-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F2macz5bLTsnEgmRfhjOcufHiovzbTm+2GG0LXJC/+40h4qI5YObN+3i6YnIcef7 KOLpuYgPaaoivNJtZ7snUQ== 0001170918-06-000999.txt : 20061113 0001170918-06-000999.hdr.sgml : 20061113 20061113151737 ACCESSION NUMBER: 0001170918-06-000999 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061113 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061113 DATE AS OF CHANGE: 20061113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TAG IT PACIFIC INC CENTRAL INDEX KEY: 0001047881 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-APPAREL, PIECE GOODS & NOTIONS [5130] IRS NUMBER: 954654481 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13669 FILM NUMBER: 061208544 BUSINESS ADDRESS: STREET 1: 21900 BURBANK BLVD. STREET 2: SUITE 270 CITY: WOODLAND HILLS STATE: CA ZIP: 91367 BUSINESS PHONE: 8184444100 MAIL ADDRESS: STREET 1: 21900 BURBANK BLVD. STREET 2: SUITE 270 CITY: WOODLAND HILLS STATE: CA ZIP: 91367 8-K 1 fm8k-111306.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported): November 13, 2006 TAG-IT PACIFIC, INC. (Exact Name of Registrant as Specified in Charter) DELAWARE 1-13669 95-4654481 (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 21900 BURBANK BLVD., SUITE 270 WOODLAND HILLS, CALIFORNIA 91367 (Address of Principal Executive Offices) (Zip Code) (818) 444-4100 (Registrant's Telephone Number, Including Area Code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On November 13, 2006, Tag-It Pacific, Inc. issued a press release regarding its financial results for the quarter and nine months ended September 30, 2006. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by this reference. The information in this report shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such a filing. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. None. (b) PRO FORMA FINANCIAL INFORMATION. None. (c) SHELL COMPANY TRANSACTIONS. None. (d) EXHIBITS. 99.1 Press Release dated November 13, 2006, published by the Registrant.* * This exhibit is furnished, not filed. 2 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TAG-IT PACIFIC, INC. Date: November 13, 2006 By: /S/ LONNIE D. SCHNELL ------------------------------------- Lonnie D. Schnell, Chief Financial Officer 3 EX-99 2 ex99-1m.txt EX-99.1 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. 2 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 3 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 ============ ============ ============ ============
4 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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