<PAGE>
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 June 30, 1997
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.
- --------------------------------------------------------------------------------
(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
- ------------------------------------------ ---------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 297-6132
- --------------------------------------------------------------------------------
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 July 31, 1997.
<PAGE>
FINANCIAL INFORMATION
FINANCIAL STATEMENTS
Page
----
Consolidated Balance Sheets
at June 30, 1997
and December 31, 1996 3
Consolidated Statements of Income
for the Six Months Ended
June 30, 1997 and June 30, 1996 5
Consolidated Statements of Income
for the Three Months Ended
June 30, 1997 and June 30, 1996 6
Consolidated Statement of Cash Flows
for the Six Months Ended
June 30,1997 and June 30, 1996 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)
JUNE 30, December 31,
ASSETS 1997 1996
----------- ------------
CURRENT ASSETS
Cash and cash equivalents $18,519 $ 17,211
Accounts receivable, net 44,281 43,400
Advances to subcontractors 265 282
Inventories (Note C) 42,495 61,178
Other current assets 5,512 10,561
---------- --------
Total current assets 111,072 132,632
RESTRICTED CASH 4,018 8,356
PROPERTY AND EQUIPMENT, NET 32,214 33,630
INVESTMENTS IN AND ADVANCES TO AFFILIATES 26,340 26,525
OTHER INVESTMENTS 366 555
OTHER ASSETS 2,373 1,858
----------- ---------
$176,383 $203,556
======== ========
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
IIC Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
(dollar amounts in thousands, except share data)
JUNE 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
----------- ------------
CURRENT LIABILITIES
Accounts payable $26,470 $ 20,554
Bank loans 15,681 35,750
Current maturities of long-term debt 30 88
Accrued expenses and other payables 11,279 18,083
Advances from customers 8,614 10,693
----------- ----------
Total current liabilities 62,074 85,168
LONG-TERM DEBT, less current portion 3,168 2,160
DUE TO AFFILIATES 1,870 1,850
OTHER LIABILITIES AND DEFERRED
CREDITS 5,265 5,854
MINORITY INTEREST IN SUBSIDIARIES 17,078 20,494
-------- --------
89,455 115,526
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 94,687 92,053
Foreign translation adjustment (29,561) (25,825)
Less treasury stock - at cost (162,438 shares) (2,725) (2,725)
---------- --------
86,928 88,030
------ --------
$176,383 $203,556
========= ========
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
IIC Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(dollar amounts in thousands, except share data)
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
---- ----
Net sales $120,421 $127,210
Cost of sales 95,813 97,080
------ ------
Gross profit 24,608 30,130
Selling, general and administrative expenses 22,266 22,846
------ ------
Operating income 2,342 7,284
----- -----
Other income (expenses)
Interest income 1,041 1,530
Equity in earnings of affiliates 1,881 2,528
Foreign currency loss (Note B) (1,396) (129)
Gain on sale of noncurrent assets, net 1,827 237
Interest expense (2,473) (1,565)
Other, net 434 429
---- ----
Income before income taxes and
minority interest 3,656 10,314
Income taxes (1,192) (1,625)
-------- --------
Income before minority interest 2,464 8,689
Minority Interest 170 (2,557)
--- -------
NET INCOME $ 2,634 $ 6,132
====== ======
Net income per common share $ 1.85 $ 4.31
===== =====
Weighted average number of common shares outstanding 1,423,368 1,423,368
========= =========
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
IIC Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(dollar amounts in thousands, except share data)
THREE MONTHS ENDED JUNE 30,
---------------------------
1997 1996
---- ----
Net sales $59,980 $67,712
Cost of sales 47,459 51,540
------ ------
Gross profit 12,521 16,172
Selling, general and administrative expenses 10,945 11,264
------ ------
Operating income 1,576 4,908
----- -----
Other income (expenses)
Interest income 501 587
Equity in earnings of affiliates 2,397 2,100
Foreign currency (loss) gain (Note B) (1,309) 279
Gain on sale of noncurrent assets, net 326 165
Interest expense (764) (593)
Other, net 143 275
---- ----
Income before income taxes and
minority interest 2,870 7,721
Income taxes (441) (1,114)
------ --------
Income before minority interest 2,429 6,607
Minority Interest (92) (2,229)
---- -------
NET INCOME $ 2,337 $ 4,378
====== ======
Net income per common share $ 1.64 $ 3.08
===== =====
