RNS Number:8490S
Technoplast Industries Ld
04 December 2003
TECHNOPLAST INDUSTRIES LIMITED
FINANCIAL STATEMENTS
30 SEPTEMBER 2003
UNAUDITED
TECHNOPLAST INDUSTRIES LIMITED
FINANCIAL STATEMENTS AS AT 30 SEPTEMBER 2003
TABLE OF CONTENTS
Page
Management Discussion and Analysis A - L
Auditors' Review Report 2
Condensed Consolidated Profit and Loss Accounts 3
Condensed Statement of Recognized Gains and Losses 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Cash Flow Statements 5 - 7
Notes to the Financial Statements 8 - 16
Management Discussion and Analysis
for the nine month period ended 30th September 2003
We take pleasure in presenting the consolidated financial statements of
Technoplast Industries Limited for the period ended 30th September 2003
(hereinafter - "the period under report"). The term "Company" as used in this
report refers to the parent company, Technoplast Industries Ltd. and the term "
Group" refers to the consolidation of the Company and its subsidiaries.
The term "the period" refers to the results of operations for the nine-month
period, whereas the term "quarter" refers to the results of operations for the
three-month period ended 30th September 2003.
We present below a description of the main events that occurred during the
period under report.
Significant developments of the Company:
* During the quarter under review, the results of operations of the Company
once again reflected an improving trend, after the second quarter which was
a deviant quarter when compared with other periods since the Company
implemented its reorganization plan. The improving trend was reflected in
the comparison between the results of this quarter with those of the
previous quarter and with those of the same quarter last year in most
aspects, as detailed below:
* Sales turnover during the quarter totalled NIS 22.2 million, compared with
NIS 16.7 million during the second quarter of the year, and with NIS 24.2
million during the same quarter last year.
* Gross profit during the quarter totalled NIS 2.8 million (13% of sales),
compared with a gross loss of NIS 0.8 million (5% of sales) in the second
quarter of this year, and with NIS 1.2 million (5% of sales) during the same
quarter last year.
* The operating loss during the quarter totalled NIS 1.7 million (8% of
sales), compared with an operating loss of NIS 5.7 million (34% of sales) in
the second quarter of this year, and an operating loss of NIS 3.6 million
(15% of sales) during the same quarter last year.
* On the other hand, the Company's financing expenses which during the
quarter totalled NIS 2.9 million, due among other reasons to the effects of
the negative inflation during the quarter on the excess of monetary
liabilities, resulted to an after-tax loss (before the share of the Company
in the losses of subsidiaries) in an amount of NIS 3.8 million, compared
with NIS 14.4 million in the second quarter of the year, and with NIS 4.4
million in the same quarter last year.
* During the quarter, the Company generated a positive cash inflow from
operations in an amount of NIS 0.2 million.
* During the period, the Company's sales turnover totalled an amount of NIS
64.3 million, compared with NIS 69.5 million during the same period last
year (a decrease of 7%).
The improving trend reflected in the operations and financial results
of the Company continued and even strengthened during the fourth quarter of
the year.
Significant developments of the subsidiary
* The change in the pattern of sales to the major customer (Home Depot) and
the costs of setting up the logistics center in the U.S., continued their
negative effects on the results of operations of the subsidiary. The sales
turnover of the subsidiary decreased during the period to NIS 40 million,
compared with NIS 52.3 million during the same period of 2002, and there was
a transition from a positive contribution of NIS 2.2 million to consolidated
profits during the first nine months of 2002, to a negative contribution of
NIS 5.2 million during the reporting period.
Sales of the subsidiary during the quarter totalled an amount of NIS 13.5
million, compared with NIS 13.7 million during the same period last year.
Notwithstanding the above, we would like to point out that commencing at the
end of the third quarter, there was a significant awakening in orders from
the subsidiary, mainly, from Home Depot. The results of the awakening in
sales will be reflected in the fourth quarter of the year.
Significant developments of the Group
* Group sales during the period totalled NIS 104.3 million, compared with
NIS 121.2 million during the same period last year, a decrease of 14%
(mainly sales of a subsidiary).
* Group sales during the quarter totalled NIS 35.3 million, compared with
NIS 37.9 million during the same quarter last year, a decrease of 7%.
* During the period, the Group had a consolidated loss of NIS 23.8 million,
compared with NIS 10.1 million during the same period last year.
This loss is comprised of the NIS 19.1 million loss of the Company
(compared to NIS 12.3 million during the same period last year), plus the
share of the Company in the losses of subsidiaries and investee companies in
an amount of NIS 4.7 million (compared with earnings of NIS 2.2 million last
year).
* The financial results during the period were negatively affected by a
number of events that occurred during the second quarter, as detailed below:
* A decrease in the volume of operations due to decrease of orders from ZAG
and Home Depot that caused a gross loss in the second quarter and an
increase in the operating loss for the same quarter, as detailed above.
* Non-recurring expenses totalling NIS 2.1 million that derived from the
shutdown of the Barkan plant.
* Based on the data of the valuation that was commissioned by the Company
from an outside expert and adopted by the Company's board of directors for
the expected merger transaction with Kidron (see details of the transaction,
below), the Company updated its implementation of Israeli Accounting
Standard No. 15 pertaining to the decrease in value of assets, and recorded
a reserve of NIS 6.9 million in respect of the decrease in value of its
assets.
The loss of the Group, net of abovementioned non-recurring expenses,
amounted to NIS 14.8 million, compared to NIS 10.1 million in the same
period last year.
* The consolidated net loss for the quarter amounted to NIS 6.6 million,
compared with NIS 4.4 million during the same quarter last year.
* In February 2003, the Company signed a long-term rental agreement in
respect of property it owns in the Barkan industrial zone. The Company will
receive annual rents amounting to U.S.$ 140,000.
* Further to the agreement in principle, signed on 29 June 2003, a final
agreement was signed on 31 August 2003 and amended on 14 September 2003 and
on 13 November 2003 with Kidron Management and Holdings Company (1961) Ltd.
on its behalf and on behalf of others (hereinafter - "Kidron"), whereby
Kidron will transfer to the Company, by means of a merger, all the shares of
Kidron Plastics Ltd. (a company active in importing and marketing raw
materials for the plastics industry), in return for an allotment of shares
in the Company which will grant Kidron and Michael and Sigal Zsus 75% of the
issued and outstanding shares (fully diluted) of the Company. Michael Zsus
is directly and through a subsidiary company, fully controlled by him,
controlling 90% of Kidrow.
The percentage of Kidron's holdings in the Company was determined on the
basis of a valuation performed by an external expert.
Consummation of the transaction is subject to a number of pre-conditions and
to obtaining the necessary approvals under law, including the approval of
the general shareholders meeting of the Company. The closing of this
transaction is scheduled to take place up to 31 December 2003. Each party
has the right to extend this date until 31 January 2004.
The Kidron Group operates through subsidiaries in Israel and Europe in a
variety of areas related to the manufacture and supply of raw materials and
other inputs to industry.
* As at 30th September 2003, the Group had a shareholders' deficit amounting
to NIS 1.9 million and a working capital deficit amountingto NIS 68.4
million. The Group has accumulated losses as at 30th September 2003
amounting to NIS 88.9 million. The Group finished the period ended 30th
September 2003 with a negative cash flow from operations amounting to NIS
4.3 million (the Company finished the period with a negative cash flow from
operations amounting to NIS 1.4 million).
