Tefron Reports First Quarter 2010 Results

MISGAV, Israel, May 21, 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 first quarter of 2010.

First Quarter 2010 Results

Tefron reported revenues for the first quarter of 2010 of $25.8 million. This compares with revenues of $22.3 million in the fourth quarter of 2009 and $47 million in the first quarter of 2009. The Company reported a gross profit in the first quarter of $0.9 million, compared with a gross loss of $2.16 million in the fourth quarter of 2009 and a gross profit of $5.5 million in the first quarter of 2009. Operating loss for the first quarter of 2010 was $3.6 million, compared with an operating loss of $5.6 million for the fourth quarter of 2009 and an operating loss of $0.3 million in the first quarter of 2009. Net loss for the first quarter of 2010 was $3.3 million, equivalent to a loss of $1.5 per diluted share, compared with net loss of $4.7 million in the prior fourth quarter, or a loss of $2.2 per diluted share, and net income of $0.1 million in the first quarter of 2009, equivalent to earnings per diluted share of $0.1.

Commenting on the results, CEO Amit Meridor, said, "In the first quarter we successfully completed the financial restructuring of Tefron culminating in the agreement with the banks on March 2, 2010 and the rights issue at the end of the quarter on March 25, 2010. The sales and operational results reported today met the targets we presented to the Board of Directors in our budget. We are pleased that having achieved these results, we can now focus on the next stage of the turnaround program with the implementation of stricter quality control, enhanced manufacturing effectiveness and efficiency and more consistent, dependable customer service."

About Tefron

Tefron manufactures boutique-quality everyday seamless intimate apparel, active wear and swimwear sold throughout the world by such name-brand marketers as Victoria's Secret, Nike, The Gap, J.C. Penney, Wall-Mart, lululemon Athletica, Calvin Klein, Maidenform, Patagonia, Reebok, , 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, swimwear, 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 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.

    TABLE 1: SALES BY SEGMENTS

               Three months ended   Three months ended  Year ended December
                 March 31, 2010       March 31, 2009          31, 2009
              USD                  USD                  USD
    Segment   Thousands % of total Thousands % of total Thousands % of total
    Cut & sew    14,349      55.7%    25,334      53.9%    53,232      46.1%
    Seamless     11,424      44.3%    21,651      46.1%    62,306      53.9%
    Total        25,773     100.0%    46,985     100.0%   115,538     100.0%


    TABLE 2: SALES BY PRODUCT LINE

                       Three months   Three months      Year ended
                       ended March    ended March        December
                        31, 2010        31, 2009         31, 2009
    Product line     USD       % of   USD      % of   USD        % of
                     Thousands total Thousands total  Thousands  total
    Intimate Apparel 13,014    50.5%  20,017   42.6%   64,143     55.5%
    Active wear       2,329     9.0%   8,743   18.6%   21,533     18.6%
    Swimwear         10,430    40.5%  18,225   38.8%   29,862     25.8%
    Total            25,773   100.0%  46,985  100.0%  115,538    100.0%

                     Swimwear growth              -42.8%
                     Intimate Apparel growth      -35.0%
                     Active wear                  -73.4%


    CONSOLIDATED BALANCE SHEETS
    U.S. dollars in thousands


                                             March 31,      December 31,
                                        2010        2009        2009
                                            Unaudited         Audited
    ASSETS

    CURRENT ASSETS:
    Cash and cash equivalents          $ 326      $ 211       $ 1,904
    Short-term investments               737      1,149           737
    Trade receivables, net            14,974     30,595        14,597
    Other accounts receivable and
    prepaid expenses                   2,971      4,312         2,892
    Inventories                       21,348     26,026        19,778

    Total current assets              40,356     62,293        39,908

    NON- CURRENT ASSETS:
    Subordinated note                      -      2,400             -
    Deferred taxes, net                1,220          -         1,409
    Property, plant and equipment,
    net                               54,706     62,613        56,920
    Intangible assets, net               857      1,921           960

                                      56,783     66,934        59,289

    Total assets                    $ 97,139  $ 129,227      $ 99,197


    CONSOLIDATED BALANCE SHEETS
    U.S. dollars in thousands (except share and per share data)

                                              March 31,         December 31,
                                          2010         2009         2009
                                              Unaudited           Audited
    LIABILITIES AND SHAREHOLDERS' EQUITY

    CURRENT LIABILITIES:
    Short-term bank credit                 $ 2,971   $ 24,262    $ 25,847
    Trade payables                          18,215     24,769      15,042
    Other accounts payable and accrued
    expenses                                 4,346      6,970       5,666

    Total current liabilities               25,532     56,001      46,555

    LONG-TERM LIABILITIES:
    Long term loans from banks (net of
    current maturities)                     19,790          -           -
    Other accounts payable                   1,454      1,432       1,838
    Accrued severance pay, net                 648      1,413         729
    Deferred taxes, net                      1,906      6,688       3,080

    Total long-term liabilities             23,798      9,533       5,647

    SHAREHOLDERS' EQUITY:
    Share capital -
    Ordinary shares                         10,351      7,518       7,518
    Additional paid-in capital             108,782    107,161     107,522
    Accumulated deficit                    (63,920)   (43,594)    (60,666)
    Less - 99,740 Ordinary shares in
    treasury, at cost                       (7,408)    (7,408)     (7,408)
    Other capital reserve                        4       (231)         29

