Blue Square - Israel Ltd. Reports Financial Results for the First Half and Second Quarter of 2009

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Be Semiconductor Industries NV	TG:BSI	Tradegate	Ordinary Share

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ROSH HA'AYIN, Israel, August 17 /PRNewswire-FirstCall/ -- - The Continued Implementation of the Strategic Plan That Includes a Successful Launch and the Expansion of the "Mega Bool" Chain, the Launch of a Private Brand, Establishing Logistic Centers for the Non-Food and Vegetables Activities and Launching Additional Enrolment Options to "You" Club - The Operating Profit Margin was Maintained Compared to the Prior Quarter, Despite the Increased Competition and the Effect of the Passover Holiday Blue Square-Israel Ltd. (NYSE and TASE: BSI) today announced its financial results for the first half of 2009 and the second quarter ended June 30, 2009. Results for the First Half of 2009 Revenues for the first half of 2009 were NIS 3,608.7 million (U.S.(1) $920.8 million), compared to NIS 3,739.6 million in the corresponding period of 2008 - a decrease of 3.5 %. Supermarket same store sales (SSS) for the period decreased by 6.8% due to the recession in the market, increase competition and erosion of the sales prices in HD chains. On the other hand, the decrease in sales was offset by the net addition of ten new stores during the 12-month period of approximately 12,100 square meters; in addition, the sales of BEE Group increased during the period compared to the corresponding period last year by 8.2%. Gross Profit of the first half of 2009 amounted to NIS 1,004.8 million (U.S. $ 256.4 million) (27. 8 % of revenues) compared to gross profit of NIS 1,031.1 million (27.6% of revenues) in the first half of 2008. The increase in the gross profit margin derives from an increase in sales of BEE Group characterized with higher gross profit margins relative to those acceptable in the food retail sector. In addition, gross margin increased from supplier agreements, part of which relate to the establishment of the "Mega Bool" chain that offset the effect of the planned erosion in the gross profitability rate due to the establishment of the "Mega Bool" chain. Selling, General, and Administrative Expenses for the first half of 2009 amounted to NIS 884.0 million (U.S. $ 225.6 million) (24.5% of revenues) compared to NIS 870.1 million (23.3% of revenues) in the corresponding period, an increase of 1.6%. The increase reflects increased expenses associated with the opening of ten new stores, including the expenses associated with the accelerated opening of six branches of the Eden Teva Market format during the last twelve months and expenses associated with the launch of the Mega Bool format. Concurrently, several measures to increase efficiency were taken, which resulted in a relative decrease of the tendency for increased expenses as a result of opening new branches. Operating Income (before income and other expenses and increase in fair value of real estate) in the first half of 2009 amounted to NIS 120.9 million (U.S $ 30.8 million) (3.3% of revenues) compared to the operating income of NIS 161.0 million (4.3% of revenues) in the corresponding period. The decrease in the operating income was affected by a decrease in sales and increase in the selling and administrative expenses, mainly from accelerated opening of branches (pre-operating costs and their negative contribution in the initial operating period) and costs associated with the establishment of the "Mega Bool" chain. Appreciation of Investment Property: In the first half of 2009, the Company recorded gain from appreciation of investment property in the amount of NIS 1.7 million (U.S $ 0.4 million) compared to NIS 18.0 million in the corresponding period of the previous year. Other Income Expenses, Net: In the first half of 2009, the Company recorded other expenses, net of NIS 0.6 million (U.S. $ 0.2 million), compared to other expenses, net of NIS 1.8 million in the corresponding period of the previous year. The other expenses included, in this period, a provision for impairment of property and equipment in Dr. Baby Stores in the amount of NIS 2.8 million (U.S $ 0.7 million) and were offset from the capital gain of NIS 0.3 million (U.S $ 0.1 million) from the sale of 1.5% of the shares of Blue Square Real Estate for NIS 10.1 million (U.S $2.6 million) and from a capital gain of NIS 2.8 million (U.S $ 0.7 million) from purchasing 8% of Naaman shares that were held by minority. Operating Income before financing in the first half of 2009 was NIS 122.0 million (U.S. $ 31.1 million) (3.4% of revenues) compared to operating income of NIS 177.2 million (4.7% of revenues) in the first half of 2008. Financial Expenses (net) for the first half of 2009 were NIS 47.2 million (U.S. $12 million) compared to financial expenses (net) of NIS 48.4 million in the corresponding period of the previous year. The decrease in financial expenses in the first half of this year compared to the corresponding period last year mainly derives from the effect of the change in the value of hedging transactions on the index that were effected in the fourth quarter of 2008 and the change in the value derivative financial instruments that contributed in the first half of 2009 to an income of NIS 24.0 million (U.S $6.1 million) compared to an