-- Net sales for the quarter were $12.8 million, up 42% vs. Q3 2007
-- Talon zipper sales up 68% vs. Q3 2007
-- Net loss for the period of $2.4 million includes impairment loss
reserves of $1.5 million
Third Quarter 2008 Financial Results
Net sales for the third quarter of 2008 were $12.8 million, an increase of
42% from $9.0 million in the third quarter of 2007. The revenue gains are
attributable to new brands and program sales of Talon Zipper and Trim
products, and expansion within mainland China. Talon Zipper sales increased
$3.0 million, or 68%, to $7.2 million in the quarter, as compared to the
same period a year ago. Talon Trim sales increased $785,000, or 17%, to
$5.5 million as compared to the same period a year ago. Tekfit product
sales were $95,000 for the quarter.
Net sales for the nine months ended September 30, 2008 were $39.8 million,
an increase of 26% from $31.7 million for the same period in 2007. Talon
zipper sales for the first nine months of 2008 increased $6.8 million or
39% over the same period in 2007 to $24.3 million. Trim product sales for
the first nine months of 2008 were $15.4 million or $1.9 million greater
than the same period in 2007, for an increase of 14%. Tekfit product sales
for the first nine months of 2008 were $139,000.
"Our gain in sales for the third quarter and year to date once again
exceeded our expectations," said Lonnie Schnell, Talon's CEO. "The
continued improvement is the result of new brand programs within the US and
our sales expansion within Southeast Asia, particularly China. The demand
for a quality global supply alternative within the zipper market remains
strong. Talon products continue their popularity among major value focused
retailers representing the major brands served by our customers."
Gross profit for the third quarter of 2008 totaled $3.2 million or 25% of
sales, as compared to $2.5 million or 28% of sales in same quarter in 2007.
Gross profit for the nine months ended September 30, 2008 was $10.9
million, an increase of $1.6 million over the same period in 2007. The
increase in gross profit for the quarter and the nine months was
attributable to higher overall sales volumes, partially offset by increased
costs of manufacturing, freight and delivery. The gross margin as a
percentage of sales in 2008 is lower than 2007 for the quarter and the
first nine months as a result of a higher mix of lower margin zipper
products in 2008 as compared to 2007, as well as volume price discounts to
certain zipper brands in 2008.
Operating expenses for the third quarter of 2008 were $4.9 million, as
compared to $5.6 million for the same period in 2007. Operating expenses
for the nine months ended September 30, 2008 were $12.9 million, as
compared to $12.0 million for the same period in 2007. Increased employee
costs and business expenses in connection with the company's growth and
expansion primarily account for the increase in operating expenses in the
first nine months of 2008, which included charges of $724,000 associated
with the severance of former executives.
Impairment reserves of $1.5 million were also recorded in the third quarter
of 2008. This included an impairment reserve of $1.0 million to fully
reserve the value of marketable securities obtained early in the year in
settlement of a note receivable that had defaulted. (In the third quarter
of 2007 an impairment reserve of $2.1 million in bad debts was recorded for
the same note receivable exchanged for the marketable securities.)
Additionally, an impairment reserve of $500,000 was recorded in the third
quarter of 2008 in connection with certain components of idle equipment
which are not expected to be redeployed in the near term. All of these
impairment reserves are non-cash charges.
The net loss for the third quarter of 2008 was $2.4 million or $0.12 per
share, as compared to a net loss of $3.7 million or $0.18 per share for the
same period in 2007. The net loss for the third quarter of 2008 includes
the $1.5 million of impairment reserves, as compared to the net loss in the
third quarter of 2007 that included impairment reserves of $2.1 million.
For the nine months ended September 30, 2008, net loss totaled $3.7 million
or $0.18 per share, as compared to a net loss of $4.0 million or $0.21 per
share for the same period in 2007.
The net loss for the third quarter and net loss for the first nine months
of 2008 includes net interest expense of $625,000 and $1.8 million,
respectively.
Cash on hand at September 30, 2008 was $2.0 million, as compared with $2.9
million at December 31, 2007.
Conference Call
Talon International will hold a conference call on Monday, November 17,
2008, to discuss these quarterly financial results. Talon's CEO Lonnie D.
Schnell will host the call starting at 4:30 p.m. Eastern time. A question
and answer session will follow the presentation.
To participate in the call, dial the appropriate number 5-10 minutes prior
to the start time, request the Talon International conference call and
provide the conference ID.
