Delta Galil Reports Record 2016 Results

Operating Profit Increased 24% to All-Time Record of $85.3 Million, on Sales of $1,179.2 Million;
Operating Cash Flow Increased to $76.6 Million

Sales in the 4th Quarter Increased 31% to $376.3 Million
Operating Profit in the 4th Quarter Increased 80% to $32.3 Million

Initial 2017 Earnings Guidance:
Sales Expected to Reach $1,330 Million-$1,370 Million, and
Full-Year EPS Expected to Reach $1.95-$2.02

2016 Fourth Quarter Highlights

  • Sales grew 31% to $376.3 million in the fourth quarter of 2016, from $287.1 million in the 2015 fourth quarter.
  • Operating profit increased 80% to $32.3 million in the fourth quarter of 2016, compared to $17.9 million in the fourth quarter of 2015.
  • Operating profit before one-time items increased 36% in the fourth quarter of 2016 and amounted to $32.3 million, compared to $23.7 million in the fourth quarter of 2015.
  • EBITDA in the fourth quarter of 2016 increased 33% to $39.2 million, from $29.5 million in the fourth quarter of 2015.
  • Diluted earnings per share increased 52% and amounted to $0.73 in the 2016 fourth quarter, compared to $0.48 in the fourth quarter of 2015.
  • A strong balance sheet post-acquisition, highlighted by $390.6 million in equity as of December 31, 2016, and $81.9 million in cash and cash equivalents.
  • Operating cash flow totaled $76.6 million for the 2016 full year, compared to $70.5 million last year.
  • The Board of Directors declared a dividend of $3.5 million, or $0.139 per share, to be distributed on March 14th 2017. The determining and "ex-dividend" date will be March 2nd 2017.
  • Isaac Dabah, CEO of Delta Galil, stated: “We are very pleased with our results for 2016, which concluded with a particularly strong fourth quarter and reflected all-time high sales, operating profit and cash flow. Our diverse blend of business segments, product categories and an expanded global presence, along with our strategic efforts to grow in areas such as branded products, continue to drive both growth momentum and balance. We remain committed to investing in new products and resources to drive sustained profitable growth and long-term shareholder value, and are focused on attaining overall double digit EBITDA 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 fourth quarter and full year ended December 31, 2016.

“Looking ahead, we remain committed to investing in new products and resources to drive sustained profitable growth and long-term shareholder value and, with a strong balance sheet and cash position, we have the necessary financial resources to continue to invest, innovate and grow.”

Sales

The Company reported sales of $376.3 million for the fourth quarter of 2016, a 31% increase compared to $287.1 million for the same quarter last year. Sales for the 2016 full year were $1,179.2 million, a 9% increase from $1,080.0 million for the 2015 full year. The year-over-year increase reflected top-line growth in all key geographic regions, as well as the positive impact of Delta Galil’s diversified portfolio. This includes a significant increase in its branded activity, new businesses with strong global reach, and expansion of its retail activity in Israel and Germany.

Operating profit

Operating profit increased 80% to $32.3 million in the fourth quarter of 2016, compared to $17.9 million in the fourth quarter last year. For the 2016 full year, operating profit grew 23% to $85.3 million, compared to $69.0 for the 2015 full year.

Operating profit excluding one-time items increased 36% in the fourth quarter of 2016, and amounted to $32.3 million, compared to $23.7 million last year. For the 2016 full year, operating profit excluding one-time items amounted to $83.2 million, compared to $75.5 million last year, representing a 10% increase.

Net income

Net income increased 51% to $18.5 million in the fourth quarter of 2016, compared to $12.3 million in the same quarter last year. Net income excluding one-time items totaled $18.5 million, compared to $16.0 million for the same period last year, representing a 16% increase. Diluted earnings per share increased 52% in the 2016 fourth quarter to $0.73, compared to $0.48 for the same quarter last year. For the 2016 full year, net income was $51.9 million, or $2.03 per diluted share, compared to $43.8 million or $1.71 per diluted share for the same period of 2015, representing a 18% increase.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “We are very pleased with our results for 2016, which concluded with a particularly strong fourth quarter and reflected all-time high sales, operating profit and cash flow. Throughout the year, we remained focused on a number of operational and growth initiatives that improved our business segments and helped make us a more efficient company. Further, our diverse blend of business segments, product categories and an expanded global presence continue to drive both growth momentum and balance.

“During the year, we made the successful acquisition of 7 For All Mankind®, Splendid® and Ella Moss®, reflecting our strategic efforts to grow Delta Galil’s branded business and expand our global footprint. These brands further diversify our product offering and distribution channels, while adding significant strength to our structure.

“We’ve upgraded our digital platform and increased our ecommerce market share by selling to wholesale customers such as Amazon, Zalando, and Otto, while elevating sales on our proprietary Schiesser and Delta Israel websites. We also launched a new advanced digital platform for the 7 For All Mankind, Splendid and Ella Moss brands.

