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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Technoplast | LSE:TNP | London | Ordinary Share | IL0005410118 | ORD ILS1.0 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.00 | - |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:2519X
Technoplast Industries Ld
01 April 2004
TECHNOPLAST INDUSTRIES LIMITED
FINANCIAL STATEMENTS
31st DECEMBER 2003
AUDITED
TECHNOPLAST INDUSTRIES LIMITED
FINANCIAL STATEMENT AS AT 31st DECEMBER 2003
TABLE OF CONTENTS
Page
Management Discussion and Analysis A - M
Auditors Report 2
Consolidated Profit and Loss Accounts 3
Consolidated Statement of Recognised Gains and Losses 3
Consolidated Balance Sheets 4
Consolidated Cash Flows Statements 5 - 6
Notes to the Financial Statements 7 - 42
Management Discussion and Analysis
for the year ended 31 December 2003
We take pleasure in presenting the consolidated financial statements of
Technoplast Industries Limited for the year ended 31st December 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 year ended 31
December 2003, whereas the term "quarter" refers to the results of operations
for the three-month period ended 31st December 2003.
We present below a description of the main events that occurred during the
period under report.
* On 16 March 2004, the board of directors of the Company approved the
sale of all of the shares and rights of the Company in SMS to a third party, in
return for the cancellation of the Company's guarantee of the debts of SMS to a
certain bank (the guarantee was for an amount of U.S.$ 400 thousand) and in
return for an amount equal to 15% of the annual net income of SMS in excess of
NIS 3 million, relative tothe shares being sold, but not to exceed an aggregate
amount of NIS 650 thousand, linked to the Israeli Consumer Price Index, over a
period of 60 months.
The sale of the shares to the third party is subject to receipt of the approval
of the creditor banks, by no later than 15 May 2004.
In the event that such approval is not forthcoming and/or the Company's
guarantee is not cancelled by 15 May 2004, the Company has the right, until 31
May 2004, to demand the return of all of its rights and shares of SMS. If no
demand is made for the return of the rights and shares, they shall remain the
possession of the third party.
In accordance with the approval of the sale of the shares, the activity of the
subsidiary, SMS, is presented separately from the activity of the Company in the
consolidated statement of profit and loss in an item entitled "Loss from
discontinued operations". The assets of SMS are presented in the consolidated
balance sheet as "Assets attributed to discontinued operations" and its
liabilities are presented as "Liabilities attributed to discontinued operations".
The discontinued operations generated a loss in the consolidated income
statement of NIS 16.6 million during 2003 (NIS 11.5 million during the quarter).
As a result of the sale of the rights in the subsidiary, the Company expects to
report a gain of NIS 9 million in 2004.
* The recovery plan which the Company started implementing in the
fourth quarter of 2001 continues to bear fruit. This year's results showed that
the trend toward improvement in results of current operations which the Company
exhibited in 2002 continued in 2003 as well.
- The implementation of the resolution of the board of directors from
October2002 to transfer the operations of the Barkan plant to the plant in
Migdal Ha'emek and to transfer the equipment from the Barkan plant to Migdal
Ha'emek in order to consolidate the production framework and save costs
contributed to the improvement in the Company's gross profit and to the
reduction in the Company's operating loss of 2003.
- The increasing trend in Company sales which began in the third
quarter of 2002 continued during the year under report as well.
The increase in sales of self-manufactured products offset the decrease in sales
to ZAG. The increase in sales turnover also continued in the fourth quarter of
the year, compared with the previous quarter. Company sales during the fourth
quarter of the year amounted to NIS 33.3 million, an increase of 50.1% over the
third quarter of the year, and an increase of 36% over the same quarter last
year.
- The Company showed an improvement in its gross profit margin which
reached 15% for the fourth quarter, compared with an average gross profit margin
of 10% for the first three quarters of the year and a gross profit margin of 10%
for 2002.
* Company sales in 2003 totalled NIS 97.4 million, compared with NIS
93.7 million in 2002 and NIS93.8 million in 2001.
* We present below condensed income statement data for 2003, compared
with results of operations in 2002 and 2001, in NIS millions:
2003 2002 2001
Sales 97.4 93.7 93.8
Gross profit 11.2 7.3 (0.8)
Operating loss before financing (10.0) (13.6) (22.6)
Operating loss after financing (12.9) (15.8) (29.0)
* For 2003, the Group had a consolidated loss of NIS 37.3 million,
compared with NIS 16.8 million during 2002, and a loss of NIS 34.8 million in
2001.
* The financial results were adversely affected by a number of events
occurring during the second quarter of the year and by the loss from
discontinued operations, as follows:
- A decrease in the volume of operations during the second quarter of
the year due to a reduction in the orders from ZAG and Home Depot, which caused
a gross loss in the second quarter and an increase in the operating loss for the
same period.
- Non-recurring expenses in an amount of NIS 2.1 million which
resulted from the shutting down of the Barkan plant.
- Based on the company valuation commissioned by the Company from an
external appraiser, and adopted by the Company's board of directors for purposes
of theexpected merger with Kidron (details of which are presented below), the
Company updated its implementation of Standard No. 15 of the Israeli Accounting
Standards Board regarding the decline in value of assets and recorded a
provision for a decline in value of NIS 6.9 million during the second quarter of
the year.
- During 2003, the Company recorded a loss from discontinued
operations in an amount of NIS 16.6 million, compared with a loss of NIS 0.5
million in 2002, and a loss of NIS 3 million in 2001.
Excluding these non-recurring expenses, the Group's loss for the period amounted
to NIS 11.7 million, compared with NIS 16.3 million in 2002 and NIS 31.8 million
in 2001.
* As at 31st December 2003, the Group had ashareholders' deficit
amounting to NIS 15.5 million and a working capital deficit amounting to NIS
44.1 million. The Group has accumulated losses as at 31st December 2003
amounting to NIS 102 million. The Group finished the year ended 31st December
2003 with a negative cash flow from operations amounting to NIS 4.5 million and
the quarter with a positive cash flow from operations amounting to NIS 1.4
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".
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 directly and through a
wholly-controlled subsidiary, controls 90% of Kidron.
In addition, Kidron was granted an option to purchase additional shares in
return for an amount of U.S.$ 500 thousand.
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. On 22 December 2003, the general
shareholders meeting of the Company approved the allotment of shares to Kidron.
On 24 February 2004, the general shareholders meeting approved the extension for
the consummation of the agreement for the allotment of shares to Kidron until 31
March 2004, and empowered the Company's board of directors to sign an agreement
with Kidron for an additional 45 day extension.
In the past few days, Kidron has asked the Company to come to an arrangement
with the Company's creditors. Reaching such arrangement is Kidron's
pre-condition for consummation of the merger with the Company.
On 31March 2004, the Company's board of directors passed a resolution whereby
it extended the date for the closing of the transaction until 15 May 2004 and
whereby it agreed to enter into an arrangement with its creditors, as requested
by Kidron, on condition and subject to receipt from Kidron, by no later than 4
April 2004, of the following:
a. A written waiver of all of the pre-conditions for the closing of the
transaction, except for the following pre-conditions:
- Reaching an arrangement between the Company and its creditors (including the
tax authorities, banks, and suppliers) to the complete satisfaction of Kidron.
Kidron agrees that this item shall be deemed to have been fulfilled on the date
arrangement with the creditors is approved (in accordance with an agreed-upon
request to be submitted by the Company) by the court authorized to do so, with
regard to all of the Company's creditors, except for the income tax authorities.
- The required approval of the Tel Aviv Stock Exchange.
- The approval of the tax authorities of the merger, in accordance with
article 103(T) of the Israeli Income Tax Ordinance.
- The approval of the Israel Investment Center.
These waivers will in no way prejudice any of the rights of Kidron and/or
the Company.
b. A commitment to realize the option to invest U.S.$ 500 thousand in cash in
the shares of the Company, on the date of the closing, whether by Kidron or by
assignment of the rights to any third party.
c. A loan in a cash amount of U.S.$ 100 thousand, to be considered as a payment
on account of the realization of the option mentioned in the preceding
paragraph. In the event the option is not exercised, the loan shall be repaid
within 90 days.
d. A commitment to close the transaction within 7 days of the fulfillment of
the pre-conditions detailed in paragraph "a" above, but no later than 15 May
2004, subject to fulfillment of the aforementioned conditions by that date.
* 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.
* On 1 February 2004, the C.E.O. of the Company, Mr. Daniel Stern,
concluded his employment with the Company. To the best of the knowledge of
Company Management, his departure does not involve circumstances that should be
brought to the knowledge of the Company's investors.
On 11January 2004, 1,468,750 option warrants expired out of a total of
2,350,000 warrants that had previously been allotted to Dekel HaGalil Ltd., a
company wholly-owned by Mr. Daniel Stern. Dekel Ha'Galil still has 881,250
option warrants which are exercisable into 881,250 shares of the Company.
As of 2 January 2004, Mr. Moshe Katz has been serving as the new C.E.O.
of the Company.
* On 15 June 2003, Mrs. Orna Patishi resigned from the Company's board
of directors, and Mr. AviadShachar was appointed to serve in her stead.
* On 22 May 2003, Mr. Yoel Feldshow, a public director, resigned from
the Company's board of directors, and on 31 August, Mrs. Bilha Sova was
appointed to serve as an external director of the Company.
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.
Developments in Group activity
The Company is continuing its efforts to develop new products and markets with
the goal of reducing its dependency on ZAG.
In 2002, 2002, and 2003, sales to ZAG comprised 53%, 45%, and 38% of total
Company sales, respectively.
Subsidiaries, associated undertakings and other companies
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 during 2003.
Sales of AFIC during 2003 totalled NIS 24.5 million, compared with NIS 20.9
million during the same period of last year. Net earnings for the period
amounted to NIS 2.3 million, compared with NIS 1.6 million during the same
period last year. The company's shareholders' equity as at 31st December 2003
amounted to NIS 6.2 million, compared with NIS 3.8 million during the current
year.
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 31st December 2003, the Company recorded its investment in AFIC at an
amount of NIS 1.5 million, 25.1% of the shareholders' equity of AFIC at that
date.
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, theCompany filed suit in the Netanya Magistrates Court against Amir Levit
and others to recoup the balance of the debt.
Financial Position (consolidated)
31st December 2003 31st December2002
% of balance % of balance
NIS'000 sheet NIS'000 sheet
Total balance sheet 143,076 169,372
Current assets 29,352 20% 34,846 21%
Investments 1,578 1% - 0%
Tangible assets 56,356 39% 73,395 43%
Assets attributable to discontinued operations 55,790 39% 61,131 36%
Current liabilities 73,498 51% 64,592 38%
Long-term liabilities 14,051 10% 23,138 14%
Liabilities attributable to discontinued operations 71,037 50% 59,817 36%
Shareholders' funds (capital deficit) (15,510) (11%) 21,825 12%
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 5.5
million. This decrease resulted from a decrease of NIS 6 million in trade
accounts receivable, a reduction of NIS 0.5 million in the Company's inventory,
offset by the increase of NIS 0.5 million in other debit balances.
The NIS 17 million decrease in tangible fixed assets derived mainly from
depreciation for the period in an amount of NIS 8.4 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 2.9 million, less purchases of fixed assets in an
amount of NIS 1.2 million.
Current liabilities increased by approximately NIS 8.9 million, as a result of
the increase of NIS 10.9 million in short-term credit from banking institutions,
of which NIS 6.5 million were loans originally granted for the long-term. Since
the Company is in arrears regarding payment of these loans, and the banks are
entitled to demand immediate repayment of the entire balance of the loans, they
were presented as short-term loans. These amounts were offset by a decrease of
NIS 2 million in trade and other accounts payable.
The NIS 9 million decrease in long-term liabilities derived from loans amounting
to NIS 6.5 million that were originally classified as long-term but were now
presented as short-term, from the net repayment of loans during the period, and
from the erosion of foreign currency-linked loans.
The NIS 37.3 million decrease in shareholders' funds derived from the loss for
the period under report.
