duty recoveries and seeks damages in an amount no less than $11,420. The Company will respond in due course and will defend the claims and otherwise enforce its rights and remedies under the Merger Agreement. The Company recorded a liability based on its estimate of the contingent payments as part of purchase accounting. The Company will accrue for future tax refunds, proceeds received on the land held for sale, and customs duty recoveries as they are collected. This matter is not expected to have a material adverse effect on the Company’s financial position, results of operations, or liquidity. |
Nature of Operations and Basi22
Nature of Operations and Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Nature of Operations and Basis of Presentation [Abstract] | |
Business Combinations | Business Combinations Significant estimates in valuing certain intangible assets include but are not limited to: future expected cash flows related to each individual asset, market position of the tradenames, as well as assumptions about cash flow savings from the tradenames, determination of useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. |
Goodwill | Goodwill At least annually and when events and circumstances warrant an evaluation, we perform our impairment assessment of goodwill. This assessment initially permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity can support the conclusion that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it would not need to perform the two-step impairment test for the reporting unit. However, if it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the two step analysis is performed, which incorporates a fair-value based approach. We determine the fair value of our reporting unit based on discounted cash flows and market approach analyses as considered necessary. We consider factors such as the economy, reduced expectations for future cash flows coupled with a decline in the market price of our stock and market capitalization for a sustained period as indicators for potential goodwill impairment. If the reporting unit’s carrying amount exceeds its estimated fair value, a second step must be performed to measure the amount of the goodwill impairment loss, if any. The second step compares the implied fair value of the reporting unit’s goodwill, determined in the same manner as the amount of goodwill recognized in a business combination, with the carrying amount of such goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” This ASU includes a five-step process by which entities will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which an entity expects to be entitled in exchange for those goods or services. The ASU also will require enhanced disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The ASU may be adopted utilizing one of two methods. The first method is to adopt the ASU by recording the effect of the guidance in the ASU retrospectively to each prior period presented in the period of adoption. The second method is to adopt the ASU by recording the effect of the guidance in the ASU retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application. On July 9, 2015, the FASB voted to approve a one-year deferral of the effective date of this ASU. This deferral was issued by the FASB in ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date”. As a result of ASU No. 2015-14 the Company expects that it will apply the new revenue standard to annual and interim reporting periods beginning after December 15, 2017. In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606) – Narrow-Scope Improvements and Practical Expedients”. The amendments and practical expedients presented in the ASU aim to simplify the transition to the new standard, to provide practical expedients for transition and sales taxes, and to clarify certain aspects of the standard. The Company is currently evaluating the impact these ASU will have on its consolidated financial statements, including the method of adoption that will be utilized. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory.” This ASU provides guidance to entities that measure inventory using a method other than last-in, first-out (LIFO) or the retail inventory method. For entities using first-in, first-out (FIFO) or average cost, the measurement principle for their inventory changes from the lower of cost or market to lower of cost and net realizable value. Current U.S. GAAP requires, at each financial statement date, that entities measure inventory at the lower of cost or market. The measurement of market is commonly the current replacement cost. However, entities also need to consider net realizable value and net realizable value less an approximately normal profit margin in their measurement. For entities using a method other than LIFO or the retail inventory method, the ASU replaces market with net realizable value. This ASU requires prospective adoption for inventory measurement for annual and interim periods beginning after December 15, 2016 for public business entities. The Company has concluded that this ASU will not have a significant impact on our financial position or results of operations. In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes,” which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent. The amendments in the ASU may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The ASU is effective for public business entities for interim and annual periods in fiscal years beginning after December 15, 2016. The Company has determined that it will adopt the ASU using the retrospective approach and has concluded that the adoption of this ASU