-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GgAe5yeW3SEtNiNRWPVRkoq15UvoRCAV1s7w0O/UIyLZ3IEHhBdNPBrExpZl6HL6 t8K9AlGGTVHnAuGF/PwiHg== 0000910680-02-000979.txt : 20021205 0000910680-02-000979.hdr.sgml : 20021205 20021205170958 ACCESSION NUMBER: 0000910680-02-000979 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021205 FILED AS OF DATE: 20021205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELSCINT LTD CENTRAL INDEX KEY: 0000032522 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08781 FILM NUMBER: 02850060 BUSINESS ADDRESS: STREET 1: 13 MOZES STREET CITY: TEL AVIV ISRAEL STATE: L3 ZIP: 67442 BUSINESS PHONE: 01197236086011 MAIL ADDRESS: STREET 1: 13 MOZES STREET CITY: TEL AVIV ISRAEL STATE: L3 ZIP: 67442 6-K 1 form6ki-122002.txt DECEMBER 5, 2002 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 December 2002 ----------------------- ELSCINT LIMITED (Translation of Registrant's Name into English) 13 Mozes Street, Tel Aviv 67442, 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 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 Attached hereto as Exhibit 1 and incorporated by reference herein is the Registrant's press release dated December 2, 2002. Attached hereto as Exhibit 2 and incorporated by reference herein are the Registrant's unaudited consolidated financial statements for the quarter ended September 30, 2002. 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. ELSCINT LIMITED (Registrant) By: /s/ Rachel Lavine ---------------------------------- Name: Rachel Lavine Title: President Dated: December 5, 2002. EXHIBIT INDEX ------------- EXHIBIT NO. DESCRIPTION - ----------- ----------- 1. Press release dated December 2, 2002. 2. Unaudited consolidated financial statements. EXHIBIT 1 --------- Elscint Ltd. Announces Third Quarter 2002 Results - ------------------------------------------------- Monday, December 2, 4:44 p.m. ET TEL-AVIV, Israel, Dec. 2 /PRNewswire-FirstCall/ -- Elscint Ltd. (NYSE: ELT - News), a subsidiary of Elbit Medical Imaging Ltd. (Nasdaq: EMITF - News), today announced its results for the quarter ended September 30, 2002, and for the nine month period ended September 30, 2002. The Company recently announced that it has signed an agreement with an unrelated third party ("the Purchaser") for the sale of the manufacturing, assembly, engineering and integration operations (mainly for medical imaging equipment) of its sub-assemblies and components segment located at its Ma'alot facility in Northern Israel. Upon consummation of the transaction, the activities of the Company in the sub-assemblies and components segment in particular, and in the medical imaging area in general, will as a practical matter be discontinued. As a result, the accompanying financial tables reflect the assets and liabilities, which relate to the discontinuing operations in separate categories in the balance sheet, namely as "assets/liabilities relating to discontinuing operations." In addition, the transactions relating to the aforesaid operations are included in a separate category in the statement of operations entitled "income from discontinuing operations." The comparative figures for prior years have been reclassified in order to reflect these changes, retroactively, for all reported periods, by the presentation of the assets, liabilities, revenues and expenses which relate to the discontinuing operations separately from those which relate to the continuing operations. Third Quarter Results - --------------------- Consolidated revenues for the third quarter of 2002 were NIS 53.4 million (US$11.0 million), as compared with NIS 43.4 million reported in the parallel quarter last year. The increase in revenues is attributable to the hotel division, primarily due to the commencement of operations at the Victoria London Hotel and the Sherlock Holmes Hotel, also in London, as well as to an increase in the exchange rate of the Euro against the NIS during the three-month period ended September 30, 2002. Gross profit for the third quarter of 2002 was NIS 22.9 million (US$4.7 million) as compared with NIS 12.8 million in the corresponding quarter of 2001. This increase is primarily due to the increase in revenue from the hotel division. Operating loss in the third quarter of 2002 was NIS 4.6 million (US$0.9 million) as compared with NIS 1.7 million for the corresponding quarter of last year. The increase is derived mainly from an increase in general and administrative expenses, which resulted primarily from dividend payments of NIS 3.4 million (US$0.7 million) with respect to shares which are held by employees, and which are recorded as an expense in the statement of operation. Net income from continuing operations for the third quarter of 2002 was NIS 9.0 million (US$1.8 million), or NIS 0.54 (US$0.11) per share, as compared with NIS 17.9 million, or NIS 1.07 per share, for the same quarter last year. Net income from continuing operations is attributable mainly to net finance income, which totaled NIS 14.6 million (US$3.0 million) for the three month period ended September 30,2002 as compared with NIS 28.2 million during the same period of the previous year. This finance income was derived primarily from devaluation (NIS against the US$) of 2.14% net of inflationary erosion of 0.65% in the three month period ended September 30, 2002 as compared with devaluation (NIS against the US$) of 4.56% net of inflationary erosion of 0.9% in the same period of the previous year. Net income from discontinuing operations for the third quarter of 2002 was NIS 0.3 (US$0.07 million) as compared with NIS 14.5 million for the same quarter last year mainly due to exchange rate fluctuations. Nine Month Results Consolidated revenues for the first nine months ended September 30, 2002 totaled NIS 156.7 million (US$32.1 million) as compared with NIS 108.6 million reported in the nine-month period ended September 30, 2001. The increase in revenues is attribute to the hotel division, primarily due to the commencement of operations at the Victoria London Hotel and the Sherlock Holmes Hotel, also in London, as well as an increase in the exchange rate of the Euro against the NIS during the nine-month period ended September 30, 2002. Gross profit for the first nine months of 2002 was NIS 57.1 million (US$11.7 million) as compared with NIS 34.1 million in the corresponding period of 2001. This increase is primarily due to the increase in revenue from the hotel division. Operating loss in the first nine months of 2002 increased to NIS 15.5 million (US$3.2 million) as compared with NIS 4.9 million in the same period of the previous year. This increase is derived from an increase in the hotels' depreciation and operational expenses, primarily due to commencement of operations at the Victoria London Hotel and Sherlock Holmes Hotels in London; as well as an increase in general and administrative expenses primarily due to dividend payments of NIS 3.4 million (US$0.7 million) with respect to shares which are held by employees, and which are recorded as an expense in the statement of operation. This increase was partially offset by the increase in the gross profit of the hotels' division. Net income from continuing operations was NIS 12.9 million (US$2.6 million) or NIS 0.77 (US$0.16) per share as compared with NIS 19.7 million or NIS 1.18 per share, for the corresponding period of 2001. Net income from continuing operations is attributable mainly to net finance income, which totaled NIS 26.2 million (US$5.4 million) for the nine month period ended September 30,2002 as compared with NIS 49.5 million during the same period of the previous year. This finance income was derived primarily from devaluation (NIS against the US$) of 10.3% net of inflationary erosion of 7% in the nine month period ended September 30,2002 as compared with devaluation (NIS against the US$) of 7.8% net of inflationary erosion of 2% in the same period of the previous year. Net income from discontinuing operations for the first nine month period ended September 30,2002 was NIS 34.8 (US$7.1 million) as compared with NIS 26.6 million for the same period last year. About Elscint Limited - --------------------- Elscint Limited generates revenues and earnings through two principal ventures: leisure and technology. It has interests in hotels in Western Europe, in hotel development projects principally in Western and Central Europe and in the commercial and entertainment center at Herzlia Marina. In the medical device sector, Elscint's Ma'alot facility in northern Israel manufactures medical and other components for customers engaged in various technology and medical device businesses. This release contains certain forward-looking statements which involve known and unknown risks, uncertainties or other factors not under the Company's control which may cause actual results, performance or achievements of the Company to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include, but are not limited to, those detailed in the Company's periodic filings with the Securities and Exchange Commission. ELSCINT LIMITED AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (1) Convenience translation September 30, December 31, September 30, 2002 * 2001 * 2001 2002 (Unaudited) (Audited) (Unaudited) U.S.