AFS.L Regulatory News (AFS)

30 Aug 2007 07:01

Amiad Filtration Systems Ltd30 August 2007 30 August 2007 Amiad Filtration Systems Ltd. ("Amiad" or "the Company") Results for the six months to 30 June 2007 Amiad, the producer and global supplier of water filters and filtration systems for the industrial, municipal and irrigation markets, announces its interim results for the six months to 30 June 2007. Financial Highlights• Turnover increased by 24% to $27.4m (H1 2006: $22.0m)• Profit before tax increased by 68% to $3.7m (H1 2006: $2.2m)• Gross margins were 49% (H1 2006: 50%)• Fully diluted earnings per share almost doubled to 14.8 US cents (H1 2006: 7.8 US cents)• Interim dividend of 3.0 US cents (gross) (H1 2006: 2.385 US cents) Operational Highlights• Strong finish to end of 2006 continued into the first half of 2007 reflecting the demand for its automatic filters• Market growth in most territories and segments• High growth in Australia, USA and Europe• Good penetration into Russia, Ukraine and Kazakhstan• Significant penetration for the microfiber technology as a platform for water treatment projects Commenting on the results, Rami Treger, Chief Executive Officer of Amiad, said: "The market for Amiad's products continues to expand with greater global investments in water infrastructure. Specifically, there is increasing investment in the municipality area (waste water, desalination, potable water) due to stricter restrictions and regulations being introduced worldwide. These positive long-term trends underpin Amiad's prospects. The Company has entered the second half of 2007 with an order volume and backlog which is substantially higher at this stage than at the corresponding time last year, which gives the Company confidence of achieving good growth across the business in the second half of this year as compared to the equivalent period last year. As a result, the Company expects to report a significant increase in revenues for the full year as compared with last year." Enquiries: Amiad Filtration Systems Ltd.Rami Treger, Chief Executive Officer +972 (0) 4 690 9500Itamar Eder, Chief Financial Officer Corfin CommunicationsHarry Chathli, Neil Thapar + 44 (0) 20 7929 8989 Operational Review The Board is pleased to report robust growth in the first half of 2007, building on the good momentum achieved in late 2006. The Company increased its revenues by 24% compared to the first half of 2006 to $27.4 million (H1 2006: $22.0m) and profit before tax increased by 68% compared to the first half of 2006 to $3.7 million (H1 2006: $2.2m) reflecting demand for its automatic filters. The results reflect increasing investment in major markets in water treatment and filtration systems to improve the supply and availability of clean water. Amiad's automatic filters require low maintenance and can be adapted to provide bespoke solutions to a wide range of applications in industries including steel, power, oil and gas, pulp and paper, in addition to a wide variety of other applications in the irrigation market. In the first half of 2007, order levels were good across all major territories. Amiad now sells its products in over 70 countries across the Americas, Africa, Europe, Asia and Australasia through a network of distributors and its own subsidiaries. In USA, the Company saw high growth in all parts of its business. The Company installed filtration system for surface water for irrigation in the Bonita Bay area and an industrial application for river water use in the cooling process of a power generating station in Oklahoma. Its technology was also employed to solve the problem and produce potable water at a central hospital in Virginia when the city water supply contaminants caused upsets in the hospital water systems and contributed to an unreasonable replacement of cartridge filters and maintenance calls. In Europe, Amiad entered into a contract with Bulmer, the UK cider producing company, to install water filters in their production facility. This is a leading brand in cider manufacturing and Amiad's filtration system has already improved the level of efficiency of their production. In May, the Company supplied its automatic filters to one of Scandinavia's largest oil & gas companies for a mounted filtration solution to be used for an oil drilling rig in the North Sea. Earlier in the year, the Company continued its penetration into Russia. In January 2007, Amiad resolved a severe drinking water quality problem in the City of Ramenskoe, Russia and, as a result, received additional three substantial projects to be supplied this year. It also received orders for the first time in Kazakhstan and Ukraine for industrial automatic