* The Group finished the quarter with a positive cash flow from operations
amounting to NIS 1.4 million (the Company finished the quarter with a
positive cash flow from operations amounting to NIS 0.2 million).
Notwithstanding the above, the Company is continuing to implement the
reorganization plan it commenced upon toward the end of 2001 and is
continuing negotiations with its banks.
Company Management estimates that implementation of the reorganization plan
and/or successful conclusion of negotiations with its banks and/or the
closing of the agreement with Kidron and/or an influx of cash to the
Company, will allow it to continue its business operations in a regular
manner and with a sound cash flow.
If the aforementioned plans are not brought to fruition, there is a
doubt as to whether the Group can continue to operate as a "going concern"
and, therefore, may not be able to dispose of its assets and repay its
liabilities during the normal course of its business.
The financial statements do not contain any adjustments to the value or
classification of assets or liabilities that may be necessary should the
Company not be able to continue operating as a "going concern".
* The accountants of the subsidiary, Smart Modular Storage Ltd., pointed out
in their review letter on the financial statement as of 30 September 2003,
the following:
- A loss of NIS 9.9 million in the reporting period,
shareholders deficit in an amount of NIS 10.5 million, a deficit in
working capital in an amount of NIS 31.4 million and a negative cash
flow from operating activities during the period in an amount of NIS
2.9 million.
- The financing of the working capital deficit needed for its
operations requires the extension of due dates of bank loans and the
receipt of alternative lines of credit.
If the aforementioned conditions are not fulfilled, it is
doubtful whether the subsidiary will be able to continue operating
as a "going concern" and, as a result, it may be unable to realize
its assets or pay off its liabilities during the normal course of
its business.
The Group and its Business Environment
General
The Company is an industrial concern engaged in the manufacture of
injection-moulded and pressed plastic products. The Company has an active plant
in Migdal Ha'emek.
The second-tier subsidiary, B'Ma'asaf Plastics (1994) Ltd., has a plant in the
industrial zone of Kibbutz Gezer for the manufacture of plastic product under
the extrusion method.
Developments in Group activity
As mentioned above, the quarter under review was characterised mainly by a
turnaround from the low point in activity and the results of operations of the
second quarter of 2003 and a return to the growth that commenced seven quarters
ago. This trend continued into the fourth quarter as well.
Subsidiaries, associated undertakings and other companies
Smart Modular Storage Ltd. (hereafter - "SMS")
The Company holds 56.5% of the issued and outstanding share capital of SMS.
SMS is engaged in the development and marketing of plastic do-it-yourself
storage rooms, manufactured under the extrusion method, for sale in Israel and
abroad.
During the fourth quarter of 2002, the terms of the agreement with a major
customer in the U.S. were changed, commencing on 1 January 2003. On that date,
the subsidiary became a local U.S. supplier, i.e., the subsidiary is obligated
to supply the customer's stores directly, as opposed to the previous terms of
agreement whereby the subsidiary delivered the product to the customer at the
Israeli port.
Approximately 60% of SMS's sales turnover during the period were to the major
customer - Home Depot in the U.S. (50% in the quarter), compared with 71% during
all of 2002. The subsidiary has been making great efforts to expand its customer
base, mainly in Europe and in the local market.
The total investment of the Company in SMS (including shareholders' loans) as at
the balance sheet date amounted to NIS (3.8) million (a credit balance), net of
the Company's share in the losses of SMS from the date of investment in an
amount of NIS 12.8 million.
In addition, the Company placed at the disposal of SMS a bank guarantee limited
in amount to an amount of up to U.S.$ 0.5 million.
B'Ma'asaf Plastics (1994) Ltd. (hereafter - "B'Ma'asaf")
As at the balance sheet date, the subsidiary, SMS, holds 100% of the issued and
outstanding shares of B'Ma'asaf, a company engaged in the manufacture of plastic
products using the extrusion method and manufactures PVC profiles for the
construction, electricity and agriculture industries.
Since the beginning of 2000, the manufacture of storage rooms has been gradually
transferred from SMS to B'Ma'asaf. At present, B'Ma'asaf manufactures all of the
storage rooms consumed by SMS.
CD Anywhere Innovative Storage Solutions Ltd. (hereafter - "CD")
In September 2001, the Company sold its investment in CD for an amount of U.S.$
350 thousand (at cost), of which it received half (an amount of NIS 0.6
million). The second half has not yet been paid, therefore, on 28th August 2003,
the Company filed suit in the Netanya Magistrates Court against Amir Levit and
others to recoup the balance of the debt.
AFIC Printing Products Ltd. (hereafter - "AFIC")
The Company holds 25.1% of AFIC's shares. AFIC is engaged in the production and
marketing of cartridges for printers and cash registers.
At the end of 2001, the Company set up a provision to write off the entire
investment in AFIC, in an amount NIS 1.1 million.
There was a significant increase of AFIC activity during 2002, and the company
made the transition from loss to profit. This trend continued into the first
quarter of 2003.
Sales of AFIC during the period totalled NIS 18.2 million, compared with NIS
14.4 million during the same period of last year. Net earnings for the period
amounted to NIS 1.8 million, compared with NIS 1.1 million during the same
period last year. The company's shareholders' equity amounted to NIS 5.7
million.
On 27 March, 2003, Itamar Patishi and Moshe Katz were appointed as directors in
AFIC.
In view of the above appointments, Company management decided to cancel the
reserve for decline in value set up in the past in respect of the investment in
AFIC and to include its investment in AFIC in the financial statements on the
equity basis.
As at 30th September 2003, the Company recorded its investment in AFIC at an
amount of NIS 1.4 million, 25.1% of the shareholders' equity of AFIC at that
date.
Financial Position (consolidated)
30th September 2003 30th September 2002 31st December 2002
NIS'000 % of balance NIS'000 % of balance NIS'000 % of balance
sheet sheet sheet
Total balance sheet 155,941 178,536 170,065
Current assets 53,881 35% 61,502 34% 56,056 33%
Long-term debit 1,489 1% 59 0% 69 0%
balances
Redundancy provision 13 0% - - - -
Tangible assets 86,388 55% 106,207 60% 103,120 61%
Goodwill 9,573 6% 10,768 6% 10,469 6%
Deferred taxes - 0% - - 39 -
Minority receivable 4,597 3% - - 312 0%
Current liabilities 122,304 78% 104,343 59% 108,119 64%
Long-term 30,037 19% 38,157 21% 34,516 20%
liabilities
Capital notes 5,527 4% 5,480 3% 5,516 3%
Minority rights -- -- 1,890 1% -- --
Shareholders' funds (1,927) (1%) 28,666 16% 21,914 13%
The explanations below pertain to the changes in the consolidated balance sheet
which took place during the reporting period.
Current assets decreased during the period under report by approximately NIS 2.2
million. This decrease resulted from the decrease of NIS 2.2 million in
inventory (mostly at the subsidiary), offset by the increase of NIS 0.7 million
in cash, and an identical increase in debtors and other accounts receivable.
The NIS 1.4 million increase in long-term debit balances derives from the
cancellation of the reserve for decline in value of the investment in AFI.
