Tefron Announces Third Quarter 2010 Financial Results Tefron Continues to Achieve Improvements in Operational Results: Company Improves EBITDA for Q3 2010 by $6.4M to -$0.6M and Reduces Operating Loss by $6.2M Compared to Q3 2009
MISGAV, Israel, December 1, 2010 /PRNewswire-FirstCall/ -- Tefron Ltd. (OTC:TFRFF; TASE:TFRN), a leading producer of seamless intimate apparel and engineered-for-performance (EFPTM) active wear, today announced financial results for the third quarter of 2010.
Financial Highlights: - EBITDA improved to negative $0.6 million in the third quarter of 2010, an improvement of $6.4 million compared with negative EBITDA of $7.0 million in the third quarter of 2009. - Operating loss for the third quarter of 2010 improved by $6.2 million to $3.1 million, compared with an operating loss of $9.3 million in the third quarter of 2009. - Loss for the third quarter of 2010 totaled $3.1 million, compared with a loss of $8.3 million for the third quarter of 2009. - Operating loss for the first nine months of 2010 totaled $8.9 million, compared to an operating loss of $15.3 million in the first nine months of 2009. - The loss for the first nine months of 2010 amounted to $8.3 million compared with a loss of $12.7 million in the corresponding period of 2009.
Third Quarter 2010 Results
Tefron reported revenues for the third quarter of 2010 of $18.0 million. This compares with revenues of $21.0 million in the third quarter of 2009. The Company reported a gross profit in the third quarter of $0.2 million, compared with a gross loss of $5.5 million in third quarter of 2009. Operating loss for the third quarter of 2010 was $3.1 million, representing a $6.2 million improvement compared with an operating loss of $9.3 million in the third quarter of 2009. Despite the lower sales turnover, Tefron achieved this $6.2 million reduction in the operating loss through its efforts to cut production waste and losses, lower labor costs, increase operating efficiency, and an improvement in lead time to costumers.
EBITDA for the third quarter of 2010 improved to negative $0.6 million, compared to negative EBITDA of $7.0 million in the third quarter of 2009, representing a $6.4 million improvement. Net financial expenses in the third quarter of 2010 totaled $869 thousand, compared to net financial expenses of $474 thousand in the third quarter of 2009. This 83.3% increase in financial expenses resulted from an increase of interest on loans and bank credit, and from the devaluation of the U.S. dollar against the NIS. Loss for the third quarter of 2010 was $3.1 million, compared with loss of $8.3 million in the third quarter of 2009.
Revenues for the nine-month period ended September 30, 2010 totaled $68.7 million, compared to $93.3 million for the comparable period in 2009. Operating loss for the first nine months of 2010 was $8.9 million, compared to an operating loss of $15.3 million for the first three quarters of 2009. EBITDA from January to September 30, 2010 was negative $ 1.7 million, compared to negative EBITDA of $8.4 million for the first nine months of 2009, representing an improvement of $ 6.7 million. The loss in the nine month reporting period amounted to $8.3 million compared with a loss of $12.7 million for the same period in 2009.
Third Quarter 2010 Financial Position
Current assets as of September 30, 2010 were $30 million, compared to 39.9 million on December 31, 2009. The 24.8% decrease in current assets was mainly due to a decease of $5.2 million in trade receivables and $4.2 million in inventories, reflecting the reduction in sales volume and the seasonality in swimwear products.
Tefron's current liabilities on September 30, 2010 amounted to $37.7 million, compared to $46.6 million on December 31, 2009. The decrease of $8.9 million was mainly due to the reduction of $6 million in trade payables following the decrease in activity of the company during the reporting period. The balance of current liabilities includes long-term loans of $19.8 million and $11.6 million as of September 30, 2010 and December 31, 2009, respectively.
Non-current liabilities of the company on September 30, 2010 were $ 2.6 million, compared to $5.6 million on December 31, 2009. The decrease of $3 million was mainly due to a decrease of $2.4 million in deferred tax balances.
Shareholders' equity totaled $42.8 million on September 30, 2010 and accounted for 51.5% of the balance sheet, compared to $47 million on December 31, 2009, which was equivalent to 47.4% of the balance sheet .The decrease in shareholders' equity was mainly due to the $8.3 million net loss in the reporting period, which was partly offset by fund raising of $ 4 million (gross) in Tefron's Rights Offering and Private Placement.
Tefron CEO Amit Meridor: "Tefron's adherence to its turnaround program has enabled the Company to significantly improve operating performance this quarter, reducing operating losses and improving EBITDA, and to better balance the effects of seasonality on swimwear sales typical in the third quarter. These improvements reflect the company's enhanced cost structure, in particular, improvements on lead time delivery to customers, the reduction of production waste, lower labor costs, and increase in manufacturing efficiency. "
Mr. Meridor continued, "Our recent transaction to acquire the Seamless activities of the Canadian apparel manufacturer, Nouvelle Seamless, has far-reaching implications for our success in regaining our leading position in Seamless and performance apparel. Nouvelle's activities with its strong product offering to the mass market and its customer portfolio, complement Tefron's activity in the market and will strengthen Tefron's sales and marketing network in the US. At the same time, Nouvelle has developed low-cost production channels, as well as other distribution channels in the Far East which will enable us to continue to improve Tefron's offering and geographical reach."
