UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31,20192020
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31,
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report ________
Commission File No. 000-29256
G. WILLI-FOOD INTERNATIONAL LTD.
(Exact name of Registrant as specified in its charter
and translation of Registrant’s name into English)
(Exact name of Registrant as specified in its charter
and translation of Registrant’s name into English)
Israel
(Jurisdiction of incorporation or organization)
4 Nahal Harif St., Northern Industrial Zone, Yavne 81106, Israel
(Address of principal executive offices)
Yitschak Barabi, Chief Financial Officer 4 Nahal Harif St., Northern Industrial Zone, Yavne 81106, Israel Tel: 972-8-932-1000 |
(Name, Telephone, E-mail and/or Facsimile number and Address of Registrant's Contact Person) |
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Ordinary Shares, NIS 0.10 par value per share | WILC | Nasdaq Capital Market |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
The registrant had 13,217,01750,000,000 ordinary shares, NIS 0.10 nominal value per share, as of December 31, 2019.2020.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files):
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
:
:
Large Accelerated filer ☐ Emerging growth company ☐ | Accelerated filer ☐ Non-accelerated filer ☒ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐
International Financing Reporting Standards as issued by the International Accounting Standards Board ☒
Other ☐
If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow:
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
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TABLE OF CONTENTS
Page | |||
PART I | 5 | ||
5 | |||
5 | |||
5 | |||
30 | |||
54 | |||
56 | |||
61 | |||
76 | |||
76 | |||
| 77 | |||
| 77 | |||
78 | |||
PART II | 80 | ||
3
In this Annual Report, references to the “Company”, “we” and “us” refer to G. Willi-Food International Ltd. and its consolidated subsidiaries. References to “Willi-Food” refer to Willi-Food Investments Ltd., our controlling shareholder.
The Company presents its consolidated financial statements in New Israeli Shekels, the currency of the State of Israel. Unless otherwise specified or the context otherwise requires, references to “$”, “US$”, “Dollars”, “USD” and “U.S. Dollars” are to the United States Dollars and references to "NIS" are to New Israeli Shekels.
Solely for the convenience of the reader, this Annual Report contains translations of certain NIS amounts into U.S. Dollars at specified rates. These translations should not be construed as representations that the translated amounts actually represent such dollar or NIS amounts, as the case may be, or could be converted into U.S. Dollars or NIS as the case may be, at the rates indicated or at any other rate. Therefore, unless otherwise stated, the translations of NIS into U.S. Dollars have been made at the rate of NIS 3.4563.215 = $1.00, the representative exchange rate on December 31, 2019.2020.
CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this Annual Report that are not historical facts, including, without limitation, certain statements made in the sections hereof entitled “Information on the Company,” “Dividends,” “Operating and Financial Review and Prospects,” and “Quantitative and Qualitative Disclosures about Market Risk” are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, the risks set forth in "Item 3. Key Information – D. Risk Factors", including the following:
market risks of our portfolio of marketable securities, such as changes affecting currency exchange rates;
payment default by, or loss of, one or more of our principal clients; the loss of one or more of our key personnel;
termination of, or changes in, arrangements with our key customers;
termination of arrangements with our suppliers;
increasing levels of competition in Israel and other markets in which we do business;
increase or decrease in global purchase prices of food products;
our inability to accurately predict consumption of our products or changes in consumer preferences;
product liability claims and other litigation matters;
interruption to our storage facilities;
our insurance coverage may not be sufficient;
our operating results may be subject to variations from quarter to quarter;
our inability to successfully compete with nationally branded products;
our inability to successfully integrate our acquisitions;
our inability to protect our intellectual property rights;
significant concentration of our shares are held by one shareholder;
we are controlled by and have business relations with Willi-Food Investments Ltd. and its management;
the price of our ordinary shares may be volatile;
our inability to meet the Nasdaq Capital Market (“Nasdaq”) listing requirements;
our shares are listed for trade on more than one stock exchange;
our inability to maintain an effective system of internal controls;
cyber-attacks on the Company's information systems;
risks related to our non-bank loan business activity;
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;
economic conditions in Israel;
changes in political, economic and military conditions in Israel, including, in particular, economic conditions in the Company’s core markets; and
our international operations may be adversely affected by risks associated with international business.business; and
the ongoing COVID-19 pandemic.
The Company is under no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason. See "Item 3. Key Information – D. Risk Factors” and "Item 5. Operating and Financial Review and Prospects – A. Results of Operations”.
4
PART I
Not applicable.
Not applicable.
A. SELECTED FINANCIAL DATA
The following selected consolidated financial data for each of the years in the three-year period which ended December 31, 2020, 2019 2018 and 20172018 are derived from our audited consolidated financial statements set forth elsewhere in this report, which have been prepared in accordance with IFRS as issued by IASB. The selected consolidated financial data for the years ended December 31, 20162017 and 20152016 is derived from our audited consolidated financial statements not appearing in this report. All of the financial data set forth below are in thousands (except share and per share amounts). You should read the following selected consolidated financial data in conjunction with "Item 5. Operating and Financial Review and Prospects” and the consolidated financial statements and notes thereto appearing elsewhere herein. Historical results are not necessarily indicative of any results to be expected in any future period.
Income Statement Data:
In accordance with IFRS
For the year ended December 31
| 2019 | 2018 | 2017 | 2016 | 2015 | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
| NIS | USD | NIS | USD | NIS | NIS | NIS | NIS | USD | NIS | USD | NIS | NIS | NIS | |||||||||||||||||||||||||||||||||||||||||||
| Revenue | 395,637 | 114,478 | 338,245 | 97,872 | 311,978 | 294,202 | 312,514 | 454,094 | 141,242 | 395,637 | 123,060 | 338,245 | 311,978 | 294,202 | ||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 271,784 | 78,641 | 240,032 | 69,454 | 237,645 | 217,585 | 237,452 | 308,717 | 96,024 | 271,784 | 84,536 | 240,032 | 237,645 | 217,585 | ||||||||||||||||||||||||||||||||||||||||||
| Gross profit | 123,853 | 35,837 | 98,213 | 28,418 | 74,333 | 76,617 | 75,062 | 145,377 | 45,218 | 123,853 | 38,524 | 98,213 | 74,333 | 76,617 | ||||||||||||||||||||||||||||||||||||||||||
| Selling expenses | 55,490 | 16,056 | 43,823 | 12,680 | 42,090 | 39,405 | 37,294 | 65,990 | 20,526 | 55,490 | 17,260 | 43,823 | 42,090 | 39,405 | ||||||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 21,067 | 6,096 | 16,686 | 4,828 | 15,839 | 14,577 | 32,926 | 21,918 | 6,817 | 21,067 | 6,553 | 16,686 | 15,839 | 14,577 | ||||||||||||||||||||||||||||||||||||||||||
| Other Income | - | - | (69 | ) | (20 | ) | (361 | ) | (112 | ) | -2,182 | (108 | ) | (34 | ) | - | - | (69 | ) | (361 | ) | (112 | ) | |||||||||||||||||||||||||||||||||
| Total operating expenses | 76,557 | 22,152 | 60,440 | 17,488 | 57,568 | 53,870 | 68,038 | 87,800 | 27,309 | 76,557 | 23,813 | 60,440 | 57,568 | 53,870 | ||||||||||||||||||||||||||||||||||||||||||
| Operating profit | 47,296 | 13,685 | 37,773 | 10,930 | 16,765 | 22,747 | 7,025 | 57,577 | 17,909 | 47,296 | 14,711 | 37,773 | 16,765 | 22,747 | ||||||||||||||||||||||||||||||||||||||||||
| Finance income | 20,966 | 6,067 | (7,212 | ) | (2,087 | ) | 17,937 | (3,425 | ) | 3,363 | 11,348 | 3,530 | 20,966 | 6,521 | (7,212 | ) | 17,937 | (3,425 | ) | |||||||||||||||||||||||||||||||||||||
| Finance expense | 3,016 | 873 | (2,256 | ) | (653 | ) | 3,769 | 3,143 | 978 | 1,253 | 389 | 3,016 | 938 | (2,256 | ) | 3,769 | 3,143 | |||||||||||||||||||||||||||||||||||||||
| Finance income (expense), net | 17,950 | 5,194 | (4,956 | ) | (1,434 | ) | 14,168 | (6,568 | ) | 2,385 | 10,095 | 3,141 | 17,950 | 5,583 | (4,956 | ) | 14,168 | (6,568 | ) | |||||||||||||||||||||||||||||||||||||
| Profit before taxes on income | 65,246 | 18,879 | 32,817 | 9,496 | 30,933 | 16,179 | 9,410 | 67,672 | 21,050 | 65,246 | 20,294 | 32,817 | 30,933 | 16,179 | ||||||||||||||||||||||||||||||||||||||||||
| Taxes on income | (13,735 | ) | (3,975 | ) | (7,850 | ) | (2,271 | ) | (5,910 | ) | (5,327 | ) | (2,566 | ) | (15,463 | ) | (4,810 | ) | (13,735 | ) | (4,272 | ) | (7,850 | ) | (5,910 | ) | (5,327 | ) | ||||||||||||||||||||||||||||
| Profit from continuing operations | 51,511 | 14,904 | 24,967 | 7,224 | 25,023 | 10,852 | 6,844 | 52,209 | 16,240 | 51,511 | 16,022 | 24,967 | 25,023 | 10,852 | ||||||||||||||||||||||||||||||||||||||||||
| Profit for the year | 51,511 | 14,904 | 24,967 | 7,224 | 25,023 | 10,852 | 6,844 | 52,209 | 16,240 | 51,511 | 16,022 | 24,967 | 25,023 | 10,852 | ||||||||||||||||||||||||||||||||||||||||||
| Attributable to: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owners of the Company | 51,511 | 14,904 | 24,967 | 7,224 | 25,023 | 10,852 | 6,844 | 52,209 | 16,240 | 51,511 | 16,022 | 24,967 | 25,023 | 10,852 | ||||||||||||||||||||||||||||||||||||||||||
| Net Income | 51,511 | 14,904 | 24,967 | 7,224 | 25,023 | 10,852 | 6,844 | 52,209 | 16,240 | 51,511 | 16,022 | 24,967 | 25,023 | 10,852 | ||||||||||||||||||||||||||||||||||||||||||
| Basic and diluted earnings per Share | 3.90 | 1.13 | 1.89 | 0.5 | 1.89 | 0.82 | 0.52 | 3.89 | 1.21 | 3.90 | 1.2 | 1.89 | 1.89 | 0.82 | ||||||||||||||||||||||||||||||||||||||||||
| Shares Used in Computing Earnings per Share | 13,217,017 | 13,217,017 | 13,240,913 | 13,240,913 | 13,240,913 | 13,240,913 | 13,090,729 | 13,433,684 | 13,433,684 | 13,217,017 | 13,217,017 | 13,240,913 | 13,240,913 | 13,240,913 | ||||||||||||||||||||||||||||||||||||||||||
5
Balance Sheet Data:
In accordance with IFRS
| 2019 | 2018 | 2017 | 2016 | 2015 | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
| NIS | USD | NIS | USD | NIS | NIS | NIS | NIS | USD | NIS | USD | NIS | NIS | NIS | |||||||||||||||||||||||||||||||||||||||||||
| Working capital | 452,819 | 131,023 | 399,405 | 115,569 | 374,981 | 374,981 | 108,157 | 536,761 | 166,955 | 452,819 | 140,846 | 399,405 | 374,981 | 374,981 | ||||||||||||||||||||||||||||||||||||||||||
| Total assets | 537,235 | 155,450 | 466,413 | 134,957 | 436,922 | 436,922 | 126,023 | 629,923 | 195,932 | 537,235 | 167,103 | 466,413 | 436,922 | 436,922 | ||||||||||||||||||||||||||||||||||||||||||
| Shareholders' equity | 491,356 | 142,174 | 440,879 | 127,569 | 415,581 | 415,581 | 119,868 | 585,743 | 182,191 | 491,356 | 152,832 | 440,879 | 415,581 | 415,581 | ||||||||||||||||||||||||||||||||||||||||||
| Capital stock | 13,217,017 | 13,217,017 | 13,240,913 | 13,240,913 | 13,240,913 | 13,240,913 | 13,240,913 | 13,867,017 | 13,867,017 | 13,217,017 | 13,217,017 | 13,240,913 | 13,240,913 | 13,240,913 | ||||||||||||||||||||||||||||||||||||||||||
B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D. RISK FACTORS
You should carefully consider the risks we describe below, in addition to the other information set forth elsewhere in this annual report, including our financial statements and the related notes beginning on page F-1, before deciding to invest in our ordinary shares (the “Ordinary Shares”). The risks and uncertainties described below in this annual report on Form 20-F for the year ended December 31, 2020 are not the only risks facing us. We may face additional risks and uncertainties not currently known to us or that we currently deem to be immaterial. Any of the risks described below or incorporated by reference in this Form 20-F, and any such additional risks, could materially adversely affect our business, financial condition or results of operations. In such case, you may lose all or part of your investment.
Risks Related to Our Business and Industry
Our results of operations may be impacted by monetary risk. Our portfolio of marketable securities is subject to various market risks.
We are exposed to fluctuations in the rate of the United States Dollar and Euro versus the NIS. Most of our income is in NIS, whereas most of our purchases are in United States Dollars and in Euros. A significant depreciation in the NIS vis-à-vis the United States Dollar and/or Euro could have a material adverse effect on our results of operations and financial condition.
We strive to minimize market risks arising from exchange rate fluctuations and the cost of imported goods, especially by opening documentary credit arrangements (a/k/a letters of credit) for suppliers abroad, holding foreign currency reserves and initiating forward transactions and foreign currency options.
6
As a method of investing cash reserves, we hold a portfolio of marketable securities traded on the Tel Aviv Stock Exchange as well as other stock exchanges. This portfolio of marketable securities is subject to various market risks resulting from fluctuations in interest rates, exchange rates, price fluctuations and other market risks in Israel and abroad. We do not utilize derivative securities for trading purposes, enter into swap arrangements or otherwise hedge our currency in a manner that we believe could expose us to significant market risk.
In order to reduce these risks, the Board has adopted the procedure of regularly removing available funds in the Company's accounts for management by internal investment manager. In addition, the Board has revised the Company's investment policy, has appointed members of the Board to the investment committee and has added both Co-Chairman of the Board to the investment committee.
Our financial instruments consist mainly of cash and cash equivalents, current accountstrade receivable, current accountstrade payable and accruals. In view of their nature, the fair value of the financial instruments, included in working capital, is usually identical or close to their book value.
We depend on a small number of principal clients who have in the past bought our products in large volumes. Our business may be materially affected if any of our major clients default on their payments to us.
Financial instruments that potentially subject us to concentrations of credit risk consist principally of trade receivables.receivable. Despite our large number of clients (approximately 1,2501,600 customers, 2,5003,200 selling points in Israel and abroad), a major part of our sales is made to a limited number of customers. Our largest customer is Shufersal Ltd. ("Shufersal"), which owns, among other things, supermarkets which accounted for approximately NIS 55.664.6 million (which represents 14.1%14.2%) of our sales revenue during 2019.2020. We generally do not require collateral from our big supermarket chain customers, such as Shufersal, although we do require collateral from most of our remaining clients in Israel to ensure security in collecting payments that are due to us. In addition, we buy credit insurance for many of our customers. We maintain an allowance for doubtful debts based upon factors surrounding the credit risk of specific customers, historical trends and other information which our management believes adequately covers all reasonably anticipated losses in respect of trade receivables.receivable. There can be no assurance that this allowance will be adequate. In the event that any of our major clients default on their payment obligations to us, we will not possess sufficient security to collect the entire debt.
We cannot assure that our principal clients or any other client will continue to buy our products in the same volumes, on the same terms or at all.
We do not have long term purchase contracts with our clients, including our major clients like Shufersal, and our sales arrangements do not have minimum purchase requirements. We cannot assure that our major clients will continue to buy our products at all or in the same volumes or on the same terms as they have in the past. Losing one or more of them may adversely affect our business results. In addition, we cannot assure that we will be able to attract new customers. Our failure to do so may significantly reduce our sales.
The failure to attract and retain key personnel could adversely affect our business.
Our success depends in large part on our ability to continue to attract, retain, develop and motivate highly skilled professional personnel. Competition for certain employees, particularly top management, is intense. We may be unable to continue to attract and retain sufficient numbers of highly skilled employees. Our inability to attract and retain additional key employees or the loss of one or more of our current key employees could adversely impact our business, financial condition and results of operations.
7
In particular, we depend on the management services provided to us by Mr. Zwi Williger and Mr. Joseph Williger through management companies that they control, each of whom is a director and Co-Chairman of the Board. We do not have any key-man life insurance policy on either Mr. Zwi Williger or Mr. Joseph Williger. See Item 7. Major Shareholders and Related Party Transactions – A. Major Shareholders". The loss of either or both of Mr. Zwi Williger and/or Mr. Joseph Williger could adversely impact our business, financial condition and results of operations.
We work with a limited number of key suppliers. If these suppliers raise prices or terminate their engagement with us, our operating results could be adversely affected.
Although no one company supplies the majority of any of our products, we work with a limited number of key suppliers. If one or more of our key suppliers raises their prices, our operating results may be adversely affected. See risk factor below - "Increases or decreases in global product prices have in the past, and in the future, may continue to have a material adverse effect on our profitability". We believe that there are alternative suppliers for purchasing our products; however, we cannot assure that the products of the alternative suppliers will become immediately available and that the terms of purchase will be similar to those provided by current suppliers.
We may not be able to successfully compete with larger competitors who have greater operations, financial, marketing, labor and other resources than we have.
The food distribution business in Israel is highly competitive. We face competition from existing competitors in respect of imported as well as locally manufactured food products. Local producers are not subject to the financial risks of importing food products or to governmental policies regarding taxation of imported food products to which we as importers are subject. We may also face competition from potential newcomers to the local food manufacturing business as well as from existing importers and/or manufacturers not currently offering the same lines of products as us. In addition, in the event we further expand our activity in international food markets, we will also face competition from manufacturers and/or distributors in those markets. Certain of our current and potential competitors are substantially more established, benefit from substantially greater market recognition and have greater financial, marketing, labor and other resources than we have. If any of our competitors materially reduces prices, we may be required to reduce our prices in order to remain competitive. Such reductions, if effected, could have a material adverse effect on our financial condition and results of operations.
Increases or decreases in global product prices have in the past, and in the future may continue to have a material adverse effect on our profitability.
The cost of food commodities and other food products is cyclical and subject to other market factors and may fluctuate significantly. As a result, our cost in securing these products is subject to substantial increases over which we have no control. In addition, fuel costs, which represent the most significant factor affecting both utility costs at our facilities and our transportation costs, are subject to wide fluctuations. Although we are making best efforts, we cannot assure that we will be able to pass on to customers any increased costs associated with the procurement of these products. Moreover, there has been in the past, and there may be in the future, a time lag between the occurrence of such increased costs and the transfer of such increases to customers. To the extent that increases in the prices of our products cannot be passed on to customers or there is a delay in doing so, we are likely to experience an increase in our costs which may materially reduce our margin of profitability.
Further, there is an additional lag time from the date we purchase inventory from our suppliers situated outside of Israel (or commit to purchase inventory from such suppliers) and the date we sell the inventory to our customers in Israel. To the extent that the price we are able to sell such inventory to customers decreases from the time that we purchasespurchase it (or commit to purchase it), our margin of profitability may be materially reduced.
8
Increases or decreases in global product prices in the future may have a material adverse effect on our profitability.
Our results of operations may be adversely affected if we do not accurately predict the rate of consumption of our products.
We hold inventory of basic foodstuffs (such as preserved food, dairy and dairy substitute products, edible oils, pasta and rice (and other food products, and we accumulate inventories of these products based on our prediction of the rate of consumption of these products by our customers. If actual consumption does not meet our expectations, and the shelf life of such products expires or we cannot otherwise sell such products, this may materially and adversely affect our financial condition and results of operations. On the other hand, to the extent we do not have adequate inventory of our products to meet demand (for example, due to consumer conditions that create unexpectedly high demand or our failure to accurately predict the rate of consumption of our products), we will not be able to meet the needs of our customers and our revenues may be adversely affected.
We may be unable to anticipate changes in consumer preferences, which may result in decreased demand for our products.
Our success depends in part on our ability to anticipate the tastes and eating habits of our consumers and to offer products that appeal to their preferences. Consumer preferences change from time to time and our failure to anticipate, identify or react to these changes could result in reduced demand for our products, which would adversely affect our operating results and profitability.
We may be subject to product liability claims for misbranded, adulterated, contaminated or spoiled food products.
We sell food products for human consumption, which involves risks such as product contamination or spoilage, misbranding, product tampering, and other adulteration. Consumption of contaminated, spoiled, misbranded, tampered with or adulterated products may result in personal illness or injury. We could be subject to claims or lawsuits relating to an actual or alleged illness or injury, and we could incur liabilities that are not insured or that exceed our insurance coverage. Even if product liability claims against us are not successful or fully pursued, these claims could be costly and time consuming and may require management to spend significant time defending the claims rather than operating our business. In addition, a product that has been actually or allegedly misbranded or becomes adulterated could result in product withdrawals, product recalls, destruction of product inventory, negative publicity, temporary plant closings, and substantial costs of compliance or remediation. Any of these events, including a significant product liability judgment against us, could result in a loss of confidence in our food products, which could have an adverse effect on our financial condition, results of operations or cash flows.
Our insurance coverage may not be sufficient to cover our losses in the event our products are subject to product liability claims or our products are subject to recall. In such event, it could have a material adverse effect on us.
