News Column

Delta Galil Reports Record 2014 First Quarter Results

May 7, 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--(BUSINESS WIRE)-- 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.

     

    DELTA GALIL INDUSTRIES LTD.

    Concise Consolidated Balance Sheets

    As of March 31, 2014

       

     

       

    March 31

    December 31

    2014

       

    2013

    2013

    (Unaudited)

    (Audited)

     

    Thousands of Dollars

    Assets

    Current assets:
    Cash and cash equivalents 51,228 41,227 97,346
    Restricted Cash 1,561 2,134 1,448
    Other accounts receivable:
    Trade receivables 107,384 110,320 112,293
    Taxes on income receivable 4,632 1,780 2,427
    Others 11,416 17,719 9,522
    Financial derivative 2,817 983 2,955
    Inventory 178,912 154,366 169,303
    Assets classified as held for sale 1,000 6,358 1,000
    Total current assets 358,950 334,887 396,294
     
    Non-current assets:
    Long-term receivables 18,174 10,583 15,520
    Investment property 4,817 4,610 4,850
    Fixed assets, net of accumulated depreciation 94,793 93,910 95,797
    Intangible assets, net of accumulated amortization 127,482 112,805 118,135
    Deferred tax assets 10,028 9,052 9,560
    Financial derivative 11,976 3,495 10,942
    Total non-current assets 267,270 234,455 254,804
    Total assets626,220 569,342 651,098
           
     

    March 31

    December 31

    2014

       

    2013

    2013

    (Unaudited)

    (Audited)

    Thousands of Dollars

     

    Liabilities and Equity

    Current liabilities:
    Short-term bank loans 2,165 55,028 26,438
    Current maturities of long-term loans
    from banking corporations - 1,357 150
    Current maturities of debentures 18,080 15,980 17,847
    Other accounts payable:
    Trade payables 61,418 58,606 71,283
    Taxes on income payable 5,241 5,084 4,401
    Others 54,754 48,847 56,441
    Total current liabilities141,658 184,902 176,560
     
    Non-current liabilities:
    Severance pay liabilities less plan assets 2,238 2,820 2,105
    Other non-current liabilities 20,822 13,576 17,196
    Debentures 128,817 81,526 129,717
    Reserve for deferred taxes 4,105 3,881 3,630
    Total non-current liabilities 155,982 101,803 152,648
    Total liabilities297,640 286,705 329,208
     
    Equity:
    Equity attributable to equity holders of the parent company:
    Share capital 23,510 23,339 23,499
    Share premium 127,194 124,653 127,024
    Other capital reserves 17,790 8,833 16,212
    Retained earning 169,915 134,614 163,990
    Treasury shares (10,996) (10,996) (10,996)
    327,413 280,443 319,729
    Minority interests 1,167 2,194 2,161
    Total equity328,580 282,637 321,890
    Total liabilities and equity626,220 569,342 651,098
     
     

    DELTA GALIL INDUSTRIES LTD.

    Concise Consolidated Statement of Comprehensive Income

    For the 3-month period ending March 31, 2014

     
        Three months ended on    
    March 31

    % Increase/

    (decrease)

    2014     2013
    (Unaudited)
    Thousands of dollars
    Sales 238,074 227,255 5%
    Cost of sales 165,635 162,629
    Gross profit 72,439 64,626 12%
    % of sales %30.4%28.4
    Selling and marketing expenses 49,950 44,568 12%
    % of sales %21.0%19.6
    General and administrative expenses 8,786 9,417 (7%)
    % of sales %3.7%4.1
    Other income, net 1,135 926
    Operating income14,838 11,567 28%
    % of sales %6.2%5.1
    Finance expenses, net 3,047 2,601 17%
    Income before taxes on income 11,791 8,966
    Taxes on income 2,461 2,310
    Net income for the period9,330 6,656 40%
    Attribution of net earnings for the period:
    Attributed to company's shareholders8,749 6,626 32%
    Attributed to non-controlling interests581 30
    9,330 6,656

    Net diluted earnings per share attributable to

    Company shareholders

    0.34 0.26 30%
     
     

    DELTA GALIL INDUSTRIES LTD.

