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, 1994
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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
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Commission file number 2-5061
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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 each of the issuer's classes of
common stock is Common - 3,000,000; Class A - 20,753,996 (as of July
31, 1994).
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AMPAL-AMERICAN ISRAEL CORPORATION
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Index to Form 10-Q
Page
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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
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME
<TABLE><CAPTION>
SIX MONTHS ENDED JUNE 30, 1994 1993
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(Dollars in thousands, except per share data) (Unaudited) (Unaudited)
<S> <C> <C>
REVENUES
Interest:
Related parties............................ $ 7,214 $ 8,989
Others..................................... 821 818
Food processing.............................. 16,176 17,709
Manufacturing and distribution............... 4,811 -
Equity in earnings of affiliates and others.. 3,447 4,518
Other income:
Related parties............................ 1,574 1,799
Others..................................... 811 1,231
Gains on issuance of shares by affiliates
(Note 4).................................... 2,692 -
Gain on sale of investments (Note 5)......... - 1,150
-------- --------
Total revenues........................... 37,546 36,214
-------- --------
EXPENSES
Interest:
Related parties............................ 1,820 2,541
Others..................................... 6,786 9,507
Food processing.............................. 14,071 15,448
Manufacturing and distribution............... 2,977 -
Other expenses............................... 6,985 5,234
Minority interests........................... (275) (331)
-------- --------
Total expenses........................... 32,364 32,399
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Income before income taxes................... 5,182 3,815
Income taxes................................. 2,007 1,200
-------- --------
Income before cumulative effect of change in
accounting principle....... .............. 3,175 2,615
Cumulative effect on prior years of change in
accounting principle........................ - (4,982)
-------- --------
NET INCOME (LOSS)....................... $ 3,175 $ (2,367)
======== ========
Earnings (loss) per Class A share:
Earnings before cumulative effect of change
in accounting principle.................... $ .12 $ .11
Cumulative effect on prior years of change
in accounting principle.................... - (.21)
-------- --------
Earnings (loss) per Class A share............ $ .12 $(.10)
======== ========
Weighted average number of Class A and
equivalent shares outstanding (in thousands) 23,933 20,717
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME
<TABLE><CAPTION>
THREE MONTHS ENDED JUNE 30, 1994 1993
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(Dollars in thousands, except per share data) (Unaudited) (Unaudited)
<S> <C> <C>
REVENUES
Interest:
Related parties............................ $ 4,156 $ 6,334
Others..................................... 474 602
Food processing.............................. 8,896 9,038
Manufacturing and distribution............... 2,157 -
Equity in earnings of affiliates and others.. 457 1,263
Other income:
Related parties............................ 821 911
Others..................................... 410 550
Gain on sale of investments (Note 5)......... - 1,150
-------- --------
Total revenues........................... 17,371 19,848
-------- --------
EXPENSES
Interest:
Related parties............................ 1,003 2,148
Others..................................... 3,846 6,932
Food processing.............................. 6,973 8,127
Manufacturing and distribution............... 1,383 -
Other expenses............................... 3,625 2,477
Minority interests........................... 4 (559)
-------- --------
Total expenses........................... 16,834 19,125
-------- --------
Income before income taxes................... 537 723
Income taxes................................. 36 339
-------- --------
NET INCOME.............................. $ 501 $ 384
======== ========
Earnings per Class A share................... $.02 $.02
==== ====
Weighted average number of Class A and
equivalent shares outstanding (in thousands) 25,218 20,717
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION> JUNE 30, DECEMBER 31,
ASSETS AS AT 1994 1993
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(Dollars in thousands) (Unaudited) (Note 2)
<S> <C> <C>
Cash and cash equivalents...................... $ 35,379 $ 3,178
Deposits:
Related parties.............................. 86,084 99,481
Notes and loans receivable:
Related parties.............................. 12,811 11,948
Others....................................... 2,229 4,964
Investments (Note 2):
Related parties.............................. 103,558 103,319
Others....................................... 31,604 8,322
Property and equipment, less accumulated
depreciation of $10,522 and $10,554........... 30,285 30,496
Other assets................................... 43,531 42,352
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TOTAL ASSETS................................... $ 345,481 $ 304,060
========== ==========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
LIABILITIES AND JUNE 30, DECEMBER 31,
SHAREHOLDERS' EQUITY AS AT 1994 1993
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(Dollars in thousands) (Unaudited) (Note 2)
<S> <C> <C>
LIABILITIES
Deposits and notes and loans payable:
Related parties............................... $ 32,048 $ 42,752
Others........................................ 16,293 18,091
Debentures outstanding.......................... 88,088 91,270
Accounts and income taxes payable and accrued
expenses:
Related parties............................... 188 1,169
Others........................................ 36,109 33,621
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Total liabilities....................... 172,726 186,903
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MINORITY INTERESTS.............................. 3,688 340
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SHAREHOLDERS' EQUITY (Note 3)
4% Cumulative, Participating, Convertible
Preferred Stock, $5 par value; authorized
650,000 shares; issued and outstanding
211,065 and 213,720 shares..................... 1,055 1,068
6-1/2% Cumulative, Convertible Preferred Stock,
$5 par value; authorized 4,282,850 shares;
issued and outstanding 1,140,736 and 1,202,342
shares......................................... 5,703 6,011
Class A Stock, $1 par value; authorized
30,000,000 shares; issued 20,740,806 and
16,224,779 shares; outstanding 20,740,806