The NIS 16.7 million decrease in tangible fixed assets derived from depreciation
for the period in an amount of NIS 9.3 million, plus the reserve for decline in
value of NIS 6.9 million, sales of fixed assets, the depreciated value of which
amounted to NIS 3 million, less purchases of fixed assets in an amount of NIS
2.5 million.
Current liabilities increased by approximately NIS 14.2 million, as a result of
the increase in short-term credit from banking institutions and from the
increase in suppliers and service providers.
The NIS 4.5 million decrease in long-term liabilities derived mainly from the
net repayment of loans which were made during the reporting period, and from the
erosion of foreign currency-linked loans.
The NIS 23.8 million decrease in shareholders' funds derived from the loss for
the period under report.
Results of consolidated operations
Nine Months Ended 30th September Three Months Ended 30th September Year Ended 31st
December
2003 2002 2003 2002 2002
NIS'000 % of NIS'000 % of NIS'000 % of NIS'000 % of NIS'000 % of
sales sales sales sales sales
Turnover 104,283 - 121,241 35,254 37,937 150,032
Gross profit 13,002 12% 16,520 14% 4,851 14% 4,265 11% 18,469 12%
Selling 19,342 18% 14,035 12% 6,831 19% 4,335 11% 19,508 13%
expenses
Research & - - 35 - - - 25 - 118 -
Development
Administrative 9,269 9% 8,336 7% 2,826 8% 2,839 8% 12,150 8%
and general
expenses
Operating loss (15,609) (15%) (5,886) (5%) (4,806) (14%) (2,934) (8%) (13,127) (9%)
Financing (4,725) (4%) (2,524) (2%) (4,188) (11%) (1,508) (4%) (3,839) (3%)
expenses
Operating (20,334) (19%) (8,410) (7%) (8,994) (25%) (4,442) (12%) (16,966) (11%)
loss after
financing
Other income (8,106) (8%) (329) 0% 838 2% - - (760) (1%)
(expenses)
Tax benefit (40) - (33) - (996) (3%) (33) - 1 -
Company share 444 - - - 165 - - - - -
in earnings
of investee
companies
Minority 4,285 4% (1,373) (1%) 2,406 7% 94 - 828 1%
share in
(earnings)
losses of
subsidiaries
Loss for the (23,841) (23%) (10,145) (8%) (6,581) (19%) (4,381) (12%) (16,897) (11%)
period
Results of Company operations
Nine Months Ended 30th September Three Months Ended 30th September Year Ended 31st
December
2003 2002 2003 2002 2002
NIS'000 % of NIS'000 % of NIS'000 % of NIS'000 % of NIS'000 % of
sales sales sales sales sales
Turnover 64,333 69,489 22,166 24,222 94,089
Gross profit 6,150 10% 4,594 7% 2,813 13% 1,170 5% 7,365 8%
Operating (8,232) (13%) (10,423) (15%) (1,689) (8%) (3,610) (15%) (13,652) (15%)
loss
Financing (2,690) (4%) (1,549) (2%) (2,885) (13%) (745) (3%) (2,118) (2%)
expenses
Operating (10,922) (17%) (11,972) (17%) (4,574) (21%) (4,335) (18%) (15,770) (17%)
loss after
financing
Other (8,225) (13%) (352) - 823 4% (14) - (595) (1%)
income
(expenses)
Tax on - - (33) - - (33) - (33) -
income
Loss after (19,133) (30%) (12,360) (18%) (3,751) (17%) (4,402) (18%) (16,398) (17%)
taxation
Company (4,694) (7%) 2,215 3% (2,830) (13%) 21 - (499) (1%)
share in
earnings
(losses) of
subsidiaries
and
investee
companies
Loss for (23,841) (37%) (10,145) (15%) (6,581) (30%) (4,381) (18%) (16,897) (18%)
the period
Analysis of the results of consolidated operations for the period ended 30th
June 2003
Turnover
Group sales during the period decreased by NIS 17 million (14%) compared with
sales of the first nine months of 2002, and totalled NIS 104.3 million for the
quarter.
Company sales totalled NIS 64.3 million during the period under report, a
decrease of NIS 5.2 million (7%) over the same period last year.
The decrease in Company sales occurred mainly during the second quarter and
derived mainly from the decrease in sales to Z.A.G. and the upward revaluation
of the shekel versus the dollar and the euro.
Sales of subsidiaries amounted to NIS 40 million during the period, compared
with NIS 51.7 million in the same period last year. The decrease in sales of the
subsidiary is explained mainly by the change in the method of selling to Home
Depot in the U.S., and the upward revaluation of the shekel versus the dollar
and the euro and seasonal fluctuations that affect sales.
Gross profit
Consolidated gross profit during the period decreased from NIS 16.5 million (14%
of sales during the same period last year), to NIS 13 million (12% of sales).
The gross profit of the Company increased by NIS 4.6 million (7% of sales) from
the same period last year, to NIS 6.2 million (10% of sales) during the period
under review. The gross profit of the subsidiary, SMS, decreased during the
current period by an amount of NIS 4.1 million (35%) compared with the same
period last year. This was mainly due to the decrease in sales turnover and the
increase in raw material prices.
Operating loss
The decrease in the gross profit and the increase in general and administrative
expenses of the subsidiary, resulted in an increased operating loss for the
Group, which totalled NIS 15.6 million, compared with NIS 5.9 million in the
same period last year.
Selling and marketing expenses totalled NIS 19.3 million (18% of sales) for the
period, compared with NIS 14.1 million (12% of sales) in the same period last
year.
This increase is mainly the result of the change in the operating method
employed by the subsidiary in the U.S. market.
General and administrative expenses of the Group amounted to NIS 9.3 million (9%
of sales), compared with NIS 8.3 million (7% of sales) in the same period last
year.
Sales expenses and general and administrative expenses of the Company decreased
from NIS 15 million in the same period last year to NIS 14.4 million during the
period under report.
Financing expenses
The Group's financing expenses increased during the period by an amount of NIS
2.2 million compared with the same period in 2002, mainly as a result of the
effects of the negative inflation during the third quarter of the year.
Other expenses
This item increased significantly during the period under report and includes
non-recurring expenses during the second quarter in respect of the shut-down of
the Barkan plant, in an amount of NIS 2.1 million, a reserve for the decline in
value of machinery and equipment in an amount of NIS 6.9 million, offset by
income from the cancellation of the reserve for the decline in value of the
investment in AFIC, in an amount of NIS 1.1 million.
Liquidity and cash flows
Liquidity data (consolidated) 30/9/03 30/9/02 31/12/02
Working capital deficit (68,423) (42,841) (52,063)
Cash, bank deposits and short-term trade investments 1,649 2,729 931
Liquidity ratios (consolidated)
Current ratio 0.44 0.59 0.52
Quick ratio 0.31 0.46 0.35
Cash flows (consolidated)
Company cash flows from current operations during the quarter totalled an inflow
of approximately NIS 0.2 million. Company cash flows from current operations
during the period totalled an outflow of approximately NIS 1.4 million, compared
with an outflow of NIS 1.8 million for the same period last year.
Group cash flows from operations for the period totalled an outflow of NIS 4.3
million, compared with an inflow if NIS 4.3 million during the same period last
year.
