Form 6-K Alon Blue Square Israel For: May 27

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of May 2015

 

ALON BLUE SQUARE ISRAEL LTD.

(translation of registrant’s name into English)

 

Europark Yakum, France Building,

Yakum 60972 Israel

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40 F:

 

Form 20-F  x     Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ______

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ______

 

Attached hereto and incorporated by reference herein are the following documents:

 

1. Press release entitled "Alon Blue Square Israel Ltd. (NYSE: BSI) Announces the Financial Results for the First Quarter of 2015"

 

  

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned, thereunto duly authorized.

 

	ALON BLUE SQUARE ISRAEL LTD.
May 27, 2015		By:	/s/ Ortal Klein
			Ortal Klein, Adv.
			Corporate Secretary

 

 

 

Contact:

Alon Blue Square Israel Ltd.

Yehuda van der Walde, CFO

Toll-free telephone from U.S. and Canada: 888-572-4698

Telephone from rest of world: 972-9-961-8504

Fax: 972-9-961-8636

Email: [email protected]

 

May 27, 2015 - Yakum

 

ALON BLUE SQUARE ISRAEL LTD. (NYSE: BSI) ANNOUNCES THE FINANCIAL RESULTS FOR THE FIRST QUARTER OF 2015

 

*

The Company's revenues, net of government fess, in the first quarter of 2015 amounted to NIS 2.5 billion compared to NIS 2.7 billion in the first quarter of 2014. The decrease in revenues between periods mainly derived from a decrease in fuel prices in the Fueling and Commercial sites segment.

 

*

Operating profit in the first quarter of 2015 amounted to NIS 1.4 million compared to a loss of NIS 74.9 million in the fourth quarter of 2014 and a profit of NIS 10.5 million in the first quarter of 2014.

 

*

Cash flow from operating activities amounted to NIS 171.1 million compared to NIS 140.9 million in the corresponding quarter last year and NIS 27.5 million in the fourth quarter of 2014. The main increase in cash flows derived from changes in the working capital in the amount of NIS 33.7 million.

 

*

Adjusted EBITDA amounted to NIS 81.3 million in the first quarter of 2015 compared to NIS 84.8 million in the first quarter of 2014 and NIS 68.8 million in the fourth quarter of 2014.

 

*

In the Fueling and Commercial sites segment- in the first quarter of 2015, the results of this segment amounted to NIS 22.9 million compared to NIS 27.1 million in the first quarter of 2014. This quarter included higher inventory losses by more than NIS 9 million following the decrease in fuel prices compared to the corresponding quarter last year.

 

*

In the Supermarkets segment- in the first quarter of 2015, the results of this segment amounted to a loss of NIS 24.6 million compared to a loss of NIS 29.4 million (including a profit from asset realization of NIS 10 million) in the fourth quarter of 2014, the decrease in loss derived from an increase in sales of YOU chain. In the corresponding quarter last year, the results of the segment amounted to a loss of NIS 6.5 million. The increase in the loss compared to the corresponding quarter derived from a decrease in the gross profit margin following the completion of YOU chain deployment.

 

  

*

In the Real Estate segment – in the first quarter of 2015, the results of this segment amounted to NIS 26.1 million compared to NIS 44.0 million in the fourth quarter of 2014 and NIS 24.0 million in the first quarter of 2014. The fourth quarter of 2014 included higher revaluation profits due to lowering the discounting interest.

 

*

In the Houseware and textile segment – in the first quarter of 2015, results amounted to NIS 7.3 million compared to NIS 5.8 million in the first quarter of 2014. The increase in the results mainly derived from the Passover holiday timing.

 

*

Others segment

 

-

Diners – the Company's share in the net income of Diners amounts to NIS 4.4 million in the first quarter of 2015 compared to NIS 5.9 million in the corresponding quarter last year.

 

-

You Phone – a decrease in operating loss in the period at the rate of 62% compared to the corresponding period last year.

 

*

The net aggregate loss of the Company in the first quarter of 2015 amounted to NIS 30.5 million compared to a net loss of NIS 339.1 million in the fourth quarter of 2014 (which included amortization of tax asset in amount of NIS 141 million) and a loss of NIS 21.8 million in the first quarter of 2014.

 

Consolidated profit and loss

 

		2015				2014
Consolidated profit and loss, NIS in millions		Q1				Q4				Q3				Q2				Q1
Revenues from sales, net			2,482				2,572				2,887.5				2,886.9				2,714.9
Gross profit			591.9				523.7				650.3				644.2				601.8
Operating profit (loss) before financing			1.4				(74.9	)			80.1				40.6				10.5
Net income (loss)			(30.5	)			(349.1	)			12.0				(19.1	)			(21.8	)
Adjusted EBITDA			81.3				68.8				136.5				110.4				84.8

 

 

Segment results:

 

		2015				2014
Segment results, NIS in millions		Q1				Q4				Q3				Q2				Q1
Fueling and Commercial sites			22.9				30.6				44.4				38.4				27.1
Supermarkets *			(24.6	)			(29.4	)			59.5				15.8				(6.6	)
Houseware and textile			7.3				1.0				3.0				1.7				5.8
Real Estate			26.1				44.0				12.1				22.5				24.0

 

* The third quarter of 2014 included a gain of NIS 28 million from realizing part of the logistic center complex in Rishon Lezion. The fourth quarter of 2014 included a gain of NIS 10 from realization of assets.

 

  

Results for the first quarter of 2015¹

 

Gross revenues

Revenues (including government levies) in the first quarter of 2015 amounted to NIS 3,230.2 million (U.S. $811.6 million) as compared to revenues of NIS 3,448.3 million in the comparable quarter last year, a decrease of 6.3% which mainly derives from a decrease in fuel prices between periods resulting in a decline in Dor Alon sales.

