Published: March 14, 2007
Delta Galil Reports Fourth Quarter and Year 2006 Results
-- Revenues in the fourth quarter of 2006 were $174.1 million compared to
the fourth quarter of 2005, an increase of 2.3%.
-- Operating income in the fourth quarter of 2006 was $5.8 million
compared to an operating loss of $2.9 million in the fourth quarter of
2005.
-- Net income in the fourth quarter of 2006 was $0.4 million, or $0.02
diluted earnings per share, compared to a loss of $7.6 million, or $0.41
diluted loss per share, reported in the fourth quarter of 2005.
-- The Company had positive cash flow for the full year 2006 of $26.3
million, compared to $11.6 million for the full year 2005.
-- Net bank debt decreased in 2006 from a level of $164.3 million as of
December 31, 2005 to $142.0 million of December 31, 2006.
Selected data in million US $:
Q4 2006 Q4 2005 % Chg. 2006 2005 % Chg.
-------- ------- ------ -------- ------- ------
Revenues $ 174.1 $ 170.2 2.3 $ 706.7 $ 684.5 3.2
Operating income (loss) 5.8 (2.9) 23.0 (28.2)
Adjusted EBITDA(1) 9.9 1.0 40.3 9.6
Financial expenses-net 4.1 3.1 33.5 13.6 10.2 32.7
Net income (loss) $ 0.4 $ (7.6) $ 3.1 $ (36.3)
(1) Adjusted EBITDA is a non-GAAP measure used by Delta Galil to measure
performance of ongoing operations. It is derived from net income (loss)
before taxes on income, financial expense net, restructuring expenses,
impairment of fixed assets and goodwill and depreciation and amortization
expenses.
For a calculation of Adjusted EBITDA, please refer to the table
accompanying this press release.
Delta Galil Industries Ltd. (NASDAQ: DELT) ("Delta"), the global provider
of private label ladies' intimate apparel, socks, men's underwear,
baby-wear and leisurewear, today reported results for the fourth quarter
and full year ended December 31, 2006.
Revenues for the fourth quarter were $174.1 million, compared to $170.2
million in revenues reported in the fourth quarter of 2005, an increase of
2.3%.
Revenues for the full year rose 3.2% to $706.7 million, compared to $684.5
reported for the full year in 2005.
Operating Income
Operating income in the fourth quarter of 2006 was $5.8 million, compared
to an operating loss of $2.9 million reported in the fourth quarter of last
year.
Operating income for the full year 2006 was $23.0 million, compared to an
operating loss of $28.2 million reported for the full year in 2005.
Operating income in 2006, excluding restructuring expenses and impairment
of assets and goodwill, was $24.6 million, compared to an operating loss of
$6.2 million in 2005.
Financial Expenses
Financial expenses in the fourth quarter of 2006 amounted to $4.1 million,
compared to $3.1 million in the fourth quarter of 2005. The increase in the
financial expenses in the fourth quarter versus the comparable quarter of
last year was mainly due to currency exchange differences derived from the
strengthening of the pound sterling versus the US dollar.
Financial expenses for the full year 2006 were $13.6 million, compared to
$10.2 million reported for the full year 2005. The increase in financial
expenses is mainly due to the increase in the LIBOR rate in the U.S. in
2006 despite the decrease in the debt level, and due to currency exchange
differences derived from the strengthening of the pound sterling versus the
US dollar.
Net Income
Net income in the fourth quarter of 2006 was $0.4 million, or $0.02 diluted
earnings per share, compared to a loss of $7.6 million, or $0.41 diluted
loss per share, reported in the fourth quarter of 2005.
Net income for the full of 2006 year was $3.1 million, or $0.17 diluted
earnings per share, compared to a loss of $36.3 million, or $1.94 diluted
loss per share, reported for the full year 2005.
Net income in 2006, excluding restructuring expenses and impairment of
assets and goodwill was $4.8 million, or $0.26 diluted earnings per share,
compared to a loss of $15.6 million, or $0.83 diluted loss per share,
reported last year.
