Delta Galil Reports Strong Sales and Earnings Growth for 2017 Second Quarter

Sales Increased 36% to $340.5 Million; Operating Profit Increased 31% to $17.7 Million

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 Second Quarter Highlights

  • Sales increased 36% and totaled $340.5 million in the 2017 second quarter, compared to $249.5 million in the same quarter last year.
  • Operating profit increased 31% to $17.7 million in the second quarter, compared to $13.5 million in the second quarter of 2016.
  • EBITDA rose 35% in the second quarter of 2017 and amounted to $25.5 million, compared to $18.9 million in the same quarter last year.
  • Net income in the second quarter of 2017 was $8.9 million, a 14% increase from $7.8 million in the comparable period last year.
  • Operating cash flow for the last twelve months ended June 30, 2017 was $76.4 million, compared with $69.2 million for the same period last year.
  • The Board of Directors declared a dividend of $4.25 million, or $0.167 per share, to be distributed on August 29, 2017. The determining and "ex-dividend" date will be August 16, 2017, per the Tel Aviv Stock Exchange.
  • A strong balance sheet post-acquisition, was highlighted by $417.8 million in equity and $100.7 million in cash as of June 30, 2017.
  • 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.
  • Isaac Dabah, CEO of Delta Galil, stated: “Delta Galil delivered an exceptionally strong performance in the second quarter, reflecting double-digit growth on the top- and bottom-line. Our results were driven by well-defined strategies to build our premium and branded business, expand our market reach, extend our manufacturing resources, and be an ever increasing source of innovative, high quality, differentiated products for our customers and consumers worldwide.”

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 and activewear, today reported its financial results for the second quarter ended June 30, 2017.

Sales

The Company reported sales of $340.5 million for the second quarter of 2017, a 36% increase from $249.5 million for the second quarter of 2016. Excluding Delta Galil Premium Brands (DGPB), sales increased by 9% compared to the second quarter of 2016. Sales for the first six months of 2017 were $656.1 million, up 30% from $506.2 million in the same six-month period of 2016. Excluding DGPB, sales increased by 3% compared to the first six months of 2016.

Operating Profit

Operating profit for the second quarter of 2017 was $17.7 million, a 31% increase from $13.5 million in the second quarter of 2016. For the first six months of 2017, operating profit before one-time items was $30.6 million, an 8% increase from $28.4 million a year earlier. Operating profit in the first six months was $27.9 million, down 2% from $28.4 million in the same period of 2016. The decline was driven preliminary by restructuring expenses included in the first quarter for the DGPB segment.

Net Income

Net income attributable to shareholders was $8.9 million in the second quarter of 2017, compared to $7.8 million in the same quarter of 2016, representing a 14% increase. For the first six months of 2017, net income attributable to shareholders was $14.5 million, compared to $15.7 million last year, representing an 8% decrease. Net income excluding one-time items attributable to shareholders for the first six months of 2017 increased 3% to $16.1 million, compared to $15.6 million in the same period of 2016.

Diluted Earnings Per Share

Diluted earnings per share attributed to shareholders increased 15% and amounted to $0.35 for the 2017 second quarter, compared to $0.30 for the same quarter last year. For the first six months of 2017, diluted earnings were $0.57, compared to $0.61 per diluted share for the same period of 2016, representing a 7% decrease. Diluted earnings per share excluding one-time items attributed to shareholders in the first six months of 2017 increased by 4% to $0.63, from $0.61 in the same period of 2016.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “Delta Galil delivered an exceptionally strong performance in the second quarter, reflecting double-digit growth on the top- and bottom-line. Our results were driven by well-defined strategies to build our premium and branded business, expand our market reach, extend our manufacturing resources, and be an ever increasing source of innovative, high quality, differentiated products for our customers and consumers worldwide.”

“During the quarter, we saw significant growth in Delta Galil USA, mainly kids and activewear categories and in the global upper market. Importantly, the gross margin in Delta Galil USA increased across all business units. Delta Premium Brands, our recent acquisition, continued to exceed the plan.”

“Throughout the quarter we continued to invest in growing our production capacity, and are currently running our Vietnamese factory with 850 employees. We expect to reach full operational status in the facility in the second half of 2018.”

“Looking ahead, we are focused on growing our international and e-commerce businesses, while continuing to pursue strategic acquisition opportunities.”

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA was $25.5 million, or 7.5% of sales in the second quarter of 2017, compared to $18.9 million, or 7.6% of sales in the same quarter last year. For the first six months of 2017, EBITDA was $44.6 million, compared to $39.1 million in the same period of 2016.

Operating cash flow for the trailing 12 months ended June 30, 2017 was $76.4 million, compared to $69.2 million for the trailing 12 months ended June 30, 2016.

Net financial debt as of June 30, 2017 was $169.7 million, compared to $106.6 million as of June 30, 2016, and $181.2 million as of December 31, 2016.

