Ituran Location & Control Ltd 20-F for FY2021
Ituran Location & Control Ltd. (ITRN)
About this 20-F
Ituran Location & Control Ltd filed this 20-F on April 26, 2022, covering the fiscal year ended December 31, 2021 (FY2021).
Headline figures
Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $270.88M
- up 10.3% from $245.63M a year earlier
- Net income
- $34.26M
- up 112.5% from net income of $16.12M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
OR
For the fiscal year ended
OR
OR
Date of event requiring this shell company report..........................................
For the transition period from ____________ to ____________
Commission file number.
(Exact name of Registrant as specified in its charter)
ITURAN LOCATION AND CONTROL LTD.
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
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per share |
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Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
SEC 1852 (04-20) - Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ⌧
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ⌧
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer", "accelerated filer", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐ |
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Non-accelerated filer ☐ |
Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
|
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International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ |
Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes ☐ No
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V | ||
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V | ||
|
1 | ||
|
1 | ||
|
1 | ||
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A. |
SELECTED FINANCIAL DATA |
1 |
|
B. |
CAPITALIZATION AND INDEBTEDNESS |
3 |
|
C. |
REASONS FOR THE OFFER AND USE OF PROCEEDS
|
3 |
|
D. |
RISK FACTORS |
3 |
| 11 | ||
|
A. |
HISTORY AND DEVELOPMENT OF THE COMPANY
|
11 |
|
B. |
BUSINESS OVERVIEW |
12 |
|
C. |
ORGANIZATIONAL STRUCTURE |
22 |
|
D. |
PROPERTY, PLANTS AND EQUIPMENT |
22 |
| 24 | ||
|
24 | ||
|
A. |
OPERATING RESULTS |
24 |
|
B. |
LIQUIDITY AND CAPITAL RESOURCES |
34 |
|
C. |
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
|
37 |
|
D. |
TREND INFORMATION |
37 |
|
E. |
OFF-BALANCE SHEET ARRANGEMENTS |
37 |
|
F. |
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
|
37 |
|
G. |
SAFE HARBOR |
38 |
| 38 | ||
|
A. |
DIRECTORS AND SENIOR MANAGEMENT |
38 |
|
B. |
COMPENSATION |
41 |
|
C. |
BOARD PRACTICES |
43 |
|
D. |
EMPLOYEES |
47 |
|
E. |
SHARE OWNERSHIP |
49 |
| 50 | ||
|
A. |
MAJOR SHAREHOLDERS |
50 |
|
B. |
RELATED PARTY TRANSACTIONS |
51 |
|
C. |
INTERESTS OF EXPERTS AND COUNSEL |
56 |
| 56 | ||
|
A. |
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
|
56 |
|
B. |
SIGNIFICANT CHANGES |
57 |
| 57 | ||
|
A. |
OFFER AND LISTING DETAILS |
57 |
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B. |
PLAN OF DISTRIBUTION |
57 |
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C. |
MARKETS |
57 |
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D. |
SELLING SHAREHOLDERS |
57 |
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E. |
DILUTION |
57 |
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F. |
EXPENSES OF THE ISSUE |
57 |
| 57 | ||
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A. |
SHARE CAPITAL |
57 |
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B. |
MEMORANDUM AND ARTICLES OF ASSOCIATION
|
57 |
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C. |
MATERIAL CONTRACTS |
64 |
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D. |
EXCHANGE CONTROLS |
64 |
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E. |
TAXATION |
64 |
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F. |
DIVIDENDS AND PAYING AGENTS |
71 |
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G. |
STATEMENT BY EXPERTS |
71 |
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H. |
DOCUMENTS ON DISPLAY |
71 |
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I. |
SUBSIDIARY INFORMATION |
71 |
| 71 | ||
| 72 | ||
| 72 | ||
| 72 | ||
| 72 |
| 76 | ||
| 76 | ||
| 76 | ||
| 76 | ||
| 76 | ||
| 76 | ||
| 77 | ||
| 77 | ||
| 77 | ||
|
77 | ||
|
77 | ||
| 78 |
| ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
| ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE |
| ITEM 3. |
KEY INFORMATION |
|
Year Ended December 31, |
||||||||||||||||||||
|
2021 |
2020 |
2019 |
2018 |
2017 |
||||||||||||||||
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In USD |
||||||||||||||||||||
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In thousands, except per share amounts
|
||||||||||||||||||||
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Revenues: |
||||||||||||||||||||
|
Telematics services |
189,649 |
182,944 |
204,728 |
181,357 |
169,752 |
|||||||||||||||
|
Telematics products |
81,235 |
62,683 |
74,604 |
71,978 |
64,884 |
|||||||||||||||
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Total Revenues |
270,884 |
245,627 |
279,332 |
253,335 |
234,636 |
|||||||||||||||
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Cost of Revenues: |
||||||||||||||||||||
|
Telematics services |
84,783 |
81,365 |
90,158 |
70,329 |
60,256 |
|||||||||||||||
|
Telematics products |
59,619 |
48,747 |
58,656 |
55,678 |
54,996 |
|||||||||||||||
|
Total cost of revenues |
144,402 |
130,112 |
148,814 |
126,007 |
115,252 |
|||||||||||||||
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Gross profit |
126,482 |
115,515 |
130,518 |
127,328 |
119,384 |
|||||||||||||||
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Research and development expenses |
14,099 |
12,767 |
13,913 |
6,223 |
3,160 |
|||||||||||||||
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Selling and marketing expenses |
11,906 |
11,014 |
12,778 |
11,340 |
12,246 |
|||||||||||||||
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General and administrative expenses |
46,118 |
49,705 |
55,166 |
47,693 |
47,590 |
|||||||||||||||
|
Impairment of goodwill |
- |
10,508 |
12,292 |
- |
- |
|||||||||||||||
|
Impairment of intangible assets and other expenses (income) net |
(256 |
) |
3,690 |
13,715 |
(306 |
) |
(147 |
) | ||||||||||||
|
Operating Income |
54,615 |
27,831 |
22,654 |
62,378 |
56,535 |
|||||||||||||||
|
Other income (expenses), net |
(109 |
) |
(272 |
) |
(26 |
) |
13,138 |
- |
||||||||||||
|
Financing income (expenses), net |
(5,538 |
) |
1,480 |
576 |
717 |
(989 |
) | |||||||||||||
|
Income before income tax |
48,968 |
29,039 |
23,204 |
76,233 |
55,546 |
|||||||||||||||
|
Income tax |
(11,854 |
) |
(10,856 |
)) |
(12,234 |
) |
(17,273 |
) |
(17,705 |
) | ||||||||||
|
Share in gains (losses) of affiliated companies, net |
(102 |
) |
(842 |
) |
(3,203 |
) |
4,219 |
8,520 |
||||||||||||
|
Net income for the year |
37,012 |
17,341 |
7,767 |
63,179 |
46,361 |
|||||||||||||||
|
Less: net income attributable to non-controlling interest |
(2,756 |
) |
(1,218 |
) |
(878 |
) |
(2,504 |
) |
(2,567 |
) | ||||||||||
|
Net income attributable to Company stockholders |
34,256 |
16,123 |
6,889 |
60,675 |
43,794 |
|||||||||||||||
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Earnings per share |
||||||||||||||||||||
|
Basic |
1,65 |
0.77 |
0.33 |
2.88 |
2.09 |
|||||||||||||||
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Diluted |
1,65 |
0.77 |
0.33 |
2.88 |
2.09 |
|||||||||||||||
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Weighted average number of shares outstanding |
||||||||||||||||||||
|
Basic |
20,769 |
20,813 |
21,037 |
21,077 |
20,968 |
|||||||||||||||
|
Diluted |
20,769 |
20,813 |
21,037 |
21,077 |
20,968 |
|||||||||||||||
|
Year Ended December 31, |
||||||||||||||||||||
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2021 |
2020 |
2019 |
2018 |
2017 |
||||||||||||||||
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In USD |
||||||||||||||||||||
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In thousands, except per share amounts
|
||||||||||||||||||||
|
Cash & Cash Equivalent; and investment in trading marketable
securities |
54,711 |
78,846 |
54,322 |
53,295 |
40,465 |
|||||||||||||||
|
Working Capital |
58,102 |
66,708 |
73,085 |
84,214 |
71,360 |
|||||||||||||||
|
Total Assets |
293,021 |
312,472 |
339,235 |
373,792 |
215,159 |
|||||||||||||||
|
Total Liabilities |
155,218 |
182,573 |
203,321 |
213,592 |
81,930 |
|||||||||||||||
|
Retained Earnings |
143,259 |
127,684 |
116,479 |
129,580 |
92,065 |
|||||||||||||||
|
Stockholders’ Equity |
132,460 |
127,192 |
129,330 |
153,693 |
125,790 |
|||||||||||||||
|
Dividend declared per share |
0.90 |
0.24 |
0.95 |
0.95 |
1.12 |
|||||||||||||||
|
Year Ended December 31, |
||||||||||||||||||||
|
2021 |
2020 |
2019 |
2018 |
2017 |
||||||||||||||||
|
Subscribers of telematics services (1)
|
1,881,000 |
1,768,000 |
1,781,000 |
1,770,000 |
1,160,000 |
|||||||||||||||
|
Average monthly churn rate |
3 |
% |
3 |
% |
3.3 |
% |
2.8 |
% |
3.2 |
% | ||||||||||
|
(1) |
Number of subscribers are rounded to the nearest thousand. |
| ◾ |
accepting vehicle location and recovery technology as a preferred security product; |
| ◾ |
requiring or providing a premium discount for using location and recovery services and products; |
| ◾ |
mandating or encouraging use of our SVR services and telematics products, or similar
services and products, for vehicles with the same or similar threshold values and for the same or similar required duration of use; and
|
| ◾ |
the rate of car theft or consumer concern over vehicle safety is high; |
|
◾ |
satisfactory radio frequencies are available to us for our RF technology, that allow us to operate our
business in an uninterrupted manner; and |
|
◾ |
insurance companies, car manufacturers or owners of cars believe that the value of cars justifies incurring
the expense associated with the deployment of SVR services. |
| ◾ |
the gain or loss of significant orders or customers; |
| ◾ |
recruitment or departure of key personnel; |
| ◾ |
the announcement of new products or service enhancements by us or our competitors; |
| ◾ |
quarterly variations in our or our competitors' results of operations; |
| ◾ |
announcements related to litigation; |
| ◾ |
changes in earnings estimates, investors' perceptions, recommendations by securities analysts or our failure to achieve analysts'
earnings estimates; |
| ◾ |
developments in our industry; and |
| ◾ |
general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors.
|
|
• |
the ability to locate the fleet’s
vehicles; |
| • |
continuous data communication with the fleet’s vehicles; |
| • |
real-time vehicle status indicators: speed, distance driven, direction of travel, driver name, motion start/stop, engine start/stop,
speeding, diagnostic alerts, driver behavior and more; |
| • |
recording of determined events and analysis of data over time to improve driving and vehicle use; |
| • |
remote monitoring and processing of data, such as temperature control in refrigerated or chilled compartments, time stamp, tire pressure
and heat and other complementary data; |
| • |
connection to standard organization systems; |
| • |
accident notification; |
| • |
task management optimization. |
| ■ |
Base Site: a radio receiver, which includes a processor and a data computation unit to collect
and send data to and from transponders and send that data to control centers as part of the terrestrial infrastructure of the location
system; |
| ■ |
Control Center: a center consisting of software used to collect data from various base sites,
conduct location calculations and transmit location data to various customers and law enforcement agencies; |
| ■ |
GPS/GPRS-based products: navigation and tracking devices installed in vehicles; and
|
| ■ |
SMART: a portable transmitter installed in vehicles (including motorcycles) that sends a signal
to the base site, enabling the location of vehicles, equipment or an individual; |
|
Country |
Services offered |
Products sold | ||
|
Israel
|
SVR,
Fleet Management,
Value-added services, including:
Connected Car,
UBI |
Telematics Products | ||
|
Brazil, Argentina, Mexico, Ecuador, Colombia |
SVR,
Fleet Management, |
Telematics Products | ||
|
Value-added services, including:
Connected Car |
||||
|
|
||||
|
United States |
SVR, |
Telematics Products | ||
|
Fleet Management, |
||||
|
Value-added services, including: Asset protection to Auto Lenders |
| ■ |
Israel: We commenced operations in Israel in 1995 and we had approximately 653,000 subscribers
as of December 31, 2021. The operations in Israel were expended through M& A transactions with local companies (following the RTH
Transaction) as well as organic growth. We operate throughout Israel in providing services through GPS/GPRS and RF based products and
services. |
|
◾ |
Brazil: We commenced operations in Brazil in 2000 and we had approximately
453,000 subscribers as of December 31, 2021. The operations were expended through M& A transactions with local companies (following
the RTH Transaction) as well as organic growth. We currently provide RF based products and services only in the metropolitan areas of
Sao Paulo, Campinas, Americans and Rio de Janeiro. However, we operate throughout Brazil in providing GPS/GPRS based products and services.
|
| ■ |
Argentina: We commenced operations in Argentina in 2002. We currently provide RF based products
and services only in the metropolitan area of Buenos Aires. However, we also operate throughout Argentina in providing GPS/GPRS based
products and services. |
| ■ |
United States: We commenced operations in the United States in 2000. We provide GPS/GPRS products
and services throughout the United States. |
| ■ |
Mexico: We acquired the operations in Mexico in September 2018 as part of the RTH Transaction.
We currently provide GPS/GPRS based products and services. |
| ■ |
Ecuador: We acquired the operations in Ecuador in September 2018 as part of the RTH Transaction.
We currently provide GPS/GPRS based products and services. |
| ■ |
Colombia: We acquired the operations in Colombia in September 2018 as part of the RTH Transaction.
We currently provide GPS/GPRS based products and services. |
| ■ |
Israel. Our primary competitors in Israel are Pointer and Skylock Ltd. |
| ■ |
Brazil. Brazil is a highly fragmented market with many companies selling competing products
and services (including immobilizers and other less-sophisticated vehicle security systems). Our main competitors in Brazil are Sascar,
Zatix, CEABS, Car Systems, Sat-Company, 3S. |
| ■ |
Argentina. Argentina is a highly fragmented market with many companies selling competing products
and services (including immobilizers and other less-sophisticated vehicle security systems). Our main competitors in Argentina are LoJack
Corporation, Pointer Argentina S.A., Prosegur S.A. and Megatrans S.A. |
| ■ |
United States. In the United States, there are several major companies offering various theft
protection and recovery products that compete with our product and service offerings, including LoJack Corporation, OnStar Corporation,
Advantage GPS/Procon Analytics, Sarekon GPS, Calamp, Spireon (which also includes SysLocate and GoldStar), PassTime, Guide Point, Icon
and I-Metrik SVR. |
| ◾ |
Colombia. Colombia is a highly fragmented market. Main
companies operate under the satellite/cellular infrastructure. Our main competitors are LoJack Corporation (under Detekor Brand), Prosegur,
SATRACK (Local Company). |
| ◾ |
Mexico. Mexico is a highly fragmented market in tracking and satellite location services,
in which there are multiple companies dedicated to providing comprehensive satellite tracking, fleet management and vehicle recovery solutions
with GPS technology through the marketing of similar devices and technologies to ours, highly specialized in fleet management. The direct
competitors are LoJack Corporation, Encontrack S.A. and Pointer Recuperación S.A. |
| ◾ |
Ecuador. Ecuador is highly fragmented market.