The factors that contributed to the cash flows were as follows: the loss for the
period in an amount of NIS 23.8 million, less expenses not involving cash flows,
in a net amount of NIS 11.7 million, a decrease in accounts receivable (NIS 0.8
million) and an increase in trade creditors (NIS 4.8 million), less a decrease
in inventories (NIS 2.2 million).
Cash flows used in investment activity during the period under report totalled
an outflow of approximately NIS 1.4 million, compared with NIS 4.3 million in
the same period last year. The outflow was used mainly for the purchase of fixed
assets in an amount of NIS 2.5 million, offset by cash proceeds from the sale of
fixed assets in an amount of NIS 1.1 million.
Cash flows from financing activity during the period under report amounted to an
inflow of approximately NIS 6.3 million during the period under report, compared
with NIS 2 million in the same period last year. The inflow resulted from the
receipt of short-term bank credit in a net amount of NIS 9.5 million, offset by
the net repayment of long-teloans in an amount of NIS 3.2 million.
Sources of finance
The Group's current financing needs are covered by credit lines granted by
banks.
During 2002, the Company signed agreements whereby it recorded a floating charge
in favor of banks and a fixed charge on the building and property in Barkan and
a fixed charge on the building and property in Migdal Ha'emek in favor of one of
the banks, which increased the Company's credit framework by an amount of NIS
4.5 million.
Concurrently, the Group is continuing its negotiations with the banks to further
expand its credit framework and to reschedule the repayment dates of its
long-term loans. The Group requested the increased credit in order to finance
its working capital needs and to make necessary investments. Group Management
believes that the successful culmination of negotiations with the banks and/or
the closing with Kidron and/or an influx of cash to the Company will enable it
to continue its business activity in an orderly fashion with a proper cash flow.
Donations
Company policy is to contribute to the community, especially in the areas
surrounding its plants, based on the financial ability to do so.
During the period under report, in accordance with this policy, the Company made
contributions of NIS 10 thousand to various institutions and organizations.
Exposure to market risks and risk management
General
The Group's activity in competitive international markets for consumer goods
exposes the Company to risks deriving from changes in exchange rates and prices
of raw materials, to the risks of granting credit to customers in Israel and
abroad, and to the risks of being dependent on major customers.
The Company's board of directors discusses market risks and the manner in which
they are handled, at its quarterly meetings.
The chief financial officer of the Company is the party in charge of managing
the Company's risks to changes in exchange rates and the risks of granting
credit to customers.
The general manager is responsible for managing risks deriving from changes in
raw material prices (changing selling prices in accordance with the up-to-date
prices of raw materials) and from dependency on major customers.
The Company is exposed to the following market risks:
Exchange rate fluctuations
Approximately 90% of the Company's sales are denominated in the dollar or
European currencies (hereinafter - "foreign currency"). In addition, 90% of the
raw material costs are foreign currency denominated and about 20% of the Group's
other expenses are foreign currency linked.
As at 30th September 2003, the excess of the Group's liabilities in foreign
currency over its assets in foreign currency amounted to NIS 36 million.
The above data show that the Company is exposed to two opposing foreign currency
effects - on the one hand, a devaluation of the shekel results in financing
expenses because of the outstanding foreign currency liabilities. On the other
hand, since the percentage of foreign currency linked expenses is lower than the
percentage of foreign currency linked revenues, the Company's operating income
increases as a result of the same devaluation.
Changes in raw material prices
In accordance with the Company's agreement with ZAG, the Company's major
customer (approximately 40% of all Company sales during the period), any change
in the price of raw materials is immediately and entirely transferred to the
prices of products.
With regard to other customers, the Company has no obligation to fixed prices
over the long-term. As a result, no forward transactions are entered into, to
guarantee raw material prices. Nevertheless, it is difficult to raise product
prices every time raw material prices increase and under the best of
circumstances, compensation is only partial.
During the period, raw material prices rose by approximately 35%, but the
Company and its competitors have not raised the prices of merchandise they sell
to their customers.
Customer credit risks
As indicated below, the Group has two primary customers Z.A.G. and Home Depot,
comprising 49% of the consolidated sales turnover. Management estimates that the
credit risk in respect of these customers is not high and does not justify
taking out credit insurance. Therefore, the Group does not insure itself for
credit risks.
The Company entered into an agreement with an international provider of business
and financial data regarding companies around the world, and it uses the data it
obtains to conduct initial and ongoing credit risk evaluations of both its new
and existing customers.
Dependency on a major customer
The Company has a major customer - Z.A.G., to which it sold during the period,
25% of the total Group sales.
The dependency on this customer is declining and the Company carries a policy of
diverse products and multiplicity of customers.
The subsidiary has a major customer - Home Depot, to which it sold, during the
reporting period, 24% of the total sales of the Group.
In order to reduce the risk of dependency on a sole customer, the subsidiary has
stepped up its marketing and development efforts. The subsidiary has been
investing efforts in expanding its customer base, primarily in North America and
the local market.
Linked balance sheet as at 30th September 2003 (NIS '000)
Linked to the ICPI Denominated in or Unlinked Non-monetary items Total
linked to Foreign
currency
Assets
Cash and cash equivalents - 1,414 235 - 1,649
Trade debtors - 21,563 8,763 - 30,326
Other debtors 1,162 - 4,208 512 5,882
Stocks - - - 16,024 16,024
Investments - 12 59 1,418 1,489
Redundancy provision 13 - - - 13
Tangible assets - - - 86,388 86,388
Deferred taxes - - - - -
Intangible assets - - - 9,573 9,573
Minority debt - - - 4,597 4,597
Total assets 1,175 22,989 13,265 118,512 155,941
Liabilities
Bank loans and 3,481 21,677 36,603 - 61,761
overdrafts (excluding
current maturities)
Trade creditors - 3,544 35,920 - 39,464
Other creditors 1,158 - 10,512 24 11,694
Long-term loans 5,323 33,720 - - 39,043
Redundancy provision - - 215 - 215
Deferred income - - - 164 164
Capital note 5,527 - - - 5,527
Total liabilities 15,489 58,941 83,250 188 157,868
Surplus (deficit) of (14,314) (35,952) (69,983) 118,324 (1,927)
assets over liabilities
Itamar Patishi Daniel Stern
Chairman of the Board C.E.O.
30th November 2003
The Board of Directors of 30 November 2003
Technoplast Industries Ltd.
Dear Sirs:
Re: Review of the Unaudited Condensed Interim Consolidated
Financial Statements for the nine month and three month periods
ended 30th September, 2003
At your request, we have reviewed the condensed interim consolidated balance
sheet of TECHNOPLAST INDUSTRIES LIMITED as at 30th September 2003, the condensed
consolidated profit and loss accounts, condensed statements of recognized gains
and losses, condensed statements of changes in shareholders' equity and the
condensed consolidated statements of cash flows for the nine month and three
month periods then ended.
Our review was conducted in accordance with procedures prescribed by the
Institute of Certified Public Accountants in Israel and included, inter alia,
reading the said financial statements, reading the minutes of the shareholders'
meetings and of the meetings of the Board of Directors and its committees, as
well as making inquiries of persons responsible for financial and accounting
matters.
