SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
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 September 30, 1995
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------- --------------------
Commission file number 2-5061
----------
AMPAL-AMERICAN ISRAEL CORPORATION
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-0435685
- ----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1177 Avenue of the Americas, New York, New York 10036
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 782-2100
-------------------------
- ----------------------------------------------------------------------------
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
----- -----
The number of shares outstanding of each of the issuer's classes of common
stock is Common - 3,000,000; Class A - 20,453,956 (as of October 31, 1995).
AMPAL-AMERICAN ISRAEL CORPORATION
---------------------------------
Index to Form 10-Q
Page
----
Part I Financial Information
Consolidated Statements of Income
Nine Months Ended September 30........................ 1
Three Months Ended September 30....................... 2
Consolidated Balance Sheets............................ 3
Consolidated Statements of Cash Flows.................. 5
Consolidated Statements of Changes in Shareholders'
Equity.............................................. 7
Notes to the Consolidated Financial Statements......... 9
Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 11
Part II Other Information...................................... 15
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995 1994
- --------------------------------------------------------------------------------
(Dollars in thousands, except per share data) (Unaudited) (Unaudited)
(Note 2)
REVENUES
Equity in earnings of affiliates............. $ 6,859 $ 6,381
Food processing and manufacturing............ 33,258 31,820
Interest:
Related parties............................. 7,355 10,961
Others...................................... 2,646 1,556
Gains on issuance of shares by subsidiary and
affiliate (Note 6).......................... - 2,692
Realized and unrealized gains on investments
(Note 5).................................... 3,030 4,524
Rental income................................ 4,948 2,501
Other........................................ 1,507 1,294
-------- --------
Total revenues.......................... 59,603 61,729
-------- --------
EXPENSES
Food processing and manufacturing............ 33,717 29,772
Interest:
Related parties............................. 3,051 2,732
Others...................................... 9,073 10,352
Rental property operating expenses........... 1,599 365
Other........................................ 3,831 5,804
-------- --------
Total expenses.......................... 51,271 49,025
-------- --------
Income before income taxes................... 8,332 12,704
Income taxes................................. 5,260 5,665
-------- --------
NET INCOME.............................. $ 3,072 $ 7,039
======== ========
Earnings per Class A share................... $ .11 $ .26
===== =====
Weighted average number of Class A and
equivalent shares outstanding (in thousands) 25,076 24,318
The accompanying notes are an integral part of the consolidated financial
statements.
- 1 -
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1995 1994
- --------------------------------------------------------------------------------
(Dollars in thousands, except per share data) (Unaudited) (Unaudited)
(Note 2)
REVENUES
Equity in earnings of affiliates............. $ 1,239 $ 2,934
Food processing and manufacturing............ 10,443 10,833
Interest:
Related parties............................. 2,719 3,747
Others...................................... 712 735
Realized and unrealized gains on investments
(Note 5).................................... 1,313 4,524
Rental income................................ 3,161 924
Other........................................ 538 486
-------- --------
Total revenues.......................... 20,125 24,183
-------- --------
EXPENSES
Food processing and manufacturing............ 11,624 9,564
Interest:
Related parties............................. 1,448 912
Others...................................... 2,936 3,566
Rental property operating expenses........... 1,354 123
Other........................................ 914 2,496
-------- --------
Total expenses.......................... 18,276 16,661
-------- --------
Income before income taxes................... 1,849 7,522
Income taxes................................. 1,364 3,658
-------- --------
NET INCOME.............................. $ 485 $ 3,864
======== ========
Earnings per Class A share................... $ .02 $ .14
===== =====
Weighted average number of Class A and
equivalent shares outstanding (in thousands) 24,875 25,218
The accompanying notes are an integral part of the consolidated financial
statements.
