Delta Galil Reports First Quarter 2017 Results

Sales Increase 23% to $315.7 Million, Including Delta Premium Brands

Operating Cash Flow for the Twelve Month Period Ending March 31, 2017 was $87 Million, Compared with $67 Million for the Same Period Last Year

Reaffirms 2017 Guidance; Sales Expected to Reach $1,330 Million-$1,370 Million and Full-Year EPS Expected to Reach $1.95-$2.02


2017 First Quarter Highlights

  • Sales grew 23% to $315.7 million in the first quarter of 2017, from $256.7 million in the first quarter 2016.
  • Strong balance sheet post-acquisition, highlighted by $399.1 million in equity, and $66.2 million in cash and cash equivalents as of March 31, 2017.
  • Diluted earnings per share excluding one-time items amounted to $0.28 in the first quarter of 2017, compared to $0.31 in the first quarter of 2016.
  • Financial guidance for 2017 was reaffirmed: Full-year 2017 sales are expected to range between $1,330 million-$1,370 million, representing an increase of 13%-16% from 2016 actual sales of $1,179 million. Full-year 2017 diluted EPS is expected to range between $1.95-$2.02, representing an increase of 5%-9% from 2016 actual EPS of $1.85.
  • Declared a dividend of $2.75 million, or $0.108 per share, to be distributed on June 6, 2017. The determining and "ex-dividend" date will be May 25, 2017.
  • Successful issuing of new series bond.
  • Signed licensing deal with Calvin Klein Inc. to develop, produce and distribute boys and girls underwear, sleepwear and socks for the brand.
  • Isaac Dabah, CEO of Delta Galil, stated: “We are pleased with the continued strength of our diversified business model. Our first quarter results were in line with our plan, and consistent with Delta’s historical performance of generating higher profits in the second half of the year. We continue to have a strong balance sheet and remain focused on growing our global business segment.”

TEL AVIV--()--Delta Galil Industries, Ltd. (DELT/Tel Aviv Stock Exchange, DELTY.PK/OTCQX), the global manufacturer and marketer of branded and private label apparel products for men, women and children, as well as leisurewear, jeans and activewear, today reported its financial results for the first quarter ended March 31, 2017.

Sales

The Company reported sales of $315.7 million for the first quarter of 2017, a 23% increase compared to $256.7 million for the same quarter last year. The increase was primarily driven by the addition of Delta Premium Brands.

Operating profit

Operating profit excluding one-time items amounted to $12.9 million for the first quarter of 2017, compared to $14.8 million for the first quarter last year, representing a 13% decrease. Operating profit was $10.2 million for the first quarter of 2017, compared to $14.8 million in the same period last year, representing a 31% decrease.

Net income

Net income excluding one-time items was $7.2 million for the 2017 first quarter, representing an 8% decrease from $7.9 million in the first quarter last year. Net income was $5.6 million in the first quarter of 2017, compared to $7.9 million in the first quarter last year, representing a 29% decrease.

Diluted earnings per share excluding one-time items amounted to $0.28 in the first quarter of 2017, compared to $0.31 in the first quarter of 2016. Diluted earnings per share were $0.22 in the 2017 first quarter, compared to $0.31 in the same quarter last quarter last year. The results reflect a stronger gross margin offset by higher marketing and other expenses including negative impact of foreign currency translation.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “We are pleased with the continued strength of our diversified business model. Our first quarter results were in line with our plan, and consistent with Delta’s historical performance of generating higher profits in the second half of the year.”

“During the quarter, we made meaningful changes in our company that will improve our efficiency and production capacity. We started to run our Vietnamese factory with 750 new employees, and are on track to have our first orders shipped in April 2017. We expect the facility to reach full operational status in 2018.”

“Also during the quarter, we signed a licensing deal with Calvin Klein Inc. to develop, produce and distribute boys and girls underwear, sleepwear and socks for the brand. This represented an important step in our ongoing strategy of enhancing our branded portfolio and broadening our presence in the premium sector.”

