DELT Delta Technology Holdings Limited - Ordinary Shares

- Revenues in the second quarter of 2006 rose 4.5% to $176.5 million, compared to the second quarter of 2005. TEL AVIV, Israel, Aug. 8 /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 second quarter 2006 revenues of $176.5 million compared to $168.9 million in revenues reported in the second quarter of 2005, an increase of 4.5%. Revenues for the first half of 2006 were $348.5 million compared to $342.3 million in the first half of 2005, an increase of 1.8%. Net income in the second quarter of 2006 was $0.5 million, or $0.03 diluted earnings per share, compared to the net loss of $3.0 million, or $0.16 diluted loss per share, reported in the second quarter of last year. During the second quarter of 2006, the Company decided to re-organize its activities in the Far East. This reorganization will include the closure of the Delta sewing plant in China. As a result the second quarter results include reorganization expenses of $1.7 million, consisting of a $1.2 million non-cash provision for impairment of fixed assets and a $0.5 million provision for severance payments related to employee dismissals. Mr. Dov Lautman, Chairman and CEO, stated, "As part of the changes we are making in the organizational structure, Delta management has decided to focus our Chinese operations on procurement of finished goods and raw materials and product development. In addition, we have decided to close our sewing plant in China and to concentrate Far East self-production in Thailand. This decision is also due to re-imposed quotas on production in China starting in 2006." Net income in the second quarter of 2006, excluding reorganization expenses and capital gains was $2.0 million, or $0.10 diluted earnings per share, compared to a net loss of $3.0 million or $0.16 diluted loss per share in the second quarter of 2005. The net loss in the first half of 2006 narrowed to $0.5 million, or $0.03 diluted loss per share, compared to the net loss of $5.9 million, or $0.32 diluted loss per share, reported in the first half of 2005. Net income in the first half of 2006, excluding reorganization expenses and capital gains, was $0.7 million, or $0.04 diluted earnings per share, compared to the net loss of $5.9 million, or $0.31 diluted loss per share, in the first half of last year. Operating profit in the second quarter of 2006 was $5.9 million, which compares to an operating loss of $2.0 million in the second quarter of last year. Operating profit excluding reorganization expenses and capital gains, in the second quarter of 2006 was $7.4 million compared to an operating loss of $2.0 million in the second quarter of 2005. Operating profit in the first half of 2006 was $9.0 million, compared to an operating loss of $3.7 million in the first half of 2005. Operating profit excluding reorganization expenses and capital gains, in the first half of 2006 amounted to $10.2 million compared to an operating loss of $3.2 million in the comparable period last year. Operating cash flow in the second quarter of 2006 was $14.7 million, compared to $10.0 million in the second quarter of last year. Operating cash flow in the first half of 2006 was positive $10.8 million, compared to a negative cash flow of $8.8 million in the first half of 2005. "We continue to see an improvement in our business and were able to return to positive bottom line results in the second quarter due to continued execution of our reorganization plan and increased sales," added Mr. Lautman. "The increase in sales in the quarter was achieved despite the erosion in selling prices in Europe" Mr. Lautman concluded, "Delta's activities in Israel continue as usual, despite the war situation in the Northern part of the country where a portion of Delta's activities are carried out. We wish to thank all of our employees for their devotion to Delta during this period." Revenues by geographic area ($ millions) Second Quarter