will result in recording deferred tax assets as non-current and will not impact our results of operations. In February 2016, the FASB issued its new lease accounting standard, Topic 842, which requires lessees to recognize most leases, including operating leases, on-balance sheet via a right of use asset and lease liability. Lessees are allowed to account for short-term leases (i.e., leases with a term of 12 months or less) off-balance sheet, consistent with current operating lease accounting. A number of other significant changes to lease accounting have been effected through the issuance of this standard. The requirements of the new standard for leases shall be recognized and measured at the beginning of the earliest comparative period presented. When adopted, the Company will be required to adjust equity at the beginning of the earliest comparative period presented, and the other comparative amounts disclosed for each prior period presented in the financial statements, as if the requirements of the new standard had always been applied. The new standard also contains practical expedients which the Company may elect to follow. The new standard is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements, including whether to elect the practical expedients outlined in the new standard. In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which simplified accounting for share-based payments. The ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those years for public business entities. Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted. Amendments in the ASU related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares should be applied retrospectively. Amendments requiring the recognition of excess tax benefits and tax deficiencies in the income statement should be applied prospectively. The amendments related to the presentation of excess tax benefits on the statement of cash flows may be applied using either a prospective or retrospective transition method. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements, including, where applicable, determining the method of adoption. In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments,” which addresses eight classification issues related to the statement of cash flows: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon bonds; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. The ASU is effective for public companies for fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The amendments in the ASU should be applied using a retrospective transition method to each period presented. If it is impracticable for the amendments to be applied retrospectively for some of the issues, the amendments for those issues may be applied prospectively as of the earliest date practicable. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements, including the method of adoption. |
Acquisition of Mophie Inc. (Tab
Acquisition of Mophie Inc. (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Acquisition of Mophie Inc [Abstract] | |
Schedule of purchase consideration | Adjustments to Preliminary Allocation Working Revised Allocation March 3, and March 3, Cash consideration $ 100,000 $ - $ 100,000 Negative working capital at Acquisition Date (23,478 ) - (23,478 ) Additional negative working capital deficit - (26,317 ) (26,317 ) Contingent payments 11,283 856 12,139 Total purchase price $ 87,805 $ (25,461 ) $ 62,344 |
Schedule of the preliminary estimates of the fair values of the identifiable assets acquired and liabilities assumed | Cash and cash equivalents $ 1,779 Trade receivables (gross contractual receivables of $12,824) 12,823 Inventories 24,911 Prepaid expenses and other assets 1,073 Income tax receivable 11,814 Deferred tax assets 15,649 Property and equipment 10,191 Land held for sale 325 Amortizable identifiable intangible assets 43,812 Goodwill 12,791 Accounts payable (37,359 ) Income tax payable (196 ) Accrued liabilities (5,163 ) Deferred revenue (9 ) Sales returns liability (29,584 ) Other noncurrent liabilities (513 ) Total $ 62,344 Preliminary Purchase Adjustments to Revised Purchase Price Working Price March 3, and March 3, Cash and cash equivalents $ 1,779 $ - $ 1,779 Trade receivables 13,483 (660 ) 12,823 Inventories 32,335 (10,011 ) 22,325 Inventory step-up 6,937 (4,351 ) 2,586 Prepaid expenses 485 215 700 Other assets 200 173 373 Income tax receivable 10,958 856 11,814 Deferred tax assets 24,925 (9,276 ) 15,649 Property and equipment 10,191 - 10,191 Land held for sale 325 - 325 Amortizable identifiable intangible assets 45,463 (1,651 ) 43,812 Goodwill 14,092 (1,301 ) 12,791 Accounts payable (34,228 ) (3,131 ) (37,359 ) Income tax payable (196 ) - (196 ) Accrued liabilities (5,185 ) 22 (5,163 ) Deferred revenue (800 ) 791 (9 ) Sales returns liability (14,468 ) (15,116 ) (29,584 ) Deferred tax liabilities (17,978 ) 17,978 - Other noncurrent liabilities (513 ) - (513 ) Total $ 87,805 $ (25,461 ) $ 62,344 |
Schedule of identifiable intangible assets | Intangible asset class Weighted-average amortization period Tradenames $ 18,348 10.0 years Patents and technology 15,225 7.5 years Customer relationships 8,200 5.0 years Non-compete agreements 1,796 5.0 years Backlog 243 0.3 years Total $ 43,812 |
Schedule of pro forma results from operations | 3 Months Ended September 30, Net sales $ 108,614 Net loss $ (8,592 ) Basic earnings per share $ (0.30 ) Diluted earnings per share $ (0.30 ) 9 Months Ended September 30, September 30, Net sales $ 304,254 $ 343,675 Net loss $ (15,432 ) $ (9,002 ) Basic loss per share $ (0.55 ) $ (0.31 ) Diluted loss per share $ (0.55 ) $ (0.31 ) |
