SOURCE: Delta Galil Industries Ltd.

August 15, 2007 16:15 ET

Delta Galil Reports Second Quarter of 2007 Results

TEL AVIV, ISRAEL--(Marketwire - August 15, 2007) - Delta Galil Industries Ltd. (NASDAQ: DELT) ("Delta"), the global provider of private label ladies' intimate apparel, socks, men's underwear and leisurewear, today reported results for the second quarter, which ended June 30, 2007.

--  Second quarter revenues were $149.8 million compared to $176.5 million
    reported in the second quarter of 2006, a decrease of 15.1%.
    
--  First half revenues were $309.2 million compared to $348.5 million
    reported in the first half of 2006, a decrease of 11.3%.
    
--  Second quarter operating loss was $0.1 million, compared to an
    operating income of $5.9 million reported in the second quarter of 2006.
    
--  First half operating loss was $8.7 million, compared to an operating
    income of $9.0 million in the first half of 2006. Operating income before
    restructuring expenses in the first half of 2007 was $2.1 million compared
    to $10.7 million in the first half of 2006.
    
--  Second quarter net loss was $3.4 million, or $0.18 per diluted share,
    compared to a net income of $0.5 million, or $0.03 per diluted share
    reported in the second quarter of 2006.
    
--  First half net loss was $16.6 million, or $0.89 per diluted share,
    compared to a loss of $0.5 million, or $0.03 per diluted share in the first
    half of 2006.
    
    Net loss before restructuring expenses in the first half of 2007 was $5.8
    million, or $0.31 per diluted share, compared to a net income before
    restructuring expenses of $1.2 million, or $0.06 per diluted share in the
    first half of 2006.
    
--  In the second quarter of 2007 the Company had negative operating cash
    flow of $4.2 million, compared to positive operating cash flow of $14.7
    million in the second quarter of 2006.
    
--  In the first half of 2007 the Company had negative operating cash flow
    of $3.2 million compared to positive operating cash flow of $10.8 million
    in the first half of 2006.
    

Selected data in US $ millions:

                                                          First     First
                                                          half      half
                                    Q2 2007   Q2 2006     2007      2006
                                    --------  --------- --------  --------
Revenues                            $  149.8  $   176.5 $  309.2  $  348.5
Operating (loss) income excluding
 restructuring expenses                 (0.1)       7.5      2.1      10.7
Operating (loss) income                 (0.1)       5.9     (8.7)      9.0
Adjusted EBITDA[1]                       3.2       11.3      8.8      18.2
Net income (loss) excluding
 restructuring expenses                 (3.4)       2.2     (5.8)      1.2
Restructuring expenses                    --        1.7     10.8       1.7
Net (loss) income                       (3.4)       0.5    (16.6)     (0.5)
Operating cash flow                     (4.2)      14.7     (3.2)     10.8

[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,
    and depreciation and amortization expenses.

    For a calculation of Adjusted EBITDA, please refer to the table
    accompanying this press release.

CEO Comments on the Quarter results and State of the Business

Mr. Aviram Lahav, Delta's CEO, stated, "The net and operating loss in the second quarter of the year are due to several factors including an exceptional decrease in the US Mass Market division's sales; our exit from sales of certain unprofitable product categories to customers in the US and in Europe; and the continued implementation of the restructuring plan including the transfer of production to Egypt.

"US Mass Market division sales decreased 14% in the second quarter compared to the second quarter of last year, primarily due to significantly lower sales to a major customer that had accumulated inventory and due to a decrease in that customer's sales during the quarter. This decline in sales impacted the operating profit in this division as well. We anticipate sales to this customer increasing in the second half of 2007.

"Second quarter sales in the Europe and US Intimate Apparel division decreased 30% from the comparable quarter last year. These goods are produced in Israel, Jordan, Egypt and Thailand. This decrease is primarily due to significantly lower sales to a major US customer that had accumulated inventory and due to a decrease in this customer's own sales, as well as our decision to exit certain unprofitable categories. Sales for this division were also affected by a decrease in sales to a major European customer as a result of price erosion and our exit from unprofitable categories. The operating loss in the Europe and US Intimate Apparel division resulted from the decreases in sales described above, as well as the transfer of this division's production from our facilities in Israel to Egypt, as part of the restructuring plan started in the beginning of the year.

"Sales and operating income in the Socks division for the second quarter were maintained at the same level as in the comparable quarter last year.

"Delta Marketing Israel, our domestic retail and wholesale activity reported consistently growing sales and operating income compared to the second quarter of last year.

