<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Month of November, 1999
Koor Industries Ltd.
- --------------------------------------------------------------------------------
(Translation of registrant's name into English)
4 Kaufman Street, Tel-Aviv, 68012, Israel
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
FORM 20-F X FORM 40-F
------- -------
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of 1934.
YES NO X
------- -------
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-_____
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.
Koor Industries Limited
/s/ Jonathan Kolber
----------------------------------------
Jonathan Kolber
CEO and Vice Chairman of the
Board of Directors
Dated: November 24, 1999
<PAGE>
Exhibit Description
A Translation from Hebrew to English of an Immediate Report (the
"Report"), which was served on the Israeli Securities Authority,
The Tel-Aviv Stock Exchange Ltd. and the Registrar of Companies,
on August 24, 1999, regarding 3Q consolidated Financial
Statements of Koor.
<PAGE>
[Koor Letterhead]
EXHIBIT A
24 November, 1999
The Securities Authority The Tel Aviv Stock The Registrar of Companies
22 Kanfei Nesharim St. Exchange 97 Yafo St.
Jerusalem 95464 54 Ahad Ha'am St. Jerusalem 91007
- --------------- Tel Aviv 65202 ---------------
------------------
Fax: 02-6513940 Fax: 03-5105379
- --------------- ---------------
Dear Sirs,
Re: Immediate Report - Koor Industries Ltd.
Company No. 52-001414-3
We hereby enclose the Consolidated Financial Statements of Koor Industries Ltd.,
together with the Directors' Report for the period of January - September 1999.
Yours sincerely,
Koor Industries Ltd.
Yossef Ben Shalom
Executive Vice President
& Chief Financial Officer
<PAGE>
Koor Industries Limited.
(An Israeli Corporation)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS AT SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
CONTENTS
PAGE
Review Report of Interim Consolidated Financial Statements 2
Interim Consolidated Financial Statements:
Balance Sheets 3
Statements of Income 4
Statement of Changes in Shareholders' Equity 6
Statements of Cash Flows 11
Notes to the Financial Statements 16
<PAGE>
November 24, 1999
The Board of Directors
Koor Industries Ltd.
REVIEW REPORT OF UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE
NINE MONTH AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 1999
At your request, we reviewed the interim consolidated balance sheet of Koor
Industries Limited and its subsidiaries as at September 30, 1999, and the
related interim consolidated statements of income, shareholders' equity and cash
flows for the nine month and three month periods then ended.
Our review was made in accordance with the procedures prescribed by the
Institute of Certified Public Accountants in Israel, and included, inter alia,
reading the aforementioned interim consolidated financial statements, reading
the minutes of the Shareholders Meetings and of the Board of Directors and its
committees, and making inquiries of persons responsible for financial and
accounting matters.
The review reports of certain subsidiaries, whose assets as at September 30,
1999 constitute 16% of the total consolidated assets and whose revenues for the
nine months then ended constitute 15% of the total consolidated revenues, have
been reviewed by other auditors. The financial statements of the affiliates, the
investments in which, on the equity basis as at September 30, 1999 totalled
approximately NIS 381 million, and the share of Koor in the losses of which for
the nine months then ended totalled approximately NIS 4 million have also been
reviewed by other auditors.
The foregoing procedures which are limited in scope do not constitute an
examination made in accordance with generally accepted auditing standards.
Therefore, we do not express an opinion on the interim consolidated financial
statements.
In the course of our review, including the reading of the review reports of the
other auditors referred to above, nothing came to our attention which would
indicate the necessity of making material changes to the interim consolidated
financial statements in order for them to be in conformity with generally
accepted accounting principles in Israel and in accordance with Section D of the
Israeli Securities Regulations (Periodic and Immediate Reports), 1970.
<PAGE>
We draw attention to Note 5A to the interim consolidated financial statements
regarding an investigation which is being conducted by the Commissioner of
Restrictive Trade Practices. Concerning the alleged coordination of operations
within the Koor Group with respect to the products of its subsidiaries, Tadiran
Telecommunications Ltd. and Telrad Telecommunications and Electronics Industries
Ltd. The Company and its subsidiaries referred this issue to their legal
consultants. As the results of the examination by the Commissioner of
Restrictive Trade Practices are as yet unknown, the Company can not provide at
this stage a comprehensive analysis of the possible consequences, if any, of
these proceedings, or their impact upon the financial position of the Company
and the results of its operations.
Furthermore, we draw attention to Note 1C of the financial statements regarding
the uncertainty arising from the Year 2000 Issue.
Certified Public Accountants (Isr.)
Tel Aviv, Israel
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------------------------
IN TERMS OF NIS OF SEPTEMBER 1999
CONVENIENCE
TRANSLATION
(NOTE 1B)
SEPTEMBER 30 SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1999 1998 1998 1999
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents 707,570 1,051,299 1,484,382 165,475
Short-term deposits and investments 624,782 903,572 1,579,905 146,113
Customers 3,402,846 3,472,030 3,612,151 795,801
Other accounts receivable 751,288 865,936 680,739 175,699
Inventories and work in progress,
net of customer advances 2,287,303 2,784,890 2,797,338 534,917
----------- ----------- ----------- -----------
Total current assets 7,773,789 9,077,727 10,154,515 1,818,005
----------- ----------- ----------- -----------
INVESTMENTS AND LONG-TERM
RECEIVABLES
Investments in affiliates 3,564,744 1,466,797 1,615,452 833,663
Other investments and receivables 445,053 543,589 579,207 104,082
----------- ----------- ----------- -----------
4,009,797 2,010,386 2,194,659 937,745
----------- ----------- ----------- -----------
FIXED ASSETS
Cost 10,604,575 10,635,616 10,790,758 2,480,022
Less - accumulated depreciation 6,265,142 6,340,259 6,296,036 1,465,188
----------- ----------- ----------- -----------
4,339,433 4,295,357 4,494,722 1,014,834
----------- ----------- ----------- -----------
OTHER ASSETS, NET 729,172 535,763 858,281 170,527
----------- ----------- ----------- -----------
16,852,191 15,919,233 17,702,177 3,941,111
=========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
Koor Industries Limited.
(An Israeli Corporation)
- --------------------------------------------------------------------------------------------------------------------------
CONVENIENCE
TRANSLATION
(NOTE 1B)
SEPTEMBER 30 SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1999 1998 1998 1999
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C> <C> <C>
Credit from banks and others 2,594,391 1,802,024 2,718,004 606,733
Trade payables 1,521,670 1,471,388 1,538,026 355,863
Other payables and accruals 1,656,308 1,866,584 2,096,927 387,350
Customer advances, net of work in
progress 361,312 368,509 330,862 84,498
----------- ----------- ----------- -----------
Total current liabilities 6,133,681 5,508,505 6,683,819 1,434,444
----------- ----------- ----------- -----------
LONG-TERM LIABILITIES net of current maturities:
Loans from banks 4,008,366 2,874,450 4,277,817 937,410
Loans from others 87,028 109,577 106,259 20,353
Debentures 64,615 108,836 96,034 15,111
Convertible debentures 126,823 206,250 193,677 29,659
Customer advances 126,438 170,055 179,987 29,569
Deferred taxes 300,169 271,910 218,484 70,199
Liabilities for employee severance
benefits, net 285,239 222,029 262,810 66,707
----------- ----------- ----------- -----------
Total long-term liabilities 4,998,678 3,963,107 5,335,068 1,169,008
----------- ----------- ----------- -----------
MINORITY INTEREST 1,382,811 2,173,006 1,626,477 323,389
----------- ----------- ----------- -----------
SHAREHOLDERS' EQUITY 4,337,021 4,274,615 4,056,813 1,014,270
----------- ----------- ----------- -----------
16,852,191 15,919,233 17,702,177 3,941,111
=========== =========== =========== ===========
===================================================================================================================
Date of approval of the financial statements: 24 November, 1999
<S> <C> <C>
- ------------------------- ------------------------- -------------------------
Jonathan Kolber Danny Biran Yossef Ben-Shalom
CEO and Vice Chairman President and Member Executive Vice President
of the Board of Directors of the Board of Directors and CFO
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Koor Industries Limited.
(An Israeli Corporation)
CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------------------------------------------
IN TERMS OF NIS OF SEPTEMBER 1999
CONVENIENCE
TRANSLATION
(NOTE 1B)
NINE MONTHS
NINE MONTHS ENDED ON THREE MONTHS ENDED ON YEAR ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1999 1998 1999 1998 1998 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS US$ THOUSANDS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from sales 8,254,936 9,400,681 2,952,243 3,237,041 12,732,350 1,930,527
Cost of sales 6,287,945 7,230,462 2,178,131 2,502,796 9,793,703 1,470,520
----------- ----------- ----------- ----------- ----------- -----------
Gross profit 1,966,991 2,170,219 774,112 734,245 2,938,647 460,007
Selling and marketing
expenses 758,853 889,911 260,892 313,660 1,223,889 177,468
General and
administrative expenses 563,311 726,192 182,825 229,747 1,006,146 131,738
----------- ----------- ----------- ----------- ----------- -----------
Operating income 644,827 554,116 330,395 190,838 708,612 150,801
Finance expenses, net 306,723 145,816 135,282 81,100 249,837 71,731
----------- ----------- ----------- ----------- ----------- -----------
338,104 408,300 195,113 109,738 458,775 79,070
Other income
(expenses) net 27,926 180,675 (36,159) 26,557 (70,936) 6,531
----------- ----------- ----------- ----------- ----------- -----------
Income before taxes
on income 366,030 588,975 158,954 136,295 387,839 85,601
Taxes on income 96,111 261,612 11,319 68,095 232,888 22,477
----------- ----------- ----------- ----------- ----------- -----------
269,919 327,363 147,635 68,200 154,951 63,124
Equity in results of
affiliates, net 90,402 43,019 40,828 7,000 61,694 21,142
----------- ----------- ----------- ----------- ----------- -----------
360,321 370,382 188,463 75,200 216,645 84,266
Minority interest in
subsidiaries, net 49,477 193,163 19,584 67,618 238,840 11,571
Net income (loss) ----------- ----------- ----------- ----------- ----------- -----------
from continuing
operations 310,844 177,219 168,879 7,582 (22,195) 72,695
Discontinued
Operations - 8,979 - - 8,979 -
Results of discontinued
operations, net - 60,115 - 60,115 60,115 -
----------- ----------- ----------- ----------- ----------- -----------
Net income for the
period 310,844 246,313 168,879 67,697 46,899 72,695
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
<CAPTION>
Koor Industries Limited.
(An Israeli Corporation)
CONSOLIDATED STATEMENTS OF INCOME (cont'd)
- --------------------------------------------------------------------------------------------------------------------------
IN TERMS OF NIS OF SEPTEMBER 1999
CONVENIENCE
TRANSLATION
(NOTE 1B)
NINE MONTHS
NINE MONTHS ENDED ON THREE MONTHS ENDED ON YEAR ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1999 1998 1999 1998 1998 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS US$ THOUSANDS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NIS NIS NIS NIS NIS ($)
----------- ----------- ----------- ----------- ----------- -----------
Basic earnings of
NIS 1 par value of
the ordinary share
capital:
From continuing
operations 19,760 11,340 10,733 482 (1,340) 4,621
From discontinued
operations - 4,394 - 3,823 4,392 -
----------- ----------- ----------- ----------- ----------- -----------
19,760 15,734 10,733 4,305 3,052 4,621
=========== =========== =========== =========== =========== ===========
Diluted earnings of
NIS 1 par value of
the ordinary share
capital:
From continuing
operations 19,646 11,049 10,626 481 (1,340) 4,594
From discontinued
operations - 4,262 - 3,710 4,392 -
----------- ----------- ----------- ----------- ----------- -----------
19,646 15,311 10,626 4,191 3,052 4,594
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Koor Industries Limited.
(An Israeli Corporation)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
IN TERMS OF NIS OF SEPTEMBER 1999
CUMULATIVE
COMPANY FOREIGN
NUMBER OF ADDITIONAL SHARES CURRENCY
ORDINARY PAID-IN HELD BY TRANSLATION RETAINED
SHARES SHARE CAPITAL CAPITAL SUBSIDIARIES ADJUSTMENTS EARNINGS TOTAL
---------- ------------- ------------- ------------- ------------- ------------- -------------
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS AT JANUARY 1,
1999 (AUDITED) 15,723,327 530,251 2,403,688 (53,390) (554,946) 1,731,210 4,056,813
CHANGES DURING THE NINE MONTHS
ENDED SEPTEMBER 30, 1999
(UNAUDITED):
Net income for the period - - - - - 310,844 310,844
Interim dividend - - - - - (57,953) (57,953)
Erosion of dividend proposed
in 1998 - - - - - (445) (445)
Exercise of stock options
granted to Israeli banks - *- 410 - - - 410
Exercise of stock options
granted to senior employees 5,473 *- - - - - -*
Conversion of debentures to
shares 2,162 *- 995 - - - 995
Dividend on company shares
held by subsidiaries - - - - - 620 620
Other adjstments - - 32 - - - 32
Foreign currency translation
adjustments at investee
companies - - - - 25,705 - 25,705
----------- ------------- ------------- ------------- ------------- ------------- -------------
BALANCE AS AT SEPTEMBER 30,
1999 (UNAUDITED) 15,730,962 530,251 2,405,125 (53,390) (529,241) 1,984,276 4,337,021
=========== ============= ============= ============= ============= ============= =============
BALANCE AS AT JULY 1,
1999 (UNAUDITED) 15,730,962 530,251 2,405,125 (53,390) (592,534) 1,815,397 4,104,849
CHANGES DURING THE THREE
MONTHS ENDED SEPTEMBER 30,
1999 (UNAUDITED):
Net income for the period - - - - - 168,879 168,879
Foreign currency translation
adjustments at investee
companies - - - - 63,293 - 63,293
---------- ------------- ------------- ------------- ------------- ------------- -------------
BALANCE AS AT SEPTEMBER 30,
1999 (UNAUDITED) 15,730,962 530,251 2,405,125 (53,390) (529,241) 1,984,276 4,337,021
=========== ============= ============= ============= ============= ============= =============
* Represents a sum less than NIS 1,000.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Koor Industries Limited.
