Delta Galil Reports 2016 Second Quarter Results

Net Income Attributable to Shareholders was $7.8 million on Sales of $249.5 Million

Operating Cash Flow Rose to $26.5 Million

2016 Second Quarter Highlights

  • Sales amounted to $249.5 million in the 2016 second quarter, compared to $255.5 million in the 2015 second quarter, representing a 2% decrease.
  • Operating profit in the second quarter of 2016 was $13.5 million, a 7% decrease from $14.5 million in the second quarter of 2015. The decrease in operating income was mainly due to high depreciation expenses derived from investments for future growth.
  • EBITDA in the second quarter of 2016 was $18.9 million, a 1% decrease from $19.0 million for the second quarter of 2015. For the six months ended June 30, 2016, EBITDA increased by 1% to $39.1 million, versus $38.7 million a year ago.
  • Net income in the second quarter of 2016 amounted to $7.8 million, compared to $9.3 million in the same period of 2015.
  • Operating cash flow increased to $26.5 million, compared to $24.0 million last year.
  • The Board of Directors declared a dividend of $3.5 million or $0.139 per share, to be distributed on September 6th, 2016. The determining and "ex-dividend" date will be August 23rd, 2016, per the Tel Aviv Stock Exchange.
  • Strong balance sheet was highlighted by $363.3 million in equity and $134.2 million in cash as of June 30, 2016.
  • The Company has completed its share buy-back plan of $6.9 million.
  • Financial guidance for 2016: the Company expects to meet the lower end of the previously stated guidance range, reflecting the continuance of the soft market in the U.S.
  • Isaac Dabah, CEO of Delta Galil, stated: “While we experienced a challenging U.S. retail environment this quarter, this was partially offset by improvements in all of our other business segments and regions, reflecting the strength of our diversified business model. Looking ahead, we are continuing to build our branded business and global footprint by implementing the new acquisition, which we anticipate will be consummated during the third quarter. Importantly, we have a strong balance sheet to support our long-term growth, and we are continuing with our investments aimed at attaining double digit EBIT growth in 2017 and 2018.”

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 second quarter ended June 30, 2016.

The Company reported sales of $249.5 million for the second quarter of 2016, compared to $255.5 million for the same quarter last year, reflecting softer topline performance in the U.S market, offset by stronger sales in regions such as Europe and Israel. Sales for the first six months of 2016 were $506.2 million, versus $508.4 million in the same period of 2015.

Operating income for the second quarter of 2016 was $13.5 million, down 7% from $14.5 million in the second quarter of 2015. For the first six months of 2016, operating income was $28.4 million, down 5% from $29.8 million a year earlier. The decrease in operating income was mainly due to higher depreciation expenses derived from investments for future growth.

Net income attributable to shareholders was $7.8 million in the second quarter of 2016, compared to $9.3 million in the same quarter of 2015, representing a 16% decrease. Diluted earnings per share attributed to shareholders were $0.30 for the 2016 second quarter, compared to $0.36 for the same quarter last year. For the first six months of 2016, net income attributable to shareholders was $15.6 million, or $0.61 per diluted share, compared to $18.2 million or $0.71 per diluted share for the same period of 2015. The decrease for the second quarter and the first half of 2016 derives mainly from higher depreciation expenses and an increase in tax on income expenses compared to the same periods a year ago.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “While we experienced a challenging U.S. retail environment in the second quarter, which is expected to continue into the third quarter, this was partially offset by improvements in all of our other business segments and regions, reflecting the strength of our diversified business model. Through our balanced blend of branded and private label products, an expanding global presence, and a range of market segments, we are positioned for long-term profitable growth.”

“As part of our growth strategy, we announced during the quarter the acquisition of contemporary premium brands, including the businesses and brands of 7 For All Mankind®, Splendid® and Ella Moss® from VF Corporation. We are now working to maximize the benefits these brands bring to Delta, as they further diversify our product offering and distribution channels, while adding significant strength to our structure.”

“We are on track to launch our new factories in Vietnam, with Seamfree and Cut & Sew factories opening in the fourth quarter of 2016, and our Socks factory in the first quarter of 2017, which will contribute to our growth in 2017 and 2018. With a strong balance sheet to support our long-term growth and acquisition strategy, we are focused on growing our e-commerce business, and are working to attain double digit EBIT growth in 2017 and 2018.”

Cash Flow, EBITDA, Net Debt, Equity and Dividend

Operating cash flow increased to $26.5 million in the second quarter, from $24.0 million in the same period a year ago. Operating cash flow for the 12 months ended June 30, 2016 and 2015, was $69.2 million and $53.9 million, respectively.

EBITDA was $18.9 million or 7.6% of sales in the second quarter of 2016, compared to $19.0 million or 7.5% of sales in the same quarter last year. For the first six months of 2016, EBITDA was $39.1 million or 7.7% of sales, compared to $38.7 million or 7.6% of sales in the same period of 2015.

