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 2003
_______________________
AMERICAN ISRAELI PAPER MILLS LTD.
(Translation of Registrant's Name into English)
P.O. Box 142, Hadera, Israel
(Address of Principal Corporate Offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F:
|X| Form 20-F |_| Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): |_|
NOTE: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a
Form 6-K if submitted solely to provide an attached annual report to security
holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): |_|
NOTE: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a
Form 6-K submitted to furnish a report or other document that the registrant
foreign private issuer must furnish and make public under the laws of the
jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
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 |X| No
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-______________
Attached hereto as Exhibit 1 and incorporated by reference herein is
the Registrant's press release dated November 13, 2003.
Attached hereto as Exhibit 2 and incorporated by reference herein is
the report of the Registrant's management for the fiscal quarter ended September
30, 2003.
Attached hereto as Exhibit 3 and incorporated by reference herein are
the unaudited financial statements of the Registrant for the fiscal quarter
ended September 30, 2003.
Attached hereto as Exhibit 4 and incorporated by reference herein are
the unaudited financial statements of each of Neusiedler Hadera Paper Ltd. and
Hogla-Kimberly Ltd.
SIGNATURE
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.
AMERICAN ISRAELI PAPER MILLS LTD.
(Registrant)
By: ________________________________
Name: Lea Katz
Title: Corporate Secretary
Dated: November 13, 2003.
-2-
EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
----------- -----------
1. Press release dated November 13, 2003.
2. Report of the Registrant's management.
3. Unaudited financial statements of the Registrant.
4. Unaudited financial statements of each of Neusiedler
Hadera Paper Ltd. and Hogla-Kimberly Ltd.
-3-
EXHIBIT 1
---------
NEWS
CLIENT: AMERICAN ISRAELI
PAPER MILLS LTD.
AGENCY CONTACT: PHILIP Y. SARDOFF
FOR RELEASE: IMMEDIATE
AMERICAN ISRAELI PAPER MILLS LTD.
REPORTS THIRD QUARTER AND NINE MONTHS RESULTS
Hadera, Israel, November 13, 2003 - American Israeli Paper Mills Ltd. (ASE:AIP)
["AIPM" or the "Company"] today reported financial results for the third quarter
and first nine months ended September 30, 2003.
Consolidated sales in the first nine months of this year totaled NIS 354.9
million (NIS - New Israeli Shekels adjusted to changes in the dollar exchange
rate), compared with NIS 337.1 million in the corresponding period last year
($79.9 million, compared with $75.9 million). Consolidated sales in the third
quarter of the year totaled NIS 119.0 million, compared with NIS 112.6 million
in the third quarter last year ($26.8 million, compared with $25.3 million).
The increase in consolidated sales in the nine months compared to the
corresponding period last year is primarily attributable to the growth of 8% in
volume sales of the packaging paper and recycling division and to a certain
increase in selling prices.
Consolidated operating profit in the first nine months of 2003 totaled NIS 35.5
million, compared with NIS 24.3 million in the corresponding period of 2002
($8.0 million compared with $5.5 million). Operating consolidated profit in the
third quarter of 2003 totaled NIS 12.1 million, compared with NIS 11.5 million
in the third quarter of 2002 ($2.7 million compared with $2.6 million).
Since AIPM's share in the profits of associated companies constitutes an
essential part of the profit and loss statement of the Company, mainly due to
its share in the profits of Neusiedler Hadera Paper (NHP) and Hogla-Kimberly
(H-K), which were formerly consolidated until the transfer of control to the
international strategic partners (Neusiedler AG and Kimberly-Clark) the
aggregate data (including the associated companies, whose results are included
in the financial statements as "earnings of associated companies", without
considering the holding percentage of AIPM in such companies and net of
inter-company sales) is presented as follows.
Aggregate group sales in the first nine months of 2003 totaled NIS 1,791.5
million, compared with NIS 1,645.4 million in the corresponding period last year
($403.4 million compared with $370.5 million). Aggregate sales in the third
quarter of 2003 totaled NIS 630.6 million, compared with NIS 538.7 million in
the corresponding quarter last year ($142.0 million, compared with $121.3
million).
Aggregate operating profit in the first nine months of 2003 totaled NIS 123.0
million, compared with NIS 99.0 million in the corresponding period last year
($27.7 million, compared with $22.3 million). Aggregate operating profit in the
third quarter of 2003 totaled NIS 47.1 million, compared with NIS 33.8 million
in the corresponding quarter last year ($10.6 million, compared with $7.6
million).
Net profit in the first nine months of 2003 totaled NIS 45.6 million, compared
with NIS 28.6 million in the corresponding period last year ($10.3 million,
compared with $6.4 million). Net profit in the reported period includes
approximately NIS 1.1 million ($0.2 million) in net capital gains, resulting
from the sale of apartments owned by the Company, which had previously been used
by the Company's employees. Net profit in the corresponding period last year
included approximately NIS 0.4 million ($0.1 million) in non-recurring income,
net, from the realization of assets and from taxes on account of preceding
years.
Net profit in the third quarter of the year totaled NIS 13.8 million, as
compared with NIS 9.2 million in the corresponding quarter last year ($3.1
million, as compared with $2.1 million).
Earnings per share (EPS) in the first nine months of 2003 totaled NIS 11.35 ($
2.56) compared with NIS 7.25 ($1.63) for the corresponding period last year. EPS
in the third quarter of 2003 totaled NIS 3.43 ($0.77) compared with NIS 2.34
($0.53) for the corresponding quarter last year.
The inflation rate during the reported period this year was negative and
amounted to -1.5%, as compared with an inflation rate of 7.0% during the
corresponding period last year, and as compared with 6.5% for all of 2002.
The exchange rate of the NIS was revaluated by approximately 6.2% against the US
dollar during the reported period as compared with a devaluation of 10.3% in the
corresponding period last year and a devaluation of 7.3% for all of 2002.
Mr. Avi Patir, General Manager of AIPM, said that the economic recession in
Israel is continuing in 2003. The recession has been plaguing the country for
three years and is expressed by low demand, a lack of growth and elevated
unemployment rates.
Due to the global economic crisis, low-priced imports into Israel are continuing
benefiting from the low dollar exchange rate. The low-priced imports intensify
competition and contribute to the decrease in selling prices.
Pulp prices recently began to rise. This trend may continue in the following
quarters as well. Nevertheless, due to the severe recession in Europe and the
existing surplus in output capacity - especially in fine paper - paper selling
prices are not rising and are actually even decreasing.
The consolidated gross margin as a percentage of consolidated sales reached
22.3% during the reported period this year, compared to 19.3% in the
corresponding period last year.
The improved gross margin compared to the corresponding period last year was
achieved due to the Company's ongoing improvement and increased efficiency. Such
improvement resulted from higher machine output, a reduced work force, and
various lower manufacturing expenses.
-2-
The improved net margin was recorded despite a sharp increase in energy prices,
following an average increase of 29% in fuel oil prices in relation to the
corresponding period last year and a 20% increase in water prices. Energy
expenses grew by NIS 5.8 million ($1.3 million), including the effect of the
transition to low-sulfur fuel oil, due to compliance with environmental-related
demands.
Since the Company's financial statements are denominated in US dollars and the
Company has a surplus of shekel-denominated financial liabilities over
NIS-denominated assets, the financial expenses decrease with a devaluation,
whereas a revaluation serves to increase the financial expenses.
Consequently, financial expenses were recorded during the reported period this
year, as compared with net financial revenues during the corresponding period
last year.
The Company's share in the earnings of associated companies amounted to NIS 28.0
million in the first nine months of the year, compared with NIS 13.0 million in
the corresponding period last year ($6.3 million, compared with $2.9 million).
The companies whose earnings are reported in this item (in proportion to AIPM's
share therein), include primarily: H-K, NHP, Carmel Containers Systems and TMM
Integrated Recycling Industries.
The principal changes in AIPM's share in the earnings of associated companies
during the reported period this year, compared with the corresponding period
last year, are as follows:
- The Company's share in the net profit of NHP grew by NIS 2.2 million
($0.5 million) as a result of the continuing improvement in NHP's
profitability, which resulted primarily from efficiency measures and
the reorganization of operations and marketing at NHP. The improved
profitability was somewhat adversely affected due to a certain decrease
in the net profit in the third quarter of the year, originating from a
decrease in the operating income in relation to the previous quarters
this year (resulting primarily from the decrease in the gross margin,
due to higher pulp prices and lower paper prices, as a result of the
economic crisis in Europe), coupled with the effects of the
devaluation.
- The Company's share in the net profit of H-K grew by some NIS 13.4
million ($3.0 million) and resulted from the improvement in the
operating profit as compared with the corresponding period last year,
coupled with financial revenues that were recorded at H-K during the
reported period this year, due to the impact of the revaluation (H-K
possesses a surplus of NIS-denominated assets). The devaluation in the
third quarter of the year (3%) nevertheless served to erode H-K's net
profit, due to higher financial expenses, despite the significant
improvement in the operating profit.
In March 2003, the Company declared a dividend for 2002, in the aggregate amount
of NIS 25.9 million (NIS 6.61 per share). The dividend was paid in April 2003.
In August, the Company declared a special dividend for 2003, in the aggregate
amount of approximately NIS 75 million (NIS 19.04 per share). The dividend was
paid in September 2003.
This report may contain various forward-looking statements, based upon the
Company's board of directors' present expectations and estimates regarding the
operations of the Company and its business environment. The Company does not
guarantee that the future results of operations will coincide with the
forward-looking statements and these may in fact considerably differ from the
present forecasts as a result of factors that may change in the future, such as
-3-
changes in costs and market conditions, failure to achieve projected goals,
failure to achieve anticipated efficiencies and other factors which lie outside
the control of the Company. The Company undertakes no obligation for publicly
updating the said forward-looking statements, regardless of whether these
updates originate from new information, future events or any other reason.
AMERICAN ISRAELI PAPER MILLS LTD.
