EX-99.1 2 v388314_ex1.htm EXHIBIT 1

 

Exhibit 1

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF JUNE 30, 2014

 

IN U.S. DOLLARS

 

UNAUDITED

 

INDEX

 

  Page
   
Interim Consolidated Balance Sheets 2 - 3
   
Interim Consolidated Statements of Income and Comprehensive income 4 - 5
   
Interim Statements of Changes in Shareholders' Equity 6 - 7
   
Interim Consolidated Statements of Cash Flows 8 – 10
   
Notes to Interim Consolidated Financial Statements 11 - 22

 

- - - - - - - - - - - -

 

 
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

   June 30,   December 31, 
   2014   2013 
   Unaudited     
         
ASSETS          
           
CURRENT ASSETS:          
Cash and cash equivalents  $11,790   $3,349 
Restricted cash   65    81 
Trade receivables (net of allowance for doubtful accounts of $ 1,328 and $ 1,270 at June 30, 2014 and December 31, 2013, respectively)   21,356    19,793 
Other accounts receivable and prepaid expenses   2,563    2,033 
Inventories   6,359    6,038 
           
Total current assets   42,133    31,294 
           
           
LONG-TERM ASSETS:          
Long-term accounts receivable   537    546 
Severance pay fund   9,517    9,349 
Property and equipment, net   13,438    13,975 
Other intangible assets, net   2,471    2,936 
Goodwill   55,878    55,127 
           
Total long-term assets   81,841    81,933 
           
Total assets  $123,974   $113,227 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

2
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share and per share data)

 

   June 30,   December 31, 
   2014   2013 
   Unaudited     
         
LIABILITIES AND SHAREHOLDERS' EQUITY          
           
CURRENT LIABILITIES:          
Short-term bank credit and current maturities of long-term loans  $8,787   $10,643 
Trade payables   14,958    14,793 
Deferred revenues and customer advances   8,396    7,753 
Other accounts payable and accrued expenses   8,748    10,768 
           
Total current liabilities   40,889    43,957 
           
LONG-TERM LIABILITIES:          
Long-term loans from banks   16,776    9,301 
Long-term loans from others   1,161    1,301 
Deferred taxes and other long-term liabilities   6,596    5,712 
Accrued severance pay   10,620    10,317 
           
    35,153    26,631 
COMMITMENTS AND CONTINGENT LIABILITIES          
           
EQUITY:          
Pointer Telocation Ltd's shareholders' equity:          
Share capital          
Ordinary shares of NIS 3 par value -          
Authorized: 8,000,000 shares at June 30, 2014 and December 31, 2013; Issued and outstanding: 7,688,564 and 5,565,558 and shares at June 30, 2014 and December 31, 2013, respectively   5,705    3,878 
Additional paid-in capital   129,418    120,996 
Accumulated other comprehensive income   1,995    1,456 
Accumulated deficit   (86,608)   (89,220)
           
Total Pointer Telocation Ltd.'s shareholders' equity   50,510    37,110 
           
Non-controlling interest   (2,578)   5,529 
           
Total equity   47,932    42,639 
           
Total liabilities and equity  $123,974   $113,227 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

3
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

INTERIM CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

U.S. dollars in thousands (except per share data)

 

   Six months ended
June 30,		   Three months ended
June 30,		   Year ended
December 31,		 
   2014   2013   2014   2013   2013 
   Unaudited     
Revenues:                         
Products  $17,170   $15,816   $8,054   $8,394   $34,662 
Services   35,719    29,564    17,820    14,841    63,195 
                          
Total revenues   52,889    45,380    25,874    23,235    97,857 
                          
Cost of revenues:                         
Products   10,342    9,198    4,946    4,817    20,763 
Services   24,553    21,343    12,344    10,783    45,497 
                          
Total cost of revenues   34,895    30,541    17,290    15,600    66,260 
                          
Gross profit   17,994    14,839    8,584    7,635    31,597 
                          
Operating expenses:                         
                          
Research and development   1,766    1,470    908    800    3,244 
Selling and marketing   5,523    4,894    2,832    2,569    10,398 
General and administrative   5,901    4,653    2,944    2,370    10,539 
Other expenses   -    -    -    -    403 
Amortization of intangible assets   567    510    230    129    967 
                          
