Business Wire | Nov 11, 2020 07:00AM EST

Delta Galil Reports Third Quarter 2020 Results

Nov. 11, 2020

TEL AVIV, Israel--(BUSINESS WIRE)--Nov. 11, 2020--Delta Galil Industries, Ltd. (DELT/Tel Aviv Stock Exchange, DELTY.PK), 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 third quarter ended September 30, 2020.

Third Quarter 2020 Highlights

* Sales were $382.9 million, compared to $446.1 million in the third quarter of 2019, a 14% decrease associated with Covid-19 impact.

* Net income was $19.5 million, a 39% increase compared to $14.0 million last year, and a sharp turnaround from a loss of $53.3 million in the 2020-second quarter.

* Diluted earnings per share increased 40% to $0.77, from $0.55 last year.

* Operating cash flow improved $32.9 million to $44.1 million in Q3 2020, from $11.2 million in the third quarter last year.

* Gross margin increased 400 basis points to 38.1% versus 34.1% in Q3 last year.

* Strong balance sheet highlighted by $215 million in cash, and $436.4 million in equity as of September 30, 2020.

* E-commerce own websites sales nearly doubled, with a 97% increase.

* Announced acquisition of leading US online retailer Bare Necessities, which enhanced Delta's digital presence, while offering more than 160 brands and 6,400 styles in intimates, women's swimwear, shapewear, sexy lingerie, sleepwear, and hosiery, among others.

* Net debt reduced by $131.4 million from September 2019.

Isaac Dabah, CEO of Delta Galil, stated: "As we continue to live and operate through this pandemic, we are very pleased with our strong third quarter performance. Our return to profitability exceeded our expectations and will continue in the fourth quarter. Our results this quarter were driven by a strong performance in Delta European Brands and Delta Israel, coupled with initial benefits reaped from our strategic restructuring plan announced last quarter, as well as additional cost savings initiatives. Looking ahead, we continue our ongoing focus on driving innovation and excellence to deliver sustained profitable growth and long-term shareholder value. And, with a strong balance sheet, we have the necessary financial resources to continue to innovate and grow."

COVID-19

Delta Galil noted that the disruption caused by COVID-19 and related business closures and public quarantine measures resulted in decreased sales volume, primarily with several major DGUSA and DGPB customers, and lower retails sales due to store closures, which were partially offset by higher web and e-commerce customer sales. The impact of COVID-19 reduced third quarter sales was approximately $60 million, while the impact on EBIT was negligible. In an effort to reduce operational costs and strengthen financial flexibility, the Company quickly implemented a number of initiatives, which it continues to benefit from, including:

* A companywide hiring freeze, 10%-20% reduction in salaries of senior management until the end of the third quarter, furlough and reduced working hours. * Elimination and/or reduction of marketing spend travel and consulting fees. * Tightly managed working capital items. * Negotiated reduction in rental costs. * Suspension of quarterly cash dividend for remainder of 2020. * Received government-supported loans of $46 million during the second and the third quarters, under attractive terms. * Increased Company's committed and uncommitted credit facilities to a total of $249 million, of which $30 million utilized as of September 30, 2020.

Sales

The Company reported sales of $382.9 million for the third quarter of 2020, compared to $446.1 million for the third quarter of 2019, a 14% decrease. The decrease in sales was primarily due to reduced volume in Delta Galil Premium Brands, Delta USA and Global Upper Market business segments following the outbreak of COVID-19. Sales for the first nine months of 2020 were $986.5 million, compared to $1,185.4 million for the same period last year, representing a 17% decrease.

Operating Profit

Operating profit for the third quarter was $33.6 million, a 26% increase from $26.7 million in the third quarter last year. Before one-time items, operating profit was $33.6 million, compared to $27.1 million in the third quarter of 2019. The increase in operating profit was due primarily to cost-saving initiatives and due to improved gross margin, as explained above.

For the first nine months of 2020, operating loss was $50.5 million, compared to operating profit of $51.5 million in the first nine months of 2019. Excluding non-recurring items, operating profit for the first nine months of 2020 was $1.5 million, compared to operating profit of $54.7 million for the comparable period last year.

Net Income

Net income for the third quarter of 2020 was $19.5 million, a 39% increase from $14.0 million in the third quarter last year. Excluding one-time items, net income was $19.5 million for the third quarter of 2020, compared to $14.5 million in the third quarter of 2019.

For the first nine months of 2020, net loss was $64.3 million, compared to net income of $22.1 million for the same period last year. Excluding one-time items, net loss was $23.5 million for the first nine months of 2020, compared to net income of $25.4 million for the same period last year.

