EXHIBIT 99.1
FOR IMMEDIATE RELEASE INVESTOR RELATIONS CONTACT:
Hayden Communications, Inc.
MATTHEW HAYDEN
Tel: 858-456-4533
matt@haydenir.com
www.haydenir.com
TAG-IT PACIFIC, INC. ANNOUNCES PROFITABILE SECOND QUARTER 2004 RESULTS
Highlights:
o Company returns to profitability
o Sales decrease 28 percent compared to Q2 2003, but increase 47
percent sequentially compared to the first quarter
o Continued progress on customer diversification results in 22%
increase in new business
Los Angeles, CA. August 11, 2004 --Tag-It Pacific, Inc. (AMEX: TAG), a full
service outsourced trim management department for manufacturers of fashion
apparel, today announced financial results for its second quarter and six month
period ended June 30, 2004.
For the quarter, net sales were $14.9 million, a 28 percent decrease compared to
$20.7 million for the same quarter last year, but a 47 percent increase
sequentially compared to the first quarter. Costs of goods sold for the 2004
second quarter were $11 million, compared to $15.3 million in the year ago
period. Gross profit for this quarter was $3.9 million compared to $5.5 million
in the year ago period, yielding gross margins of approximately 26 percent in
each respective quarter. Selling expense was $702,482, a 43.6 percent decrease
from the $1.2 million reported in the second quarter last year. General and
Administrative expenses decreased to $2.79 million compared to $2.94 million for
the second quarter of last year. Interest expense decreased to $144,000 compared
to $343,000 for the second quarter of last year. The Company reported net income
to common shareholders of $170,319, or $0.01 per share, compared to $701,564, or
$0.07 per share, for the second quarter of 2003. The Company completed the
second quarter with 18,779,239 fully diluted shares outstanding compared to
10,737,427 as of the end of the second quarter last year.
Approximately $8.9 million in sales related to the Company's Managed Trim
Solution(TM) TrimNet were generated from Tlaxcala, Mexico during the second
quarter of 2003. During the fourth quarter of 2003, management implemented a
plan to restructure certain business operations, including the reduction of its
reliance on Tarrant Apparel Group and Azteca Production. This plan was
accelerated when Tarrant unexpectedly exited its Mexico operations. The
Company's response to this situation resulted in the replacement of 22 percent
of the lost revenue, despite the unanticipated decline in revenues from the
Tarrant Apparel Group. Revenues from these customers decreased from 43 percent
of the total reported in the second quarter of 2003 to 3.9 percent during the
second quarter of this year. The increase in new business substantially offset
the unanticipated decrease and validates the success of the Company's
diversification strategy.
Colin Dyne, Chief Executive Officer of Tag-It Pacific, commented, "We made
continued progress in our transition strategy during the second quarter,
increasing sales by more than 45 percent compared to the first quarter and
decreasing operating expenses across the board. Recent orders from Levi's and
others has helped to diversify our customer base - a key strategy during this
transition period - and we continue to see broad based market acceptance of our
Oracle-based ERP system, TRIMNET(TM). We are no longer reliant on a single
customer for the majority of our sales and we continue to replace a significant
portion of our revenues with multiple new customers. In summary, we continue to
make noticeable progress towards diversifying our customer base and replacing
sales previously made to Tarrant Apparel Group by focusing our resources on the
three core growth vehicles embedded in our business."
For the six month period, the Company reported revenues of $25.1 million, a
decrease of 28.5 percent from the $35.1 million reported in the first six months
of 2003. Cost of good sold for the first six months of 2004 was $18.2 million
compared to $25.3 million in the year ago period, yielding gross profit of $6.9
million and $9.8 million for the respective periods. Gross margins were 27.4
percent compared to 27.8 percent in 2003. Selling expense was $1.47 million, a
28.9 percent decrease from the $2.08 million reported in the six month period
last year. General and Administrative expenses were $5.65 million compared to
$5.64 million for the first six months of last year. Interest expense decreased
to $331,000 compared to $664,000 for the six months of last year. The Company
reported a net loss to common shareholders of $412,215, or $(0.02) per share,
compared to net income to common shareholders of $1.02 million, or $0.10 per
share, for the first six months of 2003. Fully diluted shares outstanding for
the six-month period were 16,491,684 compared to 10,169,168 for the six month
period last year.
Recent Highlights include:
o On July 28, Tag-It announced it extended its two-year
relationship with Levi Strauss & Co. for the use of its
patented TekFit(TM) stretch waistband technology in the
Dockers(R) product line. The two-year agreement will extend
the relationship from this November through November of 2006
and is estimated to yield approximately $35 to $40 million in
revenue during the two years.
o As previously disclosed on May 13, Tag-It signed a contract
with a large manufacturer of private-label jeans in Mexico and
Central America. Tag-It will provide all of the trim needs for
a single large manufacturing location, which is expected to
add $6-8 million in revenues for the coming 12 months. The
Company expects to expand its offerings to additional
manufacturing facilities owned and operating by this customer.
o In June, Tag-it announced the addition of Zipper Industry
Veteran, Derik Kim, who helped develop and successfully launch
the Company's International Franchise strategy.
o Tag-it initiated a relationship with a major Women's Retailer
with over 1,000 stores to develop and implement a new
marketing initiative, including a full line of products
offered through TRIMNET.
