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Tefron Ltd. — Interim / Quarterly Report 2005
Dec 28, 2005
7077_rns_2005-12-28_be0b787a-7944-4a80-816a-3809a752a2ff.pdf
Interim / Quarterly Report
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Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of The Securities Exchange Act of 1934
For the month of December, 2005
TEFRON LTD. (Translation of registrant's name into English)
Ind. Center Teradyon, P.O. Box 1365, Misgav 20179, Israel (Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☑ Form 40-F ☐
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ☐ No ☑
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- N/A
Attached hereto and incorporated by reference herein are pro forma financial statements in connection with Tefron’s recent announcement that its Board of Directors had authorized the exercise of its option to require AlbaHealth LLC to purchase its ownership interest in AlbaHealth.
This Form 6-K is hereby incorporated by reference into Tefron Ltd.’s Registration Statement on Form F-3 (Registration No. 333-128847) and its Registration Statement on Form S-8 (Registration No. 333-111932).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TEFRON LTD. (Registrant)
By: /s/ Asaf Alperovitz Name: Asaf Alperovitz Title: Chief Financial Officer
By: /s/ Hanoch Zlotnik Name: Hanoch Zlotnik Title: Finance Manager
Date: December 27, 2005
PRO FORMA FINANCIAL INFORMATION
On December 22, 2005, Tefron Ltd. ("Tefron") announced that its Board of Directors had authorized the exercise of its option to require AlbaHealth LLC ("AlbaHealth") to purchase its ownership interest in AlbaHealth, which manufactures and sells textile healthcare products. On December 22, 2005, Tefron delivered the notice of exercise.
Under the terms of the option agreement, the net proceeds to Tefron from the sale of its ownership interest are expected to be approximately $11.9 million in cash payable over three years, and Tefron expects to record a loss of approximately $6.5 million in the fourth quarter of 2005, composed of approximately $4.6 million in income tax expenses (of which approximately $2 million in cash) and an approximately $2 million capital loss.
AlbaHealth's obligation to purchase Tefron's ownership interest, and the receipt of payment by Tefron for its interest, are subject to the satisfaction of conditions relating to AlbaHealth's assets and liabilities, compliance with its credit agreement and obtaining of sufficient financing. There is no assurance that these conditions will be satisfied. If they are not satisfied, the option exercise period under the option agreement will be extended accordingly.
The unaudited pro forma consolidated financial statements reported below consist of an unaudited pro forma consolidated balance sheet as of September 30, 2005 and unaudited pro forma consolidated statements of income for the nine months ended September 30, 2005 and for the year ended December 31, 2004. The unaudited pro forma consolidated financial statements should be read in conjunction with Tefron's historical consolidated financial statements and the related notes included in the Company's Annual Report on Form 20-F for the year ended December 31, 2004 and the consolidated financial statements of Tefron for the nine months ended September 30, 2005 filed under cover of Form 6-K on November 25, 2005. The following unaudited pro forma consolidated financial statements have been prepared giving effect to the disposal of Tefron's ownership interest in AlbaHealth as if it had occurred as of September 30, 2005 for the unaudited pro forma consolidated balance sheet and as of January 1 of each period for the unaudited pro forma consolidated statements of income.
Unaudited pro forma consolidated financial information is presented for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have actually been reported had the disposal of Tefron's ownership interest in AlbaHealth occurred at the beginning of the periods presented, nor is it necessarily indicative of future financial position or results of operations. These unaudited pro forma consolidated financial statements are based upon the respective historical financial statements of Tefron, and do not incorporate, nor do they assume, any benefits from cost savings from the disposal of Tefron's ownership interest in AlbaHealth. The pro forma adjustments are based on available financial information and certain estimates and assumptions that Tefron believes are reasonable and that are set forth in the notes to the unaudited pro forma condensed financial statements.