SUMMARY OF RESULTS
(UNAUDITED)
ADJUSTED NIS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS
Nine months ended September 30,
-------------------------------
ADJUSTED NIS
------------
2003 2002
---- ----
Net sales 354,942 337,097
Net earnings 45,586 28,566
Earnings per share 11.35 7.25
Three months ended September 30,
--------------------------------
ADJUSTED NIS
------------
2003 2002
---- ----
Net sales 118,952 112,571
Net earnings 13,788 9,226
Earnings per share 3.43 2.34
Adjusted New Israeli Shekel amounts have been adjusted to reflect changes in the
rate of exchange between the U.S. dollar and the New Israeli Shekel as at the
end of September 2003. The representative exchange rate at September 30, 2003
was N.I.S. 4.441 = $1.00.
-4-
EXHIBIT 2
---------
November 12, 2003
MANAGEMENT DISCUSSION
---------------------
We are honored to present the consolidated financial statements of the American
Israeli Paper Mills Ltd. Group ("AIPM" or the "Company") for the first nine
months of the year 2003.
I. A SUMMARIZED DESCRIPTION OF THE GROUP AND ITS BUSINESS ENVIRONMENT
------------------------------------------------------------------
1. GENERAL
-------
AIPM is the leading Israeli group in the manufacture of paper
and paper products. The Group produces and markets a wide
range of paper types, household paper products, hygienic
products, disposable baby diapers, absorbent products for the
incontinent, office supplies, corrugated board packaging and
consumer packaging. The Group is also engaged in recycling
operations in the fields of paper and plastics as well as in
the treatment of solid waste.
2. THE BUSINESS ENVIRONMENT
------------------------
The economic recession in Israel has continued during 2003.
The recession has been plaguing the country for three years
and is expressed by low demand, a lack of growth and increased
unemployment rates.
Due to the global economic crisis, low-priced imports into
Israel are continuing, benefiting from the low dollar exchange
rate. The low-priced imports intensify competition and
contribute to the erosion of selling prices.
Pulp prices recently began to rise. This trend may continue in
the following quarters as well. Nevertheless, due to the
severe recession in Europe and the existing surplus in output
capacity - especially in fine paper - paper-selling prices are
not rising and are actually even decreasing.
The dollar exchange rate, which fell sharply in the first half
of 2003 (revaluation of approximately 9%), strengthened in the
third quarter of 2003 (approximately 3%), yet remained low
compared to the third quarter of last year (NIS 4.441 per
dollar on September 30, 2003, as compared with NIS 4.871 per
dollar on September 30, 2002, and as compared with NIS 4.737
per dollar on December 31, 2002).
The exchange rate of the NIS was revaluated by approximately
6.2% against the US dollar during the reported period
(January-September 2003), as compared with a devaluation of
10.3% in the corresponding period of last year
(January-September 2002), and as compared with a devaluation
of 7.3% for all of 2002.
Inflation during the reported period of this year was negative
and amounted to -1.5%, as compared with an inflation rate of
7.0% in the corresponding period of last year and 6.5% in all
of 2002.
The lower inflation rate enabled the Bank of Israel (the
central bank) to significantly lower the prime interest rate
(approximately 3% since the beginning of the year). The
real-term interest rate nevertheless remains high.
II. RESULTS OF OPERATIONS
---------------------
1. CONSOLIDATED DATA
-----------------
The information set forth below does not include the results
of operations of Neusiedler Hadera Paper("NHP"),
Hogla-Kimberly ("H-K"), Carmel and TMM Integrated Recycling
Industries ("TMM").
The aggregate sales in the reported period amounted to NIS
354.9 million (NIS - New Israeli Shekels adjusted to changes
in the dollar exchange rate), as compared with NIS 337.1
million in the corresponding period last year ($79.9 million,
as compared with $75.9 million).
The operating profit amounted to NIS 35.5 million during the
reported period, as compared with NIS 24.3 million in the
corresponding period last year ($8.0 million, as compared with
$5.5 million).
The sales in the third quarter of the year (July-September
2003) totaled NIS 119.0 million, as compared with NIS 112.6
million in the corresponding quarter last year (July-September
2002) ($26.8 million as compared with $25.3 million).
The operating income in the third quarter of the year totaled
NIS 12.1 million, as compared with NIS 11.5 million in the
corresponding quarter last year ($2.7 million, as compared
with $2.6 million).
The financial expenses during the reported period this year
amounted to NIS 11.9 million, as compared with financial
revenues of NIS 1.0 million in the corresponding period last
year ($2.7 million in expenses, as compared with $0.2 million
in revenues).
-2-
2. AGGREGATE DATA
--------------
Since the Company's share in the earnings of associated
companies constitutes a material component in the Company's
statement of income (primarily on account of its share in the
earnings of NHP and Hogla-Kimberly that were consolidated in
the past, until the transfer of control over these companies
to the Company's international strategic partners), the
aggregate data appearing below include the results of all the
companies in the AIPM Group (including the associated
companies whose results appear in the financial statements
under "earnings from associated companies"), without
considering the rate of AIPM's holding in such entities and
net of inter-company sales .
The aggregate sales amounted to NIS 1,791.5 million during the
reported period, as compared with NIS 1,645.4 million in the
corresponding period last year ($403.4 million, as compared
with $370.5 million).
The aggregate operating profit amounted to NIS 123.0 million
during the reported period, as compared with NIS 99.0 million
in the corresponding period last year ($27.7 million, as
compared with $22.3 million).
The aggregate sales in the third quarter of the year amounted
to NIS 630.6 million, as compared with NIS 538.7 million in
the corresponding quarter last year ($142.0 million, as
compared with $121.3 million).
The aggregate operating profit totaled NIS 47.1 million in the
third quarter of the year, as compared with NIS 33.8 million
in the corresponding quarter last year ($10.6 million, as
compared with $7.6 million).
The growth in the aggregate operating profit as compared with
the corresponding period last year originates from all of the
Group's sectors of operation, following the efforts to improve
efficiency, increase output and cut costs.
3. NET PROFIT AND EARNINGS PER SHARE
---------------------------------
Net profit, before non-recurring income, amounted to NIS 44.5
million during the reported period this year, as compared with
NIS 28.2 million in the corresponding period last year ($10.0
million, as compared with $6.3 million).
Net profit amounted to NIS 45.6 million during the reported
period this year, as compared with NIS 28.6 million in the
corresponding period last year ($10.3 million, as compared
with $6.4 million). Net profit for the reported period this
year included approximately NIS 1.1 million ($0.2 million) in
net capital gains, resulting from the sale of apartments owned
by the Company that had previously served the Company's
employees. Net profit in the corresponding period last year
included approximately NIS 0.4 million ($0.1 million) in
non-recurring income, net, from the realization of assets and
from taxes on account of preceding years.
-3-
Net profit in the third quarter of the year (before
non-recurring income) totaled NIS 13.8 million, as compared
with NIS 8.8 million in the corresponding quarter last year
($3.1 million, as compared with $2.0 million) (NIS 9.2
million, or $2.1 million, including non-recurring income in
the corresponding quarter last year ).
Earnings per share (EPS) in the reported period this year
totaled NIS 1,135 per NIS 1 par value ($2.56 per share), as
compared with NIS 725 per NIS 1 par value ($1.63 per share) in
the corresponding period last year.
Earnings per share (EPS) in the third quarter of the year
totaled NIS 343 per NIS 1 par value ($0.77 per share), as
compared with NIS 234 per NIS 1 par value ($0.53 per share) in
the corresponding quarter last year.
III. ANALYSIS OF OPERATIONS AND PROFITABILITY
----------------------------------------
The analysis set forth below is based on the Company's consolidated
data.
1. SALES
-----
The consolidated sales amounted to NIS 354.9 million during
the reported period this year, as compared with NIS 337.1
million in the corresponding period last year ($79.9 million,
as compared with $75.9 million).
We note that the sales turnover during the corresponding
period last year included approximately NIS 8.0 million ($1.8
million) in net sales on account of the Shafir operations,
which were discontinued in September 2002.
The growth in sales is attributed primarily to the growth in
sales of packaging paper and recycling division, originating
from a quantitative increase of 8% and from a certain
improvement in selling prices.
2. COST OF SALES
-------------
The cost of sales amounted to NIS 275.8 million - or 77.7% of
sales - during the reported period this year, as compared with
NIS 272.2 million - or 80.7% of sales - in the corresponding
period last year ($62.1 million, as compared with $61.3
million).
The gross profit amounted to NIS 79.1 million during the
reported period this year, as compared with NIS 64.9 million
in the corresponding period last year ($17.8 million, as
compared with $14.6 million).
The gross margin as a percentage of sales reached 22.3% during
the reported period this year, as compared with 19.3% in the
corresponding period last year.
The improved gross margin in relation to the corresponding
period last year was achieved due to the Company's ongoing
improvement and increased efficiency, expressed by an improved
machine output, reduced work force and various lower
manufacturing expenses.
-4-
The wage component of the Company's costs increased during the
reported period in relation to the corresponding period last
year, both due to the CPI increase in 2002, which resulted in
the updating of wages in order to prevent their real-term
erosion, and the revaluation of the NIS against the dollar
during the reported period, which resulted in an increase in
expenditures in dollar terms. The said increase was partially
offset by personnel cutbacks.
The improved net margin was achieved despite a sharp increase
in energy prices, following an average increase of 29% in fuel
oil prices and a 20% increase in water prices in relation to
the corresponding period last year. Energy expenses increased
by NIS 5.8 million ($1.3 million), including the effect of the
transition to low-sulfur fuel oil, due to compliance with
environmental-related demands.
3. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
The selling, general and administrative expenses (including
wages) amounted to NIS 43.6 million in the reported period
this year - or 12.3% of sales - as compared with NIS 40.6
million - or 12.0% of sales - in the corresponding period last
year ($9.8 million, as compared with $9.1 million).
The increase in expenses resulted primarily from the sharp
revaluation this year of the NIS compared to the dollar, which
resulted in an increase in expenses in dollar terms (since
most of such expenses (including wages) are originally
denominated in NIS.
4. OPERATING PROFIT
----------------
The operating profit amounted to NIS 35.5 million - or 10.0%
of sales - during the reported period this year, as compared
with NIS 24.3 million - or 7.2% of sales - in the
corresponding period last year ($8.0 million, as compared with
$5.5 million).
