Tefron Announces Strong Improvement in Sales and Gross Profit in the First Half of 2011 and Consistent Positive EBITDA for a Six Month Period Revenues Grow 12% Year-on-year in the First Six Months of 2011 to $56.8M, Representing $110M Annual Sales
MISGAV, Israel, August 17, 2011 /PRNewswire/ --
Tefron Ltd. (OTC:TFRFF; TASE:TFRN), a leading producer of seamless intimate apparel and engineered-for-performance (EFPT) active wear, today announced financial results for the first half and second quarter of 2011.
Commenting on the results, Amit Meridor, Tefron's CEO said: "Tefron's strong sales and operational improvements provide a clear indication that we are growing in accord with our turnaround plan. The increase in sales to $56.8 million from $50.7 million in the first half last year, represents an annualized sales rate of approximately $110 million for 2011. I am very pleased to report that the strong sales reflect both higher sales to existing customers, as well as an important broadening of the customer base."
Meridor continued, "These first half results do not yet reflect the full potential of the acquisition of the seamless assets of Nouvelle Inc. of Canada. Not only is the organic improvement in performance seen in the first half of 2011 expected to continue, but we expect a greater contribution to growth in the second half of the year from the Nouvelle acquisition, with an important increase in sales to the mass market in the USA, as well as in European markets. Looking further forward, Tefron has been focusing much of our development expenditure and investment in new technology toward the launch of new products in the sports market for 2012. We believe that these products will enable us to return to our global leadership position in seamless technology and the preliminary indications regarding the new products are very positive."
Arnon Tiberg, Tefron's Chairman confirmed that "Tefron is continuing to improve its major financial and operational parameters in line with the strategic objectives of the Turnaround plan introduced by management a year and a half ago. This half year financial report noticeably demonstrates the results of our efforts to increase the efficiency of our operational processes, which had been a major bottleneck in growth. The expansion of sales in the first half of the year is a result of both the enlistment of new large retail customers and higher sales to existing strategic customers. These two factors are a direct result of the steps taken to increase marketing and sales activity in targeted markets in Europe and North America, investment in new product development to regain our position of technological leadership, and our strenuous efforts to improve customer service, timeliness of delivery and quality control. Finally, I would add that we are pleased how management has begun to exploit the synergies and benefits of the merger with Nouvelle, although there are clearly more gains to exploit going forward. "
Financial highlights for the first half of 2011
- Sales for the first half of 2011 rose to $56.8 million, representing approximately 12% increase compared to the first six months of 2010.
- Sales for the second quarter of 2011 totaled $28.8 million, an increase of 15.6% compared to the second quarter of 2010.
- Gross profit more than doubled to $9.2 million (16.3% of sales), compared to gross profit of $4.1 million (8.0% of sales) in the first half of 2010.
- EBITDA improved to a positive position of $777,000, compared to a negative EBITDA of approximately $1.2 million in the first six months of 2010.
- The operating loss was reduced to $3.2 million from an operating loss of $5.8 million in the first half of 2010.
Results First Half of 2011
Sales in the first half of 2011 totaled $56.8 million, an increase of 11.9% compared with $50.7 million during the same period last year and an increase of 60.7% compared with $35.3 million in the second half of 2010. Most of the increase in sales compared to last year and compared to the prior reporting period can be attributed to the growth in sales of Intimate and Active wear apparel in the "seamless" sector. Higher sales in this segment are mainly due to the successful incorporation of activities acquired from Nouvelle. In addition, first half sales, compared with the prior reporting period, were boosted by due to the above and due to seasonal increase in swimwear sales which totaled $7.8 million in the first six months of 2011.
Gross profit for first half 2011 totaled $9.2 million (16.3% of sales) compared with gross profit amounting to about $4.1 million (8.0% of sales) in the same period last year and a negative $1.9 million in the second half of 2010. The significant improvement in gross profit and gross profit margin in the second half of 2010 can be largely attributed to improved efficiency in the sales cycle, as well as the successful application of the Turnaround plan which has among other benefits, helped to reduce cost of sales.
Operating loss for the first half of 2011 declined by about 46% and totaled $3.2 million, compared to an operating loss of $5.8 million in the same period last year, and an operating loss of $17.0 million in the second half of 2010.
EBITDA during the first six months of 2011 turned positive and amounted to approximately $777,000. The positive EBITDA for the first half of 2011, compares with a negative EBITDA of $1.2 million in the same six-month period last year and a negative EBITDA of $5.5 million in the second half of 2010.
Cash flow used in operating activities totaled $9.2 million, in the first half of 2011 compared to cash flows used in operating activities of $4.2 million in the same period last year.
