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 June 30, 1997
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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 __________________
Commission file number 0-538
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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 |_|
The number of shares outstanding of the issuer's Class A Stock, its only
authorized common stock, is 23,764,879 (as of July 31, 1997).
AMPAL-AMERICAN ISRAEL CORPORATION
---------------------------------
Index to Form 10-Q
Page
----
Part I Financial Information
Consolidated Statements of Income
Six Months Ended June 30.............................. 1
Three Months Ended June 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......... 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 10
Part II Other Information...................................... 13
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1997 1996
- --------------------------------------------------------------------------------
(Dollars in thousands, except per share data) (Unaudited) (Unaudited)
(Note 2)
REVENUES
Equity in earnings of affiliates ..................... $ 9,211 $ 1,348
Manufacturing (Note 6) ............................... 6,286 5,204
Interest:
Related parties ..................................... 4,325 6,205
Others .............................................. 1,228 1,130
Rental income ........................................ 3,707 5,726
Realized and unrealized gains on investments ......... 4,046 2,131
Other ................................................ 1,037 944
------- --------
Total revenues .................................. 29,840 22,688
------- --------
EXPENSES
Manufacturing (Note 6) ............................... 6,735 5,455
Interest:
Related parties ..................................... 1,292 2,114
Others .............................................. 3,765 5,884
Rental property operating expenses ................... 2,083 2,883
Other ................................................ 4,161 3,442
------- --------
Total expenses .................................. 18,036 19,778
------- --------
Income from continuing operations before
income taxes ........................................ 11,804 2,910
Provision for income taxes ........................... 4,514 1,358
------- --------
Income from continuing operations .................... 7,290 1,552
Loss from discontinued operations (Note 2) ........... -- (2,575)
------- --------
NET INCOME (LOSS) ............................... $ 7,290 $ (1,023)
======= ========
Earnings (loss) per Class A share (Note 4):
Earnings from continuing operations ................. $ .26 $ .05
Loss from discontinued operations ................... -- (.09)
------- --------
Earnings (loss) per Class A share .................... $ .26 $ (.04)
======= ========
Weighted average number of Class A and
equivalent shares outstanding (in thousands) ........ 27,614 24,613
The accompanying notes are an integral part of the consolidated financial
statements.
1
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1997 1996
- --------------------------------------------------------------------------------
(Dollars in thousands, except per share data) (Unaudited)(Unaudited)
(Note 2)
REVENUES
Equity in earnings of affiliates ....................... $ 6,630 $ 2,428
Manufacturing (Note 6) ................................. 3,274 2,594
Interest:
Related parties ....................................... 1,822 3,323
Others ................................................ 748 581
Rental income .......................................... 1,656 2,852
Realized and unrealized gains on investments ........... 2,682 2,445
Other .................................................. 558 467
------- --------
Total revenues .................................... 17,370 14,690
------- --------
EXPENSES
Manufacturing (Note 6) ................................. 3,714 2,733
Interest:
Related parties ....................................... 577 1,095
Others ................................................ 1,712 3,225
Rental property operating expenses ..................... 1,098 1,504
Other .................................................. 2,301 1,681
------- --------
Total expenses .................................... 9,402 10,238
------- --------
Income from continuing operations before income
taxes ................................................. 7,968 4,452
Provision for income taxes ............................. 3,199 1,499
------- --------
Income from continuing operations ...................... 4,769 2,953
Loss from discontinued operations (Note 2) ............. -- (1,074)
------- --------
NET INCOME ........................................ $ 4,769 $ 1,879
======= ========
Earnings per Class A share (Note 4):
Earnings from continuing operations ................... $ .17 $ .10
Loss from discontinued operations ..................... -- (.03)
------- --------
Earnings per Class A shares ............................ $ .17 $ .07
======= ========
Weighted average number of Class A and
equivalent shares outstanding (in thousands) .......... 27,614 24,613
The accompanying notes are an integral part of the consolidated financial
statements.
