Tefron Reports Third Quarter 2009 Results
Third Quarter 2009 Results
Third quarter revenues were $21.0 million, representing a 45.1% decrease from the third quarter of 2008 revenues of $38.3 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 quarter of $5.5 million, compared with a gross loss of $1.9 million in the Third quarter of 2008. Operating loss for the quarter was $9.3 million, as compared with an operating loss of $7.1 million in the Third quarter of 2008. Net loss for the quarter was $8.3 million, or $3.9 loss per diluted share, as compared with net loss of $5.8 million, or $2.7 per diluted share, in the third quarter of 2008.
The decline in gross and operating margins in the quarter compared with the third quarter of 2008 was primarily due to the significant decline in revenues which exceeded the corresponding decline in our fixed expenses, that resulted from the implementation of our efficiency plan and the devaluation of the US Dollar versus the New Israeli Shekel.
Results for the Nine Months Period ended September 30, 2009
Revenues in the nine months of 2009 were $93.3 million, representing a 32.4% decrease from nine months of 2008 revenues of $137.9 million. The decrease in revenues was due to a decrease in sales of both the active-wear and intimate apparel product lines.
The 2009 nine months period gross loss was $1.6 million compared to a gross margin of $8.7 in the nine months period of 2008. Operating loss was $15.3 million compared to an operating loss of $8.4 million in the nine months of 2008. Net loss was $12.7 million, or $6.0 loss per diluted share, compared with net loss of $8.6 million, or $4.0 per diluted share, in the nine months of 2008. These decreases in margins were due to the significant decline in sales, which exceeded the corresponding decline in our fixed expenses, that resulted from the implementation of our efficiency plan and due to maintenance costs associated with new sales offices that we opened in 2009.
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, Target, The Gap, J.C. Penney, Maidenform, lululemon Athletica, Warnaco/Calvin Klein, Patagonia, Reebok, Swimwear Anywhere, 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 liquidity challenges that we face;
- our dependence on a small number of principal customers and on
their continued purchase of our products in the same volumes or on the
same terms and their ability to meet their payment obligations to us;
- the effect of the worldwide recession on our target markets and
the cyclical nature of the clothing retail industry and the ongoing
changes in fashion preferences;
- our failure to generate sufficient cash from our operations to
pay our debt and our failure to meet our financial covenants in our
bank loan agreements;
- 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 future operating efficiency
resulting from our expansion into new product lines with more
complicated products, different raw materials and changes in market
trends;
- fluctuations in inflation and currency exchange rates;
- cost increase in the purchase of finish products or production
services;
- the limitations and restrictions imposed by our substantial debt
obligations;
- 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);
- political, economic and social risks associated with
international business and relating to operations in Israel.
- the purchase of new equipment that may be necessary as a result
of our expansion into new product lines;
- our dependence on subcontractors in connection with our
manufacturing process, in particular the sewing, dyeing and finishing
process;
- the fluctuating costs of raw materials; and
- dependence on our suppliers for our machinery and the maintenance
of our machinery.
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 SEGMENT
Nine months ended__ Nine months ended__ Three months ended
September 30, 2009__ September 30, 2008__ September 30, 2009
USD__ USD__ USD
Segment__ Thousands % of total Thousands % of total Thousands % of total
Cut & sew__ 44,469__ 47.7%__ 70,950__ 51.5%__ 7,174__ 34.1%