Tag-It's TRIMNET system, a state-of-the-art, Internet-based trim management
system that includes product development, online catalogs, trim
bill-of-materials and order management, continued to gain wide market
acceptance. The Company continues to see considerable growth in its activities
in Asia relating to TRIMNET.
Mr. Dyne concluded, "Talon will become increasingly important to our growth in
the coming years. Zippers are an essential component of our TRIM NET solutions
and give us a competitive advantage over others who try to replicate this
strategy. The zipper industry worldwide is approximately $1.6 billion -- with
only one dominate player -- and we believe our strategy of international
expansion through franchise relationships will not only allow the Company to
gain market share, but do so at minimal cost and risk. We expect to report
revenues from this initiative in the fourth quarter of this year and see this
division become a significant contributor in 2005."
The Company completed the quarter with $5.4 million in cash and cash equivalents
ABOUT TAG-IT PACIFIC, INC. - Tag-It specializes in the distribution of a full
range of trim items to manufacturers of fashion apparel, specialty retailers and
mass merchandiser. Tag-It acts as a full service outsourced trim management
department for manufacturers of fashion apparel such as Abercrombie & Fitch,
Kentucky Apparel and Azteca Production International. Tag-it also serves as a
specified supplier of trim items to specific brands, brand licensees and
retailers, including Levi Strauss & Co., Abercrombie & Fitch, Express, The
Limited, Miller's Outpost and Lerner, among others. In addition, Tag-It
distributes zippers under its TALON brand name to manufacturers for apparel
brands and retailers such as Levi Strauss & Co., Wal-Mart, JC Penny and Tropical
Sportswear, among others. In 2002, Tag-It created a new division under the
TEKFIT brand name. This division develops and sells apparel components that
utilize the patented Pro-Fit technology, including a stretch waistband. These
products are marketed to the same customers targeted by our MANAGED TRIM
SOLUTION and TALON zipper divisions.
FORWARD LOOKING STATEMENTS:
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 benefits of our new TRIMNET system, and the successful
expansion of our zipper business. Factors which could cause actual results to
differ materially from these forward-looking statements include an unfavorable
outcome in
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our litigation with Pro-Fit Holdings relating to our stretch waistbands, the
unanticipated loss of one or more major customers, economic conditions, the
availability and cost of financing, the risk of a softening of customer
acceptance of the Company's products, risks of introduction by competitors of
trim management systems with similar or better functionality than our Managed
Trim Solution, pricing pressures and other competitive factors, potential
fluctuations in quarterly operating results, our management of potential growth
and the risks of expansion into new business areas. These and other risks are
more fully described in the Company's 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. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
TABLES ATTACHED
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TAG-IT PACIFIC, INC.
Selected Balance Sheet Items
(all numbers in $000's)
June 30, December
2004 31, 2003
------- -------
Cash ................................................... $ 5,353 $14,443
Accounts Receivable .................................... $25,884 $19,253
Inventories ............................................ $19,004 $17,097
Total Current Assets ................................... $54,245 $55,726
Total Assets ........................................... $66,409 $67,770
Line of Credit ......................................... $ 5,935 $ 7,096
Accounts Payable and Accrued Expenses .................. $ 9,395 $ 9,552
Total Current Liabilities .............................. $18,551 $19,260
Total Liabilities ...................................... $19,344 $21,312
Convertible Redeemable preferred stock Series C ........ $ -- $ 2,895
Total Stockholders' Equity ............................. $47,065 $43,564
Total Liabilities and Equity .......................... $66,409 $67,770
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TAG-IT PACIFIC, INC.
Consolidated Statements of Operations
(all numbers (excluding EPS) in $000's)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2004 2003 2004 2003
-------- -------- -------- --------
Net sales ......................... $ 14,923 $ 20,732 $ 25,083 $ 35,090
Cost of goods sold ................ 11,031 15,267 18,199 25,326
-------- -------- -------- --------
Gross profit ................... 3,892 5,465 6,884 9,764
Selling expenses .................. 703 1,246 1,475 2,075
General and administrative
expenses ....................... 2,791 2,940 5,648 5,638
-------- -------- -------- --------
Total operating expenses ....... 3,494 4,186 7,123 7,713
-------- -------- -------- --------
Income (loss) from operations ..... 398 1,279 (239) 2,051
Interest expense, net ............. 144 343 331 664
-------- -------- -------- --------
Income (loss) before income taxes . 254 936 (570) 1,387
Provision (benefit) for income
taxes .......................... 84 187 (188) 277
-------- -------- -------- --------
Net income (loss) ................. $ 170 $ 749 $ (382) $ 1,110
======== ======== ======== ========
Less: Preferred stock dividends .. -- (47) (30) (94)
-------- -------- -------- --------
Net income (loss) to common
shareholders ................... $ 170 $ 702 $ (412) $ 1,016
======== ======== ======== ========
Basic earnings (loss) per share ... $ 0.01 $ 0.07 $ (0.02) $ 0.10
======== ======== ======== ========
Diluted earnings (loss) per share . $ 0.01 $ 0.07 $ (0.02) $ 0.10
======== ======== ======== ========
Weighted average number of common
shares outstanding:
Basic .......................... 18,062 10,209 16,492 9,818
======== ======== ======== ========
Diluted ........................ 18,779 10,737 16,492 10,169
======== ======== ======== ========
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