We were provided with the reports of other accountants regarding the review of
the financial statements of a subsidiary, whose assets as at 30 September 2003
constitute approximately 37% of total consolidated assets and whose revenues for
the nine month and three month periods constitute approximately 39% and 38% of
total consolidated revenues respectively. Moreover, the data included in the
consolidated financial statements pertaining to the equity value of the
investment and the Company's share in the results of operations of an associated
undertaking, are based on the financial statements that were reviewed by other
accountants.
Since the review performed is limited in scope and does not constitute an audit
in accordance with generaccepted auditing standards, we do not express an
opinion on the condensed financial statements.
During the performance of our review, including reading the review reports of
others as stated above, nothing came to our attention that would necessitate any
material modifications to the condensed financial statements referred to above
in order for them to be in conformity with generally accepted accounting
principles and in accordance with Section D of the Securities Regulations
(Periodic and Immediate Reports), 1970.
We draw attention to Note 1 of the condensed financial statements regarding the
doubt as to the ability of the Company to continue as a "going concern", and the
plans of Management pertaining to the continued existance as a "going concern".
The condensed financial statements to not contain any adjustments or
reclassifications of assets and liabilities that may prove to be necessary if
the Company cannot continue operating as a "going concern".
Fahn Kanne & Co. Schmidt & Co.
Certified Public Accountants (Isr.) Certified Public Accountants (Isr.)
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(Adjusted to NIS of September 2003)
Convenience translation
Year ended Three months ended Nine months ended Three months Nine months
31st 30th September 30th September ended 30th ended 30th
December September September
2002 2002 2003 2002 2003 2003 2003
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 #' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Turnover 150,032 37,937 35,254 121,241 104,283 4,749 14,047
Cost of sales 131,383 33,672(*) 30,403 104,721(*) 91,281 4,095 12,296
_______ ______ ______ ______ ______ ______ ______
Gross profit 18,649 4,265 4,851 16,520 13,002 654 1,751
Selling, 31,776 7,199 9,657 22,406(*) 28,611 1,301 3,854
general and
administration
expenses
_______ ______ ______ ______ ______ ______ ______
Operating (13,127) (2,934) (4,806) (5,886) (15,609) (647) (2,103)
profit (loss)
before other
expenses
Other income (760) - 838 (329) (8,1296) 113 (1,104)
(expenses)
_______ ______ ______ ______ ______ ______ ______
Loss on (13,887) (2,934) (3,968) (6,215) (23,805) (534) (3,207)
ordinary
activities
before
financial
expenses
Net financial (3,839) (1,508) (4,188) (2,524) (4,725) (564) (636)
income
(expenses)
_______ ______ ______ ______ ______ ______ ______
Loss on (17,726) (4,442) (8,156) (8,739) (28,530) (1,098) (3,843)
ordinary
activities
before
taxation
Tax benefit 1 (33) (996) (33) (40) (134) (5)
(tax on
profit) on
ordinary
activities
_______ ______ ______ ______ ______ ______ ______
Loss on (17,725) (4,475) (9,152) (8,772) (28,570) (1,232) (3,848)
ordinary
activities
after
taxation
Net equity in - - 165 - 444 22 60
profit of
associated
undertakings
Minority 828 94 2,406 (1,373) 4,285 324 577
share in loss
(profit) of
investee
_______ ______ ______ ______ ______ ______ ______
Loss for the (16,897) (4,381) (6,581) (10,145) (23,841) (886) (3,211)
period
_______ ______ ______ ______ ______ ______ ______
_______ ______ ______ ______ ______ ______ ______
Loss per (0.50) (0.13) (0.19) (0.3) (0.71) (0.02) (0.09)
share (NIS/#)
_______ ______ ______ ______ ______ ______ ______
_______ ______ ______ ______ ______ ______ ______
(*) Reclassified.
CONDENSED STATEMENT OF RECOGNISED GAINS AND LOSSES
(Adjusted to NIS of September 2003)
Convenience translation
Year ended Three months ended Nine months ended Three months Nine months
31st 30th September 30th September ended 30th ended 30th
December September September
2002 2002 2003 2002 2003 2003 2003
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 #' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Loss for (16,897) (4,381) (6,581) (10,145) (23,841) (886) (3,211)
the period
_______ ______ ______ ______ ______ ______ ______
Total (16,897) (4,381) (6,581) (10,145) (23,841) (886) (3,211)
recognized
losses for
the period
_______ ______ ______ ______ ______ ______ ______
_______ ______ ______ ______ ______ ______ ______
CONDENSED CONSOLIDATED BALANCE SHEETS
(Adjusted to NIS of September 2003)
Convenience
translation
31st December 30th September 30th September
2002 2002 2003 2003
NIS' 000 NIS' 000 NIS' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Minority receivable 312 - 4,597 619
Intangible assets 10,469 10,768 9,573 1,290
Fixed assets
Tangible assets 103,120 106,207 86,388 11,637
Investment in investee companies - - 1,418 191
Deposits 69 59 71 10
_______ _______ _______ ______
103,189 106,266 87,877 11,838
Funded amounts in respect of redundancy provision - - 13 2
Deferred tax 39 - - -
Current assets
Stocks 18,188 13,228 16,024 2,159
Debtors 36,937 45,545 36,208 4,877
Cash at bank and in hand 931 2,729 1,649 222
_______ _______ _______ ______
56,056 61,502 53,881 7,258
Creditors: amounts falling due within one year
Bank loans and overdrafts 62,057 59,295 71,146 9,584
Creditors 46,062 45,048 51,158 6,891
_______ _______ _______ ______
108,119 104,343 122,304 16,475
Net current assets/(liabilities) (52,063) (42,841) (68,423) (9,217)
_______ _______ _______ ______
Total assets less current liabilities 61,946 74,193 33,637 4,532
_______ _______ _______ ______
_______ _______ _______ ______
Creditors: amounts falling due after
more than one year
Minority rights - 1,890 - -
Capital note 5,516 5,480 5,527 745
Non-convertible bank loans 33,977 37,010 29,658 3,995
Deferred income 215 230 164 22
_______ _______ _______ ______
39,708 44,610 35,349 4,762
Provisions for liabilities and charges
Redundancy provision 324 917 215 29
_______ _______ _______ ______
40,032 45,527 35,564 4,791
_______ _______ _______ ______
Net assets (liabilities) 21,914 28,666 (1,927) (259)
_______ _______ _______ ______
_______ _______ _______ ______
Capital and reserves
Share capital 42,899 42,899 42,899 5,779
Share premium account 43,786 43,786 43,786 5,898
Capital funds 328 328 328 44
Profit and loss account (*) (65,099) (58,347) (88,940) (11,980)
_______ _______ _______ ______
Shareholders' funds 21,914 28,666 (1,927) (259)
_______ _______ _______ ______
_______ _______ _______ ______
(*) Reclassified.
Date of approval: 30 November 2003.
Moshe Katz Itamar Patishi Daniel Stern
Vice President of Finance Chairman of the Board C.E.O.
