Blue Square-Israel Ltd. (NYSE: BSI) today announced results for the fourth quarter and full year ended December 31, 2000.

Results of the Year 2000

Revenues for the year 2000 increased by 5.5% to NIS 5,199.0 million (US$ 1,286.6) from NIS 4,929.5 million in 1999. Gross margins increased to 27.7% for 2000 from 26.5% in 1999.

The Company’s 2000 operating income increased 22.8% to NIS 271.3 million (US$ 67.1 million) from NIS 221.0 million in 1999. Operating margins for the period increased to 5.2% from 4.5% for the corresponding period in 1999. The rise in operating margins is due both to the increase in the Company’s gross profit and to the successful implementation of the Company’s ongoing efficiency program.

Financial expense for the year increased to NIS 41.7 million (US$ 10.3 million) from NIS 26.7 million in 1999. This increase derives primarily from three factors:

(i) During 2000, the Company increased its level of bank finance.

(ii) “Financial Expense” for 1999 was affected by gains from the

increase of value of marketable securities, while in the year 2000

it was affected by a decrease in the value of marketable

securities.

(iii) The Company’s financial statements are adjusted for inflation according to Israeli GAAP. In the year 2000, the CPI was flat (0%), as compared to 1999’s CPI, which increased by 1.3%. The Company’s net unlinked monetary liabilities appreciate as a result of a negative CPI, and depreciate as a result of a positive CPI. In 1999, the depreciation generated financial income, while in 2000, no such financial income was generated.

“Other Income/Expenses” included a one-time charge of approximately NIS 10 million associated with the write-off of goodwill in subsidiaries. In addition, it included the divestiture of the Company’s holdings in Home Centers, which contributed a before-tax capital gain of approximately NIS 32 million.

“Discontinued operations” for 2000 are related to the sale of Blue Square Furniture, the Company’s affiliate which held the Israeli franchise of IKEA N.V. in Israel, to the Company’s major shareholder, the Co-Op Blue Square Cooperative Association. The deal was finalized during the first quarter of 2001. As a capital transaction with the parent cooperative, the capital gain derived by Blue Square from the sale, which amounted to approximately NIS 8 million, will be charged to “Additional Paid-In Capital” during the first quarter of 2001.

“Discontinued operations, net of taxes” for 1999 included a one-time expense related to the sale of the Company’s holdings in I.D. Design.

Net income for the year 2000 increased by 60% to NIS 129.4 million (US$ 32.0 million), or NIS 3.37 per ADS (US$ 0.83), compared to NIS 81.0 million, or NIS 2.11 per ADS for 1999.

For the year, sales per employee rose by 3.2% reflecting the Company’s efficiency program. Same store sales for the year decreased by 4.4%, and sales per square meter decreased by 4.2%.

Results of the Fourth Quarter

Revenues for the fourth quarter of 2000 increased by 5.7% to NIS 1,293.4 million (US$ 320.0 million)(a) from NIS 1,223.3 million(b) for the fourth quarter of 1999. The unusually high 1999 fourth quarter revenues reflected the consumer reaction to “Y2K” fears, which led to large purchases of staple items. On a sequential basis, revenues of the fourth quarter of 2000 were lower than those of the third quarter, reflecting the timing of the fall holidays, which fell during the third quarter.

Gross margins for the quarter increased to 28.5% from 26.4% for the fourth quarter of 1999.

The Company’s fourth quarter operating income increased by 48% to NIS 66.0 million (US$ 16.3 million) compared to NIS 44.5 million for the fourth quarter of 1999. Operating margins for the period increased to 5.1%, compared to 3.6% for the corresponding period in 1999, reflecting the improvement in gross margins.

Financial expense for the fourth quarter increased to NIS 13.4 million (US$ 3.3 million) compared to NIS 5.9 million for the parallel quarter in 1999 because of the factors outlined above.

As explained above, the Company recorded several one-time charges during the fourth quarter of 2000.

Net income for the quarter rose by 38% to NIS 22.6 million (US$ 5.6 million), or NIS 0.59 per ADS (US$ 0.14), compared to NIS 16.5 million, or NIS 0.43 per ADS, for the fourth quarter of 1999.

During the fourth quarter, sales per employee remained unchanged, same store sales decreased by 3.2%, and sales per square meter decreased by 3.4%.

Comments of Management

Commenting on the results, Yoram Dar, Blue Square’s President and Chief Executive Officer, said, “2000 was a year of dramatic performance improvement and strategic progress for Blue Square. Through focus and hard work, we achieved almost all of the aggressive targets we set at the beginning of the year, delivering a 23% increase in operating income, a 60% increase in net income, along with improved revenues, margins, and sales metrics. Just as important, we strengthened the Company’s organizational and operational foundations, giving us a more solid basis for future growth. As we move into 2001, we are sharpening our focus to ensure continued growth for Blue Square.”

