Revenues (including government levies) in 2012 amounted to NIS 15,805.5 million (U.S. $4,234.0 million) as compared to revenues of NIS 15,159.4 million last year, an increase of 4.3%. The increase in revenues was mainly due to an increase in the revenues of Dor Alon compared to the corresponding period last year.Revenues from sales, net Revenues of the Commercial and Fueling sites segment - in 2012 amounted to NIS 5,935.2 million (U.S. $1,589.9 million) as compared to NIS 5,301.9 million in 2011, an increase of 11.9%. The main increase was due to an increase in the prices of petrol, quantity sales and increase in retail revenues in the convenience stores. Revenues of the Supermarkets segment - amounted in 2012 to NIS 6,552.9 million (U.S. $1,755.4 million) as compared to NIS 6,723.8 million last year, a decrease of 2.5%. The decrease in revenues was due to a reduction in the same store sales (SSS) at a rate of 2.6%. Revenues of the Non-Food segment - amounted in 2012 to NIS 321.1 million (U.S. $86.0 million) compared to NIS 289.0 million in 2011 an increase of 11.1%. The increase in revenues is mainly due to an increase in the houseware stores and in stores transferred from franchise to self-operation. Revenues of the Real Estate segment - an increase in rental income of 9.4% from NIS 31.0 million in 2011 to NIS 33.9 million (U.S. $9.1 million) in 2012, due to an increase in leased space and increase of CPI. Gross profit in 2012 amounted to NIS 2,842.3 million (U.S. $761.4 million) (22.1% of revenues) as compared to gross profit of NIS 2,903.8 million (23.5% of revenues) in 2011. The decrease in the gross profit was mainly due to the decrease in sales of the Supermarkets segment. In the Commercial and Fueling sites segment, gross profit amounted to NIS 883.5 million (U.S. $236.7 million), (14.9% of revenues) compared to NIS 876.0 million in 2011 (16.5% of revenues). An increase in gross profit of 0.9% compared to the corresponding period last year deriving from an increase in the activity of convenience stores and an increase in quantitative sales net of the impact of changes in the petrol prices on the value of inventory between periods. In the Supermarkets segment, gross profit amounted to NIS 1,788.6 million (U.S. $479.1 million), (27.3% of revenues) compared to NIS 1,850.8 million in 2011 (27.5% of revenues), a decrease of 3.4% stemming from decrease in the sales and erosion in gross profit. In the Non Food segment, gross profit amounted to NIS 148.3 million (U.S. $39.7 million), (46.2% of revenues) compared to NIS 145.9 million last year (50.5% of revenues). The increase in gross profit mainly derives from an increase in revenues, as aforesaid. Selling, general and administrative expenses in 2012 amounted to NIS 2,658.2 million (U.S. $712.1 million) (20.7% of revenues), compared to expenses of NIS 2,611.8 million (21.2% of revenues) in 2011, an increase of 1.8%. The main increase was recorded in the Non-food segment, from transfer to self-operated stores and from costs relating to launching "You Phone" activity. In the Commercial and Fueling sites segment, these expenses amounted to NIS 718.7 million (U.S. $192.5 million) compared to NIS 702.4 million in 2011, an increase of 2.3%, mainly deriving from opening new fueling sites and was partly offset by efficiency measures beginning from the fourth quarter of 2011. In the Supermarkets segment, selling, general and administrative expenses amounted to NIS 1,659.7 million (U.S. $444.6 million) compared to expenses of NIS 1,673.4 million in 2011, a decrease of 0.8% that resulted from closing branches and taking efficiency measures in the Company's headquarters. In the Non Food segment, these expenses amounted to NIS 160.4 million (U.S. $43.0 million) (a decrease of 3.2%) compared to NIS 165.8 million in 2011. The decrease derives from a decrease in allowance for doubtful accounts. In the Real Estate segment - these expenses amounted to NIS 28.3 million (U.S. $7.6 million) compared to NIS 15.6 million in 2011. The increase in expenses derives from recording a provision for management fees in the mall company which builds the mall in the wholesale market complex and from increase in advertising expenses relating to the fashion week that took place in December. Operating profit (before other gains and losses and changes in fair value of investment property) in 2012 amounted to NIS 184.1 