Tefron Reports Strong Improvement in Operating and Net Profit in the Second Quarter and First Half of 2012 and First Positive Quarterly Cash Flow in Six Quarters
MISGAV, Israel, August 17, 2012 /PRNewswire/ --
- Operating profit in the second quarter of 2012 totaled $149 thousand in comparison to operating loss in the amount of $1.3 million in the corresponding period last year .
- EBITDA in the second quarter of 2012 totaled $1.6 million compared to $0.5 million in the corresponding period last year.
- Net income for second quarter of 2012 totals $1.3 million, or 20 cents diluted earnings per share including a tax benefit of $1.1 million, compared to a net loss of $1.7 million in the same period in 2011
- Cash flow from operating activities for the second quarter totaled $3.2 million, compared to a negative cash flow of $1.5 million in the second quarter of 2011.
- Operating profit in the first half of 2012 totaled $256 thousand in comparison to operating loss in the amount of $3.2 million in the corresponding period last year.
- EBITDA in the first half of 2012 totaled $3.0 million in comparison to $0.8 million in the corresponding period last year.
- Net income for the first six months of 2012 totaled $477 thousand, or 7 cents diluted earnings per share compared to a loss of $4.0 million in the first half of 2011.
- Cash flow from operating activities totaled $0.6 million in the first half of 2012 compared to negative cash flow of $9.2 million in the first six months of 2011.
Commenting on developments at Tefron in the period, Amit Meridor, Tefron's CEO said: "In the second quarter of 2012, Tefron recorded an increase of 22.2% in the seamless apparel sector sales. This very positive operational result, as well as the stronger financial results we reported are a direct outcome of the large scale investments that we have made at Tefron over the past two years, particularly in the development of new products and the improvement in product mix. These important investments, combined with our advance production capabilities in Israel and more recently established production operations in China, have enabled Tefron to offer a full and competitive basket of solutions to customers and to solidify our position as the global leader in seamless technology.
During Tefron's recent turnaround period, we have made major improvements in production efficiencies and, equally important, we have worked to establish a culture of streamlining costs at all levels. These efforts have allowed us to stay competitive and turn a positive operating profit and net profit despite the increase in the price of raw materials and additional costs.
Moreover, we have not stopped in our efforts to secure our competitive position and we are currently conducting negotiations with a Chinese partner in order to establish and expand the company's supply and production resources. This is a major and important strategic step in the company's future that will allow us to maximize profitability with increased production capabilities and a competitive cost structure from East Asia that is under the company's control. This will also allow our local management to focus more time and resources in the development of advance product lines at the development center in Israel."
Arnon Teiberg, Tefron Chairman: "Tefron's success lies in its ability to leverage the company's impressive technological legacy in its sector to further lead the global engineered seamless apparel industry with more advanced technologies and products to meet ever more demanding customer requirements. The cooperation agreements that Tefron signed in the first half of 2012 are significant milestones in establishing a global production and distribution network, thereby strengthening Tefron's position as the worldwide leader in the engineered seamless apparel industry.
Results in the first half and second quarter of 2012:
The company's sales in the second quarter of 2012 totaled $29.3M, a 1.4% increase in comparison to $28.8M in the corresponding period last year. The company's sales in the first half of 2012 totaled $57.6M, a 1.5% increase in comparison to $56.8 in the corresponding period last year.
In Q2 2012 the company recorded an increase of 22.2% in the "seamless" sector sales in comparison to the corresponding period last year. This increase mainly derives from continuation of the Company's sales efforts that leveraged sales to clients that were absorbed in the Nouvelle transaction and continued with the strategic success in penetrating mass markets in North America. To the best of the Company's knowledge, the sales in the seamless segment positions Tefron as one of the global leaders in the seamless sector.
Gross profit in Q2 2012 totaled $4.7M (16.2% of the sales) in comparison to gross profit in the amount of $4.3M (14.7% of the sales) in the corresponding period last year. Gross profit in the first half of 2012 totaled $10.0M (17.3% of the sales) in comparison to $9.2M (16.2% of the sales) in the corresponding period last year. Increase in gross profit and gross profit percentage mainly stemmed from streamlining operations, developing alternative suppliers, and strengthening of the dollar exchange rate in comparison to the Shekel.
Operating profit in Q2 2012 totaled 149 thousand dollars in comparison to operating loss in the amount of $1.3M in the corresponding period last year. Operating profit in the first half of 2012 totaled 256 thousand dollars in comparison to operating loss in the amount of $3.2M in the corresponding period last year.
