SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 1996
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: 811-854
IIC Industries, Inc.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 13-567594
- ------------------------------------------- --------------------------
(STATE OF OTHER JURISDICTION OF (IRS IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
420 Lexington Avenue; New York, N.Y. 10170
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 297-6132
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FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT.
Indicate by check 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 1,423,368 shares of common
stock outstanding at October 31, 1996.
<PAGE>
FINANCIAL INFORMATION
FINANCIAL STATEMENTS
Page
Consolidated Balance Sheets
at September 30, 1996
and December 31, 1995 3
Consolidated Statements of Income
for the Nine Months Ended
September 30, 1996 and September 30, 1995 5
Consolidated Statements of Income
for the Three Months Ended
September 30, 1996 and September 30, 1995 6
Consolidated Statements of Cash Flows
for the Nine Months Ended
September 30, 1996 and September 30, 1995 7
Notes to Consolidated Financial
Statements 8
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<PAGE>
IIC Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(dollar amounts in thousands, except share data)
SEPTEMBER 30, December 31,
ASSETS 1996 1995
------------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 23,716 $ 19,414
Accounts receivable, net 35,952 34,202
Advances to subcontractors 1,585 1,336
Inventories (Note C) 61,807 45,004
Other current assets 5,982 10,609
-------- --------
Total current assets 129,042 110,565
RESTRICTED CASH 4,141 5,719
PROPERTY AND EQUIPMENT, NET 31,859 28,418
INVESTMENTS IN AND ADVANCES TO AFFILIATES 29,780 27,052
OTHER INVESTMENTS 876 1,367
OTHER ASSETS 887 2,328
-------- --------
$196,585 $175,449
======== ========
The accompanying notes are an integral part of these statements.
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<PAGE>
IIC Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
(dollar amounts in thousands, except share data)
SEPTEMBER 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
------------- ------------
CURRENT LIABILITIES
Accounts payable $ 31,263 $ 18,316
Bank loans 20,987 16,919
Current maturities of long-term debt 24 127
Accrued expenses and other payables 12,020 16,729
Advances from customers 11,000 9,058
--------- --------
Total current liabilities 75,294 61,149
LONG-TERM DEBT, less current portion 2,490 2,528
DUE TO AFFILIATES 1,498 1,542
OTHER LIABILITIES AND DEFERRED
CREDITS 5,707 5,760
MINORITY INTEREST IN SUBSIDIARIES 23,834 22,171
--------- --------
108,823 93,150
CONTINGENCIES (Note D)
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value per share;
authorized 1,800,000 shares; issued
1,585,806 shares 1,586 1,586
Additional paid-in capital 22,941 22,941
Retained earnings 89,118 79,342
Foreign translation adjustment (23,158) (18,845)
Less treasury stock - at cost (162,438 shares) (2,725) (2,725)
--------- --------
87,762 82,299
--------- --------
$ 196,585 $ 175,449
========= ========
The accompanying notes are an integral part of these statements.
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<PAGE>
IIC Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(dollar amounts in thousands, except share data)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
---- ----
Net Sales $ 196,971 $ 209,486
Cost of sales 149,006 161,442
--------- ---------
Gross Profit 47,965 48,044
Selling, General And Administrative Expenses 37,007 37,320
--------- ---------
Operating Income 10,958 10,724
--------- ---------
Other Income (Expenses)
Interest income 2,413 3,712
Dividend income 14 158
Equity in earnings of affiliates 4,669 2,358
Foreign currency (loss) gain (Note B) (152) 71
Gain on sale of noncurrent assets, net 186 1,401
Interest expense (2,655) (3,044)
Other, net 716 581
--------- ---------
Income before income taxes and
minority interest 16,149 15,961
Income taxes (2,556) (5,117)
--------- ---------
Income before minority interest 13,593 10,844
Minority Interest (3,817) (2,908)
--------- ---------
NET INCOME $ 9,776 $ 7,936
========= =========
Net income per common share $ 6.87 $ 5.58
========= =========
Weighted average number of common
shares outstanding 1,423,368 1,423,368
========= =========
The accompanying notes are an integral part of these statements.