million (U.S. $49.3 million) (1.4% of revenues) as compared to NIS 292.0 million (2.4% of revenues) in 2011, a decrease of 36.9%. The decrease in the operating profit was mainly due to a decrease in sales in the Supermarkets segment and from expenses in Alon Cellular in connection with the commencement of its activity. In the Commercial and Fueling sites segment, operating profit decreased from NIS 173.7 million in 2011 to NIS 164.8 million (U.S. $44.1 million) in the reported period due to the reduction of marketing margins and the impact of petrol prices on the value of inventory and was partly offset by efficacy measures. In the Supermarkets segment, operating profit decreased from NIS 177.3 million in 2011 to NIS 129.0 million (U.S. $34.5 million) in the reported period due to decrease in sales partially offset by efficacy measures as mentioned above, during the last quarter the company began closing 11 stores (7 in the fourth quarter). In the Non Food segment, operating loss decreased from NIS 19.8 million in the comparable period to operating loss of NIS 12.1 million (U.S. $3.2 million) in the reported period. In the Real Estate segment, operating profit decreased from NIS 15.4 million in the comparable period to operating profit of NIS 5.6 million (U.S. $1.5 million) in the reported period due to an increase in the selling, general and administrative expenses as mentioned above. Changes in fair value of investment property in 2012 the Company recorded profit of NIS 106.4 million (U.S. $28.5 million) compared to NIS 41.9 million in 2011. The profit in 2012 includes NIS 87.6 million from revaluation of the commercial section in the wholesale market complex in Tel Aviv. Other income (expenses), net in 2012, other income amounted to NIS 23.4 million (U.S. $6.3 million) compared to other expenses of NIS 16.9 million last year. Income in the reported period includes profit from decrease in holding rate and loss of control in the residential company in the wholesale market complex in Tel Aviv in the amount of NIS 19.6 million. Operating profit in 2012 amounted to NIS 313.9 million (U.S. $84.1 million) as compared to operating profit of NIS 317.0 million in the comparable period last year, a decrease of 1.0%. Finance costs, net in 2012 amounted to NIS 245.8 million (U.S. $65.8 million) as compared to net finance costs of NIS 171.9 million in 2011. The increase in finance costs, net derives from decrease in finance income, this period compared to the corresponding period which included revenues from revaluation of Diners option in the amount of NIS 100 million. Taxes on income in 2012 totaled NIS 16.6 million (U.S. $4.4 million) (an effective tax rate of 21% as compared to the statutory rate of 25%) as compared to tax expenses totaled NIS 48.5 million last year (an effective tax rate of 32% as compared to the statutory rate of 24%). The effective tax rate in 2012 was affected by recording a profit from a decrease in holding rate in respect of which, the Company did not record deferred taxes. Net income from continued operation in 2012 amounted to NIS 63.6 million (U.S. $17.0 million) compared to a net income of NIS 102.3 million in 2011. The income from continued operation in 2012 attributable to the Company's shareholders amounted to NIS 19.3 million (U.S. $5.2 million) or NIS 0.29 per share (U.S. $0.08) and the income attributable to the non-controlling interests amounted to NIS 44.4 million (U.S. $11.9 million). Net loss from discontinued operation in 2012 amounted to NIS 22.5 million (U.S. $6.0 million) or NIS 0.34 per share (U.S. $0.09) compared to a loss of NIS 18.6 million in 2011 attributed in its entirety to the Company's shareholders. Cash flows for 2012 Cash flows from operating activities: Net cash flows from operating activities amounted to NIS 286.1 million (U.S. $76.7 million) in 2012 compared to NIS 627.6 million from operating activities in 2011. The decrease mainly derives from purchase of real estate inventory by BSRE of NIS 249.1 million (U.S $66.7 million) in 2012 compared to purchase of real estate inventory of NIS 5.6 million last year, from decrease in operating profit of approximately NIS 107.8 million (U.S $28.9 million) and from decrease in working capital needs net of tax returns received, net amounting to NIS 16.6 million (U.S $4.5 million) in 2012 compared to tax paid, net amounting to NIS 79.4 million