ZAGG Inc Reports Financial Results for Fourth Quarter and Full Year 2013

ZAGG Inc Reports Financial Results for Fourth Quarter and Full Year 2013

  *Net sales of $66.8 million for the fourth quarter and $219.4 million for
    the full year 2013
  *Full year 2013 cash flow from operations of over $35.0 million
  *GAAP diluted EPS of $(0.07) for the fourth quarter and $0.15 for the full
    year 2013
  *Adjusted EBITDA of $12.3 million for the fourth quarter and $39.1 million
    for the full year 2013
  *Pro forma diluted EPS of $0.23 for the fourth quarter and $0.73 for the
    full year 2013
  *Introduces full year 2014 net sales and Adjusted EBITDA guidance

SALT LAKE CITY, Feb. 25, 2014 (GLOBE NEWSWIRE) -- ZAGG Inc (Nasdaq:ZAGG), a
leading mobile device accessories company with a brand portfolio that includes
ZAGG and iFrogz, today announced fourth quarter ended December 31, 2013 and
full year 2013 financial results.

"We are pleased to have finished the year with a strong fourth quarter, our
third highest in terms of net sales in the company's history. We also launched
our first rugged case under the ZAGG brand, and experienced growth in tablet
keyboard sales," said Randy Hales, president and CEO of ZAGG Inc. "2013 was a
reset year in which we focused on building a solid foundation for ZAGG moving
forward. We made changes in sales, product management, product development,
marketing, distribution, operations, customer service, and key leadership
roles. All of this was done to position the company to win share strategically
and return to growth in the second half of 2014 with well-designed products,
clear brand positioning, focused sales execution, and investment in our
distribution channels."

Fourth Quarter Highlights (fourth quarter 2013 versus fourth quarter 2012)

  oNet sales of $66.8 million versus $87.5 million
  oGross margins of 37% versus 44%
  oGAAP diluted EPS of $(0.07) versus $0.01
  oAdjusted EBITDA of $12.3 million versus $20.9 million
  oGenerated over $9.0 million in operating cash flow
  oReduced total debt outstanding to $17.5 million
  oinvisibleSHIELD sales represented 40% of net sales versus 43%
  oKeyboard sales represented 30% of net sales versus 28%
  oiFrogz Audio represented 17% of net sales versus 15%

Fourth Quarter Results

Net sales for the fourth quarter of 2013 decreased 24% to $66.8 million from
$87.5 million in the same quarter the previous year. Net sales this quarter
were impacted by increased market competition from protective cases, which
impacted invisibleSHIELD sales, along with increased market competition in
tablet keyboards and the personal audio line.

Net sales by channel were 86% through indirect channels, 8% through
www.ZAGG.com and www.iFrogz.com and 6% through the Company's mall cart and
kiosk franchise program.

Gross profit for the fourth quarter was $24.5 million, or 37% of net sales,
versus $38.6 million, or 44% of net sales, in the prior year quarter.

Operating loss for the fourth quarter of 2013 was $2.9 million compared to
operating income of $5.3 million for the fourth quarter of 2012. Operating
income for the fourth quarter, excluding the non-cash impairment charges of
$11.2 million in 2013 and $11.5 million in 2012, was $8.3 million in 2013
compared to operating income of $16.8 million for the fourth quarter of 2012.

Net loss for the fourth quarter of 2013 was $2.0 million, or ($0.07) per
diluted share, as compared to net income of $0.2 million, or $0.01 per diluted
share, in the fourth quarter of 2012.

Pro forma net income for the fourth quarter of 2013 was $7.1 million, or $0.23
per diluted share, compared to pro forma net income for the fourth quarter of
2012 of $11.9 million, or $0.37 per diluted share.

Adjusted EBITDA for the fourth quarter of 2013 was $12.3 million, versus $20.9
million of Adjusted EBITDA in the fourth quarter of 2012.