Debt and Letters of Credit (Tab
Debt and Letters of Credit (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt and Letters of Credit [Abstract] | |
Scedule of contractual future payments under the credit and security agreement | Line of Credit Term Loan Total Remaining 2016 $ — $ 1,563 $ 1,563 2017 — 6,250 6,250 2018 — 6,250 6,250 2019 — 6,250 6,250 2020 — 1,562 1,562 Thereafter 30,195 — 30,195 Total $ 30,195 $ 21,875 $ 52,070 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Intangible Assets [Abstract] | |
Schedule of definite-lived intangibles | As of September 30, 2016 Gross Carrying Amount Acquisitions Accumulated Amortization Net Carrying Amount Weighted Average Amortization Period Customer relationships $ 41,500 $ 8,200 $ (33,535 ) $ 16,165 7.5 years Tradenames 12,921 18,348 (8,790 ) 22,479 9.8 years Patents and technology 6,003 15,225 (4,615 ) 16,613 8.8 years Non-compete agreements 4,100 1,796 (4,310 ) 1,586 4.9 years Other 324 243 (542 ) 25 2.4 years Total amortizable assets $ 64,848 $ 43,812 $ (51,792 ) $ 56,868 8.2 years As of December 31, 2015 Gross Carrying Amount Acquisitions Accumulated Amortization Net Carrying Amount Weighted Average Amortization Period Customer relationships $ 41,500 $ — $ (29,150 ) $ 12,350 8.0 years Tradenames 12,921 — (6,253 ) 6,668 9.5 years Patents and technology 5,805 198 (2,381 ) 3,622 11.9 years Non-compete agreements 4,100 — (3,729 ) 371 4.8 years Other 324 — (290 ) 34 4.1 years Total amortizable assets $ 64,650 $ 198 $ (41,803 ) $ 23,045 8.4 years |
Schedule of estimated future amortization expense | Remaining 2016 $ 3,506 2017 12,387 2018 11,351 2019 9,267 2020 6,653 Thereafter 13,704 Total $ 56,868 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Inventories [Abstract] | |
Schedule of inventories | September 30, December 31, Finished goods $ 64,925 $ 44,764 Raw materials 1,279 1,148 Total inventories $ 66,204 $ 45,912 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of reconciliation of numerator and denominator used to calculate basic earnings per share and diluted earnings per share | Three months ended September 30, September 30, Net (loss) income $ (7,105 ) $ 3,739 Weighted average shares outstanding: Basic 28,125 28,734 Dilutive effect of stock options, restricted stock units, and warrants — 196 Diluted 28,125 28,930 Earnings (loss) per share: Basic $ (0.25 ) $ 0.13 Diluted $ (0.25 ) $ 0.13 Nine months ended September 30, September 30, Net (loss) income $ (11,442 ) $ 10,631 Weighted average shares outstanding: Basic 27,987 29,209 Dilutive effect of stock options, restricted stock units, and warrants — 242 Diluted 27,987 29,451 Earnings (loss) per share: Basic $ (0.41 ) $ 0.36 Diluted $ (0.41 ) $ 0.36 |
Fair Value Measures (Tables)
Fair Value Measures (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Measures [Abstract] | |
Schedule of assets and liabilities measured at fair value on recurring basis | Fair Value Measurements Using: September 30, Level 1 Inputs Level 2 Inputs Level 3 Inputs Money market funds included in cash equivalents $ 5 $ 5 — — Fair Value Measurements Using: December 31, Level 1 Inputs Level 2 Inputs Level 3 Inputs Money market funds included in cash equivalents $ 375 $ 375 — — |
Concentrations (Tables)
Concentrations (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Concentrations [Abstract] | |
Schedules of concentration of accounts receivable and sales | September 30, December 31, Customer A 14 % 29 % Customer B 38 % 31 % Customer C 11 % 5 % Three months ended September 30, Three months ended September 30, Superior Communications 30 % 17 % Best Buy 10 % 18 % Nine months ended September 30, Nine months ended September 30, Superior Communications 27 % 13 % Best Buy 10 % 20 % |
Schedule of percentage of sales by geographic region | Three months ended September 30, Three months ended September 30, United States 87 % 89 % Europe 8 % 9 % Other 5 % 2 % Nine months ended September 30, Nine months ended September 30, United States 89 % 91 % Europe 7 % 8 % Other 4 % 1 % |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies [Abstract] | |
Schedule of future minimum rental payments required under the operating leases | Remaining 2016 $ 623 2017 2,661 2018 1,890 2019 1,453 2020 1,484 Thereafter 4,030 Total $ 12,141 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Schedule of segment reporting information | Three months ended September 30, Three months ended September 30, ZAGG segment $ 84,931 $ 66,774 mophie segment 39,731 — Net sales $ 124,662 $ 66,774 Nine months ended September 30, Nine months ended September 30, ZAGG segment $ 207,538 $ 190,679 mophie segment 79,390 — Net sales $ 286,928 $ 190,679 Three months ended September 30, Three months ended September 30, ZAGG segment $ 35,420 $ 24,871 mophie segment 7,726 — Gross profit $ 43,146 $ 24,871 Nine months ended September 30, Nine months ended September 30, ZAGG segment $ 84,885 $ 72,785 mophie segment 12,863 — Gross profit $ 97,748 $ 72,785 Three months ended September 30, Three months ended September 30, ZAGG segment $ (9,405 ) $ 6,228 mophie segment (3,305 ) — Income (loss) from operations $ (12,710 ) $ 6,228 Nine months ended September 30, Nine months ended September 30, ZAGG segment $ (704 ) $ 17,918 mophie segment (17,062 ) — Income (loss) from operations $ (17,766 ) $ 17,918 September 30, 2016 December 31, 2015 ZAGG segment $ 154,018 $ 179,541 mophie segment 150,347 — Total assets $ 304,365 $ 179,541 |
Nature of Operations and Basi32
Nature of Operations and Basis of Presentation (Details) - USD ($) $ in Thousands | Mar. 03, 2016 | Feb. 29, 2016 | Sep. 30, 2016 |
Nature of Operations and Basis of Presentation [Abstract] | |||
