Ituran Location & Control Ltd 20-F for FY2025
Ituran Location & Control Ltd. (ITRN)
20-F
2026-04-23
For: 2025-12-31
View Original
Added on
April 23, 2026
About this 20-F
Ituran Location & Control Ltd filed this 20-F on April 23, 2026, covering the fiscal year ended December 31, 2025 (FY2025).
Headline figures
Fiscal year ended December 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $359.02M
- up 6.8% from $336.26M a year earlier
- Net income
- $57.97M
- up 8.0% from net income of $53.65M a year earlier
- Diluted EPS
- $2.92
- up 8.1% from $2.70 a year earlier
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 20-F
|
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
OR
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 |
For the fiscal year ended December
31 , 2025
OR
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
OR
|
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
Date of event requiring this shell
company report..........................................
For the transition period from ____________
to ____________
Commission file number. 001-32618
(Exact name of Registrant as specified
in its charter)
N/A
(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:
|
Title
of each class |
Trading
symbol(s) |
Name
of each exchange on which registered |
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|
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Securities registered or to be registered
pursuant to Section 12(g) of the Act:
None
(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 ☒ No
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 ☒ No
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.
☒ Yes
☐ No
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).
☒ Yes
☐ No
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 ☐
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Emerging growth company
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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. ☒
If securities are registered pursuant to Section 12(b)
of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of
an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis
of accounting the registrant has used to prepare the financial statements included in this filing:
|
|
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 ☒
No
TABLE OF CONTENTS
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iv | ||
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iv | ||
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1 | ||
| 1 | ||
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1 | ||
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A |
(Reserved) |
1 |
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B. |
CAPITALIZATION AND INDEBTEDNESS |
1 |
|
C. |
REASONS FOR THE OFFER AND USE OF PROCEEDS |
1 |
|
D. |
RISK FACTORS |
1 |
| 9 | ||
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A. |
HISTORY AND DEVELOPMENT OF THE COMPANY |
9 |
|
B. |
BUSINESS OVERVIEW |
10 |
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C. |
ORGANIZATIONAL STRUCTURE |
20 |
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D. |
PROPERTY, PLANTS AND EQUIPMENT |
20 |
| 21 | ||
| 22 | ||
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A. |
OPERATING RESULTS |
22 |
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B. |
LIQUIDITY AND CAPITAL RESOURCES |
31 |
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C. |
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES |
33 |
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D. |
TREND INFORMATION |
33 |
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E. |
CRITICAL ACCOUNTING ESTIMATES |
33 |
i
|
34 | ||
|
A. |
DIRECTORS AND SENIOR MANAGEMENT |
34 |
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B. |
COMPENSATION |
38 |
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C. |
BOARD PRACTICES |
40 |
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D. |
EMPLOYEES |
44 |
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E. |
SHARE OWNERSHIP |
47 |
| 48 | ||
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A. |
MAJOR SHAREHOLDERS |
48 |
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B. |
RELATED PARTY TRANSACTIONS |
48 |
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C. |
INTERESTS OF EXPERTS AND COUNSEL |
53 |
| 53 | ||
|
A. |
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION |
53 |
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B. |
SIGNIFICANT CHANGES |
53 |
| 53 | ||
|
A. |
OFFER AND LISTING DETAILS |
53 |
|
B. |
PLAN OF DISTRIBUTION |
53 |
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C. |
MARKETS |
53 |
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D. |
SELLING SHAREHOLDERS |
53 |
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E. |
DILUTION |
53 |
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F. |
EXPENSES OF THE ISSUE |
53 |
| 53 | ||
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A. |
SHARE CAPITAL |
53 |
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B. |
MEMORANDUM AND ARTICLES OF ASSOCIATION |
53 |
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C. |
MATERIAL CONTRACTS |
54 |
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D. |
EXCHANGE CONTROLS |
54 |
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E. |
TAXATION |
54 |
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F. |
DIVIDENDS AND PAYING AGENTS |
62 |
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G. |
STATEMENT BY EXPERTS |
62 |
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H. |
DOCUMENTS ON DISPLAY |
62 |
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I. |
SUBSIDIARY INFORMATION |
62 |
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J. |
ANNUAL REPORT TO SECURITY HOLDERS |
62 |
ii
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62 | ||
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63 | ||
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A. |
DEBT SECURITIES |
63 |
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B. |
WARRANTS AND RIGHTS |
63 |
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C. |
OTHER SECURITIES |
63 |
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D. |
AMERICAN DEPOSITARY SHARES |
63 |
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63 | ||
| 63 | ||
| 64 | ||
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66 | ||
| 66 | ||
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67 | ||
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| 68 | ||
| 68 | ||
| 70 | ||
| 70 | ||
| 70 |
iii
USE OF CERTAIN TERMS
As used herein, and unless the context suggests otherwise, the
terms “we”, “us”, “our” or “Ituran” refer to Ituran Location and Control Ltd. and its
consolidated subsidiaries.
We have prepared our consolidated financial statements in US Dollars.
Our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States (“U.S.
GAAP”). All references herein to “dollars” or “$” or “USD” are to United States dollars, and
all references to “NIS” are to New Israeli Shekels.
CAUTIONARY
NOTE REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 20-F contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. The use of the words “projects,” “believes,” “expects,” “may,” “plans”
or “intends,” or words of similar import, identifies a statement as “forward-looking.” The forward-looking statements
included herein are based on current expectations that involve a number of risks and uncertainties. These forward-looking statements are
based on the assumption that we will not lose a significant customer or customers or experience increased fluctuations of demand or rescheduling
of purchase orders, that our markets will continue to grow, that our products will remain accepted within their respective markets and
will not be replaced by new technology, that competitive conditions within our markets will not change materially or adversely, that we
will retain key technical and management personnel, that our forecasts will accurately anticipate market demand, and that there will be
no material adverse change in our operations or business. Assumptions relating to the foregoing involve judgments with respect to, among
other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible
to predict accurately and many of which are beyond our control. In addition, our business and operations are subject to substantial risks
which increase the uncertainty inherent in the forward-looking statements. In light of the significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that
our objectives or plans will be achieved. Factors that could cause actual results to differ from our expectations or projections include
the risks and uncertainties described in this annual report in Item 3D: Risk Factors. Forward-looking
statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statements or
other information contained in this report, whether as a result of new information, future events or otherwise. You are advised, however,
to review any additional disclosures we make in our reports on Form 6-K filed with the U.S. Securities and Exchange Commission (“SEC”).
iv
PART I
| ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
Not applicable.
| ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE |
Not applicable.
| ITEM 3. |
KEY INFORMATION |
| A. |
(Reserved) |
| B. |
CAPITALIZATION AND INDEBTEDNESS |
Not applicable.
| C. |
REASONS FOR THE OFFER AND USE OF PROCEEDS |
Not applicable.
| D. |
RISK FACTORS |
Our business, operating results and financial condition could be
seriously harmed due to any of the following risks, among others. If we do not successfully address the risks to which we are subject,
we could experience a material adverse effect on our business, results of operations and financial condition and our share price may decline,
which may result in a loss of all or part of your investment. We cannot assure you that we will successfully address any of these risks.
You should carefully consider the following factors as well as the other information contained in this annual report before making any
investment decision with respect to our securities.
RISKS RELATED TO OUR BUSINESS
Failure to maintain our existing relationships or establish new relationships
with insurance companies or car manufacturers could adversely affect our revenues and growth potential.
Revenues from our stolen vehicle recovery services, which we refer to as SVR services
(“SVR”) and automatic vehicle location (“AVL”) products, which we refer to as telematics products,
are primarily dependent on our relationships with insurance companies and car manufacturers. In Israel, insurance companies drive demand
for our SVR services and telematics products by encouraging and, in some cases, requiring customers to subscribe to vehicle location services
and purchase vehicle location products such as ours. Our subsidiaries enter into agreements with insurance companies to subscribe
to our services and purchase or lease our products directly. Our inability to maintain our existing relationships or establish new relationships
with insurance companies could adversely affect our revenues and growth potential. In some of the territories in which we operate, we
have business relationships with car manufacturers. Our inability to maintain our existing relationships or establish new relationships
with car manufacturers could adversely affect our revenues and growth potential.
Changes in insurance company practices in the markets in which we
provide our products and services could adversely affect our revenues and growth potential.
We depend on insurance company practices in the markets in which we provide our SVR
services and sell our telematics products. In Israel, insurance companies either mandate the use of SVR services by use of telematics
products, or their equivalent, as a prerequisite for providing insurance coverage to owners of certain medium- and high-end vehicles or
provide insurance premium discounts to encourage vehicle owners to subscribe to services and purchase products such as ours. For our subsidiaries
in Brazil and Argentina, insurance companies mainly lease our telematics products directly and subsequently require their customers to
subscribe to our SVR services.
Therefore, we rely on insurance companies’ continued practice of:
| ■ |
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; and |
| ■ |
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.
|
If any of these policies or practices change, revenues from sales of our SVR services
and telematics products could decline, which could adversely affect our revenues and growth potential.
1
A reduction in vehicle theft rates may adversely impact demand for
our SVR services and telematics products.
Demand for our SVR services and telematics products depends primarily on prevailing
or expected vehicle theft rates. Vehicle theft rates may decline as a result of various reasons, such as the availability of improved
security systems, implementation of improved or more effective law enforcement measures, or improved economic or political conditions
in markets that have high theft rates. If vehicle theft rates in any or all of our existing markets decline, or if insurance companies
or our other customers believe that vehicle theft rates have declined or are expected to decline, demand for our SVR services and telematics
products may decline.
A decline in new car sales in the markets in which we operate could
result in reduced demand for our SVR services and telematics products.
Our SVR services and telematics products are primarily used to protect vehicles and
are often installed before or immediately after their initial sale. Consequently, a reduction in new vehicle sales could reduce our addressable
market for SVR services and telematics products. New car sales may decline for various reasons, including an increase in new car tariffs,
taxes or gas and electricity prices. A decline in vehicle production levels or labor disputes affecting the automobile industry in the
markets where we operate may also impact the volume of new vehicle sales. A decline in new car sales in the markets in which we provide
our SVR services or sell our telematics products could result in reduced demand for these services and products.
There is significant competition in the markets in which we offer
our services and products and our results of operations could be adversely affected if we fail to compete successfully.
The markets for our services and products are highly competitive. We compete primarily
on the basis of the technological innovation, quality and price of our services and products. Our most competitive market is the telematics
services market and the related telematics products market, due to the existence of a wide variety of competing services and products
and alternative technologies that offer various levels of protection and tracking capabilities. Furthermore, providers of competing services
or products may extend their offerings to the locations in which we operate, or new competitors may enter the telematics services market.
Our telematics products also compete with less sophisticated theft protection devices such as standard car alarms, immobilizers, steering
wheel locks and homing devices, some of which may be significantly cheaper. Some of these competing products have greater brand recognition
than our telematics products.
The development of new or improved competitive products, systems
or technologies that compete with our telematics products may render our products less competitive or obsolete, which could cause a decline
in our revenues and profitability.
We are engaged in businesses characterized by rapid technological change and frequent
new product developments and enhancements. The number of companies developing and marketing new telematics products has expanded considerably
in recent years. The development of new or improved products, systems or technologies that compete with our telematics products, for both
our SVR and fleet management services, may render our products and services less competitive and we may not be able to enhance our technology
in a timely manner. In addition to the competition resulting from new products, systems or technologies, our future product enhancements
may not adequately meet the requirements of the marketplace and may not achieve the broad market acceptance necessary to generate significant
revenues. Any of the foregoing could cause a decline in our revenues and profitability.
The inability of local law enforcement agencies to timely and effectively
recover the stolen vehicles we locate could negatively impact customers’ perception of the usefulness of our SVR services and telematics
products, adversely affecting our revenues.
Our telematics products identify the location of vehicles in which our products are
installed. Following a notification of an unauthorized entry, or if we receive notification of the vehicle’s theft from a subscriber,
we notify the relevant law enforcement agency of the location of the subscriber’s vehicle and generally rely on local law enforcement
or governmental agencies to recover the stolen vehicle. We cannot control nor predict the response time of the relevant local law enforcement
or other governmental agencies responsible for recovering stolen vehicles, nor that the stolen vehicles, once located, will be recovered
at all. In the past, some stolen vehicles in which our telematics products were installed were not recovered on timely manner, from the
time an unauthorized entry is confirmed or reported to the time the vehicle is recovered. To the extent that the relevant agencies do
not effectively and timely respond to our calls and recover stolen vehicles, our recovery rates would likely diminish, which may, in turn,
negatively impact customers’ perception of the usefulness of our SVR services and telematics products, adversely affecting our revenues.
2
The ability to detect, deactivate, disable or otherwise inhibit the
effectiveness of our telematics products could adversely affect demand for these products and adversely affect our revenues.
The effectiveness of our telematics products is dependent, in part, on the inability
of unauthorized persons to deactivate or otherwise alter the functioning of our telematics products or the vehicle anti-theft devices
that work in conjunction with our telematics products. As sales of our telematics products increase, criminals in the markets in which
we operate may become increasingly aware of our telematics products and may develop methods or technologies to detect, deactivate or disable
our tracking devices or the vehicle anti-theft devices that work in conjunction with our telematics products. We believe that, as is the
case with any product intended to prevent vehicle theft, over time, there may be an increased ability of unauthorized persons to detect,
deactivate, disable or otherwise inhibit the effectiveness of our telematics products, although it is difficult to verify this fact. An
increase in the ability of unauthorized persons to detect, deactivate, disable or otherwise inhibit the effectiveness of our telematics
products could adversely affect demand for our products and adversely affect our revenues.
We rely on some intellectual property and licenses that we license
from third parties, the loss of which could preclude us from providing our SVR services or market and sell some of our telematics products,
which would adversely affect our costs, revenues and profitability.
We license from third parties some of the technology that we need in order to provide
our SVR services and market and sell some of our telematics products. In the event that such licenses were to be terminated, or if such
licenses were rendered unenforceable or invalid and we would not be able to license similar technology from other parties, it would require
us, at a minimum, to obtain rights to a different technology and reconfigure our telematics products accordingly. In addition, some of
the licenses we obtained from third parties are non-exclusive, which may enable other entities to obtain identical licenses from such
third parties to operate in the places in which we conduct our business resulting in increased competition and could adversely affect
our revenues. Our ability to sell some of our services and products depends upon the prior receipt and maintenance of various governmental
licenses and approvals and our failure to obtain or maintain such licenses and approvals, or third-party use of the same licenses and
frequencies, could result in a disruption or curtailment of our operations, a significant increase in costs and a decline in revenues.
We are required to obtain specific licenses and approvals from various governmental
authorities in order to conduct our operations. For example, some of our telematics products use radio frequencies that are licensed and
renewed periodically from the Ministry of Communications in Israel and similar agencies worldwide. As we continue to expand into additional
markets, we might be required to obtain new permits and approvals from relevant governmental authorities. Furthermore, once our telematics
infrastructure is deployed and our telematics end-units are sold to subscribers, a change in radio frequencies would require us to recalibrate
all of our antennas and replace or modify all end-units held by subscribers, which would be costly and may result in delays in the provision
of our SVR services. In addition, some of the governmental licenses for radio frequencies that we currently use may be preempted by third
parties. In Israel, our license is designated as a “joint” license, allowing the government to grant third parties a license
to use the same frequencies, and in Brazil our license is designated as a “secondary”, non-exclusive license, which allows
the government to grant a third party a primary license to use such frequencies, which third-party use could adversely affect, disrupt
or curtail our operations. Our inability to maintain necessary governmental licenses and frequency approvals, or third-party use of or
interference with the same licenses or frequencies, could result in a significant increase in costs and decline in revenues and profitability.
Our SVR services business model is based on the existence of certain
conditions, the loss or lack of which in existing or potential markets could adversely affect our revenues and our growth potential.
Our SVR services business model and, consequently, our ability to provide our SVR services
and sell our telematics products, relies on our ability to successfully identify markets in which:
| ■ |
the rate of car theft or consumer concern over vehicle safety is high; and |
| ■ |
insurance companies, car manufacturers or car owners belief in the value of vehicles justifying incurring the expenses associated
with the deployment of SVR services. |
The absence of these conditions, our inability to locate markets in which these conditions
exist or the loss of any one of these conditions in markets we currently serve could adversely affect our revenues generated in existing
markets and our growth potential.
The loss of key personnel could adversely affect our business and
growth prospects.
Our success depends upon the efforts and abilities of key management personnel, including
our Co-Chief Executive Officers. Loss of the services of one or more of such key personnel could adversely affect our ability to
execute our business plan. In addition, we believe that our future success depends in part upon our ability to attract, retain and motivate
qualified personnel necessary for the development of our business. If one or more members of our management team or other key technical
personnel become unable or unwilling to continue in their present positions, and if additional key personnel cannot be hired and retained
as needed, our business and growth prospects could be adversely affected.
3
We rely on third parties to manufacture our telematics products,
which could affect our ability to provide these products in a timely and cost-effective manner, adversely impacting our revenues and profit
margins.
We outsource the manufacturing of a significant part of our telematics products to third
parties. We use manufacturers for production of our telematics products and we do not maintain significant levels of inventories to support
us in the event of unexpected interruptions in the products manufacturing process. If our principal manufacturer or any of our other manufacturers
is unable to or fails to manufacture our products in a timely manner, we may not be able to secure alternative manufacturing facilities
without experiencing an interruption in the supply of our products or an increase in production costs. Any such interruption or increase
in production costs could affect our ability to provide our telematics products in a timely and cost-effective manner, adversely impacting
our revenues and profit margins.
We rely on three major suppliers to supply us with various products
and software. Each of these suppliers supply us with different types of products and services and acts as single supplier of these products
and services.
We rely on three major suppliers to supply us with various products and software, one
of which is our subsidiary (E.R.M. Electronic Systems Ltd).. Each of these suppliers supply us with different types of products and software
and acts as the single supplier of these products and services. Termination of relations with one of our major suppliers would adversely
affect our operations and revenues.
We depend on the use of specialized quality assurance testing equipment
to produce our telematics products, the loss or unavailability of which could adversely affect our results of operations.
We and our third-party manufacturers use specialized quality assurance testing equipment
in the production of our telematics products. The replacement of any such equipment as a result of its failure or loss could result in
a disruption of our production process or an increase in costs, which could adversely affect our results of operations.
The rapid development of artificial intelligence may negatively
effect our business
The rapid development and increasing use of artificial intelligence("AI")
technologies across the industries we operate in may create risks and uncertainties that could effect our business. Competitors, collaborators
or other third parties may adopt tools that improve the speed, cost, or effectiveness of our services. We may face new challenges
especially in the sphere of misinformation and manipulation, data privacy issue and cybersecurity threats, data integrity ,confidentiality,
intellectual property ownership or regulatory compliance. The legal and regulatory landscape governing AI technology is evolving and may
impose additional obligations or costs on industry participants. The broader proliferation of AI may indirectly effect our business, financial
conditions, results of operations, or competitive position...
The adoption of industry standards that do not incorporate the technology
we use may decrease or eliminate the demand for our services or products and could harm our results of operations.
There are no established industry standards in all of the businesses in which we sell
our telematics products. For example, vehicle location devices may operate by employing various technologies, including network triangulation,
GPS, satellite-based or network-based cellular or direction-finding homing systems. The development of industry standards that do not
incorporate the technology we use may decrease or eliminate the demand for our services or products and we may not be able to develop
new services and products that are in compliance with such new industry standards on a cost-effective basis. If industry standards develop
and such standards do not incorporate our telematics products and we are unable to effectively adapt to such new standards, such development
could harm our results of operations.
Expansion of our operations to new markets involves risks and our
failure to manage such risks may delay or preclude our ability to generate anticipated revenues and may impede our overall growth strategy.
We anticipate future growth to be attributable to our business activities in new markets,
particularly in developing countries, where we may encounter additional risks and challenges, such as longer payment cycles, potentially
adverse tax consequences, potential difficulties in collecting receivables and potential difficulties in enforcing agreements or other
rights in foreign legal systems. The challenges and risks of entering a new market may delay or preclude our ability to generate anticipated
revenues and may impede our overall growth strategy.
Part of our services rely on GPS/GPRS-based technology owned and
controlled by others, the loss, impairment or increased expense of which could negatively impact our immediate and future revenues from,
or growth of, our services and adversely affect our results of operations.
Part of our business relies on signals from GPS/GPRS satellites built and maintained
by third parties. If GPS/GPRS satellites become unavailable to us, or if the costs associated with using GPS/GPRS technology increase
such that it is no longer feasible or cost-effective for us to use such technology, we will not be able to adequately provide our services.
In addition, if one or more GPS/GPRS satellites malfunction, there could be a substantial delay before such satellites are repaired or
replaced, if at all. The occurrence of any of the foregoing events could negatively impact our immediate and future revenues from, or
growth of, our telematics services and adversely affect our results of operations.
4
Material cybersecurity failure may harm our operations, which rely
on use of information technology and wireless transmission.
Our telematics and SVR and cloud services, relies on the use of information technology
which under a major cyber security breach, could harm our operations. We are using physical services, wireless transmitting stations,
GPRS/GPS, and in lesser account cloud computing to provide our services. There are risks associated with storing and transmitting data,
which due to cyber security breach may be corrupted, and the store data on remote servers may be destroyed, damaged, seized, or otherwise
no longer accessible, which may temporarily decrease our ability to deliver telematics and SVR services.
We implemented cyber security controls – which consists of three pillars: prevention,
detection and response (data recovery in the event of a cyber breach). We perform an ongoing review of our systems and an annual external
review of our cyber security controls and their implementation. However, such cyber security controls may not be able to prevent all unexpected
weaknesses. In the event of a cyber-attack, we could experience the corruption or loss of data, misappropriation of assets or sensitive
information, including customer information, or operational disruption. This could result in response costs and various financial loss
and may subject us to litigation and cause damage to our reputation, for which we may not be covered under our current insurance policies
and may lead to substantial loss of revenues.
Some of our employees in our subsidiaries in Brazil and Argentina
are members of labor unions and a dispute between us and any such labor union could result in a labor strike that could delay or preclude
altogether our ability to generate revenues in the markets where such employees are located.
Some of our employees in our subsidiaries in Brazil and Argentina are members of labor
unions. If a labor dispute were to develop between us and our unionized employees, such employees could go on strike and we could suffer
work stoppage for a significant period of time. A labor dispute can be difficult to resolve and may require us to seek arbitration for
resolution, which arbitration can be time consuming, distracting to management, expensive and difficult to predict. The occurrence of
a labor dispute with our unionized employees could delay or preclude altogether our ability to generate revenues in the markets where
such employees are located.
Inflation and shortage of semiconductor and other critical components
supplies.
In periods of shortages impacting the semiconductor industry such as during year 2022,
we have placed and may continue to place, non-cancellable inventory orders in advance of our historical lead times, and pay premiums and/or
provide deposits to secure future supply and capacity.. However, we may not be able to accurately predict when such periods of shortage
will end, nor do we know whether those inventory orders accurately address our current and future demand needs. These actions increased
some of our product costs.
We may encounter growing inflation rates and growing interest rates in the main territories
where we operate. This may cause and additional costs to our financing and operations. This environment may have a potential negative
impact on our results, as long as it sustains. We did not encounter this issue materially in year 2025.
Regional or Global Health Pandemic
A regional or a global health pandemic, such as COVID-19, could severely affect our
business, results of operations and financial condition due to impacts on our suppliers and customers, as well as impacts from remote work
arrangements.
Currency fluctuations may result in valuation adjustments in our
assets and liabilities and could cause our results of operations to decline.
The valuation of our assets and liabilities, our revenues received, and the related
expenses incurred are not always denominated in the same currency. This lack of correlation between revenues and expenses exposes us to
risks resulting from currency fluctuations. These currency fluctuations could have an adverse effect on our results of operations, such
currency fluctuations take place in several countries in which we operate which affects our operation results in these countries. In addition,
fluctuations in currencies may result in valuation adjustments in our assets and liabilities which could cause our results of operations
to decline.
5
RISKS RELATED TO OUR OPERATIONS IN ISRAEL
We are headquartered in Israel and therefore our results of operations
may be adversely affected by political, economic and military instability in Israel.
Our headquarters are located in Israel and most our key employees, officers and directors
are residents of Israel. Accordingly, security, political and economic conditions in Israel directly affect our business. Over the past
several decades, a number of armed conflicts have taken place between Israel and its Arab neighbours. During the recent years Israel was
engaged in an armed conflicts with a militant group and political party who controls the Gaza Strip. These conflicts involved missile
strikes against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located,
and may negatively affect business conditions in Israel.
On October 7th,
2023, Hamas terrorist organization has launched an horrific hostile military assault against Israel. Hamas has murdered 795 civilians,
373 soldiers, policemen and foreigners and kidnapped more than 230 into the Gaza Strip. On that day, where militant groups
launched a surprise attack on southern Israel from the Gaza Strip, marking the start of a most significant military escalation
in the region. After clearing Hamas militants, the Israeli retribution war actions against Hamas which started from October 8th
with more than 250,000 Israeli soldiers recruited from reserve military retaliated by conducting an extensive aerial bombardment campaign
on Hamas targets, followed by a large-scale ground military act on Gaza. The aforementioned was also coupled with military
actions taken on the Northern part of Israel against the Hasbullah from Lebanon which later turned into full scale fighting. Moreover
during 2024 Iran has launched several missiles and ballistic missiles attacks against Israel to which Israel retaliated. During
June 2025 there were intense military actions, including missiles, between Israel and Iran (12 days) with much damage caused to civil
residential, hospital and research institute (Weizman) with dozens of casualties and destruction. During March-April 2026
there are again intense military actions, including missiles, between Israel and Iran. We were not significantly affected by the aforementioned
hostile and military actions. Continued or increased hostilities, future armed conflicts, political developments in other states in the
region or continued or increased terrorism could make it more difficult for us to conduct our operations in Israel, which could increase
our costs and adversely affect our financial results.
Furthermore, there are number of countries, primarily in the Middle East, that still
restrict business with Israel or Israeli companies and as a result our company is precluded from marketing its products in these countries.
Restrictive laws or policies directed toward Israel or Israeli businesses could have an adverse effect on our ability to grow our business
and our results of operations.
The Israeli government during year 2023 - 2025 pursued extensive changes to Israel’s
judicial system. This has sparked extensive political debate. In response to the foregoing developments, many individuals, organizations
and institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business
environment in Israel, due to potential reluctance of foreign investors to invest or transact business in Israel, increased currency fluctuations,
downgrades in credit rating which already occurred twice, increased interest rates, increased volatility in securities markets, and other
changes in macroeconomic conditions. To the extent that any of these negative developments occur, they may have an adverse effect on our
business, our results of operations, or our ability to raise additional funds.
Under Israeli law, we are considered a “monopoly” and
therefore subject to certain restrictions that may negatively impact our ability to grow our business in Israel.
We have been declared a monopoly under the Israeli Economy competition Law (formerly
known as Restrictive Trade Practices Law, 1988) (the “Israeli Antitrust Law”), in the market for the provision of systems
for the location of vehicles. 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 (under its new name
- Competition Authority) may further declare that we have abused our position in the market. Any such declaration in any suit in which
it is claimed that we engage in anti-competitive conduct would serve as prima facie evidence
that we are a monopoly or that we have engaged in anti-competitive behaviour. Furthermore, we may be ordered to take or refrain from taking
certain actions, such as set maximum prices, in order to protect against unfair competition. If we breach certain provisions of the Israeli
Antitrust Law, including as a monopoly, the Israeli Competition authority may also impose on us in an administrative procedure, financial
sanctions in an amount of up to the lower of NIS 121 million (approximately $37.9 million, or 8% of our annual revenues for the last financial
year prior to such breach. Restraints on our operations as a result of being considered a “monopoly” in Israel could adversely
affect our ability to grow our business in Israel.
It may be difficult and costly to enforce a judgment issued in the
United States against us, our executive officers and directors, or to assert United States securities laws claims in Israel or serve process
on our officers and directors.
We are incorporated and headquartered in Israel. As a result, our executive officers
and directors are non-residents of the United States and a substantial portion of our assets, and the assets of these persons are located
outside of the United States. Therefore, service of process upon any of these officers or directors may be difficult to effect in the
United States. Furthermore, it may be difficult to enforce a judgment issued against us in the United States or any of such persons in
both United States courts and other courts abroad.
Additionally, there is doubt as to the enforceability of civil liabilities under United
States federal securities laws in actions originally instituted in Israel or in actions for the enforcement of a judgment obtained in
the United States on the basis of civil liabilities in Israel.
6
Provisions of Israeli corporate and tax law may delay, prevent or
otherwise encumber a merger with, or an acquisition of, our company, which could prevent a change of control, even when the terms of such
transaction are favourable to us and our shareholders.
We may be subject to Israeli corporate law which regulates mergers, requires tender
offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers
or significant shareholders and regulates other matters that may be relevant to these types of transactions. In addition, our articles
of association contain, among other things, provisions that may make it more difficult to acquire our company, such as classified board
provisions and certain restrictions on the members of our board pursuant to regulatory requirements of the Israeli Ministry of Communication.
Furthermore, Israeli tax considerations may make potential transaction structures involving the acquisition of our company unappealing
to us or to some of our shareholders. See Item 10.B. – “Memorandum and Articles of Association” - “Our Corporate
Practices under the Israeli Companies Law” under the caption “Approval of Transactions under Israeli law” and Item 10.E.
– “Taxation” under the caption “Israeli Tax Considerations” for additional discussion of some anti-takeover
effects of Israeli law. These provisions of Israeli law and our articles of association may delay, prevent or otherwise encumber a merger
with, or an acquisition of, our company or any of our assets, which could have the effect of delaying or preventing a change in control
of our company, even when the terms of such a transaction could be favourable to our shareholders.
The rights and responsibilities of our shareholders will be governed
by Israeli law and may differ in some respects from the rights and responsibilities of shareholders under United States law.
We are incorporated under Israeli law. The rights and responsibilities of holders of
our ordinary shares are governed by our memorandum of association, articles of association and by Israeli law. These rights and responsibilities
differ in some respects from the rights and responsibilities of shareholders in typical US-based corporations. In particular, a shareholder
of an Israeli company has a duty to act in good faith toward the company and other shareholders and to refrain from abusing his, her or
its power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters., There is
little case law available to assist in understanding the implications of these provisions that govern shareholders’ actions, which
may be interpreted to impose additional obligations on holders of our ordinary shares that are typically not imposed on shareholders of
US-based corporations.
GENERAL RISKS RELATED TO OUR ORDINARY SHARES AND THE ECONOMY
Future sales of our ordinary shares could reduce the market price
of our ordinary shares.
If we or our shareholders sell substantial amounts of our ordinary shares on the Nasdaq
Global Select Market, the market price of our ordinary shares may decline.
The market price of our ordinary shares is subject to fluctuation,
which could result in substantial losses for our investors.
The stock market in general, and the market price of our ordinary shares in particular,
are subject to fluctuation, and changes in our share price may be unrelated to our operating performance. The market price of our ordinary
shares may fluctuate as a result of a number of factors, including:
| ■ |
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; |
| ■ |
general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors.
|
These factors and price fluctuations may materially and adversely
affect the market price of our ordinary shares and result in substantial losses to our investors.
7
Somewhat significant portion of our ordinary shares are held by a
small number of existing shareholders and our articles of association provide for a staggered board, which may hinder change of control.
Moked Ituran Ltd. currently beneficially owns approximately 19.52% of our outstanding
ordinary shares (not including treasury stock held by us). Other than applicable regulatory requirements under applicable law, Moked Ituran
Ltd., is not prohibited from selling an interest in our company to a third party. In addition, our articles of association provide for
a staggered board which may delay, prevent or deter a change in control. For additional information concerning our staggered board, see
Item 6.A – Directors and Senior Management.
U.S. investors in our company could suffer adverse tax consequences
if we are characterized as a passive foreign investment company.
If, for any taxable year, our passive income or our assets that produce passive income
exceed levels established by the Internal Revenue Code, we may be characterized as a passive foreign investment company, which we refer
to as PFIC, for US federal income tax purposes. This characterization could result in adverse US tax consequences to our shareholders
who are U.S. Holders. See Item 10.E. – “Taxation” under the caption “United States Tax Considerations” below,
for more information about which shareholders may qualify as U.S. Holders. If we were classified as a PFIC, a U.S. Holder could be subject
to increased tax liability upon the sale or other disposition of our ordinary shares or upon the receipt of amounts treated as “excess
distributions.” Under such rules, the excess distribution and any gain would be allocated rateably over the U.S. Holder’s
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, U.S holders of shares in a
PFIC may not receive a “step-up” in basis on shares acquired from a decedent. U.S. Holders should consult with their own U.S.
tax advisors with respect to the United States tax consequences of investing in our ordinary shares as well as the specific application
of the “excess distribution” and other rules discussed in this paragraph. For a discussion of how we might be characterized
as a PFIC and related tax consequences, please see Item 10.E. – “Taxation” under the caption “United States Tax
Considerations–Passive foreign investment company considerations”.
Securities we issue to fund our operations or in connection with
acquisitions could dilute our shareholders ownership or impact the value of our ordinary shares.
We may decide to raise additional funds through a public or private debt or equity financing
to fund our operations or finance acquisitions. If we issue additional equity securities, the percentage of ownership of our shareholders
will be reduced and the new equity securities may have rights superior to those of our ordinary shares, which may, in turn, adversely
affect the value of our ordinary shares.
Global and local economic downturns could reduce the level of consumer
spending and available credit within the automobile industry, which could adversely affect demand for our products and services and negatively
impact our financial results.
Current and future economic conditions could adversely affect consumer spending in the
automobile industry, as such spending is often discretionary and may decline during economic downturns when consumers have less disposable
income. Consequently, changes in general economic conditions resulting in a significant decrease in dealer automobile sales or in a tightening
of credit in financial markets, such as the 2007 U.S. subprime mortgage crisis and resulting credit crunch, could adversely impact our
future revenue and earnings. Such decreases could also affect the financial security of the automobile dealers and manufactures with whom
we do business. The delayed payment from or closure of our larger dealer groups could affect our ability to collect on our receivables.
Similar effects could result from local economic downturns in either one of our main markets of operations, i.e. Israel, Brazil and other
regions which we operate. Given the volatile nature of the current market disruption, we may not timely anticipate or manage such existing
or new risks. Our failure to do so could materially and adversely affect our business, financial condition, results of operations and
prospects.
Our directors and officers will be subject to additional reporting
requirements beginning in March 2026.
Section 8103 of the National Defense Authorization Act for Fiscal Year 2026, named the
“Holding Foreign Insiders Accountable Act”, which was signed into law on December 18, 2025, requires directors and officers
of foreign private issuers to make insider reports under Section 16(a) of the Exchange Act,
effective March 18, 2026. Our principal shareholders continue to remain exempt from the reporting under Section 16(a) of the Exchange
Act and our directors, officers and principal shareholders continue to remain exempt from the short-swing profit recovery provisions contained
in Section 16(b) of the Exchange Act.
8
| ITEM 4. |
INFORMATION ON THE COMPANY |
| A. |
HISTORY AND DEVELOPMENT OF THE COMPANY |
Our History
Our legal name is Ituran Location and Control Ltd. We were incorporated under the laws
of the State of Israel in 1994 as a subsidiary of Tadiran Ltd., an Israeli-based designer and manufacturer of telecommunications equipment,
software and defence electronic systems, whose original business purpose was to adapt military-grade technologies for the civilian market.
We are mainly engaged in the area of Telematics services, consisting of stolen vehicle
recovery, fleet management services, connected cars, UBI, and other tracking services. We also provide telematics products used in connection
with our Telematics services and various other applications. We currently primarily provide our services and sell and lease our products
in Israel, Brazil, and other regions where we operate. We also provide fleet management services in other countries through distributors.
In May 1998, we completed the initial public offering of our ordinary shares in Israel
and our ordinary shares began trading on the Tel-Aviv Stock Exchange. In September 2005, we publicly offered our ordinary shares in the
United States. On May 25, 2016, we voluntarily delisted our shares from the Tel Aviv Stock Exchange, and our ordinary shares are currently
quoted only on Nasdaq under the symbol “ITRN”.
Our principal executive offices are located at 3 Hashikma Street, Azour 58001, Israel,
and our telephone number is +972-3-557-1333. Our website address is www.ituran.com (the information contained therein or linked
thereto shall not be considered incorporated by reference in this annual report). Our agent for service of process in the United States
is Ituran USA Inc.1700 NW 64th ST. SUITE 100 Fort Lauderdale, Florida 33309, and its telephone number is +1 (866) 543-5433. As a
company whose ordinary shares are registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we
report publicly to the SEC. The SEC maintains an Internet site (http:// www.sec.gov) that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC.
In the years 2018 and 2021, we completed in two steps, the acquisition of Road Track
Holding S.L, (following transaction name was changed to Ituran Spain Holdings S.L) a telematics company operating primarily in the Latin
American region ("RTH Transaction").
Principal Capital Expenditures
We had capital expenditures of $21.8 million in 2025, $13.6 million in 2024 and of $14.2
million in 2023, primarily in Israel, Brazil and Mexico, consisting primarily of acquisitions of the operational equipment we use to provide.
We financed our capital expenditures with cash flows generated from our operations.
9
| B. |
BUSINESS OVERVIEW |
Overview
We believe we are a leading provider of telematics services, consisting predominantly
of stolen vehicle recovery, fleet management services and other tracking services as well as connected car and usage base insurance (UBI).