2
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS AS AT 1997 1996
- --------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited) (Note 2)
Cash and cash equivalents ............................ $ 17,808 $ 20,633
Deposits, notes and loans receivable ................. 58,012 57,041
Investments .......................................... 125,495 123,084
Real estate rental property, less accumulated
depreciation of $5,455 and $6,215 (Note 3) .......... 28,129 58,199
Property and equipment, less accumulated
depreciation of $2,427 and $4,041 ................... 3,156 5,571
Other assets ......................................... 18,912 19,023
-------- --------
TOTAL ASSETS ......................................... $251,512 $283,551
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
3
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
LIABILITIES AND June 30, December 31,
SHAREHOLDERS' EQUITY AS AT 1997 1996
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(Dollars in thousands) (Unaudited) (Note 2)
LIABILITIES
Notes and loans payable:
Related parties ...................................... $ 17,257 $ 34,005
Others ............................................... 5,793 10,538
Debentures ............................................. 43,367 57,871
Accounts and income taxes payable, accrued
expenses and minority interests ....................... 30,078 29,017
--------- ---------
Total liabilities .............................. 96,495 131,431
--------- ---------
SHAREHOLDERS' EQUITY
4% Cumulative, Participating, Convertible Preferred
Stock, $5 par value; authorized 189,287 shares; issued
and outstanding 187,426 and 190,936 shares ............ 937 955
6-1/2% Cumulative, Convertible Preferred Stock,
$5 par value; authorized 988,055 shares; issued and
outstanding 976,783 and 1,002,483 shares .............. 4,884 5,012
Class A Stock, $1 par value; authorized
60,000,000 shares; issued 24,354,070 and
24,256,420 shares; outstanding 23,748,670 and
23,651,020 shares ..................................... 24,354 24,257
Additional paid-in capital ............................. 57,474 57,410
Retained earnings ...................................... 82,233 74,943
Treasury Stock, 605,400 shares of Class A Stock,
at cost ............................................... (3,829) (3,829)
Cumulative translation adjustments ..................... (11,036) (6,530)
Unrealized loss on marketable securities ............... -- (98)
--------- ---------
Total shareholders' equity ..................... 155,017 152,120
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............. $ 251,512 $ 283,551
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
4
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 1996
- --------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited)(Unaudited)
(Note 2)
Cash flows from operating activities:
Net income (loss) ....................................... $ 7,290 $ (1,023)
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of affiliates ....................... (9,211) (1,348)
Loss from discontinued operations ...................... -- 2,575
Realized and unrealized gains on investments ........... (4,046) (2,131)
Depreciation expense ................................... 923 1,011
Amortization expense ................................... 979 1,856
Translation (gain) ..................................... (101) (357)
Minority interests ..................................... (211) (225)
(Increase) in other assets .............................. (520) (741)
Increase in accounts and income taxes payable,
accrued expenses and minority interests ................ 1,202 698
Investments made in trading securities .................. (3,376) (858)
Proceeds from sale of trading securities ................ 3,038 1,331
Dividend received from affiliate ........................ 70 --
-------- --------
Net cash (used in) provided by operating activities .... (3,963) 788
-------- --------
Cash flows from investing activities:
Deposits, notes and loans receivable collected .......... 13,336 12,941
Deposits, notes and loans receivable granted ............ (907) (3,385)
Investments made in:
Available-for-sale securities .......................... -- (265)
Affiliates and others .................................. (4,650) (4,332)
Proceeds from sale of investments:
Available for sale ..................................... 1,537 639
Others ................................................. 13,625 3,229
Proceeds from sale of real estate rental
property ............................................... 15,046 --
Purchase of property and equipment ...................... (257) (505)
Purchase of real estate rental property ................. (194) (414)
-------- --------
Net cash provided by investing activities .............. 37,536 7,908
-------- --------
The accompanying notes are an integral part of the consolidated financial
statements.
