☐
☐ | 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, 2021.
2023
☐
☐ | 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..........................................
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Ordinary Shares, par value NIS per share | ITRN | Nasdaq Global Select Market |
SEC 1852 (04-20) - Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.
(Title of Class)
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Large accelerated filer ☐ | Accelerated filer | Non-accelerated filer ☐ | Emerging growth company ☐ |
U.S. GAAP | International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes ☐ No
1 | ||
1 | ||
1 | ||
A. | ||
B. | CAPITALIZATION AND INDEBTEDNESS | |
C. | REASONS FOR THE OFFER AND USE OF PROCEEDS | |
D. | RISK FACTORS | |
A. | HISTORY AND DEVELOPMENT OF THE COMPANY | |
B. | BUSINESS OVERVIEW | |
C. | ORGANIZATIONAL STRUCTURE | |
D. | PROPERTY, PLANTS AND EQUIPMENT | |
A. | OPERATING RESULTS | |
B. | LIQUIDITY AND CAPITAL RESOURCES | |
C. | RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES | |
D. | TREND INFORMATION | |
E. | OFF-BALANCE SHEET ARRANGEMENTS | |
A. | DIRECTORS AND SENIOR MANAGEMENT | |
B. | COMPENSATION | |
C. | BOARD PRACTICES | 43 |
D. | EMPLOYEES | 47 |
E. | SHARE OWNERSHIP | 49 |
50 | ||
A. | MAJOR SHAREHOLDERS | 50 |
B. | RELATED PARTY TRANSACTIONS | |
C. | INTERESTS OF EXPERTS AND COUNSEL | 56 |
56 | ||
A. | CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION | 56 |
B. | SIGNIFICANT CHANGES | 57 |
57 | ||
A. | OFFER AND LISTING DETAILS | 57 |
B. | PLAN OF DISTRIBUTION | 57 |
C. | MARKETS | 57 |
D. | SELLING SHAREHOLDERS | 57 |
E. | DILUTION | 57 |
F. | EXPENSES OF THE ISSUE | 57 |
57 | ||
A. | SHARE CAPITAL | 57 |
B. | MEMORANDUM AND ARTICLES OF ASSOCIATION | 57 |
C. | MATERIAL CONTRACTS | |
D. | EXCHANGE CONTROLS | |
E. | TAXATION |
F. | DIVIDENDS AND PAYING AGENTS | |
G. | STATEMENT BY EXPERTS | |
H. | DOCUMENTS ON DISPLAY | |
I. | SUBSIDIARY INFORMATION | |
J. | ANNUAL REPORT TO SECURITY HOLDERS | 73 |
ITEM 16I. | 78 | |
ITEM 16J. | 79 | |
ITEM 16K. | CYBERSECURITY | 79 |
ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. | KEY INFORMATION |
Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
In USD | ||||||||||||||||||||
In thousands, except per share amounts | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Telematics services | 189,649 | 182,944 | 204,728 | 181,357 | 169,752 | |||||||||||||||
Telematics products | 81,235 | 62,683 | 74,604 | 71,978 | 64,884 | |||||||||||||||
Total Revenues | 270,884 | 245,627 | 279,332 | 253,335 | 234,636 | |||||||||||||||
Cost of Revenues: | ||||||||||||||||||||
Telematics services | 84,783 | 81,365 | 90,158 | 70,329 | 60,256 | |||||||||||||||
Telematics products | 59,619 | 48,747 | 58,656 | 55,678 | 54,996 | |||||||||||||||
Total cost of revenues | 144,402 | 130,112 | 148,814 | 126,007 | 115,252 | |||||||||||||||
Gross profit | 126,482 | 115,515 | 130,518 | 127,328 | 119,384 | |||||||||||||||
Research and development expenses | 14,099 | 12,767 | 13,913 | 6,223 | 3,160 | |||||||||||||||
Selling and marketing expenses | 11,906 | 11,014 | 12,778 | 11,340 | 12,246 | |||||||||||||||
General and administrative expenses | 46,118 | 49,705 | 55,166 | 47,693 | 47,590 | |||||||||||||||
Impairment of goodwill | - | 10,508 | 12,292 | - | - | |||||||||||||||
Impairment of intangible assets and other expenses (income) net | (256 | ) | 3,690 | 13,715 | (306 | ) | (147 | ) | ||||||||||||
Operating Income | 54,615 | 27,831 | 22,654 | 62,378 | 56,535 | |||||||||||||||
Other income (expenses), net | (109 | ) | (272 | ) | (26 | ) | 13,138 | - | ||||||||||||
Financing income (expenses), net | (5,538 | ) | 1,480 | 576 | 717 | (989 | ) | |||||||||||||
Income before income tax | 48,968 | 29,039 | 23,204 | 76,233 | 55,546 | |||||||||||||||
Income tax | (11,854 | ) | (10,856 | )) | (12,234 | ) | (17,273 | ) | (17,705 | ) | ||||||||||
Share in gains (losses) of affiliated companies, net | (102 | ) | (842 | ) | (3,203 | ) | 4,219 | 8,520 | ||||||||||||
Net income for the year | 37,012 | 17,341 | 7,767 | 63,179 | 46,361 | |||||||||||||||
Less: net income attributable to non-controlling interest | (2,756 | ) | (1,218 | ) | (878 | ) | (2,504 | ) | (2,567 | ) | ||||||||||
Net income attributable to Company stockholders | 34,256 | 16,123 | 6,889 | 60,675 | 43,794 | |||||||||||||||
Earnings per share | ||||||||||||||||||||
Basic | 1,65 | 0.77 | 0.33 | 2.88 | 2.09 | |||||||||||||||
Diluted | 1,65 | 0.77 | 0.33 | 2.88 | 2.09 | |||||||||||||||
Weighted average number of shares outstanding | ||||||||||||||||||||
Basic | 20,769 | 20,813 | 21,037 | 21,077 | 20,968 | |||||||||||||||
Diluted | 20,769 | 20,813 | 21,037 | 21,077 | 20,968 |
Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
In USD | ||||||||||||||||||||
In thousands, except per share amounts | ||||||||||||||||||||
Cash & Cash Equivalent; and investment in trading marketable securities | 54,711 | 78,846 | 54,322 | 53,295 | 40,465 | |||||||||||||||
Working Capital | 58,102 | 66,708 | 73,085 | 84,214 | 71,360 | |||||||||||||||
Total Assets | 293,021 | 312,472 | 339,235 | 373,792 | 215,159 | |||||||||||||||
Total Liabilities | 155,218 | 182,573 | 203,321 | 213,592 | 81,930 | |||||||||||||||
Retained Earnings | 143,259 | 127,684 | 116,479 | 129,580 | 92,065 | |||||||||||||||
Stockholders’ Equity | 132,460 | 127,192 | 129,330 | 153,693 | 125,790 | |||||||||||||||
Dividend declared per share | 0.90 | 0.24 | 0.95 | 0.95 | 1.12 |
Year Ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
Subscribers of telematics services (1) | 1,881,000 | 1,768,000 | 1,781,000 | 1,770,000 | 1,160,000 | |||||||||||||||
Average monthly churn rate | 3 | % | 3 | % | 3.3 | % | 2.8 | % | 3.2 | % |
◾ | 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 |
◾ | the rate of car theft or consumer concern over vehicle safety is high; |
◾ | satisfactory radio frequencies are available to us for our RF technology, that |
◾ | insurance companies, car manufacturers or car owners |
◾ | 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 |
◾ | announcements related to litigation; |
◾ | changes in earnings estimates, |
◾ | developments in our industry; and |
◾ | general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors. |
ITEM 4. | INFORMATION ON THE COMPANY |
A. | HISTORY AND DEVELOPMENT OF THE COMPANY |
B. | BUSINESS OVERVIEW |
■ | Base Site: a radio receiver, which includes a processor and a data computation unit to collect and send data to and from transponders and send that data to control centers as part of the terrestrial infrastructure of the location system; |
■ | Control Center: a center consisting of software used to collect data from various base sites, conduct location calculations and transmit location data to various customers and law enforcement agencies; |
■ | GPS/GPRS-based products: navigation and tracking devices installed in vehicles; and |
■ | SMART: a portable transmitter installed in vehicles (including motorcycles) that sends a signal to the base site, enabling the location of vehicles, equipment or an |
Country | Services offered | Products sold | ||
Israel | SVR, Fleet Management, Value-added services, including: Connected Car, UBI | Telematics Products | ||
Brazil | SVR, Fleet Management, Value-added services, including: Connected Car | Telematics Products | ||
Mexico, Ecuador, Colombia | SVR, Fleet Management, | Telematics Products | ||
Value-added services, including: | ||||
Connected Car | ||||
United States | SVR, | Telematics Products | ||
Fleet Management, | ||||
Value-added services, including: Asset protection to Auto Lenders | ||||
Argentina | SVR, Fleet Management, Value-added services, including: Connected Car | Telematics Products |
■ | Israel: We commenced operations in Israel in 1995 and we had approximately |
◾ | Brazil: We commenced operations in Brazil in 2000 and we had approximately |
■ | 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. However, we also operate throughout Argentina in providing GPS/GPRS based products and services. |
■ | United States: We commenced operations in the United States in 2000. We provide GPS/GPRS products and services throughout the United States. |
■ | Mexico: We acquired the operations in Mexico in September 2018 as part of the RTH Transaction. We currently provide GPS/GPRS based products and services. |
■ | Ecuador: We acquired the operations in Ecuador in September 2018 as part of the RTH Transaction. We currently provide GPS/GPRS based products and services. |
■ | Colombia: We acquired the operations in Colombia in September 2018 as part of the RTH Transaction. We currently provide GPS/GPRS based products and services. |
Israel. Our primary competitors in Israel are Pointer and Skylock Ltd. |
Brazil. Brazil is a highly fragmented market with many companies selling competing products and services (including immobilizers and other less-sophisticated vehicle security systems). Our main competitors in Brazil are Sascar, Zatix, CEABS, Car Systems, Sat-Company, 3S. |
Argentina. Argentina is a highly fragmented market with many companies selling competing products and services (including immobilizers and other less-sophisticated vehicle security systems). Our main competitors in Argentina are LoJack Corporation, Pointer Argentina S.A., Prosegur S.A. and Megatrans S.A. |
United States. In the United States, there are several major companies offering various theft protection and recovery products that compete with our product and service offerings, including LoJack Corporation, OnStar Corporation, Advantage GPS/Procon Analytics, Sarekon GPS, Calamp, Spireon (which also includes SysLocate and GoldStar), PassTime, Guide Point, Icon and I-Metrik SVR. |
◾ | Colombia. Colombia is a highly fragmented market. Main companies operate under the satellite/cellular infrastructure. Our main competitors are LoJack Corporation (under Detekor Brand), Prosegur, SATRACK (Local Company). |
◾ | Mexico. Mexico is a highly fragmented market in tracking and satellite location services, in which there are multiple companies dedicated to providing comprehensive satellite tracking, fleet management and vehicle recovery solutions with GPS technology through the marketing of similar devices and technologies to ours, highly specialized in fleet management. The direct competitors are LoJack Corporation, Encontrack S.A. and Pointer Recuperación S.A. |
◾ | Ecuador. Ecuador is highly fragmented market. Main companies operate under the satellite/cellular infrastructure. Our main competitors are Hunter (Lojack Corporation),Tracklink and |
• | Israel: Pointer Telocation, ISR, Traffilog and Skylock; |
• | United States: GPS Insight, Trimble, Network Fleet, Street Eagle, FleetMatics, Navtrack, Teletrac, Trim Track, FleetBoss, PassTime, Verizon, AT&T, Geotab, Fleet-Complete,Sprint, Zubie, and Spireon; |
• | Brazil: Sascar, Zatix, CEABS, 3S and GolSat; |
• | Argentina: LoJack Corporation, Megatrans |
• | Mexico: LoJack Corporation, Encotrack, Easytrack, Geotab and Tracker; |
• | Ecuador: Hunter (LoJack Corporation), Tracklink, Carsync and Sherlock; |
• |
erection and operating permits from the Israeli Ministry of the Environment; |
permits from the Israeli Civil Aviation Authority, in certain cases; |
permits from the Israeli |
approval from Israel’s Land Administration and/or from Civil Administration in the Territories, which usually also involves payment for the land use rights; and |
building permits from local or regional zoning authorities in Israel and Brazil. |
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 | Argentina | 100% | ||
Ituran Sistemas de Monitoramento Ltda | Brazil | 98.75% | ||
Ituran Instalacoes Ltda | Brazil | 98.75% | ||
Teleran Holding Ltda | Brazil | 99.99% | ||
Ituran servicos Ltda | Brazil | 98.75% | ||
E.R.M. Electronic Systems Limited | Israel | 49.5%1 | ||
Mapa Mapping & Publishing Ltd | Israel | 100% | ||