Equity on June 30, 2017 was $417.8 million, up from $363.3 million a year earlier.

Delta Galil declared a dividend of $4.25 million, or $0.167 per share, to be distributed on August 29, 2017. The determining and "ex-dividend" date will be August 16, 2017, per the Tel Aviv Stock Exchange.

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 $1.14 per euro and 3.60 NIS per US$.

  • 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 June 30, 2017

 
 

June 30

  December 31
2017   2016 2016
(Unaudited) (Audited)
Thousands of Dollars
 
Assets
Current assets:
Cash and cash equivalents 99,138 134,177 81,947
Restricted Cash 1,577 540 1,767
Other accounts receivable:
Trade receivables 150,188 113,529 153,044
Taxes on income receivable 1,788 5,860 2,264
Others 18,689 16,756 16,980
Financial derivative 1,111 338 286
Inventory 261,393 194,550 233,114
Assets classified as held for sale 1,000 1,000 1,000
Total current assets 534,884 466,750 490,402
 
Non-current assets:
Investments in associated companies accounted using the equity method and long-term receivables

10,830

7,292

11,341
Investment property 3,605 3,631 3,389
Fixed assets, net of accumulated depreciation 154,771 134,429 171,954
Goodwill 70,101 70,101 70,101
Intangible assets, net of accumulated amortization 150,856 88,608 147,990
Deferred tax assets 16,334 10,843 14,269
Financial derivative 22,619 2,545 4,096
Total non-current assets 429,116 317,449 423,140
Total assets 964,000 784,199 913,542
 
   
June 30 December 31
2017   2016

2016

(Unaudited) (Audited)
Thousands of Dollars
 
Liabilities and Equity
Current liabilities:
Short-term bank loans 108 278 44,988
Current maturities of debentures 14,475 24,105 13,479
Financial derivative 1,332 3,004 2,383
Other accounts payable:
Trade payables 100,094 89,015 104,797
Taxes on income payable 5,892 2,737 3,478
Others 93,380   60,384   95,767  
Total current liabilities 215,551   179,523   264,892  
 
Non-current liabilities:
Severance pay liabilities less plan assets 3,507 2,793 3,213
Other non-current liabilities 45,092 19,106 42,040
Debentures 277,937 214,392 207,024
Reserve for deferred taxes 4,160 2,687 4,353
Financial derivative -   2,446   1,383  
Total non-current liabilities 330,696   241,424   258,018  
Total liabilities 546,247   420,947   522,910  
 
Equity:
Equity attributable to equity holders of the parent company:
Share capital 23,700 23,671 23,696
Share premium 130,750 130,403 130,901
Other capital reserves 1,849 (12,051 ) (15,824 )
Retained earning 277,530 237,745 268,217
Treasury shares (17,222 ) (17,632 ) (17,474 )
416,607 362,136 389,516
Minority interests 1,146   1,116   1,116  
Total equity 417,753   363,252   390,632  
Total liabilities and equity 964,000   784,199   913,542  
 
 

DELTA GALIL INDUSTRIES LTD.

 

Consolidated Statement of Comprehensive Income

For the 3-month and 6-month periods ending June 30, 2017

       

Six months ended June 30

%
Increase/(Decrease)

Three months ended June 30

%
Increase/(Decrease)

2017   2016       2017   2016    
(Unaudited)
Thousands of Dollars
Except for Earnings per Share Data
Sales 656,142   506,218 30 % 340,461   249,531 36 %
Cost of sales 418,098   351,987   216,360   174,114  
Gross profit 238,044 154,231 54 % 124,101 75,417 65 %
% of sales 36.2 % 30.5 % 36.4 % 30.2 %
Selling and marketing expenses 173,949 106,931 63 % 90,678 54,463 66 %
% of sales 26.5 % 21.1 % 26.6 % 21.8 %
General and administrative expenses 33,138 18,453 80 % 17,179 8,425 104 %
% of sales 5.1 % 3.6 % 5.0 % 3.4 %
Other (Expenses) income, net (576 ) (626 ) 1,293 868
Share in profits (losses) of associated companies accounted for using the equity method 187   139   157   112  
Operating income excluding non-recurring items 30,568 28,360 8 % 17,694 13,509 31 %
% of sales 4.7 % 5.6 % 5.2 % 5.4 %
Restructuring expenses 2,665   -   -   -  
Operating income 27,903 28,360 (2 %) 17,694 13,509 31 %
% of sales 4.3 % 5.6 % 5.2 % 5.4 %
Finance expenses, net 9,115   7,267   5,405   3,648  
Income before tax on income 18,788 21,093 12,289 9,861
Taxes on income 4,289   5,393   3,379   2,050  
Net income for the period 14,499   15,700   (8 %) 8,910   7,811   14 %
 
Attribution of net earnings for the period:
Attributed to company's shareholders 14,439 15,640 8,880 7,781
Attributed to non-controlling interests 60   60   30   30  
14,499   15,700   8,910   7,811  
Net diluted earnings per share attributed to company's shareholders 0.57   0.61   (7 %) 0.35   0.30   15 %
Net diluted earnings per share, before non-recurring items attributable to Company's shareholders 0.63   0.61   4 % 0.35   0.30   15 %
 
 

DELTA GALIL INDUSTRIES LTD.

