Delta Galil Reports Strong Performance for Third Quarter of 2014
Nov 04, 2014
OTC Disclosure & News Service
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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 ended September 30, 2014.
The Company reported sales of $ 267.2 million for the third quarter of 2014, an increase of 4% from $ 257.2 million for the same quarter of 2013. Sales in the first nine months of 2014 were $ 754.5 million, an increase of 5% from $ 718.8 million in the same period of 2013. Sales growth over the past nine months benefitted from Delta Galil’s focus on increasing the diversity of its geographic base and customer mix, as well as an increase in sales of branded products.
Operating income was $ 21.7 million for third quarter of 2014 before one-time items, up 2% from $ 21.3 million in the same quarter of 2013. For the first nine months of 2014, operating income rose 11%, to $ 52.0 million from $ 46.8 million a year earlier.
The growth in operating income reflected Delta Galil’s increasing sales and a wider gross profit margin, due in part to the expansion of its branded products business. Gross profit increased to 30.9% of sales for both the third quarter and nine months of 2014, up from 30.4% in the third quarter and 29.5% in the nine months of 2013. This was partly offset by higher selling and marketing expenses as the Company invested in the growth of its business.
Net income attributable to shareholders was $ 13.8 million in the 2014 third quarter, compared to $ 12.6 million in the same quarter of 2013, a 9% increase. Diluted earnings per share attributed to shareholders rose to $ 0.54 for the 2014 third quarter, from $ 0.50 for the 2013 period. For the first nine months of 2014, net income attributable to shareholders was $ 32.3 million or $ 1.26 per diluted share, compared to $ 28.1 million or $ 1.11 per diluted share for the same period of 2013.
Management Comment
Isaac Dabah, CEO of Delta Galil, stated: “Our strong results for 2014 to-date have put the Company firmly on track for a year of record sales and earnings, including our first full year of $ 1 billion-plus in sales. To continue our strong growth momentum we are pursuing a number of strategic initiatives, with a goal of significantly increasing our sales over the next five years through both organic means and acquisitions. The Company is adding world-class management talent in key areas such as the U.S. Intimates business, global manufacturing, and acquisitions and corporate development. We are growing our Activewear business by penetrating new distribution channels and partnering with customers to create innovative products. And we will centralize and consolidate some office locations to promote greater efficiency, teamwork and more agile decision-making.”
“As we invest for long-term, consistent growth, our strategies will be supported by a solid balance sheet with $ 147.7 million in cash and $ 335.6 million in equity. Throughout the year, we have allocated capital to expanding our manufacturing capacity, enhancing our retail store operations in Israel and Europe, and other investments in our future.”
“Our strategy going forward remains focused on organic growth and acquisitions; further development of our branded, retail and activewear businesses; and continual innovation as a source of competitive advantage,” Mr. Dabah concluded.
EBITDA, Cash Flow, Net Debt, Equity and Dividend
EBITDA was $ 26.1 million or 9.8% of sales in the 2014 third quarter, increasing 4% compared with $ 25.2 million or 9.8% of sales in the 2013 period. For the first nine months of 2014, EBITDA rose 10% to $ 65.0 million or 8.6% of sales, compared to $ 59.3 million or 8.2% of sales in the same period of 2013.
Operating cash flow was $ 14.8 million in the third quarter and $ 18.4 million in the first nine months of 2014. In the respective third quarter and nine month periods of 2013, operating cash flow was $ 19.4 million and $ 24.1 million. Operating cash flow for the last four quarters was $ 40.6 million.
Net financial debt decreased to $ 77.3 million at September 30, 2014 from $ 85.4 million at September 30, 2013.
The net financial debt to EBITDA ratio (based on the last four quarters) improved to 0.8 as of September 30, 2014, down from 1.0 a year earlier.
Equity on September 30, 2014 was $ 335.6 million, up from $ 305.7 million a year earlier.
Delta Galil declared a dividend of $ 3.5 million or $ 0.14 per share, to be distributed on November 25, 2014. The determining and “ex-dividend” date will be November 12, 2014, per the Tel Aviv Stock Exchange
2014 Updated Financial Guidance
Delta Galil also has updated its 2014 financial guidance.
