delta galil
leading in fabrics since 1975
15 May 2019

Sales Increased 9% to $365.4 Million;

$14 Million Improvement in Cash Flow

Reaffirms 2019 Guidance; Sales Expected to Reach $1,550 Million-$1,590 Million and

Full-Year EPS Expected to Grow by 5% to 12% and Reach $2.50-$2.65

2019 First Quarter Highlights

  • Sales grew 9% to $365.4 million in the first quarter of 2019, from $334.5 million in the first quarter of 2018.
  • EBITDA increased 43% to $30.6 million in the first quarter of 2019, from $21.4 million in the same quarter last year.
  • A strong balance sheet following Eminence acquisition and IFRS 16 implementation highlighted by $456.1 million in equity and $45.8 million in cash as of March 31, 2019.
  • Financial guidance for 2019 was reaffirmed: Full-year 2019 sales are expected to range between $1,550 million – $1,590 million, representing an increase of 3%-6% from 2018 actual sales of $1,498 million. Full-year 2019 diluted EPS is expected to range between $2.50-$2.65, representing an increase of 5%-12% from 2018 actual EPS of $2.37.
  • Declared dividend of $1.5 million, or $0.059 per share, to be distributed on June 5, 2019. The determining and “ex-dividend” date will be May 23, 2019.
  • Isaac Dabah, CEO of Delta Galil, stated: “We concluded the quarter with a 9% increase in sales and a significant improvement in cash flow; however, our first quarter results were impacted by the devaluation of the Euro and NIS versus the US dollar, and a shift of holiday sales to the second quarter. Still, we remain pleased as we continue to benefit from a diversified model, including a range of business segments, product categories and an expanded global presence, that enables us to drive momentum and balance. As we look ahead, we remain committed to investing in new products and resources to deliver sustained profitable growth and long-term shareholder value. With a strong balance sheet in place, we have the necessary financial resources to continue to innovate and grow — both organically and through strategic acquisitions.”

Tel Aviv, May 14, 2019 – 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, activewear and denim, today reported its financial results for the first quarter ended March 31, 2019. The Company’s results for the first quarter of 2019 reflect the application of International Financial Reporting Standard 16 (“IFRS 16”) with respect to accounting for leases.

Sales
The Company reported a 9% increase in sales of $365.4 million for the first quarter of 2019, compared to $334.5 million for the first quarter last year. The sales increase largely reflected top-line growth in Delta Galil USA, Delta Galil’s Global Upper Market, Delta Israel, and Delta European Brands, which included a strong contribution from its newly acquired Eminence business.

Operating Profit
Operating profit was $10.4 million for the first quarter of 2019, compared to $14.0 million in the first quarter of 2018, representing a 25% decrease.

Net Income
Net income was $3.0 million in the first quarter of 2019, compared to $7.4 million in the same quarter last year, a 59% decrease.

Diluted earnings per share were $0.12 the first quarter of 2019, compared to $0.30 in the first quarter of 2018, a 61% decrease.

Management Comment
Isaac Dabah, CEO of Delta Galil, stated: “We concluded the quarter with a 9% increase in sales and a significant improvement in cash flow; however, our first quarter results were impacted by the devaluation of the Euro and NIS versus the US dollar, and a shift of holiday sales to the second quarter. Still, we remain pleased as we continue to benefit from a diversified model, including a range of business segments, product categories and an expanded global presence, that enables us to drive momentum and balance. In the first quarter of 2019, we saw a strong performance from Delta Galil USA, Global Upper Market, and a contribution from Eminence.”

“During the quarter, we continued to improve efficiencies at our factories and expect full operational status for 2019. Our Delta Galil Premium Brands business was impacted by the shift in holiday and the depreciation of the Euro, as well as a new store opening expenses; however it remains an exciting growth opportunity.”

“As we look ahead, we remain committed to investing in new products and resources to deliver sustained profitable growth and long-term shareholder value. With a strong balance sheet in place, we have the necessary financial resources to continue to innovate and grow — both organically and through strategic acquisitions.”

EBITDA, Cash Flow, Net Debt, Equity and Dividend
EBITDA was $30.6 million in the first quarter of 2019, up 43% from $21.4 million in the same quarter last year.

Operating cash flow was negative $2.8 million in the first quarter of 2019, compared to negative $30.3 million in the first quarter of 2018, representing a $14.1 million Cash Flow improvement and $13.4 million rental expenses classification to finance activities due to the IFRS 16 implementation.

Net financial debt as of March 31, 2019 was $361.8 million, compared to $170.0 million as of March 31, 2018.

Equity on March 31, 2019 was $456.1 million, approximately equal to $459 million a year earlier.

Delta Galil declared a dividend of $1.5 million, or $0.059 per share, to be distributed on June 5, 2019. The determining and “ex-dividend” date will be May 23, 2019.

2019 Financial Guidance

Delta Galil reaffirmed its 2019 financial guidance, excluding one-time items, which is based on current market conditions and current exchange rates of: Euro/USD 1.14 and USD / NIS 3.65. The Company’s financial guidance for 2019 includes the impact of IFRS 16 on accounting for leases.

  • Full-year 2019 sales are expected to range between $1,550 million-$1,590 million, representing an increase of 3%-6% from 2018 actual sales of $1,498 million.
  • Full-year 2019 EBIT is expected to range between $112 million-$117 million, representing an increase of 14%-19% from 2018 actual EBIT of $98 million.
  • Full-year 2019 EBITDA is expected to range between $189 million-$194 million, representing an increase of 45%-49% from 2018 actual EBITDA of $130 million.
  • Full-year 2019 net income is expected to range between $64 million-$67 million, representing an increase of 5%-12% from 2018 actual net income of $60 million.
  • Full-year 2019 diluted EPS is expected to range between $2.50-$2.65, representing an increase of 5%-12% from 2018 actual EPS of $2.37.

IFRS 16
Starting January 1, 2019, the Company adopted the new lease accounting standards set forth in IFRS 16. This requires that certain leases, which were accounted for as operating leases be treated as capital leases going forward. Certain leases will be reclassified as assets and liabilities on the balance sheet, which will yield increased depreciation and interest expense, offset by a reduction in rental expense.

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 including the brands Schiesser, Eminence, Athena & Liabel; babywear, activewear, sleepwear such as PJ Salvage, and leisurewear. Delta Galil also designs, develops markets and sells branded denim and apparel under the brand 7 For All Mankind®, and ladies apparel under the brands Splendid® and Ella Moss®, among others. In addition it sells its products under brand names licensed to the company, including: Wilson, Maidenform, Tommy Hilfiger, and others. 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.

For more information:

Nissim Douek
+972-54-5201178
Nissim@unik.co.il
U.S. Media Contact:
Stacy Berns/Melissa Jaffin
Berns Communications Group
+1-212-994-4660
sberns@bcg-pr.com