ZAGG Inc Reports Financial Results for Third Quarter 2013

ZAGG Inc Reports Financial Results for Third Quarter 2013

  *Net sales of $49.9 million
  *Adjusted EBITDA of $10.2 million
  *GAAP diluted EPS of $0.10 and pro forma diluted EPS of $0.19
  *Cash flow from operations year-to-date of over $25.0 million
  *Paid down $6.6 million on line of credit and term note during the quarter
  *Revises 2013 revenue and Adjusted EBITDA guidance

SALT LAKE CITY, Nov. 5, 2013 (GLOBE NEWSWIRE) -- ZAGG Inc (Nasdaq:ZAGG), a
market leader in innovative mobile device accessories and technologies, today
announced financial results for the third quarter ended September 30, 2013.

"For the second quarter in a row, we've demonstrated the ability to maximize
profitability during a period of top line compression by focusing on expenses
and implementing several disciplines for managing our cost structure," said
Randy Hales, president and CEO. "Looking ahead, we will continue to maximize
profitability and cash flow with a reorganized sales team under new
leadership, a strong product management focus, and a renewed focus on growing
distribution. We are making the necessary changes to improve shareholder
value."

Third Quarter Highlights (third quarter 2013 versus third quarter 2012)

  *Net sales of $49.9 million versus $59.8 million
  *Gross margins of 44.3% versus 44.5%
  *GAAP diluted EPS of $0.10 versus $0.11
  *Adjusted EBITDA of $10.2 million versus $12.0 million
  *Generated over $6.0 million in operating cash flow; over $25.0 million
    year-to-date
  *Paid down $4.6 million on line of credit and $2.0 million on term note
  *invisibleSHIELD sales represented 47% of net sales versus 51%
  *Keyboard sales represented 28% of net sales versus 19%
  *iFrogz Audio represented 14% of net sales versus 15%

Third Quarter Results

Net sales for the third quarter of 2013 decreased 17% to $49.9 million from
$59.8 million in the same quarter last year. Revenue this quarter was impacted
by the absence of meaningful expansion in our domestic and international
distribution channels and as well as modest product expansion with existing
customers.

Revenue by channel was 84% through indirect channels, 8% through ZAGG.com and
iFrogz.com and 8% through the Company's mall cart and kiosk programs.

Gross profit for the third quarter was $22.1 million or 44.3% of net sales,
versus $26.6 million or 44.5% of net sales in the prior year quarter.

Operating income for the third quarter of 2013 was $6.4 million compared to
operating income of $7.1 million for the third quarter of 2012.

Net income for the third quarter of 2013 was $3.2 million or $0.10 per diluted
share as compared to net income of $3.4 million or $0.11 per diluted share in
the third quarter of 2012.

Pro forma net income for the third quarter of 2013 was $5.9 million or $0.19
per diluted share as compared to pro forma net income of $7.0 million or $0.22
per diluted share in the third quarter of 2012.

Adjusted EBITDA for the third quarter of 2013 was $10.2 million versus $12.0
million of Adjusted EBITDA in the third quarter of 2012.

About Non-GAAP Financial Information

ZAGG considers earnings before stock-based compensation expense, depreciation
and amortization, other income/expense, impairment of investment, and
provision for income taxes ("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,
amortization, impairment of investment, and other income/expense (excluding
cash interest expense), net of tax effects where applicable, ("pro forma net
income") 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, 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

The Company is revising full year revenue guidance for 2013 down to a range of
$212.0 million - $218.0 million from the previous range of $245.0 million -
$252.0 million. The Company is also revising full year Adjusted EBITDA
guidance to $37.5 million - $ 39.5 million from the previous range of $41.0
million - $42.2 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.

Non-GAAP Financial Disclosure

Investors are cautioned that the Adjusted EBITDA (earnings before stock-based
compensation expense, depreciation and amortization, other income/expense,
impairment of investment, and provision for income taxes) and pro forma net
income (earnings before stock-based compensation expense, amortization,
impairment of investment, and other income/expense [excluding cash interest
expense], 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 38.25% to derive the
pro forma net income and pro forma EPS. 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.

About ZAGG Inc:

ZAGG Inc and its subsidiaries (collectively, the "Company," or "ZAGG") design,
produce, and distribute creative product solutions such as protective
coverings, keyboards, keyboard cases, earbuds, portable batteries, and device
cleaning accessories for mobile devices under the family of ZAGG brands.
Within the family of the ZAGG brands are products sold under the following
names: invisibleSHIELD®, ZAGGskins™, ZAGGbuds™, ZAGGsparq™, ZAGGfolio™,
ZAGGmate™, ZAGGkeys™, ZAGGkeys PRO™, ZAGGkeys PRO Plus™, ZAGGkeys PROfolio,
ZAGGkeys PROfolio+, and ZAGGkeys MINI 7.

In addition, the Company designs, produces, and distributes cases, Near-Field
Audio™ amplifying speakers, earbuds, traditional headphones, and gaming
headphones for mobile devices under the family of iFrogz brands in the
value-priced lifestyle sector. Within the iFrogz brand portfolio are products
sold under the following names: iFrogz™, Earpollution™, Caliber™, and
Animatone™.


ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)
                                                                
                                                                
                                                   September 30, December 31,
                                                   2013          2012
                                                                
ASSETS                                                           
                                                                
Current assets                                                   
Cash and cash equivalents                           $12,654     $20,177
Accounts receivable, net of allowances of $3,459 in 32,475       54,561
2013 and $2,974 in 2012
Inventories                                         50,714       39,988
Prepaid expenses and other current assets           3,127        9,547
Deferred income tax assets                          7,372        6,912
Total current assets                                106,342      131,185
Investment in HzO                                   177          2,013
Property and equipment, net of accumulated          4,823        4,862
depreciation at $5,233 in 2013 and $3,317 in 2012
Goodwill                                            1,484        1,484
Intangible assets, net of accumulated amortization  53,458       57,905
at $20,953 in 2013 and $13,790 in 2012
Deferred income tax assets                          6,596        6,596
Note receivable                                     789          583
Other assets                                        687          1,457
Total assets                                        $174,356    $206,085
                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY                            
                                                                
Current liabilities                                              
Accounts payable                                    $13,048     $19,027
Income taxes payable                                3,292        3,062
Accrued liabilities                                 2,452        3,754
Accrued wages and wage related expenses             1,149        2,554
Deferred revenue                                    174          722
Current portion of note payable                     8,000        6,000
Sales returns liability                             3,975        6,697
Total current liabilities                           32,090       41,816
Revolving line of credit                            --          22,173
Noncurrent portion of note payable                  12,000       18,000
Total liabilities                                   44,090       81,989
Stockholders' equity                                            
Common stock, $0.001 par value; 100,000 shares
authorized; 32,119 and 31,215 shares issued in 2013 32           31
and 2012, respectively
Additional paid-in capital                          82,270       77,234
Accumulated other comprehensive income              35           (57)
Note receivable collateralized by stock             (360)        (566)
Treasury stock, 797 and 0 common shares in 2013 and (5,999)      --
2012 respectively, at cost
Retained earnings                                   54,288       47,454
Total stockholders' equity                          130,266      124,096
Total liabilities and stockholders' equity          $174,356    $206,085


ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
                                                             
                                                             
                      Three Months Ended         Nine Months Ended
                      September 30, September 30, September 30, September 30,
                       2013          2012          2013          2012
                                                             
                                                             
Net sales              $49,869     $59,828     $152,538    $176,943
Cost of sales          27,768       33,203       89,904       94,980
Gross profit           22,101       26,625       62,634       81,963
                                                             
Operating expenses:                                           
Advertising and        2,340        3,378        6,593        8,181
marketing
Selling, general and   10,904       13,707       35,014       38,237
administrative
Amortization of
definite-lived         2,421        2,422        7,169        7,313
intangibles
                                                             
Total operating        15,665       19,507       48,776       53,731
expenses
                                                             
Income from operations 6,436        7,118        13,858       28,232
                                                             
Other expense:                                                
Interest expense       (120)        (1,012)      (490)        (3,519)
Loss from equity
method investment in   (612)        (545)        (1,836)      (1,481)
HzO
Other expense          (89)         (215)        (136)        (237)
                                                             
Total other expense   (821)        (1,772)      (2,462)      (5,237)
                                                             
Income before
provision for income   5,615        5,346        11,396       22,995
taxes
                                                             
Income tax provision   (2,431)      (1,958)      (4,562)      (8,684)
                                                             
Net income            3,184        3,388        6,834        14,311
                                                             
Earnings per share:                                           
Basic earnings per     $0.10       $0.11       $0.22       $0.47
share
Diluted earnings per   $0.10       $0.11       $0.22       $0.45
share



ZAGG INC AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(in thousands, except per share amounts)
(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 analternative to any other measures of performance
determined in accordance with GAAP, or as an indicator of our
operating performance, liquidity or cashflows generated by
operating, investing and financing activities as there may be
significant factors or trends that it fails to address.We present   
this financialinformation because we believe that it is helpful to
some investors as one 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 otherreporting periods and with the results of other
companies.
                                                                 
                                                                 
                                                                 
Adjusted EBITDA           Three Months Ended         Nine Months Ended
Reconciliation
                         September 30,  September 30, September 30, September
                          2013           2012          2013          30, 2012
                                                                 
                                                                 
Net income attributable
to stockholders in        $3,184       $3,388      $6,834      $14,311
accordance with GAAP
                                                                 
Adjustments:                                                      
a. Stock based            793           2,087        3,162        4,922
compensation expense
b. Depreciation and       2,947         2,823        9,160        8,506
amortization
c. Impairment of
investment in private     --           --          591          --
company
d. Provision for income   2,431         1,958        4,562        8,684
taxes
e. Other (income) expense 821           1,772        2,462        5,237
                                                                 
Adjusted EBITDA           $10,176      $12,028     $26,771     $41,660
                                                                 
                                                                 
Pro forma Net Income      Three Months Ended         Nine Months Ended
Reconciliation
                         September 30,  September 30, September 30, September
                          2013           2012          2013          30, 2012
Net income in accordance  $3,184       $3,388      $6,834      $14,311
with GAAP
                                                                 
Adjustments:                                                      
a. Stock based            793           2,087        3,162        4,922
compensation expense
b. Amortization of        2,441         2,439        7,224        7,362
intangibles
c. Impairment of
investment in private     --           --          591          --
company
d. Other (income) expense
excluding cash interest   119           371          46           834
expense and loss on
equity method investment
e. Loss on equity method  612           545          1,836        1,481
investment
f. Income tax effects     (1,283) *     (1,873)      (4,216) *    (5,018)
                                                                 
Pro forma net income     $5,866       $6,957      $15,477     $23,892
                                                                 
Pro forma EPS             $0.19        $0.22       $0.49       $0.75
                                                                 
Weighted average number
of shares outstanding -   31,466        31,734       31,493       31,647
diluted
                                                                 
* For comparative purposes, we applied an annualized statutory tax rate of
38.25%

CONTACT: Investor Relations:
         Genesis Select Corp.
         Kim Rogers, 303-415-0200
         krogersc@genesisselect.com
        
         or
        
         Media:
         LANE PR
         Jane Taber, 503-546-7888
         jane@lanepr.com
        
         or
        
         Company:
         ZAGG Inc
         Nathan Nelson, 801-506-7341
         nnelson@zagg.com

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