and 16,042,713 shares.......................... 20,741 16,225
Common Stock, $1 par value; authorized, issued
and outstanding 3,000,000 shares............... 3,000 3,000
Additional paid-in capital...................... 57,246 10,605
Retained earnings............................... 85,254 82,079
Cumulative translation adjustments.............. (2,685)
(2,171)
Unrealized loss on marketable securities
(Note 2)....................................... (1,247) -
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Total shareholders' equity.............. 169,067 116,817
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..... $ 345,481 $ 304,060
========== ==========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
SIX MONTHS ENDED JUNE 30, 1994 1993
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(Dollars in thousands) (Unaudited) (Unaudited)
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net income (loss).......................... $ 3,175 $ (2,367)
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in earnings of affiliates and
others................................... (3,447) (4,518)
Gains on issuance of shares by affiliates. (2,692) -
Cumulative effect on prior years of change
in accounting principle.................. - 4,982
Gain on sale of investments............... -
(1,150)
Translation loss (gain)................... 122 (41)
Depreciation expense...................... 1,053 979
Amortization expense...................... 2,399 2,294
Minority interests........................ (275) (331)
(Increase) in other assets................. (2,690) (9,895)
(Decrease) increase in accounts and income
taxes payable and accrued expenses:
Related parties........................... (981) (2,045)
Others.................................... 2,141 6,331
Dividend received from affiliate........... 4,277 1,409
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Net cash provided by (used in) operating
activities............................... 3,082 (4,352)
-------- --------
Cash flows from investing activities:
Deposits receivable collected:
Related parties........................... 15,355 13,517
Others.................................... - 350
Notes and loans receivable granted:
Related parties........................... (1,745) -
Notes and loans receivable collected:
Related parties........................... 1,551 2,409
Others.................................... 2,665 769
Investments made:
Related parties........................... (1,552) (51,673)
Others.................................... (25,249) (2,052)
Proceeds from sale of investments:
Others.................................... 2,323 5,392
Purchase of property and equipment......... (1,367) (3,902)
-------- --------
Net cash (used in) investing activities... (8,019) (35,190)
-------- --------
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
SIX MONTHS ENDED JUNE 30, 1994 1993
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(Dollars in thousands) (Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from financing activities:
Deposits and notes and loans payable
received:
Related parties........................... $ 798 $ 15,047
Others.................................... 1,304 44,992
Deposits and notes and loans payable
repaid:
Related parties........................... (12,180) (17,660)
Others.................................... (3,239) (4,160)
Debentures outstanding issued.............. 4,493 -
Debentures outstanding repaid.............. (11,443) (5,210)
Proceeds from issuance of shares........... 57,572 686
-------- --------
Net cash provided by financing activities. 37,305 33,695
Effect of exchange rate changes on cash
and cash equivalents....................... (167) (173)
-------- --------
Net increase (decrease) in cash and cash
equivalents................................ 32,201 (6,020)
Cash and cash equivalents at beginning
of period.................................. 3,178 9,698
-------- --------
Cash and cash equivalents at end of
period..................................... $ 35,379 $ 3,678
======== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest:
Related parties........................... $ 865 $ 1,203
Others.................................... 3,054 3,569
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Total interest paid..................... $ 3,919 $ 4,772
======== ========
Income taxes paid......................... $ 1,375 $ 1,590
======== ========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE><CAPTION>
SIX MONTHS ENDED JUNE 30, 1994 1993
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(Dollars in thousands) (Unaudited) (Unaudited)
<S> <C> <C>
4% PREFERRED STOCK
Balance, beginning of year................... $ 1,068 $ 1,202
Conversion of 2,655 and 7,048 shares into
Class A Stock............................... (13) (35)
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Balance, end of period....................... $ 1,055 $ 1,167
======== ========
6-1/2% PREFERRED STOCK
Balance, beginning of year................... $ 6,011 $ 7,554
Conversion of 61,606 and 125,901 shares into
Class A Stock............................... (308) (629)
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Balance, end of period....................... $ 5,703 $ 6,925
======== ========
CLASS A STOCK
Balance, beginning of year................... $ 16,225 $ 15,164
Issuance of shares upon conversion of
Preferred Stock............................. 198 413
Issuance of shares in a public offering*..... 4,318 -
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Balance, end of period....................... $ 20,741 $ 15,577
======== ========
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year................... $ 10,605 $ 9,989
Conversion of Preferred Stock................ 122 251
Proceeds from issuance of shares in a public
offering.................................... 46,519 -
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Balance, end of period....................... $ 57,246 $ 10,240
======== ========
RETAINED EARNINGS
Balance, beginning of year................... $ 82,079 $ 82,293
Net income (loss)............................ 3,175 (2,367)
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Balance, end of period....................... $ 85,254 $ 79,926
======== ========
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year................... $ (2,171) $ -
Foreign currency translation adjustment...... (514) (466)
-------- --------
Balance, end of period....................... $ (2,685) $ (466)
======== ========
UNREALIZED LOSS ON MARKETABLE SECURITIES
Balance, beginning of year................... $ - $ -
Unrealized loss, net......................... (1,247) -
-------- --------
Balance, end of period....................... $ (1,247) $ -
======== ========
* Issuance of 4,500,000 shares, including 182,066 shares held in treasury.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. As used in these financial statements, the term the "Company"
refers to Ampal-American Israel Corporation ("Ampal") and its
consolidated subsidiaries.
