- Operating loss in the fourth quarter was $2.9 million. TEL AVIV,
Israel, March 14 /PRNewswire-FirstCall/ -- 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 fourth quarter 2005 revenues of $170.2
million, an increase of 2% compared to the $167.2 million in
revenues reported in the fourth quarter of 2004. Revenues in the
fourth quarter excluding Burlen, which was acquired in the fourth
quarter of 2004, decreased by 10% compared to the same period in
2004. Revenues in 2005 increased by 5% to $684.5 million, compared
to $654.3 in 2004. Revenues, excluding Burlen, decreased by 11%
compared to 2004. Net loss for the fourth quarter of 2005 was $7.6
million or $0.41 diluted loss per share, compared to a net loss of
$0.2 million or $0.01 diluted loss per share in the fourth quarter
last year. Net loss in 2005 was $36.3 million or $1.94 diluted loss
per share, compared to net income of $12.7 million or $0.67 diluted
earning per share in 2004. Net loss in 2005 includes reorganization
expenses, impairment of fixed assets and goodwill and capital loss
from realization of assets net of other income in the amount of
$20.8 million ($1.11 diluted loss per share), or $21.8 million
before tax. Excluding reorganization expenses, impairment of fixed
assets and goodwill and the capital loss from the realization of
assets net of other income, as noted, net loss for 2005 would have
been $15.5 million or $0.83 diluted loss per share. Operating loss
in the fourth quarter of 2005 was $2.9 million, compared to an
operating income of $0.4 million in the fourth quarter of 2004.
Excluding reorganization expenses, impairment of fixed assets and
goodwill and capital loss from realization of assets, operating
loss in 2005 reached $6.1 million, compared to an operating profit
of $22.6 million in 2004. The primary reason for the deterioration
in the operating results in the fourth quarter and in 2005 compared
to the same periods in 2004 is the erosion in selling prices to the
Company's customers, particularly to Marks & Spencer in the UK
and in the European market. Operating cash flow in the fourth
quarter of 2005 was positive $11.2 million compared to $34.3
million in the fourth quarter of 2004. In 2005, operating cash flow
was positive $11.6 million compared to $23.0 million in 2004. "2005
was a difficult year for Delta Galil and its investors," stated Dov
Lautman, Chairman and CEO. "The changes in the business environment
were greater than we expected, as evidenced by the results issued
today. We completed the closure of our production facilities in
Honduras and in Canada, as outlined in the reorganization plan that
the Company announced in the third quarter of 2005. We believe that
the plan will be completed during the third quarter of 2006. In
parallel with the execution of this reorganization plan, we are
nearing the conclusion of a survey of our organizational structure
in order to better harmonize it with the current business
environment. We believe that the successful execution of our
reorganization plan will return Delta Galil to profitability." Mr.
Lautman concluded, "Delta is a Company that offers its customers
innovations in fashion and technology. This creativity, together
with years of industry experience and the reputation we have
developed over the years among the leading customers in the world,
have enabled us to prudently address the difficult business
environment of the past year and develop a solid restructuring plan
that management believes puts Delta Galil back on the path to
profitability." The Board of Directors appointed Mr. Arnon Tiberg,
the former CEO of the Company, to the Board of directors until the
next annual shareholders meeting. Revenues by geographic area ($
millions) Fourth Quarter % of total % of total % 2005 revenues 2004
revenues Chg. ------ ------ ------ ------ ------ North America(1)
95.5 56.1 83.7 50.0 14.1 Europe 60.3 35.4 67.3 40.3 (10.4) Israel
14.4 8.5 16.2 9.7 (11.1) Total 170.2 100.0 167.2 100.0 1.8 Year
Ended December 31 % of total % of total % 2005 revenues 2004
revenues Chg. ------ ------ ------ ------ ------ North America(1)
401.1 58.6 334.8 51.2 19.8 Europe 230.3 33.6 267.6 40.9 (13.9)
Israel 53.1 7.8 51.9 7.9 2.3 Total 684.5 100.0 654.3 100.0 4.6 (1)
North America's revenues, excluding Burlen revenues, decreased in
the fourth quarter and in the year 2005 by 9% and 11% respectively
compared to the same periods last year. Revenues and operating
