Sales Increased 10% to $374 Million
Operating cash flow was $34.5 in the second quarter
2019 Second Quarter Highlights
- Net income was $5.1 million for the 2019-second quarter, including a one-time non-recurring charge of $2.8 million related to Bogart acquisition costs.
- EBITDA increased 63% to $37.3 million in the second quarter of 2019, from $22.9 million in the same quarter last year.
- Operating profit grew 27% to $14.3 million in the second quarter of 2019, from $11.3 million in the second quarter of 2018.
- Sales increased 10% to $373.9 million in the second quarter of 2019, from $338.9 million in the second quarter of 2018.
- A strong balance sheet, highlighted by $462 million in equity and $40 million in cash as of June 30, 2019.
- Declared dividend of $2.5 million, or $0.098 per share, to be distributed on September 3, 2019. The determining and “ex-dividend” date will be August 21, 2019.
- Isaac Dabah, CEO of Delta Galil, stated: “We’re pleased with our second quarter results, as sales grew 10%, driven primarily by our Global Upper Market, Delta European Brands, and Delta Israel. During the quarter, we made several strategic investments in our business that I am confident will drive continued momentum and growth. We have a strong balance sheet in place and looking ahead, our healthy cash flow will pave the way for future growth.”
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, activewear and denim, today reported net income of $5.1 million for the second quarter ended June 30, 2019, including a one-time non-recurring charge of $2.8 million related to Bogart acquisition costs. This compared to net income of $6.5 million for the same quarter of 2018, including a one-time non-recurring charge of $3.95 million related to Eminence acquisition costs. Net income excluding one-time items was $7.9 million in the second quarter of 2019, compared to $9.1 million last year.
The Company’s results in 2019 reflect the application of International Financial Reporting Standard 16 (“IFRS 16”) with respect to accounting for leases.
Sales
The Company reported a 10% increase in sales of $373.9 million for the second quarter of 2019, compared to $338.9 million for the second quarter last year. Sales for the first six months of 2019 also increased 10% to $739.3 million from $673.4 million for the same period of 2018.
Operating Profit
Operating profit increased 27% to $14.3 million in the second quarter of 2019, compared to $11.3 million in the second quarter last year. Operating profit before one-time items increased 13% to $17.2 million for the second quarter of 2019, compared to $15.2 million for the same quarter last year.
Operating profit for the first six months of 2019 was $24.8 million, compared to $25.3 million in the first six months of 2018, a 2% decrease. Operating profit excluding one-time items for the first six months of 2019 totaled $27.6 million, compared to $29.2 million for the comparable period of 2018, a 5% decrease.
Net Income
Net income was $5.1 million in the second quarter of 2019, compared to $6.5 million in the same quarter last year, a 22% decrease. Net income excluding one-time items was $7.9 million in the second quarter of 2019, compared to $9.1 million last year, a 13% decrease.
Net income for the first six months of 2019 totaled $8.1 million, compared to $13.9 million for the same period last year, a 42% decrease. Net income excluding one-time items for the first six months of 2019 was $10.9 million, compared to $16.6 million for the comparable period of 2018, 34% decrease.
Diluted earnings per share were $0.20 the second quarter of 2019, compared to $0.25 in the second quarter of 2018, a 22% decrease. Diluted earnings per share excluding one time items were $0.31 in the second quarter of 2019, compared to $0.36 in the second quarter last year, a 14% decrease.
Diluted earnings per share for the first six months of 2019 were $0.32, compared to $0.55 for the first six months of 2018, a 43% decrease. Diluted earnings per share excluding one-time items for the first six months of 2019 were $0.43, compared to $0.65 for the same period last year, a 35% decrease.
Management Comment
Isaac Dabah, CEO of Delta Galil, stated: “We’re pleased with our second quarter results, as sales grew 10%, driven primarily by our Global Upper Market, Delta European Brands, and Delta Israel. During the quarter, we made several strategic investments in our business that I’m confident will drive continued momentum and growth.
“This includes strengthening our management team with two key appointments. We named Steve Moore President of Delta Galil’s Mass Division, and Suzanne Silverstein President of 7 For All Mankind®. Both will be instrumental in helping to build the company both in the U.S. and globally.”
“Also to this point, we announced progress on a longtime goal of Delta’s – expanding our presence in the bra category – with the acquisition of intimate apparel leader The Bogart Group. We will begin consolidating Bogart results beginning Q3 2019.”
