SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of the Report: May 4, 2009
-------------------------------------
G. WILLI-FOOD INTERNATIONAL LTD.
(Translation of registrant's name into English)
4 NAHAL HARIF ST., YAVNE, ISRAEL 81106
(Address of principal executive offices)
-------------------------------------
Indicate by check mark whether registrant files or will file annual reports
under cover of Form 20-F or Form 40-F:
FORM 20-F [X] FORM 40-F [_]
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1): _____.
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7): _____.
Indicate by check mark whether registrant by furnishing the information
contained in this Form, the registrant is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934:
YES [_] NO [X]
If "YES" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_____.
EXPLANATORY NOTE
Attached hereto and incorporated by reference herein are the following:
ITEM 1 - Consolidated financial statements of G. Willi-Food International Ltd.
for the year ended December 31, 2008, prepared in accordance with
International Financial Reporting Standards ("IFRSs") and
interpretations issued by the International Accounting Standard Board
("IASB"), and such accounting policies have been applied
retrospectively to the Company's financial statements as of
December 31, 2007 and for the year then ended. (these financial
statements are in addition to the year ended December 31, 2008 results
that were contained in a press release dated March 12, 2009 and filed
under Form 6-K that day).
ITEM 2 - Operating and financial review and prospects.
This report on Form 6-K shall be deemed to be incorporated by reference in the
Registration Statement on Form F-3 (File No. 333-11848 and 333-138200) of the
Company.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
G. WILLI-FOOD INTERNATIONAL LTD.
By: /s/ Ety Sabach
------------------
Ety Sabach
Chief Financial Officer
Dated: May 4, 2009
ITEM 1
G. WILLI-FOOD INTERNATIONAL LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2008
G. WILLI-FOOD INTERNATIONAL LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2008
TABLE OF CONTENTS
PAGE
------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F - 1
FINANCIAL STATEMENTS:
Balance Sheets F - 2
Statements of Operations F - 3
Statements of Changes in Shareholders' Equity F - 4
Statements of Cash Flows F - 5 - F - 6
Notes to the Financial Statements F - 7 - F - 63
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Brightman Almagor Zohar 1 Azrieli Center Tel Aviv 67021 P.O.B. 16593, Tel Aviv 61164 Israel Tel: +972 (3) 608 5555 Fax: +972 (3) 609 4022 info@deloitte.co.il www.deloitte.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF G. WILLI-FOOD INTERNATIONAL LTD.
We have audited the accompanying consolidated balance sheets of G. WILLI-FOOD
INTERNATIONAL LTD. ("the Company") and its subsidiaries as of December 31, 2008
and 2007 and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the two years in the period ended December 31,
2008. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provide a reasonable
basis for our opinion.
In our opinion, such the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company and its subsidiaries as of December 31, 2008 and 2007 and the
consolidated results of their operations and their consolidated cash flows for
each of the two years in the period ended December 31, 2008, in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board (IASB).
BRIGHTMAN ALMAGOR ZOHAR & CO.
CERTIFIED PUBLIC ACCOUNTANTS
A MEMBER FIRM OF DELOITTE TOUCHE TOMHATSU
Tel-Aviv, Israel
April 30, 2009
F - 1
G. WILLI-FOOD INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(NIS IN THOUSANDS)
DECEMBER 31,
-----------------------------------
NOTE 2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
-----------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 4a 78,749 61,649 20,713
Financial assets carried at fair value through profit or loss 4b 9,367 31,267 2,464
Trade receivables 4c 79,599 63,798 20,936
Other receivables 4d 3,987 1,612 1,049
Current tax assets 2,456 908 646
Inventories 4e 34,417 31,020 9,052
-------- -------- --------
Total current assets 208,575 190,254 54,860
-------- -------- --------
NON-CURRENT ASSETS
Property, plant and equipment 55,574 44,569 14,617
Less -Accumulated depreciation 13,467 8,355 3,542
-------- -------- --------
7 42,107 36,214 11,075
-------- -------- --------
Prepaid expenses 12,539 10,815 3,298
Goodwill 8a 3,829 1,795 1,007
Intangible assets 9a 5,181 103 1,362
Deferred taxes 1,111 271 292
-------- -------- --------
Total non-current assets 64,767 49,198 17,034
======== ======== ========
TOTAL ASSETS 273,342 239,452 71,894
======== ======== ========
EQUITY AND LIABILITIES
CURRENT LIABILITIES
Short-term bank credit 11a 17,562 5,978 4,619
Trade payables 10a 53,728 34,330 14,132
Accruals 6,197 308 1,630
Current tax liabilities 1,050 593 276
Other payables and accrued expenses 10b 4,971 4,992 1,308
Employees Benefits 13a 2,544 1,408 669
-------- -------- --------
Total current liabilities 86,052 47,609 22,634
-------- -------- --------
NON-CURRENT LIABILITIES
Long-term bank loans 267 - 70
Deferred taxes 442 33 116
Warrants to issue shares 5 1,040 1
Employees Benefits 994 163 261
-------- -------- --------
Total non-current liabilities 1,708 1,236 448
-------- -------- --------
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Share capital 1,113 1,113 293
Premium 59,056 59,056 15,533
Capital fund 247 - 65
Foreign currency translation reserve 369 (414) 97
Retained earnings 111,447 112,233 29,313
Noncontrolling interest 13,350 18,619 3,511
-------- -------- --------
185,582 190,607 48,812
======== ======== ========
TOTAL EQUITY AND LIABILITIES 273,342 239,452 71,894
======== ======== ========
(*) Convenience Translation into U.S. Dollars.
----------------------- ----------------------- ----------------------------------
CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER CHAIRMAN OF THE BOARD OF DIRECTORS
Approval date of the financial statements: 30 April, 2009
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F - 2
G. WILLI-FOOD INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(NIS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
----------------------------------------
NOTE 2 0 0 8 2 0 0 7 2 0 0 8(*)
------ ---------- ---------- ----------
NIS US DOLLARS
------------------------- ----------
(IN THOUSANDS)
----------------------------------------
Revenue 19a 349,227 249,693 91,853
Cost of sales 19b 281,651 198,961 74,080
---------- ---------- ----------
GROSS PROFIT 67,576 50,732 17,773
---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Selling expenses 19c 33,759 24,263 8,879
General and administrative expenses 19d 23,127 18,869 6,083
Other (income) expenses 20 2,195 (470) 577
Goodwill Impairment 1,067 3,054 280
---------- ---------- ----------
60,148 45,716 15,819
========== ========== ==========
OPERATING PROFIT 7,428 5,016 1,954
Finance income (4,095) 2,362 (1,077)
Finance costs 21 1,612 88 424
---------- ---------- ----------
Finance income (costs), net (5,707) 2,274 (1,501)
========== ========== ==========
PROFIT BEFORE TAX 1,721 7,290 453
Income tax charge 14a 1,454 2,651 382
---------- ---------- ----------
PROFIT FOR THE PERIOD 267 4,639 71
========== ========== ==========
ATTRIBUTABLE TO:
Equity holders of the Company 22a (786) 2,342 (206)
Noncontrolling interest 1,053 2,297 277
---------- ---------- ----------
NET INCOME 267 4,639 71
========== ========== ==========
EARNINGS (LOSS) PER SHARE - (IN NIS)
Basic earnings (loss) per share (0.08) 0.23 (0.02)
Diluted earnings (loss) per share (0.08) 0.23 (0.02)
Shares used in computation of basic EPS 10,267,893 10,267,893 10,267,893
========== ========== ==========
Shares used in computation of diluted EPS 10,267,893 10,267,893 10,267,893
========== ========== ==========
(*) Convenience translation into U.S. Dollars.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F - 3
G. WILLI-FOOD INTERNATIONAL LTD. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(NIS IN THOUSANDS)
FOREIGN
CURRENCY TOTAL
SHARE SHARE CAPITAL TRANSLATION RETAINED GROSS NONCONTROLLING SHAREHOLDERS'
CAPITAL PREMIUM FUND ADJUSTMENTS EARNINGS AMOUNT INTEREST EQUITY
-------- -------- -------- -------- -------- -------- -------- --------
BALANCE - JANUARY 1, 2007 1,113 59,056 - - 109,891 170,060 14,750 184,810
Noncontrolling interests in newly acquired
subsidiary - - - - - - 1,919 1,919
Purchase of noncontrolling interest - - - - - - (146) (146)
Currency translation differences - - - (414) - (414) (201) (615)
Profit for the year - - - - 2,342 2,342 2,297 4,639
-------- -------- -------- -------- -------- -------- -------- --------
BALANCE - DECEMBER 31, 2007 1,113 59,056 - (414) 112,233 171,988 18,619 190,607
Noncontrolling interests in newly acquired
subsidiary - - - - - - 3,350 3,350
Purchase of noncontrolling interest - - 247 - - 247 (9,362) (9,115)
Currency translation differences - - - 783 - 783 (41) 742
Dividend paid to noncontrolling interests - - - - - - (269) (269)
Profit for the year - - - - (786) (786) 1,053 267
-------- -------- -------- -------- -------- -------- -------- --------
BALANCE - DECEMBER 31, 2008 1,113 59,056 247 369 111,447 172,232 13,350 185,582
======== ======== ======== ======== ======== ======== ======== ========
F - 4
G. WILLI-FOOD INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NIS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
CASH FLOWS - OPERATING ACTIVITIES
Profit for the year 267 4,639 71
Adjustments to reconcile net profit to net cash used in operating
activities(Appendix A) 18,613 3,303 4,894
-------- -------- --------
NET CASH FROM OPERATING ACTIVITIES 18,880 7,942 4,965
-------- -------- --------
CASH FLOWS - INVESTING ACTIVITIES
Acquisition of property plant and equipment (3,315) (11,259) (872)
Proceeds from sale of property plant and Equipment 249 16 65
Additions to intangible assets (300) - (79)
Additions to prepaid expenses (1,579) - (415)
Long term deposit, net 61 (131) 16
Proceeds from realization (purchase) of marketable securities, net 16,714 (17,378) 4,396
Purchase of additional shares in subsidiary (9,250) (182) (2,433)
Purchase of subsidiaries (5,664) (15,400) (1,489)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (3,084) (44,334) (811)
-------- -------- --------
CASH FLOWS - FINANCING ACTIVITIES
Short-term bank credit, net (475) - (125)
Repayment of loans (4,734) - (1,245)
Proceeds of loans 6,803 6,781 1,789
Dividend paid to noncontrolling interests (269) - (70)
-------- -------- --------
NET CASH USED IN FINANCING ACTIVITIES 1,325 6,781 349
======== ======== ========
INCREASE IN CASH AND CASH EQUIVALENTS 17,121 (29,611) 4,503
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD 61,649 91,398 16,215
NET FOREIGN EXCHANGE DIFFERENCE ON CASH AND CASH EQUIVALENTS (21) (138) (5)
-------- -------- --------
CASH AND CASH EQUIVALENTS OF THE END OF THE FINANCIAL PERIOD 78,749 61,649 20,713
======== ======== ========
(*) Convenience Translation into U.S. Dollars.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F - 5
G. WILLI-FOOD INTERNATIONAL LTD. AND SUBSIDIARIES
APPENDICES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
(NIS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-------------------------------
2008 2007 2008(*)
------- ------- -------
NIS US DOLLARS
------------------- -------
(IN THOUSANDS)
-------------------------------
A. ADJUSTMENTS TO RECONCILE NET PROFIT TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Revaluation of loans from banks and others 963 - 252
Deferred income taxes (505) (433) (133)
Unrealized loss (gain) on marketable securities 5,186 56 1,364
Depreciation and amortization 6,174 5,574 1,624
Capital loss (gain) on disposal of property
plant and equipment 264 (16) 69
Employees benefit, net 545 (122) 143
Change in value of warrants to issue shares (1,035) (767) (272)
CHANGES IN ASSETS AND LIABILITIES:
Increase in trade receivables and other receivables (4,179) (11,622) (1,099)
Increase in inventories (377) (2,568) (99)
Increase in trade and other payables, and other current liabilities 11,577 13,201 3,045
------- ------- -------
18,613 3,303 4,894
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid 835 104 220
Income tax paid 3,736 7,645 983
(*) Convenience Translation Into U.S. Dollars.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F - 6
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 1 - DESCRIPTION OF BUSINESS AND GENERAL
A. DESCRIPTION OF BUSINESS
G. Willi-Food International Ltd. ("the Company") was incorporated in
Israel in January 1994 and is engaged in the import, export, marketing
and distribution of food products.
The Company is a subsidiary of Willi-Food Investments Ltd. ("the
parent company"). The shares of the parent company are registered for
trade on the Tel-Aviv Stock Exchange.
The financial statements are prepared in accordance with the Israeli
Securities Regulations (Preparation of Annual Financial Statements),
1993.
B. DEFINITIONS:
THE COMPANY - G. WILLI-FOOD INTERNATIONAL LTD.
THE GROUP - the Company and its Subsidiaries, a list
of which is presented in Note 5.
SUBSIDIARIES - companies in which the Company exercises
control (as defined by IAS 27), and whose
financial statements are fully
consolidated with those of the Company.
RELATED PARTIES - as defined by IAS 24.
INTERESTED PARTIES - as defined in the Israeli Securities law
and Regulations, 1968.
CONTROLLING SHAREHOLDER - as defined in the Israeli Securities law
and Regulations, 1968.
NIS - New Israeli Shekel.
CPI - the Israeli consumer price index.
DOLLAR - the U.S. dollar.
EURO - the United European currency.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. APPLYING INTERNATIONAL ACCOUNTING STANDARDS (IFRS)
(1) STATEMENT OF COMPLIANCE
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRSs") as issued by the International Accounting Standards
Board ("IASB").
(2) FIRST TIME IFRS STANDARDS ADOPTION
According to standard No. 29 "Adoption of International Financial
Reporting Standards" - IFRS ("standard No. 29"), the Company
applies International Financial Reporting Standards and
interpretations of the committee of the International Accounting
Standard Board (IASB) Starting January 1, 2008.
F - 7
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
A. APPLYING INTERNATIONAL ACCOUNTING STANDARDS (IFRS) (CONT)
(2) FIRST TIME IFRS STANDARDS ADOPTION (CONT)
According to standard No. 29 "Adoption of International Financial
Reporting Standards" - IFRS ("standard No. 29"), the Company
applies International Financial Reporting Standards and
interpretations of the committee of the International Accounting
Standard Board (IASB) Starting January 1, 2008.
In compliance with the mentioned above, the financial statements,
as of December 31, 2008 and for the year then ended, including
all previous reporting periods have been prepared in accordance
with International Financial Reporting Standards and
interpretations published by the International Accounting
Standard Board (IASB).
In these financial statements the Company applied IFRS 1 "First
time Adoption of International Financial Reporting Standards"
("IFRS No. 1"), which determines instructions for first time
implementation of IFRS.
According to IFRS No. 1 the transition date for the purpose of
implementing IFRS standards commenced January 1, 2007.
The Company has applied in a retroactive manner the IFRS
standards for all reporting periods presented in the financial
statements. The Company implemented the IFRS standards which have
been published as of the preparation date of the Financial
Statements and expected to be effective as of December 31, 2008.
While applying the said transition instructions the Company chose
to apply two relieves allowed under IFRS 1. See note 30.
Until the adoption of IFRS the Company conducted the Financial
Reporting in accordance with the Israeli GAAP. The annual
financial statements as of December 31, 2007 and for the periods
then ended were prepared under the Israeli GAAP standards. The
comparative financial statements were represented in the
financial statements in accordance to the IFRS standards. See
note 30 for the relevant material adjustments between the Israeli
GAAP and the IFRS.
B. BASIS OF PREPARATION
Until December 31, 2003, Israel was considered a country in which
hyper-inflation conditions exist. Therefore, non-monetary balances in
the balance sheet were presented on the historical nominal amount and
were adjusted to changes in the exchange rate of the U.S. dollar. As
of December 31, 2003 when the economy ceased to be hyper-inflationary
and the Company no longer adjusted its financial statements to the
U.S. dollar, the adjusted amounts as of this date were used as the
historical costs. The financial statements were edited on the basis of
the historical cost, except for:
o Assets and liabilities measured by fair value: financial assets
measured by fair value recorded directly as profit or loss.
o Non-current assets are measured at the lower of their previous
carrying amount and fair value less costs of sale.
o Inventories are stated at the lower of cost and net realizable
value.
o Property, plant and equipment and intangibles assets are
presented at the lower of the cost less accumulated amortizations
and the recoverable amount.
o Liabilities to employees as described in note 12.
F - 8
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
C. FOREIGN CURRENCIES
The individual financial statements of each group entity are presented
in New Israeli Shekel the currency of the primary economic environment
in which the entity operates (its functional currency). The
consolidated financial statements are also presented in the New
Israeli Shekel ("NIS"), which is the functional currency of the
Company and the presentation currency for the consolidated financial
statements.
In preparing the financial statements of the individual entities,
transactions in currencies other than the entity's functional currency
(foreign currencies) are recorded at the rates of exchange prevailing
at the dates of the transactions. At each balance sheet date, monetary
items denominated in foreign currencies are retranslated at the rates
prevailing at the balance sheet date. (Non-monetary items carried at
fair value that are denominated in foreign currencies are retranslated
at the rates prevailing at the date when the fair value was
determined). Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in
which they accrue.
(1) FUNCTIONAL AND PRESENTATION CURRENCY
Items included in the financial statements of each of the group's
entities are measured using the currency of the primary economic
environment in which the entity operates (`the functional,
currency'). The consolidated financial statements are presented
in `NIS', which is the company's functional and the group's
presentation currency.
(2) TRANSACTIONS AND BALANCES
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are remeasured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates
of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement, except when
deferred in equity as qualifying cash flow hedges and qualifying
net investment hedges.
D. CASH AND CASH EQUIVALENTS
Cash equivalents include unrestricted liquid deposits, maturity period
of which, as at the date of investments therein, does not exceed three
months.
F - 9
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
E. BASIS OF CONSOLIDATION
(1) GENERAL
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities.
Where necessary, adjustments are made to the financial statements
of subsidiaries to bring their accounting policies into line with
those used by other members of the Group.
All intra-group transactions, balances, income and expenses are
eliminated in full.
For the effect of the issuance of IAS 27 (revised) "Consolidated
and Separate Financial Statements" see note 2Y below.
(2) NONCONTROLLING INTEREST
In instances that the Group acquires noncontrolling interest, the
excess of cost of acquired interest over the carrying value is
recognized as goodwill In cases of excess of carrying value over
the cost, such amount is recorded in earnings.
When the Group interest is reduced, without loss of control
(either by sale or by issuance of shares by the subsidiary) the
differences between the consideration received and the book value
of the Group's sold is recognized in income statements.
The group applies a policy of treating transactions with
noncontrolling interests as transactions with parties external to
the group. Disposals to noncontrolling interests result in gains
and losses for the group and are recorded in the income
statement. Purchases from noncontrolling interests result in
goodwill, being the difference between any consideration paid and
the relevant share acquired of the carrying value of net assets
of the subsidiary.
F. BUSINESS COMBINATION
Acquisitions of subsidiaries and businesses are accounted for using
the purchase method. The cost of the business combination is measured
as the aggregate of the fair values (at the date of exchange) of
assets given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree, plus any
costs directly attributable to the business combination. The
acquiree's identifiable assets, liabilities and contingent liabilities
that meet the conditions for recognition under IFRS 3 Business
Combinations are recognised at their fair values at the acquisition
date, except for non-current assets (or disposal groups) that are
classified as held for sale in accordance with IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations, which are recognised
and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group's interest in the net fair value
of the identifiable assets, liabilities and contingent liabilities
recognised. If, after reassessment, the Group's interest in the net
fair value of the acquiree's identifiable assets, liabilities and
contingent liabilities exceeds the cost of the business combination,
the excess is recognised immediately in profit or loss.
The interest of minority shareholders in the acquiree is initially
measured at the minority's proportion of the net fair value of the
assets, liabilities and contingent liabilities recognised.
