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 May 2004
-----------------------
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 herein by reference is
the Registrant's press release dated May 11, 2004 with respect to the
Registrant's results of operations for the quarter ended March 31, 2004.
Attached hereto as Exhibit 2 and incorporated herein by reference is
the Registrant's Management Discussion with respect to the Registrant's results
of operations for the quarter ended March 31, 2004.
Attached hereto as Exhibit 3 and incorporated herein by reference are
the Registrant's unaudited condensed consolidated financial statements for the
quarter ended March 31, 2004.
Attached hereto as Exhibit 4 and incorporated herein by reference is
the Interim Report of Neusiedler Hadera Paper Ltd. with respect to the quarter
ended March 31, 2004.
Attached hereto as Exhibit 5 and incorporated herein by reference are
the unaudited condensed interim consolidated financial statements of
Hogla-Kimberly Ltd. and subsidiaries with respect to the quarter ended March 31,
2004.
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: /s/ Lea Katz
-----------------------------------
Name: Lea Katz
Title: Corporate Secretary
Dated: May 11, 2004.
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
1. Press release dated May 11, 2004.
2. Registrant's management discussion.
3. Registrant's unaudited condensed consolidated
financial statements.
4. Interim report of Neusiedler Hadera Paper Ltd.
5. Unaudited condensed interim consolidated
financial statements of Hogla-Kimberly Ltd. and
subsidiaries.
Exhibit 1
NEWS
Client: AMERICAN ISRAELI
PAPER MILLS LTD.
Agency Contact: PHILIP Y. SARDOFF
For Release: IMMEDIATE
American Israeli Paper Mills Ltd.
Reports Financial Results For First Quarter
Hadera, Israel, May 11, 2004 - American Israeli Paper Mills Ltd. (ASE:AIP) (the
"Company" or "AIPM") today reported financial results for the first quarter
ended March 31,2004.
Pursuant to the directives of Standard No.12 of the Accounting Israeli Standards
Board (hereafter- Standard 12), the Company began to report in nominal New
Israeli Shekels (NIS),as of January 1, 2004. In the past, the Company's reports
were in NIS, adjusted to changes in the exchange rate of the US dollar against
the NIS.
The comparison figures with the corresponding period last year and with all of
2003 are the dollar figures, as reported in the past, multiplied by the exchange
rate of the US dollar as on December 31, 2003, the day of the transition to
NIS-based reporting pursuant to Standard 12 ($1 = NIS 4.379).
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 Neusiedler Hadera Paper (NHP)and Hogla-Kimberly
(H-K) that were consolidated in the past, until the transfer of control over
these companies to the international strategic partners), we present the
aggregate data which 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"), net of intercompany
sales and without considering the rate of holding.
Aggregate group sales in the first quarter of 2004(January - March 2004) totaled
NIS 682.5 million, compared with NIS 579.2 million in the corresponding quarter
last year (January - March 2003).
Aggregate operating profit in the first quarter of 2004 totaled NIS 56.4 million
compared with NIS 37.3 million in the corresponding quarter last year.
The consolidated data below does not include the results of operations of NHP,
H-K, Carmel Container Systems and TMM Integrated Recycling industries, which are
included in the Company's share in results of associated companies.
Consolidated sales in the first quarter of 2004 totaled NIS 119.2 million
compared with NIS 117.7 million in the corresponding quarter last year.
Operating profit in the first quarter of 2004 totaled NIS 13.5 million compared
with NIS 13.0 million in the corresponding quarter last year.
Net profit in the first quarter of 2004 totaled NIS 17.4 million compared with
NIS 13.1 million in the corresponding quarter last year. Net profit in the
corresponding quarter last year included approximately NIS 1.0 million in net
non-recurring capital gains.
Earnings per share (EPS) in the first quarter of 2004 totaled NIS 4.31 compared
with NIS 3.31 for the corresponding quarter last year.
The inflation rate in the first quarter of 2004 was negative and amounted to
-0.1% as compared with 0.8% in the corresponding quarter last year.
The exchange rate of the NIS in the first quarter of 2004 was devaluated by
approximately 3.4% against the U.S. dollar as compared with a revaluation of
1.1% in the same quarter last year.
Mr. Yaacov Yerushalmi, Chairman of the Company's Board of Directors said that
a certain recovery in the Israeli economy has been felt since the end of 2003
and during the first quarter of 2004, following several years of a severe
recession that afflicted the Israeli economy and resulted in these years in
negative growth, lower demand, greater competition and increased unemployment.
The AIPM Group operates within the said market conditions, in an attempt to
preserve its market share and its profitability, while taking various measures
to become more efficient and adapt to the changing market conditions. The Group
is also working to expand its operations overseas.
Pulp prices continued to rise moderately in the first quarter of the year and
are expected to continue to rise in the second quarter of the year as well. The
Group is working to adjust paper prices to the changes in pulp prices, in order
to prevent the erosion of profit margins.
The consolidated gross margin as a percentage of sales reached 23% in the first
quarter of 2004 as compared with 22.6% in the corresponding quarter last year.
The improved gross margin compared to the corresponding period last year
resulted from increased output capacity of the machines, improvement and
increased efficiency measures and a decrease in energy prices as a result of an
average decrease of approximately 27% in fuel oil prices as compared to the same
period last year(fuel oil prices rose dramatically in the corresponding period
last year as a result of the tension leading up to the war in Iraq). The said
improvement was partially offset by an increase of raw materials prices mainly
in the field of collection of paper waste for recycling.
The Company's share in the earnings of associated companies - mainly NHP, H-K,
Carmel and TMM - amounted to NIS 9.9 million in the first quarter of 2004, as
compared with NIS 5.7 million in the first quarter last year.
The following are details about the main changes in the earnings of associated
companies the first quarter of 2004 as compared to the corresponding quarter
last year:
2
o The Company's share in the net earnings of NHP, decreased by NIS 2.4
million, mainly due to higher financial expenses this year, as a
result of the 3.4% devaluation of the U.S. dollar during the quarter,
primarily due to the transition to reporting in NIS, pursuant to
Standard 12 and the growth in liabilities, as a result of the partial
repayment of loans granted by the shareholders when the company was
established.
o The Company's share in the net earnings of H-K grew by NIS 5.5
million, primarily as a result of the considerable improvement in the
operating profit of H-K (Israel), as compared with the corresponding
period last year, that originated primarily from improved efficiency
in logistics, with the relocation to the central warehouse and the
transition to the manufacture of Huggies diapers in Israel. The net
profit also grew in relation to the corresponding period last year as
a result of financial revenues that were recorded during the reported
period at H-K and at Ovisan,its subsidiary in Turkey, due to the
influence of the devaluation of the NIS and the revaluation of the
Turkish lira in relation to the US dollar.
o The Company's share in the net profit of the Carmel Group grew by NIS
1.2 million, due to the continued trend of improvement in the
operating profit, starting in the third quarter of 2003. The
improvement is attributed to the comprehensive efficiency measures
being initiated by the Company, coupled with the growth in the volume
of operations.
The Company's financial liabilities (net) grew in comparison to the
corresponding quarter last year. The increase originates primarily from the
dividends paid in 2003 to the shareholders (totaling approximately NIS 100
million), as well as from the repayment of long-term debts. The increase was
partially offset by dividend and loan repayment received from associated
companies.
3,905 shares were issued during the reported period (0.1% dilution), on account
of the exercise of 12,405 option warrants as part of the Company's employee
stock option plans.
This report contains various forward-looking statements based upon the Board of
Directors' present expectations and estimates regarding the operations of the
Group 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 differ considerably from the present forecasts as a result
of factors 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 for publicly updating the said forward-looking
statements, regardless of whether these updates originate from new information,
future events or any other reason.
3
AMERICAN ISRAELI PAPER MILLS LTD.