“We continue to have a strong balance sheet to support our acquisition strategy, and we remain focused on growing our global business segment, while attaining strong EBITDA growth in 2017 and beyond.”

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA was $19.1 million, or 6% of sales in the first quarter of 2017, compared to $20.2 million, or 7.9% of sales in the same quarter last year.

Operating cash flow was negative $13.1 million in the first quarter of 2017, compared with negative $23.6 million in the first quarter of 2016. Operating cash flow for the twelve month period ending March 31, 2017 was $87 million, compared with $67 million for the same period last year, representing a 30% increase.

Net financial debt as of March 31, 2017 was $205.2 million, compared to $112.4 million as of March 31, 2016, and $181.2 million as of December 31, 2016.

Equity on March 31, 2017 was $399.1 million, up from $368.9 million a year earlier.

Delta Galil declared a dividend of $2.75 million, or $.108 per share, to be distributed on June 6, 2017. The determining and "ex-dividend" date will be May 25, 2017.

The Company completed a successful issuance of a five-year USD series bond for $57 million, at a 3.85% coupon.

2017 Financial Guidance

Delta Galil reaffirmed its 2017 financial guidance, excluding non-recurring items which is based on current market conditions and current exchange rate of $1.09 per euro and 3.65 NIS per US$.

  • Full-year 2017 sales are expected to range between $1,330 million-$1,370 million, representing an increase of 13%-16% from 2016 actual sales of $1,179 million.
  • Full-year 2017 EBIT is expected to range between $86 million-$91 million, representing an increase of 3%-9% from 2016 actual EBIT of $83.2 million.
  • Full-year 2017 EBITDA is expected to range between $113.0 million-$118.0 million, representing an increase of 6%-10% from 2016 actual EBITDA of $107.0 million.
  • Full-year 2017 net income is expected to range between $50.0 million-$52.0 million, representing an increase of 6%-10% from 2016 actual net income of $47.2 million.
  • Full-year 2017 diluted EPS is expected to range between $1.95-$2.02, representing an increase of 5%-9% from 2016 actual EPS of $1.85.

About Delta Galil Industries

Delta Galil Industries is a global manufacturer and marketer of branded and private label apparel products for men, women and children. Since its inception in 1975, the Company has continually strived to create products that follow a body-before-fabric philosophy, placing equal emphasis on comfort, aesthetics and quality. Delta Galil develops innovative seamless apparel including bras, shapewear and socks; intimate apparel for women; extensive lines of underwear for men; babywear, activewear, sleepwear, and leisurewear. Delta Galil also designs, develops, markets and sells branded denim apparel under the brand 7 For All Mankind®, and ladies apparel under the brands Splendid® and Ella Moss®. For more information, visit www.deltagalil.com.

Safe Harbor Statement

Matters discussed in this press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "anticipate," "believe," "estimate," "may," "intend," "expect" and similar expressions identify such forward-looking statements. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein, and while expected, there is no guarantee that we will attain the aforementioned anticipated developmental milestones. These forward-looking statements are based largely on the expectations of the Company and are subject to a number of risks and uncertainties. These include, but are not limited to, risks and uncertainties associated with: the impact of economic, competitive and other factors affecting the Company and its operations, markets, product, and distributor performance, the impact on the national and local economies resulting from terrorist actions, and U.S. actions subsequently; and other factors detailed in reports filed by the Company.