Last 12 Months EBITDA for the period ended June 30, 2016, amounted to $95.7 million, a 3% increase from $92.8 million in the same period a year ago.

Net financial debt as of June 30, 2016 was $106.6 million, compared to $71.1 million as of June 30, 2015, and $74.5 million as of December 31, 2015. The increase in net financial debt as of June 30, 2016, compared to previous periods derives mainly from the PJ Salvage acquisition and the Company's investments in its production plants.

The net financial debt to EBITDA ratio based on the last four quarters was 1.1 as of June 30, 2016, compared to a ratio of 0.8 as of June 30, 2015.

Equity on June 30, 2016 was $363.3 million, up from $343.2 million a year earlier.

Delta Galil declared a dividend of $3.5 million, or $0.139 per share, to be distributed on September 6th, 2016. The determining and "ex-dividend" date will be August 23rd, 2016, per the Tel Aviv Stock Exchange.

Guidance for 2016

Reflecting the continuance of the soft market in the U.S., the Company expects to meet the lower end of the previously stated guidance range.

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 June 30, 2016

 

June 30

December 31

2016

2015

2015

(Unaudited)

(Audited)

Thousands of Dollars

Assets
Current assets:
Cash and cash equivalents 134,177 199,602 167,532
Restricted Cash 540 438 532
Other accounts receivable:
Trade receivables 113,529 119,022 105,630
Taxes on income receivable 5,860 6,947 8,963
Others 16,756 16,262 15,882
Financial derivative 338 808 209
Inventory 194,550 197,516 196,172
Assets classified as held for sale 1,000 1,793 1,000
Total current assets 466,750 542,388 495,920
 
Non-current assets:

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

7,292

6,615

5,421
Investment property 3,631 3,741 3,573
Fixed assets, net of accumulated depreciation 134,429 111,681 122,129
Goodwill 70,101 51,338 70,101
Intangible assets, net of accumulated amortization 88,608 64,737 89,734
Deferred tax assets 10,843 11,018 9,877
Financial derivative 2,545 4,373 1,439
Total non-current assets 317,449 253,503 302,274
Total assets 784,199 795,891 798,194
 
           

June 30

December 31

2016

 

2015

 

2015

 

(Unaudited)

(Audited)

Thousands of Dollars

Liabilities and Equity
Current liabilities:
Short-term bank loans 278 - 52
Current maturities of debentures 24,105 24,549 23,365
Financial derivative 3,004 2,323 3,049
Other accounts payable:
Trade payables 89,015 88,145 100,956
Taxes on income payable 2,737 5,833 2,690
Others 60,384   61,019   65,807  
Total current liabilities 179,523   181,869   195,919  
 
Non-current liabilities:
Severance pay liabilities less plan assets 2,793 2,228 2,696
Other non-current liabilities 19,106 17,949 22,533
Debentures 214,392 243,686 211,728
Reserve for deferred taxes 2,687 2,061 2,528
Financial derivative 2,446   4,866   5,311  
Total non-current liabilities 241,424   270,790   244,796  
Total liabilities 420,947   452,659   440,715  
 
Equity:

Equity attributable to equity holders of the
parent company:

Share capital 23,671 23,652 23,666
Share premium 130,403 129,797 130,421
Other capital reserves (12,051 ) (9,603 ) (15,692 )
Retained earning 237,745 209,145 228,817
Treasury shares (17,632 ) (10,933 ) (10,849 )
362,136 342,058 356,363
Minority interests 1,116   1,174   1,116  
Total equity 363,252   343,232   357,479  
Total liabilities and equity 784,199   795,891   798,194  
 
               

DELTA GALIL INDUSTRIES LTD.

Consolidated Statement of Comprehensive Income

For the 3-month and 6-month periods ending June 30, 2016

 
Six months ended June 30 % Increase/(Decrease) Three months ended June 30 % Increase/(Decrease)
2016       2015   2016       2015    
(Unaudited)
Thousands of Dollars
Except for Earnings per Share Data
Sales 506,218 508,375 (0 %) 249,531 255,537 (2 %)
Cost of sales 351,987   363,010   174,114   183,038  
Gross profit 154,231 145,365 6 % 75,417 72,499 4 %
% of sales 30.5 % 28.6 % 30.2 % 28.4 %
Selling and marketing expenses 106,931 99,175 8 % 54,463 49,316 10 %
% of sales 21.1 % 19.5 % 21.8 % 19.3 %
General and administrative expenses 18,453 17,520 5 % 8,425 8,324 1 %
% of sales 3.6 % 3.4 % 3.4 % 3.3 %
Other income, net (626 ) 735 868 (604 )