Cash Flow
The Company had positive operating cash flow of $11.0 million in the fourth
quarter of 2006, compared to $11.2 million in the fourth quarter of last
year.
For the full year, the Company had positive operating cash flow of $26.3
million compared to $11.6 million for the full year 2005. The positive
operating cash flow enabled the Company to reduce the net bank debt to
$142.0 million as of December 31, 2006, from $164.3 million as of December
31, 2005.
Mr. Aviram Lahav, Delta's CEO, stated, "Our 2006 results improved primarily
due to the implementation of the restructuring plan initiated in 2005.
Nevertheless, continued erosion in selling prices and increased competition
necessitate further organizational restructuring and cost cutting measures.
Therefore, during 2007, Delta plans to further modify its organizational
structure and to implement additional actions designed to improve the
Company's competitive capabilities and performance."
Revenues by Geographic Area ($ Millions)
Fourth Quarter Year Ended December 31
----------------------------- -----------------------------
% % % %
from from from from
total total % total total %
2006 sales 2005 sales Chg. 2006 sales 2005 sales Chg.
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
North America 94.8 54.5 95.5 56.1 (0.7) 418.0 59.1 401.1 58.6 4.3
Europe 59.9 34.4 60.3 35.4 (0.7) 225.8 32.0 230.3 33.6 (1.5)
Israel 17.4 10.0 14.4 8.5 21.0 60.1 8.5 53.1 7.8 13.1
Others 2.0 1.1 -,- -,- 2.8 0.4 -,- -,-
----- ----- ----- -----
Total 174.1 100.0 170.2 100.0 2.3 706.7 100.0 684.5 100.0 3.2
===== ===== ===== =====
Revenues and Operating Results by reportable segments ($ Millions)
Fourth Quarter
Operating
Revenues Income (loss)
------------------- ------------
%
2006 2005 Chg. 2006 2005
----- ----- ----- ----- -----
Delta USA 58.8 59.4 (1.0) 3.0 1.1
U.S. Upper Market 23.4 17.8 31.4 (2.0) (1.4)
Europe 43.0 42.0 2.5 3.4 (3.7)
Socks-US & Europe 35.2 37.8 (6.8) 1.3 1.8
Delta Marketing Israel 15.8 13.2 20.0 2.1 1.3
Seam-Less 5.9 4.4 34.1 (1.4) (0.5)
Adjustments & Others (8.0) (4.4) (0.6) (1.5)
----- ----- ----- -----
Total 174.1 170.2 2.3 5.8 (2.9)
===== ===== ===== =====
Year Ended December 31
Operating Income
(loss) before
restructuring
expenses and
impairment
Revenues of assets
------------------------- ----------------
%
2006 2005 Chg. 2006 2005
------- ------- ------- ------- -------
Delta USA 269.7 267.9 0.7 13.3 8.3
U.S. Upper Market 95.3 75.7 25.9 0.7 (5.4)
Europe 167.3 163.5 2.3 7.7 (6.8)
Socks-US & Europe 122.5 130.9 (6.4) 1.4 2.5
Delta Marketing Israel 54.3 49.0 10.7 6.8 5.0
Seam-Less 18.0 19.6 (8.1) (2.5) (6.8)
Adjustments & Others (20.4) (22.1) (2.8) (3.0)
------- ------- ------- -------
Total 706.7 684.5 3.2 24.6 (6.2)
======= ======= ------- -------
Impairment of Fixed Assets 7.4
Restructuring Expenses 1.6 9.1
Impairment of Goodwill 5.5
------- -------
Total Consolidated Operating
Income (Loss) 23.0 (28.2)
======= =======
Impairment Impairment
Restructuring of Fixed of
Expenses Assets Goodwill
----------------- -------- --------
2006 2005 2005 2005
-------- -------- -------- --------
Delta USA 1.1 1.5
U.S. Upper Market 1.6 3.5 1.0
Europe 2.0
Socks-US & Europe 4.1 3.4
Delta Marketing Israel
Seam-Less 2.4
Adjustments & Others 1.6 0.3 1.1
-------- -------- -------- --------
Total 1.6 9.1 7.4 5.5
-------- ======== ======== ========
Impairment of Fixed Assets
Restructuring Expenses
Impairment of Goodwill
Total Consolidated Operating
Income (Loss)
Appointment of Internal Auditor
The Board of Directors of Delta accepted the recommendation of the Audit
Committee and appointed Mr. Oren Groupi, a partner at Somekh Chaikin
("KPMG"), as the Company's internal auditor. Mr. Groupi will replace Mr.