5
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 1996
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(Dollars in thousands) (Unaudited) (Unaudited)
(Note 2)
Cash flows from financing activities:
Notes and loans payable received:
Related parties .................................... $ 1,244 $ 190
Others ............................................. 580 3,341
Notes and loans payable repaid:
Related parties .................................... (18,168) (2,489)
Others ............................................. (4,813) (691)
Debentures repaid ................................... (13,776) (13,386)
-------- --------
Net cash (used in) financing activities ............ (34,933) (13,035)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents .................................... (1,465) (1,530)
-------- --------
Net (decrease) in cash and cash equivalents .......... (2,825) (5,869)
Cash and cash equivalents at beginning of
period .............................................. 20,633 25,734
-------- --------
Cash and cash equivalents at end of period ........... $ 17,808 $ 19,865
======== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest:
Related parties .................................... $ 684 $ 1,206
Others ............................................. 1,583 1,673
-------- --------
Total interest paid .............................. $ 2,267 $ 2,879
======== ========
Income taxes paid ................................... $ 339 $ 2,160
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
6
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997 1996
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(Dollars in thousands, except share amounts) (Unaudited) (Unaudited)
4% PREFERRED STOCK
Balance, beginning of year ......................... $ 955 $ 995
Conversion of 3,510 and 2,672 shares into
Class A Stock ..................................... (18) (13)
-------- --------
Balance, end of period ............................. $ 937 $ 982
======== ========
6-1/2% PREFERRED STOCK
Balance, beginning of year ......................... $ 5,012 $ 5,263
Conversion of 25,700 and 25,890 shares into
Class A Stock ..................................... (128) (129)
-------- --------
Balance, end of period ............................. $ 4,884 $ 5,134
======== ========
CLASS A STOCK
Balance, beginning of year ......................... $ 24,257 $ 21,066
Issuance of shares upon conversion of
Preferred Stock ................................... 94 91
Issuance of additional shares ...................... 3 --
-------- --------
Balance, end of period ............................. $ 24,354 $ 21,157
======== ========
COMMON STOCK
Balance, beginning of year ......................... $ -- $ 3,000
-------- --------
Balance, end of period ............................. $ -- $ 3,000
======== ========
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year ......................... $ 57,410 $ 57,310
Conversion of Preferred Stock ...................... 52 51
Issuance of additional shares ...................... 12 --
-------- --------
Balance, end of period ............................. $ 57,474 $ 57,361
======== ========
RETAINED EARNINGS
Balance, beginning of year ......................... $ 74,943 $ 85,559
Net income (loss) .................................. 7,290 (1,023)
-------- --------
Balance, end of period ............................. $ 82,233 $ 84,536
======== ========
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year ......................... $ (6,530) $ (4,354)
Foreign currency translation adjustment ............ (4,506) (1,202)
-------- --------
Balance, end of period ............................. $(11,036) $ (5,556)
======== ========
UNREALIZED LOSS ON MARKETABLE SECURITIES
Balance, beginning of year ......................... $ (98) $ (595)
Unrealized gain, net ............................... 98 321
-------- --------
Balance, end of period ............................. $ -- $ (274)
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
7
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. As used in these financial statements, the term "Company" refers to
Ampal-American Israel Corporation ("Ampal") and its consolidated
subsidiaries.
2. The December 31, 1996 consolidated balance sheet presented herein was
derived from the audited December 31, 1996 consolidated financial
statements of the Company.
Reference should be made to the Company's consolidated financial
statements for the year ended December 31, 1996 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,
1996 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
1996 consolidated balance sheet, consolidated statement of cash flows
and consolidated statements of income have been reclassified to conform
with the current period's presentation and to reflect the results of
Pri Ha'emek (Canned and Frozen Food) 88 Ltd. as discontinued
operations. All adjustments (of a normal recurring nature) which are,
in the opinion of management, necessary for a fair presentation of the
results of the interim period have been included.
