SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the Month of December 2002
-----------------------
ELSCINT LIMITED
(Translation of Registrant's Name into English)
13 Mozes Street, Tel Aviv 67442, Israel
(Address of Principal Corporate Offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F:
|X| Form 20-F |_| Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
|_| Yes |X| No
Attached hereto as Exhibit 1 and incorporated by reference herein is the
Registrant's press release dated December 2, 2002.
Attached hereto as Exhibit 2 and incorporated by reference herein are the
Registrant's unaudited consolidated financial statements for the quarter ended
September 30, 2002.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ELSCINT LIMITED
(Registrant)
By: /s/ Rachel Lavine
----------------------------------
Name: Rachel Lavine
Title: President
Dated: December 5, 2002.
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1. Press release dated December 2, 2002.
2. Unaudited consolidated financial statements.
EXHIBIT 1
---------
Elscint Ltd. Announces Third Quarter 2002 Results
- -------------------------------------------------
Monday, December 2, 4:44 p.m. ET
TEL-AVIV, Israel, Dec. 2 /PRNewswire-FirstCall/ -- Elscint Ltd. (NYSE: ELT -
News), a subsidiary of Elbit Medical Imaging Ltd. (Nasdaq: EMITF - News), today
announced its results for the quarter ended September 30, 2002, and for the nine
month period ended September 30, 2002.
The Company recently announced that it has signed an agreement with an unrelated
third party ("the Purchaser") for the sale of the manufacturing, assembly,
engineering and integration operations (mainly for medical imaging equipment) of
its sub-assemblies and components segment located at its Ma'alot facility in
Northern Israel.
Upon consummation of the transaction, the activities of the Company in the
sub-assemblies and components segment in particular, and in the medical imaging
area in general, will as a practical matter be discontinued. As a result, the
accompanying financial tables reflect the assets and liabilities, which relate
to the discontinuing operations in separate categories in the balance sheet,
namely as "assets/liabilities relating to discontinuing operations." In
addition, the transactions relating to the aforesaid operations are included in
a separate category in the statement of operations entitled "income from
discontinuing operations." The comparative figures for prior years have been
reclassified in order to reflect these changes, retroactively, for all reported
periods, by the presentation of the assets, liabilities, revenues and expenses
which relate to the discontinuing operations separately from those which relate
to the continuing operations.
Third Quarter Results
- ---------------------
Consolidated revenues for the third quarter of 2002 were NIS 53.4 million
(US$11.0 million), as compared with NIS 43.4 million reported in the parallel
quarter last year. The increase in revenues is attributable to the hotel
division, primarily due to the commencement of operations at the Victoria London
Hotel and the Sherlock Holmes Hotel, also in London, as well as to an increase
in the exchange rate of the Euro against the NIS during the three-month period
ended September 30, 2002.
Gross profit for the third quarter of 2002 was NIS 22.9 million (US$4.7 million)
as compared with NIS 12.8 million in the corresponding quarter of 2001. This
increase is primarily due to the increase in revenue from the hotel division.
Operating loss in the third quarter of 2002 was NIS 4.6 million (US$0.9 million)
as compared with NIS 1.7 million for the corresponding quarter of last year. The
increase is derived mainly from an increase in general and administrative
expenses, which resulted primarily from dividend payments of NIS 3.4 million
(US$0.7 million) with respect to shares which are held by employees, and which
are recorded as an expense in the statement of operation.
Net income from continuing operations for the third quarter of 2002 was NIS 9.0
million (US$1.8 million), or NIS 0.54 (US$0.11) per share, as compared with NIS
17.9 million, or NIS 1.07 per share, for the same quarter last year.
Net income from continuing operations is attributable mainly to net finance
income, which totaled NIS 14.6 million (US$3.0 million) for the three month
period ended September 30,2002 as compared with NIS 28.2 million during the same
period of the previous year. This finance income was derived primarily from
devaluation (NIS against the US$) of 2.14% net of inflationary erosion of 0.65%
in the three month period ended September 30, 2002 as compared with devaluation
(NIS against the US$) of 4.56% net of inflationary erosion of 0.9% in the same
period of the previous year.
Net income from discontinuing operations for the third quarter of 2002 was NIS
0.3 (US$0.07 million) as compared with NIS 14.5 million for the same quarter
last year mainly due to exchange rate fluctuations.
Nine Month Results
Consolidated revenues for the first nine months ended September 30, 2002 totaled
NIS 156.7 million (US$32.1 million) as compared with NIS 108.6 million reported
in the nine-month period ended September 30, 2001. The increase in revenues is
attribute to the hotel division, primarily due to the commencement of operations
at the Victoria London Hotel and the Sherlock Holmes Hotel, also in London, as
well as an increase in the exchange rate of the Euro against the NIS during the
nine-month period ended September 30, 2002.
Gross profit for the first nine months of 2002 was NIS 57.1 million (US$11.7
million) as compared with NIS 34.1 million in the corresponding period of 2001.
This increase is primarily due to the increase in revenue from the hotel
division.
Operating loss in the first nine months of 2002 increased to NIS 15.5 million
(US$3.2 million) as compared with NIS 4.9 million in the same period of the
previous year. This increase is derived from an increase in the hotels'
depreciation and operational expenses, primarily due to commencement of
operations at the Victoria London Hotel and Sherlock Holmes Hotels in London; as
well as an increase in general and administrative expenses primarily due to
dividend payments of NIS 3.4 million (US$0.7 million) with respect to shares
which are held by employees, and which are recorded as an expense in the
statement of operation. This increase was partially offset by the increase in
the gross profit of the hotels' division.
Net income from continuing operations was NIS 12.9 million (US$2.6 million) or
NIS 0.77 (US$0.16) per share as compared with NIS 19.7 million or NIS 1.18 per
share, for the corresponding period of 2001.
Net income from continuing operations is attributable mainly to net finance
income, which totaled NIS 26.2 million (US$5.4 million) for the nine month
period ended September 30,2002 as compared with NIS 49.5 million during the same
period of the previous year. This finance income was derived primarily from
devaluation (NIS against the US$) of 10.3% net of inflationary erosion of 7% in
the nine month period ended September 30,2002 as compared with devaluation (NIS
against the US$) of 7.8% net of inflationary erosion of 2% in the same period of
the previous year.
Net income from discontinuing operations for the first nine month period ended
September 30,2002 was NIS 34.8 (US$7.1 million) as compared with NIS 26.6
million for the same period last year.
About Elscint Limited
- ---------------------
Elscint Limited generates revenues and earnings through two principal ventures:
leisure and technology. It has interests in hotels in Western Europe, in hotel
development projects principally in Western and Central Europe and in the
commercial and entertainment center at Herzlia Marina. In the medical device
sector, Elscint's Ma'alot facility in northern Israel manufactures medical and
other components for customers engaged in various technology and medical device
businesses.
This release contains certain forward-looking statements which involve known and
unknown risks, uncertainties or other factors not under the Company's control
which may cause actual results, performance or achievements of the Company to be
materially different from the results, performance or other expectations implied
by these forward-looking statements. These factors include, but are not limited
to, those detailed in the Company's periodic filings with the Securities and
Exchange Commission.
ELSCINT LIMITED AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (1)
Convenience
translation
September 30, December 31, September 30,
2002 * 2001 * 2001 2002
(Unaudited) (Audited) (Unaudited)
U.S.$
Adjusted NIS (thousands) (thousands)
ASSETS
Current Assets
Cash and cash equivalents 199,598 351,488 295,287 40,977
Short-term investments and
deposits 161,509 217,901 155,401 33,157
Accounts and notes
receivable - trade 21,325 16,647 14,870 4,378
Other accounts receivable
and prepaid expenses 28,325 22,756 21,426 5,815
Inventories 3,334 3,372 3,469 684
414,091 612,164 490,453 85,011
Long-term Accounts and
Investments
Investments, loans and
long-term receivables 360,721 327,549 359,670 74,055
Investments in affiliated
company -- 43,142 -- --
Venture capital investment 37,375 29,133 29,656 7,673
398,096 399,824 389,326 81,728
Fixed Assets, Net 1,604,035 1,299,736 1,366,248 329,303
Other Assets, Net 11,351 8,658 11,983 2,330
Assets Related to
Discontinuing Operation 170,569 166,290 191,415 35,017
2,598,142 2,486,672 2,449,425 533,389
(1) Prepared in accordance with Israeli GAAP
* Reclassified.