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(Adjusted to NIS of September 2003)
Convenience translation
Year ended Three months ended Nine months ended Three months Nine months
31st 30th September 30th September ended 30th ended 30th
December September September
2002 2002 2003 2002 2003 2003 2003
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 #' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net cash 2,294 2,280 1,434 4,299 (4,264) 193 (574)
(outflow)
inflow from
operating
activities
(Appendix A)
_______ ______ ______ ______ ______ ______ ______
Investing
activities
Increase in (38) - - (26) - - -
deposits
Payments to (5,079) (1,365) (519) (4,576) (2,476) (70) (333)
acquire
tangible
fixed assets
Receipts 359 49 181 311 1,117 24 150
from sales
of tangible
fixed assets
_______ ______ ______ ______ ______ ______ ______
Net cash (4,758) (1,316) (338) (4,291) (1,359) (46) (183)
outflow from
investing
activities
_______ ______ ______ ______ _______ ______ ______
Financing
activities
Receipt of 4,643 4,642 4,487 4,642 4,487 605 605
long-term
bank loans
Repayment of (11,130) (3,227) (1,852) (7,650) (7,612) (249) (1,026)
long-term
bank loans
Short-term 9,152 (9) (4,674) 4,999 9,466 (630) 1,275
bank loans
and credit,
net
_______ ______ ______ ______ ______ ______ ______
Net cash 2,665 1,406 (2,039) 1,991 6,341 (274) 854
inflow
(outflow)
from
financing
activities
_______ ______ ______ ______ ______ ______ ______
Increase 201 2,370 (943) 1,999 718 (127) 97
(decrease)
in cash and
cash
equivalents
Opening 730 359 2,592 730 931 349 125
balance
_______ ______ ______ ______ ______ ______ ______
Cash and 931 2,729 1,649 2,729 1,649 222 222
cash
equivalents
- closing
balance
_______ ______ ______ ______ ______ ______ ______
_______ ______ ______ ______ ______ ______ ______
APPENDIX A
RECONCILIATION OF OPERATING PROFIT TO NET
CASH INFLOW FROM OPERATING ACTIVITIES
(Adjusted to NIS of September 2003)
Year ended Three months ended Nine months ended Three months Nine months
31st 30th September 30th September ended 30th ended 30th
December September September
2002 2002 2003 2002 2003 2003 2003
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 #' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Loss for the (16,897) (4,381) (6,581) (10,145) (23,841) (886) (3,211)
period
Depreciation of 14,297 3,456 3,139 10,488 17,125 423 2,307
tangible fixed
assets and
intangible assets
Decrease in - - - - (974) - (131)
write-down of
investee in
other company
Amortisation of (62) (15) (20) (47) (51) (3) (7)
deferred income
Loss on sale of 579 15 303 166 1,864 41 251
tangible fixed
assets, net
Change in (38) - 995 - 39 134 5
deferred tax, net
Increase(erosion) 880 879 1,347 1,831 (1,573) 181 (212)
in the value of
long-term
liabilities
Erosion in the (54) 50 29 (19) 11 3 1
value of capital
note
Erosion in the (1) - - (2) (2) - -
value of deposits
Decrease 3,519 1,316 (15) 8,477 2,164 (2) 292
(increase) in
stocks
Decrease 7,873 7,793 2,040 (1,475) (79) 275 (11)
(increase) in
trade debtors
Decrease (1,899) (1,002) 297 (1,161) 808 40 109
(increase) in
other debtors
Increase (3,089) (3,351) 1,582 (5,020) 4,818 213 649
(decrease) in
trade creditors
Increase (1,200) (2,419) 774 33 207 104 28
(decrease) in
other creditors
Increase (18) (47) 71 (26) 71 10 10
(decrease) in
provision for
holiday pay
Increase (768) 80 17 (174) (109) 2 (15)
(decrease) in
redundancy
provision
Increase - - 27 - (13) 4 (2)
(decrease) in
funded amounts
in respect of
redundancy
provision
Net minority (828) (94) (2,406) 1,373 (4,285) (324) (577)
share in profits
(losses) of
consolidated
subsidiaries
Company's equity - - (165) - (444) (22) (60)
in profits of
associates
undertaking
______ _____ _____ _____ _____ _____ _____
Net cash inflow 2,294 2,280 1,434 4,299 (4,264) 193 (574)
(outflow) from
operating
activities
______ _____ _____ _____ _____ _____ _____
______ _____ _____ _____ _____ _____ _____
APPENDIX B
MAJOR NON-CASH TRANSACTIONS
(Adjusted to NIS of September 2003)
Convenience translation
Year ended Three months ended Nine months ended Three months Nine months
31st 30th September 30th September ended 30th ended 30th
December September September
2002 2002 2003 2002 2003 2003 2003
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 #' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Acquisition 376 - - - - - -
of tangible
fixed assets
on credit
_____ _____ _____ _____ _____ ____ ____
_____ _____ _____ _____ _____ ____ ____
Transfer 2,612 140 627 2,654 627 84 84
from
long-term
loans to
short-term
credit
_____ _____ _____ _____ _____ ____ ____
_____ _____ _____ _____ _____ ____ ____
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - GENERAL
Company activities
Technoplast Industries Limited (hereafter - the Company) is a
public company engaged in the manufacture and marketing of
plastic products.
As at 30 September 2003, the Company had a working capital
deficit that amounted to NIS 37 million and the Group had a
working capital deficit that amounted to NIS 68 million. As at
30 September 2003, the Group had an accumulated loss of NIS 89
million. The Group concluded the nine month period under report
with a negative cash flow from current operations in an amount
of NIS 4.3 million.
During the second quarter of 2003, there was a sharp decrease in
sales to Z.A.G., as well as a decrease in the Company's
self-manufactured products. This resulted in a loss to the Group
in an amount of NIS 23.8 million.
The accountants of the subsidiary, Smart Modular Storage Ltd.,
pointed out in their opinion letter on the financial statements
as of 30 September 2003, the following:
- A loss of NIS 9.9 million in the reporting period,
shareholders deficit in the amount of NIS 10.6 million, a
deficit in working capital in the amount of NIS 31 million
and a negative cash flow from operating activities in the
amount of NIS 3 million. In addition, the accountants
pointed out that the financing of the working capital
requires the extension of due dates of bank loans and the
receipt of alternative lines of credit.
- The subsidiary is currently negotiating with its major
customer, as well as with its major supplier, to improve the
terms of the agreement with each. In addition, the
subsidiary is making efforts to reach new financing
arrangements with its banks and is weighting the possibility
of bringing in a strategic partner.
- The abovementioned factors and others rise
considerable doubts whether the subsidiary will be able to
continue operating as a "going concern". The financial
statements do not include any adjustments in respect of the
subsidiary's assets and liabilities value and their
classification that may be necessary if the subsidiary will
not be able to operate as a "going concern.
Further to the agreement in principle signed on 29 June 2003, a
final agreement was signed on 31 August 2003 with Kidron
Management and Holdings Company (1961) Ltd. on its behalf and on
behalf of others (hereinafter - "Kidron"), whereby Kidron will
transfer to the Company, by means of a merger, all the shares of
Kidron Plastics Ltd. (a company active in importing and
marketing raw materials for the plastics industry), in return
for an allotment of shares in the Company which will grant
Kidron 75% of the issued and outstanding shares (fully diluted)
of the Company.
The percentage of the Company to be held by Kidron will be
determined on the basis of a company valuation by an outside
party.
Consummation of the transaction is subject to a number of
pre-conditions and to obtaining the necessary approvals under
law, including the approval of the general shareholders meeting
of the Company.