results by divisions ($ millions) Fourth Quarter Operating Profit
Reorganization Revenues (loss) Expenses % 2005 2004 Chg. 2005 2004
2005 2004 ------ ------ ------ ------ ------ ------ ------ Delta
USA(1) 59.4 45.9 29.4 1.1 (1.6) U.S. Upper market 22.4 23.4 (4.3)
(1.9) (1.4) Europe 42.0 46.9 (10.4) (3.7) (0.5) 1.1 Socks-US &
Europe 37.8 40.7 (7.1) 1.8 3.2 Delta Marketing Israel 13.2 14.8
(10.8) 1.3 2.0 China 0.6 -,- (0.8) -,- Adjustments (5.4) (4.5) (0.7
(0.2) ____ ____ Total 170.2 167.2 1.8 (2.9) 1.5 -,- 1.1
Reorganization expenses ____ (1.1) Total Consolidated Operating
profit (loss) (2.9) 0.4 Revenues and operating results by divisions
($ millions) Year Ended December 31 Operating Revenues Profit
(loss) % 2005 2004 Chg. 2005 2004 ------ ------ ------ ------
------ Delta USA(1) 267.9 186.3 43.8 8.3 5.9 U.S. Upper market 97.5
111.9 (12.9) (12.2) (0.6) Europe 163.5 193.8 (15.6) (6.8) 6.0
Socks-US & Europe 130.9 144.2 (9.2) 2.5 9.1 Delta Marketing
Israel 49.0 46.5 5.4 5.0 4.8 China 0.7 (2.3) Adjustments (25.0)
(28.4) (0.6) (1.7) Total 684.5 654.3 4.6 6.2 23.5 Impairment of
Fixed 7.4 Assets Reorganization expenses 9.1 1.1 Impairment of
Goodwill 5.5 ____ Total Consolidated (28.2) 22.4 Operating profit
(loss) Reorganization Impairment Impairment Expenses of Fixed of
Goodwill Assets 2005 2004 2005 2005 ------ ------ ------ ------
Delta USA(1) 1.1 1.5 U.S. Upper market 1.8 5.9 2.1 Europe 2.1 1.1
Socks-US & Europe 4.1 3.4 Delta Marketing Israel China
Adjustments ____ ____ ____ ____ Total 9.1 1.1 7.4 5.5 Impairment of
Fixed Assets Reorganization expenses Impairment of Goodwill Total
Consolidated Operating profit (loss) (1) Including $22.8 and $107.4
million of Burlen revenues in the fourth quarter and in the year
ended December 31, 2005, respectively. Excluding Burlen, revenues
decreased by 13% and 12% respectively, compared to the same periods
last year. 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, North and Central America, the Caribbean and the Far East.
For more information, please visit our website:
http://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 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.)
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 CONDENSED CONSOLIDATED STATEMENT OF
INCOME Year ended Three months ended December 31 December 31 2005
2004 2005 2004 ------ ------ ------ ------ In US $ thousand (except
per share data) Revenues 684,481 654,269 170,187 167,202 Cost of
revenues 582,799 533,036 146,247 140,568 Gross profit 101,682
121,233 23,940 26,634 Selling, marketing, general and
administrative expenses: Selling and marketing expenses 86,682
81,204 21,180 21,097 General and administrative expenses 20,326
17,442 5,473 4,754 Capital loss (gain) from realization of assets
77 (922) 34 (754) Impairment of fixed asset 7,415 Reorganization
expenses 9,102 1,100 1,100 Goodwill impairment 5,505 Amortization
of intangible asset 779 186 Operating income (loss) (28,204) 22,409
(2,933) 437 Financial expenses - net 10,218 6,231 3,059 1,277 Other
income - net 300 958 Income (loss) before taxes on income (38,122)
17,136 (5,992) (840) Taxes on income (2,302) 2,846 1,050 (961)
Income (loss) after taxes on income (35,820) 14,290 (7,042) 121
Share in loss of an associated company (27) (237) (21) (137)
Minority interest of subsidiaries - net (500) (1,368) (541) (169)
Net income (loss) for the period (36,347) 12,685 (7,604) (185)
Earnings (loss) per share - basic (1.94) 0.69 (0.41) (0.01)
Earnings (loss) per share - diluted (1.94) 0.67 (0.41) (0.01)
Weighted average number of shares - in thousands: Basic 18,695
18,478 18,695 18,535 Diluted 18,695 18,834 18,695 18,718 CONDENSED
CONSOLIDATED BALANCE SHEET December 31 2005 2004 ------ ------ In
US $ thousands Assets: Current assets: Cash and cash equivalents
14,595 22,150 Accounts receivable: Trade 104,424 105,129 Other
13,244 10,627 Inventories 147,142 183,767 Property, Plan and
equipment for sale 7,420 Deferred income taxes 4,726 3,675 Total
current assets 291,551 325,348 Investments and long-term
receivables 7,436 7,533 Property, plant and equipment 109,131
128,341 Other assets and deferred charges 53,956 58,497 Intangible
asset 14,499 14,778 Total assets 476,573 534,497 Liabilities and
shareholders equity: Current liabilities: Short-term bank credit
110,183 83,545 Trade 61,255 80,338 Other 39,164 34,083 Total
current liabilities 210,602 197,966 Long-term liabilities: Bank
loans and other liabilities 69,677 99,437 Liability for employee