5. FINANCIAL EXPENSES (REVENUES)
-----------------------------
The financial expenses during the reported period this year
amounted to NIS 11.9 million, as compared with financial
revenues of NIS 1.0 million in the corresponding period last
year ($2.7 million in expenses, as compared with $0.2 million
in revenues).
The Company's financial statements are denominated in US
dollars. Since the Company is exposed to a devaluation on
account of its NIS-denominated financial assets, the Company
has assumed most of its liabilities (primarily bank credit) in
NIS, as a hedge against devaluation.
The Company consequently possesses a surplus of
NIS-denominated financial liabilities over NIS-denominated
assets and the financial expenses therefore decrease with a
devaluation (last year financial revenues were recorded due to
the significant devaluation), whereas a revaluation serves to
increase the financial expenses.
-5-
The difference between the revaluation this year and the
devaluation last year is approximately 17%.
The CPI-linked liability on account of the notes grew in
dollar terms in the reported period this year, as a result of
the real-term revaluation, leading to real-term financial
expenses. A real-term devaluation was recorded in the
corresponding period last year, which led to a decrease in
liabilities in dollar terms and to the recording of financial
revenues, net, thereon.
The average balance of short-term credit increased by
approximately NIS 29.8 million ($6.7 million) during the
reported period this year, in relation to the balance during
the corresponding period last year. Moreover, the higher
average interest rate this year, as compared with the
corresponding period last year (prime interest rate of 9.6%,
as compared with 7.6%), coupled along with the revaluation
this year of the NIS against the dollar (as compared with the
devaluation last year), that resulted in an increase in the
short-term credit balances in dollar terms (mostly denominated
in NIS), and as a result financial expenses were recorded
during the reported period of this year as compared with net
financial revenues in the corresponding period last year.
6. TAXES ON INCOME
---------------
Taxes on income from current operations amounted to NIS 7.1
million in the reported period this year, as compared with NIS
10.2 million in the corresponding period last year ($1.6
million, as compared with $2.3 million).
The principal factor behind the decrease in tax expenses
during the reported period this year, as compared with the
corresponding period last year, was the difference between the
real revaluation of the NIS against the dollar during the
reported period this year and the real devaluation of the NIS
against the dollar in the corresponding period last year. The
real-term devaluation last year resulted in an increase in the
tax expenditure in the corresponding period. This devaluation
served to decrease the protection (hedging) on shareholders'
equity (measured for tax purposes according to the changes in
the Consumer Price Index). A high real-term revaluation was
recorded in the reported period this year, and contributed to
lowering the tax expenditure.
7. COMPANY'S SHARE IN EARNINGS OF ASSOCIATED COMPANIES
---------------------------------------------------
The companies whose earnings are reported under this item
(according to AIPM's holdings therein), include primarily:
Hogla-Kimberly (H-K), NHP, Carmel and TMM Integrated Recycling
Industries.
The Company's share in the earnings of associated companies
amounted to NIS 28.0 million in the reported period this year,
as compared with NIS 13.0 million in the corresponding period
last year ($6.3 million, as compared with $2.9 million).
-6-
The Company's share in the earnings of associated companies
amounted to NIS 7.3 million in the third quarter of the year,
as compared with NIS 3.0 million in the corresponding quarter
last year and NIS 14.9 million in the second quarter this year
($1.6 million, as compared with $0.7 million and $3.4 million,
respectively).
The following principal changes were recorded in the Company's
share in the earnings of associated companies, in relation to
the corresponding period last year:
- The Company's share in the net profit of NHP grew by
NIS 2.2 million ($0.5 million) as a result of the
continuing improvement in NHP's profitability, which
was achieved primarily due to efficiency measures and
the reorganization of operations and marketing at the
division. The improved profitability was somewhat
adversely effected due to a certain decrease in net
profits in the third quarter of the year, resulting
from a decrease in the operating income in relation to
the previous quarters this year (resulting primarily
from the decrease in gross margins, due to higher pulp
prices on one hand and lower paper prices on the other,
as a result of the economic crisis in Europe), coupled
with the effects of the devaluation of the dollar
against the NIS.
- The Company's share in the net profit of H-K increased
by NIS 13.4 million ($3.0 million) and resulted from
the improvement in the operating profit as compared
with the corresponding period last year (totaling NIS
7.1 million, or $1.6 million), coupled with financial
revenues of H-K this year, due to the impact of the
revaluation of the dollar against the NIS (H-K
possesses a surplus of NIS-denominated assets).
Nevertheless, in the third quarter of the year the
devaluation (3%) resulted in a decrease in H-K's net
profit, due to the higher financial expenses, despite
the significant improvement in H-K's operating profit.
- The Company's share in the net income of the Carmel
Group increased by NIS 2.5 million ($0.6 million) due
to efficiency measures initiated by the company and the
transition to operating profit in the third quarter of
the year.
- The Company's share in the net earnings of TMM
decreased by NIS 1.6 million ($0.4 million) as a result
of higher financial expenses this year in relation to
last year (on account of the higher interest rate in
relation to last year, coupled with the greater volume
of credit that originated primarily from strategic
investments made by TMM).
8. NET INCOME
----------
The Company's net profit for the reported period, before
extraordinary items, was NIS 44.5 million as compared with NIS
28.2 million in the corresponding period last year ($10.0
million, as compared with $6.3 million).
-7-
The net profit was NIS 45.6 million during the reported period
this year, as compared with NIS 28.6 million in the
corresponding period last year ($10.3 million, as compared
with $6.4 million). The net profit during the reported period
this year included approximately NIS 1.1 million ($0.2
million) in net capital gains, resulting from the sale of
apartments owned by the Company in Hadera, Israel that had
previously served the Company's employees. The net profit in
the corresponding period last year included approximately NIS
0.4 million ($0.1 million) in non-recurring income, net,
resulting from the realization of assets and from taxes on
account of preceding years.
The net profit in the third quarter this year, before
non-recurring income, was NIS 13.8 million, as compared with
NIS 8.8 million in the corresponding quarter last year ($3.1
million, as compared with $2.0 million). (NIS 9.2 million - or
$2.1 million - including non-recurring income in the
corresponding quarter last year).
The return on shareholders' equity, in annual terms, was 9.2%
during the reported period this year, as compared with 5.9% in
the corresponding period last year.
IV. LIQUIDITY AND INVESTMENTS
-------------------------
1. CASH FLOWS
----------
The cash flows from operating activities were NIS 15.8 million
during the reported period this year - before dividend
received from an associated company - as compared with NIS
22.9 million in the corresponding period last year ($3.6
million, as compared with $5.2 million). The difference in the
operating cash flows originated from the change in the
operating working capital this year, which was partially
offset by the increase in the net profit.
The cash flows from operating activities in the reported
period, including dividend received from an associated
company, were NIS 32.4 million ($7.3 million).
2. ACCOUNTS RECEIVABLE - TRADE
---------------------------
Accounts receivable, as at September 30, 2003, were NIS 148.1
million, as compared with NIS 130.4 million at September 30,
2002 and as compared with NIS 133.6 million at December 31,
2002 ($33.4 million, as compared with $29.4 million and $30.1
million, respectively).
The increase in the accounts receivable balance, as compared
with the corresponding period last year, resulted from the
growth in the volume of operations, coupled with a slow
increase in the days of receivables credit, as a result of the
economic situation in the market.
-8-
3. INVENTORIES
-----------
The inventories as at September 30, 2003, were NIS 89.7
million, as compared with NIS 95.8 million at September 30,
2002and NIS 91.8 million at December 31, 2002 ($20.2 million,
as compared with $21.6 million and $20.7 million,
respectively).
The inventories decreased despite the growth in the volume of
operations. This was achieved as a result of efforts that were
initiated with the intention of reaching a minimal operational
level of inventories that would serve to lower the working
capital balances.
4. INVESTMENTS IN FIXED ASSETS
---------------------------
The investments in fixed assets was NIS 19.5 million during
the reported period this year, as compared with NIS 41.5
million in the corresponding period last year ($4.4 million,
as compared with $9.3 million) and included primarily
investments in equipment renewal and improvements.
5. SHORT-TERM CREDIT
-----------------
The short-term credit balance, as at September 30, 2003,
amounted to NIS 190.0 million, as compared with NIS 128.0
million at September 30, 2002 and NIS 105.5 million at
December 31, 2002 ($42.8 million, as compared with $28.8
million and $23.8 million, respectively).
The increase in the credit balances at the end of the reported
period resulted primarily from the dividend that was paid to
the Company's shareholders and from the repayment of loans
(primarily to note holders). The increase in the credit
balance was partially offset by dividend received from an
associated company and the repayment of a loan by an
associated company.
Most of the credit that serves to finance the Company's
operations is denominated in NIS. Due to the said increase in
the Company's liabilities, the surplus financial liabilities
denominated in NIS grew from $24.0 million on December 31,
2002 to $38.5 million on September 30, 2003.
V. EXPOSURE AND MANAGEMENT OF MARKET RISKS
---------------------------------------
The following is an update, as at September 30, 2003, to the Management
Discussion for the year ended December 31, 2002, which outlined the
essence of the exposure and management of market risks, as set forth by
the Company's board of directors:
The maximum exposure determined by the Company's board of directors has
not changed and consequently, the maximum exposure of the surplus
assets denominated in NIS with respect to which no hedging is made
(through the acquisition of NIS/$ options) remained NIS 53.3 million
($12 million). This sum also includes balances of NHP and H-K . Due to
the fact that as of September 30, 2003, the Group possessed a surplus
of NIS liabilities (as opposed to the aforesaid surplus assets), it was
not necessary to purchase hedging.
CREDIT RISKS
------------
The Company possesses CPI-linked long-term loans (notes and loans) in
the total sum of NIS 40.7 million ($9.2 million), with the interest
thereon being no higher than the market interest rate. In the event
that the inflation rate increases and is considerably higher than the
rate of devaluation of the NIS against the US dollar, this could lead
to a loss being recorded in the Company's financial statements as a
result of a surplus of CPI-linked liabilities.
-9-
As at September 30, 2003, the Company was not engaged in any forward
transactions or derivatives.