Total operating expenses   13,757    11,527    6,914    5,868    25,551 
                          
Operating income   4,237    3,312    1,670    1,767    6,046 
Financial expenses, net   812    598    308    260    1,077 
Other income, net   6    7    9    1    3,299 
                          
Income before taxes on income   3,431    2,721    1,371    1,508    8,268 
Taxes on income   1,014    467    414    303    1,337 
                          
Income after taxes on income   2,417    2,254    957    1,205    6,931 
Equity in gains of affiliate   -    182    -    70    340 
                          
Net income  $2,417   $2,436   $957   $1,275   $7,271 

 

4
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

U.S. dollars in thousands (except per share data)

 

   Six months ended
June 30,		   Three months ended
June 30,		   Year ended
December 31,		 
   2014   2013   2014   2013   2013 
   Unaudited     
                     
Other comprehensive income (loss):                         
Currency translation adjustments of foreign operations  $367   $593   $413   $(102)  $1,006 
Realized currency translation adjustments of foreign operations   -    -    -    -    (50)
Realized losses on derivatives designated as cash flow hedges   -    (24)   -    -    (24)
                          
Total comprehensive income   2,784    3,005    1,370    1,173    8,203 
                          
Net Income attributable to:                         
Equity holders of the parent  $2,612   $1,778   $1,146   $971   $6,320 
Non-controlling interests   (195)   658    (189)   304    951 
                          
   $2,417   $2,436   $957   $1,275   $7,271 
                          
Total comprehensive income (loss) attributable to:                         
Equity holders of the parent  $3,151   $2,081   $1,575   $887   $6,649 
Non-controlling interests   (367)   924    (205)   286    1,554 
                          
   $2,784   $3,005   $1,370   $1,173   $8,203 
                          
Earnings per share attributable to Pointer Telocation Ltd.'s shareholders:                         
Basic net earnings per share  $0.36   $0.32   $0.15   $0.17   $1.14 
                          
Diluted net earnings per share  $0.35   $0.32   $0.14   $0.17   $1.10 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

5
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

U.S. dollars in thousands (except share data)

 

       Pointer Telocation Ltd.'s Shareholders         
   Number
of shares		   Share capital   Additional
paid-in
capital		   Accumulated
Other
comprehensive
income		   Accumulated
Deficit		   Non-
controlling
interest		   Total
equity		 
                             
Balance as of January 1, 2013   5,555,558   $3,871   $120,290   $1,127   $(95,540)  $5,598   $35,346 
                                    
Issuance of shares in respect of Stock-based compensation   10,000    7    20    -    -    -    27 
Stock-based compensation expenses   -    -    354    -    -    20    374 
Dividend payable to non-controlling interest   -    -    -    -    -    (1,311)   (1,311)
Expiration of options in subsidiary   -    -    332    -    -    (332)   - 
Other comprehensive income   -    -    -    329    -    603    932 
Net income attributable to Non -controlling interest   -    -    -    -    -    951    951 
Net income attributable to Pointer shareholders   -    -    -    -    6,320    -    6,320 
                                    
Balance as of December 31, 2013   5,565,558    3,878    120,996    1,456    (89,220)   5,529    42,639 
                                    
Issuance of share capital (net of issue expenses of USD 383 thousands)   2,123,006    1,827    19,615    -    -    -    21,442 
Stock-based compensation expenses   -    -    175    -    -    -    175 
Acquisition of non-controlling interests   -    -    (11,368)   -    -    (7,740)   (19,108)
Other comprehensive income   -    -    -    539    -    (172)   367 
Net income attributable to Non -controlling interest   -    -    -    -    -    (195)   (195)
Net income attributable to Pointer shareholders   -    -    -    -    2,612    -    2,612 
                                    
Balance as of June 30, 2014 (unaudited)   7,688,564   $5,705   $129,418   $1,995   $(86,608)  $(2,578)  $47,932 

 

Accumulated other comprehensive income for six month that ended on June 30, 2014:

 

Accumulated foreign currency translation differences, net   1,995 
      
Accumulated other comprehensive income   1,995 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

