MISGAV, Israel, May 7 /PRNewswire-FirstCall/ -- First Quarter 2007 Highlights - First Quarter Revenues Were $48.8 Million, Slightly Below Those of the First Quarter of 2006.
- Cash Flow From Operations was $5.4 Million, Leading to a Net Cash Position of $3.9 Million at the End of the Quarter.
- Fully Diluted EPS From Continuing Operations was $0.17 in the Quarter, Compared With $0.25 in the First Quarter of 2006 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 first quarter of 2007.
As announced on April 27, 2006, Tefron closed the sale of its ownership interest in AlbaHealth. Accordingly, the financial statements of AlbaHealth are accounted for as discontinued operations, and the financial results described below therefore do not include the financial results of AlbaHealth. Tefron ceased to consolidate the financial statements of AlbaHealth commencing April 27, 2006.
First Quarter 2007 Results First quarter revenues were $48.8 million, representing a 1.2% decrease from first quarter 2006 revenues of $49.4 million. The slight decrease in revenues in the quarter was due to an anticipated reduction in sales of active-wear during the first half of 2007. This reduction was partly offset by an increase in sales of swimwear and a slight increase in sales of intimate apparel products.
First quarter gross margin was 19.1%, compared with a gross margin 24.3% in the first quarter of 2006. Operating income totaled $5.0 million (10.2% of revenues), compared with $7.5 million (15.2% of revenues) in the first quarter of 2006.
The decline in gross and operating margins in the first quarter was primarily due to the significant weakening of the US dollar versus the Israeli shekel and the previously identified pricing pressure in older collections of our intimate apparel product line.
Income from continuing operations was $3.8 million (7.8% of revenues), or $0.17 per diluted share in the first quarter of 2007, compared to $5.2 million (10.6% of revenues), or $0.25 per diluted share, in the first quarter of 2006.
In an unrelated matter, Tefron has determined that no additional payment is due from Norfet, Limited Partnership, its major shareholder, pursuant to their 2004 Share Purchase Agreement. Tefron would have been entitled to an additional payment if, during the three-year period following closing of their share purchase transaction, Norfet had sold, at an adjusted average price per share of at least $9.22, at least 20% of the shares that it had acquired from Tefron at the closing.
Management comments Mr. Yos Shiran, Chief Executive Officer of Tefron, commented, "Our first quarter results were in line with our expectations. In addition, our strong operating cash flow during the quarter has led us to a net cash position (cash net of bank debt) for the first time in seven years." Mr. Shiran continued, "As pointed out during the last quarter, we anticipated a temporary decline in active-wear sales in the first half of 2007, with a strengthening of active-wear sales in the second half of 2007. We reaffirm our assessment and see second half growth driven mainly by our sales to Nike as they prepare to launch their next generation of performance apparel. We believe that our working relationship with Nike remains strong, and we have received positive indications from Nike for next generation products, backed up by raw materials commitments, demonstrating the importance of Tefron as a key supplier to Nike." Mr. Shiran added, "We continue to believe that revenues for the year will be higher than those of 2006 as a result of the expected growth in active-wear sales in the second half of the year. We expect our second quarter revenues to decline in approximately 12% compared to the second quarter of 2006 due to the anticipated temporary reduction in active-wear sales. We also expect a strengthening pressure on our operating margins given the ongoing weakening of the US Dollar versus the Shekel and the pricing reduction in older collections of our intimate apparel product line. To mitigate these effects we intend to continue to transfer labor intensive production processes offshore." Mr. Shiran concluded, "Our business and market fundamentals remain strong. We are specially excited by the prospects for growing our active-wear business with Nike. In addition, we are in a continuous process of looking for new revenue growth drivers while cutting costs and improving efficiencies. We believe that we have the building blocks in place to propel our business to the next level in the coming years." Conference Call The Company will be hosting a conference call today, May 7, 2007 at 10am EDT. 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: 0-800-917-5108
