TFR Tefron Ltd Ord

MISGAV, Israel, November 20 /PRNewswire-FirstCall/ -- Third Quarter Summary - Quarterly Revenues of $38.3 Million, 26.1% Above Revenues of the Third Quarter of Last Year - Operating Loss of $6.8 Million, as Compared With Operating Loss of $1.5 Million in the Third Quarter of Last Year - Net Loss of $5.6 Million or $0.26 Loss per Diluted Share, as Compared With net Loss of $1.7 Million, or $0.08 per Diluted Share, in the Third Quarter of Last Year. Tefron Ltd. (NYSE:TFR)(TASE:TFRN), a leading producer of seamless intimate apparel and engineered-for-performance (EFPTM) active wear, today announced financial results for the third quarter of 2008. Third Quarter 2008 Results Third quarter revenues were $38.3 million, representing a 26.1% increase from the third quarter of 2007 revenues of $30.3 million. The increase in revenues in the quarter was due to an increase in sales across all the Company's product lines, particularly active-wear and intimate apparel. The company reported a gross loss in the quarter of $1.7 million compared to a gross profit of $2.4 million in the third quarter of 2007. Operating loss for the quarter was $6.8 million, as compared with an operating loss of $1.5 million in the third quarter of 2007. Net loss for the quarter was $5.6 million, or $0.26 loss per diluted share, as compared with a net loss of $1.7 million, or $0.08 per diluted share, in the third quarter of 2007. The main reasons for the loss are (i) the significant devaluation of the US Dollar versus the New Israeli Shekel, amounting to $2.7 million additional expenses compared with third quarter 2007 , and (ii) the manufacturing challenges that we have not been overcome yet in the Hi-Tex division. In addition, the Company wrote down $2.2 million in inventory, due to the difficulty of selling older collections in the current weak economic environment. Results for First Nine Months of 2008 Revenues in the first nine months of 2008 were $137.9 million, representing a 15.2% increase from revenues of $119.7 million generated during the first nine months of 2007. The increase in revenue was due to an increase in year-over-year sales across all product lines including active-wear, swimwear and intimate apparel. Gross profit in the first nine months of 2008 was $8.4 million compared with $17.4 million in the first nine months of 2007. Operating loss was $8.7 million compared with an operating income of $4.5 million in the first nine months of 2007. Net loss was $8.8 million, or $0.41 per diluted share, compared to a net income of $2.9 million or $0.13 per diluted share in the first nine months of 2007. The decline in profitability was due to increased costs, in particular the manufacturing challenges faced in the Hi-Tex division as well as the significant devaluation of the US Dollar versus the New Israeli Shekel compared with the same period last year. Due to Tefron's current share price, Tefron is not in compliance under the continuing listing requirements of the New York Stock Exchange. The Company is currently reviewing various alternatives in order to regain compliance. Management comments Mr. Adi Livneh, Chief Executive Officer of Tefron, commented, "I joined Tefron in September, at the end of a very tough quarter. In my first months here, I have already taken a number of steps including far-reaching structural changes at Tefron, as well as the replacement of some senior personnel with highly experienced industry executives. I believe these are steps in the right direction, which will enable us to resolve the current challenges. Our goal is to improve the quality of our manufacturing, more efficiently exploit our inventory, while lowering wastage and saving costs with the goal of returning Tefron to profitability in the coming quarters." Mr. Livneh continued, "I recently met with all of Tefron's major customers as well as a number of potential customers. We were successful in achieving some first-time initial orders from several new customers including Wal-Mart and White House-Black Market, both of which diversify and grow our revenue base, and provide us with strong future potential. At the same time, our existing customers are behind us and support the changes we are making." "I have joined a strong team and a company with significant long-term growth potential. However, to realize this potential, I am focusing my initial efforts on solving the manufacturing issues. I do hope to see the positive results of this effort during 2009," concluded Mr. Livneh. Conference Call The Company will also be hosting a conference call today, November 20, at 10:00am ET. 