Delta Galil Reporting
Growth for 2016 Third Quarter
17 November 2016

Company has completed the 7 For All Mankind/Splendid/Ella Moss (“Premium Brands”) Acquisition

Net profit increased 31% to $17.7 Million, On Sales of $296.6 Million

Operating cash flow last 12 month is $75.8 Million

2016 Third Quarter Highlights

> Sales grew 4% to $296.6 million in the third quarter of 2016, from $284.6 million in the 2015 third quarter.

> Operating profit increased 16% to $24.6 million in the third quarter of 2016, compared to $21.2 million in the third quarter of 2015.

> Operating profit before one-time items increased by 2% in the third quarter of 2016 and amounted to $22.5 million, compared to $22.1 million in the third quarter of 2015.

> EBITDA in the third quarter of 2016 was $28.7 million, a 5% increase from $27.1 million in the third quarter of 2015.

> Net income in the third quarter of 2016 totaled $17.7 million, compared to $13.4 million in the same period of 2015, a 31% increase.

> Premium Brands activity was consolidated for the first time and contributed $28.9 million to sales, and $2.0 million to operating profit in the third quarter of 2016.

> Operating cash flow in the third quarter of 2016 increased to $12.6 million, compared to $5.9 million last year.

> The Board of Directors declared a dividend of $3.5 million, or $0.139 per share, to be distributed on December 6th, 2016. The determining and “ex-dividend” date will be November 23rd, 2016.

> Isaac Dabah, CEO of Delta Galil, stated: “We are happy with the completion of the acquisition of Premium Brands, and believe it will be a significant long-term growth engine. The acquisition will contribute to our diversification and will help introduce new categories and new customers. The Company continues to focus on attaining overall double digit EBIT growth in 2017 and beyond.”

Sales

The Company reported sales of $296.6 million for the third quarter of 2016, compared to $284.6 million for the same quarter last year, a 4% increase. Sales for the first nine months of 2016 were $802.8 million, compared to $792.9 million in the same period of 2015, a 1% increase.

Operating profit

Operating profit increased 16% to $24.6 million in the third quarter of 2016, compared to $21.2 million in the third quarter last year. For the first nine months of 2016, operating income was $53.0 million, compared to $51.0 for the same period last year, representing a 4% increase.

Operating profit before one-time items in the third quarter of 2016 amounted to $22.5 million, compared to $22.1 million last year, representing an increase of 2%.  Operating profit before one-time items in the first nine months of 2016 amounted to $50.9 million, compared to $51.9 million last year, representing a decrease of 2%.

Net income

Net income was $17.7 million in the third quarter of 2016, compared to $13.4 million in the same quarter last year, increasing 31%. Diluted earnings per share were $0.69 for the 2016 third quarter, compared to $0.52 for the same quarter last year. For the first nine months of 2016, net income was $33.3 million, or $1.30 per diluted share, compared to $31.7 million or $1.23 per diluted share for the same period of 2015.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “Our third quarter results demonstrate the strength of our business model, which is built on a diverse portfolio of branded and private label products, an expanding global presence, and a range of market segments that, together, provide both growth momentum and balance. We saw a strong contribution from our recent addition of DG Premium Brands, which includes 7 For All Mankind®, Splendid® and Ella Moss®, and despite the expected soft U.S. market, we experienced strong growth in Europe and Israel.”

“During the quarter, we focused on consolidating Premium Brands into our business, while taking important measures and implementing the necessary efficiencies to both streamline and strengthen the brands to best position them for growth. Also during the quarter, we appointed retail and fashion leader Paula Schneider, who is renowned for building profitable businesses and improving efficiencies for contemporary brands, to oversee this business and execute our ambitious goals for these brands.”

“Importantly, through this new business segment, we are growing our product offering and entering new categories, which is enabling us to reach new customers as well as strengthen our relations with existing ones – all while expanding our global reach.”

“Looking ahead, in addition to maximizing the benefits of this new acquisition, we expect our new Vietnamese factory to contribute to our growth beginning in 2017, and we are on track to open our new Seamfree and Cut & Sew factories in the fourth quarter. With a strong balance sheet to support our long-term growth and acquisition strategy, we are also focused on growing our e-commerce business, and we are working to attain double digit EBIT growth in 2017 and beyond.”

EBITDA, Cash Flow, Net Debt, Equity and Dividend

> EBITDA was $28.7 million, or 9.7% of sales in the third quarter of 2016, compared to $27.1 million, or 9.5% of sales in the same quarter last year. For the first nine months of 2016, EBITDA was $67.8 million, or 8.4% of sales, compared to $65.8 million, or 8.3% of sales in the same period of 2015.

> Operating cash flow was $12.6 million in the third quarter of 2016, compared with $5.9 million in the third quarter of 2015. Operating cash flow for the nine months ended September 30, 2016, and September 30, 2015, was $15.5 million, and $10.2 million, respectively. Operating cash flow in the last 12 months amounted to $75.8 million, compared to $45.1 million last year.

> Net financial debt as of September 30, 2016 was $223.8 million, compared to $123.5 million as of September 30, 2015, and $74.5 million as of December 31, 2015. The increase in net finance debt derives mainly from the Premium Brands activity acquisition.

> Equity on September 30, 2016 was $382.0 million, up from $349.9 million a year earlier.

> Delta Galil declared a dividend of $3.5 million, or $0.139 per share, to be distributed on December 6th, 2016. The determining and “ex-dividend” date will be November 23rd, 2016.