AIPM
AMERICAN ISRAELI PAPER MILLS LTD. GROUP Meizer street
Industrial Zone P.O.B. 142
Hadera 38101, Israel
Tel: 972-4-6349402
Fax: 972-4-6339740
E-Mail: hq@aipm.co.il
AUGUST 18, 2005
APRIL SIFFORD, BRANCH CHIEF
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
DIVISION OF CORPORATION FINANCE
RE: AMERICAN ISRAELI PAPER MILLS LTD.
FORM 20-F FOR FINANCIAL YEAR ENDED DECEMBER 31, 2004
FILED JUNE 28, 2005
FROM: ISRAEL ELDAR, CFO
AMERICAN ISRAELI PAPER MILLS LTD. (hereafter - AIPM)
Dear Ms. Sifford
In reply for your letter dated July 21, 2005, here is our reference:
Control and Procedures, Page 48
1. Comment - We note that your performed an evaluation of the
effectiveness of the design and operation of your disclosure
controls and procedures within 90 days prior to your report. Please
note that you were required to perform your evaluation as of the
last day of the reporting period. Refer to Release 33-8238. Please
amend your filing to comply.
Answer -The company maintains, as mentioned in the Form 20-F,
disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the Company's periodic
filings with the SEC is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and
that such information is accumulated and communicated to the
Company's management. The specific evaluation of the effectiveness
of the design and operation of the Company's disclosure controls and
procedures, that was performed within the 90 days prior to the date
of the report, is designed to enable a detailed check of the
procedures, and by that we are convinced, by the date of the report,
that the procedures are effective also at the last date of the
reporting period. Therefore it could be concluded that the
evaluation was made for the last date of the reporting period as
well. In response to your comment, the company will amend the filing
(following the completion of this correspondence) in ITEM 15 as
follows:
Instead of: "Within 90 days prior to the date of this report, the
Company performed..." it will be written: "As of the end of the
period covered by this report, the company performed..."
Financial Statements, Page 51
2. Comment - Please explain to us why your reconciliations to U.S. GAAP
on page 56 do not include an adjustment equal to your proportionate
share of the differences between amounts recorded for Israeli GAAP
and amounts recorded for U.S. GAAP in the financial statements of
your associated companies.
Answer - The reconciliation to U.S. GAAP on page 56 includes the
adjustment equal to our proportionate share in the adjustments of
our associated companies within the "functional currency" item. The
company has classified historically the said reconciliation to the
"functional currency" item because, in the past, most of the
difference between the Israeli GAAP and the U.S. GAAP, regarding the
associated companies was caused by the functional currency
differences (report adjusted to the dollar under Israeli GAAP as
compared with unadjusted report under U.S. GAAP).
In light of your comment, if it is preferred to report separately
the reconciliation resulting from our share in the adjustments of
the associated companies, attached hereby a proposal for an
amendment in ITEM 18 as follows:
I. THE EFFECT OF APPLYING U.S. GAAP ON THE CONSOLIDATED FINANCIAL
STATEMENTS IS AS FOLLOWS:
1) Consolidated statement of income figures:
Year ended December 31
---------------------------------
2004 2003 2002
------- ------- -------
NIS in thousands
(except per share data)
Net income, as reported according to Israeli GAAP 62,732 60,047 37,460
Effect of treatment of the following items in accordance with U.S. GAAP:
Functional currency* 2,385 5,834 22,517
Deferred income taxes - net (2,080) (4,703) (17,156)
reconciliation resulting from our share in the adjustments of the associated companies 2,442 2,409 10,737
Other then temporary impairment of an investment in an associated company (16,986)
Amortization of other then temporary impairment of an investment in
an associated company 1,699
Applying APB 25 in respect of employee stock options:
Gross amount (12,660) (12,705) 1,667
Deferred taxes 4,202 4,573 (601)
------- ------- -------
Net income under U.S. GAAP 58,720 38,469 54,624
======= ======= =======
Exhibits, Page 93
3. Comment - We note that you provide an auditor's reports for Effeh
landfill Ltd. With regard to this report:
o Comment - Please explain to us why this report is provided. We
note that this company does not appear to be mentioned among
the your subsidiaries.