mega-filters for the steel industry. The Company saw growth in Australia with it being asked to deploy its solutions at short notice and carry out water treatment projects in various cities due to a lack of drinking water caused by severe drought. In China, the Company experienced further expansion in the municipal sector. It also won the second phase of the project to treat water in the Beijing Olympic Village. The Company also saw sales growth in Japan, India and Singapore. It was also asked to supply a desalination system to convert sea water into potable water for the Davis Research Station in Antarctica. In the irrigation segment, the Company saw a worldwide increase in its sales activities, mainly in Western Europe, Argentina, Mexico and Australia. Financial review Revenue for the six months ended 30 June 2007 increased by 24% compared to the first half of 2006 to $27.4m (H1 2006: $22.0m). Profit before tax increased by 68% compared to the first half of 2006 to $3.7m (H1 2006: $2.2m). Fully diluted earnings per share were 14.8 US cents (H1 2006: 7.8 US cents). Gross margins were 49% (H1 2006: 50%) mainly reflecting the weakness of the US dollar and increases in raw material prices. The Company introduced increase in its prices effective from 1 July 2007 in those areas where its products are invoiced in USdollars. The Company increased its sales and marketing effort globally and this will continue in the second half, but the Company continues to keep a tight control over administrative and general expenses. Operating profit increased by 44% compared to the first half of 2006 to $3.7m (H1 2006: $2.5m) reflecting the substantial growth in the business. The significant growth is also reflected in the working capital requirements which resulted in an even net cash balance from operating activities. However, the Company improved its working capital ratio from 44% at the end of 2006 to 41% as at 30 June 2007. Net cash and cash equivalent and marketable securities amounted to $5.9m as of 30 June 2007. DividendThe Directors have decided to declare a dividend out of the Company's profits for the six months ended 30 June 2007 of approximately 3.0 US cents (gross) per share, with an ex dividend date of 26 September 2007, a record date of 28 September 2007 and a payment date of 26 October 2007. ManagementIn June, the Company announced the appointment as CEO of Rami Treger to lead theCompany in its next phase of long-term growth. He succeeds Yosef Katz, who isstepping down from the Board at the Company's EGM on 5 September 2007. Water Treatment EntityAs part of its strategy, the Company has recently started the process of settingup a separate entity to provide end-to-end solutions for the treatment of water,in addition to continuing to provide automated filters. Recently, it appointed asenior manager to develop this part of its business. OutlookThe market for Amiad's products continues to expand with greater global investment in water infrastructure. Specifically, there is increasing investment in the municipality area (waste water, desalination and potable water) due to stricter restrictions and regulations being introduced worldwide. These positive long-term trends underpin Amiad's prospects. The Company has entered the second half of 2007 with an order volume and backlog which is substantially higher at this stage than at the corresponding time last year. This gives the Company confidence of achieving good growth across the business in the second half of 2007 as compared to the second half of last year. As a result, the Company expects to report a significant increase in revenues for the full year compared to 2006. AMIAD FILTRATION SYSTEMS LTD. CONDENSED CONSOLIDATED BALANCE SHEET AT 30 JUNE, 2007 30 June 31 December, 2007 2006 2006 U.S. dollars in thousands A s s e t s (Unaudited) (Audited) CURRENT ASSETS:Cash and cash equivalents 3,369 4,537 4,217Short term investments 2,511 1,688 1,869Accounts receivable and accruals:Trade 19,888 16,523 16,871Other 1,245 1,456 1,009Inventories 13,223 8,769 10,470Income Tax assets 745 - 431T o t a l current assets 40,981 32,973 34,867 NON-CURRENT ASSETS:Property and equipment 2,943 2,433 2,617Intangible assets 2,759 2,447 2,759Loan to a related party 659 503 685Long term receivables 154 548 105Deferred income tax assets 1,301 708 1,225Severance pay assets 1,993 1,905 1,872T o t a l non-current assets 9,809 8,544 9,263T o t a l assets 50,790 41,517 44,130 30 June 31 December, 2007 2006 2006 U.S dollars in thousands (Unaudited) (Audited) Liabilities and shareholders' equity CURRENT LIABILITIES: Short term credit, loans from banks and other 8,948 7,646 7,532Accounts payable and provisions:Trade 