Ituran Spain Holding S.L | Spain | 100% | ||
Ituran Road Track Monitaramento de Veiculos LTDA | Brazil | 100% | ||
Ituran Road Track Argentina, | Argentina | 100% | ||
Global Telematics Solutions HK, Limited | Hong Kong | 100% | ||
Road Track De Colombia S.A.S | Colombia | 100% | ||
Road Track Ecuador, S.A. | Ecuador | 100% | ||
Ituran Chile S.A. | 100% | |||
Ituran Uruguay S.A.S | Uruguay | 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 |
D. | PROPERTY, PLANTS AND EQUIPMENT |
ITEM 4. A. | UNRESOLVED STAFF COMMENTS |
ITEM 5 | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
A. | OPERATING RESULTS |
As of December 31, | ||||||||||||||||||||||||
2021 | 2020 | 2019 | 2023 | 2022 | 2021 | |||||||||||||||||||
Israel | 653,000 | 643,000 | 610,000 | 814,000 | 738,000 | 653,000 | ||||||||||||||||||
Brazil | 453,000 | 452,000 | 489,000 | 672,000 | 558,000 | 453,000 | ||||||||||||||||||
Others | 775,000 | 673,000 | 682,000 | 766,000 | 770,000 | 775,000 | ||||||||||||||||||
Total(1) | 1,881,000 | 1,768,000 | 1,781,000 | 2,252,000 | 2,066,000 | 1,881,000 |
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
In USD, in Millions | 2023 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||
Telematics services | Telematics products | Telematics services | Telematics products | Telematic services | Telematics products | Telematics services | Telematics products | Telematics services | Telematics products | Telematics services | Telematics products | |||||||||||||||||||||||||||||||||||||
Israel | 96.5 | 44.1 | 85.1 | 35.4 | 77.6 | 32.5 | 104.4 | 49.9 | 103.3 | 48.0 | 96.5 | 44.1 | ||||||||||||||||||||||||||||||||||||
Brazil | 55.2 | 2.6 | 60.0 | 1.5 | 85.1 | 12.9 | 83.8 | 2.0 | 66.7 | 2.4 | 55.2 | 2.6 | ||||||||||||||||||||||||||||||||||||
Others | 37.9 | 34.6 | 37.8 | 25.8 | 42.0 | 29.2 | 46.4 | 33.5 | 39.6 | 33.1 | 37.9 | 34.6 | ||||||||||||||||||||||||||||||||||||
Total(1) | 189.6 | 81.3 | 182.9 | 62.7 | 204.7 | 74.6 | 234.6 | 85.4 | 209.6 | 83.5 | 189.6 | 81.3 |
Year Ended December 31, | ||||||||||||||||||||||||
% | ||||||||||||||||||||||||
Consolidated statements of operations data: | 2021 | 2020 | 2019 | 2023 | 2022 | 2021 | ||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Telematics services | 70.0 | 74.5 | 73.3 | 73.3 | 71.5 | 70.0 | ||||||||||||||||||
Telematics product | 30.0 | 25.5 | 26.7 | 26.7 | 28.5 | 30.0 | ||||||||||||||||||
Total Revenues | 100 | 100 | 100 | 100 | 100 | 100 | ||||||||||||||||||
Cost of Revenues: | ||||||||||||||||||||||||
Telematics services | 31.3 | 33.2 | 32.3 | 30.8 | 30.8 | 30.8 | ||||||||||||||||||
Telematics products | 22.0 | 19.8 | 21.0 | 21.3 | 22.3 | 22.0 | ||||||||||||||||||
Total cost of revenues | 53.3 | 53.0 | 53.3 | 52.1 | 53.1 | 52.8 | ||||||||||||||||||
Gross profit | 46.7 | 47.0 | 46.7 | 47.9 | 46.9 | 47.2 | ||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||
Research and development expenses | 5.2 | 5.2 | 5.0 | 5.3 | 5.7 | 5.2 | ||||||||||||||||||
Selling and marketing Expenses | 4.4 | 4.5 | 4.6 | 4.3 | 4.5 | 4.9 | ||||||||||||||||||
General and administrative expenses, net | 17.0 | 20.2 | 19.7 | 17.7 | 16.6 | 17.0 | ||||||||||||||||||
Impairment of goodwill | - | 4.3 | 4.4 | -- | - | - | ||||||||||||||||||
Impairment of intangible assets and other expenses (income), net | (0.1 | ) | 1.5 | 4.9 | -- | - | (0.1 | ) | ||||||||||||||||
Total operating expenses | 26.5 | 35.7 | 38.6 | 27.3 | 26.8 | 27.0 | ||||||||||||||||||
Operating Income | 20.2 | 11.3 | 8.1 | 20.6 | 20.1 | 20.2 | ||||||||||||||||||
Other income expenses, net | (0.1 | ) | (0.1 | ) | - | - | - | (0.1 | ) | |||||||||||||||
Financing income, net | (2.0 | ) | 0.6 | 0.2 | (0.5 | ) | (2.0 | ) | (2.0 | ) | ||||||||||||||
Income before income tax | 18.1 | 11.8 | 8.3 | 20.1 | 18.1 | 18.1 | ||||||||||||||||||
Income tax | (4.4 | ) | (4.4 | ) | (4.4 | ) | (4.2 | ) | (4.4 | ) | (4.4 | ) | ||||||||||||
Share in gains (losses) of affiliated companies, net | (0.1 | ) | (0.3 | ) | (1.1 | ) | (0.2 | ) | (0.2 | ) | (0.1 | ) | ||||||||||||
Net income for the year | 13.6 | 7.1 | 2.8 | 15.7 | 13.5 | 13.6 | ||||||||||||||||||
Less: net income attributable to non-controlling interests | (1.0 | ) | (0.5 | ) | (0.3 | ) | (0.7 | ) | (0.8 | ) | (1.0 | ) | ||||||||||||
Net income attributable to company stockholders | 12.6 | 6.6 | 2.5 | 15.0 | 12.7 | 12.6 |
Year Ended December 31, | ||||||||||||||||||||||||
2019 | 2020 | 2021 | ||||||||||||||||||||||
Actual | At 2018 exchange rates (1) | Actual | At 2019 exchange rates (1) | Actual | At 2020 exchange rates (1) | |||||||||||||||||||
(In thousands of US$) | ||||||||||||||||||||||||
Revenues | 279,332 | 289,676 | 245,627 | 262,529 | 270,884 | 264,507 | ||||||||||||||||||
Gross profit | 130,518 | 135,730 | 115,515 | 122,708 | 126,482 | 123,734 | ||||||||||||||||||
Operating income | 22,654 | 25,419 | 27,831 | 31,229 | 54,615 | 53,595 |
Year ended December 31, | ||||||||||||||||||||||
2021 | 2022 | 2023 | ||||||||||||||||||||
Actual | At 2020 exchange rates | Actual | At 2021 exchange rates | Actual | At 2022 exchange rates | |||||||||||||||||
(In thousands of US$) | ||||||||||||||||||||||
270,884 | 264,507 | 293,072 | 296,752 | 319,978 | 329,420 | |||||||||||||||||
127,838 | 125,090 | 137,562 | 139,120 | 153,161 | 158,291 | |||||||||||||||||
54,615 | 53,595 | 58,774 | 59,218 | 65,955 | 67,422 |
B. | LIQUIDITY AND CAPITAL RESOURCES |
Accumulated net taxable profit | will pay a fix amount of | plus a % over | the following amount | |||||
More than AR$ | up to AR$ | |||||||
AR$ | - | AR$ | 5.000.000,00 | AR$ | - | 25% | AR$ | - |
AR$ | 5.000.000,00 | AR$ | 50.000.000,00 | AR$ | 1.250.000,00 | 30% | AR$ | 5.000.000,00 |
AR$ | 50.000.000,00 | en adelante | AR$ | 14.750.000,00 | 35% | AR$ | 50.000.000,00 |
1. | Remittance tax (Impuesto a la Salida de Divisas) - Remittance tax of 5% is imposed on the transfer of money abroad in cash or through pay checks, transfers, or courier of any nature carried out with or without the mediation of the Ecuadorian financial system, including transfer from foreign bank accounts. Dividends are exempt from this tax, under certain considerations. |
2. | Labor profit sharing - Although it is not considered a tax, companies are obligated to pay 15% of their pre-tax earnings to their employees. This payment is considered a deductible expense for CIT computation purposes. |
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2023 | 2022 | 2021 | |||||||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||||||
Net cash provided by operating activities | 55,790 | 60,068 | 59,679 | 77,218 | 45,118 | 55,790 | ||||||||||||||||||
Net cash used in investing activities | (18,524 | ) | (11,479 | ) | (18,287 | ) | (17,229 | ) | (27,354 | ) | (18,524 | ) | ||||||||||||
Net cash used in financing activities | (58,666 | ) | (29,449 | ) | (38,927 | ) | (32,934 | ) | (36,360 | ) | (58,666 | ) | ||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (477 | ) | (921 | ) | 101 | (1,471 | ) | (3,860 | ) | (477 | ) | |||||||||||||
Net increase/decrease in cash and cash equivalents | (21,877 | ) | 18,219 | 2,566 | 25,584 | (22,456 | ) | (21,877 | ) |
C. | RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES |
D. | TREND INFORMATION |
E. | OFF-BALANCE SHEET ARRANGEMENTS |
Payments due by period | ||||||||||||||||||||
Contractual obligations | Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | |||||||||||||||
(In USD thousands) | ||||||||||||||||||||
*Operating leases | 5,174 | 2,768 | 1,567 | 614 | 225 | |||||||||||||||
Purchase Obligations | 17,843 | 17,843 | - | - | - | |||||||||||||||
Long – term debt obligations | 31,426 | 18,257 | 13,169 | - | - | |||||||||||||||
Total | 54,443 | 38,868 | 14,736 | 614 | 225 |
A. | DIRECTORS AND SENIOR MANAGEMENT |
Name | Age | Position |
Izzy Sheratzky | President and director | |
Yehuda Kahane | Director | |
Ze’ev Koren | Chairman of the Board of Directors and an independent director | |
Efraim Sheratzky | Director | |
Eyal Sheratzky | Co-Chief Executive Officer and Director | |
Nir Sheratzky | Co-Chief Executive Officer and Director | |
Gil Sheratzky | CEO of our Subsidiary, International Activity and Business Development Officer and a Director | |
Yoav Kahane(1)(2) | Director and an independent | |
Yigal Shani | Director | |
Israel Baron (1)(2)(3) + | External Director | |
Gidon Kotler (1)(2)(3) | External Director | |
Tal Sheratzky- Jaffa | Director and an independent director | |
Ami Saranga | Deputy Chief Executive Officer | |
Eli Kamer | Executive Vice President, Finance; Chief Financial Officer | |
Guy Aharonov | General Counsel | |
Udi Mizrahi | Deputy Chief Executive Officer International Operation and VP of Finance | |
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 | 1 | 11 | |||
Part II: Demographic Background | |||||
Underrepresented Individual in Home Country Jurisdiction | 0 | ||||
LGBTQ+ | 0 | ||||
Did Not Disclose Demographic Background | 0 |
B. | COMPENSATION |
Management fees | Wage | Social components | Car value | Bonus (results based) | Bonus (Share yield based) | Total | ||||||||||||||||||||||
Compensation components (in thousand US Dollars) | ||||||||||||||||||||||||||||
Izzy Sheratzky (President) | 781 | - | - | - | 1,228 | 836 | 2,845 | |||||||||||||||||||||
Eyal Sheratzky (Co-Chief Executive Officer) | 608 | - | - | - | 975 | 650 | 2,233 | |||||||||||||||||||||
Nir Sheratzky (Co-Chief Executive Officer) | 608 | - | - | - | 975 | 650 | 2,233 | |||||||||||||||||||||
Gil Sheratzky (CEO of our Subsidiary. International Activity and Business Development Officer) | 435 | - | - | - | 697 | 464 | 1,596 | |||||||||||||||||||||
Shahar Sheratzky (Vice president, head of our business division) | - | 182 | 44 | 17 | 229 | - | 472 | |||||||||||||||||||||
Total of our 5 highest paid officers | 2,432 | 182 | 44 | 17 | 4,104 | 2,600 | 9,379 |
Management fees | Wage | Social components | Car value | Bonus (results based) | Bonus (Share yield based) | Total | ||||||||||||||||||||||
Compensation components (in thousand US Dollars) | ||||||||||||||||||||||||||||
Izzy Sheratzky (President) | 789 | - | - | - | 1,049 | 504 | 2,342 | |||||||||||||||||||||
Eyal Sheratzky (Co-Chief Executive Officer | 614 | - | - | - | 854 | 392 | 1,860 | |||||||||||||||||||||
Nir Sheratzky (Co-Chief Executive Officer) | 614 | - | - | - | 854 | 392 | 1,860 | |||||||||||||||||||||
Gil Sheratzky (CEO of our Subsidiary. International Activity and Business Development Officer) | 439 | - | - | - | 610 | 280 | 1,329 | |||||||||||||||||||||
Shachar Sheratzky (Vice president, head of our business division) | 208 | 38 | 23 | 233 | - | 502 | ||||||||||||||||||||||
Total of our 5 highest paid officers $7,893,000 |
C. | BOARD PRACTICES |
◾ | Such majority includes at least the majority of the shares held by all non-controlling shareholders or those having personal interest in the nomination, except personal interest which is not resulting from connections with controlling shareholders, present and voting at such meeting; or |
◾ | The total number of shares voted against the election of the external director and held by shareholders other than controlling shareholders or those having personal interest in the nomination, except personal interest which is not resulting from connections with controlling shareholders, must not exceed 2% of the shares whose holders are entitled to vote at any meeting of shareholders. |
1. | Transaction that is neither extraordinary, nor insignificant. |
(1) | Transaction which is higher than 4.5% of the equity of the company according 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: |
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 Tzivtit Insurance Agency (1998) Ltd. and with Rinat Yogev Nadlan Ltd. shall be classified as insignificant transactions. If the extent of such transactions will remain similar during the following years, our management shall be deemed qualified to approve such transactions and to report them to the Audit Committee. |
