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,
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