6
 
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

U.S. dollars in thousands (except share data)

 

       Pointer Telocation Ltd.'s Shareholders         
   Number
 of		   Share   Additional
paid-in		   Accumulated
other
comprehensive		   Accumulated   Non-
controlling		   Total 
   shares   capital   capital   income   deficit   interest   equity 
                             
Balance as of January 1, 2013   5,555,558   $3,871   $120,290   $1,127   $(95,540)  $5,598   $35,346 
                                    
Stock-based compensation expenses   -   $-   $58   $-   $-   $-   $58 
Exercise of options in subsidiary   -    -    332    -    -    (332)   - 
Other comprehensive income   -    -    -    302    -    265    567 
Net income attributable to non-controlling interest   -    -    -    -    -    658    658 
Net income attributable to Pointer shareholders   -    -    -    -    1,778    -    1,778 
                                    
Balance as of June 30, 2013 (unaudited)   5,555,558   $3,871   $120,680   $1,429   $(93,762)  $6,189   $38,407 

 

Accumulated other comprehensive income for six month that ended on June 30, 2013:

 

Accumulated foreign currency translation differences, net   1,429 
      
Accumulated other comprehensive income  $1,429 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

7
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

 

   Six months ended
June 30,		   Three months ended
June 30,		   Year ended
December 31,		 
   2014   2013   2014   2013   2013 
   Unaudited     
Cash flows from operating activities:                         
                          
Net income  $2,417   $2,436   $957   $1,275   $7,271 
Adjustments required to reconcile net income to net cash provided by operating activities:                         
Depreciation and amortization   2,475    1,913    1,194    830    4,049 
Gain from obtaining control in a subsidiary previously accounted for by the equity method   -    -    -    -    (3,299)
Accrued interest and exchange rate changes of debenture and long-term loans   9    (19)   4    5    21 
Accrued severance pay, net   125    (67)   138    (27)   (397)
Gain from sale of property and equipment, net   (97)   (166)   (32)   (98)   (195)
Equity in gains of affiliate   -    (182)   -    (70)   (340)
Amortization of stock-based compensation   175    58    127    25    374 
Decrease  in restricted cash   16    10    1    5    27 
Decrease (Increase) in trade receivables, net   (1,705)   (1,478)   378    535    (1,270)
Decrease  (Increase) in other accounts receivable and prepaid expenses   (629)   (257)   (69)   136    148 
Decrease  in inventories   (217)   (94)   (481)   (59)   (685)
Deferred income taxes   804    432    319    271    1,272 
Decrease (increase) in long-term accounts receivable   (9)   32    (50)   9    (4)
Increase  in trade payables   493    (428)   1,117    (250)   1,290 
Increase (decrease) in other accounts payable and accrued expenses   (1,342)   1,259    (988)   (157)   1,449 
                          
Net cash provided by operating activities   2,515    3,449    2,615    2,430    9,711 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

8
 
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

 

   Six months ended
June 30,		   Three months ended
June 30,		   Year ended
December 31,		 
   2014   2013   2014   2013   2013 
   Unaudited     
                     
Cash flows from investing activities:                         
Purchase of property and equipment   (2,248)   (2,436)   (1,094)   (1,409)   (4,663)
Proceeds from sale of property and equipment   867    798    160    128    1,216 
Investment and loans/Repayments in affiliate, net   -    66    -    34    137 
Acquisition of subsidiary (a)   -    -    -    -    (3,973)
                          
Net cash used in investing activities   (1,381)   (1,572)   (934)   (1,247)   (7,283)
                          
Cash flows from financing activities:                         
Receipt of long-term loans from banks   12,927    3,681    1,490    2,333    7,127 
Repayment of long-term loans from banks   (4,803)   (5,598)   (2,597)   (2,420)   (10,137)
Repayment of long-term loans from others   (366)   -    (251)   -    - 
Proceeds from issuance of shares, net   10,065    -    6    -    7 
Repurchase of shares from non-controlling interests    (7,740)   -    -    -    - 
Short-term bank credit, net   (2,582)   (1,046)   (1,382)   (670)   563 
                          