Results of consolidated annual operations
Year Ended 31st December,
2003 2002
NIS'000 % of sales NIS'000 % of sales % change from '02
- '03
Turnover 97,412 - 93,706 - 4%
Gross profit 11,189 11% 7,334 8% 53%
Operating loss (9,989) (10%) (13,597) (15%) (27%)
Financing expenses (2,884) (3%) (2,112) (2%) 37%
Operating loss after financing (12,873) (13%) (15,709) (17%) (18%)
Other expenses, net (8,448) (9%) (591) (1%) (1480%)
Taxes on income -- -- (33) -- (100%)
Share of group in profits of associated 574 1% -- -- 100%
undertaking
Loss on discontinued operations (16,588) (11%) (497) 1% 2251%
Loss for the year (37,335) (33%) (16,830) (18%) (90%)
Results of operations for the three month periods ended as indicated (consolidated):
31 December 2003 30 September 2003 30 June 2003 31 March 2003 31 December 2002
NIS'000 % of NIS'000 % of NIS'000 % of NIS'000 % of NIS'000 % of
sales sales sales sales sales
Turnover 33,341 22,076 16,656 25,339 24,500
Gross profit (loss) 5,064 15% 2,802 13% (813) (5%) 4,136 16% 2,759 11%
Selling and marketing expenses 4,281 13% 3,180 14% 2,873 17% 3,436 14% 3,985 16%
General and administrative 2,574 8% 1,304 6% 1,981 12% 1,549 6% 1,990 8%
expenses
Operating loss (1,791) (5%) (1,682) (8%) (5,667) (34%) (849) (3%) (3,216) (13%)
Financing income (expenses) (205) (1%) (2,887) (13%) 1,206 7% (998) (4%) (637) (3%)
Operating loss after financing (1,996) (6%) (4,569) (21%) (4,461) (27%) (1,847) (7%) (3,853) (16%)
Other expenses (256) (1%) (818) 4% (8,192) (49%) 819 3% (240) (1%)
(Taxes) benefit on income ---- -- -- -- -- -- -- -- --
Loss after taxes (2,252) (7%) (5,387) (24%) (12,653) (76%) (1,028) (4%) (4,093) (17%)
Share of group in profits (loss) 132 1%164 (1%) 136 (1%) 142 1% -- --
of associated undertaking
Loss from continued operations (2,120) (6%) (5,223) (24%) (12,517) (75%) (886) (3%) (4,093) (17%)
Loss from discontinued (11,471) (34%) (2,968) (13%) (1,479) (9%) (671) (3%) (2,708) (11%)
operations
Loss for the period (13,591) (41%) (8,191) (37%) (13,996) (84%) (1,557) (6%) (6,802) (28%)
Analysis of the results of consolidated operations for the year ended 31st
December 2003
Turnover
Group sales during the 2003 increased by NIS 3.7 million (4%) compared with
sales 2002, and totalled NIS 97.4 million for the year.
The declining trend in Company sales not only stopped, but was even reversed
starting in the third quarter of 2002, as a result of the increase in sales of
self-manufactured products, which offset the decrease in sales to ZAG.
Group sales in the fourth quarter of the year totaledNIS 33.3 million, an
increase of NIS 8.8 million (36%), compared with the fourth quarter of last
year.
Gross profit
The trend toward increased gross profit continued in 2003. Consolidated gross
profit during the period increased from NIS 7.3 million (8% of sales during the
same period last year), to NIS 11.2 million (11% of sales). The improvement in
gross profit derived from the increase in sales turnover, from an improvement in
the product mix, and from the efficiency measures being implemented as part of
the rehabilitation plan.
The gross profit in the fourth quarter amounted to NIS 5 million (15% of sales),
compared with gross profit of NIS 2.8 million (11% of sales) in the same quarter
last year. The improvement in gross profit derived from an increase in sales
turnover of Company products, and from the improvement in the sales prices of
self-manufactured products, which was achieved notwithstanding the sharp
increase in the prices raw materials commencing in 2003.
Operating loss
The operating loss for 2003 decreased to NIS 10 million (10% of sales), compared
with NIS 13.6 million in 2002 (15% of sales). The increase in gross profit and
the decrease in selling expenses are the major factors contributing to the
decrease in the operating loss.
The operating loss for the fourth quarter of the year amounted to NIS 1.8
million (5% of sales), compared with a loss of NIS 3.2 million in the same
quarter last year (13% of sales).
Selling and marketing expenses amounted to NIS 13.8 million (14% of sales) in
2003, compared with NIS 14.3 million (15% of sales) in 2002. The decrease in
these expenses contributed to the decrease in the operating loss. The decrease
in selling expenses was achieved notwithstanding the marketing efforts and the
measures that were taken to penetrate new markets and the increase in direct
exports of Company products.
General and administrative expenses increased to NIS 7.4 million (8% of sales),
compared with NIS 6.6million (7% of sales) in 2002, mainly due to non-recurring
expenses incurred by the Company in the fourth quarter of 2003.
Financing expenses
Financing expenses amounted to NIS 2.8 million in 2003, compared with NIS 2.1
million in 2002.
Other expenses
Other expenses amounted to NIS 8.4 million in 2003, compared with NIS 0.6
million in 2002. Most of the 2003 amount, NIS 6.9 million, was a provision for
a decline in value of assets which the Company recognized in accordance with
Standard No. 15, issued in January 2003 by the Israeli Accounting Standards
Board. The balance derived mainly from expenses connected to the closure of the
Barkan plant. The provision was based on the company valuation commissioned by
the Company from an external appraiser and adopted by the Company's board of
directors.
Loss from discontinued operations
Further to the approval of the board of directors of the sale of all of the
shares and rights of the Company in its subsidiary, SMS, to a third party, the
share of the Company in the results of the subsidiary was recorded as a loss
from discontinued operations.
Liquidity and cash flows
Liquidity data (consolidated) 31/12/03 31/12/02
Working capital deficit (44,146) (29,746)
Cash, bank deposits and short-term investments 211 121
Liquidity ratios (consolidated)
Cash, bank deposits and short-term investments 0.007 0.003
/current assets
Current ratio 0.40 0.54
Quick ratio 0.30 0.43
Cashflows (consolidated)
Group cash flows from operations for the period totalled an outflow of NIS 4.5
million, compared with a cash inflow of NIS 2.3 million during 2002.
The factors that contributed to the cash flows were as follows: the loss forthe
period in an amount of NIS 37.3 million, plus income in a net amount of NIS 1.91
million not constituting a cash flow, offset by a decrease in inventories (NIS
0.4 million), a decrease in trade debtors (NIS 5.6 million), depreciation and
amortisation of NIS 15.3 million, a loss on discontinued operations in an amount
of NIS 16.6 million, less an increase in accounts receivable (NIS 0.5 million)
and a decrease in trade creditors (NIS 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 4.7 million in
2002. The outflow was used mainly for the purchase of fixed assets.
Cash flows from financing activity during the period under report amounted to an
inflow of approximately NIS 7.1 million during the period under report, compared
with NIS 2.7 million in the 2002. The inflow resulted from the receipt of
short-term bank credit in a net amount of NIS 6.0 million, offset by thenet
repayment of long-term loans in an amount of NIS 3.7 million and from receipt of
short and long-term credit, net, from discontinued operations in an amount of
NIS 3.9 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 withthe banks will
provide adequate credit frameworks to finance the continued implementation of
the rehabilitation plan. Company Management also believes that the
implementation of the rehabilitation plan and/or the successful culmination of
the 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.
In the event that the plans are not successful, it is doubtful as to whether the
Group can continue operating as a "going concern" and, as a result, it will not
be in a position to realize its assets or pay its liabilities in the normal
course of its business.
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 15 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 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), changes in exchange rates and the risks of granting
credit to customers and the risks from dependency on major customers.
The Company is exposed to the following market risks:
Exchange rate fluctuations
Approximately 90% of the Group'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 31st December 2003, the excess of the Group's liabilities in foreign
currency over its assets in foreign currency amounted to NIS 35.4 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 resultsin 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 38% 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.
Recently, raw material prices rose by approximately 39%, but the Company and its
competitors have not raised the prices of merchandise they sell to their
customers. The effects of the increases in raw material prices will be felt
mainly during the first quarter of 2004.
Customer credit risks
As indicated below, the Group has a major customer, Z.A.G., comprising 38% of
the consolidated sales turnover in 2003. Management estimates that the credit
risk in respect of this customer 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,
38% of the total Group sales.
The dependency on this customer is declining. In order to reduce the exposure
deriving from the major customer, the Company maintains a policy of varying its
product lines and makes efforts in expanding its customer base, primarily in
Europe, the U.S.and the local market.
Linked balance sheet as at 31st December 2003 (NIS '000)
Denominated in Linked to the Unlinked Non-monetary Total
or linked to ICPI items
foreign currency
Assets
Cash and cash equivalents 141 - 70 - 211
Trade debtors 15,486 - 1,945 - 17,431
Other debtors - 1,560 3,439 - 4,999
Stocks - - - 6,711 6,711
Investments- 34 - 1,544 1,578
Tangible assets - - - 56,356 56,356
Assets attributed to discontinued 7,562 660 4,652 43,500 55,790
operations
Total assets 23,189 2,254 9,522 108,111 143,076
Liabilities
Credit from banking institutions 15,484 8,147 27,370 - 51,001
Trade creditors 556 - 12,032 - 12,588
Other creditors - 5,000 4,578 331 9,909
Long-term loans 14,051 - - - 14,051
Liabilities attributed to 28,467 6,190 35,001 1,379 71,037
discontinued operations
Total liabilities 58,558 19,337 78,981 31,701 158,586
Surplus (deficit) of assets over (35,369) (17,083) (69,459) 106,401 (15,510)
liabilities
The minimum number of directors proficient in financial and accounting matters
The Company's board of directors is comprised of directors having a wealth of
professional experience in matters of business and finance. This composition
assists the board in complying with the obligations placed upon it by law and by
the Company's documents of incorporation, in all matters regarding assessing the
financial position of the Company and in preparing and approving the Company's
financial statements. In view of the above, the Company has determined that the
minimum number of directors having proficiency in business and financial matters
should be two.
Director having proficiency in accounting and financial matters
Bilha Sova - BA in economics and statistics, MBA, CFO in Galam Ltd., and a
director in Pahmas Registered Partnership. and Matechet Maayan Agricultural
Cooperative Union Ltd.
Itamar Patishi - Chairman of the Board and C.E.O. of Technoplast Ventures Ltd.;
Chairman of the Board of Patishi-Shrem Fudim Kelner Management Ltd.; Member of
the Board of the following companies: Technoplast Investments (1993) Ltd.;
Tripod Investments Ltd.; A.A. Patishi Management (1999) Ltd.; A.A. Patishi
Holdings (2002) Ltd.; Solar Properties and Real Estate Ltd.; Atech Technologies
and Engineering Ltd; Nicast Ltd.; AFIC Printing Products Ltd.
Shlomo Tisser - BA; director of the following companies: Vilar International
Ltd.; Vilar Properties (1985) Ltd.; T.Z. Construction and Property for Rent in
Tzipori (1993) Ltd.; T.Z. Equipmentand Rental Properties 1996 ltd.; T.Z.
Construction and Properties in Barkan (1997) Ltd.; T.Z. Construction and
Properties in the South (1997) Ltd.; M.L.G.A.S. Investments Ltd.; Gal Vered
Properties and Holdings Ltd.; Solar Properties and Real EstateLtd.; Vilar USA;
T.Z. Constructions and Tabor Properties (1993) Ltd.; Harkibarim Ltd.; The Center
for Storage M.A. Ltd.; Vilar Technologies 99 Ltd.; Sandak and Livne Engineering
and Initiation Ltd.; M.K.V.S.T. Management and Investments Ltd.; H.S.T.
Industrial Construction (1995) Ltd.; Mivne Peles Ltd.; M.P. Infrastructures
Ltd.; Heshet Carmel Ltd.
Avi Shachar - Shachar HaMillennium (1991) Ltd.; Smart Storage Systems Ltd.;
B'Ma'asef Plastics (1994) Ltd.; B'Ma'asef Marketing and Trade (1993) Ltd.;Plasef
(Manufacture and Marketing of Profiles) Ltd.; A.G.M.R. Holdings and Management
Ltd.; A.G.M.R. Engineering and Investments Ltd.; Zuk Bazelet Investments Ltd.
Itamar Patishi Moshe Katz
Chairman of the Board General Manager
31st March 2004
Fahn Kanne & Co. Schmidt & Co.
