BSI Be Semiconductor Industries NV

Completion of Deploying the Company's Branches in an Accurate Chain Structure and Adjusted to the Market Condition ROSH HA'AYIN, Israel, November 25 /PRNewswire-FirstCall/ -- - Expansion of the Private Brand "Mega ", Reaching 6% of the Sales, Starting to Yield Fruits Blue Square Reports stability in the Operating Profit Despite the Increased Competition and One-Time Expenses The Successful Launch of the Loyalty Club Resulted in the Enrollment of 350,000 New Club Members in the Third Quarter and in the Aggregate the Club has 500,000 Members. The Company Announces the Commencement of the Second Stage in the Development of "Eden Teva Market" Chain Planning to Open "Eden" Branches in the Company Stores Under the Concept of "Store Within a Store" Blue Square-Israel Ltd. (NYSE and TASE: BSI) today announced its financial results for the third quarter and nine months ended September 30, 2009. Results for the third quarter of 2009 Revenues for the third quarter of 2009 were NIS 1,925.5 million (U.S.(A) $512.4 million), compared to NIS 1,936.2 million in the corresponding quarter of 2008 - a decrease of 0.6 %. Supermarket same store sales (SSS) for the period decreased by 2.5% (compared to a decrease of 6.8% in sales in SSS in the first half) due to the recession in the market, increased 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 nine new stores during the last 12-month period of approximately 8,000 square meters; Gross Profit of the third quarter of 2009 amounted to NIS 533.2 million (U.S. $ 141.9 million) (27. 7 % of revenues) compared to gross profit of NIS 538.8 million (27.8% of revenues) in the corresponding quarter of 2008. The decrease in the gross profit margin derives from an increase in the relative scope of sales of the HD chains of total sales that were offset from the improvement of trade agreements and supplier discounts and from the contribution of the private brand of "Mega", which already accounts for 6% of total sales. Selling, General, and Administrative Expenses for the third quarter of 2009 amounted to NIS 474.4 million (U.S. $ 126.2 million) (24.6% of revenues) compared to NIS 478.8 million (24.7% of revenues) in the corresponding period, a decrease of 0.9%. The decrease reflects the effect of efficiency measures taken by the company during the quarter which was mitigated by 1)increased expenses associated with the net addition of nine new stores, including the expenses associated with the accelerated opening of five branches of the "Eden Teva Market" format during the last twelve months 2) enrollment costs of a new phase of the "You" club 3) costs deriving from the increase in the expenses of the private brand 4) increase of the CPI, which affects expenses of rental fees and municipal taxes. Operating Income (before changes in fair value of investment property and other gains and losses) in the third quarter of 2009 amounted to NIS 58.7 million (U.S $ 15.6 million) (3.1% of revenues) compared to the operating income of NIS 60.0 million (3.1% of revenues) in the corresponding period. Changes in fair value of Investment Property: In the third quarter of 2009, the Company recorded gain from appreciation of investment property in the amount of NIS 6.7 million (U.S $ 1.8 million). In the corresponding period of the previous year, no change in the value of investment property was recorded. Other Gains and Losses, Net: In the third quarter of 2009, the Company recorded other expenses, net of NIS 4.9 million (U.S. $ 1.3 million), compared to net income of NIS 11.1 million in the corresponding period. The expenses this quarter included costs of NIS 2.4 million (U.S $ 0.6 million) relating to the transaction of transferring real estate properties from Mega Retail Ltd. to Blue Square Real Estate and costs associated with the synergy of headquarters in BEE group amounting to NIS 0.8 million (U.S $ 0.2 million). In the corresponding quarter, mainly derives from decrease in holding rate in companies held by BEE Group due to reorganization. Operating Income before financing in the third quarter of 2009 was NIS 60.5 million (U.S. $ 16.1 million) (3.1% of revenues) compared to operating income of NIS 71.1 million (3.7% of revenues) in the third quarter of 2008. Financial Expenses (net) for the third quarter of 2009 were NIS 44.7 million (U.S. $11.9 million) compared to financial expenses (net) of NIS 50.1 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 financial income from derivative financial instruments that contributed in this quarter an income of NIS 7.0 million (U.S $1.9 million) compared to an expense of NIS 6.4 million in the corresponding quarter last year and from financial income from marketable securities that contributed this quarter an income of NIS 3 million compared to an expense of NIS 3 million in the corresponding quarter. The decrease in the financial expenses was offset mainly as a result of the increase in financial expenses on long term loans and debentures in the amount of NIS 15.6 million this quarter compared to the corresponding quarter. Taxes on Income for the third quarter 2009, tax benefit amounted to NIS 