Business Wire | Aug 11, 2021 08:57AM EDT

Delta Galil Reports Strong Second Quarter 2021 Results, Reflecting Record Q2 Sales and Earnings

Aug. 11, 2021

TEL AVIV, Israel--(BUSINESS WIRE)--Aug. 11, 2021--Delta Galil Industries, Ltd. (DELT/Tel Aviv Stock Exchange), 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 second quarter ended June 30, 2021.

Second Quarter 2021 Highlights

* Sales were $455.8 million, a 68% increase from $270.9 million last year, with strong growth across all business segments. Organic sales, excluding Bare Necessities, which was acquired in October of last year, increased by 56% in the second quarter. * Company's own websites' sales increased 97% to $63.3 million. * Gross margin increased by 1,180 basis points to an all-time high of 41.1%. * Operating margin increased to a record Q2 level of 9.3%, versus negative 6.0% in Q2 2020. * Net income was $27.3 million, compared to a net loss of $53.3 million for the second quarter of 2020. * Q2 earnings per share rose to $0.97 for the second quarter of 2021 compared to a loss per share of $2.08 in the second quarter of 2020. * Operating cash flow excluding IFRS 16 was $36.9 million compared to $65.9 million in the second quarter of 2020. * Strong balance sheet highlighted by $279.9 million in cash and $585.2 million in equity as of June 30, 2021. * Net financial debt was at its lowest level since June 2016, at $124.6 million. * Company increased its dividend to $5.0 million, or $0.196 per share, to be distributed on August 26, 2021. The determining and "ex-dividend" date will be August 18, 2021.

Isaac Dabah, CEO of Delta Galil, stated: "We are very pleased with our performance this quarter, which now marks four consecutive quarters of record operating margin and three consecutive quarters of record gross margin, including achieving the highest ever gross margin of 41.1% in this quarter. We saw a significant increase in EBIT this past quarter, which was driven by higher sales in all segments and better channel, product and customer mix, along with SG&A leverage and improvements in our factories, which were positively impacted by efficiency measures we implemented. It is also important to note that total sales were up 22% and net profit was more than four times higher than in the same quarter of 2019, the last 'normal' period before the pandemic impacted the global economy. We remain focused on our commitment to digital innovation and recently announced the strategic merger of our Bare Necessities and Brayola business units to create the largest intimates marketplace for women. We also recently signed new global license agreements with Adidas and Wolford, and we are excited by the growth opportunities ahead of us. Our operating cash flow continues to be strong, enabling us to reduce our debt to the lowest level in the last five years. With our strong balance sheet, we have the necessary resources to deliver continued innovation and growth."

Sales

The Company reported sales of $455.8 million for the second quarter of 2021, a 68% increase from $270.9 million for the second quarter of 2020. Sales for the first six months of 2021 were $871.9 million, up 44% from $603.6 million in the comparable period last year. Excluding the sales of Bare Necessities, which was acquired in October 2020, sales increased by 56% and 35% in the second quarter and the first half of the year, respectively, compared to the same periods last year. Effective as of the second quarter of 2021, Delta Galil reorganized its business segments to better reflect and align with its strategic focus. The new segments - Brands (owned and licensed), Private Label, Delta Israel, 7 for All Mankind and Online Retailer - all contributed to the recent sales growth. Growth also was seen across all geographic regions.

Digital Sales

E-commerce sales on the Company's own website for the second quarter and first six months of 2021 rose 97% and 162% to $63.3 million and $134.1 million, respectively, compared to comparable periods in 2020. Excluding Bare Necessities, e-commerce own website sales declined 5% in the second quarter of 2021 compared to the same quarter in 2020 but increased 46% in the first half of the year compared to the same period last year.

EBIT

EBIT for the second quarter increased $97.8 million to $42.4 million, compared to negative $55.4 million in the second quarter of 2020. Before non-core items, EBIT increased $58.7 million to $42.4 million from negative $16.2 million in the second quarter of 2020.

EBIT for the first six months of 2021 increased to $70.4 million, compared to a negative EBIT of $84.1 million for the first six months of 2020. Excluding non-core items, EBIT for the first six months of 2021 was $70.4 million, compared to a negative EBIT of $32.1 million for the same period last year.

Net Income

Net income for the second quarter was $27.3 million, compared to a net loss of $53.3 million for the second quarter of 2020. Excluding non-core items, net of tax, net income for the second quarter was $27.3 million, compared to a net loss of $23.0 million for the second quarter of 2020.

Net income for the first six months of 2021 was $42.4 million, compared to a net loss of $83.8 million for the same period last year. Excluding non-core items, net of tax, net income for the first six months of 2021 was $42.4 million, compared to a net loss of $43.0 million for the same period last year.