expense of NIS 11.1 million in the corresponding period last year and from a decrease in financial expenses on debentures and CPI linked loans, of NIS 9.1 million (U.S $ 2.3 million) in the first half of 2009 compared to corresponding period last year (increase in the known index in the first half of 2009 amounted to 1.1% compared to 2.8% in the corresponding period last year). On the other hand, the decrease in the financial expenses was offset as a result of the increase in the value of the conversion option of the convertible debenture (following the increase in the company's share price) which contributed in the current half to an expense of NIS 13.1 million (U.S $ 3.3 million) compared to an income of NIS 24.7 million in the corresponding half last year. Taxes on Income for the first half of 2009 were NIS 24.8 million (U.S. $6.3 million) (33.2% effective tax rate compared to a statutory tax rate of 26%) compared to NIS 26.5 million (effective tax rate of 20.6% compared to a statutory tax rate of 27%) in the corresponding half last year. The increase in the effective tax rate in the first half compared to the corresponding half last year derives mainly from recording financial expenses from revaluation of the conversion component in convertible debentures of the company and from losses of Dr. Baby formats for which no deferred taxes were recorded. On July 14, 2009, the Law for Economic Efficiency passed in the Knesset (Legislation Amendments for the Implementation of Economic Plan for 2009- 2010) 5769 - 2009, which prescribed, among others, the gradual decrease of corporate tax rate down to 18% in the 2016 tax year and onwards. The implication of the change in the tax rate will be reflected in the results of the third quarter of 2009 by decrease in deferred tax liability and recognition in income from taxes in the amount of NIS 14 million (U.S $ 3.5 million) out of which the portion attributed to the company's owners is NIS 12 million (U.S $ 3.0 million). Net Income for the first half of 2009 was NIS 49.9 million (U.S. $ 12.7 million) compared to net income of NIS 102.3 million in the first half of 2008. The decrease in the net income in the first half this year compared to the corresponding period last year derives from decrease in operating income, decrease in a gain from appreciation of investment property and increase in income tax expenses, as mentioned above. The net income for the first half of 2009, in accordance with the IFRS attributable to shareholders, was NIS 39.6 million (U.S. $10.1 million), or NIS 0.91 per ADS (U.S. $ 0.23), while the portion attributable to the share of minority interests was NIS 10.3 million (U.S. $2.6 million). Cash Flows in the First Half of 2009 Cash Flows from Operating Activities: Net cash flows deriving from operating activities in the first half of 2009 amounted to NIS 156.6 million (U.S. $ 39.9 million) compared to NIS 278.2 million in the corresponding period last year. The decrease in cash flows from operating activities derives from decrease in operating income and decrease in the negative working capital balances. Cash Flows from Investing Activities: Net Cash flows used in investing activities in the first half of 2009 amounted to NIS 85.1 million (U.S. $21.7 million) compared to net cash flows of NIS 38.5 million used in investing activities in the corresponding period last year. Cash flows used in investing activities in the first half of 2009 included mainly purchase of property and equipment, other assets and investment property in a total amount of NIS 104.9 million (U.S. $26.8 million) net of proceeds from sale of property and equipment and investment property in the amount of NIS 7.2 million (U.S. $1.8 million) and proceeds from realization of investment in a subsidiary in the amount of NIS 10.1 million (U.S. $2.6 million). Cash flows used in investing activities in the first quarter of 2008 included mainly purchase of property and equipment, other assets and investment property amounting to NIS 155.7 million net of proceeds from realization of short term deposits in the amount of NIS 100.3 million. Cash Flows from Financing Activities: Net Cash flows used in financing activities in the first half of 2009 amounted to NIS 24.0 million (U.S $ 6.1 million) compared to net cash used in financing activities of NIS 67.3 million in the corresponding period last year. Cash flows used in financing activities in the first half of 2009 included mainly repayment of long term loans of NIS 66.4 million (U.S $ 16.9 million) and paid interest of NIS 45.9 million (U.S $ 11.7 million), net of increase in short term credit of NIS 86.6 million (U.S $ 22 million). Net Cash flows used in financing activities in the first half of 2008 included mainly repayment of long term loans of NIS 46.0 million and paid interest of NIS 39.6 million and dividend paid to minority in subsidiaries in the amount of NIS 11.1 million net of receipt of long term loans amounting to NIS 13.7 million and short term credit from banks amounting to NIS 16.6 million. Comments of Management Commenting on the financial results, Mr. Zeev Vurembrand, Blue Square's President and CEO, said: "During this quarter, we continued to implement the strategic measures and establish the awareness to "Mega Bool" chain as the leading chain of the HD format and we acted to expand the categories in the private brand "Mega", constituting over 3.5% of total sales. During August, 8 additional stores will be added to the "Mega Bool" chain, 2 of which are new, as part of providing solutions to the market needs and the competitive environment. Several days ago, we announced the expansion of enrollment options to customers club "You" where the objective is to reach 500,000 members until the end of 2009. During the last year, the organic division of "Teva Eden Market" expanded significantly; comprising 9 branches and the opening of the tenth branch will take place during the fourth quarter of 2009, whereby we shall complete the first stage of the chain deployment. In addition, we commenced to exercise the synergy process under BEE group by way of process for centralizing the financial activity, import, information systems and more under the headquarters of BEE group and providing these services to subsidiaries. Finally, I wish to stress that the strategy implementation and achieving the target milestones are moving forward according to management expectations." Additional Information As of June 30, 2009, the Company operated 200 supermarkets in the following formats: Mega In Town -115; Mega Bool - 40; Mega - 19; Shefa Shuk - 18; Eden Teva Market - 8. EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization): In the first half of 2009, the EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) was NIS 205.4 million (U.S. $ 52.4 million) (5.7 % of revenues) compared to NIS 237.5 million (6.4% of revenues) in the corresponding period of last year. In the second quarter of 2009, amounted to NIS 103.6 million (U.S. $ 26.4 million) (5.6 % of revenues) compared to NIS 123.5 million (6.4% of revenues) in the corresponding period of last year. As of June 30, 2009, the ratio of its financial obligations to EBITDA was 3.6 and the ratio of its unencumbered property and equipment to the financial obligations was 1.7. Data in NIS (millions) Data Q2 2009 Q2 2008 1-6 2009 1-6 2008 Sales 1,844.0 1,918.4 3,608.7 3,739.6 Gross profit 501.7 527.5 1,004.8 1,031.1 % Gross profit 27.2% 27.5% 27.8% 27.6% Operating profit (before increase in fair value of real estate) 60.7 83.5 120.9 161.0 % Operating profit (before increase in fair value of real estate) 3.3% 4.4% 3.3% 4.3% Financial expenses 35.2 40.2 47.2 48.4 Net income 17.5 37.2 49.9 102.3 Events During the Second Quarter of 2009 Reorganization of real estate activity - transfer of real estate properties to the subsidiary Blue Square Real Estate Ltd. On December 30, 2008, and January 12, 2009, the company reported a reorganization plan of its real estate activity to be centralized under the subsidiary Blue Square Real Estate (BSRE) by the transfer of the real estate properties of the subsidiary Blue Square Chain Investment & Properties Ltd. (BSIP) to BSRE. The transaction of the property transfer was subject to the approval of the shareholders' meeting of BSRE which was obtained on February 18, 2009 by the majority. As previously reported, under the approval of the property transfer transaction the following were approved as well: 1. Lease agreement to lease the transferred properties that are not leased to third parties to BSIP for ten years from the closing date of the purchase agreement and an option to the lessee to extend the lease agreement for five additional years, and, 2. An agreement to extend the term of the existing lease agreements between BSIP and BSRE to an identical period (ten years from the closing date of the purchase agreement and an option to the lessee to extend the lease agreement for five additional years). Following discussions held between the company and its subsidiaries and the tax authorities regarding the outline of the property transfer transaction, the tax authority granted an approval according to which the transaction will be performed by a split pursuant to Section 105 to the Israel Income Tax Ordinance. Under such approval, BSIP will transfer to BSRE the transferred properties and in return BSRE will assume the financial obligations of BSIP attributed to these properties. The difference between the value of the transferred properties, as determined in the transaction (NIS 464 million) and the amount of the related financial obligations (NIS 390 million) will be paid in cash to the company by BSRE, on the closing date. Accordingly, the transaction is expected to be executed by the end of 2009. The transaction costs including purchase tax will be recorded upon their incurrence as expenses in the statements of operations. The effecting of the transaction in the outline of split pursuant to Section 105 to the Income Tax Ordinance confers upon BSIP an exemption from the payment of land appreciation tax at this stage and its deferment under the sale agreement with BSRE until the realization of the properties (as far as realized) or by the depreciation rate of the depreciable properties by BSRE. In addition, the payment of purchase tax for the transaction will be at a reduced tax rate of 0.5%. The company and the subsidiaries, BSIP and BSRE will be subject to the restrictions prescribed by the provisions of the second and fourth chapters to part E-2 to the Income Tax Ordinance regarding the split pursuant to Section 105 to the Ordinance and the conditions or limitations determined in the approval of the tax authority, will apply, including the requirement that in