(An Israeli Corporation)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (cont'd)
- -----------------------------------------------------------------------------------------------------------------------------------
IN TERMS OF NIS OF SEPTEMBER 1999
CUMULATIVE
COMPANY FOREIGN
NUMBER OF ADDITIONAL SHARES CURRENCY
ORDINARY PAID-IN HELD BY TRANSLATION RETAINED
SHARES SHARE CAPITAL CAPITAL SUBSIDIARIES ADJUSTMENTS EARNINGS TOTAL
---------- ------------- ------------- ------------- ------------- ------------- -------------
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS AT JANUARY 1, 1998
(AUDITED) 15,307,569 530,250 2,262,205 (53,390) (717,249) 2,489,146 4,510,962
CHANGES DURING THE NINE
MONTHS ENDED SEPTEMBER 30,
1998 (UNAUDITED):
Income for the period - - - - - 246,313 246,313
Interim dividend - - - - - (135,424) (135,424)
Erosion of proposed dividend - - - - - 668 668
Exercise of stock options
granted to Israeli banks - *- 519 - - - 519
Exercise of stock options
granted to senior employees 100,100 *- - - - - -
Conversion of debentures to
shares 315,658 *- 140,524 - - - 140,524
Adjustment of consideration
for purchase of investment
from controlling shareholder - - (6,051) - - (586,143) (592,194)
Employee benefit from options
granted by a controlling
shareholder - - 6,051 - - - 6,051
Other adjustments - - 140 - - - 140
Foreign currency translation
adjustments at investee
companies - - - - 97,056 - 97,056
---------- ------------- ------------- ------------- ------------- ------------- -------------
BALANCE AS AT SEPTEMBER 30,
1998 (UNAUDITED) 15,723,327 530,250 2,403,388 (53,390) (620,193) 2,014,560 4,274,615
=========== ============= ============= ============= ============= ============= =============
* Represents a sum less than NIS 1,000.
The accompanying notes are an integral part of these interim financial statements.
<PAGE>
Koor Industries Limited.
(An Israeli Corporation)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (cont'd)
- -----------------------------------------------------------------------------------------------------------------------------------
IN TERMS OF NIS OF SEPTEMBER 1999
CUMULATIVE
COMPANY FOREIGN
NUMBER OF ADDITIONAL SHARES CURRENCY
ORDINARY PAID-IN HELD BY TRANSLATION RETAINED
SHARES SHARE CAPITAL CAPITAL SUBSIDIARIES ADJUSTMENTS EARNINGS TOTAL
---------- ------------- ------------- ------------- ------------- ------------- -------------
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS AT JULY 1, 1998
(UNAUDITED) 15,645,570 530,250 2,393,164 (53,390) (692,723) 2,014,232 4,191,533
CHANGES DURING THE THREE
MONTHS ENDED SEPTEMBER 30,
1998 (UNAUDITED):
Income for the period - - - - - 67,697 67,697
Interim dividend - - - - - (67,369) (67,369)
Exercise of stock options
granted to Israeli banks - *- 145 - - - 145
Conversion of debentures to
shares 77,757 *- 9,982 - - - 9,982
Other adjustments - - 97 - - - 97
Foreign currency translation
adjustments at investee
companies - - - - 72,530 - 72,530
---------- ------------- ------------- ------------- ------------- ------------- -------------
BALANCE AS AT SEPTEMBER 30,
1998 (UNAUDITED) 15,723,327 530,250 2,403,388 (53,390) (620,193) 2,014,560 4,274,615
=========== ============= ============= ============= ============= ============= =============
* Represents a sum less than NIS 1,000.
The accompanying notes are an integral part of these interim financial statements.
<PAGE>
Koor Industries Limited.
(An Israeli Corporation)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (cont'd)
- -----------------------------------------------------------------------------------------------------------------------------------
IN TERMS OF NIS OF SEPTEMBER 1999
CUMULATIVE
COMPANY FOREIGN
NUMBER OF ADDITIONAL SHARES CURRENCY
ORDINARY PAID-IN HELD BY TRANSLATION RETAINED
SHARES SHARE CAPITAL CAPITAL SUBSIDIARIES ADJUSTMENTS EARNINGS TOTAL
---------- ------------- ------------- ------------- ------------- ------------- -------------
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS AT JANUARY 1, 1998
(AUDITED) 15,307,569 530,250 2,262,205 (53,390) (717,249) 2,489,146 4,510,962
CHANGES IN 1998 (AUDITED):
Income for the year - - - - - 46,899 46,899
Exercise of stock options
granted to Israeli banks - *- 617 - - - 617
Interim dividend - - - - - (68,547) (68,547)
Interim dividend - - - - - (66,041) (66,041)
Interim dividend - - - - - (86,890) (86,890
Erosion of proposed dividend - - - - - 721 721
Foreign currency translation
adjustments at investee
companies - - - - 162,303 - 162,303
Dividend on Company shares
held by subsidiaries - - - - - 2,065 2,065
Conversion of debentures to
shares 315,658 1 140,501 - - - 140,502
Employee benefit from options
granted by a controlling
shareholder - - 6,051 - - - 6,051
Adjustment of consideration
for purchase of investment
from controlling shareholder - - (6,051) - - (586,143) (592,194)
Exercise of stock options
granted to senior employees 100,100 *- - - - - -
Other adjustments - - 365 - - - 365
---------- ------------- ------------- ------------- ------------- ------------- -------------
BALANCE AS AT DECEMBER 31,
1998 (AUDITED) 15,723,327 530,251 2,403,688 (53,390) (554,946) 1,731,210 4,056,813
=========== ============= ============= ============= ============= ============= =============
* Represents a sum less than NIS 1,000.
The accompanying notes are an integral part of these interim financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Koor Industries Limited.
(An Israeli Corporation)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (cont'd)
- -----------------------------------------------------------------------------------------------------------------------------------
Convenience translation in to US$ OF NIS figures which were adjusted for inflation on the basis of the CPI of September 30, 1999.
Cumulative
Company foreign
Additional shares currency
Share paid-in held by translation Retained
capital capital subsidiaries adjustments earnings Total
--------------------------------------------------------------------------------------
Convenience translation - (Note 1B) - US$ thousands
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS AT
JANUARY 1, 1999
(AUDITED) 124,006 562,135 (12,486) (129,782) 404,867 948,740
CHANGES DURING THE
NINE MONTHS ENDED
SEPTEMBER 30, 1999
(UNAUDITED):
Net income for the period - - - - 72,695 72,695
Interim dividend - - - - (13,553) (13,553)
Erosion of dividend
proposed in 1998 - - - - (104) (104)
Exercise of stock options
granted to Israeli banks *- 96 - - - 96
Exercise of stock options
granted to senior
employees *- - - - - -
Conversion of
debentures to shares *- 233 - - - 233
Dividend on company
shares held by - - - - 145 145
subsidiaries
Other adjustments - 7 - - - 7
Foreign currency
translation adjustments
at investee companies - - - 6,011 - 6,011
---------- ---------- ---------- ---------- ---------- ----------
BALANCE AS AT 30
SEPTEMBER, 1999
(UNAUDITED) 124,006 562,471 (12,486) (123,771) 464,050 1,014,270
========== ========== ========== ========== ========== ==========
* Represents a sum less than NIS 1,000.
The accompanying notes are an integral part of these interim financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Koor Industries Limited.
(An Israeli Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------------------------------------
IN TERMS OF NIS OF SEPTEMBER 1999
CONVENIENCE
TRANSLATION
(NOTE 1B)
NINE MONTHS
NINE MONTHS ENDED ON THREE MONTHS ENDED ON YEAR ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1999 1998 1999 1998 1998 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
------------------------------------------------------------------------------------------
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NISTHOUSANDS NIS THOUSANDS US$ THOUSANDS
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS GENERATED
BY OPERATING ACTIVITIES:
Net income for the period 310,844 246,313 168,879 67,697 46,899 72,695
Adjustments to reconcile
net income to net cash
flows
generated by operating
activities (A) 11,031 176,695 (113,669) (162,194) 629,455 2,580
Net cash inflow (outflow) ----------- ----------- ----------- ----------- ----------- -----------
from operating activities 321,875 423,008 55,210 (94,497) 676,354 75,275
CASH FLOWS GENERATED ----------- ----------- ----------- ----------- ----------- -----------
BY INVESTMENT ACTIVITIES:
Purchase of fixed assets (479,300) (798,031) (141,067) (248,660) (1,051,834) (112,091)
Investment grant for
fixed assets 49,021 6,352 16,395 832 15,940 11,464
Investments in intangible
assets and deferred expenses (90,842) (58,025) (39,632) (11,307) (91,659) (21,245)
Additional investment in
subsidiaries (97,759) (251,374) (9,910) (185,634) (1,249,452) (22,862)
Acquisition of newly
consolidated subsidiaries (230,519) (126,708) (26,292) (12,873) (230,419) (53,910)
(B)
Investment in affiliated
companies (860,420) (1,723,048) (170,449) (162,675) (1,888,160) (201,220)
Loans to affiliates (1,150) (6,679) (379) (2,149) (8,227) (269)
Loan collection from
affiliates 4 25,564 - 117 26,881 1
Proceeds from realization of
investments in formerly
consolidated subsidiaries,
net pf cash in those
subsidiaries upon
termination of
consolidation (C) 160,489 393,118 216,473 355,695 537,980 37,532
Investment in restricted
bank deposit - - - - (742,697) -
Proceeds from realisation of
investments in affiliated
companies 86,039 324,398 66,867 5,164 312,927 20,121
Proceeds from sale of
fixed assets 160,338 63,246 83,230 17,648 71,157 37,497
Change in investments
and other receivables 11,026 141,702 47,607 18,416 183,219 2,579
Change in short-term deposits
and investments, net 25,176 (207,212) (46,529) (39,746) (161,196) 5,888
Net cash outflow generated ----------- ----------- ----------- ----------- ----------- -----------
by investment activities (1,267,897) (2,216,697) (3,686) (265,172) (4,275,540) (296,515)
----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these interim financial statements.
<PAGE>
<CAPTION>
Koor Industries Limited.
(An Israeli Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
- -----------------------------------------------------------------------------------------------------------------------------------
IN TERMS OF NIS OF SEPTEMBER 1999
CONVENIENCE
TRANSLATION
(NOTE 1B)
NINE MONTHS
NINE MONTHS ENDED ON THREE MONTHS ENDED ON YEAR ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1999 1998 1999 1998 1998 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS US$ THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
CASH FLOW GENERATED
BY FINANCING ACTIVITIES:
Proceeds from exercise
of stock options granted
to Israeli banks 410 519 - 145 617 96
Dividend paid (143,738) (126,992) - (67,632) (192,271) (33,615)
Dividend paid to minority
interest in subsidiaries (8,923) (13,667) (266) (8,160) (25,739) (2,087)
Purchase of subsidiaries'
shares by their
consolidated companies (119,947) - (47,249) - - (28,051)
Issuance of shares to
minority interest in
subsidiaries 11,091 280,482 1,800 62,147 298,232 2,594
Payment of suppliers' credit
for purchase of fixed assets (1,274) (1,492) - (40) (1,907) (293)
Issue of convertible
debentures 61,928 - - - 742,697 14,483
Receipt of loans and other
long-term liabilities 555,415 1,930,124 299,351 307,134 3,378,954 129,891
Repayment of loans,
debentures and other
long-term liabilities (514,772) (492,700) (121,872) (126,700) (681,678) (120,391)
Credit from banks and
others, net 313,193 (92,333) (382,578) (226,115) 171,694 73,244
----------- ----------- ----------- ----------- ----------- -----------
Net cash inflow (outflows)
from financing activities 153,383 1,483,941 (250,814) (59,221) 3,690,599 35,871
----------- ----------- ----------- ----------- ----------- -----------
TRANSLATION DIFFERENCES
IN RESPECT OF CASH BALANCE
OF AUTONOMOUS FOREIGN
INVESTEE COMPANIES 15,827 32,521 35,651 24,435 64,443 3,701
----------- ----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (776,812) (277,227) (163,639) (394,455) 155,856 (181,668)
BALANCE OF CASH AND
CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,484,382 1,328,526 871,209 1,445,754 1,328,526 347,143
----------- ----------- ----------- ----------- ----------- -----------
BALANCE OF CASH AND
CASH EQUIVALENTS AT
END OF PERIOD 707,570 1,051,299 707,570 1,051,299 1,484,382 165,475
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these interim financial statements.
<PAGE>
<CAPTION>
Koor Industries Limited.
(An Israeli Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
- -----------------------------------------------------------------------------------------------------------------------------------
IN TERMS OF NIS OF SEPTEMBER 1999
CONVENIENCE
TRANSLATION
(NOTE 1B)
NINE MONTHS
NINE MONTHS ENDED ON THREE MONTHS ENDED ON YEAR ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1999 1998 1999 1998 1998 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS US$ THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
A. ADJUSTMENTS TO
RECONCILE NET
INCOME TO NET CASH
FLOWS GENERATED BY
OPERATING ACTIVITIES
INCOME AND EXPENSES
NOT INVOLVING CASH
FLOWS:
Minority interest in
subsidiaries, net 49,477 200,218 19,584 67,618 245,894 11,571
Equity in results of
affiliate, net of dividend
received therefrom (46,399) (31,889) (12,674) 1,800 (34,079) (10,851)
Depreciation and
amortization 444,161 506,626 150,723 169,556 679,892 103,873
Deferred taxes (27,276) (19,673) 6,281 9,799 (116,519) (6,379)
Increase in liability for
employee severance
benefits, net 43,415 50,995 13,061 27,586 82,218 10,153
Capital losses (gains),
net:
Fixed assets 1,346 (225) 196 (596) 7,304 314
Investments in
formerly consolidated
subsidiaries (206,942) (132,979) (148,005) (130,797) (147,209) (48,396)
Investments in investee
companies (39,460) (241,118) (1,691) (1,908) (248,546) (9,228)
Write-down in value of
assets and investments 121,859 178,437 99,270 25,690 226,333 28,498
Adjustment of principal
of loans and other
long-term liabilities (13,436) 16,677 33,149 20,482 53,259 (3,142)
Erosion of principal of
credit from banks and
others 17,000 12,636 18,535 10,719 16,129 3,976
Adjustment of value of
investments, deposits
and loans receivable (8,428) (27,939) (9,007) (14,502) (54,170) (1,971)
Employee benefits in
respect of option
warrants granted by
controlling shareholder - 6,051 - - 6,051 -
----------- ----------- ----------- ----------- ----------- -----------
335,317 517,817 169,422 185,447 716,557 78,418
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these interim financial statements.
<PAGE>
<CAPTION>
Koor Industries Limited.