Diluted Earnings Per Share

Diluted earnings per share rose to $0.97 for the second quarter of 2021, compared to a loss per share of $2.08 in the second quarter of 2020. Diluted earnings per share before non-core items amounted to $0.97 for the second quarter, compared to a loss per share of $0.89 for the second quarter of 2020.

Diluted earnings per share for the first six months of 2021 were $1.54, compared to a diluted loss per share of $3.27 for the same period of 2020. Diluted earnings per share excluding non-core items were $1.54 for the first six months of 2021, compared to a loss per share of $1.67 for the comparable period last year.

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA was $66.9 million in the second quarter of 2021, compared to $6.7 million in the second quarter of 2020. For the first six months of 2021, EBITDA was $119.7 million, compared to $14.2 million in the same period last year.

Operating cash flow for the second quarter of 2021 was $50.3 million, compared with $78.5 million in the second quarter of 2020. Excluding IFRS 16, operating cash flow was $36.9 million, compared to $65.9 million in the second quarter of 2020. Excluding the second quarter of 2020, the second quarter of 2021 represented the company's highest cash flow from operations.

Operating cash flow totaled $81.6 million for the first six months of 2021, compared to $83.3 million for the first six months last year. Excluding IFRS 16, operating cash flow was $58.3 million for the first six months of 2021, compared to $58.1 million for the same period last year.

Net financial debt as of June 30, 2021, was $124.6 million - its lowest level since June 2016. This compared to $150.2 million as of March 31, 2021, $236.3 million as of December 31, 2020, and $306.6 million as of June 30, 2020.

In order to flatten the debt payment curve and extend the duration of the loan embedded in the bonds series, the Company will make full redemption of its debentures series B on August 23, 2021, in a total amount of approximately $115 million, using bank term loans and available cash.

Equity on June 30, 2021, was $585.2 million or 33.2% from total balance sheet, compared to $410.4 million or 25.5% from total balance sheet a year earlier.

Delta Galil increased its dividend to $5.0 million, or $0.196 per share, to be distributed on August 26, 2021. The determining and "ex-dividend" date will be August 18, 2021.

2021 Financial Guidance

Delta Galil raised its 2021 financial guidance, excluding non-core items and based on IFRS 16 and current market conditions and assuming there is no resurgence of the COVID-19 pandemic that leads to quarantines and/or lockdowns in any countries in which the company sells or manufactures its products:

% INCREASE % INCREASE 2019 2021 2021 CURRENT CURRENT ACTUAL PREVIOUS CURRENT GUIDANCE VS. GUIDANCE GUIDANCE GUIDANCE PREVIOUS VS. 2019 GUIDANCE ACTUAL 1,690.2 1,780 - 1,825- 3% 8% - 11%Sales 1,820 1,875

EBIT* 106.0 140 -150 160 - 170 14% 51% - 60%

EBITDA* 195.6 240 -250 260 - 270 8% 33% - 38%

60.2 81.5 - 96 - 104 17% 59% - 73%Net Income* 89.5

Diluted EPS* 2.36 2.95 - 3.40 - 15% 44% - 57%($) 3.25 3.70

* Full-year 2021 sales are expected to range between $1,825 million and $1,875 million, representing an increase of 3% compared to prior guidance and up 8%-11% from 2019 actual sales of $1,690.2 million. * Full-year 2021 EBIT is expected to range between $160 million and $170 million, representing an increase of 14% compared to prior guidance and up 51%-60% from 2019 actual EBIT of $106.0 million. * Full-year 2021 EBITDA is expected to range between $260 million and $270 million, representing an increase of 8% compared to prior guidance and up 33%-38% from 2019 actual EBITDA of $195.6 million. * Full-year 2021 net income is expected to range between $96 million and $104 million, representing an increase of 17% compared to prior guidance and up 59%-73% from 2019 actual net income of $60.2 million. * Full-year 2021 diluted EPS is expected to range between $3.40 and $3.70, representing an increase of 15% compared to prior guidance and up 44%-57% from 2019 actual EPS of $2.36.

DELTA GALIL INDUSTRIES LTD.Concise Consolidated Balance Sheets As of June 30, 2021

June 30 December 31

2021 2020 2020

(Unaudited) (Audited)

Thousands of Dollars





Assets

Current assets:

Cash and cash equivalents 279,881 253,050 230,843

Restricted Cash 898 2,501 898

Other accounts receivable:

Trade receivables 171,443 151,466 200,201

Taxes on income receivable 12,175 6,730 18,305

Others 37,621 30,763 38,255

Financial derivative 1,635 781 2,020

Inventory 357,432 289,968 291,703

Total current assets 861,085 735,259 782,225



Non-current assets:

