Management comments: Mr. Yos Shiran, Chief Executive Officer of Tefron, commented, "Our first quarter results were in line with our expectations. In addition, our strong operating cash flow during the quarter has led us to a net cash position (cash net of bank debt) for the first time in seven years."
Mr. Shiran continued, "As pointed out during the last quarter, we anticipated a temporary decline in active-wear sales in the first half of 2007, with a strengthening of active-wear sales in the second half of 2007. We reaffirm our assessment and see second half growth driven mainly by our sales to Nike as they prepare to launch their next generation of performance apparel."
"We believe that our working relationship with Nike remains strong, and we have received positive indications from Nike for next generation products, backed up by raw materials commitments, demonstrating the importance of Tefron as a key supplier to Nike."
Mr. Shiran added, "We continue to believe that revenues for the year will be higher than those of 2006 as a result of the expected growth in active-wear sales in the second half of the year. We expect our second quarter revenues to decline in approximately 12% compared to the second quarter of 2006 due to the anticipated temporary reduction in active-wear sales."
"We also expect a strengthening pressure on our operating margins given the ongoing weakening of the US Dollar versus the Shekel and the pricing reduction in older collections of our intimate apparel product line. To mitigate these effects we intend to continue to transfer labor intensive production processes offshore."
Mr. Shiran concluded, "Our business and market fundamentals remain strong. We are specially excited by the prospects for growing our active-wear business with Nike. In addition, we are in a continuous process of looking for new revenue growth drivers while cutting costs and improving efficiencies. We believe that we have the building blocks in place to propel our business to the next level in the coming years."
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