Tefron Ltd. — Regulatory Filings 2007

Aug 9, 2007

SECURITIES AND EXCHANGE COMMISSION
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 August, 2007

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

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Attached hereto and incorporated by reference herein is a press release dated the date hereof.

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 Statements on Form S-8 (Registration Nos. 333-139021 and 333-111932).

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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: Treasurer

Date: August 9, 2007

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TEFRON

news

Tefron Reports Second Quarter 2007 Results

Second Quarter 2007 Highlights

• Second quarter revenues were $40.6 million, 18.3% below revenues of the second quarter of 2006.
• Cash flow from operations was $2.2 million, leading to a net cash position of $4.2 million at the end of the quarter.
• Operating income for the quarter was $1.0 million.
• Fully diluted EPS from continuing operations was $0.04 in the quarter, compared with $0.21 in the second quarter of 2006.

Misgav, Israel, August 9, 2007 - Tefron Ltd. (NYSE: TFR; TASE: TFRN), a leading producer of seamless intimate apparel and engineered-for-performance (EFP™) active wear, today announced financial results for the second quarter of 2007.

As announced on April 27, 2006, Tefron closed the sale of its ownership interest in AlbaHealth. Accordingly, the financial statements of AlbaHealth are accounted for as discontinued operations, and the financial results described below do not include the financial results of AlbaHealth. Tefron ceased to consolidate the financial statements of AlbaHealth commencing April 27, 2006.

Second Quarter 2007 Results

Second quarter revenues were $40.6 million, representing a 18.3% decrease from second quarter 2006 revenues of $49.7 million. The decrease in revenues in the quarter was due to a reduction in sales of active-wear and intimate apparel during the quarter. This reduction was partly offset by a slight increase in sales of swimwear.

Second quarter gross margin was 14.0%, compared with a gross margin of 21.7% in the second quarter of 2006. Operating income totaled $1.0 million (2.5% of revenues), compared with $6.6 million (13.4% of revenues) in the second quarter of 2006.

The decline in gross and operating margins in the second quarter was primarily due to the lower revenue and manufacturing levels in the quarter. 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 impacted margins.

Income from continuing operations was $0.8 million (1.9% of revenues), or $0.04 per diluted share in the second quarter of 2007, compared to $4.5 million (9.1% of revenues), or $0.21 per diluted share, in the second quarter of 2006.

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First Half 2007 Results

Revenues in the first half of 2007 reached $89.4 million, representing a 9.8% decline from revenues generated during the first half of 2006. The decline in revenues was due to a reduction in sales of intimate apparel and a significant reduction in sales of active-wear. This decline was partly offset by an increase in sales of swimwear.

The 2007 first half gross margin was 16.8% compared to 23.0% in the first half of 2006. Operating income was $6.0 million (6.7% of revenues) compared to an operating income of $14.1 million (14.3% of revenues) in the first half of 2006. Income from continuing operations was $4.6 million (5.1% of revenues), or $0.21 per diluted share compared with $9.8 million (9.9% of revenues), or $0.47 per diluted share in the first half of 2006.

Management comments

Mr. Yos Shiran, Chief Executive Officer of Tefron, commented, “Our second quarter results were in line with our updated expected financial results which we outlined in our announcement a month ago. Our active-wear sales were significantly reduced in the second quarter mainly due to a delay in orders. Our intimate apparel product line sales were also down in the second quarter mainly due to a reduction in sales to Victoria's Secret of older Cut & Sew collections which have been under continuous price pressure since the beginning of the year. Additionally, we have been informed by Victoria's Secret that they intend to gradually transfer their sourcing of an old Cut & Sew cotton program to India beginning next year. We do not expect this to have a material impact on our 2008 intimate apparel revenues and profitability.”