Investments in associated companies accounted using

the equity method and long-term receivables 11,008 27,508 14,668

Investment property 3,215 3,158 3,389

Fixed assets, net of accumulated 206,886 201,522 209,465depreciation

Goodwill 149,366 145,826 150,657

Intangible assets, net of accumulated 289,095 260,998 266,967amortization

Assets in respect of usage rights 201,740 204,036 217,777

Deferred tax assets 15,838 17,192 15,590

Financial derivative 26,186 15,356 31,593

Total non-current assets 903,334 875,596 910,106

Total assets 1,764,419 1,610,855 1,692,331



DELTA GALIL INDUSTRIES LTD.Concise Consolidated Balance Sheets As of June 30, 2021

June 30 December 31

2021 2020 2020

(Unaudited) (Audited)

Thousands of Dollars



Liabilities and Equity

Current liabilities:

Short-term bank loans 13 78,926 11,013

Current maturities of bank loan 13,839 9,720 20,295

Current maturities of debentures 39,013 37,579 39,029

Financial derivative 365 2,051 170

Current maturities of liabilities in 56,678 55,436 60,363 respect of leases

Other accounts payable:

Trade payables 213,159 148,608 186,903

Taxes on income payable 21,977 18,506 26,294

Provision for restructuring plan 17,789 30,803 26,825

Others 152,575 118,251 150,737

Total current liabilities 515,408 499,880 521,629



Non-current liabilities:

Bank loan 59,747 104,489 104,096

Severance pay liabilities less plan 8,996 10,233 9,499 assets

Liabilities in respect of leases 169,670 172,899 182,408

Other non-current liabilities 72,318 41,239 43,030

Debentures 312,647 338,130 316,764

Deferred taxes liabilities 40,389 32,175 38,513

Financial derivative - 1,382 -

Total non-current liabilities 663,767 700,547 694,310

Total liabilities 1,179,175 1,200,427 1,215,939



Equity:

Equity attributable to equity holders of the parent company:

Share capital 23,714 23,714 23,714

Share premium 129,982 130,262 130,260

Other capital reserves 53,534 (14,740 ) 6,604

Retained earning 370,033 287,249 332,268

Treasury shares (15,789 ) (16,093 ) (16,067 )

561,474 410,392 476,779

Minority interests 23,770 36 (387 )

Total equity 585,244 410,428 476,392

Total liabilities and equity 1,764,419 1,610,855 1,692,331

DELTA GALIL INDUSTRIES LTD.Concise Consolidated Statement of Income For the 3-month and 6-month periods ending June 30, 2021

Six months ended June Three months ended 30 June 30

2021 2020 2021 2020

(Unaudited)

Thousands of Dollars





Sales 871,906 603,630 455,771 270,947

Cost of sales 525,605 410,411 268,500 191,461

Gross profit 346,301 193,219 187,271 79,486

% of sales 39.7 % 32.0 % 41.1 % 29.3 %

Selling and marketing 230,838 178,160 121,194 74,223 expenses

% of sales 26.5 % 29.5 % 26.6 % 27.4 %

General and administrative 45,065 38,657 23,254 17,385 expenses

% of sales 5.2 % 6.4 % 5.1 % 6.4 %

Impairment loss on trade - 7,945 - 3,876 receivables

Other Expenses (income), netand Share in profits of 2 535 381 230 associated company accountedfor using the equity method

Operating income excluding 70,396 (32,078 ) 42,442 (16,228 )non-recurring items

% of sales 8.1 % (5.3 %) 9.3 % (6.0 %)

Non-recurring items - 52,060 - 39,154

Operating income (loss) 70,396 (84,138 ) 42,442 (55,382 )

Finance expenses, net 17,298 19,050 8,319 8,647

Income (loss) before tax on 53,098 (103,188 ) 34,123 (64,029 )income

Taxes on income (tax savings) 10,747 (19,385 ) 6,853 (10,735 )

Net income (loss) for the 42,351 (83,803 ) 27,270 (53,294 )period

Net income (loss) for theperiod excluding one-time 42,351 (43,001 ) 27,270 (22,969 )items, net of tax



Attribution of net earnings for the period:

Attributed to company's 39,659 (83,555 ) 25,113 (53,152 )shareholders

Attributed to non-controlling 2,692 (248 ) 2,157 (142 )interests

42,351 (83,803 ) 27,270 (53,294 )



Net diluted earnings (loss)per share attributed to 1.54 (3.27 ) 0.97 (2.08 )company's shareholders



Net diluted earnings (loss)per share, beforenon-recurring items net of 1.54 (1.67 ) 0.97 (0.89 )tax attributable to Company'sshareholders

DELTA GALIL INDUSTRIES LTD.Concise Consolidated Cash Flow Reports For the 3-month and 6-month periods ending June 30, 2021

Six months ended June Three months ended 30 June 30

2021 2020 2021 2020

(Unaudited)

