ZAGG Inc Reports Financial Results for Fourth Quarter and Full Year 2012

ZAGG Inc Reports Financial Results for Fourth Quarter and Full Year 2012

  *Net sales of $87.5 million for the fourth quarter and net sales of $264.4
    million for the full year 2012
  *Adjusted EBITDA of $20.9 million for the fourth quarter and Adjusted
    EBITDA of $62.6 million for the full year 2012
  *GAAP diluted EPS of $0.01 for the fourth quarter and pro forma diluted EPS
    of $0.37 and GAAP diluted EPS of $0.46 for the full year 2012 and pro
    forma diluted EPS of $1.14
  *Net sales guidance of $313.0 million - $318.0 million and adjusted EBITDA
    of $69.0 million - $71.0 million for the full year 2013

SALT LAKE CITY, Feb. 26, 2013 (GLOBE NEWSWIRE) -- ZAGG Inc (Nasdaq:ZAGG)
(www.ZAGG.com), a market leader in innovative mobile device accessories and
technologies, today announced financial results for the fourth quarter and
full year ended December 31, 2012.

Fourth Quarter Highlights (fourth quarter 2012 versus fourth quarter 2011)

  oNet sales increased 30% to $87.5 million
  oGross margins of 44.1%
  oOperating income of $5.3 million; excluding a non-cash impairment charge
    of $11.5 million, operating income was up 17% to $16.8 million
  oAdjusted EBITDA increase of 12% to $20.9 million
  oGenerated over $2.0 million in operating cash flow
  oEnding cash and cash equivalents balance of $20.2 million
  oKeyboard sales increased 164% representing 28% of net sales
  oinvisibleSHIELD sales represented 43% of net sales

"We are very pleased with our record fourth quarter revenue and Adjusted
EBITDA, as we experienced strong sales volume in all product categories during
the 2012 holiday season. This quarter we successfully refinanced our debt,
substantially lowering our interest expense for 2013 and beyond. We will be
using some of our cash from operations to pay down debt as well as to purchase
our stock opportunistically in the open market," said Brandon O'Brien, ZAGG
CFO. "Gross margins in the quarter were impacted by airfreight charges linked
to the iPhone 5 and iPad mini launches, as well as airfreight charges to meet
certain urgent needs of some retail partners. Another impact on gross margins
was the product mix. Though sales in all product categories increased
year-over-year, sales of keyboards increased significantly faster than
invisibleSHIELDs, our highest margin product," continued Mr. O'Brien. "We made
an important brand strategy change during the fourth quarter by placing
greater emphasis on the promotion of our core brands, ZAGG and iFrogz. As a
result of this adjustment in brand focus and our lower stock price during the
fourth quarter, we incurred a non-cash charge of $11.5 million against one of
the secondary brands and goodwill associated with the iFrogz acquisition. With
the launch of mobile gaming products later this year and growth from the
existing iFrogz branded products, we look for continued expansion from iFrogz
in 2013."

Fourth Quarter Results

Net sales for the fourth quarter of 2012 increased 30% to $87.5 million from
$67.5 million in the same quarter last year. Revenue by channel was 82%
through indirect channels, 13% through ZAGG.com and iFrogz.com and 5% through
the company's mall cart and kiosk programs.

Gross profit for the fourth quarter was $38.6 million or 44.1% of net sales,
representing a 23% increase, versus $31.4 million or 46.5% of net sales in the
fourth quarter of the prior year. Gross profit as a percentage of sales
declined primarily due to airfreight costs and change in product mix.

In the quarter, as a result of an adjustment in brand focus and lower stock
price, the Company conducted an impairment analysis which resulted in a
non-cash impairment charge of $11.5 million related to a trademark and
goodwill from its iFrogz acquisition.

Operating income for the fourth quarter was $5.3 million. Operating income for
the fourth quarter, excluding the non-cash impairment charge of $11.5 million,
was $16.8 million compared to operating income of $14.4 million for the fourth
quarter of 2011 and $7.1 million for the previous quarter.

