Commission File No. 1-4212
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F/A
(Amendment No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
-------------------------
AMERICAN ISRAELI PAPER MILLS LTD.
(Exact name of Registrant as specified in its charter and translation of
Registrant's name into English)
---------------------------------
Israel
(Jurisdiction of incorporation or organization)
P.O. Box 142, Hadera 38101, Israel
(Address of principal executive offices)
------------------------------
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Ordinary Shares, par value NIS .01 per share American Stock Exchange
Securities registered or to be registered
pursuant to Section 12(g) of the Act:
None
(Title of Class) Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act:
None
(Title of Class)
-----------------------------------------------
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:
3,996,674 Ordinary Shares, par value NIS .01 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes |X| No |_|.
Indicate by check mark which financial statement item the registrant has elected
to follow: Item 17 |_| Item 18 |X|
EXPLANATORY NOTE
American Israeli Paper Mills Ltd. ("AIPM" or the "Company") is filing this
Amendment No. 1 on Form 20-F to amend its Annual Report for the period ending
December 31, 2004, as filed with the Securities and Exchange Commission (the
"Commission") on June 28, 2005 (the "Original Filing"). The purpose of this
Amendment is to: (1) amend Item 4C entitled "Organizational Structure" and Item
15 entitled "Controls and Procedures", (2) include Kesselman & Kesselman's audit
reports for Mondi Business Paper Hadera Ltd. and Brightman Almagor & Co.'s audit
reports for Rakefet Marketing and Trade Services Ltd. and (3) include
comparative figures for the US GAAP adjustments reports of Rakefet Marketing and
Trade Services Ltd., for Mondi Business Paper Hadera Ltd. and of Hogla-Kimberly
Ltd. This Amendment No. 1 does not otherwise update information in the Original
Filing to reflect facts or events occurring subsequent to the date of the
Original Filing.
PART I
ITEM 4 - INFORMATION ON THE COMPANY
C. Organizational Structure
As of May 31, 2005, Clal Industries and Investment Ltd. (Clal)
beneficially owned 32.90% of the ordinary shares of the Company and Discount
Investment Corporation Ltd. (DIC) beneficially owned 18.59% of the ordinary
shares of the Company. Clal and DIC agreed to coordinate and pool their voting
power in the Company. To our knowledge, IDB Development Corporation Ltd. owns
67.26% of DIC and 61.93% of Clal. See "Item 7 - Major Shareholders and Related
Party Transactions."
Significant subsidiaries and associated companies
Name of the Company Ownership and Voting Country of
Incorporation
Subsidiaries
Amnir Recycling Industries Ltd. 100.00% Israel
Graffiti Office Supplies & Paper Marketing Ltd. 100.00% Israel
Attar Marketing Office Supplies Ltd. 100.00% Israel
American Israeli Paper Mills Paper Industry (1995) Ltd. 100.00% Israel
Datashred 2003 AG 75.00% Switzerland
Associated Companies
Hogla-Kimberly Ltd. 49.90% Israel
Ovisan Sihhi Bez Sanai Ve Ticaret A.S. 49.90% Turkey
Mondi Business Paper Hadera Ltd. 49.90% Israel
Barthelemi Holdings Ltd. 33.91% Israel
T.M.M. Integrated Recycling Industries Ltd. (direct and indirect) 41.60% Israel
Carmel Containers Systems Ltd. 26.25% Israel
C.D. Packaging Systems Limited (direct and indirect) 63.20%* Israel
Cycle-Tec Recycling Technology Ltd. 30.18% Israel
In the exhibits we enclosed the auditors' reports of other companies,
because they have other auditors depending on their audit reports, although
these companies are immaterial to the Company's operations.
