SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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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 2-1271
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PEC Israel Economic Corporation
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(Exact name of registrant as specified in its charter)
Maine 13-1143528
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
511 Fifth Avenue, New York, N.Y. 10017
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 687-2400
-----------------------
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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
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NO .
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As of August 11, 1995 there were outstanding 18,758,588 shares of
Common Stock with par value of $1.00 per share.
Page 1 of 16 pages
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<TABLE><CAPTION>
PART 1 - FINANCIAL INFORMATION
------------------------------
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
---------------------------------------------
For the Six Months Ended: For the Three Months Ended:
---------------------------- --------------------------
6/30/95 6/30/94 * 6/30/95 6/30/94 *
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Inteest and dividends $ 965,036 $ 1,673,941 $ 556,710 $ 967,986
Equity in net income of Affiliated Companies 11,002,753 11,678,700 5,613,328 6,708,593
Net gain (loss) on issuance of shares
by Affiliated Companies --- 6,388,184 --- (26,994)
Revenues of General Engineers Limited 2,933,582 3,301,291 1,518,488 1,574,175
Net gain (loss) on sales of investments 551,946 307,591 305,685 (22,253)
Change in market value of marketable securities 2,124,520 (1,915,908) 1,180,008 (675,417)
Other 267,562 360,984 279,451 673,520
----------- ----------- ---------- -----------
17,845,399 21,794,783 9,453,670 9,199,610
----------- ----------- ---------- -----------
Expenses:
General and administrative 1,690,205 1,545,029 885,640 710,417
Cost of sales and expenses of
General Engineers Limited 3,115,893 3,036,730 1,759,054 1,309,025
----------- ----------- ---------- -----------
4,806,098 4,581,759 2,644,694 2,019,442
----------- ----------- ---------- -----------
Income before income taxes, loss
from discontinued operations and
cumulative effect of accounting change 13,039,301 17,213,024 6,808,976 7,180,168
Income taxes 4,327,254 1,155,458 3,360,106 900,600
----------- ----------- ---------- -----------
Income before loss from discontinued
operations and cumulative effect
of accounting change 8,712,047 16,057,566 3,448,870 6,279,568
Loss from discontinued operations, net of income taxes (401,345) (88,000) (179,345) (101,000)
Cumulative effect of change in accounting
for marketable securities, net of income taxes --- 2,472,879 --- ---
----------- ----------- ---------- -----------
Net income $ 8,310,702 $18,442,445 $ 3,269,525 $ 6,178,568
=========== =========== ========== ===========
Earnings per common share before
loss from discontinued operations and
cumulative effect of change in accounting $0.46 $0.85 $0.18 $0.33
Loss from discontinued operations,
net of income taxes (0.02) --- (0.01) ---
Cumulative effect on earnings per share
for change in accounting for marketable securities,
net of income taxes --- 0.13 --- ---
----------- ----------- ---------- -----------
Earnings per common share $0.44 $0.98 $0.17 $0.33
=========== =========== ========== ===========
Number of shares outstanding 18,758,588 18,758,588 18,758,588 18,758,588
Dividend per share None None None None
See notes to consolidated financial statements.
* Restated
Page 2 of 16 pages
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PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
June 30, December 31,
Assets 1995 1994
------ ------------ ------------
Cash and cash equivalents $ 22,813,183 $ 20,736,416
Investments 368,560,515 349,623,830
Assets of General Engineers Limited 6,266,012 9,018,224
Other assets 3,960,180 4,312,494
------------ ------------
Total assets $401,599,890 $383,690,964
============ ============
Liabilities and Shareholders' Equity
------------------------------------
Liabilities:
Liabilities of General Engineers Limited $ 2,991,528 $ 5,262,094
Deferred income taxes 35,674,905 31,702,309
Other liabilities 5,547,506 5,258,196
------------ ------------
Total liabilities 44,213,939 42,222,599
------------ ------------
Shareholders' equity:
Common stock, $1.00 par value 31,952,180 31,952,180
Additional paid-in capital 102,448,854 99,612,887
Unrealized gain on marketable securities, net 3,974,925 2,845,350
Cumulative translation adjustment (9,472,661) (13,114,003)
Retained earnings 241,676,245 233,365,543
------------ ------------
370,579,543 354,661,957
Treasury stock (13,193,592) (13,193,592)
------------ ------------
Total shareholders' equity 357,385,951 341,468,365
------------ ------------
Total liabilities and shareholders' equity $401,599,890 $383,690,964
============ ============
See notes to consolidated financial statements.