(An Israeli Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
- -----------------------------------------------------------------------------------------------------------------------------------
IN TERMS OF NIS OF SEPTEMBER 1999
CONVENIENCE
TRANSLATION
(NOTE 1B)
NINE MONTHS
NINE MONTHS ENDED ON THREE MONTHS ENDED ON YEAR ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1999 1998 1999 1998 1998 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS US$ THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
CHANGES IN OPERATING
ASSETS AND LIABILITY
ITEMS:
Increase in trade
receivables and other
accounts receivable
(after taking into
account non-current
receivables) (558,057) (641,480) (284,142) (311,447) (636,505) (130,509)
Decrease (increase) in
inventories and works
in progress, net of
customer advances
(including long- term
customer advances) 10,000 18,815 (17,919) 985 (10,726) 2,339
Increase (decrease) in
trade payables and other
payables and accruals 223,771 281,543 18,970 (37,179) 560,129 52,332
----------- ----------- ----------- ----------- ----------- -----------
(324,286) (341,122) (283,091) (347,641) (87,102) ( 75,838)
----------- ----------- ----------- ----------- ----------- -----------
11,031 176,695 (113,669) (162,194) (629,455) 2,580
=========== =========== =========== =========== =========== ===========
B. ACQUISITION OF
NEWLY CONSOLIDATED
SUBSIDIARIES:
Assets and liabilities of
subsidiaries at date of
acquisition:
Working capital
deficiency (surplus)
excluding cash and
cash equivalents 107,882 (130,001) (13,576) (11,759) (149,762) 25,230
Fixed assets and
investments (428,641) (19,422) (10,846) (15,562) (43,625) (100,243)
Long-term liabilities 43,622 4,537 7,414 - 4,653 10,201
Minority interest in
subsidiaries 66,381 2,426 2,445 2,558 2,425 15,524
Excess of cost over net
asset value at
acquisitions (34,192) (30,043) (11,729) (30,043) (48,101) (7,996)
Liability for acquisition
of subsidiaries - 41,933 - 41,933 - -
Equity in net assets 14,429 3,862 - - 3,991 3,374
----------- ----------- ----------- ----------- ----------- -----------
(230,519) (126,708) (26,292) (12,873) (230,419) (53,910)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these interim financial statements.
<PAGE>
<CAPTION>
Koor Industries Limited.
(An Israeli Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D)
- -----------------------------------------------------------------------------------------------------------------------------------
IN TERMS OF NIS OF SEPTEMBER 1999
CONVENIENCE
TRANSLATION
(NOTE 1B)
NINE MONTHS
NINE MONTHS ENDED ON THREE MONTHS ENDED ON YEAR ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 DECEMBER 31 SEPTEMBER 30
1999 1998 1999 1998 1998 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS NIS THOUSANDS US$ THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
C. PROCEEDS FROM
REALISATION OF
INVESTMENTS IN
FORMERLY-
CONSOLIDATED
COMPANIES:
Assets and liabilities of
formerly-consolidated
companies at the time they
ceased to be consolidated:
Working capital surplus,
excluding cash and
cash equivalents 567,126 98,708 13,874 84,094 94,392 132,630
Fixed assets and
investments 843,498 667,169 98,710 632,218 789,820 197,263
Long-term liabilities (209,764) (220,618) (24,118) (217,507) (248,750) (49,056)
Minority interest in
subsidiaries (242,653) (205,781) (20,517) (204,655) - (56,748)
Equity in net assets (1,004,660) 72,429 519 72,410 (205,359) (234,953)
Proceeds from sale of
subsidiaries, not yet
received - (151,768) - (141,662) (39,332) -
Capital gain on sale of
investments in 206,942 132,979 148,005 130,797 147,209 48,396
subsidiaries ----------- ----------- ----------- ----------- ----------- -----------
160,489 393,118 216,473 355,695 537,980 37,532
=========== =========== =========== =========== =========== ===========
D. NON-CASH OPERATIONS:
Purchase of switching
division 8,124 - - - - 1,900
=========== =========== =========== =========== =========== ===========
Purchase of fixed assets 2,321 3,206 544 3,206 6,642 543
=========== =========== =========== =========== =========== ===========
Purchase of other assets 17,104 - 12,204 - 29,289 4,000
=========== =========== =========== =========== =========== ===========
Proceeds from sale of fixed
assets and investee
companies, less tax 7,357 161,261 664 143,017 44,664 1,721
=========== =========== =========== =========== =========== ===========
Proposed dividend to
minority shareholders - - - - 8,752 -
=========== =========== =========== =========== =========== ===========
Interim dividend - 67,369 - 67,369 85,960 -
=========== =========== =========== =========== =========== ===========
Conversion of convertible
debentures into shares of
the Company and
subsidiaries 995 140,829 - 9,982 140,829 233
=========== =========== =========== =========== =========== ===========
Investments in newly
consolidated subsidiaries - 41,933 - 41,933 - -
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these interim financial statements.
</TABLE>
<PAGE>
Koor Industries Ltd.
(An Israeli Corporation)
NOTES TO THE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - GENERAL
A. These financial statements are as at 30 September, 1999 and for the
periods of the nine months and three month then ended. They should be
read in conjunction with the annual audited financial statements of
the Company as at December 31, 1998 and their accompanying notes.
B. The adjusted interim consolidated financial statements as at 30
September, 1999 and for the nine months then ended have been
translated into US dollars using the representative exchange rate at
the date ($1 = NIS 4.276). The translation was made solely for the
convenience of the reader.
The amounts presented in these financial statements should not be
construed to represent amounts receivable or payable in dollars or
convertible into dollars unless otherwise indicated in these financial
statements.
C. THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. Similar problems may also
occur in systems that use the digits "99" in a date field as an indication
of something other than the year 1999. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and if not
resolved, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect a company's
ability to conduct regular business operations.
The fact that Koor is a holding Company whose operations are almost
entirely conducted by its investee companies, is the overriding factor in
determining the degree of the impact of the Year 2000 Issue on Koor. The
impact of this issue is primarily on the investee companies which operate
in the telecommunication and electronics segment.
The information systems of the Group companies were developed and are
operated by the companies themselves or by outside contractors. Those
companies which operate independent systems, are performing themselves the
conversion on their own systems, or in the case of purchased systems, or
use of service bureaus, the conversion is being carried out by the
supplier. The companies have requested the suppliers to report to them on
the degree of preparedness achieved and the manner in which the problem is
being handled. Not all the requested reports have been supplied. In certain
companies, additional exposure derives from the fact that they sell
computer-embedded telecommunications systems. Furthermore, all of the Group
companies are indirectly exposed to the Year 2000 Issue as it affects
national utility companies which provide services, such as the Israel
Electric Corporation, Bezeq, etc.
It is not possible to be certain that all aspects of the Year 2000 Issue
affecting the Company, including those related to the remediation efforts
of customers, suppliers or other third parties, will be fully resolved.
<PAGE>
NOTE 2 - ACCOUNTING POLICIES
The accounting policies applied in the preparation of the interim financial
statements are consistent with those of the financial statements as at
December 31, 1998.
The interim financial statements were prepared in conformity with generally
accepted accounting principles applied as necessary in the preparation of
Interim Financial Statements.
NOTE 3 - FINANCIAL STATEMENTS IN ADJUSTED VALUES
The comparative data in these statements were adjusted to the NIS of
September 1999.
During the nine-month period ended 30 September, 1999, the CPI rose by
0.87% (in the same period last year it rose by 4.05%). The exchange rate of
the US dollar increased in the reported period by 2.79% (in the same period
last year it increased by 8.74%).
NOTE 4 - ECI TELECOM LTD.
A. MERGER OF ECI TELECOM LTD. AND TADIRAN TELECOMMUNICATIONS LTD.
1. On 16 March, 1999, ECI Telecom Ltd. (ECI) and Tadiran
Telecommunications Ltd. (TTL) announced the completion of the merger
between them, effective 1 January, 1999.
2. The merger was recorded in the financial statements of Koor at book
value, based on the accounting principles applying to transactions in
which assets of similar nature are exchanged. This treatment is
different from accepted accounting treatment in the United States
(GAAP), where the transaction would have been recorded at market
value.
3. Following the merger and before the purchase by Koor of additional
shares in ECI (see B below), the direct holdings of Koor and Tadiran
Ltd. in ECI were 16.6% and 12.6%, respectively. As a result of the
merger and the exchange of shares, the balance of goodwill of both
Koor and Tadiran Ltd. in ECI increased by a net amount of
approximately NIS 189 million.
4. As a result of the merger, effective January 1, 1999, Koor no longer
consolidates the operations of TTL in its financial statements.
<PAGE>
NOTE 4 - ECI TELECOM LTD. (CONT'D)
Following are data from the financial statements of TTL for the first
nine months of 1998 and for the whole of 1998:
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
1999 1998
(UNAUDITED) (AUDITED)
NIS THOUSANDS NIS THOUSANDS
Revenues 1,247,453 1,752,169
Operating income 106,169 176,959
Net income 117,874 166,637
Total assets 1,486,206 2,317,290
B. PURCHASE OF ADDITIONAL SHARES OF ECI
On 31 January, 1999 Koor notified Clal Electronics Industries Ltd. of
exercise of the call option to purchase from Clal Electronics Industries
Ltd. 3,830,000 ordinary shares of ECI at $37 per share. The transaction was
closed on 8 February, 1999.
As at the balance sheet date, after purchase of additional shares on the
stock exchange, Koor's direct holding in ECI reached 33.8%.
NOTE 5 - CONTINGENT LIABILITIES AND COMMITMENTS
A. During October 1997, proximate to the date of the publication of a
newspaper article containing details about alleged violations of the
Law for Restrictive Trade Practices, 1988 (the Law) regarding price
coordination and lack of competition between Tadiran
Telecommunications Ltd. (TTL) and Telrad, the Commissioner of
Restrictive Trade Practices (the Commissioner) conducted an
examination at the offices of TTL, Telrad and the Company, during
which certain documents were confiscated, certain employees were
questioned and additional information was submitted as requested.
On 13 December, 1998, the Commissioner issued a press release, in which he
announced that the Investigations Department of the Restrictive Trade
Practices Authority (the Authority) had concluded the investigation
regarding suspicions about restrictive arrangements between Koor, TTL,
Telrad, Bezeq and Bezeqcall, relating to supply of switchboards for public
switching and to N.S.R. operations.
<PAGE>
NOTE 5 - CONTINGENT LIABILITIES AND COMMITMENTS (CONT'D)
According to information released to the press by the Commissioner, the
investigators of the Investigations Department of the Authority recommended
submitting indictments against some of the investigated employees regarding
some of the suspicions investigated, and that the Legal Department of the
Authority was to decide if offenses were in fact committed and if there is
sufficient evidential basis for a trial. Up to the date of approval of the
financial statements, nothing was mentioned regarding the details of the
findings of the Legal Department of the Authority.
Under the Law, violations may result in penalties as well as in
implications at the civil level, if damage should be proven as a result of
a violation of the Law. Managements of the Company and the subsidiaries,
after consultation with their legal counsels, are of the opinion that, at
this stage, as long as the results of the Commissioner's examinations have
not yet been published, it is not possible to assess the possible
developments in this matter, nor to evaluate if a significant loss is
expected to result - if at all. Accordingly, it was not considered
appropriate to make any provision in the financial statements in respect of
this matter.
B. In October 1999, Bezeq, The Israel Telecommunication Corp. Ltd.
(Bezeq) lodged a claim against Tadiran Ltd. (Tadiran), whose main
cause is various losses incurred by Bezeq due to delays in the
performance of works which were ordered under development and
application contracts originally signed between Bezeq and TTL in the
amount of some $6.7 million (the Principal Claim).
Alter, Bezeq is suing for the balance of arrearage penalties to which
it alleges it is entitled pursuant to those contracts, and which were
not paid in full, in the amount of approximately $1.7 million (the
Alternative Claim).
In the opinion of the legal counsels of Tadiran, in the absence of
details from Bezeq it is not possible at this stage to relate to the
allegations in the Principal Claim, although it appears that Tadiran
has reasonable defence arguments against bearing liability for the
full amount of the losses claimed in the Principal Claim, and it can
be assumed that it will eventually be reduced. Furthermore, Tadiran
has reasonable defence arguments against the Alternative Claim for
payment of the balance of the arrearage penalties. Therefore, the
financial statements do not include a provision regarding this claim.
C. On 30 March, 1999 Koor signed a framework agreement with an investment
bank for the issue of convertible notes in a total amount of
approximately US $75 million. The Notes are convertible into 1.6% of
the issued share capital of ECI, out of the ECI shares held by Koor,
over a period of two years from date of issue, at a minimum exercise
price of US $50 per share. In the event that the investment bank will
exercise the conversion right of the notes, Koor has the right to pay
to the bank the value of ECI shares as at that time instead of
delivering such shares to the bank. The notes are denominated in US
dollars and carry interest of 2.5% per annum. In the account period,
notes were issued in a total amount of approximately US $15 million.
<PAGE>
NOTE 5 - CONTINGENT LIABILITIES AND COMMITMENTS (CONT'D)
D. In March 1999 a collective labour agreement was signed between Middle
East Tubes Ltd. (METCO) and The New General Federation of Workers
concerning the retirement terms of 35 workers at the Akko plant of
Tubes who it was agreed would retire from METCO and with regard to the
retirement of additional workers. A provision was made in the 1998
financial statements for the retirement of the aforementioned 35
workers. Under the agreement, workers from the Akko plant who resign
or who accept early retirement by 31.12.2000 are entitled to enlarged
compensation of between 80% and 220%, depending on the number of years
of their employment at METCO, and to an adjustment grant and a waiver
of claims grant.
It was also decided that additional workers who retire during the term
of the agreement will be entitled, upon reaching the age of 56 (or 54
for female workers), to early pension payments until they reach
retirement age. In addition, these workers will be entitled to grants
as stipulated in the agreement. Workers who are younger than 56 but
more than 54 on the date of signing the agreement and whom the
management of METCO has decided to dismiss, will also be entitled to
early pension payments. Every retirement is subjected to the approval
of the management of METCO.
The term of the above agreement is until 31.12.2000, but will remain
in effect as long as no other agreement is signed.
At this stage it is not possible to estimate how many workers, if any,
will retire pursuant to the agreement, beyond the workers who have
already been dismissed, and therefore no additional provision was made
for them in the financial statements.
E. Further to the Note on the subject which appeared in the annual
financial statements concerning a customer claim against Adaptive
Broadband Corporation (ABC) (formerly California Microwave, Inc.), the
amount of the claim was recently amended and now stands at
approximately $40 million. In May 1999 an application was filed for
arbitration against Tadiran by ABC, pursuant to the arbitration clause
in the agreement which was signed between those parties.
The main thrust of the application is a declarative decision
determining that Tadiran is required to indemnify ABC in connection
with claims which were lodged at the arbitration institute against ABC
by the customer.