Weighted average number of common shares outstanding 1,423,368 1,423,368
========= =========
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
IIC Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollar amounts in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1997 1996
---- ----
<S> <C> <C>
Net cash provided by operating activities $18,691 $18,467
------- -------
Cash flows from investing activities
Purchase of subsidiary shares, net of cash acquired (336)
Purchase of property and equipment (2,303) (3,775)
Purchase of investments (2,159) (3,197)
Purchase of other assets (5) (284)
Proceeds on disposal of property and equipment 1,909 397
Proceeds on disposal of investments 191 37
Restricted cash 4,339 1,177
----- -----
Net cash provided by (used in) investing activities 1,636 (5,645)
----- -------
Cash flows from financing activities
Issuance of long-term debt 1,339 403
Payments on long-term debt 128
Net payments of short-term bank loans (19,724) (8,691)
-------- -------
Net cash used in financing activities (18,385) (8,160)
Effect of exchange rate on cash (634) (414)
----- -----
Net increase in cash and cash equivalents
during the period 1,308 4,248
Cash and cash equivalents at beginning of period 17,211 19,414
------ ------
Cash and cash equivalents at end of period $18,519 $23,662
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for
Interest $ 2,590 $ 1,361
Income taxes 1,555 1,632
</TABLE>
The accompanying notes are an integral part of these statements.
-7-
<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 June 30, 1997 and December 31, 1996 and the results of
operations and cash flows for the six months ended June 30, 1997 and June
30, 1996.
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:
JUNE 30, December 31,
1997 1996
---- ----
Raw materials $5,126 $ 23,127
Work-in-progress 855 452
Finished goods 36,514 37,599
------ ------
$42,495 $61,178
======= =======
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 $10.6
million.
NOTE E - INVESTMENT IN AFFILIATE
At June 30, 1997, the Company's effective ownership percentage of
Danubius, Rt. ("Danubius"), a publicly traded company, was approximately
30% at a cumulative cost of approximately $25 million. Danubius owns a
number of hotels in Hungary and specializes in spa facilities.
-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 June 30, 1997. 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 of the fair value of the net assets acquired over
the cost is amortized over a period of forty years
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:
JUNE 30, 1997 June 30, 1996
------------- -------------
Current assets $ 42,058 $ 22,047
Noncurrent assets 164,627 126,478
Current liabilities 24,906 12,941
Noncurrent liabilities 50,895 11,048
Stockholders' equity 130,884 124,536
SIX MONTHS ENDED Six Months ended
JUNE 30, 1997 June 30, 1996
------------- -------------
Sales $50,183 $32,045
Operating income 5,875 7,517
Net income 6,360 7,227
-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 1996, 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 21% during 1996. Since the beginning of 1997, 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, 1996.
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 six months ended June 30, 1997
and 1996 certain information with respect to the results of operations of the
Company and its principal subsidiaries.
<TABLE>
<CAPTION>
Six Months Ended Net Sales Gross Profit Income (Loss) before Net Income (Loss)
June 30, 1997 --------- ------------ Income Taxes and -----------------
- ------------- Minority Interests
------------------
Amount % Amount % Amount % Amount %
------ - ------ - ------ - ------ -
(In thousands) (In thousands) (In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IIC Industries -- -- -- -- 1 0.1 (29) (1.1)
Inc.
(parent company)
Israel Tractors 35,015 29.1 9,464 38.5 753 20.6 100 3.8
&
Equipment Co.
(Israel)
Balton CP Group 24,842 20.6 7,991 32.4 1,742 47.6 549 20.8
(Africa)
Investor RT 60,564 50.3 7,153 29.1 1,160 31.7 $2,014 76.5
------ ---- ----- ---- ----- ----- ------ ----
Group (Hungary)
$120,421 100.0 $24,608 100.0 $3,656 100.0 $2,634 100.0
======== ===== ======= ===== ====== ===== ====== =====
Six Months Ended Net Sales Gross Profit Income (Loss) before Net Income (Loss)
June 30, 1996 --------- ------------ Minority Interests and -----------------
- ------------- Income Taxes
------------
Amount % Amount % Amount % Amount %
------ - ------ - ------ - ------ -
(In thousands) (In thousands) (In thousands) (In thousands)
IIC Industries -- -- -- -- 406 3.9 400 6.5
Inc.