We also provide telematics products used in connection with our telematics services. We currently primarily provide our services and sell
and lease our products in Israel, Brazil, and our other regions which we operate and also other regions through our distributers. We utilize
technologies that enable precise and secure high-speed data transmission and analysis. Some of the technology underlying our products
was originally developed for the Israeli Defence Forces.
We generate our revenues from subscription fees paid for our telematics services and
from the sale and lease of our telematics products.
We describe below the principal markets in which we compete. For a breakdown of total
revenues by category of activity and geographic market for each of the last three financial years, please see Item 5.A - Operating Results
under the caption “Revenues”.
Recent Developments
OEM with Stellantis
On May 27, 2025, we announced a new service agreement with Stellantis in South America.
The contract covers multiple countries in the region and is set for a multi-year period, with the potential for expansion to additional
markets and extended service periods. On February 25, 2026, we announced that we were selected to deliver the Connect Fiat program in
partnership with Stellantis. The agreement has an initial term of three years, with the option to extend for an additional two years.
This Program represents an expansion of our existing collaboration with Stellantis.
Strategic Partnership with BMW Motorrad
On June 12, 2025, we announced a partnership with BMW Motorrad in Brazil, through its
Brazilian subsidiary BMW Motorrad Brasil. The partnership offers BMW Motorrad riders a unique experience that combines advanced safety
and connectivity features. The service offers security technology for the customer and their motorcycle, using state-of-the-art telematics
and access to the Ituran app, with real-time location tracking, virtual geofencing, route history, risk zone heat maps, maintenance alerts,
digital service integration, and vehicle recovery services.
OEM with Renault
On November 24, 2025, we announced that we had signed an initial three year service
agreement with a new major European OEM, Renault. The contract covers multiple countries in the Latin American region and there is strong
potential for expansion to additional markets globally as well as extended service periods.
Telematics Services
In 2025, 74% of our revenues were attributable to our telematics services. As of
December 31, 2025, we provided our services in Israel, Brazil, and other countries to approximately 1,039,000, 814,000 and 777,000 subscribers,
respectively.
We have direct agreements with six major car manufacturers, and our products are
embedded in their vehicles or otherwise approved by the car manufacturers. This connection requires us to meet the highest car manufacturer
automotive standards.
Stolen vehicle recovery services
Our stolen vehicle recovery and tracking services, which we refer to as SVR services,
enable us to locate, track and recover stolen vehicles for our subscribers. Our customers include retail and commercial who subscribe
to our services directly, car manufacturers and insurance companies that either require their customers to install a security system or
offer their customers financial incentives to subscribe to SVR services such as ours. In certain countries, insurance companies directly
subscribe to our SVR services on behalf of their customers.
Fleet management services
Our fleet management services enable corporate and individual customers
to track and manage their vehicles in real time. Our services improve appointment scheduling, route management and fleet usage tracking,
thereby increasing efficiency and reducing operating costs for our customers. We market and sell our services to a broad range of vehicle
fleet operators and individual vehicle owners in different geographic locations and industries. As of December 31, 2025, we provided our
services to approximately 461,000 end-users through corporate customers in countries where we operate directly and through 26,000 distributers.
10
Value-added services
The locator services that we offer allow customers to protect valuable merchandise and
equipment. We currently provide locator services in Israel, Brazil, and other regions which we operate. In addition, through a call center,
we provide 24-hour on-demand navigation guidance, information and assistance to our customers. Such services include the provision of
traffic reports, help with directions and information on the location gas stations, car repair shops, post offices, hospitals and other
facilities. We offer our concierge services to our subscribers in Israel, Brazil and other regions which we operate.
"Connected Car"- The service platform includes a back-office application, a telematics
device installed in the vehicle, mobile apps for both IOS and Android and an interface using the car infotainment screen. Such services
include information on car service history, information on some car systems, remote communication with the car in order to detect malfunctions,
and to provide pre-emptive car maintenance alerts for both mechanical failures and operational issues such as a low tire pressure alert.
The system also enables booking service appointments, both from the infotainment system interface in the system and from the user's mobile
app and additional related operational, and marketing services, as well as information analysis. "Connected Car" is operating in
Israel, Brazil, and other regions which we operate.
“Usage Based Insurance” (UBI) – we have developed a unique product
(hardware and software) that measure and analyse the driving behaviour in a verity of aspects by the driver, which enables insurance companies
to offer a tailor -made and personalized insurance policy. The UBI has already been implemented and marketed by the majority of the insurance
companies in Israel.
“Auto Financing” - A strong second-hand car market in many of our geographies
in Latin America, and new fintech start-ups as well as banks enter this segment to provide the financing in this market. However, they
need a provider of location-based and connected-car technology, such as Ituran, to monitor the car location and driver’s behaviour
and thereby decrease the risk of the car loans they make in these markets.
Telematics Products
In 2025, 26% of our revenues were attributable to the sale of our telematics products.
Our telematics products employ short - and medium-range communication between two-way wireless modems and are used for various applications,
including automatic vehicle location, which we refer to as telematics products.
Our telematics products enable the location and tracking of vehicles, as well as assets,
and are used by us primarily to provide SVR, fleet management services and UBI services to our customers. Each subscriber to our services
has our telematics end-unit installed in their vehicle. Subscribers to services for locating equipment and merchandise use our SMART and
GPS/GPRS products.
Our Services and Products
Telematics services
Stolen vehicle recovery
Our stolen vehicle recovery system is based on three main components: a telematics end-unit
that is installed in the vehicle, a network of base stations and a 24-hour manned control center. Once the control center receives indication
of an unauthorized entry into a vehicle equipped with our telematics end-unit, our operators decide whether it is a false alarm or an
actual unauthorized entry. If it is determined to be an unauthorized entry, or if a notification of the vehicle’s theft is received
directly from the vehicle operator, our operators transmit a signal that activates the transmitter installed in the vehicle. We then pinpoint
the location of the transmitter with GPRS technology as we communicate the location to our operations center and notify the relevant law
enforcement agency. In Israel, Brazil, and the other regions which we operate, we also maintain private enforcement units, which work
together with local police to recover the vehicle. In addition, we have the capability to immobilize vehicles remotely from our control
centers.
Fleet management
We offer our customers the ability to use a comprehensive application for fleet management
both by using an Internet site and workstations. Our system allows our customers 24-hour access to information on their fleets through
our active control center and we are able to tailor our system to our customers’ specific needs.
11
Our solutions allow our subscribers to effectively manage and control their fleet, and
thereby to reduce their operating costs, optimize work hours and appointment scheduling and improve their services and operations. Our
system includes the following features:
| • |
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 behaviour 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. |
Value-added services
Locator services. Our services allow consumers
to protect valuable merchandise and equipment. We provide our locator services in Israel, Brazil, and other regions which we operate.
Concierge services and Connected car. Through
a call center, we provide 24-hour on-demand navigation guidance, information and assistance to our customers. Such services include the
provision of traffic reports, help with directions and information on the location of gas stations, car repair shops, post offices, hospitals
and other facilities. We provide our concierge services to subscribers in Israel, Brazil and other regions which we operate.
“UBI” and "Connected Car". We provide
UBI services in Israel to most of insurance companies, and Connected Car services in Israel, Brazil, and other regions which we operate.
For additional information on the service, see Item 4.B. – “Information on the Company “- “Business Overview”
under the caption “Telematics Services”
Telematics products
Our telematics products are used for various applications in the telematics markets
and primarily in connection with our telematics services described above.
Our telematics products enable the location and tracking of vehicles, as well as assets
or persons, and are primarily used by us in providing our telematics services. Most of our subscribers to our services have at least one
of our end-units installed in his or her vehicle. Subscribers to services for locating persons or valuables will use our SMART and GPS/GPRS
products. Our key telematics products for telematics applications include:
| ■ |
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. |
12
Geographical Information
The following table lists the key services and products that we currently sell or lease in different regions
of the world:
|
Country |
Services offered |
Products sold |
|
Israel
|
SVR,
Fleet Management,
Value-added services,
Connected Car,
UBI
|
Telematics Products |
|
Brazil
|
SVR,
Fleet Management,
Value-added services,
Connected Car,
Asset protection to Auto Lenders |
Telematics Products |
|
|
|
|
|
Mexico, Ecuador, Colombia, Chile |
SVR,
Fleet Management, |
Telematics Products |
|
|
Value-added services, including Accessories, App & web page services |
|
|
|
Connected Car
|
|
|
United States |
SVR, |
Telematics Products |
|
|
Fleet Management, |
|
|
|
Value-added services,
Asset protection to Auto Lenders |
|
|
Argentina
|
SVR,
Fleet Management,
Value-added services,
Connected Car
Asset Tracking |
Telematics Products
|
We maintain a control center in each of the countries listed above, which is operated 24 hours a day, 365
days a year. The following is a short description of key operating statistics about our telematics services in the countries in which
we operate:
| ■ |
Israel: We commenced operations in Israel in 1995 The operations in Israel were expended
through M&A transactions with local companies (following the RTH Transaction which was concluded in year 2018) as well as organic
growth. We operate throughout Israel in providing services mainly through GPS/GPRS. |
| ■ |
Brazil: We commenced operations in Brazil in 2000. The operations were expended through
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 to our
current customers (not for new installations) RF based products and services only in the metropolitan area of Buenos Aires and during
2026 will transfer the services to GPS/GPRS. 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. |
13
| ■ |
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. |
| ■ |
Chile: We commenced operation in Chile in 2024. We currently provide GPS/GPRS based products
and services. |
Customers, Marketing and Sales
We market and sell our products and services to a broad range of customers that vary
in size, geographic location and industry. No single customer or group of related customers comprised more than 10% of our total annual
revenues in the last three years.
Our selling and marketing objective is to achieve broad market penetration through targeted
marketing and sales activities. As of December 31, 2025, our selling and marketing team consisted of [73] employees.
(A) Telematics services
Stolen vehicle recovery
Our customers in the SVR market include insurance companies, car manufactures, retail
and commercial companies. As of December 31, 2025, a majority of our subscribers use SVR services.
Our marketing and sales efforts are principally focused on five target groups: insurance
companies and agents, car manufacturers, dealers and importers, cooperative sales channels (mostly vehicle fleet operators and owners),
private fleet subscribers, and finance Institution.
We maintain marketing and sales departments in each geographical market in which we
operate. Each department is responsible for maintaining our relationships with our principal target groups. These responsibilities also
include advertising and branding, sales promotions and sweepstakes.
In Israel, we focus our marketing efforts on insurance companies and agents, dealers
and importers, cooperative sales channels (mostly vehicle fleet operators and owners) and private subscribers.
In Brazil and Argentina our marketing and sales efforts are principally focused in all
five target groups, as described above. In the United States, we believe that insurance companies do not constitute a material influence
in the marketing of SVR services or telematics products. Most of our sales in the United States are made through car dealerships and dealers
for new or used vehicles and cooperative sales channels.
In Mexico, Colombia and Ecuador we focus our marketing efforts on dealers and importers,
cooperative sales channels (mostly vehicle fleet operators and owners), private subscribers and car manufactures.
Fleet management
Vehicle fleet management systems are primarily marketed through vehicle fleets’
departments, which form a part of our regional marketing departments. We conduct in-depth research to identify companies that will gain
efficiency and cost savings through the implementation of our products and services and conduct targeted marketing campaigns to these
companies. In addition, we participate in professional conventions and advertise in professional publications and journals designed for
our target customers. Our customers in the fleet management market include small-, mid- and large-size enterprises and individuals. As
of December 31, 2025, we provided our services to approximately 461,000 end users through corporate customers and individuals in countries
where we operate.
Value-added services
“Concierge Services” - Our concierge services are provided to existing
SVR customers. A few thousands SMART devices were installed in valuable merchandise and equipment.
"Connected Car"- The service platform includes a back-office application, a telematics
device installed in the vehicle, mobile apps for both IOS and Android and an interface using the car infotainment screen. Such services
include information on car service history, information on some car systems, remote communication with the car in order to detect malfunctions,
and to provide pre-emptive car maintenance alerts for both mechanical failures and operational issues such as a low tire pressure alert.
The system also enables booking service appointments, both from the infotainment system interface in the system and from the user's mobile
app, and additional related operational, and marketing services, as well as information analysis.” Connected Car’ is operating
in regions where we operate.
“Usage Based Insurance (UBI)" – we have developed a unique product (hardware
and software) that measure and analyse the driving behaviour in a verity of aspects by the driver, which enables insurance companies to
offer a tailor -made and personalized insurance policy. The UBI has already been implemented and marketed by the majority of the insurance
companies in Israel.
14
(B) Telematics products
Our telematics end-units are primarily used by us in providing our telematics services,
including, SVR, fleet management, "Connected Car" and value-added services, at the regions we operate.
Competition
We face strong competition for our services and products in each market in which we
operate. We compete primarily on technology edge, functionality, ease of use, quality, price, service availability, geographic coverage,
track record of recovery rates and response times and financial strength.
(A) Telematics services
We compete with a variety of companies in each of our markets. The major technologies
utilized by our competitors are GPS/cellular, network-based cellular, UBI and radio frequency-based homing systems. In addition, new competitors
utilizing other technologies may continue to enter the market.
Stolen vehicle recovery
| ■ |
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), Hunter, 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.,On Star 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. |
| ■ |
Chile. Chile is highly fragmented market.
Main companies operate under the satellite/cellular infrastructure. Our main competitors
are companies like LoJack/Strix, Tracker Chile, Entel Ocean, Geotab, and Autocab. |
We believe that we are a leading provider of telematics services in Israel, as we are
deemed a monopoly in this field; however, we are unable to provide specific market share information in the markets of our operations
for various reasons, including the broad range of services and products that compete in these markets, the non-existence of trade publications
with respect to the products and services we offer in such markets and the lack of meaningful or accurate market research or data available
to us.
15
Fleet Management
The vehicle fleet management market is highly fragmented with many corporations offering
location products and services. Our major competitors are:
| • |
Israel: Pointer Telocation, ISR, Traffilog, INET, 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 YPF S.A; |
| • |
Mexico: LoJack Corporation, Encotrack, Easytrack, Geotab and Tracker; |
| • |
Ecuador: Hunter (LoJack Corporation), Tracklink, Carsync and Sherlock; |
| • |
Colombia: Satrack, Detector and Hunter. |
| • |
Chile: LoJack/Strix, Tracker Chile, Entel Ocean, Geotab and Autocab. |
(B) Telematics products
Our telematics system for automatic vehicle location was based on terrestrial network
triangulation technology and GPS/GPRS and commencing from January 1st,
2026 it will gradually be consisted on GPS/GPRS solely. We primarily competes with companies that use one of three main technologies:
GPS/GPRS (in combination with telematics), network-based cellular communication and radio frequency-based homing.
Telematics products based on GPS, network-based cellular and homing technologies do
not require the construction of a separate infrastructure of base stations as with terrestrial network triangulation systems.
GPS receivers require line of sight to at least three satellites, which reduces
their effectiveness in areas where the satellite signals are subject to interference and “noise” (such as urban areas, buildings
or parking garages, forests and other enclosed or underground spaces). In addition, the satellites utilized by GPS devices are managed
by the United States Department of Defence and can be subject to forced temporary outages. The main disadvantage of homing systems is
that they provide only the general direction and not the precise location of the end-unit. In addition, homing systems require that the
vehicle be reported stolen before the tracking signal can be activated, which may result in a delay between vehicle theft and recovery.
The GPS technology can receive and transmit a massive capacity of data which enable
us to provide a better data analysis and variety of additional services.
Terrestrial network triangulation system does not require line
of sight and the signals are not easily interrupted in densely populated or obstructed areas. Also, the signals are transmitted from the
end-unit in the vehicle to a network of base stations. Therefore, in order to jam the system, receivers in each individual base station
within range of the end-unit would have to be jammed, which is difficult to accomplish. Additionally, since the primary application of
terrestrial network triangulation systems in the telematics industry is vehicle location and not continuous two-way communication,
short bursts of data are sufficient for tracking purposes, which enable the network of base stations to be deployed at a much lower density
in the coverage area than traditional network-based cellular base stations. Terrestrial network triangulation systems are capable of determining
the precise location, and not just the general direction, of a vehicle at any moment in time. Furthermore, when connected with the existing
theft protection system in the vehicle, terrestrial network triangulation systems automatically alert the control center when a vehicle
is stolen and do not require that the vehicle be reported stolen, which can potentially reduce stolen vehicle recovery times to a few
minutes. The main disadvantage of terrestrial network triangulation systems is the necessity to deploy a physical infrastructure, including
the construction, development and deployment of a network of base stations and a control center and the need to address the various financial,
legal and practical issues associated with such deployment. Any such deployment entails an investment of a sizable amount of money prior
to the receipt of any revenues.
Since our telematics end-units are primarily used by us in providing our telematics
services, the information provided above concerning our competition in this market is applicable to the competition in the telematics
products’ market as well.
Manufacturing Operations and Suppliers
Our telematics products are manufactured and assembled by a limited number of manufacturers
in Israel (including our subsidiary E.R.M) and in China. We engage with our manufacturers on a full turn-key basis, where we supply detailed
production files and materials list and receive a final product that we sell directly to our clients. Other than our dependency on manufacturing
suppliers, as described in Item 3D -“Risk Factors” above, we do not depend on a single manufacturer for the production of
our products. Our quality assurance and testing operations are performed by our manufacturers at their facilities, while using our quality
assurance and testing equipment and in accordance with the test procedures designated by us. We monitor quality with respect to key stages
of the production process, including the selection of components and subassembly suppliers, warehouse procedures, assembly of goods, final
testing, packaging and shipping. We are ISO 9001 certified. Some of our products are within the highest car manufacture automotive standard.
We believe that our quality assurance procedures have been instrumental in achieving the high degree of reliability of our products.
Several components and subassemblies included in our products are presently obtainable
from a single source or a limited group of suppliers and subcontractors. We maintain strong relationships with our manufacturers and suppliers
to ensure that we receive an adequate supply of products, components and raw materials at favourable prices and to access their latest
technologies and product specifications.
16
Proprietary Rights
We seek to protect our intellectual property through patents, trademarks, contractual
rights, trade secrets, know-how, technical measures and confidentiality, non-disclosure and assignment of inventions agreements and other
appropriate protective measures to protect our proprietary rights in the primary markets in which we operate. The continued use of some
licenses granted by third parties to use their intellectual property is material to our business. Please refer to Item 3D. – Risk
Factors, under the caption “We rely on some intellectual property that we license from third parties, the loss of which could preclude
us from providing our SVR services or market and sell some of our telematics products, which would adversely affect our revenues” above.
We typically enter into non-disclosure and confidentiality agreements with our employees
and consultants. We also seek these protective agreements from some of our suppliers and subcontractors who have access to sensitive information
regarding our intellectual property. These agreements provide that confidential information developed or made known during the course
of a relationship with us is to be kept confidential and not disclosed to third parties, except in specific circumstances.
Our stolen vehicle recovery system is based on three main components: (i) a telematics
end-unit that is installed in the vehicle, (ii) (for RF technology based telematics units) a network of base stations that relay information
between the vehicle location units and the control center, certain components of which were developed by third parties and are currently
licensed to us and (iii) a 24-hour manned control center consisting of software used to manage communications and the exchange of information
among the hardware components of the telematics system, certain components of which were developed by third parties and licensed to us.
“Ituran” and “Mr. Big” and the related logos are our trademarks,
the former has been registered in Israel, Hong Kong and as a European Union and the latter has been registered in Israel. “Mapa”
trademark and its related logos were sold as part of the sale of Mapa to an unrelated party to us.
Environmental, Social and Governance (ESG) Practices
As a global brand with material social and economic influence, we recognize that our
success can only be built alongside the success of our stakeholders, including, our users, partners, and employees. We aim to achieve
high ESG standards while continuing to develop our business and executing on our strategy.
We conduct our business activities and develop policies based on a firm commitment to
ethical practices and corporate governance best practices. This includes the “code of business conduct and ethics” and anti-bribery/corruption
area where we have a policy of zero tolerance for corruption. This also includes a “Whistle Blower” procedure whose purpose
is to dissuade and to prevent illegal activity and conduct of business that may harm our good reputation. Our code of business conduct
and ethics, and the Whistle Blower procedure are published in our website.
We promote and support fair social and economic opportunities in the professional services
global market. We recognize that there are systemic and cultural biases, caused by age, gender, race, ethnicity, sexual orientation, religion,
or ability, and we know these biases can reduce the accessibility to opportunities on a global scale. It is our mission to reduce these
accessibility gaps worldwide through our services, the programs we support, and the partners with whom we work. We invest resources into
data privacy and how we can protect our users by, among other things, building key infrastructures and policies to safeguard the data
on our platform and the privacy of our users.
We advance fairness and transparency in our workforce and we promote and implement fair
labor practices and employees' human rights throughout our organization. We respect data privacy relating to our employees. We act to
prevent sexual harassment and workplace bullying. We also implement non-discriminatory hiring and promotion practices and actively pursue
gender diversity in our workforce.
We value and celebrate diversity within our community. Our work environment seeks to
foster an inclusive culture, where our employees feel challenged and in possession of the tools to thrive at work. We are continuously
learning and looking at ways to continue to create an environment that is an inclusive place of work. Furthermore, we recognize the importance
of environmental matters.
In addition, we also have an “environmental policy”. This policy sets goals
in terms of preserving the environment, raising employee's awareness and developing and promotion products that will help our customers
to save fuel and as a result to reduce waste, air pollution and gas emissions greenhouse. We also adopted a “Code of conduct of
Ituran's Suppliers and Agents” which sets high standards in choosing our suppliers, In terms of business honestly, ethically and
quality drive. Our environmental policy and the Code of conduct of Ituran's Suppliers and Agents our both published in our website at
https://www.ituran.com/.
17
Regulatory Environment
In order to provide our SVR services in the locations where we currently operate, we
need to obtain four primary types of licenses and permits: (i) product specific licenses (commonly known as type approvals), which
enable us to use the equipment necessary for our services, and (ii) a general commerce license, which allows us to offer our services
to the public.
The telecommunication services and frequency license and general commerce licenses we
require are granted by the applicable national agency regulating communications in the markets in which we operate, specifically, the
Ministry of Communication, in Israel, Anatel. Agencia Nacional de Telecomunicatoes in Brazil. Modernization Ministry in Argentina
and the Federal Communications Commission in USA. The product specific licenses we require are granted in Israel by the Ministry of Communication,
in Brazil by IBRACE (the Instituto Brasileiro de Certificatao de Productos para Telecominicatoes), in Argentina by the Autoridad Federal
de Tecnologias de la Información y las Comunicaciones, in the United States by the Federal Communications Commission, and Ministry
of Information Technology and Communications and Regulatory Communications Commission in Colombia. In Mexico, the regulatory authority
is the Federal Telecommunications Commission, however, because of the type of services we provide, we are not obligated entities. In Ecuador's
case, the regulatory body is the Telecommunications Regulatory and Control Agency, however, we are not subject to either.
In Brazil, the general commerce licenses, such as the city permits, are granted by the
local municipalities and other specific entities, depending on the licenses required.
Our frequency licenses in all of the locations where we operate are “secondary”
or “joint”, which means that the government may grant another person or persons, typically a cellular operator, a primary
license to the same frequencies and, to the extent our operations interfere with the operations of the other person, we would have to
modify our operations to accommodate the joint use of the frequencies. All of these licenses are also subject to revocation, alteration
or limitation by the respective authority granting them. While any events that would cause us to change frequencies or to modify our operations
could have a material adverse effect on us, we do not believe that this is a likely event in any of the locations where we provide our
SVR services.
In Israel, frequency license following new regulations since October 2022, there
is no need any more for the extension of our frequency license, and registration with a specific registrar is sufficient. Our frequency
licenses in Brazil will expire in 2034. We have options to extend all of our frequency licenses for periods ranging from three-
to ten-years. A renewal application in Brazil will be submitted 6 months before the frequency license expiration date, to provide us a
new license for a period of ten (10) years. In Argentina, on July 15, 1999, the SECOM (Secretary of Communication dependent of Economy
Ministry) granted us a license to provide services in a Secondary Band. On December 2015, SECOM was converted into the Modernization Ministry,
with ENACOM (National Communication Entity) which is a decentralized entity that works within the scope of the Modernization Ministry.
Nevertheless, our frequency is still authorized, there is a new entrant with ENACOM
Authorization to provide LTE service. If this entrant starts the activity, we will face an incompatibility situation. We received the
authorization from ENACOM to use a 12-month trial in Band 8 902-905/947-950 MHz bands additionally to our current frequencies. During
this period, we will perform a test to obtain a definitive authorization. Due to the Covid-19 Pandemic we have not managed an extension
to the trial period so as not to compromise future network development. We have decided to wait for a formal request from ENACOM
to start again with this trial.
On December 9, 2016, we were informed that one of the cellular providers in Argentina,
which shares some of our frequencies, intends to implement on them 4G cellular service. Such service was implemented, without causing
interference that may prevent the provision of our SVR service in Argentina.
We are negotiating with ENACOM to define new frequency which we will migrate into. Subject
to the applicable laws, and ENACOM decision, the migration process may take few years and will be determined by ENACOM. We have decided
to continue waiting for a formal request from ENACOM to restart this trial.
Whereas we intend to fully use the GPR/GPRS technology and not the RF technology from
2026 onwards we will not need for our services erection of transmission antennas (our base sites). Therefore, we will not
any permits for such base stations anymore.
ANATEL permits are required only for sites where we have transmission equipment, and
we have obtained all the permits required with this agency. Special IBAMA permits need to be obtained only for ground sites which are
located in certain preservation areas. We have few sites of this kind, most of them are collocated sites where we pay for the right of
use and permits are undertaken by the landowner. Fire Department permits are required only for equipment rooms, and we have not applied
for any as of this date. COMAR permits are needed only for a very few of our sites, most of which are collocated.
18
In Colombia we have to pay 2.2% on the annual gross income generated by the provision
of our services to the Ministry of Information Technologies and Communications (MINTIC) for use of telecommunication spectrum (resolution
0290 MINTIC) and 0.1% to Commission Regulatory of Communications (CRC) in the same terms (resolution 5807 CRC).
In Ecuador and Mexico there are no levies imposed on our activities.
We have been declared a monopoly under the Israeli Antitrust Law, 1988, in the provision
of systems for the location of vehicles in Israel. This law prohibits a monopoly from abusing its market position in a manner that might
reduce competition in the market or negatively affect the public. For instance, a monopoly is prohibited from engaging in predatory pricing
and providing loyalty discounts, which prohibitions do not apply to other companies. The law empowers the Commissioner of Competition
to instruct a monopoly abusing its market power to perform certain acts or to refrain from taking certain acts in order to prevent the
abuse. Additionally, any declaration by the Israeli Competition authority that a monopoly has abused its position in the market may serve
in any suit in which it is claimed that such a monopoly engages in anti-competitive conduct, as prima
facie evidence that it has engaged in anti-competitive behaviour. Our declaration as a monopoly in the market of “provision
of systems for the location of vehicles in Israel” was not accompanied with any instructions or special restrictions beyond the
provisions of The Economic Competition Law. Although we may be ordered to take or refrain from taking certain actions, to date we have
not been subject to such restrictions.
Other Investments
As part of our ongoing business, we are engaged and encountered by many potential investments
which may have correlation to our core business. The following are the main investments we have consummated during lastdecade
Bringg - On December 2013 the Company invested $1.4 million in
Bringg delivery technologies Ltd. (formerly Overvyoo Ltd.), an Israeli start-up company developing solutions for the management of mobile/field
workforce. In January and July 2015, we invested additional amounts of $1.1 million and $2 million, respectively. During the years 2015
- 2020, additional investors, which are not related to us, invested in Bringg a total amount of approximately $80 million, which reduced
our capital share in Bringg. During 2021, Bringg, raised an additional $100 million, which sets Bringg’s valuation at $1 billion.
Following such investment, we now hold 16.3% of Bringg’s share capital. One should not draw from the above the value
of our shareholding in Bringg.
19
| C. | ORGANIZATIONAL STRUCTURE |
In July 1995, Moked Ituran Ltd. purchased our company and the assets used in connection
with our operations from Tadiran and Tadiran Public Offerings Ltd. In September 2018, we acquired a majority of the shares of Road Track
Holding S.L.,(today Ituran Spain Holding S.L.) a telematics company operating primarily in the Latin American region.
List of Significant subsidiaries:
|
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 MOB Services LTDA |
Brazil |
51% | ||
|
Ituran servicos Ltda |
|
Brazil |
|
98.75% |
|
E.R.M. Electronic Systems Limited |
|
Israel |
|
49.5%1
|
|
Ituran Spain Holding S.L |
|
Spain |
|
100% |
|
Ituran Road Track Monitaramento de Veiculos LTDA |
|
Brazil |
|
100% |
|
Road Track De Colombia S.A.S |
|
Colombia |
|
100% |
|
Road Track Ecuador, S.A. |
|
Ecuador |
|
100% |
|
Ituran Chile S.A |
Chile |
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 |
|
100% |
| D. |
PROPERTY, PLANTS AND EQUIPMENT |
As of the date of this annual report, we own and lease the following properties: An
office building of eight floors (approximately 5,356 sqm (57,651 square feet)), which was purchased by our subsidiary Ituran Sistemas
de Monitoramento Ltda (Ituran Brazil) in Sao Paulo, Brazil, and was later, on December 3, 2014 sold to Ituran Location and Control Ltd,
A building located in Rua Joao pessoa 450, Sao Caetano do Sul, Estado de Sao Paulo in Sao Paulo, Brazil in the area of approximately 36,936
square feet which was purchased by our subsidiary Ituran Road Track Monitoramento de Veiculos, Ltda which serve as an Operating center,
A building located in Avenida del Taller No.36 Col. Transito in Mexico in the area of approximately 21,132 square feet which was purchased
by our subsidiary Road Track Mexico, S.A de C.V which serve as an Operating center, a building located in Manuel Najas Oel 81 and Juan
de Selis in Quito, Ecuador in the area of approximately 24,176 square feet which was purchased by our subsidiary Road Track Ecuador, S.A
which serve as an Operating center, and a building located in Keren Ha' Yesod 15,
Tirat Ha'Carmel, Israel at the area of approximately 5,025 square feet which was purchased
by our subsidiary E.D.T.E – Drive Technology Ltd which serve as an office space and a warehouse.
Other than the property in Brazil, Ecuador and Mexico and Israel, all of our offices,
headquarters, control centers and facilities are leased in accordance with our specific needs in the areas in which we operate. Additionally,
we lease space for our base sites, in order to operate the reception and transmission stations of the system, in each area in which we
provide our SVR services.
In 2025 we leased an aggregate of approximately 66,000 square feet of office space in
Azour, Israel. In 2025, the annual lease payments for these facilities were approximately $1,461,000. The lease ends by April 2029. These
premises include our executive offices and the administrative and operational centers for our operations as well as our customer service,
value-added services and technical support centers and warehouse for the Israeli market. We also lease 1,000 square feet for a warehouse
in Tirat Ha’Carmel for $ 20,000 annually.
1 The proportion of
voting power is 51%
20
In Buenos Aires, Argentina, we lease approximately 10,473 square feet for office space
for the total amount of AR$121.803.927,4 ($ 130.771) annually and approximately 3,307 square feet for our Data Center and support services
offices for AR$ 22.732.493 ($ 24.514) annually.
In Bogota, Colombia, we lease approximately 9,035 square feet for office space and Operating
center for the amount of $79,500 annually.
In Mexico City, Mexico, through our subsidiary we own a building with area of approximately
21,000 sqf which serves as an operating center and we lease a warehouse for the amount of $3,000 annually.
We leased approximately 12,916 square feet of office space, stores and warehouse in
Brazil for approximately 336,000 ($58,000) Brazilian Real annually.
In Guayaquil, Ecuador, we lease approximately 7,828 square feet
for Warehouse for the amount of $ 30,000 annually. In Quito, Ecuador, we lease approximately 3,229 square feet for Warehouse for the amount
of $ 11,700 annually. In Cuenca, Ecuador, we lease approximately 538 square feet for Warehouse for the amount of $ 3,521 annually. .
We leased approximately 9,260 square feet for our offices and control center in Florida
for an amount of $176,000 annually, the lease term automatically extends for periods of one month from March 31, 2023, and for each additional
month thereafter until the tenant provides the landlord written notice that it intends to vacate the premises with 6 months notice.
We believe that our facilities are suitable and adequate for our operations as currently
conducted. In the event that additional facilities will be required, we believe that we could obtain such facilities at commercially reasonable
rates.We do not believe that we have a legal retirement obligation associated with the operating leases for our base sites pursuant to
the relevant accounting standards, since we do not own any real property. However, we are obligated pursuant to certain of the operating
leases for our base sites, mainly for base sites in Israel, Brazil and Argentina, to restore facilities or remove equipment at the end
of the lease term. Since the restoration is limited to any construction or property installed on the property, which in our case is only
the installed antennas, we do not believe that these obligations, individually or in the aggregate, will result in us incurring a material
expense.
| ITEM 4.A. |
UNRESOLVED STAFF COMMENTS |
None.
21
| ITEM 5 |
OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
| A. |
OPERATING RESULTS |
The information contained in this section should be read in conjunction with our financial
statements for the year ended December 31, 2025, and related notes and the information contained elsewhere in this annual report. Our
financial statements have been prepared in accordance with U.S. GAAP. This discussion contains forward-looking statements that are subject
to known and unknown risks and uncertainties. As a result of many factors, such as those set forth under “ITEM 3.D. Risk Factors”
and “Cautionary Note Regarding Forward-Looking Statements,” our actual results may differ materially from those anticipated
in these forward-looking statements.
Outlook
We sell our services and products directly and through our subsidiaries and distributors
to several countries mainly Israel and Brazil. In 2025, we experienced increased revenue and growth in most of the markets in which
we provide our telematics services. These markets in which we operate, are generally characterized by high vehicle theft rates, and therefore
insurance companies and car manufactures are seeking solutions to reduce their losses resulting from car theft and at the same time increasing
their sales by adding additional value to the customer. Therefore, we believe the markets in which we operate, especially in Israel and
will continue to provide growth and demand for our telematics products and services.
Geographical breakdown
Telematics services’ subscriber base
The following table sets forth the geographic breakdown of subscribers to our
telematics services as of the dates indicated: (1)
|
December 31, |
||||||||||||
|
2025 |
2024 |
2023 |
||||||||||
|
Israel |
1,039,000 |
930,000 |
814,000 |
|||||||||
|
Brazil |
814,000 |
725,000 |
672,000 |
|||||||||
|
Others |
777,000 |
754,000 |
766,000 |
|||||||||
|
Total(1) |
2,630,000 |
2,409,000 |
2,252,000 |
|||||||||
(1) All numbers provided are rounded, and therefore
totals may be slightly different than the results obtained by adding the numbers provided
Revenues
The following table sets forth the geographic breakdown of our revenues for each of
our business segments for the relevant periods indicated. (1)
| (1) |
We attribute revenues to countries based on the location of the customer. |
|
Year ended December 31, |
||||||||||||||||||||||||
|
2025 |
2024 |
2023 |
||||||||||||||||||||||
|
Telematics services |
Telematics products |
Telematics services |
Telematics products |
Telematics services |
Telematics products |
|||||||||||||||||||
|
Israel |
134.0 |
62.6 |
114.1 |
61.1 |
104.4 |
49.9 |
||||||||||||||||||
|
Brazil |
80.5 |
1.7 |
81.8 |
1.6 |
83.8 |
2.0 |
||||||||||||||||||
|
Others |
50.1 |
30.1 |
46.6 |
31.1 |
46.4 |
33.5 |
||||||||||||||||||
|
Total |
264.6 |
94.4 |
242.5 |
93.8 |
234.6 |
85.4 |
||||||||||||||||||
Telematics services segment
We generate revenues from rendering our SVR, fleet management connected car, UBI and
other value-added services. A majority of our revenues represent subscription fees paid to us by our customers. We recognize revenues
from subscription fees on a monthly basis. Most of our customers are free to terminate their subscription at any time. In the absence
of such termination, the subscription term continues automatically. We also generate subscription fees from our fleet management services.
Assuming no additional growth in our subscriber base and based on our historical average churn rates of 3% per month in this segment,
we can anticipate that at least 90% of our subscription fees generated in a prior quarter will recur in the following quarter.
22
Telematics products segment
We generate revenues from sale of our telematics products to customers in Israel, Brazil,
and other regions which we operate. We currently sell or lease our telematics end-units in each of the above regions. Growth in our subscriber
base is the principal driver for the sale of our telematics products. We recognize revenues from sales of our telematics products upon
transfer of control to the customer (usually upon delivery).
Cost of revenues
Telematics services segment
The cost of revenues in our telematics services segment consists primarily of staffing,
maintenance and operation of our control centers and base stations, costs associated with our staff and costs incurred for private enforcement,
licenses, permits and royalties, as well as communication costs and costs due to depreciation of leased products and installation fees.
Cost of revenues for sales of our fleet management services also includes payments to a third party who markets our services.
Telematics products segment
The cost of revenues in our telematics products segment consists primarily of the cost
of unit of our manufacturers and costs associated with installation fees.
Operating expenses
Research and development
Our research and development expenses consist primarily of salaries, costs of materials
and other overhead expenses, primarily in connection with the design and development of our telematics products and software solutions.
We expense some of our research and development costs as incurred. Subject to certain criteria we capitalize software development costs.
For further information see Note 1S to our consolidated financial statements.
Selling and marketing
Our selling and marketing expenses consist primarily of advertising, salaries, commissions
and other employee expenses related to our selling and marketing team and promotional and public relations expenses.
General and administrative
Our general and administrative expenses consist primarily of salaries, bonuses, accounting
and other general corporate expenses.