ELSCINT LIMITED AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (1)
Convenience
translation
September 30, December 31, September 30,
2002 * 2001 * 2001 2002
(Unaudited) (Audited) (Unaudited)
U.S.$
Adjusted NIS (thousands) (thousands)
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Short-term credits 504,135 573,634 449,035 103,497
Accounts payable - trade 51,122 29,033 27,323 10,495
Accrued liabilities 57,104 54,049 48,870 11,723
Advance from customer in
respect of project in
progress, net -- 4,130 1,545 --
Dividend declared 93,430 -- -- 19,181
705,791 660,846 526,773 144,896
Long-term Liabilities
Long-term debts 633,947 552,044 604,154 130,147
Deferred income tax
liability 10,124 7,425 18,381 2,078
Liability for employee
severance benefits, net 301 835 363 62
644,372 560,304 622,898 132,287
Liabilities Related to
Discontinuing Operations 202,522 233,856 256,636 41,577
Minority interest 30,559 27,693 28,047 6,274
Shareholders' Equity 1,014,898 1,003,973 1,015,071 208,355
2,598,142 2,486,672 2,449,425 533,389
(1) Prepared in accordance with Israeli GAAP
* Reclassified.
ELSCINT LIMITED AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATION (1)
Nine months ended Three months ended
September 30, September 30,
2002 * 2002 2002 * 2001
(Unaudited) (Unaudited)
Adjusted NIS (thousands)
Revenues
Operating and
managing hotels 155,221 100,987 53,373 41,448
Revenue from long-
term contracts 1,545 7,685 -- 1,968
156,766 108,672 53,373 43,416
Cost of revenues
Hotels operations 98,210 68,295 30,481 29,156
Cost of long-term
contracts 1,479 6,253 -- 1,500
99,689 74,548 30,481 30,656
Gross profit 57,077 34,124 22,892 12,760
Hotels' depreciation,
amortization and
operation expenses 44,878 20,174 16,823 8,514
Initial expenses
(income), net 1,663 1,336 (368) 238
General and
administrative
Expenses 26,053 17,524 11,006 5,719
Operating loss (15,517) (4,910) (4,569) (1,711)
Finance income, net 26,154 49,536 14,644 28,272
Other (expenses)
income, net (459) (10,706) 120 (11,158)
Income before
income taxes 10,178 33,920 10,195 15,403
Income taxes (2,364) 4,302 1,420 143
Income after income
taxes 12,542 29,618 8,775 15,260
The Company's share
in (loss) income
of affiliated
company -- (9,945) -- 2,519
Minority interest in
loss of a subsidiary,
net 321 11 186 144
Net income from
continuing
operations 12,863 19,684 8,961 17,923
Net income from
discontinuing
operations 34,758 26,578 348 14,557
Net income 47,621 46,262 9,309 32,480
(1) Prepared in accordance with Israeli GAAP
* Reclassified.
ELSCINT LIMITED AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATION (1)
Convenience Convenience
translation translation
Nine months Three months
Year ended ended ended
December 31, September 30, September 30,
* 2001 2002 2002
(Audited) (Unaudited)
Adjusted NIS U.S.$ (thousands)
(thousands)
Revenues
Operating and 142,564 31,866 10,957
managing hotels
Revenue from long-
term contracts 10,269 317 --
152,833 32,183 10,957
Cost of revenues
Hotels operations 98,151 20,162 6,258
Cost of long-term
contracts 7,486 304 --
105,637 20,466 6,258
Gross profit 47,196 11,717 4,699
Hotels' depreciation,
amortization
and operation
expenses 32,307 9,213 3,454
Initial expenses
(income), net 4,055 341 (76)
General and
administrative
Expenses 26,408 5,349 2,259
Operating loss (15,574) (3,186) (938)
Finance income, net 79,335 5,369 3,006
Other (expenses)
income, net (17,043) (94) 25
Income before
income taxes 46,718 2,089 2,093
Income taxes 5,511 (485) 292
Income after income
taxes 41,207 2,574 1,801
The Company's share
in (loss) income
of affiliated
company (9,945) -- --
Minority interest in
loss of a subsidiary,
net 1,319 66 38
Net income from
continuing
operations 32,581 2,640 1,839
Net income from
discontinuing 25,683 7,135 72
operations
Net income 58,264 9,775 1,911
(1) Prepared in accordance with Israeli GAAP
* Reclassified.
ELSCINT LIMITED AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS (1)
Nine months ended Three months ended
September 30, September 30,
2002 * 2002 2002 * 2001
(Unaudited) (Unaudited)
Adjusted NIS
Basic earnings per ordinary share (NIS 0.05 par value) from:
Continuing
operations 0.77 1.18 0.54 1.07
Discontinuing
operation 2.08 1.59 0.02 0.87
2.85 2.77 0.56 1.94
Diluted earnings per ordinary share (NIS 0.05 par value) from:
Continuing
operations 0.57 1.18 0.52 1.07
Discontinuing
operations 1.99 1.59 0.02 0.87
2.56 2.77 0.54 1.94
(1) Prepared in accordance with Israeli GAAP
* Reclassified
Convenience Convenience
translation translation
Nine months Three months
Year ended ended ended
December 31, September 30, September 30,
* 2001 2002 2002
(Audited) (Unaudited)
Adjusted NIS U.S.$
Basic earnings per ordinary share (NIS 0.05 par value) from:
Continuing
operations 1.95 0.16 0.11
Discontinuing
operation 1.54 0.43 --
3.49 0.59 0.11
Diluted earnings per ordinary share (NIS 0.05 par value) from:
Continuing
operations 1.95 0.12 0.11
Discontinuing
operations 1.54 0.41 --
3.49 0.53 0.11
(1) Prepared in accordance with Israeli GAAP
* Reclassified
EXHIBIT 2
---------
ELSCINT LIMITED
AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2002
(UNAUDITED)
Elscint Limited and Subsidiary Companies
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002 (UNAUDITED)
- --------------------------------------------------------------------------------
CONTENTS
PAGE
----------
Review Report of Condensed Consolidated Financial Statements 2
Condensed Consolidated Balance Sheets 3-4
Condensed Consolidated Statements of Operations 5-6
Condensed Consolidated Statements of Shareholders' Equity 7-8
Condensed Consolidated Statements of Cash Flows 9-12
Notes to the Condensed Consolidated Financial Statements 13-24
The Board of Directors
Elscint Limited
- ---------------
REVIEW REPORT OF UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
NINE-MONTHS AND THREE-MONTHS PERIODS ENDED SEPTEMBER 30, 2002
At your request, we reviewed the interim consolidated balance sheet of Elscint
Limited and its subsidiaries as of September 30, 2002, and the related condensed
consolidated statements of operations, shareholders' equity and cash flows for
the nine-months and three-months periods then ended.
Our review was made in accordance with the procedures prescribed by the
Institute of Certified Public Accountants in Israel, and included, inter-alia,
reading the aforementioned interim consolidated financial statements, reading
the minutes of the Shareholders' Meetings and of the Board of Directors and its
committees, and making inquiries of persons responsible for financial and
accounting matters.
The review reports of certain subsidiaries, whose assets as of September 30,
2002 constitute 66% of the total consolidated assets and whose revenues
constitute 33% and 32% of the total continuing and discontinuing consolidated
revenue for the nine months and three months then ended respectively, have been
reviewed by other auditors. Furthermore, the data included in the financial
statements relating to net asset value of the Company's investments in affiliate
and to its equity in its operating results is based on the financial statements
of such affiliate, which was reviewed by another auditor.
The foregoing procedures, which are limited in scope, do not constitute an
examination made in accordance with generally accepted auditing standards.
Therefore, we do not express an opinion on the interim consolidated financial
statements.
In the course of our review, including the reading of the review reports of the
other auditors referred to above, nothing came to our attention which would
indicate the necessity of making material changes to the interim consolidated
financial statements in order for them to be in conformity with generally
accepted accounting principles in Israel.
As discussed in Note 5 to the accompanying consolidated financial statements,
the Company is defendant in lawsuits and was served with additional claims out
of which two claims were filed in Israel with a request for a recognition as
representative claims.
SOMEKH CHAIKIN
CERTIFIED PUBLIC ACCOUNTANTS (ISR.)