F - 10
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
G. GOODWILL
Goodwill arising on the acquisition of a subsidiary represents the
excess of the cost of acquisition over the Group's interest in the net
fair value of the identifiable assets, liabilities and contingent
liabilities of the subsidiary or jointly controlled entity recognised
at the date of acquisition. Goodwill is initially recognised as an
asset at cost and is subsequently measured at cost less any
accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to each
of the Group's cash-generating units expected to benefit from the
synergies of the combination. Cash-generating units to which goodwill
has been allocated are tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired.
If the recoverable amount of the cash-generating unit is less than the
carrying amount of the unit, the impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated to the unit and
then to the other assets of the unit pro-rata on the basis of the
carrying amount of each asset in the unit. An impairment loss
recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is
included in the determination of the profit or loss on disposal.
H. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipments are tangible items, which are held for
use in the manufacture or supply of goods or services, or leased to
others, which are predicted to be used for more than one period. The
Company presents its property, plant and equipments items according to
the cost model.
Under the cost method - a property, plant and equipment are presented
at the balance sheet at cost (net of any investment grants), less any
accumulated depreciation and any accumulated impairment losses. The
cost includes the cost of the assets acquisition as well as costs that
can be directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner
intended by management.
Depreciation is calculated using the straight-line method at rates
considered adequate to depreciate the assets over their estimated
useful lives. Amortization of leasehold improvements is computed over
the shorter of the term of the lease, including any extention period,
where the Company intends to exercise such option, or their useful
life.
The annual depreciation and amortization rates are:
%
-----
construction 4
Motor vehicles 15-20 (mainly 20%)
Office furniture and equipment 6-15 (mainly 15%)
Computers 20-33 (mainly 33%)
Machinery and equipment 10
The gain or loss arising on the disposal or retirement of an item of
property, plant and equipment is determined as the difference between
the sales proceeds and the carrying amount of the asset and is
recognized in the income statement.
F - 11
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
I. INTANGIBLE ASSETS ACQUIRED IN A BUSINESS COMBINATION
An intangible asset is an identifiable non-monetary asset without
physical substance. Intangible assets acquired in a business
combination are identified and recognised separately from goodwill
where they satisfy the definition of an intangible asset and their
fair values can be measured reliably. The cost of such intangible
assets is their fair value at the acquisition date.
Subsequent to initial recognition, intangible assets acquired in a
business combination are reported at cost less accumulated
amortization and accumulated impairment losses, on the same basis as
intangible assets acquired separately.
An intangible asset with an indefinite useful life shall not be
amortized.
In accordance with IAS 36, an entity is required to test an intangible
asset with an indefinite useful life for impairment by comparing its
recoverable amount with its carrying amount:
(a) annually, and
(b) whenever there is an indication that the intangible asset may be
impaired.
Intangible assets with a finite useful life are stated at cost less
accumulated amortization and accumulated impairment losses.
Amortization is charged according to the straight-line method over
their estimated useful life. See also Note 9
Useful lives of Intangible assets:
YEARS
-----
INTANGIBLE ASSETS ACQUIRED IN A BUSINESS COMBINATION:
Technology knowledge 10
Customers relationship 15
Trade name 25
OTHER INTANGIBLE ASSET:
Trade name 7
J. IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS EXCLUDING GOODWILL
At each balance sheet date, the Group reviews the carrying amounts of
its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if
any). Where it is not possible to estimate the recoverable amount of
an individual asset, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs. Where a reasonable
and consistent basis of allocation can be identified, corporate assets
are also allocated to individual cash-generating units, or otherwise
they are allocated to the smallest group of cash-generating units for
which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets
not yet available for use are tested for impairment annually, and
whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.
F - 12
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
J. IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS EXCLUDING GOODWILL
(CONT.)
If the recoverable amount of an asset (or cash-generating unit) is
estimated to be less than its carrying amount, the carrying amount of
the asset (cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of
the asset (cash-generating unit) is increased to the revised estimate
of its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined
had no impairment loss been recognised for the asset (cash-generating
unit) in prior years. A reversal of an impairment loss is recognised
immediately in profit or loss.
K. INVENTORIES
Inventories are assets held for sale in the ordinary course of
business, in the process of production for such sale or in the form of
materials or supplies to be consumed in the production process or in
the rendering of services.
Inventories are stated at the lower of cost and net realizable value.
Cost of inventories includes all the cost of purchase, direct labor,
fixed and variable production over heads and other cost that are
incurred, in bringing the inventories to their present location and
condition.
Net realizable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.
Cost determined as follows:
Raw material, components and packaging - by the "first-in,
first-out" method;
Processing goods - cost of materials plus
labor
finished products - on the basis of standard
cost which approximates
actual production cost
(materials, labor and
indirect manufacturing
costs).
Products - weighted average method
L. FINANCIAL ASSETS
(1) GENERAL
Investments are recognized and derecognized on trade date where
the purchase or sale of an investment is under a contract whose
terms require delivery of the investment within the timeframe
established by the market concerned, and are initially measured
at fair value, plus transaction costs, except for those financial
assets classified as fair value through profit or loss, which are
initially measured at fair value.
Financial assets are classified into the following specified
categories:
o Financial assets 'at fair value through profit or loss'
(FVTPL)
o Loans and receivables
F - 13
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
L. FINANCIAL ASSETS (CONT.)
(2) FINANCIAL ASSETS AT FVTPL
Financial assets are classified as at FVTPL where the financial
asset is either held for trading or it is designated as at FVTPL.
A financial asset is classified as held for trading if:
o it has been acquired principally for the purpose of selling
in the near future; or
o it is a part of an identified portfolio of financial
instruments that the Group manages together and has a recent
actual pattern of short-term profit-taking; or
o it is a derivative that is not designated and effective as a
hedging instrument.
Financial assets at FVTPL are stated at fair value, with any
resultant gain or loss recognized in profit or loss. The net gain
or loss recognized in profit or loss incorporates any dividend or
interest earned on the financial asset.
(3) LOANS AND RECEIVABLES
Trade receivables, loans, and other receivables that have fixed
or determinable payments that are not quoted in an active market
are classified as loans and receivables. Loans and receivables
are measured at amortized cost using the effective interest
method, less any impairment. Interest income is recognized by
applying the effective interest rate, except for short-term
receivables when the recognition of interest would be immaterial.
(4) IMPAIRMENT OF FINANCIAL ASSETS
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at each balance sheet date.
Financial assets are impaired where there is objective evidence
that, as a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated future
cash flows of the investment have been impacted.
For all other financial assets, an objective evidence of
impairment could include:
o Significant financial difficulty of the issuer or
counterparty; or
o Default or delinquency in interest or principal payments; or
o It becoming probable that the borrower will enter bankruptcy
or financial re-organization.
For financial assets carried at amortized cost, the amount of the
impairment is the difference between the asset's carrying amount
and the present value of estimated future cash flows, discounted
at the financial asset's original effective interest rate.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is
reduced through the use of an allowance account.
When a trade receivable is considered uncollectible, it is
written off against the allowance account. Subsequent recoveries
of amounts previously written off are credited against the
allowance account. Changes in the carrying amount of the
allowance account are recognized in profit or loss.
In a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognized, the previously
recognized impairment loss is reversed through profit or loss to
the extent that the carrying amount of the investment at the date
the impairment is reversed does not exceed what the amortized
cost would have been had the impairment not been recognized.
F - 14
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
M. FINANCIAL LIABILITIES AND EQUITY INSTRUMENTS ISSUED BY THE GROUP
(1) Classification as debt or equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recorded
at the proceeds received, net of direct issue costs.
Financial liabilities are classified as either financial
liabilities 'at FVTPL' or 'other financial liabilities'.
(2) Convertible debentures
The component parts of convertible debentures are classified
separately as financial liabilities and equity in accordance with
the substance of the contractual arrangement. At the date of
issue, the fair value of the liability component is estimated
using the prevailing market interest rate for a similar
non-convertible instrument. This amount is recorded as a
liability on an amortized cost basis until extinguished upon
conversion or at the instrument's maturity date. The equity
component is determined by deducting the amount of the liability
component from the fair value of the convertible debentures as a
whole. This is recognized and included in equity and is not
subsequently remeasured.
(3) CONSUMER PRICE INDEX FINANCIAL LIABILITIES
The Company has Consumer Price Index ("CPI")-linked financial
liabilities that are not measured at fair value through profit or
loss. For those liabilities, the Company determines the effective
interest rate as a real rate plus linkage differences according
to the actual changes in the CPI up to the balance sheet date.
N. DERIVATIVE FINANCIAL INSTRUMENTS
The Group enters into a certain derivative financial instruments to
manage its exposure to interest rate and foreign exchange rate risk,
including foreign exchange forward contracts, interest rate swaps and
cross currency swaps.
Further details of derivative financial instruments are disclosed in
note 25.
Derivatives are initially recognized at fair value at the date a
derivative contract is entered into and are subsequently remeasured to
their fair value at each balance sheet date. The resulting gain or
loss is recognized in profit or loss immediately unless the derivative
is designated and effective as a hedging instrument, in which event
the timing of the recognition in profit or loss depends on the nature
of the hedge relationship. The Group designates certain derivatives as
either hedges of the fair value of recognized assets or liabilities or
firm commitments (fair value hedges), hedges of highly probable
forecast transactions or hedges of foreign currency risk of firm
commitments(cash flow hedges), or hedges of net investments in foreign
operations.
A derivative is presented as a non-current asset or a non-current
liability if the remaining maturity of the instrument is more than 12
months and it is not expected to be realized or settled within 12
months. Other derivatives are presented as current assets or current
liabilities.
F - 15
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
O. EMBEDDED DERIVATIVES
Derivatives embedded in other financial instruments or other host
contracts are treated as separate derivatives when their risks and
characteristics are not closely related to those of the host contracts
and the host contracts are not measured at fair value with changes in
fair value recognized in profit or loss.
P. FORWARDS
Changes in the fair value of forwards transactions are recorded in
profit or loss immediately as they occurred.
Q REVENUE RECOGNITION
Revenue is measured at the fair value of the consideration received or
receivable. Revenue is reduced for estimated customer returns, rebates
and other similar allowances.
(1) SALE OF GOODS
Revenue from the sale of goods is recognised when all the
following conditions are satisfied:
o The Group has transferred to the buyer the significant risks
and rewards of ownership of the goods;
o The Group retains neither continuing managerial involvement
to the degree usually associated with ownership nor
effective control over the goods sold
o The amount of revenue can be measured reliably;
o It is probable that the economic benefits associated with
the transaction will flow to the entity; and
o The costs incurred or to be incurred in respect of the
transaction can be measured reliably.
(2) INTEREST REVENUE
Interest revenue is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying amount.
(3) DIVIDEND REVENUE
Dividend revenue from investments is recognised when the
shareholder's right to receive payment has been established.
F - 16
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
R LEASING
(1) GENERAL
Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
(2) THE GROUP AS LESSEE
Assets held under finance leases are initially recognised as
assets of the Group at their fair value at the inception of the
lease or, if lower, at the present value of the minimum lease
payments. The corresponding liability to the lessor is included
in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and
reduction of the lease obligation so as to achieve a constant
rate of interest on the remaining balance of the liability.
Finance charges are charged directly to profit or loss, unless
they are directly attributable to qualifying assets, in which
case they are capitalised in accordance with the Group's general
policy on borrowing costs.
Operating lease payments are recognised as an expense on a
straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
Contingent rentals arising under operating leases are recognised
as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into
operating leases, such incentives are recognised as a liability.
The aggregate benefit of incentives is recognised as a reduction
of rental expense on a straight-line basis, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
S PROVISIONS
Provisions are recognized when the Group has a present obligation
(legal or constructive) as a result of a past event, it is
probable that the Group will be required to settle the
obligation, and a reliable estimate can be made of the amount of
the obligation.
The amount recognized as a provision is the best estimate of the
consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and
uncertainties surrounding the obligation.
Where a provision is measured using the cash flows estimated to
settle the present obligation, its carrying amount is the present
value of those cash flows.
When some or all of the economic benefits to settle a provision
are expected to be recovered from a third party, the receivable
is recognized as an asset if it is virtually certain that
reimbursement will be received and the amount of the receivable
can be measured reliably.
F - 17
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
T. SHARE-BASED PAYMENTS
Equity-settled share-based payments to employees and others providing
similar services are measured at the fair value of the equity
instruments at the grant date.
The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the
vesting period, based on the Group's estimate of equity instruments
that will eventually vest.
At each balance sheet date, the Group revises its estimate of the
number of equity instruments expected to vest. The impact of the
revision of the original estimates, if any, is recognised in profit or
loss over the remaining vesting period, with a corresponding
adjustment to the equity-settled employee benefits reserve.
Equity-settled share-based payment transactions with other parties are
measured at the fair value of the goods or services received, except
where the fair value cannot be estimated reliably, in which case they
are measured at the fair value of the equity instruments granted,
measured at the date the entity obtains the goods or the counterparty
renders the service.
For cash-settled share-based payments, a liability equal to the
portion of the goods or services received is recognized at the current
fair value determined at each balance sheet date.
Through the liability settlement, the Company shall re-measure the
fair value of the liability at each reporting date and at the date of
settlement, with any changes in the fair value is to be recognized in
profit or loss for the period.
U. TAXATION
Income tax expense represents the sum of the tax currently payable and
deferred tax.
(1) CURRENT TAX
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet date.
(2) DEFERRED TAX
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit, and are accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all
taxable temporary differences, and deferred tax assets are
generally recognised for all deductible temporary differences to
the extent that it is probable that taxable profits will be
available against which those deductible temporary differences
can be utilised. Such assets and liabilities are not recognised
if the temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.
F - 18
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
U. TAXATION (CONT.)
(2) DEFERRED TAX (CONT.)
Deferred tax assets and liabilities are measured at the tax rates
that are expected to apply in the period in which the liability
is settled or the asset realised, based on tax rates (and tax
laws) that have been enacted or substantively enacted by the
balance sheet date. The measurement of deferred tax liabilities
and assets reflects the tax consequences that would follow from
the manner in which the Group expects, at the reporting date, to
recover or settle the carrying amount of its assets and
liabilities.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Group intends to
settle its current tax assets and liabilities on a net basis.
(3) CURRENT AND DEFERRED TAX FOR THE PERIOD
Current and deferred tax are recognized as an expense or income
in profit or loss, except when they relate to items credited or
debited directly to equity, in which case the tax is also
recognized directly in equity, or where they arise from the
initial accounting for a business combination. In the case of a
business combination, the tax effect is taken into account in
calculating goodwill or in determining the excess of the
acquirer's interest in the net fair value of the acquirer's
identifiable assets, liabilities and contingent liabilities over
the cost of the business combination.
V. EMPLOYEE BENEFITS
(1) POST-EMPLOYMENT BENEFITS
The Group's POST-EMPLOYMENT BENEFITS include: benefits to
retirees and liabilities for severance benefits. The Group's
post-employment benefits are classified as DEFINED BENEFIT PLANS.
Expenses in respect of a DEFINED BENEFIT PLAN are carried to the
income statement in accordance with the PROJECTED UNIT CREDIT
METHOD, while using actuarial estimates that are performed at
each balance sheet date. The current value of the Group's
obligation in respect of the defined benefit plan is determined
by discounting the future projected cash flows from the plan by
the market yields on government bonds, denominated in the
currency in which the benefits in respect of the plan will be
paid, and whose redemption periods are approximately identical to
the projected settlement dates of the plan.
Actuarial profits and losses are recognized in earning when
incurred.
The Group's liability in respect of the DEFINED BENEFIT PLAN
which is presented in the Group's balance sheet, includes the
current value of the obligation in respect of the defined
benefit, net of the fair value of the DEFINED BENEFIT PLAN
assets.
(2) SHORT TERM EMPLOYEE BENEFITS
Short term employee benefits are benefits which it is anticipated
will be utilized or which are to be paid during a period that
does not exceed 12 months from the end of the period in which the
service that creates entitlement to the benefit was provided.
Short term company benefits include the company's liability for
short term absences, payment of grants, bonuses and compensation.
These benefits are recorded to the statement of operations when
created. The benefits are measured on a non capitalized basis.
The difference between the amount of the short term benefits to
which the employee is entitled and the amount paid is therefore
recognized as an asset or liability.
F - 19
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
W. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed with regard to income or
loss attributable to the Company's ordinary shareholders, and is
calculated for income (loss) from continuing operations attributable
to the ordinary shareholders of the reported entity, should such be
presented. Basic earnings per share is to be computed by dividing
income(loss) attributed to holders of ordinary shares of the Company
(numerator), by the weighted average of the outstanding ordinary
shares (denominator) during the period.
In the computation of diluted earnings per share, the Company adjusted
its income (loss) attributable to its ordinary shareholders for its
share in income (loss) of investees by multiplying their diluted EPS
by the Company's holding in the investees including its holding in
dilutive potential ordinary share of the investee and the weighted
average of the outstanding shares for the effects of all the dilutive
potential ordinary shares of the Company.
X. ECHANGE RATES AND LINKAGE BASIS
(1) Balances in foreign currency or linked thereto are included in
the financial statements based on the representative exchange
rates, as published by the Bank of Israel, that were prevailing
at the balance sheet date.
(2) Following are the changes in the representative exchange rate of
the U.S. dollar vis-a-vis the NIS and in the Israeli CPI:
REPRESENTATIVE REPRESENTATIVE
EXCHANGE RATE EXCHANGE RATE OF CPI
OF THE EURO THE DOLLAR "IN RESPECT OF"
AS OF: (NIS PER €1) (NIS PER $1) (IN POINTS)
---------- ---------- ----------
December 31, 2008 5.2973 3.802 110.44
December 31, 2007 5.6592 3.846 106.40
INCREASE (DECREASE) DURING THE: % % %
---------- ---------- ----------
Year ended December 31, 2008 (6.4) (1.14) 3.8
Year ended December 31, 2007 1.71 (8.97) 3.4
Y. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
(1) STANDARDS AND INTERPRETATIONS WHICH ARE EFFECTIVE AND HAVE BEEN
APPLIED IN THESE FINANCIAL STATEMENTS.
Three Interpretations issued by the International Financial Reporting
Interpretations Committee are effective for the current period, these
are:
o IFRIC 11 IFRS 2: Group and Treasury Share Transactions
(effective 1 March 2007);
o IFRIC 12 Service Concession Arrangements (effective 1 January
2008);
o IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction
(effective 1 January 2008).
The adoption of the Interpretations has not led to any changes in the
Group's accounting policies.
F - 20
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Y. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS (CONT.)
(2) STANDARDS AND INTERPRETATIONS WHICH HAVE NOT BEEN APPLIED IN
THESE FINANCIAL STATEMENTS WERE IN ISSUE BUT NOT YET EFFECTIVE
At the date of authorization of these financial statements, other
than the Standards and Interpretations adopted by the Group in
advance of their effective dates the following Interpretations
were in issue but not yet effective:
IAS 1 (AMENDED) "PRESENTATION OF FINANCIAL STATEMENTS"
The standard stipulates the presentation required in the
financial statements, and itemizes a general framework for the
structure of the financial statements and the minimal contents
which must be included in the context of the report. Changes have
been made to the existing presentation format of the financial
statements, and the presentation and disclosure requirements for
the financial statements have been broadened, including the
presentation of an additional report in the framework of the
financial statements known as the "report of comprehensive
income", and the addition of a balance sheet as of the beginning
of the earliest period that was presented in the financial
statements, in cases of changes in accounting policy by means of
retroactive implementation, in cases of restatement and in cases
of reclassifications.
The standard will be effective for reporting periods beginning
from January 1, 2009. The standard permits earlier application.
At this stage, the management of the Group is examining the
influence of this standard on the Company's financial statements.
IAS 23 (AMENDED) "BORROWING COSTS"
The standard stipulates the accounting treatment of borrowing
costs. In the context of the amendment to this standard, the
possibility of immediately recognizing borrowing costs related to
assets with an uncommon period of eligibility or construction in
the statement of operations was cancelled. The standard will
apply to borrowing costs that relate to eligible assets as to
which the capitalization period began from January 1, 2009. The
standard permits earlier implementation. At this stage, the
management of the Group estimated that the implementation of the
standard is not expected to have any influence on the financial
statements of the Group.