 

Revenues from sales, net

 

Revenues of the Fueling and Commercial sites segment – amounted in this quarter to NIS 967.3 million (U.S. $243.0 million) as compared to NIS 1,194.2 million in the corresponding quarter last year, a decrease of 19.0%. The main decrease was due to decrease in fuel prices and was partly offset by the increase in fuel quantities sold.

 

Revenues of the Supermarkets segment ²– amounted in this quarter to NIS 1,369.3 million (U.S. $344.0 million) as compared to NIS 1,314.1 million in the corresponding quarter last year, an increase of 4.2%. The increase derives mainly from increase in YOU stores and the Passover holiday timing that occurred this year at the beginning of April while last year it occurred in the middle of April, increase in the sales of SSS stores in this quarter compared to the corresponding quarter last year which amounted to 3.2%.

 

Revenues of the Houseware and textile segment – amounted in this quarter to NIS 89.8 million (U.S. $22.6 million) compared to NIS 80.4 million in the corresponding quarter last year, an increase of 11.7%. The increase in revenues derives from the Passover holiday timing that occurred this year at the beginning of April while last year it occurred in the middle of April.

 

Revenues of the Real Estate segment – increase in rental fees of 75.7% in the first quarter of 2014 from NIS 10.3 million to NIS 18.1 million (U.S. $4.5 million) in this quarter. The increase in revenues in this quarter mainly derives from increase in rented spaces to external parties compared to the corresponding period last year.

 

¹ The Company operates in 4 reportable segments: fueling and commercial sites, supermarkets, houseware and textile and real estate. Segment reporting is included in this report below.

² The segment revenues do not include branches which were resolved to cease their operations and therefore are not included in the segment.

 

  

Gross profit in the first quarter of 2015 amounted to NIS 591.9 million (U.S. $148.7 million) (23.8% of revenues) as compared to gross profit of NIS 601.8 million (22.2% of revenues) in the comparable quarter last year, a decrease of 1.6%. The decrease in the gross profit compared to the corresponding quarter last year was mainly due to the decrease in gross profit in the Fueling and Commercial sites segment.

 

In the Fueling and Commercial sites segment, gross profit amounted to NIS 186.4 million (U.S. $46.8 million), (19.3% of revenues) compared to NIS 190.2 million in the comparable quarter last year (15.9% of revenues), a decrease of 2%. The main decrease in the gross profit mainly derived from higher inventory losses in this quarter compared to the corresponding quarter last year of NIS 9 million. Said decrease was partly offset by an increase in fuel quantities sold and sales of convenience stores.

 

In the Supermarkets segment, gross profit amounted to NIS 335.6 million (U.S. $84.3 million), (24.5% of revenues) compared to NIS 338.3 million in the first quarter of 2014 (25.7% of revenues), a decrease of 0.8% deriving from an increase in sales of the YOU discount format and from price reduction.

 

In the Houseware and textile segment, gross profit amounted to NIS 48.9 million (U.S. $12.3 million), (59.4% of revenues) compared to NIS 44.2 million in the first quarter of 2014 (62.3% of revenues), an increase of 10.6% which was derived from the increase in gross profit rate in the houseware segment and was partly offset from a decrease in gross profit rate in the textile segment.

 

Selling, general and administrative expenses in the first quarter of 2015 amounted to NIS 598.7 million (U.S. $150.4 million) (24.1% of revenues), compared to expenses of NIS 602.4 million (22.2% of revenues) in the comparable quarter last year.

 

In the Fueling and Commercial sites segment, these expenses amounted to NIS 165.7 million (U.S. $41.6 million) compared to NIS 163.4 million in the first quarter of 2014, an increase of 1.4% deriving from opening new sites.

 

In the Supermarkets segment, selling, general and administrative expenses amounted to NIS 356.1 million (U.S. $89.5 million) compared to expenses of NIS 334.5 million in the first quarter of 2014, an increase of 6.5% deriving mainly from launching YOU chain and increase in real expenses.

 

  

In the Houseware and textile segment, these expenses amounted to NIS 41.4 million (U.S. $10.4 million) compared to NIS 38.4 million in the first quarter of 2014, an increase of 7.8% in expenses deriving mainly from expanding both areas of activity and the effect of the holiday timing.

 

In the Real Estate segment, these expenses amounted to NIS 6.3 million (U.S. $1.6 million) compared to NIS 5.2 million in the first quarter of 2014.

 

Increase in fair value of investment property in this quarter, the Company recorded a profit in the amount of NIS 14.8 million (U.S. $3.7 million) compared to a profit of NIS 10.5 million in the corresponding period last year.

 

Other expenses, net other expenses in this quarter amounted to NIS 10.8 million (U.S. $2.7 million) compared to other expenses of NIS 8.7 million in the first quarter of 2014.

 

Share in gains of associates in this quarter amounted to NIS 4.2 million (U.S. $1.1 million) compared to NIS 9.3 million in the corresponding quarter last year.

 

Operating loss before financing amounted to NIS 1.4 million (U.S. $0.4 million) (0.1% of revenues) in this quarter as compared to operating profit of NIS 10.5 million (0.4% of revenues) in the first quarter of 2014. The decrease derived mainly from the Supermarkets segment.

 

In the Fueling and Commercial sites segment, operating profit in this quarter amounted to NIS 22.9 million (U.S. $5.8 million) (2.4% of revenues) as compared to operating profit of NIS 27.1 million in the first quarter of 2014, a decrease of 15.5%. The main decrease in operating profit derived mainly from decrease in revenues.

 

In the Supermarkets segment, operating loss in this quarter amounted to NIS 25.0 million (U.S. $6.3 million) (1.8% of revenues) as compared to operating loss of NIS 6.5 million in the first quarter of 2014. The increase in operating loss derived from erosion of gross profit and increase in selling, administrative and general expenses.

 

  

In the Houseware and textile segment, operating profit in this quarter amounted to NIS 7.3 million (U.S. $1.8 million) (8.9% of revenues) as compared to operating profit of NIS 5.8 million in the first quarter of 2014. The increase in operating profit derives from increase in sales, gross profit and was partly offset from an increase in selling, general and administrative expenses.