2. The December 31, 1993 consolidated balance sheet presented
herein was derived from the audited December 31, 1993
consolidated financial statements of the Company.
Reference should be made to the Company's consolidated
financial statements for the year ended December 31, 1993 for a
description of the accounting policies which have been
continued except for the following:
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" which requires that
marketable equity securities, other than equity securities
accounted for by the equity method, be reported at fair value.
Unrealized gains and losses from those securities which are
classified as available-for-sale are reported as a separate
component of shareholders' equity. The cumulative effect of
adopting this accounting principle as of January 1, 1994 was
an increase in investments of $7.4 million, an increase in
deferred income taxes payable of $3.1 million and an increase
in shareholders' equity of $4.3 million. From January 1 to
June 30, 1994, the net effect of market fluctuations resulted
in a decrease of $1.2 million in shareholders' equity.
Also, reference should be made to the notes to the Company's
December 31, 1993 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. All adjustments (of a normal
recurring nature) which are, in the opinion of management,
necessary to a fair presentation of the results of the interim
period have been included.
3. On January 25, 1994, Ampal sold 4.5 million units consisting of
one share of Class A stock and one redeemable warrant to
purchase one share of Ampal's Class A stock, for $12.125 per
unit in a public offering. The warrants are exercisable at $16
per share at any time until January 31, 1999, and are callable
by Ampal, in whole or in part, from and after February 1, 1996,
without payment to the holder. The net proceeds which Ampal
received from this offering amounted to approximately $51
million.
On November 5, 1993, Ampal's Board of Directors approved a
stock option plan which provides for grants of options to
purchase up to 200,000 shares of Class A stock in the aggregate
to employees, officers and directors of Ampal and certain
subsidiaries of Ampal. On January 25, 1994, the Stock Option
Committee of the Board of Directors approved the issuance of
134,900 options in the aggregate at an exercise price of $10.91
per share (a 10% discount from market price on the date of
grant). The Stock Option Plan is subject to approval by
Ampal's shareholders.
4. In February 1994, the other shareholder of Pri Ha'emek (Canned
and Frozen Food) 88 Ltd. ("Pri Ha'emek"), the Company's then
74.9%-owned subsidiary, purchased additional shares in Pri
Ha'emek at the same price the Company paid for its shares in
1991, diluting the Company's ownership to 66.7%. In March
1994, Pri Ha'emek conducted an initial public offering in
Israel on the Tel Aviv Stock Exchange. In
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<PAGE>
connection with this offering, the Company realized a gain on
issuance of shares of $2.3 million ($1.5 million, after taxes).
The Company's interest in Pri Ha'emek was initially diluted to
51.25%. Subsequent to the public offering, the Company has
purchased additional shares at a cost of $.2 million, and at
June 30, 1994 its interest was 54.4%. Upon exercise of all
warrants and convertible debentures, the Company's interest may
be diluted to 37.4%. If the Company's interest in Pri Ha'emek
decreases below 50%, Pri Ha'emek's results will no longer be
consolidated with the Company's but will be recorded by the
equity method of accounting.
During the first quarter of 1994, Granite Hacarmel Investments
Ltd. ("Granite") issued additional shares upon conversions of
its debentures. The Company's interest in Granite was diluted
from 21.6% to 21.2% and the Company recorded a gain on issuance
of shares of approximately $.3 million ($.2 million, after
taxes).
5. In June 1993, the Company sold shares in Teledata Communication
Ltd. and realized a gain on sale of $1.1 million (approximately
$.6 million, after taxes).
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
-------------------------------
As of June 30, 1994, cash and cash equivalents were $35.4 million; an
increase of approximately $32 million from December 31, 1993. This
increase is mainly attributable to the proceeds received by Ampal in a
public offering (see below); at June 30, $21.1 million was invested in
cash and cash equivalents. The Company's food processing subsidiary,
Pri Ha'emek (Canned and Frozen Food) 88 Ltd. ("Pri Ha'emek") raised
$11.4 million ($7 million of equity and $4.4 of debentures) in a public
offering in Israel (see Results of Operations). The Company received a
dividend from Granite Hacarmel Investments Ltd. ("Granite") of $4.3
million in March 1994.