Grant Thornton
Certified Public Accountants (Isr) Certified Public Accountants (Isr)
Member firm of Grant Thornton
Head Office:
Levinstein Tower 2 Har Sinai Street
23 Menachem Begin Rd. P.O. Box 1187
Tel-Aviv 66184 Tel-Aviv 61010
PO Box 36172 Israel
Tel-Aviv 61361
Israel T: 972-3-5601060
T: 972-3-5660269
T: 972-3-7106666 F: 972-3-5609076
F: 972-3-7106660 E: schmidtt@inter.net.il
E: info@gtfk.co.il
To The Members of Technoplast Industries Ltd.
We have audited the accounts on pages 3 to 42.
Respective responsibilities of directors and auditors
The Company's directors are responsible for the preparation of accounts. It is
our responsibility to form an independent opinion, based on our audit, on those
accounts and toreport our opinion to you.
Basis of opinion
We conducted our audit in accordance with generally accepted auditing standards,
including those prescribed by the Israeli Auditor's Regulations (Mode of
Performance), 1973. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the accounts. It also includes an
assessment of the significant estimates and judgements made by the directors in
the preparation of the accounts, and of whether the accounting policies are
appropriate to the Company's circumstances, consistently applied and adequately
disclosed.
We did not audit the financial statements of a fully consolidated subsidiary
whose assets included in the consolidation as "assets of a discontinued
operation" constituted 39% and 36.1% of total consolidated assets as at 31
December 2003 and 2002, respectively, and whose results of operations for the
years ended 31 December 2003, 2002, and 2001 were included in the consolidation
as a "loss on discontinued operations". The financial statements of this
subsidiary were audited by other certified public accountants whose reports were
furnished to us. Our opinion, insofar as it related to amounts emanating from
the financial statements of such subsidiary, is based solely on the said reports
of the other accountants. Furthermore, the data included in the financial
statements relating to the net asset value of an affiliate stated on the equity
basis and to the Group's equity in its operating results, is based on financial
statements which were audited by other auditors.
The abovementioned Financial Statements were prepared on the basis of historical
cost, adjusted to reflect changes in the purchasing power of the Israeli
currency, in accordance with Opinions issued by the Institute of Certified
Public Accountants in Israel.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the accounts are free of
material misstatement. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the accounts.
Opinion
In our opinion the accounts give a true and fair view of the state of affairs of
the group at 31st December 2003 and of the loss, total recognised gains and
losses and cash flows of the group for the three years then ended, and have been
properly prepared in accordance with generally accepted accounting principles in
Israel.
We draw attention to Note 1 of the financial statements regarding the doubt as
to the ability of the Company to continue as a "going concern", and plans of
Management pertaining to the continued existence as a "going concern".
The financial statements do 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 Certified Public Accountants
31 March 2004
- 2 -
The accompanying notes are anintegral part of these statements.
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(Adjusted to NIS of December 2003)
Convenience
translation
(Note 2)
Year ended Year ended 31st
31st December December
Note 2001(*) 2002(*) 2003 2003
NIS '000 NIS '000 NIS '000 # '000
Turnover 3 93,753 93,706 97,412 12,410
Cost of sales 4 94,580 86,372 86,223 10,984
_______ _______ _______ ______
Gross (loss) profit (827) 7,334 11,189 1,426
Selling, general and administration expenses 5 21,766 20,931 21,178 2,698
_______ _______ _______ ______
Operating loss before other expenses (22,593) (13,597) (9,989) (1,272)
Other expenses, net 6 (4,597) (591) (8,448) (1,076)
_______ _______ _______ ______
Loss on ordinary activities before financial (27,190) (1,188) (18,437) (2,348)
expenses
Net financial expenses 7 (6,450) (2,112) (2,884) (367)
_______ _______ _______ ______
Loss on ordinary activities before taxation (33,640) (16,300) (21,321) (2,715)
Tax benefit (tax on profit) on ordinary 8 1,899 -
activities
Tax on behalf of previous year - (33) - -
_______ _______ _______ ______
Loss on ordinary activities aftertaxation (31,741) (16,333) (21,321) (2,715)
Net equity in earnings of associated undertaking 9 - 574 73
_______ _______ _______ ______
Loss from a continuing operation (31,741) (16,333) (20,747) (2,642)
Loss from a discontinued operation (3,029) (497) (16,588) (2,115)
_______ _______ _______ ______
Loss for the year (34,770) (16,830) (37,335) (4,757)
_______ _______ _______ ______
_______ _______ _______ ______
Loss per share (NIS/#)
Loss from a continuing operation (0.94) (0.49) (0.62) (0.08)
Loss froma discontinued operation (0.09) (0.01) (0.49) (0.06)
_______ _______ _______ ______
(1.03) (0.50) (1.11) (0.14)
_______ _______ _______ ______
_______ _______ _______ ______
Basic number of shares (in thousands) 33,584 33,584 33,584 33,584
_______ _______ _______ ______
_______ _______ _______ ______
(*) Reclassified - see Note 24.
CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES
(Adjusted to NIS of December, 2003)
Convenience
translation
(Note 2)
Year ended Year ended 31st
31st December December
2001 2002 2003 2003
NIS '000 NIS '000 NIS '000 # '000
Total recognised losses for the year (34,770) (16,830) (37,335) (4,757)
_______ _______ _______ ______
_______ _______ _______ ______
The accompanying notes are an integral part of these statements.
CONSOLIDATED BALANCE SHEETS
(Adjusted to NIS of December, 2003)
Convenience
translation
(Note 2)
31st December 31st December
Note 2002(*) 2003 2003
NIS '000 NIS '000 # '000
Assets attributed to the discontinued operation 24 61,131 55,790 7,107
----------- ----------- ---------
Fixed assets
Tangible assets 10 73,395 56,356 7,180
Investee company 11 - 1,544 197
Severance pay - redundancy provision 17 - 34 4
_______ _______ ______
73,395 57,934 7,381
----------- ----------- ---------
Current assets
Stocks 12 7,178 6,711 855
Debtors 13 27,547 22,430 2,857
Cash at bank and in hand 121 211 27
_______ _______ ______
34,846 29,352 3,739
----------- ----------- ---------
_______ _______ ______
Creditors: amounts falling due within one year
Bank loans and overdrafts 14 40,091 51,001 6,497
Creditors 15 24,501 22,497 2,866
_______ _______ ______
64,592 73,498 9,363
----------- ----------- ---------
_______ _______ ______
Net current assets/(liabilities) (29,746) (44,146) (5,624)
_______ _______ ______
_______ _______ ______
Total assets less current liabilities 104,780 69,578 8,864
_______ _______ ______
_______ _______ ______
Liabilities attributed to the discontinued operation 59,817 71,037 9,050
----------- ----------- ---------
Creditors: amounts falling due after more than one year
Non - convertible bank loans 16 22,976 14,051 1,790
----------- ----------- ---------
Provisions for liabilities and charges
Redundancy provision - severance pay 17 162 - -
----------- ----------- ---------
_______ _______ ______
Net assets (liabilities) 21,825 (15,510) (1,976)
_______ _______ ______
_______ _______ ______
Contingent liabilities and commitments 20
Capital and reserves (deficit) 18 21,825 (15,510) (1,976)
_______ _______ ______
_______ _______ ______
Date of approval: 31 March 2004
Itamar Patishi Moshe Katz Aliza Perry
Chairman of the Board General Manager Controller
(*) Reclassified - see Note 24.
The accompanying notes are an integral part of these statements.
CONSOLIDATED CASH FLOWS STATEMENTS
(Adjusted to NIS of December, 2003)
Convenience
translation
(Note 2)
Year ended Year ended 31st
31st December December
2001(*) 2002(*) 2003 2003
NIS '000 NIS '000 NIS '000 # '000
Net cash flows from operating activities (Appendix A)
Net cash flow from continuing operating activities (17,062) (4,962) (2,915) (371)
Net cash flow from discontinued operating activities (6,952) 7,246 (1,545) (197)
______ ______ ______ _____
(24,014) 2,284 (4,460) (568)
--------- --------- --------- -------
Investing activities
Payments to acquire tangible fixed assets (8,498) (1,854) (1,245) (159)
Receipts from sales of tangible fixed assets 976 251 1,089 139
______ ______ ______ _____
Net cash outflow from continuing investing activities (7,522) (1,603) (156) (20)
Net cash flow from discontinued investing activities (6,406) (3,136) (1,283) (163)
______ ______ ______ _____
Net cash flow from investing activities (13,928) (4,739) (1,439) (183)
______ ______ ______ _____
Financing activities
Receipt of long-term bank loans 13,058 - 4,470 569
Repayment of long-term loans (10,223) (8,793) (8,210) (1,046)
Short-term bank loans and credit, net 14,475 15,040 6,901 879
______ ______ ______ _____
Net cash inflow from continuing financing activities 17,310 6,247 3,161 402
Net cash flow from discontinued financing activities 13,177 (3,592) 3,916 499
______ ______ ______ _____
30,487 2,655 7,077 901
--------- --------- --------- -------
______ ______ ______ _____
Decrease in cash and cash equivalents (7,455) 200 1,178 150
______ ______ ______ _____
______ ______ ______ _____
Opening balance - from continued operation 7,708 408 121 15
______ ______ ______ _____
______ ______ ______ _____
Opening balance - from discontinued operation 474 319 806 103
______ ______ ______ _____
______ ______ ______ _____
Closing balance - from continued operation 408 121 211 27
______ ______ ______ _____
______ ______ ______ _____
Closing balance - from discontinued operation 319 806 1,894 241
______ ______ ______ _____
______ ______ ______ _____
(*) Reclassified - see Note 24.
The accompanying notes are an integral part of these statements
APPENDIX A
RECONCILIATION OF OPERATING PROFIT TO NET
CONSOLIDATED CASH FLOWS FROM OPERATING ACTIVITIES
(Adjusted to NIS of December 2003)
Convenience
translation
(Note 2)
Year ended Year ended 31st
31st December December
2001 2002 2003 2003
NIS '000 NIS '000 NIS '000 # '000
Loss for the year (34,770) (16,830) (37,335) (4,757)
Loss from discontinued operation 3,029 497 16,588 2,115
Depreciation of tangible fixed assets and intangible 8,278 9,223 15,340 1,955
assets
Write-down of investment in other company 1,125 - (970) (124)
Loss on sale of tangible fixed assets, net 566 552 1,855 236
Decrease (increase) in the value of capital note (117) - (27) (3)
Change in deferred taxes, net (1,899) - - -
Increase (erosion) in the value of long-term liabilities 2,752 754 (1,176) (150)
Company's equity in losses of associated undertakings, - - (574) (73)
net
Decrease/(increase) in stocks (80) 3,373 467 59
Decrease/(increase) in trade debtors 3,593 2,752 5,592 712
Decrease/(increase) in other debtors 3,203 (993) (475) (60)
Increase/(decrease) in trade creditors (3,796) (2,867) (2,180) (278)
Increase/(decrease) in other creditors 1,286 (582) 176 22
Decrease in redundancy provision (232) (841) (196) (25)
______ ______ ______ _____
Net cash outflow from operating activities (17,062) (4,962) (2,915) (371)
______ ______ ______ _____
______ ______ ______ _____
APPENDIX B
MAJOR NON-CASH TRANSACTIONS
(Adjusted to NIS of December 2003)
Convenience
translation
(Note 2)
Year ended Year ended 31st
31st December December
2001 2002 2003 2003
NIS '000 NIS '000 NIS '000 # '000
Acquisition of tangible fixed assets on credit 489 - - -
____ _____ ______ ____
____ _____ ______ ____
Transfer from long-term loans to short-term credit - 2,601 - -
____ _____ ______ ____
____ _____ ______ ____
The accompanying notes are an integral part of these statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
1. Company activities
Technoplast Industries Limited (hereafter - the Company) is a public company
engaged in the manufacture and marketing of plastic products.
As at 31 December 2003, the Company had a working capital deficit that amounted
to NIS 44.2 million and the Group had an accumulated loss of NIS 102 million.
The Group concluded the year under report with a negative cash flow from current
operations in an amount of NIS 4.5 million.