Kidron Group operates through subsidiaries in Israel and Europe
in a variety of areas connected to the manufacture and supply of
raw materials and other industrial inputs
The Company is continuing to implement the reorganization plan
it commenced upon toward the end of 2001 and is continuing
negotiations with its banks.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - GENERAL (cont.)
Company activities (cont.)
Company Management estimates that implementation of the
reorganization plan and/or successful conclusion of negotiations
with its banks and/or the conclusion of the agreement with
Kidron and/or an influx of cash to the Company, will allow it to
continue its business operations as a "going concern".
If this course of action is not adopted, there is doubt as to
whether the Group can continue to operate as a "going concern"
and, therefore, may not be able to dispose of its assets and
repay its liabilities during the normal course of its business.
The financial statements do not contain any adjustments to the
value or classification of assets or liabilities that may be
necessary should the Company not be able to continue operating
as a "going concern".
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A. The consolidated interim financial statements
(hereinafter - "the interim statements") have been prepared
as at 30th September 2003 and for the nine and three month
period then ended. The financial statements are presented in
condensed form, in accordance with generally accepted
accounting principles pertaining to interim financial
statements and in accordance with the Securities Regulations
(Periodic and Immediate Reports) - 1970.
These financial statements are to be read in
conjunction with the audited annual financial statements of
the Company at 31st December 2002 and their accompanying
notes.
B. The significant accounting policies applied in the
interim statements are consistent with those applied in the
annual financial statements of the Company at st December
2002.
C. In 2001, the Israeli Accounting Standards Board
issued Standard No. 12, "Discontinuance of Adjusting
Financial Statements for Inflation". In December 2002, the
Board approved Standard No. 17, "Postponement of the
Cessation of the Adjustment of Financial Statements".
According to Standard No. 12 and Standard No. 17, financial
statements will no longer be adjusted for changes in the
general purchasing power of the Israeli currency, commencing
on 1st January 2004. Until December 31, 2003, the Company
will continue to prepare its financial statements in
accordance with Opinion No. 36 of the Institute of Certified
Public Accountants in Israel. The adjusted values to be
presented in the financial statements as of December 31,
2003 will serve as the basis for the nominal financial
reporting commencing on January 1, 2004.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
D. During the period under report, the Company
implemented Standard No. 14 of the Israeli Accounting
Standards Board, Financial Reporting for Interim Periods.
This standard replaced Opinion No. 43 of the Institute of
Certified Public Accountants in Israel. Disclosure of
information pertaining to segmental data appears in Note 6,
below.
E. The accompanying financial statements are prepared on
the basis of historical cost adjusted for the changes in the
general purchasing power of the New Israeli Shekel ("NIS"),
on the basis of the changes in the Israeli Consumer Price
Index (ICPI).
The percentage change in the Israeli Consumer Price
Index ("CPI") and in the representative foreign currency
exchange rates are as follows:
CPI # $
2003 2002 2003 2002 2003 2002
% % % % % %
For the nine months
ended 30 September (1.49) 6.99 (2.74) 19.04 (6.25) 10.3
For the three months
ended 30 September (0.99) 0.65 4.42 4.28 2.99 2.14
For the year ended 31 December -- 6.5 -- 19.27 -- 7.27
NOTE 3 - CONVENIENCE TRANSLATION
The adjusted financial statements at 30 September 2003
(including the profit and loss account and the balance sheet)
have been translated into Sterling using the representative
exchange rate at the balance sheet date (#1 - NIS 7.4236). The
translation has been made solely for the convenience of the
reader. The amounts presented in these financial statements
should not be construed to represent amounts receivable or
payable in Sterling or convertible into Sterling, unless
otherwise indicated in these statements.
NOTE 4 - OTHER EXPENSES
Other expenses recorded during the period under report included,
among other things, a non-recurring expense amounting to NIS 2
million, resulting from the shutting down of the Barkan plant
and a reserve for decline in asset value in an amount of NIS 7
million. The reserve was made in accordance with Standard No. 15
of the Israel Accounting Standards Board, regarding decline in
asset value, based on an asset valuation that was ordered by the
Company from an external appraiser and adopted by the Company's
board of directors for purposes of the merger with Kidron
Plastics Ltd.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5 - STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
A. Nine month period - adjusted to NIS of September 2003
(Unaudited)
Share Premium Capital funds Profit and Total
capital on shares loss account(*)
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Nine month period ended
30th September 2003
Balances at 1st January 2003 42,899 43,786 328 (65,099) 21,914
Loss for nine months - - - (23,841) (23,841)
______ ______ ____ ______ ______
42,899 43,786 328 (88,940) (1,927)
Balances at
30th September 2003
______ ______ ____ ______ ______
______ ______ ____ ______ ______
B. Nine month period - convenience translation
(Unaudited)
Share Premium Capital funds Profit and Total
capital on shares loss account(*)
#' 000 #' 000 #' 000 #' 000 #' 000
Nine month period ended
30th September 2003
Balances at 1st January 2003 5,779 5,898 44 (8,769) 2,952
Loss for nine months - - - (3,211) (3,211)
_____ ______ ___ ______ _____
5,779 5,898 44 (11,980) (259)
Balances at
30th September 2003 _____ ______ ___ ______ _____
_____ ______ ___ ______ _____
C. Three month period - adjusted to NIS of September 2003
(Unaudited)
Share Premium Capital funds Profit and Total
capital on shares loss account(*)
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Three month period ended
30th September 2003
Balances at 1st July 2003 42,899 43,786 328 (82,359) 4,654
Loss for three months - - - (6,581) (6,581)
______ ______ ____ ______ ______
42,899 43,786 328 (88,940) (1,927)
Balances at
30th September 2003
______ ______ ____ ______ ______
______ ______ ____ ______ ______
(*) Reclassified.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5 - STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (cont.)
D. Three month period - convenience translation
(Unaudited)
Share Premium Capital funds Profit and Total
capital on shares loss account(*)
#' 000 #' 000 #' 000 #' 000 #' 000
Three month period ended
30th September 2003
Balances at 1st July 2003 5,779 5,898 44 (11,094) 627
- - - (886) (886)
Loss for three months
_____ _____ ___ ______ ______
5,779 5,898 44 (11,980) (259)
Balances at
30th September 2003
_____ _____ ___ ______ ______
_____ _____ ___ ______ ______
E. Adjusted to NIS of September 2003
(Unaudited)
Share Premium Capital fund Profit and Total
capital on shares loss account(*)
NIS ' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Nine month period ended
30th September 2002
Balances at 1st January 2002 42,899 43,786 328 (48,202) 38,811
- - - (10,145) (10,145)
Loss for nine months
______ ______ ____ ______ ______
42,899 43,786 328 (58,347) 28,666
Balances at
30th September 2002
______ ______ ____ ______ ______
______ ______ ____ ______ ______
(Unaudited)
Share Premium Capital fund Profit and Total
capital on shares loss account(*)
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Three month period ended
30th September 2002
Balances at 1st July 2002 42,899 43,786 328 (53,966) 33,047
- - - (4,381) (4,381)
Loss for three months
______ ______ ____ ______ ______
42,899 43,786 328 (58,347) 28,666
Balances at
30th September 2002
______ ______ ____ ______ ______
______ ______ ____ ______ ______
(*) Reclassified.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 5 - STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(cont.)
