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Delta Galil Reports First Quarter 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 first quarter ended March 31, 2018.

Sales

The Company reported sales of $334.5 million for the first quarter of 2018, representing a 6% increase compared to $315.7 million for the same quarter last year. The sales increase largely reflected top-line growth in the Schiesser, Delta Israel and Global Upper Market business segments.

Operating profit

Operating profit was $14.0 million for the first quarter of 2018, a 37% increase from $10.2 million in the first quarter of 2017. Operating profit before one-time items was $14.0 million for the first quarter of 2018, compared to $12.9 million in the first quarter of 2017, representing an 8% increase.

Net income

Net income was $7.4 million in the first quarter of 2018, a 33% increase compared to $5.6 million in the first quarter of 2017. Net income before one-time items was $7.5 million for the 2018 first quarter, representing a 4% increase from $7.2 million in the first quarter last year.

Diluted Earnings Per Share

Diluted earnings per share were $0.30 in the first quarter of 2018, a 38% increase compared to $0.22 in the same quarter last year. Diluted earnings per share before one-time items amounted to $0.30 in the first quarter of 2018, an increase of 5% compared to $0.28 in the first quarter of 2017.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “We’re pleased to be off to a solid start to 2018. First quarter sales rose in most segments, particularly Schiesser and Delta Israel, while profitability benefitted from rising EBIT margins at Delta Israel and Delta Premium Brands. The investments we made in our business over the last two years have put us in a stronger position today, and we’re seeing steady and diversified growth. We expect to continue on a solid track, and with a strong balance sheet in place, we have the funds necessary to take advantage of the right market opportunities as they arise.”

“We announced separately today that we named former Chief Merchandising Officer of Macy’s Tim Baxter as the Chief Executive Officer of Delta Galil Premium Brands. Tim is an extremely accomplished retail and fashion merchandising executive, whose highly profitable strategic plans, licensing deals, and partnerships at Macy’s with many of the world’s most renowned brands, will prove instrumental in leading Seven for All Mankind and Splendid into their next phase of growth.”

“Also as we recently announced, we have signed an option to acquire leading French men’s underwear group Eminence, which includes Eminence, a premium underwear brand for men, along with ATHENA and Liabel – mass-market underwear brands for men, women and kids. The deal, which is expected to close in the third quarter, would significantly expand our presence and branded business in France and Italy, while providing the potential for a platform for growth.”

“Looking ahead, we will continue to pursue growth both organically and through acquisitions – with a sharp focus on driving innovation, excellence and shareholder value.”

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA was $21.4 million in the first quarter of 2018, up 12% from $19.1 million in the same quarter last year.

Operating cash flow was negative $30.3 million for the first quarter of 2018, compared to negative $13.1 million in the first quarter of 2017.

Net financial debt as of March 31, 2018 was $170.0 million, compared to $205.2 million as of March 31, 2017, and $125.6 million as of December 31, 2017.

Equity on March 31, 2018 was $459.0 million, up from $399.1 million a year earlier.

Delta Galil declared a dividend of $3.5 million, or $0.139 per share, to be distributed on June 5, 2018. The determining and "ex-dividend" date will be May 24, 2018.

2018 Financial Guidance

Delta Galil reaffirmed its 2018 financial guidance, excluding one-time items and the acquisition of Eminence, which is based on current market conditions and current exchange rates of: Euro/USD 1.20 and USD / NIS 3.60.

  • Full-year 2018 sales are expected to range between $1,400 million-$1,440 million, representing an increase of 2%-5% from 2017 actual sales of $1,368.1 million.
  • Full-year 2018 EBIT is expected to range between $91 million-$96 million, representing an increase of 4%-10% from 2017 actual EBIT of $87.4 million.
  • Full-year 2018 EBITDA is expected to range between $119 million-$125 million, representing an increase of 3%-8% from 2017 actual EBITDA of $115.9 million.
  • Full-year 2018 net income is expected to range between $54 million-$59 million, representing an increase of 7%-16% from 2017 actual net income of $50.7 million.
  • Full-year 2018 diluted EPS is expected to range between $2.11-$2.30, representing an increase of 7%-16% from 2017 actual EPS, of $1.98.

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. Delta Galil also designs, develops, markets and sells branded denim apparel under the brand 7 For All Mankind®, and ladies apparel under the brands Splendid® and Ella Moss®. 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 March 31, 2018

March 31

December 31

2018

2017

2017

(Unaudited)

(Audited)

Thousands of Dollars

Assets
Current assets:
Cash and cash equivalents 87,182 64,629 137,470
Restricted Cash 1,277 1,542 1,430
Other accounts receivable:
Trade receivables 152,631 131,784 148,806
Taxes on income receivable 1,600 2,090 2,915
Others 23,530 20,579 20,632
Financial derivative 1,057 840 1,191
Inventory 288,640 247,488 269,877
Assets classified as held for sale - 1,000 -
Total current assets 555,917 469,952 582,321
Non-current assets:
Investments in associated companies accounted using
the equity method and long-term receivables 11,689 11,052 11,142
Investment property 3,788 3,411 3,718
Fixed assets, net of accumulated depreciation 163,307 174,835 160,018
Goodwill 70,101 70,101 70,101
Intangible assets, net of accumulated amortization 157,944 142,538 158,768
Deferred tax assets 11,388 16,946 11,654
Financial derivative 18,962 13,789 22,800
Total non-current assets 437,179 432,672 438,201
Total assets993,096 902,624 1,020,522
DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of March 31, 2018

March 31

December 31

2018

2017

2017

(Unaudited)