Tadiran lodged an application, which was dismissed, for a stay of the
arbitration proceedings in the New York Supreme Court. Accordingly,
the arbitration proceedings have commenced. At this early stage,
before ABC has presented its allegations as required, the management
of Tadiran believs, based on the opinion of its legal advisers, that
it has appropriate defence arguments against the above indemnity
demands, and accordingly, no provision was made in the financial
statements for the arbitration results.
<PAGE>
NOTE 6 - MAIN CHANGES IN HOLDINGS IN INVESTEE COMPANIES
A. On 3 March, 1999, Koor entered into an agreement with Menorah Holdings
Ltd. and B. Gaon Holdings Ltd. (the Purchasers), for the sale of most
of its equity interest in Koor Finance Ltd. (Koor Finance, which
controls, inter alia, the Koor Capital Market group and Netivot
Pension Fund), on the following terms:
Under the agreement, Koor sold to the Purchasers 80% of its rights in
Koor Finance (shares and capital notes) for a total consideration of
NIS 44 million subject to certain adjustments. The transaction was
closed on 31 May, 1999 after receipt of the approvals of the various
authorities, and the consideration was paid.
The after-tax capital gain to Koor from this sale amounted to
approximately NIS 10 million and was recorded in the second quarter of
1999.
Koor and the Purchasers granted one another put and call options for
purchase of the remainder of Koor's interest in Koor Finance. The put
option is exercisable starting from the end of one year after the date
of signature of the agreement until the end of two years from that
date. The call option is exercisable within 90 days of the expiry date
of the put option. The exercise price of the options is NIS 12
million, linked to the dollar and bearing interest.
On 14 June, 1999 Tadiran sold its holdings (20%) in Koor Investment
House (H.A.L.) Ltd. to a subsidiary in the Koor Finance Group, in
consideration of NIS 5 million.
B. On 8 March, 1999, Tadiran entered into an agreement for the sale of
all its equity interest (86.9%) in Contahal Ltd. (Contahal), in
consideration of US $24 million. The after-tax capital gain to Koor on
the date of closing the transaction was NIS 49 million and was
recorded in the results of the second quarter of 1999. In consequence
of the sale, Koor ceased to consolidate the financial statements of
Contahal in the second quarter of 1999.
C. During the first half of 1999, Telrad Holdings Ltd. (100%) sold its
full holdings in a number of its subsidiaries and affiliates, in
consideration of approximately NIS 20 million. Koor realized after-tax
capital gains of NIS 16 million on these transactions.
<PAGE>
NOTE 6 - MAIN CHANGES IN HOLDINGS IN INVESTEE COMPANIES (CONT'D)
D. In April 1999, pursuant to a memorandum of understanding dated 27
January, 1999, Koor purchased 75% of the ownership of the Radisson
Moriah hotel chain at a chain value of US $81.5 million (before
distribution of a dividend).
The name of the company was changed to Sheraton - Moriah (Israel) Ltd.
(Sheraton Moraih). Sheraton Moriah was consolidated in the financial
statements of Koor starting in the second quarter of 1999. The
goodwill generated in this purchase is NIS 20 million.
On 11 May, 1999 a memorandum of understanding was signed by Koor and
Bank Hapoalim Group for the sale of 20% of ownership of the Sheraton
Moriah in consideration of approximately US $13 million (after
distribution of a dividend). On 11 October, 1999 the transaction was
closed, the consideration was received and the shares were
transferred.
Following negotiations for transfer of ownership of the hotels owned
by Koor to Sheraton Moriah, in the third quarter of 1999 Koor recorded
other expenses of NIS 33 million in respect of decrease in value of
its hotels.
E. On 16 May, 1999 Tadiran signed an agreement of principles for the sale
of all of its holdings (87%) in Advanced Technologies Ltd. The
consideration, US $64 million, was received on 29 July, 1999. The
pre-tax capital gain to Koor in the third quarter amounts to NIS 153
million.
F. On 21 June, 1999 a transaction was completed for the sale of all the
holdings (76.37%) of Koor Investments Ltd. (a wholly-owned subsidiary
of Koor) in Merhav Building Materials and Ceramics Center Ltd.
(Merhav), in total consideration of NIS 35 million. As part of the
transaction, the buyers purchased from Koor the capital note which
Merhav had issued in favour of Koor in the amount of approximately NIS
4 million, and Koor was released from its guarantees in favour of
Merhav and its subsidiaries.
After deductions of provisions which were recorded in 1998 in respect
of this investment, the pre-tax capital gain generated in the sale
amounted to NIS 7 million and was included in the second quarter of
1999.
<PAGE>
NOTE 6 - MAIN CHANGES IN HOLDINGS IN INVESTEE COMPANIES (CONT'D)
G. During 1999, Koor purchased shares on NASDAQ, at various prices, in
BVR Systems (1998) Ltd. (BVR). The total cost of the purchases amounts
to US $20 million.
On 5 August, 1999, Koor Group signed an agreement with a number of
BVR's shareholders for the purchase of an additional BVR shares (part
by way of private placement and part in purchase from the other
shareholders), in consideration of US $14 million. The transaction was
closed on 22 September, 1999.
The agreement determined that the other shareholders of BVR, together
with Koor, will exercise their voting power so that three directors of
BVR will be recommended by Koor and the other four directors will be
recommended by the other shareholders.
As at the balance sheet date, Koor's holdings in BVR are 28.6% of
BVR's share capital. As of October 1, 1999 Koor includes its
investment in BVR according to the equity method.
H. On 10 June, 1999 an agreement was signed by Tadiran for the sale of
all of its holdings (49%) in Tadiran Information Systems Ltd. (TIS),
an affiliate, to IBM Israel Ltd., which prior to the transaction held
51% of TIS. The consideration (including dividend) was fixed at NIS
107 million. The pre-tax capital gain was NIS 59 million and was
included in the results of the second quarter of 1999.
I. On 21 July, 1999 an agreement was finalized for the sale of Koor's
holdings in Yonah Fishing & Industry Ltd. (Yonah) and its subsidiary.
Under the agreement, Koor was released from guarantees which it gave
in respect of Yonah to banking institutions and other parties in a
total sum of NIS 55 million. After provisions recorded up to the end
of the second quarter of 1999, no capital gain or loss accrued to Koor
from the transaction in the third quarter of 1999. See Section M
below.
J. In July 1999 Makhteshim-Agan Industries Ltd. (Makhteshim-Agan), a
subsidiary purchased from the shareholders of Luxembourg
Pharmaceuticals Ltd. (a pharmaceuticals, medical instruments and
equipment company, hereinafter Luxembourg), 42.86% of the issued and
paid up share capital of Luxembourg, furthermore Luxembourg issued
shares to Makhteshim-Agan constituting 7.14% of its share capital in a
total consideration of US $7.1 million. Concurrently with the
issuance, Makhteshim-Agan sold to Luxembourg its holdings (100%
ownership and control) in Koor Medica Ltd. (Koor Medica) in
consideration of US $ 1 million. Following the above transactions,
Makhteshim-Agan holds 50% of the shares of Luxembourg.
Makhteshim-Agan also has a call option to purchase the remaining
shares of Luxembourg and the shareholders of Luxembourg have a put
option enabling them to obligate Makhteshim-Agan to purchase their
shares by 31 December, 2001, in consideration of US $7 million. To
secure the option, Makhteshim-Agan has deposited the sum of US $4
million with a trustee.
<PAGE>
NOTE 6 - MAIN CHANGES IN HOLDINGS IN INVESTEE COMPANIES (CONT'D)
K. On 4 August, 1999 Koor sold all of its holdings (100%) in the
subsidiary Koor Metals Ltd. (Koor Metals) in consideration of
approximately NIS 11 million and the release of Koor from its
guarantees in favour of Koor Metals and its subsidiaries to banks and
third parties in consideration of some NIS 34 million. In addition,
the loans between Koor and Koor Metals were repaid.
After provisions of approximately NIS 10 million which were included
in respect of this investment until the end of the second quarter of
1999, no capital gain or loss was recorded from this transaction in
the third quarter of 1999.
L. In August 1999 Tadiran signed an agreement for the sale of all of its
holdings (100%) in Tadiran Batteries Ltd. in consideration of US $19.5
million. Closing of the transaction is contingent upon the fulfillment
of certain conditions which are set forth in the agreement and which
include, inter alia, due diligence by the buyer and receipt of
approvals from the relevant authorities for closing the transaction.
The expected after-tax capital gain accruing to Koor amounts to US
$5.3 million and will be recorded upon closing the transaction.
M. In the financial statements of Koor, Phoenicia and Yonah are part of
the food segment appearing in the financial statements as at 31
December, 1998 under "Others" in the segments note. Following the
completion of the sale of these companies, Koor's operations in the
food segment were terminated.
Below are data on the operations of the food segment:
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30 SEPTEMBER 30 DECEMBER 31
1999 1998 1998
(UNAUDITED) (UNAUDITED) (AUDITED)
NIS MILLIONS NIS MILLIONS NIS MILLIONS
Income from sales 96 330 375
Operating income (loss) (1) 15 19
Net loss - Koor's share (4) (2) (2)
Total assets - 246 109
<PAGE>
NOTE 7 - ADDITIONAL INFORMATION
A. As part of the ECI and TTL merger agreement, Tadiran purchased the
assets and liabilities of the switching division of TTL (Switching),
in consideration of some US $29 million.
On 21 March, 1999 an agreement was signed by Tadiran and a third party
for the sale of most of the assets and liabilities of Switching in
consideration of US $24 million, with no capital gain or loss accruing
from the transaction.
B. On 28 July, 1999, a memorandum of understanding between Koor and its
wholly- controlled subsidiaries (Tadiran and Elisra Electronic Systems
Ltd.) of the one part, and Israel Aircraft Industries Ltd. and Elta
Electronics Industries Ltd. of the other part, for cooperation on
certain subjects in the field of military electronics industry. The
cooperation will entail, inter alia, a business venture under the
equal ownership of the two parties. The parties together will approve
the business plan of the venture, which will include, among other
things, a definition of the areas of business of the venture, budgets
and resources, reciprocal relations between the parties, etc.
C. On 16 September, 1999 Koor and Clal Industries and Investments Ltd.
received the valuation determined by outside appraisers for Mashav
Initiation and Development Ltd. Following the valuation, the exercise
price of the option held by Clal for the purchase of 25% of the share
capital of Mashav from Koor, is $179 million.
D. In the nine months ended 30 September, 1999, the local currency in
Brazil was devalued against the dollar by 59%, with high volatility in
the exchange rate during the period.
Until the third quarter of 1999, most of the customer debts of the
consolidated company in Brazil were linked to the exchange rate of the
dollar. During the third quarter, owing to the sharp cumulative rise
in the exchange rate of the local currency against the dollar, the
customer market in Brazil no longer accepts linkage to the dollar and
therefore, customer balances of the consolidated company in Brazil, as
at 30 September, 1999, which amount to approximately $145 million, are
unlinked to the dollar.
As a result of the change in the market's attitude during the third
quarter in respect of the manner of linkage of customer balances,
sales of the consolidated company in Brazil include the erosion of the
customer debt at that date. Adjustment of the customer debt from the
previous period to the new accounting method, in the amount of $6.7
million, is recorded in the item Other expenses in the third quarter.
In addition, Other expenses includes, in the nine months ended 30
September, 1999, the sum of $6.5 million in respect of discounts, net,
granted to customers for the devaluation in Brazil (of which $2.5
million in the third quarter).
<PAGE>
NOTE 7 - ADDITIONAL INFORMATION (CONT'D)
E. In the third quarter of 1999, the exploitation of transferred capital
losses for tax purposes became possible, and accordingly Koor recorded
a tax asset of some NIS 50 million against the Income tax revenues
item.
F. In the second quarter of 1999, Tadiran and its consolidated company
recorded additional deductions in respect of a decrease in value of
investments in a total amount of approximately $8 million, net.
G. In the current period subsidiaries of Tadiran passed resolutions
regarding a plan for a reduction in personnel. In the opinion of the
managements of these companies the expense in the amount of $ 7.3
million reflects the cost of implementing this plan.
H. Due to the ongoing crisis in the construction industry and import of
construction steel at dumping , which are causing a depression in the
level of selling prices of steel, a consolidated company, United Steel
Mills Ltd. (United Steel) posted a loss of some NIS 22.6 million in
the first nine months of 1999. As a result, United Steel has a
negative operating cash flow deficiency in the amount of some NIS 25.8
million, and as at 30 September, 1999 the working capital deficiency
of United Steel is NIS 88 million.
In view of the aforesaid, and in view of the short and long term
credit levels, after the balance sheet date United Steel, its
shareholders and the banks which granted the credit to United Steel,
formulated an arrangement, which has not yet been signed, in respect
of restructuring the debts of United Steel to the banks.
The main point of the proposed arrangement are these:
The banks will convert the debt of United Steel from a short-term debt
to a long-term debt, including postponement of repayment of the
principal of the loans by about three years.
In exchange, Koor will grant the banks a guarantee limited by amount,
in the amount of the deterioration of credit quality incurred by the
banks, if incurred, following deterioration in the ratio of the extent
of the credit to the value of the current securities of United Steel.
In addition, Koor Industries will extend a loan to United Steel for
repayment of United Steel's obligation to Koor Issuances and will find
a solution for repayment of United Steel's obligation to the debenture
holders and will waive management fees for a defined period.
United Steel estimates, based on the understandings achieved, that the
arrangement will be formally approved by the end of 1999.
The third quarter financial statements of Koor include a provision of
NIS 44 million for a decrease in the value of the investment in United
Steel, which is recorded under the item Other expenses.
<PAGE>
NOTE 7 - ADDITIONAL INFORMATION (CONT'D)
I. In September 1999, an affiliated company of ECI signed an agreement of
principles whereunder its shares and capital notes held by its
shareholders, among them ECI, will be exchanged for the shares of
Trion Communications Systems Ltd., a company whose shares are listed
in the US. Closing of the transaction is contingent upon the
fulfillment of certain conditions which are stipulated in the
agreement of principles, and which include, inter alia, due diligence
by the buyer, receipt of the requisite approvals and the final
structure of the transaction.
The capital gain (before tax) expected from implementation of the
transaction is still contingent upon the results of the closing. ECI's
management estimates, based on the progress in the negotiations to
date, that the capital gain accruing to ECI will be not less than $22
million, which will be recorded in the statement of operations on the
date of completion of the transaction.
