Tefron Reports Fourth Quarter and Annual 2009 Results

MISGAV, Israel, March 29, 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 fourth quarter and for the year 2009.

Fourth Quarter 2009 Results

Fourth quarter revenues were $22.3 million, representing 38.1% decrease from the fourth quarter of 2008 revenues of $36.0 million. The decrease in revenues in the quarter was due to a decrease in sales in all the Company's product lines, primarily due to the worldwide economic slowdown.

The company reported a gross loss in the fourth quarter of $2.16 million, compared with $2.16 million in the fourth quarter of 2008. Operating loss for the quarter was $5.6 million, as compared with an operating loss of $10.6 million in the fourth quarter of 2008. The Company's decrease in gross and operating losses during 2009 in relation to the 2008 losses reflects the implementation of the Company's efficiency plan during 2009. Net loss for the quarter was $4.7 million, or $2.2 per diluted share, as compared with a net loss of $8.8 million, or $4.2 per share, in the fourth quarter of 2008.

Results for Annual 2009

Year 2009 revenues were $115.5 million, representing a 33.5% decrease from 2008 revenues of $173.8 million. The decrease in revenues was across all the Company's product lines, primarily due to the worldwide economic slowdown, which led to more conservative inventory management policies among some of the company's customers and a decline in sales to our two major customers.

Gross loss for the year 2009 was $3.8 million compared with gross margin of $ 6.3 million in 2008. Operating loss was $20.9 million compared with an operating loss of $19.2 million as reported in 2008. Net loss was $17.4 million, or $8.2 per diluted share, compared with a net loss of $17.6 million or $8.3 per share, as reported in 2008.

Gross and operating losses in 2009 were primarily due to the manufacturing challenges faced in the Hi-Tex division which continued to bear heavy costs. As discussed during 2009, 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. The relatively high cost of sales, as a percentage of sales, was primarily due to the significant decline in sales volumes, which exceeded the corresponding decline in our fixed expenses that resulted from the implementation of our 2009 efficiency plan, and due to maintenance costs associated with new sales offices that we opened in 2009.

Commenting on the 2009 results, Tefron new CEO, Amit Meridor, said, "The efficiency plan implemented in 2009 laid the groundwork for the more aggressive restructuring of Tefron in which we are now actively engaged to restore financial and operational strength to Tefron. We have secured a more solid financial position following the success of the bank refinancing last month and the fund raising programs completed last week and it is now the focus of the management team to implement operational changes to manufacturing and to raise the level of customer service to restore Tefron's leadership position in the industry."

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, 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.

    Table 1: Sales by segments:

              Year ended December  Year ended December
                    31, 2009             31, 2008
              USD                  USD
    Segment   Thousands % of total Thousands % of total
    Cut & sew    53,232      46.1%    87,564      50.4%
    Seamless     62,306      53.9%    86,265      49.6%
    Total       115,538     100.0%   173,829     100.0%

    (table continued)

              Three months ended   Three months ended
               December 31, 2009    December 31, 2008
              USD                  USD
    Segment   Thousands % of total Thousands % of total
    Cut & sew     8,763      39.3%    16,614      46.2%
    Seamless     13,512      60.7%    19,350      53.8%
    Total        22,275     100.0%    35,964     100.0%


    Table 2: Sales by product line

                      Year ended December  Year ended December
                           31, 2009              31, 2008
                     USD        % of total USD       % of total
    Product line     Thousands             Thousands
    Intimate Apparel     64,143      55.5%    93,683      53.9%
    Active wear          21,533      18.6%    47,189      27.1%
    Swimwear             29,862      25.8%    32,957      19.0%
    Total               115,538     100.0%   173,829     100.0%

    (table continued)

                      Three months ended   Three months ended
                      December 31, 2009    December 31, 2008
                     USD       % of total USD       % of total
    Product line     Thousands            Thousands
    Intimate Apparel     15,394      69.1%    21,402      59.5%
    Active wear           3,759      16.9%     7,639      21.2%
    Swimwear              3,122      14.0%     6,923      19.2%
    Total                22,275     100.0%    35,964     100.0%

    CONSOLIDATED BALANCE SHEETS
    U.S. dollars in thousands

                                                       December 31,
                                                    2009            2008

    ASSETS

    CURRENT ASSETS:
    Cash and cash equivalents                      $ 1,904       $ 1,566
    Short-term investments                             737           847
    Trade receivables, net                          14,597        23,446
    Other accounts receivable and prepaid
    expenses                                         2,892         4,558
    Inventories                                     19,778        32,125

    Total current assets                            39,908        62,542

    NON- CURRENT ASSETS:

    Subordinated note                                    -         2,700
    Deferred taxes, net                              1,409             -
    Property, plant and equipment, net              56,920        64,469
    Intangible assets, net                             960         2,021

                                                    59,289        69,190

    Total assets                                  $ 99,197     $ 131,732


    CONSOLIDATED BALANCE SHEETS
    U.S. dollars in thousands

                                                     December 31,
                                                  2009         2008

    LIABILITIES AND SHAREHOLDERS' EQUITY

    CURRENT LIABILITIES:
    Short-term bank credit                      $ 25,847     $ 24,809
    Trade payables                                15,042       25,167
    Other accounts payable and accrued
    expenses                                       5,666        7,636

    Total current liabilities                     46,555       57,612

    LONG-TERM LIABILITIES:
    Other accounts payable                         1,838        1,309
    Accrued severance pay, net                       729        2,169
    Deferred taxes, net                            3,080        6,897

    Total long-term liabilities                    5,647       10,375

    EQUITY:
    Ordinary shares                                7,518        7,518
    Additional paid-in capital                   107,522      107,104
    Accumulated deficit                         (60,666)     (43,716)
    Less - 997,400 Ordinary shares in
    treasury, at cost                            (7,408)      (7,408)
    Other capital reserves                            29           23

