<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 March 31, 2000
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
-------------------- -----------------------
Commission file number 0-538
AMPAL-AMERICAN ISRAEL CORPORATION
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
New York 13-0435685
- -------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1177 Avenue of the Americas, New York, New York 10036
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (212) 782-2100
----------------------------
- -------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-- --
The number of shares outstanding of the issuer's Class A Stock, its only
authorized common stock, is 18,895,015 (as of April 30, 2000).
<PAGE> 2
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
Index to Form 10-Q
<TABLE>
<CAPTION>
<S> <C> <C>
Page
Part I Financial Information
Consolidated Statements of Income...................... 1
Consolidated Balance Sheets............................ 2
Consolidated Statements of Cash Flows.................. 4
Consolidated Statements of Changes in Shareholders'
Equity................................................ 6
Consolidated Statements of Comprehensive Income........ 8
Notes to the Consolidated Financial Statements......... 9
Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 11
Part II Other Information...................................... 14
</TABLE>
<PAGE> 3
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 1999
(Dollars in thousands, except per share data) (Unaudited) (Unaudited)
(Note 2)
<S> <C> <C>
REVENUES
Equity in earnings of affiliates ................................. $ 2,866 $ 811
Interest:
Related parties.................................................. 26 104
Others........................................................... 348 221
Real estate income................................................ 2,173 1,878
Realized and unrealized gains on investments...................... 3,243 9,088
Other............................................................. 2,099 1,752
-------- --------
Total revenues............................................... 10,755 13,854
-------- --------
EXPENSES
Interest:
Related parties.................................................. - 996
Other............................................................ 2,537 988
Real estate expenses.............................................. 1,730 872
Loss from impairment of investment................................ 1,500 -
Minority interests................................................ 72 77
Translation loss (gain)........................................... 1,053 (137)
Other............................................................. 2,022 1,710
-------- --------
Total expenses............................................... 8,914 4,506
-------- --------
Income from continuing operations before
income taxes..................................................... 1,841 9,348
Provision for income taxes........................................ 679 3,371
-------- --------
Income from continuing operations................................. 1,162 5,977
-------- --------
Discontinued operations:
Loss from operations............................................. - (425)
-------- --------
Loss from discontinued operations................................. - (425)
-------- --------
NET INCOME................................................... $ 1,162 $ 5,552
======== ========
Basic EPS Earnings per Class A share:
Earnings from continuing operations............................. $ .06 $ .25
Loss from discontinued operations............................... - (.02)
----- -----
Earnings per Class A share....................................... $ .06 $ .23
===== =====
Shares used in calculation (in thousands)........................ 18,520 24,094
Diluted EPS Earnings per Class A share:
Earnings from continuing operations............................. $ .05 $ .22
Loss from discontinued operations............................... - (.02)
----- -----
Earnings per Class A share....................................... $ .05 $ .20
===== =====
Shares used in calculation (in thousands)........................ 21,723 27,716
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE> 4
<TABLE>
<CAPTION>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
ASSETS AS AT 2000 1999
- --------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited)
<S> <C> <C>
Cash and cash equivalents................................................... $ 8,685 $ 7,409
Deposits, notes and loans receivable........................................ 15,140 22,336
Investments................................................................. 321,474 273,174
Real estate property, less accumulated
depreciation of $7,824 and $7,463.......................................... 79,126 72,809
Other assets................................................................ 14,647 21,052
-------- --------
TOTAL ASSETS................................................................ $439,072 $396,780
======== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE> 5
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND March 31, December 31,
SHAREHOLDERS' EQUITY AS AT 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited)
<S> <C> <C>
LIABILITIES
Notes and loans payable:
Related parties................................................................. $ 15,185 $ 14,564
Others.......................................................................... 143,321 131,296
Debentures........................................................................ 22,893 28,659
Accounts and income taxes payable, accrued
expenses and minority interests.................................................. 80,563 65,427
-------- --------
Total liabilities......................................................... 261,962 239,946
-------- --------
SHAREHOLDERS' EQUITY
