RNS Number:2452N
Kidron Industrial Holdings Ld
05 December 2006
KIDRON INDUSTRIAL HOLDINGS LTD.
CONDENSED FINANCIAL STATEMENTS
30th SEPTEMBER 2006
UNAUDITED
KIDRON INDUSTRIAL HOLDINGS LTD.
CONDENSED FINANCIAL STATEMENTS AS AT 30th SEPTEMBER 2006
TABLE OF CONTENTS
Page
Management Discussion and Analysis A-F
Auditor's Review Report 2
Condensed Consolidated Profit and Loss Account 3
Condensed Consolidated Statement of Recognised Gains and Losses 4
Condensed Consolidated Balance Sheet 5
Condensed Consolidated Cash Flow Statement 6-7
Notes to the Financial Statements 8-19
Report of the Board of Directors
for the nine month period ended 30th September 2006
We take pleasure in presenting the Report of the Board of Directors, in
accordance with Regulation 10 of the Securities Regulations (Periodic and
Immediate Reports) - 1970. The Report of the Board of Directors should be read
in conjunction with the audited financial statements of the Company as at 31st
December 2005 and the accompanying notes, as well as with the periodic report
for 2005.
A. The Company and its business environment
Kidron Industrial Holdings Ltd. (hereinafter - the "Company") and its
subsidiaries, Kidron Plastics Marketing Ltd., Kidron Plastics Ltd., Kidron
Plastics (UK) Ltd., and Kidron Plastics Limited Partnership are referred to
herein as the "Group". The terms "Plastics Division" and "Division" refer to
the Company together with its subsidiaries, Kidron Plastics Marketing Ltd.,
Kidron Plastics (UK) Ltd., and Kidron Plastics Limited Partnership.
The term "Period" refers to the nine month period ended 30th September 2006 and
the term "Quarter" refers to the three month period ended on that date.
B. General
During the course of the reporting period, the Company recorded a decrease in
sales of Kidron Plastics on the one hand, and a significant increase in new
customers of the Division on the other hand (customers coming on-board during
the past two years). The aforementioned changes contributed an increase of 7%
to the revenues of the entire Company. The Division continued the efficiency
process which included the "Continued Efficiency" project and an improvement in
its manufacturing systems. In addition to and as part of this process, the
Company increased the preventative maintenance expenses of its manufacturing
system, an expense which increased the overhead costs of the period and which is
expected to show results in the future. There was an erosion in company
profitability as a result of the increase in the minimum wage and the Company is
taking steps to update its customer billing accordingly. The decrease in the
exchange rate of the dollar eroded gross profit on the one hand, and decreased
financing costs on the other. The Company shows a decrease in general and
administrative expenses and in marketing and selling expenses when compared with
the same period last year. The operating loss when compared with the same
period last year improved by 24%.
C. Financial position
We present below a description of the Group's financial position as at 30
September 2006, together with the reasons for the changes in financial position
which occurred since 31 December 2005:
Total assets in the balance sheet as at 30 September 2006 amounted to NIS 68.9
million, compared with NIS 74.2 million as at 31 December 2005.
Current assets as at 30 September 2006 amounted to NIS 31.3 million, compared
with NIS 32.8 million as at 31 December 2005.
The change derives on the one hand from an NIS 5.3 million decrease in debtors
(mainly as a result of the receipt of financing from credit companies in respect
of customer debts) and on the other hand from an NIS 2.8 million increase in
cash, debtors and other debit balances and from an NIS 0.9 million increase in
stocks.
Fixed assets as at 30 September 2006 amounted to NIS 37.4 million, compared with
NIS 39.4 million as at 31 December 2005.
The decrease in fixed assets derives from the gap between the investments of the
Company in fixed assets and the periodic depreciation recorded during the
period, and from the writedown of the allocation of the negative cost surplus as
a result of the continued implementation of the loan arrangement between the
Company and its banks.
Other assets - As explained in Note 3C to the financial statements, in the first
quarter of the year, the Company implemented Israeli Accounting Standard No. 22
- "Financial Instruments, Disclosure and Presentation". As a result of the
implementation of this standard, the balance of deferred expenses in respect of
the raising of loans from investment funds, which prior to implementation,
amounted to NIS 762 thousand and was presented as "Other assets", was deducted
from the balance of the loans from the investment funds.
Goodwill as at 30 September 2005 derived from the goodwill generated by the
merger transaction with Kidron Plastics Ltd. in May 2004, which was erased as
part of the loan arrangement between the banks and the Company. (See also Note
1F to the financial statements as at 31 December 2005.)
Current liabilities as at 30 September 2006 amounted to NIS 49.5 million,
compared with NIS 40.9 million as at 31 December 2005.
The increase in current liabilities derived mainly from an increase in
short-term credit from banking institutions in an amount of NIS 4.5 million,
from the receipt of a loan from a related party in an amount of NIS 0.9 million,
and from an increase in trade and other creditors in an amount of NIS 3.2
million.
Long-term liabilities as at 30 September 2006 amounted to NIS 48.5 million,
compared with NIS 55.6 million as at 31 December 2005.
The decrease in long-term liabilities derived mainly from the erasure of
liabilities to banking institutions in an amount of NIS 1.5 million as part of
the implementation of the agreements between the Company and its banks regarding
the debts of the Company (see Note 1C to the financial statements), from the
decrease in the U.S. dollar-denominated liabilities to banking institutions and
others in an amount of NIS 5.2 million, mainly as a result of the repayment of
loans to banks and from the revaluation of these liabilities in view of the
erosion of the exchange rate of the dollar versus the shekel during the period
(6.5%).
The working capital deficit as at 30 September 2006 amounted to NIS 18.2
million, compared with an amount of NIS 8.1 million as at 31 December 2005.
The deficit in the Company's shareholders' equity as at 30 September 2006
amounted to NIS 30.8 million, compared with NIS 24.1 million as at 31 December
2005.
The increase in the deficit derived from the loss for the Period which amounted
to NIS 6.7 million.
Liquidity ratios
30/9/06 30/9/05 31/12/05
Current assets / current liabilities (current ratio) 0.63 0.82 0.80
Current assets, less stocks / current liabilities (quick ratio) 0.48 0.61 0.64
D. Results of operations
1-9/2006 1-9/2005 7-9/2006 7-9/2005 1-12/2005
NIS'000 NIS'000 NIS'000 NIS'000 NIS'000
Sales turnover 87,116 81,245 25,891 24,751 108,385
Gross profit (loss) 3,085 3,918 (38) 820 5,581
Operating loss (6,555) (8,675) (3,244) (3,627) (9,891)
Financing expenses, net (1,449) (3,963) (138) (1,597) (5,164)
Operating loss after financing (8,004) (12,638) (3,382) (5,224) (15,055)
Other income 300 491 46 524 598
Gain on erasure of liabilities to banking 1,507 1,398 - 3,254 1,398
institutions
Taxes on income (615) (1,448) (229) (246) (1,785)
Share of Group in profits (losses) of 54 72 - 41 (149)
associated undertaking
Loss for the period (6,758) (12,125) (3,565) (1,651) (14,993)
Analysis of the results of operations
Turnover
The sales turnover for the period amounted to NIS 87.1 million, compared with
NIS 81.2 million in the same period last year, an increase of 7.2%. The
increase in sales derived mainly from the increase in divisional sales in the
period which amounted to NIS 73.5 million, compared with NIS 66.1 million in the
same period last year, an increase of 11.3%. The increase in divisional sales
derived from the increase in subcontracting sales. On the other hand, there was
a decrease in sales of the Kidron Plastics Ltd. subsidiary which amounted to NIS
13.5 million for the period, compared with an amount of NIS 15.3 million in the
same period last year.