Net cash provided by (used in) financing activities   7,501    (2,963)   (2,734)   (757)   (2,440)
                          
Effect of exchange rate changes on cash and cash equivalents   (194)   (194)   (227)   (351)   (324)
                          
Increase (decrease) in cash and cash equivalents   8,441    (1,280)   (1,280)   75    (336)
Cash and cash equivalents at the beginning of the period   3,349    3,685    13,070    2,330    3,685 
                          
Cash and cash equivalents at the end of the period  $11,790   $2,405   $11,790   $2,405   $3,349 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

9
 
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

 

      Six months ended
June 30,		   Three months ended
June 30,		   Year ended
December 31,		  
      2014   2013   2014   2013   2013  
      Unaudited       
(a)  Acquisition of subsidiary:                      
                              
   Working capital (Cash and cash equivalent excluded)  $-   $-   $-   $- $ 130  
   Property and equipment   -    -    -    -   2,486  
   Other intangible assets   -    -    -    -   1,690  
   Goodwill   -    -    -    -   4,894  
   Long term loans from banks and others   -    -    -    -   (1,342 )
   Investment in subsidiary previously accounted for by the equity method   -    -    -    -   (3,885 )
                              
      $-   $-   $-   $- $ 3,973  
                              
(b)  Non-cash activity:                          
                              
   Purchase  of property and equipment  $179   $-   $179   $- $ 392  
   Purchase of property and equipment at finance lease  $-   $-   $-   $- $ 3  
   Dividend payable for non-controlling interest in a consolidated subsidiary  $-   $-   $-   $- $ 1,311  
   Issuance of shares in respect of acquisition of non-controlling interests in subsidiary  $11,385   $-   $-   $- $ -  
                              
(c)  Supplemental disclosure of cash flow activity:                          
                              
   Cash paid during the year for:                          
   Interest  $1,900   $-   $298   $- $ 1,189  
                              
   Income taxes  $238   $19   $101   $7 $ 114  

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

10
 

 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1:      SIGNIFICANT ACCOUNTING POLICIES

 

a.        Unaudited interim financial information:

 

The accompanying consolidated balance sheet as of June 30, 2014, consolidated statements of operations for the three and six months ended June 30, 2014 and 2013 and consolidated statements of cash flows for the three and six months ended June 30, 2014 and 2013 are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the Company's consolidated financial position as of June 30, 2014, the Company's consolidated results of operations for the three and six months ended June 30, 2014 and 2013 and the Company's consolidated cash flows for the three and six months ended June 30, 2014 and 2013.

 

The balance sheet at December 31, 2013 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

 

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2013 included in the Company's Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission ("SEC") on March 27, 2014.

 

Results for the three and six months ended June 30, 2014 are not necessarily indicative of results that may be expected for the year ending December 31, 2014.

 

b.        Use of estimates:

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. The company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

c.Principles of consolidation:

 

Our consolidated financial statements include the accounts of the Company and its' wholly and majority owned subsidiaries, referred to herein as the group.

 

Intercompany transactions and balances including profits from intercompany sales not yet realized outside the Company, have been eliminated upon consolidation.

 

11
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

  

NOTE 1:-    SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

d.        Recent Accounting Pronouncement

On May 2014, the Financial Accounting Standards ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers" ("ASU 14-09") which creates a comprehensive set of guidelines for the recognition of revenue under the principle: "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 requirements of ASU 14-09 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and will require either retrospective application to each prior period presented or retrospective application with the cumulative effect of initially applying the standard at the date of adoption. Greystone is currently evaluating the impact this ASU will have on our financial position and results of operations.

 

e.        Acquisition of non-controlling interests Shagrir Systems Ltd. ("Shagrir"):

 

On January 15, 2014, the Company acquired an additional 45.5% interest in Shagrir, increasing its ownership interest to 100%, in consideration of cash payment of approximately $7.7 million, and issue of 994,357 Ordinary shares with total fair value of approximately $11.4 million (representing the quoted price of the Company's share at the transaction date). The difference of $11.4 million between the consideration and the carrying amount of the interests acquired was recognized in reserve from transactions with non-controlling interests. In respect with the acquisition, the Company's subsidiary Shagrir received two long term loans from two banks in the aggregate amount of approximately $11.5 million. These loans will be repaid over 5 years and bear annual interest of 3.5%-4.23%.

