NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
a.
|
Pointer Telocation Ltd. (“the
Company”) was incorporated in Israel and commenced operations in July 1991. The Company conducts its operations through two
main segments. Through its Cellocator segment, the Company designs, develops and produces leading mobile resource management products,
including asset management, fleet management, and security products, for sale to third party operators providing mobile resource
management services and to our MRM segment. Through its MRM segment, the Company acts as an operator by bundling its products
together with a range of services, including fleet management services, asset management services and stolen vehicle retrieval
services.
|
The
Company provides services, for the most part, in Israel, Argentina, Mexico, South Africa and Brazil, through its local subsidiaries
and affiliates. The Company sells its products worldwide through direct sell, its local subsidiaries and affiliates to independent
operators provide similar services in Latin America, Europe, India and other countries utilizing the Company’s technology and
operational know-how. The Company’s shares are traded on the NASDAQ Capital Market.
The
company recorded tax income in the amount of $9.2 million due to decrease in valuation allowance related to carry forward
losses of the company and other temporary differences that are more likely than not to be offset against future
income.
|
b.
|
On June
8, 2016 Pointer spun off its Israeli subsidiary, Shagrir Group Vehicle Services Ltd.,
through which Pointer carried out its road side assistance (RSA) activities and listed
Shagrir’s shares for trade on the Tel Aviv Stock Exchange. The results of Shagrir until
that date are included in Pointer’s results as discontinued operations. See also
Note 18.
|
|
c.
|
The Company
holds 93% of the share capital of Argentina SA’s (formerly: Tracsat S.A.) (“Pointer
Argentina”). Pointer Argentina is the operator of the Company’s systems and products
that provides fleet management and stolen vehicle recovery services in Buenos Aires,
Argentina.
|
|
d.
|
The Company
holds 100% of the share capital of Pointer Recuperation de Mexico S.A. de C.V. (“Pointer
Mexico”). After the company completed in 2015 the acquisition of Pointer Mexico
by acquiring the 26% of the issued share capital of Pointer Mexico that the company did
not previously own, from Pointer Recuperacion de Mexico, S. de R.L. de C.V. (the “Pointer
Mexico Sellers”), in consideration for the issuance of 81,081 of the company ordinary
shares to the Pointer Mexico Sellers.
|
Pointer
Mexico provides fleet management and stolen vehicle recovery services to its customers in Mexico as well as distributing the Company’s
products.
|
e.
|
In
August 2008 the Company incorporated a company in Brazil by the name of Pointer do Brasil Comercial S.A. (“Pointer Brazil”).
Pointer Brazil provides location, tracking and fleet management vehicles services to its customers in Brazil. As of October 13,
2013 Company held 48.8% of the share capital in Pointer Brazil.
|
In March
2014, Pointer Brazil changed its legal form from corporation to Limited Liability Company (LLC), and its trading name from Pointer
do Brasil Comercial S.A. to Pointer do Brasil Comercial Ltda., according to its article of association duly registered and properly
approved by its shareholders.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
In
July 2013, the Company incorporated a wholly-owned subsidiary in Brazil at the name of Pointer do Brasil Participações
Ltda. (“Pointer Brazil Holdings”).
On
October 14, 2013, the Company acquired the remaining 51.2% of the issued share capital of Pointer Brazil from Bracco do Brasil
Empreendimentos e Participações Ltda. (“Bracco”) through Pointer Brazil Holdings. Following the completion
of the transaction, the Company holds 100% of the issued share capital of Pointer Brazil.
In
May 2014, Pointer Brazil was merged with Pointer Brazil Holdings . As a result of this merger, The Company holds directly 100%
of the issued share capital of Pointer Brazil.
|
f.
|
In
October 2008, the Company established a wholly-owned subsidiary in the United States,
Pointer Telocation Inc.
|
|
g.
|
On
September 9, 2014, the Company acquired 100% interest in Global Telematics S.A. Proprietary
Limited (“Global Telematics”), a provider of commercial fleet management and
vehicle tracking solutions in South Africa.
|
On
October 2, 2017, the Company sold 2,519,544 ordinary shares of Pointer South Africa, representing approximately 12% of Pointer
South Africa’s issued and outstanding share capital as of the date thereof, to Ms. Preshnee Moodley, who serves on Pointer South
Africa’s Board of Directors, in exchange for her services. Following the consummation of the transaction, we now hold 88% of the
issued share capital of Pointer South Africa.
|
h.
|
In
May 2012, the Company established a wholly-owned subsidiary in India, Pointer Telocation
India Private Limited.
|
|
i.
|
On
October 6, 2016, a shareholders meeting of the Company approved a compensation Policy for the Company’s directors and officers.
The Compensation Policy includes, among other issues prescribed by the Israeli Companies Law, a framework for establishing the
terms of office and employment of the office holders, and guidelines with respect to the structure of the variable pay of office
holders. The Compensation Policy includes a compensation, bonus and benefits strategy for office holders which is designed in
order to reward performance, maintain a reasonable wage structure throughout the organization and to reinforce a culture in order
to promote the long-term success of the Company.
|
|
j.
|
On
October 7, 2016, the Brazilian subsidiary acquired 100% interest in Cielo Telecom Ltd.
(“Cielo”), a fleet management services company based in South Brazil.
|
The
acquisition-date fair value of the consideration transferred totaled to $ 8.5 million in cash.
The
acquisition was accounted for under the purchase method of accounting as determined by ASC Topic 805, “Business Combinations”.
Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values at the
date of acquisition.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
The
following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date:
Working capital, net
|
|
|
334
|
|
Property and equipment
|
|
|
1,239
|
|
Other intangible assets
|
|
|
2,100
|
|
Goodwill
|
|
|
6,068
|
|
Deferred taxes
|
|
|
(714
|
)
|
Payables for acquisition of investments in subsidiaries
|
|
|
(496
|
)
|
|
|
|
|
|
|
|
$
|
8,531
|
|
Unaudited
pro forma condensed results of operations:
The following
represents the unaudited pro forma condensed results of operations for the years ended December 31, 2015 and 2016, assuming that
the acquisitions of Cielo occurred on January 1, 2015. The pro forma information is not necessarily indicative of the results
of operations that would have actually occurred had the acquisitions been consummated on those dates, nor does it purport to represent
the results of operations for future periods.
|
|
Year ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
67,468
|
|
|
$
|
64,516
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Pointer shareholders’ from continuing operations
|
|
$
|
3,820
|
|
|
$
|
4,206
|
|
|
|
|
|
|
|
|
|
|
Basic income per share
|
|
$
|
0.49
|
|
|
$
|
0.55
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share
|
|
$
|
0.48
|
|
|
$
|
0.53
|
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
|
The
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States (“US GAAP”).
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant assumptions
are employed in estimates used in determining values of intangible assets, tax assets and tax liabilities, warranty costs and
stock-based compensation costs. Actual results could differ from those estimates.
|
b.
|
Financial
statements in U.S. dollars:
|
The
Company’s reporting currency is the US dollar.
The
majority of the revenues of the Company’s Cellocator business are generated in U.S. dollars (“dollar”) or linked to
the dollar. In addition, a substantial portion of the Company’s Cellocator business’ costs are incurred in dollars. The Company’s
management believes that the dollar is the primary currency of the economic environment of the Cellocator business and thus its
functional currency.
The
majority of the revenues of the Company’s MRM business are generated in Israeli NIS (“NIS”) or linked to the NIS. In
addition, a substantial portion of the Company’s MRM business’ costs are incurred in NIS. The Company’s management believes that
the NIS is the primary currency of the economic environment of the MRM business and thus its functional currency.
For
those subsidiaries whose functional currency has been determined to be their local currency (For Pointer Argentina- the Argentinean
peso; for Pointer Mexico- the Mexican peso; for Pointer Inc. the dollar; for Pointer do Brazil Comercial Ltda., for Pointer Brazil
Holdings and Cielo Telecom Ltda. the Brazilian Real), assets and liabilities are translated at year-end exchange rates and statement
of operations items are translated at average exchange rates prevailing during the year. Such translation adjustments are recorded
as a separate component, other comprehensive income (loss), in shareholders’ equity (deficiency).
Transactions
and balances of the Company and certain subsidiaries, which are denominated in other currencies, have been remeasured into dollars
in accordance with principles set forth in ASC 830, “Foreign Currency Matters”. Foreign currency assets and liabilities
are remeasured into U.S. dollars at the end-of-period exchange rates except for non-monetary assets and liabilities, which are
remeasured at historical exchange rates. Expenses are remeasured at the exchange rate in effect on the day the transaction occurred,
except for those expenses related to non-monetary assets and liabilities, which are remeasured at historical exchange rates. All
exchange gains and losses from the remeasurements mentioned above, are reflected in the statement of operations as financial expenses
or income, as appropriate.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
|
c.
|
Principles
of consolidation:
|
The
consolidated financial statements include the accounts of the Company and its subsidiaries.
Intercompany transactions and
balances including profits from intercompany sales not yet realized outside the Company have been eliminated upon
consolidation.
Changes
in the parent’s ownership interest in a subsidiary with no change of control are treated as equity transactions, rather than step
acquisitions or dilution gains or losses. Losses of partially owned consolidated subsidiaries shall be continued to be allocated
to the non-controlling interests even when their investment was already reduced to zero.
Cash
equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months
or less at the date acquired.
Inventories
are stated at the lower of cost or net realizable value. Cost is determined using the “moving average” cost method.