(3) | Every year the criteria for classifying transactions as set up above shall be brought for re-approval by the Audit Committee. |
◾ | a person (or a relative of a person) who holds more than 5% of the company’s shares or voting rights; |
◾ | a person (or a relative of a person) who has the power to appoint a director or the general manager of the company; |
◾ | an executive officer, director or other affiliate of the company; or |
◾ | a member of the company’s independent accounting firm. |
D. | EMPLOYEES |
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2023 | 2022 | 2021 | |||||||||||||||||||
By area of activity: | ||||||||||||||||||||||||
Control Center | 520 | 568 | 552 | 380 | 385 | 520 | ||||||||||||||||||
Research and Development | 136 | 137 | 154 | 167 | 159 | 136 | ||||||||||||||||||
Sales and Marketing | 84 | 71 | 69 | 103 | 92 | 84 | ||||||||||||||||||
Technical support and IT | 489 | 494 | 467 | 491 | 501 | 489 | ||||||||||||||||||
Finance, Administration and Management | 375 | 351 | 380 | 321 | 356 | 375 | ||||||||||||||||||
Private enforcement and operations | 1,041 | 1,015 | 1,143 | 1,196 | 1,075 | 1,041 | ||||||||||||||||||
Manufacturing | 169 | 125 | 143 | 183 | 168 | 169 | ||||||||||||||||||
Total | 2,814 | 2,761 | 2,908 | 2,841 | 2,736 | 2,814 | ||||||||||||||||||
By geographic location (out of total): | ||||||||||||||||||||||||
Israel | 864 | 855 | 863 | 906 | 795 | 864 | ||||||||||||||||||
Brazil | 782 | 820 | 884 | 865 | 861 | 782 | ||||||||||||||||||
Others | 1,168 | 1,086 | 1,161 | 1,070 | 1,080 | 1,168 | ||||||||||||||||||
Total | 2,814 | 2,761 | 2,908 | 2,841 | 2,736 | 2,814 |
E. | SHARE OWNERSHIP |
Name of Director/Officer (1) | Number of Ordinary Shares Beneficially Owned (2) | Percentage of beneficial ownership (3) | Number of Ordinary Shares Beneficially Owned (2) | Percentage of beneficial ownership (3) | |||||||||||
Izzy Sheratzky(4) | 4,077,317 | 19.87 | 4,077,317 | 20.50 | |||||||||||
Professor Yehuda Kahane (5) | 1,451,137 | 7.06 | 1,451,137 | 7.29 | |||||||||||
Zeev Koren | - | - | - | - | |||||||||||
Efraim Sheratzky (6) | 223,008 | 1.09 | 219,408 | 1.09 | |||||||||||
Yigal Shani (7) | 229,052 | 1.12 | 223,052 | 1.12 | |||||||||||
Eyal Sheratzky | - | - | - | - | |||||||||||
Nir Sheratzky | - | - | - | - | |||||||||||
Gil Sheratzky | - | - | - | - | |||||||||||
Yoav Kahane | - | - | - | - | |||||||||||
Tal Sheratzky- Jaffa | 2,403 | * | 0.0112 | * | |||||||||||
Tal Sheratzky-Jaffa | 2,403 | * | 0.01 | * | |||||||||||
Israel Baron | - | - | - | - | |||||||||||
Gidon Kotler | 105 | * | * | 105 | * | * | |||||||||
Ami Saranga | - | - | - | - | |||||||||||
Eli Kamer | - | - | - | - | |||||||||||
Guy Aharonov | - | - | - | - | |||||||||||
Udi Mizrahi | - | - | - | - | |||||||||||
Shahar Sheratzky | - | - | - | - |
(1) | This table includes only current directors and officers that beneficially hold our shares. |
(2) | Beneficial ownership’ is determined in accordance with the rules of the Securities and Exchange Commission (as defined in Rule 13d – 3 under the |
(3) | Amounts in this column are based on 23,475,431 ordinary shares issued as of April |
(4) | Shares beneficially owned include: (a) 4,075,952 shares owned by Moked Ituran Ltd., which Mr. Sheratzky is deemed to beneficially owns due to his shared voting and investment power over such shares in accordance with |
(5) | Shares beneficially owned include: (a) 13,264 shares directly owned by Professor Kahane jointly with his wife, Rivka Kahane;(b) 5,782 shares owned by Yehuda Kahane Ltd., which Professor Kahane may be considered to beneficially own by virtue of his shared voting and investment control of the company through his 50% shareholdings thereof, the other 50% being owned by his wife, Rivka Kahane; and (c) 1,432,091 shares owned by Moked Ituran Ltd., which Professor Kahane may be considered to beneficially own by virtue of his right to direct the disposition of such shares in accordance with Moked’s articles of association. Professor Kahane has shared voting and investment control over Yehuda Kahane Ltd., a holder of 35.13% of the shares of Moked Ituran. |
(6) | Shares beneficially owned include: (a) |
(7) | Shares beneficially owned include: (a) 10,000 shares directly owned by Yigal Shani, (b) |
F. | DISCLOSURE OF REGISTRANT’S ACTION TO RECOVER ERRENOUSLY AWARDED COMPENSATION. |
ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
A. | MAJOR SHAREHOLDERS |
Shareholder | Number of Ordinary Shares Beneficially Owned | % Voting | Number of Ordinary Shares Beneficially Owned | % Voting | ||||||||||||
Moked Ituran Ltd. (1) | 4,075,952 | 19.87 | 4,075,952 | 20.47 | ||||||||||||
All directors and executive officers as a group (2). | 4,137,827 | 20.17 | 4,125,227 | 20.74 | ||||||||||||
Vulcan Value Partners (3) | 3,138,608 | 15.30 | 1,681,329 | 8.45 | ||||||||||||
FMR LLC. (4) | 1,540,997 | 7.51 | 1,228,293 | 6.174 | ||||||||||||
Renaissance Technologies LLC. (5) | 1,279,400 | 6.24 | 1,123,800 | 5.65 | ||||||||||||
The Phoenix Holdings Ltd(6) | 1,773,049 | 8.64 | ||||||||||||||
Ibex Investors LLC(7) | 1,144,707 | 5.58 | ||||||||||||||
Ibex Investors LLC(6) | 1,168,815 | 5.9 | ||||||||||||||
Treasury shares | 2,962,934 | 3,581,851 |
B. | RELATED PARTY TRANSACTIONS |
Company’s Profit-Before-Tax Targets (in USD thousands) | Level of Incentive - As a Percentage of the Executive Office Holder’s Annual Cost of Pay |
24,001 - 27,500 | 20% |
27,501-31,000 | 45% |
31,001-35,000 | 75% |
35,001-39,000 | 110% |
Above 39,001 | 150% |
• | Target-based Cash Incentives shall become payable upon the lapse of 30 days from the date of publication of the company’s audited annual financial statements (the “Entitlement Date”); and such cash incentive shall be paid on such date. However, if an Executive Office Holder’s Target-based Cash Incentives exceed an amount equal to 100% of such Executive Office Holder’s annual Cost of Pay (the “100% Threshold”), then 20% of the amount by which the Target-based Cash Incentives exceed the 100% Threshold (the “Deferred Portion”) shall not be paid on their Entitlement Date, but rather shall be deferred and paid in two equal |
• | “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. |
Executive Office Holders | Target-based Cash Incentive | Deferred Portion for the next 2 years | Deferred Portion from last 2 years | Total to be paid for 2021: | Target-based Cash Incentive | Deferred Portion for the next 2 years | Deferred Portion from last 2 years | Total to be paid for 2022: | ||||||||||||||||||||||||
In US$ thousands | In US$ thousands | |||||||||||||||||||||||||||||||
Izzy Sheratzky | 1,207 | (83 | ) | 83 | 1,207 | 1,049 | (73 | ) | 73 | 1,049 | ||||||||||||||||||||||
Eyal Sheratzky | 975 | (65 | ) | 65 | 975 | 854 | (57 | ) | 57 | 854 | ||||||||||||||||||||||
Nir Sheratzky | 975 | (65 | ) | 65 | 975 | 854 | (57 | ) | 57 | 854 | ||||||||||||||||||||||
Gil Sheratzky | 696 | (46 | ) | 46 | 696 | 610 | (41 | ) | 41 | 610 |
C. | INTERESTS OF EXPERTS AND COUNSEL |
ITEM 8. | FINANCIAL INFORMATION |
A. | CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION |
B. | SIGNIFICANT CHANGES |
ITEM 9. | THE OFFER AND LISTING |
A. | LISTING DETAILS AND MARKET PRICE INFORMATION |
B. | PLAN OF DISTRIBUTION |
C. | MARKETS |
D. | SELLING SHAREHOLDERS |
E. | DILUTION |
F. | EXPENSES OF THE ISSUE |
ITEM 10. | ADDITIONAL INFORMATION |
A. | SHARE CAPITAL |
B. | MEMORANDUM AND ARTICLES OF ASSOCIATION |
◾ | the majority must include at least the majority of the shares of disinterested shareholders voted at the meeting; or |
◾ | the total number of shares of disinterested shareholders who voted against the transaction must not exceed 2% of the aggregate voting rights in the company. |
◾ | an amendment to the company’s articles of association; |
◾ | an increase of the company’s authorized share capital; |
◾ | a merger; or |
◾ | interested party transactions that require shareholder approval. |
◾ | a private placement in which the company’s shareholders approved such holder owning 25% or more of the voting rights of the company (provided that there is no other shareholder that holds 25% or more of the voting rights of the company); or more than 45% of the voting rights of the company (provided that there is no other shareholder that holds 45% or more of the voting rights of the company); or |
◾ | a purchase from an existing holder of 25% or more of the voting rights of the company that results in another person becoming a holder of 25% or more of the voting rights of the company; or |
◾ | purchase from an existing holder of more than 45% of the voting rights of the company that results in another person becoming a holder of more than 45% of the voting rights of the company. |
◾ | the transaction is not accompanied by an amendment to the acquirer’s memorandum or articles of association; |
◾ | the transaction does not contemplate the issuance of more than 20% of the voting rights of the acquirer that would result in any shareholder becoming a controlling shareholder; and |
◾ | there is no “cross-ownership” of shares of the merging companies, as described above. |
◾ | amendments to our articles of association; |
◾ | appointment or termination of our auditors; |
◾ | appointment and dismissal of external directors; |
◾ | approval of acts and transactions requiring general meeting approval pursuant to the Israeli Companies Law; |
◾ | increase or reduction of our authorized share capital; |
◾ | a merger; and |
◾ | the exercise of the Board of Directors’ powers by a general meeting, if the Board of Directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management. |
C. | MATERIAL CONTRACTS |
D. | EXCHANGE CONTROLS |
E. | TAXATION |
◾ | an individual citizen or resident of the United States; |
◾ | a corporation or partnership created or organized in or under the laws of the United States or of any state of the United States or the District of Columbia (other than a partnership, including any entity treated as a partnership for U.S. tax purposes, that is not treated as a US person under any applicable Treasury regulations); |
◾ | an estate, the income of which is subject to United States federal income taxation regardless of its source; or |
◾ | a trust if the trust has elected validly to be treated as a US person for United States federal income tax purposes or if a US court is able to exercise primary supervision over the trust’s administration and one or more US persons have the authority to control all of the trust’s substantial decisions. |
◾ | insurance companies; |
◾ | dealers or traders in stocks, securities or currencies; |
◾ | financial institutions and financial services entities; |
◾ | real estate investment trusts; |
◾ | regulated investment companies; |
◾ | grantor trusts; |
◾ | persons that receive ordinary shares as compensation for the performance of services; |
◾ | tax-exempt organizations; |
◾ | persons that hold ordinary shares as a position in a straddle or as part of a hedging, conversion or other integrated instrument; |
◾ | individual retirement and other tax-deferred accounts; |
◾ | expatriates of the United States; |
◾ | persons having a functional currency that is not the US dollar; or |
◾ | direct, indirect or constructive owners of 10% or more, by voting power or value, of our ordinary shares. |
◾ | the stock of that corporation with respect to which the dividends are paid is readily tradable on an established securities market in the US, or |
◾ | that corporation is eligible for benefits of a comprehensive income tax treaty with the US that includes an information exchange program and is determined to be satisfactory by the US Secretary of the Treasury. The Internal Revenue Service has determined that the US-Israel Tax Treaty is satisfactory for this purpose. |
◾ | 75% or more of its gross income consists of specified types of passive income, or |