SUMMARY OF RESULTS
(UNAUDITED)
Three months ended March 31,
NIS IN THOUSANDS(1)
except per share amounts
2004 2003
==== ====
Net sales 119,182 117,700
Net earnings 17,435 13,121
Earnings per share 4.31 3.31
(1) New Israeli Shekel amounts are reported according to Accounting Standard
No. 12 of the Israeli Accounting Standard Board (hereafter - Standard No.
12) - "Discontinuance of Adjusting Financial Statements for Inflation". The
reported NIS under Standard No. 12 are nominal NIS, for transactions made
after January 1, 2004. The amounts of the corresponding period last year
have been adjusted to reflect changes in the rate of exchange between the
U.S. dollar and the New Israeli Shekel until the end of December 2003 (date
of transition to Standard No. 12).
The representative exchange rate at March 31, 2004 was N.I.S. 4.528 = $1.00
and the representative exchange rate at December 31, 2003 was
N.I.S. 4.379 = $1.00.
4
1
Exhibit 2
May 10, 2004
MANAGEMENT DISCUSSION
We are honored to present the consolidated financial statements of the American
Israeli Paper Mills Ltd. Group ("AIPM") for the first three months of the year
2004.
A. A Summarized Description of the Group and its Business Environment
1. General
AIPM is the leading Israeli group in the manufacturing 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.
The company's securities are traded on the Tel Aviv Stock Exchange and
on the American Stock Exchange (AMEX).
2. The Business Environment
A certain recovery in the Israeli economy has been felt in the first
quarter of 2004 (that started at the end of 2003), following several
years of a severe recession that afflicted the Israeli economy and
resulted at the time in negative growth, lower demand, greater
competition and increased unemployment.
The AIPM Group operates within the said market conditions, in an
attempt to preserve its market share and its profitability, while
taking various measures to become more efficient and adapt to the
changing market conditions. The Group is also working to expand its
operations overseas.
Pulp prices continued to rise moderately in the first quarter of the
year and are expected to continue to rise in the second quarter of the
year as well. The Group is working to adjust paper prices to the
changes in pulp prices, in order to prevent the erosion of profit
margins.
Pursuant to the directives of Standard No. 12 of the Israeli
Accounting Standards Board, the Company began to report in nominal New
Israeli Shekels (NIS), as of January 1, 2004. In the past, the
Company's reports were in NIS, adjusted to changes in the exchange
rate of the U.S. dollar against the NIS.
The comparison figures with the corresponding period last year and
with all of 2003 are the dollar figures, as reported in the past,
multiplied by the exchange rate of the U.S. dollar as at December 31,
2003, the day of the transition to NIS-based reporting pursuant to
Standard 12 ($1 = NIS 4.379).
During the reported period (January-March 2004), the exchange rate of
the NIS in relation to the U.S. dollar was devaluated by approximately
3.4%, as compared with a revaluation of 1.1% in the corresponding
period last year (January-March 2003).
2
The inflation rate during the reported period was negative and
amounted to -0.1%, as compared with an inflation rate of 0.8% in the
corresponding period last year.
B. Results of Operations
1. 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 Neusiedler
Hadera Paper (NHP) and Hogla-Kimberly that were consolidated in the
past, until the transfer of control over these companies to the
international strategic partners), we present the aggregate data which
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"), net of
intercompany sales and without considering the rate of holding.
The aggregate sales amounted to NIS 682.5 million during the reported
period, as compared with NIS 579.2 million in the corresponding period
last year.
The aggregate operating profit totaled NIS 56.4 million during the
reported period, as compared with NIS 37.3 million in the
corresponding period last year.
2. Consolidated Data
Excluding the results of operation of NHP, Hogla-Kimberly, Carmel
Containers Systems and TMM - which appear in the company's share in
the earnings of associated companies.
The sales during the reported period amounted to NIS 119.2 million, as
compared with NIS 117.7 million in the corresponding period last year.
The operating profit totaled NIS 13.5 million during the reported
period, as compared with NIS 13.0 million in the corresponding period
last year.
The financial expenses amounted to NIS 2.0 million during the reported
period, as compared with NIS 3.6 million in the corresponding period
last year.
3. Net Profit and Earnings Per Share
The net profit totaled NIS 17.4 million during the reported period, as
compared with NIS 13.1 million in the corresponding period last year.
The net profit in the corresponding period last year included
approximately NIS 1 million in net capital gains, from the sale of
apartments owned by the Company, that previously served the Company's
employees.
3
The Earnings Per Share in the reported period amounted to NIS 431 per
NIS 1 par value ($0.95 per share), as compared with NIS 331 per NIS 1
par value ($0.76 per share) in the corresponding period last year.
The return on shareholders' equity in annual terms amounted to 11.4%
during the reported period, as compared with 8.1% in the corresponding
period last year.
C. Analysis of Operations and Profitability
The analysis set forth below is based on the consolidated data.
1. Sales
The consolidated sales during the reported period amounted to NIS
119.2 million, as compared with NIS 117.7 million in the corresponding
period last year. The NIS 1.5 million increase in sales is primarily
attributed to a quantitative increase in the sales of packaging paper.
2. Cost of Sales
The cost of sales amounted to NIS 91.8 million - or 77.0% of sales -
during the reported period, as compared with NIS 91.1 million - or
77.4% of sales - in the corresponding period last year. The gross
margin as a percentage of sales reached 23.0% during the reported
period, as compared with 22.6% in the corresponding period last year.
The improved gross margin in relation to the corresponding period last
year, was rendered possible due to the higher output capacity of the
machines, efficiency measures and the decrease in energy prices - as a
result of an average decrease of 27% in the price of fuel oil in
relation to the corresponding period last year (fuel oil prices rose
dramatically in the corresponding period last year as a result of the
tension leading up to the war in Iraq). The said improvement was
partially offset by the higher prices of raw materials, primarily in
the collection of paper waste for recycling.
3. Selling, General and Administrative Expenses
The selling, general and administrative expenses (including wages)
amounted to NIS 13.8 million in the reported period - or 11.6% of
sales -resembling to the sum of NIS 13.6 million - or 11.6% of sales -
in the corresponding period last year.
4. Operating Profit
The operating profit totaled NIS 13.5 million during the reported
period (11.4% of sales), as compared with NIS 13.0 million (11.1% of
sales) in the corresponding period last year.
4
5. Financial Expenses
The financial expenses amounted to NIS 2.0 million during the reported
period, as compared with NIS 3.6 million in the corresponding period
last year.
Growth was recorded in the Company's interest-bearing liabilities, net
of deposits, in relation to the corresponding period last year,
primarily on account of the distribution of a special dividend of NIS
75 million in September 2003. On the other hand, lower financial
expenses were recorded resulting from the NIS devaluation this year,
as opposed to the revaluation last year (see below), coupled with the
decrease in the average interest rate during the reported period, as
compared with the corresponding period last year.
The structure of the Company's linkage bases includes a surplus of
dollar-linked assets on the one hand, and a surplus of NIS-denominated
liabilities, on the other hand. Following the transition to reporting
in nominal NIS, pursuant to the directives of Standard 12, starting
January 1, 2004, the Company's financial expenses decreased, as a
result of the influence of the devaluation in the first quarter this
year (3.4%) on the Company's surplus dollar assets.
The reporting last year was adjusted to the U.S. dollar and since - as
mentioned above - the Company possesses surplus of NIS-denominated
liabilities, the revaluation last year (1.1%) led to higher financial
expenses during that period.
6. Taxes on Income
Taxes on income from current operations amounted to NIS 4.0 million in
the reported period, as compared with NIS 3.6 million in the
corresponding period last year.
The main factor for the growth in tax expenses in the reported period,
as compared with the corresponding period last year, was the growth in
pre-tax earnings.
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: NHP, Hogla-Kimberly,
Carmel and TMM.