Full Year 2013 Highlights (Full year 2013 versus full year 2012)

  oNet sales of $219.4 million versus $264.4 million
  oGross margins of 40% versus 46%
  oOperating income of $10.9 million versus $33.5 million; excluding a
    non-cash impairment charge of $11.2 million, operating income was $22.2
    million in 2013
  oAdjusted EBITDA of $39.1 million versus $62.6 million
  oGenerated over $35.0 million in operating cash flow
  oinvisibleSHIELD sales represented 42% of net sales versus 46%
  oKeyboard sales represented 29% of net sales versus 24%
  oiFrogz Audio represented 16% of net sales versus 16%

"2013 was a challenging year, but despite the revenue compression, we ended
the year with an EBITDA margin of 18%, a testament to the expense control and
operational efficiencies we realized during the year. At year-end, we had
$15.0 million in cash and paid down our debt balance by $28.6 million to $17.5
million. During the first quarter of 2014, we have paid off the remaining
balance on the line of credit and now have no debt on our balance sheet. We
generated over $35.0 million in cash flow from operations in 2013 and have a
solid financial footing to enable us to grow in 2014," said Brandon O'Brien,
CFO of ZAGG. "For the remainder of 2014, ZAGG will invest in marketing and
in-store promotions for our leading products and our overseas expansions,
while building our working capital levels. We have set the stage to resume
growth, which we anticipate occurring in the second half of the year with new
product launches and resets with our distribution partners. As a result, we
are forecasting net sales growth of 1-4% for 2014. Longer term, we'd like to
get to 10-15% annual net sales growth by adding new products, expanding
domestic and international distribution, and stabilizing our share in segments
where we've seen declines with strategic product introductions and brand
positioning."

Full Year 2013 Results

Net sales for the full year 2013 decreased 17% to $219.4 million from $264.4
million in the previous year. Net sales by channel were 85% through indirect
channels, 9% through www.ZAGG.com and www.iFrogz.com and 6% through the
company's mall cart and kiosk franchise program.

Gross profit for the full year 2013 was $87.1 million, or 40% of net sales,
versus $120.5 million, or 46% of net sales in 2012. Gross profit declined as a
result of inventory write-downs recorded during 2013 for product to be sold
below our carrying value and a product sales mix shift reflecting a higher
percentage of our total sales from keyboard, audio, and case products compared
to prior years where a higher percentage of sales were generated by our
invisibleSHIELD products, our highest margin product line.Also, an increase
in the Company's participation in discounts with retail partners, particularly
in the fourth quarter, contributed to the decline in gross margin.

Operating income for the full year 2013 was $10.9 million compared to $33.5
million for the full year 2012. Operating income was impacted by an $11.2
million non-cash charge for the impairment of goodwill and an intangible asset
recorded during the fourth quarter of 2013.A similar charge of $11.5 million
was recorded during the fourth quarter of 2012, but the 2013 charge had
greater impact on the operating margin given the decline in sales and gross
profit in 2013 compared to 2012.

Net income for the full year 2013 was $4.8 million, or $0.15 per diluted
share, as compared to net income of $14.5 million, or $0.46 per diluted share,
in the full year 2012.

Pro forma net income for the full year 2013 was $22.9 million, or $0.73 per
diluted share, compared to pro forma net income of $36.0 million, or $1.14 per
diluted share, in the full year 2012.

Adjusted EBITDA for the full year 2013 was $39.1 million versus $62.6 million
in the full year 2012.

About Non-GAAP Financial Information

ZAGG considers earnings before stock-based compensation expense, impairment of
goodwill and intangibles, depreciation and amortization, impairment of
investment, other income/expense, 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,
impairment of goodwill and intangibles, amortization, impairment of
investment, other income/expense (excluding cash interest expense), and
expenses incurred related to the departure of the former CEO, net of tax
effects where applicable, ("pro forma net income") to be a valuable metric in
respect to 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

For 2014, the company is issuing full year net sales guidance in a range of
$218 million - $228 million and full year Adjusted EBITDA guidance of $32
million - $34 million. Gross margins are anticipated to be in the mid-to-high
30's.

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, impairment of goodwill and intangibles, depreciation and
amortization, impairment of investment, other income/expense, and provision
for income taxes) and pro forma net income (earnings before stock-based
compensation expense, impairment of goodwill and intangibles, amortization,
impairment of investment, other income/expense [excluding cash interest
expense], and expenses incurred related to the departure of the former CEO,
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