Answer - The auditor's report for Effeh Landfill Ltd.
(hereafter - Effeh) is provided since the auditor's report of
Barthelemi Holdings Ltd. (hereafter - Barthelemi) and the
auditor's report of TMM Integrated Recycling Industries Ltd.
(hereafter - TMM) makes reference to and place reliance on the
work of the auditors of Effeh (see also questions 5 and 7 in
your letter dated July 21, 2005).
Effeh is not mentioned among our subsidiaries, because our
effective holding in its shares is 10.4% (it is a 25% owned
associated company of our 41.6% owned associated company,
TMM), and Effeh is also immaterial to our operations (our
share in Effeh's loss was 0.07% of our net income in 2004).
o Comment - Please tell us why you believe it appropriate to
include this report on the two years ended December 31, 2004,
rather than on the three years ended December 31, 2004.
Answer - We included the report for the two years ended
December 31, 2004 rather than for the three years ended
December 31, 2004 because the shares of Effeh were purchased
by TMM only in 2003.
o Comment - Please tell us why you believe it is not
inappropriate for the financial statements of Effeh Landfill
Ltd. to be audited by Bar-Lev, Merrari, Geva & Co. C.P.A.,
which firm does not appear to be registered with the Public
Company Accounting Oversight Board.
Answer - We believe that it is appropriate for Bar-Lev,
Merrari, Geva and Co., C.P.A. to be Effeh's auditors, as they
implemented the regulations of the PCAOB, as mentioned in
their report. We emphasis again, as described above, that
Effeh is an associated company of our associated company, and
it is immaterial to our operations (0.07% in 2004). The
company will approach Bar-Lev, Merrari, Geva and Co. to ask
them to comply with the requirements of the filing.
4. Comment - We note that the auditor's report for Carmel Containers
Systems Ltd. makes reference to and places reliance on the work of
other auditors. Please tell us the identity of such other auditors
and whether their report is also included in your filing.
Answer - The "other auditors" referred to by the auditors of Carmel
Containers Systems Ltd. (hereafter - Carmel) are PwC, and their
report regarding Carmel's subsidiary is not included, because PwC
are AIPM's auditors.
5. Comment - We note that the auditor's report for Barthelemi Holding
Ltd. makes reference to and places reliance on the work of other
auditors. Please tell us the identity of such other auditors and
whether their report is also included in your filing.
Answer - The "other auditors" referred to by the auditors of
Barthelemi are Bar-Lev, Merrari, Geva and Co., C.P.A. (auditors of
Effeh) and Mualem Glazer Inbar Junio & Co. (auditors of M.M.M.
united Landfill Industries (1998) Ltd. (hereafter - M.M.M)), and
their reports have been included in our Form 20-F for 2004.
6. Auditor's report for M.M.M.
Comment - We note that you provide an auditor's report for M.M.M. United
Landfill Industries (1998) Ltd. With regard to this report:
o Comment - Please explain to us why this report is provided. We
note that this company does not appear to be mentioned among
your subsidiaries.
Answer - The report is provided since the auditor's report of
Barthelemi and the auditor's report of TMM makes reference to
and place reliance on the work of the auditors of MMM (see
also questions 5 and 7 in your letter dated July 21, 2005).
M.M.M. is not mentioned among our subsidiaries, because our
effective holding in its shares is 13.7% (it is 33% owned
company of our 41.6% owned associated company, TMM), and M.M.M
is also immaterial to our operations (our share in MMM's
profit was 1.67% of our net income in 2004).
o Comment - Please tell us why you believe it is not
inappropriate for the financial statements to M.M.M. United
Landfill Industries (1998) Ltd. to be audited by Mualem Glazer
inbar Junio & Co.,
which firm does not appear to be registered with the public
Company Accounting Oversight Board.