The Company's share in the earnings of associated companies totaled
NIS 9.9 million during the reported period, as compared with NIS 5.7
million in the corresponding period last year.
5
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:
o The Company's share in the net earnings of NHP, decreased by NIS
2.4 million, mainly due to higher financial expenses this year,
as a result of the 3.4% Of the U.S. dollar devaluation during the
quarter, primarily due to the transition to reporting in NIS,
pursuant to Standard 12 and the growth in liabilities, as a
result of the partial repayment of loans granted by the
shareholders in the past, when the company was established.
o The Company's share in the net earnings of Hogla-Kimberly grew by
NIS 5.5 million, primarily as a result of the considerable
improvement in the operating profit of Hogla-Kimberly (Israel),
as compared with the corresponding period last year, that
originated primarily from improved efficiency in logistics, with
the relocation to the central warehouse in Tzrifin and the
transition to the manufacture of Huggies diapers in Afula. The
net profit also grew in relation to the corresponding period last
year as a result of financial revenues that were recorded during
the reported period at Hogla and at Ovisan, due to the influence
of the devaluation of the NIS and the revaluation of the Turkish
lira in relation to the U.S. dollar.
During the reported period, Hogla-Kimberly Israel successfully
launched KOTEX feminine hygiene products, while introducing the
brand to customers awareness and positioning it as a leading,
high-quality brand, through the use of a widespread advertising
campaign and the distribution of product trial packs.
o The Company's share in the net profit of the Carmel Group grew by
NIS 1.2 million, due to the continued trend of improvement in the
operating profit, starting in the third quarter of 2003. The
improvement is attributed to the comprehensive efficiency
measures being initiated by the Company, coupled with the growth
in the volume of operations.
o The Company's share in the results of TMM decreased by NIS 0.3
million, as a result of higher financial expenses during the
reported period, as compared with the corresponding period last
year, due to an increase in bank credit at TMM. This growth is
attributed to the increase in accounts receivable, primarily
local municipalities, coupled with strategic investments for the
development of the Company, that were financed by bank credit.
The strategic investments will begin to affect profitability in
the course of 2004.
D. Liquidity and Investments
1. Accounts Receivable - Trade
Accounts Receivable, at March 31, 2004, amounted to NIS 142.5 million,
as compared with NIS 135.1 million at March 31, 2003. The increase in
accounts receivable in relation to the preceding year resulted
primarily from the growth in the volume of operations.
6
2. Cash Flows
The cash flows from operating activities totaled NIS 10.1 million
during the reported period, as compared with cash flows of NIS 5.6
million in the corresponding period last year. During the
corresponding period last year, the cash flows from operating
activities grew by positive cash flows of NIS 16.4 million from
dividends from an associated company, that increased the cash flows
from operating activities last year to a total of NIS 22.0 million.
The operating cash flows improved this year, primarily due to an
improvement in the changes in operating working capital in relation to
last year.
3. Investments in Fixed Assets
The investments in fixed assets totaled NIS 6.5 million in the
reported period, as compared with NIS 4.5 million in the corresponding
period last year. The investments during the reported period included
a NIS 1.6 million investment in the manufacturing process, in order to
improve the fibers; NIS 0.6 million in the acquisition of a truck
shredder, for shredding at customer sites (Amnir Information Security)
and additional ongoing investments in the improvement and renovation
of manufacturing and transport equipment.
4. Financial Liabilities
The long-term liabilities (including current maturities) amounted to
NIS 275.0 million at March 31, 2004, as compared with NIS 77.4 million
at March 31, 2003.
Most of the increase in long-term liabilities is attributed to the
raising of NIS 200 million in loans through an issue of notes (Series
2) to institutional investors in December 2003, at a linked interest
rate of 5.65% (a margin of 1.45% over the return of government notes
at the time). Some of the proceeds from the issue of the notes were
used for the repayment of short-term credit, while the rest was
invested primarily in deposits and in short-term financial assets.
The balance of short-term credit, at March 31, 2004, amounted to NIS
140.4 million, as compared with NIS 73.1 million at March 31, 2003.
The increase in the short-term credit balances in relation to the
corresponding period last year, originates primarily from the special
dividend of NIS 75 million that was distributed to the shareholders,
in addition to an ordinary dividend of NIS 24.2 million (total
dividend: approximately NIS 100 million).
E. Exposure and Management of Market Risks
The following is an update, as of March 31, 2004, to the Management
Discussion dated December 31, 2003, that outlined the essence of the
exposure and management of market risks, as set forth by the board of
directors:
The Company possesses CPI-linked liabilities (net of deposits) in the net
overall sum of about NIS 200 million, with the interest thereupon being no
higher than
7
the market interest rate. In the event that the inflation rate shall rise
significantly, a loss may be recorded in the Company's financial
statements, due to the surplus of CPI-linked liabilities. Therefore, in
January 2004, the company entered into a forward transaction, with a term
of one year, to hedge a sum of NIS 200 million against a rise in the CPI.
Report of Linkage Bases
The following are the balance sheet items, according to linkage bases, at
December 31, 2003 and updated as of March 31, 2004:
------------------------------------------- ------------ ----------- --------------- ------------ -----------
In NIS Millions Unlinked CPI-linked In foreign Non-monetary Total
currency, or items
linked thereto
(primarily $)
------------------------------------------- ------------ ----------- --------------- ------------ -----------
Assets
Cash and cash equivalents 96.7 4.4 101.1
Short-term deposits and investments 37.1 40.0 77.1
Other Accounts Receivable 222.4 0.3 47.8 10.3 280.8
Inventories 93.2 93.2
Investments in associated companies 12.5 10.6 22.6 350.3 396.0
Deferred income taxes 3.9 3.9
Fixed assets, net 325.0 325.0
Deferred expenses, net of
accrued 1.2 1.2
amortization
------------------------------------------- ------------ ----------- --------------- ------------ -----------
Total Assets 368.7 50.9 74.8 783.9 1,278.3
----- ---- ---- ----- -------
Liabilities
Credit from Banks 140.4 140.4
Loans from banks 0.3 0.3
Accounts Payable 153.1 4.3 10.6 168.0
Deferred income taxes 62.2 62.2
Notes 239.6 239.6
Other liabilities 32.8 2.3 35.1
Shareholders' equity 632.7 632.7
------------------------------------------- ------------ ----------- --------------- ------------ -----------
Total liabilities and equity 326.3 244.2 12.9 694.9 1,278.3
----- ----- ---- ----- -------
------------------------------------------- ------------ ----------- --------------- ------------ -----------
Surplus Financial Assets (liabilities) as
at March 31, 2004 42.4 (193.3) 61.9 89.0 -
------------------------------------------- ------------ ----------- --------------- ------------ -----------
Surplus Financial Assets (liabilities) as
at December 31, 2003 69.4 (229.2) 65.2 94.6 -
------------------------------------------- ------------ ----------- --------------- ------------ -----------
Associated Companies
Hogla-Kimberly, an associated company, possesses 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 U.S. dollar - might affect the
Group's financial statements within the framework of the Company's share in
the earnings of associated companies.
8
F. Forward-Looking Statements
This report contains various forward-looking statements, based upon the
Board of Directors' present expectations and estimates regarding the
operations of the Group 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 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.
G. Miscellaneous
On April 1, 2004, the Company began operating in the disposal of
confidential data sector in Switzerland, through the operation of mobile
shredder trucks at customer sites, as part of a process intended to analyze
the feasibility of penetrating this sector of operations in Europe.
H. Donations and Contributions
The AIPM Group, within the framework of its business and social commitment,
invests efforts and resources in community assistance and support, while
focusing on providing help to the weaker layers of Israeli society - and
primarily teenagers - as part of a desire to build and contribute to
shaping the human fabric of Israeli society. As part of this policy, the
company makes contributions to various institutions that are active in the
said areas, while also participating, through its employees, in
volunteering work in the community, for promoting these same objectives.