    Concise Consolidated Cash Flow Reports

    For the 3-month period ending March 31, 2014

        Year Ending
      Three months ended on March 31December 31
    2014   20132013
    (Unaudited)(Audited)
    Thousands of Dollars
    Cash flows from operating activities
    Net profit for the period 9,330 6,656 42,680
    Adjustments required to reflect cash flows deriving from
    operating activities (12,051) (14,794) 28,910
    Interest paid in cash (2,978) (1,950) (10,001)
    Interest received in cash 102 30 471
    Taxes on income paid in cash, net (1,017) (3,215) (15,820)
    Net cash generated from (used in) operating activities (6,614) (13,273) 46,240
    Cash flows from investment activities:
    Acquisition of fixed assets and intangible assets (6,182) (4,586) (20,649)
    Investments in investees (2,798) - -
    Restricted cash deposit (110) 621 1,448
    Proceeds from realization of assets held for sale, net of tax - 348 6,233
    Proceeds from the sale of fixed assets 1,454 58 632

    Payments related to realization of asset held for sale

    (Tax payment related to the realization)

    (1,989) - 3,161
    Loan to subcontractors, net 18 (173) (826)
    Others (3) (30) (85)
    Net cash used in investment activities (9,610) (3,762) (10,086)
    Cash flows from financing activities:

    Dividends paid to non-controlling interest holders in

    consolidated subsidiary

    (1,575) - (123)
    Long term payables credit for fixed assets purchase (1,068) - (1,867)
    Debentures repayment - - (11,285)
    Dividend paid (3,000) (2,500) (10,500)
    Repayment of loans and other long-term liabilities (239) (566) (3,155)
    Short-term credit from banking corporations, net (24,245) 15,772 (14,716)
    Issuance of debentures, net - - 55,704
    Proceeds from exercise of employee options 181 461 2,542
    Net cash generated from (used in) financing activities (29,946) 13,167 16,600
    Net increase (decrease) in cash and cash equivalents(46,170) (3,868) 52,754
    Exchange rate differences and revaluation of cash and cash equivalents, net 52 (380) (883)
    Balance of cash and cash equivalents at the beginning of the period97,346 45,475 45,475
    Balance of cash and cash equivalents at the end of the period51,228 41,227 97,346
     
     

    DELTA GALIL INDUSTRIES LTD.

    Concise Consolidated Cash Flow Reports

    For the 3-month period ending March 31, 2014

     
    Year Ending

    Three months ended on March 31

    December 31

    2014

      20132013

    (Unaudited)

    (Audited)

    Thousands of Dollars

    Adjustments required to reflect cash flows

     

    from operating activities:
    Revenues and expenses not involving cash flow:
    Depreciation 3,541 3,596 15,722
    Amortization 647 596 2,528
    Cash erosion (revaluation), net (2) 4 1,155
    Interest paid in cash 2,798 1,950 10,001
    Interest received in cash (102) (30) (471)
    Taxes on income paid in cash, net 1,017 3,215 15,820
    Deferred taxes on income, net 156 459 (694)
    Severance pay liability, net 121 121 (159)
    Restructuring expenses - - 1,328
    Capital gain from sale of fixed assets and asset held for sale (1,055) (169) (1,121)
    Change to the benefit component of options granted to employees 176 124 563
    Change to the fair value of financial derivatives (443) (770) 707
    Increase in liabilities of Long-term employee bonuses 166 - 1,266
    Changes in long term balances (371) (220) -
    Others (149) 14 (482)
    6,680 8,890 46,163
    Changes to operating assets and liabilities:
    Decrease (increase) in trade receivables 6,545 (2,033) (2,528)
    Increase in other receivable balances (3,268) (3,579) (1,302)
    Decrease in trade payables (8,598) (13,753) (729)
    Increase (decrease) in other payables (4,133) 676 3,989
    Increase in inventory (9,277) (4,995) (16,683)
    (18,731) (23,684) (17,253)
    (12,051) (14,794) 28,910





    Delta Galil Industries

    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

    Source: Delta Galil Industries, Ltd.


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