Inventory consists of raw materials, work in process and finished products. Inventory write-offs are provided to cover risks arising
from slow-moving items, technological obsolescence, excess inventories, and for market prices lower than cost. In 2017, 2016 and
2015, the Company and its subsidiaries wrote-off approximately net amount of $129, $147 and $113, respectively. The net write-offs
are included in cost of revenues.
|
f.
|
Property and equipment:
|
Property
and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over
the estimated useful lives of the assets at the following annual rates:
|
|
%
|
|
|
|
Installed products
|
|
20-33
|
Computers and electronic equipment
|
|
10 - 33 (mainly 33)
|
Office furniture and equipment
|
|
6 - 15
|
Motor vehicles
|
|
15 - 20 (mainly 20)
|
Network installation
|
|
10 - 33
|
Buildings
|
|
6.67
|
Leasehold improvements
|
|
Over the term of the lease, including the option term or the useful lives of the assets, whichever is shorter
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
Goodwill
reflects the excess of the purchase price of the acquired activities over the fair value of net assets acquired. Pursuant to ASC
350, “Intangibles - Goodwill and Other”, goodwill is not amortized but rather tested for impairment at least annually,
at the reporting unit level.
The
Company identified several reporting units based on the guidance of ASC 350. ASC 350 prescribes a two-phase process for
impairment testing of goodwill. The first phase screens for impairment, while the second phase (if necessary) measures
impairment.
Goodwill
impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. In such case, the
second phase is then performed, and the Company measures impairment by comparing the carrying amount of the reporting unit’s
goodwill to the implied fair value of that goodwill. An impairment loss is recognized in an amount equal to the
excess.
In
September 2011, the FASB amended the guidance on the annual testing of goodwill for impairment. The amended guidance will allow
companies to assess qualitative factors to determine if it is more likely than not that goodwill might be impaired and whether
it is necessary to perform the two-step goodwill impairment test required under current accounting standards. The company didn’t
apply the qualitative option.
In 2015, following the annual
goodwill impairment test in accordance with ASC 350 “Intangibles - Goodwill and Others”, the Company impaired the
goodwill attributed to Brazil at the amount of $ 758. These amounts were recorded in the 2015 Consolidated Statement of
Operation under the captions “Impairment of intangible and tangible assets”. The material assumptions used for the
income approach for 2015 were 5 years of projected net cash flows, a discount rate of 25% and a long-term growth rate of
7.1%. During 2017 and 2016 there was no impairment.
|
h.
|
Identifiable
intangible assets:
|
Intangible
assets consist of the following: a brand name, customers’ related intangibles, developed technology and acquired patents. Intangible
assets are amortized over their useful life using a method of amortization that reflects the pattern in which the economic benefits
of the intangible assets are consumed or otherwise used up. Intangible assets are stated at amortized cost.
The
customers’ related intangibles are amortized over a five- to nine-year period.
Backlog
is amortized over a three-year period.
Non-competition
agreement is amortized over a three-year period.
Brand
name is amortized over a ten-year period.
Customer
related intangibles are amortized based on the accelerated method. For customer related intangibles in respect with the Brazil
transaction during 2013 and the transaction during 2016, the Company used the straight line method, the differences from the accelerated
method were immaterial.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
The
other intangibles are amortized based on straight line method over the periods above mentioned.
In 2015,
following the annual goodwill impairment test in accordance with ASC 350 “Intangibles - Goodwill and Others”, the
Company impaired intangible assets attributed to Brazil at the amount of $ 159. These amounts were recorded in the 2015
Consolidated Statement of Operation under the captions “Impairment of intangible and tangible assets”. The material
assumptions used for the income approach for 2015 were 5 years of projected net cash flows, a discount rate of 25% and a
long-term growth rate of 7.1%. During 2017 and 2016 there was no impairment.
|
i.
|
Impairment
of long-lived assets:
|
The
Company’s long lived assets are reviewed for impairment in accordance with ASC 360-10-35, “Property, Plant, and Equipment-
Subsequent Measurement” whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets
to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
No
impairment losses were identified in 2017, 2016 and 2015.
|
j.
|
Provision
for warranty:
|
The
Company and its subsidiaries generally grant a one-year to three-year warranty for their products. The Company and its
subsidiaries estimate the costs that may be incurred under its basic limited warranty and records a liability in the amount
of such costs at the time which product revenue is recognized. Factors that affect the warranty liability include the number
of installed units, historical and anticipated rates of warranty claims and cost per claim. The Company and its subsidiaries
periodically assess the adequacy of its recorded warranty liabilities and adjust the amounts as necessary. Changes in the
Company’s and its subsidiaries’ product liabilities (which are included in other accounts payable and accrued expenses and
other long term liabilities’ captions in the Balance Sheet) during 2017 and 2016 are as follows:
|
|
Year ended
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Balance, beginning of the year
|
|
|
604
|
|
|
|
544
|
|
Warranties issued during the year
|
|
|
468
|
|
|
|
422
|
|
Settlements made during the year
|
|
|
(145
|
)
|
|
|
(182
|
)
|
Expirations
|
|
|
(360
|
)
|
|
|
(180
|
)
|
|
|
|
|
|
|
|
|
|
Balance end of year
|
|
|
567
|
|
|
|
604
|
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
The
Company and its subsidiaries generate revenues from the provision of services, subscriber fees and sales of systems and
products, mainly in respect of asset management services, fleet management services, stolen vehicle recovery services and
other value added services. To a lesser extent, revenues are also derived from technical support services. The Company and
its subsidiaries sell the systems primarily through their direct sales force and indirectly through resellers. Sales
consummated by the Company’s sales forces and sales to resellers are considered sales to end-users. Revenues from the sale of
systems and products are recognized in accordance with Staff Accounting Bulletin (“SAB”) No. 104, “Revenue
Recognition” (“SAB No. 104”), when delivery has occurred, persuasive evidence of an agreement exists, the
vendor’s fee is fixed or determinable, no further obligation exists and collectability is reasonably assured. Service
revenues including subscriber fees are recognized as services are performed, over the term of the agreement.
Revenues
from the sale of systems and products are recognized in accordance with Staff Accounting Bulletin (“SAB”) No. 104,
“Revenue Recognition” (“SAB No. 104”), when delivery has occurred, persuasive evidence of an agreement
exists, the vendor’s fee is fixed or determinable, no further obligation exists and collectability is reasonably assured.
Service revenues including subscriber fees are recognized as services are performed, over the term of the
agreement.
Deferred
revenue includes amounts received under maintenance and support contracts, and amounts received from customers but not yet recognized
as revenues.
In
accordance with ASC 605-25, “Multiple-Element Arrangements”, revenue from certain arrangements may include multiple
elements within a single contract. The Company’s accounting policy complies with the requirements set forth in ASC 605-25, relating
to the separation of multiple deliverables into individual accounting units with determinable fair values. The Company considers
the sale of products and subscriber fees to be separate units of accounting.
When
a sales arrangement contains multiple elements, such as hardware and services, the Company allocates revenue to each element based
on a selling price hierarchy. The selling price for each deliverable is based on its vendor specific objective evidence (“VSOE”),
if available, third party evidence (“TPE”) if VSOE is not available, or estimated selling price (“ESP”) if
neither VSOE nor TPE is available.
The
company uses ESP to allocate the elements.
Revenues
generated from technical support services, installation and de-installation are recognized when such services are rendered.
Generally,
the Company does not grant rights of return. The Company follows ASC 605-15-25 “sales of product when right of return exists”.
Based on the Company’s experience, no provision for returns was recorded.
|
l.
|
Research
and development costs:
|
Research
and development costs are charged to expenses as incurred.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
Advertising
expenses are charged to the statement of operations as incurred. Advertising expenses for the years ended December 31, 2017, 2016
and 2015 were $1,459, $1,337 and $1,214, respectively.
The
Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” This ASC prescribes the use of the liability
method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to
their estimated realizable value.
The
Company adopted an amendment to ASC 740, “Income Taxes”. The amendment clarifies the accounting for uncertainties in
income taxes by establishing minimum standards for the recognition and measurement of tax positions taken or expected to be taken
in a tax return. Under the requirements of ASC 740, the Company must review all of its tax positions and make a determination
as to whether its position is more-likely-than-not to be sustained upon examination by regulatory authorities. If a tax position
meets the more-likely-than-not standard, then the related tax benefit is measured based on a cumulative probability analysis of
the amount that is more-likely-than-not to be realized upon ultimate settlement or disposition of the underlying issue.
In the years
ended December 31, 2017, 2016 and 2015, the Company recorded tax expenses (income) in connection to uncertainties in income taxes
of $ 127, $ 0 and $ 0 respectively.
In
November 2015, the FASB issued Accounting Standards Update No. 2015-17 (ASU 2015-17) “Income Taxes (Topic 740): Balance
Sheet Classification of Deferred Taxes.” ASU 2015-17 simplifies the presentation of deferred income taxes by eliminating
the separate classification of deferred income tax liabilities and assets into current and noncurrent amounts in the consolidated
balance sheet statement of financial position. The amendments in the update require that all deferred tax liabilities and assets
be classified as noncurrent in the consolidated balance sheet. The amendments in this update are effective for annual periods
beginning after December 15, 2016, and interim periods therein and may be applied either prospectively or retrospectively
to all periods presented. The Company had early adopted this standard in the fourth quarter of 2015 on a retrospective basis.