Page 3 of 16 pages
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<TABLE><CAPTION>
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995
Additional Unrealized Gain Cumulative
Common Paid-in on Marketable Translation Retained Treasury
Stock Capital Securities Adjustment Earnings Stock Total
----------- ----------- ------------ ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $31,952,180 $99,612,887 $2,845,350 ($13,114,003) $233,365,543 ($13,193,592) $341,468,365
Change in market value
for available-for-
sale equity securities,
net of tax --- --- 1,129,575 --- --- --- 1,129,575
Paid-in capital of
Affiliated Companies --- 2,835,967 --- --- --- --- 2,835,967
Change in cumulative
translation adjustment --- --- --- 3,641,342 --- --- 3,641,342
Net income --- --- --- --- 8,310,702 --- 8,310,702
----------- ----------- ------------ ------------- ------------ ------------- -------------
Balance, June 30, 1995 $31,952,180 $102,448,854 $3,974,925 ($9,472,661) $241,676,245 ($13,193,592) $357,385,951
=========== =========== ============ ============= ============ ============= =============
See notes to consolidated financial statements.
Page 4 of 16 pages
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<TABLE><CAPTION>
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
For the Six Months Ended:
6/30/95 6/30/94 *
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 8,310,702 $ 18,442,445
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Cumulative effect of changes in
accounting for marketable securities --- (2,472,879)
Change in market value of marketable securities (2,124,520) 1,915,908
Purchase of marketable securities (3,390,095) (11,695,528)
Proceeds from sale of marketable securities 5,733,487 628,190
Equity in net income of Affiliated Companies (11,002,753) (11,678,700)
Gain on sales of investments (551,946) (307,591)
Loss on investment in partnerships 253,454 39,580
Income of consolidated subsidiaries (116,419) (456,477)
Amortization of premiums on receivables, net 41,719 137,207
Net gain on issuance of shares by Affiliated Companies --- (6,388,184)
Dividends and interest from Affiliated Companies 4,167,890 2,161,247
Decrease (increase) in other assets 576,680 (440,414)
Loss from discontinued operations 401,345 88,000
Provision for deferred income taxes 3,027,477 267,192
Increase in other liabilities 83,065 266,636
------------ ------------
Net cash provided by (used in) operating activities 5,410,086 (9,493,368)
------------ ------------
Cash Flows from Investing Activities:
Collection of notes receivable and U.S. Government obligations 250,011 9,484,219
Purchase of notes and bonds receivable (1,273,438) (1,976,642)
Proceeds from sale of equity interests 4,959,987 2,324,300
Purchase of equity interests (7,269,879) (9,826,674)
------------ ------------
Net cash (used in) provided by investing activities (3,333,319) 5,203
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents 2,076,767 (9,488,165)
Cash and Cash Equivalents, beginning of period 20,736,416 42,665,957
------------ ------------
Cash and Cash Equivalents, end of period $ 22,813,183 $ 33,177,792
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during period for income taxes $ 922,341 $ 671,770
See notes to consolidated statements.
</TABLE>
* Restated
Page 5 of 16 pages
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PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
Notes to Consolidated Financial Statements
(Unaudited)
1. The December 31, 1994 balance sheet presented herein was derived from
the audited December 31, 1994 consolidated financial statements of the
Company and Subsidiaries.
2. These financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. The financial statements should be read in
conjunction with the audited consolidated financial statements of the
Company and Subsidiaries for the year ended December 31, 1994 for a
description of the significant accounting policies, which have
continued without change, and other footnote information.
3. During the second quarter of 1995, General Engineers Limited (i)
entered into an agreement with a majority owned subsidiary of Discount
Investment Corporation Ltd. for that company to distribute household
appliances made by manufacturers represented by General Engineers and
(ii) sold its service and repair business for household appliances to
an unrelated party. As a result of these transactions, PEC has
restated its results of operations for the three and six months ended
June 30, 1995 and June 30, 1994 to reflect these discontinued
operations of General Engineers. The losses from discontinued
operations for the six and three month periods ended June 30, 1995 and
1994 were $401,345, $88,000, $179,345 and $101,000 respectively, net
of $130,000, $22,000, $65,000 and $25,000 respectively, of income tax
benefits. The loss upon discontinuance of these operations for the
three months ended June 30, 1995 was $120,000, net of income tax
benefits of $43,000, which amount is included in the loss from
discontinued operations of $401,345.
