MISGAV, Israel, May 15 /PRNewswire-FirstCall/ --
First Quarter Summary
- Quarterly revenues of $50.9 million, 4.5% above revenues of
the first quarter of last year
- Operating income of $0.1 million, as compared with operating
income of $5.0 million in the first quarter of last year
- EBITDA of $2.4 million, as compared with EBITDA of $7.3
million in the first quarter of last year
- Net loss of $0.7 million, or $0.03 per diluted share, as
compared with net income of $3.8 million, or $0.17 per diluted share,
in the first 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 first quarter of 2008.
First Quarter 2008 Results
First quarter revenues were $50.9 million, representing a 4.5% increase from the first quarter of 2007 revenues of $48.8 million. The increase in revenues in the quarter was due to an increase in sales of swimwear, including revenues delayed from the fourth quarter of 2007 and an increase in sales of active-wear products. This increase was partly offset by a reduction in sales of intimate apparel .
First quarter gross margin was 12.4% compared with a gross margin of 19.1% in the first quarter of 2007. Operating income for the quarter was $0.1 million (0.3% of revenues), as compared with an operating income of $5.0 million (10.2% of revenues) in the first quarter of 2007. Net loss for the quarter was $0.7 million, or $0.03 per diluted share, as compared with net income of $3.8 million (7.8% of revenues), or $0.17 per diluted share, in the first quarter of 2007.
The decline in gross and operating margins in the quarter compared with the first quarter of last year was primarily due to the significant devaluation of the US Dollar versus the New Israeli Shekel, the higher proportion of Cut & Sew products in the active-wear sales mix which have a lower profitability than those of the Seamless products, and finally, the continuing short-term manufacturing challenges faced in the Hi-Tex division. As discussed last quarter, these challenges are mainly due to the learning curve required for the manufacture of various new and complex products, which are technologically advanced and 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 in the quarter increased the US Dollar value of the New Israeli Shekel denominated liabilities and accordingly resulted in increased financial expenses.
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: 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 segments:
Three months ended Three months ended Year ended December
March 31, 2008 March 31, 2007 31, 2007
USD USD USD
Segment Thousands % of total Thousands % of total 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 December
March 31, 2008 March 31, 2007 31, 2007
Product line USD % of total USD % of total USD % of total
Thousands Thousands Thousands
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%
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
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
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except share and per share data)
Three months ended Year ended
December
March 31, 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
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year
Three months ended ended
December
March 31, 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)
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year
Three months ended ended
December
March 31, 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
Calculation of the EBITDA
U.S. dollars in thousands
Calculation of the EBITDA
(in thousands $)
Three months ended Year ended
March 31, December 31,
2008 2007 2007
Operating income
(See statements
of operations) $130 $4,990 $1,752
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
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
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,