10,496 6,688 7,862Other 3,583 2,453 3,111Income tax liability 366 629 488T o t a l current liabilities 23,393 17,416 18,993 NON-CURRENT LIABILITIES:Loans from banks and other(net of current maturities) 2,800 2,761 2,786Severance pay obligations 2,027 1,961 1,909Deferred taxes 471 565 542T o t a l non-current liabilities 5,298 5,827 5,237T o t a l liabilities 28,691 22,703 24,230SHAREHOLDERS' EQUITYCapital and reserves attributable to theCompany's equity holders:Share capital 2,291 2,291 2,291Capital reserve 12,797 12,797 12,797Currency translation reserve 240 134 164Retained earnings 6,340 3,294 4,303 21,668 18,516 19,555MINORITY INTEREST 431 298 345T o t a l shareholders' equity 22,099 18,814 19,900T o t a l liabilities and shareholders' equity 50,790 41,517 44,130 The notes on pages 9 to 13 are an integral part of these condensed financial statements. AMIAD FILTRATION SYSTEMS LTD. CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2007 6 months Year ended ended 31 December, 30 June 2007 2006 2006 U.S dollars in thousands except per share data (Unaudited) (Audited) Continuing operations:Revenue 27,437 22,045 44,076Cost of sales 14,009 10,946 22,097Gross profit 13,428 11,099 21,979Selling and marketing costs 6,486 5,680 11,455Administrative and general expenses 3,071 2,699 5,581Amortization of other assets 188 170 348Other expenses, net 12 8 4Operating profit 3,671 2,542 4,591Financial expenses, net 15 364 864Profit before income tax 3,656 2,178 3,727Income tax expenses 749 618 736Profit for the period 2,907 1,560 2,991Attributed to:Equity holders of the company 2,821 1,491 2,875Minority interest 86 69 116 2,907 1,560 2,991 U.S dollarsEarnings per share attributable to the equityholders of the Company during the period(see note 3d):Basic 0.149 0.079 0.152Diluted 0.148 0.078 0.150 The notes on pages 9 to 13 are an integral part of these consolidated financial statements. AMIAD FILTRATION SYSTEMS LTD. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2007 Attributable to equity holders of the Company Share Capital Currency Retained capital reserve translation earning reserve $ in thousandsBALANCE AT JANUARY 1, 2007 (audited) 2,291 12,797 164 4,303 CHANGES DURING THE 6 MONTH ENDED 30 June 2007:Currency translation differences - - 76 -Profit for the period - - - 2,821Total recognized profit for 6 month ended 30June 2007 - - 76 2,821Employees share purchase plan - value ofemployee services - - - 60Cash dividend ($ 0.045 per share) - - - (844)BALANCE AT JUNE 30, 2007 (unaudited) 2,291 12,797 240 6,340 BALANCE AT JANUARY 1, 2006 (audited) 2,291 12,797 123 3,190CHANGES DURING THE 6 MONTH ENDED 30 June 2006:Currency translation differences - - 11 -Profit for the period - - - 1,491Total recognized profit for 6 month ended 30June 2006 - - 11 1,491Employees share purchase plan - value ofemployee services - - - 68Cash dividend ($0.077 per share) - - - (1,455)Dividend to minority - - - -BALANCE AT JUNE 30, 2006 (unaudited) 2,291 12,797 134 3,294 The notes on pages 9 to 13 are an integral part of these condensed financial statements. AMIAD FILTRATION SYSTEMS LTD. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2007 (continued) Attributable to equity holders of the Company Share Capital Currency Retained capital reserve translation earning reserve $ in thousands BALANCE AT JANUARY 1, 2006 (audited) 2,291 12,797 123 3,190CHANGES DURING THE YEAR ENDED 31 December 2006: Currency translation differences - - 41 -Profit for the period - - - 2,875Total recognized profit for year ended 30December 2006 - - 41 2,875Employees share purchase plan - value ofemployee services - - - 143Cash dividend ($0.1 per share) - - - (1,905)Dividend to minority - - - -BALANCE AT DECEMBER 31, 2006 (audited) 2,291 12,797 164 4,303 The notes on pages 9 to 13 are an integral part of these condensed financial statements. AMIAD FILTRATION SYSTEMS LTD. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2007 (continued) Attributable to equity holders of the Company Total Minority Total interest shareholders equity $ in thousands BALANCE AT JANUARY 1, 2007 (audited) 19,555 345 19,900 CHANGES DURING THE 6 MONTH ENDED 30 June 2007:Currency translation differences 76 - 76Profit for the period 2,821 86 2,907Total recognized profit for 6 month ended 30 June 2007 2,897 86 2,983Employees share purchase plan - value of employeeservices 60 - 60Cash dividend ($ 0.045 per share) (844) - (844)BALANCE AT JUNE 30, 2007 (unaudited) 21,668 431 22,099 BALANCE AT JANUARY 1, 2006 (audited) 18,401 265 18,666CHANGES DURING THE 6 MONTH ENDED 30 June 2006:Currency translation differences 11 - 11Profit for the period 1,491 69 1,560Total recognized profit for 6 month ended 30 June 2006 1,502 69 1,571Employees share purchase plan - value of employeeservices 68 - 68Cash dividend ($0.077 per share) (1,455) - (1,455)Dividend to minority - (36) (36)BALANCE AT JUNE 30, 2006 (unaudited) 18,516 298 18,814 AMIAD FILTRATION SYSTEMS LTD. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2007 (continued) Attributable to equity holders of the Company Total Minority Total interest shareholders equity $ in thousands BALANCE AT JANUARY 1, 2006 (audited) 18,401 265 18,666CHANGES DURING THE YEAR ENDED 31 December 2006: Currency translation differences 41 - 41Profit for the period 2,875 116 2,991Total recognized profit for year ended 30 December2006 2,916 116 3,032Employees share purchase plan - value of employeeservices 143 - 143Cash dividend ($0.1 per share) (1,905) - (1905)Dividend to minority - (36) (36)BALANCE AT DECEMBER 31, 2006 (audited) 19,555 345 19,900 AMIAD FILTRATION SYSTEMS LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2007 6 months ended Year ended 30 June 31 December, 2007 2006 2006 U.S. dollars in thousands (Unaudited) (Audited) CASH FLOWS FROM OPERATING ACTIVITIES:Cash generated from operations 1,353 1,827 3,805Interest paid (298) (281) (633)Income tax paid (1,078) (1,327) (1,833)Net cash generated from (used in) operatingactivities (23) 219 1,339CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment (729) (202) (677)Purchases of intangible assets (189) - (527)Investments grants received 93 61 79Short term investments, net (630) (1,679) (1,853)Proceeds from sale of property and equipment 58 27 62Long-term loan granted to a related party andothers (49) (543) (328)Collection of long-term loan granted to a relatedparty 23 28 85Net cash used in investing activities (1,423) (2,308) (3,159)CASH FLOWS FROM FINANCING ACTIVITIES:Dividends paid to the minority interest - (36) (36)Dividends paid (844) (1,455) (1,905)Repayments of long term loans (1,048) (981) (1,872)Receipt of long-term loans and other liabilities 1,003 29 1,075Short-term loans, net 1,473 1,356 1,092Net cash generated from (used in) financingactivities 584 (1,087) (1,646)NET INCREASE (DEREASE) IN CASH AND CASHEQUIVALENTS (862) (3,176) (3,466)CASH AND CASH EQUIVALENTS AT BEGINNINGOF THE YEAR 4,217 7,692 7,692EXCHANGE GAINS ON CASH AND CASHEQUIVALENTS 14 21 (9)CASH AND CASH EQUIVALENTS ATEND OF THE PERIOD 3,369 4,537 4,217 The notes on pages 9 to 13 are an integral part of these condensed financial statements. AMIAD FILTRATION SYSTEMS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - GENERAL: The interim financial statement as of 30 June 2007 and for the six-month periodthen ended (hereafter - the interim statements) has been prepared in condensedform in accordance with IAS 34 - "Interim Financial Reporting". The interim condensed financial report should be read in conjunction with theannual financial statements for the year ended 31 December 2006. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted are consistent with those of the annualfinancial statements for the year ended 31 December 2006, As described in theannual financial statements for the year ended 31 December 2006. The following new standards, amendments to standards and interpretations havebeen issued but are not effective for 2007 and have not been early adopted: • IAS 23 (revised March 2007), Borrowing Costs (effective from 1 January 2009). The standard is not expected to have any impact on the Company's accounts. • IFRIC 13, Customer Loyalty Programmes, effective for annual periods beginning on or after 1 July 2008. IFRIC 13 is not expected to have any impact on the Company's accounts. • IFRIC 14, IAS 19 - The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, effective for annual periods beginning on or after 1 January 2008. Management is currently assessing the impact of IFRIC 14 on the Company's operations. NOTE 3 - SHAREOLDERS' EQUITY: a. On 26 March, 2007, the Company's Board of Directors resolved to distributedividends to its shareholders in the amount of $844 thousand. b. Share options 1) On 12 August 2005, the Company granted to three senior employees, thechairman of the board of directors and to Kibbutz Amiad options to purchase386,682, 154,674 and 77,336 Ordinary Shares, respectively (as adjusted for theshare split and bonus shares). The options to the senior employees were grantedin the framework of the Company's option plan that was submitted to the IsraeliTax Authorities, in accordance with the provisions of Section 102 to the IsraeliIncome Tax Ordinance and the remaining options were granted under the provisionsof section 3(i) of the Income Tax Ordinance. The options vest over a period offour years (except in the case of the CEO