ALON BLUE SQUARE ISRAEL LTD YAKUM, Israel, March 30, 2016 /PRNewswire/ --
-- 2015 marked as the continued deterioration in the financial position of
Mega Retail in view of its non- compliance with the targets of the
strategic plan that was formulated to respond to the increased
competition between the food chains in Israel. After a new management
took office, and following the continued deterioration in its position,
the Company and Mega reached an agreement in June 2015 with Mega's
employees and the Histadrut so as to reduce employment costs and exiting
32 losing branches. Under the agreement, the employees would be entitled
to 33% of Mega's shares. Later that month, in view of the difficulties
of formulating agreements with Mega's other creditors, a motion was
filed with the court on June 29, 2015 to approve the reorganization
arrangement with its creditors. On July 15, 2015, an agreement was
reached pursuant to which, among others, the Company assumed liabilities
for repaying the bank debt, which had guaranteed and inject to Mega by
cash or by extending guarantees up to NIS 320 million, of which NIS 160
million would be converted into Mega's share capital, NIS 80 million as
a loan to be repaid after the full repayment of the effective debt to
banks and suppliers and NIS 80 million as financing for the working
capital, as required by Mega.
-- Following the control loss in Mega and the liabilities assumed by the
Company to support Mega under the reorganization arrangement, Mega was
presented in the financial statements from the third quarter as
discontinued operations. The effect of deconsolidation resulted in
recording of a loss of NIS 78 million deriving from liabilities and
guarantees granted to Mega in the past and liabilities the Company
assumed under the reorganization arrangement in the amount exceeding the
Company's share in Mega's accumulated losses on the deconsolidation
date.
-- To finance the liabilities undertaken by the Company, the Company turned
to Alon Israel, its parent company, requesting to obtain financing and
made number of decisions regarding the sale of assets. Alon Israel
agreed to extend to the Company loans totaling NIS 220 million of which
NIS 110 million representing a bridge loan to be repaid from the
proceeds the Company will receive from the share of the parent company
in the issuance of rights and NIS 60 million representing a long term
loan to be repaid after the full payment of the Company's debt to banks
and bondholders and NIS 50 million that were supposed to be received as
a short-term loan were transferred in exchange for 8% of Dor Alon shares
that were sold to the parent company in the fourth quarter.
-- The major decisions regarding the sale of assets are listed below. These
decisions had a substantial impact on the structure and composition of
the financial statements for this year:
-- During the third quarter, the Company's Board of Directors decided
to put up for sale the entire holding of the Company at that time
(71%) in Dor Alon. Following this decision, Dor Alon is presented
starting from the third quarter of this year as part of activities
designated for sale according to its market value; as a result, the
Company recorded a loss of NIS 631 million.
-- During the third quarter, it was resolved to sell the holding in
Diners and consequently an amortization of NIS 55 million was
carried out to its sale value. The sale of the Company's holding in
Diners was completed in the fourth quarter of 2015 in exchange for
NIS 97.5 million.
-- During the fourth quarter, it was resolved to sell the entire
holding of the group (77%) in Naaman which is also presented as part
of activities designated for sale starting from the fourth quarter
of this year.
-- As required by generally accepted accounting principles the company
included the results of Mega in the profit or loss statement the results
of Mega until the deconsolidation date and Dor Alon and Naaman as
discontinued operations including the comparative figures.
-- As a result of such changes, the results of the Group's continuing
operations primarily reflect the results of BSRE and changes in the
liabilities prior to the reorganization arrangement and the liabilities
assumed by the Company as part of Mega's reorganization arrangement. The
consolidated balance reflects - mainly the assets and liabilities of
BSRE and the Company (solo) and in addition the assets and liabilities
of discontinued operations.
-- Following the resolutions on the sale of assets and in order to enable
the sale of those assets in the best possible manner, the Company agreed
on November 2, 2015 on an outline of principles with its financial
creditors regarding the restructuring of its debt, including the
guaranteed financial debt from Mega until 2020 and its repayment from
the sale of its holdings.
-- Following the deterioration in Mega's position, on January 17, 2016,
Mega applied to court seeking a stay of proceedings and three trustees
were appointed for Mega.
-- Later on, Alon Oil and Alon Retail (the "controlling shareholders")
received several proposals to acquire control of the Company, which were
brought for the approval of the Series C bondholders. On February 16,
2016, the Series C bondholders decided to conduct negotiations with Mr.
Moti Ben Moshe (the "potential buyer" or "Mr. Ben Moshe") regarding his
proposal to acquire the control of the Company, which includes, among
others, an outline for repaying the financial debt of the Company (NIS
932 million) the essence of which is the injection of NIS 900 million to
the Company for repaying the entire financial debt to the financial
creditors desiring such repayment. On February 28, 2016, the controlling
shareholders provided "an acceptance notice" to Mr. Moti Ben-Moshe's
proposal. The completion of the transaction is subject to various
conditions precedent, including the completion of the debt arrangement
with the financial creditors and court approval. It should be noted that
in the proposal from Mr. Ben Moshe, reaching an arrangement with Mega's
trustees is not a condition precedent for the completion of the
transaction. In view of the fact that the Series C bondholders resolved
to negotiate with Mr. Moti Ben Moshe, where a basic condition for his
proposal was conduct in the ordinary course of business and avoiding
disposal (realization) of assets, upon receiving the acceptance notice
by the controlling shareholders, the Company discontinued to promote the
realization of its assets in order not foil the possibility of admitting
the potential buyer. There is no assurance that the purchase will be
carried out with all that it entails. It should be noted that as of this
date, an arrangement has not yet been signed with the financial
creditors and it is uncertain whether the purchase of the Company will
be completed.
-- Following the debt arrangement of Mega in July 2015, the Company
committed to support Mega in addition to the guarantees granted for
various liabilities of Mega prior to Mega's debt arrangement and
thereafter resulting in the following developments.
-- In November 2015, and prior to the proposal of the potential buyer
(received on February 2016), the Company formulated an outline with its
financial creditors - the banks and bond holders for rescheduling the
Company's debts to them. These agreements are not yet materialized into
a binding agreement, and at this stage the potential buyer is
negotiating with the Company's financial creditors according to his
committed principles under his proposal which included, among others, a
liability to pay one third of the debt to these creditors upon the
transaction's closing and the possibility of early repayment of the debt
balance upon lapse of 90 days from completing the purchase process to
any of the financial creditors interested in such repayment (out of
sources injected by the potential buyer). In January 2016, Mega filed
with the court an application for stay of proceedings, and trustees were
appointed by the court for Mega. In view of the stay of proceedings, the
trustees and various creditors filed claims and demands against the
Company, including the exercise of guarantees.
-- In view of the uncertainty regarding the completion of the purchase of
the control of the Company by the potential buyer, or regarding reaching
agreements with its various creditors, and in light of the termination
of negotiations for the sale of properties, there are substantial doubts
about the Company's continued existence as a "going concern". The
Company's reporting excludes adjustments as to the values of assets and
liabilities and their classification that may be required should the
Company will not be able to continue to operate as a "going concern".
Consolidated profit and loss
2015 2014
==== ====
Consolidated
profit
and
loss,
NIS
in
millions 1-12.2015 Q4 1-12.2014 Q4
------------ --------- --- --------- ---
Continued
operations
----------
Revenues,
net 205.5 61.6 96.5 4.2
--------- ----- ---- ---- ---
Gross
profit
(loss) 147.9 55.6 23.0 (12.0)
------- ----- ---- ---- -----
Operating
profit
(loss)
before
financing 22.2 57.4 31.0 (13.1)
--------- ---- ---- ---- -----
Loss
from
continued
operations (180.7) (35.9) (152.5) (81.6)
----------- ------ ----- ------ -----
Loss
from
discontinued
operations (1,169.2) (4.6) (225.5) (260.8)
------------- -------- ---- ------ ------
EBITDA(1) 133.0 20.1 113.1 4.9
-------- ----- ---- ----- ---
The following details operating profit (loss) before tax according to companies:
2015 2014
==== ====
1-12.2015 Q4 1-12.2014 Q4
--------- --- --------- ---
Companies
results NIS in millions
--------- ---------------
BSRE 189.2 86.9 338.1 153.1
---- ----- ---- ----- -----
Na'aman
Group -
activity
designated
for sale (10.2) (17.2) 11.5 1.0
----------- ----- ----- ---- ---
Dor Alon -
activity
designated
for sale 116.2 28.7 143.1 26.5
------------ ----- ---- ----- ----
(1) 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 gains
(losses) net, changes in fair
value of investment property,
taxes, share in gains of
associates, depreciation and
amortization in addition to
income from intercompany rental
income. 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.
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. 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 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 EBITDA which
is presented in this press
release
--------------------------------
Results for 2015
Continued operations:
Gross revenues
Revenues for 2015 amounted to NIS 205.5 million (U.S. $52.7 million) as compared to revenues of NIS 96.5 million in 2014, an increase of 113.0% mainly deriving from recording rental fees from Mega in the second half of 2015 due to Mega's deconsolidation in the course of the year.
Gross profit in 2015 amounted to NIS 147.9 million (U.S. $37.9 million) as compared to gross profit of NIS 23.0 million in 2014, an increase of 543%. The increase in the gross profit derived from recording rental income from Mega in the second half of the year.
Selling, general and administrative expenses in 2015 amounted to NIS 104.9 million (U.S. $26.9 million), compared to expenses of NIS 87.3 million in 2014, an increase of 20.2%. The increase in expenses in this year compared to last year mainly derived from recording provisions.
Increase in fair value of investment property in 2015, the Company recorded a profit in the amount of NIS 57.5 million (U.S. $14.7 million), compared to a profit of NIS 49.8 million in 2014. The main increase in value derived from the lowering the discount rate in the fourth quarter of this year in the amount of 0.25%-0.50% in assets leased to third parties.
Other expenses, net in 2015 amounted to NIS 80.9 million (U.S. $20.7 million) compared to other income, net of NIS 25.3 million in 2014. These expenses include mainly amortization of investment of NIS 54.7 million (U.S. $14.0 million) in Diners that was sold in the fourth quarter of this year.
Share in gains of associates in 2015 amounted to NIS 2.6 million (U.S. $0.7 million) compared to a profit of NIS 20.0 million in 2014. The main decrease in this period derived from a revaluation of the value of the commercial spaces of Tel Aviv Mall in the wholesale market in 2014.
Operating profit before financing in 2015 amounted to NIS 22.2 million (U.S. $5.7 million) as compared to operating profit of NIS 31.0 million in 2014. The decrease in operating profit mainly derived from an increase in other expenses and was partially offset by an increase in income, as aforesaid.
Finance expenses, net in 2015 amounted to NIS 197.9 million (U.S. $50.7 million) as compared to net finance expenses of NIS 113.8 million in 2014, an increase of 73.9%. The increase in finance expenses, net derived from updates in the value of the guarantees and commitments granted by the Company to Mega which was partially offset by a decrease in finance expenses in BSRE.
Taxes on income tax expenses in 2015 amounted to NIS 5.1 million (U.S. $1.3 million) as compared to tax expense of NIS 69.7 million in 2014. The decrease in tax expenses derived from recording a tax asset for the Company's investments in Bee Group and Alon Cellular and was partially offset by recording a tax provision due to investments in BSRE.
Net loss from continued operations in 2015 amounted to NIS 180.8 million (U.S. $46.3 million) compared to a net loss of NIS 152.4 million in 2014. The loss from continued operations this year attributed to the Company's shareholders amounted to NIS 243.3 million (U.S. $62.3 million) or NIS 3.68 per share (U.S. $0.94), and the profit from continued operations attributed to non-controlling interests amounted to NIS 62.6 million (U.S. $16.0 million).
Net loss from discontinued operations in 2015 amounted to NIS 1,169.2 million (U.S. $299.6 million) compared to a loss of NIS 225.5 million in 2014. The loss from discontinued operations in 2015 attributed to the Company's shareholders amounted to NIS 1,026.0 million (U.S. $262.9 million) or NIS 15.55 per share (U.S. $3.98), and the loss from discontinued operations attributed to non-controlling interests amounted to NIS 143.1 million (U.S. $36.6 million).
The loss balance from discontinued operations this year included:
-- Mega's financial results in the first half of 2015, and a loss of loss
of control in Mega, including the value of liabilities and guarantees
upon the control loss date;
-- The results of Dor Alon in the first half of 2015 and a loss from the
adjustment of value of the Company's investment in Dor Alon to the
market value resulting from the Board resolution to sell the Company's
holdings in Dor Alon; and
-- The financial results of Naaman for 2015 and amortization of the
Company's investment in Naaman to its equity resulting from the
resolution of Bee Group's Board to sell the Company's holdings in
Naaman.
Mega:
The loss from discontinued operations attributed to Mega included:
-- The Company's share in the operating loss of Mega results for the first
half of 2015 as included in the consolidated statements as of that date
amounting to NIS 397.7 million (U.S. $101.9 million); and
-- Other expenses of NIS 78.2 million (U.S. $19.9 million) deriving from
recording guarantees previously extended to Mega and liabilities the
Company assumed in a total amount of NIS 654.4 million (U.S. $166.8
million) as a part of Mega's arrangement that was approved in court, net
of Mega's shareholders' deficiency upon deconsolidation in the amount of
NIS 576.2 million. For details regarding the developments in Mega
position, see below.
Dor Alon:
Loss from discontinued operations attributed to Dor Alon includes the Dor Alon's profit for six months as included in the consolidated statements as of that date amounting to NIS 16.5 million (U.S. $4.2 million) and loss of NIS 631.3 million (U.S. $161.8 million) deriving from the resolution to present the investment in Dor Alon as an activity designated for sale and setting the investment at market value in the books (see the note on discontinued operations of Dor Alon in additional information).