REPORT OF LINKAGE BASES
-----------------------
The following are the balance sheet items, according to linkage bases,
on December 31, 2002 and September 30, 2003:
IN FOREIGN
CURRENCY, OR
LINKED THERETO NON-MONETARY
IN NIS MILLIONS UNLINKED CPI-LINKED (PRIMARILY $) ITEMS TOTAL
----------------------------------------------------------------------------------------------------------------------------
ASSETS
CASH AND CASH EQUIVALENTS 3.4 2.2 5.6
ACCOUNTS RECEIVABLE 221.7 53.0 15.9 290.6
INVENTORIES 89.7 89.7
INVESTMENTS IN ASSOCIATED
COMPANIES 12.2 10.2 28.9 335.5 386.8
FIXED ASSETS, NET 327.4 327.4
DEFERRED EXPENSES, NET OF
ACCRUED AMORTIZATION 0.5 0.5
----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 237.3 10.2 84.1 769.0 1,100.6
-----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
CREDIT FROM BANKS 190.0 190.0
ACCOUNTS PAYABLE 155.1 10.6 165.7
DEFERRED TAXES ON INCOME 62.0 62.0
LOANS FROM BANKS 0.8 0.8
NOTES 39.9 39.9
OTHER LIABILITIES 32.8 2.2 35.0
SHAREHOLDERS' EQUITY 607.2 607.2
----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY 377.9 40.7 12.8 669.2 1,100.6
----------------------------------------------------------------------------------------------------------------------------
SURPLUS FINANCIAL ASSETS (LIABILITIES) AS (140.6) (30.5) 71.3 99.8 --
AT SEPT-30-03
-----------------------------------------------------------------------------------------------------------------------------
SURPLUS FINANCIAL ASSETS (LIABILITIES) AS (70.1) (36.4) 66.3 40.2 --
AT DEC-31-02
----------------------------------------------------------------------------------------------------------------------------s
ASSOCIATED COMPANIES
--------------------
H-K, an associated company, holds a subsidiary operating in Turkey. The
impact of the exposure of this subsidiary to the economic situation in
Turkey - and especially to fluctuations in the exchange rate of the
Turkish lira in relation to the US dollar - might affect the Group's
financial statements under the Company's share in earnings of
associated companies.
VI. FORWARD-LOOKING STATEMENTS
--------------------------
This report contains various forward-looking statements, based upon the
Company's board of directors' present expectations and estimates
regarding the operations of the Company and its business environment.
The Company does not guarantee that the future results and operations
will coincide with the forward-looking statements and these may in fact
differ considerably from the present forecasts as a result of factors
-10-
that may change in the future, such as changes in costs and market
conditions, failure to achieve projected goals, failure to achieve
anticipated efficiencies and other factors which lie outside the
control of the Company. The Company undertakes no obligation to
publicly update such forward-looking statements, regardless of whether
these updates originate from new information, future events or any
other reason.
VII. GENERAL
-------
- In March 2003, the Company declared a dividend for 2002 in the
amount of approximately NIS 25.9 million (NIS 6.61 per share).
The dividend was paid in April 2003.
In August, the Company declared a special dividend for 2003 in
the amount of approximately NIS 75 million (NIS 19.04 per
share). The dividend was paid in September 2003.
- 27,714 shares were issued during the reported period (0.7%
dilution), pursuant to the exercise of 55,163 options as part
of the Company's 1998 senior employee option plan.
- The vesting period on the 2001 Jubilee Employee Stock Option
Plan ended on November 4, 2003. Subsequent to the balance
sheet date (and until November 10, 2003), an aggregate of
41,885 options were exercised into 14,052 shares (dilution of
0.4%).
/s/ Yaki Yerushalmi /s/ Avi Patir
-------------------- ---------------
YAKI YERUSHALMI AVI PATIR
Chairman of the General Manager
Board of Directors
-11-
EXHIBIT 3
---------
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
SUMMARY OF CONSOLIDATED BALANCE SHEETS
--------------------------------------
ADJUSTED NIS IN THOUSANDS
Sept. 30, 2003 Sept. 30, 2002 Dec. 31, 2002
(UNAUDITED) (UNAUDITED) (AUDITED)
-------------- -------------- -------------
CURRENT ASSETS:
Cash and cash equivalents 5,627 3,082 5,537
Receivables :
Trade 148,109 130,370 133,601
Other 142,477 161,181 133,758
Inventories 89,685 95,810 91,776
-----------------------------------------------------------
Total current assets 385,898 390,443 364,672
Investments in associated companies 386,789 374,269 371,341
FIXED ASSETS
------------
Cost 959,144 940,075 943,738
Less - accumulated depreciation 631,725 608,697 613,288
-----------------------------------------------------------
327,419 331,378 330,450
Deferred charges -
net of accumulated amortization 492 591 557
-----------------------------------------------------------
1,100,598 1,096,681 1,067,020
-----------------------------------------------------------
CURRENT LIABILITIES:
--------------------
Credit from banks 190,720 128,718 106,194
Current maturities of long-term notes 6,635 6,115 6,302
Trade 90,835 96,432 100,661
Other 74,872 86,592 63,352
-----------------------------------------------------------
Total current liabilities 363,062 317,857 276,509
LONG-TERM LIABILITIES
---------------------
Deferred income taxes 62,014 59,465 59,091
Loans from banks and other liabilities (net
of current maturities):
Loans from banks 688 360
Notes 33,273 36,784 37,895
Other liabilities 35,046 32,153 32,997
-----------------------------------------------------------
Total long term liabilities 130,333 129,090 130,343
Total liabilities 493,395 446,947 406,852
SHAREHOLDERS' EQUITY :
----------------------
Share capital 127,029 127,029 127,029
Capital surplus 91,335 91,335 91,335
Currency adjustments in respect of financial
statements of associated companies (1,550) (4,539) (3,531)
Retained earnings 390,389 435,909 445,335
-----------------------------------------------------------
607,203 649,734 660,168
-----------------------------------------------------------
1,100,598 1,096,681 1,067,020
-----------------------------------------------------------
Adjusted New Israeli Shekel amounts have been adjusted to reflected changes
in the rate of exchange between the U.S. dollar and the New Israeli Shekel as
at the end of September 2003.
The representative exchange rate at September 30, 2003 was N.I.S. 4.441 = $1.00
The accompanying notes are in integral part of the financial statements.
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
SUMMARY OF CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------
ADJUSTED NIS IN THOUSANDS
-------------------------
NINE-MONTH PERIOD THREE-MONTH PERIOD YEAR ENDED
ENDED SEPT. 30 ENDED SEPT. 30 DEC. 21
2003 2002 2003 2002 2002
(UNAUDITED) (UNAUDITED) (AUDITED)
----------------- ------------------ ----------
Net sales 354,942 337,097 118,952 112,571 462,229
Cost of sales 275,825 272,203 92,488 87,223 368,922
--------------------------------------------------------------------
Gross profit 79,117 64,894 26,464 25,348 93,307
--------------------------------------------------------------------
Selling and marketing, administrative and
general expenses:
Selling and marketing 23,948 21,713 8,640 7,358 29,580
Administrative and general 19,650 18,877 5,692 6,445 26,756
--------------------------------------------------------------------
43,598 40,590 14,332 13,803 56,336
--------------------------------------------------------------------
Income from ordinary operations 35,519 24,304 12,132 11,545 36,971
--------------------------------------------------------------------
Financial income (expenses) - net (11,858) 1,019 330 (2,138) (3,029)
Discontinued operations and realization
of assets, net 1,629 (2,984) (2,984) (2,984)
--------------------------------------------------------------------
Income before taxes on income 25,290 22,339 12,462 6,423 30,958
--------------------------------------------------------------------
Taxes on income 7,673 6,816 5,993 155 9,930
--------------------------------------------------------------------
Income from operations of the company
and the consolidated subsidiaries 17,617 15,523 6,469 6,268 21,028
--------------------------------------------------------------------
Share in profits of associated companies - net 27,969 13,043 7,319 2,958 16,964
--------------------------------------------------------------------
Net income for the period 45,586 28,566 13,788 9,226 37,992
--------------------------------------------------------------------
NET INCOME PER NIS 1 PAR VALUE OF SHARES (IN
--------------------------------------------
ADJUSTED N.I.S) 1,135 725 343 234 960
--------------- --------------------------------------------------------------------
Adjusted New Israeli Shekel amounts have been adjusted to reflected changes in
the rate of exchange between the U.S. dollar and the New Israeli Shekel as at
the end of September 2003.
The representative exchange rate at September 30, 2003 was N.I.S. 4.441 = $1.00
The accompanying notes are in integral part of the financial statements.