Prior years have been retrospectively adjusted.
|
o.
|
Basic
and diluted net earnings per share:
|
Basic
and diluted net earnings per share are computed based on the weighted average number of ordinary shares outstanding during the
year. Diluted net earnings (loss) per share further include the dilutive effect of stock options outstanding during the year,
in accordance with ASC 260, “Earnings Per Share”. Part of the Company’s outstanding stock options and warrants has been
excluded from the calculation of the diluted earnings (loss) per share because such securities are anti-dilutive. The total weighted
average number of pointer shares related to the outstanding options and warrants excluded from the calculations of diluted earnings
(loss) per share was 20,125, 202,000 and 64,000 for the years ended December 31, 2017, 2016 and 2015, respectively.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
|
p.
|
Accounting
for stock-based compensation:
|
The
Company applies ASC 718, “Compensation - Stock Compensation”. In accordance with ASC 718, all grants of employee
equity based stock options are recognized in the financial statements based on their grant date fair values. The fair value
of graded vesting
options, as measured at the date of grant, is charged to expenses, based on the accelerated
attribution method over the requisite service period of each of the awards, net of estimated forfeitures.
Effective as of January 1,
2017, the Company adopted Accounting Standards Update 2016-09, “Compensation-Stock Compensation (Topic 718)” (“ASU2016-09”)
on a modified, retrospective basis. ASU 2016-09 permits entities to make an accounting policy election related to how forfeitures
will impact the recognition of compensation cost for stock - based compensation: to estimate the total number of awards for which
the requisite service period will not be rendered or to account for forfeitures as they occur. Upon adoption of ASU 2016-09, the
Company elected to change its accounting policy to account for forfeitures as they occur. Upon the adoption in the first quarter
of 2017, the effect of the adoption on the Company’s retained earnings was immaterial.
During
the years ended December 31, 2017, 2016 and 2015, the Company recognized stock-based compensation expenses related to employee
stock options in the amounts of $380, $320 and $309, respectively.
According
to ASC 718, a change in any of the terms or conditions of the Company’s stock options is accounted for as a modification. Therefore,
if the terms of an award are modified, the Company calculates incremental compensation costs as the excess of the fair value of
the modified option over the fair value of the original option immediately before its terms are modified, measured based on the
share price and other pertinent factors existing at the modification date. For vested options, the Company recognizes any incremental
compensation cost immediately in the period the modification occurs, whereas for unvested options, the Company recognizes, over
the new requisite service period, any incremental compensation cost due to the modification and any remaining unrecognized compensation
cost for the original award over its term.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
|
q.
|
Data
related to options to purchase the Company shares:
|
|
1.
|
The
fair value of the Company’s stock options granted to employees and directors for the
years ended December 31, 2017, 2016 and 2015 was estimated using the Black-Scholes-Merton
option-pricing model, with the following weighted average assumptions:
|
|
|
Year ended
December 31,
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
Risk free interest rate
|
|
0.86%-1.39%
|
|
0.8%-1.00%
|
|
1.29%-1.62%
|
Dividend yield
|
|
0%
|
|
0%
|
|
0%
|
Expected volatility
|
|
52.25%-57.73%
|
|
55.81%-60.84%
|
|
51.47%-49.78%
|
Expected term (in years)
|
|
4.00-5.50
|
|
4.00-5.50
|
|
4.00-5.50
|
Forfeiture rate
|
|
-
|
|
2%
|
|
2%
|
The
Black-Scholes-Merton option-pricing model requires a number of assumptions, of which the most significant are expected stock
price volatility and the expected option term. Expected volatility was calculated based upon actual historical stock price
movements. The expected option term represents the period that the Company’s stock options are expected to be outstanding and
was determined for plain vanilla options, based on the simplified method permitted by SAB 107 and extended by SAB 110 as the
average of the vesting period and the contractual term.
The
Company adopted SAB 110 and continues to apply the simplified method until enough historical experience is available to provide
a reasonable estimate of the expected term for stock option grants. In a few limited cases the Company did not use the simplified
method in measuring the fair value of modified awards, either when the options were deeply out of the money immediately before
the modification or when the Company accelerated the vesting and extended the exercise period after an employee’s resignation.
Since in both instances the entire remaining contractual term of the options was relatively short, we assumed that the expected
life to be the entire remaining contractual term.
The
risk-free interest rate is based on the yield from U.S. Treasury bill with accordance to the expected term of the options.
The
Company has historically not paid dividends and has no foreseeable plans to pay dividends and therefore uses an expected dividend
yield of zero in the option pricing model. The Company is required to estimate forfeitures at the time of grant and revise those
estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate
pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
On
October 2, 2017, the Company sold 2,519,544 ordinary shares of Pointer South Africa, representing approximately 12% of Pointer
South Africa’s issued and outstanding share capital as of the date thereof, to Ms. Preshnee Moodley, who serves on Pointer South
Africa’s Board of Directors, in exchange to its services.
The
liability of the Company and its subsidiaries in Israel for severance pay is calculated pursuant to Israel’s Severance Pay Law
based on the most recent salary of the employees multiplied by the number of years of employment as of balance sheet date and
are presented on an undiscounted basis (the “Shut Down Method”). Employees are entitled to one month’s salary for each
year of employment, or a portion thereof. The liability for the Company and its subsidiaries in Israel is fully provided by monthly
deposits with insurance policies and by accrual. The value of these policies is recorded as an asset in the Company’s balance
sheet.
The
deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to Israel’s Severance Pay Law or labor agreements.
The value of the deposited funds is based on the cash surrendered value of these policies, and includes profits or losses accumulated
to balance sheet date.
Some
of the company’s employees are subject to Section 14 of the Severance Pay Law and the General Approval of the Labor Minister
dated June 30, 1998, issued in accordance to the said Section 14, mandating that upon termination of such employees’
employment, all the amounts accrued in their insurance policies shall be released to them. The severance pay liabilities and
deposits covered by these plans are not reflected in the balance sheet as the severance pay risks have been irrevocably
transferred to the severance funds.
Severance
pay expenses for the years ended December 31, 2017, 2016 and 2015 were $399, $303 and $292, respectively.
|
s.
|
Concentrations of credit risk:
|
Financial
instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of
cash and cash equivalents, trade receivables, trade payables and derivatives.
The
Company’s cash and cash equivalents are invested primarily in deposits with major banks worldwide, mainly in Israel. Generally,
these deposits may be redeemed upon demand and, therefore, bear low risk. Management believes that the financial institutions
that hold the Company’s investments have a high credit rating.
The
Company’s trade receivables include amounts billed to clients located mainly in Israel, Latin America and Europe. Management periodically
evaluates the collectability of its trade receivables to reflect the amounts estimated to be collectible. An allowance is determined
in respect of specific debts whose collection, in management’s opinion, is doubtful. In 2017, 2016 and 2015, the Company recorded
expenses in respect of such debts in the amount of $802, $511 and $98, respectively. As for major customers, see Note 17d.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
Changes
in the allowance for doubtful accounts during 2017 and 2016 are as follows:
|
|
Year ended
December 31,
|
|
|
|
2017
|
|
|
201
6
|
|
|
|
|
|
|
|
|
Balance at beginning of the year
|
|
|
1,281
|
|
|
|
1,053
|
|
|
|
|
|
|
|
|
|
|
Deductions during the year
|
|
|
(992
|
)
|
|
|
(339
|
)
|
Charged to expenses
|
|
|
802
|
|
|
|
511
|
|
Foreign currency translation adjustment
|
|
|
36
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
1,127
|
|
|
|
1,281
|
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
|
t.
|
Fair
value measurements:
|
The
following methods and assumptions were used by the Company and its subsidiaries in estimating fair value disclosures for financial
instruments:
The
carrying amounts reported in the balance sheet for cash and cash equivalents, trade receivables, other accounts receivable, short-term
bank credit, trade payables and other accounts payable approximate their fair values due to the short-term maturities of such
instruments.
Amounts
recorded for long-term loans approximate fair values. The fair value was estimated using discounted cash flow analysis, based
on the Company’s incremental borrowing rates for similar type of borrowing arrangements.
The
Company accounts for certain assets and liabilities at fair value under ASC 820, “Fair Value Measurements and Disclosures”.
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined
based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions,
ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring
fair value:
|
Level 1
-
|
Observable inputs that
reflect quoted prices (unadjusted) for identical assets or liabilities in active markets;
|
|
Level 2 -
|
Significant other observable
inputs based on market data obtained from sources independent of the reporting entity;
|
|
Level 3 -
|
Unobservable inputs which are
supported by little or no market activity (for example cash flow modeling inputs based on assumptions).
|
The
fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value. The Company categorized each of its fair value measurements in one of these three levels of hierarchy.
Assets
and Liabilities that are measured at Fair Value on a Nonrecurring Basis subsequent to their initial recognition.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
During
2015, such measurements of fair value related solely to an impairment loss of goodwill reducing its carrying amount in $758. The
Company used an income approach for measuring the fair value of the goodwill. See Note 2g and 2i for significant assumptions.
As the fair value was measured using significant unobservable assumptions, the goodwill was classified as level 3 in ASC 820 fair
value hierarchy.
During
2017 and 2016, there were no impairment losses regarding goodwill.
|
u.
|
Derivatives
and hedging activities:
|
ASC
815, “Derivatives and Hedging” requires the Company to recognize all of its derivative instruments as either assets
or liabilities on the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative
instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type
of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must
designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge or a hedge of a
net investment in a foreign operation.