3. On January 31, 1997, the Company sold to the Government of Israel (the
"Government") for $31 million a condominium unit in the 290,000
square-foot office building located at 800 Second Avenue, New York, New
York which is occupied by the Government. As a result of this
transaction, the Company recorded a loss of $1.1 million ($.6 million
net of taxes) in its December 31, 1996 financial statements.
4. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings
Per Share. This statement establishes standards for computing and
presenting earnings per share ("EPS"), replacing the presentation of
currently required primary EPS with a presentation of Basic EPS. For
entities with complex capital structures, the statement requires the
dual presentation of both Basic EPS and Diluted EPS on the face of the
Statement of Income. Under this new standard, Basic EPS is computed
based on the weighted average number of shares actually outstanding
during the period. Diluted EPS includes the effect of potential
dilution from the conversions of 6-1/2% and 4% Preferred Stocks to
Class A Stock. SFAS No. 128 is effective for financial statements
issued for periods ending after December 15, 1997, and earlier
application in the interim financial statements is not permitted. When
adopted, the Company will be required to restate its EPS data for all
prior periods presented.
Had the Company applied the principles of SFAS No. 128, earnings per
share data on a Pro Forma basis would be as follows:
Six months ended June 30, 1997 1996
---- ----
Basic EPS:
Earnings from continuing operations .................. $ .31 $ .07
Loss from discontinued operations .................... -- (.11)
----- -----
Earnings (loss) per Class A share .................... $ .31 $(.04)
===== =====
8
Six months ended June 30, 1997 1996
---- ----
Diluted EPS:
Earnings from continuing operations .................. $ .26 $ .05
Loss from discontinued operations .................... -- (.09)
----- -----
Earnings (loss) per Class A share .................... $ .26 $(.04)
===== =====
Shares used in calculation (in thousands):
Basic EPS ............................................ 23,702 23,503
Diluted EPS .......................................... 27,614 27,613
Three months ended June 30, 1997 1996
---- ----
Basic EPS:
Earnings from continuing operations .................. $ .20 $ .13
Loss from discontinued operations .................... -- (.05)
----- -----
Earnings per Class A share ........................... $ .20 $ .08
===== =====
Diluted EPS:
Earnings from continuing operations................... $ .17 $ .10
Loss from discontinued operations..................... -- (.03)
----- -----
Earnings per Class A share............................ $ .17 $ .07
===== =====
Shares used in calculation (in thousands):
Basic EPS ............................................ 23,725 23,526
Diluted EPS .......................................... 27,614 27,613
5. On May 8, 1997, the Company sold all of its direct holdings in Orlite
Industries (1959) Ltd. ("Orlite") and a wholly-owned subsidiary which
holds a separate interest in Orlite to Investment Company of Bank
Hapoalim for an aggregate purchase price of $5.3 million plus interest.
The Company recorded a gain on sale of $.3 million in its June 30, 1997
consolidated financial statements.
6. On June 26, 1997 the main factory of the Company's 85%-owned
subsidiary, Paradise Industries Ltd. ("Paradise"), was heavily damaged
by a fire and has been closed since then. Paradise carries both fire
damage and business interruption insurance covering the factory. It is
too early to determine the amount of loss to be incurred as a result of
the fire, if any, or when Paradise will resume its operations. The 1997
manufacturing revenues and expenses reflect the operations of Paradise
through the date of the fire.
9
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Six months ended June 30, 1997 compared to six months ended June 30, 1996:
- --------------------------------------------------------------------------
Consolidated income from continuing operations increased to $7.3 million for the
six-month period ended June 30, 1997, from $1.6 million for the same period in
1996. The increase in income resulted primarily from the increases in equity in
earnings of affiliates, realized and unrealized gains on investments and net
interest income in 1997 as compared to net interest expense in 1996.
