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 2005
-----------------------
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, 2005 with respect to the
Registrant's results of operations for the quarter ended March 31, 2005.
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, 2005.
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, 2005.
Attached hereto as Exhibit 4 and incorporated herein by reference is
the Interim Report of Mondi Business Paper Hadera Ltd. with respect to the
quarter ended March 31, 2005.
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,
2005.
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, 2005.
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
1. Press release dated May 11, 2005.
2. Registrant's management discussion.
3. Registrant's unaudited condensed consolidated
financial statements.
4. Interim report of Mondi Business Paper Hadera
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, 2005 - American Israeli Paper Mills Ltd. (ASE:AIP) (the
"Company" or "AIPM") today reported financial results for the first quarter
ended March 31, 2005.
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 Mondi Business Hadera Paper (Mondi Hadera) 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 also 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 2005(January - March 2005) totaled
NIS 685.7 million compared with NIS 682.1 million in the corresponding quarter
last year (January - March 2004).
Aggregate operating profit in the first quarter of 2005 totaled NIS 36.1 million
compared with NIS 55.9 million in the corresponding quarter last year, which was
especially high as compared with the annual average.
The consolidated data below does not include the results of operations of Mondi
Hadera, 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 2005 totaled NIS 121.8 million
compared with NIS 119.2 million in the corresponding quarter last year.
Operating profit in the first quarter of 2005 totaled NIS 14.5 million compared
with NIS 13.5 million in the corresponding quarter last year.
Net profit in the first quarter of 2005 totaled NIS 14.0 million compared with
NIS 17.4 million in the corresponding quarter last year.
Earnings per share (EPS) in the first quarter of 2005 totaled NIS 3.46 compared
with NIS 4.31 for the corresponding quarter last year.
The inflation rate in the first quarter of 2005 was negative and amounted to
-0.6% as compared with -0.1% in the corresponding quarter last year.
The exchange rate of the NIS in the first quarter of 2005 was devaluated by
approximately 1.2% against the U.S. dollar as compared with a devaluation of
3.4% in the corresponding quarter last year.
Mr. Avi Brener, Chief Executive Officer of the Company said that following the
recovery that was recorded in economic activity in Israel in 2004, the first
quarter of 2005 was marked by a slowdown of growth in the economy, with a
certain decrease being recorded in terms of activity and demand. The global
economy also failed to display a real recovery in economic activity.
The rise in energy prices (especially fuel oil, diesel and electricity) that
characterized 2004 continued in the first quarter of 2005, as well. This rise,
which amounted, as compared with the first quarter of 2004, to an average rise
of 40% in diesel prices for transportation, and a 20% rise in fuel oil and
electricity prices, significantly affected the Group's operations and its
financial results.
The Company is promoting the project for establishing a combined cycle
co-generation plant based on natural gas at Hadera. In addition, the Company is
preparing for the conversion of its energy-generation systems to natural gas,
once the transportation infrastructure of natural gas to Hadera is completed.
This conversion is expected to enable savings in production costs, while further
improving environmental compliance.
The consolidated gross margin as a percentage of sales reached 23.2% during the
reported quarter, as compared with 23.0% in the corresponding quarter last year.
The company managed to maintain the gross margin level and even to improve it in
relation to the corresponding quarter last year, despite the rise in raw
material prices (paper waste by 9%), energy prices (approximately 20%), and
water (5%). This was accomplished through growth in sales, higher sales prices
and the continued efficiency process in all sectors of operation.
The Company's share in the earnings of associated companies - mainly Mondi
Hadera, H-K, Carmel and TMM - amounted to NIS 5.8 million in the first quarter
of 2005, as compared with NIS 9.9 million in the first quarter last year.
The following principal changes were recorded in the Company's share in the
earnings of associated companies, in relation to the corresponding quarter last
year:
- The Company's share in the net earnings of Mondi Hadera (49.9%)
decreased slightly (by approximately NIS 0.1 million). Most of the
change in the earnings is associated to the decrease in operating
profit between the periods, originated from a quantitative decrease
and the higher prices of raw materials, energy and water, which was
partially offset by the decrease in financial expenses during the
reported period, resulting from the differentials in the devaluation
between the periods.
- The Company's share in the net earnings of Hogla-Kimberly Israel
(49.9%) decreased by NIS 0.3 million, primarily due to the decrease in
operating
2
income as compared with the corresponding quarter last year, which
originated primarily from a quantitative decrease and from the rise in
raw material prices.
- The Company's share in the net earnings of Ovisan (Turkey) (49.9%)
fell by NIS 3.3 million, primarily due to the operating loss
originating from dealing with the fierce competition in the Turkish
market in the baby diaper sector, towards the expansion of operations
into premium products, within the framework of the strategic program
that is currently being formulated. The challenge is to keep market
share, in order to continue to develop Ovisan and to introduce
Kimberly-Clark products into the Turkish market.
- The Company's share in the net earnings of the Carmel Group (26.25%)
fell by NIS 0.2 million, due to the decrease in the operating income,
which was partially offset by the improvement in financial expenses
during the reported quarter. The decrease in operating income
originated primarily from the sharp rise in raw material prices, that
was not fully compensated by the raising of selling prices.
- The Company's share in the TMM net earnings (41.6%) decreased by NIS
0.5 million. TMM recorded an operating loss during the reported period
due to the significant increase in transportation costs (originating
from a significant 40% average rise in diesel prices in relation to
the corresponding quarter last year), together with the eroding in
revenues originated both from the need to provide discounts (due to
the fierce competition in waste removal resulting from surplus
transportation capacity in the market), as well as a result of the
decrease in the CPI during the reported quarter (-0.6%), to which a
significant proportion of the revenues are linked.
A total of 2,155 shares were issued during the reported period (0.05% dilution),
as a result of the exercise of 6,955 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)
except per share amounts
Three months ended March 31,
NIS IN THOUSANDS(1)
2005 2004
---- ----
Net sales 121,778 119,182
Net earnings 14,031 17,435
Earnings per share 3.46 4.31
(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 representative exchange rate at March 31, 2005 was N.I.S. 4.361 =
$1.00.
(sec-Pres-11162)
Exhibit 2
---------
May 10, 2005
MANAGEMENT DISCUSSION
We are honored to present the consolidated financial statements of the American
Israeli Paper Mills Ltd. Group ("AIPM" or "the Group") for the first three
months of the year 2005.
