Net Income Up 53% For The 3rd Quarter
Blue Square-Israel Ltd. (NYSE: BSI) yesterday announced results for the third quarter and nine months ended September 30, 2000.
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Results of the Third Quarter
Revenues for the third quarter of 2000 were NIS 1,355.2 million (US$ 336.8 million)(a), an increase of 6.2% compared to NIS 1,276.5 million(b) for the third quarter of 1999. Gross margins for the third quarter of 2000 rose to 28.2% compared to 26.4% for the third quarter of 1999.
The Company’s third quarter operating income was NIS 68.2 million (US$ 16.9 million), an increase of 39% compared to NIS 49.0 million for the third quarter of 1999. Operating margins for the period rose to 5.0%, compared to 3.8% 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 success of the Company’s ongoing efficiency program. These positive factors were partially offset by costs associated with the opening of new stores during the quarter.
Financial expense for the third quarter rose to NIS 14.4 million (US$ 3.6) compared to NIS 3.9 million in the third quarter of 1999. This substantial increase derives primarily from the adverse effect of the gap between the current quarter’s 0.84% decrease in the Israeli CPI compared to the 1.2% increase in the Israeli CPI during the third quarter of 1999. The Company’s financial statements are adjusted for inflation according to Israeli GAAP. Therefore:
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By GlobalData- (i) The Company’s net unlinked monetary liabilities appreciate as a result of a negative CPI, and depreciate as a result of a positive CPI. For the current quarter, the appreciation of excess net unlinked monetary liabilities generated financial expense, while for the third quarter of 1999, the depreciation generated financial income.
- (ii) The Company’s long-term linked loans are adjusted to the CPI published as of the end of the quarter, while all other balance sheet items are adjusted according to the CPI which is published one month later.
Both these factors affected the current quarter’s financial expense.
“Other Income/Expenses” for the third quarter of 2000 included the write-off of the unamortized goodwill associated with the prior years’ acquisition of a subsidiary in the amount of NIS 4.2 million due to a permanent decrease in its value. In the corresponding quarter of 1999, “Other Expense” included a one-time payment of NIS 5.3 million to the real estate tax authorities regarding long-term property leases.
The Company’s effective tax rate for the third quarter decreased as a result of an agreement reached with Israeli tax authorities regarding previously reported capital gain.
Net income for the quarter rose by 53% to NIS 26.9 million (US$ 6.7 million), or NIS 0.70 per ADS (US$ 0.17), compared to NIS 17.6 million, or NIS 0.46 per ADS for the third quarter of 1999. Excluding the non-recurring items detailed above, net income for the quarter rose by 30% compared to the corresponding quarter in 1999.
During the quarter, sales per employee increased by 3.9%, reflecting the Company’s ongoing program to streamline the workforce. Same store sales for the third quarter decreased by 3.5%, partially reflecting the influence of the holiday season compared to the previous year.
Results of the First Nine Months
Revenues for the first nine months of 2000 were NIS 3,887.3 million (US$ 966.0), an increase of 5.4% compared to NIS 3,688.8 million for the first nine months of 1999. Gross margins rose to 28.0% in the first nine months of 2000 from 27.1% in the first nine months of 1999.
The Company’s operating income for the first nine months of 2000 rose 16% to NIS 204.3 million (US$ 50.8 million) from NIS 175.7 million in the first nine months of 1999. Operating margin for the period rose to 5.3%, compared to 4.8% for the corresponding period in 1999, reflecting an improvement of gross margin and the ongoing control of operating expenses.
During the first quarter of 2000, the Company divested its holdings in Home Centers, resulting in a capital gain of approximately NIS 24 million after tax. The capital gain was accounted for as “Other Income”.
Net income for the first nine months of 2000 rose by 65% to NIS 106.2 million (US$ 26.4 million), or NIS 2.77 per ADS (US$ 0.69), compared to NIS 64.3 million, or NIS 1.66 per ADS for the first nine months of 1999. Excluding the non-recurring items detailed above, net income for the nine months rose by 17% compared to the first nine months of 1999.