Net income attributable to stockholders for the fourth quarter of 2012 was
$0.2 million or $0.01 per diluted share as compared to net income attributable
to stockholders of $9.9 million or $0.32 per diluted share in the fourth
quarter of 2011.

Pro forma net income attributable to stockholders for the fourth quarter of
2012 was $11.9 million or $0.37 per diluted share as compared to pro forma net
income attributable to stockholders of $11.1 million or $0.35 per diluted
share in the fourth quarter of 2011 and $7.4 million or $0.23 per diluted
share in the prior quarter.

Adjusted EBITDA for the fourth quarter of 2012 was $20.9 million versus $18.7
million of Adjusted EBITDA in the fourth quarter of 2011, representing an
increase of 12% over the prior year's fourth quarter results.

Full Year 2012 Highlights (Full year 2012 versus full year 2011)

  oNet sales increased 48% to $264.4 million
  oGross margins of 46%
  oOperating income of $33.5 million; excluding a non-cash impairment charge
    of $11.5 million, operating income was up 60% to $45.0 million
  oAdjusted EBITDA increase of 38% to $62.6 million
  oKeyboard sales increased 111% representing 24% of net sales
  oinvisibleSHIELD sales represented 46% of net sales

"2012 has been a year of growth and maturing for ZAGG. In addition to
appointing a new CEO, ZAGG added three new independent board members this
year. Early in 2012, the Company established corporate objectives and a
product management discipline and, as a result, ZAGG has significantly
increased the breadth and depth of our product offering," said Randy Hales,
President and CEO of ZAGG. "We expanded our invisibleSHIELD line, increased
the number of tablet offerings, including the keyboard cases and folios, and
expanded our power offering throughout 2012. At CES earlier this year, we
introduced over 70 SKUs and two new product categories, gaming handsets and
desktop audio. Overall, our record 2012 revenue was driven by brisk sales of
keyboards, invisibleSHIELDs, and continued expansion of our distribution
channels."

Full Year 2012 Results

Net sales for the full year 2012 increased 48% to $264.4 million from $179.1
million in the previous year. Revenue by channel was 82% through indirect
channels, 13% through ZAGG.com and iFrogz.com and 5% through the company's
mall cart and kiosk programs.

Gross profit for the full year 2012 was $120.5 million, or 46% of net sales,
representing a 47% increase over the prior year in which gross profit was
$81.9 million, or 46% of net sales.

In the fourth quarter, as a result of an adjustment in brand focus and lower
stock price, the Company conducted an impairment analysis, which resulted in a
non-cash impairment charge of $11.5 million related to a trademark and
goodwill from its iFrogz acquisition.

Operating income for the full year 2012 was $33.5 million. Operating income
for the full year 2012, excluding the non-cash impairment charge of $11.5
million, was $45.0 million compared to operating income of $28.1 million for
the full year 2011.

Net income attributable to stockholders for the full year 2012 was $14.5
million or $0.46 per diluted share as compared to net income attributable to
stockholders of $18.2 million or $0.63 per diluted share in the full year
2011.

Pro forma net income attributable to stockholders for the full year 2012 was
$36.0 million or $1.14 per diluted share as compared to pro forma net income
attributable to stockholders of $26.6 million or $0.92 per diluted share in
the full year 2011.

Adjusted EBITDA for the full year 2012 was $62.6 million versus $45.3 million
of Adjusted EBITDA in the full year 2011, an increase of 38%.

About Non-GAAP Financial Information

ZAGG considers earnings before stock-based compensation expense, impairment of
goodwill and intangibles, depreciation and amortization, iFrogz acquisition
expenses, iFrogz inventory fair value write-up, impairment of note receivable,
other expense, provision for income taxes, and noncontrolling interest
("Adjusted EBITDA") to be an important financial indicator of the Company's
operational strength and the performance of its business.