A. A SUMMARIZED DESCRIPTION OF THE GROUP AND ITS BUSINESS ENVIRONMENT
------------------------------------------------------------------
1. GENERAL
-------
AIPM deals in the manufacture and sale of paper, in the recycling of
paper waste and in the marketing of office supplies - through
subsidiaries. AIPM also holds interests in associated companies that
deal in the manufacture and marketing of printing and writing paper,
in the manufacture and marketing of household paper products, hygiene
products, disposable diapers and complementary kitchen products,
corrugated board containers, packaging for consumer goods and the
handling 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
------------------------
Following the recovery that was recorded in economic activity in
Israel in 2004, the first quarter of 2005 was marked by a slowdown of
growth in the economy, with a certain decrease being recorded in terms
of activity and demand. The global economy also failed to display a
real recovery in economic activity.
The rise in energy prices (especially fuel oil, diesel and
electricity) that characterized 2004 continued in the first quarter of
2005 as well. This rise, which amounted to an average rise of 40% in
diesel prices for transportation, and a 20% rise in fuel oil and
electricity prices as compared with the first quarter of 2004,
significantly affected the Group's operations and its financial
results.
AIPM is promoting the project for establishing a combined cycle
co-generation plant based on natural gas at Hadera. In addition, AIPM
is preparing for the conversion of its energy-generation systems to
natural gas, once the transportation infrastructure of natural gas to
Hadera is completed. This conversion is expected to enable savings in
production costs, while further improving environmental compliance.
During the reported period (January-March 2005), the exchange rate of
the NIS in relation to the US dollar was devaluated by approximately
1.2%, as compared with a devaluation of 3.4% in the corresponding
period last year (January-March 2004).
The inflation rate during the reported period was negative and
amounted to -0.6%, as compared with a negative inflation rate of -0.1%
in the corresponding period last year.
2
B. RESULTS OF OPERATIONS
---------------------
1. AGGREGATE DATA
--------------
Since AIPM's share in the earnings of associated companies constitutes
a material component in AIPM's statement of income (primarily on
account of its share in the earnings of Mondi Business Hadera Paper
Ltd. [Mondi Hadera] and Hogla-Kimberly that were consolidated in the
past, until the transfer of control over these companies to the
international strategic partners), the aggregate data appearing below
also 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 inter company sales and without considering the rate of holding.
The aggregate sales amounted to NIS 685.7 million during the reported
period, as compared with NIS 682.1 million in the corresponding
period.
The aggregate operating profit totaled NIS 36.1 million during the
reported period, as compared with NIS 55.9 million in the
corresponding period last year, which was especially high, as compared
with the annual average.
2. CONSOLIDATED DATA
-----------------
The information set forth below does not include the results of
operation of Mondi Hadera, Hogla-Kimberly, Carmel and TMM Integrated
Recycling Industries.
The sales during the reported period amounted to NIS 121.8 million, as
compared with NIS 119.2 million in the corresponding period last year.
The operating profit totaled NIS 14.5 million during the reported
period, as compared with NIS 13.5 million in the corresponding period
last year.
The profit after taxes and before AIPM's share in the earnings of
associated companies for the reported year, amounted to NIS 8.2
million, as compared with NIS 7.5 million during the corresponding
period last year.
3. NET PROFIT AND EARNINGS PER SHARE
---------------------------------
The net profit totaled NIS 14.0 million during the reported period, as
compared with NIS 17.4 million in the corresponding period last year.
The Earnings Per Share in the reported period amounted to NIS 346 per
NIS 1 par value ($0.79 per share), as compared with NIS 431 per NIS 1
par value ($0.95 per share) in the corresponding period last year.
The return on shareholders' equity in annual terms amounted to 9.8%
during the reported period, as compared with 10.2% for all of 2004.
3
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
121.8 million, as compared with NIS 119.2 million in the corresponding
period last year.
The growth in sales in relation to the corresponding period last year
originated from a quantitative increase and a certain improvement in
the selling prices.
2. COST OF SALES
-------------
The cost of sales amounted to NIS 93.6 million - or 76.8% of sales -
during the reported period, as compared with NIS 91.8 million - or 77%
of sales - in the corresponding period last year.
The gross margin as a percentage of sales reached 23.2% during the
reported period, as compared with 23.0% in the corresponding period
last year.
AIPM managed to maintain the gross margin level and even to improve it
in relation to the corresponding period last year, despite the rise in
raw material prices (paper waste by 9%), energy prices (approximately
20%), and water (5%). This was accomplished through growth in sales,
higher sales prices and the continued efficiency process in all
sectors of operation.
LABOR WAGES
Wages in the cost of sales and in the selling, general and
administrative expenses amounted to about NIS 37 million in the
reported period, as compared with about NIS 36 million in the
corresponding period last year.
The change in the cost of wages in relation to the corresponding
period last year reflects a nominal increase of 2% in wages.
3. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
The selling, general and administrative expenses (including wages)
amounted to NIS 13.7 million in the reported period - or 11.3% of
sales - as compared with NIS 13.8 million - or 11.6% of sales - in the
corresponding period last year.
4. OPERATING INCOME
----------------
The operating profit totaled NIS 14.5 million during the reported
period (11.9% of sales), as compared with NIS 13.5 million (11.4% of
sales) in the corresponding period last year.
4
5. FINANCIAL EXPENSES
------------------
The financial expenses during the reported period amounted to NIS 3.3
million, as compared with NIS 2.0 million in the corresponding period
last year.
The outstanding long-term liabilities, net of deposits and short-term
investments, grew by NIS 100 million as compared with the
corresponding period last year, since a dividend of NIS 100 million
was distributed in September 2004, lowering the deposit balance while
increasing net liabilities. In addition, the cost of hedging the
Series 2 notes against a rise in the CPI has risen to 1.3% per annum
in 2005, as compared with 0.92% per annum in 2004.
The said growth in the net long-term liabilities and in the hedging
cost has resulted in an increase in the financial expenses during the
reported period as compared with last year.
The said increase in financial expenses was partially offset due to
the decrease in the average balance of the short-term credit during
the reported period, as compared with the corresponding period last
year (by some NIS 50 million), coupled with the decrease in the
average short-term interest rate in the reported period, as compared
with the corresponding period last year (down by approximately 1.3%).
6. TAXES ON INCOME
---------------
Taxes on income amounted to NIS 3.0 million in the reported period, as
compared with NIS 4.0 million in the corresponding period last year.
The principal factors behind the decrease in tax expenses during the
reported period as compared with the corresponding period last year
include the decrease in pre-tax earnings this year and the impact of
the change in the tax rate on both the current and deferred taxes in a
comparison between the two periods.
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: Mondi Hadera,
Hogla-Kimberly, Carmel and TMM.
AIPM's share in the earnings of associated companies totaled NIS 5.8
million during the reported period, as compared with NIS 9.9 million
in the corresponding period last year.
