Tarrant Apparel Group Announces Fourth Quarter and Full Year
Results
LOS ANGELES, March 31 /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 fourth quarter
and full year ended December 31, 2004.
Financial Results Fiscal 2004 net sales were $155.5 million compared to $320.4 million in fiscal
2003. Gross profit was $21.0 million versus $32.0 million last year. Net loss
was $104.7 million, or $3.64 per diluted share, based on 28.7 million weighted
average diluted shares outstanding. Net loss in the prior year was $35.9
million, or $1.97 per diluted share, based on 18.2 million weighted average
diluted shares outstanding.
Fourth quarter net sales were $36.7 million versus $67.0 million in the fourth
quarter of fiscal 2003. Gross profit was $4.1 million compared to $12.1
million in the same period last year, primarily due to the decline in sales and
lower margins from unplanned air freight costs and high quota costs in some
categories. Selling, general and administrative expenses were $8.7 million
versus $11.3 million in the year-ago period, as a result of continued efforts
to streamline overhead costs. Net loss was $29.1 million, or $1.01 per diluted
share, based on 28.8 million weighted average diluted shares outstanding. In
last year's fourth quarter, net income was $0.4 million, or $0.02 per diluted
share, based on 26.3 million weighted average diluted shares outstanding.
As previously disclosed, net loss for the fourth quarter and full year includes
a non-cash charge of $22.8 million incurred in the fourth quarter, resulting
from a reclassification of foreign currency translation adjustments previously
recorded on the balance sheet as a reduction of stockholders' equity. Net loss
for the full year also includes a non-cash charge of $64.3 million recorded in
the second quarter of 2004, which is the Company's portion of a $78.0 million
charge for impairment of assets resulting from an appraisal of the Company's
fixed assets in Mexico. Excluding both non-cash charges, net loss was $6.3
million for the fourth quarter and $17.6 million for fiscal 2004.
Barry Aved, President and CEO of Tarrant Apparel Group, commented, "We believe
that fiscal 2004 marked a very challenging period in the history of our
Company. During the year, our financial results were impacted by various
factors including softer than anticipated back-to-school and holiday sales,
internal challenges faced by certain large customers, and congestion in the
West Coast ports. At the same time, we made significant progress in three
major areas of our business. First, by exiting manufacturing in Mexico and
selling substantially all of our Mexico assets, we returned to our proven
trading model for our Private Label division. Second, we expanded our Private
Brands business by adding Gear7, Jessica Simpson and Beyonce Knowles to our
diverse portfolio as well as launching Alain Weiz with Dillard's. In addition,
we extended the exclusive distribution agreement with Macy's Merchandising
Group for American Rag CIE, a casual sportswear collection for juniors and
young men. Finally, we streamlined our operations, reduced costs, and improved
productivity as evidenced by a decline in expenses.
"The design strength of our Private Brands collections has earned us
credibility in the market place as a premier source for product development and
marketing expertise, which is providing momentum for growing our Private Label
business and attracting new business opportunities. We look forward to
realizing the benefits of the work that has been done and the foundation that
has been built," continued Mr. Aved.
Company Outlook For fiscal 2005, the Company is updating its previously announced expectations. Based on the expected initial revenue contribution from recently acquired
brands as well as improved bookings in the Private Label and Private Brands
divisions, 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, "Looking ahead, we believe that the steps we took in
response to the difficult challenges faced in fiscal 2004 and the advances we
made in both our Private Brands and Private Label businesses will greatly
improve our financial results in fiscal 2005. Thus far this year, Gear7 has
been shipped to all K-Mart stores and our Alain Weiz plus size apparel
collection was recently launched in Dillard's stores, both of which have been
favorably received by consumers. Early response to the "Princy" line by
Jessica Simpson has been strong and indicates a solid launch in the third
quarter. In addition, we will offer the House of Dereon brand by Beyonce
Knowles for the holiday selling season. Moreover, we intend to continue to
seek strategic growth opportunities to diversify our portfolio of Private
Brands, and broaden the reach of our Private Label capabilities. With these
objectives, we are well positioned to deliver long term growth and
profitability as well as enhanced shareholder value." Conference Call Tarrant Apparel Group will host a conference call today March 31, 2005 at 10:00
a.m. Eastern Time that may be accessed via the Internet at:
http://www.tags.com/ or by dialing (866) 483-1149. Additionally, a replay of
the call will be available through April 7, 2005 and can be accessed by dialing
(800) 642-1687, passcode 5171240.
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.,
the Company 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.