“We have a strong balance sheet in place and looking ahead, our healthy cash flow will pave the way for future growth.”
EBITDA, Cash Flow, Net Debt, Equity and Dividend
EBITDA was $37.3 million in the second quarter of 2019, up 63% from $22.9 million in the same quarter last year. For the first six months of 2019, EBITDA was $68.0 million, up 53% from 44.3 million in the same period of 2018.
Operating cash flow was $34.5 million in the second quarter of 2019, compared to $10.4 million in the second quarter of 2018. For the first six months of 2019, Operating Cash flow was $31.6 million, up from negative $22.0 million in the same period of 2018.
Net financial debt as of June 30, 2019 was $361.1 million, compared to $178.7 million, as of June 30, 2018 and $326.7 million as of December 31, 2018.
Equity on June 30, 2019 was $462.3 million, up from $450.1 million a year earlier.
Delta Galil declared a dividend of $2.5 million, or $0.098 per share, to be distributed on September 3, 2019. The determining and “ex-dividend” date will be August 21, 2019.
2019 Financial Guidance
Delta Galil left unchanged its 2019 financial guidance, excluding one-time items. The Company’s financial guidance for 2019 includes the impact of IFRS 16 on accounting for leases. The current financial guidance does not include the impact from expected higher tariffs on imported products from China to the US and costs related to recall of damage goods shipped to a primarily customer, which are in total estimated at an amount of up to $4 million. Excluding the above and the impact from Bogart acquisition, the Company estimates that it will meet its sales target and the lower range of its profitability goals set in the guidance.
The Company will update its guidance with respect to these factors in the 2019 third quarter.
- 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.
- 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.
- 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.
IFRS 16
Starting January 1, 2019, the Company adopted the new lease accounting standards set forth in IFRS 16. This requires that certain leases, which were accounted for as operating leases be treated as capital leases going forward. Certain leases will be reclassified as assets and liabilities on the balance sheet, which will yield increased depreciation and interest expense, offset by a reduction in rental expense.
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 including the brands Schiesser, Eminence, Athena & Liabel; babywear, activewear, sleepwear such as PJ Salvage, 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, 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. |
|||||
|
|
June 30 |
|
December 31 |
||
|
|
2019 |
|
2018 |
|
2018 |
|
|
(Unaudited) |
|
(Audited) |
||
|
|
Thousands of Dollars |
||||
|
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
38,611 |
|
104,753 |
|
70,534 |
|
Restricted Cash |
1,218 |
|
1,180 |
|
3,494 |
|
Other accounts receivable: |
|
|
|
|
|
|
Trade receivables |
186,130 |
|
153,134 |
|
224,019 |
|
Taxes on income receivable |
2,159 |
|
1,277 |
|
881 |
|
Others |
66,035 |
|
27,192 |
|
26,395 |
|
Financial derivative |
12 |
|
694 |
|
273 |
|
Inventory |
350,129 |
|
295,680 |
|
309,645 |
|
Total current assets |
644,294 |
|
583,910 |
|
635,241 |
|
|
|
|
|
|
|
|
Non-current assets: |
|
|
|
|
|
|
Investments in associated companies accounted using |
|
|
|
|
|
|