Cash consideration on acquired | $ 100,000 | ||
Working capital adjustment, net | $ 49,795 | ||
Lease term | P12M |
Acquisition of Mophie Inc. (Det
Acquisition of Mophie Inc. (Details) $ in Thousands | Mar. 03, 2016USD ($) |
Preliminary Allocation [Member] | |
Business Acquisition [Line Items] | |
Cash consideration | $ 100,000 |
Negative working capital at Acquisition Date | (23,478) |
Additional negative working capital deficit | |
Contingent payments | 11,283 |
Total purchase price | 87,805 |
Adjustments to Working Capital and Fair Value [Member] | |
Business Acquisition [Line Items] | |
Cash consideration | |
Negative working capital at Acquisition Date | |
Additional negative working capital deficit | (26,317) |
Contingent payments | 856 |
Total purchase price | (25,461) |
Revised Allocation [Member] | |
Business Acquisition [Line Items] | |
Cash consideration | 100,000 |
Negative working capital at Acquisition Date | (23,478) |
Additional negative working capital deficit | (26,317) |
Contingent payments | 12,139 |
Total purchase price | $ 62,344 |
Acquisition of Mophie Inc. (D34
Acquisition of Mophie Inc. (Details 1) - USD ($) $ in Thousands | Sep. 30, 2016 | Mar. 03, 2016 |
Business Acquisition [Line Items] | ||
Cash and cash equivalents | $ 1,779 | |
Trade receivables (gross contractual receivables of $12,824) | 12,823 | |
Inventories | 24,911 | |
Prepaid expenses and other assets | 1,073 | |
Income tax receivable | 11,814 | |
Deferred tax assets | 15,649 | |
Property and equipment | 10,191 | |
Land held for sale | 325 | |
Amortizable identifiable intangible assets | 43,812 | |
Goodwill | 12,791 | |
Accounts payable | (37,359) | |
Income tax payable | (196) | |
Accrued liabilities | (5,163) | |
Deferred revenue | (9) | |
Sales returns liability | (29,584) | |
Other noncurrent liabilities | (513) | |
Total | $ 62,344 | |
Preliminary Purchase Price Allocation [Member] | ||
Business Acquisition [Line Items] | ||
Cash and cash equivalents | $ 1,779 | |
Trade receivables (gross contractual receivables of $12,824) | 13,483 | |
Inventories | 32,335 | |
Inventory step-up | 6,937 | |
Prepaid expenses | 485 | |
Other assets | 200 | |
Income tax receivable | 10,958 | |
Deferred tax assets | 24,925 | |
Property and equipment | 10,191 | |
Land held for sale | 325 | |
Amortizable identifiable intangible assets | 45,463 | |
Goodwill | 14,092 | |
Accounts payable | (34,228) | |
Income tax payable | (196) | |
Accrued liabilities | (5,185) | |
Deferred revenue | (800) | |
Sales returns liability | (14,468) | |
Deferred tax liabilities | (17,978) | |
Other noncurrent liabilities | (513) | |
Total | 87,805 | |
Adjustments to Working Capital and Fair Value [Member] | ||
Business Acquisition [Line Items] | ||
Cash and cash equivalents | ||
Trade receivables (gross contractual receivables of $12,824) | (660) | |
Inventories | (10,011) | |
Inventory step-up | (4,351) | |
Prepaid expenses | 215 | |
Other assets | 173 | |
Income tax receivable | 856 | |
Deferred tax assets | (9,276) | |
Property and equipment | ||
Land held for sale | ||
Amortizable identifiable intangible assets | (1,651) | |
Goodwill | (1,301) | |
Accounts payable | (3,131) | |
Income tax payable | ||
Accrued liabilities | 22 | |
Deferred revenue | 791 | |
Sales returns liability | (15,116) | |
Deferred tax liabilities | 17,978 | |
Other noncurrent liabilities | ||
Total | (25,461) | |
Revised Purchase Price Allocation [Member] | ||
Business Acquisition [Line Items] | ||
Cash and cash equivalents | 1,779 | |
Trade receivables (gross contractual receivables of $12,824) | 12,823 | |
Inventories | 22,325 | |
Inventory step-up | 2,586 | |
Prepaid expenses | 700 | |
Other assets | 373 | |
Income tax receivable | 11,814 | |
Deferred tax assets | 15,649 | |
Property and equipment | 10,191 | |
Land held for sale | 325 | |
Amortizable identifiable intangible assets | 43,812 | |
Goodwill | 12,791 | |
Accounts payable | (37,359) | |
Income tax payable | (196) | |
Accrued liabilities | (5,163) | |
Deferred revenue | (9) | |
Sales returns liability | (29,584) | |
Deferred tax liabilities | ||
Other noncurrent liabilities | (513) | |
Total | $ 62,344 |
Acquisition of Mophie Inc. (D35
Acquisition of Mophie Inc. (Details 2) $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Business Acquisition [Line Items] | |
Intangible asset class | $ 43,812 |
Tradenames [Member] | |
Business Acquisition [Line Items] | |
Intangible asset class | $ 18,348 |
Weighted-average amortization period | 10 years |
Patents and technology [Member] | |
Business Acquisition [Line Items] | |
Intangible asset class | $ 15,225 |
Weighted-average amortization period | 7 years 6 months |
Customer relationships [Member] | |
Business Acquisition [Line Items] | |
Intangible asset class | $ 8,200 |
Weighted-average amortization period | 5 years |
Non-compete agreements [Member] | |
Business Acquisition [Line Items] | |
Intangible asset class | $ 1,796 |
Weighted-average amortization period | 5 years |
Backlog [Member] | |
Business Acquisition [Line Items] | |
Intangible asset class | $ 243 |
Weighted-average amortization period | 3 months 18 days |
Acquisition of Mophie Inc. (D36
Acquisition of Mophie Inc. (Details 3) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Acquisition of Mophie Inc [Abstract] | |||
Net sales | $ 108,614 | $ 304,254 | $ 343,675 |
Net loss | $ (8,592) | $ (15,432) | $ (9,002) |
Basic earnings (loss) per share | $ (0.30) | $ (0.55) | $ (0.31) |
Diluted earnings (loss) per share | $ (0.30) | $ (0.55) | $ (0.31) |
Acquisition of Mophie Inc. (D37
Acquisition of Mophie Inc. (Details Textual) - USD ($) $ in Thousands | Mar. 03, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Feb. 02, 2016 |