Moreover, a sum totaling NIS 90 thousand was granted for student
scholarships in the first quarter of the year, through the Schenkar
Foundation, that was established by the company together with its Austrian
strategic partner in NHP.
I. General
3,905 shares were issued during the reported period (0.1% dilution), on
account of the exercise of 12,405 option warrants as part of the Company's
employee option plans.
------------------------------ ------------------------------
Y. Yerushalmi Zvi Livnat
Chairman of the Board of Directors Director
Exhibit 3
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
SUMMARY OF CONSOLIDATED BALANCE SHEETS
--------------------------------------
NIS IN THOUSANDS (see note 1c)
------------------------------
MARCH 31,2004 MARCH 31,2003 DEC. 31,2003
(UNAUDITED) (UNAUDITED) (AUDITED)
-------------------------------------------------------------
CURRENT ASSETS:
---------------
Cash and cash equivalents 101,145 2,796 158,706
Short-term deposits and investments 77,114 20,000
Receivables :
Trade 142,546 135,115 140,996
Other 138,220 147,156 128,246
Inventories 93,235 88,699 90,654
-------------------------------------------------------------
Total current assets 552,260 373,766 538,602
INVESTMENTS AND LONG TERM RECEIVABLES:
--------------------------------------
Investments in associated companies 396,007 356,420 383,879
Deferred income taxes 3,885 3,885
---------------- ------------- --------------
399,892 356,420 387,764
FIXED ASSETS
------------
Cost 956,250 934,157 953,656
Less - accumulated depreciation 631,283 611,093 628,015
-------------------------------------------------------------
324,967 323,064 325,641
Deferred charges -
net of accumulated amortization 1,227 528 1,267
-------------------------------------------------------------
1,278,346 1,053,778 1,253,274
-------------------------------------------------------------
CURRENT LIABILITIES:
--------------------
Credit from banks 140,772 73,853 144,989
Current maturities of long-term notes 6,575 6,298 6,590
Payables and accured liabilities :
Trade 84,841 103,734 84,602
Other 83,154 74,959 73,010
Proposed dividend 24,205
-------------------------------------------------------------
Total current liabilities 315,342 283,049 309,191
LONG-TERM LIABILITIES
---------------------
Deferred income taxes 62,214 59,051 61,801
Loans from banks and other liabilities (net
of current maturities):
Loans from banks 362
Notes 232,975 37,881 233,039
Other liabilities 35,090 32,859 35,013
-------------------------------------------------------------
Total long term liabilities 330,279 130,153 329,853
Total liabilities 645,621 413,202 639,044
SHAREHOLDERS' EQUITY:
---------------------
Share capital 125,257 125,256 125,257
Capital surplus 90,060 90,060 90,060
Currency adjustments in respect of financial
statements of associated companies (62) (2,772) (1,122)
Retained earnings 417,470 428,032 400,035
-------------------------------------------------------------
632,725 640,576 614,230
-------------------------------------------------------------
1,278,346 1,053,778 1,253,274
-------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
SUMMARY OF CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------
NIS IN THOUSANDS (see note 1c)
------------------------------
THREE-MONTH PERIOD YEAR ENDED
ENDED MARCH 31 DEC. 31
2004 2003 2003
------------ ------------ ------------
(UNAUDITED) (AUDITED)
Net sales 119,182 117,700 465,092
Cost of sales 91,817 91,078 362,185
------------ ------------ ------------
Gross profit 27,365 26,622 102,907
Selling and marketing, administrative and general expenses
Selling and marketing 8,345 7,527 31,324
Administrative and general 5,477 6,078 24,999
------------ ------------ ------------
13,822 13,605 56,323
------------ ------------ ------------
Income from ordinary operations 13,543 13,017 46,584
Financial expenses - net 2,044 3,581 15,989
Other income 1,609 1,609
------------ ------------ ------------
Income before taxes on income 11,499 11,045 32,204
Taxes on income 4,000 3,617 7,706
------------ ------------ ------------
Income from operations of the company
and the consolidated subsidiaries 7,499 7,428 24,498
Share in profits of associated companies - net 9,936 5,693 35,549
Net income for the period 17,435 13,121 60,047
------------ ------------ ------------
Net income per NIS 1 par value of shares (in N.I.S) 431 331 1,494
------------ ------------ ------------
The accompanying notes are an integral part of the financial statements.
AMERICAN ISRAELI PAPER MILLS LTD.
ADJUSTMENTS
SUMMARY OF STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY DUE TO THE
======================================================== TRANSLATION
NIS IN THOUSANDS (see note 1c) OF FINANCIAL
============================== STATEMENTS
SHARE CAPITAL OF ASSOCIATED RETAINED
CAPITAL SURPLUS COMPANIES EARNINGS TOTAL
------------- ------------ ------------------ ------------ ------------
Balance at January 1, 2004 (audited) 125,257 90,060 (1,122) 400,035 614,230
------------------------------------
Changes during the three month period
ended March 31, 2004 (unaudited)
Net income 17,435 17,435
Exercise of employee options into shares * *
Adjustments due to the translation respect of financial
statements of associated companies 1,060 1,060
------------- ------------ ------------------ ------------ ------------
Balance at March 31, 2004 (unaudited) 125,257 90,060 (62) 417,470 632,725
------------------------------------- ------------- ------------ ------------------ ------------ ------------
Balance at January 1, 2003 (audited) 125,256 90,060 (3,482) 439,116 650,950
------------------------------------
Changes during the three month period
ended March 31, 2003 (unaudited)
Net income 13,121 13,121
Proposed dividend (24,205) (24,205)
Adjustments due to the translation respect of financial
statements of associated companies 710 710
------------- ------------ ------------------ ------------ ------------
Balance at March 31, 2003 (unaudited) 125,256 90,060 (2,772) 428,032 640,576
------------------------------------- ------------- ------------ ------------------ ------------ ------------
Balance at January 1, 2003 (audited) 125,256 90,060 (3,482) 439,116 650,950
------------------------------------
Changes during the year ended
December 31, 2003 (audited)
Net income 60,047 60,047
Dividend paid (99,128) (99,128)
Exercise of employee options into shares 1 1
Adjustments due to the translation of financial
statements of associated companies 2,360 2,360
------------- ------------ ------------------ ------------ ------------
Balance at December 31, 2003 (audited) 125,257 90,060 (1,122) 400,035 614,230
-------------------------------------- ------------- ------------ ------------------ ------------ ------------
* Less than 1,000 NIS.
The accompanying notes are an integral part of the financial statements.
