DELTA-GALIL INDUSTRIES DELTY

Open:	-
Change:	-
Volume:	-

Low:	-
High:	-
High / Low range:	-

Type:	Stocks
Ticker:	DELTY
ISIN:

Delta Galil Reports Record 2018 Results

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, 2018.

Sales

The Company reported record sales of $454.3 million for the fourth quarter of 2018, a 22% increase from $371.6 million in the same quarter of 2017. Sales for the 2018 full year increased 10% to $1,498.4 million, from $1,368.1 million for the 2017 full year. The sales growth primarily reflected strength in Delta Galil USA, Delta Galil Premium Brands, Delta European Brands (including Eminence starting the third quarter) and Delta Israel.

Operating Profit

Operating profit increased 18% to $38.4 million in the fourth quarter of 2018, from $32.5 million in the fourth quarter of 2017. Operating profit excluding one-time items increased 30% and amounted to $42.1 million for the fourth quarter of 2018, compared to $32.5 million for the fourth quarter of 2017. For the 2018 full year, operating profit was $80.7 million, compared to $84.6 million in 2017, representing a 5% decrease. Operating profit excluding one-time items increased 12% for the 2018 full year and totaled $98.0 million, compared to $87.4 million for the 2017 full year. The increase in operating profit in the reporting periods is mainly due to the increase in sales and the consolidation of Eminence group.

Net Income

Net income increased 23% to $24.7 million in the fourth quarter of 2018, compared to $20.1 million in the same quarter of 2017. Net income excluding one-time items increased 36% and amounted to $27.2 million for the fourth quarter of 2018, compared to $20.1 million for the fourth quarter of 2017. For the 2018 full year, net income was $48.2 million, compared to $49.0 million in 2017, a 2% decrease. Net income excluding one-time items increased 19% for the 2018 full year and totaled $60.5 million, compared to $50.7 million for the 2017 full year.

Diluted Earnings Per Share

Diluted earnings per share increased 23% in the 2018 fourth quarter to $0.97, compared to $0.79 for the same quarter of 2017. Diluted earnings per share excluding one-time items increased 36% in the 2018 fourth quarter and amounted to $1.07, compared to $0.79 for the 2017 comparable period. For the 2018 full year, diluted earnings per share amounted to $1.90, compared to $1.91 for the 2017 full year, representing a 1% decrease. Diluted earnings per share excluding one-time items increased 20% for the 2018 full year and totaled $2.37, compared to $1.98 for the 2017 full year.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “2018 represented a record year for Delta Galil, highlighted by strong sales, EBITDA, and net income (excluding one-time items). We are very pleased with the continued momentum in our business, which was driven by Delta Israel, a strong second half for Delta Galil USA, and fourth quarter improvements in Global Upper Market.”

“During the year, we focused on consolidating the acquired Eminence Group and incorporating its brands Eminence, Athena and Liabel within the Delta Galil business. Additionally, going forward we are leveraging Eminence as a growth vehicle to expand our distribution of Delta Galil’s core products.”

“In 2018 we saw continued strength and improvements in Delta Galil Premium Brands, which delivered meaningful cost savings and efficiencies from operations, and is now under the leadership of Tim Baxter. We announced in January that we hired Simon Spurr as Global Creative Director of 7 For All Mankind®, and we are excited about upcoming initiatives for that brand, which will contribute to long-term growth.”

“Overall, we will continue to grow both organically and through accretive acquisitions, while focusing on areas such as Asia and South America and our direct-to-consumer business. With a strong balance sheet in place, we remain committed to investing in new products and resources to drive sustained profitable growth and long-term shareholder value.”

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA was $50.2 million, or 11.1% of sales in the fourth quarter of 2018, compared to $40.0 million, or 10.8% of sales in the same quarter of 2017. For the 2018 full year, EBITDA was $129.8 million, or 8.7% of sales, compared to $115.9 million, or 8.5% of sales in 2017.

Operating cash flow was $56.5 million in the fourth quarter of 2018, compared with $55.0 million in the fourth quarter of 2017. For the 2018 full year, operating cash flow was $22.4 million, compared to $74.7 million last year. The decrease in 2018 operating cash-flow vs 2017 is due to increase in the level of working capital vs a moderate increase last year. The said increase is primarily due to increase in accounts receivables due to record sales in the fourth quarter of 2018 as mentioned above.

Net financial debt as of December 31, 2018 was $326.7 million, compared to $125.6 million as of December 31, 2017. The increase in net financial debt as of December 31^st in mainly due to Eminence group acquisition amounted to $136.4 million and capital expenditures of $45.4 million.

Equity on December 31, 2018 was $467.9 million, up from $451.3 million a year earlier.

Delta Galil declared a dividend of $3.5 million, or $0.139 per share, to be distributed on March 6, 2019. The determining and "ex-dividend" date will be February 26, 2019.

