TFR Tefron Ltd Ord

MISGAV, Israel, August 14 /PRNewswire-FirstCall/ -- Second Quarter Summary - Quarterly revenues of $48.6 million, 19.7% above revenues of the second quarter of last year - EBITDA of $0.5 million, as compared with EBITDA of $3.2 million in the second quarter of last year - Operating loss of $1.9 million, as compared with operating income of $1.0 million in the second quarter of last year - Net loss of $2.3 million or $0.12 loss per diluted share, as compared with net income of $0.8 million, or $0.04 per diluted share, in the second quarter of last year. Tefron Ltd. (NYSE:TFR)(TASE:TFR), a leading producer of seamless intimate apparel and engineered-for-performance (EFPTM) active wear, today announced financial results for the second quarter of 2008. Second Quarter 2008 Results Second quarter revenues were $48.6 million, representing a 19.7% increase from the second quarter of 2007 revenues of $40.6 million. The increase in revenues in the quarter was due to an increase in sales in all the Company's product lines, especially active-wear, but also swimwear and intimate apparel. Second quarter gross margin was 7.6% compared with a gross margin of 14.0% in the second quarter of 2007. Operating loss for the quarter was $1.9 million, as compared with an operating income of $1.0 million (2.5% of revenues) in the second quarter of 2007. Net loss for the quarter was $2.5 million, or $0.12 loss per diluted share, as compared with net income of $0.8 million, or $0.04 per diluted share, in the second quarter of 2007. The decline in gross and operating margins in the quarter compared with the second quarter of 2007 was primarily due to the significant devaluation the US Dollar versus the New Israeli Shekel. Additionally, short-term manufacturing challenges faced in the Hi-Tex division continued to increase costs. As discussed in the last two quarters, these challenges are mainly due to the learning curve required for the manufacture of various new and technologically advanced products, which have been ordered in short production runs for a larger number of apparel categories. In addition, the significant devaluation of the US Dollar versus the New Israeli Shekel during the quarter increased the US Dollar value of the New Israeli Shekel denominated liabilities, and accordingly resulted in increased financial expenses. First Half 2008 Results Revenues in the first half of 2008 were $99.6 million, representing an 11.4% increase from first half of 2007 revenues of $89.4. The increase in revenues was due to an increase in sales of both the active-wear and swimwear product lines. This increase was partly offset by a slight decline in sales of intimate apparel. The 2008 first half gross margin was 10.1% compared to a gross margin of 16.8% in the first half of 2007. Operating loss was $1.8 million compared to an operating income of $6.0 million (6.7% of revenues) in the first half of 2007. Net loss was $3.2 million, or $0.15 loss per diluted share, compared with net income of $4.6 million (5.1% of revenues), or $0.21 per diluted share, in the first half of 2007. The Company also reports that a supplier of its swimwear division, which accounts for about 40% of the division's manufacturing capacity, is facing financial difficulties. The Company is currently exploring its options to overcome this situation in order to ensure it meets its production plan. Management comments Mr. Yos Shiran, Chief Executive Officer of Tefron, commented, "While we are pleased with our increase in revenues across all our product lines, we continued to present operating and net losses. As indicated in the prior quarter, our efforts are currently focused on overcoming the manufacturing hurdles in our Hi-Tex division which significantly pressure our margins. In the second quarter we started to see the fruits of these efforts, as demonstrated by increased production and sales in our Hi-Tex division compared to that of the last couple of quarters. We believe that this improvement will continue into the third quarter, leading to increased production capacity and improved margins for the Hi-Tex division. In addition, our strategy to expand our customer base was successful in the quarter. We achieved first time orders from several new customers including Eddie Bauer, The North-Face and Wacoal, thereby diversifying and growing our revenue base. We expect to deliver these orders in the coming quarters." Mr. Shiran continued, "Seasonally, swimwear revenues are the lowest