delta galil
leading in fabrics since 1975
17 May 2017

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, May 16, 2017 – 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.