EXHIBIT B
KOOR Industries Limited (An Israeli Corporation)
Financial Statements
As at September 30, 2000
(Unaudited)
<PAGE>
KOOR Industries Limited
(An Israeli Corporation)
Interim Consolidated Financial Statements as at September 30, 2000
--------------------------------------------------------------------------------
Contents
Page
Review Report of Interim Consolidated Financial Statements 2
Interim Consolidated Financial Statements:
Balance Sheets
Statements of Income 5
Statements of Shareholders' Equity 6
Statements of Cash Flows 11
Notes to the Financial Statements 17
<PAGE>
The Board of Directors
Koor Industries Limited
Review report of Unaudited Interim Consolidated Financial Statements
for the nine and three month periods ended September 30, 2000
At your request, we have reviewed the interim consolidated balance sheet of Koor
Industries Limited and its subsidiaries as at September 30, 2000, and the
related consolidated statements of income, the statement of shareholders' equity
and the consolidated statements of cash flows for the nine month and three month
periods then ended.
Our review was conducted in accordance with procedures prescribed by the
Institute of Certified Public Accountants in Israel, and included, inter-alia,
reading the said financial statements, reading the minutes of the Shareholders'
Meetings and of the meeting of the Board of Directors and its committees, as
well as making inquiries of persons responsible for financial and accounting
matters.
The review reports of certain subsidiaries, whose assets as at September 30,
2000 constitute 21% of the total consolidated assets and whose revenues for the
nine months then ended constitute 23% of the total consolidated revenues, have
been reviewed by other auditors. The financial statements of affiliates, the
investment in which, on the equity basis, as at September 30, 2000 totaled
approximately NIS 264 million, and the equity of Koor in their profits for the
nine months then ended totaled approximately NIS 2 million, have also been
reviewed by other auditors.
Since the review performed was limited in scope and does not constitute an audit
in accordance with generally accepted auditing standards, we do not express an
opinion on the said interim financial statements.
In the course of our review, including the reading of the review reports of the
other auditors as stated above, nothing came to our attention which would
indicate the necessity of making any material modifications to the interim
financial statements referred to above 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.
We draw attention to Note 6A to the 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 Ltd. and
Telrad Networks Ltd.
Somekh Chaikin
Certified Public Accountants (Isr.)
November 28, 2000
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
------------------------------------------------------------------------------------------------------------
In terms of NIS of September 2000
Convenience
translation
(Note 1B)
September 30 --------------
---------------------------------- December 31 September 30
2000 1999 1999 2000
-------------- --------------- --------------- --------------
Unaudited Audited Unaudited
---------------------------------- --------------- --------------
NIS thousands US$ thousands
----------------------------------------------------- --------------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents 927,772 707,570 1,441,915 230,559
Short-term deposits and investments 685,795 624,782 470,122 170,426
Trade receivables 2,721,563 3,402,846 3,198,145 676,333
Other accounts receivable 476,272 751,288 657,518 118,358
Inventories and work in progress,
net of customer advances 1,698,313 2,287,303 2,113,732 422,046
-------------- --------------- --------------- --------------
Total current assets 6,509,715 7,773,789 7,881,432 1,617,722
-------------- --------------- --------------- --------------
Investments and long-term
receivables
Investments in affiliates 3,248,644 3,564,744 3,479,385 807,317
Other investments and receivables 1,092,019 445,053 754,193 271,377
-------------- --------------- --------------- --------------
4,340,663 4,009,797 4,233,578 1,078,694
-------------- --------------- --------------- --------------
Fixed assets
Cost 6,724,871 10,604,575 10,612,984 1,671,191
Less - accumulated depreciation 3,386,714 6,265,142 6,063,138 841,629
-------------- --------------- --------------- --------------
3,338,157 4,339,433 4,549,846 829,562
-------------- --------------- --------------- --------------
Other assets, net 849,990 729,172 624,321 211,230
-------------- --------------- --------------- --------------
15,038,525 16,852,191 17,289,177 3,737,208
============== =============== =============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Corporation)
------------------------------------------------------------------------------------------------------------
Convenience
translation
(Note 1B)
September 30 --------------
---------------------------------- December 31 September 30
2000 1999 1999 2000
-------------- --------------- --------------- --------------
Unaudited Audited Unaudited
---------------------------------- --------------- --------------
NIS thousands US$ thousands
----------------------------------------------------- --------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Credit from banks and others 2,067,762 2,594,391 3,542,330 513,857
Trade payables 1,327,502 1,521,670 1,504,950 329,896
Other payables and accruals 1,225,420 1,656,308 1,725,789 304,528
Customer advances, net of work in
progress 260,632 361,312 202,495 64,770
-------------- --------------- --------------- --------------
Total current liabilities 4,881,316 6,133,681 6,975,564 1,213,051
-------------- --------------- --------------- --------------
Long-term liabilities
Net of current maturities:
Loans from banks 3,611,480 4,008,366 3,674,583 897,485
Loans from others 201,935 87,028 132,436 50,182
Debentures 33,950 64,615 64,922 8,437
Convertible debentures 72,467 126,823 179,315 18,009
Customer advances 113,014 126,438 45,369 28,085
Deferred taxes 72,432 300,169 235,784 18,000
Liability for employee severance
benefits, net 423,216 285,239 303,462 105,173
-------------- --------------- --------------- --------------
Total long-term liabilities 4,528,494 4,998,678 4,635,871 1,125,371
-------------- --------------- --------------- --------------
Liability for acquisition of
subsidiaries' shares 80,106 - - 19,907
-------------- --------------- --------------- --------------
Minority Interest 984,186 1,382,811 1,313,584 244,579
-------------- --------------- --------------- --------------
Shareholders' Equity 4,564,423 4,337,021 4,364,158 1,134,300
-------------- --------------- --------------- --------------
-------------- --------------- --------------- --------------
15,038,525 16,852,191 17,289,177 3,737,208
-------------- --------------- --------------- --------------
November 28, 2000
------------------------- ------------------------
Jonathan Kolber Yuval Yanai
CEO and Vice Chairman Executive Vice President
of the Board of Directors and CFO
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Company)
Consolidated Statements of Income
-----------------------------------------------------------------------------------------------------------------------
In terms of NIS of September 2000
Convenience
translation
(Note 1B)
------------
Nine months
Nine months ended September 30 Three months ended September 30 Year ended ended
------------------------------ ------------------------------- December 31 September 30