Mr. Shiran continued, “For the third quarter, we expect active-wear and intimate apparel sales to decline compared to the third quarter of last year. Seasonally, swim-wear revenues are the lowest in the third quarter, and accordingly we expect overall revenues in the third quarter to be below those of last year. We believe the lower revenue level will lead to a net loss of around $1 million in the third quarter. However, given our expectations for improved active-wear sales in the fourth quarter mainly due to positive indications received from Nike for increased 'next generation' product orders, and a seasonally stronger quarter for swimwear sales, we expect a strong improvement in sales and margins in the fourth quarter compared to the second quarter of 2007.”

Mr. Shiran concluded, “While the first half of 2007 has been challenging for us, we have been successful in positioning Tefron as a leading developer, designer and manufacturer of high-end performance apparel. We are in a continuous process of looking for new customers for our products and new revenue growth drivers while looking for ways to cut costs and improve efficiencies.”

1. Conference Call

The Company will be hosting a conference call today, August 9, 2007 at 10am EDT. On the call, management will review and discuss the results, and will be available to answer investor questions.

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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 0691
INTERNATIONAL Dial-in Number: +972 3 918 0691

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

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, Target, The Gap, Banana Republic, J. C. Penney, lululemon athletica, Warnaco/Calvin Klein, Patagonia, Reebok 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:

• our customers’ continued purchase of our products in the same volumes or on the same terms;
• the cyclical nature of the clothing retail industry 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).
• the potential adverse effect on our future operating efficiency resulting from our expansion into new product lines with more complicated products and different raw materials;
• 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;
• the fluctuations costs of raw materials; our dependence on subcontractors in connection with our manufacturing process;

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• our failure to generate sufficient cash from our operations to pay our debt;
• fluctuations in inflation and currency; and
• 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.

Contacts

Company Contact:	IR
Contact:
Asaf Alperovitz	EhudHett
/ Kenny Green
Chief Financial Officer	G.K. Investor Relations
+972-4-9900803	1646201
9246
Aasaf@Tefron.com	info@gkir.com

TABLE 1: SALES BY SEGEMENT

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CONSOLIDATED BALANCE SHEETS

	Six months ended June 30, 2007		Six months ended June 30, 2006		Three months ended June 30, 2007		Three months ended June 30, 2006		Year ended December 31, 2006
Segment	USD Thousands	% of total	USD Thousands	% of total	USD Thousands	% of total	USD Thousands	% of total	USD Thousands	% of total
Cut & sew	42,052	47.1%	45,753	46.2%	17,770	43.7%	22,792	45.8%	85,951	45.7%
Seamless	47,322	52.9%	53,343	53.8%	22,853	56.3%	26,937	54.2%	102,153	54.3%
Total	89,374	100.0%	99,096	100.0%	40,623	100.0%	49,729	100.0%	188,104	100.0%

TABLE 2: SALES BY PRODUCT LINE

	Six months ended June 30, 2007		Six months ended June 30, 2006		Three months ended June 30, 2007		Three months ended June 30, 2006		Year ended December 31, 2006
Product line	USD Thousands	% of total	USD Thousands	% of total	USD Thousands	% of total	USD Thousand	% of total	USD Thousand	% of total
Intimate Apparel	49,266	55.1%	50,693	51.2%	22,808	56.1%	25,267	50.8%	100,890	53.6%
Active wear	21,114	23.6%	31,324	31.6%	10,275	25.3%	17,275	34.7%	59,406	31.6%
Swimwear	18,994	21.3%	17,079	17.2%	7,540	18.6%	7,187	14.5%	27,808	14.8%
Total	89,374	100.0%	99,096	100.0%	40,623	100.0%	49,729	100.0%	188,104	100.0%

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U.S. dollars in thousands

	June 30,		December 31,
	2007	2006	2006
	Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$ 5,181	$ 20,073	$ 3,966
Short-term deposit	11,402	-	10,089
Marketable securities	9,868	-	4,975
Trade receivables, net	28,234	26,837	30,655
Other accounts receivable and prepaid expenses	3,736	4,398	4,166
Inventories	24,609	22,420	28,912
Total current assets	83,030	73,728	82,763
LONG-TERM INVESTMENTS:
Bank deposit	-	-	1,029
Severance pay fund	854	878	778
Subordinate note	3,000	3,000	3,000
Total long-term investments	3,854	3,878	4,807
PROPERTY, PLANT AND EQUIPMENT, NET	76,043	78,363	77,086
Total assets	$ 162,927	$ 155,969	$ 164,656