In addition, ZAGG considers earnings before stock-based compensation expense,
impairment of goodwill and intangibles, amortization, iFrogz acquisition
expenses, iFrogz inventory fair value write-up, impairment of note receivable,
other expense (excluding cash interest expense), non-cash deferred loan costs
charge, noncontrolling interest, and expense related to the former CEO's
departure, net of tax effects where applicable, ("pro forma net income
attributable to stockholders") to be a valuable metric in respect of the
operational performance of the Company.

These results should be considered in addition to results prepared in
accordance with generally accepted accounting principles ("GAAP"), but should
not be considered as a substitute for, or superior to, GAAP results.

A reconciliation of the differences between Adjusted EBITDA and pro forma net
income attributable to stockholders, and the most comparable financial measure
calculated and presented in accordance with GAAP, is presented under the
heading "Reconciliation of Non-GAAP Financial Information to GAAP" immediately
following the Condensed Consolidated Statements of Operations included below.

Outlook

Guidance for 2013 net sales is $313.0 million - $318.0 million and Adjusted
EBITDA of $69.0 million - $71.0 million.

Conference Call

A conference call will be held today at 5:00 p.m. EST to review these results.
Interested parties may access via the Internet on the Company's website at:

http://investors.zagg.com.

The ZAGG Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=17092

Non-GAAP Financial Disclosure

Investors are cautioned that the Adjusted EBITDA (earnings before stock-based
compensation expense, impairment of goodwill and intangibles, depreciation and
amortization, iFrogz acquisition expenses, iFrogz inventory fair value
write-up, impairment of note receivable, other expense, provision for income
taxes, and noncontrolling interest) and pro forma net income attributable to
stockholders (earnings before stock-based compensation expense, impairment of
goodwill and intangibles, amortization, iFrogz acquisition expenses, iFrogz
inventory fair value write-up, impairment of note receivable, other expense,
non-cash deferred loan costs charge, noncontrolling interest, and expense
related to the former CEO's departure, net of tax effects where applicable)
contained in this press release are not financial measures under generally
accepted accounting principles. In addition, they should not be construed as
alternatives to any other measures of performance determined in accordance
with generally accepted accounting principles, or as indicators of our
operating performance, liquidity or cash flows generated by operating,
investing and financing activities, as there may be significant factors or
trends that they fail to address. For comparative purposes, we applied an
annualized statutory tax rate of 38.5% to derive the pro forma net income
attributable to stockholders and pro forma EPS attributable to stockholders.
We present this financial information because we believe that it is helpful to
some investors as a measure of our performance. We caution investors that
non-GAAP financial information, by its nature, departs from traditional
accounting conventions; accordingly, its use can make it difficult to compare
our current results with our results from other reporting periods and with the
results of other companies.

Safe Harbor Statement

This release contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and such forward-looking
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. "Forward-looking statements"
describe future expectations, plans, results, or strategies and are generally
preceded by words such as "may," "future," "plan" or "planned," "will" or
"should," "expected," "anticipates," "draft," "eventually" or "projected." You
are cautioned that such statements are subject to a multitude of risks and
uncertainties that could cause future circumstances, events, or results to
differ materially from those projected in the forward-looking statements,
including the risks that actual results may differ materially from those
projected in the forward-looking statements as a result of various factors,
and other risks identified in filings made by the company with the Securities
and Exchange Commission.

                                                                
ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)
                                                                
                                                                
                                                    December 31, December 31,
                                                    2012         2011
                                                                
ASSETS                                                           
                                                                
Current assets                                                   
Cash and cash equivalents                            $20,177    $26,433
Accounts receivable, net of allowances of $2,974 in  54,561      45,450
2012 and $2,070 in 2011
Inventories                                          39,988      29,622
Prepaid expenses and other current assets            9,547       1,593
Deferred income tax assets                           7,846       5,132
                                                                
Total current assets                                 132,119     108,230
                                                                
Investment in HzO                                    2,013       4,879
                                                                
Property and equipment, net of accumulated           4,862       4,162
depreciation at $3,317 in 2012 and $1,857 in 2011
                                                                
