EXHIBIT 99.1
PRESS RELEASE Source: Tag-It Pacific, Inc.
TAG-IT PACIFIC, INC. REPORTS NET EARNINGS FOR THE THIRD QUARTER
AND NINE MONTHS OF 2006
COMPANY REPORTS RESTRUCTURING COMPLETE - THIRD QUARTER SALES UP 41%
2006 THIRD QUARTER NET INCOME OF $0.02 PER SHARE VS.
2005 NET LOSS OF $0.56 PER SHARE
Monday, November 13, 2006
LOS ANGELES--(BUSINESS WIRE)--Nov. 13, 2006--Tag-It Pacific, Inc. (AMEX: TAG),
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 third quarter and nine-month period ended September 30, 2006.
For the three months ended September 30, 2006 the Company reported Net Income of
$339,000, or $0.02 per share, as compared to a Net Loss for the same period in
2005 of $10,285,000, or $0.56 per share. "The net income for the third quarter
of 2006 represents another significant step in the continuation in our
turn-around efforts", commented Stephen Forte, the Company's CEO. "These results
are very encouraging and evidence the new direction and momentum of the Company.
Our business is now beginning to reflect the success of our restructuring plan
implemented late in 2005, and we believe our sales growth is evidencing the
success of our global growth strategy. We believe both the restructuring and our
growth plans contributed to our positive performance," Mr. Forte said. The net
income for the third quarter in 2006 includes a $117,000 non-cash compensation
charge for employee stock options in accordance with FAS 123(R) which was
adopted by the Company at the beginning of 2006.
For the nine months ended September 30, 2006 the Company reported net income of
$264,000, or $0.01 per share as compared to a net loss of $24,410,000 or a net
loss per share of $1.34 for the first nine months of 2005. The net income for
the nine months ended September 30, 2006 included $283,000 in non-cash
compensation expense in connection with the adoption of FAS 123(R) at the
beginning of the year.
Sales for the three months ended September 30, 2006 were $13,367,000 as compared
to sales of $9,473,000 for the same quarter in 2005. The improvement in sales
for the third quarter in 2006 as compared to the same period in 2005 reflects
double-digit growth in all of our product lines with the continuing expansion of
our business in Asia. The growth in Asia has substantially offset the sales
declines in the U.S. and Latin America that resulted from the shift, beginning
in 2004, of apparel industry production to Asia. Sales for the third quarter of
2005 were partially impacted by our restructuring efforts implemented during the
quarter that closed assembly operations in Mexico and the manufacturing plant in
North Carolina. Gross profit for the three months ended September 30, 2006
increased over the same period in 2005 by $6.2 million as the Company eliminated
substantial operating and manufacturing costs, avoided excess inventory and
obsolescence costs, and improved its overall margin on sales. Gross profit for
the three months ended September 30, 2005 included restructuring charges of $3.5
million associated principally with valuation reserves on inventory. The net
loss for the nine months ended September 30, 2005 also included a $1.0 million
provision for the deferred tax asset valuation reserves.
For the nine months ended September 30, 2006 sales were $38,251,000, as compared
to sales of $38,168,000 for the same period in 2005. The sales increase for the
period results from the impact of rapidly growing apparel sales in Asia as the
Company's sales in Mexico and the U.S. declined. The sales increase for the nine
months ended September 30, 2006 over the same period in 2005 also reflects
growth within our core products offsetting the impact of approximately $6.2
million of Mexico sales from the same period in 2005 that were discontinued.
In October 2006 our exclusive supply contract with our single customer for our
patented TekFit waistband product expired pursuant to its terms. With the
expiration of this exclusive contract we now have the ability to sell our
waistband products to multiple brands and retailers. Over the longer term, this
should expand the market for our waistband products considerably. Nonetheless,
purchase commitments from the expired contract are expected to decline
significantly through the next two quarters, and it is unlikely that shipments
of our waistband products to new customers will fully offset the decline in
sales to our prior exclusive customer in the near term.
Gross margins for the nine months ended September 30, 2006 improved $9.2 million
from the same period in 2005 partly as a result of the restructuring costs of
$3.5 million incurred in 2005, but also as a result of improved product margins,
lower distribution and manufacturing costs, and reduced obsolescence costs in
2006 as compared to 2005.
Operating expenses for the three and nine months ended September 30, 2006 were
lower than the same periods in 2005 by $4.5 million and $14.0 million,
respectively. The cost reductions are partially the result of restructuring and
goodwill impairment charges of $2.7 million in the third quarter of 2005, and
$6.6 million in provisions for uncollectible receivables in Mexico that was
recorded in the first nine months of 2005. In addition to the elimination of
these 2005 charges, operating expenses in 2006 were also lower than 2005 due to
reduced employee costs, lower legal and professional costs, reduced travel costs
and lower overall operating expenses as the Company operated with a smaller more
efficient organizational structure. The overall operating cost savings for the
quarter and nine months ended September 30, 2006 as compared to the same periods
in 2005 is also net of increased spending in sales and marketing to promote
global growth, and the added non-cash compensation costs associated with the
implementation of FAS 123(R).