J. After the balance sheet date, the Board of Directors of Telrad
approved a further reorganization plan which includes the retirement
of another 113 employees at a total cost of some NIS 48 million (about
NIS 32 million after deduction of relevant deferred taxes). The
financial statements as at 30 September, 1999 include expenses in
respect of the above retirement agreements which are shown under the
item Other expenses.
NOTE 8 - SUBSEQUENT EVENTS
A. On 28 July, 1999 Koor signed an agreement for the sale of all of its
holdings (about 75%) in Phoenicia Glass Works Ltd. (Phoenicia) in
consideration of NIS 6 million and the release of Koor from its
guarantees in favour of Phoenicia towards other third parties in the
amount of approximately NIS 36 million. On 20 October, 1999 the
transaction was closed, the consideration was paid and the shares
transferred.
The after-tax capital gain accruing to Koor in the fourth quarter
after the provisions which were recorded, amounts to some NIS 9
million. See Section 6M.
B. On 11 June, 1999 agreement in principle was reached between Tadiran
and Shamrock Group and others, for the sale of all of Tadiran's
holdings in Tadiran Com.
On 10 November, 1999 the sale agreement was signed, the shares
transferred and the consideration received.
The total consideration is $149 million, of which $ 5 million were
distributed as dividend and $35 million were paid by Tadiran Com. for
the use of Tadiran's logo and a non competition agreement. The capital
gain (after tax) expected to accrue to Koor in the fourth quarter
amounts to approximately $42.5 million.
<PAGE>
NOTE 8 - SUBSEQUENT EVENTS (CONT'D)
C. On 26 October, 1999 Tadiran signed a document of principles for the
sale of all of its holdings (56.6%) in Tadiran Appliances Ltd. The
consideration is in the amount of some $31 million, subject to
adjustments.
Completion of the transaction is contingent upon the fulfillment of
certain conditions which are set out in the agreement, and include,
inter alia, due diligence by the buyer and receipt of the requisite
approvals from the relevant authorities for completion of the
transaction.
A provision of NIS 17 million was recorded in the financial statements
in the third quarter of 1999, reflecting the expected loss from
disposal of the holding.
D. In October 1999, a subsidiary of ECI whose principal business is the
development, production and marketing of fraud detection systems in
communications systems and improvement of traffic quality in
communications systems, completed an initial public offering on
NASDAQ. The net proceeds from the IPO amounted to $37 million.
Following the IPO, a capital gain of some $26 million accrued to ECI,
which will be recorded in the statement of operations of the fourth
quarter of 1999. ECI's holding in the subsidiary decreased to
approximately 77.5%.
Under the prospectus, the underwriters of the issue were granted a
right to purchase an additional quantity of up to 2.5% of the ECI
subsidiary's share capital. Up to the date of approval of the
financial statements the right was exercised, with a further capital
gain of about $3 million to ECI.
<PAGE>
Directors' Report on the state of the Company's affairs
for the period 1 January to 30 September, 1999
1. Strategic Plan
In 1999, Company management is continuing with the successful
implementation of a strategy designed to create value for its shareholders
by focusing on the segments of telecommunications, military electronics and
agro-chemicals, expanding existing operations and abandoning fields with
less potential for high profitability. The Company management is looking
for ways to strengthen its presence in markets and fields which are the
core business of Koor with potential for growth and profitability.
Since the beginning of the year, holdings have been realised in Koor
Finance, Contahal, Merhav, the switching division of Tadiran
Telecommunications, Techem, Tadiran Information Systems, Koor Metals,
Phoenicia, Yonah, and Tadiran Com. In addition, agreements have been signed
for the realization of holdings in Tadiran Batteries and Tadiran Appliances
(see 2J below).
Towards the end of the first quarter of the Year 2000, the Company is
scheduled to complete the first stage of the strategic plan, which
includes, among other things, the disposal of holdings, downsizing of
headquarters and the simplification of holding structures, which is
expected to lead to a considerable decrease in capital gains from the
realization of additional companies. In the second stage of the plan, the
Company's management will focus on the management and enhancement of its
principal holdings.
2. Principal events and changes in the state of the Company's affairs
A. ECI Telecom Ltd. (ECI)
1) On 8 February, 1999, a call option to purchase from Clal
Electronic Industries Ltd. 3,830,000 ordinary shares of a par
value of NIS 0.12 each of ECI at $37 per share, was exercised for
a total sum of approximately $142 million, in accordance with the
provisions of the agreement from 9 April, 1998.
2) During 1999, Koor purchased additional shares of ECI for
approximately $13 million.
3) The percentage of Koor's holdings in ECI as at 30 September, 1999
was approximately 33.8%.
<PAGE>
4) In October 1999, a subsidiary of ECI whose principal business is
the development, production and marketing of fraud detection
systems in communications networks and improving traffic quality
in communications networks, completed an initial public offering
on NASDAQ . The net proceeds from the offering amounted to some
$37 million. Following the offering, capital gains accrued at ECI
were approximately $26 million, which will be recorded in the
Statement of Operations of the fourth quarter in 1999.
Under the prospectus, the offering's underwriters were granted a
right, to purchase an additional quantity of up to 2.5% of the
shares of the ECI subsidiary. By the end of November 1999, the
above right was exercised and an additional capital gain of
approximately $3 million accrued to ECI.
5) In September 1999, an affiliated company of ECI signed an
agreement of principles whereunder its shares and capital notes
held by its shareholders, among them ECI, will be exchanged for
shares of Trion Communications Systems Ltd., a company whose
shares are listed in the US. Closing of the transaction is
contingent upon the fulfillment of certain conditions which are
set out in the agreement of principles, which include, inter
alia, due diligence by the buyer, receipt of certain approvals,
and the final structure of the transaction.
The capital gain (before tax) anticipated from realization of the
transaction is still contingent upon the outcome of closing the
transaction. ECI's management estimates, based on the progress in
the negotiations to date, that the capital gain accruing to ECI
will be not less than $22 million, which will be recorded in the
Statement of Operations on the date of completing the
transaction.
B. Merger of ECI and Tadiran Telecommunications
1) On 16 March, 1999, the merger of the two companies was completed.
After completion of the merger, Tadiran's holdings in ECI reached
approximately 12.6%.
2) As part of the agreement, Tadiran acquired the Switching Division
of Telecommunications for the sum of approximately $28.8 million.
About $25 million of that sum were paid in May 1999 (see J5
below).
3) The merger transaction was recorded in Koor's financial
statements at book values, in keeping with the rules for similar
asset exchange transactions. ECI included in its results an $87
million write-off for research and development in progress in
respect of Tadiran Telecommunications. This write-off was not
included in the financial results of Koor.
4) As a result of the merger, as of 1 January, 1999, the operations
of Tadiran Telecommunications are no longer consolidated in the
financial statements of Koor.
The integration of Tadiran Telecommunications and ECI and the
reorganization of operations in the US are in their final stages.
In accordance with the Securities Regulations, the financial
statements of ECI are attached to those of Koor. ECI's reports
relate to consolidated ECI and include the results of Tadiran
Telecommunications which merged with ECI starting from the first
quarter of 1999.
<PAGE>
Below are selected ECI data (in rounded millions of dollars):
1 - 9 7 - 9
----- -----
1999 1998 1998 1998
---- ---- ---- ----
Revenues 876.9 591.4 302.2 210.2
Gross profit 460.7 337.4 157.4 120.2
Operating income 43.4* 117.4 54.4 32.9
Net income 46.5* 109.4 55.0 30.0
*After reductions relating to the merger - 1999 including
approximately $87 million for purchase of research and
development in progress and $25 million for restructuring
expenses related to the merger with Tadiran Telecommunications.
C. Tadiran shares
1) In accordance with the purchase proposal documents, in January
1999 Koor transferred the consideration for the balance of
Tadiran's shares, approximately NIS 79 million, thereby attaining
100% ownership of Tadiran.
2) Pursuant to a resolution of the Board of Directors of Tadiran, a
reorganization program which includes a significant reduction in
the company's headquarters staff and merger with Koor
headquarters, transfer of real estate management to Koor
Properties, and sale of software and domestic appliance
companies, is now in its final stages. Examination is continuing
of alternatives for mergers and acquisitions in the military
field.
D. Telrad
As part of a comprehensive program for immediate organizational
change, the reorganization of the company into independent profit and
loss units has been completed, 850 employees have left the company
without disruption of labour relations. After the balance sheet date,
the Board of Directors of Telrad approved an additional reorganization
plan which includes the retirement of another 113 employees, at a
total cost of approximately NIS 48 million (NIS 32 million after
deduction of deferred taxes in respect thereof).
The financial statements as at 30 September, 1999 include expenses in
respect of the above retirement agreements, which are recorded under
Other income.
In the first nine months of 1999 and in the third quarter of 1999,
Telrad reported substantial operating and net profit, compared with
operating and net loss in the corresponding period and in the first
quarter of 1999.
Below are selected Telrad Networks data (in rounded millions of NIS):
1 - 9 7 - 9
----- -----
1999 1998 1998 1998
---- ---- ---- ----
Revenues 1,363.0 1,083.3 525.9 256.2
Gross profit (loss) 337.1 107.1 193.3 (22.0)
Operating income (loss) 157.9 (64.2) 129.6 (63.2)
<PAGE>
E. BVR Systems (1998) Ltd. (BVR)
Since the beginning of 1999, Koor has acquired on NASDAQ shares in BVR
at various prices. The total cost of the acquisitions amounts to some
$20 million.
On 5 August, 1999 Elisra Electronic Systems Ltd. (a subsidiary of
Tadiran Ltd. and wholly-owned -100% by Koor), signed an agreement with
BVR and with its shareholders, whereunder Elisra purchased 1,060,000
BVR shares (part in a private placement by BVR and part by purchase
from the other shareholders), at $13 per share, in total consideration
of approximately $14 million. On 22 September, 1999 the transaction
was closed after receipt of the approvals of the various authorities,
and the consideration paid. As at 30 September, 1999, Koor's holdings
in BVR reached approximately 28.6%.
F. Elisra Electronic Systems Ltd. (Elisra)
On 28 July, 1999, approval in principle was given for a memorandum of
understanding between Koor and its wholly-owned subsidiaries (Tadiran
Electronic Systems and Elisra), and Israel Aircraft Industries Ltd.
and Elta Electronics Industries Ltd., for cooperation in certain areas
of the military electronics industry.
The cooperation will entail the establishment of a joint,
equally-owned business venture to which each of the parties will
contribute its abilities in the areas to be defined, so that their
know-how and infrastructure will be channelled into increasing their
ability to compete in global markets and increase their volumes of
business.
A detailed business plan which will define, inter alia, the specific
areas of business, budgets and sources, the reciprocal relations
between the venture and the parties, and other issues, will be
prepared within five months. The memorandum of understanding and
activation of the joint venture require the approval of various
entities.
G. Mashav Initiation and Development (Mashav)
On 8 April, 1998 an agreement was signed between Koor and the Central
Israeli Trade & Investment Company Ltd., and Clal Industries and
Investments Ltd., whereby Clal Industries was granted an option to
purchase from Koor 25% of the issued share capital of Mashav
Initiating & Development Ltd. which are currently held in equal parts
by Koor and Clal Industries. The option was exercisable on terms which
were defined in the agreement in the period starting on 1 August, 1999
and ending on 31 July, 2000. The exercise price will be set by an
outside appraiser and a $10 million control premium added.
On 16 September, 1999 Koor and Clal Industries and Investments Ltd.
received the valuation of the outside appraisers for Mashav, according
to which the exercise price of the Clal's option to purchase 25% of
the share capital of Mashav from Koor was set at $179 million.
H. United Steel Mills (United Steel)
Due to the ongoing crisis in the construction industry and the dumping
of construction steel imports which have driven the selling prices
down to an all-time low, United Steel posted losses in the first nine
months of 1999 of some NIS 22.6 million. As a result, the company has
an operating negative cash flow of NIS 25.8 million. As at 30
September, 1999, the company's working capital deficiency is
approximately NIS 88 million.
In view of the aforesaid and the short and long term credit levels,
the company, its shareholders and the banks which provide the company
with credit, put together, after the balance sheet date, an
arrangement, as yet unsigned, in respect of rescheduling the Company's
debts to the banks from short term to long term.
<PAGE>
The main points of the proposed arrangement are these:
The banks will convert the company's debt from short term to long
term, including a three-year postponement of repayment of the
principal on the loans.
In exchange, Koor will grant the banks a guarantee limited by amount,
in the amount of the deterioration in the quality of the credit which
the banks will incur, if incurred, following deterioration of the
ratio of the scope of the credit to the value of the current
securities of the company. In addition, Koor Industries will extend a
loan to the company for repayment of the company's liabilities to Koor
Issuances, and will find a solution for repayment of the company's
liabilities to the debenture-holders, and will waive management fees
for a stipulated period.
Based on the understandings reached, United Steel estimates that the
arrangement will be formally approved by the end of 1999.
In the third quarter of 1999, the financial statements of Koor
recorded a provision of NIS 44 million for decrease in the value of
the investment in United Steel, under the item Other income.
I. Sheraton Moriah (Israel) Hotels
1) On 27 January, 1999 Koor won a tender for purchase of Moriah
Hotels Ltd. jointly by Koor Industries (75%) and Sheraton
International (25%).
On 12 April, 1999 the transaction was closed at a value of $81.5
million for the entire chain (before distribution of a dividend).
2) On 11 May, 1999 a memorandum of understanding was signed between
Koor and Hapoalim Assets (Shares) Ltd., a wholly owned subsidiary
of Bank Hapoalim B.M., whereby Hapoalim Assets (Shares) Ltd. will
purchase from Koor 20% of the issued and paid up capital of
Moriah Hotels Ltd.
The transaction for the sale of 20% of the issued and paid up
capital of Sheraton Moriah (Israel) Ltd. (formerly Moriah Hotels
Ltd.) by Koor Hapoalim Assets (Shares) Ltd. was closed on 11
October, 1999. The shares were transferred against payment of
approximately $13 million (after distribution of a dividend),
which was paid to Koor by Hapoalim Assets.
On completion of the above transaction, the shareholders of
Sheraton Moriah (Israel) Ltd. are these:
Koor - 55%, Sheraton International Group - 25%, Hapoalim Assets -
20%.
No capital gain is recorded in the financial statements of Koor
in respect of this transaction.
3) In the wake of negotiations for transfer of the hotels owned by
Koor to Sheraton Moriah, Koor recorded in the third quarter of
1999, other expenses of some NIS 33 million for write-off of the
value of the hotels under its ownership.
4) On 10 May, 1999, Moriah Hotels Ltd. signed an agreement for the
sale of the Moriah Plaza Jerusalem Hotel to Dan Hotels Ltd., in
consideration of approximately $27 million.