two years from the split date, most of the properties remaining with BSIP and most properties transferred to BSRE under the split will not be sold by any of them and in the relevant period, such assets will be used in an acceptable manner in the ordinary course of business. The subsidiaries are further required that in two years from the split date, the company will have the same rights as previously held in BSRE prior to the split, however such event will not be considered as 1) Submitted Prospectus for Public Offering 2) private issuance of shares or 3) sale of shares not exceeding 10% of the rights in BSRE - as an event of change in rights, provided that during the two years from the split date, the rights of BSIP in BSRE will not fall below 50%. BSRE intends to pledge most of the transferred properties as collateral for a loan to be taken in order to finance the transaction. Results for the Second Quarter of 2009 Revenues for the second quarter of 2009 were NIS 1,844 million (U.S$470.5 million), compared to NIS 1,918.4 million in the corresponding quarter of 2008 - a decrease of 3.9 %. Supermarket same store sales (SSS) for the period decreased by 6.1% compared to the corresponding quarter due to the recession and increased competition mainly on "Mega" format (stores that were not yet converted) erosion of prices in HD chains and the timing of Passover which this year fell on April 8 compared to April 20 last year and its contribution to increase in sales in the second quarter this year was partial compared to full contribution to an increase in sales in the second quarter last year. On the other hand, the decrease in sales was offset by the opening of ten new stores during the 12-month period of approximately 12,100 square meters. The sales of BEE Group decreased during this quarter compared to the corresponding quarter last year by 4.2% and that is due to Passover, as described above. Gross Profit of the second quarter of 2009 amounted to NIS 501.7 million (U.S. $ 128 million) (27.2 % of revenues) compared to gross profit of NIS 527.5 million (27.5% of revenues) in the corresponding quarter of 2008. The decrease in the gross profit and gross profit margin derives from a decrease in sales characterized with relatively higher gross profit margins ("Mega" "Mega In Town") and the increase in the scope of sales of the HD formats of total sales which were offset by improved supplier agreements and discounts and the contribution of the private brand of "Mega" constituting already over 3% of the sales. Selling, General, and Administrative Expenses for the second quarter of 2009 amounted to NIS 441 million (U.S. $ 112.5 million) (23.9% of revenues) compared to NIS 444.0 million (23.1% of revenues) in the corresponding quarter, a decrease of 0.7%. The decrease reflects the effect of efficiency measures taken by the company during the quarter, which is contingent upon increased expenses associated with the opening of ten new stores during the last year, including the expenses associated with the accelerated opening of six branches of the Eden Teva Market format and expenses deriving from the increase in the selling prices of the private brand. Operating Income (before other income and expenses and increase in the fair value of real estate) in the second quarter of 2009 amounted to NIS 60.7 million (U.S $ 15.5 million) (3.3% of revenues) compared to the operating income of NIS 83.5 million (4.4% of revenues) in the corresponding period. Appreciation of Investment Property: During the second quarter of 2009, the Company recorded gain from appreciation of investment property of NIS 1.7 million (U.S $ 0.4 million) compared to NIS 5.2 million in the corresponding quarter of the previous year. Other Income Expenses, Net: In the second quarter of 2009, the Company recorded other expenses, net of NIS 2.8 million (U.S. $ 0.7 million), compared to other expenses of NIS 0.6 million in the corresponding quarter of the previous year. The expenses included, in this quarter, provision for impairment of property and equipment in Dr. Baby stores in the amount of NIS 2.8 million (U.S. $ 0.7 million) and were offset from the capital gain in the amount of NIS 0.3 million (U.S. $ 0.1 million) from selling 1.5% of the shares of Blue Square Real Estate for NIS 10.1 (U.S. $ 2.6 million). Operating Income before financing in the second quarter of 2009 was NIS 59.6 million (U.S. $ 15.2 million) (3.2% of revenues) compared to operating income of NIS 88.2 million (4.6% of revenues) in the second quarter of 2008 and compared to NIS 62.3 million (3.5% of revenues) in the first quarter of 2009. Financial Expenses (net) for the second quarter of 2009 were NIS 35.2 million (U.S. $9 million) compared to financial expenses (net) of NIS 40.2 million in the corresponding quarter of the previous year. The decrease in financial expenses in this quarter compared to the corresponding quarter last year mainly derives from the effect of the change in the value of hedging transactions on the index and derivative financial instruments that contributed in the current quarter to an income of NIS 14.9 million (U.S $3.8 million) compared to an expense of NIS 1.9 million in the corresponding quarter last year and from a decrease in financial expenses on debentures and CPI linked loans, of NIS 5.6 million (U.S $ 1.4 million) in this quarter compared to the