Answer - We believe that it is appropriate for Mualem Glazer
Inbar Junio & Co. to be M.M.M.'s auditors, as they implemented
the regulations of the PCAOB, as mentioned in their report. We
emphasis again, as described above, that MMM is 33% owned by
our associated company, and it is immaterial to our operations
(1.67% in 2004). The company will approach Mualem Glazer Inbar
Junio & Co. to ask them to comply with the requirements of the
filing.
7. Comment - We note that the auditor's report for TMM Integrated
Recycling Industries Ltd. makes reference to and places reliance on
the work of other auditors. Please tell us the identity of such
other auditors and whether their reports are also included in your
filing.
Answer - The "other auditors" referred to by the auditors of TMM are
Bar-Lev, Merrari, Geva and Co., C.P.A. (auditors of Effeh) and
Mualem Glazer Inbar Junio & Co. (auditors of M.M.M), and their
reports have been included in our Form 20-F for 2004.
8. Comment - We note that the auditor's report for Mondi Business Paper
Hadera Ltd. references only the financial statements at December 31,
2004, and for the year ended December 31, 2004. Please amend your
filing to include a reissued audit report on the financial
statements of this company at December 31, 2003 and December 31,
2002, and for the two years ended December 31, 2003.
Answer - Before the year 2004 the auditors of Mondi Business Paper
Hadera Ltd. were PwC. The filing will be amended to include PwC's
audit reports for the corresponding years.
9. Comment - We note that you include a US GAAP Adjustment Report for
Rakefet Marketing and Trade Services ltd. Please explain to us your
relationship to this company and why this report is included.
Answer - Rakefet Marketing and Trade Services Ltd. (hereafter -
Rakefet) is an associated company. All of Rakefet's assets are the
holdings of other associated companies of AIPM. Because it has no
activities of its own, we consider Rakefet to be immaterial to our
operations, and therefore it is not mentioned among our subsidiaries
and associated companies.
In addressing your comment it was noted that the auditor's report on
Rakefet was inadvertently omitted from our filing, and it will be
included in the amended filing.
10. Comment - As to US GAAP adjustments presented for associated
companies, amend your filing to include US GAAP adjustments for all
periods presented in your filing.
Answer - The company receives, historically, a report regarding
adjustment to US GAAP from other auditors regarding its associated
companies, for the reported year, while the results regarding
previous years are based on the reports received in the years before
(that were included in these years fillings).
The filing will be amended to include US GAAP adjustments for all
periods presented in the filing.
11. Comment - Please expand your disclosure to include explanatory
language that clarifies your relationships to all companies whose
financial statements and/or audit reports are included in your
filing. Provide sufficient information so that it is clear to the
reader that all of the required information is, in fact, included.
Answer - The list of subsidiaries and associated companies, attached
in ITEM 4 C. in our filing, contains the material and directly held
subsidiaries and associated companies. As the other companies are
immaterial to our operations, and their results are included in the
results of the above mentioned companies, we believe that any
additional information could be confusing to the reader. In light of
your request, we will add the following sentence in connection with
the list of subsidiaries and associated companies (in ITEM 4 C.) :
" In the exhibits we enclosed the auditors' reports of other
companies, because they have other auditors depending on their audit
reports, although these companies are immaterial to the company's
operations".
We hope the above is answering all your questions. You may contact me at
972-4-6349470 if you have any questions regarding our response.
The amended filing will follow the completion of this correspondence.
At your request we hereby acknowledge that:
o The company is responsible for the adequacy and accuracy of
the disclosure in the filing;
o staff comments or changes to disclosure in response to staff
comments do not foreclose the commission from taking any
action with respect to the filing; and
o the company may not assert staff comments as a defense in any
proceeding initiated by the commission or any person under the
federal securities laws of the United States.
Sincerely,
Israel Eldar, CFO
AMERICAN ISRAELI PAPER MILLS LTD.