Mr. Dar continued, “As we move into 2001, we are sharpening our strategy to enable us to further increase our revenues and improve our margins. Increasing the level of private label sales is one of our top strategic priorities, and we have set an aggressive goal of 10% private label sales by the end of 2002. To help us achieve this target, we recently signed an exclusive agreement with a subsidiary of Casino, the French supermarket giant, to sell its `Leader Price‘ private label products in our region. This agreement will condense the time required to bring thousands of private label brands to our shelves. We are confident that the exceptional value offered by the Leader Price brand will result in new loyal Blue Square customers, whose purchases will bring us higher revenues and gross margins.

“Another important aspect of our work plan is the consolidation of our brand strategy. To maximize our media efforts, we are phasing out the `Zil v’Zol’ brand, and extending the `Super Center’ brand with new `Super Center City’ neighborhood stores. We also continue to strengthen the extremely successful MEGA format. With last week’s launch of a new MEGA branch in Jerusalem, we now have seven MEGA branches, and plan to open additional branches throughout the country.”

Mr. Dar continued, “Besides these initiatives, we have set demanding targets in terms of Logistic Center utilization, category management, and e-commerce. Each of these areas will be important in helping us achieve our financial goals for 2001 and beyond.

“To increase shareholder value, in November we became one of the first companies to dual-list our shares on both Israeli and US stock exchanges. The immediate result was an influx of Israeli and European investors whose trading boosted our share price and liquidity.”

Mr. Dar concluded, “Overall, we are very pleased with our 2000 results, and optimistic looking forward. During 2000, we proved our ability to set the right strategic agenda, and to implement it through focused hands-on management and hard work. As we enter 2001, we have sharpened our work plan, and are confident in our ability to deliver continued financial improvement.”

The Company will hold a teleconference to review and discuss the results on March 6, 2001, at 10:30AM (EST). The access number from the US or Canada is 888-273-9887. The access number from outside the US and Canada is 612-332-0720. To participate, please call the access number a few minutes before 10:30AM. A taped replay of the teleconference will be available after 1:30PM (EST) on March 6, 2001, until midnight, March 7, 2001. To access the replay, please call 800-475-6701 from the US or Canada, and 320-365-3844 from outside the US and Canada. The access code for the replay is 571459.

Blue Square is a leading retailer in Israel. A pioneer of modern food retailing in the region, Blue Square currently operates 168 supermarkets under different formats, each offering varying levels of service and pricing.

The statements contained in this release which are not historical facts contain forward-looking information with respect to plans, projections, or future performance of the Company, the occurrence of which involve certain risks and uncertainties, including risk of market acceptance, the effect of economic conditions, the impact of competitive pricing, supply constraints, the effect of the Company’s accounting policies, as well as certain other risks and uncertainties which are detailed in the Company’s filings with the Security and Exchange Commission, particularly the prospectus with respect to its public offering in July,1996.


  • (a) The convenience translation of the Adjusted New Israeli Shekel (NIS) into US dollars was made at the rate of exchange prevailing at December 31, 2000: US $1.00 equals 4.042 NIS. The translations were made solely for the convenience of the reader.
  • (b) In accordance with applicable Israeli accounting principles, the Company maintains its accounts and presents its financial statements in New Israeli Shekels (“NIS”) adjusted for changes in the Israeli consumer price index (“CPI”) through the latest balance sheet date (“Adjusted CPI”). The Israeli CPI increased by 0.47% for the three months ended December 31, 2000 and remained flat at 0% for the full year ended December 31, 2000.

                       Blue Square – Israel Ltd.
Condensed Consolidated Statement of Income
(In thousands, except for per share data)

Convenience
Translation
into US$
December 2000 adjusted NIS Three Months
Three Months Ended Year Ended Ended
December 31, December 31, December 31,
2000 1999 2000 1999 2000
——— ——— ——— ——– ————
Unaudited Unaudited Audited Audited Unaudited
——— ——— ——— ——– ————

Sales 1,293,394 1,223,328 5,199,039 4,929,484 $319,989
Cost of
sales 925,340 900,615(1) 3,759,756 3,624,024(1) $228,931
——— ——— ——— ——— ———
Gross
profit 368,054 322,713 1,439,283 1,305,460 $ 91,057

Operation &
administrative
expenses 302,038 278,230(1) 1,168,030 1,084,473(1) $ 74,725
——— ——— ——— ——— ———
Operating
income 66,015 44,483 271,253 220,987 $ 16,332

Financial
expenses,
net (13,394) (5,890) (41,738) (26,655) $ (3,314)
——— ——— ——— ——— ———
52,621 38,593 229,515 194,332 $ 13,019

Amortization
of goodwill (1,199) (1,594) (5,617) (5,800) $ (297)

Other (expenses)
income, net (5,868) (1,745) 19,139 (7,104) $ (1,452)
——— ——— ——— ——— ———
Income before
taxes
on income 45,554 35,254 243,037 181,428 $ 11,270