corresponding quarter last year. The decrease in the financial expenses was offset mainly from the effect of the change in the value of the conversion option of the convertible debenture (following the increase in the company's share price) which contributed in the current quarter to an expense of NIS 9.8 million (U.S $ 2.5 million) compared to an income of NIS 3.8 million in the corresponding quarter last year. Taxes on Income for the second quarter of 2009 were NIS 6.9 million (U.S. $1.8 million) (28.2% effective tax rate compared to a statutory tax rate of 26%) compared to NIS 10.7 million (effective tax rate of 22.2% compared to a statutory tax rate of 27%) in the corresponding quarter last year. The increase in the effective tax rate in this quarter compared to the corresponding quarter last year derives mainly from recording financial expenses from revaluation of the conversion component in convertible debentures of the company and from losses of Dr. Baby formats, for which no deferred taxes were recorded Net Income for the second quarter of 2009 was NIS 17.5 million (U.S. $ 4.5 million) compared to net income of NIS 37.2 million in the second quarter of 2008. The decrease in the net income in this quarter compared to the corresponding quarter last year derives from decrease in operating income and increase in income tax expenses, as mentioned above. The net income for the second quarter of 2009, in accordance with the IFRS attributable to shareholders, was NIS 13.1 million (U.S. $3.3 million), or NIS 0.3 per ADS (U.S. $ 0.08), while the portion attributable to the share of minority interests was NIS 4.4 million (U.S. $1.1 million). Cash Flows in the Second Quarter of 2009 Cash Flows from Operating Activities: Net cash flows deriving from operating activities in the second quarter of 2009 amounted to NIS 126.4 million (U.S. $ 32.2 million) compared to NIS 255.0 million in the corresponding quarter last year. The decrease in cash flows from operating activities derives mainly from decrease in sales. Cash Flows from Investing Activities: Net Cash flows used in investing activities in the second quarter of 2009 amounted to NIS 27.3 million (U.S. $6.9 million) compared to net cash flows of NIS 60.2 million used in investing activities in the corresponding quarter last year. Cash flows used in investing activities in the second quarter of 2009 included mainly purchase of property and equipment, other assets and investment property in a total amount of NIS 45.3 million (U.S. $11.6 million) net of proceeds from realization of investment in a subsidiary in the amount of NIS 10.1 million (U.S. $2.6 million). Cash flows used in investing activities in the second quarter of 2008 included mainly purchase of property and equipment, other assets and investment property amounting to NIS 52.2 and net investment in marketable securities in the amount of NIS 10.5 million. Cash Flows from Financing Activities: Net Cash flows used in financing activities in the second quarter of 2009 amounted to NIS 21.1 million (U.S $ 5.4 million) compared to net cash used in financing activities of NIS 19.2 million in the corresponding quarter last year. Cash flows used in financing activities in the second quarter of 2009 included mainly repayment of long term loans of NIS 35.9 million (U.S $ 9.2 million) dividend paid to minority in subsidiaries in the amount of NIS 6.2 million (U.S $ 1.6 million) and paid interest of NIS 10.5 million (U.S $ 2.7 million), net of increase in short term credit of NIS 27.1 million (U.S $ 6.9 million). Net Cash flows used in financing activities in the second quarter of 2008 included mainly repayment of long term loans of NIS 22.7 million, dividend paid to minority in subsidiaries in the amount of NIS 11.1 million and paid interest of NIS 8.2 million net of receipt of long term loans amounting to NIS 5.0 million and short term credit from banks amounting to NIS 18.4 million. NOTE A: Convenience Translation to Dollars The convenience translation of New Israeli Shekel (NIS) into U.S. dollars was made at the exchange rate prevailing at June 30, 2009: U.S. $1.00 equals NIS 3.919. The translation was made solely for the convenience of the reader. Blue Square is a leading retailer in Israel. A pioneer of modern food retailing in the region, Blue Square currently operates 201 supermarkets under different formats, each offering varying levels of service and pricing. This press release contains forward-looking statements within the meaning of safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, plans or projections about our business and our future revenues, expenses and profitability. Forward-looking statements may be, but are not necessarily, identified by the use of forward-looking terminology such as "may," "anticipates," "estimates," "expects," "intends," "plans," "believes," and words and terms of similar substance. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual events, results, performance, circumstance and achievements to be materially different from any future events, results, performance, circumstance and achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, the following: the effect of the recession in Israel on the sales in our stores and on our profitability; our ability to compete effectively against low-priced supermarkets and other competitors; quarterly fluctuations in our operating results that may cause volatility of our ADS and share price; risks associated with our dependence on a limited number of key suppliers for products that we sell in our stores; the effect of an increase in minimum wage in Israel on our operating results; the effect of any actions taken by the Israeli Antitrust Authority on our ability to execute our business strategy and on our profitability; the effect of increases in oil, raw material and product prices in recent years; the effects of damage to our reputation or to the reputation to our store brands due to reports in the media or otherwise; and other risks, uncertainties and factors disclosed in our filings with the U.S. Securities and Exchange Commission, including, but not limited to, risks, uncertainties and factors identified under the heading "Risk Factors" in our Annual Report on Form 20-F for the year ended December 31, 2008. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except for our ongoing obligations to disclose material information under the applicable securities laws, we undertake no obligation to update the forward-looking information contained in this press release. It is hereby clarified that this version is a translation to Hebrew for merely convenience purposes of the company's notice to SEC in the U.S. The binding version is the version in English. BLUE SQUARE - ISRAEL LTD. INTERIM CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2009 (UNAUDITED) Convenience translation(a) December 31, June 30, June 30, 2008 2008 2009 2009 ---------- --------- ----------- -------- Audited Unaudited ------- ----------------------------------- NIS U.S. dollars ----------------------------------- ------- In thousands --------------------------------------------- A s s e t s CURRENT ASSETS: Cash and cash equivalents 95,325 228,754 137,241 35,019 Marketable securities 171,849 195,857 173,726 44,329 Short-term bank deposit 206 1,231 207 53 Restricted deposit - - 440,015 112,277 Trade receivables 729,970 826,136 773,892 193,799 Other accounts receivable 87,624 109,626 96,308 28,248 Income taxes receivable 74,446 46,951 87,635 22,362 Inventories 497,080 491,591 527,798 134,677 --------- --------- --------- ------- 1,656,500 1,900,146 2,236,822 570,764 --------- --------- --------- ------- NON-CURRENT ASSETS: Long-term receivables 1,554 3,810 4,827 1,231 Embedded derivative 5,248 925 19,381 4,945 Prepaid expenses in respect of operating lease 192,426 196,684 190,605 48,636 Investments in investee companies 4,915 4,931 1,356 346 Investment property 434,232 409,297 1,739,071 443,754 Intangible assets, net 404,422 287,635 435,386 111,096 Property and equipment, net 1,701,222 1,658,553 404,934 103,326 Deferred taxes 44,508 35,401 46,504 11,866 --------- --------- --------- ------- 2,788,527 2,597,236 2,842,064 725,200 --------- --------- --------- --------- Total assets 4,445,027 4,497,382 5,078,886 1,295,964 --------- --------- --------- --------- BLUE SQUARE - ISRAEL LTD. INTERIM CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2009 (UNAUDITED) Convenience translation(a) December 31, June 30, June 30 2008 2008 2009 2009 Audited Unaudited U.S. dollars In thousands Liabilities and shareholders' equity CURRENT LIABILITIES: Credit From banks and others 210,901 184,057 725,528 185,131 Current maturities of convertible debentures 25,999 72,450 29,064 7,416 Trade payables 1,006,386 1,086,936 1,025,728 261,732 Other accounts payable 426,217 481,124 493,312 125,878 Income taxes payable 6,933 4,254 3,449 880 Provisions for other liabilities 43,397 36,677 42,457 10,834 --------- --------- --------- ------- 1,719,833 1,865,498 2,319,538 591,871 --------- --------- --------- ------- LONG-TERM LIABILITIES: Loans from banks 341,586 224,763 289,885 73,969 Convertible debentures 130,525 144,916 128,070 32,679 Debentures 985,844 796,888 1,001,537 255,559 Other liabilities 39,925 10,834 45,506 11,612 Derivatives instruments * 21,074 7,954 8,725 2,226 Liabilities in respect of employee benefits, net 49,911 37,095 49,619 12,661 Deferred taxes 60,327 59,675 66,354 16,931 --------- --------- --------- ------- 1,629,192 1,282,125 1,589,696 405,637 --------- --------- --------- ------- Total liabilities 3,349,025 3,147,623 3,909,234 997,508 --------- --------- --------- ------- SHAREHOLDERS' EQUITY: Share capital - Ordinary shares of NIS 1 par value 57,094 57,094 57,438 14,656 Additional paid-in capital 1,018,405 1,018,405 1,030,259 262,888 Other reserves (261) 4,757 8,183 2,088 Accumulated deficit (154,719) (17,658) (109,711) (27,995) --------- --------- --------- ------- 920,519 1,062,598 986,169 251,637 Minority interest 175,483 287,161 183,483 46,819 --------- --------- --------- ------- Total equity 1,096,002 1,349,759 1,169,652 298,456 --------- --------- --------- ------- Total liabilities and shareholders' equity 4,445,027 4,497,382 5,078,886 1,295,964 --------- --------- --------- ------- *) Reclassified, under the application of IAS1(R). The company classified financial liabilities at fair value through the statements of operations from current liabilities to long term liabilities. * BLUE SQUARE - ISRAEL LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2009 Convenience translation(a) For the For the for the Year ended Six months Three months six months December Ended 31, Ended June 30, Ended June 30, June 30, 2008 2008 2009 2008 2009 2009 Audited Unaudited