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<PAGE>
IIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(dollar amounts in thousands, except share data)
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1996 1995
---- ----
Net sales $ 69,761 $ 71,287
Cost of sales 51,926 56,368
--------- ---------
Gross profit 17,835 14,919
Selling, general and administrative expenses 14,161 12,932
--------- ---------
Operating income 3,674 1,987
--------- ---------
Other income (expenses)
Interest income 884 936
Dividend income 6 56
Equity in earnings of affiliates 2,141 1,018
Foreign currency (loss) gain (Note B) (23) 445
Gain (Loss) on sale of noncurrent assets, net (51) 571
Interest expense (1,113) (992)
Other, net 318 220
--------- ---------
Income before income taxes and
minority interest 5,836 4,241
Income taxes (932) (690)
--------- ---------
Income before minority interest 4,904 3,551
Minority Interest (1,260) (581)
--------- ---------
NET INCOME $ 3,644 $ 2,970
========= =========
Net income per common share $ 2.56 $ 2.09
========= =========
Weighted average number of
common shares outstanding 1,423,368 1,423,368
========= =========
The accompanying notes are an integral part of these statements.
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<PAGE>
IIC Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollar amounts in thousands)
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------
1996 1995
---- ----
Net cash provided by operating activities $ 6,366 $ 5,041
-------- --------
Cash flows from investing activities
Purchase of subsidiary shares, net of cash acquired (7,953)
Purchase of property and equipment (5,553) (4,202)
Purchase of investments (3,287) (21,032)
Purchase of other assets (4) (1,487)
Proceeds on disposal of property and equipment 807 2,297
Proceeds on disposal of investments 214 2,151
Change in restricted cash 1,578 3,066
-------- --------
Net cash used in investing activities (6,245) (27,160)
-------- --------
Cash flows from financing activities
Payments to acquire share capital of subsidiary (192)
Issuance of long-term debt 2,338
Payments of long-term debt (141)
Net receipts of short-term bank loans 5,383 3,028
--------
Dividends paid to minority interests of subsidiaries (201)
--------
Net cash provided by financing activities 5,050 5,165
Effect of exchange rate on cash (869) (2,519)
-------- --------
Net increase (decrease) in cash and cash
equivalents during the period 4,302 (19,473)
Cash and cash equivalents at beginning of period 19,414 40,564
-------- --------
Cash and cash equivalents at end of period $ 23,716 $ 21,091
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for
Interest $ 2,526 $ 3,057
Income taxes 2,960 4,734
The accompanying notes are an integral part of these statements.
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<PAGE>
IIC Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The consolidated financial statements included herein which have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, include the
accounts of IIC Industries Inc. and all material majority-owned
subsidiaries (collectively the "Company"). All material intercompany
transactions and balances have been eliminated. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations.
In the opinion of management, the consolidated financial statements
contain all adjustments which are those of a recurring nature and
disclosures necessary to present fairly the financial position of the
Company as of September 30, 1996 and December 31, 1995 and the results of
operations and cash flows for the nine months ended September 30, 1996
and September 30, 1995.
NOTE B - FOREIGN CURRENCY EXCHANGE
Investor Rt ("Investor"), a majority-owned subsidiary, uses the local
currency, the Hungarian forint, as its functional currency and translates
all assets and liabilities at balance sheet exchange rates, all income
and expense accounts at average rates and records adjustments resulting
from the translation in a separate component of shareholders' equity.
The Israel Tractors and Equipment Company Limited ("Israel Tractor"), a
wholly-owned subsidiary, uses the US dollar as the functional currency,
since the dollar is the currency in which most of the significant
business of Israel Tractor is conducted, or to which it is linked. Balton
C.P. Limited ("Balton"), a majority-owned subsidiary, uses the US dollar
as the functional currency, since the African subsidiaries operate in
hyperinflationary economies. These subsidiaries translate monetary assets
and liabilities at historical rates. Income and expense accounts are
translated at the rate of exchange prevailing at the date of transaction,
except that depreciation is translated at historical rates. Adjustments
resulting from the translation of these entities are included in results
of operations.
Transactions arising in a foreign currency are translated into the
functional currency at the rate of exchange effective at the date of the
transaction and gains or losses are included in results of operations.
-8-
<PAGE>
IIC Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE C - INVENTORIES
Inventories are as follows:
SEPTEMBER 30, December 31,
1996 1995
---- ----
Raw materials $22,611 $12,432
Work-in-progress 973 1,174
Finished goods 38,223 31,398
------- -------
$61,807 $45,004
======= =======
NOTE D - CONTINGENCIES
The Company has given a guarantee to the bankers of Balton amounting to
$1.6 million. The guarantee is in respect of various outstanding letters
of credit given by the bankers of certain of Balton's creditors. The
Company has also agreed to indemnify a co-guarantor for any losses
accumulating to $510,000.