Diluted Earnings (Per Share)

Diluted earnings per share increased 40% to $0.77 for the third quarter of 2020, compared to $0.55 in the third quarter of 2019. Excluding one-time items, diluted earnings per share were $0.77 for the third quarter of 2020, a 35% compared to $0.57 for the same quarter last year.

For the first nine months of 2020, diluted loss per share amounted to $2.50, compared to earnings per share of $0.87 for the first nine months of 2019. Excluding one-time items, diluted loss per share was $0.90 for the first nine months of 2020, compared to earnings per share of $0.99 for the comparable period last year.

EBITDA, Cash Flow, Net Debt, Equity and Dividend

EBITDA was $57.7 million in the third quarter of 2020, a 12% increase compared to $51.5 million in the third quarter of 2019. For the first nine months of 2020, EBITDA was $71.9 million, compared to $119.5 million in the same period last year, a 40% decrease.

Operating cash flow was $44.1 million, improving $32.9 million compared to $11.2 million in the third quarter of 2019, - mainly due to uncompromising management of working capital. Excluding IFRS 16, operating cash flow improved $32.3 million to $27.8 million in the third quarter of 2020, compared to negative $4.5 million in the comparable period last year.

Net financial debt as of September 30, 2020 was $286.4 million, reduced from $417.8 million as of September 30, 2019, and $334.5 million as of December 31, 2019.

Short-term bank credit was reduced by approximately $50 million, versus the end of last quarter.

Equity on September 30, 2020 was $436.4 million, compared with $469.1 million a year earlier.

The Company does not currently anticipate declaring a dividend for the remainder of the fiscal year.

2020 Financial Guidance

As previously stated, Delta Galil is not providing financial guidance for fiscal 2020, as a result of the global impact of COVID-19 and the continued uncertainty surrounding the pandemic. Nevertheless, the Company estimates that its operating results will maintain profitability in Q4 of this year.

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 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(r), and ladies apparel under the brands Splendid(r) and Ella Moss(r), among others. In addition, it sells its products under brand names licensed to the company, including Wilson, Spalding, 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.

Concise Consolidated Balance Sheets

As of September 30, 2020



September 30 December 31

2020 2019 2019

(Unaudited) (Audited)

Thousands of Dollars





Assets

Current assets:

Cash and cash equivalents 215,520 50,221 108,294

Restricted Cash 2,450 813 933

Other accounts receivable:

Trade receivables 184,100 213,701 212,311

Taxes on income receivable 7,905 2,552 2,867

Others 35,008 34,591 35,200

Financial derivative 1,074 880 971

Inventory 306,964 405,372 328,108

Total current assets 753,021 708,130 688,684



Non-current assets:

Investments in associated companies accounted using

the equity method and long-term receivables 27,105 14,541 14,367

Investment property 3,264 3,174 3,228

Fixed assets, net of accumulated 199,438 216,308 213,210depreciation

Goodwill 147,506 145,675 148,001

Intangible assets, net of accumulated 259,974 269,897 273,318amortization

Assets in respect of usage rights 211,474 209,376 207,651

Deferred tax assets 9,016 15,779 19,678

Financial derivative 15,143 17,096 19,677

Total non-current assets 872,920 891,846 899,130

Total assets 1,625,941 1,599,976 1,587,814



DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of September 30, 2020

September 30

December 31

2020

2019

2019

(Unaudited)

(Audited)

Thousands of Dollars

Liabilities and Equity

Current liabilities:

Short-term bank loans

30,025

80,917

1,868

Current maturities of bank loan

15,340

10,662

10,588

Current maturities of debentures

37,645

29,706

36,802

Financial derivative

1,352

2,074

2,070

Current maturities of liabilities in respect of leases

57,584

52,818

53,401

Other accounts payable:

Trade payables

187,505

186,023

140,475

Taxes on income payable

17,935

10,903

16,392

Provision for restructuring plan

28,122

2,719

1,435

Others

125,100

123,698

138,802

Total current liabilities

500,608

499,520

401,833

Non-current liabilities:

Bank loan

105,488

70,975

68,337

Severance pay liabilities less plan assets

10,464

8,726

10,155

Liabilities in respect of leases

177,033

178,703

172,903

Other non-current liabilities

36,364

49,719

47,899

Debentures

323,515

288,197

340,376

Deferred taxes liabilities

34,725

35,002

39,368

Financial derivative

1,325

-

-

Total non-current liabilities

688,914

631,322

679,038

Total liabilities

1,189,522

1,130,842

1,080,871

Equity:

Equity attributable to equity holders of the parent company:

Share capital

23,714

23,714

23,714

Share premium

130,262

130,236

130,237

Other capital reserves

(8,530)

(14,528)

(7,962)

Retained earning

307,125

345,550

376,763

Treasury shares

(16,093)

(16,092)

(16,093)

436,478

468,880

506,659

Minority interests

(59)

254

284

Total equity

436,419

469,134

506,943

Total liabilities and equity

1,625,941

1,599,976

1,587,814

DELTA GALIL INDUSTRIES LTD.