Unaudited NIS U.S. dollars In thousands (except share and per share data) Revenues from sales 7,429,121 3,739,561 3,608,739 1,918,403 1,843,951 920,832 Cost of sales 5,369,149 2,708,484 2,603,905 1,390,880 1,342,204 664,431 --------- --------- --------- --------- --------- ------- Gross profit 2,059,972 1,031,077 1,004,834 527,523 501,747 256,401 Selling, general and administrative expenses 1,794,720 870,050 883,981 443,983 441,062 225,563 --------- --------- --------- --------- --------- ------- Operating profit before changes in fair value of investment property and other gains and losses 265,252 161,027 120,853 83,540 60,685 30,838 Other gains 12,233 617 4,464 392 1,739 1,139 Other losses (14,716) (2,426) (5,102) (947) (4,539) (1,302) Changes in fair value of investment property, net 19,067 17,970 1,740 5,225 1,740 444 --------- --------- --------- --------- --------- ------- Operating profit 281,836 177,188 121,955 88,210 59,625 31,119 Finance income 60,700 45,231 37,995 16,004 27,016 9,695 Finance expenses (166,295) (93,658) (85,222) (56,187) (62,246) (21,746) Share in losses of associates (33) (17) (88) (144) (4) (22) --------- --------- --------- --------- --------- ------- Income before taxes on income 176,208 128,744 74,640 47,883 24,391 19,046 Taxes on income 43,806 26,474 24,780 10,650 6,879 6,323 Net income 132,402 102,270 49,860 37,233 17,512 12,723 --------- --------- --------- --------- --------- ------- Attributable to: Equity holders of the parent 104,586 87,613 39,606 29,505 13,071 10,106 --------- --------- --------- --------- --------- ------- Minority interests 27,816 14,657 10,254 7,728 4,441 2,617 --------- --------- --------- --------- --------- ------- Net income per Ordinary share attributed to Company shareholders or ADS: Basic 2.41 2.02 0.91 0.68 0.30 0.23 --------- --------- --------- --------- --------- ------- Fully diluted 1.62 2.02 0.91 0.64 0.30 0.23 --------- --------- --------- --------- --------- ------- Weighted average number of shares or ADS used for computation of income per share: Basic 43,372,819 43,372,819 43,397,543 43,372,819 43,421,996 43,397,543 ---------- ---------- ---------- ---------- ---------- ---------- Fully diluted 45,037,692 44,793,240 43,397,543 44,793,240 43,421,996 43,397,543 ---------- ---------- ---------- ---------- ---------- ---------- BLUE SQUARE - ISRAEL LTD. INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW FOR FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2009 (UNAUDITED) Convenience translation(a) For the For the for the Year ended Six months Three months six months December 31, ended June 30, ended June 30 ended June 30, -------------- ------------- 2008 2008 2009 2008 2009 2009 ------- ------- ------- ------- ------- ------ Audited Unaudited Unaudited ------- ---------------------------------- --------- NIS U.S. dollars ----------------------------------------------------------- In thousands ----------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Income before taxes on income 176,208 128,744 74,640 47,883 24,391 19,046 Income tax paid (94,212) (48,044) (34,775) (29,410) (19,642) (8,873) Adjustments required to reflect the cash flows from operating activities (a) 327,777 197,529 116,688 236,561 121,669 29,775 ------- ------- ------- ------- ------- ------ Net cash provided by operating activities 409,773 278,229 156,553 255,034 126,418 39,948 ------- ------- ------- ------- ------- ------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (211,646) (104,306) (92,439) (44,517) (39,107) (23,587) Purchase of investment property (69,749) (36,331) (3,307) (4,158) (978) (844) Purchase of minority shares in subsi- diaries (186,403) - (6,607) - - (1,686) Purchase of intangible assets (30,372) (15,108) (9,194) (3,609) (5,181) (2,347) Proceeds from collection of short-term bank deposits, net 102,531 100,426 - 256 - - Proceeds from sale of property, plant and equipment 1,559 377 1,537 60 1,036 392 Proceeds from investment property 6,567 6,567 5,700 - - 1,454 Proceeds from sale of marketable securities 185,104 106,237 57,179 40,481 22,976 14,590 Investment in marketable securities (169,747) (100,640) (54,339) (50,989) (20,946) (13,866) Proceeds from sale of investment in subsidiary - - 10,074 - 10,074 2,571 Interest received 17,778 4,242 6,330 2,208 4,747 1,615 ------- ------- ------- ------- ------- ------ Net cash used in investing activities (354,378) (38,536) (85,066) (60,268) (27,379) (21,708) ------- ------- ------- ------- ------- ------ CASH FLOWS FROM FINANCING ACTIVITIES: Dividend paid to share- holders (150,000) - - - - - Issuance of debentures 121,259 - - - - - Dividend paid to minority shareholders of subsidiaries (22,077) (11,117) (6,181) (11,117) (6,181) (1,577) Receipt of long-term loans 231,398 13,709 6,500 5,000 2,500 1,659 Repayment of long-term loans (130,571) (46,074) (66,389) (22,824) (35,901) (16,940) Repayment of long term credit from trade payables (1,740) (870) (870) (435) (435) (222) Short-term credit from banks and others, net 15,689 16,645 86,560 18,392 27,142 22,087 Proceeds from exercise of options in a subsidiary - - 2,306 - 2,306 588 Interest paid (89,244) (39,642) (45,879) (8,224) (10,495) (11,707) ------- ------- ------- ------- ------- ------ Net cash used in financing activities (25,286) (67,349) (23,953) (19,208) (21,064) (6,112) ------- ------- ------- ------- ------- ------ INCREASE