Balton has given guarantees to third parties in the amount of
approximately $1,250,000.
Investor and certain subsidiaries are potentially liable with respect to
certain guarantees of debt and other financial instruments of other
related and nonrelated companies to the extent of approximately $2.5
million.
NOTE E - INVESTMENT IN AFFILIATE
In February 1995, Interag Rt. purchased approximately 18 % of the share
capital of Danubius Rt. ("Danubius"), a company publicly quoted in
Hungary. Danubius owns a number of hotels in Hungary and specializes in
spa facilities. By March 31, 1996, Interag Rt. and the Company had
purchased an additional 11% and 5.5% , respectively, of Danubius' share
capital. At September 30, 1996, the Company's effective ownership
percentage was approximately 27% at a cumulative cost of approximately
$25 million.
-9-
<PAGE>
IIC Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE E (CONTINUED)
Accordingly, the Company accounted for this investment under the equity
method at September 30, 1996. Under this method, the investment is
carried at cost plus the Company's share of earnings or losses less
distributions. Since the Company's share of the underlying net assets of
Danubius exceeded the cost at the various purchase dates, the excess
(approximately $8.5 million) of the fair value of the net assets acquired
over the cost was used to reduce the value of the fixed assets acquired.
The following is summarized financial information of Danubius (in
thousands), which was prepared in accordance with international
accounting standards. There were no significant differences between
international accounting standards and generally accepted accounting
standards in the United States:
SEPTEMBER 30, 1996
------------------
Current assets $ 27,797
Noncurrent assets 123,024
Current liabilities 12,426
Noncurrent liabilities 11,128
Stockholders' equity 127,267
NINE MONTHS ENDED
SEPTEMBER 30, 1996
------------------
Sales 51,655
Operating income 13,963
Net income 12,539
-10-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is presently operated as a holding company with subsidiaries
in three principal operating geographic areas: (1) Investor RT, a Hungarian
holding company ("Investor" or "Investor Group"), which through its
subsidiaries, engages in a variety of commercial activities in Hungary; (2)
The Israel Tractors and Equipment Company Limited ("Israel Tractor"), an
Israeli corporation, which distributes tractors and related heavy machinery in
Israel and (3) Balton C.P. Limited, an English holding company with African
subsidiaries ("Balton CP") engaged in trading activities in several African
countries.
Substantially all of the Company's revenues are derived from foreign
operations. As such, its income is significantly affected by fluctuations in
currency exchange rates and by currency controls. Most of the countries where
the Company operates such as Hungary and several African countries do not have
freely convertible currencies and their currencies have been subject to
devaluations in recent years. In particular, during 1995, the income from the
Company's Hungarian and African subsidiaries was significantly reduced by
losses arising from foreign exchange transactions due to significant currency
devaluations against the U.S. dollar. The Hungarian currency which is not
freely convertible and which floats against a basket of two currencies (the
U.S. Dollar and the European Currency Unit) underwent devaluations against the
U.S. Dollar at the rate of 20% during 1995. Since the beginning of 1996, the
Hungarian currency has been further devalued by approximately 14% against the
U.S. Dollar. Since the functional currency for Investor is the Hungarian
Forint, these devaluations have resulted in certain currency translation
adjustments directly impacting stockholders' equity. See Notes A(8) and P of
Notes to Registrant's Consolidated Financial Statements on Form 10-K for the
year ended December 31, 1995.
The Company may be subject to tax in some or all of the foreign countries
in which it has operations. However, foreign taxes imposed on the Company's
income may qualify as a foreign income tax and therefore be eligible for
credit against the Company's United States income tax liability subject to
certain limitations set out in the Internal Revenue Code of 1986, as amended
(or alternatively, for deduction against income in determining such
liability). The limitations set out in the Code include, among others,
computation rules under which foreign tax credits allowable with respect to
specific classes of income cannot exceed the United States federal income
taxes otherwise payable with respect to each class of income. Foreign income
taxes exceeding the credit limitation for the year of payment or accrual can
be carried back for two taxable years and forward for five taxable years, in
order to reduce United States federal income taxes, subject to the credit
limitations applicable in each of such years. Other restrictions on the
foreign tax credit include a prohibition on the use of the credit to reduce
liability for the United States corporate alternative minimum taxes by more
than 90%.
