Delta Galil Reports Financial Results for Third Quarter of 2012

Sales Increase 27% and Operating Income Rises 26% Excluding Net Gains from One-Time Items – Driven by Accretive Acquisition and U.S. Market Growth

Initial Guidance for 2013 Reflects Continued Growth over 2012

Quarterly Highlights

  • Sales were a record $234.0 million in the 2012 third quarter, up 27% from the same period of 2011. This is the 12th consecutive quarter of increasing sales.
  • Operating income excluding gains from one-time items was $15.8 million for the 2012 third quarter, a 23% increase from a year ago.
  • Net income attributed to shareholders excluding gains from one-time items was $10.0 million in the 2012 third quarter, a 29% increase from the same quarter of 2011.
  • Diluted earnings per share attributed to shareholders, excluding gains from one-time items, was $0.41 for the 2012 third quarter and $0.81 for nine months, up from $0.32 and $0.68, respectively, for the same periods of 2011.
  • Operating cash flow was $40.2 million for 2012 year-to-date, up from $15.3 million in the same period last year.
  • The Company’s Board of Directors on October 31, 2012, authorized a share repurchase plan to buy back up to US$2.5 million in Delta Galil common stock, from time to time, during the three-month period beginning November 11, 2012.
  • Delta Galil declared a dividend totaling approximately $2.0 million, or $0.0841 per share, to be distributed on November 27, 2012. The determining and "ex-dividend" date for this distribution will be November 14, 2012.
  • Isaac Dabah, CEO of Delta Galil, noted: “The Company’s solid performance in the 2012 third quarter and strong financial matrix reflects highly focused, transformational strategies that have broadened our global reach, diversified our customer base and distribution channels and expanded our portfolio of branded products.”

TEL AVIV--()--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 third quarter and nine months of 2012.

Delta Galil reported record sales for the third quarter of 2012 of $234.0 million, compared to $184.8 million in the same quarter of 2011, an increase of 27%. Sales in the first nine months of 2012 were $571.2 million, compared to $502.4 million in the same period of 2011, an increase of 14%. The higher sales in the 2012 third quarter benefitted from Delta Galil’s acquisition of Schiesser Group, completed in July 2012, while sales in both the 2012 third quarter and nine months also reflected a strong performance in the North American mass market and Upper Market channels.

Operating income excluding gains from one-time items was $15.8 million in the third quarter of 2012, rising 23% from the $12.8 million reported in the third quarter of 2011. In the first nine months of 2012, operating income excluding gains from one-time items was $31.0 million, compared to $24.7 million in the same period of 2011, a 26% increase.

Net income attributed to shareholders excluding gains from one-time items, after tax, was $10.0 million in the third quarter of 2012, compared to $7.7 million in the same quarter of last year, a 29% increase. For the first nine months of 2012, net income attributed to shareholders excluding capital gains and one-time items, after tax, was $20.0 million, rising 23% from $16.3 million in the same period of 2011.

Diluted earnings per share attributed to shareholders, excluding net gains from one-time items, was $0.41 for the 2012 third quarter and $0.81 for nine months. In the third quarter and first nine months of 2011, the comparable amounts were $0.32 and $0.68, respectively.

Results for the third quarter and first nine months of 2012 included net gains attributed to the Lucky Buy of $12.2 million from the acquisition of Schiesser, partially offset by restructuring expenses of $2.4 million due to efficiency measures. Results for the first nine months of 2012 included a capital gain of $19.9 million from the sale of real estate, expenses of $1.2 million from the Schiesser acquisition, a write-down of unused fixed assets of $1.3 million, a net gain from the Schiesser acquisition as previously noted, and restructuring expenses of $5.4 million. The only one-time item in the 2011 nine month period, were capital gains of $3.6 million from assets sale.

