ZAGG (ZAGG) 8-K ZAGG Inc. Reports Fourth Quarter and Full Year 2010 Financial Results

Exhibit 99.1

ZAGG Inc. Reports Fourth Quarter and Full Year 2010 Financial Results

·   Record revenue for the fourth quarter of $29.3 million, an increase of 157% year over year and up 27% sequentially.

·   Adjusted EBITDA for the fourth quarter was $6.6 million or $0.27 per share versus $1.7 million or $0.07 per share for Q4 2009, an increase of 281%. 

·   Net income attributable to stockholders for the quarter was $3.4 million or $0.13 per diluted share for the fourth quarter 2010 versus $0.3 million or $0.01 for the fourth quarter 2009, an increase of $0.12 per share year-over-year. 

·   For the full year, net income attributable to stockholders was $10.0 million versus $3.4 million in 2009, an increase of 195% year-over-year.

SALT LAKE CITY, March 14, 2011--(BUSINESS WIRE)--ZAGG Inc. (NASDAQ:ZAGG - News) (www.ZAGG.com), a leading producer of mobile electronics accessories including the popular invisibleSHIELD™ and ZAGGaudio™ brands, today announced financial results for the fourth quarter and full year ended December 31, 2010.

Financial Results

Revenue for the fourth quarter was $29.3 million, an increase of 157% from the fourth quarter of 2009, and a 27% sequential increase as compared to the third quarter of 2010.  Revenue for the full year was $76.1 million, a 98% increase from $38.4 million in 2009.

Gross profit for the fourth quarter was $13.4 million, or 46% of sales, compared to $6.1 million, or 54% of sales in the fourth quarter of 2009.  Gross profit for the full year was $37.4 million, or 49% of sales, compared to $22.1 million, or 58% of sales in 2009.

Net income attributable to stockholders for the fourth quarter was $3.4 million or $0.13 per share as compared to net income attributable to stockholders of $0.3 million or $0.01 per share in the fourth quarter of 2009.  Net income attributable to stockholders for the full year was $10.0 million or $0.41 per diluted share as compared to net income attributable to stockholders of $3.4 million or $0.15 per diluted share in the prior year.

“The 2010 holiday season was very strong for ZAGG’s product line, and our newest product, the ZAGGmate for the Apple iPad, was extremely well received” said Robert G. Pedersen II, CEO and President.  “ZAGG benefited from a number of popular device introductions in 2010, as well as the expansion of our indirect channel, and new product introductions throughout the year.”

Business Highlights

During the fourth quarter, ZAGG introduced the ZAGGmate, a protective and functional companion to the Apple® iPad® that accentuates both the appearance and utility of Apple’s innovative device. Made from aircraft-grade aluminum, the patent-pending ZAGGmate is a protective case, featuring a simple and innovative hinge stand for viewing and typing in portrait and landscape mode, with a version containing a built-in wireless Bluetooth® keyboard.  The ZAGGmate was first made available in select national big box retail locations on Black Friday, November 26th, and shortly afterward began shipping to online customers.

Adjusted EBITDA

ZAGG considers earnings before other income or expense; income tax provision; impairment losses; depreciation and amortization; and share-based compensation expense related to stock and stock options (“Adjusted EBITDA”) to be important financial indicators of the Company’s operational strength and the performance of its business.  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 the most comparable financial measure calculated and presented in accordance with GAAP, being net income attributable to stockholders, is presented under the heading “Reconciliation of Non-GAAP Financial Information to GAAP” immediately following the Condensed Consolidated Statements of Operations included below.

Adjusted EBITDA for the fourth quarter of 2010 was $6.6 million or $0.27 per diluted share versus $1.7 million or $0.07 per diluted share in the fourth quarter of 2009.  For the full year, Adjusted EBITDA was $18.2 million or $0.75 per diluted share versus $7.3 million or $0.32 per diluted share in the prior year.

Our Form 10-K is due to be filed on March 31, 2011 and therefore we have not completed our financial reporting process.  As such, there may be some adjustments to the financial statements contained herein as we complete our internal control over financial reporting and issuance of our Form 10-K.

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Conference Call

A conference call will be held today at 6:00 p.m. Eastern Time to review these results.  Participants may access via the Internet at the event website and on the Company website at: www.ZAGG.com. The call will be available for replay for 30 days by dialing 1-877-660-6853 and entering account number 286 and call ID number 368473. A podcast of the event will also be available online or via Investor Calendar’s RSS feed. 

Non-GAAP Financial Disclosure

Investors are cautioned that the Adjusted EBITDA, or earnings/(loss) before other income/(expense), taxes, depreciation and amortization, impairment losses and stock-based compensation, and adjusted EBITDA per common share information 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. 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.