The sales turnover for the Quarter amounted to NIS 25.8 million, similar to the
NIS 24.7 million in the same quarter last year. Divisional sales in the Quarter
amounted to NIS 21.5 million, compared with NIS 20.3 million in the same quarter
last year, an increase of 6.3%.
Gross profit
Gross profit for the Period amounted to NIS 3.1 million, comprising 3.5% of
sales, compared with NIS 3.9 million (4.8% of sales) in the same period last
year.
The gross loss for the Quarter amounted to NIS 38 thousand, comprising 0.1% of
sales, compared with NIS 820 thousand (3.3% of sales) in the same quarter last
year and compared with NIS 0.3 million (1.0% of sales) in the previous quarter
of this year.
The impairment of gross profit in the Quarter when compared with the same
quarter last year derives from an NIS 0.3 million increase in payroll costs as a
result of the increase in the minimum wage, and from an NIS 0.2 million erosion
in profitability due to the erosion in the exchange rate of the dollar versus
the shekel. In addition and as part of the annual maintenance program, the
Company recorded equipment maintenance costs in an amount of NIS 0.9 million,
compared with an amount of NIS 0.4 million in the same period last year.
Selling and marketing expenses
Selling expenses for the Period amounted to NIS 2.7 million, comprising 3.1% of
sales, compared with NIS 4.1 million (5.0% of sales) in the same period last
year, a decrease of NIS 1.4 million (34%), as a result of the change in the
Company's sales network.
Selling expenses for the Quarter amounted to NIS 0.9 million, comprising 3.5% of
sales, compared with NIS 1.3 million (5.5% of sales) in the same quarter last
year.
General and administrative expenses
General and administrative expenses for the Period amounted to NIS 6.9 million,
comprising 7.9% of sales, compared with NIS 8.4 million (10.4% of sales) in the
same period last year.
General and administrative expenses for the Quarter amounted to NIS 2.2 million,
comprising 8.8% of sales, compared with NIS 3.1 million (12.4% of sales) in the
same quarter last year.
Operating loss
The operating loss for the Period amounted to NIS 6.5 million, 7.5% of sales,
compared with NIS 8.6 million (10.6% of sales) in the same period last year (an
improvement of 24%).
The operating loss for the quarter amounted to NIS 3.2 million, 12.5% of sales,
compared with NIS 3.6 million (14.6% of sales) in the same quarter last year.
The improvement in Company operations when compared with the same period last
year derived from the Company's efficiency measures which included, among other
things, a change in its customer mix, as well as from the change in the
structure of selling and general and administrative expenses.
Financing expenses, net and the gain on the erasure of liabilities to banking
institutions
Financing expenses for the Period amounted to NIS 1.4 million, comprising 1.6%
of sales, compared with an amount of NIS 3.9 million (4.8% of sales) in the same
period last year.
Financing expenses amounted to NIS 0.1 million during the quarter, comprising
0.5% of sales, compared with financing expenses in an amount of NIS 1.6 million
(6.4% of sales) in the same quarter last year.
Financing expenses of the quarter derived from accrued interest of NIS 3.8
million in respect pf bank loans and, on the other hand from exchange rate
differentials of NIS 2.4 million mainly as a result of the valuation of
long-term liabilities to banking institutions in view of the erosion of the
exchange rate of the dollar vs. the shekel (6.5%).
In addition, the Company recorded a profit of NIS 1.5 million during the Period
as part of the implementation of the loan arrangement between the Company and
its banks (see also Note 1C to the financial statements).
Taxes on income
The Group's tax expense for the current period and quarter derive from the
provision for current taxes of the subsidiaries, Kidron Plastics Ltd. and Kidron
Plastics Marketing Ltd. The Group's tax expenses in the same periods last year
derive from the provision for current taxes and from the finalization of
assessments up to and including 2003 of the Kidron Plastics subsidiary.
Cash flows from current operations
Group cash flows from operations for the Period totalled an inflow of NIS 1.4
million, compared with a cash outflow from current operations of NIS 6.2 million
during the same period last year.
Group cash flows from operations for the Quarter totalled an inflow of NIS 2.2
million, compared with a cash outflow from current operations of NIS 5.7 million
during the same quarter last year.
Cash flows from investment activity
Group cash flows from investment activity for the period (including investments
in fixed assets) amounted to an outflow of NIS 1.6 million, compared with an
inflow of NIS 1.6 million during the same period last year (mainly the result of
a redemption of a bank deposit).
Cash flows from financing activity
Group cash flows from financing activity during the period under report amounted
to an inflow of approximately NIS 1.8 million, compared with an inflow of NIS
6.1 million in the same period last year. The inflow this year resulted mainly
from the NIS 2.9 million increase in credit lines from banks, from the NIS 2
million repayment of long-term loans, and the receipt of a loan from a related
party in an amount of NIS 0.9 million. The inflow last year resulted mainly
from the receipt of a loan from an investment fund in an amount of NIS 15.1
million and, on the other hand, from the repayment of loans from banking
institutions in an amount of NIS 8.9 million.
Sources of financing
The Company financed its operation during the Period mainly through supplier
credit, and an increase in bank credit.
E. Exposure to market risks and risk management
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 general manager is responsible for managing these risks.
During the period under report, except for the risks detailed below, no material
changes occurred in the exposure of the Company to market risks or in the manner
in which such risks are managed, in relation to the Company's 2005 reports on
these issues.
Exposure to raw material prices
According to the agreements signed between the Company and its major customers,
any change in raw material prices is immediately and entirely transferred to the
price of products.
During the reporting period, there was a 10.5% increase in the prices of raw
materials, compared with a 9.9% decrease in raw material prices in the same
period last year.
Dependency on major customers
The Company has a major customer, the sales to which during the Period comprised
46.8% of total Group sales, amounting to NIS 40.8 million, similar to the NIS
42.1 million (60.3% of sales) in the same period last year. Another major
customer, sales to which during the Period amounted to NIS 11.7 million (13.4%
of total Group sales), compared with NIS 5.7 million (7.0% of sales) in the same
period last year.
F. Peer review
Further to the instructions of the Israel Securities Authority, requiring
reporting companies to provide disclosure of their consent to participate in a
"peer review", the goal of which (as mentioned in the instructions) is to
advance a process of control pertaining to the work of the external auditors of
reporting companies, the board of directors of the Company, at its meeting on 23
May 2006, granted its consent to the performance of a peer review.
G. Major event during the reporting period
On 8 August 2006, an agreement was signed between the Company and AFIC Printing
Products (Marketing) Ltd. (hereinafter - the "Purchaser") for the sale to the
Purchaser of the shares of the Company in AFIC Printing Products Ltd.
(hereinafter - "AFIC")(an associated undertaking), which comprise 25% of the
issued share capital of AFIC. In consideration, the Purchaser paid the Company
an amount of NIS 900,000 on the following dates: (A) An amount of NIS 150,000
was paid to the Company at the closing of the transaction; and (B) the balance
was paid out in 10 consecutive monthly installments of NIS 75,000 each. As a
result of the sale of the investment in AFIC shares, the Company recorded a
provision for decline in value of the investment in an amount of NIS 55 thousand
(see also Note 6 of the financial statements).