4% Cumulative Convertible Preferred Stock, $5
par value; authorized 189,287 shares; issued
162,519 and 165,823 shares; outstanding 159,169
and 162,473 shares............................................................... 813 829
6-1/2% Cumulative Convertible Preferred Stock,
$5 par value; authorized 988,055 shares;
issued 772,098 and 891,763 shares; outstanding 649,562
and 769,227 shares............................................................... 3,860 4,459
Class A Stock, $1 par value; authorized
60,000,000 shares; issued 25,192,960 and
24,817,445 shares; outstanding 18,773,779
and 18,289,264 shares............................................................ 25,193 24,817
Additional paid-in capital........................................................ 58,193 57,896
Retained earnings................................................................. 119,524 118,362
Treasury stock, at cost........................................................... (34,863) (35,552)
Accumulated other comprehensive income (loss)..................................... 4,390 (13,977)
-------- --------
Total shareholders' equity................................................ 177,110 156,834
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................................ $439,072 $396,780
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 6
<TABLE>
<CAPTION>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited) (Unaudited)
(Note 2)
<S> <C> <C>
Cash flows from operating activities:
Net income..................................................................... $ 1,162 $ 5,552
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in earnings of affiliates.............................................. (2,866) (811)
Loss from discontinued operations............................................. - 425
Realized and unrealized gains on investments.................................. (3,243) (9,088)
Depreciation expense.......................................................... 429 273
Amortization expense.......................................................... 249 318
Loss from impairment of investment............................................ 1,500 -
Translation loss (gain)....................................................... 1,053 (137)
Minority interests............................................................ 72 77
Decrease (increase) in other assets........................................... 4,578 (27)
Increase in accounts and income taxes
payable, accrued expenses and minority
interests.................................................................... 495 2,336
Investments made in trading securities......................................... (14,336) (4,514)
Proceeds from sale of trading securities....................................... 9,925 1,235
Dividends received from affiliates............................................. 3,423 2,243
--------- ---------
Net cash provided by (used in) operating
activities................................................................... 2,441 (2,118)
--------- ---------
Cash flows from investing activities:
Deposits, notes and loans receivable collected................................. 7,806 6,107
Deposits, notes and loans receivable granted................................... (191) (3,702)
Investments made in:
Available-for-sale securities................................................. (2,127) -
Affiliates and others......................................................... (9,189) (1,863)
Proceeds from sale of investments:
Others........................................................................ 1,133 1,072
Deposit-sale of affiliate...................................................... - 7,581
Capital improvements........................................................... (5,768) (508)
--------- ---------
Net cash (used in) provided by investing
activities................................................................... (8,336) 8,687
--------- ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 7
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited) (Unaudited)
(Note 2)
<S> <C> <C>
Cash flows from financing activities:
Notes and loans payable received:
Others............................................................................ $ 19,564 $ -
Notes and loans payable repaid:
Related parties................................................................... - (1,281)
Others............................................................................ (7,285) (48)
Proceeds from exercise of stock options............................................ 747 -
Debentures repaid.................................................................. (6,389) (5,764)
-------- -------
Net cash provided by (used in) financing
activities....................................................................... 6,637 (7,093)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents................................................................... 534 377
-------- --------
Net increase (decrease) in cash and cash
equivalents........................................................................ 1,276 (147)
Cash and cash equivalents at beginning of
period............................................................................. 7,409 12,047
-------- --------
Cash and cash equivalents at end of period.......................................... $ 8,685 $ 11,900
======== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest:
Related parties.................................................................. $ - $ 348
Others........................................................................... 1,540 550
-------- --------
Total interest paid............................................................. $ 1,540 $ 898
======== ========
Income taxes paid.................................................................. $ 139 $ 36
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 8