 
 

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of March 31, 2017

       
March 31 December 31
2017   2016 2016
(Unaudited) (Audited)
Thousands of Dollars
Assets
Current assets:
Cash and cash equivalents 64,629 129,717 81,947
Restricted Cash 1,542 535 1,767
Other accounts receivable:
Trade receivables 131,784 117,920 153,044
Taxes on income receivable 2,090 8,533 2,264
Others 20,759 16,186 16,980
Financial derivative 840 559 286
Inventory 247,488 199,058 233,114
Assets classified as held for sale 1,000 1,000 1,000
Total current assets 469,952 473,508 490,402
 
Non-current assets:

Investments in associated companies accounted using the equity method and long-term receivables

11,052 7,276 11,341
Investment property 3,411 3,742 3,389
Fixed assets, net of accumulated depreciation 174,835 130,809 171,954
Goodwill 70,101 70,101 70,101
Intangible assets, net of accumulated amortization 142,538 89,582 147,990
Deferred tax assets 16,946 9,910 14,269
Financial derivative 13,789 3,937 4,096
Total non-current assets 432,672 315,357 423,140
Total assets 902,624 788,865 913,542
 
 

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of March 31, 2017

   
March 31 December 31
2017   2016 2016
(Unaudited) (Audited)
Thousands of Dollars
Liabilities and Equity
Current liabilities:
Short-term bank loans 24 183 44,988
Current maturities of debentures 13,983 24,432 13,479
Financial derivative 1,623 1,972 2,383
Other accounts payable:
Trade payables 81,655 83,947 104,797
Taxes on income payable 4,571 4,874 3,478
Others 87,859 55,211 95,767
Total current liabilities 189,715 170,619 264,892
 
Non-current liabilities:
Severance pay liabilities less plan assets 3,337 2,761 3,213
Other non-current liabilities 34,820 23,763 42,040
Debentures 269,929 219,160 207,024
Deferred taxes liabilities 5,308 2,170 4,353
Financial derivative 439 1,451 1,388
Total non-current liabilities 313,833 249,305 258,018
Total liabilities 503,548 419,924 522,910
 
Equity:
Equity attributable to equity holders of the parent company:
Share capital 23,699 23,670 23,696
Share premium 130,847 130,387 130,901
Other capital reserves (10,179) (8,571) (15,824)
Retained earning 270,785 233,624 268,217
Treasury shares (17,222) (11,315) (17,474)
397,930 367,795 389,516
Minority interests 1,146 1,146 1,116
Total equity 399,076 368,941 390,632
Total liabilities and equity 902,624 788,865 913,542
 
 

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Statement of Income

For the 3-month period ending March 31, 2017

       
Three months ended on
March 31

% Increase

(Decrease)

2017   2016
(Unaudited)
Thousands of dollars
Sales 315,681 256,687 23%
Cost of sales 201,738 177,873
Gross profit 113,943 78,814 45%
% of sales 36.1% 30.7%
Selling and marketing expenses 83,271 52,468 59%
% of sales 26.4% 20.4%
General and administrative expenses 15,959 10,028 59%
% of sales 5.1% 3.9%
Other expenses, net 1,869 1,494

Share in profit of associated companies accounted
for using the equity method

30 27
Operating income excluding non-recurring items 12,874 14,851 (13%)
% of sales 4.1% 5.8%
Restructuring expenses 2,665 -
Operating income 10,209 14,851
Finance expenses, net 3,710 3,619 3%
Income before taxes on income 6,499 11,232
Taxes on income 910 3,343
Net income for the period 5,589 7,889 (29%)

Net income excluding non-recurring items, net
of tax for the period

7,241 7,889 (8%)
Attribution of net earnings for the period:
Attributed to company's shareholders 5,559 7,859
Attributed to non-controlling interests 30 30
5,589 7,889

Net diluted earnings per share attributable to
Company's shareholders

0.22 0.31 (29%)

Net diluted earnings per share, before non-
recurring items attributable to Company's
shareholders

0.28 0.31 (8%)
 
 

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Statement of Income

For the 3-month period ending March 31, 2017

     
Year Ending
Three months ended on March 31 December 31
2017   2016 2016
(Unaudited) (Audited)
Thousands of Dollars
Cash flows from operating activities
Net profit for the period 5,589 7,889 51,902

