MISGAV, Israel, February 28 /PRNewswire-FirstCall/ -- - Full Year 2007 Summary
- Annual Revenues of $158.6 Million, 15.7% Below Revenues of Last Year. - Operating Cash Flow of $3.0 Million Compared With $27.8 Million in 2006. - Operating Income of $1.8 Million, Compared With $25.9 Million in 2006. - EBITDA of $10.9 Million Compared With $35.2 Million in 2006. - Net Income of $0.5 Million; Fully Diluted EPS of $0.02 Compared With $18.4 Million or $0.89 per Diluted Share in 2006.
Fourth Quarter Summary - Quarterly Revenues of $38.9 Million, 22.2% Below Revenues of the Fourth Quarter of Last Year.
- Net Loss of $2.4 Million; Fully Diluted Loss per Share of $0.11 Compared With Net Income of $4.7 Million or $0.22 per Diluted Share in the Fourth Quarter of Last Year.
Tefron Ltd. (NYSE:TFR)(TASE:TFRN), a leading producer of seamless intimate apparel and engineered-for-performance (EFP(TM)) active wear, today announced financial results for the fourth quarter and full year 2007.
Fourth Quarter 2007 Results Fourth quarter revenues were $38.9 million, representing a 22.2% decrease from fourth quarter of 2006 revenues of $50.0 million. The decrease in revenues in the quarter was due to a reduction in sales of active-wear products, primarily to Nike, a reduction in sales of intimate apparel, mainly to Victoria's Secret for older Cut & Sew collections and lower sales of swimwear, mainly due to the delay of some swimwear revenues to the first quarter of 2008.
Fourth quarter gross margin was 5.4% compared with a gross margin of 22.2% in the fourth quarter of 2006. Operating loss for the quarter was $2.8 million, as compared with an operating income of $6.4 million (12.9% of revenues) in the fourth quarter of 2006. Net loss for the quarter was $2.4 million, or $0.11 per diluted share as compared with net income of $4.7 million (9.3% of revenues), or $0.22 per diluted share, in the fourth quarter of 2006.
The decline in gross margin and the operating loss in the quarter were primarily due to the lower revenue and manufacturing levels, increased costs due to factors described below and a one-time inventory write-off of approximately $0.7 million related to obsolete inventory.
The significant devaluation of the US Dollar versus the New Israeli Shekel, as well as the previously identified price reductions in older collections of Tefron's intimate apparel product line also continued to impact margins. Additionally, the higher proportion of Cut & Sew 'new generation' products in the sales mix for Nike, which have a lower profitability than those of the Seamless products, also reduced profitability. Finally, the short-term manufacturing challenges faced in the Hi-Tex division continued into the fourth quarter. As discussed in the prior 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.
Results for Full Year 2007 Full year 2007 revenues were $158.6 million, representing a 15.7% decrease from 2006 revenues of $188.1 million. The decline in revenue was primarily due to a reduction in sales of active-wear products, primarily to Nike, reduced sales of intimate apparel, mainly to Victoria's Secret for older Cut & Sew collections, and a slight decline in sales of swimwear.
Full year 2007 gross margin decreased to 12.3%, compared with 22.8% as reported in 2006. Operating income was $1.8 million (1.1% of revenues) compared with an operating income of $25.9 million (13.8% of revenues) as reported in 2006. Net income was $483 thousand (0.3% of revenues), or $0.02 per diluted share, compared with $18.4 million (9.8% of revenues) or $0.89 per diluted share, as reported in 2006.
