EXHIBIT 99.1
PRESS RELEASE Source: Tag-It Pacific, Inc.
TAG-IT PACIFIC, INC. REPORTS NET EARNINGS OF $309,000 FOR 2006 COMPARED TO A
($29.5) MILLION NET LOSS IN THE PRIOR YEAR
2006 EPS OF $0.02 VS. ($1.62) LOSS IN PRIOR YEAR
Thursday, April 5, 2007
LOS ANGELES--(BUSINESS WIRE)--April 5, 2007--Tag-It Pacific, Inc. (AMEX: TAG),
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brand owner of Talon(R) zippers and a full service outsourced trim management
supplier for manufacturers of fashion apparel, today announced financial results
for the Company's fiscal year ended December 31, 2006.
For the year ended December 31, 2006, the Company reported Net Income of
$309,000, or $0.02 per share, as compared to a Net Loss for the year ended
December 31, 2005 of ($29,538,000), or a loss of ($1.62) per share. "We are very
pleased with the financial results for 2006" commented Stephen Forte, the
Company's CEO. "2006 was a critical transition year for the Company, and we
believe important changes and progress were made in many areas. These changes
not only resulted in a substantial turn-around of the Company's operating
results, but we believe have positioned the Company for the tremendous market
opportunities we see ahead." Mr. Forte continued. The net income for 2006 is
after the deduction of $395,000 in non-cash compensation charges associated with
the Company's implementation of FAS 123(R) at the beginning of 2006. Net cash
provided by operating activities in 2006 was $2,020,000.
Sales for the year ended December 31, 2006 were $48,825,000, as compared to
sales of $47,331,000 for 2005. The sales increase for the year reflects a 45%
increase in the Company's sales within Asia, while the Company's sales in Mexico
and the U.S. declined. The sales declines in Mexico and the U.S. are a result of
the restructuring actions taken in late 2005 where the assembly and
manufacturing operations in these regions were closed, and also as a result of
the apparel industry shift to Asia manufacturing sources. In addition, the
decline in sales from Mexico also reflects the impact of the elimination of
approximately $4.0 million of sales of products that the Company discontinued at
the end of 2005. In October 2006 the Company's supply contract with its
exclusive customer for the TekFit(R) waistband product expired. With the
expiration of this exclusive contract the Company can now sell this waistband to
other brands and retailers. Sales orders for this product however are expected
to be significantly less than the prior year through the next several quarters,
as the Company's initial shipments of the waistband products to new customers
will not fully offset the decline in sales from the prior exclusive customer in
the near term. In 2006 this product accounted for approximately 19% of the
Company's revenues.
Gross margins for the year ended December 31, 2006 improved $14.2 million from
2005. "Our gross margin improvements for 2006 are strong evidence of the
effectiveness of our restructuring strategy" commented Mr. Forte. "Approximately
$3.4 million of the improvement reflects the cost of the restructuring we
incurred in 2005, however the bulk of the improvement reflects the results of
structural changes we made in the business that eliminated significant costs in
the manufacturing and distribution areas, and more than $5.0 million of the
improvement is the result of increased margins on core product sales and from
increased volume" Forte said.
Operating expenses for the year ended December 31, 2006 were $14.2 million lower
than in 2005. The cost reductions reflect the result of restructuring and
goodwill impairment charges of $2.5 million, and $5.9 million in provisions for
uncollectible receivables principally from Mexico that were recorded in 2005. In
addition to the elimination of these 2005 charges, operating expenses in 2006
were lower than 2005 due to reduced employee costs, lower legal costs,
recoveries of previous bad debts, and reductions in travel and overall operating
expenses as the Company operated with a smaller more efficient organizational
structure. The operating costs for the year ended December 31, 2006 also
included non-cash compensation costs of $395,000 associated with the
implementation of FAS 123(R).
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Teleconference Information
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Management will host a conference call at 1:30 p.m. PST (4:30 p.m. EST)
Thursday, April 5, 2007 to discuss the 2006 operating results.
To participate in the conference call, please dial the following number five to
ten minutes prior to the scheduled conference call time: 800-322-9079.
International callers should dial 973-582-2717. There is no pass code required
for this call.
If you are unable to listen to the live teleconference at its scheduled time,
there will be a replay available through May 4, 2007 midnight Eastern time and
can be accessed by dialing 877-519-4471 (U.S.), 973-341-3080 (Int'l), replay pin
number: 8650149.
This call is being webcast by ViaVid Broadcasting and can be accessed at
http://viavid.net/dce.aspx?sid=00003474.
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About Tag-It Pacific, Inc.