                                            47,809     63,446      46,995
    Employee stock options in subsidiary         -        247           -

    Total shareholders' equity              47,809     63,693      46,995

    Total liabilities and shareholders'
    equity                                $ 97,139  $ 129,227    $ 99,197


    CONSOLIDATED STATEMENTS OF OPERATIONS
    U.S. dollars in thousands (except share and per share data)
                                                                     Year
                                             Three months ended      ended
                                                                    December
                                                  March 31,            31,
                                             2010          2009       2009
                                                 Unaudited          Audited

    Sales                                  $ 25,773      $ 46,985 $ 115,538
    Cost of sales                            24,829        41,520   119,339

    Gross profit (loss)                         944         5,465    (3,801)
    Selling, general and administrative
    expenses                                  4,519         5,798    17,621
    Other income                                  -             -      (496)

    Operating loss                           (3,575)         (333)  (20,926)
    Loss from early repayment of
    subordinated note receivable                  -             -    (1,285)
    Financial expenses (income), net            538          (494)      512

    Income (loss) before taxes on income     (4,113)          161   (22,723)
    Taxes on income (tax benefit)              (859)           16    (5,330)

    Net income (loss)                      $ (3,254)        $ 145   (17,579)

    Basic and diluted net earnings
    (losses) per share:
    Basic net earnings (losses) per share    $ (1.5)        $ 0.1    $ (8.1)
    Diluted net earnings (losses) per
    share                                    $ (1.5)        $ 0.1    $ (8.1)

    Weighted average number of shares used
    for computing basic earnings (losses)
    per share                              2,178,746    2,137,178 2,137,178

    Weighted average number of shares used
    for computing diluted earnings
    (losses) per share                     2,178,746    2,137,178 2,137,178


    CONSOLIDATED STATEMENTS OF CASH FLOWS
    U.S. dollars in thousands
                                                                    Year
                                                Three months ended  ended
                                                                    December
                                                     March 31,      31,
                                                 2010         2009  2009
                                                     Unaudited      Audited

    Cash flows from operating activities
    Net income (loss)                       $ (3,254)     $ 145   $ (17,393)
    Adjustments to reconcile net income
    (loss) to net cash provided by (used in)
    operating activities:
    Depreciation of property, plant and
    equipment and intangible assets            2,340      2,213       9,256
    Compensation related to options granted
    to employees                                  70         57         171
    Impairment reversal of property, plant
    and equipment and intangible assets            -          -        (496)
    Inventory write-off                          297        480       2,808
    Extinguishment of contingent
    consideration against profit or loss           -          -        (399)
    Change in employee benefit liabilities,
    net                                          (81)      (756)       (850)
    Loss from early repayment of subordinated
    note receivable                                -          -         (75)
    Deferred taxes, net                         (985)      (209)     (5,364)
    Loss (gain) on disposal of property,
    plant and equipment                            -          -       1,285
    Decrease (increase) in trade receivables,
    net                                         (377)    (7,149)      8,849
    Decrease (increase) in other accounts
    receivable and prepaid expenses             (294)       499       1,497
    Decrease (increase) in inventories        (1,867)     5,619       9,730
    Increase (decrease) in trade payables      3,173       (398)    (10,125)
    Decrease in other accounts payable and
    accrued expenses                          (1,514)    (1,052)       (428)

    Net cash used in operating activities     (2,496)      (568)     (1,476)

    Cash flows from investing activities
    Purchase of property, plant and equipment    (22)      (232)       (611)
    Purchase of intangible assets                 (1)       (26)        (75)
    Contingent consideration paid                  -          -        (271)
    Proceeds from sale of property, plant and
    equipment                                      4         18          18
    Proceeds from early repayment loss from
    subordinated note receivable                   -          -       1,715

    Net cash provided by (used in) investing
    activities                                   (19)      (240)        776


    CONSOLIDATED STATEMENTS OF CASH FLOWS
    U.S. dollars in thousands
                                                                  Year
                                            Three months ended    ended
                                                                  December
                                                March 31,         31,
                                             2010         2009    2009
                                                Unaudited         Audited
    Cash flows from financing activities
    Short-term bank credit, net           $ (11,275)     $ 491    $ 4,923
    Repayment of long-term bank loans       (11,601)    (1,038)    (3,885)
    Proceeds from long-term bank loans       20,000          -          -
    Issue of shares (net of issue
    expenses)                                 3,813          -          -

    Net cash provided by (used
    in)financing activities                     937       (547)     1,038

    Increase (decrease) in cash and cash
    equivalents                              (1,578)    (1,355)       338
    Cash and cash equivalents at the
    beginning of the period                   1,904      1,566      1,566

    Cash and cash equivalents at the end
    of the period                             $ 326      $ 211    $ 1,904

    Contacts

    Company Contact:
    Eran Rotem
    Chief Financial Officer
    +972-4-990-0881
    reran@tefron.com

SOURCE Tefron Ltd




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