IAS 27 (AMENDED) "CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS"
The standard prescribes the rules for the accounting treatment of
consolidated and separate financial statements. Among other
things, the standard stipulates that transactions with minority
shareholders, in the context of which the company holds control
of the subsidiary before and after the transaction, will be
treated as capital transactions. In the context of transactions,
subsequent to which the company loses control in the subsidiary,
the remaining investment is to be measured as of the date that
control is lost, at fair value, with the difference as compared
to book value to be recorded to the statement of operations. The
noncontrolling interest in the losses of a subsidiary, which
exceed its share in shareholders' equity, will be allocated to it
in every case, while ignoring its obligations and ability to make
additional investments in the subsidiary.
The provisions of the standard apply to annual financial
reporting periods which start on January 1, 2010 and thereafter.
Earlier adoption is permitted, on the condition that it will be
done simultaneous with early adoption of IFRS 3 (amended). The
standard will be implemented retrospectively, excluding a number
of exceptions, as to which the provisions of the standard will be
implemented prospectively. At this stage, the management of the
Group estimated that the implementation of the standard is not
expected to have any influence on the financial statements of the
Group.
F - 21
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Y. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS (CONT.)
(2) STANDARDS AND INTERPRETATIONS WHICH HAVE NOT BEEN APPLIED IN
THESE FINANCIAL STATEMENTS WERE IN ISSUE BUT NOT YET EFFECTIVE
IFRS 3 (AMENDED) "BUSINESS COMBINATIONS"
The new standard stipulates the rules for the accounting
treatment of business combinations. Among other things, the
standard determines measurement rules for contingent
consideration in business combinations which is to be measured as
a derivative financial instrument. The transaction costs directly
connected with the business combination will be recorded to the
statement of operations when incurred. Noncontrolling interests
will be measured at the time of the business combination to the
extent of their share in the fair value of the assets, including
goodwill, liabilities and contingent liabilities of the acquired
entity, or to the extent of their share in the fair value of the
net assets, as aforementioned, but excluding their share in
goodwill.
As for business combinations where control is achieved after a
number of acquisitions (acquisition in stages), the earlier
purchases of the acquired company will be measured at the time
that control is achieved at their fair value, while recording the
difference to the statement of operations.
The standard will apply to business combinations that take place
from January 1, 2010 and thereafter. Earlier adoption is
possible, on the condition that it will be simultaneous with
early adoption of IAS 27 (amended).
At this stage, the management of the Group estimated that the
implementation of the standard is not expected to have any
influence on the financial statements of the Group.
IFRIC 13, CUSTOMER LOYALTY PROGRAMS
The clarification stipulates that transactions for the sale of
goods and services, for which the company confers reward grants
to its customers, will be treated as multiple component
transactions and the payment received from the customer will be
allocated between the different components, based upon the fair
value of the reward grants. The consideration attributed to the
grant will be recognized as revenue when the reward grants are
redeemed and the company has made a commitment to provide the
grants.
The directives of the clarification apply to annual reporting
periods commencing on January 1, 2009. Earlier implementation is
permissible.
At this stage, the management of the Group estimated that the
implementation of the standard is not expected to have any
influence on the financial statements of the Group.
AMENDMENT TO IAS 32, FINANCIAL INSTRUMENTS: PRESENTATION, AND IAS
1, PRESENTATION OF FINANCIAL STATEMENTS
The amendment to IAS 32 changes the definition of a financial
liability, financial asset and capital instrument and determines
that certain financial instruments, which are exercisable by
their holder, will be classified as capital instruments.
The provisions of the standard apply to annual financial
reporting periods which start on January 1, 2009 and thereafter.
Earlier adoption is permitted.
At this stage, the management of the Group estimated that the
implementation of the standard is not expected to have any
influence on the financial statements of the Group.
IFRS 1 "FIRST TIME ADOPTION OF IFRS" AND IAS 27 "CONSOLIDATED AND
SEPARATE FINANCIAL STATEMENTS"
The amendment states, among other things, the method in which the
measurement of the investments in subsidiaries, associated
entities and joint control entities should be applied at first
time adopting IFRS, and the method in which income from dividends
received should be recognized.
The amendment is effective for annual periods commencing January
1, 2009.
At this stage, the management of the Group estimated that the
implementation of the standard is not expected to have any
influence on the financial statements of the Group.
F - 22
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 3 - SIGNIFICANT ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION
A. GENERAL
In the application of the Group's accounting policies, which are
described in Note 2, the management is required to make judgments,
estimates and assumptions about the carrying amounts of assets and
liabilities. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the period
in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the
revision affects both current and future periods.
B. SIGNIFICANT JUDGMENTS IN APPLYING ACCOUNTING POLICIES
The following are the significant judgments, apart from those
involving estimations (see below), that the management have made in
the process of applying the entity's accounting policies and that have
the most significant effect on the amounts recognized in financial
statements.
o Useful lives of property, plant and equipment - As described at
2H above, the Group reviews the estimated useful lives of
property, plant and equipment at the end of each annual reporting
period.
o Impairment of goodwill - Determining whether goodwill is impaired
requires an estimation of the value in use of the cash-generating
units to which goodwill has been allocated. The value in use
calculation requires the management to estimate the future cash
flows expected to arise from the cash-generating unit and a
suitable discount rate in order to calculate present value.
The carrying amount of goodwill at the balance sheet date was NIS
3,829 thousand (USD 1,007 thousand).
o Deferred taxes- the company recognizes deferred tax assets for
all of the deductible temporary differences up to the amount as
to which it is anticipated that there will be taxable income
against which the temporary difference will be deductible. During
each period, for purposes of calculation of the utilizable
temporary difference, management uses estimates and
approximations as a basis which it evaluates each period.
o Measurement of obligation for employee benefits.
NOTE 4 - CURRENT ASSETS
A. CASH AND CASH EQUIVALENTS - COMPOSITION
DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Cash in bank 6,611 11,343 1,739
Short-term bank deposits 72,138 50,306 18,974
-------- -------- --------
Total cash 78,749 61,649 20,713
======== ======== ========
F - 23
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 4 - CURRENT ASSETS (CONT.)
B. OTHER FINANCIAL ASSETS
CURRENT
----------------------------------
DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
FINANCIAL ASSETS CARRIED AT FAIR VALUE THROUGH PROFIT OR
LOSS (FVTPL)
Non-derivative financial assets designated as at FVTPL
Shares 882 3,726 232
Governmental loan and other bonds 1,526 11,475 401
Certificate of participation in mutual fund 6,959 16,066 1,831
DERIVATIVES 77 - 20
-------- -------- --------
9,444 31,267 2,484
-------- -------- --------
C. TRADE RECEIVABLES
(1) COMPOSITION
DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Open accounts 56,655 42,488 14,901
Credit cards company 97 261 26
Checks receivable 24,005 23,731 6,314
-------- -------- --------
80,757 66,480 21,241
Less - allowance for doubtful accounts 1,158 2,682 305
-------- -------- --------
79,599 63,798 20,936
======== ======== ========
The average credit period on sales of goods is 81 days. Trade
receivables are provided for based on estimated irrecoverable
amounts from the sale of goods, determined by reference to past
default experience.
Before accepting any new customer, the Group asses the potential
customer's credit quality and defines credit limits by customer.
Of the trade receivables balance at the end of the year, NIS 8.3
million (2007: NIS 7.2 million) is due from Company A, the
Group's largest customer. There are no other customers who
represent more than 10% of the total balance of trade
receivables.
Included in the Group's trade receivable balance are debtors with
a carrying amount of NIS 0.7 million which are past due at the
reporting date for which the Group has not provided allowance for
doubtful accounts as there has not been a significant change in
credit quality and the amounts are still considered recoverable.
The Group does not hold any collateral over these balances.
F - 24
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 4 - CURRENT ASSETS (CONT.)
C. TRADE RECEIVABLES
(2) AGING OF PAST DUE BUT NOT IMPAIRED
DECEMBER 31,
-----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
-----------------------------------
0-120 days 587 447 154
120-150 days 137 395 36
150 days and above - 2,882 -
-------- -------- --------
Total 724 3,724 190
======== ======== ========
(3) MOVEMENT IN THE ALLOWANCE FOR DOUBTFUL DEBTS
DECEMBER 31,
-----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
-----------------------------------
Balance at beginning of the year 2,682 206 705
Increase relating to subsidiary consolidated for
the first time 164 - 43
Amounts written off as uncollectible (2,482) - (652)
Change in allowance doubtful debts 794 2,476 209
-------- -------- --------
Balance at end of the year 1,158 2,682 305
======== ======== ========
D. OTHER RECEIVABLES
DECEMBER 31,
-----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
-----------------------------------
Prepaid expenses 438 647 116
Income receivables 377 41 99
Derivatives at fair value 77 - 20
Government authorities 613 554 161
Advances to suppliers 597 370 157
Others 1,885 - 496
-------- -------- --------
3,987 1,612 1,049
======== ======== ========
E. INVENTORIES
DECEMBER 31,
-----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
-----------------------------------
Raw and auxiliary materials 2,573 - 677
Finished products and goods in process 29,082 29,166 7,649
-------- -------- --------
31,655 29,166 8,326
======== ======== ========
Advances to suppliers 2,762 1,854 726
======== ======== ========
34,417 31,020 9,052
======== ======== ========
The inventories are presented net of impairment provision.
F - 25
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 4 - CURRENT ASSETS (CONT.)
F. OTHER RECEIVABLES
BREAKDOWN BASED ON LINKAGE CONDITIONS:
DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
MONETARY ITEMS:
CPI linked 5,349 9,489 1,407
Linked or denominated in foreign currency 22,339 25,051 5,876
Not linked 145,435 123,731 38,252
-------- -------- --------
173,123 158,271 45,535
-------- -------- --------
NON-MONETARY ITEMS 35,452 31,983 9,325
208,575 190,254 54,860
======== ======== ========
NOTE 5 - INVESTMENTS IN SUBSIDIARIES
A. CONSOLIDATED SUBSIDIARIES
The consolidated financial statements as of December 31, 2008, include
the financial statements of the following Subsidiaries:
OWNERSHIP AND CONTROL
------------------
AS OF DECEMBER 31,
2 0 0 8
------------------
%
------------------
Gold Frost Ltd ("GOLDFROST") 89.99
Shamir Salads (2006) Ltd ("SHAMIR SALADS") 51.00
WF Kosher Food Distributors Ltd. ("WF") 100.00
Y.L.W. Baron international trading Ltd. ("BARON") 50.10
W.F.D. Ltd. 100.00
Willi-food frozen products Ltd. 100.00
Goldfrost's subsidiary
Dairy distributor in Denmark ("THE DISTRIBUTOR") 51.00
NOTE 6 - PREPAID LONG-TERM LEASE
The Company entered into a long term lease agreement with the ILA with
respect to a parcel of land which its facilities were constructed. The
prepaid lease payments amounted to NIS 10,741 in thousands, and are
amortized over the lease period.
F - 26
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 7 - PROPERTY PLANT AND EQUIPMENT
OFFICE
FURNITURE,
MACHINERY COMPUTERS
AND MOTOR LEASEHOLD AND
BUILDING EQUIPMENT VEHICLES IMPROVEMENTS EQUIPMENT TOTAL
-------- -------- -------- -------- -------- --------
CONSOLIDATED
COST:
Balance - January 1, 2007 27,485 755 6,784 311 3,137 38,472
Changes during 2007
Additions 3,431 255 1,891 - 744 6,321
Dispositions - - (105) (311) - (416)
Balances relating to subsidiary
consolidated for the first time - - - - 208 208
Effect of foreign currency exchange
differences - - - - (16) (16)
-------- -------- -------- -------- -------- --------
Balance - December 31, 2007 30,916 1,010 8,570 - 4,073 44,569
Changes during 2008:
Additions 610 1,934 487 8 276 3,315
Dispositions - - (583) - (265) (848)
Balances relating to subsidiary
consolidated for the first time - 6,142 1,696 348 358 8,544
Effect of foreign currency exchange
differences - - (6) - - (6)
-------- -------- -------- -------- -------- --------
Balance - December 31, 2008 31,526 9,086 10,164 356 4,442 55,574
-------- -------- -------- -------- -------- --------
ACCUMULATED DEPRECIATION:
Balance - January 1, 2007 - - 4,104 307 2,031 6,442
Changes during 2007:
Additions 842 64 1,048 4 371 2,329
Dispositions - - (105) (311) - (416)
-------- -------- -------- -------- -------- --------
Balance - December 31, 2007 842 64 5,047 - 2,402 8,355
Changes during 2008:
Additions 1,420 763 1,362 36 621 4,202
Dispositions - - (304) - (8) (312)
Balances relating to subsidiary
consolidated for the first time - 830 251 2 129 1,212
Effect of foreign currency exchange
differences - - 10 - - 10
-------- -------- -------- -------- -------- --------
Balance - December 31, 2008 2,262 1,657 6,366 38 3,144 13,467
======== ======== ======== ======== ======== ========
Net book value:
December 31, 2008 29,264 7,429 3,798 318 1,298 42,107
======== ======== ======== ======== ======== ========
December 31, 2007 30,074 946 3,523 - 1,671 36,214
======== ======== ======== ======== ======== ========
Net book value (Dollars in thousands):
December 31, 2008 7,697 1,954 999 84 341 11,075
======== ======== ======== ======== ======== ========
F - 27
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 8 - GOODWILL
A. COMPOSITION
DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
COST
Balance at beginning of year 4,884 - 1,284
Additional amounts recognised from business combinations
occurring during the year 3,101 4,848 815
Additional amounts recognized from acquiring additional
shares in subsidiary - 36 -
-------- -------- --------
BALANCE AT END OF YEAR 7,985 4,884 2,099
-------- -------- --------
ACCUMULATED IMPAIRMENT LOSSES
Balance at beginning of year 3,089 - 812
Impairment losses recognized in the year 1,067 3,054 280
Effect of foreign currency exchange differences - 35 -
-------- -------- --------
Balance at end of year 4,156 3,089 1,092
-------- -------- --------
CARRYING AMOUNT
At the beginning of the year 1,795 - 472
-------- -------- --------
At the end of the year 3,829 1,795 1,007
======== ======== ========
B. ANNUAL TEST FOR IMPAIRMENT
During 2008, the Group assessed the recoverability of goodwill, and
determined that goodwill associated with the Group's overseas
marketing of refrigerated products activity was not recoverable and
was written off in the amount of NIS 1,067 thousands. There were no
other impairments to any of the other cash-generating units in the
year 2008.
C. ALLOCATION OF GOODWILL TO CASH-GENERATING UNITS
Goodwill has been allocated for impairment testing purposes to the
following cash-generating units:
o Export activity ( Baron that was acquired in the year 2007).
o Export activity (WF that was acquired in the year 2007).
o Salad production and marketing activity (Shamir Salads that was
acquired in the year 2008).
o Overseas marketing of refrigerated products activity (The
distributor that was acquired in the year 2008).
Before recognition of impairment losses, the carrying amount of
goodwill was allocated to the following cash-generating units:
DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Marketing activity of chilled and frozen products
(Goldfrost) 36 36 9
Export activity (Baron) 1,893 1,759 498
Export activity (WF) 3,089 3,089 812
Salad production and marketing activity (Shamir salads) 1,900 - 500
Overseas marketing of refrigerated products activity
(the Distributor) 1,067 - 280
F - 28
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 8 - GOODWILL (CONT.)
D. ALLOCATION OF GOODWILL TO CASH-GENERATING UNITS
EXPORT ACTIVITY (BARON)
The recoverable amount of this cash-generating unit was determined
based on the projected cash flow forecast approach for the coming
years, which is based on the activity's budget for the years
2009-2012. The key assumptions used in calculating the usage value
are:
o Operating profit rate - the operating profit during the years
2009-2012 should increase by 5% per annum. This assessment is
based on an increase in the turnover, while the operating
expenses should remain essentially at the same level. During the
subsequent period, and during a period of another 15 years, the
operating profit should increase by 3% per annum.
o Changes in the working capital - the working capital at the end
of each year should represent 7% of the annual operating profit.
o Fixed assets and depreciation - the periodic investments in fixed
assets should approximate the aggregate of the depreciation
costs.
o The period of the estimate - 20 years. The residual value at the
end of that period should approximate the present value of the
working capital at that time.
o The capitalization rate - the following risk factors were taken
into account in the determination of the capitalization rate -
the competition from local manufacturers in the United States,
which benefit from the advantage of proximity to the market; the
Jewish population in the United States, which constitutes the
activity's principal customer base, grew at a very slow pace,
while the ultra-orthodox Jewish population in the United States
(to which the activity also sells) increased at a rapid pace,
however, this community has its own rabbis, who do not always
trust the kashrut supervision in Israel; as well as a significant
dependence on the existing management. The composition of the
financing was also taken into account - 65% equity and 35%
external financing. According to these assumptions, the weighted
average interest rate that was taken into account in respect of
the cash flow is 17%.
EXPORT ACTIVITY (WF)
The recoverable amount of this cash-generating unit was determined
based on the projected cash flow forecast approach for the coming
years, which is based on the activity's budget for the years
2008-2012. The key assumptions used in calculating the usage value
are:
o Total sales - the assumption was that in 2008, the sales would
increase by 25% compared with 2007, by 5% during the years 2009 -
2012, by 3% during the subsequent five years, while regarding an
additional ten-year period, a fixed cash flow was assumed at the
height of the cash flow in 2017.
o Operating profit rate - the operating profit rate during the
years 2009-2012 should be negligible (from a negative rate of
1.1% in 2008 up to a positive rate of 1.4% in 2012). As of the
year 2013, an operating profit rate of 4% was assumed. This
assessment is based on an increase in the turnover, while the
operating expenses should remain essentially at the same level.
During the subsequent period, and for an additional period of 15
years, the operating profit should increase by 3% per annum.
o Changes in the working capital - the assumption is that the
working capital should increase each year at the same rate as the
rate of the increase in the turnover.
o Fixed assets and depreciation - the fixed assets of this activity
are immaterial, and no significant investments are anticipated in
the future; therefore, the assumption is that the total
depreciation costs should be similar to the total periodic
purchase costs.
F - 29
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 8 - GOODWILL (CONT.)
D. ALLOCATION OF GOODWILL TO CASH-GENERATING UNITS (CONT.)
EXPORT ACTIVITY (WF) (Cont.)
o The period of the estimate - 20 years. The residual value at the
end of that period should approximate the present value of the
working capital at that time.
o The capitalization rate - the following risk factors were taken
into account in the determination of the capitalization rate -
the Management's forecast involves significant uncertainty,
including with regard to the rate of the increase in the volume
of activity, and the pace of the improvement to profitability. In
addition, in 2007, the activity suffered heaving losses.
Furthermore, the sector in which it operates - trade in kosher
food - is subject to stiff competition, and it is unclear whether
the activity has a relevant advantage over its competitors,
especially since the ultra-orthodox population, which the
activity also targets, is counseled by its own rabbis, and this
community could have its own marketing channels. In terms of the
financing structure - the assumption was that the long-term
financing structure of the activity should include 50%
shareholders' equity and 50% bank loans. Accordingly, the
weighted average interest rate that was taken into account
(excluding the residual value) was 15%. A capitalization rate of
7% was taken into account in relation to the residual value,
considering the chance that the activity can be realized as a
going concern. It should be noted that the goodwill in respect of
this activity was written off in its entirety in 2007.