12
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
SUMMARY OF CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------
NIS IN THOUSANDS (see note 1c)
------------------------------
THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED
MARCH 31, 2004 MARCH 31, 2003 DEC. 3, 2003
(UNAUDITED) (UNAUDITED) (AUDITED)
-------------- -------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net income for the period 17,435 13,121 60,047
Adjustments to reconcile net income to net cash provided by
operating activities (a) (7,338) 8,891 (7,396)
-------------- -------------- ------------
Net cash provided by operating activities 10,097 22,012 52,651
-------------- -------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Purchase of fixed assets (6,505) (4,476) (29,247)
Short-term deposits and investments (56,999) (20,000)
Associated companys:
Loans granted (359) (8,241)
Repayment of loans 8,758 21,895
Proceeds from sale of fixed assets 422 1,910 3,332
-------------- -------------- ------------
Net cash provided by (used in) investing activities (63,441) 6,192 (32,261)
-------------- -------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Notes Issuance, net of issuance expenses of NIS 800,000 198,909
Consideration in respect of the exercise of options by employees 1
Repayment of long-term loans from banks (762)
Redemption of Notes (6,770)
Dividend paid (99,128)
Short-term bank credit - net (4,217) (30,868) 40,606
-------------- -------------- ------------
Net cash provided by (used in) financing activites (4,217) (30,868) 132,856
-------------- -------------- ------------
Increase (decrease) in cash and cash equivalents (57,561) (2,664) 153,246
Balance of cash and cash equivalents at beginning of period 157,706 5,460 5,460
-------------- -------------- ------------
Balance of cash and cash equivalents at end of period 100,145 2,796 158,706
-------------- -------------- ------------
(a) 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 (9,936) (5,693) (35,549)
Dividend received from those companies 16,386 16,391
Depreciation and amortization 7,039 7,002 28,247
Deferred income taxes - net (947) 518 3,471
Capital losses (gains):
On sale of fixed assets (242) (1,082) (2,054)
Income from short-term deposits and investments, not realized yet (115)
Linkage differences on principal of long-term loans from
banks and others - net 77 15 79
Linkage differences on (erosion of) Notes (79) 599 3,110
Linkage differences on loans to associated companies (773) (247) (1,101)
Linkage differences on long term capital note to associated company 323 2,477
Changes in operating assets and liabilities:
Increase in receivables (10,164) (27,695) (18,195)
Decrease (increase) in inventories (2,581) 1,796 (159)
Increase (decrease) in payables and accrued liabilities 10,383 16,969 (4,113)
-------------- -------------- ------------
(7,338) 8,891 (7,396)
-------------- -------------- ------------
The accompanying notes are an integral part of the financial statements.
AMIRICAN ISRAELI PAPER MILLS LTD.
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT MARCH 31, 2004
(Unaudited)
Note 1 - General
a. The interim financial statemena. as of March 31, 2004 and for the three
month period 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.
b. The accounting principles applb.d in preparation of the interim statements
are consistent with those applied in the annual financial statements,
except for the adoption for the first time of standard No. 12 of the IASB -
" Discontinuaunce of adjusting Financial statements of inflation", see c
hereafter. 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. Transition to nominal-historicc. financial reporting: With effect from
January 1, 2004, the company has adopted the provisions of Standard No. 12
-"Discontinuance of Adjusting Financial Statements for Inflation" - of the
IASB and, pursuant thereto, the company has discontinued, from the
aforesaid date, the practice of adjusting its financial statements for the
effects of changes in the exchange rate of the U.S. dollar (hereafter -
"the dollar").
Through December 31, 2003, the company prepared its financial statements on
the basis of historical cost adjusted for the changes
In the general purchasing power of Israeli currency (hereafter - "NIS"),
based upon changes in the exchange rate of the dollar, in accordance with
pronouncements of the Institute of Certified Public Accountants in Israel
(hereafter - "the Israeli Institute").
The adjusted amounts, as above, presented in the financial statements as of
December 31, 2003 (hereafter - "the transition date"), are used as the
opening balances for the nominal-historical financial reporting in the
following periods. Additions made after the transition date have been
included in the financial statements at their nominal values
The comparative figures included in these financial statements are based on
the adjusted financial statements for the prior reporting periods, as
previously presented, after adjustment to the exchange rate for December
31, 2003 (the exchange rate in effect at the transition date).
The amounts reported for periods after the transition date are composed as
follows: all the amounts originating from the period prior to the
transition date are composed of their adjusted amount at the transition
date, with the addition of amounts in nominal values that were added after
the transition date, and net of amounts that were deducted after the
transition date (the retirement of such sums is effected at their adjusted
values as of transition date, their nominal values, or a combination of the
two, according to the circumstances). All the amounts originating from the
period after the transition date are included in the financial statements
at their nominal values
Follwing are the changes in exchange rate of the dollar and in the Israeli
consumer price index (the "CPI"):
Exchange rate
of the dollar CPI
------------- -----------
% %
------------- -----------
Three months ended March 31:
2004 3.4 (0.1)
2003 (1.1) 0.8
Year ended December 31, 2003 (7.6) (1.9)
AMIRICAN ISRAELI PAPER MILLS LTD.
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT MARCH 31, 2004
(Unaudited)
Note 2 - Segment Information
Data on segment activity:
In NIS in thousands (see note 1c)
Paper and recycling Marketing of office supplies Total
------------------- ---------------------------- -----
Jan-March Jan-March Jan-March Jan-March Jan-March Jan-March
2004 2003 2004 2003 2004 2003
---- ---- ---- ---- ---- ----
Sales - net (1) 88,552 81,915 30,630 35,785 119,182 117,700
Income (loss) from operations 14,658 12,741 (1,115) 276 13,543 13,017
(1) Represents sales to external customers.
[LETTERHEAD OF AMERICAN ISRAELI PAPER MILLS GROUP]
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.
Exhibit 4
NEUSIEDLER HADER PAPER LTD
INTERIM REPORT
(Unaudited)
At MARCH 31, 2004
[LETTERHEAD OF PRICEWATERHOUSECOOPERS
--------------------------------------------------------------------------------
Kesselman & Kesselman
Certified Public Accountants (Isr.)
Trade Tower, 25 Hamered Street
Tel Aviv 68125 Israel
P.O Box 452 Tel Aviv 61003
Telephone +972-3-7954555
Facsimile +972-3-7954556
May 10, 2004
The Board of Directors of
Neusiedler Hadera paper Ltd.,
Hadera.
Re: Review of condensed unaudited consolidated interim financial statements
for the three month period ended March 31, 2004
At your request, we have reviewed the condensed consolidated balance sheet of
Neusiedler Hadera paper Ltd. (hereafter - the Company) and its subsidiaries as
of March 31, 2004 and the condensed consolidated statement of operations,
changes in shareholders' equity and cash flows for three month period then
ended.
Our review was performed in accordance with the procedures prescribed by the
Institute of Certified Public Accountants in Israel. Inter alia, these
procedures include: reading of the financial statements referred to above,
reading of minutes of meetings of shareholders, the board of directors and its
committees, and making inquiries of company officers responsible for financial
and accounting matters.
Since our review was limited in scope and did not constitute an audit in
accordance with generally accepted auditing standards, we do not express an
opinion on the consolidated interim financial statements.
During our review, nothing came to our attention that indicated that significant
adjustments should be made in the interim financial statements referred to above
in order for them to be considered as having been prepared in accordance with
the accounting principles generally accepted in Israel and in accordance with
Securities (Periodic and Immediate Reports) Regulation, 1970.
Sincerely yours,
2
NEUSIEDLER HADERA PAPER LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2004
NIS in thousands (see note 1c)
------- ------- -------
March 31 December 31,
------- ------- -------
2004 2003 2003
------- ------- -------
(Unaudited) (Audited)
------- ------- -------
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents 37,212 74,167 31,678
Accounts receivable:
Trade 154,876 139,177 147,748
Other 13,064 18,428 11,296
Inventories 81,258 76,707 89,231
------- ------- -------
T o t a l current assets 286,410 308,479 279,953
------- ------- -------
FIXED ASSETS:
Cost 134,856 126,527 132,692
L e s s - accumulated depreciation 27,389 19,732 25,381
------- ------- -------
107,467 106,795 107,311
------- ------- -------
GOODWILL, net of accumulated amorization 4,261 4,891 4,423
------- ------- -------
T o t a l assets 398,138 420,165 391,687
======= ======= =======
Liabilities and shareholders' equity
CURRENT LIABILITIES:
Short-term bank credit 15,527 14,692 15,108
Accounts payable and accruals:
Trade - open accounts 97,795 84,760 104,097
American Israeli Paper Mills Limited and its
subsidiaries , shareholders - net 63,093 69,302 52,968
Other 15,897 16,881 12,682
------- ------- -------
T o t a l current liabilities 192,312 185,635 184,855
------- ------- -------
LONG-TERM LIABILITIES:
Banks loans 46,435 66,057 51,725
Capital notes from shareholders (net of current
maturities) 45,280 70,064 43,790
Deferred income taxes - net 29,737 27,715 29,247
Liability for employee rights upon retirement 145 136 145
------- ------- -------
T o t a l long- term liabilities 121,597 163,972 124,907
------- ------- -------
T o t a l liabilities 313,909 349,607 309,762
------- ------- -------
SHAREHOLDERS' EQUITY:
Share capital 1 1 1
Capital surplus 43,352 43,352 43,352
Retained earnings 40,876 27,205 38,572
------- ------- -------
84,229 70,558 81,925
------- ------- -------
T o t a l liabilities and shareholders' equity 398,138 420,165 391,687
======= ======= =======
Eliaz Amar Avner Solel Yaki Yerushalmi
Chief Vice Chairman of the
Financial Officer General Manager Board of Directors
Date of approval of the financial statements: May 10, 2004
The accompanying notes are an integral part of these condensed financial
statements.