Our products may become the subject of product liability claims and product recalls, and there can be no assurance that our product liability insurance coverage limits will be adequate or that all such claims will be covered by such insurance. A product liability claim or product recall, even one without merit or for which we have substantial insurance coverage, could result in significant expenses, including legal defense costs, thereby lowering our earnings and potentially resulting in additional losses. Successful product liability claims or other judgments against us in excess of our insurance coverage could have a material adverse effect on us and our reputation.
9
We may be adversely affected by any interruption to our storage facility.
We store most of our products to be distributed to customers in one main location – a logistics center warehouse situated in Yavne, Israel. Any interruption to this storage facility, whether by power failure, flooding or otherwise, would have a material impact on our ability to trade in the ordinary course of our business.
Our operating results may be subject to variations from quarter to quarter.
Our operating results may be subject to variations from quarter to quarter depending on, among other things, the timing of sales campaigns and special events initiated both by us and our customers, the major Jewish holidays (such as the Jewish New Year and Passover), our ability to manage future inventory levels in line with business opportunities and anticipated customer demand, competitive developments in the market, changes in government regulations, periodic work stoppages or disruptions, changes in the rates of inflation in Israel and fluctuations in NIS/dollar and NIS/euro exchange rates. There can be no assurance that our sales or net income (if any) in any particular quarter will not be lower than the preceding and/or comparable prior-year quarter or that our sales or net income (if any) in a particular quarter will be indicative of our results of operations for the entire year. The trading prices of our ordinary shares may fluctuate significantly in response to variations in our quarterly operating results.
Our branded products may not be able to compete successfully with nationally branded products.
Competition to obtain shelf space for our branded products with retailers is primarily based on the expected or historical performance of our product sales relative to our competitors. The principal competitive factors for sales of our branded products to consumers are brand recognition and loyalty, product quality and price. Most of our branded product competitors have significantly greater resources than we do and may have a competitive advantage over our products due to greater brand name recognition.
Competitive pressures or other factors could cause us to lose market share, which may require us to lower prices, increase marketing expenditures, and/or increase the use of discounting or promotional programs, each of which would adversely affect our margins and could result in a decrease in our operating results and profitability.
We may not successfully integrate our acquisitions.
We have made acquisitions in the past and may do so in the future. Our success will depend in part on our ability to manage the combined operations of any acquired company, to integrate the operations and personnel of such company together with our other subsidiaries into a single organizational structure, and to replace those subsidiary managers who have departed or may in the future leave our employ. There can be no assurance that we will be able to effectively integrate the operations of our subsidiaries and our acquired businesses into a single organizational structure. Integration of operations could also place additional pressures on our management as well as on our other key personnel. The failure to successfully manage any integration could have an adverse material effect on results of our operations.
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If we are unable to protect our intellectual property rights, our competitive position could be compromised.
We market certain products under the trademarks “Willi-Food”, "Euro European Dairies", "Donna Rozza", "Manchow", “Gold Frost”, "Tifeeret", "The Chef Dish", "Art Coffe", "Mr Chang", "Muchi", "Euro Butter", "Euro Spread", "Euro Cheese", Euro Cream", "Euro Dessert", "Euro Veg", "Ha-Bulgaria ", "Gelato", "Pinukim", and "Emma". Although we have registered trademarks for these brands, we cannot assure that the degree of protection from this registration will be sufficient to protect our rights in these trademarks.
One shareholder owns a majority of our shares.
As of March 19, 2019,25, 2021, Willi-Food directly owned approximately 62.05%59.1% of our ordinary shares (approximately 62.05%59.1% on a fully‑diluted basis), and its majority shareholder, B.S.D. Crown Ltd. ("BSD"), counting the holding of Willi-Food and additional ordinary shares that it held directly, beneficially owned approximately 5.83%5.6% of our outstanding shares (approximately 5.83%5.6% on a fully‑diluted basis). Messrs. Zwi Williger and Joseph Williger together own a majority of the outstanding shares of BSD and therefore may be considered the beneficial owners of all shares beneficially owned by BSD. See "Item 7. Major Shareholders and Related Party Transactions – A. Major Shareholders".
Our Articles of Association do not provide for cumulative voting rights with respect to the election of directors and every resolution in a general meeting of shareholders is deemed duly passed if passed by a simple majority of the shareholders present and voting unless another majority is required by the Israeli Companies Law (the "Companies Law") or by our Articles of Association. Therefore, our majority shareholder, Willi-Food, is able to control the outcome of matters requiring shareholder approval that do not require a special majority.
We have business relations with Willi-Food and its management.
Willi-Food, our controlling shareholder, is a holding company whose main asset is the ordinary shares it owns in our company. Willi-Food currently does not directly conduct any material business.
Certain of our key personnel also serve in management positions in Willi-Food. By serving in dual capacities, these persons may experience conflicts of interest involving the two companies. Israeli law imposes procedures, including a requirement of shareholder approval for certain material transactions, as a precondition to entering into interested party transactions. These procedures may apply to transactions between Willi-Food and us. However, we cannot assure that we will be able to avoid possible detrimental effects of any such conflicts that may arise.
Our ordinary shares on Nasdaq could fluctuate significantly.
other market.
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Our inability to meet the Nasdaq listing requirements could result in delisting.delisting
We may in the future fail to comply with the Nasdaq Capital Market regulations and listing requirements as to minimum share price, minimum net income, minimum number of shareholders and public float and other requirements. In addition, under Nasdaq’s Listing Rules, any company whose shares have a closing bid price less than $1.00 for 30 consecutive business days may be subject to a delisting proceeding by Nasdaq.
If we fail to meet the continued listing criteria under the Rule, our ordinary shares may be delisted from trading on the Nasdaq Capital Market.Market and the TASE under dual-listing requirements.
Delisting from the Nasdaq Capital Market and/or the TASE could have an adverse effect on our business and on the trading of our ordinary shares. If a delisting of our ordinary shares from Nasdaq were to occur, our shares would trade in the over-the-counter market in the U.S. such as on the OTC Bulletin Board or on the “pink sheets”. The over-the-counter market is generally considered to be a less efficient market, and this could diminish investors’ interest in our ordinary shares as well as significantly impact our share price and the liquidity of our ordinary shares. Any such delisting may also severely complicate trading of our shares by our shareholders, or prevent them from re-selling their shares at/or above the price they paid. Furthermore, relatively low trading volumes may make it difficult for shareholders to trade shares or initiate any other transactions. Delisting may also make it more difficult for us to issue additional securities or secure additional financing.
The Company participates in tenders for the importation into Israel of certain food products on a duty free basis which are published from time to time by the Ministry of Finance. Our resultscompetitors also participate in these tenders and may offer better bids than those of operationsthe Company, thereby resulting in the Company losing the competitive processes to acquire the quotas. The winners of these tax exempt import quotas commit to selling preset quantities of the products at a relatively low price to the final consumer. Violation of the terms of the tenders may be impacted by cyber-attacks oncause forfeiture of bank guarantees granted against compliance with the Company's information systems.tender terms, and non-issuance of tax exempt import quotas in the competitive proceeding for up to five years. Our inability to win such tenders or any Company violation of the terms of the tenders could negatively impact our business and harm our financial condition.
Risks Related to Our Non-Bank Loan Business Activity
Our credit standards and on-going credit assessment processes might not protect us from significant credit losses.
During 2019, the Company began to engage in the non-bank credit field by extending loans to other companies. We manage credit risk in our loans through a program of underwriting standards, the review of certain credit decisions and an ongoing process of assessment of the quality of the credit already extended. In addition, our credit administration function employs risk management techniques intended to promptly identify problem loans. While these procedures are designed to provide us with the information needed to implement policy adjustments where necessary and to take appropriate corrective actions, there can be no assurance that such measures will be effective in avoiding future undue credit risk, and credit losses may occur in the future.
The amount of our future loan losses could be influenced by changes in economic, operating and other conditions, including changes in interest rates, which may be beyond our control, and these losses may exceed current estimates. While the risk of nonpayment is inherent in providing financing, we could experience greater nonpayment levels than we anticipate. Deterioration in the quality of our loan portfolio could cause our interest income and net interest margin to decrease and our provisions for loan losses to increase further, which could adversely affect our results of operations and financial condition.
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Our allowance for loancredit losses may not be adequate to cover actual losses, which could materially and adversely affect our operating results.
We maintain an allowance for loan losses that we believe is appropriate to provide for any potential losses in our loan portfolio. The allowance is based upon factors such as the credit risk of specific customers, historical trends and experience, ongoing review of the quality, size and diversity of our loan portfolio, the amount and quality of collateral securing the loans, current economic conditions, geographic and industry loan concentrations and other information which we believe adequately covers all anticipated losses in respect of trade receivables.receivable. There can be no assurance that this allowance will be adequate.
Our business is subject to interest rate risk, and variations in interest rates may negatively affect financial performance.
Changes in the interest rate environment may reduce our profits. Loan volume and yields are affected by market interest rates on loans, and rising interest rates generally are associated with a lower volume of loan originations. We cannot ensure that we can minimize our interest rate risk. While an increase in the general level of interest rates may increase the loan yield and the net interest margin, it may adversely affect the ability of certain borrowers with variable rate loans to pay the interest and principal of their obligations. Accordingly, changes in levels of market interest rates could materially and adversely affect the net interest spread, asset quality, loan origination volume and our overall profitability.
Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business.
Risks Related to Our Location in Israel
We are subject to regulations and other policies of the Israeli government and of other countries from which we import and into which we export. If we are unable to obtain and maintain regulatory qualifications or approvals for our products, our business may be adversely affected.
Regulatory, licensing and quotas: The import, export, storage, marketing, distribution and labeling of some major food products are subject to extensive regulation and licensing by various Israeli government and municipal agencies, principally the Ministry of Health, the Ministry of Economy, the Ministry of Agriculture and the Ministry of Finance. To the extent that we have imported and exported, or will import and export, food products outside of Israel, we may be subject to quotas and other import and export laws and regulations which may limit our ability to sell or buy certain of our food products into or from these countries. We are required to maintain our distribution processes in conformity with all applicable laws and regulations. In the event that such laws and regulations change, or we fail to comply with such laws and regulations, we may be prevented from trading within Israel or other parts of the world.
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Tariffs: The Ministry of Finance and the Ministry of Economy of the State of Israel may increase the levels of tariffs on importing goods. This would have a direct impact on us and our financial performance by increasing our costs which we may not be able to pass on to our customers.
Kosher Licenses: Under kosher regulations, we are required to ascertain that the food products which we offer for sale bear kosher certification approved by certain authorities such as the Chief Rabbinate of Israel. There is a risk that the relevant authorities in Israel or other areas of the world responsible for issuing kosher licenses may change the criteria for obtaining such licenses. In such circumstances, we may be prohibited from obtaining kosher licenses for various products that we sell into the various kosher markets. Failure to comply with such applicable laws and regulations in relation to kosher licenses could subject us to civil sanctions, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, any of which could have a material adverse effect on us and our financial performance.
Economic conditions in Israel affect our financial performance.
A major part of our sales is made in Israel, and consequently our financial performance is dependent to a significant extent on the economy of Israel. A deterioration of the economic situation in Israel, or periodic work stoppages or disruptions, may erode the real wages and lower the buying power of our potential customers. This in turn may adversely affect our activities and business results.
We may be affected by political, economic and military conditions in Israel and the Middle East.
We are incorporated under the laws of the State of Israel, our principle offices are located in central Israel and all of our officers, employees and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel have a direct influence on us. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could materially and adversely affect our operations. During the winter of 2012 and the summer of 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political party operating in the Gaza Strip. This conflict involved missile strikes by Hamas against civilian targets in various parts of Israel and negatively affected business conditions in Israel. We estimate that the conflict with Hamas in 2014 reduced the Company's sales by approximately NIS 16 million. Ongoing or revived hostilities related to Israel may have a material adverse effect on our business and on our share price. The political uncertainty in surrounding countries, including Syria, is affecting the political stability of that country. This instability may lead to deterioration of the political relationships that exist between Israel and neighboring countries and has raised concerns regarding security in the region and the potential for armed conflict. In addition, Iran is believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza and Hezbollah in Lebanon. The tension between Israel and Iran and/or these groups may escalate in the future and turn violent, which could affect the Israeli economy generally and us in particular.
Many of our executive officers and employees in Israel are obligated to perform annual military reserve duty in the Israeli Defense Forces and, in addition, may be called to active duty under emergency circumstances at any time. If a military conflict or war arises, these individuals could be required to serve in the military for extended periods of time. Our operations could be disrupted by the absence for a significant period of one or more of our executive officers or key employees or a significant number of our other employees due to reserve duty. Any disruption in our operations may harm our business.
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Our commercial insurance does not cover property, asset or operational losses that may occur as a result of events associated with the security situation in the Middle East. Although the Israeli government currently reimburses for the value of direct damages that are caused by terrorist attacks or acts of war, and if certain conditions are met covers indirect damages (up to limited amounts) as well, we cannot assure you that this government coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business.
Additionally, several Arab countries restrict business with Israeli companies and these restrictions may have an adverse impact on our operating results, financial condition or the expansion of our business. From time to time pro-Arab organizations in various locations around the world promote local boycotts of products from Israel. Prompted by political, religious or other factors, these and other restrictive laws or policies directed towards Israel and Israeli businesses may affect our financial condition and results of operations.
It will be extremely difficult to acquire jurisdiction and enforce liabilities against us, our officers and directors who are based in Israel.
We are organized under the laws of the State of Israel. The majority of our officers and present directors reside outside of the United States and most of our operations and assets, and the assets of these persons, are located outside the United States. As a result, it may not be possible for United States investors to enforce their legal rights, to effect service of process or to enforce judgments of United States courts against us, our directors or our officers under federal securities laws of the United States. Further, it is unclear if extradition treaties now in effect between the United States and Israel would permit effective enforcement of criminal penalties under such securities laws. It may also be difficult to enforce civil liabilities under such securities laws in actions initiated in Israel.
Our international operations may be adversely affected by risks associated with international business.
We purchase food products from over 120135 suppliers located in Israel and around the world, including the Far East (China, India, the Philippines and Thailand), Eastern Europe (Poland, Lithuania and Latvia), South America (Ecuador), the United States, Canada, Western and Central Europe (the Netherlands, Belgium, Monaco, Germany, Sweden, Switzerland, Denmark, and France) and Southern Europe (Spain, Portugal, Italy, Turkey and Greece). Therefore, we are subject to certain risks that are inherent in an international business. These include the adverse effects on our operations from:
war, terrorism and public health crises, such as pandemics and epidemics;
varying regulatory restrictions on sales of our products to certain markets and unexpected changes in regulatory requirements;
tariffs, customs, duties, quotas and other trade barriers;
global or regional economic crises;
difficulties in managing foreign operations and foreign distribution partners;
longer payment cycles and problems in collecting accountstrade receivable;
fluctuations in currency exchange rates;
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political risks;
foreign exchange controls which may restrict or prohibit repatriation of funds;
export and import restrictions or prohibitions, and delays from customs brokers or government agencies;
seasonal reductions in business activity in certain parts of the world; and
potentially adverse tax consequences.
Depending on the countries involved, any or all of the foregoing factors could materially harm our business, financial condition and results of operations. For example, in December 2019, a strain
The ongoing COVID-19 pandemic may adversely affect our business, revenues, results of operations and financial condition.
Outbreaks of epidemic, pandemic or contagious diseases, such as the coronavirus was reported to have surfaced in Wuhan, China,known as COVID-19, may adversely affect our business, financial condition and results of operations. The global spread of COVID-19 has reached many other countries worldwide, resultingresulted in government-imposed quarantines, travel restrictions, stay-at-home orders and other public health safety measures in numerousthe United States, Israel and other affected countries around the world. At this point,These precautionary measures have and may continue to have an adverse effect on the extent to whichglobal markets and its economy and could impact the coronavirus may impactavailability and/or pricing of our operations is uncertain; however, the continued outbreakemployees, resources, materials, manufacturing and spreading of the coronavirusdelivery efforts. For example, COVID-19 may restrict the ability of our suppliers to manufacture of our products in sufficient quantities or at all. Furthermore, as of December 31, 20192020 the Company and its subsidiaries hold a diversified securities portfolio listed on the Tel Aviv Stock Exchange and other stock exchanges worldwide (the “Investment Portfolio”), which amounts to approximately NIS 142168.4 million (in addition to approximately NIS 122201.8 million in cash and cash equivalents). The coronavirus outbreak has caused and may continue to cause high volatility in financial markets and sharp slumps in capital markets both in Israel and abroad, which have resulted in and could continue to result in a material adverse impact on the value of the Investment Portfolio. The loss accrued in the Investment Portfolio from the beginningCOVID-19 outbreak continues to rapidly evolve, and its ultimate scope, duration and effects are unknown. The extent of the year throughimpact of the date of this report amountsdisruptions to approximately NIS 24.9 million. Moreover, the coronavirus outbreak has begun to have indeterminable adverse effects on general commercial activity and the world economy, and our business, including our manufacturing capabilities and resultscommercial sales, as a result of operations could be adversely affected to the extent that this coronavirus or any other epidemic harms the global economy generally. The extent to which the coronavirus impacts our business and results of operationspandemic, will depend on future developments, which are highly uncertain and cannot be predicted including new information which may emerge concerning the severitywith confidence. The continuation of the coronavirusCOVID-19 pandemic could materially disrupt our business and operations, hamper our ability to raise additional funds or sell our securities, continue to slow down the overall economy, curtail consumer spending, interrupt our sources of supply, and make it hard to adequately staff our operations.
General Risk Factors
The market price of our ordinary shares on either Nasdaq or the Tel Aviv Stock Exchange could fluctuate significantly.
The market price of our ordinary shares on the Nasdaq Capital Market or the Tel Aviv Stock Exchange (the “TASE”) has in the past fluctuated significantly and may be affected by our operating results, changes in our business, changes in the products we market and distribute, and general market and economic conditions which are beyond our control. In addition, the stock market in general has, from time to time, experienced significant price and volume fluctuations that are unrelated or disproportionate to the operating performance of individual companies. These fluctuations have affected stock prices of many companies without regard to their specific operating performance. For these reasons, the price of our ordinary shares may fluctuate significantly in the future.
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Also, the financial markets in the Unites States, Israel and other countries have experienced significant price and volume fluctuations, and market prices of public companies have been and continue to be volatile. Volatility in the price of our ordinary shares may be caused by factors outside of our control and may be unrelated or disproportionate to our results of operations. In the past, following periods of volatility in the market price of a public company’s securities, shareholders have frequently instituted securities class action litigation against that company. Litigation of this kind could result in substantial costs and a diversion of our management’s attention and resources.
If we fail to maintain an effective system of internal controls, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our ordinary shares may be adversely affected.
Our reporting obligations as a public company place a significant strain on our management, operational and financial resources and systems. We implemented financial and disclosure control procedures and corporate governance practices that enable us to comply, with the Sarbanes-Oxley Act of 2002 and related Securities and Exchange Commission, or the SEC, rules. For example, we developed accounting and financial capabilities, including the establishment of an internal audit function and development of documentation related to internal control policies and procedures. Failure to establish the necessary controls and procedures would make it difficult to comply with SEC rules and regulations with respect to internal control and financial reporting. We need to take further actions to containcontinue to improve our internal controls. If we are unable to implement solutions to any weaknesses in our existing internal controls and procedures, or if we fail to maintain an effective system of internal controls, we may be unable to accurately report our financial results or prevent fraud and investor confidence and the coronavirusmarket price of our ordinary shares may be adversely impacted.
Our results of operations may be impacted by cyber-attacks on the Company's information systems.
Suspension or treat itsmalfunction of internal or third-party information systems, or unauthorized access, misuse, computer viruses and cyber-attacks affecting such systems, could impact among others.our results of operations. Our businesses rely on secure processing, storage, transmission and reception of personal, confidential and proprietary information on our systems. We may become the target of attempted unauthorized access, computer viruses or malware, and other cyber-attacks designed to access and obtain information on our systems or to disrupt and cause other damage to our services. Although these threats may originate from human error or technological failure, they may also originate from the malice or fraud of internal parties, such as employees, or third parties, including foreign state actors and extremist parties. Additionally, we could also be adversely impacted if any of the third-party vendors, exchanges, clearing houses or other financial institutions to which we are interconnected are subject to cyber-attacks or other informational security breaches. Such events could cause interruptions to our systems, reputational damage, client dissatisfaction, legal liability, enforcement actions or additional costs, any and all of which could adversely affect our financial condition and operations. While we continue to devote significant resources to monitor and update our systems and implement information security measures to protect our systems, there can be no assurance that any controls and procedures we have in place will be sufficient to protect us from future security breaches. As cyber threats are continually evolving, our controls and procedures may become inadequate and we may be required to devote additional resources to modify or enhance our systems in the future.
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| A. | HISTORY AND DEVELOPMENT OF THE COMPANY |
The Company was incorporated in Israel in January 1994 under the name G. Willi-Food Ltd. and commenced operations in February 1994. It changed its name to G. Willi-Food International Ltd. in June 1996. The Company's corporate headquarters and principal executive offices are located at 4 Nahal Harif Street, Northern Industrial Zone, Yavne 81106, Israel. The Company's telephone number in Israel is +972 8-9321000, its fax number is +972-8-9321001, its e-mail address for communications is willi@willi-food.co.il and its website is www.willi-food.com. The information contained in its website, or that can be accessed therefrom, does not constitute a part of this annual report and is not incorporated by reference herein. We have included our website address in this annual report solely for informational purposes.
In May 1997, the Company completed an initial offering to the public in the United States (the “Initial Public Offering”) of 1,397,500 units, each unit consisting of one ordinary share and one redeemable ordinary share purchase warrant.warrant, and our ordinary shares began trading on the Nasdaq Capital Market, where they currently trade under the symbol “WILC”.