Operating Income
Telematics services segment
Operating income in our telematics services segment is primarily affected by increases
in our subscriber base and our ability to increase the resulting revenues without a commensurate increase in our corresponding costs.
Telematics products segment
Operating income in our telematics products segment is primarily affected by our ability
to increase sales of our telematics products.
Financing expenses (income), net
Financing income (expenses), net include, inter alia ,short-term
and long-term interest expenses, financial commissions, income (expenses) in respect of changes in obligation to purchase non-controlling
interests ,and gains (losses) from currency fluctuations from the translation of monetary balance sheet items denominated in currencies
other than the functional currency of each entity in the group, gains (losses) in respect of marketable securities and other investments,
and expenses related to tax positions.
Taxes on income
Income earned from our services and product sales is subject to tax in the country in
which we provide our services or from which we sell our products.
23
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared as accordance with U.S. General
Accepted Principles ("GAAP") Certain of our accounting policies require us to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates on
a periodic basis. We base our estimates on historical experience, industry trends, authoritative pronouncements and various other assumptions
that we believe to be reasonable under the circumstances. Such assumptions and estimates are subject to an inherent degree of uncertainty.
On a regular basis we review the accounting policies assumptions and estimates to verify that our financial statements are in accordance
with GAAP and presented fairly.
The following are our most critical accounting policies and the significant judgments
and estimates affecting the application of those policies in our consolidated financial statements. For further information see Note 1
to our consolidated financial statements included elsewhere in this report.
Revenue recognition
We and our 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. We and our subsidiaries sell the systems primarily
through their direct sales force and indirectly through resellers.
We apply ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).
In accordance with ASC 606, we determine revenue recognition through the following five steps:
| • |
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. |
A contract with a customer exists when certain criteria are met.
For each type of contract, at inception, we assess 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, we allocate
the contract’s transaction price to each performance obligation using it’s the best estimate of the relative standalone selling
price of each distinct good or service in the contract. However, when applicable (see below), we estimate 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 we expect 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.
Our credit terms to customers are, on average, between thirty and ninety days.
We do not adjust the amount of consideration for the effects of a significant financing
component since we expect, 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.
In accordance with ASC 606, the Company’s revenues are recognized depending on
the various products and services 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. |
| 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. |
24
| 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 (i.e.,
if both 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; and, 2. The Company’s promise to transfer the good or service is separately identifiable from other promises in the contract).
If we determine that the product or service is 'distinct' we apply the policy described in 1 or 2 above, as applicable. |
We have some arrangements that are determined to have multiple performance obligations
that are distinct. For such arrangements, we allocate 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 limited circumstances, we estimate 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 was 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. We use this approach since we sold the same type of
service in these jurisdictions to different customers (at or near the same time) for a broad range of amounts (thus, the stand-alone selling
price was highly variable).
| 4. |
Revenues from SVR services subscription fees and from installation services (related to AVL products that remain as the Company's
property), sold to customers within a single arrangement were accounted for revenue recognition purposes, on a combined basis
as a single performance obligation, since the installation services element was determined not to be ‘distinct’. Therefore,
the entire contract fee was recognized over time, on a straight-line basis over the subscription period. |
| 5. |
With regards to amounts earned by certain Brazilian subsidiary for arranging a bundle transaction of SVR services subscription together
with insurance services to be supplied by a third party insurance company, these revenues are recognized ratably on a straight-line basis
over the subscription period , since the amount allocated to us (for the SVR services subscription, 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 recognize only the net amounts as revenues, after deduction of amounts related to the insurance component. |
| 6. |
Deferred revenues include unearned amounts received from customers (mostly for 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 "extended
warranty" below, as applicable. |
For the years ended December 31, 2025 and 2024 the Company recognized revenue of
approximately US$ 22.8 million and US$ 27.1 million, respectively, that was included in the deferred revenue balance
at the beginning of each reporting period.
As of December 31, 2025, the aggregate amount of the amounts allocated to remaining
unsatisfied performance obligations (deferred revenue) that the Company expects to recognize as revenue in future periods is $42.1 million
of which, $27.2 million (64.6%) is expected to be recognized over the next 12 months (and presented as short-term balance), and
the remainder amount of $14.9 million (35.4%) is expected to be recognized through 2027.
Extended warranty - In the majority of countries, in which we operate, 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.
25
Contingencies
We and our subsidiaries are involved in certain legal proceedings
that arise from time to time in the ordinary course of our business and in connection with certain agreements with third parties. Except
for income tax contingencies, we record 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.
Goodwill and intangible assets
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 and whenever events or changes in circumstances
indicates that amount of goodwill may not be recoverable in accordance with the provisions of ASC Topic 350, "Intangibles - Goodwill and
Other". The annual goodwill assessment is performed as of December 31, each year.
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.
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. Management determines the fair value of its reporting
units using the income approach. Within the income approach, the method that is generally used to measure the fair value of a reporting
unit is the discounted cash flow method. Management starts with a forecast of the expected net cash flows associated with the reporting
unit, which includes the application of a terminal growth rate, and applies 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. 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, 2025, 2024 and 2023, 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 with an allocated amount of approximately US$ 1.9 million of goodwill, the Company performed a qualitative
assessment as of December 31, 2025 and 2024, 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.
For the second reporting unit (resulted from RT acquisition) with
an allocated amount of approximately US$ 32.3 million of goodwill (as of December 31, 2025), the Company performed the annual impairment
test, as of December 31, 2025 using a quantitative assessment and reached to a conclusion that no impairment should be recorded at that
point. The impairment test was performed using the income approach. The measurement of fair value of reporting units as part of goodwill
impairment analysis is classified within Level 3 within the fair value hierarchy.
26
Telematics products:
Under the telematics products segment there are two reporting units
with goodwill, for one of which with an allocated amount of approximately US$ 2.2 million of goodwill, the Company performed a qualitative
assessment as of December 31, 2025 and 2024, 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.
For the second reporting unit (resulted from RT acquisition)
with an allocated amount of approximately US$ 3.5 million of goodwill (as of December 31, 2025), the Company performed the annual impairment
test, as of December 31, 2025, using a quantitative assessment and reached to a conclusion that no impairment should be recorded at that
point. The impairment test was performed using the income approach. The measurement of fair value of reporting units as part of goodwill
impairment analysis is classified within Level 3 within the fair value hierarchy.
Results of Operations
The following table sets forth for the periods indicated selected items from our consolidated
statements of income as a percentage of our total revenues.
|
Year ended December 31, |
||||||||||||
|
Consolidated statements of operations data: |
2025 |
2024 |
2023 |
|||||||||
|
Revenues |
||||||||||||
|
Telematics services |
73.7 |
72.1 |
73.3 |
|||||||||
|
Telematics product |
26.3 |
27.9 |
26.7 |
|||||||||
|
Total Revenues |
100 |
100 |
100 |
|||||||||
|
Cost of revenues |
||||||||||||
|
Telematics services |
30.2 |
29.8 |
30.8 |
|||||||||
|
Telematics products |
20.1 |
22.4 |
21.3 |
|||||||||
|
Total cost of revenues |
50.3 |
52.2 |
52.1 |
|||||||||
|
Gross profit |
49.7 |
47.8 |
47.9 |
|||||||||
|
Operating Expenses |
||||||||||||
|
Research and development expenses |
5.8 |
5.4 |
5.3 |
|||||||||
|
Selling and marketing Expenses |
5.1 |
4.5 |
4.3 |
|||||||||
|
General and administrative expenses, net |
17.3 |
16.7 |
17.7 |
|||||||||
|
Other income, net |
- |
- |
-- |
|||||||||
|
Total operating expenses |
28.2 |
26.6 |
27.3 |
|||||||||
|
Operating Income |
21.5 |
21.2 |
20.6 |
|||||||||
|
Other income, net |
(0.1 |
) |
- |
- |
||||||||
|
Financing income (expenses), net |
(0.5 |
) |
- |
(0.5 |
) | |||||||
|
Income before income tax |
20.9 |
21.2 |
20.1 |
|||||||||
|
Income tax |
(4.2 |
) |
(4.3 |
) |
(4.2 |
) | ||||||
|
Share in losses of affiliated companies, net |
- |
(0.1 |
) |
(0.2 |
) | |||||||
|
Net income for the year |
16.7 |
16.8 |
15.7 |
|||||||||
|
Less: net income attributable to non-controlling interests |
(0.6 |
) |
(0.8 |
) |
(0.7 |
) | ||||||
|
Net income attributable to company stockholders |
16.1 |
16.0 |
15.0 |
|||||||||
27
Analysis of our Operation Results for the Year ended December 31,
2025 as compared to the Year ended December 31, 2024
Revenues
Total revenues increased from $336.3 million in 2024 to $359.0 million in 2025 or 7%.
This increase consisted of an increase of $22.1 million from subscription fees from our telematics services and an increase of $0.7 million
from sales of our telematics products.
Telematics services segment
Revenues in our telematics services segment increased by $22.1 million from $242.5 million
in 2024 to $ 264.6 million in 2025. The increase was mainly due to an increase in our average annual number of subscribers from
2,330,000 in 2024 to 2,520,000 in 2025.
Telematics products segment
Revenues in our telematics products segment increased from $93.8 million in 2024, to
$94.5 million in 2025 or 1%. This increase of $0.7 million was primarily due to an increase in the quantity of units' sales.
Cost of revenues
Total cost of revenues increased from $175.6 million in 2024, to $180.4 million in 2025
or 3%. This increase consisted of an increase of $8.3 million in the telematics services segment and a decrease of $3.4 million in the
telematics product segment. As a percentage of total revenues, cost of revenue decreased from 52.2 % in 2024 to 50.3% in 2025.
Telematics services segment
Cost of revenues for our telematics services segment increased from $100.2 million in
2024, to $108.4 million in 2025 or 8%. This increase was primarily due to an increase in salary expenses of approximately $8.1 million.
As a percentage of total revenues for this segment, cost of revenues decreased from 41.3% in 2024 to 41.0 % in 2025.
Telematics products segment
Cost of revenues for our telematics products segment decreased from $75.4 million in
2024, to $72.0 million in 2025 or 4.6%. This decrease was mainly due to the change in the mixture of products sales. As a percentage of
total revenues for this segment, cost of revenues decreased from 80.5% in 2024, to 76.2% in 2025.
Operating expenses
Research and development.
Our research and development expenses increased from $18.1 million in 2024 to $20.8
million in 2025. As a percentage of total revenues, research and development expenses increased from 5.4 % in 2024 to 5.8% in 2025.
Selling and marketing
Our selling and marketing expenses increased from $15.3 million in 2024 to $18.4 million
in 2025. As a percentage of total revenues, selling and marketing expenses increased from 4.5% in 2024 to 5.1% in 2025.
|
General and administrative |
General and administrative expenses increased from $56.2 million in 2024, to $62.5 million
in 2025. The increase was mainly due to an increase in salary expenses of approximately $5.0 million and an increase in professional expenses
in amount of $0.9 million. As a percentage of total revenues, general and administrative expenses increased from 16.7% in 2024 to 17.4%
in 2025.
|
Operating income |
Total operating income increased from $71.2 million in 2024, to $77.0 million in 2025
or 8.2%. This increase of approximately $5.8 million reflects an increase of $3.3 million in the operating income in the telematics service
segment and a decrease of $2.5 million in the operating income in the telematics products segment.
28
Telematics services segment
Operating income in our telematics services segment increased from $69.2 million in
2024 to $72.5 million in 2024, or 4.8%. This increase was mainly attributed to the increase of our average base of subscribers from 2,330,000
subscribers in 2024 to 2,520,000 subscribers in 2025.
As a percentage of income in our telematics services segment revenues, operating income
in our telematics services segment decreased from 28.5% in 2024 to 27.4% in 2025.
Telematics products segment
Operating income in our telematics products segment increased from $2.0 million in 2024
to $4.5 million in 2025. This increase in was mainly attributed to the increase in other product costs and sales mixture.
As a percentage of income in our telematics products segment revenues, operating income
in our telematics products segment increased from 2.1 % in 2024 to 4.8% in 2025.
Financing income (expenses), net
Financing expenses net, was $1.9 million in 2025 compared with $0.1 million income in
2024.
The decrease in the financing income was mainly due to an increase in losses in respect
of exchange rate effect in an amount of $3.7 million and on the other hand, an increase of income in respect of deposit in an amount of
$1.1 million
Income Tax
Income Tax expenses increased from $14.6 million in 2024, to $14.9 million in 2025 or
2.2 %. As a percentage of income before tax, income tax expenses decreased from 20.5% in 2024 to 19.9% in 2025 mainly
due to the countries profit mixture.
Analysis of our Operation Results for the Year ended December 31,
2024 as compared to the Year ended December 31, 2023
Revenues
Total revenues increased from $320.0 million in 2023 to $336.3 million in 2024 or 5.1%.
This increase consisted of an increase of $8.0 million from subscription fees from our telematics services and an increase of $8.3 million
from sales of our telematics products.
Telematics services segment
Revenues in our telematics services segment increased by $8.0 million from $ 234.5 million
in 2023 to $242.5 million in 2024, or 3.4%. The increase was mainly due to an increase in our average annual number of subscribers
from 2,186,000 in 2023 to 2,330,000 in 2024.
Telematics products segment
Revenues in our telematics products segment increased from $85.4 million in 2023, to
$93.8 million in 2024 or 9.7%. This increase of $8.3 million was primarily due to an increase in the quantity of units' sales.
Cost of revenues
Total cost of revenues increased from $166.8 million in 2023, to $175.6 million in 2024
or 5.3%. This increase consisted of an increase of $ 1.5 million in the telematics services segment and an increase of $7.3 million in
the telematics product segment. As a percentage of total revenues, cost of revenues increased slightly from 52.1% in 2023 to 52.2% in
2024.
Telematics services segment
Cost of revenues for our telematics services segment increased from $98.7 million in
2023, to $100.2 million in 2023 or 1.5%. This increase was primarily due to an increase in salary expenses of approximately $2.0 million,
a decrease in depreciation and amortization expenses of approximately $1.5 million and an increase in installation and communication costs
expenses of approximately $0.5 million. As a percentage of total revenues for this segment, cost of revenues decreased from 42.1% in 2023
to 41.3% in 2024.
29
Telematics products segment
Cost of revenues for our telematics products segment increased from $68.1 million in
2023, to $75.4 million in 2024 or 10.8%. This increase was mainly due to the increase in our products’ sales and the change in the
mixture of products sales. As a percentage of total revenues for this segment, cost of revenues increased from 79.7% in 2023, to 80.5%
in 2024.
Operating expenses
Research and development.
Our research and development expenses increased from $17.0 million in 2023 to $18.1
million in 2024. As a percentage of total revenues, research and development expenses increased from 5.3% in 2023 to 5.4% in 2024.
Selling and marketing
Our selling and marketing expenses increased from $13.6 million in 2023 to $15.3 million
in 2024. As a percentage of total revenues, selling and marketing expenses increased from 4.3% in 2023 to 4.5% in 2024.
General and administrative
General and administrative expenses decreased from $56.6 million in 2023, to $56.2 million
in 2024 or 1%. The decrease was mainly due to a decrease in salary expenses of approximately $0.6 million As a percentage of total revenues,
general and administrative expenses decreased from 17.7% in 2023 to 16.7 % in 2024.
Operating income
Total operating income increased from $ 66.0 million in 2023, to $71.2 million in 2024
or 7.9%. This increase of approximately $ 5.2 million reflects an increase of $4.1 million in the operating income in the telematics service
segment and an increase of $1.1 million in the operating loss in the telematics products segment.
Telematics services segment
Operating income in our telematics services segment increased from $65.1 million in
2023 to $69.2 million in 2024, or 6.3%. This increase was mainly attributed to the increase of our average base of subscribers from 2,160,000
subscribers in 2023 to 2,330,000 subscribers in 2024.
As a percentage of income in our telematics services segment revenues, operating income
in our telematics services segment increased from 27.7% in 2024 to 28.5% in 2024.
Telematics products segment
Operating income in our telematics products segment increased from $0.9 million in 2023
to $2.0 million in 2024. This increase in operating income was mainly attributed to the increase in product sold and sales mixture.
As a percentage of income in our telematics products segment revenues, operating income
in our telematics products segment increased from 1.1% in 2023 to 2.1% in 2024.
Financing income (expenses), net
Financing income, net, was $0.1 million in 2024 compared with an expenses of $1.6 million
in 2023.
The decrease in the financing expenses was mainly due to a decrease in exchange rate
differences in an amount of $1.7 million.
Income Tax
Income Tax expenses increased from $13.4 million in 2023, to $14.6 million in 2024 or
9.2%. As a percentage of income before tax, income tax expenses slightly decreased from 20.7% in 2023 to 20.5% in 2024 mainly due to the
countries profit mixture.
30
Impact of Currency Fluctuations on Results of Operations, Liabilities and Assets
Although we report our consolidated financial statements in dollars, in 2023, 2024 and
2025, a portion of our revenues and direct expenses was derived in other currencies. For fiscal years, 2023 ,2024 and 2025 we derived
approximately 25.3%, 23.1% and 22.4% of our revenues in dollars and other currencies, 48.2%, 52.1% and 54.6% in NIS 26.5%, 24.8% and 22.9%
in Brazilian Reals. In fiscal years, 2023, 2024 and 2025, 27.0%, 25.1% and 23.5% of our expenses were incurred in dollars and other currencies,
51.2%, 55% and 56.5% in NIS and 21.8%, 19.9% and 20.0% in Brazilian Reals.
Exchange differences upon conversion from our functional currency to dollars (presentation
currency) are accumulated as a separate component of accumulated other comprehensive income under stockholders’ equity. In the year
2025, accumulated other comprehensive income increased by $ 18.3 million. In the year 2024, accumulated other comprehensive income decreased
by $12.4 million. In the year 2023, accumulated other comprehensive income increased by $0.8 million.
The fluctuation of the other currencies in which we incur our expenses or generate revenues
against the dollar has had the effect of increasing or decreasing (as applicable) reported revenues, cost of revenues and operating expenses
in such foreign currencies when converted into dollars from period to period. The following table illustrates the effect of the changes
in exchange rates on our revenues, gross profit and operating income for the periods indicated (each for December 31):
|
Year ended December 31, |
||||||||||||||||||||||||
|
2023 |
2024 |
2025 |
||||||||||||||||||||||
|
Actual |
At 2022 exchange rates (1)
|
Actual |
At 2023 exchange rates (1)
|
Actual |
At 2024 exchange rates |
|||||||||||||||||||
|
Revenues |
319,978 |
329,420 |
336,257 |
344,146 |
359,023 |
350,084 |
||||||||||||||||||
|
Gross profit |
153,161 |
158,291 |
160,620 |
163,895 |
178,577 |
173,866 |
||||||||||||||||||
|
Operating income |
65,955 |
67,422 |
71,169 |
73,518 |
77,028 |
75,567 |
||||||||||||||||||
Based on average exchange rates during the
period. Those columns are Non-GAAP information.
Our policy remains to reduce exposure to exchange rate fluctuations by entering into
foreign currency forward transactions that mainly qualify as hedging transactions under ASC Topic 815, “Derivatives
and Hedging”, the results of which are reflected in our income statements as revenues or cost of revenues. The result of
these transactions, which are affected by fluctuations in exchange rates, could cause our revenues, cost of revenues, gross profit and
operating income to fluctuate.
| B. |
LIQUIDITY AND CAPITAL RESOURCES |
We fund our operations primarily from cash and cash equivalents generated from operations.
As of December 31, 2023, 2024 and 2025 we had $53.4 million, $ 77.4 million and $107.6million in cash and marketable securities
and $86.1 million, $106.8 million and $133.5 million in working capital, respectively. We hold most of our cash and cash equivalents in
US dollars or the local currency of their location.
As of December 31, 2025 we had no a short term loans. As of December 31, 2024 we had
a short term loans at the amount of $ 0.1 million. As of December 31, 2023 we had a long term loan at the amount of $0.2 million and a
short term loans at the amount of $0.4 million. As of December 31, 2023, 2024 and 2025, we also had $2.1 million, $1.1million and $4.1
million, respectively, available to us under existing lines of credit. As of December 31, 2023 we utilized $0.6 million of our credit
line As of December 31,2024 we utilized $ 0.1 million of our credit line. As of December 31, 2025 we did not utilize any of
our credit line.
We believe that our cash flow from operations, availability under our lines of credit
and cash and marketable securities will be adequate to fund our capital expenditures, contractual commitments and other demands and commitments
for the foreseeable future as well as for the long-term. We believe that cash flow generated from operations and cash available to us
from our credit facilities will be sufficient to cover future expansion of our various businesses into new geographical markets or new
products, as currently contemplated and as we describe herein. However, if existing cash and cash generated from operations are insufficient
to satisfy our liquidity requirements, we may seek financing elsewhere by selling additional equity or debt securities or by obtaining
additional credit facilities.
31
As of December 31, 2023 , 2024 and 2025 we had long-term liabilities of $ 24.6 million,
$27.6 million and $35.1 million, respectively, for employee rights upon retirement for certain of our employees that become payable upon
their retirement. Our Israeli employees are entitled to one month’s salary, equal to the applicable monthly salary at the time of
such employee’s retirement, for each year of employment, or a portion thereof, upon retirement. This liability is partially funded
by deposit balances maintained for these employee benefits in the amount of $18.5 million, $21.8 million and $28.5 million, as of December
31, 2023, 2024 and 2025, respectively. The deposited funds include profits accumulated up to the balance sheet date and may be withdrawn
upon the fulfilment of the obligation pursuant to Israeli severance pay laws or labor agreements.
In Ecuador, there are two unique Laws which are relevant to our activities:
| 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. |
In Mexico, All Mexican employers, whether individuals or entities, are required to calculate
and pay mandatory profit- sharing payments to employees within 60 days following the filing of their annual Mexican tax return. The obligation
for employers to make such payments is based on the legal provisions in Section IX of Article 123 of the Political Constitution of the
United Mexican States, which establishes that employees shall have the right to participate in their employer’s profits in the amount
of 10% of such employer’s taxable income. As such, the following types of employees have the right to receive profit sharing payments:
(a) permanent employees hired to carry out normal, long-term work for an employer, without regard to the number of days worked during
the January 1 through December 31, 2019 fiscal year; (b) eventual permanent employees who have worked for an employer fewer than 60 days,
whether continuously or sporadically, during the fiscal year referred to above; (c) former employees who have the right to claim profit
sharing payments, when such rights have not lapsed.
Dividends
In February 2024 the board of directors approved the increase of quarterly dividend
to $8 million. This latter amount of quarterly dividends was declared on February 29, May 28 and November 21, 2024. In February 2025 the
board of directors approved the increase of quarterly dividend to $10 million commencing from payment declared on April 3, 2025. On March
5, 2026, the Board of Directors approved a one-time dividend distribution of $30 Million dollars.
As part of implementation of our Board of Directors decision of $25 million share repurchase
program, Share repurchases were funded by our wholly owned subsidiary with available cash. Repurchases of the Company’s ordinary
shares were based on Rule 10b-18 terms. During the years 2019 and 2021 we purchased 227,828 and 228,725 of our shares for approximately
$6 million each year. During the year 2021, we also directly purchased additional 50,995 shares for approximately $1.3 million not through
publicly announced plans. During 2022 we purchased additional 357,362 shares for approximately $5 million. During 2023 we purchased additional
282,644 shares for approximately $ 6.6 million. During year 2025 we purchased our shares as detailed in item 16E.
As of the date of this report, the updated quantity of treasury
shares are 3,666,789 (including the aforementioned 655,909 shares which are entitled to dividend distributed). The following table sets
forth the components of our historical cash flows for the periods indicated:
|
Year ended December 31, |
||||||||||||
|
2025 |
2024 |
2023 |
||||||||||
|
Net cash provided by operating activities |
88,578 |
74,267 |
77,218 |
|||||||||
|
Net cash used in investing activities |
(24,180 |
) |
(15,940 |
) |
(17,229 |
) | ||||||
|
Net cash used in financing activities |
(42,707 |
) |
(31,769 |
) |
(32,934 |
) | ||||||
|
Effect of exchange rate changes on cash and cash equivalents |
8,503 |
(2,635 |
) |
(1,471 |
) | |||||||
|
Net increase/decrease in cash and cash equivalents |
30,194 |
23,923 |
25,584 |
|||||||||
32
Years ended December 31 ,2025, December 31, 2024 and December 31, 2023
Net cash provided by operating activities.
Our operating activities provided cash of $77.2 million in 2023, $74.3 million in 2024
and $88.6 million in 2025.
Cash from operating activities in 2025 increased in an amount of approximately $14.3
million, this increase was mainly due to the decrease in other current assets and decrease in inventory.
Net cash used in investing activities.
Net cash used in investing activities in 2025 in an amount of approximately $24.2 million,
included capital expenditure in the amount of $21.8 million.
Net cash used in investing activities in 2024 in an amount of approximately $15.0 million,
included capital expenditure in the amount of $13.6 million
Net cash used in investing activities in 2023 in an amount of approximately $17.2 million,
included capital expenditure in the amount of $14.2 million.
Net cash used in financing activities.
Net cash used in financing activities in 2025 in an amount of approximately $42.7 million
consisted primarily of cash dividend payment in an amount of approximately $39.5 million and acquisition of company shares in an amount
of $3.1 million.
Net cash used in financing activities in 2024 in an amount of approximately $31.8 million
consisted primarily of a repayment of short and long term credit from financial institution in an amount of $ 0.4 million and cash dividend
payment in an amount of approximately $31.3 million.
Net cash used in financing activities in 2023 in an amount of approximately $32.9 million
consisted primarily of a repayment of short and long term credit from financial institution in an amount of $11.4 million, cash dividend
payment in an amount of approximately $14.9 million and acquisition of company shares in an amount of approximately $6.6 million.
| C. |
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES |
Most of our research and development activities take place in Israel, Mexico, Colombia
and Ecuador. Our Research and Design department is constantly working on upgrading the service infrastructure and improving our fleet
management applications, including by introducing new services and uses of the system, while utilizing both internal development staff
and outsourcing such activities to third parties, as well as developing new service platforms for cellular/GPS based devices.
Expenditures for research and development activities undertaken by us were approximately
$20.8 million in 2025, $18.1 million in 2024 and $17.0 million in 2023.
| D. |
TREND INFORMATION |
The COVID-19 pandemic had no impact on our business during year 2025. Nevertheless,
in case this pandemic or similar in effect will erupt this may have an adverse effect on our business.
Please see Item 4.A. – History and Development of the Company and Item 4.B. –
Business Overview above for trend information.
| E. |
CRITICAL ACCOUNTING ESTIMATES |
Elaborated discussion on critical accounting policies and estimates
please see above pages 23-25.
33
| ITEM 6. |
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
| A. |
DIRECTORS AND SENIOR MANAGEMENT |
The following table sets forth information regarding our executive officers, key employees
and directors as of the date of this annual report:
|
Name |
Age |
Position | ||
|
Izzy Sheratzky |
79 |
President and director | ||
|
Yehuda Kahane |
81 |
Director | ||
|
Ze’ev Koren |
81 |
Chairman of the Board of Directors and an independent director | ||
|
Efraim Sheratzky |
73 |
Director | ||
|
Eyal Sheratzky |
57 |
Co-Chief Executive Officer and Director | ||
|
Nir Sheratzky |
54 |
Co-Chief Executive Officer and Director | ||
|
Gil Sheratzky |
48 |
CEO of our Subsidiary, International Activity and Business Development Officer and a Director |
||
|
Yoav Kahane (1)(2) |
52 |
Director and an independent Director | ||
|
Yigal Shani |
81 |
Director | ||
|
Israel Baron (1)(2)(3) +
|
72 |
External Director | ||
|
Riki Segev (1)(2) |
57 |
External Director | ||
|
Tal Sheratzky- Jaffa |
48 |
Director and an independent director | ||
|
Ami Saranga |
62 |
Deputy Chief Executive Officer Israel operation | ||
|
Eli Kamer |
59 |
Executive Vice President, Finance; Chief Financial Officer | ||
|
Guy Aharonov |
60 |
Co-General Counsel | ||
|
Udi Mizrahi |
54 |
Deputy Chief Executive Officer International Operation and VP of Finance | ||
|
Matan Omer |
36 |
Co-General Counsel & Data Privacy Officer |
Notes:
(1)
Member of audit committee
(2)
Member of compensation committee
(3)
External director elected in accordance with the Israeli Companies Law
+ Chairperson
of all committees
34
Izzy Sheratzky is a co-founder of our company
and its President. He has previously served as the Chairman of our Board of Directors, which in our company constitutes both an officer
and director positions, ever since our company was acquired from Tadiran in 1995. Until 2003, Mr. Sheratzky also served as our Chief Executive
Officer. Mr. Sheratzky also serves as the Chairman of the Board of Directors of Moked (1973) Investigations Company Ltd., Moked Services,
Information and Investments Ltd., and Moked Ituran. He also serves as a director in Tikal Document Collection Ltd. Mr. Sheratzky is the
father of Eyal, Nir and Gil Sheratzky, Brother of Efraim Sheratzky and uncle of Tal Sheratzky-Jaffa.
Yehuda Kahane is a co-founder of our company
and has served on our board since 1995. Professor Kahane is an entrepreneur in both the academic and business arenas. He is a Fellow of
the World Academy of Art and Science. He received the 2011 highest international award for his lasting contribution to the theory, practice
and education in insurance and risk management, as well as a lifetime achievements award by the Israeli Insurance industry. He is a co-founder
and chairperson of the YK Center for Preparing for the New Economy. Kahane is a Professor (Emeritus) from the Collar Business, Tel Aviv
University where he headed the Institute for Business and the Environment. He taught at many business schools around the world, including
the Wharton School, the University of Texas (Austin), the University of Toronto and the University of Florida, and has founded and served
as the first Dean of the Israeli Academic School of Insurance. Professor Kahane chairs and is a major owner of Capital Point Ltd., and
is active in the formation, seed investment and management of start-up companies and technological incubators, unrelated to our company.
He chairs the association for the visually impaired people in Herzliya and Sharon district, and a board member of the Center for Blind
People in Israel (The Umbrella organization). He is an honorary member of the Israel-Brazil Chamber of Commerce. Professor Kahane holds
a BA degree in Economics and Statistics, an MA degree in Business Administration and a PhD in Finance from the Hebrew University of Jerusalem
and is a Fellow of the Israeli Association of Actuaries. He specializes in insurance, risk management, environmental issues and technological
forecasting. He is the father of Yoav Kahane.
Zeev Koren has served as a director of
our company since 2006 and since 2011 serves as the Chairman of the Board of Directors of the Company. In 1988 Brigadier Gen. (Res) Koren
retired from the Israel Defence Forces after a career of 25 years, where in his final position he served as the head of human resources
planning for the general staff division. Since then he has served in a senior capacity in companies in the fields of international forwarding
and medical services. During the past ten years he has also served as the general manager of a Provident Management Company. He holds
a B.A. in Political Science and Criminology from Bar Ilan University.
Efraim Sheratzky was appointed to the board
on February 9, 2015, to replace Mr. Amos Kurz, as a Class A Director. Efraim Sheratzky studied insurance in the Israeli Insurance College.
Efraim Sheratzky owns together with Yigal Shani, Tzivtit Insurance Agency (1998) Ltd. Efraim Sheratzky served as our director from 1999
and until 2005. Efraim Sheratzky is the brother of Izzy Sheratzky and the uncle of Eyal, Nir and Gil Sheratzky and father of Ms. Tal Sheratzky-Jaffa.
Mr. Efraim Sheratzky was elected, on December 16, 2025, in annual general shareholders meeting,
to serve as a director in Class A for additional period until third succeeding Annual General meeting, thereafter.
Eyal Sheratzky has served as a director
of our company since its acquisition from Tadiran in 1995 and currently serves as a Co-Chief Executive Officer since 2003. Prior to 2003,
he served as Vice President of Business Development during the years 1999 through 2002. Mr. Sheratzky also serves as a director of Moked
Ituran and certain of our other subsidiaries, including Ituran Network. From 1994 to 1999, he served as the Chief Executive Officer of
Moked Services, Information and Investments and as legal advisor to several of our affiliated companies. Mr. Sheratzky holds LLB and LLM
degrees from Tel Aviv University School of Law and an Executive MBA degree from the Kellogg School of Management at Northwestern University,
USA. Mr. Sheratzky is the son of Izzy Sheratzky and the brother of Nir and Gil Sheratzky and nephew of Effraim Sheratzky. Mr. Eyal Sheratzky was
elected, on December 16, 2025, in annual general shareholders meeting, to serve as a director in Class A for additional period until third
succeeding Annual General meeting, thereafter.
Nir Sheratzky has served as a director
of our company since its acquisition from Tadiran in 1995 and currently serves as a Co-Chief Executive Officer since 2003. Prior to 2003,
Mr. Sheratzky served as an Executive Officer in our company from 1995 to 2003. Mr. Sheratzky is also a director in Moked Ituran. He holds
BA and MA degrees in Economics from Tel Aviv University. Nir is the son of Izzy Sheratzky and the brother of Eyal and Gil Sheratzky and
nephew of Effraim Sheratzky.
Gil Sheratzky serves as a director of our
company and since 2013 as our International Activity and Business Development Officer. Mr. Sheratzky has been serving since January 23,
2007 as the Chief Executive Officer of our subsidiary, E-Com Global Electronic Commerce Ltd. From 2003 and until 2013 Mr. Sheratzky served
as our marketing communication officer. During the years 2000 - 2001 Gil worked in our control center, and during the years 2001 - 2002
he worked in an advertising agency. Mr. Sheratzky holds a BA in Business Administration from the Herzliya Interdisciplinary Center,
and an MBA degree from the Booth School of Business at Chicago University, USA. Gil serves also as director in Bringg and chairman of
Mapa GIS (a subsidiary of Ituran). Gil Sheratzky is the son of Izzy Sheratzky and the brother of Eyal Sheratzky and Nir Sheratzky and
nephew of Effraim Sheratzky
35
Yoav Kahane (Director and an Independent Director,
and also a member of audit committee and a member of compensation committee) has served as director of our company since 1998. Mr. Kahane
is serving as the Chief Executive Officer of Vizo Specs Ltd,a startup company he co-founded that develop a non-invasive technology for
immediate enhancement of attention and the treatment of ADHD. During 2020 he served as CBO of PrintCB, developer and manufacturer of advanced
copper materials for car electrification. a. During 2006-2014, Mr. Kahane has worked for Enzymotec in various managerial positions including
Director of Business Development, VP Sales & Marketing, Infant Nutrition Business Unit Manager, Chief Executive Officer and Chairman
of Advanced Lipids AB, a joint venture of AAK AB and Enzymotec, specializing in nutritional ingredients to the infant nutrition industry.
During the years 2004-2005, Mr. Kahane served as Vice President of Sales and Marketing in Elbit Vision Systems Ltd. During the years 2001
and 2002, he served as Manager of Business Development in Denver Holdings and Investments Ltd. In 2000, Mr. Kahane established Ituran
Florida Corp. and served as its Chief Executive Officer until 2001. Mr. Kahane holds a BA degree in Life Sciences from Tel-Aviv University,
a BA degree in Insurance and an MBA degree from the University of Haifa. Yoav Kahane is the son of Professor Yehuda Kahane. Mr. Kahane.
Mr. Kahane was elected, on December 16, 2025, in annual general shareholders meeting, to serve as an Independent Director in Class A for
additional period until third succeeding Annual General meeting, thereafter.
Yigal Shani has served as a director of
our company since its acquisition from Tadiran in 1995. Mr. Shani is an insurance agent and a partner in the insurance agency Tzivtit
Insurance Agency (1998) Ltd. together with Efraim Sheratzky, which provides insurance services
to our company. Mr. Shani has resigned on March 13, 2014 in order to allow compliance with the provisions of the Israeli Companies Law,
which require that the board of directors to include at least one female and was reappointed on February 9, 2015 to replace Mr. Avner
Kurz, as a Class B Director.
Israel Baron has been serving as an external
director of our company since 2003 and is the Chairman of our board’s committees. Mr. Baron served as a director in Poalim Trust
Services Ltd., a fully owned subsidiary of Bank Hapoalim Ltd from 2009 until 2017. In addition, Mr. Baron has been serving as Chief Executive
Officer of several public sector employee retirement and saving plans since 2003. Prior to 2003, Mr. Baron managed an organizational consulting
firm, served as an investment manager in the Isaac Tshuva group during the years 1999 to 2001 and as Chief Executive Officer of Gmulot
Investment Company Ltd.during the years 1994-1999. Mr. Baron serves as a director of Quality Baron Management Services Ltd. and since
August 2022 he serves as a director of Brill Shoe Industries Ltd. Mr. Baron is a certified CPA and holds a BA degree in Economics and
Accounting from the Bar-Ilan University in Ramat-Gan, Israel. Israel Baron was re-elected on Noveember 30, 2023 for additional 3-year
term to serve as external director.
Riki Segev is an external
director of our company. She was nominated on December 16, 2025. Mrs. Riki Segev served from
1995-2019 as chief officer of client’s service at our company. Since 2020 she acts as independent consultant to various clients
on clients’ service and internal management. Ms. Segev has B.A. from the Hebrew University in Jerusalem (Sociology, geography and
anthropology) and M.A. from the College of Management Academic Studies, Rishon LeZion, Israel.