CEO Comment: Branded Products, Global Markets Drive Growth

Isaac Dabah, CEO of Delta Galil, stated: “The Company’s solid performance in the 2012 third quarter and strong financial matrix reflects highly focused, transformational strategies that have broadened our global reach, diversified our customer base and distribution channels and expanded our portfolio of branded products. The Schiesser acquisition, in particular, has added new markets, including Europe, while delivering a higher EBIT margin. With a strong and diversified portfolio of four business segments, we are also increasing our business with a wide range of existing customers and are adding new customers. At the same time, we are continuing to invest in product innovation and marketing, while pursuing operational efficiencies. The net effect of these measures has been a record level of quarterly sales, sharply rising profits, and a greater ability to enhance shareholder value through our recently announced share buyback, as well as dividends.”

Positive Outlook for 2013

Delta Galil today provided its initial estimate for 2013 business results. The following forecast excludes the effect of any one-time items:

  • Full-year 2013 sales are estimated to range from $910 million to $920 million, which would constitute an average increase of 12% compared to the current 2012 forecast.
  • Full-year 2013 EBIT is estimated to range between $55 million and $60 million, which would constitute an average increase of 13% compared to the current 2012 forecast.

The Company also reiterated its existing 2012 forecast, which includes:

  • Full-year 2012 sales estimated to range from $810 million to $820 million.
  • Full-year 2012 EBIT estimated to range from $50 million to $52 million.
  • Full-year 2012 net income estimated to range from $33.0 million to $34.5 million.
  • Full-year 2012 diluted EPS estimated to range from $1.37 to $1.44.

Strong Cash Flow

Delta derived positive cash flow from current operations in the first nine months of 2012 of $40.2 million, compared to $15.3 million in the same period last year, an increase of 163%.

Increase in Capital

The net financial debt of Delta Galil amounted to $109.4 million at September 30, 2012, compared to $72.8 million at September 30, 2011 and $53.8 million on December 31, 2011.

The capital of the Group as of September 30, 2012 amounted to $259.0 million, representing 49.3% of the total balance sheet, compared to approximately $210.4 million, representing 46.0% of the total balance sheet as of September 30, 2011 and $217.2 million, or 49.0% of the total balance sheet, as of December 31, 2011. The increase in capital derives primarily from total income for the first nine months of 2012, which amounted to approximately $45.4 million, less distributed dividend in the amount of $6.0 million.

Dividend Declaration

Delta Galil declared a dividend totaling approximately $2.0 million, or $0.0841 per share, to be distributed on November 27, 2012. The determining and "ex-dividend" date for this distribution will be November 14, 2012.

In addition, the Company’s Board of Directors on October 31, 2012, authorized a share repurchase plan to buy back up to US$2.5 million in Delta Galil common stock, from time to time, during the three-month period beginning November 11, 2012.

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of September 30, 2012

 
  September 30     December 31
2012    

2011

2011

(Unaudited)

 

(Audited)

Thousands of Dollars

Assets
Current assets:
Cash and cash equivalents 10,976 58,493 65,760
Restricted cash 2,860 - -
Other accounts receivable:
Trade receivables 112,986 108,349 103,444
Taxes on income receivable 976 1,112 1,434
Others 14,637 12,160 9,770
Inventories 159,677 125,469 110,824
Assets classified as held for sale 6,183 1,766 1,766
Total current assets 308,295 307,349 292,998
Non-current assets:
Long-term pre-paid expenses 385 224 322
Investment property 4,749 - -
Long-term receivables 12,525 1,224 1,202
Fixed assets, net of accumulated depreciation 90,836 64,008 64,184
Intangible assets, net of accumulated amortization 102,266 78,488 77,390
Deferred tax assets 6,635 6,244 7,014
Total non-current assets 217,396 150,188 150,112
Total assets 525,691 457,537 443,110

September 30

    December 31
2012    

2011

2011
(Unaudited)

 

(Audited)

Thousands of Dollars

Liabilities and Equity
Current liabilities:
Short-term bank loans 26,523 71,353 62,053
Current maturities of long-term loans
from banking corporations 2,110 2,110 2,110
Current maturities of Debentures 14,863 11,079 12,367
Financial Derivative 52 645 297
Other accounts payable:
Trade payables 73,161 69,873 55,920
Taxes on income – payable 8,016 910 1,770
Others 47,986 37,938 39,096
Total current liabilities 172,711 193,908 173,613
 