Equity in earnings of affiliates increased from $1.3 million for the six months
ended June 30, 1996, to $9.2 million for the same period in 1997. The increase
is primarily attributable to the significantly improved earnings of Ophir
Holdings Ltd. ("Ophir"), the Company's 42.5%-owned affiliate, which is a holding
company with interests in high technology and real estate companies, and Coral
World International Ltd. ("CWI"), the Company's 50%-owned affiliate, which owns
and operates marine parks in Eilat (Israel) and Perth and Manly (Australia). The
increase in Ophir's 1997 earnings resulted from gains on sale and issuance of
shares of Teledata Communications Ltd. ("Teledata") as part of a public offering
made by Teledata in May 1997, a gain on sale of office and commercial space
located in Petach Tikva, Israel and lower interest expense which resulted from
repayments of loans.
CWI reported earnings in 1997 as compared to losses it incurred in the first
half of 1996. The losses recorded by CWI in 1996 were primarily attributable to
the company's investments in marine parks in Nassau (Bahamas) and St. Thomas
(U.S. Virgin Islands), which were sold in September 1996 and April 1997,
respectively.
The increases noted above were partially offset by the losses recorded by the
Company's 50%-owned affiliate, Trinet Venture Capital Ltd. ("Trinet"), a
high-technology venture capital fund which recorded unrealized losses on its
investments in the six months ended June 30, 1997 as compared to unrealized
gains in the same period in 1996, and losses of Carmel Container Systems Limited
("Carmel"), the Company's 20.7%-owned affiliate, which is a manufacturer of
paper-board packaging and related products. Carmel recorded losses in the six
months ended June 30, 1997 as compared to earnings in the same period in 1996
primarily because of a decrease in sales volume as a result of the economic
slowdown in Israel, a decrease in sales prices as a result of escalating
competition, an increase in costs which are associated with the running-in of a
new plant and the one-time expenses incurred with respect to the closing of old
plants.
In the six months ended June 30, 1997, the Company recorded $2.7 million of
gains on sale of investments, $1.8 million of which is attributable to its
direct investment in Teledata, as compared to $1.1 million of gains on sale of
investments ($.3 million with respect to Teledata) recorded in the same period
in 1996.
The Company also recorded $2.3 million of unrealized gains on investments which
are classified as trading securities and a $1 million loss from impairment of
its investment in a distribution software company in the six-month period ended
June 30, 1997, as compared to $1.1 million of unrealized gains on investments in
trading securities in the same period in 1996. At June 30, 1997 and December 31,
1996, the aggregate fair value of trading securities amounted to approximately
$7.9 million and $4.5 million, respectively.
The Company recorded net interest income in the six months ended June 30, 1997,
as compared to net interest expense in the same period in 1996. The increase in
net
10
interest income is primarily attributable to debt reduction in connection
with the sale of a condominium unit in an office building ("800 Second Avenue")
located at 800 Second Avenue New York, New York. See Liquidity and Capital
Resources.
On June 26, 1997 the main factory of the Company's 85%-owned subsidiary,
Paradise Industries Ltd. ("Paradise") was heavily damaged by a fire and has been
closed since then. Paradise carries both fire damage and business interruption
insurance covering the factory. It is too early to determine the amount of loss
to be incurred as a result of the fire, if any, or when Paradise will resume its
operations. The 1997 manufacturing revenues and expenses reflect the operations
of Paradise through the date of the fire.
The decreases in rental income and rental property operating expenses are
attributable to the sale of a condominium unit in 800 Second Avenue.
The change in the effective income tax rate in 1997 as compared to 1996 is
mainly attributable to the losses of certain Israeli subsidiaries in 1996 for
which no tax benefits were available.
Three months ended June 30, 1997 compared to three months ended June 30, 1996:
- ------------------------------------------------------------------------------
Consolidated income from continuing operations increased to $4.8 million for the
three-month period ended June 30, 1997, from $3 million for the same period in
1996. The increase in income resulted primarily from the increases in equity in
earnings of affiliates, realized and unrealized gains on investments recorded,
and net interest income in 1997 as compared to net interest expense in 1996.