Ms. Tal Sheratzki-Jaffa is the founder and CEO
of VC Academy - an accelerator for female investors in venture capital funds. In addition, Ms. Sheratzki-Jaffa teaches economics
and business management in high-school and acts as a member of the school management. Prior to her current roles, Ms. Sheratzki-Jaffa
held various positions in Jerusalem Venture Partners Fund, including as the manager of JVP's Investor Relations department and
as a Vice President of Business Development at Margalit Startup City, a related company creating centres of excellence for tech communities
worldwide. Prior to joining JVP, Ms. Sheratzky-Jaffa acted as a Strategy and Development Manager at Reality Investment Funds, Israeli
value-add real estate fund. Previously, Ms. Sheratzki-Jaffa was a Partner at the High-Tech and Venture Capital department at Amit,
Pollak, Matalon and Co., an Israeli law firm and prior to that as an associate at the New York offices of the US law firm Akin
Gump Strauss Hauer & Feld. Ms. Sheratzki-Jaffa holds an LL.M degree from Columbia University (New York), LL.B from Haifa University
and B.A (economics) from Haifa University and is a member of the Israeli Bar Association and the New York State Bar. Ms. Sheratzki-Jaffa
is the nephew of Izzy Sheratzki and the cousin of Eyal, Nir and Gil Sheratzki and the daughter of Efraim Sheratzki. Ms. Sheratzki
– Jaffa was elected, on December 16, 2025, in annual general shareholders meeting, to serve as director in Class A for additional
period until third succeeding Annual General meeting, thereafter.
Ami Saranga has been serving as the Deputy
Chief Executive Officer of our company since 2011. Prior to that Mr. Saranga served as our VP Marketing since 2008. Prior to 2008, Mr.
Saranga managed the SME division of Pelephone Communications Ltd., one of Israel’s largest telecommunication network operators.
Mr. Saranga holds a BA degree in Business Administration from Ruppin Academic Center, Israel.
Eli Kamer has served as Executive Vice
President, Finance and Chief Financial Officer of our company since 1999, after serving as its Finance Department Manager since 1997.
Prior such date, Mr. Kamer worked as an accountant in Fahn Kanne & Co., our independent registered public accountant. Mr. Kamer is
a CPA and holds a BA degree in Business Administration from the Israel College of Management and an MBA degree in business administration
from Bar Ilan University.
36
Guy Aharonov has served as our in-house
legal counsel since 1999. Prior to joining our company, he has worked as an attorney in Cohen Lahat & Co. Mr. Aharonov holds LLB and
LLM degrees from Tel Aviv University.
Udi Mizrahi has served as our VP Finance
since 2000. On his current position Mr. Mizrahi serve as a Deputy Chief Executive Officer International Operation and VP of Finance. Mr.
Mizrahi is a CPA and holds a BA degree in accounting and economics from Ruppin Academic Center, Israel.
Shahar Sheratzky has served
in different marketing roles in our company since 2007. In January 2022 Mr. Shahar Sheratzky was nominated to Vice president, head of
our business division. Among his responsibilities are the marketing, selling and digital fields. Mr. Sheratzky holds a MBA degree in business
administration with a specialization in global marketing from Reichman University, Israel. Mr. Shahar Sheratzky is the nephew of Izzy
Sheratzky and the cousin of Eyal, Nir and Gil Sheratzky and the son of Efraim Sheratzky.
Matan Omer has served as
our in-house General Legal Counsel since 2021, as our Data Protection Officer and as a Compliance Officer in the field of anti-trust and
competition. Prior to joining our company, he has worked as an in-house legal counsel in Electra and as a legal associate in Katzenell
Dimant Law Offices. Adv. Omer holds L.L.B degree from the College of Management, he is a Certified Chief Information Security Officer
and Data Protection Officer from Bar-Ilan University and a Certified Mediator.
Our articles of association provide for staggered three-year terms for all our directors
(except our external directors, who are elected in accordance with the provisions of the Israeli Companies Law). The directors on our
board (excluding the external directors) are divided into three classes, and each class of directors serves for a term of three years,
as follows: Izzy Sheratzky, Gil Sheratzky and Zeev Koren (class C), Nir Sheratzky, Yigal Shani and Yehuda Kahane (class B), and
Eyal Sheratzky, Efraim Sheratzky, Tal Sheratzky-Jaffa and Yoav Kahane (class A). This classification of the board of directors may delay
or prevent a change of control of our company.
Diversity of the Board of Directors
The table below provides certain information regarding the composition
of our Board. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Rule 5605(f) and related
instructions.
Board Diversity Matrix (As of
April 19, 2026)
|
Country of Principal Executive Offices |
Israel | ||||
|
Foreign Private Issuer |
Yes | ||||
|
Disclosure Prohibited under Home Country Law |
No | ||||
|
Total Number of Directors
|
12 | ||||
|
Part I: Gender Identity |
Female |
Male |
Non-Binary |
Did Not Disclose
Gender | |
|
Directors |
2 |
10 |
|
| |
|
Part II: Demographic Background |
| ||||
|
Underrepresented Individual in Home Country Jurisdiction |
0 | ||||
|
LGBTQ+ |
0 | ||||
|
Did Not Disclose Demographic Background |
0 | ||||
37
Shareholders Agreement and Articles of Association of Moked Ituran Ltd.
Pursuant to Moked Ituran Ltd's articles of association and agreement (as amended) between
its shareholders, there is a mechanism in place with regard to directors to be designated and voted for election by Moked Ituran Ltd in
each of our annual shareholders meeting for the relevant class of directors (four directors in class A and B and three in class C). This
arrangement for the election of directors is only effective for as long as Moked Ituran Ltd. holds at least 15% of our issued and outstanding
share capital.
| B. |
COMPENSATION |
The aggregate direct compensation we paid to our directors who
are not officers for their services as directors as a group for the year ended December 31, 2025 was approximately $240,000. Directors
are reimbursed for expenses incurred in connection with their attendance of board or committee meetings. The compensation payable to external
directors is determined in accordance with regulations promulgated under the Israeli Companies Law. See Item 6.C - Board Practices under
the caption “External directors” below. Our audit committee and board of directors approved compensation for Mr. Ze’ev
Koren, for serving as the Chairman of our board of directors, and for Mr. Yoav Kahane, for serving as a member of our board committees,
such that they shall be compensated in the same manner as our external directors are compensated, annually and per meeting, in accordance
with the Companies Regulations (Rules for the Compensation and Expenses of an External Director), 2000-5760. In 2025, we paid the sum
of NIS 341,000 (approximately $99,000) to our external directors, NIS 206,000 (approximately $60,000) to Mr. Ze’ev Koren, NIS 161,000
(approximately $47,000) to Mr. Yoav Kahane, NIS 118,000 (approximately $34,000) to Ms. Tal Sheratzky-Jaffa. We do not have any agreements
with directors providing for benefits upon termination of their respective services as such.
The aggregate costs to the Company of the compensation to our Co-Chief
Executive Officers in 2025 were $4,826,000. The aggregate compensation paid to all of our officers as a group during 2025 was approximately
$15,691,000. In 2025 we paid an aggregate amount of $75,000 to one director who provided us with services. The above compensation amounts
include amounts attributable to automobiles made available to our officers and other fringe benefits commonly reimbursed or paid by companies
in Israel. Employee directors do not receive additional fees for their services as directors.
The following table sets forth the breakdown of the compensation
of our five highest paid officers in 2025:
|
Management fees |
Wage |
Social components |
Car value |
Bonus (results based) |
Bonus (Share yield based) |
Total |
||||||||||||||||||||||
|
Compensation components (in thousand US Dollars) |
||||||||||||||||||||||||||||
|
Izzy Sheratzky (President) |
899 |
- |
- |
- |
1,326 |
866 |
3,091 |
|||||||||||||||||||||
|
Eyal Sheratzky (Co-Chief Executive Officer |
699 |
- |
- |
- |
1,040 |
674 |
2,413 |
|||||||||||||||||||||
|
Nir Sheratzky (Co-Chief Executive Officer) |
699 |
- |
- |
- |
1,040 |
674 |
2,413 |
|||||||||||||||||||||
|
Gil Sheratzky (CEO of our Subsidiary. International Activity and Business Development Officer) |
499 |
- |
- |
- |
653 |
295 |
1,447 |
|||||||||||||||||||||
|
Shachar Sheratzky (Vice president, head of our business division) |
- |
237 |
53 |
43 |
452 |
- |
785 |
|||||||||||||||||||||
|
Total of our 5 highest paid officers $ |
2,796 |
237 |
53 |
43 |
4,511 |
2,509 |
10,149 |
|||||||||||||||||||||
During 2025, we set aside $ 765,000 for the benefit of our officers for pension, retirement
or similar benefits. We do not set aside any funds for the benefit of our directors who are not employees for any pension, retirement
or similar benefits.
All numbers in this section are rounded to the nearest thousand.
During 2025, Messrs. Izzy Sheratzky, Eyal Sheratzky, Nir Sheratzky
and Gil Sheratzky provided their services as President, Co-Chief Executive Officers and CEO of our Subsidiary & International Activity
and Business Development Officer respectively, as independent contractors pursuant to services agreements, which were adopted by our shareholders
meeting in January 2014, which terms correspond to our compensation policy as described below.
38
For further details concerning such terms of service, please
see Item 7.B – Related Parties Transactions under the caption “Transactions with our directors and principal officers.”
In 2006, our compensation committee has devised a bonus scheme pursuant to which some
of our officers and employees received shares of our profit before tax on a consolidated basis, based on their seniority, level of global
and domestic involvement, contribution to our operations and other criteria set by the compensation committee. In 2010, our compensation
committee resolved that additional managers shall be entitled to receive bonuses under this bonus scheme and that some of the grantees
should continue to receive a bonus based on our consolidated results and some should receive a bonus based only on our solo financial
statements. During 2025, we paid a total of $ 1,657,000 to our officers and employees pursuant to the above bonus schemes.
Our compensation policy for office holders
In December 2012, amendment no. 20 to the Israeli Companies Law became effective. Among
other things, this amendment requires Israeli public companies to set forth their policy regarding their office holders’ terms of
office, including fixed compensation, target-based incentives, equity awards, severance and other benefits. The amendments also set forth
the considerations that should be applied when devising a compensation policy for office holders.
The term “office holder” is defined in the Israeli Companies Law, to mean
the chief executive officer, chief business officer, deputy chief executive officer, vice chief executive officer, any other person fulfilling
such position even if his title is different, as well as a director or a manager directly subordinate to the chief executive officer.
The compensation policy must be approved every three years by the board of directors,
after considering the recommendations of the compensation committee; and generally requires the approval of the company’s general
meeting of shareholders by a special majority of shareholders who are not controlling shareholders and who do not have a personal interest
in the approval of the policy; or, alternatively, that the non-controlling shareholders and shareholders who do not have a personal interest
in the matter who are present and vote against the policy hold two percent or less of the voting power of the company.
The compensation policy does not intend to amend any officer’s existing terms
of office; nor to bestow any officer with a right to receive the compensation, or any element thereof set forth therein. However, generally,
once the compensation policy is approved, all future terms of service of office holders should conform to its provisions. The specific
terms of office of each officer shall be separately determined in accordance with the relevant provisions of the Israeli Companies Law
and the regulations promulgated thereunder.
Our general shareholders meeting approved our compensation policy for office holders
on October 31, 2013, and on November 7, 2016, and recently on December 12, 2025 approved a renewal of the compensation policy with another
amendment raising the the maximum annual cost of base pay and benefits for business unit managers approved on March 31, 2026. The
policy applies to office holders of the Company (see definition above), who serve as the Company’s President, Chief Executive
Officer(s) and other executives who are deemed office holders of the Company, as well as office holders of the Company’s Israeli
wholly owned subsidiaries, provided they report to the chief executive officer. The policy also applies to directors of the Company.
Our compensation policy for office holders was formulated in view of our belief that
our business success is the result of the excellence of our human resources and their devotion to the achievement of our company’s
goals. Therefore, it is aimed at offering our officers with a competitive compensation package that will align their incentives with those
of our company and our shareholders, and at motivating them to achieve the goals of our company, while avoiding undue pressure to take
excessive risks. Among other factors, our compensation committee and board of directors have considered, as required by amendment no.
20 to the Israeli Companies Law and as reflected in the policy: (a) the advancement of the company’s goals, its business plan and
its policy with a long-term view; (b) the creation of appropriate incentives for office holders, considering the company’s risk
management policy; (c) the size of the company and the nature of its business; (d) with respect to variable components of the terms of
office – the contribution of the office holders to the achievement of the company’s goals and to the maximization of its profits,
with a long-term view and in accordance with the position of the office holder.
The compensation policy incorporates all matters required to be included in a compensation
policy as mandated by amendment 20 to the Israeli Companies Law, including (without limitation): (a) the requirement to consider the office
holders’ education, skills, professional experience, expertise, position and past compensation agreements; (b) consideration of
the ratios between overall compensation of the officers and the average and median salary of the other employees of the Company; (c) the
board’s right to reduce variable compensation; (d) the determination of a maximum period for advanced and transition periods upon
termination of services; (e) basing variable components of compensation on key performance indicators and on measurable criteria; (f)
determining the ratio between fixed and variable components of compensation and setting forth caps on the amount of variable compensation
payable; and (g) a claw-back provision with respect to restatements of financial statements.
39
| C. |
BOARD PRACTICES |
Board of Directors
Pursuant to our articles of association as presently in effect, our board of directors
generally consists of twelve directors, including at least three independent directors in accordance with the listing rules of Nasdaq
concerning the composition of audit committees, of whom two directors are external directors as required by Israeli law. Our independent
directors, as such term is defined under the Nasdaq listing rules, are Mr. Baron, Mrs. Riki Segev , Mr. Koren, Mr. Yoav Kahane and Ms.
Tal Sheratzky - Jaffa, Pursuant to our articles of association, other than the external directors, for whom special election requirements
apply (see “External directors” below), our directors are elected, by majority of our shareholders and may be removed by special
majority. However, see Item 6.A – Directors and Senior Management for a description of our staggered board and the shareholders
agreement and articles of association of Moked Ituran Ltd. Our board of directors may at any time and from time to time appoint any other
person as a director to fill a vacancy until the general meeting of shareholders in which the term of service of the replaced director
was scheduled to expire.
Pursuant to the Israeli Companies Law, our chairman convenes and presides over the meetings
of the board. In addition, any two directors may convene a meeting of the board of directors, as well as a director who becomes aware
of a company’s matter that allegedly involves a breach of the law or an improper business conduct. A quorum consists of a majority
of the members of the board, and decisions are taken by a vote of the majority of the members present. Our articles of association provide
that such quorum will in no event be less than two directors.
We are incorporated in Israel and are therefore subject to the provisions of the Israeli
Companies Law, including certain corporate governance provisions. Our ordinary shares are listed on the Nasdaq Global Select Market (Our
shares were delisted from the Tel Aviv stock exchange on May 25, 2016, for additional information see Item 9.A – Price History of
Our Shares), and we are therefore subject to certain provisions of the Israeli securities laws, the U.S. securities laws and the Nasdaq
listing rules. See also Item 16.G. – Corporate Governance below for additional information concerning our compliance with the Nasdaq
listing rules and exemptions therefrom.
According to our Articles of Association, some of our officers and employees (including
the chairman of our board and at least one third member of the Board) should be citizens and residents of Israel and receive clearance
approval from the Israeli General Security Service. All the members of our board comply with these requirements.
On February 26, 2017 our board has adopted an Internal Compliance policy, which following
review of our internal process included a comprehensive update of our internal regulations and codification of our internal regulations,
all pursuant to the applicable Israeli laws. On August 28, 2022 our board adopted a revised internal compliance policy.
External directors
Under Israeli law, the board of directors of companies whose shares are publicly traded
are required to include at least two members who qualify as external directors. External directors are to be elected by a majority vote
at a shareholders’ meeting, provided that either:
| ■ |
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. |
External directors are generally elected to serve an initial term of three years and
may be re-elected to serve in that capacity for two additional three-year terms; however, companies whose securities are listed on recognized
foreign exchanges, such as Nasdaq, may extend the service terms of their external directors for additional unlimited terms, each of no
more of than three years , subject to the approval of the audit committee and the board of directors that such extension is for the benefit
of the company in view of the directors’ expertise and special contribution to the operation of the board and its committees and
these reasons together with the term served by the external director were presented to the shareholders prior to their approval (see the
Israeli Companies Regulations (Allowances for Companies with Securities Listed on an Exchange Outside Israel), 2000-5760). The appointment
of an external director for additional terms may be brought for the approval of the shareholders either by the board of directors or by
a shareholder that holds at least 1% of the company’s voting rights, provided that the nominee is not a related or competing shareholder
(as defined below) or a relative thereof, at the time of the appointment, and does not have an affinity to such shareholder (as defined
below) at the time of the appointment or the two years preceding such appointment. The term “related or competing shareholder”
means the shareholder who proposed the appointment or a 5% shareholder of the company if, at the time of the appointment, his controlling
person or a company controlled by either of them, has business relations with the company, or if he, his controlling person or a company
controlled by either of them are competitors of the company. The term “affinity” means the on-going existence of work relationship,
business or professional relationship or control and the service as an officer.
40
External directors may generally be removed from office by the same majority of shareholders
required for their election or by a court, in each case, only under limited circumstances, including if they cease to meet the statutory
qualification for their appointment or violate the duty of loyalty to the company.
If at the time of the appointment of an external director, all directors who are not
controlling persons or their relatives are of the same gender, then the elected external director must be of the other gender.
Each committee of the board of directors that is vested with an authority of the board
must include at least one external director, except that the audit committee and compensation committee must include all external directors
then serving on the board of directors. The Israeli Companies Law prohibits external directors from receiving, directly or indirectly,
any compensation other than for services as an external director pursuant to the provisions and limitations set forth in the applicable
regulations promulgated under the Israeli Companies Law.
Israeli law provides that a person is not qualified to serve as an external director
if he is a relative (as defined in the Israeli Companies Law) of the company’s controlling person, or if, at the time of his/her
appointment and/or at any time during the two years preceding his or her appointment, that person, a relative, partner or employer of
that person, or any entity under that person’s control, has or has had an affinity (as defined above) to the company, its controlling
person or its relative or to any entity that, as of the date of appointment, or at any time during the two years preceding that date,
is controlled by the company or by its controlling person. In addition, no person may serve as an external director if that person’s
professional activities create, or may create, a conflict of interest with that person’s responsibilities as a director or otherwise
interfere with that person’s ability to serve as a director; and, a person already serving as a director of one company may not
be appointed as an external director of the company if at that time a director of the company is serving as an external director of the
first company. In addition, a company, controlling shareholder and any other entity controlled by the controlling shareholder may not
grant to such external director, its spouse or child, any benefits, directly or indirectly, and the external director, its spouse or child
may not be appointed to serve in any position, may not be employed by and may not, directly or indirectly, render any professional services
to the company, such controlling shareholder or any other entity controlled by the controlling shareholder, during the first two years
following such external director’s termination of tenure of office, and with respect to a relative who is not the external director’s
spouse or child – during the first year following such termination.
Mr. Israel Baron is now serving his seventh term as an external director of the Company,
who was re-elected on of November 30, 2023 for a term of 3 years. Mrs. Riki Segev was elected on December 16, 2025 after the demise of
Mr. Gideon Kotler, our former external director.
Audit committee
Under Israeli law, the board of directors of a public company must appoint an audit
committee. The audit committee must comprise of at least three directors, including all of the external directors and the chairman of
the audit committee must be an external director. In addition, the majority of the members of the audit committee must be independent
directors. Under the Israeli Companies Law, a director is considered “independent” if he/she is an external director or if
he/she meets the qualifications of an external director, has not served as a director of the company for over 9 consecutive years, and
has been classified as such. Under Israeli regulations a director who serves more than 9 consecutive years as a director may still be
deemed as "independent director" provided the Audit committee and thereafter the board of directors resolved that his-her tenure as a
director for an extend term is for the benefit of the company based on his/her expertise and unique contribution to the board and its
committees. Our Audit committee and board of directors so resolved with regard to Mr. Israel Baron. The audit committee may not include
the chairman of the board, any director who is employed by the company or regularly provides services to the company (other than as a
board member), a controlling shareholder or any relative of such person. All audit committee decisions must be approved by a majority
of the committee members of which the majority of members present are independent directors. Furthermore, a person who is not eligible
to serve on the audit committee is restricted from participating in its meetings and votes, unless the chairman of the audit committee
determines that such person’s presence is necessary in order to present a certain matter, provided however, that the company employees
who are not controlling shareholders or relatives of such shareholders may be present in the meetings but not in the actual votes and
likewise, company counsel and secretary who are not controlling shareholders or relatives of such shareholders may be present in meetings
and decisions of such present is requested by the audit committee.
41
Our audit committee must also meet the requirements of the Nasdaq listing rules concerning
audit committees.
Our board of directors has formed an audit committee that is empowered, among other
things, to exercise the powers of the board of directors concerning our accounting, reporting and financial control practices. Our audit
committee operates in accordance with a charter, which complies with the provisions of the Israeli Companies Law and the Nasdaq listing
rules. The members of the audit committee are currently Messrs. Israel Baron, Mrs. Riki Segev and Yoav Kahane, all of whom are independent
as required of members of the audit committee under the Nasdaq listing rules. Our board of directors has determined that Mr. Israel Baron
possesses financial sophistication as required by Rule 5605(c)(2) under the Nasdaq listing rules, and that Mr. Baron possess accounting
and financial expertise as defined by Israeli regulations.
Pursuant to the Israeli Companies Regulations (Provisions and Conditions regarding the
Financial Statements’ Authorization Process), 2010, a reporting entity, except for a reporting entity that is subject to Chapter
E(3) of the Israeli Securities Act, is required to establish a committee of the board of directors for the examination of financial statements.
Since we are a reporting entity under Chapter E(3), we are not obliged to constitute a committee for the examination of financial statements;
and therefore, commencing with the financial statements for the first quarter of 2013, we ceased holding meetings of the examination of
financial statements committee; and instead, our audit committee considers the financial statements prior to their approval by the board.
Pursuant to the 22nd amendment
in the Israeli Company law, which was set to define new rules to approve transaction of the public company with its controlling shareholders,
or the transaction in which the controlling shareholder has interest. The law requires from our Audit committee to set up rules to define
the criteria for classification of transactions, which are neither Insignificant Transactions nor extraordinary transactions, and their
procedures of approval that will be determined per each year in advance. In addition, the law requires from the Audit Committee to set
methods of examining transactions with the controlling shareholders, in order to enable their classification and their comparison to the
conditions in the free market. The Audit Committee resolved on September 29, 2014 as follows:
| 1. |
Transaction that is neither extraordinary, nor insignificant. |
Definition: the relevant criteria that is calculated for the transaction is such transaction
which is higher than 0.25% of the equity of the company according to its last combined financial reports, or higher than 1% of average
net revenue of the past 3 years of the company in their absolute value, in the last 2 calendar years prior to the date of the transaction
is being reported according the last financial report of the company.
Methods of approval: approval by the senior management of the company (from vice chief
executive officer and higher) and report to the Board. The following transactions will require also the approval of the Audit Committee:
| (1) |
Transaction which is higher than 4.5% of the equity of the company according to 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: |
Definition: such transaction which is not higher than 0.25% of the equity of the company
according to its last combined financial reports or is not higher than 1% of average net revenue of the past 3 years of the company in
their absolute value, in the last 2 calendar years prior to the date of the transaction is being reported according to the last financial
report of the company.
Methods of approval: Approval by the management of the company or by the officer in
charge in the company (vice chief executive officer, other officer or other in charged body in the company according to the decisions
of the company).
42
| 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 to the adopted criteria, transactions 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.
|
Compensation committee
The Israeli Companies Law mandates the appointment of a compensation committee comprising
of at least three directors. The compensation committee must include all of the external directors, who shall constitute the majority
of the members thereof, and its remaining members shall be directors whose terms of service comply with the provisions promulgated concerning
the remuneration of external directors. The chairman of the committee must be an external director. The members of the Compensation committee
are currently Israel Baron, Riki Segev and Yoav Kahane. All members of our compensation committee are independent directors as defined
by the Nasdaq listing rules, and all of whom meet the composition requirements under the Israeli Companies Law. Since February 2016, the
Israeli Companies Law permits that Audit Committee can serve also as a Compensation committee, provided that it will comply with requirements
of the Compensation Committee as explained above.
Under the Israeli Companies Law, the compensation committee is responsible for: (i)
making recommendations to the board of directors with respect to the approval of the compensation policy for office holders and any extensions
thereto; (ii) periodically reviewing the implementation of the compensation policy and providing the board of directors with recommendations
with respect to any amendments or updates thereto; (iii) reviewing and resolving whether or not to approve arrangements with respect to
the terms of office of office holders; and (iv) determining whether or not to exempt a transaction with a candidate for chief executive
officer from shareholders' approval.
Furthermore, our compensation committee oversees, on behalf of the Board, the management
of Ituran’s compensation and other human resources-related issues and otherwise carries out on behalf of the Board its responsibilities
relating to these issues. The committee is responsible for establishing annual and long-term performance goals and objectives for our
executive officers. In addition, as required under the Nasdaq listing rules, our compensation committee is responsible for the appointment,
compensation and oversight of the work of any compensation consultant, legal counsel and other adviser retained by the committee; and
may retain such advice only after taking into account the considerations set forth in the Nasdaq listing rules in this respect. Our compensation
committee operates in accordance with a charter, which complies with the provisions of the Israeli Companies Law and the Nasdaq listing
rules.
According to our compensation committee charter, the compensation committee, among its
other duties, is responsible on reviewing the disclosure in this form which concerns the Compensation Policy and the sections describing
the Terms of Service of Officers, controlling persons and their relatives.
Internal auditor
Under the Israeli Companies Law, the board of directors of a public company must appoint
an internal auditor nominated by the audit committee. An internal auditor may not be:
| ■ |
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. |
The role of the internal auditor is to examine, among other things, the compliance of
the company’s conduct with applicable law and orderly business procedures. Our internal auditor in 2020 was Shimon Yarel, CPA,
who has served as our internal auditor since January 1999. In March , 2026, the audit committee and subject to the approval of the
board of directors approved the appointment of BDO-Ziv Haft instead of Mrs. Alexandra Meron Yarel as an internal auditor .
43
| D. |
EMPLOYEES |
The following table sets forth the total number of our employees at the end of each
of the past three years, and a breakdown of such employees by main category of activity and by geographic location:
|
Year ended December 31, |
||||||||||||
|
|
2025 |
2024 |
2023 |
|||||||||
|
USD in thousands |
||||||||||||
|
By area of activity: |
||||||||||||
|
Control Center |
547 |
402 |
380 |
|||||||||
|
Research and Development |
127 |
163 |
167 |
|||||||||
|
Sales and Marketing |
100 |
126 |
103 |
|||||||||
|
Technical support and IT |
498 |
513 |
491 |
|||||||||
|
Finance, Administration and Management
|
357 |
327 |
321 |
|||||||||
|
Private enforcement and operations |
1,143 |
1,191 |
1,196 |
|||||||||
|
Manufacturing |
145 |
170 |
183 |
|||||||||
|
Total |
2,917 |
2,892 |
2,841 |
|||||||||
|
|
||||||||||||
|
By geographic location (out of total): |
||||||||||||
|
Israel |
970 |
961 |
906 |
|||||||||
|
Brazil |
885 |
848 |
865 |
|||||||||
|
Others |
1,062 |
1,083 |
1,070 |
|||||||||
|
Total |
2,917 |
2,892 |
2,841 |
|||||||||
We consider our relations with our employees to be satisfactory and have no ongoing
major labor disputes or material labor-related litigation. Our employees are subject to local labor laws and regulations, which in some
countries are more stringent than others. Some of our senior executives also have employment agreements that may grant them rights in
excess of those provided by the applicable laws.
Israel
Our employees in Israel are subject to Israeli labor laws and regulations and employment
customs. The applicable labor laws and regulations principally concern matters such as paid annual vacation, paid sick days, length of
the workday, payment for overtime and severance pay. Israeli law generally requires severance pay equal to one month’s salary for
each year of employment upon retirement or death of an employee or termination of employment without cause. Furthermore, Israeli employees
and employers are required to pay predetermined sums to the National Insurance Institute, which is similar to the United States Social
Security Administration. Since January 1, 1995, these amounts also include payments for national health insurance.
Israeli labor laws impose on employers increased liability, including monetary sanctions
and criminal liability, in cases of violations of certain labor laws and certain violations by contractors providing maintenance, security
and cleaning services.
44
Brazil
Our employment agreements in Brazil are subject to Brazilian labor laws and regulations,
to collective labor agreements or bargaining arrangements with unions and contract. The laws and regulations in Brazil govern almost all
aspects of an employment relationship and do not leave much room to be negotiated with the employee. Still, employment contracts create
obligations to the parties if they are in compliance with the law. The Labor Code mainly governs the employees’ right to paid annual
vacation, paid sick days, the maximum length of a workday, minimum payment for overtime and statutory severance pay. Brazilian law generally
requires severance pay equal to 40% of the balance of the employee’s FGTS account (a mandatory fund to guarantee severance and unemployment).
The FGTS can also be withdrawn when the employee retires, dies or his employment is terminated without cause, among others. Brazilian
employers are required to purchase health insurance for employees only in the event it is set forth by the applicable collective labor
agreement, contract or company policy, and are required to cover employees’ food and travel costs whenever a business trip is required,
and to make deposits into a Guarantee Severance Fund (the so-called “FGTS”). Furthermore, Brazilian employees and employers
are required to make contributions to the National Insurance Institute (“INSS”), similar to the United States Social Security
Administration. Our collections to the National Insurance Institute amount to 34.8% to 39.8% of the payrolls, out of which 8% to 11% (limited
to R$7,087.22 of individual salary) corresponds to contributions by the employees deducted from salaries and 26.8% is the fixed part we
pay. Our contribution of 26.8% includes mandatory contribution to the Public Insurance for Labor Accidents and Diseases (SAT). According
to Decree Law 6957/2009 such portion, which varies from 1% to 3% of payroll, should be multiplied by another factor (FAP) from 0.5 to
2 in order to reduce or increase our burden to reflect statistics of occupational accidents and diseases in our business.
All of our employees in Brazil, excluding the chief executive officer, some directors
(VPs) and some IT providers are represented by a labor union and the employees’ mandatory contributions to their union are paid
by us. The law no. 13.467/2017, which entered into force on November 11, 2017, made the labor union contribution optional (i.e., discounted
only upon the employees’ consent).
Argentina
Our employees in Argentina are subject to Argentine labor laws and regulations and other
special practices and employment customs. The laws and regulations in Argentina control all aspects of labor relations and designate a
general Employment Contract with which all employees and employers must comply. This general Employment Contract adopts by reference the
provisions of the Labor Law which principally concerns matters such as paid annual vacation, paid sick days, the length of the workday,
and payment for overtime and severance pay.
Argentine law generally requires severance pay equal to one month per year of service
upon the termination of employment without a justified cause.
Argentine employers are also required to contribute for the following items: (a) Pension
funds 20.70 % (b) health insurance for employees 6% (c) occupational accident insurance 2.03% for January to February 2024 and 1,72% from
March to December 2024; and (d) Retirement fund insurance 2.5% (only this item is for Union Employees). All the rates should be applied
on the gross salary.
Our employees in Argentina, excluding the chief executive officer and several other
employees, are members of a labor union and the employee member fees are paid by them.
United States
We have no collective bargaining agreements with any of our employees in the United
States and none of our employees are members of a union.
Mexico
The hiring of employees in Mexico is subject to the regulations
of the Federal Labor Law, the Social Security Law, the Infonavit Law, the Income Tax Law, Afore, and Infonacot In these laws both workers
and employers have obligations and rights; the percentage corresponding to the employer is 40% in Payroll and Employee Tax depending on
their level of income. The working relationship between employer and employee is regulated by the Individual work contract In Mexico we
have several modalities of types of Labor Contract, according to the permanence and type of contract, example: Contract for a Determined
Time, Permanent Contract, and Contract for Determined Work. In these Contracts the conditions of the work are specified. Within our company
we also have working relationships through outsourcing, where our employees have the same rights and obligations and adhere to the same
internal and legal guidelines. Contract terminations without cause by the employer require the payment of 3 months' salary as a concept
of damages.
Ecuador
Our employees in Ecuador are subject by the Ecuadorian Labor Code.
The Labor Code provides for a 40-hour work week, 15 calendar days of annual paid vacation, restrictions and sanctions for those who employ
child labor, general protection of worker health and safety, minimum wages and bonuses, maternity and paternity leave, and employer-provided
benefits. The 2008 Constitution bans child labor, requires hiring workers with disabilities, and unpaid internships are not permitted
in Ecuador. The law also mandates that employees’ thirteenth and fourteenth month bonuses, which are required by law, be paid in
instalments throughout the year instead of in lump sums. Employees have the option to opt out of this change and continue to receive the
payments in lump sums. The law eliminates fixed-term employee contracts and replaced them with indefinite contracts, which shortens the
allowable trial period for employees to 90 days. The Law for Labor Justice and Recognition of Work in the Home, which included several
changes related to labor and social security, took effect in April 2015. Workers in the private sector have the constitutional right to
form trade unions and local law allows for unionization of any company with more than 30 employees. Private employers are required to
engage in collective bargaining with recognized unions. The Labor Code provides for resolution of union´s conflicts through
a tripartite arbitration and conciliation board process. The Code also prohibits discrimination against union members and requires that
employers provide space for union activities.
45
Colombia
Our employees in Colombia are subject to Colombian labor laws and regulations. All employees
have an indefinite term employment contract and the law determines a minimum monthly salary (SMM), which is increased annually by the
government and used to calculate labor obligations. 44 hours are the maximum hours for a week. All employees are affiliated with the Social
Security System (Health, Pension and Occupational Risks), a percentage is paid by the company and the other by the employee, the calculation
depends on the salary. The law determines additional benefits called social benefits payable by the company: Holidays: 15 working days
for each year worked; Bonus premium corresponds to the payment of 15 days of salary per semester worked or fraction; Unemployment corresponds
to the payment of 30 days of salary per year worked or fraction; Unemployment interest corresponds to 12% of severance pay; Employees
who earn less than 2 SMM must be given 3 times a year clothing and footwear or equivalent in bonuses. Termination of employment relationship
by the company without a justified reason, is coupled with compensation to the employee. Additionally, for every 20 employees, the company
must hire an apprentice who will receive financial support from 1 SMM, and who will be employed for a period of 6 months. Currently the
company doesn't have any unionized employee. For year 2025, Income Tax remains 35%, as a result of tax reform approved by Colombia congress
on 2021 (2021 income tax rate was 31%).
Chile
Our employees in Chile are subject to Chilean labour laws and regulations. All employees
have an indefinite-term employment contract. As of April 26, 2026, 42 hours are the maximum hours per week. All employees are affiliated
with the Social Security System (Health, Pension, Unemployment Insurance and Labor Protection), a percentage is paid by the company and
the other by the employee, the calculation depends on the salary. The law determines additional benefits called social benefits paid by
the company: Vacations: 15 working days for each year worked; Progressive vacations are granted when the employee has 10 years of work,
3 of them in the current job, granting 1 additional day; Unemployment insurance is a sum of money that is granted to the worker who has
lost his job, for reasons beyond his control, with a maximum limit of 360 days. The termination of the employment relationship by the
company without justified cause is accompanied by compensation to the worker. Currently the company does not have any unionized employees.
For the year 2025, the Income Tax was 25% for SMEs and 27% for big companies.
46
| E. |
SHARE OWNERSHIP |
The following table sets forth share ownership information for our directors and executive
officers listed in Item 6.A above as of April 19, 2026. All of the information with respect to beneficial ownership by our directors and
executive officers has been furnished by the respective director or executive officer, as the case may be.
|
Name of Director/Officer (1) |
Number of Ordinary Shares Beneficially Owned (2) |
Percentage of
beneficial ownership (3) |
||||||
|
Izzy Sheratzky (4)
|
3,867,317 |
19.52 |
||||||
|
Professor Yehuda Kahane (5)
|
1,316,137 |
6.615 |
||||||
|
Zeev Koren |
- |
- |
||||||
|
Efraim Sheratzky (6)
|
131,442 |
0.73 |
||||||
|
Yigal Shani (7)
|
211,442 |
1.12 |
||||||
|
Eyal Sheratzky |
- |
- |
||||||
|
Nir Sheratzky |
- |
- |
||||||
|
Gil Sheratzky |
- |
- |
||||||
|
Yoav Kahane |
- |
- |
||||||
|
Tal Sheratzky-Jaffa |
2,403 |
* |
0.01 |
* | ||||
|
Israel Baron |
- |
- |
||||||
|
Riki Segev |
- |
- |
||||||
|
Ami Saranga |
- |
- |
||||||
|
Eli Kamer |
- |
- |
||||||
|
Guy Aharonov |
- |
- |
||||||
|
Udi Mizrahi |
- |
- |
||||||
|
Shahar Sheratzky |
- |
- |
||||||
|
Matan Omer |
- |
- |
||||||
* Own less than one percent of our shares.
| (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 Exchange Act) 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 2, 2026, less 3,581,851 treasury shares held by
us. |
| (4) |
Shares beneficially owned include: (a) 3,865,952 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 those 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) 1,297,091 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, following sale of 135,000 shares attributed to him during year
2025. 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: 131,4422 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,following sale
of 75,000 shares attributed to him during year 2025. 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) 5,000 shares directly owned by Yigal Shani, (b) 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. |
| F. |
DISCLOSURE OF REGISTRANT’S ACTION TO RECOVER ERRONEOUSLY AWARDED COMPENSATION. |
Not applicable.
47
| ITEM 7. |
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
| A. |
MAJOR SHAREHOLDERS |
The following table shows the number of our ordinary shares beneficially owned by (a)
the shareholders known to us as of April 19, 2026 to beneficially own more than 5% of our outstanding ordinary shares and (b) all of our
directors and executive officers as a group.