In their opinion letter on the financial statements as of 31 December 2003, the
accountants of the subsidiary, Smart Modular Storage Ltd., drew attention to the
loss of NIS 29.6 million in the reporting period (of which NIS 14.5 million was
in respect of a write-off of goodwill), the shareholders deficit in an amount of
NIS 30.3 million, the deficit in working capital in an amount of NIS 36.5
million and the negativecash flow from operating activities in an amount of NIS
1.5 million. In addition, the accountants pointed out that the financing of
the working capital needed by the subsidiary is conditioned upon the extension
of due dates of bank loans and the receipt of alternative lines of credit.
In accordance with Opinion No. 57 of the Institute of Certified Public
Accountants in Israel, the Company also included in the results of its
operations the minority share in the shareholders' deficit of SMS, which exceeds
SMS's liabilities to the minority shareholders and the guarantees received from
the minority shareholders by an amount of NIS 5.2 million.
On 16 March 2004, the board of directors of the Company approved the sale of all
of the shares and rights of the Company in SMS to a third party, in return for
the cancellation of the Company's guarantee of the debts of SMS to a certain
bank (the guarantee was for an amount of U.S.$ 400 thousand) and in return for
an amount equal to 15% of the annual net income of SMS in excess of NIS 3
million, relative to the shares being sold, but not to exceed an aggregate
amount of NIS 650 thousand over a period of 60 months.
The sale of the shares to the third party is subject to receipt of the approval
of the creditor banks, by no later than 15 May 2004.
In the event that such approval is not forthcoming and/or the Company's
guarantee is not cancelled by 15 May 2004, the Company has the right, until 31
May 2004, to demandthe return of all of its rights and shares of SMS.
If no demand is made for the return of the rights and shares, they shall remain
the possession of the third party.
Mr. Itamar Patishi resigned from the board of directors of SMS, effective 16
March 2004 and, as such, Technoplast no longer has any representation on the SMS
board.
The financial statements present the SMS activity as discontinued operations, in
accordance with Standard No. 8 of the Israeli Accounting Standards Board. See
also Note 24.
As a result of the decision of the Company to sell the shares of SMS, the
Company expects to report a profit of NIS 15 million in the financial statements
for the year ended 31 December 2004.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL (cont.)
1. Company activities (cont.)
Further to the agreement in principle signed on 29 June 2003, a final agreement
was signed on 31 August 2003 with Kidron Management andHoldings 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.
In addition, Kidron was granted an option to purchase additional shares in
return for an amount of U.S.$ 500 thousand.
The percentage of the Company held by Kidron was 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.
On 22 December 2003, the general shareholders meeting of the Company approved
the allotment of shares toKidron. On 24 February 2004, the general
shareholders meeting approved the extension for the consummation of the
agreement for the allotment of shares to Kidron until 31 March 2004, and
empowered the Company's board of directors to sign an agreement with Kidron for
an additional 45-day extension.
In the past few days, Kidron has asked the Company to come to an arrangement
with the Company's creditors. Reaching such arrangement is Kidron's
pre-condition for consummation of the merger with the Company.
On 31 March 2004, the Company's board of directors passed a resolution whereby
it extended the date for the closing of the transaction until 15 May 2004 and
whereby it agreed to enter into an arrangement with its creditors, as requested
by Kidron, on condition and subject to receipt from Kidron, by no later than 4
April 2004, of the following:
a. A written waiver of all of the pre-conditions for the closing of the
transaction, except for the following pre-conditions:
- Reaching an arrangement between the Company and its creditors (including
the tax authorities, banks, and suppliers) to the complete satisfaction of
Kidron. Kidron agrees that this item shall be deemed to have been fulfilled on
thedate arrangement with the creditors is approved (in accordance with an
agreed-upon request to be submitted by the Company) by the court authorized to
do so, with regard to all of the Company's creditors, except for the income tax
authorities.
- The required approval of the Tel Aviv Stock Exchange.
- The approval of the tax authorities of the merger, in accordance with
article 103(T) of the Israeli Income Tax Ordinance.
- The approval of the Israel Investment Center.
These waivers will in no way prejudice any of the rights of Kidron and
/or the Company.
b. A commitment to realize the option to invest U.S.$ 500 thousand in cash
in the shares of the Company, on the date of the closing, whether by Kidron or
by assignment of the rights to any third party.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL (cont.)
c. A loan in a cash amount of U.S.$ 100 thousand, to be considered as a
payment on account of the realization of the option mentioned in the preceding
paragraph. In the event the option is not exercised, the loan shall be repaid
within 90 days.
d. A commitment to close the transaction within 7 days of the fulfillment
of the pre-conditions detailed in paragraph "a" above, but no later than 15 May
2004, subject to fulfillment of the aforementioned conditions by that date.
The Kidron Group operates through subsidiaries in Israel and Europe in a variety
of areasconnected 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.
Company Management estimates that implementation of the reorganization plan and/
or successful conclusion of negotiations with its banks and/or reaching an
arrangement with its creditors and/or the consummation 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".
2. Accounting policies
The financial statements presented herein were prepared in accordance with
generally accepted accounting principles ("GAAP") in Israel, whichare not
materially different from those followed under International Accounting
Standards.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL (cont.)
3. Definitions
The Company - Technoplast Industries Ltd.
Subsidiaries - Companies, the control in which exceeds 50% and the financial statements of
which are consolidated with those of the Company (see appendix)
Associated undertaking - A company, except for a subsidiary that the company's investment therein is
included on the basis of the equity value.
Investee company - A subsidiary or an associated undertaking.
The Group- The Company and its investees.
Interested parties - As defined in the Israeli Securities Regulations (Preparation of Annual
Financial Statements) 1993.
Related parties - As defined in the Opinion of the Institute of Certified Public Accountants in
Israel pertaining to related parties.
Dollar - U.S. dollar
CPI - Israeli Consumer Price Index
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
1. Financial reporting in inflationary economies
In most countries, primary financial statements are prepared on the historical
cost basis of accounting without regard to changes in the general level of
prices.
In an inflationary economy, reporting of operating results and financial
position in the local currency, without making any adjustments is not always
helpful to the users of financial statements. Money loses purchasing power at
such a rate that comparison of amounts from transactions and other events that
have occurred at different times, even within the same accounting period, can be
misleading.
In an inflationary economy, financial statements, are useful only if they are
expressed in terms of the measuring unit, current at the balance sheet date.
Accordingly, Israeli GAAP requires that financial statements be prepared in
accordance with historical cost, adjusted for changes in the general purchasing
power of the Israeli shekel at the balance sheet date ("Stable currency approach
").
In accordance with the stable currency approach, the financial statements are
prepared using historical cost values which are adjusted for changes in the
general purchasing power of the currency at the balance sheet date.
The underlying premise in this approach is to translate the current and
comparative shekel amounts in the financial statements to constant shekel
(possessing fixed purchasing power), thereby neutralising the inflationary
effect.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
2. Financial statements in adjusted Israeli currency (cont.)
All figures in the accompanying financial statements are presented in adjusted
NIS which have a constant purchasing power (December 2003 NIS), in accordance
with the changes in the Israeli Consumer Price Index ("CPI" or "Index").
The financial statements have been adjusted in accordance with the Opinions of
the Institute of Certified Public Accountants in Israel ("the Israeli Institute")
and are based on the group's accounts maintained in nominal NIS.
The adjusted amounts of non-monetary assets donot necessarily represent
realisable current economic value, but only the original historical cost of
those assets in terms of adjusted NIS. The term "cost" in these financial
statements represents cost in adjusted NIS.
3. Principles of adjustment
A. Balance sheet components have been adjusted as follows:
Non-monetary items (balance sheet amounts which reflect their historical values
when acquired or originated - mainly fixed assets, stocks and shareholders'
equity) havebeen adjusted for changes in the CPI from the date acquired or
originated, to the CPI for December 2003.
Monetary items (balance sheet amounts which reflect their updated values or
realisation values at the balance sheet date) are stated in the adjusted
financial statements at their nominal values. Comparative figures of monetary
items have been adjusted to the NIS of December 2003.
Investments in associated undertakings and the share in the results of their
operations for the reported period are determined on the basis of the adjusted
financial statements of those companies.
B. Profit and loss account components have been adjusted as follows:
Components derived from non-monetary items have been adjusted on the same basis
as the corresponding balance sheet items.
With the exception of finance costs, profit and loss account transactions
relating to trading items (e.g. sales, purchases, labour costs etc.) have been
adjusted using the CPI for the month in which the transaction took place.
The net financial income/(expenses) represents financial income and expenses in
real terms, as well as the erosion of monetary items during the period.
Current corporation tax includes an adjustment to reflect the erosion in value
of payments on account made during the period, from the date of payment to the
end of the period.
C. Adjustment of financial statements of associated undertakings to US
dollars
The financial statements of a subsidiary included in the discontinued
operations, which operates abroad as the "long arm" of the Group, were adjusted
for changes in the Index after being translated into the Israeli currency, as
follows:
Non-monetary assets - at the exchange rate on the date of the transaction.
Monetary assets - at the exchange rate on the balance sheet date.
Income statement items - at average rates.
Differences deriving from the aforementioned accounting treatment were reported
as part of the financing component in the income statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
3. Principles of adjustment (cont.)
D. Convenience translation
The adjusted financial statements at 31st December 2003 (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 7.8496). 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.
4. Details of changes in the CPI and the representative exchange rate of
the US dollar and Sterling are as follows:
CPI Exchange Exchange
rate of US$ 1 rate of # 1
Points (*) NIS NIS
At 31st December:
2003 178.571 4.379 7.8496
2002 182.01 4.737 7.6334
2001 170.9 4.416 6.4001
% % %
Rate of change:
For the year ended 31st December:
2003 (1.89) (7.56) 2.832
2002 6.50 7.27 19.27
2001 1.41 9.28 6.01
(*) Based on the CPI for the month ended on the balance sheet date, using an
average base of 1993 = 100.
5. Discontinuance of adjusting financial statements for the effects of
changes in the general purchasing power of the Israeli currency
In 2001, the Israeli AccountingStandards Board issued Standard No. 12, "
Discontinuance of Adjusting Financial Statements for Inflation". In December
2002, the Board approved Standard No. 17, "Postponement of the Discontinuance 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 January 1,
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 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 CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
6. Consolidation of financial statements
A. The consolidated financial statements include the financial statements
of Technoplast Industries Limited and its subsidiaries, Technoplast Investments
(1993) Limited (inactive during reported period) and Smart Modular Storage Ltd.
B. Inter-company balances and transactions between companies, whose
financial statements were consolidated into the consolidated financial
statements, as well as inter-company profits, were eliminated in the
consolidated financial statements.
7. Cash equivalents
This item includes current bank balances that are available for withdrawal and
unrestricted short-term bank deposits, with maturities of less than three
months.
8. Stocks
The stocks are presented at the lower of cost or market. Cost is determined as
follows:
Products - on the basis of sales price less the computed gross profit
margin.
Raw materials, consumables and purchased products - on the basis of "
first in - first out".
9. Allowance for doubtful debts
The allowance is calculated on specific debts, the collection of which is
doubtful in the opinion of management.
10. Investment in investee companies
Investments in investee companies are presented on the equity method.
11. Investment in associated undertakings
A. The investments in associated undertakings have been accounted for under
the equity method of accounting.
B. The difference between the cost of the investment and the fair value of
its assets less the fair value of its liabilities as at the date of purchase
represents goodwill.
This goodwill is amortised at an annual rate of 10% and is presented as an asset
in the balance sheet, provided that it represents economic value. The Company
has a policy of periodically evaluating the economic benefit expected to be
derived from the goodwill and to consider a write-down if appropriate.
A loss on the decline in value of goodwill should be recorded whenever the book
value of the goodwill exceeds its recoverable value.
C. In determining the Company's share of the business results of
associated undertakings, intercompany transactions have been eliminated.
NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
12. Fixed assets
Fixed assets are presented at cost, net of investment grants received, and net
of accumulated depreciation.
Depreciation is computed on the straight-line method, over the estimated useful
lives, of fixed assets as follows:
%
Buildings 2
Machinery and equipment 4-20 (mainly 10%)
Vehicles 15
Office furniture and equipment 7-33 (mainly 10%)
Fixed assets under self construction include payroll costs, materials
and other direct costs.
13. Deferred tax
1. Deferred tax is computed in respect of temporary differences between
amounts included in the adjusted financial statements and amounts taken into
account for tax purposes.