“Looking ahead, we remain committed to investing in new products and resources to drive sustained profitable growth and long-term shareholder value and, with a strong balance sheet and cash position, we have the necessary financial resources to continue to invest, innovate and grow.

“We are very proud of Delta's achievements in the past year, and would like to express our gratitude to our associates and customers for their cooperation and support. Hopefully, this collaboration will lead Delta to significant achievements in the future."

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA was $39.2 million, or 10.4% of sales in the fourth quarter of 2016, compared to $29.5 million, or 10.3% of sales in the same quarter last year. For the 2016 full year, EBITDA was $107.0 million, or 9.1% of sales, compared to $95.3 million, or 8.8% of sales last year.

Operating cash flow was $61.1 million in the fourth quarter of 2016, compared with $60.3 million in the fourth quarter of 2015. For the 2016 full year, operating cash flow was $76.6 million, compared to $70.5 million last year.

Net financial debt as of December 31, 2016 was $181.2 million, compared to $223.8 million as of September 30, 2016, and $74.5 million as of December 31, 2015. The increase in net finance debt derives mainly from the Premium Brands activity acquisition, offset by the positive cash-flow generated in the fourth quarter.

Equity on December 31, 2016 was $390.6 million, up from $357.5 million a year earlier.

Delta Galil declared a dividend of $3.5 million, or $0.139 per share, to be distributed on March 14th 2017. The determining and "ex-dividend" date will be March 2nd 2017.

2017 Financial Guidance

Delta Galil provided its 2017 financial guidance, excluding non-recurring items which is based on current market conditions and current exchange rate of $1.06 per euro and 3.8 NIS per US$.

  • Full-year 2017 sales are expected to range between $1,330 million-$1,370 million, representing an increase of 13%-16% from 2016 actual sales of $1,179 million.
  • Full-year 2017 EBIT is expected to range between $86 million-$91 million, representing an increase of 3%-9% from 2016 actual EBIT of $83.2 million.
  • Full-year 2017 EBITDA is expected to range between $113.0 million-$118.0 million, representing an increase of 6%-10% from 2016 actual EBITDA of $107.0 million.
  • Full-year 2017 net income is expected to range between $50.0 million-$52.0 million, representing an increase of 6%-10% from 2016 actual net income of $47.2 million.
  • Full-year 2017 diluted EPS is expected to range between $1.95-$2.02, representing an increase of 5%-9% from 2016 actual EPS of $1.85.

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 December 31, 2016

 
December 31
2016   2015
Thousands of Dollars
Assets
Current assets:
Cash and cash equivalents 81,947 167,532
Restricted Cash 1,767 532
Other accounts receivable:
Trade receivables 153,044 105,630
Taxes on income receivable 2,264 8,963
Others 16,980 15,882
Financial derivative 286 209
Inventory 233,114 196,172
Assets classified as held for sale 1,000 1,000
Total current assets 490,402 495,920
 
Non-current assets:
Investments in associated companies accounted using the equity method and long-term receivables 11,341 5,421
Investment property 3,389 3,573
Fixed assets, net of accumulated depreciation 171,954 122,129
Goodwill 70,101 70,101
Intangible assets, net of accumulated amortization 147,990 89,734
Deferred tax assets 14,269 9,877
Financial derivative 4,096 1,439
Total non-current assets 423,140 302,274
Total assets 913,542 798,194
 

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of December 31, 2016

 
  December 31
2016   2015
Thousands of Dollars
Liabilities and Equity
Current liabilities:
Short-term bank loans 44,988 52
Current maturities of debentures 13,479 23,365
Financial derivative 2,383 3,049
Other accounts payable:
Trade payables 104,797 100,956
Taxes on income payable 3,478 2,690
Others 95,767 65,807
Total current liabilities 264,892 195,919
 
Non-current liabilities:
Severance pay liabilities less plan assets 3,213 2,696
Other non-current liabilities 42,040 22,533
Debentures 207,024 211,728
Reserve for deferred taxes 4,353 2,528
Financial derivative 1,388 5,311
Total non-current liabilities 258,018 244,796
Total liabilities 522,910 440,715
 
Equity:
Equity attributable equity holders of the

parent company:

Share capital 23,696 23,666
Share premium 130,901 130,421
Other capital reserves (15,824) (15,692)
Retained earning 268,217 228,817
Treasury shares (17,474) (10,849)
389,516 356,363
Minority interests 1,116 1,116
Total equity 390,632 357,479
Total liabilities and equity 913,542 798,194
 

The enclosed notes constitute an integral part of these Financial Statements

       
DELTA GALIL INDUSTRIES LTD.
 