4. On July 25, 1995, the Company sold to Israel Discount Bank of New York
("IDBNY") all of the Company's nonvoting preferred shares of IDBNY for
approximately $27 million, a price that equalled PEC's carrying value
of those shares. While the sale did not result in a gain for
financial statement purposes, PEC did realize a gain for tax purposes,
for which PEC provided approximately $3 million of additional income
taxes during the second quarter of 1995.
5. All adjustments (recurring in nature) which are, in the opinion of
management, necessary for a fair presentation of the results of the
interim periods have been included. The results of the interim
periods are not necessarily indicative of the results for the full
year.
Page 6 of 16 pages
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MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
-----------------------------------------------
RESULTS OF OPERATIONS
---------------------
Three Months Ended June 30, 1995 Compared to Three Months Ended June 30,
------------------------------------------------------------------------
1994
----
Consolidated net income for the three months ended June 30, 1995 was
$3.3 million compared to $6.2 million for the three months ended June 30,
1994. The reduction in consolidated net income resulted primarily from an
increase in PEC's provision for income taxes, decreases in equity in net
income of Affiliated Companies and in interest and dividend income and a
loss in respect of continuing operations of General Engineers compared to
income for the corresponding 1994 quarter. The reduction attributable to
these factors was partially offset by the positive effect of a change in
the market value of marketable securities in the second quarter of 1995.
Equity in net income of Affiliated Companies for the second quarter of
1995 was $5.6 million compared to $6.7 million for the corresponding 1994
period. The reduction in equity in net income of Affiliated Companies for
the three months ended June 30, 1995 reflected losses in respect of certain
of PEC's Affiliated Companies, particularly CellCom (approximately $2.0
million of start up losses), and reduced net income in respect of some of
PEC's other Affiliated Companies, principally Scitex (which incurred a
special charge). This reduction was partially offset by increased net
income in respect of certain other Affiliated Companies, particularly
Super-Sol.
As described in Note 2 of the Notes to the Consolidated Financial
Statements for the year ended December 31, 1994 (the "1994 Notes"), PEC
reports debt and equity securities, other than equity securities accounted
for under the equity method, at fair value with unrealized gains and losses
from those securities which are classified as "trading securities" included
in net income and unrealized gains and losses from those securities which
are classified as "available-for-sale securities" reported as a separate
component of shareholders' equity. The market value of "trading
securities" increased by $1.2 million for the three months ended June 30,
1995 compared to a loss of $675,000 for the corresponding 1994 period.
PEC's interest and dividend income decreased to $557,000 in the second
quarter of 1995 compared to $968,000 for the corresponding 1994 period
primarily because PEC did not recognize any dividend income on its
nonvoting preferred shares of Israel Discount Bank of New York ("IDBNY") in
the second quarter of 1995 since PEC agreed in principle in May 1995 to
sell those shares to IDBNY.
Page 7 of 16 pages
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General Engineers had a loss from continuing operations of $241,000,
before tax benefit, in the second quarter of 1995 compared to income from
continuing operations of $265,000, before income taxes, in the
corresponding quarter of 1994.
The net gain on sales of investments for the three months ended June
30, 1995 of $306,000 resulted from PEC's sale of marketable securities of
U.S. companies while PEC did not realize any net gain on sales of
investments for the corresponding 1994 period. PEC's other income in the
second quarter of 1995 was $279,000 compared to $674,000 in the
corresponding 1994 period. PEC's other income in the second quarter of
1994 included $307,000 of income with respect to PEC's interest in a
limited partnership which PEC sold in January 1995 and, therefore, PEC did
not recognize any income from such limited partnership interest in the
second quarter of 1995.
In July 1995, PEC sold to IDBNY all of PEC's nonvoting preferred
shares of IDBNY for approximately $27 million, a price that equalled PEC's
carrying value of those shares. While the sale did not result in a gain
for financial statement purposes, PEC realized a gain for tax purposes, for
which PEC provided approximately $3 million of additional income taxes in
the second quarter of 1995. This provision was the primary reason for the
increase in the provision for income taxes to $3.4 million in the second
quarter of 1995 from $901,000 in the corresponding 1994 period.