- 2 -
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
ASSETS AS AT 1995 1994
- -------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited) (Note 2)
Cash and cash equivalents...................... $ 54,458 $ 42,104
Deposits, notes and loans receivable:
Related parties.............................. 74,948 90,462
Others....................................... 1,601 3,786
Investments (Note 5)........................... 114,879 131,537
Real estate rental property, less accumulated
depreciation of $5,147 and $4,556 (Notes 4
and 7)........................................ 58,428 13,600
Property and equipment, less accumulated
depreciation of $8,368 and $7,060............. 17,820 17,314
Other assets................................... 49,610 44,077
---------- ----------
TOTAL ASSETS................................... $ 371,744 $ 342,880
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
- 3 -
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SEPTEMBER 30, DECEMBER 31,
SHAREHOLDERS' EQUITY AS AT 1995 1994
- -------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited) (Note 2)
LIABILITIES
Notes and loans payable:
Related parties (Note 4)...................... $ 52,186 $ 24,837
Others........................................ 18,384 19,226
Debentures...................................... 80,381 84,491
Accounts and income taxes payable, accrued
expenses and minority interests................ 46,980 40,832
---------- ----------
Total liabilities....................... 197,931 169,386
---------- ----------
SHAREHOLDERS' EQUITY
4% Cumulative, Participating, Convertible
Preferred Stock, $5 par value; authorized
650,000 shares; issued and outstanding
201,066 and 206,608 shares..................... 1,005 1,033
6-1/2% Cumulative, Convertible Preferred Stock,
$5 par value; authorized 4,282,850 shares;
issued and outstanding 1,078,429 and 1,114,927
shares......................................... 5,392 5,575
Class A Stock, $1 par value; authorized
30,000,000 shares; issued 20,977,722 and
20,840,518 shares; outstanding 20,511,822
and 20,840,518 shares (Note 8)................. 20,978 20,841
Common Stock, $1 par value; authorized, issued
and outstanding 3,000,000 shares............... 3,000 3,000
Additional paid-in capital...................... 57,259 57,185
Retained earnings............................... 91,688 89,007
Treasury Stock, at cost (Note 3)................ (3,046) -
Cumulative translation adjustments.............. (2,419) (2,636)
Unrealized loss on marketable securities........ (44) (511)
---------- ----------
Total shareholders' equity.............. 173,813 173,494
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 371,744 $ 342,880
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
- 4 -
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 1994
- -------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited) (Unaudited)
(Note 2)
Cash flows from operating activities:
Net income................................. $ 3,072 $ 7,039
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in earnings of affiliates.......... (6,859) (6,381)
Gains on issuance of shares by
subsidiary and affiliate................. - (2,692)
Realized and unrealized gains on
investments.............................. (3,030) (4,524)
Translation loss.......................... 97 102
Depreciation expense...................... 1,996 1,628
Amortization expense...................... 3,603 3,748
Minority interests........................ (1,774) (115)
(Increase) in other assets................. (5,537) (4,867)
Increase in accounts and income taxes
payable, accrued expenses and minority
interests................................. 7,213 6,361
Investments made in trading securities..... (5,606) (1,165)
Proceeds from sale of trading securities... 12,029 783
Dividends received from affiliates......... 3,029 4,277
-------- --------
Net cash provided by operating activities. 8,233 4,194
-------- --------
Cash flows from investing activities:
Deposits, notes and loans receivable
collected:
Related parties........................... 21,477 27,860
Others.................................... 2,322 2,845
Deposits, notes and loans receivable
granted:
Related parties........................... (3,042) (5,899)
Others.................................... (40) -
Investments made in:
Available-for-sale securities............. (1,339) -
Affiliates and others..................... (32,039) (18,515)
Proceeds from sale of investments:
Affiliates and others..................... 50,969 4,730
Purchase of property and equipment......... (1,908) (1,939)
Purchase of real estate rental property.... (45,270) -
-------- --------
Net cash (used in) provided by investing
activities............................... (8,870) 9,082
-------- --------
The accompanying notes are an integral part of the consolidated financial
statements.