Management comments Mr. Yos Shiran, Chief Executive Officer of Tefron, commented, "We faced a tough fourth quarter, particularly from a profitability standpoint. The primary cause was the weak US dollar, coupled with our Hi-Tex division manufacturing hurdles. While we are improving our ability to overcome these hurdles, we do expect them to continue into the early part of 2008." "We are currently working diligently to formulate a strategic and operational plan, together with the support of our new chairman, Mr. Yaacov Gelbard, intended to grow our revenue base, improve our operating efficiencies, while reducing our costs," continued Mr. Shiran. "In the short term, we will focus our efforts on solving the manufacturing challenges in our Hi-Tex division and aim to reduce operational costs. At the same time, we will continue our efforts to broaden our customer base." Mr. Shiran continued, "On the positive side, we saw a sequential growth in active-wear revenues following a few quarters of slower sales. This was primarily due to increased orders from Nike for their 'New Generation' products. Continuing this trend, from a revenue standpoint our first quarter looks strong. This is primarily due to continued growth in sales to Nike in both our Cut and Sew and Hi-Tex divisions, as well as a growth in sales to lululemon. In fact, supporting our long-term goals, we see this trend of strong growth in active-wear sales continuing throughout the first half of 2008, driving a growth in our overall sales. We also expect a strong increase in first quarter sales of swimwear." Mr. Shiran concluded, "Based on our current orders, we currently expect first quarter 2008 revenues of around $50 million. However, we believe that the continued weakening of the US Dollar, in addition to the temporary manufacturing hurdles of our Hi-Tex division, will continue to significantly affect our profitability in the first quarter of 2008. Accordingly, we expect to breakeven at the operating level in the first quarter of 2008." Conference Call The Company will be hosting a conference call today, February 28, 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: 0-800-917-5108
ISRAEL Dial-in Number: 03-918-0609
INTERNATIONAL Dial-in Number: +972-3-918-0609
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, Dolce and Gabbana, 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 Year ended December Year ended December
31, 2007 31, 2006
USD USD
Segments Thousands % of total Thousands % of total
Cut & sew 77,020 48.6% 85,951 45.7%
Seamless 81,594 51.4% 102,153 54.3%
Total 158,614 100.0% 188,104 100.0%
(continued) Three months Three months
ended ended
December 31, December 31,
2007 2006
% of
Segments USD Thousands total USD Thousands % of total
Cut & sew 23,047 59.3% 25,159 50.3%
Seamless 15,846 40.7% 24,848 49.7%
Total 38,893 100.0% 50,007 100.0%
TABLE 2: Sales by Product Line Year ended December Year ended December
31, 2007 31, 2006
USD % of total USD % of total
Product line Thousands Thousands
Intimate Apparel 89,877 56.7% 100,890 53.6%
Active wear 42,047 26.5% 59,406 31.6%
Swimwear 26,690 16.8% 27,808 14.8%
Total 158,614 100.0% 188,104 100.0%
(continued) Three months Three months
ended ended
December 31, December 31,
2007 2006
USD Thousands % of USD Thousands % of total
Product line total
Intimate Apparel 21,010 54.0% 26,209 52.4%
Active wear 11,284 29.0% 13,618 27.2%
Swimwear 6,599 17.0% 10,180 20.4%
Total 38,893 100.0% 50,007 100.0% Consolidated Balance Sheets U.S. dollars in thousands December 31,
2007 2006 ASSETS CURRENT ASSETS:
Cash and cash equivalents $ 2,384 $ 3,966
Short - term deposits 7,063 10,089
Marketable securities 5,668 4,975
Trade receivables, net 29,033 30,655
Other accounts receivable and prepaid
expenses 5,404 4,166
Inventories 32,577 28,912 Total current assets 82,129 82,763 LONG TERM INVESTMENTS: Marketable securities and bank deposit 1,284 1,029
Severance pay fund 1,288 778
Subordinated note 3,000 3,000 Total long term investments 5,572 4,807 PROPERTY, PLANT AND EQUIPMENT, NET 74,791 77,086 Total assets $ 162,492 $ 164,656 Consolidated Balance Sheets U.S. dollars in thousands (except share and per share data) December 31,
2007 2006 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES:
Current maturities of long-term bank loans $ 5,948 $ 5,948
Trade payables 29,720 31,143
Other accounts payable and accrued
expenses 8,635 10,402 Total current liabilities 44,303 47,493 LONG-TERM LIABILITIES:
Long term loans from banks (net of current
maturities) 13,374 19,322
Deferred taxes 12,397 12,313
Accrued severance pay 3,882 3,298 Total long-term liabilities 29,653 34,933
SHAREHOLDERS' EQUITY:
Share capital
Ordinary shares 7,518 7,411
Additional paid-in capital 106,530 101,684
Less - 997,400 Ordinary shares in
treasury, at cost (7,408) (7,408)
Cumulative other comprehensive income 368 55
Accumulated deficit (18,472) (19,512) Total shareholders' equity 88,536 82,230 Total liabilities and shareholders' equity $ 162,492 $ 164,656 Consolidated Statements of Operations U.S. dollars in thousands (except share and per share data) Year ended Three months ended December 31, December 31,
2007 2006 2007 2006 Sales $ 158,614 $ 188,104 $ 38,893 $ 50,007
Cost of sales 139,147 145,144 36,783 38,881 Gross profit 19,467 42,960 2,110 11,126
Selling, general and
administrative
expenses 17,715 17,077 4,866 4,699 Operating income
(loss) 1,752 25,883 (2,756) 6,427
