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Delta Galil Reports 2016 Third Quarter Results

16 Nov 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.”

TEL AVIV, Israel--()--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 third quarter ended September 30, 2016.

“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.”

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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.

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.

             

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of September 30, 2016

 

September 30

December 31

2016

2015

2015

(Unaudited)

(Audited)

Thousands of Dollars

Assets
Current assets:
Cash and cash equivalents 47,788 128,088 167,532
Restricted Cash 1,762 456 532
Other accounts receivable:
Trade receivables 144,949 122,291 105,630
Taxes on income receivable

5,599

8,530 8,963
Others 18,703 15,408 15,882
Financial derivative 511 264 209
Inventory 267,693 204,702 196,172
Assets classified as held for sale 1,000 1,935 1,000
Total current assets

488,005

481,674 495,920
 
Non-current assets:

Investments in associated companies accounted using
the equity method and long-term receivables

11,256 10,433 5,421
Investment property 3,639 3,719 3,573
Fixed assets, net of accumulated depreciation 167,724 114,977 122,129
Goodwill 70,101 70,101 70,101
Intangible assets, net of accumulated amortization 135,707 84,373 89,734
Deferred tax assets 16,912 10,376 9,877
Financial derivative 6,490 1,033 1,439
Total non-current assets 411,829 295,012 302,274
Total assets

899,834

776,686 798,194
 
           

September 30

December 31

2016

2015

2015

(Unaudited)

(Audited)

Thousands of Dollars

 
Liabilities and Equity
Current liabilities:
Short-term bank loans 51,332 617 52
Current maturities of debentures 13,583 23,489 23,365
Financial derivative 1,832 2,854 3,049
Other accounts payable:
Trade payables 103,859 83,851 100,956
Taxes on income payable 4,393 4,343 2,690
Others 87,905 60,526 65,807
Total current liabilities 262,904 175,680 195,919
 
Non-current liabilities:
Severance pay liabilities less plan assets 2,867 2,254 2,696
Other non-current liabilities 33,810 20,282 22,533
Debentures 211,981 216,446 211,728
Reserve for deferred taxes 4,638 3,118 2,528
Financial derivative 1,607 9,052 5,311
Total non-current liabilities 254,903 251,152 244,796
Total liabilities 517,807 426,832 440,715
 
Equity:

Equity attributable to equity holders of the parent company:

Share capital 23,688 23,662 23,666
Share premium 130,529 130,113 130,421
Other capital reserves (8,759) (13,814) (15,692)
Retained earning 252,943 219,712 228,817
Treasury shares (17,490) (10,933) (10,849)
380,911 348,740 356,363
Minority interests 1,116 1,114 1,116
Total equity 382,027 349,854 357,479
Total liabilities and equity 899,834 776,686 798,194
 
               

DELTA GALIL INDUSTRIES LTD.

Consolidated Statement of Comprehensive Income

For the 3-month and 9-month periods ending September 30, 2016

 

Nine months ended September 30

% Increase/(Decrease)

Three months ended September 30

% Increase/(Decrease)
2016     2015           2016     2015      
(Unaudited)
Thousands of Dollars
Except for Earnings per Share Data
Sales 802,852     792,931 1% 296,634     284,556 4%
Cost of sales 548,151 564,549 196,164 201,539
Gross profit 254,701 228,382 12% 100,470 83,017 21%
% of sales 31.7% 28.8% 33.9% 29.2%
Selling and marketing expenses 172,122 150,788 14% 65,191 51,613 26%
% of sales 21.4% 19.0% 22.0% 18.1%
General and administrative expenses 30,936 27,136 14% 12,483 9,616 30%
% of sales 3.9% 3.4% 4.2% 3.4%
Other expenses (income), net 1,053 (801) 427 (66)

Share in profits of associated companies accounted for using the equity
method

305 594 166 199
Operating income before one-time items 50,895 51,853 (2%) 22,535 22,053 2%
% of sales 6.3% 6.5% 7.6% 7.7%
Restructuring expenses 6,895 - 6,895 -
Bargain purchase profit 10,420 - 10,420 -
Activity Acquisition expenses 1,456 809 1,456 809
Operating income 52,964 51,044 4% 24,604 21,244 16%
Finance expenses, net 10,786 12,122 (11%) 3,519 4,555 (23%)
Income before tax on income 42,178 38,922 21,085 16,689
Taxes on income 8,823 7,247 3,430 3,245
Net income for the period 33,355 31,675 5% 17,655 13,444 31%
Net income for the period before one-time items 28,670 32,403 (12%) 12,970 14,172 (8%)
 
Attribution of net earnings for the period:
Attributed to company's shareholders 33,265 31,585 17,625 13,414
Attributed to non-controlling interests 90 90 30 30
33,355 31,675 5% 17,655 13,444 31%

Operating income attributed to company's shareholders before one-
time items, net