the equity method and long-term receivables |
14,773 |
|
14,460 |
|
29,401 |
|
Investment property |
3,340 |
|
3,552 |
|
3,424 |
|
Fixed assets, net of accumulated depreciation |
190,040 |
|
165,721 |
|
191,738 |
|
Goodwill |
110,739 |
|
70,101 |
|
110,955 |
|
Intangible assets, net of accumulated amortization |
220,139 |
|
156,304 |
|
221,669 |
|
Assets in respect of usage rights |
195,426 |
|
– |
|
– |
|
Deferred tax assets |
16,096 |
|
13,755 |
|
9,285 |
|
Financial derivative |
11,332 |
|
10,592 |
|
4,216 |
|
Total non-current assets |
761,885 |
|
434,485 |
|
570,688 |
|
Total assets |
1,406,179 |
|
1,018,395 |
|
1,205,929 |
|
DELTA GALIL INDUSTRIES LTD. |
|||||
|
|
June 30 |
|
December 31 |
||
|
|
2019 |
|
2018 |
|
2018 |
|
|
(Unaudited) |
|
(Audited) |
||
|
|
Thousands of Dollars |
||||
|
Liabilities and Equity |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Short-term bank loans |
15,034 |
|
24,598 |
|
79,987 |
|
Current maturities of bank loan |
7,973 |
|
– |
|
8,015 |
|
Current maturities of debentures |
29,335 |
|
20,409 |
|
19,514 |
|
Financial derivative |
2,395 |
|
2,879 |
|
2,935 |
|
Current maturities of liabilities in respect of leases |
49,546 |
|
– |
|
– |
|
Other accounts payable: |
|
|
|
|
|
|
Trade payables |
142,725 |
|
117,271 |
|
139,591 |
|
Taxes on income payable |
5,992 |
|
8,569 |
|
10,481 |
|
Others |
99,222 |
|
97,609 |
|
112,326 |
|
Total current liabilities |
352,222 |
|
271,335 |
|
372,849 |
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
Bank loan |
65,776 |
|
– |
|
70,134 |
|
Severance pay liabilities less plan assets |
8,965 |
|
4,151 |
|
8,886 |
|
Liabilities in respect of leases |
167,867 |
|
– |
|
– |
|
Other non-current liabilities |
29,753 |
|
35,893 |
|
35,833 |
|
Debentures |
291,767 |
|
248,009 |
|
222,975 |
|
Deferred taxes liabilities |
27,558 |
|
8,951 |
|
25,798 |
|
Financial derivative |
– |
|
– |
|
1,603 |
|
Total non-current liabilities |
591,686 |
|
297,004 |
|
365,229 |
|
Total liabilities |
943,908 |
|
568,339 |
|
738,078 |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
Equity attributable to equity holders of the parent company: |
|
|
|
|
|
|
Share capital |
23,714 |
|
23,712 |
|
23,714 |
|
Share premium |
130,321 |
|
130,792 |
|
130,667 |
|
Other capital reserves |
(9,383) |
|
(1,314) |
|
(10,503) |
|
Retained earning |
333,568 |
|
312,759 |
|
339,922 |
|
Treasury shares |
(16,177) |
|
(16,677) |
|
(16,523) |
|
|
462,043 |
|
449,272 |
|
467,277 |
|
Minority interests |
228 |
|
784 |
|
574 |
|
Total equity |
462,271 |
|
450,056 |
|
467,851 |
|
Total liabilities and equity |
1,406,179 |
|
1,018,395 |
|
1,205,929 |
|
DELTA GALIL INDUSTRIES LTD. |
||||||||||||
|
|
Six months ended June 30 |
|
% Increase/(Decrease) |
|
Three months ended June 30 |
|
% Increase/(Decrease) |
|||||
|
|
2019 |
|
2018 |
|
|
|
2019 |
|
2018 |
|
|
|
|
|
(Unaudited) |
|||||||||||
|
|
Thousands of Dollars |
|||||||||||
|
|
Except for Earnings per Share Data |
|||||||||||
|
Sales |
739,261 |
|
673,394 |
|
10% |
|
373,886 |
|
338,907 |
|
10% |
|
|
Cost of sales |
474,725 |
|
423,776 |
|
|
|
239,733 |
|
216,200 |
|
|
|
|
Gross profit |
264,536 |
|
249,618 |
|
6% |
|
134,153 |
|
122,707 |
|
9% |
|
|
% of sales |
35.8% |
|
37.1% |
|
|
|
35.9% |
|
36.2% |
|
|
|
|
Selling and marketing expenses |
206,013 |
|
189,928 |
|
8% |
|
102,724 |
|
93,483 |
|
10% |
|
|
% of sales |
27.9% |
|
28.2% |
|
|
|
27.5% |
|
27.6% |
|
|
|
|
General and administrative expenses |
