~ Net Sales Gain 31% ~
LOS ANGELES, Aug. 4 /PRNewswire-FirstCall/ -- Tarrant Apparel Group (NASDAQ:TAGS), a design and sourcing company for private label and private brand casual apparel, today announced financial results for the second quarter and six months ended June 30, 2005.
Second Quarter Highlights - Net sales for the second quarter grew 31% with Private Brands sales up
143% to $11.5 million and Private Label sales up 15% to $39 million.
- Gross margin in the current period improved approximately 900 basis
points to 23% compared to 14% in the second quarter last year.
- The Company generated a $0.03 per share profit in the second quarter
compared to a substantial net loss last year.
- The first shipments of the JS by Jessica Simpson line occurred in June,
demonstrating the Company's continued progress in growing the higher
margin Private Brands division.
Second Quarter Results
Net sales increased 31% to $50.5 million for the second quarter of 2005 from $38.5 million last year. The increase was driven primarily by the Company's Private Brands business, which contributed $11.5 million in the current period compared to $4.7 million in the second quarter last year. In addition, the Company's Private Label business increased 15% to $39 million in the second quarter of 2005 versus $33.8 million last year Gross profit increased 118% to $11.5 million in the second quarter of 2005 from $5.3 million in the same period last year. The increased contribution from the higher-margin Private Brands business combined with improved Private Label margins resulted in a gross margin of 23% for the second quarter of 2005 versus 14% in the year ago period. Selling, general and administrative expenses decreased to $9.4 million in the current period from $11.7 million in the comparable period last year. The 2004 selling, general, and administrative expenses included $3.3 million of depreciation expense related to the Company's Mexico facilities that was not incurred in 2005 due to the sale of the facilities in November 2004.
Net income for the quarter ended June 30, 2005 was $0.9 million, or $0.03 per diluted share. Net loss for the second quarter of fiscal 2004 was $68.6 million, or $2.39 per diluted share, which included a $78.0 million charge related to the impairment of certain of the Company's Mexico assets.
Barry Aved, President and CEO of Tarrant Apparel Group, commented, "We are pleased with the progress we made in the second quarter. We continue to work aggressively to grow our Private Brands division, and made our first shipments of JS by Jessica Simpson late in June. In addition, we remain focused on improving our position as a value-added supplier of Private Label apparel through our design leadership and expansion of our product mix beyond casual bottoms. We are using Private Brands as a product development and marketing model for new Private Label initiatives and have placed tests with several high volume retailers during the quarter. Further, we successfully improved our margins while continuing to appropriately invest in our brands." Six Month Results Net sales increased 18% to $95.4 million in the first six months of 2005 compared to $80.6 million in the same period last year. Net income for the six month period was $0.8 million, or $0.03 per diluted share. Net loss for the first six months of fiscal 2004 was $71.5 million, or $2.50 per diluted share, which included the aforementioned $78.0 million charge related to the impairment of certain of the Company's Mexico assets.
Company Outlook Based on business and economic conditions, the Company reiterates its previously announced expectations for fiscal 2005. The Company currently anticipates sales to be in the range of approximately $240 million to $250 million and net income to be between approximately $9 million and $12 million. This outlook contemplates Private Brands to contribute in the range of $60 million to $70 million in revenue and Private Label to contribute in the range of $175 million to $185 million in revenue.
Mr. Aved concluded, "During the first half of the year, we executed our plan and delivered results that were in-line with our expectations. We are optimistic that the strategic initiatives we have in place will continue to gain traction as we move into the second half of the year. We look forward to continued growth as we ship the Princy by Jessica Simpson line and launch House of Dereon by Beyonce Knowles in the third quarter. Our Private Brands business has provided an additional engine for top line growth and margin expansion and we look forward to building upon our success in this area." Conference Call Tarrant Apparel Group will host a conference call Thursday, August 4, 2005 at 5:00 p.m. Eastern Time that may be accessed via the Internet at: http://www.tags.com/ or by dialing 800-683-1525 or 973-409-9261. Additionally, a replay of the call will be available through August 11, 2005 and can be accessed by dialing 877-519-4471 or 973-341-3080, passcode 6349396.
About Tarrant Apparel Group Tarrant Apparel Group serves specialty retailers, mass merchants, national department stores, and branded wholesalers by designing, merchandising, contracting for the manufacture of, and selling casual and well-priced apparel for women, men, and children. Through its subsidiary, Private Brands, Inc., Tarrant designs, markets, and manufactures privately owned brands, including American Rag CIE, and has exclusive license agreements with several celebrity brands such as Jessica Simpson and Beyonce Knowles' House of Dereon.
Forward-Looking Statements Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently unreliable and actual results may differ materially. Examples of forward looking statements in this news release include sales and net income guidance for fiscal 2005 and the anticipated launch of the Jessica Simpson and Beyonce Knowles brands. Factors which could cause actual results to differ materially from these forward-looking statements include a softening of retailer or consumer acceptance of the Company's products, pricing pressures and other competitive factors, continued delays at West Coast ports, the unanticipated loss of a major customer, delays in the launch of new private brands, and the inability to raise additional capital necessary to support anticipated growth. These and other risks are more fully described in the Company's filings with the Securities and Exchange Commission. 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.