-2-
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
SUMMARY OF STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
--------------------------------------------------------
ADJUSTED NIS IN THOUSANDS
-------------------------
ADJUSTMENTS
DUE TO THE
TRANSLATION
STATEMENTS OF
SHARE CAPITAL ASSOCIATED RETAINED
CAPITAL SURPLUS COMPANIES EARNINGS TOTAL
-----------------------------------------------------------------
BALANCE AT JANUARY 1, 2003 (AUDITED) 127,029 91,335 (3,531) 445,335 660,168
------------------------------------ ------- ------ ------- ------- -------
CHANGES DURING THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 2003 (UNAUDITED) :
NET INCOME 45,586 45,586
DIVIDEND DISTRIBUTED (100,532) (100,532)
EXERCISE OF EMPLOYEES OPTIONS INTO SHARES *
*
ADJUSTMENTS DUE TO THE TRANSLATION RESPECT OF FINANCIAL
STATEMENTS OF ASSOCIATED COMPANIES 1,981 1,981
----------- -------------- ------------------------ -------------
BALANCE AT SEPTEMBER 30, 2003 (UNAUDITED) 127,029 91,335 (1,550) 390,389 607,203
----------------------------------------- ----------- -------------- ------------------------ -------------
Balance at January 1, 2002 (audited) 127,029 91,335 (3,220) 428,311 643,455
-----------------------------------
Changes during the nine month period ended
September 30, 2002 (unaudited) :
Net income 28,566 28,566
Dividend distributed (20,968) (20,968)
Adjustments due to the translation respect of financial
statements of associated companies (1,319) (1,319)
----------- -------------- ------------------------ -------------
Balance at September 30, 2002 (unaudited) 127,029 91,335 (4,539) 435,909 649,734
---------------------------------------- ----------- -------------- ------------------------ -------------
BALANCE AT JULY 1, 2003 (UNAUDITED) 127,029 91,335 101 451,717 670,182
-----------------------------------
CHANGES DURING THE THREE MONTH PERIOD ENDED
SEPTEMBER 30, 2003 (UNAUDITED):
NET INCOME 13,788 13,788
DIVIDEND DISTRIBUTED (75,116) (75,116)
EXERCISE OF EMPLOYEES OPTIONS INTO SHARES *
*
ADJUSTMENTS DUE TO THE TRANSLATION RESPECT OF FINANCIAL
STATEMENTS OF ASSOCIATED COMPANIES (1,651) (1,651)
----------- -------------- ------------------------ -------------
BALANCE AT SEPTEMBER 30, 2003 (UNAUDITED) 127,029 91,335 (1,550) 390,389 607,203
----------------------------------------- ----------- -------------- ------------------------ -------------
Balance at July 1, 2002 (unaudited) 127,029 91,335 (3,873) 426,683 641,174
----------------------------------
Changes during the three month period ended
September 30, 2002 (unaudited):
Net income 9,226 9,226
Adjustments due to the translation respect of financial
statements of associated companies (666) (666)
----------- -------------- ------------------------ -------------
Balance at September 30, 2002 (unaudited) 127,029 91,335 (4,539) 435,909 649,734
---------------------------------------- ----------- -------------- ------------------------ -------------
Balance at January 1, 2002 (audited) 127,029 91,335 (3,220) 428,311 643,455
-----------------------------------
Changes during the year ended December 31, 2002 (audited) :
Net income 37,992 37,992
Dividend distributed (20,968) (20,968)
Adjustments due to the translation respect of financial
statements of associated companies (311) (311)
----------- -------------- ------------------------ -------------
Balance at December 31, 2002 (audited) 127,029 91,335 (3,531) 445,335 660,168
------------------------------------- ----------- -------------- ------------------------ -------------
* Represents a sum under 1,000 NIS.
Adjusted New Israeli Shekel amounts have been adjusted to reflect changes in the
rate of exchange between the U.S. dollar and the New Israeli Shekel as at the
end of September 2003.
The representative exchange rate at September 30, 2003 was N.I.S. 4.441 = $1.00
The accompanying notes are an integral part of the financial statements.
-3-
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
SUMMARY OF CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------
ADJUSTED NIS IN THOUSANDS
-------------------------
NINE-MONTH NINE-MONTH THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED
SEPT. 30, 2003 SEPT. 30, 2002 SEPT. 30, 2003 SEPT. 30, 2002 DEC. 31, 2002
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (AUDITED)
---------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES :
--------------------------------------
Net income for the period 45,586 28,566 13,788 9,226 37,992
Adjustments to reconcile net income to net
cash provided by operating activities (*): (13,161) 16,512 15,348 (2,946) 40,277
-------- -------- -------- -------- --------
Net cash provided by operating activities 32,425 45,078 29,136 6,280 78,269
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES :
--------------------------------------
Purchase of fixed assets (19,465) (41,451) (7,828) (31,663) (47,470)
Associated companies :
Investment in associated companies and
loans granted (7,896) (2,665) (6,137) (2,106) (3,349)
Repayment of loans 15,543
Proceeds from sale of fixed assets 2,780 11,003 760 9,701 9,867
-------- -------- -------- -------- --------
Net cash used in investing activities (9,038) (33,113) (13,205) (24,068) (40,952)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES :
--------------------------------------
Repayment of long-term loans from banks
and others (386) (702) (182) (1,053)
Redemption of Notes (6,865) (6,045) (6,044)
Dividend paid (100,532) (20,968) (75,116) (20,968)
Short-term bank credit and loans - net 84,486 15,226 46,217 18,361 (7,321)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities (23,297) (12,489) (28,899) 18,179 (35,386)
-------- -------- -------- -------- --------
Increase (decrease) in cash and cash
equivalents 90 (524) (12,968) 391 1,931
Balance of cash and cash equivalents at
beginning of period 5,537 3,606 18,595 2,691 3,606
-------- -------- -------- -------- --------
Balance of cash and cash equivalents at
end of period 5,627 3,082 5,627 3,082 5,537
-------- -------- -------- -------- --------
(*) Adjustments to reconcile net income to net cash provided by operating
activities:
INCOME AND EXPENSES NOT INVOLVING CASH FLOWS:
Associated companies:
Share in profits of associated companies - net (27,969) (13,043) (7,319) (2,958) (16,964)
Dividend received from those companies 16,619 22,160 22,161
Depreciation and amortization 21,544 20,468 7,157 6,813 27,189
Deferred income taxes - net 2,497 7,270 4,476 2,514 3,756
Capital (gains) losses -
On sale of fixed assets (702) (11) (737) 255 (139)
On discontinued operations and realization of (1,061) 1,364 1,364 1,364
assets-net
Linkage differences (erosion) of principal of
long-term loans from banks and others - net 67 (63) (26) (4) (17)
Linkage differences (erosion) and linkage 2,576 (1,829) (1,643) (232) (532)
differences on Notes
Erosion (linkage differences) of long-term loans
to associated companies (882) 497 515 166 154
Linkage differences (erosion) on long term capital
note to an associated company 2,048 (3,078) (980) (638) (2,233)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Decrease (increase) in receivables (31,683) (48,050) 6,994 (40,170) (11,835)
Decrease (increase) in inventories 2,091 16,814 (4,890) (2,520) 22,371
Increase (decrease) in payables and accrued
liabilities 1,694 14,013 11,801 32,464 (4,998)
-------- -------- -------- -------- --------
(13,161) 16,512 15,349 (2,946) 40,277
-------- -------- -------- -------- --------
Adjusted New Israeli Shekel amounts have been adjusted to
reflect changes in the rate of exchange between the U.S. dollar and the
New Israeli Shekel as at the end of September 2003.
The representative exchange rate at September 30, 2003 was N.I.S. 4.441 = $1.00
The accompanying notes are an integral part of the financial statements.
-4-
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 2003
(Unaudited)
NOTE 1 - GENERAL
a. The interim financial statements as of September 30, 2003 and for the
nine and three month periods then ended (hereafter - the interim
financial statements) were drawn up in condensed form, in accordance
with Accounting Standard No. 14 of the Israel Accounting Standards
Board (hereafter - the IASB) and in accordance with the Securities
(Preparation of Periodic and Immediate Financial Statements)
Regulations , 1970. Standard 14, which supersedes Opinion 43 of the
Institute of Certified Public Accountants in Israel, is applicable to
financial statements for periods commencing on January 1, 2003 and
thereafter; the application of the Standard at the beginning of 2002
would not have affected the comparative figures.
b. The accounting principles applied in preparation of the interim
statements are consistent with those applied in the annual financial
statements, except for the first implementation of Accounting Standard
No. 15 of the IASB, "Impairment of assets", which has no effect on the
Company's consolidated financial statements. Nevertheless, the interim
statements do not include all the information and explanations required
for the annual financial statements.
Costs unevenly incurred during the year are brought forward or deferred
for interim reporting purposes if, and only if, such costs may be
brought forward or deferred in the annual reporting.
c. The financial statements have been drawn up in September 2003 adjusted
NIS, based on the changes in the exchange rate of the U.S. dollar. As
prescribed by Accounting Standards Nos. 12 and 17 of the IASB, the
adjustment of financial statements will be discontinued as from January
1, 2004. The adjusted amounts as of December 31, 2003 will be the base
for the nominal-historical financial reporting in the following
periods. Accounting Standard No. 13, which would come into effect
concurrently with the abovementioned standards, will supersede
Clarifications Nos. 8 and 9 to Opinion 36.
Following are the changes in exchange rate of the dollar and in the
Israeli consumer price index (the "CPI"):
EXCHANGE RATE
OF THE DOLLAR CPI
% %
-------------- ----------
Increase (decrease) in the nine months ended September 30:
2003 (6.2) (1.5)
2002 10.3 7.0
Increase (decrease) in the three months ended September 30:
2003 3.0 (1.0)
2002 2.1 0.6
Increase in the year ended December 31, 2002 7.3 6.5
-5-
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 2003
(Unaudited)
NOTE 2 - SEGMENT INFORMATION
Data on segment activity - In NIS in thousands:
For the period of 9 monthes
Paper and recycling Marketing of office supplies Total
------------------- ---------------------------- -----
Jan-Sept. Jan-Sept. Jan-Sept. Jan-Sept. Jan-Sept. Jan-Sept.
2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ----
Sales - net (1) 252,711 234,942 102,231 102,155 354,942 337,097
Income (loss) from operations 34,928 25,673 591 (1,368) 35,519 24,305
For the period of 3 months
Paper and recycling Marketing of office supplies Total
------------------- ---------------------------- -----
July-Sept. July-Sept. July-Sept. July-Sept. July-Sept. July-Sept.
2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ----
Sales - net (1) 83,717 77,998 35,235 34,573 118,952 112,571
Income (loss) from operations 11,475 11,634 657 (89) 12,132 11,545
----------
(1) Represents sales to external customers.
-6-
EXHIBIT 4
---------
[Registrant's logo]
Enclosed please find the financial reports of the following associated
companies:
- Neusiedler Hadera Paper Ltd.
- Hogla-Kimberly Ltd.
The financial report of the following associated companies are not included:
- Carmel Containers Systems Ltd., according to section 44(c) of the
Securities (Periodic and Immediate Reports) Regulations.
- TMM Integrated Recycling Industries Ltd., a reporting corporation.
NEUSIEDLER HADERA PAPER LTD.
INTERIM REPORT
(Unaudited)
AS OF SEPTEMBER 30, 2003
NEUSIEDLER HADERA PAPER LTD.