 

In the Real Estate segment, operating profit in this quarter amounted to NIS 26.1 million (U.S. $6.6 million) (144.4% of revenues) as compared to operating profit of NIS 24.0 million in the first quarter of 2014, an increase of 8.8%, which mainly derives from an increase in rental income.

 

Finance costs, net in this quarter amounted to NIS 5.9 million (U.S. $1.5 million) as compared to net finance costs of NIS 32.7 million in the first quarter of 2014. The decrease in finance costs, net derives mainly from decrease in CPI between the periods.

 

Taxes on income tax expenses in this quarter amounted to NIS 26.0 million (U.S. $6.5 million) as compared to a tax benefit of NIS 3.4 million in the first quarter of 2014.

 

Net loss in this quarter amounted to NIS 30.5 million (U.S. $7.7 million) compared to a net loss of NIS 21.9 million in the corresponding quarter last year (which includes loss from continued operations of NIS 18.8 million and a loss from discontinued operations of NIS 3.1 million) in the first quarter of 2014. The loss of this quarter attributed to the Company's shareholders amounted to NIS 50.7 million (U.S. $12.7 million) or NIS 0.77 per share (U.S. $0.19) and the income attributed to non-controlling interests amounted to NIS 20.1 million (U.S. $5.1 million).

 

  

Cash flows for the first quarter of 2015

 

Cash flows from operating activities: Net cash flow provided by operating activities amounted to NIS 171.1 million (U.S. $43.0 million) in the first quarter of 2015 compared to net cash flow provided by operating activities of NIS 140.9 million in the comparable quarter last year. The main increase in cash flow provided by operating activities in this quarter compared to the corresponding quarter last year derives from changes in working capital in the amount of NIS 33.7 million (U.S. $8.5 million), which was offset from an increase in operating loss of NIS 7.4 million (U.S. $ 1.9 million) and from taxes paid in the amount of NIS 11.3 million (U.S. $2.3 million).

 

Cash flows used in investing activities: Net cash flows provided by investing activities amounted to NIS 131.7 million (U.S. $33.1 million) in this quarter as compared to net cash flows used in investing activities of NIS 113.7 million in the comparable quarter last year. Cash flows provided by investing activities in this quarter mainly included the proceeds from realization of property of NIS 85.2 million (U.S. $21.4 million), repayment of loans granted to interested parties and others of NIS 49.1 million (U.S. $ 12.3 million) and proceeds from realization of marketable securities, net, in the amount of NIS 67.9 million (U.S. $ 17.1 million) offset by the purchase of investment property, property and equipment and intangible assets of total NIS 52.2 million (U.S. $13.1 million). In the first quarter of 2014 the cash flows used in investing activities mainly included the purchase of investment property, property and equipment, and intangible assets of NIS 81.6 million, grant of long term loans of NIS 46.5 million, net of proceeds from marketable securities in the amount of NIS 12.0 million, and interest received of NIS 5.4 million.

 

Cash flows used in financing activities: Net cash flows used in financing activities amounted to NIS 44.6 million (U.S. $11.2 million) in this quarter as compared to net cash flows used in financing activities of NIS 2.7 million in the corresponding quarter last year. The cash flows used in financing activities this quarter mainly included repayment of long term loans of NIS 67.9 million (U.S. $17.1 million), repayment of commercial papers of NIS 17.2 million (U.S. $4.4 million), decrease in short term credit of NIS 106.8 million (U.S. $26.8 million) and interest payments of NIS 33.3 million (U.S. $8.4 million), and were offset by receiving long term loans of NIS 95.0 million (U.S. $23.9 million), purchase of shares in subsidiaries by non- controlling interest in the amount of NIS 88 million (U.S. $22.1 million). The net cash flows used in financing activities in the first quarter of 2014 included mainly repayment of long term loans of NIS 39.1 million, interest payments of NIS 41.8 million and a payment of dividend to non-controlling interest of NIS 40.3 million, and was offset by receipt of long term loan of NIS 100.0 million and increase in short term bank credit of NIS 20.8 million, net.

 

  

Additional Information

 

Adjusted EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization)³

In the first quarter of 2015 adjusted EBITDA was NIS 81.3 million (U.S. $20.4 million) (3.3% of revenues) compared to NIS 84.8 million (3.1% of revenues) in the first quarter of 2014.

 

Events during the reporting period

 

Fueling and Commercial sites segment

 

As of March 31, 2015, Dor Alon operated 212 fueling stations and 219 convenience stores in various formats.

 

Supermarkets segment

 

a.

As of March 31, 2015, Mega operated 192 supermarkets under different formats.

 

³ Use of financial measures that are not in accordance with Generally Accepted Accounting Principles

Adjusted EBITDA is a measure that is not in accordance with Generally Accepted Accounting Principles (Non-GAAP) and is defined as income before financial income (expenses) net, other gains (losses) net, changes in fair value of investment property, taxes, share in gains of associates, depreciation and amortization in addition to share in adjusted EBITDA of equity accounted investees and share in EBITDA of branches which were resolved to cease their operation and accumulated revaluation profits of real estate properties that were realized in the period and capital gains from realizing real estate properties that were self-used. It is an accepted ratio in the retail industry. It is presented as an additional performance measure, since it enables comparisons of operating performances between periods and companies while neutralizing potential differences resulting from changes in capital structures, taxes, age of property and equipment and its related depreciation expenses. Adjusted EBITDA, however, should not be related to as a single measure or as an alternative to operating income, another performance indicator and to cash flow information, which are prepared using Generally Accepted Accounting Principles (GAAP) as indicators of profit or liquidity. Adjusted EBITDA does not take the costs of servicing debt and other liabilities into account, including capital expenditures and therefore it does not necessarily indicate the amounts that may be available to the use of the company and in addition Adjusted EBITDA should not be compared to other indicators with similar names reported by other companies because of differences in the calculation of these indicators. See the reconciliation between our net income and Adjusted EBITDA which is presented in this press release.