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Tag-It distributes zippers under its Talon(R) brand name to manufacturers for
apparel brands and retailers such as Levi Strauss & Co., Wal-Mart and JCPenney.
Tag-It also supplies a full range of trim items to manufacturers of fashion
apparel, specialty retailers, mass merchandisers, brand licensees and major
retailers, including Levi Strauss & Co., Motherworks, Express, The Limited, New
York & Co., Victoria's Secret and House of Dereon, among others.
Forward Looking Statements:
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With the exception of the historical information, this press release contains
forward-looking statements, as referenced in the Private Securities Litigation
Reform Act. Forward-looking statements are inherently unreliable and actual
results may differ materially. Examples of forward-looking statements in this
press release include the projected effects of our restructuring actions and
growth strategy in future periods and the effects of the expiration of our
exclusive supply contract for TekFit waistbands. Factors which could cause
actual results to differ materially from these forward-looking statements
include our ability to acquire new customers for our TekFit waistbands, an
unfavorable outcome in litigation in which we are party, the unanticipated loss
of one or more major customers, economic conditions, pricing pressures and other
competitive factors and our management of the growth strategy. These and other
risks are more fully described in our filings with the Securities and Exchange
Commission including the Company's most recently filed Annual Report on Form
10-K and Quarterly Report on Form 10-Q, which should be read in conjunction
herewith for a further discussion of important factors that could cause actual
results to differ materially from those in the forward-looking statements. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Contact:
Tag-It Pacific, Inc.
Rayna Long, 818-444-4128
rlong@tagitpacific.com
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TAG-IT PACIFIC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Year Ended Year Ended
December 31, December 31,
2006 2005
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Net sales $ 48,825,002 $ 47,331,176
Cost of goods sold 34,356,034 47,070,381
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Gross profit 14,468,968 260,795
Selling expenses 2,777,772 2,928,659
General and administrative expenses 10,670,311 22,267,070
Restructuring charges - 2,474,281
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Total operating expenses 13,448,083 27,670,010
Income (loss) from operations 1,020,885 (27,409,215)
Interest expense, net 677,682 1,069,015
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Income (loss) before income taxes 343,203 (28,478,230)
Provision for income taxes 33,900 1,059,479
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Net income (loss) 309,303 (29,537,709)
Less: Preferred stock dividends - -
------------- --------------
Net income(loss) to common shareholders $ 309,303 $ (29,537,709)
============= ==============
Basic income(loss) per share $ 0.02 $ (1.62)
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Diluted income( loss) per share $ 0.02 $ (1.62)
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Basic weighted average shares outstanding 18,377,484 18,225,851
============= ==============
Diluted weighted average shares outstanding 18,955,796 18,225,851
============= ==============
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TAG-IT PACIFIC, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, December 31,
2006 2005
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Assets
Current Assets:
Cash and cash equivalents $ 2,934,673 $ 2,277,397
Accounts receivable, net 4,664,766 5,652,990
Note receivable 1,378,491 662,369
Inventories, net 3,051,220 5,573,099
Prepaid expenses and other current assets 541,034 618,577
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Total current assets 12,570,184 14,784,432
Property and equipment, net 5,623,040 6,438,096
Fixed assets held for sale 826,904 826,904
Note receivable, less current portion 1,420,969 2,777,631
Due from related parties 750,137 730,489
Other intangible assets, net 4,139,625 4,255,125
Other assets 362,569 508,117
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Total assets $ 25,693,428 $ 30,320,794
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,006,241 $ 6,719,226
Accrued legal costs 427,917 2,520,111
Other accrued expenses 3,359,267 4,168,552
Demand notes payable to related parties 664,970 664,971
Current portion of capital lease obligations 432,728 590,884
Current portion of notes payable 1,107,207 186,837
Current portion of secured convertible promissory notes 12,472,622 -
-------------- --------------
Total current liabilities 22,470,952 14,850,581
Capital lease obligations, less current portion 474,733 856,495
Notes payable, less current portion 1,061,514 1,261,018
Secured convertible promissory notes - 12,440,623
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Total liabilities 24,007,199 29,408,717
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Commitments and contingencies
Stockholders' Equity:
Preferred stock Series A, $0.001 par value; 250,000 shares authorized; no shares
issued or outstanding - -
Common stock, $0.001 par value, 100,000,000 shares authorized;
18,466,433 shares issued and outstanding at December 31, 2006;
18,241,045 at December 31, 2005 18,466 18,241
Additional paid-in capital 51,792,502 51,327,878
Accumulated deficit (50,124,739) (50,434,042)
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Total stockholders' equity 1,686,229 912,077
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Total liabilities and stockholders' equity $ 25,693,428 $ 30,320,794
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