Tefron Reports Second Quarter 2010 Results

    TEL AVIV, Israel, August 18, 2010 /PRNewswire-FirstCall/ --
    - Tefron Ltd. (OTC:TFRFF; TASE:TFRN)

    Second Quarter Highlights:

    - Tefron reports a positive EBITDA for the second quarter of
      2010, as compared to a negative EBITDA of about $3.3M for the
      corresponding quarter last year.

    - Net loss of approximately $2M as compared with net loss of
      approximately $4.6M for the corresponding quarter last year.

    - Decrease of $3.4M in operating loss for Q2/10 as compared
      with second quarter last year. This decrease was achieved primarily due
      to significant improvements in key operational measures;`On Time
      Delivery` to customers and reduction in production waste, which led to
      increased efficiency and yield. In addition, significant savings were
      achieved in fixed costs.

    - Operational efficiency increased from 60% to 85%, while
      increasing the Company's production capacity.

    - The Company began receiving orders from new strategic
      customers in the U.S.

Commenting on the results, CEO Amit Meridor, said: "During the first quarter of the year, Tefron began implementation of its Turnaround Plan, for an immediate improvement of the operating results and returning to a momentum of growth. Tefron exceed the Turnaround plan goals set for the second quarter. The Company demonstrated substantial operational improvements, which led to a reduction in losses and to a positive EBITDA for the quarter, as compared to a negative EBITDA of approximately $12M in 2009. While enhancing collaboration with current customers, the Company has recently begun to supply to new customers and is also operating toward extending its swimwear development and production activities to the American and European markets."

Meridor further added that: "We are investing great efforts in regaining customer confidence in Tefron and our operational improvements enable us to be both efficient and competitive. Second quarter results demonstrate Tefron's ability to introduce changes in the Company's cost structure within a short period of time, improve customer service and create a healthy company. We expect the significant changes implemented during the first half of the year and those to be applied in the second half, shall enable Tefron to regain and expand its customer base."

Incoming Tefron Chairman, Arnon Tiberg, commented: "Tefron took on the challenge of regaining a major position in the global textile industry as a leading player in its field, while implementing an aggressive long term recovery and growth plan. The Company continues to operate toward improving all of the parameters identified with its production floor, such as improving On Time Delivery to customers and reduction in production waste. In addition, the Company continues cutting down cost structure in terms of personnel, rent and transportation expenses."

Tiberg further added that: "In recent months, we have strengthened our top management with leading textile and fashion managers and the results were forthcoming. The Company board has complete confidence in management and its ability to achieve improvements in framework of the Turnaround plan."

Results for Q2/2010

Company sales amounted to $24.9M as compared to $25.3M for the corresponding period last year.

Operating losses amounted to approximately $2.3M, as compared to losses of $5.6M for the corresponding period last year. This decline is mainly due to the improvement in On Time Delivery to customers and reduction in production waste, which led to increased efficiency while improving the production capacity and, due to significant savings on fixed costs.

The Company reports positive EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) of about $12K, as compared to a negative EBITDA of about $3.3M for the corresponding period last year.

Financial expenses amounted to $370K, as compared to $434K for the corresponding quarter last year.

Net loss amounted to approximately $2M, as compared with $4.6M net loss for the corresponding quarter last year.

Company's Financials as on 30 June, 2010:

Current assets totaled to $36.0M as compared with $39.9M on 31 December, 2009. The 9.8% decline was derived mainly of a $1.5M decline in cash, which were used to finance the Company losses, and of a $1.3M decline in inventory due to the seasonality of the swimwear products.

Current liabilities total about $23.0M, as compared to $46.6M on 31 December, 2009. The $26.6M decline is derived mainly of bank credits. The agreement signed with the banks on 2 March, 2010 included a restructure for the Company's credit facilities. As part of this reorganization, the main part of the bank credit become long term debts and as such, classified as non-current liabilities.

Non-current liabilities total about $22.5M, as compared to approximately $5.6M on 31 December, 2009. The $16.9M increase is derived mainly of the abovementioned restructuring and of the $1.8M offset of the balance for deferred taxes, net.

Company equity totals about $45.9M, comprising approximately 50.2% of the entire balance sheet, as compared to about $47.0M, which comprised 47.4% of the total balance sheet as on 31 December, 2009. The decline in equity as compared to 31 December, 2009 was derived mainly of the $5.2M loss recorded during the reporting period and the offset of the $4M capital investment in the Company under the Company's rights offering and private equity issuances.

Company net loss, for the first half ending on 30 June, 2010, amounted to about $5.2M, as compared to a net loss of approximately $4.5M for the corresponding period last year.