Tefron's Chairman of the Board of Directors, Arnon Tiberg: "The third quarter results reflect the success of Tefron's management in meeting targets for streamlining the manufacturing process which were set in the turnaround program and included a systematic restructuring of the organization and the production floor to increase efficiency, as well as processes to improve other operational components. The recently signed deal includes, as well, an investment of $5.8 million in Tefron, and will contribute to further improvements in the cost structure of Tefron, as well as expanding our marketing and distribution activities, particularly in the US. We are currently working on the preparations for the merger of the Nouvelle's Seamless activities into Tefron's operation so that immediately upon closing and approval by the Tefron's shareholders committee we can move ahead to integrate the businesses. In addition, Tefron is expected to sign a modified agreement with its financing banks approving the deal and extending Tefron's credit and debt line by at least $5m."
Mr. Tiberg summarizes, "The combined effect of Tefron's improved cost structure, funding sources of $10.8m, and intensive marketing activity in North America gives Tefron strong potential for profitable growth."
Events after balance sheet date:
Tefron announced that the company signed an agreement for a total investment of $5.8 million dollars in exchange for 51% of its equity. In addition, it would acquire the seamless activities of Canadian apparel manufacturer, Nouvelle.
In addition, Tefron announced that it was in advanced stages of negotiations with its financing banks to approve the transaction, increase its credit and debt facilities by at least $5 million and to determine new financial covenants, according to the company's business plan.
The Lieberman family, Nouvelle shareholders, will invest $3.3 million in Tefron. Together with the shares issued to Nouvelle for its assets, the Lieberman family will become Tefron's largest shareholder, with approximately 33% of Tefron's shares. Mivtach Shamir will invest $ 1.3 million for a consideration of 9.5% of Tefron shares, and the investors group led by Rimon Funds will invest a total of $1.2 million in exchange for 8.7% of the company shares.
The transaction is subject to fulfillment of conditions, including, inter alia, approval of the transaction at the shareholders' general meeting of the company by a special majority, and a modified financing arrangement with the banks. The company is in advanced stages of negotiations with the financing banks to increase its credit and debt facilities by at least $5 million and to determine new financial covenants, to the satisfaction of the new investors. The company is waiting for the approval of the banks, but there is no certainty that such authorization will be received. The company will provide updated information with the signing of a final settlement.
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, lululemon athletica, Warnaco/Calvin Klein , Walmart Stores Inc, The Gap, J. C. Penney, Maidenform, , Patagonia, Reebok, 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 industr 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.
Tefron Ltd. - Consolidated Balance Sheets As of December As of September 30, 31, 2010 2009 2009 Unaudited Audited In dollars thousands Current Assets Cash and cash equivalents 1,948 5,326 1,904 Sort-term investments 700 837 737 Trade receivables, net 9,430 16,258 14,597 Other current assets 2,080 2,933 2,892 Inventories 15,625 20,046 19,778 29,783 45,400 39,908 Non-Current Assets held for sale 176 - - 29,959 45,400 39,908 Non-Current Assets Deferred taxes, net 1,488 1,449 1,409 Fixed assets, net 50,997 58,712 56,920 Goodwill and other intangible assets, net 660 1,554 960 53,145 61,715 59,289 83,104 107,115 99,197 Current Liabilities Bank credit 25,260 16,956 25,847 Trade payables 8,981 18,615 15,042 Other current liabilities 3,454 5,824 5,666 37,695 41,395 46,555 Non-Current Liabilities Bank loans - 8,222 - Employee benefits, net 486 1,543 729 Other non-current liabilities 1,473 778 1,838 Deferred taxes, net 635 4,048 3,080 2,594 14,591 5,647 Equity related to Company shareholders Share capital 10,351 7,518 7,518 Additional paid-in capital 108,942 107,492 107,522 Accumulated deficit (69,138) (56,477) (60,666) Treasury shares (7,408) (7,408) (7,408) Capital reserves 68 4 29 Total equity 42,815 51,129 46,995 83,104 107,115 99,197 Tefron Ltd. - Consolidated Statements of Income Year ended Nine months ended Three months ended December September 30, September 30, 31, 2010 2009 2010 2009 2009 Unaudited Audited In dollars thousands (excluding loss per share data) Sales 68,709 93,263 17,990 21,018 115,538 Cost of sales 65,927 94,902 17,768 26,542 119,339 Gross profit (loss) 2,782 (1,639) 222 (5,524) (3,801) Selling and marketing expenses 9,123 10,925 2,527 3,138 13,842 General and administrative expenses 2,440 2,745 642 652 3,779 Other expenses (income) 133 - 133 - (496) Operating loss (8,914) (15,309) (3,080) (9,314) (20,926) Loss from the early repayment of a subordinated note receivable - (1,285) - (1,285) (1,285) Financial income 271 2,425 7 270 1,747 Financial expenses (2,048) (2,839) (876) (744) (2,259) Financial expenses, net (1,777) (414) (869) (474) (512) Loss before taxes on income (10,691) (17,008) (3,949) (11,073) (22,723) Tax benefit 2,365 4,270 872 2,810 5,330 Loss (8,326) (12,738) (3,077) (8,263) (17,393) Basic and diluted loss (2.9) (6.0) (1.0) (3.9) (8.1) Contacts Company Contact: Eran Rotem Chief Financial Officer +972-4-990-0881 firstname.lastname@example.org
SOURCE Tefron Ltd