For
derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected
future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument
is reported as a component of accumulated other comprehensive income and reclassified into earnings in the line item associated
with the hedged transaction in the period or periods during which the hedged transaction affects earnings. The remaining gain
or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged
item, if any, is recognized immediately in financial income/expense in the statement of operations.
The
Company recognizes investment in equity affiliates under ASC 323, “Investments – Equity Method and Joint Ventures”.
The Company recognizes its proportionate share of the income of equity affiliates. Losses of equity affiliates are recognized
to the extent of our investment, advances, financial guarantees and other commitments to provide financial support to the investee.
Any losses in excess of this amount are deferred and reduce the amount of future earnings of the equity investee recognized by
the Company.
|
w.
|
Discontinued operations
|
Under ASC
205, “Presentation of Financial Statements - Discontinued Operation” when a component of an entity, as defined in ASC
205, has been disposed of or is classified as held for sale, the results of its operations, including the gain or loss on its disposal
are classified as discontinued operations and the assets and liabilities of such component are classified as assets and liabilities
attributed to discontinued operations; that is, provided that the operations, assets and liabilities and cash flows of the component
have been eliminated from the Company’s consolidated operations and the Company will no longer have any significant continuing
involvement in the operations of the component.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
|
x.
|
Accounting
Standards still not effective:
|
In
May 2014, the FASB issued Accounting Standard Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). The core
principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. The ASU is effective for the Company in 2018 using either of two methods: (i) retrospective application of ASU 2014-09
to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09;
or (ii) retrospective application of ASU 2014-09 with the cumulative effect of initially applying ASU 2014-09 recognized at the
date of initial application and providing certain additional disclosures as defined per ASU 2014-09 (“Modified Retrospective
Adoption Transition Method”).
The
Company has established an implementation team to analyze the potential impact the standard will have on its consolidated financial
statements and related disclosures as well as its business processes, systems and controls. This includes reviewing revenue contracts
across all revenue streams and evaluating potential differences that would result from applying the requirements under the standard.
The Company will adopt the new standard on January 1, 2018 using the Modified Retrospective Adoption Transition Method.
The
Company has completed its evaluation of the Standard and expects a change relating to the application of the legacy contingent
revenue “cash cap” guidance in ASC 605-25, Revenue Recognition – Multiple-Element Arrangements, that limited
the amount of revenue recognized at contract inception. In addition, the Standard requires the deferral and amortization of “incremental”
costs incurred to obtain a contract. The primary contract acquisition cost for the Company are sales commissions. Under current
GAAP, the Company expenses sales commissions as incurred while under the Standard such costs will be classified as a contract asset
and amortized over a period that approximates the timing of revenue recognition on the underlying contracts.
Upon initial
application the company will record deferred revenues, assets and a cumulative effect to retained earnings in an immaterial amounts
on the opening balance sheet at January 1, 2018.
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). The new guidance requires lessees to
recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more
than 12 months. ASU 2016-02 also will require disclosures designed to give financial statement users information on the amount,
timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for annual reporting periods beginning after
December 15, 2018 including interim periods within those fiscal years, but early adoption is permitted. The ASU requires a modified
retrospective transition approach and provides certain optional transition relief. The Company is currently evaluating when it
will adopt this new standard and the expected impact on its consolidated financial statements and related disclosures.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
(Cont.)
|
In
August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments (“ASU 2016-15”). This new standard clarifies certain aspects of the statement of cash flows, including the
classification of debt prepayment or debt extinguishment costs or other debt instruments with coupon interest rates that are insignificant
in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination,
proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions
received from equity method investees and beneficial interests in securitization transactions. This new standard also clarifies
that an entity should determine each separately identifiable source of use within the cash receipts and payments on the basis
of the nature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class
of cash flows and cannot be separated by source or use, the appropriate classification should depend on the activity that is likely
to be the predominant source or use of cash flows for the item. ASU 2016-15 will generally be applied retrospectively and is effective
for annual periods beginning after December 15, 2017. The Company does not expect that this new guidance will have a material
impact on its consolidated financial statements.
In
November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which
requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash
equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18
will be effective for the Company in the first quarter of 2018 and early adoption is permitted. The Company does not expect that
this new guidance will have a material impact on its consolidated financial statements.
In
January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill
Impairment (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 of the goodwill impairment test, which requires the calculation
of the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as
if that reporting unit had been acquired in a business combination. Instead, an entity will compare the fair value of a reporting
unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting
unit’s fair value. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after
December 15, 2019. The Company is currently evaluating the expected impact of the standard on its consolidated financial statements.
In August
2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,
which expands the activities that qualify for hedge accounting and simplifies the rules for reporting hedging transactions. The
standard is effective for the Company beginning January 1, 2019. Early adoption is permitted. The Company does not expect that
this new guidance will have a material impact on its consolidated financial statements.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 3:-
|
OTHER ACCOUNTS RECEIVABLE AND
PREPAID EXPENSES
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Government authorities
|
|
|
517
|
|
|
|
583
|
|
Employees
|
|
|
30
|
|
|
|
35
|
|
Prepaid expenses
|
|
|
1,715
|
|
|
|
1,677
|
|
Others
|
|
|
603
|
|
|
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,865
|
|
|
|
2,504
|
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
3,621
|
|
|
|
2,510
|
|
Work in process
|
|
|
149
|
|
|
|
89
|
|
Finished goods
|
|
|
2,781
|
|
|
|
2,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,551
|
|
|
|
5,242
|
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 5:-
|
PR
O
PERTY
AND EQUIPMENT
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installed products
|
|
|
9,771
|
|
|
|
9,323
|
|
Computers and electronic equipment
|
|
|
7,353
|
|
|
|
5,550
|
|
Office furniture and equipment
|
|
|
1,397
|
|
|
|
1,205
|
|
Motor vehicles
|
|
|
349
|
|
|
|
339
|
|
Network installation
|
|
|
4,211
|
|
|
|
3,839
|
|
Leasehold improvements
|
|
|
778
|
|
|
|
670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,859
|
|
|
|
20,926
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installed products
|
|
|
7,061
|
|
|
|
5,912
|
|
Computers and electronic equipment
|
|
|
4,768
|
|
|
|
3,981
|
|
Office furniture and equipment
|
|
|
1,290
|
|
|
|
994
|
|
Motor vehicles
|
|
|
237
|
|
|
|
175
|
|
Network installation
|
|
|
4,193
|
|
|
|
3,826
|
|
Leasehold improvements
|
|
|
462
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,011
|
|
|
|
15,312
|
|
|
|
|
|
|
|
|
|
|
Depreciated cost
|
|
|
5,848
|
|
|
|
5,614
|
|
|
b.
|
Depreciation
expenses for the years ended December 31, 2017, 2016 and 2015 were $2,461, $2,133
and $1,674, respectively.
|
|
c.
|
No
Impairment losses recorded for the years ended December 31, 2017, 2016 and 2015.
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 6:-
|
OTHER INTANGIBLE ASSETS, NET
|
|
a.
|
Other
intangible assets, net:
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Cost:
|
|
|
|
|
|
|
|
|
Patents
|
|
|
639
|
|
|
|
639
|
|
Developed technology
|
|
|
4,978
|
|
|
|
4,978
|
|
Customer related intangible
|
|
|
8,114
|
|
|
|
7,891
|
|
Others
|
|
|
874
|
|
|
|
874
|
|
Brand name
|
|
|
2,816
|
|
|
|
2,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,421
|
|
|
|
17,175
|
|
Accumulated amortization:
|
|
|
|
|
|
|
|
|
Patents
|
|
|
639
|
|
|
|
639
|
|
Developed technology (see note 2h)
|
|
|
4,945
|
|
|
|
4,901
|
|
Customer related intangible
|
|
|
6,853
|
|
|
|
6,534
|
|
Others
|
|
|
696
|
|
|
|
650
|
|
Brand name
|
|
|
2,353
|
|
|
|
2,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,486
|
|
|
|
14,997
|
|
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
|
1,935
|
|
|
|
2,178
|
|
|
b.
|
Amortization
expenses for the years ended December 31, 2017, 2016 and 2015 were $463, $473 and
$538, respectively.
|
|
c.
|
Estimated
amortization expenses for the years ending:
|
December 31,
|
|
|
|
|
|
|
|
2018
|
|
|
487
|
|
2019
|
|
|
399
|
|
2020
|
|
|
368
|
|
2021
|
|
|
343
|
|
2022 and after
|
|
|
338
|
|
|
|
|
|
|
|
|
|
1,935
|
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
The
changes in the carrying amount of goodwill for the years ended December 31, 2017 and 2016 are as follows:
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Goodwill, beginning of the year
|
|
|
38,107
|
|
|
|
31,388
|
|
Additions in respect of acquisitions
|
|
|
-
|
|
|
|
6,070
|
|
Foreign currency translation adjustments
|
|
|
2,903
|
|
|
|
649
|
|
|
|
|
|
|
|
|
|
|
Goodwill, end of year
|
|
|
41,010
|
|
|
|
38,107
|
|
The
carrying value of goodwill by reporting unit as of 31 December, 2017 is as follows:
Reporting unit
|
|
2017
|
|
|
|
|
|
Cellocator
|
|
|
2,534
|
|
SVR (*)
|
|
|
30,245
|
|
Pointer brazil
|
|
|
2,338
|
|
Cielo brazil
|
|
|
5,893
|
|
|
|
|
|
|
|
|
|
41,010
|
|
The
carrying value of goodwill by reporting unit as of 31 December 2016 is as follows:
Reporting unit
|
|
2016
|
|
|
|
|
|
Cellocator
|
|
|
2,534
|
|
SVR (*)
|
|
|
27,219
|
|
Pointer brazil
|
|
|
2,373
|
|
Cielo brazil
|
|
|
5,981
|
|
|
|
|
|
|
|
|
|
38,107
|
|
(*)
SVR in Israel.