H. Compliance with Financial Conventions
As at 30 September 2006, two subsidiaries of the Company are not in compliance
with financial conventions stipulated with banking institutions.
As part of the arrangement between the Company and the bank regarding one of the
subsidiaries, a controlling interest furnished a personal guarantee in an amount
of NIS 2 million. Regarding the ratio of tangible shareholders' equity to the
total balance sheet, this ratio will be implemented in the subsidiary's balance
sheet commencing on 30 April 2007.
Regarding the lack of compliance of the second subsidiary with the financial
conventions, it was agreed between the banks and the Company that the amount of
the shortage in collateral furnished by the subsidiary to the banks would be
gradually reduced until 30 April 2007, and the ratio of tangible shareholders'
equity to the total balance sheet will be implemented in the subsidiary's
balance sheet commencing on 30 April 2007.
I. Compliance with the Preservation Rules of the Tel Aviv Stock Exchange
(TASE)
As explained in Note 1B of the financial statements, the board of
directors of the Tel Aviv Stock Exchange, at its meeting held in September 2005,
decided to transfer the shares of the Company to its preservation list. On 17th
August 2006, the Company petitioned the Tel Aviv Stock Exchange to postpone the
date of the meeting of the board of directors of the TASE on the matter of the
delisting the Company's shares, until the first meeting to be held after 24
months have passed after the shares of the Company ceased being traded on the
TASE's regular list. In its letter to the TASE, the Company noted that it has
been taking steps and will continue to take further steps in its efforts to be
in compliance with the terms stipulated in the regulations of the TASE for the
relisting of the Company's shares on the regular list and the transfer of the
shares of the Company from the restricted list to the regular list.
The TASE notified the Company that it decided to postpone the
deliberations on the delisting of the shares of the Company to the first meeting
of the board of directors of the TASE to be held after 5 September 2007.
J. Directors having financial accounting expertise
In accordance with the directives of the Israeli Securities Authority pertaining
to reporting on directors having financial and accounting expertise and taking
into consideration the scope and nature of Company activity, it was decided that
the minimum number of directors having accounting and financial expertise would
be two. No changes took place regarding the directors having accounting and
financial expertise since the last report as of 31 December 2005 and those same
directors continued to serve as at 30 September 2006.
Michael Susz Ofer Tzimhi
General Manager and Director
Chairman of the Board
30 November 2006
30 November 2006
The Board of Directors of
Kidron Industrial Holdings Ltd.
Ramat Gan
Dear Sirs:
Re: Review of the Unaudited Condensed Interim Consolidated
Financial Statements for the nine and three month periods ended 30
September 2006
At your request, we have reviewed the condensed interim consolidated balance
sheet of KIDRON INDUSTRIAL HOLDINGS LIMITED and its subsidiaries as at 30
September 2006, the condensed consolidated profit and loss accounts, condensed
statements of recognised gains and losses, condensed statements of changes in
shareholders' equity and the condensed consolidated statements of cash flows for
the nine 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.
The data presented in the consolidated financial statements, which relate to the
equity of the Company in the investment in an associated undertaking and to the
Company's share in the results thereof are based on financial statements that
were reviewed by other auditors.
Since the review performed is limited in scope and does not constitute an audit
in accordance with generally accepted auditing standards, we do not express an
opinion on the condensed financial statements.
During the performance of our review, including reading review reports of other
auditors 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.
Fahn Kanne & Co.
Certified Public Accountants (Isr.)
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT
Convenience translation
Year ended Three months ended Nine months ended Three months Nine months
31st 30th September 30th September ended ended
December 30 September 30 September
2005 2005 2006 2005 2006 2006 2006
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 #' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Turnover 108,385 24,751 25,891 81,245 87,116 3,219 10,831
Cost of sales 102,804 23,931 25,929 77,327 84,031 3,224 10,448
_______ ______ ______ ______ ______ ______ ______
Gross profit (loss) 5,581 820 (38) 3,918 3,085 (5) 383
Selling, general and administrative expenses 15,472 4,447 3,206 12,593 9,640 399 1,199
_______ ______ ______ ______ ______ ______ ______
Operating loss before other expenses (9,891) (3,627) (3,244) (8,675) (6,555) (404) (816)
Other income, net 598 524 46 491 300 6 37
Profit from erasure of liabilities to banking 1,398 3,254 - 1,398 1,507(*) - 187
institutions
_______ ______ ______ ______ ______ ______ ______
Loss on ordinary activities before financial (7,895) 151 (3,198) (6,786) (4,748) (398) (592)
expenses
Net financial expenses (5,164) (1,597) (138) (3,963) (1,449) (17) (180)
_______ ______ ______ ______ ______ ______ ______
Loss on ordinary activities before taxation (13,059) (1,446) 3,336 (10,749) (6,197) (415) (772)
Tax on profit on ordinary activities (1,785) (246) (229) (1,448) (615) (28) (76)
_______ ______ ______ ______ ______ ______ ______
Loss on ordinary activities after taxation (14,844) (1,692) (3,565) (12,197) (6,812) (443) (848)
Net equity in earnings (losses) of associated (149) 41 - 72 54 - 7
undertaking
_______ ______ ______ ______ ______ ______ ______
Loss for the period (14,993) (1,651) (3,565) (12,125) (6,758) (443) (841)
_______ ______ ______ ______ ______ ______ ______
_______ ______ ______ ______ ______ ______ ______
Loss per share (NIS/#)
Loss from continuing operation (0.08) (0.01) (0.02) (0.06) (0.04) (0.002) (0.005)
_______ ______ ______ ______ ______ ______ ______
_______ ______ ______ ______ ______ ______ ______
(*) See Note 1C.
The accompanying notes are an integral part of these condensed statements.
CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES
Convenience translation
Year ended Three months ended Nine months ended Three months Nine months
31st 30th September 30th September ended ended
December 30 September 30 September
2005 2005 2006 2005 2006 2006 2006
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 #' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Total recognised losses for the period (14,993) (1,651) (3,565) (12,125) (6,758) (443) (841)
_______ ______ ______ ______ ______ _____ _____
_______ ______ ______ ______ ______ _____ _____
The accompanying notes are an integral part of these condensed statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
Convenience
translation
31st December 30th September 30th September
2005 2005 2006 2006
NIS' 000 NIS' 000 NIS' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Fixed assets
Tangible assets 39,479 40,367 37,495 4,662
Investee company 879 1,100 - -
Severance pay - redundancy provision 248 149 164 20
Goodwill - 878 - -
Other assets 820 - - -
_______ _______ _______ ______
41,426 42,494 37,659 4,682
----------- ---------- ---------- ---------
Current assets
Stocks 6,368 7,376 7,325 911
Debtors 25,327 18,272 21,174 2,633
Cash at bank and in hand 1,130 2,635 2,812 350
_______ _______ _______ ______
32,825 28,283 31,311 3,894
----------- ---------- ---------- ---------
_______ _______ _______ ______
Creditors: amounts falling due within one year
Bank loans and overdrafts 17,169 18,520 21,596 2,685
Creditors 23,815 15,814 27,001 3,357
Loans from interested party - - 950 118
_______ _______ _______ ______
40,984 34,334 49,547 6,160
----------- ---------- ---------- ---------
_______ _______ _______ ______
Net current liabilities (8,159) (6,051) (18,236) (2,266)
_______ _______ _______ ______
_______ _______ _______ ______
Total assets less current liabilities 33,267 36,443 19,423 2,416
_______ _______ _______ ______
_______ _______ _______ ______
Liabilities attributed to the discontinued 1,800 1,800 1,800 224
operation
----------- ---------- ---------- ---------
Creditors: amounts falling due after more than
one year
Non-convertible bank loans 24,012 24,567 20,201 2,512
Loans from investment fund 16,247 16,148 14,802 1,840
Creditors 890 890 590 73
Deferred taxes 22 18 21 3
Liabilities to be repaid out of future income 12,905 12,863 12,905 1,605
Liabilities to banking institutions, expected to 1,529 1,427 - -
be written-off
_______ _______ _______ ______
55,605 55,913 48,519 6,033
----------- ---------- ---------- ---------
_______ _______ _______ ______
Net liabilities (24,138) (21,270) (30,896) (3,841)
_______ _______ _______ ______
_______ _______ _______ ______
Capital and reserves (deficit) (24,138) (21,270) (30,896) (3,841)
_______ _______ _______ ______
_______ _______ _______ ______
Date of approval: 30 November 2006.