On January 25, 1994, Ampal sold 4.5 million units consisting of one
Class A share and one redeemable warrant to purchase one share of
Ampal's Class A stock in a public offering. This offering resulted in
net proceeds to Ampal of approximately $51 million which Ampal intends
to use for the financing of acquisitions, additions to existing holdings
and other working capital and general corporate purposes, including
early redemption of Ampal's outstanding debentures. The Company's
investments increased by approximately $23.5 million; this increase is
related to the investment of the proceeds of this public offering in
short-term interest-bearing securities.
Deposits, notes and loans receivable, and deposits and notes and loans
payable declined as a result of scheduled repayments. Outstanding
debentures declined primarily as a result of the early redemption of
$6.5 million of high interest-bearing debentures and the scheduled
repayment of approximately $5 million. Pri Ha'emek issued debentures in
the amount of $4.4 million. On July 1, 1994, Ampal called approximately
$4.4 million of its 8%-10% interest-bearing debentures which are
scheduled to mature in 2000 and later in 1994 it intends to make further
redemptions of approximately $4.7 million of this same series of
debentures.
Results of Operations
---------------------
Six months ended June 30, 1994 compared to six months ended June 30, 1993:
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Consolidated net income increased to $3.2 million for the six months
ended June 30, 1994, as compared with a net loss of $2.4 million for the
six months ended June 30, 1993. In 1993, the Company was required to
record a nonrecurring charge to net income of approximately $5 million
with respect to its adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." In addition, net
income in 1994 increased as a result of gains on issuances of shares and
a reduction in net interest expense. These increases were partially
offset by a loss incurred by the Company's food processing subsidiary,
reductions in equity in earnings of affiliates and other income, and a
higher effective income tax rate in 1994.
The decreases in interest revenue, interest expense and net interest
expense for the six months ended June 30, 1994 as compared to the same
period in 1993 resulted from the repayment of deposits, notes and loans
receivable as well as deposits, notes and
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loans payable and outstanding debentures. Also, Ophir Holdings Ltd.'s
("Ophir") results, which were consolidated in the first six months of
1993, are reflected by the equity method in 1994 because the Company's
interest in Ophir was diluted to 42.5% in November 1993. In the second
quarter of 1993, Ophir incurred significant interest expense on bank
borrowings used to finance its March 1993 investment in Industrial
Buildings Corporation Ltd. ("Industrial Buildings") and as a result
recorded a loss in the first six months.
Equity in earnings of affiliates decreased for the six months ended June
30, 1994 as compared to the same period in 1993 because Ophir's 1993
loss was not reported by the equity method in 1993 as its financial
statements were consolidated with the Company's (see above). In 1994,
Ophir reported greater losses due to significant financing expense
associated with its acquisition of Industrial Buildings. Were it not
for the change in accounting for Ophir's losses, equity in earnings of
affiliates would have shown an increase, primarily because the Moriah
Hotel group reported increased earnings due to higher occupancy rates.
Also, Granite's earnings were reduced because it reported lower interest
income than in 1993.
In February 1994, the other shareholder of Pri Ha'emek, the Company's
then 74.9%-owned subsidiary, purchased additional shares in Pri Ha'emek
at the same price the Company paid for its shares in 1991, diluting the
Company's ownership to 66.7%. In March 1994, Pri Ha'emek conducted an
initial public offering in Israel on the Tel Aviv Stock Exchange. In
connection with this offering, the Company realized a gain on issuance
of shares of $2.3 million ($1.5 million, after taxes). The Company's
interest in Pri Ha'emek was initially diluted to 51.25%. Subsequent to
the public offering, the Company has purchased additional shares at a
cost of $.2 million, and at June 30, 1994 its interest was 54.4%. Upon
exercise of all warrants and convertible debentures, the Company's
interest may be diluted to 37.4%. If the Company's interest in Pri
Ha'emek decreases below 50%, Pri Ha'emek's results will no longer be
consolidated with the Company's but will be recorded by the equity
method of accounting. The increase in minority interests in the balance
sheet is attributable to the minority interests' share of proceeds from
this offering.
In February and June 1993, the Company invested an aggregate of
approximately $4.3 million in Paradise Mattresses (1992) Ltd.
("Paradise") for approximately 85.1% of the shares of Paradise.
Paradise's assets and liabilities were consolidated commencing June 30,
1993; its manufacturing and distribution operations were included in
equity in earnings of affiliates for the six months ended June 30, 1993
and consolidated thereafter. This also accounts for the 1994 increase
in the "Other expenses" category. Paradise is a company which
manufactures and markets mattresses and fold-out beds in Israel and is a
licensee of the Sealy Posturepedic Mattress name and manufacturing
process.
Other income, and specifically rental income which is included in this
category, decreased because Ophir's financial statements, which were
consolidated with the Company's financial statements in the first nine
months of 1993, are reflected by the equity method thereafter.