Seamless__ 48,794__ 52.3%__ 66,915__ 48.5%__ 13,844__ 65.9%
Total__ 93,263__ 100.0%__ 137,865__ 100.0%__ 21,018__ 100.0%
(table continued)
Three months ended__ Year ended December
September 30, 2008__ 31, 2008
USD__ USD
Segment__ Thousands % of total Thousands % of total
Cut & sew__ 13,710__ 35.8%__ 87,564__ 50.4%
Seamless__ 24,572__ 64.2%__ 86,265__ 49.6%
Total__ 38,282__ 100.0%__ 173,829__ 100.0%
TABLE 2: SALES BY PRODUCT LINE
Nine months ended__ Nine months ended__ Three months ended
September 30, 2009__ September 30, 2008__ September 30, 2009
USD__ % of total__ USD__ % of total__ USD__ % of total
Product
line__ Thousands__ Thousands__ Thousands
Intimate
Apparel__ 48,749__ 52.3%__ 72,281__ 52.4%__ 15,957__ 75.9%
Active
wear__ 17,774__ 19.1%__ 39,550__ 28.7%__ 3,826__ 18.2%
Swimwear__ 26,740__ 28.7%__ 26,034__ 18.9%__ 1,235__ 5.9%
Total__ 93,263__ 100.0%__ 137,865__ 100.0%__ 21,018__ 100.0%
(table continued)
Three months ended__ Year ended December
September 30, 2008__ 31, 2008
USD__ % of total USD__ % of total
Product line__ Thousands__ Thousands
Intimate Apparel__ 24,221__ 63.3%__ 93,683__ 53.9%
Active wear__ 12,353__ 32.3%__ 47,189__ 27.1%
Swimwear__ 1,708__ 4.5%__ 32,957__ 19.0%
Total__ 38,282__ 100.0%__ 173,829__ 100.0%
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
September 30,__ December 31,
2009__ 2008__ 2008
Unaudited__ Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents__ $ 5,326__ $ 3,614__ $ 1,566
Marketable securities__ 837__ -__ 847
Trade receivables, net__ 16,258__ 26,031__ 23,446
Other accounts receivable and
prepaid expenses__ 2,933__ 4,740__ 4,558
Inventories__ 20,046__ 30,884__ 32,125
Total current assets__ 45,400__ 65,269__ 62,542
NON CURRENT ASSETS:
Subordinated note__ -__ 3,000__ 2,700
Marketable securities__ -__ 1,587__ -
Deferred taxes, net__ 1,449__ -__ -
Fixed assets, net__ 58,712__ 67,805__ 64,469
Goodwill and other intangible
assets, net__ 1,554__ 2,236__ 2,021
61,715__ 74,628__ 69,190
Total assets__ $ 107,115__ $ 139,897__ $ 131,732
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
September 30,__ December 31,
2009__ 2008__ 2008
Unaudited__ Audited
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Short-term bank credit__ $ 16,956__ $ 8,351__ $ 24,809
Trade payables__ 18,615__ 26,365__ 25,167
Other accounts payable and accrued
expenses__ 5,824__ 9,348__ 7,636
Total current liabilities__ 41,395__ 44,064__ 57,612
NON CURRENT LIABILITIES:
Long-term loans from banks (net of
current maturities)__ 8,222__ 12,372__ -
Liabilities in respect of employee
benefits__ 1,543__ 1,620__ 2,169
Long-term accounts payable -
institutions__ 778__ -__ 1,309
Deferred taxes, net__ 4,048__ 8,942__ 6,897
14,591__ 22,934__ 10,375
SHAREHOLDERS' EQUITY:
Ordinary shares__ 7,518__ 7,518__ 7,518
Additional paid-in capital__ 107,492__ 107,020__ 107,104
Accumulated deficit__ (56,477)__ (34,523)__ (43,739)
Less - 99,740 Ordinary shares in
treasury, at cost__ (7,408)__ (7,408)__ (7,408)
Other capital reserves__ 4__ 45__ 23
Total equity attributable to equity
holders of the Company__ 51,129__ 72,652__ 63,498
Employee stock options in a
subsidiary__ -__ 247__ 247
Total shareholders' equity__ 51,129__ 72,899__ 63,745
Total liabilities and
shareholders' equity__ $ 107,115__ $ 139,897__ $ 131,732
CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars in thousands (except per share data)
Year
ended
Nine months__ Three months ended__ December
ended September 30,__ September 30,__ 31
2009__ 2008__ 2009__ 2008__ 2008
Unaudited__ Audited
$ in thousands (except per share data)
Sales__ $93,263__ $137,865__ $21,018__ $38,282__ $173,829
Cost of sales__ 94,902__ 129,199__ 26,542__ 40,143__ 167,557
Gross profit
(loss)__ (1,639)__ 8,666__ (5,524)__ (1,861)__ 6,272
Selling and
marketing
expenses__ 10,925__ 12,538__ 3,138__ 3,934__ 16,959
General and
administrative
expenses__ 2,745__ 4,520__ 652__ 1,264__ 6,406
Other expenses__ -__ -__ -__ -__ 2,135
Operating loss__ (15,309)__ (8,392)__ (9,314)__ (7,059)__ (19,228)
Other expenses__ 1,285__ -__ 1,285__ -__ -
Financing
income__ (2,425)__ (525)__ (270)__ (195)__ (319)
Financing
expenses__ 2,839__ 3,482__ 744__ 855__ 3,347