In May 2001, the Company acquired all the shares of Euro European Dairies Ltd., formerly Gold Frost Ltd. (hereinafter: “Euro European Dairies”) for NIS 336 thousand (USD 90105 thousand). Euro European Dairies, which was registered in 1977 in Israel, is engaged in designing, developing and distributing frozen and chilled food products.
On March 9, 2006, Euro European Dairies completed an initial issuance to the public on the London AIM market which yielded gross proceeds of NIS 36.5 million ($9.811.4 million). Following this issuance, as of May 30, 2006, the Company held approximately 75.7% of Euro European Dairies’ share capital. From November 2007 to January 2008, the Company purchased on the AIM market approximately an additional 14.3% of Euro European Dairies’ share capital, reaching aggregate holdings of up to 90% of Euro European Dairies’ share capital.
On May 20, 2008, a special general meeting of shareholders of Euro European Dairies approved the cancellation of its ordinary share listing to the AIM Market of the London Stock Exchange. The cancellation of Euro European Dairies’ AIM admission took place on May 27, 2008. On July 27, 2009, the Company announced that it had successfully completed a tender offer for all of the issued and outstanding share capital of Euro European Dairies which was not already held by the Company. The Company paid an aggregate amount of approximately £370,430 ($619,198) for all such shares and depositary interests.
On March 17, 2010, the Company raised net proceeds of approximately a $19 million through a public offering of its ordinary shares. The Company issued a total of 3,305,786 ordinary shares at a purchase price of $6.05 per share.
On May 4, 2014, Mr. Zwi Williger and Mr. Joseph Williger sold their controlling stake (approximately 58% of the outstanding shares) in Willi-Food to BSD,, a company listed on the London Stock Exchange, the ultimately controlling shareholder of which was Mr. Alexander Granovsky.
On July 15, 2015, Mr. Granovsky sold his indirect controlling interest in BSD to Mr. Gregory Gurtovoy, according to public filings and information supplied to the Company.
On May 7, 2017, Mr. Joseph Williger informed Willi-Food that he was the controlling shareholder of BSD through private companies he owns, and that he was therefore the controlling shareholder of Willi-Food and the Company as of May 5, 2017.
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On June 11, 2017, a General Meeting of Willi-Foods' Shareholders approved the appointment of the following BSD nominated directors: Messrs. Joseph Williger, Zwi Williger, Kobi Navon and Bensi Sao, and the termination of the term of office of all then current directors (other than the external directors): Mr. Ilan Admon, Gregory Gurtovoy, Eli Arad, Shalhevet Hasdiel and Arik Safran. On June 12, 2017, Willi-Foods' Board of Directors approved the appointment of Mr. Gil Hochboim as a director.
On June 20, 2017, a General Meeting of Shareholders of the Company approved the appointment of the following directors: Messrs. Yoseph Williger, Zwi Williger, Gil Hochboim and David Donin and the termination of the term of office of all then current directors of the company (other than the external directors): Messrs. Ilan Admon, Gregory Gurtovoy and Ilan Cohen. On June 20, 2017 the Board of Directors of the company approved the appointment of Mr. Victor Bar as a director.
On June 15, 2020, our ordinary shares began trading on the Tel Aviv Stock Exchange under the ticker symbol “WILC”.
On September 15, 2020, the Company raised gross proceeds of approximately $12.79 million through a private placement of its ordinary shares. The Company issued a total of 650,000 ordinary shares at a purchase price of $19.67 per share.
CAPITAL EXPENDITURES
Our capital expenditures were $0.9 million, $0.52 $0.62 million and $0.76$0.62 million for the three years ended December 31, 2020, 2019 and 2018, and 2017, respectively. Our capital expenditures from January 1, 20202021 until March 19, 202025, 2021 were approximately $0.1$0.3 million. For more information, see "Item 4. Information on the Company – D. Property, Plants and Equipment".
| B. | BUSINESS OVERVIEW |
Overview
The Company is an Israeli-based company engaged, directly and through subsidiaries, in the development, import, export, marketing and distribution of a wide variety of over 600 food products world-wide. In the year ended December 31, 2019,2020, substantially all of our revenue was generated in Israel, with less than 1% of our revenue resulting from exports outside Israel.
The Company purchases food products from over 120135 suppliers located in Israel and throughout the world, including from the Far East (China, India, the Philippines and Thailand), Eastern Europe (Poland, Lithuania and Latvia), South America (Ecuador), the United States, Canada, Western and Central Europe (the Netherlands, Belgium, Monaco, Germany, Sweden, Switzerland, Denmark, and France) and Southern Europe (Spain, Portugal, Italy, Turkey and Greece).
The Company's products are marketed and sold to approximately 1,2501,600 customers and 2,5003,200 selling points in Israel and around the world (for example, to customers in the Unites States, England and France), including to supermarket chains, wholesalers and institutional consumers. The Company markets most of its products under the brand name “Willi-Food,” and some of its chilled and frozen products under the brand name “Euro European Dairies”. Certain products are marketed under brand names of other manufacturers or under other brand names. In addition, the Company distributes some of its products on an exclusive basis, as described further below.
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Following changes in management in recent years, the Company continues to re-evaluate its strategic position and consider other business opportunities. As part of this re-evaluation, the Company is considering forming strategic alliances with or entering into different lines of business, expanding its product lines, and increasing product sales with existing customers while adding new customers. In addition, the Company is examining M&A opportunities to further increase its market presence.
As of March 19, 2020,25, 2021, the Company’s principal shareholder, Willi-Food, held approximately 62.05%59.1% of our ordinary shares (approximately 62.05%59.1% on a fully‑diluted basis). The primary assets of Willi-Food are the Company’s ordinary shares. See “Item 7. Major Shareholders and Related Party Transactions – A. Major Shareholders”. Willi-Food’s securities are traded on the Tel Aviv Stock Exchange.
Credit Activity
During 2019, the Company began to engageengaged in the non-bank credit field by extending loans to other Israeli companies (“credit extension activity”). This activity is executed and managed through W.F.D. (Import, Marketing and Trading) Ltd., a wholly-owned and controlled subsidiary of the Company. The activity is funded from the Company and subsidiaries own resources and executed in parallel to the existing activity of importing, marketing and distributing food products. During 2019,2020, the Company extended loansone loan to one Israeli company totaling NIS 43.6520 million (USD 12.636.2 million) for periods ranging from 5 months to 24a period of eight months.
Business Strategy
The Company’s principal business strategy is:
to promote the “Willi-Food” brand name and other brand names used by the Company (such as " Euro European Dairies") and to increase market penetration of products through marketing efforts and advertising campaigns;
to expand its current food product lines and diversify into additional product lines, as well as to respond to market demand;
to consider new fields of activity/operating segments; and
to expand the Company's activity in the international food markets, mainly in the U.S. and Europe.
Utilizing management’s expertise in identifying market demand and preferences, as well as its supplier sourcing abilities, the Company intends:
to continue to locate, develop and distribute additional food products, some of which may be new to Israeli consumers;
to penetrate new food segments within Israel through the establishment of food manufacturing factories or the establishment of business relationships and cooperation with existing Israeli food manufacturers;
to increase its inventory levels from time to time both to achieve economies of scale on its purchases from suppliers and to more fully meet its customers’ demands;
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to further expand into international food markets, mainly in the U.S. and Europe, by purchasing food distribution companies, increasing cooperation with local existing distributors and/or exporting products directly to customers;
to penetrate new markets in other countries through the establishment of business relationships and cooperation with representatives in such markets, subject to a positive political climate; and
The Company has developed certain trade relationships locally, as well as in areas administered by the Palestinian Authority, although current sales volumes to Palestinian-administered areas remain low.
Principal Products
We and Euro European Dairies import a broad variety of over 600800 food products, which are sold, marketed, and distributed by us in Israel. A small percentage of our products are purchased from suppliers in Israel.
We aim to broaden the variety of products we import, and expect to launch additional imported products in the near future while continuing to develop new and innovative food products internally.
The principal products in our import segment product line are as follows:
Canned Vegetables and Pickles: including mushrooms (whole and sliced), artichoke (hearts and bottoms), beans, asparagus, capers, corn kernels, baby corn, palm hearts, vine leaves (including vine leaves stuffed with rice), sour pickles, mixed pickled vegetables, pickled peppers, an assortment of olives, garlic, roasted eggplant sun and dried tomatoes. These products are imported primarily from China, Greece, Thailand, Turkey, India, and the Netherlands.
Canned Fish: including tuna (in oil or water), sardines, anchovies, smoked and pressed cod liver, herring, fish paste and salmon. These products are primarily imported from the Philippines, Thailand, Greece, Germany and Sweden.
Canned Fruit: including pineapple (sliced or pieces), peaches, apricots, pears, mangos, cherries, litchis and fruit cocktail. These products are primarily imported from China, Monaco, the Philippines, Thailand, Greece and Europe.
Edible Oils: including olive oil, regular and enriched sunflower oil, soybean oil, corn oil and rapeseed oil. These products are primarily imported from Belgium, Turkey, Italy, the Netherlands and Spain.
Dairy and Dairy Substitute Products: including hard and semi-hard cheeses (parmesan, edam, kashkaval, gouda, havarti, cheddar, pecorino, manchego, maasdam, rossiysky, iberico and emmental), molded cheeses (Brie, Camembert and Bloose), feta, Bulgarian cubes, goat cheese, fetina, butter, butter spreads, margarine, melted cheese, cheese alternatives, condensed milk, whipped cream, yogurt, frozen pizza and others. These products are primarily imported from Greece, France, Lithuania, Denmark, Germany, Italy and the Netherlands.
Dried Fruit, Nuts and Beans: including figs, apricots and organic apricots, chestnuts organic chestnuts, sunflower seeds, walnuts, pine nuts, cashews, banana chips, pistachios and peanuts. These products are primarily imported from Greece, Turkey, India, China, Thailand and the United States.
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Other Products: including, among others, instant noodle soup, frozen edamame soybeans, freeze dried instant coffee, bagels, breadstick, coffee creamers, lemon juice, halva, Turkish delight, cookies, vinegar, sweet pastry and crackers, sauces, corn flour, rice, rice sticks, pasta, organic pasta, spaghetti and noodles, breakfast cereals, corn flakes, rusks, rusks, tortilla, dried apples snacks, deserts (such as tiramisu and pastries), ice cream and light and alcoholic beverages. These products are primarily imported from the Netherlands, Germany, Italy, Greece, Belgium, the United States, Scandinavia, Switzerland, China, Thailand, Turkey, India, and South America.
Product Information
The products that generated the largest sales volume for the year ended December 31, 2020 were dairy and dairy substitute products (41.55% of sales), canned vegetables (14.82% of sales), cereals, rice and pastas products (14.0% of sales) and fish products (11.79% of sales).
The products that generated the largest sales volume for the year ended December 31, 2019 were dairy and dairy substitute products (39% of sales), fish products (12% of sales) and canned vegetables (16% of sales).
The allocation mentioned above does not include the product line "Other Products" in the import segment, as this product line includes products that have no characteristic definition.
Most of the products that we import and market are approved as kosher by, and/or under the supervision of, various supervisory institutions, including the Chief Rabbinate of Israel, Badatz Edah HaChareidis, Badatz Beit Yosef, Chug Chatam Sofer, certain Jewish organizations administering Kashrut procedures and certifications (such as the Union of the Orthodox Jewish Congregation of America (referred to as OU), Badatz Igud Harabanim Manchester, OK, Circle K and Triangle K) and rabbis of local Jewish congregations abroad. For more information, see “– Government Regulation” in this section below.
Our products are packaged by various manufacturers and suppliers abroad and labeled in Hebrew, English and, in certain cases, Arabic and Russian, in accordance with our instructions and applicable law. For more information, see “– Government Regulation” in this section below.
Suppliers
We purchase food products from over 120135 suppliers, including suppliers located in Israel, the Far East (China, India, the Philippines and Thailand), Eastern Europe (Poland, Latvia, and Lithuania), South America (Ecuador and Argentina), the United States, Canada and in Western, Northern and Southern Europe (Sweden, Denmark, Greece, Monaco, the Netherlands, Italy, Monaco, Portugal, Spain, Belgium, Germany, France, and Turkey).
In addition, we actively maintain contact with our suppliers world-wide through which we assess, on an on-going basis, world market trends, fluctuations in prices, and other issues relevant to our business. Our management and personnel visit food trade fairs world-wide on a regular basis and endeavor to create new business relationships with potential suppliers.
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Certain of the products we import are seasonal agricultural products, such as artichokes, cherries, mushrooms, eggplants and peaches. In order to ensure a continued supply of these seasonal items, we generally make arrangements with the producers of such products at the beginning of the season for the terms of purchase of such items for the upcoming year.
A substantial portion of our purchases from suppliers outside of Israel is made in U.S. Dollars (such as purchases from the Far East (China, India, the Philippines and Thailand), the United States, South America and certain European countries) with the remaining purchases usually made in Euros and other foreign currencies. Supply is generally made to us against letters of credit for a period of up to 90 days. No single supplier provides us with the majority of our products, most of which we purchase from several suppliers.
We purchased several products from a single supplier in 20192020 and, as a result, that supplier accounted for more than 10% of our total purchases; however, purchases from this supplier were made due to economies of scale, operational efficiency and convenience, and the Company does not consider itself dependent on this supplier.
The average volume of our credit balance with our suppliers in 20192020 was NIS 19.923 million (US$ 5.767.2 million) consisting of 28 days of suppliers credit on average, in 20182019 was NIS 16.219.9 million (US$ 4.36.2 million) consisting of 2428 days of suppliers credit on average and in 20172018 was NIS 14.716.2 million (US$ 3.95.0 million) consisting of 24 days of suppliers credit on average.
Customers
The Company's products are marketed and sold to approximately 1,2501,600 customers and 2,5003,200 selling points throughout Israel and outside of Israel.
The Company's customers generally fall within one of the following three groups:
large retail supermarket chains,
small retail supermarket chains, and
other customers, including small private grocery shops, government institutions, wholesalers, restaurants, hotels, and hospitals.
The first group of customers above includes the large retail food marketing chains: Shufersal Ltd., Yenot Bitan, Rami-Levy Ltd, "Osher-Ad",Osher-Ad, Viktory, Yohananof, Mahsanei Hashuk, Hazi Hinam, Freshmarket and others. Large retail food marketing chains usually have dozens of stores with nationwide deployment.
The Company contracts with large retail supermarket chains through the buyers in the head office, after which the Company receives orders from the supermarket chain's logistics center or directly from individual stores. Merchandise is then delivered directly to each branch or to the supermarket chain’s distribution centers. Simultaneous with closing of sale prices with the buyers at the chains’ central offices, quantities of the products to be supplied to the branches are routinely determined directly with the branches.
A number of provisions of a law entitled "Promoting Competition in the Food Industry" (the "Food Law"), which went into effect on January 15, 2015, regulating the operations of food suppliers and retailers, are applicable to the Company, (which is not defined as a large supplier in respect of its engagements with retailers subject to the provisions of the Food Law), including a prohibition on any interference on the part of a supplier in a retailer’s determination of the consumer price that such retailer will collect on another suppliers’ merchandise, or the terms of such sale; a prohibition on retailers interfering in any way with a supplier’s determination regarding what products to sell other retailers and what prices to charge for those products, or the terms of such sale; a ban on suppliers transferring payments (in cash or cash equivalents) to a large retailer, other than by lowering the price per unit of a product, subject to certain exceptions; a prohibition on interfering in any way in the price per product collected by a retailer for that supplier’s products, the allocation of any share of sales space for that supplier’s products, the purchase of products provided by that supplier on any scale in proportion to the retailer’s purchase of the product from alternative suppliers; and a prohibition on interfering in the purchase or sale of products provided to a retailer by another supplier, including quantities and purchase targets, sales space allocated to another supplier in stores and other commercial terms. In 2019,2020, the Company had one retail customer, Shufersal, that is considered a large supplierretailer according to the Food Law. The Company’s sales to Shufersal exceeded 10% of its income in 2019. As2020. a result, the Company's interaction with this customer is required to meet certain principles for engagement, including those impacting commercial agreements, logistics and monetary collection.
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The second group of customers includes small retail supermarket chains of up to 15 stores, usually in a regional deployment.
Generally, the Company’s engagement with small retail chains does not involve exclusivity, or other obligatory terms of operations. Prior to entering into an engagement with such customer, the Company gauges the customer's financial stability and determines the scope of credit to assign to and the sureties to obtain from such customer. Small retail chains are generally requested to provide deferred checks as sureties, and some are requested to provide additional sureties, including promissory notes, personal guarantees and bank guarantees. In addition, the Company insures most of its small retail chains with credit insurance. In 2019,2020, more than 70%75 % of the Company's small retail chains were insured with credit insurance policies by credit insurance companies.
With some small retail supermarket chains not subject to provisions of the Food Law, the Company pays a fixed incentive in the form of a percentage of sales of our products, or other incentive payment in the event the scope of sales exceeds the scope agreed upon between the parties. Towards a small number of small retail supermarket chains the Company provides discounts for the inclusion of new products, limited-time discounts for the opening of new stores, and participates in payments for certain of such customers’ advertisements at rates determined in negotiations between the parties, and subject to the actual execution of the advertisements in various media, including in print newspapers, or in specific advertisement placed inside a customer's stores.
The sale prices to small retail chains are determined in negotiations that occur frequently, usually on a monthly basis, owing to the lack of uniformity in the purchase terms for different products from different manufacturers, and to variable market conditions.
The Company's sales by customer group for the years ended December 31, 2020, 2019 2018 and 20172018 were as follows:
| Percentage of Total Sales Year Ended December 31 | Percentage of Total Sales Year Ended December 31 | |||||||||||||||||||||||
| Customer Groups | 2019 | 2018 | 2017 | 2020 | 2019 | 2018 | ||||||||||||||||||
| large retail supermarket chains | 50 | % | 50 | % | 50 | % | 53 | % | 50 | % | 50 | % | ||||||||||||
| other customers | 50 | % | 50 | % | 50 | % | 47 | % | 50 | % | 50 | % | ||||||||||||
| 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||
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The average aggregate debitreceivable balance of the Company's customers with the Company in 20192020 was NIS 117.23140.4 million (USD 33.9243.7 million) and the average time period within which our accountstrade receivable were paid was 9291 days, the average aggregate receivable balance in 20182019 was NIS 96.2117.23 million (USD 25.736.46 million) and the average time period within which our accountstrade receivable were paid was 8892 days and in 20172018 the average aggregate receivable was NIS 86.796.2 million (USD 23.129.92 million) and the average time period within which our accountstrade receivable were paid was 8688 days.
In the event that a small retail supermarket chain or other customer does not respect its financial commitments, the Company may elect to foreclose on the collateral or the promissory note provided by such customer. Since 2008, the Company has made no significant use of this foreclosure power. The Company strives to minimize its credit risk by constantly reviewing the credit it extends to customers versus the security it receives. As a result of such review, the Company has ceased selling products to certain customers and considerably reduced sales to other customers, and may continue to do so.
Distribution, Marketing and Sales
The Company principally distributes and markets its products using internal sales agents, although with sales of certain products to clients situated in different areas of Israel, the Company utilizes external distributors, with whom it does not have exclusivity agreements.
The Company generally has no written agreements with its customers, nor are its arrangements with its customers on an exclusive or binding basis. The Company generally extends its customers approximately 60-90 days credit, and in limited cases up to 110 days credit, beginning at the end of the month in which the sale took place. Most of the large retail supermarket chains generally effect payment by wire transfers or cash payments on the due date, while other customers are generally required to provide post-dated promissory notes at least one month prior to the date of the expected payment. The Company does not require large retail supermarket chains to provide any kind of security for payments; however, other customers may be required to provide security, including personal guarantees.
Sales are made by the placement of customers’ orders (except for part of the dairy and dairy substitute products), which are directed to the Company’s regional office and placed by the sales personnel or directly by the customers. Orders are delivered by the Company’s transport network (including 14 refrigeration trucks and three regular trucks) and by independent transporters. In certain cases, the Company transports products directly from port to customers, utilizing the services of independent transporters. In some instances, the Company transfers the merchandise to the logistics centers of the supermarket chains, and the supermarket chains themselves are responsible for the distribution of the merchandise to their chain stores for a commission charged to the Company.
The sale of most of our dairy and dairy substitute products is performed by external distributers, although some of these sales are made by “van sale” sales agents using small terminals. The sales agents supply these products immediately from the stock of products in the refrigeration trucks in which they travel.
Some of the marketing and distribution to institutional clients in the private sector (such as hotels, police, prisons, the Ministry of Defense and "kibbutz" collective settlements) is done by winning tenders, direct distribution or by wholesalers.
With imported products, the Company generally holds an inventory of products which the Company believes to be sufficient to meet market requirements for a period of up to 70 days. Occasionally, the Company may take advantage of low-priced merchandise and purchase larger amounts than usual of a product with long shelf life. In those cases, the inventory may be sufficient to meet market requirements for more than 70 days. Products ordered by customers in full container loads are generally forwarded directly to the customers’ facilities without being stored in the Company’s facilities. The Company does not regularly maintain a significant backlog of orders from customers; orders received by customers are generally filled within one week. The Company’s inventory as of December 31, 20192020 amounted to NIS 59.5 million (USD 18.5 million) compared with NIS 71.5 million (USD 20.7 million) compared with NIS 49.3 million (USD 14.322.2 million) as of December 31, 2018.2019.
The Company maintains close contact with its consumers in an effort to be attentive to market needs, market trends, and demand for certain products in various markets. The Company also regularly gathers information on new products manufactured world-wide, including by attending food exhibitions and maintaining close relations with manufacturers and suppliers world-wide.