As discussed in Note 2 of the 1994 Notes, PEC does not provide
deferred income taxes with respect to undistributed earnings of, and gains
on issuances of shares by, Majority-Owned Affiliated Companies. Although
income before income taxes, loss from discontinued operations and
cumulative effect of accounting change was $6.8 million in the second
quarter of 1995 compared to $7.2 million in the corresponding 1994 quarter,
the provision for income taxes in the second quarter of 1995, excluding the
additional income taxes attributable to PEC's sale of its nonvoting preferred
shares of IDBNY, was approximately $360,000 compared to approximately $901,000
in the second quarter of 1994. This decrease in income taxes as a percentage
of income before income taxes, loss from discontinued operations and
cumulative effect of accounting change is primarily attributable to an
increase in the proportion of income from undistributed earnings of
Majority-Owned Affiliated Companies in the second quarter of 1995 compared to
the second quarter of 1994.
As discussed in Note 3 to the consolidated financial statements for
the three months and six months ended June 30,
Page 8 of 16 pages
<PAGE>
1995 (the "June 1995 Notes"), during the second quarter of 1995, General
Engineers (i) entered into an agreement with a majority owned subsidiary of
Discount Investment Corporation Ltd. providing for that company to
distribute household appliances made by manufacturers represented by
General Engineers and (ii) sold its service and repair business for
household appliances to an unrelated party. For the second quarter of
1995, General Engineers incurred a loss of $179,000, net of income taxes,
in respect of these discontinued operations compared to a loss of $101,000,
net of income taxes, in respect of discontinued operations for the second
quarter of 1994.
Six Months Ended June 30, 1995 Compared to Six Months Ended
-----------------------------------------------------------
June 30, 1994
-------------
Consolidated net income for the six months ended June 30, 1995 was
$8.3 million compared to $18.4 million for the six months ended June 30,
1994. The reduction in consolidated net income resulted primarily from the
absence in the first half of 1995 of any net gain on issuance of shares by
Affiliated Companies ($6.4 million for the first half of 1994), from an
increase of approximately $3.2 million in the provision for income taxes
and from a decrease of approximately $700,000 in interest and dividend
income. The decrease in consolidated net income also resulted from the
effect of PEC's adoption of Statement of Financial Accounting Standards No.
115 "Accounting for Certain Investments in Debt and Equity Securities"
effective January 1, 1994 which increased consolidated net income in the
first half of 1994 by a cumulative effect adjustment of approximately $2.5
million, net of taxes. The decrease attributable to these factors was
partially offset by the positive effect of a change in the market value of
marketable securities in the first half of 1995.
Equity in net income of Affiliated Companies for the six months ended
June 30, 1995 was $11.0 million compared to $11.7 million for the six
months ended June 30, 1994. The reduction in equity in net income of
Affiliated Companies for the first half of 1995 reflected losses in respect
of certain of PEC's Affiliated Companies, particularly CellCom
(approximately $3.2 million of start up losses), and reduced net income in
respect of some of PEC's Affiliated Companies, principally Scitex (which
incurred a special charge). This decrease was largely offset by increased
net income in respect of certain other Affiliated Companies, particularly
Super-Sol, Tambour and Tel-Ad (which had losses for the first half of
1994).
PEC did not realize any net gain on issuance of shares by Affiliated
Companies for the six months ended June 30, 1995 while it realized $6.4
million for the corresponding 1994 period. During the first half of 1994,
PEC realized a net gain on issuance of shares by Tambour of approximately
$5.9 million as
Page 9 of 16 pages
<PAGE>
the result of the exercise by option holders of one and two year options to
purchase ordinary shares of Tambour and realized a net gain on the issuance
of shares by Lego of approximately $528,000 as a result of Lego's initial
public offering of ordinary shares in Israel in January 1994.
The market value of "trading securities" increased by $2.1 million for
the first half of 1995 compared to a loss of $1.9 million for the first
half of 1994.
PEC's interest and dividend income decreased to $965,000 for the six
months ended June 30, 1995 compared to $1.7 million for the six months
ended June 30, 1994 primarily because PEC did not recognize any dividend
income on its nonvoting preferred shares of IDBNY in the first half of 1995
since PEC agreed in principle in May 1995 to sell those shares to IDBNY.
General Engineers had a loss from continuing operations of $182,000,
before tax benefit, in the first half of 1995 compared to income from
continuing operations of $265,000, before income taxes, in the first half
of 1994.