 

f.         On March 9 2014, the Company issued 1.13 million of its ordinary shares for total consideration of approximately $10.4 million (The shares were valued at $9.25 per share, the fair market value on the date of issuance). The Company recorded an amount of approximately $0.4 million as issuance expenses.

 

NOTE 2:-     INVENTORIES

 

   June 30,   December 31, 
   2014   2013 
   Unaudited     
           
Raw materials  $2,229   $2,189 
Work in process   417    232 
Finished goods   3,713    3,617 
           
   $6,359   $6,038 

 

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POINTER TELOCATION LTD. AND SUBSIDIARIES

 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 3:-     COMMITMENTS AND CONTINGENT LIABILITIES

 

a.        Charges:

 

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.

 

b.        Collateral:

 

1.        To secure Shagrir's obligations for providing services to several of its customers, Shagrir provided such customers with a bank guarantee in the amount of about $ 2,321 in effect between January 2009 and January 2016.

 

2.        The Company obtained bank guarantees in the amount of $ 255 in favor of its lessor and customs.

 

3.        As of June 30, 2014, the use of $ 65 has been restricted following B.C.R.A. (Central Bank of Argentina) regulations.

 

c.        Royalties:

 

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 June 30, 2014 is $ 2,444. No royalties were accrued or paid during 2014 and 2013.

 

d.        Litigation:

 

As of June 30, 2014, several claims were filed against Shagrir, mainly by customers. The claims are in an amount aggregating to approximately $ 2,204. The substance of the claims is the malfunction of Shagrir's products, which occurred during the ordinary course of business. Shagrir's management, based on the opinion of its legal counsel, is of the opinion that no material costs will arise to Shagrir in respect to these claims. Therefore, Shagrir has not recorded any provision regarding these claims.

 

e.        Commitments:

 

1.         The Company and DBSI Investments Ltd. ("DBSI"), an equity owner in the Company (see Note 6), are parties to a management services agreement pursuant to which DBSI provides management services in consideration of annual management fees of $180. The previous three year agreement commenced on August 1, 2011, and on April 2014, the shareholders of the Company approved an additional three year period commencing August 1, 2014.

 

2.         During 1998, the Company entered into an agreement with Shagrir, for the supply of the services and equipment required to set up reception bases to be positioned throughout Israel. An addendum to the agreement was entered into in 2004 (the "First Addendum"). The agreement was for a period of 10 years with an option to extend it by an additional 10 years. During 2008, the Company and Shagrir entered into a second addendum to the agreement that extended the agreement by a period of 5 years, until 2013. During 2014 the Company and Shagrir entered into a third addendum to the agreement that extended the agreement by a period of 5 years, until 2018.

 

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POINTER TELOCATION LTD. AND SUBSIDIARIES

 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 3:-        COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

 

3.        Shagrir entered into a management services agreement with the Company, pursuant to which the Company agreed to provide management services to Shagrir, in consideration of NIS 2 million per year.

 

f.         Covenants:

 

In respect of the bank loans provided to the Company for the purpose of funding the 2007 acquisition transaction, pursuant to which the Company acquired the activities and assets of Cellocator Ltd. ("Cellocator") and the acquisition of Pointer Brazil and in connection with the utilization of its 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.

 

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 June 30, 2014, the Company is in compliance, and expects to remain in compliance, with the financial covenants of its credit facilities in 2014.

 

Under the credit facility (in respect of the loans denominated in NIS) from the bank, Shagrir is required to meet financial covenants.

 

The financial covenants are:

 

1.        The ratio of the debt to the bank to the annual EBITDA will not exceed 5.5.

 

2.        The ratio of the annual EBITDA to the current maturities (the loan principal plus interest) of long-term loans from the bank will not be less than 1, at any time.

 

14
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 

  

NOTE 3:-     COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

 

3.        The shareholders' equity, including loans from shareholders, will not be less than NIS 50 million, at any time

 

4.        Shagrir shall not declare any distribution of dividends without the prior written consent of the bank.

 

As of June 30, 2014, Shagrir is in compliance and expect to remain in compliance with the financial covenants of its credit facility.