The following principal changes were recorded in AIPM's share in the
earnings of associated companies, in relation to the corresponding
period last year:
- AIPM's share in the net earnings of Mondi Hadera (49.9%)
decreased slightly (by approximately NIS 0.1 million). Most of
the change in the earnings is associated to the decrease in
operating profit between the periods, originated from a
quantitative decrease and the higher prices of raw materials,
energy and water, and which was partially offset by the decrease
in financial expenses
5
during the reported period, as a result the differentials in the
devaluation between the periods.
- AIPM's share in the net earnings of Hogla-Kimberly Israel (49.9%)
decreased by NIS 0.3 million, primarily due to the decrease in
operating income as compared with the corresponding period last
year, that originated primarily from a quantitative decrease and
from the rise in raw material prices.
- AIPM's share in the net earnings of Ovisan (Turkey) (49.9%) fell
by NIS 3.3 million, primarily due to the operating loss
originating from the fierce competition in the Turkish market in
the baby diaper sector, towards the expansion of operations into
premium products, within the framework of the strategic program
that is being formulated nowadays. The challenge is to keep
market share, in order to continue to develop Ovisan and to
introduce Kimberly-Clark products to the Turkish market.
- AIPM's share in the net earnings of the Carmel Group (26.25%)
fell by NIS 0.2 million, due to the decrease in the operating
income, that was partially offset by the improvement in financial
expenses during the reported period. The decrease in operating
income originated primarily from the sharp rise in raw material
prices, that was not fully compensated by the raising of selling
prices.
- AIPM's share in the TMM net earnings (41.6%) decreased by NIS 0.5
million. TMM recorded an operating loss during the reported
period due to the significant increase in transportation costs
(originating from a significant 40% average rise in diesel prices
in relation to the corresponding period last year), together with
the eroding in revenues originated both from the need to provide
discounts (due to the fierce competition in waste removal
resulting from surplus transportation capacity in the market), as
well as a result of the decrease in the CPI during the reported
quarter (-0.6%), to which a significant proportion of the
revenues are linked.
D. LIQUIDITY AND INVESTMENTS
-------------------------
1. ACCOUNTS RECEIVABLE - TRADE
---------------------------
Accounts Receivable, as at March 31, 2005, amounted to NIS 143.2
million, as compared with NIS 142.5 million at December 31, 2004. The
higher accounts receivable balance is attributed primarily to the
growth in the volume of operations.
2. CASH FLOWS
----------
The cash flows from operating activities totaled NIS 28.2 million
during the reported period, as compared with NIS 10.1 million in the
corresponding period last year. The improvement in the cash flows from
operating activities during the reported period originated primarily
from a decrease in working capital.
6
3. INVESTMENTS IN FIXED ASSETS
---------------------------
The investments in fixed assets amounted to NIS 5.7 million during the
reported period, as compared with NIS 6.5 million during the
corresponding period last year, and included current investments in
storage and compaction equipment, in compactors, in machines,
equipment and transportation equipment.
4. FINANCIAL LIABILITIES
---------------------
The long-term liabilities (including current maturities) amounted to
NIS 267.2 million as at March 31, 2005, as compared with NIS 275.0
million as at March 31, 2004. The long-term liabilities include
primarily two series of notes:
Series 1 - NIS 33.3 million, for repayment until 2009. Series 2 - NIS
201.2 million, for repayment between 2007 and 2013.
The balance of short-term credit, as at March 31, 2005, amounted to
NIS 51.7 million, as compared with NIS 140.4 million at March 31,
2004.
The short-term credit balances decreased in relation to the balances
in the corresponding period last year, primarily due to the positive
cash flows from operating activities between the periods and the
decrease in the balance of company deposits that served for the
distribution of NIS 100 millions in dividends and for reducing the
short-term credit.
E. EXPOSURE AND MANAGEMENT OF MARKET RISKS
---------------------------------------
The following is an update, as at March 31, 2005, to the Management
Discussion for December 31, 2004, that outlined the essence of the exposure
and management of market risks, as set forth by the board of directors.
AIPM possesses CPI-linked liabilities (net of deposits) in the net overall
sum of NIS 219 million, with the interest thereupon being no higher than
the market interest rate. In the event that the inflation rate shall rise
significantly, a loss may be recorded in AIPM's financial statements, due
to the surplus of CPI-linked liabilities. AIPM consequently entered into a
forward transaction, with a term of one year - until the end of 2005, to
hedge a sum of NIS 200 million against a rise in the CPI (at a cost of 1.3%
per annum).
7
REPORT OF LINKAGE BASES
-----------------------
The following are the balance sheet items, according to linkage bases, as
at December 31, 2004 and an update for March 31, 2005:
In NIS Millions Unlinked CPI-linked In foreign Non-monetaryTotal
currency, or items
linked thereto
(primarily US$)
---------------------------------------------- ----------- ------------ ---------------- ----------- --------------
Assets
------
Cash and cash equivalents 0.4 6.5 6.9
Short-term deposits and
investments 17.1 5.0 22.1
Accounts Receivable 189.0 0.2 41.4 8.5 239.1
Inventories 82.6 82.6
Investments in associated companies
49.3 14.0 8.7 369.7 441.7
Deferred taxes on income 6.5 6.5
Fixed assets, net 322.4 322.4
Deferred expenses, net of accrued
amortization 1.1 1.1
Total Assets 255.8 19.2 56.6 790.8 1,122.4
----- ---- ---- ----- -------
Liabilities
-----------
Credit from Banks 50.5 1.2 51.7
Accounts Payable 149.5 4.1 7.4 161.0
Deferred taxes on income 51.7 51.7
Notes 234.4 234.4
Other liabilities 32.8 32.8
Shareholders' equity 590.8 590.8
Total liabilities and equity 232.8 238.5 8.6 642.5 1,122.4
----- ----- --- ----- -------
Surplus financial assets (liabilities) as at
Mar-31-05 23.0 (219.3) 48.0 148.3
-
Surplus financial assets (liabilities) as at
Dec-31-04 (24.6) (177.5) 44.4 157.7 -
ASSOCIATED COMPANIES
--------------------
AIPM is exposed to various risks associated with operations in Turkey,
where Hogla-Kimberly is active through its subsidiary, Ovisan. These
risks originate from concerns regarding economic instability and elevated
inflation rates that characterized the Turkish economy in the past and
that may recur and harm the Ovisan operations.
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. AIPM 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. AIPM 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. DONATIONS AND CONTRIBUTIONS
---------------------------
AIPM, 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 echelons of Israeli society - primarily
teenagers - as part of a desire to build and contribute to shaping the
human fabric of Israeli society.