Concise Consolidated Balance Sheets

As of September 30, 2020



September 30 December 31

2020 2019 2019

(Unaudited) (Audited)

Thousands of Dollars





Liabilities and Equity

Current liabilities:

Short-term bank loans 30,025 80,917 1,868

Current maturities of bank loan 15,340 10,662 10,588

Current maturities of debentures 37,645 29,706 36,802

Financial derivative 1,352 2,074 2,070

Current maturities of liabilities in respect 57,584 52,818 53,401of leases

Other accounts payable:

Trade payables 187,505 186,023 140,475

Taxes on income payable 17,935 10,903 16,392

Provision for restructuring plan 28,122 2,719 1,435

Others 125,100 123,698 138,802

Total current liabilities 500,608 499,520 401,833



Non-current liabilities:

Bank loan 105,488 70,975 68,337

Severance pay liabilities less plan assets 10,464 8,726 10,155

Liabilities in respect of leases 177,033 178,703 172,903

Other non-current liabilities 36,364 49,719 47,899

Debentures 323,515 288,197 340,376

Deferred taxes liabilities 34,725 35,002 39,368

Financial derivative 1,325 - -

Total non-current liabilities 688,914 631,322 679,038

Total liabilities 1,189,522 1,130,842 1,080,871



Equity:

Equity attributable to equity holders of the parent company:

Share capital 23,714 23,714 23,714

Share premium 130,262 130,236 130,237

Other capital reserves (8,530) (14,528) (7,962)

Retained earning 307,125 345,550 376,763

Treasury shares (16,093) (16,092) (16,093)

436,478 468,880 506,659

Minority interests (59) 254 284

Total equity 436,419 469,134 506,943

Total liabilities and equity 1,625,941 1,599,976 1,587,814

DELTA GALIL INDUSTRIES LTD.

Consolidated Statement of Comprehensive Income

For the 3-month and 9-month periods ending September 30, 2020

Nine months ended September 30

Three months ended September 30

2020

2019

2020

2019

(Unaudited)

Thousands of Dollars

Sales

986,508

1,185,400

382,878

446,139

Cost of sales

647,250

768,537

236,839

293,812

Gross profit

339,258

416,863

146,039

152,327

% of sales

34.4%

35.2%

38.1%

34.1%

Selling and marketing expenses

271,711

312,509

93,551

106,496

% of sales

27.5%

26.4%

24.4%

23.9%

General and administrative expenses

55,976

52,474

17,318

18,839

% of sales

5.7%

4.4%

4.5%

4.2%

Trade receivable credit loss

8,744

540

799

212

Other Expenses (income), net

1,302

(3,401)

767

(360)

Operating income excluding non-recurring items

1,525

54,741

33,604

27,140

% of sales

0.2%

4.6%

8.8%

6.1%

Non-recurring items

52,060

3,273

-

431

Operating income (loss)

(50,535)

51,468

33,604

26,709

Finance expenses, net

27,713

25,435

8,663

10,119

Income before tax on income

(78,248)

26,033

24,941

16,590

Taxes on income

(13,987)

3,902

5,399

2,556

Net income (loss) for the period

(64,261)

22,131

19,542

14,034

Net income (loss) for the period excluding one-time items, net of tax

(23,458)

25,404

19,542

14,465

Attribution of net earnings for the period:

Attributed to company's shareholders

(63,918)

22,177

19,637

14,080

Attributed to non-controlling interests

(343)

(46)

(95)

(46)

(64,261)

22,131

19,542

14,034

Net diluted earnings (loss) per share attributed to company's shareholders

(2.50)

0.87

0.77

0.55

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

(0.91)

0.99

0.77

0.57

DELTA GALIL INDUSTRIES LTD.