-11-
<PAGE>
The Company has three primary areas of operation with respect to its
subsidiaries:
(a) Investor and its subsidiaries in Hungary
(b) Israel Tractor in Israel
(c) Balton CP and its subsidiaries in Nigeria, Ghana, Zambia, Tanzania,
Kenya and Uganda.
The Company has five principal business segments:
(a) vehicle sales and service
(b) export/import and processing/storage of agricultural products
(c) the distribution of tractors and other heavy equipment
(d) the sale of agricultural, communications and electrical equipment
(e) other industries including retail and wholesale consumer products
and Hungarian corporate.
RESULTS OF OPERATIONS
The table below sets forth for the nine months ended September 30, 1996
and 1995 certain information with respect to the results of operations of the
Company and its principal subsidiaries.
<TABLE>
<CAPTION>
Nine Months Ended Net Sales Gross Profit Income (Loss) before Net Income (Loss)
- ----------------- --------- ------------ Income Taxes and ------------------
September 30, 1996 Minority Interests
- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amount % Amount % Amount % Amount %
------ --- ------ --- ------ --- ------ ---
(In thousands) (In thousands) (In thousands) (In thousands)
IIC Industries Inc. -- -- -- -- $ 991 6.1 $ 983 10.1
(parent company)
Israel Tractors & $ 63,315 32.1 $ 18,060 37.7 4,447 27.5 3,454 35.3
Equipment Co. (Israel)
Balton CP Group (Africa) 31,925 16.2 9,846 20.5 3,345 20.7 1,200 12.3
Investor RT Group (Hungary) 101,731 51.7 20,059 41.8 7,366 45.7 4,139 42.3
-------- ----- -------- ----- -------- ----- -------- -----
$196,971 100.0 $ 47,965 100.0 $ 16,149 100.0 $ 9,776 100.0
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Net Sales Gross Profit Income (Loss) before Net Income (Loss)
- ----------------- --------- ------------ Income Taxes and ------------------
September 30, 1995 Minority Interests
- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amount % Amount % Amount % Amount %
------ --- ------ --- ------ --- ------ ---
(In thousands) (In thousands) (In thousands) (In thousands)
IIC Industries Inc. -- -- -- -- $ 119 0.7 $ (149) (1.8)
(parent company)
Israel Tractors & $ 71,142 34.0 $ 19,930 41.5 6,505 40.8 4,602 58.0
Equipment Co. (Israel)
Balton CP Group (Africa) 35,272 16.8 8,783 18.3 2,990 18.7 900 11.3
Investor RT Group (Hungary) 103,072 49.2 19,331 40.2 6,347 39.8 2,583 32.5
-------- ----- -------- ----- -------- ----- -------- -----
$209,486 100.0 $ 48,044 100.0 $ 15,961 100.0 $ 7,936 100.0
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
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<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS
Net Sales. Net Sales on a consolidated basis for the nine months ended
September 30, 1996 decreased by approximately $12 million as compared to the
comparable period in 1995. This decrease was mainly attributable to a
reduction in demand for the Company's products.
Gross Profit. Gross Profit on a consolidated basis for the nine months
ended September 30, 1996 decreased by $79,000, to approximately $48 million,
or approximately 24.3% of Net Sales.
Operating income. Operating income on a consolidated basis for the nine
months ended September 30, 1996 increased by approximately $234,000, or
approximately 2%, to approximately $10.9 million, or approximately 5.6% of net
sales, from approximately $10.7 million, or approximately 5.1% of Net Sales
for the corresponding period in 1995. This increase was principally due to a
reduction of expenses.
Interest income. Interest income decreased for the nine months ended
September 30, 1996 by approximately $1.3 million, or approximately 35%, to
approximately $2.4 million due to the investment of its cash by Interag in
shares in Danubius Hotel & Spa Rt. (the "Hotel Company" or the "Danubius").
Interest expense. Interest expense for the nine months ended decreased by
approximately $389,000, or approximately 13%, to approximately $2.7 million
due to a reduction in bank loans.
Income before Income Taxes and Minority Interest. Income before Income
Taxes and Minority Interest in the first nine months increased by
approximately $200,000, or approximately 1.2 %, to approximately $16.1 million
in the first nine months (representing approximately 8.2% of Net Sales for
that period) from approximately $16 million for the corresponding period in
1995 (representing 7.6% of Net Sales for that period).
