SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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
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(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 April 30, 1996.
<PAGE>
FINANCIAL INFORMATION
FINANCIAL STATEMENTS
Page
Consolidated Balance Sheets
at March 31, 1996
and December 31, 1995 3
Consolidated Statements of Income
for the Three Months Ended March 31,
1996 and March 31, 1995 5
Consolidated Statement of Cash Flows
for the Three Months Ended March 31,
1996 and March 31, 1995 6
Notes to Consolidated Financial
Statements 7
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<PAGE>
IIC Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollar amounts in thousands, except share data)
MARCH 31, December 31,
ASSETS 1996 1995
---------- -----------
CURRENT ASSETS
Cash and cash equivalents $18,273 $ 19,414
Accounts receivable, net 39,277 34,202
Advances to subcontractors 1,469 1,336
Inventories (Note C) 44,762 45,004
Other current assets 9,447 10,609
---------- ---------
Total current assets 113,228 110,565
RESTRICTED CASH 5,311 5,719
PROPERTY AND EQUIPMENT, NET 28,821 28,418
INVESTMENTS IN AND ADVANCES TO AFFILIATES 29,006 27,052
OTHER INVESTMENTS 1,082 1,367
OTHER ASSETS 3,178 2,328
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$180,626 $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)
MARCH 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
----------- ----------
CURRENT LIABILITIES
Accounts payable $31,974 $ 18,316
Bank loans 9,742 16,919
Current maturities of long-term debt 74 127
Accrued expenses and other payables 17,928 16,729
Advances from customers 7,439 9,058
------- ---------
Total current liabilities 67,157 61,149
LONG-TERM DEBT, less current portion 2,170 2,528
DUE TO AFFILIATES 1,450 1,542
OTHER LIABILITIES AND DEFERRED
CREDITS 5,901 5,760
MINORITY INTEREST IN SUBSIDIARIES 21,582 22,171
-------- ---------
98,260 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 81,096 79,342
Foreign translation adjustment (20,532) (18,845)
Less treasury stock - at cost (162,438
shares) (2,725) (2,725)
---------- ---------
82,366 82,299
---------- ---------
$180,626 $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)
Three months ended March 31,
----------------------------
1996 1995
---- ----
Net sales $59,498 $66,830
Cost of sales 45,540 50,354
------ ------
Gross profit 13,958 16,476
Selling, general and administrative
expenses 11,661 11,318
------ ------
Operating income 2,297 5,158
------ ------
Other income (expenses)
Interest income 942 1,621
Dividend income 3 11
Equity in earnings (loss) of affiliates 427 (34)
Foreign currency loss (Note B) (408) (520)
Gain on sale of noncurrent assets, net 72 15
Interest expense (915) (1,340)
Other, net 160 428
------ ------
Income before income taxes and
minority interest 2,578 5,339
Income taxes (511) (1,903)
------ ------
Income before minority interest 2,067 3,436
Minority Interest (313) (1,100)
------ ------
NET INCOME $ 1,754 $2,336
====== =====
Net income per common share 1.23 $1.64
====== =====
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)
Three months ended March 31,
------------------ ---------
1996 1995
---- ----
Net cash provided by operating activities $9,478 $2,328
------ -----
Cash flows from investing activities
Purchase of subsidiary shares, net of
cash acquired (714)
Purchase of property and equipment (1,806)
Purchase of investments (2,729) (14,560)
Purchase of other assets (155)
Proceeds on disposal of property and
equipment 22 42
Proceeds on disposal of investments 375 7
Restricted cash 408 (101)
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Net cash used in investing
activities (3,730) (15,481)
------- -------
Cash flows from financing activities
Issuance of long-term debt 26 536
Net payments of short-term bank loans (6,505) (5,965)
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Net cash used in financing activities (6,479) (5,429)
Effect of exchange rate on cash (410) (759)
------- -------
Net decrease in cash and cash
equivalents during the period (1,141) (19,341)
Cash and cash equivalents at beginning of
period 19,414 40,564
------ -------
Cash and cash equivalents at end of period $18,273 $ 21,223
======= =======
Supplemental disclosure of cash flow
information:
Cash paid during the period for
Interest $ 1,039 $ 1,239
Income taxes 1,574 1,995
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 March 31, 1996 and December 31, 1995 and the results of
operations and cash flows for the three months ended March 31, 1996 and
March 31, 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 year-end 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.
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<PAGE>
IIC Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
NOTE C - INVENTORIES
Inventories are as follows:
MARCH 31, December 31,
1996 1995
Raw materials $9,156 $ 12,432
Work-in-progress 1,070 1,174
Finished goods 34,536 31,398
------ --------
$44,762 $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 $750,000.
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 $3.1
million.