Goodwill                                             1,484       6,925
                                                                
Intangible assets, net of accumulated amortization   57,905      73,691
at $13,790 in 2012 and $3,989 in 2011
                                                                
Deferred income tax assets                           5,662       82
                                                                
Note receivable                                      583         1,349
                                                                
Other assets                                         1,457       3,010
                                                                
Total assets                                         $206,085   $202,328
                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY                            
                                                                
Current liabilities                                              
Accounts payable                                     $19,027    $16,013
Income taxes payable                                 3,062       4,294
Accrued liabilities                                  3,754       3,886
Accrued wages and wage related expenses              2,554       1,468
Deferred revenue                                     722         320
Current portion of note payable                      6,000       2,372
Sales returns liability                              6,697       5,387
Total current liabilities                            41,816      33,740
Revolving line of credit                             22,173      23,332
Noncurrent portion of note payable                   18,000      42,628
Total liabilities                                    81,989      99,700
Stockholders' equity                                            
Common stock, $0.001 par value; 100,000 shares
authorized;31,215 and 29,782 shares issued and      31          30
outstanding, respectively
Additional paid-in capital                           77,234      70,248
Accumulated other comprehensive income               (57)        (33)
Note receivable collateralized by stock              (566)       (566)
Retained earnings                                    47,454      32,949
Total stockholders' equity                           124,096     102,628
Total liabilities and stockholders' equity           $206,085   $202,328
                                                                

                                                              
ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
                                                              
                                                              
                                                              
                          Three Months Ended       Twelve Months Ended
                          December 31, December 31, December 31, December 31,
                           2012         2011         2012         2011
                                                              
                                                              
Net sales                  $87,482    $67,492    $264,425   $179,125
Cost of sales              48,900      36,122      143,880     97,201
                                                              
Gross profit               38,582      31,370      120,545     81,924
                                                              
Operating expenses:                                            
Advertising and marketing  4,312       2,367       12,495      10,246
Selling, general and       15,095      12,539      53,330      39,592
administrative
Impairment of goodwill and 11,497      --         11,497      --
intangibles
Amortization of            2,418       2,085       9,732       3,949
definite-lived intangibles
                                                              
Total operating expenses   33,322      16,991      87,054      53,787
                                                              
Income from operations     5,260       14,379      33,491      28,137
                                                              
Other income (expense):                                        
Interest expense           (2,802)     (1,452)     (6,321)     (3,022)
Loss from equity method    (1,385)     --         (2,866)     --
investment in HzO
Gain on deconsolidation of --         1,906       --         1,906
HzO
Other income and (expense) (170)       (123)       (407)       (19)
                                                              
Total other expense        (4,357)     331         (9,594)     (1,135)
                                                              
Income before provision    903         14,710      23,897      27,002
for income taxes
                                                              
Income tax provision       (710)       (5,083)     (9,393)     (9,418)
                                                              
Net income                193         9,627       14,504      17,584
                                                              
Net loss attributable to   --         319         --         664
noncontrolling interest
                                                              
Net income attributable to $193       $9,946     $14,504    $18,248
stockholders
                                                              
Earnings per share
attributable to                                                
stockholders:
Basic earnings per share   $0.01      $0.34      $0.48      $0.67
Diluted earnings per share $0.01      $0.32      $0.46      $0.63
                                                              

                                                             
ZAGG INC AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(Unaudited)
                                                             
                                                             
Unaudited                                                     
Supplemental Data
                                                             
The following information is not a financial measure under generally accepted
accounting principals (GAAP).In addition, it should not be construed as an
alternative to any other measures of performance determined in accordance with
GAAP, or as an indicator of our operating performance, liquidity or cash flows
generated by operating, investing and financing activities as there may be
significant factors or trends that it fails to address.We present this
financial information because we believe that it is helpful to some investors
as a measure of our operations. We caution investors that non-GAAP financial
information, by its nature, departs from traditional accounting conventions;
accordingly, its use can make it difficult to compare our results with our
results from other reporting periods and with the results of other companies.
                                                             