First Half % % % % from from from from total total % total total % 2006 sales 2005 sales Chg. 2006 sales 2005 sales Chg ---- ----- ---- ----- ---- ---- ----- ---- ----- --- North America 107.4 60.8 99.5 58.9 7.9 212.0 60.8 202.7 59.3 4.6 Europe 55.5 31.4 57.1 33.8 (2.8) 109.7 31.5 114.8 33.5 (4.4) Israel 13.6 7.8 12.3 7.3 10.6 26.8 7.7 24.8 7.2 8.1 ---- --- ---- --- ---- ---- --- ---- --- --- Total 176.5 100.0 168.9 100.0 4.5 348.5 100.0 342.3 100.0 1.8 Revenues and operating results by divisions ($ millions) Second Quarter First Half Operating Operating Profit Profit Sales (loss) Sales (loss) % % 2006 2005 Chg. 2006 2005 2006 2005 Chg 2006 2005 ---- ---- ---- ---- ---- ---- ---- --- ---- ---- Delta USA 67.4 64.7 4.2 3.9 0.5 137.1 138.2 (0.8) 6.2 4.0 U.S. Upper market 24.9 18.9 31.8 1.0 (1.6) 47.4 38.5 23.1 1.9 (3.7) Europe 42.0 41.1 2.2 1.4 0.2 81.7 80.8 1.1 1.5 (1.8) Socks-US & Europe 30.8 32.5 (5.2) 0.4 0.8 58.6 64.0 (8.4) 0.3 (1.9) Delta Marketing Israel 12.1 11.3 7.1 1.7 1.2 24.4 22.9 6.6 2.8 2.1 Seam-less 3.7 5.4 (31.5) (0.2) (2.8) 7.2 10.8 (33.3) (0.5)(5.1) China 0.3 (1.0) (0.3) 0.8 (1.9)(0.5) Adjustments (4.7) (5.0) 0.4 (8.7)(12.9) 0.4 0.1 ----- ----- --- ----------- --- --- Total 176.5 168.9 4.5 7.6 (2.0)348.5 342.3 1.8 10.7 (3.2) Reorganization expenses (1.7) - (1.7)(0.5) Total Operating profit (loss) 5.9 (2.0) 9.0 (3.7) 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, Bulgaria, 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 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 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 Six months ended Three months ended June 30 June 30 2006 2005 2006 2005 ---- ---- ---- ---- In US $ thousands Revenues 348,541 342,337 176,473 168,879 Cost of revenues 284,018 291,818 141,227 143,056 ------- ------- ------- ------- Gross profit 64,523 50,519 35,246 25,823 Selling, marketing, general and administrative expenses: Selling and marketing expenses 44,709 42,936 23,366 22,431 General and administrative expenses 9,216 10,387 4,337 5,241 Capital loss (gain) from realization of assets (446) 35 (188) Reorganization expenses 1,663 461 1,663 Amortization of intangible asset 368 410 183 183 --- --- --- --- Operating income (loss) 9,013 (3,710) 5,885 (2,032) Financial expenses - net 6,306 4,441 3,276 2,066 Other income 300 Income (loss) before taxes on income 2,707 (7,851) 2,609 (4,098) Taxes on income (tax saving) 2,995 (2,068) 1,982 (1,094) ----- ------- ----- ------- Income (loss) after taxes on income (288) (5,783) 627 (3,004) Share in loss of an associated company (83) Minority interest in profits of subsidiaries - net (222) (51) (140) 39 ----- ---- ----- -- Income (loss) for the period (510) (5,917) 487 (2,965) ===== ======= ===== ======= Income (loss) per share - basic (0.03) (0.32) 0.03 (0.16) Income (loss) per share - diluted (0.03) (0.32) 0.03 (0.16) Weighted average number of shares- in thousands: Basic 18,695 18,695 18,695 18,695 Diluted 18,695 18,758 18,695 18,703 CONDENSED CONSOLIDATED BALANCE SHEET June 30 December 31 2006 2005 2005 ---- ---- ---- In US $ thousands Assets: Current assets: Cash and cash equivalents 10,523 7,490 14,595 Accounts receivable: Trade 110,352 102,597 104,424 Other 11,112 10,710 13,244 Inventories 135,922 166,785 147,142 Property, plant and equipment for sale 5,273 7,420 Deferred income taxes 4,828 7,039 4,726 ----- ----- ----- Total current assets 278,010 294,621 291,551 Investments and long-term receivables 8,939 8,531 7,436 Property, plant and equipment 103,475 126,689 109,131 Other assets and deferred charges 55,298 58,802 53,956 Intangible assets 14,047 14,368 14,499 ------ ------ ------ Total assets 459,769 503,011 476,573 ======= ======= ======= Liabilities and shareholders equity: Current liabilities: Short-term bank credit 124,850 96,496 110,183 Trade 59,368 56,689 61,255 Other 35,957 32,805 39,164 ------ ------ ------ Total current liabilities 220,175 185,990 210,602 Long-term liabilities: Bank loans