13.9 million (U.S. $3.7 million) (net of tax benefit in respect of the changes in tax rates as detailed below of NIS 20.3 million the effective tax rate was 40.9% compared to a statutory tax rate of 26%) compared to tax expenses of NIS 8.9 million (effective tax rate of 42.6% compared to a statutory tax rate of 27%) in the corresponding quarter. The change of tax expenses in the corresponding quarter to tax benefit this quarter mainly derives from recording tax benefit due to the decrease in deferred tax liabilities following the change in tax rates, as a result of the legislation of the Law for Economic Efficiency (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 rates were reflected in the results of the third quarter of 2009 by a decrease in deferred tax liability and a recognition in income from taxes in the amount of NIS 20.3 million (U.S $ 5.4 million) out of which the portion attributed to the company's shareholders is NIS 15.2 million (U.S $ 4.0 million). Net Income for the third quarter of 2009 was NIS 29.6 million (U.S. $ 7.9 million) compared to net income of NIS 12.0 million in the third quarter of 2008. The increase in the net income in this quarter compared to the corresponding quarter last year derives from tax benefit offsetting decrease in operating income, as mentioned above. The net income for the third quarter of 2009 attributable to shareholders, was NIS 25.1 million (U.S. $6.7 million), or NIS 0.57 per ADS (U.S. $ 0.15), while the portion attributable to the share of minority interests was NIS 4.5 million (U.S. $1.2 million). Cash Flows in the third quarter of 2009 Cash Flows from Operating Activities: Net cash flows deriving from operating activities in the third quarter of 2009 amounted to NIS 173.7 million (U.S. $ 46.2 million) compared to NIS 59.5 million in the corresponding quarter last year. The increase in cash flows from operating activities derives from increase in the negative working capital balances, decrease in paid taxes and was offset from decrease in operating income. Cash Flows from Investing Activities: Net Cash flows proceeds from investing activities in the third quarter of 2009 amounted to NIS 307.3 million (U.S. $81.8 million) compared to net cash flows of NIS 73.3 million used in investing activities in the corresponding quarter last year. Cash flows proceeds from investing activities in the third quarter of 2009 included mainly realization of short term deposits of NIS 389.3 million (U.S. $103.6 million) net of cash used in investing activities for purchase of property and equipment, intangible assets and investment property in a total amount of NIS 72.5 million (U.S. $19.3 million) and net investment in marketable securities of NIS 12.2 million (U.S. $3.2 million). Cash used in investing activities in the third quarter of 2008 mainly included the purchase of property and equipment in a total amount of NIS 52.3 million and purchase shares of minority interests in subsidiaries in the amount of NIS 35.4 million. Cash Flows from Financing Activities: Net Cash flows used in financing activities in the third quarter of 2009 amounted to NIS 167.4 million (U.S $ 44.5 million) compared to net cash provided by financing activities of NIS 98.8 million in the corresponding period last year. Cash flows used in financing activities in the third quarter of 2009 included mainly decrease in short term credit of NIS 380.3 million (U.S $ 101.2 million), repayment of long term loans of NIS 31.9 million (U.S $ 8.5 million), dividend paid to minority in subsidiaries in the amount of NIS 7.3 million (U.S $ 1.9 million), repayment of convertible debentures of NIS 13.3 million (U.S $ 3.5 million) and interest paid in the amount of NIS 35.2 million (U.S $ 9.4 million) net of receipt of long term loans amounting to NIS 301 million (U.S $ 80.1 million). Cash flows provided by financing activities in the third quarter of 2008 mainly included receipt of long term loans of NIS 172.5 million and increase in short term bank credit of NIS 25 million net of cash used in financing activities for repayment of long term loans of NIS 56.5 million, dividend paid to minority in subsidiaries of NIS 11 million and interest paid in the amount of NIS 30.8 million. Comments of Management Commenting on the financial results, Mr. Zeev Vurembrand, Blue Square's President and CEO, said: "2009 is marked by strategic measures with long term impact, which will shape the image and performance of the company in the coming years: the adjustment of the chains and the sub-brands through the establishment of Mega Bool Chain, the entry into the private brand segment and the launch of renewed loyalty club. In addition, during 2009 we performed a procedure of increasing operating efficiency and structural change which costs were charged to statement of operations. In "Teva Eden Market" we completed Stage A of opening 9-10 branches. In Stage B, we intend to open approximately 6 Eden branches during the next two years inside the Mega branches, as a store within a store. In BEE retail group, during the next two quarters the synergy process of the headquarters will be finalized and the new logistic center will commence its operations during the second half of 2010. "Mega Bool" brand positions itself as a strong and leading brand in the HD segment in shorter time than expected. In conclusion, we began to see the fruits of the strategy, which was first implemented a year ago and we expect that the new actions will continue to impact the results of the company in the coming quarters". Additional Information 1. As of September 30, 2009, the Company operated 203 supermarkets in the following formats: Mega In Town -119; Mega Bool - 47; Mega - 11; Shefa Shuk - 17; Eden Teva Market - 9. 2. EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) In the first nine months of 2009, the EBITDA was NIS 311.7 million (U.S. $ 83 million) (5.6 % of revenues) compared to NIS 344.0 million (6.1% of revenues) in the corresponding period of last year. In the third quarter of 2009, amounted to NIS 106.5 million (U.S. $ 28.4 million) (5.5 % of revenues) compared to NIS 104.3 million (5.4% of revenues) in the corresponding quater of last year. As of September 30, 2009, the ratio of its net financial obligations to EBITDA was 3.6 and the ratio of its unpledged property and equipment to the net financial obligations was 1.7. Use of financial measures that are not in accordance with Generally Accepted Accounting Principles 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 gain (losses) net, changes in fair value of investment property, taxes, depreciation and amortization. It is presented because it is a measure commonly used in the retail industry and 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. EBITDA, however, should not be considered as an alternative to operating income or income for the year as an indicator of our operating performance. Similarly, EBITDA should not be considered as an alternative to cash flow from operating activities as a measure of liquidity. EBITDA is not a measure of financial performance under Generally Accepted Accounting Principles (GAAP) and may not be comparable to other similarly titled measures for other companies. EBITDA may not be indicative of our historic operating results nor is it meant to be predictive of potential future results. Reconciliation between our income for the period and EBITDA is presented in the attached condensed financial reports. 3. On October 1, 2009, Standard & Poors Maalot ratified the rating of ilA+ for the debentures Series A and B of the company and updated the rating forecast from stable to negative. Data in NIS (millions) Data Q3 2009 Q3 2008 1-9 2009 1-9 2008 Sales 1,925.5 1,936.2 5,534.2 5,675.8 Gross profit 533.2 538.8 1,538.0 1,569.9 % Gross profit 27.7% 27.8% 27.8% 27.7% Operating profit (before increase in fair value of real estate) 58.7 60.0 179.6 221.0 % Operating profit (before increase in fair value of real estate) 3.1% 3.1% 3.2% 3.9% Financial expenses 44.7 50.1 92.0 98.6 Net income 29.6 12.0 79.4 114.3 Events During the third Quarter of 2009 Reorganization of real estate activity - transfer of real estate properties to the subsidiary Blue Square Real Estate Ltd. In September 2009, the reorganization plan of the real estate activity of the company and its centralization under the subsidiary (78.45%) Blue Square Real Estate (BSRE), was completed under which the real estate properties of the subsidiary Mega Retail Ltd. ( formerly Blue Square Chain Investment & Properties Ltd) (Mega Retail), were transferred to BSRE. Within 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 Mega Retail 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 Mega Retail 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). The completion of the transaction was performed as a of split pursuant to Section 105 to the Income Tax Ordinance which confers upon Mega Retail an exemption from the payment of land appreciation tax at this stage and its deferment under the split 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, Mega Retail and BSRE will be subject to the restrictions prescribed by the provisions regarding the split pursuant to Section 105 to the Ordinance. BSRE pledged certain of the transferred properties as collateral for a loan taken in order to finance the transaction. Transaction costs including purchase tax were recorded as expense in the statement of operations. Results for the first nine months of 2009 Revenues for the first nine months of 2009 were NIS 5,534.2 million (U.S $1,472.6 million), compared to NIS 5,675.8 million in the corresponding period of 2008 - a decrease of 2.5 %. Supermarket same store sales (SSS) for the period decreased by 5.5% due to the recession and increased competition and erosion of prices in HD chains. On the other hand, the decrease in sales was offset by the net addition of nine new stores during the 12-month period of approximately 8,000 square meters. Gross Profit in the first nine months of 2009 amounted to NIS 1538.0 million (U.S. $ 409.3 million) (27.8 % of revenues) compared to gross profit of NIS 1,569.9 million (27.7% of revenues) in the corresponding period of 2008. The increase in the gross profit derives from an increase in sales of BEE group characterized with relatively