The Company is responsible for the products it markets in Israel under the Israeli Law of "Liability for Defective Products Law, 1980" and it has also purchased an insurance policy for product liability claims.
Seasonality
Each year as the Jewish holidays of Pesach (Passover, celebrated in March-April), Shavuot (celebrated in May) and Rosh Hashana (celebrated in September-October) approach, the Company normally increases its inventories in order to meet the expected increase in market demand prior to such holidays. Despite the impact of the holiday season on the Company’s activities, the Company’s quarterly sales are not materially affected as a result of these changes.
Competition
The food distribution business in Israel is highly competitive with respect to imported, as well as locally manufactured, food products. The Company faces direct competition both from local manufacturers and from a number of importers of food products. The food market in Israel is very price sensitive.
For each of the categories of products distributed by the Company, there exists competition from dozens of local manufacturers and importers. The barriers to entry in the food market are low, and new potential competitors are constantly joining the market. In addition to new-comers to the food business, the Company faces competition from existing importers and/or manufacturers currently not offering the same lines of products as the Company.
For example, certain of the products imported by the Company, such as canned fish, corn flakes, edible oils, certain pickles, olives, pasta, cereal, sweet pastry and crackers and certain dairy products, are also produced by local manufacturers in Israel. Local producers are not subject to the financial risks of importing food products or to governmental policies regarding taxation of imported food products to which the Company is subject.
To the Company's knowledge, several of its competitors (for example, Shemen, Tomer, Taaman, Solbar and Y.T.V Foods Industries Ltd with respect to edible oils; Fodor (Starkist and Yona), Posidon and Williger of the Neto Group, Filtuna, Vita Pri HaGalil and Shastowits with respect to fish products; the Vita Pri HaGalil, Yachin-Zan laKol, Williger of the Neto Group, and Tomer with respect to canned fruit and vegetable products; Osem, Barila, Vita Pri HaGalil, Williger of the Neto Group, Taaman and Tomer with respect to pasta products; and Tnuva, Tara, Strauss, Seyman, and Gad Dairy with respect to dairy and dairy substitute products) are substantially more established, have greater market recognition and have greater financial, marketing, human and other resources than those of the Company. If any of the Company’s major competitors materially reduces prices, the Company would experience significantly more competitive pressure and a decrease in profitability. The Company cannot predict whether it could successfully compete with these pressures and, if it were unable to do so, the Company’s business would be adversely impacted.
Although the Company does not have precise information regarding the import of food products into Israel, it believes that it is currently one of the leading importers in Israel with regard to its line of products.
Intellectual Property Rights
The Company markets certain products under the trademark “Willi-Food,” which was approved for registration in Israel in May 1997 for certain uses relating to the food industry. In 2015, the trademark's validity was extended for an additional ten years. The Company markets certain products under the trademark “Gold-Frost,” which was registered in Israel in February 2002. The company markets certain product under the trademark "Euro European Dairies", which was approved for registration in Israel in September 2019.
The Company also markets cheeses and cheese substitutes such as "Ha-Bulgaria", which was registered in Israel in June 2009, and "EMMA", which was registered in Israel in December 2014.
The Company also markets Ice-Creamice cream products such as "Muchi-Ice", which was registered in Israel in November 2019, and "Gelato", which was registered in Israel in May 2013.
The Company also markets frozen edamame soybeansa line of products under the trademark "Manchow,"Pinukim," which was registered in Israel in October 2007.June 2020.
The Company markets a line of products with kosher supervision by Badatz Edah HaChareidis under the trademark "Tifeeret", which was registered in Israel in September 2010 for different uses in the food industry.
The Company also markets pasta and sauces under the trademark "Donna Rozza," which was registered in Israel in December 2005 for different uses in the food industry.
The Company also markets coffee products under the trademark "Art Coffee," which was registered in Israel in January 2020.
The Company also markets other products which are in the process of being registered in Israel, such as "Super Kidos", "Better Food", "Lucky Cat Ice-Cream", and "Muchi Ice-Dessert" and "Super Kidoos".
Other products marketed by the Company under their original brand names are “Completa”, "Del Monte", "Danesita", "Fiorentini", "Pils", "Wyke", "Muratbey", "Nobeleza Gaucha", "Sera", "Daawat", "Zanetti", "Ferro", "Hahne", "Pastor", "Valio", and "Kolios".
The Company imports several products for the Shufersal chain under the brand name “Shufersal”.
There can be no assurances as to the degree of protection registration of the Company’s trademarks will afford.
The Company's investment in registering these trademarks was insignificant.
Government Regulation
The import, export, storage, distribution, manufacturing, marketing and labeling of food products is subject to extensive regulation and licensing by various Israeli government and municipal agencies, principally the Ministry of Health, the Ministry of Finance and the Ministry of Economy. Failure to comply with these applicable laws and regulations could subject us to civil sanctions, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, any of which could have a material adverse effect on us. We believe that we comply in all material respects with the above-mentioned requirements. To the extent that the Company exports food products outside of Israel, we may be subject to quotas and other laws and regulations of the country to which we export which may limit our ability to sell certain of our food products into these countries.
In 1978, the Israeli government issued the free import decree, which exempted the import of most food products from the requirement to obtain a license. However, preliminary permits from the Ministry of Health or the Ministry of Agriculture are still required. These preliminary permits are granted based on laboratory analysis reports and other data.
Customs duties and charges are levied on a portion of the Company’s products imported into Israel. In addition, the Company is required to obtain import licenses for the import of certain food products from the Ministry of Economy. The Company has also obtained the necessary authorization required by the Ministry of Health (Food Authority) for the import of all of its food products to Israel. The Company’s products are packaged by various manufacturers and suppliers abroad and labeled in Hebrew, English and, in certain cases, Arabic and Russian, according to the Company’s instructions and the requirements of the Israeli authorities. In the past, the Company has occasionally been found to have mislabeled packages, as a result of which itwasit was required to pay an immaterial amount of fines.
Customs duty applies to various food products in Israel, including cheese, butter, frozen vegetable, oils, tinned goods and other food products imported by the Company. In May 2014, the Ministry of Finance published a notice regarding a Government decision in connection with increasing the tax-exempt import quotas of hard cheese and butter (hereafter – “Tax Exempt Import Quotas”) whereby importers undertake to sell the products to the end customer at a relatively low price. Further to the aforesaid resolution, the Ministry of Economy published, for the first time, a competitive process in which companies can win Tax Exempt Import Quotas. The Company participated in this process and won some of these quotas while committing to sell the products to the end customer at a relatively low price. In subsequent years, the Ministry of Economy has continued to publish annual tenders for Tax Exempt Import Quotas against winners undertaking to sell the imported products at a relatively low price to the end customer and to meet a minimum sale target in respect of the goods in question. The Company has participated in these annual tenders and won some of these quotas. As part of the tender process, the Company was required to provide financial guarantees and participate in audit procedures on behalf of the Ministry of Economy for the purpose of assessing its compliance with its undertakings. The Company successfully passed most of the audit procedures, apart from immaterial breaches in which immaterial amounts, which were provided by the Company, were forfeited, and an import quota which the Company was supposed to received was cancelled. Pursuant to the terms of the tenders, a breach of undertakings in the tender process may result, among other things, in the imposition of sanctions in the form of non-issuance of tax-exempt import quotas as part of the competitive process for a period of no more than five years.
On February 26, 2020, a temporary order was issued by the Ministry of the Economy whereby the butter market will be opened for tax-exempt importation through December 31, 2020. On December 17, 2020 the Ministry of the Economy extended the order until December 31, 2021.
The Company estimates that it will take part in future tenders for Tax Exempt Import Quotas, if such tenders will be held; however, it is unable to estimate if it winswill win any such tenders.
Most of the products which the Company imports and markets are approved as kosher by and/or under the supervision of various supervisory institutions including the Chief Rabbinate of Israel, Chug Chatam Sofer, Badatz Edeh HaChareidis, certain Jewish organizations administering Kashrut procedures and certifications (such as the Union of the Orthodox Jewish Congregation of America (OU), Badatz Igud Harabanim Manchester, OK, Circle K and Triangle K) and rabbis of local Jewish congregations abroad. Such procedures include, in certain cases, personal supervision by a Kashrut supervisor sent by such institutions to the manufacturing facilities from which the Company purchases products, who is present at the plant during the processing of the product. Under Israeli law, the Company is required to ascertain that the kosher foodstuffs which it offers for sale bear kosher certification approved by certain authorities, such as the Chief Rabbinate of Israel, and also bear the name of the individual authorized to certify such product. Not all products marketed by the Company have been so certified, although they do bear certain kosher certifications from other certification bodies.
| C. | ORGANIZATIONAL STRUCTURE |
The Company’s principal shareholder, Willi-Food, as of March 19, 2020,25, 2021, held approximately 62.05%59.1% of our ordinary shares (approximately 62.05%59.1% on a fully‑diluted basis). The primary assets of Willi-Food are the Company’s ordinary shares. Willi-Food was established on November 27, 1992 and its securities have been traded on the Tel Aviv Stock Exchange since January 1993.
The Company has three active subsidiaries, as follows:
| Subsidiary | Jurisdiction of Organization | Company's Ownership Interest |
| W.F.D. (Import, Marketing and Trading) Ltd. ("WFD") | Israel | 100% |
| W. Capital Ltd. | Israel | 100% |
| Euro European Dairies Ltd. | Israel | 100% |
The offices of our active subsidiaries are located in Yavne, Israel, at the offices of the Company.
WFD
In November 1995, the Company incorporated a wholly-owned subsidiary, WFD. The Company occasionally imports certain products through this subsidiary, which then sells these products to the Company. Beginning in 2019, the Company began providing loans from WFD under its new credit extension activity.
W. Capital
In June 2014, the Company incorporated a wholly-owned subsidiary, W.Capital, which engages in capital market investments.
Euro European Dairies Ltd.
In May 2001, the Company acquired all the shares of Euro European Dairies in order to take advantage of Euro European Dairies’ know-how in importing frozen and chilled products into Israel and for its well-known Israeli brand name. Euro European Dairies, which was registered in 1977 in Israel, is engaged in designing and developing frozen and chilled food products, and distributes over 140200 products, usually packed for private consumers (in cans, jars, containers and plastic sealed and vacuumed packages), but also for institutional consumers, and labeled in Hebrew, English, and in certain cases, Arabic and Russian. Euro European Dairies’ markets certain products under the trademarks “Euro European Dairies” and “Willi-Food”. Euro European Dairies is working towards broadening the variety of products that it develops and distributes.
| D. | PROPERTY, PLANTS AND EQUIPMENT |
The Company's principal executive offices are situated at a logistics center in the northern industrial zone of Yavne, at 4 Nahal Harif St., Israel, which is approximately 35 kilometers south of Tel Aviv. The logistics center is 8,526 square meters (approximately 92,000 square feet) and is located on a plot of 19,000 square meters (approximately 205,000 square feet).
In addition to the current logistics center, the Company makes use of so-called "free" warehouse services, mainly in the area of the Ashdod seaport. For such services, the Company is charged only for storage per container or pallet (i.e., there is no charge for rental when containers or pallets are not stored there). The Company's expenses for usage of free warehouses services were NIS 1,624 thousand (USD 505 thousand) for the year ended December 31, 2020, NIS 446 thousand (USD 129139 thousand) for the year ended December 31, 2019 and NIS 152 thousand (USD 4147 thousand) for the year ended December 31, 2018 and NIS 1,522 thousand (USD 406 thousand) for the year ended December 31, 2017.2018.
As of December 31, 2019,2020, the Company owned four refrigeration trucks (each with a capacity of 12 tons), 10 refrigeration trucks (each with a capacity of 15 to 18 tons), three combined trucks (each with capacity of 26 tons) and four private cars. As of December 31, 2019,2020, the depreciated total cost of such vehicles amounted to approximately NIS 1,526822 thousand (USD 442256 thousand).
Since January 22, 2008, the Company has been operating the Yavne facility under a municipal business license as required under Israeli applicable law.
Not applicable.
Overview
The Company was incorporated in Israel in January 1994 and started operations in February 1994.
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For convenience purposes, the financial data for the years ended December 31, 2020, 2019 2018 and 20172018 has been translated into U.S. Dollars using the representative exchange rate. This rate as of December 31, 20192020 was NIS 3.456=3.215= USD 1.00.
The following discussion and analysis should be read in conjunction with the consolidated financial statements of the Company and the related notes thereto submitted in this Annual Report. The Company's financial statements as of December 31, 20192020 and for the year then ended have been prepared in accordance with IFRS and interpretations issued by the IASB, which differ in certain respects from U.S. Generally Accepted Accounting Principles, or U.S. GAAP.
The Company is engaged, directly and through its subsidiaries, in the design, import, marketing and distribution of a broad range of food products purchased from over 120135 suppliers worldwide and marketed throughout Israel and abroad. The products imported by the Company are marketed in Israel and sold to approximately 1,2501,600 customers and 2,5003,200 selling points, including supermarket chains, mini-markets, wholesalers, manufacturers and institutional consumers. The Company also sells its products outside Israel to a variety of customers world-wide.
In 2019, the Company entered the non-bank credit field by providing credit to other Israeli companies in addition to the existing activity of importing, marketing and distributing food products. The credit extension activity is managed through W.F.D. (Import, Marketing and Trading) Ltd., a wholly-owned subsidiary of the Company, and is funded from the Company's and its subsidiaries' own resources. During 2019,2020, the Company extended loansone loan to one Israeli company totaling NIS 43.6520 million (USD 12.636.2 million) for periods ranging from 5 months to 24a period of eight months.
Critical Accounting Policies
Management’s discussion and analysis is based upon the consolidated financial statements, which have been prepared in accordance with IFRS as issued by the IASB for all reporting periods presented. The use of IFRS 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 collectability of accountstrade 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 introductions of new 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.
Recognition of income
IFRS 15 – “Revenue from Contracts with Customers” is mandatory for reporting periods starting on January 1, 2018.
Revenue is measured and recognized in accordance with the fair value of the entire amount of proceeds receivable under the terms of the contract, net of the amounts collected on behalf of third parties (such as taxes).
Revenue is recognized in the consolidated statements of profit or loss at a point in time when control of the goods has transferred to the extent that itcustomer. This is probable thatgenerally when the economic benefits will flowgoods are delivered to the Company and/or its subsidiaries (the “Group”) , and to the extent that the revenues and costs, if relevant, can be reliably measured.customer.
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The Group is engaged mainly in the sale of food products in the Israeli market. Revenue from sale of goods is recognized when control of the goods has transferred to the buyer, generally being when the goods arrived to the buyer’s specific location. Upon receipt of the goods, the buyer has full discretion over the distribution channels and price to sell the goods; the buyer has principal responsibility upon sale of the goods and it bears the risks of obsolescence and/or loss of the goods. After delivery of the goods, the Group recognizes receivables in respect of the sale since as of that point in time the consideration is unconditional. In most cases, the Group enables specific customers to return products which they have not sold, despite that there is no agreement between the Group and its customers regarding such returns and the Group does not have a formal policy regarding such returns. Accordingly, the Group recognizes a provision for return of goods against a decrease in revenues and a corresponding inventory asset against the right to return the goods. The amount of the asset is determined based on the lower of cost ofand net realizable value. Past experience is used by the Group to estimate the number of returns. Based on past experience, the Group estimates, with a high level of probability that no significant portion of revenue recognized in respect of sale of goods will be reversed.
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 calculated using the weighted average cost method.
The Group records a provision for slow moving inventory in respect of inventory items estimated by management not to be realized due to expiration date. The slow-moving inventory is based on the historic realization rate of the respective item as well as on management's estimate with respect to its future realization rate.
Contingent liabilities and legal proceedings
In estimating the likelihood of the outcome of legal claims filed against the Company and its investees, management considers the facts and circumstances, as well as the opinion of Company's legal counsel. These estimates are based on professional judgment, taking into account, inter alia, the stage of proceedings and legal precedents in respect of the different issues. Since the outcome of the claims will be determined in court, the results could differ from these estimates.
| A. | RESULTS OF OPERATIONS |
The following table sets forth for the periods indicated the correlation (in percentages) between items from the Company’s statements of operations to its total sales for such periods:
Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||||||||
| Revenues | 395,637 | 338,245 | 454,094 | 395,637 | ||||||||||||
| Cost of Sales | 271,784 | 240,032 | 308,717 | 271,784 | ||||||||||||
| Gross Profit | 123,853 | 98,213 | 145,377 | 123,853 | ||||||||||||
| Selling Expenses | 55,490 | 43,823 | 65,990 | 55,490 | ||||||||||||
| General and Administrative Expenses | 21,067 | 16,686 | 21,918 | 21,067 | ||||||||||||
| Other Income | - | (69 | ) | (108 | ) | - | ||||||||||
| Operating profit | 47,296 | 37,773 | 57,577 | 47,296 | ||||||||||||
| Financial Income (Loss), Net | 17,950 | (4,956 | ) | 10,095 | 17,950 | |||||||||||
| Profit before taxes on income | 65,246 | 32,817 | 67,672 | 65,246 | ||||||||||||
| Taxes on income | (13,735 | ) | (7,850 | ) | (15,463 | ) | (13,735 | ) | ||||||||
| Net Income | 51,511 | 24,967 | 52,209 | 51,511 | ||||||||||||
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Year Ended December 31, 20192020 compared with Year Ended December 31, 20182019
Cost of Sales. Cost of sales for fiscal year 20192020 increased by 13.2%13.6% to NIS 271,784 thousand308.7 million (USD 78,641 thousand)96.0 million), or 68.7%68.0% of revenues, from NIS 240,032 thousand271.8 million (USD 69,454 thousand)84.5 million), or 71.0%68.7% of revenues, recorded in fiscal year 2018.2019. The increase in cost of sales in fiscal year 2019 compared to fiscal year 2018 was primary due to increase in sales.
Gross Profit. Gross profit for fiscal year 20192020 increased by 26.1%17.4% to NIS 123,853 thousand145.4 million (USD 35,837 thousand)45.2 million), or 31.3%32.0% of revenues, from NIS 98,213 thousand123.9 million (USD 28,418 thousand)38.5 million), or 29.0%31.3% of revenues, recorded in fiscal year 2018.2019. The increase in gross profit in fiscal year 2019 compared to fiscal year 2018 was primary due to theincrease in sales and the gross margin increase resulting from the Company's strategy of selling a more favorable mix of products which generate a higher gross margin and depreciation of the Euro and USD exchange rates against the NIS.margin.
Selling Expenses. Selling expenses for fiscal year 20192020 increased by 26.6%18.9% to NIS 55,490 thousand66.0 million (USD 16,056 thousand)20.5 million), or 14.0%14.5% of revenues from NIS 43,823 thousand55.5 million (USD 12,680 thousand)17.3 million), or 13%14% of revenues, recorded in fiscal year 2018.2019. The increase in selling expenses was primarily due to an increase of salary resulting from an increase in personnelpayroll expenses in the saleslogistics department increaseas a result of advertising expensesworking in two shifts to comply with government workplace restrictions due to the COVID-19 pandemic, and sales promotion andan increase of freight to customers' expenses.
General and Administrative Expenses. General and administrative expenses for fiscal year 20192020 increased by 26.3%4.0% to NIS 21,067 thousand21.9 million (USD 6,096 thousand)6.8 million), or 5.3%4.8% of revenues, from NIS 16,686 thousand21.1 million (USD 4,828 thousand)6.6 million), or 4.9%5.3% of revenues, recorded in fiscal year 2018.2019. The increase in general and administrative expenses was primarily due to an increase in personnel andgoal-based bonuses in management salaries.the payroll expenses.
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Profit before taxes on income for fiscal year 2020 increased by NIS 2,426 thousand (USD (1,434)755 thousand), or by 3.7%, to NIS 67,672 thousand (USD 21,050 thousand) from NIS 65,246 thousand (USD 20,294 thousand) recorded in fiscal year 2018. The increase in Financing income, net, for fiscal year 2019 consisted primarily of change in fair value of financial assets at fair value.
Taxes on Income. Taxes on income for fiscal year 20192020 increased by 75.0%12.58% to NIS 15,463 thousand (USD 4,810 thousand) from NIS 13,735 thousand (USD 3,974 thousand) from NIS 7,850 thousand (USD 2,2714,272 thousand) recorded in fiscal year 2018.2019. The increase in taxes on income in fiscal year 20192020 compared to fiscal year 20182019 was mainly due to increase in profit before taxes. For more information see Note 11a11 (Taxes on income) of our financial statements for the year ended December 31, 20192020 included in this report.
Net profit for the year. yearNet profit for fiscal year 20192020 was NIS 51.5 million52,209 thousand (USD 14.9 million)16,240 thousand), or NIS 3.903.89 (USD 1.13)1.21) per share.
Year Ended December 31, 20182019 compared with Year Ended December 31, 20172018
This analysis can be found in Item 5 of the Company’s Annual Report on Form 20-F for the year ended December 31, 2018.2019.
| B. | LIQUIDITY AND CAPITAL RESOURCES. |
The Company’s operations are funded mainly through its own equity and cash flows from its operating activities. In addition, the Company has unutilized bank credit lines.
For fiscal year 2019,2020, cash and cash equivalents decreasedincreased from NIS 134.2121.9 million (USD 38.937.9 million) as of December 31, 20182019 to NIS 121.9201.8 million (USD 35.362.8 million) as of December 31, 2019.
During fiscal year 2019,2020, financial assets at fair value through profit or loss increased to NIS 154.7 million (USD 48.1 million) from NIS 141.5 million (USD 41.0 million) from NIS 137.9 million (USD 39.944.0 million) as of December 31, 2018.2019.