In addition to the historical information contained in this press release,
this release contains (and oral communications made by ZAGG may contain)
statements that relate to future events and expectations and, as such,
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Any statements that express, or
involve discussions as to, expectations, beliefs, plans, objectives, outlook,
assumptions, or future events or performance, often, but not always, through
the use of words or phrases such as "anticipates," "believes," "estimates,"
"expects," "intends," "plans," "predicts," "projects," "targets," or similar
expressions, are not statements of historical facts and may be
forward-looking. 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. In addition to any assumptions and other factors
and matters referred to specifically in connection with such forward-looking
statements, factors that could cause actual results or outcomes to differ
materially from those contained in forward-looking statements include the
following: (a) the ability to design, produce, and distribute the creative
product solutions required to retain existing customers and to attract new
customers; (b) building and maintaining marketing and distribution functions
sufficient to gain meaningful international market share for ZAGG's products;
(c) the ability to respond quickly with appropriate products after the
adoption and introduction of new mobile devices by major manufacturers like
Samsung and Apple; (d) changes or delays in announced launch schedules for new
mobile devices by major manufacturers like Samsung and Apple; (e) the impact
of inconsistent quality or reliability of new product offerings; (f) the
impact of lower profit margins in certain new product categories; (g) the
impacts of changes in economic conditions, including on customer demand; (h)
the failure of information systems or technology solutions or the failure to
secure information system data, failure to comply with privacy laws, security
breaches, or the effect on the company from cyber attacks, terrorist
incidents, or the threat of terrorist incidents; and (i) adoption of or
changes in accounting policies, principles, or estimates. Any forward-looking
statement speaks only as of the date on which such statement is made. New
factors emerge from time to time and it is not possible for management to
predict all such factors, nor can it assess the impact of any such factor on
the business or the extent to which any factor, or combination of factors, may
cause results to differ materially from those contained in any forward-looking
statement. Readers should also review the risks and uncertainties listed in
ZAGG's most recent Annual Report on Form 10-K and other reports the company
files with the U.S. Securities and Exchange Commission, including (but not
limited to) Item 1A - "Risk Factors" in the Form 10-K and Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the risks described therein from time to time. ZAGG disclaims any obligation
to update publicly any forward-looking information, whether in response to new
information, future events, or otherwise, except as required by applicable
law.

About ZAGG Inc:

ZAGG Inc and its subsidiaries (collectively, the "Company", or "ZAGG") design,
produce, and distribute creative product solutions for mobile and media
accessories such as protective coverings, cases, keyboards, keyboard cases,
earbuds, portable power, and device cleaning under the family of ZAGG brands.
In addition, the Company designs, produces, and distributes cases, Near-Field
Audio™ amplifying speakers, earbuds, traditional headphones, and gaming
headphones for mobile and media devices under the family of iFrogz brands in
the fashion and youth oriented lifestyle sector. ZAGG distinguishes itself as
the preferred brand by offering creative product solutions through targeted
global distribution channels, with the broadest product offering in its
sector.More information about the company and its brands is at www.ZAGG.com.

ZAGG INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)
                                                                  
                                                        2013       2012
                                                                  
ASSETS                                                             
                                                                  
Current assets                                                     
Cash and cash equivalents                                $15,031  $20,177
Accounts receivable, net of allowances of $2,540 in 2013 46,591    54,561
and $2,974 in 2012
Inventories                                              44,539    39,988
Prepaid expenses and other current assets                2,403     9,547
Deferred income tax assets                               7,917     6,912
                                                                  
Total current assets                                     116,481   131,185
                                                                  
Investment in HzO                                        --       2,013
                                                                  
Property and equipment, net of accumulated depreciation  5,004     4,862
at $5,778 in 2013 and $3,317 in 2012
                                                                  
Goodwill                                                 --       1,484
                                                                  
Intangible assets, net of accumulated amortization at    41,219    57,905
$23,431 in 2013 and $13,790 in 2012
                                                                  
Deferred income tax assets                               11,377    6,596
                                                                  
Note receivable                                          801       583
                                                                  
Other assets                                             588       1,457
                                                                  
Total assets                                             $175,470 $206,085
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY                              
                                                                  
Current liabilities                                                
Accounts payable                                         $15,207  $19,027
Income taxes payable                                     6,359     3,062
Accrued liabilities                                      2,608     3,754
Accrued wages and wage related expenses                  891       2,554
Deferred revenue                                         159       722
Current portion of note payable                          --       6,000
Sales returns liability                                  7,872     6,697
                                                                  