Haifa, November 27, 2002
Elscint Limited and Subsidiary Companies
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
ADJUSTED TO THE NIS OF SEPTEMBER 2002
CONVENIENCE
TRANSLATION
SEPTEMBER 30, (NOTE 2B)
-------------------------- DECEMBER 31, SEPTEMBER 30,
2002 * 2001 * 2001 2002
---------- ---------- ----------- -------------
(UNAUDITED) (AUDITED) (UNAUDITED)
-------------------------- ----------- -------------
U.S.$
ADJUSTED NIS (THOUSANDS) (THOUSANDS)
-------------------------------------- ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 199,598 351,488 295,287 40,977
Short-term investments and deposits 161,509 217,901 155,401 33,157
Accounts and notes receivable - trade 21,325 16,647 14,870 4,378
Other accounts receivable and prepaid expenses 28,325 22,756 21,426 5,815
Inventories 3,334 3,372 3,469 684
---------- ---------- ----------- -------------
414,091 612,164 490,453 85,011
---------- ---------- ----------- -------------
LONG-TERM ACCOUNTS AND INVESTMENTS
Investments, loans and long-term receivables 360,721 327,549 359,670 74,055
Investments in affiliated company - 43,142 - -
Venture capital investment 37,375 29,133 29,656 7,673
---------- ---------- ----------- -------------
398,096 399,824 389,326 81,728
---------- ---------- ----------- -------------
FIXED ASSETS, NET 1,604,035 1,299,736 1,366,248 329,303
---------- ---------- ----------- -------------
OTHER ASSETS, NET 11,351 8,658 11,983 2,330
---------- ---------- ----------- -------------
ASSETS RELATED TO DISCONTINUING OPERATION
(SEE NOTE 3) 170,569 166,290 191,415 35,017
2,598,142 2,486,672 2,449,425 533,389
========== ========== =========== =============
* Reclassified.
The accompanying notes are an integral part of the financial statements.
3
Elscint Limited and Subsidiary Companies
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
ADJUSTED TO THE NIS OF SEPTEMBER 2002
CONVENIENCE
TRANSLATION
(NOTE 2B)
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
2002 * 2001 * 2001 2002
---------- ---------- ----------- -------------
(UNAUDITED) (AUDITED) (UNAUDITED)
-------------------------- ----------- -------------
U.S.$
ADJUSTED NIS (THOUSANDS) (THOUSANDS)
-------------------------------------- ------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term credits 504,135 573,634 449,035 103,497
Accounts payable - trade 51,122 29,033 27,323 10,495
Accrued liabilities 57,104 54,049 48,870 11,723
Advance from customer in respect of project
in progress, net - 4,130 1,545 -
Dividend declared 93,430 - - 19,181
---------- ---------- ----------- -------------
705,791 660,846 526,773 144,896
---------- ---------- ----------- -------------
LONG-TERM LIABILITIES
Long-term debts 633,947 552,044 604,154 130,147
Deferred income tax liability 10,124 7,425 18,381 2,078
Liability for employee severance benefits, net 301 835 363 62
---------- ---------- ----------- -------------
644,372 560,304 622,898 132,287
---------- ---------- ----------- -------------
LIABILITIES RELATED TO DISCONTINUING OPERATIONS
(SEE NOTE 3) 202,522 233,856 256,636 41,577
---------- ---------- ----------- -------------
MINORITY INTEREST 30,559 27,693 28,047 6,274
---------- ---------- ----------- -------------
CONTINGENCIES AND COMMITMENTS (SEE NOTE 5)
SHAREHOLDERS' EQUITY 1,014,898 1,003,973 1,015,071 208,355
---------- ---------- ----------- -------------
2,598,142 2,486,672 2,449,425 533,389
========== ========= ============ ==============
* Reclassified.
Date: November 27, 2002
/s/ A.R. Goren /s/ R. Lavine /s/ U. Levin
---------------------------------- ----------------------- ------------------------
A.R. Goren R. Lavine U. Levin
Chairman of the Board of Directors President C.F.O
The accompanying notes are an integral part of the financial statements.
4
Elscint Limited and Subsidiary Companies
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
ADJUSTED TO THE NIS OF SEPTEMBER 2002
CONVENIENCE CONVENIENCE
TRANSLATION TRANSLATION
(NOTE 2B) (NOTE 2B)
NINE MONTHS THREE MONTHS
NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- -------------- ----------- -------------
2002 * 2001 2002 * 2001 * 2001 2002 2002
-------- -------- -------- -------- ----------- ----------- -------------
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
-------------------- -------------------- ----------- ---------------------------
ADJUSTED NIS (THOUSANDS) U.S.$ (THOUSANDS)
----------------------------------------------------------- ---------------------------
REVENUES
Operating and managing hotels 155,221 100,987 53,373 41,448 142,564 31,866 10,957
Revenue from long-term contracts 1,545 7,685 - 1,968 10,269 317 -
---------- ---------- ---------- ---------- ----------- ----------- -----------
156,766 108,672 53,373 43,416 152,833 32,183 10,957
---------- ---------- ---------- ---------- ----------- ----------- -----------
COST OF REVENUES
Hotels operations 98,210 68,295 30,481 29,156 98,151 20,162 6,258
Cost of long-term contracts 1,479 6,253 - 1,500 7,486 304 -
---------- ---------- ---------- ---------- ----------- ----------- -----------
99,689 74,548 30,481 30,656 105,637 20,466 6,258
---------- ---------- ---------- ---------- ----------- ----------- -----------
GROSS PROFIT 57,077 34,124 22,892 12,760 47,196 11,717 4,699
Hotels' depreciation, amortization
and operation expenses 44,878 20,174 16,823 8,514 32,307 9,213 3,454
Initial expenses (income), net 1,663 1,336 (368) 238 4,055 341 (76)
General and administrative
expenses 26,053 17,524 11,006 5,719 26,408 5,349 2,259
---------- ---------- ---------- ---------- ----------- ----------- -----------
OPERATING LOSS (15,517) (4,910) (4,569) (1,711) (15,574) (3,186) (938)
Finance income, net 26,154 49,536 14,644 28,272 79,335 5,369 3,006
Other (expenses) income, net (459) (10,706) 120 (11,158) (17,043) (94) 25
---------- ---------- ---------- ---------- ----------- ----------- -----------
Income before income taxes 10,178 33,920 10,195 15,403 46,718 2,089 2,093
Income taxes (2,364) 4,302 1,420 143 5,511 (485) 292
---------- ---------- ---------- ---------- ----------- ----------- -----------
Income after income taxes 12,542 29,618 8,775 15,260 41,207 2,574 1,801
The Company's share in (loss) income
of affiliated company - (9,945) - 2,519 (9,945) - -
Minority interest in loss
of a subsidiary, net 321 11 186 144 1,319 66 38
---------- ---------- ---------- ---------- ----------- ----------- -----------
NET INCOME FROM CONTINUING
OPERATIONS 12,863 19,684 8,961 17,923 32,581 2,640 1,839
---------- ---------- ---------- ---------- ----------- ----------- -----------
NET INCOME FROM
DISCONTINUING OPERATION
(SEE NOTE 3) 34,758 26,578 348 14,557 25,683 7,135 72
---------- ---------- ---------- ---------- ----------- ----------- -----------
NET INCOME 47,621 46,262 9,309 32,480 58,264 9,775 1,911
========== ========== ========== ========== =========== =========== ===========
* Reclassified.
The accompanying notes are an integral part of the financial statements.
5
CONVENIENCE CONVENIENCE
TRANSLATION TRANSLATION
(NOTE 2B) (NOTE 2B)
NINE MONTHS THREE MONTHS
NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- -------------- ----------- -------------
2002 * 2001 2002 * 2001 * 2001 2002 2002
-------- -------- -------- -------- ----------- ----------- -------------
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
-------------------- -------------------- ----------- ---------------------------
ADJUSTED NIS (THOUSANDS) U.S.$ (THOUSANDS)
----------------------------------------------------------- ---------------------------
BASIC EARNINGS
PER ORDINARY SHARE (NIS 0.05
PAR VALUE) FROM:
Continuing operations 0.77 1.18 0.54 1.07 1.95 0.16 0.11
Discontinuing operation 2.08 1.59 0.02 0.87 1.54 0.43 -
-------- -------- -------- -------- ----------- ----------- -------------
2.85 2.77 0.56 1.94 3.49 0.59 0.11
======== ======== ======== ======== =========== =========== =============
DILUTED EARNINGS PER ORDINARY SHARE (NIS 0.05 PAR VALUE) FROM:
Continuing operations 0.57 1.18 0.52 1.07 1.95 0.12 0.11
Discontinuing operations 1.99 1.59 0.02 0.87 1.54 0.41 -
-------- -------- -------- -------- ----------- ----------- -------------
2.56 2.77 0.54 1.94 3.49 0.53 0.11
======== ======== ======== ======== =========== =========== =============
* Reclassified.