Non-current liabilities:
Loans from financial institutions, less
current maturities 302 2,411 1,504
Severance pay over liabilities from termination
of employer – employee relations less plan assets 1,574 466 1,183
Other non-current liabilities 8,386 4,514 3,900
Debentures 75,682 44,369 41,506
Financial Derivative 5,416 1,507 2,978
Reserve for deferred taxes 2,663 - 1,182
Total non-current liabilities 94,023 53,267 52,253
Total liabilities 266,734 247,175 225,866
 
Equity:
Equity attributable equity holders of the

parent company:

Share capital 23,191 23,098 23,106
Share premium 122,839 121,130 121,216
Other capital reserves 1,637 825 (633)
Retained earnings 118,826 72,842 81,084
Treasury shares (9,700) (9,700) (9,700)
256,793 208,195 215,073
Minority interests 2,164 2,167 2,171
Total equity 258,957 210,362 217,244
Total liabilities and equity 525,691 457,537 443,100

The enclosed notes constitute an integral part of these Financial Statements

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Statement of Comprehensive Income –(Non GAAP)

For the 3-month and 9-month periods ending September 30, 2012

 

Nine months ended September 30

    Three months ended September 30  

2012

 

2011

2012   2011
Thousands of Dollars % Increase Thousands of Dollars % Increase
Unaudited   Unaudited (Decrease)
Sales 571,212 502,431 14% 233,996 184,781 27%
Cost of sales 451,081 403,490 177,082 147,561
Gross profit 120,131 98,941 56,914 37,220
% of sales 21.0% 19.7% 24.3% 20.1%
Selling and marketing expenses 70,426 54,705 29% 33,315 18,846 77%
% of sales 12.3% 10.9% 14.2% 10.2%
Administrative and general expenses 19,194 18,770 2% 7,855 5,979 31%
% of sales 3.4% 3.7% 3.4% 3.2%
Other income (expenses), net 468 (808) 58 411
Operating income excluding capital gains and non-recurring items 30,979 24,658 26% 15,802 12,806 23%
% of sales 5.4% 4.9% 6.8% 6.9%
Capital gain from selling of asset held for sale 19,910 3,597 - -
Schiesser acquisition cost 1,160 - - -

Net income derived from adjustments due to Purchase Price Allocation of Schiesser*

12,163 - 12,163 -
Impairment of fixed assets 1,309 - - -
Restructuring expenses 5,424 - 2,441 -
Operating income 55,159 28,255 95% 25,524 12,806 99%
Finance expenses, net 6,805 5,987 14% 2,828 3,235 (13%)
Profit before tax on income 48,354 22,268 22,696 9,571
Taxes on income 5,338 3,064 2,599 1,842
Equity income 93 - 93 -
Income for the period 43,109 19,204 20,190 7,729
Income for period excluding capital gain and non-recurring items, net for period 20,052 16,374 22% 9,995 7,729 29%
Attribution of net earnings for the period
To shareholders of the parent company 43,019 19,111 20,160 7,698
To minority interests 90 93 30 31
43,109 19,204 20,190 7,729
Diluted earnings per share attributed to shareholders of the company 1.75 0.79 0.82 0.32
Diluted earnings per share attributed to shareholders of the company excluding capital gains and non-recurring items 0.81 0.68 0.41 0.32

* Net Income includes, Lucky Buy of $12.6 million offset by inventory Step-Up of $0.4 million which is included in the GAAP financials among Cost of Sales.

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Cash Flow Reports

For the 3-month and 9-month periods ending September 30, 2012

 

Nine months ending

 

Three months ending

September 30

September 30

2012  

2011

2012

 

2011

(Unaudited)