in the third quarter. Accordingly, while we expect third quarter revenues to be below those of the second quarter due to this seasonal reduction which will result in an increased operating loss for the third quarter, we are looking for overall revenues in the third quarter to be around 25% higher than those of the comparable quarter last year, with year-on-year growth across all product lines. Continued growth in our revenues and improvement in margins as we further implement our operational plan, should lead to an improvement in our results toward year-end." Mr. Shiran concluded, "On a personal note, I will be leaving Tefron after seven and a half years of service. I will be passing the reins over to Adi Livneh, and I wish him the best of luck in his new position. I would like to thank Tefron's employees and officers, which are Tefron's cornerstone, for their dedicated contributions and efforts. While we have faced a particularly challenging period over the past year, the growth in our revenue levels proves our success in positioning Tefron as a leading developer, designer and manufacturer of high-end performance apparel, in accordance with our strategy. With that, together with the improving performance of the Hi-Tex division, I feel comfortable leaving Tefron with great business potential to be realized." Appointment of a new Chief Financial Officer The Company appointed Mr. Eran Rotem as a Chief Financial Officer, effective August 17, 2008. Mr. Rotem has a broad financial and managerial experience, after his service for the past six years as Chief Financial Officer of Healthcare Technologies Ltd, a company which waas traded on the NASDAQ Capital Market, and of the Gamida For Life Group. Between 1995 and 2002, Mr. Rotem served as a senior manager in Ernst & Young Israel. Mr. Rotem holds a BA in Business Administration from The Tel Aviv College of Management and he is a Certified Public Accountant. Conference Call The Company will be hosting a conference call today, August 14, 2008 at 10:00am EST. On the call, management will review and discuss the results, and will be available to answer investor questions. To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 5 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number. US Dial-in Number: 1-888-407-2553 UK Dial-in Number: 0-800-917-5108 ISRAEL Dial-in Number: 03-918-0650 INTERNATIONAL Dial-in Number: +972-3-918-0650 For those unable to listen to the live call, a replay of the call will be available for three months within three days after the call in the investor relations section of Tefron's website, at: http;//http://www.tefron.com/ About Tefron Tefron manufactures boutique-quality everyday seamless intimate apparel, active wear and swim wear sold throughout the world by such name-brand marketers as Victoria's Secret, Nike, Target, The Gap, J. C. Penney, lululemon athletica, Warnaco/Calvin Klein, Patagonia, Reebok, Swimwear Anywhere, Abercombie&Fitch, and El Corte Englese, as well as other well known retailers and designer labels. The company's product line includes knitted briefs, bras, tank tops, boxers, leggings, crop, T-shirts, nightwear, bodysuits, swim wear, beach wear and active-wear. This press release contains certain forward-looking statements, within the meaning of Section 27A of the US Securities Act of 1933, as amended, Section 21E of the US Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995, with respect to the Company's business, financial condition and results of operations. We have based these forward-looking statements on our current expectations and projections about future events. Words such as "believe," "anticipate," "expect," "intend," "will," "plan," "could," "may," "project," "goal," "target," and similar expressions often identify forward-looking statements but are not the only way we identify these statements. Except for statements of historical fact contained herein, the matters set forth in this press release regarding our future performance, plans to increase revenues or margins and any statements regarding other future events or future prospects are forward-looking statements. These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements, including, but not limited to: - our customers' continued purchase of our products in the same volumes or on the same terms; - the cyclical nature of the clothing retail industry and the ongoing changes in fashion preferences; - the competitive nature of the markets in which we operate, including the ability