$ Adjusted NIS (thousands) (thousands) ASSETS Current Assets Cash and cash equivalents 199,598 351,488 295,287 40,977 Short-term investments and deposits 161,509 217,901 155,401 33,157 Accounts and notes receivable - trade 21,325 16,647 14,870 4,378 Other accounts receivable and prepaid expenses 28,325 22,756 21,426 5,815 Inventories 3,334 3,372 3,469 684 414,091 612,164 490,453 85,011 Long-term Accounts and Investments Investments, loans and long-term receivables 360,721 327,549 359,670 74,055 Investments in affiliated company -- 43,142 -- -- Venture capital investment 37,375 29,133 29,656 7,673 398,096 399,824 389,326 81,728 Fixed Assets, Net 1,604,035 1,299,736 1,366,248 329,303 Other Assets, Net 11,351 8,658 11,983 2,330 Assets Related to Discontinuing Operation 170,569 166,290 191,415 35,017 2,598,142 2,486,672 2,449,425 533,389 (1) Prepared in accordance with Israeli GAAP * Reclassified. ELSCINT LIMITED AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (1) Convenience translation September 30, December 31, September 30, 2002 * 2001 * 2001 2002 (Unaudited) (Audited) (Unaudited) U.S.$ Adjusted NIS (thousands) (thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term credits 504,135 573,634 449,035 103,497 Accounts payable - trade 51,122 29,033 27,323 10,495 Accrued liabilities 57,104 54,049 48,870 11,723 Advance from customer in respect of project in progress, net -- 4,130 1,545 -- Dividend declared 93,430 -- -- 19,181 705,791 660,846 526,773 144,896 Long-term Liabilities Long-term debts 633,947 552,044 604,154 130,147 Deferred income tax liability 10,124 7,425 18,381 2,078 Liability for employee severance benefits, net 301 835 363 62 644,372 560,304 622,898 132,287 Liabilities Related to Discontinuing Operations 202,522 233,856 256,636 41,577 Minority interest 30,559 27,693 28,047 6,274 Shareholders' Equity 1,014,898 1,003,973 1,015,071 208,355 2,598,142 2,486,672 2,449,425 533,389 (1) Prepared in accordance with Israeli GAAP * Reclassified. ELSCINT LIMITED AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENT OF OPERATION (1) Nine months ended Three months ended September 30, September 30, 2002 * 2002 2002 * 2001 (Unaudited) (Unaudited) Adjusted NIS (thousands) Revenues Operating and managing hotels 155,221 100,987 53,373 41,448 Revenue from long- term contracts 1,545 7,685 -- 1,968 156,766 108,672 53,373 43,416 Cost of revenues Hotels operations 98,210 68,295 30,481 29,156 Cost of long-term contracts 1,479 6,253 -- 1,500 99,689 74,548 30,481 30,656 Gross profit 57,077 34,124 22,892 12,760 Hotels' depreciation, amortization and operation expenses 44,878 20,174 16,823 8,514 Initial expenses (income), net 1,663 1,336 (368) 238 General and administrative Expenses 26,053 17,524 11,006 5,719 Operating loss (15,517) (4,910) (4,569) (1,711) Finance income, net 26,154 49,536 14,644 28,272 Other (expenses) income, net (459) (10,706) 120 (11,158) Income before income taxes 10,178 33,920 10,195 15,403 Income taxes (2,364) 4,302 1,420 143 Income after income taxes 12,542 29,618 8,775 15,260 The Company's share in (loss) income of affiliated company -- (9,945) -- 2,519 Minority interest in loss of a subsidiary, net 321 11 186 144 Net income from continuing operations 12,863 19,684 8,961 17,923 Net income from discontinuing operations 34,758 26,578 348 14,557 Net income 47,621 46,262 9,309 32,480 (1) Prepared in accordance with Israeli GAAP * Reclassified. ELSCINT LIMITED AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENT OF OPERATION (1) Convenience Convenience translation translation Nine months Three months Year ended ended ended December 31, September 30, September 30, * 2001 2002 2002 (Audited) (Unaudited) Adjusted NIS U.S.$ (thousands) (thousands) Revenues Operating and 142,564 31,866 10,957 managing hotels Revenue from long- term contracts 10,269 317 -- 152,833 32,183 10,957 Cost of revenues Hotels operations 98,151 20,162 6,258 Cost of long-term contracts 7,486 304 -- 105,637 20,466 6,258 Gross profit 47,196 11,717 4,699 Hotels' depreciation, amortization and operation expenses 32,307 9,213 3,454 Initial expenses (income), net 4,055 341 (76) General and administrative Expenses 26,408 5,349 2,259 Operating loss (15,574) (3,186) (938) Finance income, net 79,335 5,369 3,006 Other (expenses) income, net (17,043) (94) 25 Income before income taxes 46,718 2,089 2,093 Income taxes 5,511 (485) 292 Income after income taxes 41,207 2,574 1,801 The Company's share in (loss) income of affiliated company (9,945) -- -- Minority interest in loss of a subsidiary, net 1,319 66 38 Net income from continuing operations 32,581 2,640 1,839 Net income from discontinuing 25,683 7,135 72 operations Net income 58,264 9,775 1,911 (1) Prepared in accordance with Israeli GAAP * Reclassified. ELSCINT LIMITED AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (1) Nine months ended Three months ended September 30, September 30, 2002 * 2002 2002 * 2001 (Unaudited) (Unaudited) Adjusted NIS Basic earnings per ordinary share (NIS 0.05 par value) from: Continuing operations 0.77 1.18 0.54 1.07 Discontinuing operation 2.08 1.59 0.02 0.87 2.85 2.77 0.56 1.94 Diluted earnings per ordinary share (NIS 0.05 par value) from: Continuing operations 0.57 1.18 0.52 1.07 Discontinuing operations 1.99 1.59 0.02 0.87 2.56 2.77 0.54 1.94 (1) Prepared in accordance with Israeli GAAP * Reclassified Convenience Convenience translation translation Nine months Three months Year ended ended ended December 31, September 30, September 30, * 2001 2002 2002 (Audited) (Unaudited) Adjusted NIS U.S.$ Basic earnings per ordinary share (NIS 0.05 par value) from: Continuing operations 1.95 0.16 0.11 Discontinuing operation 1.54 0.43 -- 3.49 0.59 0.11 Diluted earnings per ordinary share (NIS 0.05 par value) from: Continuing operations 1.95 0.12 0.11 Discontinuing operations 1.54 0.41 -- 3.49 0.53 0.11 (1) Prepared in accordance with Israeli GAAP * Reclassified EXHIBIT 2 --------- ELSCINT LIMITED AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002 (UNAUDITED) Elscint Limited and Subsidiary Companies CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002 (UNAUDITED) - -------------------------------------------------------------------------------- CONTENTS PAGE ---------- Review Report of Condensed Consolidated Financial Statements 2 Condensed Consolidated Balance Sheets 3-4 Condensed Consolidated Statements of Operations 5-6 Condensed Consolidated Statements of Shareholders' Equity 7-8 Condensed Consolidated Statements of Cash Flows 9-12 Notes to the Condensed Consolidated Financial Statements 13-24 The Board of Directors Elscint Limited - --------------- REVIEW REPORT OF UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTHS AND THREE-MONTHS PERIODS ENDED SEPTEMBER 30, 2002 At your request, we reviewed the interim consolidated balance sheet of Elscint Limited and its subsidiaries as of September 30, 2002, and the related condensed consolidated statements of operations, shareholders' equity and cash flows for the nine-months and three-months periods then ended. Our review was made in accordance with the procedures prescribed by the Institute of Certified Public Accountants in Israel, and included, inter-alia, reading the aforementioned interim consolidated financial statements, reading the minutes of the Shareholders' Meetings and of the Board of Directors and its committees, and making inquiries of persons responsible for financial and accounting matters. The review reports of certain subsidiaries, whose assets as of September 30, 2002 constitute 66% of the total consolidated assets and whose revenues constitute 33% and 32% of the total continuing and discontinuing consolidated revenue for the nine months and three months then ended respectively, have been reviewed by other auditors. Furthermore, the data included in the financial statements relating to net asset value of the Company's investments in affiliate and to its equity in its operating results is based on the financial statements of such affiliate, which was reviewed by another auditor. The foregoing procedures, which are limited in scope, do not constitute an examination made in accordance with generally accepted auditing standards. Therefore, we do not express an opinion on the interim consolidated financial statements. In the course of our review, including the reading of the review reports of the other auditors referred to above, nothing came to our attention which would indicate the necessity of making material changes to the interim consolidated financial statements in order for them to be in conformity with generally accepted accounting principles in Israel. As discussed in Note 5 to the accompanying consolidated financial statements, the Company is defendant in lawsuits and was served with additional claims out of which two claims were filed in Israel with a request for a recognition as representative claims. SOMEKH CHAIKIN CERTIFIED PUBLIC ACCOUNTANTS (ISR.) Haifa, November 27, 2002 Elscint Limited and Subsidiary Companies CONDENSED CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- ADJUSTED TO THE NIS OF SEPTEMBER 2002