Please also see Item 6.E above. There are no shares underlying
options or warrants held by such persons. Beneficial ownership is determined in accordance with the rules of the SEC and includes
voting or investment power with respect to ordinary shares. The shareholders listed below do not have any different or special voting
rights from any other shareholders of our company. Except where otherwise indicated, we believe, based on information furnished by the
owners, that the beneficial owners of the ordinary shares listed below have sole investment and voting power with respect to such shares.
|
Shareholder |
Number of
Ordinary
Shares
Beneficially
Owned |
% Voting |
||||||
|
Moked Ituran Ltd. (1)
|
3,865,952 |
19.52 |
||||||
|
All directors and executive officers as a group (2).
|
3,915,227 |
19.68
|
||||||
|
FMR LLC. (3)
|
1,177,886 |
5.92 |
||||||
|
Treasury shares |
3,666,789 |
|||||||
(1) Moked’s
articles of association provides that each of Moked’s shareholders shall have the right to direct Moked to dispose of such number
of our shares corresponding to his or her relative shareholdings in Moked. In addition, ownership of all shares held by Moked are attributed
to Mr. Izzy Sheratzky by virtue of his holdings in Moked. Please see Item 6.E above for the ownership of our shares attributed to Moked’s
shareholders. For further information please see Item 6.A – Directors and Senior Management under the caption “Shareholders
Agreement and Articles of Association of Moked Ituran Ltd” above.
(2) Includes shares
held by Moked Ituran Ltd., which ownership are attributed to some of these directors and executive officers.
(4) Fidelity
Management & Research Co. LLC.The information presented herein is based on Investing.com public information.
As of March 2026, we had a total of approximately3760 shareholders (including the Depository
Trust Company) of record in the United States with registered addresses in the United States. The number of record holders in the United
States is not representative of the number of beneficial holders nor is it representative of where such beneficial holders are resident
since many of these ordinary shares were held of record by brokers or other nominees.
| B. |
RELATED PARTY TRANSACTIONS |
Transactions with our directors and principal officers
We have entered into indemnification agreements with each of our directors and officers
and the officers and directors of our subsidiaries providing them with indemnification for liabilities or expenses incurred as a result
of acts performed by them in their capacity as our directors and officers. Our general meeting of shareholders approved on January 28,
2014 an amendment to these indemnification agreements and the grant thereof to office holders, including controlling persons and their
relatives, who serve at our company and its subsidiaries from time to time. For the full indemnification agreements as so approved, please
see Exhibit 4.5 under Item 19 – Exhibits.
Our general meeting of shareholders has also approved on January 28, 2014 the procurement
from time to time of directors’ and officers’ insurance policies covering the liability of office holders, including controlling
persons and their relatives, who serve at the Company and its subsidiaries from time to time, under the following terms: (a) the principal
terms of the D&O insurance policies shall not materially deviate from the terms of our current directors’ and officers’
insurance policy; or (b) to the extent that the Company shall desire to procure a D&O insurance policy, which a material term thereof
adversely deviates ( from our company’s point of view) from the terms of the current policy, then our company’s board of the
directors shall confirm that, notwithstanding such deviation, our procurement of such policy is compatible with market terms and does
not materially affect our profitability, assets or liabilities..
48
In February 2014, following the approval of our general meeting of shareholders on January
28, 2014, we entered into service agreements, setting forth the terms of service of our President and Co-Chief Executive Officers in compliance
with our 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 our compensation policy for officer holders. The principal terms of these agreements are as
follows:
Mr. Izzy Sheratzky shall provide his services
as an independent contractor through A. Sheratzky Holdings Ltd., which shall be entitled to a monthly payment of NIS258,000 (or $81,000)
plus VAT, linked to the consumer price index for December 2013. At the request of the service provider, part of the fixed monthly pay
may be granted through benefits, such as the provision of a company car for the use o/f Mr. Sheratzky and the payment of its maintenance
costs and the cost of tax resulting there from the fixed monthly pay shall also include Mr. Sheratzky’s entitlement for a 25 days’
vacation and sick days as provided by law. The service provider shall also be entitled to payment or reimbursement of expenses, including
hosting expenses, subsistence allowance abroad and participation in work-related home telephone expenses. The service provider shall be
entitled to Target-based Cash Incentives and Excess Return Cash Incentives as detailed below. The agreement shall be in force for a period
of 3 years and may be terminated upon 180 days’ advance notice of termination; however, the company may terminate the agreement
without an advance notice and without compensation if the following shall occur: (a) Mr. Sheratzky is convicted of a criminal offense
involving moral turpitude; (b) a final court ruling (without the possibility of appeal) determines that Mr. Sheratzky has breached his
fiduciary duty towards the company; (c) a final court ruling (without the possibility of appeal) determines that Mr. Sheratzky has materially
breached the agreement through the unauthorized disclosure of company’s secrets or competition with the company. The aggregate amounts
paid to A. Sheratzky Holdings according this new service agreement in 2023. 2024 and 2025 were approximately, $2,155,000 $2,734,000
and $3,196,000 respectively (the numbers include 18% value added tax).
Mr. Eyal Sheratzky shall provide his services
as an independent contractor through ORAS Capital Ltd. which shall be entitled to a monthly payment of NIS 201,000 (or $63,000) plus VAT,
linked to the consumer price index for December 2013. At the request of the service provider, part of the fixed monthly pay may be granted
through benefits, such as the provision of a company car for the use of Mr. Sheratzky and the payment of its maintenance costs and the
cost of tax resulting therefrom. The fixed monthly pay shall also include Mr. Sheratzky’s entitlement for a 25 days’ vacation
and sick days as provided by law. The service provider shall also be entitled to payment or reimbursement of expenses, including hosting
expenses and subsistence allowance abroad. The service provider shall be entitled to Target-based Cash Incentives and Excess Return Cash
Incentives as detailed below. The agreement shall be in force for a period of 3 years and may be terminated upon 180 days’ advance
notice of termination; however, the company may terminate the agreement without an advance notice and without compensation if the following
shall occur: (a) Mr. Sheratzky is convicted of a criminal offense involving moral turpitude; (b) a final court ruling (without the possibility
of appeal) determines that Mr. Sheratzky has breached his fiduciary duty towards the company; (c) a final court ruling (without the possibility
of appeal) determines that Mr. Sheratzky has materially breached the agreement through the unauthorized disclosure of company’s
secrets or competition with the company. The aggregate amount paid to ORAS Capital Ltd in 2023,2024 and 2025 was approximately,
$1,727,000, $2,188,000 and $2,500,000 respectively (the numbers include value added tax).
Mr. Nir Sheratzky shall provide his services
as an independent contractor through Galnir Management and Investments Ltd., which shall be entitled to a monthly payment of NIS 201,000
(or $63,000) plus VAT, linked to the consumer price index for December 2013. At the request of the service provider, part of the fixed
monthly pay may be granted through benefits, such as the provision of a company car for the use of Mr. Sheratzky and the payment of its
maintenance costs and the cost of tax resulting therefrom. The fixed monthly pay shall also include Mr. Sheratzky’s entitlement
for a 25 days’ vacation and sick days as provided by law. The service provider shall also be entitled to payment or reimbursement
of expenses, including hosting expenses and subsistence allowance abroad. The service provider shall be entitled to Target-based Cash
Incentives and Excess Return Cash Incentives as detailed below. The agreement shall be in force for a period of 3 years and may be terminated
upon 180 days’ advance notice of termination; however, the company may terminate the agreement without an advance notice and without
compensation if the following shall occur: (a) Mr. Sheratzky is convicted of a criminal offense involving moral turpitude; (b) a final
court ruling (without the possibility of appeal) determines that Mr. Sheratzky has breached his fiduciary duty towards the company; (c)
a final court ruling (without the possibility of appeal) determines that Mr. Sheratzky has materially breached the agreement through the
unauthorized disclosure of company’s secrets or competition with the company. The aggregate amount paid to Galnir Management and
Investments Ltd, in, 2023, 2024 and 2025 was approximately $1,727,000, $2,137,000and $2,456,000 respectively (the numbers include value
added tax).
49
Mr. Gil Sheratzky shall provide his services
as an independent contractor through ZERO-TO-ONE S.B.L. INVESTMENTS LTD., which shall be entitled to a monthly payment of NIS 143,000
(or 45,000) plus VAT, linked to the consumer price index for December 2013. At the request of the service provider, part of the fixed
monthly pay may be granted through benefits, such as the provision of a company car for the use of Mr. Sheratzky and the payment of its
maintenance costs and the cost of tax resulting therefrom. The fixed monthly pay shall also include Mr. Sheratzky’s entitlement
for a 25 days’ vacation and sick days as provided by law. The service provider shall also be entitled to payment or reimbursement
of expenses, including hosting expenses and subsistence allowance abroad. The service provider shall be entitled to Target-based Cash
Incentives and Excess Return Cash Incentives as detailed below. The agreement shall be in force for a period of 3 years and may be terminated
upon two months’ advance notice of termination; however, E-Com may terminate the agreement without an advance notice and without
compensation if the following shall occur: (a) Mr. Sheratzky is convicted of a criminal offense involving moral turpitude; (b) a final
court ruling (without the possibility of appeal) determines that Mr. Sheratzky has breached his fiduciary duty towards E-Com; (c) a final
court ruling (without the possibility of appeal) determines that Mr. Sheratzky has materially breached the agreement through the unauthorized
disclosure of E-Com’ and/or company’s secrets or competition with E-Com and/or the company. The aggregate amount paid to ZERO-TO-ONE
S.B.L. INVESTMENTS LTD, in 2023, 2024 and 2025 according to this new service agreement, were approximately $1,227,000, $1,238,000and $1,793,000
Each of the above agreements also provides that the executives may request to provide
their services to the company as an employee, 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 cost to us of the provision of the services as set forth in the service agreements.
The aforementioned agreements were extended on April 20, 2020 (commencing as of February
1, 2020) subject to the approval of our next general shareholders meeting, for additional three years, with accordance to the provisions
of Israeli Company Law and Israeli Companies Regulations (Relaxations in Transactions with Interested Parties) 5760-2000, and were approved
accordingly by our compensation committee and our board of directors. Our shareholders meeting approved the aforementioned agreements
for an additional period of three years on December 10, 2020.
All agreements mentioned above are in compliance with our amended compensation policy
as approved on November 7,2016 and re approved on December 12, 2019, thereafter on December 14, 2022, and recently on December 16,2025
by the Company’s general meeting of shareholders, which sets forth the principles of our office holders’ compensation.
The terms of the Cash Incentives applicable to each of Messrs. Izzy Sheratzky, Eyal
Sheratzky, Nir Sheratzky and Gil Sheratzky (the “Executive Office 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 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% |
“Minimum Threshold” means, with
respect to a particular calendar year, a Minimum Company’s Return on Equity (as defined below) of 15%, and a minimum company’s
Profit before Tax of $24 million.
“Return on Equity” means, with
respect to a particular calendar year, the ratio between the net income for such year and the average of the shareholders’ equity
at the beginning of such calendar year and at the end of each calendar quarter of such year; calculated in accordance with the company’s
audited or reviewed consolidated financial statements for such year, as the case may be, after taking into account Executive Officers’
compensation, but excluding adjustments of the value of assets and obligations to their fair value in accordance with accounting standards
50
“Profit-Before-Tax” means, with respect to a particular calendar year, the
company’s profit before tax for such year in accordance with the company’s audited consolidated financial statements for such
year, after taking into account Executive Officers’ compensation, but excluding adjustments of the value of assets and obligations
to their fair value in accordance with accounting standards.
“Executive Officers” means Office Holders of the Company (“Nosei Misra”,
as such term is defined in the Companies Law) who serve as the company’s President, Co-CEOs and other executives who are deemed
Office Holders of the company, as well as Office Holders of the company’s Israeli wholly owned subsidiaries, provided they report
to the CEO.
“Cost of Pay” means, with respect to independent contractors – their
invoice amount plus company car and related expenses; and with respect to employees - their base pay (i.e. fixed gross amount payable
to the employee in return for his services, excluding expenses, benefits and bonuses) plus 40% thereof.
| • |
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 instalments 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 instalment) and during the second calendar year (for the second instalment) 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. |
“Company’s Stock Yield” means
the percentage of increase or decrease of the company’s stock price on Nasdaq over an Examined Period (as defined below), as adjusted
for dividend distribution, calculated based on the average adjusted closing price of the company’s shares on the Nasdaq during the
5 business days prior to and the 5 business days after the commencement and end of such Examined Period.
“Russell 2000 Index’s Yield”
means the percentage of increase or decrease of the Russell 2000 Index over an Examined Period, calculated based on the average Russell
2000 Index closing quotes during the 5 business days prior to and the 5 business days after the commencement and end of such Examined
Period.
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 – since the date of its approval (an “Examined
Period”), as compared to the Russell 2000 Index’s Yield over such Examined Period; and to the extent that the Company’s
Stock Yield exceeds the Russell 2000 Index’s Yield for such period, each of the Executive Office Holders shall receive an amount
equal to 50% of his monthly Cost of Pay for each 1% of excess return (in percentage points’ terms), or a relative amount in the
event of a partial excess return. For the avoidance of doubt, in the event that the Company’s Stock Yield during such period is
negative, no grant shall be awarded.
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 30 days after the termination of service/employment, as the case may be. |
51
| • |
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. |
In 2025 Executive Office Holders were eligible to Target based cash incentives at the
maximum rate of (150%) as follows (which is included in the aforementioned payments according to the above new service agreements
TBC
|
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 2025: |
||||||||||||
|
|
In US$ thousands |
|||||||||||||||
|
Izzy Sheratzky |
1,326 |
(88 |
) |
76 |
1,314 |
|||||||||||
|
Eyal Sheratzky |
1,040 |
(69 |
) |
61 |
1,032 |
|||||||||||
|
Nir Sheratzky |
1,040 |
(69 |
) |
61 |
1,032 |
|||||||||||
|
Gil Sheratzky |
749 |
(50 |
) |
44 |
743 |
|||||||||||
For the full-service agreements regarding the services of our President, Co-Chief Executive
Officers and the Chief Executive Officer of E-Com, please see Exhibits 4.9-4.12(a) attached hereto.
On January 28, 2014, our general meeting of shareholders re-approved the terms of engagement
of Professor Yehuda Kahane, which were set forth in a financial services agreement, dated March 23, 1998, between our company and Professor
Kahane. Pursuant to this agreement, as amended in May 2003, we are obligated to pay Professor Kahane a monthly consulting fee of NIS 15,000,
or approximately $4,100, linked to the Israeli consumer price index as known on May 1, 2003. The term of the agreement automatically renews
every two-years; however, either party may terminate it by providing a 180-day prior notice. The aggregate amounts paid to Professor Kahane
by virtue of this agreement in each of the years, 2023, 2024 and 2025 were approximately $66,000, $68,000 and $ 75,000, respectively.
Transactions with our affiliates and associates
We purchase our GPS/GPRS equipment from our subsidiary, E.R.M Electronic Systems Limited.
In, 2023,2024 and 2025, Ituran, including its subsidiaries, mainly in Brazil, Argentina and USA, purchased GPS/GPRS equipment from E.R.M
in the sum of approximately, NIS 95.1 ($26.2 million) , NIS 86.0 million (or $23.2 million) and NIS 85.5 ($24.8 million), respectively.
52
| C. |
INTERESTS OF EXPERTS AND COUNSEL |
Not applicable.
| ITEM 8. |
FINANCIAL INFORMATION |
| A. |
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION |
For the audited financial statements and audit reports required to be contained in this
annual report, please see Item 18 below.
Material Legal Proceedings
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(including penalty and interest)
of approximately R$26.5 million ($ 4.80 million). as of December 2025 including interest and penalties. The reason Anatel demand the payment
of FUST and FUNTELL from us is the fact that in order to provide monitoring services we need to operate telecommunication equipment in
a given radio frequency. We hold a telecommunication license from Anatel (for information on our licenses see item 4B. “Information
on the company” – “Business overview” under the caption “Regulatory Environment”). The authorities
have construed that we render telecommunication services and taxes should be levied in relation to Net Revenues. Based on the legal opinion
of the subsidiary’s Brazilian legal counsel we believe that such claim is without merit, the interpretation of the legislation is
mistaken, given that we don’t render telecommunication services, but rather services of monitoring goods and persons for security
purposes and therefore the chances of our success are more likely than not. We have filed our defence against such claims. We are
currently awaiting the Lower Court or Administrative decisions on all the aforementioned FUST and FUNTELL claims.
10.B. – “Memorandum and Articles of Association” - “Our Corporate
Practices under the Israeli Companies Law” under the caption “Approval of Transactions under Israeli law”
Dividend distribution policy
For a description of our dividend policy, see Item 5.B – Liquidity and Capital
Resources above.
| B. |
SIGNIFICANT CHANGES |
Except as stated in this annual report, there are no significant changes since December
31, 2025.
| ITEM 9. |
THE OFFER AND LISTING |
| A. |
LISTING DETAILS AND MARKET PRICE INFORMATION |
Our ordinary shares have been trading on Nasdaq under the symbol “ITRN”
since September 2005.
| B. |
PLAN OF DISTRIBUTION |
Not applicable.
| C. |
MARKETS |
Our ordinary shares are quoted on the Nasdaq Global Select Market under the symbol “ITRN”.
| D. |
SELLING SHAREHOLDERS |
Not applicable.
| E. |
DILUTION |
Not applicable.
| F. |
EXPENSES OF THE ISSUE |
Not applicable.
| ITEM 10. |
ADDITIONAL INFORMATION |
| A. |
SHARE CAPITAL |
Not applicable.
| B. |
MEMORANDUM AND ARTICLES OF ASSOCIATION |
The information called for by this item
is set forth in Exhibit 2.4 to this annual report on Form 20-F and is incorporated by reference into this annual report on Form 20-F.
53
| C. |
MATERIAL CONTRACTS |
For information concerning our service contracts with our President and Co-Chief Executive
Officers, see Item 7.B – Related Party Transactions.
| D. |
EXCHANGE CONTROLS |
Ordinary shares purchased by non-residents of Israel with certain non-Israeli currencies
(including dollars) and any amounts payable upon the dissolution, liquidation or winding up of our affairs, as well as the proceeds of
any sale in Israel of our securities to an Israeli resident, may be paid in non-Israeli currencies (including US dollars) or, if paid
in NIS, may be converted into freely repatriable currencies at the rate of exchange prevailing at the time of conversion – pursuant
to the general permit issued under the Israeli Currency Control Law, 1978, provided that Israeli income tax has been paid on (or withheld
from) such payments. Because exchange rates between the NIS and the U.S. dollar fluctuate continuously, U.S. shareholders will be subject
to any such currency fluctuation during the period from when a dividend is declared through the date payment is made in U.S. dollars.
Investments outside Israel by our company no longer require specific approval from the Controller of Foreign Currency at the Bank of Israel.
| E. |
TAXATION |
The following describes certain income tax issues relating to us and also certain income
tax consequences arising from the purchase, ownership and disposition of our ordinary shares. This
discussion is for general information only and is not intended, and should not be construed, as legal or professional tax advice and does
not cover all possible tax considerations. To the extent that the discussion is based on legislation yet to be judicially or administratively
interpreted, there can be no assurance that the views expressed herein will accord with any such interpretation in the future. Accordingly,
holders of our ordinary shares should consult their own tax advisor as to the particular tax consequences arising from your purchase,
ownership and disposition of ordinary shares, including the effects of applicable Israeli, United States and other laws and possible changes
in the tax laws.
The following discussion represents a summary of the material United States & Israeli
tax laws affecting us and our shareholders.
54
Certain Material United
States Tax Considerations
The following discussion is a description of certain material United States, or US,
federal income tax considerations applicable to the acquisition, ownership and disposition of our ordinary shares by US Holders who hold
such ordinary shares as “capital assets”. As used in this section, the term “US Holder” means a beneficial owner
of an ordinary share who is:
| ■ |
an individual citizen or resident of the United States; |
| ■ |
a corporation (or other entity taxable as a corporation for US federal income tax purposes) organized in or under the laws of the
United States or of any state of the United States or the District of Columbia; |
| ■ |
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. |
The term “Non-US Holder” means a beneficial owner of an ordinary share who
is not a US Holder. The tax consequences to a Non-US Holder may differ substantially from the tax consequences to a US Holder. This discussion
does not address any aspects of US federal income tax which may be relevant to a Non-US Holder. Accordingly, Non-US Holders are strongly
urged to consult with their own tax advisors.
This description is based on provisions of the United States Internal Revenue Code of
1986, as amended, existing, proposed and temporary US Treasury regulations ,administrative and judicial interpretations thereof, and the
US-Israel Tax Treaty each as available and in effect as of the date of this report. These sources may change, possibly with retroactive
effect, and are open to differing interpretations. This description does not discuss all aspects of US federal income taxation that may
be applicable to investors in light of their particular circumstances or to investors who are subject to special treatment under US federal
income tax law, including:
| ■ |
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. |
This description also does not consider the US federal gift or estate tax or alternative
minimum tax consequences of the acquisition, ownership and disposition of our ordinary shares.
If a partnership (or any other entity treated as a partnership for US federal income
tax purposes) holds our ordinary shares, the tax treatment of a partner in such partnership will generally depend on the status of the
partner and the activities of the partnership. The tax consequences to such a partner or entity are not considered in this summary and
such a partner should consult its tax advisor as to its tax consequences.
We urge our shareholders to consult with your own tax advisor regarding
the tax consequences of acquiring, owning or disposing of our ordinary shares, including the effects of US federal, state, local and foreign
and other tax laws. This summary does not constitute, and should not be construed as, legal or tax advice to holders of our shares.
55
Medicare Tax
Beginning January 1, 2013, certain individuals, estates and trusts,
which have income above the statutory threshold amounts, generally will be subject to a 3.8% Medicare tax on their investment income and
gain, with limited exceptions. US Holders should consult their own tax advisors concerning Medicare tax consequences, if any, of owning
or disposing of our ordinary shares.
Distribution Paid on the Ordinary Shares
Subject to the discussion below under “Passive Foreign Investment Company Considerations”,
US Holders, f, will generally be required to include in their gross income as ordinary dividend income (unless qualifies as “qualified
dividend income”) the amount of any distributions made to them in cash or property (other than certain distributions, if any, of
our ordinary shares distributed pro rata to all our shareholders), with respect to their ordinary shares, before reduction for any Israeli
taxes withheld (without regard to whether any portion of such tax may be refunded to them by the Israeli tax authorities), to the extent
that those distributions are paid out of our current or accumulated earnings and profits as determined for US federal income tax purposes.
Subject to the discussion below under “Passive Foreign Investment Company Considerations”, distributions in excess of our
current and accumulated earnings and profits as determined under US federal income tax principles will be treated first as a non-taxable
return of capital, reducing a US Holder's tax basis for the ordinary shares to the extent thereof, and thereafter as either long-term
or short-term capital gain depending upon whether the US Holders has held our ordinary shares for more than one year as of the time such
distribution is received. We do not maintain calculations of our earnings and profits under US federal income tax principles. Therefore,
US Holders should expect that the entire amount of any distribution generally will be reported as dividend income.
For a US Holder, if we pay a dividend in NIS, any such dividend, including the amount
of any Israeli taxes withheld, will be includible in such US Holder’s income in a US dollar amount calculated by reference to the
currency exchange rate in effect on the day the distribution is includible in such U.S. Holder's income, regardless of whether the NIS
are converted into US dollars. Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend
is includible in such US Holder’s income to the date that payment is converted into US dollars generally will be treated as ordinary
income or loss.
A non-corporate US Holder’s “qualified dividend income” currently
is subject to tax at reduced rates not exceeding 23.8% (including, if applicable, Medicare tax at a rate of 3.8%). For purposes of determining
whether a non-corporate US Holders will have “qualified dividend income”, “qualified dividend income” generally
includes dividends paid by a foreign corporation if either:
| ■ |
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. |
In addition, under current law, a non-corporate US Holder must generally hold his ordinary
shares for more than 60 days during the 121-day period beginning 60 days prior to the ex-dividend date in order for the dividend to qualify
as “qualified dividend income”.
Dividends paid by a foreign corporation will not be treated as “qualified dividend
income”, however, if such corporation is treated, for the tax year in which the dividend is paid or the preceding tax year, as a
“passive foreign investment company” for US federal income tax purposes. We do not believe that we will be classified as a
“passive foreign investment company” for US federal income tax purposes for our current taxable year. However, see the discussion
under “Passive Foreign Investment Company Considerations” below.
Subject to certain significant conditions and limitations, including potential limitations
under the US-Israel Tax Treaty, US Holders may be entitled to a credit against their US federal income tax liability or a deduction against
US federal taxable income in an amount equal to the non-refundable Israeli tax withheld on distributions on our ordinary shares. The election
to deduct, rather than credit, foreign taxes, is made on a year-by-year basis and applies to all foreign taxes paid by a US Holder or
withheld from a US Holder that year. Distributions paid on our ordinary shares will generally be treated as passive income that is a foreign
source for US foreign tax credit purposes. As a result of recent changes to the US foreign tax credit rules, a withholding tax may need
to satisfy certain additional requirements in order to be considered a creditable tax for a US Holder. We have not determined whether
these requirements have been met and, accordingly, no assurance can be given that any withholding tax on dividends paid by us will be
creditable. US Holders should consult their own tax advisors to determine whether and to what extent they would be entitled to such credit.
56
Disposition of Ordinary Shares
Upon the sale or other disposition of ordinary shares, subject to the discussion below
under “Passive Foreign Investment Company Considerations”, if a holder of our shares is a US Holder, such shareholder generally
will recognize capital gain or loss equal to the difference between the amount realized on the disposition and such shareholder’s
adjusted tax basis in the ordinary shares, which is usually the cost of such shares, in dollars. US Holders should consult their own advisors
with respect to the tax consequences of the receipt of a currency other than dollars upon such sale or other disposition.
Gain or loss upon the disposition of the ordinary shares will be treated as long-term
if, at the time of the disposition, the ordinary shares were held for more than one year. Long-term capital gains realized by non-corporate
US Holders generally are subject to a lower maximum marginal US federal income tax rate than the maximum marginal US federal income tax
rate applicable to ordinary income, other than qualified dividend income, as defined above, generally, not exceeding 23.8% (including,
if applicable, Medicare tax at a rate of 3.8%). The deductibility of capital losses by a US Holder is subject to limitations. In general,
any gain or loss recognized by a US Holder on the sale or other disposition of ordinary shares will be US source income or loss for US
foreign tax credit purposes. US Holders should consult their own tax advisors concerning the source of income for US foreign tax credit
purposes and the effect of the US-Israel Tax Treaty on the source of income.
Passive Foreign Investment Company Considerations
Special US federal income tax rules apply to US Holders owning shares of a “passive
foreign investment company”, or a PFIC, for US federal income tax purposes. A non-US corporation will be considered a PFIC for any
taxable year in which, after applying look-through rules, either
| ■ |
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 rateably 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. |
We believe that we were not a PFIC for US federal income tax purposes for our 2025 taxable
year and we will not be classified as a PFIC for our current taxable year , In addition, we anticipate that we will not become a PFIC
in any future taxable year based on our financial statements, our current expectations regarding the value and nature of our assets, and
the sources and nature of our income. This conclusion, however, is a factual determination that must be made annually based on income
and assets for the entire taxable year and thus may be subject to change. It is not possible to determine whether we will be a PFIC for
the current taxable year until after the close of the year and our status in future years depends on our income, assets and activities
in those years. In addition, because the market price of our ordinary shares is likely to fluctuate and the market price of the shares
of technology companies has been especially volatile, and because that market price may affect the determination of whether we will be
considered a PFIC, we cannot assure any US Holder that we will not be considered a PFIC for any taxable year.
If we were a PFIC for any taxable year during which a US Holder held our ordinary shares,
our shareholders could avoid certain tax consequences referred to above by making an election to treat us as a qualified electing fund
or by electing to mark the ordinary shares to market. A US Holder may make a qualified electing fund election only if we furnish the US
Holder with certain tax information and we do not presently intend to prepare or provide this information. Alternatively, a US Holder
of PFIC stock that is publicly traded may elect to mark the stock to market annually and recognize as ordinary income or loss each year
an amount equal to the difference as of the close of the taxable year between the fair market value of the PFIC stock and the US Holder’s
adjusted tax basis in the PFIC stock. Losses would be allowed only to the extent of net mark-to-market gain previously included by the
US Holder under the election for prior taxable years. This election is available for as long as our ordinary shares constitute “marketable
stock,” which includes stock that is “regularly traded” on a “qualified exchange or other market.” We believe
that the Nasdaq Global Select Market will constitute a qualified exchange or other market for this purpose. However, no assurances can
be provided that our ordinary shares will continue to trade on the Nasdaq Global Select Market or that the shares will be regularly traded
for this purpose.
57
If a US Holder holds ordinary shares in any year in which we are treated as a PFIC,
such US Holder will be required to file IRS form 8621 and may be subject to certain other information reporting requirements, Failure
to file IRS form 8621 for each applicable taxable year may result in substantial penalties and the statute of limitations on the assessment
and collection of US federal income taxes of such US Holder for the related taxable year may not close until three years after the date
on which the required information is filed.
The rules applicable to owning shares of a PFIC are complex, and our shareholders should
consult with their own tax advisor regarding the tax consequences that would arise if we were treated as a PFIC.
Information Reporting and Back-up Withholding
Dividend payments with respect to ordinary shares and proceeds from the sale or disposition
of ordinary shares made within the United States or by a US payor or US middleman may be subject to information reporting to the Internal
Revenue Service and possible US backup withholding. Certain exempt recipients (such as corporations) are not subject to these information
reporting requirements. Backup withholding also will not apply to a US Holder who furnishes a correct taxpayer identification number and
makes any other required certification or otherwise is exempt from US backup withholding requirements. US Holders who are required to
establish their exempt status must provide such certification on Internal Revenue Service Form W-9. US Holders should consult their tax
advisors regarding the application of the US information reporting and backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld under the backup withholding
rules may be credited against a US Holder’s US federal income tax liability and a US Holder may obtain a refund of any excess amounts
withheld by filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information in a timely
manner.
Certain US Holders with interests in "specified foreign financial assets" (including,
among other assets, our ordinary shares, unless such ordinary shares are held on such US Holder's behalf through a financial institution)
may be required to file an information report with IRS if the aggregate value of all such assets exceeds $ 50,000 on the last day of the
taxable year or $ 75,000 at any time during the taxable year (or such higher dollar amount as may be prescribed by applicable IRS guidance).
You should consult your own tax advisor as to the possible obligation to file such information report.
Tax Reporting
Certain US Holders will be required to file
an IRS Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation) to report a transfer of cash or other property to us
and information relating to US Holder and us. Substantial penalties may be imposed on a US Holder that fails to comply with these reporting
requirements. Each US Holder is urged to consult with its own tax advisor regarding these reporting obligations.
The above description is not intended to constitute a complete analysis
of all tax consequences relating to acquisition, ownership and disposition of our ordinary shares. Our shareholders are urged to consult
their own tax advisor concerning the tax consequences of their particular situation.
58
Israeli Tax Considerations-
The following is a summary of the current material Israeli tax laws applicable to companies
in Israel with special reference to its effect on us. This section also contains a discussion of certain Israeli government programs from
which we may benefit and some Israeli tax consequences to persons acquiring ordinary shares. This summary does not discuss all the acts
of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types
of investors subject to special treatment under Israeli law. Examples of this kind of investor include residents of Israel, traders in
securities or persons that own, directly or indirectly, 10% or more of our outstanding capital, all of whom are subject to special tax
regimes not covered in this discussion. Some parts of this discussion are based on new tax legislation that has not been subject to judicial
or administrative interpretation. Accordingly, we cannot assure you that the views expressed in the discussion will be accepted by the
tax authorities in question. The discussion is not intended and should not be construed as legal or professional tax advice and does not
cover all possible tax considerations.
The discussion below should not be construed as legal or professional tax advice and
does not cover all possible tax considerations. Potential investors are urged to consult their own tax advisors as to the Israeli or other
tax consequences of the purchase, ownership and disposition of our ordinary shares, including in particular, the effect of any foreign,
state or local taxes.
General Corporate Tax Structure in Israel
Israeli companies are generally subject to corporate tax on their taxable income. As
of 2018 and thereafter corporate tax rate is 23%. Capital gains derived after January 1, 2010 are subject to a corporate tax rate imposed
in the sale year.
Tax Benefits Under the Law for the Encouragement of Capital Investments, 1959, as amended
Under the Israeli law, Israeli subsidiary of the company is entitled to various tax
benefits by virtue of the “Preferred Enterprise” status that was granted to her production under the “Investment Law”.
There can be no assurance that this Israeli subsidiary will continue to qualify as “Preferred Enterprises” in the future or
that the benefits will be granted in the future.
Reform of the Investments Law under the 2010 and 2013 Amendments
On December 29, 2010, the Israeli parliament approved an amendment to the Investments
Law, effective as of January 1, 2011, which introduces a new status of “Preferred Company”
and “Preferred Enterprise”. The amendment allows enterprises meeting certain required
criteria to enjoy grants as well as tax benefits. The amendment also introduces certain changes to the map of geographic development areas
for purposes of the Investments Law, which will take effect in future years. The amendment generally abolishes the previous tax benefit
routes that were afforded under the Investment Law, specifically the tax-exemption periods previously allowed, and introduces new tax
benefits for industrial enterprises meeting the criteria of the law, which include among others the following:
On August 5, 2013 the Israeli Parliament amended the Investments Law, by which, inter
alia, it cancelled the scheduled progressive reduction in the corporate tax rate for Preferred Enterprises and set it at 16% for enterprises
located elsewhere as of January 1, 2014.
On December 2016 the Israeli Parliament amended the Investments Law, by which, inter
alia, it reduced for Preferred Enterprises which is located in areas other than “Development Zone A” and set it at 16% and
7.5% for enterprises located in "Development Zone A" as of January 1, 2017.
| • |
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. |
A Preferred Company (as defined in the Investments Law) may generally elect to apply
the provisions of the amendment to preferred income produced or generated by it commencing from January 1, 2011. The amendment provides
various transitional provisions which allow, under certain circumstances, to apply the new regime to investment programs previously approved
or elected under the Investments Law in its previous form, or to continue existing investment programs under the provisions of the Investment
Law in its previous form for a certain period of time.
As of December 31, 2025, only 1 of our Israeli subsidiaries is entitled to a “Preferred
Company” status pursuant to the Investments Law.(see Note 15 B.2 to the Financial Statements).
59
Tax Benefits under the 2016 Amendment
In December 2016 new legislation amended the Investment 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 conditions,
is part of a consolidated group with consolidated revenues of less than NIS 10 billion. A Technological Preferred Enterprise which is
located in areas other than Development Zone A will be subject to tax at a rate of 12% on profits derived from intellectual property,
and a Technological Preferred Enterprise in Development Zone A will be subject to tax at a rate of 7.5%. Income
not eligible for Technological Preferred Enterprise is taxed at the regular corporate tax rate or at the preferred tax rate as mentioned
above, as the case may be.
As of December 31, 2025, 2 of our Israeli subsidiaries are entitled to a “Technological
Preferred Enterprise” status pursuant to the Investments Law.
Taxation of Non-Israeli Subsidiaries
Non-Israeli subsidiaries are generally taxed based upon tax laws applicable in their
countries of residence. In accordance with the provisions of Israeli-controlled foreign corporation rules, certain income of a non-Israeli
subsidiary, if the subsidiary’s primary source of income is passive income (such as interest, dividends, royalties, rental income
or income from capital gains), may be deemed distributed as a dividend to the Israeli parent company and consequently is subject to Israeli
taxation. An Israeli company that is subject to Israeli taxes on such deemed dividend income of its non-Israeli subsidiaries may generally
receive a credit for non-Israeli income taxes paid by the subsidiary in its country of residence or are to be withheld from the actual
dividend distributions.
On December 23, 2013 the Israeli Parliament amended the Income Tax Ordinance, with profound
changes to the tax treatment of CFC, mainly with regard to the following:
| • |
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. |
Taxation of our shareholders
Capital Gains Taxes Applicable to Israeli Resident Shareholders
The income tax rate applicable to Real Capital Gain derived by an Israeli individual
from the sale of shares which had been purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However,
if such shareholder is considered a “Substantial Shareholder” (as defined below) at the time of sale or at any time during
the preceding 12-month period, such gain will be taxed at the rate of 30%. A “substantial shareholder”
is generally a person who alone, or together with his relative or another person who collaborates with him on a permanent basis, hold,
directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means
of control” generally include the right to vote, receive profits, nominate a director or an officer, receive assets upon
liquidation, or order someone who holds any of the aforesaid rights how to act, and all regardless of the source of such right.
Generally, as of January 1, 2012, the tax rate applicable to capital gains derived from
by Israeli resident company on the sale of shares, whether listed on a stock market or not, is the corporate tax rate in Israel (commencing
from January 1, 2018, 23%).
Commencing as of January 1, 2025, an individual whose taxable income during a tax year
is in excess of NIS 721,560, will be liable for an additional 3%) and 5% on the portion of passive income which exceed the aforementioned
threshold.
Moreover, capital gains derived by a shareholder who is a dealer or trader in securities,
or to whom such income is otherwise taxable as ordinary business income, are taxed in Israel at ordinary income rates (currently up to
48% for individuals in 2014). Pursuant to Amendment No. 234 to the Income Tax Ordinance there was a decrease of 1% and stands at 47% from
January 1, 2017 and onwards.