2000 1999 2000 1999 1999 2000
--------------- -------------- --------------- --------------- --------------- -------------
Unaudited Unaudited Audited Unaudited
--------------- -------------- --------------- --------------- --------------- -------------
NIS thousands NIS thousands US$ thousands
------------------------------ ----------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales and revenues 6,315,071 8,254,936 2,015,189 2,952,299 10,625,260 1,569,352
Cost of sales and
revenues 4,727,976 6,299,268 1,533,459 2,180,999 8,091,756 1,174,945
--------------- -------------- --------------- --------------- --------------- -------------
Gross profit 1,587,095 1,955,668 481,730 771,300 2,533,504 394,407
Selling and marketing
expenses 585,743 747,530 186,282 258,073 973,471 145,562
General and
administrative expenses 385,429 563,311 130,230 182,829 726,090 95,783
--------------- -------------- --------------- --------------- --------------- -------------
Operating income 615,923 644,827 165,218 330,398 833,943 153,062
Financing expenses, net 226,236 306,723 92,198 135,284 356,610 56,221
--------------- -------------- --------------- --------------- --------------- -------------
389,687 338,104 73,020 195,114 477,333 96,841
Other income (expenses),
net 492,056 27,926 223,856 (36,159) 106,724 122,280
Income before taxes on --------------- -------------- --------------- --------------- --------------- -------------
income 881,743 366,030 296,876 158,955 584,057 219,121
Taxes on income 267,661 96,111 75,199 11,321 161,128 66,516
--------------- -------------- --------------- --------------- --------------- -------------
614,082 269,919 221,677 147,634 422,929 152,605
Equity in results of
affiliates, net (28,689) 90,402 (24,013) 40,829 121,154 7,130
--------------- -------------- --------------- --------------- --------------- -------------
585,393 360,321 197,664 188,463 544,083 145,475
Minority interest in
subsidiaries, net 43,466 49,477 13,927 19,584 (2,461) 10,801
--------------- -------------- --------------- --------------- --------------- -------------
Net income for the
period 541,927 310,844 183,737 168,879 546,544 134,674
=============== ============== =============== =============== =============== =============
NIS NIS NIS NIS NIS US$
--------------- -------------- --------------- --------------- --------------- -------------
Earnings per NIS 1 par
value of the ordinary
share capital: 35,064 19,760 12,043 10,733 34,727 8,714
=============== ============== =============== =============== =============== =============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Company)
Statement of Shareholders' Equity
------------------------------------------------------------------------------------------------------------------------------------
In terms of NIS of September 2000
Company Cumulative
shares held foreign
Number of by the currency Total
ordinary Share Capital company and translation Retained Shareholders'
shares capital reserves subsidiaries adjustments earnings Equity
------------ --------- ----------- -------------- ------------- ----------- ---------------
NIS thousands
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as at January 1, 2000 (Audited) 15,730,971 530,251 2,405,929 (53,390) (574,206) 2,055,574 4,364,158
Changes during the nine months ended
September 30, 2000 (Unaudited):
Net income for the period - - - - - 541,927 541,927
Inflationary erosion of dividend
proposed in 1999 - - - - - (1,135) (1,135)
Interim dividend - - - - - (58,251) (58,251)
Dividend in respect of shares of the
Company held by subsidiaries - - - - - 641 641
Acquisition of "treasury stock" (538,592) - - (202,530) - - (202,530)
Premium received in respect of issuance
of options exercisable for Company
shares - - 1,869 - - - 1,869
A capital reserve in respect of
conversion of notes in affiliate by a
controlling shareholder - - 400 - - - 400
Foreign currency translation adjustments - - - - (82,793) - (82,793)
Exercise of stock options granted to
Israeli banks - * 137 - - - 137
------------ --------- ----------- -------------- ------------- ----------- --------------
Balance as at September 30, 2000
(Unaudited) 15,192,379 530,251 2,408,335 (255,920) (656,999) 2,538,756 4,564,423
------------ --------- ----------- -------------- ------------- ----------- --------------
* Represents an amount lower than NIS 1,000.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Company)
Statement of Shareholders' Equity (cont'd)
------------------------------------------------------------------------------------------------------------------------------------
In terms of NIS of September 2000
Company Cumulative
shares held foreign
Number of by the currency Total
ordinary Share Capital company and translation Retained Shareholders'
shares capital reserves subsidiaries adjustments earnings Equity
------------ --------- ----------- -------------- ------------- ----------- ---------------
NIS thousands
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as at July 1, 2000 (Unaudited) 15,288,763 530,251 2,408,335 (215,959) (641,978) 2,355,019 4,435,668
Changes during the three months ended
September 30, 2000 (Unaudited):
Net income for the period - - - - - 183,737 183,737
Acquisition of "treasury stock" (96,384) - - (39,961) - - (39,961)
Foreign currency translation adjustments - - - - (15,021) - (15,021)
------------ --------- ----------- -------------- ------------- ----------- --------------
Balance as at September 30, 2000
(Unaudited) 15,192,379 530,251 2,408,335 (255,920) (656,999) 2,538,756 4,564,423
------------ --------- ----------- -------------- ------------- ----------- --------------
* Represents an amount lower than NIS 1,000.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Company)
Statement of Shareholders' Equity (cont'd)
------------------------------------------------------------------------------------------------------------------------------------
In terms of NIS of September 2000
Company Cumulative
shares held foreign
Number of by the currency Total
ordinary Share Capital company and translation Retained Shareholders'
shares capital reserves subsidiaries adjustments earnings Equity
------------ --------- ----------- -------------- ------------- ----------- ---------------
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
Exercise of stock options granted to
Israeli banks - * 410 - - - 410
Exercise of stock options granted to
senior employees 5,473 * - - - - *
Conversion of debentures into shares 2,162 * 995 - - - 995
Interim dividend - - - - - (57,953) (57,953)
Erosion of dividend proposed in 1998 - - - - - (445) (445)
Dividend on company shares held by
subsidiaries - - - - - 620 620
Foreign currency translation
adjustments - - - - 25,737 - 25,737
------------ --------- ----------- -------------- ------------- ----------- --------------
Balance as at September 30, 1999
(Unaudited) 15,730,962 530,251 2,405,093 (53,390) (529,209) 1,984,276 4,337,021
============ ========= =========== ============== ============= =========== ==============
Balance as at July 1, 1999 (Unaudited) 15,730,962 530,251 2,405,093 (53,390) (592,502) 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 - - - - 63,293 - 63,293
------------ --------- ----------- -------------- ------------- ----------- --------------
Balance as at September 30, 1999
(Unaudited) 15,730,962 530,251 2,405,093 (53,390) (529,209) 1,984,276 4,337,021
------------ --------- ----------- -------------- ------------- ----------- --------------
* Represents an amount lower than NIS 1,000.
The accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Company)
Statement of Shareholders' Equity (cont'd)
------------------------------------------------------------------------------------------------------------------------------------
In terms of NIS of September 2000
Cumulative
Company foreign
Number of shares currency Total
ordinary Share Capital held by translation Retained Shareholders'
shares capital reserves subsidiaries adjustments earnings Equity
------------ --------- ----------- -------------- ------------- ----------- ---------------
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 1999 (Audited):
Net income for the year - - - - - 546,544 546,544
Exercise of stock options granted to
Israeli banks - * 412 - - - 412
Interim dividend - - - - - (57,954) (57,954)
Interim dividend - - - - - (42,733) (42,733)
Interim dividend - - - - - (123,448) (123,448)
Inflationary erosion of dividend
proposed in 1998 - - - - - (446) (446)
Foreign currency translation adjustments - - - - (19,260) - (19,260)
Dividend on Company shares held by
subsidiaries - - - - - 2,401 2,401
Conversion of debentures into shares 2,171 * 1,059 - - - 1,059
Adjustment of consideration in
respect of employee benefit from
options granted by a controlling
shareholder - - 770 - - - 770
Exercise of stock options granted to
senior employees 5,473 * - - - - *
------------ --------- ----------- -------------- ------------- ----------- --------------
Balance as at December 31, 1999
(Audited) 15,730,971 530,251 2,405,929 (53,390) (574,206) 2,055,574 4,364,158
------------ --------- ----------- -------------- ------------- ----------- --------------
* Represents an amount lower than NIS 1,000.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Company)
Statement of Shareholders' Equity (cont'd)
------------------------------------------------------------------------------------------------------------------------------------
Convenience translation into US dollars (Note 1B)
Company Cumulative
shares held foreign
by the currency Total
Share Capital company and translation Retained Shareholders'
capital reserves subsidiaries adjustments earnings Equity
------- -------- ------------ ----------- -------- -------------
Convenience translation (Note 1B) - US$ thousands
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance as at January 1, 2000 (Audited) 131,772 597,895 (13,268) (142,695) 510,828 1,084,532
Changes during the six months ended
September 30, 2000 (Unaudited):
Net income for the period - - - - 134,674 134,674
Inflationary erosion of dividend proposed in 1999 - - - - (282) (282)
Interim dividend - - - - (14,476) (14,476)
Dividend in respect of shares of the Company held
by subsidiaries - - - - 159 159
Acquisition of "treasury stock" - - (50,330) - - (50,330)
Premium received in respect of issuance of
options exercisable for Company shares - 464 - - - 464
A capital reserve in respect of conversion of notes
in affiliate by a controlling shareholder - 100 - - - 100
Foreign currency translation adjustments - - - (20,575) - (20,575)
Exercise of stock options granted to Israeli banks * 34 - - - 34
------- ------- ------- ------- ------- ---------
Balance as at September 30, 2000 (Unaudited) 131,772 598,493 (63,598) (163,270) 630,903 1,134,300
------- ------- ------- ------- ------- ---------
* Represents an amount lower than NIS 1,000.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Company)
Consolidated Statements of Cash Flows
--------------------------------------------------------------------------------------------------------------------------------
In terms of NIS of September 2000
Convenience
translation
(Note 1B)
Nine months
Year ended ended
Nine months ended September 30 Three months ended September 30 December 31 September 30
2000 1999 2000 1999 1999 2000
---------- ---------- ---------- ---------- ---------- ----------
Unaudited Unaudited Audited Unaudited
------------------------------ ---------------------------- ---------- ----------
NIS thousands NIS thousands US$ thousands
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows generated by
operating activities:
Net income for the period 541,927 310,844 183,737 168,879 546,544 134,674
Adjustments to reconcile
net income to net cash
flows generated by
operating activities (a) 41,223 11,031 (94,023) (113,669) 170,705 10,244
Net cash inflow generated ---------- ---------- ---------- ---------- ---------- ----------
by operating activities 583,150 321,875 89,714 55,210 717,249 144,918
Cash flows generated by ---------- ---------- ---------- ---------- ---------- ----------
investing activities:
Purchase of fixed assets (322,621) (479,300) (115,280) (141,067) (651,624) (80,174)
Investment grants in
respect of fixed assets 11,291 49,021 4,692 16,395 44,839 2,806
Investments in intangible
assets and deferred charges (50,688) (90,842) (15,002) (39,632) (106,790) (12,596)
Additional investment in
subsidiaries (297,680) (97,759) (283,177) (9,910) (118,311) (73,976)
Payment of liabilities for
purchase of consolidated
companies (111,606) - - - - (27,735)
Acquisition of newly
consolidated subsidiaries(b) (18,306) (230,519) (18,306) (26,292) (233,333) (4,549)
Investments in affiliates (14,575) (860,420) (3,291) (170,449) (882,823) (3,622)
Granting of loans to (6,742) (1,150) (6,385) (379) (5,883) (1,675)
affiliates
Collection of loans from
affiliates 170 4 46 - 104 42
Proceeds from realization
of investments in
formerly consolidated
subsidiaries, net of cash
in those subsidiaries at
the time they ceased
being consolidated (c) 1,191,797 160,489 94,572 216,473 505,761 296,172
Proceeds from realization
of activities (d) 466,383 - 466,383 - - 115,900
Purchase of consolidated
companies' shares by their
consolidated companies - (119,947) - (47,249) (115,951) -
Proceeds from disposal of
investments in investees 53,031 86,039 - 66,867 139,619 13,179
Proceeds from sale of fixed
assets 28,476 160,338 10,301 83,230 185,022 7,076
Change in investments
and other receivables, net (480,111) 11,026 (351,474) 47,607 (345,556) (119,312)
Change in short term
deposits and investments,
net (216,949) 25,176 34,032 (46,529) (150,254) (53,914)
Net cash inflow (outflow) ---------- ---------- ---------- ---------- ---------- ----------
generated by investing
activities 231,870 (1,387,844) (182,889) (50,935) (1,735,180) 57,622
---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Company)
Consolidated Statements of Cash Flows (cont'd)
---------------------------------------------------------------------------------------------------------------------------------
In terms of NIS of September 2000
Convenience
translation
(Note 1B)
Nine months
Year ended ended
Nine months ended September 30 Three months ended September 30 December 31 September 30
2000 1999 2000 1999 1999 2000
---------- ---------- ---------- ---------- ---------- ----------
Unaudited Unaudited Audited Unaudited
------------------------------ ---------------------------- ---------- ----------
NIS thousands NIS thousands US$ thousands
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows generated