Deferred tax balances are computed according to the tax rate at which the
Company's profits are expected to be taxed.
2. The Company has not created a deferred tax liability in respect of the
difference between the book value and the tax value of the investment which the
Company has no intention of realising in the foreseeable future.
3. Due to the uncertainty of future profits, no deferred tax assets were
recorded in the accounting records of the Company or its investee companies.
14. Assets and liabilities linked to the CPI or to foreign currency
Balances linked to the CPI are included on the basis of the CPI relevant to the
terms of the transaction.
Balances linked to or denominated in foreign currencies are included at the
relevant exchange rate prevailing on the balance sheet date, as published by the
Bank of Israel.
15. Turnover
Sales are recognised in the profit and loss account upon delivery of merchandise
to customers.
16. Earnings per share
Earnings per share is computed in accordance with the provisions of Opinion No.
55 of the Institute of Certified Public Accountants in Israel.
The effect of warrants is included in the computation of primary earnings per
share only if their exerciseis considered probable, based on the relationship
between the market price of the shares stemming from the exercise of the
warrants and the discounted present value of the future proceeds derived from
the exercise of the warrants.
The warrants will only be included in diluted earnings per share, if their
exercise is considered improbable and they have a dilutive effect.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
17. Transaction between the Company and its controlling shareholders
Transactions between the Company and its controlling shareholders are presented
in accordance with the guidelines of the Securities Regulations (Financial
Statement Presentation of Transactions Between an Entity and its Controlling
Shareholders) 1996.
Assets transferred from a controlling shareholder to the Company are presented
at their cost in the accounting records of the controlling shareholder. The
considerations paid by the Company in excess of the cost of the assets are
debited to a capital fund which is added to the accumulated deficit.
18. Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities as of the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
19. Fair value of financial instruments
The Company and its subsidiaries have financial instruments which include, among
other things, cash and cash equivalents, quoted securities, and trade and other
debtors, as well as financial liabilities which include, among other things,
short-term credit, and trade and other creditors.
The fair value of these financial instruments is not materially different from
their book value.
20. Advertising expenses
Advertising costs are expensed when incurred.
21. Israeli Accounting Standard No. 15
In January 2003, the Israeli Accounting Standards Board issued Standard No. 15,
which deals with a decline in asset value. The standard stipulates the required
accounting treatment and presentation in cases of a decline in asset value. The
standard requires the entity to recognize the loss on the decline in asset value
whenever the book value of the asset exceeds its recoverable value. The
standard is applicable to the financial statements of periods commencing on or
after January 1, 2003.
Adoption of the standard will, in most cases, have no retroactive effect.
The Company set up a reserve for decline in asset value in an amount of NIS 7
million, which was 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.
22. Financial criteria
According to the guidelines of the Israeli Securities Authority, when a
long-term liability is payable on demand due to a breach of a restriction or
financial criterion, it must be presented in the balance sheet as a current
liability.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - TURNOVER
The turnover and profit before taxation are attributable to one area of
operations, the manufacture and marketing of plastic products.
An analysis of turnover by geographical market is shown below.
Convenience
translation
(Note 2)
Year endedYear ended 31st
31st December December
2001(*) 2002(*) 2003 2003
Adjusted NIS '000 # '000
In Israel (1) 64,614 53,101 48,477 6,176
Abroad 29,139 40,605 48,935 6,234
_______ ______ _______ ______
93,753 93,706 97,412 12,410
_______ ______ _______ ______
_______ ______ _______ ______
(1) Includes sales to major Customer A 49,970 43,011 37,308 4,753
_______ ______ ______ ______
_______ ______ ______ ______
Percentage from turnover 53.3% 45.9% 38.3% 38.3%
_______ ______ ______ ______
_______ ______ ______ ______
(*) Reclassified - see Note 24.
NOTE 4 - COST OF SALES
Convenience
translation
(Note 2)
Year ended Year ended 31st
31st December December
2001(*) 2002(*) 2003 2003
Adjusted NIS '000 # '000
Materials 48,088 44,350 46,343 5,904
Labour 21,311 17,122 15,599 1,987
Outside contractors 7,837 4,246 8,282 1,055
Depreciation 7,730 9,004 8,268 1,053
Manufacturing overhead 9,421 9,495 7,859 1,001
Decrease/(increase) in finished goods stock 193 2,155 (128) (16)
______ ______ ______ ______
94,580 86,372 86,223 10,984
______ ______ ______ ______
______ ______ ______ ______
(*) Reclassified - see Note 24.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - SELLING, RESEARCH AND DEVELOPMENT, GENERAL AND ADMINISTRATION EXPENSES
Convenience
translation
(Note 2)
Year ended Year ended 31st
31st December December
2001(*) 2002(*) 2003 2003
Adjusted NIS '000 # '000
Selling expenses
Wages and related expenses 1,617 2,305 2,814 358
Shipping and export expenses 7,052 7,308 6,915 881
Marketing commissions 2,765 2,965 2,190 279
Other 299 1,754 1,851 236
______ ______ ______ _____
11,733 14,332 13,770 1,754
--------- --------- --------- --------
General and administrative expenses
Wages and related expenses 3,156 2,594 2,272 289
Travel and automobile maintenance (including 637 539 423 54
depreciation)
Professional services 1,575 933 1,700 217
Depreciation 204 116 9712
Allowance for doubtful debts 2,269 882 1,417 181
Other 2,192 1,535 1,499 191
______ ______ ______ _____
10,033 6,599 7,408 944
--------- --------- --------- --------
______ ______ ______ _____
21,766 20,931 21,178 2,698
______ ______ ______ _____
______ ______ ______ _____
(*) Reclassified - see Note 24.
NOTE 6 - OTHER EXPENSES
Convenience
translation
(Note 2)
Year ended Year ended 31st
31st December December
2001(*) 2002(*) 2003 2003
Adjusted NIS '000 # '000
Capital loss on sale of fixed assets (568) (552) (1,855) (236)
Reserve for decline in assets value - - 970 124
Write-down of investment in other company (1,123) - (6,903) (881)
Expensesrelating to prior years, net (2,641) (60) (122) (15)
Other income/(expenses), net (265) 21 (538) (68)
_____ _____ _____ _____
(4,597) (591) (8,448) (1,076)
_____ _____ _____ _____
_____ _____ _____ _____
(*) Reclassified - see Note 24.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - NET FINANCIAL EXPENSES
Convenience
translation
(Note 2)
Year ended Year ended 31st
31st December December
2001(*) 2002(*) 2003 2003
Adjusted NIS '000 # '000
On long-term loans (4,989) (1,220) 255 32
On short-term loans (561) (2,070) (3,722) (473)
Net increase (erosion) in the value of monetary items (900) 1,178 583 74
and other financing expenses
_____ _____ _____ _____
(6,450) (2,112) (2,884) (367)
_____ _____ _____ _____
_____ _____ _____ _____
(*) Reclassified - see Note 24.
NOTE 8 - TAXATION
A. Tax on profit from ordinary activities (tax benefit):
Convenience
translation (Note
2)
Year ended Year ended 31st
31st December December
2001(*) 2002(*) 2003 2003
Adjusted NIS '000 # '000
Net deferred tax (1,899) - - -
Current tax in respect of prior years - 33 - -
_____ _____ _____ ____
(1,899) 33 - -
_____ _____ _____ ____
_____ _____ _____ ____
(*) Reclassified - see Note 24.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - TAXATION (cont.)
B. Tax adjustments on income
We present belowa reconciliation between the theoretical tax expense, assuming
that all the income of the Company and the subsidiary were taxed at the regular
rates of 36%, and the actual tax expense as reported in the profit and loss
account.
Convenience
translation (Note
2)
Year ended Year ended 31st
31st December December
2001(*) 2002(*) 2003 2003
Adjusted NIS '000 # '000
Profit (loss) on ordinary activities before (33,640) (16,300) (21,321) (2,715)
taxation
_____ _____ _____ ____
_____ _____ _____ ____
Ordinary tax rates 36% 36% 36% 36%
_____ _____ _____ ____
_____ _____ _____ ____
Tax on profit (tax benefit) computed according to (12,111) (5,868) (7,676) (977)
the ordinary tax rates
Increase/(decrease) in the tax burden:
Tax on profit (tax benefit) from the reduction in 4,227 2,091 2,772 352
tax rates- "approved plants"
Net non-deductible expenses and exempt income 628 80 1,889 241
Deduction of "extraordinary settlements" (666) (664) (488) (62)
Tax adjustment in respect of prior years - 33 - -
Differences arising from sale of investment in 1,847 - - -
associated undertaking
Amounts in respect of which deferred taxes were not 4,121 4,299 3,306 421
provided, net
Other differences 55 62 197 25
_____ _____ _____ ____
Taxes on income included in the profit and loss (1,899) 33 - -
account
_____ _____ _____ ____
_____ _____ _____ ____
(*) Reclassified - see Note 24.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - TAXATION (cont.)
C. Other information
1. Tax assessments
The Company has final tax assessments for the tax years up to and including
1997.
The tax assessment officer issued an assessment for the 1998 tax year whereby
the Company has to pay additional tax of NIS 9 million (in NIS of 1998). On 28
December 2000, the Company filed an appeal in respect of the assessment to the
district court.
In the opinion of the Company's legal counsel, the Company's reasons for
rejecting the assessment are very sound. Based on discussions held with the
Income Tax Authorities, the Company set up a provision for taxes in its books in
an amount of NIS 5 million.
Subsequent to the balance sheet date, the Company engaged in negotiations with
the Israeli Income Tax Authorities for the cancellation of the assessment made
as part of the expected merger with Kidron Plastics Ltd., as reported in Note
1A.
2. As at 31 December 2003, the loss carryforward for income tax purposes
amounted to NIS 83 million.
3. Benefits under the Law for the Encouragement of Industry (Taxation)
1969
The Company and a subsidiary are "Industrial Companies" under the Law for the
Encouragement of Industry (taxation) 1969.
Under this law, the Company claims a deduction in respect of issuance costs and
is entitled to deduct depreciation at higher rates, as stipulated in the
regulations under the Inflationary Adjustments Law.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - TAXATION (cont.)
C. Other information (cont.)
4. Benefits under the Law for The Encouragement of Capital Investment
("the Law")
The Company obtained approval for five expansion plans, which entitle it to tax
benefits in respect of its "approved plants" in accordance with the Law. Tax
benefits arecontingent upon compliance with the conditions and regulations
stipulated in the Law and the approval letter. According to the Law, if the
Company does not comply with the terms stipulated in the Law and approval
letter, it will have to repay the investment grant received, plus interest and
linkage differentials. In addition, the tax benefits will be revoked. Management
of the Company is of the opinion that the Company has complied with all said
conditions. In addition, the Company is entitled to accelerated depreciation in
respect of fixed assets used in "approved plants".
Details of the expansion plans are as follows:
Expansion Date of Amount of The Company is Year in Approval The Company's Base year Year in Shareholders'
Plan approval Investment entitled to an which from the entitlement to on which which entitlement to
Number letter in US Investment InvestmentInvestmenttax benefits to entitlement tax benefit
Dollars Grant at the requirements Centre on calculate to tax
(thousands) following were fulfilment tax benefit
rates fulfilled of an benefits ceases
approved
plan
1 1988 730 38% 1988 Received Taxation at a (a) (a) Taxation at a
2 1990 1,721 38% 1993 Received rate of 25% 1992 (b) rate of 15% on
3 1993 7,391 38% 1995 Not yet whichis 1995 2007 dividends
received measured on the distributed
4 1996 6,992 34% in respect 1996 Not yet basis of the 1995 2008 from income
of an received increase in derived from
investment of turnover as an "approved
US$ 6,025 compared with plant".
thousand. 24% the base year
in respect of (for a period of
an investment 7 years from the
of US$967 first year in
thousand. which taxable
income is
generated) (c).
5 1997 9,516 Notentitled 2000 Not yet Tax exemption 1997 2007
to a grant received for a period of
ten years (c)
(*) The expanded tax plan which granted the Company a ten-year tax exemption
was cancelled by the Israeli Investment Centre. The Company's appeal of the
cancellation was rejected by the appeals committee. The Company is looking into
its options to prevent the cancellation of the approved plan.
a) Benefit period ended in 1995.
b) Benefit period ended in 2002.
c) Where dividends are distributed from tax exempt income, the Company is
liable for Company tax at a rate of25%.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - NET EQUITY IN PROFITS OF ASSOCIATED UNDERTAKINGS
Convenience
translation
(Note 2)
Year ended Year ended 31st
31st December December
2001 2002 2003 2003
Adjusted NIS'000 # '000
Company's share in net profits (losses) - - 574 73
___ ___ ___ ___
___ ___ ___ ___
(*) Reclassified - see Note 24.