Minority Interests. Minority Interests for the nine months increased by
approximately $900,000 as a result of higher income.
Net Income. Net Income for the nine months ended September 30, 1996
increased by approximately $1.8 million (or approximately 23%) to
approximately $9.8 million (representing approximately 5% of Net Sales for
that period) from approximately $7.9 million for the corresponding period in
1995 (representing approximately 3.8% of Net Sales for that period).
-13-
<PAGE>
The table below sets forth for the nine months ended September 30, 1996
and 1995 certain information with respect to the results of operations of the
Company and its five principal business segments.
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996 Nine Months Ended September 30, 1995
------------------------------------------ --------------------------------------------------
Income before Income before
Income Taxes and Income Taxes and
Net Sales Minority Interest Net Sales Minority Interest
--------- ----------------- --------- -----------------
Amount % Amount % Amount % Amount %
(In thousands) (In thousands) (In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Vehicle sales and distribution
(Investor) 8,135 4.1 $ 136 0.8 $ 7,399 3.5 $ 75 0.5
Export and import of agricultural
products (Investors) 91,270 46.3 4,629 28.7 86,493 41.3 3,831 24.0
Other Industries (Investor) 2,326 1.2 3,592 22.2 9,180 4.4 2,560 16.0
Tractors and heavy equipment 63,315 32.1 4,447 27.5 71,142 34.0 6,505 40.8
(Israel Tractor)
Agricultural, communications and
electrical equipment (Balton CP) 31,925 16.3 3,345 20.8 35,272 16.8 2,990 18.7
------- ----- ------- ----- -------- ----- ------- -----
$196,971 100.0 $16,149 100.0 $209,486 100.0 $15,961 100.0
======== ===== ======= ===== ======== ===== ======= =====
</TABLE>
INVESTOR
The operations of three of the Company's segments are conducted in Hungary
through Investor. Investor's business is significantly affected by general
conditions in Hungary. General economic difficulties have contributed to a
recession in Hungary, which has had a negative effect on Investor's business.
Despite such conditions, because of management's actions in reducing overhead
costs and closing unprofitable operations, Investor has remained profitable
for the first nine months of 1996.
Vehicle Sales and Service Segment
o Net Sales for the nine months ended September 30, 1996 increased by
approximately $736,000, or approximately 10%, as compared to the
corresponding period in 1995.
o There was a Profit before Minority Interests and Income Taxes for
the nine months ended September 30, 1996 of $136,000 as compared to
a profit of $75,000 in the corresponding period in 1995.
The increase in Net Sales and the increase in Income before Income Taxes
and Minority Interests was primarily due to the rationalization of the
business.
-14-
<PAGE>
Export/Import and Processing/Storage of Agricultural Products Segment
o Net Sales for the nine months ended September 30, 1996 increased by
approximately $4.8 million, or approximately 5.5%, as compared to
the corresponding period in 1995. The increase in Net Sales was
primarily due to the increased activity of the milling companies.
o Income before Income Taxes and Minority Interest for the nine months
ended September 30, 1996 increased by approximately $798,000 or
approximately 21% as compared to the corresponding period in 1995 as
a result of increased income in the milling companies.
Other Industries
o Net Sales for the nine months ended September 30, 1996 decreased by
approximately $6.9 million, or approximately 75%, as compared to the
corresponding period in 1995 due to the disposal of lossmaking
businesses.
o There was a Profit before Income Taxes and Minority Interest of
approximately $3.6 million for the nine months ended September 30,
1996, compared to a profit of approximately $2.6 million for the
nine months ended September 30, 1995 as a result of the increased
equity in earnings of Danubius.
ISRAEL TRACTOR: TRACTORS AND HEAVY EQUIPMENT SEGMENT
o Net Sales for the nine months ended September 30, 1996 decreased by
approximately $7.8 million or approximately 11% as compared to the
corresponding period in 1995, due to a reduction in demand for the
Company's products.
o Income before Income Taxes and Minority Interest for the nine months
ended September 30, 1996 decreased by approximately $2 million, or
approximately 32% as compared to the corresponding period in 1995 as
a result of lower trading activity.