SALAD PRODUCTION AND MARKETING ACTIVITY (SHAMIR SALADS)
The recoverable amount of this cash-generating unit was determined
based on the projected cash flow forecast approach for the coming
years, which is based on the activity's budget for the year 2009. The
key assumptions used in calculating the usage value are:
o The sales turnover - the sales turnover was calculated based on
the activity's budgeted sales turnover for 2009, with an annual
increment at the rate of 2.5% during the years 2010-2011, which
represents mainly the expected increase in the population during
this period, and 3.5% as of the year 2012 and the subsequent
years, according to the anticipated long-term rise in the
standard of living.
o Operating profit rate - the operating profit rate was calculated
based on the operating profit rate budgeted for 2009, which is
likely to increase concurrent with the increase in the turnover,
mainly due to the significant proportion of fixed expenses out of
the total operating expenses. Nonetheless, the competition in the
sector could lead to a slow improvement in the operating profit.
o Changes in the working capital - the assumption is that the
working capital should increase during the coming years at the
same rate as the rate of the increase in the turnover.
o Fixed assets and depreciation - this activity has material fixed
assets, the majority being comprised of machinery, equipment and
vehicles. The assumption is that in the coming years the need for
significant investments in fixed assets should diminish. The
assumptions adopted in relation thereto are that the sums of the
investments in fixed assets will be NIS 1,200 thousand during the
years 2009 and 2010, while in subsequent years, the total
investment should increase by some 3% per annum. The balance of
the activity's fixed assets as on December 31, 2008 shall be
amortized at equal annual sums over the next seven years. The
average depreciation in respect of purchases subsequent to
January 1, 2009 should be at the rate of 12.5% per annum.
o The period of the estimate - 20 years. The residual value at the
end of that period should approximate the present value of the
working capital at that time.
F - 30
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 8 - GOODWILL (CONT.)
D. ALLOCATION OF GOODWILL TO CASH-GENERATING UNITS (CONT.)
SALAD PRODUCTION AND MARKETING ACTIVITY (SHAMIR SALADS) (CONT.)
o The capitalization rate - the following risk factors were taken
into account in the determination of the capitalization rate -
the competition in the sector, which is liable to have an impact
on the profitability; the significant deficit in the Company's
working capital; and its problematic liquidity situation. The
composition of the financing was also taken into account - as of
December 31, 2008, 75% of the Company's financing is from bank
credit. The assessment is that financing will not continue at
this ratio in the long term, so that, the financing from bank
credit in the long-term should be 50% of the activity's total
financial means. According to these assumptions, the weighted
average interest rate taken into account in respect of the cash
flow, including the residual value, is 14%.
OVERSEAS MARKETING OF REFRIGERATED PRODUCTS ACTIVITY
The recoverable amount of this cash-generating unit was determined
based on the projected cash flow forecast approach for the coming
years, which is based on the activity's budget for the year 2009. The
key assumptions used in calculating the usage value are:
o The sales turnover - the sales turnover was calculated based on
the activity's budgeted sales turnover for 2009, with an annual
increment at the rate of 3%, which represents mainly the expected
increase in the population that generates the demand for the
activity's products.
o Operating profit rate - the operating profit rate was calculated
based on the operating profit rate budgeted for 2009, which is
likely to increase concurrent with the increase in the turnover,
mainly due to the significant proportion of fixed expenses out of
the total operating expenses. Nonetheless, the competition in the
sector could lead to a slow improvement in the operating profit.
o Fixed assets and depreciation - the fixed assets of this activity
are immaterial, and no significant investments are anticipated in
the future; therefore, the assumption is that the total annual
investments in fixed assets will be similar to the total annual
depreciation expenses.
o The period of the estimate - 20 years. The residual value at the
end of that period should approximate the present value of the
working capital at that time.
o The capitalization rate - the following risk factors were taken
into account in the determination of the capitalization rate -
the competition in the sector, which is liable to have an impact
on the profitability; the operating results during the report
year, which indicates poor profitability. The composition of the
financing was also taken into account, and it was decided that in
the long-term the basic financing structure of the activity
should be 60% shareholders' capital and 40% external credit.
According to these assumptions, the weighted average interest
rate that was taken into account in respect of the cash flow
(excluding the residual value) is 17.5%. The capitalization rate
of 12% was taken into account in relation to the residual value.
F - 31
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 9 - INTANGIBLE ASSETS
A. COMPOSITION:
DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
COST
Suppliers relationship 120 120 32
Customers relationship 1,404 40 369
Brand name 3,570 - 938
technological know-how 439 - 115
-------- -------- --------
5,533 160 1,454
-------- -------- --------
ACCUMULATED AMORTIZATION AND IMPAIRMENT
Suppliers relationship 34 17 9
Customers relationship 131 40 34
Brand name 143 - 38
technological know-how 44 - 11
-------- -------- --------
352 57 92
-------- -------- --------
AMORTIZED COST 5,181 103 1,362
======== ======== ========
B. AMORTIZATION RATES - see note 2J.
NOTE 10 - DETAILS OF CURRENT LIABILITIES
A. TRADE PAYABLES
DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Open accounts 39,206 30,539 10,312
Accrued expenses 832 369 219
Checks payables 13,690 3,422 3,601
-------- -------- --------
53,728 34,330 14,132
======== ======== ========
(*) Average days of credit for trade payables are 62 days.
B. OTHER PAYABLES AND ACCRUED EXPENSES
DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Derivatives at fair value - 166 -
Government authorities 297 - 78
Customer advances 169 188 45
Deferred income 346 - 91
Related parties 1,690 3,945 445
Accrued expenses 1,958 292 515
Other 511 401 134
-------- -------- --------
4,971 4,992 1,308
======== ======== ========
F - 32
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 10 - DETAILS OF CURRENT LIABILITIES (CONT.)
C. CURRENT LIABILITIES - BREAKDOWN BASED ON LINKAGE CONDITIONS:
DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Monetary commitments:
CPI linked 456 - 120
Linked or denominated in foreign currency 36,652 28,651 9,640
Not linked 48,429 18,770 12,738
-------- -------- --------
85,537 47,421 22,498
======== ======== ========
Non-monetary commitments: 515 188 136
======== ======== ========
86,052 47,609 22,634
======== ======== ========
NOTE 11 - BANK LOANS AND OTHER CREDIT PROVIDERS
A. Loans and other credits Comprised as follows:
LIABILITIES
--------------------------------------------------
INTEREST RATE CURRENT NON-CURRENT TOTAL
--------------- ---------------------- ---------------------- ----------------------
AS OF DECEMBER 31, 2008 AS OF DECEMBER 31, AS OF DECEMBER 31, AS OF DECEMBER 31,
--------------- ---------------------- ---------------------- ----------------------
ANNUAL 2 0 0 8 2 0 0 7 2 0 0 8 2 0 0 7 2 0 0 8 2 0 0 7
--------------- -------- -------- -------- -------- -------- --------
% NIS IN THOUSAND NIS IN THOUSAND NIS IN THOUSAND
--------------- ---------------------- ---------------------- ----------------------
Banks:
Overdraft P+1-P+6.65 5,837 - - - 5,837 -
Loans:
CPI linked 5.91 456 - - - 456 -
In U.S dollars L+1 3,296 5,978 - - 3,296 5,978
Not linked P+1-6.95 7,657 - - - 7,657 -
Others:
CPI linked 3.75-9.81 316 - 267 - 583 -
-------- -------- -------- -------- -------- --------
17,562 5,978 267 - 17,829 5,978
======== ======== ======== ======== ======== ========
B. DUE DATES AS OF DECEMBER 31, 2008
THOUSAND NIS
-----
First year - Current portion 2,324
-----
Second year 267
-----
Total 2,591
=====
F - 33
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 12 - LIABILITIES UNDER FINANCE LEASE ARRANGEMENTS
A. CAPITAL LEASES:
(1) GENERAL
The Company's subsidiary entered into several finance leasing
arrangements of cars for time periods varies between 3 - 3.33
years with a purchase possibility for a total amount of NIS 81 in
thousand. The group's commitment for lease payments is assured by
the legal ownership of the lessor.
(2) CAPITAL LEASE ASSETS:
NET BOOK VALUE OF THE COMPANY'S CAPITAL LEASE ASSETS:
DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Vehicles 734 - 193
-------- -------- --------
734 - 193
======== ======== ========
NOTE 13 - EMPLOYEE BENEFITS
A. COMPOSITION
DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
POST EMPLOYMENT BENEFITS:
Benefits to retirees 994 163 261
======== ======== ========
SHORT TERM EMPLOYEE BENEFITS:
Accrued payroll and related expenses 1,989 1,160 523
Liability for vacation pay 555 248 146
-------- -------- --------
2,544 1,408 669
======== ======== ========
F - 34
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 13 - EMPLOYEE BENEFITS (CONT.)
B. DEFINED BENEFIT PLANS
The principal assumptions used for the purposes of the actuarial
valuations were as follows:
VALUATION AT
--------------------------
2 0 0 8 2 0 0 7
---------- ----------
Discount rate 4.2%-4.7% 5.8%
Expected return on the plan assets 1.75%-4.7% 2.6%-5.8%
Rate of increase in compensation 4% 4%
Expected rate of termination:
0-1 years 35%-60% 30%
1-2 years 30% 20%
2-3 years 20% 15%
3-4 years 10%-15% 5%
4-5 years 10% 5%
5 years and more 7.5% 5%
Amounts recognized in profit or loss in respect of these defined
benefit plans are as follows:
YEAR ENDED DECEMBER 31,
------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
------------------------------------
Current service cost 961 502 252
Interest cost 126 85 33
Expected return on the plan assets (111) (76) (29)
Employer contribution (841) (446) (221)
Interest losses on severance payment allocated to
remuneration benefits 25 - 7
Actuarial losses (gains) recognized in the year 478 (80) 126
Benefit paid during the year (93) (107) (25)
-------- -------- --------
545 (122) 143
======== ======== ========
The expense included in the P&L is as follows:
YEAR ENDED DECEMBER 31,
------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
------------------------------------
Cost of sales 155 - 41
Selling expenses 224 (60) 59
General and administrative expenses 166 (62) 43
-------- -------- --------
545 (122) 143
======== ======== ========
F - 35
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 13 - EMPLOYEE BENEFITS (CONT.)
B. DEFINED BENEFIT PLANS (CONT.)
Movements in the present value of the defined benefit obligation in
the current period were as follows:
YEAR ENDED DECEMBER 31,
------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
------------------------------------
Opening defined benefit obligation 1,521 1,002 400
Current service cost 961 502 252
Interest cost 126 85 33
Actuarial gains (losses) (138) 175 (36)
Benefits paid (268) (243) (71)
Change relating to subsidiary consolidated
for the first time 604 - 159
-------- -------- --------
Closing defined benefit obligation 2,806 1,521 737
======== ======== ========
Movements in the fair value of the defined benefit assets in the
current period were as follows:
YEAR ENDED DECEMBER 31,
------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
------------------------------------
Opening defined benefit assets 1,358 717 357
Expected return on the plan assets 111 76 29
Actuarial gains (losses) (616) 255 (162)
Employer contribution 841 446 221
Benefits paid (175) (136) (46)
Acquisition of subsidiary consolidated for
the first time 318 - 84
Interest losses on severance payment allocated to
remuneration benefits (25) - (7)
-------- -------- --------
Closing defined benefit assets 1,812 1,358 476
======== ======== ========
F - 36
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 14 - INCOME TAXES
A. COMPOSITION
YEAR ENDED DECEMBER 31,
------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
------------------------------------
Current taxes 1,959 3,422 515
Taxes in respect of prior years - (338) -
Deferred taxes (D. below) (505) (433) (133)
-------- -------- --------
1,454 2,651 382
======== ======== ========
B. RECONCILIATION OF THE STATUTORY TAX RATE TO THE EFFECTIVE TAX RATE
YEAR ENDED DECEMBER 31,
------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
------------------------------------
Income before income taxes 1,721 7,290 453
======== ======== ========
Statutory tax rate 27% 29% 27%
Tax computed by statutory tax
rate 465 2,114 122
TAX INCREMENTS (SAVINGS) DUE TO:
Non-deductible expenses 1,180 130 310
Deferred tax in respect of losses for which
valuation allowance was provided 1,110 2,364 292
Tax exempt income (367) (182) (96)
Permanent differences 329 - 87
Temporary differences for which deferred taxes
were not provided (1,295) - (341)
Effect of decrease in tax rate on deferred
taxes assets 5 (13) 1
Differences in the definition of capital and
non-monetary items for tax purposes and financial
reporting purposes (22) (1,227) (6)
Previous year taxes - (338) -
Other 49 (197) 13
-------- -------- --------
1,454 2,651 382
======== ======== ========
F - 37
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 14 - INCOME TAXES (CONT.)
C. DEFERRED TAXES
YEAR ENDED DECEMBER 31,
------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
------------------------------------
Balance as of beginning of year 238 (195) 62
Charged to the consolidated income statements 510 420 134
Tax rate changes (5) 13 (1)
Change relating to subsidiary consolidated
for the first time (74) - (19)
-------- -------- --------
Balance as of end of year 669 238 176
======== ======== ========
DEFERRED TAXES ARISE FROM THE FOLLOWING:
Allowance for doubtful accounts 294 104 77
Employees benefits 391 190 103
Carry forward tax losses 747 - 196
Depreciable fixed assets (893) - (234)
Unrealized profits - 32 -
Financial assets carried at fair value
through profit or loss 130 (88) 34
-------- -------- --------
669 238 176
======== ======== ========
For 2008 - Deferred taxes were computed at rates between 26%-25%,
primarily - 26%.
D. REDUCTION OF CORPORATE TAX RATES
In July 2005, the Israeli Knesset passed the Law for Amending the
Income Tax Ordinance (No. 147), 2005, according to which commencing in
2006 the corporate income-tax rate would be gradually reduced, for
which a 31% tax rate was established, through 2010, in respect of
which a 25% tax rate was established..
E. The Company and its subsidiaries were not assessed for Income Taxes.
According to section 145 of the Tax Ordinance assessments for the
years 2001 and backward are considered final.
F. On February 26, 2008, the Knesset ratified the third reading of the
Income Tax Law ("Inflation Adjustments") (Amendment 20) (Limitation of
Term of Validity) - 2008 (hereinafter: "The Amendment"), pursuant to
which the application of the inflationary adjustment law will
terminate in tax year 2007 and as of tax year 2008, the law will no
longer apply, other than transition regulations whose intention is to
prevent distortions in tax calculations.
According to the amendment, in tax year 2008 and thereafter, the
adjustment of revenues for tax purposes will no longer be considered a
real-term basis for measurement. Moreover, the linkage to the CPI of
the depreciated sums of fixed assets and carryover losses for tax
purposes will be discontinued, in a manner whereby these sums will be
adjusted until the CPI at the end of 2007 and their linkage to the CPI
will end as of that date.
F - 38
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES
1. Commitments
a. The Company has agreed to pay the large supermarket retail chains
in the organized market and to cretin of the customers in the
private sector incentives calculated as a fixed percentage of the
annual sales to such customer or incentives based on the increase
in volume of sales to such customers in excess of a certain
agreed amount with respect to the year 2008. The extent of such
incentives varies between 0.5%-8.5% of the annual sales turnover
of each relevant customer (depending on the agreement with each
customer) and are usually awarded as part of a written annual
framework agreement.
b. As of June 1, 1998, the Company entered into certain management
services agreements with certain companies controlled by each of
Messrs. Joseph and Zwi Williger, respectively (collectively, the
"Williger Management Companies"), pursuant to which Messrs.
Joseph and Zwi Williger are to provide management services on
behalf of the Williger Management Companies to the Company (the
"Management Services Agreements").
The Management Services Agreements were for a period of four
years commencing on June 1, 1998 (the "Management Services
Period"), were automatically renewed on June 1, 2002 for two
years and were automatically renewed for an additional period of
two years in June 2004.
Each of the Management Services Agreements provided for monthly
services fees equal to $24,500 (excluding VAT) and an annual
bonus at a rate of 3% of the Company's consolidated pre-tax
annual profits, if such profits are equal to or less than NIS 3.0
million (approximately USD 0.8 million), or at a rate of 5% if
such profits exceed such level.
On May 4, 2005 the Company's Audit Committee and Board of
Directors decided to amend the terms of the abovementioned
agreements, mainly extending the management services period for
an unlimited period, with an option to terminate them by the
Company's advance notice of 18 months and the Management
Companies' advance notice of 180 days. The General Meeting of the
Company's shareholders ratified these amendments on July 20,
2005.
On February 15, 2006 the Company's board of directors resolved,
in light of the expressed position of the Israeli Securities
Authority, to set those agreements for a five-year period
following ratification by the Company's shareholders General
Meeting, i.e., until July 19, 2010.
On January 2, 2008 the Audit Committee and the Board of Directors
unanimously approved the amendment of the Management Services
Agreements with Messrs. Zwi Williger and Joseph Williger. In
accordance to the new Management Services Agreements the terms
were amended as follows:
(1) The current monthly services fees according to the
Management Services Agreements will cease to be linked to
the US Dollar and will be translated to NIS 102,900
(excluding VAT) linked to changes in the Israeli consumer
price index.
(2) The terms of the Management Services Agreements are to be
extended indefinitely, subject to clause (3) below; provided
however that in the event the Williger Management Company
provides the management services to the Company without the
presence of Messrs. Zwi Williger or Joseph Williger, as the
case may be, and/or in the case of the death and/or
permanent disability of Messrs. Zwi Williger or Joseph
Williger, the Company will be entitled to terminate the
Management Services Agreement immediately.
F - 39
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
1. Commitments
b. Cont.
(3) Each of the parties to the Management Services Agreements
may terminate the agreement at any time, and for any reason,
by prior written notice which will be delivered to the other
party as follows:
The Company may terminate the agreement at any time, and for
any reason, by prior written notice of at least 36 months.
The Williger Management Company may terminate the agreement
at any time, by prior written notice of at least 180 days.
(4) If a Williger Management Company is to terminate the
Management Services Agreement, the Williger Management
Company would be entitled to receive the management fees for
a period of twelve (12) months, which would begin after the
prior notice period, whether or not it provides the Company
with any management services during such twelve-month
period.
In addition, the Management Services Agreements contain
provisions entitling each of Messrs. Zwi Williger and Joseph
Williger to 30 vacation days per year, during which days the
applicable Williger Management Company will not provide
management services to the Company. Unused vacation days may
be accumulated and paid for in lieu of taking such days as
vacation.
c. On April 1, 1997, the Company entered into an agreement to
provide the Parent Company administrative services pursuant to
which the Company may provide office facilities leased by the
parent company for a monthly fee of NIS 5,480 (USD 1,441) to be
adjusted annually for changes in the Israeli CPI.
d. The Company does not generally enter into written agency or other
agreements with its suppliers. However, the Company has written
agreements with sixteen foreign suppliers that confirm the
exclusive appointment of the Company as the sole agent and/or
distributor of such suppliers either with respect to a specific
product or with respect to a line of products, within the State
of Israel.
e. Shamir Salads signed distribution agreements with 25
distributors, that distributes Shamir Salads products all over
Israel for a commission that range between 6% to 16% of the
distributor sales, depending of the customer. Shamir Salads has
no commitment to any of those distributors for ongoing
relationship.
f. Shamir Salads leases two joined buildings for its operation
(factory, logistics and head office) - the first is 2,512 squared
meters, the monthly rent is NIS 40,432 (linked to the CPI from
December 2005) and the lease ends on January 2012. The second is
2,192 squared meters, the monthly rent is NIS 41,141 (linked to
the CPI from December 2005) and the lease ends on January 2012.
F - 40
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
2. Contingent liabilities
1. On November 24, 2003 the Israeli custom issued the Company and
Gold Frost a notice for total payment of NIS 381 thousand
claiming that the tariff on a certain product imported by the
Company was wrong. The Company and Gold Frost didn't agree to the
notice and on November 25, 2004 they filed a lawsuit against the
state of Israel to have the notice be declared void. The
summaries from both sides have been submitted and the Company is
waiting for the verdict of the court. A reserve of NIS 308
thousand is included in the Company's 2008 financial statements.
2. A lawsuit was filed in December 2001 against 29
importers/producers of food products, including the Company, for
an amount totalling NIS 500 million. Concurrently, the plaintiffs
filed a request for an exemption from the court fee. Following
the court's rejection of the plaintiffs' request for the noted
fee exemption and their failure to pay such fee, the court
dismissed the case. In January 2004 the abovementioned plaintiffs
filed a new lawsuit against the 29 noted importers/producers for
NIS 1 billion. Again, a request was made concurrently for an
exemption from the court fee. This request was rejected by the
registrar of the court, and the action was dismissed without
prejudice in November 2006.
The plaintiffs then filed an appeal with the District court of
the registrar's November 2006 decision. This request was rejected
by the registrar of the District court. The plaintiffs then filed
an appeal with the Supreme Court, and requested an exemption from
the court fee for the appeal and from the requisite security
deposit. The next hearing in this appeal is scheduled for June
15, 2009.