 

 

b.

As of March 31, 2015, the Company operated branches in a total area of 292,000 sq.m. In the first quarter of 2015, 5 branches with a total area of 6,000 sq.m were closed and commercial spaces in branches at a total area of 5,000 sq.m were reduced.

 

Sales per square meter in the Supermarkets segment in the first quarter of 2015 amounted to NIS 4,746 (U.S. $1,192) compared to NIS 4,312 in the corresponding quarter last year.

 

Houseware and textile segment

 

As of March 31, 2015, the Company operates 113 stores (of which 11 franchised) according to the following breakdown: Na'aman – 65 stores, Vardinon – 48 stores.

 

Real Estate segment

 

a.

On March 16, 2015, BSRE declared a dividend distribution of NIS 30 million that was paid on April 15, 2015. The Company's share was NIS 19.1 million (U.S. $ 4.9 million).

 

b.

Wholesale market complex

 

Sale agreements with apartment purchasers

 

On or about the date of issuing the report, the residence company entered into commitment for 699 sale agreements with a scope of NIS 1,760 million (including VAT) and received advances of NIS 1,210 million (including VAT). In addition, with respect to 15 additional units, purchase requests were signed which are in various stages of commercial and/or legal negotiations where some of them may develop into signing sales agreements.

 

Commercial spaces in the mall

 

As of March 31, 2015, lease agreements were signed or are to be signed for 61% of the commercial spaces.

 

c.

Givon Parking Lot – Tel Aviv

 

The parking lot was established by BSRE and a third party via a jointly controlled company and it includes 1,000 parking spaces. The parking lot was opened to the public in April 2015. The development of the square is scheduled to be completed in the second quarter of 2015.

 

General

 

1 .Sale of BSRE shares

 

a.

On February 8, 2015, the Company sold 5% of BSRE shares for NIS 72.3 million. After the sale the Company held 64.71% of BSRE share capital.

 

b.

On February 26, 2015, the Company sold 1% of BSRE shares for NIS 15.4 million. After the sale the Company holds 63.71% of BSRE share capital. The sale was carried out so as to increase the public holding in the share as defined in the stock exchange directive, over 35% on the next examination date effective February 28, 2015 and by that increase the weight of BSRE share according to indicators calculated by the stock exchange.

 

 

2.

On March 10, 2015, Midroog ratified the A3 rating with negative outlook of series C bonds and lowered to P2 the rating of the Company's commercial papers.

 

3.

In addition to the measures included in the Plan, the Company has committed to provide additional funding to support Mega in an aggregate amount not to exceed NIS 240 million to assist Mega Retail if peak temporary liquidity needs arise and if the disposal of the operations of stores is not effectuated in accordance with the schedule provided in the Plan.

 

Subsequent events

 

a.

On April 1, 2015, Midroog lowered the rating of the Company's series C bonds from A3 to Baa1 and put the rating under review with negative –neutral implications. In addition, the rating of the Company's commercial papers remained P2 under review.

 

b.

On May 20, 2015, Midroog lowered the rating from Baa1 to Baa2 and left the rating under review with uncertain implications.

 

c.

In May 2015, the Company completed the repayment of the commercial papers.

 

d.

On May 20, 2015, BSRE declared a dividend distribution of NIS 30 million that will be paid on June 11, 2015.

 

e.

On May 27, 2015, Dor Alon completed the sale of a part of its treasury shares in amount of NIS 50.4 million. As a result, the Company's share in Dor Alon decreased to 71.17%.

 

 

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 March 31, 2015: U.S. $1.00 equals NIS 3.98. The translation was made solely for the convenience of the reader.

 

  

###

 

Alon Blue Square Israel Ltd. (hereinafter: "Alon Blue Square") operates in four reportable operating segments and is the largest retail company in the State of Israel. In the Fueling and Commercial Sites segment, Alon Blue Square through its 71.17% subsidiary, which is listed on the Tel Aviv stock exchange ("TASE"), Dor Alon Energy in Israel (1988) Ltd is one of the four largest fuel retail companies in Israel based on the number of petrol stations and a leader in the field of convenience stores operating a chain of 212 petrol stations and 219 convenience stores in different formats in Israel. In its supermarket segment, Alon Blue Square, as a pioneer in the modern food retail, through its 100% subsidiary, Mega Retail Ltd., currently operates 192 supermarkets under different formats, each offering a wide range of food products, "Near Food" products and "Non-Food" products at varying levels of service and pricing. In its "Housware and textile" segment, Alon Blue Square, through its TASE traded 77.51% subsidiary, Na'aman Group (NV) Ltd. operates specialist outlets in self-operation and franchises and offers a wide range of "Non-Food" products as retailer and wholesaler. In the Real Estate segment, Alon Blue Square, through its TASE traded 63.71% subsidiary Blue Square Real Estate Ltd., owns, leases and develops income producing commercial properties and projects. In addition, Alon Blue Square through its 100% subsidiary, Alon Cellular Ltd, operates an MVNO network in Israel, through Diners Club Israel Ltd., an associate held at 49%, which operates in the sector of issuance and clearance of YOU credit cards to the customer club members of the group and through Dr. Baby Marketing and Distribution 888 Ltd. 100 % held subsidiary as a retailer and wholesaler in the baby products sector.

 

  

Forward-looking statements

 

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, 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 economic conditions in Israel on the sales in our stores and of our products and on our profitability; our ability to compete effectively against low-priced supermarkets, large fuel companies and our other competitors; enactment of new laws and regulations, including the enactment of recommendations of governmental appointed committees and regulations with respect to the procurement of petroleum products by fuel companies and the price of petroleum products that are subject to regulation; quarterly fluctuations in our operating results that may cause volatility of our ADS and share price; fluctuations in the price of petroleum products and increases in excise tax rates imposed on the sale of petroleum products in Israel; 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 the 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 of our store brands due to reports in the media or otherwise; government policies with respect to residential building may have a negative impact on our operations in residential building, and other risks, uncertainties and factors disclosed in our filings with the U.S. Securities and Exchange Commission (SEC), 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, 2014.  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.