Aquisition of Mophie (Textual) | |||||||
Paid to principal shareholders in escrow account | $ 2,000 | $ 2,000 | $ 2,000 | ||||
Insurance policy amount | 10,000 | ||||||
Acquisition related costs | 145 | 2,467 | |||||
Net loss before tax | (13,366) | 6,126 | $ (19,405) | 17,786 | |||
Contingent payments, description | The contingent payments described above related to tax refunds and customs duties and claims damages in the amount of $11,420. | ||||||
Preliminary Allocation [Member] | |||||||
Aquisition of Mophie (Textual) | |||||||
Cash consideration | $ 100,000 | ||||||
Purchase price | 62,344 | ||||||
Adjustments to Working Capital and Fair Value [Member] | |||||||
Aquisition of Mophie (Textual) | |||||||
Additional working capital deficit | 26,317 | ||||||
Adjustments to fair value of working capital | 856 | ||||||
ZAGG Inc [Member] | |||||||
Aquisition of Mophie (Textual) | |||||||
Paid to principal shareholders in escrow account | 2,000 | 2,000 | $ 2,000 | ||||
Additional working capital deficit | 26,317 | ||||||
Negative working capital at acquisition date | 49,795 | ||||||
Loss on purchase price | $ 24,317 | ||||||
Options exploring, description | The Company is exploring all options to recover the amounts related to the aggregate net working capital deficit including (1) pursuing collection of the $2,000 escrow amount, (2) submitting claims under the $10,000 representation and warranty insurance policy put in place at the Acquisition Date, and (3) pursuing any and all offset rights granted under the Merger Agreement with respect to the contingent payments that would have been paid to the Principal Shareholders. | ||||||
Mophie Inc [Member] | |||||||
Aquisition of Mophie (Textual) | |||||||
Acquisition date | Mar. 3, 2016 | ||||||
Cash consideration | $ 100,000 | ||||||
Earn out consideration | 20,000 | ||||||
Issuance of common stock value | $ 5,000 | ||||||
Contractual receivable amount | 12,824 | 12,824 | 12,824 | ||||
Net sales | 39,731 | 79,390 | |||||
Net loss before tax | $ 3,305 | $ 17,030 | |||||
Pro forma net loss amortization expense | 1,818 | 5,076 | 5,698 | ||||
Business acquisition pro forma information | $ 2,586 | ||||||
Tax adjustment, percentage | 10.00% | ||||||
Amortization of debt issuance cost | $ 536 | $ 1,508 | $ 1,622 | ||||
Additional working capital deficit | $ 26,317 |
Debt and Letters of Credit (Det
Debt and Letters of Credit (Details) $ in Thousands | Sep. 30, 2016USD ($) |
Short-term Debt [Line Items] | |
Remaining 2,016 | $ 1,563 |
2,017 | 6,250 |
2,018 | 6,250 |
2,019 | 6,250 |
2,020 | 1,562 |
Thereafter | 30,195 |
Total | 52,070 |
Line of Credit [Member] | |
Short-term Debt [Line Items] | |
Remaining 2,016 | |
2,017 | |
2,018 | |
2,019 | |
2,020 | |
Thereafter | 30,195 |
Total | 30,195 |
Term Loan [Member] | |
Short-term Debt [Line Items] | |
Remaining 2,016 | 1,563 |
2,017 | 6,250 |
2,018 | 6,250 |
2,019 | 6,250 |
2,020 | 1,562 |
Thereafter | |
Total | $ 21,875 |
Debt and Letters of Credit (D39
Debt and Letters of Credit (Details Textual) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Line Of Credit Facility [Line Items] | ||||
Unused line fees | $ 18 | $ 10 | $ 40 | $ 28 |
Weighted average interest rate on all outstanding borrowings | 2.03% | 2.03% | ||
Effective interest rate | 3.05% | 3.05% | ||
Incurred and capitalization direct cost | $ 1,144 | |||
Line of Credit [Member] | ||||
Line Of Credit Facility [Line Items] | ||||
Line of credit maturity date | Mar. 2, 2021 | |||
Line of credit interest rate, description | Interest on the Line of Credit will accrue at the base rate plus 0.50% or LIBOR plus 1.50%. | |||
Line of credit fee percentage | 0.20% | |||
Revolving credit commitment | $ 85,000 | |||
Term Loan [Member] | ||||
Line Of Credit Facility [Line Items] | ||||
Line of credit facility, maximum borrowing capacity | $ 25,000 | $ 25,000 | ||
Line of credit maturity date | Mar. 2, 2020 | |||
Line of credit interest rate, description | Interest on the Term Loan will accrue at the base rate plus 1.0% or at a rate of LIBOR plus 2.0%. | |||
Line of credit facility principal payment | $ 521 | |||
Credit and Security Agreement [Member] | ||||
Line Of Credit Facility [Line Items] | ||||
Incurred and capitalization direct cost | 1,144 | |||
Cost related to line of credit | 884 | |||
Cost related to long-term debt | 260 | |||
Amortization of capitalization costs | $ 60 | $ 141 | ||
Line of credit fee percentage | 0.125% | |||
Wells Fargo Bank [Member] | ||||
Line Of Credit Facility [Line Items] | ||||
Amortization of capitalization costs | $ 16 | $ 49 |
Intangible Assets (Details )
Intangible Assets (Details ) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 64,848 | $ 64,650 |
Acquisitions | 43,812 | 198 |
Accumulated Amortization | (51,792) | (41,803) |
Net Carrying Amount | $ 56,868 | $ 23,045 |
Weighted Average Amortization Period | 8 years 2 months 12 days | 8 years 4 months 24 days |
Customer relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 41,500 | $ 41,500 |
Acquisitions | 8,200 | |
Accumulated Amortization | (33,535) | (29,150) |
Net Carrying Amount | $ 16,165 | $ 12,350 |
Weighted Average Amortization Period | 7 years 6 months | 8 years |
Tradenames [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 12,921 | $ 12,921 |
Acquisitions | 18,348 | |
Accumulated Amortization | (8,790) | (6,253) |
Net Carrying Amount | $ 22,479 | $ 6,668 |
Weighted Average Amortization Period | 9 years 9 months 18 days | 9 years 6 months |
Patents and technology [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 6,003 | $ 5,805 |
Acquisitions | 15,225 | 198 |