The net gain on sales of investments for the six months ended June 30,
1995 of $552,000 resulted from PEC's sale of marketable securities of U.S.
companies while its net gain on sales of investments for the corresponding
period of 1994 of $308,000 resulted from PEC's sale of a small portion of
the shares of Maxima and its sale of marketable securities of U.S.
companies, which was partially offset by losses on the sale of marketable
bonds of the U.S. Government and of a U.S. Government sponsored
corporation. PEC's other income for the first half of 1995 was $268,000
compared to $361,000 for the first half of 1994 principally because of an
increased loss with respect to PEC's interest in a limited partnership in
the first half of 1995 compared with the corresponding period of 1994. PEC
sold its interest in the limited partnership in January 1995.
The provision for income taxes in the first half of 1995 increased to
$4.3 million from $1.2 million in the corresponding 1994 period. This
increase was attributable primarily to the provision of $3 million of
additional income taxes arising from PEC's sale of its nonvoting preferred
shares of IDBNY.
As discussed above and in Note 2 of the 1994 Notes, PEC does not
provide deferred income taxes with respect to undistributed earnings of,
and gains on issuances of shares by, Majority-Owned Affiliated Companies.
Although income before income taxes, loss from discontinued operations and
cumulative effect of accounting change decreased to $13.0 million in the
first half of 1995 compared to $17.2 million in the first half of 1994, the
provision for income taxes for the first half of 1995, excluding the
additional income taxes attributable
Page 10 of 16 pages
<PAGE>
to PEC's sale of its nonvoting preferred shares of IDBNY, was substantially
the same as for first half of 1994. This increase in income taxes as a
percentage of income before income taxes, loss from discontinued operations
and cumulative effect of accounting change is primarily attributable to a
reduction in the proportion of income from undistributed earnings of, and
gains on issuances of shares by, Majority-Owned Affiliated Companies in the
first half of 1995 compared to the first half of 1994 (in which PEC had a
$5.9 million net gain on issuance of shares by Tambour, a Majority-Owned
Affiliated Company).
As discussed in Note 3 to the June 1995 Notes, for the first half of
1995 General Engineers incurred a loss of $401,000, net of income taxes, in
respect of discontinued operations compared to a loss of $88,000, net of
income taxes, in respect of discontinued operations for the first half of
1994.
SHAREHOLDERS' EQUITY
----------------------
As a result of increases in the market value of "available-for-sale
securities" since January 1, 1995, the unrealized gain, net of taxes, from
those securities that was included in shareholders' equity as of June 30,
1995 was approximately $4.0 million compared to $2.8 million as of December
31, 1994.
As discussed in Note 2 of the 1994 Notes, translation differences are
reflected in shareholders' equity as a "Cumulative Translation Adjustment."
During the first half of 1995, the New Israeli Shekel appreciated
approximately 2% against the U.S. dollar. As of June 30, 1995, the
Cumulative Translation Adjustment reduced shareholders' equity by $9.5
million compared to $13.1 million at the end of 1994.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
As of June 30, 1995, PEC's liquid assets (consisting of cash, money
market funds, short-term bank deposits, marketable securities of U.S.
companies and marketable bonds) totalled approximately $40.2 million.
For the six months ended June 30, 1995, PEC received cash dividends
and interest totalling $5.1 million (including $4.2 million of dividends
and interest from Affiliated Companies) which substantially exceeded PEC's
general and administrative expenses. During the first half of 1995, PEC
received a total of $10.9 million of additional funds, of which $5 million
was generated from the sale of a limited partnership interest, $5.7 million
was generated from the sale of securities and $250,000 was generated from
the collection of loans. During the same period, PEC purchased securities
of several Affiliated Companies for approximately $7.3 million (of which
approximately $5.2 million was for the purchase of securities of CellCom
and
Page 11 of 16 pages
<PAGE>
approximately $1.2 million was for additional capital contributions to
Renaissance Fund LDC, reducing PEC's obligation to make additional capital
contributions to Renaissance to $1.6 million), purchased marketable
securities of U.S. companies for approximately $3.4 million and purchased
notes and bonds receivable for approximately $1.3 million (of which
approximately $850,000 was for capital notes of Affiliated Companies,
principally DEP Technology Holdings Ltd. with respect to which PEC
purchased $740,000 of capital notes.)
In July 1995, upon PEC's receipt of the approval of Israel's Minister
of Communications, a 2% equity interest in CellCom was transferred to PEC
from a subsidiary of Discount Investment Corporation Ltd., increasing PEC's
equity interest in CellCom to 11.5%. PEC made shareholder loans totalling
$8 million to CellCom in July 1995, which loans represented PEC's
proportionate share of all shareholder loans made to CellCom in July 1995.