"We continue to implement the restructuring plan and are working to reduce production in high cost sites, while transferring production into lower cost countries and reducing overhead. We believe that the completion of the restructuring plan will improve Delta's competitiveness and return us to profitability," concluded Mr. Lahav.

              Revenues by Geographic Area ($ millions)


                                         Second Quarter
                     -----------------------------------------------------
                                 % from                % from
                       2007     total sales   2006    total sales   % Chg
                     ---------- ---------- ---------- ---------- ---------
North America              81.6       54.4      107.4       60.8     (24.0)
Europe                     51.9       34.7       55.4       31.4      (5.9)
Israel                     16.1       10.7       13.6        7.7      18.4
Others                      0.2        0.2        0.1        0.1
                     ----------            ----------
Total                     149.8      100.0      176.5      100.0     (15.1)
                     ==========            ==========


                                           First Half
                     -----------------------------------------------------
                                 % from                % from
                       2007     total sales   2006    total sales   % Chg
                     ---------- ---------- ---------- ---------- ---------
North America             173.8       56.2      212.0       60.8     (18.0)
Europe                    101.9       32.9      109.4       31.5      (6.8)
Israel                     33.0       10.7       26.8        7.6      23.1
Others                      0.5        0.2        0.3        0.1
                     ----------            ----------
Total                     309.2      100.0      348.5      100.0     (11.3)
                     ==========            ==========



    Revenues and Operating Results by reportable segments ($ millions)


                                         Second Quarter
                     -----------------------------------------------------
                                                        Operating Profit
                                  Sales                      (loss)
                     -------------------------------  --------------------
                       2007       2006       % Chg      2007       2006
                     ---------  ---------  ---------  ---------  ---------
Delta USA-Mass
 Market                   58.2       67.4      (13.6)       0.6        3.9
Intimate apparel-
 Europe and
 US-Upper Market(*)       45.5       65.3      (30.3)      (2.8)       2.3
Socks-Europe & US         30.4       30.8       (1.1)       0.6        0.4
Delta Marketing
 Israel                   13.7       12.1       12.8        2.0        1.7
Seam-less                  4.7        3.7       24.3       (0.4)      (0.2)
Adjustments & Others      (2.7)      (2.8)                  0.1        0.7
                     ---------  ---------             ---------  ---------
Total                    149.8      176.5      (15.1)      (0.1)       7.6
                     =========  =========  =========  ---------  ---------
Restructuring
 expenses                                                    --       (1.7)
                                                      ---------  ---------
Total Consolidated
 Operating (loss)
 income                                                    (0.1)       5.9
                                                      =========  =========


                                           First Half
                     -----------------------------------------------------
                                                        Operating Profit
                                  Sales                      (loss)
                     -------------------------------  --------------------
                       2007       2006       % Chg      2007       2006
                     ---------  ---------  ---------  ---------  ---------

Delta USA-Mass
 Market                  123.5      137.1       (9.9)       3.6        6.2
Intimate apparel-
 Europe and
 US-Upper Market(*)       95.4      127.5      (25.2)      (5.2)       3.3
Socks-Europe & US         59.8       58.6        2.1        1.7        0.3
Delta Marketing
 Israel                   28.2       24.4       15.4        3.6        2.8
Seam-less                  8.4        7.2       16.0       (0.9)      (0.5)
Adjustments & Others      (6.1)      (6.3)                 (0.7)      (1.4)
                     ---------  ---------             ---------  ---------
Total                    309.2      348.5       11.3        2.1       10.7
                     =========  =========  =========  ---------  ---------
Restructuring
 expenses                                                 (10.8)      (1.7)
                                                      ---------  ---------
Total Consolidated
 Operating (loss)
 income                                                    (8.7)       9.0
                                                      =========  =========


(*)  Following the changes in the organizational structure the results of
     the US Upper Market and the Europe segments are presented together.

     Comparable numbers were reclassified accordingly.