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except share amounts) (Unaudited) (Unaudited)
<S> <C> <C>
4% PREFERRED STOCK
Balance, beginning of year.................................................... $ 829 $ 861
Conversion of 3,324 and 1,983 shares into
Class A Stock................................................................ (16) (10)
-------- --------
Balance, end of period........................................................ $ 813 $ 851
======== ========
6-1/2% PREFERRED STOCK
Balance, beginning of year.................................................... $ 4,459 $ 4,626
Conversion of 119,665 and 5,093 shares into
Class A Stock................................................................ (599) (25)
-------- --------
Balance, end of period........................................................ $ 3,860 $ 4,601
======== ========
CLASS A STOCK
Balance, beginning of year.................................................... $ 24,817 $ 24,685
Issuance of shares upon conversion of
Preferred Stock.............................................................. 376 25
-------- --------
Balance, end of period........................................................ $ 25,193 $ 24,710
======== ========
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year.................................................... $ 57,896 $ 57,829
Conversion of Preferred Stock................................................. 239 10
Issuance of shares upon exercise of
stock options................................................................ 58 -
-------- --------
Balance, end of period........................................................ $ 58,193 $ 57,839
======== ========
RETAINED EARNINGS
Balance, beginning of year.................................................... $118,362 $ 90,615
Net income.................................................................... 1,162 5,552
-------- --------
Balance, end of period........................................................ $119,524 $ 96,167
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 9
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 1999
- -------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except share amounts) (Unaudited) (Unaudited)
<S> <C> <C>
TREASURY STOCK
4% PREFERRED STOCK
Balance, end of period................................................. $ (84) $ -
--------- --------
6-1/2% PREFERRED STOCK
Balance, end of period................................................. (1,853) -
--------- --------
CLASS A STOCK
Balance, beginning of year - 6,528,181
and 605,400 shares, at cost........................................... (33,615) (3,829)
Issuance of shares upon exercise of 109,000
stock options......................................................... 689 -
--------- ---------
Balance, end of period - 6,419,181 and
605,400 shares, at cost............................................... (32,926) (3,829)
--------- ---------
Balance, end of period.................................................... $ (34,863) $ (3,829)
========= =========
ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance, beginning of year............................................. $ (13,977) $(13,622)
Cumulative translation adjustments:
Balance, beginning of year............................................. (17,676) (18,580)
Foreign currency translation adjustment................................ 852 1,163
--------- --------
Balance, end of period................................................. (16,824) (17,417)
--------- --------
Unrealized gain on marketable securities:
Balance, beginning of year............................................. 3,699 4,958
Unrealized gain, net................................................... 17,515 1,745
Transfer to trading securities......................................... - (1,711)
--------- --------
Balance, end of period................................................. 21,214 4,992
--------- --------
Balance, end of period.................................................... $ 4,390 $(12,425)
========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
7
<PAGE> 10
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 1999
- --------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) (Unaudited) (Unaudited)
<S> <C> <C>
Net income......................................................................... $ 1,162 $ 5,552
-------- --------
Other comprehensive income, net of tax:
Foreign currency translation adjustments.......................................... 852 1,163
Unrealized gain on securities..................................................... 17,515 1,745
-------- --------
Other comprehensive income........................................................ 18,367 2,908
-------- --------
Comprehensive income.............................................................. $ 19,529 $ 8,460
======== ========
Related tax (expense) of other comprehensive income:
Foreign currency translation adjustments.......................................... $ (236) $ (178)
Unrealized gain on securities..................................................... $(11,732) $ (940)
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
8
<PAGE> 11
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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, 1999 consolidated balance sheet presented herein was
derived from the audited December 31, 1999 consolidated financial
statements of the Company.
Reference should be made to the Company's consolidated financial
statements for the year ended December 31, 1999 for a description of the
accounting policies, which have been continued without change. Also,
reference should be made to the notes to the Company's December 31, 1999
consolidated financial statements for additional details of the Company's
consolidated financial condition, results of operations and cash flows.
