SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 2-5061
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AMPAL-AMERICAN ISRAEL CORPORATION
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(Exact name of registrant as specified in its charter)
New York 13-0435685
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1177 Avenue of the Americas, New York, New York 10036
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 782-2100
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Former name, former address and former fiscal year, if changed since last
report.
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 X No
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The number of shares outstanding of each of the issuer's classes of common
stock is Common - 3,000,000; Class A - 20,880,869 (as of April 30, 1995).
AMPAL-AMERICAN ISRAEL CORPORATION
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Index to Form 10-Q
Page
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Part I Financial Information
Consolidated Statements of Income...................... 1
Consolidated Balance Sheets............................ 2
Consolidated Statements of Cash Flows.................. 4
Consolidated Statements of Changes in
Shareholders' Equity.................................. 6
Notes to the Consolidated Financial Statements......... 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 8
Part II Other Information...................................... 10
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1995 1994
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(Dollars in thousands, except per share data) (Unaudited) (Unaudited)
(Note 2)
REVENUES
Equity in earnings of affiliates............. $ 2,723 $ 2,990
Food processing and manufacturing............ 11,282 9,934
Interest:
Related parties............................. 2,211 3,058
Others...................................... 1,259 347
Gains on issuance of shares by subsidiary and
affiliate (Note 3).......................... - 2,692
Realized and unrealized gains on investments. 722 -
Rental income................................ 969 767
Other........................................ 443 387
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Total revenues.......................... 19,609 20,175
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EXPENSES
Food processing and manufacturing............ 10,536 10,238
Interest:
Related parties............................. 786 817
Others...................................... 2,937 2,940
Other........................................ 1,744 1,535
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Total expenses.......................... 16,003 15,530
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Income before income taxes................... 3,606 4,645
Income taxes................................. 2,020 1,971
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NET INCOME.............................. $ 1,586 $ 2,674
======== ========
Earnings per Class A share................... $ .06 $ .10
===== =====
Weighted average number of Class A and
equivalent shares outstanding (in thousands) 25,218 22,968
The accompanying notes are an integral part of the consolidated financial
statements.
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
ASSETS AS AT 1995 1994
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(Dollars in thousands) (Unaudited) (Note 2)
Cash and cash equivalents...................... $ 49,629 $ 42,104
Deposits, notes and loans receivable:
Related parties.............................. 80,565 90,462
Others....................................... 1,932 3,786
Investments.................................... 129,139 131,537
Property and equipment, less accumulated
depreciation of $12,140 and $11,616........... 30,962 30,914
Other assets................................... 45,866 44,077
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TOTAL ASSETS................................... $ 338,093 $ 342,880
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The accompanying notes are an integral part of the consolidated financial
statements.
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
LIABILITIES AND MARCH 31, DECEMBER 31,
SHAREHOLDERS' EQUITY AS AT 1995 1994
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(Dollars in thousands) (Unaudited) (Note 2)
LIABILITIES
Notes and loans payable:
Related parties............................... $ 21,746 $ 24,837
Others........................................ 19,611 19,226
Debentures...................................... 80,340 84,491
Accounts and income taxes payable, accrued
expenses and minority interests................ 40,718 40,832
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Total liabilities....................... 162,415 169,386
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SHAREHOLDERS' EQUITY
4% Cumulative, Participating, Convertible
Preferred Stock, $5 par value; authorized
650,000 shares; issued and outstanding
205,785 and 206,608 shares..................... 1,029 1,033
6-1/2% Cumulative, Convertible Preferred Stock,
$5 par value; authorized 4,282,850 shares;
issued and outstanding 1,109,242 and 1,114,927
shares......................................... 5,546 5,575
Class A Stock, $1 par value; authorized
30,000,000 shares; issued and outstanding
20,861,688 and 20,840,518 shares............... 20,862 20,841
Common Stock, $1 par value; authorized, issued
and outstanding 3,000,000 shares............... 3,000 3,000
Additional paid-in capital...................... 57,197 57,185
Retained earnings............................... 90,593 89,007
Cumulative translation adjustments.............. (1,999) (2,636)
Unrealized loss on marketable securities........ (550) (511)
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Total shareholders' equity.............. 175,678 173,494
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 338,093 $ 342,880
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 1994
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(Dollars in thousands) (Unaudited) (Unaudited)
Cash flows from operating activities:
Net income................................. $ 1,586 $ 2,674