3
NEUSIEDLER HADERA PAPER LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2004
NIS in thousands (see note 1c)
-----------------------------
Three months Year ended
ended March 31 December 31,
------------------ -------
2004 2003 2003
------- ------- -------
(Unaudited) (Audited)
------- ------- -------
SALES - net 180,358 174,237 642,140
COST OF SALES 156,809 149,306 554,039
------- ------- -------
GROSS PROFIT 23,549 24,931 88,101
------- ------- -------
SELLING, MARKETING, ADMINISTRATIVE
AND GENERAL EXPENSES:
Selling and marketing 12,658 10,658 42,892
administrative and general 1,703 2,562 11,491
------- ------- -------
14,361 13,220 54,383
------- ------- -------
INCOME FROM ORDINARY OPERATIONS 9,188 11,711 33,718
FINANCIAL EXPENSES - net 5,769 1,003 4,681
------- ------- -------
INCOME BEFORE TAXES ON INCOME 3,419 10,708 29,037
TAXES ON INCOME 1,115 3,556 10,518
------- ------- -------
NET INCOME FOR THE PERIOD 2,304 7,152 18,519
======= ======= =======
-----------------------------
NET INCOME PER NIS 1 OF PAR VALUE
OF SHARES IN NIS 2,304 7,152 18,519
======= ======= =======
The accompanying notes are an integral part of these condensed financial
statements.
4
NEUSIEDLER HADERA PAPER LTD.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2004
NIS in thousands (see note 1c)
------------------------------------------------
Share Capital Reatained
capital surplus earnings Total
------ ------ ------ ------
BALANCE AT JANUARY 1, 2004 (audited) 1 43,352 38,572 81,925
CHANGES DURING THE THREE MONTHS
ENDED MARCH 31, 2004 (unaudited)-
net income 2,304 2,304
------ ------ ------ ------
BALANCE AT MARCH 31, 2004 (unaudited) 1 43,352 40,876 84,229
====== ====== ====== ======
BALANCE AT JANUARY 1, 2003 (audited) 1 43,352 20,053 63,406
CHANGES DURING THE THREE MONTHS
ENDED MARCH 31, 2003 (unaudited)-
net income 7,152 7,152
------ ------ ------ ------
BALANCE AT MARCH 31, 2003 (unaudited) 1 43,352 27,205 70,558
====== ====== ====== ======
BALANCE AT JANUARY 1, 2003 (audited) 1 43,352 20,053 63,406
CHANGES DURING 2003 (audited)-
net income 18,519 18,519
------ ------ ------ ------
BALANCE AT DECEMBER 31, 2003 (audited) 1 43,352 38,572 81,925
====== ====== ====== ======
The accompanying notes are an integral part of these condensed financial
statements.
5
NEUSIEDLER HADERA PAPER LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2004
NIS in thousands (see note 1c)
--------------------------------------
Three months ended
March 31 Year
---------------------- ended
2004 2003 December 31, 2003
------ ------- -------
(Unaudited) (Audited)
---------------------- -------
CASH FLOWS FROM OPERATING ACTIVITIES :
Net income for the period 2,304 7,152 18,519
Adjustments to reconcile net income to net cash
provided by operating activities (a) 14,829 43,559 37,698
------ ------- -------
Net cash provided by operating activities 17,133 50,711 56,217
------ ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES :
Purchase of fixed assets (2,250) (2,258) (9,339)
Proceeds from sale of fixed assets 22 236 635
------ ------- -------
Net cash used in investing activities (2,228) (2,022) (8,704)
------ ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES :
Short-term credit from banks - net (18) (18)
Discharge of long-term bank loans (9,371) (6,077) (21,116)
Discharge of long-term Capital notes from shareholders (17,516) (43,790)
------ ------- -------
Net cash used in financing activites (9,371) (23,611) (64,924)
------ ------- -------
INCREASE (DECREASE) OF CASH AND CASH EQUIVALENTS 5,534 25,078 (17,411)
BALANCE OF CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 31,678 49,089 49,089
------ ------- -------
BALANCE OF CASH AND CASH EQUIVALENTS AT
END OF PERIOD 37,212 74,167 31,678
====== ======= =======
(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 2,234 2,122 8,626
Deferred income taxes - net 896 3,556 10,438
Liability for employee rights upon retirement 5 14
Capital losses on sale of fixed assets 82 215
Erosion of long-term bank loans 4,500 335 1,460
Erosion of long-term Capital notes from shareholders 1,490
------ ------- -------
9,120 6,100 20,753
------ ------- -------
Changes in operating assets and liabilities:
Decrease (increase) in receivable :
Trade (7,128) 15,817 7,247
Other (2,174) (1,023) 752
Decrease (increase) in inventories 7,973 2,991 (9,533)
Increase (decrease) in accounts payable and accruals :
Trade (6,302) 6,462 27,447
American Israeli Paper Mills Limited and its
subsidiaries shareholders - net 10,125 16,264 (1,717)
Other 3,215 (3,052) (7,251)
------ ------- -------
5,709 37,459 16,945
------ ------- -------
14,829 43,559 37,698
====== ======= =======
The accompanying notes are an integral part of these condensed financial
statements.
6
NEUSIEDLER HADERA PAPER LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT MARCH 31, 2004
(Unaudited)
Note 1 - General
a. The interim financial statements as of March 31, 2004 and for the three
month period 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.
b. The accounting principles applied in preparation of the interim statements
are consistent with those applied in the annual financial statements,
except for the adoption for the first time of standard No. 12 of the IASB -
"Discontinuaunce of adjusting Financial statements of inflation". see c
herelater. 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. Transition to nominal-historical financial reporting: With effect from
January 1, 2004, the company has adopted the provisions of Standard No. 12
-"Discontinuance of Adjusting Financial Statements for Inflation" - of the
IASB and, pursuant thereto, the company has discontinued, from the
aforesaid date, the practice of adjusting its financial statements for the
effects of changes in the exchange rate of the US dollar (hereafter - "the
dollar").
Through December 31, 2003, the company prepared its financial statements on
the basis of historical cost adjusted for the changes In the general
purchasing power of Israeli currency (hereafter - "NIS"), based upon
changes in the exchange rate of the dollar, in accordance with
pronouncements of the Institute of Certified Public Accountants in Israel
(hereafter - "the Israeli Institute"). The adjusted amounts, as above,
presented in the financial statements as of December 31, 2003 (hereafter -
"the transition date"), are used as the opening balances for the
nominal-historical financial reporting in the following periods. Additions
made after the transition date have been included in the financial
statements at their nominal values
The comparative figures included in these financial statements are based on
the adjusted financial statements for the prior reporting periods, as
previously presented, after adjustment to the exchange rate for December
31, 2003 (the exchange rate in effect at the transition date).
