July 28, 2014 11:10 UTC

Delta Galil Reports Record Results for Second Quarter of 2014

Operating Income Rises 11% from Prior Year

Sales Increase 6%, Trailing 12-Month Sales Exceed $1 Billion

19th Consecutive Quarter of Year-over-Year Organic Sales Growth

Reaffirming 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 $249.2 million in the 2014 second quarter, up 6% from the same period of 2013.
  • Delta Galil delivered its 19th consecutive quarter of year-over-year organic sales growth.
  • Operating income was $15.5 million in the 2014 second quarter, growing 11% from the comparable amount a year ago.
  • EBITDA was $19.9 million or 8.0% of sales in the 2014 second quarter, increasing 9% compared with $18.3 million or 7.8% of sales in the 2013 second quarter.
  • Net income attributed to shareholders rose to $9.7 million in the 2014 second quarter, increasing 11% from the comparable amount of $8.8 million a year ago.
  • Diluted earnings per share attributed to shareholders rose to $0.38 for the 2014 second quarter, up 9% from the comparable amount of $0.35 a year ago.
  • Financial guidance for 2014 was reaffirmed: sales are expected to be $1,045 million-$1,075 million. Full-year 2014 EBITDA is expected to range between $95 million-$101 million. Full-year 2014 diluted EPS is expected to be $1.95- $2.14.
  • The Board of Directors declared a dividend of $3.5 million or $0.141 per share, to be distributed on August 20, 2014. The determining and "ex-dividend" date will be August 6, 2014, per the Tel Aviv Stock Exchange.
  • Strong balance sheet was highlighted by a record $336.3 million in equity as of June 30, 2014, and approximately $117 million in cash and equivalents.
  • Isaac Dabah, CEO of Delta Galil, stated: “Our strong results for the first half of 2014 were distinguished by record sales and profitability, sustained organic growth across nearly all of our business segments, and a solid financial base that will support Delta Galil’s future expansion and success. We are well on the way to our first $1 billion sales year, and in fact have already reached that milestone during the four quarters ended June 30, 2014.”

TEL AVIV, Israel--(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 second quarter and six months ended June 30, 2014.

The Company reported sales of $249.2 million for the second quarter of 2014, an increase of 6% from $234.4 million for the same quarter of 2013. Sales in the first six months of 2014 were $487.2 million, an increase of 6% from $461.6 million in the same period of 2013.

Operating income was $15.5 million for second quarter of 2014, up 11% from $14.0 million in the same quarter of 2013. For the first six months of 2014, operating income grew 19%, to $30.4 million from $25.5 million a year earlier.

The increase in operating income reflected both the rising sales and an expanding gross profit margin. Gross profit increased to 31.2% of sales in the second quarter and 30.8% in the first half of 2014, up from 29.5% and 29.0% in the respective periods 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 $9.7 million in the 2014 second quarter, compared to $8.8 million in the same quarter of 2013, an 11% increase. Diluted earnings per share attributed to shareholders rose to $0.38 for the 2014 second quarter, from $0.35 for the 2013 period. For the first six months of 2014, net income attributable to shareholders was $18.5 million or $0.73 per diluted share, compared to $15.4 million or $0.61 per diluted share for the same period of 2013.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “Our strong results for the first half of 2014 were distinguished by record sales and profitability, sustained organic growth across nearly all of our business segments, and a solid financial base that will support Delta Galil’s future expansion and success. We are well on the way to our first $1 billion sales year, and in fact have already reached that milestone during the four quarters ended June 30, 2014.”

“The solid performance of Delta Galil is the product of sharply focused strategies to diversify our portfolio, invest in innovation, and strengthen our financial resources. As a result, we have delivered 19 straight quarters of organic sales growth, driven by such diverse engines as brands, activewear and retail. By broadening our global presence, we are positioned to grow in markets as diverse as Israel, Germany and North America. Our decision to expand the branded business has also led to meaningful margin improvement. And our capacity to continue this profitable growth is supported by a strong balance sheet, with $336.3 million in equity and low financial leverage.”

“We are continuing to invest in Delta Galil’s future growth, including manufacturing capacity, retail store enhancements and other areas that will reinforce our reputation for innovation, quality and customer service,” Mr. Dabah concluded.

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA was $19.9 million or 8.0% of sales in the 2014 second quarter, increasing 9% compared with $18.3 million or 7.8% of sales in the 2013 second quarter. For the first six months of 2014, EBITDA rose 14% to $38.9 million or 8% of sales, compared to $34.0 million or 7.4% of sales in the same period of 2013.