of our competitors to enter into and compete in the seamless market in which we operate; - the potential adverse effect on our business resulting from our international operations, including increased custom duties and import quotas (e.g., in China, where we manufacture for our swimwear division). - the potential adverse effect on our future operating efficiency resulting from our expansion into new product lines with more complicated products and different raw materials; - the purchase of new equipment that may be necessary as a result of our expansion into new product lines; - our dependence on our suppliers for our machinery and the maintenance of our machinery; - the fluctuations costs of raw materials; our dependence on subcontractors in connection with our manufacturing process; - our failure to generate sufficient cash from our operations to pay our debt; - fluctuations in inflation and currency; and - political, economic, social, climatic risks, associated with international business and relating to operations in Israel; As well as certain other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Table 1: Sales by Segment Six Six Three Three Year Months months months months ended ended ended ended ended June 30, June 30, June 30, June 30, December 31, 2008 2007 2008 2007 2007 USD USD USD USD USD Segment (000's) % of (000's) % of (000's) % of (000's) % of (000's) % of total total total total total Cut & sew 57,240 57.5 42,052 47.1 25,530 52.5 17,770 43.7 77,020 48.6 Seam- less 42,343 42.5 47,322 52.9 23,111 47.5 22,853 56.3 81,594 51.4 Total 99,583 100.0 89,374 100.0 48,641 100.0 40,623 100.0 158,614 100.0 Table 2: Sales by Product Line Six Six Three Three Year Months months months months ended ended ended ended ended June 30, June 30, June 30, June 30, December 31, 2008 2007 2008 2007 2007 USD USD USD USD USD Product (000's) % of (000's) % of (000's) % of (000's) % of (000's) % of Line total total total total total Intimate Apparel 48,060 48.3 49,266 55.1 25,134 51.7 22,808 56.1 89,877 56.7 Active wear 27,197 27.3 21,114 23.6 14,253 29.3 10,275 25.3 42,047 26.5 Swim Wear 24,326 24.4 18,994 21.3 9,254 19.0 7,540 18.6 26,690 16.8 Total 99,583 100.0 89,374 100.0 48,641 100.0 40,623 100.0 158,614 100.0 Consolidated Balance Sheets U.S. dollars in thousands June 30, December 31, 2008 2007 2007 Unaudited Audited ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,203 $ 5,181 $ 2,384 Short-term deposit - 11,402 7,063 Marketable securities - 9,868 5,668 Trade receivables, net 35,924 28,234 29,033 Other accounts receivable and prepaid expenses 6,426 3,736 5,404 Inventories 30,125 24,609 32,577 Total current assets 73,678 83,030 82,129 LONG-TERM INVESTMENS: Marketable securities 1,155 - 1,284 Severance pay fund 1,344 854 1,288 Subordinated note 3,000 3,000 3,000 Total long-term investments 5,499 3,854 5,572 PROPERTY, PLANT AND EQUIPMENT, NET 72,810 76,043 74,791 Total assets $ 151,987 $ 162,927 $ 162,492 CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands (except share and per share data) June 30, December 31, 2008 2007 2007 Unaudited Audited LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term bank credit $ 2,842 $ - $ - Current maturities of long-term bank loans 4,151 5,948 5,948 Trade payables 27,910 22,903 29,720 Other accounts payable and accrued expenses 10,665 10,633 8,635 Total current liabilities 45,568 39,484 44,303 LONG-TERM LIABILITIES: Long-term loans from banks (net of current maturities) 13,411 16,348 13,374 Deferred taxes 12,024 12,220 12,397 Accrued severance pay 4,373 3,427 3,882 Total long-term liabilities 29,828 31,995 29,653 EMPLOEE STOCK OPTIONS IN SUBSIDIARY 247 - - SHAREHOLDERS' EQUITY: Ordinary shares 7,518 7,518 7,518 Additional paid-in capital 106,626 106,138 106,530 Cumulative other comprehensive income (loss) (749) 130 368 Less - 997,400 Ordinary shares in treasury, at cost (7,408) (7,408) (7,408) Accumulated deficit (29,643) (14,930) (18,472) Total shareholders' equity 76,344 91,448 88,536 Total liabilities and shareholders' equity $ 151,987 $ 162,927 $ 162,492 CONSOLIDATED STATEMENTS OF INCOME U.S. dollars in thousands (except share and per share data) Six months ended Three months ended Year ended June 30, June 30, December 31, 2008 2007 2008 2007 2007 Unaudited Audited Sales $ 99,583 $ 89,374 $ 48,641 $ 40,623 $ 158,614 Cost of sales 89,547 74,381 44,933 34,921 139,147 Gross profit 10,036 14,993 3,708 5,702 19,467 Selling, general and administrative expenses 11,852 8,998 5,654 4,697 17,715 