◾ | 50% or more of the average value of its assets consists of passive assets, which generally means assets that generate, or are held for the production of, “passive income.” |
◾ | Passive income for this purpose generally includes dividends, interest, royalties, rents and gains from commodities and securities transactions and includes amounts derived by reason of the temporary investment of funds. If we were classified as a PFIC, and you are a US Holder, you could be subject to increased tax liability upon the sale or other disposition of ordinary shares or upon the receipt of amounts treated as “excess distributions” (generally, your ratable portion of distributions in any year which are greater than 125% of the average annual distribution received by you either in the shorter of the three preceding years or your holding period). Under these rules, the excess distribution and any gain would be allocated |
F. | DIVIDENDS AND PAYING AGENTS |
G. | STATEMENT BY EXPERTS |
H. | DOCUMENTS ON DISPLAY |
I. | SUBSIDIARY INFORMATION |
J. | ANNUAL REPORT TO SECURITY HOLDERS |
ITEM 11 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2020 | 2021 | 2021 | 2022 | 2023 | |||||||||||||||||||||||||||||||||||||||||||
Actual | At 2018 exchange rates (1) | Actual | At 2019 exchange rates (1) | Actual | At 2020 exchange rates (1) | Actual | At 2020 exchange rates (1) | Actual | At 2021 exchange rates (1) | Actual | At 2022 exchange rates (1) | |||||||||||||||||||||||||||||||||||||
(In US$ thousands) | (In US$ thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
Revenues | 279,332 | 289,676 | 245,627 | 262,529 | 270,884 | 264,507 | 270,884 | 264,507 | 293,072 | 296,752 | 234,541 | 329,420 | ||||||||||||||||||||||||||||||||||||
Gross profit | �� | 130,518 | 135,730 | 115,515 | 122,708 | 126,482 | 123,734 | 126,482 | 123,734 | 137,562 | 139,120 | 153,161 | 158,291 | |||||||||||||||||||||||||||||||||||
Operating income | 22,654 | 25,419 | 27,831 | 31,229 | 54,615 | 53,595 | 54,615 | 53,595 | 58,774 | 59,218 | 65,955 | 67,422 |
ITEM 12. | DESCRIPTIONS OF SECURITIES OTHER THAN EQUITY SECURITIES |
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
ITEM15. | CONTROLS AND PROCEDURES |
Fahn Kanne & Co. | ||
Head Office | ||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 32 Hamasger Street | |
Tel-Aviv 6721118, | ||
Board of Directors and Stockholders | ISRAEL | |
PO Box 36172, 6136101 | ||
ITURAN LOCATION AND CONTROL LTD. | ||
T +972 3 7106666 | ||
F +972 3 7106660 | ||
www.gtfk.co.il |
ITEM16. | [RESERVED] |
ITEM16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
CODE OF ETHICS |
ITEM16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
2020 | 2021 | 2023 | 2022 | |||||||||||||
(in thousands, USD) | (in thousands, USD) | |||||||||||||||
Audit Fees (1) | 572 | 573 | 596 | 581 | ||||||||||||
Tax Fees (2) | 48 | 7 | 17 | 13 | ||||||||||||
Total | 620 | 580 | 613 | 594 |
(1) | The audit fees for the years ended December 31, |
(2) | Consists of all tax related services. |
ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
Period | Total Number of Shares | Average Price Paid per Share | Total Proceeds | Maximum Approximate Value that May Yet to Be Purchased Under the Program |
August 2021 | 15,000 | 26.23 | 394,485 | 18,607,714 |
September 2021 | 56,409 | 26.15 | 1,475,218 | 17,132,496 |
October 2021 | 59,428 | 26.38 | 1,567,434 | 15,565,062 |
November 2021 | 60,688 | 26.71 | 1,620,889 | 13,944,173 |
December 2021 | 88,195 | 25.21 | 2,223,215 | 11,720,958 |
Total 2021 | 279,720 | 26.03 | 7,281,241 | 11,720,958 |
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 |
March 2023 | 53,558 | 22.40 | 1,199,971 | 12,075,963 |
April 2023 | 48,118 | 21.66 | 1,117,933 | 10,958,030 |
May 2023 | 55,102 | 21.77 | 1,199,776 | 9,758,254 |
June 2023 | 49,418 | 24.28 | 1,199,977 | 8,558,277 |
July 2023 | 50,336 | 25.17 | 1,267,171 | 7,291,106 |
August 2023 | 22,612 | 27.78 | 628,260 | 6,662,846 |
Total 2023 | 282,644 | 6,613,088 | 6,662,846 |
ITEM 16F. | CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT |
ITEM 16G. | CORPORATE GOVERNANCE |
ITEM 16H. | MINE SAFETY DISCLOSURE |
ITEM 16I. | DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENT INSPECTIONS |
ITEM 16J. | Insider Trading Policies |
ITEM 16K. | Cybersecurity |
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. | We have not experienced a cybersecurity threat or incident that resulted in or is reasonably likely to result in a material adverse impact to our business or operations. With that, there can be no guarantee that we will not experience such an incident in the future. Such incidents, whether successful or not, could result in our incurring significant costs related to, for example, rebuilding our internal systems, implementing additional threat protection measures, providing modifications or replacements to our products and services, defending against litigation, responding to regulatory inquiries or actions, paying damages or taking other remedial steps with respect to third parties, as well as incurring significant reputational harm. |
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. |
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. | We aim to incorporate industry best practices throughout our cybersecurity program. Our cybersecurity strategy focuses on implementing effective and efficient controls, technologies, and other processes to assess, identify, and manage material cybersecurity risks. Our cybersecurity program is designed to be aligned with applicable industry standards and is assessed annually by independent third-party auditors. We have processes in place to assess, identify, manage, and address material cybersecurity threats and incidents. These include, among other things: ongoing security awareness training for employees; mechanisms to detect and monitor unusual network activity and containment and incident response tools. |
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. We also have a process in place to manage cybersecurity risks associated with third-party service providers. We impose security requirements upon our suppliers and intends to broaden such security requirements globally in the near future, including, inter alia: maintaining an effective security management program; abiding by information handling and asset management requirements; and notifying us in the event of any known or suspected cyber incident. |
8. | Our Board of Directors has oversight of cybersecurity risk, which it manages as part of our enterprise risk management program. That program is utilized in making decisions with respect to company priorities, resource allocations, and oversight structures. The Board of Directors is assisted by the Audit Committee, which reviews our cybersecurity program with management and reports to the Board of Directors, and also assisted by the Company’s Vice Presidents of Information Technology (VPIT), Chief Information Security Officers (CISO’s), Data Protection Officer (DPO) and Ituran IT Director International. Cybersecurity reviews by the Audit Committee or the Board of Directors generally occur at least once annually, or more frequently as determined to be necessary or advisable. |
9. | Our cybersecurity program is run by our CISO’s, who reports to our VPIT’s. Our CISO’s is informed about and monitors prevention, detection, mitigation, and remediation efforts through regular communication and reporting from professionals in the information security team, many of whom hold cybersecurity certifications such as a Certified Information Systems Security Professional or Certified Information Security Manager and using technological tools and software and results from third party audits. Our CISO’s and VPIT’s have extensive experience assessing and managing cybersecurity programs and cybersecurity risk. Our CISO’s and VPIT’s regularly report directly to the Audit Committee or the Board of Directors on our cybersecurity program and efforts to prevent, detect, mitigate, and remediate issues. In addition, we have an escalation process in place to inform senior management and the Board of Directors of material issues. |
(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 |
(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. |
By: /s/ Eyal Sheratzky | /s/ Nir Sheratzky | ||
Eyal Sheratzky | Nir Sheratzky | ||
Co-Chief Executive Officers |
Page | |
Report of Independent Registered Public Accounting Firm(PCAOB ID 1375) | F-2 |
Consolidated Financial Statements: |
(PCAOB ID 1375)
Consolidated Financial Statements:
F-4 | |
F-6 | |
F-7 | |
F-8 | |
F-9 | |
F-11 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of ITURAN LOCATION AND CONTROL LTD. | Fahn Kanne & Co. Head Office 32 Hamasger Street Tel-Aviv 6721118, ISRAEL PO Box 36172, 6136101 |
T +972 3 7106666 F +972 3 7106660 www.gtfk.co.il |
Fahn Kanne & Co. is the Israeli member firm of Grant Thornton International Ltd
F - 2
Critical Audit Matter
Critical Audit Matter (cont.)
Fahn Kanne & Co. is the Israeli member firm of Grant Thornton International Ltd
F - 3
Our audit procedures related to this matter included the following, among others. We tested the design and the operating effectiveness of controls relating to management’s goodwill and intangible assets impairment analysis, including controls over the valuation. We tested management’s process for determining the fair value estimate, which included evaluating the appropriateness of the discounted cash flow model; testing the completeness, accuracy and relevance of underlying data used in the model; and evaluating the reasonableness of significant assumptions used by management, including revenue growth rates, discount rate and terminal growth rate with respect to goodwill and future revenues and discount rate with respect to other intangible assets. Evaluating management’s assumptions related to revenue growth rates and terminal growth rate involved evaluating whether the assumptions used by management were reasonable considering (i)(1) the current and past performance of the reporting units, (ii)(2) the consistency with external market and industry data, and (iii)(3) the constituencyconsistency 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 Accountants18, 2024
Fahn Kanne & Co. is the Israeli member firm of Grant Thornton International Ltd
F - 4
US dollars | US dollars | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(in thousands) | 2021 | 2020 | 2023 | 2022 | ||||||||||||
| ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | 50,306 | 72,183 | 53,434 | 27,850 | ||||||||||||
Investment in marketable securities | 4,405 | 6,663 | 119 | 316 | ||||||||||||
Accounts receivable (net of allowance for doubtful accounts) | 43,916 | 39,343 | 45,390 | 45,821 | ||||||||||||
Other current assets (Note 2) | 36,979 | 38,624 | 52,724 | 48,156 | ||||||||||||
Inventories (Note 3) | 27,128 | 22,622 | 26,872 | 28,509 | ||||||||||||
178,539 | 150,652 | |||||||||||||||
162,734 | 179,435 | |||||||||||||||
Long-term investments and other assets | ||||||||||||||||
Investments in affiliated companies (Note 4A) | 885 | 908 | 714 | 1,188 | ||||||||||||
Investments in other companies (Note 4B) | 1,866 | 1,263 | 2,213 | 1,779 | ||||||||||||
Other non-current assets (Note 5) | 3,146 | 2,953 | 3,989 | 3,129 | ||||||||||||
Deferred income taxes (Note 15) | 11,091 | 11,360 | 14,452 | 11,400 | ||||||||||||
Funds in respect of employee rights upon retirement | 16,205 | 13,558 | 18,525 | 15,146 | ||||||||||||
33,193 | 30,042 | 39,893 | 32,642 | |||||||||||||
| ||||||||||||||||
Property and equipment, net (Note 6) | 35,652 | 37,653 | 41,955 | 45,598 | ||||||||||||
| ||||||||||||||||
Operating lease right of use assets, net (Note 7) | 4,690 | 5,548 | 8,071 | 9,905 | ||||||||||||
| ||||||||||||||||
Intangible assets, net (Note 8) | 16,753 | 19,932 | 10,830 | 12,620 | ||||||||||||
| ||||||||||||||||
Goodwill (Note 9) | 39,999 | 39,862 | 39,400 | 39,510 | ||||||||||||
| ||||||||||||||||