INTERIM REPORT
(Unaudited)
AS OF SEPTEMBER 30, 2003
TABLE OF CONTENTS
-----------------
PAGE
----
ACCOUNTANTS' REVIEW REPORT 2
CONDENSED INTERIM FINANCIAL STATEMENTS:
IN ADJUSTED NEW ISRAELI SHEKELS (NIS):
Balance Sheets 3
Statements of Operations 4
Statements of Changes in Shareholders' Equity 5
Statements of Cash Flows 6
Notes to the Financial Statements 7
NEUSIEDLER HADERA PAPER LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2003
ADJUSTED NEW ISRAELI SHEKELS **
---------------------------------------------------
SEPTEMBER 30 DECEMBER 31,
-------------------------------- ------------
2003 2002 2002
----------- ------------ ------------
(UNAUDITED) (AUDITED)
-------------------------------- ------------
In thousands
---------------------------------------------------
A S S E T S
CURRENT ASSETS:
Cash and cash equivalents 36,456 42,918 49,784
Accounts receivable:
Trade 155,659 157,619 157,190
Other 16,504 12,600 12,977
Inventories 74,285 82,700 80,826
----------- ------------ ------------
Total current assets 282,904 295,837 300,777
----------- ------------ ------------
FIXED ASSETS:
Cost 131,462 123,367 126,582
Less - accumulated depreciation 23,719 16,587 18,248
----------- ------------ ------------
107,743 106,780 108,334
----------- ------------ ------------
GOODWILL, net of accumulated amortization 4,645 5,276 5,120
----------- ------------ ------------
Total assets 395,292 407,893 414,231
=========== ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank credit 15,210 14,841 14,878
Current maturities of long-term capital notes 17,764
Accounts payable and accruals:
Trade - open accounts 79,574 69,826 77,736
American Israeli Paper Mills Limited and its subsidiaries, 62,707 69,142 55,459
shareholders - net
Other 16,445 15,845 20,215
----------- ------------ ------------
Total current liabilities 173,936 169,654 186,052
----------- ------------ ------------
LONG-TERM LIABILITIES:
Banks loans 53,767 73,476 72,855
Capital notes from shareholders (net of current maturities) 57,733 88,820 71,056
Deferred income taxes - net 29,311 16,200 19,834
Liability for employee rights upon retirement 142 129 133
----------- ------------ ------------
Total long- term liabilities 140,953 178,625 163,878
----------- ------------ ------------
Total liabilities 314,889 348,279 349,930
----------- ------------ ------------
SHAREHOLDERS' EQUITY:
Share capital 1 1 1
Capital surplus 43,965 43,965 43,965
Retained earnings 36,437 15,648 20,335
----------- ------------ ------------
80,403 59,614 64,301
----------- ------------ ------------
Total liabilities and shareholders' equity 395,292 407,893 414,231
=========== ============ ============
----------
* Reclassified.
** Adjusted for the changes in the general purchasing power of the Israeli
currency based on the changes in the exchange rate of the U.S dollar at
the end of September 2003. The representative exchange rate at September
30, 2003 was $1= NIS 4.441.
/s/ Eliaz Amar /s/ Avner Solel /s/ Yaki Yerushalmi
----------------------- ------------------- -----------------------
Eliaz Amar Avner Solel Yaki Yerushalmi
Chief Financial Officer General Manager Vice Chairman of the
Board of Directors
Date of approval of the financial statements: November 12, 2003.
The accompanying notes are an integral part of these condensed
financial statements.
-2-
NEUSIEDLER HADERA PAPER LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 2003
ADJUSTED NEW ISRAELI SHEKELS **
------------------------------------------------------------------
NINE MONTHS THREE MONTHS YEAR ENDED
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 DECEMBER 31,
------------------ ------------------ ------------
2003 2002 2003 2002 2002
---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (AUDITED)
------------------ ------------------ ------------
IN THOUSANDS (EXCEPT PER SHARE DATA)
------------------------------------------------------------------
SALES - net 502,432 440,750 172,238 145,534 583,755
COST OF SALES 433,562 *376,162 150,430 *122,826 *496,922
------- -------- ------- -------- --------
GROSS PROFIT 68,870 64,588 21,808 22,708 86,833
------- -------- ------- -------- --------
SELLING, MARKETING, ADMINISTRATIVE
AND GENERAL EXPENSES:
Selling and marketing 31,691 *30,664 10,223 *9,666 *43,060
Administrative and general 8,713 8,394 3,392 3,678 10,465
------- -------- ------- -------- --------
40,404 39,058 13,615 13,344 53,525
------- -------- ------- -------- --------
INCOME FROM ORDINARY OPERATIONS 28,466 25,530 8,193 9,364 33,308
FINANCIAL EXPENSES - NET 3,295 4,783 1,074 1,718 5,307
------- -------- ------- -------- --------
INCOME BEFORE TAXES ON INCOME 25,171 20,747 7,119 7,646 28,001
TAXES ON INCOME 9,069 9,131 3,443 3,136 11,698
------- -------- ------- -------- --------
NET INCOME FOR THE PERIOD 16,102 11,616 3,676 4,510 16,303
======= ======== ======= ======== ========
NET INCOME PER NIS 1 OF PAR VALUE OF SHARES 16,102 11,616 3,676 4,510 16,303
======= ======== ======= ======== ========
----------
* Reclassified.
** Adjusted for the changes in the general purchasing power of the Israeli
currency based on the changes in the exchange rate of the U.S dollar at
the end of September 2003.
The representative exchange rate at September 30, 2003 was $1= NIS 4.441.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED FINANCIAL
STATEMENTS.
-3-
NEUSIEDLER HADERA PAPER LTD.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 2003
ADJUSTED NEW ISRAELI SHEKELS*
-----------------------------------------------------
SHARE CAPITAL REATAINED
CAPITAL SURPLUS EARNINGS TOTAL
------- ------- -------- -----
IN THOUSANDS
-----------------------------------------------------
BALANCE AT JANUARY 1, 2003 (audited) 1 43,965 20,335 64,301
CHANGES DURING THE NINE MONTHS
ENDED SEPTEMBER 30, 2003 (unaudited) -
net income 16,102 16,102
------ ------ ------ ------
BALANCE AT SEPTEMBER 30, 2003 (unaudited) 1 43,965 36,437 80,403
====== ====== ====== ======
BALANCE AT JANUARY 1, 2002 (audited) 1 43,965 4,032 47,998
CHANGES DURING THE NINE MONTHS
ENDED SEPTEMBER 30, 2002 (unaudited) -
net income 11,616 11,616
------ ------ ------ ------
BALANCE AT SEPTEMBER 30, 2002 (unaudited) 1 43,965 15,648 59,614
====== ====== ====== ======
BALANCE AT JULY 1, 2003 (unaudited) 1 43,965 32,761 76,727
CHANGES DURING THE THREE MONTHS
ENDED SEPTEMBER 30, 2003 (unaudited) -
net income 3,676 3,676
------ ------ ------ ------
BALANCE AT SEPTEMBER 30, 2003 (unaudited) 1 43,965 36,437 80,403
====== ====== ====== ======
BALANCE AT JULY 1, 2002 (unaudited) 1 43,965 11,138 55,104
CHANGES DURING THE THREE MONTHS
ENDED SEPTEMBER 30, 2002 (unaudited) -
net income 4,510 4,510
------ ------ ------ ------
BALANCE AT SEPTEMBER 30, 2002 (unaudited) 1 43,965 15,648 59,614
====== ====== ====== ======
BALANCE AT JANUARY 1, 2002 (audited) 1 43,965 4,032 47,998
CHANGES DURING2002 (audited) -
net income 16,303 16,303
------ ------ ------ ------
BALANCE AT DECEMBER 31, 2002 (audited) 1 43,965 20,335 64,301
====== ====== ====== ======
* Adjusted for the changes in the general purchasing power of the Israeli
currency based on the changes in the exchange rate of the U.S dollar at
the end of September 2003.
The representative exchange rate at September 30, 2003 was $1= NIS 4.441.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED FINANCIAL
STATEMENTS.
-4-
NEUSIEDLER HADERA PAPER LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE AND THREE MONTH PERIODS ENDED SEPTEMBER 30, 2003
ADJUSTED NEW ISRAELI SHEKELS **
------------------------------------------------------------------
NINE MONTHS THREE MONTHS YEAR ENDED
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 DECEMBER 31,
------------------ ------------------ ------------
2003 2002 2003 2002 2002
---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (AUDITED)
------------------ ------------------ ------------
IN THOUSANDS (EXCEPT PER SHARE DATA)
------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income for the period 16,102 11,616 3,676 4,510 16,303
Adjustments to reconcile net income to
net cash provided by (used
in) operating activities (a) 27,349 25,306 (13,791) 27,962 32,110
------- ------- ------- ------ -------
Net cash provided by (used in) operating activities 43,451 36,922 (10,115) 32,472 48,413
------- ------- ------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES :
Purchase of fixed assets (6,270) (12,786) (2,750) (2,816) (16,536)
Proceeds from sale of fixed assets 604 373 275 213 811
------- ------- ------- ------ -------
Net cash used in investing activities (5,666) (12,413) (2,475) (2,603) (15,725)
------- ------- ------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES :
Short-term credit from banks - net (18) (4,099) 71 (4,206)
Discharge of long-term bank loans (20,008) (6,163) (12,479) (6,163) (7,369)
Discharge of long-term capital notes from shareholders (31,087)
------- ------- ------- ------ -------
Net cash used in financing activities (51,113) (10,262) (12,479) (6,092) (11,575)
------- ------- ------- ------ -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,328) 14,247 (25,069) 23,777 21,113
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 49,784 28,671 61,525 19,141 28,671
------- ------- ------- ------ -------
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD 36,456 42,918 36,456 42,918 49,784
======= ======= ======= ====== =======
(a) ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Income and expenses not involving cash flows:
Depreciation and amortization 6,528 6,080 2,202 2,065 8,191
Deferred income taxes - net 9,098 9,321 3,473 3,200 11,646
Liability for employee rights upon retirement 9 (3) (4) 5
Capital loss on sale of fixed assets 204 284 110 289 85
Erosion of (linkage differences on)
long-term bank loans 1,270 (864) (1,013) (132) (136)
------- ------- ------- ------ -------
17,109 14,821 4,769 5,418 19,791
------- ------- ------- ------ -------
Changes in operating assets and liabilities:
Decrease (increase) in receivable :
Trade 1,531 (1,136) (14,750) 17,587 (705)
Other (3,148) 8,224 (3,477) 2,264 9,154
Decrease in inventories 6,541 11,320 2,553 13,452 13,195
Increase (decrease) in accounts payable and accruals :
Trade 1,838 (1,781) 1,826 (12,301) 6,129
American Israeli Paper Mills Limited and its
subsidiaries, shareholders - net 7,248 (5,382) (5,312) 2,670 (19,065)
Other (3,770) (760) 600 (1,128) 3,611
------- ------- ------- ------ -------
10,240 10,485 (18,560) 22,544 12,319
------- ------- ------- ------ -------
27,349 25,306 (13,791) 27,962 32,110
======= ======= ======= ====== =======
* Adjusted for the changes in the general purchasing power of the Israeli
currency based on the changes in the exchange rate of the U.S dollar at
the end of September 2003.