NOTE 10 - TANGIBLE FIXED ASSETS
A. Composition and changes
1. Adjusted NIS
Real Machinery Vehicles Office Total
estate (1) and furniture & (2) (3)
equipment equipment
Adjusted NIS' 000
Cost
Balance at 31st December 2002 26,153 102,354 480 946 129,933
Additions during the year 23 1,222 - - 1,245
Disposals during the year - (13,724) - - (13,724)
Allowance for decline in value - (6,903) - - (6,903)
______ _______ _____ _____ _______
Balance at 31st December 2003 26,176 82,949 480 946 110,551
______ _______ _____ _____ _______
______ _______ _____ _____ _______
Accumulated depreciation
Balance at 31st December 2002 (2,671) (53,199) (223) (445) (56,538)
Charge for the year (497) (7,771) (72) (97) (8,437)
Disposals during the year - 10,780 - - 10,780
______ _______ _____ _____ _______
Balance at 31st December 2003 (3,168) (50,190) (295) (542) 54,195
______ _______ _____ _____ _______
______ _______ _____ _____ _______
Net book value
31st December 2003 23,008 32,759 185 404 56,356
______ _______ _____ _____ _______
______ _______ _____ _____ _______
31st December 2002(*) 23,482 49,155 257 501 73,395
______ _______ _____ _____ _______
______ _______ _____ _____ _______
(1) (2) (3) See next page.
(*) Reclassified - see Note 24.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - TANGIBLE FIXED ASSETS (cont.)
A. Composition and changes (cont.)
2. Convenience translation into Sterling
Real Machinery Vehicles Office Total
estate (1) and furniture & (2) (3)
equipment equipment
# '000
Cost
Balance at 31st December2002 3,332 13,039 61 120 16,552
Additions during the year 3 156 - - 159
Disposals during the year - (1,748) - - (1,748)
Allowance for decline in value - (879) - - (879)
_____ ______ ____ ____ ______
Balance at 31st December 2003 3,335 10,568 61 120 14,084
_____ ______ ____ ____ ______
_____ ______ ____ ____ ______
Accumulated depreciation
Balance at 31st December 2002 (340) (6,778) (28) (57) (7,203)
Charge for the year (63) (990) (9) (12) (1,074)
Disposals during the year - 1,373 - - 1,373
_____ ______ ____ ____ ______
Balance at 31st December 2003 (403) (6,395) (37) (69) (6,904)
_____ ______ ____ ____ ______
_____ ______ ____ ____ ______
Net book value at 2,932 4,173 24 51 7,180
31st December 2003
_____ ______ ____ ____ ______
_____ ______ ____ ____ ______
3. Other Information
A. (1) The lease of land in Migdal Ha'emek expires in 2043. The lease
of land in Barkan expires in 2036.
(2) The cost at 31st December 2003 is net of investment grants of adjusted
NIS 17,674 thousand (31st December 2002 - adjusted NIS 22,205 thousand)
(3) The accumulated depreciation at 31st December 2003 is net of the
amortisation of the investment grants amounting to adjusted NIS 10,387 thousand
(31st December 2002 - adjusted NIS13,443 thousand).
(4) Liens on fixed assets - see Note 21.
(5) The decline in asset value is included in other expenses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - INVESTMENTS IN INVESTEE COMPANIES
A. The Company has a wholly-owned subsidiary named Technoplast Investments
(1993) Ltd. During the period under report, the subsidiary was inactive.
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.
NOTE 12 - STOCKS
Convenience
translation
(Note 2)
31st December 31st December
2002(*) 2003 2003
Adjusted NIS '000 # '000
Raw materials and consumables 3,830 3,238 412
Finished goods 3,348 3,473 443
_____ _____ ____
7,178 6,711 855
_____ _____ ____
_____ _____ ____
(*) Reclassified - see Note 24.
NOTE 13 - DEBTORS
Convenience
translation
(Note 2)
31st December 31st December
2002(*) 2003 2003
Adjusted NIS '000 # '000
Trade debtors (1)(2) 23,023 17,431 2,220
Government institutions 1,616 1,560 199
Employees 89 31 4
Income receivable 1,552 1,899 242
Prepaid expenses 68 173 22
Controlling shareholder 7 7 1
Prepayment to trade creditors 207 154 20
Other debtors and prepayments (3) 985 1,175 149
_____ _____ ____
27,547 22,430 2,857
_____ _____ ____
_____ _____ ____
(1) Net of allowance for doubtful debts 2,938 4,421 563
_____ _____ ____
_____ _____ ____
(2) Includes related parties 440 736 94
_____ _____ ____
_____ _____ ____
(3) Includes related parties 291 570 73
_____ _____ ____
_____ _____ ____
(*) Reclassified - see Note 24.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - BANK LOANS AND OVERDRAFTS
Composition:
Convenience
translation (Note
2)
31st December 31st December
Interest 2002(*) 2003 2003
rate % Adjusted NIS '000 # '000
Overdraft 8.2-16.2 11,526 16,062 2,045
Unlinked credit5.2-8.6 13,003 11,308 1,441
Credit linked to CPI 11.3-16.2 413 1,636 208
Credit linked to US dollar 7-10.12 7,175 9,998 1,274
Loan originally granted as long-term (**) 4.5-8 - 6,511 830
Current maturities of long-term loans 7,974 5,486 699
______ ______ _____
40,091 51,001 6,497
______ ______ _____
______ ______ _____
(*) Reclassified - see Note 24.
(**) The Company was in arrears in repaying its loans. Therefore, according
to the agreement with the banks, they are entitled to demand immediate repayment
of the entire amount of the debt.
NOTE 15 - CREDITORS
Convenience
translation
(Note 2)
31st December 31st December
2002(*) 2003 2003
AdjustedNIS '000 # '000
Trade creditors 14,768 12,588 1,604
Employees and institutions 917 1,319 168
Provision for holiday pay 318 416 53
Other creditors and credit balances 8,498 8,174 1,041
______ ______ _____
24,501 22,497 2,866
______ ______ _____
______ ______ _____
(*) Reclassified - see Note 24.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - NON-CONVERTIBLE BANK LOANS
A. Composition:
Convenience
translation (Note
2)
31st December 31st December
Linkage Interest 2002(*) 2003 2003
basis rate % Adjusted NIS '000 # '000
Long-term bank loans: US$ 1.87-2.35 26,062 18,845 2,401
Euro 3 1,779 692 88
CPI 3,109 - -
______ ______ _____
30,950 19,537 2,489
Less current maturities (7,974) (5,486) (699)
______ ______ _____
22,976 14,051 1,790
______ ______ _____
______ ______ _____
(*) Reclassified - see Note 24.
B. The long-term non-convertible bank loans mature as follows:
Convenience
translation
(Note 2)
31st December 31st December
2003 2003
Adjusted NIS # '000
'000
Year following balance sheet date:
2004 5,486 699
2005 4,940 630
2006 3,982 507
2007 3,363 428
2008 and thereafter 1,766 225
______ _____
19,537 2,489
______ _____
______ _____
C. For information regarding financing expenses in "real terms" in respect
of long-term loans, see Note 7.
D. For information about the reclassification of loans originally granted
as long-term, see Note 14.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - REDUNDANCY PROVISION
A. In accordance with a collective agreement regarding the introduction of
comprehensive pension rights, the Company makes regular payments for some of its
employees to the "Mivtachim" pension fund, which confers pension rights when
they reach retirement age.
B. Several employees are provided for by the Company in managers' insurance
policies, which include a severance component.
C. The amounts accrued in the pension fund and in the managers' insurance
are not under the Company's control. Accordingly, these sums and the related
liabilities are not included in the financial statements.
D. The balance sheet liability for future redundancy pay represents the
balance of the liability that is not covered by the abovementioned deposits and
insurance policies.
There is a funded provision in a recognised severance fund for the entire
liability.
E. The liability and funded liability for redundancy pay at the balance
sheet date are as follows:
Convenience
translation (Note
2)
31st December31st December
2002(*) 2003 2003
Adjusted NIS '000 # '000
Total liabilities 556 428 54
Less - funded provision in redundancy fund (394) (462) (58)
___ ___ ___
162 (34) (4)
___ ___ ___
___ ___ ___
(*) Reclassified - see Note 24.
NOTE 18 - SHARE CAPITAL AND RESERVES
1. Share capital
A. Composition:
Authorised capital Issued and fully paid
31st December 31st December
2002 2003 2002 2003
Number of ordinary shares with no par value 450,000,000 35,000,000 33,583,691 33,583,691
__________ __________ _________ _________
__________ __________ _________ _________
B. The ordinary shares confer on their owners the right to vote and to
participate in shareholders' meetings, the right to receive income and the right
to participate in net assets upon liquidation of the Company.
C. The Company's shares are in registered form and are listed on the
Tel-Aviv Stock Exchange and, as of February 1997, are also listed on the Primary
List of the London Stock Exchange.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SHARE CAPITAL AND RESERVES (cont.)
1. Share capital (cont.)
D. During November 1993, the Company issued 1,000,000 ordinary shares,
500,000 warrants (Series 1), and 1,042,000 warrants (Series 2) for total net
proceeds of NIS 20,085 thousand (adjusted to NIS of December 2003).
The exercise dates of both series have lapsed. Series 2 warrants were fully
exercised. Of Series 1 - 333,272 warrants were exercisedand 166,728 warrants
expired.
E. In June 1996 the Company issued 246,905 ordinary shares for total net
proceeds of NIS 2,756 thousand (adjusted to NIS of December 2003).
F. On 9th February 1997, the authorised share capital of the company was
increased by NIS 19.6 million.
G. On 11th February, 1997, the Company allotted bonus shares at a rate of
200 percent, equivalent to 11,503,248 ordinary shares, par value NIS 1 each.
The shares were allotted from undistributable funds and profit and loss account
income of the Company. The bonus shares that were allotted, carry the same
rights as all other ordinary shares.
H. On 11th February 1997 the Company issued 8,000,000 ordinary shares, par
value NIS 1 each, to the public in England. Net proceeds from the issue totalled
NIS 49,785 thousand (adjusted to NIS of December 2003).
I. On 12th December 1999, the authorised share capital of the Company was
increased by NIS 4.9 million.
J. During December 1999, the Company issued 1,400,000 ordinary shares in
a private placement in return for net proceeds of NIS 8,185 thousand (adjusted
to NIS of December 2002).
K. During March 2000, the Board of Directors approved a private placement
of 1,430,000 unquoted option warrants to 33 Company employees.
The warrants were granted to the employees without consideration and
will be exercisable into 1,430,000 ordinary shares of the Company, par value NIS
1 each.
The base exercise price of each warrant is NIS 4.34, linked to the
Israeli Consumer Price Index of December 1999 (published on 14th January 2000).
The quantity of shares to be purchased by way of the warrants will be
limited so as to reflect the benefit component to be derived from them on the
date of exercise, i.e., the difference between the base exercise price of each
warrant and the market price on the Tel Aviv Stock Exchange of each NIS 1 par
value share on the date of exercise.
The employees will be entitled to receive the option warrants in four
equal annual instalments, on condition that they were employed by the Company
during the relevant period. The first portion will be granted on 1st February
2001, with the subsequent portions being granted on 1st February of each
succeeding year, until 1st February 2004.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SHARE CAPITAL ANDRESERVES (cont.)
1. Share capital (cont.)
L. The former General Manager of the Company holds 250,000 options to
purchase 250,000 ordinary shares at a base exercise price of NIS 4.34, linked to
the Israeli Consumer Price Index of December 1999.
The quantity of shares to be purchased by way of the warrants will be
limited so as to reflect the benefit component to be derived from them on the
date of exercise, i.e., the difference between the base exercise price of each
warrant and the market price on the Tel Aviv Stock Exchange of each NIS 1 par
value share on the date of exercise.