As part of this policy, AIPM 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 105 thousand was granted for student
scholarships and a project this year, through the Schenker Foundation, that
was established by AIPM together with its Austrian strategic partner in
Mondi Hadera.
H. GENERAL
o 2,155 shares were issued during the reported period (0.05% dilution),
on account of the exercise of 6,955 option warrants as part of AIPM's
employee option plans.
----------------------------------- ----------------------------
Y. Yerushalmi Avi Brenner
Chairman of the Board of Directors Chief Executive Officer
Exhibit 3
---------
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
SUMMARY OF CONSOLIDATED BALANCE SHEETS
-------------------------------------
NIS IN THOUSANDS
----------------
MARCH 31,2005 MARCH 31,2004 DEC. 31,2004
(UNAUDITED) (UNAUDITED) (AUDITED)
--------------- --------------- ---------------
CURRENT ASSETS:
---------------
Cash and cash equivalents 6,873 101,145 7,813
Short-term deposits and investments 22,145 77,114 62,464
Receivables :
Trade 143,195 142,546 143,275
Other 95,982 138,220 101,840
Inventories 82,605 93,235 83,220
--------------- --------------- ---------------
Total current assets 350,800 552,260 398,612
INVESTMENTS AND LONG TERM RECEIVABLES:
--------------------------------------
Investments in associated companies 441,651 396,007 431,752
Deferred income taxes 6,511 3,885 6,511
--------------- --------------- ---------------
448,162 399,892 438,263
FIXED ASSETS
------------
Cost 978,728 956,250 974,462
Less - accumulated depreciation 656,310 631,283 650,056
--------------- --------------- ---------------
322,418 324,967 324,406
Deferred charges -
net of accumulated amortization 1,066 1,227 1,106
--------------- --------------- ---------------
1,122,446 1,278,346 1,162,387
--------------- --------------- ---------------
CURRENT LIABILITIES:
--------------------
Credit from banks 51,691 140,772 112,684
Current maturities of long-term notes 6,628 6,575 6,648
Payables and accured liabilities :
Trade 79,293 84,841 87,556
Other 81,765 83,154 66,355
--------------- --------------- ---------------
Total current liabilities 219,377 315,342 273,243
LONG-TERM LIABILITIES
---------------------
Deferred income taxes 51,665 62,214 52,562
Loans and other liabilities (net of current maturities):
Notes 227,817 232,975 228,499
Other liabilities 32,770 35,090 32,770
--------------- --------------- ---------------
Total long term liabilities 312,252 330,279 313,831
Total liabilities 531,629 645,621 587,074
SHAREHOLDERS' EQUITY :
----------------------
Share capital 125,257 125,257 125,257
Capital surplus 90,060 90,060 90,060
Capital surplus on account of tax benefit from
exercise of employee options 174
Currency adjustments in respect of financial
statements of associated company and a subsidiary (1,508) (62) (2,807)
Retained earnings 376,834 417,470 362,803
--------------- --------------- ---------------
590,817 632,725 575,313
1,122,446 1,278,346 1,162,387
--------------- --------------- ---------------
The accompanying notes are an integral part of the financial statements.
9
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
SUMMARY OF CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------
NIS IN THOUSANDS
----------------
THREE-MONTH PERIOD YEAR ENDED
ENDED MARCH 31 DEC. 31
2005 2004 2004
------------- ------------ --------------
(UNAUDITED) (AUDITED)
----------- ---------
Net sales 121,778 119,182 482,854
Cost of sales 93,556 91,817 375,904
------------- ------------ --------------
Gross profit 28,222 27,365 106,950
Selling and marketing, administrative and general expenses
Selling and marketing 7,347 8,345 30,595
Administrative and general 6,399 5,477 22,425
------------- ------------ --------------
13,746 13,822 53,020
Income from ordinary operations 14,476 13,543 53,930
Financial expenses - net 3,260 2,044 13,118
------------- ------------ --------------
Income before taxes on income 11,216 11,499 40,812
Taxes on income 3,000 4,000 3,152
------------- ------------ --------------
Income from operations of the company
and the consolidated subsidiaries 8,216 7,499 37,660
Share in profits of associated companies - net 5,815 9,936 25,072
------------- ------------ --------------
Net income for the period 14,031 17,435 62,732
------------- ------------ --------------
NET INCOME PER NIS 1 PAR VALUE OF SHARES (IN N.I.S) 346 431 1,544
--------------------------------------------------- ------------- ------------ --------------
The accompanying notes are an integral part of the financial statements.
10
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
SUMMARY OF STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
--------------------------------------------------------
NIS IN THOUSANDS
----------------
CURRENCY
CAPITAL ADJUSTMENTS
SURPLUS ON IN RESPECT OF
ACCOUNT OF FINANCIAL
TAX BENEFIT STATEMENTS OF
FROM EXERCISE AN ASSOCIATED
SHARE CAPITAL OF EMPLOYEE COMPANY AND RETAINED
CAPITAL SURPLUS OPTIONS A SUBSIDIARY EARNINGS TOTAL
------- ------- ------------- ------------- -------- -----
BALANCE AT JANUARY 1, 2005 (AUDITED) 125,257 90,060 (2,807) 362,803 575,313
-----------------------------------
Changes during the three month period
ended March 31, 2005 (unaudited)
Net income 14,031 14,031
Exercise of employee options into shares * 174 174
Currency adjustments in respect of financial
statements of associated company and a subsidiary 1,299 1,299
-------- -------- -------- -------- -------- --------
BALANCE AT MARCH 31, 2005 (UNAUDITED) 125,257 90,060 174 (1,508) 376,834 590,817
------------------------------------- -------- -------- -------- -------- -------- --------
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
Currency adjustments in 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, 2004 (Audited) 125,257 90,060 (1,122) 400,035 614,230
------------------------------------
Changes during the year ended
December 31, 2004 (audited)
Net income 62,732 62,732
Dividend paid (99,964) (99,964)
Exercise of employee options into shares * *
Currency adjustments in respect of financial
statements of associated companies (1,685) (1,685)
-------- -------- -------- -------- --------
Balance At December 31, 2004 (Audited) 125,257 90,060 (2,807) 362,803 575,313
-------- -------- -------- -------- --------
Less than 1,000 NIS.
The accompanying notes are an integral part of the financial statements.
11
AMERICAN ISRAELI PAPER MILLS LTD.