Total current liabilities                                33,096    41,816
                                                                  
Revolving line of credit                                 --       22,173
                                                                  
Noncurrent portion of note payable                       17,543    18,000
                                                                  
Total liabilities                                        50,639    81,989
                                                                  
Stockholders' equity                                              
Common stock, $0.001 par value; 100,000 shares                     
authorized;
32,331 and 31,215 shares issued in 2013 and 2012,        32        31
respectively
Additional paid-in capital                               82,807    77,234
Accumulated other comprehensive income                   93        (57)
Note receivable collateralized by stock                  (348)     (566)
Treasury stock, 1,756 and 0 common shares in 2013 and    (9,997)   --
2012 respectively, at cost
Retained earnings                                        52,244    47,454
                                                                  
Total stockholders' equity                               124,831   124,096
                                                                  
Total liabilities and stockholders' equity               $175,470 $206,085



ZAGG INC AND SUBSIDIARIES
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,
                           2013         2012         2013         2012
                                                              
Net sales                  $66,818    $87,482    $219,356   $264,425
Cost of sales              42,332      48,900      132,236     143,880
                                                              
Gross profit               24,486      38,582      87,120      120,545
                                                              
Operating expenses:                                            
Advertising and marketing  2,359       4,312       8,952       12,495
Selling, general and       11,342      15,095      46,356      53,330
administrative
Impairment of goodwill and 11,246      11,497      11,246      11,497
intangibles
Amortization of            2,451       2,418       9,620       9,732
definite-lived intangibles
                                                              
Total operating expenses   27,398      33,322      76,174      87,054
                                                              
Income (loss) from         (2,912)     5,260       10,946      33,491
operations
                                                              
Other income (expense):                                        
Interest expense           (85)        (2,802)     (575)       (6,321)
Loss from equity method    (177)       (1,385)     (2,013)     (2,866)
investment in HzO
Other income and (expense) 264         (170)       127         (406)
                                                              
Total other income         2           (4,357)     (2,461)     (9,593)
(expense)
                                                              
Income (loss) before       (2,910)     903         8,485       23,898
provision for income taxes
                                                              
Income tax (provision) or  866         (710)       (3,695)     (9,393)
benefit
                                                              
Net income (loss)          (2,044)     193         4,790       14,505
                                                              
Earnings per share                                             
                                                              
Basic earnings (loss) per  $(0.07)    $0.01      $0.16      $0.48
share
                                                              
Diluted earnings (loss)    $(0.07)    $0.01      $0.15      $0.46
per share



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,
                       2013          2012          2013          2012
                                                             
Net income (loss) in   $(2,044)    $193        $4,790      $14,505
accordance with GAAP
                                                             
Adjustments:                                                  
                                                             
a. Stock based         964          1,096        4,126        6,018
compensation expense
b. Impairment of
goodwill and           11,246       11,497       11,246       11,497
intangibles
c. Depreciation and    3,036        3,059        12,196       11,561
amortization
d. Impairment of
investment in private  --          --          591          --
company
e. Other (income)      (2)          4,357        2,461        9,593
expense
f. Provision (benefit) (866)        710          3,695        9,393
for income taxes
                                                             
Adjusted EBITDA        $12,334     $20,912     $39,105     $62,567
                                                             
                                                             
Pro forma Net Income
Reconciliation - Three                                        
and
Twelve Months Ended    Three months ended        Twelve months ended
December 31, 2013
                      December 31,  December 31,  December 31,  December 31,
                       2013          2012          2013          2012
                                                             
Net income (loss) in   $(2,044)    $193        $4,790      $14,505
accordance with GAAP
                                                             
Adjustments:                                                  
                                                             
a. Stock based         964          1,096        4,126        6,018
compensation expense
b. Impairment of
goodwill and           11,246       11,497       11,246       11,497
intangibles
c. Amortization of     2,478        2,439        9,701        9,801
intangibles
d. Impairment of
investment in private  --          --          591          --
company
e. Other expense
excluding cash
interest expense and   (264)        170          (127)        406
loss on equity method
investment
f. Non-cash deferred   57           1,509        147          1,509
loan costs charge
g. Former CEO          --          --          --          910
departure expense
h. Loss on equity      177          1,385        2,013        2,866
method investment
i. Income tax effects  (5,539)*     (6,392)*     (9,598)*     (11,529)*
                                                             
Pro forma net income  $7,075      $11,897     $22,889     $35,983
                                                             
Pro forma diluted EPS $0.23       $0.37       $0.73       $1.14
                                                             
Weighted average
number of shares       31,358       31,735       31,459       31,656
outstanding - diluted
                                                             
* For comparative purposes, we applied an annualized statutory tax rate of
38.5%

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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