Certain amounts in the 1999 consolidated statements of income and cash
flows have been reclassified to conform with current period's
presentation. 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. Segment information presented below results primarily from operations in
Israel.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 1999
-----------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Revenues:
Finance .......................................................... $ 5,409 $ 10,916
Real estate....................................................... 2,173 1,878
Leisure-time...................................................... 416 390
Intercompany adjustments.......................................... (109) (141)
-------- --------
Total........................................................ $ 7,889 $ 13,043
======== ========
Pretax Operating (Loss) Income:
Finance .......................................................... $ (1,043) $ 7,867
Real estate....................................................... (19) 654
Leisure-time...................................................... 109 93
-------- --------
Total........................................................ $ (953) $ 8,614
======== ========
Total Assets:
Finance .......................................................... $353,347* $272,811*
Real estate....................................................... 82,148 36,055
Leisure-time...................................................... 14,206 36,436
Intercompany adjustments.......................................... (10,629) (9,954)
-------- --------
Total........................................................ $439,072 $335,348
======== ========
</TABLE>
Corporate office expense is principally applicable to the financing
operation and has been charged to that segment above. Revenues and pretax
operating income above exclude equity in earnings of affiliates and
minority interests. Total assets exclude assets from discontinued
operations.
The real estate segment consists of rental property owned in Israel and
the United States leased to related and unrelated parties and of the
operations of Am-Hal Ltd. (in 2000 only), the Company's wholly-owned
subsidiary which owns and operates a chain of senior citizens facilities
located in Israel. The leisure-time segment consists primarily of Moriah
Hotels Ltd. (hotel chain in Israel, 1999 only), Coral World International
Limited (marine parks located
9
<PAGE> 12
around the world) and Country Club Kfar Saba (the company's 51%-owned
subsidiary located in Israel).
*Includes an investment in MIRS Communications Ltd. of $111 million.
4. The following table summarizes securities that were outstanding as of
March 31, 2000 and 1999, but not included in the calculations of diluted
earnings per Class A share because such shares are antidilutive.
<TABLE>
<CAPTION>
(Shares in thousands) March 31,
------------------------------
2000 1999
------ -----
<S> <C> <C>
Options and Rights - 1,100
</TABLE>
5. On April 18, 2000, the Company completed the sale of its indirect
holdings in Combox Ltd. ("Combox"), through its 42.5%-owned affiliate,
Ophir Holdings Ltd. ("Ophir"), to Terayon Communications Systems, Inc.
("Terayon"), a leading supplier of broadband network systems. Ophir
exchanged its 19.7% interest in Combox for approximately 150,000 shares
(subsequently split 2 shares for 1 share) of Terayon. Ophir acquired
Combox for approximately $2.3 million. The market price of Terayon's
shares as of the market close on April 18, 2000, was $75-1/2 per share.
During the first quarter of 2000, Ophir sold short approximately 60,000
Terayon shares at $140 per share.
6. On March 23, 2000, the Company's investee, BreezeCOM Ltd.
("BreezeCOM"), a developer and manufacturer of wireless access products,
completed an initial public offering of 5 million shares in the United
States and raised $100 million (at $20 per share). The Company holds
approximately 815,000 shares of BreezeCOM which were acquired for $1.1
million. At March 31, 2000, the Company recorded an unrealized gain on
its investment in BreezeCOM in the amount of $29.3 million ($18.8 million
net of income taxes) in accumulated other comprehensive income on its
consolidated balance sheet.
10
<PAGE> 13
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Consolidated income from continuing operations decreased to $1.2 million for the
three-month period ended March 31, 2000, from $6 million for the same period in
1999. The decrease in income is primarily attributable to lower unrealized gains
on investments, a loss from impairment of investment in 2000, and a translation
loss in 2000 as compared to a translation gain in 1999. These decreases were
partially offset by the increase in equity in earnings of affiliates.