Full-year 2014 sales are expected to range between $ 1,040 million-$ 1,050 million, representing an increase of 7%-8% from 2013 sales of $ 974.7 million.
Full-year 2014 EBIT is expected to range between $ 77 million-$ 79 million, representing an increase of 13%-16% from 2013 EBIT of $ 67.9 million.
Full-year 2014 EBITDA is expected to range between $ 95 million-$ 97 million, representing an increase of 10%-13% from 2013 EBITDA of $ 86.2 million.
Full-year 2014 net income is expected to range between $ 50 million-$ 51 million, representing an increase of 13%-15% from 2013 net income of $ 44.3 million.
Full-year 2014 diluted EPS is expected to range between $ 1.95-$ 2.00, representing an increase of 11%-14% from 2013 EPS of $ 1.75.
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. 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 September 30, 2014
September 30
December 31
2014
2013
2013
(Unaudited)
(Audited)
Thousands of Dollars
Assets
Current assets:
Cash and cash equivalents
147,727
85,541
97,346
Restricted Cash
196
1,421
1,448
Other accounts receivable:
Trade receivables
114,437
113,968
112,293
Taxes on income receivable
3,173
2,040
2,427
Others
15,987
23,435
9,522
Financial derivative
1,074
1,994
2,955
Inventory
201,790
175,433
169,303
Assets classified as held for sale
1,000
1,018
1,000
Total current assets
485,384
404,850
396,294
Non-current assets:
Long-term receivables
17,788
8,015
15,520
Investment property
4,316
4,790
4,850
Fixed assets, net of accumulated depreciation
98,153
97,906
95,797
Intangible assets, net of accumulated amortization
121,761
119,143
118,135
Deferred tax assets
11,631
9,232
9,560
Financial derivative
9,340
7,256
10,942
Total non-current assets
262,989
246,342
254,804
Total assets
748,373
651,192
651,098
September 30
December 31
2014
2013
2013
(Unaudited)
(Audited)
Thousands of Dollars
Liabilities and Equity
Current liabilities:
Short-term bank loans
830
40,202
26,438
Current maturities of long-term loans
from banking corporations
-
300
150
Current maturities of debentures
24,353
18,051
17,847
Financial derivative
756
-
-
Other accounts payable:
Trade payables
90,815
81,099
71,283
Taxes on income payable
4,409
4,552
4,401
Others
55,236
55,725
56,441
Total current liabilities
176,399
199,929
176,560
Non-current liabilities:
Severance pay liabilities less plan assets
2,290
2,950
2,105
Other non-current liabilities
21,802
17,997
17,196
Debentures
205,400
120,793
129,717
Reserve for deferred taxes
3,800
3,786
3,630
Financial derivative
3,045
-
-
Total non-current liabilities
236,337
145,526
152,648
Total liabilities
412,736
345,455
329,208
Equity:
Equity attributable to equity holders of the parent company:
Share capital
23,555
23,467
23,499
Share premium
127,737
126,092
127,024
Other capital reserves
7,403
13,639
16,212
Retained earning
186,763
151,343
163,990
Treasury shares
(10,933)
(10,996)
(10,996)
334,525
303,545
319,729
Minority interests
1,112
2,192
2,161
Total equity
335,637
305,737
321,890
Total liabilities and equity
748,373
651,192
651,098
DELTA GALIL INDUSTRIES LTD.
