MRO Magazine

Delta Galil Reports Strong 2015 Third Quarter Results


October 27, 2015
By Business Wire News

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 and activewear, today reported its financial results for the third quarter ended September 30, 2015.

The Company reported sales of $284.6 million for the third quarter of 2015, up from $267.2 million for the same quarter last year, an increase of 6% after the effect of currency translation, 5% organic growth, and a 12% increase in original currency representing 10% organic growth. Sales in the first nine months of 2015 were $792.9 million, an increase of 5% from $754.5 million in the same period of 2014, equal to 5% organic growth and 11% in constant currency. Sales growth over the past nine months benefitted from Delta Galil’s focus on increasing the diversity of its geographic base and customer mix.

Operating income before one-time items was $22.1 million for third quarter of 2015, up by 2% from $21.7 million in the same quarter of 2014. For the first nine months of 2015, operating income before one-time items was $51.9 million, virtually unchanged from $52.0 million a year earlier, primarily due to currency translation.

Net income before one-time items attributable to shareholders was $14.1 million in the 2015 third quarter, compared to $13.9 million in the same quarter of 2014, a 2% increase. For the first nine months of 2015, net income before one-time items attributable to shareholders was $32.3 million compared to $32.4 million for the same period of 2014.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “The 2015 third quarter was consistent with our expectations. Sales in the third quarter and the first nine months of 2015 increased at a double digit rate, led by an increase in activewear products. Growth in sales, in terms of constant currency, was reflected in all of our geographic markets.”

“Looking at the key drivers of our profitable growth this quarter, we saw an increase in sales in Delta USA and in the Global Upper Market segments, while both our Schiesser business in Europe and Delta Israel increased sales in original currency. A rising proportion of our sales now comes from branded products, which has been another of our major strategic initiatives.”

“We have continued to invest in long-term growth initiatives,” Mr. Dabah continued.“Earlier this year, we acquired the PJ Salvage brand, providing an opportunity to expand our presence in sleepwear and loungewear, attract a millennial customer base, and strengthen our position in the upper market. We are also excited about our license agreement with Columbia for men’s and ladies’ underwear, launching in 2016; our new seamless R&D center at Nike HQ in Oregon; and a new factory in Vietnam set to open in the 2016 first half.”

Cash Flow, EBITDA, Net Debt, Equity and Dividend

Operating cash flow was $5.9 million in the third quarter and $10.2 million in the first nine months of 2015. In the respective third quarter and nine month periods of 2014, operating cash flow was $14.8 million and $18.4 million.

EBITDA before one-time items was $27.1 million or 9.5% of sales in the 2015 third quarter, an increase of 4% compared with $26.1 million in the 2014 period. For the first nine months of 2015, EBITDA was $65.8 million or 8.3% of sales, compared to $65.0 million in the same period of 2014, increase of 1%.

Net financial debt as of September 30, 2015 was $123.5 million, compared to $77.3 million as of September 30, 2014 and $64.5 million as of December 31, 2014. The increase in the net financial debt was driven primarily by the PJ Salvage acquisition in the third quarter of 2015.

Equity on September 30, 2015 rose to $349.9 million, compared to $335.6 million a year earlier.

Delta Galil declared a dividend of $3.5 million, or $0.139 per share, to be distributed on November 17, 2015. The determining and “ex-dividend” date will be November 4, 2015, per the Tel Aviv Stock Exchange.

Reiterating Guidance for 2015

The Company today reiterated its 2015 financial guidance, excluding non-recurring items, which is based on current market conditions and current exchange rates of $1.12 per Euro and 3.85NIS per US$, reflecting a strong outlook for sales and profitability.

  • Full-year 2015 sales are expected to range between $1,080 million-$1,095 million, representing an organic increase of 4%-6% (equivalent to 7% to 9% in constant currency) from 2014 actual sales of $1,031.9 million. The expected sales level includes the contribution from the PJ Salvage brand, acquired in the 2015 third quarter.
  • Full-year 2015 EBIT is expected to range between $75 million-$79 million, representing an increase of 1%-6% from 2014 actual EBIT of $74.4 million; excluding the exchange rate impact the increase is between 12%-17%.
  • Full-year 2015 EBITDA is expected to range between $94 million-$99 million, representing an increase of 1%-6% from 2014 actual EBITDA of $93 million; excluding the exchange rate impact the increase is between 10%-15%.
  • Full-year 2015 net income is expected to range between $48.5 million-$51.5 million, representing an increase of 0%-6% from 2014 actual net income of $48.4 million; excluding the exchange rate impact the increase is between 12%-18%.
  • Full-year 2015 diluted EPS is expected to range between $1.88-$2.00, representing an increase of 1%-8% from 2014 actual EPS of $1.86; excluding the exchange rate impact the increase is between 13%-19%.