U.S. dollars in thousands (except share and per share data)
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2005
| Historical | Adjustments | Pro-Form | |
|---|---|---|---|
| ASSETS | |||
| CURRENT ASSETS: | |||
| Cash and cash equivalents | 7,847 | 2,641 A, B, C | 10,488 |
| Trade receivables, net of allowance for doubtful accounts | 24,058 | (3,938) A | 20,120 |
| Other accounts receivable and prepaid expenses | 4,672 | 1,391 A, B | 6,063 |
| Inventories | 29,208 | (3,849) A | 25,359 |
| Total current assets | 65,785 | -3,755 | 62,030 |
| DEFERRED TAXES | 2,456 | (2,456) C | - |
| PROPERTY, PLANT AND EQUIPMENT | 89,337 | (6,032) A | 83,305 |
| GOODWILL | 30,743 | (30,743) A | - |
| DEFERRED LOAN ISSUANCE COSTS | 314 | (284) A | 30 |
| LONG TERM ASSETS | - | 3,006 B | 3,006 |
| Total assets | 188,635 | (40,264) | 148,371 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| CURRENT LIABILITIES: | |||
| Short-term bank credit | 19,221 | (7,613) A, B | 11,608 |
| Current maturities of long-term debt: | |||
| Banks and other loans | 6,875 | (938) A | 5,937 |
| Capital leases | 23 | (23) A | - |
| Trade payables | 29,179 | (2,258) A | 26,921 |
| Other accounts payable and accrued expenses | 7,386 | 675 A | 8,061 |
| Total current liabilities | 62,684 | (10,157) | 52,527 |
| LONG-TERM LIABILITIES: | |||
| Banks and other loans (net of current maturities) | 43,292 | (5,812) A | 37,480 |
| Tax Payable | - | 545 C | - |
| Deferred taxes | 7,550 | 7,550 | |
| Accrued severance pay | 1,960 | 1,960 | |
| Total long-term liabilities | 52,802 | (5,267) | 46,990 |
| MINORITY INTEREST | 16,951 | (16,951) | - |
| SHAREHOLDERS' EQUITY: | |||
| Share capital | 6,804 | 6,804 | |
| Additional paid-in capital | 82,798 | 82,798 | |
| Deferred stock-based compensation | (240) | (240) | |
| Less - 997,400 Ordinary shares in treasury, at cost | (7,408) | (7,408) | |
| Cumulative other comprehensive loss | (80) | (80) | |
| Accumulated deficit | (25,676) | (6,539) A, B, C | (32,215) |
| Total shareholders' equity | 56,198 | (6,539) | 49,659 |
| Total liabilities and shareholders' equity | 188,635 | (38,914) | 149,176 |
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2005
U.S. dollars in thousands (except share and per share data)
| Historical | Adjustments | Pro-forma | |
|---|---|---|---|
| Sales | 150,496 | (25,159) | A 125,337 |
| Cost of sales | 123,982 | (17,882) | A 106,100 |
| Gross profit | 26,514 | (7,277) | 19,237 |
| Selling, general and administrative expenses | 14,915 | (4,311) | A 10,604 |
| Operating income | 11,599 | (2,966) | 8,633 |
| Financial expenses, net | 2,998 | (940) | A 2,058 |
| Other income, net | 399 | 65 | A 464 |
| Income before taxes on income | 9,000 | (1,961) | 7,039 |
| Taxes on income | 2,499 | (49) | A 2,450 |
| Minority interest in earnings of a subsidiary | 989 | (989) | A 0 |
| Net income | 5,512 | (923) | 4,589 |
| Basic net earnings per share | 0.31 | (0.05) | 0.26 |
| Diluted net earnings per share | 0.30 | (0.04) | 0.26 |
| Weighted average number of shares used for computing basic earnings per share | 17,626,276 | 17,626,276 | |
| Weighted average number of shares used for computing diluted earnings per share | 18,395,487 | 18,395,487 |
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2004 U.S. dollars in thousands (except share and per share data)
| Historical | Adjustments | Pro-forma | |
|---|---|---|---|
| Sales | 182,819 | (34,199) | A 148,620 |
| Cost of sales | 159,937 | (23,513) | A 136,424 |
| Gross profit | 22,882 | (10,686) | 12,196 |
| Selling, general and administrative expenses | 22,387 | (5,471) | A 16,916 |
| Operating income (loss) | 495 | (5,215) | (4,720) |
| Financial expenses, net | 5,212 | (1,324) | A 3,888 |
| Other income, net | 0 | 4 | A 4 |
| Income (loss) before taxes on income | (4,717) | (3,887) | (8,604) |
| Taxes on income | 203 | (120) | A 83 |
| Minority interest in earnings of a subsidiary | 1,945 | (1,945) | A 0 |
| Net income (loss) | (6,865) | (1,822) | (8,687) |
| Basic and diluted net earnings (loss) per share | (0.44) | (0.12) | (0.56) |
| Weighted average number of shares used for computing basic and diluted earnings (loss) per share | 15,603,904 | 15,603,904 |
NOTE 1:- PRO-FORMA
The pro forma consolidated balance sheet includes the adjustments necessary to give effect to the disposal of Tefron’s ownership interest in AlbaHealth as if it had occurred on January 1, 2005.
Adjustments included in the pro forma consolidated balance sheet are summarized as follows:
(A) Reflects the balance sheet of AlbaHealth as of September 30, 2005 and the statements of income of AlbaHealth for the nine months ended September 30, 2005 and for the year ended December 31, 2004.
(B) Reflects the contemplated proceeds from the exercise of the put option under the terms of the option agreement upon satisfaction of conditions for payment: $9.2 million in cash, $1.7 million in the year 2006 and the balance of $3.0 million to be received in the years 2007 and 2008. In accordance with its bank lenders, 50% of the net proceeds from such sale will be used to repay a portion of Tefron’s loans.
(C) Reflects the tax influence due to the exercise of the put option. $2.5 million deferred tax assets to be written off, $1.5 million to be paid immediately and $0.5 million to be paid during the years 2007 to 2008.