last year. Cash flows used in investing activities: Net cash flows used in investing activities amounted to NIS 560.0 million (U.S. $150.0 million) in 2012 as compared to net cash used in investing activities of NIS 547.4 million in 2011. Cash flows used in investing activities in 2012 mainly included the purchase of property and equipment, investment property and intangible assets of total NIS 436.4 million (U.S. $116.9 million) as well as the grant of long term loans of NIS 102.2 million (U.S. $27.3 million) mainly to an associate, investment in restricted deposits of NIS 69.9 million (U.S. $18.7 million) and investment in securities of NIS 178.1 million (U.S. $47.7 million), net of proceeds from realization of securities of NIS 150.9 million (U.S. $40.4 million) proceeds from realization of property and equipment and investment property of NIS 43.4 million (U.S. $11.6 million) and receiving a dividend in the amount of NIS 12.5 million (U.S. $3.3 million). Cash flows used in investing activities in 2011 included mainly purchases of property and equipment, investment property and intangible assets, in a total amount of NIS 347.3 million, the grant of long term loans of NIS 144.9 million, mainly to controlling shareholders and investment in restricted deposits in the amount of NIS 102.6 million and an investment in an associate (Diners) of NIS 36.4 million, net of proceeds from realization property and equipment and investment property of NIS 63.5 million. Cash flows from financing activities: Net cash flows from financing activities amounted to NIS 482.1 million (U.S. $129.1 million) in 2012 as compared to net cash flows used in financing activities of NIS 110.7 million in 2011. The cash flows from financing activities in 2012 mainly included issuance of debentures of NIS 504.1 million (U.S. $135.0 million), receiving long term loans of NIS 594.3 million (U.S. $159.2 million) and an increase in short term bank credit of NIS 205.4 million (U,S, $55.0 million) that was offset by interest payments of NIS 258.8 million (U.S. $69.3 million), repayment of loans of NIS 350.3 million (U.S. $93.8 million) and debentures repayment of NIS 209.3 million (U.S. $56.1 million). The net cash flows used in financing activities in 2011 included mainly repayment of debentures in the amount of NIS 174.9 million, repayment of long term loans in the amount of NIS 382.5 million, and payments of interest in the amount of NIS 222.7 million, this was offset by an increase in short term bank credit in the amount of NIS 582.5 million and receiving long term loans in the amount of NIS 213.7 million. Additional Information EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) [ 3] in the fourth quarter of 2012 EBITDA was NIS 89.8 million (U.S. $24.1 million) (2.9% of revenues) compared to NIS 87.8 million (2.9% of revenues) in the comparable quarter of 2011. In 2012 EBITDA was NIS 470.4 million (U.S. $126.0 million) (3.7% of revenues) compared to NIS 568.9 million (4.6% of revenues) in the comparable period of 2011. Events during the reporting period General
- In December 2012, the Company resolved to realize Kfar Hashashuim that coordinates the activity of the leisure and toy activity of the Company under the Non-food segment. The Company intends to complete the realization of the activity in 2013. As of December 31, 2012, the Company includes the assets and liabilities attributed to Kfar Hashashuim in the consolidated statements of financial position in the item of the assets and liabilities held for sale under current assets and liabilities. The statements of income, including comparative figures, were restated such that the results of discontinued operation were separated from continued operation and were presented separately after the income from continued operation. Operating segment reporting presents the segments' results from continued operation before taxes.
- Effective January 2012, the Company applies the amendment to IAS 12, Taxes on Income - deferred taxes on investment property. The adoption of the standard was made retrospectively. The effect of the above change on the presented comparative figures are decrease in provisions for deferred taxes of NIS 3 million and increase in accumulated earnings of NIS 2.4 million and increase in non-controlling interests of NIS 0.6 million. The above amendment had no material effect on the statement of income.
