Delta Galil Reports Second Quarter 2006 Results

- 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: [phone]

  U.S. Investors
  Kathy Price    The Global Consulting Group    Tel: [phone]



                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., [phone]; U.S.

Investors - Kathy Price, The Global Consulting Group, [phone]



Web site:  http://www.deltagalil.com/ 

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