6
Elscint Limited and Subsidiary Companies
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
ADJUSTED TO THE NIS OF SEPTEMBER 2002
LOANS TO
CUMULATIVE EMPLOYEES
FOREIGN FOR
CURRENCY PURCHASE OF TOTAL
SHARE CAPITAL TRANSLATION RETAINED COMPANY'S SHAREHOLDERS'
CAPITAL SURPLUS ADJUSTMENTS EARNINGS SHARES EQUITY
--------- ---------- ----------- ----------- ------------ ---------------
ADJUSTED NIS (THOUSANDS)
--------------------------------------------------------------------------------
BALANCE AS OF JANUARY 1, 2002
(AUDITED) 5,439 739,679 3,420 279,588 (13,055) 1,015,071
CHANGES DURING THE NINE
MONTHS ENDED
SEPTEMBER 30, 2002 (UNAUDITED)
Net income for the period - - - 47,621 - 47,621
Foreign currency translation
adjustment - - 41,636 - - 41,636
Employee shares which were
returned to pool (2) (504) - - 506 -
Erosion net of interest on loan
to employees (3) (306) 309 -
Dividends declared * - - - (89,430) - (89,430)
--------- ---------- ----------- ----------- ------------ ---------------
BALANCE AS OF
SEPTEMBER 30, 2002 (UNAUDITED) 5,434 738,869 45,056 237,779 (12,240) 1,014,898
========= ========== =========== =========== ============ ===============
BALANCE AS OF JANUARY 1, 2001
(AUDITED) 5,397 726,666 (12,771) 221,324 - 940,616
CHANGES DURING THE NINE
MONTHS ENDED
SEPTEMBER 30, 2001 (UNAUDITED)
Net income for the period - - - 46,262 - 46,262
Foreign currency translation
adjustment - - 17,095 - - 17,095
--------- ---------- ----------- ----------- ------------ ---------------
BALANCE AS OF SEPTEMBER 30,
2001 (UNAUDITED) 5,397 726,666 4,324 267,586 - 1,003,973
========= ========== =========== =========== ============ ===============
* Not including a dividend in the amount of NIS 3,429 thousand, in respect
of shares which are held by employees which was recorded as an expense in
the statement of operations.
The accompanying notes are an integral part of the financial statements.
7
LOANS TO
CUMULATIVE EMPLOYEES
FOREIGN FOR
CURRENCY PURCHASE OF TOTAL
SHARE CAPITAL TRANSLATION RETAINED COMPANY'S SHAREHOLDERS'
CAPITAL SURPLUS ADJUSTMENTS EARNINGS SHARES EQUITY
--------- ---------- ------------ ----------- ------------ -------------
ADJUSTED NIS (THOUSANDS)
--------------------------------------------------------------------------------
BALANCE AS OF JULY 1, 2002
(UNAUDITED) 5,435 739,176 33,428 317,900 (12,548) 1,083,391
CHANGES DURING THE THREE
MONTHS ENDED SEPTEMBER 30,
2002 (UNAUDITED)
Net income for the period - - - 9,309 - 9,309
Foreign currency translation
Adjustment - - 11,628 - - 11,628
Employee shares which were
returned to pool (1) (405) - - 406 -
Interest net of erosion on loan
to employees - 98 - - (98) -
Dividends declared * - - - (89,430) - (89,430)
--------- ---------- ------------ ----------- ------------ -------------
BALANCE AS OF SEPTEMBER 30,
2002 (UNAUDITED) 5,434 738,869 45,056 237,779 (12,240) 1,014,898
========= ========== ============ =========== ============ ===============
BALANCE AS OF JULY 1, 2001
(UNAUDITED) 5,397 726,666 (13,427) 235,106 - 953,742
CHANGES DURING THE THREE
MONTHS ENDED SEPTEMBER 30,
2001 (UNAUDITED)
Net income for the period - - - 32,480 - 32,480
Foreign currency
translation adjustments - - 17,751 - - 17,751
--------- ---------- ------------ ----------- ------------ -------------
BALANCE AS OF SEPTEMBER 30,
2001 (UNAUDITED) 5,397 726,666 4,324 267,586 - 1,003,973
========= ========== ============ =========== ============ ===============
BALANCE AS OF JANUARY 1,
2001(AUDITED) 5,397 726,666 (12,771) 221,324 - 940,616
CHANGES DURING THE YEAR
(AUDITED)
Net income for the year - - - 58,264 - 58,264
Issuance of shares to employees 42 13,013 - - (13,055) -
Foreign currency
translation adjustments - - 16,191 - - 16,191
--------- ---------- ------------ ----------- ------------ -------------
BALANCE AS OF DECEMBER 31,
2001 (AUDITED) 5,439 739,679 3,420 279,588 (13,055) 1,015,071
========= ========== ============ =========== ============ ===============
* Not including a dividend in the amount of NIS 3,429 thousand, in respect of
shares which are held by employees which was recorded as an expense in the
statement of operations.
The accompanying notes are an integral part of the financial statements.
8
Elscint Limited and Subsidiary Companies
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
ADJUSTED TO THE NIS OF SEPTEMBER 2002
CONVENIENCE CONVENIENCE
TRANSLATION TRANSLATION
(NOTE 2B) (NOTE 2B)
NINE MONTHS THREE MONTHS
NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- -------------- ------------ -------------
2002 * 2001 2002 * 2001 * 2001 2002 2002
-------- -------- -------- -------- ----------- ----------- -------------
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
-------------------- -------------------- ----------- ---------------------------
U.S.$ U.S.$
ADJUSTED NIS (THOUSANDS) (THOUSANDS) (THOUSANDS)
----------------------------------------------------------- ---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 47,621 46,262 9,309 32,480 58,264 9,775 1,911
Adjustments to reconcile net
income to net cash
provided by (used in) operating
activities from
continuing operations (A) (38,064) (25,236) (1,507) (34,759) (22,212) (7,814) (309)
--------- --------- -------- -------- --------- -------- -------
Net cash provided by (used in)
Operating activities from
continuing operations 9,557 21,026 7,802 (2,279) 36,052 1,961 1,602
Net cash provided by
Operating activities from
discontinuing operation 2,654 6,319 13,427 9,672 3,802 545 2,757
--------- --------- -------- -------- --------- -------- -------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 12,211 27,345 21,229 7,393 39,854 2,506 4,359
--------- --------- -------- -------- --------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of affiliated company - - - - 22,351 - -
Proceeds from sale of fixed assets 400 492 219 - 520 82 45
Purchase of fixed assets and other assets (115,358) (161,791) (46,325) (48,836) (209,296) (23,683) (9,511)
Purchase of venture capital investment (5,001) (22,616) - (22,390) (23,380) (1,027) -
Proceeds from sale of long-term 2,636 106 560 2,636 223 22
investments and loans
Proceeds from (purchase of) short -
term investments and loans, net 238 32,755 (1,452) (5,879) 101,680 49 (298)
Purchase of long-term investments
and loans (436) (23,422) - (299) (47,722) (89) -
Purchase of investment on cost basis - (26,252) - - (26,252) - -
Proceeds from investment
in a subsidiary company (B) - 3,616 - - 3,616 - -
--------- --------- -------- -------- --------- -------- -------
Net cash used in investing
activities from continuing operations (119,072) (194,582) (47,452) (76,844) (175,847) (24,445) (9,742)
Net cash (used in) provided by investing
activities from discontinuing operation (1,862) 122,888 (1,193) (475) 122,165 (382) (245)
--------- --------- -------- -------- --------- -------- -------
NET CASH USED IN
INVESTING ACTIVITIES (120,934) (71,694) (48,645) (77,319) (53,682) (24,827) (9,987)
--------- --------- -------- -------- --------- -------- -------
* Reclassified.
The accompanying notes are an integral part of the financial statements.
9
Elscint Limited and Subsidiary Companies
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
ADJUSTED TO THE NIS OF SEPTEMBER 2002
CONVENIENCE CONVENIENCE
TRANSLATION TRANSLATION
(NOTE 2B) (NOTE 2B)
NINE MONTHS THREE MONTHS
NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- -------------- ------------ -------------
2002 * 2001 2002 * 2001 * 2001 2002 2002
-------- -------- -------- -------- ----------- ----------- -------------
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
-------------------- -------------------- ----------- ---------------------------
U.S.$ U.S.$
ADJUSTED NIS (THOUSANDS) (THOUSANDS) (THOUSANDS)
----------------------------------------------------------- ---------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from long-term debts 4,591 68,887 105 19,287 83,472 943 22
Payments of long-term debt (8,606) (6,508) (1,823) (2,348) (8,457) (1,767) (374)
Change in short-term credits, net 15,217 39,175 8,273 8,494 (60,082) 3,125 1,698
-------- -------- -------- -------- -------- ------ -------
NET CASH PROVIDED BY
FINANCING ACTIVITIES FROM
CONTINUING OPERATIONS 11,202 101,554 6,555 25,433 14,933 2,301 1,346
-------- -------- -------- -------- -------- ------ -------
NET EFFECT OF EXCHANGE RATE CHANGES
ON CASH 1,832 3,223 640 3,446 3,122 376 131
-------- -------- -------- -------- -------- ------ -------
Net (decrease) increase in cash
and cash equivalents (95,689) 60,428 (20,221) (41,047) 4,227 (19,644) (4,151)
Cash and Cash Equivalents
at Beginning of period 295,287 291,060 219,819 392,535 291,060 60,621 45,128
-------- -------- -------- -------- -------- ------ -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 199,598 351,488 199,598 351,488 295,287 40,977 40,977
======== ======== ======== ======== ======== ====== =======
* Reclassified.