33,963 |
|
31,458 |
|
8% |
|
15,992 |
|
14,970 |
|
7% |
|
|
% of sales |
4.6% |
|
4.7% |
|
|
|
4.3% |
|
4.4% |
|
|
|
|
Other Expenses (income), net |
(2,672) |
|
(812) |
|
|
|
(1,384) |
|
(850) |
|
|
|
|
Share in profits of associated company accounted for using the equity method |
369 |
|
161 |
|
|
|
336 |
|
141 |
|
|
|
|
Operating income excluding non-recurring items |
27,601 |
|
29,205 |
|
(5%) |
|
17,157 |
|
15,245 |
|
13% |
|
|
% of sales |
3.7% |
|
4.3% |
|
|
|
4.6% |
|
4.5% |
|
|
|
|
Restructuring expenses (Income) |
– |
|
(5) |
|
|
|
– |
|
– |
|
|
|
|
Deal cost |
2,842 |
|
3,950 |
|
|
|
2,842 |
|
3,950 |
|
|
|
|
Operating income |
24,759 |
|
25,260 |
|
(2%) |
|
14,315 |
|
11,295 |
|
27% |
|
|
Finance expenses, net |
15,316 |
|
9,597 |
|
60% |
|
7,365 |
|
4,568 |
|
61% |
|
|
Income before tax on income |
9,443 |
|
15,663 |
|
|
|
6,950 |
|
6,727 |
|
|
|
|
Taxes on income |
1,346 |
|
1,795 |
|
|
|
1,882 |
|
269 |
|
|
|
|
Net income for the period |
8,097 |
|
13,868 |
|
(42%) |
|
5,068 |
|
6,458 |
|
(22%) |
|
|
Net income for the period excluding one-time items, net of tax |
10,939 |
|
16,620 |
|
(34%) |
|
7,910 |
|
9,105 |
|
(13%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attribution of net earnings for the period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributed to company’s shareholders |
8,097 |
|
14,170 |
|
|
|
5,068 |
|
6,484 |
|
|
|
|
Attributed to non-controlling interests |
0 |
|
(302) |
|
|
|
0 |
|
(26) |
|
|
|
|
|
8,097 |
|
13,868 |
|
|
|
5,068 |
|
6,458 |
|
|
|
|
Net diluted earnings per share attributed to company’s shareholders |
0.32 |
|
0.55 |
|
(43%) |
|
0.20 |
|
0.25 |
|
(22%) |
|
|
Net diluted earnings per share, before non-recurring items net of tax attributable to Company’s shareholders |
0.43 |
|
0.65 |
|
(34%) |
|
0.31 |
|
0.36 |
|
(14%) |
|
|
DELTA GALIL INDUSTRIES LTD. |
|||||||
|
|
Six months ending |
|
Three months ending |
||||
|
|
June 30 |
|
June 30 |
||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
(Unaudited) |
||||||
|
|
Thousands of Dollars |
||||||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income for the period |
8,097 |
|
13,868 |
|
5,068 |
|
6,458 |
|
Adjustments required to reflect cash flows deriving from operating activities |
39,404 |
|
(25,647) |
|
38,427 |
|
7,961 |
|
Interest paid in cash |
(10,307) |
|
(5,953) |
|
(6,460) |
|
(2,523) |
|
Interest received in cash |
437 |
|
310 |
|
427 |
|
213 |
|
Taxes on income paid in cash, net |
(6,015) |
|
(2,546) |
|
(3,005) |
|
(1,748) |
|
Net cash generated (used in) from operating activities |
31,616 |
|
(19,968) |
|
34,457 |
|
10,361 |
|
Cash flows from investment activities: |
|
|
|
|
|
|
|
|
Acquisition of fixed assets and intangible assets |
(13,582) |
|
(20,249) |
|
(6,979) |
|
(11,189) |
|
Providing loans |
(18,102) |
|
– |
|
(9,290) |
|
– |
|
Restricted cash release (deposit) |
2,276 |
|
250 |
|
1,316 |
|
97 |
|
Earn-out payment for acquisition of an activity |
– |
|
(2,250) |
|
– |
|
– |
|
Acquisition of a subsidiary |
(441) |
|
– |
|
– |
|
– |
|
Proceeds from selling of fixed asset |
97 |
|
1,676 |
|
27 |
|
179 |
|
Others |
– |
|
(1,645) |
|
– |
|
(925) |
|
Net cash generated from ( used in) Investing activities |
(29,752) |
|
(22,218) |
|
(14,926) |
|
(11,838) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Dividends paid to non-controlling interest holders in consolidated subsidiary |
|
|
|
|
|
|
|
|
(346) |
|
(30) |
|
– |