higher gross profit margins relative to the acceptable gross profit in the area of food retailing. In addition, the gross profit increased from trade agreements, some of which relate to the establishment of Mega Bool chain that offset the effect of the planned erosion in the gross profit margin as a result of establishing the chain. Selling, General, and Administrative Expenses in the first nine months of 2009 amounted to NIS 1,358.4 million (U.S. $ 361.4 million) (24.5% of revenues) compared to NIS 1,348.9 million (23.8% of revenues) in the corresponding period, an increase of 0.7%. The increase reflects increase in expenses deriving from 1) net addition of 9 new stores, part of which relate to accelerated opening of 5 branches of the "Eden Teva Market" during the last 12 months 2) costs associated with launch of "Mega Bool" chain. 3) enrollment costs of a new phase of the "You" club 4) increase of the CPI, which affects expenses of rental fees and municipal taxes. On the other hand, the company took efficiency measures which resulted in decrease in payroll and related expenses. This decrease was offset in one time costs of NIS 9 million. Operating Income (before changes in fair value of investment property and other gains and losses) in the first nine months of 2009 amounted to NIS 179.6 million (U.S $ 47.8 million) (3.2% of revenues) compared to the operating income of NIS 221.0 million (3.9% of revenues) in the corresponding period. The decrease in operating income was effected by the decrease in sales and increase in selling and administrative expenses, as mentioned above. Changes in fair value of Investment Property in the first nine months of 2009, the Company recorded gain from appreciation of investment property of NIS 8.4 million (U.S $ 2.2 million) compared to NIS 18.0 million in the corresponding period of the previous year. Other Gains and Losses, Net in the first nine months of 2009, the Company recorded other expenses, net of NIS 5.6 million (U.S. $ 1.5 million), compared to other expenses of NIS 9.3 million in the corresponding period of the previous year. The expenses included, in this period, provision for impairment of property and equipment in Dr. Baby stores in the amount of NIS 3.7 million (U.S. $ 1.0 million) and costs of NIS 2.4 million (U.S. $ 0.6 million) related to the transaction of transferring real estate properties from Mega Retail to BSRE and were offset by the capital gain in the amount of NIS 0.3 million (U.S. $ 0.1 million) from selling 1.55% of the shares of Blue Square Real Estate for NIS 10.1 (U.S. $ 2.7 million) and from capital gain of NIS 2.8 million (U.S. $ 0.7 million) from the purchase of 8% of Naaman shares held by minority. In the corresponding period, income mainly included gain from decrease in holding rate in companies held by BEE group due to the reorganization. Operating Income before financing in the first nine months of 2009, was NIS 182.4 million (U.S. $ 48.5 million) (3.3% of revenues) compared to operating income of NIS 248.3 million (4.4% of revenues) in the corresponding period in 2008. Financial Expenses (net) in the first nine months of 2009 were NIS 92.0 million (U.S. $24.5 million) compared to financial expenses (net) of NIS 98.6 million in the corresponding period of the previous year. The decrease in financial expenses in the current period compared to the corresponding period last year mainly derives from the effect of the change in the value of derivative financial instruments that contributed in the current period to an income of NIS 25 million (U.S $6.6 million) compared to an income of NIS 8.3 million in the corresponding period last year net of increase in the net financial debt of the company in the current period compared to the corresponding period last year which resulted in increase in short term financial expenses by NIS 10.7 million (U.S $2.8 million) in the current period compared to the corresponding period last year. Taxes on Income in the first nine months of 2009 were NIS 10.9 million (U.S. $2.9 million) (12.1% effective tax rate compared to a statutory tax rate of 26%) compared to NIS 35.4 million (effective tax rate of 23.7% compared to a statutory tax rate of 27%) in the corresponding period. The decrease in the effective tax rate in this period compared to the corresponding period last year derives mainly from recording tax benefit due to the decrease in deferred tax liabilities following the change in tax rates, as a result of the legislation of the Law for Economic Efficiency (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 rates were reflected in the results of this period by decrease in deferred tax liability and recognition in income from taxes in the amount of NIS 20.3 million (U.S $ 5.4 million) out of which the portion attributed to the company's owners is NIS 15.2 million (U.S $ 4.0 million). Net Income for the first nine months of 2009 was NIS 79.4 million (U.S. $ 21.1 million) compared to net income of NIS 114.3 million in the corresponding period of 2008. The decrease in the net income in the first nine months of the year compared to the corresponding period last year derives from a