Delta Galil Reports Financial Results for Third Quarter of 2012

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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--(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 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 equivalents10,97658,49365,760
Restricted cash2,860--
Other accounts receivable:
Trade receivables112,986108,349103,444
Taxes on income receivable9761,1121,434
Others14,63712,1609,770
Inventories159,677125,469110,824
Assets classified as held for sale6,1831,7661,766
Total current assets308,295307,349292,998
Non-current assets:
Long-term pre-paid expenses385224322
Investment property4,749--
Long-term receivables12,5251,2241,202
Fixed assets, net of accumulated depreciation90,83664,00864,184
Intangible assets, net of accumulated amortization102,26678,48877,390
Deferred tax assets6,6356,2447,014
Total non-current assets217,396150,188150,112
Total assets525,691457,537443,110

September 30

  December 31
2012  

2011

2011
(Unaudited)

 

(Audited)

Thousands of Dollars

Liabilities and Equity
Current liabilities:
Short-term bank loans26,52371,35362,053
Current maturities of long-term loans
from banking corporations2,1102,1102,110
Current maturities of Debentures14,86311,07912,367
Financial Derivative52645297
Other accounts payable:
Trade payables73,16169,87355,920
Taxes on income - payable8,0169101,770
Others47,98637,93839,096
Total current liabilities172,711193,908173,613
 
Non-current liabilities:
Loans from financial institutions, less
current maturities3022,4111,504
Severance pay over liabilities from termination
of employer - employee relations less plan assets1,5744661,183
Other non-current liabilities8,3864,5143,900
Debentures75,68244,36941,506
Financial Derivative5,4161,5072,978
Reserve for deferred taxes2,663-1,182
Total non-current liabilities94,02353,26752,253
Total liabilities266,734247,175225,866
 
Equity:
Equity attributable equity holders of the

parent company:

Share capital23,19123,09823,106
Share premium122,839121,130121,216
Other capital reserves1,637825(633)
Retained earnings118,82672,84281,084
Treasury shares(9,700)(9,700)(9,700)
256,793208,195215,073
Minority interests2,1642,1672,171
Total equity258,957210,362217,244
Total liabilities and equity525,691457,537443,100

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% IncreaseThousands of Dollars% Increase
Unaudited Unaudited(Decrease)
Sales571,212502,43114%233,996184,78127%
Cost of sales451,081403,490177,082147,561
Gross profit120,13198,94156,91437,220
% of sales21.0%19.7%24.3%20.1%
Selling and marketing expenses70,42654,70529%33,31518,84677%
% of sales12.3%10.9%14.2%10.2%
Administrative and general expenses19,19418,7702%7,8555,97931%
% of sales3.4%3.7%3.4%3.2%
Other income (expenses), net468(808)58411
Operating income excludingcapital gains and non-recurring items30,97924,65826%15,80212,80623%
% of sales5.4%4.9%6.8%6.9%
Capital gain from selling of asset held for sale19,9103,597--
Schiesser acquisition cost1,160---

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

12,163-12,163-
Impairment of fixed assets1,309---
Restructuring expenses5,424-2,441-
Operating income55,15928,25595%25,52412,80699%
Finance expenses, net6,8055,98714%2,8283,235(13%)
Profit before tax on income48,35422,26822,6969,571
Taxes on income5,3383,0642,5991,842
Equity income93-93-
Income for the period43,10919,20420,1907,729
Income for period excluding capital gain and non-recurring items, net for period20,05216,37422%9,9957,72929%
Attribution of net earnings for the period
To shareholders of the parent company43,01919,11120,1607,698
To minority interests90933031
43,10919,20420,1907,729
Diluted earnings per share attributed to shareholders of the company1.750.790.820.32
Diluted earnings per share attributed to shareholders of the company excluding capital gains and non-recurring items0.810.680.410.32

* 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

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