Tefron's shareholders may obtain, free of charge, a printed copy of Tefron's complete audited financial statements for the year 2007 by sending a request to the Company's General Counsel, Michal Baumwald Oron (email: bomichal@tefron.com), or by calling 972-3-9230215.
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Tefron LTD Reports Third Quarter 2007 Results
Tefron Reports Third Quarter 2007 Results
Third Quarter 2007 Summary
·Third quarter revenues were $30.3 million, 22.2% below revenues of the third quarter of last year.
·Net loss, on a GAAP basis was $1.7 million and fully diluted loss per share was $0.08. Net loss on a non-GAAP basis, excluding compensation related to modification of stock options, was $1.4 million, and fully diluted loss per share on a non-GAAP basis was $0.07.
Misgav, Israel, November 15, 2007- Tefron Ltd. (NYSE:TFR; TASE:TFRN), a leading producer of seamless intimate apparel and engineered-for-performance (EFPTM) active wear, today presented its financial results for the third quarter of 2007.
Third Quarter 2007 Results
Third quarter revenues were $30.3 million, representing a 22.2%decrease from third quarter 2006 revenues of $39.0 million. The decrease in revenues in the quarter was due to a reduction in sales of active-wear, primarily to Nike, and a reduction in sales of intimate apparel, mainly to Victoria's Secret for older Cut & Sew collections. This reduction was slightly offset by an increase in sales of swimwear, which are seasonally weak in the third quarter.
Third quarter gross margin was 7.8%, compared with a gross margin of 23.3% in the third quarter of 2006. Operating loss for the quarter was $1.5 million, while on a non-GAAP basis, excluding compensation related to modification of stock options, operating loss, was $1.2 million, as compared with an operating income of $5.3 million (13.7% of revenues) in the third quarter of 2006. Net loss for the quarter was $1.7 million, or $0.08 per diluted share, while on a non-GAAP basis, excluding compensation related to modification of stock options, net loss was $1.4 million, or $0.07 per diluted share, as compared with net income of $3.9 million (9.9% of revenues), or $0.18 per diluted share, in the third quarter of 2006.
The decline in gross margin and the operating loss in the quarter were primarily due to the lower revenue and manufacturing levels, which were also affected by a number of manufacturing challenges faced in the Hi-Tex division. This was mainly due to the learning curve required for the manufacture of various new and complex products, as well as shorter production runs for a larger number of apparel categories. In addition, the significant devaluation of the US Dollar versus the New Israeli Shekel, as well as the previously identified price reductions in older collections of Tefron's intimate apparel product line also continued to impact margins.
Results for First Nine Months of 2007
Revenues in the first nine months of 2007 were $119.7 million, representing a 13.3% decrease from revenues of $138.1 million generated during the first nine months of 2006. The decline in revenue was due to a reduction in sales of intimate apparel and a significant reduction in sales of active-wear. This decline was slightly offset by an increase in sales of swimwear.
Gross margin in the first nine months of 2007 decreased to 14.5%, compared with 23.1% in the first nine months of 2006. Operating income decreased to $4.5 million (3.8% of revenues), and on a non-GAAP basis excluding compensation related to a modification of stock options, operating income decreased to $4.8 million (4.0% of revenues), as compared to an operating income of $19.5 million (14.1% of revenues) in the first nine months of 2006. Net income was $2.9 million (2.4% of revenues), or $0.13 per diluted share, in the first nine months of 2007, while on a non-GAAP basis, excluding compensation related to a modification of stock options, net income was $3.2 million (2.6% of revenues), or $0.14 per diluted share, in the first nine months of 2007. Net income in the first nine months of 2006, was $13.7 million (9.9% of revenues), or $0.66 per diluted share.
Joint Venture in China
Tefron also announced that its contemplated joint venture in China with Langsha Knitting Co. Ltd. and Itochu Corporation has been terminated due to lack of progress with the Chinese partner.
Management comments
Mr. Yos Shiran, Chief Executive Officer of Tefron, commented, “The third quarter, in which we reported lower revenues and an operating loss, was a tough one for Tefron. With regard to the fourth quarter, we now expect active-wear sales to remain at similar levels seen over the last few quarters. A large portion of these sales will be derived from our Cut & Sew division’s 'new generation' Nike products, which have a relatively lower profitability than those of the Seamless active-wear products. However, we have started manufacturing seamless products for the 'new generation' which will mostly be shipped next year, and we are very excited with the prospects of this project.These products are technologically advanced, and they have created short-term manufacturing challenges for us, which we expect to again affect profitability in the fourth quarter. Additionally, we expect our fourth quarter swimwear sales to be below those of the same quarter last year. Thus, while we expect to record sequentially improved fourth quarter revenues of around $40 million, we will record an operating and net loss.”
Mr. Shiran added, "For the first quarter of next year we expect a growth in active-wear sales. We believe our sales to Nike for their 'new generation' of performance apparel products will increase and sales to lululemon, which we see as a promising customer, will also increase. Additionally, we expect a strong quarter for our swimwear division with increased sales in the European market. This underlies our expectations of a continued sequential improvement in sales and the return to profitability in the first quarter of next year.”
Mr. Shiran concluded, “While the last few quarters have been very challenging for us, we are working diligently to develop new, advanced products and increase sales, particularly in our active-wear business. At the same time, we are continuously exploring ways to improve our manufacturing efficiencies and cut our costs. In spite of the difficulties we encountered this year, we strongly believe in our strategy and we look forward to next year, as we aim to begin realizing the strong potential of our active-wear product line in accordance with our long-term vision.”
Conference Call
The Company will be hosting a conference call today, November 15, 2007at 10:00am EST. On the call, management will review and discuss the results, and will be available to answer investor questions.
To participate, please call one of the following teleconferencing numbers.Please begin placing your calls at least 5 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.
US Dial-in Number: 1 888 642 5032
UK Dial-in Number: 0 800 917 5108
ISRAEL Dial-in Number: 03 918 0692
INTERNATIONAL Dial-in Number:+972 3 918 0692
For those unable to listen to the live call, a replay of the call will be available for three months from the day after the call in the investor relations section of Tefron’s website, at: www.tefron.com
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