- 5 -
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 1994
- --------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited) (Unaudited)
(Note 2)
Cash flows from financing activities:
Notes and loans payable received:
Related parties........................... $ 32,167 $ 1,077
Others.................................... 7,718 2,225
Notes and loans payable repaid:
Related parties........................... (5,121) (18,789)
Others.................................... (8,689) (3,824)
Debentures issued by subsidiary............ - 4,622
Debentures repaid.......................... (9,582) (15,927)
Proceeds from issuance of shares........... - 57,296
Proceeds from issuance of shares to
minority interests........................ 50 -
Purchase of treasury stock................. (3,046) -
-------- --------
Net cash provided by financing activities. 13,497 26,680
Effect of exchange rate changes on cash
and cash equivalents....................... (506) (973)
-------- --------
Net increase in cash and cash equivalents... 12,354 38,983
Cash and cash equivalents at beginning
of period.................................. 42,104 3,178
-------- --------
Cash and cash equivalents at end of
period..................................... $ 54,458 $ 42,161
======== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest:
Related parties........................... $ 1,748 $ 1,310
Others.................................... 4,825 5,062
-------- --------
Total interest paid..................... $ 6,573 $ 6,372
======== ========
Income taxes paid.......................... $ 2,421 $ 1,528
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
- 6 -
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1995 1994
- --------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited) (Unaudited)
4% PREFERRED STOCK
Balance, beginning of year................... $ 1,033 $ 1,068
Conversion of 5,542 and 4,521 shares into
Class A Stock............................... (28) (22)
-------- --------
Balance, end of period....................... $ 1,005 $ 1,046
======== ========
6-1/2% PREFERRED STOCK
Balance, beginning of year................... $ 5,575 $ 6,011
Conversion of 36,498 and 71,355 shares into
Class A Stock............................... (183) (356)
-------- --------
Balance, end of period....................... $ 5,392 $ 5,655
======== ========
CLASS A STOCK
Balance, beginning of year................... $ 20,841 $ 16,225
Issuance of shares upon conversion of
Preferred Stock............................. 137 236
Issuance of shares in a public offering*..... - 4,318
-------- --------
Balance, end of period....................... $ 20,978 $ 20,779
======== ========
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year................... $ 57,185 $ 10,605
Conversion of Preferred Stock................ 74 142
Proceeds from issuance of shares in a public
offering.................................... - 46,242
-------- --------
Balance, end of period....................... $ 57,259 $ 56,989
======== ========
RETAINED EARNINGS
Balance, beginning of year................... $ 89,007 $ 82,079
Net income................................... 3,072 7,039
Dividends declared:
4% Preferred Stock - $.20 per share......... (40) (42)
6-1/2% Preferred Stock - $.325 per share.... (351) (368)
-------- --------
Balance, end of period....................... $ 91,688 $ 88,708
======== ========
TREASURY STOCK (Note 3)
Balance, beginning of year................... $ - $ -
Purchase of 465,900 shares of Class A Stock
at cost..................................... (3,046) -
-------- --------
Balance, end of period....................... $ (3,046) $ -
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
- 7 -
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
- --------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1995 1994
- ------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited) (Unaudited)
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year................... $ (2,636) $ (2,171)
Foreign currency translation adjustment...... 217 (972)
-------- --------
Balance, end of period....................... $ (2,419) $ (3,143)
======== ========
UNREALIZED LOSS ON MARKETABLE SECURITIES
Balance, beginning of year................... $ (511) $ 4,300**
Transfer to trading securities............... - (3,800)
Write-down due to permanent impairment....... - (500)
Unrealized gain (loss), net.................. 467 (394)
-------- --------
Balance, end of period....................... $ (44) $ (394)
======== ========
* 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.
- 8 -
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
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 consolidated statement of income,
balance sheet and statement of cash flows 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. On March 28, 1995 Ampal's Board of Directors authorized the repurchase of up
to 2 million shares of Ampal's Class A Stock through open market purchases.
At September 30, 1995 Ampal had purchased 465,900 shares of its Class A
Stock for approximately $3 million.
4. On June 28, 1995 one of the Company's subsidiaries purchased a property on
which an approximately 290,000 square-foot office building is located for
approximately $45 million. The building is located at 800 Second Avenue,
New York, New York and houses the Consulate of the Government of Israel in
New York and many other Israel government offices as well as other tenants.
The purchase was partially financed by a loan of $30 million from Bank
Hapoalim B.M. ("Hapoalim") at an interest rate based on a three-month London
Interbank Offered Rate plus 1% which matures on the initial expiry date of
June 28, 1996. The effective interest rate on the loan from the inception
date to September 30, 1995 was 6.97%. At Ampal's request, Hapoalim may, but
is not required to, extend the repayment of the loan until June 28, 2000
with quarterly principal payments commencing March 28, 1997. The Company
financed the balance of the acquisition from its own funds. For further
details, see the Company's Form 8-K dated June 28, 1995.