60
Taxation of Israeli shareholders on receipt of dividends
Israeli resident individuals are subject to Israeli income tax on the receipt of dividends
paid, at the rate of 25%, or 30% for a shareholder that is considered a “Substantial Shareholder” (as defined above) at any
time during the 12-month period preceding such distribution. A distribution of dividend to Israeli resident individuals from income attributed
to a Preferred Enterprise income or a Technological Preferred Enterprise income will be generally subject to a tax rate of 20%. From January
1, 2017 taxpayers having taxable income of NIS 640,000 will be subject to an additional tax payment at the rate of 2% (and commencing
from January 1, 2017 – an additional tax payment at the rate of 3%) on the portion of their taxable income for such tax year that
is in excess such threshold. The aforementioned amount is adjusted by the CPI and stands for year 2025 in the amount of NIS 721,560. Commencing
January 1,2025 additional 2% (total 5%) levied on passive income (including from dividends) which exceed the NIS 721,560. For this purpose,
taxable income includes taxable capital gains from the sale of our shares and taxable income from dividend distributions.
Dividends paid from income derived from Preferred Enterprises are
subject to withholding at the rate of 20%. Any dividends distributed to foreign companies, as defined in the Investment law, derived from
income from the Technological Preferred Enterprise will be subject to tax at a rate of 4%, provided the foreign company holds over 90%
of the outstanding shareholding.
Dividends paid on our ordinary shares to Israeli companies are exempt from such tax,
except for dividends distributed from income derived outside of Israel, which are subject to the corporate tax rate.
Taxation of non-Israeli shareholders on receipt of dividends.
Non-residents of Israel are subject to income tax on income accrued or derived from
sources in Israel, including dividends paid by Israeli companies. On distributions of dividends other than stock dividends, income tax
(generally collected by means of withholding) will generally apply at the rate of 25%, or 30% for a shareholder that is considered a significant
shareholder (as defined above) at any time during the 12-month period preceding such distribution, unless a different rate is provided
in a treaty between Israel and the shareholder’s country of residence. Dividends paid from income derived from Approved or Benefited
Enterprises are subject to withholding at the rate of 20%, or 4% for Benefited Enterprises in the Ireland Track. Under the U.S.-Israel
Tax Treaty, the maximum tax on dividends paid to a holder of ordinary shares who qualifies as a resident of the United States within the
meaning of the U.S.-Israel Tax Treaty is 25%. The treaty provides for reduced tax rates on dividends if (a) the shareholder is a U.S.
corporation holding at least 10% of our issued voting power during the part of the tax year that precedes the date of payment of the dividend
and held such minimal percentage during the whole of its prior tax year, and (b) not more than 25% of the Israeli company’s gross
income consists of interest or dividends, other than dividends or interest received from subsidiary corporations or corporations 50% or
more of the outstanding voting shares of which is owned by the Israeli company. The reduced treaty rate, if applicable, is 15% in the
case of dividends paid from income derived from Approved, Benefited or Preferred Enterprise or 12.5% otherwise and subject that the non-Israeli
shareholder would provide to prior to the divided distribution a certificate from the Israeli Tax Authority for the reduce tax rates under
the tax treaty with their country of residence and additional conditions must be met A distribution of dividend to non-Israeli resident
from income attributed to a Preferred Enterprise will be generally subject to withholding tax rates of 20%, subject to a reduced rate
under the provisions of any applicable double tax treaty.
A non-resident of Israel who receives dividends from which full tax was withheld is
generally exempt from the duty to file returns in Israel in respect of such income, provided such income was not derived from a business
conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income in Israel.
Capital Gains Taxes Applicable to Non-Israeli Resident Shareholders.
Israeli law generally imposes a capital gains tax on the sale of securities and any
other capital asset. But, generally non-Israeli residents are exempt from Israeli capital gains tax on any gains derived from the
sale of shares of Israeli companies publicly traded on a recognized stock exchange or regulated market outside of Israel, provided that
the shares were purchased after January 1, 2009, capital gain does not belong to the foreign resident’s permanent establishment
in Israel, the security was not acquired by the foreign resident from a relative and the shares are not listed on Israeli stock exchange
upon the sale of the shares. After the company’s shares had been listed for trading on a foreign Exchange capital gain does not
belong to the foreign resident’s permanent establishment in Israel, the shares had to be acquired after the listing of the shares
of the company on a stock exchange outside of Israel, and the provisions of section 101 of the Ordinance, the provisions of the Adjustments
Law and provisions under section 130A of the Ordinance do not apply to the capital gain, non-Israeli corporations will not be entitled
to such exemption if an Israeli resident (i) has a controlling interest of more than 25% in such non-Israeli corporation, or (ii) is the
beneficiary or is entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.
In some instances where our shareholders may be liable to Israeli tax on the sale of
their ordinary shares, the payment of the consideration may be subject to the withholding of Israeli tax at the source.
61
| F. |
DIVIDENDS AND PAYING AGENTS |
Not applicable.
| G. |
STATEMENT BY EXPERTS |
Not applicable.
| H. |
DOCUMENTS ON DISPLAY |
We are subject to certain information reporting requirements of
the Exchange Act, applicable to foreign private issuers and under those requirements will file reports with the SEC. The SEC maintains
an Internet website that contains reports and other information regarding issuers that file electronically with the SEC. Our filings with
the SEC are also available to the public through the SEC’s website at www.sec.gov.
As a foreign private issuer, we are exempt from the rules under
the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders will
be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are
not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently
or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC,
within 120 days after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing
financial statements audited by an independent registered public accounting firm, and may submit to the SEC, on a Form 6-K, unaudited
interim financial information.
We maintain a corporate website at http://www.ituran.com. Information
contained on, or that can be accessed through, our website and the other websites referenced above do not constitute a part of this annual
report on Form 20-F. We have included these website addresses in this annual report on Form 20-F solely as inactive textual references.
| I. |
SUBSIDIARY INFORMATION |
Not applicable.
| J. |
ANNUAL REPORT TO SECURITY HOLDERS |
Not applicable.
| ITEM 11. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
The principal market risks to which we are exposed as a result of our operations are
foreign exchange rate risks and interest rate risks.
Foreign exchange rate risk
Although we report our consolidated financial statements in dollars, in, 2023, 2024
and 2025, a portion of our revenues and direct expenses was derived in other currencies. For fiscal years 2023, 2024 and 2025, we derived
approximately 25.3%, 23.1% and 22.4% of our revenues in dollars and other currencies, 48.2%, 52.1% and 54.6% in NIS, 26.5%, 24.8% and
22.9% in Brazilian Reals. In fiscal years, 2023 ,2024 and 2025, 27.0%, 25.1% and 23.5 % of our expenses were incurred in dollars and other
currencies, 51.2%, 55% and 56.5% in NIS and, 21.8%, 19.9% and 20.0% in Brazilian Reals.
Exchange differences upon conversion from our functional currency to dollars (presentation
currency) are accumulated as a separate component of accumulated other comprehensive income (loss) under stockholders’ equity. In
the year 2023 a profit of $ 0.8 million, in the year 2024 a loss of $ 12.3 million and in year a profit of $18.3 million 2025.
62
.
The fluctuation of the other currencies in which we incur our expenses or generate revenues
against the dollar has had the effect of increasing or decreasing (as applicable) reported revenues, cost of revenues and operating expenses
in such foreign currencies when converted into dollars from period to period. The following table illustrates the effect of the changes
in exchange rates on our revenues, gross profit and operating income for the periods indicated (Year ended December 31, all in $ Thousands):
|
2023 |
2024 |
2025 |
||||||||||
|
Actual |
At 2022 exchange rates (1)
|
Actual |
At 2023 exchange rates (1)
|
Actual |
At 2024 exchange rates |
|||||||
|
Revenues |
319,978 |
329,420 |
336,257 |
344,146 |
359,023 |
350,084 |
||||||
|
Gross profit |
153,161 |
158,291 |
160,620 |
163,895 |
178,577 |
173,866 |
||||||
|
Operating income |
65,955 |
67,422 |
71,169 |
73,518 |
77,028 |
75,567 |
||||||
(1) Based on average exchange
rates during the period. Those columns are Non GAAP information.
Our policy remains to reduce exposure
to exchange rate fluctuations by entering into foreign currency forward transactions that mainly qualify as hedging transactions under
ASC Topic 815, “Derivatives and Hedging” the results of which are reflected
in our income statements as revenues or cost of revenues. Currently, the item most likely to be affected by the foreign currency risk
is our inventory purchase price. Therefore, from time to time, we enter into such forward contracts, generally of 3 to 20 months’
duration in order to hedge a portion of our foreign currency risk on the inventory purchase price. The result of these transactions, which
are affected by fluctuations in exchange rates, could cause our cost of revenues, gross profit and operating income to fluctuate.
Interest rate risk
We invest our cash balances in each country in local currency in bank deposits and therefore,
we are exposed to interest rate fluctuation in those currencies, but we do not believe such risks to be material. We do not use derivative
financial instruments to limit exposure to interest rate risk.
| ITEM 12. |
DESCRIPTIONS OF SECURITIES OTHER THAN EQUITY SECURITIES |
| A. |
Debt Securities. |
Not applicable.
| B. |
Warrants and rights. |
Not applicable.
| C. |
Other Securities. |
Not applicable.
| D. |
American Depositary Shares |
Not applicable.
PART II
| ITEM 13. |
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
Not applicable
| ITEM 14. |
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
None
63
| ITEM 15. |
CONTROLS AND PROCEDURES |
(A) Disclosure Controls and Procedures
Our co-chief executive officers and chief financial officer, after evaluating the effectiveness
of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) as of December 31,
2025 have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that information required to
be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including
our co-chief executive officers and chief financial officer, to allow timely decisions regarding required disclosure and is recorded,
processed, summarized and reported within the periods specified by the SEC’s rules and forms.
(B) Management’s Annual Report on Internal Control Over
Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control
over our financial reporting. Internal control over financial reporting is designed to provide reasonable assurance to our management
and the board of directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial
statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore,
even those systems determined to be effective can provide only reasonable assurances with respect to financial statement preparation and
presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may decline.
Our management assessed the effectiveness of our internal control over financial reporting,
as of December 31, 2025. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013 Framework).
Based on such assessment, our management has concluded that, as of December 31,
2025, our internal control over financial reporting is effective.
Fahn Kanne & Co. Grant Thornton Israel, our independent registered public accounting
firm, has issued an attestation report on our internal control over financial reporting, as of December 31, 2025 and such report is included
elsewhere in this Form 20 -F.
(C) Attestation Report of the Registered Public Accounting
Firm.
64
|
|
Fahn Kanne & Co. | |
|
|
Head Office | |
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
|
32 Hamasger Street |
|
|
|
Tel-Aviv 6721118, |
|
Board of Directors and Shareholders |
|
ISRAEL |
|
|
|
PO Box 36172, 6136101 |
|
ITURAN LOCATION AND CONTROL LTD. |
|
T +972 3 7106666 |
|
|
|
F +972 3 7106660 |
|
|
|
www.gtfk.co.il |
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Ituran Location and
Control Ltd. and Subsidiaries (the “Company”) as of December 31, 2025, based on criteria established in the 2013 Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued
by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended
December 31, 2025, and our report dated April 23, 2026, expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. 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 audit in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides
a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
FAHN KANNE & CO. GRANT THORNTON ISRAEL
Certified Public Accountants (Isr.)
Tel-Aviv, Israel
April 23, 2026
65
(D) Change in Internal Control over Financial
Reporting
There have not been any changes in our internal control over financial reporting during
the year ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
| ITEM 16. |
[RESERVED] |
| ITEM 16A.
|
AUDIT COMMITTEE FINANCIAL EXPERT |
Our board of directors determined that Mr. Israel Baron, one of our independent directors,
is an “audit committee financial expert”, as defined by the applicable regulations promulgated under Section 407 of the Sarbanes-Oxley
Act. For information concerning the experience of Mr. Baron, please refer to Item 6.A – Directors and Senior Management, above.
| ITEM 16B. |
CODE OF ETHICS |
In 2005, we adopted a Code of Ethics that applies to our senior management, including
chief executive officer, chief financial officer, internal auditor and other individuals performing similar functions. Code of Business
Conduct and Ethics was revised on February 26, 2017 as part of our Internal Compliance Program. The amendments were imposing on our employee’s
stricter rules on compliance with Intellectual properties laws, compliance with Foreign Corrupt Practices Act, restrictions and rules
on posting information on Ituran on social media and online networking websites, adding additional disciplinary measures and providing
contact details of our compliance officer. The Code of Business Conduct and Ethics has been posted on our website at www.ituran.com.
| ITEM 16C. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Fahn Kanne & Co. Grant Thornton Israel (“Grant Thornton”), has served
as our independent auditors. On December 16, 2025 they have been re-elected by our shareholders to serve as our independent auditors for
the year 2025, until the next general meeting of the shareholders. The following table presents aggregate fees for professional audit
services and other services rendered by Grant Thornton, for 2024 and 2025:
|
|
2025 |
2024 |
||||||
|
|
(in thousands, USD) |
|||||||
|
Audit Fees (1)
|
581 |
551 |
||||||
|
Tax Fees (2)
|
70 |
65 |
||||||
|
Total
|
651 |
616 |
||||||
| (1) |
The audit fees for the years ended December 31, 2024 and 2025 respectively, were for professional services rendered for the audits
of our annual consolidated financial statements, review of consolidated quarterly financial statements and statutory audits. |
Our audit committee has approved the above audit and non-audit services provided by
Grant Thornton, during the years 2024 and 2025.
| ITEM 16D. |
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|
Not applicable.
| ITEM 16E. |
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
On March 5, 2026 we announced another purchase plan under Rule 10b-5 and Rule
10b-18 to purchase our shares for another $ 10 million. During the year 2025 we purchased additional 84,938 of our shares.
|
Period |
Total number of shares purchased |
Average price paid per share |
Total number of shares purchased as part of publicly announced plans or programs
|
Maximum Approximate Value that May Yet to Be Purchased Under the Program |
|
Sep 2025 |
41,751 |
35.34 |
1,475,663 |
5,187,182 |
|
Oct 2025 |
9,995 |
37.67 |
376,479 |
4,810,704 |
|
Nov 2025 |
33,192 |
37.59 |
1,247,820 |
3,562,884 |
|
Total 2025 |
84,938 |
36.50 |
3,099,962 |
3,562,884 |
66
| ITEM 16F. |
CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT |
Not applicable.
| ITEM 16G. |
CORPORATE GOVERNANCE |
Under NASDAQ Marketplace Rule 5615(a)(3), foreign private issuers, such as our company,
are permitted to follow certain home country corporate governance practices instead of certain provisions of the Rule 5600 series and
the requirement to distribute annual and interim reports. A foreign private issuer that elects to follow a home country practice instead
of any of such provisions, must disclose in its annual reports each requirement that it does not follow, describe the home country practice
followed by the company in lieu of such requirements, satisfy the voting rights (Rule 5640) requirements, have an audit committee that
satisfies Rule 5605(c)(3), and ensure that such audit committee’s members meet the independence requirement in Rule 5605(c)(2)(A).
In reliance upon Rule 5615(a)(3), as a foreign private issuer, we have elected to follow our home country practices, absent home country
rules requiring otherwise, in lieu of certain Nasdaq Marketplace Rules. Specifically, in Israel, it is not required that a public company
have (i) a majority of independent board members or that independent directors have regularly scheduled meetings at which only independent
directors are present, or (iii) independent oversight of director nominations. As a result, we have elected to follow Israeli law regarding
the independence requirements of our board of directors. See “External directors” above. In addition, our board of directors
has not appointed a nominating committee and, instead, elects to follow Israeli law, which provides that a company may determine its method
of nominating its directors.
| ITEM 16H.
|
MINE SAFETY DISCLOSURE |
Not applicable.
| ITEM 16I.
|
DISCLOSURE REGARDING FOREIGN JURISDICTION THAT
PREVENT INSPECTIONS |
Not applicable.
67
ITEM
16J. INSIDER TRADING POLICIES
ITEM
16K. CYBERSECURITY
Risk
management and Strategy-
| 1. |
Cybersecurity risk management is an integral part
of our overall enterprise risk management program. We face certain cybersecurity risks due to: (1) the substantial level of harm that
could occur to us, our customers and business partners in case we suffer impacts of a material cybersecurity incident; (2) the networks
and systems we must defend against cybersecurity attacks; (3) the use of our systems, products and processes and (4) our use of third-party
products and services. |
| 2. |
We are committed to maintaining robust governance
and oversight of these risks and to implement mechanisms, controls, technologies, and processes designed to help us assess, identify,
and manage these risks. |
| 3. |
|
| 4. |
In addition, these threats are constantly evolving,
thereby increasing the difficulty of successfully defending against them or implementing adequate preventative measures. We have seen
a worldwide increase in cyberattack volume, frequency, and sophistication and we constantly expand our cybersecurity budget in accordance
with such increase We constantly seek to detect and investigate unauthorized attempts and attacks against our network, products, and services,
and to prevent their occurrence and recurrence where practicable through changes or updates to our internal processes and tools and changes
or updates to our products and services. however, we remain potentially vulnerable to known or unknown threats. In some instances, we,
our suppliers and customers can be unaware of a threat or incident or effects. |
68
Governance
| 5. |
Further, there is increasing regulation regarding
responses to cybersecurity incidents, including reporting to regulators, which could subject us to additional liability and reputational
harm. |
| 6. |
|
| 7. |
We are actively seeking benchmarking and awareness
of best practices. We monitor issues that are internally discovered or externally reported that may affect our products and have processes
to assess those issues for potential cybersecurity impact or risk. |
| 8. |
|
| 9. |
|
69
PART
III
ITEM
17. FINANCIAL STATEMENTS
See “Item
18—Financial Statements.”
ITEM
18. FINANCIAL STATEMENTS
The consolidated
financial statements and the related notes required by this Item are included in this annual report on Form 20-F beginning on page F-1.
| ITEM 19. |
EXHIBITS |
|
Exhibit
No. |
Exhibit
Description |
| 2.4 | Description of Securities |
70
| 97.1. |
71
| (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. https://www.sec.gov/Archives/edgar/data/1337117/000117891317001231 |
| (8) |
Filed as an exhibit to the annual report on Form
20-F for the year ended December 31, 2024 and incorporated herein by reference. https://www.sec.gov/ix?doc=/Archives/edgar/data/0001337117/000117891325001365/zk2533014.htm |
* Certain
portions of this exhibit have been omitted pursuant to an order granting confidential treatment by the United States Securities and Exchange
Commission. The omitted non-public information has been filed with the United States Securities and Exchange Commission
72
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.
Date: April 23, 2026
ITURAN
LOCATION AND CONTROL LTD.
|
By: /s/
Eyal Sheratzky |
/s/
Nir Sheratzky |
||
|
Eyal Sheratzky |
Nir Sheratzky |
||
|
Co-Chief Executive Officers |
73
ITURAN
LOCATION AND CONTROL LTD.
Consolidated
Financial Statements
as
of December 31, 2025
ITURAN
LOCATION AND CONTROL LTD.
Consolidated
Financial Statements
as
of December 31, 2025
Table
of Contents
|
Page
| |
|
Report
of Independent Registered Public Accounting Firm (PCAOB ID
|
F-2
|
|
Consolidated
Financial Statements: |
|
|
F-4
| |
|
F-6
| |
|
F-7
| |
|
F-8
| |
|
F-9
| |
|
F-11
|
=======================
=============
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of Directors and Shareholders
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, 2025 and 2024, the related consolidated statements of income, comprehensive income (loss), changes in equity and cash
flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2025, 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, 2025, 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 23, 2026, expressed an unqualified opinion.
Basis
for opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated 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 consolidated 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 consolidated 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 consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical
audit matter
The
critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F
- 2
Critical
audit matter (cont.)
Goodwill
impairment analysis
As
described further in Note 1N, and Note 9 to the consolidated financial statement, as of December 31, 2025, the Company’s goodwill
balance was US$ 39,831 thousand. As disclosed by management, goodwill is assigned to reporting units and is tested for impairment
at least annually, and whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable.
With respect to certain reporting units, management determines the fair value of its reporting units using the income approach. Within
the income approach, the method that was used to measure the fair value of a reporting unit is the discounted cash flow method. Management
started with a forecast of all the expected net cash flows associated with the reporting units, which includes the application of a terminal
growth rate, 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. As disclosed by management,
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.
We
identified the goodwill impairment analysis as a critical audit matter. The principal considerations for our determination that the goodwill
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. 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.
Our
audit procedures related to the goodwill impairment analysis included the following, among others. 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.
Evaluating management’s assumptions related to revenue growth rates and terminal growth rate involved evaluating whether the assumptions
used by management were reasonable considering (1) the current and past performance of the reporting units, (2) the consistency with external
market and industry data, and (3) the consistency 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
23, 2026
F
- 3
ITURAN
LOCATION AND CONTROL LTD.
CONSOLIDATED
BALANCE SHEETS
|
US
dollars |
||||||||
|
December
31, |
||||||||
|
(in
thousands) |
2025
|
2024
|
||||||
|
Current
assets |
||||||||
|
Cash
and cash equivalents |
|
|
||||||
|
Investment
in marketable securities |
|
|
||||||
|
Accounts
receivable (net of provision for credit loss) |
|
|
||||||
|
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
- 4
ITURAN
LOCATION AND CONTROL LTD.
CONSOLIDATED
BALANCE SHEETS
|
US
dollars |
||||||||
|
December
31, |
||||||||
|
(in
thousands, except share data) |
2025
|
2024
|
||||||
|
Current
liabilities |
||||||||
|
Credit
from banking institutions (Note 10A) |
|
|
||||||
|
Accounts
payable |
|
|
||||||
|
Deferred
revenues |
|
|
||||||
|
Other
current liabilities (Note 11) |
|
|
||||||
|
|
|
|||||||
|
Long-term
liabilities |
||||||||
|
Deferred
income taxes (Note 15) |
|
|
||||||
|
Liability
for employee rights upon retirement |
|
|
||||||
|
Deferred
revenues |
|
|
||||||
|
Operating
lease liabilities, non-current (Note 7) |
|
|
||||||
|
Other
non-current liabilities |
|
|
||||||
|
|
|
|||||||
|
Commitments
and contingent liabilities (Note 12) |
||||||||
|
Equity:
|
||||||||
|
Stockholders’
equity (Note 13) |
||||||||
|
Share
capital – ordinary shares of NIS |
|
|
||||||
|
Authorized
– December 31, 2025 and 2024 – |
||||||||
|
Issued
and outstanding – December 31, 2025 and 2024 – |
||||||||
|
Additional
paid- in capital |
|
|
||||||
|
Accumulated
other comprehensive loss |
(
|
)
|
(
|
)
| ||||
|
Retained
earnings |
|
|
||||||
|
Treasury
stock at cost – December 31, 2025 – |
(
|
)
|
(
|
)
| ||||
|
Stockholders’
equity |
|
|
||||||
|
Non-controlling
interests |
|
|
||||||
|
Total
equity |
|
|
||||||
|
Total
liabilities and equity |
|
|
||||||
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 5
ITURAN
LOCATION AND CONTROL LTD.
CONSOLIDATED
STATEMENTS OF INCOME
|
US
dollars |
||||||||||||
|
Year
ended December 31, |
||||||||||||
|
(in
thousands except earnings per share) |
2025
|
2024
|
2023
|
|||||||||
|
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 |
|
|
|
|||||||||
|
Other income, net
|
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Operating
income |
|
|
|
|||||||||
|
Other
income (expenses), 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
- 6
ITURAN
LOCATION AND CONTROL LTD.
|
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (loss)
|
US
dollars |
||||||||||||
|
Year
ended December 31, |
||||||||||||
|
(in
thousands) |
2025
|
2024
|
2023
|
|||||||||
|
Net
income for the year |
|
|
|
|||||||||
|
Other
comprehensive income (loss), net of tax: |
||||||||||||
|
Unrealized
losses in respect of derivative financial instruments designated for cash flow hedge |
(
|
)
|
|
(
|
)
| |||||||
|
Reclassification
of net loss realized to net income |
|
|
|
|||||||||
|
Foreign
currency translation adjustments |
|
(
|
)
|
|
||||||||
|
Other
comprehensive income (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
- 7
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 |
Non-controlling
interests |
Total
|
|||||||||||||||||||||||||
|
US dollars
(except for number of shares) |
||||||||||||||||||||||||||||||||
|
Balance
as of January 1, 2023 |
|
|
|
(
|
)
|
|
(
|
)
|
|
|
||||||||||||||||||||||
|
Changes
during 2023: |
||||||||||||||||||||||||||||||||
|
Net
income |
-
|
-
|
-
|
-
|
|
-
|
|
|
||||||||||||||||||||||||
|
Other
comprehensive income (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, 2023 |
|
|
|
(
|
)
|
|
(
|
)
|
|
|
||||||||||||||||||||||
|
Changes
during 2024: |
||||||||||||||||||||||||||||||||
|
Net
income |
-
|
-
|
-
|
-
|
|
-
|
|
|
||||||||||||||||||||||||
|
Other
comprehensive loss |
-
|
-
|
-
|
(
|
)
|
-
|
-
|
(
|
)
|
(
|
)
| |||||||||||||||||||||
|
Dividend
paid to non-controlling interests |
-
|
-
|
-
|
-
|
-
|
-
|
(
|
)
|
(
|
)
| ||||||||||||||||||||||
|
Dividend
paid |
-
|
-
|
-
|
-
|
(
|
)
|
-
|
-
|
(
|
)
| ||||||||||||||||||||||
|
Dividend
declared |
-
|
(
|
)
|
-
|
-
|
(
|
)
| |||||||||||||||||||||||||
|
Purchase
of non-controlling interest shares |
-
|
-
|
-
|
-
|
-
|
-
|
(
|
)
|
(
|
)
| ||||||||||||||||||||||
|
Stock-based
compensation in a subsidiary company |
|
-
|
-
|
-
|
-
|
|
||||||||||||||||||||||||||
|
Balance
as of December 31, 2024 |
|
|
|
(
|
)
|
|
(
|
)
|
|
|
||||||||||||||||||||||
|
Changes
during 2025: |
||||||||||||||||||||||||||||||||
|
Net
income |
-
|
-
|
-
|
-
|
|
-
|
|
|
||||||||||||||||||||||||
|
Other
comprehensive income |
-
|
-
|
-
|
|
-
|
-
|
|
|
||||||||||||||||||||||||
|
Dividend
paid to non-controlling interests |
-
|
-
|
-
|
-
|
-
|
-
|
(
|
)
|
(
|
)
| ||||||||||||||||||||||
|
Dividend
paid |
-
|
-
|
-
|
-
|
(
|
)
|
-
|
-
|
(
|
)
| ||||||||||||||||||||||
|
Dividend
declared |
-
|
-
|
-
|
-
|
(
|
)
|
-
|
-
|
(
|
)
| ||||||||||||||||||||||
|
Purchase
of treasury shares (*) |
-
|
-
|
-
|
-
|
-
|
(
|
)
|
-
|
(
|
)
| ||||||||||||||||||||||
|
Balance
as of December 31, 2025 |
|
|
|
(
|
)
|
|
(
|
)
|
|
|
||||||||||||||||||||||
(*)
See Note 13A3.
The
accompanying capital notes are an integral part of the consolidated financial statements.
F
- 8
ITURAN
LOCATION AND CONTROL LTD.
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
US
dollars |
||||||||||||
|
Year
ended December 31, |
||||||||||||
|
(in
thousands) |
2025
|
2024
|
2023
|
|||||||||
|
Cash
flows from operating activities |
||||||||||||
|
Net income for the year
|
|
|
|
|||||||||
|
Adjustments
to reconcile net income to net cash from operating activities: |
||||||||||||
|
Depreciation
and amortization |
|
|
|
|||||||||
|
Loss
in respect of trading marketable securities and other investments |
|
|
|
|||||||||
|
Increase
in liability for employee rights upon retirement |
|
|
|
|||||||||
|
Share
in losses of affiliated and other companies, net |
|
|
|
|||||||||
|
Deferred
income taxes |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Capital
loss on sale of property and equipment, net |
|
|
|
|||||||||
|
Increase
in accounts receivable |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Decrease
(increase) in other current and non-current assets |
|
(
|
)
|
(
|
)
| |||||||
|
Decrease
in inventories |
|
|
|
|||||||||
|
Increase
(decrease) in accounts payable |
(
|
)
|
|
(
|
)
| |||||||
|
Increase
(decrease) in deferred revenues |
|
(
|
)
|
|
||||||||
|
Increase
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 |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Return
from (investment in) affiliated company |
|
|
(
|
)
| ||||||||
|
Repayment
of (investments in) long - term deposit |
|
(
|
)
|
(
|
)
| |||||||
|
Return
from (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 |
|
|
(
|
)
| ||||||||
|
Short
term credit from banking institutions |
(
|
)
|
(
|
)
|
|
|||||||
|
Acquisition
of company shares |
(
|
)
|
|
(
|
)
| |||||||
|
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 2025, the
Company declared a dividend in an amount of US$ 10 million. The dividend was paid in January 2026.
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 9
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) |
2025
|
2024
|
2023
|
|||||||||
|
Interest paid
|
|
|
|
|||||||||
|
Income taxes paid, net
of refunds |
|
|
|
|||||||||
The
accompanying notes are an integral part of the consolidated financial statements.
F
- 10
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 “Company”) 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.
|
| 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 of a long-term investment nature (i.e., 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 Company 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
- 11
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, |
|||
|
2025
|
|
|
|
|
2024
|
|
|
|
|
2023
|
|
|
|
|
Increase
(decrease) during the year: |
|||
|
2025
|
(
|
(
|
|
|
2024
|
|
|
|
|
2023
|
|
(
|
|
| (*) |
Based on the Index for the month ending on each
balance sheet date, on the basis of 2008 average. |
| 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).
| 5. |
Iron Swords War
|
In
October 2023, the Israeli government declared a state of war in response to an attack on civilians at its southern border. Subsequently,
additional attacks were launched towards northern Israel. The new security situation has led to several challenges, including some disruptions
in supply chains, a shortage of personnel due to mobilization for reserve duty, and fluctuations in foreign currency exchange rates relative
to the Israeli shekel.
Regional
tensions involving Houthis attacks on commercial ships have recently intensified, affecting shipping operation at the Red Sea. This could
lead to delays in shipments as well as increased shipping costs.
The
Company has taken measures to ensure the safety of its employees and business partners, as well as the communities in which it operates,
in order to minimize any potential impact on its business, including avoidance of disruption to operation in its facilities in Israel.
As
of today, the security situation in recent months had a non-material impact on the Company’s business results. However, since the
developments related to the war situation, as well as its duration, are unpredictable, the Company has no ability to estimate the extent
of the war’s potential impact on its future business and results. The Company continuously monitors the developments and will take
all necessary actions to minimize any negative consequences to its operations and assets.
F
- 12
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| 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 Company, 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.
| C. |
Cash
and cash equivalents |
The
Company 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 marketable debt securities in accordance with 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.
Changes
in fair value measurement of debt and equity securities for the years 2025, 2024 and 2023 amounted to loss of approximately US$ (8 ),
US$ (107 )
and US$ (89 )
thousand, respectively.
| 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. |
Provision
for credit loss |
The
provision for credit loss is determined with respect to amounts the Company 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 provision for credit losses
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 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
receivables are written off against the provision for credit losses when the Company determines
amounts are no longer collectible.
See
also Note 19A.
The
allowance in respect of accounts receivable on December 31, 2025 and 2024 was US$ 4,419
and US$ 3,978
thousand, respectively
F
- 13
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| 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). The other method which is utilized for determining the value of inventories is the moving average.
The Company regularly reviews its inventories for obsolescence and other impairment risks and write-offs are incurred when necessary.
| H. |
Investment
in affiliated companies |
Investments
in companies in which the Company 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 Company, is eliminated. The Company also reviews these investments for impairment
whenever events indicate the carrying amount may not be recoverable.
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 2025, 2024 and 2023, 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 also Note
1I 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.
| J. |
Derivatives
|
The
Company 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.
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.
F
- 14
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| J. |
Derivatives
(cont.) |
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.
See
also Note 19B for further information regarding the hedging activities of the Company.
| 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
Company’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
Company 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.
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 to 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.
F
- 15
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| 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 and whenever events or changes in circumstances indicates that amount of goodwill may not be recoverable in accordance with the
provisions of ASC Topic 350, "Intangibles - Goodwill and Other". The annual goodwill assessment is performed as of December 31, each year.
|
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.
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. Management determines the fair value of its reporting units using the income approach. Within the income approach,
the method that is generally used to measure the fair value of a reporting unit is the discounted cash flow method. Management starts
with a forecast of the expected net cash flows associated with the reporting unit, which includes the application of a terminal growth
rate, and applies 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. 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, 2025, 2024 and 2023, 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 with an allocated amount of approximately
US$ 1.9
For
the second reporting unit (resulted from RT acquisition) with an allocated amount of approximately US$ 32.3
million of goodwill (as of December 31, 2025), the Company performed the annual impairment test, as of December 31, 2025, using a quantitative
assessment and reached to a conclusion that no impairment should be recorded at that point. The impairment test was performed using the
income approach and the fair value of the reporting unit was measured based on the discounted cash flow method. The measurement of fair
value of reporting units as part of goodwill impairment analysis is classified within Level 3 within the fair value hierarchy.
F
- 16
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.)
| |
Telematics
products:
Under
the telematics products segment there are two reporting units with goodwill, for one of which with an allocated amount of approximately
US$ 2.2
For
the second reporting unit (resulted from RT acquisition) with an allocated amount of approximately US$ 3.5
million of goodwill (as of December 31, 2025), the Company performed the annual impairment test, as of December 31, 2025, using a quantitative
assessment and reached a conclusion that no impairment should be recorded at that point. The impairment test was performed using the income
approach and the fair value of the reporting unit was measured based on the discounted cash flow method.
The
measurement of fair value of reporting units as part of goodwill impairment analysis is classified within Level 3 within the fair value
hierarchy.
| 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, 2025, the intangible assets are amortized averagely as follows:
|
Years
| |
|
Technology services
|
|
|
Other
|
|
During
2025 and 2024, the Company did not record any impairment.
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.
F
- 17
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| P. |
Funds in
respect of, and liability for employee rights upon retirement (cont.) |
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, 2025, 2024 and 2023, amounted to US$ 3,324 ,
US$ 2,430
and US$ 2,218
thousand, respectively
| 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.
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.
F
- 18
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| Q. |
Revenue recognition
(cont.) |
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 is 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 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 arrangements 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 limited 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 was 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 sold the same type of service in these jurisdictions to different customers (at or near
the same time) for a broad range of amounts (thus, the stand-alone selling price was highly variable).
Revenues
from SVR services subscription fees and from installation services (related to AVL products that remain as the company's property), 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 a certain Brazilian subsidiary
for arranging a bundle transaction of SVR services subscription 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, 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 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, 2025 and 2024 the Company recognized revenue of approximately US$ 22.8 million
and US$ 27.1 million,
respectively, that was included in the deferred revenue balance at the beginning of each reporting period.
F
- 19
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| Q. |
Revenue recognition
(cont.) |
| 5. |
(cont.) | |
As
of December 31, 2025, the aggregate amount of the amounts allocated to remaining unsatisfied performance obligations (deferred revenue)
that the Company expects to recognize as revenue in future periods is $42.1
million of which, $27.2
million (64.6 %)
is expected to be recognized over the next 12 months (and presented as short-term balance), and the remainder amount of
$14.9
million (35.4 %)
is expected to be recognized through 2027.
| 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.
| 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, 2025 and 2024, no such unrecoverable amounts were identified.
| T. |
Advertising costs
|
Advertising
costs are expensed as incurred.
Advertising
expenses for the years ended December 31, 2025, 2024 and 2023 amounted to US$ 8.9
million, US$ 7.6
million and US$ 7.3
million, respectively. Advertising expenses are presented among "selling and marketing expenses".
F
- 20
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| 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.
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 also Note 19C.
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 Notes 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 "deferred
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.
F
- 21
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| W. |
Contract costs and prepaid
expenses (cont.) | |
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.
| 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. However, when a grant includes a performance condition (that is not considered
as 'market condition'), the compensation cost is recognized if and when it is probable that the condition will be achieved. 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 17C 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 attributed separately for each vesting tranche of the award (generally calendar year).
| Y. |
Leases
|
The
Company 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.
The
Company determines if an arrangement is a lease at inception.
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. |
F
- 22
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| Y. |
Leases (cont.)
|
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 Company
‘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 Company’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.
| Z. |
Recently adopted accounting
pronouncements |
Income
Taxes (Topic 740): Improvements to Income Tax Disclosures
On
December 14, 2023, the FASB issued ASU 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU
2023-09”).
ASC
2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on
income taxes paid. ASU 2023-09, Improvements to Income Tax Disclosures, applies to all entities subject to income taxes.
The
amendments in ASU 2023-09 require that public business entities (PBE’s) on an annual basis (1) disclose specific categories in the
rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. Specifically, PBE’s
are required to disclose a tabular reconciliation, using both percentages and reporting currency amounts, according to specific categories.
Separate disclosure is required for any reconciling item in which the effect of the item is equal to or greater than 5 percent of the
amount computed by multiplying the income (or loss) from continuing operations before income taxes by the applicable statutory income
tax rate.
Also,
ASC 2023-09 require that all entities disclose on an annual basis, information about income taxes paid, including the amount of income
taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes and the amount of income taxes paid
(net of refunds received) disaggregated by individual jurisdictions. In addition, ASC 2023-09 require that all entities disclose information
about income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and
Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign.
The
amendments in ASC 2023-09 also eliminate certain current disclosure requirements.
For
public business entities (PBEs), the new requirements will be effective for annual periods beginning after December 15, 2024. The guidance
will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted.