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ZAGG INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	December 31,
	2010			2009
ASSETS
Current assets
Cash	$	2,373,293		$	4,970,756
Accounts receivable, net		17,668,612			5,450,722
Inventories		17,946,948			3,695,840
Prepaid expenses and other current assets		2,620,308			1,909,835
Related party other asset		3,899,910			1,152,500
Deferred income tax assets		2,195,687			255,653
Total current assets		46,704,758			17,435,306
Property and equipment, net		1,496,532			887,705
Deferred income tax assets		-			446,154
Other assets		63,310			9,688
Intangible assets, net		9,167,466			119,627
Total assets	$	57,432,066		$	18,898,480
LIABILITIES AND EQUITY
Current liabilities
Notes payable	$	30,923		$	-
Accounts payable		12,122,011			2,781,425
Accrued liabilities		8,271,173			1,252,461
Accrued wages and wage related expenses		302,965			164,495
Deferred revenue		294,931			262,937
Sales returns liability		2,067,671			550,201
Total current liabilities		23,089,674			5,011,519
Deferred income tax liability		1,561,465			-
Total liabilities		24,651,139			5,011,519
Equity
Stockholders' equity
Common stock, $0.001 par value; 50,000,000 shares authorized;
23,925,763  and 21,711,862 shares issued and outstanding, respectively		23,926			21,712
Additional paid-in capital		15,494,836			9,239,285
Cumulative translation adjustment		(59,802	)		(112,039	)
Retained earnings		14,701,074			4,738,003
Total stockholders' equity		30,160,034			13,886,961
Noncontrolling interest		2,620,893			-
Total equity		32,780,927			13,886,961
Total liabilities and equity	$	57,432,066		$	18,898,480

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ZAGG INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended						Twelve months ended
	December 31, 2010			December 31, 2009			December 31, 2010			December 31, 2009
Net sales	$	29,252,986		$	11,397,588		$	76,135,025		$	38,361,747
Cost of sales		15,898,108			5,252,598			38,738,077			16,308,501
Gross profit		13,354,878			6,144,990			37,396,948			22,053,246
Operating expenses:
Advertising and marketing		1,508,966			1,676,947			5,067,377			5,845,801
Selling, general and administrative		5,741,856			3,696,282			15,516,149			10,497,394
Total operating expenses		7,250,822			5,373,229			20,583,526			16,343,195
Income from operations		6,104,056			771,761			16,813,422			5,710,051
Other income (expense):
Interest expense		-			(166,791	)		(242,617	)		(231,445	)
Interest and other income		(11,106	)		(106,548	)		6,593			34,833
Total other (expense) income		(11,106	)		(273,339	)		(236,024	)		(196,612	)
Income before provision for income taxes		6,092,950			498,422			16,577,398			5,513,439
Income tax provision		(2,726,500	)		(247,578	)		(6,649,740	)		(2,132,010	)
Net income		3,366,450			250,844			9,927,658			3,381,429
Net loss attributable to noncontrolling interest		35,414			-			35,414			-
Net income attributable to stockholders	$	3,401,864		$	250,844		$	9,963,072		$	3,381,429
Earnings per share attributable to stockholders:
Basic earnings per common share attributable to stockholders	$	0.14		$	0.01		$	0.44		$	0.16
Diluted earnings per common share attributable to stockholders	$	0.13		$	0.01		$	0.41		$	0.15
Weighted average number of shares outstanding - basic		23,702,509			21,701,829			22,518,441			20,633,812
Weighted average number of shares outstanding - diluted		25,769,060			23,852,584			24,435,827			22,989,039

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ZAGG INCORPORATED 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 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 other reporting periods and with the results of other companies.

				Three months ended				Twelve months ended
				December 31, 2010		December 31, 2009		December 31, 2010		December 31, 2009
Net income attributable to stockholders in accordance with GAAP				$	3,401,864	$	250,844	$	9,963,072	$	3,381,429
	Add/(less):
		a.	Impairment of notes receivable and related interest		-		712,000		-		712,000
		b.	Stock based compensation expense		316,639		166,011		993,476		664,792
		c.	Depreciation and amortization		108,948		71,156		363,292		243,119
		d.	Provision for income taxes		2,726,500		247,578		6,649,740		2,132,010
		e.	Other expense (income)		11,106		273,339		236,024		196,612
Adjusted EBITDA				$	6,565,057	$	1,720,928	$	18,205,604	$	7,329,962
Diluted Adjusted EBITDA per common share				$	0.27	$	0.07	$	0.75	$	0.32
Weighted average number of shares outstanding - diluted					24,584,992		23,852,584		24,435,827		22,989,039

Media:

ZAGG Inc.

Nathan Nelson, 801-263-0699 ext. 107

nnelson@zagg.com

or

Investor Relations:

Genesis Select Corp.

Kim Rogers-Carrete, 949-429-7408

krogersc@genesisselect.com

Source: ZAGG Inc.

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