CONVENIENCE TRANSLATION SEPTEMBER 30, (NOTE 2B) -------------------------- DECEMBER 31, SEPTEMBER 30, 2002 * 2001 * 2001 2002 ---------- ---------- ----------- ------------- (UNAUDITED) (AUDITED) (UNAUDITED) -------------------------- ----------- ------------- U.S.$ ADJUSTED NIS (THOUSANDS) (THOUSANDS) -------------------------------------- ------------ ASSETS CURRENT ASSETS Cash and cash equivalents 199,598 351,488 295,287 40,977 Short-term investments and deposits 161,509 217,901 155,401 33,157 Accounts and notes receivable - trade 21,325 16,647 14,870 4,378 Other accounts receivable and prepaid expenses 28,325 22,756 21,426 5,815 Inventories 3,334 3,372 3,469 684 ---------- ---------- ----------- ------------- 414,091 612,164 490,453 85,011 ---------- ---------- ----------- ------------- LONG-TERM ACCOUNTS AND INVESTMENTS Investments, loans and long-term receivables 360,721 327,549 359,670 74,055 Investments in affiliated company - 43,142 - - Venture capital investment 37,375 29,133 29,656 7,673 ---------- ---------- ----------- ------------- 398,096 399,824 389,326 81,728 ---------- ---------- ----------- ------------- FIXED ASSETS, NET 1,604,035 1,299,736 1,366,248 329,303 ---------- ---------- ----------- ------------- OTHER ASSETS, NET 11,351 8,658 11,983 2,330 ---------- ---------- ----------- ------------- ASSETS RELATED TO DISCONTINUING OPERATION (SEE NOTE 3) 170,569 166,290 191,415 35,017 2,598,142 2,486,672 2,449,425 533,389 ========== ========== =========== =============
* Reclassified. The accompanying notes are an integral part of the financial statements. 3 Elscint Limited and Subsidiary Companies CONDENSED CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- ADJUSTED TO THE NIS OF SEPTEMBER 2002
CONVENIENCE TRANSLATION (NOTE 2B) SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, 2002 * 2001 * 2001 2002 ---------- ---------- ----------- ------------- (UNAUDITED) (AUDITED) (UNAUDITED) -------------------------- ----------- ------------- U.S.$ ADJUSTED NIS (THOUSANDS) (THOUSANDS) -------------------------------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term credits 504,135 573,634 449,035 103,497 Accounts payable - trade 51,122 29,033 27,323 10,495 Accrued liabilities 57,104 54,049 48,870 11,723 Advance from customer in respect of project in progress, net - 4,130 1,545 - Dividend declared 93,430 - - 19,181 ---------- ---------- ----------- ------------- 705,791 660,846 526,773 144,896 ---------- ---------- ----------- ------------- LONG-TERM LIABILITIES Long-term debts 633,947 552,044 604,154 130,147 Deferred income tax liability 10,124 7,425 18,381 2,078 Liability for employee severance benefits, net 301 835 363 62 ---------- ---------- ----------- ------------- 644,372 560,304 622,898 132,287 ---------- ---------- ----------- ------------- LIABILITIES RELATED TO DISCONTINUING OPERATIONS (SEE NOTE 3) 202,522 233,856 256,636 41,577 ---------- ---------- ----------- ------------- MINORITY INTEREST 30,559 27,693 28,047 6,274 ---------- ---------- ----------- ------------- CONTINGENCIES AND COMMITMENTS (SEE NOTE 5) SHAREHOLDERS' EQUITY 1,014,898 1,003,973 1,015,071 208,355 ---------- ---------- ----------- ------------- 2,598,142 2,486,672 2,449,425 533,389 ========== ========= ============ ============== * Reclassified. Date: November 27, 2002 /s/ A.R. Goren /s/ R. Lavine /s/ U. Levin ---------------------------------- ----------------------- ------------------------ A.R. Goren R. Lavine U. Levin Chairman of the Board of Directors President C.F.O
The accompanying notes are an integral part of the financial statements. 4 Elscint Limited and Subsidiary Companies CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - -------------------------------------------------------------------------------- ADJUSTED TO THE NIS OF SEPTEMBER 2002
CONVENIENCE CONVENIENCE TRANSLATION TRANSLATION (NOTE 2B) (NOTE 2B) NINE MONTHS THREE MONTHS NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, -------------------- -------------------- -------------- ----------- ------------- 2002 * 2001 2002 * 2001 * 2001 2002 2002 -------- -------- -------- -------- ----------- ----------- ------------- (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) -------------------- -------------------- ----------- --------------------------- ADJUSTED NIS (THOUSANDS) U.S.$ (THOUSANDS) ----------------------------------------------------------- --------------------------- REVENUES Operating and managing hotels 155,221 100,987 53,373 41,448 142,564 31,866 10,957 Revenue from long-term contracts 1,545 7,685 - 1,968 10,269 317 - ---------- ---------- ---------- ---------- ----------- ----------- ----------- 156,766 108,672 53,373 43,416 152,833 32,183 10,957 ---------- ---------- ---------- ---------- ----------- ----------- ----------- COST OF REVENUES Hotels operations 98,210 68,295 30,481 29,156 98,151 20,162 6,258 Cost of long-term contracts 1,479 6,253 - 1,500 7,486 304 - ---------- ---------- ---------- ---------- ----------- ----------- ----------- 99,689 74,548 30,481 30,656 105,637 20,466 6,258 ---------- ---------- ---------- ---------- ----------- ----------- ----------- GROSS PROFIT 57,077 34,124 22,892 12,760 47,196 11,717 4,699 Hotels' depreciation, amortization and operation expenses 44,878 20,174 16,823 8,514 32,307 9,213 3,454 Initial expenses (income), net 1,663 1,336 (368) 238 4,055 341 (76) General and administrative expenses 26,053 17,524 11,006 5,719 26,408 5,349 2,259 ---------- ---------- ---------- ---------- ----------- ----------- ----------- OPERATING LOSS (15,517) (4,910) (4,569) (1,711) (15,574) (3,186) (938) Finance income, net 26,154 49,536 14,644 28,272 79,335 5,369 3,006 Other (expenses) income, net (459) (10,706) 120 (11,158) (17,043) (94) 25 ---------- ---------- ---------- ---------- ----------- ----------- ----------- Income before income taxes 10,178 33,920 10,195 15,403 46,718 2,089 2,093 Income taxes (2,364) 4,302 1,420 143 5,511 (485) 292 ---------- ---------- ---------- ---------- ----------- ----------- ----------- Income after income taxes 12,542 29,618 8,775 15,260 41,207 2,574 1,801 The Company's share in (loss) income of affiliated company - (9,945) - 2,519 (9,945) - - Minority interest in loss of a subsidiary, net 321 11 186 144 1,319 66 38 ---------- ---------- ---------- ---------- ----------- ----------- ----------- NET INCOME FROM CONTINUING OPERATIONS 12,863 19,684 8,961 17,923 32,581 2,640 1,839 ---------- ---------- ---------- ---------- ----------- ----------- ----------- NET INCOME FROM DISCONTINUING OPERATION (SEE NOTE 3) 34,758 26,578 348 14,557 25,683 7,135 72 ---------- ---------- ---------- ---------- ----------- ----------- ----------- NET INCOME 47,621 46,262 9,309 32,480 58,264 9,775 1,911 ========== ========== ========== ========== =========== =========== ===========
* Reclassified. The accompanying notes are an integral part of the financial statements. 5
CONVENIENCE CONVENIENCE TRANSLATION TRANSLATION (NOTE 2B) (NOTE 2B) NINE MONTHS THREE MONTHS NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, -------------------- -------------------- -------------- ----------- ------------- 2002 * 2001 2002 * 2001 * 2001 2002 2002 -------- -------- -------- -------- ----------- ----------- ------------- (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) -------------------- -------------------- ----------- --------------------------- ADJUSTED NIS (THOUSANDS) U.S.$ (THOUSANDS) ----------------------------------------------------------- --------------------------- BASIC EARNINGS PER ORDINARY SHARE (NIS 0.05 PAR VALUE) FROM: Continuing operations 0.77 1.18 0.54 1.07 1.95 0.16 0.11 Discontinuing operation 2.08 1.59 0.02 0.87 1.54 0.43 - -------- -------- -------- -------- ----------- ----------- ------------- 2.85 2.77 0.56 1.94 3.49 0.59 0.11 ======== ======== ======== ======== =========== =========== ============= DILUTED EARNINGS PER ORDINARY SHARE (NIS 0.05 PAR VALUE) FROM: Continuing operations 0.57 1.18 0.52 1.07 1.95 0.12 0.11 Discontinuing operations 1.99 1.59 0.02 0.87 1.54 0.41 - -------- -------- -------- -------- ----------- ----------- ------------- 2.56 2.77 0.54 1.94 3.49 0.53 0.11 ======== ======== ======== ======== =========== =========== =============
* Reclassified. 6 Elscint Limited and Subsidiary Companies CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - -------------------------------------------------------------------------------- ADJUSTED TO THE NIS OF SEPTEMBER 2002
LOANS TO CUMULATIVE EMPLOYEES FOREIGN FOR CURRENCY PURCHASE OF TOTAL SHARE CAPITAL TRANSLATION RETAINED COMPANY'S SHAREHOLDERS' CAPITAL SURPLUS ADJUSTMENTS EARNINGS SHARES EQUITY --------- ---------- ----------- ----------- ------------ --------------- ADJUSTED NIS (THOUSANDS) -------------------------------------------------------------------------------- BALANCE AS OF JANUARY 1, 2002 (AUDITED) 5,439 739,679 3,420 279,588 (13,055) 1,015,071 CHANGES DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED) Net income for the period - - - 47,621 - 47,621 Foreign currency translation adjustment - - 41,636 - - 41,636 Employee shares which were returned to pool (2) (504) - - 506 - Erosion net of interest on loan to employees (3) (306) 309 - Dividends declared * - - - (89,430) - (89,430) --------- ---------- ----------- ----------- ------------ --------------- BALANCE AS OF SEPTEMBER 30, 2002 (UNAUDITED) 5,434 738,869 45,056 237,779 (12,240) 1,014,898 ========= ========== =========== =========== ============ =============== BALANCE AS OF JANUARY 1, 2001 (AUDITED) 5,397 726,666 (12,771) 221,324 - 940,616 CHANGES DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2001 (UNAUDITED) Net income for the period - - - 46,262 - 46,262 Foreign currency translation adjustment - - 17,095 - - 17,095 --------- ---------- ----------- ----------- ------------ --------------- BALANCE AS OF SEPTEMBER 30, 2001 (UNAUDITED) 5,397 726,666 4,324 267,586 - 1,003,973 ========= ========== =========== =========== ============ ===============