During the first quarter of 1994, Granite issued additional shares upon
conversions of its debentures. The Company's interest in Granite was
diluted from 21.6% to 21.2% and the Company recorded a gain on issuance
of shares of approximately $.3 million ($.2 million, after taxes).
The increase in income tax expense and the effective income tax rate
in the six months ended June 30, 1994 as compared to the same period
in 1993 is attributable to the lesser availability of tax loss carryforwards
of certain Israeli subsidiaries in 1994 as compared to 1993, and changes in
the components of these taxable incomes.
Three months ended June 30, 1994 compared to three months ended June 30, 1993:
-----------------------------------------------------------------------------
Consolidated net income increased to $.5 million for the three months
ended June 30,
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1994 as compared with $.4 million for the three months ended June 30,
1993. Net income increased as a result of a reduction of net interest
expense, improved earnings of the Company's food processing subsidiary
and a reduction in income tax expense, which was offset by a decrease in
equity in earnings of affiliates. Also, in 1993 the Company recorded a
$1.1 million gain on sale of investments.
Interest revenue, interest expense and net interest expense declined in
the three months ended June 30, 1994 as compared to the same period in
1993 for the reasons discussed in Results of Operations - Six months
ended June 30, 1994 compared to six months ended June 30, 1993.
In the three months ended June 30, 1994, the decline in equity in
earnings of affiliates resulted from the accounting for Ophir's losses
(see discussion in Results of Operations - Six months ended June 30,
1994 compared to six months ended June 30, 1993, above) which was offset
by the Moriah Hotel group's increased earnings due to higher occupancy
rates.
The Company's food processing subsidiary recorded earnings in the second
quarter of 1994 as compared to a loss in 1993 because of the change in
the mix of products sold and a greater emphasis on local sales.
In the three months ended June 30, 1993, the Company sold shares in
Teledata Communication Ltd. and reported a gain on sale of investments
of approximately $1.1 million (approximately $.6 million, after taxes).
The decline in income tax expense and the effective income tax rate in
the three months ended June 30, 1994 as compared to the same period in
1993 is attributable to changes in the components of taxable income.
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None.
-----------------
Item 2. Changes in Securities - None.
---------------------
Item 3. Defaults upon Senior Securities - None.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders -
---------------------------------------------------
None.
Item 5. Other Information - None.
-----------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Index to Exhibits:
Schedule setting forth the computation of earnings
per Class A share......................................Page 14
Agreement of Sublease dated as of June 22, 1993, by
and between Bank Hapoalim B.M. and Ampal-American
Israel Corporation...................................Page E-1*
(b) No Reports on Form 8-K were filed during the quarter
covered by this Report.
* Refers to a separately bound exhibit volume
- 13 -
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
SCHEDULE SETTING FORTH COMPUTATION OF EARNINGS PER CLASS A SHARE
----------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1994 1993
-----------------------------------------------------------------------------
(Amounts in thousands, except per (Unaudited) (Unaudited)
share data)
Weighted average number of shares
outstanding:
4% Preferred...................... 212 229
6-1/2% Preferred.................. 1,159 1,444
Class A........................... 19,396 15,240
Common............................ 3,000 3,000
======= =======
Weighted average number of shares out-
standing assuming conversion of pre-
ferred stock into Class A shares:
Class A........................... 23,933 88.86% 20,717 87.35%
Common............................ 3,000 11.14 3,000 12.65
------- ------- ------- -------
26,933 100.00% 23,717 100.00%
======= ======= ======= =======
Income before cumulative effect of
change in accounting principle....... $ 3,175 $ 2,615
Cumulative effect on prior years of
change in accounting principle....... - (4,982)
------- -------
NET INCOME (LOSS)................ $ 3,175 $(2,367)
======= =======
Allocation of net income (loss) on the
basis of the respective dividend
rights of the above classes of
stock, pro rata:
Class A........................... $ 2,821 88.86% $(2,068) 87.35%
Common............................ 354 11.14 (299) 12.65
------- ------- ------- -------
$ 3,175 100.00% $(2,367) 100.00%
======= ======= ======= =======
Earnings (loss) per Class A share:
Earnings before cumulative effect
of change in accounting principle... $ .12 $ .11
Cumulative effect on prior years of
change in accounting principle...... - (.21)
----- -----
Earnings (loss) per Class A share.... $ .12 $(.10)
===== =====
- 14 -
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMPAL-AMERICAN ISRAEL CORPORATION
By:/s/ Lawrence Lefkowitz
---------------------------------
Lawrence Lefkowitz
President
(Principal Executive Officer)
By:/s/ Alan L. Schaffer
---------------------------------
Alan L. Schaffer
Vice President - Finance
and Treasurer
(Principal Financial Officer)
By:/s/ Alla Kanter
---------------------------------
Alla Kanter
Controller
(Principal Accounting Officer)
Dated: August 15, 1994
- 15 -
AGREEMENT OF SUBLEASE, dated as of the 22nd day of June 1993,
by and between BANK HAPOALIM B.M., a corporation organized under the
laws of the State of Israel (hereinafter the "Landlord") and AMPAL-
AMERICAN ISRAEL CORPORATION, a New York corporation (hereinafter the
"Tenant").