M. On 11 November 2001, the Company allotted to Itamar Patishi (hereinafter
- "Patishi") and to Orlight Industries (1959) Ltd. (hereinafter - "Orlight")
1,150,000 option warrants each. The unquoted warrants are exercisable into
2,300,000 shares of the Company, par value NIS 1 each. The option warrants will
be distributed to Patishi and Orlight pro rata (and equally) each quarter over a
12 quarter period beginning on 1 October 2001 and will be exercisable upon
distribution. The options will be allotted gratis and will not be listed for
trade on the stock exchange. The exercise price for each option warrant isNIS
1.70, linked to the Consumer Price Index of September 2001.
The quantity of shares to be purchased by way of the warrants will be
limited so as to reflect the benefit component to be derived from them on the
date of exercise, i.e., the difference between the base exercise price of each
warrant and the market price on the Tel Aviv Stock Exchange of each NIS 1 par
value share on the date of exercise.
This placement was made as part of the approval of the termsof
service of Itamar Patishi and Shaul Kovrinsky as co-chairmen of the board of
directors of the Company. They receive no salary for their service, for the
three year period which commenced on 1 July 2001.
On 14 July 2002, Mr. Shaul Kovrinsky resigned his membership in the board of
directors of the Company. Upon his leaving the job of Joint Chairman of the
board, 846,529 options out of a total quantity of 1,150,000 options that had
been previously allotted to Orlight Industries Ltd., expired.
Out of all of the option warrants allotted to him, Itamar Patishi undertook to
waive 214,000 option warrants under certain circumstances pertaining to the
merger with Kidron.
N. On 17 July 2002, an extraordinary general shareholders' meeting of the
Company approved the resolution passed by the board of directors regarding the
private placement of 2,350,000 option warrants to Dekel HaGalil Ltd.
(hereinafter - "Dekel", a private company wholly-owned by Mr. Daniel Stern. The
option warrants are non-negotiable and can be exercised into 2,350,000 ordinary
shares of the Company, par value NIS 1 each. The option warrants will be
distributed to Dekel in stages such, that after 1 June 2003, Dekel will be
entitled to receive and exercise into Company shares 587,500 warrants. The
remaining warrants will be distributed quarterly over a 12 quarter period
commencing on 1 September 2003 and will be exercisable on the date of
distribution.
The option warrants were allotted without consideration and will not be listed
on the stock exchange. The base exercise price of each option warrant is NIS 1,
linked to the Index of April 2002.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SHARE CAPITAL AND RESERVES (cont.)
1. Share capital (cont.)
N. (cont.)
The option are exercisable into the quantity of shares that will reflect just
the benefit component that derives therefrom on the date of exercise, i.e., the
difference between the base exercise price of each option and the market price
per share of the Company's shares on the Tel Aviv Stock Exchange. This
allotment took place as part of the terms of Mr. Stern's employment in his
duties as GeneralManager of the Company.
On 11 January 2004, Mr. Daniel Stern resigned from the Company. Upon his
resignation, 1,468,750 options of the 2,350,000 options which were allotted to
Dekel HaGalil expired.
O. 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.
P. On 30th September 2003, thegeneral 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 byconverting 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, withoutexception, will pass over to the non-par valve shares
2. Share capital and reserves
A. Adjusted
Share Premium on Capital Profit Total
capital shares funds and loss
account(*)
Adjusted NIS '000
Balance at 31st January 2001 42,724 43,608 327 (13,234) 73,425
Changes during 2001
Loss for the year - - - (34,770) (34,770)
______ ______ ____ ______ _______
Balance at 31st December, 2001 42,724 43,608 327 (48,004) 38,655
Changes during 2002
Loss for the year - - - (16,830) (16,830)
______ ______ ____ ______ _______
Balance at 31st December, 2002 42,724 43,608 327 (64,834) 21,825
Changes during 2003
Loss for the year - -- (37,335) (37,335)
______ ______ ____ ______ _______
Balance at 31st December, 2003 42,724 43,608 327 (102,169) (15,510)
______ ______ ____ ______ _______
______ ______ ____ ______ _______
(*) Reclassified - see Note 2.17.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SHARE CAPITAL AND RESERVES (cont.)
2. Share capital and reserves (cont.)
B. Convenience translation
Share Premium on Capital Profit Total
capital shares funds and loss
account(*)
# '000
Balance at 31st December, 2002 5,443 5,555 42 (8,259) 2,781
Changes during 2003
Loss for the year - - - (4,757) (4,757)
_____ _____ ___ ______ ______
Balance at 31st December, 2003 5,443 5,555 (13,016) (1,976)
_____ _____ ___ ______ ______
_____ _____ ___ ______ ______
(*) Reclassified - see also Note 2.17.
NOTE 19 - INTERESTED PARTIES
Convenience
translation
(Note 2)
31st December 31st December
2002 2003 2003
Adjusted NIS '000 # '000
A. Balance sheet items
Debtors 7 7 1
___ ___ ___
___ ___ ___
Highest current debit balance during the year 7 7 1
___ ___ ___
___ ___ ___
B. Transactions with interested parties
Convenience
translation (Note
2)
31st December 31st December
2001 2002 2003 2003
Adjusted NIS '000 # '000
Office rent expense 98 - - -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 - INTERESTED PARTIES (cont.)
C. Benefits to interested parties
Convenience
translation (Note
2)
31st December 31st December
2001 2002 2003 2003 No. of
Adjusted NIS '000 # '000 people
Interested parties employed by the Company
Remuneration of chief executive officer 1,116 676 801 103 1
Other interested parties 1,181 - - -
Directors' Remuneration (not employees of the 218 109 314 40 5
Company)
NOTE 20 - CONTINGENT LIABILITIES AND COMMITMENTS
1. Contingent liabilities under the Law for the Encouragement of Capital
Investments are described in Note 8.
2. During 1996, the Company and ZAG entered into a manufacturing agreement
for a period of five years commencing on 1st January 1996. On 6th April 2000,
an amendment to the agreement was signed, extending it for a period of five
years commencing 1st January 2000 to 31st December 2004. The major points of
the agreement are as follows:
A. ZAG agreed to place orders each year with the Company equal to 30% of
ZAG's plastic injection production in Israel (based on its dollar value), on
condition that the Company has the capacity to produce such amount.
B. The Company will ensure that the production and packaging are carried
out only in the Company's factories which operate in development zone "A", as
defined in the Law for the Encouragement of Capital Investment - 1959, unless
ZAG agrees otherwise in writing.
C. In return for the production and packaging, ZAG will pay the Company
amounts based on an agreed-upon costing method of the costs of manufacturing and
packaging the products. A mechanism for updating the prices was also stipulated
in the agreement.
D. In the event that ZAG merges with another company or at least 50% of ZAG
is purchased by another party, ZAG is entitled to cancel the manufacturing
agreement upon giving the Company 90 days advance notice. In such a case, ZAG
will incur no penalties or further liabilities. This right accrues only in the
event that the merger is with or the purchase is by a strategic partner and the
cancellation of the agreement is a precondition to any such merger or purchase.
Furthermore, the manufacturing agreement can be cancelled by ZAG upon 30 days
advance notice if control of the Company is transferred to a competitor of ZAG.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 - CONTINGENT LIABILITIES AND COMMITMENTS (cont.)
2. (cont.)
E. In August 2003, an addendum to the agreement with ZAG was signed,
whereby the liability of ZAG mentioned in paragraph 1 above was amended to an
amount of US$ 700,000 a month and to 40% of the dollar value of ZAG's injection
production in Israel.
In March 2002, Technoplast was notified by the Restrictive Trade Practices
Authority (hereinafter - the "Authority") that the Authority views the
production agreement between Technoplast and Z.A.G. as a restrictive agreement
if it limits competition. The Authority added that it does not currently
possess enough information to determine if there was an actual restriction on
competition. On 26 August 2002, the Supervisor of Restrictive Trade Practices
notified the Company that he decided to exercise his authority under the law to
exempt the production agreement between the Company and Z.A.G. from the
requirement to obtain the approval of the Restrictive Trade Practices Court on a
restrictive agreement. The exemption will apply only in cases in which
Technoplast's commitment to refrain from competing with Z.A.G. preventsan
infringement on Z.A.G.'s intellectual property.
3. Guarantees
The Company is a guarantor in favor of the subsidiary, Smart Modular
Storage Ltd., in an amount of U.S.$ 500 thousand. See also Note 1.
The Company gave finance guarantees amounting to NIS 240 thousand.
4. In February 2003, the Company signed a long-term agreement pertaining
to real estate it leases in the Barkan industrial zone. In respect of this
agreement, the Company willreceive annual rents (linked to changes in the
exchange rate of the US dollar) in an amount of US$ 140 thousand.
5. Litigation
A. In 2001, a suit in an amount of NIS 1.6 million was filed in the Tel
Aviv District Court against Z.A.G. Industries Ltd., Technoplast Ventures Ltd.,
Tripod Investments Ltd., Technoplast Industries Ltd., Itamar Patishi, and Zvi
Yemini.
The suit pertained to the negotiations that were allegedly conducted
in 1997 and at the beginning of 1998, between the plaintiffs and any or all of
the aforementioned six defendants, regarding an agreement to invest in a
start-up company for the development of a paramedical device for relieving lower
back pain. Notwithstanding the fact that the negotiations did not come to
fruition and that no investment agreement was signed, the plaintiffs claim that
a binding contract was made and breached by one or all of the defendants. As
part of the suit, the plaintiffs claimed damages in respect of expenses
allegedly incurred by them in an amount of U.S.$ 58 thousand, and the balance in
respect of the loss of future profits.
In the opinion of the Company's legal counsel, the suit is a nuisance
suit and is factually without merit. The chances of the suit's succeeding are
slim. No provision was set up in respect of this suit in the accounting records
of the Company.
B. For information regarding the tax assessment order issued to the
Company, see Note 8.C.1.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 21 - LIENS
1. To secure compliance with the terms of the receipt of investment
grants, a lien, unlimited as to amount, was placed on the assets of the Company
in favour of the State of Israel.
2. To secure repayment of the Company's liabilities to banks and others,
the Company gave a lien on its machinery and equipment, and on a bank deposit
and notes deposited with the bank.
3. During July 2002, the Company put a first pledge on its real estate and
plant in Barkan. During the reporting period, the Company signed agreements
whereby it put in favor of one of the banks a floating charge in favor of banks
and a fixed charge on the building and property in Migdal Ha'emek in favor of
one of the banks.
4. Total liabilities of the Company to banking institutions in an amount
of NIS 65 million are secured by liens.
NOTE 22 - BUSINESS SEGMENTS
A. General
Group companies are engaged in two main business segments:
Manufacture and marketing for subcontractors (including Z.A.G.), and manufacture
of self manufactured products.
B. Business segments
Consolidated 2003
1. Profit and loss data
a. Adjusted NIS
Year ended 31 December 2003
Production Production & Total
of self marketing - consolidated
manufactured subcontracting
products (including
Z.A.G.)
NIS'000 NIS'000 NIS'000
Sales turnover:
Outside customers 56,103 41,309 97,412
______ ______ ______
______ ______ ______
Segment results (6,985) (3,004) (9,989)
Unallocated financing expenses (2,884)
Other expenses, net (8,448)
Net equity in earnings of associated undertaking 574
from continuing operating
______
Loss from continuing operations (20,747)
Loss from discontinued operations (16,588)
______
Loss for the year (37,335)
______
______
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22 - BUSINESS SEGMENTS (cont.)
B. Business segments (cont.)
Consolidated 2003 (cont.)
1. Profit and loss data (cont.)
b. Convenience translation
Year ended 31 December 2003
Production Production & Total
of self marketing - consolidated
manufactured subcontracting
products (including
Z.A.G.)
#'000 #'000 #'000
Sales turnover:
Outside customers 7,148 5,262 12,410
_____ _____ ______
_____ _____ ______
Segment results (889) (383) (1,272)
Unallocated financing expenses (367)
Other expenses, net (1,076)
Taxes on income -
Net equity in earning of associated undertakings 73
from continuing operations
______
Loss from continuing operations (2,642)
Loss from discontinued operations (2,115)
______
Loss for the year (4,757)
______
______
2. Other information
a. Adjusted NIS
31 December 2003
Total
consolidated
NIS'000
General assets 87,286
Assets attributed to discontinued operation 55,790
_______
Total consolidated assets 143,076
_______
_______
General liabilities 87,549
Liabilities attributed to discontinued operation 71,037
_______
Total consolidated liabilities 158,586
_______
_______
Long-term assets - cost
General long-term assets - cost - attributed to continuing operation 1,245
General depreciation and amortization - attributed to continuing operation 15,340
General non-cash expenses excluding depreciation and amortization - attributed 1,088
continuing operation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22 - BUSINESS SEGMENTS (cont.)