|
– |
|
|
Long term payables credit for fixed assets purchase |
(1,641) |
|
(1,643) |
|
(503) |
|
(1,154) |
|
Lease principle repayment |
(26,789) |
|
– |
|
(13,436) |
|
– |
|
Financial Institute payment |
– |
|
(6,413) |
|
– |
|
– |
|
Dividend paid |
(5,052) |
|
(6,999) |
|
(1,505) |
|
(3,538) |
|
Repayment of long-term loans from banks |
(3,970) |
|
– |
|
(1,966) |
|
– |
|
Short-term credit from banking corporations, net |
(64,827) |
|
24,570 |
|
(7,036) |
|
24,586 |
|
Proceed from Debentures Issuance, net of Issuance expenses |
69,130 |
|
– |
|
– |
|
– |
|
Proceeds from exercise of employees options |
– |
|
242 |
|
– |
|
137 |
|
Net cash generated from ( used in) financing activities |
(33,495) |
|
9,727 |
|
(24,446) |
|
20,031 |
|
Net increase (decrease) in cash and cash equivalents |
(31,631) |
|
(32,459) |
|
(4,915) |
|
18,554 |
|
Exchange rate differences and revaluation of cash and cash equivalents, net |
(292) |
|
(258) |
|
236 |
|
(983) |
|
Balance of cash and cash equivalents at the beginning of the period |
70,534 |
|
137,470 |
|
43,290 |
|
87,182 |
|
Balance of cash and cash equivalents at the end of the Period |
38,611 |
|
104,753 |
|
38,611 |
|
104,753 |
|
DELTA GALIL INDUSTRIES LTD. |
|||||||
|
|
Six months ending |
|
Three months ending |
||||
|
|
June 30 |
|
June 30 |
||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
(Unaudited) |
||||||
|
|
Thousands of Dollars |
||||||
|
Adjustments required to reflect cash flows |
|
|
|
|
|
|
|
|
from operating activities: |
|
|
|
|
|
|
|
|
Revenues and expenses not involving cash flow: |
|
|
|
|
|
|
|
|
Depreciation |
13,423 |
|
12,685 |
|
6,756 |
|
6,388 |
|
Amortization |
26,931 |
|
2,395 |
|
13,425 |
|
1,259 |
|
Cash erosion, net |
(147) |
|
(40) |
|
124 |
|
(23) |
|
Interest paid in cash |
10,307 |
|
5,953 |
|
6,460 |
|
2,523 |
|
Interest received in cash |
(437) |
|
(310) |
|
(427) |
|
(213) |
|
Taxes on income paid in cash, net |
6,015 |
|
2,546 |
|
3,005 |
|
1,748 |
|
Deferred taxes on income, net |
(791) |
|
(631) |
|
241 |
|
(929) |
|
Discount component for lease agreements |
4,255 |
|
– |
|
2,060 |
|
– |
|
Severance pay liability, net |
105 |
|
127 |
|
19 |
|
51 |
|
Restructuring expenses ,net |
– |
|
(442) |
|
– |
|
– |
|
Capital loss (gain) from sale of fixed assets and asset held for sale |
33 |
|
(66) |
|
9 |
|
(77) |
|
Change to the benefit component of options and RSU granted to employees |
601 |
|
800 |
|
310 |
|
446 |
|
Share in profits of associated company accounted for using the equity method |
(369) |
|
(161) |
|
(336) |
|
(141) |
|
Others |
531 |
|
254 |
|
1,127 |
|
(898) |
|
|
60,457 |
|
23,110 |
|
32,773 |
|
10,134 |
|
Changes to operating assets and liabilities: |
|
|
|
|
|
|
|
|
Decrease (increase) in trade receivables |
39,283 |
|
(7,837) |
|
(165) |
|
(4,212) |
|
Decrease in other receivable and balances |
(8,394) |
|
(5,242) |
|
(3,779) |
|
(2,547) |
|
Increase (decrease) in trade payables |
2,253 |
|
6,029 |
|
40,849 |
|
17,528 |
|
Increase (decrease) in other payables |
(15,431) |
|
(9,459) |
|
(1,069) |
|
2,183 |
|
Decrease (increase) in inventory |
(38,764) |
|
(32,248) |
|
(30,182) |
|
(15,125) |
|
|
(21,053) |
|
(48,757) |
|
5,654 |
|
(2,173) |
|
|
39,404 |
|
(25,647) |
|
38,427 |
|
7,961 |
Contacts
For more information:
Nissim Douek
+972-54-5201178
[email protected]
U.S. Media Contact:
Stacy Berns/Melissa Jaffin
Berns Communications Group
+1-212-994-4660
[email protected]