Michael Susz Ofer Tsimchi Eyal Shalmon
General Manager and Director CFO
Chairman of the Board
The accompanying notes are an integral part of these condensed statements.
CONSOLIDATED CASH FLOW STATEMENTS
Convenience translation
Year ended Three months ended Nine months ended Three months Nine months
31st 30th September 30th September ended ended
December 30 September 30 September
2005 2005 2006 2005 2006 2006 2006
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 #' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Net cash flows from operating activities
(Appendix A)
Net cash inflow (outflow) from continuing (3,949) (5,751) 2,258 (6,214) 1,477 281 184
operating activities
--------- --------- --------- --------- --------- --------- ---------
Investing activities
Payments to acquire tangible fixed assets (1,375) (353) (596) (754) (1,738) (73) (216)
Proceeds from investee company - - 150 - 150 19 19
Proceeds from deposits 2,159 - - 2,159 - - -
Receipts from sales of tangible fixed assets 171 132 - 132 - - -
______ ______ ______ ______ ______ ______ ______
Net cash inflow (outflow) from continuing 955 (221) (446) 1,537 (1,588) (54) (197)
investing activities
______ ______ ______ ______ ______ ______ ______
Financing activities
Receipt of long-term bank loans 145 - - - - - -
Receipt of loans from interested party - - - - 950 - 118
Receipt of long-term loans from investment 15,155 15,155 - 15,155 - - -
fund (*)
Repayment of long-term loans (1,813) (695) (703) (1,106) (2,062) (87) (255)
Short-term bank loans and credit, net (10,502) (5,998) (222) (7,876) 2,905 (27) 361
______ ______ ______ ______ ______ ______ ______
Net cash inflow (outflow) from continuing 2,985 8,462 (925) 6,173 1,793 (114) 224
financing activities
--------- --------- --------- --------- --------- --------- ---------
______ ______ ______ ______ ______ ______ ______
Increase (decrease) in cash and cash (9) 2,490 887 1,496 1,682 113 211
equivalents
Opening balance - from continuing operation 1,139 145 1,925 1,139 1,130 237 139
______ ______ ______ ______ ______ ______ ______
Closing balance - from continuing operation 1,130 2,635 2,812 2,635 2,812 350 350
______ ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______ ______
(*) Net of loan raising expenses.
The accompanying notes are an integral part of these condensed statements.
APPENDIX A
RECONCILIATION OF OPERATING PROFIT TO NET
CASH INFLOW FROM OPERATING ACTIVITIES
Convenience translation
Year ended Three months ended Nine months ended Three months Nine months
31st 30th September 30th September ended ended
December 30 September 30 September
2005 2005 2006 2005 2006 2006 2006
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 #' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Loss for the period (14,993) (1,651) (3,565) (12,125) (6,758) (443) (841)
Depreciation of tangible fixed assets and 6,967 1,711 1,225 5,437 3,916 152 487
intangible assets
Capital gain from sales of fixed assets, net (9) (10) - (10) - - -
Change in deferred taxes, net 16 (11) - (10) - - -
Interest and increase (erosion) in the value 1,986 161 (1,288) 1,904 (2,575) (160) (320)
of long-term liabilities
Gain on write-off of liabilities to banking - (3,254) - (1,398) - - -
institutions (*)
Reserve for the decline in investment of - - (22) - 33 (3) 4
investee company
Company's equity in profits (losses) of 149 (41) - (72) (54) - (7)
associated undertakings, net
Decrease/(increase) in stocks 516 (1,434) 328 (492) (957) 41 (119)
Decrease in trade debtors 789 3,489 6,121 1,680 5,313 761 661
Increase in other debtors (248) (146) (100) (755) (411) (12) (51)
Increase/(decrease) in trade creditors (1,022) (1,992) (1,077) 750 3,829 (134) 476
Increase/(decrease) in other creditors 2,132 (2,547) 614 (990) (943) 76 (117)
Decrease/(increase) in redundancy provision (232) (26) 22 (133) 84 3 11
______ ______ ______ ______ ______ _____ _____
Net cash inflow (outflow) from operating (3,949) (5,751) 2,258 (6,214) 1,477 281 184
activities
______ ______ ______ ______ ______ _____ _____
______ ______ ______ ______ ______ _____ _____
(*) See Note 1C.
The accompanying notes are an integral part of these condensed statements.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
A. Company activities
Kidron Industrial Holdings Limited (hereinafter - the "Company") is a public
company engaged primarily in the manufacture, importing, and marketing of
plastic products.
B. Compliance with the preservation rules of the Tel Aviv Stock Exchange
(TASE)
On 17th January 2005, the Company was given notice by the Tel Aviv
Stock Exchange as to its lack of compliance with the preservation rules set down
in the Stock Exchange's Regulations and in the guidelines enacted thereunder,
since the Company's shareholders' equity in the last four annual financial
statements was below NIS 2 million. The board of directors of the Tel Aviv
Stock Exchange, at its September 2005 meeting, decided to transfer the Company's
shares to the "Preservation List".
On 17th August 2006, the Company petitioned the Tel Aviv Stock
Exchange to postpone the date of the meeting of the board of directors of the
TASE on the matter of the delisting the Company's shares, until the first
meeting to be held after 24 months have passed after the shares of the Company
ceased being traded on the TASE's regular list. In its letter to the TASE, the
Company noted that it has been taking steps and will continue to take further
steps in its efforts to be in compliance with the terms stipulated in the
regulations of the TASE for the relisting of the Company's shares on the regular
list and the transfer of the shares of the Company from the preservation list to
the regular list.
The TASE notified the Company that it decided to postpone the
deliberations on the delisting of the shares of the Company to the first meeting
of the board of directors of the TASE to be held after 5 September 2007.
C. Erasure of liability to a banking institution
In accordance with an agreement between the Company and a banking institution,
pertaining to the creditors arrangement from May 2004, the banking institution,
in 2006, erased the liability of the Company to the bank in an amount of NIS 1.5
million.
As a result of the erasure, based on Opinion No. 57 of the Institute of
Certified Public Accountants in Israel, the Company recorded income of NIS 1.5
million in the first quarter of 2006, presented as a separate item in the Profit
and Loss Account.