Main companies operate under the satellite/cellular infrastructure. Our main competitors
are Hunter (Lojack Corporation),Tracklink and Carsync. |
| • |
Israel: Pointer, ISR, Traffilog and Skylock; |
| • |
United States: GPS Insight, Trimble, Network Fleet, Street Eagle, FleetMatics, Navtrack, Teletrac,
Trim Track, FleetBoss, PassTime, Verizon, AT&T, Geotab, Fleet-Complete,Sprint, Zubie, and Spireon; |
| • |
Brazil: Sascar, Zatix, CEABS, 3S and GolSat; |
| • |
Argentina: LoJack Corporation, Megatrans SA., Sitrac S.A., American Tracer, Ubicar S.A.,Sky
Cop. and Prosegur S.A; |
| • |
Mexico: LoJack Corporation, Encotrack, Easytrack, Geotab and Tracker; |
| • |
Ecuador: Hunter (LoJack Corporation), Tracklink, Carsync and Sherlock; |
| • |
Colombia: Satrack, Detector and Prosegur. |
| ■ |
erection and operating permits from the Israeli Ministry of the Environment; |
| ■ |
permits from the Israeli Civil Aviation Authority, in certain cases; |
| ■ |
permits from the Israeli Defense Forces; |
| ■ |
approval from Israel’s Land Administration and/or from Civil Administration in the Territories, which usually also involves
payment for the land use rights; and |
| ■ |
building permits from local or regional zoning authorities in Israel and Brazil. |
| • |
a permit from Anatel (National Agency for Telecommunication) |
| • |
a permit from IBAMA (Environment national agency) and/or state EPAs |
| • |
Municipal permits |
| • |
a permit from the fire department; and a |
| • |
permit from COMAR (Aviation authorities) |
|
Name of Subsidiary |
Country of Incorporation |
Proportion of Ownership Interest | ||
|
Ituran USA Holdings Inc |
USA |
100% | ||
|
Ituran USA Inc |
USA |
85.80% | ||
|
Ituran de Argentina S.A |
Argentina |
100% | ||
|
Ituran Sistemas de Monitoramento Ltda |
Brazil |
98.75% | ||
|
Ituran Instalacoes Ltda |
Brazil |
98.75% | ||
|
Teleran Holding Ltda |
Brazil |
99.99% | ||
|
Ituran servicos Ltda |
Brazil |
98.75% | ||
|
E.R.M. Electronic Systems Limited |
Israel |
49.5%1
| ||
|
Mapa Mapping & Publishing Ltd |
Israel |
100% | ||
|
Ituran Spain Holding S.L |
Spain |
100% | ||
|
Ituran Road Track Monitaramento de Veiculos LTDA |
Brazil |
100% | ||
|
Ituran Road Track Argentina, S.A |
Argentina |
100% | ||
|
Global Telematics Solutions HK, Limited |
Hong Kong |
100% | ||
|
Road Track De Colombia S.A.S |
Colombia |
100% | ||
|
Road Track Ecuador, S.A. |
Ecuador |
100% | ||
|
Road Track Mexico S.A. De C.V |
Mexico |
100% | ||
|
Road Track HK Telematics Limited |
Hong Kong |
100% | ||
|
E.D.T.E – Drive Technology Ltd |
Israel |
100% | ||
|
Ituran Tech Ltd |
Israel | 99.99% |
| D. |
PROPERTY, PLANTS AND EQUIPMENT |
| A. |
OPERATING RESULTS |
|
As of December 31, |
||||||||||||
|
2021 |
2020 |
2019 |
||||||||||
|
Israel |
653,000 |
643,000 |
610,000 |
|||||||||
|
Brazil |
453,000 |
452,000 |
489,000 |
|||||||||
|
Others |
775,000 |
673,000 |
682,000 |
|||||||||
|
Total(1)
|
1,881,000 |
1,768,000 |
1,781,000 |
|||||||||
|
Year ended December 31, |
||||||||||||||||||||||||
|
2021 |
2020 |
2019 |
||||||||||||||||||||||
|
In USD, in Millions |
||||||||||||||||||||||||
|
Telematics services |
Telematics products |
Telematics services |
Telematics products |
Telematic services |
Telematics products |
|||||||||||||||||||
|
Israel |
96.5 |
44.1 |
85.1 |
35.4 |
77.6 |
32.5 |
||||||||||||||||||
|
Brazil |
55.2 |
2.6 |
60.0 |
1.5 |
85.1 |
12.9 |
||||||||||||||||||
|
Others |
37.9 |
34.6 |
37.8 |
25.8 |
42.0 |
29.2 |
||||||||||||||||||
|
Total(1)
|
189.6 |
81.3 |
182.9 |
62.7 |
204.7 |
74.6 |
||||||||||||||||||
| • |
Identification of the contract, or contracts, with a customer; |
| • |
Identification of the performance obligations in the contract; |
| • |
Determination of the transaction price; |
| • |
Allocation of the transaction price to the performance obligations in the contract; and |
| • |
Recognition of revenue when, or as, we satisfy a performance obligation. |
| 1. |
Revenues from sales of Automatic Vehicle Location ("AVL") products are recognized when the control of the product passed to the customer
(usually upon delivery). |
| 2. |
Revenues from provision of SVR services are recognized over time, as the customers simultaneously receive and consume the benefits
provided by our performance as we perform. |
| 3. |
For arrangements that involve the delivery or performance of multiple products (mostly, AVL products), services (such as SVR services)
and/or rights to use assets, we analyze whether the goods or services that were promised to the customer are distinct. A good or service
promised to a customer is considered ‘distinct’ if both of the following criteria are met: 1. The customer can benefit from
the good or service, either on its own or together with other resources that are readily available to the customer; and, 2. Our promise
to transfer the good or service to the customer is separately identifiable from other promises in the contract. When the above criteria
are met, the revenue recognition for the related products and/or services are recognized as described in 1 and 2 above, as applicable.
|
| 4. |
Amounts earned by certain Brazilian subsidiary for arranging a bundle transaction of SVR services subscription and installation services
together with insurance services to be supplied by a third party insurance company, are recognized ratably on a straight-line basis over
the subscription period (see 2 above), since the amount allocated to us (for the SVR services subscription, installation services and
for arranging the transaction), is contingent upon the delivery of the SVR services. As the insurance company is acting as a principal
with respect to the insurance component, we recognized only the net amounts as revenues, after deduction of amounts related to the insurance
component. |
| 5. |
Deferred revenues include unearned amounts received from customers (mostly for the provision of installation, future subscription
services and extended warranty) but not yet recognized as revenues. Such deferred revenues are recognized as described in paragraph
2 above or paragraph 6 below, as applicable. |
| 6. |
Extended warranty |
| A. |
An amount of approximately $35.8 million (as of December 31, 2021) relates to two different reporting units (resulted from the
RT acquisition). we have historically performed an annual goodwill assessment as of June 30 of each year or more often if indicators
of impairment are presented (including June 30, 2021). During the fourth quarter of 2021, following the second closing of the RT acquisition
we decided to change the date of its annual impairment assessment from June 30 to December 31. The change was made because we believe
that the second closing gives a fair value to the goodwill presented in its report. |
| B. |
An amount of approximately $4.2 million (as of December 31, 2021) relates to two different reporting units (resulted from past
acquisitions) is tested on December 31 of each year, or more often if indicators of impairment are present. |
|
Year Ended December 31, |
||||||||||||
|
% |
||||||||||||
|
Consolidated statements of operations data: |
2021 |
2020 |
2019 |
|||||||||
|
Revenues: |
||||||||||||
|
Telematics services |
70.0 |
74.5 |
73.3 |
|||||||||
|
Telematics product |
30.0 |
25.5 |
26.7 |
|||||||||
|
Total Revenues |
100 |
100 |
100 |
|||||||||
|
Cost of Revenues: |
||||||||||||
|
Telematics services |
31.3 |
33.2 |
32.3 |
|||||||||
|
Telematics products |
22.0 |
19.8 |
21.0 |
|||||||||
|
Total cost of revenues |
53.3 |
53.0 |
53.3 |
|||||||||
|
Gross profit |
46.7 |
47.0 |
46.7 |
|||||||||
|
Operating Expenses: |
||||||||||||
|
Research and development expenses |
5.2 |
5.2 |
5.0 |
|||||||||
|
Selling and marketing Expenses |
4.4 |
4.5 |
4.6 |
|||||||||
|
General and administrative expenses, net |
17.0 |
20.2 |
19.7 |
|||||||||
|
Impairment of goodwill |
- |
4.3 |
4.4 |
|||||||||
|
Impairment of intangible assets and other expenses (income), net |
(0.1 |
) |
1.5 |
4.9 |
||||||||
|
Total operating expenses |
26.5 |
35.7 |
38.6 |
|||||||||
|
Operating Income |
20.2 |
11.3 |
8.1 |
|||||||||
|
Other income expenses, net |
(0.1 |
) |
(0.1 |
) |
- |
|||||||
|
Financing income, net |
(2.0 |
) |
0.6 |
0.2 |
||||||||
|
Income before income tax |
18.1 |
11.8 |
8.3 |
|||||||||
|
Income tax |
(4.4 |
) |
(4.4 |
) |
(4.4 |
) | ||||||
|
Share in gains (losses) of affiliated companies, net |
(0.1 |
) |
(0.3 |
) |
(1.1 |
) | ||||||
|
Net income for the year |
13.6 |
7.1 |
2.8 |
|||||||||
|
Less: net income attributable to non-controlling interests |
(1.0 |
) |
(0.5 |
) |
(0.3 |
) | ||||||
|
Net income attributable to company stockholders |
12.6 |
6.6 |
2.5 |
|||||||||
|
Year Ended December 31, |
||||||||||||||||||||||||
|
2019 |
2020 |
2021 |
||||||||||||||||||||||
|
Actual |
At 2018
exchange rates (1) |
Actual |
At 2019
exchange rates (1) |
Actual |
At 2020
exchange rates (1) |
|||||||||||||||||||
|
(In thousands of US$) |
||||||||||||||||||||||||
|
Revenues |
279,332 |
289,676 |
245,627 |
262,529 |
270,884 |
264,507 |
||||||||||||||||||
|
Gross profit |
130,518 |
135,730 |
115,515 |
122,708 |
126,482 |
123,734 |
||||||||||||||||||
|
Operating income |
22,654 |
25,419 |
27,831 |
31,229 |
54,615 |
53,595 |
||||||||||||||||||
|
Accumulated net taxable profit |
will pay a fix amount of |
plus a % over |
the following amount | |||||
|
More than AR$ |
up to AR$ | |||||||
|
AR$
|
- |
AR$ |
5.000.000,00 |
AR$ |
- |
25% |
AR$ |
- |
|
AR$ |
5.000.000,00 |
AR$ |
50.000.000,00 |
AR$ |
1.250.000,00 |
30% |
AR$ |
5.000.000,00 |
|
AR$ |
50.000.000,00 |
en adelante |
AR$ |
14.750.000,00 |
35% |
AR$ |
50.000.000,00 | |
| 1. |
Remittance tax (Impuesto a la Salida de Divisas) - Remittance tax of 5% is imposed on the transfer of money abroad in cash or through
pay checks, transfers, or courier of any nature carried out with or without the mediation of the Ecuadorian financial system, including
transfer from foreign bank accounts. Dividends are exempt from this tax, under certain considerations. |
| 2. |
Labor profit sharing - Although it is not considered a tax, companies are obligated to pay 15% of their pre-tax earnings to their
employees. This payment is considered a deductible expense for CIT computation purposes. |
|
Year ended December 31, |
||||||||||||
|
2021 |
2020 |
2019 |
||||||||||
|
(In thousands) |
||||||||||||
|
Net cash provided by operating activities |
55,790 |
60,068 |
59,679 |
|||||||||
|
Net cash used in investing activities |
(18,524 |
) |
(11,479 |
) |
(18,287 |
) | ||||||
|
Net cash used in financing activities |
(58,666 |
) |
(29,449 |
) |
(38,927 |
) | ||||||
|
Effect of exchange rate changes on cash and cash equivalents |
(477 |
) |
(921 |
) |
101 |
|||||||
|
Net increase/decrease in cash and cash equivalents |
(21,877 |
) |
18,219 |
2,566 |
||||||||
|
Payments due by period |
||||||||||||||||||||
|
Contractual obligations |
Total |
Less than 1 year |
1-3 years |
3-5 years |
After 5 years |
|||||||||||||||
|
(In USD thousands) |
||||||||||||||||||||
|
*Operating leases |
5,174 |
2,768 |
1,567 |
614 |
225 |
|||||||||||||||
|
Purchase Obligations |
17,843 |
17,843 |
- |
- |
- |
|||||||||||||||
|
Long – term debt obligations |
31,426 |
18,257 |
13,169 |
- |
- |
|||||||||||||||
|
Total |
54,443 |
38,868 |
14,736 |
614 |
225 |
|||||||||||||||
| A. |
DIRECTORS AND SENIOR MANAGEMENT |
|
Name |
Age |
Position |
|
Izzy Sheratzky |
75 |
President and director |
|
Yehuda Kahane |
77 |
Director |
|
Ze’ev Koren |
77 |
Chairman of the Board of Directors and an independent director |
|
Efraim Sheratzky |
69 |
Director |
|
Eyal Sheratzky |
53 |
Co-Chief Executive Officer and Director |
|
Nir Sheratzky |
50 |
Co-Chief Executive Officer and Director |
|
Gil Sheratzky |
44 |
CEO of our Subsidiary, International Activity and Business Development Officer and a Director |
|
Yoav Kahane(1)(2) |
48 |
Director and an independent director |
|
Yigal Shani |
77 |
Director |
|
Israel Baron (1)(2)(3)
+ |
68 |
External Director |
|
Gidon Kotler (1)(2)(3) |
81 |
External Director |
|
Tal Sheratzky- Jaffa |
44 |
Director and an independent director |
|
Ami Saranga |
58 |
Deputy Chief Executive Officer |
|
Eli Kamer |
55 |
Executive Vice President, Finance; Chief Financial Officer |
|
Guy Aharonov |
56 |
General Counsel |
|
Udi Mizrahi |
50 |
Deputy Chief Executive Officer International Operation and VP of Finance |
|
Shahar Sheratzky |
42 |
Vice President, head of our business division |
|
Management fees |
Wage |
Social components |
Car value |
Bonus (results based) |
Bonus (Share yield based) |
Total |
||||||||||||||||||||||
|
Compensation components (in thousand US Dollars) |
||||||||||||||||||||||||||||
|
Izzy Sheratzky (President)
|
781 |
- |
- |
- |
1,228 |
836 |
2,845 |
|||||||||||||||||||||
|
Eyal Sheratzky (Co-Chief Executive Officer) |
608 |
- |
- |
- |
975 |
650 |
2,233 |
|||||||||||||||||||||
|
Nir Sheratzky (Co-Chief Executive Officer) |
608 |
- |
- |
- |
975 |
650 |
2,233 |
|||||||||||||||||||||
|
Gil Sheratzky (CEO of our Subsidiary. International Activity
and Business Development Officer) |
435 |
- |
- |
- |
697 |
464 |
1,596 |
|||||||||||||||||||||
|
Shahar Sheratzky (Vice president, head of our business division)
|
- |
182 |
44 |
17 |
229 |
- |
472 |
|||||||||||||||||||||
|
Total of our 5 highest paid officers
|
2,432 |
182 |
44 |
17 |
4,104 |
2,600 |
9,379 |
|||||||||||||||||||||
| C. |
BOARD PRACTICES |
| ◾ |
Such majority includes at least the majority of the shares held by all non-controlling shareholders or those having personal interest
in the nomination, except personal interest which is not resulting from connections with controlling shareholders, present and voting
at such meeting; or |
| ◾ |
The total number of shares voted against the election of the external director and held by shareholders other than controlling shareholders
or those having personal interest in the nomination, except personal interest which is not resulting from connections with controlling
shareholders, must not exceed 2% of the shares whose holders are entitled to vote at any meeting of shareholders. |
| 1. |
Transaction that is neither extraordinary, nor insignificant. |
| (1) |
Transaction which is higher than 4.5% of the equity of the company according its last combined financial reports which were published
prior to the approval of the transaction. |
| (2) |
Transaction that involves risks or significant exposure beyond mere monetary liabilities or obligations. |
| (3) |
Transaction in which the company enters a new activity field or exits from an existing activity field. |
| 2. |
Insignificant transaction: |
| 3. |
General rules: |
| (1) |
Any transaction with a controlling shareholder or any transaction that a controlling shareholder has an interest in, will be brought
before the Audit Committee, which will determine its type and decide on case by case basis on defining it as an insignificant transaction
or other kind of transaction, and will decide on its review and on its approval. |
| (2) |
According the adopted criteria, transactions with Tzivtit Insurance Agency (1998) Ltd. and with Rinat Yogev Nadlan Ltd. shall be
classified as insignificant transactions. If the extent of such transactions will remain similar during the following years, our management
shall be deemed qualified to approve such transactions and to report them to the Audit Committee. |
| (3) |
Every year the criteria for classifying transactions as set up above shall be brought for re-approval by the Audit Committee.
|
| ◾ |
a person (or a relative of a person) who holds more than 5% of the company’s shares or voting rights; |
| ◾ |
a person (or a relative of a person) who has the power to appoint a director or the general manager of the company; |
| ◾ |
an executive officer, director or other affiliate of the company; or |
| ◾ |
a member of the company’s independent accounting firm. |
| D. |
EMPLOYEES |
|
Year Ended December 31, |
||||||||||||
|
2021 |
2020 |
2019 |
||||||||||
|
By area of activity: |
||||||||||||
|
Control Center |
520 |
568 |
552 |
|||||||||
|
Research and Development |
136 |
137 |
154 |
|||||||||
|
Sales and Marketing |
84 |
71 |
69 |
|||||||||
|
Technical support and IT |
489 |
494 |
467 |
|||||||||
|
Finance, Administration and Management |
375 |
351 |
380 |
|||||||||
|
Private enforcement and operations |
1,041 |
1,015 |
1,143 |
|||||||||
|
Manufacturing |
169 |
125 |
143 |
|||||||||
|
Total |
2,814 |
2,761 |
2,908 |
|||||||||
|
By geographic location (out of total): |
||||||||||||
|
Israel |
864 |
855 |
863 |
|||||||||
|
Brazil |
782 |
820 |
884 |
|||||||||
|
Others |
1,168 |
1,086 |
1,161 |
|||||||||
|
Total |
2,814 |
2,761 |
2,908 |
|||||||||
| E. |
SHARE OWNERSHIP |
|
Name of Director/Officer (1) |
Number of Ordinary Shares Beneficially Owned (2) |
Percentage of
beneficial ownership (3) |
||||||
|
Izzy Sheratzky(4)
|
4,077,317 |
19.87 |
||||||
|
Professor Yehuda Kahane (5)
|
1,451,137 |
7.06 |
||||||
|
Zeev Koren |
- |
- |
||||||
|
Efraim Sheratzky (6)
|
223,008 |
1.09 |
||||||
|
Yigal Shani (7)
|
229,052 |
1.12 |
||||||
|
Eyal Sheratzky |
- |
- |
||||||
|
Nir Sheratzky |
- |
- |
||||||
|
Gil Sheratzky |
- |
- |
||||||
|
Yoav Kahane |
- |
- |
||||||
|
Tal Sheratzky- Jaffa |
2,403 |
* |
0.0112 |
* | ||||
|
Israel Baron |
- |
- |
||||||
|
Gidon Kotler |
105 |
* |
* |
|||||
|
Ami Saranga |
- |
- |
||||||
|
Eli Kamer |
- |
- |
||||||
|
Guy Aharonov |
- |
- |
||||||
|
Udi Mizrahi |
- |
- |
||||||
|
Shahar Sheratzky |
- | - | ||||||
| (1) |
This table includes only current directors and officers that beneficially hold our shares. |
| (2) |
Beneficial ownership’ is determined in accordance with the rules of the Securities and Exchange Commission (as defined in Rule
13d – 3 under the Securities Exchange Act of 1934) and shares deemed beneficially owned by virtue of the right of any person or
group to acquire such ordinary shares within 60 days are treated as outstanding only for the purposes of determining the percent owned
by such person or group. To our knowledge, the persons and entities named in the table above are believed to have sole voting and investment
power with respect to all ordinary shares shown as owned by them, except as described below. |
| (3) |
Amounts in this column are based on 23,475,431 ordinary shares issued as of April 15, 2022, less 2,962,934 treasury shares held by
us. |
| (4) |
Shares beneficially owned include: (a) 4,075,952 shares owned by Moked Ituran Ltd., which Mr. Sheratzky is deemed to beneficially
owns due to his shared voting and investment power over such shares in accordance with that certain shareholders agreement, dated May
18, 1998 as amended on September 6, 2005 and on September 17, 2014, among Moked Ituran and its shareholders, which we refer to as the
Moked Shareholders Agreement. For further information concerning the Moked Shareholders Agreement see the discussion under Item 6.A. –
Directors and Senior Management under the caption “Shareholders Agreement and Articles of Association of Moked Ituran Ltd.”