Although the proceedings are still at a preliminary stage, the
Company's management and legal counsel believe that the
plaintiffs' likelihood of success in the proceedings is low.
3. In or about October, 2005, Vitarroz Corp. commenced an action in
the Superior Court of the State of New Jersey, against Willi USA
Holdings, Inc. (a subsidiary of the Company), the Company and Zwi
Williger (collectively, the "Defendants") due to a dispute
concerning a press release announcing the termination of the
proposed acquisition of the Vitarroz business by the Company On
September 2005, the Company removed the matter from the Superior
Court of New Jersey to the United States District Court for the
District of New Jersey. The complaint was subsequently amended
and, as amended, alleged, inter alia, breach of contract,
defamation, breach of covenants of good faith and fair dealing,
fraudulent inducement and tortious interference with contractual
relations and prospective economic advantage. Defendants did not
respond to the complaint as an agreement was reached to arbitrate
all disputes between the parties and certain third parties. Not
only did the parties agree to submit the claims which are the
subject of the amended complaint to binding arbitration but they
agreed to submit to arbitration (i) claims that defendants have
against plaintiff and related third parties, and (ii) claims
which the Company asserted against Vitarroz in an action that was
then pending in Israel regarding the alleged breach of an
agreement executed by the Company and Vitarroz, pursuant to which
Vitarroz was to supply food products to the Company. Although
there was no discovery taken in the then pending Court matters,
Vitarroz claimed in correspondence to the District Court that it
sustained, inter alia, damage: to its financial reputation; that
suppliers refused to extend favorable credit and delivery terms;
that there were lost profits of approximately USD 500,000; and
that its sale to IDT realized a sales price of approximately USD
3 million less than what was expected; and that there are
additional damages resulting from defendants' actions which are
claimed to exceed USD 3.5 million.. During the course of
discovery, Vitarrozz submitted the reports of its financial
expert claiming damages in excess of USD 6.6 million. The Company
has submitted the report of its financial expert claiming damages
in excess of $10 million. The attributing hearings were in May
2008 and the on August 25 2008, the arbitration panel has granted
an award against the Company in the amount of approximately USD
0.6 million). Among other things, the panel found that the press
release issued by the Company announcing the termination of the
proposed acquisition of the Vitarroz business by the Company
constituted a breach of contract and violation of the covenant of
good faith and fair dealing. In addition, the panel rejected the
Company's counterclaims. On October 13, 2008 the Company filed a
motion to the Superior Court of the State of New Jersey New to
vacate the award. A reserve on the full award is included in the
Company's 2008 financial statements.
F - 41
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
2. Contingent liabilities
4. On February 21, 2007, a lawsuit was filed against Gold Frost by
Cukierman & Co. Investment House Ltd. in the Tel Aviv-Jaffa
Magistrates Court in the amount of NIS 273,852, claiming non
payment of fees for professional services rendered. A statement
of defense was filed. Given the early stage of these proceedings,
the Company is unable at this point to assess the risks involved.
5. In September 2007, Thurgeman Construction Co. Ltd. ("Thurgeman")
filed a claim against the Company in the District Court of Tel
Aviv the amount of NIS 4,449,340 (plus VAT) regarding a dispute
in connection with the construction of the Company's logistics
center in Yavne (the "Project") pursuant to a contract between
the parties, dated as of September 9, 2005. Under the terms of
the contract, Thurgeman was to serve as the operating contractor
for the construction of the frame and the surrounding portions
for the construction of the Project.
During the course of construction on the Project, the parties
raised several claims against each other in connection with the
progress of construction on the Project. The Company claimed that
Thurgeman grossly violated the terms of the contract by
continuous delays in the completion of the Project, and by
performing the construction work in a negligent and
unprofessional manner and with inferior quality. Thurgeman
counterclaimed that it performed the construction work according
to the terms of the contract and that any delays in the work were
not caused through any fault of Thurgeman. Furthermore, Thurgeman
claimed that the Company withheld certain payments to which
Thurgeman was entitled for additional work on the Project,
causing Thurgeman damages.
At the end of November 2007, the Company filed a statement of
defense, which included a counterclaim against Thurgeman and its
executive, Dotan Thurgeman, which contained among other things, a
claim of defamation, a claim for damages caused by the delay in
delivery of the completed Project, and damages caused by
Thurgeman's poor and careless work on the Project. The sum of the
damages claimed by the Company in the counterclaim was NIS 5
million. In February 2008, Thurgeman filed a response to the
counter claim. The parties started performing the preliminary
proceedings.
At the current preliminary stage of the dispute, the Company's
management and legal counsel cannot assess the chances of the
parties.
6. On June 18, 2006, the Company filed a claim against Filiz and
Ash-Bar in the amount of NIS 4,473,878 for breach of contract.
The complaint was served on filiz and Ash-Bar through Ash-Bar's
chief executive officer. Filiz then filed a request to cancel the
complaint, claiming that Ash-Bar is not authorized to accept
service of process on its behalf. The request was denied by the
court's registrar.
On November 4, 2007, Filiz filed an appeal of the registrar's
decision and requested an extension for filing its defense to the
complaint pending a decision on the appeal. The appeal was denied
and the service of process was accepted by the court.
Notwithstanding the fact that the proceedings are still at a
preliminary stage, the Company's legal counsel believes that the
complaint is based on sound legal arguments, and that there is a
reasonable possibility that a not insignificant portion of the
arguments will be sustained by the court.
F - 42
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
2. Contingent liabilities
7. On July 7, 2008, WF filed a lawsuit in the Supreme Court of the
State of New York, Country of New York, against Laish Israeli
Food Ltd., Laish Dairy Ltd., 860 Nostrand Associates Llc., Arie
Steiner, Eli Biran (WF's former CEO) and others. The plaintiffs
assert claims, inter alia, of fraud, conversion and breach of
contract against the seller and former principal of Laish Israeli
Food and related parties. Certain defendants have filed motions
to dismiss the claim. On August 27, 2008, 860 Nostrand Associates
Llc. Filed a lawsuit against the Company claiming that the
defendant is liable to it as a guarantor of a certain lease that
was supposedly signed by WF. Damages are being sought. These
matters are in the early stage of discovery.
8. On September 22, 2008, a lawsuit was filed against the Company,
WF and one of the Company's officers by several Israeli's WF's
vendors in the Tel Aviv-Jaffa Magistrates Court in the amount of
NIS 1,349,899, claiming non payment of WF for food products that
they allegedly supplied to WF. A statement of defense was filed.
Even at the early stage of these proceedings, the Company's
management and legal counsel believe that the lawsuit against
Company and the Company's officer are without merit, and they
intend to vigorously defend against such claims.
9. On November 2008, a purported class action lawsuit had been filed
by an individual against Shamir Salads. The complaint, which has
not been recognized as a class action, alleges that Shamir Salads
misled its customers by writing on certain of its products that
such products were "home production" while those products were
manufactured in Shamir Salad's industrial factory. The complaint
alleges damages of approximately NIS 7.45 million. Shamir Salads
believes that the complaint is without merit and intends to
vigorously defend against the litigation.
NOTE 16 - RECLASSIFICATION
The Group reclassified the sum of NIS 1,854 thousand (USD 488 thousand)
from the "Other receivables" item to the "Inventory" item. This
reclassification derives from an adjustment of the comparative figures to
the manner by which certain transactions are presented in the Group's
financial statements as on December 31, 2008.
The Group reclassified the sum of NIS 369 thousand (USD 97 thousand) from
the "Other payables and accrued expenses" item to the "Trade payables"
item. This reclassification derives from an adjustment of the comparative
figures to the manner by which certain transactions are presented in the
Group's financial statements as on December 31, 2008.
The Group reclassified the sum of NIS 238 thousand (USD 63 thousand) from
the "Other payables and accrued expenses" item and the sum of NIS 70
thousand (USD 18 thousand) from the "Trade receivables" item to the
"Accruals" item. This reclassification derives from an adjustment of the
comparative figures to the manner by which certain transactions are
presented in the Group's financial statements as on December 31, 2008.
The Group reclassified the sum of NIS 1,408 thousand (USD 370 thousand)
from the "Other payables and accrued expenses" item to the "Employees
benefits" item. This reclassification derives from an adjustment of the
comparative figures to the manner by which certain transactions are
presented in the Group's financial statements as on December 31, 2008.
The Group reclassified the sum of NIS 593 thousand (USD 156 thousand) from
the "Other payables and accrued expenses" item to the "Current tax
liabilities" item. This reclassification derives from an adjustment of the
comparative figures to the manner by which certain transactions are
presented in the Group's financial statements as on December 31, 2008.
F - 43
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 16 - RECLASSIFICATION (CONT.)
AS REPORTED
AS PREVIOUSLY IN CURRENT
REPORTED MODIFICATION STATEMENTS
-------- -------- --------
AS OF DECEMBER 31, 2007
Trade receivables 63,728 70 63,798
Other receivables 4,374 (1,854) 2,520
Inventory 29,166 1,854 31,020
Trade payables 33,961 369 34,330
Other payables and accrued expenses 7,600 (2,608) 4,992
Accruals - 308 308
Employees benefits - 1,408 1,408
Current tax liabilities - 593 593
NOTE 17 - SHAREHOLDERS' EQUITY
COMPOSITION:
ORDINARY SHARES
OF NIS 0.1 PAR VALUE EACH
-------------------------
DECEMBER 31
-------------------------
2 0 0 8 2 0 0 7
---------- ----------
Authorized share capital 50,000,000 50,000,000
Issued and outstanding 10,267,893 10,267,893
NOTE 18 - OPTIONS PLANS
On January 2005 the Parent Company's audit committee and Board of Directors
adopted a Stock Incentive Plan. The Parent Company was authorized to grant
up to 138,000 options to 9 of the Group's employees (93,000 of the options
to the Company's employees). The issuance of the options was ratified by
the Parent Company's Board of Directors and the audit committee on February
27, 2005.
The options granted vest in three equal annual installments commencing
January 2006 and will expire in 2.5, 3.5 and 4.5 years, respectively. The
purchase price per share payable upon exercise of an option is NIS 14 (USD
3.7) per share, linked to the changes in the Consumer Price Index, and
subject to adjustments.
F - 44
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 18 - OPTIONS PLANS (CONT.)
A summary of the status of the Company's stock option plans as of December
31, 2008, 2007 and changes during the years then ended, is presented below:
NUMBER OF OPTIONS
-----------------------------------------------
YEAR ENDED DECEMBER 31
-----------------------------------------------
2 0 0 8 2 0 0 7
--------------------- ---------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE
-------- -------- -------- --------
(NIS) (NIS)
-------- --------
Balance at the beginning of the year 27,000 13.43 42,000 13.55
Exercised - 11,000 13.10
Forfeited 8,000 4,000
-------- -------- --------
Balance at the end of the year 19,000 14.04 27,000 13.43
======== ======== ========
Options exercisable at the year end 19,000 8,000
======== ======== ========
NOTE 19 - SELECTED CONSOLIDATED STATEMENTS OF OPERATIONS DATA
A. REVENUES
YEAR ENDED DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Sale of products manufactured by the group 70,248 - 18,477
Sale of other products 278,784 249,693 73,325
Income from services provided 52 - 14
Commissions 143 - 37
-------- -------- --------
349,227 249,693 91,853
======== ======== ========
B. COST OF SALES
YEAR ENDED DECEMBER 31,
------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
------------------------------------
Purchases 247,418 190,779 65,076
Materials consumed 9,123 - 2,400
Salaries and related expenses 5,673 - 1,492
Loss on firmly committed orders 3,500 - 921
Transportation 2,364 2,866 622
Depreciation and amortization 2,587 1,020 680
Maintenance and rent 8,408 4,066 2,211
Other manufacturing costs
and expenses 2,169 2,273 570
-------- -------- --------
281,242 201,004 73,972
Change in raw materials (986) - (259)
Change in finished goods and in
goods in process, 1,395 (2,043) 367
-------- -------- --------
281,651 198,961 74,080
======== ======== ========
F - 45
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 19 - SELECTED CONSOLIDATED STATEMENTS OF OPERATIONS DATA (CONT.)
C. SELLING EXPENSES
YEAR ENDED DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Salaries and related expenses 14,106 12,432 3,710
Sales commissions 4,648 - 1,223
Maintenance and rent 3,871 3,920 1,018
Vehicles 5,168 3,711 1,359
Advertising and promotion 2,666 1,983 701
Depreciation and amortization 1,544 812 406
Others 1,756 1,405 462
-------- -------- --------
33,759 24,263 8,879
======== ======== ========
D. GENERAL AND ADMINISTRATIVE EXPENSES
YEAR ENDED DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Salaries and related expenses 10,769 8,001 2,832
Office maintenance 1,812 2,604 477
Professional fees 4,059 3,261 1,068
Vehicles 618 442 163
Depreciation and amortization 976 688 257
Bad and doubtful debts 3,161 2,303 831
Communication 385 380 101
Other 1,347 1,190 354
-------- -------- --------
23,127 18,869 6,083
======== ======== ========
E. EMPLOYEES BENEFIT COSTS
YEAR ENDED DECEMBER 31,
-----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
-----------------------------------
Payroll 30,003 20,555 7,891
Employee Benefit Plan expenses 545 (122) 143
-------- -------- --------
30,548 20,433 8,034
======== ======== ========
F. DEPRECIATION AND AMORTIZATION
YEAR ENDED DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Depreciation of fixed assets 4,202 2,329 1,105
Amortization of Intangible assets 295 57 78
Amortization of prepaid rental expenses 610 134 160
Impairment of Goodwill 1,067 3,054 280
-------- -------- --------
6,174 5,574 1,623
======== ======== ========
F - 46
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 20 - OTHER INCOME AND EXPENSES
A. OTHER INCOME
YEAR ENDED DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Capital gain on fixed assets realization 85 16 22
Other 50 454 13
-------- -------- --------
135 470 35
======== ======== ========
B. OTHER EXPENSES
YEAR ENDED DECEMBER 31,
----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
--------------------- --------
(IN THOUSANDS)
----------------------------------
Loss from statutory suit 1,981 - 521
Capital loss from fix assets realization 349 - 91
-------- -------- --------
2,330 - 612
======== ======== ========
NOTE 21 - FINANCE INCOME AND EXPENSES
YEAR ENDED DECEMBER 31,
------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
------------------------------------
A. FINANCING INCOME:
Interest income:
Short-term bank deposits 1,475 2,251 388
Changes in value of debentures held for trading 348 193 92
Other 198 77 52
-------- -------- --------
Total interest income 2,021 2,521 532
Other:
Changes in fair value of financial assets
at fair values (4,836) (68) (1,272)
Realized gain on derivatives 243 - 64
Foreign currency differences (1,602) (267) (421)
Dividends 8 176 2
Other 71 - 18
-------- -------- --------
TOTAL FINANCING INCOME (4,095) 2,362 (1,077)
-------- -------- --------
B. FINANCING EXPENSES:
Interest expenses:
Bank credit 343 - 90
Short-term loans 236 366 62
long-term loans 130 - 34
Lease obligations 52 - 14
Other 82 104 22
-------- -------- --------
TOTAL INTEREST EXPENSE 843 470 222
-------- -------- --------
Other:
Decrease in values of warrants to
issue shares (1,035) (767) (272)
Realized loss on derivatives - 102 -
Foreign currency differences 1,096 (38) 288
Bank fees 703 317 185
Other 5 4 1
-------- -------- --------
TOTAL OTHER COSTS 769 (382) 202
======== ======== ========
TOTAL FINANCING COSTS 1,612 88 424
======== ======== ========
F - 47
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 22 - EARNING PER SHARE
A. BASIC EARNINGS PER SHARE
YEAR ENDED DECEMBER 31,
-----------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
-------- -------- --------
NIS US DOLLARS
---------------------- --------
(IN THOUSANDS)
-----------------------------------
Profit (loss) for the year attributable to
equity holders of the parent (786) 2,342 (206)
Earnings used in the calculation of total
basic earnings per share (786) 2,342 (206)
-------- -------- --------
Earnings used in the calculation of basic
earnings per share from continuing operations (786) 2,342 (206)
======== ======== ========
B. DILUTED EARNINGS PER SHARE
AS OF DECEMBER 31,
-----------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
---------- ---------- ----------
NIS US DOLLARS
-------------------------- ----------
(IN THOUSANDS)
-----------------------------------------
PROFIT USED TO COMPUTE BASIC EARNING PER SHARE (786) 2,342 (206)
Adjustments:
Options - - -
---------- ---------- ----------
PROFIT USED TO COMPUTE DILUTED EARNING PER SHARE (786) 2,342 (206)
Weighted average number of shares used in
computing basic earnings per share 10,267,893 10,267,893 10,267,893
Adjustments:
Options - - -
---------- ---------- ----------
Weighted average number of shares used
in computing diluted earnings per share 10,267,893 10,267,893 10,267,893
========== ========== ==========
C. The following potential ordinary shares are not dilutive and are
therefore excluded from the weighted average number of ordinary shares
for the purposes of diluted earnings per share:
561,982 as of December 31, 2008 and 2007.
F - 48
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 23 - ACQUISITION OF SUBSIDIARIES
A. SUBSIDIARIES ACQUIRED
PROPORTION OF
DATE OF SHARES COST OF
PRINCIPAL ACTIVITY ACQUISITION ACQUIRED ACQUISITION
------------------------------ --------- -------- --------
2008
Shamir salads Producing and marketing salads 1/1/2008 51% 5,000
The Distributor Marketing food products 1/1/2008 51% 1,454
2007
Baron Marketing food products 13/2/2007 50.1% -
WF Marketing food products 19/1/2007 100% 15,400
B. ANALYSIS OF ASSETS AND LIABILITIES ACQUIRED
SHAMIR SALADS
------------------------------------
FAIR VALUE ON FAIR VALUE ON
BOOK VALUE ADJUSTMENT ACQUISITION
------- ------- -------
CURRENT ASSETS:
Cash & cash equivalents 31 - 31
Trade & other receivables 15,651 - 15,651
Inventories 3,099 - 3,099
NON-CURRENT ASSETS:
Property, Plant & equipment 7,331 - 7,331
Prepaid expenses 818 - 818
Intangible assets - 3,373 3,373
CURRENT LIABILITIES:
Bank credit and short term loan (10,225) - (10,225)
Trade & other payables (13,640) - (13,640)
NON-CURRENT LIABILITIES:
Deferred tax liabilities (74) - (74)
Severance pay, net (286) - (286)
------- ------- -------
2,705 3,373 6,078
NONCONTROLLING INTEREST (2,978)
GOODWILL ON ACQUISITION 1,900
-------
TOTAL 5,000
=======
THE
DISTRIBUTOR
BOOK VALUE
------
CURRENT ASSETS:
Cash & cash equivalents 759
------
NONCONTROLLING INTEREST (372)
GOODWILL ON ACQUISITION 1,067
------
TOTAL 1,454
======
F - 49
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 23 - ACQUISITION OF SUBSIDIARIES (CONT.)
B. ANALYSIS OF ASSETS AND LIABILITIES ACQUIRED (CONT.)
WF KOSHER FOOD DISTRIBUTORS LTD
--------------------------------------
FAIR VALUE ON FAIR VALUE ON
BOOK VALUE ADJUSTMENT ACQUISITION
------- ------- -------
CURRENT ASSETS:
Trade & other receivables 5,402 - 5,402
Inventories 8,142 - 8,142
NON-CURRENT ASSETS:
Property, Plant & equipment 208 - 208
Prepaid expenses 89 - 89
CURRENT LIABILITIES:
Trade & other payables (1,530) - (1,530)
------- ------- -------
12,311 - 12,311
GOODWILL ON ACQUISITION 3,089
------- ------- -------
TOTAL 12,311 - 15,400
======= ======= =======
C. FAIR VALUES DETERMINED ON A PROVISIONAL BASIS
A valuation was performed for the purpose of allocating the
acquisition cost of Shamir Salads and of the Danish company. The
valuation determined, inter alia, that the entire excess cost in the
acquisition of the Danish company should be allocated to goodwill (the
goodwill was written off entirely in examination of its
recoverability), while the acquisition cost of Shamir Salads was
allocated as follows - the value of NIS 1,570 thousand was allocated
to the brand name, the value of NIS 1,364 thousand was allocated to
customer relations, and the value of NIS 439 thousand was allocated to
technological know-how. The value of the goodwill was determined
accordingly - NIS 1,900 thousand.