The accompanying notes are an integral part of the financial statements.
10
Elscint Limited and Subsidiary Companies
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
ADJUSTED TO THE NIS OF SEPTEMBER 2002
CONVENIENCE CONVENIENCE
TRANSLATION TRANSLATION
(NOTE 2B) (NOTE 2B)
NINE MONTHS THREE MONTHS
NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- -------------- ------------ -------------
2002 * 2001 2002 * 2001 * 2001 2002 2002
-------- -------- -------- -------- ----------- ----------- -------------
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
-------------------- -------------------- ----------- ---------------------------
U.S.$ U.S.$
ADJUSTED NIS (THOUSANDS) (THOUSANDS) (THOUSANDS)
----------------------------------------------------------- ---------------------------
A. ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH:
INVOLVING CASH FLOW:
Discontinuing operation (34,758) (26,578) (348) (14,557) (25,683) (7,136) (71)
Depreciation and amortization 28,201 13,437 9,822 5,314 22,075 5,790 2,016
The Company's share in loss
(income) of affiliated company - 9,945 - (2,519) 9,945 - -
Decrease in value of investments
not of a temporary nature 338 11,647 - 11,647 13,065 69 -
Capital (gain) loss (69) (62) 18 - (87) (14) 4
Exchange differences on
investments and loans, net (27,061) (32,954) (12,228) (21,679) (43,779) (5,556) (2,510)
Changes in liability for employee
severance benefits, net (116) 171 (90) 210 (295) (24) (18)
Loss (profit) from evaluation of
marketable securities 711 (62) 389 456 (610) 146 80
Changes in deferred income taxes (645) 1,068 159 78 73 (132) 33
Minority interest in loss of
a subsidiary, net (321) (11) (186) (144) (1,319) (66) (38)
CHANGES IN ASSETS AND LIABILITIES:
Decrease (increase) in:
Accounts and notes receivable
- trade, net (4,051) 513 871 (1,145) 2,371 (832) 179
Other accounts receivable and
prepaid expenses (13,259) (90) (7,773) (12,951) 1,415 (2,722) (1,596)
Inventories 613 (68) (199) (58) (79) 126 (41)
Long-term receivables - 2,003 - - 3,408 - -
Increase (Decrease) in:
Accounts payable-trade 6,158 7,585 6,580 658 232 1,265 1,350
Accrued liabilities 7,740 (4,095) 1,478 1,899 7,325 1,589 303
Advance from customer
in respect of project progress, net (1,545) (7,685) - (1,968) (10,269) (317) -
-------- -------- -------- -------- -------- ------- -------
(38,064) (25,236) (1,507) (34,759) (22,212) (7,814) (309)
======== ======== ======== ======== ======== ======= =======
* Reclassified.
The accompanying notes are an integral part of the financial statements.
11
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
B. ACQUISITION OF INITIALLY-CONSOLIDATED SUBSIDIARY
In April 2001, the Company, through its wholly-owned subsidiary, achieved
actual control in SC Bucuresti Turism S.A. ("Bucuresti") (until that date
the investment in Bucuresti had been presented on cost basis).
Assets and liabilities of the subsidiary company at the date of initial
consolidation are as follows:
YEAR ENDED
DECEMBER 31,
2001
------------
ADJUSTED NIS
(THOUSANDS)
------------
Deficit in working capital
(excluding cash), net 823
Investments on cost basis 132,838
Fixed assets, net (170,383)
Deferred income tax liability 13,426
Minority interest 26,912
---------
3,616
=========
CONVENIENCE CONVENIENCE
TRANSLATION TRANSLATION
(NOTE 2B) (NOTE 2B)
NINE MONTHS THREE MONTHS
NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- ------------- ------------- --------------
2002 2001 2002 2001 2001 2002 2002
-------- -------- -------- -------- ----------- ----------- -------------
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
-------------------- -------------------- ----------- ---------------------------
ADJUSTED NIS (THOUSANDS) U.S.$ (THOUSANDS)
----------------------------------------------------------- ---------------------------
C. SUPPLEMENTAL SCHEDULE OF
NON-CASH TRANSACTIONS AND
INVESTING ACTIVITIES
Purchase of fixed assets against
accounts payable 22,082 9,461 22,082 9,461 14,113 4,533 4,533
====== ===== ====== ===== ====== ===== =====
Sale of affiliated company
against decrease in accrued
liability - - - - 13,444 - -
====== ===== ====== ===== ====== ===== =====
Investment grant receivable in
respect of fixed assets 5,169 - - - - 1,061 -
====== ===== ====== ===== ====== ===== =====
The accompanying notes are an integral part of the financial statements.
12
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 1 - GENERAL
The accompanying unaudited financial statements do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine and three months
periods ending September 30, 2002, are not necessarily indicative of the results
that may be expected for the year ending December 31, 2002. For further
information, refer to the consolidated financial statements and footnotes
thereto for the year ended December 31, 2001.
These financial statements should be read in conjunction with the annual audited
financial statements of the Company as of December 31, 2001 and their
accompanying notes.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A. The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles
("GAAP") in Israel for interim financial information.
All significant accounting policies have been applied consistently
with the year ended December 31, 2001.
B. FINANCIAL STATEMENTS IN ADJUSTED ISRAELI CURRENCY AND ISRAELI GAAP
i. The financial statements are prepared on the basis of the
historical cost convention, adjusted for changes in the
general purchasing power of the Israeli currency (New Israeli
Shekel - "NIS") based on the changes in the Israeli consumer
price index (CPI).
Comparative data in the statements were adjusted to the NIS of
September 2002.
Below is data regarding the CPI and the U.S. dollar exchange
rate:
EXCHANGE RATE
OF ONE
U.S. DOLLAR CPI
September 30, 2002 4.871 108.7
September 30, 2001 4.355 102.2
December 31, 2001 4.416 101.6
CHANGES DURING THE PERIOD:
January 1, 2002 - September 30, 2002 10.3 6.99
July 1, 2002 - September 30, 2002 2.14 0.65
January 1, 2001 - September 30, 2001 7.77 2.01
July 1, 2001 - September 30, 2001 4.56 0.88
January 1, 2001 - December 31, 2001 9.28 1.41
13
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
ii. The adjusted financial statements as of September 30, 2002 and
for the nine and three months periods then ended have been
translated into U.S. dollars using the representative exchange
rate as of that date (U.S.$ 1 = NIS 4.871). The translation
was made solely for the convenience of the reader. The dollar
amounts so presented in these financial statements should not
be construed as representing amounts receivable or payable in
dollars or convertible into dollars, unless otherwise
indicated.
C. EFFECT OF NEW ACCOUNTING STANDARDS NOT YET IMPLEMENTED
i. During 2001, the Israel Accounting Standards Board published
Accounting Standard No. 12 - Discontinuance of Adjustment of
Financial Statements. Pursuant to this standard, the
adjustment of financial statements will be discontinued as of
January 1, 2003. Pursuant to the decision of the Professional
Committee of the Israel Accounting Standards Board, dated
November 10, 2002, application of the Standard is postponed to
January 1, 2004 and, therefore, adjustment of the financial
statements will be discontinued commencing January 1, 2004.
Until December 31, 2003, the Company will continue to prepare
financial statements adjusted in accordance with Opinion 36 of
the Institute of Certified Public Accountants in Israel.
Implementation of this standard may have a significant
negative effect on the reported results of the Company. The
extent of the effect will depend on the rate of inflation and
the Company's sources of financing.
ii. In 2001, the Israel Accounting Standards Board published
Accounting Standard No.13 - Effect of Changes in the Rates of
Exchange of Foreign Currency. This standard deals with
translation of transactions in foreign currency and
translation of financial statements of outside activities for
the purpose of their inclusion in the financial statements of
the reporting entity, and supersedes the provisions of
Clarifications 8 and 9 to Opinion 36 of the Institute of
Certified Public Accountants in Israel, which will be
discontinued upon the entry into effect of Accounting Standard
No. 12 - Discontinuance of Adjustment of Financial Statements.