* Not including a dividend in the amount of NIS 3,429 thousand, in respect of shares which are held by employees which was recorded as an expense in the statement of operations. The accompanying notes are an integral part of the financial statements. 7
LOANS TO CUMULATIVE EMPLOYEES FOREIGN FOR CURRENCY PURCHASE OF TOTAL SHARE CAPITAL TRANSLATION RETAINED COMPANY'S SHAREHOLDERS' CAPITAL SURPLUS ADJUSTMENTS EARNINGS SHARES EQUITY --------- ---------- ------------ ----------- ------------ ------------- ADJUSTED NIS (THOUSANDS) -------------------------------------------------------------------------------- BALANCE AS OF JULY 1, 2002 (UNAUDITED) 5,435 739,176 33,428 317,900 (12,548) 1,083,391 CHANGES DURING THE THREE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED) Net income for the period - - - 9,309 - 9,309 Foreign currency translation Adjustment - - 11,628 - - 11,628 Employee shares which were returned to pool (1) (405) - - 406 - Interest net of erosion on loan to employees - 98 - - (98) - Dividends declared * - - - (89,430) - (89,430) --------- ---------- ------------ ----------- ------------ ------------- BALANCE AS OF SEPTEMBER 30, 2002 (UNAUDITED) 5,434 738,869 45,056 237,779 (12,240) 1,014,898 ========= ========== ============ =========== ============ =============== BALANCE AS OF JULY 1, 2001 (UNAUDITED) 5,397 726,666 (13,427) 235,106 - 953,742 CHANGES DURING THE THREE MONTHS ENDED SEPTEMBER 30, 2001 (UNAUDITED) Net income for the period - - - 32,480 - 32,480 Foreign currency translation adjustments - - 17,751 - - 17,751 --------- ---------- ------------ ----------- ------------ ------------- BALANCE AS OF SEPTEMBER 30, 2001 (UNAUDITED) 5,397 726,666 4,324 267,586 - 1,003,973 ========= ========== ============ =========== ============ =============== BALANCE AS OF JANUARY 1, 2001(AUDITED) 5,397 726,666 (12,771) 221,324 - 940,616 CHANGES DURING THE YEAR (AUDITED) Net income for the year - - - 58,264 - 58,264 Issuance of shares to employees 42 13,013 - - (13,055) - Foreign currency translation adjustments - - 16,191 - - 16,191 --------- ---------- ------------ ----------- ------------ ------------- BALANCE AS OF DECEMBER 31, 2001 (AUDITED) 5,439 739,679 3,420 279,588 (13,055) 1,015,071 ========= ========== ============ =========== ============ ===============
* Not including a dividend in the amount of NIS 3,429 thousand, in respect of shares which are held by employees which was recorded as an expense in the statement of operations. The accompanying notes are an integral part of the financial statements. 8 Elscint Limited and Subsidiary Companies CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------- ADJUSTED TO THE NIS OF SEPTEMBER 2002
CONVENIENCE CONVENIENCE TRANSLATION TRANSLATION (NOTE 2B) (NOTE 2B) NINE MONTHS THREE MONTHS NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, -------------------- -------------------- -------------- ------------ ------------- 2002 * 2001 2002 * 2001 * 2001 2002 2002 -------- -------- -------- -------- ----------- ----------- ------------- (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED) -------------------- -------------------- ----------- --------------------------- U.S.$ U.S.$ ADJUSTED NIS (THOUSANDS) (THOUSANDS) (THOUSANDS) ----------------------------------------------------------- --------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income 47,621 46,262 9,309 32,480 58,264 9,775 1,911 Adjustments to reconcile net income to net cash provided by (used in) operating activities from continuing operations (A) (38,064) (25,236) (1,507) (34,759) (22,212) (7,814) (309) --------- --------- -------- -------- --------- -------- ------- Net cash provided by (used in) Operating activities from continuing operations 9,557 21,026 7,802 (2,279) 36,052 1,961 1,602 Net cash provided by Operating activities from discontinuing operation 2,654 6,319 13,427 9,672 3,802 545 2,757 --------- --------- -------- -------- --------- -------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 12,211 27,345 21,229 7,393 39,854 2,506 4,359 --------- --------- -------- -------- --------- -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of affiliated company - - - - 22,351 - - Proceeds from sale of fixed assets 400 492 219 - 520 82 45 Purchase of fixed assets and other assets (115,358) (161,791) (46,325) (48,836) (209,296) (23,683) (9,511) Purchase of venture capital investment (5,001) (22,616) - (22,390) (23,380) (1,027) - Proceeds from sale of long-term 2,636 106 560 2,636 223 22 investments and loans Proceeds from (purchase of) short - term investments and loans, net 238 32,755 (1,452) (5,879) 101,680 49 (298) Purchase of long-term investments and loans (436) (23,422) - (299) (47,722) (89) - Purchase of investment on cost basis - (26,252) - - (26,252) - - Proceeds from investment in a subsidiary company (B) - 3,616 - - 3,616 - - --------- --------- -------- -------- --------- -------- ------- Net cash used in investing activities from continuing operations (119,072) (194,582) (47,452) (76,844) (175,847) (24,445) (9,742) Net cash (used in) provided by investing activities from discontinuing operation (1,862) 122,888 (1,193) (475) 122,165 (382) (245) --------- --------- -------- -------- --------- -------- ------- NET CASH USED IN INVESTING ACTIVITIES (120,934) (71,694) (48,645) (77,319) (53,682) (24,827) (9,987) --------- --------- -------- -------- --------- -------- -------
* Reclassified. The accompanying notes are an integral part of the financial statements. 9 Elscint Limited and Subsidiary Companies CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------- ADJUSTED TO THE NIS OF SEPTEMBER 2002
CONVENIENCE CONVENIENCE TRANSLATION TRANSLATION (NOTE 2B) (NOTE 2B) NINE MONTHS THREE MONTHS NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, -------------------- -------------------- -------------- ------------ ------------- 2002 * 2001 2002 * 2001 * 2001 2002 2002 -------- -------- -------- -------- ----------- ----------- ------------- (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED) -------------------- -------------------- ----------- --------------------------- U.S.$ U.S.$ ADJUSTED NIS (THOUSANDS) (THOUSANDS) (THOUSANDS) ----------------------------------------------------------- --------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debts 4,591 68,887 105 19,287 83,472 943 22 Payments of long-term debt (8,606) (6,508) (1,823) (2,348) (8,457) (1,767) (374) Change in short-term credits, net 15,217 39,175 8,273 8,494 (60,082) 3,125 1,698 -------- -------- -------- -------- -------- ------ ------- NET CASH PROVIDED BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS 11,202 101,554 6,555 25,433 14,933 2,301 1,346 -------- -------- -------- -------- -------- ------ ------- NET EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,832 3,223 640 3,446 3,122 376 131 -------- -------- -------- -------- -------- ------ ------- Net (decrease) increase in cash and cash equivalents (95,689) 60,428 (20,221) (41,047) 4,227 (19,644) (4,151) Cash and Cash Equivalents at Beginning of period 295,287 291,060 219,819 392,535 291,060 60,621 45,128 -------- -------- -------- -------- -------- ------ ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD 199,598 351,488 199,598 351,488 295,287 40,977 40,977 ======== ======== ======== ======== ======== ====== =======
* Reclassified. The accompanying notes are an integral part of the financial statements. 10 Elscint Limited and Subsidiary Companies CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------- ADJUSTED TO THE NIS OF SEPTEMBER 2002
CONVENIENCE CONVENIENCE TRANSLATION TRANSLATION (NOTE 2B) (NOTE 2B) NINE MONTHS THREE MONTHS NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, -------------------- -------------------- -------------- ------------ ------------- 2002 * 2001 2002 * 2001 * 2001 2002 2002 -------- -------- -------- -------- ----------- ----------- ------------- (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED) -------------------- -------------------- ----------- --------------------------- U.S.$ U.S.$ ADJUSTED NIS (THOUSANDS) (THOUSANDS) (THOUSANDS) ----------------------------------------------------------- --------------------------- A. ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH: INVOLVING CASH FLOW: Discontinuing operation (34,758) (26,578) (348) (14,557) (25,683) (7,136) (71) Depreciation and amortization 28,201 13,437 9,822 5,314 22,075 5,790 2,016 The Company's share in loss (income) of affiliated company - 9,945 - (2,519) 9,945 - - Decrease in value of investments not of a temporary nature 338 11,647 - 11,647 13,065 69 - Capital (gain) loss (69) (62) 18 - (87) (14) 4 Exchange differences on investments and loans, net (27,061) (32,954) (12,228) (21,679) (43,779) (5,556) (2,510) Changes in liability for employee severance benefits, net (116) 171 (90) 210 (295) (24) (18) Loss (profit) from evaluation of marketable securities 711 (62) 389 456 (610) 146 80 Changes in deferred income taxes (645) 1,068 159 78 73 (132) 33 Minority interest in loss of a subsidiary, net (321) (11) (186) (144) (1,319) (66) (38) CHANGES IN ASSETS AND LIABILITIES: Decrease (increase) in: Accounts and notes receivable - trade, net (4,051) 513 871 (1,145) 2,371 (832) 179 Other accounts receivable and prepaid expenses (13,259) (90) (7,773) (12,951) 1,415 (2,722) (1,596) Inventories 613 (68) (199) (58) (79) 126 (41) Long-term receivables - 2,003 - - 3,408 - - Increase (Decrease) in: Accounts payable-trade 6,158 7,585 6,580 658 232 1,265 1,350 Accrued liabilities 7,740 (4,095) 1,478 1,899 7,325 1,589 303 Advance from customer in respect of project progress, net (1,545) (7,685) - (1,968) (10,269) (317) - -------- -------- -------- -------- -------- ------- ------- (38,064) (25,236) (1,507) (34,759) (22,212) (7,814) (309) ======== ======== ======== ======== ======== ======= =======