Total assets | 293,021 | 312,472 | 318,688 | 290,927 |
F - 5
US dollars | US dollars | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(in thousands, except share data) | 2021 | 2020 | 2023 | 2022 | ||||||||||||
| ||||||||||||||||
Current liabilities | ||||||||||||||||
Credit from banking institutions (Note 10A) | 18,257 | 20,388 | 355 | 11,845 | ||||||||||||
Accounts payable | 21,275 | 19,716 | 20,842 | 21,937 | ||||||||||||
Deferred revenues | 24,333 | 24,351 | 27,117 | 21,783 | ||||||||||||
Obligation to purchase non-controlling interests (Notes 1Y) | 0- | 10,595 | ||||||||||||||
Other current liabilities (Note 11) | 40,767 | 37,677 | 44,150 | 37,407 | ||||||||||||
104,632 | 112,727 | 92,464 | 92,972 | |||||||||||||
| ||||||||||||||||
Long-term liabilities | ||||||||||||||||
Deferred income taxes (Note 15) | 1,952 | 2,494 | 1,116 | 1,534 | ||||||||||||
Loan from bank institution (Note 10B) | 13,169 | 34,068 | 237 | 345 | ||||||||||||
Liability for employee rights upon retirement | 22,476 | 19,715 | 24,562 | 21,224 | ||||||||||||
Deferred revenues | 8,902 | 8,536 | 13,259 | 13,036 | ||||||||||||
Operating lease liabilities, non-current | 1,750 | 2,692 | ||||||||||||||
Operating lease liabilities, non-current (Note 7) | 4,774 | 6,886 | ||||||||||||||
Other non-current liabilities | 2,337 | 2,341 | 2,027 | 2,071 | ||||||||||||
50,586 | 69,846 | 45,975 | 45,096 | |||||||||||||
| ||||||||||||||||
Contingent liabilities (Note 12) | ||||||||||||||||
Commitments and contingent liabilities (Note 12) | ||||||||||||||||
| ||||||||||||||||
Equity: | ||||||||||||||||
Stockholders’ equity (Note 13) | ||||||||||||||||
Share capital – ordinary shares of NIS 0.33⅓ par value: | 1,983 | 1,983 | 1,983 | 1,983 | ||||||||||||
Authorized – December 31, 2021 and 2020 – 60,000,000 shares | ||||||||||||||||
Issued and outstanding – December 31, 2021 and 2020 – 23,475,431 shares | ||||||||||||||||
Authorized – December 31, 2023 and 2022 – 60,000,000 shares | ||||||||||||||||
Issued and outstanding – December 31, 2023 and 2022 – 23,475,431 shares | ||||||||||||||||
Additional paid- in capital | 78,334 | 78,304 | 78,369 | 78,355 | ||||||||||||
Accumulated other comprehensive loss | (41,888 | ) | (38,832 | ) | (45,175 | ) | (45,831 | ) | ||||||||
Retained earnings | 143,259 | 127,684 | 203,563 | 168,963 | ||||||||||||
Treasury stock at cost – December 31, 2021 – 2,941,845 shares and December 31, 2020 – 2,662,125 shares. | (49,228 | ) | (41,947 | ) | ||||||||||||
Treasury stock at cost – December 31, 2023 – 3,581,851 shares and December 31, 2022 – 3,299,207 shares. | (64,286 | ) | (57,673 | ) | ||||||||||||
Stockholders’ equity | 132,460 | 127,192 | 174,454 | 145,797 | ||||||||||||
Non-controlling interests | 5,343 | 2,707 | 5,795 | 7,062 | ||||||||||||
Total equity | 137,803 | 129,899 | 180,249 | 152,859 | ||||||||||||
| ||||||||||||||||
Total liabilities and equity | 293,021 | 312,472 | 318,688 | 290,927 |
F - 6
US dollars | US dollars | |||||||||||||||||||||||
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
(in thousands except earnings per share) | 2021 | 2020 | 2019 | 2023 | 2022 | 2021 | ||||||||||||||||||
| ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Telematics services | 189,649 | 182,944 | 204,728 | 234,541 | 209,558 | 189,649 | ||||||||||||||||||
Telematics products | 81,235 | 62,683 | 74,604 | 85,437 | 83,514 | 81,235 | ||||||||||||||||||
270,884 | 245,627 | 279,332 | 319,978 | 293,072 | 270,884 | |||||||||||||||||||
| ||||||||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||
Telematics services | 84,783 | 81,365 | 90,158 | 98,707 | 90,129 | 83,427 | ||||||||||||||||||
Telematics products | 59,619 | 48,747 | 58,656 | 68,110 | 65,381 | 59,619 | ||||||||||||||||||
144,402 | 130,112 | 148,814 | 166,817 | 155,510 | 143,046 | |||||||||||||||||||
| ||||||||||||||||||||||||
Gross profit | 126,482 | 115,515 | 130,518 | 153,161 | 137,562 | 127,838 | ||||||||||||||||||
Research and development expenses | 14,099 | 12,767 | 13,913 | 16,986 | 16,848 | 14,099 | ||||||||||||||||||
Selling and marketing expenses | 11,906 | 11,014 | 12,778 | 13,643 | 13,327 | 13,262 | ||||||||||||||||||
General and administrative expenses | 46,118 | 49,705 | 55,166 | 56,635 | 48,705 | 46,118 | ||||||||||||||||||
Impairment of goodwill (Note 9) | 0- | 10,508 | 12,292 | |||||||||||||||||||||
Impairment of intangible assets and other expenses (income), net (Note 8) | (256 | ) | 3,690 | 13,715 | ||||||||||||||||||||
Other expenses (income), net (Note 8) | (58 | ) | (92 | ) | (256 | ) | ||||||||||||||||||
Operating income | 54,615 | 27,831 | 22,654 | 65,955 | 58,774 | 54,615 | ||||||||||||||||||
Other expense, net | (109 | ) | (272 | ) | (26 | ) | ||||||||||||||||||
Financing income (expenses), net (Note 14) | (5,538 | ) | 1,480 | 576 | ||||||||||||||||||||
Other income (expenses), net | 2 | - | (109 | ) | ||||||||||||||||||||
Financing expenses, net (Note 14) | (1,552 | ) | (5,944 | ) | (5,538 | ) | ||||||||||||||||||
Income before income tax | 48,968 | 29,039 | 23,204 | 64,405 | 52,830 | 48,968 | ||||||||||||||||||
Income tax expenses (Note 15) | (11,854 | ) | (10,856 | ) | (12,234 | ) | (13,355 | ) | (12,745 | ) | (11,854 | ) | ||||||||||||
Share in losses of affiliated companies, net (Note 4A) | (102 | ) | (842 | ) | (3,203 | ) | (706 | ) | (585 | ) | (102 | ) | ||||||||||||
Net income for the year | 37,012 | 17,341 | 7,767 | 50,344 | 39,500 | 37,012 | ||||||||||||||||||
Less: Net income attributable to non-controlling interest | (2,756 | ) | (1,218 | ) | (878 | ) | (2,207 | ) | (2,397 | ) | (2,756 | ) | ||||||||||||
Net income attributable to the Company | 34,256 | 16,123 | 6,889 | 48,137 | 37,103 | 34,256 | ||||||||||||||||||
| ||||||||||||||||||||||||
Basic and diluted earnings per share attributable to Company’s stockholders (Note 16) | 1.65 | 0.77 | 0.33 | 2.41 | 1.82 | 1.65 | ||||||||||||||||||
| ||||||||||||||||||||||||
Basic and diluted weighted average number of shares outstanding | 20,769 | 20,813 | 21,037 | 20,000 | 20,418 | 20,769 |
F - 7
US dollars | US dollars | |||||||||||||||||||||||
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
(in thousands) | 2021 | 2020 | 2019 | 2023 | 2022 | 2021 | ||||||||||||||||||
| ||||||||||||||||||||||||
Net income for the year | 37,012 | 17,341 | 7,767 | 50,344 | 39,500 | 37,012 | ||||||||||||||||||
| ||||||||||||||||||||||||
Other comprehensive loss, net of tax: | ||||||||||||||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||
Unrealized losses in respect of derivative financial instruments designated for cash flow hedge | (299 | ) | - | - | ||||||||||||||||||||
Foreign currency translation adjustments | (2,935 | ) | (12,918 | ) | (4,054 | ) | 808 | (4,621 | ) | (2,935 | ) | |||||||||||||
Unrealized losses in respect of derivative financial instruments designated for cash flow hedge | 0- | 0- | (384 | ) | ||||||||||||||||||||
Reclassification of net gains realized to net income | 0- | 0- | (399 | ) | ||||||||||||||||||||
Other comprehensive loss, net of tax | (2,935 | ) | (12,918 | ) | (4,837 | ) | ||||||||||||||||||
Other comprehensive income (loss), net of tax | 509 | (4,621 | ) | (2,935 | ) | |||||||||||||||||||
| ||||||||||||||||||||||||
Comprehensive income | 34,077 | 4,423 | 2,930 | 50,853 | 34,879 | 34,077 | ||||||||||||||||||
Less: comprehensive income attributable to non-controlling interests | (2,877 | ) | (1,267 | ) | (1,302 | ) | (2,018 | ) | (1,719 | ) | (2,877 | ) | ||||||||||||
Comprehensive income attributable to the Company | 31,200 | 3,156 | 1,628 | 48,835 | 33,160 | 31,200 |
F - 8
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMPANY STOCKHOLDERS | COMPANY STOCKHOLDERS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ordinary shares | Ordinary shares | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of shares | Share capital amount | Additional paid in capital | Accumulated other comprehensive loss | Retained earnings | Treasury stock | Purchase price adjustment to be settled in shares | Non-controlling interests | Total | 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, 2019 | 23,476 | 1,983 | 78,680 | (20,604 | ) | 129,580 | (25,146 | ) | (10,800 | ) | 6,507 | 160,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes during 2019: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury shares return (*) | - | - | - | - | - | (10,800 | ) | 10,800 | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury shares (**) | - | - | - | - | - | (6,001 | ) | - | - | (6,001 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2021 | 23,476 | 1,983 | 78,304 | (38,832 | ) | 127,684 | (41,947 | ) | 2,707 | 129,899 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes during 2021: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | - | - | - | - | 6,889 | - | - | 878 | 7,767 | - | - | - | - | 34,256 | - | 2,756 | 37,012 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | - | - | - | (5,261 | ) | - | - | - | 424 | (4,837 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | - | - | - | (3,056 | ) | - | - | 121 | (2,935 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend paid to non-controlling interests | - | - | - | - | - | - | - | (1,225 | ) | (1,225 | ) | - | - | - | - | - | - | (241 | ) | (241 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Dividend paid | - | - | - | - | (14,940 | ) | - | - | - | (14,940 | ) | - | - | - | - | (15,809 | ) | - | - | (15,809 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Dividend declared | - | - | - | - | (5,050 | ) | - | - | - | (5,050 | ) | - | - | - | - | (2,872 | ) | - | - | (2,872 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2019 | 23,476 | 1,983 | 78,680 | (25,865 | ) | 116,479 | (41,947 | ) | 0- | 6,584 | 135,914 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury shares (*) | - | - | (7,281 | ) | (7,281 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation in a subsidiary company | - | - | 30 | - | - | - | - | 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2021 | 23,476 | 1,983 | 78,334 | (41,888 | ) | 143,259 | (49,228 | ) | 5,343 | 137,803 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes during 2022: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | - | - | - | - | 37,103 | - | 2,397 | 39,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | - | - | - | (3,943 | ) | - | - | (678 | ) | (4,621 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend paid | - | - | - | - | (8,574 | ) | - | - | (8,574 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend declared | - | - | - | - | (2,825 | ) | - | - | (2,825 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury shares (*) | - | - | - | - | - | (8,445 | ) | - | (8,445 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation in a subsidiary company | - | - | 21 | - | - | - | - | 21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2022 | 23,476 | 1,983 | 78,355 | (45,831 | ) | 168,963 | (57,673 | ) | 7,062 | 152,859 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes during 2023: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | - | - | - | - | 48,137 | - | 2,207 | 50,344 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | - | - | - | 656 | - | - | (147 | ) | 509 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend paid to non-controlling interests | - | - | - | - | - | - | (3,327 | ) | (3,327 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend paid | - | - | - | - | (8,763 | ) | - | - | (8,763 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend declared | - | - | - | - | (4,774 | ) | - | - | (4,774 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury shares (*) | - | - | - | - | - | (6,613 | ) | - | (6,613 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation in a subsidiary company | - | - | 14 | - | - | - | - | 14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2023 | 23,476 | 1,983 | 78,369 | (45,175 | ) | 203,563 | (64,286 | ) | 5,795 | 180,249 |
(**) See Note 14A5
13A6.