 

 

ALON BLUE SQUARE ISRAEL LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF MARCH 31, 2015

(UNAUDITED)

 

														Convenience
														translation
		December 31,				March 31,								March 31,
		2014				2014				2015				2015
	NIS													U.S. dollars
	In thousands
Assets
CURRENT ASSETS:
Cash and cash equivalents			290,102				343,376				544,111				136,711
Investment in securities			362,827				487,993				336,703				84,599
Short-term bank deposits			94,307				94,376				99,587				25,022
Trade receivables			1,030,367				1,236,219				1,096,757				275,567
Other accounts  receivable including current maturities of loans receivable			430,707				571,999				464,316				116,662
Derivative financial instruments			395				777				2,156				542
Income taxes receivable			16,020				23,487				14,225				3,574
Inventories			511,661				652,992				550,184				138,237
			2,736,386				3,411,219				3,108,039				780,914
NON-CURRENT ASSETS:
Investments accounted for using equity method			977,028				978,888				967,050				242,977
Derivative financial instruments			4,698				6,169				4,797				1,205
Real estate inventories			126,012				109,026				130,601				32,814
Investments in securities			59,283				63,401				59,798				15,025
Loans receivable, net of current maturities			135,171				143,316				116,553				29,285
Property and equipment, net			2,322,036				2,523,621				2,299,454				577,752
Investment property			982,619				810,148				1,014,368				254,866
Intangible assets, net			1,140,343				1,191,529				1,135,738				285,361
Other long-term receivables			52,740				30,501				50,825				12,770
Deferred taxes			27,844				189,927				29,199				7,336
			5,827,774				6,046,526				5,808,383				1,459,391
Total assets			8,564,160				9,457,745				8,916,422				2,240,305

  

 

ALON BLUE SQUARE ISRAEL LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF MARCH 31, 2015

(UNAUDITED)

 

														Convenience translation
		December 31,				March 31,								March 31,
		2014				2014				2015				2015
		NIS												U.S. dollars
		In thousands
Liabilities and shareholders’ equity
CURRENT LIABILITIES:
Credit and loans from banks and others			774,626				843,200				646,030				162,319
Current maturities of debentures and convertible debentures			466,935				527,933				460,145				115,614
Current maturities of long-term loans from banks			283,342				269,915				297,741				74,809
Trade payables			1,195,822				1,400,109				1,422,589				357,434
Other accounts payable and accrued expenses			723,274				875,091				943,551				237,073
Customers' deposits			28,212				27,947				28,042				7,046
Derivative financial instruments			1,060				5,907				2,065				519
Income taxes payable			24,393				6,929				12,996				3,265
Provisions			67,697				50,042				51,462				12,930
			3,565,361				4,007,073				3,864,621				971,009
NON CURRENT LIABILITIES:
Long-term loans from banks and others, net of current maturities			1,414,607				1,301,186				1,420,851				356,998
Convertible debentures, net of current maturities			30,738				60,862				30,078				7,557
Debentures, net of current maturities			2,011,999				2,277,830				1,987,323				499,327
Other liabilities			106,267				125,673				109,678				27,557
Derivative financial instruments			1,931				2,334				4,049				1,017
Liabilities in respect of employee benefits, net of amounts funded			58,716				58,219				60,560				15,216
Deferred taxes			232,752				195,326				251,139				63,100
			3,857,010				4,021,430				3,863,678				970,772
Total liabilities			7,422,371				8,028,503				7,728,299				1,941,781
EQUITY:
Ordinary shares of NIS 1 par value			79,881				79,881				79,881				20,071
Additional paid-in capital			1,219,279				1,219,279				1,219,279				306,352
Other reserves			76,661				36,497				127,858				32,125
Accumulated deficit			(711,122	)			(310,848	)			(762,276	)			(191,527	)
			664,699				1,024,809				664,742				167,021
Non-controlling interests			477,090				404,433				523,381				131,503
Total equity			1,141,789				1,429,242				1,188,123				298,524
Total liabilities and equity			8,564,160				9,457,745				8,916,422				2,240,305

 

 

ALON BLUE SQUARE ISRAEL LTD.
CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2015

(UNAUDITED)

 

														Convenience
														translation for
		Year  ended				Three months								the three months
		December 31,				ended March 31,								ended March 31,
		2014				2014				2015				2015
		NIS												U.S. dollars
		In thousands (except per share data)
Revenues			14,048,034				3,448,418				3,230,190				811,606
Less – government levies			2,987,077				733,547				747,992				187,938
Net revenues			11,060,957				2,714,871				2,482,198				623,668
Cost of sales			8,640,992				2,113,046				1,890,310				474,951
Gross profit			2,419,965				601,825				591,888				148,717
Selling, general and administrative expenses			2,459,701				602,432				598,700				150,428
Other gains			95,036				4,056				1,414				355
Other losses			(87,344	)			(12,797	)			(12,171	)			(3,057	)
Increase in fair value of investment property, net			50,258				10,551				14,771				3,711
Share in gains of associates			37,997				9,303				4,224				1,061
Operating  profit			56,211				10,506				1,426				359
Finance income			61,791				16,086				26,027				6,539
Finance expenses			(273,043	)			(48,817	)			(31,957	)			(8,029	)
Finance expenses, net			(211,252	)			(32,731	)			(5,930	)			(1,490	)
Loss  before taxes on income			155,041				22,225				4,504				1,131
Taxes on income (tax benefit)			219,855				(3,434	)			26,036				6,542
Loss from continued operations			374,896				18,791				30,540				7,673
Loss from discontinued operation			3,065				3,065				-				-
			377,961				21,856				30,540				7,673
Attributable to:
Equity holders of the Company			(431,778	)			(31,237	)			(50,662	)			(12,729	)
Non-controlling interests			53,817				9,381				20,122				5,056
Profit (loss) per ordinary share or ADS attributable to equity holders of the company
Basic and fully diluted
Continuing operations			(6.50	)			(0.42	)			(0.77	)			(0.19	)
Discontinued operations			(0.05	)			(0.05	)			-				-
			(6.55	)			(0.47	)			(0.77	)			(0.19	)
Weighted average number of shares or ADSs used for computation of earnings per share (NIS in thousands):
Basic and fully diluted			65,954				65,954				65,954				65,954

 

  

ALON BLUE SQUARE ISRAEL LTD. 