The amounts reported for periods after the transition date are composed as
follows: all the amounts originating from the period prior to the
transition date are composed of their adjusted amount at the transition
date, with the addition of amounts in nominal values that were added after
the transition date, and net of amounts that were deducted after the
transition date (the retirement of such sums is effected at their adjusted
values as of transition date, their nominal values, or a combination of the
two, according to the circumstances). All the amounts originating from the
period after the transition date are included in the financial statements
at their nominal values
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 three months ended March 31:
2004 3.4 (0.1)
2003 (1.1) 0.8
Decrease in the year ended December 31, 2003 (7.6) (1.9)
The dollar exchange rate as of March 31, 2004 is: $1=NIS 4.528
7
Exhibit 5
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AS OF MARCH 31, 2004
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 7-10
The Board of Directors of
Hogla-Kimberly Ltd.
Re: Review of Unaudited Condensed Interim Consolidated Financial
Statements for the three months ended March 31, 2004
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 March 31, 2004.
- Statement of operations for the three months ended March 31, 2004.
- Statement of changes in shareholders' equity for the three months
ended March 31, 2004.
- Statement of cash flows for the three months ended March 31, 2004.
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 Firm of Deloitte Touche Tohmatsu
Tel Aviv, May 6, 2004
1
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(NIS in thousands)
March 31, December 31,
------- ------- -------
2 0 0 4 2 0 0 3 2 0 0 3
------- ------- -------
Reported Adjusted Adjusted
Amounts(1) Amounts(3) Amounts(3)
------- ------- -------
Current Assets (Unaudited)
------- -------
Cash and cash equivalents 54,885 11,921 37,340
Current maturities of long-term deposits 8,150 9,195 7,882
Trade receivables 269,818 182,536 229,979
Other receivables 20,127 7,931 14,222
Inventories 101,173 97,861 92,664
------- ------- -------
454,153 309,444 382,087
------- ------- -------
Long-Term Investments
Long-term deposits 72,448 77,947 70,064
Capital note of shareholder 32,770 30,617 32,770
------- ------- -------
105,218 108,564 102,834
------- ------- -------
Fixed Assets
Cost 480,716 463,802 479,744
Less - accumulated depreciation 212,479 197,788 210,176
------- ------- -------
268,237 266,014 269,568
------- ------- -------
Other Assets - Goodwill 29,346 31,148 29,073
------- ------- -------
856,954 715,170 783,562
======= ======= =======
Current Liabilities
Short-term bank credit - 16,640 1,087
Current maturities of long-term bank loans 18,501 24,960 15,147
Trade payables 174,614 125,050 139,555
Other payables and accrued expenses 51,164 33,126 37,632
------- ------- -------
244,279 199,776 193,421
------- ------- -------
Long-Term Liabilities
Long-term bank loans 96,447 85,391 96,338
Deferred taxes 32,254 22,496 29,428
------- ------- -------
128,701 107,887 125,766
------- ------- -------
Minority Interest 52,556 45,316 51,394
------- ------- -------
Shareholders' Equity
Share capital 28,788 28,788 28,788
Capital reserves 156,799 156,799 156,799
Translation adjustments relating to
foreign held autonomous Subsidiary (2) 2,124 - -
Retained earnings 243,707 176,604 227,394
------- ------- -------
431,418 362,191 412,981
------- ------- -------
856,954 715,170 783,562
======= ======= =======
(1) See Note 2B(1).
(2) See Note 2B(2).
(3) Adjusted for changes in the exchange rate of the U.S dollar as of December
31, 2003.
--------------- --------------- ---------------
T. Davis A. Magid A. Brenner
Chairman of the Board of Directors Financial Manager Managing Director
--------------------------------------------------------------------------------
Approval date of the interim financial statements: May 6, 2004.
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
(NIS in thousands)
Three months ended Year ended
March 31, December 31,
--------- --------- ---------
2 0 0 4 2 0 0 3 2 0 0 3
--------- --------- ---------
Reported Adjusted Adjusted
Amounts (1) Amounts (2) Amounts (2)
--------- --------- ---------
(unaudited)
------------------------
Net sales 266,766 196,753 868,671
Cost of sales 185,037 147,620 621,014
--------- --------- ---------
Gross profit 81,729 49,133 247,657
Selling expenses 45,643 (*)27,545 130,670
General and administrative expenses 9,920 (*)10,041 39,046
--------- --------- ---------
Operating profit 26,166 11,547 77,941
Financing income (expenses), net 2,080 (1,628) 5,517
Other income, net 87 149 496
--------- --------- ---------
Income before income taxes 28,333 10,068 83,954
Income taxes 10,858 3,548 20,566
--------- --------- ---------
Income after income taxes 17,475 6,520 63,388
Minority interest in earnings of Subsidiary (1,162) (1,057) (7,135)
--------- --------- ---------
Net income for the period 16,313 5,463 56,253
========= ========= =========
Earnings per share (in NIS) 1.97 0.66 6.81
========= ========= =========
Number of shares used in computation 8,263,473 8,263,473 8,263,473
========= ========= =========
(*) Reclassified.
(1) See Note 2B(1).
(2) Adjusted for changes in the exchange rate of the U.S dollar as of December
31, 2003.
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
(NIS in thousands)
Translation
adjustments Dividend
relating to declared after
foreign held balance
Share Capital autonomous Retained sheet
capital reserves Subsidiary earnings date Total
------ ------- -------- ------- ------- -------
Three months ended
March 31, 2004 (unaudited)
(Reported Amounts (1))
Balance - January 1, 2004 28,788 156,799 - 227,394 - 412,981
Translation adjustments
relating to foreign held
autonomous Subsidiary (2) 2,124 2,124
Net income for the period 16,313 16,313
------ ------- -------- ------- ------- -------
Balance - March 31, 2004 28,788 156,799 2,124 243,707 - 431,418
Three months ended
March 31, 2003 (unaudited)
(Adjusted Amounts (3))
Balance - January 1, 2003 28,788 156,799 - 171,141 32,843 389,571
Dividend paid (32,843) (32,843)
Net income for the period 5,463 5,463
------ ------- -------- ------- ------- -------
Balance - March 31, 2003 28,788 156,799 - 176,604 - 362,191
Year ended December 31, 2003
(Adjusted Amounts (3))
Balance - January 1, 2003 28,788 156,799 - 171,141 32,843 389,571
Dividend paid (32,843) (32,843)
Net income for the year 56,253 56,253
------ ------- -------- ------- ------- -------
Balance - December 31, 2003 28,788 156,799 - 227,394 - 412,981
====== ======= ======== ======= ======= =======
(1) See Note 2B(1).
(2) See Note 2B(2).
(3) Adjusted for changes in the exchange rate of the U.S dollar as of December
31, 2003.
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
(NIS in thousands)
Three months ended Year ended
March 31, December 31,
-------------------- ------
2 0 0 4 2 0 0 3 2 0 0 3
------ ------ ------
Reported Adjusted Adjusted
Amounts(1) Amounts(3) Amounts(3)
------ ------ ------
(unaudited)
--------------------
Cash flows - operating activities
Net income for the period 16,313 5,463 56,253
Adjustments to reconcile net income to net cash
provided by operating activities (Appendix A) 5,147 7,261 4,190
------ ------ ------
Net cash provided by operating activities 21,460 12,724 60,443
------ ------ ------
Cash flows - investing activities
Withdrawal of long-term bank deposits - - 9,195
Acquisition of fixed assets (3,458) (9,376) (26,953)
Proceeds from sale of fixed assets 499 381 1,092
------ ------ ------
Net cash used in investing activities (2,959) (8,995) (16,666)
------ ------ ------
Cash flows - financing activities
Dividend paid - (32,843) (32,843)
Long-term loan received 4,427 3,065 28,949
Repayment of long-term loans (4,421) - (24,960)
Short-term bank credit, net (1,087) 16,640 1,087
------ ------ ------
Net cash used in financing activities (1,081) (13,138) (27,767)
------ ------ ------
Translation adjustments of cash and
cash equivalents and operations of
foreign held autonomous Subsidiary (2) 125 - -
------ ------ ------
Increase (decrease) in cash and cash equivalents 17,545 (9,409) 16,010
Cash and cash equivalents - beginning of period 37,340 21,330 21,330
------ ------ ------
Cash and cash equivalents - end of period 54,885 11,921 37,340
====== ====== ======
(1) See Note 2B(1).
