SOURCE: Delta Galil Industries Ltd.

November 14, 2007 16:45 ET

Delta Galil Reports Third Quarter of 2007 Results

TEL AVIV, ISRAEL--(Marketwire - November 14, 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 third quarter, which ended September 30, 2007.

-- Third quarter revenues were $172.4 million compared to $184.0 million
   reported in the third quarter of 2006, a decrease of 6.3%.

-- Revenues for the first nine months of 2007 were $481.5 million compared
   to $532.6 million reported in the first nine months of 2006, a decrease
   of 9.6%.

-- Third quarter operating income was $7.7 million, compared to $8.2
   million reported in the third quarter of 2006.

-- Operating loss in the first nine months of 2007 was $0.9 million,
   compared to an operating income of $17.2 million in the first nine
   months of 2006. Operating income before restructuring expenses in the
   first nine months of 2007 was $9.9 million compared to $18.9 million in
   the first nine months of 2006.

-- Third quarter net income was $2.9 million or $0.15 per diluted share,
   compared to a net income of $3.2 million, or $0.17 per diluted share
   reported in the third quarter of 2006.

-- Net loss in the first nine months of 2007 was $13.8 million, or $0.73
   per diluted share, compared to a net income of $2.7 million, or $0.15
   per diluted share in the first nine months of 2006.

   Net loss before restructuring expenses in the first nine months of 2007
   was $3.0 million, or $0.16 per diluted share, compared to a net income
   before restructuring expenses of $4.4 million, or $0.24 per diluted
   share in the first nine months of 2006.

-- In the third quarter of 2007 the Company had negative operating cash
   flow of $11.2 million, compared to positive operating cash flow of $4.6
   million in the third quarter of 2006.

-- In the first nine months of 2007 the Company had negative operating
   cash flow of $14.4 million compared to positive operating cash flow
   of $15.3 million in the first nine months of 2006.


Selected data in US $ millions:


                                                     First nine  First nine
                                                       months      months
                                 Q3 2007    Q3 2006     2007        2006
                                ---------  ---------- ---------  ----------
Revenues                        $   172.4  $    184.0 $   481.5  $    532.6
Operating income (loss)
 excluding restructuring expenses     7.7         8.2       9.9        18.9
Operating income (loss)               7.7         8.2      (0.9)       17.2
Adjusted EBITDA(1)                   10.8        12.2      19.6        30.3
Net income (loss) excluding
 restructuring expenses               2.9         3.2      (3.0)        4.4
Net income (loss)                     2.9         3.2     (13.8)        2.7
Restructuring expenses                -,-         -,-      10.8         1.7
Operating cash flow                 (11.2)        4.6     (14.4)       15.3






                 Revenues by Geographic Area ($ millions)


                                              Third Quarter
                               --------------------------------------------
                                        % from            % from
                                         total             total
                                 2007   revenues   2006   revenues  % Chg
                               -------- -------- -------- -------- -------
North America                     101.2     58.7    110.9     60.3    (8.8)
Europe                             52.9     30.7     56.9     30.9    (7.0)
Israel                             18.1     10.5     15.7      8.5    15.3
Others                              0.2      0.1      0.5      0.3   (69.8)
                               --------          --------
 Total                            172.4    100.0    184.0    100.0    (6.3)
                               ========          ========




                                     Nine Months Ended September 30
                               --------------------------------------------
                                        % from            % from
                                         total             total
                                 2007   revenues   2006   revenues  % Chg
                               -------- -------- -------- -------- -------
North America                     275.1     57.2    322.9     60.6   (14.8)
Europe                            154.7     32.1    166.1     31.2    (6.9)
Israel                             51.1     10.6     42.7      8.0    19.7
Others                              0.6      0.1      0.9      0.2   (24.8)
                               --------          --------
 Total                            481.5    100.0    532.6    100.0    (9.6)
                               ========          ========





    Revenues and Operating Results by reportable segments ($ millions)