Comments of Management
Commenting on the news, Yoram Dar, Blue Square’s President and Chief Executive Officer, said, “For three quarters now, strategies adopted last year have paid off with continually improving revenues and margins, and lower operating expenses. We continue to streamline our workforce and to improve the operations of our logistics center. Our six MEGA stores are delivering exceptional performance, and we continue making progress as we pursue aggressive goals for our private label and category management programs.
“Although Israel’s political situation during the last two months has been difficult, it has not affected our sales. Our stores are distributed widely throughout every region of the country, while security problems have been concentrated in just a few small geographical areas. People are staying home more, which actually increases average food demand.”
Mr. Dar continued, “We continue expanding our operations, with an emphasis on the MEGA format. During the quarter, we opened three new stores in 8,000 square meters, converted one Super Center into MEGA. During the next few months, we plan to open three additional new stores including a new MEGA in Jerusalem.
“As announced today in parallel with this press release, our shares will soon be listed on the Tel Aviv Stock Exchange in parallel with our listing on the New York Stock Exchange. Because our share will be exposed to more potential Israeli investors and will become more convenient for European traders, we believe the double listing will increase our liquidity.”
Mr. Dar concluded, “Overall, we are pleased with our progress. Our strategy is delivering improved revenues and margins, and we are on track with new initiatives. We are planning an e-commerce program which will be launched next year, and increasing our usage of one-to-one marketing techniques. We believe all these efforts will continue to improve our financial results in the future.”
A three-member management committee which includes acting Chairman of Blue Square-Israel, Mr. D. Brodet, has recently been appointed to replace the senior management of the Company’s major shareholder. On an operating basis, the Company continues to attend to business as usual, with the goal of achieving the greatest possible value for all of its shareholders.
Blue Square is a leading retailer in Israel. A pioneer of modern food retailing in the region, Blue Square currently operates 169 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 dowas made at the rate of exchange prevailing at September 30, 2000: US $1.00 equals 4.024 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 decreased by 0.84% for the three months ended September 30, 2000 and decreased by 0.5% for the nine months ended September 30, 2000.
Blue Square - Israel Ltd.
Condensed Consolidated Statement of Operations
(In thousands, except for per share data)
(unaudited)
September 2000 adjusted NIS
---------------------------
Three Months Ended
September 30,
2000 1999
------------- ------------
Sales 1,355,218 1,276,518
Cost of sales 973,424 938,980
------------- ------------
Gross profit 381,794 337,538
Operation &
administrative
expenses 313,607 288,363
------------- ------------
Operating income 68,187 49,175
Financial
expenses, net (14,437) (3,877)
------------- ------------
53,750 45,298
Amortization
of goodwill (1,449) (1,449)
Other (expenses)
income, net (4,716) (5,416)
------------- ------------
Income before
taxes on
income 47,585 38,433
Taxes on income 15,178 15,564
------------- ------------
32,407 22,869
Equity in
results of
affiliated,
net of taxes 369 (58)
------------- ------------
32,776 22,811
Minority
interest in
earnings of
subsidiaries,
net (5,918) (5,259)
------------- ------------
Net income for
the period
before
discontinued
operation 26,858 17,552
Discontinued
operations,
net of taxes - -
------------- ------------
Net income for
the period 26,858 17,552
============= ============
Basic and
diluted
earnings per
ordinary share
or per ADS
from continued
operations 0.70 0.46
Basic and
diluted
earnings per
ordinary share
or per ADS
from
discontinued
operations - -
Basic and
diluted
earnings per
ordinary share
or per ADS 0.70 0.46
------------- ------------
Weighted average
no. of shares
outstanding
during the
period 38,400,000 38,400,000