No capital gain is recorded in the financial statements of Koor
in respect of this transaction.
<PAGE>
J. Divestiture
As part of the strategy of focusing on the areas of operation which
are the core business, Koor divested itself of the following holdings:
1) Subsidiaries and affiliated companies of Telrad Holdings Ltd.
In the reported period, all of the holdings of Telrad Holdings
Ltd. in a number of its subsidiaries and affiliated companies
were sold, in consideration of approximately NIS 20 million. The
capital gain accruing to Koor for these sales is approximately
NIS 16 million.
2) Koor Finance (Koor Capital Markets and Netivot Pension)
On 3 March, 1999 an agreement was signed with Menorah Holdings
Ltd. and B. Gaon Holdings Ltd. for the sale of most of Koor's
shares in Koor Finance Ltd., which controls, among others, Koor
Capital Markets and Netivot Pension Group.
Under the agreement, Koor sold to the buyers 80% of its rights in
Koor Finance (share capital and capital note).
On 31 May, 1999 the transaction was closed after receipt of the
approvals of the various authorities and payment of the
consideration, which amounted to approximately NIS 44 million.
The capital gain is approximately NIS 10 million.
Koor and the buyers granted each other put and call options for
purchase of the balance of Koor's holdings and rights in Koor
Finance. The put option is valid starting from the end of one
year from the date of signing the agreement until the elapse of
two years from signing the agreement, while the call option is
for a period of 90 days after expiry of the put option.
Consideration of the exercise for Koor was set at NIS 12 million,
linked to the dollar and bearing interest.
3) Contahal
On 8 March, 1999 an agreement was signed whereunder Tadiran will
sell all of the Contahal shares held by Tadiran and by its
wholly-owned subsidiary, which are 86.9% of Contahal's shares.
The consideration to Tadiran is approximately NIS 101 million.
Capital gain to Koor from this sale amounts to some NIS 49
million. The transaction was closed on 13 May, 1999, the shares
were transferred and the consideration received.
4) Merhav
On 13 April 1999 an agreement was signed for the sale of all of
the holdings (76.37%) of Koor Investments Ltd. (a wholly-owned
Koor company) in Merhav Building Materials and Ceramics Center
Ltd. to L. M. Lipsky Ltd. The agreement stipulates, inter alia,
that L. M. Lipsky Ltd. will buy from Koor the capital note issued
by Merhav in Koor's favour in the amount of approximately NIS 3.6
million, and will release Koor from its guarantees in favour of
Merhav and its subsidiaries.
The agreement was implemented on 21 June, 1999, the shares were
transferred and the consideration paid, after fulfillment of all
the conditions stipulated therefor between the parties.
The total consideration (including the capital note) amounted to
approximately NIS 35 million. The pre-tax capital gain to Koor
from this sale was approximately NIS 6.6 million.
5) Switching Division of Tadiran Telecommunications
During the account period, Tadiran sold most of the assets and
liabilities of the Switching Division in consideration of some
$24 million. Neither profit nor loss was recorded in the
financial statements for as a result of the transaction.
<PAGE>
6) Techem
On 16 May, 1999 Tadiran Ltd. signed an agreement of principles
for the sale of all of its holdings (87.4%) in Advanced
Technologies Ltd. (Techem) to Ness Technologies. On 29 July, 1999
the transaction was closed, the shares were transferred and the
consideration received.
The consideration amounts to NIS 274 million. Pre-tax capital
gain accruing to Koor in the third quarter amounted to
approximately NIS 153 million.
7) Tadiran Information Systems Ltd. (TIS)
On 10 June, 1999 an agreement was signed by Tadiran for the sale
of all of its holdings (49%) in TIS to IBM Israel Ltd., which
prior to the agreement held 51% of TIS. The consideration
(including a dividend) amounts to approximately NIS 107 million,
and the capital gain (before tax) amounts to some NIS 59 million,
and was included in the results of the second quarter of 1999.
8) Tadiran Com.
On 11 June, 1999, agreement in principle was reached between
Tadiran and Shamrock Group together with a third party, for sale
of all of Tadiran's holdings in Tadiran Com. On 10 November, 1999
an agreement was signed with the buyers for the sale of all of
Tadiran's holdings in Tadiran Com. Additional agreements were
signed together with the sale agreement. Since all the necessary
approvals had been received, the transaction was closed there and
then, the shares were transferred and the consideration paid. The
consideration amounts to approximately $149 million. The after
tax capital gain expected to accrue to Koor is approximately
$42.5 million.
9) Koor Metals Ltd.
On 11 July, 1999 an agreement was signed for the sale of all of
Koor's holdings in Koor Metals Ltd. to Accord Technologies
Holdings (1999) Ltd., in consideration of NIS 11 million, and the
release of Koor from its guarantees in favour of Koor Metals and
its subsidiaries to banks and third parties in consideration of
some NIS 34 million.
The transaction was closed on 4 August, 1999, the shares
transferred and the consideration received, and Koor was released
from its guarantees.
After deduction of provisions for decline in value which were
included in respect of this investment, no capital gain or loss
was recorded from this transaction in the third quarter of 1999.
10) Phoenicia
On 28 July, 1999 an agreement was made for the sale of all of
Koor's holdings (about 75%) in Phoenicia Glass Works Ltd. in
consideration of NIS 6 million and the release of Koor from its
guarantees in favour of Pheonicia towards third parties of
approximately NIS 36 million.
Capital gain after the provisions recorded for decline in value,
amounts to some NIS 9 million and will be recorded in the fourth
quarter of 1999.
The transaction was closed on 20 October, 1999, the shares
transferred, the consideration received and Koor released from
its guarantees.
11) Yonah Fishing & Industry Ltd. (Yonah)
On 21 July, 1999 an agreement was finalised for the sale of
Koor's holdings in Yonah and its subsidiary. Under the agreement,
Koor was released from guarantees it gave in respect of Yonah to
banking institutions and other parties in a total amount of
approximately NIS 55 million.
The transaction was closed in September 1999 and the shares were
transferred.
<PAGE>
After deduction of provisions which were included in respect of
the investment in the past, no capital gain or loss was recorded
from this transaction in the third quarter of 1999.
12) Tadiran Batteries
In August 1999, Tadiran signed an agreement for the sale of all
of its holdings (100%) in Tadiran Batteries Ltd. in consideration
of approximately $19.5 million. Closing of the transaction is
contingent upon the fulfillment of certain conditions which are
set forth in the agreement and which include, inter alia, due
diligence by the buyer and receipt of approvals from the relevant
entities for closing the transaction.
The expected capital gain accruing to Koor will be approximately
$5.3 million and will be recorded upon closing the transaction.
13) Tadiran Appliances Ltd.
On 26 October, 1999, Tadiran Ltd. signed a memorandum of
principles for the sale of all of its holdings (about 56%) in
Tadiran Appliances Ltd. to Nehushtan Investment Co. Ltd. The
consideration amounts to approximately $31 million, subject to
adjustments.
A final agreement is scheduled for signature within 60 days.
Closing of the transaction, subject to due diligence, is
contingent upon receipt of certain approvals, including that of
the Commissioner of Restrictive Trade Practices.
Capital loss to Koor amounts to some NIS 17 million, and was
recorded in the third quarter of 1999.
K. Holdings of the shareholders
1) On 8 September, 1999 an agreement was made between Claridge
Israel LLC (a member of the Claridge Group, an interested party
in Koor) and Bank Leumi Le'Israel B.M. (an interested party in
Koor which holds 5.56% of its issued share capital), which will
bring about a change in their holdings in Koor.
Under the agreement, Bank Leumi will sell all of its holdings in
Koor (5.56%), as follows: 3.77% to Claridge Group and 1.79% to
Poalim Investments Ltd. The sale will be made at $90.652 per
share, subject to adjustments as set forth in the agreement.
The shares will be transferred and the consideration paid on 2
January, 2000. On closing the transaction, Bank Leumi will cease
to be an interested party in Koor.
2) On 28 September, 1999, agreement was reached between Claridge
Group and a wholly owned subsidiary of Israel Corporation Ltd.,
which will bring about a change in the Holdings of Claridge Group
in Koor.
It was agreed that Claridge Group will sell to Israel Corporation
295,402 ordinary shares of Koor (about 1.78% of Koor's issued
share capital) at $90.652 per share, subject to adjustments
agreed upon.
Transfer of the shares and payment of the consideration will be
on the first business day of January 2000.
3) On 1 November, 1999, Bank Hapoalim notified Claridge Group of
exercise of the put option granted to it under the agreement
which was signed on 12 July, 1998 between Claridge Group and Bank
Hapoalim B.M. in the name of Hapoalim Assets (Shares) Ltd.
Under the notice of exercise, Bank Hapoalim will sell to Claridge
Group 364,038 ordinary shares of Koor at $142.50 per share.
Transfer of the shares to Claridge Group will take place not
later than on 30 November, 1999.
<PAGE>
4) The holdings of Koor ordinary shares are these:
<TABLE>
<CAPTION>
Immediately prior to After closing the
publication of the transactions mentioned
financial statements above (2.1.2000)
Number of shares
<S> <C> <C> <C>
Claridge Group 4,697,311 5,389,573
Hapoalim Assets (Shares) Ltd. 3,544,672 3,180,634
Bank Leumi Le'Israel B.M. 919,028 -
Israel Corporation Ltd. - 295,402
Poalim Investments Ltd. - 295,402
Telrad Holdings Ltd. and Koor
Investments Ltd. 170,436 170,436
The public 6,569,951 6,569,951
---------- ----------
15,901,398 15,901,398
========== ==========
</TABLE>
L. Dividend
On 28 June, 1999, a first interim dividend for 1999 was distributed in
the amount of NIS 3.60 per ordinary share of NIS 0.001.
3. Financial condition
Koor's policy of investing in companies included in its consolidated
financial statements on a equity basis (ECI), while divesting holdings in
companies which are not synergetic with its core business and which were
consolidated in its financial statements until disposal, is reflected in a
considerable decline in the turnover of revenues from sales and
consequently in the gross profit and operating profit in Koor's
consolidated financial statements.
Shareholders' equity as at 30 September, 1999 amounted to approximately NIS
4,337 million ($1,014 million) and constitutes 25.7% of the balance sheet,
compared with NIS 4,057 million which were 22.9% of the balance sheet as at
the end of 1998.
Minority rights in subsidiaries which were consolidated as at 30 September,
1999 amount to NIS 1,383 million, compared with NIS 1,626 million at 31
December, 1998. The decline in this item derives mainly from purchase of
the minority rights in Tadiran as a result of the purchase offer of Tadiran
shares by Koor, in Makhteshim as a result of the purchase of the Company's
shares by its consolidated company, and from termination of the
consolidation of Tadiran Telecommunications. The decline was partially
offset by a minority interest in profits of consolidated companies, and
consolidation for the first time of Moriah Hotels since the beginning of
the second quarter of 1999.
<PAGE>
Current assets as at 30 September, 1999, amount to NIS 7,774 million, which
are 46.1% of the balance sheet, compared with NIS 10,155 million which were
57.4% of the balance sheet on 31 December, 1998. The decrease in current
assets derives mainly from termination of the consolidation of Tadiran
Telecommunications as of 1 January, 1999. Other contributory factors were a
decline in cash and cash equivalents and in short-term deposits, mainly at
Koor - the parent company - for financing exercise of the option to
purchase ECI shares from Clal Electronics Industries and the balance of
Tadiran's shares as part of the purchase offer, and in Makhteshim for
financing the purchase of Company shares by its consolidated company.
The decline in customer balances, which derives mainly from termination of
the consolidation of Tadiran Telecommunications and other companies in
which holdings were divested during the reported period, was partly offset
by the increase in customer balances, mainly Telrad and Makhteshim-Agan.
Investments in affiliated companies as at 30 September, 1999 amount to NIS
3,565 million, compared with NIS 1,615 million at the end of 1998. The
increase is largely the result of the investment in ECI due to completion
of the merger of ECI and Tadiran Telecommunications, and exercise of the
call option from Clal Electronics Industries, and from investment in BVR by
Koor and Elisra.
Fixed assets as at 30 September, 1999 amount to NIS 4,339 million, which
are 25.8% of the balance sheet compared with NIS 4,495 million which were
25.4% of the balance sheet at 31 December, 1998. The decrease in fixed
assets derives mostly from termination of consolidation of Tadiran
Telecommunications, which was partly offset by an increase in fixed assets
deriving from the consolidation of the Moriah Hotels chain from the
beginning of the second quarter of 1999.
Intangible assets and deferred charges as at 30 September, 1999 amount to
NIS 729 million, compared with NIS 858 million at 31 December, 1998. The
decline in this item derives mainly from goodwill assigned to Tadiran
Telecommunications which is included as at the balance sheet date in
investments in affiliated companies after completion of the merger.
Long-term financial liabilities amount to NIS 4,287 million and are 25.4%
of the balance sheet, compared with NIS 4,674 million which were 26.4% of
the balance sheet at 31 December, 1998.
Total financial liabilities as at 30 September, 1999 are NIS 6,881 million
- 40.8% of the balance sheet, compared with NIS 7,392 million - 41.8% of
the balance sheet at 31 December, 1998. The decline in the total amount for
this item derives from termination of consolidation of Tadiran
Telecommunications - NIS 731 million in short-term credit and NIS 53
million in long-term liabilities. In contrast, short-term credit from banks
and others increased, particularly at Koor - the parent company. Long-term
liabilities, net declined mainly at Koor - the parent company.
Currency exposure of Koor as at 30 September, 1999 is reflected in a
surplus of NIS 3,273 million in financial liabilities over financial assets
denominated in or linked to foreign currency, compared with NIS 2,616
million at 31 December, 1998. Surplus financial liabilities over financial
assets linked to the CPI as at the balance sheet date amount to NIS 947
million, compared with NIS 864 million at 31 December, 1998.
For financing investments in ECI and consolidated companies in 1998, Koor -
the parent company - took US dollar-linked loans which amounted to
approximately NIS 2.5 billion as at 30 September, 1999, of which
dollar-linked loans of NIS 1.8 billion are specific loans for the
acquisition of companies whose operating currency is the US dollar.
Accordingly, exchange rate differences in respect of such loans are not
assigned to the statement of operations but to adjustments deriving from
translation of financial statements of investee companies in foreign
currency.
Pursuant to a resolution of the Board of Directors, hedging transactions
were implemented during the reported period in a total amount of
approximately $105 million.