B. Business segments (cont.)
Consolidated 2003 (cont.)
2. Other information (cont.)
b. Convenience translation
31 December 2003
Total
consolidated
#'000
General assets 11,120
Assets attributed to discontinued operation 7,102
______
Total consolidated assets 18,227
______
______
General liabilities 11,153
Liabilities attributed to discontinued operation 8,864
______
Total consolidated liabilities 20,017
______
______
Long-term assets - cost
General long-term assets - cost - attributed to continuing operation 159
General depreciation and amortization - attributed to continuing operation 1,954
General non-cash expenses excluding depreciation and amortization - attributed to 231
continuing operation
Consolidated 2002
1. Profit and loss data - Adjusted NIS
Year ended 31 December 2002
Production Production & Total
of self marketing - consolidated
manufactured subcontracting
products (including
Z.A.G.)
NIS'000 NIS'000 NIS'000
Sales turnover:
Outside customers 43,327 50,379 93,706
______ ______ ______
______ ______ ______
Segment results (10,670) (2,927) (13,597)
Unallocated financing expenses (2,112)
Other expenses, net (591)
Taxes on income (33)
______
Loss from continuing operations (16,333)
Loss from discontinued operations (497)
______
Loss for the year (16,830)
______
______
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22 - BUSINESS SEGMENTS (cont.)
B. Business segments (cont.)
Consolidated 2002 (cont.)
2. Other information - Adjusted NIS
31 December 2002
Total
consolidated
NIS'000
General assets 108,241(*)
Assets attributed to discontinued operation 61,131(*)
_______
Total consolidated assets 169,372
_______
_______
General liabilities 87,730(*)
Liabilities attributed to discontinued operation 59,817(*)
_______
Total consolidated liabilities 147,547
_______
_______
Long-term assets - cost
General long-term assets - cost - attributed to continuing operation 2,229
General depreciation and amortization - attributed to continuing operation 9,223
General non-cash expenses excluding depreciation and amortization - attributed to 2,645
continuing operation
(*) Reclassified - see Note 24.
Consolidated 2001
1. Profit and loss data - Adjusted NIS
Year ended 31 December 2001(*)
Production Production & Total
of self marketing - consolidated
manufactured subcontracting
products (including
Z.A.G.)
NIS'000 NIS'000 NIS'000
Sales turnover:
Outside customers 31,257 62,496 93,753
______ ______ _______
______ ______ _______
Segment results (17,934) (4,659) (22,593)
Unallocated financing expenses (6,450)
Other expenses, net (4,597)
Taxes on income 1,899
_______
Loss from continuing operations (31,741)
Loss from discontinued operations (3,029)
_______
Loss for the year 34,770
_______
_______
(*) Reclassified - see Note 24.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22 - BUSINESS SEGMENTS (cont.)
C. Geographical segments
1. Consolidated - in 2003
a. Adjusted NIS
Revenues by source
Geographical segments
Year ended 31 December 2003
Israel U.S.A. Europe Other Consolidated
NIS'000 NIS'000 NIS'000 NIS'000 NIS'000
Sales turnover to outside customers 48,477 8,807 34,077 6,051 97,412
______ ______ ______ _____ ______
______ ______ ______ _____ ______
b. Convenience translation
Revenues by source
Geographical segments
Year ended 31 December 2003
Israel U.S.A. Europe Other Consolidated
#'000 #'000 #'000 #'000 #'000
Sales turnover to outside customers 6,176 1,122 4,341 771 12,410
_____ _____ _____ ____ ______
_____ _____ _____ ____ ______
2. Consolidated - in 2002 (*)
Revenues by source
Geographical segments
Year ended 31 December 2002
Israel U.S.A. Europe Other Consolidated
NIS'000 NIS'000 NIS'000 NIS'000 NIS'000
Sales turnover to outside customers 53,101 7,211 28,305 5,089 93,706
______ ______ ______ _____ ______
______ ______ ______ _____ ______
(*) Reclassified - see Note 24.
3. Consolidated - in 2001 (*)
Revenues by source
Geographical segments
Year ended 31 December 2001
Israel U.S.A. Europe Other Consolidated
NIS'000 NIS'000 NIS'000 NIS'000 NIS'000
Sales turnover to outside customers 64,614 4,415 24,037 687 93,753
______ ______ ______ ____ ______
______ ______ ______ ____ ______
(*) Reclassified - see Note 24.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23 - LINKAGE BASIS
Linkage basis of monetary assets and liabilities as of31st December 2002:
a. Adjusted NIS
Denominated in Linked to the Unlinked Non-monetary Total
or linked to ICPI items
Foreign
currency
Adjusted NIS '000
Assets
Cash and cash equivalents 141 - 70 - 211
Trade debtors 15,486 - 1,945 - 17,431
Other debtors - 1,560 3,439 - 4,999
Stocks - - - 6,711 6,711
Deposits and other debit balances - 34 - 1,544 1,578
Tangible assets - - - 56,356 56,356
Assets attributed to discontinued 7,562 660 4,652 42,916 55,790
operations
______ ______ ______ _______ _______
Total assets 23,189 2,254 10,106 107,527 143,076
______ ______ ______ _______ _______
______ ______ ______ _______ _______
Liabilities
Bank loans and overdrafts (less 9,998 8,147 27,370 - 45,515
current maturities)
Trade creditors 556 - 12,032 - 12,588
Other creditors - 5,000 4,578 331 9,909
Long-term loans 19,537 - - - 19,537
Liabilities attributed to 28,467 6,762 35,436 372 71,037
discontinued operations
______ ______ ______ _______ _______
Total liabilities 58,558 19,909 79,416 703 158,586
______ ______ ______ _______ _______
______ ______ ______ _______ _______
Surplus (deficit) of assets over (35,369) (17,655) (69,310) 106,824 (15,510)
liabilities
______ ______ ______ _______ _______
______ ______ ______ _______ _______
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23 - LINKAGE BASIS (cont.)
Linkage basis of monetary assets and liabilities as of 31st December 2003
(cont.):
b. Convenience translation
Denominated in Linked to the Unlinked Non-monetary Total
or linked to ICPI items
Foreign
currency
Adjusted #'000
Assets
Cash and cash equivalents 18 - 9 - 27
Trade debtors 1,973 - 248 - 2,221
Other debtors - 199 437 - 636
Stocks - - - 855 855
Deposits and other debit balances - 4 - 197 201
Tangible assets - - 7,180 7,180
Assets attributed to discontinued 963 84 592 5,468 7,107
operations
_____ _____ ______ ______ ______
Total assets 2,954 287 1,286 13,700 18,227
_____ _____ ______ ______ ______
_____ _____ ______ ______ ______
Liabilities
Bank loans and overdrafts (less 1,274 1,038 3,486 - 5,798
current maturities)
Trade creditors 71- 1,533 - 1,604
Other creditors - 637 583 42 1,262
Long-term loans 2,489 - - - 2,489
Liabilities attributed to 3,625 861 4,515 49 9,050
discontinued operations
_____ _____ ______ ______ ______
Total liabilities 7,459 2,536 10,117 91 20,203
_____ _____ ______ ______ ______
_____ _____ ______ ______ ______
Surplus (deficit) of assets over (4,505) (2,249) (8,831) 13,609 (1,976)
liabilities
_____ _____ ______ ______ ______
_____ _____ ______ ______ ______
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 24 - DISCONTINUED OPERATION
1. On 16 March 2004, the board of directors of the Company approved the
sale of all of the shares and rights of the Company in SMS to a third party, in
return for the cancellation of the Company's guarantee of the debts of SMS to a
certain bank (the guarantee was for an amount of U.S.$ 400 thousand) and in
return for an amount equal to 15% of the annual net income of SMS in excess of
NIS 3 million, relative to the shares being sold, but not to exceed an aggregate
amount of NIS 650 thousand over a period of 60 months.
The sale of the shares to the third party is subject to receipt of the approval
of the creditor banks, by no later than 15 May 2004.
In the event that such approval is not forthcoming and/or the Company's
guarantee is not cancelled by 15 May 2004, the Company has the right, until 31
May 2004, to demand the return of all of its rights and shares of SMS.
If no demand is made for the return of the rights and shares, they shall remain
the possession of thethird party.
Mr. Itamar Patishi resigned from the board of directors of SMS, effective 16
March 2004 and, as such, Technoplast no longer has any representation on the SMS
board.
The assets and liabilities attributed to the discontinued operations were
presented in the financial statements in separate items after fixed assets and
after long-term liabilities, respectively, in accordance with Standard No. 8 of
the Israeli Accounting Standards Board. In the income statement, the loss from
the discontinued operations was presented in a single line entitled "Loss from
discontinued operations".
2. Summary of Profit and Loss Accounts
Convenience
translation (Note
2)
Year ended Year ended 31st
31st December December
2001 2002 2003 2003
NIS '000 NIS '000 NIS '000 # '000
Turnover 50,079 55,717 52,507 6,689
Cost of sales 44,030 44,479 43,715 5,569
_______ _______ _______ ______
Gross profit 6,049 11,238 8,792 1,120
Selling, research and development, general and (7,394) (10,717) (20,900) (2,665)
administration expenses
_______ _______ _______ ______
Operating loss before other expenses (1,345) 521 (12,108) (1,545)
Other income (expenses), net 45 (167) (9,080) (1,157)
_______ _______ _______ ______
Loss on ordinary activities before financial (1,300) 354 (21,188) (2,702)
expenses
Net financial expenses (2,415) (1,708) (2,990) (381)
_______ _______ _______ ______
Loss on ordinary activities before taxation (3,715) (1,354) (24,178) (3,083)
Tax benefit (tax on profit) on ordinary activities - 34 (41) (5)
_______ _______ _______ ______
Loss on ordinary activities after taxation (3,715) (1,320) (24,219) (3,088)
Minority share in loss of investee 686 823 7,631 973
_______ _______ _______ ______
Loss for the year (3,029) (497) (16,588) (2,115)
_______ _______ _______ ______
_______ _______ _______ ______
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 24 - DISCONTINUED OPERATION (cont.)
Assets Attributed to Discontinued Operation
Convenience
translation
(Note 2)
31st December 31st December
2002 2003 2003
NIS '000 NIS '000 # '000
Minority receivable 310 7,941 1,012
----------- ----------- ---------
Intangible assets 10,427 - -
----------- ----------- ---------
Fixed assets
Tangible assets 29,305 26,999 3,440
Deposits and other debit balances 70 136 17
_______ _______ ______
29,375 27,135 3,457
----------- ----------- ---------
Current assets
Stocks 10,935 7,546 961
Debtors 9,278 11,274 1,436
Cash at bank and in hand 806 1,894 241
______________ ______
21,019 20,714 2,638
----------- ----------- ---------
_______ _______ ______
Creditors: amounts falling due within one year
Bank loans and overdrafts 21,713 27,916 3,727
Creditors 21,373 29,256 3,557
_______ _______ ______
43,086 57,172 7,284
----------- ----------- ---------
_______ _______ ______
Net current assets/(liabilities) (22,067) (36,458) (4,646)
_______ _______ ______
_______ _______ ______
Total assets less current liabilities 18,045 (1,382) (177)
_______ _______ ______
_______ _______ ______
Creditors: amounts falling due after more than one year
Capital note 5,493 5,480 698
Non - convertible bank loans 10,863 8,013 1,021
Deferred income 214 152 19
_______ _______ ______
16,570 13,645 1,738
----------- ----------- ---------
Provisions for liabilities and charges
Redundancy provision - severance pay 161 220 28
----------- ----------- ---------
_______ _______ ______
Net assets (liabilities) 1,314 (15,247) (1,943)
_______ _______ ______
_______ _______ ______
Capital and reserves (deficit) 1,314 (15,247) (1,943)
_______ _______ ______
_______ _______ ______
This informationis provided by RNS
The company news service from the London Stock Exchange
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