The representative exchange rate at September 30, 2003 was $1= NIS 4.441.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED FINANCIAL
STATEMENTS.
-5-
NEUSIEDLER HADERA PAPER LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT SEPTEMBER 30, 2003
(UNAUDITED)
NOTE 1 - GENERAL
----------------
A. The interim financial statements as of September 30, 2003 and for the
nine and three month periods then ended (hereafter - the interim
financial statements) were drawn up in condensed form, in accordance
with Accounting Standard No. 14 of the Israel Accounting Standards
Board (hereafter - the IASB) and in accordance with the Securities
(Preparation of Periodic and Immediate Financial Statements)
Regulations , 1970. Standard 14, which supersedes Opinion 43 of the
Institute of Certified Public Accountants in Israel, is applicable to
financial statements for periods commencing on January 1, 2003 and
thereafter; the application of the Standard at the beginning of 2002
would not have affected the comparative figures.
B. The accounting principles applied in preparation of the interim
statements are consistent with those applied in the annual financial
statements, except for the first implementation of Accounting Standard
No. 15 of the IASB, "Impairment of assets", which has no effect on the
Company's consolidated financial statements. Nevertheless, the interim
statements do not include all the information and explanations required
for the annual financial statements.
Costs unevenly incurred during the year are brought forward or deferred
for interim reporting purposes if, and only if, such costs may be
brought forward or deferred in the annual reporting.
C. The financial statements have been drawn up in September 2003 adjusted
NIS, based on the changes in the exchange rate of the U.S. dollar. As
prescribed by Accounting Standards Nos. 12 and 17 of the IASB, the
adjustment of financial statements will be discontinued as from January
1, 2004. The inflation-adjusted amounts as of December 31, 2003 will be
the base for the nominal-historical financial reporting in the
following periods. Accounting Standard No. 13, which would come into
effect concurrently with the abovementioned standards, will supersede
Clarifications Nos. 8 and 9 to Opinion 36.
Following are the changes in exchange rate of the dollar and in the
Israeli consumer price index (the "CPI"):
EXCHANGE RATE OF
THE DOLLAR CPI
% %
---------------- --------
Increase (decrease) in the nine months ended September 30:
2003 (6.2) (1.5)
2002 10.3 7.0
Increase (decrease) in the three months ended September 30:
2003 3.0 (1.0)
2002 2.1 0.6
Increase in the year ended December 31, 2002 7.3 6.5
The dollar exchange rate as of September 30, 2003 is: $1=NIS 4.441
-6-
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
TABLE OF CONTENTS
-----------------
PAGE
----
ACCOUNTANTS' REVIEW REPORT 1
CONDENSED FINANCIAL STATEMENTS:
Balance Sheets 2
Statements of Operations 3
Statements of Changes in Shareholders' Equity 4
Statements of Cash Flows 5-6
Notes to the Financial Statements 7-8
The Board of Directors of
Hogla-Kimberly Ltd.
-------------------------
Re: Review of Unaudited Condensed Interim Consolidated Financial
Statements for the nine months ended September 30, 2003
Gentlemen:
At your request, we have reviewed the condensed interim consolidated
financial statements ("interim financial statements") of Hogla-Kimberly Ltd.
("the Company") and its subsidiaries, as follows:
- Balance sheet as of September 30, 2003.
- Statements of operations for the nine months and three months ended
September 30, 2003.
- Statements of changes in shareholders' equity for the nine months and
three months ended September 30, 2003.
- Statements of cash flows for the nine months and three months ended
September 30, 2003.
Our review was conducted in accordance with procedures prescribed by
the Institute of Certified Public Accountants in Israel. The procedures
included, inter alia, reading the aforementioned interim financial statements,
reading the minutes of the shareholders' meetings and meetings of the board of
directors and its committees, and making inquiries with the persons responsible
for financial and accounting affairs.
Since the review that was performed is substantially less in scope than
an examination in accordance with generally accepted auditing standards, we do
not express an opinion on the interim financial statements.
In performing our review, nothing came to our attention which indicates
that material modifications should be made to the aforementioned interim
financial statements in order for them to be in conformity with generally
accepted accounting principles in Israel and in accordance with the Securities
Regulations (Periodic and Immediate Reports), 1970.
Brightman Almagor & Co.
Certified Public Accountants
A Member of Deloitte Touche Tohmatsu
Tel Aviv, November 7, 2003
-1-
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(Adjusted for changes in the U.S. dollar vis-a-vis the NIS)
SEPTEMBER 30, DECEMBER 31,
----------------------- ----------------
2003 2002 2002
---- ---- ----
NIS IN THOUSANDS NIS IN THOUSANDS
----------------------- ----------------
CURRENT ASSETS (UNAUDITED)
-----------------------
Cash and cash equivalents 16,500 8,712 21,632
Current maturities of long-term bank deposits 7,994 13,767 9,325
Trade receivables 229,892 166,215 185,154
Other receivables 14,754 15,435 10,724
Inventories 87,879 83,806 87,651
------- ------- -------
357,019 287,935 314,486
------- ------- -------
LONG-TERM INVESTMENTS
Long-term deposits 71,056 79,050 79,050
Capital note of shareholder 32,770 29,877 30,722
------- ------- -------
103,826 108,927 109,772
------- ------- -------
FIXED ASSETS
Cost 478,843 455,192 470,716
Less - accumulated depreciation 208,947 191,775 196,167
------- ------- -------
269,896 263,417 274,549
------- ------- -------
OTHER ASSETS
Goodwill 30,186 32,984 32,292
------- ------- -------
760,927 693,263 731,099
------- ------- -------
CURRENT LIABILITIES
Short-term bank loans - 1,322 -
Current maturities of long-term bank loans 19,372 20,871 25,314
Trade payables 129,781 100,055 129,436
Other payables and accrued expenses 37,372 32,998 32,965
------- ------- -------
186,525 155,246 187,715
------- ------- -------
LONG-TERM LIABILITIES
Long-term bank loans 91,041 83,491 83,491
Deferred taxes 28,427 18,807 19,922
------- ------- -------
119,468 102,298 103,413
------- ------- -------
MINORITY INTEREST 48,208 43,992 44,885
------- ------- -------
SHAREHOLDERS' EQUITY
Share capital 29,195 29,195 29,195
Capital reserves 159,019 159,019 159,019
Retained earnings 218,512 203,513 173,564
Dividend declared after balance sheet date - - 33,308
------- ------- -------
406,726 391,727 395,086
------- ------- -------
760,927 693,263 731,099
======= ======= =======
/s/ T. Davis /s/ A. Magid /s/ A. Brenner
---------------------------------- ----------------- -----------------
T. DAVIS A. MAGID A. BRENNER
Chairman of the Board of Directors Financial Manager Managing Director
Approval date of the interim financial statements: November 7, 2003.
The accompanying notes are an integral part of the condensed interim
consolidated financial statements.
-2-
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(ADJUSTED FOR CHANGES IN THE U.S. DOLLAR VIS-A-VIS THE NIS)
NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
----------------- ------------------ ----------
2 0 0 3 2 0 0 2 2 0 0 3 2 0 0 2 2 0 0 2
------- ------- ------- ------- -------
NIS IN THOUSANDS NIS IN THOUSANDS
-------------------------------------------------------- ----------------
(UNAUDITED)
--------------------------------------------------------
Net sales 647,512 586,021 237,158 189,002 777,402
Cost of sales 464,874 411,551 168,215 132,444 562,618
--------- ------------ ---------- --------- ------------
GROSS PROFIT 182,638 174,470 68,943 56,558 214,784
Selling expenses 95,440 99,526(*) 34,001 33,899(*) 125,705(*)
General and administrative expenses 30,063 24,676(*) 10,406 8,119(*) 30,369(*)
--------- ------------ ---------- --------- ------------
OPERATING PROFIT 57,135 50,268 24,536 14,540 58,710
Financing income (expenses), net 5,373 (14,986) (4,355) (5,618) (13,617)
Other income, net 431 220 200 78 79
--------- ------------ ---------- --------- ------------
INCOME BEFORE INCOME TAXES 62,939 35,502 20,381 9,000 45,172
Income taxes 14,668 14,086 8,161 4,612 19,504
--------- ------------ ---------- --------- ------------
INCOME AFTER INCOME TAXES 48,271 21,416 12,220 4,388 25,668
Minority interest in losses
(earnings) of Subsidiary (3,323) (1,743) 79 (508) (2,636)
NET INCOME FOR THE PERIOD 44,948 19,673 12,299 3,880 23,032
========= ============ ========== ========= ============
EARNINGS PER SHARE (IN NIS) 5.44 2.38 1.49 0.47 2.79
========= ============ ========== ========= ============
NUMBER OF SHARES USED IN
COMPUTATION 8,263,473 8,263,473 8,263,473 8,263,473 8,263,473
========= ============ ========== ========= ============
(*) Reclassified.
The accompanying notes are an integral part of the condensed interim
consolidated financial statements.
-3-
HOGLA-KIMBERLY LTD.
