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Press release content from Business Wire. The AP news staff was not involved in its creation.

Delta Galil Reports Third Quarter 2020 Results

November 11, 2020 GMT

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.

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  • 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.”

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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 ®, 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, 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 depreciation

 

199,438

 

216,308

 

213,210

Goodwill

 

147,506

 

145,675

 

148,001

Intangible assets, net of accumulated amortization

 

259,974

 

269,897

 

273,318

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.

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 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
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.ilU.S. Media Contact:

Danielle Poggi

Berns Communications Group

+1-212-994-4660

dpoggi@bcg-pr.com

KEYWORD: ISRAEL MIDDLE EAST

INDUSTRY KEYWORD: FASHION ONLINE RETAIL RETAIL DEPARTMENT STORES MANUFACTURING TEXTILES

SOURCE: Delta Galil Industries, Ltd.

Copyright Business Wire 2020.

PUB: 11/11/2020 07:00 AM/DISC: 11/11/2020 07:01 AM

http://www.businesswire.com/news/home/20201111005194/en