                                     Third Quarter
                           ---------------------------------
                                                  Operating
                                 Revenues       Profit (loss)
                           -------------------  ------------
                           2007   2006   % Chg  2007   2006
                           -----  -----  -----  -----  -----
Delta USA-Mass Market       75.3   73.8    2.0    5.2    4.1
Intimate apparel-Europe
 and US-Upper Market (*)    49.0   67.1  (27.0)  (0.6)   3.9
Socks-Europe & US           30.1   28.7    4.9    1.2   (0.3)
Delta Marketing Israel      16.0   14.1   13.5    2.5    1.8
Seam-less                    5.0    4.8    4.9   (0.3)  (0.5)
Adjustments & Others        (3.0)  (4.5)         (0.3)  (0.8)
                           -----  -----         -----  -----
Total                      172.4  184.0   (6.3)   7.7    8.2
                           =====  =====  =====  -----  -----
Restructuring expenses                            -,-    -,-
                                                -----  -----
Total Consolidated
 Operating (loss) income                          7.7    8.2
                                                =====  =====


                                   Nine Months Ended September 30
                           ------------------------------------------------
                                                 Operating   Reorganization
                                 Revenues       Profit (loss)   Expenses
                           -------------------  ------------  -------------
                           2007   2006   % Chg  2007   2006   2007   2006
                           -----  -----  -----  -----  -----  ------ ------
Delta USA-Mass Market      198.8  210.9   (5.7)   8.8   10.3
Intimate apparel-Europe
 and US-Upper Market (*)   144.4  194.6  (25.8)  (5.9)   7.1     8.5
Socks-Europe & US           89.9   87.3    3.0    2.9            2.0
Delta Marketing Israel      44.2   38.5   14.7    6.1    4.6
Seam-less                   13.4   12.0   11.6   (1.2)  (1.0)    0.3
Adjustments & Others        (9.2) (10.7)         (0.8)  (2.1)    -,-    1.7
                           -----  -----         -----  -----  ------ ------
Total                      481.5  532.6   (9.6)   9.9   18.9    10.8    1.7
                           =====  =====  =====  -----  -----  ====== ======
Restructuring expenses                          (10.8)  (1.7)
                                                -----  -----
Total Consolidated
 Operating (loss) income                         (0.9)  17.2
                                                =====  =====

(1) Adjusted EBITDA is a non-GAAP measure used by the Company to measure
    performance of ongoing operations. It is derived from net income (loss)
    before taxes on income, financial expense net, restructuring expenses,
    depreciation and amortization expenses.
    For a calculation of Adjusted EBITDA, please refer to the table
    accompanying this press release.

(*) 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.

CEO Comments on the Quarter results and State of the Business

Mr. Aviram Lahav, Delta's CEO, stated, "The net and operating profit in the third quarter were driven by an increase in sales compared to the first two quarters of the year; our exit from sales of certain unprofitable product categories to customers in the US and in Europe; and the continued implementation of our restructuring plan including the transfer of production to Egypt and to the Far East.

"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 these measures will improve our business results in 2008.

"US Mass Market division sales increased by 2% in the third quarter, which was a major factor in the increase in operating profitability in this division in the quarter compared to the corresponding quarter of last year.

"Third quarter sales in the Europe and US Intimate Apparel division decreased by 27% 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 due to 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 our exit from unprofitable categories. The reduction in the operating loss in this division, compared to previous quarters, is due to the decrease in production in the company's facilities in Israel and in Jordan and continued transfer of production to Egypt as part of the restructuring plan which started in the beginning of the year.

"Sales in the Socks division for the third quarter of the year increased by 5% compared to the parallel quarter last year. The improvement in the operating profitability in this division is mainly due to the increase in sales and the implementation of the restructuring plan.

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

"The negative operating cash flow in the third quarter of the year is due to an increase in accounts receivable as a result of the increase in sales in the third quarter compared to the second quarter of the year. The Company expects an improvement in the operating cash flow in the fourth quarter of the year," concluded Mr. Lahav.

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, and Nike. 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



                                          Nine months       Three months
                                              ended             ended
                                          September 30      September 30
                                        ----------------  -----------------
                                          2007     2006     2007     2006
                                        -------  -------- -------- --------
                                        In US $ thousand (except per share
                                                      data)
                                        ----------------------------------