2
ITEM 15 - CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
periodic filings with the SEC is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to the Company's management,
including the Company's Chief Executive Officer (CEO - the Company's senior
executive officer) and Chief Financial Officer (CFO - the Company's senior
financial officer), as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives. Furthermore, management necessarily was required to
use its judgment in evaluating the cost to benefit relationship of possible
disclosure controls and procedures. As of the end of the period covered by this
report, the Company performed an evaluation of the effectiveness of the design
and operation of the Company's disclosure controls and procedures. The
evaluation was performed with the participation of senior management of each
business segment and key corporate functions, and under the supervision of the
CEO and CFO. Based on the evaluation, the Company's management, including the
CEO and CFO, concluded that the Company's disclosure controls and procedures
were effective. There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls
after the date the Company completed the evaluation.
ITEM 19 - EXHIBITS
(a) The following financial statements and supporting documents are filed
with this report:
(i) Reports of Independent Registered Public Accounting Firms to
the Shareholders of 1) Rakefet Marketing and Trade Services
Ltd. and 2) Mondi Business Paper Hadera Ltd. (formerly:
Neuisiedler Hadera Paper Ltd.)
(ii) Reconciliation to US GAAP report of Rakefet Marketing and
Trade Services Ltd. for the year ended December 31, 2004.
(iii) Reconciliation to US GAAP report of of Mondi Business Paper
Hadera Ltd. for the year ended December 31, 2004.
(iv) Reconciliation to US GAAP report of of Hogla-Kimberly Ltd. for
the year ended December 31, 2004.
(b) Exhibits:
31.1 Certification of Chief Executive Officer pursuant to 17 CFR
240.13a-14(a), as adopted pursuant to ss. 302 of the Sarbanes-Oxley
Act.
31.2 Certification of Chief Financial Officer pursuant to 17 CFR
240.13a-14(a), as adopted pursuant to ss. 302 of the Sarbanes-Oxley
Act.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.ss.1350,
as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.ss.1350,
as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act.
3
SIGNATURES
Pursuant to the requirement of Section 12 of the Securities Exchange
Act of] 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERICAN ISRAELI PAPER MILLS LIMITED
By: /s/ Lea Katz
--------------------------------
Name: Lea Katz
Title: Corporate Secretary
Dated: September 29, 2005
4
EXHIBIT INDEX
19(a)(i) Reports of Independent Registered Public Accounting Firms to the
Shareholders of 1) Rakefet Marketing and Trade Services Ltd. and
2) Mondi Business Paper Hadera Ltd. (formerly: Neuisiedler Hadera
Paper Ltd.)
19(a)(ii) Reconciliation to US GAAP report of Rakefet Marketing and Trade
Services Ltd. for the year ended December 31, 2004.
19(a)(iii) Reconciliation to US GAAP report of Mondi Business Paper Hadera
Ltd. for the year ended December 31, 2004.
19(a)(iv) Reconciliation to US GAAP report of Hogla-Kimberly Ltd. for the
year ended December 31, 2004.
31.1 Certification of Chief Executive Officer pursuant to 17 CFR
240.13a-14(a), as adopted pursuant to ss. 302 of the Sarbanes-Oxley
Act.
31.2 Certification of Chief Financial Officer pursuant to 17 CFR
240.13a-14(a), as adopted pursuant to ss. 302 of the Sarbanes-Oxley
Act.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.ss.1350,
as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.ss.1350,
as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act.
5
EXHIBIT 19(a)(i)
----------------
Independent Auditors' Report
to the Shareholders of
Rakefet Marketing and Trade Services Ltd.
We have audited the accompanying balance sheets of Rakefet Marketing and Trade
Services Ltd. (the "Company") as of December 31, 2004 and 2003 and the related
statements of operations and changes in shareholders' equity for each of the
three years in the period ended December 31, 2004. These financial statements
are the responsibility of the Company's Board of Directors and management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Israel, including those prescribed by the Israeli Auditors' Regulations (Mode
of Performance), 1973. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the Board of Directors and management, as well as evaluating
the overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
2004 and 2003 and the results of operations and changes in shareholders' equity
for each of the three years then ended, in accordance with generally accepted
accounting principles in Israel.
As explained in Note 2A, the financial statements as of dates and for reporting
period commencing January 1, 2004, are presented at reported amounts, in
accordance with accounting standards of the Israeli Accounting Standards Board.