and other liabilities 42,979 88,328 69,677 Liability for employee rights upon retirement 8,335 8,299 7,850 Deferred income taxes 1,215 2,290 1,267 ----- ----- ----- Total long-term liabilities 52,529 98,917 78,794 Total liabilities 272,704 284,907 289,396 Minority interest 2,816 3,262 2,863 Shareholders equity 184,249 214,842 184,314 ------- ------- ------- Total Liabilities and shareholders equity 459,769 503,011 476,573 ======= ======= ======= CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW Six months ended Three months ended June 30 June 30 2006 2005 2006 2005 ---- ---- ---- ---- In US $ thousands Cash flows from operating activities: Net income (Loss) for the period (510) (5,917) 487 (2,965) Adjustment required to reflect the cash flows from operating activities 11,282 (2,883) 14,240 13,006 ------ ------- ------ ------ Net cash (used in) provided by operating activities 10,772 (8,800) 14,727 10,041 Cash flows from investing activities: Purchase of fixed assets (3,086) (6,003) (1,150) (3,144) Additional payment for the acquisition of subsidiaries (1,245) (950) (950) Proceeds from realization of fixed assets 788 271 447 Proceeds from realization of assets held for sale 2,096 2,096 Proceeds from realization of investment in associated company 300 Other (906) (720) (547) (247) ----- ----- ----- ----- Net cash provided by (used in) investing activities (2,353) (7,102) 846 (4,341) Cash flows from financing activities: Long-term bank loans - net (32,948) (11,111) (4,991) (6,563) Short-term bank credit - net 20,917 12,953 (10,778) (58) Other (495) (532) (495) (21) ----- ----- ----- ---- Net cash provided by (used in) financing activities (12,526) 1,310 (16,264) (6,642) DECREASE IN CASH AND CASH EQUIVALENTS (4,107) (14,592) (691) (942) TRANSLATION IN DIFFERENCES IN CASH AND CASH EQUIVALENTS 35 (68) 30 (68) BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,595 22,150 11,184 8,500 ------ ------ ------ ----- BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD 10,523 7,490 10,523 7,490 ====== ===== ====== ===== CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW Six months ended Three months ended June 30 June 30 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 7,476 8,247 3,784 4,235 Reorganization expenses 1,663 1,663 Deferred income taxes - net (125) (5,960) (141) (3,481) Capital gain from realization of investment in associated company (300) Capital (gain) loss from sales of assets (446) 35 (188) Other 656 339 353 363 --- --- --- --- 9,224 2,361 5,471 1,117 Changes in operating assets and liabilities items: Decrease (Increase) in accounts receivable (3,957) 1,554 2,701 7,725 Increase (Decrease) in accounts payable and accruals (5,247) (23,624) 8,915 41 Decrease (increase) in inventories 11,262 16,826 (2,847) 4,123 ------ ------ ------- ----- 2,058 (5,244) 8,769 11,889 ----- ------- ----- ------ 11,282 (2,883) 14,240 13,006 ====== ======= ======= ====== 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 2006 2005 2006 2005 ---- ---- ---- ---- In US $ thousands (except per share data) Operating income (loss)- As reported 9,013 (3,710) 5,885 (2,032) Non-GAAP Measures: Capital loss (gain) from realization of assets (446) 35 (188) Reorganization expenses 1,663 461 1,663 ----- --- ----- ----- Operating income (loss) for the period before Non-GAAP Measures 10,230 (3,214) 7,360 (2,032) ====== ======= ===== ======= Net income (loss) for the period- As reported (510) (5,917) 487 (2,965) Non-GAAP Measures: Capital loss (gain) from realization of assets (446) 35 (188) Reorganization expenses 1,663 461 1,663 Other income (300) Tax benefit (150) ----- ----- ----- ----- Net income (loss) for the period before Non-GAAP Measures 707 (5,871) 1,962 (2,965) === ======= ===== ======= Diluted earnings (loss) per share ($) before Non-GAAP Measures 0.04 (0.31) 0.10 (0.16) ==== ====== ==== ====== 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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