Accumulated Amortization | (4,615) | (2,381) |
Net Carrying Amount | $ 16,613 | $ 3,622 |
Weighted Average Amortization Period | 8 years 9 months 18 days | 11 years 10 months 24 days |
Non-compete agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 4,100 | $ 4,100 |
Acquisitions | 1,796 | |
Accumulated Amortization | (4,310) | (3,729) |
Net Carrying Amount | $ 1,586 | $ 371 |
Weighted Average Amortization Period | 4 years 10 months 24 days | 4 years 9 months 18 days |
Other [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 324 | $ 324 |
Acquisitions | 243 | |
Accumulated Amortization | (542) | (290) |
Net Carrying Amount | $ 25 | $ 34 |
Weighted Average Amortization Period | 2 years 4 months 24 days | 4 years 1 month 6 days |
Intangible Assets (Details 1)
Intangible Assets (Details 1) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Intangible Assets [Abstract] | ||
Remaining 2,016 | $ 3,506 | |
2,017 | 12,387 | |
2,018 | 11,351 | |
2,019 | 9,267 | |
2,020 | 6,653 | |
Thereafter | 13,704 | |
Total | $ 56,868 | $ 23,045 |
Intangible Assets (Details Text
Intangible Assets (Details Textual) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expenses | $ 2,398 | $ 2,134 | $ 9,909 | $ 6,403 |
Amortization expense and accumulated amortization | 1,078 | |||
Acquired technology [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expenses | 28 | $ 26 | 80 | $ 75 |
Acquired mophie [Member] | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expenses | $ 740 | $ 4,485 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Inventories [Abstract] | ||
Finished goods | $ 64,925 | $ 44,764 |
Raw materials | 1,279 | 1,148 |
Total inventories | $ 66,204 | $ 45,912 |
Inventories (Details Textual)
Inventories (Details Textual) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Inventories (Textual) | ||
Inventory deposits with third-party manufacturers | $ 736 | $ 813 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Payment of withholdings on restricted stock units | $ 621 | $ 718 | ||
Restricted Stock [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of restricted stock granted | 163 | 24 | 876 | 569 |
Weighted average fair value of restricted stock per share | $ 6.41 | $ 8.24 | $ 8.17 | $ 6.58 |
Number of restricted stock acheived | 497 | |||
Number of restricted shares vested | 15 | 244 | ||
Shares granted in excess of original grant | 7 | |||
Number of restricted shares forfeited | 52 | |||
Payment of withholdings on restricted stock units | $ 621 | $ 718 | ||
Incremental expense | $ 117 | |||
Maximum [Member] | Restricted Stock [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Term of restricted stock vested | 3 years | |||
Minimum [Member] | Restricted Stock [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Term of restricted stock vested | 9 months | |||
Selling, general and administrative expenses [Member] | Restricted Stock [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based compensation expense | $ 1,384 | $ 898 | $ 3,675 | $ 2,708 |
Executives and employees [Member] | Restricted Stock [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of restricted stock granted | 575 | 289 | ||
Chief executive officer [Member] | Restricted Stock [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of restricted stock granted | 213 | |||
Number of restricted shares vested | 213 | |||
Restricted stock, Description | (1) the Company's achievement of a gross profit margin equal to or in excess of 31.9%, (2) the Company's achievement of certain cost savings initiatives within cost of sales specified by the compensation committee of the board of directors, and (3) the chief executive officer's continued employment. |
Income Taxes (Details)
Income Taxes (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Taxes (Textual) | ||||
Effective tax rate | 47.00% | 39.00% | 41.00% | 40.00% |
Federal statutory rate | 35.00% |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Earnings Per Share [Abstract] | ||||
Net (loss) income | $ (7,105) | $ 3,739 | $ (11,442) | $ 10,631 |
Weighted average shares outstanding: | ||||
Basic | 28,125 | 28,734 | 27,987 | 29,209 |
Dilutive effect of stock options, restricted stock units, and warrants | 196 | 242 | ||
Diluted | 28,125 | 28,930 | 27,987 | 29,451 |
Earnings (loss) per share: | ||||
Basic | $ (0.25) | $ 0.13 | $ (0.41) | $ 0.36 |
Diluted | $ (0.25) | $ 0.13 | $ (0.41) | $ 0.36 |
Earnings Per Share (Details Tex
Earnings Per Share (Details Textual) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Warrants, Restricted Stock Units, or Stock Options [Member] | ||||
Earnings per share (Textual) | ||||
Shares of common stock were not considered in calculating diluted earnings per share | 443 | 328 | ||
Restricted Stock Units [Member] | ||||
Earnings per share (Textual) | ||||
Shares of common stock were not considered in calculating diluted earnings per share | 1,001 | 1,001 | ||
Restricted stock units granted that were not yet vested | 452 | 452 | ||
Warrant [Member] | ||||
Earnings per share (Textual) | ||||
Shares of common stock were not considered in calculating diluted earnings per share | 50 | 50 |
Treasury Stock (Details)
Treasury Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Treasury stock (Textual) | |||||
Number of repurchase of shares authorized by board of directors | $ 20,000 | ||||
Repurchase of common stock for shares consideration | 1,844 | 1,886 | |||
Repurchase of common stock for cash consideration | $ 13,570 | $ 13,894 | |||
Repurchase of common stock commissions paid to brokers | $ 55 | $ 56 | |||
Repurchase of common stock weighted average price per share | $ 7.32 | $ 7.33 | |||