Naaman
The loss from discontinued operations attributed to Naaman included:
-- Naaman's loss for 2015 as included in the consolidated statements as of
that date amounting to NIS 14.8 million (U.S. $3.8 million); and
-- Loss of NIS 63.7 million (U.S. $16.3 million) deriving from the
resolution to present the investment in Naaman as an activity designated
for sale and setting the investment at equity in the books of Naaman
(see the note on discontinued operations of Naaman in additional
information).
Cash flows for 2015
Cash flows from operating activities: Net cash flow provided by operating activities amounted to NIS 270.4 million (U.S. $69.4 million) in 2015 compared to net cash flow provided by operating activities of NIS 505.9 million in 2014. The main decrease in cash flow provided by operating activities this year derived from changes in net working capital in the amount of NIS 297.3 million (U.S. $76.1 million) compared to last year and was partially offset by an increase from continued operations of NIS 92.9 million (U.S $ 23.8 million).
Cash flows from investing activities: Net cash flows provided by investing activities amounted to NIS 105.9 million (U.S. $27.1 million) in 2015 as compared to net cash flows used in investing activities of NIS 74.7 million in 2014.
The cash flows provided by investing activities this year mainly included:
-- Proceeds from sale of property and equipment of NIS 92.3 million (U.S.
$23.7 million);
-- Proceeds from sale of marketable securities in the amount of NIS 135.1
million (U.S. $ 34.6 million);
-- Repayment of loans granted to interested parties and others of NIS 143.9
million (U.S. $ 36.9 million);
-- Proceeds from sale of associate of NIS 139.6 million (U.S. $ 35.8
million);
-- Interest received of NIS 9.8 million (U.S. $ 2.5 million);
-- Offset by the purchase of investment property, property and equipment
and intangible assets in a total of NIS 133.8 million (U.S. $34.3
million);
-- Offset of funding to associates of NIS 223.4 million (U.S $ 57.2
million); and
-- Offset of funds derecognized upon Mega's deconsolidation of NIS 29.9
million (U.S. $ 7.7 million).
The net cash flows used in investing activities in 2014 mainly included:
-- Purchase of investment property, property and equipment, and intangible
assets of NIS 323.8 million;
-- Grant of long term loans, net of NIS 86.9 million;
-- Offset of proceeds from the sale of property and equipment and
investment property in the amount of NIS 109.7 million; and
-- Offset of proceeds from the sale of marketable securities of NIS 140.3
million and interest received of NIS 12.4 million.
Cash flows from financing activities: Net cash flows used in financing activities amounted to NIS 341.4 million (U.S. $87.5 million) in 2015 as compared to net cash flows used in financing activities of NIS 457.6 million in 2014.
The cash flows used in financing activities this year mainly included:
-- Repayment of long term loans of NIS 496.4 million (U.S. $127.2 million);
-- Repayment of bonds of NIS 415.5 million (U.S. $106.5 million);
-- Repayment of commercial paper of NIS 111.2 million (U.S. $28.5 million);
-- Decrease in short- term credit from banks and others of NIS 206.2
million (U.S. $52.8 million);
-- Interest payments of NIS 178.3 million (U.S. $45.7 million);
-- Dividend payment to non-controlling interests of NIS 36.2 million (U.S.
$9.3 million);
-- Offset by receipt of long term loans of NIS 354.3 million (U.S. $90.8
million);
-- Offset by receipt of long term loans from the parent company of NIS
170.0 million (U.S. $43.6 million);
-- Offset by purchase of shares in subsidiaries by non- controlling
interest in the amount of NIS 267.1 million (U.S. $68.5 million); and
-- Offset by issuance of shares in a subsidiary to non-controlling
interests of NIS 50.4 million (U.S. $ 12.9 million).
The net cash flows used in financing activities in 2014 mainly included:
-- Repayment of long term loans of NIS 586.4 million;
-- Bond repayments of NIS 536.3 million, interest payments of NIS 220.7
million;
-- Decrease in short term bank credit of NIS 36.6 million;
-- Payment of dividend to non-controlling interest of NIS 59.4 million;
-- Offset by receipt of long term loan of NIS 768.3 million; and
-- Offset by issuance of bonds of NIS 158.1 million.
Results for the fourth quarter of 2015
Continued operations:
Revenues
Revenues in the fourth quarter of 2015 amounted to NIS 61.6 million (U.S. $15.8 million) as compared to revenues of NIS 4.2 million in the comparable quarter last year. The increase derived from recording rental income from Mega's deconsolidation in the course of the year 2015.
Gross profit in the fourth quarter of 2015 amounted to NIS 55.6 million (U.S. $14.2 million) as compared to a gross loss of NIS 12.0 million in the comparable quarter last year. The increase in the gross profit compared to the corresponding quarter last year mainly derived from recording rental income from Mega in the quarter as aforesaid. (In the comparative figures, the Company continues to cancel the sale turnovers of the companies that remained as continued operations as consolidated with the companies whose results are presented as discontinued operations, however the cost of those sales remains in the continued operations such that a gross loss results in the consolidated report in respect of the continued operations).
Selling, general and administrative expenses in the fourth quarter of 2015 amounted to NIS 40.2 million (U.S. $10.3 million) compared to expenses of NIS 26.3 million in the comparable quarter last year, an increase of 52.9%. The main increase derived from an increase of provisions and from an increase in expenses deriving from the debt arrangement in the Company and Mega.
Increase in fair value of investment property in the fourth quarter of 2015 the Company recorded a profit in the amount of NIS 38.3 million (U.S. $9.8 million) compared to a profit of NIS 29.9 million in the corresponding quarter last year.
Other income (expenses), net: other income in this quarter amounted to NIS 6.7 million (U.S. $1.7 million) compared to other expenses of NIS 7.3 million in the fourth quarter of 2014.
Share in gains of associates in this quarter amounted to NIS 3.0 million (U.S. $0.8 million) compared to a profit of NIS 2.6 million in the corresponding quarter last year.
Operating profit before financing in this quarter amounted to NIS 57.4 million (U.S. $14.87 million) (93.2% of revenues) as compared to operating loss of NIS 13.1 million in the fourth quarter of 2014. The increase in the operating profit derived from an increase in revenues due to recording rental income in this quarter in which Mega was deconsolidated.
Finance income (expenses), net: finance expenses in this quarter amounted to NIS 73.9 million (U.S. $18.9 million) as compared to net finance expenses of NIS 19.6 million in the fourth quarter of 2014, an increase of 277%. The increase in finance expenses was mainly from an increase in the measurement of liabilities and guarantees extended by the Company in connection with its investment in Mega.
Taxes on income: tax expenses in this quarter amounted to NIS 19.4 million (U.S. $5.0 million) as compared to tax expenses of NIS 48.9 million in the fourth quarter of 2014.
Net profit (loss) from continued operations: loss from continued operations in this quarter amounted to NIS 35.9 million (U.S. $9.2 million) compared to a net loss from continued operations of NIS 81.6 million in the corresponding quarter last year. The loss of this quarter attributed to the Company's shareholders amounted to NIS 62.8 million (U.S. $16.1) or NIS 0.95 per share (U.S. $0.24) and the profit attributed to non-controlling interests amounted to NIS 26.9 million (U.S. $6.9 million).
Net loss from discontinued operations in this quarter amounted to NIS 4.6 million (U.S. $1.2 million) compared to a loss of NIS 260.8 million in the corresponding quarter last year. The loss from discontinued operations of this quarter attributed to the Company's shareholders amounted to NIS 2.6 million (U.S. $0.7 million) or NIS 0.04 per share (U.S. $0.01 million) and the loss from discontinued operations attributed to non-controlling interests amounted to NIS 7.1 million (U.S. $1.8 million).
The loss balance from discontinued operations in this quarter includes an impairment loss of the Company's investment in Dor Alon resulting from the Board resolution to sell the Company's holdings in Dor Alon and from the financial results of Naaman for 2015 that included an impairment of the Company's investment in Naaman as a result of the Bee Group's Board resolution to sell the Company's holdings in Naaman.
Dor Alon
Loss from discontinued operations includes a profit of NIS 11.3 million (U.S. $ 2.9 million) deriving from the updated impairment in Dor Alon as an activity designated for sale and setting the investment at market value in the books (see the note on discontinued operations of Dor Alon in additional information).
Naaman
The loss from discontinued operations attributed to Naaman includes a loss of NIS 15.4 million (U.S. $4.0 million) deriving from the resolution to present the investment in Naaman as an activity designated for sale and setting the investment at equity in the books of Naaman (see the note on discontinued operations of Naaman in additional information).
Cash flows for the fourth quarter of 2015
Cash flows from operating activities: Net cash flow provided by operating activities amounted to NIS 105.6 million (U.S. $27.1 million) in the fourth quarter of 2015 compared to net cash flow provided by operating activities of NIS 27.5 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 derived mainly:
-- From a decrease in loss from discontinued operations in this quarter in
the amount of NIS 16.2 million (U.S. $4.1 million) and,
-- Offset of cash flows used in this quarter to finance the working capital
in the amount of NIS 12.0 million (U.S. $3.1 million) compared to cash
flows provided by working capital in the comparable quarter of NIS 73.9
million (the total change between quarters in the working capital
amounts to NIS 61.9 million (U.S. $15.9 million)).
Cash flows from investing activities: Net cash flows provided by investing activities amounted to NIS 45.4 million (U.S. $11.6 million) in this quarter as compared to net cash flows provided by investing activities of NIS 37.7 million in the corresponding quarter last year.
Cash flows provided by investing activities in this quarter mainly included:
-- Proceeds from the sale of an associate of NIS 120.3 million (U.S. $30.8
million);
-- Proceeds from the sale of marketable securities in the amount of NIS
18.5 million (U.S. $ 4.7 million);
-- Interest received of NIS 1.3 million (U.S. $ 0.3 million);
-- Offset of funding to a subsidiary that was deconsolidated and
transferred into equity of NIS 53.8 million (U.S $ 13.8 million);
-- Offset by the purchase of investment property, property and equipment
and intangible assets in a total of NIS 21.4 million (U.S. $5.5
million); and
-- Offset by investment in marketable securities of NIS 21.5 million (U.S.
$5.5 million);
The net cash flows used in investing activities in the fourth quarter of 2014 mainly included:
-- Proceeds from the sale of property and equipment and investment property
of NIS 54.3 million;
-- Proceeds from the sale of marketable securities of NIS 71.0 million
offset by purchase of investment property, property and equipment and
intangible assets of NIS 72.2 million, and
-- Grant of long term loans of NIS 12.4 million;
Cash flows from financing activities: Net cash flows provided by financing activities amounted to NIS 82.7 million (U.S. $21.2 million) in this quarter as compared to net cash flows used in financing activities of NIS 43.0 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 173.3 million (U.S. $44.4 million);
-- Repayment of bonds of NIS 91.2 million (U.S. $23.4 million);
-- Change in short-term credit of NIS 84.7 million (U.S. $21.7 million) and
interest payments of NIS 59.8 million (U.S. $15.3 million);
-- Offset by receipt of long term loan from the parent company of NIS 30.0
million (U.S. $7.7 million);
-- Offset by issuance of bonds of NIS 247.6 million (U.S. $63.4 million);
and
-- Offset by issuance of shares in subsidiaries by non-controlling
interests of NIS 49.9 million (U.S. $ 12.8 million).
The net cash flows used in financing activities in the fourth quarter of 2014 mainly included:
-- Repayment of long term loans of NIS 111.1 million;
-- Bond repayments of NIS 126.6 million;
-- Payment of dividend to non-controlling interest of NIS 19.1 million;
-- Interest payments of NIS 61.7 million;
-- Offset by receipt of long term loan of NIS 159.3 million;
-- Offset by short term bank credit of NIS 49.7 million; and
-- Offset by issuance of shares in subsidiaries by non-controlling
interests of NIS 69.7 million.
Additional Information
Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) in 2015 was NIS 133.0 million (U.S. $34.1 million) compared to NIS 113.1 million in 2014.
In the fourth quarter of 2015, EBITDA was NIS 20.1 million (U.S. $5.2 million) compared to EBITDA of NIS 4.9 million in the fourth quarter of 2014.
Events during the reporting period
1. Going concern comment in the Company's financial statements
Following the debt arrangement of Mega in July 2015, the Company committed to support Mega in addition to the guarantees granted for various liabilities of Mega prior to Mega's debt arrangement and thereafter resulting in the following developments.
In November 2015, and prior to the proposal of the potential buyer (received on February 2016) the Company formulated an outline with its financial creditors - the banks and bond holders for rescheduling the Company's debts to them. These agreements are not yet materialized into a binding agreement, and at this stage the potential buyer is negotiating with the Company's financial creditors according to his committed principles under his proposal which included, among others, a liability to pay NIS 300 million of the debt to these creditors upon the transaction's closing and the possibility of early repayment of the debt balance upon lapse of 90 days from completing the purchase process to any of the financial creditors interested in such repayment (out of sources injected by the potential buyer).
In January 2016, Mega filed with the court an application for stay of proceedings, and trustees were appointed by the court for Mega. In view of the stay of proceedings, the trustees and various creditors filed claims and demands against the Company, including the exercise of guarantees.
In view of the uncertainty regarding the completion of the purchase of the control of the Company by the potential buyer, or regarding reaching agreements with its various creditors, and in light of the termination of negotiations for the sale of properties, there are substantial doubts about the Company's continued existence as a "going concern". The Company's reporting excludes adjustments as to the values of assets and liabilities and their classification that may be required should the Company will not be able to continue to operate as a "going concern".