F - 9
(in thousands) | ||||||||||||||||||||||||||||||||
COMPANY STOCKHOLDERS | ||||||||||||||||||||||||||||||||
Ordinary shares | ||||||||||||||||||||||||||||||||
Number of shares | Share capital amount | Additional paid in capital | Accumulated other comprehensive loss | Retained earnings | Treasury stock | Non-controlling interests | Total | |||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
US dollars (except for number of shares) | ||||||||||||||||||||||||||||||||
Balance as of January 1, 2020 | 23,476 | 1,983 | 78,680 | (25,865 | ) | 116,479 | (41,947 | ) | 6,584 | 135,914 | ||||||||||||||||||||||
Changes during 2020: | ||||||||||||||||||||||||||||||||
Net income | - | - | - | - | 16,123 | - | 1,218 | 17,341 | ||||||||||||||||||||||||
Other comprehensive loss | - | - | - | (12,967 | ) | - | - | 49 | (12,918 | ) | ||||||||||||||||||||||
Dividend paid to non-controlling interests | - | - | - | - | - | - | (1,461 | ) | (1,461 | ) | ||||||||||||||||||||||
Dividend paid | - | - | - | - | (4,918 | ) | - | - | (4,918 | ) | ||||||||||||||||||||||
Dividend declared to non-controlling interests | - | - | - | - | - | - | (3,363 | ) | (3,363 | ) | ||||||||||||||||||||||
Purchase of subsidiary shares from non-controlling interests | - | - | (430 | ) | - | - | - | (320 | ) | (750 | ) | |||||||||||||||||||||
Stock-based compensation in a subsidiary company | - | - | 54 | - | - | - | - | 54 | ||||||||||||||||||||||||
Balance as of December 31, 2020 | 23,476 | 1,983 | 78,304 | (38,832 | ) | 127,684 | (41,947 | ) | 2,707 | 129,899 | ||||||||||||||||||||||
Changes during 2021: | ||||||||||||||||||||||||||||||||
Net income | - | - | - | - | 34,256 | - | 2,756 | 37,012 | ||||||||||||||||||||||||
Other comprehensive loss | - | - | - | (3,056 | ) | - | - | 121 | (2,935 | ) | ||||||||||||||||||||||
Dividend paid to non-controlling interests | - | - | - | - | - | - | (241 | ) | (241 | ) | ||||||||||||||||||||||
Dividend paid | - | - | - | - | (15,809 | ) | - | - | (15,809 | ) | ||||||||||||||||||||||
Dividend declared | - | - | - | - | (2,872 | ) | - | - | (2,872 | ) | ||||||||||||||||||||||
Purchase of treasury shares (*) | - | - | (7,281 | ) | (7,281 | ) | ||||||||||||||||||||||||||
Stock-based compensation in a subsidiary company | - | - | 30 | - | - | - | - | 30 | ||||||||||||||||||||||||
Balance as of December 31, 2021 | 23,476 | 1,983 | 78,334 | (41,888 | ) | 143,259 | (49,228 | ) | 5,343 | 137,803 |
(*) See Note 13A6
net of withdrawals
F - 10
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2021 | 2020 | 2019 | |||||||||
Cash flows from operating activities | ||||||||||||
Net income for the year | 37,012 | 17,341 | 7,767 | |||||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||||||
Depreciation and amortization | 18,096 | 18,831 | 22,843 | |||||||||
Interest and exchange rate on long term credit | (47 | ) | (266 | ) | 26 | |||||||
Loss (gains) in respect of trading marketable securities and other investments | 2,387 | (4,101 | ) | 241 | ||||||||
Increase in liability for employee rights upon retirement | 2,069 | 1,445 | 1,094 | |||||||||
Share in losses of affiliated companies, net | 102 | 842 | 3,203 | |||||||||
Deferred income taxes | (443 | ) | (2,158 | ) | (2,246 | ) | ||||||
Capital loss (gain) on sale of property and equipment, net | (166 | ) | 199 | 112 | ||||||||
Decrease (increase) in accounts receivable | (3,994 | ) | 4,496 | 10,704 | ||||||||
Decrease in other current and non-current assets | 1,047 | 3,064 | 2,021 | |||||||||
Increase (decrease) in inventories | (3,841 | ) | 3,120 | 3,815 | ||||||||
Increase (decrease) in accounts payable | 1,776 | (658 | ) | (1,125 | ) | |||||||
Increase (decrease) in deferred revenues | 318 | (5,367 | ) | (7,392 | ) | |||||||
Increase (decrease) in obligation to purchase non-controlling interests | 967 | (848 | ) | (3,215 | ) | |||||||
Impairment of goodwill | 0- | 10,508 | 12,292 | |||||||||
Impairment of other intangible assets | 0- | 3,661 | 13,862 | |||||||||
Increase (decrease) in other current and non-current liabilities | 507 | 9,959 | (4,323 | ) | ||||||||
Net cash provided by operating activities | 55,790 | 60,068 | 59,679 | |||||||||
Cash flows from investment activities | ||||||||||||
Increase in funds in respect of employee rights upon retirement, net of withdrawals | (2,097 | ) | (1,148 | ) | (1,191 | ) | ||||||
Capital expenditures | (16,626 | ) | (10,234 | ) | (18,310 | ) | ||||||
Investment in affiliated company | (136 | ) | (90 | ) | (55 | ) | ||||||
Investment in marketable securities | 0- | 0- | (1,102 | ) | ||||||||
Investments in long - term deposit | (48 | ) | (32 | ) | (16 | ) | ||||||
Investments in other companies, net | (539 | ) | (467 | ) | (229 | ) | ||||||
Proceeds from sale of property and equipment | 922 | 223 | 216 | |||||||||
Sale of marketable securities | 0- | 269 | 2,400 | |||||||||
Net cash used in investment activities | (18,524 | ) | (11,479 | ) | (18,287 | ) | ||||||
Cash flows from financing activities | ||||||||||||
Repayment of long-term loan | (23,576 | ) | (18,157 | ) | (8,938 | ) | ||||||
Settlement of obligation to purchase non-controlling interests | (11,281 | ) | 0- | 0- | ||||||||
Short term credit from banking institutions | (197 | ) | 1,186 | (2,167 | ) | |||||||
Acquisition of company shares | (7,281 | ) | 0- | (6,001 | ) | |||||||
Purchase of shares from non-controlling interests | 0- | (750 | ) | 0- | ||||||||
Dividend paid | (15,809 | ) | (9,967 | ) | (19,848 | ) | ||||||
Dividend paid to non-controlling interests | (522 | ) | (1,761 | ) | (1,973 | ) | ||||||
Net cash used in financing activities | (58,666 | ) | (29,449 | ) | (38,927 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (477 | ) | (921 | ) | 101 | |||||||
Net change in cash and cash equivalents | (21,877 | ) | 18,219 | 2,566 | ||||||||
Balance of cash and cash equivalents at beginning of year | 72,183 | 53,964 | 51,398 | |||||||||
Balance of cash and cash equivalents at end of year | 50,306 | 72,183 | 53,964 |
In November 2021, the Company declared a dividend in an amount of US$3 million. The dividend was paid in January 2022.
In June 2020, an Israeli investee have completed public registration in Israel and its shares became equity investment with readily determinable fair value. As a result, the Company reclassified the above-mentioned investment (in the amount of approximately US$3.6 million) from investment in other companies (under long-term investments and other assets) to investment in marketable securities (under current assets).
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2023 | 2022 | 2021 | |||||||||
Interest paid | 358 | 713 | 979 | |||||||||
Income taxes paid, net of refunds | 10,926 | 11,094 | 13,497 |
F - 11
ITURAN LOCATION AND CONTROL LTD.
Supplementary disclosure of cash flow information
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2021 | 2020 | 2019 | |||||||||
| ||||||||||||
Interest paid | 979 | 1,956 | 1,788 | |||||||||
| ||||||||||||
Income taxes paid, net of refunds | 13,497 | 14,402 | 10,376 |
The accompanying notes are an integral part of the 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. On September 13, 2018, the Company closed the acquisition of 81.3% of the shares of Road Track Holding S.L (Today called Ituran Spain Holdings) (“Road Track” or "Ituran Spain Holdings"), a telematics’ company operating primarily in the Latin American region. On September 22, 2021 the Company purchased the remaining 18.7% of shares in Ituran Spain Holdings. |
2. | Functional currency and translation to the reporting currency The functional currency of the Company and its subsidiaries located in Israel (except those that are held through the subsidiary “Road track”) is the New Israeli Shekel (“NIS”), which is the local currency in which those entities operate. The functional currency of the foreign subsidiaries located in Brazil, Mexico and Colombia is the local currency in each country and the functional currency of the rest of the subsidiaries (including Argentinian subsidiaries that operates in highly inflationary economy) is the US Dollar. Regarding the Argentinian subsidiaries see below. The consolidated financial statements of the Company and all of its subsidiaries were translated into U.S. dollars in accordance with the standards of the Financial Accounting Standards Board ("FASB"). Accordingly, assets and liabilities were translated from local currencies to U.S. dollars using yearend exchange rates, and income and expense items were translated at average exchange rates during the year. Gains or losses resulting from translation adjustments (which result from translating an entity’s financial statements into U.S. dollars if its functional currency is different than the U.S. dollar) are reported in other comprehensive income and are reflected in equity, under “accumulated other comprehensive income (loss)”. Translation gains and losses resulting from changes in exchange rates used in the translation of intercompany balances that are long term investment nature (i.e. which their settlement is not planned or anticipated) are also included in other comprehensive income (loss). When an economy in which a foreign entity of the 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. |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.General
1.Operations
Ituran Location and Control Ltd. (the “Company”) commenced operations in 1994. The Company and its subsidiaries (the “Group”) are engaged in the provision of Location based Telematics services and machine-to-machine Telematics products for use in stolen vehicle recovery, fleet management and other applications.
On September 13, 2018, the Company closed the acquisition of 81.3% of the shares of Road Track Holding S.L (Today called Ituran Spain Holdings) (“Road Track” or "Ituran Spain Holdings"), a telematics’ company operating primarily in the Latin American region.
On September 22, 2021 the Company purchased the remaining 18.7% of shares in Ituran Spain Holdings. This was in line with the original acquisition agreement with the former shareholders of this subsidiary.
2. Functional currency and translation to the reporting currency
The functional currency of the Company and its subsidiaries located in Israel (except those that are held through the subsidiary “Road track”) is the New Israeli Shekel (“NIS”), which is the local currency in which those entities operate. The functional currency of the foreign subsidiaries located in Brazil, Mexico and Colombia is the local currency in each country and the functional currency of the rest of the subsidiaries (including Argentinian subsidiaries that operates in highly inflationary economy) is the US Dollar. Regarding the Argentinian subsidiaries see below.
The consolidated financial statements of the Company and all of its subsidiaries were translated into U.S. dollars in accordance with the standards of the Financial Accounting Standards Board ("FASB"). Accordingly, assets and liabilities were translated from local currencies to U.S. dollars using yearend exchange rates, and income and expense items were translated at average exchange rates during the year.
Gains or losses resulting from translation adjustments (which result from translating an entity’s financial statements into U.S. dollars if its functional currency is different than the U.S. dollar) are reported in other comprehensive income and are reflected in equity, under “accumulated other comprehensive income (loss)”. Translation gains and losses resulting from changes in exchange rates used in the translation of intercompany balances that are long term investment nature (i.e. which their settlement is not planned or anticipated) are also included in other comprehensive income (loss).
When an economy in which a foreign entity of the group operates, becomes highly inflationary environment (an economy with a cumulative inflation rate of approximately 100% or more over a three-year period, such as the Company's subsidiaries in Argentina), the financial statements of that foreign entity are remeasured as if its functional currency is the reporting currency of its parent.
Balances denominated in, or linked to foreign currency are stated on the basis of the exchange rates prevailing at the balance sheet date. For foreign currency transactions included in the statement of income, the exchange rates applicable on the relevant transaction dates are used. Transaction gains or losses arising from changes in the exchange rates used in the translation of such balances are carried to financing income or expenses as applicable.
F - 13
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
A.General (cont.)
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
A. | General (cont.) |
2. | Functional currency and translation to the reporting currency (cont.) |
2. Functional currency and translation to the reporting currency (cont.)
The following table presents data regarding the dollar exchange rate of relevant currencies and the Israeli CPI:
Exchange rate of one US dollar | Israeli CPI(*) | ||||||||||
NIS | Brazilian Real | ||||||||||
At December 31, | |||||||||||
| |||||||||||
2021 | 3.110 | 5.5805 | 117.03 points | ||||||||
2020 | 3.215 | 5.1967 | 113.84 points | ||||||||
2019 | 3.456 | 4.0307 | 114.63 points | ||||||||
| |||||||||||
Increase (decrease) during the year: | |||||||||||
| |||||||||||
2021 | (3.27 | )% | 7.39% | 2.80% | |||||||
2020 | (6.97 | )% | 28.93% | (0.69)% | |||||||
2019 | (7.79 | )% | 4.02% | 0.60% |
| 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, | |||||||||
2023 | 3.627 | 4.8413 | 126.83 points | ||||||
2022 | 3.519 | 5.2177 | 123.19 points | ||||||
2021 | 3.110 | 5.5805 | 117.03 points | ||||||
Increase (decrease) during the year: | |||||||||
2023 | 3.07% | (7.21%) | 2.95% | ||||||
2022 | 13.15% | (6.50%) | 5.26% | ||||||
2021 | (3.27% | 7.39% | 2.80% |
(*) | 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. |
ITURAN LOCATION AND CONTROL LTD.
The consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.).
4. Use of estimates in the preparation of financial statements
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from the estimates.
As applicable to these consolidated financial statements, the most significant estimates and assumptions relate to legal contingencies, valuation of goodwill and other intangible assets and revenue recognition and related deferred expenses (contract costs).
As of December 31, 2021, the impact of the outbreak of COVID-19 continues to unfold. As a result, some of the Company's estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, the Company's estimates may change materially in future periods
B. | Principles of consolidation |
The consolidated financial statements include the accounts of the Company and all of its subsidiaries. In these financial statements, the term “subsidiary” refers to a company over which the Company exerts control and the financial statements of which are consolidated with those of the Company. Significant intercompany transactions and balances are eliminated upon consolidation; profits from intercompany sales, not yet realized outside of the Group,Company, are also eliminated. Non-controlling interests are presented in equity.
F - 14
C. | Cash and cash equivalents |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
C.Cash and cash equivalents
The GroupCompany 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 320-10, which is applicable to Debt Securities only, while equity securities are accounted for in accordance with ASC Topic 321-10, "Investments - Equity Securities" (“(“ASC Topic 321-10”).
The security was acquired with intent to sell it in the near future.
E. | Treasury stock |
ITURAN LOCATION AND CONTROL LTD.
F.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.) Allowance for doubtful accounts
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
F. | Allowance for doubtful accounts |
collectible.
19A.
4,946 thousand, respectively
G. | Inventories |
Inventories are stated at the lower of cost or net realizable value. Cost of raw materials and finished products is mainly determined on the basis of first-in, first-out (FIFO). Other method which is utilized for determining the value of inventories is the moving average. The GroupCompany regularly reviews its inventories for obsolescence and other impairment risks and reserves are established when necessary.
F - 15
H. | Investment in affiliated companies |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
H. Investment in affiliated companies
Investments in companies in which the GroupCompany has significant influence but less than controlling interests, are accounted for by the equity method. Income on intercompany sales, not yet realized outside of the Group, wasCompany, is eliminated. The Company also reviews these investments for impairment whenever events indicate the carrying amount may not be recoverable.
When the Company obtain control of an affiliated company that was previously accounted for by the equity method, the investment is then remeasured at its fair value as of the date of which control was obtained and any remeasurement gain or loss is recognized in earnings.
ITURAN LOCATION AND CONTROL LTD.
I. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)Investment in other companies
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
I. | Investment in other companies |
In June 2020, an Israeli investee have completed public registration in Israel and its shares became equity investment with readily determinable fair value. As a result, the
J. | Derivatives |
J. Derivatives
The group applies the provisions of ASC Topic 815, "Derivatives and Hedging". In accordance with ASC Topic 815, all the derivative financial instruments are recognized as either assets or liabilities on the balance sheet at fair value. The accounting for changes in the fair value of a derivative financial instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For derivative financial instruments that are designated and qualify as hedging instruments for accounting purposes, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation.