The financial statements as of dates prior to January 1, 2004 and for reporting
periods ended through December 31, 2003, have been prepared on the basis of
historical cost adjusted for changes in the exchange rate of the U.S. dollar in
relation to the NIS, in accordance with pronouncements of the Institute of
Certified Public Accountants in Israel.
/s/ Brightman Almagor & Co.
Brightman Almagor & Co.
Certified Public Accountants
A Member Firm of Deloitte Touche Tohmatsu
Tel Aviv, March 7, 2005
6
REPORT OF INDEPENDENT AUDITORS
To the shareholders of
MONDI BUSINESS PAPER HADERA LTD (formerly: Neusiedler Hadera Paper Ltd.)
We have audited the financial statements of Mondi business paper Hadera Ltd.
(formerly: Neusiedler Hadera Paper Ltd, hereafter - the Company) and the
consolidated financial statements of the Company and its subsidiaries: balance
sheets as of December 31, 2003 and the related statements of income, changes in
shareholders' equity and cash flows for each of the two years in the period
ended December 31, 2003. These financial statements are the responsibility of
the Company's board of directors and management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Israel and in the standards of the Public Company Accounting Oversight Board
(United States), including those prescribed by the Israeli Auditors (Mode of
Performance) Regulations, 1973, Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the Company's board of directors and management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to above
present fairly, in all material respects, the financial position - of the
Company and consolidated - as of December 31, 2003 results of operations, the
changes in shareholders' equity and the cash flows - of the Company and
consolidated - for each of the two years in the period ended December 31, 2003,
in conformity with accounting principles generally accepted ("GAAP") in Israel.
Furthermore, in our opinion, the financial statements referred to above are
prepared in accordance with the Israeli Securities (Preparation of Annual
Financial Statements) Regulations, 1993.
As explained in note 1b, the financial statements referred to above are
presented in values adjusted for the changes in the exchange rate of the U.S.
dollar, in accordance with pronouncements of the Institute of Certified Public
Accountants in Israel.
Tel-Aviv, Israel
March 10, 2004
/s/ Kesselman & Kesselman
7
EXHIBIT 19(a)(ii)
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Date: March 7, 2005
Our ref: 783910
To: Rakefet Marketing and Trade Services Ltd.
Ramla
-----
Gentlemen,
Re: US GAAP Adjustments Report as of December 31, 2004
--------------------------------------------------
Pursuant to your request and as the independent accountants of Rakefet Marketing
and Trade Services Ltd. ("the Company"), we have audited the Company's US GAAP
Adjustments Report as of December 31, 2004 and for the year then ended ("the
Report"). The Report, which is enclosed herewith, marked by our Firm's
identification seal, is your responsibility.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States) and with generally accepted auditing
standards in Israel, including those prescribed by the Israeli Auditors'
Regulations (Mode of Performance), 1973. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the Report is
free of material misstatement. An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the Report, assessing the accounting principles used and significant estimates
made by the Board of Directors and management, as well as evaluating the overall
Report presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the Report referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2004, and the
results of operations and changes in shareholders' equity for the year then
ended., in accordance with generally accepted accounting principles in the
United States of America.
Sincerely,
/s/ Brightman Almagor & Co.
Brightman Almagor & Co.
Certified Public Accountants
A Member Firm of Deloitte Touche Tohmatsu
8
Rakefet Marketing and Trade Services Ltd.
US GAAP Adjustments Report
As of December 31, 2004
-----------------------
As of the date of this letter, the audit of the Company's books
has been completed, and the financial statements of the Company
are to be prepared in accordance with generally accepted
accounting principles ("GAAP") applicable in Israel. The
following describes the effects on the Company's financial
statements had the Company would have prepared its financial
statements in accordance with GAAP applicable in the United
States of America.
A. Basis of Measurement - Adjusted NIS vis-a-vis Nominal NIS
According to Israeli GAAP, the financial statements of the
Company through December 31, 2003 were presented based on
nominal historical cost adjusted for the changes in the
exchange rate of the U.S. Dollar in relation to the NIS
based on the principles presented in Note 2A(4) to the
Parent-Company's (Hogla-Kimberly Ltd.) financial statements
as of December 31, 2004, while according to US GAAP, the
financial statements are to be presented in nominal
historical terms. Accordingly, the effect of the difference
in the basis of measurement on the Company's financial
position and results of operations is excluded for the U.S.