Cash flow from operating activities
For fiscal year 2019,2020, the Company generated a positive cash flow from continuing operating activities of NIS 64.2 million (USD 20.0 million) compared to negative cash flow from continuing operating activities of NIS 2.60.4 million (USD 0.7 million) compared to positive cash flow from continuing operating activities of NIS 27.0 million (USD 7.80.1 million) in fiscal year 2018,2019, a change primarily due to an increasethe profit of the Company in working capitaladdition to decrease in 2019, especially inventory, decrease in deferred income taxes, gains on marketable securities, depreciation and amortization and decrease in trade receivables.and other payables.
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Cash flow from investing activities
During fiscal year 2019,2020, the Company utilized cash flow of NIS 8.124.6 million (USD 2.37.6 million) for continuing investing activities compared to net cash flow from continuing investing activities of NIS 5.88.1 million (USD 1.72.5 million) utilized in fiscal year 20182019 primarily due to loans granted to others, net, proceeds from purchases of marketable securities, net and acquisition of property plant and equipment.
Cash flow used in financing activities
On September 15, 2020, the Company raised gross proceeds of approximately a $13.2 million through a private placement of its ordinary shares. The Company issued a total of 650,000 ordinary shares at a purchase price of $20.3 per share.
During fiscal year 2019,2020, the Company utilized cash flow of NIS 1.840.7 million (USD 0.512.6 million) from financing activities compared to no net cash was used toflow from financing activities of NIS 1.8 million (USD 0.6 million) utilized in fiscal year 2018,2019, primarily due to private placement to classified institutional investors in Israel in the amount of NIS 42.5 million (USD 13.2 million) of 650,000 ordinary shares for NIS 66 per share and of stock option (not listed for trading) for the purchase of up to 650,000 ordinary shares of the company for a change as a resultperiod of lease liability payments and acquisitiontwelve months at an exercise price of treasury shares.73 NIS (USD 14,759 million).
Cash requirements
The Company’s cash requirements, net, during the years ended December 31, 20192020 and 20182019 were met primarily through its working capital. As of December 31, 2019,2020, the Company had working capital of NIS 452.8536.8 million (USD 131.0167 million) compared to working capital of NIS 399452.8 million (USD 115.6140.8 million) as of December 31, 2018.2019. The Company believes that its working capital is sufficient for the Company's present requirements.
Trade receivablesreceivable
The Company’s trade receivablesreceivable balance as of December 31, 2020 was NIS 131.3 million (USD 40.8 million) compared to the trade receivable balance as of December 31, 2019 was NIS 133.0 million (USD 38.5 million) compared to the trade receivables balance as of December 31, 2018 in the amount of NIS 98.0133.0 million (USD 28.441.4 million). The average time period within which our accountstrade receivable was paid was 91 days in 2020 compared to 92 days in 2019 compared to 88 days in 2018.2019.
Impact of Inflation and Devaluation on Results of Operations, Liabilities and Assets
The representative rate of the U.S. Dollar was NIS 3.215 on December 31, 2020 compared to NIS 3.456 on December 31, 2019, compared to NIS 3.748 on December 31, 2018, NIS 3.467 on December 31, 2017 and NIS 3.845 on December 31, 2016 and NIS 3.902 on December 31, 2015.2016. As of March 18, 2019,22, 2021, the representative rate of the U.S. Dollar was NIS 3.827.3.303.
The annual rates of inflation (deflation) in Israel during the years ended December 31, 2015, 2016, 2017, 2018, 2019 and 20192020 were approximately (0.1%), (0.3%), 0.4%,0.8%, 0.6% and 0.6%(0.3%), respectively, while during such periods the revaluation (devaluation) of the NIS against the U.S. Dollar was approximately (0%), (1.5%), (10%), 8.1%, (9.2%) and (9.2%(6.9%), respectively.
A revaluation of the NIS in relation to the U.S. Dollar has 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 also has 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 has 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.
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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.
Guarantees and Pledges
Other than letter of credit granted by the Company to some of its suppliers, the Company has no obligation or use credit lines to the banks or to other party. The outstanding amount of such letters of credit as of December 31, 20192020 was approximately NIS 1.680.6 million (USD 0.490.2 million).
| C. | RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES |
Not applicable.
| D. | TREND INFORMATION |
In recent 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 revenues. In order to maintain our gross margin at its high levels, in the past we were able to change our product mix and introduce new products with higher margins to increase our gross profit.
The food industry is characterized by a high level of competition and limited consumer loyalty. The sector is dynamic, responding to the demands, needs and various tastes of an audience numbering millions of Israeli consumers.
Recent years have seen a strengthening of private brands marketed by the large supermarket chains Shufersal Ltd. ("Shufersal") and Rami Levi Hashikma Marketing Ltd. ("Rami Levy"). The marketing of these private brands strengthens competition; however, it also allows the Company to integrate into this market by marketing its products as private brands to the large supermarket chains.
On January 15, 2015, the Food Law went into effect. Designed to advance and increase competition in the food industry in order to reduce prices to the consumer, the Food Law is divided into three main sections:
(i) provisions related to increasing the transparency of prices at large retailers ("Large Retailer", as defined therein) – the Food Law requires that large food retail chains advertise on the internet the current prices of their products in each branch, which will enable the development of internet sites to compare prices between food stores close to a consumer's residence.
(ii) provisions related to addressing regional concentration for food retailers – the industry is characterized by high concentration of food retail chains in a single geographic area. These chains force competitors from the same region and limit competition. The Food Law prohibits, among other things, the large food retail chains that control a specific region from opening new stores without the consent of the Israel Antitrust Commissioner. In addition, the anti-trust court may require these retailers to sell branches suffering from high concentration and low competition.
(iii) provisions related to advancement of competition and arrangement of fair competition in the food retail industry – the food industry is characterized by a small number of dominant suppliers, most of which have been declared monopolies. In addition, anti-competitive arrangements have been established in the industry whose purpose is to force products of medium-sized and small suppliers from the shelves and to hurt competition. The Food Law prohibits various anti-competitive arrangements by large suppliers and large food retailers, such as involvement of a supplier in the manner of arrangement of products in the stores, and in setting of prices of products from other suppliers.
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In addition, the law includes a temporary order to limit the shelf space of very large suppliers (defined as retailers whose annual sales exceed NIS 1 billion) to 50% of the shelf space at large stores (defined as stores with more than 250 square meters) of larger retailers. The purpose is to enable medium-sized and small suppliers, such as the Company, to obtain shelf space at the large food retailers and thereby increase competition and lower prices for the end customer. The Company is not currently on the list of large suppliers maintained by the Anti-Trust Authority. A large supplier is defined as a supplier with revenues to retailers, or through retailers, in Israel of more than NIS 300 million, or a supplier who is a monopoly as defined in the Israel anti-trust law, with respect to a particular food products for which it was declared a monopoly.
In addition, various macro economic factors impact the food industry, including the macro economic environment in Israel, which includes the following:
Labor market activity – The data show that before the imposition of the second lock-down, the broad unemployment rate stabilized at around 11-12%, increasing to 23% during the second lock-down due to the COVID-19 pandemic and then gradually decreasing and to about 12.7% in the first half of December 2020.
Inflation environment - During the second half of 2020, the inflation target setrate remained low and negative, but slightly higher than at the end of the first half of 2020. For the year 2020, inflation stood at (0.6%).
Developments in financial markets - In the first half of 2020, the COVID-19 pandemic led to sharp declines in the financial markets in Israel and around the world. In response, central banks around the world, including the Bank of Israel, implemented various programs that continued in the second half of 2020 to purchase assets and open credit barriers for sectors that needed them, in order to ensure that the markets continued to provide liquidity and to support their proper functioning. Relative stability was maintained in financial markets during most of the second half of 2020, and at the end of the year there were general share market price increases - among other things, against the background of the news about various vaccines for coronavirus.
Fiscal policy - The deficit at the end of 2020 is expected to be about 12% of GDP. About three-quarters of the deficit is attributed to the consequences of the COVID-19 pandemic – about half from increased spending and a quarter due to declining tax revenues.
Monetary policy - In the second half of 2020, with the deteriorating economic conditions in the economy following the spread of the COVID-19 pandemic and measures taken to combat its impact, the Bank of Israel implemented various measures to help reduce the economic damage which included, among other things: (1) keeping the interest rate unchanged at 0.1%, its lowest level ever; (2) intervention in the foreign exchange market - aggressive acquisitions to help appreciate the value of the shekel; (3) acquisitions of corporate bonds in the secondary market to a significant extent in order to expand the possibility for large companies to raise credit directly and make available bank and non-bank credit to smaller businesses; (4) renewal of a program to expand the supply of credit to small businesses; (5) increasing the program of government bond purchases in order to reduce credit costs in the economy; (6) providing loans to the banking system by the Bank of Israel (1%-3%).
credit.
In addition, 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, conducting inquiries, and following negative publicity regarding its customers or other signs indicating financial difficulties.
OFF-BALANCE SHEET ARRANGEMENTS
Not applicable.
| E. | TABULAR DISCLOSURE OF CONTRACTURAL OBLIGATIONS |
Not applicable.
| A. | DIRECTORS AND SENIOR MANAGEMENT |
The directors, executive officers and key employees of the Company as of the date of this Annual Report are as follows:
| Name | Age | Position with the Company | ||||
| Joseph Williger | 64 | Director, Co-Chairman of the Board | ||||
| Zwi Williger | 66 | Director, Co-Chairman of the Board | ||||
| Victor Bar (1) (2) | 56 | Director | ||||
| Einat Peled-Shapira | 43 | Chief Executive Officer | ||||
| Yitschak Barabi | 36 | Chief Financial Officer | ||||
| Einav Brar (1) (2) | 49 | External Director | ||||
| Idan Ben-Shitrit (1) (2) | 46 | External Director | ||||
(1) (2) | Members of the Company’s Audit Committee Members of the Company’s Compensation Committee | ||||
The Directors are elected at the annual general meeting of shareholders and hold office until the next annual general meeting of shareholders and until their successors have been elected. Officers serve at the discretion of the Board, subject to the terms of any agreement between officers and the Company.
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The business experience of each of the Directors, executive officers and key employees of the Company is set forth below:
Zwi Willigerhas served as the active Co-Chairman of the board of the Company (together with his brother Mr. Joseph Williger) and as a Chairman of the board of Willi-Food, the controlling shareholder of the Company, since August 2017 and June 2017, respectively. In addition, From January 1994 until January 2016 he served as an active Chairman of the board of the Company and a director and a CEO of Willi-Food. Prior to that and from inception of the Company in 1994 until 1997, he served as a director and Manager of Marketing Development of the Company. In addition, Mr. Williger served as Chief Operating Officer of the Company from 1997 until 2011. Mr. Williger attended Fresno University in California.
Victor Bar has served as independent director of the Company since June 2017. In addition, Mr. Bar is director at his wholly-owned company, Victor Bar Consultant Ltd, where. since 2015 he has provided financial services including value estimations for companies and other entities. Between 2014 and 2016, Mr. Bar served as CFO of Edriel Israel Assets Ltd, a real estate company traded on Tel Aviv Stock Exchange. Mr. Bar holds a B.A. in accounting and economy from Bar Ilan University and C.P.A license in Israel since 1992.
Einat Peled-Shapira has served as the Company’s Chief Executive Officer since March 10, 2020, when she replaced Mr. Michael Luboschitz, who previously served as CEO. Ms Peled-Shapira resigned from the Company effective April 1, 2021. Prior to being appointed CEO, Ms. Peled-Shapira held several senior positions over 14 years at Osem-Nestle group, one of the largest food manufacturers and distributors in Israel, most recently since 2018 as Business Unit Manager of "Bonjour", a leading fresh baked goods company in Israel. Mrs. Peled-Shapira holds an BA in Business Administration with a specialization in information systems from the College of Management Academic Studies in Rishon LeZion, Israel and an MBA with a specialization in marketing from the Peres Academic Center in Rehovot, Israel.Israel
Yitschak Barabi has served as Chief Financial Officer/finance manager of the Company and Willi-Food since September 1, 2019, when he replaced Mr. Amir Kaplan, who previously served as CFO.2019. Prior to his appointment as Finance Manager, Mr. Barabi served as the Company’s Controller and Deputy CFO since October 15, 2017. Mr. Barabi is certified public accountant (Israel) and holds a BA (Accounting & Economic) from the Hebrew University.
Einav Brar has served as external director of the Company since August 2018. Since 2015, Ms. Brar has served as owner and CEO of TLV Medical Center, and from 1994 until 2015, she served as founder and former CEO of DPL - Disposable Hygienic Products LTD. Ms. Brar earned a bachelor's degree in Business Administration from Roppin Academic Center in Emek Hefer, Israel.
Idan Ben-Shitrit has served as external director of the Company since August 2018. SinceFrom 2009 to 2016, he has served as a self-employed portfolio manager at Meitav Co. & Altris Co. Since 2017, he has served as a self-employed hedge fund manager, a wealth management advisor for private clients and as an advisor in the finance and investment sector. Mr. Idan earned a bachelor of arts degree in Mathematics and Economics from Tel-Aviv University and an MBA in Finance from IDC in Herzliya, Israel.
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| B. | COMPENSATION |
The table below reflects the compensation granted to our five most highly compensated office holders (as defined in the Companies Law) during or with respect to the year ended December 31, 2019.2020. We refer to the five individuals for whom disclosure is provided herein as our “Covered Executives.” For purposes of the table below, “compensation” includes amounts accrued or paid in connection with management fees, salary cost, consultancy fees, bonuses, equity-based compensation, retirement or termination payments, benefits and perquisites such as car, phone and social benefits and any undertaking to provide such compensation. All amounts reported in the table are in terms of cost to the Company, as recognized in our financial statements for the year ended December 31, 2019,2020, plus compensation paid to such Covered Executives following the end of the year in respect of services provided during the year. Each of the Covered Executives was covered by our D&O liability insurance policy and was entitled to indemnification and exemption in accordance with applicable law and our articles of association.
| Name and Principal Position | Salary (1) | Management Fees (2) | Bonus (3) | Total |
| NIS thousands | ||||
Zwi Williger (4) Co-Chairman of the Board and a chairman of the board of Willi-Food | - | 1,590 | 2,500 | 4,090 |
Joseph Williger (4) Co-Chairman of the Board and a director of Willi-Food | - | 1,503 | 2,500 | 4,003 |
Einat Peled-Shapira CEO of the Company and Willi-Food | 739 | - | 210 | 949 |
Yitschak Barabi Chief Finance officer of the company | 536 | - | 84 | 620 |
Ran Asulin Chief Trade and Selling Officer of the Company. | 534 | - | 82 | 616 |
| Name and Principal Position | Salary (1) | Management Fees (2) | Bonus (3) | Total |
| NIS thousands | ||||
Zwi Williger (4) Co-Chairman of the Board and a chairman of the board of Willi-Food | - | 1,650 | 1,500 | 3,150 |
Joseph Williger (4) Co-Chairman of the Board and a director of Willi-Food | - | 1,569 | 1,500 | 3,069 |
Michael Luboschitz (5) Former CEO of the Company and Willi-Food | - | 936 | 330 | 1,266 |
Ran Asulin Chief Trade and Selling Officer of the Company. | 486 | - | 72 | 558 |
Amir Kaplan (6) Former Chief Financial Officer of the Company and Willi-Food | 441 | - | 71 | 513 |
| (1) | The aggregate of gross monthly salaries or other payments with respect to the Company's Executive Officers for |
| (2) | Management fees includes also tax gross-up payments. |
| (3) | Annual profit-related bonuses for |
| (4) | For additional information on Zwi Williger's and Joseph Williger's compensation arrangements with the Company, see - "Item 7. Major Shareholders and Related Party Transactions – B. Related Party Transactions – Management Service Agreements" with Zwi Williger and Joseph Williger", below. |
Terms of Service of Mr. Zwi Williger and Mr. Joseph Williger
On August 13, 2017 and on August 17, 2017, the Company’s Compensation Committee and Board, respectively, unanimously approved the following terms of office of each of the co-Chairmen, which were approved by the Company's shareholders on October 17, 2017.
According to the Management Services Agreements approved by shareholders on October 17, 2017 and approved in amended form by shareholders on April 3, 2019 (the “Current Management Services Agreements”), each of the co-Chairmen will serve as an active co-Chairman of the Board of Directors of the Company in a 100% full time position as of January 1, 2019.
On June 4, 2020, the shareholders approved an amendment to the Current Management Services Agreements. Pursuant to the amendment, as of January 1, 2020 and for a period of three years, the maximum annual Measurable Bonus to be paid to a co-chairman will not exceed the amount set forth in the Company’s Revised Compensation Policy, NIS 2.5 million (currently approximately USD 0.78 million), instead of NIS 1.5 million contained in the Current Management Services Agreements, provided that the Company’s annual minimum operating profit before bonuses exceeds NIS 30 million (currently USD 9.33 million) instead of NIS 20 million as provided in the Current Management Services Agreements.
The main terms and conditions of each of the Current Management Services AgreementAgreements, as amended on June 4, 2020, are as follows:
(a) Monthly service fees of NIS 100,000 (currently approximately USD 28.931.1 thousand) (excluding VAT).
In addition to the monthly service fees, the co-Chairman will be entitled to annual remuneration, remuneration for participation in meetings of the Board of Directors and/or its committees according the “minimum amount” as set forth in the Israeli Companies Regulations (Rules Regarding Compensation and expenses of an External Director), 5760-2000 (the “Compensation Regulations”) and in accordance with the level of equity of the Company as defined in the Compensation Regulations (as amended from time to time).
(b) Profit Related Bonus - an annual bonus determined according to measurable quantitative criteria:
Payment of the Measurable Bonus will be subject to achieving an operating profit target before bonuses to all Company’s officers (the “Bonuses”) of at least NIS 2030 million (currently approximately USD 5.789.33 million) (the “Minimum Operating Profit before Bonuses”).
Achieving or exceeding the Minimum Operating Profit before Bonuses the co-Chairman will entitle to receive a bonus in the following manner: (i) a Bonus of 2% of the actual operating profit before Bonuses up to and including NIS 10 million (currently approximately USD 2.893.11 million); (ii) a Bonus of 3% of the actual operating profit before Bonuses above NIS 10 million and up to and including NIS 15 million (currently approximately USD 4.344.66 million); (iii) ) a Bonus of 4% of the actual operating profit before Bonuses above NIS 15 million and up to and including NIS 20 million (currently approximately USD 5.796.22 million); (iv) a Bonus of 5% of actual operating profit before Bonuses exceeding NIS 20 million.
The maximum annual Measurable Bonus to be paid to the co-chairman will not exceed NIS 1.52.5 million (currently approximately USD 434 thousand)0.78 million).
(c) The Company may terminate the Management Service Agreements at any time, and for any reason, by prior written notice of at least three months in the first year of acting as co-Chairman and by prior written notice of at least four months after the first year.
The co-Chairman may terminate their respective Management Service Agreement at any time, and for any reason, by prior written notice of at least three months.
During the notice period, the co-Chairman must fulfill his duties in order to ensure the continued and smooth operation of the Company, unless the Board decides to conclude his service before the end of the Notice Period.
(d) Upon termination of Management Services Agreement by the Company, the co-Chairman will be entitled to a retirement grant in an amount equal to six (6) monthly service fees (provided that the Company did not terminate the Management Services Agreement in circumstances specified in the agreement), and three (3) monthly service fees following termination of the Management Services Agreement by the applicable co-Chairman.
The co-Chairman will be entitled to a retirement grant described above, provided the co-Chairman has been acting as co-Chairman the Company for at least one (1) year.
(e) The Company will provide the co-Chairman with use of a vehicle, the value of which will not exceed the amount of NIS 400,000 (currently approximately USD 115,740)124,417). The Company will cover all the operating expenses of the Company car (excluding fines), including grossing up the related tax. In case, at the request of the co-Chairman, the value of the vehicle will exceed the amount of NIS 400,000, the co-Chairman will reimburse the Company with any amount exceeding NIS 400,000.
(f) Benefits in general, including the social benefits of the co-Chairman and income tax payments, national insurance payments and other payments due to employees in respect of their employment, are to be paid for at the sole expense of the co-Chairman’s Management Company. The co-Chairman’s Management Company has undertaken to indemnify the Company with respect to any claims against the Company with respect to employer/employee relations.
Terms of Office and Employment of Michael Luboschitz, CEO of the Company and Willi-Food
The Board appointed Ms. ShapiraPeled-Shapira as CEO effective March 10, 2020.2020 and she resigned from the Company effective April 1, 2021.
On January 26,June 4, 2020, the Compensation Committee of the Company and the Board eachshareholders approved the following terms of office and employment of Ms. Shapira, subject to shareholders’ approval:Peled-Shapira, effective from her date of appointment:
Salary – monthly salary of NIS 53,330 (currently approximately USD 15,431)16,587) (“Monthly Payment”);
Managers’ Insurance Policy – monthly payments to be made by the Company towards Ms. Shapira'sPeled-Shapira's pension and compensation funds will be in accordance with Israeli law (currently approximately NIS 7,900, or USD 2,288);
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Study Fund (‘Keren Hishtalmut’) – monthly payment to be made by the Company towards Ms. Shapira'sPeled-Shapira's study fund will total 7.5% of the of the sum of the Monthly Payment (currently approximately NIS 4,000 or USD 1,157)1,244);
Vehicle – Company will provide Ms. Shapira'sPeled-Shapira's with a leased vehicle, the value of which will not exceed the amount of NIS 200,000 (currently approximately USD 57,870)62,208). The Company will cover all the operating expenses of the Company car (excluding fines). Ms. Shapira'sPeled-Shapira's will bear all related tax (known in Hebrew as ‘Shovi Rechev’);
Vacation Days – 25 vacation days per year;
Convalescence and Illness Days – in accordance with applicable Israeli law; and
Profit Related Bonus – an annual bonus determined according to measurable quantitative criteria (the “Measurable Bonus”).