At this time, it is not possible to estimate the effects of
this standard on the financial statements.
iii. In August 2002, the Israeli Accounting Standards Board
published Accounting Standard No. 14 - Financial Reporting for
Interim Periods. The Standard provides the minimum content of
financial statements for interim periods, including the
disclosure required in the notes, and also details the
accounting principles for recognition and measurement which
are to be applied in interim-period financial statements. This
Standard applies to financial statements for periods beginning
on and after January 1, 2003. Restatement of comparative data
for interim periods prior to the commencement date, is not
required by the Standard. Nonetheless, if financial statements
include comparative data for interim periods prior to the
commencement date, which is not in accordance with the
provisions of the Standard, a description is required to be
included in the notes of the main differences between the
principles provided in this Standard and those principles
according to which the comparative data is prepared.
14
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 3 - DISCONTINUING OPERATION DISCLOSURE
Upon completion of the transaction, as described in Note 7.I, the
activities of the Company in the sub-assemblies and components segment,
in particular, and in the medical imaging area, in general will, as a
practical matter, be discontinued. As a result, these financial
statements include the assets and liabilities which relate to the
discontinuing operation, in separate categories in the balance sheet
"assets/liabilities relating to discontinuing operation". In addition,
the transactions relating to the aforesaid operation were included in a
separate category in the statement of operations "income from
discontinuing operation". The comparative figures for prior years were
reclassified in order to reflect therein, retroactively, for all
reported periods, presentation of the assets, liabilities, revenues and
expenses which relate to the discontinuing operation, separate from
those which relate to the continuing operations.
The following are the condensed financial data relating to
discontinuing operations:
A. BALANCE SHEET ITEMS:
CONVENIENCE
TRANSLATION
(NOTE 2B)
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
2002 2001 2001 2002
---- ---- ---- ----
(UNAUDITED) (AUDITED) (UNAUDITED)
----------- --------- -----------
U.S.$
ADJUSTED NIS (THOUSANDS) (THOUSANDS)
-------------------------------------------- ------------
ASSETS:
Accounts and notes receivable - trade 92,344 69,970 90,004 18,958
Other accounts receivable and
prepaid expenses 12,623 19,953 18,620 2,591
Inventories 43,497 57,231 57,631 8,930
------- ------- ------- ------
148,464 147,154 166,255 30,479
------- ------- ------- ------
Long-term receivables 9,470 6,901 11,736 1,944
------- ------- ------- ------
Fixed assets, net 12,635 12,235 13,424 2,594
------- ------- ------- ------
TOTAL ASSETS 170,569 166,290 191,415 35,017
======= ======= ======= ======
CURRENT LIABILITIES:
Accounts payable - trade 77,826 62,320 96,163 15,977
Accrued liabilities 123,512 169,932 158,776 25,357
------- ------- ------- ------
201,338 232,252 254,939 41,334
------- ------- ------- ------
LONG-TERM LIABILITIES:
Long-term debts 558 1,085 784 115
Liability for employee severance
benefits, net 626 519 913 128
------- ------- ------- ------
1,184 1,604 1,697 243
------- ------- ------- ------
TOTAL LIABILITIES 202,522 233,856 256,636 41,577
======= ======= ======= ======
15
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 3 - DISCONTINUING OPERATION DISCLOSURE (CONT'D)
B. STATEMENTS OF OPERATIONS:
CONVENIENCE CONVENIENCE
TRANSLATION TRANSLATION
(NOTE 2B) (NOTE 2B)
NINE MONTHS THREE MONTHS
NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------- ------------- --------------- --------------
2002 2001 2002 2001 2001 2002 2002
-------- -------- -------- -------- ----------- ----------- -------------
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
-------------------- -------------------- ----------- ---------------------------
ADJUSTED NIS (THOUSANDS) U.S.$ (THOUSANDS)
----------------------------------------------------------- ---------------------------
Sales 315,865 285,759 114,588 92,993 402,804 64,846 23,525
Cost of sales 275,612 263,725 104,572 85,510 368,829 56,582 21,468
------- ------- ------- ------ ------- ------ ------
GROSS PROFIT 40,253 22,034 10,016 7,483 33,975 8,264 2,057
Sales and marketing expenses 879 914 263 209 984 180 54
General and administration
Expenses 7,070 10,335 2,296 2,131 12,457 1,452 471
------- ------- ------- ------ ------- ------ ------
OPERATING INCOME 32,304 10,785 7,457 5,143 20,534 6,632 1,532
Finance
Expenses, net (10,295) (8,720) (5,023) (9,955) (12,696) (2,114) (1,032)
Other income (expenses), net 16,211 24,513 (2,052) 19,369 17,845 3,328 (421)
------- ------- ------- ------ ------- ------ ------
INCOME BEFORE INCOME TAXES 38,220 26,578 382 14,557 25,683 7,846 79
Income taxes 3,462 - 34 - - 711 7
------- ------- ------- ------ ------- ------ ------
NET INCOME RELATED TO
DISCONTINUING OPERATION 34,758 26,578 348 14,557 25,683 7,135 72
======= ======= ======= ====== ======= ====== ======
NOTE 4 - HOTELS SEGMENT
A. OPTION AGREEMENT
In June 2001, B.H. and the management company ("PP") reached an
agreement, according to which B.H. was granted an option by PP,
exercisable until December 31, 2002, to purchase from PP, 33.3% of
its ownership and controlling rights in and to a company which was
incorporated to acquire the business (including management
agreements, hotels management rights, rights of trade name usage
and others) of the European park Plaza chain ("the Acquired
Company"), with a retroactive effect from October 26, 2000. As part
of the agreement, B.H. granted PP a loan in the amount of $5
million, convertible into the Acquired Company's shares in case of
exercise of the option or repayable in the event the option is not
exercised. B.H. received no securities for this loan.
The scope of B.H.'s investment may increase by $2.25 million, if
and to the extent that this amount is required for the purchase of
additional assets by the Acquired Company. The management company
has, in any event, an option, exercisable up to a period of a year
or at any time in the event of disagreement between the parties,
regarding the management company's rights, to acquire the part of
the company, in consideration for the refunding of the company's
original investment.
16
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 4 - INVESTMENTS (CONT'D)
B. SUBSIDY WITH RESPECT TO PARTICIPATION IN THE HOTEL'S EMPLOYEES'
SALARIES
Pursuant to the provisions of the local laws in Belgium, under
certain conditions, employers who create employment positions are
entitled to receive, a one-time subsidy from the Belgium
Government, with respect to participation in the employees'
salaries, based on the amount of the investment in connection with
each position - up to the maximum participation amount for each
position.
Due to a disagreement between AP and the Government of Belgium,
regarding the definition of AP for purposes of application and
implementation of the subsidy provisions, as stated, no income was
included in the financial statements for prior periods in
connection with participation in salaries of the hotel's employees
in AP.
In September 2002, Government of Belgium approved a subsidy with
respect to the hotel's employees in AP in the amount of (euro)1,090
thousand (net after deduction of commission).
In accordance with the above, this amount was included as a
participation in the salaries expenses in the three-month period
ended September 30, 2002.
NOTE 5 - CONTINGENCIES AND COMMITMENTS
A. The Company and subsidiary companies are involved in litigation
arising out of the ordinary course of business. Although the
outcome of such litigation is uncertain at this time, management
believes that the outcome of such litigation will not have a
material adverse effect on the financial position of the Company.
B. (i) On September 8, 1999, the Company was served with a claim and
a motion for recognition of the claim as a representative
claim. This claim was filed against the Company, Elbit Medical
Imagine Ltd. ("EMI"), (the company's parent company), Elbit
Medical Holding Ltd., Elron and six former directors of the
Company. The motion was filed on behalf of all persons who
were minority shareholders of the Company at the date of
submission of the claim, as well as all minority shareholders
of the Company who held Company's shares on February 18, 1999.
The main allegation of the claim is that EMI, through the
actions of the former directors of the Company, caused
discrimination of the minority shareholders.
The requested relief is approximately U.S.$ 603 thousand for
the plaintiff and approximately U.S.$ 158 million for the
damages to the represented group, plus legal expenses.
Following the Court's decision in the claim mentioned in
clause B.ii. below, the parties agreed to postpone the hearing
of the case until a final decision will be given on the
plaintiffs appeal in the other claim, as stated in clause
B.ii. below. Management, based on a legal advice received, is
of the opinion that the ultimate outcome of this claim, the
request for recognizing the claim as a representative claim
and the effect, if any, this may have on the Company can not
be estimated at this stage.
17
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 5 - CONTINGENCIES AND COMMITMENTS (CONT'D)
(ii) On November 2, 1999, a claim and a motion for recognition of
the claim as a representative claim were filed against the
Company, EMI, Elbit Medical Holdings Ltd., Europe Israel
(M.M.S) Ltd. ("EIL"), (indirect parent company of the
Company), Control Centers, Marina Herzlia Limited Partnership
1998, Elron and 25 past and present directors in the above
companies. The motion was served on behalf of those who held
shares of the Company on September 6, 1999, and continued to
hold such shares on the date of the claim, excluding the
respondents.