- During the second quarter of 2012, the Company launched its operations in the cellular activity under the brand name "YouPhone" and commenced to provide services to its customers.
- On November 19, 2012, the Company's CEO, Mr. Zeev Vurembrand, announced the termination of his service at the end of February 2013.
- On November 22, 2012, the Company announced that Mr. Motti Keren has been appointed as CEO of Mega Retail. Mr. Motti Keren commenced his service on January 1, 2013.
- On November 27, 2012, Mr. David Weissman was appointed as CEO of the Company and Mr. Itzhak Bader was appointed chairman of the Company. The appointments are in effect as of January 1, 2013, without changes in the terms of employment.
- As of December 31, 2012, Dor Alon operated - 202 fueling stations and 209 convenience stores.
- Commitment for establishing a power plant: On February 8, 2012, a corporation controlled by Dor Alon (55% held) entered into a detailed agreement with Sugat Sugar Refineries Ltd. (Sugat) under which the corporation shall establish a power plant on its premises with total capacity of up to 124 Mega Watt. At the first stage, the plant capacity shall be 64 Mega Watt. Under the agreement, the power plant shall provide the energy needs of Sugat for 24 years and 11 months and in addition, the corporation may sell steam and electricity to third parties. It was further agreed that in the stage preceding the first stage, the corporation shall connect the Sugat plant to the natural gas transmission systems, shall convert the existing energy plant of Sugat to a dual system enabling the operation by fuel oil and natural gas and shall operate and maintain for Sugat its existing energy plant, all as determined in the detailed agreement. On March 1, 2012, the corporation entered into an agreement with Israel Natural Gas Lines Ltd. ("INGL") to connect Sugat to the national transmission system for natural gas and to provide natural gas transmission services by INGL (the agreement). Pursuant to the agreement, INGL shall establish the infrastructures that include, inter alia, the transmission piping and the facilities necessary to connect the Sugat plant to natural gas and shall install the infrastructures necessary for natural gas transmission to the power plant which is planned to be built by the corporation on the Sugat plant premises. The agreement is for a period until July 31, 2029 with a renewal option of five additional years. Pursuant to the agreement, the corporation shall bear the connecting expenses to the transmission system which is estimated at NIS 15 million. In addition the corporation is committed to pay the current annual payments to INGL for transmission services until the end of the agreement term in an immaterial amount, regardless of whether the corporation uses the transmission services or not. On December 9, 2012, the Corporation entered into an agreement to purchase natural gas from the partners in Tamar partnership (the partnership agreement) for the purpose of operating existing installations and a power plant, when established, the purpose of which, is to supply the energy needs of Sugat. Dor Alon's Board of Directors approved the transaction as an extraordinary transaction, in which the controlling shareholders may have a personal interest, pursuant to the Companies' Regulations (Relieves in Transactions with Interested Parties) - 2000. Pursuant to the agreement, Tamar partnership partners committed to supply the partnership with natural gas at a scope of up to 1.68 billion square meters according to the conditions set forth in the supply agreement. The term of agreement is 15 years or the end of consuming the contractual quantity, whichever is earlier, and is expected to commence at the beginning of 2014.
- On May 31, 2012, the Water and Energy Ministry updated the supervised marketing margin of gasoline 95 such that the marketing margin for self-service was increased by 4.7 Agorot per litter (before VAT) and the addition for full service was reduced by 3.8 Agorot per litter (before VAT).
- On June 28, 2012, the Palestinian authority informed Dor Alon on discontinuing the commitment with the company regarding the supply of fuels to Gaza strip effective October 1, 2012. No material effect is expected on the financial results of the Commercial and Fuling sites segment in 2012.
- As of December 31, 2012, the Company operated 212 supermarkets divided as follows: Mega In Town - 119; Mega Bool - 67; Zol Beshefa - 15; Eden Teva Market - 20 of which 9 Eden within Mega.