above; (b) 1,365 shares that are directly held by Mr. Sheratzky’s wife, Maddie Sheratzky. |
| (5) |
Shares beneficially owned include: (a) 13,264 shares directly owned by Professor Kahane jointly with his wife, Rivka Kahane;(b) 5,782
shares owned by Yehuda Kahane Ltd., which Professor Kahane may be considered to beneficially own by virtue of his shared voting and investment
control of the company through his 50% shareholdings thereof, the other 50% being owned by his wife, Rivka Kahane; and (c) 1,432,091 shares
owned by Moked Ituran Ltd., which Professor Kahane may be considered to beneficially own by virtue of his right to direct the disposition
of such shares in accordance with Moked’s articles of association. Professor Kahane has shared voting and investment control over
Yehuda Kahane Ltd., a holder of 35.13% of the shares of Moked Ituran. |
| (6) |
Shares beneficially owned include: (a) 3,956 shares directly owned by Efraim Sheratzky, (b) 25,000 shares owned by Tzivtit Insurance
Agency (1998) Ltd., which Efraim Sheratzky may be considered to beneficially own by virtue of his shared voting and investment control
over such shares through his 50% ownership thereof, the other 50% of the shares held by Yigal Shani, and (c) 206,552 shares owned by Moked
Ituran, which Mr. Sheratzky may be considered to beneficially own by virtue of his right to direct the disposition of such shares in accordance
with Moked’s articles of association. Mr. Sheratzky may be considered to beneficially own such shares by virtue of his sole voting
and investment control over his wholly owned G T.S.D. Holdings Ltd, the holder of 3.75% of Moked’s shares. |
| (7) |
Shares beneficially owned include: (a) 10,000 shares directly owned by Yigal Shani, (b) 25,000 shares owned by Tzivtit Insurance
Agency (1998) Ltd., which Yigal Shani may be considered to beneficially own by virtue of his shared voting and investment control over
such shares through his 50% ownership thereof, the other 50% of the shares held by Efraim Sheratzky, and (c) 206,552 shares owned by Moked
Ituran, which Mr. Shani may be considered to beneficially own by virtue of his right to direct the disposition of such shares in accordance
with Moked’s articles of association. Mr. Shani may be considered to beneficially own such shares by virtue of his sole voting and
investment control over his wholly owned G.N.S. Holdings, the holder of 3.75% of Moked’s shares. |
| A. |
MAJOR SHAREHOLDERS |
|
Shareholder |
Number of
Ordinary
Shares
Beneficially
Owned |
% Voting |
||||||
|
Moked Ituran Ltd. (1)
|
4,075,952 |
19.87 |
||||||
|
All directors and executive officers as a group (2).
|
4,137,827 |
20.17 |
||||||
|
Vulcan Value Partners (3)
|
3,138,608 |
15.30 |
||||||
|
FMR LLC. (4)
|
1,540,997 |
7.51 |
||||||
|
Renaissance Technologies LLC. (5)
|
1,279,400 |
6.24 |
||||||
|
The Phoenix Holdings Ltd(6)
|
1,773,049 |
8.64 |
||||||
|
Ibex Investors LLC(7)
|
1,144,707 |
5.58 |
||||||
|
Treasury shares |
2,962,934
|
|||||||
| • |
“Target-based Cash Incentives” means a cash incentive awarded to the Executive Office Holders for the company’s
achievement of the following Profit-Before-Tax targets in each calendar year following the effective date of the above agreements, in
which the Minimum Threshold (as defined below) has been achieved: |
|
Company’s Profit-Before-Tax Targets (in USD thousands) |
Level of Incentive - As a Percentage of the
Executive Office Holder’s Annual Cost of Pay |
|
24,001 - 27,500 |
20% |
|
27,501-31,000 |
45% |
|
31,001-35,000 |
75% |
|
35,001-39,000 |
110% |
|
Above 39,001 |
150% |
| • |
Target-based Cash Incentives shall become payable upon the lapse of 30 days from the date of publication of the company’s audited
annual financial statements (the “Entitlement Date”); and such cash incentive shall
be paid on such date. However, if an Executive Office Holder’s Target-based Cash Incentives exceed an amount equal to 100% of such
Executive Office Holder’s annual Cost of Pay (the “100% Threshold”), then 20%
of the amount by which the Target-based Cash Incentives exceed the 100% Threshold (the “Deferred
Portion”) shall not be paid on their Entitlement Date, but rather shall be deferred and paid in two equal installments on
the first and second anniversary of the Entitlement Date, provided that the Minimum Threshold was achieved during the first calendar year
(for the first installment) and during the second calendar year (for the second installment) following the Entitlement Date, respectively.
The Deferred Portion shall be linked to the consumer price index known on the Entitlement Date. |
| • |
The company may pay to the Executive Office Holders advances on account of expected Target-based Cash Incentives, based on the company’s
reviewed financial statements, prior to the Entitlement Date; provided that if on the Entitlement Date, it turns out that such advances
exceed the Target-based Cash Incentives to which the Executive Office Holders are entitled, then the excess amounts shall be returned
to the Company or shall be deducted from the payment of the remainder Target-based Cash Incentives on the Entitlement Date, as the case
may be. |
| • |
“Excess Return Cash Incentives” means a cash grant based on the company’s
Stock Yield as compared to the Russell 2000 Index’s Yield, as set forth below. |
| • |
In the event that an Agreement is terminated during a calendar year, the company’s compensation committee and board of directors
shall determine the relative amounts out of the Target-based Cash Incentives and/or Excess Return Cash Incentives to which the relevant
Executive Office Holder is entitled for the portion of the year during which the Agreement was in force; and these amounts shall be paid
within 30 days after the termination of service/employment, as the case may be. |
| • |
On the date of determination of each Executive Office Holder’s entitlement for a Target-based Cash Incentive for a particular
year, the company’s compensation committee shall examine whether the total amount of grants to which Executive Officers are entitled
with respect to such calendar year and which constitute variable components of their terms of services (the “Total Amount of Grants
to Executive Officers”), exceed an amount equal to 10% of the Company’s EBITDA for such year (the “EBITDA’s Threshold”),
as calculated in accordance with data extracted from the company’s audited consolidated annual financial statements, after taking
into account the Executive Officers’ fixed compensation but excluding their variable compensation. In such event, the amount by
which the Total Amount of Grants to Executive Officers exceeds the EBITDA’s Threshold shall be referred to as the “Excess
Amount”. |
| • |
In the event that the Total Amount of Grants to Executive Officers exceeds the EBITDA’s Threshold, then the Target-based Cash
Incentive and the Excess Return Cash Incentive to which an Executive Office Holder is entitled (together, the “Grants”) shall
be reduced by an amount equal to the Executive Office Holder’s Rate of Grants (as defined below) out of the Excess Amount. The term
“Executive Office Holder’s Rate of Grants” means, with respect to a particular Executive Office Holder, the percentage
which such Executive Office Holder’s Grants constitute out of the Total Amount of Grants to Executive Officers. |
| • |
The company’s board of directors shall have the right, under special circumstances at its discretion, to reduce the amount
of Grants to which the Executive Office Holders are entitled, upon a 60 days prior notice. |
| • |
The Executive Office Holder shall be required to return any compensation paid to them on the basis of results included in financial
statements that turned out to be erroneous and were subsequently restated in the company’s financial statements published during
the three year period following publication of the erroneous financial statements; to the extent they would not have been entitled to
the compensation actually received had it been determined based on the restated financial statements. In such case, compensation amounts
will be returned within 60 days from the date of publication of the restated financial statements, net of taxes that were withheld thereon.
If the Executive Office Holder has a right to reclaim such tax payments with respect to Grants which were paid in excess, from the relevant
tax authorities, then the Executive Office Holder shall reasonably act to reclaim such amounts from the tax authorities and upon their
receipt, shall remit them to the company. |
|
Executive Office Holders |
Target-based Cash Incentive |
Deferred Portion for the next 2 years |
Deferred Portion from last 2 years |
Total to be paid for 2021: |
||||||||||||
|
In US$ thousands |
||||||||||||||||
|
Izzy Sheratzky |
1,207 |
(83 |
) |
83 |
1,207 |
|||||||||||
|
Eyal Sheratzky |
975 |
(65 |
) |
65 |
975 |
|||||||||||
|
Nir Sheratzky |
975 |
(65 |
) |
65 |
975 |
|||||||||||
|
Gil Sheratzky |
696 |
(46 |
) |
46 |
696 |
|||||||||||
| C. |
INTERESTS OF EXPERTS AND COUNSEL |
| ITEM 8. |
FINANCIAL INFORMATION |
| A. |
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION |
| B. |
SIGNIFICANT CHANGES |
| ITEM 9. |
THE OFFER AND LISTING |
| A. |
LISTING DETAILS AND MARKET PRICE INFORMATION |
| B. |
PLAN OF DISTRIBUTION |
| C. |
MARKETS |
| D. |
SELLING SHAREHOLDERS |
| E. |
DILUTION |
| F. |
EXPENSES OF THE ISSUE |
| ITEM 10. |
ADDITIONAL INFORMATION |
| A. |
SHARE CAPITAL |
| B. |
MEMORANDUM AND ARTICLES OF ASSOCIATION |
| ◾ |
the majority must include at least the majority of the shares of disinterested shareholders voted at the meeting; or |
| ◾ |
the total number of shares of disinterested shareholders who voted against the transaction must not exceed 2% of the aggregate voting
rights in the company. |
| ◾ |
an amendment to the company’s articles of association; |
| ◾ |
an increase of the company’s authorized share capital; |
| ◾ |
a merger; or |
| ◾ |
interested party transactions that require shareholder approval. |
| ◾ |
a private placement in which the company’s shareholders approved such holder owning 25% or more of the voting rights of the
company (provided that there is no other shareholder that holds 25% or more of the voting rights of the company); or more than 45% of
the voting rights of the company (provided that there is no other shareholder that holds 45% or more of the voting rights of the company);
or |
| ◾ |
a purchase from an existing holder of 25% or more of the voting rights of the company that results in another person becoming a holder
of 25% or more of the voting rights of the company; or |
| ◾ |
purchase from an existing holder of more than 45% of the voting rights of the company that results in another person becoming a holder
of more than 45% of the voting rights of the company. |
| • |
There is a limitation on acquisition of any level of control of the company, or |
| • |
The acquisition of any level of control requires the purchaser to offer a tender offer to the public. |
| ◾ |
the transaction is not accompanied by an amendment to the acquirer’s memorandum or articles of association; |
| ◾ |
the transaction does not contemplate the issuance of more than 20% of the voting rights of the acquirer that would result in any
shareholder becoming a controlling shareholder; and |
| ◾ |
there is no “cross-ownership” of shares of the merging companies, as described above. |
| ◾ |
amendments to our articles of association; |
| ◾ |
appointment or termination of our auditors; |
| ◾ |
appointment and dismissal of external directors; |
| ◾ |
approval of acts and transactions requiring general meeting approval pursuant to the Israeli Companies Law; |
| ◾ |
increase or reduction of our authorized share capital; |
| ◾ |
a merger; and |
| ◾ |
the exercise of the Board of Directors’ powers by a general meeting, if the Board of Directors is unable to exercise its powers
and the exercise of any of its powers is required for our proper management. |
| • |
Financial liability imposed on him or her in favor of another person pursuant to a judgment, settlement or arbitrator’s award
approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance then
such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s
activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors
as reasonable under the circumstances, and such undertaking shall detail the abovementioned events and amount or criteria. |
| • |
Reasonable litigation expenses, including attorneys’ fees, incurred by the office holder as a result of an investigation or
proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no
indictment was filed against such office holder as a result of such investigation or proceeding, and (ii) no financial liability,
such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation
or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal
intent or in connection with monetary penalty. |
| • |
Reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings
instituted against him or her by the company, on its behalf or by a third party or in connection with criminal proceedings in which the
office holder was acquitted or as a result of a conviction for an offense that does not require proof of criminal intent. Under the Israeli
Companies Law, a company may obtain insurance for an office holder against liabilities incurred in his or her capacity as an office holder
if and to the extent provided in the company’s articles of association. |
| • |
A breach of duty of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis to
believe that the act would not prejudice the company. |
| • |
A breach of duty of care to the company or to a third party, including a breach arising out of the negligent conduct of the office
holder. |
| • |
A financial liability imposed on the office holder in favor of a third party. |
| • |
a breach of duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe
that the act would not prejudice the company; |
| • |
a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office
holder; |
| • |
an act or omission committed with intent to derive illegal personal benefit; or |
| • |
a fine, civil fine, monetary penalty or forfeit levied against the office holder. |
| C. |
MATERIAL CONTRACTS |
| D. |
EXCHANGE CONTROLS |
| E. |
TAXATION |
| ◾ |
an individual citizen or resident of the United States; |
| ◾ |
a corporation or partnership created or organized in or under the laws of the United States or of any state of the United States
or the District of Columbia (other than a partnership, including any entity treated as a partnership for U.S. tax purposes, that is not
treated as a US person under any applicable Treasury regulations); |
| ◾ |
an estate, the income of which is subject to United States federal income taxation regardless of its source; or |
| ◾ |
a trust if the trust has elected validly to be treated as a US person for United States federal income tax purposes or if a US court
is able to exercise primary supervision over the trust’s administration and one or more US persons have the authority to control
all of the trust’s substantial decisions. |
| ◾ |
insurance companies; |
| ◾ |
dealers or traders in stocks, securities or currencies; |
| ◾ |
financial institutions and financial services entities; |
| ◾ |
real estate investment trusts; |
| ◾ |
regulated investment companies; |
| ◾ |
grantor trusts; |
| ◾ |
persons that receive ordinary shares as compensation for the performance of services; |
| ◾ |
tax-exempt organizations; |
| ◾ |
persons that hold ordinary shares as a position in a straddle or as part of a hedging, conversion or other integrated instrument;
|
| ◾ |
individual retirement and other tax-deferred accounts; |
| ◾ |
expatriates of the United States; |
| ◾ |
persons having a functional currency that is not the US dollar; or |
| ◾ |
direct, indirect or constructive owners of 10% or more, by voting power or value, of our ordinary shares. |
| ◾ |
the stock of that corporation with respect to which the dividends are paid is readily tradable on an established securities market
in the US, or |
| ◾ |
that corporation is eligible for benefits of a comprehensive income tax treaty with the US that includes an information exchange
program and is determined to be satisfactory by the US Secretary of the Treasury. The Internal Revenue Service has determined that the
US-Israel Tax Treaty is satisfactory for this purpose. |
| ◾ |
75% or more of its gross income consists of specified types of passive income, or |
| ◾ |
50% or more of the average value of its assets consists of passive assets, which generally means assets that generate, or are held
for the production of, “passive income.” |
| ◾ |
Passive income for this purpose generally includes dividends, interest, royalties, rents and gains from commodities and securities
transactions and includes amounts derived by reason of the temporary investment of funds. If we were classified as a PFIC, and you are
a US Holder, you could be subject to increased tax liability upon the sale or other disposition of ordinary shares or upon the receipt
of amounts treated as “excess distributions” (generally, your ratable portion of distributions in any year which are greater
than 125% of the average annual distribution received by you either in the shorter of the three preceding years or your holding period).