W I T N E S E T H :
- - - - - - - - -
WHEREAS, Landlord is presently the holder of the tenant's
estate in and to the following lease (hereinafter the "Overlease"):
Lease dated as of August 21, 1992 between KG A&A Corporation,
as landlord (hereinafter the "Overlandlord") and Landlord, as tenant,
and first amendment thereto dated as of November 1, 1993, covering the
eleventh, twelfth and fourteenth floors in the building known as
Americas Tower, 1177 Avenue of the Americas, New York, New York 10036
(hereinafter the "Building"), which premises are more particularly
described in the Overlease; and
WHEREAS, Tenant desires to sublet from Landlord a portion of
the premises demised in the Overlease located on the twelfth floor of
the Building, which portion contains 2,825 usable square feet, as more
particularly described on the Exhibit annexed hereto and made a part
hereof (hereinafter the "Sublet Space") upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein, Landlord and Tenant do hereby agree as follows:
E-1
<PAGE>
1. Leased Premises and Term. Landlord hereby leases to Tenant,
------------------------
and Tenant hereby hires from Landlord, the Sublet Space for a term of 17
years and 9 days, which term shall commence as of August 21, 1992 and
shall expire on August 30, 2009 or on such earlier date upon which said
term may expire or be canceled or terminated pursuant to any of the
provisions of this Lease upon and subject to the covenants, agreements,
terms and conditions herein contained. Tenant shall have the same
option as Landlord to extend the term of the Lease under the provisions
of Article 40 of the Overlease, provided Landlord exercises its option
thereunder.
2. Fixed Rent. The fixed rent shall commence on September
----------
1, 1994 and shall be equal to Tenant's Proportionate Share, as defined
in Section 5(c) of this Lease, of the rent paid under the Overlease,
which Tenant agrees to pay in equal monthly installments in advance on
the first day of each and every calendar month during the term, and
shall initially be at the rate of $168,640.00 per annum. Tenant
covenants to pay the fixed rent, additional rent and other charges
herein reserved or payable to Landlord at the office of Landlord or at
such other place as Landlord may designate, by notice, in lawful money
of the United States Of America, without demand therefor and without
deduction, setoff or abatement whatsoever, except as expressly provided
or incorporated by reference in this Lease. The fixed rent shall not be
increased beyond Tenant's Proportionate Share of the rent payable by
Landlord to Overlandlord under Article 1 of the Overlease without taking
into account the provisions of any
E-2
<PAGE>
amendment to the Overlease, unless Tenant shall consent thereto in
writing.
3. Tenant Fund. Tenant shall pay its Proportionate Share,
-----------
as defined in Section 5(c) of the Lease, of Landlord's costs of Initial
Alterations, as defined in the Overlease, beyond those costs covered by
the Tenant Fund, as defined in Section 3.4 of the Overlease. Tenant
shall also pay Landlord for equipment, furniture and filing systems,
purchased by Landlord for Tenant if: a) not included in Initial
Alterations and b) requested or approved by Tenant.
4. Provisions of Overlease. Tenant acknowledges that it is
-----------------------
fully familiar with the terms of the Overlease. Tenant hereby assumes
all of the responsibilities and obligations on the part of the Tenant to
be performed under the Overlease with respect to the Sublet Space other
than the obligation to pay to Overlandlord the fixed rent and additional
rent as provided in the Overlease. Any sums which are paid or credited
by Overlandlord to Landlord as tenant under the Overlease shall be
credited by Landlord to Tenant's rent account hereunder to the extent of
Tenant's Proportionate Share, as defined in Section 5(c) of this Lease.
Except as otherwise expressly provided in this Lease, all of the terms,
provisions, covenants and conditions contained in the Overlease, and
such rights and obligations as are contained in the Overlease, are
hereby imposed upon the respective parties hereto, the Landlord being
substituted for the Overlandlord in said Lease, with the Landlord having
all of the rights, remedies and powers of
E-3
<PAGE>
the Overlandlord as set forth in the Overlease, and the Tenant being
substituted for the tenant in the Overlease, with the Tenant having all
the rights, obligations and duties of the tenant as set forth in the
Overlease, it being distinctly understood and agreed, however, that
Landlord shall not be bound by any warranties and representations made
by the Overlandlord in the Overlease, nor shall Landlord be obligated to
perform any of the terms, covenants, conditions and agreements in the
Overlease required to be performed by the Overlandlord; and Tenant
agrees to look solely to the Overlandlord for the performance of the
same. Tenant further covenants and agrees not to violate any of the
terms, covenants and provisions of the Overlease. Tenant shall be bound
by all of the restrictions and limitations placed upon the Landlord as
tenant under the Overlease, as if the Tenant were the tenant thereunder.