* Reclassified. The accompanying notes are an integral part of the financial statements. 11 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS B. ACQUISITION OF INITIALLY-CONSOLIDATED SUBSIDIARY In April 2001, the Company, through its wholly-owned subsidiary, achieved actual control in SC Bucuresti Turism S.A. ("Bucuresti") (until that date the investment in Bucuresti had been presented on cost basis). Assets and liabilities of the subsidiary company at the date of initial consolidation are as follows: YEAR ENDED DECEMBER 31, 2001 ------------ ADJUSTED NIS (THOUSANDS) ------------ Deficit in working capital (excluding cash), net 823 Investments on cost basis 132,838 Fixed assets, net (170,383) Deferred income tax liability 13,426 Minority interest 26,912 --------- 3,616 =========
CONVENIENCE CONVENIENCE TRANSLATION TRANSLATION (NOTE 2B) (NOTE 2B) NINE MONTHS THREE MONTHS NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, -------------------- -------------------- ------------- ------------- -------------- 2002 2001 2002 2001 2001 2002 2002 -------- -------- -------- -------- ----------- ----------- ------------- (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) -------------------- -------------------- ----------- --------------------------- ADJUSTED NIS (THOUSANDS) U.S.$ (THOUSANDS) ----------------------------------------------------------- --------------------------- C. SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS AND INVESTING ACTIVITIES Purchase of fixed assets against accounts payable 22,082 9,461 22,082 9,461 14,113 4,533 4,533 ====== ===== ====== ===== ====== ===== ===== Sale of affiliated company against decrease in accrued liability - - - - 13,444 - - ====== ===== ====== ===== ====== ===== ===== Investment grant receivable in respect of fixed assets 5,169 - - - - 1,061 - ====== ===== ====== ===== ====== ===== =====
The accompanying notes are an integral part of the financial statements. 12 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 1 - GENERAL The accompanying unaudited financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine and three months periods ending September 30, 2002, are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2001. These financial statements should be read in conjunction with the annual audited financial statements of the Company as of December 31, 2001 and their accompanying notes. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES A. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in Israel for interim financial information. All significant accounting policies have been applied consistently with the year ended December 31, 2001. B. FINANCIAL STATEMENTS IN ADJUSTED ISRAELI CURRENCY AND ISRAELI GAAP i. The financial statements are prepared on the basis of the historical cost convention, adjusted for changes in the general purchasing power of the Israeli currency (New Israeli Shekel - "NIS") based on the changes in the Israeli consumer price index (CPI). Comparative data in the statements were adjusted to the NIS of September 2002. Below is data regarding the CPI and the U.S. dollar exchange rate: EXCHANGE RATE OF ONE U.S. DOLLAR CPI September 30, 2002 4.871 108.7 September 30, 2001 4.355 102.2 December 31, 2001 4.416 101.6 CHANGES DURING THE PERIOD: January 1, 2002 - September 30, 2002 10.3 6.99 July 1, 2002 - September 30, 2002 2.14 0.65 January 1, 2001 - September 30, 2001 7.77 2.01 July 1, 2001 - September 30, 2001 4.56 0.88 January 1, 2001 - December 31, 2001 9.28 1.41 13 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT'D) ii. The adjusted financial statements as of September 30, 2002 and for the nine and three months periods then ended have been translated into U.S. dollars using the representative exchange rate as of that date (U.S.$ 1 = NIS 4.871). The translation was made solely for the convenience of the reader. The dollar amounts so presented in these financial statements should not be construed as representing amounts receivable or payable in dollars or convertible into dollars, unless otherwise indicated. C. EFFECT OF NEW ACCOUNTING STANDARDS NOT YET IMPLEMENTED i. During 2001, the Israel Accounting Standards Board published Accounting Standard No. 12 - Discontinuance of Adjustment of Financial Statements. Pursuant to this standard, the adjustment of financial statements will be discontinued as of January 1, 2003. Pursuant to the decision of the Professional Committee of the Israel Accounting Standards Board, dated November 10, 2002, application of the Standard is postponed to January 1, 2004 and, therefore, adjustment of the financial statements will be discontinued commencing January 1, 2004. Until December 31, 2003, the Company will continue to prepare financial statements adjusted in accordance with Opinion 36 of the Institute of Certified Public Accountants in Israel. Implementation of this standard may have a significant negative effect on the reported results of the Company. The extent of the effect will depend on the rate of inflation and the Company's sources of financing. ii. In 2001, the Israel Accounting Standards Board published Accounting Standard No.13 - Effect of Changes in the Rates of Exchange of Foreign Currency. This standard deals with translation of transactions in foreign currency and translation of financial statements of outside activities for the purpose of their inclusion in the financial statements of the reporting entity, and supersedes the provisions of Clarifications 8 and 9 to Opinion 36 of the Institute of Certified Public Accountants in Israel, which will be discontinued upon the entry into effect of Accounting Standard No. 12 - Discontinuance of Adjustment of Financial Statements. At this time, it is not possible to estimate the effects of this standard on the financial statements. iii. In August 2002, the Israeli Accounting Standards Board published Accounting Standard No. 14 - Financial Reporting for Interim Periods. The Standard provides the minimum content of financial statements for interim periods, including the disclosure required in the notes, and also details the accounting principles for recognition and measurement which are to be applied in interim-period financial statements. This Standard applies to financial statements for periods beginning on and after January 1, 2003. Restatement of comparative data for interim periods prior to the commencement date, is not required by the Standard. Nonetheless, if financial statements include comparative data for interim periods prior to the commencement date, which is not in accordance with the provisions of the Standard, a description is required to be included in the notes of the main differences between the principles provided in this Standard and those principles according to which the comparative data is prepared. 14 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 3 - DISCONTINUING OPERATION DISCLOSURE Upon completion of the transaction, as described in Note 7.I, the activities of the Company in the sub-assemblies and components segment, in particular, and in the medical imaging area, in general will, as a practical matter, be discontinued. As a result, these financial statements include the assets and liabilities which relate to the discontinuing operation, in separate categories in the balance sheet "assets/liabilities relating to discontinuing operation". In addition, the transactions relating to the aforesaid operation were included in a separate category in the statement of operations "income from discontinuing operation". The comparative figures for prior years were reclassified in order to reflect therein, retroactively, for all reported periods, presentation of the assets, liabilities, revenues and expenses which relate to the discontinuing operation, separate from those which relate to the continuing operations. The following are the condensed financial data relating to discontinuing operations: A. BALANCE SHEET ITEMS:
CONVENIENCE TRANSLATION (NOTE 2B) SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, 2002 2001 2001 2002 ---- ---- ---- ---- (UNAUDITED) (AUDITED) (UNAUDITED) ----------- --------- ----------- U.S.$ ADJUSTED NIS (THOUSANDS) (THOUSANDS) -------------------------------------------- ------------ ASSETS: Accounts and notes receivable - trade 92,344 69,970 90,004 18,958 Other accounts receivable and prepaid expenses 12,623 19,953 18,620 2,591 Inventories 43,497 57,231 57,631 8,930 ------- ------- ------- ------ 148,464 147,154 166,255 30,479 ------- ------- ------- ------ Long-term receivables 9,470 6,901 11,736 1,944 ------- ------- ------- ------ Fixed assets, net 12,635 12,235 13,424 2,594 ------- ------- ------- ------ TOTAL ASSETS 170,569 166,290 191,415 35,017 ======= ======= ======= ====== CURRENT LIABILITIES: Accounts payable - trade 77,826 62,320 96,163 15,977 Accrued liabilities 123,512 169,932 158,776 25,357 ------- ------- ------- ------ 201,338 232,252 254,939 41,334 ------- ------- ------- ------ LONG-TERM LIABILITIES: Long-term debts 558 1,085 784 115 Liability for employee severance benefits, net 626 519 913 128 ------- ------- ------- ------ 1,184 1,604 1,697 243 ------- ------- ------- ------ TOTAL LIABILITIES 202,522 233,856 256,636 41,577 ======= ======= ======= ======