Financial expenses,
net 1,289 1,912 329 411 Income (loss) before
taxes on income 463 23,971 (2,420) 6,016
Taxes on income (tax
benefit) (20) 5,711 (665) 1,348 Income (loss) from
continuing
operations 241 18,260 (2,662) 4,668
Income from
discontinued
operations - 120 - - Net income (loss) $ 483 $ 18,380 $ (2,420) $ 4,668 Basic and diluted
net earnings
(losses) per share
from continuing
operations:
Basic net earnings
(losses) per share $ 0.02 $ 0.90 $ (0.11) $ 0.23
Diluted net earnings
(losses) per share $ 0.02 $ 0.88 $ (0.11) $ 0.22 Basic and diluted
net earnings per
share from
discontinued
operations:
Basic net earnings
per share $ - $ 0.01 $ - $ -
Diluted net earnings
per share $ - $ 0.01 $ - $ - Basic and diluted
net earnings
(losses) per share:
Basic net earnings
(losses) per share $ 0.02 $ 0.91 $ (0.11) $ 0.23
Diluted net earnings
(losses) per share $ 0.02 $ 0.89 $ (0.11) $ 0.22 Weighted average
number of shares
used for computing
basic earnings
(losses) per share 21,188,161 20,210,722 21,202,986 20,620,500 Weighted average
number of shares
used for computing
diluted earnings
(losses) per share 21,630,124 20,754,566 21,202,986 21,672,528 Consolidated Statements of Cash Flows U.S. dollars in thousands Year ended Three months ended
December 31, December 31,
2007 2006 2007 2006
Cash flows from operating
activities:
Net income (loss) $ 483 $ 18,380 $(2,420) $ 4,668
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Income from discontinued
operations - (120) - -
Depreciation of property,
plant and equipment 8,567 8,719 2,126 2,410
Compensation related to
options granted to employees 571 555 73 79
Increase (decrease) in
severance pay, net 74 459 (70) 134
Increase (decrease) in
deferred taxes, net 79 3,098 58 (2,164)
Accrual of interest on short
and long-term deposits (613) (100) (117) (100)
Gain related to sale of
marketable securities (134) (37) (124) (37)
Interest and amortization of
premium and accretion of
discount of marketable
securities (124) (20) 201 (20)
Gain on disposal of property,
plant and equipment, net (651) (73) (10) (79)
Decrease (Increase) in trade
receivables, net 1,622 (4,677) 52 (11,463)
Decrease (increase) in other
accounts receivable and
prepaid expenses (984) (417) (158) 752
Increase in inventories (3,665) (2,530) (6,232) (2,098)
Increase (decrease) in trade
payables (1,423) 3,278 4,941 4,357
Increase in other accounts
payable and accrued expenses (768) 748 (316) 4,185 Net cash provided by (used
in) continuing operating
activities 3,034 27,263 (1,996) 624
Net cash provided by
discontinued operating
activities - 507 - - Net cash provided by (used
in) operating activities 3,034 27,770 (1,996) 624 Cash flows from investing
activities: Purchase of property, plant
and equipment (6,376) (4,688) (1,765) (2,264)
Investment grants received - 1,218 - -
Proceeds from sale of
property, plant and equipment 943 335 16 30
Dividend received from
discontinued operations - 140 - -
Proceeds from (payment
related to) sale of
subsidiary, net - 9,917 - (333)
Investment in marketable
securities (18,974) (11,876) (2,013) (11,876)
Proceeds from sale of
marketable securities 17,240 6,961 2,259 6,961
Investment in short-term and
long-term deposits (8,321) (11,018) (5,821) (11,018)
Proceeds from repayment of
deposits 12,989 - 10,489 - Net cash provided by (used
in) continuing investing
activities (2,499) (9,011) 3,165 (18,500)
Net cash used in discontinued
investing activities - (172) - - Net cash provided by (used
in) investing activities (2,499) (9,183) 3,165 (18,500) Consolidated Statements of Cash Flows U.S. dollars in thousands Year ended Three months ended
December 31, December 31,
2007 2006 2007 2006 Cash flows from financing
activities: Repayment of long-term bank
loans (5,948) (21,188) (1,487) (1,487)
Proceeds from long-term bank
loans - 5,000 - -
Decrease in short-term bank
credit - (14,713) - -
Tax benefit from exercise of
stock options related to
employees and directors - 446 - 446
Proceeds from exercise of
stock options related to
employees and directors 92 3,175 7 615
Exercise of tradable options
issued at the secondary
offering 4,290 972 - 972
Proceeds from secondary
offering of shares and
options, net - 13,816 - -
Dividend paid to shareholders (551) (9,446) - (4,825) Net cash used in continuing
financing activities (2,117) (21,938) (1,480) (4,279)
Net cash used in discontinued
financing activities - (544) - - Net cash used in financing
activities (2,117) (22,482) (1,480) (4,279) Total decrease in cash and
cash equivalents (1,582) (3,895) (311) (22,155)
Decrease in cash and cash
equivalents attributed to
discontinued operations - 209 - - Decrease in cash and cash
equivalents attributed to
continuing operations (1,582) (3,686) (311) (22,155)
Cash and cash equivalents at
beginning of period 3,966 7,652 2,695 26,121 Cash and cash equivalents at
end of period $ 2,384 $ 3,966 $ 2,384 $ 3,966 Calculation of the EBITDA U.S. dollars in thousands Year ended Three months ended
December 31, December 31, 2007 2006 2007 2006 Operating income
(See statements of
operations) $1,510 $25,883 $(3,020) $6,427
Depreciation and
amortization (See
statements of cash
flows) 8,567 8,719 2,126 2,410
Compensation related to
options granted to
employees (See
statement of cash flow) 813 555 315 79
EBITDA $10,890 $35,157 $(579) $8,916 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,
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