 

Consolidated Cash Flow Reports

For the 3-month and 6-month periods ending June 30, 2017

 
  Six months ending   Three months ending
June 30 June 30
2017

 

2016

2017   2016
(Unaudited)
Thousands of Dollars
 
Cash flows from operating activities:
Net income for the period 14,499 15,700 8,910 7,811
Adjustments required to reflect cash flows deriving from operating activities (1,753 ) (5,411 ) 11,729 22,677
Interest paid in cash (7,480 ) (6,277 ) (3,224 ) (3,230 )
Interest received in cash 231 940 122 617
Taxes on income paid in cash, net (2,746 ) (1,990 ) (1,646 ) (1,357 )
Net cash generated from operating activities 2,751   2,962   15,891   26,518  
Cash flows from investment activities:
Acquisition of fixed assets and intangible assets (12,809 ) (18,830 ) (6,583 ) (9,913 )
Restricted cash release (deposit) 190 2 (35 ) (5 )
Earn-out payment for acquisition of an activity (1,500 ) - - -
Proceeds from selling of fixed asset 28,231 75 28,056 58
Others (640 ) (417 ) (901 ) (14 )
Net cash generated from ( used in) for Investing activities 13,472   (19,170 ) 20,537   (9,874 )
Cash flows from financing activities:
Dividends paid to non-controlling interest holders in consolidated subsidiary
(30 ) (60 ) (30 ) (60 )
Long term payables credit for fixed assets purchase (2,034 ) (2,651 ) (480 ) (1,336 )
Shares Buy-Back - (6,895 ) - (6,317 )
Dividend paid (6,300 ) (7,056 ) (2,761 ) (3,516 )
Repayment of loans and other long-term liabilities - (755 ) - -
Short-term credit from banking corporations, net (44,880 ) 225 84 100
Release (deposit) of bank deposit used as a security with respect of SWAP transaction 1,545 (335 ) - (750 )
Debentures principle repayment (6,413 ) - - -
Debentures issuance return, excluding issuance expenses 57,152 - - -
Proceeds from exercise of employee options 103   99   (98 ) 17  
Net cash generated used for financing activities (857 ) (17,428 ) (3,286 ) (11,862 )
Net increase (decrease) in cash and cash equivalents 15,366 (33,636 ) 33,143 4,782
Exchange rate differences and revaluation of cash and cash equivalents, net 1,825 281 1,366 (321 )
Balance of cash and cash equivalents at the beginning of the period 81,947   167,532   64,629   129,716  
Balance of cash and cash equivalents at the end of the Period 99,138   134,177   99,138   134,177  
 
 

DELTA GALIL INDUSTRIES LTD.

 

Consolidated Cash Flow Reports

For the 3-month and 6-month periods ending June 30, 2017
 
Six months ending

 

Three months ending

June 30

 

June 30

2017   2016

 

2017

  2016
(Unaudited)

Thousands of Dollars

 
Adjustments required to reflect cash flows
from operating activities:
Revenues and expenses not involving cash flow:
Depreciation 11,409 9,232 5,893 4,688
Amortization 2,600 1,478 1,812 687
Cash erosion (revaluation), net (406 ) (62 ) (232 ) 95
Interest paid in cash 7,480 6,277 3,224 3,230
Interest received in cash (231 ) (940 ) (122 ) (617 )
Taxes on income paid in cash, net 2,746 1,990 1,646 1,357
Restructuring expenses, net 2,665 - - -
Deferred taxes on income, net (2,455 ) (842 ) (669 ) (415 )
Severance pay liability, net 190 76 86 96
Capital loss (gain) from sale of fixed assets and asset held for sale (3,142 ) 29 (3,184 ) 38
Change to the benefit component of options granted to employees 1,174 370 626 (144 )
Share in profits of associated companies accounted for using the equity method (187 ) (139 ) (157 ) (112 )
Others 233   38   (159 ) (142 )
22,076   17,507   8,854   8,761  
Changes to operating assets and liabilities:
Decrease (increase) in trade receivables 6,264 (7,723 ) (17,305 ) 3,851
Decrease (increase) in other receivable and balances 494 1,932 4,043 1,590
Increase (decrease) in trade payables (4,653 ) (13,727 ) 17,542 5,198
Increase (decrease) in other payables (3,647 ) (6,768 ) 7,834 928
Decrease (increase) in inventory (22,287 ) 3,368   (9,239 ) 2,349  
(23,829 ) (22,918 ) 2,875   13,916  
(1,753 ) (5,411 ) 11,729   22,677  

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

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