decrease in operating income and a decrease in income from appreciation of investment property net of a decrease in income tax expenses, as mentioned above. The net income for the first nine months of 2009, attributable to shareholders, was NIS 64.7 million (U.S. $17.2 million), or NIS 1.49 per ADS (U.S. $ 0.40), while the portion attributable to the share of minority interests was NIS 14.7 million (U.S. $3.9 million). Cash Flows in the first nine months of 2009 Cash Flows from Operating Activities: Net cash flows deriving from operating activities in the first nine months of 2009 amounted to NIS 331.7 million (U.S. $ 88.2 million) compared to NIS 337.7 million in the corresponding period last year. The decrease in cash flows from operating activities derives mainly from a decrease in operating income, and part of which was offset from a decrease in net taxes paid. Cash Flows from Investing Activities: Net Cash flows used in investing activities in the first nine months of 2009 amounted to NIS 169.2 million (U.S. $45 million) compared to net cash flows of NIS 111.8 million used in investing activities in the corresponding period last year. Cash flows used in investing activities in the first nine months of 2009 included mainly purchase of property and equipment, intangible assets and investment property of NIS 177.4 (U.S $ 47.3 million) and net investment in marketable securities of NIS 9.4 million (U.S $ 2.5 million) net of cash flows proceeds from realization of property and equipment and investment property in a total amount of NIS 7.7 million (U.S.$2 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 nine months of 2008 included mainly purchase of property and equipment, intangible assets and investment property amounting to NIS 208 million, net proceeds in marketable securities in the amount of NIS 11.1 million and investment in subsidiary in the amount of NIS 35.4 million, net of proceeds from realization short term deposits of NIS 101 million and interest received of NIS 12.3 million. Cash Flows from Financing Activities: Net Cash flows deriving from financing activities in the first nine months of 2009 amounted to NIS 198.6 million (U.S $ 52.9 million) compared to net cash provided by financing activities of NIS 31.4 million in the corresponding period last year. Cash flows deriving from financing activities in the first nine months of 2009 included mainly increase in short term credit of NIS 96.2 million (U.S $ 25.6 million) and receipt of long term loans of NIS 307.5 million (U.S $ 81.8 million) net of cash flows used for repayment of long term loans of NIS 98.2 million (U.S $ 26.1 million) repayment of convertible debentures of NIS 13.3 million (U.S $ 3.5 million) dividend paid to minority in subsidiary in the amount of NIS 13.5 million (U.S $ 3.6 million) and paid interest of NIS 81 million (U.S $ 21.6 million). Net Cash flows deriving from financing activities in the first nine months of 2008 included mainly receipt of long term loans of NIS 186.2 million and short term bank credit of NIS 41.6 million, net of repayment of long term loans of NIS 102.6 million, interest paid of NIS 70.5 million and dividend paid to minority in subsidiaries of NIS 22 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 September 30, 2009: U.S. $1.00 equals NIS 3.758. 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 204 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. BLUE SQUARE - ISRAEL LTD. CONDENSED INTERIM CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2009 (UNAUDITED) Convenience translation(a) December September 30, September 31, 2008 2008 2009 30, 2009 __________ _________ __________ __________ Audited Unaudited __________ _________________________________ NIS U.S.dollars ___________________________________ ___________ A s s e t s In thousands _______________________________________________ CURRENT ASSETS: Cash and cash equivalents 95,325 313,738 445,085 118,437 Marketable securities 171,849 176,964 188,909 50,268 Bank deposits 206 650 864 230 Trade receivables 729,970 896,191 798,286 212,423 Other accounts receivable 87,624 408,558 292,066 77,718 Derivative financial instruments - - 1,513 403 Income taxes receivable 74,446 67,339 84,520 22,491 Inventories 497,080 511,755 534,628 142,264 __________ _________ __________ __________ 1,656,500 2,375,195 2,345,871 624,234 __________ _________ __________ __________ NON-CURRENT ASSETS: Investment in associates 4,915 4,930 4,787 1,274 Derivative financial instruments 5,248 850 21,106 5,616 Prepaid expenses in respect of operating lease 192,426 195,186 189,526 50,433 Other long term receivables 1,554 4,158 1,394 371 Property and equipment, net 1,701,222 1,673,245 1,765,853 469,892 Investment property 434,232 409,297 437,354 116,379 Intangible assets and deferred charges 404,422 345,116 402,775 107,178 Deferred taxes 44,508 36,695 43,647 11,614 __________ _________ __________ __________ 2,788,527 2,669,477 2,866,442 762,757 __________ _________ __________ __________ Total assets 4,445,027 5,044,672 5,212,313 1,386,991 __________ _________ __________ __________ BLUE SQUARE - ISRAEL LTD. CONDENSED INTERIM CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2009 (UNAUDITED) Convenience transla tion(a) December September 30, September 31, 2008 2008 2009 30, 2009 __________ ________ _________ __________ Audited Unaudited U.S. dollars __________________________________________ In thousands __________________________________________ Liabilities and shareholders' equity CURRENT LIABILITIES: Credit and loans from banks and others 210,901 213,739 309,643 82,396 Current maturities of debentures and convertible debentures 25,999 21,501 75,811 20,173 Trade payables 1,006,386 1,197,281 1,199,366 319,150 Other accounts payable *426,217 613,380 617,291 164,261 Income taxes payable 6,933 5,846 4,061 1,081 Dividend payable - 150,000 - - Provisions for other liabilities 43,397 36,756 42,920 11,421 __________ ________ _________ __________ 1,719,833 2,238,503 2,249,092 598,482 __________ ________ _________ __________ LONG-TERM LIABILITIES: Loans from banks, net of current maturities 341,586 339,672 542,400 144,332 Convertible debentures, net of current maturities 130,525 134,320 141,004 37,521 Debentures, net of current maturities 985,844 1,009,180 953,256 253,660 Other liabilities 39,925 35,160 23,503 6,254 Derivatives financial instruments *21,074 6,316 8,361 2,225 Liabilities in respect of employee benefits, net 49,911 39,125 48,757 12,974 Deferred taxes 60,327 54,864 43,063 11,459 __________ ________ _________ __________ 1,629,192 1,618,637 1,760,344 468,425 __________ ________ _________ __________ Total liabilities 3,349,025 3,857,140 4,009,436 1,066,907 __________ ________ _________ __________ SHAREHOLDERS' EQUITY: Share capital - Ordinary shares of NIS 1 par value 57,094 57,094 57,438 15,284 Additional paid-in capital 1,018,405 1,018,405 1,030,259 274,151 Other reserves (261) 1,176 10,904 2,902 Accumulated deficit (154,719) (161,407) (81,089) (21,578) __________ ________ _________ __________ 920,519 915,268 1,017,512 270,759 Minority interest 175,483 272,264 185,365 49,325 __________ ________ _________ __________ Total equity 1,096,002 1,187,532 1,202,877 320,084 __________ ________ _________ __________ Total liabilities and shareholders' equity 4,445,027 5,044,672 5,212,313 1,386,991 ========== ======== ========= ========== (*) 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 NINE AND THREE MONTHS PERIODS ENDED SEPTEMBER 30, 2009 For the Year ended Three months December Ended September 30, 31, 2008 2008 2009 __________ _________ _________ Audited Unaudited __________ ____________________ NIS ________________________________ In thousands (except share and per share data) ________________________________ Revenues from sales, net 7,429,121 1,936,236 1,925,473 Cost of sales 5,369,149 1,397,451 1,392,320 __________ _________ _________ Gross profit 2,059,972 538,785 533,153 Selling, general and administrative expenses 1,794,720 478,815 474,420 __________ _________ _________ Operating profit before changes in fair value of investment property and other gains and losses 265,252 59,970 58,733 Other gains 12,233 11,841 - Other losses 14,716 734 4,927 Changes in fair value of investment property, net 19,06 - 6,650 __________ _________ _________ Operating profit 281,836 71,078 60,456 Finance income 60,700 10,738 18,405 Finance expenses (166,295) (60,874) (63,138) Share in losses of associates (33) (1) (40) __________ _________ _________ Income before taxes on income 176,208 20,940 15,683 Taxes on income (tax benefit) 43,806 8,941 (13,887) __________ _________ _________ Income for the period 132,402 11,999 29,570 ========== ========= ========= Attributable to: Equity holders of the parent 104,586 6,536 25,114 __________ _________ _________ Minority interests 27,816 5,463 4,456 __________ _________ _________ Net income per Ordinary share attributed to Company shareholders or ADS: Basic 2.41 0.15 0.57 __________ _________ _________ Fully diluted 1.62 0.15 0.49 __________ _________ _________ Weighted average number of shares or ADS used for computation of income per share: Basic 43,372,819 43,372,819 43,717,058 __________ _________ _________ Fully diluted 45,037,692 43,372,819 44,597,479 __________ _________ _________ For the Convenience Nine months translation(a) Ended September 30, for the 2008 2009 nine months ended September 30, 2009 _________ _________ ____________ Unaudited Unaudited ____________________________________________ NIS U.S. dollars ____________________________________________ In thousands (except share and per share data) Revenues from sales, net 5,675,797 5,534,212 1,472,648 Cost of sales 4,105,935 3,996,225 1,063,391 _________ _________ ____________ Gross profit 1,569,862 1,537,987 409,257 Selling, general and administrative expenses 1,348,865 1,358,401 361,469 _________ _________ ____________ Operating profit before changes in fair value of investment property and other gains and losses 220,997 179,586 47,788 Other gains 12,458 4,464 1,188 Other losses 3,160 10,029 2,669 Changes in fair value of investment property, net 17,970 8,390 2,233 _________ _________ ____________ Operating profit 248,265 182,411 48,540 Finance income 41,651 46,689 12,424 Finance expenses (140,214) (138,649) (36,894) Share in losses