The Measurable Bonus mechanism is as follows:
Payment of the Measurable Bonus will be subject to achieving the Minimum Operating Profit before Bonuses, and will not be less than the operating profit (excluding bonuses) that will be recorded in 2019 less 12.5%.
Achieving or exceeding the Minimum Operating Profit before Bonuses will entitle Ms. ShapiraPeled-Shapira to receive a bonus in the following manner: (i) a Bonus of 0.35% of the actual operating profit before Bonuses up to and including the Minimum Operating Profit before Bonuses; and (ii) a Bonus of 0.7% of the actual operating profit before Bonuses exceeding the Minimum Operating Profit before Bonuses.
The maximum annual Measurable Bonus to be paid to Ms. ShapiraPeled-Shapira will not exceed NIS 320,000 or USD 92,592.
Ms. ShapiraPeled-Shapira will be included in the D&O insurance policy available to the Company and its subsidiaries under the same terms as other officers of the Company, and she will be entitled to an exemption and indemnification letter, which is identical to the form of exemption and indemnification that was approved by the General Meeting of Shareholders on July 20, 2005 for all directors and officers.
Terms of Office and Employment of Yitschak Barabi, Chief Financial Officer of the Company
Mr. Barabi has served as Chief Financial Officer of the Company since September 1, 2019. Before that, Mr. Barabi served as Controller and CFO deputy of the Company. Mr. Barabi is entitled to a monthly salary in accordance with the terms of his employment agreement as approved by the certified organs of the Company, including salary, car, mobile phone and accepted social conditions. In addition, Mr. Barabi is included in the insurance policy for directors and officers of the Company, and is also entitled to exemption and indemnification from the Company. Pursuant to his employment agreement, Mr. Barabi is entitled to a bonus based on the Company's operating profit. Each party may terminate the agreement by giving 60 days advance notice.
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Terms of Office and Employment of Ran Asulin, Chief tradeTrade and selling officerSelling Officer of the companyCompany
Mr. Asulin has served as Chief Trade and Selling Officer of the companyCompany since February 24, 2020. Before that, MrMr. Asulin served as National Trade Manager of the Company since December 2018. Mr. Asulin is entitled to a monthly salary in accordance with the terms of his employment agreement as approved by the certified organs of the Company, including salary, car, mobile phone and accepted social conditions. In addition, Mr. Asulin is included in the insurance policy for directors and officers of the Company, and is also entitled to exemption and indemnification from the Company. Pursuant to his employment agreement, Mr. Asulin is entitled to a bonus based on the Company's sales and gross profit.
Each party may terminate the agreement by giving 60 days advance notice.
Aggregate Compensation of Directors and Officers
The aggregate compensation paid by the Company to its directors and officers as a group for the fiscal year 20192020 was approximately NIS 6.45.4 million (USD 1.91.7 million), excluding bonuses in an aggregate amount of approximately NIS 3.55.4 million (USD 1.01.7 million) paid to Messrs. Joseph and Zwi Williger and other officers. These amounts include all contingent or deferred compensation payable to directors or officers during fiscal year 2019.2020. These amounts also include payments to non-executive directors in the aggregate amount of approximately NIS 551403 thousand (USD 159125 thousand) during fiscal year 2019.2020.
The foregoing includes amounts expended by the Company for motor vehicles made available to its officers. The Company provides motor vehicles to key employees and certain officers, at the Company’s expense.
See also “Item 7. Major Shareholders and Related Party Transactions – B. Related Party Transactions”.
Compensation Policy
Pursuant to Amendment No. 20 to the Companies Law and following approval of the Compensation Committee and Board, a Compensation Policy was approved by shareholders on November 28, 2013 and a revised Compensation Policy was approved by shareholders on October 17, 2017 (the "October 2017 Compensation Policy"). The objective of the October 2017 Compensation Policy is to achieve the goals and work plans of the Company, including its long-term best interests by: (i) creating a reasonable and appropriate set of incentives for the Company’s executives; (ii) providing the tools necessary for recruiting, motivating and retaining talented and skilled executives; (iii) putting an emphasis on performance based compensation; and (iv) creating proper balance between the various compensation components (such as fixed versus variable components and short-term versus long-term).
Pursuant to Amendment No. 20 to the Companies Law, a compensation policy must be reviewed and re-approved every three years, whether or not it has been amended. An amendment to the October 2017 Compensation Policy and its approvalwas approved by shareholders for a period ofan additional three yearsyear period on April 3, 2019, and such compensation policy was proposedfurther amended by shareholders on April 3, 2019.June 4, 2020.
| C. | BOARD PRACTICES |
Terms of Office
Except as to External Directors, who are discussed below, Directors are elected by the shareholders at the annual general meeting of the shareholders, except in certain cases where Directors are appointed by the Board of Directors, and their appointment is later ratified at the first annual general meeting of the shareholders thereafter. Except for External Directors, Directors serve until the next annual general meeting of the shareholders.
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Alternate Directors
The Articles of Association of the Company provide that any director (except for External Directors) may, by written notice to the Company, appoint another person to serve as an alternate director. Under the Israeli Companies Law, the directors of the Company cannot appoint an incumbent director or an incumbent alternate director as an alternate director. The term of appointment of an alternate director may be for a specified period or until notice is given of the termination of the appointment. A Director who is member of a Board Committee may appoint anyone to be his alternate on that committee provided that the candidate for appointment as alternate is not a member of such committee.
Audit Committee
Nasdaq Requirements
Our ordinary shares are listed for quotation on the Nasdaq Capital Market, and we are subject to the rules of the Nasdaq Capital Market applicable to listed companies. Under the current Nasdaq rules, a listed company is required to have an audit committee consisting of at least three independent directors, all of whom are financially literate and one of whom has accounting or related financial management expertise. Einav Brar (Chair), Idan Ben-Shitrit, and Victor Bar qualify as independent directors under the Nasdaq requirements and are members of the Audit Committee. The role of the audit committee for Nasdaq purposes includes assisting the Board of Directors in fulfilling its responsibility for oversight of the quality and integrity of the Company's accounting, auditing and reporting practices.
Israeli Companies Law Requirements
Under the Israeli Companies Law, the board of directors of a public company must appoint an audit committee, comprised of at least three directors including all of the external directors, with a majority of independent directors but excluding a:
The Chairman of the board of directors;
A controlling shareholder or his relative;
Any director employed by or who provides services to the company on a regular basis.
Any director employed by the controlling shareholder or by any corporation controlled by the controlling shareholder or who provides services to the controlling shareholder on a regular basis; and
Any director whose principal livelihood comes from the controlling shareholder.
The Chairman of the audit committee must be an external director.
The responsibilities of the audit committee under the Israeli Companies Law include, among others, identifying irregularities in the management of the company’s business, approving related party transactions as required by law, approving “actions” or “transactions” (as such terms are defined in the Israeli Companies Law), identifying deficiencies in the business management practices of the Company in consultation with the Company’s internal auditor or independent auditors and recommending to the Board ways to improve such practices and approving transactions with affiliates. In addition, the audit committee has certain powers with regard to transactions with controlling shareholders or with persons or entities in which the controlling shareholder has a personal interest, including the power to require a competitive procedure or in some cases other procedure prior to entering into such transactions and the power to establish a procedure for approving such transactions in cases they are not de minimis to the Company.
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Compensation Committee
Israeli Companies Law Requirements
Einav Brar (Chair), Idan Ben-Shitrit and Victor Bar are members of the Board’s Compensation Committee. All of our Compensation Committee members have been determined to be eligible to be members of a compensation committee in accordance with the amendments to the Israeli Companies Law.
Under the Israeli Companies Law, the compensation committee of a public company is required to consist of at least three members, all the external directors must be members of it and one of them must be appointed as chairperson, and the majority of the members must be independent. The remaining members must be directors who qualify to serve as members of the audit committee as defined in the Israeli Companies Law. The roles of the compensation committee include, among others:
Recommending the board of directors, the compensation policy for the company's office holders to be adopted by the company and to recommend to the board of directors, once every three years, regarding any extension or modification of the current compensation policy which had been approved for a period of more than three years;
From time to time, recommending to the board of directors regarding updates required to the compensation policy and examining the implementation thereof;
Determining whether to approve the company’s office holders’ terms of office and employment in situations that require the approval of the compensation committee in accordance with the Israeli Companies Law; and
According to the Israeli Companies Law, the terms of service and employment of a public company’s office holders (including cash and equity-based compensation, exemption from liability, indemnification, D&O insurance and other benefits and payments related to service and employment) must beare usually approved by the board of directors, while, the terms of service and employment of the directors and the CEO must also beare usually approved also by the company's shareholders in accordance with the majority requirements of the Israeli Companies Law.
Independent Directors
The Company is a “Controlled Company” within the meaning of the Nasdaq rules since more than 50% of its voting power is held by Willi-Food. As a Controlled Company, the Company is exempt from certain Nasdaq independence requirements, such as the requirement that a majority of the Board of Directors be independent and the rules relating to independence of directors approving nominations and executive compensation.
External Directors under the Israeli Companies Law/Financial Experts
The Israeli Companies Law requires that the Company have at least two external directors on its Board of Directors. The electionnomination of an external director under the Israeli Companies Law must be approved by a general meeting of shareholders provided that either: (a) the majority of shares voted at the meeting, including at least a majority of the shares of non-controlling shareholders and who do not have a personal interest in the appointment (excluding a personal interest which diddoes not result from the shareholder's relation with the controlling shareholder) voted at the meeting, vote in favor of such arrangement (not including abstentions) or (b) the total number of shares voted against such arrangement does not exceed two percent of the aggregate voting rights in the company.
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A “Controlling Shareholder” is defined in the Israeli Companies Law as a shareholder with the ability to control the actions of the company, whether by majority ownership or otherwise, and for the purpose of transactions with related parties, the definition may include a shareholder who holds at least 25% of the voting rights in the Company, provided that there is no other shareholder who hold more than 50% of the voting rights in the company; if two or more shareholders who hold voting rights in the Company have a personal interest in the approval of a transaction with a related party will be seen as holding together. The Israeli Companies Law further requires that at least one external director have financial and accounting expertise, and that the other external director(s) have professional competence, as determined by the company’s board of directors. A director having financial and accounting expertise is a person who, due to his or her education, experience and talents is highly skilled in respect of, and understands, business-accounting matters and financial reports in a manner that enables him or her to understand in depth the company’s financial statements and to stimulate discussion regarding the manner in which the financial data is presented. Under the regulations, a director having professional competence is a person who has an academic degree in either economics, business administration, accounting, law or public administration or an academic degree in an area relevant to the company’s business, or has at least five years' experience in a senior position in the business management of a corporation with a substantial scope of business, in a senior position in the public service or a senior position in the field of the company’s business.
An external director is appointed for a period of three consecutive years and may be re-appointed for two additional three-year periods only, subject to certain conditions (including approval by shareholders at a general meeting) as provided under Israeli regulations. Under the Israeli Companies Law, any committee of the Board of Directors to which the Board of Directors has delegated its powers in whole or in part must include at least one external director. Under the Israeli Companies Law, the Audit Committee and the Compensation Committee must include all the external directors.
The External Directors of the Company are Ms. Einav Brar and Mr. Idan Ben-Shitrit. Ms. Brar was elected by the Company shareholders on August 2, 2018 to serve for a period of three years, and was determined by the Board to have “financial and accounting expertise” under Israeli Companies Law. Mr. Ben-Shitrit was elected by the Company shareholders on August 2, 2018 to serve for a period of three years, and was determined by the Board to have “professional expertise” under the Israeli Companies law.
Internal Auditor
Under the Israeli Companies Law, Israeli companies whose securities are publicly traded are also required to appoint an internal auditor, as recommended by the audit committee. The role of the internal auditor is to check, among others, the integrity of the company's operations in terms of compliance with the law and proper business practice. Mr. Doron Yunisy, the Company’s internal auditor, works in accordance with an annual audit plan approved by the Audit Committee.
Indemnification
In accordance with the Israeli Companies Law and the Company’s Articles of Association, the Company has undertaken to indemnify and insure its directors and senior officers against certain liabilities which they may incur in connection with the performance of their duties. Under the terms of such indemnification provisions, the Company may, to the extent permitted by law, indemnify its directors or officers for legal expenses incurred by him/her in connection with such liabilities.
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Exemption
In May 2005, the Board of Directors and Audit Committee of the Company approved an exemption in advance to any director or officer from any liability to the Company attributed to damage or loss caused by breach of the director or the officer’s duty of care owed to the Company, except for such breach in distribution (as such term is defined in the Israeli Companies Law). Also, the Board of Directors, the Audit Committee and the shareholders approved an irrevocable indemnification of the Company officers with respect to any liability or expense paid for by the officer or that the officer may be obligated to pay.
In accordance with the Israeli Companies Law, an agreement with a controlling shareholder, such as the Company's exemption and indemnification letter to its controlling shareholders, must be approved every three years by the Company’s Audit Committee or Compensation Committee (as the case may be), the Board of Directors and a special majority of the Company shareholders.
All current officers and directors of the Company have received exemption and indemnification letters, including Joseph Williger and Zwi Williger, Gil Hochboim, Victor Bar, Einav Brar and Idan Ben-Shitrit.
Directors and officer's liability insurance policy
In accordance with the Israeli Companies Law, an agreement with a controlling shareholder, such as the Company's directors' and officers' liability insurance policy for its controlling shareholders, must be approved every three years by the Company’s Audit Committee or Compensation Committee (as the case may be), by the Board of Directors and by a special majority of the Company shareholders, unless it is approved in accordance with Article 1B(5) of the Israeli Companies Regulations (Relief with Respect to Transactions with Interested Parties), 5760-2000 (the “Relief Regulations”). On October 17, 2017 the Company shareholders approved an insurance policy for Messrs. Zwi Williger and Joseph Williger for a three years period on the same terms such policy applies to the other directors and officers of the Company. The terms of office of Messrs. Williger, including the insurance policy, were re-approved by the Company shareholders on April 3, 2019.
Approval of Related Party Transactions under the Israeli Companies Law
Office Holders
The Israeli Companies Law codifies the fiduciary duties that office holders owe to a company. An office holder is defined as a general manager, chief executive officer, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of that person’s title and a director or manager directly subordinate to the general manager. Each person listed in the table under "Item 6. Directors, Senior Management and Employees – A. Directors and Senior Management” is an office holder under the Israeli Companies Law.
Fiduciary duties. An office holder’s fiduciary duties consist of a duty of loyalty and a duty of care. The duty of loyalty requires the office holder to act in good faith and for the benefit of the company, and includes, among other things, the duty to avoid any conflict of interest between the office holder’s position in the company and his/her personal affairs. In addition, the duty of loyalty proscribes any competition with the company or the exploitation of any business opportunity of the company in order to receive personal advantage for him or herself or others. This duty also requires disclosure to the company of any information or documents relating to the company’s affairs that the office holder has received due to his or her position as an office holder. The duty of care requires an office holder to act with a level of care that a reasonable office holder in the same position would employ under the same circumstances. This includes the duty to use reasonable means to obtain information regarding the advisability of a given action submitted for his or her approval or performed by virtue of his or her position and all other relevant information pertaining to these actions.
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Compensation. The Israeli Companies Law requires that the terms of service and engagement of the chief executive officer, directors or controlling shareholders (or a relative thereof) receive the approval of the compensation committee, board of directors, and shareholders, subject to limited exceptions. Similarly, the terms of service and engagement of any officer other than the CEO must receive the approval of the compensation committee and board of directors. However, shareholder approval is only required if the compensation of such officer other than the CEO is not in accordance with the compensation policy. This compensation policy is required to take into account, among other things, providing proper incentives to directors and officers, taking into account the risk management of the company, the officer’s contribution to achieving corporate objectives and increasing profits, and the function of the officer or director. Following the approval of the Compensation Committee and Board, a newly revised Compensation Policy was approved by the Company shareholders on October 17, 2017 at a special meeting of shareholders. An amendment to the October 2017 Compensation Policy was approved by the shareholders for an additional period of three years on April 3, 2019.2019 and was further amended by shareholders on June 4, 2020. For more information on the Company's Compensation Policy, see "Item 6. Directors, Senior Management and Employees – B. Compensation". In accordance with the Israeli Companies Law the compensation policy must be re-approved every three years, in the manner described above. The Compensation Committee is responsible for reviewing from time to time the compensation policy and determining whether or not there are circumstances that require adjustments to the current compensation policy.
The Israeli Companies Law provides that a compensation policy requires shareholder approval by a special majority vote. Notwithstanding the above, the compensation committee and the board of directors may approve the compensation policy of a company, even if the shareholders do not approve such terms, provided that:
1) the compensation committee and after the Board decide,decided, on the basis of detailed reasons and re-discussion of the compensation policy, the approval of the compensation policy despite the shareholders' objection is in favor of the company; and
2) the company is not a "Public Pyramid Held Company", which is a public company controlled by another public company (including by a company that only issued debentures to the public), which is also controlled by another public company (including a company that only issued debentures to the public) that has a controlling shareholder.
As of March 19, 2020,25, 2021, the Company is a "public pyramid held company", with the parent Company, Willi-Food, a public company traded on the Tel-Aviv Stock Exchange, and BSD, Willi-Food's parent company, a public company traded on the London Stock Exchange.
Disclosure of personal interest. The Israeli Companies Law requires that an office holder promptly disclose to the company any personal interest that he or she may have and all related material information known to him or her, in connection with any existing or proposed transaction by the company. “Personal interest”, as defined by the Israeli Companies Law, includes a personal interest of any person in an act or transaction of the company, including a personal interest of his relative or of a corporate body in which that person or a relative of that person holds 5% or more, or holds 5% or more of the voting rights, a director or general manager, or in which he or she has the right to appoint at least one director or the general manager. “Personal interest” does not apply to a personal interest stemming merely from the fact that the office holder is also a shareholder in the company. "Personal interest" also includes (1) the personal interest of a person who votes via a proxy for another person, even if the other person has no personal interest, and (2) the personal interest of a person who gives a proxy to vote even if the person who votes on his or her behalf has no personal interest, regardless of whether the discretion of how to vote lies with the person voting or not.
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The office holder must make the disclosure of his or her personal interest promptly and, in any event, no later than the first meeting of the company’s board of directors that discusses the particular transaction. This duty does not apply to the personal interest of a relative of the office holder in a transaction unless it is an “extraordinary transaction”. The Israeli Companies Law defines an extraordinary transaction as a transaction not in the ordinary course of business, not on market terms or that is likely to have a material impact on the company’s profitability, assets or liabilities, and defines a relative as a spouse, sibling, parent, grandparent, descendent and spouse’s descendant, and includes a sibling, parent and spouse of any of the foregoing.
Approvals. The Israeli Companies Law provides that a transaction with an office holder or a transaction in which an office holder has a personal interest may not be approved if it is adverse to the company’s interest. In addition, such a transaction generally requires board approval, unless the transaction is an extraordinary transaction or the articles of association provide otherwise. If the transaction is an extraordinary transaction, or if it concerns exculpation, indemnification or insurance of an office holder, then in addition to any approval stipulated by the articles of association, approval of the company’s audit committee or compensation committee (as the case may be) and board of directors, in that order, is required, and may also require special majority approval by shareholders. In accordance with the Israeli Companies Law, approval by both the compensation committee and the board of directors is required for all arrangements regarding terms of service, including cash and equity based compensation, exemption from liability, indemnification, D&O insurance and other benefits and payments related to the service and employment of an office holder. Except for certain specific exemptions under the Israeli Companies Law, matters referred to herein with respect to the CEO of a public company or a director of a company (including engagement with respect to employment terms of a director in a position other than as a director) also require shareholder approval.
With respect to the CEO of a public company, or with respect to a director who is a controlling shareholder, shareholder approval must be by a special majority vote. With respect to transactions described above with the CEO, the compensation committee may determine that such transaction does not require shareholders' approval, provided that: (i) the CEO is considered to be "independent" based on criteria set forth in the Companies Law; (ii) the compensation committee determined, based on detailed reasons, that bringing the transaction to the approval of the shareholders may compromise the entering into the transaction; and (iii) the terms of the transaction are consistent with the company's compensation policy.
In order to be approved, the terms of employment of Office Holders of a public company must be consistent with the company's compensation policy. However, the compensation committee and the board of directors may, under special circumstances, approve terms of employment which are not in accordance with the company's compensation policy if:
| 1) | the compensation committee and the board of directors have taken into consideration the mandatory considerations and criteria which are specified in the Israeli Companies Law for a compensation policy and the respective employment terms include such mandatory considerations and criteria; and |
| 2) | the company's shareholders approved such terms of employment, subject to a special majority requirement. |
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Notwithstanding the above, the compensation committee and the board of directors may approve terms of employment of Office Holders (other than CEO or directors) that are not in accordance with the company's compensation policy, even if the shareholders' do not approve such terms, provided that:
| 1) | both the compensation committee and the board of directors re-discussed the transaction and decided to approve it despite the shareholders' objection, based on detailed reasons; and |
| 2) | the Israeli company is not a "Public Pyramid Held Company", which is a public company controlled by another public company (including by a company that only issued debentures to the public), which is also controlled by another public company (including a company that only issued debentures to the public) that has a controlling shareholder. |
As of March 19, 2020,25, 2021, the Company is a "public pyramid held company", with the parent Company, Willi-Food, a public company traded on the Tel-Aviv Stock Exchange, and BSD, Willi-Food's parent company, a public company traded on the London Stock Exchange.