---------------------------------
SUMMARY OF CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------
NIS IN THOUSANDS
----------------
THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED YEAR ENDED
MARCH 31, 2005 MARCH 31, 2004 DEC. 31, 2004
(UNAUDITED) (UNAUDITED) (AUDITED)
-------------- --------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net income for the period 14,031 17,435 62,732
Adjustments to reconcile net income to net cash provided by
operating activities (a) 14,148 (7,338) (15,637)
-------------- --------------- ------------
Net cash provided by operating activities 28,179 10,097 47,095
-------------- --------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Purchase of fixed assets (5,705) (6,505) (30,952)
Short-term deposits and investments 40,163 (56,999) (42,000)
Associated companys:
Loans granted (2,739) (359) (779)
Repayment of loans 13,688
Proceeds from sale of fixed assets 155 422 1,001
-------------- --------------- ------------
Net cash provided by (used in) investing activities 31,874 (63,441) (59,042)
-------------- --------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Repayment of long-term loans from banks (383)
Redemption of Notes (6,666)
Dividend paid (99,964)
Short-term bank credit - net (60,993) (4,217) (31,933)
-------------- --------------- ------------
Net cash used in financing activites (60,993) (4,217) (138,946)
-------------- --------------- ------------
Decrease in cash and cash equivalents (940) (57,561) (150,893)
Balance of cash and cash equivalents at beginning of period 7,813 158,706 158,706
-------------- --------------- ------------
Balance of cash and cash equivalents at end of period 6,873 101,145 7,813
-------------- --------------- ------------
(a) Adjustments to reconcile net income to net cash provided by
---------------------------------------------------------------
operating activities:
---------------------
INCOME AND EXPENSES NOT INVOLVING CASH FLOWS:
Share in profits of associated companies - net (5,815) (9,936) (25,072)
Depreciation and amortization 7,691 7,039 28,633
Deferred income taxes - net (1,681) (947) (10,096)
Capital losses (gains) on sale of fixed assets (113) (242) 508
Lose (income) from short-term deposits and investments, not realized yet 156 (115) (464)
Linkage differences on (erosion of) principal of long-term loans from
banks and others - net 77 (26)
Linkage differences on (erosion of) Notes (702) (79) 2,184
Linkage differences on loans to associated companies (153) (773) (721)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Decrease (Increase) in receivables 6,829 (10,164) (14,316)
Decrease (increase) in inventories 615 (2,581) 7,434
Increase (decrease) in payables and accrued liabilities 7,321 10,383 (3,701)
-------------- --------------- ------------
14,148 (7,338) (15,637)
-------------- --------------- ------------
The accompanying notes are an integral part of the financial statements.
12
AMIRICAN ISRAELI PAPER MILLS LTD.
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT MARCH 31, 2005
(Unaudited)
NOTE 1 - GENERAL
a. The interim financial statements as of March 31, 2005 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 change in the accounting treatment applied to taxes on
income as detalied in note 3; 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 company draws up and presents its financial statements in Israeli
currency (hereafter -NIS)in accordance with the provisions of Accounting
Standard No.12 -"Discontinuance of Adjusting Financial Statements for
Inflation"-of the IASB,which set transitory provisions for financial
reporting on a nominal basis,commencing January 1,2004.Accordingly,the
amounts of non-monetary assets,mainly fixed assets and other assets
(including depreciation and amortization in respect of those assets),and
the shareholders'equity components included in the financial statements,
originating from the period that preceded the transition date,are based on
their adjusted to December 2003 shekel amount.
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:
2005 1.2 (0.6)
2004 3.4 (0.1)
Year ended December 31, 2004 (1.6) 1.2
The representative exchange rate at March 31, 2005 was N.I.S. 4.361 = $1.00.
13
AMIRICAN ISRAELI PAPER MILLS LTD.
---------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AT MARCH 31, 2005
(Unaudited)
NOTE 2 - SEGMENT INFORMATION
Data on segment activity:
In NIS in thousands
For 3 months period: Paper and recycling Marketing of office supplies Total
----------------------------------------------------------------------------------------
Jan-March Jan-March Jan-March Jan-March Jan-March Jan-March
2005 2004 2005 2004 2005 2004
---- ---- ---- ---- ---- ----
Sales - net (1) 94,957 88,552 26,821 30,630 121,778 119,182
Income (loss) from operations 14,939 14,658 (463) (1,115) 14,476 13,543
For 2004 : Paper and recycling Marketing of office supplies Total
----------------------------------------------------------------------------------------
2004 2004 2004
---- ---- ----
Sales - net (1) 367,391 115,463 482,854
Income (loss) from operations 58,496 (4,566) 53,930
(1) Represents sales to external customers.
NOTE 3 - TAXES ON INCOME:
a. Accounting changes Accounting Standard No.19
Commencing in the financial statements for the 3-month period ended March
31,2005 ,the company implements Israel Accounting Standard No.19 -"Taxes on
Income"of the IASB, which came into effect on January 1,2005. This Standard
prescribes the accounting treatment (recognition criteria, measurement,
presentation and disclosure) required for taxes on income.
For the most part, the provisions of this standard are the same as the
accounting principles that were applied before the application of the new
standard. The adoption of this standard does not have any effect on the
company's financial statements in the reported periods.
b. Change in tax rates
On June 29,2004, the Kneset amended the Income Tax Ordinance. One of the
provisions of this amendment is that the corporate tax rate is to be
gradually reduced, commencing January 1, 2004, from 36% to 30%, in the
following manner: the rate for 2004 will be 35%, in 2005 -34%, in 2006 -
32%, and in 2007 and thereafter -30%.
The taxes on income for the 3-month period ended March 31,2004 were
determined based on the tax rate in effect as of that date -36%. The
adjustment of the income tax expenses on account of the deferred taxes of
the company to the new tax rate set for the year as a result of the
aforesaid correction -amounting to NIS 5,824 thousands - was included in
company's accounts in the second quarter of 2004.
NOTE 4 - SUBSEQUENT EVENT:
After the balance sheet date, an accosiated company declared the
distribution of a dividend. The company's share in the dividend declared -
NIS 21,761,000 - is not included yet in these financial statements, and
will be reported in the following quarter.
14
[Graphic Omitted] Meizer Street
AIPM American Israeli Paper Industrial Zone, P.O. B. 142
Mills Ltd. Group Hadera 38101, Israel
Tel: 972-4-6349402
Fax: 972-4-6339740
E-Mail: chq@aipm.co.il
Enclosed please find the financial reports of the following associated
companies:
- Mondi Business Paper Hadera 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
---------
MONDI BUSINESS PAPER HADERA LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
MONDI BUSINESS PAPER HADERA LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
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
Notes to the Financial Statements 6
The Board of Directors of
Mondi Business Paper Hadera Ltd.
