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Delta Galil Reports Third Quarter 2018 Results

November 19, 2018

TEL AVIV, Israel--(BUSINESS WIRE)--Nov 19, 2018--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 financial results for the third quarter and nine months ended September 30, 2018.

Sales

The Company reported sales of $370.8 million for the third quarter of 2018, a 9% increase from $340.3 million in the third quarter of 2017. Sales for the first nine months of 2018 were $1,044.2 million, up 5% from $996.4 million in the same nine-month period of 2017. The sales growth primarily reflected strength in Delta Galil USA, Delta European Brands (now including Eminence) and Delta Israel.

Operating Profit

Operating profit before one-time items increased 10% to $26.7 million in the third quarter of 2018, compared to $24.3 million in the third quarter of 2017. Operating profit including $9.6 million of acquisition-related and restructuring costs was $17.0 million for the third quarter of 2018, compared to $24.2 million for the same period last year, representing a 29% decrease.

Operating profit in the first nine months of 2018, before one-time items increased 2% to $55.9 million, compared to $54.9 million in the same period of 2017. For the first nine months of 2018, operating profit including $13.6 million of acquisition-related and restructuring costs was $42.3 million, down 19% from $52.1 million in the same period last year. The increase in operating profit excluding one-time items was due to higher gross profit achieved from Eminence results consolidated for the first time, which has a relatively high gross margin compared to average margin in Delta.

Net Income

Net income excluding Eminence acquisition-related costs and restructuring costs increased 15% to $16.6 million, from $14.5 million in the third quarter of 2017. Net income including acquisition-related and restructuring costs of $7.0 million (net of tax) was $9.6 million for the third quarter of 2018, compared to $14.4 million last year, a 33% decrease.

Net income before acquisition-related and restructuring costs increased 8% for the first nine months of 2018, and totaled $33.2 million, compared to $30.6 million for the same period of 2017. For the first nine months of 2018, net income including the acquisition-related and restructuring costs totaled $23.5 million, compared to $28.9 million for the same period last year, a 19% decrease.

Diluted Earnings Per Share

Diluted earnings per share before adjustments increased 15% in the 2018 third quarter, and totaled $0.65, compared to $0.57 last year. Diluted earnings per share including acquisition-related and restructuring costs were $0.38 for the third quarter of 2018, compared to $0.56 in the same quarter last year, representing a 33% decrease.

For the nine-month period, diluted earnings per share before adjustments increased 9% and totaled $1.31 in 2018, compared to $1.20 for the same period in 2017. For the first nine months of 2018, diluted earnings per share including acquisition-related and restructuring costs were $0.93, down 17% from $1.13 last year.

Management Comment

Isaac Dabah, CEO of Delta Galil, stated: “We are pleased with the continued strength of our diversified business model, as we concluded the quarter with a 9% sales increase and 10% increase in EBIT, before adjustments. We saw strong performance from Delta USA, where successful launches for Costco and new kids businesses drove a 9% increase in sales and a 49% increase in EBIT. We continued to see significant improvement in Delta Israel, with a 19% increase in sales and $1.3 million improvement in EBIT, as well as strong comparable sales and online growth.”

“During the quarter, we focused on consolidating Eminence Group, which made a strong contribution to sales in its first quarter as part of Delta Galil, while expanding our European presence.”

“Also during the quarter, we signed a global licensing agreement to exclusively develop, produce and distribute Ted Baker men’s underwear, loungewear, and thermal wear worldwide, with the first collection launching Spring 2019. This represents an important step in our ongoing strategy to grow our global portfolio of premium brands.”

“Looking ahead, we expect continued long-term growth in Delta Galil Premium Brands to reach above 10% EBIT. We see significant opportunities, including potential corporate initiatives to sell to key online retailers, and the ability to introduce core Delta products through Eminence distribution channels. Further, the investments we made in our manufacturing facilities will start having positive impacts on our bottom line towards 2019. We have a strong balance sheet, and 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 $35.3 million or 9.5% of sales in the third quarter of 2018, compared to $31.3 million, or 9.2% of sales in the same quarter last year. For the first nine months of 2018, EBITDA was $79.6 million, compared to $75.9 million in the same period of 2017.

Operating cash flow for the trailing 12 months ended September 30, 2018 was $20.9 million, compared to $80.7 million for the trailing 12 months ended September 30, 2017.

Net financial debt as of September 30, 2018 was $349.1 million, compared to $164.8 million as of September 30, 2017, mainly explained by the acquisition of Eminence for $135.4 million.

Equity on September 30, 2018 was $457.6 million, up from $436.0 million a year earlier.

Delta Galil declared a dividend of $3.5 million, or $0.139 per share, to be distributed on December 5, 2018. The determining and “ex-dividend” date will be November 27, 2018.

2018 Financial Guidance

Delta Galil updates its 2018 financial guidance, excluding one-time items:

Full-year 2018 sales are expected to range between $1,475 million-$1,495 million, representing an increase of 8%-9% from 2017 actual sales of $1,368.1 million. Full-year 2018 EBIT is expected to range between $97 million-$99 million, representing an increase of 11%-13% from 2017 actual EBIT of $87.4 million. Full-year 2018 EBITDA is expected to range between $127 million-$130 million, representing an increase of 10%-12% from 2017 actual EBITDA of $115.9 million. Full-year 2018 net income is expected to range between $57 million-$60 million, representing an increase of 12%-18% from 2017 actual net income of $50.7 million. Full-year 2018 diluted EPS is expected to range between $2.23-$2.34, representing an increase of 12%-18% 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 and branded Men’s underwear under the brands Eminence, Athena & Liabel; babywear, activewear, sleepwear, 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 ®. 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.

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