The
material assumptions used for the income approach for 2017 were:
|
|
Cellocator
|
|
|
SVR
|
|
|
Pointer brazil
|
|
|
Cielo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
16
|
%
|
|
|
15
|
%
|
|
|
21
|
%
|
|
|
21
|
%
|
Growth rate
|
|
|
3
|
%
|
|
|
2
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
Years of projected cash flows
|
|
|
5
|
|
|
|
5
|
|
|
|
5
|
|
|
|
5
|
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 8:-
|
SHORT-TERM BANK CREDIT AND CURRENT
MATURITIES OF LONG-TERM LOANS FROM BANKS, SHAREHOLDERS AND OTHERS
|
Classified
by currency, linkage terms and annual interest rates, the credit and loans are as follows:
|
|
Interest rate
|
|
December 31,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
|
2016
|
|
|
|
%
|
|
|
|
|
|
|
Current maturities of long-term loans from banks, shareholders and others:
|
|
|
|
|
|
|
|
|
|
|
|
|
In, or linked to Dollars
|
|
Libor+2%
|
|
Libor+2%
|
|
|
4,856
|
|
|
|
4,497
|
|
In other currencies
|
|
10%-17%
|
|
10%-17%
|
|
|
245
|
|
|
|
339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,101
|
|
|
|
4,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unutilized credit lines
|
|
|
|
|
|
|
10,954
|
|
|
|
8,714
|
|
|
NOTE 9:-
|
OTHER ACCOUNTS PAYABLE AND ACCRUED
EXPENSES
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Employees and payroll accruals
|
|
|
4,260
|
|
|
|
3,477
|
|
Government authorities
|
|
|
1,858
|
|
|
|
817
|
|
Provision for warranty
|
|
|
369
|
|
|
|
391
|
|
Accrued expenses
|
|
|
2,561
|
|
|
|
2,100
|
|
Related party
|
|
|
53
|
|
|
|
53
|
|
Others
|
|
|
16
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,117
|
|
|
|
6,839
|
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 10:-
|
LONG-TERM LOANS FROM BANKS
|
|
|
Interest rate
|
|
December 31,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
|
2016
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In, or linked to Dollars (see c below )
|
|
3.71%
|
|
3.71%
|
|
|
9,871
|
|
|
|
14,356
|
|
In other currencies
|
|
10%-17%
|
|
10%-17%
|
|
|
245
|
|
|
|
662
|
|
|
|
|
|
|
|
|
10,116
|
|
|
|
15,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less - current maturities
|
|
|
|
|
|
|
5,101
|
|
|
|
4,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,015
|
|
|
|
10,182
|
|
|
b.
|
As
of December 31, 2017, the aggregate annual maturities of the long-term loans are as follows:
|
2018 (current maturities)
|
|
|
5,101
|
|
2019
|
|
|
2,341
|
|
2020
|
|
|
1,506
|
|
2021 and thereafter
|
|
|
1,168
|
|
|
|
|
|
|
|
|
|
10,116
|
|
|
c.
|
In respect of the bank loans provided to the Company for the purpose of funding the the acquisition of
Pointer Brazil (see note 1e), the acquisition of Cielo Telecom Ltda. and utilize of credit facilities,
the
Company is required to meet certain financial covenants as follows:
|
|
1.
|
The
ratio of the shareholders equity to the total consolidated assets will not be less than
20% and the shareholders equity will not be less than $ 20,000, starting December
31, 2007.
|
|
2.
|
The
ratio of the Company and its subsidiaries’ debt (debt to banks, convertible debenture
and loans from others that are not subordinated to the bank less cash) to the annual
EBITDA will not exceed 4 in 2010 and thereafter.
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 10:-
|
LONG-TERM LOANS FROM BANKS (Cont.)
|
|
3.
|
The
ratio of Pointer Telocation Ltd.’s debt (debt to banks, convertible debenture and loans
from others was not subordinated to the bank less cash) to the annual EBITDA will not
exceed 4.2 in 2013-2014, 3.5 in 2015, 3 in 2016 and 2.5 in 2017 and thereafter.
|
As
of December 31, 2017 the Company is in compliance with the financial covenants of its bank loans.
|
NOTE 11:-
|
DEFERRED TAXES AND OTHER LONG-TERM
LIABILITIES
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Provision for warranty
|
|
|
199
|
|
|
|
213
|
|
Deferred tax
|
|
|
540
|
|
|
|
666
|
|
Deferred revenues
|
|
|
99
|
|
|
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
838
|
|
|
|
976
|
|
|
NOTE 12:-
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
As
collateral for its liabilities, the Company has recorded floating charges on all of its assets, including the intellectual property
and equipment, in favor of banks.
|
The
Company obtained bank guarantees in the amount of $407 in favor of its lessor, customs
and customers.
|
The
Company has undertaken to pay royalties to the BIRD Foundation (“BIRD”), at the rate of 5% on sales proceeds of products
developed with the participation of BIRD up to the amount received, linked to the U.S. dollar. The contingent obligation as of
December 31, 2017 is $ 2,444. No royalties were accrued or paid during 2017, 2016 and 2015.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 12:-
|
COMMITMENTS AND CONTINGENT LIABILITIES
(Cont.)
|
The
Company and its subsidiaries have leased offices, motor vehicles and locations for periods through 2020. Minimum annual rental
payments under non-cancelable operating leases are as follows:
2018
|
|
|
2,367
|
|
2019
|
|
|
1,848
|
|
2020
|
|
|
504
|
|
2021
|
|
|
271
|
|
|
|
|
|
|
|
|
|
4,990
|
|
Rent
expenses for the years ended December 31, 2017, 2016 and 2015, were $2,325, $2,327 and $2,380, respectively.
|
1.
|
As
of December 31, 2017, several claims were filed against the Company, mainly by customers.
The claims are in an amount aggregating to approximately $46. The substance of the claims
is the malfunction of the Company’s products, which occurred during the ordinary course
of business. The Company is defending this litigation at court and has recorded a provision
of $20.
|
|
2.
|
In
August 2014, Pointer Brazil received a notification of lack of payments of $515 of VAT
tax (Brazilian ICMS tax) plus $2,161 of interest and penalty totaling $2,676 of infraction,
as of December 31, 2017. Company is defending this litigation at court and made a provision
of $79; The total timeframe of litigation is up to 14 years.
|
|
3.
|
In
July 2015, the company received a tax deficiency notice against Pointer Brazil, pursuant to which Pointer or Pointer Brazil is
required to pay an aggregate amount of approximately US$12.8 million. The claim is based on the argument that the services provided
by Pointer Brazil should be classified as “Telecommunication Services”, and therefore subject to the State Value Added
Tax. The Company based on the opinion of its legal counsel, in the opinion that no material costs will arise in respect to
these claims and did not make any provision once this issue has two precedents that won the same type of litigation.
|
|
1.
|
The Company
and DBSI Investment Ltd. (“DBSI”), an equity owner in the Company (see Note
16), have entered into a management services agreement pursuant to which DBSI shall provide
management services in consideration of annual management fees of $180 for a period of
three years commencing on August 1, 2017.
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 12:-
|
COMMITMENTS AND CONTINGENT LIABILITIES
(Cont.)
|
|
2.
|
Under
the credit facility from the Bank, the Company are required to meet financial covenants
(see Note 10c).
|
Ordinary
shares confer upon their holders voting rights, the right to receive cash dividends and the right to participate in the distribution
of excess assets upon liquidation of the Company.
|
b.
|
Issued
and outstanding share capital:
|
On
March 9 2014, the Company completed a round of financing for the aggregate amount of $ 10.44 million, in consideration for
1.13 million of the Company’s ordinary shares at a price per share of $ 9.25.
|
1.
|
In
November 2003 the Company adopted an Employee Share Option Plan (2003) (the “2003
Plan”). The Board of Directors of the Company approves, from time to
time, increases to the number of shares reserved under the 2003 Plan. To date, the
options under the 2003 Plan are and have been granted in accordance with Section 102
to the Israeli Income Tax Ordinance in the Capital Gains Track, all subject to the provisions
of the Israeli Income Tax Ordinance. The grant of options is subject to the approval
of the Board of Directors of the Company. The exercise price of the options shall be
determined by the Board of Directors in its discretion, provided that the price per share
is not less than the nominal value of each share. The options usually vest over
a period of four years and are valid for a period of five years from the date of grant.
The 2003 Plan terminated at the end of November 2013.
|
|
2.
|
On
November 30, 2011, the Board of Directors approved an amendment to the 2003 Plan whereby
in the event a cash dividend is paid out to the Company’s shareholders, the Board of
Directors may adjust the exercise price of any options granted prior to the record date
of the dividend distribution but not exercised as of such date.