The transition from operating loss to operating balance mainly stems from the increase in the seamless segment sales and continuation of streamlining operations in the Company as well as a decrease in depreciation costs as a result of fixed assets evaluation that was performed in 2011 and the decrease in the administration and general expenses especially due to deregistration of the Company's shares under U.S. securities laws.
EBITDA (Earnings before interest, taxes, depreciation and amortization) in Q2 2012 totaled $1.6M in comparison to $0.5M EBITDA in the corresponding quarter last year. Improvement in the EBITFA can be attributed to the factors specified above. In the first half of 2012 EBITDA totaled $3.0M, a significant improvement of $2.3M in comparison to $0.8M EBITDA in the corresponding period last year.
Cash flow from operating activities in Q2 2012 totaled $3.2M in comparison to a negative cash flow in the amount of $1.5M in the corresponding period last year. In the first half of 2012, cash flow from operating activities totaled $0.6M in comparison to a negative cash flow in the amount of $9.2M in the corresponding period last year.
The transition from a negative to a positive cash flow, for the first time in 6 quarters, can be mainly attributed to an improvement in the Company's financial results and a decrease in the trade receivables in the quarter due to seasonality in the swimwear sector. In the corresponding periods, the Company faced a negative cash flow especially due to the high working capital which the Company needed in the beginning of 2011 that was meant to support the significant increase in activities following acquisition of Nouvelle activities at the end of 2010.
Tax benefit - In Q2 2012 the Company recorded a tax benefit totaling 1,107 thousand dollars in comparison to 172 thousand dollars in the corresponding quarter last year. The increase in the tax benefit derives from a change in the estimate of deferred taxes in the Company. This change resulted from performing a renewed evaluation of the Company's tax asset in connection with the profitability of the Company's offshore activities in light of the experience the Company gained in respect of the ability to evaluate the profitability of this activity and especially in light of the significant change due to the agreement with Mike Gao and the establishment of the procurement office in Shanghai and with offsetting a decrease in the tax benefit in Macro (subsidiary) upon updating the tax benefit due to delay in the Company's compliance with its forecasts.
Net income in Q2 2012 totaled $1.3M, or 20 cents diluted earnings per share compared to a loss in the amount of $1.7M during the corresponding period last year. Profit per share in full dilution is $0.2 per share in Q2 2012 in comparison to loss in the amount of $0.3 per share in full dilution during the corresponding period last year.
Net income in the first half of 2012 totaled 477 thousand dollars, or 7 cents diluted earnings per share compared to a loss of $4.0M during the corresponding period last year. Profit per share in full dilution is $0.07 dollars in the reporting period in comparison to a loss per share in full dilution of $0.6 in the corresponding period last year.
Material events during the reporting period
Cooperation agreement with Cifra S.P.A
In January 2012 the Company signed a cooperation agreement with the Italian Cifra S.P.A Company that, to the best of the Company's knowledge, is the leading player in the seamless warp knitting sector - a seamless knitting technology. In the framework of cooperation, Cifra and the Company will jointly develop and design seamless warp knitting products in the sports, underwear and swimwear sectors.
An agreement for services and providing suppliers' credit with Asia Socks
On February 14, 2012 the Company's Board of Directors granted its approval, followed by the Company's shareholders' approval in a meeting convened on April 4 2012, and also approved the Company, to enter a service agreement with Mr. Mike Gao through Asia Socks Inc. Company and/or through any other company owned by Mr. Gao. In accordance with the agreement Mr. Gao will provide the Company, through Asia Socks, tracing services in connection with raw materials and products and/or subcontractors and supervision and consultation services that include the provision of suppliers credit to the Company for a period of three years. The Company expects that the execution of this agreement will result in further decrease of the Company's procurement costs especially in the procurement of raw materials and auxiliary materials and, in addition to the said, will increase competition among suppliers.
Conducting negotiations for the purpose of setting up a joint venture in China
The company hereby announces that it commenced negotiations with a private company incorporated in China that is an unrelated party to the Company, for the purpose of setting up a long term joint venture between the parties for the purpose of producing apparel in "seamless" technology (hereinafter: the Venture).
It is emphasized that there is no certainty that the negotiations between the parties will result in a binding agreement and/or any other cooperation between the parties. The Company will continue to report, as required by law, to the extent that a binding agreement is signed between the parties or to the extent that the negotiations between the parties terminates.
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 segments: "Seamless" design, development, production and sale of intimate apparel and active wear; and "Cut & Sew" design, development, production and sale of intimate apparel, swimwear and active wear. 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: Victoria's Secret, Hanes Brands Industries, Reebok, Patagonia, GAP, Calvin Klein and Wal-Mart..
For further details please contact Dan Moses at +972-52-8744809
SOURCE Tefron Ltd