Adjustments required to reflect cash flows deriving from
  operating activities

(13,482) (28,088) 42,758
Interest paid in cash (4,256) (3,047) (11,971)
Interest received in cash 109 323 1,284
Taxes on income paid in cash, net (1,101) (633) (7,368)
Net cash generated from (used in) operating activities (13,141) (23,556) 76,605
Cash flows from investment activities:
Acquisition of fixed assets and intangible assets (6,225) (8,917) (42,604)
Restricted cash release (deposit) 225 7 (1,224)
Acquisition of activity - - (118,885)
Proceeds from the sale of fixed assets 175 17 258
Earn-out payment for acquisition of an activity (1,500) - -
Others 261 (403) (919)
Net cash used in investment activities (7,064) (9,296) (163,374)
Cash flows from financing activities:

Dividends paid to non-controlling interest holders in
  consolidated subsidiary

- - (120)
Long term payables credit for fixed assets purchase (1,554) (1,315) (3,308)
Debentures principle repayment (6,413) - (19,379)
Dividend paid (3,539) (3,540) (14,094)
Shares Buy-Back - (578) (6,895)
Repayment of loans and other long-term liabilities - (755) (755)
Short-term credit from banking corporations, net (44,964) 125 44,165
Debentures issuance return, excluding issuance expenses 57,152 - -

A deposit with a banking corporation as security in respect of
the SWAP transaction

1,545 415 1,745
Proceeds from exercise of employee options 201 82 618
Net cash used in financing activities 2,428 (5,566) 1,977
Net decrease in cash and cash equivalents (17,777) (38,418) (84,792)

Exchange rate differences and revaluation of cash and cash
equivalents, net

459 603 (793)

Balance of cash and cash equivalents at the beginning of
the period

81,947 167,532 167,532

Balance of cash and cash equivalents at the end of the
period

64,629 129,717 81,947
 
 

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Statement of Income

For the 3-month period ending March 31, 2017

     
Year Ending
Three months ended on March 31 December 31
2017 2016 2016
(Unaudited) (Audited)
Thousands of Dollars
Adjustments required to reflect cash flows
from operating activities:
Revenues and expenses not involving cash flow:
Depreciation 5,426 4,544 21,420
Amortization 788 791 3,029
Cash erosion, net (174) (157) 50
Interest paid in cash 4,256 3,047 11,971
Interest received in cash (109) (323) (1,284)
Taxes on income paid in cash, net 1,101 633 7,368
Deferred taxes, net (1,787) (427) 932
Severance pay liability, net 104 (20) 62
Restructuring expenses 2,665 - 3,984
Capital loss (gain) from sale of fixed assets 42 (9) (54)

Change in benefit component of options and restricted shares
granted to Employees

548 514 2,130

Bargain purchase

- - (10,420)

Share in losses of associated companies accounted for using the
equity method

(30) (27) (351)
Others 392 180 577
13,222 8,746 39,414
Changes to operating assets and liabilities:
Decrease (increase) in trade receivables 23,569 (11,574) (26,054)
Decrease (increase) in other receivable (3,549) 342 8,404
Decrease in trade payables (22,195) (18,925) (6,339)
Increase (decrease ) in other payables (11,481) (7,696) 5,757
Decrease (increase) in inventory (13,048) 1,019 21,576
(26,704) (36,834) 3,344
(13,482) (28,088) 42,758

Contacts

Delta Galil Industries, Ltd.
Nissim Douek, +972-54-5201178
Nissim@unik.co.il
or
U.S. Media Contact:
Berns Communications Group
Stacy Berns/Melissa Jaffin, +1-212-994-4660
sberns@bcg-pr.com

Release Summary

Delta reports first quarter 2017 results

Contacts

Delta Galil Industries, Ltd.
Nissim Douek, +972-54-5201178
Nissim@unik.co.il
or
U.S. Media Contact:
Berns Communications Group
Stacy Berns/Melissa Jaffin, +1-212-994-4660
sberns@bcg-pr.com