Delta Galil Reports Financial Results for Third Quarter of 2012

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 equivalents

10,976

58,493

65,760

Restricted cash

2,860

-

-

Other accounts receivable:

Trade receivables

112,986

108,349

103,444

Taxes on income receivable

976

1,112

1,434

Others

14,637

12,160

9,770

Inventories

159,677

125,469

110,824

Assets classified as held for sale

6,183

1,766

1,766

Total current assets

308,295

307,349

292,998

Non-current assets:

Long-term pre-paid expenses

385

224

322

Investment property

4,749

-

-

Long-term receivables

12,525

1,224

1,202

Fixed assets, net of accumulated depreciation

90,836

64,008

64,184

Intangible assets, net of accumulated amortization

102,266

78,488

77,390

Deferred tax assets

6,635

6,244

7,014

Total non-current assets

217,396

150,188

150,112

Total assets

525,691

457,537

443,110

September 30

December 31

2012

2011

2011

(Unaudited)

(Audited)

Thousands of Dollars

Liabilities and Equity

Current liabilities:

Short-term bank loans

26,523

71,353

62,053

Current maturities of long-term loans

from banking corporations

2,110

2,110

2,110

Current maturities of Debentures

14,863

11,079

12,367

Financial Derivative

52

645

297

Other accounts payable:

Trade payables

73,161

69,873

55,920

Taxes on income - payable

8,016

910

1,770

Others

47,986

37,938

39,096

Total current liabilities

172,711

193,908

173,613

Non-current liabilities:

Loans from financial institutions, less

current maturities

302

2,411

1,504

Severance pay over liabilities from termination

of employer - employee relations less plan assets

1,574

466

1,183

Other non-current liabilities

8,386

4,514

3,900

Debentures

75,682

44,369

41,506

Financial Derivative

5,416

1,507

2,978

Reserve for deferred taxes

2,663

-

1,182

Total non-current liabilities

94,023

53,267

52,253

Total liabilities

266,734

247,175

225,866

Equity:

Equity attributable equity holders of the

parent company:

Share capital

23,191

23,098

23,106

Share premium

122,839

121,130

121,216

Other capital reserves

1,637

825

(633)

Retained earnings

118,826

72,842

81,084

Treasury shares

(9,700)

(9,700)

(9,700)

256,793

208,195

215,073

Minority interests

2,164

2,167

2,171

Total equity

258,957

210,362

217,244

Total liabilities and equity

525,691

457,537

443,100

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

% Increase

Thousands of Dollars

% Increase

Unaudited

Unaudited

(Decrease)

Sales

571,212

502,431

14%

233,996

184,781

27%

Cost of sales

451,081

403,490

177,082

147,561

Gross profit

120,131

98,941

56,914

37,220

% of sales

21.0%

19.7%

24.3%

20.1%

Selling and marketing expenses

70,426

54,705

29%

33,315

18,846

77%

% of sales

12.3%

10.9%

14.2%

10.2%

Administrative and general expenses

19,194

18,770

2%

7,855

5,979

31%

% of sales

3.4%

3.7%

3.4%

3.2%

Other income (expenses), net

468

(808)

58

411

Operating income excludingcapital gains and non-recurring items

30,979

24,658

26%

15,802

12,806

23%

% of sales

5.4%

4.9%

6.8%

6.9%

Capital gain from selling of asset held for sale

19,910

3,597

-

-

Schiesser acquisition cost

1,160

-

-

-

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

12,163

-

12,163

-

Impairment of fixed assets

1,309

-

-

-

Restructuring expenses

5,424

-

2,441

-

Operating income

55,159

28,255

95%

25,524

12,806

99%

Finance expenses, net

6,805

5,987

14%

2,828

3,235

(13%)

Profit before tax on income

48,354

22,268

22,696

9,571

Taxes on income

5,338

3,064

2,599

1,842

Equity income

93

-

93

-

Income for the period

43,109

19,204

20,190

7,729

Income for period excluding capital gain and non-recurring items, net for period

20,052

16,374

22%

9,995

7,729

29%

Attribution of net earnings for the period

To shareholders of the parent company

43,019

19,111

20,160

7,698

To minority interests

90

93

30

31

43,109

19,204

20,190

7,729

Diluted earnings per share attributed to shareholders of the company

1.75

0.79

0.82

0.32

Diluted earnings per share attributed to shareholders of the company excluding capital gains and non-recurring items

0.81

0.68

0.41

0.32

* 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