In May 1995, CellCom and the manufacturer of certain types of digital
cellular telephones jointly instituted a plan of action (the "plan of
action") to reprogram or replace telephones produced by the manufacturer
which had caused, under certain circumstances, a blocking of CellCom's
cellular telephone network. On July 16, 1995, CellCom completed the plan
of action and resumed the sale of cellular telephones, the connection of
subscribers to CellCom's network and the charging for air time of telephone
calls initiated by CellCom's subscribers through CellCom's network, all of
which had been temporarily suspended on April 27, 1995 because of the
blocking of the network. The amount of compensation to CellCom from the
manufacturer in connection with the plan of action, the suspended
activities and their effect on CellCom has not been determined and CellCom,
therefore, has not provided for any compensation in its financial
statements. All expenses incurred by CellCom relating to and resulting
from the plan of action and the suspended activities have been included in
CellCom's loss from operations.
In addition to the two lawsuits against CellCom disclosed under the
heading "Subsequent Events" in PEC's Quarterly Report on Form 10-Q for the
three months ended March 31, 1995, on April 25, 1995 a petition was filed
with Israel's High Court of Justice against Israel's Ministry of
Communications and other respondents, including CellCom, requesting, among
other things, the following remedies:
1. To require the providers of cellular mobile telephone services,
including CellCom, to credit their respective subscribers and the customers
of the land line company for calls to and from their respective networks
that were disconnected due to insufficient network capacity, and;
2. To prevent the providers of cellular mobile telephone
Page 12 of 16 pages
<PAGE>
services, including CellCom, from connecting additional subscribers, until
such time as the capacities of their respective networks are expanded.
As of August 8, 1995, neither CellCom nor Israel's Ministry of
Communications had responded to the petition and no hearing has been
scheduled thereon. CellCom has stated that it intends to vigorously
contest the petition.
CellCom has also stated that at this stage CellCom is unable to
estimate the effects of the foregoing events on CellCom's financial
condition or results of operations.
Page 13 of 16 pages
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PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the Annual Meeting of Shareholders on May 23, 1995, the
shareholders elected eleven directors, each for a term of one year.
Proxies for the meeting were solicited pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended. A total of 16,875,185 shares
were voted with respect to the election of directors, and there were no
broker non-votes. The tabulation of the votes cast for each nominee for
director was as follows:
NUMBER OF SHARES
----------------------------------------
NAME OF NOMINEE WITHHELD AUTHORITY
FOR DIRECTOR VOTED FOR TO VOTE
------------------------------------------------------------------
Raphael Recanati 16,812,501 62,684
Frank J. Klein 16,866,109 9,076
Robert H. Arnow 16,855,234 19,951
Joseph Ciechanover 16,866,309 8,876
Eliahu Cohen 16,812,305 62,880
Roger Cukierman 16,866,309 8,876
Alan S. Jaffe 16,864,759 10,426
Hermann Merkin 16,865,137 10,048
Harvey M. Meyerhoff 16,866,249 8,936
Alan S. Rosenberg 16,865,109 10,076
Richard S. Zeisler 16,865,137 10,048
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
Exhibit 27. Financial Data Schedule, which is page 16 of
this report.
Page 14 of 16 pages
<PAGE>
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.
Date: August 14, 1995 PEC ISRAEL ECONOMIC CORPORATION
-------------------------------
(Registrant)
/s/Frank J. Klein
------------------------------
Frank J. Klein
President
/s/William Gold
------------------------------
William Gold
Treasurer, Principal Financial
Officer and Principal
Accounting Officer
Page 15 of 16 pages
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
PEC ISRAEL ECONOMIC CORPORATION AND SUBSIDIARIES
------------------------------------------------
FINANCIAL DATA SCHEDULE
-----------------------
This schedule contains summary financial information extracted from the
consolidated balance sheet as of June 30, 1995 and the consolidated
statement of income for the six months ended June 30, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 22,813,183
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 401,599,890
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 31,952,180
0
0
<OTHER-SE> 325,433,771
<TOTAL-LIABILITY-AND-EQUITY> 401,599,890
<SALES> 0
<TOTAL-REVENUES> 17,845,399
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,806,098
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,039,301
<INCOME-TAX> 4,327,254
<INCOME-CONTINUING> 8,712,047
<DISCONTINUED> (401,345)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,310,702
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
</TABLE>