Equity in earnings of affiliates increased from $2.4 million for the three
months ended June 30, 1996, to $6.6 million for the same period in 1997. The
increase is primarily attributable to the improved earnings of Ophir which
recorded gains on sale and issuance of shares of Teledata and lower interest
expense. This increase was partially offset by losses recorded by Trinet and
Carmel. See Discussion on Results of Operations - Six months ended June 30, 1997
compared to six months ended June 30, 1996.
In the quarter ended June 30, 1997, the Company recorded $1.5 million of gains
on sale of investments, $1.1 million of which is attributable to its direct
investment in Teledata, as compared to $1 million of gains on sale of
investments ($.3 million with respect to Teledata) recorded in the same period
in 1996.
The Company also recorded $2.1 million of unrealized gains on investments which
are classified as trading securities and a $1 million loss from impairment of
its investment in a distribution software company in the three-month period
ended June 30, 1997, as compared to $1.4 million of unrealized gains on
investments in trading securities in the same period in 1996.
The Company recorded net interest income in the three months ended June 30,
1997, as compared to net interest expense in the same period in 1996. See
Discussion on Results of Operations - Six months ended June 30, 1997 compared to
six months ended June 30, 1996.
The decreases in rental income and rental property operating expenses are
attributable to the sale of a condominium unit in 800 Second Avenue.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1997, cash and cash equivalents were approximately $17.8 million as
compared with approximately $20.6 million at December 31, 1996. In addition,
Ampal had approximately $9 million of highly liquid interest bearing securities
included in the investments caption at June 30, 1997 as compared with $14
million at December 31, 1996. The decrease in cash and cash equivalents and
short-term investments is primarily attributable to scheduled debenture
redemptions of approximately $14
11
million. For the balance of 1997 scheduled debenture redemptions aggregate
approximately $3 million.
The decrease in real estate rental property, and notes and loans payable are
primarily attributable to the sale of a condominium unit in 800 Second Avenue to
the Government of Israel (the "Government") for $31 million on January 31, 1997.
At that time the Government paid $15 million and gave the Company a note for the
remaining $16 million which is payable on January 30, 1998.
The increase in the balance of the cumulative translation adjustments at June
30, 1997, as compared to December 31, 1996, is attributable to the 10.3%
devaluation of the New Israeli Shekel to the U.S. Dollar in the first half of
1997.
In 1997, the Company made several new investments in the high-technology field,
notably (1) a $1 million investment in UNIC View Ltd., a company which
manufactures and markets a liquid screen display projector for video, large
screen television and computer projection systems and is developing a new
projector engine for home use, (2) a $.75 million investment in FundTech Ltd., a
company engaged in the development of software for worldwide banking
institutions to facilitate fund transfers, and (3) a $1 million investment in
NKO, Inc. which is developing low cost facsimile transmission services.
As a result of the improvement in the Company's earnings in 1997 together with
its significant reduction of debt, the Company's debt to equity ratio has
decreased from .67 to 1 at December 31, 1996, to .43 to 1 at June 30, 1997.
This, combined with the substantial amounts of uncommitted and committed credit
lines, further enhances the Company's ability to make new investments.
Recently Issued Accounting Standards
- ------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share. This
statement establishes standards for computing and presenting earnings per share
("EPS"), replacing the presentation of currently required primary EPS with a
presentation of Basic EPS. For entities with complex capital structures, the
statement requires the dual presentation of both Basic EPS and Diluted EPS on
the face of the statement of income. Under this new standard, Basic EPS is
computed based on the weighted average number of shares actually outstanding
during the period. Diluted EPS includes the effect of potential dilution from
the conversions of 6-1/2% and 4% Preferred Stocks to Class A Stock. SFAS No. 128
is effective for financial statements issued for periods ending after December
15, 1997, and earlier application is not permitted. When adopted, the Company
will be required to restate its EPS data for all prior periods presented. The
Company reflected the effect of adoption of SFAS No. 128, on a pro forma basis,
in Note 4 to its June 30, 1997 consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income.