CONDENSED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(ADJUSTED FOR CHANGES IN THE U.S. DOLLAR VIS-A-VIS THE NIS)
DIVIDEND
DECLARED
AFTER
SHARE CAPITAL RETAINED BALANCE SHEET
CAPITAL RESERVES EARNINGS DATE TOTAL
------- -------- -------- -------------- --------
NIS IN THOUSANDS
-----------------------------------------------------------------------------
Balance - January 1, 2003 29,195 159,019 173,564 33,308 395,086
Dividend paid (33,308) (33,308)
Net income for the period 44,948 44,948
------ ------- ------- ------ -------
Balance - September 30, 2003 29,195 159,019 218,512 - 406,726
====== ======= ======= ====== =======
NINE MONTHS ENDED SEPTEMBER 30,
Balance - January 1, 2002 29,195 159,019 183,840 - 372,054
Net income for the period 19,673 19,673
------ ------- ------- ------ -------
Balance - September 30, 2002 29,195 159,019 203,513 - 391,727
====== ======= ======= ====== =======
THREE MONTHS ENDED SEPTEMBER 30,
Balance - July 1, 2003 29,195 159,019 206,213 - 394,427
Net income for the period 12,299 12,299
------ ------- ------- ------ -------
Balance - September 30, 2003 29,195 159,019 218,512 - 406,726
====== ======= ======= ====== =======
THREE MONTHS ENDED SEPTEMBER 30,
Balance - July 1, 2002 29,195 159,019 199,633 - 387,847
Net income for the period 3,880 3,880
------ ------- ------- ------ -------
Balance - September 30, 2002 29,195 159,019 203,513 - 391,727
====== ======= ======= ====== =======
Balance - January 1, 2002 29,195 159,019 183,840 - 372,054
Dividend declared
after balance sheet date (33,308) 33,308 -
Net income for the year 23,032 23,032
------ ------- ------- ------ -------
Balance - December 31, 2002 29,195 159,019 173,564 33,308 395,086
====== ======= ======= ====== =======
The accompanying notes are an integral part of the condensed interim
consolidated financial statements.
-4-
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(ADJUSTED FOR CHANGES IN THE U.S. DOLLAR VIS-A-VIS THE NIS)
NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
---------------------- --------------------- ------------
2 0 0 3 2 0 0 2 2 0 0 3 2 0 0 2 2 0 0 2
NIS IN THOUSANDS NIS IN THOUSANDS
--------------------------------------------------- ----------------
(UNAUDITED)
---------------------------------------------------
CASH FLOWS - OPERATING ACTIVITIES
Net income for the period 44,948 19,673 12,299 3,880 23,032
Adjustments to reconcile net
income to net cash provided by
operating activities
(Appendix A) (4,975) (2,223) 12,283 15,655 14,527
-------- ---------- -------- -------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 39,973 17,450 24,582 19,535 37,559
-------- ---------- -------- -------- --------
CASH FLOWS - INVESTING ACTIVITIES
Withdrawal of short-term bank
deposit - 57,877(*) - - 57,877
Withdrawal of long-term bank
deposits 9,325 4,441 1,331 4,441 8,882
Acquisition of fixed assets (24,062) (62,744) (6,661) (22,489) (77,606)
Proceeds from sale of fixed assets 1,376 351 838 32 462
-------- ---------- -------- -------- --------
NET CASH USED IN
INVESTING ACTIVITIES (13,361) (75) (4,492) (18,016) (10,385)
-------- ---------- -------- -------- --------
CASH FLOWS - FINANCING ACTIVITIES
Dividend paid (33,308) (44,410) - - (44,410)
Long-term loans received 22,437 7,104 11,548 7,104 11,547
Repayment of long-term loans (20,873) - (12,880) - -
Short-term bank loans, net - 1,322 (12,235) (13,857) -
-------- ---------- -------- -------- --------
NET CASH USED IN
FINANCING ACTIVITIES (31,744) (35,984) (13,567) (6,753) (32,863)
-------- ---------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (5,132) (18,609) 6,523 (5,234) (5,689)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 21,632 27,321(*) 9,977 13,946 27,321
-------- ---------- -------- -------- --------
CASH AND CASH EQUIVALENTS -END OF PERIOD 16,500 8,712 16,500 8,712 21,632
-------- ---------- -------- -------- --------
(*) Reclassified.
The accompanying notes are an integral part of the condensed interim
consolidated financial statements.
-5-
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
APPENDICES TO CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF CASH FLOWS
(ADJUSTED FOR CHANGES IN THE U.S. DOLLAR VIS-A-VIS THE NIS)
NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
----------------- ------------------ --------------
2 0 0 3 2 0 0 2 2 0 0 3 2 0 0 2 2 0 0 2
------- ------- ------- ------- -------
NIS IN THOUSANDS NIS IN THOUSANDS
-------------------------------------------------- ----------------
(UNAUDITED)
--------------------------------------------------
A. ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
INCOME AND EXPENSES NOT
involving cash flows:
Minority interest in earnings
(losses) of subsidiary 3,323 1,743 (79) 508 2,636
Depreciation and amortization 19,967 16,452 6,800 5,153 22,399
Deferred taxes, net 6,970 834 2,845 166 1,088
Loss (gain) from sale of fixed
assets (431) (220) (200) (78) 83
Effect of exchange rate
differences, net (2,004) 3,078 1,024 635 2,232
CHANGES IN ASSETS AND LIABILITIES:
Decrease (increase) in trade
receivables (45,195) 3,848 (18,070) 6,620 (14,615)
Decrease (increase) in other
receivables (2,494) (645) (1,308) (80) 4,929
Decrease (increase) in inventories (228) (12,750) 14,053 4,735 (16,594)
Increase (decrease) in trade
payables 9,753 1,652 15,492 (17,134) 18,603
Net change in balances with
related parties 957 (2,174) (14,249) 13,659 7,840
Increase (decrease) in other
payables and accrued expenses 4,407 (14,041) 5,975 1,471 (14,074)
------- -------- -------- -------- --------
(4,975) (2,223) 12,283 15,655 14,527
======= ======== ======== ======== ========
B. NON-CASH ACTIVITIES
Acquisition of fixed assets
on credit 5,938 9,548 1,510 283 13,901
======= ======== ======== ======== ========
The accompanying notes are an integral part of the condensed interim
consolidated financial statements.
-6-
NOTE 1 - BASIS OF PRESENTATION
A. The unaudited condensed interim consolidated financial statements as of
September 30, 2003 and for the nine months and three months then ended ("interim
financial statements") of Hogla-Kimberly Ltd. ("the Company") and subsidiaries
should be read in conjunction with the audited consolidated financial statements
of the Company and subsidiaries as of December 31, 2002 and for the year then
ended, including the notes thereto. In the opinion of management, the interim
financial statements include all adjustments necessary for a fair presentation
of the financial position and results of operations as of the dates and for the
interim periods presented. The results of operations for the interim periods are
not necessarily indicative of the results to be expected on a full-year basis.
The accounting principles applied in the preparation of the condensed interim
financial statements are consistent with those principles applied in preparation
of the Company's most recent annual audited consolidated financial statements,
with the exception of that during the reporting period, the Company applied
initially Standard No. 15, "Impairment of Assets" published in January 2003 by
the Israeli Accounting Standards Board. Implementation of this Standard had no
impact on the Company's interim financial position and results of operations.
The interim financial statements have been prepared in a condensed format in
accordance with generally accepted accounting principles applicable to the
preparation of interim period financial statements, including the initial
application during the reporting period of the provisions of Standard No. 14,
"Interim Financial Reporting" published in August 2002 by the Israeli Accounting
Standards Board. The implementation of this Standard had no impact on the
Company's interim financial position and results of operations.
B. Following are the changes in the representative exchange rate of the U.S.
dollar vis-a-vis the NIS and the Turkish Lira, and in the Israeli Consumer Price
Index ("CPI").
REPRESENTATIVE TURKISH LIRA ("TL")
EXCHANGE EXCHANGE RATE WITH CPI
RATE OF THE DOLLAR THE U.S. DOLLAR "IN RESPECT OF"
AS OF: (NIS PER $1) (TL'000 PER $1) (IN POINTS)
------------------ --------------- --------------
September 30, 2003 4.441 1,384 179.30
September 30, 2002 4.871 1,650 182.85
December 31, 2002 4.737 1,640 182.02
% % %
------ ------- -------
INCREASE (DECREASE) DURING THE PERIOD:
Nine months ended September 30, 2003 (6.2) (15.6) (1.5)
Nine months ended September 30, 2002 10.3 14.1 7.0
Three months ended September 30, 2003 3.0 (1.7) (1.0)
Three months ended September 30, 2002 2.1 5.2 0.6
Year ended December 31, 2002 7.3 13.3 6.5
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NOTE 2 - OPERATIONS OF NEW FACILITY
During 2002, the Company's program for the establishment of a new facility for
manufacturing paper was granted Approved Enterprise status in accordance with
the Law for the Encouragement of Capital Investments, 1959 under "alternative
benefits" track. The approval program is for total investments of approximately
NIS 80 million. According to the terms of the program, income derived from the
Approved Enterprise will be tax-exempt for a period of 10 years commencing in
the year in which the program is substantially completed. Distribution of
dividends from tax exempt profits of the Approved Enterprise will be subject to
income tax at a rate equal to the income tax rate of the Approved Enterprise had
the Company not elected the alternative benefits track. The Company completed
the investments relating to the new facility and commenced its operations during
the reporting period.
NOTE 3 - RECENT ACCOUNTING STANDARDS - CESSATION OF FINANCIAL STATEMENTS
ADJUSTMENT AND EFFECT OF CHANGES IN RATES
In October 2001, the Israeli Accounting Standards Board issued Standard No. 12,
Cessation of Financial Statement Adjustment. According to this Standard, as
amended by Standard No. 17 in November 2002, the adjustment of financial
statements for inflation or exchange rate of foreign currency will cease for
reporting periods commencing January 1, 2004. Through December 31, 2003, the
Company will continue to prepare dollar-linked financial statements, in
accordance with the pronouncements of the Institute of Certified Public
Accountants in Israel. The adjusted amounts presented in the December 31, 2003
balance-sheet will serve as the opening, nominal balances as of January 1, 2004.
In October 2001, the Israeli Accounting Standards Board issued Standard No. 13,
Effect of Changes in Foreign Currency Exchange Rates. This Standard addresses
the translation of transactions denominated in foreign currency, as well as the
translation of financial statements of a foreign operation, for inclusion in the
financial statements of the reporting company. Standard No. 13, as amended by
Standard No. 17 in November 2002, will become effective for reporting periods
subsequent to December 31, 2003.
While the Company is currently examining Standards No. 12 and 13, it cannot
evaluate, at this stage, the impact they will have on its financial position and
results of operations.
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