15 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 3 - DISCONTINUING OPERATION DISCLOSURE (CONT'D) B. STATEMENTS OF OPERATIONS:
CONVENIENCE CONVENIENCE TRANSLATION TRANSLATION (NOTE 2B) (NOTE 2B) NINE MONTHS THREE MONTHS NINE MONTHS ENDED THREE MONTHS ENDED YEAR ENDED ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, -------------------- -------------------- ------------- --------------- -------------- 2002 2001 2002 2001 2001 2002 2002 -------- -------- -------- -------- ----------- ----------- ------------- (UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) -------------------- -------------------- ----------- --------------------------- ADJUSTED NIS (THOUSANDS) U.S.$ (THOUSANDS) ----------------------------------------------------------- --------------------------- Sales 315,865 285,759 114,588 92,993 402,804 64,846 23,525 Cost of sales 275,612 263,725 104,572 85,510 368,829 56,582 21,468 ------- ------- ------- ------ ------- ------ ------ GROSS PROFIT 40,253 22,034 10,016 7,483 33,975 8,264 2,057 Sales and marketing expenses 879 914 263 209 984 180 54 General and administration Expenses 7,070 10,335 2,296 2,131 12,457 1,452 471 ------- ------- ------- ------ ------- ------ ------ OPERATING INCOME 32,304 10,785 7,457 5,143 20,534 6,632 1,532 Finance Expenses, net (10,295) (8,720) (5,023) (9,955) (12,696) (2,114) (1,032) Other income (expenses), net 16,211 24,513 (2,052) 19,369 17,845 3,328 (421) ------- ------- ------- ------ ------- ------ ------ INCOME BEFORE INCOME TAXES 38,220 26,578 382 14,557 25,683 7,846 79 Income taxes 3,462 - 34 - - 711 7 ------- ------- ------- ------ ------- ------ ------ NET INCOME RELATED TO DISCONTINUING OPERATION 34,758 26,578 348 14,557 25,683 7,135 72 ======= ======= ======= ====== ======= ====== ======
NOTE 4 - HOTELS SEGMENT A. OPTION AGREEMENT In June 2001, B.H. and the management company ("PP") reached an agreement, according to which B.H. was granted an option by PP, exercisable until December 31, 2002, to purchase from PP, 33.3% of its ownership and controlling rights in and to a company which was incorporated to acquire the business (including management agreements, hotels management rights, rights of trade name usage and others) of the European park Plaza chain ("the Acquired Company"), with a retroactive effect from October 26, 2000. As part of the agreement, B.H. granted PP a loan in the amount of $5 million, convertible into the Acquired Company's shares in case of exercise of the option or repayable in the event the option is not exercised. B.H. received no securities for this loan. The scope of B.H.'s investment may increase by $2.25 million, if and to the extent that this amount is required for the purchase of additional assets by the Acquired Company. The management company has, in any event, an option, exercisable up to a period of a year or at any time in the event of disagreement between the parties, regarding the management company's rights, to acquire the part of the company, in consideration for the refunding of the company's original investment. 16 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 4 - INVESTMENTS (CONT'D) B. SUBSIDY WITH RESPECT TO PARTICIPATION IN THE HOTEL'S EMPLOYEES' SALARIES Pursuant to the provisions of the local laws in Belgium, under certain conditions, employers who create employment positions are entitled to receive, a one-time subsidy from the Belgium Government, with respect to participation in the employees' salaries, based on the amount of the investment in connection with each position - up to the maximum participation amount for each position. Due to a disagreement between AP and the Government of Belgium, regarding the definition of AP for purposes of application and implementation of the subsidy provisions, as stated, no income was included in the financial statements for prior periods in connection with participation in salaries of the hotel's employees in AP. In September 2002, Government of Belgium approved a subsidy with respect to the hotel's employees in AP in the amount of (euro)1,090 thousand (net after deduction of commission). In accordance with the above, this amount was included as a participation in the salaries expenses in the three-month period ended September 30, 2002. NOTE 5 - CONTINGENCIES AND COMMITMENTS A. The Company and subsidiary companies are involved in litigation arising out of the ordinary course of business. Although the outcome of such litigation is uncertain at this time, management believes that the outcome of such litigation will not have a material adverse effect on the financial position of the Company. B. (i) On September 8, 1999, the Company was served with a claim and a motion for recognition of the claim as a representative claim. This claim was filed against the Company, Elbit Medical Imagine Ltd. ("EMI"), (the company's parent company), Elbit Medical Holding Ltd., Elron and six former directors of the Company. The motion was filed on behalf of all persons who were minority shareholders of the Company at the date of submission of the claim, as well as all minority shareholders of the Company who held Company's shares on February 18, 1999. The main allegation of the claim is that EMI, through the actions of the former directors of the Company, caused discrimination of the minority shareholders. The requested relief is approximately U.S.$ 603 thousand for the plaintiff and approximately U.S.$ 158 million for the damages to the represented group, plus legal expenses. Following the Court's decision in the claim mentioned in clause B.ii. below, the parties agreed to postpone the hearing of the case until a final decision will be given on the plaintiffs appeal in the other claim, as stated in clause B.ii. below. Management, based on a legal advice received, is of the opinion that the ultimate outcome of this claim, the request for recognizing the claim as a representative claim and the effect, if any, this may have on the Company can not be estimated at this stage. 17 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 5 - CONTINGENCIES AND COMMITMENTS (CONT'D) (ii) On November 2, 1999, a claim and a motion for recognition of the claim as a representative claim were filed against the Company, EMI, Elbit Medical Holdings Ltd., Europe Israel (M.M.S) Ltd. ("EIL"), (indirect parent company of the Company), Control Centers, Marina Herzlia Limited Partnership 1998, Elron and 25 past and present directors in the above companies. The motion was served on behalf of those who held shares of the Company on September 6, 1999, and continued to hold such shares on the date of the claim, excluding the respondents. The claimants allege that the minority shareholders of the Company have been discriminated as a result of the various activities carried out by its controlling shareholders and its Board of Directors. The remedy which has been requested by the claimants is that EMI be compelled to execute the alleged buy-out shares at U.S.$ 14 per share. Alternatively, the Company and/or EMI and or other shareholders in the Company be compelled to purchase the claimants' shares in the Company according to an external valuation, or alternatively that the claimants be paid compensation for the damages which they allegedly suffered and the annulment of certain transactions with controlling parties. On August 16, 2000, the District Court of Haifa dismissed the Application to recognize the claim as a Representative Claim. Notwithstanding the above, the claim itself remains. Some of the plaintiffs filed applications to the Israeli High Court for permission to file an appeal on this dismissal. In addition, the Government's Attorney General submitted his supportive position with the plaintiffs allegation to the Court. Following the company's claim that the Court's fees are inappropriate to these type of claim, on August 3, 2001, the District Court ordered the Plaintiffs to pay Courts' fees in respect of some parts of the claim, in the sum of NIS 20 million not later than September 10, 2001, otherwise their applications will be deleted, in respect to those parts of the claim for which the fees would not be paid. Following a request by the plaintiffs the Court decided to postpone the payment of the fees until further decision. In a hearing that took place on April 25, 2002, the District Court showed a strong tendency to accept the plaintiffs' view concerning the court fees. However, Elscint's counsel strongly opposed such approach of the court, and in their opinion, succeeded in shaking the court's position with regard to its ability to cancel the previous decision of the court in the interim procedure or its ability to enable the plaintiffs to postpone the payment of these fees. The court decided to render its ruling regarding the court fees at a later date, which has not been determined as yet. Negotiations for a settlement with some of the plaintiffs in this case are in process. Management, based on a legal advice received, is of the opinion that the ultimate outcome of the claim and the effect, if any, this may have on the Company, can not be estimated at this stage. 