The claimants allege that the minority shareholders of the
Company have been discriminated as a result of the various
activities carried out by its controlling shareholders and its
Board of Directors. The remedy which has been requested by the
claimants is that EMI be compelled to execute the alleged
buy-out shares at U.S.$ 14 per share. Alternatively, the
Company and/or EMI and or other shareholders in the Company be
compelled to purchase the claimants' shares in the Company
according to an external valuation, or alternatively that the
claimants be paid compensation for the damages which they
allegedly suffered and the annulment of certain transactions
with controlling parties.
On August 16, 2000, the District Court of Haifa dismissed the
Application to recognize the claim as a Representative Claim.
Notwithstanding the above, the claim itself remains. Some of
the plaintiffs filed applications to the Israeli High Court
for permission to file an appeal on this dismissal. In
addition, the Government's Attorney General submitted his
supportive position with the plaintiffs allegation to the
Court. Following the company's claim that the Court's fees are
inappropriate to these type of claim, on August 3, 2001, the
District Court ordered the Plaintiffs to pay Courts' fees in
respect of some parts of the claim, in the sum of NIS 20
million not later than September 10, 2001, otherwise their
applications will be deleted, in respect to those parts of the
claim for which the fees would not be paid. Following a
request by the plaintiffs the Court decided to postpone the
payment of the fees until further decision.
In a hearing that took place on April 25, 2002, the District
Court showed a strong tendency to accept the plaintiffs' view
concerning the court fees. However, Elscint's counsel strongly
opposed such approach of the court, and in their opinion,
succeeded in shaking the court's position with regard to its
ability to cancel the previous decision of the court in the
interim procedure or its ability to enable the plaintiffs to
postpone the payment of these fees. The court decided to
render its ruling regarding the court fees at a later date,
which has not been determined as yet.
Negotiations for a settlement with some of the plaintiffs in
this case are in process. Management, based on a legal advice
received, is of the opinion that the ultimate outcome of the
claim and the effect, if any, this may have on the Company,
can not be estimated at this stage.
18
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 5 - CONTINGENCIES AND COMMITMENTS (CONT'D)
C. The Company is named as a defendant in a number of lawsuits and
other claims filed by distributors - of which some have no
specified amount of requested damages, while the others demand
compensation by the Company, for damage allegedly caused by its
alleged breach of the agreements relating to the Sale Transaction
in 1998, in the aggregate amount of U.S.$ 31 million.
At this stage, the Company's legal counsel cannot estimate the
outcome of these lawsuits and claims. However, the Company has
included in its financial statements provisions which - in
management's opinion, at the date of issuance of the financial
statements based, inter alia, on its legal counsel for this matter
and on its past experience, are considered adequate to cover the
costs and resources necessary to resolve the obligations under
these claims.
The aggregate amount of the claims as mentioned above, was
decreased from an amount of $80 million in December 31, 2001, to a
total of U.S.$ 31 million, as a result of negotiations carried out
with part of the distributors, which negotiations lead to
settlements with claimants. As a result of such settlements being
reached during the nine months period ended on September 30, 2002
no costs incurred beyond the provisions that were included in the
financial statements.
D. The Company is a defendant in several claims filed by customers who
previously purchased medical equipment from the company (including
some demanding the cancellation of sales and service agreements)
totaling approximately U.S.$ 6 million. These claims include mainly
alleged damages caused to medical equipment acquired from the
Company.
The financial statements of the Company include provisions, which,
in management's opinion, at the date of preparation of the
financial statements, based on the advice of its professional
counsel for this issue and on its past experience, were sufficient
to cover the costs and resources required for settling these
claims.
E. i. As a result of a dispute which has arisen between Bea Hotels
N.V. ("B.H.") and a third party ("Third Party Shareholder"),
regarding the latter's failure to comply with its obligations
to provide an indemnity to B.H. relating to certain matters
which are pending against Domino (the controlling shareholder
in Bucuresti which is the owner of the rights in a hotel in
Romania) and which derive from events which occurred prior to
the execution of the memorandum of understanding for the
purchase of Bucuresti, B.H. is presently withholding the
shares of the Third Party Shareholder (20%) in Domino as
security for compliance with the indemnity obligations made
by the Third Party Shareholder. Accordingly, on the date of
the approval of these financial statements, B.H. is formally
recorded as the holder of 100% of capital and voting rights
in Domino. The results of this dispute have no effect on the
results of operations of B.H. for the reported periods and/or
the amount of its shareholders' equity as of and for the
period ended September 30, 2002.
BEA Hotels Eastern Europe BV (a wholly owned subsidiary of
B.H. and the holder of 100% of the capital and voting rights
of Domino, as above mentioned) has submitted a financial
claim against the Third Party Shareholder arising out of the
failure of the Third Party Shareholder to fulfill the
conditions of the indemnity, within the framework of which
certain charges have been placed on the assets of the Third
Party Shareholder. The Third Party Shareholder has submitted
a motion to the court requesting that the dispute be referred
to arbitration in terms of the Memorandum of Understanding,
and the claimant has submitted its response opposing this
motion. As at the date of the approval of these financial
statements, the court has not rendered its decision in
respect of this motion.
19
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 5 - CONTINGENCIES AND COMMITMENTS (CONT'D)
ii. A motion submitted to the courts in Romania for the
cancellation of the tender within the framework of which
Domino acquired the controlling shareholding of Bucuresti -
was rejected by the courts. This decision is subject to
appeal, although as at the date of the approval of these
financial statements, no such appeal has been filed. If an
appeal will be filed, and if the appeal will be accepted,
then B.H.'s rights may be adversely and materially affected.
At this stage, BH is unable to assess the outcome of these
proceedings or their impact upon the rights of Domino in
Bucuresti. However, the management of B.H. is of the opinion,
based on the opinion of its legal counsel in Romania in
respect of a similar motion (which has been cancelled prior
to adjudication by the courts following the claimaints'
withdrawal of their motion) that even if such an appeal is
filed and accepted by the Supreme Court of Romania, and even
if an order is issued on the basis of such an appeal,
regarding the termination of the tender and in consequence
the cancellation of the rights of Domino in Bucuresti, in
accordance with the acquisition agreement, Domino will be
indemnified by the SOF for the full consideration of its
original investment (including proven damages for the above
acquisition transaction caused to the Group companies, plus
interest).
iii. Within the framework of a criminal investigation, which was
conducted against several suspects (including former officers
of the SOF who were involved in the privatization procedures
and the sale of the controlling interest in Bucuresti to
Domino) relating to events which occurred prior to the
acquisition of control in Bucuresti by B.H.A judicial lien
which was previously imposed upon Domino's shareholding in
Bucuresti by the investigating authorities in accordance with
the provisions of the Romanian Criminal Law, was removed by a
decision of the Public Prosecutors Office. Accordingly, as at
the date of the approval of these financial statements, the
shares held by Domino in Bucuresti are no longer encumbered
under the lien.
The criminal investigations culminated, in June 2002, by the
filing of an indictment by the Public Prosecutors Office of
Romania, against 17 accused individuals. The hearings in
these criminal proceedings have been postponed to March 2003.
These criminal proceedings may have indirect implications on
the validity of the privatization process and, consequently,
on Domino's shareholding in Bucuresti, even although Domino
is not an accused party in these criminal proceedings. B.H.'s
legal counsels are unable to evaluate, at this stage, the
results of these proceedings or their possible effects on
Domino's holdings in Bucuresti.
20
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 5 - CONTINGENCIES AND COMMITMENTS (CONT'D)
iv. The Third Party Shareholder in Domino (see i above)
terminated a certain partnership agreement which it had
executed with a third party ("Third Party Claimant"), prior
to the acquisition by B.H. of Domino, regarding their joint
investment in Domino on the grounds of the failure of the
Third Party Claimant to fulfill his obligations under the
said partnership agreement. The Third Party Claimant
subsequently filed a monetary claim against Domino and others
with the Romanian courts, in the amount of U.S.$ 2.5 million,
in respect of commissions allegedly payable to Third Party
Claimant pursuant to the provisions of the above partnership
agreement, to which Domino was also a party. In parallel
proceedings, an order imposing a charge over the shares held
by Domino in Bucuresti was cancelled by the Court of Appeals,
and the matter was returned to the court of first instance
for re-hearing. Accordingly, as at the date of the approval
of these financial statements, the shares held by Domino in
Bucuresti are no longer subject to this charge.