Ampal-American Israel Corporation ("Ampal") and its subsidiaries (the "Company")
recorded $1.7 million of unrealized gains on investments which are classified as
trading securities in the three-month period ended March 31, 2000, as compared
to $8.5 million in the same period in 1999. The unrealized gains recorded in
2000 are primarily attributable to the Company's investment in Bank Leumi
Le'Israel B.M. ("Leumi"), and in 1999 the gains were attributable to the
investments in the shares of Leumi (pre-tax gain of $4.5 million) and Fundtech
Ltd. (pre-tax gain of $3.6 million). At March 31, 2000 and December 31, 1999,
the aggregate fair value of trading securities amounted to approximately $47.7
million and $40.4 million, respectively.
In the quarter ended March 31, 2000, the Company recorded $1.5 million of gains
on the sale of various marketable securities. In the quarter ended March 31,
1999, the Company recorded $.6 million of gains on the sale of investments,
which were primarily attributable to its investment in Fundtech Ltd.
Equity in earnings of affiliates increased to $2.9 million for the three months
ended March 31, 2000, from $.8 million for the same period in 1999. The increase
is primarily attributable to the increased earnings of the Company's 50%-owned
affiliate, Trinet Venture Capital Ltd., which recorded unrealized gains on its
investments in Netformx Ltd. ("Netformx") and Sim-Player.com Ltd., and to the
absence of losses from Moriah Hotels Ltd. ("Moriah") in the first quarter of
2000, which were included in this category in the same period in 1999. The
Company sold its investment in Moriah on April 14, 1999.
The increase in real estate income and expenses in the first quarter of 2000 as
compared to the same period in 1999 is attributable to the operations of Am-Hal
Ltd. ("Am-Hal"), the Company's wholly-owned subsidiary, which owns and operates
a chain of senior citizens facilities in Israel. The Company acquired an
additional 50% interest in Am-Hal on December 31, 1999. As a result, Am-Hal's
statement of income was consolidated with the Company's consolidated statement
of income in the first quarter of 2000, while in the same period in 1999,
Am-Hal's results were recorded in equity in earnings of affiliates.
The increase in other income in the three months ended March 31, 2000, as
compared to the same period in 1999, is attributable to a larger dividend
received from MIRS Communications Ltd. ("MIRS").
The Company recorded higher interest expense in the three months ended March 31,
2000, as compared to the same period in 1999, as a result of increased
borrowings in connection with the acquisition of its shares from Bank Hapoalim
B.M. in July, 1999.
In the three-month period ended March 31, 2000, the Company recorded an
additional $1.5 million loss from impairment of its investment in M.D.F.
Industries Ltd., which continues to experience operational problems.
11
<PAGE> 14
The Company recorded a translation loss of $1.1 million in the quarter ended
March 31, 2000, as compared to a translation gain of $.1 million in the same
period in 1999. The translation loss in 2000 is attributable to the foreign
exchange forward contracts executed by the Company, which were outstanding
during the first quarter of 2000.
Liquidity and Capital Resources
At March 31, 2000, cash and cash equivalents were $8.7 million as compared with
$7.4 million at December 31, 1999. The increase in cash is primarily
attributable to the dividend received from MIRS in the first quarter of 2000.
The decrease in deposits, notes and loans receivable and debentures is primarily
attributable to scheduled repayments. The decrease in other assets and the
increase in accounts payable is primarily attributable to the increase in the
deferred tax provision with respect to the unrealized gains on the
available-for-sale securities. The increase in notes and loans payable is
attributable to the increased borrowings with respect to the operations of
Am-Hal, and in connection with the new investments made by the Company.