by financing activities:
Proceeds from exercise
of stock options granted
to Israeli banks 137 410 - - 412 34
Acquisition of "treasury
stock" (202,530) - (39,961) - - (50,330)
Premium received in respect
of issuance of options
exercisable for Company
shares 1,869 - - - - 464
Dividend paid (223,142) (143,738) (57,618) - (143,734) (55,453)
Dividend paid to
minority in subsidiaries (2,261) (8,923) (2,261) (266) (12,833) (562)
Interests in subsidiaries 37,936 11,091 13,831 1,800 13,489 9,427
Payment of suppliers'
credit for the purchase
of fixed assets (2,026) (1,274) - - (1,227) (503)
Issuance of convertible
debentures - 61,928 - - 61,930 -
Proceeds from long-term
loans and other
long-term liabilities 512,142 555,415 203,908 299,351 760,345 127,272
Repayment of long-term
loans, debentures and
other long-term (1,043,042) (514,772) (79,768) (121,872) (603,651) (259,205)
liabilities
Credit from banks and
others, net (395,181) 313,193 189,988 (382,578) 909,620 (98,206)
Net cash inflow (outflow) ---------- ---------- ---------- ---------- ---------- ----------
generated by financing
activities (1,316,098) 273,330 228,119 (203,565) 984,351 (327,062)
Translation differences ---------- ---------- ---------- ---------- ---------- ----------
in respect of cash
balances of autonomous
foreign investees (13,065) 15,827 (2,847) 35,651 (8,887) (3,247)
Increase (decrease) in ---------- ---------- ---------- ---------- ---------- ----------
cash and cash
equivalents (514,143) (776,812) 132,097 (163,639) (42,467) (127,769)
Balance of cash and
cash equivalents at
beginning of period 1,441,915 1,484,382 795,675 871,209 1,484,382 358,328
Balance of cash and ---------- ---------- ---------- ---------- ---------- ----------
cash equivalents at
end of period 927,772 707,570 927,772 707,570 1,441,915 230,559
---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Company)
Consolidated Statements of Cash Flows (cont'd)
-------------------------------------------------------------------------------------------------------------------------
In terms of NIS of September 2000
Convenience
translation
(Note 1B)
Nine months
Year ended ended
Nine months ended September 30 Three months ended September 30 December 31 September 30
2000 1999 2000 1999 1999 2000
Unaudited Unaudited Audited Unaudited
NIS thousands NIS thousands US$ thousands
------------------------------ -------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. Adjustments to
reconcile net income
to net cash
generated by
operating
activities:
Income and expenses
not involving
cash flows:
Minority interest in
subsidiaries, net 43,466 49,477 13,927 19,584 (2,461) 10,802
Equity in results of
affiliates, net of
dividend
received therefrom 47,278 (46,399) 30,071 (12,674) (74,345) 11,749
Depreciation and
amortization 281,056 444,161 92,859 150,723 567,396 69,845
Deferred taxes 67,141 (27,276) (28,584) 6,281 (154,953) 16,685
Increase in liability for
employee severance
benefits, net 176,197 43,415 41,287 13,061 59,780 43,787
Capital losses (gains),
net:
Fixed assets 17,587 1,346 3,635 196 2,979 4,370
Investment in formerly
consolidated subsidiaries (446,065) (206,942) (55,899) (148,005) (399,995) (110,851)
Profit from realization of
activities (296,294) - (296,294) - - (73,632)
Investments in investee
companies (36,501) (39,460) (12,682) (1,691) (47,336) (9,071)
Inflationary adjustment
of principal of long-term
loans and other (64,380) (13,436) (17,661) 33,149 (43,608) (15,999)
liabilities
Inflationary erosion of
principal of credit
from banks and others (6,920) 17,000 (5,283) 18,535 - (1,720)
Adjustment of value of
investments, deposits
and loans receivable 13,863 (8,428) 6,832 (9,007) (2,607) 3,445
Changes in value of
assets and investments 32,822 121,859 46,481 99,270 261,002 8,157
Employee benefits in
respect of option warrants
granted by a controlling
shareholder - - - - 770 -
---------- ---------- ---------- ---------- ---------- ----------
(170,750) 335,317 (181,311) 169,422 166,622 (42,433)
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Company)
Consolidated Statements of Cash Flows (cont'd)
-------------------------------------------------------------------------------------------------------------------------
In terms of NIS of September 2000
Convenience
translation
(Note 1B)
Nine months
Year ended ended
Nine months ended September 30 Three months ended September 30 December 31 September 30
2000 1999 2000 1999 1999 2000
Unaudited Unaudited Audited Unaudited
NIS thousands NIS thousands US$ thousands
------------------------------ -------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. Adjustments to
reconcile net income
to net cash
generated by
operating
activities (cont'd):
Changes in operating
assets and liability
liability items:
Decrease (increase) in
trade
receivables and other
accounts receivable (after
taking into account
non-current receivables) 97,611 (558,057) 38,520 (284,142) (362,220) 24,257
Decrease (increase) in
inventories, works in
progress and customer
advances (including
long-term customer
advances and deposits) (33,325) 10,000 (15,168) (17,919) (30,883) (8,282)
Increase in trade payables
and other payables
and accruals 147,687 223,771 63,936 18,970 397,186 36,702
---------- ---------- ---------- ---------- ---------- ----------
211,973 (324,286) 87,288 (283,091) 4,083 52,677
---------- ---------- ---------- ---------- ---------- ----------
41,223 11,031 (94,023) (113,669) 170,705 10,244
========== ========== ========== ========== ========== ==========
B. Acquisition of newly
consolidated
subsidiaries:
Assets and liabilities of
the subsidiaries at date of
acquisition:
Working capital deficiency
excluding cash and cash
equivalents 14,516 107,882 14,516 (13,576) 136,715 3,607
Fixed assets and investments (124,589) (428,641) (124,589) (10,846) (805,164) (30,961)
Long-term liabilities 2,064 43,622 2,064 7,414 191,519 513
Minority interest in
subsidiaries 13,456 66,381 13,456 2,445 61,647 3,344
Excess of cost over net
asset value upon
acquisition (28,546) (34,192) (28,546) (11,729) (37,742) (7,094)
Investment in affiliated
companies 104,793 14,429 104,793 - 108,087 26,042
Liability for acquisition
of subsidiaries - - - - 111,605 -
---------- ---------- ---------- ---------- ---------- ----------
(18,306) (230,519) (18,306) (26,292) (233,333) (4,549)
---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Company)
Consolidated Statements of Cash Flows (cont'd)
-------------------------------------------------------------------------------------------------------------------------
In terms of NIS of September 2000
Convenience
translation
(Note 1B)
Nine months
Year ended ended
Nine months ended September 30 Three months ended September 30 December 31 September 30
2000 1999 2000 1999 1999 2000
Unaudited Unaudited Audited Unaudited
NIS thousands NIS thousands US$ thousands
------------------------------ -------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. Proceeds from
realization of
investments in
formerly
consolidated
subsidiaries, net of
cash in those
subsidiaries at the
time they ceased