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
3.
|
In
December 2013 the Company adopted an Employee Share Option Plan (2013) (the “2013
Plan”). The Board of Directors of the Company approved 376,712 of shares
reserved under the 2013 Plan. To date, the options under the 2013 Plan are granted
in accordance with Section 102 to the Israeli Income Tax Ordinance in the Capital Gains
Track, all subject to the provisions of the Israeli Income Tax Ordinance. The grant
of options is subject to the approval of the Board of Directors of the Company. The exercise
price of the options shall be determined by the Board of Directors in its discretion,
provided that the price per share is not less than the nominal value of each share, or
to the extent required pursuant to applicable law or to qualify for favorable tax treatment,
not less than 100% of the closing price of the share on the market on the date of grant
or average of the closing price within a specific time frame prior to the grant as determined
by the Board of Directors or a committee of the Board of Directors. Generally, options
vest over a period of four years are valid for a period of seven years from the date
of grant.
|
|
4.
|
A
summary of employee option activity under the Company’s Stock Option Plans and RSU’s
as of December 31, 2017 and changes during the year ended December 31, 2017 are
as follows:
|
|
|
Number of
options
|
|
|
Weighted-
average
exercise
price
|
|
|
Weighted-
average
remaining
contractual
term
(in years)
|
|
|
Aggregate
intrinsic
value (in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2017
|
|
|
556,134
|
|
|
$
|
5.15
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
21,500
|
|
|
$
|
0.87
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(185,675
|
)
|
|
$
|
2.10
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(52,500
|
)
|
|
$
|
5.79
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
|
339,459
|
|
|
$
|
4.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2017
|
|
|
131,509
|
|
|
$
|
3.49
|
|
|
|
2.79
|
|
|
$
|
1,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2017
|
|
|
335,300
|
|
|
$
|
4.67
|
|
|
|
4.44
|
|
|
$
|
1,566
|
|
The
weighted-average grant-date fair value of options granted during the years ended December 31, 2017 and 2016 was $ 7.8
and $ 5.9, respectively. The aggregate intrinsic value in the table above represents the total intrinsic value (the difference
between the Company’s closing stock price on the last trading day of the fourth quarter of fiscal 2017 and the exercise price,
multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised
their options on December 31, 2017. This amount changes based on the fair market value of the Company’s stock.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
As
of December 31, 2017, there was approximately $358 of total unrecognized compensation costs related to non-vested share-based
compensation arrangements granted under the Company’s stock option plans.
That
cost is expected to be recognized over a weighted-average period of 1.8 years. Total grant-date fair value of options that vested
during the year ended December 31, 2017 was approximately $ 278.
|
5.
|
The
following table summarizes information relating to employees’ stock options and RSU’s
outstanding as of December 31, 2017, according to exercise prices:
|
Options outstanding
|
|
|
Options exercisable
|
|
Number
outstanding at
December 31,
2017
|
|
|
Weighted
average
remaining
contractual life
|
|
|
Weighted
average
exercise
price
|
|
|
Number
exercisable at
December 31,
2017
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
Years
|
|
|
|
|
|
|
|
|
|
|
|
62,384
|
|
|
|
0.7
|
|
|
$
|
1.17
|
|
|
|
62,384
|
|
|
$
|
1.17
|
|
|
10,000
|
|
|
|
0.52
|
|
|
$
|
3.38
|
|
|
|
10,000
|
|
|
$
|
3.38
|
|
|
4,575
|
|
|
|
3.31
|
|
|
$
|
0.87
|
|
|
|
-
|
|
|
$
|
0.87
|
|
|
28,500
|
|
|
|
4.16
|
|
|
$
|
6.14
|
|
|
|
6,000
|
|
|
$
|
6.14
|
|
|
212,500
|
|
|
|
5.52
|
|
|
$
|
5.94
|
|
|
|
53,125
|
|
|
$
|
5.94
|
|
|
21,500
|
|
|
|
6.32
|
|
|
$
|
0.87
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
339,459
|
|
|
|
4.39
|
|
|
$
|
4.61
|
|
|
|
131,509
|
|
|
$
|
3.49
|
|
|
6.
|
In
January 2011, the Board of Directors appointed the Company’s new Chief Executive Officer
(CEO) effective as of February 1, 2011. Under the terms of his employment, the new CEO
was granted 246,984 options at an exercise price of $7.00, in accordance with 2003 option
plan, which will vest over a three year period, according to the vesting dates as stipulated
in the employment agreement, commencing upon the effective date of his employment. The
new CEO will also be entitled to an annual performance bonus of up to one year’s salary
which will be calculated in accordance with certain fixed criteria relating to the company’s
growth and profitability in the year preceding payment of the bonus.
|
In
lieu of the above-mentioned options, on September 12, 2013 the Shareholders resolved to grant to the Company’s Chief Executive
Officer options to purchase 246,984 Ordinary Shares of the Company with an exercise price per share of $3.38, reflecting the average
closing price of the share during a 90 day period preceding the date on which the Board of Directors approved the Compensation
Policy of the Company, July 8, 2013. The options shall vest over a period of two years, such that at the end of each three month
period from the date of the Shareholders resolution, the Chief Executive Officer shall be entitled to one eighth of the options.
The exercise price of the options shall be adjusted for stock dividend. The fair value of the new options measured at $599 as
of the grant day.
|
7.
|
On August 31, 2011, the Board
of Directors resolved to issue to the Company’s Chief Financial Officer, options exercisable to 10,000 of the company’s ordinary
shares, pursuant to the plan, which will vest in four equal annual installments over a period of four years, commencing as of
date of the grant, at an exercise price of $ 4.80 per share.
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
In
lieu of the above-mentioned options, on July 8, 2013 the Board of Directors resolved to grant to the Company’s Chief Finance Officer
options to purchase 20,000 Ordinary Shares of the Company with an exercise price per share of $3.38, reflecting the average closing
price of the share during a 90 day period preceding the date on which the Board of Directors approved the Compensation Policy
of the Company, July 8, 2013. The options shall vest over a period of two years, such that at the end of each three month period
from the date of the Board of Directors resolution, the Chief Finance Officer shall be entitled to one eighth of the options.
The fair value of the new options measured at $31 as of the grant day.
|
8.
|
On
July 8, 2013, the Board of Directors resolved to issue to the Company’s employees, options
exercisable to 41,000 of the company’s ordinary shares, pursuant to the plan, which will
vest in four equal annual installments over a period of four years, commencing as of
date of the grant, at an exercise price of $ 3.38 per share.
|
|
9.
|
In
2014, the Board of directors resolved to issue to the Company’s employees and directors
Restricted Stock Units exercisable to 46,300 of the Company’s ordinary shares, pursuant
to the 2013 plan, which will vest in four equal installments over a period of four years,
commencing as of March 27, 2014, at an exercise price of 3 NIS per share.
|
|
10.
|
On
February 26, 2015, the Board of Directors resolved to issue to certain of the Company’s
employees options exercisable for 77,000 of the Company’s ordinary shares pursuant to
the 2013 Plan. These options vest in four equal annual installments over a period of
four years, commencing as of the date of the grant, at an exercise price of $8.35
per share.
|
|
11.
|
On
July 06, 2016, the Board of Directors resolved to issue to certain of the Company’s employees
options exercisable for 250,000 of the Company’s ordinary shares pursuant to the 2013
Plan. These options vest in four equal annual installments over a period of four years,
commencing as of the date of the grant, at an exercise price of $5.94 per share.
|
|
12.
|
In April 2017, the Board of
directors resolved to issue to the Company’s directors Restricted Stock Units exercisable to 4,500 of the Company’s ordinary shares,
pursuant to the 2013 plan, which will vest in three equal installments over a period of three years, at an exercise price of 3
NIS per share, commencing June 2017. In April 2017, the Board of directors resolved to issue to the Company’s employees Restricted
Stock Units exercisable to 17,000 of the Company’s ordinary shares, pursuant to the 2013 plan, which will vest in four equal installments
over a period of four years, at an exercise price of 3 NIS per share, commencing April 2017.
|
|
13.
|
As
of December 31, 2017, 346,662 options are available for future grant under the 2013 Plan.
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
Any
dividend distributed by the Company will be declared and paid in dollars, subject to statutory limitations. The Company’s policy
is not to declare dividends out of tax exempt earnings.
|
NOTE 14:-
|
NET EARNINGS PER SHARE
|
The
following table sets forth the computation of basic and diluted net earnings per share:
|
|
Year ended
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic net earnings per share - Net income
|
|
$
|
16,518
|
|
|
$
|
3,444
|
|
|
$
|
3,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for diluted net earnings per share - Net income
|
|
$
|
16,518
|
|
|
$
|
3,444
|
|
|
$
|
3,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic net earnings per share - weighted-average number of shares outstanding (in thousands)
|
|
|
7,998
|
|
|
|
7,820
|
|
|
|
7,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted net earnings per share - adjusted weighted average shares and assumed exercises (in thousands)
|
|
|
8,131
|
|
|
|
7,938
|
|
|
|
7,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per share
|
|
$
|
2.07
|
|
|
$
|
0.45
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings per share
|
|
$
|
2.03
|
|
|
$
|
0.45
|
|
|
$
|
0.50
|
|
Taxable
income of the Israeli companies is subject to the Israeli corporate tax at the rate as follows: 2015 - 26.5%, 2016 - 25% and
2017 – 24%.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 15:-
|
INCOME TAXES (Cont.)
|
The
deferred tax balances included as of December 31, 2015 were calculated according to a tax rate of 26.5%. Following the change in
the tax rate in early 2016, the Company recorded a decrease of NIS 1,265 thousand in the balance of deferred tax liabilities
and a decrease of NIS 729 thousand in the balance of deferred tax assets. In addition, expenses of NIS 536 thousand (138$)
was recorded in profit or loss, in taxes on income.