During the first quarter of 2000, the Company made the following investments,
aggregating $17.4 million, notably: (1) a $6.2 million investment to acquire a
4.9% interest in Arel Communications and Software Ltd., a leading provider of
interactive distance learning systems; (2) an additional $2.75 million
investment in Netformx (net equity interest - 20.2%), a developer of network
design tools; (3) a $2 million investment to acquire a 0.4% interest in Sonic
Foundry Inc., a developer of digital media and Internet software tools, services
and systems; (4) an additional $1.8 million investment in PowerDsine Ltd. (total
equity interest - 10.8%), a leading developer of power supply devices for the
telecommunications industry; (5) a $1 million investment to acquire a 2.9%
interest in BridgeWave Communications Inc., a developer of wireless solutions
for cable companies; (6) a $1 million investment in preferred stock of APA
Optics Inc., a manufacturer of fiber optics communications equipment; (7) a $1
million investment to acquire a 0.5% interest in SeraNova, Inc., a provider of
E-business services; (8) a $.75 million investment to acquire a 20% interest in
Xpert Integrated Systems Ltd., a software and systems integrator specializing in
systems security; (9) a $.5 million investment to acquire a 13% interest in
Geometry-On-Line Inc., a developer and marketer of a 3D browser that enables
fast viewing, compression and streaming of 3D models and (10) an additional $.4
million investment in ShellCase Ltd., (total equity interest - 17.6%), a
developer of the smallest packages for semiconductor chips.
Other Developments
On April 18, 2000, the Company completed the sale of its indirect holdings in
Combox Ltd. ("Combox"), through its 42.5%-owned affiliate, Ophir Holdings Ltd.
("Ophir"), to Terayon Communications Systems, Inc. ("Terayon"), a leading
supplier of broadband network systems. Ophir exchanged its 19.7% interest in
Combox for approximately 150,000 shares (subsequently split 2 shares for 1
share) of Terayon. Ophir acquired Combox for approximately $2.3 million. The
market price of Terayon's shares as of the market close on April 18, 2000, was
$75-1/2 per share. During the first quarter of 2000, Ophir sold short
approximately 60,000 Terayon shares at $140 per share.
On March 23, 2000, the Company's investee, BreezeCOM Ltd. ("BreezeCOM"), a
developer and manufacturer of wireless access products, completed an initial
public offering of 5 million shares in the United States and raised $100 million
(at $20 per share). The Company holds approximately 815,000 shares of BreezeCOM
which were acquired for $1.1 million. At March 31, 2000, the Company recorded an
unrealized gain on its investment in BreezeCOM in the amount of $29.3 million
($18.8 million net of income taxes) in accumulated other comprehensive income on
its consolidated balance sheet.
MARKET RISKS AND SENSITIVITY ANALYSIS
The Company is exposed to various market risks, including changes in interest
rates, foreign currency rates and equity price changes. The following analysis
presents the hypothetical loss in earnings, cash flows and fair values of the
financial
12
<PAGE> 15
instruments which were held by the Company at March 31, 2000, and are sensitive
to the above market risks.
Interest Rate Risks
At March 31, 2000, the Company had financial assets totalling $21.2 million and
financial liabilities totalling $181.4 million. For fixed rate financial
instruments, interest rate changes affect the fair market value but do not
impact earnings or cash flows. Conversely, for variable rate financial
instruments, interest rate changes generally do not affect the fair market value
but do impact future earnings and cash flows, assuming other factors held
constant.
At March 31, 2000, the Company had fixed rate financial assets of $14.9 million
and variable rate financial assets of $6.3 million. Holding other variables
constant, a ten percent increase in interest rates would decrease the unrealized
fair value of the fixed financial assets by approximately $.1 million.
At March 31, 2000, the Company had fixed rate debt of $48.7 million and variable
rate debt of $132.7 million. A ten percent decrease in interest rates would
increase the unrealized fair value of the fixed rate debt by approximately $.5
million.
The net decrease in earnings for the next year resulting from a ten percent
interest rate increase would be approximately $.8 million, holding other
variables constant.
Exchange Rate Sensitivity Analysis
The Company's exchange rate exposure on its financial instruments results from
its investments and ongoing operations in Israel. To partially hedge this
exposure, the Company enters into various foreign exchange forward purchase
contracts. At March 31, 2000, the open foreign exchange forward purchase
contracts totalled $17 million. Holding other variables constant, if there were
a ten percent adverse change in foreign currency exchange rates, the Company's
cumulative translation loss (reflected in accumulated other comprehensive income
(loss)) would increase by $.6 million.