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 CANADA Dial-in Number: 1-866-958-6867 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://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, Maidenform, 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). - fluctuations in inflation and currency rates; - the potential adverse effect on our future operating efficiency resulting from our expansion into new product lines with more complicated products, different raw materials and changes in market trends; - 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; - 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 SEGEMENT Nine months Nine months Three months ended September ended September ended September 30, 2008 30, 2007 30, 2008 Segment USD % of USD % of USD % of Thousands total Thousands total Thousands total Cut & 70,950 51.5% 53,973 45.1% 13,710 35.8% sew Seamless 66,915 48.5% 65,748 54.9% 24,572 64.2% Total 137,865 100.0% 119,721 100.0% 38,282 100.0% TABLE 1: SALES BY SEGEMENT Continued.... Three months Year ended ended September December 31, 30, 2007 2007 Segment USD % of USD % of Thousands total Thousands total Cut & 11,921 39.3% 77,020 48.6% sew Seamless 18,426 60.7% 81,594 51.4% Total 30,347 100.0% 158,614 100.0% TABLE 2: SALES BY PRODUCT LINE Nine months Nine months Three months ended September ended September ended September 30, 2008 30, 2007 30, 2008 Product USD % of USD % of USD % of line Thousands total Thousands total Thousands total Intimate 72,281 52.4% 68,867 57.5% 24,221 63.2% Apparel Active 39,550 28.7% 30,763 25.7% 12,353 32.3% wear Swimwear 26,034 18.9% 20,091 16.8% 1,708 4.5% Total 137,865 100.0% 119,721 100.0% 38,282 100.0% TABLE 2: SALES BY PRODUCT LINE Continued.... Three months Year ended December ended September 31, 2007 30, 2007 Product USD % of USD % of line Thousands total Thousands total Intimate 19,601 64.6% 89,877 56.7% Apparel Active 9,649 31.8% 42,047 26.5% wear Swimwear 1,097 3.6% 26,690 16.8% Total 30,347 100.0% 158,614 100.0% CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands September 30, December 31, 2008 2007 2007 Unaudited Audited ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,614 $ 2,695 $ 2,384 Short-term deposit 500 11,614 7,063 Marketable securities 1,087 7,292 6,952 Trade receivables, net 26,031 29,085 29,033 Other accounts receivable and prepaid expenses 8,440 5,623 5,404 Inventories 29,789 26,345 32,577 Total current assets 69,461 82,654 83,413 LONG-TERM INVESTMENS: Severance pay fund 1,455 939 1,288 Subordinated note 3,000 3,000 3,000 Total long-term investments 4,455 3,939 4,288 PROPERTY, PLANT AND EQUIPMENT, NET 71,136 75,519 74,791 Total assets $ 145,052 $ 162,112 $ 162,492 CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands September 30, December 31, 2008 2007 2007 Unaudited Audited LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term bank credit $ 4,200 $ - $ - Current maturities of long-term bank loans 4,151 5,948 5,948 Trade payables 26,365 24,779 29,720 Other accounts payable and accrued expenses 9,348 9,869 8,635 Total current liabilities 44,064 40,596 44,303 LONG-TERM LIABILITIES: Long-term loans from banks (net of current maturities) 12,372 14,861 13,374 Deferred taxes 12,306 12,107 12,397 Accrued severance pay 4,466 3,603 3,882 Total long-term liabilities 29,144 30,571 29,653 EMPLOYEE STOCK OPTIONS IN SUBSIDIARY 247 - - SHAREHOLDERS' EQUITY: Ordinary shares 7,518 7,518 7,518 Additional paid-in capital 106,674 106,446 106,530 Cumulative other comprehensive income 45 998 368 Less - 997,400 Ordinary shares in treasury, at cost (7,408) (7,408) (7,408) Accumulated deficit (35,232) (16,609) (18,472) Total shareholders' equity 71,597 90,945 88,536 Total liabilities and shareholders' equity $ 145,052 $ 162,112 $ 162,492 CONSOLIDATED STATEMENTS OF INCOME U.S. dollars in thousands (except share and per share data) Nine months ended Three months ended Year ended September 30, September 30, December 31, 2008 2007 2008 2007 2007 Unaudited Audited Sales $ 137,865 $ 119,721 $ 38,282 $ 30,347 $ 158,614 Cost of sales (*) 129,481 102,364 39,934 27,983 139,147 Gross profit (loss) 8,384 17,357 (1,652) 2,364 19,467 