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

139   395   112   216  
Operating income 28,360 29,800 (5 %) 13,509 14,471 (7 %)
% of sales 5.6 % 5.9 % 5.4 % 5.7 %
Finance expenses, net 7,267   7,567   3,648   3,368  
Income before tax on income 21,093 22,233 (5 %) 9,861 11,103 (11 %)
Taxes on income 5,393   4,002   2,050   1,791  
Net income for the period 15,700   18,231   (14 %) 7,811   9,312   (16 %)
 
Attribution of net earnings for the period:
Attributed to company's shareholders 15,640 18,171 7,781 9,282
Attributed to non-controlling interests 60   60   30   30  
15,700   18,231   7,811   9,312  
Net diluted earnings per share attributed to company's shareholders 0.61   0.71   0.30   0.36  
               

DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports

For the 3-month and 6-month periods ending June 30, 2016

 

Six months ending

Three months ending

June 30

June 30

2016

 

2015

 

2016

 

2015

 

(Unaudited)

Thousands of Dollars

Cash flows from operating activities:
Net income for the period 15,700 18,231 7,811 9,312

Adjustments required to reflect cash flows
deriving from operating activities

(5,411 ) (4,161 ) 22,677 20,551
Interest paid in cash (6,277 ) (6,437 ) (3,230 ) (2,651 )
Interest received in cash 940 1,312 617 101
Taxes on income paid in cash, net (1,990 ) (4,729 ) (1,357 ) (3,268 )
Net cash generated from operating activities 2,962   4,216   26,518   24,045  
Cash flows from investment activities:
Acquisition of fixed assets and intangible assets (18,830 ) (16,178 ) (9,913 ) (9,464 )
Restricted cash release (deposit) 2 (85 ) (5 ) 1
Acquisition of a subsidiary - (2,000 ) - -
Proceeds from selling of fixed asset 75 116 58 30

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

- 10,879 - -
Others (417 ) 81   (14 ) 99  
Net cash used for Investing activities (19,170 ) (7,187 ) (9,874 ) (9,334 )
Cash flows from financing activities:

Dividends paid to non-controlling interest holders
in consolidated subsidiary

(60 ) (28 ) (60 ) -
Long term payables credit for fixed assets purchase (2,651 ) (1,842 ) (1,336 ) (192 )
Shares Buy-Back (6,895 ) - (6,317 ) -
Dividend paid (7,056 ) (7,000 ) (3,516 ) (3,500 )
Repayment of loans and other long-term liabilities (755 ) (215 ) - (59 )
Short-term credit from banking corporations, net 225 (852 ) 100 (402 )
Issuance of debentures, net of issuance costs - 40,006 - 40,006

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

(335 ) 4,950 (750 ) 2,242
Proceeds from exercise of employee options 99   1,596   17   975  
Net cash generated (used in) from financing activities (17,428 ) 36,615   (11,862 ) 39,070  

Net increase (decrease) in cash and cash
equivalents

(33,636 ) 33,644 4,782 53,781

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

281 (1,000 ) (321 ) 478

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

167,532   166,958   129,716   145,343  

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

134,177   199,602   134,177   199,602  
 
               

DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports

For the 3-month and 6-month periods ending June 30, 2016

 
 

Six months ending

Three months ending

June 30

June 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 9,232 7,668 4,688 3,994
Amortization 1,478 1,253 687 609
Cash erosion (revaluation), net (62 ) 190 95 (99 )
Interest paid in cash 6,277 6,437 3,230 2,651
Interest received in cash (940 ) (1,312 ) (617 ) (101 )
Taxes on income paid in cash, net 1,990 4,729 1,357 3,268
Deferred taxes on income, net (842 ) (596 ) (415 ) (1,040 )
Severance pay liability, net 76 139 96 (15 )

Capital loss (gain) from sale of fixed assets and asset
held for sale

29 (93 ) 38 (103 )

Change to the benefit component of options granted to
employees

370 839 (144 ) 408

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

(139 ) (395 ) (112 ) (216 )
Others 38   (195 ) (142 ) 276  
17,507   18,664   8,761   9,632  
Changes to operating assets and liabilities:
Decrease (increase) in trade receivables (7,723 ) (11,049 ) 3,851 (8,185 )
Decrease (Increase) in other receivable and balances 1,932 (417 ) 1,590 974
Increase (decrease) in trade payables (13,727 ) 8,156 5,198 23,944
Increase (decrease) in other payables (6,768 ) (442 ) 928 3,363
Decrease (increase) in inventory 3,368   (19,073 ) 2,349   (9,177 )
(22,918 ) (22,825 ) 13,916   10,919  
(5,411 ) (4,161 ) 22,677   20,551  

Contacts

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

Recent Stories

RSS feed for Delta Galil Industries, Ltd.

Release Summary

Delta Galil Reports 2016 Second Quarter Results

Delta Galil Industries, Ltd.