In the absence of disposal of properties or the completion of the transaction with the potential buyer, the Company has liquid available sources sufficient at the most for financing the Company's current operations for a period of up to two months (provided that no extraordinary events occur), at the end of which, if the transaction with the potential buyer is not completed, the Company will need to sell any of its assets to finance its continued operations.
2. Mega
Mega Retail Ltd. was wholly owned and controlled by the Company untill the middle of 2015. In June 2015, Mega's employees received a right to be allocated 33% of Mega's shares under an agreement signed by the Company, Mega and Mega's employees as detailed below. In July 2015 under Mega's reorganization arrangement, it was determined that Mega's Board will be composed of seven members three of whom would be appointed by the Company and by that, the Company actually lost control of Mega. On January 18, 2016 Mega entered into a stay of proceedings and trustees were appointed, and from that date the Company has no effect on Mega's management.
Mega has accumulated significant losses in recent years. The losses of Mega and its subsidiaries in 2014 and 2013 amounted to NIS 436 million and NIS 130 million, respectively. The Company does not have Mega's data for 2015 as such data were not received from the appointed trustees.
Agreement with the employees and reorganization plan from July 2015
Considering Mega's deterioration, on June 21, 2015, a collective agreement and understanding letter were signed between Mega's management, BSI, Mega's employee committee and the Histadrut (the employees' agreement), effective from April 1, 2015. The following are the principles of the employee agreement:
1. Closing of 32 losing branches of Mega and discontinuing the employment of
employees in the branches to be closed and reduction of personnel in the
headquarters.
2. The employees waived part of their wage cost and certain retirement term
of the employees, the employment of whom will be discontinued.
3. The allocation of 33% of Mega's share capital (to be carried out by way
of allocating new shares or by transferring Mega's shares held by the
Company) to a legal corporation to be established by the employees'
representation for the active and permanent employees. The corporation to
be established may appoint one-third of the Company's Board who are not
external directors, and in any event not less than two members, where one
is the chairman of the employees committee and the other is a
professional party ("The professional party"). As of the report date, the
shares were not yet allocated.
4. The Company committed under the employees' agreement to provide certain
credit lines during the first five years of the agreement. This
commitment was replaced by a commitment to extend higher credit lines to
which the Company agreed under Mega's reorganization arrangement (see
below).
Mega's reorganization arrangement
On June 29, 2015, Mega filed with the District Court in Lod a reorganization plan for Mega under which a petition was filed also under section 350 of the Companies' Law-1999 to convene meetings of certain of Mega's creditors: employees, suppliers, property owners and the banks in order to reach an arrangement with each of these creditor groups as part of the reorganization plan. On July 1, 2015, the court approved the convening of meetings and granted Mega an interim period of two weeks during which it will be able to formulate a reorganization arrangement with the creditors.
On July 12, 2015, the creditors' meetings of the Company convened for the purpose of voting on the arrangements being presented.
On July 14 and 15, 2015, the Court approved the creditors' arrangement ("the arrangement approval date"). Under the arrangement, the Company assumed various liabilities as follows:
1. Supporting Mega - the Company committed to extend to Mega, effective June
1, 2015, NIS 320 million as follows: NIS 240 million by way of loans or
guarantees of which NIS 160 million would be converted into Mega's share
capital (before allocating 33% of Mega's share capital to employees by
virtue of the collective agreement signed on June 21, 2015). The balance
of NIS 80 million beyond the converted amount to share capital would be
repaid only after the full repayment of the effective debt to banks and
suppliers (as defined in the arrangement). NIS 80 million as a framework
for working capital based on the current needs of Mega and at its request
if necessary.
2. Liabilities regarding guaranteed and shared bank debts - the debts of
Mega and Eden Teva Market Ltd. to banks that were secured by the
Company's guarantee or debts that are shared by Mega and the Company (the
guaranteed debt) would be paid by the Company without derogating from the
Company's right to be in the creditors' shoes in respect of the paid debt
under the conditions set forth in the arrangement. The total guaranteed
debt as of the reports date is NIS 301 million on account of Mega and NIS
29 million as on account of Eden.
3. Arrangement with suppliers - under the arrangement with Mega's suppliers
it was agreed that 30% of past debts to Mega's large suppliers (namely
Mega's debt as of the effective date is higher than NIS 800 thousand)
(the deferred debt shall be deferred for two years (grace period) and
shall be repaid effective from July 15, 2017 in 36 equal monthly
installments (the repayment period). The deferred debt shall bear in the
grace period, interest (unlinked) at 2% per annum (grace interest) and
shall bear in the repayment period, interest (unlinked) at 3% per annum
(repayment interest). The deferred debt shall not be linked. Each large
supplier shall be granted a non-marketable option for five months from
the issuance date of such option to convert the deferred debt (in whole
or in part) into the Company's shares by allocating shares in lieu of the
deferred debt to the supplier (the suppliers' option). During the first
two months from the allocation date of the suppliers' option, the
exercise price shall be the price of the Company's share in the rights
issuance date (base price). Upon the elapse of two months from the
allocation of the option, the exercise price of the option shall be the
higher of: the closing price of the Company's share during 30 trading
days that preceded the conversion or 120% of the base price. According to
the debt arrangement, the deadline for issuing the options shall be
January 15, 2016. Due to regulatory limitations, such options were not
issued until such deadline. Since a motion was filed to adjourn the date
sue to Mega's entry into stay of proceedings, the Company applied to the
court seeking the court to instruct that commitment to the issuance of
options is invalid when Mega entered into a stay of proceedings and the
Company is not committed to issue the supplier's option, as aforesaid. A
decision has not yet been rendered in the above motion.
4. Waiver of control in Mega's Board - under the above reorganization
arrangement, the Company agreed that Mega's Board will be composed of
seven members, three of whom shall be appointed by the Company, two
members shall be appointed by the employees, one director shall be
appointed by Mega out of a list of five candidates to be recommended by
the President of the Manufacturers Association and one director shall be
appointed by the court based on the bank's recommendation. Following this
ruling, the Company lost the majority in Mega's Board and as a result
lost the control of Mega. Following the loss of control, the investment
in Mega is presented on an equity basis. On July 20, 2015, the Company's
Board approved the provisions of the creditors' arrangement that relate
to the Company, subject to the approval of the arrangement with Discount
Bank regarding a deferral until September 30, 2015 of the repayment of on
call loans made by Discount Bank to the Company. On July 27, 2015, the
Company reached an agreement with Discount Bank under which the bank
shall not require an immediate repayment of on call loans until September
30, 2015, and by that the condition precedent for approving the
arrangement of Mega was met by the Company. Mega's reorganization plan
could not settle two material issues - the first, the continued supply of
products by suppliers to Mega in credit terms that preceded the
arrangement; and the second, the return of Mega's customers to purchase
products in its branches. Mega's working assumption, as reported to the
Company, was that in view of the efficiency measures taken and the
support of the Company, the suppliers would return to regularly supply
Mega and the customers would return to the branches. After the approval
of the reorganization plan, Mega closed 32 branches and two other losing
branches were closed (in addition to the initial agreement), and 1,200
employees were dismissed; Mega negotiated with its main lessor, BSRE,
from which it received a discount of 9% in rental fees as from November
1, 2015 for 24 months. (See below).The Company has supported Mega
according to its obligations under the arrangement; a new board was
appointed for Mega, comprised mostly of directors who were not appointed
by the controlling shareholder and closely supervised and independent
conduct of Mega. However, a significant part of the suppliers has not
returned to supply Mega under the credit terms prior to the arrangement.
As reported by Mega to the Company, the suppliers continued to stiffen
and toughen the supply conditions to Mega, resulting in substantial
deterioration of sales, especially in the discount stores operated under
the brand YOU. After further deteriorated relations with the suppliers,
Mega has reached a decision to sell all 22 branches in the sub chain,
YOU. The sub chain, YOU, constituted Mega's discount chain which employed
more than one thousand employees. The sale of the sub chain, YOU, was
made quickly for a total of NIS 130 million and reaching agreements with
the employees' committee and the Histadrut on the employment termination
of more than an additional one thousand employees.According to the
information reported by Mega, after the sale of these discount stores,
Mega planned to be left with 120 stores of its branches "Mega in Town"
located in the city centers, in the best locations - a chain that for
years operated well with good profitability having a great potential to
return to a reasonable profitability. Simultaneously, BSI and Mega
negotiated with various potential investors to make an additional
investment in Mega.However, even after the closure of the sub chain, YOU,
the relations of Mega with its suppliers continued to worsen and created
a situation in which other suppliers condition their supply on cash
payment. In January, 2016, some of Mega's large suppliers notified Mega
that they will not supply goods to Mega, but with cash only. At the same
time, the Company and Mega invested efforts to admit an investor to Mega.
Such efforts did not succeed. Under these circumstances, Mega's board
resolved on January 17, 2016 to file an urgent application with the
district court in Lod seeking a stay of proceedings and the appointment
of a trustee. On January 17, 2016, a temporary stay of proceedings order
was rendered, and on January 18, 2016, an order of stay of proceedings
was rendered for 30 days three trustees were appointed to Mega. The court
authorized the trustees to operate for the recovery and sale of Mega
reaching a creditors' arrangement and examine the completion of the
reorganization plan from July 2015. On February 14, 2016, the order was
extended for an additional three months until May 17, 2016.
The following are the arguments of Mega's trustees to the Company and BSRE
In several applications to the Company, Mega's trustees notified the Company that Mega and some of Mega's creditors are direct creditors of the Company in the amount of hundreds of millions of NIS. As per Mega's trustees, this indebtedness is due among other things from the Company's contractual obligations towards Mega and Mega's creditors and from liabilities in accordance with the reorganization agreement dated July 2015, as well as from other causes of action. According to Mega's trustees, the Company must meet the following obligations:
1. Completion of the liabilities to inject NIS 320 million. At first, the
trustees claimed that the Company had not yet transferred NIS 63-70
million and on March 7, 2016, the total amount to be completed was
updated to NIS 117 million (see below).
2. Issuance of rights in the Company of no less than NIS 150 million and the
allocation of options to Mega's large suppliers.
3. Repayment of the guaranteed and shared debt to banks of NIS 300 million.
4. Repayment of the Company's guarantee towards the Company's employees
transferred to work at Mega in the amount estimated by the trustees at
NIS 40 million.
5. Repayment of guarantee to suppliers, insurance companies, suppliers'
credit and property owners amounting to NIS 150 million.
6. Contingent liability in connection with the return of NIS 117 million
resulting from dividend distribution of Mega in 2013, as argued in the
application for approval of a derivative claim.
In their request, Mega's trustees made clear that the indebtedness of Mega and the Company's creditors are on one line having an equal priority. Therefore, the Company is not permitted and is hereby required not to carry out a debt arrangement with its creditors without including a suitable arrangement agreed upon with the trustees. The trustees also demanded that the Company would not make any payment nor place a lien in favor of its financial creditors, since this act would be a preference of the creditors.
On February 23, 2016 (Application 37), Mega's trustees filed an application for instruction in which the court was requested to sign a summary judgment instructing the land registry offices and/or the Israel Lands Authority to register in the books caveats regarding the appointment of Mega's trustees, on all of the real estate assets in which Mega has rights.
On February 24, 2016 (Application 38), the trustees filed with the court a report on behalf of the trustees and an application for remedies in connection with the Company's liabilities towards Mega. Among other things the trustees claim that the Company has the following obligations:
1. The Company owes NIS 118 million to complete its liability which was
taken under the reorganization arrangement from July 2015 to inject NIS
320 million to Mega, issuance of an option to large suppliers of Mega for
a debt of NIS 193 million to convert their debt into the Company's
shares. The trustees also argue that the Company has no right to return
to Mega for the Company's liabilities for the repayment of Mega's debts
to banks (the guaranteed and the shared debt of NIS 301 million).
2. Other liabilities of NIS 186 million mainly for transferring employees,
guarantees to suppliers, and to insurers of suppliers' credit, and
property owners. The trustees claim that the Company extended to Mega
these guarantees as a substitute for the equity required for Mega and as
part of the policy of its conduct in thin financing.
3. Contingent indebtedness in connection with a dividend of NIS 100 million
that was distributed in 2013 from Mega to the Company in respect of which
a derivative claim of NIS 117 million was filed.
4. The Company transferred to Mega its holdings in Eden where during the
period it was held by Mega (2010 and onwards) it lost NIS 100 million and
a minority shareholder filed an application against Mega and the Company
(and this while ignoring the fact that the claim was filed for NIS 40
million).
The trustees also argue that:
1. Split of real estate activity in 2009 from Mega transferred to BSRE and
their rental by Mega- as alleged by the trustees, under the split a
dividend of tens of millions of NIS was distributed to the Company and as
per the trustees' allegations, there is a concern that the lease
agreements are higher than market prices, and in addition BSRE forced
Mega to continue renting losing branches and did not allow Mega's release
from such agreements. The trustees also wondered about Mega's consent
regarding the application filed with the court for an arrangement between
Mega and BSRE under which Mega will receive a discount of 9% on the
rental fees for two years in exchange for a waiver of any claim or demand
against BSRE about the lease and split agreements either in the making
and/or approving such agreements.
2. Mega was operated by thin financing and therefore, as far as determined
that this argument is correct, the trustees believe that in these
circumstances they have a cause of action to charge the shareholders for
all of Mega's debts and/or the rejection of their debts.
3. Deteriorated corporate governance - in Mega there was a deteriorated
corporate governance resulting from making decisions by Mega's board
which were in contrast to Mega's best interest and these decisions led to
Mega's position.