Thousands of Dollars



Cash flows from operating activities:

Net income for the period 42,351 (83,803 ) 27,270 (53,294 )

Adjustments required to reflect cash flows

deriving from operating 51,578 184,042 30,534 139,252 activities

Interest paid in cash (15,055 ) (16,336 ) (7,050 ) (7,926 )

Interest received in cash 161 323 72 195

Taxes on income refund (paid) in 2,559 (963 ) (569 ) 286 cash, net

Net cash generated from 81,594 83,263 50,257 78,513 operating activities

Cash flows from investment activities:

Acquisition of fixed assets and (12,396 ) (9,171 ) (5,696 ) (3,753 )intangible assets

Providing a loan to a business (1,750 ) - - - partner

Bank deposit with respect to (1,770 ) - - 5,180 SWAP transaction

Acquisition of a subsidiary - (1,469 ) - -

Proceeds from selling of fixed 643 312 55 32 asset

Others (346 ) - - -

Net cash used in Investing (15,619 ) (10,328 ) (5,641 ) 1,459 activities

Cash flows from financing activities:

Dividends paid to non-controlling interest holders

in consolidated subsidiary (220 ) - (220 ) -

Long term payables credit for (2,491 ) (2,036 ) (959 ) (852 )fixed assets purchase

Lease principle repayment (23,293 ) (25,173 ) (13,392 ) (12,650 )

Dividend paid (3,514 ) (6,506 ) (3,514 ) -

Repayment of long-term loans (46,304 ) 34,031 (43,566 ) 36,171 from banks

Short-term credit from banking (10,999 ) 78,926 (14,007 ) 10,463 corporations, net

Repayment of bank loan used to (3,001 ) (5,412 ) (1,457 ) (4,314 )acquisition of a subsidiary

Net proceeds from issuance of a 77,156 - - - subsidiary

Net cash generated from ( used (12,666 ) 73,830 (77,115 ) 28,818 in) financing activities

Net increase (decrease) in cash 53,309 146,765 (32,499 ) 108,790 and cash equivalents



Exchange rate differences and revaluation of cash

and cash equivalents, net (4,271 ) (141 ) 401 1,126

Balance of cash and cash equivalents

at the beginning of the period, 230,843 106,426 311,979 143,134 net

Balance of cash and cashequivalents at the end of the 279,881 253,050 279,881 253,050 Period, net

DELTA GALIL INDUSTRIES LTD.Concise Consolidated Cash Flow Reports For the 3-month and 6-month periods ending June 30, 2021

Six months ended June Three months ended 30 June 30

2021 2020 2021 2020

(Unaudited)

Thousands of Dollars

Adjustments required to reflect cash flows

from operating activities:

Revenues and expenses not involving cash flow:

Depreciation 17,511 19,713 8,723 11,643

Amortization 31,776 30,134 15,801 14,782

Impairment of intangible assets - 12,780 - -

Cash erosion, net (1,878 ) 291 (2,554 ) (99 )

Interest paid in cash 9,464 11,252 4,762 5,582

Interest received in cash (161 ) (323 ) (72 ) (195 )

Taxes on income paid (received) (2,559 ) 963 569 (286 )in cash, net

Deferred taxes on income, net 5,867 (4,906 ) 1,704 6,812

Interest due to lease agreements 5,591 5,084 2,288 2,344

Severance pay liability, net 240 90 112 33

Restructuring (payments) (9,036 ) 29,597 (4,871 ) 29,597 provision

Decrease in liabilities inrespect of leases due to rent (3,391 ) (2,164 ) (332 ) (2,164 )payments relief

Capital loss from sale of fixed (240 ) (115 ) (68 ) (49 )assets

Change to the benefit component 1,620 547 770 227 of options granted to employees

Impairment loss on trade - 7,945 - 3,876 receivables

Share in profits of associatedcompany accounted for using the (38 ) (75 ) (32 ) (132 )equity method

Others 731 2,107 3,630 1,866

55,497 112,920 30,430 73,837

Changes to operating assets and liabilities:

Decrease (increase) in trade 23,691 50,800 15,719 (4,363 )receivables

Decrease (Increase) in other 9,092 48 4,447 (426 )receivable and balances

Decrease in trade payables 26,175 8,441 6,516 36,982

Decrease (increase) in other 11,703 (25,886 ) 17,209 (3,075 )payables

Decrease (increase) in inventory (74,580 ) 37,719 (43,787 ) 36,297

(3,919 ) 71,122 104 65,415

51,578 184,042 30,534 139,252

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CONTACT: For more information: Nissim Douek +972-54-5201178 Nissim@unik.co.il U.S. Media: Danielle Poggi Berns Communications Group dpoggi@bcg-pr.com