F - 16
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
J. Derivatives (cont.)
The entire changes in fair value of the derivative instruments designated for hedging purposes that were determined as qualifying for hedging purposes (including the ineffective components of the hedging relationship) are reported as other comprehensive income (loss), net of tax under the caption "unrealized gains (losses) in respect of derivative financial instruments designated for cash flow hedge" and are reclassified to the statements of income when the hedged transaction realizes.
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 liveshedging activities 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:ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
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 20%-33%) | 6.5-33 | ||
Office furniture, equipment and computers | 7-33 | ||
Buildings | 2.5 | ||
Vehicles | 15 | ||
Leasehold improvements | Duration of the lease which is less or equal to useful life. |
L. | Impairment of long-lived assets |
The Group’sCompany’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 GroupCompany accounts for income taxes in accordance with ASC Topic 740-10,"Income "Income Taxes". According to this guidance, deferred income taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial accounting and the tax bases of assets and liabilities under the applicable tax law. Deferred tax balances are computed using the tax rates expected to be in effect at the time when these differences reverse. Valuation allowances in respect of the deferred tax assets are provided for if, based upon the weight of available evidence, it is more likely than not that all or a portion of the deferred income tax assets will not be realized. Deferred tax balances are presented as non-current amounts.
F - 17
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
M. Income taxes (cont.)
US GAAP provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is "more-likely-than-not" to be sustained were to be challenged by a taxing authority. The assessment of a tax position is based solely on the technical merits of the position, without regard the likelihood that the tax position may be challenged. If an uncertain tax position meets the "more-likely-than-not" threshold, the largest amount of tax benefit that is greater than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded.
ITURAN LOCATION AND CONTROL LTD.
N. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)Goodwill and intangible assets
1.
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 in accordance with the provisions of ASC Topic 350, "Intangibles - Goodwill and Other". Commencing fiscal 2021, the annual goodwill assessment as of December 31, each year. |
The Company elected to perform the goodwill annual impairment test for its operating units as follows:
A. An amount of approximately $35.8 million (as of December 31, 2021) relates to two different reporting units (resulted from the RT acquisition). The Company has historically performed an annual goodwill assessment as of June 30 of each year (including June 30, 2021) or more often if indicators of impairment are presented. During the fourth quarter of 2021, following the second closing of the RT acquisition the Company decided to change the date of its annual impairment assessment from June 30 to December 31. The change was made because the Company believe that the second closing provided an appropriate basis to the fair value of such reporting units.
B. An amount of approximately $4.2 million (as of December 31, 2021) relates to two different reporting units (resulted from past acquisitions) is tested on December 31 of each year, or more often if indicators of impairment are present.
As required by ASC Topic 350, the Company chooses either to perform a qualitative assessment whether the quantitative goodwill impairment test is necessary or proceeds directly to the quantitative goodwill impairment test. Such determination is made for each reporting unit on a stand-alone basis. The qualitative assessment includes various factors such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, earnings multiples, gross margin and cash flows from operating activities and other relevant factors. When the Company chooses to perform a qualitative assessment and determines that it is more likely than not (more than 50 percent likelihood) that the fair value of the reporting unit is less than its carrying value, then the Company proceeds to the quantitative goodwill impairment test. If the Company determines otherwise, no further evaluation is necessary.
With respect to goodwill impairment tests performed before the adoption of ASU 2017-04 (Which became effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019), when the Company decided or was required to perform the quantitative goodwill impairment test, the Company firstly was required to compare the fair value of the reporting unit to its carrying value ("step 1"). If the fair value of the reporting unit exceeded the carrying value of the reporting unit net assets (including the goodwill allocated to such reporting unit), goodwill was considered not to be impaired, and no further testing was required. If the carrying value was determined to exceed the fair value of the reporting unit, then the implied fair value of goodwill was determined by subtracting the fair value of all the identifiable net assets from the fair value of the reporting unit. An impairment loss was recorded for the excess, if any, of the carrying value of the goodwill allocated to the reporting unit over its implied fair value ("step 2").
F - 18
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
N. Goodwill and intangible assets (cont.)
1. (cont.)
Commencing the adoption of ASU 2017-04 (which eliminated Step 2 from the goodwill impairment test), whenWhen the Company decides or is required to perform the quantitative goodwill impairment test, the Company compares the fair value of the reporting unit to its carrying value and an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. In the performance of the quantitative analysis the Company applies assumptions that market participants would consider in determining the fair value of each reporting unit.
ITURAN LOCATION AND CONTROL LTD.
The Company has historically performedNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
N. | Goodwill and intangible assets (cont.) |
1. | (cont.) |
Under the telematics products segment there are two reporting units with goodwill, for one of which (resulted from past acquisitions) with an allocated amount of approximately US$ 2.2 million of goodwill, the Company performed a qualitative assessment as of December 31, 2021 and 2020, 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$ 3.63.5 million of goodwill (as of December 31, 2021)2023), the Company performed the annual impairment test, as of June 30, 2021December 31, 2023, using a qualitative assessment and reached to a conclusion that no impairment should be recorded at that point. The impairment test was perform using the income approach (quantitative test).
The Company has historically performed an annual goodwill assessment for such reporting unit as of June 30 of each year or more often if indicators of impairment are presented. Following the second closing of the RT acquisition, the Company decided to change the date of its annual impairment assessment from June 30 to December 31. Accordingly, the Company performed a qualitative assessment as of December 31, 2021, and concluded that the qualitative assessment did not result in a more likely than not indication of impairment, and therefore no further impairment testing was required, with respect to such unit.
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. |
F - 19
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
N.Goodwill and intangible assets (cont.)
2. Intangible assets with finite live are amortized using the straight-line basis over their useful lives, to reflect the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up.
As of December 31, 2021,2023, the intangible assets are amortized as follows:
Years | |||
|
| ||
Technology services | 5 | ||
Other | 5 |
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.
ITURAN LOCATION AND CONTROL LTD.
P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)Funds in respect of, and liability for employee rights upon retirement
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
P. | Funds in respect of, and liability for employee rights upon retirement |
F - 20
Q. | Revenue recognition | |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Q. Revenue recognition
The Company and its subsidiaries generate revenue from subscriber fees for the provision of services and sales of systems and products, mainly in respect of fleet management services, stolen vehicle recovery services and other value-added services. To a lesser extent, revenues are also derived from technical support services. The Company and its subsidiaries sell the systems primarily through their direct sales force and indirectly through resellers.
Revenue recognition accounting policy applied from January 1, 2018 (following the adoption of ASC Topic 606);
1.
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. |
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.
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
Q. | Revenue recognition (cont.) |
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. |
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. |
F - 21
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Q. Revenue recognition (cont.)
2. Revenues from provision of SVR services are recognized over time, as the customers simultaneously receive and consume the benefits provided by the Company performance as the Company performs.
3. For arrangements that involve the delivery or performance of multiple products (mostly, AVL products), services (such as SVR services) and/or rights to use assets, the Company analyzes whether the goods or services that were promised to the customer are distinct. A good or service promised to a customer is considered ‘distinct’ if both of the following criteria are met: 1. The customer can benefit from the good or service, either on its own or together with other resources that are readily available to the customer; and, 2. The Company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. When the above criteria are met, the revenue recognition for the related products and/or services are recognized as described in 1 and 2 above, as applicable.
With respect to arrangement that are determined to have multiple performance obligations that are distinct, the Company allocates the contract’s transaction price to each performance obligation using the relative standalone selling price of each distinct good or service in the contract. However, in certain circumstances, the company estimates the selling prices of the SVR services (which are sold together with AVL products) using the residual approach. Under the residual approach, the standalone selling price of the SVR services is estimated by reference to the total transaction price less the sum of the observable standalone selling prices of all other goods or services promised in the contract. Such approach is used since the Company sells the same type of service in those jurisdictions to different customers (at or near the same time) for a broad range of amounts (thus, the stand-alone selling price is highly variable).
4. Amounts earned by certain Brazilian subsidiary for arranging a bundle transaction of SVR services subscription and installation services together with insurance services to be supplied by a third party insurance company, are recognized ratably on a straight-line basis over the subscription period (see 2 above), since the amount allocated to the Company (for the SVR services subscription, installation services and for arranging the transaction), is contingent upon the delivery of the SVR services. As the insurance company is acting as a principal with respect to the insurance component, the Company recognized only the net amounts as revenues, after deduction of amounts related to the insurance component.
5. Deferred revenues include unearned amounts received from customers (mostly for the provision of installation, future subscription services and extended warranty) but not yet recognized as revenues. Such deferred revenues are recognized as described in paragraph 2 above or paragraph 6 below, as applicable.
For the years ended December 31, 2021 and 2020 the Company recognized revenue of approximately US$ 24.4 million and US$ 29.1 million, respectively, that was included in the deferred revenue balance at the beginning of each reporting period.
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.
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
Q. | Revenue recognition (cont.) |
4. | Amounts earned by certain Brazilian subsidiary for arranging a bundle transaction of SVR services subscription and installation services together with insurance services to be supplied by a third party insurance company, are recognized ratably on a straight-line basis over the subscription period (see 2 above), since the amount allocated to the Company (for the SVR services subscription, installation services and for arranging the transaction), is contingent upon the delivery of the SVR services. As the insurance company is acting as a principal with respect to the insurance component, the Company recognized only the net amounts as revenues, after deduction of amounts related to the insurance component. |
5. | Deferred revenues include unearned amounts received from customers (mostly for the provision of installation, future subscription services and extended warranty) but not yet recognized as revenues. Such deferred revenues are recognized as described in paragraph 2 above or paragraph 6 below, as applicable. For the year ended December 31, 2023, the Company recognized revenue of approximately US$21.7 million that was included in the deferred revenue balance at the beginning of the reporting period. An amount of approximately US$27.1 million is expected to be recognized in the following year. |
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. |
7. | Payment terms – The vast majority of the company's payment terms are between 30 to 90 days. |
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.
S. | Research and development costs |
1. | Research and development costs (other than computer software related expenses) are expensed as incurred. |
2. | Software 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”.
ITURAN LOCATION AND CONTROL LTD.
T. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)Advertising costs
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
T. | Advertising costs |
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.
V. | Fair value measurements |
The Company measures fair value and discloses fair value measurements for financial and non-financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
F - 23
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
V. Fair value measurements (cont.)
As such, fair value is a market-based measurement that is required to be determined based on the assumptions that market participants would use to determine the price of an asset or a liability.
19C.
ITURAN LOCATION AND CONTROL LTD.
W. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)Contract costs and prepaid expenses
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
W. | Contract costs and prepaid expenses |
The contract costs are amortized over the estimated life of the related subscription arrangements by the straight-line method. Costs that do not meet the aforementioned criteria, are recognized immediately as expenses.
Prepaid expenses, consist mainly of amounts paid by certain Brazilian subsidiary to insurance companies as a prepaid insurance on behalf of its customers as part of bundle transactions of SVR services together with insurance services to be supplied by a third-party insurance company. Under such transactions, the customers are required accordingly to pay to the Brazilian subsidiary a monthly fee for all the bundled services (see Note 1Q regarding the revenue recognition of such bundle transactions). The insurance companies are obligated to refund any unearned insurance amounts to the Brazilian subsidiary in the event of termination of the transaction by the customers. The prepaid expenses are amortized over the contractual life of the insurance service with the insurance company (usually 12 months) by the straight-line method. The amortization is netted against the monthly receipts from customers for the bundled services.
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 - 24
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 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
X.Stock-based compensation
The Company accounts for stock-based compensation to employees and non-employees in accordance with ASC 718, "Compensation - Stock Compensation", ("ASC 718"). The fair value of the award, is recognized in the Company's consolidated statement of income as an expense over the requisite service periods. 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.
ITURAN LOCATION AND CONTROL LTD.
Y. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)Obligation to purchase non-controlling interests
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
Y. | Obligation to purchase non-controlling interests |
Z. | Leases |
The GroupCompany entered into several non-cancelable lease agreements for real estate (mainly offices, warehouses and base sites), network equipment and vehicles for use in its operations, which are classified as operating leases.
Lease accounting policy applied from January 1, 2019 (following the adoption of ASC Topic 842):
On January 1, 2019, the
The Group determines if an arrangement is a lease at inception.
F - 25
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Z.Leases (cont.)
A classification of a lease is determined based on the following criteria:
1.
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. |
2. The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
3. The lease term is for the major part of the remaining economic life of the underlying asset (Generally, 75% or more of the remaining economic life of the underlying assets).
4. The present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset (Generally, 90% or more of the fair value of the underlying asset).
5. The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.
If any of these five criteria is met, the lease is classified as a finance lease. Otherwise, the lease is classified as an operating lease.
AA. Reclassification
Certain comparative figures have been reclassified to conform to the current year presentation. Such reclassifications did not have any significant impact on the Company's equity, net income or cash flows.