D. COST OF ACQUISITION
The cost of the joint establishment of the Danish distribution company
was paid in cash. The acquisition cost of Shamir Salads was contingent
upon the sum of the audited net profit, after neutralizing capital
gains that Shamir Salads shall present in its audited financial
statements for the year 2008, being multiplied by 2.55. As of December
31, 2008, and according to the total net profit that Shamir Salads
presented for the year ended December 31, 2008, the sum of the
compensation was calculated on the sum of the advance.
E. NET CASH OUTFLOW ON ACQUISITION
YEAR ENDED DECEMBER 31,
------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
------- ------- -------
NIS US DOLLARS
---------------------- -------
(IN THOUSANDS)
------------------------------------
Total purchase consideration 6,454 15,400 1,698
Compensation paid in cash 6,454 15,400 1,698
Less: cash and cash equivalent balances acquired (790) - (208)
------- ------- -------
5,664 15,400 1,490
======= ======= =======
F - 50
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 23 - ACQUISITION OF SUBSIDIARIES (CONT.)
F. GOODWILL ARISING ON ACQUISITION
Goodwill was recognized during the acquisition of Shamir Salads,
because the compensation that was paid within the scope of the
business combination includes sums relating to the expected benefits
from the synergy (cooperation), income growth, and future developments
that are anticipated in the markets of both companies. These benefits
are not recognized separately from the goodwill, since the future
economic benefits deriving from them cannot be reliably measured.
Furthermore, the compensation includes sums relating to benefits
expected from Shamir Salad's experienced manpower; meaning, the costs
that Shamir Salads saved (and that Willi-Food saved indirectly) due to
the fact that Shamir Salads has existing manpower, which eliminated
the need for a general recruitment of employees and job training
(assembled workforce).
Goodwill was recognized during the acquisition of the Danish
distribution company because the compensation that was paid within the
scope of the business combination includes sums relating to the
expected benefits from the synergy (cooperation), increased export
income, and the receipt of licenses to export to the United States.
NOTE 24 - NON-CASH TRANSACTION
During 2008 the group has made a commitment to pay royalties for a brand
name in the amount of NIS 2,000 in thousands over a three years period. As
of December 31, 2008 the amount not yet paid in cash is NIS 1,700 in
thousands.
NOTE 25 - FINANCIAL INSTRUMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
Details of the significant accounting policies and methods adopted,
including the criteria for recognition, the basis of measurement and
the basis on which income and expenses are recognized, in respect of
each class of financial asset, financial liability and equity
instrument are disclosed in note 2 to the financial statements.
B. CATEGORIES OF FINANCIAL INSTRUMENTS
AS OF DECEMBER 31,
-------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
------- ------- -------
NIS US DOLLARS
---------------------- -------
(IN THOUSANDS)
-------------------------------------
FINANCIAL ASSETS
Held for trading 9,444 31,267 2,484
Trade and other receivables
(including cash and cash equivalents) 163,679 127,004 43,051
FINANCIAL LIABILITIES
Held for trading 5 1,206 1
Amortized cost 85,804 47,255 22,568
C. OBJECTIVES OF MANAGING FINANCIAL RISKS
The finance departments of the Group provide services to the business
activity, enable access to local and international financial markets,
supervise and manage the financial risks relating to the Group's
activities using internal report that analyze the extent of the risk
exposure according to degree and intensity. These risks include market
risks (including currency risk, fair value risk in respect of the
interest rates, price risk and cash flow risk in respect of the
interest rates), credit risk and liquidity risk.
The Group reduces the impact of the aforesaid risks from time to time
by using derivative financial instruments in order to hedge the risk
exposures, such derivatives are not designated as hedges for
accounting purposes. Derivatives are used according to the Group's
policy, which was approved by the boards of directors. The policy
prescribes principles regarding: management of currency risk, interest
rate risk, credit risk, the use of derivatives and of non-derivative
financial instruments, and investment of liquidity surplus. The
compliance with policy and the exposure levels are reviewed by the
internal auditor on a continuing basis.
F - 51
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 25 - FINANCIAL INSTRUMENTS (CONT.)
C. OBJECTIVES OF MANAGING FINANCIAL RISKS (CONT.)
The financial management departments of the Group report to the
investment committee of the Group and to the board of directors of the
Company about the risks and about implementation of the assimilated
policy in order to minimize the risk exposures.
D. MARKET RISK
The Group's activity exposes it mainly to financial risks of
fluctuations in the exchange rates of foreign currency and/or changes
in the prices of the imported products and/or changes in the interest
rates. The Group purchases forward foreign-currency swap contracts, as
needed, opens documentary credit to suppliers, and carries out orders
for imported goods.
During the report period, no change occurred in the exposure to market
risks or in the way by which the Group manages or measures the risk
E. LIQUIDITY RISK MANAGEMENT
The following table presents the Group's outstanding contractual
maturity profile for its non-derivative financial liabilities. The
analysis presented is based on the undiscounted contractual maturities
of the Group's financial liabilities, including any interest that will
accrue. Non-interest bearing financial liabilities which are due to be
settled in less than 12 months from maturity equal their carrying
values, since the impact of the time value of money is immaterial over
such a short duration.
MATURITY PROFILE OF OUTSTANDING FINANCIAL LIABILITIES'
1 YEAR 1-5 YEARS TOTAL
------- ------- -------
2008
Interest free 65,813 2,166 67,979
Lease agreement liability 333 271 604
Instruments bearing variable interest 17,322 - 17,322
------- ------- -------
Total 83,468 2,437 85,905
======= ======= =======
2007
Interest free 40,565 1,752 42,317
Instruments bearing variable interest - 5,978 5,978
------- ------- -------
Total 40,565 7,730 48,295
======= ======= =======
F. EXCHANGE RATE RISK
The Group undertakes certain transactions denominated in foreign
currencies. Hence, exposures to exchange rate fluctuations arise.
Exchange rate exposures are managed within approved policy parameters
utilizing forward foreign exchange contracts.
The carrying amounts of the Group's foreign currency denominated
monetary assets and monetary liabilities at reporting date are as
follows:
LIABILITIES ASSETS
-------------------- --------------------
2 0 0 8 2 0 0 7 2 0 0 8 2 0 0 7
------ ------ ------ ------
NIS NIS NIS NIS
------ ------ ------ ------
USD 30,464 27,683 17,465 21,400
EUR 2,347 968 870 3,650
DKK 3,841 - 4,004 -
Other - - - 1
F - 52
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 25 - FINANCIAL INSTRUMENTS (CONT.)
F. EXCHANGE RATE RISK (CONT.)
The Group is mainly exposed to USD and EUR.
The following table details the Group's sensitivity to a 10% increase
and decrease in the NIS against the relevant foreign currencies. 10%
is the sensitivity rate used when reporting foreign currency risk
internally to key management personnel and represents management's
assessment of the reasonably possible change in foreign exchange
rates. The sensitivity analysis includes only outstanding foreign
currency denominated monetary items and adjusts their translation at
the period end for a 10% change in foreign currency rates. A positive
number below indicates an increase in profit and other equity where
the NIS strengthens 10% against the relevant currency. For a 10%
weakening of the NIS against the relevant currency, there would be an
equal and opposite impact on the profit and other equity, and the
balances below would be negative.
USD IMPACT EUR IMPACT
------ ------
2008 2008
------ ------
NIS NIS
------ ------
Profit or loss (1) 1,300 148
USD IMPACT EUR IMPACT
------ ------
2007 2007
------ ------
NIS NIS
------ ------
Profit or loss (1) 629 (269)
(1) This is mainly attributable to the exposure outstanding on
receivables, cash and payables at year end in the Group, and
forward foreign exchange contracts.
FORWARD FOREIGN EXCHANGE CONTRACTS
The Group enters into forward foreign exchange contracts to manage the
risk associated with anticipated sales and purchase transactions,
which are treated as non hedging instruments. The resulting gain or
loss is recognized in profit or loss immediately.
The following table details the forward foreign currency (FC) contracts
outstanding as at reporting date:
AVERAGE EXCHANGE RATE FOREIGN CURRENCY CONTRACT VALUE FAIR VALUE
--------------------- -------------------- -------------------- --------------------
2008 2007 2008 2007 2008 2007 2008 2007
------ ------ ------ ------ ------ ------ ------ ------
CURRENCY CURRENCY NIS NIS NIS NIS
NIS NIS THOUSANDS THOUSANDS THOUSANDS THOUSANDS THOUSANDS THOUSANDS
------ ------ ------ ------ ------ ------ ------ ------
CASH FLOWS HEDGES
PURCHASE OF USD SELL NIS 3.5878 4.1081 900 6,000 3,349 23,261 77 (184)
PURCHASE OF EUR SELL NIS 5.2585 5.6243 - 300 - 1,680 - 18
------ ------
77 (166)
====== ======
G. FAIR VALUE OF FINANCIAL INSTRUMENTS
The financial instruments of the Group consist of derivative and non
derivative assets and liabilities. Non-derivative assets include cash
and cash equivalents, receivables and other current assets.
Non-derivative liabilities include short-term bank credit, trade
payables, other current liabilities and long-term loans from banks and
others. Derivative assets and liabilities include mainly foreign
exchange forward contracts (2007 - also included index swap
contracts). Due to the nature of these financial instruments, their
fair value, generally, is identical or close to the value at which
they are presented in the financial statements, unless stated
otherwise.
The fair value of the long-term loans approximates their carrying
value, since they bear interest at rates close to the prevailing
market rates.
F - 53
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 26 - BUSINESS AND GEOGRAPHIC SEGMENTS
A. DATA REGARDING BUSINESS SEGMENTS
YEAR ENDED DECEMBER 31, 2008
NON-PRESERVED PRESERVED
PRODUCTS PRODUCTS TOTAL
-------- -------- --------
YEAR ENDED DECEMBER 31, 2008:
REVENUES 258,855 90,372 349,227
======== ======== ========
OPERATING INCOME (LOSS) BY SEGMENT 28,690 5,127 33,817
======== ========
Less - unallocated general and administrative
expenses 23,127
Other expense 2,195
Goodwill impairment 1,067
Financial costs, net (5,707)
--------
PROFIT BEFORE INCOME TAXES 1,721
Income taxes 1,454
--------
PROFIT FROM CONTINUING OPERATIONS 267
DECEMBER 31, 2008:
TOTAL SEGMENT ASSETS 22,215 12,202 34,417
======== ========
UNALLOCATED ASSETS 238,925
--------
273,342
========
SEGMENT LIABILITIES - - -
======== ========
UNALLOCATED LIABILITIES 87,760
--------
87,760
========
YEAR ENDED DECEMBER 31, 2007
NON-PRESERVED PRESERVED
PRODUCTS PRODUCTS TOTAL
-------- -------- --------
YEAR ENDED DECEMBER 31 2007:
REVENUES 157,986 91,707 249,693
======== ======== ========
OPERATING INCOME (LOSS) BY SEGMENT 18,544 7,925 26,469
======== ========
Less - unallocated general and administrative
expenses 18,869
Other income (470)
Goodwill impairment 3,054
Financial income, net 2,274
--------
PROFIT BEFORE INCOME TAXES 7,290
Income taxes 2,651
--------
PROFIT FROM CONTINUING OPERATIONS 4,639
DECEMBER 31 2007:
TOTAL SEGMENT ASSETS 19,625 11,395 31,020
======== ========
UNALLOCATED ASSETS 208,432
--------
239,452
========
SEGMENT LIABILITIES - - -
======== ========
UNALLOCATED LIABILITIES 48,845
--------
48,845
========
F - 54
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 26 - BUSINESS AND GEOGRAPHIC SEGMENTS (CONT.)
B. DATA REGARDING GEOGRAPHICAL SEGMENTS
REVENUES BY GEOGRAPHICAL MARKETS
-------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
------- ------- -------
NIS US DOLLARS
---------------------- -------
(IN THOUSANDS)
-------------------------------------
Israel 281,973 199,064 74,164
North America 35,931 41,989 9,451
Europe 29,462 7,158 7,749
Others 1,861 1,482 489
------- ------- -------
349,227 249,693 91,853
======= ======= =======
PURCHASE COST OF SEGMENT
(TANGIBLE AND INTANGIBLE) ASSETS
-------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
------- ------- -------
NIS US DOLLARS
---------------------- -------
(IN THOUSANDS)
-------------------------------------
Israel 64,623 48,621 16,997
North America - 577 -
Europe 144 - 37
------- ------- -------
64,767 49,198 17,034
======= ======= =======
SEGMENT ASSETS
-------------------------------------
DECEMBER 31,
-------------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
------- ------- -------
NIS US DOLLARS
---------------------- -------
(IN THOUSANDS)
-------------------------------------
Israel 269,084 230,546 70,774
North America 46 8,906 12
Europe 4,212 - 1,108
------- ------- -------
273,342 239,452 71,894
======= ======= =======
F - 55
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 27 - RELATED PARTIES
Transactions between the Company and its subsidiaries, which are related
parties of the Company, have been eliminated on consolidation and are not
disclosed in this note. Details of transactions between the group and other
related parties are disclosed below:
A. TRANSACTIONS WITH RELATED PARTIES
YEAR ENDED DECEMBER 31,
---------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
------- ------- -------
NIS US DOLLARS
-------------------- -------
(IN THOUSANDS)
---------------------------------
Purchases of goods 586 1,568 154
======= ======= =======
Participation in expenses 70 67 18
======= ======= =======
Management fees 2,650 2,404 697
======= ======= =======
Bonus 75 762 20
======= ======= =======
B. BALANCES WITH RELATED PARTIES
YEAR ENDED DECEMBER 31,
---------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
------- ------- -------
NIS US DOLLARS
-------------------- -------
(IN THOUSANDS)
---------------------------------
Due to officers 223 844 59
======= ======= =======
Parent company 1,467 3,101 386
======= ======= =======
F - 56
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 28 - BORROWINGS
SECURED LIABILITIES
AS OF DECEMBER 31,
-------------------------------
2 0 0 8 2 0 0 7 2 0 0 8(*)
------- ------- -------
NIS US DOLLARS
------------------- -------
(IN THOUSANDS)
-------------------------------
Bank credit 4,514 - 1,187
Bank loans 8,871 - 2,333
Liability relating to Lease agreement 584 - 154
------- ------- -------
13,969 - 3,674
======= ======= =======
NOTE 29 - SUBSEQUENT EVENTS
1. The Company the commenced a tender offer on February 5, 2009 (that was
extended on March 5, 2009) to purchase from the holders of shares
and/or depositary interests of Gold Frost all of the issued and
outstanding share capital of Gold Frost not already held by the
Company for a price of 5 pence per share or per depositary interest in
cash has expired. The tender offer had been subject to the condition
that the number of shares and depositary interests duly tendered
constitute, upon expiration of the offer period and together with the
shares held by the Company at such time, more than 95 per cent of the
issued and outstanding share capital of Gold Frost. Such condition was
not met. As a result, the Company will not purchase any of the Gold
Frost shares that have been tendered.
2. On April 16, 2009 a purported class action lawsuit had been filed
against the Company. The complaint alleges that the Company misled its
customers by illegal marking of a product that the Company imports and
sells as "sugar free", according to The Israeli Consumer Protection
Law, 1981.
The group, which the lawsuit desires to represent are any Israeli
resident who bought this product due to such person's preference for a
sugar free or a reduced sugar product (the "GROUP"). According to the
plaintiff, the Group consists of 2,000 customers. The plaintiff
appraises its own damages at NIS 2,000 (approximately USD 500) and the
damages of the entire Group to be NIS 4 million (approximately USD 1
million).
At this preliminary stage, the Company is examining the plaintiff's
alleged claims, and it will respond and relate to the allegations, to
the extent necessary, after its examination and after consulting with
its legal advisors.
F - 57
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 30 - TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS'S)
A. GENERAL
Following the publication of Accounting Standard No. 29, "the Adoption
of International Financial Reporting Standards (IFRS)" in July 2006,
the Company adopted IFRS starting January 1, 2008.
Pursuant to the provisions of IFRS 1, which deals with the first-time
adoption of IFRS, and considering the date in which the Company
elected to adopt these standards for the first time, the financial
statements which the Company must draw up in accordance with IFRS
rules, are the consolidated financial statement as of December 31,
2008, and for the year ended on that date. The date of transition of
the Company to reporting under IFRS, as it is defined in IFRS 1, is
January 1, 2007 (hereinafter: "the transition date"), with an opening
balance sheet as of January 1, 2007 (hereinafter: "Opening Balance").
Under the opening balance sheet, the Company performed the following
reconciliations:
o Recognition of all assets and liabilities whose recognition is
required by IFRS.
o De-recognition of assets and liabilities if IFRS do not permit
such recognition.
o Classification of assets, liabilities and components of equity
according to IFRS.
o Application of IFRS in the measurement of all recognized assets
and liabilities.
IFRS 1 states that all IFRS shall be adopted retroactively for the
opening balance sheet. At the same time, IFRS 1 includes 14 relieves,
in respect of which the mandatory retroactive implementation does not
apply. The Company chose to implement two relieves. See note 29f.
Changes in the accounting policy which the Company implemented
retroactively in the opening balance sheet under IFRS, compared to the
accounting policy in accordance with Generally Accepted Accounting
Principles in Israel, were recognized directly under Retained Earnings
or another item of Shareholders' Equity, as the case may be.
This note is formulated on the basis of International Financial
Reporting Standards and the notes thereto as they stand today, that
have been published and entered into force or that may be adopted
earlier as at the Group's first annual reporting date according to
IFRS, December 31, 2008.
Listed below are the Company's consolidated balance sheets as of
January 1, 2007, and December 31, 2007, and the consolidated statement
of income and the shareholders' equity for the year ended on December
31, 2007 prepared in accordance with International Accounting
Standards. In addition, the table presents the material
reconciliations required for the transition from reporting under
Israeli GAAP to reporting under IFRS.
F - 58
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 30 - TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS'S) (CONT.)
B. RECONCILIATION OF BALANCE SHEETS FROM ISRAELI GAAP TO IFRS
DECEMBER 31, 2007 JANUARY 1, 2007
------------------------------------------ ------------------------------------------
EFFECT OF EFFECT OF
ISRAELI TRANSITION TO ISRAELI TRANSITION TO
GAAP IFRS IFRS GAAP IFRS IFRS
-------- -------- -------- -------- -------- --------
NIS IN THOUSANDS NIS IN THOUSANDS
------------------------------------------ ------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 61,649 61,649 91,398 91,398
Marketable securities 31,267 31,267 13,945 13,945
Trade receivables 63,798 63,798 48,233 48,233
Other receivables 2,776 (256) 2,520 2,585 2,585
Inventories 31,020 31,020 21,015 21,015
-------- -------- -------- -------- -------- --------
Total current assets 190,510 (256) 190,254 177,176 177,176
-------- -------- -------- -------- -------- --------
NON-CURRENT ASSETS
Property, plant and
equipment 55,310 (10,741) 44,569 49,213 (10,741) 38,472
Less -Accumulated
depreciation 8,355 8,355 6,442 6,442
-------- -------- -------- -------- -------- --------
46,955 (10,741) 36,214 42,771 (10,741) 32,030
Goodwill 1,795 1,795 - -
Intangible assets 103 103 - -
Prepaid rental expenses 208 10,607 10,815 - 10,741 10,741
Deferred taxes 115 156 271 94 (94) -
-------- -------- -------- -------- -------- --------
Total non-current assets 49,176 22 49,198 42,865 (94) 42,771
======== ======== ======== ======== ======== ========
TOTAL ASSETS 239,686 (234) 239,452 220,041 (94) 219,947
======== ======== ======== ======== ======== ========
EQUITY AND LIABILITIES
CURRENT LIABILITIES
Short-term bank credit 5,978 5,978 - - -
Trade payables 34,330 34,330 20,772 - 20,772
Other payables and accrued
expenses 7,013 288 7,301 12,081 (3) 12,078
-------- -------- -------- -------- -------- --------
Total current liabilities 47,321 288 47,609 32,853 (3) 32,850
-------- -------- -------- -------- -------- --------
NON-CURRENT LIABILITIES
Employees Benefits 460 (297) 163 347 (62) 285
Warrants to issue shares - 1,040 1,040 348 1,459 1,807
Deferred taxes - 33 33 - 195 195
-------- -------- -------- -------- -------- --------
Total non-current
liabilities 460 776 1,236 695 1,592 2,287
-------- -------- -------- -------- -------- --------
Noncontrolling interest 18,613 (18,613) - 14,754 (14,754) -
-------- -------- -------- -------- -------- --------
CAPITAL AND RESERVES
Share capital 1,113 1,113 1,113 1,113
Premium 61,350 (2,294) 59,056 61,350 (2,294) 59,056
Foreign currency
translation reserve (414) (414) - -
Retained earnings 111,243 990 112,233 109,276 615 109,891
Noncontrolling interest - 18,619 18,619 - 14,750 14,750
-------- -------- -------- -------- -------- --------
173,292 17,315 190,607 171,739 13,071 184,810
======== ======== ======== ======== ======== ========
TOTAL EQUITY AND LIABILITIES 239,686 (234) 239,452 220,041 (94) 219,947
======== ======== ======== ======== ======== ========
F - 59
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 30 - TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS'S) (CONT.)