NOTE 2 - GENERAL SIGNIFICANT ACCOUNTING POLICIES
A. The interim financial statements as at 30 September 2006 and for the
nine and three month periods then ended (hereinafter - the "Interim financial
statements") are presented in condensed format, in accordance with Standard No.
14 of the Israel Accounting Standards Board and should be read in conjunction
with the annual financial statements of the Company as at 31 December 2005 and
its accompanying notes. In addition, the interim financial statements are
presented in accordance with the provisions of Chapter D of the Securities
Regulations (Periodic and Interim Reports) - 1970.
B. The accounting principles used in the presentation of the interim
financial statements are consistent with those used in presenting the annual
financial statements, except for the accounting treatment of various issues, as
indicated in Note 3 which details the accounting changes.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (cont.)
NOTE 2 - GENERAL SIGNIFICANT ACCOUNTING POLICIES (cont.)
C. The measurement basis for the financial statements
The financial statements are presented in reported shekels.
Commencing on 1 January 2004, as required by Accounting Standards No. 12,
"Discontinuance of Adjusting Financial Statements to Inflation" of the Israeli
Accounting Standards Board, financial statements are no longer adjusted for the
effects of inflation. The adjusted amounts as at 31 December 2003 served as the
point of departure for nominal financial reporting as at 1 January 2004.
The percentage change in the Israeli Consumer Price Index ("CPI") and in the
representative foreign currency exchange rates are as follows:
Year ended 31 Nine months ended Three months ended
December 30 September 30 September
2005 2005 2006 2005 2006
% % % % %
Israeli Consumer Price Index 2.38 1.89 0.78 1.39 (0.77)
Representative exchange rate of US dollar 6.85 6.73 (6.54) 0.52 (3.11)
Representative exchange rate of the Euro (7.32) (5.94) 0.16 0.03 (3.34)
NOTE 3 - CHANGES IN SIGNIFICANT ACCOUNTING POLICIES
A. Initial implementation of Accounting Standard No. 20 (Amended) - "The
Accounting Treatment of Goodwill and Intangible Assets on the Acquisition of
Investee Companies"
Since January 1, 2006, the Company has been implementing Accounting
Standard No. 20 (Amended) - "The Accounting Treatment of Goodwill and Intangible
Assets on the Acquisition of Investee Companies" issued by the Israeli
Accounting Standards Board (hereinafter - "Standard No. 20 as Amended") in March
2006, replacing Israeli Accounting Standard No. 20, "Amortization Period of
Goodwill". Standard No. 20 as Amended stipulates that Goodwill and intangible
assets having unlimited useful lives, generated upon acquisition of an investee
company, should not be amortized.
Standard No. 20 as Amended distinguishes between goodwill deriving
from the acquisition of a subsidiary and goodwill deriving from the acquisition
of an investee company that is not a subsidiary, and stipulates that regarding
goodwill that derived from the purchase of a subsidiary, a company must check
for impairment once a year, or even more frequently if there is any indication
that there was a decline in the value of the asset. Goodwill that derived from
the acquisition of an investee company that is not a subsidiary is included in
the book value of the investment in that company. Accordingly, the assessment
of a possible impairment in respect of the goodwill would be conducted as part
of the assessment of a possible impairment in the entire investment. Such an
assessment should be carried out in accordance with the provisions of Israeli
Accounting Standard No. 15, Decline in Asset Value.
The Standard stipulates that when allocating the acquisition cost,
fair value should be allocated to identifiable assets, including intangible
assets. Standard No. 20 as Amended also sets forth guidelines for the
accounting treatment of intangible assets that were identified, as above. The
Standard also sets forth the accounting treatment of the net excess of the fair
value of the assets over the acquisition cost of the investee company (negative
surplus cost).
Initial implementation of the provisions of the Standard did not have
a material impact on the interim financial statements.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (cont.)
NOTE 3 - CHANGES IN SIGNIFICANT ACCOUNTING POLICIES (cont.)
B. Initial implementation of Accounting Standard No. 21 - "Earnings per
Share"
Since 1 January 2006, the Company has been implementing Accounting
Standard No. 21 - "Earnings Per Share" issued by the Israeli Accounting
Standards Board (hereinafter - "Standard No. 21") in January 2006, which sets
out the principles to be used in computing and presenting earnings (loss) per
share in the financial statements and which replaces Opinion No. 55 of the
Institute of Certified Public Accountants in Israel pertaining to this issue.
Standard No. 21 must be implemented in respect of financial statements of
periods commencing on or after 1 January 2006 (hereinafter - the "Effective
Date").
According to Standard No. 21, earnings per share data are computed on
the basis of the number of shares (and not in terns of NIS 1 par value as was
customary until the effective date). Among other things, the Standard sets
forth the treatment of option warrants and convertible debentures and their
possible impact on diluted earnings per share.
According to Standard No. 21, for purposes of computing basic earnings
per share, the number of ordinary shares should be the weighted average of the
number of ordinary shares in circulation during the period.
According to Standard No. 21, for purposes of computing diluted
earnings per share, the number of ordinary shares should be the number computed
for the basic earnings per share, plus the weighted average of the number of
ordinary shares that would have been issued as a result of the conversion of all
convertible securities into shares.
According to the Standard, option warrants should be included in
diluted earnings when their exercise would result in the issuance of shares for
a consideration that is less than the average market price of ordinary shares
during the period. The effect of such option warrants is solely on the number
of shares. For purposes of the calculation, the number of shares deriving from
the exercise of the warrants should be added to the denominator of the equation,
and the number of shares that could have been purchased with the consideration
that would have been received as a result of the conversion of the option
warrants into shares at the average market price of the shares during the period
should be deducted from the denominator (this amount includes the balance of the
fair value of goods or work not yet supplied in respect of share-based payment
arrangements to which Accounting Standard No. 24 applies).
According to Standard No. 21, for purposes of computing consolidated
EPS, the share of a holding company in the earnings of its investees should be
deducted from the consolidated earnings of the reporting entity and the EPS of
the investee company multiplied by the weighted number of shares held by the
holding company should be added.
The Standard should be applied retrospectively by restating the
comparative data of the earnings per share relating to prior periods.
Initial implementation of the provisions of the Standard had no
material impact on the earnings per share data presented in the past.
C. Initial implementation of Accounting Standard No 22 - "Financial
Instruments - Disclosure and Presentation"
Since 1 January 2006, the Company has been implementing Accounting Standard No.
22 - "Financial Instruments - Disclosure and Presentation", that was issued in
July 2005, by the Israeli Accounting Standards Board (IASB).
This standard sets down the presentation provisions for financial instruments
and the fair disclosure required thereof in the financial statements. The
presentation provisions address the rules for the break down and classification
of financial instruments into financial liabilities and equity, the
classification of interest, dividends, and losses and gains related thereto, and
the conditions that are required for the offset of financial assets against
financial liabilities. The Standard also sets forth the accounting treatment of
the issuance of a number of financial instruments as part of one package.
According to Standard No. 22, the costs of a transaction in respect of a
financial liability are deducted from the financial liability and are taken into
consideration in the calculation of the effective rate of interest, in lieu of
its being treated as an asset in the balance sheet as was the accepted practice
prior to the effective date of the Standard.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (cont.)
NOTE 3 - CHANGES IN SIGNIFICANT ACCOUNTING POLICIES (cont.)