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




                                     Six months ended   Three months ended
                                          June 30             June 30
                                    ------------------  ------------------
                                      2007      2006      2007      2006
                                    --------  --------  --------  ---------
                                               In US $ thousand
                                    --------------------------------------

Revenues                             309,167   348,541   149,803    176,473
Cost of revenues                     253,330   284,018   123,485    141,227
                                    --------  --------  --------  ---------
Gross profit                          55,837    64,523    26,318     35,246
Selling and marketing, general and
 administrative expenses:
Selling and marketing expenses        44,674    44,709    22,296     23,366
General and administrative expenses    9,192     9,216     4,165      4,337
Gain from realization of assets          523       446       197        188
Restructuring expenses                10,800     1,663                1,663
Amortization of intangible asset         369       368       184        183
                                    --------  --------  --------  ---------
Operating (loss) income               (8,675)    9,013      (130)     5,885
Financial expenses - net               6,014     6,306     2,889      3,276
                                    --------  --------  --------  ---------
Income (loss) before taxes on
 income                              (14,689)    2,707    (3,019)     2,609
Taxes on income                        1,764     2,995       345      1,982
                                    --------  --------  --------  ---------
Income (loss) after taxes on income  (16,453)     (288)   (3,364)       627
Minority interest of subsidiaries -
 net                                     170       222        76        140
                                    --------  --------  --------  ---------
Net income (loss) for the period     (16,623)     (510)   (3,440)       487
                                    ========  ========  ========  =========
Earnings (loss) per share - basic &
 diluted                               (0.89)    (0.03)    (0.18)      0.03
                                    ========  ========  ========  =========
                                       (0.89)    (0.03)    (0.18)      0.03
                                    ========  ========  ========  =========
Weighted average number of shares -
 in thousands:
Basic                                 18,740    18,695    18,740     18,695
                                    ========  ========  ========  =========
Diluted                               18,740    18,695    18,740     18,695
                                    ========  ========  ========  =========





                        DELTA GALIL INDUSTRIES LTD.
                   CONDENSED CONSOLIDATED BALANCE SHEET



                                                June 30         December 31
                                          --------------------- -----------
                                            2007       2006        2006
                                          ---------- ---------- -----------
                                                  In US $ thousands
                                          ---------------------------------

         Assets:
 Current assets:
Cash and cash equivalents                     10,818     10,523      10,342
Restricted cash                                                       4,000
Accounts receivable:
Trade                                        100,543    110,352     109,710
Other                                          9,921     11,112       7,573
Inventories                                  138,053    135,922     131,556
Assets held for sale                           4,260      5,273       4,474
Deferred income taxes                          4,621      4,828       4,779
                                          ---------- ---------- -----------
           Total current assets              268,216    278,010     272,434
                                          ---------- ---------- -----------

Investments and long-term receivables          8,095      8,939       8,344
                                          ---------- ---------- -----------
Property, plant and equipment                 91,357    103,475      99,263
                                          ---------- ---------- -----------
Other assets and deferred charges             57,511     55,298      57,562
                                          ---------- ---------- -----------
Intangible assets                             12,888     14,047      13,259
                                          ---------- ---------- -----------
           Total assets                      438,067    459,769     450,862
                                          ========== ========== ===========

     Liabilities and shareholders equity:
Current liabilities:
Short-term bank credit                       149,745    124,850     124,039
Trade                                         58,285     59,368      59,038
Other                                         32,948     35,957      34,504
                                          ---------- ---------- -----------
         Total current liabilities           240,978    220,175     217,581
                                          ---------- ---------- -----------


         Long-term liabilities:
Bank loans and other liabilities              13,606     42,979      33,196
Liability for employee rights upon
 retirement                                    6,257      8,335       6,863
Deferred income taxes                          2,355      1,215       2,159
                                          ---------- ---------- -----------
          Total long-term liabilities         22,218     52,529      42,218
                                          ---------- ---------- -----------

          Total liabilities                  263,196    272,704     259,799
Minority interest                              2,734      2,816       2,846
Shareholders' equity                         172,137    184,249     188,217
                                          ---------- ---------- -----------
          Total Liabilities and
           shareholders equity               438,067    459,769     450,862
                                          ========== ========== ===========





                        DELTA GALIL INDUSTRIES LTD.
              CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW



                                     Six months ended   Three months ended
                                          June 30             June 30
                                    ------------------  ------------------
                                      2007      2006      2007      2006
                                    --------  --------  --------  --------
                                              In US $ thousands
                                    --------------------------------------

Cash flows from operating
 activities:

Net income (loss) for the period     (16,623)     (510)   (3,440)      487
Adjustment required to reflect the
 cash flows from operating
 activities                           13,386    11,282      (735)   14,240
                                    --------  --------  --------  --------
Net cash provided by (used in)
 operating activities                 (3,237)   10,772    (4,175)   14,727
                                    --------  --------  --------  --------

Cash flows from investing
 activities:

Purchase of fixed assets              (5,121)   (3,086)   (2,540)   (1,150)
Additional payment for the
 acquisition of subsidiary            (2,400)   (1,245)
Proceeds from realization of fixed
 assets                                  869       788       439       447
Proceeds from realization of assets
 held for sale                           302     2,096               2,096
Collection of restricted cash          4,000
Other                                    388      (906)      572      (547)
                                    --------  --------  --------  --------
Net cash provided by (used in)
 investing activities                 (1,962)   (2,353)   (1,529)      846
                                    --------  --------  --------  --------

Cash flows from financing
 activities:

Long-term bank loans, net            (28,289)  (32,948)   (4,752)   (4,991)
Short-term bank credit, net           34,405    20,917    13,268   (10,778)
Other                                   (441)     (495)     (124)     (495)
                                    --------  --------  --------  --------
Net cash provided by (used in)
 financing activities                  5,675   (12,526)    8,392   (16,264)
                                    --------  --------  --------  --------

INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS                        476    (4,107)    2,688      (691)
TRANSLATION IN DIFFERENCES IN CASH
 AND CASH EQUIVALENTS                               35                  30
BALANCE OF CASH AND CASH
 EQUIVALENTS AT BEGINNING OF PERIOD   10,342    14,595     8,130    11,184
                                    --------  --------  --------  --------
BALANCE OF CASH AND CASH
 EQUIVALENTS AT END OF PERIOD         10,818    10,523    10,818    10,523
                                    ========  ========  ========  ========




                        DELTA GALIL INDUSTRIES LTD.
              CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW



                                     Six months ended   Three months ended
                                          June 30             June 30
                                    ------------------  ------------------
                                      2007      2006      2007      2006
                                    --------  --------  --------  --------
                                              In US $ thousands
                                    --------------------------------------

Adjustment required to reflect the
 cash flows from operating
 activities:

Income and expenses not involving
 cash flows:
Depreciation and amortization          6,651     7,476     3,295     3,784
Restructuring expenses, net           10,227     1,663      (573)    1,663
Deferred income taxes, net               450      (125)       91      (141)
Gain from realization of assets         (523)     (446)     (197)     (188)
Other                                   (419)      656      (657)      353
                                    --------  --------  --------  --------
                                      16,386     9,224     1,959     5,471
                                    --------  --------  --------  --------

Changes in operating assets and
 liabilities items:

Decrease (increase) in accounts
 receivable                            6,973    (3,957)    8,038     2,701
Increase (decrease) in accounts
 payable and accruals                 (3,476)   (5,247)    7,087     8,915
Decrease (increase) in inventories    (6,497)   11,262   (17,819)   (2,847)
                                    --------  --------  --------  --------
                                      (3,000)    2,058    (2,694)    8,769
                                    --------  --------  --------  --------
                                      13,386    11,282      (735)   14,240
                                    ========  ========  ========  ========




                        DELTA GALIL INDUSTRIES LTD.
    RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL RESULTS IN THOUSANDS
                U.S. DOLLARS EXCEPT EARNINGS PER SHARE DATA




                                     Six months ended   Three months ended
                                          June 30             June 30
                                    ------------------  ------------------
                                      2007      2006      2007      2006
                                    --------  --------  --------  ---------
                                               In US $ thousand
                                    --------------------------------------

Operating income (loss)-As reported   (8,675)    9,013      (130)     5,885
Restructuring expenses                10,800     1,663                1,663
                                    --------  --------  --------  ---------
Operating income for the period
 before Non-GAAP Measures              2,125    10,676      (130)     7,548
                                    ========  ========  ========  =========
Net income (loss) for the period-As
 reported                            (16,623)     (510)   (3,440)       487
Restructuring expenses                10,800     1,663                1,663
                                    --------  --------  --------  ---------
Net income (loss) for the period
 before Non-GAAP Measures             (5,823)    1,153    (3,440)     2,150
                                    ========  ========  ========  =========
Earnings (loss) per share-diluted
 ($) before Non-GAAP Measures          (0.31)     0.06     (0.18)      0.12
                                    ========  ========  ========  =========


Calculation of the adjusted EBITDA
Net income (loss) for the peried -
 As reported                         (16,623)     (510)   (3,440)       487
Minority interest of subsidiaries -
 net                                     170       222        76        140
Taxes on income                        1,764     2,995       345      1,982
Financial expenses - net               6,014     6,306     2,889      3,276
Restructuring expenses                10,800     1,663                1,663
Depreciation and amortization          6,651     7,476     3,295      3,784
                                    --------  --------  --------  ---------
Adjusted - EBITDA                      8,776    18,152     3,165     11,332
                                    ========  ========  ========  =========

Contact Information

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

    U.S. Investors:
    Rachel Levine
    The Global Consulting Group
    Tel: +1-646-284-9439