being consolidated:
Assets and liabilities of
formerly consolidated
subsidiaries at the time
they ceased being
consolidated:
Working capital surplus,
(deficiency) excluding
cash and cash equivalents (63,559) 567,126 5,743 13,874 607,946 (15,795)
Fixed assets and
investments 1,330,390 843,498 32,945 98,710 989,786 330,614
Long-term liabilities (403,080) (209,764) (764) (24,118) (232,689) (100,169)
Minority interest in
subsidiary at the
time they ceased being
consolidated (130,718) (242,653) 665 (20,517) (242,023) (32,485)
Investments in
affiliated companies 12,699 (1,004,660) 84 519 - 3,156
Investments in affiliated
companies, net - - - - (1,017,254) -
Capital gain on sale
of investments in
subsidiaries 446,065 206,942 55,899 148,005 399,995 110,851
---------- ---------- ---------- ---------- ---------- ----------
1,191,797 160,489 94,572 216,473 505,761 296,172
---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KOOR Industries Limited
(An Israeli Company)
Consolidated Statements of Cash Flows (cont'd)
-------------------------------------------------------------------------------------------------------------------------
In terms of NIS of September 2000
Convenience
translation
(Note 1B)
Nine months
Year ended ended
Nine months ended September 30 Three months ended September 30 December 31 September 30
2000 1999 2000 1999 1999 2000
Unaudited Unaudited Audited Unaudited
NIS thousands NIS thousands US$ thousands
------------------------------ -------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
D. Proceeds from
realization activities
Working capital surplus
excluding cash
and cash equivalents 148,786 - 148,786 - - 36,974
Fixed assets 42,597 - 42,597 - - 10,586
Accrued income-
long term 20,833 - 20,833 - - 5,177
Realization proceeds
receivable (42,127) - (42,127) - - (10,469)
Capital gain from
realization of activities 296,294 - 296,294 - - 73,632
---------- ---------- ---------- ---------- ---------- ----------
466,383 - 466,383 - - 115,900
---------- ---------- ---------- ---------- ---------- ----------
E. Non-cash operations:
Purchase of switching
division - 8,124 - - 3,927 -
========== ========== ========== ========== ========== ==========
Purchase of fixed assets 18,181 2,321 13,791 544 5,869 4,518
========== ========== ========== ========== ========== ==========
Purchase of other assets 2,286 17,104 2,286 12,204 8,267 568
========== ========== ========== ========== ========== ==========
Proceeds from sale of
fixed assets and investees 42,435 7,357 42,127 664 - 10,545
========== ========== ========== ========== ========== ==========
Investment in initially
consolidated subsidiaries - - - - 111,606 -
========== ========== ========== ========== ========== ==========
Interim dividend - - - - 164,397 -
========== ========== ========== ========== ========== ==========
Conversion of
convertible debentures
into shares of the
company and of
subsidiaries - 995 - - 1,015 -
========== ========== ========== ========== ========== ==========
Investment in
subsidiaries 66,143 - 66,143 - - 16,437
========== ========== ========== ========== ========== ==========
Proceeds from realization
of affiliated company in
marketable securities 15,759 - 15,759 - - 3,916
========== ========== ========== ========== ========== ==========
Dividend proposed to
outside share holders 10,483 - 10,483 - - 2,605
---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
KOOR Industries Limited
(An Israeli Corporation)
Notes to the Financial Statements
--------------------------------------------------------------------------------
Note 1 - General
A. These financial statements are as at 30 September, 2000 and for the
nine-month and three-month periods then ended. They should be read in
conjunction with the annual audited financial statements of the Company as
at 31 December, 1999 and their accompanying notes.
B. The adjusted interim financial statements as at September 30, 2000, and for
the nine months then ended have been translated into U.S. dollars using the
representative exchange rate at that date ($1= NIS 4.024). 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.
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 31
December, 1999.
The interim financial statements were prepared in compliance with generally
accepted accounting principles, applied as necessary in the preparation of
financial statements for interim periods.
Note 3 - Financial Statements in Adjusted Values
The financial statements are prepared on the basis of the historical cost
convention, adjusted for changes in the general purchasing power of the Israeli
currency based on the changes in the Israeli consumer price index (CPI).
The comparative data in these statements were adjusted to the shekel of
September 2000.
During the nine-month period ended 30 September, 2000, the CPI decreased by
0.47% (in the corresponding period last year it increased by 0.86%). The
exchange rate of the US dollar decreased by 3.1% (in the corresponding period
last year it increased by 2.78%).
In the three months ended 30 September, 2000, the CPI decreased by 0.84% (and in
the corresponding period last year increased by 1.24%), and the exchange rate of
the US dollar decreased by 1.47% (and in the corresponding period last year
increased by 4.9%).
Note 4 - Details Concerning Affiliated Companies and Divestiture
A. Telrad Networks Ltd. (hereinafter - "Telrad") - consolidated company
1. On 31 August, 2000, a series of agreements was signed and closed between
the Company, Telrad and Nortel Networks Ltd. (hereinafter "Nortel"), an
Canadian international telecommunications company. Pursuant to the
agreements, a new company has been established in Israel, Nortel Networks
Israel (Sales and Marketing) Limited (hereinafter "Nortel Israel"),
controlled by Nortel. Koor group holds 28% of the rights to profits,
without voting rights, and has the right to appoint one director out of
six.
Under the series of agreements, Koor was given an PUT option to sell to
Nortel Koor shares at Nortel Israel, while Nortel was given a CALL option
to purchase those shares from Koor. The two options have the same exercise
price and they can be exercised in 2003, at a price which reflects the
amount of Koor's investment in the company plus the yield stipulated in the
agreements, which is based on the performance of Nortel Israel. The Company
estimates that the probability of one of the options not being exercised is
low. Thus, the investment of Koor Group in Nortel Israel is presented under
the cost method, in the item "Other investments and receivables".
Pursuant to the series of agreements, Koor Group invested approximately 5.6
million dollars in the share capital of Nortel Israel, and made available
to it a shareholders' loan of approximately 42 million dollars. The loan is
repayable in 2003, and bears interest at 6% p.a.
In addition, on the date of closing the above transactions, Nortel
exercised the option which it received in 1997 and sold to Koor 20% of
Telrad's shares in consideration of 45 million dollars, thereby making
Telrad a wholly-owned subsidiary of Koor.