In December
2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Achieving the Budget Targets for
the 2017 and 2018 Budget Years), 2016 which reduces the corporate tax rate to 24% (instead of 25%) effective from January 1, 2017
and to 23% effective from January 1, 2018.
The
deferred tax balances included as of December 31, 2016 are calculated according to the updated tax rate. Following the change in
the tax rate, the Company recorded an additional decrease of NIS 1,687 thousand in the balance of deferred tax liabilities
and an additional decrease of NIS 1,046 thousand in the balance of deferred tax assets. Furthermore, additional expanses of
NIS 640 thousand (166 $) was recorded in profit or loss, in taxes on income.
|
2.
|
Measurement
of taxable income:
|
On
February 26, 2008, the Israeli Parliament enacted the Income Tax Law (Inflationary Adjustments) (Amendment 20) (Restriction
of Effective Period), 2008 (Inflationary Adjustments Amendment). In accordance with the Inflationary Adjustments Amendment,
the effective period of the Inflationary Adjustments Law will cease at the end of the 2007 tax year, and as of the 2008 tax
year, the provisions of the Law shall no longer apply, other than the transitional provisions intended at preventing
distortions in the tax calculations. In accordance with the Inflationary Adjustments Amendment, commencing with the 2008 tax
year, income for tax purposes will no longer be adjusted to a real (net of inflation) measurement basis. Furthermore, the
depreciation of inflation immune assets and carried forward tax losses will no longer be linked to the Israeli Consumer Price
Index.
In
accordance with ASC 740, the Company has not provided deferred income taxes on the above difference between the reporting currency
and the tax basis of assets and liabilities.
|
b.
|
Tax benefits under the Law for
the Encouragement of Industry (Taxation), 1969:
|
The
Company has the status of an “industrial company”, as defined by this law. According to this status and by virtue of
regulations published thereunder, the Company is entitled to claim a deduction of accelerated depreciation on equipment used in
industrial activities, as determined in the regulations issued under the Inflationary Law. The Company is also entitled to amortize
a patent or rights to use a patent or intellectual property that are used in the enterprise’s development or advancement, to deduct
issuance expenses for shares listed for trading, and to file consolidated financial statements under certain conditions.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 15:-
|
INCOME TAXES (Cont.)
|
|
c.
|
The Law for the Encouragement
of Capital Investments, 1959 (“the Law”):
|
On
August 5, 2013, the “Knesset” issued the Law for Changing National Priorities (Legislative Amendments for
Achieving Budget Targets for 2013 and 2014), 2013 which consists of Amendment 71 to the Law for the Encouragement of Capital
Investments (“The Amendment”). According to the Amendment, the tax rate on preferred income form a preferred
enterprise in 2014 and thereafter will be 16% (in development area A - 9%). The Amendment also prescribes that any dividends
distributed to individuals or foreign residents from the preferred enterprise’s earnings as above will be subject to tax at a
rate of 20%.
In
December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget
Years), 2016 which includes Amendment 73 to the Law for the Encouragement of Capital Investments (“the Amendment”) was
published. According to the Amendment, a preferred enterprise located in development area A will be subject to a tax rate of 7.5%
instead of 9% effective from January 1, 2017 and thereafter (the tax rate applicable to preferred enterprises located in other
areas remains at 16%).
Income
not eligible for Approved Enterprise benefits or Benefited Enterprise benefits is taxed at a regular rate, which was 24% in
2017, 25% in 2016 and 26.5% in 2015.
|
d.
|
Non-Israeli
subsidiaries:
|
Non-Israeli
subsidiaries are taxed based on tax laws in their respective jurisdictions. The Corporate income tax rate of significant
jurisdictions are as follows:
|
|
Tax rate
|
|
Mexico
|
|
|
30
|
%
|
Brazil
|
|
|
34
|
%
|
Argentina
|
|
|
35
|
%
|
United States (*)
|
|
|
35
|
%
|
|
e.
|
Income
(loss) before taxes on income:
|
|
|
Year ended
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
8,813
|
|
|
|
5,936
|
|
|
|
4,189
|
|
Foreign
|
|
|
487
|
|
|
|
(743
|
)
|
|
|
413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,300
|
|
|
|
5,193
|
|
|
|
4,602
|
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 15:-
|
INCOME TAXES (Cont.)
|
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes, and amounts used for income tax purposes. Significant components of the deferred tax liabilities and assets
of the Company and its subsidiaries are as follows:
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Reserves and accruals
|
|
|
392
|
|
|
|
985
|
|
Carryforward tax losses
|
|
|
23,950
|
|
|
|
23,271
|
|
Other temporary differences
|
|
|
666
|
|
|
|
423
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets before valuation allowance
|
|
|
25,008
|
|
|
|
24,679
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance (2)
|
|
|
(9,229
|
)
|
|
|
(17,621
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
15,779
|
|
|
|
7,058
|
|
|
|
|
|
|
|
|
|
|
Goodwill and other intangible assets
|
|
|
(6,696
|
)
|
|
|
(5,482
|
)
|
Other temporary differences
|
|
|
(38
|
)
|
|
|
(809
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(6,734
|
)
|
|
|
(6,291
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax Assets , net of deferred tax liabilities
|
|
|
9,045
|
|
|
|
767
|
|
|
2.
|
The
Company and its subsidiaries have provided valuation allowances in respect of deferred
tax assets resulting from tax losses carryforward and other temporary differences for
amounts that are more likely than not be realized in the foreseeable future.
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 15:-
|
INCOME TAXES (Cont.)
|
|
3.
|
Reconciling
items between the statutory tax rate of the Company and the effective tax rate:
|
|
|
Year ended
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Income before taxes, as reported in the consolidated statements of operations
|
|
|
9,300
|
|
|
|
5,193
|
|
|
|
4,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory tax rate
|
|
|
24
|
%
|
|
|
25
|
%
|
|
|
26.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theoretical tax expenses on the above amount at the Israeli statutory tax rate
|
|
|
2,232
|
|
|
|
1,298
|
|
|
|
1,219
|
|
Tax adjustment in respect of different tax rates in subsidiaries and changes in tax rates
|
|
|
31
|
|
|
|
118
|
|
|
|
21
|
|
Change in valuation allowance in respect of deferred taxes
|
|
|
(8,950
|
)
|
|
|
-
|
|
|
|
-
|
|
Operating carryforward losses for which a valuation allowance was provided
|
|
|
3
|
|
|
|
197
|
|
|
|
17
|
|
Tax adjustment in respect of different tax rates due to approved enterprise
|
|
|
(567
|
)
|
|
|
-
|
|
|
|
-
|
|
Realization of carryforward tax losses for which a valuation allowance was provided
|
|
|
(404
|
)
|
|
|
40
|
|
|
|
(191
|
)
|
Provision for uncertain tax position
|
|
|
127
|
|
|
|
-
|
|
|
|
-
|
|
Nondeductible expenses and other permanent differences
|
|
|
307
|
|
|
|
192
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,221
|
)
|
|
|
1,845
|
|
|
|
1,131
|
|
|
g.
|
Carryforward
tax losses and deductions:
|
Carryforward
tax losses of the Company totaled approximately $90,813 (including a capital loss in the amount of approximately $44,625) as of
December 31, 2017. The carryforward tax losses have no expiration date.
Carryforward
tax losses of Pointer Argentina are approximately $67 as of December 31, 2017. The carryforward tax losses will expire in
2020.
Carryforward
tax losses of Pointer Mexico totaled approximately $1,813 as of December 31, 2017. The carryforward tax losses will expire
from 2018 to 2027.
Carryforward
tax losses of Pointer Brazil totaled approximately $3,249 as of December 31, 2017. The carryforward tax losses have no expiration
date.
Carryforward
tax losses of Pointer South Africa totaled approximately $7,304 as of December 31, 2017. The carryforward tax losses have
no expiration date.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 15:-
|
INCOME TAXES (Cont.)
|
|
j.
|
Final
tax assessments:
|
Tax
assessments for the Company are considered final as of the 2012 tax year.
Tax
assessments for Pointer Mexico are considered final as of the 2008 tax year.
Tax
assessments for Pointer Argentina are considered final as of the 2012 tax year.
|
h.
|
Taxes
on income (tax benefit) included in the consolidated statements of operations:
|
|
|
Year ended
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
927
|
|
|
|
501
|
|
|
|
348
|
|
Deferred
|
|
|
(8,148
|
)
|
|
|
1,344
|
|
|
|
783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,221
|
)
|
|
|
1,845
|
|
|
|
1,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(7,674
|
)
|
|
|
1,768
|
|
|
|
1,256
|
|
Foreign
|
|
|
453
|
|
|
|
77
|
|
|
|
(125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,221
|
)
|
|
|
1,845
|
|
|
|
1,131
|
|
|
i.
|
Uncertain
tax position:
|
As
of December 31, 2017 and 2016 balances in respect to ASC 740, “Income Taxes” amounted to $ 127 and $ 0, respectively.