Date: Monday, November 17, 2008 Time: 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) Domestic callers: 1-800-894-5910 International callers: 1-785-424-1052 Conference ID#: 7TALON Internet Simulcast and replay: http://viavid.net/dce.aspx?sid=000059A4If you have any difficulty connecting with the conference call or webcast, please contact the Liolios Group at 949-574-3860. A replay of the call will be available after 7:30 p.m. Eastern time and until December 17, 2008: Toll-free replay number: 1-800-723-2156 International replay number: 1-402-220-2660 About Talon International, Inc. Talon International, Inc. is a global supplier of apparel fasteners, trim and interlining products to manufacturers of fashion apparel, specialty retailers, mass merchandisers, brand licensees and major retailers. Talon manufactures and distributes zippers and other fasteners under its Talon® brand, known as the original American zipper invented in 1893. Talon also designs, manufactures, engineers, and distributes apparel trim products and specialty waistbands under its trademark names, Talon, Tag-It and TekFit, to more than 60 apparel brands and manufacturers including Levi Strauss & Co., Juicy Couture, Ralph Lauren, Victoria's Secret, Target Stores, Wal-Mart, and Express. The company has offices and facilities in the United States, Hong Kong, China, India and the Dominican Republic. Forward-Looking Statements This news release contains forward-looking statements made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and are inherently subject to uncertainties and other factors which could cause actual results to differ materially from the forward-looking statement. These statements are based upon, among other things, assumptions made by, and information currently available to, management, including management's own knowledge and assessment of the company's industry, competition and capital requirements, and the potential for growth in zipper sales and other products. Factors which could cause actual results to differ materially from these forward-looking statements include our ability to manage an international expansion, the level of acceptance of the company's products by retailers and consumers, pricing pressures and other competitive factors, our ability to reduce costs, and the unanticipated loss of major customers. 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.
TALON INTERNATIONAL, INC.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
Net sales $ 12,772,021 $ 9,013,135 $ 39,778,139 $ 31,670,234
Cost of goods sold 9,552,669 6,486,659 28,899,918 22,422,412
------------ ------------ ------------ ------------
Gross profit 3,219,352 2,526,476 10,878,221 9,247,822
Selling expenses 877,593 722,447 2,365,421 2,161,666
General and
administrative
expenses 2,518,048 2,731,665 8,948,448 7,749,445
Reserve for note
impairment - 2,127,653 - 2,127,653
Loss on marketable
securities 1,040,000 - 1,040,000 -
Impairment loss on
idle equipment 500,000 - 500,000 -
------------ ------------ ------------ ------------
Total operating
expenses 4,935,641 5,581,765 12,853,869 12,038,764
Loss from
operations (1,716,289) (3,055,289) (1,975,648) (2,790,942)
Interest expense,
net 624,716 647,514 1,817,360 1,138,088
------------ ------------ ------------ ------------
Loss before income
taxes (2,341,005) (3,702,803) (3,793,008 (3,929,030)
Provision (benefit)
for income taxes 99,150 (20,972) (112,266) 57,652
------------ ------------ ------------ ------------
Net Loss $ (2,440,155) $ (3,681,831) $ (3,680,742) $ (3,986,682)
============ ============ ============ ============
Basic loss per
share $ (0.12) $ (0.18) $ (0.18) $ (0.21)
============ ============ ============ ============
Diluted loss per
share $ (0.12) $ (0.18) $ (0.18) $ (0.21)
============ ============ ============ ============
Weighted average
number of common
shares
outstanding:
Basic 20,291,433 20,041,433 20,291,433 19,060,664
============ ============ ============ ============
Diluted 20,291,433 20,041,433 20,291,433 19,060,664
============ ============ ============ ============
TALON INTERNATIONAL, INC.
Consolidated Balance Sheets
September 30,
2008 December 31,
(Unaudited) 2007
------------- -------------
Assets
Current Assets:
Cash and cash equivalents $ 2,037,795 $ 2,918,858
Marketable Securities, net of valuation
reserves - 1,040,000
Accounts receivable, net 6,095,504 3,504,351
Inventories, net 2,352,002 2,487,427
Prepaid expenses and other current assets 572,553 945,566
------------- -------------
Total current assets 11,057,854 10,896,202
Property and equipment, net 4,259,268 5,210,446
Property held for sale 770,071 700,000
Due from related parties 661,528 625,454
Other intangible assets, net 4,110,751 4,110,751
Other assets 546,547 140,782
------------- -------------
Total assets $ 21,406,019 $ 21,683,635
============= =============
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 9,174,748 $ 6,603,929
Accrued legal costs 233,063 498,846
Other accrued expenses 2,821,569 2,646,662
Demand notes payable to related parties 85,176 85,176
Current portion of capital lease
obligations 255,277 323,317
Current portion of notes payable 245,818 299,108
------------- -------------
Total current liabilities 12,815,651 10,457,038
Capital lease obligations, less current
portion 5,688 189,705
Notes payable, less current portion 679,286 848,484
Revolver note payable 4,138,988 3,807,806
Term notes payable, net of discount 7,740,959 7,014,301
Other long term liabilities 93,869 83,651
------------- -------------
Total liabilities 25,474,441 22,400,985
Commitments and contingencies
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;
20,291,433 shares issued and outstanding
at September 30, 2008 and December 31,
2007 20,291 20,291
Additional paid-in capital 54,726,608 54,510,161
Accumulated deficit (58,972,988) (55,292,246)
Accumulated other comprehensive income 157,667 44,444
------------- -------------
Total stockholders’ equity (deficit) (4,068,422) (717,350)
------------- -------------
Total liabilities and stockholders’ equity $ 21,406,019 $ 21,683,635
============= =============
Contact Information: Company Contact: Talon International, Inc. Rayna Hernandez Tel (818) 444-4128 Investor Relations: SCOTT KITCHER LIOLIOS GROUP, INC. TEL (949) 574-3860