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Delta Galil Reports Record 2018 Results

TEL AVIV, Israel--(BUSINESS WIRE)--

Sales Increased 10% to All-Time High $1,498.4 Million;
EBITDA Increased 12% to Record $129.8 Million

Q4 Sales Increased 22% to $454.3 Million; EBITDA Increased 25% to $50.2 Million;
Diluted Earnings Per Share Increased 23% to $0.97 in Q4

Initial 2019 Earnings Guidance:
Sales Expected to Reach $1,550 Million-$1,590 Million and Full-Year EPS Expected to grow by 5% to 12% and reach $2.50-$2.65

2018 Fourth Quarter Highlights

  • Sales Increased 22% in the fourth quarter of 2018 to a record $454.3 million, from $371.6 million in the fourth quarter of 2017.
  • EBITDA increased 25% in the fourth quarter of 2018 and amounted to $50.2 million, from $40.0 million in the fourth quarter of 2017.
  • Operating profit excluding one-time items increased 30% to $42.1 million in 2018, from $32.5 in the same period of 2017.
  • Operating profit for the fourth quarter increased 18% to $38.4 million in 2018, compared to $32.5 million in 2017.
  • Diluted earnings per share excluding one-time items increased 36% in the fourth quarter of 2018 to $1.07, compared to $0.79 in the fourth quarter of 2017.
  • Diluted earnings per share for the fourth quarter increased 23% to $0.97 in 2018, from $0.79 in the same quarter of 2017.
  • A strong balance sheet post the Eminence acquisition, highlighted by $468 million in equity as of December 31, 2018, and $74 million in cash and cash equivalents.
  • The Board of Directors declared a dividend of $3.5 million, or $0.139 per share, to be distributed on March 6, 2019. The determining and "ex-dividend" date will be February 26, 2019.
  • Isaac Dabah, CEO of Delta Galil, stated: “2018 represented a record year for Delta Galil, highlighted by strong sales, EBITDA, and net income (excluding one-time items). We are very pleased with the continued momentum in our business, which was driven by Delta Israel, a strong second half for Delta Galil USA, and fourth quarter improvements in our Global Upper Market and Delta Galil Premium Brands. Looking ahead, we will continue to grow both organically and through accretive acquisitions to drive sustained profitable growth and long-term shareholder value.”

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 fourth quarter and full year ended December 31, 2018.

Sales

The Company reported record sales of $454.3 million for the fourth quarter of 2018, a 22% increase from $371.6 million in the same quarter of 2017. Sales for the 2018 full year increased 10% to $1,498.4 million, from $1,368.1 million for the 2017 full year. The sales growth primarily reflected strength in Delta Galil USA, Delta Galil Premium Brands, Delta European Brands (including Eminence starting the third quarter) and Delta Israel.

Operating Profit

Operating profit increased 18% to $38.4 million in the fourth quarter of 2018, from $32.5 million in the fourth quarter of 2017. Operating profit excluding one-time items increased 30% and amounted to $42.1 million for the fourth quarter of 2018, compared to $32.5 million for the fourth quarter of 2017. For the 2018 full year, operating profit was $80.7 million, compared to $84.6 million in 2017, representing a 5% decrease. Operating profit excluding one-time items increased 12% for the 2018 full year and totaled $98.0 million, compared to $87.4 million for the 2017 full year. The increase in operating profit in the reporting periods is mainly due to the increase in sales and the consolidation of Eminence group.

Net Income

Net income increased 23% to $24.7 million in the fourth quarter of 2018, compared to $20.1 million in the same quarter of 2017. Net income excluding one-time items increased 36% and amounted to $27.2 million for the fourth quarter of 2018, compared to $20.1 million for the fourth quarter of 2017. For the 2018 full year, net income was $48.2 million, compared to $49.0 million in 2017, a 2% decrease. Net income excluding one-time items increased 19% for the 2018 full year and totaled $60.5 million, compared to $50.7 million for the 2017 full year.

Diluted Earnings Per Share

Diluted earnings per share increased 23% in the 2018 fourth quarter to $0.97, compared to $0.79 for the same quarter of 2017. Diluted earnings per share excluding one-time items increased 36% in the 2018 fourth quarter and amounted to $1.07, compared to $0.79 for the 2017 comparable period. For the 2018 full year, diluted earnings per share amounted to $1.90, compared to $1.91 for the 2017 full year, representing a 1% decrease. Diluted earnings per share excluding one-time items increased 20% for the 2018 full year and totaled $2.37, compared to $1.98 for the 2017 full year.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “2018 represented a record year for Delta Galil, highlighted by strong sales, EBITDA, and net income (excluding one-time items). We are very pleased with the continued momentum in our business, which was driven by Delta Israel, a strong second half for Delta Galil USA, and fourth quarter improvements in Global Upper Market.”

“During the year, we focused on consolidating the acquired Eminence Group and incorporating its brands Eminence, Athena and Liabel within the Delta Galil business. Additionally, going forward we are leveraging Eminence as a growth vehicle to expand our distribution of Delta Galil’s core products.”