Finance
expenses, net__ 414__ 2,957__ 474__ 660__ 3,028
Loss before
taxes on
income__ (17,008)__ (11,349)__ (11,073)__ (7,719)__ (22,256)
Tax benefit__ 4,270__ 2,788__ 2,810__ 1,969__ (4,677)
Loss__ $(12,738)__ $(8,561)__ $(8,263)__ $(5,750)__ $(17,579)
Loss per
share,
attributable
to equity
holders of the
Company ($)
Basic and
diluted loss__ (6.0)__ (4.0)__ (3.9)__ (2.7)__ (8.3)
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Nine months__ Three months__ Year ended
ended September__ ended September__ December
30,__ 30,__ 31
2009__ 2008__ 2009__ 2008__ 2008
Unaudited__ Audited
$ in thousands
OPERATING
ACTIVITIES:
Loss__ $(12,738)__ $(8,561)__ $(8,263)__ $(5,750)__ $(17,579)
Depreciation__ 6,744__ 6,475__ 2,263__ 2,139__ 8,925
of fixed
assets and
intangible
assets
Impairment of
fixed assets__ -__ -__ -__ -__ 2,135
Inventories
write-off__ 2,224__ 2,473__ 1,364__ 1,830__ 4,523
Impairment of
marketable
securities__ -__ 313__ -__ 313__ 553
Share-based
payment
expenses__ 141__ 403__ 32__ 52__ 487
Loss (gain)
from sale of
fixed assets__ (17)__ (21)__ -__ (2)__ 188
Gain from
sale of
marketable
securities__ -__ (22)__ -__ -__ (22)
Deferred
taxes, net__ (4,298)__ (3,256)__ (2,830)__ (1,239)__ (5,558)
Change in
employee
benefit
liabilities,
net__ (626)__ 135__ (7)__ 191__ 420
Interest and
amortization
of marketable__ -__ (263)__ -__ -__ (263)
securities
Interest on__ (75)
deposits__ -__ (75)__ -__ -
Loss from
early
repayment of
subordinated
note__ 1,285__ -__ 1,285__ -__ -
Taxes on__ 421__ -
income__ 1,059__ -__ -
Financing__ 490__ 1,536
expenses, net__ 797__ 3,767__ 3,444
7,309__ 9,929__ 3,018__ 6,728__ 12,849
Changes in
asset and
liability
items:
Decrease in
trade
receivables__ 7,188__ 3,002__ 7,865__ 9,893__ 5,587
Decrease
(increase) in
other
accounts
receivable__ 1,316__ 500__ (183)__ (179)__ 488
Decrease
(increase) in
inventory__ 9,855__ 315__ 42__ (1,494)__ (3,051)
Increase
(decrease) in
trade
payables__ (6,552)__ (3,355)__ 1,740__ (1,545)__ (4,553)
Decrease in
other
accounts
payable__ (2,686)__ (2,415)__ (526)__ (3,323)__ (96)
9,121__ (1,953)__ 8,938__ 3,352__ (1,625)
Cash paid and
received
during the
period for:
Interest paid__ (679)__ (994)__ (434)__ (632)__ (1,528)
Interest__ 264__ 165
received__ 296__ 184__ 59
Taxes paid__ (1,059)__ -__ (421)__ -__ -
(1,442)__ (810)__ (591)__ (573)__ (1,363)
Net cash from
(used in)
operating
activities__ 2,250__ (1,395)__ 3,102__ 3,757__ (7,718)
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year
Nine months__ ended
Three months
Ended September__ ended September__ December
30__ 30__ 31
2009__ 2008__ 2009__ 2008__ 2008
Unaudited__ Audited
$ in thousands
INVESTING
ACTIVITIES:
Purchase of fixed
assets__ (465)__ (2,877)__ (160)__ (840)__ (3,151)
Purchase of
intangible assets__ (56)__ (186)__ (16)__ (39)__ (223)
Acquisition of
operations (a)__ (71)__ (300)__ (71)__ (300)__ (300)
Proceeds from sale
of fixed assets__ 18__ 35__ -__ 14__ 35
Proceeds from early
repayment of
subordinated note__ 1,715__ -__ 1,715__ -__ -
Proceeds from sale
of marketable
securities, net__ -__ 5,914__ -__ -__ 5,914
Proceeds from
repayment of
deposits, net__ -__ 6,638__ -__ (500)__ 7,138
Net cash from (used
in) investing
activities__ 1,141__ 9,224__ 1,468__ (1,665)__ 9,413
FINANCING
ACTIVITIES:
Short-term credit
from banks, net__ 3,482__ 4,200__ 956__ 1,358__ 9,323
Repayment of
long-term loans__ (3,113)__ (8,799)__ (1,037)__ (1,039)__ (9,836)
Proceeds from
long-term loans__ -__ 6,000__ -__ -__ 6,000
Dividends paid to
shareholders__ -__ (8,000)__ -__ -__ (8,000)
Net cash from (used
in) financing
activities__ 369__ (6,599)__ (81)__ 319__ (2,513)
Increase (decrease)
in cash and cash
equivalents__ 3,760__ 1,230__ 4,489__ 2,411__ (818)
Cash and cash
equivalents at the
start of the period__ 1,566__ 2,384__ 837__ 1,203__ 2,384
Cash and cash
equivalents at the
end of the period__ $5,326__ $3,614__ $5,326__ $3,614__ $1,566
Contacts
Company Contact:
Eran Rotem
Chief Financial Officer
+972-4-990-0803
reran@tefron.com
SOURCE: Tefron Ltd
Originally published by Tefron Ltd.
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