Under application 38, two operative remedies are sought:
1. The appointment of an appraiser in connection with the split agreements
of the real estate assets from Mega to BSRE and regarding the rental fees
and terms to which Mega is committed.
2. Investigation powers - empowering trustees to investigate the issues
listed above and the reasons for the collapse of Mega including calling
officers and controlling shareholders of Mega, the Company, BSRE and Alon
(the Company's parent company) for investigation and instruct them to
produce any document required by the trustees for the purpose of
examinations and investigations. On March 2, 2016, the court approved the
applications of the trustees.On March 7, 2016, Mega's trustees filed an
application with the court for leave of instructions regarding the
Company's liability to inject funds to Mega by virtue of the
reorganization arrangement from July 2015 and pay on account of the
injection of NIS 320 million, the amount of NIS 117 million. As per the
trustees' arguments, the injections of NIS 320 million took effect from
the arrangement approval date, namely from July 15, 2015 and not from
June 1, 2015 (as claimed by the Company and as stated in the agreement),
and accordingly, the amount balance that was not yet injected by the
Company amounts to NIS 117 million (Application 46). On February 21,
2016, several employees of Mega filed an application to court
(Application 32) to allow them participate in the negotiations to be held
between the Company and Mega's trustees in connection with a guarantee
granted to the employees transferred from the Company to Mega and in
connection with compensation fund. They claim that the guarantee applies
also to the early termination notice component and the employment period
in Mega and not only to their employment period in the Company. Mega's
trustees opposed to the addition of these employees to the
negotiations.On February 3, 2016, several employees of Mega filed an
application with the court (application 22) in which they requested the
Company to transfer the balance of its central fund to the trustees. In
response to the application, the trustees have extended the application
and demanded that the Company will transfer to them NIS 26 million in
respect of the amounts, allegedly guaranteed by the Company for the
employees transferred from the Company to Mega in 2011. On March 11,
2016, the Company filed an application (application 96) that it is no
longer obligated for the suppliers' option because Mega entered into a
stay of proceedings. The trustees as well as some suppliers (including
the manufacturers association) responded that the Company should issue
the option to suppliers. In addition, Mega's managers conduct proceedings
requesting to instruct "waiver of onerous contracts" under which the
court is requested to instruct the conclusion of the rental agreements
alleging that such agreements are onerous. For one of the above assets,
BSI was added to the proceeding that it guarantees the rental agreement
(application 45).
The main reactions of the Company and BSRE to arguments and applications of Mega's trustees'
The Company objects to the arguments of Mega's trustees and in the context of the legal proceedings, it argues among others, that it fully complied with its obligations to Mega, and the Company also claims that with Mega's entry into stay of proceedings, even determined that it did not complete all its liabilities under the reorganization arrangement, their liabilities expire according to the reorganization arrangement. The Company claims, among others, all of the following:
1. Regarding the Company's liability to inject up to NIS 320 million, the
Company's position is that it has no liability whatsoever, among others,
because it met all of its liabilities, injected all as Mega required, and
the total amounts it injected or guaranteed in the arrangement period,
including the guarantees it extended during the agreement and after
deduction of amounts which will be paid by the Company in respect of
guarantees given by the Company before the reorganization arrangement are
in excess of NIS 320 million. The Company further claims that it injected
all that was required by Mega, whose decisions were made effective from
reorganization arrangement date by an independent board and for good
reason it was not required to inject amounts in excess of what it
injected. The Company claims that if determined that it did not inject
all amounts, the sums that were not injected are amounts for liabilities
so as to extend a framework for the working capital for Mega's needs, if
required, which was purported to assist dealing with "peaks" (short term
loan purported to reconcile the timing differences between the payment
date of Mega for goods purchased from suppliers and the date of receiving
the consideration when goods are sold to customers which is not
designated to finance losses), and these were not required by Mega. The
Company further claims that once Mega entered a stay of proceedings, the
liabilities that were not yet performed, if any, are canceled in the
Company's circumstances. The Company also claims that the amounts of the
guarantees and the injection from June 1, 2015 shall be included as
settled in the agreement.
2. Regarding the supplier's option, the main argue of the Company is
considering the stay of proceedings, its duty to carry out the suppliers'
option did not arise, among others on the grounds that its liability was
given against the suppliers' commitment to defer their debt, liability
that the suppliers themselves cannot meet considering the stay of
proceedings and considering the fact the suppliers have improved their
position following the injections of funds made by the Company to Mega.
3. As to applications of the employees that the central compensation fund
will be transferred to the trustees, the Company claims that the trustees
or the employees have no right in the central compensation fund that
belongs to the Company since in the funds central compensation fund that
were used by Mega from June 1, 2015 are debts of Mega to the Company, and
therefore should be recorded on account of the liability to inject funds
to Mega. As for the claims of the employees and trustees regarding the
scope of the Company's guarantee, beyond the claims regarding substantial
procedural flaws raised in the employees' and the trustees' applications,
the Company's position is that the amounts for which it guarantees are
significantly lower than the claimed amounts, and today, the scope of
Mega's debts to its employees that are guaranteed by the Company are
negligible. The Company also objected to joining the employees to the
negotiation process (application 32) and the claims raised by the
employees and trustees in the application in question.
4. As to the guaranteed debt, the Company's position is that it has the
right to return to Mega for any amount to be paid by it to the financial
creditors. The above does not exhaust the Company's claims and those that
are argued as part of the relevant legal proceedings, where the Company's
claims and other arguments will be deliberated as well as the Company's
claims and the allegations of Mega's trustees and its creditors. Taking
into account the unique circumstances of the case and the stage of the
proceedings and the fact that the claims will be decided in legal
proceedings and therefore the Company has no control over the outcome,
there is no certainty that the Company's position on these matters will
be accepted and at this stage it is impossible to estimate the
probability that the company's allegations will be accepted.
On February 29, 2016, BSRE notified Mega that according to the addendum of the lease agreements between the parties, in the circumstances under which a trustee was appointed for Mega and the decision was not cancelled with, in 30 days from the date it was granted, then Mega is in breach of the lease agreements including the addendum and therefore the discount set forth in the addendum is null and void.
BSRE responded to application 37 and claimed that the trustees' application should be dismissed regarding the assets that were transferred to the Company under the asset transfer agreement from Mega Retail where the process of registering them in the Company's name was not yet completed. The court did not accept the position of BSRE and on March 20, 2016, it rendered a decision that the trustees will register caveats in their names in the various land registry offices. BSRE filed an application for stay of execution and an application for leave of appeal with the Supreme Court.
On March 8, 2016, BSRE filed a motion with the court in which the court was requested to appoint a receiver for the purpose of exercising the rights of BSRE in accordance with a bond issued by Mega for BSRE on March 31, 2009, in relation to assets acquired by BSRE from Mega pursuant to an agreement dated March 31, 2009, and as of the report date, the registration in BSRE's name in Israel Lands Authority and/or the Land registry Office had not yet been completed. On March 13, 2016 the court ruled that the motion is not in accordance with the stay of proceedings order granted to Mega and therefore decided to strike such motion. On March 15, 2016, BSRE filed with the stay of proceedings court a motion to allow it exercise the pledged rights according to the bond.
On March 10, 2016, BSRE filed a motion for leave of instructions to be paid NIS 1.8 million representing the balance of the rental fees due to BSRE for leasing the assets for the period from February 17, 2016 through March 16, 2016.
Eden Teva Market (a company which was held at 51% by Mega) and Dr. Baby (a company which was wholly owned by Mega)
On July 9, 2015, Eden Teva Market (Eden) filed an application with the court for leave of a stay of proceedings order, to which was attached the creditors' arrangement proposal for the creditors of Eden Teva Market creditors. Eden's debts are estimated at NIS 81 million, excluding the banks' creditors which amount to NIS 74.6 million. Mega guarantees the debts of Eden to Bank Leumi in the amount of approximately NIS 35.7 million and NIS 9.7 million to the First International Bank. The Company guarantees the debts of Eden to Bank Hapoalim in the amount of approximately NIS 29.2 million.
On July 9, 2015, the court granted the stay of proceedings application and rendered a stay of proceedings order to Eden and appointed a trustee for the stay of proceeding period. Under the application for stay of proceedings, Mega filed a proposal for creditors' arrangement however, on July 22, 2015 Mega notified the court that it withdraws the proposed arrangement submitted to Eden's creditors.
On December 3, 2015, a settlement agreement between Mega and Eden was approved by the district court according to which NIS 3.8 million was paid to Eden Teva. On December 6, 2015, a permanent liquidation order was rendered against Eden Teva.
On July 28, 2015, an application for the liquidation of Dr. Baby (a company held by Mega) was filed and a liquidator was appointed by the court.
The effect of the reorganization plan in Mega from July 2015 on the consolidated financial statements
The effect of Mega's deconsolidation is derecognition of Mega's balance sheet from the consolidated data of the Company and the recording of its share in Mega according to the value of Mega's shares that were received, recording the liabilities in respect of guarantees existed as of the date of deconsolidation (transferred employees, property owners and suppliers credit insurers), plus the Company's liabilities assumed under the arrangement (repayment of the guaranteed debt, liability to inject to Mega and option to Mega's suppliers) as ruled by the court. Liabilities and guarantees as of the control loss date were measured at fair value and the impact on profit or loss, net (net of the negative investment balance in Mega that was derecognized) was recorded in loss from discontinued operations. The value of the liabilities and guarantees as of December 31, 2015 was re-measured and the difference in the value of liabilities between periods is recognized in the profit or loss statement, under financial expenses.
Regarding Mega's debt arrangement, the Company made appropriate provisions and estimates and created debt balances that are included in the appropriate items (according to nature of the provision, debt balance or the estimate) of the current liabilities as of December 31, 2015.
For the sake of accounting conservatism, these statements do not include amounts the Company will be entitled to receive from Mega so far as the Company will have to pay these amounts according to the debt arrangement.
The comparative figures in the profit or loss statements have been restated such that Mega's results until the control loss date are included as part of the Company's losses from discontinued operations. With the transition to the accounting treatment of the investment in Mega using the equity method, the Company includes its share in the losses of Mega up to the amount of liabilities and guarantees it has assumed on the control loss date Mega has a capital deficiency and the Company included its liabilities to Mega at fair value. The Company does not include the results of Mega from the control loss date, but only the effect of the change in the value of liabilities between periods.
The liabilities, estimates, the provisions and guarantees are measured based on different scenarios that could occur. In practice, these scenarios may not occur, or may occur on a different date from the date on which it was assumed that they would occur. If the liabilities and/or guarantees will materialize differently than the assumptions underlying the measurement basis, the Company may record additional expense or reduce the expense amount that was recorded previously.
The Company's position as reflected in the legal proceedings conducted with respect to Mega and as described above is that it complied with all of its liabilities towards Mega under the reorganization arrangement and in the event that if any liabilities remained unfulfilled towards Mega or its creditors, those liabilities expired when Mega initiated stay of proceedings in January 2016. In view of the fact that it is a subsequent event, the cancellation of the liabilities is not reflected in these reports.
In the opinion of the Company and its legal advisors, there is no assurance that the position of the Company regarding the expiration of its commitments will be actually accepted by the court and that the estimates prepared by the Company reflect all obligations of the Company in connection with Mega, and that is in light of the precedence of the circumstances in the matter of the Company, the early stage of the proceedings and the fact that Mega's trustees do not provide the Company with data and in view of the fact that it is unknown what the refund amount to be received from the liquidation of Mega will be for amounts to be paid by the Company to Mega's creditors on debts guaranteed by the Company.
Cash flows used in the deconsolidation of Mega:
1.7.2015
--------
NIS in thousands
----------------
Trade receivables and checks
payable 203,443
Inventory 259,776
Other accounts receivable 3,717
Property and equipment and
other assets, net 440,051
Short term credit (512,437)
Trade payables (638,230)
Provisions for other short
term liabilities 595,091
Other accounts payable (248,894)
Accrued severance pay (52,003)
Income (loss) from sale of
investment (78,248)
-------
(27,734)
=======
3. Support of the controlling shareholder - Alon Oil Company
a. In June 2015, the Company's parent company, Alon Israel Oil Company Ltd. charged in favor of a bank a deposit of NIS 75 million which was used as collateral for the credit line for three months at the same amount the bank extended to the Company. As of December 31, 2015, the credit line was paid out of the deposit of the parent company.
b. On July 27, 2015, the Board of Directors of Alon Oil Company approved to inject a total of NIS 95 million as a bridge loan to the Company which shall be repaid from the proceeds the Company would receive from a rights' issuance of NIS 150 million, under which the parent company committed to participate according to its holding percentage (NIS 110 million) such that the deposit in sub section a (that was used by the Company) with the injection amount will constitute NIS 170 million. The total amount of NIS 170 million is composed of NIS 110 million representing a bridge loan to be repaid from the proceeds the Company will receive on account of its share in the parent company in the issuance of rights and a total of NIS 60 million representing a long term loan to be repaid after the full repayment of the Company's debt to banks and bond holders.
In addition, the parent company committed to extend to the Company a short-term loan of NIS 50 million to be used by the Company to support Mega's reorganization plan. The short-term loan shall be repaid from proceeds to be received by the Company from the sale of its holdings in subsidiaries. It was determined that all of these loans do not bear interest but shall be CPI-linked. (Including the base index). Accordingly, the above loans were approved as a qualified transaction.
c. A total of NIS 110 million was recorded as a short term loan linked to CPI to be repaid from the proceeds the Company will receive on account of the parent company share in the issuance of rights and NIS 60 million were recorded as a short term loan linked to the CPI to be repaid after the full repayment of the Company's debt to banks and bondholders.