Concurrently, Telrad signed an agreement whereby the marketing, the
installations and the support in Israel, Africa and several other
countries, of the public networks and the TX1 business exchanges, will from
now on be conducted by Nortel Israel, and elsewhere will be conducted by
another company of Nortel Group.
Telrad will serve as a sub-contractor of Nortel Israel for the manufacture
of exchanges, which will be marketed by Nortel Israel for the period
defined in the agreement.
These activities in 1999 and the six months ended 30 June, 2000,
constituted approximately 43.5% and 31.3% of Telrad's sales. Telrad
received approximately 90 million dollars for the transaction, over the
book value of the above transferred assets.
As part of the above series of agreements, earlier agreements relating to a
commitment made by Telrad to purchase know-how and pay royalties to Nortel,
were cancelled by mutual consent.
As a result of the transaction, Koor recorded a capital gain, after tax, in
the third quarter of 2000, of approximately NIS 277 million.
2. During the third quarter, Telrad sold its plant in Maalot to a third party.
As part of the sale agreement, third party undertook to manufacture
electronic cards for Telrad for at least four years. The capital gain to
Koor is approximately NIS 14 million after tax.
3. The Board of Directors of Telrad approved a retirement plan for additional
employees, over and above the previous retirement plans from 1998 and 1999,
at a total cost of approximately NIS 245 million (approximately NIS 167
million after the effects of tax), which is shown in the financial
statements as at 30 September, 2000 in the item Other income (expenses),
net. Amount of NIS 121 million has been recorded in the third quarter of
2000.
B. ECI Telecom Ltd. (hereinafter - "ECI") - an affiliated company
1. In the first quarter of 2000, ECI recorded a capital gain of approximately
31 million dollars from the exercise of traded shares in Terayon
Communications Systems Ltd., which were received by ECI as part of a share
swap with Telegate Ltd. at the end of 1999.
2. In the second quarter of 2000, ECI recorded an expense of approximately 29
million dollars for the purchase of R&D in progress deriving from
acquisition of companies.
3. ECI's Board of Directors approved Management's recommendation to split up
ECI's operation into five companies which will engage in different
activities, as follows: Access, Transport, Optical Networks, Next
Generation Telephony Solutions and Innowave.
Implementation of the split up is subject to receipt of various approvals
where necessary in accordance with law, including approvals of the Income
Tax Authorities, ECI's shareholders and the court, as well as the readiness
and preparedness of the different activities targeted for separation.
In addition, the Company intends divestiture activities of its Business
Systems Division.
C. B.V.R. Systems (1998) Ltd. (hereainafter - "BVR") - company consolidated
for the first time
During August 2000, BVR allotted to Elisra one million ordinary shares
(which are approximately 9% of the capital after their offering) in
consideration of 5 million dollars. In addition, BVR granted Elisra an
option to purchase an additional 1.5 million ordinary shares of BVR by June
2003 (which are approximately 12% of the capital of BVR after their
offering), for a total price of 9 million dollars (subject to the
adjustments stipulated in the agreement). Furthermore, during July 2000
Elisra signed an additional agreement with a shareholder in BVR, whereby
Elisra acquired all of his shares, which constitute about 10% of the share
capital of BVR (before dilution), in consideration of approximately 4.5
million dollars. As at the balance sheet date, Koor Group's holdings in BVR
are 44.5%.
In addition, Elisra signed a voting agreement with other BVR shareholders,
whereby Elisra will have the right to appoint most of the members of the
Board of Directors of BVR. Accordingly, the financial statements of BVR as
at 30 September, 2000 were consolidated for the first time in the
consolidated statements of Koor.
During the third quarter, a write-off of approximately NIS 40 million was
recorded in the consolidated financial statements for the amount of
goodwill, which has been created in previous purchases in 1999, due to a
decrease in the value of the shares that is not of a temporary nature.
D. Makhteshim - Agan Industries Ltd. (hereinafter - "M-A Industries") -
consolidated company
On 4 August, 2000 an agreement was signed between a company of M-A
Industries and the minority shareholders of a consolidated company of M-A
Industries in Brazil (hereinafter "Millennia"), for the acquisition of
their shares, approximately 28.5%, in Millennia. (hereinafter "the Minority
Shares"). The consideration to the minority shareholders for their shares
includes the following components:
1. Immediate cash payment of approximately 22 million dollars.
2. Transfer to the minority shareholders of 12.4 million shares of M-A
Industries, which are owned by another consolidated company of M-A
Industries, with a market value on the date of the transaction of
approximately 28 million dollars. 10.4 million shares were transferred
immediately and the balance will be transferred in April 2002. For 8.9
million of these shares, the minority shareholders were granted a PUT
option granting them, on certain terms, the right to sell the shares to the
other consolidated company on 31 January, 2002, in consideration of 2.57
dollars per share.
3. Future payment according to the cumulative profits of Millennia in the
years 2000-2001, in an amount which could reach approximately 27 million
dollars, if the cumulative profits amount to at least 50 million dollars.
Following the acquisition, M-A Industries has full ownership and control of
Millennia. The goodwill generated on the date of the acquisition amounts to
approximately 40 million dollars (taking into account the assessment of the
management with regard to Millennia's profits as aforesaid in item 3).
As at 30 September, 2000, Koor holds 59.19% of the paid-up share capital of
M-A Industries. Assuming that the minority will hold M-A Industries shares
and will not exercise the put option, Koor's holding in M-A Industries will
be approximately 57.7%.
E. Mashav Initiating & Development Ltd. (hereinafter - "Mashav")-
proportionally consolidated company
On 6 January, 2000 the transaction for the sale of Mashav to Clal
Industries & Investments Ltd. was closed, in the amount of NIS 886 million.
In addition, Koor received 47.5% of the share capital of Mashal Alumina
Industries Ltd. The capital gain to Koor from the sale is approximately NIS
361 million before tax, and after the allocation of deferred taxes amounts
to approximately NIS 233 million.
Below are data (based on proportional consolidation) from the financial
statements of Mashav for 1999, and for the first nine months and three
months ended 30 September 1999:
<TABLE>
<CAPTION>
Nine months ended Three months ended Year ended
30 September 1999 30 September 1999 31 December 1999
----------------- ----------------- ----------------
NIS millions NIS millions NIS millions
------------ ------------ ------------
<S> <C> <C> <C>
Total assets 1,334 1,334 1,294
Shareholders' equity 866 866 541
Income from sales 655 224 872
Earnings from ordinary operations 101 39 134
Net profit 68 27 96
</TABLE>
F. Tadiran Ltd. - consolidated company
1. On 20 January, 2000 an agreement was signed between Tadiran, the Company
and Elisra Electronic Systems Ltd. (hereinafter - "Elisra"), whereby
Tadiran will transfer its entire holding in Elisra to the Company effective
from 1 January 2000, free of charge. Immediately after transfer of the
shares, Elisra will receive shares of Tadiran Spectralink Ltd. and of
Tadiran Electronic Systems Ltd. (wholly-owned companies of Tadiran), free
of charge.
