Delta Galil Reports Record 2017 Results

Sales Increased 16% to Record $1,368.1 Million;
EBITDA Increased 8% to $115.9 Million

Q4 Net Income Increased 8% to $20.1 Million;
Diluted Earnings Per Share Increased 7% to $0.79 in Q4

Initial 2018 Earnings Guidance:
Sales Expected to Reach $1,400 Million-$1,440 Million and
Full-Year EPS Expected to grow by 7% to 16% and reach $2.11-$2.30

2017 Fourth Quarter Highlights

  • Net income increased 8% and amounted to $20.1 million in the fourth quarter of 2017, compared to $18.5 million in the fourth quarter of 2016.
  • Diluted earnings per share increased 7% and totaled $0.79 in the 2017 fourth quarter, compared to $0.73 in the fourth quarter of 2016.
  • EBITDA in the fourth quarter of 2017 increased 2% to $40.0 million, from $39.2 million in the fourth quarter of 2016.
  • Operating profit was $32.5 million in the fourth quarter of 2017, compared to $32.3 million in the fourth quarter last year, a 1% increase.
  • A strong balance sheet post-acquisition, highlighted by $451.3 million in equity as of December 31, 2017, and $138.9 million in cash and cash equivalents.
  • The Board of Directors declared a dividend of $3.5 million, or $0.139 per share, to be distributed on March 13, 2018. The determining and "ex-dividend" date will be February 28, 2018.
  • Isaac Dabah, CEO of Delta Galil, stated: “We are extremely pleased with our 2017 annual results, which were highlighted by record sales, EBITDA, net income and EPS excluding one-time items. The results reflect the strength in our Global Upper Market and Schiesser business and the positive contribution of our recently acquired business (Delta Galil Premium Brands)– all demonstrating the strength of our diversified portfolio. We continue to focus on driving both organic growth and accretive acquisitions, and seek new opportunities to apply our competitive and financial strengths to deliver shareholder value.”

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, activewear and denim, today reported its financial results for the fourth quarter and full year ended December 31, 2017.

“As always, 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, we have the necessary financial resources to continue to innovate and grow -- both through organic means and strategic acquisitions.”

Sales

The Company reported sales of $371.6 million for the fourth quarter of 2017, compared with $376.3 million for the same quarter last year, representing a 1% decrease. Sales for the 2017 full year increased 16% to a record $1,368.1 million, from $1,179.2 million for the 2016 full year. The year-over-year increase reflected the annualization of Delta Galil Premium Brands, which was acquired on August 2016, as well as continued strength of Delta’s Global Upper Market and Schiesser business segments, along with improvements in Delta Israel.

Operating Profit

Operating profit was $32.5 million in the fourth quarter of 2017, compared to $32.3 million in the fourth quarter last year, representing a 1% increase. Operating profit excluding one-time items increased 5% for the 2017 full year and amounted to $87.4 million, compared to $83.2 million for the full year 2016.

For the 2017 full year, operating profit was $84.6 million, compared to $85.3 for the 2016 full year, representing a 1% decrease.

Net Income

Net income increased 8% to $20.1 million in the fourth quarter of 2017, compared to $18.5 million in the same quarter last year.

Net income excluding one-time items net of tax increased 7% for the 2017 full year and amounted to a record $50.7 million, compared to $47.2 million for the 2016 full year.

Net income for the 2017 full year was $49.0 million, compared to $51.9 million for the 2016 full year, representing a 6% decrease.

Diluted Earnings Per Share

Diluted earnings per share increased 7% in the 2017 fourth quarter to $0.79, compared to $0.73 for the same quarter last year.

Diluted earnings per share excluding one-time items increased 7% and amounted to $1.98 for the 2017 full year, compared to $1.85 for the 2016 full year.

For the 2017 full year, diluted earnings per share amounted to $1.91, compared to $2.03 for the 2016 full year, a 6% decrease.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “We are extremely pleased with our 2017 annual results, which were highlighted by record sales, EBITDA, net income and EPS excluding one-time items. The results reflect the strength in our Global Upper Market and Schiesser business segments which demonstrate the strength of our diversified portfolio. We continue to focus on driving both organic growth and accretive acquisitions, and seek new opportunities to apply our competitive and financial strengths to deliver shareholder value.”

“Our recently acquired Delta Galil Premium Brands (DGPB) segment continued to be a strong contributor to sales throughout 2017, and remains an exciting growth opportunity looking ahead. We have several strategic initiatives and category expansions in place for 2018 that are intended to maximize growth opportunities within that segment.”

“Throughout the year, we focused on making meaningful changes to the company that will improve our efficiency and production capacity and best position us to develop the most innovative, high quality products for our customers worldwide. We also enhanced our focus on e-commerce, and increased top-line growth to key customers, as well as our proprietary brands.”