18 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 5 - CONTINGENCIES AND COMMITMENTS (CONT'D) C. The Company is named as a defendant in a number of lawsuits and other claims filed by distributors - of which some have no specified amount of requested damages, while the others demand compensation by the Company, for damage allegedly caused by its alleged breach of the agreements relating to the Sale Transaction in 1998, in the aggregate amount of U.S.$ 31 million. At this stage, the Company's legal counsel cannot estimate the outcome of these lawsuits and claims. However, the Company has included in its financial statements provisions which - in management's opinion, at the date of issuance of the financial statements based, inter alia, on its legal counsel for this matter and on its past experience, are considered adequate to cover the costs and resources necessary to resolve the obligations under these claims. The aggregate amount of the claims as mentioned above, was decreased from an amount of $80 million in December 31, 2001, to a total of U.S.$ 31 million, as a result of negotiations carried out with part of the distributors, which negotiations lead to settlements with claimants. As a result of such settlements being reached during the nine months period ended on September 30, 2002 no costs incurred beyond the provisions that were included in the financial statements. D. The Company is a defendant in several claims filed by customers who previously purchased medical equipment from the company (including some demanding the cancellation of sales and service agreements) totaling approximately U.S.$ 6 million. These claims include mainly alleged damages caused to medical equipment acquired from the Company. The financial statements of the Company include provisions, which, in management's opinion, at the date of preparation of the financial statements, based on the advice of its professional counsel for this issue and on its past experience, were sufficient to cover the costs and resources required for settling these claims. E. i. As a result of a dispute which has arisen between Bea Hotels N.V. ("B.H.") and a third party ("Third Party Shareholder"), regarding the latter's failure to comply with its obligations to provide an indemnity to B.H. relating to certain matters which are pending against Domino (the controlling shareholder in Bucuresti which is the owner of the rights in a hotel in Romania) and which derive from events which occurred prior to the execution of the memorandum of understanding for the purchase of Bucuresti, B.H. is presently withholding the shares of the Third Party Shareholder (20%) in Domino as security for compliance with the indemnity obligations made by the Third Party Shareholder. Accordingly, on the date of the approval of these financial statements, B.H. is formally recorded as the holder of 100% of capital and voting rights in Domino. The results of this dispute have no effect on the results of operations of B.H. for the reported periods and/or the amount of its shareholders' equity as of and for the period ended September 30, 2002. BEA Hotels Eastern Europe BV (a wholly owned subsidiary of B.H. and the holder of 100% of the capital and voting rights of Domino, as above mentioned) has submitted a financial claim against the Third Party Shareholder arising out of the failure of the Third Party Shareholder to fulfill the conditions of the indemnity, within the framework of which certain charges have been placed on the assets of the Third Party Shareholder. The Third Party Shareholder has submitted a motion to the court requesting that the dispute be referred to arbitration in terms of the Memorandum of Understanding, and the claimant has submitted its response opposing this motion. As at the date of the approval of these financial statements, the court has not rendered its decision in respect of this motion. 19 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 5 - CONTINGENCIES AND COMMITMENTS (CONT'D) ii. A motion submitted to the courts in Romania for the cancellation of the tender within the framework of which Domino acquired the controlling shareholding of Bucuresti - was rejected by the courts. This decision is subject to appeal, although as at the date of the approval of these financial statements, no such appeal has been filed. If an appeal will be filed, and if the appeal will be accepted, then B.H.'s rights may be adversely and materially affected. At this stage, BH is unable to assess the outcome of these proceedings or their impact upon the rights of Domino in Bucuresti. However, the management of B.H. is of the opinion, based on the opinion of its legal counsel in Romania in respect of a similar motion (which has been cancelled prior to adjudication by the courts following the claimaints' withdrawal of their motion) that even if such an appeal is filed and accepted by the Supreme Court of Romania, and even if an order is issued on the basis of such an appeal, regarding the termination of the tender and in consequence the cancellation of the rights of Domino in Bucuresti, in accordance with the acquisition agreement, Domino will be indemnified by the SOF for the full consideration of its original investment (including proven damages for the above acquisition transaction caused to the Group companies, plus interest). iii. Within the framework of a criminal investigation, which was conducted against several suspects (including former officers of the SOF who were involved in the privatization procedures and the sale of the controlling interest in Bucuresti to Domino) relating to events which occurred prior to the acquisition of control in Bucuresti by B.H.A judicial lien which was previously imposed upon Domino's shareholding in Bucuresti by the investigating authorities in accordance with the provisions of the Romanian Criminal Law, was removed by a decision of the Public Prosecutors Office. Accordingly, as at the date of the approval of these financial statements, the shares held by Domino in Bucuresti are no longer encumbered under the lien. The criminal investigations culminated, in June 2002, by the filing of an indictment by the Public Prosecutors Office of Romania, against 17 accused individuals. The hearings in these criminal proceedings have been postponed to March 2003. These criminal proceedings may have indirect implications on the validity of the privatization process and, consequently, on Domino's shareholding in Bucuresti, even although Domino is not an accused party in these criminal proceedings. B.H.'s legal counsels are unable to evaluate, at this stage, the results of these proceedings or their possible effects on Domino's holdings in Bucuresti. 20 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 5 - CONTINGENCIES AND COMMITMENTS (CONT'D) iv. The Third Party Shareholder in Domino (see i above) terminated a certain partnership agreement which it had executed with a third party ("Third Party Claimant"), prior to the acquisition by B.H. of Domino, regarding their joint investment in Domino on the grounds of the failure of the Third Party Claimant to fulfill his obligations under the said partnership agreement. The Third Party Claimant subsequently filed a monetary claim against Domino and others with the Romanian courts, in the amount of U.S.$ 2.5 million, in respect of commissions allegedly payable to Third Party Claimant pursuant to the provisions of the above partnership agreement, to which Domino was also a party. In parallel proceedings, an order imposing a charge over the shares held by Domino in Bucuresti was cancelled by the Court of Appeals, and the matter was returned to the court of first instance for re-hearing. Accordingly, as at the date of the approval of these financial statements, the shares held by Domino in Bucuresti are no longer subject to this charge. An additional claim has been submitted against Domino by another third party claimant prior to the date of approval of these financial statements. The principal remedies sought under this additional claim are the payment of same commission of U.S.$ 2.5 million arising from the partnership agreement referred to above, as well as a demand for the termination of an agreement entered into between Domino and an Israeli bank for the pledge of the shares held by Domino in Bucuresti as security for certain credit facilities advanced by that Bank. The Company has received an indemnity against these claims from the Third Party Shareholder (see i above). Based upon the opinion of its legal counsel, Domino is of the opinion that these claims are devoid of any legal merit or contractual foundation, and therefore was no provision in respect of these claims was included in its financial statements. v. Within the framework of an joint venture agreement concluded to set up a joint venture company owned by Bucuresti and a third party investor ("Third Party Investor"), signed prior to the acquisition of Bucuresti by B.H., that Third Party Investor undertook to invest in the joint venture company an amount of U.S.