GAAP presentation. As presented in Note 2A to the
Parent-Company's financial statements as of December 31,
2004, commencing January 1, 2004, the Company ceased the
presentation of its financial statements based on adjusted
NIS, and effective with the interim financial statements as
of March 31, 2004 and for the reporting periods thereafter,
including the year ended December 31, 2004, the Company's
financial statements are prepared and presented in Reported
Amounts, as defined in Note 2A(1) to the Mother-Company's
financial statements as of December 31, 2004.
B. Selected Balance Sheet Items
As of December 31, 2004
-----------------------
As As per
reported Adjustment US GAAP
-------- ---------- -------
NIS in thousands
----------------
Shareholders' equity 268,433 1,059 269,492
======= ===== =======
As of December 31, 2003
-----------------------
As As per
reported Adjustment US GAAP
-------- ---------- -------
NIS in thousands
----------------
Shareholders' equity 253,175 1,092 254,267
======= ===== =======
9
Rakefet Marketing and Trade Services Ltd.
US GAAP Adjustments Report
As of December 31, 2004
-----------------------
C. Selected Statements of Operation Items
Company
-------
Year ended December 31,
-----------------------
2004 2003 2002
---- ---- ----
NIS in thousands
----------------
Net income under Israeli GAAP 15,258 35,149 12,808
Effect of material differences between
Israeli GAAP and US GAAP:
Change in basis of measurement
from adjusted NIS to nominal NIS
28 (16,057) 15,669
Deferred taxes
(61) (569) 40
------ ------ ------
Net income under US GAAP
15,225 18,523 28,517
====== ====== ======
D. Changes in Shareholders' Equity in Accordance with US GAAP
NIS in thousands
----------------
Shareholders' equity under US GAAP as of January 1, 2002 207,227
Net income for the year under US GAAP 28,517
-------
Shareholders' equity under US GAAP as of December 31, 2002 235,744
=======
NIS in thousands
----------------
Shareholders' equity under US GAAP as of January 1, 2003 235,744
Net income for the year under US GAAP 18,523
-------
Shareholders' equity under US GAAP as of December 31, 2003 254,267
=======
NIS in thousands
----------------
Shareholders' equity under US GAAP as of January 1, 2004 254,267
Net income for the year under US GAAP 15,225
-------
Shareholders' equity under US GAAP as of December 31, 2004 269,492
=======
/s/
-------------
signature
10
EXHIBIT 19(a)(iii)
------------------
Date: February 23, 2005
Our ref: 793776
To: Mondi Business Paper Hadera Ltd.
Hadera
------
Gentlemen,
Re: US GAAP Adjustments Report as of December 31, 2004
--------------------------------------------------
Pursuant to your request and as the independent accountants of Mondi Business
Paper Hadera Ltd. ("the Company"), we have audited the Company's US GAAP
Adjustments Report as of December 31, 2004 and for the year then ended ("the
Report"). The Report, which is enclosed herewith, marked by our Firm's
identification seal, is your responsibility.
The Company's US GAAP adjustments financial data as of December 31, 2003 and for
each of the two years in the period then ended were audited by other auditors
whose report, dated March 10, 2004, expressed an unqualified opinion on those US
GAAP adjustments financial data.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States) and with generally accepted auditing
standards in Israel, including those prescribed by the Israeli Auditors'
Regulations (Mode of Performance), 1973. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the Report is
free of material misstatement. An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the Report, assessing the accounting principles used and significant estimates
made by the Board of Directors and management, as well as evaluating the overall
Report presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the Report referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2004, and the
results of operations and changes in shareholders' equity for the year then
ended, in accordance with generally accepted accounting principles in the United
States of America.
Sincerely,
Brightman Almagor & Co.
Certified Public Accountants
A Member Firm of Deloitte Touche Tohmatsu
11
Mondi Business Paper Hadera Ltd.