“As always, 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, we have the necessary financial resources to continue to innovate and grow -- both through organic means and strategic acquisitions.”

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA was $40.0 million, or 10.8% of sales in the fourth quarter of 2017, compared to $39.2 million, or 10.4% of sales in the same quarter last year. For the 2017 full year, EBITDA was $115.9 million, or 8.5% of sales, compared to $107.0 million, or 9.1% of sales last year.

Operating cash flow was $55.0 million in the fourth quarter of 2017, compared with $61.1 million in the fourth quarter of 2016. For the 2017 full year, operating cash flow was $74.7 million, compared to $76.6 million last year.

Net financial debt as of December 31, 2017 was $125.6 million, compared to $164.8 million as of September 30, 2017, and $181.2 million as of December 31, 2016.

Equity on December 31, 2017 was $451.3 million, up from $390.6 million a year earlier.

Delta Galil declared a dividend of $3.5 million, or $0.139 per share, to be distributed on March 13, 2018. The determining and "ex-dividend" date will be February 28, 2018.

2018 Financial Guidance

Delta Galil provided its initial 2018 financial guidance, excluding one-time items, which is based on current market conditions and current exchange rates of: Euro/USD 1.20 and USD / NIS 3.50.

  • Full-year 2018 sales are expected to range between $1,400 million-$1,440 million, representing an increase of 2%-5% from 2017 actual sales of $1,368.1 million.
  • Full-year 2018 EBIT is expected to range between $91 million-$96 million, representing an increase of 4%-10% from 2017 actual EBIT of $87.4 million.
  • Full-year 2018 EBITDA is expected to range between $119 million-$125 million, representing an increase of 3%-8% from 2017 actual EBITDA of $115.9 million.
  • Full-year 2018 net income is expected to range between $54 million-$59 million, representing an increase of 7%-16% from 2017 actual net income of $50.7 million.
  • Full-year 2018 diluted EPS is expected to range between $2.11-$2.30, representing an increase of 7%-16% from 2017 actual EPS of $1.98.

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. Delta Galil also designs, develops, markets and sells branded denim apparel under the brand 7 For All Mankind®, and ladies apparel under the brands Splendid® and Ella Moss®. 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, 2017

   

December 31

2017

2016

Thousands of Dollars

Assets
Current assets:
Cash and cash equivalents 137,470 81,947
Restricted Cash 1,430 1,767
Other accounts receivable:
Trade receivables 148,806 153,044
Taxes on income receivable 2,915 2,264
Others 20,632 16,980
Financial derivative 1,191 286
Inventory 269,877 233,114
Assets classified as held for sale - 1,000
Total current assets 582,321 490,402
 
Non-current assets:
Investments in associated companies accounted using the equity method and long-term receivables 11,142 11,341
Investment property 3,718 3,389
Fixed assets, net of accumulated depreciation 160,018 171,954
Goodwill 70,101 70,101
Intangible assets, net of accumulated amortization 158,768 147,990
Deferred tax assets 11,654 14,269
Financial derivative 22,800 4,096
Total non-current assets 438,201 423,140
Total assets 1,020,522 913,542
 
     

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of December 31, 2017

 

December 31

2017

2016

Thousands of Dollars

 
Liabilities and Equity
Current liabilities:
Short-term bank loans 28 44,988
Current maturities of debentures 20,596 13,479
Financial derivative 1,432 2,383
Other accounts payable:
Trade payables 112,028 104,797
Taxes on income payable 6,373 3,478
Others 117,804 95,767
Total current liabilities 258,261 264,892
 
Non-current liabilities:
Severance pay liabilities less plan assets 4,057 3,213
Other non-current liabilities 40,212 42,040
Debentures 258,945 207,024
Reserve for deferred taxes 7,724 4,353
Financial derivative - 1,388
Total non-current liabilities 310,938 258,018
Total liabilities 569,199 522,910
 
Equity:

Equity attributable equity holders of the parent company:

Share capital 23,708 23,696
Share premium 130,791 130,901
Other capital reserves 7,834 (15,824)
Retained earning 304,788 268,217
Treasury shares (16,914) (17,474)
450,207 389,516
Minority interests 1,116 1,116
Total equity 451,323 390,632
Total liabilities and equity 1,020,522 913,542
 