Foreclose shares of common stock | 80 | ||||
Total value of foreclose shares of common stock | $ 8.59 | ||||
Foreclose price per share | $ 688 |
Note Receivable (Details Textua
Note Receivable (Details Textual) - USD ($) $ in Thousands | Oct. 02, 2015 | May 21, 2015 | Mar. 23, 2011 | Sep. 30, 2016 | Jul. 13, 2015 | Jun. 29, 2015 | Jan. 31, 2012 | Dec. 31, 2009 |
Note Receivable (Textual) | ||||||||
Advance payments for ZAGGbox in aggregate amount | $ 50 | $ 50 | ||||||
Description of first term or condition to terminate agreement | Mr. Harmer, Teleportall, and certain of their affiliates delivered a promissory note (the "Note") dated March 23, 2011, to the Company in the original principal amount of $4,126 which accrued interest at the rate of LIBOR plus 4% per annum (adjusted quarterly) payable as follows: (i) interest only payments (a) on September 23, 2011, and (b) thereafter on or before the last day of each calendar quarter, (ii) 50% of the net profits of each ZAGGbox sale by Teleportall and its affiliates, and (iii) the unpaid balance of principal and interest due in full on March 23, 2013. The Note was secured by certain real property, interests in entities that own real property and restricted and free-trading securities. | |||||||
Foreclosed on real estate property valued | 1,099 | $ 250 | ||||||
Litigation settlement amount | $ 1,396 | $ 4,735 | ||||||
Litigation settlement interest rate | 12.00% | |||||||
ZAGG products [Member] | ||||||||
Note Receivable (Textual) | ||||||||
Advance payments for ZAGGbox in aggregate amount | $ 3,900 | $ 638 | ||||||
Original principal amount | $ 4,126 | |||||||
Teleportall, LLC ('Teleportall') | Promissory note (the 'Note') [Member] | ||||||||
Note Receivable (Textual) | ||||||||
Fixed rate | 4.00% | |||||||
Original principal amount | $ 4,126 | |||||||
Description of reference rate | LIBOR | |||||||
Percentage of the net profits of selling product | 50.00% | |||||||
Teleportall, LLC ('Teleportall') | ZAGG products [Member] | ||||||||
Note Receivable (Textual) | ||||||||
Initial purchase order price for ZAGGbox units | $ 3,500 | |||||||
Advance payments for ZAGGbox in aggregate amount | $ 3,900 | |||||||
Zagg Inc [Member] | ||||||||
Note Receivable (Textual) | ||||||||
Advance payments for ZAGGbox in aggregate amount | 298 | |||||||
Real estate property other assets | 801 | |||||||
Asset held for sale | $ 1,099 |
Note Receivable (Details Text51
Note Receivable (Details Textual 1) - USD ($) shares in Thousands, $ in Thousands | Jul. 13, 2015 | Dec. 31, 2011 | Sep. 30, 2016 | Dec. 31, 2015 | Jun. 29, 2015 | May 31, 2012 | Jan. 31, 2012 | Mar. 23, 2011 |
Note Receivable (Textual) | ||||||||
Number of shares issued in the process of foreclosure | 45 | |||||||
Value of shares issued in the process of foreclosure | $ 496 | |||||||
Foreclosed on real estate property valued | $ 1,099 | $ 250 | ||||||
Foreclosed on stock and warrants | $ 516 | |||||||
Note receivable carrying amount | $ 50 | |||||||
Notes receivable net | $ 50 | 50 | ||||||
Reduced balance | $ 0 | |||||||
Unpaid fee | 5,158 | $ 4,836 | ||||||
Increase in accured interest | 324 | |||||||
Zagg Inc [Member] | ||||||||
Note Receivable (Textual) | ||||||||
Number of shares issued in the process of foreclosure | 80 | |||||||
Value of shares issued in the process of foreclosure | $ 688 | |||||||
Notes receivable net | $ 298 | |||||||
Reduced balance | 0 | |||||||
ZAGG products [Member] | ||||||||
Note Receivable (Textual) | ||||||||
Notes receivable net | $ 638 | $ 3,900 | ||||||
ZAGG products [Member] | Minimum [Member] | ||||||||
Note Receivable (Textual) | ||||||||
Estimated value of the underlying collateral security | 135 | |||||||
ZAGG products [Member] | Maximum [Member] | ||||||||
Note Receivable (Textual) | ||||||||
Estimated value of the underlying collateral security | $ 270 |
Fair Value Measures (Details)
Fair Value Measures (Details) - Fair Value Measurements Using: [Member] - Money market funds [Member] - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Estimate of Fair Value [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Money market funds included in cash equivalents | $ 5 | $ 375 |
Level 1 Inputs [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Money market funds included in cash equivalents | 5 | 375 |
Level 2 Inputs [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Money market funds included in cash equivalents | ||
Level 3 Inputs [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Money market funds included in cash equivalents |
Concentrations (Details)
Concentrations (Details) - Customer Concentration Risk [Member] | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Accounts Receivable [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk percentage | 10.00% | 10.00% | |||
Accounts Receivable [Member] | Customer A [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk percentage | 14.00% | 29.00% | |||
Accounts Receivable [Member] | Customer B [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk percentage | 38.00% | 31.00% | |||
Accounts Receivable [Member] | Customer C [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk percentage | 11.00% | 5.00% | |||
Sales Revenue, Net [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk percentage | 10.00% | 10.00% | 10.00% | 10.00% | |
Sales Revenue, Net [Member] | Superior Communications [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk percentage | 30.00% | 17.00% | 27.00% | 13.00% | |
Sales Revenue, Net [Member] | Best Buy [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk percentage | 10.00% | 18.00% | 10.00% | 20.00% |
Concentrations (Details 1)