Under these rules, the excess distribution and any gain would be allocated ratably over our shareholders’ holding period for the
ordinary shares, and the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we
were a PFIC would be taxed as ordinary income. The amount allocated to each of the other taxable years would be subject to tax at the
highest marginal rate in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit
would be imposed on the resulting tax allocated to such other taxable years. In addition, holders of stock in a PFIC may not receive a
“step-up” in basis on shares acquired from a decedent. If any of our shareholders are US Holders who hold ordinary shares
during a period when we are a PFIC, such shareholders be subject to the foregoing rules even if we cease to be a PFIC. |
| • |
The reduced tax rates will no longer be contingent upon making a minimum qualifying investment in productive assets. |
| • |
A definition of “preferred income” was introduced into the Investments Law to include certain types of income that are
generated by the Israeli production activity of a preferred enterprise. |
| • |
Reducing the tax rate criterion: a company is considered CFC If the tax rate applicable to passive income does not exceed 15 % (instead
of 20 %). |
| • |
Sale of a security will be considered passive income, unless the holding duration is less than one year and it has been shown that
the security served in a business. |
| • |
Cancel the notional credit mechanism and replacing it with dividend deduction against the actual dividend distribution. Tax refund
may be allowed under certain conditions. |
| • |
Dividends derived from income that was taxed at a rate of at least 15% shall not be considered “passive income” under
certain conditions. |
| F. |
DIVIDENDS AND PAYING AGENTS |
| G. |
STATEMENT BY EXPERTS |
| H. |
DOCUMENTS ON DISPLAY |
| I. |
SUBSIDIARY INFORMATION |
|
Year Ended December 31, |
||||||||||||||||||||||||
|
2019 |
2020 |
2021 |
||||||||||||||||||||||
|
Actual |
At 2018
exchange rates (1) |
Actual |
At 2019
exchange rates (1) |
Actual |
At 2020
exchange rates (1) |
|||||||||||||||||||
|
(In US$ thousands) |
||||||||||||||||||||||||
|
Revenues |
279,332 |
289,676 |
245,627 |
262,529 |
270,884 |
264,507 |
||||||||||||||||||
|
Gross profit |
130,518 |
135,730 |
115,515 |
122,708 |
126,482 |
123,734 |
||||||||||||||||||
|
Operating income |
22,654 |
25,419 |
27,831 |
31,229 |
54,615 |
53,595 |
||||||||||||||||||
| ITEM 12. |
DESCRIPTIONS OF SECURITIES OTHER THAN EQUITY SECURITIES |
|
Fahn Kanne & Co. | ||
|
Head Office | ||
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
32 Hamasger Street | |
|
Tel-Aviv 6721118, | ||
|
Board of Directors and Stockholders |
ISRAEL | |
|
PO Box 36172, 6136101 | ||
|
ITURAN LOCATION AND CONTROL LTD. |
||
|
T +972 3 7106666 | ||
|
F +972 3 7106660 | ||
|
www.gtfk.co.il |
|
2020 |
2021 |
|||||||
|
(in thousands, USD) |
||||||||
|
Audit Fees (1)
|
572 |
573 |
||||||
|
Tax Fees (2)
|
48 |
7 |
||||||
|
Total |
620 |
580 |
||||||
| (1) |
The audit fees for the years ended December 31, 2020 and 2021 respectively, were for professional services rendered for the audits
of our annual consolidated financial statements, review of consolidated quarterly financial statements and statutory audits. |
| (2) |
Consists of all tax related services. |
|
Period |
Total Number of Shares |
Average Price Paid per Share |
Total Proceeds |
Maximum Approximate Value that May Yet to Be Purchased Under the
Program |
|
August 2021 |
15,000 |
26.23 |
394,485 |
18,607,714 |
|
September 2021 |
56,409 |
26.15 |
1,475,218 |
17,132,496 |
|
October 2021 |
59,428 |
26.38 |
1,567,434 |
15,565,062 |
|
November 2021 |
60,688 |
26.71 |
1,620,889 |
13,944,173 |
|
December 2021 |
88,195 |
25.21 |
2,223,215 |
11,720,958 |
|
Total 2021
|
279,720 |
26.03 |
7,281,241 |
11,720,958 |
|
Page | |
|
Report of Independent Registered Public Accounting Firm |
F-2 - F-4 |
|
Consolidated Balance Sheets |
F-5 - F-6 |
|
Consolidated Statements of Income |
F-7 - F-7 |
|
Statements of Comprehensive Income |
F-8 - F-8 |
|
Statement of Changes in Equity |
F-9 - F-10 |
|
Consolidated Statements of Cash Flows |
F-11 - F-12 |
|
Notes to Consolidated Financial Statements |
F-13 - F-48 |
| (1) |
Filed as an exhibit to the Registrant’s Registration Statement on Form F-1 (File No. 333-128028) filed on September 23, 2005
and incorporated herein by reference. |
| (2) |
Filed as an exhibit to the annual report on Form 20-F for the year ended December 31, 2007 and incorporated herein by reference.
|
| (3) |
Filed as an exhibit to the annual report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference.
|
| (4) |
The current lessee under this agreement is the Registrant. |
| (5) |
Filed as an exhibit to Form 13G of Yehuda Kahane for the year ended December 31, 2014, filed on February 17, 2015, and incorporated
herein by reference. |
| (6) |
Filed as an exhibit to the annual report on Form 20-F for the year ended December 31, 2013 and incorporated herein by reference.
|
| (7) |
Filed as an exhibit to the annual report on Form 20-F for the year ended December 31, 2016 and incorporated herein by reference.
|
ITURAN LOCATION AND CONTROL LTD.
Consolidated Financial Statements
as of December 31, 2021
ITURAN LOCATION AND CONTROL LTD.
Consolidated Financial Statements
as of December 31, 2021
Table of Contents
(PCAOB ID
Consolidated Financial Statements:
|
|
|
|
F-5 | |
|
|
|
|
F-7 | |
|
|
|
|
F-8 | |
|
|
|
|
F-9 | |
|
|
|
|
F-11 | |
|
|
|
|
F-13 | |
|
|
|
=======================
=============
|
| |
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of ITURAN LOCATION AND CONTROL LTD. |
Fahn Kanne & Co. Head Office 32 Hamasger Street Tel-Aviv 6721118, ISRAEL PO Box 36172, 6136101 |
|
| |
|
T +972 3 7106666 F +972 3 7106660 www.gtfk.co.il |
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Ituran Location and Control Ltd. and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated April 26, 2022 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Certified Public Accountants
Fahn Kanne & Co. is the Israeli member firm of Grant Thornton International Ltd
F - 2
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill and intangible assets impairment analysis
As described further in Note 1N, Note 8 and Note 9 to the consolidated financial statement, the Company’s consolidated goodwill and intangible assets balances were US$39,999 and US$16,753 thousand, respectively, as of December 31, 2021. As disclosed by management, goodwill is assigned to reporting units and tested for impairment at least annually, and whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. Management determines the fair value of its reporting units using the income approach. Within the income approach, the method that was used is the discounted cash flow method with respect to the goodwill impairment analysis. Management started with a forecast of all the expected net cash flows associated with the reporting units, which includes the application of a terminal value, and then applied a discount rate to arrive at a net present value amount. Cash flow projections are based on management’s estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions (including COVID-19 impact estimates). With respect to the intangible asset's impairment analysis, management measures the recoverability of such assets to be held and used by a comparison of the carrying amount of the asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value.
We identified the goodwill and intangible assets impairment analysis as a critical audit matter. The principal considerations for our determination that performing procedures relating to the goodwill and intangible assets impairment analysis is a critical audit matter are due to the significant judgment by management when determining the fair value measurement of the reporting units and the intangible assets. This in turn led to a high degree of auditor judgment, effort and subjectivity in performing procedures and evaluating management’s fair value estimate, which included significant assumptions related to revenue growth rates, expected cash flows, discount rate and terminal growth rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.
Certified Public Accountants
Fahn Kanne & Co. is the Israeli member firm of Grant Thornton International Ltd
F - 3
Our audit procedures related to this matter included the following, among others. We tested the design and the operating effectiveness of controls relating to management’s goodwill and intangible assets impairment analysis, including controls over the valuation. We tested management’s process for determining the fair value estimate, which included evaluating the appropriateness of the discounted cash flow model; testing the completeness, accuracy and relevance of underlying data used in the model; and evaluating the reasonableness of significant assumptions used by management, including revenue growth rates, discount rate and terminal growth rate with respect to goodwill and future revenues and discount rate with respect to other intangible assets. Evaluating management’s assumptions related to revenue growth rates and terminal growth rate involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting units, (ii) the consistency with external market and industry data, and (iii) the constituency of the assumptions used with evidence obtained in other areas of the audit. We also used professionals with specialized skill and knowledge to assist in the evaluation of management’s discounted cash flow model, and certain significant assumptions, including the discount rate.
Certified Public Accountants (Isr.)
We have served as the Company’s auditor since 1997.
April 26, 2022
Certified Public Accountants
Fahn Kanne & Co. is the Israeli member firm of Grant Thornton International Ltd
F - 4
ITURAN LOCATION AND CONTROL LTD.
CONSOLIDATED BALANCE SHEETS
|
US dollars | ||||||||
|
December 31, | ||||||||
|
(in thousands) |
2021 |
2020 | ||||||
|
| ||||||||
|
Current assets | ||||||||
|
Cash and cash equivalents |
|
| ||||||
|
Investment in marketable securities |
|
| ||||||
|
Accounts receivable (net of allowance for doubtful accounts) |
|
| ||||||
|
Other current assets (Note 2) |
|
| ||||||
|
Inventories (Note 3) |
|
| ||||||
|
|
| |||||||
|
Long-term investments and other assets | ||||||||
|
Investments in affiliated companies (Note 4A) |
|
| ||||||
|
Investments in other companies (Note 4B) |
|
| ||||||
|
Other non-current assets (Note 5) |
|
| ||||||
|
Deferred income taxes (Note 15) |
|
| ||||||
|
Funds in respect of employee rights upon retirement |
|
| ||||||
|
|
| |||||||
|
| ||||||||
|
Property and equipment, net (Note 6) |
|
| ||||||
|
| ||||||||
|
Operating lease right of use assets, net (Note 7) |
|
| ||||||
|
| ||||||||
|
Intangible assets, net (Note 8) |
|
| ||||||
|
| ||||||||
|
Goodwill (Note 9) |
|
| ||||||
|
| ||||||||
|
Total assets |
|
| ||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 5
ITURAN LOCATION AND CONTROL LTD.
CONSOLIDATED BALANCE SHEETS (cont.)
|
US dollars | ||||||||
|
December 31, | ||||||||
|
(in thousands, except share data) |
2021 |
2020 | ||||||
|
| ||||||||
|
Current liabilities | ||||||||
|
Credit from banking institutions (Note 10A) |
|
| ||||||
|
Accounts payable |
|
| ||||||
|
Deferred revenues |
|
| ||||||
|
Obligation to purchase non-controlling interests (Notes 1Y) |
|
| ||||||
|
Other current liabilities (Note 11) |
|
| ||||||
|
|
| |||||||
|
| ||||||||
|
Long-term liabilities | ||||||||
|
Deferred income taxes (Note 15) |
|
| ||||||
|
Loan from bank institution (Note 10B) |
|
| ||||||
|
Liability for employee rights upon retirement |
|
| ||||||
|
Deferred revenues |
|
| ||||||
|
Operating lease liabilities, non-current |
|
| ||||||
|
Other non-current liabilities |
|
| ||||||
|
|
| |||||||
|
| ||||||||
|
Contingent liabilities (Note 12) | ||||||||
|
| ||||||||
|
Equity: | ||||||||
|
Stockholders’ equity (Note 13) | ||||||||
|
Share capital – ordinary shares of NIS par value: |
|
| ||||||
|
Authorized – December 31, 2021 and 2020 – | ||||||||
|
Issued and outstanding – December 31, 2021 and 2020 – | ||||||||
|
Additional paid- in capital |
|
| ||||||
|
Accumulated other comprehensive loss |
( |
) |
( |
) | ||||
|
Retained earnings |
|
| ||||||
|
Treasury stock at cost – December 31, 2021 – |
( |
) |
( |
) | ||||
|
Stockholders’ equity |
|
| ||||||
|
Non-controlling interests |
|
| ||||||
|
Total equity |
|
| ||||||
|
| ||||||||
|
Total liabilities and equity |
|
| ||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
ITURAN LOCATION AND CONTROL LTD.
CONSOLIDATED STATEMENTS OF INCOME
|
US dollars | ||||||||||||
|
Year ended December 31, | ||||||||||||
|
(in thousands except earnings per share) |
2021 |
2020 |
2019 | |||||||||
|
| ||||||||||||
|
Revenues: | ||||||||||||
|
Telematics services |
|
|
| |||||||||
|
Telematics products |
|
|
| |||||||||
|
|
|
| ||||||||||
|
| ||||||||||||
|
Cost of revenues: | ||||||||||||
|
Telematics services |
|
|
| |||||||||
|
Telematics products |
|
|
| |||||||||
|
|
|
| ||||||||||
|
| ||||||||||||
|
Gross profit |
|
|
| |||||||||
|
Research and development expenses |
|
|
| |||||||||
|
Selling and marketing expenses |
|
|
| |||||||||
|
General and administrative expenses |
|
|
| |||||||||
|
Impairment of goodwill (Note 9) |
|
|
| |||||||||
|
Impairment of intangible assets and other expenses (income), net (Note 8) |
( |
) |
|
| ||||||||
|
Operating income |
|
|
| |||||||||
|
Other expense, net |
( |
) |
( |
) |
( |
) | ||||||
|
Financing income (expenses), net (Note 14) |
( |
) |
|
| ||||||||
|
Income before income tax |
|
|
| |||||||||
|
Income tax expenses (Note 15) |
( |
) |
( |
) |
( |
) | ||||||
|
Share in losses of affiliated companies, net (Note 4A) |
( |
) |
( |
) |
( |
) | ||||||
|
Net income for the year |
|
|
| |||||||||
|
Less: Net income attributable to non-controlling interest |
( |
) |
( |
) |
( |
) | ||||||
|
Net income attributable to the Company |
|
|
| |||||||||
|
| ||||||||||||
|
Basic and diluted earnings per share attributable to Company’s stockholders (Note 16) |
|
|
| |||||||||
|
| ||||||||||||
|
Basic and diluted weighted average number of shares outstanding |
|
|
| |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 7
ITURAN LOCATION AND CONTROL LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
US dollars | ||||||||||||
|
Year ended December 31, | ||||||||||||
|
(in thousands) |
2021 |
2020 |
2019 | |||||||||
|
| ||||||||||||
|
Net income for the year |
|
|
| |||||||||
|
| ||||||||||||
|
Other comprehensive loss, net of tax: | ||||||||||||
|
Foreign currency translation adjustments |
( |
) |
( |
) |
( |
) | ||||||
|
Unrealized losses in respect of derivative financial instruments designated for cash flow hedge |
|
|
( |
) | ||||||||
|
Reclassification of net gains realized to net income |
|
|
( |
) | ||||||||
|
Other comprehensive loss, net of tax |
( |
) |
( |
) |
( |
) | ||||||
|
| ||||||||||||
|
Comprehensive income |
|
|
| |||||||||
|
Less: comprehensive income attributable to non-controlling interests |
( |
) |
( |
) |
( |
) | ||||||
|
Comprehensive income attributable to the Company |
|
|
| |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 8
ITURAN LOCATION AND CONTROL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
(in thousands) | ||||||||||||||||||||||||||||||||||||
|
COMPANY STOCKHOLDERS | ||||||||||||||||||||||||||||||||||||
|
Ordinary shares | ||||||||||||||||||||||||||||||||||||
|
Number of shares |
Share capital amount |
Additional paid in capital |
Accumulated other comprehensive loss |
Retained earnings |
Treasury stock |
Purchase price adjustment to be settled in shares |
Non-controlling interests |
Total | ||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||
|
US dollars (except for number of shares) | ||||||||||||||||||||||||||||||||||||
|
Balance as of January 1, 2019 |
|
|
|
( |
) |
|
( |
) |
( |
) |
|
| ||||||||||||||||||||||||
|
Changes during 2019: | ||||||||||||||||||||||||||||||||||||
|
Treasury shares return (*) |
- |
- |
- |
- |
- |
( |
) |
|
- |
- | ||||||||||||||||||||||||||
|
Purchase of treasury shares (**) |
- |
- |
- |
- |
- |
( |
) |
- |
- |
( |
) | |||||||||||||||||||||||||
|
Net income |
- |
- |
- |
- |
|
- |
- |
|
| |||||||||||||||||||||||||||
|
Other comprehensive loss |
- |
- |
- |
( |
) |
- |
- |
- |
|
( |
) | |||||||||||||||||||||||||
|
Dividend paid to non-controlling interests |
- |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) | |||||||||||||||||||||||||
|
Dividend paid |
- |
- |
- |
- |
( |
) |
- |
- |
- |
( |
) | |||||||||||||||||||||||||
|
Dividend declared |
- |
- |
- |
- |
( |
) |
- |
- |
- |
( |
) | |||||||||||||||||||||||||
|
Balance as of December 31, 2019 |
|
|
|
( |
) |
|
( |
) |
|
|
| |||||||||||||||||||||||||
(*)
(**)
The accompanying notes are an integral part of the consolidated financial statements.
F - 9
ITURAN LOCATION AND CONTROL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (cont.)
|
(in thousands) | ||||||||||||||||||||||||||||||||
|
COMPANY STOCKHOLDERS | ||||||||||||||||||||||||||||||||
|
Ordinary shares | ||||||||||||||||||||||||||||||||
|
Number of shares |
Share capital amount |
Additional paid in capital |
Accumulated other comprehensive loss |
Retained earnings |
Treasury stock |
Non-controlling interests |
Total | |||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||
|
US dollars (except for number of shares) | ||||||||||||||||||||||||||||||||
|
Balance as of January 1, 2020 |
|
|
|
( |
) |
|
( |
) |
|
| ||||||||||||||||||||||
|
Changes during 2020: | ||||||||||||||||||||||||||||||||
|
Net income |
- |
- |
- |
- |
|
- |
|
| ||||||||||||||||||||||||
|
Other comprehensive loss |
- |
- |
- |
( |
) |
- |
- |
|
( |
) | ||||||||||||||||||||||
|
Dividend paid to non-controlling interests |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) | ||||||||||||||||||||||
|
Dividend paid |
- |
- |
- |
- |
( |
) |
- |
- |
( |
) | ||||||||||||||||||||||
|
Dividend declared to non-controlling interests |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) | ||||||||||||||||||||||
|
Purchase of subsidiary shares from non-controlling interests |
- |
- |
( |
) |
- |
- |
- |
( |
) |
( |
) | |||||||||||||||||||||
|
Stock-based compensation in a subsidiary company |
- |
- |
|
- |
- |
- |
- |
| ||||||||||||||||||||||||
|
Balance as of December 31, 2020 |
|
|
|
( |
) |
|
( |
) |
|
| ||||||||||||||||||||||
|
Changes during 2021: | ||||||||||||||||||||||||||||||||
|
Net income |
- |
- |
- |
- |
|
- |
|
| ||||||||||||||||||||||||
|
Other comprehensive loss |
- |
- |
- |
( |
) |
- |
- |
|
( |
) | ||||||||||||||||||||||
|
Dividend paid to non-controlling interests |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) | ||||||||||||||||||||||
|
Dividend paid |
- |
- |
- |
- |
( |
) |
- |
- |
( |
) | ||||||||||||||||||||||
|
Dividend declared |
- |
- |
- |
- |
( |
) |
- |
- |
( |
) | ||||||||||||||||||||||
|
Purchase of treasury shares (*) |
- |
- |
( |
) |
( |
) | ||||||||||||||||||||||||||
|
Stock-based compensation in a subsidiary company |
- |
- |
|
- |
- |
- |
- |
| ||||||||||||||||||||||||
|
Balance as of December 31, 2021 |
|
|
|
( |
) |
|
( |
) |
|
| ||||||||||||||||||||||
(*)
The accompanying notes are an integral part of the consolidated financial statements.