ISRAEL Dial-in Number: +972-(0)-3-918-0687
INTERNATIONAL Dial-in Number: +972-3-918-0687
For those unable to listen to the live call, a replay of the call will be available for three months from the day 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, Banana Republic, J. C. Penney, Lululemon Athletica, Warnaco/Calvin Klein, Patagonia, Reebok 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, swimwear, 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 - 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 SEGEMENT
Three months ended Three months ended Year ended December
March 31, 2007 March 31, 2006 31, 2006
Segment USD % of total USD % of total USD % of total
Thousands Thousands Thousands
Cut & sew 24,282 49.8% 22,961 46.5% 85,951 45.7%
Seamless 24,469 50.2% 26,406 53.5% 102,153 54.3%
Total 48,751 100.0% 49,367 100.0% 188,104 100.0%
TABLE 2: SALES BY PRODUCT LINE
Three months ended Three months ended Year ended December
March 31, 2007 March 31, 2006 31, 2006
Product line USD % of total USD % of total USD % of total
Thousands Thousands Thousands
Intimate Apparel 26,458 54.3% 25,426 51.5% 100,890 53.6%
Active wear 10,839 22.2% 14,049 28.5% 59,406 31.6%
Swimwear 11,454 23.5% 9,892 20.0% 27,808 14.8%
Total 48,751 100.0% 49,367 100.0% 188,104 100.0% CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands March 31, December 31,
2007 2006 2006
Unaudited
ASSETS CURRENT ASSETS:
Cash and cash equivalents $7,347 $ 11,489 $ 3,966
Short-term deposit 11,280 - 10,089
Marketable securities 9,045 - 4,975
Trade receivables, net 29,327 27,809 30,655
Other accounts receivable and
prepaid expenses 3,871 4,300 4,166
Inventories 25,855 28,417 28,912 Total current assets 86,725 72,015 82,763 LONG TERM INVESTMENTS:
Bank deposit - - 1,029
Severance pay fund 824 638 778
Subordinate note 3,000 - 3,000 Total long term investments 3,824 638 4,807 PROPERTY, PLANT AND EQUIPMENT,
NET 76,258 79,248 77,086 ASSETS ATTRIBUTED TO
DISCONTINUED OPERATIONS - 39,907 - Total assets $ 166,807 $ 191,808 $ 164,656
CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands, except share data March 31, December 31,
2007 2006 2006
Unaudited LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES:
Current maturities of long-term bank
loans $ 5,948 $ 6,373 $ 5,948
Trade payables 25,995 28,166 31,143
Other accounts payable and accrued
expenses 10,831 7,890 10,402 Total current liabilities 42,774 42,429 47,493 LONG-TERM LIABILITIES:
Long-term loans from banks (net of
current maturities) 17,836 34,055 19,322
Deferred taxes 12,284 11,603 12,313
Accrued severance pay 3,402 2,698 3,298 Total long-term liabilities 33,522 48,356 34,933 LIABILITIES AND MINORITY INTEREST
ATTRIBUTED TO DISCONTINUED OPERATIONS - 26,664 - SHAREHOLDERS' EQUITY:
Share capital - 7,515 7,229 7,411
Additional paid-in capital 106,000 96,967 101,684
Less - 997,400 Ordinary shares in
treasury, at cost (7,408) (7,408) (7,408)
Cumulative other comprehensive income 124 83 55
Accumulated deficit (15,720) (22,512) (19,512) Total shareholders' equity 90,511 74,359 82,230 Total liabilities and shareholders'
equity $ 166,807 $ 191,808 $164,656
CONSOLIDATED STATEMENTS OF INCOME U.S. dollars in thousands, except per share data Three months ended Year ended
March 31, December 31,
2007 2006 2006
Unaudited
Sales $ 48,751 $ 49,367 $ 188,104
Cost of sales 39,460 37,373 145,144 Gross profit 9,291 11,994 42,960
Selling, general and administrative
expenses 4,301 4,505 17,077 Operating income 4,990 7,489 25,883
Financial expenses, net 408 315 1,912 Income before taxes on income 4,582 7,174 23,971
Taxes on income 790 1,943 5,711 Income from continuing operations 3,792 5,231 18,260
Income from discontinued operations
(including impairment and other costs
related to the exercise of the put
option), net of taxes - 152 120 Net income $ 3,792 $ 5,383 $ 18,380 Basic and diluted net earnings per
share from continuing operations:
Basic net earnings per share $ 0.18 $ 0.26 $ 0.90
Diluted net earnings per share $ 0.17 $ 0.25 $ 0.88 Basic and diluted net earnings per
share from discontinued operations:
Basic net earnings per share $ - $ 0.01 $ 0.01
Diluted net earnings per share $ - $ 0.01 $ 0.01 Basic and diluted net earnings per
share:
Basic net earnings per share $ 0.18 $ 0.27 $ 0.91
Diluted net earnings per share $ 0.17 $ 0.26 $ 0.89 Weighted average number of shares
used for computing basic earnings per
share 21,155,284 19,703,654 20,210,722 Weighted average number of shares
used for computing diluted earnings
per share 21,843,997 20,816,656 20,754,566
CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Three months ended Year ended
March 31, December 31,
2007 2006 2006
Unaudited
Cash flows from operating activities
Net income $ 3,792 $ 5,383 $ 18,380
Adjustments to reconcile net income to net
cash provided by operating activities:
Income from discontinued operations - (152) (120)
Depreciation, amortization and impairment of
property, plant and equipment 2,189 2,101 8,719
Compensation related to options granted to
employees 105 195 555
Increase (decrease) in accrued severance
pay, net 58 (1) 459
Increase in deferred taxes, net 146 2,598 2,128
Accrual of interest on short and long-term
deposits and marketable securities (203) - (100)
Gain on sale of and accretion of discount on
marketable securities (65) - (57)
Gain on sale of property, plant and
equipment, net (396) (15) (73)
Decrease (increase) in trade receivables,
net 1,328 (1,831) (4,677)
Decrease (increase) in other accounts
receivable and prepaid expenses 108 (786) (417)
Decrease (increase) in inventories 3,057 (2,035) (2,530)
Increase (decrease) in trade payables (5,148) 303 3,278
Increase (decrease) in other accounts
payable and accrued expenses 379 (824) 1,718 Net cash provided by continuing operating
activities 5,350 4,936 27,263
Net cash provided by discontinued operating
activities - 517 507 Net cash provided by operating activities 5,350 5,453 27,770 Cash flows from investing activities
Purchase of property, plant and equipment (964) (602) (4,688)
Investment grants received - 1,218 1,218
Proceeds from sale of property, plant and
equipment 679 10 335
Dividend received from discontinued
operations - 139 140
Proceeds from sale of subsidiary, net - - 9,917
Investment in short and long-term deposits
and marketable securities (8,461) - (22,894)
Proceeds from sale of marketable securities 4,499 - 6,961 Net cash provided by (used in) continuing
investing activities (4,247) 765 (9,011)
Net cash used in discontinued investing
activities - (168) (172) Net cash provided by (used in) investing
activities (4,247) 597 (9,183)
CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Three months ended Year ended
March 31, December 31,
2007 2006 2006
Unaudited Cash flows from financing activities
Repayment of long-term bank loans (1,486) (1,479) (21,188)
Proceeds from long-term bank loans - - 5,000
Decrease in short-term bank credit,
net - (14,705) (14,713)
Excess tax benefit from exercise of
stock options related to employees and
directors - - 446
Proceeds from exercise of stock
options related to employees and
directors 25 486 3,175
Proceeds from exercise of tradable
options issued at the secondary
offering 4,290 - 972
Proceeds from issuance of shares and
options, net - 13,834 13,816
Dividend paid to shareholders (551) - (9,446) Net cash provided by (used in)
continuing financing activities 2,278 (1,864) (21,938)
Net cash used in discontinued
financing activities - (463) (544) Net cash provided by (used
in)financing activities 2,278 (2,327) (22,482) Increase (decrease) in cash and cash
equivalents 3,381 3,723 (3,895)
Decrease in cash and cash equivalents
attributed to discontinued operations - 114 209 Increase (decrease) in cash and cash
equivalents attributed to continuing
operations 3,381 3,837 (3,686)
Cash and cash equivalents at the
beginning of the period 3,966 7,652 7,652 Cash and cash equivalents at the end
of the period $ 7,347 $ 11,489 $ 3,966
Calculation of the EBITDA U.S. dollars in thousands Three months ended Year ended
March 31, December 31, 2007 2006 2006 Operating income $4,990 $7,489 $25,883 (See statements of
operations)
Depreciation and 2,189 2,101 8,719
amortization (See
statements of cash
flows)
Compensation related to 105 195 555
options granted to
employees (See statement
of cash flow)
EBITDA $7,284 $9,785 $35,157 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: 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,
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