An additional claim has been submitted against Domino by
another third party claimant prior to the date of approval of
these financial statements. The principal remedies sought
under this additional claim are the payment of same
commission of U.S.$ 2.5 million arising from the partnership
agreement referred to above, as well as a demand for the
termination of an agreement entered into between Domino and
an Israeli bank for the pledge of the shares held by Domino
in Bucuresti as security for certain credit facilities
advanced by that Bank.
The Company has received an indemnity against these claims
from the Third Party Shareholder (see i above). Based upon
the opinion of its legal counsel, Domino is of the opinion
that these claims are devoid of any legal merit or
contractual foundation, and therefore was no provision in
respect of these claims was included in its financial
statements.
v. Within the framework of an joint venture agreement concluded
to set up a joint venture company owned by Bucuresti and a
third party investor ("Third Party Investor"), signed prior
to the acquisition of Bucuresti by B.H., that Third Party
Investor undertook to invest in the joint venture company an
amount of U.S.$ 27 million, and in consideration Bucuresti
undertook to transfer the rights in the Bucuresti Complex to
the joint venture company. As that Third Party Investor
failed to meet its investment obligations, Bucuresti
cancelled the joint venture agreement and submitted an
application to the court to liquidate the joint venture
company. At this stage the parties are engaged in proceedings
which relate only to the authority of the Romanian courts to
order the liquidation of the joint venture company, but do
not relate to the transfer of the rights of the Bucuresti
Complex to this joint venture company. If Bucuresti is
compelled to transfer its rights in the Bucuresti Complex to
the joint venture company, then its rights in the hotel are
liable to be materially prejudiced. B.H.'s management is of
the opinion that this is not likely that as a result of the
proceedings, Bucuresti will be compelled to transfer its
rights in the Bucuresti Complex to the said joint venture
company.
21
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 5 - CONTINGENCIES AND COMMITMENTS (CONT'D)
vi. In addition, various additional proceedings are being
conducted in Romania (objections submitted to the Chamber of
Commerce), within the framework of which it is claimed that
certain resolutions taken at general meetings of Bucuresti's
shareholders were not validly adopted and are devoid of any
legal force for procedural reasons. The court acknowledged
part of the above mentioned proceedings, and Domino has filed
an appeal thereon. B.H's management is of the opinion, that
these claims are spurious and vexatious, and will have no
material effect on B.H.'s rights in and to Bucuresti's shares
and in the Bucuresti Complex owned by Bucuresti.
F. The Company is required to pay royalties to the Office of the Chief
Scientist ("OCS") in respect of sales of products developed with
grants provided by the latter. The royalties are computed on the
sales volume of these products at percentages ranging from 1% to 5%
up to the aggregate amount of the grants. The Company received
correspondence from the OCS, requesting the furnishing of certain
data in order to ascertain its obligation in respect of royalties
due to the OCS.
The liability to the OCS in respect of the sale of the MRI
operations to GEMS, determined at U.S.$ 11 million, and was
allocated at 60% to the Company and 40% to GEMS. In addition, it
was agreed that the NM and MRI technologies, products and
components would not be transferred out of Israel unless GEMS first
seeks OCS approval. Pursuant to the agreement between the Company,
GEMS and the OCS, the Company undertook - should GEMS sell MRI
products containing certain know-how and components financed with
the assistance of the OCS - to pay the OCS royalties in excess of
U.S.$ 1.5 million. The Company received a written notification from
the OCS, requiring details concerning the allocation of the
proceeds received from GEMS, in connection with the sales
transaction, to the MRI project, based on which the royalties had
been computed.
EMI and Elron Ltd. notified the Company that the outcome of the
settlement of their disagreement with the OCS in connection with
the sale of Elron's holdings in the Company does not impose any
additional cost to the Company.
G. The allocation of the proceeds in respect of the sale transaction,
between the Company and its subsidiaries is based on an estimate of
the assets' fair value (both tangible and intangible) sold by each
one of the companies; based on separate negotiations held with each
selling Group company; and on the basis of the provisions
stipulated in the sales agreement. A different method of allocation
may cause the Company and its subsidiaries additional liabilities
and/or expense. Company's management believes that the estimates
used as the basis for this allocation of proceeds are adequate
under the circumstances.
22
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 6 - TRANSACTION WITH RELATED PARTY
In April 2002, SLS (a subsidiary of the Company), entered into an
agreement with a company controlled by the controlling interests in the
Company (hereinafter - "CDPM"), in the framework of which CDPM committed
to complete the construction of a commercial and entertainment center in
the Herzlyia Marina (hereinafter - "the Commercial Center"), including,
the development work, as defined in the agreement, for a final and
absolute consideration of U.S. $57.7 million, which is to be paid based
on the progress of the work (hereinafter - "the Work Consideration").
CDPM committed to deliver the Commercial Center to the Company in a state
of being ready for operation ("turnkey"), by March 2003. The amount of
the Work Consideration was determined on the basis of a calculation of
the amount of work remaining to be performed, as at March 1, 2002. In
respect of each payment and/or expense paid by the Company to a
sub-contractor, supplier, professional adviser or other entity as part of
the implementation of the project from March 1, 2002 to the date CDPM
commences work, the Work Consideration will be adjusted accordingly. From
March 1, 2002 until September 30, 2002 the Company made such payments on
account of implementation of the project in the total sum of U.S. $11.2
million. The work in the framework of the agreement does not include
specific work, which was detailed in the agreement (mainly - planning,
marketing, tolls and supervision), the cost of which is to be borne by
the Company. In addition, the agreement provides, that CDPM is to bear
the cost of adaptations for tenants, based on the specification detailed
in the agreement and the consideration for adaptations which are not
included in the specification, is to be determined based on a mechanism
set forth in the agreement. Until the date of publication of these
financial statements the agreement had not yet been closed. Upon the
closing of the agreement, the Company is to pay to CDPM an advance of $3
million, on account of the Work Consideration and, concurrently, CDPM is
to provide the Company with a bank guarantee, at the rate of 5% of the
Work Consideration. In addition, the Company committed, as part of the
agreement, to assign to CDPM all the rights and obligations, based on the
agreements, which it signed with various suppliers, except for those
specified in the agreement. The agreement includes a number of
conditions, the breach of which is considered as a fundamental breach,
which confers the remedies stated in the agreement. The agreement was
approved by the General Meeting of the Company's shareholders.
23
Elscint Limited and Subsidiary Companies
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 7 - SUBSEQUENT EVENTS
A. In November 2002, the Company signed an agreement with an unrelated
third party ("the Purchaser") for the sale of the manufacturing,
assembly, engineering and integration operations (mainly for the
medical imaging equipment) of the sub-assemblies and components
segment, conducted by the Company at its Ma'alot facility in
Northern Israel ("the Plant").
Pursuant to the agreement, the Company will sell to the Purchaser
the Plant's assets (tangible and intangible assets) as defined in
the agreement ("the Transferred Assets"). In addition, the
Purchaser will assume certain liabilities incurred in connection
with the Plant (agreed balance sheet and off-balance sheet
liabilities). The Purchaser will not assume liabilities for claims
and disputes if arising out of facts and circumstances which
occurred or arose prior to the closing date of the transaction as
defined in the agreement.
The amount of the consideration ("the Consideration") will be
determined, inter alia, on the basis of the net book value of the
assets and liabilities being transferred (trade receivables,
inventory and fixed assets net of balance sheet liabilities), as
included in the audited financial statements of the Plant as of the
closing date. The final amount of the consideration (and
accordingly the gain which the Company will generate from the
transaction) are subject to the Purchaser's post closing
verification that the assets included in the balance sheet of the
Plant as of the closing date properly reflect the Transferred
Assets on the basis of the criterions as determined in the
agreement. In order to secure possible adjustments to the
consideration (if any) in consequence of such verification
procedures, an amount equal to 15% of the book value of the
Transferred Assets shall be deposit into escrow for a period of up
to 90 days following the closing date.
Completion of the transaction is subject to the waiver, by another
unrelated third party, of certain rights of first refusal
previously awarded to that party, as well as the approval of the
Controller of Restrictive Trade Practices in Israel. Subject to the
receipt of such waiver and approval, it is anticipated that the
closing date of the transaction will be December 31, 2002.
B. Subsequent to the balance sheet date, a proportionately
consolidated company (held indirectly at the rate of 35%), which
owns a hotel in London (hereinafter - "the Hotel Company"), entered
into an agreement with a third-party hotel company (hereinafter -
"the Third Party"), pursuant to which the Hotel Company will lease
out its hotel for a period of 25 years, in exchange for a fixed
annual amount during the first four years, and beginning with the
fifth year and up to the end of the lease period, such amount
increases at the rate of 2.5% per year. The Third Party was given
an option to extend the agreement for two additional periods of 15
years each. The agreement with the Third Party is scheduled to take
effect in January 2003.
24