About Tefron:

Tefron is a market leader in the field of apparel, serving customers in the U.S. and Europe. Tefron focuses on developing, producing, marketing and selling undergarments, athletic wear, beach and swimwear. Tefron activities are divided into two business sectors: "Seamless" design, development, production and sale of undergarments and athletic apparel; and "Cut & Sew" design, development, production and sale of undergarments, swimsuits and athletic apparel. The design and production are mainly performed in Israel, Jordan and the Far East, while the finished goods are sold mainly in the U.S. and Europe.

Company customers include leading international players, such as: Hanes Brands Industries, Reebok, Patagonia, Lululemon Athletica, GAP, Calvin Klein, Wal-Mart, Victoria's Secret.

For further details: Dan Moses - 052-874-4809

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:

    - the effect of the worldwide recession on our sales to our
      customers in the United States and in Europe and on our ability to
      finance our operations;

    - our customers' continued purchase of our products in the same
      volumes or on the same terms;

    - the failure of any of our principal customers to satisfy its
      payment obligations to us;

    - 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)

    - fluctuations in inflation and currency rates;

    - the potential adverse effect on our future operating efficiency
      resulting from our expansion into new product lines with more
      complicated products, different raw materials and changes in market
      trends;

    - 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;

    - 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.

    Consolidated Balance Sheets

                                                                      As of
                                                                     December
                                                  As of June 30,        31,
                                               2010        2009        2009
    ASSETS                                             $ in thousands

    CURRENT ASSETS

    Cash and cash equivalents                 $ 439        $ 837     $ 1,904
    Short-term investments                      700        1,188         737
    Trade receivables, net                   13,634       24,123      14,597
    Other current assets                      2,865        3,616       2,892
    Inventories                              18,451       21,452      19,778
                                             36,089       51,216      39,908

    NON-CURRENT ASSETS

    Deferred taxes, net                       1,181        2,100       1,409
    Property, plant and equipment, net       53,446       60,643      56,920
    Goodwill and other intangible assets,
    net                                         757        1,710         960

                                             55,384       64,453      59,289
                                           $ 91,473    $ 115,669    $ 99,197
    LIABILITIES AND EQUITY

    CURRENT LIABILITIES

    Short-term loans (including current
    portion of long term - loans)           $ 4,760     $ 25,259    $ 25,847
    Trade payables                           14,048       16,875      15,042
    Other current liabilities                 4,199        5,619       5,666
                                             23,007       47,753      46,555

    NON-CURRENT LIABILITIES

    Long-term loans                          19,802            -           -
    Employee benefits, net                      430        1,550         729
    Deferred taxes, net                       1,053        1,166       3,080
    Other non-current liabilities             1,233        5,429       1,838
                                             22,518        8,145       5,647

    EQUITY ATTRIBUTABLE TO OWNERS OF THE

    PARENT

    Share capital                            10,351        7,518       7,518
    Additional paid-in capital              108,852      107,460     107,522
    Accumulated deficit                    (65,915)     (48,214)    (60,666)
    Treasury shares                         (7,408)      (7,408)     (7,408)
    Other capital reserves                       68          415          29

    Total                                    45,948       59,771      46,995

                                           $ 91,473    $ 115,669    $ 99,197

    CONSOLIDATED STATEMENTS OF INCOME
    U.S. dollars in thousands (except per share data)

                                                                     Year
                                                                     ended
                       Six months         Three months ended       December
                      ended June 30,            June 30,              31
                     2010       2009        2010        2009         2009
                                    Unaudited                      Audited
                            $ in thousands (except per share data)

    Sales           50,719$    72,245$    24,946$     25,260$       115,538$
    Cost of sales   48,159     68,360     26,840      26,840        119,339

    Gross profit
    (loss)           2,560      3,885      1,616      (1,580)        (3,801)

    Selling and
    marketing
    expenses         6,596      7,787      2,951       3,280         13,842
    General and
    administrative
    expenses         1,798      2,093        924         802          3,779
    Other income         -          -          -           -           (496)

    Operating loss  (5,834)    (5,995)    (2,259)     (5,662)       (20,926)

         Loss from
             early
      repayment of
      subordinated
              note
        receivable       -          -          -           -         (1,285)
    Financial
    income             271      2,155        271         332          1,747
    Financial
    expenses        (1,179)    (2,095)      (641)       (766)        (2,259)

    Financial
    Income
    (expenses),
    net               (908)        60       (370)       (434)          (512)

    Loss before
    income taxes    (6,742)    (5,935)    (2,629)     (6,096)       (22,723)
    Tax benefit     (1,493)    (1,460)       634      (1,476)         5,330


    Loss            (5,249)$   (4,475)$   (1,995)$    (4,620)$      (17,393)$

    Basic and
    diluted loss      (2.0)      (2.1)      (0.6)       (2.2)          (8.1)


    Company Contact:

    Eran Rotem
    Chief Financial Officer
    [phone]
    [e-mail]

SOURCE Tefron Ltd

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