Operating income (loss) (1,816) 5,995 (1,946) 1,005 1,752 Financial expenses, net 2,297 457 1,116 49 1,289 Income (loss) before taxes on income (4,113) 5,538 (3,062) 956 463 Taxes (tax benefit) on income (942) 956 (590) 166 (20) Net income (loss) $ (3,171) $ 4,582 (2,472) $ 790 $483 Basic and diluted net earnings (losses) per share : Basic net earnings (losses) per share $ (0.15) $ 0.22 $ (0.12) $ 0.04 $ 0.02 Diluted net earnings (losses) per share $ (0.15) $ 0.21 $ (0.12) $ 0.04 $ 0.02 Weighted average number of shares used for computing basic earning (losses) per share 21,202,986 21,174,775 21,202,986 21,194,630 21,188,161 Weighted average number of shares used for computing diluted earnings (losses) per share 21,202,986 21,843,126 21,202,986 21,862,557 21,630,124 CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Six months ended Three months ended Year ended June 30, June 30, December 31, 2008 2007 2008 2007 2007 Unaudited Audited Cash flows from operating activities: Net income (loss) $ (3,171) $ 4,582 $ (2,472) $ 790 $ 483 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation of property, plant and equipment 4,336 4,335 2,169 2,146 8,567 Compensation related to options granted to employees 343 186 284 77 571 Increase (decrease) in accrued severance pay, net 435 53 108 (5) 74 Increase (decrease) in deferred taxes, net (2,141) 60 (1,021) (86) 79 Accrual of interest on short-term deposits (75) (237) (7) (90) (613) Gain related to sale of marketable securities (22) (65) - - (134) Interest and amortization of premium and accretion of discount of marketable securities (263) (91) (61) (35) (189) Gain on sale of property, plant and equipment (19) (395) (13) 1 (651) Decrease (increase) in trade receivables, net (6,891) 2,421 2,886 1,093 1,622 Decrease (increase) in other accounts receivable and prepaid expenses 772 271 (905) 167 (919) Decrease (increase) in inventories 2,452 4,303 2,596 1,246 (3,665) Decrease in trade payables (1,810) (8,240) (4,395) (3,092) (1,423) Increase (decrease) in other accounts payable and accrued expenses 902 385 284 6 (768) Net cash provided by (used in) operating activities (5,152) 7,568 (547) 2,218 3,034 Cash flows from investing activities: Purchase of property, plant and equipment (2,184) (3,102) (744) (2,138) (6,376) Proceeds from sale of property, plant and equipment 21 681 15 2 943 Investment in marketable securities - - - (18,974) Investment in short-term deposits (12,560) (16,961) - (8,500) (8,321) Proceeds from sale of marketable securities 5,914 12,179 4,332 7,680 17,240 Proceeds from repayment of deposits 19,698 - 3,013 - 12,989 Net cash provided by (used in) investing activities 10,889 (7,203) 6,616 (2,956) (2,499) CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Six months ended Three months ended Year ended June 30, June 30, December 31, 2008 2007 2008 2007 2007 Unaudited Audited Cash flows from financing activities: Repayment of long-term bank loans (7,760) (2,974) (1,079) (1,488) (5,948) Proceeds from long-term bank loans 6,000 - - - Increase in short-term bank credit, net 2,842 - 2,842 - - Proceeds from exercise of stock options related to employees and directors - 85 - 60 92 Proceeds from exercise of tradable options issued at the secondary offering - 4,290 - - 4,290 Dividend paid to shareholders (8,000) (551) (8,000) - (551) Net cash provided by (used in) financing activities (6,918) 850 (6,237) (1,428) (2,117) Increase (decrease) in cash and cash equivalents (1,181) 1,215 (168) (2,166) (1,582) Cash and cash equivalents at beginning of period 2,384 3,966 1,371 7,347 3,966 Cash and cash equivalents at end of period $ 1,203 $ 5,181 $ 1,203 $ 5,181 $ 2,384 Calculation of the EBITDA U.S. dollars in thousands Six months ended Three months ended Year ended June 30, June 30, December 31, 2008 2007 2008 2007 2007 Operating income (loos) (See statements of operations) $(1,816) $5,995 $(1,946) $1,005 $1,510 Depreciation and amortization (See statements of cash flows) 4,336 4,335 2,169 2,146 8,567 Compensation related to options granted to employees (See statement of cash flow) 343 182 284 77 813 EBITDA $2,863 $10,512 $507 $3,228 $10,890 Contacts: Company Contact: Asaf Alperovitz Chief Financial Officer +972-4-9900803 IR Contact: Ehud Helft / Kenny Green G.K. Investor Relations +1-646-201-9246 DATASOURCE: Tefron Ltd CONTACT: Company Contact: Asaf Alperovitz, Chief Financial Officer, +972-4-9900803, . IR Contact: Ehud Helft / Kenny Green, G.K. Investor Relations, +1-646-201-9246,

Copyright