“In 2018 we saw continued strength and improvements in Delta Galil Premium Brands, which delivered meaningful cost savings and efficiencies from operations, and is now under the leadership of Tim Baxter. We announced in January that we hired Simon Spurr as Global Creative Director of 7 For All Mankind®, and we are excited about upcoming initiatives for that brand, which will contribute to long-term growth.”

“Overall, we will continue to grow both organically and through accretive acquisitions, while focusing on areas such as Asia and South America and our direct-to-consumer business. With a strong balance sheet in place, we remain committed to investing in new products and resources to drive sustained profitable growth and long-term shareholder value.”

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA was $50.2 million, or 11.1% of sales in the fourth quarter of 2018, compared to $40.0 million, or 10.8% of sales in the same quarter of 2017. For the 2018 full year, EBITDA was $129.8 million, or 8.7% of sales, compared to $115.9 million, or 8.5% of sales in 2017.

Operating cash flow was $56.5 million in the fourth quarter of 2018, compared with $55.0 million in the fourth quarter of 2017. For the 2018 full year, operating cash flow was $22.4 million, compared to $74.7 million last year. The decrease in 2018 operating cash-flow vs 2017 is due to increase in the level of working capital vs a moderate increase last year. The said increase is primarily due to increase in accounts receivables due to record sales in the fourth quarter of 2018 as mentioned above.

Net financial debt as of December 31, 2018 was $326.7 million, compared to $125.6 million as of December 31, 2017. The increase in net financial debt as of December 31st in mainly due to Eminence group acquisition amounted to $136.4 million and capital expenditures of $45.4 million.

Equity on December 31, 2018 was $467.9 million, up from $451.3 million a year earlier.

Delta Galil declared a dividend of $3.5 million, or $0.139 per share, to be distributed on March 6, 2019. The determining and "ex-dividend" date will be February 26, 2019.

2019 Financial Guidance

Delta Galil provided its initial 2019 financial guidance, excluding one-time items, which is based on current market conditions and current exchange rates of: Euro/USD 1.14 and USD / NIS 3.65. The Company’s financial guidance for 2019 includes the impact of IFRS 16 on accounting for leases.

  • 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. Excluding IFRS 16 impact, 2019 EBIT is estimated to range between $104 million - $109 million, representing an increase of 6% - 11% over 2018.
  • 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. Excluding IFRS 16 impact, 2019 EBITDA is estimated to range between $138 million - $143 million, representing an increase of 6% - 10% over 2018.
  • 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.

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 and branded Men’s underwear including the brands Schiesser, Eminence, Athena & Liabel; babywear, activewear, sleepwear such as the PJ Salvage brand, 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, Lacoste 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.

Concise Consolidated Balance Sheets

As of December 31, 2018

       

2018

2017

(audited)

Thousands of Dollars

 
Assets
Current assets:
Cash and cash equivalents 70,534 137,470
Restricted Cash 3,494 1,430
Other accounts receivable:
Trade receivables 224,019 148,806
Taxes on income receivable 881 2,915
Others 26,395 20,632
Financial derivative 273 1,191
Inventory 309,645 269,877
Total current assets 635,241 582,321
 
Non-current assets:

Investments in associated companies accounted
using the equity method and long-term receivables

29,401 11,142
Investment property 3,424 3,718
Fixed assets, net of accumulated depreciation 191,738 160,018
Goodwill 110,955 70,101
Intangible assets, net of accumulated amortization 221,669 158,768
Deferred tax assets 9,285 11,654
Financial derivative 4,216 22,800
Total non-current assets 570,688 438,201
Total assets 1,205,929 1,020,522
 
     
DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of December 31, 2018

 
       
2018

2017

(audited)
Thousands of Dollars
Liabilities and Equity
Current liabilities:
Short-term bank loans 79,987 28
Current maturities of bank loan 8,015 -
Current maturities of debentures 19,514 20,596
Financial derivative 2,935 1,432
Other accounts payable:
Trade payables 139,591 112,028
Taxes on income payable 10,481 6,373
Others 112,326 117,804
Total current liabilities 372,849 258,261
 
Non-current liabilities:
Bank loan 70,134 -
Severance pay liabilities less plan assets 8,886 4,057
Other non-current liabilities 35,833 40,212
Debentures 222,975 258,945
Reserve for deferred taxes 25,798 7,724
Financial derivative 1,603 -
Total non-current liabilities 365,229 310,938
Total liabilities 738,078 569,199
 
Equity:
Equity attributable to equity holders of the parent company:
Share capital 23,714 23,708
Share premium 130,667 130,791
Other capital reserves (10,503) 7,834
Retained earning 339,922 304,788
Treasury shares (16,523) (16,914)
467,277 450,207
Minority interests 574 1,116
Total equity 467,851 451,323
Total liabilities and equity 1,205,929 1,020,522
 
       
DELTA GALIL INDUSTRIES LTD.