<PAGE>
4. Results of operations
Sales in the first nine months of 1999 amounted to NIS 8,255 million,
compared with NIS 9,401 million in the first nine months of 1998, a decline
of about 12.2% in sales in the first nine months of 1999.
Sales in the third quarter of 1999 amounted to NIS 2,952 million, compared
with NIS 3,237 million in the second quarter of 1998, a decline of 8.8%.In
the first nine months of 1999, the sales of Tadiran Telecommunications,
Soltam, Pri Hagalil, Hod Lavan, Shallon, Hornet, Secutech and others in
which holdings were sold, were not included. In addition, sales of Koor
Metals, Yonah, Merhav, Techem and others in which holdings were divested at
the end of the second quarter of 199, were also not included in the third
quarter of 1999.
The decline of sales of companies which were consolidated in the past
amounted to NIS 1,891 million in the first nine months of 1999 and NIS 780
million in the third quarter of 1999 (of which - Tadiran Telecommunications
- NIS 1,248 million in the first nine months and NIS 459 million in the
third quarter).
In addition, the sales of number of companies declined in the first nine
months and in the third quarter of 1999 compared with the corresponding
periods in 1998, particularly at Mashav and Middle East Tubes. On the other
hand, sales at Makhteshim-Agan and Telrad increased during the same periods
compared with 1998. Increased sales in the reported period also resulted
from the first-time consolidation of Moriah Hotels starting from the second
quarter of 1999.
Cost of sales in the first nine months of 1999 amounted to NIS 6,288
million compared with NIS 7,230 million in the corresponding period in
1998, a decrease of 13.0%.
Cost of sales in the third quarter of 1999 amounted to NIS 2,178 million,
compared with NIS 2,503 million in the corresponding period in 1998, a
decline of 13.0%.
Costs of research and development, net, included in the cost of sales
amounted to NIS 293 million in the first nine months of 1999, compared with
NIS 378 million in the first nine months of 1998 (of which, NIS 138 million
at Tadiran Telecommunications). Most of the research and development costs
were expended at Tadiran and at Telrad.
Gross profit in the first nine months of 1999 amounted to NIS 1,967
million, which are 9.4% less than the gross profit of NIS 2,170 million in
the first nine months of 1998.
Gross profit in the third quarter of 1999 amounted to NIS 774 million,
which are 5.4% higher than the gross profit of NIS 734 million in the third
quarter of 1998.
The gross profit margin in the first nine months of 1999 reached 23.8% of
sales, compared with 23.1% of sales in the corresponding period in 1998.
The gross profit margin in the third quarter of 1999 reached 26.2% of
sales, compared with gross profit of 22.7% of sales in the third quarter of
1998.
The NIS 203 million decrease in the absolute amount of gross profit in the
first nine months of 1999 occurred following termination of consolidation
of Tadiran Telecommunications from the beginning of 1999 - NIS 298 million,
and of other companies in which holdings were sold during 19- NIS 153
million.
In contrast, gross profit increased in the first nine months of 1999
compared with the corresponding period on 1998, mainly at Telrad and United
Steel.
In the third quarter of 1999, the absolute amount of gross profit increased
by NIS 40 million compared with the corresponding period in 1998, as a
result of an increase in gross profit at Telrad and United Steel, which was
<PAGE>
almost entirely offset by termination of the consolidation of Tadiran
Telecommunications - NIS 115 million, and of other companies in which
holdings were sold - NIS 76 million.
Selling expenses in the first nine months of 1999 amounted to NIS 759
million, 14.7% less than the NIS 890 million in the first nine months of
1998.
Selling expenses in the third quarter of 1999 amounted to NIS 261 million,
16.8% less than in the third quarter of 1998.
The principal cause of the decrease in selling expenses is termination of
formerly-consolidated companies - NIS 190 million for the first nine months
and NIS 64 million for the third quarter (of which, Tadiran
Telecommunications NIS 119 million and NIS 38 million respectively).
Selling expenses in the first nine months and the third quarter of 1999
increased, however, compared with the corresponding periods in 1998, at
Tadiran (excluding Tadiran Telecommunications), as a result of bolstering
the marketing force and of the first-time consolidation of TMN in the
second quarter of 1998, at Makhteshim-Agan as a result of considerable
growth in company operations, and at Telrad.
General and administrative expenses in the first nine months of 1999
amounted to NIS 563 million, which are 22.4% less than the NIS 726 million
recorded in the first nine months of 1998.
General and administrative expenses in the third quarter of 1999 amounted
to NIS 183 million, which are 20.4% less than the NIS 230 million for the
third quarter of 1998.
The decrease in general and administrative expenses in the first nine
months and the third quarter of the year compared with the corresponding
periods in 1998, occurred mainly at Koor - the parent company, following
the downsizing of headquarters and the inclusion of additional provisions
for retirement arrangements for employees in the first nine months of 1998,
at Telrad, in the wake of that company's ongoing recovery program, at
Middle East Tubes and at United Steel following adjustment of expenses to
the level of operations.
A decrease deriving from the administrative expenses of Tadiran
Telecommunications in the first nine months and in the third quarter
amounted to NIS 77 million and NIS 26 million respectively, and of other
formerly-consolidated companies to NIS 65 million and NIS 33 million
respectively. In contrast, administrative expenses increased, mainly at
Tadiran and at Makhteshim-Agan, as a result of expansion of their
operations.
Operating profit in the first nine months of 1999 amounted to NIS 645
million, an increase of 16.4% over the NIS 554 million recorded in the
first nine months of 1998.
Operating profit in the third quarter of 1999 amounted to NIS 330 million,
an increase of 73.1% over the NIS 191 million recorded in the third quarter
of 1998.
The increase in operating profit stems mainly from a significant
improvement in the operating profit of Telrad, of Mashav and of United
Steel.
The increase in operating profit was partially offset by termination of the
consolidation of Tadiran Telecommunications - NIS 102 million for the first
nine months and NIS 53 million for the third quarter, and by a decline in
operating profit, mainly at Tadiran.
The operating profit margin in the first nine months of 1999 reached 7.8%
of sales, - compared with 5.9% in the corresponding period in 1998.
The operating profit margin in the third quarter of 1999 reached 11.2% of
sales, compared with 5.9% in the corresponding period in 1998.
Financing expenses in the first nine months of 1999 amounted to NIS 307
million, of which NIS 135 million in the third quarter of the year,
compared with NIS 146 million in the first nine months of 1998, of which
NIS 81 million in the third quarter of 1998.
These figures reflect the 2.7% real devaluation of the shekel against the
US dollar compared with a rise in the CPI, which occurred in the first nine
months of 1999 (in the third quarter of the year the real devaluation was
<PAGE>
3.6%), which increased dollar liabilities even as it increased financing
expenses.
The increase in financing expenses occurred mainly at Koor - the parent
company, as a result of an increase in total financial liabilities, net for
financing the purchase of ECI and Tadiran shares, mainly during the
previous year, and as a result of the real devaluation, at Makhteshim-Agan
as a result of translation differences between the Brazilian currency (the
real) and the dollar, which derived from the sharp devaluation of the
Brazilian currency in the first quarter of 1999, at Telrad as a result of
an increase in long-term credit for financing severance pay for its
employees, and at Mashav.
Other income, net in the first nine months of 1999 amounted to NIS 28
million, of which NIS 36 million Other expenses in the third quarter of the
year, compared with NIS 181 million in the first nine months of 1998, of
which NIS 27 Other income in the third quarter. This item consists mainly
of capital gains of NIS 304 million from divesting holdings in Techem,
Tadiran Information Systems, Contahal, in subsidiaries and affiliated
companies of Telrad Holdings Ltd. (primarily ISDN - NET), Koor Finance and
Merhav, of which NIS 158 million in the third quarter of 1999 compared with
NIS 410 million in the first nine months of 1998 from divesting holdings in
Gvanim, Soltam, Home Center, Tambour and Wireless Communications at
Tadiran, of which NIS 73 million in the third quarter of 1998.
The other expenses in this item are mainly a provision for risks as a
result of the uncertainty in Brazil - NIS 64 million at Makhteshim-Agan,
NIS 41 million in amortisation of goodwill compared with NIS 17 million in
the corresponding period in 1998, and NIS 62 million for supplementary
severance pay, compared with NIS 49 million in the first nine months of
1998. The item also includes other expenses of NIS 142 million for a
decline of asset value, particularly United Steel, hotels, Scopus and
Batteries at Tadiran and Tadiran Appliances, due to an anticipated loss
from divestiture, of which NIS 101 million in the third quarter of 1999,
compared with NIS 180 million in the first nine months of 1998, of which
NIS 23 million in the third quarter of that year.
Profit before income tax in the first nine months of 1999 amounted to NIS
366 million, of which NIS 159 million in the third quarter of the year,
compared with NIS 589 million in the first nine months of 1998, of which
NIS 136 million in the third quarter of 1998.
Income tax in the first half of 1999 amounted to NIS 96 million, of which
NIS 11 million in the third quarter of the year, compared with NIS 262
million in the first half of 1998, of which NIS 68 million in the third
quarter.
The decline in income tax derives from the capital gains tax of NIS 95
million from the realization of Gvanim which was included in this item in
the second quarter of 1998, compared with capital gains tax of NIS 41
million, mainly from realization of Tadiran Information Systems in the
second quarter of 1999.
In addition, in the third quarter of 1999, the exploitation of transferred
capital losses for tax purposes became possible, and accordingly, the
Company recorded a tax asset in the amount of some NIS 50 million against a
record of tax revenues.
The decline in income tax also applies largely to Makhteshim-Agan as a
result of tax saved on translation differences between the Brazilian
currency and the dollar and from a relative improvement in the contribution
of subsidiaries whose tax rate is lower than the average of all the
Makhteshim-Agan companies, and to Tadiran as a result of a decline in
pre-tax profit. On the other hand, income tax increased, mainly at Telrad,
as a result of a considerable increase in income before tax on income.
Equity of Koor Group in the results of affiliates in the first nine months
of 1999 amounted to NIS 90 million, of which NIS 41 million in the third
quarter of the year, compared with NIS 43 million in the first nine months
of 1998, of which NIS 7 million in the third quarter. This item consists
mainly of Koor's equity in the net profits of ECI - NIS 93 million, and
<PAGE>
Koor's equity in the profits of the affiliated companies of Tadiran,
Q-Multimedia and Balton C.P., less Koor's equity in the losses of Herod's
Hotel and Ba-Li Travel.
Minority interest in the profits of the consolidated companies amounted in
the first nine months of 1999 to NIS 50 million, of which NIS 20 million in
the third quarter of the year, compared with NIS 193 million in the first
nine months of 1998, of which NIS 68 million in the third quarter of that
year.
The decrease in this item occurred mainly in the minority interest in the
profits of Tadiran - NIS 101 million, as a result of the purchase offer for
Tadiran shares by Koor and termination of the consolidation of Tadiran
Telecommunications, and in the minority interest in the profits of
Makhteshim-Agan as a result of lower profits.
Profit from continued operations in the first nine months of 1999 amounted
to NIS 311 million, of which NIS 169 million in the third quarter of the
year, compared with NIS 177 million in the first nine months of 1998, of
which NIS 8 million in the third quarter of that year.
Results of discontinued operations, net, (Including capital gain from the
sale of a discontinued operation) in the first nine months of 1998 amounted
to NIS 69.1 million, of which NIS 60.1 million in the third quarter of the
year.
Net profit in the first nine months of 1999 amounted to NIS 311 million,
compared with NIS 246 million in the first nine months of 1998.
Net profit in the third quarter of 1999 amounted to NIS 169 million,
compared with NIS 68 million in the third quarter of 1998.
5. Liquidity
Working capital as at 30 September, 1999 amounts to NIS 1,640 million,
compared with NIS 3,471 million at 31 December, 1998. The current ratio is
now 1.27, compared with 1.52 at the end of last year, and the quick ratio
is now 0.95, compared with 1.16 at the end of last year.
Cash flows from operating activities in the first nine months of 1999
amounted to NIS 322 million, compared with NIS 423 in the first nine months
of 1998. Permanent cash flow from operating activities, i.e., net profit
plus income and expenses not involving cash flows - amounted to NIS 646
million in the reported period compared with NIS 764 in the corresponding
period last year. The increase in the Customers and Other trade receivables
items, which amounts to NIS 558 million, caused a decrease in the cash flow
from operating activities and occurred mainly at Telrad, Tadiran and
Makhteshim-Agan, and derives from the expansion of customer credit. The NIS
224 million growth in Suppliers and Accounts payable caused an increase in
the cash flow from operating activities.
Investment activities in the first nine months of 1999 consumed NIS 1,268
million compared with NIS 2,217 million in the first nine months of 1998.
Investment in fixed assets, net - after deduction of an investment grant -
amounted to NIS 521 million, compared with NIS 850 million in the
corresponding period last year, and constitutes 117.3% of depreciation and
amortization, compared with 167.7% in the corresponding period last year.
Principal investments in fixed assets in the reported period were in
Makhteshim-Agan, Mashav, Tadiran, Telrad and Y.D. Vehicles and
Transportation.
Investments in affiliated companies in the first nine months of 1999
amounted to NIS 862 million, primarily ECI - NIS 642 million, BVR - NIS 142
million, and the City Tower and Herod's hotels - NIS 56 million.
Investments in consolidated companies in the first nine months of 1999
amounted to NIS 98 million, which consist mainly of the balance of Tadiran
shares which were part of the purchase offer.
<PAGE>
Financing activities in the first nine months of 1999 contributed NIS 153
million compared with NIS 1,484 million in the first nine months of 1998.
The long-term loans received and the issue of convertible debentures in the
reported period amounted to NIS 617 million, compared with NIS 1,930
million in the corresponding period last year. The major part of the loans
were received at Makhteshim-Agan, Telrad, Koor - the parent company, Mashav
and Middle East Tubes. Repayment of long-term loans and debentures in the
reported period amounted to NIS 515 million, compared with NIS 493 million
in the corresponding period in 1998. The amount of long-term loan repayment
refers mainly to Makhteshim-Agan, Koor - the parent company , Koor
Issuances, Telrad and Mashav.
Short-term credit, net, increased in the reported period by NIS 313 million
compared with a decline of NIS 92 million in the corresponding period last
year, most of the increase at Koor - the parent company.
In the first nine months of 1999, a dividend was paid to the shareholders
of Koor Industries Ltd. in the amount of NIS 144 million.
Total cash and cash equivalents declined in the first nine months of 1999
by NIS 777 million, mainly at Koor - the parent company, Tadiran and
Makhteshim-Agan.
6. Addressing the Y2K issue
The essence of the year 2000 issue (Y2K) is possible failure of computer
systems in reading the date.