C. RECONCILIATION OF INCOME STATEMENTS FROM ISRAELI GAAP TO IFRS
YEAR ENDED DECEMBER 31, 2007
------------------------------------------
EFFECT OF
TRANSITION TO
ISRAELI GAAP IFRS IFRS
-------- -------- --------
NIS IN THOUSANDS
------------------------------------------
Revenue 249,693 249,693
Cost of sales 198,827 134 198,961
-------- -------- --------
GROSS PROFIT 50,866 134 50,732
-------- -------- --------
OPERATING COSTS AND EXPENSES
Selling expenses 24,404 (141) 24,263
General and administrative expenses 18,963 (94) 18,869
Other (income) expenses - (470) (470)
Goodwill Impairment 3,054 3,054
-------- -------- --------
46,421 (705) 45,716
-------- -------- --------
OPERATING PROFIT 4,445 571 5,016
Finance income 1,856 506 2,362
Finance expenses - 88 88
Other income 470 (470) -
-------- -------- --------
PROFIT BEFORE TAX 6,771 519 7,290
Income tax charge 2,517 134 2,651
======== ======== ========
PROFIT FOR THE PERIOD 4,254 385 4,639
======== ======== ========
Attributable to:
Equity holders of the Company 1,967 375 2,342
Noncontrolling interest 2,287 10 2,297
-------- -------- --------
NET INCOME 4,254 385 4,639
======== ======== ========
F - 60
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 30 - TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS'S) (CONT.)
D. EQUITY RECONCILIATION
FOREIGN CURRENCY
SHARE TRANSLATION RETAINED
CAPITAL PREMIUM RESERVE EARNINGS TOTAL
-------- -------- -------- -------- --------
YEAR ENDED DECEMBER 31, 2007
ISRAELI GAAP 1,113 61,350 (414) 111,243 173,292
======== ======== ======== ======== ========
EFFECT OF TRANSITION TO IFRS
UNDER IFRS RULES - (2,294) - 990 (1,304)
======== ======== ======== ======== ========
BALANCE - JANUARY 1, 2007
ISRAELI GAAP 1,113 61,350 - 109,276 171,739
======== ======== ======== ======== ========
EFFECT OF TRANSITION TO IFRS
UNDER IFRS RULES - (2,294) - 615 (1,679)
======== ======== ======== ======== ========
E. ADDITIONAL INFORMATION
1. DEFERRED TAXES
In accordance with generally accepted accounting principles in
Israel, deferred tax assets or liabilities were classified as
current or non-current assets or liabilities depending on the
classification of the assets or liabilities in respect of which
they were created.
Pursuant to IAS 1, deferred tax assets or liabilities are
classified as non-current assets or liabilities, respectively.
Consequently, amounts of NIS 289 thousand and NIS 94 thousand
which were previously presented under accounts payable and under
non-current assets, respectively, were reclassified to deferred
taxes under non-current liabilities as of January 1, 2007.
As of December 31, 2007, amounts of NIS 256 thousand and NIS 133
thousand which were previously presented under accounts
receivable and under accounts payable, respectively, were
reclassified to deferred taxes under non-current liabilities in
the amount of NIS 33 thousand and to deferred taxes under
non-current assets in the amount of NIS 271 thousand.
2. LEASE FROM THE ISRAELI LAND AUTHORITY ("ILA")
Leasehold rights In accordance with Previous GAAP: Though
December 31, 2006, leasehold rights were presented under
property, plant and equipments.
In accordance with IFRSs: Leasehold rights are presented within
prepaid expenses.
The effect on the balance sheet as of January 1, 2007 was an
increase in prepaid expenses of NIS 10,741 thousand against
decrease of NIS 10,741 thousand in property, plant and
equipments.
The effect on the balance sheet as of December 31, 2007 was an
increase in prepaid expenses of NIS 10,607 thousand and decrease
in property, plant and equipment in the amount of NIS 10,741
thousand. The change in the year 2007 of NIS 134 thousand has
been attributed to the P&L in Cost of sales.
F - 61
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 30 - TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS'S) (CONT.)
E. ADDITIONAL INFORMATION (Cont.)
3. WARRANTS TO ISSUE SHARES
Under Israeli GAAP warrants with exercise price linked to the CPI
can be treated as permanent equity.
Under IFRS IAS 32, if terms of a derivative financial instrument
are such that it is not settled by the issuer exchanging a fixed
amount of cash or another financial asset for a fixed number of
its own equity instruments it should be classified as liability,
carried at fair value with changes in fair values recorded in
earnings.
Hence, warrants with exercise price linked to the CPI with fair
values of NIS 1,459 and NIS 1,040 as of January 1, 2007 and
December 31, 2007 respectively has been recognized as liability.
As a result of that classification changes in fair values of NIS
2,294 were recorded in retained earnings balance as of January 1,
2007 and changes in fair values of NIS 419 were recorded in
earnings for the year ended December 31, 2007.
4. NONCONTROLLING INTEREST
In accordance with Previous GAAP: Noncontrolling interest was
presented in the balance sheet between the liabilities and
shareholders' equity as a quasi- equity item.
The minority share in results of subsidiary was presented as
income (expense) within the Group's consolidated income
statements.
In accordance with IFRSs: Noncontrolling interest is presented
within the shareholders' equity. The Minority share in result of
subsidiaries is not included in the consolidated income
statements as income (expense) but rather the total profit (loss)
is attributed to the Company and the minority.
The effect on the balance sheet as of January 1, 2007 was an
increase in Shareholders' equity of NIS 13,071 thousand against
decrease of NIS 14,750 thousand in liabilities.
The effect on the balance sheet as of December 31, 2007 was an
increase in Shareholders' equity of NIS 17,315 thousand and
decrease in liabilities in the amount of NIS 18,619 thousand.
F - 62
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS IN THOUSANDS)
NOTE 30 - TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS'S) (CONT.)
E. ADDITIONAL INFORMATION (CONT.)
5. EMPLOYEES BENEFITS
In accordance with generally accepted accounting principles in
Israel, the Company's liability for severance pay is calculated
based on the recent salary of the employee multiplied by the
number of years of employment.
Pursuant to IAS 19, the provision for severance pay is calculated
according to an actuarial basis taking into account the
anticipated duration of employment, the value of time, the
expected salary increases until retirement and the possible
retirement under conditions not entitling severance pay.
Discount rate used in the calculations was based on yields on
governmental bonds as the Company believes that there is no deep
market for high quality corporate bonds. The issue of deep market
is still under consideration and the decision regarding deep
market may be changed. The use of market yields on highly rated
corporate bond would have the effect of decreasing the Company's
obligation since the discount rate would have been higher than
the governmental bond yields used under the assumption of no deep
market.
As of December 31, 2007, the nominal discount rate used in the
calculations was 5.8% and was determined in reference to Shachar
governmental bond.
In addition, under Israeli GAAP, deposits made with regular
policies or directors' insurance policies which are not in the
employee's name, but in the name of the employer, were also
deducted from the Company's liability.
Under IFRS, regular policies or directors' insurance policies as
aforesaid, which do not meet the definition of plan assets under
IAS 19, will be presented in the balance sheet under a separate
item and will not be deducted from the employer's liability.
The impact of the aforesaid on the balance sheet is decrease
employee benefit obligation in the amounts of NIS 62 thousand and
NIS 297 thousand as of January 1, 2007 and December 31, 2007,
respectively.
The Company adopted a policy to recognize actuarial gains and
losses immediately in earnings.
F. RELIEFS WITH RESPECT TO THE RETROACTIVE IMPLEMENTATION OF IFRS ADOPTED
BY THE COMPANY
IFRS 1 includes several reliefs, in respect of which the mandatory
retroactive implementation does not apply. The Company elected to
adopt in its opening balance sheet under IFRS as of January 1, 2007
(hereinafter: "the opening balance sheet") the reliefs with regards
to:
Business Combinations, in accordance to the relief, the Company chose
not to retroactively implement the provisions of IFRS 3 regarding to
business combination which occurred before January 1, 2007.
Consequently goodwill and adjustments due to fair value of
subsidiaries that where acquired before January 1, 2007 are treated in
accordance to generally accepted accounting principles in Israel.
F - 63
ITEM 2 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS
OVERVIEW
The following discussion and analysis should be read in conjunction with
the consolidated financial statements of the Company and the related Notes
thereto submitted with this Form 6-K. The Company's financial statements as of
December 31, 2008 and for the year then ended have been prepared in accordance
with International Financial Reporting Standards ("IFRSs") and interpretations
issued by the International Accounting Standard Board ("IASB"), and such
accounting policies have been applied retrospectively to the Company's financial
statements as of December 31, 2007 and for the year then ended.
The Company is engaged in the design, import, manufacture, export,
marketing and distribution of a broad range of food products purchased from over
120 suppliers worldwide and marketed in Israel and internationally, and to a
much lesser extent, the areas administered by the Palestinian Authority. The
Company's products are sold in Israel and around the world to over 1,500
customers, including supermarket chains in the organized market, private
supermarket chains, mini-markets, wholesalers, manufacturers and institutional
consumers. The Company was incorporated in Israel in January 1994 and commenced
operations in February 1994.
In 2008, the Company faced challenges pertaining to increases in food
commodity prices that exceeded global inflation rates. Beginning in the of
fourth quarter of 2008, the Company has been affected by the sharp decrease of
global purchase prices of food products, resulting in the sharp decrease in the
selling prices of the Company's products as well. Because the Company's
commitments to purchase food products were based on higher prices from its
vendors, the immediate consequence was a decline in the gross margin in the
fourth quarter of 2008 and the Company expect a further decline until
approximately mid 2009 when the Company would complete the sale of the inventory
in the orders from vendors backlog acquired at the higher prices. The decrease
of global purchase prices of food products compounded with the recent
strengthening of the U.S. dollar versus the NIS (a depreciation of more than 11%
of the value of the NIS in the fourth quarter of 2008) and the general effects
of the global economic recession and increasing unemployment rates reduced our
gross margin to 7.4% in the fourth quarter of 2008.
In light of the anticipated continued recession and increasing unemployment
rates, our foreseeable challenges ahead will be in managing our expenses, and in
particular the cost of our products, to an acceptable degree in order to
accommodate our consumers' anticipated desire to acquire lower cost products. We
hope that in these difficult times we will be able to maintain our customer base
both in the retail and in the wholesale markets.
We also intend to continue to seek to grow our market share in Israel and
abroad through the introduction of additional innovative niche products to give
the customer more choice, healthier and/or less expensive products and, where
permitted, by expanding our relationships with our suppliers. We also intend to
increase expenditures on marketing and sales activities to increase the market
penetration of the products that we currently sell in Israel.
We also intend to expand our business outside of Israel, and in particular,
in the U.S. and Europe. For convenience purposes, the financial data for the
years ended December 31, 2008, 2007, 2006, 2005 and 2004 has been translated
into U.S. Dollars using the representative exchange rate. This rate as of
December 31, 2008 was NIS 3.802 = USD 1.00.
The Company is not involved in any off balance sheet transactions or
long-term contractual obligations.
CRITICAL ACCOUNTING POLICIES
Management's discussion and analysis is based upon the consolidated
financial statements, which have been prepared in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board (IASB) for all reporting periods presented. The use of these
International Financial Reporting Standards requires the management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting accounting periods presented. These estimates include,
among other things, assessing the collectibility of accounts receivable and the
use of recoverability of inventory. Actual results could differ from those
estimates. The markets of the Company's products are characterized by intense
competition and a rapid turnover of products and frequent new introductions of
products, all of which may impact future ability to value the Company's assets.
The following critical accounting policies may affect significant judgments
and estimates used in the preparation of the consolidated financial statements.
1. Revenue Recognition - Revenue is measured at the fair value of the
consideration received or receivable. Revenue is reduced for estimated customer
returns, rebates and other similar allowances.
(1) Sale of goods
Revenue from the sale of goods is recognised when all the following
conditions are satisfied:
o The Company has transferred to the buyer the significant risks
and rewards of ownership of the goods;
o The Company retains neither continuing managerial involvement to
the degree usually associated with ownership nor effective
control over the goods sold
o The amount of revenue can be measured reliably;
o It is probable that the economic benefits associated with the
transaction will flow to the entity; and
o The costs incurred or to be incurred in respect of the
transaction can be measured reliably.
This policy is significant because the revenue is a key component of the
Company's operations, as well as the fact that the revenue recognition
determines the timing of certain expenses. Revenue results are difficult to
predict and any shortfall in revenue or delay in recognizing revenue could cause
the operating results to vary from quarter to quarter and may result in
operating losses
2. Inventories - Inventories are assets held for sale in the ordinary course
of business, in the process of production for such sale or in the form of
materials or supplies to be consumed in the production process or in the
rendering of services.
Inventories are stated at the lower of cost and net realizable value. Cost
of inventories includes all the cost of purchase, direct labor, fixed and
variable production overheads and other cost that are incurred, in bringing
the inventories to their present location and condition.
Net realizable value is the estimated selling price in the ordinary course
of business less the estimated costs of completion and the estimated costs
necessary to make the sale.
Cost is determined as follows:
Raw material, components and packaging - by the "first-in, first-out" method;
Processing goods - cost of materials plus labor
finished products - on the basis of standard cost
which approximates actual production
cost (materials, labor and indirect
manufacturing costs).
Products - weighted average method
3. Useful lives of property, plant and equipment - the Company reviews the
estimated useful lives of property, plant and equipment at the end of each
annual reporting period.
4. Impairment of goodwill - Determining whether goodwill is impaired requires
an estimation of the value in use of the cash-generating units to which
goodwill has been allocated. The value in use calculation requires the
management to estimate the future cash flows expected to arise from the
cash-generating unit and a suitable discount rate in order to calculate
present value.
5. Deferred taxes- the company recognizes deferred tax assets for all of the
deductible temporary differences up to the amount as to which it is
anticipated that there will be taxable income against which the temporary
difference will be deductible. During each period, for purposes of
calculation of the utilizable temporary difference, management uses
estimates and approximations as a basis which it evaluates each period.
6. The current value of the Company's obligation in respect of severance pay
is based on actuarial assumptions, including discount rate (which is based
on the discount rate of government bonds), market conditions, etc.
Differences in the actuarial assumptions may change the book value of the
Company's obligation in respect of severance pay.
ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
1. STANDARDS AND INTERPRETATIONS WHICH ARE EFFECTIVE AND HAVE BEEN APPLIED IN
THESE FINANCIAL STATEMENTS.
The following three Interpretations issued by the International Financial
Reporting Interpretations Committee are effective for the current period:
IFRIC 11 IFRS 2: Group and Treasury Share Transactions (effective March 1, 2007);
IFRIC 12 Service Concession Arrangements (effective January 1, 2008);
IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction (effective January 1, 2008).
The adoption of the Interpretations has not led to any changes in the
Company's accounting policies.
(2) STANDARDS AND INTERPRETATIONS WHICH HAVE NOT BEEN APPLIED IN THESE
FINANCIAL STATEMENTS WERE IN ISSUE BUT NOT YET EFFECTIVE
As of the date of authorization of these financial statements, other than
the Standards and Interpretations adopted by the Company in advance of the
effective date of the financial statements, the following Interpretations
were in issue but not yet effective:
IAS 1 (AMENDED) "PRESENTATION OF FINANCIAL STATEMENTS"
The standard stipulates the presentation required in the financial
statements, and itemizes a general framework for the structure of the
financial statements and the minimal contents which must be included in the
context of the report. Changes have been made to the existing presentation
format of the financial statements, and the presentation and disclosure
requirements for the financial statements have been broadened, including
the presentation of an additional report in the framework of the financial
statements known as the "report of comprehensive income", and the addition
of a balance sheet as of the beginning of the earliest period that was
presented in the financial statements, in cases of changes in accounting
policy by means of retroactive implementation, in cases of restatement and
in cases of reclassifications.
The standard will be effective for reporting periods beginning from January
1, 2009. The standard permits earlier application.
At this stage, the management of the Company is examining the influence of
this standard on the Company's financial statements.
IAS 23 (AMENDED) "BORROWING COSTS"
The standard stipulates the accounting treatment of borrowing costs. In the
context of the amendment to this standard, the possibility of immediately
recognizing borrowing costs related to assets with an uncommon period of
eligibility or construction in the statement of operations was cancelled.
The standard will apply to borrowing costs that relate to eligible assets
as to which the capitalization period began from January 1, 2009. The
standard permits earlier implementation.
At this stage, the management of the Company estimated that the
implementation of the standard is not expected to have any influence on the
financial statements of the Company.
IAS 27 (AMENDED) "CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS"
The standard prescribes the rules for the accounting treatment of
consolidated and separate financial statements. Among other things, the
standard stipulates that transactions with minority shareholders, in the
context of which the company holds control of the subsidiary before and
after the transaction, will be treated as capital transactions. In the
context of transactions, subsequent to which the company loses control in
the subsidiary, the remaining investment is to be measured as of the date
that control is lost, at fair value, with the difference as compared to
book value to be recorded to the statement of operations. The
noncontrolling interest in the losses of a subsidiary, which exceed its
share in shareholders' equity, will be allocated to it in every case, while
ignoring its obligations and ability to make additional investments in the
subsidiary.
The provisions of the standard apply to annual financial reporting periods
which start on January 1, 2010 and thereafter. Earlier adoption is
permitted, on the condition that it will be done simultaneous with early
adoption of IFRS 3 (amended). The standard will be implemented
retrospectively, excluding a number of exceptions, as to which the
provisions of the standard will be implemented prospectively. At this
stage, the management of the Company estimated that the implementation of
the standard is not expected to have any influence on the financial
statements of the Company.
IFRS 3 (AMENDED) "BUSINESS COMBINATIONS"
The new standard stipulates the rules for the accounting treatment of
business combinations. Among other things, the standard determines
measurement rules for contingent consideration in business combinations
which is to be measured as a derivative financial instrument. The
transaction costs directly connected with the business combination will be
recorded to the statement of operations when incurred. Noncontrolling
interests will be measured at the time of the business combination to the
extent of their share in the fair value of the assets, including goodwill,
liabilities and contingent liabilities of the acquired entity, or to the
extent of their share in the fair value of the net assets, as
aforementioned, but excluding their share in goodwill.
As for business combinations where control is achieved after a number of
acquisitions (acquisition in stages), the earlier purchases of the acquired
company will be measured at the time that control is achieved at their fair
value, while recording the difference to the statement of operations.
The standard will apply to business combinations that take place from
January 1, 2010 and thereafter. Earlier adoption is possible, on the
condition that it will be simultaneous with early adoption of IAS 27
(amended).
At this stage, the management of the Company estimated that the
implementation of the standard is not expected to have any influence on the
financial statements of the Company.