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, 2017

 
For the year ended December 31 Three months ended December 31
2017   2016 2017   2016
Thousands of Dollars % change Thousands of Dollars % change
Sales 1,368,080   1,179,167 16% 371,637   376,315 (1%)
Cost of sales 855,268 787,650 225,952 239,499
Gross profit 512,812 391,517 31% 145,685 136,816 6%
% of sales 37.5% 33.2% 39.2% 36.4%
Selling and marketing expenses 360,506 262,527 37% 98,366 90,405 9 %
% of sales 26.4% 22.3% 26.5% 24.0%
Administrative and general expenses 65,393 46,967 39% 15,098 16,031 (6%)
% of sales 4.8% 4.0% 4.1%% 4.3%
Other income, net 50 832 272 1,885
Share in profit (loss) of associated companies accounted for using the equity method 427 351 (5) 46
Operating income excluding non-recurring items 87,390 83,206 5% 32,488 32,311 1%
% of sales 6.4% 7.1% 8.7% 8.6%
Restructuring expenses 2,832 6,895 - -
Bargain purchase - 10,420 - -
Cost associated with acquisition of activity - 1,456 - -
Operating income 84,558 85,275 32,488 32,311
Finance expenses, net 18,848 17,420 8% 4,330 6,634 (35%)
Profit before tax on income 65,710 67,855 28,158 25,677
Taxes on income 16,751 15,953 8,087 7,130
Net income for the period 48,959 51,902 20,071 18,547
Net income for period excluding non-recurring items, net of tax 50,715 47,217 7% 20,071 18,547 8%
Attribution of net earnings for the period
Attributed to company's shareholders 48,839 51,782 20,041 18,517
Attributed to non-controlling interests 120 120 30 30
48,959 51,902 20,071 18,547
Net diluted earnings per share attributed to shareholders of the company 1.91 2.03 0.79 0.73
Net diluted earnings per share excluding non-recurring items net of tax, attributed to shareholders of the company 1.98 1.85 7% 0.79 0.73

 

7%

 
 

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Cash Flow Reports

 

For the year ended December 31

2017

 

2016

Thousands of Dollars

 
Cash flows from operating activities:
Net profit for the year 48,959 51,902

Adjustments required to reflect cash flows deriving from operating activities

47,876 42,758
Interest paid in cash (14,144) (11,971)
Interest received in cash 292 1,284
Taxes on income paid in cash, net (8,315) (7,368)
Net cash generated from operating activities 74,668 76,605
Cash flows from investment activities:
Acquisition of fixed assets and intangible assets (30,754) (42,604)
Restricted cash deposit 337 (1,224)
Acquisition of activity - (118,885)
Earn-out payment for acquisition of an activity (1,500) -
Proceeds from sale of fixed asset 28,696 258
Others (1,431) (919)
Net cash used in Investing activities (4,652) (163,374)
Cash flows from financing activities:

Dividends paid to non-controlling interest holders in consolidated subsidiary

(120)

(120)

Long term payables credit for fixed assets purchase (3,308) (3,308)
Shares Buy-Back - (6,895)
Debentures principle repayment (20,919) (19,379)
Liability to financial institution 6,413 -
Dividend paid (14,055) (14,094)
Repayment of loans and other long-term liabilities - (755)
Short-term credit from banking corporations, net (44,960) 44,165
Debentures issuance net of issuance expenses 57,152 -
A deposit with a banking corporation as security in respect of the SWAP transaction 1,545 1,745
Proceeds from exercise of employee options 451 618
Net cash generated (used in) from financing activities (17,801) 1,977
Net increase ( decreased) in cash and cash equivalents 52,215 (84,792)
Exchange rate differences of cash and cash equivalents, net 3,308 (793)

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

81,947 167,532

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

137,470 81,947
 
 

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Cash Flow Reports

 
For the year ended December 31
2017

 

2016

Thousands of Dollars

Adjustments required to reflect cash flows from operating activities:

Revenues and expenses not involving cash flow:
Depreciation 23,918 21,420
Amortization 4,582 3,029
Cash erosion, net (598) 50
Interest paid in cash 14,144 11,971
Interest received in cash (292) (1,284)
Taxes on income paid in cash, net 8,315 7,368
Deferred taxes on income, net 5,112 932
Severance pay liability, net 381 62

Restructuring expenses, net

2,832 3,984
Capital gain from sale of fixed assets and assets held for sale (4,332) (54)
Change in benefit component of options and restricted shares granted 2,074 2,130
Bargain purchase - (10,420)
Share in losses of associated companies accounted for using the equity method (427) (351)
Others 1,313 577
57,022 39,414
Changes to operating assets and liabilities:
Decrease (increase) in trade receivables 10,336 (26,054)
Decrease in other receivable and balances 2,164 8,404
Decrease in trade payables (219) (6,339)
Increase in other payables 2,056 5,757
Decrease (increase) in inventory (23,483) 21,576
(9,146) 3,344
47,876 42,758

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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