C. Initial implementation of Accounting Standard No 22 - "Financial
Instruments - Disclosure and Presentation" (cont.)
The Standard applies to the financial statements for periods commencing on or
after January 1, 2006. Accounting Standard No. 22 requires prospective
application of its provisions. Accordingly, comparative amounts presented in
the financial statements of periods commencing on the effective date of the
Standard will not be restated.
Implementation of this Standard supersedes Opinion No. 48 and Opinion No. 53,
whereby, under certain circumstances, a holding company was required to set up a
provision in its books for the expected loss on the decrease in the percentage
held as a result of the exercise of convertible securities of the investee
company. Such a provision, if set up, would be cancelled as at the effective
date and presented as a cumulative effect of a change in accounting principles.
Initial implementation of the provisions of the Standard had the following
impact:
The balance of the deferred costs incurred in raising loans from investment
funds in an amount of NIS 820 thousand, which prior to the effective date were
presented as other assets, was deducted from the balance of the loans from the
investment funds.
D. Initial implementation of Accounting Standard No 24 - "Share-Based
Payments"
Since 1 January 2006, the Company has been implementing Accounting Standard No.
24, Share-Based Payment (hereinafter - Standard No. 24), issued in September
2005 by the Israeli Accounting Standards Board. Standard No. 24 requires an
entity to recognize share-based payment transactions in its financial
statements, including transactions with employees or other parties that have to
be settled in cash, other assets, or equity instruments.
The Standard sets forth the guidelines for recognition, measurement, and
disclosure in respect of share-based payment transactions and the guidelines for
handling any changes in the terms of such transactions, and the cancellation or
buy-back of equity instruments granted in the past.
The transition provisions pertaining to share-based payment transactions settled
with equity instruments stipulate that the provisions of the Standard must be
implemented in respect of grants made after March 15, 2005 and which have not
vested by January 1, 2006.
Adoption of the Standard had no material impact on the results of operations,
financial position and the cash flows of the Company.
E. Initial implementation of Accounting Standard No. 25 - "Revenues"
Since 1 January 2006, the Company has been implementing Accounting
Standard No. 25 - "Revenues" (hereinafter - "Standard No. 25") which was issued
in February 2006 by the Israeli Accounting Standards Board. Standard No. 25
stipulates the required accounting treatment for recognition, measurement,
presentation, and disclosure of revenue recognition.
The provisions of the Standard must be implemented in respect of
revenues deriving from the following transactions or events: the sale of goods,
the supply of services or the use by others of assets of the Company that
generate interest, royalties or dividends.
The Standard stipulates the conditions for the recognition of such
revenues and indicates that a company shall measure its revenues based on the
fair value of the consideration received and/or the consideration the entity is
entitled to receive, taking into account the interest component of transactions
that contain a financing component
Initial implementation of the provisions of the Standard did not have
a material impact on the interim financial statements.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (cont.)
NOTE 3 - CHANGES IN SIGNIFICANT ACCOUNTING POLICIES (cont.)
F. Disclosure of the impact of new accounting standards in the period
prior to initial implementation
Accounting Standard No. 26 - "Stocks"
In August 2006, the Israeli Accounting Standards Board issued Accounting
Standard No. 26 - "Stocks" (hereinafter - the "Standard") which prescribes the
accounting treatment for stocks.
The Standard stipulates that stocks be measured at the lower of cost and net
realizable value. Net realizable value is the estimated sales price during the
normal course of business, less the estimated costs of completion and the
estimated costs required to conduct the sale. The cost of the stock includes
purchase costs, production costs and other costs incurred in bringing the stock
to its current location and status.
The Standard mandates specific identification of the cost of inventory items
that are irreplaceable and of merchandise or services that were generated and
separated for purposes of specific projects. The cost of other stocks should be
determined on the basis of the first-in-first out formula or on the basis of the
weighted average. A specific formula should be used for all of the stock having
a similar nature or use for the entity, unless some other costing formula is
justified. Regarding allocation of inventory conversion costs, the Standard
stipulates that when in a specific period an entity does not manufacture at its
normal output capacity, it should not include in the cost of inventory
additional fixed overhead costs in excess of the costs usually incurred in times
of normal production. Such costs which were not allocated should be expensed in
the period in which they were incurred.
In accordance with the Standard, in cases in which the inventory was purchased
on credit, and the arrangement contains a financing component, the inventory
should be presented at the cash cost and the financing component should be
recognized as interest expense over the duration of the financing period.
When inventory is sold, the book value of the sold inventory should be
recognized as an expense in the period in which the revenue from the sale was
recognized. The amount of any decline in value of the inventory to its net
realizable value and all losses in respect of inventory should be recognized in
the period in which they were incurred. The amount of the cancellation of a
decline in value deriving from an increase in the net realizable value should be
recognized as a reduction in the amount of the inventory that is recognized as
an expense in the period in which the cancellation occurred.
The Standard applies to the financial statements of periods commencing on or
after 1 January 2007 and requires retrospective adoption, unless it is
impractical to allocate the specific effects to a given period, or the aggregate
effect of the change.
The Company is of the opinion that adoption of the Standard will not have a
material impact on the results of operations, financial position, and cash flows
of the Company.
Accounting Standard No. 27 - "Fixed Assets"
In September 2006, the Israeli Accounting Standards Board issued
Accounting Standard No. 27 - "Fixed Assets" (hereinafter - the "Standard") which
sets forth the accounting treatment for fixed assets.
The Standard stipulates that the cost of a fixed asset shall be
recognized as an asset, if and only if it is probable that the future economic
benefits associated with the item will flow to the entity and the cost of the
item can be measured reliably. A fixed asset item that qualifies as an asset
will be measured at its cost at the time of its initial recognition.
According to the Standard, cost includes, in addition to the purchase
price, all of the costs that can be directly attributed to bringing the item to
its present location and to the condition required to enable the item to operate
in the manner intended by Company Management.
The Standard permits an entity to elect a measurement model once
initial recognition has been achieved, either the cost model or the revaluation
model, based on the fair value of the fixed asset item as of the date of
revaluation, with the results of the revaluation being carried to a capital
fund. The same measurement model must be applied to an entire class of fixed
assets.
According to the cost model, a fixed asset item should be presented at
cost, net of accumulated depreciation, and net of accumulated impairment losses.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (cont.)
NOTE 3 - CHANGES IN SIGNIFICANT ACCOUNTING POLICIES (cont.)
F. Disclosure of the impact of new accounting standards in the period
prior to initial implementation (cont.)
Accounting Standard No. 27 - "Fixed Assets" (cont.)
According to the revaluation method, a fixed asset item, the fair
value of which can be measured reliably, should be presented at its revalued
value, net of depreciation accumulated subsequent to the revaluation, and net of
impairment losses accumulated subsequent to the revaluation. Revaluations
should be made with sufficient regularity to ensure that the carrying amount in
the books is not materially different than the fair value that was determined as
of the balance sheet date. If the book value of the asset decreases as a result
of the revaluation, a loss on the decline should be recognized in the period in
which it incurred. Notwithstanding the above, the loss should be debited
directly to shareholders' equity, under the title "Revaluation Surplus", to the
extent that the Revaluation Surplus has a credit balance in respect of the same
asset.