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; ladies intimate apparel; extensive lines of underwear for men; kids, 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, 2015
 
 
September 30December 31
201520142014
(Unaudited)(Audited)
Thousands of Dollars
Assets
Current assets:
Cash and cash equivalents128,088 147,727 166,958
Restricted Cash456 196 369
Other accounts receivable:
Trade receivables122,291 114,437 108,559
Taxes on income receivable8,530 3,173 6,096
Others15,408 15,987 26,202
Financial derivative264 1,074 329
Inventory204,702 201,790 181,687
Assets classified as held for sale1,935 1,000 1,000
Total current assets481,674 485,384 491,200
 
Non-current assets:
Long-term receivables10,433 17,788 8,013
Investment property3,719 4,316 4,132
Fixed assets, net of accumulated depreciation114,977 98,153 98,861
Intangible assets, net of accumulated amortization154,474 121,761 118,506
Deferred tax assets10,376 11,631 11,348
Financial derivative1,033   9,340   1,254
Total non-current assets295,012   262,989   242,114
Total assets776,686   748,373   733,314
 
           
 
September 30December 31
2015      20142014
(Unaudited)(Audited)
Thousands of Dollars
Liabilities and Equity
Current liabilities:
Short-term bank loans617 830 931
Current maturities of debentures23,489 24,353 23,054
Financial derivative2,854 756 2,235
Other accounts payable:
Trade payables83,851 90,815 80,648
Taxes on income payable4,343 4,409 4,961
Others60,526 55,236 57,548
Total current liabilities175,680 176,399 169,377
 
Non-current liabilities:
Severance pay liabilities less plan assets2,254 2,290 2,339
Other non-current liabilities20,282 21,802 19,999
Debentures216,446 205,400 197,262
Reserve for deferred taxes3,118 3,800 2,954
Financial derivative9,052 3,045 8,784
Total non-current liabilities251,152 236,337 231,338
Total liabilities426,832 412,736 400,715
 
Equity:

Equity attributable to equity holders of the parent
company:

Share capital23,662 23,555 23,579
Share premium130,113 127,737 128,274
Other capital reserves(13,814) 7,403 (6,598)
Retained earning219,712 186,763 197,135
Treasury shares(10,933) (10,933) (10,933)
348,740 334,525 331,457
Minority interests1,114 1,112 1,142
Total equity349,854 335,637 332,599
Total liabilities and equity776,686 748,373 733,314
 
 
 
DELTA GALIL INDUSTRIES LTD.
Consolidated Statement of Comprehensive Income
For the 3-month and 9-month periods ending September 30, 2015
         
 

Nine months ended
September 30

%
Increase/(Decrease)

Three months ended
September 30

%
Increase/(Decrease)

2015    2014      2015    2014    
(Unaudited)
Thousands of Dollars
Except for Earnings per Share Data
Sales792,931     754,4635%284,556     267,2376%
Cost of sales564,549 521,620201,539 184,587
Gross profit228,382 232,843(2%)83,017 82,650
% of sales28.8%30.9%29.2%30.9%
Selling and marketing expenses150,788 156,772(4%)51,613 53,252(3%)
% of sales19.0%20.8%18.1%19.9%
General and administrative expenses27,136 26,4013%9,616 8,58712%
% of sales3.4%3.5%3.4%3.2%
Other income, net801 2,52166 1,084

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

594 (324)199 (223)
Operating income before one-time items51,853 52,0490%22,053 21,6722%
% of sales6.5%6.9%7.7%8%
Costs associated with acquisition of activity809809
Restructuring cost, net 182 182
51,044 51,867(2%)21,244 21,490(1%)
Finance expenses, net12,122 10,75213%4,555 4,664(2%)
Income before tax on income38,922 41,11516,689 16,826
Taxes on income7,247 8,2143,245 3,028
Net income for the period31,675 32,901(4%)13,444 13,798(2%)
Net income for the period before one-time items, net of tax32,403 33,064(2%)14,172 13,9612%
 
Attribution of net earnings for the period:
Attributed to company’s shareholders31,585 32,260(2%)13,414 13,768(3%)
Attributed to non-controlling interests90 64130 30
31,675 32,90113,444 13,798
Net diluted earnings per share attributed to company’s shareholders1.26 1.270.55 0.55
 
 
 
 
DELTA GALIL INDUSTRIES LTD.
Consolidated Cash Flow Reports
For the 3-month and 9-month periods ending September 30, 2015
                     
 
Nine months endingThree months ending
September 30September 30
2015201420152014
(Unaudited)
Thousands of Dollars
Cash flows from operating activities:
Net income for the period31,675 32,90113,444 13,798