This statement establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. This statement requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. This
statement does not require a specific format for that financial statement but
requires that an enterprise display an amount representing total comprehensive
income for the period in that financial statement. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997 with earlier application
permitted. When adopted, the Company will be required to reclassify financial
statements for all prior periods presented. The Company does not plan to adopt
SFAS No. 130 prior to the effective date.
12
AMPAL-AMERICAN ISRAEL CORPORATION
---------------------------------
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None.
-----------------
Item 2. Changes in Securities - On June 2, 1997, Ampal issued 1,000
---------------------
shares of its Class A Stock, $1.00 par value (the "Class A
Stock"), to each of the three members of the Board of Directors
who had recently retired. The shares were issued in consideration
for past services performed by the retired directors and in an
effort to continue a close working relationship with the retired
directors in the future. Such issuance was exempt from
registration under the Securities Act of 1933, as amended,
pursuant to Section 4(2) of such act.
See Item 4. below for recent amendments to Ampal's
Certificate of Incorporation.
Item 3. Defaults upon Senior Securities - None.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders - On May
---------------------------------------------------
28, 1997, Ampal's shareholders held their annual meeting (the
"Annual Meeting"). At such meeting, the shareholders elected the
following individuals as directors by the following vote:
FOR AUTHORITY WITHHELD
Arie Abend 20,611,515 79,233
Michael Arnon 20,612,515 78,233
Benzion Benbassat 20,636,015 54,733
Yaacov Elinav 20,611,357 79,391
Kenneth L. Henderson 20,636,715 54,033
Irwin Hochberg 20,637,115 53,633
Lawrence Lefkowitz 20,616,015 74,733
Hillel Peled 20,636,915 53,833
Shimon Ravid 20,611,357 79,391
Evelyn Sommer 20,611,615 79,133
M. Sonnenfeldt 20,641,015 49,733
Daniel Steinmetz 20,638,115 52,633
Raz Steinmetz 20,642,015 48,733
Also at the Annual Meeting, the shareholders approved
three amendments to Ampal's Certificate of Incorporation, as
amended (the "Certificate"): (i) the elimination of Ampal's Common
Stock, $1.00 par value (the "Common Stock") and all references to
the Common Stock from the Certificate; (ii) the elimination of the
rights of holders of the Class A Stock, voting as a class, to
elect 25% of Ampal's directors (the "Class A Directors"); and
(iii) the reduction of the total number of shares of authorized
capital stock of Ampal's from 67,932,850 to 61,177,342 shares
divided into two classes. See Exhibit 3a for the full text of the
amended and restated Certificate.