Under the Israeli Companies Law, changes of the terms of a current arrangement regarding service and employment terms of an office holder (other than a director) may require only the approval of the compensation committee if the compensation committee determines that such changes are not material.
A director who has a personal interest in a matter that is considered at a meeting of the board of directors, compensation committee or audit committee may not attend that meeting or vote on that matter. However, if the chairman of the board of directors or the chairman of the compensation committee or audit committee determines that the presence of an office holder with a personal interest is required for the presentation of a matter, such officer holder may be present at the meeting. Notwithstanding the foregoing, a director who has a personal interest may be present at the meeting and vote on the matter if a majority of the board of directors, compensation committee or audit committee also has a personal interest in the matter. If a majority of the board of directors, compensation committee or audit committee has a personal interest in the transaction, shareholder approval also would be required.
Shareholders
The Israeli Companies Law imposes the same requirements regarding disclosure to the company of a personal interest, as described above, on a controlling shareholder of a public company that it imposes on an office holder. For these purposes, a controlling shareholder is any shareholder who has the ability to direct the company’s actions, including any shareholder holding 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights in the company. Two or more shareholders with a personal interest in the approval of the same transaction are deemed to be one shareholder.
Unless approved in accordance with the Relief Regulations, approval of the audit committee, board of directors and shareholders, in that order, is required, among others, for:
extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest; and
the terms of an engagement by the company, directly or indirectly, with a controlling shareholder or a controlling shareholder’s relative (including through a corporation controlled by a controlling shareholder), regarding the company’s receipt of services from the controlling shareholder, and if such controlling shareholder is also an office holder of the company, regarding his or her terms of employment.
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The shareholder approval must include the majority of shares voted at the meeting. In addition, either:
the majority of the shares of the voting shareholders who have no personal interest in the transaction must vote in favor of the proposal (shares held by abstaining shareholders shall not be considered); or
the total shareholdings of those who have no personal interest in the transaction and who vote against the transaction must not represent more than 2% of the aggregate voting rights in the company.
Furthermore, any extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest with a term of more than three years requires the abovementioned approval every three years, unless, with respect to transactions not involving the receipt of services or compensation, the audit committee or compensation committee (as the case may be) determines that a longer term is reasonable under the circumstances.
In accordance with the recent amendments to the Israeli Companies Law, approval by both the compensation committee and the board of directors is required for all arrangements regarding terms of service. Except for certain specific exemptions under the Companies Law, matters referred to herein with respect to the CEO of a public company or a director of a company (including engagement with respect to employment terms of a director in a position other than as a director) also require shareholder approval. With respect to the CEO of a public company, or with respect to a director who is a controlling shareholder, shareholder approval must be by a special majority vote, provided that either:
| 1) | such majority includes a majority of the total votes of shareholders who have no personal interest in the approval of the transaction (and in case of a CEO, who are not a controlling shareholder) and who participate in the voting, in person, by proxy or by written ballot, at the meeting (abstentions not taken into account); or |
| 2) | the total number of votes of shareholders mentioned above that vote the transaction do not represent more than 2% of the total voting rights in the company. |
The Israeli Companies Law requires that every shareholder who participates in person, by proxy or by voting instrument in a vote regarding a transaction with a controlling shareholder must indicate either in advance or on the ballot whether or not that shareholder has a personal interest in the vote in question. Failure to so indicate will result in the invalidation of that shareholder’s vote.
Under the Israeli Companies Law, a shareholder has a duty to act in good faith towards the company and other shareholders and to refrain from abusing his or her power in the company including, among other things, when voting in a general meeting of shareholders or in a class meeting on the following matters:
any amendment to the articles of association;
an increase in the company’s authorized share capital;
a merger; or
approval of related partyactions and transactions that require shareholder approval.
A shareholder has a general duty to refrain from depriving any other shareholder of their rights as a shareholder. In addition, any controlling shareholder, any shareholder who knows that he/she possesses the power to determine the outcome of a shareholder vote, and any shareholder who has the power to appoint or prevent the appointment of an office holder in the company is under a duty to act with fairness towards the company. The Israeli Companies Law does not describe the substance of this duty of fairness except to state that the remedies generally available for breach of contract would also apply in the event of a breach of the duty to act with fairness toward the company.
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| D. | EMPLOYEES |
As of December 31, 2019,2020, the Company, including its subsidiaries, employed a total of 162181 persons (all of them are located in Israel), 7seven of whom were in management, 36 of whom were in accounting and importing positions, 38 of whom were involved in the Company's sales and marketing departments and 100 of whom were employed in logistics networks (warehousing and transportation). This compares with 162 employees as of December 31, 2019, seven of whom were in management, 33 of whom were in accounting and importing positions, 35 of whom were involved in the Company's sales and marketing departments and 87 of whom were employed in logistics networks (warehousing and transportation). This compares with 159 employees as of December 31, 2018, 6 of whom were in management, 32 of whom were in accounting and importing positions, 35 of whom were involved in the Company's sales and marketing departments and 86 of whom were employed in logistics networks (warehousing and transportation).
All the Company's employees are party to written employment contracts.
The Company has complied with and is in compliance with all material respects with all laws and other legal requirements relating to the employment of labor (including, without limitation, provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social pension benefits and the payment or withholding of payroll or similar taxes for employees, or any other applicable law or regulation concerning the employees of the Company).
The Extension Order for Mandatory Pension Insurance and the Extension Order for Increasing the Allocations to Pension Insurance (the "Extension Orders") that apply to the Company, require the maintenance of pension insurance for the benefit of its employees (the "Pension Insurance"). The Extension Orders settle the contribution of certain percentages of the employee's monthly insured salary to a Pension Insurance that may be one of the two following types: pension fund or insurance fund. The contribution is made by both the Company and its employees.
Each month, the employee contributes an amount equals to 6% of his insured salary, and the Company contributes an additional amount equals to 12.5% or 14.83% of the employee's insured salary. The contributions made by the Company to the pension fund cover 72% or 100% of the Company's severance liability towards its employees in case of termination (the differences in coverage depends on the amount the Company contributes to the severance part of the Pension Insurance). In the event that the Company contributes amounts to the severance part of the pension insurance that cover only 72% of the Company's severance liability, then in the case of termination of employment relations that entitle the employee to a payment of full severance pay under the law, the Company shall pay to the employee a supplementary amount. Furthermore, Israeli employees and employers are required to pay predetermined sums to the Israeli National Insurance Institute (which is similar, to some extent, to the United States Social Security Administration). The payments thereto range from 6.95% to 18.75% of wages; the employee’s share range from 3.5% to 12% (depending on the marginal level of wages) and the employer’s share range from 3.45% to 6.75%.
SHARE OWNERSHIP
For information regarding the share ownership of Directors and Officers of the Company see “Item 7. Major Shareholders and Related Party Transactions – A. Major Shareholders”.
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| A. | MAJOR SHAREHOLDERS |
The following table sets forth, as of March 19, 2020,25, 2021, the number of Ordinary Shares beneficially owned by each shareholder known to the Company to own more than 5% of the Ordinary Shares and (ii) all directors and officers as a group. The information presented in the table is based on 13,217,01713,867,017 Ordinary Shares outstanding as of March 19, 2020.25, 2021.
| Name and Address | Number of Ordinary Shares Beneficially Owned | Percentage of Ordinary Shares | ||||||
| Willi-Food Investments Ltd. | 8,200,542 | 62.05 | % | |||||
| B.S.D. Crown Ltd. (1) | 8,971,617 | 67.88 | % | |||||
| Joseph and Zwi Williger (2) (3) | 9,711,598 | 73.48 | % | |||||
| Brian Gaines (4) | 1,120,072 | 8.5% | ||||||
| Renaissance Technologies Holding Corporation (5) | 665,812 | 5.04 | % | |||||
| Name and Address | Number of Ordinary Shares Beneficially Owned | Percentage of Ordinary Shares | ||||||
| Willi-Food Investments Ltd. | 8,200,542 | 59.1 | % | |||||
| B.S.D. Crown Ltd. (1) | 8,971,617 | 64.7 | % | |||||
| Joseph and Zwi Williger (2) (3) | 9, 535,901 | 68.8 | % | |||||
| Brian Gaines (4) | 945,357 | 6.8 | % | |||||
| The Phoenix Holdings Ltd. (5) | 998,568 | 7.2 | % | |||||
| (1) | Includes (i) 8,200,542 Ordinary Shares held by Willi-Food, and (ii) 771,075 Ordinary Shares held by B.S.D. Crown Ltd. ("BSD"). Willi-Food is controlled by its majority shareholder, BSD, and BSD may be deemed to beneficially own all of the shares owned by Willi-Food. |
| (2) | Based on a Schedule 13D filed on January |
| (3) | Based on information provided to us, all of the Company's directors and officers as a group (excluding Joseph and Zwi Williger) hold |
| (4) | Based on a Schedule 13G filed February |
| (5) | Based on a Schedule 13G filed February |
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All of the shareholders of the Company (including Willi-Food) have the same number of votes for each Ordinary Share held. Accordingly, the major shareholder of the Company, Willi-Food, does not have voting rights that are different from those of the Company’s other shareholders. The Company believes that, as March 19, 2020, 1,719,53525, 2021, 2,553,741 Ordinary Shares (approximately 12.98%18.4% of its outstanding Ordinary Shares) were held by persons who were not officers, directors or the owners of 5% or more of the Company's outstanding Ordinary Shares. As of March 6, 2020,25, 2021, there were 1413 holders of Ordinary Shares of record registered with a United States mailing address, including banks, brokers and nomineesnominees. These holders of record, including a part of the Company’s shares held by Willi-Food through brokers, represented as of March 19, 202025, 2021 approximately 74.32%75.53% of the total outstanding Ordinary Shares. Because these holders of record include banks, brokers and nominees, the beneficial owners of these Ordinary Shares may include persons who reside outside the United States.
| B. | RELATED PARTY TRANSACTIONS |
Management Service Agreements.
For information regarding Management Services Agreements with Messrs. Zwi and Joseph Williger through Williger Management Companies, see "Item 7. Major Shareholders and Related Party Transactions – B. Related Party Transactions – Management Service Agreements".
Services to Willi-Food
The Company has been providing certain services to Willi-Food on an on-going basis since the Company’s commencement of operations, including office space and certain management, financial and administrative services. Effective May 19, 1997, the effective date of the Company’s initial public offering, the Company entered into a service agreement with Willi-Food. This agreement was updatedlast amended on October 2, 2017.June 4, 2020.
55
Pursuant to this agreement, Willi-Food is entitled to manage its operations from the Company’s executive offices in Yavne, including use of an office space and facilities and certain management, financial, accounting, legal, administrative and secretarial services.
Pursuant to this agreement, Willi-Food is to pay the Company a monthly amount of NIS 10,000 for these services and for external services that are provided at the same time to the Company and to the subsidiary by the same third party, such as legal services, auditing services, etc., but excluding unique and specific services that are provided to the Company or to Willi-Food. This agreement will be effective for a three-year period through October 18, 2020.
In light of the enactment of Amendment No. 16, an agreement with a controlling shareholder, such as the Company's service agreement with Willi-Food, must be approved every three years by the Audit Committee, Board of Directors and by a special majority of the General Meeting of Shareholders. Willi-Food is the parent company of the Company and is the controlling shareholder of the Company. On October 18, 2017June 4, 2020 following the unanimous approval of the Company's Audit Committee and Board of Directors, the General Meeting of Shareholders of the Company approved the extension of the above service agreement, for a three-year period ending October 18, 2020.June 4, 2023.
| C. | INTERESTS OF EXPERTS AND COUNSEL |
Not applicable.
| A. | CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION |
The financial statements required by this item are found at the end of this report, beginning on page F-1.
Dividend Policy
On November 22, 2016, the Company announced that it had adopted a dividend policy of issuing a regular annual dividend at a rate of at least 25% of its annual after-tax revenues (out of earnings generated after December 31, 2013). On April 29, 2018, the Board of Directors decided to suspend the current dividend policy and to consider adopting a new policy in the future.
Currently, we do not intend to pay cash dividends. We currently intend to reinvest any future earnings in developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our Board of Directors and will depend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, business prospects, applicable Israeli law and other factors our Board of Directors may deem relevant.
56
Legal Proceedings
| (1) | On February 24, 2016, a motion to certify a derivative action (hereinafter - the “Motion”) was received On August 16, 2018, the Company filed a notice with the court of its intention to file a lawsuit against of the opinion that the disclosure in the financial statements and in the notes thereto is sufficient. |
57
| (2) | On July 23, 2017, Mr. Iram Graiver, former CEO of the Company and Willi-Food (hereinafter - “Mr. Graiver”) filed a lawsuit |
| (3) |
On October 29, 2009, the Company, and million in addition to NIS 1.1 received in 2015. |
58
F - 34
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS in thousands)
Year ended December 31, | ||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 9 | ||||||||||
NIS | NIS | US Dollars | ||||||||||
| Current tax assets/(liabilities) | (3,750 | ) | 862 | (1,085 | ) | |||||||
| Deferred tax assets/liabilities: | 818 | 2,882 | 237 | |||||||||
| January | December | December | ||||||||||||||
1, 2019 | Change | 31, 2019 | 31, 2019 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Deferred taxes arise from the following: | ||||||||||||||||
| Financial assets carried at fair value through profit or loss | 2,001 | (3,119 | ) | (1,118 | ) | (323 | ) | |||||||||
| Employees benefits | 336 | 175 | 511 | 148 | ||||||||||||
| Allowance for doubtful accounts | 545 | 191 | 736 | 213 | ||||||||||||
| 2,882 | (2,753 | ) | 129 | 38 | ||||||||||||
| Carry forward tax losses | - | 689 | 689 | 199 | ||||||||||||
2,882 | (2,064 | ) | 818 | 237 | ||||||||||||
| January | December | December | ||||||||||||||
1, 2018 | Change | 31, 2018 | 31, 2018 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Deferred taxes arise from the following: | ||||||||||||||||
| Financial assets carried at fair value through profit or loss | (775 | ) | 2,776 | 2,001 | 579 | |||||||||||
| Employees benefits | 395 | (59 | ) | 336 | 97 | |||||||||||
| Allowance for doubtful accounts | 548 | (3 | ) | 545 | 157 | |||||||||||
| 168 | 2,714 | 2,882 | 833 | |||||||||||||
| Carry forward tax losses | 335 | (335 | ) | - | - | |||||||||||
503 | 2,379 | 2,882 | 833 | |||||||||||||
Year ended December 31 | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Current taxes: | ||||||||||||||||
| Current taxes | 11,671 | 10,069 | 3,918 | 3,378 | ||||||||||||
| Taxes in respect of prior years | - | 160 | 141 | - | ||||||||||||
11,671 | 10,229 | 4,059 | 3,378 | |||||||||||||
| Deferred taxes | 2,064 | (2,379 | ) | 1,851 | 597 | |||||||||||
13,735 | 7,850 | 5,910 | 3,975 | |||||||||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Income before Income taxes | 65,247 | 32,817 | 30,933 | 18,879 | ||||||||||||
| Statutory tax rate | 23 | % | 23 | % | 24 | % | 23 | % | ||||||||
| Tax computed by statutory tax rate | 15,006 | 7,548 | 7,424 | 4,342 | ||||||||||||
| Tax increments (savings) due to: | ||||||||||||||||
| Non-deductible expenses | 16 | 4 | 51 | 5 | ||||||||||||
| Tax exempt Income | (38 | ) | (163 | ) | (343 | ) | (11 | ) | ||||||||
| Donations | (27 | ) | (22 | ) | (9 | ) | (8 | ) | ||||||||
| Profit or loss for tax for which deferred taxes were not provided | (1,047 | ) | 368 | (1,196 | ) | (303 | ) | |||||||||
| Temporary differences for which deferred taxes were not provided | (100 | ) | - | (132 | ) | (29 | ) | |||||||||
| Previous year taxes | - | 162 | 141 | - | ||||||||||||
| Other | (75 | ) | (47 | ) | (26 | ) | (21 | ) | ||||||||
13,735 | 7,850 | 5,910 | 3,975 | |||||||||||||
The Company has an obligation to pay incentives to several customers that are not subject to the Food Law, 5744-2014, which came into effect on January 15, 2015. Some of those incentives are payable as a rate of total annual sales to those customers, and some of those incentives are payable as a rate of acquisitions in excess of an agreed upon annual volume of activities. The incentives are calculated specifically for each customer. |
- On According to the Management Services Agreements, each of the co-Chairmen are to serve as an active co-Chairman of the Board of Directors on a full-time basis (100% of a full-time position), over a period of three years from as of January 1, Messrs. Joseph Williger and Zwi Williger will each be entitled to annual bonus at a total amount that will not exceed NIS The Management Services Agreements include an advance notice period and a retirement grant of 3-6 months (according to the period that has elapsed since the date of entering into the engagement and according to the identity of person/entity who terminated the engagement). |
Messrs. Joseph Williger and Zwi Williger will be included in the Company's insurance policy, including directors and office holders policy (if any), and they will also be entitled to an exemption and indemnification letter from the Company in accordance with the exemption and indemnification letters that were adopted and/or will be adopted by the company with regard to all of its office holders. Under the Management Service Agreement, the Company will provide each of Messrs. Joseph Williger and Zwi Williger a personal vehicle and means of communication (mobile and landline phone and home internet). The company shall bear all the expenses relating to the provision of the above, including grossing up the related tax in connection therewith. |
F - 35
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS in thousands)
(Cont.)