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in earnings of affiliates.......... (2,723) (2,990)
Gains on issuance of shares by
subsidiary and affiliate................. - (2,692)
Realized and unrealized gains on
investments.............................. (722) -
Translation loss (gain)................... 62 (52)
Depreciation expense...................... 587 527
Amortization expense...................... 1,184 1,237
Minority interests........................ (167) (279)
(Increase) decrease in other assets........ (2,172) 8
Increase in accounts and income taxes
payable, accrued expenses and minority
interests................................. 140 1,143
Investments made in trading securities..... (1,419) -
Proceeds from sale of trading securities... 3,787 -
Dividends received from affiliates......... 3,029 4,277
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Net cash provided by operating activities. 3,172 3,853
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Cash flows from investing activities:
Deposits, notes and loans receivable
collected:
Related parties........................... 13,702 11,323
Others.................................... 192 2,490
Deposits, notes and loans receivable
granted:
Related parties........................... (505) (1,009)
Others.................................... (20) (336)
Investments made in:
Available-for-sale securities............. (1,128) -
Affiliates and others..................... (4,012) (28,038)
Proceeds from sale of investments:
Others.................................... 5,678 2,398
Purchase of property and equipment......... (484) (429)
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Net cash provided by (used in) investing
activities............................... 13,423 (13,601)
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The accompanying notes are an integral part of the consolidated financial
statements.
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 1994
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(Dollars in thousands) (Unaudited) (Unaudited)
Cash flows from financing activities:
Notes and loans payable received:
Related parties........................... $ - $ 261
Others.................................... 4,041 639
Notes and loans payable repaid:
Related parties........................... (3,258) (8,081)
Others.................................... (3,725) (1,415)
Debentures issued by subsidiary............ - 4,360
Debentures repaid.......................... (6,449) (11,442)
Proceeds from issuance of shares........... - 57,602
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Net cash (used in) provided by financing
activities............................... (9,391) 41,924
Effect of exchange rate changes on cash
and cash equivalents....................... 321 (196)
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Net increase in cash and cash equivalents... 7,525 31,980
Cash and cash equivalents at beginning
of period.................................. 42,104 3,178
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Cash and cash equivalents at end of
period..................................... $ 49,629 $ 35,158
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Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest:
Related parties........................... $ 425 $ 505
Others.................................... 2,227 2,603
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Total interest paid..................... $ 2,652 $ 3,108
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Income taxes paid.......................... $ 1,055 $ 1,134
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1995 1994
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(Dollars in thousands) (Unaudited) (Unaudited)
4% PREFERRED STOCK
Balance, beginning of year................... $ 1,033 $ 1,068
Conversion of 823 and 1,622 shares into
Class A Stock............................... (4) (7)
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Balance, end of period....................... $ 1,029 $ 1,061
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6-1/2% PREFERRED STOCK
Balance, beginning of year................... $ 5,575 $ 6,011
Conversion of 5,685 and 56,519 shares into
Class A Stock............................... (29) (282)
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Balance, end of period....................... $ 5,546 $ 5,729
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CLASS A STOCK
Balance, beginning of year................... $ 20,841 $ 16,225
Issuance of shares upon conversion of
Preferred Stock............................. 21 178
Issuance of shares in a public offering*..... - 4,317
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Balance, end of period....................... $ 20,862 $ 20,720
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ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year................... $ 57,185 $ 10,605
Conversion of Preferred Stock................ 12 111
Proceeds from issuance of shares in a public
offering.................................... - 46,516
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Balance, end of period....................... $ 57,197 $ 57,232
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RETAINED EARNINGS
Balance, beginning of year................... $ 89,007 $ 82,079
Net income................................... 1,586 2,674
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Balance, end of period....................... $ 90,593 $ 84,753
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CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year................... $ (2,636) $ (2,171)
Foreign currency translation adjustment...... 637 (90)
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Balance, end of period....................... $ (1,999) $ (2,261)
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UNREALIZED (LOSS) GAIN ON MARKETABLE SECURITIES
Balance, beginning of year................... $ (511) $ 4,300**
Unrealized loss.............................. (39) (1,571)
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Balance, end of period....................... $ (550) $ 2,729
======== ========
* Issuance of 4,500,000 shares, including 182,066 shares held in treasury.