where the period is three years) andhave an exercise price of $ 1.53 per share. The options will be held during thevesting period by a trustee and will be released in accordance with the terms ofthe option plan. Unexercised options expire10 years after date of grant. AMIAD FILTRATION SYSTEMS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 - SHAREOLDERS' EQUITY (continued): 2) On 19 April 2007, following a request made by the Company, the senioremployees and the chairman of the board of directors gave written notice to theCompany of their waiver, with immediate effect, of 21,874 and 8,751 optionsrespectively granted to them by the Company.At the same time, the Company received written notice from Kibbutz Amiad of itswaiver, with immediate effect, of its right to options granted to it by theCompany over 77,336 ordinary shares. 3) On 19 April 2007, the board of directors resolved to grant options over72,961 ordinary shares under the plan to a director of the Company, at anexercise price of $ 1.53 per ordinary share (being the same price as theexercise price for the options previously granted to Kibbutz Amiad and all otheroption holders), such options to vest over a period of 2.13 years. Unexercisedoptions expire 8.13 years after date of grant. The actual grant date of theabove option was 26 Jun 2007 following the approval company grant at the companyannual general meeting on the 26 Jun 2007. 4) On 14 May 2007, the CEO announced that he was stepping down and would stay onas Chief Executive Officer until a replacement is appointed.On 27 July 2007, following a request made by the Company, the CEO gave hisconsent to amend his option agreement, so that the number of options andordinary shares exercisable there under, will be reduced by 54,722 options (from 218,886 options to 164,164 options), that there vesting period under theoptions agreement is August 11, 2008. 5) On 5 July 2007, the Company entered into an employment agreement with a newCEO in respect of his employment as of 1 August 2007. Pursuant to the terms ofthe agreement the CEO entitled to receive a phantom bonus which will becalculated on base of the change in the average price of the company's ordinaryshare for the 2 years period ended in August 2009. The bonus will be paid onAugust 2009, provided that CEO is employed by the Company at the record date. On 27 July 2007, the Company entered into an Option Agreement with the CEOpursuant to which the CEO granted options to purchase 54,722 ordinary shares ofthe company, subject to the terms and conditions set out in the OptionAgreement. The phantom bonus and the Option Agreement are conditional upon obtainingshareholder approval at the Company's Annual General Meeting to be held inSeptember 2007. AMIAD FILTRATION SYSTEMS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 - SHAREOLDERS' EQUITY (continued): c. Earnings per share 6 months ended Year ended 30 June 31 December, 2007 2006 2006 U.S. dollars in thousands (Unaudited) (Audited) Diluted:Number of shares used for calculation of earningsper share -basic 18,873 18,873 18,873Adjustments for share options 200 321 309Number of shares used for calculation of earningsper share -diluted 19,073 19,194 19,182 Net income attributable to equity holdersof the parent 2,821 1,491 2,875 Basic earnings per share (in U.S. dollars) 0.149 0.079 0.152 Diluted earnings per share (in U.S. dollars) 0.148 0.078 0.150 NOTE 4 - EMPLOYEE INCNTIVE PLAN On 27 July 2007, the board of directors approved a Bonus Scheme which will beavailable to staff members and members of Senior Management, including to threemembers of the board conditional upon obtaining shareholder approval at theCompany's Extraordinary General Meeting to be held in September 2007. a. Senior Management - bonus scheme will be in operation in relation tofinancial year ending 31 December 2007 which will pay a bonus to the SeniorManagement team by reference to their monthly salary. The level of bonus payablewill be depended on the achievement of targets as set out in the Bonus Scheme.The maximum total bonus liability for the Company is NIS 600,000.Any bonus shall be paid following Board's approval of the 2007 financialstatement in March 2008. If any member of Senior Management is not employed bythe Company for the whole of the Bonus Year or is not employed at the bonuspayment date, the payment of any bonus to that individual shall be subject tothe absolute discretion of the Chairman and/or CEO of the Company. AMIAD FILTRATION SYSTEMS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - EMPLOYEE INCNTIVE PLAN (continued): b. Staff members -a discretionary bonus scheme will be in operation inrelation to the financial year