"We have successfully executed our business restructuring and growth plans
during the first nine months of 2006" Stephen Forte stated, "and we are
confident that with our new organization structure, operating disciplines, and
strategic focus that our efforts will continued to result in renewed shareholder
confidence and value".
* * * * *
TELECONFERENCE INFORMATION
Management will host a conference call at 1:30 p.m. PST (4:30 p.m. EST) Monday,
November 13, 2006 to discuss 2006 third quarter and nine months results.
To participate in the conference call, please dial the following number five to
ten minutes prior to the scheduled conference call time: 888-338-6760.
International callers should dial 973-582-2858. 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 November 30, 2006 midnight Eastern time
and can be accessed by dialing 877-519-4471 (U.S.), 973-341-3080 (Int'l), replay
pin number: 8104706.
This call is being webcast by ViaVid Broadcasting and can be accessed at
http://viavid.net/dce.aspx?sid=00003474.
ABOUT TAG-IT PACIFIC, INC.
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.
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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 projected the effects of our restructuring plan,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)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
Net sales .......................... $ 13,366,945 $ 9,472,898 $ 38,251,248 $ 38,167,821
Cost of goods sold ................. 9,218,539 11,567,128 27,132,880 36,254,108
------------ ------------ ------------ ------------
Gross profit .................... 4,148,406 (2,094,230) 11,118,368 1,913,713
Selling expenses ................... 910,996 549,434 2,131,515 1,940,283
General and administrative expenses 2,684,695 4,908,555 8,136,448 19,649,868
Impairment of goodwill ............. -- 450,000 -- 450,000
Restructuring Costs ................ -- 2,278,835 -- 2,278,835
------------ ------------ ------------ ------------
Total operating expenses ........ 3,595,691 8,186,824 10,267,963 24,318,986
Income (loss) from operations ...... 552,715 (10,281,054) 850,405 (22,405,273)
Interest expense, net .............. 158,741 264,551 519,692 802.400
------------ ------------ ------------ ------------
Income (loss) before income taxes .. 393,974 (10,545,605) 330,713 (23,207,673)
Provision (benefit) for income taxes 54,857 (260,731) 66,357 1,202,282
------------ ------------ ------------ ------------
Net Income (loss) ............... $ 339,117 $(10,284,874) $ 264,356 $(24,409,955)
============ ============ ============ ============
Basic income (loss) per share ...... $ 0.02 $ (0.56) $ 0.01 $ (1.34)
============ ============ ============ ============
Diluted income (loss) per share .... $ 0.02 $ (0.56) $ 0.01 $ (1.34)
============ ============ ============ ============
Weighted average number of common
shares outstanding:
Basic ........................... 18,440,927 18,241,045 18,347,509 18,220,731
============ ============ ============ ============
Diluted ......................... 19,279,648 18,241,045 18,719,531 18,220,731
============ ============ ============ ============
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TAG-IT PACIFIC, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, December 31,
2006 2005
------------ ------------
Assets
Current Assets:
Cash and cash equivalents ....................... $ 3,726,234 $ 2,277,397
Trade accounts receivable, net .................. 5,054,939 5,652,990
Note receivable ................................. 1,344,049 662,369
Inventories ..................................... 3,150,063 5,573,099
Prepaid expenses and other current assets ....... 681,513 618,577
------------ ------------
Total current assets ......................... 13,956,798 14,784,432
Property and equipment, net ........................ 5,846,119 6,438,096
Fixed assets held for sale ......................... 826,904 826,904
Note receivable, less current portion .............. 1,778,781 2,777,631
Due from related parties ........................... 643,774 730,489
Other intangible assets, net ....................... 4,172,001 4,255,125
Other assets ....................................... 449,396 508,117
------------ ------------
Total assets ....................................... $ 27,673,773 $ 30,320,794
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable ................................ $ 4,857,098 $ 6,719,226
Accrued legal costs ............................. 722,550 2,520,111
Other accrued expenses .......................... 3,814,618 4,168,552
Demand notes payable to related parties ......... 664,971 664,971
Current portion of capital lease obligations .... 425,896 590,884
Current portion of notes payable ................ 1,495,196 186,837
------------ ------------
Total current liabilities .................... 11,980,329 14,850,581
Capital lease obligations, less current portion .... 586,807 856,495
Notes payable, less current portion ................ 1,112,623 1,261,018
Secured convertible promissory notes ............... 12,464,557 12,440,623
------------ ------------
Total liabilities ............................ 26,144,316 29,408,717
------------ ------------
Commitments, Contingencies and guarantees - (Note 5) -- --
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 September 30, 2006;
18,241,045 at December 31, 2005 .............. 18,466 18,241
Additional paid-in capital ...................... 51,680,677 51,327,878
Accumulated deficit ............................. (50,169,686) (50,434,042)
------------ ------------
Total stockholders' equity ......................... 1,529,457 910,077
------------ ------------
Total liabilities and stockholders' equity ......... $ 27,673,773 $ 30,320,794
============ ============
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