Concise Consolidated Statement of Comprehensive Income

For the 3-month and 12-month periods ending December 31, 2016

 
For the year ended December 31 Three months ended December 31
2016   2015 2016   2015
Thousands of Dollars % change Thousands of Dollars

% change

Sales 1,179,167   1,079,987 9% 376,315   287,056 31%
Cost of sales 787,650 763,261 239,499 198,712
Gross profit 391,517 316,726 24% 136,816 88,344 55%
% of sales 33.2% 29.3% 36.4% 30.8%
Selling and marketing expenses 262,527 208,283 26% 90,405 57,495

57%

% of sales 22.3% 19.3% 24% 20.0%
Administrative and general expenses 46,967 35,828 31% 16,031 8,692 84%
% of sales 4% 3.3% 4.3% 3.0%
Other income, net 832 2,208 1,885 1,407
Share in profit of associated companies accounted for using the equity method 351 710 46 116
Operating income excluding non-recurring items 83,206 75,533

10%

32,311 23,680 36%
% of sales 7.1% 7.0% 8.6% 8.2%
Restructuring expenses 6,895 5,747 - 5,747
Bargain purchase 10,420 - - -
Cost associated with acquisition of activity 1,456 809 - -
Operating income 85,275 68,977 32,311 17,933
Finance expenses, net 17,420 16,594 5% 6,634 4,472 48%
Profit before tax on income 67,855 52,383 25,677 13,461
Taxes on income 15,953 8,435 7,130 1,188
Net income for the period 51,902 43,948 18% 18,547 12,273 51%
Net income for period excluding non-recurring items, net of tax 47,217 48,454 (3%) 18,547 16,051 16%
Attribution of net earnings for the period
Attributed to company's shareholders 51,782 43,828 18,517 12,243
Attributed to non-controlling interests 120 120 30 30
51,902 43,948 18,547 12,273
Net diluted earnings per share attributed to shareholders of the company 2.03 1.71 0.73 0.48
Net diluted earnings per share excluding non-recurring items net of tax, attributed to shareholders of the company 1.85 1.88 (2%) 0.73 0.62

18%

 
 
DELTA GALIL INDUSTRIES LTD.
 

Concise Consolidated Cash Flow Reports

 
For the year ended December 31

2016

 

2015

Thousands of Dollars
Cash flows from operating activities:
Net profit for the period 51,902 43,948

Adjustments required to reflect cash flows deriving from operating activities

42,758 49,811
Interest paid in cash (11,971) (13,573)
Interest received in cash 1,284 1,697
Taxes on income paid in cash, net (7,368) (11,421)

Net cash generated from operating activities

76,605 70,462
Cash flows from investment activities:
Acquisition of fixed assets and intangible assets (42,604) (38,077)
Restricted cash deposit (1,224) (184)
Acquisition of activity (118,885) (37,368)
Investments in associated company - (2,000)
Acquisition of subsidiary, net of cash in the acquired company - 673
Proceeds from sale of fixed asset 258 291

Proceeds from realization of real estate

- 10,879
Others (919) (8)
Net cash used for Investing activities (163,374) (65,794)
Cash flows from financing activities:

Dividends paid to non-controlling interest holders in
consolidated subsidiary

 

(120)

(146)

Long term payables credit for fixed assets purchase (3,308) (2,347)
Shares Buy-Back (6,895) -
Debentures principle repayment (19,379) (25,792)
Dividend paid (14,094) (14,073)
Repayment of loans and other long-term liabilities (755) (916)
Short-term credit from banking corporations, net 44,165 (3,212)
Proceeds from Debentures issuance net of issuance expenses - 40,006

A deposit with a banking corporation as security in respect of the SWAP transaction

1,745 1,660
Proceeds from exercise of employee options 618 2,044
Net cash generated (used in) from financing activities 1,977 (2,776)

Net increase (decreased) in cash and cash equivalents

(84,792) 1,892
Exchange rate differences of cash and cash equivalents, net (793) (1,318)
Balance of cash and cash equivalents at the

beginning of the period

167,532 166,958

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

81,947 167,532
 
   
DELTA GALIL INDUSTRIES LTD.
 

Concise Consolidated Cash Flow Reports

 
For the year ended December 31
2016

 

2015

Thousands of Dollars

Adjustments required to reflect cash flows

from operating activities:
Revenues and expenses not involving cash flow:
Depreciation 21,420 17,091
Amortization 3,029 2,678
Cash erosion, net 50 443
Interest paid in cash 11,971 13,573
Interest received in cash (1,284) (1,697)
Taxes on income paid in cash, net 7,368 11,421
Deferred taxes on income, net 932 1,075
Severance pay liability, net 62 86
Restructuring expenses ,net 3,984 5,320
Capital gain from sale of fixed assets (54) 203

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

2,130 2,240
Bargain purchase (10,420) -
Share in losses of associated companies accounted for using the equity method (351) (710)
Increase in liabilities of Long-term employee bonuses
Others 577 (2,195)
39,414 49,528
Changes to operating assets and liabilities:
Decrease (increase) in trade receivables (26,054) 3,518
Decrease (increase) in other receivable and balances 8,404 (4,970)
Increase (decrease) in trade payables (6,339) 19,092
Increase (decrease) in other payables 5,757 (1,326)
Decrease (increase) in inventory 21,576 (16,031)
3,344 283
42,758 49,811
 

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

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Delta Galil reports record 2016 results.

Delta Galil Industries Ltd.