Ezra Yehuda, whose engagement was terminated by mutual consent. Mr. Yehuda
served as internal auditor since 1992.
The Company's management thanks Mr. Ezra Yehuda for his contribution.
Use of Non-GAAP Measures
This press release provides financial measures that are not calculated in
accordance with generally accepted accounting principals (GAAP). The
presentation of this non-GAAP financial information is not intended to be
considered in isolation or as a substitute for the financial information
prepared and presented in accordance with GAAP. Management uses both GAAP
and non-GAAP measures when evaluating the business internally and therefore
felt it important to make these non-GAAP adjustments available to
investors. A reconciliation of each GAAP to non-GAAP financial measure
discussed in this press release is contained in the accompanying financial
tables.
Adjusted EBITDA is presented in the earnings release because management
believes that it enhances the understanding of our operating results and is
of interest to our investors. EBITDA, however, should not be considered as
an alternative to operating income or income for the period as an indicator
of our operating performance. Similarly, EBITDA should not be considered as
an alternative to cash flows form operating activities as a measure of
liquidity. EBITDA is not a measure of financial performance under generally
accepted accounting principles and may not be comparable to other similarly
titled measures for other companies.
Delta Galil is a leading global manufacturer of quality apparel sold under
brands such as Calvin Klein, Hugo Boss, Nike, Ralph Lauren. Recognized for
product innovation and development, Delta's products are sold worldwide
through retailers including Wal-Mart, Marks & Spencer, Target, Victoria's
Secret, JC Penney, Hema, and others. Headquartered in Israel, Delta
operates manufacturing facilities in Israel, Jordan, Egypt, Turkey, Eastern
Europe, Central America, the Caribbean and the Far East. For more
information, please visit our website: www.deltagalil.com.
This press release contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. Such
statements are based on the current expectations of the management of DELTA
Galil Industries Ltd. (the Company) only, and are subject to a number of
risk factors and uncertainties, including but not limited to changes in
quotas; our dependence on a few significant customers; our anticipated
growth strategies; our intention to introduce new products; anticipated
trends in our business; future expenditures for capital projects; and our
ability to continue to control costs and maintain quality which could cause
the actual results or performance of the company to differ materially from
those described therein.
For a more detailed description of the risk factors and uncertainties
affecting the Company, refer to the Company's reports filed from time to
time with the Securities and Exchange Commission including the Company's
Annual Report on Form 20-F.