CONSOLIDATED BALANCE SHEETS

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U.S. dollars in thousands

	June 30,		December 31,
	2007	2006	2006
	Unaudited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term bank loans	$ 5,948	$ 6,398	$ 5,948
Trade payables	22,903	22,241	31,143
Other accounts payable and accrued expenses	10,633	8,145	10,402
Total current liabilities	39,484	36,784	47,493
LONG-TERM LIABILITIES:
Long-term loans from banks (net of current maturities)	16,348	22,296	19,322
Deferred taxes	12,220	13,120	12,313
Accrued severance pay	3,427	3,143	3,298
Total long-term liabilities	31,995	38,559	34,933
SHAREHOLDERS' EQUITY:
Ordinary shares	7,518	7,292	7,411
Additional paid-in capital	106,138	98,181	101,684
Less - 997,400 Ordinary shares in treasury, at cost	(7,408)	(7,408)	(7,408)
Cumulative other comprehensive income	130	615	55
Accumulated deficit	(14,930)	(18,054)	(19,512)
Total shareholders' equity	91,448	80,626	82,230
Total liabilities and shareholders' equity	$ 162,927	$ 155,969	$ 164,656

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CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands, except share data

	Six months ended June 30,		Three months ended June 30,		Year ended December 31, 2006
	2007	2006	2007	2006
	Unaudited				1.1.1
Sales	$ 89,374	$ 99,096	$ 40,623	$ 49,729	$ 188,104
Cost of sales	74,381	76,334	34,921	38,961	145,144
Gross profit	14,993	22,762	5,702	10,768	42,960
Selling, general and administrative expenses	8,998	8,632	4,697	4,127	17,077
Operating income	5,995	14,130	1,005	6,641	25,883
Financial expenses, net	457	1,016	49	701	1,912
Income before taxes on income	5,538	13,114	956	5,940	23,971
Taxes on income	956	3,335	166	1,392	5,711
Income from continuing operations	4,582	9,779	790	4,548	18,260
Income (loss) from discontinued operations	-	62	-	(90)	120
Net income	$ 4,582	$ 9,841	$ 790	$ 4,458	$ 18,380
Basic and diluted net earnings per share from continuing operations:
Basic net earnings per share	$ 0.22	$ 0.49	$ 0.04	$ 0.22	$ 0.90
Diluted net earnings per share	$ 0.21	$ 0.47	$ 0.04	$ 0.21	$ 0.88
Basic and diluted net earnings per share from discontinued operations:
Basic net earnings per share	$ -	$ -	$ -	-	$ 0.01
Diluted net earnings per share	$ -	$ -	$ -	-	$ 0.01
Basic and diluted net earnings per share :
Basic net earnings per share	$ 0.22	$ 0.49	$ 0.04	$ 0.22	$ 0.91
Diluted net earnings per share	$ 0.21	$ 0.47	$ 0.04	$ 0.21	$ 0.89
Weighted average number of shares used for computing basic earning per share	21,174,775	19,906,775	21,194,630	20,107,137	20,210,722
Weighted average number of shares used for computing diluted earnings per share	21,843,126	20,919,799	21,862,557	21,365,011	20,754,566