============= ============
Convenience
Translation
into US$
-----------------
Three Months
September 2000 adjusted NIS Ended
---------------------------
Nine Months Ended
September 30, September 30,
2000 1999 2000
----------------------- -----------
Sales 3,887,326 3,688,773 $ 336,784
Cost of sales 2,797,185 2,689,708 $ 241,905
----------------------- -----------
Gross profit 1,090,141 999,065 $ 94,879
Operation &
administrative
expenses 885,866 823,388 $ 77,934
----------------------- -----------
Operating income 204,275 175,677 $ 16,945
Financial
expenses, net (28,211) (20,668) $ (3,588)
----------------------- -----------
176,064 155,009 $ 13,357
Amortization
of goodwill (4,397) (4,186) $ (360)
Other (expenses)
income, net 24,890 (5,334) $ (1,172)
----------------------- -----------
Income before
taxes on
income 196,557 145,489 $ 11,825
Taxes on income 73,433 56,039 $ 3,772
----------------------- -----------
123,124 89,450 $ 8,053
Equity in
results of
affiliated,
net of taxes (126) 478 $ 92
----------------------- -----------
122,998 89,928 $ 8,145
Minority
interest in
earnings of
subsidiaries,
net (16,767) (16,064) $ (1,471)
----------------------- -----------
Net income for
the period
before
discontinued
operation 106,231 73,864 $ 6,674
Discontinued
operations,
net of taxes - (9,603) -
----------------------- -----------
Net income for
the period 106,231 64,261 $ 6,674
======================= ===========
Basic and
diluted
earnings per
ordinary share
or per ADS
from continued
operations 2.77 1.90 $ 0.17
Basic and
diluted
earnings per
ordinary share
or per ADS
from
discontinued
operations - (0.25) -
Basic and
diluted
earnings per
ordinary share
or per ADS 2.77 1.65 $ 0.17
----------------------- -----------
Weighted average
no. of shares
outstanding
during the
period 38,400,000 38,400,000 38,400,000
======================= ===========
Blue Square - Israel Ltd.
Condensed Consolidated Balance Sheet
(In thousands, adjusted to the NIS of September 2000)
Convenience
Translation
into US$
September 30, December 31, September 30,
2000 1999 2000
(Unaudited) (Audited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 2,796 9,481 695
Marketable securities and
short-term deposits 76,074 70,610 18,905
Trade receivable 646,070 523,064 160,554
Other accounts receivable
and prepaid expenses 80,744 54,023 20,066
Inventories 314,486 301,605 78,153
1,120,170 958,783 278,373
Long-term Investments
Investments in affiliates 784 67,599 195
Long-term loan to jointly
controlled entities 20,646 10,088 5,131
21,430 77,687 5,326
Fixed assets 2,783,819 2,572,464 691,802
Cost 791,104 726,994 196,596
Less -accumulated
depreciation 1,992,715 1,845,470 495,206
Intangible assets and
deferred charges, net 105,077 116,780 26,113
Total Assets 3,239,392 2,998,720 805,018
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Credit from banks
and others 308,703 365,942 76,715
Trade payables 838,011 706,275 208,253
Short term loan from
parent corporation 3,537 129,316 879
Other accounts payable 330,675 217,228 82,177
1,480,926 1,418,761 368,024
Long-term liabilities net
of current maturities
Long-term loans from
banks and others 300,272 186,720 74,620
Debentures 31,570 55,323 7,845
Deferred taxes 24,859 23,921 6,178
Accrued severance pay, net 16,687 12,008 4,147
373,388 277,972 92,790
Minority interest 135,359 119,641 33,638
Shareholders' equity
Share capital 48,953 48,953 12,165
Additional paid in capital 689,914 689,914 171,450
Retained earnings 510,852 443,479 126,951
1,249,719 1,182,346 310,566
3,239,392 2,998,720 805,018
Blue Square - Israel Ltd.
Selected Operating Data
(in thousands, adjusted to the NIS of September 2000)
Convenience
Translation
into US$
------------
Three months Nine months Three months
ended ended Ended
September 30, September 30, September 30,
2000 1999 2000 1999 2000
-------------- -------------- ------------
Sales
(in millions) 1,355 1,277 3,887 3,689 337
Operating income
(in millions) 68.2 49.0 204.3 175.7 17
Number of stores
(at end of period) 169 161 169 161 na
Total square
meters (at
end of period) 257,650 229,700 257,650 229,700 na
Same store sales -3.50% -7.59% -5.20% -2.60% na
Sales
per sq. mtr. 5,334 5,749 15,688 16,294 1,326
Sales per employee
(in thousands) 187 180 566 544 46
EBITDA
(in millions) 104 79 302 262 26
EBITDA Margin 7.68% 6.19% 7.77% 7.10% na