Adjustments required to reflect cash flows
deriving from operating activities

(4,198) 4,241(37) 9,975
Interest paid in cash(10,277) (9,079)(3,840) (4,213)
Interest received in cash1,488 220176 38
Taxes on income paid in cash, net(8,537) (9,865)(3,808) (4,785)
Net cash generated from operating activities10,151 18,4185,935 14,813
Cash flows from investment activities:
Acquisition of fixed assets and intangible assets(26,539) (18,534)(10,361) (6,166)
Restricted cash release (deposit)(103) 1,252(18) 271
Acquisition of a subsidiary (see appendix A)(2,000) (1,500) (1,500)
Acquisition of activity(37,368)(37,368)

Investments and investment down payment in
associated companies

(3,700) (5,000)(3,700)
Proceeds from selling of fixed asset149 1,80733 68

Payments related to realization of asset held for
sale (Tax payment related to the realization)

10,879 (1,989)
Others146 7765 52
Net cash used for Investing activities(58,536) (23,887)(51,349) (7,275)
Cash flows from financing activities:

Dividends paid to non-controlling interest holders in
consolidated subsidiary

(118) (1,690)(90) (29)
Long term payables credit for fixed assets purchase(2,104) (2,289)(262) (487)
Dividend paid(10,500) (10,000)(3,500) (3,500)
Repayment of loans and other long-term liabilities(19,379) (11,285)(19,379) (11,285)
Short-term credit from banking corporations, net(1,706) (25,344)(854) (5,515)
Repayment of other long term liabilities(215) (566) (236)
Issuance of debentures, net of issuance costs40,006 107,532 45,650

Release of bank deposit used as a security with
respect of SWAP transaction

2,670(2,280)
Proceeds from exercise of employee options1,922 832326 583

Net cash generated from (used in) financing
activities

10,576 57,190(26,039) 25,181

Net increase (decrease) in cash and cash
equivalents

(37,809) 51,721(71,453) 32,719

Exchange rate differences and revaluation of
cash and cash equivalents, net

(1,061) (1,340)(61) (1,812)

Balance of cash and cash equivalents at the
beginning of the period

166,958 97,346199,602 116,820

Balance of cash and cash equivalents at the
end of the Period

128,088 147,727128,088 147,727
 
                     
 
DELTA GALIL INDUSTRIES LTD.
Consolidated Cash Flow Reports
For the 3-month and 9-month periods ending September 30, 2015
 
 

Nine months ending
September 30

Nine months ending
September 30

2015

2014

2015

2014

(Unaudited)

Thousands of Dollars

Adjustments required to reflect cash flows
from operating activities:
Revenues and expenses not involving cash flow:
Depreciation12,037 11,0014,369 3,769
Amortization1,896 1,948644 667
Cash erosion (revaluation), net361 437171 976
Interest paid in cash10,277 9,0793,840 4,213
Interest received in cash(1,488) (220)(177) (38)
Taxes on income paid in cash, net8,537 9,8653,808 4,785
Deferred taxes on income, net1,101 (1,461)1,697 (66)
Severance pay liability, net81 341(58) 117
Restructuring expenses, net(628) (182)(201) (182)

Capital gain from sale of fixed assets and asset held for
sale

(133) (1,339)(40) (20)

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

1,492 513653 164

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

(594) 324(199) 223

Increase (decrease) in liabilities of Long-term
employee bonuses

463 (532)
Changes in long term balances(661) 995(747) 681
Others(645) (470)(364) 466
31,633 31,29413,396 15,223
Changes to operating assets and liabilities:
Decrease (Increase) in trade receivables(13,106) (1,638)(2,057) 6,900
Increase in other receivable and balances(608) (3,586)(191) (133)
Increase (decrease) in trade payables4,247 22,768(3,909) 11,022
Decrease in other payables(546) (5,201)(531) (3,003)
Increase in inventory(25,818) (39,396)(6,745) (20,034)
(35,831) (27,053)(13,433) (5,248)
(4,198) 4,241(37) 9,975
 
 
 
 
DELTA GALIL INDUSTRIES LTD.
Consolidated Cash Flow Reports
For the 3-month and 9-month periods ending September 30, 2015
 
 
Appendix A
 

On July 31(st) 2015 the company purchased the activity of Loomwork Apparel Inc.

Following below the assets and liabilities recognized:
 
 
 

As of July 31st, 2015
USD in thousands

Accounts receivable 1,708
Inventory 1,472
Other receivable 109
Accounts payable (78)
Financial institutes (1,478)
Fixed assets 6
Trade mark 14,000
Goodwill 18,763
Costumer relations 6,200

Conditioned liability presented
on a discounted value basis

(3,334)
37,368
 
 

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