F - 10
ITURAN LOCATION AND CONTROL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
US dollars | ||||||||||||
|
Year ended December 31, | ||||||||||||
|
(in thousands) |
2021 |
2020 |
2019 | |||||||||
|
Cash flows from operating activities | ||||||||||||
|
Net income for the year |
|
|
| |||||||||
|
Adjustments to reconcile net income to net cash from operating activities: | ||||||||||||
|
Depreciation and amortization |
|
|
| |||||||||
|
Interest and exchange rate on long term credit |
( |
) |
( |
) |
| |||||||
|
Loss (gains) in respect of trading marketable securities and other investments |
|
( |
) |
| ||||||||
|
Increase in liability for employee rights upon retirement |
|
|
| |||||||||
|
Share in losses of affiliated companies, net |
|
|
| |||||||||
|
Deferred income taxes |
( |
) |
( |
) |
( |
) | ||||||
|
Capital loss (gain) on sale of property and equipment, net |
( |
) |
|
| ||||||||
|
Decrease (increase) in accounts receivable |
( |
) |
|
| ||||||||
|
Decrease in other current and non-current assets |
|
|
| |||||||||
|
Increase (decrease) in inventories |
( |
) |
|
| ||||||||
|
Increase (decrease) in accounts payable |
|
( |
) |
( |
) | |||||||
|
Increase (decrease) in deferred revenues |
|
( |
) |
( |
) | |||||||
|
Increase (decrease) in obligation to purchase non-controlling interests |
|
( |
) |
( |
) | |||||||
|
Impairment of goodwill |
|
|
| |||||||||
|
Impairment of other intangible assets |
|
|
| |||||||||
|
Increase (decrease) in other current and non-current liabilities |
|
|
( |
) | ||||||||
|
Net cash provided by operating activities |
|
|
| |||||||||
|
Cash flows from investment activities | ||||||||||||
|
Increase in funds in respect of employee rights upon retirement, net of withdrawals |
( |
) |
( |
) |
( |
) | ||||||
|
Capital expenditures |
( |
) |
( |
) |
( |
) | ||||||
|
Investment in affiliated company |
( |
) |
( |
) |
( |
) | ||||||
|
Investment in marketable securities |
|
|
( |
) | ||||||||
|
Investments in long - term deposit |
( |
) |
( |
) |
( |
) | ||||||
|
Investments in other companies, net |
( |
) |
( |
) |
( |
) | ||||||
|
Proceeds from sale of property and equipment |
|
|
| |||||||||
|
Sale of marketable securities |
|
|
| |||||||||
|
Net cash used in investment activities |
( |
) |
( |
) |
( |
) | ||||||
|
Cash flows from financing activities | ||||||||||||
|
Repayment of long-term loan |
( |
) |
( |
) |
( |
) | ||||||
|
Settlement of obligation to purchase non-controlling interests |
( |
) |
|
| ||||||||
|
Short term credit from banking institutions |
( |
) |
|
( |
) | |||||||
|
Acquisition of company shares |
( |
) |
|
( |
) | |||||||
|
Purchase of shares from non-controlling interests |
|
( |
) |
| ||||||||
|
Dividend paid |
( |
) |
( |
) |
( |
) | ||||||
|
Dividend paid to non-controlling interests |
( |
) |
( |
) |
( |
) | ||||||
|
Net cash used in financing activities |
( |
) |
( |
) |
( |
) | ||||||
|
Effect of exchange rate changes on cash and cash equivalents |
( |
) |
( |
) |
| |||||||
|
Net change in cash and cash equivalents |
( |
) |
|
| ||||||||
|
Balance of cash and cash equivalents at beginning of year |
|
|
| |||||||||
|
Balance of cash and cash equivalents at end of year |
|
|
| |||||||||
Supplementary information on investing and financing activities not involving cash flows:
In November 2021, the Company declared a dividend in an amount of US$3 million. The dividend was paid in January 2022.
In June 2020, an Israeli investee have completed public registration in Israel and its shares became equity investment with readily determinable fair value. As a result, the Company reclassified the above-mentioned investment (in the amount of approximately US$
The accompanying notes are an integral part of the consolidated financial statements.
F - 11
ITURAN LOCATION AND CONTROL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (cont.)
Supplementary disclosure of cash flow information
|
US dollars | ||||||||||||
|
Year ended December 31, | ||||||||||||
|
(in thousands) |
2021 |
2020 |
2019 | |||||||||
|
| ||||||||||||
|
Interest paid |
|
|
| |||||||||
|
| ||||||||||||
|
Income taxes paid, net of refunds |
|
|
| |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 12
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.General
1.Operations
Ituran Location and Control Ltd. (the “Company”) commenced operations in 1994. The Company and its subsidiaries (the “Group”) are engaged in the provision of Location based Telematics services and machine-to-machine Telematics products for use in stolen vehicle recovery, fleet management and other applications.
On September 13, 2018, the Company closed the acquisition of
On September 22, 2021 the Company purchased the remaining
2. Functional currency and translation to the reporting currency
The functional currency of the Company and its subsidiaries located in Israel (except those that are held through the subsidiary “Road track”) is the New Israeli Shekel (“NIS”), which is the local currency in which those entities operate. The functional currency of the foreign subsidiaries located in Brazil, Mexico and Colombia is the local currency in each country and the functional currency of the rest of the subsidiaries (including Argentinian subsidiaries that operates in highly inflationary economy) is the US Dollar. Regarding the Argentinian subsidiaries see below.
The consolidated financial statements of the Company and all of its subsidiaries were translated into U.S. dollars in accordance with the standards of the Financial Accounting Standards Board ("FASB"). Accordingly, assets and liabilities were translated from local currencies to U.S. dollars using yearend exchange rates, and income and expense items were translated at average exchange rates during the year.
Gains or losses resulting from translation adjustments (which result from translating an entity’s financial statements into U.S. dollars if its functional currency is different than the U.S. dollar) are reported in other comprehensive income and are reflected in equity, under “accumulated other comprehensive income (loss)”. Translation gains and losses resulting from changes in exchange rates used in the translation of intercompany balances that are long term investment nature (i.e. which their settlement is not planned or anticipated) are also included in other comprehensive income (loss).
When an economy in which a foreign entity of the group operates, becomes highly inflationary environment (an economy with a cumulative inflation rate of approximately 100% or more over a three-year period, such as the Company's subsidiaries in Argentina), the financial statements of that foreign entity are remeasured as if its functional currency is the reporting currency of its parent.
Balances denominated in, or linked to foreign currency are stated on the basis of the exchange rates prevailing at the balance sheet date. For foreign currency transactions included in the statement of income, the exchange rates applicable on the relevant transaction dates are used. Transaction gains or losses arising from changes in the exchange rates used in the translation of such balances are carried to financing income or expenses as applicable.
F - 13
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
A.General (cont.)
2. Functional currency and translation to the reporting currency (cont.)
The following table presents data regarding the dollar exchange rate of relevant currencies and the Israeli CPI:
|
Exchange rate of one US dollar |
Israeli CPI(*) | ||||||||||
|
NIS |
Brazilian Real | ||||||||||
|
At December 31, | |||||||||||
|
| |||||||||||
|
2021 |
|
|
| ||||||||
|
2020 |
|
|
| ||||||||
|
2019 |
|
|
| ||||||||
|
| |||||||||||
|
Increase (decrease) during the year: | |||||||||||
|
| |||||||||||
|
2021 |
( |
)% |
|
| |||||||
|
2020 |
( |
)% |
|
( | |||||||
|
2019 |
( |
)% |
|
| |||||||
|
(*) |
|
3.Basis of presentation
The consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
4. Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from the estimates.
As applicable to these consolidated financial statements, the most significant estimates and assumptions relate to legal contingencies, valuation of goodwill and other intangible assets and revenue recognition and related deferred expenses (contract costs).
As of December 31, 2021, the impact of the outbreak of COVID-19 continues to unfold. As a result, some of the Company's estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, the Company's estimates may change materially in future periods
B. Principles of consolidation
The consolidated financial statements include the accounts of the Company and all of its subsidiaries. In these financial statements, the term “subsidiary” refers to a company over which the Company exerts control and the financial statements of which are consolidated with those of the Company. Significant intercompany transactions and balances are eliminated upon consolidation; profits from intercompany sales, not yet realized outside of the Group, are also eliminated. Non-controlling interests are presented in equity.
Changes in the Company ownership interest in a subsidiary while the control is retained are accounted for as equity transactions and accordingly no gain or loss is recognized in consolidated net income or comprehensive income. Upon such transaction, the carrying amount of the non-controlling interest is adjusted to reflect the change in its ownership interest in the subsidiary and any difference between the fair value of the consideration received or paid and the amount by which the non-controlling interest was adjusted is recognized in additional paid-in capital.
F - 14
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
C.Cash and cash equivalents
The Group considers all highly liquid investments, which include short-term bank deposits that are not restricted as to withdrawal or use, and short-term debentures, with original periods to maturity not exceeding three months, to be cash equivalents.
D. Marketable securities
The Company account for its investments in debt securities in accordance with ASC Topic 320-10, which is applicable to Debt Securities only, while equity securities are accounted for in accordance with ASC Topic 321-10, "Investments - Equity Securities" (“ASC Topic 321-10”).
According to ASC Topic 321-10, equity securities with readily determinable fair value are measured upon initial recognition and in subsequent periods at fair value with gains and losses reported periodically in earnings as financing income or expenses.
The investments in debt and equity securities that were held by the Company during the reported periods and were subject to the provisions of ASC Topic 320-10 were designated by management as trading securities.
Changes in fair value measurement of debt and equity securities for the years 2021, 2020 and 2019 amounted to gain (loss) of approximately (US$
E. Treasury stock
Company shares held by the Company and a wholly owned subsidiary are presented as a reduction of equity, at their cost, under the caption “Treasury Stock”. Gains and losses upon sale of these shares, net of related income taxes, are recorded as additional paid in capital.
F. Allowance for doubtful accounts
The allowance for doubtful accounts is determined with respect to amounts the Group has determined to be doubtful of collection, in order to reflect the expected credit losses on accounts receivable balances. Judgment is required in the estimation of the allowance for doubtful accounts and the Company evaluates the collectability of its accounts receivable based on a combination of factors including , among other things, the past experience with customers, the length of time that the balance is past due using an aging schedule, the customer's current ability to pay and their the creditworthiness using all available information about the credit risk on such customers taking into consideration the current business environment. If it's becomes aware of a customer’s inability to meet its financial obligations, a specific allowance is recorded to reduce the net receivable to the amount reasonably believed to be collectible from such customer.
Accounts receivable are written off against the allowance for uncollectible accounts when the Company determines amounts are no longer collectible
See also Note 21A.
The allowance in respect of accounts receivable at December 31, 2021 and 2020 was US$
G. Inventories
Inventories are stated at the lower of cost or net realizable value. Cost of raw materials and finished products is mainly determined on the basis of first-in, first-out (FIFO). Other method which is utilized for determining the value of inventories is the moving average. The Group regularly reviews its inventories for obsolescence and other impairment risks and reserves are established when necessary.
F - 15
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
H. Investment in affiliated companies
Investments in companies in which the Group has significant influence but less than controlling interests, are accounted for by the equity method. Income on intercompany sales, not yet realized outside of the Group, was eliminated. The Company also reviews these investments for impairment whenever events indicate the carrying amount may not be recoverable.
In accordance with ASC Topic 323-10-40-1, a change in the Company’s proportionate share of an investee’s equity, resulting from issuance of shares by the investee to third parties, is accounted for as if the Company had sold a proportionate share of its investment. Any gain or loss resulting from an investee’s share issuance is recognized in earnings.
When the Company obtain control of an affiliated company that was previously accounted for by the equity method, the investment is then remeasured at its fair value as of the date of which control was obtained and any remeasurement gain or loss is recognized in earnings.
Management evaluates investments in affiliated companies, for evidence of other-than-temporary declines in value. Such evaluation is dependent on the specific facts and circumstances and includes analysis of relevant financial information (e.g. budgets, business plans, financial statements, etc.). During 2021, 2020 and 2019, no impairment was identified with respect to such affiliated companies.
Investments in companies in which the Company no longer has significant influence, are classified as "investments in other companies". See I. below.
I. Investment in other companies
Equity investments without readily determinable fair values are measured at cost, less impairment, and plus or minus subsequent adjustments for observable price changes. Periodic changes in the basis of these equity investments are reported in current earnings. In addition, at each reporting period a qualitative assessment is performed to identify impairment. When a qualitative assessment indicates an impairment exists, the Company estimates the fair value of the investment and recognize in current earnings an impairment loss equal to the difference between the fair value and the carrying amount of the equity investment.
In June 2020, an Israeli investee have completed public registration in Israel and its shares became equity investment with readily determinable fair value. As a result, the Company remeasured the investment to its fair value and recorded gain in the amount of approximately $
J. Derivatives
The group applies the provisions of ASC Topic 815, "Derivatives and Hedging". In accordance with ASC Topic 815, all the derivative financial instruments are recognized as either assets or liabilities on the balance sheet at fair value. The accounting for changes in the fair value of a derivative financial 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 derivative financial instruments that are designated and qualify as hedging instruments for accounting purposes, 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.
From time to time the Company carries out transactions involving foreign exchange derivative financial instruments mainly (forward exchange contracts) which are mostly designed to hedge the cash flows expected to be paid with respect to forecasted monthly purchases of inventory, denominated in currencies other than the functional currency of the Company. Such transactions were designated as hedging instruments on the date that the Company entered into such derivative contracts, and were determined to qualify as cash flow hedges under ASC Topic 815.
F - 16
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
J. Derivatives (cont.)
The entire changes in fair value of the derivative instruments designated for hedging purposes that were determined as qualifying for hedging purposes (including the ineffective components of the hedging relationship) are reported as other comprehensive income (loss), net of tax under the caption "unrealized gains (losses) in respect of derivative financial instruments designated for cash flow hedge" and are reclassified to the statements of income when the hedged transaction realizes.
For all other derivative financial instruments that are not designated or qualify as hedging instruments for accounting purposes, the changes in fair value are recognized periodically in profit or loss, as incurred. As of December 31, 2021 and 2020 and during the years then ended, the company did not have material financial derivatives.
K. Property and equipment
1. Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated on the straight-line method over the shorter of the estimated useful life of the property or the duration of the lease.
2. Rates of depreciation:
|
% | |
|
Operating equipment (mainly |
|
|
Office furniture, equipment and computers |
|
|
Buildings |
|
|
Vehicles |
|
|
Leasehold improvements |
|
L. Impairment of long-lived assets
The Group’s long-lived assets (including finite-lived intangible assets) are reviewed for impairment, 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 an asset to the future undiscounted cash flows expected to be generated by the asset. 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 asset exceeds its fair value (see also Note 1N).
M. Income taxes
The Group accounts for income taxes in accordance with ASC Topic 740-10, "Income Taxes". According to this guidance, deferred income taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial accounting and the tax bases of assets and liabilities under the applicable tax law. Deferred tax balances are computed using the tax rates expected to be in effect at the time when these differences reverse. Valuation allowances in respect of the deferred tax assets are provided for if, based upon the weight of available evidence, it is more likely than not that all or a portion of the deferred income tax assets will not be realized. Deferred tax balances are presented as non-current amounts.
F - 17
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
M. Income taxes (cont.)
US GAAP provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is "more-likely-than-not" to be sustained were to be challenged by a taxing authority. The assessment of a tax position is based solely on the technical merits of the position, without regard the likelihood that the tax position may be challenged. If an uncertain tax position meets the "more-likely-than-not" threshold, the largest amount of tax benefit that is greater than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded.
The Company recognizes interest as interest expenses (among financing expenses) and penalties, if any, related to unrecognized tax benefits in its provision for income tax.
N. Goodwill and intangible assets
1. Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in business combinations accounted for in accordance with the "purchase method" and is allocated to reporting units at acquisition. Goodwill is not amortized but rather tested for impairment at least annually in accordance with the provisions of ASC Topic 350, "Intangibles - Goodwill and Other".
The Company elected to perform the goodwill annual impairment test for its operating units as follows:
A. An amount of approximately $
B. An amount of approximately $
As required by ASC Topic 350, the Company chooses either to perform a qualitative assessment whether the quantitative goodwill impairment test is necessary or proceeds directly to the quantitative goodwill impairment test. Such determination is made for each reporting unit on a stand-alone basis. The qualitative assessment includes various factors such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, earnings multiples, gross margin and cash flows from operating activities and other relevant factors. When the Company chooses to perform a qualitative assessment and determines that it is more likely than not (more than 50 percent likelihood) that the fair value of the reporting unit is less than its carrying value, then the Company proceeds to the quantitative goodwill impairment test. If the Company determines otherwise, no further evaluation is necessary.
With respect to goodwill impairment tests performed before the adoption of ASU 2017-04 (Which became effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019), when the Company decided or was required to perform the quantitative goodwill impairment test, the Company firstly was required to compare the fair value of the reporting unit to its carrying value ("step 1"). If the fair value of the reporting unit exceeded the carrying value of the reporting unit net assets (including the goodwill allocated to such reporting unit), goodwill was considered not to be impaired, and no further testing was required. If the carrying value was determined to exceed the fair value of the reporting unit, then the implied fair value of goodwill was determined by subtracting the fair value of all the identifiable net assets from the fair value of the reporting unit. An impairment loss was recorded for the excess, if any, of the carrying value of the goodwill allocated to the reporting unit over its implied fair value ("step 2").
F - 18
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
N. Goodwill and intangible assets (cont.)
1. (cont.)
Commencing the adoption of ASU 2017-04 (which eliminated Step 2 from the goodwill impairment test), when the Company decides or is required to perform the quantitative goodwill impairment test, the Company compares the fair value of the reporting unit to its carrying value and an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. In the performance of the quantitative analysis the Company applies assumptions that market participants would consider in determining the fair value of each reporting unit.
As of December 31, 2021, 2020 and 2019, the Company had four reporting units which include goodwill.