The
Company is still in the process of evaluating the impact of adoption of ASU 2023-09.
F
- 23
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
| AA. |
Recently issued accounting
pronouncements, not yet adopted |
ASU
2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures"
In
November 2024, the FASB issued ASU 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures"
("ASU 2024-03").
ASU
2024-03 enhances disclosure of certain costs and expenses to provide enhanced transparency into the expenses presented in the income statement.
ASU
2024-03 is effective for annual periods beginning after December 15, 2026. The Company intends to adopt and apply the guidance in fiscal
year 2027. ASU 2024-03 should be adopted retrospectively to all periods presented in the financial statements and early adoption is permitted.
The Company is still in the process of evaluating the impact of adoption of ASU 2024-03.
| NOTE 2 | - | OTHER
CURRENT ASSETS
|
|
US
dollars |
||||||||
|
December
31, |
||||||||
|
(in
thousands) |
2025
|
2024
|
||||||
|
Prepaid expenses (*)
|
|
|
||||||
|
Government institutions
|
|
|
||||||
|
Deferred contract costs
(*) |
|
|
||||||
|
Advances to suppliers
|
|
|
||||||
|
Employees
|
|
|
||||||
|
Others
|
|
|
||||||
|
|
|
|||||||
| (*) |
See Note 1W |
| NOTE 3 | - | INVENTORIES |
|
US
dollars |
||||||||
|
December
31, |
||||||||
|
(in
thousands) |
2025
|
2024
|
||||||
|
Finished products
|
|
|
||||||
|
Raw materials
|
|
|
||||||
|
|
|
|||||||
| NOTE 4 | - | INVESTMENTS IN AFFILIATED AND OTHER COMPANIES |
| A. |
Investment in affiliated
companies |
|
US
dollars |
||||||||
|
December
31, |
||||||||
|
(in
thousands) |
2025
|
2024
|
||||||
|
Lumax
|
|
|
||||||
|
|
|
|||||||
F
- 24
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 4 | - | INVESTMENTS IN AFFILIATED AND OTHER COMPANIES (cont.) |
| B. |
Investment in other companies
|
During
2025, the Company made additional investments in two Israeli startups, In an amount of US$ 0.2
million
| NOTE 5 | - | OTHER
NON-CURRENT ASSETS
|
|
US
dollars |
||||||||
|
December
31, |
||||||||
|
(in
thousands) |
2025
|
2024
|
||||||
|
Deferred contract costs
and prepaid expenses (*) |
|
|
||||||
|
Deposits
|
|
|
||||||
|
|
|
|||||||
| (*) |
See Note 1W. |
| NOTE 6 | - | PROPERTY AND EQUIPMENT, NET |
| A. |
Property and equipment,
net consists of the following:
|
|
US
dollars |
||||||||
|
December
31, |
||||||||
|
(in
thousands) |
2025
|
2024
|
||||||
|
Cost:
|
||||||||
|
Operating
equipment (*) |
|
|
||||||
|
Office
furniture, equipment and computers |
|
|
||||||
|
Land
|
|
|
||||||
|
Buildings
|
|
|
||||||
|
Vehicles
|
|
|
||||||
|
Leasehold
improvements |
|
|
||||||
|
|
|
|||||||
|
Less
– accumulated depreciation (**) |
(
|
)
|
(
|
)
| ||||
|
Total
property and equipment, net |
|
|
||||||
| (*) |
As of December 31, 2025 and 2024, an amount
of US$ |
| (**) |
As of December 31, 2025 and 2024, an amount
of US$ |
| B. |
During the years ended December 31, 2025,
2024 and 2023, depreciation expenses were US$ |
F
- 25
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 7 | - | LEASES |
The
Company have entered into several non-cancelable operating lease agreements for real estate (mainly offices, warehouses 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 between 2026 and 2029. Payments due under such lease contracts
include primarily fixed payments. The Company does not assume renewals in the determination of the lease term unless the renewals are
deemed to be reasonably assured at lease commencement (or become as such in future date). The Company's lease agreements do not contain
any material residual value guarantees or material restrictive covenants.
The
components of annual lease costs, lease term and discount rate are as follows:
|
US
dollars |
||||||||
|
December
31, |
||||||||
|
(in
thousands) |
2025
|
2024
|
||||||
|
Operating
annual lease cost: |
||||||||
|
Office
and warehouse space |
|
|
||||||
|
Base
stations |
|
|
||||||
|
Vehicle
|
|
|
||||||
|
Others
|
|
|
||||||
|
|
|
|||||||
|
Weighted
Average Remaining Lease Term (years): |
||||||||
|
Office
space |
|
|
||||||
|
Base
stations |
|
|
||||||
|
Vehicle
|
|
|
||||||
|
Others
|
|
|
||||||
|
Weighted
Average Discount Rate (%): |
||||||||
|
Office
space |
|
|
||||||
|
Base
stations |
|
|
||||||
|
Vehicle
|
|
|
||||||
|
Others
|
|
|
||||||
The
leasing fees expense in each of the years ended December 31, 2025, 2024 and 2023, were US$ 4.0
million, US$ 3.6
million and US$ 3.4
million, respectively.
Supplemental
cash flow information related to operating leases was as follows:
|
US
dollars |
||||||||
|
December
31, |
||||||||
|
(in
thousands) |
2025
|
2024
|
||||||
|
Cash
paid for amounts included in the measurement of lease liabilities: |
||||||||
|
Operating
cash flows from operating leases |
|
|
||||||
F
- 26
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 7 | - | LEASES (cont.) |
The
following is a schedule, by years, of maturities of operating lease liabilities as of December 31, 2025:
|
|
US
dollars |
|||
|
(in
thousands) |
December 31,
2025
|
|||
|
|
||||
|
Period:
|
||||
|
2026
|
|
|||
|
2027
|
|
|||
|
2028
|
|
|||
|
2029
|
|
|||
|
2030
|
|
|||
|
Thereafter
|
|
|||
|
Total
operating lease payments |
|
|||
|
Less:
imputed interest |
(
|
)
| ||
|
Present
value of lease liabilities (*) |
|
|||
| (*) |
An amount of US$ |
| NOTE 8 | - | INTANGIBLE ASSETS, NET |
|
US dollars | ||||||||||||||||||||||||
|
December 31,
|
Year
ended December 31, |
December 31,
|
||||||||||||||||||||||
|
(in
thousands) |
2023
|
2024
|
2024
|
|||||||||||||||||||||
|
|
Opening
balance |
Impairment
|
Amortization
(*) |
Additions
|
Translation
differences |
Closing
balance |
||||||||||||||||||
|
Technology
|
|
|
(
|
)
|
|
(
|
)
|
|
||||||||||||||||
|
Others
|
|
|
(
|
)
|
|
(
|
)
|
|
||||||||||||||||
|
|
|
(
|
)
|
|
(
|
)
|
|
|||||||||||||||||
|
US dollars | ||||||||||||||||||||||||
|
December 31,
|
Year
ended December 31, |
December 31,
|
||||||||||||||||||||||
|
(in
thousands) |
2024
|
2025
|
2025
|
|||||||||||||||||||||
|
|
Opening
balance |
Impairment
|
Amortization
(*) |
Additions
|
Translation
differences |
Closing
balance |
||||||||||||||||||
|
Technology
|
|
|
(
|
)
|
|
|
|
|||||||||||||||||
|
Others
|
|
|
(
|
)
|
|
|
|
|||||||||||||||||
|
|
|
(
|
)
|
|
|
|
||||||||||||||||||
During
the years 2023-2025, the impairment analysis of intangible assets did not result in any impairment charge.
| (*) |
As of December 31, 2025, the estimated aggregate
amortization of intangible assets for the next five years is as follows: 2026 – US$ |
F
- 27
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, 2025 and 2024 are as follows:
|
US
dollars |
||||||||||||
|
(in
thousands) |
Telematics
services
|
Telematics
products |
Total
|
|||||||||
|
|
||||||||||||
|
Balance as of January
1, 2024 |
|
|
|
|||||||||
|
Changes
during 2024: |
||||||||||||
|
Translation differences
|
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Balance as of December
31, 2024 (*) |
|
|
|
|||||||||
|
Changes
during 2025: |
||||||||||||
|
Translation differences
|
|
|
|
|||||||||
|
Balance as of December
31, 2025 (*) |
|
|
|
|||||||||
| (*) |
The accumulated amount of goodwill impairment
loss as of December 31, 2025, and 2024 was US$ |
The
Company performed annual assessments as of December 31, 2025, 2024 and 2023, and reached the conclusion that no impairment should
be recorded at such dates.
For
additional information regarding the impairment analysis, see Note 1N.
| NOTE 10 | - | CREDIT FROM BANKING INSTITUTIONS |
| A. |
Short-term loans:
|
|
US
dollars |
||||||||
|
December
31, |
||||||||
|
(in
thousands) |
2025
|
2024
|
||||||
|
Short-term
loans - linked to the Mexican Pezo |
|
|
||||||
|
Credit
line utilized |
|
|
||||||
|
|
|
|||||||
| B. |
Lines
of credit: |
Unutilized
short-term lines of credit of the Company as of December 31, 2025, aggregated to US$ 4.1
million.
F
- 28
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 11 | - | OTHER CURRENT LIABILITIES |
Composition:
|
US
dollars |
||||||||
|
December
31, |
||||||||
|
(in
thousands) |
2025
|
2024
|
||||||
|
Accrued
expenses |
|
|
||||||
|
Accrued
payroll and related taxes |
|
|
||||||
|
Government
institutions |
|
|
||||||
|
Accrued
dividend |
|
|
||||||
|
Operating
lease liabilities, current |
|
|
||||||
|
Others
|
|
|
||||||
|
|
|
|||||||
| 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 the company and additional tax assessment for FUNTELL contribution (contribution to Fund for the Technological Development
of Telecommunication) levied on the monitoring services rendered by the company regarding all for the period 2007-2012.Total amounts of
approximately R$ |
| 2. |
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. |
| 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 Competition 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. |
F
- 29
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 13 | - | STOCKHOLDERS’ EQUITY |
| A. |
Share capital:
|
| 1. |
Composition: | |
|
December
31, 2025 and 2024 |
Registered
|
Issued
and outstanding |
||||||
|
Ordinary
shares of NIS |
|
|
* | |||||
*Before
considering treasury stock.
| 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. |
During
2023, the Company repurchased a total of 282,644
shares amounting to approximately $6.6
million.
During
2025, the Company repurchased a total of 84,938
shares amounting to approximately $3.1
million.
As
of December 31, 2025, an amount of 3,666,789
ordinary shares representing 15.62 %
of the share capital of the Company is held by the Company and its' fully owned subsidiary as treasury shares. (3,581,851
shares as of December 31, 2024).
| 4. |
Treasury stock has no voting rights.
|
| 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 either
by the Company or its subsidiary (presented as a separate item in the consolidated balance sheet and the statement of changes in equity)
must be deducted from the amount of retained earnings. |
| 2. |
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.
|
| 3. |
In November 2023 the Board of directors decided
to resume to $ |
| 4. |
In February 2024 the board of directors approved
the increase of quarterly dividend to $ |
| 5. |
In February 2025 the board of directors approved
the increase of quarterly dividend to $ |
| 6. |
During the years ended December 31, 2025, 2024
and 2023, the Company declared dividends in the amount of US$ |
F
- 30
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 14 | - | FINANCING INCOME (EXPENSES), NET |
|
US
dollars |
||||||||||||
|
Year
ended December 31, |
||||||||||||
|
(in
thousands) |
2025
|
2024
|
2023
|
|||||||||
|
Short-term
interest expenses commissions and other |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Loss
in respect of marketable securities and other investments |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Interest
expenses in respect of long-term loans |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Interest
income in respect of deposits |
|
|
|
|||||||||
|
Income
related to taxes positions |
|
|
|
|||||||||
|
Exchange
rate differences and others, net |
(
|
)
|
|
(
|
)
| |||||||
|
(
|
)
|
|
(
|
)
| ||||||||
| NOTE 15 | - | INCOME TAX |
| A. |
Taxes on income included
in the statements of income: | |
|
US
dollars |
||||||||||||
|
Year
ended December 31, |
||||||||||||
|
(in
thousands) |
2025
|
2024
|
2023
|
|||||||||
|
Income
taxes (tax benefit): |
||||||||||||
|
Current
taxes: |
||||||||||||
|
In
Israel |
|
|
|
|||||||||
|
Brazil
|
|
|
|
|||||||||
|
Rest
of the world |
|
|
|
|||||||||
|
|
|
|
||||||||||
|
Deferred
taxes: |
||||||||||||
|
In
Israel |
|
|
(
|
)
| ||||||||
|
Brazil
|
(
|
)
|
(
|
)
|
|
|||||||
|
Rest
of the world |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
(
|
)
|
(
|
)
|
(
|
)
| |||||||
|
Taxes
in respect of prior years: |
||||||||||||
|
In
Israel |
(
|
)
|
(
|
)
|
|
|||||||
|
Brazil
|
|
|
|
|||||||||
|
Rest
of the world |
(
|
)
|
(
|
)
|
|
|||||||
|
(
|
)
|
(
|
)
|
|
||||||||
|
|
|
|
||||||||||
| B. |
Measurement of results
for tax purposes |
Commencing
January 1, 2008, and thereafter, the results of operations for tax purposes are measured on a nominal basis.
| 1. |
According to the Law for Economic Efficiency (Legislative
Amendments for Achieving Budget Objectives in the Budget Years 2017 and 2018) – 2016 (hereinafter – the “Economic Efficiency
Law”) c the corporate tax rate applicable to a preferred enterprise located in Development Zone A from
|
| 2. |
As of December 31, 2025, 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 |
F
- 31
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 15 | - | INCOME TAX (cont.) |
| C. |
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 Company with consolidated revenues
of less than NIS 10
billion. A Technological Preferred Enterprise which is located in areas other than Development Zone A will be subject to a tax rate of
12 %
on profits derived from intellectual property, and a Technological Preferred Enterprise in Development Zone A will be subject to tax rate
at a 7.5 %.
| 2. |
As of December 31, 2025, 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 |
| D. |
Israeli corporate tax
rates |
For
the years 2023, 2024 and 2025, 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
| E. |
Non-Israeli subsidiaries
|
Non-Israeli
subsidiaries are taxed according to the tax laws and rates in their country of residence. For example, Brazil mainly 34 %,
Mexico 30 %.
| F. |
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.
| G. |
Tax assessments
|
The
Company and certain Israeli subsidiaries have received final tax assessments through the year of 2022, one of our subsidiaries in Israel
has received final tax assessments through the 2023 tax year, one of the subsidiaries in Brazil has received final tax assessments through
the 2015 tax year. Some subsidiaries have not yet been assessed since incorporation.
| H. |
Carry
forward foreign tax credits and tax losses |
As
of December 31, 2025, there are no material losses carried forward that are likely to be used in the near future.
F
- 32
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 15 | - | INCOME TAX (cont.) |
| I. |
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:
|
| 1) |
A reconciliation of the accrual for income taxes
for the year ended December 31, 2025, to the amount computed by applying tax rates applicable to companies in Israel (see b(1) above),
and the actual tax expense after the adoption of ASU 2023-09 is as follows: | |
|
December
31, 2025 |
||||||||
|
(in
thousands) |
In Thousand
of US dollars
|
Percent
|
||||||
|
Deferred
taxes |
||||||||
|
Pretax income
|
|
|
%
| |||||
|
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 |
|
|
%
| |||||
|
Adjustment in respect
of tax rate deriving from “approved enterprises” |
(
|
)
|
(
|
)%
| ||||
|
Tax
related to previous years |
(
|
)
|
(
|
)%
| ||||
|
Others
|
(
|
)
|
(
|
)%
| ||||
|
|
|
%
| ||||||
| 2) |
A reconciliation of the accrual for income taxes
for the years ended December 31, 2024, and 2023 to the amount computed by applying tax rates applicable to companies in Israel (see b(1)
above), and the actual tax expense for years prior to the adoption of ASU 2023-09 is as follows: | |
|
(in
thousands) |
2024
|
2023
|
||||||
|
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 |
|
|
||||||
|
Adjustment
in respect of tax rate deriving from “approved enterprises” |
(
|
)
|
(
|
)
| ||||
|
Tax
related to previous years |
(
|
)
|
|
|||||
|
Others
|
|
|
||||||
|
|
|
|||||||
F
- 33
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 15 | - | INCOME TAX (cont.) |
| J. |
Summary of deferred taxes
Composition:
|
|
US
dollars |
||||||||
|
December
31, |
||||||||
|
(in
thousands) |
2025
|
2024
|
||||||
|
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) |
2025
|
2024
|
||||||
|
Deferred
income taxes included in long-term investments and other assets |
|
|
||||||
|
Deferred
income taxes included in long-term liabilities |
(
|
)
|
(
|
)
| ||||
|
|
|
|||||||
| K. |
Income before income
taxes is composed as follows:
|
|
US
dollars |
||||||||||||
|
Year
ended December 31, |
||||||||||||
|
(in
thousands) |
2025
|
2024
|
2023
|
|||||||||
|
The
Company and its Israeli subsidiaries |
|
|
|
|||||||||
|
Brazil
subsidiaries |
|
|
|
|||||||||
|
Rest
of the world subsidiaries |
|
|
(
|
)
| ||||||||
|
|
|
|
||||||||||
| L. |
Reconciliation of taxes
at statutory rate to our income tax expenses was as follows: |
|
US
dollars |
US
dollars |
US
dollars |
||||||||||||||||||||||
|
Year
ended
December
31, |
Year
ended
December
31, |
Year
ended
December
31, |
||||||||||||||||||||||
|
(in
thousands) |
2025
|
2024
|
2023
|
|||||||||||||||||||||
|
Tax
expenses
|
Tax
rate
|
Tax
expenses
|
Tax
rate
|
Tax
expenses
|
Tax
rate
|
|||||||||||||||||||
|
Israel
statutory income tax rate |
|
|
%
|
|
|
%
|
|
|
%
| |||||||||||||||
|
Foreign
tax effect |
||||||||||||||||||||||||
|
Brazil
|
|
|
%
|
|
|
%
|
|
|
%
| |||||||||||||||
|
Adjustment
in respect of tax rate deriving from “approved enterprises” |
(
|
)
|
(
|
)%
|
(
|
)
|
(
|
)%
|
(
|
)
|
(
|
)%
| ||||||||||||
|
Other
adjustments |
(
|
)
|
(
|
)%
|
(
|
)
|
(
|
)%
|
|
|
%
| |||||||||||||
|
|
|
%
|
|
|
%
|
|
|
%
| ||||||||||||||||
F
- 34
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 15 | - | INCOME TAX (cont.) |
| M. |
Uncertain tax positions
|
The
Company and its subsidiaries files income tax returns in Israel, US, and Latin America.
Reconciliation
of the beginning and ending amount of unrecognized tax benefits is as follows:
|
(in thousands)
|
US dollars |
|||
|
|
||||
|
Balance as
of January 1, 2024 |
|
|||
|
Changes during 2024:
|
||||
|
Increase related tax positions
of prior years |
|
|||
|
Translations differences related
to the current year |
(
|
) | ||
|
Balance as
of January 1, 2025 |
|
|||
|
Changes during 2025:
|
||||
|
Decrease related tax positions
of prior years |
(
|
) | ||
|
Translations differences related
to the current year |
|
|||
|
Balance as of December 31, 2025
|
|
|||
| 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, 2025, 2024 and 2023,
are as follows:
|
US
dollars |
||||||||||||
|
Year
ended December 31, |
||||||||||||
|
(in
thousands) |
2025
|
2024
|
2023
|
|||||||||
|
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) |
2025
|
2024
|
2023
|
|||||||||
|
Weighted
average number of shares used in the computation of basic and diluted earnings per share |
|
|
|
|||||||||
F
- 35
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 17 | - | RELATED PARTIES |
| A. |
The Company paid monthly consulting fees of NIS |
| B. |
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 the wholly owned subsidiary 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 258,000 ,
201,000 ,
201,000
and 143,000
respectively plus VAT (US$78,000 ,
US$63,000 ,
US$63,000
and US$45,000
respectively) linked to the consumer price index for December 2013. At the request of the service providers, part of the fixed monthly
pay may be granted through benefits, such as the provision of a company car and the payment of its maintenance costs and the cost of tax
resulting therefrom. The fixed monthly pay shall also include 25 days' vacation and sick days as provided by law. The service providers
shall also be entitled to payment or reimbursement of expenses, including hosting expenses, subsistence allowance abroad and participation
in work-related home telephone expenses. The service providers shall be entitled to Target-based Cash Incentives and Excess Return Cash
Incentives as detailed below. The agreement shall be in force for a period of 3 years (On December 12, 2022 the Company's general meeting
of shareholders has reapproved the compensation policy for additional 3 years) and may be terminated upon 180
days' advance notice of termination; however, the Company may terminate the agreement without an advance notice and without compensation
if the following shall occur: (a) The service provider is convicted of a criminal offense involving moral turpitude; (b) a final court
ruling (without the possibility of appeal) determines that The service provider has breached his fiduciary duty towards the Company; (c)
a final court ruling (without the possibility of appeal) determines that the service provider has materially breached the agreement through
the unauthorized disclosure of Company's secrets or competition with the Company.
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.
F
- 36
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 17 | - | RELATED PARTIES (cont.) |
| C. |
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 |
|
24,001
- 27,500 |
|
|
27,501-31,000
|
|
|
31,001-35,000
|
|
|
35,001-39,000
|
|
|
Above
39,001 |
|
"Minimum
Threshold" means, with respect to a particular calendar year, a minimum Company's Return on Equity of 15 %,
and a minimum company's Profit before Tax of USD 24
million.
| (*) |
Profit before tax target will not include adjustment
of the value of assets and obligations to their fair value in accordance with accounting standards. |
| • |
"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 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".
F
- 37
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 17 | - | RELATED PARTIES (cont.) |
| C. |
(cont.) | |
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 -day
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 cases, 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.
| • |
In 2025, 2024 and 2023 Executive Offices Holders
were entitled to Target based cash incentives at the maximum rate of (
|
The
table below summarizes the aggregate amounts paid to the company's Executive Office Holders:
|
US
dollars |
||||||||||||
|
Year
ended December 31, |
||||||||||||
|
(in
thousands) |
2025
|
2024
|
2023
|
|||||||||
|
Izzy
Sheratzky |
|
|
|
|||||||||
|
Eyal
Sheratzky |
|
|
|
|||||||||
|
Nir
Sheratzky |
|
|
|
|||||||||
|
Gil
Sheratzky |
|
|
|
|||||||||
F
- 38
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 18 | - | SEGMENT REPORTING |
| A. |
General information:
|
The
operations of the Company 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 Company.
The
reportable segments are viewed and evaluated separately to determine key operating decisions and to assess their performance by the Company's
Co-Chief Executive Officers which have been determined to be the company's Chief Operating Decision Maker (the “CODMs”), since
the marketing strategies, processes and expected long term financial performances of the segments are different. See also C below.
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
Company 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
- 39
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: |
|
US
dollars |
||||||||||||
|
(in
thousands) |
Telematics
services |
Telematics
products |
Total
|
|||||||||
|
Year
ended December 31, 2025 |
||||||||||||
|
Revenues
|
|
|
|
|||||||||
|
Cost
of product |
|
(
|
)
|
(
|
)
| |||||||
|
Salaries
|
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Other
segment items (1) |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Operating
income |
|
|
|
|||||||||
|
Assets
|
|
|
|
|||||||||
|
Goodwill
|
|
|
|
|||||||||
|
Expenditure
for assets |
|
|
|
|||||||||
|
Depreciation
and amortization |
|
|
|
|||||||||
|
Year
ended December 31, 2024 |
||||||||||||
|
Revenues
|
|
|
|
|||||||||
|
Cost
of product |
|
(
|
)
|
(
|
)
| |||||||
|
Salaries
|
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Other
segment items (1) |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Operating
income |
|
|
|
|||||||||
|
Assets
|
|
|
|
|||||||||
|
Goodwill
|
|
|
|
|||||||||
|
Expenditure
for assets |
|
|
|
|||||||||
|
Depreciation
and amortization |
|
|
|
|||||||||
|
Year
ended December 31, 2023 |
||||||||||||
|
Revenues
|
|
|
|
|||||||||
|
Cost
of product |
|
(
|
)
|
(
|
)
| |||||||
|
Salaries
|
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Other
segment items (1) |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Operating
income |
|
|
|
|||||||||
|
Assets
|
|
|
|
|||||||||
|
Goodwill
|
|
|
|
|||||||||
|
Expenditure
for assets |
|
|
|
|||||||||
|
Depreciation
and amortization |
|
|
|
|||||||||
| (1) |
Other segment items included in Segment operating
income primarily include salaries, telematics services and products costs that cannot be directly allocated, research and development,
Selling and marketing expenses and general and administrative expenses, etc. |
F
- 40
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 18 | - | SEGMENT REPORTING (cont.) |
| C. |
Information about reported
segment profit or loss and assets: |
The
Company's country managers and Deputy CEO's are reporting to the company's CODMs. The CODMs evaluate the segment’s operating performance
and allocate resources for each of the two reportable segments based on operating profit. The CODMs use segment operating income in the
forecasting process. The CODMs consider forecast to-actual variances for operating income for evaluating the performance of each segment
and making decisions about allocating capital and other resources to each segment. The measure of segment assets is reported on the consolidated
balance sheets as total assets. The accounting policies of the reportable segments are the same as those described in the summary of significant
accounting policies. 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 at the enterprise level.
F
- 41
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: |
|
US
dollars |
||||||||||||
|
Year
ended December 31, |
||||||||||||
|
(in
thousands) |
2025
|
2024
|
2023
|
|||||||||
|
Total
revenues of reportable segment and consolidated revenues |
|
|
|
|||||||||
|
Operating
income |
||||||||||||
|
Total
operating income for reportable segments |
|
|
|
|||||||||
|
Unallocated
amounts: |
||||||||||||
|
Financing
income, net |
(
|
)
|
|
(
|
)
| |||||||
|
Other
expenses, net |
(
|
)
|
|
|
||||||||
|
Consolidated
income before taxes on income |
|
|
|
|||||||||
|
Assets
|
||||||||||||
|
Total
assets for reportable segments (*) |
|
|
|
|||||||||
|
Other
unallocated amounts: |
||||||||||||
|
Current
assets |
|
|
|
|||||||||
|
Investments
in affiliated and other companies |
|
|
|
|||||||||
|
Property
and equipment, net |
|
|
|
|||||||||
|
Other
unallocated amounts |
|
|
|
|||||||||
|
Consolidated
total assets (at year end) |
|
|
|
|||||||||
|
Other
significant items |
||||||||||||
|
Total
expenditure for assets of reportable segments |
|
|
|
|||||||||
|
Unallocated
amounts |
|
|
|
|||||||||
|
Consolidated
total expenditures for assets |
|
|
|
|||||||||
|
Total
depreciation, amortization and impairment for reportable segments |
|
|
|
|||||||||
|
Unallocated
amounts |
|
|
|
|||||||||
|
Consolidated
total depreciation, amortization and impairment |
|
|
|
|||||||||
| (*) |
Including goodwill. |
F
- 42
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 18 | - | SEGMENT REPORTING (cont.) |
| E. |
Geographic information
|
|
Revenues
|
||||||||||||
|
Year
ended December 31, |
||||||||||||
|
(in
thousands) |
2025
|
2024
|
2023
|
|||||||||
|
Israel
|
|
|
|
|||||||||
|
Brazil
|
|
|
|
|||||||||
|
Others
|
|
|
|
|||||||||
|
Total
|
|
|
|
|||||||||
|
Property
and equipment, net |
||||||||||||
|
December
31, |
||||||||||||
|
(in
thousands) |
2025
|
2024
|
2023
|
|||||||||
|
Israel
|
|
|
|
|||||||||
|
Brazil
|
|
|
|
|||||||||
|
Others
|
|
|
|
|||||||||
|
Total
|
|
|
|
|||||||||
| - |
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
2023, 2024 and 2025 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, 2024 and 2025:
|
US
dollars |
||||||||||||||||||||||||
|
Reportable
segments result of operations |
||||||||||||||||||||||||
|
(in
thousands) |
Year
ended December 31, 2024 |
Year
ended December 31, 2025 |
||||||||||||||||||||||
|
Telematics
services |
Telematics
products |
Total
|
Telematics
services |
Telematics
products |
Total
|
|||||||||||||||||||
|
At
a point of time |
|
|
|
|
|
|
||||||||||||||||||
|
Over
a period of time |
|
|
|
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
In
the following table, revenue is disaggregated by primary major product lines, and timing of revenue recognition for the year ended December
31, 2023:
|
US
dollars |
||||||||||||
|
Reportable
segments result of operations |
||||||||||||
|
(in
thousands) |
Year
ended December 31, 2023 |
|||||||||||
|
Telematics
services |
Telematics
products |
Total
|
||||||||||
|
At
a point of time |
|
|
|
|||||||||
|
Over
a period of time |
|
|
|
|||||||||
|
|
|
|
||||||||||
F
- 43
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| 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 Company’s cash and cash equivalents, deposits in short-term investments (and investments in trading marketable securities),
as of December 31, 2025 and 2024, 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 Company’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 Company’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. Regarding the activity
in 2023-2025 see B below.
| B. |
Foreign exchange risk
management |
The
Company 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
2023 and 2025 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. As of December 31, 2025, 6 transactions that originated
in 2025 remain outstanding.
As
of December 31, 2024 there were no material forward exchange contracts outstanding.
During
2025, all the financial derivatives were designated and accounted for as hedging instruments.
The
following table summarizes a tabular disclosure of (a) fair values of derivative instruments in the balance sheets and (b) the effect
of derivative instruments in the statements of income:
Fair
values of derivative instruments:
|
Assets
derivatives | ||
|
As
of December 31, 2025 |
Thousands
of US dollars | |
|
Balance
sheet location |
Fair
value
| |
|
Derivatives
designated as hedging instruments: |
||
|
Foreign
exchange contracts |
Other
current liabilities |
|
F
- 44
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
| NOTE 19 | - | FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT (cont.) |
| B. |
Foreign exchange risk
management (cont.) | |
Amounts
reclassified to statement of comprehensive income (loss):
|
Derivatives
designated
as
hedging instruments |
Location
of loss recognized in income |
Amount
of gain recognized in income | |
|
Year
ended December 31, 2025 |
Thousands
of US dollars | ||
|
Foreign exchange contracts
|
Unrealized losses in
respect of derivative financial instruments designated for cash flow hedge |
(
|
Amounts
reclassified to statement of comprehensive income (loss):
|
Derivatives
designated
as
hedging instruments |
Location
of loss recognized in income |
Amount
of gain recognized in income | |
|
Year
ended December 31, 2024 |
Thousands
of US dollars | ||
|
Foreign exchange contracts
|
Unrealized gain in respect
of derivative financial instruments designated for cash flow hedge |
|
As
of December 31, 2025, the notional amount of forward exchange contract with respect to cash flow hedge of anticipated transactions amounted
to US$ 7,500
thousand (US$ 1,250
thousand per month for the next 6 months).
| 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 securities
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.
The
fair value of the financial instruments included in the working capital of the Company (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.
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).
F
- 45
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 (cont.) | |
The
Company's financial assets measured at fair value on a recurring basis consisted of the following types of instruments as of December 31,
2025 and 2024:
|
December
31, 2025 |
||||||||||||
|
(in
thousands) |
Level
1 |
Level
2 |
Level
3 |
|||||||||
|
Trading securities
|
|
|
|
|||||||||
|
Total
|
|
|
|
|||||||||
|
December
31, 2024 |
||||||||||||
|
(in
thousands) |
Level
1 |
Level
2 |
Level
3 |
|||||||||
|
Trading securities
|
|
|
|
|||||||||
|
Total
|
|
|
|
|||||||||
===========================
==============
F
- 46
Exhibit 2.4
Description of Securities
Ituran Location & Control Ltd., an Israeli corporation (the “Company,” “we” or “our”), currently has one class of securities registered under Section 12 of the Securities Exchange Act of 1934,
as amended, the Company’s ordinary shares, par value NIS 0.331/3 per share. The
following is a summary of some of the terms of our ordinary shares based on our articles of association, as may be amended and restated from time to time, and Israeli law.
The following summary is not complete and is subject to, and is qualified in its entirety by reference to, the provisions of our articles of association and Israeli law.
Authorized Share Capital
Our authorized share capital is of NIS 60,000,000 , divided into
60,000,000 ordinary shares, par value NIS 0.331/3 per share.
MEMORANDUM AND ARTICLES OF ASSOCIATION
Our number with the Israeli Registrar of Companies is 52-004381-1. Our purpose appears in our memorandum of association and includes engaging in any lawful business.
Articles of Association; Israeli Companies Law
Articles of Association
Pursuant to our articles of association our objectives are to engage in any lawful business and our purpose is to operate in accordance with business considerations to maximize our profits. We may take
into consideration, inter alia, the interests of our creditors, employee and the public interest. Please also see a summarized description of our purposes and activities under the caption “Overview” in Item B.4. .
Our Corporate Practice Under the Israeli Companies Law
Approval of Transactions under Israeli Law
Directors and executive officers
Fiduciary duties
Israeli law codifies the fiduciary duties that office holders owe to a company. An office holder is defined as any director, managing director, general manager, chief executive officer, executive vice
president, vice president, other manager directly subordinate to the general manager or any other person assuming the responsibilities of any of these positions regardless of that person’s title.
An office holder’s fiduciary duties consist of a duty of loyalty and a duty of care. The duty of loyalty requires the office holder to avoid any conflict of interest between the office holder’s
position in the company and personal affairs, and proscribes any competition with the company or the exploitation of any business opportunity of the company in order to receive personal advantage for himself or others. This duty also requires him or
her to reveal to the company any information or documents relating to the company’s affairs that the office holder has received due to his or her position as an office holder. The duty of care requires an office holder to act with a level of care
that a reasonable office holder in the same position would employ under the same circumstances. This includes the duty to use reasonable means to obtain information regarding the advisability of a given action submitted for his or her approval or
performed by virtue of his or her position and all other relevant information pertaining to these actions.
Disclosure of Personal interest
Israeli law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may have and all related material information known to him or her concerning
any existing or proposed transaction with the company. A personal interest, as defined by the Israeli Companies Law, includes a personal interest of any person in an act or transaction of the company, including a personal interest of one’s relative
or of a corporate body in which such person or a relative of such person is a 5% or greater shareholder, a holder of 5% or more of the voting rights, a director or general manager, or in which he or she has the right to appoint at least one director
or the general manager, but excluding a personal interest stemming solely from one’s ownership of shares in the company. A personal interest also includes personal interest of a person voting pursuant to a proxy given by another person even if the
other person does not have personal interest, regardless of whether the person given the proxy to vote at the meeting is given directions to vote in a certain manner or given discretion to vote independently. An office holder must disclose his
personal interest no later than the first meeting of the company’s board of directors that discusses the particular transaction. An office holder is not obliged to disclose such information if the personal interest of the office holder derives solely
of the personal interest of his or her relative in a transaction that is not an “extraordinary transaction.” The Israeli Companies Law defines an “extraordinary transaction” as a transaction not in the ordinary course of business, not on market terms
or that is likely to have a material impact on the company’s profitability, assets or liabilities. The term “relative” is defined by the Israeli Companies Law as a spouse, sibling, parent, grandparent, descendent, and descendent, brother, sister or
parent of a spouse or the spouse of any of the foregoing.
The Israeli Companies Law provides that once an office holder has complied with the disclosure requirement, a company may approve a transaction between the company and the office holder or a third
party in which the office holder has a personal interest, or approve an action by the office holder that would otherwise be deemed a breach of duty of loyalty. Such a transaction generally requires approval by the board of directors, unless the
articles of association provide otherwise. Our articles of association do not provide otherwise. If the transaction considered is an extraordinary transaction, audit committee approval is required prior to approval by the board of directors. For the
approval of arrangements regarding the compensation, indemnification or insurance of executive officers and directors, see “Compensation arrangements” below. A company may not approve a transaction or action that is adverse to the company’s interest
or that is not performed by the office holder in good faith.
A director who has a personal interest in a matter involving an extraordinary transaction, as defined in the Israeli Companies Law, which is considered at a meeting of the board of directors or the
audit committee may not attend that meeting or vote on that matter, unless a majority of the directors or members of the audit committee, as applicable, also have a personal interest in the matter. Any transaction in which a majority of the directors
has a personal interest requires shareholder approval.
Compensation arrangements
Subject to the provisions relating to related-party transactions as described below, the terms of office of office holders other than the chief executive officer and directors, require the approval of
both our compensation committee and the board of directors; and the terms of office of chief executive officers and directors require the approval of the compensation committee, the board of directors and our shareholders. However due to the change
in the Israeli Company law, from February 2016, the extension or renewal of terms of office of chief executive officer, which terms are not improving the previous terms or not significantly different, and are according to the compensation policy,
shall not require approval by the shareholders meeting. In addition, according to recent changes in Israeli Company law, chief executive officer can decide upon insignificant change in the terms of office of his subordinate officers, subject to
additional conditions and requirement to include such right in the compensation policy of the company (such requirement was fulfilled in our renewed compensation policy which was approved by our shareholder’s committee on November 7, 2016). In
addition, according to Israeli Company Regulations (Relaxations in Transactions with Interested Parties) 5760-2000, transaction with board members and chief executive, on their term of office, which is according to the compensation policy and
according to terms of office which are not better than the terms of office of previous holder of such position or there is no significant difference between the two engagements and relevant circumstances, including the scope of employment, may be
approved by our compensation committee and the board of directors, and will not require general shareholders meeting approval until the next general meeting which will be announced by the company. “terms of office” includes the grant of an exemption,
insurance, undertaking to indemnify or indemnification, retirement compensation, and any benefit, other payment or an undertaking to pay, which are granted by virtue of serving as an office holder.See also Item 6B :"Compensation"/ :"
".