28,580 32,313 (12%) 12,940 14,142 (8%)
Net diluted earnings per share attributed to company's shareholders 1.30 1.23 6% 0.69 0.52 33%

Net diluted earnings per share attributed to company's shareholders
before one-time items

1.12 1.26 (11%) 0.51 0.55 (7%)
 
               

DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports

For the 3-month and 9-month periods ending September 30, 2016

 

Nine months ending

Three months ending

September 30

September 30

2016

2015

2016

2015

(Unaudited)

Thousands of Dollars

Cash flows from operating activities:
Net income for the period 33,355 31,675 17,655 13,444
Adjustments required to reflect cash flows deriving from operating activities (4,811) (4,198) 600 (37)
Interest paid in cash (9,678) (10,277) (3,401) (3,840)
Interest received in cash 1,160 1,488 220 176
Taxes on income paid in cash, net (4,510) (8,537) (2,520) (3,808)
Net cash generated from operating activities 15,516 10,151 12,554 5,935
Cash flows from investment activities:
Acquisition of fixed assets and intangible assets (29,184) (26,539) (10,354) (10,361)
Restricted cash deposit (1,224) (103) (1,226) (18)
Acquisition of a subsidiary - (2,000) - -
Acquisition of Activity (116,902) (37,368) (116,902) (37,368)
Investments in associated companies - (3,700) - (3,700)
Proceeds from selling of fixed asset 159 149 84 33
Proceeds from realization of real estate - 10,879 - -
Others (552) 146 (135) 65
Net cash used for Investing activities (147,703) (58,536) (128,533) (51,349)
Cash flows from financing activities:
Dividends paid to non-controlling interest holders in consolidated subsidiary
(90) (118) (30) (90)
Long term payables credit for fixed assets purchase (2,896) (2,104) (245) (262)
Shares Buy-Back (6,895) - - -
Debentures principle repayment (19,379) (19,379) (19,379) (19,379)
Dividend paid (10,567) (10,500) (3,511) (3,500)
Repayment of loans and other long-term liabilities (755) (215) - -
Short-term credit from banking corporations, net 50,503 (1,706) 50,278 (854)
Issuance of debentures, net of issuance costs - 40,006 - -
Release (deposit) of bank deposit used as a security with respect of SWAP transaction 1,745 2,670 2,080 (2,280)
Proceeds from exercise of employee options 384 1,922 285 326
Net cash generated (used in) from financing activities 12,050 10,576 29,478 (26,039)
Net decrease in cash and cash equivalents (120,137) (37,809) (86,501) (71,453)
Exchange rate differences and revaluation of cash and cash equivalents, net 393 (1,061) 112 (61)
Balance of cash and cash equivalents at the beginning of the period 167,532 166,958 134,177 199,602
Balance of cash and cash equivalents at the end of the Period 47,788 128,088 47,788 128,088
 
               

DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports

For the 3-month and 9-month periods ending September 30, 2016

 

Nine months ending

Three months ending

September 30

September 30

2016

2015

2016

2015

(Unaudited)

Thousands of Dollars

 
Adjustments required to reflect cash flows
from operating activities:
Revenues and expenses not involving cash flow:
Depreciation 15,157 12,037 5,925 4,369
Amortization 2,307 1,896 829 643
Cash erosion, net (115) 361 (53) 171
Interest paid in cash 9,678 10,277 3,401 3,840
Interest received in cash (1,160) (1,488) (220) (176)
Taxes on income paid in cash, net 4,510 8,537 2,520 3,808
Deferred taxes on income, net (1,582) 1,101 (740) 1,697
Severance pay liability, net 146 81 70 (58)
Capital gain from sale of fixed assets (48) (133) (77) (40)

Restructuring expenses and impairment of intangible
assets, net

3,984 (628) 3,984 (201)

Change in benefit component of options and restricted
shares granted to employees

1,454 1,492 1,084 653
Bargain purchase profit (10,420) - (10,420) -

Share in profits of associated companies accounted for using
the equity method

(305) (594) (166) (199)
Others 212 (1,306) 174 (1,111)
23,818 31,633 6,311 13,396
Changes to operating assets and liabilities:
Increase in trade receivables (17,703) (13,106) (9,980) (2,057)
Decrease (increase) in other receivable and balances 2,514 (608) 582 (191)
Increase (decrease) in trade payables (6,385) 4,247 7,342 (3,909)
Increase (decrease) in other payables 2,314 (546) 9,082 (531)
Increase in inventory (9,369) (25,818) (12,737) (6,745)
(28,629) (35,831) (5,711) (13,433)
(4,811) (4,198) 600 (37)

Contacts

For Delta Galil Industries, Ltd.
Nissim Douek, +972-54-5201178
Nissim@unik.co.il
or
U.S. Media:
Berns Communications Group
Stacy Berns/Melissa Jaffin, +1-212-994-4660
sberns@bcg-pr.com

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