Thousands of Dollars

 
Cash flows from operating activities:
Net profit for the period 43,109 19,204 20,190 7,729
Adjustments required to reflect cash flows deriving

from operating activities

5,021 4,088 (12,412) 9,611
Interest paid in cash (5,385) (4,960) (2,299) (2,521)
Interest received in cash 541 527 2 133
Taxes on income paid in cash, net (3,050) (3,611) (727) (2,458)
Net cash generated from operating activities 40,236 15,248 4,754 12,494
Cash flows from investment activities:
Cash added from purchased subsidiary 12,258 - 12,258 -
Insolvency and other payments regarding

subsidiary purchase

(86,052) - (85,172) -
Acquisition of activity - (4,000) - -
Acquisition of fixed assets and intangible assets (12,260) (9,071) (5,850) (3,427)
Change in Restricted cash deposit (2,860) - 82,787 -
Proceeds from sale of assets held for sale 2,903 4,209 1,038 174
Payments relating to realizations of assets which

was held for sale

(705) - - -
Proceeds from selling of fixed asset 563 202 57 11
Loans to subcontractor (400) (500) - (100)
Loans granted to employees (37) (26) (9) (16)
Employees' loans return 40 28 9 6
Others (292) (43) (164) 9
Net cash (used for) generated from Investing

activities

(86,842) (9,201) 4,954 (3,343)
Cash flows from financing activities:
Dividends paid holders of minority rights in

consolidated subsidiary

(97) (102) (30) (41)
Proceeds from the issuance of debentures, less

issuance expenses

50,987 - - -
Debentures repayment (11,245) - (11,245) -
Dividend paid (6,000) (6,000) (2,100) (2,000)
Repayment of loans and other long-term liabilities (1,730) (1,207) (675) (150)
Short-term credit from banking corporations, net (42,566) 13,479 10,616 8,229
Proceeds from exercise of employee options 1,708 171 461 10
Net cash generated from financing activities
(used for financing activities) (8,943) 6,341 (2,973) 6,048
Net increase (decrease) in cash and cash

equivalents

(55,549) 12,388 6,735 15,199
Profit due to exchange rate differentials on cash

and cash equivalents

765 (110) 142 (600)
Balance of cash and cash equivalents at the

beginning of the period

65,760 46,215 4,099 43,894
Balance of cash and cash equivalents at the end

of the Period

10,976 58,493 10,976 58,493

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Cash Flow Reports

For the 3-month and 9-month periods ending September 30, 2012

 

 

Nine months ending

   

Three months ending

 

September 30

September 30

 

2012

   

2011

2012

   

2011

 

(Unaudited)

 

Thousands of Dollars

 
Adjustments required to reflect cash flows
from operating activities:
Revenues and expenses not involving cash flow:
Depreciation 7,939 7,268 3,350 2,567
Amortization 1,727 1,439 588 517
Revaluation of cash, net (484) 110 139 600
Interest paid in cash 5,385 4,960 2,299 2,521
Interest received in cash (541) (527) (2) (133)
Taxes on income paid in cash 3,050 3,611 727 2,548
Deferred taxes on income, net 2,545 (796) 569 1,022
Liabilities from termination of employer – employee

relations, net

158 (6) 82 (11)
Capital gain (loss) from sale of fixed assets 23 (106) 23 (5)
Capital gain from realization of asset classified as held

for sale

(19,910) (2,330) - -
Impairment of fixed assets 1,309 - - -
Restructuring expenses 2,286 - 1,193 -
Change in benefit component of options granted to

employees

723 762 254 181
Change in fair value of financial instruments (93) 694 281 (224)
Long-term pre-paid expenses (59) (26) (81) (2)
Income adjustments due to Purchase Price Allocation (12,619) - (12,619) -
Others 906 525 159 288
(7,655) 15,578 (3,038) 9,779
Changes to operating assets and liabilities:
Increase in trade receivables (2,891) (17,531) (9,902) (335)
Decrease (increase) in other receivable and balances (25) (2,454) 1,099 (259)
Increase in trade payables 9,582 16,667 2,748 14,438
Decrease in other payables (1,839) (4,142) (1,705) (3,564)
Decrease (increase) in inventory 7,849 (4,030) (1,614) (10,448)
12,676 11,490 (9,374) (168)
5,021 4,088 (12,412) 9,611

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.

Contacts

Nissim Duek
Irit Nahmani
iritn@unik.co.il
UNIK
or
U.S. Media:
Stacy Berns/Jessica Liddell
Berns Communications Group
+1-212-994-4660
jliddell@bcg-pr.com

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Release Summary

Delta Galil Reports Financial Results for Third Quarter of 2012

Delta Galil Industries, Ltd.