5. On August 15, 1995 Ampal sold all of its Ordinary Shares and 7% Preferred
Shares of Bank Hapoalim (Cayman) Ltd., which constituted 49% and 50% of each
series, respectively, to Hapoalim. The sales price was approximately $20.3
million and the Company recorded a gain on sale of approximately $.4
- 9 -
million ($.2 million, net of taxes). Ampal obtained an opinion from an
independent investment consultant that the consideration received in the
sale was fair to Ampal.
6. 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 September
30, 1995 its interest was 57.9%. If all warrants and convertible debentures
were to be exercised, the Company's interest would be diluted to 40.5%. If
the Company's interest in Pri Ha'emek decreases to 50% or below, 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).
7. On November 6, 1995 Ampal sold its property located at 174 North Michigan
Avenue, Chicago, Illinois to an unrelated party for $.85 million. In
connection therewith, Ampal received $.55 million from Hapoalim and Ampal,
as landlord, and Hapoalim, as tenant, released each other from their
respective obligations under a lease which was scheduled to expire in 2007.
Ampal obtained an opinion from an independent real estate consultant that
the consideration received from Hapoalim was fair to Ampal. The Company
will record a total gain of approximately $.5 million ($.3 million, net of
taxes).
8. On November 8, 1995, at a Special Meeting of Shareholders of Ampal, the
shareholders voted to approve an amendment to Ampal's Certificate of
Incorporation increasing the number of authorized shares of Class A Stock
from 30,000,000 to 60,000,000.
- 10 -
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Nine months ended September 30, 1995 compared to nine months ended September 30,
- --------------------------------------------------------------------------------
1994:
- ----
Consolidated net income decreased from $7 million for the nine-month period
ended September 30, 1994 to $3 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, lower unrealized gains on
investments, greater losses incurred by the Company's food processing
subsidiary, Pri Ha'emek (Canned and Frozen Food) 88 Ltd. ("Pri Ha'emek"), and
higher net interest expense and effective income tax rate in 1995. These
decreases were partially offset by an increase in net rental income and equity
in earnings of affiliates and a decrease in other expenses in 1995.
Equity in earnings of affiliates increased for the nine months ended September
30, 1995 as compared to the same period in 1994. The earnings of the Company's
42.5%-owned affiliate, Ophir Holdings Ltd. ("Ophir"), increased in 1995 because
of realized and unrealized gains recorded on its investment in DSP
Communications, Inc. as well as decreased interest expense on its CPI-linked
bank borrowings in 1995 due to the lower rate of increase in the Consumer Price
Index ("CPI") in Israel. Am-Hal Limited, the Company's 50%-owned affiliate
which operates a luxury senior citizens center in Rishon Lezion, recorded higher
earnings in 1995 resulting from a higher occupancy rate which reached 97% in
1995 and a decrease in finance expenses resulting from loan repayments. Carmel
Container Systems Limited ("Carmel"), the Company's 20.4%-owned affiliate, which
is a manufacturer of paper-based packaging, also reported higher earnings in
1995 because of increased sales volume and selling prices which were adjusted
for the continuing increase in the price of paper on international markets in
1995. At the same time, Carmel's gross profit increased due to greater
efficiency and improvements originating from investments in equipment as well as
the renovation of production lines at its plants. Bay Heart Ltd., the Company's
37%-owned affiliate which owns and operates a shopping mall near Haifa, reported
improved results in 1995 mainly because of lower interest expense on its CPI-
linked borrowings in 1995 due to the lower rate of increase in the CPI in
Israel. These increases were partially offset by losses recorded by Teledata
Communication Ltd. which sustained decreased demand for its products and losses
recorded by the Company's start-up affiliates. In addition, the Moriah Hotel
group of companies ("Moriah") reported lower earnings because the increase in
hotel operating expenses which are linked to the CPI in Israel exceeded the
increase in revenues resulting from higher room and occupancy rates in 1995.
Moriah's earnings also decreased due to higher income tax provisions in 1995
because of the absence of loss carryforwards, which were available in 1994.
- 11 -
Pri Ha'emek recorded higher losses in 1995 as compared to 1994 because of lower
sales prices and increased cost of goods sold due to increases in the CPI in
Israel. Because of the disappointing results, the Managing Director was
replaced and additional steps are being considered.
