Tefron (NYSE:TFR)
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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,