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--(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, 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 usingthe 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 theparent 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 theequity 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 flowsderiving 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 forsale (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 holdersin 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 asecurity 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 cashequivalents			(33,636	)			33,644				4,782				53,781
Exchange rate differences and revaluation ofcash and cash equivalents, net			281				(1,000	)			(321	)			478
Balance of cash and cash equivalents at thebeginning of the period			167,532				166,958				129,716				145,343
Balance of cash and cash equivalents at the endof 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 assetheld for sale			29				(93	)			38				(103	)
Change to the benefit component of options granted toemployees			370				839				(144	)			408
Share in profits of associated companies accounted for usingthe 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

View source version on businesswire.com: http://www.businesswire.com/news/home/20160815006239/en/

Delta Galil Industries, Ltd.
Nissim Douek, +972-54-5201178
[email protected]
or
U.S. Media:
Berns Communications Group
Stacy Berns/Melissa Jaffin
+1-212-994-4660
[email protected]

Source: Delta Galil Industries, Ltd.

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