 

g.        In December 2011 one of the Company's Argentinean subsidiaries received a notification from the C.N.C. (Telecommunication Authority Agency) stating that the subsidiary is subject to a new tax (1% over sales related to data transmission) that had not been applicable to the subsidiary in the past.

 

As of the issuance of these financial statements, the subsidiary had only answered this notification but plans to appeal in the near future. Management has recorded a provision for the full amount (i.e. capital plus interest for $193).

 

NOTE 4:-     NET EARNINGS PER SHARE

 

The following table sets forth the computation of basic and diluted net earnings per share from continuing operations:

 

   Six months ended
June 30,		   Three months ended
June 30,		   Year ended
December 31,		 
   2014   2013   2014   2013   2013 
   Unaudited     
Numerator:                         
Numerator for basic net earnings per share - Net income from continuing operations  $2,612   $1,778   $1,146   $971   $6,320 
                          
Numerator for diluted net earnings per share - Net income from continuing operations  $2,612   $1,778   $1,146   $971   $6,320 
                          
Denominator:                         
                          
Denominator for basic net earnings per share - weighted-average number of shares outstanding (in thousands)   7,201    5,556    7,689    5,556    5,558 
 
                         
Denominator for diluted net earnings per share - adjusted weighted average shares and assumed exercises (in thousands)   7,542    5,556    8,030    5,556    5,697 
                          
Basic net earnings per share from continuing operations  $0.36   $0.32   $0.15   $0.17   $1.14 
                          
Diluted net earnings per share from continuing operations  $0.35   $0.32   $0.14   $0.17   $1.10 

 

15
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 5:-      INCOME TAXES

 

The effective tax rate for the six months ended June 30, 2014 was 30% as compared to 17% for the six months ended June 30, 2013. The increase is due to an increase in the Israeli tax rate from 25% to 26.5%, and the consolidation of the Brazilian subsidiary in October 2013, whose effective tax rate is approximately 34%.

 

NOTE 6:-      BALANCES AND TRANSACTIONS WITH RELATED PARTIES

 

a.        Balances with related parties:

 

   June 30,   December 31, 
   2014   2013 
   Unaudited     
         
Other accounts payable and accrued expenses:          
DBSI (see note 3e(1))  $53   $53 

 

b.        Transactions with related parties:

 

   Six months ended
June 30,		   Three months ended
June 30,		   Year ended
December 31,		 
   2014   2013   2014   2013   2013 
   Unaudited     
                     
Sales to affiliate  $-   $361   $-   $232   $596 
Management fees to DBSI (see Note 3e(1))  $90   $90   $45   $45   $180 

 

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POINTER TELOCATION LTD. AND SUBSIDIARIES

 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 7:-      SEGMENT INFORMATION

 

a.        The following segment identification is identical to the segment used in the latest annual consolidated financial report.

 

b.        The following presents segment results of operations for the six months ended June 30, 2014 (unaudited):

 

  

Cellocator

segment

  

Pointer

segment

   Total 
                
Segments revenues  $11,265   $46,955   $58,220 
Intersegments revenues   (5,331)   -    (5,331)
                
Revenues from external customers  $5,934   $46,955   $52,889 
                
Segments operating income  $958   $4,775   $5,733 
                
Segments assets  $25,208   $100,982   $126,190 

 

The Pointer segment revenues include revenue from services in the amount of $ 35,728.

 

The following reconciles segment operating profit and segments assets to net operating profit and assets as reported in the interim consolidated statements of income:

 

Segments operating income  $5,733 
Intercompany gains on intersegment sales   (1,496)
      
Operating income  $4,237 
      
Segments assets  $126,190 
Intercompany elimination   (2,216)
      
Total assets  $123,974 

 

c.        The following presents segment results of operations for the six months ended June 30, 2013 (unaudited):

 

   Cellocator
segment		   Pointer
segment		   Total 
                
Segments revenues  $11,895   $38,508   $50,403 
Intersegments revenues   (5,023)   -    (5,023)
                
Revenues from external customers  $6,872   $38,508   $45,380 
                
Segments operating income  $1,551   $1,587   $3,138 
                
Segments assets  $17,898   $82,816   $100,714 

 

The Pointer segment revenues include revenue from services in the amount of $ 29,495.