The results for the voting on the three amendments were as
follows:
13
For the amendment to the Certificate eliminating
the Common Stock and all references to it in the Certificate:
For Against Abstain
20,427,506 76,562 34,725
For the amendment to the Certificate eliminating
the rights of the holders of Class A Stock to vote for the
Class A Directors:
For Against Abstain
14,757,484 118,261 50,211
For the amendment to the Certificate reducing the
number of shares of authorized capital stock:
For Against Abstain
20,452,598 47,960 38,235
Item 5. Other Information - After the conclusion of the Annual Meeting,
-----------------
Ampal's Board of Directors (the "Board") held a meeting. Among
other action taken, a new Chairman of the Board, Mr. Daniel
Steinmetz, was elected. At a meeting of the Executive Committee of
the Board of Directors on the same day, Mr. Raz Steinmetz was
reelected as Chairman of the Executive Committee. Both Mr. Daniel
Steinmetz and Mr. Raz Steinmetz are officers and shareholders of
Rebar Financial Corp., the holder of approximately 38% of Ampal's
Class A Stock. Additionally, at the Board Meeting a new position
of Chief Executive Officer was created which required certain
changes to Ampal's by-laws including adding the position of Chief
Executive Officer and redefining the position of President. See
Exhibit 3b for the full text of the by-laws as amended at the May
28, 1997 meeting of the Board. Furthermore, the following were
elected by the Board to serve as officers for the upcoming year:
Chairman of the Board: Daniel Steinmetz
Chief Executive Officer: Yehoshua Gleitman
President: Lawrence Lefkowitz
Vice President -
Finance and Treasurer: Alan L. Schaffer
Vice President -
Accounting and Controller: Alla Kanter
Vice President -
Legal and Secretary: Isaiah Halivni
Assistant Vice President -
Israel Operations: Miri Lent Sharir
Assistant Vice President: Alvia Miller
Assistant Secretary: Gennifer A. Starita
Also on May 28, 1997, Ampal, Ampal (Israel) Ltd. ("Ampal
Israel"), a wholly-owned subsidiary of Ampal and Dr. Yehoshua
Gleitman ("Gleitman") entered into an employment agreement (the
"Employment Agreement") pursuant to which Gleitman will act as the
Chief Executive Officer of Ampal Israel and as a senior executive
officer of Ampal, See Exhibit 10a for the full text of the
Employment Agreement. Gleitman will receive a monthly base salary
of $20,000 (adjusted annually according to the rate of increase in
the Israeli consumer price index), the use of a company car and
other standard benefits.
14
Additionally, pursuant to an Amendment (the "Amendment"),
dated June 4, 1997, to that certain Legal Services Agreement
between Bank Hapoalim B.M. (the "Bank") and Ampal, the Bank
agreed, effective January 1, 1996, to increase the annual amount
the Bank reimburses Ampal to $120,000 (an increase of $20,000) for
Mr. Lawrence Lefkowitz's services. Mr. Lefkowitz is the President
of Ampal. See Exhibit 10b for the full text of the Amendment.
Item 6. Exhibits and Reports on Form 8-K
(a) Index to Exhibits:
Exhibit 3a - Amended and Restated Certificate of
Incorporation of Ampal dated May 28, 1997................. Page 18
Exhibit 3b - By-Laws of Ampal as amended................. Page 40
Exhibit 10a - Employment Agreement, dated May 28, 1997,
among Ampal, Ampal (Israel) Ltd. and
Dr. Yehoshua Gleitman..................................... Page 68
Exhibit 10b - Amendment No. 1, dated June 4, 1997,
to that certain Legal Services Agreement between
Bank Hapoalim B.M. and Ampal.............................. Page 81
Exhibit 11 - Schedule Setting Forth Computation
of Earnings Per Class A Share............................. Page 83
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. No Reports on Form 8-K were filed between
April 1, 1997 and June 30, 1997.
15
AMPAL-AMERICAN ISRAEL CORPORATION
---------------------------------
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/ Yehoshua Gleitman
------------------------
Yehoshua Gleitman
Chief Executive Officer
(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
and Controller
(Principal Accounting Officer)
Dated: August 14, 1997
16
AMPAL-AMERICAN ISRAEL CORPORATION
---------------------------------
Exhibit Index
Exhibit No. Description
3a Amended and Restated Certificate of Incorporation
of Ampal dated May 28, 1997......................... Page 18
3b By-Laws of Ampal as amended......................... Page 40
10a Employment Agreement, dated May 28, 1997, among
Ampal, Ampal (Israel) Ltd. and
Dr. Yehoshua Gleitman............................... Page 68
10b Amendment No. 1, dated June 4, 1997, to that
certain Legal Services Agreement between Bank
Hapoalim B.M. and Ampal............................. Page 81
11 Schedule Setting Forth Computation of Earnings
Per Share of Class A Stock.......................... Page 83
27 Financial Data Schedule.
17