E. Adjusted to NIS of September 2003 (cont.)
(Audited)
Share Premium Capital Profit and Total
capital on shares funds loss account(*)
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Year ended 31st December 2002
Balances at 1st January 2002 42,899 43,786 328 (48,202) 38,811
- -- - (16,897) (16,897)
Net loss for the year
______ ______ ______ ______ ______
42,899 43,786 328 (65,099) 21,914
Balances at
31st December 2002 ______ ______ ______ ______ ______
______ ______ ______ ______ ______
(*) Reclassified.
NOTE 6 - BUSINESS SEGMENTS
A. General
Group companies are engaged in three main business
segments:
Manufacture of Smart warehouses and products for the
construction industry, manufacture and marketing for
subcontractors (including Z.A.G.), and manufacture of self
manufactured products.
B. Business segments
Adjusted to NIS of September 2003
Production Production & Smart warehouses Cancellations Total
of self marketing - & construction consolidated
manufactured subcontracting industry
products (including products
Z.A.G.)
NIS'000 NIS'000 NIS'000 NIS'000 NIS'000
Nine month period
ended 30 September
2003 (unaudited) 34,939 29,394 40,725 (775) 104,283
Segmental turnover
______ ______ ______ ____ ______
______ ______ ______ ____ ______
Segmental results (6,166) (2,066) (7,377) - (15,609)
______ ______ ______ ____ ______
______ ______ ______ ____ ______
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE 6 - BUSINESS SEGMENTS (cont.)
B. Business segments (cont.)
Convenience translation
(unaudited)
Production Production & Smart warehouses Cancellations Total consoli
of self marketing - & construction
manufactured subcontracting industry
products (including products
Z.A.G.)
# '000 # '000 # '000 # '000 # '000
Nine month period
ended 30 September
2003 (unaudited)
Segmental turnover 4,706 3,959 5,486 (104) 14,047
_____ _____ _____ ___ _____
_____ _____ _____ ___ _____
Segmental results (831) (278) (994) - (2,103)
_____ _____ _____ ___ _____
_____ _____ _____ ___ _____
Adjusted to NIS of September 2003
Production Production & Smart warehouses Cancellations Total
of self marketing - & construction consolidated
manufactured subcontracting industry
products (including products
Z.A.G.)
NIS'000 NIS'000 NIS'000 NIS'000 NIS'000
Three month period
ended 30 September
2003 (unaudited)
10,187 11,980 13,492 (405) 35,254
Segmental turnover
______ _____ ______ ____ ______
______ _____ ______ ____ ______
(1,135) (554) (3,117) - (4,806)
Segmental results
______ _____ ______ ____ ______
______ _____ ______ ____ ______
Convenience translation
(unaudited)
Production Production & Smart warehouses Cancellations Total
of self marketing - & construction consolidated
manufactured subcontracting industry
products (including products
Z.A.G.)
# '000 # '000 # '000 # '000 # '000
Three month period
ended 30 September
2003 (unaudited)
Segmental turnover 1,372 1,614 1,817 (54) 4,749
_____ ______ ______ ____ ______
_____ ______ ______ ____ ______
Segmental results (153) (75) (419) - (647)
_____ ______ ______ ____ ______
_____ ______ ______ ____ ______
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE 6 - BUSINESS SEGMENTS (cont.)
B. Business segments (cont.)
Adjusted to NIS of September 2003
Production Production & Smart warehouses Cancellations Total
of self marketing - & construction consolidated
manufactured subcontracting industry
products (including products
Z.A.G.)
NIS'000 NIS'000 NIS'000 NIS'000 NIS'000
Nine month period
ended 30 September
2002 (unaudited)
34,769 34,719 52,285 (532) 121,241
Segmental turnover
______ ______ ______ ____ _______
______ ______ ______ ____ _______
(8,464) (1,959) 4,537 - (5,886)
Segmental results
______ ______ ______ ____ _______
______ ______ ______ ____ _______
Adjusted to NIS of September 2003
Production Production & Smart warehouses Cancellations Total
of self marketing - & construction consolidated
manufactured subcontracting industry
products (including products
Z.A.G.)
NIS'000 NIS'000 NIS'000 NIS'000 NIS'000
Three month period
ended 30 September
2002 (unaudited)
12,096 12,125 13,711 5 37,937
Segmental turnover
______ ______ ______ ____ ______
______ ______ ______ ____ ______
(3,051) (559) 676 - (2,934)
Segmental results
______ ______ ______ ____ ______
______ ______ ______ ____ ______
Adjusted to NIS of September 2003
Production Production & Smart warehouses Cancellations Total
of self marketing - & construction consolidated
manufactured subcontracting industry
products (including products
Z.A.G.)
NIS'000 NIS'000 NIS'000 NIS'000 NIS'000
Year ended 31 December
2002 (audited)
43,505 50,586 56,958 (1,017) 150,032
Segmental turnover
______ ______ ______ _____ _______
______ ______ ______ _____ _______
(10,712) (2,939) 524 - (13,127)
Segmental results
______ ______ ______ _____ _______
______ ______ ______ _____ _______
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE 7 - EVENTS DURING THE REPORTING PERIOD
A. In February 2003, the Company signed a long-term
agreement pertaining to real estate it owns in the Barkan
industrial zone. In respect of this agreement, the Company
will receive annual rents (linked to changes in the exchange
rate of the U.S. dollar) in an amount of U.S.$ 140 thousand.
B. The Company owns 25.1% of the shares of AFIC. At the
end of 2001, the Company wrote off the entire investment in
AFIC which amounted to NIS 1.1 million.
The year 2002 and the first quarter of 2003 were
characterised by a significant increase in AFIC's activities
and a transition from loss to profit.
On 27 March 2003, Itamar Patishi and Moshe Latz were
appointed to the board of AFIC.
In view of the above, Company management decided to
include the investment in AFIC in the financial statements,
on the equity basis.
C. During the period, a fixed pledge, first degree
mortgage, and assignment of rights (in favor of banks) were
recorded on all of the monies and monetary rights of any
kind due to the subsidiary, Smart Modular Storage Ltd.
(hereinafter - SMS), from SMS Smart Storage Enterprises
Inc., USA, a wholly owned subsidiary of SMS. In addition, a
fixed pledge was placed on all of the shares of SMS USA held
by the subsidiary, as well as on related rights.
In addition, floating charges were recorded on all of
the assets of the subsidiary, its rights and other assets,
as well as a fixed pledge on the unpaid-in capital, the
goodwill, monies, notes, securities and other pledges that
currently exist or will exist in the future, and on the
rights deriving from pledged property insurance.
D. On 27 April, 2003, the general shareholders meeting
of the Company authorized an increase in the share capital
of the Company by an amount of NIS 100,000,000 by creating
an additional 100,000,000 ordinary shares, par value NIS 1
each.
E. On 30th September 2003, the general shareholders
meeting of the Company passed a number of resolutions
regarding an increase in the registered share capital of the
Company by an amount of NIS 315,000,000, by registering
315,000,000 ordinary shares, par value NIS 1 each, and by
converting all of the ordinary shares of the Company
(including those deriving from the capital increase) into
ordinary shares with no par value.
Any and all rights that the par value NIS 1 ordinary
share of the Company had, without exception, will pass over
to the non-par valve shares
This information is provided by RNS
The company news service from the London Stock Exchange
END
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