2019 Financial Guidance

Delta Galil provided its initial 2019 financial guidance, excluding one-time items, which is based on current market conditions and current exchange rates of: Euro/USD 1.14 and USD / NIS 3.65. The Company’s financial guidance for 2019 includes the impact of IFRS 16 on accounting for leases.

Full-year 2019 sales are expected to range between $1,550 million-$1,590 million, representing an increase of 3%-6% from 2018 actual sales of $1,498 million.
Full-year 2019 EBIT, is expected to range between $112 million-$117 million, representing an increase of 14%-19% from 2018 actual EBIT of $98 million. Excluding IFRS 16 impact, 2019 EBIT is estimated to range between $104 million - $109 million, representing an increase of 6% - 11% over 2018.
Full-year 2019 EBITDA, is expected to range between $189 million-$194 million, representing an increase of 45%-49% from 2018 actual EBITDA of $130 million. Excluding IFRS 16 impact, 2019 EBITDA is estimated to range between $138 million - $143 million, representing an increase of 6% - 10% over 2018.
Full-year 2019 net income is expected to range between $64 million-$67 million, representing an increase of 5%-12% from 2018 actual net income of $60 million.
Full-year 2019 diluted EPS is expected to range between $2.50-$2.65, representing an increase of 5%-12% from 2018 actual EPS of $2.37.

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 and branded Men’s underwear including the brands Schiesser, Eminence, Athena & Liabel; babywear, activewear, sleepwear such as the PJ Salvage brand, and leisurewear. Delta Galil also designs, develops, markets and sells branded denim and apparel under the brand 7 For All Mankind®, and ladies apparel under the brands Splendid® and Ella Moss®, among others. In addition, it sells its products under brand names licensed to the company, including: Wilson, Maidenform, Tommy Hilfiger, Lacoste and others. 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, 2018

	2018	2017
	(audited)
	Thousands of Dollars

Assets
Current assets:
Cash and cash equivalents	70,534	137,470
Restricted Cash	3,494	1,430
Other accounts receivable:
Trade receivables	224,019	148,806
Taxes on income receivable	881	2,915
Others	26,395	20,632
Financial derivative	273	1,191
Inventory	309,645	269,877
Total current assets	635,241	582,321

Non-current assets:
Investments in associated companies accounted using the equity method and long-term receivables	29,401	11,142
Investment property	3,424	3,718
Fixed assets, net of accumulated depreciation	191,738	160,018
Goodwill	110,955	70,101
Intangible assets, net of accumulated amortization	221,669	158,768
Deferred tax assets	9,285	11,654
Financial derivative	4,216	22,800
Total non-current assets	570,688	438,201
Total assets	1,205,929	1,020,522


DELTA GALIL INDUSTRIES LTD.
Concise Consolidated Balance Sheets
As of December 31, 2018


	2018	2017
	(audited)
	Thousands of Dollars
Liabilities and Equity
Current liabilities:
Short-term bank loans	79,987	28
Current maturities of bank loan	8,015	-
Current maturities of debentures	19,514	20,596
Financial derivative	2,935	1,432
Other accounts payable:
Trade payables	139,591	112,028
Taxes on income payable	10,481	6,373
Others	112,326	117,804
Total current liabilities	372,849	258,261

Non-current liabilities:
Bank loan	70,134	-
Severance pay liabilities less plan assets	8,886	4,057
Other non-current liabilities	35,833	40,212
Debentures	222,975	258,945
Reserve for deferred taxes	25,798	7,724
Financial derivative	1,603	-
Total non-current liabilities	365,229	310,938
Total liabilities	738,078	569,199

Equity:
Equity attributable to equity holders of the parent company:
Share capital	23,714	23,708
Share premium	130,667	130,791
Other capital reserves	(10,503)	7,834
Retained earning	339,922	304,788
Treasury shares	(16,523)	(16,914)
	467,277	450,207
Minority interests	574	1,116
Total equity	467,851	451,323
Total liabilities and equity	1,205,929	1,020,522

DELTA GALIL INDUSTRIES LTD.

Consolidated Statement of Comprehensive Income

For the 3-month and year ending December 31, 2018

Year ended December 31

%
Increase/(Decrease)

Three months ended December 31

%
Increase/(Decrease)

2018

2017

2018

2017

(audited)

Thousands of Dollars

Except for Earnings per Share Data

Sales

1,498,421

1,368,080

10%

454,264

371,637

22%

Cost of sales

931,981

855,268

280,365

225,952

Gross profit

566,440

512,812

10%

173,899

145,685

19%

% of sales

37.8%

37.5%

38.3%

39.2%

Selling and marketing expenses

406,132

360,506

13%

114,093

98,366

16%

% of sales

27.1%

26.4%

25.1%

26.5%

General and administrative expenses

65,163

65,393

18,456

15,098

22%

% of sales

4.3%

4.8%

4.1%

4.1%

Other Expenses (income), net

(2,468)

(50)

(684)

(272)

Share in profits of associated company accounted for using the equity method

392

427

110

(5)