Equity Price Risk
The Company's investments at March 31, 2000 included marketable securities
(trading and available-for-sale) which are recorded at fair value of $97
million, including net unrealized gains of $37 million. Those securities have
exposure to price risk. The estimated potential loss in fair value resulting
from a hypothetical 10% decrease in prices quoted by stock exchanges is
approximately $9.7 million.
13
<PAGE> 16
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None.
Item 2. Changes in Securities and Use of Proceeds - 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) Exhibits:
Exhibit 11 - Schedule Setting Forth Computation of Earnings Per Share
of Class A Stock.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. None.
14
<PAGE> 17
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/ Raz Steinmetz
---------------------------------------
Raz Steinmetz
President and
Chief Executive Officer
(Principal Executive Officer)
By:/s/ Shlomo Meichor
---------------------------------------
Shlomo Meichor
Vice President - Finance
and Treasurer
(Principal Financial Officer)
By:/s/ Alla Kanter
---------------------------------------
Alla Kanter
Vice President - Accounting
and Controller
(Principal Accounting Officer)
Dated: May 15, 2000
15
<PAGE> 18
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C> <C>
11 Schedule Setting Forth Computation of Earnings
Per Share of Class A Stock...................................................................... Page*
27 Financial Data Schedule.
* These exhibits were included in the
copy of this report filed with the
Securities and Exchange Commission and
are available upon request from Ampal.
</TABLE>
16
<PAGE> 1
Exhibit 11
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
SCHEDULE SETTING FORTH COMPUTATION OF EARNINGS PER SHARE OF CLASS A STOCK
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
(Amounts in thousands, except (Unaudited) (Unaudited)
per share data)
<S> <C> <C>
BASIC EPS
Income from continuing operations............................................. $ 1,091(1) $ 5,893(1)
Loss from discontinued operations............................................. - (425)
-------- -------
Net income................................................................... $ 1,091 $ 5,468
======== =======
Earnings per Class A share:
Earnings from continuing operations.......................................... $ .06 $ .25
Loss from discontinued operations............................................ - (.02)
----- -----
Earnings per Class A share.................................................... $ .06 $ .23
===== =====
Weighted average number of Class A
Shares outstanding........................................................... 18,520 24,094
DILUTED EPS
Income from continuing operations............................................. $ 1,162 $ 5,977
Loss from discontinued operations............................................. - (425)
-------- -------
Net income................................................................... $ 1,162 $ 5,552
======== =======
Earnings per Class A share:
Earnings from continuing operations.......................................... $ .05 $ .22
Loss from discontinued operations............................................ - (.02)
----- -----
Earnings per Class A share.................................................... $ .05 $ .20
===== =====
Weighted average number of Class A Shares outstanding assuming Conversion of
preferred stock into Class A shares and the exercise
of stock options............................................................. 21,723 27,716
</TABLE>
(1) After deduction of accrued preferred stock dividends of $71 and $84,
respectively
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from unaudited
consolidated financial statements for the three months ended March 31, 2000
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,685
<SECURITIES> 321,474
<RECEIVABLES> 15,140
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,647
<PP&E> 86,950
<DEPRECIATION> 7,824
<TOTAL-ASSETS> 439,072
<CURRENT-LIABILITIES> 80,563
<BONDS> 181,399
0
4,673
<COMMON> 25,193
<OTHER-SE> 147,244
<TOTAL-LIABILITY-AND-EQUITY> 439,072
<SALES> 0
<TOTAL-REVENUES> 10,755
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,377
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,537
<INCOME-PRETAX> 1,841
<INCOME-TAX> 679
<INCOME-CONTINUING> 1,162
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,162
<EPS-BASIC> .06
<EPS-DILUTED> .05
</TABLE>