Delta Galil Industries Ltd.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year ended Three months ended
December 31 December 31
-------------------- --------------------
2006 2005 2006 2005
--------- --------- --------- ---------
In US $ thousand (except per share data)
------------------------------------------
Revenues 706,699 684,481 174,128 170,187
Cost of revenues 574,246 582,799 142,424 146,247
--------- --------- --------- ---------
Gross profit 132,453 101,682 31,704 23,940
Selling, marketing, general and
administrative expenses:
Selling and marketing expenses 88,165 86,682 20,866 21,180
General and administrative
expenses 19,587 20,326 5,046 5,473
Loss (gain) from realization of
assets (686) 77 (172) 34
Impairment of fixed asset 7,415
Restructuring expenses 1,663 9,102
Goodwill impairment 5,505
Amortization of intangible
asset 739 779 186 186
--------- --------- --------- ---------
Operating income (loss) 22,985 (28,204) 5,778 (2,933)
Financial expenses - net 13,558 10,218 4,085 3,059
Other income 300
--------- --------- --------- ---------
Income (loss) before taxes on
income 9,427 (38,122) 1,693 (5,992)
Taxes on income (tax benefit) 5,784 (2,302) 1,162 1,050
--------- --------- --------- ---------
Income (loss) after taxes on
income 3,643 (35,820) 531 (7,042)
Share in loss of an associated
company (27) (21)
Minority interest of
subsidiaries - net (495) (500) (118) (541)
--------- --------- --------- ---------
Net income (loss) for the
period 3,148 (36,347) 413 (7,604)
========= ========= ========= =========
Earnings (loss) per share -
basic 0.17 (1.94) 0.02 (0.41)
========= ========= ========= =========
Earnings (loss) per share -
diluted 0.17 (1.94) 0.02 (0.41)
========= ========= ========= =========
Weighted average number of
shares - in thousands:
Basic 18,700 18,695 18,714 18,695
========= ========= ========= =========
Diluted 18,742 18,695 18,815 18,695
========= ========= ========= =========
Delta Galil Industries Ltd.
CONDENSED CONSOLIDATED BALANCE SHEET
December 31
-------------------------
2006 2005
------------ ------------
In US $ thousands
-------------------------
Assets:
Current assets:
Cash and cash equivalents 10,342 14,595
Restricted cash 4,000
Accounts receivable:
Trade 109,710 104,424
Other 7,573 13,244
Inventories 131,556 147,142
Property, Plan and equipment for sale 4,474 7,420
Deferred income taxes 4,779 4,726
------------ ------------
Total current assets 272,434 291,551
------------ ------------
Investments and long-term receivables 8,344 7,436
------------ ------------
Property, plant and equipment 99,263 109,131
------------ ------------
Other assets and deferred charges 57,562 53,956
------------ ------------
Intangible asset 13,259 14,499
------------ ------------
Total assets 450,862 476,573
============ ============
Liabilities and shareholders equity:
Current liabilities:
Short-term bank credit 124,039 110,183
Trade 59,038 61,255
Other 34,504 39,164
------------ ------------
Total current liabilities 217,581 210,602
------------ ------------
Long-term liabilities:
Bank loans and other liabilities 33,196 69,677
Liability for employee rights upon retirement 6,863 7,850
Deferred income taxes 2,159 1,267
------------ ------------
Total long-term liabilities 42,218 78,794
------------ ------------
Total liabilities 259,799 289,396
Minority interest 2,846 2,863
Shareholders' equity 188,217 184,314
------------ ------------
Total Liabilities and shareholders
equity 450,862 476,573
============ ============
Delta Galil Industries Ltd.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
Year ended Three months ended
December 31 December 31
---------------- ----------------
2006 2005 2006 2005
------- ------- ------- -------
In US $ thousands
----------------------------------
Cash flows from operating activities:
Net income (loss) for the period 3,148 (36,347) 413 (7,604)
Adjustment required to reflect the cash
flows from operating activities 23,151 47,951 10,555 18,797
------- ------- ------- -------
Net cash provided by operating
activities 26,299 11,604 10,968 11,193
------- ------- ------- -------
Cash flows from investing activities:
Purchase of fixed assets (5,706) (13,034) (1,332) (2,716)
Additional payment for the acquisition
of subsidiary (1,245) (2,274) (1,134)