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2015

(UNAUDITED)

 

														Convenience
														translation
		Year ended				Three months ended								for the three months ended
		December 31,				March 31,								March 31,
		2014				2014				2015				2015
		NIS												U.S. dollars
		In thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss  before  taxes  on  income from continuing operations			(155,041	)			(22,225	)			(4,504	)			(1,131	)
Net loss from discontinued operation (before taxes)			(3,065	)			(3,065	)			-				-
Income tax  paid, net			(17,982	)			(4,485	)			(11,307	)			(2,841	)
Adjustments for cash generated from operations			682,006				170,737				186,867				46,949
Net cash provided by operating activities (a)			505,918				140,962				171,056				42,977
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment			(225,250	)			(52,094	)			(40,629	)			(10,208	)
Purchase of investment property			(72,379	)			(26,703	)			(6,992	)			(1,757	)
Purchase of intangible assets			(26,190	)			(2,833	)			(4,580	)			(1,151	)
Proceeds from collection of  short-term bank deposits, net			(504	)			(573	)			(5,280	)			(1,327	)
Proceeds from sale of property and equipment			100,940				355				85,255				21,421
Proceeds from sale of investment property			8,750				-				-				-
Proceeds from sale of  marketable securities			378,491				35,353				67,899				17,060
Investment in marketable securities			(238,239	)			(23,326	)			(28,346	)			(7,122	)
Investment and loans to associates			(7,341	)			(691	)			642				161
Proceeds from decrease in holding rate of an associate			-				-				9,822				2,468
Grant of long term loans			(79,580	)			(64,249	)			-				-
Collection of long-term loans			76,292				17,766				49,106				12,338
Discontinuance of consolidation			(2,089	)			(2,089	)			-				-
Interest received			12,361				5,430				4,846				1,218
Net cash provided by (used in) investing activities			(74,738	)			(113,654	)			131,743				33,101

 

  

ALON BLUE SQUARE ISRAEL LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2015

(UNAUDITED)

 

														Convenience
														translation
		Year ended				Three months ended								for  the three  months ended
		December 31,				March 31,								March 31,
		2014				2014				2015				2015
		NIS												U.S. dollars
		In thousands
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend paid to non-controlling interests			(59,380	)			(40,286	)			-				-
Issuance of debentures			158,103				-				-				-
Repayment of debentures			(536,259	)			(2,406	)			(2,347	)			(590	)
Receipt of long-term loans			768,319				100,000				95,000				23,869
Repayment of long-term loans			(586,396	)			(39,084	)			(67,894	)			(17,059	)
Repayment of commercial paper			(9,139	)			-				(17,222	)			(4,327	)
Short-term credit from banks and others, net			(36,651	)			20,854				(106,835	)			(26,843	)
Transactions with non-controlling interests in subsidiary without loss of control			69,695				-				88,008				22,114
Settlement of forward contracts			(5,232	)			-				-				-
Interest paid			(220,672	)			(41,786	)			(33,314	)			(8,370	)
Net cash used in financing activities			(457,612	)			(2,708	)			(44,604	)			(11,206	)
INCREASE (DECREASE)  IN CASH AND CASH  EQUIVALENTS AND BANK OVERDRAFTS			(26,432	)			24,600				258,195				64,872
Translation differences on cash and cash equivalents			53				5				38				10
BALANCE OF CASH AND CASH EQUIVALENTS AND BANK OVERDRAFTS AT BEGINNING OF PERIOD			310,991				310,991				284,612				71,511
BALANCE OF CASH AND CASH EQUIVALENTS AND BANK OVERDRAFTS AT END OF PERIOD			284,612				335,596				542,845				136,393

 

  

ALON BLUE SQUARE ISRAEL LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2015

(UNAUDITED)

 

														Convenience
														translation
														the three
		Year ended				Three months								months ended
		December 31,				ended March 31,								March 31,
		2014				2014				2015				2015
		NIS												U.S. dollars
		In thousands
(a)  Net cash provided by operating activities:
Adjustments for:
Depreciation and amortization			278,526				66,214				70,642				17,749
Increase in fair value of investment property, net			(50,258	)			(10,551	)			(14,771	)			(3,711	)
Gain from decreasing holding rate in associate			-				-				(1,611	)			(405	)
Share in profit of associates			(37,997	)			(9,303	)			(4,224	)			(1,061	)
Dividend received			38,000				2,725				1,506				378
Gain (loss) from sale and disposal of  property and equipment, net			(77,674	)			3,308				1,501				377
Provision for impairment of property and equipment, net			22,000				-				-				-
Loss (gain) from changes in fair value of  derivative financial instruments			(4,775	)			(1,727	)			1,263				317
Linkage differences on monetary assets, debentures, loans and other long term liabilities			(2,367	)			(20,950	)			(36,385	)			(9,142	)
Employee benefit liability, net			(9,579	)			(9,601	)			1,844				463
Increase  in value of investment in securities, deposits and long-term receivables, net			(12,799	)			473				(8,680	)			(2,181	)
Interest paid, net			199,771				34,887				27,124				6,815
Changes in operating assets and liabilities:
Investment in real estate inventories			(3,589	)			(571	)			(801	)			(201	)
Decrease (increase) in trade receivables and other accounts			173,619				(227,982	)			(246,517	)			(61,939	)
Increase in trade payables and other accounts payable			75,681				391,700				434,502				109,170
Decrease (increase) in inventories			93,447				(47,885	)			(38,526	)			(9,680	)
			682,006				170,737				186,867				46,949
(b) Supplementary information on investing and financing activities not involving cash flows:
Dividends declared to non- controlling interests			-				-				10,887				2,735
Purchase of property and equipment and investment property on credit			4,228				11,915				1,698				427
Proceeds from sale of property and equipment on credit			90,486				-				-				-

 

  

ALON BLUE SQUARE ISRAEL LTD.

