MANAGEMENT COMMENTS
Mr. Yos Shiran, Chief Executive Officer of Tefron, commented, "While we are
pleased with our increase in revenues, we still presented a net loss, mainly due
to the weak US dollar against the shekel and manufacturing hurdles at our Hi-Tex
division. We are currently focusing our efforts on overcoming these hurdles and
reducing our operational costs. In the next few months, we aim to finalize the
operational plan that we discussed in the prior quarter, and we expect to
continue implementing the plan in the second half of the year. In the coming
quarters, we hope to share with you positive news with regard to the
implementation of this plan."
Mr. Shiran continued, "On the positive side, we are happy to announce a
significant new customer: Maidenfrom. We expect to record sales to Maidenform in
the next few months for orders already received. Additionally, we have seen two
quarters of sequential growth in our active-wear sales, mainly due to increased
orders from Nike for their 'Next Generation' products. We are looking for this
trend of growth in our active-wear sales to continue into the second quarter of
2008, driving a growth in our overall sales."
Mr. Shiran concluded, "Based on our current orders, we currently expect second
quarter 2008 revenues of around $45 million, driven by continued growth in
active-wear sales while taking into account the seasonal decline in second
quarter swimwear sales. However, we believe that the weakness of the US Dollar,
in addition to the manufacturing hurdles of our Hi-Tex division, will continue
to negatively affect our profitability, and accordingly we expect to show an
operating loss for the second quarter."
CONFERENCE CALL
--------------------------------------------------------------------------------
The Company will be hosting a conference call today, May 15, 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: 1 888 668 9141
UK DIAL-IN NUMBER: 0 800 051 8913
ISRAEL DIAL-IN NUMBER: 03 918 0691
INTERNATIONAL DIAL-IN NUMBER: +972 3 918 0691
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: 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.
5
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:
o OUR CUSTOMERS' CONTINUED PURCHASE OF OUR PRODUCTS IN THE SAME VOLUMES
OR ON THE SAME TERMS;
o THE CYCLICAL NATURE OF THE CLOTHING RETAIL INDUSTRY AND THE ONGOING
CHANGES IN FASHION PREFERENCES;
o 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;
o 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).
o 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;
o THE PURCHASE OF NEW EQUIPMENT THAT MAY BE NECESSARY AS A RESULT OF OUR
EXPANSION INTO NEW PRODUCT LINES;
o OUR DEPENDENCE ON OUR SUPPLIERS FOR OUR MACHINERY AND THE MAINTENANCE
OF OUR MACHINERY;
o THE FLUCTUATIONS COSTS OF RAW MATERIALS; OUR DEPENDENCE ON
SUBCONTRACTORS IN CONNECTION WITH OUR MANUFACTURING PROCESS;
o OUR FAILURE TO GENERATE SUFFICIENT CASH FROM OUR OPERATIONS TO PAY OUR
DEBT;
o FLUCTUATIONS IN INFLATION AND CURRENCY; AND
o 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.
CONTACTS
COMPANY CONTACT: IR CONTACT:
ASAF ALPEROVITZ EHUD HELFT / KENNY GREEN
CHIEF FINANCIAL OFFICER G.K. INVESTOR RELATIONS
+972-4-9900803 1 646 201 9246
Aasaf@Tefron.com info@gkir.com
6
TABLE 1: SALES BY SEGEMENT
--------------------------------------------------------------------------------
Three months ended Three months ended Year ended
March 31, 2008 March 31, 2007 December 31, 2007
-------------------------- -------------------------- ---------------------------
Segment USD Thousands % of total USD Thousands % of total USD Thousands % of total
------- ------------- ---------- ------------- ---------- ------------- ----------
Cut & sew 31,710 62.2% 24,282 49.8% 77,020 48.6%
Seamless 19,232 37.8% 24,469 50.2% 81,594 51.4%
Total 50,942 100.0% 48,751 100.0% 158,614 100.0%
TABLE 2: SALES BY PRODUCT LINE
--------------------------------------------------------------------------------
Three months ended Three months ended Year ended
March 31, 2008 March 31, 2007 December 31, 2007
-------------------------- -------------------------- ---------------------------
Product line USD Thousands % of total USD Thousands % of total USD Thousands % of total
------------ ------------- ---------- ------------- ---------- ------------- ----------
Intimate Apparel 22,926 45.0% 26,458 54.3% 89,877 56.7%
Active wear 12,944 25.4% 10,839 22.2% 42,047 26.5%
Swimwear 15,072 29.6% 11,454 23.5% 26,690 16.8%
Total 50,942 100.0% 48,751 100.0% 158,614 100.0%
7
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
MARCH 31,
---------------------- DECEMBER 31,
2008 2007 2007
-------- -------- --------
UNAUDITED AUDITED
---------------------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,371 $ 7,347 $ 2,384
Short-term deposits 3,006 11,280 7,063
Marketable securities 4,261 9,045 5,668
Trade receivables, net 38,810 29,327 29,033
Other accounts receivable and prepaid expenses 4,640 3,871 5,404
Inventories 32,721 25,855 32,577
-------- -------- --------
TOTAL current assets 84,809 86,725 82,129
-------- -------- --------
LONG TERM INVESTMENTS:
Marketable securities 1,277 - 1,284
Severance pay fund 1,275 824 1,288
Subordinated note 3,000 3,000 3,000
-------- -------- --------
TOTAL long term investments 5,552 3,824 5,572
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 74,041 76,258 74,791
-------- -------- --------
TOTAL assets $164,402 $166,807 $162,492
======== ======== ========
8
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)
MARCH 31,
------------------------- DECEMBER 31,
2008 2007 2007
--------- --------- ---------
UNAUDITED AUDITED
------------------------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term bank loans $ 4,161 $ 5,948 $ 5,948