Telematics services:
Under the telematics services segment there are two reporting units with goodwill. For one of which (resulted from past acquisitions) with an allocated amount of approximately US$
For the second reporting unit (resulted from RT acquisition) with an allocated amount of approximately US$
The Company has historically performed an annual goodwill assessment for such reporting unit as of June 30 of each year or more often if indicators of impairment are presented. Following the second closing of the RT acquisition, the Company decided to change the date of its annual impairment assessment from June 30 to December 31. Accordingly, the Company performed a qualitative assessment as of December 31, 2021, and concluded that the qualitative assessment did not result in a more likely than not indication of impairment, and therefore no further impairment testing was required, with respect to such unit.
Telematics products:
Under the telematics products segment there are two reporting units with goodwill, for one of which (resulted from past acquisitions) with an allocated amount of approximately US$
For the second reporting unit (resulted from RT acquisition) with an allocated amount of approximately US$
The Company has historically performed an annual goodwill assessment for such reporting unit as of June 30 of each year or more often if indicators of impairment are presented. Following the second closing of the RT acquisition, the Company decided to change the date of its annual impairment assessment from June 30 to December 31. Accordingly, the Company performed a qualitative assessment as of December 31, 2021, and concluded that the qualitative assessment did not result in a more likely than not indication of impairment, and therefore no further impairment testing was required, with respect to such unit.
F - 19
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
N.Goodwill and intangible assets (cont.)
2. Intangible assets with finite live are amortized using the straight-line basis over their useful lives, to reflect the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up.
As of December 31, 2021, the intangible assets are amortized as follows:
|
Years | |
|
Customer relationship |
|
|
Technology services |
|
|
Other |
|
During 2021, the Company did not record any impairment. During 2020 and 2019, the Company recorded an intangible assets impairment loss in the amount of approximately US$3.7 million and US$13.9 million, respectively. The impairment was recorded in the consolidated statement of income under "Impairment of intangible assets and other expenses". See Note 8.
Recoverability of intangible assets is measured as described in Note 1L above.
O. Contingencies
The Company and its subsidiaries are involved in certain legal proceedings that arise from time to time in the ordinary course of their business and in connection with certain agreements with third parties. Except for income tax contingencies, the Company records accruals for contingencies to the extent that the management concludes that the occurrence is probable and that the related liabilities are estimable. Legal expenses associated with contingencies are expensed as incurred.
P. Funds in respect of, and liability for employee rights upon retirement
The Company's liability for employee rights upon retirement with respect to its Israeli employees is calculated, pursuant to Israeli severance pay law, based on the most recent salary of each employee multiplied by the number of years of employment, as of the balance sheet date. Employees are entitled to one month's salary for each year of employment, or a portion thereof. The Company makes monthly deposits to insurance policies and severance pay funds. The liability of the Company is fully provided for. The Company also has defined contribution plans for which it makes contributions to severance pay funds and appropriate insurance policies
The deposited funds include profits or losses accumulated up to the balance sheet date. The deposited funds may be withdrawn upon the fulfillment of the obligation pursuant to Israeli severance pay laws or labor agreements. The value of the deposited funds is based on the cash surrender value of these policies, and includes profits or losses. Withdrawal of the reserve monies is contingent upon the fulfillment of detailed provision in the Law.
The liability for employee rights upon retirement in respect of the employees of the non-Israeli subsidiaries of the Company, is calculated on the basis of the labor laws of the country in which the subsidiary is located and is covered by an appropriate accrual.
Severance payments for the abovementioned policies for the years ended December 31, 2021, 2020 and 2019, amounted to US$
F - 20
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Q. Revenue recognition
The Company and its subsidiaries generate revenue from subscriber fees for the provision of services and sales of systems and products, mainly in respect of 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.
Revenue recognition accounting policy applied from January 1, 2018 (following the adoption of ASC Topic 606);
The Company applies ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).
In accordance with ASC 606, the Company determines revenue recognition through the following five steps:
1. Identification of the contract, or contracts, with a customer;
2. Identification of the performance obligations in the contract;
3. Determination of the transaction price;
4. Allocation of the transaction price to the performance obligations in the contract; and
5. Recognition of revenue when, or as, the Company satisfies a performance obligation.
A contract with a customer exists when all of the following criteria are met: the parties to the contract have approved it (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations, the Company can identify each party’s rights regarding the distinct goods or services to be transferred (“performance obligations”), the Company can determine the transaction price for the goods or services to be transferred, the contract has commercial substance and it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.
For each type of contract, at inception, the Company assesses the goods or service promised in a contract with a customer and identifies the performance obligations. With respect to contracts that are determined to have multiple performance obligations, such as contracts that combine product with services (mostly SVR services) and/or rights to use assets, the Company allocates the contract’s transaction price to each performance obligation using its best estimate of the relative standalone selling price of each distinct good or service in the contract. However, when applicable (see below), the company estimates the selling prices of certain services using the residual approach.
Revenues are recognized when, or as, control of services or products is transferred to the customers at a point in time or over time, as applicable to each performance obligation.
Revenues are recorded in the amount of consideration to which the Company expects to be entitled in exchange for performance obligations upon transfer of control to the customer, excluding amounts collected on behalf of other third parties and sales taxes.
The Company does not adjust the amount of consideration for the effects of a significant financing component since the Company expects, at most contracts inception, that the period between the time of transfer of the promised goods or services to the customer and the time the customer pays for these goods or services to be generally one year or less, based on the practical expedient. The Company’s credit terms to customers are, on average, between thirty and ninety days.
In accordance with ASC 606, the Company’s revenues are recognized as follows:
1. Revenues from sales of Automatic Vehicle Location ("AVL") products are recognized when the control of the product passed to the customer (usually upon delivery).
F - 21
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Q. Revenue recognition (cont.)
2. Revenues from provision of SVR services are recognized over time, as the customers simultaneously receive and consume the benefits provided by the Company performance as the Company performs.
3. For arrangements that involve the delivery or performance of multiple products (mostly, AVL products), services (such as SVR services) and/or rights to use assets, the Company analyzes whether the goods or services that were promised to the customer are distinct. A good or service promised to a customer is considered ‘distinct’ if both of the following criteria are met: 1. The customer can benefit from the good or service, either on its own or together with other resources that are readily available to the customer; and, 2. The Company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. When the above criteria are met, the revenue recognition for the related products and/or services are recognized as described in 1 and 2 above, as applicable.
With respect to arrangement that are determined to have multiple performance obligations that are distinct, the Company allocates the contract’s transaction price to each performance obligation using the relative standalone selling price of each distinct good or service in the contract. However, in certain circumstances, the company estimates the selling prices of the SVR services (which are sold together with AVL products) using the residual approach. Under the residual approach, the standalone selling price of the SVR services is estimated by reference to the total transaction price less the sum of the observable standalone selling prices of all other goods or services promised in the contract. Such approach is used since the Company sells the same type of service in those jurisdictions to different customers (at or near the same time) for a broad range of amounts (thus, the stand-alone selling price is highly variable).
Revenues from SVR services subscription fees, right to use assets (AVL products installed in customers vehicles) and installation services, sold to customers within a single contractually binding arrangement were accounted for revenue recognition purposes, as a single performance obligation, since the installation services element was determined not to be ‘distinct’. Accordingly, the entire contract fee for the two deliverables was recognized over time, on a straight-line basis over the subscription period.
4. Amounts earned by certain Brazilian subsidiary for arranging a bundle transaction of SVR services subscription and installation services together with insurance services to be supplied by a third party insurance company, are recognized ratably on a straight-line basis over the subscription period (see 2 above), since the amount allocated to the Company (for the SVR services subscription, installation services and for arranging the transaction), is contingent upon the delivery of the SVR services. As the insurance company is acting as a principal with respect to the insurance component, the Company recognized only the net amounts as revenues, after deduction of amounts related to the insurance component.
5. Deferred revenues include unearned amounts received from customers (mostly for the provision of installation, future subscription services and extended warranty) but not yet recognized as revenues. Such deferred revenues are recognized as described in paragraph 2 above or paragraph 6 below, as applicable.
For the years ended December 31, 2021 and 2020 the Company recognized revenue of approximately US$
6. Extended warranty
In the majority of countries, in which the Company operates, the statutory warranty period is one year, and the extended warranty covers periods beyond year one. Revenues from extended warranty include warranty services which were sold separately for a monthly fee, or warranty services that were determined to represent a separate performance obligation and were sold together with an AVL unit. Such revenues are recognized over the duration of the warranty periods.
F - 22
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
R. Warranty costs
The Company provides a standard warranty for its products to end-users at no extra charge. The Company estimates the costs that may be incurred under its warranty obligation and records a liability at the time the related revenues are recognized.
Among the factors affecting the warranty liability are the number of installed units and historical percentages of warranty claims. The Company periodically assesses the adequacy of the recorded warranty liability and adjusts the amount to the extent necessary. To date, warranty costs and the related liabilities related to the standard warranty period have not been material.
S. Research and development costs
1. Research and development costs (other than computer software related expenses) are expensed as incurred.
2. Software Development Costs
All research and development costs incurred in the process of software development before establishment of technological feasibility are charged to expenses as incurred. Costs incurred subsequent to the establishment of technological feasibility are capitalized according to the principles set forth in ASC Topic 985-20, “Costs of Software to be Sold, Leased or Marketed”.
Capitalized software costs are amortized on a product by product basis by the straight-line method over the estimated useful life of the software product (3-5 years).
The Company assesses the recoverability of these intangible assets on a regular basis by assessing the net realizable value of such intangible assets based on the estimated future gross revenues from each product net of the estimated future costs of completing and disposing of that product (including the estimated costs of performing maintenance and customer support over the remaining economical useful life), cost of completion of products and cost of delivery to customers over its remaining economical useful life. During each of the years ended December 31, 2021 and 2020, no such unrecoverable amounts were identified.
T. Advertising costs
Advertising costs are expensed as incurred.
Advertising expenses for the years ended December 31, 2021, 2020 and 2019 amounted to US$
U. Earnings per share
Basic earnings per share are computed by dividing net income attributable to the common shares, by the weighted average number of shares outstanding during the year, net of the weighted average number of treasury stock.
In computing diluted earnings per share, basic earnings per share are adjusted to reflect the effect of any potential dilutive ordinary shares. During the reporting periods there were no such potential shares.
V. Fair value measurements
The Company measures fair value and discloses fair value measurements for financial and non-financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
F - 23
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
V. Fair value measurements (cont.)
As such, fair value is a market-based measurement that is required to be determined based on the assumptions that market participants would use to determine the price of an asset or a liability.
As a basis for considering such assumptions, fair value accounting standard establishes the following fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3 - Unobservable inputs are used when little or no market data is available. Level 3 inputs are considered as the lowest priority under the fair value hierarchy.
In determining fair value, companies are required to utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as to consider counterparty credit risk in the assessment of fair value.
Regarding the fair value measurements of financial assets and liabilities and the fair value hierarchy of such measurements, see Note 21C.
The Company also measures certain non-financial assets, consisting mainly of certain reporting units (as part of goodwill impairment test) and intangible assets at fair value on a nonrecurring basis. These assets are adjusted to fair value when they are considered to be impaired (see 1N and 1L above).
W. Contract costs and prepaid expenses
Direct installation expenses by certain Brazilian subsidiary were determined not to represent a separate performance obligation for revenue recognition purposes in accordance with the principles of ASC 606, as they were determined not to be considered ‘distinct’ (see Note 1Q above). The Company has determined that such installation expenses, and certain other commission and other direct expenses incurred by the company's subsidiaries, relate directly to obtaining or fulfilling contract with a specific subscriber, they generate or enhance the Company resources and are expected to be recovered.
In accordance with ASC 340-40, Other Assets and Deferred Costs: Contracts with Customers, such costs are capitalized and presented as "contract costs" within the balances "Other current assets" and "Other non-current assets", as applicable.
The contract costs are amortized over the estimated life of the related subscription arrangements by the straight-line method. Costs that do not meet the aforementioned criteria, are recognized immediately as expenses.
Prepaid expenses, consist mainly of amounts paid by certain Brazilian subsidiary to insurance companies as a prepaid insurance on behalf of its customers as part of bundle transactions of SVR services together with insurance services to be supplied by a third-party insurance company. Under such transactions, the customers are required accordingly to pay to the Brazilian subsidiary a monthly fee for all the bundled services (see Note 1Q regarding the revenue recognition of such bundle transactions). The insurance companies are obligated to refund any unearned insurance amounts to the Brazilian subsidiary in the event of termination of the transaction by the customers. The prepaid expenses are amortized over the contractual life of the insurance service with the insurance company (usually 12 months) by the straight-line method. The amortization is netted against the monthly receipts from customers for the bundled services.
F - 24
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
X.Stock-based compensation
The Company accounts for stock-based compensation to employees and non-employees in accordance with ASC 718, "Compensation - Stock Compensation", ("ASC 718"). The fair value of the award, is recognized in the Company's consolidated statement of income as an expense over the requisite service periods. During the reported periods there were no significant grants of equity-based payment awards.
The Company measures and recognizes compensation expense for cash bonuses to senior employees, which are based, or partly based, on the price of the Company’s shares in accordance with ASC 718 -30, "Compensation-Stock Compensation - Awards Classified as Liabilities" (See Note 19C regarding "Excess Return Cash Incentives").
The awards are measured at the grant date at their fair value and remeasured at the end of each reporting period through settlement, with changes in the fair value recognized as compensation cost over the requisite service period. Compensation cost for awards that are subject to market conditions are be attributed separately for each vesting tranche of the award (generally calendar year).
Y. Obligation to purchase non-controlling interests
An obligation to acquire shares of a subsidiary held by Non-controlling interests at a stated future date, represents liability under ASC Topic 480. Upon initial recognition such liability was measured at fair value in accordance with ASC Topic 480-10-30-3 at the amount of cash that would be paid under the conditions specified in the contract if the shares were repurchased immediately and in subsequent periods at the amount of cash that would be paid under the conditions specified in the contract if settlement occurred at the reporting date with any change in value from the previous reporting date recognized as interest cost. In addition, the Non-controlling interests subject to such obligation were not recognized and no earnings were allocated to them.
On September 22, 2021, the Company settled the obligation to purchase the remaining 18.7% of the shares of Ituran Spain Holdings for cash in the amount of $11.3 million. As a result, the balance of the obligation to purchase non-controlling interests was derecognized.
Z. Leases
The Group entered into several non-cancelable lease agreements for real estate (mainly offices, warehouses and base sites), network equipment and vehicles for use in its operations, which are classified as operating leases.
Lease accounting policy applied from January 1, 2019 (following the adoption of ASC Topic 842):
On January 1, 2019, the Company adopted ASC Topic 842, Leases (“ASC 842”) and all its related amendments using the modified retrospective transition approach.
The Group determines if an arrangement is a lease at inception.
F - 25
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Z.Leases (cont.)
A classification of a lease is determined based on the following criteria:
1. The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.
2. The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
3. The lease term is for the major part of the remaining economic life of the underlying asset (Generally, 75% or more of the remaining economic life of the underlying assets).
4. The present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset (Generally, 90% or more of the fair value of the underlying asset).
5. The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.
If any of these five criteria is met, the lease is classified as a finance lease. Otherwise, the lease is classified as an operating lease.
With the exception of short-term leases, Operating leases are included at the commencement date as a lease liability, which represent the group ‘s obligation to make lease payments arising from a lease, measured on a discounted basis. As the leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on information available on the commencement date in determining the present value of lease payments. Concurrently, the Company recognizes a right-of-use asset ("ROU") at the same amount of the liability, adjusted for any prepaid or accrued lease payments, plus initial direct costs incurred in respect of the lease which represents the group’s right to use, or control the use of, a specified asset for the lease term. In subsequent periods the ROU asset is measured at the present value of the remaining lease payments, adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term and any unamortized initial direct costs. Further, the Company recognizes lease expenses on a straight-line basis over the lease term.
Lease liabilities are classified as current and non-current liabilities in the consolidated balance sheets. ROU assets are presented as non-current assets.
See also Note 7.
AA. Reclassification
Certain comparative figures have been reclassified to conform to the current year presentation. Such reclassifications did not have any significant impact on the Company's equity, net income or cash flows.
F - 26
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
AB. Recently issued accounting pronouncements
Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”)
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating consolidated income taxes to separate financial statements of entities not subject to income tax. ASU 2019-12 is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted.
The Company adopted ASU 2019-12 in January 1, 2021. However, the adoption of ASU 2019-12 did not have a significant impact on the Company's consolidated financial statements.
NOTE 2 - OTHER CURRENT ASSETS
|
US dollars | ||||||||
|
December 31, | ||||||||
|
(in thousands) |
2021 |
2020 | ||||||
|
Prepaid expenses |
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Government institutions |
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Deferred contract costs |
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| ||||||
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Advances to suppliers |
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Employees |
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Others |
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| ||||||
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NOTE 3 - INVENTORIES
|
US dollars | ||||||||
|
December 31, | ||||||||
|
(in thousands) |
2021 |
2020 | ||||||
|
Finished products |
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| ||||||
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Raw materials |
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| ||||||
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| |||||||
F - 27
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 4 - INVESTMENTS IN AFFILIATED AND OTHER COMPANIES
A. Investment in affiliated companies
|
US dollars | ||||||||
|
December 31, | ||||||||
|
(in thousands) |
2021 |
2020 | ||||||
|
Bringg |
|
| ||||||
|
Lumax |
|
| ||||||
|
Cellutrack |
|
| ||||||
|
|
| |||||||
B. Investment in other companies
During the years 2020-2021, the Company made additional investments in two Israeli startups and in one new Israeli startup.