Concentrations (Details 1) - Sales revenue [Member] | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
United States [Member] | ||||
Concentration Risk [Line Items] | ||||
Percentage of sales | 87.00% | 89.00% | 89.00% | 91.00% |
Europe [Member] | ||||
Concentration Risk [Line Items] | ||||
Percentage of sales | 8.00% | 9.00% | 7.00% | 8.00% |
Other [Member] | ||||
Concentration Risk [Line Items] | ||||
Percentage of sales | 5.00% | 2.00% | 4.00% | 1.00% |
Concentrations (Details Textual
Concentrations (Details Textual) - Concentration of credit risk [Member] - Customer | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Accounts Receivable [Member] | |||||
Concentrations (Textual) | |||||
Percentage of sales | 10.00% | 10.00% | |||
Number of customer | 3 | 2 | |||
Accounts revenues in percentage of all customers | No other customer account balances were more than 10% of accounts receivable. | No other customer account balances were more than 10% of accounts receivable. | |||
Concentration of sales [Member] | |||||
Concentrations (Textual) | |||||
Percentage of sales | 10.00% | 10.00% | 10.00% | 10.00% | |
Accounts revenues in percentage of all customers | One other customer accounted for more than 10% of the quarterly revenues in each respective quarter. Other than Superior and Best Buy, those customers with over 10% of net sales in a given period tend to change from year-to-year. | One other customer accounted for more than 10% of the quarterly revenues in each respective quarter. Other than Superior and Best Buy, those customers with over 10% of net sales in a given period tend to change from year-to-year. | One other customer accounted for more than 10% of the quarterly revenues in each respective quarter. Other than Superior and Best Buy, those customers with over 10% of net sales in a given period tend to change from year-to-year. | One other customer accounted for more than 10% of the quarterly revenues in each respective quarter. Other than Superior and Best Buy, those customers with over 10% of net sales in a given period tend to change from year-to-year. |
Commitments and Contingencies56
Commitments and Contingencies (Details) $ in Thousands | Sep. 30, 2016USD ($) |
Commitments and Contingencies [Abstract] | |
Remaining 2,016 | $ 623 |
2,017 | 2,661 |
2,018 | 1,890 |
2,019 | 1,453 |
2,020 | 1,484 |
Thereafter | 4,030 |
Total | $ 12,141 |
Commitments and Contingencies57
Commitments and Contingencies (Details Textual) - USD ($) $ in Thousands | Oct. 02, 2015 | May 21, 2015 | Oct. 21, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Commitments and contingencies (Textual) | |||||||
Rent expense | $ 793 | $ 391 | $ 2,450 | $ 1,182 | |||
Litigation settlement amount | $ 1,396 | $ 4,735 | |||||
Litigation settlement interest rate | 12.00% | ||||||
Complaint against the company | Peter Kravitz v. ZAGG Inc., U.S. Bankruptcy Court, District of Delaware, Adv. Pro. No. 15-51558(BLS). On October 29, 2015, Kravitz, as Liquidating Trustee (the "Trustee") of the RSH Liquidating Trust (formerly known as RadioShack) filed a complaint against the Company, alleging, among other things, that the Company received preference payments for product the Company sold and delivered to RadioShack in the amount of $1,834 pursuant to Section 547 of the Bankruptcy Code. | ||||||
Unamortization acquisition costs | $ 2,027 | ||||||
Subsequent Events [Member] | |||||||
Commitments and contingencies (Textual) | |||||||
Contingent payments, Description | Daniel Huang as the representative of the shareholders of mophie, inc. under the Merger Agreement dated February 2, 2016, by and among the Company, ZM Acquisition, Inc. and mophie, inc., filed a lawsuit against the Company alleging that the Company breached the Merger Agreement by failing to pay certain contingent payments related to tax refunds and customs duty recoveries and seeks damages in an amount no less than $11,420. |
Segment Reporting (Details)
Segment Reporting (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Schedule of segment reporting information | |||||
Net sales | $ 124,662 | $ 66,774 | $ 286,928 | $ 190,679 | |
Gross profit | 43,146 | 24,871 | 97,748 | 72,785 | |
Income (loss) from operations | (12,710) | 6,228 | (17,766) | 17,918 | |
Total assets | 304,365 | 304,365 | $ 179,541 | ||
ZAGG segment [Member] | |||||
Schedule of segment reporting information | |||||
Net sales | 84,931 | 66,774 | 207,538 | 190,679 | |
Gross profit | 35,420 | 24,871 | 84,885 | 72,785 | |
Income (loss) from operations | (9,405) | 6,228 | (704) | 17,918 | |
Total assets | 154,018 | 154,018 | 179,541 | ||
mophie segment [Member] | |||||
Schedule of segment reporting information | |||||
Net sales | 39,731 | 79,390 | |||
Gross profit | 7,726 | 12,863 | |||
Income (loss) from operations | (3,305) | (17,062) | |||
Total assets | $ 150,347 | $ 150,347 |
Segment Reporting (Details Text
Segment Reporting (Details Textual) | 9 Months Ended |
Sep. 30, 2016Segment | |
Segment Reporting (Textual) | |
Number of operating segments | 2 |
Subsequent Events (Details)
Subsequent Events (Details) | 1 Months Ended |
Oct. 21, 2016 | |
Subsequent Events [Member] | |
Subsequent Events (Textual) | |
Contingent payments, Description | Daniel Huang as the representative of the shareholders of mophie, inc. under the Merger Agreement dated February 2, 2016, by and among the Company, ZM Acquisition, Inc. and mophie, inc., filed a lawsuit against the Company alleging that the Company breached the Merger Agreement by failing to pay certain contingent payments related to tax refunds and customs duty recoveries and seeks damages in an amount no less than $11,420. |