On 28 June 2000, after receipt of all the relevant approvals, the shares
were transferred as aforesaid.
2. On 15 March, 2000 an agreement was signed between Tadiran Ltd. and Electric
Fuel Corporation (hereinafter - "EFC"), a public company registered in
Delaware, USA with shares traded on NASDAQ. Under the agreement, Tadiran
will transfer its entire holding (100%) in Tadiran Batteries Ltd.
(hereinafter - "Batteries") to EFC. See also Note 27F to the financial
statements at 31 December, 1999. In May 2000 the agreement for the sale of
Batteries was cancelled and an agreement was signed with EFC, whereby Koor
invested the sum of 10 million dollars in EFC, in consideration of which it
was allotted 5.3% of the share capital of EFC.
In the financial statements as at 30 September, 2000, the investment in EFC
shares, after partial divestiture, is presented as a current investment in
marketable securities in a total amount of approximately 9 million dollars.
According to the agreement, as a result of the adjustment to EFC share
price, Koor is entitled at the end of November 2000, to receive an
additional 111,000 shares at no cost.
In June 2000 an agreement was signed with a third party for the sale of
Batteries. See note 9I.
G. United Steel Mills Ltd. (hereinafter - "USM") - consolidated company
On 2 March, 2000 USM (approximately 73% interest) announced that it had not
reached an arrangement with the banks and other credit suppliers for
restructuring USM's short-term and long-term debts, and that negotiations
between USM and the banks had been terminated. The financial statements of
Koor for 1999 included a provision for reduction of value of the total
investment, including the loans which Koor extended to USM.
Owing to the fact that Koor is not guarantor for the debts of USM to third
parties, Koor and its legal advisers believe that Koor will not be
obligated in the future to bear any financial cost beyond the above
provisions, in respect of the debts of USM to third parties. Furthermore,
the management of Koor does not intend to cover the past debts and the
capital deficit in realisation values, if any.
On 16 March, 2000, USM and its subsidiaries filed an application for a
proceedings freeze order pursuant to Section 350 of the Companies Law, 1999
and for the appointment of a trustee in the Haifa District Court.
The court acceded to the request and gave a freeze order on proceedings
against the applicants, so that no legal proceeding can be continued or
started against the applicants except with the consent of the court, so as
to enable the formulation of a comprehensive recovery plan and a proposal
for a composition of creditors. In addition, the court decided to revoke
the powers of the Board of Directors and to appoint a trustee for the
period of the freeze order. In the decision, all management powers in the
company and the subsidiaries were vested in the trustee. The court further
decided to approve an approach by the Trustee to various business
corporations in order to interest them in acquiring USM and/or its
subsidiaries and/or operating them. The authority of the freeze order on
proceedings has been extended until the end of December 2000.
Koor agreed to the freeze on proceedings order and in March 2000 made NIS
15 million available in credit for the special management account for
current operation purposes at USM. If no deficit is generated in the
trustee's account, under certain conditions, this credit will have
preferred status over the company's creditors.
During the third quarter of 2000 a provision of NIS 15 million was recorded
in Koor's financial statements for the credit which was made available.
H. Koor Properties Ltd. - consolidated company
On 15 August, 2000 an agreement was signed by Koor Properties Ltd.
(wholly-controlled subsidiary of Koor) for the sale of its holdings (50%)
in Carmel Gate Ltd. to a foreign company. On 3 October, 2000 the
transaction was closed and the consideration, 20 million dollars, was
received. The capital gain after tax which Koor will record in the fourth
quarter amounts to approximately NIS 55 million.
I. Other divestitures
1. On 30 March, 2000 a transaction was closed for the sale of Koor's entire
holding (approximately 76%) in Middle East Tube Ltd., pursuant to an
agreement from 23 December, 1999, in consideration of approximately NIS 83
million. Following a loss of NIS 25 million which was reported by Middle
East Tube in the first quarter, Koor recorded capital gain after tax of
approximately NIS 20 million in the first quarter of 2000.
2. On 30 March, 2000 a transaction was closed for the sale of Tadiran's entire
holding (approximately 56%) in Tadiran Appliances Ltd., under an agreement
from 30 December, 1999, in consideration of approximately NIS 133 million.
After recording a provision for decrease in value in 1999, no material
capital gain was recorded from the sale.
3. Following completion of a tender offer for the purchase of the holdings of
various shareholders in Q Group PLC (hereinafter - "Q Group"), in which
Koor holds, through Koor Multimedia Ltd. (a wholly-owned subsidiary)
approximately 23%, Koor sold on 18 January, 2000, its holdings in Q Group
in consideration of approximately NIS 41 million. The capital gain to Koor
from this sale (before tax) amounts to approximately NIS 30 million.
4. On 15 February, 2000 a transaction was closed for the sale of Tadiran's
entire holding in Tadiran Telematics Ltd., under an agreement from 25
November, 1999, in consideration of approximately NIS 31 million. After
recording a provision for decrease in value in 1999, no material capital
gain was recorded from the sale.
5. On 16 March, 2000, sale of Koor's holding (20%) in Koor Financing Ltd. was
completed by virtue of a put option which was granted, in consideration of
approximately NIS 12 million. The capital gain after tax which was
generated in the sale, amounted to approximately NIS 2 million.
6. In January 2000 a transaction was closed for the sale of Koor's entire
holding (approximately 51%) in Merkavim Metals Ltd. under an agreement from
7 December, 1999, in consideration of approximately NIS 18 million. The
capital gain after tax amounted to approximately NIS 4 million.
7. On 21 February, 2000 a transaction was closed for the sale of Koor's entire
holding (approximately 51%) in Histour-Altiv Ltd. (hereinafter -
"Histour"), under an agreement from 25 November, 1999. Koor invested
approximately NIS 16 million in Histour, and was released from all its
guarantees for the obligations of Histour towards third parties.
8. On 4 June, 2000 a transaction was closed for the sale of Koor's entire
holding (approximately 33.3%) in Y.D. Vehicles and Transportation Ltd. in
consideration of approximately NIS 16 million. The capital gain after tax
amounted to approximately NIS 1 million.