NOTE E - INVESTMENT IN AFFILIATE
In February 1995, Interag Rt. purchased approximately 18 % of the share
capital of Danubius Rt. ("Danubius"), a publicly quoted company. 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 March 31,
1996, the Company's effective ownership percentage was approximately 27%
at a cumulative cost of approximately $25 million.
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<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 March 31, 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:
March 31, 1996
--------------
Current assets $ 24,372
Noncurrent assets 122,081
Current liabilities 4,538
Noncurrent liabilities 11,004
Stockholders' equity 130,911
Three Months ended
March 31, 1996
--------------
Sales 12,225
Operating income 1,175
Net income 1,289
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<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 8% 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%.
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<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 fiscal quarters ended March 31,
1996 and 1995 certain information with respect to the results of operations of
the Company and its principal subsidiaries.
<TABLE>
<CAPTION>
Income (Loss) before
March 31, 1996 Income Taxes and
Three Months Ended Net Sales Gross Profit Minority Interests Net Income (Loss)
- ------------------ --------- ------------- ----------------------- -----------------
Amount % Amount % Amount % Amount %
------ --- ------ --- ------ --- ------ ---
(In thousands) (In thousands) (In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IIC Industries Inc. -- -- -- -- 93 3.6 90 5.1
(parent company)
Israel Tractors & 22,630 38.0 5,705 40.9 1,453 56.4 1,251 71.3
Equipment Co. (Israel)
Balton CP Group (Africa) 7,296 12.3 2,470 17.7 264 10.2 75 4.3
Investor RT Group 29,572 49.7 5,783 41.4 768 29.8 338 19.3
------ ---- ----- ---- --- ----- ----- -----
(Hungary)
$59,498 100.0 $13,958 100.0 $2,578 100.0 $1,754 100.0
======= ===== ======= ===== ====== ===== ====== =====
</TABLE>
<TABLE>
<CAPTION>
Income (Loss) before
March 31, 1995 Income Taxes and
Three Months Ended Net Sales Gross Profit Minority Interests Net Income (Loss)
- ------------------ --------- ------------- ----------------------- -----------------
Amount % Amount % Amount % Amount %
------ --- ------ --- ------ --- ------ ---
(In thousands) (In thousands) (In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IIC Industries Inc. -- -- -- -- (60) (1.1) (60) (2.6)
(parent company)
Israel Tractors & 24,571 36.8 6,616 40.2 2,675 50.1 1,755 75.1
Equipment Co. (Israel)
Balton CP Group (Africa) 5,985 9.0 2,530 15.3 991 18.6 319 13.7
Investor RT Group 36,274 54.2 7,330 44.5 1,733 32.4 322 13.8
------ ---- ----- ---- ----- ----- ----- -----
(Hungary)
$66,830 100.0 $16,476 100.0 $5,339 100.0 $2,336 100.0
======= ===== ======= ===== ===== ===== ===== =====
</TABLE>
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<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS
Net Sales. Net Sales on a consolidated basis for the fiscal quarter ended
March 31, 1996 decreased by approximately $7.3 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 fiscal quarter
ended March 31, 1996 decreased by approximately $2.5 million or approximately
15%, to approximately $14 million, or approximately 23.5% of Net Sales, from
approximately $16.5 million, or approximately 24.7% of Net Sales, in the
corresponding period in 1995.
Operating income. Operating income on a consolidated basis for the first
fiscal quarter of 1996 decreased by approximately $2.9 million, or
approximately 55%, to approximately $2.3 million, or approximately 3.9% of net
sales, from approximately $5.2 million, or approximately 7.7% of Net Sales for
the corresponding period in 1995. This decrease was principally due to lower
trading activity.
Interest income. Interest income decreased for the quarter by
approximately $679 thousand, or approximately 42%, to approximately $942
thousand 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 in the quarter decreased by
approximately $425,000, or approximately 32%, to approximately $915 thousand
due to a reduction in bank loans.
Income before Income Taxes and Minority Interest. Income before Income
Taxes and Minority Interest in the fiscal quarter decreased by approximately
$2.8 million, or approximately 52%, to approximately $2.6 million in the
quarter (representing approximately 4% of Net Sales for that period) from
approximately $5.3 million for the corresponding period in 1995 (representing
7.9% of Net Sales for that period).
Minority Interests. Minority Interests in the quarter decreased by
approximately $787 thousand as a result of lower income.
Net Income. Net Income for the quarter decreased by $582 thousand (or
approximately 25%) to approximately $1.75 million (representing approximately
2.9% of Net Sales for that period) from approximately $2.34 million for the
corresponding period in 1995 (representing approximately 3.5% of Net Sales for
that period).
