DELT Delta Technology Holdings Limited - Ordinary Shares

- 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/

Copyright