US GAAP Adjustments Report
As of December 31, 2004
-----------------------
The consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting
principles ("GAAP") applicable in Israel. The following describes
the effects on the Company's consolidated financial statements
had the Company prepared its financial statements in accordance
with GAAP applicable in the United States of America.
A. Recent accounting pronouncements by the FASB
(1) SFAS No. 151 - Inventory Costs, an Amendment of ARB No. 43,
Chapter 4 - In November 2004 the FASB issued SFAS No. 151,
"Inventory Costs, an Amendment of ARB No. 43, Chapter 4".
SFAS No. 151 amends the guidance in ARB 43, Chapter 4,
"Inventory Pricing", which provides guidance on the
allocation of certain costs to inventory. SFAS 151
clarifies that abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage)
should be recognized as current-period charges. In
addition, SFAS 151 requires that allocation of fixed
production overheads to the costs of conversion be based on
the normal capacity of the production facilities. The
provisions of this statement are effective for inventory
costs incurred during fiscal years beginning after June
2005. The provisions of this statement shall be applied
prospectively. The Company is currently assessing the
impact of the adoption of this Standard on the Company's
financial position and results of operations under U.S.
GAAP.
(2) SFAS 153, Exchange of Non-Monetary Assets - In December
2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets an amendment of APB No. 29". This
Statement amends Opinion 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance.
The Statement specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity
are expected to change significantly as a result of the
exchange. This Statement is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June
15, 2005. Earlier application is permitted for nonmonetary
asset exchanges occurring in fiscal periods beginning after
the date this Statement is issued. Retroactive application
is not permitted. The Company is assessing the impact of
the adoption of this Standard, and currently estimates that
its adoption in not expected to have a material effect on
the Company's financial position and results of operations.
12
Mondi Business Paper Hadera Ltd.
US GAAP Adjustments Report
As of December 31, 2004
-----------------------
B. Goodwill
According to Israeli GAAP, goodwill is to be amortized over
the expected estimated economic life of the asset acquired,
while according to US GAAP (SFAS 142), commencing January
2002 goodwill is no longer amortized but rather is reviewed
annually (or more frequently if impairment indicators
arise) for impairment. Following are the corresponding
balance-sheet items presented according to US GAAP with
regard to the goodwill associated with the acquisition of
Miterani (see Note 7B to the Company's financial statements
as of December 31, 2004) and the other GAAP differences
outlined in D. Below.
C. Basis of Measurement - Adjusted NIS vis-a-vis Nominal NIS
According to Israeli GAAP, the financial statements of the
Group through December 31, 2003 were presented based on
nominal historical cost adjusted for the changes in the
exchange rate of the U.S. Dollar in relation to the NIS
based on the principles presented in Note 2A(4) to the
Company's financial statements as of December 31, 2004,
while according to US GAAP, the financial statements are to
be presented in nominal historical terms. Accordingly, the
effect of the difference in the basis of measurement on the
Group's financial position and results of operations is
excluded for the U.S. GAAP presentation. As presented in
Note 2A to the Company's financial statements as of
December 31, 2004, commencing January 1, 2004, the Group
ceased the presentation of its financial statements based
adjusted NIS, and effective with the interim financial
statements as of March 31, 2004 and for the reporting
periods thereafter, including the year ended December 31,
2004, the Group's financial statements are prepared and
presented in Reported Amounts, as defined in Note 2A(1) to
the Company's financial statements as of December 31, 2004.
D. Selected Balance Sheet Items
As of December 31, 2004 As of December 31, 2003
----------------------- -----------------------
As As per As As per
reported Adjustment US GAAP reported Adjustment US GAAP
-------- ---------- ------- -------- ---------- -------
NIS in thousands NIS in thousands
---------------- ----------------
Other assets-Goodwill 3,800 1,678 5,478 4,423 1,055 5,478
------ ------ ------ ------ ------ ------
Shareholders' equity 99,187 (2,313) 96,874 81,925 (2,272) 79,653
====== ====== ====== ====== ====== ======
13
Mondi Business Paper Hadera Ltd.