The loan of NIS 60 million was discounted over 7 years according to the returns of interest on bonds of the Company. The differences of value were carried directly to equity. The short term loan of NIS 50 million was converted in a qualifying transaction for the sale of Dor Alon shares (see below).
d. Qualifying transaction for the sale of Dor Alon shares
On November 8, 2015, Alon Oil Company acquired in a qualifying transaction from the Company, shares of Dor Alon at a financial scope of NIS 50 million (8.04% of shares), in lieu of a short-term loan that was agreed upon in the resolution of the Board of Directors of the parent company in July 2015.
As part of the qualifying transaction, additional conditions were determined in the case of the sale of the shares by Alon Oil Company allowing further consideration to the Company. To secure the additional payments, 20% of the sold shares of Dor Alon were pledged in favor of the Company (for a period of up to 2 years).
4. Sale of Dor Alon
On July 20, 2015, the Company's Board of Directors decided to sell all of its holdings in Dor Alon in order to meet the liabilities the Company undertook in the reorganization arrangement of Mega as approved by the court on July 15, 2015. These liabilities were higher than the amounts the Company intended to inject to Mega in the framework of the application to the court on June 29, 2015. As of December 31, 2015, Dor Alon is presented as an activity designated for sale at a value of NIS 583.5 million according to the quoted value of the shares on the stock exchange on December 31, 2015. The loss of NIS 614 million (net of taxes) which includes Dor Alon's results for the period net of investment impairment is recorded as part of activity designated for realization. Following the potential buyer's entry into an agreement (conditional) with the controlling shareholder of the Company for the purchase of the shares of the controlling shareholder, as of the publication date of the report, no activities have occurred for the sale of Dor Alon.
5. Financial debt arrangement in BSI
a. Non- compliance with financial covenants
The Company has a bank loan of NIS 140.5 million as of December 31, 2015. Under the terms of the loan, the lowering the Company's rating by a recognized rating company (Maalot or Midroog) below BBB under Maalot`s ratings or Baa2 under Midroog's ratings, will grant the bank the right to demand immediate repayment of the debt. As of publication date of this report, the Company's rating is Caa1 under credit review with uncertain implications, and therefore the loan balance was classified into credit and short-term loans from banks and others as part of current liabilities in the balance sheet.
b. Settling the bank debt of the Company
Upon completion of the reorganization arrangement of Mega and following the lowering of rating of the Company, the Company has bank debt amounting to approximately NIS 522 million which is due for immediate repayment. As described below in the reorganization arrangement of Mega, most of the banks agreed to defer under certain conditions the repayment of the debt for half a year and Discount Bank has agreed to defer payment until September 30. In the fourth quarter of 2015, the Company reached agreements with Discount Bank that at this stage the debt will not be put for immediate repayment.
c. Series C bonds
The Company has outstanding bonds amounting to NIS 379.9 million par value linked as of December 31, 2015. On July 28, 2015, representatives and legal counsel were appointed for Series C bondholders.
Starting from October 27, 2015, the meeting of bondholders convened who decided on the deferment of the principal payment dates from November 4, 2015 to April 7, 2016. The meeting of bondholders, in its decision dated February 15, 2016 allowed for negotiation with the potential buyer (Ben Moshe) until March 17, 2016. it was also decided at the meeting, to instruct the bonds' trustee to put for immediate repayment the full balance of the Company's debt to the bondholders and authorized him to take the necessary measures to execute the decision, including notifying the Company for making a decision in this section and the demand of the debt's payment within seven days from the notice date ("immediate repayment decision"). The immediate repayment decision is supposed to enter into effect without further decision at the earlier of: a. transfer of the control of the Company directly or indirectly (including changing the control in the controlling shareholder) without the consent of bondholders or b. the exclusivity period (no-shop) of Ben Moshe's proposal has elapsed and an application was not filed with the court (agreed by the trustee and the representatives of the bondholders) to convene meetings for the approval of the debt arrangement between the Company and its financial creditors. At this stage, the entry into effect of the immediate repayment decision was extended to April 3, 2016.
The balance of bonds presented in long term liabilities was classified to short term liabilities starting from the third quarter of 2015.
d. Outline of agreements with the Company's financial creditors
On November 2, 2015, in the framework of the negotiations conducted by the Company with the representatives of Series C bond holders and the Company's creditor banks, principles were formulated for an outline of rescheduling and reorganization of the financial debt, including the guaranteed debt of the Company. As part of the outline, it was agreed that effective from November 1, 2015 all debts bear interest at the rate of 4% per annum linked to the CPI to be paid regularly by semi-annual installments each year, 1% interest will accrue and paid at the final payment date of the principal, as well as an addition of up to 1% interest, which terms will be determined in a detailed agreement. In addition, principal payments (pro-rated among banks and bondholders) will be paid at a rate of 2% each year from November 2017 until 2019. The outstanding principal will be repaid in one payment in November 2020.
In addition, it was agreed that debt repayment would be accelerated if Dor Alon or BSRE will be sold, and the debt holders would receive up to 10% of the Company's shares.
However, on February 28, 2016, an acceptance notice was given by the controlling shareholder of the Company for the proposal of the potential buyer. The proposal of the potential buyer includes various conditions for the debt rescheduling and reorganization as detailed below.
6. Sale of the control in the Company and outline for debt arrangement in the Company
At the end of January 2016 and at the beginning of February 2016 the controlling shareholders received several proposals to purchase the control over the Company two of which were brought for voting before the Series C bondholders. On February 16, 2016, the series C bondholders approved to hold negotiations with Mr. Ben Moshe regarding his proposal which includes, among others, an outline for the repayment the Company's financial debt (NIS 932 million), the essence of which is the injection of NIS 900 million to the Company for the full repayment of the financial debt to financial creditors interested in such repayment. On February 28, 2016, acceptance notice to Mr. Ben Moshe's proposal was received by the controlling shareholders (holding approximately 72.21% of the Company's shares).
The principles of Moti Ben-Moshe's proposal (in accordance with his proposal from February 15, 2016 and the clarifications to the proposal)- in exchange for NIS 115 million to be paid to the controlling shareholders, he will purchase (through a company under his control) the holdings of the controlling shareholders in the Company on AS IS basis and the rights of Alon in the bridge loan of NIS 110, million including the right to allocate shares of the Company shares against such holdings and the rights in the subordinated loan of NIS 60 million extended to the Company by Alon.
The completion of the acquisition is subject to the fulfillment of the following conditions precedent no later than 60 days from the acceptance date of the proposal (a possibility was granted to extend the deadline by 14 days and under certain conditions for additional 30 days):
a. Removal of all liens or rights of third parties on the acquired assets.
b. An application will be submitted to convene the creditors meeting to approve the debt arrangement, the principles of which were approved by the potential buyer, the Company and its creditors (the debt arrangement).
The debt arrangement will be based on the outline of principles agreed with the financial creditors on November 2, 2015 (the outline of principles) and will include (1) an annual interest rate of 6% linked to CPI, (2) the provision of liens in favor of the financial creditors as set out in the outline of principles (3) allocation of the Company's shares to its financial creditors at a rate of 10% (4) determining that the loans of the controlling shareholders (NIS 170,000 million) will be subordinate to the debts of the Company to its financial creditors including to a state of insolvency. The arrangement will not be based on quick sale of the assets and will not depend on such sale. The debt arrangement will include an exemption towards the Company's officers as agreed by its creditors. In addition, the debt arrangement will determine that the potential buyer will have the right to convert any debt of the Company due to him into the Company's securities including as part of an issuance of rights (This condition should take place within 40 days from the acceptance date).
c. Approval of the court for the debt arrangement will be obtained.
d. All of the regulatory approvals required for purchasing the Company will be obtained, as required.
e. A decision is made by the Series C bondholders, which its essence is negotiating with the potential buyer exclusively for 15 days from the date of making the decision. As to Mega - in contrast to another proposal that was not approved by the Series C bondholders, in Ben Moshe proposal, reaching an agreement with Mega trustees is not a condition precedent to complete the purchase.
As part of the debt arrangement the potential buyer committed to inject to the Company NIS 900 million and committed act as follows:
a. Upon the closing date, the Company will repay to its financial creditors NIS 300 million by early repayment.
b. An amount of NIS 600 million will be injected to the Company on or about after the closing of the transaction for the purchase of the Company, subject to the completion of the issuance of rights and allocating the securities to the controlling shareholders, Mega's suppliers and the financial creditors, however, should the Company be in need of cash flow needs after the closing of the purchase and prior to the allocation and as far as required for an early repayment, as detailed below, part of this amount will be injected to the Company prior the completion of said issuances and allocations.
c. 3 months after the closing date, the Company will carry out an early repayment of the entire debt to the financial creditors interested in this early repayment, any amount paid will be amortized on a pro rata basis from the amortization schedule as follows.
d. After the early repayment the following amortization schedule will apply:
-- In each of the years 2017 - 2019 15% of the financial debt will be paid, -- In 2020 the debt balance will be paid.If an early repayment will be carried out in the first three years from the closing date beyond the payment designated for that year, including the early repayment in three months from the closing date, 2.5% of the paid amount will be added to the repayment amount. This addition will not apply to the amount paid upon the transaction closing date.
Other conditions committed by the potential buyer under his proposal:
a. Upon the closing date, NIS 300 million will deposited to be used as collateral for any liability of the potential buyer for carrying out the fund injections after the closing date. So far as the liability balance decreases from the above amount, the deposit amount will decrease accordingly.
b. The fund injections to the Company will be extended by way of subordinated debt and/or capital note and/or capital allocation and/or by private placement and/or by issuance of rights at the exclusive discretion of the potential buyer. The potential buyer may convert any debt indebted to him into the Company's securities.
c. The debt arrangement will include limitations on using the injections for new investments and/or for the purchase of Mega from its trustees.
d. Limitations will apply to the Company for dividend distributions unless the creditors' consents are obtained.
e. Upon the full repayment of the financial debt under the arrangement, the commitments of the potential buyer will expire.
f. Until the transaction closing date, the Company and its controlled companies will not carry out any disposition of their assets and/or any act to foil the purchase of control, including the issue of not coming into agreement with Mega's trustees, otherwise the buyer will have the right to cancel its commitments.
g. The potential buyer committed to deposit NIS 250,000,000 as earnest fees. Documents that were presented to the Company show that such amount was deposited in two banks accounts where the authorized signatories are the attorneys of the potential buyer.
h. If the potential buyer will change his mind regarding the proposal for its own reasons while violating its commitments under its proposal, his attorney will be directed to transfer NIS 20 million to the Company as an agreed compensation by the potential buyer constituting an exclusive remedy.
i. Effective from accepting the proposal and until the conditions precedent are fulfilled and/or the expiration of the proposal, the controlling shareholders will not negotiate an alternative transaction.
j. ExtraHolding Ltd guarantees any commitment the potential buyer must carry out on the closing date.
7. 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 held 63.71% of BSRE share capital. The sale was carried out so as to increase the public holdings in the shares as defined in the stock exchange directives, to above 35% on the next examination date beginning February 28, 2015 and by that increase the weight of BSRE share in the indices calculated by the stock exchange.
c. On June 30, 2015, the Company sold 2.5% of BSRE shares for NIS 34.7 million. After the sale the Company held 61.19% of BSRE share capital. The sale of the shares was carried out at the end of the trading day and therefore the consideration was received on July 1, 2015.
d. On August 31, 2015, the Company sold 7.27% of BSRE shares for NIS 93.4 million. After the sale the Company held 53.92% of BSRE share capital.
8. Changes in the Company's management in the fourth quarter of 2015
a. Retirement of the director Mordechai Ventura and the appointment of Michael Lazar
On November 23, 2015, Mr. Mordechai Ventura informed that he concluded his membership on the Board, and the Company instead appointed Michael Lazar on November 26, 2015.
b. The appointment of Zahi Otzar as director
On December 24, 2015, Mr. Zahi Otzar was appointed as director in the Company. Mr. Zahi Otzar serves as CFO of Bailsol investments, and works approximately 4.5 years at Rosebud Real Estate.
9. Material Lawsuits
a. In July 2015, a claim was filed against the Company and Mega with the Tel Aviv District Court, in connection with the 51% subsidiary of Mega, Eden Health Teva Market Ltd. ("Eden"), by the minority shareholders (49%) in Eden. In the claim, the plaintiffs sought, among others, an injunction under which the defendants will be required to purchase the shares of the plaintiffs in Eden for NIS 77.6 million. Prior to filing an answer, the plaintiffs requested to amend the claim sue to change in circumstances after filing the claim originating in Eden's entry into stay of proceedings and the sale of its operations. On November 25, 2015, an amended claim was filed under which the plaintiffs allege that damages were caused to them in the amount of loss of their shares' value (according to the value claimed in the original claim) however the amount of the claim was reduced for purposes of court fees and was set at NIS 40 million. In the amended claim other defendants were added who served in Mega and the Company as office holders in various dates. On January 17, 2016, an answer a counterclaim was filed by Mega and BSI in the amount of NIS 40 million (for purposes of court fees). It was argued in the answer, among others, that there was no breach of the claimed liability to extend financing and this, inter alia, since the agreement between the parties does not apply such liability without derogating that financing was extended at any stage of Eden's activity including at the stage when Eden entered the stay of proceedings. The plaintiffs further allege that the claim lacks cause of action toward the Company due to the fact that on May 19, 2009, the plaintiffs signed an explicit and unqualified consent according to which, upon the transfer of shares in Eden Teva Market from BSI to Mega, BSI has no liability of any sort whatsoever towards the plaintiffs including by virtue of the agreements that were signed. In the counterclaim, the Company and Mega alleged that the financing they extended to Eden (guarantees for third parties extended by Mega and BSI with shareholders' loans extended by Mega) was made based on misrepresentations of the plaintiffs regarding Eden's ability to move to profitability as well as its ability to repay its debts towards the aforesaid. As of this date, an answer was not yet filed to the counterclaim and a response was not yet filed to the answer. According to the parties agreement (since the plaintiffs filed a motion in the stay of proceedings case against Mega to approve the proceedings management) the hearing that was scheduled April 3, 2016 was canceled until the plaintiffs' motion is heard.