In the event the Overlease is terminated pursuant to its terms
for any reason, this Lease shall automatically cease and terminate as of
the date upon which the Overlease is so terminated. Upon any such
termination of the Overlease, all fixed rent and additional rent
provided for in this Lease shall be prorated as of the date of such
termination and all fixed rent and additional rent owing to the Landlord
hereunder shall be paid to the Landlord, prorated as aforesaid, and
thereafter, neither party shall have any further obligation or liability
to the other thereafter arising under this Lease except as more
particularly set forth herein.
Tenant hereby indemnifies and agrees to hold harmless Landlord
against any and all claims, loss and damage, including
E-4
<PAGE>
without limitation attorneys' fees and disbursements, which may at any
time be asserted by Overlandlord against Landlord for failure of
Landlord to perform any of the covenants, agreements, terms, provisions
or conditions contained in the Overlease, which by reason of the
provisions of this Lease, Tenant is obligated to perform.
5. Additional Rent.
---------------
(a) Tenant agrees to pay to Landlord as additional rent
hereunder, Tenant's Proportionate Share of all additional rent required
to be paid by Landlord to Overlandlord under the Overlease and an amount
equal to three (3) times Tenant's Proportionate Share, as defined in
Section 5(c) of the Lease, of electricity costs incurred by Landlord for
the 12th Floor of the Building, not later than the date on which such
amounts are required to be paid by Landlord to Overlandlord under the
Overlease.
(b) Tenant agrees to pay to Landlord as additional rent
hereunder, Tenant's Proportionate Share of all other sums and charges
required to be paid by Landlord to Overlandlord under the Overlease,
whether or not therein referred to as additional rent, not later than
the date on which such amounts are required to be paid by Landlord to
Overlandlord under the Overlease.
(c) The term "Tenant's Proportionate Share" shall mean that
fraction, the numerator of which is the number 4,960 (which number
represents the number of square feet of the total rentable area
allocable to Tenant and which may be adjusted pursuant to the Access
Agreement of even date herewith between Landlord and Tenant)
E-5
<PAGE>
and the denominator of which is the number of square feet of the total
rentable area of the "Premises", as defined in the Overlease, which is
the number 68,700. In the event that the area of the "Premises", as
defined in the Overlease, should change during any period for which
additional rent is payable hereunder, then Tenant's Proportionate Share
will be appropriately adjusted to reflect Tenant's equitable share of
any such additional rent payable for such period.
6. Landlord Not Liable for Acts of Overlandlord.
--------------------------------------------
Notwithstanding anything in this Lease contained to the contrary,
Landlord shall not be liable for any of the obligations, duties,
responsibilities or liabilities of the Landlord under the Overlease or
for the failure or any delay by the Overlandlord to perform or discharge
the same. Landlord shall not be obligated to take any action by reason
of any matter relating to the operation or maintenance, repair,
replacement or restoration of the Sublet Space or of any facilities or
services thereof.
7. Tenant's Rights Against Overlandlord. Tenant shall have
------------------------------------
all of the benefits, privileges, powers and rights against Overlandlord
and others that Landlord has against Overlandlord and others under the
Overlease and otherwise. Landlord hereby assigns to Tenant its rights
under the Overlease (to the full extent permitted by law) to require and
obtain compliance by Overlandlord with all the provisions of the
Overlease insofar as the same affects the Sublet Space or any part
thereof, or the access to or use or occupancy thereof, and all other
rights and remedies
E-6
<PAGE>
Landlord would have as a result of Overlandlord's failure or refusal to
comply with such provisions whether arising under the Overlease or at
law or in equity. Landlord agrees that in the event Overlandlord fails
or refuses to comply with any provision of the Overlease affecting the
Sublet Space or any part thereof or the access to or use or occupancy
thereof, then Tenant shall have, but shall not be limited to, the right
in its own name or as the true and lawful representative and attorney-
in-fact of Landlord in Landlord's name but at Tenant's sole cost and
expense, to require and obtain performance by Overlandlord pursuant to
the terms of the Overlease. In the event of such failure or refusal by
Overlandlord, Landlord covenants and agrees that, at the request of
Tenant, Landlord will join in and give its full cooperation and
assistance to any action or proceeding in connection with or resulting
from Overlandlord's failure or refusal to comply with any of the terms,
covenants and conditions of the Overlease affecting the Sublet Space or
the access to or the use or occupancy thereof, provided that the same
shall be without cost or expense to it. In the event Landlord shall so
join in any action or proceeding, Tenant shall indemnify Landlord
against any loss or liability actually incurred by Landlord by reason of
such action or proceeding.
8. Condition of Premises. Neither Landlord nor Landlord's
---------------------
agents have made any representations or promises with respect to the
Sublet Space or the equipment and improvements therein situated or the
physical condition thereof except as the
E-7
<PAGE>
parties hereafter may otherwise agree.