US GAAP Adjustments Report
As of December 31, 2004
-----------------------
E. Selected Statements of Operation Items
Consolidated and Company
---------------------------------------------------------
Year ended December 31,
---------------------------------------------------------
2 0 0 4 2 0 0 3 2 0 0 2
------- ------- -------
NIS in thousands
---------------------------------------------------------
17,262 18,519 16,077
Net income under Israeli GAAP
Effect of material differences between
Israeli GAAP and US GAAP:
Change in basis of measurement
from adjusted NIS to nominal NIS (1,104) 5,367 (253)
Amortization of goodwill 623 602 602
Deferred taxes 440 (2,938) 402
------ ------ ------
Net income under US GAAP 17,221 21,550 16,828
F. Changes in Shareholders' Equity in Accordance with US GAAP
NIS in thousands
---------------------------------------------------------
2 0 0 4 2 0 0 3 2 0 0 2
------- ------- -------
Shareholders' equity under US GAAP as of the 79,653 58,103 41,275
beginning of the year
Net income for the year under US GAAP 17,221 21,550 16,828
------ ------ ------
Shareholders' equity under US GAAP as of the end 96,874 79,653 58,103
of the year
/s/ Avi Magid
-------------
Avi Magid
Chief Financial Officer
14
EXHIBIT 19(a)(iv)
-----------------
Date: March 7, 2005
Our ref: 783908
To: Hogla-Kimberly Ltd.
Ramla
-----
Gentlemen,
Re: US GAAP Adjustments Report as of December 31, 2004
--------------------------------------------------
Pursuant to your request and as the independent accountants of Hogla-Kimberly
Ltd. ("the Company"), we have audited the Company's US GAAP Adjustments Report
as of December 31, 2004 and for the year then ended ("the Report"). The Report,
which is enclosed herewith, marked by our Firm's identification seal, is your
responsibility.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States) and with generally accepted auditing
standards in Israel, including those prescribed by the Israeli Auditors'
Regulations (Mode of Performance), 1973. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the Report is
free of material misstatement. An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the Report, assessing the accounting principles used and significant estimates
made by the Board of Directors and management, as well as evaluating the overall
Report presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the Report referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2004, and the
results of operations and changes in shareholders' equity for the year then
ended, in accordance with generally accepted accounting principles in the United
States of America.
Sincerely,
/s/
Brightman Almagor & Co.
Certified Public Accountants
A Member Firm of Deloitte Touche Tohmatsu
15
[OBJECT OMITTED]
US GAAP Adjustments Report
As of December 31, 2004
-----------------------
The consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting
principles ("GAAP") applicable in Israel. The following describes
the effects on the Company's consolidated financial statements
had the Company prepared its financial statements in accordance
with GAAP applicable in the United States of America.
A. Recent accounting pronouncements by the FASB
(1) SFAS No. 151 - Inventory Costs, an Amendment of ARB No. 43,
Chapter 4 - In November 2004 the FASB issued SFAS No. 151,
"Inventory Costs, an Amendment of ARB No. 43, Chapter 4".
SFAS No. 151 amends the guidance in ARB 43, Chapter 4,
"Inventory Pricing", which provides guidance on the
allocation of certain costs to inventory. SFAS 151
clarifies that abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage)
should be recognized as current-period charges. In
addition, SFAS 151 requires that allocation of fixed
production overheads to the costs of conversion be based on
the normal capacity of the production facilities. The
provisions of this statement are effective for inventory
costs incurred during fiscal years beginning after June
2005. The provisions of this statement shall be applied
prospectively. The Company is currently assessing the
impact of the adoption of this Standard on the Company's
financial position and results of operations under U.S.
GAAP.
(2) SFAS 153, Exchange of Non-Monetary Assets - In December
2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets an amendment of APB No. 29". This
Statement amends Opinion 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance.