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POINTER TELOCATION LTD. AND SUBSIDIARIES

 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 7:-       SEGMENT INFORMATION (Cont.)

 

The following reconciles segment operating profit and segments assets to net operating profit and assets as reported in the interim consolidated statements of income:

 

Segments operating income  $3,138 
Intercompany gains on intersegment sales   174 
      
Operating income  $3,312 
      
Segments assets  $100,714 
Intercompany elimination   (1,064)
      
Total assets  $99,650 

 

d.        The following presents segment results of operations for the three months ended June 30, 2014 (unaudited):

 

   Cellocator
segment		   Pointer
segment		   Total 
                
Segments revenues  $5,867   $23,008   $28,875 
Intersegments revenues   (3,001)   -    (3,001)
                
Revenues from external customers  $2,866   $23,008   $25,874 
                
Segments operating profit  $711   $2,105   $2,816 
                
Segments assets  $25,208   $100,982   $126,190 

 

The Pointer segment revenues include revenue from services in the amount of $17,818.

 

The following reconciles segment operating profit and segments assets to net operating profit and assets as reported in the interim consolidated statements of income:

 

Segments operating income  $2,816 
Intercompany gains on intersegment sales   (1,164)
      
Operating income  $1,652 
      
Segments assets  $126,190 
Intercompany elimination   (2,216)
      
Total assets  $123,974 

 

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POINTER TELOCATION LTD. AND SUBSIDIARIES

 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 7:-        SEGMENT INFORMATION (Cont.)

 

e.        The following presents segment results of operations for the three months ended June 30, 2013 (unaudited):

 

   Cellocator
segment		   Pointer
segment		   Total 
                
Segments revenues  $6,013   $19,733   $25,746 
Intersegments revenues   (2,511)   -    (2,511)
                
Revenues from external customers  $3,502   $19,733   $23,235 
                
Segments operating profit  $697   $883   $1,580 
                
Segments assets  $17,898   $82,816   $100,714 

 

The Pointer segment revenues include revenue from services in the amount of $ 14,772.

 

The following reconciles segment operating profit and segments assets to net operating profit and assets as reported in the interim consolidated statements of income:

 

Segments operating income  $1,580 
Intercompany gains on intersegment sales   187 
      
Operating income  $1,767 
      
Segments assets  $100,714 
Intercompany elimination   (1,064)
      
Total assets  $99,650 

 

f.         The following presents segment results of operations for the year ended December 31, 2013:

 

   Cellocator segment   Pointer segment   Total 
             
Segments revenues  $24,268   $81,990   $106,258 
Intersegments revenues   (8,401)   -    (8,401)
                
Revenues from external customers  $15,867   $81,990   $97,857 
                
Segments operating profit  $3,065   $4,890   $7,955 
                
Segments assets  $36,513   $78,930   $115,443 
                
Depreciation, amortization and impairment expenses  $291   $3,758   $4,049 
                
Expenditures for assets  $135   $4,528   $4,663 
19
 

 

POINTER TELOCATION LTD. AND SUBSIDIARIES

 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 7:-       SEGMENT INFORMATION (Cont.)

 

The Pointer segment revenues include revenue from services in the amount of $ 63,141.

 

The following reconciles segment operating profit and segments assets to net operating profit and assets as reported in the consolidated statements of income:

 

Segments operating income  $7,955 
Intercompany adjustments on intersegment sales   (1,909)
      
Operating income  $6,046 
      
Segments assets  $115,443 
Intercompany elimination   (1,779)
      
Total assets  $113,664 

 

NOTE 8:-       SUBSEQUENT EVENTS

 

a.    On September 9, 2014, the Company acquired a 100% interest in Global Telematics S.A. Proprietary Limited ("Global Telematics"), a provider of commercial fleet management and vehicle tracking solutions in South Africa.

 

- - - - - - - - - - - - - - - - - - -

 

20