Interest income from related parties decreased in 1995 due to the scheduled
repayments of deposits, notes and loans receivable to related parties. Net
interest expense increased mainly because of increased interest expense recorded
on a CPI-linked loan which was refinanced in 1995 by Pri Ha'emek (prior to
refinancing, the loan was linked to the U.S. dollar), and interest expense
incurred in connection with the purchase of an office building located at 800
Second Avenue, New York, New York ("800 Second Avenue"). See Liquidity and
Capital Resources.
The Company recorded $1.3 million and $2.7 million of unrealized gains on
marketable securities and $1.7 million and $1.8 million of gains on sale of
investments in the nine months ended September 30, 1995 and 1994, respectively.
The aggregate fair value of trading securities amounted to approximately $4.7
million and $8.6 million at September 30, 1995 and 1994, respectively.
In the quarter ended March 31, 1994, the Company recorded gains on issuance of
shares of $2.3 million by Pri Ha'emek and $.3 million by Granite Hacarmel
Investments Ltd.
The increases in rental income and rental property operating expenses are
attributable to the operations of 800 Second Avenue.
The decrease in other expenses is due to the decrease in minority interest in
1995 which is included in this category.
The increase in the effective income tax rate from 45% in 1994 to 63% in 1995 is
attributable to changes in the components of taxable income and a reported loss
of an Israeli subsidiary from which no tax benefit was available.
Three months ended September 30, 1995 compared to three months ended September
- ------------------------------------------------------------------------------
30, 1994:
- --------
Consolidated net income decreased from $3.9 million for the three-month period
ended September 30, 1994 to $.5 million for the same period in 1995. The
decrease in net income in 1995 resulted primarily from lower realized and
unrealized gains on investments, losses incurred by Pri Ha'emek, decreased
equity in earnings of affiliates, and higher net interest expense and effective
income tax rate in 1995. These decreases were partially offset by an increase
in net rental income and a decrease in other expenses in 1995.
Equity in earnings of affiliates decreased primarily because of lower earnings
reported by Moriah, unrealized losses on marketable securities recorded by Ophir
in the third quarter of 1995 and losses recorded by the Company's start-up
affiliates.
Pri Ha'emek recorded higher losses for the reasons discussed in Results of
- 12 -
Operations - Nine months ended September 30, 1995 compared to nine months ended
September 30, 1994.
Interest income from related parties decreased and net interest expense
increased for the reasons discussed in Results of Operations - Nine months ended
September 30, 1995 compared to nine months ended September 30, 1994.
The Company recorded $.7 million and $2.7 million of unrealized gains on
marketable securities and $.6 million and $1.8 million of gains on sale of
investments in the three months ended September 30, 1995 and 1994, respectively.
The increases in rental income and rental property operating expenses are
attributable to the operations of 800 Second Avenue.
Other expenses decreased because of the decrease in the amount attributed to
minority interests in 1995 which is included in this category.
The increase in the effective tax rate from 49% in 1994 to 74% in 1995 is
attributable to the reasons discussed in Results of Operations - Nine months
ended September 30, 1995 compared to nine months ended September 30, 1994.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1995, cash and cash equivalents were $54.5 million and short-
term, interest-bearing securities included in the investments caption were $4.8
million as compared with $42.1 million and $11.6 million, respectively, at
December 31, 1994. The overall $6 million increase is primarily a result of
approximately $20 million received from the sale of the Company's investment in
Bank Hapoalim (Cayman) Ltd. and the expenditure of approximately $15 million for
the acquisition of 800 Second Avenue (see below).
Deposits, notes and loans receivable and debentures decreased as a result of
scheduled repayments.
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.
On June 6, 1995 the Company invested $1 million to acquire a 13.64% equity
interest in Lannair, Ltd., an Israeli company which is a developer, manufacturer
and marketer of wireless local area networks for computers, using license-free,
spread spectrum radio technology.