NET LIABILITIES

(UNAUIDITED)

 

														Convenience
														translation
		December 31,				March 31,								March 31,
		2014				2014				2015				2015
		NIS												U.S. dollars
		In thousands
		Alon Blue Square*
Cash and cash equivalence			163,292				39,700				202,115				50,783
Investment in securities			87,858				136,912				87,116				21,888
Total assets			251,150				176,612				289,231				72,671
Short term and Long-term debt:
Short term loans from banks			94,975				100,008				93,292				23,440
Current maturities of loans from banks			17,718				17,614				17,435				4,381
Current maturities of debentures			47,913				111,760				47,148				11,846
Commercial papers			120,337				120,360				97,072				24,390
Long term loans from banks			124,115				140,910				122,470				30,771
Debentures			316,825				225,791				311,858				78,356
Total  debt			721,883				716,443				689,275				173,184
Equity:
Equity attributable to equity holders of the company:			664,699				1,024,809				664,742				167,021
Total debt, net			(470,733	)			(539,831	)			(400,044	)			(100,513	)

 

*

Net of grant of loans or loans received from subsidiaries

 

Net liabilities, Alon Blue Square and fully owned subsidiaries														Convenience
														translation
		December 31,				March 31,								March 31,
		2014				2014				2015				2015
		NIS												U.S. dollars
		In thousands
		Alon Blue Square
Cash and securities			258,363				182,833				307,474				77,255
Short term debt			662,889				562,826				621,639				156,191
Long term debt			715,244				672,670				682,785				171,554
Total debt			1,378,133				1,235,496				1,304,424				327,745
Total debt, net			(1,119,770	)			(1,052,663	)			(996,950	)			(250,490	)

 

Repayment of loans and debentures, Alon Blue Square and fully owned subsidiaries of March 31, 2015														Fourth
		First				Second				Third				Year
		Year				Year				Year				and thereafter				Total
		In thousands
Alon solo		62,076				62,076				62,076				310,470				496,698
Subsidiaries			70,762				69,105				61,194				119,701				320,762
			132,838				131,181				123,270				430,171				817,460

 

 

ALON BLUE SQUARE ISRAEL LTD.

RECONCILIATION BETWEEN NET INCOME FOR THE PERIOD AND ADJUSTED EBITDA

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2015

(UNAUDITED)

 

														Convenience
														translation
		Year ended				Three months								for the three months ended
		December 31,				ended March 31,								March 31,
		2014				2014				2015				2015
		NIS in thousands												U.S. dollars in thousands
Loss from continuing operations			(374,896	)			(18,791	)			(30,540	)			(7,673	)
Taxes on income (tax benefit)			219,855				(3,434	)			26,036				6,542
Share in gains of associates			(37,997	)			(9,303	)			(4,224	)			(1,061	)
Share in adjusted EBITDA of equity accounted investees			47,916				10,101				12,825				3,222
Share in EBITDA of branches which were resolved to cease their operation			54,533				9,107				4,631				1,164
Finance expenses, net			211,252				32,731				5,930				1,490
Other losses (income), net			(7,692	)			8,741				10,757				2,703
Changes in fair value of investment property			(50,258	)			(10,551	)			(14,771	)			(3,711	)
Depreciation and amortization			278,526				66,214				70,642				17,749
Proceeds from sale of property*			59,261				-				-				-
Adjusted EBITDA			400,500				84,815				81,286				20,425

 

*Comparative figures are represented and include gains from realization of properties. For further information see "Additional Information-Adjusted EBITDA"

 

  

ALON BLUE SQUARE ISRAEL LTD.

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2015

(UNAUDITED)

 

Note 1 - Segment reporting

 

The Company includes segment information according to IFRS 8. The reporting is based on the Company's organizational structure, the internal reporting, the allocation of resources and the decision-making process. The Company presents four reporting segments: Supermarkets – food retail, Fueling and Commercial sites, Houseware and textile, Real Estate in addition to other segment which includes mainly Cellular activity, the Company's share in the issuance and clearance activity of credit cards, the baby products sector and the logistic center in Beer Tuvia. The segments' results, as reviewed by the Chief Operating Decision Maker (CODM) include the operating profit before financial expenses from continuing operations, including the company's share in gains of associates and excluding impairment of excess costs. The segments' results for prior periods were adjusted in order to reflect the segment's results and the adjustment to the results in the consolidated report for those periods from continuing operations.

 

The Company's operating segments consist of the following:

 

(1)

Fueling and commercial sites – Through its subsidiary Dor-Alon the Company is engaged in the development, construction and operation of vehicle fueling stations, adjacent commercial centers and independent convenience stores, marketing of fuel products and other products through the fueling stations and convenience stores and direct marketing of distillates to customers. The fueling and commercial sites segment is presented according to the published financial statements of Dor-Alon, with reclassification of credit card fees and with the amortization of the excess of costs arising at the time of acquisition allocated to the reconciliation between the operating profit of the segment and the consolidated operating profit.