(parent company)
Israel Tractors & 42,853 33.7 11,645 38.6 2,818 27.3 2,319 37.8
Equipment Co.
(Israel)
Balton CP Group 23,045 18.1 6,375 21.2 2,437 23.6 868 14.2
(Africa)
Investor RT 61,312 48.2 12,110 40.2 4,653 45.2 2,545 41.5
Group (Hungary) -------- ----- ------- ----- ------- ----- ------ -----
$127,210 100.0 $30,130 100.0 $10,314 100.0 $6,132 100.0
======== ===== ======= ===== ======= ===== ====== =====
</TABLE>
12
<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS
Net Sales. Net Sales on a consolidated basis for the half year ended June
30, 1997 decreased by approximately $7 million as compared to the comparable
period in 1996. This decrease was mainly attributable to a reduction in demand
for Israel Tractor's products.
Gross Profit. Gross Profit on a consolidated basis for the half year ended
June 30, 1997 decreased by approximately $5.5 million or approximately 18%, to
approximately $24.6 million, or approximately 20.4% of Net Sales, from
approximately $30.1 million, or approximately 23.7% of Net Sales, in the
corresponding period in 1996. This decrease was mainly attributable to
depressed market conditions, and reductions of margins in the Investor group,
primarily in the agricultural sector. Furthermore, the legacy of the irregular
activities of the previous management of Agrimill, who were removed from their
posts in February 1997 contributed to the decrease. Agrimill operates in the
agricultural sector of the Investor group. (See Note O to the Notes of the 1996
Consolidated Financial Statements.)
Operating income. Operating income on a consolidated basis for the half
year ended June 30, 1996 decreased by approximately $4.9 million, or
approximately 67%, to approximately $2.3 million, or approximately 1.9% of net
sales, from approximately $7.3 million, or approximately 5.7% of Net Sales for
the corresponding period in 1996. This decrease was principally due to the
reasons stated in the Gross Profits section.
Interest income. Interest income decreased for the half year by
approximately $489,000, or approximately 32%, to approximately $1,041,000 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 half year increased by
approximately $908,000, or approximately 58%, to approximately $2.5 million due
to an increase in bank loans.
Income before Income Taxes and Minority Interest. Income before Income
Taxes and Minority Interest in the first six months decreased by approximately
$6.7 million, or approximately 65% to approximately $3.7 million in the first
six months (representing approximately 3% of Net Sales for that period) from
approximately $10.3 million for the corresponding period in 1996 (representing
8.1% of Net Sales for that period).
Minority Interests. Minority Interests in the half year decreased by
approximately $2.7 million as a result of losses in the Investor group.
Net Income. Net Income for the half year decreased by approximately $3.5
million (or approximately 57%) to approximately $2.6 million (representing
approximately 2.2 % of Net Sales for that period) from approximately $6.1
million for the corresponding period in 1996 (representing approximately 4.8%
of Net Sales for that period).
13
<PAGE>
The table below sets forth for the six months ended June 30, 1997 and 1996
certain information with respect to the results of operations of the Company
and its five principal business segments.
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997 Six Months Ended June 30, 1996
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>
Vehicle sales and $ 5,289 4.4 $(11) (0.3) $4,919 3.9 $ 150 1.5
distribution (Investor)
Export and import of 54,649 45.4 (2,233) (61.1) 54,724 43.0 3,034 29.4
agricultural products
(Investor)
Other Industries 626 0.5 3,405 93.1 1,669 1.3 1,875 18.2
(Investor)
Tractors and heavy 35,015 29.1 753 20.6 42,853 33.7 2,818 27.3
equipment
(Israel Tractor)
Agricultural, 24,842 20.6 1,742 47.7 23,045 18.1 2,437 23.6
communications and
electrical equipment
(Balton CP)
-------- ----- ------ ----- -------- ----- ------- -----
$120,421 100.0 $3,656 100.0 $127,210 100.0 $10,314 100.0
======== ===== ====== ===== ======== ===== ======= =====
</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, following management's actions in reducing overhead
costs and closing unprofitable operations, Investor has shown a profit for the
first six months of 1997.
