2014 FINANCIAL REPORTS
FIRST QUARTER
7 May 2014

Operating Income Rises 28% from Prior Year, Sales Increase 5%, Driven by Diverse Growth Engines and Global Reach, 18th Consecutive Quarter of Year-over-Year Organic Sales Growth

Raising 2014 Guidance; Sales Expected to Reach $1,045 Million-$1,075 Million and Full-Year EPS Expected to Reach $1.95-2.14

Quarterly Highlights

• Sales increased to $238.1 million in the 2014 first quarter, up 5% from the same period of 2013.

• Delta Galil delivered its 18th consecutive quarter of year-over-year organic sales growth.

• Operating income was $14.8 million in the 2014 first quarter, growing 28% from the comparable amount a year ago.

• EBITDA was $19.0 million or 8.0% of sales in the 2014 first quarter, increasing 21% compared with $15.8 million or 6.9% of sales in the same quarter of 2013.

• Net income attributed to shareholders rose to $8.7 million in the 2014 first quarter, increasing 32% from the comparable amount in 2013.

• Diluted earnings per share attributed to shareholders increased to $0.34 for the 2014 first quarter, up 30% from the comparable amount of $0.26 a year ago.

• Financial guidance for 2014 increased: sales are now expected to be $1,045 million-$1,075 million, up from prior forecast of $1,035 million- $1,065 million. Full-year 2014 EBITDA is expected to range between $95 million-$101 million, up from prior forecast of $93 million-$99 million. Full-year 2014 diluted EPS is expected to be $1.95- $2.14, up from prior forecast of $1.93-$2.11.

• The Board of Directors declared a dividend of $3.5 million or $0.141 per share, to be distributed on May 28, 2014, which is an increase over the previous dividend rate of $0.121. The determining and “ex-dividend” date will be May 15, 2014, per the Tel Aviv Stock Exchange.

• Strong balance sheet was highlighted by a record $328.6 million in equity as of March 31, 2014, and $51.2 million in cash.

• Isaac Dabah, CEO of Delta Galil, stated: “The Company is off to a strong start for 2014. We delivered our 18th consecutive quarter of organic sales increases and generated record earnings, driven by diverse growth engines such as branded products, activewear and our retail business. Our top-line performance was highlighted by rising sales in Germany and the rest of Europe, and stable results in North America. We are enthusiastic about our prospects for the balance 2014, which is expected to be our first year of sales in the $1 billion-plus range, and we are increasing our financial guidance. The Board of Directors is pleased to be able to translate our progress into enhanced returns for shareholders by raising the quarterly dividend.”

Tel Aviv, May 7, 2014 – 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, today reported its financial results for the first quarter ended March 31, 2014.

The Company reported sales of $238.1 million for the first quarter of 2014, up from $227.3 million for the same quarter last year, an increase of 5%.

Operating income was $14.8 million for first quarter 2014, up 28% from $11.6 million in the same quarter of 2013.

A key contributor to the higher operating income was an expanding gross profit margin, which rose to 30.4% in the 2014 first quarter from 28.4% a year ago. This was partly offset by higher selling and marketing expenses as Delta Galil invested in the growth of its business.

Net income attributable to shareholders was $8.7 million in the 2014 first quarter, compared to $6.6 million in the same quarter of 2013, a 32% increase. Diluted earnings per share attributed to shareholders were $0.34 for the 2014 first quarter, up from $0.26 for the 2013 first quarter.

 

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “The Company is off to a strong start for 2014. We delivered our 18th consecutive quarter of organic sales increases and generated record earnings, driven by diverse growth engines such as branded products, activewear and our retail business. Our top-line performance was highlighted by rising sales in Germany and rest of Europe, and stable results in North America. We are enthusiastic about our prospects for the balance 2014, which is expected to be our first year of sales in the $1 billion-plus range, and we are increasing our financial guidance. The Board of Directors is pleased to be able to translate our progress into enhanced returns for shareholders by raising the quarterly dividend.”

“Delta Galil has a solid base for sustained profitable growth,” Mr. Dabah continued. “Our business is well diversified across geographies, branded and private label categories, and the upper, mid-tier and mass market segments. The balance sheet at the end of the first quarter was solid, with nearly $329 million in equity and a strong cash position. During the 2014 first quarter we invested in future growth, with capital expenditures dedicated to two socks joint ventures, additional manufacturing capacity, and our Schiesser and Israel-based retail stores.”

“Our strategy for Delta Galil’s long-term success includes continued investments in innovation and world-class manufacturing; growing organically and through selective acquisitions; building our branded and retail businesses; focusing on opportunities in activewear, socks and seamless products; and expanding our global presence.”

 

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA was $19.0 million or 8.0% of sales in the 2014 first quarter, increasing 21% compared with $15.8 million or 6.9% of sales in the same quarter of 2013.

Operating cash flow was negative $6.6 million in the 2014 first quarter, versus negative $13.3 million in the same period of 2013. The improvement in operating cash flow in Q1 2014 compared to Q1 2013 was mainly due to higher net income and lower increase in working capital versus the comparable period of last year.

Net financial debt as of March 31, 2014 was $83.2 million compared to $109.1 million as of March 31, 2013 and $63.3 million as of December 31, 2013. The increase in the net financial debt as of March 31, 2014 compared to December 31, 2013 is attributed mainly to a negative $6.6 million operating cash flow and $9.6 million investing cash flow.

The financial debt to EBITDA ratio improved significantly to 0.9 for Q1 2014, 44% lower compared to Q1 2013

Equity on March 31, 2014 was a record $328.6 million, compared to $282.6 million a year earlier.

Delta Galil declared a dividend of $3.5 million, or $0.141 per share, to be distributed on May 28, 2014. The determining and “ex-dividend” date will be May 15, 2014, per the Tel Aviv Stock Exchange.

 

Raising Guidance for 2014

The Company today increased its 2014 financial guidance, reflecting a strong outlook for sales and profitability (amounts below exclude one-time items).

• Full-year 2014 sales are expected to range between $1,045 million-$1,075 million (prior forecast was $1,035 million-$1,065 million), representing an increase of 7%-10% from 2013 sales of $974.7 million.

• Full-year 2014 EBIT is expected to range between $77 million-$83 million (prior forecast was $75 million-$81 million), representing an increase of 13%-22% from 2013 EBIT of $67.9 million.

• Full-year 2014 EBITDA is expected to range between $95 million-$101 million (prior forecast was $93 million-$99 million), representing an increase of 10%-17% from 2013 EBITDA of $86.2 million.

• Full-year 2014 net income is expected to range between $50 million-$55 million (prior forecast was $49 million-$54 million), representing an increase of 13%-24% from 2013 net income of $44.3 million.

• Full-year 2014 diluted EPS is expected to range between $1.95-$2.14 (prior forecast was $1.93-$2.11), representing an increase of 11%-22% from 2013 EPS of $1.75.

 

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. 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.