(2) See Note 2B(2).
(3) Adjusted for changes in the exchange rate of the U.S dollar as of December
31, 2003.
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
(NIS in thousands)
Three months ended Year ended
March 31, December 31,
-------------------- -------
2 0 0 4 2 0 0 3 2 0 0 3
------ ------- -------
Reported Adjusted Adjusted
Amounts(1) Amounts(2) Amounts(2)
------ ------- -------
(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 of Subsidiary 1,162 1,057 7,135
Depreciation and amortization 6,052 6,607 25,213
Deferred taxes, net 443 2,747 8,251
Gain from sale of fixed assets (87) (149) (482)
Effect of exchange rate differences, net (598) (323) (2,266)
Changes in assets and liabilities:
Increase in trade receivables (38,329) (398) (47,933)
Decrease (increase) in other receivables (3,444) 2,749 (2,115)
Increase in inventories (8,014) (11,434) (6,237)
Increase in trade payables 28,341 6,589 27,544
Net change in balances with related parties 6,229 (804) (10,050)
Increase in other payables
and accrued expenses 13,392 620 5,130
------ ------- -------
5,147 7,261 4,190
====== ======= =======
B Non-cash activities
Acquisition of fixed assets on credit 634 - 8,661
====== ======= =======
(1) See Note 2B(1).
(2) Adjusted for changes in the exchange rate of the U.S dollar as of December
31, 2003.
The accompanying notes are an integral part of the condensed interim
consolidated financial statements.
6
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS AS OF MARCH 31, 2004
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed interim consolidated financial statements as
of March 31, 2004 and for the 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, 2003 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 March 31,
2004 and for the interim period presented. The results of operations
for the interim period are not necessarily indicative of the results
to be expected on a full-year basis.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. General
The interim financial statements have been prepared in
conformity with generally accepted accounting principles
("GAAP") in Israel, in a condensed format in accordance with
GAAP applicable to the preparation of interim period financial
statements, including those under Standard No. 14, "Interim
Financial Reporting".
B. New Accounting Standards
The accounting principles applied in the preparation of these
interim financial statements are consistent with those
principles applied in the preparation of the most recent
annual audited financial statements with the exception of the
following:
(1) Cessation of Financial Statement Adjustment and Change
to Reporting in Reported Amounts - Standard No. 12
(a) Definitions:
Adjusted Amount - historical nominal amount
adjusted for changes in the exchange rate of the
U.S dollar as of December 31, 2003, in accordance
with Opinion No. 36 of the Institute of Certified
Public Accountants in Israel.
Reported Amount - Adjusted Amount plus amounts in
nominal terms added subsequent to December 31,
2003, and less amounts subtracted after that date.
7
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS AS OF MARCH 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
B. New Accounting Standards (cont.)
(1) Cessation of Financial Statement Adjustment and Change to
Reporting in Reported Amounts - Standard No. 12 (cont.)
(b) In January 2004, Israeli Accounting Standard No. 12
"Cessation of Financial Statements Adjustment" came into
effect. Following the initial implementation of Standard No.
12, commencing January 1, 2004, the Group ceased the
presentation of its financial statements based on nominal
historical cost adjusted for the changes in the exchange
rate of the US Dollar in relation to the NIS. Effective with
the interim financial statements as of March 31, 2004 and
for the reporting periods thereafter, the Group's financial
statements are prepared and presented in Reported Amounts.
Comparative figures included in the interim financial
statements relating to December 31, 2003 and March 31, 2003
and for the year and three-month period respectively then
ended, are presented in Adjusted Amounts.
(c) Reported Amounts are determined as follows:
Balance Sheet Items
Monetary items (items whose balance sheet amount reflects
their current value or realization value at the balance
sheet date) are presented at their nominal value as of the
balance sheet date.
Non-monetary items are presented at their Adjusted Amounts
plus additions and dispositions occurring during the
reporting period. Additions made subsequent to December 31,
2003 and dispositions of items added subsequent to such
date, are presented at their historical nominal value.
Dispositions of items added prior to December 31, 2003 are
presented at their Adjusted Amount.
Minority interest in a Subsidiary is presented based on the
interim financial statements of that Subsidiary prepared
according to the guidance of Standard No. 12.
Statement of Operation Items
Income and expenses reflecting transactions, and financial
income and expenses, are presented at their nominal value.
Income and expenses deriving from non-monetary items (mainly
depreciation and amortization) were presented in a manner
corresponding to the presentation of the related
non-monetary balance sheet item, as illustrated above.
Minority interest in earnings of a Subsidiary is determined
based on the interim financial statements of that Subsidiary
prepared according to the guidance of Standard No. 12.
8
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS AS OF MARCH 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
B. New Accounting Standards (cont.)
(d) The amounts at which non-monetary items are presented in these
interim financial statements do not necessarily represent their
realization value or economic value, but solely their Reported
Amount.
(2) Translation of Foreign Operations' Financial Statements -
Standard No. 13
(a) In January 2004, Israeli Accounting Standard No. 13 "Effect
of Changes in Foreign Exchange Rates" came into effect. This
Standard addresses the translation of transactions
denominated in foreign currency, as well as the translation
of financial statements of a foreign entity, for inclusion
in the financial statements of the reporting company.
Standard No. 13 supersedes Clarifications No. 8 and 9 to
Opinion No. 36 of the Institute of Certified Public
Accountants in Israel, which were nullified on the date on
which Accounting Standard No. 12 came into effect, as
described in (1) above.
(b) A foreign entity classified as a foreign held autonomous
Subsidiary
o Following the implementation of Standard No. 13,
commencing January 2004 goodwill derived from an
investment made in another entity is to be treated as
one of that entity's assets. Accordingly, the goodwill
associated with the Group's investment in Ovisan is
translated to NIS at the closing rate, rather than at
the exchange rate at the date in which said investment
was made, as was previously required under the
applicable accounting literature in effect through
December 31, 2003.
o Monetary and non-monetary assets and liabilities of the
foreign entity are translated at the closing rate.
o Operating and cash flow items of the foreign entity are
translated, in general, by the average exchange rate
for the reporting period, rather than by the closing
rate as was previously required under the applicable
accounting literature prior to the date in which
Standard No. 13 came into effect (January 1, 2004).
o All differences resulting from the translation of the
foreign entity's financial statements by the method
described above, are included in a separate component
of shareholders' equity as "Translation adjustments
relating to foreign held autonomous Subsidiary".
9
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS AS OF MARCH 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
B. New Accounting Standards (cont.)
(3) Amortization of Goodwill - Standard No. 20
In March 2004, the Israeli Accounting Standard Board issued
Standard No. 20 "The Amortization Period of Goodwill". Standard
No. 20 calls for the amortization of goodwill over its useful
life, based on a systematic method that should reflect the
estimated expected period in which the goodwill is to contribute
economic benefits. The amortization period shall not exceed 20
years from the date on which the goodwill was initially
recognized. Standard No. 20 is in effect for reporting periods
commencing January 1, 2004, and its provisions are to be applied
on a prospective basis. The implementation of Standard No. 20 did
not, and is not expected to, effect the Group's financial
position and results of operations.
C. During the reporting period, the representative exchange rate of the
US Dollar vis-a-vis the NIS increased by 3.4%, while the exchange rate
of the Turkish Lira vis-a-vis the NIS and the Israeli Consumer Price
Index decreased by 9.4% and 0.1%, respectively.
10