The total investments in such companies were US$
In June 2020, an Israeli investee have completed public registration in Israel stock market and its shares became equity investment with readily determinable fair value. As a result, the Company reclassified the abovementioned investment (in the amount of approximately US$
NOTE 5 - OTHER NON-CURRENT ASSETS
|
US dollars | ||||||||
|
December 31, | ||||||||
|
(in thousands) |
2021 |
2020 | ||||||
|
| ||||||||
|
Deferred contract costs (*) |
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|
Deposits |
|
| ||||||
|
|
| |||||||
|
(*) |
|
F - 28
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 6 - PROPERTY AND EQUIPMENT, NET
A. Property and equipment, net consists of the following:
|
US dollars | ||||||||
|
December 31, | ||||||||
|
(in thousands) |
2021 |
2020 | ||||||
|
Cost: | ||||||||
|
Operating equipment (*) |
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|
Office furniture, equipment and computers |
|
| ||||||
|
Land |
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| ||||||
|
Buildings |
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| ||||||
|
Vehicles |
|
| ||||||
|
Leasehold improvements |
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| ||||||
|
|
| |||||||
|
Less – accumulated depreciation (**) |
( |
) |
( |
) | ||||
|
Total property and equipment, net |
|
| ||||||
|
(*) |
|
|
|
|
|
(**) |
|
B. During the years ended December 31, 2021, 2020 and 2019, depreciation expenses were US$
NOTE 7 - LEASES
The Company have entered into several non-cancelable operating lease agreements for real estate (mainly offices, warehouse and base stations), vehicles and certain network equipment. In addition to rent, the leases may require payment of maintenance, insurance and other operating expenses. The Company's leases have original lease periods expiring
F - 29
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 7 - LEASES (cont.)
The components of lease costs, lease term and discount rate are as follows:
|
US dollars | ||||
|
(in thousands) |
Year Ended December 31, 2021 | |||
|
| ||||
|
Operating lease cost: | ||||
|
Office and warehouse space |
| |||
|
Base stations |
| |||
|
Vehicle |
| |||
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Others |
| |||
|
| ||||
|
Weighted Average Remaining Lease Term (years): | ||||
|
Office space |
| |||
|
Base stations |
| |||
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Vehicle |
| |||
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Others |
| |||
|
| ||||
|
Weighted Average Discount Rate (%): | ||||
|
Office space |
| |||
|
Base stations |
| |||
|
vehicle |
| |||
|
Others |
| |||
Supplemental cash flow information related to operating leases was as follows:
|
US dollars | ||||
|
(in Million) |
Year Ended December 31, 2021 | |||
|
| ||||
|
Cash paid for amounts included in the measurement of lease liabilities: | ||||
|
Operating cash flows from operating leases |
| |||
The following is a schedule, by years, of maturities of operating lease liabilities as of December 31, 2021:
|
US dollars | ||||
|
December 31, 2021 | ||||
|
Period: | ||||
|
2022 |
| |||
|
2023 |
| |||
|
2024 |
| |||
|
2025 |
| |||
|
2026 |
| |||
|
Thereafter |
| |||
|
Total operating lease payments |
| |||
|
Less: imputed interest |
( |
) | ||
|
Present value of lease liabilities |
| |||
F - 30
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 8 - INTANGIBLE ASSETS, NET
|
US dollars | ||||||||||||||||||||||||
|
December 31, 2019 |
Year ended December 31, 2020 |
December 31, 2020 | ||||||||||||||||||||||
|
(in thousands) |
Opening balance |
Impairment (*) |
Amortization (**) |
Additions |
Translation differences |
Closing balance | ||||||||||||||||||
|
Costumer relationship |
|
( |
) |
( |
) |
|
|
| ||||||||||||||||
|
Technology |
|
|
( |
) |
|
|
| |||||||||||||||||
|
Others |
|
|
( |
) |
|
( |
) |
| ||||||||||||||||
|
|
( |
) |
( |
) |
|
( |
) |
| ||||||||||||||||
|
US dollars | ||||||||||||||||||||||||
|
December 31, 2020 |
Year ended December 31, 2021 |
December 31, 2021 | ||||||||||||||||||||||
|
(in thousands) |
Opening balance |
Impairment |
Amortization (**) |
Additions |
Translation differences |
Closing balance | ||||||||||||||||||
|
Costumer relationship |
|
|
( |
) |
|
|
| |||||||||||||||||
|
Technology |
|
|
( |
) |
|
|
| |||||||||||||||||
|
Others |
|
|
( |
) |
|
( |
) |
| ||||||||||||||||
|
|
|
( |
) |
|
( |
) |
| |||||||||||||||||
|
(*) |
|
|
|
|
|
In order to determine the fair value of such intangible assets, the Company, based on a valuation performed by the management, with the assistance of a third-party appraiser, utilized the "Relief from Royalties" valuation method. Accordingly, certain assumptions and judgments were made in order to determine the future income from which royalties will be derived from and in order to determine the appropriate rate of royalties and rate of discount. | |
|
|
|
|
As a result of the above, the Company recorded, an impairment loss in an amount of US$ 3,661 thousand in 2020, with respect to Costumer relationship, that was recorded under "impairment of intangible assets and other expenses" in the consolidated statement of income. See also Note 1N. | |
|
|
|
|
(**) |
|
F - 31
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 9 - GOODWILL
The changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020 are as follows:
|
US dollars | ||||||||||||
|
Telematics services |
Telematics products |
Total | ||||||||||
|
(in thousands) | ||||||||||||
|
Balance as of January 1, 2020 |
|
|
| |||||||||
|
Changes during 2020: | ||||||||||||
|
Impairment (**) |
( |
) |
( |
) |
( |
) | ||||||
|
Translation differences |
|
|
| |||||||||
|
Balance as of December 31, 2020 (*) |
|
|
| |||||||||
|
Changes during 2021: | ||||||||||||
|
Translation differences |
|
|
| |||||||||
|
Balance as of December 31, 2021 (*) |
|
|
| |||||||||
|
(*) |
|
|
|
|
|
(**) |
|
|
|
|
|
The Company, with the assistance of a third-party appraiser, performed the annual goodwill impairment test, as of June 30, 2021 and reached to a conclusion that no impairment should be recorded at that point. | |
|
|
|
|
The Company has historically performed an annual goodwill assessment as of June 30 of each year or more often if indicators of impairment are presented. following the second closing of the RT acquisition, the Company decided to change the date of its annual impairment assessment from June 30 to December 31. Accordingly, the Company performed a qualitative assessment as of December 31, 2021, and concluded that the qualitative assessment did not result in a more likely than not indication of impairment, and therefore no further impairment testing was required, with respect to such unit. |
NOTE 10 - CREDIT FROM BANKING INSTITUTIONS
A. Short term loans:
|
US dollars | ||||||||
|
December 31, | ||||||||
|
(in thousands) |
2021 |
2020 | ||||||
|
| ||||||||
|
Short-term loans - linked to the Mexican Pezo |
|
| ||||||
|
Current maturities of long-term loan (Note 10B) |
|
| ||||||
|
|
| |||||||
F - 32
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 10 - CREDIT FROM BANKING INSTITUTIONS (cont.)
B. Long term loan:
In August 2018, the Company signed on Loan Agreement (the “Loan agreement”) with commercial Israeli bank (the “Bank”) under which the Company has received an amount of approximately
According to the loan agreement the Company is obligated to comply with the following covenants (the “Loan Covenants”):
•
Equity to total assets Ratio - The Ratio will not be less than
•
Total equity - Total equity will not be less than $
•
Net debt to EBITDA Ratio - The Ratio will not exceed 4.
•
EBITDA - EBITDA will not be less than $
The company is required to maintain such covenants on a quarterly basis
Upon noncompliance with any of the above mentioned covenants, the bank shall have the right to demand immediate repayment of the remaining balance of the loan.
During 2020, 2021 and as of December 31, 2021, and 2020, the Company was in compliance with the Loan Covenants.
C. Maturity dates:
|
US dollars | ||||
|
(in thousands) |
December 31, 2021 | |||
|
| ||||
|
First year |
| |||
|
Second year |
| |||
|
| ||||
D. Lines of credit:
Unutilized short-term lines of credit of the Group as of December 31, 2021, aggregated to US$
NOTE 11 - OTHER CURRENT LIABILITIES
Composition:
|
US dollars | ||||||||
|
December 31, | ||||||||
|
(in thousands) |
2021 |
2020 | ||||||
|
| ||||||||
|
Accrued expenses |
|
| ||||||
|
Accrued payroll and related taxes |
|
| ||||||
|
Government institutions |
|
| ||||||
|
Accrued dividend |
|
| ||||||
|
Operating lease liabilities, current |
|
| ||||||
|
Others |
|
| ||||||
|
|
| |||||||
F - 33
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 12 - CONTINGENT LIABILITIES
A. Claims
1. During year 2016 Brazilian Federal Communication Agency – Anatel issued a tax assessment for FUST contribution (contribution on telecommunication services) levied on the monitoring services rendered by us and additional tax assessment for FUNTELL contribution (contribution to Fund for the Technological Development of Telecommunication) levied on the monitoring services rendered by us regarding all for the period 2007-2012.Total amounts of approximately R$
2. On July 13, 2015 the company received a purported class action lawsuit which was filed against the Company in the District Court of Central Region in Tel-Aviv, by one plaintiff who is a subscriber of the Company, alleging that the Company, which was declared a monopoly under the Israeli Antitrust Law, 1988, unlawfully abused its power as a monopoly and discriminated between its customers. The plaintiff claims that the alleged discrimination resulted from the Company charging higher monthly subscription fees from customers who are obliged by insurance company requirements to install location and recovery systems in their vehicles than the monthly subscription fees that are charged from customers who are not required by insurance companies to install location and recovery systems in their vehicles. In addition, the plaintiff claims that the Company offers to customers who are not required by insurance companies to install location and recovery systems in their vehicles, a discounted warranty service to their location and recovery systems. The plaintiff claims in addition to the above, that such actions raise additional causes of action against the Company such as negotiations without good faith, executing contract without good faith, breach of contract, unjust enrichment, breach of consumer protection laws, tort laws, and breach of statutory duty. The lawsuit is yet to be approved as a class action. The total amount claimed if the lawsuit is approved as a class action was estimated by the plaintiff to be approximately NIS
3. Claims are filed against the Company and its subsidiaries from time to time during the ordinary course of business, usually with respect to civil, labor and commercial matters. The Company's management believes, based on its legal counsels' assessment, that the provision for contingencies recognized in the balance sheet is sufficient and that currently there are no claims (other than those described in this Note above) that are material, to the consolidated financial statements as a whole.
F - 34
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 12 - CONTINGENT LIABILITIES (cont.)
B.The Company was declared a monopoly under the Israeli Antitrust Law, 1988, in the market for the provision of systems for the location of vehicles in Israel. Under Israeli law, a monopoly is prohibited from taking certain actions, such as predatory pricing and the provision of loyalty discounts, which prohibitions do not apply to other companies. The Israeli Antitrust Authority may further declare that the Company has abused its position in the market. Any such declaration in any suit in which it is claimed that the Company engages in anticompetitive conduct may serve as prima facie evidence that the Company is either a monopoly or that it has engaged in anticompetitive behavior. Furthermore, it may be ordered to take or refrain from taking certain actions, such as setting maximum prices, in order to protect against unfair competition.
C.Commitments
As of December 31, 2021, minimum future rentals under operating leases of buildings, vehicles and base station sites for periods were as follows: 2022 – US$
The leasing fees expensed in each of the years ended December 31, 2021, 2020 and 2019, were US$
NOTE 13 - STOCKHOLDERS’ EQUITY
A. Share capital:
1. Composition:
|
December 31, 2021 and 2020 |
Registered |
Issued and outstanding | ||||||
|
Ordinary shares of NIS each |
|
| ||||||
2. In September 2005, the Company registered its ordinary shares for trade in the United States.
3. The Ordinary shares of the Company confer upon their holders the right to receive notice to participate and vote in general meetings of the Company and the right to receive dividends, if and when, declared.
4. As of December 31, 2017, an amount of
As part of the Acquisition of Ituran Spain Holdings, the Company reissued, in September 2018,
5. On May 21, 2019, the board of directors approved a share buyback program, which Ituran has commenced. Under which, the Company is able to repurchase Ituran shares in an amount up to $
6. During 2019, the Company's fully owned subsidiary had repurchased a total of
During 2021, the Company's fully owned subsidiary had repurchased a total of
During 2021, the Company had repurchased a total of
As of December 31, 2021, an amount of
7. Treasury stock have no voting rights.
F - 35
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 13 - STOCKHOLDERS’ EQUITY (cont.)
B. Retained earnings
1. In determining the amount of retained earnings available for distribution as a dividend, the Israeli Companies Law stipulates that the cost of the Company’s shares acquired by the Company and its subsidiaries (presented as a separate item in the statement of changes in equity) must be deducted from the amount of retained earnings.
2. On February 27, 2017, the board of directors approved a change in the dividend policy. The new policy calls for a dividend of $
3. Dividends are declared and paid in NIS. Dividends paid to stockholders outside Israel are converted into dollars on the basis of the exchange rate prevailing at the date of declaration.
4. During May 2020 (As part of the steps the Company did in order to deal with Covid-19), the Company's board of directors unanimously approved a freeze on the dividend distribution policy until further notice.
5. On March 3, 2021, the board of directors unanimously approved the unfreeze of the dividend policy and approved the distribution of a cash dividend in the amount of $
6. On March 3, 2021, the board of directors also approved a dividend policy of $
7. During the years ended December 31, 2021, 2020 and 2019, the Company declared dividends in the amount of US$
NOTE 14 - FINANCING INCOME (EXPENSES), NET
|
US dollars | ||||||||||||
|
Year ended December 31, | ||||||||||||
|
(in thousands) |
2021 |
2020 |
2019 | |||||||||
|
| ||||||||||||
|
Short-term interest expenses commissions and other |
( |
) |
( |
) |
( |
) | ||||||
|
Gains (loss) in respect of marketable securities and other investments |
( |
) |
|
( |
) | |||||||
|
Interest expenses in respect of long-term loans |
( |
) |
( |
) |
( |
) | ||||||
|
Interest income in respect of deposits |
|
|
| |||||||||
|
Income (expenses) related to taxes positions |
|
( |
) |
| ||||||||
|
Exchange rate differences and others, net |
( |
) |
( |
) |
( |
) | ||||||
|
Income (expenses) in respect of changes in obligation to purchase non-controlling interests (*) |
( |
) |
|
| ||||||||
|
( |
) |
|
| |||||||||
(*)
F - 36
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 15 - INCOME TAX
A. Taxes on income included in the statements of income:
|
US dollars | ||||||||||||
|
Year ended December 31, | ||||||||||||
|
(in thousands) |
2021 |
2020 |
2019 | |||||||||
|
Income taxes (tax benefit): | ||||||||||||
|
Current taxes: | ||||||||||||
|
In Israel |
|
|
| |||||||||
|
Outside Israel |
|
|
| |||||||||
|
|
|
| ||||||||||
|
Deferred taxes: | ||||||||||||
|
In Israel |
( |
) |
( |
) |
| |||||||
|
Outside Israel |
( |
) |
( |
) |
( |
) | ||||||
|
( |
) |
( |
) |
( |
) | |||||||
|
Taxes in respect of prior years: | ||||||||||||
|
In Israel |
|
(*) |
| |||||||||
|
Outside Israel |
|
|
| |||||||||
|
|
|
| ||||||||||
|
|
|
| ||||||||||
(*)
B. Measurement of results for tax purposes under the Income Tax (Inflationary Adjustments) Law, 1985 (the “Inflationary Adjustment Law”)
Until December 31, 2007, the Company and its Israeli subsidiaries reported income for tax purposes in accordance with the provisions of the Inflationary Adjustments Law, whereby taxable income was measured in NIS, adjusted for changes in the Israeli Consumer Price Index where results of operations for tax purposes were measured in terms of earnings in NIS after adjustments for changes in the Israeli Consumer Price Index ("CPI"). Commencing January 1, 2008, this law became void, and in its place, there are transition provisions, whereby the results of operations for tax purposes are measured on a nominal basis.
C. The Law for the Encouragement of Capital Investments, 1959 (the "Investment Law")
1. On December 22, 2016, the Israeli parliament passed the Law for Economic Efficiency (Legislative Amendments for Achieving Budget Objectives in the Budget Years 2017 and 2018) – 2016 (hereinafter – the “Economic Efficiency Law”) and on December 29, 2016, the Law was publicized in the Official Gazette. The Economic Efficiency Law, among other things, reduced the tax rate applicable to a preferred enterprise located in Development Zone A from
2. As of December 31, 2021, one Israeli subsidiary (located in areas other than Development Zone A) is entitled to a "Preferred Company" status pursuant to the investment law and subject to 16% corporate tax rate.
F - 37
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 15 - INCOME TAX (cont.)
D. The Law for the Encouragement of Capital Investments, 1959, under the 2016 amendment (the "Investment Law")
1. In December 2016 new legislation amended the Investments Law (the "2016 amendment"). Under the 2016 amendment a new status of "Technological Preferred Enterprise" was introduced to the Investment Law.
Technological Preferred Enterprise – an enterprise which, amongst other condition, is part of a consolidated group with consolidated revenues of less than NIS
2. As of December 31, 2021, two Israeli subsidiaries (located in areas other than Development Zone A). are entitled to a "Technological Preferred Enterprise" status pursuant to the investment (under the 2016 amendment) law and subject to 12% corporate tax rate. Income not eligible for Technological Preferred Enterprise is taxed at the regular corporate tax rate or at the preferred tax rate as mention in Note C2 above, as the case may be.
E. Israeli corporate tax rates
Taxable income of the Company and its Israeli subsidiaries (that are not entitled to special tax rates as described above) is subject to a corporate tax rate of 23% in 2019, 2020 and 2021.
F. Non-Israeli subsidiaries
Non-Israeli subsidiaries are taxed according to the tax laws and rates in their country of residence.
G. Use of assumptions and judgments
The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and can be ambiguous; the Company is, therefore, obliged to make many subjective assumptions and judgments regarding the application of such laws and regulations to its facts and circumstances. In addition, interpretations of and guidance surrounding income tax laws and regulations are subject to changes over time. Any changes in the Company's subjective assumptions and judgments could materially affect amounts recognized in its consolidated balance sheets and statements of income.