rights upon retirement 7,850 7,408 Deferred income taxes 1,267
4,894 Total long-term liabilities 78,794 111,739 Total liabilities
289,396 309,705 Minority interest 2,863 3,711 Shareholders' equity
184,314 221,081 Total Liabilities and shareholders equity 476,573
534,497 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW Three months
Year ended ended December 31 December 31 (restated) (restated) 2005
2004* 2005 2004* ------ ------ ------ ------ In US $ thousands Cash
flows from operating activities*: Net income (loss) for the period
(36,347) 12,685 (7,604) (185) Adjustment required to reflect the
cash flows from operating activities 47,951 10,286 18,797 34,493
Net cash provided by operating activities 11,604 22,971 11,193
34,308 Cash flows from investing activities*: Purchase of fixed
assets, net of investment grants (13,034) (12,410) (2,716) (2,072)
Additional payment for the acquisition of subsidiaries (2,274)
(62,739) (1,134) (56,039) Proceeds from realization of fixed assets
1,071 4,318 771 3,538 Proceeds from realization of investment in
associated company 300 2,640 Other (510) (698) (150) (297) Net cash
used in investing activities (14,447) (68,889) (3,229) (54,870)
Cash flows from financing activities: Long-term bank loans, net
(28,079) 108,570 (7,746) 83,906 Dividend to shareholders (8,312)
(2,216) Short-term bank credit - net 24,957 (48,890) 5,804 (43,795)
Other (1,522) (1,129) (163) (383) Net cash provided by (used in)
financing activities (4,644) 50,239 (2,105) 37,512 INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS (7,487) 4,321 5,859 16,950
TRANSLATION IN DIFFERENCES IN CASH AND CASH EQUIVALENTS (68) 130
130 BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
22,150 17,699 8,736 5,070 BALANCE OF CASH AND CASH EQUIVALENTS AT
END OF PERIOD 14,595 22,150 14,595 22,150 * Payments of $4.8
millions and $1.8 millions, made in year 2004 and in 2004 fourth
quarter respectively, relating to reorganization expenses recorded
as part of the acquisition of Auburn Hosiery Mills, and were
classified in the 2004 financial statements as cash flows used in
investing activities have been restated and are included as cash
flows used in operating activities. Restated financial statements
for 2004 will be filed shortly. CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOW Year ended Three months ended December 31 December 31
2005 2004 2005 2004 ------ ------ ------ ------ In US $ thousands
Adjustment required to reflect the cash flows from operating
activities: Income and expenses not involving cash flows:
Depreciation and amortization 15,811 15,185 3,969 3,785
Reorganization expenses and impairment of assets 18,582 (2,157)
Deferred income taxes - net (4,937) (279) 1,991 57 Capital gain
from realization of investment in associated company (300) (958)
Capital gain from sales of fixed assets 77 (922) 34 (754) Other 698
3,336 758 1,737 29,931 16,362 4,595 4,825 Changes in operating
assets and liabilities items: Increase (decrease) in accounts
receivable (1,770) 1,798 (127) 22,770 Increase (decrease) in
accounts payable and accruals (16,679) 12,204 11,034 5,087 Decrease
(increase) in inventories 36,469 (20,078) 3,295 1,811 18,020
(6,076) 14,202 29,668 47,951 10,286 18,797 34,493 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 2005 2004 2005 2004 ------ ------ ------
------ In US $ thousand (except per share data) Operating income
(loss)-As reported (28,204) 22,409 (2,933) 437 Non-GAAP Measures:
Capital loss (gain) from realization of assets 77 (922) 34 (754)
Impairment of fixed assets 7,415 Reorganization expenses 9,102
1,100 1,100 Goodwill impairment 5,505 Operating income (loss) for
the period before Non-GAAP Measures (6,105) 22,587 (2,899) 783 Net
income (loss) for the period-As reported (36,347) 12,685 (7,604)
(185) Non-GAAP Measures: Capital loss (gain) from realization of
assets 77 (922) 34 (754) Impairment of fixed assets 7,415
Reorganization expenses 9,102 1,100 1,100 Goodwill impairment 5,505
Other income (300) (958) Taxes on income (Tax benefit) (987) 218
Net income (loss) for the period before Non-GAAP Measures (15,535)
12,123 (7,570) 161 Earnings (loss) per share- diluted ($) before
Non-GAAP Measures (0.83) 0.64 (0.41) 0.01 DATASOURCE: Delta Galil
Industries Ltd. CONTACT: Yossi Hajaj, Delta Galil Industries Ltd.,
+972-3-519-3744; U.S. Investors - Kathy Price, The Global
Consulting Group, +1-646-284-9430 Web site:
http://www.deltagalil.com/
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