Shareholders
Controlling shareholders
Pursuant to Israeli law, the disclosure requirements regarding personal interests that apply to an office holder also apply to a “controlling shareholder” of a public company. A “controlling
shareholder” is a shareholder who has the ability to direct the activities of a company, and for the purpose of the disclosure requirements and approval of related party transactions, the term includes any shareholder holding 25% or more of the
voting rights if no other shareholder holds more than 50% of the voting rights in the company. Two or more shareholders with a personal interest in the approval of the same transaction are deemed to be one shareholder. Currently there is no
shareholder of us who holds more than 25% of the voting rights.
Required approval
Extraordinary transactions of a public company and a controlling shareholder, or in which a controlling shareholder has a personal interest, including a private placement in which a controlling
shareholder has a personal interest, a transaction concerning the terms of compensation of the controlling shareholder or the controlling shareholder’s relative, directly or indirectly, through a company controlled by him in respect of receipt of
services from same and if he is an office holder or an employee – the terms of his employment, generally require the approval of the audit committee (or with respect to Terms of Office and Employment – the compensation committee), the board of
directors and the shareholders, in that order. If required, shareholder approval must include the majority of shares voted at the meeting. In addition, either:
| ◾ |
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.
|
Transactions for a period of more than three years generally need to be brought for approval in accordance with the above procedures every three years.
A Shareholder is required according to Israeli Companies Law in certain votes on transactions to disclose his/her personal interest. Failure to disclose such interest will invalidate the casted vote of
such shareholder and the Company shall not count it. According to our Articles of Association, a Shareholder seeking to vote using a proxy with respect to a resolution which requires that the majority for its adoption include at least a specified
majority of the votes of all those not having a personal interest (as defined in the Companies Law) shall mark on the Proxy, if he or she has Personal Interest in such resolution, and in such case the Company will not count his/her vote for such
resolution. In event the shareholder will vote by other means than Proxy, he/she shall notify the company of his/her Personal Interest in writing prior to the time of the General Meeting. Such notice either in Proxy or in writing (as applicable)
shall be a condition for the right to vote with respect to a resolution which requires that the majority for its adoption include at least a specified majority of the votes of all those not having a Personal Interest.
Shareholder duties
Pursuant to the Israeli Companies Law, a shareholder has a duty to act in good faith and in customary way toward the company and other shareholders and to refrain from abusing his or her power in the
company, including, among other things, in voting at the general meeting of shareholders and class meetings with respect to the following matters:
| ◾ |
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.
|
In addition, specified shareholders have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that it possesses the power to
determine the outcome of a shareholder vote and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Israeli Companies Law does not describe the
substance of this duty except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness.
Anti take-over provisions; mergers and acquisitions under Israeli Law
Tender offers
Full Tender Offer. A person wishing to acquire shares or any class of shares, or voting rights of a publicly traded Israeli company and who would, as a result,
hold over 90% of the company’s issued and outstanding share capital or of a class of shares that are listed, is required by the Israeli Companies Law to make a tender offer to all of the company’s shareholders or all shareholders of such class of
shares, as applicable, for the purchase of all of the issued and outstanding shares of the company or of that class of shares, as applicable. If the shareholders who do not respond to the offer hold less than 5% of the issued share capital of the
company or of that class of shares, as applicable, and the majority of shareholders who are disinterested accepted the offer, then all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law
(however, full tender offer shall be accepted if shareholders who objected to the offer constituted less than 2% of the issued and outstanding share capital of the company to which the offer relates). However, the shareholders may petition the court
to determine that the consideration for the shares constituted less than their fair value and that their fair value should be paid to the offerees. If the full tender offer is not accepted as described above, the acquirer may not acquire shares from
shareholders who accepted the tender offer that would provide it over 90% of the company’s issued and outstanding share capital or of the shares comprising such class, as applicable.
Special Tender Offer. The Israeli Companies Law provides that an acquisition of shares of a public company must be made by means of a tender offer if as a
result of the acquisition the purchaser would become a holder of 25% or more of the voting rights of the company. This rule does not apply if there is already another holder of 25% or more of the voting rights of the company. Similarly, the Israeli
Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of more than 45% of the voting rights of the company, if there is
no other holder of more than 45% of the voting rights of the company. The foregoing provisions do not apply to:
| ◾ |
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.
|
In the event that a special tender offer is made, a company’s board of directors is required to express its opinion on the advisability of the offer or shall abstain from expressing any opinion if it
is unable to do so, provided that it gives the reasons for its abstention. An office holder in a target company who, in his or her capacity as an office holder, performs an action the purpose of which is to cause the failure of an existing or
foreseeable special tender offer or is to impair the chances of its acceptance, is liable to the potential purchaser and shareholders for damages, unless such office holder acted in good faith and had reasonable grounds to believe he or she was
acting for the benefit of the company. However, office holders of the target company may negotiate with the potential purchaser in order to improve the terms of the special tender offer and may further negotiate with third parties in order to obtain
a competing offer.
If a special tender offer was accepted by a majority of the shareholders who announced their stand on such offer, then shareholders who did not announce their stand or who had objected to the offer may
accept the offer within four days of the last day set for the acceptance of the offer.
In the event that a special tender offer is accepted, the purchaser or any person or entity controlling it at the time of the offer or under common control with the purchaser or such controlling person
or entity shall refrain from making a subsequent tender offer for the purchase of shares of the target company and cannot execute a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such
person or entity undertook to effect such an offer or merger in the initial special tender offer.
Regulations promulgated under the Israeli Companies Law provide that these tender offer requirements do not apply to companies whose shares are listed for trading outside of Israel if, according to the
law in the country in which the shares are traded or the rules and regulations of the stock exchange on which the shares are traded:
| • |
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.
|
Merger
The Israeli Companies Law permits merger transactions if approved by each party’s board of directors and shareholders. Pursuant to the Israeli Companies Law and our articles of association as currently
in effect, merger transactions may be approved by holders of a simple majority of our shares present, in person or by proxy, at a general meeting and voting on the transaction. In determining whether the required majority has approved the merger in
the event of “cross ownership” between the merging companies, namely, if our shares are held by the other party to the merger, or by any person holding at least 25% of the outstanding voting shares or 25% of the means of appointing directors of the
other party to the merger, then a vote against the merger by holders of the majority of the shares present and voting, excluding shares held by the other party or by such person, or anyone acting on behalf of either of them, including any of their
affiliates, is sufficient to reject the merger transaction. If the transaction would have been approved but for the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of
at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and the consideration offered to the shareholders. Upon the request of a creditor of
either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the
parties to the merger. In addition, a merger may not be consummated unless at least 50 days have passed from the time that a proposal for approval of the merger has been filed with the Israeli Registrar of Companies and 30 days have passed from the
date of the approval of the shareholders of the merging companies.
The Israeli Companies Law further provides that the foregoing approval requirements will not apply to shareholders of a wholly owned subsidiary in a roll-up merger transaction, or to the shareholders
of the acquirer if:
| ◾ |
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.
|
For these purposes, “controlling shareholder” is a shareholder who has the ability to direct the activities of a company, including a shareholder who owns 25% or more of the voting rights if no other
shareholder owns more than 50% of the voting rights.
The Israeli Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providing certain preferred or additional rights to
voting, distributions or other matters and shares having preemptive rights. In the future, if we do create and issue a class of shares other than our ordinary shares, such class of shares, depending on the specific rights that may be attached to
them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of
association. Shareholders voting at such a meeting will be subject to the restrictions under the Israeli Companies Law. See “Voting, Shareholder Meetings and Resolutions” below.
Dividend and Liquidation Rights.
We may declare a dividend to be paid to the holders of our ordinary shares according to their rights and interests in our profits. If we dissolve, after satisfaction of liabilities to creditors, our
assets will be distributed to the holders of our ordinary shares in proportion to their shareholdings. This right may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential
rights that may be authorized in the future. Our articles of association provide that shareholder approval would not be required for the declaration of dividends. Dividends may only be paid out of our retained earnings or “profits” accrued over a
period of two years, as defined in the Israeli Companies Law, whichever is greater, according to the last reviewed or audited financial reports of the company, provided that the date of the financial reports is not more than six months before the
date of distribution (the “profits” test), and further provided that there is no reasonable concern that a payment of a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due, as determined by our Board
of Directors. However, if we do not meet the profit requirement, a court may allow us to distribute a dividend, as long as the court is convinced that there is no reasonable risk that a distribution might prevent us from being able to meet our
existing and anticipated obligations as they become due. For more information on our ability to grant or declare dividends, see Item 8.A – Financial Information under the caption “Dividend Distribution Policy” .
Voting, Shareholder Meetings and Resolutions.
As a foreign private issuer, we have elected to follow our home country practices in lieu of the Nasdaq Marketplace Rule requiring an issuer to hold its annual meeting of its shareholders no later than
one year after the end of the issuer’s fiscal year-end. Specifically, according to the Israeli Companies Law, we are required to hold an annual general meeting of our shareholders once every calendar year, and no later than 15 months after the date
of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Our Board of Directors may call special meetings whenever it sees fit, at such time and place, within or
outside of Israel, as it may determine. In addition, the Israeli Companies Law provides that the board of directors of a public company is required to convene a special meeting upon the request of (a) any two directors of the company or one quarter
of its board of directors or (b) one or more shareholders holding, in the aggregate, (i) 5% of the outstanding shares of the company and 1% of the voting power in the company or (ii) 5% of the voting power in the company.
Pursuant to our articles of association, shareholders are entitled to participate and vote at general meetings and are the shareholders of record on a date to be decided by our Board of Directors,
provided that such date is not more than 40 days, nor less than four days, prior to the date of the general meeting, except as otherwise permitted by the Israeli Companies Law. Furthermore, the Israeli Companies Law dictates that resolutions
regarding the following matters must be passed at a general meeting of our shareholders:
| ◾ |
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.
|
The Israeli Companies Law and our articles of association require that a notice of any annual or special shareholders meeting will be provided 21 days prior to the meeting, except where the regulation
prescribe for a period of not less than 35 days if the agenda includes certain resolutions to be adopted at the general meeting.
Pursuant to our articles of association, holders of ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of the shareholders. These voting rights may be
affected by the grant of any special voting rights to the holders of a class of shares with preferential rights that we may authorize in the future. The quorum required for our ordinary meetings of shareholders consists of at least two shareholders
present in person or by proxy, who hold or represent between them at least thirty-three and one-third percent of the total outstanding voting rights. A meeting adjourned for lack of a quorum generally is adjourned to the same day in the following
week at the same time and place or on a later date specified in the summons or notice of the meeting. At the reconvened meeting, any number of our shareholders present in person or by proxy shall constitute a lawful quorum.
Our articles of association provide that, other than with respect to the amendment of the provisions of the articles of association with respect to the appointment of directors and a resolution for
removal of a director and the resolution of removal of a director, which action requires a majority vote of 75%, all resolutions of the shareholders require a simple majority.
Israeli law does not provide for public companies such as ours to have shareholder resolutions adopted by means of a written consent in lieu of a shareholders meeting. The Israeli Companies Law
provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its other shareholders, must act in good faith and in an acceptable manner and avoid abusing his or her powers. This is
required, among other things, when voting at general meetings on matters such as changes to the articles of association, increasing the company’s registered capital, mergers and approval of related-party transactions. In addition, pursuant to the
Israeli Companies Law, any controlling shareholder, any shareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under the company’s articles of association, can appoint or prevent the appointment
of an office holder, is required to act with fairness towards the company.
An ordinary resolution requires approval by the holders of a simple majority of the voting rights represented at the meeting, in person, by proxy or by written ballot, and voting on the resolution.
Under the Israeli Companies Law, unless otherwise provided in the articles of association or applicable law, all resolutions of the shareholders require a simple majority. A resolution for the voluntary winding up of the company requires the approval
of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by written ballot and voting on the resolution. For information regarding the majority required for approval of related party transactions, see “Approval of
related party transactions under Israeli law” above.
Transfer of Shares and Notice.
Our ordinary shares that are fully paid are issued in registered form and may be freely transferred under our articles of association unless the transfer is restricted or prohibited by applicable law
or rules of a stock exchange on which the shares are traded.
Election of Directors.
Our ordinary shares do not have cumulative voting rights in the election of directors. As a result, the holders of a majority of the voting power represented at a shareholders
meeting have the power to elect all of our directors, subject to the special approval requirements for external directors described under the caption “External directors” in Item 6.C. – “Board Practices” . Pursuant to the Israeli Companies Law, the
procedures for the appointment and removal and the term of office of directors, other than external directors, may be contained in the articles of association of a company. Our articles of association provide for staggered terms for directors. This
provision may be amended only by a vote of 75% of our shares voting at a meeting of shareholders. The appointing mechanism of our directors is further described under the caption “Shareholders Agreement and Articles of Association of Moked Ituran
Ltd.” in item 6.A. – “Directors and Senior Management” .
Insurance, Indemnification and Exculpation of Directors and Officers.
Under the Israeli Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from
liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our articles of association do
not include such a provision. An Israeli company may not exculpate a director for liability arising out of a breach of duty of care in respect of a prohibited dividend or distribution to shareholders.
Under the Israeli Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed as an office holder, either in advance of an
event or following an event, provided a provision authorizing such indemnification is included in its articles of association:
| • |
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.
|
An Israeli company may not indemnify or insure an office holder against any of the following:
| • |
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.
|
Under the Israeli Companies Law, exculpation, indemnification and insurance of office holders must be approved by our compensation committee and our board of directors and, in respect to our chief
executive officer, directors and controlling persons, by our shareholders. However, due to the change in the Israeli Company law, from February 2016, the extension or renewal of terms of office (which includes exculpation, indemnification and
insurance) of chief executive officer, which terms are not improving the previous terms or not significantly different, and are according to the compensation policy, shall not require approval by the shareholders meeting. In addition, according to
changes in Israeli Company law from March 2016, chief executive officer can decide upon insignificant change in the terms of office of his subordinate officers, subject to additional conditions and requirement to include such right in the
compensation policy of the company.
Our articles of association allow us to indemnify and ensure our office holders to the fullest extent permitted by the Israeli Companies Law. Our articles of association also allow us to insure or
indemnify any person who is not an office holder, including any employee, agent, consultant or contractor who is not an office holder.
We currently have directors’ and officers’ liability insurance covering our officers and directors (including the officers and directors of our subsidiaries) against certain claims. No claims for
liability have been filed under this policy to date.
Our compensation committee, board of directors and shareholders have resolved to indemnify our directors and officers to the fullest extent permitted by law and by our articles of association for
liabilities that are of certain enumerated types of events, subject to an aggregate sum equal to 25% of the shareholders equity outstanding at the time a claim for identification is made as indicated by our then latest financial statements (which sum
also includes all insurance amounts received by such directors and officers under directors and officers insurance policies maintained by us). For further details, see Item 7.B – Related Party Transactions above.
Change in Capital.
Our articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Israeli Companies Law and must be approved by a resolution duly
passed by our shareholders at a general meeting and voting on such change in the capital. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained
earnings and profits and an issuance of shares for less than their nominal value, require a resolution of the Board of Directors and court approval.
Exhibit 4.8
ITURAN LOCATION & CONTROL LTD.
COMPENSATION POLICY
| 1. |
Preamble
|
| 1.1. |
Legal Framework: this Compensation Policy of Ituran Location & Control Ltd. (this "Policy") is adopted in accordance with the requirements of Section
267a(a) of the Israeli Companies Law, 5759-1999 (the “Companies Law”); and its interpretation and implementation are subject to the provisions thereof, as well as the provisions of the Company's
Articles of Association.
|
| 1.2. |
Adoption and Amendment: this Policy was approved by the Board of Directors (the "Board") of Ituran Location & Control Ltd. (the “Company”)in September and October of 2013, following the approval and recommendation of the Company’s Compensation Committee (the “Committee”). Any amendment to this Policy shall be
recommended by the Committee and approved by the Board. This Policy and any amendment thereof shall be adopted by the Company's shareholders as prescribed by and subject to the provisions of the Companies Law.
|
| 1.3. |
Application: this Policy shall apply to any compensation arrangement of Executive Officers and Non-executive Officers (as defined below, and collectively referred to as "Officers"), which is approved following this Policy's adoption pursuant to the provisions of the Companies Law.
|
This Policy does not intend to amend any Officer's existing terms of office; nor to bestow any Officer with a right to receive the compensation, or any
element thereof set forth herein. The specific compensation of each Officer shall be separately determined in accordance with the relevant provisions of the Companies Law and the regulations promulgated thereunder.
| 1.4. |
Term: this Policy shall be in effect for a period of three (3) years from the date of its adoption pursuant to the provisions of the Companies Law; or for a shorter period to the extent the
Committee and the Board resolve to amend it.
|
| 1.5. |
Supervision and Control: The Committee and the Board shall periodically review this Policy and monitor its implementation to ensure that its provisions and implementation meet the goals set forth in
Section 2 below and to consider whether it requires revisions in view of changes in circumstances or the law.
|
| 2. |
Principles of the Policy
|
| 2.1. |
Goals: we strongly believe that our business success is the result of the excellence of our human resources and their devotion to the achievement of the Company's goals. Therefore, our Compensation
Policy is aimed at achieving the following goals:
|
| 2.1.1. |
Retain, motivate and attract experienced and high quality personnel who will continue to lead the Company and contribute to its success;
|
| 2.1.2. |
Offer Officers a compensation package, which will align their incentives with those of the Company and its shareholders;
|
| 2.1.3. |
Motivate our Officers to achieve short- and long-term goals of the Company, while avoiding undue pressure to take excessive risks;
|
| 2.1.4. |
Reward Officers for superior individual and corporate performance;
|
| 2.1.5. |
Compensate Officers equitably in relation to one another in view of their role and responsibilities, skills, expertise, achievements and seniority;
|
| 2.1.6. |
Establish an appropriate balance between various compensation components; and
|
| 2.1.7. |
Provide our Compensation Committee and Board with adequate measures and flexibility to tailor each of our Officers' compensation package.
|
| 2.2. |
Executive and Non-Executive Officers:
|
| 2.2.1. |
This Policy regulates the compensation of Executive Officers and Non-executive Officers. The term "Executive Officers" means Officer Holders of the Company ("Nosei Misra", as such term is defined
in the Companies Law) who serve as the Company's President, Chief Executive Officer(s) ("CEO(s)") and other executives who are deemed Office Holders of the Company, as well as Office Holders of the
Company's Israeli wholly owned subsidiaries, provided they report to the CEO ("Business Unit Managers"); while the term "Non-executive Officers" means the
Company's directors who do not serve as Executive Officers.
|
| 2.2.2. |
An Officer may be engaged as an employee of the Company or through a personal management company, as an independent contractor.
|
| 2.2.3. |
Non-significant change, which is within the terms of this Policy, in the compensation of Executive Officers provided they are included in Section 272(c) of the Companies Law, who report to the CEO
(including the Business Unit Managers) ("Officers Reporting to CEO"), can be approved solely by the CEO.
|
Factors that should be considered when determining Executive Officers' Officers' compensation:
2
| 2.3.1. |
The Executive Officer’s education, skills, professional experience, expertise and achievements, both prior to and during his/her engagement with the Company;
|
| 2.3.2. |
The Executive Officer’s position, area(s) of responsibility and tenure with the Company;
|
| 2.3.3. |
Past compensation agreements of the Executive Officers, including prior to joining the Company;
|
| 2.3.4. |
The Company's personnel needs as compared to the availability of such personnel in the market;
|
| 2.3.5. |
The Executive Officer's actual and/or potential contribution to the Company's goals;
|
| 2.3.6. |
The nature of the industry in which the Company operates;
|
| 2.3.7. |
Fixed compensation data of other public companies with appropriate similarities to the Company, as shall be set forth by the Committee ("Peer Companies"), relating, as much as practicable, to the
particular role being considered; it being clarified that the Committee and the Board currently view the market capitalization of companies included in the TA 100, RUSSEL 2000 and FTSE AIM All-Share indexes as most relevant for the purposes
of designating Peer Companies, however, other similarities, such as equity, revenues and field of activity may also be considered1; and
|
| 2.3.8. |
Past compensation practices of the Company.
|
| 2.4. |
Components of Compensation: an Executive Officer's compensation package shall be composed of some or all of the following components:
|
| 2.4.1. |
Base Pay;
|
| 2.4.2. |
Expenses;
|
| 2.4.3. |
Benefits;
|
| 2.4.4. |
Compensation upon termination of service or employment;
|
| 2.4.5. |
Indemnification and Directors & Officers Insurance;
|
| 2.4.6. |
Target-based cash incentives;
|
1 For example, for the purposes of this Policy, the Company considered Africa-Israel Investments Ltd., Kamada Ltd., Hadera Paper Ltd., ORBCOMM Inc., CalAmp Corp. and
Telit Communications PLC., among others, as Peer Companies.
3
| 2.4.7. |
Discretionary cash incentives; and
|
| 2.4.8. |
Excess return cash incentives.
|
Components 2.4.1 through 2.4.5 shall be referred to as "fixed compensation" while components 2.4.6 through 2.4.8 shall be referred to as "variable
compensation."
| 2.5. |
Fix to Variable Pay Ratio: assuming maximum grants of cash incentives, an Executive Officer's fixed compensation shall constitute not less than 25% of his/her total compensation package (without
regard to the value of components 2.4.2 and 2.4.5).
|
| 2.6. |
Internal Compensation Ratio: in the process of composing this Policy, the Committee and the Board have examined the ratios between overall compensation of the Officers and the average and median
salary of the other employees of the Company, both in their entirety and excluding call-centers employees; and have determined that the ratios do not adversely impact labor relations within the Company primarily in view of the Company's field
of business and required mixture of manpower and their relative responsibilities.
|
| 3. |
Base Pay
|
| 3.1. |
Executive Officers' Base Pay (as defined below) shall be individually determined according to the factors set forth in Section 2.3 above and subject to the maximum amounts set forth in Section 5 below; it being clarified that an Executive
Officer's Base Pay shall be initially determined, among other things, in view of the Company's performance as compared to the Peer Companies' performance. The term "Base Pay" means the fixed gross
amount payable to an Executive Officer in return for his/her services, excluding expenses, benefits and bonuses.
|
| 3.2. |
The Base Pay may be linked to the Israeli consumer price index or to a currency.
|
| 3.3. |
The Committee and the Board may periodically consider and approve Base Pay adjustments for Executive Officers. The considerations for a Base Pay adjustment shall primarily be the factors used in initially determining the Base Pay, as well
as change of role or responsibility, relocation, professional achievements, market trends and budgetary constraints.
|
| 4. |
Expenses and Benefits
|
| 4.1. |
Expenses: An Executive Officer may be entitled to reimbursement or payment of expenses, group insurance policies and relocation expenses, all in accordance with the Company's procedures in this
respect.
|
4
| 4.2. |
Benefits: An Executive Officer is entitled to the benefits mandated by the law and may be entitled to various benefits that are customary for high-level professionals, in accordance with such
Executive Officer's position at the Company and form of engagement (i.e., as an employee or independent contractor). Such benefits may include (without limitation):
|
| (a) |
social benefits, including payments to pension funds and manager's insurance;
|
| (b) |
life insurance and disability insurance;
|
| (c) |
payment to an advanced study fund;
|
| (d) |
annual convalescence pay;
|
| (e) |
sick leave;
|
| (f) |
vacation of up to 30 days per year;
|
| (g) |
company car and related expenses (including the amount of tax payable with respect thereto) in accordance with the standard customary for same-level executive officers of peer companies;
|
| (h) |
communication and media expenses, such as mobile and fixed phones, laptop, internet and subscription for daily and professional newspapers and magazines;
|
| (i) |
professional conferences; and
|
| (j) |
member fees of professional associations.
|
| 5. |
Maximum Annual Cost of Base Pay and Benefits
|
The annual cost to the Company of the respective Executive Officers' Base Pay and benefits actually granted shall not exceed the following amounts:
|
Role
|
Amount (in NIS thousands)
|
|
President
|
2,700
|
|
CEO
|
2,100
|
|
Business Unit Managers
|
2,100
|
|
Other Executives
|
1,200
|
| 6. |
Compensation upon Termination of Service or Employment
|
| 6.1. |
An Executive Officer may be entitled to both an advance notice of termination and payment for a transition period after termination; provided, however, that such periods shall be determined in view of the factors set forth in Section 2.3
above and shall not exceed 6 months in the aggregate.
|
| 6.2. |
Upon termination of employment, including in the event of resignation, Executive Officers may be entitled to receive the amounts accumulated in their manager's insurance funds on account of severance pay as of the date of such termination;
or, if higher, the amount payable upon termination of employment by the employer under the provisions of the Severance Payment Law, 1963.
|
| 6.3. |
Executive Officers shall not be entitled to any other compensation upon termination of service or employment.
|
5
| 7. |
Target-based Cash Incentives
|
| 7.1. |
Minimum Threshold: the compensation package of an Executive Officer may include the provision of Target-based Cash Incentives as set forth below. The grant of awards under Target-based Cash
Incentives, for a particular calendar year, shall be conditioned upon the achievement during such year, of a minimum Company's Return on Equity (as defined below) of 15%, and a minimum Company's profit before tax of USD 24 million (the "Minimum Threshold").
|
| 7.2. |
Key Performance Indicators: The provision of annual cash incentives to Executive Officers may be based on either or both of the following key performance indicators (the "Target-based Cash Incentives"): (a) the Company's Return on Equity (as defined below); and/or (b) the Company's profit before tax. These key performance indicators ("KPI") shall be
calculated in accordance with the Company's audited consolidated annual financial statements, after taking into account Executive Officers' compensation, but excluding adjustments of the value of assets and obligations to their fair value in
accordance with accounting standards. The term "Return on Equity" for a particular calendar year means the ratio between the net income for such year and the average of the shareholders' equity at the
beginning of such calendar year and at the end of each calendar quarter of such year.
|
| 7.3. |
Mechanism; Maximum Awards: Target-based Cash Incentives shall provide for the award of amounts equal to pre-determined percentages of the Executive Officer's annual Cost of Pay (as defined below),
depending on the applicable KPI achieved during the relevant calendar year; such that the awards are increased in relation to higher percentages of Return on Equity and/or higher profits before tax for such year. In any event, an Executive
Officer's Target-based Cash Incentives for a calendar year may not exceed an amount equal to 150% of such Executive Officer's annual Cost of Pay (the "Maximum Award"). The term "Cost of Pay" means, with respect to independent contractors, their invoice amount plus company car and related expenses; and with respect to employees, their Base Pay plus 40% thereof.
|
| 7.4. |
Deferred Grants: 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"). However, if an Executive Officer's Target-based Cash Incentives exceed an amount
|
6
equal to 100% of such Executive Officer'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.
| 7.5. |
Advances: the Company may pay to Executive Officers advances on account of expected Target-based Cash Incentives.
|
| 8. |
Discretionary Cash Incentives
|
| 8.1. |
In addition to the Target-based Cash Incentives, the Committee and the Board may award to Executive Officers who are not Controlling Shareholders of the Company (as defined below) or relatives thereof, additional annual discretionary cash
grants ("Discretionary Cash Incentives"). Discretionary Cash Incentives shall be based on recommendations from such Executive Officer's direct managers and with respect to CEOs and the President, from
the Chairman of the Board. The Discretionary Cash Incentives shall not be subject to the achievement of the Minimum Threshold; however, their amount may not exceed the lower of 1/4 of such Executive Officer's annual Cost of Pay or 20%
of his/her Maximum Award. Notwithstanding the above, the aggregate amount of the Discretionary Cash Incentives and the Target-based Cash Incentives may not exceed the Maximum Award. The term "Controlling
Shareholders of the Company" means shareholders of the Company who have the ability to direct the operations of the Company (but not merely by virtue of their position as office holders of the Company), and/or who hold (alone or
together with others) 25% or more of the voting rights of the Company.
|
| 8.2. |
Notwithstanding the above, the limits to the Discretionary Cash Incentives as described in Section 8.1 above (i.e. 1/4 of annual Cost of Pay and 20% of Maximum Award) shall not apply to the Discretionary Cash Incentives paid to the
Officers Reporting to CEO.
|
| 9. |
Excess Return Cash Incentives
|
| 9.1. |
Excess Return Cash Incentives: in addition to the Target-based Cash Incentives and the Discretionary Cash Incentives, the compensation package of an Executive Officer may include the provision of a
cash grant based on the Company's Stock Yield as compared to the RUSSEL 2000 Index's Yield, as set forth below (the "Excess Return Cash Incentive").
|
| 9.2. |
Defined Terms: the term "Company's Stock Yield" means the percentage of increase or decrease of the Company’s stock price on the NASDAQ
|
7
Stock Exchange over an Examined Period (as defined below), as adjusted for dividend distribution, calculated based on the average adjusted closing price of
the Company's shares on the NASDAQ Stock Exchange during the 5 business days prior to and the 5 business days after the commencement and end of such Examined Period.
The term "RUSSEL 2000 Index's Yield" means the percentage of increase or decrease of the RUSSEL 2000 Index over an
Examined Period, calculated based on the average RUSSEL 2000 Index closing quotes during the 5 business days prior to and the 5 business days after the commencement and end of such Examined Period.
| 9.3. |
Mechanism: with respect to each Executive Officer who is granted an Excess Return Cash Incentive, the Company shall examine on December 31 of each year, the Company's Stock Yield since January 1 of
such year or, with respect to the first year of such grant – since the date of its approval (an "Examined Period"), as compared to the RUSSEL 2000 Index's Yield over such Examined Period; and to the
extent that the Company's Stock Yield exceeds the RUSSEL 2000 Index's Yield for such period, the Executive Officer shall receive an amount equal to 50% of his/her monthly Cost of Pay for each 1% of excess return (in percentage points' terms),
or a relative amount in the event of a partial excess return. For the avoidance of doubt, in the event that the Company's Stock Yield during such period is negative, no grant shall be awarded. Notwithstanding the above, no Excess Return Cash
Incentive shall be awarded for the first year of its grant if it was approved after June 30 of such year.
|
| 9.4. |
Cap: the Excess Return Cash Incentive for each year shall not exceed an amount equal to the Executive Officer's annual Cost of Pay.
|
| 10. |
Total Cap on Variable Compensation
|
The aggregate amount of cash incentives described under Sections 7, 8 and 9 above to be awarded to all Executive Officers for each calendar year shall not
exceed an amount equal to 10% of the Company's EBITDA for such year, 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.
| 11. |
Directors & Officers Insurance
|
In approving this compensation policy, the Company adopts a policy to purchase liability insurance, according to the limits, terms and conditions, as
follows:
| a. |
An annual premium of up to 425,000 USD;
|
| b. |
Retentions - up to 500,000 USD;
|
| c. |
Liability limits - 50 million USD, in the aggregate for the policy period of one calendar year and for all loss;
|
| d. |
A change-over framework for the next 3 years (i.e, during this period of compensation policy) - up to 5% per annum;
|
All of the above provided that the insurance terms will be in market conditions at all times and are not expected to materially affect the profitability of the Company, its
properties or its liabilities.
8
| 12. |
General Terms relating to Variable Compensation
|
| 12.1. |
The Board shall have the right to reduce any variable compensation to be granted to an Executive Officer due to circumstances as determined in the sole discretion of the Board.
|
| 12.2. |
The Company's Executive Officers 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 during the three year period
following filing thereof; 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 net of
taxes that were withheld thereon, unless the Executive Officer has reclaimed or is able to reclaim such tax payments from the relevant tax authorities (in which case the Executive Officer will also be obligated to return such tax amounts).
The Committee and the Board will determine applicable terms to enforce repayment of clawback amounts.
|
| 12.3. |
In the event that an Executive Officer's employment or service is terminated during a calendar year, the Board may nevertheless approve the award of proportional grants pursuant to approved Target-based Cash Incentives and Excess Return
Cash Incentives.
|
| 12.4. |
As part of the Company's annual disclosure on Form 20-F concerning the compensation paid to Executive Officers, the Company shall provide details as to the calculation of the Target-Based Cash Incentives and Excess Return Cash Incentives
actually paid to such Executive Officers (if paid), including the extent of the Executive Officers' achievement of their pre-determined targets and the incentives paid with respect thereto.
|
9
| 13. |
Non-executive Officers' Compensation
|
Non-executive Officers may be entitled to receive, subject to provisions and required approval pursuant to the Companies Law:
| 13.1. |
Indemnification and Directors & Officers Insurance;
|
| 13.2. |
Annual and/or per-meeting compensation of up to the maximum amounts allowed to be paid to external directors of public companies pursuant to the second and third supplements of the Companies Regulations (Rules regarding Compensation and
Expense Reimbursement of External Directors), 2000 (the "Regulations"), respectively, and in accordance with the Company's equity level pursuant to the first supplement thereof; provided, however,
that (a) external directors may be compensated in accordance with the provisions of the Companies Regulations (Relief for Companies which Securities are Listed for Trading in an Exchange outside of Israel), 2000; and (b) a non-executive
Chairman of the Board may receive an annual compensation, without regard to the amounts set forth in the Regulations, in an amount of up to NIS 300,000.
|
| 13.3. |
Reimbursement or payment of certain expenses incurred in attending Board and committee meetings or performing other services for the Company in their capacity as directors.
|
| 13.4. |
To the extent a non-executive director's services are requested in addition to his/her services as a director of the Company, such director may be entitled to receive consultation fees in accordance with the scope of the services required
and market terms of comparable services, provided such fees were approved in accordance with applicable provisions of the Companies Law and regulations promulgated thereunder.
|
10
Exhibit 8.1
List of Significant Subsidiaries
|
Name of Subsidiary
|
Country of Incorporation Interest
|
Proportion of Ownership
|
|
|
|
|
|
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 MOB Services LTDA
|
Brazil
|
51%
|
|
Ituran servicos Ltda
|
Brazil
|
98.75%
|
|
E.R.M. Electronic Systems Limited
|
Israel
|
49.5%1
|
|
Ituran Spain Holding S.L
|
Spain
|
100%
|
|
Ituran Road Track Monitaramento de Veiculos LTDA
|
Brazil
|
100%
|
|
Road Track De Colombia S.A.S
|
Colombia
|
100%
|
|
Road Track Ecuador, S.A.
|
Ecuador
|
100%
|
|
Ituran Chile S.A
|
Chile
|
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
|
100%
|
1 The proportion of voting power is 51%
Exhibit 12.1
CERTIFICATION OF THE CO-CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
I, Eyal Sheratzky, certify that:
1. I have reviewed this annual report on Form 20-F of Ituran Location and Control Ltd.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, present in all material respects the financial condition, results of operations and cash flows of the company
as of, and for, the periods presented in this report.
4. The company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a. Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared.
b. Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
c. Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is
reasonably likely to materially affect, the company's internal control over financial reporting, and
5. The company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of company's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the company's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether material, that involves management or other employees who have a significant role in the company's internal controls over financial reporting.
Date: April 23, 2026
/s/ Eyal Sheratzky
Eyal Sheratzky
Co-Chief Executive Officer
Co-Chief Executive Officer
CERTIFICATION OF THE CO-CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
I, Nir Sheratzky, certify that:
1. I have reviewed this annual report on Form 20-F of Ituran Location and Control Ltd.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, considering the circumstances under which such
statements were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
company as of, and for, the periods presented in this report.
4. The company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a. Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared.
b. Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
c. Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is
reasonably likely to materially affect, the company's internal control over financial reporting, and
5. The company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of company's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the company's ability
to record, process, summarize and report financial information; and
b. Any fraud, whether material, that involves management or other employees who have a significant role in the company's internal controls over financial reporting.
Date: April 21, 2026
/s/ Nir Sheratzky
Nir Sheratzky
Co-Chief Executive Office
Exhibit 12.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
I, Eli Kamer, certify that:
1. I have reviewed this annual report on Form 20-F of Ituran Location and Control Ltd.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
company as of, and for, the periods presented in this report.
4. The company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a. Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared.
b. Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
c. Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is
reasonably likely to materially affect, the company's internal control over financial reporting, and
5. The company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of company's board
of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the company's ability
to record, process, summarize and report financial information; and
b. Any fraud, whether material, that involves management or other employees who have a significant role in the company's internal controls over financial reporting.
Date: April 23, 2026
/s/ Eli Kamer
Eli Kamer
Chief Financial Officer
Exhibit 13
CERTIFICATION OF THE COMPANY'S CO-CHIEF EXECUTIVE OFFICERS
AS REQUIRED BY RULE 13a-14(b) OF THE SECURITIES EXCHANGE ACT OF 1934
In connection with the Annual Report on Form 20-F of Ituran Location and Control Ltd. (the "Company") for the period ended December 31, 2023as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), each of the undersigned Co-Chief Executive Officers of the Company, certify that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: April 23, 2026
|
/s/ Eyal Sheratzky
|
/s/ Nir Sheratzky
|
|
Eyal Sheratzky
|
Nir Sheratzky
|
|
Co-Chief Executive Officer
|
Co-Chief Executive Officer
|
CERTIFICATION OF THE COMPANY'S CHIEF FINANCIAL OFFICER
AS REQUIRED BY RULE 13a-14(b) OF THE SECURITIES EXCHANGE ACT OF 1934
In connection with the Annual Report on Form 20-F of Ituran Location and Control Ltd. (the "Company") for the period ended December 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned Chief Financial Officer of the Company, certify that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: April 23, 2026
/s/ Eli Kamer
Eli Kamer
Chief Financial Officer