Vehicle Sales and Service Segment
o Net Sales for the six months ended June 30, 1997 increased by
approximately $370,000, or approximately 7.5%, as compared to the
corresponding period in 1996.
o There was a Loss before Minority Interests and Income Taxes for the six
months ended June 30, 1997 of $11,000 as compared to a profit of $150,000
in the corresponding period in 1996.
The increase in Net Sales and the decrease in Income before Income Taxes
and Minority Interests was primarily due to increased demand and competition
throughout the motor trade business, resulting from lower margins.
14
<PAGE>
Export/Import and Processing/Storage of Agricultural Products Segment
o Net Sales for the six months ended June 30, 1997 decreased by
approximately $75,000, or 0.1% as compared to the corresponding period in
1996.
o Income before Income Taxes and Minority Interest for the six months ended
June 30, 1997 decreased by approximately $5.3 million, or approximately
174% as compared to the corresponding period in 1996. This decrease was
mainly attributable to depressed market conditions in the domestic and
export markets, a reduction of margins due to fierce competition, and the
legacy of the irregular activities of the previous management of Agrimill,
who were removed from their posts in February 1997. (See Note O to the
Notes of the 1996 Consolidated Financial Statements.)
Other Industries
o Net Sales for the six months ended June 30, 1997 decreased by
approximately $1.04 million, or approximately 62%, as compared to the
corresponding period in 1996 due to the disposal of businesses in late
1996.
o There was a Profit before Income Taxes and Minority Interest of
approximately $3.4 million for the six months ended June 30, 1997,
compared to a profit of approximately $1.9 million for the six months
ended June 30, 1996 as a result of the increased equity in earnings in
Danubius.
ISRAEL TRACTOR: TRACTORS AND HEAVY EQUIPMENT SEGMENT
o Net Sales for the six months ended June 30, 1997 decreased by
approximately $7.8 million or approximately 18.2% as compared to the
corresponding period in 1996, due to a reduction in demand for the
Company's products.
o Income before Income Taxes and Minority Interest for the six months ended
June 30, 1997 decreased by approximately $2.1 million, or approximately
73% as compared to the corresponding period in 1996 as a result of lower
trading activity.
BALTON CP: AGRICULTURAL, COMMUNICATIONS AND ELECTRICAL EQUIPMENT SEGMENT
o Net Sales for the six months ended June 30, 1997 increased by
approximately $1.8 million, or approximately 7.8%, as compared to the
corresponding period in 1996. This was due to the increased demand for the
Company's products and the consolidation of Dizengoff W.A.Nigeria Limited
("Dizengoff"), which was previously accounted for under the equity method.
15
<PAGE>
o Income before Income Taxes and Minority Interests for the six months ended
June 30, 1997 decreased by approximately $695,000 , or approximately 28.5
% as compared to the corresponding period in 1996. This decrease was
mainly due to a reduced level of activity in Nigeria.
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 1997. At
June 30, 1997, IIC Industries Inc., the parent company (the "Parent Company"),
and its wholly-owned Israel Tractor subsidiary, had working capital of $39.1
million, including cash and cash equivalents of $14.3 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 June 30, 1997, Investor, Israel Tractor, and Balton had outstanding
short-term indebtedness of approximately $9.9 million, $1.1 million and $4.6
million, respectively.
At June 30, 1997, Investor, Israel Tractor and Balton had unused lines of
short-term credit of approximately 10.3 million, $4 million and $3.6 million,
respectively.
During the first half of 1997, Investor, Israel Tractor and Balton made
capital expenditures of $579,000; $391,000; and $1,3 million, respectively, for
the purchase of equipment and vehicles and improvements to property. Such
expenditures were made from internally generated funds.
At June 30, 1997, 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 1996 and during the first half of
1997, and therefore did not significantly affect operations in that country.
Furthermore, the devaluation of the Israeli shekel against the U.S. Dollar for
the six months of 1997 was at an annual rate of 9%.
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: August 13, 1997
IIC INDUSTRIES, INC.
By: /s/ Fortunee F. Cohen
----------------------------------
Fortunee F. Cohen, Secretary
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