BALTON CP: AGRICULTURAL, COMMUNICATIONS AND ELECTRICAL EQUIPMENT SEGMENT
o Net Sales for the nine months ended September 30, 1996 decreased by
approximately $3.3 million, or approximately 9.5%, as compared to
the corresponding period in 1995. This was due to lower demand for
the Company's products offset by the consolidation of Dizengoff
W.A.Nigeria Limited ("Dizengoff"), which was previously accounted
for under the equity method. At April 15, 1996, Balton CP increased
its equity ownership in Dizengoff from 51.7% to 88.3% at a cost of
approximately $770,000.
o Income before Income Taxes and Minority Interests for the nine
months ended September 30, 1996 increased by approximately $355,000,
or approximately 12 % as compared to the corresponding period in
1995. This increase was due to higher profits at one of the African
branches.
-15-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through funds generated internally
and through cash and cash equivalents available at the beginning of 1996. At
September 30, 1996, IIC Industries Inc., the parent company (the "Parent
Company"), and its wholly-owned Israel Tractor subsidiary, had working capital
of $38 million, including cash and cash equivalents of $12.2 million. Cash of
subsidiaries that are not wholly-owned (including the Investor Group and the
Balton CP Group) is generally not available for use by the Parent Company or
other subsidiaries (except to the extent paid to the Parent Company as
reimbursement for general overhead paid by the Parent Company or as management
fees) other than in the form of dividends, if and when declared. Dividends to
the Parent Company from its Israel Tractor subsidiary are subject to a
withholding tax of 15% to 25%. The Parent Company does not expect to receive
cash dividends or other distributions in the foreseeable future from any of
its subsidiaries.
At September 30, 1996, Investor, and Balton had outstanding short-term
indebtedness of approximately $19.1 million, and $1.8 million, respectively.
At September 30, 1996, Investor and Israel Tractor had unused lines of
short-term credit of $37 million.
A significant part of the Company's cash holdings were held within the
Investor Group in Hungary (approximately $7.3 million at September 30, 1996).
Due to the weakness of the Hungarian currency and the current low rates of
return on dollar deposits, the Company sought other investments. From February
22, 1995 to date, approximately 2.87 billion HUF (approximately $25 million at
exchange rates at time of purchase) was spent for the purchase of a 34.5%
interest in Danubius Hotel. To date, the Company's effective interest is
approximately 27%.
During the first nine months of 1996, Investor and Israel Tractor made capital
expenditures of $2,592,000 and $1,681,000 , respectively, for the purchase of
equipment and vehicles and improvements to property. Such expenditures were
made from internally generated funds. At September 30, 1996, the Company had
no significant capital commitments.
INFLATION
Inflation has been a persistent aspect of the Hungarian economy in recent
years, although the annual rate of inflation has been predictable and has
therefore been taken into account by the government and private businesses.
Inflation has contributed to the devaluation of the Hungarian currency and has
therefore had an effect on Investor's financial condition.
Inflation in Israel was moderate in 1995 and during the first nine months
of 1996, and therefore did not significantly affect operations in that
country. Furthermore, there was virtually no devaluation of the Israeli shekel
against the U.S. Dollar in 1995 and only 2.7% for the first nine months of
1996.
Significant rates of inflation persisted in the African countries where
Balton CP operates, triggering significant devaluations of local currencies.
-16-
<PAGE>
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the period covered by this
report.
EXHIBIT NO. DESCRIPTION
----------- -----------
27 Financial Data Schedule
-17-
<PAGE>
SIGNATURES
In accordance with 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.
Date: November 13, 1996
IIC INDUSTRIES, INC.
By: /s/ Fortunee F. Cohen
---------------------
Fortunee F. Cohen, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 23,716
<SECURITIES> 0
<RECEIVABLES> 35,952
<ALLOWANCES> 3,401
<INVENTORY> 61,807
<CURRENT-ASSETS> 129,042
<PP&E> 31,859
<DEPRECIATION> 15,498
<TOTAL-ASSETS> 196,585
<CURRENT-LIABILITIES> 75,294
<BONDS> 0
0
0
<COMMON> 1,586
<OTHER-SE> 86,176
<TOTAL-LIABILITY-AND-EQUITY> 196,585
<SALES> 196,971
<TOTAL-REVENUES> 196,971
<CGS> 149,006
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 37,007
<LOSS-PROVISION> 609
<INTEREST-EXPENSE> 2,655
<INCOME-PRETAX> 16,149
<INCOME-TAX> 2,556
<INCOME-CONTINUING> 9,776
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,776
<EPS-PRIMARY> 6.87
<EPS-DILUTED> 6.87
</TABLE>