- 13 -
On June 28, 1995 one of the Company's subsidiaries purchased 800 Second Avenue
for approximately $45 million. 800 Second Avenue houses the Consulate of the
Government of Israel in New York and many other Israel government offices as
well as other tenants. The purchase was partially financed by a loan of $30
million from Bank Hapoalim B.M., at an interest rate based on the three-month
London Interbank Offered Rate plus 1%, which matures on the initial expiry date
of June 28, 1996. The effective interest rate on the loan from the inception
date to September 30, 1995 was 6.97%. At Ampal's request, the bank may, but is
not required to, extend the repayment of the loan until June 28, 2000 with
quarterly principal payments commencing March 28, 1997. Notes and loans payable
increased primarily as a result of the aforementioned loan. The Company
financed the balance of the acquisition from its own funds.
On August 15, 1995 Ampal sold all of its Ordinary Shares and 7% Preferred Shares
of Bank Hapoalim (Cayman) Ltd., which constituted 49% and 50% of each series,
respectively, to Bank Hapoalim B.M. The sales price was approximately $20.3
million and the Company recorded a gain on sale of approximately $.4 million
($.2 million, net of taxes). Ampal obtained an opinion from an independent
investment consultant that the consideration received in the sale was fair to
Ampal.
On September 21, 1995 the Company invested $1.3 million to acquire a 20.6%
equity interest in Barshar, Ltd. ("Barshar") and three-year options to acquire
up to an additional 5.7% equity interest. Barshar is an Israeli high-technology
company which has developed software packages based on optimization models which
allow savings in the cost of distribution and increased management control over
routing of products and people. Barshar's products have been marketed primarily
in Israel and it expects to use the proceeds of the Company's investment to
expand into world markets.
On March 28, 1995 Ampal's Board of Directors authorized the repurchase of up to
2 million shares of Ampal's Class A Stock through open market purchases. At
September 30, 1995 Ampal had purchased 465,900 shares of its Class A Stock for
approximately $3 million.
On November 6, 1995 Ampal sold its property located at 174 North Michigan
Avenue, Chicago, Illinois to an unrelated party for $.85 million. In connection
therewith, Ampal received $.55 million from Hapoalim and Ampal, as landlord, and
Hapoalim, as tenant, released each other from their respective obligations under
a lease which was scheduled to expire in 2007. Ampal obtained an opinion from
an independent real estate consultant that the consideration received from
Hapoalim was fair to Ampal. The Company will record a gain of approximately $.5
million ($.3 million, net of taxes).
- 14 -
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None.
-----------------
Item 2. Changes in Securities - None.
---------------------
Item 3. Defaults upon Senior Securities - None.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On November 8, 1995, at a Special Meeting of Shareholders of
Registrant, the shareholders voted to approve an amendment to
Registrant's Certificate of Incorporation increasing the number of
authorized shares of Class A Stock from 30,000,000 to 60,000,000 by
the following vote:
FOR AGAINST ABSTAIN
--- ------- -------
20,448,688 13,242 4,413
Item 5. Other Information - None.
-----------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Index to Exhibits:
Exhibit 11 - Schedule Setting Forth Computation of Earnings Per Class
A Share...................................................... Page 16
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K - None.
- 15 -
Exhibit 11
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
SCHEDULE SETTING FORTH COMPUTATION OF EARNINGS PER CLASS A SHARE
----------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1995 1994
- --------------------------------------------------------------------------------
(Amounts in thousands, except per share data) (Unaudited) (Unaudited)
Weighted average number of shares
outstanding:
4% Preferred...................... 205 212
6-1/2% Preferred.................. 1,102 1,150
Class A........................... 20,745 19,808
Common............................ 3,000 3,000
======= =======
Weighted average number of shares out-
standing assuming conversion of pre-
ferred stock into Class A shares:
Class A........................... 25,076 89.31% 24,318 89.02%
Common............................ 3,000 10.69 3,000 10.98
------- ------- ------- -------
28,076 100.00% 27,318 100.00%
======= ======= ======= =======
NET INCOME....................... $ 3,072 $ 7,039
======= =======
Allocation of net income on the
basis of the respective dividend
rights of the above classes of
stock, pro rata:
Class A........................... $ 2,744 89.31% $ 6,266 89.02%
Common............................ 328 10.69 773 10.98
------- ------- ------- -------
$ 3,072 100.00% $ 7,039 100.00%
======= ======= ======= =======
Earnings per Class A share........... $ .11 $ .26
===== =====
-16-
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
SIGNATURES
----------
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
Vice President - Accounting
& Controller
(Principal Accounting Officer)
Dated: November 14, 1995
- 17 -