Operating cash flow was $10.2 million in the second quarter and $3.6 million in the first six months of 2014. In the respective second quarter and six month periods of 2013, operating cash flow was $18.0 million and $4.7 million. Operating cash flow for the last four quarters increased to $45.1 million from $42.2 million.

Net financial debt decreased to $82.4 million at June 30, 2014 from $99.1 million at June 30, 2013.

The net financial debt to EBITDA ratio (based on the last four quarters) improved significantly to 0.9 as of June 30, 2014, down from 1.3 a year earlier.

Equity on June 30, 2014 was a record $336.3 million, compared to $290.8 million a year earlier.

Delta Galil declared a dividend of $3.5 million or $0.141 per share, to be distributed on August 20, 2014. The determining and “ex-dividend” date will be August 6, 2014, per the Tel Aviv Stock Exchange

Reaffirming Guidance for 2014

The Company today reiterated its 2014 financial guidance, reflecting a strong outlook for sales and profitability.

  • Full-year 2014 sales are expected to range between $1,045 million-$1,075 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, 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, 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, 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, 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 June 30, 2014

       

June 30

       

December 31

2014

       

2013

2013

(Unaudited)

(Audited)

 

Thousands of Dollars

 

Assets
Current assets:
Cash and cash equivalents 116,820 34,825 97,346
Restricted Cash 453 1,790 1,448
Other accounts receivable:
Trade receivables 121,676 117,367 112,293
Taxes on income receivable 4,084 2,389 2,427
Others 12,110 22,797 9,522
Financial derivative 2,875 1,262 2,955
Inventory 188,801 159,890 169,303
Assets classified as held for sale 1,000 1,017 1,000
Total current assets 447,819 341,337 396,294
 
Non-current assets:
Long-term receivables 20,493 10,910 15,520
Investment property 4,722 4,668 4,850
Fixed assets, net of accumulated depreciation 99,987 95,503 95,797
Intangible assets, net of accumulated amortization 124,200 112,619 118,135
Deferred tax assets 10,157 9,956 9,560
Financial derivative 16,202 3,280 10,942
Total non-current assets 275,761 236,936 254,804
Total assets 723,580 578,273 651,098
 
             

June 30

December 31

2014

       

2013

2013

(Unaudited)

(Audited)

Thousands of Dollars

 
Liabilities and Equity
Current liabilities:
Short-term bank loans 6,566 38,744 26,438
Current maturities of long-term loans
from banking corporations - 450 150
Current maturities of debentures 18,667 16,468 17,847
Other accounts payable:
Trade payables 82,650 72,832 71,283
Taxes on income payable 4,461 4,618 4,401
Others 55,839 52,986 56,441
Total current liabilities 168,183 186,098 176,560
 
Non-current liabilities:
Severance pay liabilities less plan assets 2,328 2,985 2,105
Other non-current liabilities 22,228 12,815 17,196
Debentures 191,866 81,857 129,717
Reserve for deferred taxes 2,688 3,693 3,630
Total non-current liabilities 219,110 101,350 152,648
Total liabilities 387,293 287,448 329,208
 
Equity:
Equity attributable to equity holders of the parent company:
Share capital 23,515 23,451 23,499
Share premium 127,257 125,896 127,024
Other capital reserves 19,069 9,220 16,212
Retained earning 176,331 141,030 163,990
Treasury shares (10,996) (10,996) (10,996)
335,176 288,601 319,729
Minority interests 1,111 2,224 2,161
Total equity 336,287 290,825 321,890
Total liabilities and equity 723,580 578,273 651,098
 

DELTA GALIL INDUSTRIES LTD.

Consolidated Statement of Comprehensive Income
For the 3-month and 6-month periods ending June 30, 2014

                     
Six months ended June 30 % Increase/(Decrease) Three months ended June 30 % Increase/(Decrease)
2014       2013               2014       2013        
(Unaudited)
Thousands of Dollars
Except for Earnings per Share Data
Sales 487,226       461,623 6% 249,152       234,368 6%
Cost of sales 337,033 327,765 171,398 165,136
Gross profit 150,193 133,858 12% 77,754 69,232 12%
% of sales 30.8% 29.0% 31.2% 29.5%
Selling and marketing expenses 103,520 90,807 14% 53,570 46,239 16%
% of sales 21.2% 19.7% 21.5% 19.7%
Administrative and general expenses 17,815 19,336 (8%) 9,029 9,919 (9%)
% of sales 3.7% 4.2% 3.6% 4.2%
Other income, net 1,619 1,831 484 905
Share in losses of associated companies accounted for using the equity method 101 - 101 -
Operating income 30,376 25,546 19% 15,538 13,979 11%
% of sales 6.2% 5.5% 6.2% 6.0%
Finance expenses, net 6,088 5,290 15% 3,041 2,689 13%
Income before tax on income 24,288 20,256 12,497 11,290
Taxes on income 5,186 4,767 2,725 2,457
Net income for the period 19,102 15,489 23% 9,772 8,833 11%
 