At this preliminary stage of the proceedings, the Company it is unable to assess the prospects of the lawsuit, including the counterclaim.
b. In July 2015, a lawsuit was filed with the Tel Aviv District Court against the Company, Mega, and whoever served as members of the board of directors of Mega, by one of Mega's suppliers of dairy products (the petitioner). As a part of the petition that was filed, an approval as a derivative claim is requested, alleging that in 2013 Mega conducted a prohibited distribution of dividends in the amount of approximately NIS 100 million. The plaintiff requests the court to order the Company and directors to return to Mega all payments and/or dividends and/or benefits and/or rights received by them in connection with the said distribution. In addition, the plaintiff requests the court to order the Company and Mega to provide documents and information about Mega, including its financial statements for 2011 - 2014. On January 3, 2016, the Company with the directors filed a motion to strike in linine the approval petition with the key allegation that the petitioner cannot be called a "creditor" for the purpose of filing a derivative claim as prescribed in the Companies Law - 1999. Following the stay of proceedings against Mega and various motions filed by the Company and Mega's trustees, the proceeding was stayed at this stage. The Company denies all allegations contrary, but at this early stage of the proceedings, it is unable to assess the prospects of the lawsuit.
c. In February 2016, a motion for approval of a claim as class action was filed with the Central District Court against the Company. The subject of the motion for the approval according to the petitioner, stems from insolvency proceedings of Mega, starting from the end of June 2015, where severe damage was inflicted upon the customers holding purchase coupons issued by the Company, to use their rights and perform through such coupons purchases of goods in general, but particularly purchases of food products in Mega branches, as the Company has undertaken towards the group members. The group was defined in the approval motion: "any person or corporation holding purchase coupon from June 29, 2015 issued by the respondent". Accordingly, it is sought to determine that the Company has violated materially its commitment by virtue of the purchase coupons towards the group members due to severe harm to the exercise ability of the coupons which resulted in severe harm to the coupon's value. In addition, the court was requested to order the Company compensate the petitioner and any plaintiff included in the group for damages caused as a result of the claimed material violation.
Monetary amount was not stated in the lawsuit since at this stage the petitioner does not have accurate data concerning the aggregate claimed damage of the group. Nevertheless, it is indicated in Mega's arrangement motion, where Mega stated that as of June 29, 2015, the scope of unutilized coupons was NIS 200 million and therefore, as per the petitioner, the damage caused to the group members can be estimated as considerable. At this stage, the results of the proceeding cannot be estimated.
d. Legal proceedings under the stay of proceedings in Mega - as aforesaid,
On February 24, 2016, the Company filed a debt claim against Mega (most of which are contingent debts).
10. Rating
a. On March 10, 2015, Midroog ratified the A3 rating with negative outlook of Series C bonds and lowered to P-2 the rating of the Company's commercial papers.
b. 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 paper remained P-2 under review.
c. On May 20, 2015, Midroog lowered the rating from Baa1 to Baa2 and left the rating under review with uncertain implications.
d. In May 2015, the Company completed the repayment of the commercial paper.
e. On July 7, 2015, Midroog lowered the rating from Baa2 to Baa3 and left the rating under review with negative implications.
f. On July 29, 2015, Midroog lowered the rating from Baa3 to Ba2 and left the rating under review with negative implications.
g. On October 27, 2015, Midroog lowered the rating from Ba2 to B3 and left the rating under review with uncertain implications.
h. On January 27, 2016, Midroog lowered the rating from B3to Caa1 and left the rating under review with uncertain implications.
Events during the reported period from continued operations
BSRE
a. Wholesale market complex
Sale agreements with apartment purchasers
On or about the date of issuing the report, the residence company entered into commitment for 717 sale agreements with a scope of NIS 1,894 million (including VAT) and received advances of NIS 1,328 million (including VAT).
Commercial spaces in the mall
As of December 31, 2015, lease agreements were signed or are to be signed for 24,831 square meters of the commercial spaces.
b. Givon Parking Lot - Tel Aviv
The parking lot was established under an agreement with the Tel Aviv municipality dated September 1, 2010 for 22.5 years by BSRE and a third party via a jointly controlled company and includes 1,000 parking spaces. The parking lot was opened to the public on April 16, 2015. The development of the square was completed and its handing over to Tel Aviv municipality was carried out in September 2015. In December 2015, the bank financing of NIS 119 million was replaced by a long term loan for the same amount repaid in installments until 2030 with an early repayment option. The loan bears annual interest of Prime plus 1%.
c. On March 16, 2015, BSRE declared a dividend distribution of NIS 30 million which was paid on April 15, 2015. The Company's share was NIS 19.1 million (U.S $ 4.9 million).
d. On May 20, 2015, BSRE declared a dividend distribution of NIS 30 million which was paid on June 11, 2015. The Company's share was NIS 19.1 million (U.S $ 4.9 million).
e. On November 5, 2015, the Board of Directors of BSRE approved and on December 23, 2015, the general meeting of BSRE approved the entry into addendum to the rental agreements from 2006 and from 2009 with Mega Retail. The addendum included agreements for the exit from 11 branches that Mega continues to rent from BSRE subject to conditions set forth in the agreement, a discount of 9% of rental fees in branches Mega continues to rent for 24 months starting from November 1, 2015 beyond the payment of rental fees on a monthly basis, waiver by Mega and BSRE of mutual claims regarding the split agreements, asset transfer and lease agreements. If a trustee is appointed for Mega for a period exceeding 30 days, the discount in rental fees will be canceled and the transition to payment of monthly rental fees.
f. On December 24, 2015, the Board of BSRE approved the transfer of rights in 10 branches of YOU chain that are leased to Mega to third parties following Mega's resolution from December 2015 for the immediate sale of all of its discount branches under the YOU brand. BSRE entered into rental agreements with third parties under which rental fees paid by Mega with adjustments, grace periods and various discounts were granted to new tenants as acceptable in these agreements. The rental period ranges from 10 to 20 years and includes renewal options to extend the period and the agreements include collateral.
g. Following publications and reports on proposals for the sale of the Company by the controlling shareholder, a trustee for series E bonds approached BSRE regarding a provision in the deed of trust which deals with the transfer of control in BSRE. In its letter, the trustee indicated that he intends to obtain a legal opinion regarding the definition of "the current controlling shareholder" contained in the deed of trust and the existence of a cause of action to put the bonds (series E) for immediate repayment if such sale takes place without receiving an advance approval of the bondholders (series E) of BSRE. The trustee informed BSRE that as per his opinion, a meeting of the bondholders (series E) of BSRE should be convened for the purpose of obtaining the approval of the bondholders (series E) for the sale of holdings of the Company by the controlling shareholder, if such purchase is carried out .
h. On March 16, 2016, BSRE declared a dividend distribution of NIS 30 million which will be paid on April 7, 2016. The Company's share is NIS 16.1 million (U.S $ 4.1 million).
i. On February 16, 2016, BSRE filed a debt claim to Mega's trustees, as Mega's creditor, in the amount of NIS 9.2 million (excluding VAT) for rental fee debt and other expenses and debts in respect of the rental and NIS 123.5 million (excluding VAT) for damages caused to BSRE by Mega and Mega's liabilities according to agreements and indemnification letters and a possible exposure due to legal proceedings where BSRE and Mega are parties to such proceedings.
j. The Company received several proposals to purchase its holdings in BSRE (53.92%), and these proposals were reviewed by the Company's Board. As of the report date, the proposals the Company received for the purchase of BSRE are invalid.
k. As to the motions filed by Mega's trustees against BSRE, see above events during the report period.
Other Companies
a. Agreement for the sale of Kfar Hashaashuim
On June 22, 2015, an agreement was signed between Bee Retail Group, Retail 3000 and Kfar Hashaashuim for sale of all of the holdings of Bee Group in Kfar Hashaashuim. According to the agreement the share transfer will take place with the full repayment of the debt, for which the Company granted guarantees of NIS 45 million and with the cancellation of the guarantee granted by the Company in favor of Bank Hapoalim.
In return for the transfer of the shares, Retail 3000 has undertaken to pay Bee Group every year for five years from the date of signing the agreement five installments of NIS 1 million each (the first payment was fully paid), or 35% of the Company's net income in the same year, whichever is higher.
Under the agreement, Retail 3000 committed to repay the entire debt to Bank Hapoalim, which is guaranteed by the Company, until December 30, 2015.
As part of the agreement, in 2015 the Company injected into Kfar Hashaashuim a total of NIS 19, million and the Company's guarantees to Bank Hapoalim were canceled.
As of December 30, 2015, the shares of Kfar Hashaashuim were transferred and shareholders' loans granted to Kfar Hashaashuim were assigned in favor of Retail 3000.
b. Alon Cellular -Agreement for the sale of Alon Cellular activity
On July 6, 2015, the Company signed an agreement with Pelephone for the sale of Alon Cellular activity. Upon the completion of the agreement, Alon Cellular shall be entitled to half the income from the transferred customers for 36 months. In addition, under the agreement, the purchaser shall be entitled to market and sell SIM cards in Mega stores in exchange for fees determined in the agreement between the parties. The agreement was subject to the approvals of the relevant parties: the Ministry of Communications and the Antitrust Authority. In September and October 2015, the required regulatory approvals were received for consummating said agreement, and in November 2015 the transaction was consummated. According to the number of transferred customers, Alon Cellular shall be entitled to a minimum consideration of NIS 10 million if its share in income from transferred customers over three years is lower than this amount. A gain of NIS 3.5 million resulted to the Company based on the minimum consideration set forth in the agreement. In December 2015, after completing the sale of the commercial activity, the Board of Alon Cellular resolved to voluntarily dissolve Alon Cellular after the Board of Alon Blue Square approved the debt forgiveness to Alon Cellular and the forgiveness of the debt balance upon the completion of the dissolution process. The Company recognized capital losses for tax purposes for the debt forgiveness and included them in the tax assets it created in 2015.
c. Investment in Diners - Negotiations for sale and provision for impairment
On November 29, 2015, the Company entered into an agreement with Dor Alon for the sale of all of their holdings in Diners (36.75% and 12.25%, respectively, a total of 49%) to Israel Credit Cards Ltd. (ICC). On December 15, 2015, the transaction was completed in a consideration for NIS 130 million of which NIS 120.25 million were received in cash and the balance was received in January 2016. Due to the price reflected in the transaction, the Company recorded in the second quarter of 2015 a provision for impairment on its investment in Diners of NIS 54.7 million in the statement of profit or loss under other expenses.
The agreement states that ICC will pay the Company and Dor Alon further consideration of four additional equal installments amounting to NIS 5 million on March 31, 2016, September 30, 2016, March 31, 2017 and September 30, 2017, subject to fulfillment of the following conditions (in each of the dates above): (1) the agreement between Diners Customer Club, BSI Dor Alon (a registered partnership) ("You Partnership") (in which the holders of rights are the Company and Mega Retail Ltd. ("Mega"), which settles the relationship between You Partnership and You Customer Club ("The club's agreement" and "club", respectively), remains in effect; (2) Mega and the chain of fueling stations of Dor Alon (including the convenience stores attached to them, operating under the brands "Dor Alon" and "Alonit") are part of the companies that provide benefits under the club; (3) on the payment date March 31, 2016, the number of Mega stores will not be less than 115 stores and regarding the payments between the dates April 1, 2016 to September 30, 2017, the number of Mega stores will not be less than 100 stores; (4) Mega and Dor Alon will continue to offer to their customers and the customers of corporations controlled by them (as applicable), the issuance of the Club credit card and all as set forth in the club agreement and pursuant to its terms; (5) the club will offer value proposition to the Club credit card holders, as set out in the club agreement; (6) an application for a liquidation order and/or appointment of a receiver and/or stay of proceedings and/or the appointment of a temporary or permanent liquidator against Mega was not filed, which was not canceled within 60 days of filing the application and/or granting the order, respectively.
After the balance sheet date - on January 17, 2016, Mega applied to court seeking a stay of proceedings and appointment of a trustee and on January 18, 2016, trustees were appointed for Mega where their appointment as of the report date was extended until May 17, 2016.
d. Merger of Bee Group into the Company
On December 27, 2015, a merger agreement was signed between Bee Retail Group, a wholly owned subsidiary of the Company and the Company under which in view of broad economic considerations, the above companies agreed to cooperate by a merger the purposes of which are streamlining the activities carried out by the two merged companies while utilizing the organizational and economic advantages deriving from the merger. Under the merger, Bee Group will transfer to the Company upon the merger completion date and as of the effective date that was set for December 29, 2015, the ownership and the basic right to use all of the assets of Bee Group and the Company will absorb all of the rights and liabilities of Bee Group. The rights and liabilities of Bee Group are to be transferred to the Company AS IS and at no consideration. The existence of the merger agreement is contingent upon the fulfillment of several conditions precedent including the approval of the relevant organs approval of each of the companies, approvals of various authorities and government parties. As of the report date, the approvals were not yet received. The Company expects that the merger will allow recognizing capital losses for tax purposes for its investments in Bee Group and included them in the tax assets it created in 2015.