Net loss in the first half of 2011 was reduced to $4.0 million, compared with a net loss of $5.2 million during the same period last year and a net loss of $17.4 million dollars in the second half of 2010.
Second quarter results for 2011
Sales in the second quarter of 2011 totaled $28.8 million, an increase of 15.6% compared with sales of $24.9 million in the second quarter of 2010. Gross profit for the second quarter of 2011 totaled $4.3 million (14.7% of sales), compared to gross profit of $2.3 million (9.2% of sales) last year.
Second quarter operating loss for 2011 declined by about 43% and totaled $1.3 million, compared to an operating loss of $2.3 million in the same period last year.
EBITDA totaled $507,000 for the second quarter of 2011, compared with EBITDA of $12,000 dollars for the same period last year.
Cash flows used in operating activities for the second quarter of 2011 totaled $1.5 million, compared to cash used in operating activities of $1.7 million in the same period last year.
The second quarter net loss for 2011 amounted to $1.7 million, compared with a net loss of $2.0 million in the three months between April and June last year.
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, Warnaco/Calvin Klein, Wal-Mart Stores Inc,The Gap, J. C. Penney, Patagonia, Reebok, TJMaxx, TMGTV, and El Corte Ingles, 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:
- 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 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;
- fluctuations in the 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 at As at June 30, December 31, 2011 2010 2010 Unaudited Audited Dollars thousands Current assets Cash $ 3,469 $ 439 $ 9,361 Investment in securities available for sale 753 700 731 Trade receivables 18,287 13,634 9,339 Other receivables 2,386 2,865 1,878 Inventory 14,597 18,451 16,664 39,492 36,089 37,973 Non current assets held for sale 5,226 - 2,088 44,718 36,089 40,061 Non current assets Deferred taxes, net 1,055 1,181 972 Fixed assets, net 32,952 53,446 38,936 Goodwill and intangible assets 2,079 757 2,783 36,086 55,384 42,691 $ 80,804 $ 91,473 $ 82,752
Consolidated balance sheets
As at As at December June 30, 31, 2011 2010 2010 Unaudited Audited Dollars thousands Current liabilities Credit from banks (including current maturities of long-term loans) $ 6,685 $ 4,760 $ 6,194 Trade payables 14,222 14,048 11,864 Other payables 4,574 4,199 8,450 25,481 23,007 26,508 Non current liabilities Long-term loans from banks 22,721 19,802 19,818 Employees benefits, net 521 430 516 Long-term institutions payable - 1,053 - Deferred taxes, net - 1,233 - 23,242 22,518 20,334 Equity attributable to the equity holders of the Company Share capital 19,818 10,351 19,818 Additional paid-in capital 107,427 108,852 107,204 Accumulated deficit (87,957) (65,915) (83,803) Treasury shares (7,408) (7,408) (7,408) Capital reserve for financial assets available for sale (69) (122) (91) Capital reserve for hedging transactions 80 - - Capital reserve for transactions with a controlling shareholder 190 190 190 Total capital 32,081 45,948 35,910 $ 80,804 $ 91,473 $ 82,752
Consolidated statements of income
Year ended Six months ended Three months ended December June 30, June 30, 31 2011 2010 2011 2010 2010 Unaudited Audited In dollars thousands Sales $ 56,766 $50,719 $ 28,838 $ 24,946 $ 86,044 Cost of sales, net* 47,547 46,640* 24,585 22,646* 83,990* Gross profit 9,219 4,079 4,253 2,300 2,054 Development expenses, net* 2,051 1,519* 929 684 2,869* Selling and marketing expenses 8,518 6,596 3,828 2,951 11,850 General and administrative expenses 1,827 1,798 782 924 4,050 Other expenses - - - - 6,091 Operating loss (3,177) (5,834) (1,286) (2,259) (20,806) Financial income 14 271 7 271 30 Financial expenses (966) (1,179) (575) (641) (2,379) Financial expenses, net (952) (908) (568) (370) (2,349) Loss before taxes on income (4,129) (6,742) (1,854) (2,629) (25,155) Tax benefit 100 1,493 172 634 2,469 Loss $ (4,029)$ (5,249) (1,682) $ (1,995) $ (22,686) Loss per share relating to the Company's shareholders (in dollars) Basic and diluted loss per share $ (0.6) $ (2.0) $ (0.3) $ (0.6) $ (7.7) EBITDA $ 777 $ (1,153) $ 507 $ 12 $ (6,630) * Reclassified
Chief Financial Officer
SOURCE Tefron Ltd