H. Tax assessments
The Company and certain Israeli subsidiary have received final tax assessments through the 2018, One of the subsidiaries in Brazil has received final tax assessments through the 2015 tax year. The other subsidiaries have not yet been assessed since incorporation.
I. Carry forward foreign tax credits and tax losses
As of December 31, 2021, there is no losses carried forward that are likely to use in the near future.
F - 38
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 15 - INCOME TAX (cont.)
J. The following is reconciliation between the theoretical tax on pretax income, at the applicable Israeli tax rate, and the tax expense reported in the financial statements:
|
US dollars | ||||||||||||
|
Year ended December 31, | ||||||||||||
|
(in thousands) |
2021 |
2020 |
2019 | |||||||||
|
Pretax income |
|
|
| |||||||||
|
Statutory tax rate |
|
% |
|
% |
|
% | ||||||
|
Tax computed at the ordinary tax rate |
|
|
| |||||||||
|
Nondeductible expenses (income) |
( |
) |
|
| ||||||||
|
Losses and timing differences in respect of which no deferred taxes assets were recognized |
|
|
| |||||||||
|
Tax adjustment in respect of different tax rates |
|
|
| |||||||||
|
Taxes in respect of withholding at the source from royalties and dividends |
|
|
| |||||||||
|
Adjustment in respect of tax rate deriving from “approved enterprises” |
( |
) |
( |
) |
( |
) | ||||||
|
Tax related to previous years |
|
|
| |||||||||
|
Others |
|
( |
) |
( |
) | |||||||
|
|
|
| ||||||||||
K. Summary of deferred taxes
Composition:
|
US dollars | ||||||||
|
December 31, | ||||||||
|
(in thousands) |
2021 |
2020 | ||||||
|
Deferred taxes | ||||||||
|
Provision for vacation, recreation and bad debt |
|
| ||||||
|
Provision for other employee related obligations |
|
| ||||||
|
Provision for deferred revenues/expenses and other obligations |
|
| ||||||
|
Other temporary differences, net |
|
| ||||||
|
|
| |||||||
|
US dollars | ||||||||
|
December 31, | ||||||||
|
(in thousands) |
2021 |
2020 | ||||||
|
| ||||||||
|
Deferred income taxes included in long-term investments and other assets |
|
| ||||||
|
Deferred income taxes included in long-term liabilities |
( |
) |
( |
) | ||||
|
|
| |||||||
F - 39
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 15 - INCOME TAX (cont.)
L. Income before income taxes is composed as follows:
|
US dollars | ||||||||||||
|
Year ended December 31, | ||||||||||||
|
(in thousands) |
2021 |
2020 |
2019 | |||||||||
|
The Company and its Israeli subsidiaries |
|
|
| |||||||||
|
Non-Israeli subsidiaries |
|
( |
) |
( |
) | |||||||
|
|
|
| ||||||||||
NOTE 16 - EARNINGS PER SHARE
During the periods, there were no potential instruments that could be exercised or converted to ordinary shares. The net income and the weighted average number of shares used in computing basic and diluted earnings per share for the years ended December 31, 2021, 2020 and 2019, are as follows:
|
US dollars | ||||||||||||
|
Year ended December 31, | ||||||||||||
|
(in thousands) |
2021 |
2020 |
2019 | |||||||||
|
Net income attributable to stockholder's used for the computation of basic and diluted earnings per share |
|
|
| |||||||||
|
Number of shares | ||||||||||||
|
Year ended December 31, | ||||||||||||
|
(in thousands) |
2021 |
2020 |
2019 | |||||||||
|
Weighted average number of shares used in the computation of basic and diluted earnings per share |
|
|
| |||||||||
NOTE 17 - RELATED PARTIES
A. The Tzivtit Insurance Ltd. (“Tzivtit Insurance”), owned by a director of the Company, serves as the Company’s insurance agent and provides the Company with elementary insurance and managers insurance.
In respect of these insurance services, Tzivtit Insurance is entitled to receive commissions at various rates, paid by the insurance company (which is not considered a related party).
With respect to basic insurance policies, and directors and offices insurance policies, the Company paid to the insurance company in 2021, US$
Tzivtit Insurance is entitled to commissions in an aggregate amount of NIS
B.In accordance with an agreement with a related party (as amended), Prof. Yehuda Kahane, for financial consulting, the Company is required to pay the consultant monthly consulting fees of NIS
F - 40
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 17 - RELATED PARTIES (cont.)
C. In February 2014, following the approval of the Company's general meeting of shareholders on January 28, 2014, the Company entered into new service agreements, setting forth the terms of service of its President, Co-Chief Executive Officers and its International Activity and Business Development Officer, in compliance with the Company's compensation policy for office holders; and E-Com entered into a service agreement setting forth the terms of service of its Chief Executive Officer in compliance with the Company's compensation policy for officer holders. The principal terms of these agreements are as follows:
Messrs. Izzy Sheratzky, Eyal Sheratzky, Nir Sheratzky and Gil Sheratzky (the "Executive Offices Holders" or "the Executives"), shall provide services as independent contractors, which shall be entitled to a monthly payment of NIS
Each of the above agreements also provides that the executives may request to provide their services to the Company as employees, and not through a service provider, and in such event, the they shall execute an employment agreement with the Company, in lieu of the above service agreements, which shall also set forth the provisions of social security and other benefits that the Company usually grants its senior executive officers (which may not deviate from the provisions of the Compensation policy in this respect). In any event, it was agreed that the nature of the agreement pursuant to which the services are provided shall not affect the company's provision of the services as set forth in the service agreements.
The terms of the Cash incentives applicable to the "Executive Offices Holders", as set forth in their agreements referred to above (the "Agreements"), are as follows:
•
"Target-based Cash Incentives" means a cash incentive awarded to the Executive Office Holders for the Company's achievement of the following Profit-Before-Tax targets in each calendar year following the effective date of the above agreements, in which the Minimum Threshold (as defined below) has been achieved:
|
Company's Profit-Before-Tax Targets (In US$ thousands) (*) |
Level of Incentive - As a Percentage of the Executive Office Holder's Annual Cost of Pay | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
Above |
|
"Minimum Threshold" means, with respect to a particular calendar year, a minimum Company's Return on Equity of
(*)
F - 41
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 17 - RELATED PARTIES (cont.)
C. (cont.)
•
"Excess Return Cash Incentives" means that at the end of each calendar year, the Company shall examine the Company's Stock Yield since January 1 of such year or, with respect to the first year of such grant –
The Excess Return Cash Incentive for each year shall not exceed an amount equal to the Executive Officer Holder's annual Cost of Pay.
In the event that an Agreement is terminated during a calendar year, the Company's compensation committee and board of directors shall determine the relative amounts out of the Target-based Cash Incentives and/or Excess Return Cash Incentives to which the relevant Executive Office Holder is entitled for the portion of the year during which the Agreement was in force; and these amounts shall be paid within
On the date of determination of each Executive Office Holder's entitlement for a Target-based Cash Incentive for a particular year, the Company's compensation committee shall examine whether the total amount of grants to which Executive Officers are entitled with respect to such calendar year and which constitute variable components of their terms of services (the "Total Amount of Grants to Executive Officers"), exceed an amount equal to
In the event that the Total Amount of Grants to Executive Officers exceeds the EBITDA's Threshold, then the Target-based Cash Incentive and the Excess Return Cash Incentive to which an Executive Office Holder is entitled (together, the "Grants") shall be reduced by an amount equal to the Executive Office Holder's Rate of Grants (as defined below) out of the Excess Amount. The term "Executive Office Holder's Rate of Grants" means, with respect to a particular Executive Office Holder, the percentage which such Executive Office Holder's Grants constitute out of the Total Amount of Grants to Executive Officers.
The Company's board of directors shall have the right, under special circumstances at its discretion, to reduce the amount of Grants to which the Executive Office Holders are entitled, upon a
The Executive Office Holder shall be required to return any compensation paid to them on the basis of results included in financial statements that turned out to be erroneous and were subsequently restated in the Company's financial statements published during the three year period following publication of the erroneous financial statements; to the extent they would not have been entitled to the compensation actually received had it been determined based on the restated financial statements. In such case, compensation amounts will be returned within
F - 42
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 17 - RELATED PARTIES (cont.)
C. (cont.)
In 2021 and 2020 Executive Offices Holders were entitled to Target based cash incentives at the maximum rate of (
Due to the Covid-19 effects and based on their own initiative, the Company's executive Offices Holders agreed to temporarily decrease their base salary by
The Company's executive Offices Holders also agreed to temporarily delay the payment of their Target-based Cash Incentives for 2020, during the first quarter of 2021 the Company paid the executive Offices Holders the incentives for 2020 (additional amount of $
Herein below is attached table regards the aggregate amounts paid to Executive Offices Holders:
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US dollars | ||||||||||||
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Year ended December 31, | ||||||||||||
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(in thousands) |
2021 |
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2020 |
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2019 |
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Izzy Sheratzky |
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Eyal Sheratzky |
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Nir Sheratzky |
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Gil Sheratzky |
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NOTE 18 - SEGMENT REPORTING
A. General information:
The operations of the Group are conducted through two different core activities: Location based services ("Telematics services") and Wireless communications products ("Telematics products"). These activities also represent the reportable segments of the Group.
The reportable segments are viewed and evaluated separately by the Company's Chief Operating Decision Maker (the Company's Co-Chief Executive Officers), since the marketing strategies, processes and expected long term financial performances of the segments are different.
Telematics services:
The telematics services segment consists predominantly of regionally- based stolen vehicle recovery (SVR) services, fleet management services and value-added services that include among others, connected car, UBI (usage base insurance), personal advanced locater services and concierge services.
The Group provides Location based services in Israel, Brazil, Argentina, Colombia, Mexico, Ecuador and the United States.
Telematics products:
The telematics product segment consists mainly of short and medium range two-way machine-to-machine wireless communications products that are used for various applications, including automatic vehicle location, and automatic vehicle identification.
F - 43
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 18 - SEGMENT REPORTING (cont.)
B. Information about reported segment profit or loss and assets:
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US dollars | ||||||||||
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(in thousands) |
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Telematics services |
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Telematics products |
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Total | ||||
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Year ended December 31, 2021 | ||||||||||||
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Revenues |
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Operating income |
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Assets |
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Goodwill |
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Expenditures for assets |
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Depreciation and amortization |
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Year ended December 31, 2020 | ||||||||||||
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Revenues |
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Operating income (loss) |
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( |
) |
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Assets |
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Goodwill |
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Expenditures for assets |
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Depreciation and amortization |
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Impairment of goodwill |
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Impairment of intangible assets |
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Year ended December 31, 2019 | ||||||||||||
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Revenues |
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Operating income (loss) |
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( |
) |
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Assets |
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Goodwill |
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Expenditures for assets |
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Depreciation and amortization |
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Impairment of goodwill |
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Impairment of intangible assets |
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C. Information about reported segment profit or loss and assets:
The evaluation of performance is based on the operating income of each of the two reportable segments.
Accounting policies of the segments are the same as those described in the accounting policies applied in the consolidated financial statements.
Due to the nature of the reportable segments, there have been no inter-segment sales or transfers during the reported periods.
Financing expenses, net, non-operating other expenses, net, taxes on income and the share of the Company in losses of affiliated companies were not allocated to the reportable segments, since these items are carried and evaluated on the enterprise level.
F - 44
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 18 - SEGMENT REPORTING (cont.)
D. Reconciliations of reportable segment revenues, profit or loss, and assets, to the enterprise’s consolidated totals:
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US dollars | ||||||||||||
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Year ended December 31, | ||||||||||||
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(in thousands) |
2021 |
2020 |
2019 | |||||||||
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Total revenues of reportable segment and consolidated revenues |
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Operating income | ||||||||||||
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Total operating income for reportable segments |
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Unallocated amounts: | ||||||||||||
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Financing income, net |
( |
) |
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Other expense, net |
( |
) |
( |
) |
( |
) | ||||||
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Consolidated income before taxes on income |
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Assets | ||||||||||||
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Total assets for reportable segments (*) |
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Other unallocated amounts: | ||||||||||||
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Current assets |
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Investments in affiliated and other companies |
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Property and equipment, net |
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Other unallocated amounts |
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Consolidated total assets (at year end) |
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Other significant items | ||||||||||||
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Total expenditures for assets of reportable segments |
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Unallocated amounts |
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Consolidated total expenditures for assets |
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Total depreciation, amortization and impairment for reportable segments |
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Unallocated amounts |
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Consolidated total depreciation, amortization and impairment |
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(*)
F - 45
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 18 - SEGMENT REPORTING (cont.)
E. Geographic information
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Revenues | ||||||||||||
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Year ended December 31, | ||||||||||||
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(in thousands) |
2021 |
2020 |
2019 | |||||||||
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Israel |
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Brazil |
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Others |
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Total |
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Property and equipment, net | ||||||||||||
|
December 31, | ||||||||||||
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(in thousands) |
2021 |
2020 |
2019 | |||||||||
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Israel |
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Brazil |
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Others |
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Total |
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- Revenues were attributed to countries based on customer location.
- Property and equipment were classified based on major geographic areas in which the Company operates.
F. Major customers
During 2019, the Company had one costumer (global world vehicles manufacturer) which represent
During 2020, and 2021 there were no sales exceeding 10% of total revenues to none of the Company customers.
G.Major product lines and timing of revenue recognition
In the following table, revenue is disaggregated by primary major product lines, and timing of revenue recognition for the years ended December 31, 2020 and 2021:
|
US dollars | ||||||||||||||||||||||||
|
Reportable segments result of operations | ||||||||||||||||||||||||
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(in thousands) |
Year ended December 31, 2020 |
Year ended December 31, 2021 | ||||||||||||||||||||||
|
Telematics services |
Telematics products |
Total |
Telematics services |
Telematics products |
Total | |||||||||||||||||||
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At a point of time |
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Over a period of time |
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F - 46
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 18 - SEGMENT REPORTING (cont.)
G.Major product lines and timing of revenue recognition (cont.)
In the following table, revenue is disaggregated by primary major product lines, and timing of revenue recognition for the year ended December 31, 2019:
|
US dollars | |||||||||
|
Reportable segments result of operations | |||||||||
|
(in thousands) |
Year ended December 31, 2019 | ||||||||
|
Telematics services |
Telematics products |
Total | |||||||
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At a point of time |
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Over a period of time |
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NOTE 19 - FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT
A. Concentrations of credit risks
Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash and cash equivalents, accounts receivables and marketable securities.
Most of the Group’s cash and cash equivalents, deposits in short-term investments (and investments in trading marketable securities), as of December 31, 2021 and 2020, were deposited with major banks with high credit rating. The Company is of the opinion that the credit risk in respect of these balances is immaterial.
Most of the Group’s sales are made in Israel, Brazil, Argentina, Mexico, Ecuador, Colombia and the United States to a large number of customers, including insurance companies and Car manufacturers. Management periodically evaluates the collectability of the trade receivables to determine the amounts that are doubtful of collection and determine a proper allowance for doubtful accounts. Accordingly, management believes that the Group’s trade receivables do not represent a substantial concentration of credit risk.
From time to time the Company enters into foreign exchange forward contracts intended to protect against the increase in the purchase price of forecasted inventory purchases dominated in currencies other than the functional currency of the purchasing entity.
However, during the years ended December 31, 2021, and 2020 such activity was limited.
B. Foreign exchange risk management
The Group operates internationally, which gives rise to exposure to market risks mainly from changes in exchange rates of foreign currencies in relation to the functional currency of each of the entities of the Group.
During 2017 the Company entered into foreign currency forward transactions in order to protect itself against the risk that the eventual cash flows resulting from anticipated transactions (mainly purchases of inventory), denominated in currencies other than the functional currency of the purchasing entity, will be affected by changes in exchange rates. Such transactions were settled during the years 2017, 2018 and 2019.
During the years 2021 and 2020 the company did not have hedging activity, and as of December 31, 2021, and 2020 there were no material forward exchange contracts outstanding.
F - 47
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 19 - FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT (cont.)
C. Fair value of financial instruments
The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is an exit price, representing the amount that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between market participants.
The Company measured cash and cash equivalents, marketable securities and derivative financial instruments at fair value. Such financial instruments are measured at fair value, on a recurring basis. The measurement of cash and cash equivalents and marketable derivatives are classified within Level 1. The fair value of derivatives generally reflects the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting dates, based on the prevailing currency prices and the relevant interest rates. Such measurement is classified within Level 2. However, as of December 31, 2021 and 2020, the company did not have material financial derivatives.
The fair value of the financial instruments included in the working capital of the Group (cash and cash equivalents, accounts receivable, accounts payable and other current assets and liabilities) approximates their carrying value, due to the short-term maturity of such instruments.
The fair value of the long-term liability (loans from bank institutions) approximates its fair value, as the loan carries variable interest rate.
See Note 1N regarding non-recurring measurement of the fair value of certain non-financial assets (mainly reporting units with goodwill and other definite-lite intangible assets).
The fair value of the Company's obligation to purchase non-controlling interests was based on the amount of cash that would be paid to settle the liability if settlement occurred at the balance sheet date. On September 22, 2021, the Company settled the obligation to purchase the remaining
The Company's financial assets measured at fair value on a recurring basis, consisted of the following types of instruments as of December 31, 2021 and 2020:
|
December 31, 2021 | ||||||||||||
|
(in thousands) |
Level 1 |
Level 2 |
Level 3 | |||||||||
|
| ||||||||||||
|
Trading securities |
|
|
| |||||||||
|
Total |
|
|
| |||||||||
|
December 31, 2020 | ||||||||||||
|
(in thousands) |
Level 1 |
Level 2 |
Level 3 | |||||||||
|
| ||||||||||||
|
Trading securities |
|
|
| |||||||||
|
Total |
|
|
| |||||||||
F - 48
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
ITURAN LOCATION AND CONTROL LTD.
(Registrant)
|
By: /s/ Eyal Sheratzky |
/s/ Nir Sheratzky | ||
|
Eyal Sheratzky |
Nir Sheratzky | ||
|
Co-Chief Executive Officers | |||
Dated: April 26, 2022
80