(2)

Supermarkets – The Company operates the second largest food retail chain in Israel. Through its subsidiary, Mega Retail Ltd. ("Mega Retail"), which operates Supermarket branches, the Company offers a wide range of food and beverage products and “Non-food” items, such as houseware, toys, small electrical appliances, computers and computer accessories, entertainment and leisure products and textile products and “Near-Food” products, such as health and beauty aids, products for infants, cosmetics and hygiene products. As of March 31, 2015, Mega Retail operated 192 supermarkets including branches which were resolved to cease their operation. This segment also includes properties owned through Blue Square Real Estate ("BSRE"), in connection with the supermarket operation of Mega Retail's stores (including warehouses and offices). The results of branches which were resolved to cease their operation including comparative figures that were restated are included in the adjustments of segment results to consolidated profit or loss since the CODM reviews the Supermarkets segment without these branches. The allocation of costs attributed to the branches which were resolved to cease their operation was made based on direct costs and joint expenses that will be saved.

(3)

Houseware and textile –through its subsidiary, Na'aman Group (NV) Ltd. ("Na'aman"), the Company is engaged as retailer and wholesaler in houseware and textile activities. As of March 31, 2015, Na'aman operated 113 stores, some through franchisees. Effective from this quarter, the Company presents in Houseware and textile segment Na'aman Group's houseware and textile activity. Other activities which were included in this segment are presented in others. Comparative figures were classified accordingly. The segment's results are presented according to the published financial statements of Na'aman Group. Amortization of excess costs and impairment of goodwill included in the reconciliation between the operating profit of the segment and the consolidated operating profit.

(4)

Real Estate – Through its subsidiary BSRE the Company is engaged in generating yield from commercial centers, logistics centers and offices, land for the purpose of capital appreciation and deriving long-term yield as well as in the development of the "Wholesale Market" residency project.

(5)

Others – Alon Blue Square through its 100% subsidiary, Alon Cellular Ltd, operates an MVNO network in Israel and through Diners Club Israel Ltd., an associate held at 49%, which operates in the sector of issuance and clearance of YOU credit cards to the customer club members of the group, by Dr. Baby Marketing and Distribution 888 Ltd. 100 % held subsidiary as a retailer and wholesaler in the baby products sector and by Bee Group Ltd.100% held subsidiary which operates the logistic center in Beer Tuvia.

 

  

ALON BLUE SQUARE ISRAEL LTD.

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2015

(UNAUDITED)

 

		Three months ended March 31, 2015
																						Adjustments
		Fueling and Commercial sites				Supermarkets				Houseware and textile				Real Estate				Others				Branches resolved to cease their operation				Other adjustments				Total consolidated
		NIS in thousands
Net segment revenues			967,279				1,369,272				82,310				18,076				26,272				18,989				-				2,482,198
Inter segment revenues			7,789				-				7,461				-				914				-				(16,164	)			-
Gross profit (loss)			186,364				335,641				48,851				18,076				314				3,419				(777	)			591,888
Depreciation and amortization			23,141				41,249				1,818				-				2,573				-				1,861				70,642
Segment profit			22,861				(25,023	)			7,314				26,086				(6,297	)			(5,639	)			(11,538	)			7,764
Unallocated corporate expenses																															(6,338	)
Financial expenses, net																															(5,930	)
Loss before taxes on income																															(4,504	)

 

		Three months ended March 31, 2014
																						Adjustments
		Fueling and Commercial sites				Supermarkets				Houseware and textile				Real Estate				Others				Branches resolved to cease their operation				Other adjustments				Total consolidated
		NIS in thousands
Net segment revenues			1,194,200				1,314,059				70,958				10,288				27,568				97,799				-				2,714,872
Inter segment revenues			7,356				-				9,426				-				1,102				-				(17,884	)			-
Gross profit (loss)			190,172				338,254				44,238				10,288				(2,875	)			22,413				(665	)			601,825
Depreciation and amortization			21,490				34,076				1,411				-				2,618				4,528				2,101				66,214
Segment profit			27,086				(6,536	)			5,792				24,039				(6,509	)			(15,563	)			(11,448	)			16,861
Unallocated corporate expenses																															(6,355	)
Financial expenses, net																															(32,731	)
Profit before taxes on income																															(22,225	)

 

 

ALON BLUE SQUARE ISRAEL LTD.

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2015

(UNAUDITED)

 

Note 1 - Segment reporting (continued):

 

						Year ended December 31, 2014
																						Adjustments
		Fueling and Commercial sites				Supermarkets				Houseware and textile				Real Estate				Others				Branches resolved to cease their operation				Other adjustments				Total consolidated
		NIS in thousands
Net segment revenues			4,859,627				5,442,942				280,888				51,158				116,949				309,393				-				11,060,957
Inter segment revenues			48,110				-				19,298				-				4,144				-				(71,552	)			-
Gross profit (loss)			791,665				1,353,109				166,629				51,158				(8,741	)			66,710				(565	)			2,419,965
Depreciation and amortization			91,219				146,613				5,949				-				11,361				14,351				9,033				278,526
Segment profit			140,481				39,266				11,549				102,610				(28,970	)			(68,885	)			(105,363	)			90,688
Unallocated corporate expenses																															(34,477	)
Financial expenses, net																															(211,252	)
Loss before taxes on income																															(155,041	)

 

		Three months ended March 31, 2015
																						Adjustments
		Fueling and Commercial sites				Supermarkets				Houseware and textile				Real Estate				Others				Branches resolved to cease their operation				Other adjustments				Total consolidated
		U.S dollars in thousands
Net segment revenues			243,035				344,038				20,681				4,542				6,601				4771				-				623,668
Inter segment revenues			1,957				-				1,875				-				230				-				(4,062	)			-
Gross profit (loss)			46,825				84,332				12,274				4,542				79				859				(194	)			148,717
Depreciation and amortization			5,814				10,364				457				-				646				-				468				17,749
Segment profit			5,744				(6,287	)			1,838				6,554				(1,582	)			(1,417	)			(2,899	)			1,951
Unallocated corporate expenses																															(1,592	)
Financial expenses, net																															(1,490	)
Loss before taxes on income																															(1,131	)