IFRIC 13, CUSTOMER LOYALTY PROGRAMS
The clarification stipulates that transactions for the sale of goods and
services, for which the company confers reward grants to its customers,
will be treated as multiple component transactions and the payment received
from the customer will be allocated between the different components, based
upon the fair value of the reward grants. The consideration attributed to
the grant will be recognized as revenue when the reward grants are redeemed
and the company has made a commitment to provide the grants.
The directives of the clarification apply to annual reporting periods
commencing on January 1, 2009. Earlier implementation is permissible.
At this stage, the management of the Company estimated that the
implementation of the standard is not expected to have any influence on the
financial statements of the Company.
AMENDMENT TO IAS 32, FINANCIAL INSTRUMENTS: PRESENTATION, AND IAS 1,
PRESENTATION OF FINANCIAL STATEMENTS
The amendment to IAS 32 changes the definition of a financial liability,
financial asset and capital instrument and determines that certain
financial instruments, which are exercisable by their holder, will be
classified as capital instruments.
The provisions of the standard apply to annual financial reporting periods
which start on January 1, 2009 and thereafter. Earlier adoption is
permitted.
At this stage, the management of the Company estimated that the
implementation of the standard is not expected to have any influence on the
financial statements of the Company.
IFRS 1 "FIRST TIME ADOPTION OF IFRS" AND IAS 27 "CONSOLIDATED AND SEPARATE
FINANCIAL STATEMENTS"
The amendment states, among other things, the method in which the
measurement of the investments in subsidiaries, associated entities and
joint control entities should be applied at first time adopting IFRS, and
the method in which income from dividends received should be recognized.
The amendment is effective for annual periods commencing January 1, 2009.
At this stage, the management of the Company estimated that the
implementation of the standard is not expected to have any influence on the
financial statements of the Company.
A. RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2008 COMPARED WITH YEAR ENDED DECEMBER 31, 2007
SALES. Sales for the year ended December 31, 2008 increased by approximately NIS
99,534 thousand (USD 26,179 thousand), or 39.86%, to approximately NIS 349,227
thousand (USD 91,853 thousand) from NIS 249,693 thousand (USD 65,674 thousand)
for the year ended December 31, 2007. This increase in sales resulted mainly
from the recent consolidation of the revenues of the two subsidiaries - Shamir
Salads and the Danish dairy distributor.
COST OF SALES. Cost of sales for the year ended December 31, 2008 increased to
approximately NIS 281,651 thousand (USD 74,080 thousand), or 80.65% of sales,
from approximately NIS 198,961 thousand (USD 52,331 thousand), or 79.68% of
sales, for the year ended December 31, 2007. The increase in Cost of sales was
mainly due to the recent strengthening of the U.S. dollar versus the NIS
(devaluation of 13% in the second half of 2008) and due to the sharp decrease in
the global purchase prices of food products in the fourth quarter of 2008.
GROSS PROFIT. Gross profit for the year ended December 31, 2008 increased to NIS 67,576 thousand (USD 17,773 thousand), or 19.35% of sales, in the year ended December 31, 2008, as compared to a gross profit of approximately NIS 50,732 thousand (USD 13,344 thousand), or 20.32% of sales, in the year ended December 31, 2007. The decrease in the gross profit margin was due to the recent strengthening of the U.S. dollar versus the NIS (devaluation of 13% in the second half of 2008) and due to the sharp decrease in the fourth quarter of 2008 in the global purchase prices of food products, resulting in the sharp decrease in the selling prices of the Company's products as well. Because the Company's commitments to purchase food products were based on higher prices from its vendors, the immediate consequence was a decline in the gross margin in the fourth quarter of 2008. SALES AND MARKETING EXPENSES. Sales and marketing expenses for the year ended December 31, 2008 increased to approximately NIS 33,759 thousand (USD 8,879 thousand), or 9.67% of sales, from approximately NIS 24,263 thousand (USD 6,382 thousand), or 9.72% of sales, for the year ended December 31, 2007. This increase in sales and marketing expenses was mainly due to the sales and marketing expenses of the Company's two new subsidiaries, Shamir Salads and the Danish dairy distributor. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the year ended December 31, 2008 increased to approximately NIS 23,127 thousand (USD 6,083 thousand), or 6.62% of sales, from approximately NIS 18,869 thousand (USD 4,963 thousand), or 7.56% of sales, for the year ended December 31, 2007. This increase of general and administrative expenses was mainly due to the general and administrative expenses of the Company's two subsidiaries, Shamir Salads and the Danish dairy distributor, whose results were consolidated with the Company's results starting in 2008. OTHER EXPENSE (INCOME). Other expense for the year ended December 31, 2008 amounted to NIS 2,195 thousand (USD 577 thousand) as compared to other income of NIS 470 thousand (USD 124 thousand) for the year ended December 31, 2007. Other expense for the year ended December 31, 2008, was mainly due to a final arbitration award entered against the Company for damages in the amount of NIS 1,981 thousand (USD 521 thousand) in connection with a dispute with the Vitarroz Corp. IMPAIRMENT OF GOODWILL. Impairment of Goodwill expense for the year ended December 31, 2008, was NIS 1,067 thousand (USD 280 thousand) due to impairment of goodwill relating to the Danish dairy distributor, as compared to Impairment of Goodwill expense for the year ended December 31, 2007, of NIS 3,054 thousand (USD 803 thousand), which was due to impairment of goodwill relating to WF Kosher Food Distributors Ltd. OPERATING INCOME. Operating income for the year ended December 31, 2008 increased by approximately NIS 2,412 thousand (USD 634 thousand), or by 48.09%, to approximately NIS 7,428 thousand (USD 1,954 thousand), or 2.13% of sales, from approximately NIS 5,016 thousand (USD 1,319 thousand), or 2.01% of sales, for the year ended December 31, 2007. FINANCING INCOME (COSTS), NET. Financing costs, net, for the year ended December 31, 2008 was approximately NIS 5,707 thousand (USD 1,501 thousand) compared with Financing income, net, for the year ended December 31, 2007 of approximately NIS 2,274 thousand (USD 598 thousand). The Financing costs, for the year ended December 31, 2008 mainly included losses from marketable securities of NIS 4,836 thousand (USD 1,272 thousand) as compared to a losses from marketable securities of NIS 68 thousand (USD 18 thousand) in the year ended December 31, 2007, and expenses due to rate exchanges of NIS 2,698 thousand (USD 710 thousand) as compared to expenses due to rate exchanges of NIS 229 thousand (USD 60 thousand) in the year ended December 31, 2007. The Financing income, for the year ended December 31, 2008 mainly included interest income from short-term bank deposits of NIS 1,475 thousand (USD 388 thousand) as compared to NIS 2,251 thousand (USD 592 thousand) in the year ended December 31, 2007.
PRE-TAX INCOME. Income before taxes for the year ended December 31, 2008
decreased by approximately NIS 5,569 thousand (USD 1,465 thousand), or by
76.39%, to approximately NIS 1,721 thousand (USD 453 thousand) from NIS 7,290
thousand (USD 1,917 thousand) for the year ended December 31, 2007.
TAXES ON INCOME. Taxes on income for the year ended December 31, 2008 decreased
to approximately NIS 1,454 thousand (USD 382 thousand) from approximately NIS
2,651 thousand (USD 697 thousand) in the year ended December 31, 2007. The
decrease in taxes on income in 2008 in compare to 2007 was attributable to the
decrease in income before taxes.
NET INCOME. Net income for the year ended December 31, 2008 decreased by
approximately NIS 4,374 thousand (USD 1,150 thousand), or 94.25%, to
approximately NIS 267 thousand (USD 71 thousand), or 0.08% of sales, from
approximately NIS 4,639 thousand (USD 1,220 thousand), equal to 1.86% of sales
for the year ended December 31, 2007.
B. LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company's operations have been funded mainly
through equity and cash flows from operating activities. The Company's bank
indebtedness is secured by certain liens on its share capital, goodwill and
certain other assets.
For the year ended December 31, 2008, cash and cash equivalents increased
from approximately NIS 61.6 million (USD 16.2 million) at December 31, 2007 to
approximately NIS 78.7 million (USD 20.7 million) at December 31, 2008.
During the year ended December 31, 2008, marketable securities decreased to
NIS 9.4 million (USD 2.5 million) from NIS 31.3 million (USD 8.2 million) at
December 31, 2007.
For the year ended December 31, 2008, the Company generated a positive cash
flow from operating activities of approximately NIS 18.9 million (USD 5.0
million) primarily as a result of an increase in trade and other payables, and
accrued expenses of approximately NIS 11.6 million (USD 3.0 million) and of
unrealized loss on marketable securities of approximately NIS 5.1 million (USD
1.3 million) which was offset by an increase in trade receivables and other
receivables of approximately NIS 4.2 million (USD 1.1 million).
For the year ended December 31, 2007, the Company generated a positive cash
flow from operating activities of approximately NIS 7.9 million (USD 2.1
million), primarily as a result of an increase in trade and other payables, and
accrued expenses of approximately NIS 13.2 million (USD 3.5 million) which was
offset by an increase in trade receivables and other receivables of
approximately NIS 11.6 million (USD 3.0 million). Our trade receivables and
other receivables increased primarily due to the increase in trade receivables.
During the year ended December 31, 2008, the Company utilized cash flow of
NIS 3.1 million (USD 0.8 million) for investing activities, mainly for a
purchase of the subsidiaries (Shamir Salads and the Danish dairy distributor)
and purchase of additional shares of Gold Frost in the total amount of NIS 14.9
million (USD 3.9 million) and for additions to fixed assets of NIS 3.3 million
(USD 0.9 million), which was offset by Proceeds from realization of marketable
securities, net, in the amount of NIS 16.7 million (USD 4.4 million).
During the year ended December 31, 2007, the Company utilized cash flow of
NIS 44.3 million (USD 11.7 million) for investing activities, mainly for a
purchase of subsidiary and purchase of additional shares of Gold Frost in the
total amount of NIS 15.6 million (USD 4.1 million), for the purchase of
marketable securities, net, in the amount of NIS 17.4 million (USD 4.6 million),
and for additions to fixed assets of NIS 11.3 million (USD 3.0 million),
consisting mostly of the investments in the Company's new logistics center.
During the year ended December 31, 2008, the Company generated cash flow
from financing activities of NIS 1.3 million (USD 0.3 million) mainly due to
short term bank borrowings. During the year ended December 31, 2007, the Company
generated cash flow from financing activities of NIS 6.8 million (USD 1.8
million) due to short term bank borrowings.
The Company's cash requirements, net, during the years ended December 31,
2008 and 2007 were met primarily through its working capital. As of December 31,
2008, the Company had working capital of approximately NIS 122.5 million (USD
32.2 million) compared with working capital of NIS 142.6 million (USD 37.5
million) as of December 31, 2007. The Company believes that its working capital
is sufficient for the Company's present requirements.
The Company's trade receivables balance as of December 31, 2008 was NIS
79.6 million (USD 20.9 million) as compared to a trade receivables balance as of
December 31, 2007 in the amount of NIS 63.8 million (USD 16.8 million). The
average time period within which our accounts receivable were paid was 81 days
for 2008, compared with 95 days for 2007.
IMPACT OF INFLATION AND DEVALUATION ON RESULTS OF OPERATIONS, LIABILITIES AND
ASSETS
The rate of inflation in Israel during the last six years has been
significantly reduced as compared to previous years. The rate of devaluation of
the U.S. dollar, which was high until 2005, has reversed course and the
representative rate of the U.S. Dollar was NIS 3.802 on December 31, 2008,
compared with NIS 3.846 on December 31, 2007, 4.225 on December 31, 2006, NIS
4.603 on December 31, 2005, and 4.308 on December 31, 2004. As of April 30,
2009, the representative rate of the U.S. Dollar was NIS 4.163.
The annual rates of inflation in Israel during the years ended December 31,
2003, 2004, 2005, 2006, 2007 and 2008 were approximately (1.9%), 1.6%, 2.4%
(0.1%), 3.4% and 3.8%, respectively, while during such periods the devaluation
of the NIS against the U.S. Dollar was approximately (7.6%), (1.6%), 6.8%
(8.2%), (9.0%) and (1.1%), respectively. During each of the years ended December
31, 2003, 2004, 2006, 2007 and 2008, the rate of inflation in Israel exceeded
the rate of devaluation of the NIS against the U.S. Dollar, while during the
year ended December 31, 2005 the rate of devaluation of the NIS against the U.S.
Dollar exceeded the rate of inflation in Israel.
A revaluation of the NIS in relation to the U.S. Dollar will have the
effect of increasing the U.S. Dollar value of any assets of the Company which
consist of NIS or receivables payable in NIS. Such a revaluation would also have
the effect of increasing the U.S. Dollar amount of any liabilities of the
Company which are payable in NIS (unless such payables are linked to the
Dollar). Conversely, any decrease in the value of the NIS in relation to the
U.S. Dollar will have the effect of decreasing the U.S. Dollar value of any
linked NIS assets of the Company and the U.S. Dollar amount of any linked NIS
liabilities of the Company.
The dollar cost of the Company's operations in Israel is influenced by the
extent to which any increase in the rate of inflation in Israel over the rate of
inflation in the United States is offset by the devaluation of the NIS in
relation to the U.S. Dollar.
The Company's assets are not linked to the Israeli CPI or the U.S. Dollar.
However, some of the Company's liabilities are linked to the Israeli CPI and
various foreign currencies. Consequently, inflation in Israel and currency
fluctuations will have a negative effect on the value to the Company of payments
the Company receives in NIS and on the Company's liabilities linked to foreign
currencies.
GUARANTEES AND PLEDGES
Principally in connection with letters of credit issued to the Company, the
Company has issued a debenture to each of Bank Leumi Le'Israel, Bank Mizrahi
Ltd. and Bank Hapoalim Ltd., pursuant to which the Company has pledged all of
its assets (including its outstanding share capital and goodwill of the Company)
in favor of such banks to secure its obligations or those obligations incurred
by the Company jointly with third parties, including obligations with respect to
letters of credit with the Company's suppliers. Bank Leumi Le'Israel, Bank
Mizrahi Ltd. and Bank Hapoalim Ltd. have agreed among them that the pledges
subject to such debentures shall rank PARI PASSU. The outstanding amount of such
letters of credit as of December 31, 2008 was approximately NIS 19,215 thousand
(USD 5,054 thousand).
The Company also guarantees, without limitation as to amount and for an
unlimited period of time, for 51% of the obligations of its subsidiary, Shamir
Salads, to the United Mizrahi Bank Ltd. and Ben-Leumi Bank. As of December 31,
2008, Shamir Salads obligations to those banks amounted to NIS 13,385 thousand
(USD 3,520 thousand).
The Company also guarantees, without limitation as to amount and for an
unlimited period of time, the obligations of its wholly-owned subsidiary,
W.F.D., to the United Mizrahi Bank Ltd. As of December 31, 2008, W.F.D. had no
obligations to United Mizrahi Bank Ltd.
The Company also guarantees, without limitation as to amount and for an
unlimited period of time, the obligations of its subsidiary, Gold Frost, both to
Bank Leumi Le'Israel Ltd. and to the United Mizrahi Bank Ltd. As of December 31,
2008, Gold Frost had no obligations to such banks.
C. TREND INFORMATION
In prior years, there has been an increase in the number of small private
supermarket stores that have opened in Israel, which has resulted in greater
price competition in the stores and in our business. The increased price
competition resulted in an increase in our cost of sales as a percentage of
total sales. In order to keep our gross margin at its high levels, in the past
we were able to change our product mix and introduce new products with high
margins to increase our gross profit. In 2007, the global market experienced
steep price increases in agricultural commodities and cost pressures due to
weather-related problems, reduced milk production, cessation of EU dairy export
subsidies at the same time that consumption and demand increased in growing
emerging markets. These factors have negatively impacted our near term sales and
gross margins. In 2008, and especially in the fourth quarter of 2008, the
decrease in our gross margin continued due to the sharp decrease of the global
purchase prices of food products, resulting in the sharp decrease in the selling
prices of our products as well. Because of our commitments to purchase food
products were based on higher prices from our vendors, the immediate consequence
was a decline in our gross margin in 2008, and we expect a further decline until
approximately mid 2009 when we will complete the sale of the inventory in the
orders from vendors backlog acquired at the higher prices. The decrease of
global purchase prices of food products compounded with the recent strengthening
of the U.S. dollar versus the NIS (a revaluation of more than 13% of the NIS in
relation to the U.S. Dollar in the second half of 2008) and the general effects
of the global economic recession, led to a gross margin of 19.35% in 2008 as
compared to a gross margin of 20.32% in 2007. To the extent that global purchase
prices of food products continue to decline, or the depreciation of the NIS
versus the U.S. dollar continues, our gross margins may be impacted beyond the
second quarter of 2009 because we must continue to purchase inventory from
foreign vendors in advance to take into account the time for manufacture and
shipment of products.
The Company is operating from a new logistic center starting from the
second quarter of 2007 with the aim of increasing the efficiency of its logistic
process and reducing its operating expenses. The Company is also working towards
increasing its sales to customers outside of Israel.
The Company's management is evaluating the financial stability of its
customers by entering into agreements with companies for providing business
data, examining bank accounts, investigations, and following negative
publications regarding those customers or other signs indicating financial
difficulties.
In the U.S., despite the declining Jewish population (due to intermarriage
and lower birth rates), a published report earlier this year concluded that
global demand for kosher products is growing because of demand for kosher
products is not limited to just the Jewish population. Kosher food now commands
attention from a new crop of consumers and not just those who follow traditional
Jewish dietary laws. In a survey referred to in this report, approximately 62%
of respondents who buy kosher foods felt that kosher products are of better
quality than non-kosher items, while approximately 51% of respondents who buy
kosher foods felt that kosher products are healthier than non-kosher items. We
believe that as increasing number of mainstream consumers are becoming concerned
about the integrity of the food they eat for ethical or health reasons, and this
will provide a growth opportunity for the kosher market, in which our
subsidiary, WF, is currently operating. . In addition to the increase in
health-conscious consumers, we believe that other ethnic or religious groups
contribute to the increase in the kosher food market since the dietary
restrictions for certain other religious groups are met by kosher food.
D. TABULAR DISCLOSURE OF CONTRACTURAL OBLIGATIONS
The following table of the Company's material contractual obligations as of
December 31, 2008 summarizes the aggregate effect that these obligations are
expected to have on our cash flows in the periods indicated:
2008
PAYMENTS DUE BY PERIOD
------------------------------------------------------------------------
CONTRACTUAL OBLIGATIONS TOTAL LESS THAN 1 YEAR 1-3 YEARS 3-5 YEARS MORE THAN 5 YEARS
------------------------ ---------- ------------------ --------- --------- -----------------
(IN THOUSANDS)
Open purchase orders NIS 19,215 NIS 19,215 - - -
(USD 5,054) (USD 5,054) - - -
Loans from banks NIS 17,246 NIS 17,246 - - -
(USD 4,536) (USD 4,536) - - -
Lease agreements NIS 584 NIS 317 NIS 267 - -
(USD 153) (USD 83) (USD 70) - -
Total NIS 37,045 NIS 36,778 NIS 267 - -
(USD 9,743) (USD 9,673) (USD 70) - -
E. SAFE HARBOR
This annual report contains certain forward-looking statements (as such
term is defined in the Private Securities Litigation Reform Act of 1995). When
used in this report, the words "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to the Company or the
management of the Company, identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future events, based on
certain assumptions and information currently available to management, all of
which are subject to certain risks and uncertainties including, among others:
o changes affecting currency exchange rates, including the NIS/U.S.
Dollar exchange rate;
o payment default by any of our major clients;
o the loss of one of more of our key personnel;
o changes in laws and regulations, including those relating to the food
distribution industry, and inability to meet and maintain regulatory
qualifications and approvals for our products;
o termination of arrangements with our suppliers, in particular Arla
Foods amba;
o loss of one or more of our principal clients;
o increasing levels of competition in Israel and other markets in which
we do business;
o changes in economic conditions in Israel, including in particular
economic conditions in our core markets;
o our inability to accurately predict consumption of our products;
o product liability claims;
o our inability to continue to meet the Nasdaq listing requirements;
o we may not successfully integrate our prior acquisitions; and
o increases in milk, corn, wheat and other product prices.
Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results of operations may
vary materially from those described herein as anticipated, believed, estimated,
expected or intended.