Events in the reported period from activity designated for sale
Dor Alon - activity designated for sale
a. As of December 31, 2015, Dor Alon operated 211 fueling stations and 218 convenience stores in various formats.
b. Issuance of new bond series (Series E)
In November 2015, Dor Alon completed the issuance of new bond series (Series E) in the amount of NIS 250 million par value rated A3 with stable outlook. The total immediate consideration amounted to NIS 248 million. The bonds (Series E) were listed for trade on the stock exchange. The bonds are payable (principal) in seven equal annual installments effective from July 1, 2017, are unlinked and bear annual interest of 4.55% payable in semiannual effective from July 1, 2016.
Dor Alon committed to comply with financial covenants including, among others, complying with minimum equity and equity to balance sheet ratio and limitations on dividend distribution from current and accumulated earnings.
c. Dividend distribution
On January 26, 2016, the Board of Alon decided to distribute interim dividend in cash of NIS 25 million out of the retained earnings that were not designated as of September 30, 2015. The dividend was paid in on February 17, 2016. The Company's share in the dividend was NIS 15.7 million.
d. Agreement of long term bank credit facility of NIS 150 million
On January 19, 2016, the Company entered into an agreement with a bank for a credit facility totaling NIS 150 million that can be used until January 19, 2017, (the "credit facility" and "credit facility agreement"), where the amounts withdrawn will be extended as loans to be repaid in 10 equal semi-annual installments beginning on July 31, 2018 to January 31, 2023. The loans are not linked and bear interest at a rate equal to the yield on government bonds plus a margin of 3%, to be payable in semi-annual installments commencing July 31, 2016. The loans include liabilities of the Company to maintain financial covenants regarding equity, equity to balance sheet and ratio of financial debt to adjusted EBITDA.
In accordance with the Company's liabilities to financial institutions from which a loan it took in 2014, starting from January 19, 2016 the same financial criteria given in connection with the credit facility are applicable to the loan from the financial institutions
e. Dor Alon's results analysis:
Dor Alon's results for 2015:
Revenues from sales in 2015 amounted to NIS 4,012 million (U.S $ 1,028.2 million) compared to revenues of NIS 4,907.7 million in 2014, a decrease of 18.3%. The main decrease resulted from a decrease in fuel prices that was partially offset by an increase in the fuel quantities sold and by an increase in the sales turnover of the convenience stores.
Gross profit in 2015 amounted to NIS 807.0 million (U.S $ 206.8 million) (20.1% of revenues) compared to a gross profit of NIS 791.7 million in 2014 (16.1% of revenues). The increase in gross profit derived from an increase in the fuel quantities sold and sales of the convenience stores that was partially offset by inventory losses of NIS 19 million compared to NIS 9 million in 2014.
Selling, general and administrative expenses in 2015 amounted to NIS 686.8 million (U.S $ 176.0 million) compared to expenses of NIS 670.8 million in 2014 an increase of 2.4%. The main increase derived from additional costs for opening new fueling and commercial sites and from updating the minimum wage effective from April 1, 2015.
Operating profit before financing amounted to NIS 116.2 million (U.S $ 29.8 million) (2.9% of revenues) as compared to NIS 143 million in 2014, a decrease of 18.8%. The main decrease derived from increase in inventory losses, loss from increase in selling, general and administrative expenses, and a provision for impairment of associate of NIS 16.7 million compared to other income of NIS 8 million in 2014.
Dor Alon's results for the fourth quarter:
Revenues from sales in this quarter amounted to NIS 918.5 million (U.S $ 235.4 million) compared to revenues of NIS 1,160.7 million in the comparable quarter last year, a decrease of 20.9%. The main decrease resulted from a decrease in fuel prices that was partially offset by an increase in the fuel quantities sold and by an increase in the sales turnover of the convenience stores.
Gross profit in this quarter amounted to NIS 203.5 million (U.S $ 52.2 million) (22.2% of revenues) compared to a gross profit of NIS 189 million in the comparable quarter last year (16.3% of revenues). The decrease in gross profit derived mainly from an increase in the quantities of fuel sold and increase in sales of convenience stores and from a decrease in inventory losses in this quarter (NIS 2 million) compared to the corresponding quarter last year. (NIS 6 million)
Selling, general and administrative expenses in this quarter amounted to NIS 174.9 million (U.S $ 44.8 million) compared to expenses of NIS 170.3 million in the comparable quarter last year, an increase of 2.7%.
Operating profit before financing amounted in this quarter to NIS 28.7 million (U.S $ 7.4 million) (3.1% of revenues) as compared to NIS 26.5 million in the comparable quarter last year, an increase of 8.3%. The main increase derived from increase in gross profit and was partly offset by selling general and administrative expenses.
Naaman Group - activity designated for sale
a. As of December 31, 2015, Naaman Group (NV) is active as retailer and wholesaler in the houseware and textile segment and operated 120 stores part of which by franchisees and convenience stores under different formats.
b. Amortization of customer relations goodwill and brand - in the course of the year goodwill balance, customer relations and brand attributed to the purchase of Naaman were amortized. The amortization derived from updating Naaman's forecasts for future sales following the deterioration in Mega's position and its exit from branches constituting a material customer of Naaman, and accordingly amortization of NIS 99.3 million was carried out.
c. Na'aman's results analysis
Naaman's results for 2015:
Revenues from sales in 2015 amounted to NIS 291.1 million (U.S $ 74.6 million) compared to revenues of NIS 300.2 million in 2014, a decrease of 3.0%. The main decrease resulted from a decrease in sales to Mega due to its deterioration and its exit from branches.
Gross profit in 2015 amounted to NIS 162.8 million (U.S $ 41.7 million) (55.9% of revenues) compared to a gross profit of NIS 166.6 million (55.5% of revenues) in 2014. The decrease in gross profit derived from a decrease in sales.
Selling, general and administrative expenses in 2015 amounted to NIS 157.0 million (U.S $ 40.2 million) compared to expenses of NIS 155.1 million in 2014.
The main increase derived from provisions for doubtful debts made in 2015.
Operating profit (loss) before financing loss amounted to NIS 10.2 million in 2015 (U.S $ 2.6 million) as compared to profit of NIS 11.5 million in 2014. The transition to loss in 2015 derived from impairment provision for goodwill in the houseware and textile segment of NIS 15.4 million (U.S.$ 3.9 million).
Naaman's results for the fourth quarter as contained in the segment note include:
Revenues from sales amounted to NIS 62.7 million (U.S $ 16.1 million) compared to revenues of NIS 66.9 million in the comparable quarter last year, a decrease of 6.3%. The main decrease resulted from a decrease in the sales due to deterioration of its position and exiting from branches.
Gross profit in this quarter amounted to NIS 36.1 million (U.S $ 9.3 million) (57.5% of revenues) compared to a gross profit of NIS 38.1 million (56.9% of revenues) in the comparable quarter last year. The decrease in gross profit derived from decrease in sales.
Selling, general and administrative expenses in this quarter amounted to NIS 37.6 million (U.S $ 9.6 million) compared to NIS 37.5 million in the comparable quarter last year.
Operating profit (loss) before financing amounted to NIS 17.2 million (U.S $ 4.4 million) as compared to a profit of NIS 1.0 million in the comparable quarter last year. The transition into loss in this quarter derived from a provision for impairment of goodwill in the houseware and textile segment in the amount of NIS 15.4 million (U.S $ 3.9 million).
NOTE: Use of Non-GAAP Measures
This press release provides financial measures for Adjusted EBITDA, revenues from sales, net, gross profit, operating profit (loss) before financing, net loss from continuing operations, and net loss, which exclude revenues and expenses related to supermarket stores branches closed after the balance sheet date and other income (expenses) and are therefore not calculated in accordance with generally accepted accounting principles (GAAP). Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance because it reflects our ongoing operational results, revenues from sales, net, gross profit, operating profit (loss) before financing, net loss from continuing operations, and net loss. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management uses non-GAAP measures when evaluating the business internally and, therefore, believes it important to make these non-GAAP adjustments available to investors. A reconciliation of each GAAP to non-GAAP financial measure discussed in this press release is contained in the accompanying financial tables.
OTHER NOTES:
The convenience translation of New Israeli Shekel (NIS) into U.S. dollars was made at the exchange rate prevailing at December 31, 2015: U.S. $1.00 equals NIS 3.902. The translation was made solely for the convenience of the reader.
Alon BSI Israel Ltd. (hereinafter: "Alon BSI") operates through subsidiaries.
Continued operations - through its TASE traded 53.92% subsidiary, BSRE Ltd., owns, leases and develops income producing commercial properties and projects. The others activities include the clearance of purchase coupons and operating the logistic center in Beer Tuvia.
Companies designated for sale - under the activity designated for sale, the 63.13% held subsidiary, Dor Alon Energy in Israel (1988) Ltd, which is listed on the Tel Aviv stock exchange ("TASE"), 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 211 petrol stations and 218 convenience stores in different formats in Israel. Na'aman Group (NV) Ltd. Which is TASE traded 77.51% subsidiary, operates specialist outlets in self-operation and franchises and offers a wide range of "Non-Food" in the houseware and textile segment.
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 uncertainty of the success of Mega's plan of recovery and arrangement with debtors, suppliers, service providers and lessors, including the risk that key suppliers of Mega Retail will discontinue supplying their products to Mega Retail, in whole or in part, or that customers will lower their purchases at Mega Retail, and the risk that Mega will be required to close additional or all of its supermarket branches or enter into insolvency proceedings; failure to reach a settlement with our bank lenders and holders of our Series C Debentures; the effect of an appointment of a representative by holders of Series C Debentures; results of a lawsuit if we are found liable to return past dividends to Mega; the effect of our high leverage on our business; 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 BSI ISRAEL LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF DECEMBER 31, 2015
(UNAUDITED)
Convenience
translation
December 31, December 31,
------------ ------------
2014 2015 2015
---- ---- ----
NIS U.S. dollars
--- ------------
In thousands
------------
A s s e t s
CURRENT ASSETS:
Cash and cash
equivalents 290,102 243,283 62,348
Investment in
securities 362,827 187,788 48,126
Short-term bank
deposits 94,307 - -
Trade receivables 1,030,367 3,765 965
Other accounts
receivable including
current maturities of
loans receivable 430,707 34,817 8,923
Derivative financial
instruments 395 - -
Assets of disposal
group classified as
held for sale - 2,744,300 703,306
Income taxes receivable 16,020 - -
Inventories 511,661 - -
------- --- ---
2,736,386 3,213,953 823,668
--------- --------- -------
NON-CURRENT ASSETS:
Investments accounted
for using equity
method 977,028 378,603 97,028
Derivative financial
instruments 4,698 - -
Real estate inventories 126,012 136,273 34,924
Investments in
securities 59,283 - -
Loans receivable, net
of current maturities 135,171 84,463 21,646
Property and equipment,
net 2,322,036 105,387 27,008
Investment property 982,619 2,820,759 722,901
Intangible assets, net 1,140,343 - -
Other long-term
receivables 52,740 3,738 958
Deferred taxes 27,844 849 218
------ --- ---
5,827,774 3,530,072 904,683
--------- --------- -------
Total assets 8,564,160 6,744,025 1,728,351
========= ========= =========
ALON BSI ISRAEL LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF DECEMBER 31, 2015
(UNAUDITED)
Convenience
translation
December 31, December 31,
------------ ------------
2014 2015 2015
---- ---- ----
NIS U.S. dollars
--- ------------
In thousands
------------
Liabilities and shareholders'
equity
CURRENT LIABILITIES:
Credit and loans from banks
and others 774,626 381,428 97,752
Short-term loan from holding
company - 110,000 28,191
Current maturities of
debentures and 466,935 562,911 144,262
convertible debentures
Current maturities of long-
term loans from banks 283,342 190,995 48,948
Trade payables 1,195,822 17,999 4,613
Other accounts payable and
accrued expenses 723,274 386,158 98,965
Customers' deposits 28,212 - -
Derivative financial
instruments 1,060 62,593 16,041
Income taxes payable 24,393 19,824 5,080
Provisions 67,697 52,366 13,420
Liabilities of disposal
groups classified as - 2,077,931 532,530
held for sale
3,565,361 3,862,205 989,802
--------- --------- -------
