SOURCE: Delta Galil Industries Ltd.

March 14, 2007 10:17 ET

Delta Galil Reports Fourth Quarter and Year 2006 Results

TEL AVIV, ISRAEL -- (MARKET WIRE) -- March 14, 2007 --

--  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
                                ========== =========  ========== =========

Contact Information

  • Contacts:
    Yossi Hajaj
    Delta Galil Industries Ltd.
    Tel: +972-3-519-3744

    U.S. Investors
    Kathy Price
    The Global Consulting Group
    Tel: +1-646-284-9430