9. On 25 July, 2000, a transaction was closed for the sale of all Tadiran's
holdings (100%) in Tadiran Batteries Ltd. in consideration of approximately
33 million dollars, including a dividend. The capital gain after tax in the
third quarter amounted to approximately NIS 46 million.
Note 5 - Stock Options for Employees
A. 1997 and 1998 option plans
On 22 March, 2000 the Board of Directors of Koor decided to amend the stock
options plans for employees (except for interested parties) from 1997 and
1998. It was decided that for the 1998 plan, the exercise price would be
adjusted for the distribution of a dividend for all the options, even if
the entitlement date for exercise fell before the entitlement of the
dividend.
Furthermore, it was decided that with regard to options from the 1997 and
1998 plans, for an employee who resigned and who held options which matured
prior to his resignation, their exercise period would be up to the end of a
period of five years from the date on which the plan entered into effect.
In the report period, the Company allotted to employees another 30,000
stock options as part of the 1998 plan.
On 6 August, 2000, the Board of Directors resolved to amend the stock
options plan, so that the exercise period of all the options would be
extended until the end of 5 years from the date of maturity of its
entitlement, for option-holding employees who are not interested parties in
the Company and who will not retire before the end of the year 2000.
b. Options 2000 plan
On 6 August, 2000, the Board of Directors approved the Options 2000 plan
which was previously approved on 14 June, 2000 by the Executive Committee
of the Board of Directors. And these are the main points of the plan:
1. A framework was approved for the allotment of 400,000 stock options
theoretically exercisable into up to 400,000 ordinary shares of the
company, i.e. about 2.5% of the company's issued share capital.
2. The options will be exercised into shares in a quantity which will reflect
the amount of the monetary benefit inherent in the options, i.e. against
the difference between the rate of the ordinary share of the company as was
on the date of exercise of the option, and the exercise price of the
option. Thus, the aforesaid regarding the number and price of the
underlying shares is theoretical only.
3. The exercise price of each option will be the average closing price of the
ordinary share of the company (dollar-linked) in the month preceding the
date of the committee's decision, i.e. an exercise price of 97.39 dollars.
4. Since the underlying shares will be allotted only against the monetary
benefit, the employees will not be required to pay the exercise price on
the date of exercising the options. The price will serve purely for
calculating the amount of the monetary benefit.
5. The options are designated for the company's employees who are not
"interested parties" in the company, and who will not become "interested
parties" in the company as a result of allotment of the options.
6. Entitlement to exercise the options will apply according to a break-down of
the options into three parcels, so that at the end of the first year from
the Effective Date (i.e. 14 June 2000) or from the date on which the
employee started work at the company (whichever is the later), entitlement
to exercise one third of the quantity to be allotted will mature, and the
remaining two thirds at the end of each of the subsequent two years. The
exercise period of each option which matures to entitlement is 5 years,
from the date of maturity of the entitlement.
7. On 5 October, 2000, the total quantity of 400,000 stock options was
allotted to a trustee, out of which 125,000 options have been earmarked for
employees.
Note 6 - 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") concerning ostensible
price coordination and absence of competition between Tadiran
Telecommunications Ltd. (hereinafter - "Communications") and Telrad
Networks Ltd. (hereinafter - "Telrad"), the Commissioner of Restrictive
Trade Practices (the "Commissioner") investigated the offices of
Telecommunications, Telrad and the Company, during which certain documents
were confiscated, certain employees were questioned and additional
information was submitted as requested.
On December 13, 1998, the Commissioner issued a press release, in which he
announced that the Investigations Department of the Restrictive Trade
Practices Authority (hereinafter - "Authority") has concluded the
investigation regarding suspicions about restrictive arrangements between
Koor, Communications, Telrad, Bezeq and Bezeqcall, relating to supply of
switchboards for the commercial market and to N.S.R. operations.
According to information released to the press by the Commissioner, the
investigators of the Investigations Department of the Authority recommend
submitting indictments against several of the investigated employees
regarding some of the suspicions investigated, and that the Legal
Department of the Authority is to decide if offenses were in fact committed
and if there is sufficient evidential basis for a trial. In this press
release, 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.
Management of the Company and the subsidiaries, after consultation with
their legal counsel, 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. Below are data on Koor's investment, through the Koor Corporate Venture
Capital partnership (hereinafter - "Koor CVC"), in venture capital funds
and in high-tech companies, and the commitments of Koor CVC for additional
investment, as at the date of publication of the financial statements:
$ millions
----------
Actual investment as at 30 September 2000 56
=======================
Commitment to invest, over and above
the sum actually invested 80
=======================
In addition, the holdings of Tadiran in Tadiran Scopus Ltd. were transferred to
the Koor CVC.
C. On 20 April, 2000, a settlement agreement was signed between Tadiran and
Adaptive Broadband Corporation, whereby both parties withdrew their mutual
claims and the arbitration between them was terminated. See Note 18A(5) of
the financial statements for 1999.
Note 7 - Re-Purchase of Company Shares
On 7 April, 2000, the Board of Directors of Koor adopted a resolution to
approve a framework of 50 million dollars for re-purchasing Koor's ordinary
shares. It was decided that these purchases would be effected from time to
time during stock exchange trading, under the supervision of the Executive
Committee of the Company and in accordance with its guidelines.
In this framework, which was fully utilized, 538,592 ordinary shares
(approximately 3.4% of the ordinary share capital) have been purchased, at
a cost of approximately NIS 203 million. This sum is deducted from the
Company's shareholders' equity.
On 12 May, 2000, Koor wrote an off-the-floor PUT option in consideration of
NIS 1.9 million, which can be exercised on 14 August, 2000, for 115,000
ordinary shares of Koor, at an exercise price of 92.949 dollars per one
ordinary share. This option expired on 14 August 2000.
Note 8 - Events Subsequent to the Balance Sheet Date
1. On November 21, 2000, two wholly-owned subsidiaries of M-A Industries
signed agreements with Syngenta AG, the world's largest agro-chemical
company, for acquisition of two of its agro-chemical product lines. One of
the products is protected by patents which will be transferred to the
acquiring company. The consideration to be paid for acquisition of the
aforementioned two product lines is 135 million Swiss francs. If the sales
during the next three years exceed certain levels, the companies will have
to pay additional consideration, which could reach up to 15 million Swiss
francs.
The execution of the aforementioned agreements is contingent on approval of
the European Commission.
2. On 11 October, 2000 Koor Properties signed a series of agreements for the
sale of its rights in various real estate properties, in total
consideration of approximately 21 million dollars. The capital gain after
tax which Koor will record in the fourth quarter amounts to approximately
24 million shekels.
