Delta Galil Reports
Successful 2016 First Quarter Results
16 May 2016

Sales Rise to $256.7 Million;
Net Income to Shareholders is $7.9 Million

Reaffirms 2016 Guidance;
Sales Expected to Reach $1,090 Million-$1,110 Million and Full-Year EPS Expected to Reach $1.93-$2.02

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2016 First Quarter Highlights

> Sales grew to $256.7 million in the 2016 first quarter, an increase of 2% from last year.

> Operating income increased by 17% to $16.3 million, excluding mark to market effect of hedging transactions in both Q1 2016 and Q1 2015.

> EBITDA increased 18% excluding the effect of mark to market effect of hedging transactions in both Q1 2016 and Q1 2015.

> Financial guidance for 2016 was reaffirmed: full-year sales expected to range between $1,090 million-$1,110 million, rising 1%-3% from 2015 actual sales. Full-year 2016 diluted EPS is expected to range between $1.93-$2.02, representing an increase of 2%-7% from 2015 actual EPS of $1.88.

> The Board of Directors declared a dividend of $3.5 million or $0.139 per share, to be distributed on June 7, 2016. The determining and “ex-dividend” date will be May 25, 2016, per the Tel Aviv Stock Exchange.

> The Company has repurchased 163,216 shares since February 25th till May 15th 2016 under its share buyback plan, representing approximately 59% of the $7.5 million plan approved by the board.

> Strong balance sheet was highlighted by $368.9 million in equity and $130.3 million in cash as of March 31, 2016.

> Isaac Dabah, CEO of Delta Galil, stated: “Our 2016 first quarter results were in line with expectations, reflecting a moderate top-line growth and a double-digit increase in operating profit before the effect of hedging. During the quarter, we began to benefit from investments made in 2015 to improve our business. We remain committed to investing in new products and resources to drive sustained profitable growth and long-term shareholder value.”

Tel Aviv, May 16, 2016 – 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 ladies, men and kids, as well as leisurewear and activewear, today reported its financial results for the first quarter ended March 31, 2016.

The Company reported sales of $256.7 million for the first quarter of 2016, an increase of 2% from $252.8 million for the same quarter last year. The growth in sales primarily reflected a significant improvement in Europe and in Israel.

Operating income was $14.8 million for first quarter 2016, versus $15.3 million for the first quarter last year, representing a 3% decrease. The decline in operating income was primarily a result of the impact of mark-to-market valuation on hedging transactions which resulted in a loss of $1.5 million in this quarter versus a profit of $1.4 million in the first quarter of last year.
Excluding the mark to market valuation mentioned above, the operating income in the first quarter of 2016 amounted to $16.3 million compared to $ 13.9 million in the first quarter of 2015, an increase of 17%.

Net income attributable to shareholders was $7.9 million in the first quarter of 2016, compared to $8.9 million in the same quarter of 2015. Excluding the mark to market valuation mentioned above net of tax effect, the net income in the first quarter of 2016 amounted to $9.0 million compared to $ 7.9 million in the first quarter of 2015, an increase of 13%.

Diluted earnings per share attributed to shareholders were $0.31 for the 2016 first quarter, compared to $0.35 for the 2015 first quarter. Excluding the mark to market valuation mentioned above net of tax effect, the diluted earnings per share in the first quarter of 2016 amounted to $0.35 compared to $0.31 in the first quarter of 2015, an increase of 13%.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “Our 2016 first quarter results were in line with expectations, reflecting a moderate top-line growth and a double-digit increase in operating profit before the effect of hedging. During the quarter, we began to benefit from investments made in 2015 to improve our business, as we saw a significant increase in Delta USA’s operating profit and meaningful improvements in our global upper market performance resulting from efficiencies in our owned factories.”

“Our diverse blend of business segments, product categories and an expanded global presence, along with our strategic efforts to grow in areas such as branded products, continue to drive both growth momentum and balance,” Mr. Dabah continued. “We were pleased with the successful launch of the Puma brand license in Israel during the quarter, and will continue to expand our prominent portfolio of licensed brands by pursuing additional strategic acquisitions.”

“Looking ahead, we are focused on attaining double digit EBIT growth in 2017. We remain committed to investing in new products and resources to drive sustained profitable growth and long-term shareholder value and, with a strong balance sheet and cash position, we have the necessary financial resources to continue to invest, innovate and grow,” Mr. Dabah concluded.

EBITDA, Net Debt, Equity, Dividend and Shares Buyback

  • EBITDA was $20.2 million or 7.9% of sales in the 2016 first quarter, increasing 3% compared with $19.6 million or 7.8% of sales in the same quarter of 2015. EBITDA increased 18% excluding the effect of mark to market effect of hedging transactions in both Q1 2016 and Q1 2015.
  • Operating cash flow was negative $23.6 million in the 2016 first quarter, versus negative $19.8 million in the same period of 2015. The increase in negative operating cash flow was due to a $36.8 million increase in working capital, compared with a working capital increase of $33.5 million in the same quarter of 2015, reflecting the seasonality of the business. Operating cash flow for the twelve-month period ending March 31, 2016 was $66.7 million, compared to $40.1 million for the same period last year.
  • Net financial debt as of March 31, 2016 was $112.4 million, compared to $83.7 million as of March 31, 2015 and $74.5 million as of December 31, 2015.
  • Equity as of March 31, 2016 was $368.9 million, compared to $328.2 million a year earlier.
  • Delta Galil declared a dividend of $3.5 million, or $0.139 per share, to be distributed on June 7, 2016. The determining and “ex-dividend” date will be May 25th 2016, per the Tel Aviv Stock Exchange.
  • The Company has repurchased 163,216 shares since February 25th and till May 15th 2016 under its share buyback plan, representing approximately 59% of the $7.5 million plan approved by the board.

Reaffirming Guidance for 2016

The Company reiterating its 2016 financial guidance, excluding non-recurring items, which is based on current market conditions and current exchange rates of $1.12 per euro and 3.80 NIS per US$. Full-year sales expected to range between $1,090 million-$1,110 million, rising 1%-3% from 2015 actual sales. Full-year 2016 diluted EPS is expected to range between $1.93-$2.02, representing an increase of 2% -7% from 2015 actual EPS of $1.88.

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.