Selling, general and administrative expenses 17,046 12,849 5,194 3,851 17,715 Operating income (loss) (8,662) 4,508 (6,846) (1,487) 1,752 Financial expenses, net 2,957 960 660 503 1,289 Income (loss) before taxes on income (11,619) 3,548 (7,506) (1,990) 463 Taxes on income (tax benefit) (2,859) 645 (1,917) (311) (20) Net income (loss) $ (8,760) $ 2,903 $ (5,589) $ (1,679) $483 Basic and diluted net earnings (losses) per share from continuing operations: Basic net earnings (losses) per share $ (0.41) $ 0.14 $ (0.26) $ (0.08) $ 0.02 Diluted net earnings (losses) per share $ (0.41) $ 0.13 $ (0.26) $ ( 0.08) $ 0.02 Weighted average number of shares used for computing basic earnings (losses) per share 21,202,986 21,183,397 21,202,986 21,200,986 21,188,161 Weighted average number of shares used for computing diluted earnings (losses) per share 21,202,986 21,779,955 21,202,986 21,200,986 21,630,124 (*) Includes inventory write-off $ 3,005 $ 580 $ 2,190 $ 40 $ 1,260 CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Nine months ended Three months ended Year ended September 30, September 30, December 31, 2008 2007 2008 2007 2007 Unaudited Audited Cash flows from operating activities: Net income (loss) $(8,760) $ 2,903 $(5,589) $(1,679) $ 483 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation of property, plant and equipment 6,475 6,441 2,139 2,106 8,567 Compensation related to options granted to employees 391 498 48 312 571 Increase (decrease) in accrued severance pay, net 417 144 (18) 91 74 Accrual of interest on short-term deposits (75) (496) - (168) (613) Gain related to sale of marketable securities (22) (335) - (270) (134) Interest and amortization of premium and accretion of discount of marketable securities (263) - - - (189) Impairment of marketable securities 313 - 313 - - Increase (decrease) in deferred income taxes (3,327) 21 (1,186) (39) 79 Gain on disposal of property, plant and equipment, net (21) (641) (2) (246) (651) Decrease (increase) in trade receivables, net 3,002 1,570 9,893 (851) 1,622 Decrease (increase) in other accounts receivable and prepaid expenses 500 (826) (272) (1,097) (919) Decrease (increase) in inventories 2,788 2,567 336 (1,736) (3,665) Increase (decrease) in trade payables (3,355) (6,364) (1,545) 1,876 (1,423) Increase (decrease) in other accounts payable and accrued expenses 542 (452) (360) (837) (768) Net cash provided by operating activities (1,395) 5,030 3,757 (2,538) 3,034 Cash flows from investing activities: Purchase of property, plant and equipment (3,063) (4,611) (879) (1,509) (6,377) Proceeds from sale of property, plant and equipment 35 927 14 246 943 Investment in marketable securities - - - - (18,974) Investment in short-term deposits (13,060) (16,961) (500) - (8,321) Proceeds from sale of marketable securities 5,914 14,981 - 2,802 17,241 Proceeds from repayment of deposits 19,698 - - - 12,989 Purchase of intangible asset (300) - (300) - - Net cash provided by (used in) investing activities 9,224 (5,664) (1,665) 1,539 (2,499) CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Nine months ended Three months ended Year ended September 30, September 30, December 31, 2008 2007 2008 2007 2007 Unaudited Audited Cash flows from financing activities: Repayment of long-term bank loans (8,799) (4,461) (1,039) (1,487) (5,948) Proceeds from long-term bank loans 6,000 - - - - Increase in short-term bank credit, net 4,200 - 1,358 - - Proceeds from exercise of stock options related to employees and directors - 85 - - 92 Proceeds from exercise of tradable options issued at the secondary offering - 4,290 - - 4,290 Dividend paid to shareholders (8,000) (551) - - (551) Net cash provided by (used in) financing activities (6,599) (637) 319 (1,487) (2,117) Total increase (decrease) in cash and cash equivalents 1,230 (1,271) 2,411 (2,486) (1,582) Cash and cash equivalents at beginning of period 2,384 3,966 1,203 5,181 3,966 Cash and cash equivalents at end of period $ 3,614 $ 2,695 $ 3,614 $ 2,695 $ 2,384 Contacts Company Contact: IR Contact: Eran Rotem Ehud Helft / Kenny Green Chief Financial Officer G.K. Investor Relations +972-4-9900803 +1-646-201-9246 DATASOURCE: Tefron Ltd CONTACT: Contacts: Company Contact: Eran Rotem, Chief Financial Officer, +972-4-9900803, ; IR Contact: Ehud Helft / Kenny Green, G.K. Investor Relations, +1-646-201-9246,

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