--------------------------------
Re: Review of Unaudited Condensed Interim Consolidated
Financial Statements for the Three months Ended March 31, 2005
--------------------------------------------------------------
Gentlemen:
At your request, we have reviewed the condensed interim consolidated financial
statements ("interim financial statements") of Mondi Business Paper Hadera Ltd.
("the Company") and its subsidiaries, as follows:
- Balance sheet as of March 31, 2005.
- Statement of operations for the three months ended March 31, 2005.
- Statement of changes in shareholders' equity for the three months ended
March 31, 2005.
- Statement of cash flows for the three months ended March 31, 2005.
The comparative figures as of March 31, 2004 and for the three months then ended
were reviewed by other accountants. Those other accountants issued unqualified
reports on said financial statements.
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 limited in scope and does not constitute
an audit in accordance with generally accepted auditing standards, we do not
express an opinion on the aforementioned interim financial statements.
In performing our review, nothing came to our attention, which indicates that
material adjustments are required to the aforementioned interim financial
statements for them to be deemed financial statements prepared in conformity
with generally accepted accounting principles in Israel and in accordance with
the Israeli Securities Regulations (Periodic and Immediate Reports), 1970.
Brightman Almagor & Co.
Certified Public Accountants
A Member Firm of Deloitte Touche Tohmatsu
Tel Aviv, April 21, 2005
1
MONDI BUSINESS PAPER HADERA LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(NIS in thousands; Reported Amounts)
March 31, December 31,
-------------------- ------------
2005 2004 2004
---- ---- ----
(Unaudited)
--------------------
A S S E T S
Current Assets
Cash and cash equivalents -- 37,212 10,804
Trade receivables 156,046 154,876 157,815
Other receivables 8,251 13,064 7,580
Inventories 98,351 81,258 90,391
------- ------- -------
Total current assets 262,648 286,410 266,590
------- ------- -------
Fixed Assets
Cost 167,174 134,856 149,083
Less - accumulated depreciation 35,365 27,389 33,345
------- ------- -------
131,809 107,467 115,738
------- ------- -------
Other Assets - Goodwill 3,644 4,261 3,800
------- ------- -------
Total assets 398,101 398,138 386,128
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term bank credit 11,066 -- --
Current maturities of long-term bank loans 15,273 15,527 15,125
Trade payables 111,458 97,795 104,661
American Israeli Paper Mills Group, net 63,911 57,893 (*) 65,033
Other payables and accrued expenses 21,529 21,097 (*) 23,132
------- ------- -------
Total current liabilities 223,237 192,312 207,951
------- ------- -------
Long-Term Liabilities
Long-term bank loans 30,318 46,435 36,248
Capital notes to shareholders 17,444 45,280 17,233
Deferred taxes 25,683 29,737 25,422
Accrued severance pay, net 87 145 87
------- ------- -------
Total long-term liabilities 73,532 121,597 78,990
------- ------- -------
Shareholders' Equtiy
Share capital 1 1 1
Premium 43,352 43,352 43,352
Retained earnings 57,979 40,876 55,834
------- ------- -------
101,332 84,229 99,187
------- ------- -------
Total liabilities and shareholders' equity 398,101 398,138 386,128
======= ======= =======
------------------ ------------------ --------------------
A. Magid A. Solel Y. Yerushalmi
Financial Director General Manager Vice Chairman of the
Board of Directors
(*) Reclassified.
Approval date of the interim financial statements: April 21, 2005.
The accompanying notes are an integral part of the condensed interim
consolidated financial statements.
2
MONDI BUSINESS PAPER HADERA LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(NIS in thousands; Reported Amounts, except per share data)
Three months ended Year ended
--------------------------- ----------
March 31, December 31,
2005 2004 2004
---- ---- ----
(Unaudited)
---------------------------
NET SALES 164,060 175,364(*) 686,094
COST OF SALES 146,296 151,815(*) 605,738
------- -------- -------
GROSS PROFIT 17,764 23,549 80,356
------- -------- -------
OPERATING COSTS AND EXPENSES
Selling expenses 9,598 12,658 46,135
General and administative expenses 2,595 1,703 7,803
------- -------- -------
12,193 14,361 53,938
------- -------- -------
OPERATING PROFIT 5,571 9,188 26,418
FINANCING EXPENSES, NET (1,906) (5,769) (8,438)
OTHER INCOME, NET 76 -- 100
------- -------- -------
INCOME BEFORE INCOME TAXES 3,741 3,419 18,080
INCOME TAXES 1,596 1,115 818
------- -------- -------
NET INCOME FOR THE PERIOD 2,145 2,304 17,262
======= ======== =======
BASIC EARNINGS PER ORDINARY SHARE
Earnings per ordinary share (in NIS) 2,145 2,304 17,262
======= ======== =======
Number of shares used in computation 1,000 1,000 1,000
======= ======== =======
(*) Reclassified.
The accompanying notes are an integral part of the condensed interim
consolidated financial statements.
3
MONDI BUSINESS PAPER HADERA LTD.
CONDENSED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(NIS in thousands; Reported Amounts)
Share Retained
capital Premium earnings Total
------- ------- -------- -----
Three months ended March 31, 2005
(Unaudited)
Balance - January 1, 2005 1 43,352 55,834 99,187
Net income for the period 2,145 2,145
----- ------ ------ ------
Balance - March 31, 2005 1 43,352 57,979 101,332
===== ====== ====== =======
Three months ended March 31, 2004
(Unaudited)
Balance - January 1, 2004 1 43,352 38,572 81,925
Net income for the period 2,304 2,304
----- ------ ------ ------
Balance - March 31, 2004 1 43,352 40,876 84,229
===== ====== ====== =======
Year ended December 31, 2004
Balance - January 1, 2004 1 43,352 38,572 81,925
Net income for the year 17,262 17,262
----- ------ ------ ------
Balance - December 31, 2004 1 43,352 55,834 99,187
===== ====== ====== =======
The accompanying notes are an integral part of the condensed interim
consolidated financial statements.