Proceeds from realization of fixed
assets 1,274 1,071 243 771
Proceeds from realization of assets
held for sale 3,117 271
Proceeds from realization of investment
in associated company 300
Investment in a short term restricted
cash deposit (4,000)
Other (1,027) (510) (257) (150)
------- ------- ------- -------
Net cash used in investing activities (7,587) (14,447) (1,075) (3,229)
------- ------- ------- -------
Cash flows from financing activities:
Long-term bank loans, net (49,123) (28,079) (2,975) (7,746)
Short-term bank credit - net 26,498 24,957 (1,748) 5,804
Other (399) (1,522) 88 (163)
------- ------- ------- -------
Net cash used in financing activities (23,024) (4,644) (4,635) (2,105)
------- ------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (4,312) (7,487) 5,258 5,859
TRANSLATION IN DIFFERENCES IN CASH AND
CASH EQUIVALENTS 59 (68) 24
BALANCE OF CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 14,595 22,150 5,060 8,736
------- ------- ------- -------
BALANCE OF CASH AND CASH EQUIVALENTS AT
END OF PERIOD 10,342 14,595 10,342 14,595
======= ======= ======= =======
Delta Galil Industries Ltd.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
Year ended Three months ended
December 31 December 31
---------------- ----------------
2006 2005 2006 2005
------- ------- ------- -------
In US $ thousands
----------------------------------
Adjustment required to reflect the cash
flows from operating activities:
Income and expenses not involving cash
flows:
Depreciation and amortization 15,626 15,811 4,149 3,969
Restructuring expenses and impairment
of assets 1,156 19,390 (85) (1,349)
Deferred income taxes - net 839 (4,872) 819 2,056
Capital gain from realization of
investment in associated company (300)
Loss (gain) from realization of assets (686) 77 (172) 34
Other 762 633 265 693
------- ------- ------- -------
17,697 30,739 4,976 5,403
------- ------- ------- -------
Changes in operating assets and
liabilities items:
Decrease (increase) in accounts
receivable (741) (2,130) 9,527 (487)
Increase (decrease) in accounts payable
and accruals (9,468) (17,127) (3,631) 10,586
Decrease (increase) in inventories 15,663 36,469 (317) 3,295
------- ------- ------- -------
5,454 17,212 5,579 13,394
------- ------- ------- -------
23,151 47,951 10,555 18,797
======= ======= ======= =======
Delta Galil Industries Ltd.
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL RESULTS IN THOUSANDS
U.S. DOLLARS EXCEPT EARNINGS PER SHARE DATA
Year ended Three months ended
December 31 December 31
--------------------- ---------------------
2006 2005 2006 2005
---------- --------- ---------- ---------
In US $ thousand (except per share data)
-------------------------------------------
Operating income (loss)-As
reported 22,985 (28,204) 5,778 (2,933)
Non-GAAP Measures:
Impairment of fixed assets 7,415
Restructuring expenses 1,663 9,102
Goodwill impairment 5,505
---------- --------- ---------- ---------
Operating income (loss) for the
period before Non-GAAP
Measures 24,648 (6,182) 5,778 (2,933)
========== ========= ========== =========
Net income (loss) for the
period-As reported 3,148 (36,347) 413 (7,604)
Non-GAAP Measures:
Impairment of fixed assets 7,415
Restructuring expenses 1,663 9,102
Goodwill impairment 5,505
Other income (300)
Tax benefit (987)
---------- --------- ---------- ---------
Net income (loss) for the
period before Non-GAAP
Measures 4,811 (15,612) 413 (7,604)
---------- --------- ---------- ---------
Earnings (loss) per
share-diluted ($) before
Non-GAAP Measures 0.26 (0.83) 0.02 (0.41)
========== ========= ========== =========
Calculation of the adjusted
EBITDA
Net income (loss) for the
peried 3,148 (36,347) 413 (7,604)
Minority interest of
subsidiaries - net 495 500 118 541
Share in loss of an associated
company 27 21
Taxes on income (tax benefit) 5,784 (2,302) 1,162 1,050
Other income - net (300)
Financial expenses - net 13,558 10,218 4,085 3,059
Goodwill impairment 5,505
Restructuring expenses 1,663 9,102
Restructuring expenses 7,415
Depreciation and amortization 15,626 15,811 4,149 3,969
---------- --------- ---------- ---------
Adjusted - EBITDA 40,274 9,629 9,927 1,036
========== ========= ========== =========
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