$ 27 million, and in consideration Bucuresti undertook to transfer the rights in the Bucuresti Complex to the joint venture company. As that Third Party Investor failed to meet its investment obligations, Bucuresti cancelled the joint venture agreement and submitted an application to the court to liquidate the joint venture company. At this stage the parties are engaged in proceedings which relate only to the authority of the Romanian courts to order the liquidation of the joint venture company, but do not relate to the transfer of the rights of the Bucuresti Complex to this joint venture company. If Bucuresti is compelled to transfer its rights in the Bucuresti Complex to the joint venture company, then its rights in the hotel are liable to be materially prejudiced. B.H.'s management is of the opinion that this is not likely that as a result of the proceedings, Bucuresti will be compelled to transfer its rights in the Bucuresti Complex to the said joint venture company. 21 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 5 - CONTINGENCIES AND COMMITMENTS (CONT'D) vi. In addition, various additional proceedings are being conducted in Romania (objections submitted to the Chamber of Commerce), within the framework of which it is claimed that certain resolutions taken at general meetings of Bucuresti's shareholders were not validly adopted and are devoid of any legal force for procedural reasons. The court acknowledged part of the above mentioned proceedings, and Domino has filed an appeal thereon. B.H's management is of the opinion, that these claims are spurious and vexatious, and will have no material effect on B.H.'s rights in and to Bucuresti's shares and in the Bucuresti Complex owned by Bucuresti. F. The Company is required to pay royalties to the Office of the Chief Scientist ("OCS") in respect of sales of products developed with grants provided by the latter. The royalties are computed on the sales volume of these products at percentages ranging from 1% to 5% up to the aggregate amount of the grants. The Company received correspondence from the OCS, requesting the furnishing of certain data in order to ascertain its obligation in respect of royalties due to the OCS. The liability to the OCS in respect of the sale of the MRI operations to GEMS, determined at U.S.$ 11 million, and was allocated at 60% to the Company and 40% to GEMS. In addition, it was agreed that the NM and MRI technologies, products and components would not be transferred out of Israel unless GEMS first seeks OCS approval. Pursuant to the agreement between the Company, GEMS and the OCS, the Company undertook - should GEMS sell MRI products containing certain know-how and components financed with the assistance of the OCS - to pay the OCS royalties in excess of U.S.$ 1.5 million. The Company received a written notification from the OCS, requiring details concerning the allocation of the proceeds received from GEMS, in connection with the sales transaction, to the MRI project, based on which the royalties had been computed. EMI and Elron Ltd. notified the Company that the outcome of the settlement of their disagreement with the OCS in connection with the sale of Elron's holdings in the Company does not impose any additional cost to the Company. G. The allocation of the proceeds in respect of the sale transaction, between the Company and its subsidiaries is based on an estimate of the assets' fair value (both tangible and intangible) sold by each one of the companies; based on separate negotiations held with each selling Group company; and on the basis of the provisions stipulated in the sales agreement. A different method of allocation may cause the Company and its subsidiaries additional liabilities and/or expense. Company's management believes that the estimates used as the basis for this allocation of proceeds are adequate under the circumstances. 22 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 6 - TRANSACTION WITH RELATED PARTY In April 2002, SLS (a subsidiary of the Company), entered into an agreement with a company controlled by the controlling interests in the Company (hereinafter - "CDPM"), in the framework of which CDPM committed to complete the construction of a commercial and entertainment center in the Herzlyia Marina (hereinafter - "the Commercial Center"), including, the development work, as defined in the agreement, for a final and absolute consideration of U.S. $57.7 million, which is to be paid based on the progress of the work (hereinafter - "the Work Consideration"). CDPM committed to deliver the Commercial Center to the Company in a state of being ready for operation ("turnkey"), by March 2003. The amount of the Work Consideration was determined on the basis of a calculation of the amount of work remaining to be performed, as at March 1, 2002. In respect of each payment and/or expense paid by the Company to a sub-contractor, supplier, professional adviser or other entity as part of the implementation of the project from March 1, 2002 to the date CDPM commences work, the Work Consideration will be adjusted accordingly. From March 1, 2002 until September 30, 2002 the Company made such payments on account of implementation of the project in the total sum of U.S. $11.2 million. The work in the framework of the agreement does not include specific work, which was detailed in the agreement (mainly - planning, marketing, tolls and supervision), the cost of which is to be borne by the Company. In addition, the agreement provides, that CDPM is to bear the cost of adaptations for tenants, based on the specification detailed in the agreement and the consideration for adaptations which are not included in the specification, is to be determined based on a mechanism set forth in the agreement. Until the date of publication of these financial statements the agreement had not yet been closed. Upon the closing of the agreement, the Company is to pay to CDPM an advance of $3 million, on account of the Work Consideration and, concurrently, CDPM is to provide the Company with a bank guarantee, at the rate of 5% of the Work Consideration. In addition, the Company committed, as part of the agreement, to assign to CDPM all the rights and obligations, based on the agreements, which it signed with various suppliers, except for those specified in the agreement. The agreement includes a number of conditions, the breach of which is considered as a fundamental breach, which confers the remedies stated in the agreement. The agreement was approved by the General Meeting of the Company's shareholders. 23 Elscint Limited and Subsidiary Companies - -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 7 - SUBSEQUENT EVENTS A. In November 2002, the Company signed an agreement with an unrelated third party ("the Purchaser") for the sale of the manufacturing, assembly, engineering and integration operations (mainly for the medical imaging equipment) of the sub-assemblies and components segment, conducted by the Company at its Ma'alot facility in Northern Israel ("the Plant"). Pursuant to the agreement, the Company will sell to the Purchaser the Plant's assets (tangible and intangible assets) as defined in the agreement ("the Transferred Assets"). In addition, the Purchaser will assume certain liabilities incurred in connection with the Plant (agreed balance sheet and off-balance sheet liabilities). The Purchaser will not assume liabilities for claims and disputes if arising out of facts and circumstances which occurred or arose prior to the closing date of the transaction as defined in the agreement. The amount of the consideration ("the Consideration") will be determined, inter alia, on the basis of the net book value of the assets and liabilities being transferred (trade receivables, inventory and fixed assets net of balance sheet liabilities), as included in the audited financial statements of the Plant as of the closing date. The final amount of the consideration (and accordingly the gain which the Company will generate from the transaction) are subject to the Purchaser's post closing verification that the assets included in the balance sheet of the Plant as of the closing date properly reflect the Transferred Assets on the basis of the criterions as determined in the agreement. In order to secure possible adjustments to the consideration (if any) in consequence of such verification procedures, an amount equal to 15% of the book value of the Transferred Assets shall be deposit into escrow for a period of up to 90 days following the closing date. Completion of the transaction is subject to the waiver, by another unrelated third party, of certain rights of first refusal previously awarded to that party, as well as the approval of the Controller of Restrictive Trade Practices in Israel. Subject to the receipt of such waiver and approval, it is anticipated that the closing date of the transaction will be December 31, 2002. B. Subsequent to the balance sheet date, a proportionately consolidated company (held indirectly at the rate of 35%), which owns a hotel in London (hereinafter - "the Hotel Company"), entered into an agreement with a third-party hotel company (hereinafter - "the Third Party"), pursuant to which the Hotel Company will lease out its hotel for a period of 25 years, in exchange for a fixed annual amount during the first four years, and beginning with the fifth year and up to the end of the lease period, such amount increases at the rate of 2.5% per year. The Third Party was given an option to extend the agreement for two additional periods of 15 years each. The agreement with the Third Party is scheduled to take effect in January 2003. 24 -----END PRIVACY-ENHANCED MESSAGE-----