                                                  46,995       63,498
    Employee stock options in subsidiary               -          247

    Total shareholders' equity                    46,995       63,745

    Total liabilities and total shareholders'
    equity                                      $ 99,197    $ 131,732


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

                                    Year ended           Three months ended

                                   December 31,             December 31,
                                2009          2008       2009          2008

    Sales                     $ 115,538     $ 173,829  $ 22,275      $ 35,964
    Cost of sales               119,339       167,557    24,437        38,077

    Gross profit (loss)         (3,801)         6,272   (2,162)       (2,113)
    Selling, general and
    administrative expenses      17,621        23,365     3,951         6,316
    Other expenses (income)       (496)         2,135     (496)         2,135

    Operating income (loss)    (20,926)      (19,228)   (5,617)      (10,564)

    Other expenses                1,285             -     1,285             -
    Financing income            (1,747)         (319)     (169)         (819)
    Financing expenses            2,259         3,347       267           892

    Financing expenses, net         512         3,028        98            73
    Taxes benefit               (5,330)       (4,677)   (1,060)       (1,818)

    Net income (loss)        $ (17,393)    $ (17,579) $ (4,655)     $ (8,819)

    Basic and diluted net
    earnings (losses) per
    share:
    Basic net earnings
    (losses) per share          $ (8.2)       $ (8.3)   $ (2.2)       $ (4.2)
    Diluted net earnings
    (losses) per share          $ (8.2)       $ (8.3)   $ (2.2)       $ (4.2)

    Weighted average number
    of shares used for
    computing basic earnings
    (losses) per share        2,120,298     2,120,298 2,120,298     2,120,298

    Weighted average number
    of shares used for
    computing diluted
    earnings (losses) per
    share                     2,120,298     2,120,298 2,120,298     2,120,298

    CONSOLIDATED STATEMENTS OF CASH FLOWS
    U.S. dollars in thousands


                                                              Three months
                                         Year ended               ended
                                        December 31,          December 31,
                                      2009         2008     2009        2008
    Cash flows from operating
    activities:

    Net income (loss)              $(17,393)    $(17,579) $(4,655)   $(8,819)
    Adjustments to reconcile net
    income (loss) to net cash
    provided by (used in)
    operating activities:
    Depreciation of property,
    plant and equipment and
    intangible assets                  9,256        8,925    2,512      2,450
    Compensation related to
    options granted to employees         171          487       30         96
    Fixed assets impairment
    (impairment reversal)              (496)        2,135    (496)      2,135
    Inventory write-off                2,808        4,523      584      1,519
    Elimination of contingent
    proceeds versus P&L                (399)            -    (399)
    Increase (decrease) in
    severance pay, net                 (850)          420    (224)          3
    Loss from early payment of
    subordinated note                  1,285            -
    Accrual of interest on short
    and long-term deposits                 -         (75)        -          -
    Gain related to sale of
    marketable securities                  -         (22)        -          -
    Interest and amortization of
    premium and accretion of
    discount of marketable
    securities                             -        (263)        -          -
    Impairment of marketable
    securities                             -          553        -        240
    Increase (decrease) in
    deferred taxes, net              (5,364)      (5,558)  (1,066)    (2,231)
    Loss (gain) on disposal of
    property, plant and equipment       (17)          188        -        209
    Decrease in trade receivables,
    net                                8,849        5,587    1,661      2,585
    Decrease (increase) in other
    accounts receivable and
    prepaid expenses                   1,497          488      181        161
    Decrease (increase) in
    inventories                        9,730      (3,051)    (125)    (2,835)
    Decrease in trade payables      (10,125)      (4,553)  (3,573)    (1,198)
    Increase (decrease) in other
    accounts payable and accrued
    expenses                           (428)           77    1,844      (638)

    Net cash provided by (used in)
    operating activities             (1,476)      (7,718)  (3,726)    (6,323)

    Cash flows from investing
    activities:

    Purchase of property, plant
    and equipment                      (611)      (3,151)    (146)      (311)
    Purchase of intangible assets       (75)        (224)     (19)          -
    Purchase of business activity          -        (300)        -          -
    Contingent consideration paid      (271)            -    (200)
    Proceeds from sale of
    property, plant and equipment         18           35        -          -
    Proceeds from early payment of
    a subordinated note                1,715            -
    Investment in marketable
    securities                             -            -        -          -
    Investment in short-term and
    long-term deposits                     -     (13,060)        -          -
    Proceeds from sale of
    marketable securities                  -        5,914        -          -
    Proceeds from repayment of
    deposits                               -       20,199        -        500

    Net cash provided by (used in)
    investing activities                 776        9,413    (365)        189

    CONSOLIDATED STATEMENTS OF CASH FLOWS
    U.S. dollars in thousands

                                                              Three months
                                          Year ended              ended
                                         December 31,         December 31,
                                       2009        2008     2009        2008

    Cash flows from financing
    activities:

    Short-term bank credit, net        4,923       9,323    1,441       5,123
    Repayment of long-term bank
    loans                            (3,885)     (9,836)    (772)     (1,037)
    Proceeds from long-term bank
    loans                                  -       6,000        -           -
    Dividend paid to shareholders          -     (8,000)        -           -

    Net cash provided by (used in)
    financing activities               1,038     (2,513)      669       4,086

    Total increase (decrease) in
    cash and cash equivalents            338       (818)  (3,422)     (2,048)
    Cash and cash equivalents at
    beginning of period                1,566       2,384    5,326       3,614

    Cash and cash equivalents at end
    of period                        $ 1,904     $ 1,566  $ 1,904     $ 1,566


    Contacts

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


SOURCE Tefron Ltd



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