Adjusted EBITDA       Three months ended         Twelve months ended
Reconciliation
                     December 31,   December 31,  December 31,  December 31,
                      2012           2011          2012          2011
                                                             
Net income
attributable to       $193         $9,946      $14,504     $18,248
stockholders in
accordance with GAAP
                                                             
Adjustments:                                                  
                                                             
a. Stock based        1,096         584          6,018        3,258
compensation expense
b. Impairment of
goodwill and          11,497        --          11,497       --
intangibles
c. Depreciation and   3,059         2,463        11,561       5,926
amortization
d. iFrogz acquisition --           --          --          1,947
expenses
e. iFrogz inventory   --           864          --          4,506
fair value write up
f. Impairment of note --           418          --          1,489
receivable
g. Other expense      4,357         (331)        9,594        1,135
h. Provision for      710           5,083        9,393        9,418
income taxes
i. Noncontrolling     --           (319)        --          (664)
interest
                                                             
Adjusted EBITDA       $20,912      $18,708     $62,567     $45,263
                                                             
Pro forma Net Income
Reconciliation -
Three and Twelve      Three months ended          Twelve months ended
Months Ended December
31, 2012
                     December 31,   December 31,  December 31,  December 31,
                      2012           2011          2012          2011
                                                             
Net income
attributable to       $193         $9,946      $14,504     $18,248
stockholders in
accordance with GAAP
                                                             
Adjustments:                                                  
                                                             
a. Stock based        1,096         584          6,018        3,258
compensation expense
b. Impairment of
goodwill and          11,497        --          11,497       --
intangibles
c. Amortization of    2,439         2,085        9,801        4,931
intangibles
d. iFrogz acquisition --           --          --          1,947
expenses
e. iFrogz inventory   --           864          --          4,506
fair value write up
f. Impairment of note --           418          --          1,489
receivable
g. Other expense
excluding cash
interest expense and  170           (1,750)      407          (1,887)
loss on equity method
investment
h. Non-cash deferred  1,509         --          1,509        --
loan costs charge
i. Noncontrolling     --           (319)        --          (664)
interest
j. CEO departure      --           --          910          --
expense
k. Loss on equity     1,385         --          2,866        --
method investment
l. Income tax effects (6,392)*      (720)*       (11,529)*    (5,194)*
                                                             
Pro forma net income
attributable to       $11,897      $11,108     $35,983     $26,634
stockholders
                                                             
Pro forma EPS
attributable to       $0.37        $0.35       $1.14       $0.92
stockholders
                                                             
Weighted average
number of shares      31,735        31,378       31,656       29,082
outstanding - diluted
                                                             
* For comparative purposes, we applied an annualized statutory tax rate of
38.5%
                                                             
Pro forma Net Income
Reconciliation -
Three and Nine Months Three months ended           Nine months ended
Ended September 30,
2012
                     September 30,  September 30, September 30, September 30,
                      2012           2011          2012          2011
                                                             
Net income
attributable to       $3,388       $2,248      $14,311     $8,302
stockholders in
accordance with GAAP
                                                             
Adjustments:                                                  
                                                             
a. Stock based        2,086         406          4,922        2,674
compensation expense
b. Impairment of
goodwill and          --           --          --          --
intangibles
c. Amortization of    2,439         2,086        7,362        2,846
intangibles
d. iFrogz acquisition --           122          --          1,947
expenses
e. iFrogz inventory   --           3,063        --          3,642
fair value write up
f. Impairment of note --           1,071        --          1,071
receivable
g. Other expense
excluding cash
interest expense and  215           (129)        237          (137)
loss on equity method
investment
h. Non-cash deferred  --           --          --          --
loan costs charge
i. Noncontrolling     --           (149)        --          (345)
interest
j. CEO departure      910           --          910          --
expense
k. Loss on equity     545           --          1,481        
method investment
l. Income tax effects (2,161)*      (2,475)*     (5,137)*     (4,474)*
                                                             