According to the Standard, the accounting treatment in cases of an
asset exchange should be based on fair value, except in a case in which the
exchange lacks commercial substance or where the value of the assets cannot be
measured reliably. If the acquired asset was not measured at its fair value,
its cost should be measured at the carrying amount of the asset given up.
According to the Standard, any part of the fixed asset, the cost of
which is significant to the total cost of the entire asset, should be
depreciated separately over the useful life of the part. The depreciation
method should reflect the pattern in which the entity expects to derive economic
benefits from the asset in the future. The useful life of an asset is defined
in terms of the forecasted benefit to be derived by the entity from the asset.
The useful life of an asset may be shorter than its economic life.
According to the Standard, the book value of a fixed asset item should
be derecognized when the item is disposed of, or when no future economic
benefits are expected from use or disposal of the asset. The gain or loss on
the derecognition of the fixed asset item should be carried to the income
statement when the item is derecognized. Such gains should not be classified as
revenue.
The Standard applies to the financial statements of periods commencing
on or after January 1, 2007 and requires retrospective application, except in
two instances:
1. When an entity elects the revaluation method as its measurement model
for a class of fixed assets, the Revaluation Surplus shall constitute the
difference between the revalued book value of the asset as of that date and its
cost in the books.
2. An entity that did not include the costs of dismantlement and removal
of an asset as part of the cost of a fixed asset at its initial recognition, is
required to calculate the decommissioning liabilities (the liabilities involved
in the dismantlement and removal of the fixed assets) as of the transition date
(based on an estimate of the economic resources and discount rate as known on
that date). This amount should be discounted back to the date on which the
asset was originally purchased, based on an estimate of the historical discount
rate. The aforementioned amount should be deducted from retained earnings, from
the date of the purchase of the asset until the transition date, based on an
estimate of the useful life of the item, as of the transition date. The
difference between the amount of the liability and the amount carried to
retained earnings should be carried to the cost of the asset on the transition
date.
The Company is in the process of assessing the impact of Standard No.
27 on the financial statements. However, at present, it is not impossible to
estimate the effect of Standard No. 27 on the financial statements.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 - CHANGES IN SIGNIFICANT ACCOUNTING POLICIES (cont.)
F. Disclosure of the impact of new accounting standards in the period
prior to initial implementation (cont.)
Accounting Standard No. 29 - "Adoption of International Financial
Reporting Standards (IFRS)"
In July 2006, the Israeli Accounting Standards Board issued Accounting Standard
No. 29 - "Adoption of International Financial Reporting Standards (IFRS)"
(hereinafter - the "Standard"). The Standard mandates that entities that are
subject to the Israeli Securities Law - 1968 and that are required to file
reports under the provisions of this law shall present their financial
statements in accordance with International Financial Reporting Standards
(hereinafter - "IFRS Standards"). This stipulation applies to periods
commencing on or after January 1, 2008 (i.e., the interim financial statements
for the first quarter of 2008), with the entity's "first comprehensive financial
statements in accordance with IFRS Standards" being the annual financial
statements of 2008. The Standard permits and encourages such entities to
present their financial statements, issued subsequent to July 31, 2006, in
accordance with IFRS Standards.
An entity that presented its financial statements in the past not in accordance
with international standards and is required or elects to present them in
accordance with international standards shall implement International Financial
Reporting Standard No. 1 (IFRS 1), "First-time Adoption of International
Financial Reporting Standards", for transition purposes.
IFRS 1 provides guidelines as to the transition from reporting under previous
accounting principles (accounting principles generally accepted in Israel) to
reporting in accordance with international standards. In order to alleviate the
transition, financial statements presented for the first time under
International Financial Reporting Standards (the financial statements for the
year ended December 31, 2008) are required to present comparative amounts in
respect of only one year (as of December 31, 2007 and for the year then ended)
instead of the two years that are required for public companies in Israel.
IFRS 1 stipulates that an entity implement the same accounting policy in its
opening balance as of January 1, 2007 (hereinafter - "Opening Balance" or
"Transition Date") in accordance with the IFRS that are in effect on the
reporting date of the first annual financial statements (December 31, 2008).
All comparative amounts presented in the financial statements must also be
presented accordingly. In other words, the IFRS in effect on the reporting date
of the first annual financial statements must be applied retrospectively.
Changes and adjustments to balances to be included in the balance sheet that is
presented for the first time in accordance with IFRS as opposed to the balances
included in accordance with previously accepted accounting principles, should be
carried directly to retained earnings (or, if appropriate, another category of
equity).
IFRS 1 grants 12 limited exemptions from some issues in respect of which there
is no requirement for retroactive implementation in the Opening Balance, that an
entity adopting IFRS Standards for the first time may elect to use (all or part
thereof). In addition, it includes four prohibitions regarding the
retrospective application of some aspects of other IFRS Standards.
The IFRS provisions for recognition and measurement of assets and liabilities,
disclosure requirements, and reporting formats differ from, those generally
accepted in Israel. Therefore, the initial adoption of IFRS Standards may have
a material impact on the financial position and results of operations of the
Company.
The Company has been assessing the implications of the initial adoption of IFRS
Standards, but at present, it is unable to properly estimate the impact of the
initial adoption of IFRS Standards on the results of operations, financial
position and cash flows of the Company.
G. Convenience translation
The financial statements at 30th September 2006 (including the profit and loss
account and the balance sheet) have been translated into Sterling using the
representative exchange rate at that date (# 1 = NIS 8.043). 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.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (cont.)
NOTE 4 - STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
A. Nine month period ended 30 September 2006 (unaudited)
Share Premium Capital Loss account Total
capital on shares funds
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Balances at 1 January 2006 42,724 71,166 327 (138,355) (24,138)
Net loss for nine months - - - (6,758) (6,758)
______ ______ ____ _______ ______
Balances at 30 September 2006 42,724 71,166 327 (145,113) 30,896
______ ______ ____ _______ ______
______ ______ ____ _______ ______
B. Nine month period ended 30 September 2005 (unaudited)
Share Premium Capital Profit Total
capital on shares funds and loss
account
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Balances at 1 January 2005 (audited) 42,724 71,166 327 (123,362) (9,145)
Net loss for nine months - - - (12,125) (12,125)
______ ______ ____ _______ ______
Balances at 30 September 2005 42,724 71,166 327 (135,487) (21,270)
______ ______ ____ _______ ______
______ ______ ____ _______ ______
C. Three month period ended 30 September 2006 (unaudited)
Share Premium Capital Loss account Total
capital on shares funds
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Balances at 1 July 2006 42,724 71,166 327 (141,548) (27,331)
Net loss for three months - - - (3,565) (3,565)
______ ______ ____ _______ ______
Balances at 30 September 2006 42,724 71,166 327 (145,113) (30,896)
______ ______ ____ _______ ______
______ ______ ____ _______ ______
D. Three month period ended 30 September 2005 (unaudited)
Share Premium Capital Profit Total
capital on shares funds and loss
account
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Balances at 1 July 2005 42,724 71,166 327 (133,836) (19,619)
Net loss for three months - - - (1,651) (1,651)
______ ______ ____ _______ ______
Balances at 30 September 2005 42,724 71,166 327 (135,487) (21,270)
______ ______ ____ _______ ______
______ ______ ____ _______ ______
E. Convenience Translation
Nine month period ended 30 September 2006 (unaudited)
Share Premium Capital Loss account Total
capital on shares funds
# '000 # '000 # '000 # '000 # '000
Balances at 1 January 2006 (audited) 5,312 8,848 41 (17,201) (3,000)
Net loss for nine months - - - (841) (841)
______ ______ ____ ______ ______
Balances at 30 September 2006 5,312 8,848 41 (18,042) (3,841)
______ ______ ____ ______ ______
______ ______ ____ ______ ______
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (cont.)