NON CURRENT LIABILITIES:
Long-term loans from banks
and others, net of current
maturities 1,414,607 435,015 111,485
Long-term loan from holding
company - 29,194 7,482
Convertible debentures, net
of current maturities 30,738 - -
Debentures, net of current
maturities 2,011,999 1,287,207 329,884
Other liabilities 106,267 6,120 1,568
Derivative financial
instruments 1,931 - -
Liabilities in respect of
employee benefits, net of
amounts funded 58,716 3,324 852
Deferred taxes 232,752 468,132 119,972
------- ------- -------
3,857,010 2,228,992 571,243
--------- --------- -------
Total liabilities 7,422,371 6,091,197 1,561,045
--------- --------- ---------
EQUITY:
Ordinary shares of NIS 1 par
value 79,881 79,881 20,472
Additional paid-in capital 1,219,279 1,219,279 312,475
Other reserves 76,661 413,175 105,888
Accumulated deficit (711,122) (1,980,472) (507,553)
-------- ---------- --------
664,699 (268,137) (68,718)
Non-controlling interests 477,090 920,965 236,024
------- ------- -------
Total equity 1,141,789 652,828 167,306
--------- ------- -------
Total liabilities and equity 8,564,160 6,744,025 1,728,351
========= ========= =========
ALON BSI ISRAEL LTD.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR AND THREE MONTH PERIOD ENDED DECEMBER 31, 2015
(UNAUDITED)
Convenience
translation for
Year Three months the year ended
ended December 31, ended December 31, December 31,
------------------ -------------------
2014 2015 2014 2015 2015
---- ---- ---- ---- ----
NIS U.S. dollars
--- ------------
In thousands (except per share data)
-----------------------------------
Revenues 96,548 205,529 4,221 61,618 52,673
------
Cost of revenues 73,553 57,634 16,200 5,997 14,769
------ ------ ------ ----- ------
Gross profit (loss) 22,995 147,895 (11,979) 55,621 37,904
Selling, general and
administrative expenses 87,242 104,890 26,335 40,248 26,882
Other gains 60,899 6,113 28,298 6,737 1,567
Other losses (35,575) ( 86,983) (35,575) - (22,291)
Increase in fair value of
investment property, net 49,894 57,464 29,922 38,307 14,727
Share in gains of
associates 20,034 2,646 2,591 (3,003) 678
------ ----- ----- ------ ---
Operating profit (loss) 31,005 22,245 (13,078) 57,414 5,703
Finance income 20,626 34,647 3,938 8,685 8,880
Finance expenses (134,434) (232,575) (23,567) (82,586) (59,604)
-------- -------- ------- ------- -------
Finance expenses, net (113,808) (197,928) (19,629) (73,901) (50,724)
-------- -------- ------- ------- -------
Loss before taxes on
income (82,803) (175,683) (32,707) (16,487) (45,021)
Taxes on income 69,676 5,071 48,929 19,376 1,300
------ ----- ------ ------ -----
Loss from continued
operations (152,479) (180,754) (81,636) (35,863) (46,321)
Loss from discontinued
operation (225,482) (1,169,173) (260,773) (4,559) (299,634)
-------- ---------- -------- ------ --------
Net loss (377,961) (1,349,927) (342,409) (40,422) (345,955)
======== ========== ======== ======= ========
Profit (loss) from continued
operations
Attributable to:
Equity holders of the
Company (197,588) (243,314) (104,267) (62,801) (62,356)
Non-controlling interests 45,109 62,560 22,631 26,938 16,054
------ ------ ------ ------ ------
(152,479) (180,754) (81,636) (35,863) (46,321)
-------- -------- ------- ------- -------
Profit (loss) from discontinued
operations
Attributable to:
Equity holders of the
Company (234,186) (1,026,035) (262,802) 2,564 (262,951)
Non-controlling interests 8,704 (143,138) 2,029 (7,123) (36,683)
----- -------- ----- ------ -------
(225,482) (1,169,173) (260,773) (4,559) (299,634)
------
Profit (loss) per ordinary share or
ADS attributable to equity holders
of the company
Basic and fully diluted
Continuing operations (2.99) (3.68) (1.58) 0.04 (0.94)
Discontinued operations (3.55) (15.55) (3.98) (0.10) (3.98)
----- ------ ----- ----- -----
(6.54) (19.23) (5.56) (0.06) (4.92)
Weighted average number of shares or
ADSs used for computation of
earnings per share:
Basic and fully diluted 65,954 65,954 65,954 65,954 65,954
====== ====== ====== ====== ======
ALON BSI ISRAEL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR AND THREE MONTH PERIOD ENDED DECEMBER 31, 2015
(UNAUDITED)
Convenience
translation
Year ended Three months ended for the year
ended
December 31, December 31, December
31,
2014 2015 2014 2015 2015
---- ---- ---- ---- ----
NIS U.S. dollars
--- ------------
In thousands
------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss before taxes on
income from continuing
operations (82,803) (175,683) (32,707) (16,487) (45,021)
Net loss from discontinued
operation (before taxes) (75,302) (1,177,976) (94,078) (3,171) (301,890)
Income tax paid, net (17,982) (31,475) (14,708) (12,481) (8,066)
Adjustments for cash
generated from operations
(a) 682,008 1,655,529 169,039 137,753 424,273
------- --------- ------- ------- -------
Net cash provided by
operating activities 505,921 270,395 27,546 105,614 69,296
------- ------- ------ ------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and
equipment (225,250) (106,584) (54,194) (20,549) (27,315)
Purchase of investment
property (72,379) (20,079) (9,452) (557) (5,146)
Purchase of intangible
assets (26,190) (7,120) (8,519) (255) (1,825)
Purchase of short-term
bank deposits, net (504) (24,321) (4,400) (2,538) (6,233)
Proceeds from sale of
property and equipment 100,940 92,327 54,335 2,218 23,661
Proceeds from sale of
investment property 8,750 - - - -
Proceeds from sale of
marketable securities 378,491 260,531 142,009 18,491 66,769
Investment in marketable
securities (238,239) (125,448) (71,001) (21,516) (32,150)
Investment and loans to
associates (7,341) (2,173) (1,681) 1,034 (557)
Proceeds from sale of
associate - 139,643 - 120,250 35,788
Grant of loans to non-
consolidated subsidiaries - (29,375) - - (7,528)
Grant of loans to Company
transferred from
consolidation to equity - (194,001) - (53,779) (49,718)
Grant of long term loans (79,580) (1,372) (12,431) (36) (352)
Collection of long-term
loans 76,292 143,919 1,514 1,333 36,883
Discontinuance of
subsidiary - (27,734) - - (7,107)
Discontinuance of
consolidation (2,089) (2,145) - - (550)
Interest received 12,361 9,786 1,476 1,338 2,508
------ ----- ----- ----- -----
Net cash provided by (used
in) investing activities (74,738) 105,854 37,656 45,434 27,128
------- ------- ------ ------ ------
ALON BSI ISRAEL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR AND THREE MONTH PERIOD ENDED DECEMBER 31, 2015
(UNAUDITED)
Convenience
translation
Year ended Three months ended for the year
ended
December 31, December 31, December
31,
---
2014 2015 2014 2015 2015
---- ---- ---- ---- ----
NIS U.S. dollars
--- ------------
In thousands
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of treasury
shares - 50,443 - - 12,927
Dividend paid to non-
controlling interests (59,380) (36,189) (19,093) - (9,273)
Issuance of debentures 158,103 261,494 2,055 247,552 67,015
Repayment of
debentures (536,259) (415,528) (126,566) (91,187) (106,491)
Receipt of long-term
loans 768,319 354,358 159,306 - 90,814
Repayment of long-
term loans (586,396) (496,389) (111,070) (173,307) (127,214)
Repayment of
commercial paper (9,139) (111,198) - - (28,498)
Short-term credit
from banks and
others, net (36,651) (206,207) 49,698 (84,710) (52,846)
Loan from parent
company - 170,000 - 30,000 43,567
Transactions with non-
controlling interests
in subsidiary without
loss of control 69,695 267,120 69,695 49,916 68,457
Settlement of forward
contracts (5,232) (1,040) (5,232) (1,040) (267)
Interest paid (220,672) (178,262) (61,749) (59,874) (45,685)
-------- -------- ------- ------- -------
Net cash used in
financing activities (457,612) (341,398) (42,956) (82,650) (87,494)
-------- -------- ------- ------- -------
(26,429) 34,851 22,246 68,398 8,930
DECREASE IN CASH AND CASH
EQUIVALENTS AND BANK OVERDRAFTS
Translation
differences on cash
and cash equivalents 53 - 51 - -
BALANCE OF CASH AND
CASH EQUIVALENTS AND
BANK OVERDRAFTS AT
BEGINNING OF PERIOD 310,991 284,615 262,318 251,068 72,940
------- ------- ------- ------- ------
BALANCE OF CASH AND
CASH EQUIVALENTS AND
BANK OVERDRAFTS AT
END OF PERIOD 284,615 319,466 284,615 319,466 81,870
======= ======= ======= ======= ======
ALON BSI ISRAEL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR AND THREE MONTH PERIOD ENDED DECEMBER 31, 2015
(UNAUDITED)
Convenience
translation
for the year
Year Three months ended
ended December 31, ended December 31, December
------------------- -------------------
2014 2015 2014 2015 31, 2015
---- ---- ---- ---- --------
NIS U.S. dollars
--- ------------
(a) Net cash provided by operating activities:
Adjustments for:
Depreciation and amortization 278,526 141,354 76,303 3,936 36,226
Increase in fair value of investment (50,258) (58,340) (30,286) (39,183) (14,951)
property, net
Gain from sale of associate - (1,859) - - (476)
Share in profit of associates (37,997) (14,345) (13,348) (8,696) (3,676)
Dividend received 38,000 3,675 2,926 800 942
Gain from sale and disposal of property and
equipment, net (77,674) (510) (19,039) (35) (131)
Provision for impairment of property 22,000 396,266 22,000 25,394 101,555
and equipment, net
Loss (gain) from changes in fair value of
derivative financial instruments (4,775) 399 1,625 922 102
Linkage differences on monetary assets,
debentures, loans and other long (2,367) (21,935) (91) (12,731) (5,621)
term liabilities
Employee benefit liability, net (9,579) 8,217 2,942 14,905 2,106
Decrease (increase) in value of investment in
securities, deposits and long-term
receivables, net (12,799) (17,274) (5,637) (10,724) (4,427)
Increase in value of liabilities and liens of
associate - 137,553 - 66,847 35,252
Interest paid, net 199,771 162,908 57,726 57,034 41,750
Loss from discontinuance of consolidation and
consolidated company transferred to
discontinued operations - 877,565 - 27,235 224,901
Changes in operating assets and liabilities:
Investment in real estate inventories (3,589) (4,236) (951) (1,125) (1,086)
Decrease in trade receivables and other
accounts 173,619 159,955 299,065 94,383 40,994
Increase (decrease) in trade payables 75,683 (158,484) (272,378) (102,740) (40,622)
and other accounts payable
Decrease in inventories 93,447 44,620 48,182 21,531 11,435
------ ------ ------ ------ ------
682,008 1,655,529 169,039 137,753 424,273
------- --------- ------- ------- -------
(b) Supplementary information on investing and
financing activities not involving cash
flows:
Purchase of property and equipment and investment
property on credit 4,228 (9,693) 4,228 (9,693) (2,484)
===== ====== ===== ====== ======
Proceeds from sale of property and equipment on
credit 90,486 - - - -
====== === === === ===
Proceeds from sale of subsidiary - 9,750 - 9,750 2,499
=== ===== === ===== =====
ALON BSI ISRAEL LTD.
NET LIABILITIES
(UNAUDITED)
Convenience
translation
December 31, December 31,
------------ ------------
2014 2015 2015
---- ---- ----
NIS U.S. dollars
--- ------------
In thousands
------------
Alon BSI- solo*
--------------
Cash and cash
equivalence 163,292 113,133 28,994
Investment in
securities 87,858 - -
------ --- ---
Total assets 251,150 113,133 28,994
======= ======= ======
Short term and Long-term debt:
Short term loans from
banks 94,975 119,428 30,606
Short term loans from
parent company - 110,000 28,191
Current maturities of
loans from banks 17,718 140,477 36,001
Current maturities of
debentures 47,913 364,637 93,449
Commercial papers 120,337 - -
Long term loans from
banks 124,115 - -
Long term loans from
parent company - 29,194 7,482
Debentures 316,825 - -
------- --- ---
Total debt 721,883 763,736 195,729
======= ======= =======
Equity:
Equity attributable
to equity holders of
the company: 664,699 (268,137) (68,718)
------- -------- -------
Total debt, net (470,733) (650,603) (166,735)
======== ======== ========
* Net of grant of loans or loans received from subsidiaries
Notes:
1. As of December 31, 2015 the Company guarantees:
a. As for liabilities and guarantees of Mega see events during the
reporting period - Mega.
b. Additional guarantees-during August 2015 untill December 2015, the
Company granted guarantees in amount of NIS 53 million and additional
NIS 11 million in January 2016.
2. As of December 31, 2015 the liability in respect of gift certificates,
net amounted to NIS 96 million.
3. As of December 31, 2015 the Company had short term loan from BSRE in the
amount of NIS 50 million, the loan repayable at any time with prior
notice of one week.
ALON BSI ISRAEL LTD.
RECONCILIATION BETWEEN NET INCOME FOR THE PERIOD AND EBITDA
FOR THE YEAR AND THREE MONTH PERIOD ENDED DECEMBER 31, 2015
(UNAUDITED)
Convenience
translation
Year Three months for the year
months ended
ended December 31, ended December 31, December
31,
---
2014 2015 2014 2015 2015
---- ---- ---- ---- ----
NIS in U.S. dollars
thousands in thousands
--------- ------------
Net profit
(loss) from
continuing
operations * 19,572 (97,177) (39,972) (32,988) (24,904)
Taxes on
income 69,676 5,071 48,929 19,376 1,300
Share in
losses
(gains) of
associates (20,034) (2,646) (2,591) 3,003 (678)
Finance
expenses, net 113,808 197,928 19,629 73,901 50,724
Other losses,
net (25,324) 80,870 7,277 (6,737) 20,724
Changes in
fair value of
investment
property (49,894) (57,464) (29,922) (38,307) (14,727)
Depreciation
and
amortization 5,335 6,399 1,594 1,837 1,640
----- ----- ----- ----- -----
EBITDA 113,139 132,981 4,944 20,085 34,079
======= ======= ===== ====== ======
*Including inter-company rental revenues
Contact:
Alon BSI 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: cfo@bsi.co.il
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/alon-bsi-israel-ltd-nyse-bsi-announces-the-financial-results-for-2015-and-the-fourth-quarter-of-2015-300243258.html
SOURCE Alon Holdings Blue Square - Israel Ltd.