Taxes on
income 16,700 14,876 90,479 71,179 $ 4,132
——— ——— ——— ——— ———
28,854 20,378 152,558 110,249 $ 7,139

Equity in
results of
affiliated (74) 113 1,306 593 $ (18)
——— ——— ——— ——— ———
28,779 20,491 153,864 110,842 $ 7,120
Minority
interest in
earnings of
subsidiaries,
net (5,148) (4,027) (21,994) (20,167) $ (1,274)
——— ——— ——— ——— ———
Net income
for the period
from continued
operations 23,631 16,464 131,870 90,675 $ 5,846

Discontinued
operations,
net of taxes (993) – (2,500) (9,649) $ (246)
——— ——— ——— ——— ———
Net income
for the
period 22,638 16,464 129,370 81,026 $ 5,601
========= ========= ========= ========= =========

Basic and
diluted earnings
per ordinary share
or per ADS from
continued
operations 0.62 0.43 3.43 2.36 $ 0.15

Basic and
diluted earnings
per ordinary share
or per ADS from
discontinued
operations (0.03) – (0.06) (0.25) $ 0.01

Basic and
diluted earnings
per ordinary share
or per ADS 0.59 0.43 3.37 2.11 $ 0.14
========= ========= ========= ========= =========
Weighted average
no. of shares
outstanding
during the
period 38,400,000 38,400,000 38,400,000 38,400,000 38,400,000

(1) reclassified

Blue Square – Israel Ltd.
Condensed Consolidated Balance Sheet
(in thousands, adjusted to the NIS of December 2000, audited)

Convenience
Translation
into US$
————
December 31, December 31, December 31,
2000 1999 2000
———— ———— ————

ASSETS
Current assets
Cash and cash
equivalents 1,413 9,525 $350
Marketable
securities 32,166 70,943 $7,960
Trade
receivables 535,906 525,529 $132,617
Other accounts
receivable and
prepaid expenses 37,477 61,768(1) $9,724
Inventories 291,908 303,027 $72,237
———— ———— ————
898,870 970,792 $222,438

Long-term Investments
Investments in
affiliates 2,124 67,917 $526
Long-term loan to
joined controlled
entities 23,068 10,136 $5,708
———— ———— ————
25,192 78,053 $6,234

Fixed assets 2,843,758 2,584,587 $703,726
Cost 827,793 730,421 $204,878
———— ———— ————
Less -accumulated
depreciation 2,015,965 1,854,166 $498,878

Intangible assets
and deferred charges,
net 103,530 117,331 $ 25,619
———— ———— ————
3,043,557 3,020,342 $753,169
============ ============ ============

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities
Short term credit
from banks and
others 328,128 367,666 $81,200
Trade payables 682,824 709,604 $168,974
Short-term loan
from parent
cooperative and
current accounts 4,657 129,925 $1,152
Other accounts
payable 245,196 225,742(1) $60,677
———— ———— ————
1,260,805 1,432,937 $312,003

Long-term liabilities,
net of current maturites
Long-term loans
from banks and
others 290,041 187,600 $71,775
Debentures 31,570 55,584 $7,812
Deferred taxes 24,367 24,033 $6,030
Accrued severance pay,
net 16,596 12,065 $4,107
———— ———— ————
362,574 279,282 $89,724

Minority interest 141,933 120,205 $35,123
———— ———— ————
Shareholders` equity
Share capital 49,184 49,184 $12,171
Additional paid in
capital 693,165 693,165 $171,533
Retained earnings 535,896 445,569 $132,615
———— ———— ————
1,278,245 1,187,918 $316,319

3,043,557 3,020,342 $753,169
============ ============ ============

(1) reclassified

Blue Square – Israel Ltd.
Selected Operating Data
(in thousands, adjusted to the NIS of December 2000)

Convenience
Translation
into US$
Three months ended Year Ended Three months
December 31, December 31, December 31,
2000 1999 2000 1999 2000
——- ——- ——- ——- ————-

Sales
(in millions) 1,293 1,223 5,199 4,929 $320

Operating
income
(in millions) 66.0 44.5 271.3 221.0 $16.3

Number of
stores
(at end
of period) 168 165 168 165 na
Stores added
during the
period 2 5 9 12 na
Stores closed
during the period 3 1 6 5 na

Total square
meters
(at end
of period) 258,000 239,000 258,000 239,000 na
Additional
square meters,
net 900 7,650 19,000 19,100 na

Same store sales -3.2% -6.6% -4.4% -4.0% na

Sales per square
meter 5,021 5,195 20,851 21,773 $1,242

Sales per employee
(in thousands) 170 169 701 679 $42

EBITDA
(in millions) 109 77 412 340 $27

EBITDA Margin 8.4% 6.3% 7.9% 6.9% na

Note: EBITDA is defined as operating income before depreciation
and amortization