Pro Forma Financial Information Tarrant Apparel Group has prepared adjusted net income (loss) data applicable
to 2004 to supplement its estimated results determined under applicable
generally accepted accounting principles (GAAP). The adjusted amounts are not
meant as a substitute for GAAP, but are included solely for informational
purposes. The adjusted data has been adjusted for two items that the Company
believes to be one-time charges as described above.
The following table illustrates the adjustments to net loss described in this
press release and reconciles the adjusted data to the net loss determined in
accordance with GAAP: Three Months Ended Year Ended
December 31, 2004 December 31, 2004 Net (loss) $(29.1) $(104.7)
Add back impairment of
assets charge net of
minority interest (a) -- 64.3
Add back foreign currency
translation adjustment (b) 22.8 22.8
Adjusted net (loss) $(6.3) $(17.6) (a) Represents the Company's portion of a $78 million charge incurred in
the 2004 second quarter for impairment of assets resulting from an
appraisal of the Company's fixed assets in Mexico. (b) Represents a charge incurred in the fourth quarter, resulting from a
reclassification of foreign currency translation adjustments
previously recorded on the balance sheet as a reduction of
stockholders' equity. TARRANT APPAREL GROUP
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited) December 31, December 31,
2004 2003
ASSETS
Current assets:
Cash and cash equivalents $1,215 $3,320
Restricted cash - 2,760
Accounts receivable, net 37,759 57,166
Due from related parties 10,652 18,056
Inventory 19,144 23,251
Prepaid expenses and other
receivables 1,252 1,776
Prepaid royalties 2,258 -
Income tax receivable 145 278 Total current assets 72,425 106,607 Property and equipment, net 1,875 135,646
Notes receivable 45,431 -
Equity method investment 1,880 1,434
Deferred financing costs, net 1,203 327
Other assets 414 508
Excess of cost over fair value of net
assets acquired 8,583 8,583 Total assets $131,811 $253,105 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term bank borrowings $17,951 $29,293
Accounts payable 24,395 23,515
Accrued expenses 11,243 11,194
Income taxes 16,826 16,498
Due to related parties - 5,419
Due to shareholders - 1
Current portion of long-term
debt 19,629 38,705 Total current liabilities 90,044 124,625 Long-term obligations 2,545 588
Convertible debentures, net 8,330 -
Long term deferred tax liabilities 214 275 Minority interest in UAV - 5,142
Minority interest in Tarrant Mexico - 14,766 Commitments and contingencies Shareholders' equity:
Preferred stock, 2,000,000
shares authorized; no shares
issued and outstanding - -
Common stock, no par value,
100,000,000 shares authorized:
28,814,763
shares (2004) and 27,614,763
shares (2003) issued and
outstanding 111,515 107,891
Warrants to purchase common
stock 2,847 1,799
Contributed capital 2,471 1,506
Retained earnings (Accumulated
deficit) (83,689) 20,988
Notes receivable from
officer/shareholder (2,466) (4,796)
Accumulated other comprehensive
loss - (19,679) Total shareholders' equity 30,678 107,709 Total liabilities and
shareholders' equity $131,811 $253,105 TARRANT APPAREL GROUP
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
(Unaudited) Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2004 2003 2004 2003 Net sales $36,706 $67,035 $155,453 $320,423
Cost of sales 32,646 54,941 134,493 288,445 Gross profit 4,060 12,094 20,960 31,978
Selling and distribution
expenses 2,181 2,606 9,291 11,329
General and
administrative
expenses 6,519 8,655 32,084 31,767
Inpairment of assets - - 77,982 22,277
Cumulative translation
loss attributable to
liquidated
Mexico operations 22,786 - 22,786 - Income (loss) from
operations (27,426) 833 (121,183) (33,395)
Interest expense (663) (1,092) (2,857) (5,603)
Interest income 96 161 378 425
Other income (expense) 49 3,006 6,002 3,359
Minority interest 135 (315) 15,331 3,461 Income (loss) before
provision for income
taxes (27,809) 2,593 (102,329) (31,753)
Provision (benefit)
for income taxes 1,308 2,166 2,348 4,132 Net income (loss) $(29,117) $427 $(104,677) $(35,885) Net income (loss)
per share:
Basic $(1.01) 0.02 $(3.64) $(1.97) Diluted $(1.01) 0.02 $(3.64) $(1.97) Weighted average common
and common equivalent
shares:
Basic 28,814,763 21,426,451 28,732,796 18,215,071 Diluted 28,814,763 26,250,037 28,732,796 18,215,071
DATASOURCE: Tarrant Apparel Group CONTACT: Corazon Reyes, Chief Financial Officer of Tarrant Apparel Group, 323-780-8250; or Investor Relations, Melissa Myron or Lila Sharifian, both of Financial Dynamics, 212-850-5600
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