Pro forma net income
attributable to       $7,422       $6,243      $24,086     $15,526
stockholders
                                                             
Pro forma EPS
attributable to       $0.23        $0.20       $0.76       $0.55
stockholders
                                                             
Weighted average
number of shares      31,734        31,375       31,647       28,308
outstanding - diluted
                                                             
* For comparative purposes, we applied an annualized statutory tax rate of
38.5%
                                                             
Pro forma Net Income
Reconciliation -      Three months ended         Six months ended
Three and Six Months
Ended June 30, 2012
                     June 30, 2012  June 30, 2011 June 30, 2012 June 30, 2011
                                                             
Net income
attributable to       $5,812       $2,743      $10,923     $6,053
stockholders in
accordance with GAAP
                                                             
Adjustments:                                                  
                                                             
a. Stock based        1,494         1,962        2,836        2,268
compensation expense
b. Impairment of
goodwill and          --           --          --          --
intangibles
c. Amortization of    2,488         710          4,923        760
intangibles
d. iFrogz acquisition --           1,816        --          1,825
expenses
e. iFrogz inventory   --           579          --          579
fair value write up
f. Impairment of note --           --          --          --
receivable
g. Other expense
excluding cash
interest expense and  (224)         (8)          22           (8)
loss on equity method
investment
h. Non-cash deferred  --           --          --          --
loan costs charge
i. Noncontrolling     --           (145)        --          (196)
interest
j. CEO departure      --           --          --          --
expense
k. Loss on equity     473           --          936          --
method investment
l. Income tax effects (1,437)*      (1,880)*     (2,976)*     (2,000)*
                                                             
Pro forma net income
attributable to       $8,606       $5,777      $16,664     $9,281
stockholders
                                                             
Pro forma EPS
attributable to       $0.27        $0.21       $0.53       $0.35
stockholders
                                                             
Weighted average
number of shares      31,738        27,279       31,577       26,749
outstanding - diluted
                                                             
* For comparative purposes, we applied an annualized statutory tax rate of
38.5%
                                                             
Pro forma Net Income
Reconciliation -      Three months ended         
Three Months Ended
March 31, 2012
                     March 30, 2012 March 30,                  
                                     2011
                                                             
Net income
attributable to       $5,112       $3,310                   
stockholders in
accordance with GAAP
                                                             
Adjustments:                                                  
                                                             
a. Stock based        1,342         306                       
compensation expense
b. Impairment of
goodwill and          --           --                       
intangibles
c. Amortization of    2,435         50                        
intangibles
d. iFrogz acquisition --           9                         
expenses
e. iFrogz inventory   --           --                       
fair value write up
f. Impairment of note --           --                       
receivable
g. Other expense
excluding cash
interest expense and  246           --                       
loss on equity method
investment
h. Non-cash deferred  --           --                       
loan costs charge
i. Noncontrolling     --           (51)                      
interest
j. CEO departure      --           --                       
expense
k. Loss on equity     463           --                       
method investment
l. Income tax effects (1,539)*      (120)*                    
                                                             
Pro forma net income
attributable to       $8,059       $3,504                   
stockholders
                                                             
Pro forma EPS
attributable to       $0.26        $0.13                    
stockholders
                                                             
Weighted average
number of shares      31,417        26,216                    
outstanding - diluted
                                                             
* For comparative purposes, we applied an annualized statutory tax rate of
38.5%
                                                             

CONTACT: Investor Relations:
         Genesis Select Corp.
         Kim Rogers-Carrete
         303-415-0200
         krogersc@genesisselect.com
        
         Media:
         LANE PR
         Jane Taber
         503-546-7888
         jane@lanepr.com
        
         Company:
         ZAGG Inc
         Nathan Nelson
         801-263-0699 ext. 107
         nnelson@zagg.com

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