Consolidated Statement of Comprehensive Income
For the 3-month and 9-month periods ending September 30, 2014
Nine months ended September 30
%
Increase/(Decrease)
Three months ended September 30
%
Increase/(Decrease)
2014
2013
2014
2013
(Unaudited)
Thousands of Dollars
Except for Earnings per Share Data
Sales
754,463
718,822
5%
267,237
257,199
4%
Cost of sales
521,620
506,696
184,587
178,931
Gross profit
232,843
212,126
10%
82,650
78,268
6%
% of sales
30.9%
29.5%
30.9%
30.4%
Selling and marketing expenses
156,772
138,540
13%
53,252
47,733
12%
% of sales
20.8%
19.3%
19.9%
18.6%
Administrative and general expenses
26,401
27,791
(5%)
8,587
8,455
2%
% of sales
3.5%
3.9%
3.2%
3.3%
Other income (expenses), net
2,703
1,037
1,084
(794)
Share in losses of associated companies accounted for using the equity method
324
-
223
-
Operating income before one-time items
52,049
46,832
11%
21,672
21,286
2%
% of sales
6.9%
6.5%
8.1%
8.3%
Restructuring expenses
182
1,529
182
1,529
Operating income
51,867
45,303
14%
21,490
19,757
9%
Finance expenses, net
10,752
7,518
43%
4,664
2,228
109%
Income before tax on income
41,115
37,785
16,826
17,529
Taxes on income
8,214
9,622
3,028
4,855
Net income for the period
32,901
28,163
17%
13,798
12,674
9%
Net income for the period before onetime items, net
33,064
29,737
11%
13,961
14,248
(2%)
Attribution of net earnings for the period:
Attributed to company’s shareholders
32,260
28,073
15%
13,768
12,644
9%
Attributed to non-controlling interests
641
90
30
30
32,901
28,163
13,798
12,674
Net diluted earnings per share attributed to company’s shareholders
1.26
1.11
14%
0.54
0.5
8%
Net diluted earnings per share attributed to company’s shareholders before one-time items, net
1.27
1.17
9%
0.55
0.56
(2%)
DELTA GALIL INDUSTRIES LTD.
Consolidated Cash Flow Reports
For the 3-month and 9-month periods ending September 30, 2014
Nine months ending
Three months ending
September 30
September 30
2014
2013
2014
2013
(Unaudited)
Thousands of Dollars
Cash flows from operating activities:
Net income for the period
32,901
28,163
13,798
12,674
Adjustments required to reflect cash flows deriving from operating activities
4,241
14,067
9,975
14,782
Interest paid in cash
(9,079)
(6,166)
(4,213)
(3,583)
Interest received in cash
220
287
38
180
Taxes on income paid in cash, net
(9,865)
(12,247)
(4,785)
(4,678)
Net cash generated from operating activities
18,418
24,104
14,813
19,375
Cash flows from investment activities:
Acquisition of fixed assets and intangible assets
(18,534)
(15,904)
(6,166)
(6,293)
Investments in associated companies
(6,502)
-
(1,500)
-
Restricted cash release
1,252
1,434
271
424
Proceeds from realization of assets held for sale, net of tax
-
1,577
-
574
Proceeds from selling of fixed asset
1,807
526
68
60
Payments related to realization of asset held for sale (Tax payment related to the realization)
(1,989)
2,118
-
2,118
Loans to subcontractor, net
55
(412)
19
(12)
Others
24
(115)
33
(67)
Net cash used for Investing activities
(23,887)
(10,776)
(7,275)
(3,196)
Cash flows from financing activities:
Dividends paid to non-controlling interest holders in consolidated subsidiary
(1,690)
(63)
(29)
(63)
Long term payables credit for fixed assets purchase
(2,289)
(1,577)
(487)
(201)
Debentures principle pay down
(11,285)
(11,285)
(11,285)
(11,285)
Debentures issuance return, excluding issuance expenses
107,532
49,710
45,650
49,710
Dividend paid
(10,000)
(7,500)
(3,500)
(2,500)
Repayment of loans and other long-term liabilities
(566)
(2,723)
(236)
(839)
Short-term credit from banking corporations, net
(25,344)
(795)
(5,515)
489
Proceeds from exercise of employee options
832
2,028
583
212
Net cash generated from financing activities
57,190
27,795
25,181
35,523
Net increase in cash and cash equivalents
51,721
41,123
32,719
51,702
Exchange rate differences and revaluation of cash and cash equivalents, net
(1,340)
(1,057)
(1,812)
(986)
Balance of cash and cash equivalents at the beginning of the period
97,346
45,475
116,820
34,825
Balance of cash and cash equivalents at the end of the Period
147,727
85,541
147,727
85,541
DELTA GALIL INDUSTRIES LTD.
Consolidated Cash Flow Reports
For the 3-month and 9-month periods ending September 30, 2014
Nine months ending
Three months ending
September 30
September 30
2014
2013
2014
2013
(Unaudited)
Thousands of Dollars
Adjustments required to reflect cash flows
from operating activities:
Revenues and expenses not involving cash flow:
Depreciation
11,001
10,701
3,769
3,397
Amortization
1,948
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