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CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Six months ended June 30,		Three months ended June 30,		Year ended December 31,
	2007	2006	2007	2006	2006
	Unaudited
Cash flows from operating activities:
Net income	$ 4,582	$ 9,841	$ 790	$ 4,458	$ 18,380
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (income) from discontinued operations	-	(62)	-	90	(120)
Depreciation, amortization and impairment of property, plant and equipment	4,335	4,151	2,146	2,050	8,719
Compensation related to options granted to employees	182	336	77	141	555
Increase (decrease) in accrued severance pay, net	53	204	(5)	205	459
Accrual of interest on short and long-term deposits and marketable securities	(328)	-	(125)	-	(100)
Gain on sale of and accretion of discount on marketable securities	(65)	-	-	-	(57)
Increase (decrease) in deferred income taxes	60	3,979	(86)	1,381	2,128
Loss (gain) on disposal of property, plant and equipment, net	(395)	8	1	23	(73)
Decrease (increase) in trade receivables, net	2,421	(859)	1,093	972	(4,677)
Decrease (increase) in other accounts receivable and prepaid expenses	275	(224)	167	562	(417)
Decrease (increase) in inventories	4,303	3,962	1,246	5,997	(2,530)
Increase (decrease) in trade payables	(8,240)	(5,624)	(3,092)	(5,927)	3,278
Increase (decrease) in other accounts payable and accrued expenses	385	(1,529)	6	(705)	1,718
Net cash provided by continuing operating activities	7,568	14,183	2,218	9,247	27,263
Net cash provided by (used in) discontinued operating activities	-	507	-	(10)	507
Net cash provided by operating activities	7,568	14,690	2,218	9,237	27,770
Cash flows from investing activities:
Purchase of property, plant and equipment	(3,102)	(1,164)	(2,138)	(562)	(4,688)
Investment grants received	-	1,218	-	-	1,218
Proceeds from sale of property, plant and equipment	681	265	2	255	335
Dividend received from discontinued operation	-	140	-	1	140
Investment in short and long-term deposits and marketable securities	(16,961)	-	(8,500)	-	(22,894)
Proceeds from sale of marketable securities	12,179	-	7,680	-	6,961
Proceeds from sale of subsidiary, net	-	10,250	-	10,250	9,917
Net cash provided by (used in) continuing investing activities	(7,203)	10,709	(2,956)	9,944	(9,011)
Net cash used in discontinued investing activities	-	(172)	-	(4)	(172)
Net cash provided by (used in) investing activities	(7,203)	10,537	(2,956)	9,940	(9,183)

10171/1250/778020/1

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CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Six months ended June 30,		Three months ended June 30,		Year ended December 31, 2006
	2007	2006	2007	2006
	Unaudited
Cash flows from financing activities:
Repayment of long-term bank loans	(2,974)	(18,214)	(1,488)	(16,735)	(21,188)
Proceeds from long-term bank loans	-	5,000	-	5,000	5,000
Decrease in short-term bank credit, net	-	(14,713)	-	(8)	(14,713)
Excess tax benefit from exercise of stock options related to employees and directors	-	-	-	-	446
Proceeds from exercise of stock options related to employees and directors	85	1,622	60	1,136	3,175
Proceeds from exercise of tradable options issued at the secondary offering	4,290	-	-	-	972
Proceeds from secondary offering of shares and options, net	-	13,834	-	-	13,816
Dividend paid to shareholders	(551)	-	-	-	(9,446)
Net cash provided by (used in) continuing financing activities	850	(12,471)	(1,428)	(10,607)	(21,938)
Net cash used in discontinued financing activities	-	(544)	-	(81)	(544)
Net cash provided by (used in) financing activities	850	(13,015)	(1,428)	(10,688)	(22,482)
Total increase (decrease) in cash and cash equivalents	1,215	12,212	(2,166)	8,489	(3,895)
Decrease in cash and cash equivalents attributed to discontinued operations	-	209	-	95	209
Increase (decrease) in cash and cash equivalents attributed to continued operations	1,215	12,421	(2,166)	8,584	(3,686)
Cash and cash equivalents at beginning of period	3,966	7,652	7,347	11,489	7,652
Cash and cash equivalents at end of period	$ 5,181	$20,073	$ 5,181	$20,073	$ 3,966

6k_9_8_07