NOTE 4 - STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (cont.)
F. Convenience Translation
Three month period ended 30 September 2006 (unaudited)
Share Premium Capital Loss account Total
capital on shares funds
# '000 # '000 # '000 # '000 # '000
Balances at 1 July 2006 5,312 8,848 41 (17,599) (3,398)
Net loss for three months - - - (443) (443)
______ ______ ____ ______ ______
Balances at 30 September 2006 5,312 8,848 41 (18,042) (3,841)
______ ______ ____ ______ ______
______ ______ ____ ______ ______
G. Year ended 31 December 2005 (audited)
Share Premium Capital Profit Total
capital on shares funds and loss
account
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Balances at 1 January 2005 42,724 71,166 327 (123,362) (9,145)
Changes during 2005
Loss for the year - - - (14,993) (14,993)
______ ______ ___ _______ ______
Balances at 31 December 2005 42,724 71,166 327 (138,355) (24,138)
______ ______ ___ _______ ______
______ ______ ___ _______ ______
NOTE 5 - BUSINESS SEGMENTS
A. General
Group companies are engaged in three main business segments:
Manufacturing and marketing as a subcontractor (including for Z.A.G.),
manufacturing self manufactured products, and importing and marketing raw
materials for the chemicals industry.
B. Business segments
Production of self Production & Import & Total
manufactured marketing - marketing of consolidated
products subcontracting raw materials
(including Z.A.G.) for chemicals
industry
NIS'000 NIS'000 NIS'000 NIS'000
Nine month period ended
30 September 2006 (unaudited)
Segmental turnover 10,133 63,422 13,561 87,116
______ ______ ______ ______
______ ______ ______ ______
Segmental results 709 (9,502) 2,238 (6,555)
______ ______ ______ ______
______ ______ ______ ______
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (cont.)
NOTE 5 - BUSINESS SEGMENTS
B. Business segments (cont.)
Production of self Production & Import & Total
manufactured marketing - marketing of consolidated
products subcontracting raw materials
(including Z.A.G.) for chemicals
industry
NIS'000 NIS'000 NIS'000 NIS'000
Nine month period ended
30 September 2005 (unaudited)
Segmental turnover 15,921 50,080 15,244 81,245
______ ______ ______ ______
______ ______ ______ ______
Segmental results (7,729) (4,580) 3,634 (8,675)
______ ______ ______ ______
______ ______ ______ ______
Production of self Production & Import & Total
manufactured marketing - marketing of consolidated
products subcontracting raw materials
(including Z.A.G.) for chemicals
industry
NIS'000 NIS'000 NIS'000 NIS'000
Three month period ended
30 September 2006 (unaudited)
Segmental turnover 3,778 17,734 4,379 25,891
______ ______ _____ ______
______ ______ _____ ______
Segmental results 643 (4,524) 637 (3,244)
______ ______ _____ ______
______ ______ _____ ______
Production of self Production & Import & Total
manufactured marketing - marketing of consolidated
products subcontracting raw materials
(including Z.A.G.) for chemicals
industry
NIS'000 NIS'000 NIS'000 NIS'000
Three month period ended
30 September 2005 (unaudited)
Segmental turnover 4,529 15,526 4,696 24,751
______ ______ _____ ______
______ ______ _____ ______
Segmental results (2,604) (1,896) 873 (3,627)
______ ______ _____ ______
______ ______ _____ ______
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (cont.)
NOTE 5 - BUSINESS SEGMENTS (cont.)
B. Business segments (cont.)
Production of self Production & Import & Total
manufactured marketing - marketing of consolidated
products subcontracting raw materials
(including Z.A.G.) for chemicals
industry
NIS'000 NIS'000 NIS'000 NIS'000
Year ended 31 December 2005 (audited)
Segmental turnover 20,991 67,489 19,905 108,385
______ ______ _____ _______
______ ______ _____ _______
Segmental results (726) (13,695) 4,530 (9,891)
______ ______ _____ _______
______ ______ _____ _______
Convenience translation
(unaudited)
Production of self Production & Import & Total
manufactured marketing - marketing of consolidated
products subcontracting raw materials
(including Z.A.G.) for chemicals
industry
# '000 # '000 # '000 # '000
Nine month period ended
30 September 2006 (unaudited)
Segmental turnover 1,260 7,885 1,686 10,831
______ ______ ______ ______
______ ______ ______ ______
Segmental results 88 (1,182) 278 (816)
______ ______ ______ ______
______ ______ ______ ______
Production of self Production & Import & Total
manufactured marketing - marketing of consolidated
products subcontracting raw materials
(including Z.A.G.) for chemicals
industry
# '000 # '000 # '000 # '000
Three month period ended
30 September 2006 (unaudited)
Segmental turnover 470 2,205 544 3,219
______ ______ _____ ______
______ ______ _____ ______
Segmental results 80 (562) 78 (404)
______ ______ _____ ______
______ ______ _____ ______
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (cont.)
NOTE 6 - SALE OF AN ASSOCIATED UNDERTAKING
On 8 August 2006, an agreement was signed between the Company and AFIC Printing
Products (Marketing) Ltd. (hereinafter - the "Purchaser") for the sale to the
Purchaser of the shares of the Company in AFIC Printing Products Ltd.
(hereinafter - "AFIC")(an associated undertaking), which comprise 25% of the
issued share capital of AFIC. The major terms of the agreement are as follows:
A. In consideration of the shares, the Purchaser will pay the Company an
amount of NIS 900,000 on the following dates: (A) An amount of NIS 150,000 will
be paid to the Company at the closing of the transaction; and (B) the balance
will be paid out in 10 consecutive monthly installments of NIS 75,000 each.
B. In the third quarter of 2006, the transaction was consummated.
C. The sale of the shares of AFIC has no effect on the operations of the
Company. As a result of the signing of the agreement for the sale of the AFIC
shares, the Company recorded in its financial statements as at 30 September 2006
a provision for a decline in value of the investment in AFIC in an amount of NIS
55 thousand.
NOTE 7 - COMPLIANCE WITH FINANCIAL COVENANTS
As at 30 September 2006, two subsidiaries of the Company are not in compliance
with financial covenants stipulated with banking institutions.
As part of the arrangement between the Company and the bank regarding one of the
subsidiaries, a controlling interest furnished a personal guarantee in an amount
of NIS 2 million. Regarding the ratio of tangible shareholders' equity to the
total balance sheet, this ratio will be implemented in the subsidiary's balance
sheet commencing on 30 April 2007.
Regarding the lack of compliance of the second subsidiary with the financial
covenants, it was agreed between the banks and the Company that the amount of
the shortage in collateral furnished by the subsidiary to the banks would be
gradually reduced until 30 April 2007, and the ratio of tangible shareholders'
equity to the total balance sheet will be implemented in the subsidiary's
balance sheet commencing on 30 April 2007.
===========================
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This information is provided by RNS
The company news service from the London Stock Exchange
END
QRTZGMGZRKLGVZG_SN_RNS2452N_SU_RNSTEST_XX_084945.8532_RZ__RT_R.xRoute.0.3
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