Attribution of net earnings for the period:
Attributed to company's shareholders 18,491 15,429 20% 9,742 8,803 11%
Attributed to non-controlling interests 611 60 30 30
19,102 15,489 9,772 8,833
Net diluted earnings per share attributed to company's shareholders 0.73 0.61 20% 0.38 0.35 9%
 

DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports
For the 3-month and 6-month periods ending June 30, 2014

   

Six months ending

June 30

     

Three months ending

June 30

2014

     

2013

2014

     

2013

(Unaudited)

Thousands of Dollars

Cash flows from operating activities:
Net income for the period 19,102 15,489 9,772 8,833
Adjustments required to reflect cash flows deriving from operating activities (5,733) (715) 6,318 14,079
Interest paid in cash (4,866) (2,584) (1,889) (634)
Interest received in cash 182 107 81 77
Taxes on income paid in cash, net (5,080) (7,568) (4,063) (4,353)
Net cash generated from operating activities 3,605 4,729 10,219 18,002
Cash flows from investment activities:
Acquisition of fixed assets and intangible assets (12,368) (9,611) (6,186) (5,024)
Investments in associated companies (5,002) - (2,204) -
Restricted cash release 981 1,010 1,091 389
Proceeds from realization of assets held for sale, net of tax - 1,003 - 655
Proceeds from selling of fixed asset 1,739 466 285 408

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

(1,989) - - -
Loans to subcontractor, net 36 (400) 18 (227)
Others 9 (49) 6 (19)
Net cash used for Investing activities (16,612) (7,581) (7,002) (3,818)
Cash flows from financing activities:
Dividends paid to non-controlling interest holders in consolidated subsidiary
(1,661) - (86) -
Long term payables credit for fixed assets purchase (1,802) (1,376) (734) (1,376)
Dividend paid (6,500) (5,000) (3,500) (2,500)
Repayment of loans and other long-term liabilities (330) (1,883) (91) (1,317)
Short-term credit from banking corporations, net (19,829) (1,284) 4,416 (17,056)
Issuance of debentures, net 61,882 - 61,882 -
Proceeds from exercise of employee options 249 1,816 68 1,355
Net cash generated from (used in) financing activities 32,009 (7,727) 61,955 (20,894)
Net increase (decrease) in cash and cash equivalents 19,002 (10,579) 65,172 (6,710)
Exchange rate differences and revaluation of cash and cash equivalents, net 472 (71) 420 308
Balance of cash and cash equivalents at the beginning of the period 97,346 45,475 51,228 41,227
Balance of cash and cash equivalents at the end of the Period 116,820 34,825 116,820 34,825
 

DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports
For the 3-month and 6-month periods ending June 30, 2014

     

Six months ending

June 30

       

Three months ending

June 30

2014

       

2013

2014

       

2013

(Unaudited)

Thousands of Dollars

 

Adjustments required to reflect cash flows
from operating activities:

Revenues and expenses not involving cash flow:
Depreciation 7,232 7,304 3,691 3,708
Amortization 1,281 1,197 634 601
Cash erosion (revaluation), net (539) (16) (537) (20)
Interest paid in cash 4,866 2,584 1,889 634
Interest received in cash (182) (107) (81) (77)
Taxes on income paid in cash, net 5,080 7,568 4,063 4,353
Deferred taxes on income, net (1,395) (773) (1,551) (1,232)
Severance pay liability, net 224 300 103 179
Capital gain from sale of fixed assets and asset held for sale (1,319) (1,343) (264) (1,174)
Change to the benefit component of options granted to employees 350 237 174 113
Change to the fair value of financial derivatives (557) (491) (114) 279
Share in losses of associated companies accounted for using the equity method 101 - 101 -
Increase in liabilities of Long-term employee bonuses 995 - 829 -
Changes in long term balances 314 (239) 685 (19)
Others (379) (58) (229) (72)
16,072 16,163 9,393 7,273
Changes to operating assets and liabilities:
Increase in trade receivables (8,538) (7,475) (13,942) (5,442)
Increase in other receivable and balances (3,453) (3,925) (185) (346)
Increase (decrease) in trade payables 11,746 (236) 20,344 13,519
Increase (decrease) in other payables (2,198) 4,309 793 3,631
Increase in inventory (19,362) (9,551) (10,085) (4,556)
(21,805) (16,878) (3,075) 6,806
(5,733) (715) 6,318 14,079

Contacts

For more information:
Unik Public Image
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.