** Represents cumulative effect of adoption of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities."
The accompanying notes are an integral part of the consolidated financial
statements.
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. As used in these financial statements, the term the "Company" refers to
Ampal-American Israel Corporation ("Ampal") and its consolidated
subsidiaries.
2. The December 31, 1994 consolidated balance sheet presented herein was
derived from the audited December 31, 1994 consolidated financial statements
of the Company.
Reference should be made to the Company's consolidated financial statements
for the year ended December 31, 1994 for a description of the accounting
policies which have been continued without change. Also, reference should
be made to the notes to the Company's December 31, 1994 consolidated
financial statements for additional details of the Company's consolidated
financial condition, results of operations and cash flows. The details in
those notes have not changed except as a result of normal transactions in
the interim. Certain amounts in the 1994 statement of income have been
reclassified to conform with the current period's presentation. All
adjustments (of a normal recurring nature) which are, in the opinion of
management, necessary to a fair presentation of the results of the interim
period have been included.
3. In March 1994, Pri Ha'emek (Canned and Frozen Food) 88 Ltd. ("Pri Ha'emek"),
the Company's then 66.7%-owned subsidiary, conducted an initial public
offering in Israel on the Tel Aviv Stock Exchange. In connection with this
offering, the Company realized a gain on issuance of shares of $2.3 million
($1.5 million net of taxes). The Company's interest in Pri Ha'emek was
diluted initially to 51.25%. Subsequent to the public offering, the Company
has purchased additional shares and convertible debentures and at March 31,
1995 its interest was 56.2%. If all warrants and convertible debentures
were to be exercised, the Company's interest would be diluted to 39.2%. If
the Company's interest in Pri Ha'emek decreases below 50%, Pri Ha'emek's
results will no longer be consolidated with the Company's but will be
recorded by the equity method of accounting.
During the first quarter of 1994, Granite Hacarmel Investments Ltd.
("Granite") issued additional shares upon conversions of its debentures.
The Company's interest in Granite was diluted from 21.6% to 21.2% and the
Company recorded a gain on issuance of shares of approximately $.3 million
($.2 million, net of taxes).
4. On April 12, 1995, one of the Company's subsidiaries acquired an option from
Massachusetts Mutual Life Insurance Company ("Mass Mutual") to purchase the
290,000 square-foot office building which houses the Consulate of the
Government of Israel in New York and many other Israel Government offices as
well as other tenants. The building is located at 800 Second Avenue, New
York, New York. At the request of Mass Mutual, the purchase price will not
be publicly announced by the Company unless and until the option is
exercised; but if consummated, the purchase would represent a significant
acquisition for the Company. The option may be exercised any time on or
before June 12, 1995. If the option is exercised, the closing is scheduled
to take place on June 28, 1995.
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
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Consolidated net income decreased from $2.7 million for the three-month period
ended March 31, 1994 to $1.6 million for the same period in 1995. The decrease
in net income in 1995 resulted primarily from the absence of gains on issuance
of shares which were recorded in 1994 and which were partially offset by
unrealized gains on investments in 1995.
Equity in earnings of affiliates decreased because of a net decline in earnings
of affiliates accounted for by the equity method.
Food processing revenues and expenses increased as a result of the increased
sales volume of Pri Ha'emek (Canned and Frozen Food) 88 Ltd.'s ("Pri Ha'emek")
products in the domestic market.
In the quarter ended March 31, 1995, the Company recorded $.8 million of
unrealized gains on marketable securities, which are classified as trading
securities, in the statement of income. At March 31, 1995, the aggregate fair
value of trading securities amounted to approximately $5.7 million.