ending 31 December 2007 which will provide abonus pool for Staff to recognize their contribution to the success of thebusiness. The level of bonus payable will be depended on the achievement oftargets as set out in the Bonus Scheme. The amount of the bonus for the Staffwill be calculated as a bonus pool, the amount in the pool being dependent onthe achievement of the targets. The maximum bonus pool is NIS 900,000.A portion of the bonus pool shall be paid to Kibbutz Amiad subject to theformula that is presented in the bonus scheme conditional upon obtainingshareholder approval at the Company's Extraordinary General Meeting to be heldin September 2007.The bonus shall be paid, subject to the absolute discretion of management,following Board's approval of the 2007 financial statements in March 2008. Asthe payment of the bonus is fully discretionary, the Company reserves the rightnot to pay a bonus. NOTE 5 - REVENUES FROM SALES Sales by customer location: 6 months ended Year ended 30 June 31 December, 2007 2006 2006 U.S. dollars in thousands (Unaudited) (Audited) North America 7,383 5,804 11,558Europe 6,433 4,684 9,842Australia 4,761 3,064 6,252East Asia 3,411 3,967 7,655Israel 3,174 2,337 4,486South America 1,831 1,789 3,051Africa 444 400 1,232Total 27,437 22,045 44,076 NOTE 6 - CONTINGENT LIABILITIES a. On or about August 21, 2007, Amiad USA, Inc. received a draft complaint fromcounsel for Yitzhak Orlans, the former President and a current director of AmiadUSA, Inc. The draft complaint alleges age discrimination, disabilitydiscrimination, employment discrimination, wrongful termination and furtheralleges various other violations of the California Labor Code and the CaliforniaBusiness & Professions Code in connection with the termination of Mr. Orlans'employment with Amiad USA, Inc. The draft complaint indicates that Mr. Orlansis seeking damages in excess of USD$2,625,000 as well as unspecified amounts ofnon-economic damages, punitive damages and attorneys' fees and costs. It is tooearly to predict any outcome or potential liability. b. In March 2006, a claim was filed in the supreme court of Victoria against thesubsidiary in Australia, Amiad Australia PTY Ltd. (hereafter - the subsidiary)as well as 8 other defendants for damages allegedly caused by inducing certainpeople who were then employed by the claimant to breach their employment andother duties to the claimant, and otherwise interfered with their employmentcontracts. AMIAD FILTRATION SYSTEMS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 - CONTINGENT LIABILITIES (continued): In May 2007, the claimant filed an Amended Statement of Claim which altered thenature of the claim and increased the quantum of the claim against thesubsidiary and the other defendant.The amount alleged to have been lost by the claimant as a result of the conductcomplained of in its Amended Statement of Claim is estimated by the claimant inits Amended Statement of Claim to be between $16.5 million AUD and $25 millionAUD.According to the legal counsel of the subsidiary it is not possible to predictwhether this claim will succeed. Further, even if the claimant is successful inestablishing that the subsidiary (either alone or with other defendants) isliable to it in the manner alleged, it is not possible to predict the amount (ifany) that will be awarded against it.In addition to the amount referred to above, the claimant is also seeking anorder that the defendants pay its cost of the proceedings, and that they payinterest on any amount awarded against them.Based on its agreements with Plastro Irrigation Ltd the Company believes to besubstantially indemnified in this claim. NOTE 7 - CASH FLOWS FROM OPERATIONS: 6 months ended Year ended 30 June 31 December, 2007 2006 2006 U.S. dollars in thousands Profit for the period 2,907 1,560 2,991(a) Adjustments for:Depreciation and amortization 509 471 941Interest paid 298 281 633Income taxes paid 1,078 1,327 1,833Share based payment 60 68 143Deferred taxes, net (146) 355 (184)Accrued severance pay, net (3) 95 76Exchange rate differences on liabilities tobanks 2 17 69Loss on sale of fixed assets and others 11 2 14Gain from marketable securities, net (12) (5) (12)Exchange rate differences in on loans to relatedparty and others 3 (18) (48) 4,707 4,153 6,456Changes in working capital:Increase in accounts receivable:Trade (2,861) (2,026) (2,261)Other (613) (208) (187)Increase (Decrease) in accounts payable:Trade 2,405 804 1,802Other 328 (372) 131Increase in inventories (2,613) (524) (2,136) (3,354) (2,326) (2,651)Cash generated from operations 1,353 1,827 3,805 This information is provided by RNS The company news service from the London Stock Exchange