Trade payables 32,305 25,995 29,720
Other accounts payable and accrued expenses 10,179 10,831 8,635
--------- --------- ---------
TOTAL current liabilities 46,645 42,774 44,303
--------- --------- ---------
LONG-TERM LIABILITIES:
Long-term loans from banks (net of current maturities) 14,480 17,836 13,374
Deferred taxes 12,190 12,284 12,397
Accrued severance pay 4,196 3,402 3,882
--------- --------- ---------
TOTAL long-term liabilities 30,866 33,522 29,653
--------- --------- ---------
SHAREHOLDERS' EQUITY:
Share capital -
Ordinary shares 7,518 7,515 7,518
Additional paid-in capital 106,589 106,000 106,530
Cumulative other comprehensive income (loss) (637) 124 368
Less - 997,400 Ordinary shares in treasury, at cost (7,408) (7,408) (7,408)
Accumulated deficit (19,171) (15,720) (18,472)
--------- --------- ---------
TOTAL shareholders' equity 86,891 90,511 88,536
--------- --------- ---------
TOTAL liabilities and shareholders' equity $ 164,402 $ 166,807 $ 162,492
========= ========= =========
9
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31, YEAR ENDED
------------------------------- DECEMBER 31
2008 2007 2007
------------ ------------ ------------
UNAUDITED AUDITED
------------------------------- ------------
Sales $ 50,942 $ 48,751 $ 158,614
Cost of sales 44,614 39,460 139,147
------------ ------------ ------------
Gross profit 6,328 9,291 19,467
Selling, general and administrative expenses 6,198 4,301 17,715
------------ ------------ ------------
Operating income 130 4,990 1,752
Financial expenses, net 1,181 408 1,289
------------ ------------ ------------
Income (loss) before taxes on income (1,051) 4,582 463
Taxes (tax benefit) on income (352) 790 (20)
------------ ------------ ------------
Net income (loss) $ (699) $ 3,792 $ 483
============ ============ ============
Basic and diluted net earnings (losses) per share:
Basic net earnings (losses) per share $ (0.03) $ 0.18 $ 0.02
============ ============ ============
Diluted net earnings (losses) per share $ (0.03) $ 0.17 $ 0.02
============ ============ ============
Weighted average number of shares used for computing basic
earnings (losses) per share 21,202,986 21,155,284 21,188,161
============ ============ ============
Weighted average number of shares used for computing diluted
earnings (losses) per share 21,202,986 21,843,997 21,630,124
============ ============ ============
10
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER
----------------------- 31,
2008 2007 2007
-------- -------- --------
UNAUDITED AUDITED
----------------------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (699) $ 3,792 $ 483
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation of property, plant and equipment 2,167 2,189 8,567
Compensation related to options granted to employees 59 105 571
Increase in accrued severance pay, net 327 58 74
Increase (decrease) in deferred taxes, net (1,120) 146 79
Accrual of interest on short-term deposits (68) (162) (613)
Gain related to sale of marketable securities (22) (19) (134)
Interest and amortization of premium and accretion of
discount of marketable securities (202) (87) (189)
Gain on sale of property, plant and equipment (6) (396) (651)
Decrease (increase) in trade receivables, net (9,777) 1,328 1,622
Decrease (increase) in other accounts receivable and
prepaid expenses 1,677 108 (919)
Decrease (increase) in inventories (144) 3,057 (3,665)
Increase (decrease) in trade payables 2,585 (5,148) (1,423)
Increase (decrease) in other accounts payable and accrued
expenses 618 379 (768)
-------- -------- --------
Net cash provided by (used in) operating activities (4,605) 5,350 3,034
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (1,440) (964) (6,376)
Proceeds from sale of property, plant and equipment 6 679 943
Investment in marketable securities - (8,461) (18,974)
Proceeds from sale of marketable securities 1,582 4,499 17,240
Investment in short-term deposits (12,560) - (8,321)
Proceeds from repayment of deposits 16,685 - 12,989
-------- -------- --------
Net cash provided by (used in) investing activities 4,273 (4,247) (2,499)
-------- -------- --------
11
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER
--------------------- 31,
2008 2007 2007
------- ------- -------
UNAUDITED AUDITED
--------------------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term bank loans (6,681) (1,486) (5,948)
Proceeds from long-term bank loans 6,000 - -
Proceeds from exercise of stock options related to employees
and directors - 25 92
Exercise of tradable options issued at the secondary offering - 4,290 4,290
Dividend paid to shareholders - (551) (551)
------- ------- -------
Net cash provided by (used in)financing activities (681) 2,278 (2,117)
------- ------- -------
Increase (decrease) in cash and cash equivalents (1,013) 3,381 (1,582)
Cash and cash equivalents at the beginning of the period 2,384 3,966 3,966
------- ------- -------
Cash and cash equivalents at the end of the period $ 1,371 $ 7,347 $ 2,384
======= ======= =======
12
CALCULATION OF THE EBITDA
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
Three months ended Year ended
March 31, December 31,
------------------------------ ------------
2008 2007 2007
------------ ------------ ------------
Operating income $ 130 $ 4,990 $ 1,752
(See statements of operations)
Depreciation and amortization
(See statements of cash flows) 2,167 2,189 8,567
Compensation related to options
granted to employees (See
statement of cash flow) 59 105 571
------------ ------------ ------------
EBITDA $ 2,356 $ 7,284 $ 10,890
============ ============ ============
13
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