Operating income excluding non-recurring items

98,005

87,390

12%

42,144

32,488

30%

% of sales

6.5%

6.4%

9.3%

8.7%

Restructuring expenses

5,422

2,832

Inventory Step up due to Eminence acquisition

7,625

3,776

Eminence acquisition cost

4,283

Operating income

80,675

84,558

(5%)

38,368

32,488

18%

% of sales

5.4%

6.2%

8.4%

8.7%

Finance expenses, net

21,352

18,848

13%

5,448

4,330

26%

Income before tax on income

59,323

65,710

32,920

28,158

Taxes on income

11,146

16,751

8,242

8,087

Net income for the period

48,177

48,959

(2%)

24,678

20,071

23%

Net income for the period excluding one-time items, net of tax

60,451

50,715

19%

27,207

20,071

36%

Attribution of net earnings for the period:

Attributed to company's shareholders

48,539

48,839

24,685

20,041

23%

Attributed to non-controlling interests

(362)

120

(7)

48,177

48,959

24,678

20,071

Net diluted earnings per share attributed to company's shareholders

1.9

1.91

0.97

0.79

Net diluted earnings per share, before non-recurring items net of tax
attributable to Company's shareholders

2.37

1.98

19%

1.07

0.79

36%


DELTA GALIL INDUSTRIES LTD.
Consolidated Cash Flow Reports

	Year ended December 31
	2018	2017
	(audited)
	Thousands of Dollars
Cash flows from operating activities:
Net income for the period	48,177	48,959
Adjustments required to reflect cash flows deriving from operating activities	(4,730)	47,876
Interest paid in cash	(16,798)	(14,144)
Interest received in cash	398	292
Taxes on income paid in cash, net	(4,678)	(8,315)
Net cash generated from operating activities	22,369	74,668
Cash flows from investment activities:
Acquisition of fixed assets and intangible assets	(41,854)	(30,754)
Providing a loan	(13,800)	-
Restricted cash release (deposit)	(433)	337
Earn-out payment for acquisition of an activity	(2,250)	(1,500)
Acquisition of a subsidiary	(136,341)	-
Proceeds from selling of fixed asset	1,789	28,696
Others	(2,687)	(1,431)
Net cash used in Investing activities	(195,576)	(4,652)
Cash flows from financing activities:
Dividends paid to non-controlling interest holders in consolidated subsidiary
	(180)	(120)
Long term payables credit for fixed assets purchase	(3,648)	(3,308)
Debentures principle repayment	(20,920)	(20,919)
Financial Institute receipt (payment)	(6,413)	6,413
Dividend paid	(14,070)	(14,055)
Long term loan received from bank	81,480	-
Repayment of a long-term loan from bank	(2,014)	-
Short-term credit from banking corporations, net	73,415	(44,960)
Debentures issuance net of issuance expenses	-	57,152
Release of bank deposit used as a security with respect of SWAP transaction	-	1,545
Proceeds from exercise of employees options	272	451
Net cash generated from ( used in) financing activities	107,922	(17,801)
Net increase (decrease) in cash and cash equivalents	(65,285)	52,215
Exchange rate differences and revaluation of cash and cash equivalents, net	(1,651)	3,308
Balance of cash and cash equivalents at the beginning of the period	137,470	81,947
Balance of cash and cash equivalents at the end of the Period	70,534	137,470


DELTA GALIL INDUSTRIES LTD.
Consolidated Cash Flow Reports

	Year ended December 31
	2018	2017
	(audited)
	Thousands of Dollars

Adjustments required to reflect cash flows
from operating activities:
Revenues and expenses not involving cash flow:
Depreciation	26,818	23,918
Amortization	5,498	4,582
Cash erosion, net	324	(598)
Interest paid in cash	16,798	14,144
Interest received in cash	(398)	(292)
Taxes on income paid in cash, net	4,678	8,315
Deferred taxes on income, net	(463)	5,112
Severance pay liability, net	(121)	381
Restructuring expenses, net	2,947	2,832
Capital loss (gain) from sale of fixed assets and asset held for sale	99	(4,332)
Change to the benefit component of options granted to employees	946	2,074
Share in profits of associated company accounted for using the equity method	(393)	(427)
Others	2,630	1,313
	59,363	57,022
Changes to operating assets and liabilities:
Decrease (increase) in trade receivables	(59,454)	10,336
Decrease (increase) in other receivable and balances	396	2,164
Increase (decrease) in trade payables	18,330	(219)
Increase (decrease) in other payables	(7,566)	2,056
Decrease (increase) in inventory	(15,799)	(23,483)
	(64,093)	(9,146)
	(4,730)	47,876

View source version on businesswire.com: https://www.businesswire.com/news/home/20190219006024/en/

Business Wire

Business Wire, acquired by Berkshire Hathaway in 2006, is the global market leader in commercial news distribution. Thousands of member companies and organizations depend on Business Wire to transmit their full-text press releases, regulatory filings, photos and other multimedia content to journalists, financial professionals, investor services, regulatory authorities and consumers worldwide.