In the quarter ended March 31, 1994, the Company recorded gains on issuances of
shares of $2.3 million ($1.5 million net of tax) by Pri Ha'emek and $.3 million
($.2 million net of tax) by Granite Hacarmel Investments Ltd.
The increase in the effective income tax rate from 42% in 1994 to 56% in 1995
resulted from changes in the components of taxable income and the utilization of
tax loss carryforwards in 1994 which were not available in 1995.
On April 12, 1995, one of the Company's subsidiaries acquired an option from
Massachusetts Mutual Life Insurance Company ("Mass Mutual") to purchase the
290,000 square-foot office building which houses the Consulate of the Government
of Israel in New York and many other Israel Government offices as well as other
tenants. The building is located at 800 Second Avenue, New York, New York. At
the request of Mass Mutual, the purchase price will not be publicly announced by
the Company unless and until the option is exercised; but if consummated, the
purchase would represent a significant acquisition for the Company. The option
may be exercised any time on or before June 12, 1995. If the option is
exercised, the closing is scheduled to take place on June 28, 1995.
Liquidity and Capital Resources
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At March 31, 1995, cash and cash equivalents were $49.6 million as compared with
$42.1 million at December 31, 1994. The increase of $7.5 million is primarily a
result of investments in cash equivalents of funds received from sales and
maturities of short-term investments during the quarter ended March 31, 1995.
In addition, at March 31, 1995 investments included $7.7 million of short-term,
interest-bearing securities as compared with $11.6 million at December 31, 1994.
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In January 1995, the Company invested $1.5 million and acquired a 20% interest
in Epsilon Investment House Ltd. ("Epsilon") and its affiliate Renaissance
Investment Company Ltd. Epsilon is an investment bank which provides portfolio
management and its affiliate provides underwriting services in Israel through
its subsidiaries.
In January 1995, the Company acquired 260,416 common shares, equal to a 4.1%
interest in M-Systems Flash Disk Pioneers Ltd. ("M-Systems"), for $1 million and
received warrants to purchase an additional 130,206 common shares at $4.61 per
share until June 30, 1998. M-Systems is an Israeli company engaged in the
development, manufacturing and marketing of data storage media based on "flash
memory," a new silicon memory chip.
Deposits, notes and loans receivable, notes and loans payable, and debentures
decreased as a result of scheduled repayments.
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None.
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Item 2. Changes in Securities - None.
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Item 3. Defaults upon Senior Securities - None.
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Item 4. Submission of Matters to a Vote of Security Holders - None.
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Item 5. Other Information - None.
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Item 6. Exhibits and Reports on Form 8-K
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(a) Index to Exhibits:
Exhibit 10 - Agreement of Sale and Purchase, dated
April 12, 1995, between Massachusetts Mutual
Life Insurance Company and Ampal Realty
Corporation regarding the premises located at
800 Second Avenue, New York, New York................... Page E-1*
Exhibit 11 - Schedule Setting Forth the Computation
of Earnings per Class A Share........................... Page E-73*
Exhibit 27 - Financial Data Schedule
(b) A Report on Form 8-K, dated March 28, 1995, was filed, reporting that
on March 28, 1995, the Registrant's Board of Directors approved a
stock repurchase program relating to the Registrant's Class A Stock.
* Refers to a separately bound exhibit volume
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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SIGNATURES
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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.
AMPAL-AMERICAN ISRAEL CORPORATION
By:/s/ Lawrence Lefkowitz
---------------------------------
Lawrence Lefkowitz
President
(Principal Executive Officer)
By:/s/ Alan L. Schaffer
---------------------------------
Alan L. Schaffer
Vice President - Finance
and Treasurer
(Principal Financial Officer)
By:/s/ Alla Kanter
---------------------------------
Alla Kanter
Controller
(Principal Accounting Officer)
Dated: May 15, 1995
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EXHIBIT INDEX
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Exhibit No. Description
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10 Agreement of Sale and Purchase, dated April 12, 1995, between
Massachusetts Mutual Life Insurance Company and Ampal Realty
Corporation regarding the premises located at 800 Second Avenue,
New York, New York
11 Schedule Setting Forth the Computation of Earnings per Class A
Share
27 Financial Data Schedule
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