The matter relates to data which are stored in data bases, application
programs, computer platform systems, computer-embedded systems (such as
production systems, switchboards and elevators) and the like, in which the
date is defined in a 6-character field (in which 2 characters represent the
year), rather than an 8-character field (in which 4 characters represent
the year). In addition, in some systems the digits "99" in the year field
were defined as a combination that does not indicate the year 1999.
Data systems from the high-risk group which are not adapted, are
susceptible to range of malfunctions, including total shutdown, partial
work, or work accomplished while providing erroneous data to users who will
be unaware of the errors.
Such malfunctions could well harm the current operations of the
corporation, including its financial reporting.
The Company sees fit to emphasize that an inherent uncertainty exists as to
the Y2K issue.
It is not possible to guarantee that all aspects of the Y2K issue impacting
on Group companies, including aspects relating to third parties, will be
fully resolved.
Critical systems have been identified in all companies in the Group. These
systems are operated mainly by outside entities (service providers). The
Group's companies have implemented a strategy of action for dealing with
the Y2K issue, and are at various stages of that implementation, which
includes the formulation of contingency plans.
Pursuant to the Securities Regulations, below is a report on how Koor is
addressing the Y2K issue.
<PAGE>
Attached Questionnaire
Addendum
(Regulation 2)
Report on Addressing the Y2K Issue
1. Details of plans for solving Y2K bug problems
a. Do you have a list of computer systems and computer-integrated systems
used by the corporation in its operations? Yes
b. Have you identified critical systems? Yes
c. Are the systems operated by the corporation? Yes/No
In some of the investee companies, operation is by the companies
themselves and others are operated by outside entities, such as
service providers.
d. If the answer to (c) is no, state whether the service is provided by a
service provider, a subsidiary or other entity, and what means the
company is employing to ensure organization in good time for the year
2000.
The companies applied to the providers of the data for receipt of a
document of readiness of the systems for the year 2000, including the
methods employed for dealing with the issue.
In this context, an explanation is required of intermediate
situations, such as where some of the systems are managed by the
company and some by others.
The service can be provided by a company held by outside service
provider, a subsidiary or another outside entity.
e. Does the corporation have plans for dealing with the Y2K issue? Yes
Each of the investee companies has a program for dealing with the Y2K
issue.
f. If the answer to (e) is yes, to which systems does the program refer?
(Circle the appropriate answers. More than one answer is possible.)
(1) All systems
(2) Critical systems
(3) Computer-integrated systems
(4) Communications systems
(5) Interfaces with computer systems of third parties which are linked
to the company's systems
Give details:
In some of the companies the program relates to all systems, in others
it relates only to the critical systems and in some only to specific
systems.
In general, each investee company has a program for addressing the Y2K
issue.
g. If the answer to (e) is no, state the reasons therefor and how the
company intends to address the Y2K issue.
Not applicable.
h. If the Y2K bug problem is not material to the functioning of the
company's computer systems, state the reason.
Not applicable.
<PAGE>
2. Cost of addressing the Y2K issue
Give details of investments made in addressing the Y2K issue, according to
financial year:
<TABLE>
<CAPTION>
Financial Have costs or If yes, describe the activities Approximate
year budgets been included in the planned costs amounts, in
designated? NIS millions
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 Yes Conversion and replacement of systems. 46
1999 Yes Conversion, replacement and assimilation 86
of systems
2000 Yes Repairs and dealing with any problems 4
--------------------------------------------------------------------------------------------
</TABLE>
For the current year - will the corporation meet the planned budget?
At this stage, each investee company is within the planned budget.
3. Human resources for the plan
List the persons appointed to be responsible for implementation of the
company's Y2K activities:
Each company in the Group, including Company headquarters, has appointed a
senior person to be responsible and/or a steering committee to coordinate
Y2K problems.
4. Outside professional assistance
Have you hired professional assistance? Yes
Outside professional assistance has been hired by some of the companies in
the Group.
If yes, state the type of assistance (more than one answer is possible).
1. Assessment of the problem.
2. Insertion of corrections in the system.
3. System replacement.
4. Internal audit.
5. Instruction.
6. Supplier assessment.
7. Testing of communications systems to third party.
In each of the companies, the outside professional assistance relates to
several of the types of assistance listed above, as may be necessary.
5. Progress assessment
a. How is progress assessed? (more than one answer is possible).
(1) Periodic discussions for assessing progress? In which forums?
Discussions in the steering committees and managements of the
Group's companies.
(2) Written reports on fixed dates? To whom?
Reports are made in writing, usually to company managements.
(3) Describe any other monitoring methods.
In a number of cases, other means of monitoring and control are
in place, such as GANTT charts and compliance with timetables.
<PAGE>
b. Does the Board of Directors receive a regular report? Yes
If yes, how often? If not, why not?
Since January 1999, all the investee companies and the Company have
started to report regularly to their Boards of Directors at least
quarterly.
6. Compliance with timetable
Is the company keeping to the timetable it set for itself for addressing
the Y2K issue? Yes
All of the investee companies have reported that they are keeping to the
timetables set for dealing with the Y2K issue.
7. Contingency plan for system failure
Is there a contingency plan for system failure due to the Y2K issue? Yes/No
If yes, describe the main points of the plan. If not, explain why not.
Some of the principal investee companies in the Group have such a plan. In
other investee companies the plans are being formulated or the companies
plan to prepare them by 30.11.99
8. Third party systems
Is there a list of existing third party systems which are critical for the
operation of the corporation?
Yes
To what extent are these systems ready?
As part of its assessment of the problem, each company mapped third party
critical systems. The companies addressed these parties for receipt of
documents attesting to readiness and the ways in which they are dealing
with the issue.
Comfort letters have not yet been received from all of these entities. In
addition, all the companies of the Group are exposed to national
infrastructure suppliers such as Israel Electric Corporation, Bezeq,
transport infrastructures, etc.
9. Additional information
State any additional information which you believe to be important for the
reasonable investor, relating to the Y2K issue in your corporation.
9.1 Koor Industries Ltd. ("Koor") is a holding company, all of whose
businesses and operations are in fact managed by investee companies,
and therefore the extent of readiness of its investee companies is
liable to affect Koor itself.
Most of the activities in addressing the Y2K issue are carried out in
the investee companies. In these companies, the issue involves mainly
the telecommunications and electronics fields. It is possible that
Koor will realise, in retrospect, that some of the actions were
inadequate, or do not provide an appropriate solution to the Y2K
problem, for a variety of reasons, such as failure of the systems of
investee companies and/or of third parties which affect the company
(and which the company does not control), inadequate implementation of
the plans, inexact or incomplete identification of possible failures
between the company and the investee companies, and failures in the
link between different computer systems (such as interfaces between
the computer systems of the company and other computer systems).
<PAGE>
9.2 Koor is taking steps and making efforts to prepare itself and to
ensure that the investee companies are also ready for the year 2000.
Each company has appointed a responsible senior person or steering
committee to coordinate and monitor the issue, and these are
monitoring the question so as to pinpoint any problems associated with
the issue and find solutions in a timely manner.
9.3 All of the companies in the Group are exposed to failure of the
systems of national infrastructure providers - Israel Electric
Corporation, Bezeq, etc. Furthermore, in some of the investee
companies - such as Telrad Networks Ltd. ("Telrad"), Tadiran Ltd.
("Tadiran") and ECI Telecom Ltd. ("ECI") - additional exposure derives
from the fact that they sell computer-embedded communications systems.
On this point, see Section 9.6 below.
9.4 The information set out here should not be construed as a
representation or undertaking that Koor, its investee companies or its
business environment will be fully prepared for the year 2000, or that
failures in this regard will not cause, directly or indirectly,
material damages in the company.
9.5 The investee companies in which Koor's investment is material and
whose securities are listed on the Tel Aviv Stock Exchange as at the
balance sheet date, are these: M. A. Industries Ltd., Middle East
Tubes Ltd., United Steel Mills Ltd., Knafayim - Arkia Holdings Ltd.
These companies published their financial reports separately, and
those reports include details of their activities in respect of the
year 2000 issue, in compliance with the Securities Regulations (Rules
for Reporting on Preparation for Solving the Year 2000 Bug Problem)
(Temporary Order), 1998, and should be referred to. Accordingly, the
statements made here do not refer to those companies.
9.6 Koor has applied to the investee companies, requesting information on
their preparations for the year 2000 to which it could refer in the
above Directors' Report. Below are some of the points which arose,
inter alia, from the questionnaires which were filled in by the
investee companies. We note that the review below is presented to the
best of Koor's knowledge, and is based on the answers it received from
the investee companies.
o ECI Telecom Ltd. (ECI) (in which Koor's holding as at the balance
sheet date is 33.8%) - ECI haspublished details of its
preparations according to the reporting rules applicable to it.
o Telrad (holding as at the balance sheet date - 80%) - Telrad
advised that a first report was conveyed to the Board of
Directors in March 1999, since when reports have been made
periodically. Assessment of progress in dealing with the issue is
made by means of follow-up discussions with the responsible
entities. According to its reports, Telrad has a detailed work
plan for dealing with the issue and is keeping to the timetable
it set for itself. Telrad also noted that it has not yet
completed its Y2K contingency plans; these are in preparation
with the assistance of an outside company which specializes in
the subject. To the best of Telrad's knowledge, its business
activities are not expected to be significantly harmed on
1.1.2000 and onwards.
According to its report, Telrad has made timely preparation with
regard to the computer-embedded systems which it sells to its
customers, and where relevant has offered them solutions by way
of appropriate upgrading and adaptation.
Since 1 June, 1999, the operation of information systems in the
company is outsourced to a sub-contractor, Tadiran Information
Systems Ltd. (TIS), under the supervision of the company's own
information systems manager. TIS reported that it has a Y2K
program and that it is operating accordingly.
<PAGE>
o Tadiran (holding as at balance sheet date - 100%) - Most of the
managerial data systems of Tadiran and of its subsidiaries were
developed and are operated by Tadiran Information Systems Ltd.
(TIS) by outsourcing. Tadiran reported that it has Y2K plans
under an agreement with TIS for the adaptation of the managerial
data systems to the year 2000, for itself and for all of its
subsidiaries. According to the reports, the company and its
subsidiaries have plans for dealing with the issue and are
keeping to the timetables they set for themselves.
The Tadiran subsidiaries which operate independent data systems
(engineering and personal) are effecting the adaptations
themselves or, in cases of purchased systems and use of service
providers, the conversion is effected by the supplier. All the
systems, whether self-operated or operated by another, are
included in the Y2K plans and are reviewed in the progress
assessment process.
The company also reported that some of the subsidiaries have
contingency plans, and the others are at various stages or
formulating such plans.
On the matter of adaptation of computer-embedded products, we
note that Tadiran itself does not sell products. Each of its
subsidiaries which sells computer-embedded systems has product
update plans which are implemented in respect of their customers
according to their contractual commitments. Updating work is in
progress.
o Mashav Initiation and Development Ltd. (holding as at the balance
sheet date - 50%) - According to its reports, Mashav has plans
for addressing the issue and is keeping to the timetable it set
for itself. The company reported that it does not have
contingency plans; however, on completion of conversion of the
systems, simulation tests are carried out for dates beyond the
year 2000.
o M.A. Industries Ltd. - According to the company's report, the
budget for handling the Y2K bug problem has been updated as
follows:
1998 1999 2000
--------------- --------------- ---------------
In NIS millions In NIS millions In NIS millions
--------------- --------------- ---------------
3.2 5.0 1.2
In other words, an increase of NIS 2 million in the budget, most of
which is allocated for the year 2000, with an increase in the cost of
activities in 1999.
o United Steel Mills Ltd. - The budget for dealing with the Y2K bug
problem has been updated to approximately NIS 900,000 for 1999
(the figure given in the previous report NIS 1,500,000).
9.7 We further clarify that malfunctions in investee companies of Koor,
whether as a result of activities which turn out to be inadequate or
as a result of human error, are liable to cause a chain reaction which
will also affect Koor. In addition, systems failures in a number of
investee companies could have a cumulative effect on Koor.
9.8 Pursuant to a directive of the Association of Certified Public
Accountants in Israel, we also note the fact that the Y2K issue
contains an inherent uncertainty and it is not possible to guarantee
that all aspects of the issue which affect Koor or its investee
companies, including those which refer to third party efforts to
address the issue, will be completely solved.
The Company's auditors have seen fit to direct attention to the Y2K issue
in their review.
<PAGE>
7. Principal subsidiaries
Below are selected data from the results from the financial statements of
principal subsidiaries, in adjusted and rounded NIS millions:
<TABLE>
<CAPTION>
1 - 9 7 - 9
------- -------
1 9 9 9 1 9 9 8 Change % 1 9 9 9 1 9 9 8 Change %
- -----------------------------------------------------------------------------------------------------------
Sales:
- -----
<S> <C> <C> <C> <C> <C> <C>
Tadiran (a) 2,213.4 3,696.5* (40.1) 693.1 1,256.7* (44.8)
Telrad 1,363.0 1,083.3 25.8 525.9 256.2 105.3
Makhteshim-Agan
Industries Ltd. (a) 2,730.1 2,519.6** 8.4 963.0 920.4 4.6
Mashav 1,309.8 1,428.6 (8.3) 446.4 472.5 (5.5)
United Steel Mills 334.6 324.4 3.1 106.9 110.9 (3.6)
Middle East Tubes 136.4 187.6 (27.3) 49.2 64.7 (24.0)
Net profit:
- ----------
Tadiran (a) 298.5 240.9 23.9 163.5 79.6 105.4
Telrad 53.4 (48.6) 43.4 (52.4)
Makhteshim-Agan
Industries Ltd. (a) 114.5 164.0** (30.2) 20.0 34.4 (41.9)
Mashav 136.0 256.9*** (47.1) 55.5 144.7*** (61.6)
United Steel Mills (22.6) (41.0) 44.9 (7.5) (12.2) 38.5
Middle East Tubes (2.5) (16.1) 84.5 0.2 (2.4)
- -----------------------------------------------------------------------------------------------------------
(a) The financial statements are adjusted on the basis of changes in the exchange rate of the dollar.
(*) Including Tadiran Telecommunications.
(**) Proforma data reflecting the results of operations had the arrangement for changing the structure of
the holdings been implemented at the beginning of the reported period.
(***) Including capital gain from the sale of discontinued operations, net.
</TABLE>
- ------------------------------------ -----------------------------------
Jonathan Kolber Danny Biran
CEO and Vice-Chairman President and Member
of the Board of Directors of the Board of Directors
24 November, 1999