TARRANT APPAREL GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited) June 30, 2005 December 31, 2004 ASSETS
Current assets:
Cash and cash equivalents $1,179 $1,215
Accounts receivable, net 58,431 37,759
Due from related parties 6,882 10,652
Inventory 24,071 19,144
Current portions of notes
receivable from related parties 5,324 5,324
Prepaid expenses and other
receivables 958 1,252
Prepaid royalties 3,299 2,258
Income tax receivable 163 145 Total current assets 100,307 77,749 Property and equipment, net 1,645 1,875
Notes receivable 39,509 40,107
Equity method investment 2,146 1,880
Deferred financing costs, net 1,030 1,203
Other assets 180 414
Goodwill, net 8,583 8,583 Total assets $153,400 $131,811 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term bank borrowings $19,337 $17,951
Accounts payable 30,842 24,395
Accrued expenses 10,812 11,243
Income taxes 17,216 16,826
Current portion of long-term
debt 32,876 19,629 Total current liabilities 111,083 90,044 Long-term obligations 1,497 2,545
Convertible debentures, net 6,493 8,330
Long term deferred tax liabilities 127 214 Minority interest - - Commitments and contingencies Shareholders' equity:
Preferred stock, 2,000,000
shares authorized; no shares
issued and outstanding - -
Warrants to purchase common
stock 2,847 2,847
Common stock, no par value,
100,000,000 shares authorized:
30,143,763 shares (2005) and 28,814,763
shares (2004) issued and outstanding 114,157 111,515
Contributed capital 9,966 9,965
Retained earnings (90,418) (91,183)
Notes receivable from
officer/shareholder (2,352) (2,466)
Shareholders' equity 34,200 30,678 Total liabilities and
shareholders' equity $153,400 $131,811 TARRANT APPAREL GROUP
CONSOLIDATED STATEMENTS OF OPERATION
(in thousands, except share data) Three Months Three Months
Ended Ended
June 30, June 30,
2005 2004
(unaudited) % (unaudited) % Net sales $50,538 100.00% $38,489 100.00%
Cost of sales 39,083 77.33% 33,223 86.32% Gross profit 11,455 22.67% 5,266 13.68%
Selling and distribution
expenses 2,404 4.76% 2,386 6.20%
General and administrative
expenses 7,016 13.88% 9,291 24.14%
Impairment of assets - 0.00% 77,982 202.61% Income (loss) from operations 2,035 4.03% (84,393) -219.27%
Interest expense (1,286) -2.54% (700) -1.82%
Interest income 517 1.02% 93 0.24%
Other income (expense) (235) -0.46% 2,751 7.15%
Minority interest income
(expense) - 0.00% 14,136 36.73% Income (loss) before provision
for income taxes 1,031 2.04% (68,113) -176.97%
Provision (benefit) for income
taxes 160 0.32% 454 1.18% Net income (loss) $871 1.72% $(68,567) -178.15% Net income (loss) per share:
Basic $0.03 $(2.39) Diluted $0.03 $(2.39)
Weighted average common and
common equivalent shares:
Basic 29,155,855 28,649,928 Diluted 29,163,070 28,649,928
TARRANT APPAREL GROUP
CONSOLIDATED STATEMENTS OF OPERATION
(in thousands, except share data) Six Months Six Months
Ended Ended
June 30, June 30,
2005 2004
(unaudited) % (unaudited) % Net sales $95,368 100.00% $80,644 100.00%
Cost of sales 74,968 78.61% 67,878 84.17% Gross profit 20,400 21.39% 12,766 15.83%
Selling and distribution
expenses 4,966 5.21% 5,029 6.24%
General and administrative
expenses 12,871 13.50% 20,070 24.89%
Impairment of assets - 0.00% 77,982 96.70% Income (loss) from operations 2,563 2.69% (90,315) -111.99%
Interest expense (2,099) -2.20% (1,493) -1.85%
Interest income 1,070 1.12% 187 0.23%
Other income (expense) (308) -0.32% 5,889 7.30%
Minority interest income
(expense) - 0.00% 15,016 18.62% Income (loss) before provision
for income taxes 1,226 1.29% (70,716) -87.69%
Provision (benefit) for income
taxes 461 0.48% 825 1.02% Net income (loss) $765 0.80% $(71,541) -88.71% Net income (loss) per share:
Basic $0.03 $(2.50) Diluted $0.03 $(2.50) Weighted average common and
common equivalent shares:
Basic 28,986,251 28,567,510 Diluted 28,993,466 28,567,510
DATASOURCE: Tarrant Apparel Group CONTACT: Corazon Reyes, Chief Financial Officer of Tarrant Apparel Group, +1-323-780-8250; or Investor Relations - Leigh Parrish or Melissa Myron, +1-212-850-5600, for Tarrant Apparel Group Web site: http://www.tags.com/
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