A
reconciliation of the beginning and ending amount of unrecognized tax positions is as follows:
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Balance at the beginning of the year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Additions based on tax positions taken related to the current year
|
|
|
127
|
|
|
|
-
|
|
Reductions related to settlement of tax matters and limitation
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
$
|
127
|
|
|
$
|
-
|
|
Substantially
all the balance of unrecognized tax benefits, if recognized, would reduce the Company’s annual effective tax rate
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 16:-
|
BALANCES AND TRANSACTIONS WITH
RELATED PARTIES
|
|
a.
|
Balances
with related parties:
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Long Term Loan (*)
|
|
|
973
|
|
|
|
831
|
|
DBSI (see Note 12f(1))
|
|
|
(53
|
)
|
|
|
(53
|
)
|
(*)
On March 29, 2016 the board of directors approved to repay the Capital Note issued by Shagrir Group to the Company on December
2015, in the amount of NIS 8,000. In addition, the board of directors approved to convert NIS 4,100 to Shagrir Group equity and
NIS 3,100 Shagrir group will issue as Capital Note for 5 years without any interest.
|
b.
|
Transactions
with related parties:
|
|
|
Year ended
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Management fees to DBSI (see Note 12f(1))
|
|
|
180
|
|
|
|
180
|
|
|
|
180
|
|
Sales to related parties
|
|
|
254
|
|
|
|
106
|
|
|
|
52
|
|
Purchase from related parties
|
|
|
682
|
|
|
|
847
|
|
|
|
145
|
|
|
NOTE 17:-
|
SEGMENT, CUSTOMER AND GEOGRAPHIC
INFORMATION
|
Until
December 31, 2015 the Company had three segments: Cellocator, MRM and RSA.
During
2016 Pointer spun off its Israeli subsidiary, Shagrir Group Vehicle Services Ltd, therefore Segments reporting was
retroactively adjusted to reflect those adjustments. As of December 31, 2016 The Company has two reportable segments: the
Cellocator segment and the MRM segment
The
Company applies ASC 280, “Segment Reporting Disclosures”. The Company evaluates performance and allocates resources
based on operating profit or loss.
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 17:-
|
SEGMENT, CUSTOMER AND GEOGRAPHIC
INFORMATION (Cont.)
|
|
b.
|
The
following presents segment results of operations for the year ended December 31, 2017:
|
|
|
Cellocator
segment
|
|
|
MRM
segment
|
|
|
Elimination
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segments revenues
|
|
|
24,364
|
|
|
|
62,208
|
|
|
|
(8,417
|
)
|
|
|
78,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segments operating profit
|
|
|
2,742
|
|
|
|
7,569
|
|
|
|
(2
|
)
|
|
|
10,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segments tangible and intangible assets
|
|
|
9,026
|
|
|
|
37,799
|
|
|
|
1,968
|
|
|
|
48,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and impairment expenses
|
|
|
144
|
|
|
|
2,780
|
|
|
|
-
|
|
|
|
2,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure for assets
|
|
|
197
|
|
|
|
3,069
|
|
|
|
-
|
|
|
|
3,266
|
|
The
following presents segment results of operations for the year ended December 31, 2016:
|
|
Cellocator
segment
|
|
|
MRM
segment
|
|
|
Elimination
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segments revenues
|
|
|
22,707
|
|
|
|
49,620
|
|
|
|
(7,974
|
)
|
|
|
64,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segments operating profit
|
|
|
1,660
|
|
|
|
4,708
|
|
|
|
(120
|
)
|
|
|
6,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segments tangible and intangible assets
|
|
|
8,359
|
|
|
|
35,392
|
|
|
|
2,148
|
|
|
|
45,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and impairment expenses
|
|
|
321
|
|
|
|
2,295
|
|
|
|
-
|
|
|
|
2,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure for assets
|
|
|
135
|
|
|
|
2,264
|
|
|
|
-
|
|
|
|
2,399
|
|
The
following presents segment results of operations for the year ended December 31, 2015:
|
|
Cellocator
segment
|
|
|
MRM segment
|
|
|
Elimination
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segments revenues
|
|
|
19,489
|
|
|
|
47,938
|
|
|
|
(6,860
|
)
|
|
|
60,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segments operating profit
|
|
|
1,000
|
|
|
|
3,848
|
|
|
|
493
|
|
|
|
5,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segments tangible and intangible assets
|
|
|
8,469
|
|
|
|
24,836
|
|
|
|
1,804
|
|
|
|
35,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and impairment expenses
|
|
|
338
|
|
|
|
3,067
|
|
|
|
-
|
|
|
|
3,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure for assets
|
|
|
149
|
|
|
|
1,647
|
|
|
|
-
|
|
|
|
1,796
|
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 17:-
|
SEGMENT, CUSTOMER AND GEOGRAPHIC
INFORMATION (Cont.)
|
|
c.
|
Summary
information about geographical areas:
|
|
|
|
|
Year ended
December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
1.
|
|
Revenues *):
|
|
|
|
|
|
|
|
|
|
|
|
Israel
|
|
|
35,230
|
|
|
|
29,438
|
|
|
|
26,487
|
|
|
|
Latin America (mainly Mexico)
|
|
|
9,603
|
|
|
|
7,009
|
|
|
|
7,601
|
|
|
|
Brazil
|
|
|
14,248
|
|
|
|
9,142
|
|
|
|
7,173
|
|
|
|
Argentina
|
|
|
4,607
|
|
|
|
3,995
|
|
|
|
4,616
|
|
|
|
Europe
|
|
|
4,413
|
|
|
|
4,501
|
|
|
|
5,271
|
|
|
|
Other
|
|
|
10,054
|
|
|
|
10,268
|
|
|
|
9,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,155
|
|
|
|
64,353
|
|
|
|
60,567
|
|
*)
Revenues are attributed to geographic areas based on the location of the end customers.
|
|
|
|
Year
ended
December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
2.
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Israel
|
|
|
1,999
|
|
|
|
1,248
|
|
|
|
978
|
|
|
|
Argentina
|
|
|
614
|
|
|
|
627
|
|
|
|
539
|
|
|
|
Mexico
|
|
|
358
|
|
|
|
298
|
|
|
|
229
|
|
|
|
Brazil
|
|
|
2,398
|
|
|
|
2,949
|
|
|
|
1,090
|
|
|
|
South Africa
|
|
|
463
|
|
|
|
489
|
|
|
|
436
|
|
|
|
Other
|
|
|
16
|
|
|
|
3
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,848
|
|
|
|
5,614
|
|
|
|
3,278
|
|
|
d.
|
In
2017, 2016 and 2015, none of our customer accounted above 10% of the Company’s revenues.
|
|
NOTE 18:-
|
DISCONTINUED OPERATION
|
|
a.
|
Below
is data of the operating results attributed to the discontinued operation:
|
|
|
Year ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Revenue from sales
|
|
|
18,248
|
|
|
|
40,498
|
|
Cost of sales
|
|
|
15,260
|
|
|
|
35,427
|
|
Gross profit
|
|
|
2,988
|
|
|
|
5,071
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
2,531
|
|
|
|
4,345
|
|
Operating income
|
|
|
457
|
|
|
|
726
|
|
|
|
|
|
|
|
|
|
|
Financial expenses, net
|
|
|
54
|
|
|
|
139
|
|
Other income, net
|
|
|
-
|
|
|
|
(13
|
)
|
Taxes on income
|
|
|
249
|
|
|
|
273
|
|
Income from discontinued operation
|
|
|
154
|
|
|
|
327
|
|
POINTER TELOCATION
LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
U.S. dollars
in thousands (except share and per share data)
|
NOTE 18:-
|
DISCONTINUED OPERATION (Cont.)
|
|
c.
|
Below
is data of the net cash flows provided by (used in) the discontinued operation:
|
|
|
Year ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
116
|
|
|
|
(2,111
|
)
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
(1,187
|
)
|
|
|
746
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
251
|
|
|
|
(41
|
)
|
|
NOTE 19:-
|
SELECTED STATEMENTS OF OPERATIONS
DATA
|
|
|
|
|
Year ended
December 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
a.
|
|
Financial expenses, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on short-term bank deposits
|
|
|
8
|
|
|
|
1
|
|
|
|
78
|
|
|
|
Interest on long-term loans to affiliate
|
|
|
51
|
|
|
|
56
|
|
|
|
267
|
|
|
|
Foreign currency transaction adjustments
|
|
|
205
|
|
|
|
130
|
|
|
|
374
|
|
|
|
Other
|
|
|
47
|
|
|
|
37
|
|
|
|
9
|
|
|
|
|
|
|
311
|
|
|
|
224
|
|
|
|
728
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank charges and interest expenses
|
|
|
1,223
|
|
|
|
985
|
|
|
|
942
|
|
|
|
Foreign currency transaction adjustments
|
|
|
-
|
|
|
|
194
|
|
|
|
166
|
|
|
|
Interest on long-term loans to others
|
|
|
92
|
|
|
|
70
|
|
|
|
318
|
|
|
|
Other
|
|
|
-
|
|
|
|
21
|
|
|
|
31
|
|
|
|
|
|
|
1,315
|
|
|
|
1,270
|
|
|
|
1,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,004
|
|
|
|
1,046
|
|
|
|
729
|
|
|
NOTE 20:-
|
SUBSEQUENT EVENTS
|
|
a.
|
On February 27, 2018, the Board of Directors resolved to issue to certain of the Company’s employees
RSU’s exercisable to 89,000 of the Company’s ordinary shares, pursuant to the plan. The RSU’s will vest in four equal
annual installments over a period of four years, commencing as of date of the grant, at an exercise price of NIS 3.0 per share.
|
|
b.
|
On March 27, 2018, the Board of Directors resolved to issue to the Company’s CEO RSU’s exercisable
to 120,000 of the Company’s ordinary shares, pursuant to the plan. The RSU’s will vest in four equal annual installments
over a period of four years, commencing as of date of the grant, at an exercise price of NIS 3.0 per share. The grant is subject
to the approval of the general shareholders meeting.
|
- - -
- - - - - - - - - - - - - - -