Talon Putting Teeth into Long Term Restructuring Plan

After narrowing its losses last year, Talon International Inc. is unzipping an expanded product line and a larger sales force to regain its once vaulted status. As part of a long term restructuring, the Woodland Hills-based manufacturer of trim, zippers and fasteners has added high-end designers Ben Sherman and Tommy Hilfiger Europe to its roster of clients and a new seamless bra fastener to cater to lingerie manufacturers. “It expands our sales, further diversifies our customer base and gives us a more comfortable and secure position in the marketplace,” said CEO Lonnie Schnell. The company’s five-year restructuring effort — which so far has included layoffs, diversifying its client base, combining sales units and shifting manufacturing to Asia — appears to be boding well for the company. Talon, which hasn’t earned an annual profit since 2006, reported more than $129,000 in net income for the first nine months of 2011, an improvement from the same period a year earlier when it lost $1.4 million. The company hasn’t yet reported fourth quarter or annual earnings. Schnell said he expects to see a significant improvement in Talon’s Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA), which is currently just under 10 percent of the company’s total revenues. “We see a continued growth in those earnings for the coming years, hopefully with an uptick,” he said. Originally founded in the late 1980s under the name Tag-it Pacific Inc., the company began as a producer of woven labels and trim for the apparel industry. In 2000, the company purchased the Talon brand, widely known as the original American zipper invented in 1893. In 2007, Tag-it changed its name to Talon International. Over the decades, the company has lost much its luster, said Gerald Schwartz, who managed one of Talon’s West Coast facilities in the 1970s. “It lost contact with the marketplace,” said Schwartz, who has since founded Gerald Schwartz Inc., a Tucker, Ga.-based supplier for the sewn products and soft goods industry. Change at Talon Schnell joined Talon in 2005, as the company struggled with too much debt and as the industry moved almost completely overseas. The company reported a net loss of $29.5 million on revenues of $47.3 million for fiscal year ended Dec. 31, 2005, SEC documents show. That same year, the company’s sales were impacted by litigation surrounding one of the company’s core products, an expandable waistband, which the company sold exclusively to jean manufactuer, Levi’s. The product once generated some $10 million in sales. “Our sales have essentially dried up because we’ve been in litigation with the owner of the patent since 2004-2005,” Schnell said, noting the legal process is expected to end this year. With the goal of restructuring the company into the profitable firm it once was, Talon closed its operations in North Carolina and Latin America and adopted a supply-chain business model. It now operates through multiple manufacturing partners in Asia, which the company carefully controls and monitors. With the transition,Talon’s workforce, which once totaled more than 500, was cut in half. Additionally, Talon renegotiated some loans, , including one worth $17 million, which allowed the company to focus its efforts on growing the business. By lifting the debt load, the company has been able to invest in an expanded sales team, which previously was limited to about four U.S. sales representatives. “In 2010-2011, I expanded our sales team three-fold,” Schnell said, noting the sales force now serves the U.S. , Europe, Korea and the Asia Pacific region. The company, which is keenly focused on building its zipper and trim business, now markets and sells these products together. At the same time, it has worked to diversify its customer base to include smaller companies. The company was once reliant on sales from big-name customers, predominately Mexican garment manufacturers, Schnell said, noting that at one point, the company had about 60 to 80 percent of its sales concentrated with five or six clients. Public records show that in 2005 the company had about 300 active customers. Today, the company has about 880 customers. “We expect the momentum is just beginning,” Schnell said.