of associates (18) (128) (34) _________ _________ ____________ Income before taxes on income 149,684 90,323 24,036 Taxes on income (tax benefit) 35,415 10,893 2,899 ____________ Income for the period 114,269 79,430 21,137 ========= ========= ============ Attributable to: Equity holders of the parent 94,149 64,720 17,223 _________ _________ ____________ Minority interests 20,120 14,710 3,914 _________ _________ ____________ Net income per Ordinary share attributed to Company shareholders or ADS: Basic 2.17 1.49 0.40 _________ _________ ____________ Fully diluted 1.85 1.49 0.40 _________ _________ ____________ Weighted average number of shares or ADS used for computation of income per share: Basic 43,372,819 43,505,219 43,505,219 ____________ Fully diluted 45,037,693 43,505,219 43,505,219 _________ _________ ____________ (UNAUDITED) BLUE SQUARE - ISRAEL LTD. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW FOR FOR THE NINE AND THREE MONTHS PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) Convenience transla tion(a) for the Year For the For the ended nine ended Nine months Three months months December ended September 30, ended September 30 September 31, 2008 2008 2009 2008 2009 30, 2009 ________ ________ _______ _______ ______ ________ Audited Unaudited Unaudited ________ ___________________________________ ________ NIS U.S. dollars ___________________________________________________________ In thousands ___________________________________________________________ CASH FLOWS FROM OPERATING ACTIVITIES: Income before taxes on income 176,208 149,684 90,323 20,940 15,683 24,036 Income tax paid, net (94,212) (81,773) (36,610) (33,729) (1,835) (9,742) Adjustments required to reflect the cash flows from operating activities (a) 327,777 269,794 277,937 72,265 159,837 74,196 ________ ________ _______ _______ ______ ________ Net cash provided by operating activities 409,773 337,705 331,650 59,476 173,685 88,490 ________ ________ _______ _______ ______ ________ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (211,646)(163,022)(155,653) (52,227) (63,214) (41,419) Purchase of investment property (69,749) (36,380) (8,039) (48) (4,732) (2,139) Purchase of minority shares in subsidiaries (186,403) (35,400) (8,020) (35,400) - (2,134) Purchase of intangible assets (30,372) (8,618) (13,717) - (4,525) (3,650) Proceeds from collection of short-term bank deposits, net 102,531 101,015 (657) 589 389,343 (175) Proceeds from sale of property, plant and equipment 1,559 7,249 1,965 305 428 523 Proceeds from investment property 6,567 - 5,700 - - 1,517 Proceeds from sale of marketable securities 185,104 142,634 64,564 36,397 7,385 17,181 Investment in marketable securities (169,747)(131,544) (73,917) (30,904) (19,578) (19,669) Proceeds from sale of investment in subsidiary - - 10,074 - - 2,681 Interest received 17,778 12,261 8,464 8,019 2,135 2,252 ________ ________ _______ _______ ______ ________ Net cash provided by (used in) investing activities (354,378)(111,805)(169,236) (73,269) 307,242 (45,032) ________ ________ _______ _______ ______ ________ CASH FLOWS FROM FINANCING ACTIVITIES: Dividend paid to shareholders (150,000) - - - - - Issuance of debentures 121,259 - - - - - Dividend paid to minority shareholders of subsidiaries (22,077) (22,077) (13,523)(10,960) (7,342) (3,598) Receipt of long-term loans 231,398 186,221 307,500 172,512 301,000 81,826 Repayment of long-term loans (130,571)(102,564) (98,225)(56,490) (31,864) (26,137) Repayment of long term credit from trade payables (1,740) (1,305) (1,305) (435) (435) (347) Repayment of convertible debentures - - (13,297) - (13,269) (3,538) Short-term credit from banks and others, net 15,689 41,603 96,214 24,958 (380,346) 25,603 Proceeds from exercise of options in a subsidiary - - 2,306 - - 614 Interest paid (89,244) (70,450)(81,049) (30,808) (35,170) (21,567) ________ ________ _______ _______ ______ ________ Net cash provided by (used in) financing activities (25,286) 31,428 198,621 98,777 (167,426) 52,826 ________ ________ _______ _______ ______ ________ INCREASE IN CASH AND CASH EQUIVALENTS AND BANK OVERDRAFT 30,109 257,328 361,035 84,984 313,501 96,314 BALANCE OF CASH AND CASH EQUIVALENTS AND BANK OVERDRAFT AT BEGINNING OF PERIOD 53,029 56,410 83,138 228,754 130,672 22,123 ________ ________ _______ _______ ______ ________ BALANCE OF CASH AND CASH EQUIVALENTS AND BANK OVERDRAFT AT END OF PERIOD 83,138 313,738 444,173 313,738 444,173 118,437 ======== ======== ======= ======= ====== ======== BLUE SQUARE - ISRAEL LTD. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE NINE AND THREE MONTHS PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) Convenience translation(a) Year For the For the for the ended Nine months Three months nine months December ended ended ended 31, September 30, September 30 September 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 153,882 117,804 123,814 41,744 45,048 32,947 Increase in fair value of investment property net (19,067) (17,970) (8,390) - (6,650) (2,233) Share in losses of associated Companies, net 33 18 128 1 40 34 Benefit component in grant of employee options 8,175 5,253 8,472 2,587 2,853 2,254 Loss (gain) from sale and disposal of property, plant and equipment and provision for impairment of property, plant and equipment, net 5,989 (121) 3,983 104 1,787 1,060 Loss (gain) from changes in fair value of derivative financial instruments (19,247) (8,278) (24,965) 6,350 (7,013) (6,643) Linkage differences on debentures, loans and other long term liabilities 59,669 61,198 48,189 25,941 31,832 12,823 Capital loss (gain) from realization of investments in subsidiaries (9,801) (10,055) 393 (11,658) - 105 Accrued severance pay, net 263 (278) (1,154) (1,498) (862) (307) Decrease in value of marketable securities deposit and long-term receivables, net 11,169 13,004 7,931 9,601 868 2,111 Interest paid, net 71,466 58,189 72,585 22,789 33,036 19,315 Changes in operating assets and liabilities: Decrease (increase) in trade receivables and other accounts receivable 59,967 (309,146) (276,601) (248,613)(221,189)(73,603) Decreased (increase) in inventories (43,136) (57,811) (36,985) (20,164) 155 (9,842) Increase (decrease) in trade payables and other accounts payable 48,415 417,987 360,537 245,081 279,932 96,175 _________ ______ _______ ______ ______ _______ 327,777 269,794 277,937 72,265 159,837 74,196 ========= ====== ======= ====== ====== ======= BLUE SQUARE - ISRAEL LTD. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE NINE AND THREE MONTHS PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) Convenience translation(a) For the For the for the Year Nine months Three months nine months ended December ended ended ended 31, September 30, September 30 September 30, 2008 2008 2009 2008 2009 2009 _________ _____ ______ ______ _____ _____ Audited Unaudited Unaudited _________ ________________________________ _________ NIS U.S. $ ______________________________________________________ In thousands ______________________________________________________ (b) Supplementary information on investing and financing activities not involving cash flows: Conversion of convertible debentures into shares of subsidiaries 6,655 6,387 - 2,224 - - ======== ======= ====== ======= ====== ======= Conversion of convertible debentures into shares of the company - - 12,198 - 12,198 3,113 ======== ======= ====== ======= ====== ======= Purchasing property, plant and equipment on credit 14,797 10,169 10,201 10,169 10,201 2,714 ======== ======= ====== ======= ====== ======= BLUE SQUARE - ISRAEL LTD. SELECTED OPERATING DATA FOR THE NINE MONTH AND THREE MONTH PERIOD ENDED SEPTEMBER 30, 2009 (UNAUDITED) Convenience translation(a) For the nine For the three for the three months ended months ended months ended September 30 September 30 September 30 ________________ ______________ 2008 2009 2008 2009 2009 NIS NIS NIS NIS U.S.$ ______ ______ _____ _____ _______ (Unaudited) ______________________________________________ Sales (in millions) 5,676 5,534 1,936 1,925 512 Operating profit before changes in fair value of investment property and other gains and losses 221 180 60 59 15.7 EBITDA (in millions) 344 312 104 107 28.4 EBITDA margin 6.1% 5.6% 5.4% 5.5% N.A Increase (decrease) in same store sales 3.1% (5.5%) 0.6% (2.5%) N.A Number of stores at end of period 194 203 194 203 N.A Stores opened during the period 9 10 4 3 N.A Stores closed during the period - 1 - - N.A Total square meters at end of period 356,300 364,300 356,300 364,300 N.A Square meters added during the period, net 12,900 9,900 5,400 2,000 N.A Sales per square meter 15,234 14,568 5,015 4,896 1,303 Sales per employee (in 724 759 235 259 69 thousands) BLUE SQUARE - ISRAEL LTD. RECONCILIATION BETWEEN INCOME FOR THE PERIOD TO EBITDA FOR THE NINE AND THREE MONTHS PERIODS ENDED SEPTEMBER 30, 2009 (UNAUDITED) Conven ience transla tion(a) for the For the For the nine Year Nine months Three months months ended ended ended ended December September 30, September 30 September 31, 2008 2008 2009 2008 2009 30, 2009 _________ _______ ________ _______ _______ ________ Unaudited _____________________________________________________ NIS U.S. $ ____________________________________________ ________ In thousands _____________________________________________________ Income for the period 132,402 114,269 79,430 11,999 29,569 21,137 Taxes on income (tax benefit) 43,806 35,415 10,893 8,941 (13,885) 2,899 Finance income (60,700)(41,651) (46,689) (10,738) (18,405) (12,424) Finance expenses 166,295 140,214 138,649 60,874 63,138 36,894 Other losses (gains) 2,483 (9,298) 5,565 (11,107) 4,927 1,481 Change in fair value of investment property (19,067) 17,970) (8,390) - (6,650) (2,233) Depreciation and amortization 153,882 117,804 123,814 41,744 45,048 32,947 Benefit component in grant of employee options 8,175 5,253 8,472 2,587 2,853 2,254 _________ _______ ________ _______ _______ ________ EBITDA 427,276 344,036 311,744 104,300 106,595 82,955 ========= ======= ======== ======= ======= ======== Contact: Blue Square-Israel Ltd. Dror Moran, CFO Toll-free telephone from U.S. and Canada: +1-888-572-4698 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: +1-888-572-4698, Telephone from rest of world: +972-3-928-2220, Fax: +972-3-928-2299, Email:

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