4
MONDI BUSINESS PAPER HADERA LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(NIS in thousands; Reported Amounts)
Three months ended Year ended
--------------------------- ----------
March 31, December 31,
2005 2004 2004
---- ---- ----
(Unaudited)
---------------------------
CASH FLOWS - OPERATING ACTIVITIES
Net income for the period 2,145 2,304 17,262
Adjustments to reconcile net income to
net cash provided by operating activities
Income and expenses
not involving cash flows:
Depreciation and amortization 2,348 2,234 9,118
Deferred taxes, net 1,276 896 823
Decrease in liability for
severance pay, net -- -- (58)
Other income, net (76) -- (100)
Effect of exchange rate and linkage differences
of long-term bank loans 343 1,389(*) (195)
Effect of exchange rate differences
of long-term capital notes to shareholders 211 1,490 571
Changes in assets and liabilities:
Decrease (increase) in trade receivables 1,769 (7,128) (10,067)
Increase in other receivables (1,686) (2,174) (932)
Decrease (increase) in inventories (7,960) 7,973 (1,160)
Increase (decrease) in trade payables 6,439 (6,302) (220)
Increase (decrease) in American
Israeli Paper Mills Group, net (1,122) 9,107(*) 16,247
Increase (decrease) in other payables
and accrued expenses (1,603) 4,233(*) 6,268
------- ------- -------
Net cash provided by
operating activities 2,084 14,022 37,557
CASH FLOWS - INVESTING ACTIVITIES
Acquisition of fixed assets (17,905) (2,250) (16,235)
Proceeds from sale of fixed assets 76 22 197
------- ------- -------
Net cash used in investing activities (17,829) (2,228) (16,038)
------- ------- -------
CASH FLOWS - FINANCING ACTIVITIES
Short-term bank credit, net 11,066 -- --
Repayment of long-term loans (6,125) (6,260)(*) (15,265)
Repayment of long-term
capital notes to shareholders -- -- (27,128)
------- ------- -------
Net cash provided by (used in) financing activities 4,941 (6,260) (42,393)
------- ------- -------
Increase (decrease) in cash and cash equivalents (10,804) 5,534 (20,874)
Cash and cash equivalents - beginning of period 10,804 31,678 31,678
------- ------- -------
Cash and cash equivalents - end of period -- 37,212 10,804
======= ======= =======
Non-cash activities
Acquisition of fixed assets on credit 1,142 784
======= =======
(*) Reclassified.
The accompanying notes are an integral part of the condensed interim
consolidated financial statements.
5
MONDI BUSINESS PAPER HADERA LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS AS OF MARCH 31, 2005
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed interim consolidated financial statements as of
March 31, 2005 and for the three months then ended ("interim financial
statements") of Mondi Business Paper Hadera 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, 2004 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, 2005 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" and in accordance with Paragraph D of the
Israeli Securities Regulations (Periodic and Immediate
Financial Statements), 1970.
B. Recent Accounting Standard - Income Taxes
In July 2004, the Israeli Accounting Standards Board published
Accounting Standard No. 19 "Income Taxes" (the "Standard").
The Standard established the guideline for recognizing,
measuring, presenting and disclosing taxes on income taxes in
the financial statements. The Standard is effective for
financial statements relating to reporting periods commencing
on, or after, January 1, 2005. The initial adoption of the
Standard shall be accounted for by the cumulative effect of
change in accounting method, for the beginning of the period
in which the Standard is initially adopted. The implementation
of Standard No. 19 did not affect the Group's financial
position, results of operations and cash flows.
6
C. Following are the changes in the representative exchange rate
of the U.S. dollar vis-a-vis the NIS and in the Israeli
Consumer Price Index ("CPI"):
Representative
Exchange CPI
Rate of the dollar "in respect of"
(NIS per $1) (in points)
------------ -----------
As of:
March 31, 2005 4.361 179.66
March 31, 2004 4.528 178.40
December 31, 2004 4.308 180.74
Increase (decrease) during the: % %
------------ -----------
Three months ended March 31, 2005 1.2 (0.6)
Three months ended March 31, 2004 3.4 (0.1)
Year ended December 31, 2004 (1.6) 1.2
7
Exhibit 5
---------
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
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
The Board of Directors of
Hogla-Kimberly Ltd.
-------------------
Re: Review of Unaudited Condensed Interim Consolidated
Financial Statements for the Three Months Ended March 31, 2005
--------------------------------------------------------------
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, 2005.
- Statement of operations for the three months ended March 31, 2005.
- Statement of changes in shareholders' equity for the three months ended
March 31, 2005.
- Statement of cash flows for the three months ended March 31, 2005.
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 limited in scope and does not constitute
an audit in accordance with generally accepted auditing standards, we do not
express an opinion on the aforementioned interim financial statements.
In performing our review, nothing came to our attention, which indicates that
material adjustments are required to the aforementioned interim financial
statements for them to be deemed financial statements prepared in conformity
with generally accepted accounting principles in Israel and in accordance with
the Israeli Securities Regulations (Periodic and Immediate Reports), 1970.
Brightman Almagor & Co.
Certified Public Accountants
A Member Firm of Deloitte Touche Tohmatsu
Tel Aviv, May 5, 2005
1
HOGLA-KIMBERLY LTD. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(NIS in thousands; Reported Amounts)
March 31, December 31,
------------------------------- -------------
2 0 0 5 2 0 0 4 2 0 0 4
------- ------- -------
(Unaudited)
Current Assets
Cash and cash equivalents 122,904 54,885 117,364
Current maturities of long-term bank deposits - 8,150 -
Trade receivables 220,288 269,818 214,389
Other receivables 36,191 20,127 35,725
Inventories 125,112 101,173 142,551
------- ------- -------
504,495 454,153 510,029
------- ------- -------
Long-Term Investments
Long-term bank deposits 69,776 72,448 68,928
Capital note of shareholder 32,770 32,770 32,770
------- ------- -------
102,546 105,218 101,698
------- ------- -------
Fixed Assets
Cost 509,763 480,716 507,175
Less - accumulated depreciation 226,759 212,479 222,256
------- ------- -------
283,004 268,237 284,919
------- ------- -------
Other Assets
Goodwill 25,503 29,346 25,878
Deferred taxes 19,079 - 15,108
------- ------- -------
44,582 29,346 40,986
------- ------- -------
934,627 856,954 937,632
======= ======= =======
Current Liabilities
Current maturities of long-term bank loans 73,941 18,501 68,747
Trade payables 196,677 174,614 219,902
Other payables and accrued expenses 43,164 51,164 38,720
------- ------- -------
313,782 244,279 327,369
------- ------- -------
Long-Term Liabilities
Long-term bank loans 78,497 96,447 81,851
Deferred taxes 38,630 32,254 37,388
------- ------- -------
117,127 128,701 119,239
------- ------- -------
Minority Interest 55,173 52,556 54,492
------- ------- -------
Shareholders' Equity
Share capital 29,038 28,788 29,038
Capital reserves 180,414 156,799 180,414
Translation adjustments relating to
foreign held autonomous Subsidiary (897) 2,124 (3,377)
Retained earnings 196,380 243,707 230,457
Dividend declared after balance sheet date 43,610 - -
------- ------- -------
448,545 431,418 436,532
------- ------- -------
934,627 856,954 937,632
======= ======= =======
---------------------------------- ----------------------- -----------------------
T. Davis O. Argov A. Schor
Chairman of the Board of Directors Chief Financial Officer Chief Executive Officer
Approval date of the interim financial statements: May 5, 2005.