IN CASH AND CASH EQUIVALENTS AND BANK OVERDRAFT 30,109 172,344 47,534 175,558 77,975 12,128 BALANCE OF CASH AND CASH EQUIVALENTS AND BANK OVERDRAFT AT BEGINNING OF PERIOD 53,029 56,410 83,138 53,196 52,697 21,214 ------- ------- ------- ------- ------- ------ BALANCE OF CASH AND CASH EQUIVALENTS AND BANK OVERDRAFT AT END OF PERIOD 83,138 228,754 130,672 228,754 130,672 33,342 ------- ------- ------- ------- ------- ------ BLUE SQUARE - ISRAEL LTD. INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2009 (UNAUDITED) Convenience translation(a) Year For the For the for the ended Six months Three months six months December 31, ended June 30, ended June 30 ended June 30 -------------- ------------- 2008 2008 2009 2008 2009 2009 ------- ------- ------- ------- ------- ------ Audited Unaudited Unaudited ------- ------------------------------ --------- NIS U.S. dollars ----------------------------------------------------- In thousands ----------------------------------------------------- (a) Adjustments required to reflect the cash flows from operating activities: Income and expenses not involving cash flows: Depreciation and amortization 153,882 71,440 79,766 36,848 39,992 20,354 Increase in fair value of investment property, net (19,067) (17,970) (1,740) (5,225) (1,740) (444) Share in losses of associated company 33 17 88 144 4 22 Share based payment 8,175 2,666 5,619 2,397 2,933 1,434 Loss (gain) from sale and disposal of property, plant and equipment and provision for impairment of property, plant and equipment, net 5,989 (225) 2,196 29 2,554 560 Gain from changes in fair value of derivative financial instruments (19,247) (14,627) (17,952) (961) (15,396) (4,581) Linkage differences on debentures, loans and other long term liabilities 59,669 35,258 16,358 29,945 23,668 4,174 Capital loss (gain) from realization of investments in subsidiaries (9,801) 1,603 (1,022) 350 1,522 (261) Accrued severance pay, net 263 1,220 (292) 72 (304) (75) Decrease in value of marketable securities deposit and long-term receivables, net 11,169 3,402 7,064 3,488 4,768 1,802 Interest paid, net 71,466 35,400 39,550 6,016 5,748 10,092 Changes in operating assets and liabilities: Decrease (increase) in trade receivables and other accounts receivable 59,967 (55,914) (56,412) 133,418 290,230 (14,394) Decreased (increase) in inventories (43,136) (37,647) (37,140) 65,001 46,829 (9,477) Increase (decrease) in trade payables and other accounts payable 48,415 172,906 80,605 (34,961) (279,139) 20,569 ------- ------- ------- ------- ------- ------ 327,777 97,529 116,688 236,561 121,669 29,775 ------- ------- ------- ------- ------- ------ BLUE SQUARE - ISRAEL LTD. INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE SIX AND THREE MONTHS PERIODS ENDED JUNE 30, 2009 (UNAUDITED) Convenience translation(a) Year For the For the for the ended Six months Three months six months December 31, ended June 30, ended June 30 ended June 30 -------------- ------------- 2008 2008 2009 2008 2009 2009 ------- ------- ------- ------- ------- ------ Audited Unaudited Unaudited ------- ------------------------------ --------- NIS U.S. dollars ----------------------------------------------------- In thousands ----------------------------------------------------- (b) Supplementary information on investing and financing activities not involving cash flows: Conversion of convertible debentures of subsidiaries 6,655 6,387 - 2,224 - - ------- ------- ------- ------- ------- ------ Purchasing property, plant and equipment on credit 14,797 6,931 10,153 6,931 10,153 2,591 ------- ------- ------- ------- ------- ------ Conversion of convertible debentures of the company - - 12,198 - 12,198 3,113 ------- ------- ------- ------- ------- ------ Restricted deposit against receipt of a short term loan - - 440,015 - 440,015 112,277 ------- ------- ------- ------- ------- ------ BLUE SQUARE - ISRAEL LTD. SELECTED OPERATING DATA FOR THE THREE MONTH AND SIX MONTH PERIOD ENDED JUNE 30, 2009 (UNAUDITED) Convenience translation(a) for the three months ended June 30 For the six For the three months ended months ended June 30 June 30 ------------ -------------- 2008 2009 2008 2009 2009 NIS NIS NIS NIS U.S.$ ---- ---- ---- ---- ---- (Unaudited) (Unaudited) Sales (in millions) 3,740 3,609 1,918 1,844 470.5 Operating income (in 161 121 84 61 15.5 millions) EBITDA (in millions) 237 205 123 104 26.5 EBITDA margin 6.3% 5.7% 6.4% 6.4% NA Increase (decrease) in 4.4% (6.8%) 8.2% (6.1%) NA same store sales* Number of stores at end of period 190 200 190 200 NA Stores opened during the period 5 7 2 2 Stores closed during the period - 1 - 1 NA Total square meters at end of period 350,200 362,300 350,200 362,300 NA Square meters added during the period, net 7,000 7,900 2,700 2,800 NA Sales per square meter 10,142 9,366 5,141 4,624 1,180 Sales per employee (in 479 484 241 244 62 thousands) * Compared with the same period in the prior fiscal year. Contact: Blue Square-Israel Ltd. Dror Moran, CFO Toll-free telephone from U.S. and Canada: 888-572-4698 Telephone from rest of world: +972-3-928-2220 Fax: +972-3-928-2299 Email: DATASOURCE: Blue Square Israel Ltd CONTACT: Contact: Blue Square-Israel Ltd., Dror Moran, CFO, Toll-free telephone from U.S. and Canada: 888-572-4698, Telephone from rest of world: +972-3-928-2220, Fax: +972-3-928-2299, Email:

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