- As of December 31, 2012, the Company operated branches in a total area of 369,000 sq.m. The sales per meter amounted in the fourth quarter of 2012 to NIS 4,210 (U.S. $1,128) compared to NIS 4,394 in the corresponding quarter last year. Sales per meter in 2012 amounted to NIS 17,180 (U.S. $4,602) compared to NIS 18,090 in the corresponding period last year. In the year ended December 31, 2012, 10 branches, net, were opened in a total area of 13,400 sq.m and 9 branches were closed in a total area of 20,490 sq.m.
- According to the strategy of the Company for treating losing branches, the subsidiary, Mega Retail, in July and August 2012, signed agreements with third parties under which the Company transferred the lease rights and sold the equipment attributed to nine of its branches for a total consideration of NIS 26 million. As of the date of the Financial Statements' approval, the Company delivered 7 branches.
- As of December 31, 2012, Bee Group operates 138 branches (of which 21 franchised).
- On April 18, 2012, Bee Group informed that it had reached an agreement with a franchisee (which operates together with others 24 stores in the Non-Food segment - hereafter the franchisee) which experiences financial difficulties. Based on the franchise terms with the franchisee and the said agreement, Bee Group will take over the majority of the stores and the inventory in exchange for the debt. Following the agreement and based on the value of the assets that Bee Group will assume, the Company recorded a provision for doubtful accounts in the statements of financial position for the year ended December 31, 2011 in the amount of NIS 11.2 million.
- In December 2012, the Company resolved to realize Kfar Hashashuim that coordinates the activity of the leisure and toy activity of the Company under the Non-food segment, and as of December 31, 2012, operates 81 stores, mostly by franchisees.
Year ended December Three months ended December 31 31 -------------------- ---------------------------- 2012 2011 2012 2011 --------- ---------- -------------- ------------- NIS in thousands ------------------------------------------------- Revenues 115,214 136,808 24,402 18,602 Gross profit 23,308 11,941 11,206 820 Operating loss (11,485) (15,103) (4,606) (9,909) --------- ---------- -------------- ------------- Net loss from discontinuing operations (22,468) (18,609) (11,861) (10,366) --------- ---------- -------------- ------------- --------- ---------- -------------- -------------Real Estate segment a. Comverse Building On May 13, 2012, BSRE signed a memorandum of understanding with a third party (the lessee), pursuant to which the Company agreed to erect a 23,000 square-meter office building on a part of real property it owns in Ra'anana and also to construct a 2,300 square-meter basement (the structure), both of which will be leased to the lessee for 10 years for monthly rental fees of NIS 1,660 thousand linked to the CPI with a renewal option for an additional 5 years. The rental fees in this period shall increase by 7.5%. BSRE has undertaken to erect a surrounding structure at estimated cost of NIS 200 million and to perform all of the finishing work, as far as requested by the lessee, which is estimated at a cost NIS 75 million. BSRE will be entitled to receive from the lessee a payment equal to 7.5% of the cost of the finishing work in addition to monthly rental fees if BSRE will perform the finishing work. BSRE has undertaken to finish the construction work and to transfer the building at the end of the final quarter of 2014. BSRE and the lessee have determined acceptable compensation mechanisms. As of the reporting date, BSRE obtained building permits to erect the building and the construction work has begun. Following the earthwork in the project, in September 2012, the Company entered into an agreement with another contractor who commenced the construction work. On January 21, 2013, BSRE entered into an agreement for the sale of half of its rights in the property to Harel Investments, Insurance and Financial Services Ltd. in return for NIS 51 million and shall bear 50% of the remaining establishment costs. In addition, BSRE is entitled to an additional consideration for building rights of 2,500 sq.m that were not yet utilized and according to the agreement such consideration is to be payable in a later date. The agreement further determines that if the building rights in the real estate are increased, Harel shall have the option to purchase 50% of these rights at a consideration to be determined according to the value of the rights. A collaboration agreement was signed between BSRE and Harel.