Revenues                                481,521   532,571  172,354  184,030
Cost of revenues                        391,463   431,822  138,133  147,804
                                        -------  -------- -------- --------
Gross profit                             90,058   100,749   34,221   36,226
Selling, marketing, general and
 administrative expenses:
Selling and marketing expenses           66,944    67,299   22,270   22,590
General and administrative expenses      13,495    14,541    4,303    5,325
Gain from realization of assets             788       514      265       68
Restructuring expenses                   10,800     1,663
Amortization of intangible asset            554       553      185      185
                                        -------  -------- -------- --------
Operating income (loss)                    (947)   17,207    7,728    8,194
Financial expenses - net                  8,892     9,473    2,878    3,167
                                        -------  -------- -------- --------
Income (loss) before taxes on income     (9,839)    7,734    4,850    5,027
Taxes on income                           3,714     4,622    1,950    1,627
                                        -------  -------- -------- --------
Income (loss) after taxes on income     (13,553)    3,112    2,900    3,400
Minority interest in losses of
 subsidiaries - net                         205       377       35      155
                                        -------  -------- -------- --------
Net income (loss) for the period        (13,758)    2,735    2,865    3,245
                                        =======  ======== ======== ========
Earnings (loss) per share - basic         (0.73)     0.15     0.15     0.17
                                        =======  ======== ======== ========
Earnings (loss) per share - diluted       (0.73)     0.15     0.15     0.17
                                        =======  ======== ======== ========
Weighted average number of shares - in
 thousands:
Basic                                    18,740    18,696   18,740   18,698
                                        =======  ======== ======== ========
Diluted                                  18,740    18,698   18,740   18,750
                                        =======  ======== ======== ========




                        DELTA GALIL INDUSTRIES LTD
                   CONDENSED CONSOLIDATED BALANCE SHEET



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

         Assets:
Current assets:
Cash and cash equivalents                         8,895   9,060      10,342
Restricted cash                                                       4,000
Accounts receivable:
Trade                                           115,793 115,637     109,710
Other                                            10,411  12,038       7,573
Inventories                                     136,137 131,201     131,556
Assets held for sale                              4,260   4,532       4,474
Deferred income taxes                             4,555   4,845       4,779
                                                ------- ------- -----------
           Total current assets                 280,051 277,313     272,434
                                                ------- ------- -----------

Investments and long-term receivables             7,576   9,140       8,344
                                                ------- ------- -----------
Property, plant and equipment                    90,678 100,879      99,263
                                                ------- ------- -----------
Other assets and deferred charges                59,468  55,266      57,562
                                                ------- ------- -----------
Intangible assets                                12,705  13,820      13,259
                                                ------- ------- -----------
           Total assets                         450,478 456,418     450,862
                                                ======= ======= ===========

         Liabilities and shareholders equity:
Current liabilities:
Short-term bank credit                          163,957 125,786     124,039
Accounts payable:
Trade                                            50,651  60,581      59,038
Other                                            39,961  33,817      34,504
                                                ------- ------- -----------
         Total current liabilities              254,569 220,184     217,581
                                                ------- ------- -----------


Long-term liabilities:
Bank loans and other liabilities                  9,806  36,172      33,196
Liability for employee rights upon retirement     6,305   8,127       6,863
Deferred income taxes                             2,009   1,416       2,159
                                                ------- ------- -----------
          Total long-term liabilities            18,120  45,715      42,218
                                                ------- ------- -----------
          Total liabilities                     272,689 265,899     259,799
Minority interest                                 2,648   2,850       2,846
Shareholders' equity                            175,141 187,669     188,217
                                                ------- ------- -----------
          Total Liabilities and shareholders
           equity                               450,478 456,418     450,862
                                                ======= ======= ===========




                        DELTA GALIL INDUSTRIES LTD
              CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW



                                          Nine months       Three months
                                              ended             ended
                                          September 30      September 30
                                        ----------------  ----------------
                                          2007     2006     2007     2006
                                        -------  -------  -------  -------
                                                In US $ thousands
                                        ----------------------------------

Cash flows from operating activities:

Net income (loss) for the period        (13,758)   2,735    2,865    3,245
Adjustment required to reflect the cash
 flows from operating activities           (634)  12,596  (14,020)   1,314
                                        -------  -------  -------  -------
Net cash provided by (used in)
 operating activities                   (14,392)  15,331  (11,155)   4,559
                                        -------  -------  -------  -------

Cash flows from investing activities:

Purchase of fixed assets                 (7,192)  (4,374)  (2,071)  (1,288)
Additional payment for the acquisition
 of a subsidiary                         (2,400)  (1,245)
Collection of restricted cash             4,000
Proceeds from realization of assets
 held for sale                              302    2,846               750
Proceeds from realization of fixed
 assets                                     996    1,031      127      243
Other                                     1,327     (770)     939      170
                                        -------  -------  -------  -------
Net cash used in investing activities    (2,967)  (2,512)  (1,005)    (125)
                                        -------  -------  -------  -------

Cash flows from financing activities:

Long-term bank loans - net              (32,089) (39,748)  (3,800)  (6,800)
Short-term bank credit - net             48,617   21,846   14,212      929
Other                                      (616)    (487)    (175)     (26)
                                        -------  -------  -------  -------
Net cash provided by (used in)
 financing activities                    15,912  (18,389)  10,237   (5,897)
                                        -------  -------  -------  -------

DECREASE IN CASH AND CASH EQUIVALENTS    (1,447)  (5,570)  (1,923)  (1,463)
TRANSLATION IN DIFFERENCES IN CASH AND
 CASH EQUIVALENTS                                     35
BALANCE OF CASH AND CASH EQUIVALENTS AT
 BEGINNING OF PERIOD                     10,342   14,595   10,818   10,523
                                        -------  -------  -------  -------
BALANCE OF CASH AND CASH EQUIVALENTS AT
 END OF PERIOD                            8,895    9,060    8,895    9,060
                                        =======  =======  =======  =======





                        DELTA GALIL INDUSTRIES LTD
              CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW



                                          Nine months       Three months
                                              ended             ended
                                          September 30      September 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             9,740   11,477    3,089    4,001
Restructuring expenses and impairment
 of assets                                9,297    1,241     (930)    (422)
Deferred income taxes - net                 216       20     (234)     145
Capital gain from realization of assets    (788)    (514)    (265)     (68)
Other                                      (654)     497     (235)    (159)
                                        -------  -------  -------  -------
                                         17,811   12,721    1,425    3,497
                                        -------  -------  -------  -------

Changes in operating assets and
 liabilities items:

Increase in accounts receivable          (8,613) (10,268) (15,586)  (6,311)
Decrease in accounts payable and
 accruals                                (5,251)  (5,837)  (1,775)    (590)
Decrease (increase) in inventories       (4,581)  15,980    1,916    4,718
                                        -------  -------  -------  -------
                                        (18,445)    (125) (15,445)  (2,183)
                                        -------  -------  -------  -------
                                           (634)  12,596  (14,020)   1,314
                                        =======  =======  =======  =======





                        DELTA GALIL INDUSTRIES LTD
          RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL RESULTS



                                          Nine months       Three months
                                              ended             ended
                                          September 30      September 30
                                        ----------------  -----------------
                                          2007     2006     2007     2006
                                        -------  -------- -------- --------
                                          In US $ thousands (except per
                                                    share data)
                                        ----------------------------------

Operating income (loss)-As reported        (947)   17,207    7,728    8,194
Non-GAAP Measures:
Restructuring expenses                   10,800     1,663
                                        -------  -------- -------- --------
Operating income (loss) for the period
 before Non-GAAP Measures                 9,853    18,870    7,728    8,194
                                        =======  ======== ======== ========
Net income (loss) for the period-As
 reported                               (13,758)    2,735    2,865    3,245
Restructuring expenses                   10,800     1,663
                                        -------  -------- -------- --------
Net income (loss) for the period         (2,958)    4,398    2,865    3,245
                                        =======  ======== ======== ========
Diluted earnings (loss) per share ($)     (0.16)     0.24     0.15     0.17
                                        =======  ======== ======== ========



Calculation of the adjusted EBITDA
Net income (loss) for the peried - As
 reported                               (13,758)    2,735    2,865    3,245
Minority interest of subsidiaries - net     205       377       35      155
Taxes on income                           3,714     4,622    1,950    1,627
Financial expenses - net                  8,892     9,473    2,878    3,167
Restructuring expenses                   10,800     1,663
Depreciation and amortization             9,740    11,477    3,089    4,001
                                        -------  -------- -------- --------
Adjusted - EBITDA                        19,593    30,347   10,817   12,195
                                        =======  ======== ======== ========

Contact Information

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

    U.S. Investors:
    Andrea Costa
    The Global Consulting Group
    Tel: +1-646-284-9461