Note 26 - Contingent liabilities and commitments (continued) |
- On April 1, 1997, the parent Company, Willi-Food Investments Ltd., and the Company entered into an agreement for the provision of management, administration, bookkeeping, secretarial and controllership services. |
| Ordinary shares | ||||||||
of NIS 0.1 par value each | ||||||||
December 31 | ||||||||
2 0 1 9 | 2 0 1 8 | |||||||
| Authorized share capital | 50,000,000 | 50,000,000 | ||||||
| Issued and outstanding | 13,217,017 | 13,240,913 | ||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Sale of goods manufactured by other corporations | 394,707 | 338,245 | 311,978 | 114,209 | ||||||||||||
| Income from providing non-bank credit | 930 | - | - | 269 | ||||||||||||
395,637 | 338,245 | 311,978 | 114,478 | |||||||||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Purchases | 279,533 | 240,998 | 222,351 | 80,883 | ||||||||||||
| Transportation | 2,186 | 1,966 | 1,579 | 633 | ||||||||||||
| Depreciation and amortization | 2,335 | 2,314 | 2,323 | 676 | ||||||||||||
| Maintenance | 4,893 | 4,175 | 5,202 | 1,416 | ||||||||||||
| Other costs and expenses | 2,226 | 1,910 | 2,062 | 644 | ||||||||||||
| 291,173 | 251,363 | 233,517 | 84,252 | |||||||||||||
| Change in finished goods | (19,389 | ) | (11,331 | ) | 4,128 | (5,611 | ) | |||||||||
271,784 | 240,032 | 237,645 | 78,641 | |||||||||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Salaries and related expenses | 18,798 | 15,058 | 14,316 | 5,439 | ||||||||||||
| Transportation and maintenance | 15,128 | 12,541 | 11,619 | 4,377 | ||||||||||||
| Vehicles | 3,377 | 3,908 | 3,564 | 978 | ||||||||||||
| Advertising and promotion | 8,032 | 4,766 | 5,472 | 2,324 | ||||||||||||
| Depreciation and amortization | 1,861 | 804 | 784 | 538 | ||||||||||||
| Others | 8,294 | 6,746 | 6,335 | 2,400 | ||||||||||||
55,490 | 43,823 | 42,090 | 16,056 | |||||||||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Salaries and related expenses | 13,557 | 10,442 | 8,922 | 3,924 | ||||||||||||
| Office maintenance | 1,455 | 1,411 | 1,182 | 421 | ||||||||||||
| Professional fees | 2,921 | 2,432 | 3,436 | 845 | ||||||||||||
| Vehicles | 330 | 545 | 713 | 95 | ||||||||||||
| Depreciation and amortization | 620 | 552 | 599 | 179 | ||||||||||||
| Bad and doubtful debts | 847 | (59 | ) | 226 | 245 | |||||||||||
| Communication | 75 | 60 | 136 | 22 | ||||||||||||
| Other | 1,262 | 1,303 | 625 | 365 | ||||||||||||
21,067 | 16,686 | 15,839 | 6,096 | |||||||||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Payroll (without payment to related parties) | 25,500 | 21,148 | 21,131 | 7,378 | ||||||||||||
25,500 | 21,148 | 21,131 | 7,378 | |||||||||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Depreciation of fixed assets (see note 7) | 3,662 | 3,614 | 3,682 | 1,060 | ||||||||||||
| Depreciation of right of use asset (see note 6) | 1,153 | - | - | 333 | ||||||||||||
4,815 | 3,614 | 3,682 | 1,393 | |||||||||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Capital gain on fixed assets realization | - | 69 | 361 | - | ||||||||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Interest Income: | ||||||||||||||||
| Short-term bank deposits | 845 | 357 | 30 | 245 | ||||||||||||
| Interest Income of debentures held for trading | 4,321 | 4,603 | 3,274 | 1,250 | ||||||||||||
| Other | - | 27 | 16 | - | ||||||||||||
| Total interest Income | 5,166 | 4,987 | 3,320 | 1,495 | ||||||||||||
| Other: | ||||||||||||||||
| Changes in fair value of financial assets at fair values | 14,972 | (13,697 | ) | 7,760 | 4,332 | |||||||||||
| Gain (loss) from non-tradable financial assets | - | - | 5,368 | - | ||||||||||||
| Dividends | 389 | 1,498 | 1,489 | 113 | ||||||||||||
| Income from forward transaction | 439 | - | - | 127 | ||||||||||||
| Total financing Income | 20,966 | (7,212 | ) | 17,937 | 6,067 | |||||||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Other: | ||||||||||||||||
| Foreign currency differences | 2,121 | (2,867 | ) | 2,708 | 614 | |||||||||||
| Bank fees | 330 | 499 | 599 | 95 | ||||||||||||
| Portfolio management fees | 500 | 112 | 462 | 145 | ||||||||||||
| Other | 65 | - | - | 19 | ||||||||||||
| Total financing costs | 3,016 | (2,256 | ) | 3,769 | 873 | |||||||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
Basic and diluted earnings per share: | ||||||||||||||||
| Earnings used in the calculation of basic and diluted earnings per share to equity holders of the parent | 51,511 | 24,967 | 25,023 | 14,904 | ||||||||||||
| Weighted average number of shares used in computing basic and diluted earnings per share from continuing operations | 13,217,017 | 13,240,913 | 13,240,913 | 13,217,017 | ||||||||||||
As of December 31, | ||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 9 | ||||||||||
NIS | NIS | US Dollars | ||||||||||
financial assets carried at amortized cost | ||||||||||||
| Cash and cash equivalents | 121,860 | 134,287 | 35,260 | |||||||||
| Trade receivables and other receivables | 142,399 | 141,648 | 41,203 | |||||||||
| Loans to others | 17,650 | - | 5,107 | |||||||||
281,909 | 275,935 | 81,570 | ||||||||||
As of December 31, | ||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 9 | ||||||||||
NIS | NIS | US Dollars | ||||||||||
| financial assets at fair value through profit or loss (FVTPL) | ||||||||||||
| Financial assets at fair value through profit or loss | 141,543 | 137,904 | 40,956 | |||||||||
141,543 | 137,904 | 40,956 | ||||||||||
As of December 31, | ||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 9 | ||||||||||
NIS | NIS | US Dollars | ||||||||||
| financial liabilities at amortizes cost | ||||||||||||
| Trade payables and other payables | 33,845 | 22,121 | 9,794 | |||||||||
33,845 | 22,121 | 9,794 | ||||||||||
Assets | Liabilities | |||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 9 | 2 0 1 8 | |||||||||||||
NIS | NIS | NIS | NIS | |||||||||||||
| US Dollars | 27,562 | 22,292 | 3,162 | 3,485 | ||||||||||||
| EUR | 11,751 | 8,082 | 9,249 | 5,677 | ||||||||||||
US Dollars Impact | EUR Impact | US Dollars Impact | EUR Impact | |||||||||||||
2 0 1 9 | 2 0 1 9 | 2 0 1 8 | 2 0 1 8 | |||||||||||||
NIS | NIS | NIS | NIS | |||||||||||||
| Profit or loss | 2,440 | 250 | 1,881 | 240 | ||||||||||||
2 0 1 9 | 2 0 1 8 | |||||||
NIS | NIS | |||||||
| Profit or loss | 14,154 | 13,791 | ||||||
December 31, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
NIS | NIS | NIS | NIS | |||||||||||||
| financial assets at fair value through profit or loss (FVTPL) | ||||||||||||||||
| Marketable securities and derivatives | 141,543 | - | - | 141,543 | ||||||||||||
December 31, 2018 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
NIS | NIS | NIS | NIS | |||||||||||||
| financial assets ‘at fair value through profit or loss’ (FVTPL) | ||||||||||||||||
| Marketable securities and derivatives | 137,904 | - | - | 137,904 | ||||||||||||
Year ended December 31, 2019 | ||||||||||||
Import | Non-banking credit | Total | ||||||||||
Segment income | 394,707 | 930 | 395,637 | |||||||||
Segment outcomes | 46,554 | 742 | 47,296 | |||||||||
Finance income | 20,966 | |||||||||||
Finance expense | (3,016 | ) | ||||||||||
Profit before taxes on income | 65,246 | |||||||||||
| Other information: | ||||||||||||
Depreciation and amortization | (4,815 | ) | ||||||||||
Tax expense | (13,735 | ) | ||||||||||
Segment assets | 517,220 | 20,015 | 537,235 | |||||||||
Segment labilities | 45,863 | 55 | 45,808 | |||||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Customer A | 55,373 | 50,439 | 50,053 | 16,103 | ||||||||||||
| Year ended December 31, | ||||||||||||||||
| 2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
| NIS | NIS | NIS | US Dollars | |||||||||||||
| Canned Vegetables and Pickles | 63,674 | 57,333 | 53,839 | 18,424 | ||||||||||||
| Dairy and Dairy Substitute Products | 154,303 | 116,083 | 102,372 | 44,648 | ||||||||||||
| Canned Fish | 49,179 | 52,573 | 50,579 | 14,230 | ||||||||||||
| Cereals, rice and pastas | 48,813 | 47,064 | 41,218 | 14,124 | ||||||||||||
| Non-banking credit | 930 | - | - | 269 | ||||||||||||
| Other | 78,738 | 65,192 | 63,970 | 22,783 | ||||||||||||
| 395,637 | 338,245 | 311,978 | 114,478 | |||||||||||||
Year ended December 31, | ||||||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 7 | 2 0 1 9 | |||||||||||||
NIS | NIS | NIS | US Dollars | |||||||||||||
| Sales of goods to the Parent Company | - | - | 93 | - | ||||||||||||
| Participation in expenses with Parent Company | - | - | 95 | - | ||||||||||||
| Salary management fees, and bonus to related parties | 7,177 | 4,352 | 2,281 | 2,077 | ||||||||||||
| Salary and bonus to key management personnel | 2,540 | 2,643 | 2,734 | 735 | ||||||||||||
| Car expenses | 511 | 433 | 498 | 148 | ||||||||||||
Year ended December 31, | ||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 9 | ||||||||||
NIS | NIS | US Dollars | ||||||||||
| Due to officers | (410 | ) | (267 | ) | (119 | ) | ||||||
As of December 31, | ||||||||||||
2 0 1 9 | 2 0 1 8 | 2 0 1 9 | ||||||||||
NIS | NIS | US Dollars | ||||||||||
(in thousands) | ||||||||||||
| Bank letters of credit | 1,340 | 957 | 388 | |||||||||
On February 24, 2016, a motion to certify a derivative action (hereinafter - the “Motion”) was received at the parent Company’s offices. The Motion was filed with the District Court (Economic Department) in Tel Aviv by Yaad Peer Management Services Ltd. (hereinafter - the “Applicant”), that holds shares of the parent Company. The motion was filed against all directors and office holders in the Company. The parent Company and the Company were added as respondents to the Motion. |
The Motion deals with the Applicant’s claim for damages suffered by the parent Company, which is estimated by the Applicant, as of the filing of the Motion, at approximately $ 3 million, due to an alleged violation of the directors’ and officers’ fiduciary duty, duty of care and duty of expertise towards the parent Company in connection with a $3 million investment in a company registered in the Czech Republic and which holds an inactive hotel in the Czech Republic. According to the Applicant, the investment is not related in any way to the activity of the Company and is probably used to assist the controlling shareholder of the parent Company in other matters or to cover his other obligations.
F - 4936
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS in thousands)
(Cont.)
Note 26 - Contingent liabilities and commitments (continued) |
- On July 23, 2017, Mr. Iram Graiver, former CEO of the Company and Willi-Food (hereinafter - “Mr. Graiver”) filed a lawsuit to the Regional Labor Court in Tel Aviv Jaffa (hereinafter - “the Labor Court”) claiming payment of social rights and different compensations at the total amount of NIS |
F - 5037
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS in thousands)
(Cont.)
Note 26 - Contingent liabilities and commitments (continued) | |
- On October 29, 2009, the Company, and the subsidiary Euro European Dairies Ltd. In a ruling issued on May 13 2015, the Rishon-LeZion Magistrates Court accepted the position of the Companies to the effect that the fees in respect of early registration for food import permits were collected unlawfully and that the Companies and other food importers have an independent cause to demand the repayment of the fees that were paid, by virtue of the Unjust Enrichment Law, 1979 (hereafter – the “Law”). In addition, a partial exemption from refund was determined in accordance with Section 2 of the Law in respect of an amount equivalent to 30% of the amounts of fees claimed and proven, due to the Ministry of Health’s mechanism for regulating imported food, which granted the Companies protection from criminal and civil lawsuits in respect of damage caused to consumers from damaged imported food. As a result of the ruling, the Company received in 2015 a total of approximately NIS 1.1 million. After the Ministry of Health appealed against the ruling, on April 19 million in addition to NIS 1.1 million received in 2015. | |
| - On December 1, 2013, the Companies filed to the Rishon-LeZion Magistrates Court a lawsuit against the Ministry of Health, demanding the refund of customs clearance fees at the total amount of approximately NIS 2.1 million. The fees were paid to the Ministry of Health in respect of clearance of food products from the port, which, according to the Companies, was in effect carried out by the Customs Authorities and therefore the fees were collected unlawfully. On May 13, 2015, a ruling was issued stating that the closure release fees were collected by the Health Ministry unlawfully. The ruling ordered the Ministry of Health to repay 70% of the fees paid by the Companies. On July 8, 2015, appeals were filed by both parties. After several appeals hearings, the court offered the parties to proceed to a mediation proceeding. The parties agreed to enter into a mediation process on all issues included in the appeal and the pending lawsuits. On December 31, |
F - 5138
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS in thousands)
In March 2019, the Yavne municipality issued an amended municipal taxes assessment (hereafter – the “Assessment”) in respect of an asset located in Yavne, in which |
- A lawsuit and a motion to approve it as class action was filed on July 17, 2019, against | |
- A lawsuit and a motion to approve it as class action was filed on May 7, 2020, against the Company and 2 other respondents to the central district court. The applicant claimed that the company marketed several products as products approved by the chief rabbinate of Israel before the actual rabbinate approval |
F - 5440
G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS in thousands)
(Cont.)
Note 26 - Contingent liabilities and commitments (continued) |
| - A lawsuit and a motion to approve it as class action was filed on June 24, 2020, against G. Willi-Food, Euro European Dairies, and another respondent to the Haifa District Court. The applicant claimed that the Company marketed several products with misleading captions and contrary to the provisions of the law and the relevant regulations. A response to the request for approval was submitted on November 9, 2020, and a pre-trial hearing was scheduled for July 12, 2021. At this early stage, the company and its legal counsel are unable to assess the chances of the class action. |
-A lawsuit and a motion to approve it as class action was filed on September 9, 2020, against Euro European Dairies to the Haifa district court. The applicant claimed that Euro European Dairies violated its obligations to import and market Gaude cheese in the quantities and prices it undertook as part of duty-free tenders. The applicant claims that he and the members of the group suffered damages in the amount of NIS 57 million. A response to the request for approval was submitted on February 1, 2021 and a pre-trial hearing was set for September 13, 2021. At this early stage, the company and its legal counsel are unable to assess the chances of the class action. |
| - On May 26, 2020, a lawsuit was filed by Tnuva against the parent company and the company. According to the applicant, the packaging of several products marketed by the company constitutes an alleged infringing imitation of the packaging of Tnuva products. As part of the lawsuit, a declaratory order was requested that Tnuva's rights were violated, permanent restraining orders to prevent the continued use of the product packaging by the company, product collection orders from points of sale and an order to provide accounts regarding the company's revenue from sales of those products. In addition, financial remedies were requested for the payment of compensation valued at NIS 2.6 million. On July 26, 2020, a settlement agreement was signed between the parties, which concludes the proceedings in the case according to which Tnuva waived its financial claims against the parent company. |
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Note 27 – Events during and after the reporting period |
- COVID 19 - In the first quarter of 2020, the corona virus began to spread around the world, an event declared by the World Health Organization as a global epidemic (the "crisis"). As part of dealing with the crisis, many countries around the world, including Israel, have imposed restrictions on various activities in the economy, including movement and gatherings restrictions. The crisis and the restrictions imposed and still pose challenges that were reflected in an unprecedented decline in business activity, both in terms of its intensity and in terms of the speed with which it occurred. In December 2020, the US Food and Drug Administration approved, for the first time, the use of the vaccine to prevent the corona pandemic. In mid-December, an extensive vaccination campaign began in Israel, and as of the date of the report, a significant proportion of the population has been immunized and the morbidity indices have declined significantly. Thus, the government has approved measures to alleviate the limitations, however, the development of different mutations of the virus still leads to significant uncertainty regarding the continued spread of the virus and its intensity and how and when to exit the crisis. It should be emphasized that this is an ongoing event whose scope and duration are not under the Company's control and therefore the Company is unable to assess the full extent of the economic impacts on its areas of activity. The company is defined as an essential enterprise according to the Labor Service Law in Emergencies. The Company's business activity in the food sector during 2020 was characterized by an increase in demand for the company's products. During 2020, revenues of the Company increased by NIS 58.5 million, or 14.8%, to NIS 454.1 million from NIS 395.6 million recorded in fiscal year 2019. Revenues increased primarily due to the COVID-19 pandemic, which led to an increase in demand for the Company's line of products, primarily in retail chains, and due to a redirection of resources in favor of sales, increasing the variety of the Company's products, improving the company visibility in the stores and improved inventory management. During 2020, the Company received many requests from its customers, mainly in the institutional market, to defer payments and / or payment layout, as a result of their inability to meet payments due to the reduction and / or cessation of their business activities. The Company has reached agreements with its customers and most of their debts are insured with credit insurance and / or through deposits and / or bank guarantees and / or promissory notes and / or personal guarantees, so that the effect of deferred payments and / or spread of debts on the Company's financial results is not material. The Company purchases its goods from about 135 suppliers around the world, including the Far East, Europe, the United States, South America and Israel. As the crisis continues, the Company estimates that various restrictions on the production of products by some of its suppliers may apply, which may make it difficult for the Company to import goods in sufficient quantities from those suppliers. It will be clarified that at the date of the report, the Company is not dependent on any of its suppliers. |
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G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS in thousands)
Note 27 – Events during and after the reporting period (continued) The Company holds a diverse portfolio of securities traded on the Tel Aviv Stock Exchange and other world exchanges, which totaled NIS 168.4 million as of December 31, 2020 (in addition to NIS 201.8 million in cash and cash equivalents) ("Investment Portfolio"). The uncertainty resulting from the crisis led to high volatility in the financial markets and sharp declines in the capital markets in Israel and around the world during the first quarter of 2020, during which there was a significant decline in the value of the Company's securities portfolio. As of the second quarter of 2020, capital markets in Israel and around the world have recovered and the company ended 2020 with a profit of 10.2 from the securities portfolio. | |
- On January 22, 2020, the Company announced that Mr. Michael Luboschitzsubmitted notice of his resignation as CEO of the Company for personal reasons, effective as of March 2, 2020. |
- On January 27, 2020, the Company announced that its Board of Directors has approved the appointment of Mrs. Einat Peled Shapira as the Company’s new CEO, effective as of March 10, 2020. On March 2, 2021, Mrs. Einat Peled Shapira submitted notice of her resignation as CEO of the Company, effective as of April 1, 2021. | ||
- On June 15, 2020 the Company Ordinary Shares began trading for dual listing on the Tel-Aviv Stock Exchange. The Company's ordinary shares will continue to be traded on the Nasdaq Capital Market. | ||
| - In September 2020, the Company announced the completion of a private placement to classified institutional investors in Israel of 650,000 ordinary shares for NIS 66 per share and of stock option (not listed for trading) for the purchase of up to 650,000 ordinary shares of the Company for a period of twelve months from the allotment date at an exercise price of 73 NIS. The issue of shares was taken in to account for calculation of the basic and diluted earnings per share. |
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| Note 28 – Accounting policies |
Revenue |
| Performance obligations and timing of revenue recognition: |
| The majority of the Company's revenue is derived from selling food products in the Israeli market with revenue recognized in a point in time when control of the goods has transferred to the customer. This is generally when the goods are delivered to the customer. However, for export sales, control might also be transferred when delivered either to the port of departure or port of arrival, depending on the specific terms of the contract with a customer. There is limited judgement needed in identifying the point control passes: once physical delivery of the products to the agreed location has occurred, the Company no longer has physical possession, usually will have a present right to payment and retains none of the significant risks and rewards of the goods in question. |
Determining the transaction price: |
| Most of the Company's revenue is derived from pre-set prices with its customers, therefore the amount of revenue to be earned from each transaction is determined by reference to those prices agreed with the customers. An exception to this principal is that in most cases, the Company enables specific customers to return products which they have not sold, despite that there is no agreement between the Company and its customers regarding such returns and the Company does not have such policy. Historical experience enables the Company to estimate reliably the value of good that will be returned and restrict the amount of revenue that is recognized such that it is highly probable that there will not be a reversal of previously recognized revenue when goods are return. |
| Inventories |
Inventories are initially recognized at cost, and subsequently at the lower of cost and net realizable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. |
| Weighted average cost is used to determine the cost of the inventories. |
Basis of consolidation |
| Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. |
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G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS in thousands)
(Cont.)
Note 28 – Accounting policies (continued) The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. |
Cash and Cash equivalents |
Cash and cash equivalents include demand deposits and term deposits in banks that are not restricted as to usage, with an original period to maturity of not more than three months. |
Deposits that are restricted as to usage are classified as pledged deposits. |
| Deposits with an original period to maturity exceeding three months, which as of the statement of financial position do not exceed one year, are classified as short-term investments |
Leases |
| The majority of the Company's accounting policies for leases are set out in note 19. |
| Identifying leases |
The Company accounts for a contract as a lease when it conveys the right to use an asset for a period of time in exchange for consideration. Leases are those contracts that satisfy the following criteria: |
- There is an identified asset; |
- The Company obtains substantially all the economic benefits from use of the asset; and |
- The company has the right to direct use of the asset |
The Company considers whether the supplier has substantive substitution rights. If the supplier does have those rights, the contract is not identified as giving rise to a lease. |
In determining whether the Company obtains substantially all the economic benefits from use of the asset, the Company considers only the economic benefits that arise use of the asset, not those incidental to legal ownership or other potential benefits. |
| In determining whether the Company has the right to direct use of the asset, the Company considers whether it directs how and for what purpose the asset is used throughout the period of use. If there are no significant decisions to be made because they are pre-determined due to the nature of the asset, the Company considers whether it was involved in the design of the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use. If the contract or portion of a contract does not satisfy these criteria, the Company applies other applicable IFRSs rather than IFRS 16. |
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G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS in thousands)
(Cont.)
Note 28 – Accounting policies (continued) |
Property, plant and equipment |
Property, plant and equipment 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 equipment 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 extension period, where the Company intends to exercise such option, or their useful life. |
Useful life (Years) | % | |||
| Land | 50 | 2 | ||
| Construction | 25 | 4 | ||
| Motor vehicles | 5 | 15-20 | (Mainly 20%) | |
| Office furniture and equipment | 6 | 6-15 | (Mainly 15%) | |
| Computers | 3 | 20-33 | (Mainly 33%) | |
| Machinery and equipment | 10 | 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. |
Goodwill |
| Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the Company's interest in the net fair value of the identifiable assets, liabilities and Contingent liabilities of the subsidiary or jointly controlled entity recognized at the date of acquisition. Goodwill is initially recognized as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. |
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G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS in thousands)
(Cont.)
Note 28 – Accounting policies (continued) |
Provisions |
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company 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. |
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base. |
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilized. |
| The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered). |
| Defined benefit schemes |
Defined benefit scheme surpluses and deficits are measured at: |
- The fair value of plan assets at the reporting date; less |
- Plan liabilities calculated using the projected unit credit method discounted to its present value using yields available on high quality corporate bonds that have maturity dates approximating to the terms of the liabilities and are denominated in the same currency as the post-employment benefit obligations; less |
| - The effect of minimum funding requirements agreed with scheme trustees. |
| Remeasurements of the net defined obligation are recognized directly within equity. The remeasurements include: |
- Actuarial gains and losses. |
- Return on plan assets (interest exclusive). |
| - Any asset ceiling effects. |
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G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS in thousands)
(Cont.)
Note 28 – Accounting policies (continued) |
Service costs are recognized in profit or loss, and include current and past service costs as well as gains and losses on curtailments. |
Net interest expense (income) is recognized in profit or loss, and is calculated by applying the discount rate used to measure the defined benefit obligation (asset) at the beginning of the annual period to the balance of the net defined benefit obligation (asset), considering the effects of contributions and benefit payments during the period. Gains or losses arising from changes to scheme benefits or scheme curtailment are recognized immediately in profit or loss. |
Settlements of defined benefit schemes are recognized in the period in which the settlement occurs. |
| Share capital |
Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. |
| The Company's ordinary shares are classified as equity instruments. |
| Impairment of non-financial assets |
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly. |
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units ('CGUs'). Goodwill is allocated on initial recognition to each of the Company's CGUs that are expected to benefit from a business combination that gives rise to the goodwill. |
| Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognized in other comprehensive income. An impairment loss recognized for goodwill is not reversed. |
| Financial assets |
| The Company classifies its financial assets into one of the categories discussed below, the Company's accounting policy for each category is as follows: |
| Fair value through profit or loss- |
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G. WILLI-FOOD INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NIS in thousands)
(Cont.)
Note 28 – Accounting policies (continued) |
| Financial assets at fair value through profit or loss are measured at fair value at the end of each reporting period They are carried in the statement of financial position at fair value with changes in fair value recognized in the consolidated statement of income in the finance income or expense line. |
| Amortized cost- |
The |
| Impairment provisions for trade receivables are recognized based on the |
| Treasury shares | |||
| The cost of Company shares held by the Company or its consolidated companies is deducted from shareholders’ equity as a separate component. | |||
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