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<PAGE>
The table below sets forth for the three months ended March 31, 1996 and
1995 certain information with respect to the results of operations of the
Company and its five principal business segments.
<TABLE>
<CAPTION>
Three Months Ended March 31, 1996 Three Months Ended March 31, 1995
Income (Loss) before Income (Loss) 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 $ 2,238 3.8 83 3.2 $ 2,561 3.8 $76 1.4
(Investor)
Export and import of 26,366 44.3 736 28.6 30,907 46.2 1,705 31.9
agricultural products
(Investor)
Other Industries (Investor) 968 1.6 42 1.6 2,806 4.2 (108) (2.0)
Tractors and heavy equipment 22,630 38.0 1,453 56.4 24,571 36.8 2,675 50.1
(Israel Tractor)
Agricultural, communications and 7,296 12.3 264 10.2 5,985 9.0 991 18.6
electrical equipment (Balton CP)
-------- ----- ------- ---- ------- ----- ------ -----
$59,498 100.0 $2,578 100.0 $66,830 100.0 $5,339 100.0
======== ===== ====== ===== ======= ===== ====== =====
</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 in this quarter.
Vehicle Sales and Service Segment
_ Net Sales for the three months ended March 31, 1996 decreased by
approximately $323 thousand, or approximately 13%, as compared to the
corresponding period in 1995.
_ There was a Profit before Minority Interests and Income Taxes for the
three months ended March 31, 1996 of $83,000 as compared to a profit
of $76,000 in the corresponding period in 1995.
The decrease in Net Sales and the increase in Income before Income Taxes
and Minority Interests was primarily due to the rationalization of the
business and the closure of unprofitable operations.
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<PAGE>
Export/Import and Processing/Storage of Agricultural Products Segment
_ Net Sales for the three months ended March 31, 1996 decreased by
approximately $4.5 million, or approximately 15%, as compared to the
corresponding period in 1995. The decrease in Net Sales was primarily
due to the withdrawal of export licenses on certain cereals by the
Hungarian government.
_ Income before Income Taxes and Minority Interest for the three months
ended March 31, 1996 decreased by approximately $1 million or
approximately 57% as compared to the corresponding period in 1995 as a
result of lower trading activity at Agrimpex.
Other Industries
_ Net Sales for the quarter ended March 31, 1996 decreased by approximately
$1.8 million, or approximately 65.5%, as compared to the corresponding
period in 1995.
_ There was a Profit before Income Taxes and Minority Interest of
approximately $42,000 for the three months ended March 31, 1996, compared
to a loss of approximately $108,000 for the three months ended March 31,
1995.
ISRAEL TRACTOR: TRACTORS AND HEAVY EQUIPMENT SEGMENT
_ Net Sales for the three months ended March 31, 1996 decreased by
approximately $1.9 million or approximately 7.9% as compared to the
corresponding period in 1995, due to a reduction in demand for the
Company's products.
_ Income before Income Taxes and Minority Interest for the three months
ended March 31, 1996 decreased by approximately $1.2 million, or
approximately 45.7% as compared to the corresponding period in 1995 as a
result of lower trading activity.
BALTON CP: AGRICULTURAL, COMMUNICATIONS AND ELECTRICAL EQUIPMENT SEGMENT
_ Net Sales for the three months ended March 31, 1996 increased by
approximately $1.3 million, or approximately 22%, as compared to the
corresponding period in 1995. This was due to increased demand for the
Company's products.
_ Income before Income Taxes and Minority Interests for the three months
ended March 31, 1996 decreased by approximately $727,000, or
approximately 73.3% as compared to the corresponding period in 1995. This
decrease was due to lower profit margins.
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<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 March 31, 1996, IIC Industries Inc., the parent company (the "Parent
Company"), and its wholly-owned Israel Tractor subsidiary, had working capital
of $36.5 million, including cash and cash equivalents of $9.6 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 March 31, 1996, Investor and Israel Tractor had outstanding short-term
indebtedness of approximately $6.6 million and $3 million, respectively.
At March 31, 1996, Investor and Israel Tractor had unused lines of
short-term credit of $21 million.
A significant part of the Company's cash holdings were held within the
Investor Group in Hungary (approximately $7.5 million at March 31, 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 quarter of 1996, Investor and Israel Tractor made capital
expenditures of $904,000 and $722,000, respectively, for the purchase of
equipment and vehicles and improvements to property. Such expenditures were
made from internally generated funds.
At March 31, 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 quarter 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.
Significant rates of inflation persisted in the African countries where
Balton CP operates, triggering significant devaluations of local currencies.
-15-
<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.
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<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: May 21, 1996
IIC INDUSTRIES, INC.
By: /s/ Fortunee F. Cohen
---------------------
Fortunee F. Cohen, Secretary