The Statement specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity
are expected to change significantly as a result of the
exchange. This Statement is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June
15, 2005. Earlier application is permitted for nonmonetary
asset exchanges occurring in fiscal periods beginning after
the date this Statement is issued. Retroactive application
is not permitted. The Company is assessing the impact of
the adoption of this Standard, and currently estimates that
its adoption in not expected to have a material effect on
the Company's financial position and results of operations.
B. Goodwill
According to Israeli GAAP, goodwill is to be amortized over
the expected estimated economic life of the asset acquired,
while according to US GAAP (SFAS 142), commencing January
2002 goodwill is no longer
16
[OBJECT OMITTED]
amortized but rather is reviewed annually (or more
frequently if impairment indicators arise) for impairment.
Following are the corresponding balance-sheet items
presented according to US GAAP with regard to the goodwill
associated with the acquisition of Ovisan (see Note 9B to
the Company's financial statements as of December 31, 2004)
and the other GAAP differences outlined in D. Below.
C. Basis of Measurement - Adjusted NIS vis-a-vis Nominal NIS
According to Israeli GAAP, the financial statements of the
Group through December 31, 2003 were presented based on
nominal historical cost adjusted for the changes in the
exchange rate of the U.S. Dollar in relation to the NIS
based on the principles presented in Note 2A(4) to the
Company's financial statements as of December 31, 2004,
while according to US GAAP, the financial statements are to
be presented in nominal historical terms. Accordingly, the
effect of the difference in the basis of measurement on the
Group's financial position and results of operations is
excluded for the U.S. GAAP presentation. As presented in
Note 2A to the Company's financial statements as of
December 31, 2004, commencing January 1, 2004, the Group
ceased the presentation of its financial statements based
adjusted NIS, and effective with the interim financial
statements as of March 31, 2004 and for the reporting
periods thereafter, including the year ended December 31,
2004, the Group's financial statements are prepared and
presented in Reported Amounts, as defined in Note 2A(1) to
the Company's financial statements as of December 31, 2004.
D. Selected Balance Sheet Items
As of December 31, 2004
-----------------------
As As per
reported Adjustment US GAAP
-------- ---------- -------
NIS in thousands
----------------
Other assets - Goodwill 25,878 8,731 34,609
======= ===== =======
Shareholders' equity 436,532 (419) 436,113
======= ===== =======
As of December 31, 2003
-----------------------
As As per
reported Adjustment US GAAP
-------- ---------- -------
NIS in thousands
----------------
Other assets - Goodwill 29,073 5,536 34,609
======= ===== =======
Shareholders' equity 412,981 (3,003) 409,978
======= ===== =======
17
E. Selected Statements of Operation Items
Consolidated and Company
------------------------
Year ended December 31,
-----------------------
2004 2003 2 0 0 2
---- ---- -------
NIS in thousands
----------------
Net income under Israeli GAAP 26,928 56,253 22,712
Effect of material differences between
Israeli GAAP and US GAAP:
Change in basis of measurement
from adjusted NIS to nominal NIS (5,694) 19,321
1,254
Amortization of goodwill 2,768
2,832 2,768
Deferred taxes
(2,298) (4,458) (1,016)
------ ------ ------
Net income under US GAAP
28,716 48,869 43,785
====== ====== ======
F. Changes in Shareholders' Equity in Accordance with US GAAP
NIS in thousands
----------------
Shareholders' equity under US GAAP as of January 1, 2002 397,109
Dividend (46,697)
Translation adjustments 4,857
Net income for the year under US GAAP 47,362
-------
Shareholders' equity under US GAAP as of December 31, 2002 402,631
=======
NIS in thousands
----------------
Shareholders' equity under US GAAP as of January 1, 2003 402,631
Dividend (36,499)
Translation adjustments (5,023)
Net income for the year under US GAAP 48,869
-------
Shareholders' equity under US GAAP as of December 31, 2003 409,978
=======
F. Changes in Shareholders' Equity in Accordance with US GAAP
NIS in thousands
----------------
Shareholders' equity under US GAAP as of January 1, 2004 409,978
Translation adjustments (2,581)
Net income for the year under US GAAP 28,716
-------
Shareholders' equity under US GAAP as of December 31, 2004 436,113
=======
-------------
signature
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