Consolidated Statement of Comprehensive Income

For the 3-month and year ending December 31, 2018

 
Year ended December 31

%
Increase/(Decrease)

Three months ended December 31

%
Increase/(Decrease)

2018   2017       2018   2017    
(audited)
Thousands of Dollars
Except for Earnings per Share Data
Sales 1,498,421   1,368,080 10% 454,264   371,637 22%
Cost of sales 931,981 855,268 280,365 225,952
Gross profit 566,440 512,812 10% 173,899 145,685 19%
% of sales 37.8% 37.5% 38.3% 39.2%
Selling and marketing expenses 406,132 360,506 13% 114,093 98,366 16%
% of sales 27.1% 26.4% 25.1% 26.5%
General and administrative expenses 65,163 65,393 18,456 15,098 22%
% of sales 4.3% 4.8% 4.1% 4.1%
Other Expenses (income), net (2,468) (50) (684) (272)
Share in profits of associated company accounted for using the equity method 392 427 110 (5)
Operating income excluding non-recurring items 98,005 87,390 12% 42,144 32,488 30%
% of sales 6.5% 6.4% 9.3% 8.7%
Restructuring expenses 5,422 2,832 - -
Inventory Step up due to Eminence acquisition 7,625 - 3,776 -
Eminence acquisition cost 4,283 - - -
Operating income 80,675 84,558 (5%) 38,368 32,488 18%
% of sales 5.4% 6.2% 8.4% 8.7%
Finance expenses, net 21,352 18,848 13% 5,448 4,330 26%
Income before tax on income 59,323 65,710 32,920 28,158
Taxes on income 11,146 16,751 8,242 8,087
Net income for the period 48,177 48,959 (2%) 24,678 20,071 23%
Net income for the period excluding one-time items, net of tax 60,451 50,715 19% 27,207 20,071 36%
 
Attribution of net earnings for the period:
Attributed to company's shareholders 48,539 48,839 24,685 20,041 23%
Attributed to non-controlling interests (362) 120 (7) 30
48,177 48,959 24,678 20,071
Net diluted earnings per share attributed to company's shareholders 1.9 1.91 0.97 0.79

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

2.37 1.98 19% 1.07 0.79 36%
 
     
DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports

 
Year ended December 31

2018

2017

(audited)
Thousands of Dollars
Cash flows from operating activities:
Net income for the period 48,177 48,959
Adjustments required to reflect cash flows deriving from operating activities (4,730) 47,876
Interest paid in cash (16,798) (14,144)
Interest received in cash 398 292
Taxes on income paid in cash, net (4,678) (8,315)
Net cash generated from operating activities 22,369 74,668
Cash flows from investment activities:
Acquisition of fixed assets and intangible assets (41,854) (30,754)
Providing a loan (13,800) -
Restricted cash release (deposit) (433) 337
Earn-out payment for acquisition of an activity (2,250) (1,500)
Acquisition of a subsidiary (136,341) -
Proceeds from selling of fixed asset 1,789 28,696
Others (2,687) (1,431)
Net cash used in Investing activities (195,576) (4,652)
Cash flows from financing activities:
Dividends paid to non-controlling interest holders in consolidated subsidiary
(180) (120)
Long term payables credit for fixed assets purchase (3,648) (3,308)
Debentures principle repayment (20,920) (20,919)
Financial Institute receipt (payment) (6,413) 6,413
Dividend paid (14,070) (14,055)
Long term loan received from bank 81,480 -
Repayment of a long-term loan from bank (2,014) -
Short-term credit from banking corporations, net 73,415 (44,960)
Debentures issuance net of issuance expenses - 57,152
Release of bank deposit used as a security with respect of SWAP transaction - 1,545
Proceeds from exercise of employees options 272 451
Net cash generated from ( used in) financing activities 107,922 (17,801)
Net increase (decrease) in cash and cash equivalents (65,285) 52,215
Exchange rate differences and revaluation of cash and cash equivalents, net (1,651) 3,308
Balance of cash and cash equivalents at the beginning of the period 137,470 81,947
Balance of cash and cash equivalents at the end of the Period 70,534 137,470
 
   
DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports

 

Year ended December 31

2018

2017

(audited)

Thousands of Dollars

 
Adjustments required to reflect cash flows
from operating activities:
Revenues and expenses not involving cash flow:
Depreciation 26,818 23,918
Amortization 5,498 4,582
Cash erosion, net 324 (598)
Interest paid in cash 16,798 14,144
Interest received in cash (398) (292)
Taxes on income paid in cash, net 4,678 8,315
Deferred taxes on income, net (463) 5,112
Severance pay liability, net (121) 381

Restructuring expenses, net

2,947 2,832
Capital loss (gain) from sale of fixed assets and asset held for sale 99 (4,332)
Change to the benefit component of options granted to employees 946 2,074
Share in profits of associated company accounted for using the equity method (393) (427)
Others 2,630 1,313
59,363 57,022
Changes to operating assets and liabilities:
Decrease (increase) in trade receivables (59,454) 10,336
Decrease (increase) in other receivable and balances 396 2,164
Increase (decrease) in trade payables 18,330 (219)
Increase (decrease) in other payables (7,566) 2,056
Decrease (increase) in inventory (15,799) (23,483)
(64,093) (9,146)
(4,730) 47,876
 

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