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; Reported Amounts, except per share data)
Three months ended Year ended
March 31, December 31,
---------------------------- -------------
2 0 0 5 2 0 0 4 2 0 0 4
------- ------- -------
(unaudited)
----------------------------
Net sales 274,147 266,766 995,569
Cost of sales 199,834 185,037 719,982
--------- --------- ---------
Gross profit 74,313 81,729 275,587
Selling expenses 49,372 45,643 193,701
General and administrative expenses 10,236 9,920 41,029
--------- --------- ---------
Operating profit 14,705 26,166 40,857
Financing income (expenses), net (828) 2,080 (1,490)
Other income, net - 87 903
--------- --------- ---------
Income before income taxes 13,877 28,333 40,270
Income taxes 3,663 10,858 10,244
--------- --------- ---------
Income after income taxes 10,214 17,475 30,026
Minority interest in earnings of Subsidiary (681) (1,162) (3,098)
--------- --------- ---------
Net income for the period 9,533 16,313 26,928
========= ========= =========
Basic earnings per ordinary share
Earnings per share (in NIS) 1.12 1.92 (*) 3.16
========= ========= =========
Number of shares used in computation 8,513,473 8,513,473 (*) 8,513,473
========= ========= =========
(*) Retroactively adjusted for the effect of bonus share distribution.
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; Reported Amounts)
Translation Dividend
adjustments declared
relating to after
foreign held balance
Share Capital autonomous Retained sheet
capital reserves Subsidiary earnings date Total
------- -------- ---------- -------- ------- -----
Three months ended
March 31, 2005 (unaudited)
Balance - January 1, 2005 29,038 180,414 (3,377) 230,457 - 436,532
Translation adjustments
relating to foreign held
autonomous Subsidiary 2,480 2,480
Dividend declared after
balance sheet date (43,610) 43,610 -
Net income for the period 9,533 9,533
------ ------- ------ ------- ------ -------
Balance - March 31, 2005 29,038 180,414 (897) 196,380 43,610 448,545
====== ======= ====== ======= ====== =======
Three months ended
March 31, 2004 (unaudited)
Balance - January 1, 2004 28,788 156,799 - 227,394 - 412,981
Translation adjustments
relating to foreign held
autonomous Subsidiary 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
====== ======= ====== ======= ====== =======
Year ended December 31, 2004
Balance - January 1, 2004 28,788 156,799 - 227,394 - 412,981
Distribution of bonus shares 250 23,615 (23,865) -
Translation adjustments
relating to foreign held
autonomous Subsidiary (3,377) (3,377)
Net income for the year 26,928 26,928
------ ------- ------ ------- ------ -------
Balance - December 31, 2004 29,038 180,414 (3,377) 230,457 - 436,532
====== ======= ====== ======= ====== =======
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; Reported Amounts)
Three months ended Year ended
March 31, December 31,
--------------------------- -------------
2 0 0 5 2 0 0 4 2 0 0 4
------- ------- -------
(unaudited)
---------------------------
Cash flows - operating activities
Net income for the period 9,533 16,313 26,928
Adjustments to reconcile net income to net cash
provided by operating activities (Appendix A) (25) 5,147 30,683
------- ------ -------
Net cash provided by operating activities 9,508 21,460 57,611
------- ------ -------
Cash flows - investing activities
Withdrawal of long-term bank deposits - - 8,138
Acquisition of fixed assets (6,150) (3,458) (25,191)
Proceeds from sale of fixed assets - 499 1,827
------- ------ -------
Net cash used in investing activities (6,150) (2,959) (15,226)
------- ------ -------
Cash flows - financing activities
Long-term loan received 3,056 4,427 57,672
Repayment of long-term loan (3,056) (4,421) (15,162)
Short-term bank credit - (1,087) (1,087)
------- ------ -------
Net cash provided by
(used in) financing activities - (1,081) 41,423
------- ------ -------
Translation adjustments of cash and
cash equivalents and operations of
foreign held autonomous Subsidiary 2,182 125 (3,784)
------- ------ -------
Increase in cash and cash equivalents 5,540 17,545 80,024
Cash and cash equivalents - beginning of period 117,364 37,340 37,340
------- ------ -------
Cash and cash equivalents - end of period 122,904 54,885 117,364
======= ====== =======
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; Reported Amounts )
Three months ended Year ended
March 31, December 31,
-------------------------- ------------
2 0 0 5 2 0 0 4 2 0 0 4
------- ------- -------
(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 681 1,162 3,098
Depreciation and amortization 6,109 6,052 23,468
Deferred taxes, net (2,499) 443 (5,011)
Gain from sale of fixed assets - (87) (1,162)
Effect of exchange rate differences, net 71 (598) (1,901)
Changes in assets and liabilities:
Decrease (increase) in trade receivables (6,043) (38,329) 15,763
Increase in other receivables (424) (3,444) (20,938)
Decrease (increase) in inventories 18,411 (8,014) (46,919)
Increase (decrease) in trade payables (18,882) 28,341 49,624
Net change in balances with related parties (1,915) 6,229 13,591
Increase in other payables
and accrued expenses 4,466 13,392 1,070
------- ------ ------
(25) 5,147 30,683
======= ====== ======
B. Non-cash activities
Acquisition of fixed assets on credit 2,996 634 18,470
======= ====== ======
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, 2005
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed interim consolidated financial statements
as of March 31, 2005 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, 2004 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, 2005 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" and in accordance with
Paragraph D of the Israeli Securities Regulations (Periodic
and Immediate Financial Statements), 1970.
B. Income Taxes
In July 2004, the Israeli Accounting Standards Board
published Accounting Standard No. 19 "Income Taxes" (the
"Standard"). The Standard established the guideline for
recognizing, measuring, presenting and disclosing income
taxes in the financial statements. The Standard is
effective for financial statements relating to reporting
periods commencing on, or after, January 1, 2005. The
initial adoption of the Standard is accounted for by the
cumulative effect of change in accounting method, for the
beginning of the period in which the Standard is initially
adopted. The implementation of Standard No. 19 did not
affect the Group's financial position, results of
operations and cash flows.
C. During the reporting period, the representative exchange
rate of the US Dollar vis-a-vis the NIS and the exchange
rate of the Turkish Lira vis-a-vis the NIS increased by
1.2% and 0.5%, respectively, while the Israeli Consumer
Price Index decreased by 0.6%.
7