(Audited)

Thousands of Dollars

Liabilities and Equity
Current liabilities:
Short-term bank loans 12 24 28
Current maturities of debentures 20,676 13,983 20,596
Financial derivative 1,863 1,623 1,432
Other accounts payable:
Trade payables 101,687 81,655 112,028
Taxes on income payable 7,571 4,571 6,373
Others 98,939 87,859 117,804
Total current liabilities230,748 189,715 258,261
Non-current liabilities:
Severance pay liabilities less plan assets 4,162 3,337 4,057
Other non-current liabilities 35,288 34,820 40,212
Debentures 255,888 269,929 258,945
Deferred taxes liabilities 7,993 5,308 7,724
Financial derivative - 439 -
Total non-current liabilities 303,331 313,833 310,938
Total liabilities534,079 503,548 569,199
Equity:
Equity attributable to equity holders of the parent company:
Share capital 23,712 23,699 23,708
Share premium 130,790 130,847 130,791
Other capital reserves 11,015 (10,179 ) 7,834
Retained earning 309,367 270,785 304,788
Treasury shares (16,677) (17,222 ) (16,914 )
458,207 397,930 450,207
Minority interests 810 1,146 1,116
Total equity459,017 399,076 451,323
Total liabilities and equity993,096 902,624 1,020,522
DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Statement of Income

For the 3-month period ending March 31, 2018

Three months ended on
March 31% Chg.
20182017
(Unaudited)
Thousands of dollars
Sales 334,487 315,681 6%
Cost of sales 207,576 201,738
Gross profit 126,911 113,943 11%
% of sales 37.9%36.1%
Selling and marketing expenses 96,445 83,271 16%
% of sales 28.8%26.4%
General and administrative expenses 16,488 15,959 3%
% of sales 4.9%5.1%
Other expenses, net 38 1,869
Share in profit of associated company accounted for using the equity method 20 30
Operating income excluding non-recurring items13,960 12,874 8%
% of sales 4.2%4.1%
Restructuring income (expenses) 5 (2,665 )
Operating income13,965 10,209 37%
Finance expenses, net 5,029 3,710 36%
Income before taxes on income 8,936 6,499
Taxes on income 1,526 910
Net income for the period7,410 5,589 33%
Net income excluding non-recurring items, net of tax for the period7,5157,2414%
Attribution of net earnings for the period:
Attributed to company's shareholders7,686 5,559 38%
Attributed to non-controlling interests(276) 30
7,410 5,589

Net diluted earnings per share attributable to Company's shareholders

0.30 0.22 38%

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

0.30 0.28 5%
DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Cash Flow Reports

For the 3-month period ending March 31, 2018

Three months ended on March 31
20182017
(Unaudited)
Thousands of Dollars
Cash flows from operating activities
Net profit for the period 7,410 5,589
Adjustments required to reflect cash flows deriving from
operating activities (33,608) (13,482 )
Interest paid in cash (3,430) (4,256 )
Interest received in cash 97 109
Taxes on income paid in cash, net (798) (1,101 )
Net cash used in operating activities (30,329) (13,141 )
Cash flows from investment activities:
Acquisition of fixed assets and intangible assets (9,060) (6,225 )
Restricted cash release 153 225
Earn-out payment for acquisition of an activity (2,250) (1,500 )
Proceeds from sale of fixed asset 1,497 175
Others (720) 261
Net cash used in investment activities (10,380) (7,064 )
Cash flows from financing activities:
Dividends paid to non-controlling interest holders in consolidated subsidiary (30) -
Long term payables credit for fixed assets purchase (489) (1,554 )
Debentures principle repayment - (6,413 )
Liability to financial institution (6,413) -
Dividend paid (3,461) (3,539 )
Short-term credit from banking corporations, net (16) (44,964 )
Debentures issuance return, excluding issuance expenses - 57,152

A deposit with a banking corporation as security in respect of the SWAP transaction

- 1,545
Proceeds from exercise of employee options 105 201
Net cash generated from (used in)financing activities (10,304) 2,428
Net decreased in cash and cash equivalents(51,013) (17,777 )
Exchange rate differences and revaluation of cash and cash equivalents, net725 459
Balance of cash and cash equivalents at the beginning of the period137,470 81,947
Balance of cash and cash equivalents at the end of the period87,182 64,629
DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Cash Flow Reports

For the 3-month period ending March 31, 2018

Three months ended on March 31
20182017
(Unaudited)
Thousands of Dollars
Adjustments required to reflect cash flows
from operating activities:
Revenues and expenses not involving cash flow:
Depreciation 6,297 5,426
Amortization 1,136 788
Cash erosion, net (17) (174 )
Interest paid in cash 3,430 4,256
Interest received in cash (97) (109 )
Taxes on income paid in cash, net 798 1,101
Deferred taxes, net 298 (1,787 )
Severance pay liability, net 76 104
Restructuring expenses (442) 2,665
Capital loss (gain) from sale of fixed assets 11 42
Change in benefit component of options and restricted shares granted to Employees 354 548
Share in losses of associated companies accounted for using the equity method (20) (30 )
Others 1,192 392
12,976 13,222
Changes to operating assets and liabilities:
Decrease (increase) in trade receivables (3,625) 23,569
Decrease (increase) in other receivable (2,695) (3,549 )
Decrease in trade payables (11,499) (22,195 )
Increase (decrease ) in other payables (11,642) (11,481 )
Increase in inventory (17,123) (13,048 )
(46,584) (26,704 )
(33,608) (13,482 )

Contacts:

Delta Galil Industries, Ltd.
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

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