9. Landlord's Services. To the extent that the
--------------------
Overlandlord, pursuant to the provisions of the Overlease, shall furnish
services to or for the benefit of the Sublet Space under the Overlease
without additional charge or rental, Tenant shall be entitled to receive
such services to and for the benefit of the Sublet Space without
additional charge or rental. Landlord shall endeavor to assist Tenant
in obtaining such services from Overlandlord, but Tenant agrees to look
solely to the Overlandlord for the rendition of such services in the
Sublet Space, and Landlord shall not be liable to Tenant for any loss,
damage or expense resulting from any failure of the Overlandlord to
furnish such services.
10. Notice. Wherever any period of time after notice
------
is specified in the Overlease, the applicable period for performance by
Tenant shall be two (2) days less than the period of time specified in
the Overlease.
11. Consents of Overlandlord. Whenever Tenant wishes to do
------------------------
something to or affecting the Sublet Space or any part thereof which
requires the consent of the Overlandlord or whenever the consent of the
Overlandlord is required under the Overlease with respect to any matter
affecting the Sublet Space or any part thereof, upon request from
Tenant, Landlord will request such consent from the Overlandlord and
will not unreasonably withhold its consent if the Overlandlord consents
thereto. Whenever the consent or approval or other action on the part
of the Landlord is
E-8
<PAGE>
required hereunder, Landlord shall not be obligated or required to give
any such consent or approval or to take any action in the event the
consent or approval or other action of the Overlandlord under the
Overlease is also required by the provisions of the Overlease, unless
and until the Overlandlord under the Overlease shall have given such
consent or approval or taken such action. In the event, however, that
Overlandlord shall refuse to grant such consent, Landlord shall have no
liability to the Tenant hereunder, nor shall the rent abate, nor shall
the obligations of the parties hereto to each other be affected by
reason thereof.
12. Overlandlord's Consent to this Lease. This Lease is
------------------------------------
subject to the consent of Overlandlord as required by the Overlease.
13. Conditional Limitations. Landlord, at its option, may
-----------------------
terminate this Lease on Five (5) days' notice to Tenant if at any time
during the term of this Lease, or any renewal thereof, any of the
following shall occur:
(a) Tenant shall default beyond the applicable grace
period in the performance of any of its duties or
obligations, whether relating to the payment of any sum
or otherwise, under the terms of any agreement between
Landlord and Tenant, including but not limited to, any
lease of personal property, lease of real property, or
security agreement; or
(b) Tenant shall fail, beyond the applicable
E-9
<PAGE>
grace period, to (i) pay any sum when due to Landlord,
whether under any note, purchase agreement, lease or
otherwise, or (ii) perform any duty or obligation when
due under any of the aforesaid.
Upon such termination, Tenant shall quit and surrender the Sublet Space
to Landlord and Landlord shall thereupon have all of the rights and
remedies provided Overlandlord upon termination as set forth in the
Overlease with the same force and effect as though set forth herein. As
used herein, "Tenant" shall mean any assignee or successor of Tenant
named herein.
14. Quiet Enjoyment. Landlord covenants and agrees with
---------------
Tenant that upon Tenant paying the rent and additional rent and
observing and performing all the terms, covenants and conditions on
Tenant's part to be observed and performed, Tenant may peaceably and
quietly enjoy the Sublet Space, subject, nevertheless, to the terms and
conditions of this Lease and the terms and conditions of the Overlease.
In addition, Tenant will cause its employees to adhere to Landlord's
practices, rules and regulations regarding conduct in the sublet space.
15. Communications from Overlandlord. Landlord shall deliver
--------------------------------
to Tenant copies of all notices, requests or demands which relate to the
Sublet Space upon receipt thereof from Overlandlord.
16. Applicable Laws. This Lease shall be governed by, and
---------------
subject to, all provisions of New York and, to the extent applicable,
federal law.
E-10
<PAGE>
17. Notices. All communications and notices hereunder shall
-------
be in writing and shall be sent by personal delivery or by mail
(certified or registered, and in any event, return receipt requested),
addressed as follows or to such other address as either party may notify
the other in accordance with the provisions hereof.
To Landlord: Bank Hapoalim B.M.
1177 Avenue of the Americas
New York, N.Y. 10036
Attention: Regional Manager
To Tenant: Ampal-American Israel Corporation
1177 Avenue of the Americas
New York, N.Y. 10036
Attention: President
All notices except notice of change of address shall be deemed given
when mailed and notice of change of address shall be deemed given when
received.
18. Insurance Policies. Whenever any insurance coverage
------------------
is required to be obtained or maintained by the tenant under the
Overlease with respect to the Sublet Space, Tenant shall obtain and
maintain such insurance coverage naming as insureds therein
Overlandlord, Landlord and Tenant, as their interest may appear, and any
other party required to be named under the provisions of the Overlease.
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<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused
this Lease to be executed and delivered the date first above written.
BANK HAPOALIM B.M., Landlord
By: /s/ Arie Abend
------------------------
/s/ Barry Ben-Zeev
------------------------
AMPAL-AMERICAN ISRAEL CORPORATION,
Tenant
By: /s/ Lawrence Lefkowitz
-----------------------
E-12