Consolidated Statement of Comprehensive Income

For the 3-month and 9-month periods ending September 30, 2020

Nine months ended Three months September 30 ended September 30

2020 2019 2020 2019

(Unaudited)

Thousands of Dollars



Sales 986,508 1,185,400 382,878 446,139

Cost of sales 647,250 768,537 236,839 293,812

Gross profit 339,258 416,863 146,039 152,327

% of sales 34.4% 35.2% 38.1% 34.1%

Selling and marketing expenses 271,711 312,509 93,551 106,496

% of sales 27.5% 26.4% 24.4% 23.9%

General and administrative expenses 55,976 52,474 17,318 18,839

% of sales 5.7% 4.4% 4.5% 4.2%

Trade receivable credit loss 8,744 540 799 212

Other Expenses (income), net 1,302 (3,401) 767 (360)

Operating income excluding 1,525 54,741 33,604 27,140non-recurring items

% of sales 0.2% 4.6% 8.8% 6.1%

Non-recurring items 52,060 3,273 - 431

Operating income (loss) (50,535) 51,468 33,604 26,709

Finance expenses, net 27,713 25,435 8,663 10,119

Income before tax on income (78,248) 26,033 24,941 16,590

Taxes on income (13,987) 3,902 5,399 2,556

Net income (loss) for the period (64,261) 22,131 19,542 14,034

Net income (loss) for the periodexcluding one-time items, (23,458) 25,404 19,542 14,465net of tax



Attribution of net earnings for the period:

Attributed to company's shareholders (63,918) 22,177 19,637 14,080

Attributed to non-controlling (343) (46) (95) (46)interests

(64,261) 22,131 19,542 14,034



Net diluted earnings (loss) pershare (2.50) 0.87 0.77 0.55attributed to company's shareholders



Net diluted earnings (loss) pershare, beforenon-recurring items net of tax (0.91) 0.99 0.77 0.57attributable to Company'sshareholders

DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports

For the 3-month and 9-month periods ending September 30, 2020

Nine months ended September 30

Three months ended September 30

2020

2019

2020

2019

(Unaudited)

Thousands of Dollars

Cash flows from operating activities:

Net income for the period

(64,261)

22,131

19,542

14,034

Adjustments required to reflect cash flows

deriving from operating activities

214,415

41,647

30,373

2,243

Interest paid in cash

(17,091)

(14,913)

(5,839)

(4,606)

Interest received in cash

722

437

399

-

Taxes on income paid in cash, net

(1,338)

(6,531)

(375)

(516)

Net cash generated from operating activities

132,447

42,771

44,100

11,155

Cash flows from investment activities:

Acquisition of fixed assets and intangible assets

(13,586)

(20,022)

(4,415)

(6,440)

Providing loans

-

(18,102)

-

-

Restricted cash release

-

2,681

-

405

Payments for acquisition of subsidiary

-

(26,370)

-

(26,370)

Acquisition of a subsidiary

(1,469)

(441)

-

-

Proceeds from selling of fixed asset

398

218

86

121

Others

-

804

-

804

Net cash used in Investing activities

(14,657)

(61,232)

(4,329)

(31,480)

Cash flows from financing activities:

Dividends paid to non-controlling interest holders

in consolidated subsidiary

-

(346)

-

-

Debentures principle repayment

(15,940)

(8,093)

(15,940)

(8,093)

Long term payables credit for fixed assets purchase

(2,886)

(2,658)

(850)

(1,017)

Lease principle repayment

(46,535)

(42,492)

(16,278)

(15,703)

Dividend paid

(6,506)

(7,544)

-

(2,492)

Repayment (providing) of long-term loans from banks

37,116

(6,506)

3,085

(2,536)

Short-term credit from banking corporations, net

30,025

(1,989)

(48,901)

62,838

Proceed from Debentures Issuance, net of Issuance expenses

-

69,129

-

-

Repayment of bank loan used to acquisition of a subsidiary

(6,913)

-

(1,501)

-

-

Net cash generated from ( used in) financing activities

(11,639)

(499)

(80,385)

32,997

Net increase (decrease) in cash and cash equivalents

106,151

(18,960)

(40,614)

12,672

Exchange rate differences and revaluation of cash

and cash equivalents, net

2,943

(1,354)

3,084

(1,062)

Balance of cash and cash equivalents

at the beginning of the period, net

106,426

70,534

253,050

38,611

Balance of cash and cash equivalents at the end of the Period, net

215,520

50,221

215,520

50,221

DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports

For the 3-month and 9-month periods ending September 30, 2020

Nine months ended Three months ended September 30 September 30

2020 2019 2020 2019

(Unaudited)

Thousands of Dollars





Cash flows from operating activities:

Net income for the period (64,261) 22,131 19,542 14,034

Adjustments required to reflect cash flows

deriving from operating activities 214,415 41,647 30,373 2,243

Interest paid in cash (17,091) (14,913) (5,839) (4,606)

Interest received in cash 722 437 399 -

Taxes on income paid in cash, net (1,338) (6,531) (375) (516)

Net cash generated from operating 132,447 42,771 44,100 11,155activities

Cash flows from investment activities:

Acquisition of fixed assets and (13,586) (20,022) (4,415) (6,440)intangible assets

Providing loans - (18,102) - -

Restricted cash release - 2,681 - 405

Payments for acquisition of - (26,370) - (26,370)subsidiary

Acquisition of a subsidiary (1,469) (441) - -

Proceeds from selling of fixed 398 218 86 121asset

Others - 804 - 804

Net cash used in Investing (14,657) (61,232) (4,329) (31,480)activities

Cash flows from financing activities:

Dividends paid to non-controlling interest holders

in consolidated subsidiary - (346) - -

Debentures principle repayment (15,940) (8,093) (15,940) (8,093)

Long term payables credit for fixed (2,886) (2,658) (850) (1,017)assets purchase

Lease principle repayment (46,535) (42,492) (16,278) (15,703)

Dividend paid (6,506) (7,544) - (2,492)

Repayment (providing) of long-term 37,116 (6,506) 3,085 (2,536)loans from banks

Short-term credit from banking 30,025 (1,989) (48,901) 62,838corporations, net

Proceed from Debentures Issuance, - 69,129 - -net of Issuance expenses

Repayment of bank loan used to (6,913) - (1,501) -acquisition of a subsidiary

-

Net cash generated from ( used in) (11,639) (499) (80,385) 32,997financing activities

Net increase (decrease) in cash and 106,151 (18,960) (40,614) 12,672cash equivalents



Exchange rate differences and revaluation of cash

and cash equivalents, net 2,943 (1,354) 3,084 (1,062)

Balance of cash and cash equivalents

at the beginning of the period, net 106,426 70,534 253,050 38,611

Balance of cash and cashequivalents at the end of the 215,520 50,221 215,520 50,221Period, net

DELTA GALIL INDUSTRIES LTD.

Consolidated Cash Flow Reports

For the 3-month and 9-month periods ending September 30, 2020

Nine months ended September 30

Three months ended September 30

2020

2019

2020

2019

(Unaudited)

Thousands of Dollars

Adjustments required to reflect cash flows

from operating activities:

Revenues and expenses not involving cash flow:

Depreciation

28,174

21,640

8,461

8,217

Amortization

45,885

43,140

15,751

16,209

Impairment of intangible assets

12,780

-

-

-

Cash erosion, net

96

(138)

(195)

9

Interest paid in cash

17,091

14,913

5,839

4,606

Interest received in cash

(722)

(437)

(399)

-

Taxes on income paid in cash, net

1,338

6,531

375

516

Deferred taxes on income, net

6,522

(2,424)

11,428

(1,633)

Interest due to lease agreements

7,543

6,095

2,459

1,840

Severance pay liability, net

13

112

(77)

7

Restructuring expenses (income)

26,063

-

(3,534)

-

Decrease in liabilities in respect of leases due to rent payments relief

(2,845)

-

(681)

-

Capital loss (gain) from sale of fixed assets and asset held for sale

(180)

5

(65)

(28)

Change to the benefit component of options granted to employees

786

995

239

394

Write-down of customers and other receivables

11,659

540

799

212

Share in profits of associated company accounted

for using the equity method

(203)

(634)

(127)

(265)

Others

3,967

(216)

1,859

(418)

157,967

90,123

42,132

29,666

Changes to operating assets and liabilities:

Decrease (increase) in trade receivables

20,115

28,391

(30,685)

(10,892)

Decrease (Increase) in other receivable and balances

(7,662)

(5,791)

(4,795)

2,603

Decrease in trade payables

44,075

9,616

35,634

7,363

Decrease (increase) in other payables

(24,510)

(13,238)

1,376

2,193

Decrease (increase) in inventory

24,430

(67,454)

(13,289)

(28,690)

56,448

(48,476)

(11,759)

(27,423)

214,415

41,647

30,373

2,243

View source version on businesswire.com: https://www.businesswire.com/news/home/20201111005194/en/

CONTACT: Nissim Douek +972-54-5201178 Nissim@unik.co.il

CONTACT: U.S. Media Contact: Danielle Poggi Berns Communications Group +1-212-994-4660 dpoggi@bcg-pr.com