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
NOTE 1 | - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) |
AA. | Recently issued accounting pronouncements |
Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”)
In December 2019,October 2021, the FASB issued ASU 2019-12, Income Taxes2021-08 “Business Combinations (Topic 740): Simplifying the805), Accounting for Income Taxes,Contract Assets and Contract Liabilities from Contracts with Customers,” which simplifiesrequires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the accounting for income taxes by eliminating certain exceptions toacquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. The guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions thatwill result in a step-up in the tax basis of goodwillacquirer recognizing contract assets and allocating consolidated income taxescontract liabilities at the same amounts recorded by the acquiree. The guidance should be applied prospectively to separate financial statements of entities not subject to income tax. ASU 2019-12acquisitions occurring on or after the effective date. The guidance is effective for annual and interim periods inthe fiscal years beginning after December 15, 2020.2022, including interim periods within those fiscal years. Early adoption is permitted.
permitted, including in interim periods, for any financial statements that have not yet been issued. Adopting the new guidance in an interim period other than the first fiscal quarter requires an entity to apply the new guidance to all prior business combinations that have occurred since the beginning of the annual period in which the new guidance was adopted. The Company adoptedapplied the provisions of ASU 2019-12 in2021-08 prospectively commencing January 1, 2021.2023. However, the adoption of ASU 2019-12 did not have a significant impactnotable effect on the Company's consolidated financial statements.
AB. | Recently issued accounting pronouncements, not yet adopted |
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
Prepaid expenses | 20,858 | 22,996 | ||||||
Government institutions | 6,687 | 6,247 | ||||||
Deferred contract costs | 7,521 | 6,993 | ||||||
Advances to suppliers | 1,116 | 1,286 | ||||||
Employees | 309 | 287 | ||||||
Others | 488 | 815 | ||||||
36,979 | 38,624 |
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
Finished products | 14,156 | 17,106 | ||||||
Raw materials | 12,972 | 5,516 | ||||||
27,128 | 22,622 |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
AB. | Recently issued accounting pronouncements, not yet adopted (cont.) |
NOTE 2 | - | OTHER CURRENT ASSETS |
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2023 | 2022 | ||||||
Prepaid expenses (*) | 35,869 | 30,187 | ||||||
Government institutions | 3,206 | 5,831 | ||||||
Deferred contract costs (*) | 10,751 | 8,962 | ||||||
Advances to suppliers | 1,962 | 2,154 | ||||||
Employees | 272 | 375 | ||||||
Others | 664 | 647 | ||||||
52,724 | 48,156 |
NOTE 4 - INVESTMENTS IN AFFILIATEDITURAN LOCATION AND OTHER COMPANIESCONTROL LTD.
A. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)Investment in affiliated companies
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
Bringg | 500 | 700 | ||||||
Lumax | 357 | 208 | ||||||
Cellutrack | 28 | 0- | ||||||
885 | 908 |
NOTE 3 | - | INVENTORIES |
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2023 | 2022 | ||||||
Finished products | 19,506 | 16,894 | ||||||
Raw materials | 7,366 | 11,615 | ||||||
26,872 | 28,509 |
NOTE 4 | - | INVESTMENTS IN AFFILIATED AND OTHER COMPANIES |
A. | Investment in affiliated companies |
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2023 | 2022 | ||||||
Bringg | - | 300 | ||||||
Lumax | 563 | 414 | ||||||
Ituran MOB | 151 | 437 | ||||||
Cellutrack | - | 37 | ||||||
714 | 1,188 |
B. | Investment in other companies |
During the years 2020-2021,2022-2023, the Company made additional investments in two Israeli startups and in one new Israeli startup.
startups.
In June 2020, an Israeli investee have completed public registration in Israel stock market and its shares became equity investment with readily determinable fair value. As a result, the Company reclassified the abovementioned investment (in the amount of approximately US$3.6 million) from investment in other companies (under long-term investments and other assets) to investment in marketable securities (under current assets)
NOTE 5 - OTHER NON-CURRENT ASSETS
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
| ||||||||
Deferred contract costs (*) | 2,840 | 2,674 | ||||||
Deposits | 306 | 279 | ||||||
3,146 | 2,953 |
NOTE 5 | - | OTHER NON-CURRENT ASSETS |
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2023 | 2022 | ||||||
Deferred contract costs (*) | 3,689 | 2,942 | ||||||
Deposits | 300 | 187 | ||||||
3,989 | 3,129 |
(*) | See Note 1W. |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 6 - PROPERTY AND EQUIPMENT, NET
A. Property and equipment, net consists of the following:
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
Cost: | ||||||||
Operating equipment (*) | 43,751 | 47,647 | ||||||
Office furniture, equipment and computers | 51,788 | 50,851 | ||||||
Land | 1,728 | 1,819 | ||||||
Buildings | 5,818 | 6,415 | ||||||
Vehicles | 9,976 | 9,498 | ||||||
Leasehold improvements | 9,750 | 9,515 | ||||||
122,811 | 125,745 | |||||||
Less – accumulated depreciation (**) | (87,159 | ) | (88,092 | ) | ||||
Total property and equipment, net | 35,652 | 37,653 |
NOTE 6 | - | PROPERTY AND EQUIPMENT, NET |
A. | Property and equipment, net consists of the following: |
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2023 | 2022 | ||||||
Cost: | ||||||||
Operating equipment (*) | 59,263 | 56,070 | ||||||
Office furniture, equipment and computers | 53,490 | 49,629 | ||||||
Land | 1,684 | 1,667 | ||||||
Buildings | 5,429 | 5,492 | ||||||
Vehicles | 11,023 | 9,829 | ||||||
Leasehold improvements | 9,776 | 9,042 | ||||||
140,665 | 131,729 | |||||||
Less – accumulated depreciation (**) | (98,710 | ) | (86,131 | ) | ||||
Total property and equipment, net | 41,955 | 45,598 |
(*) | As of December 31, |
(**) | As of December 31, |
B. | During the years ended December 31, 2023, 2022 and 2021, depreciation expenses were US$ 15.8 million, US$ 13.9 million and US$ 12.3 million, respectively and additional property and equipment was purchased in an amount of US$ 10.7 million, US$ 23.9 million and US$ 13.7 million, respectively. |
NOTE 7 | - | LEASES |
NOTE 7 - LEASES
The Company have entered into several non-cancelable operating lease agreements for real estate (mainly offices, warehouse and base stations), vehicles and certain network equipment. In addition to rent, the leases may require payment of maintenance, insurance and other operating expenses. The Company's leases have original lease periods expiring between 20222024 and 2030.2029. 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.
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 7 - LEASES (cont.)
NOTE 7 | - | LEASES (cont.) |
US dollars | ||||
Year Ended | ||||
(in thousands) | December 31, | |||
Operating annual lease cost: | ||||
Office and warehouse space |
2,129 | |||
Base stations |
1,206 | |||
Vehicle |
51 | |||
Others |
16 | |||
3,402 | ||||
Weighted Average Remaining Lease Term (years): | ||||
Office space |
5.1 | |||
Base stations |
2.9 | |||
Vehicle |
1.9 | |||
Others |
2 | |||
Weighted Average Discount Rate (%): | ||||
Office space |
6.35 | |||
Base stations |
8.38 | |||
vehicle |
10.49 | |||
Others |
7.33 |
US dollars | ||||
| Year Ended | |||
(in million) | December 31, | |||
Cash paid for amounts included in the measurement of lease liabilities: | 3.4 | |||
Operating cash flows from operating leases |
|
US dollars | ||||
December 31, 2021 | ||||
Period: | ||||
2022 | 3,106 | |||
2023 | 773 | |||
2024 | 422 | |||
2025 | 346 | |||
2026 | 268 | |||
Thereafter | 224 | |||
Total operating lease payments | 5,139 | |||
Less: imputed interest | (449 | ) | ||
Present value of lease liabilities | 4,690 |
US dollars | ||||
(in thousands) | December 31, 2023 | |||
Period: | ||||
2024 | 3,450 | |||
2025 | 2,143 | |||
2026 | 1,354 | |||
2027 | 1,174 | |||
2028 | 1,085 | |||
Thereafter | 396 | |||
Total operating lease payments | 9,602 | |||
Less: imputed interest | (1,530 | ) | ||
Present value of lease liabilities | 8,072 |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 8 - INTANGIBLE ASSETS, NET
US dollars | ||||||||||||||||||||||||
December 31, 2019 | Year ended December 31, 2020 | December 31, 2020 | ||||||||||||||||||||||
(in thousands) | Opening balance | Impairment (*) | Amortization (**) | Additions | Translation differences | Closing balance | ||||||||||||||||||
Costumer relationship | 9,107 | (3,661 | ) | (2,115 | ) | 0- | 0- | 3,331 | ||||||||||||||||
Technology | 13,776 | 0- | (2,871 | ) | 2,992 | 243 | 14,140 | |||||||||||||||||
Others | 3,988 | 0- | (896 | ) | 0- | (631 | ) | 2,461 | ||||||||||||||||
26,871 | (3,661 | ) | (5,882 | ) | 2,992 | (388 | ) | 19,932 |
US dollars | ||||||||||||||||||||||||
December 31, 2020 | Year ended December 31, 2021 | December 31, 2021 | ||||||||||||||||||||||
(in thousands) | Opening balance | Impairment | Amortization (**) | Additions | Translation differences | Closing balance | ||||||||||||||||||
Costumer relationship | 3,331 | 0- | (1,486 | ) | 0- | 0- | 1,845 | |||||||||||||||||
Technology | 14,140 | 0- | (3,573 | ) | 2,891 | 148 | 13,606 | |||||||||||||||||
Others | 2,461 | 0- | (769 | ) | 62 | (452 | ) | 1,302 | ||||||||||||||||
19,932 | 0- | (5,828 | ) | 2,953 | (304 | ) | 16,753 |
NOTE 8 | - | INTANGIBLE ASSETS, NET |
US dollars | ||||||||||||||||||||||||
December 31, | Year ended December 31, | December 31, | ||||||||||||||||||||||
2021 | 2022 | 2022 | ||||||||||||||||||||||
(in thousands) | Opening balance | Impairment | Amortization (*) | Additions | Translation differences | Closing balance | ||||||||||||||||||
Costumer relationship | 1,845 | - | (1,487 | ) | - | - | 358 | |||||||||||||||||
Technology | 13,606 | - | (4,223 | ) | 2,432 | (522 | ) | 11,293 | ||||||||||||||||
Others | 1,302 | - | (531 | ) | 172 | 26 | 969 | |||||||||||||||||
16,753 | - | (6,241 | ) | 2,604 | (496 | ) | 12,620 |
US dollars | ||||||||||||||||||||||||
December 31, | Year ended December 31, | December 31, | ||||||||||||||||||||||
2022 | 2023 | 2023 | ||||||||||||||||||||||
(in thousands) | Opening balance | Impairment | Amortization (*) | Additions | Translation differences | Closing balance | ||||||||||||||||||
Costumer relationship | 358 | - | (358 | ) | - | - | - | |||||||||||||||||
Technology | 11,293 | - | (4,497 | ) | 3,477 | (97 | ) | 10,176 | ||||||||||||||||
Others | 969 | - | (419 | ) | 41 | 63 | 654 | |||||||||||||||||
12,620 | - | (5,274 | ) | 3,518 | (34 | ) | 10,830 |
(*) |
| |
| ||
| ||
| As of December 31, |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 9 - GOODWILL
NOTE 9 | - | GOODWILL |
US dollars | ||||||||||||
Telematics services | Telematics products | Total | ||||||||||
(in thousands) | ||||||||||||
Balance as of January 1, 2020 | 43,383 | 6,703 | 50,086 | |||||||||
Changes during 2020: | ||||||||||||
Impairment (**) | (9,479 | ) | (1,029 | ) | (10,508 | ) | ||||||
Translation differences | 248 | 36 | 284 | |||||||||
Balance as of December 31, 2020 (*) | 34,152 | 5,710 | 39,862 | |||||||||
Changes during 2021: | ||||||||||||
Translation differences | 63 | 74 | 137 | |||||||||
Balance as of December 31, 2021 (*) | 34,215 | 5,784 | 39,999 |
US dollars | ||||||||||||
Telematics services | Telematics products | Total | ||||||||||
(in thousands) | ||||||||||||
Balance as of January 1, 2022 | 34,215 | 5,784 | 39,999 | |||||||||
Changes during 2022: | ||||||||||||
Translation differences | (225 | ) | (264 | ) | (489 | ) | ||||||
Balance as of December 31, 2022 (*) | 33,990 | 5,520 | 39,510 | |||||||||
Changes during 2023: | ||||||||||||
Translation differences | (50 | ) | (60 | ) | (110 | ) | ||||||
Balance as of December 31, 2023 (*) | 33,940 | 5,460 | 39,400 |
(*) | The accumulated amount of goodwill impairment loss as of December 31, |
NOTE 10 | - | CREDIT FROM BANKING INSTITUTIONS |
|
| Short term loans: |
| ||
|
NOTE 10 - CREDIT FROM BANKING INSTITUTIONS
A. Short term loans:
US dollars | US dollars | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(in thousands) | 2021 | 2020 | 2023 | 2022 | ||||||||||||
| ||||||||||||||||
Short-term loans - linked to the Mexican Pezo | 699 | 920 | 138 | 206 | ||||||||||||
Current maturities of long-term loan (Note 10B) | 17,558 | 19,468 | ||||||||||||||
Current maturities of long-term loan and credit line utilized (Note 10B) | 217 | 11,639 | ||||||||||||||
18,257 | 20,388 | 355 | 11,845 |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 10 - CREDIT FROM BANKING INSTITUTIONS (cont.)
NOTE 10 | - | CREDIT FROM BANKING INSTITUTIONS (cont.) |
B. | Long term loan: |
In August 2018, the Company signed on Loan Agreement (the “Loan agreement”) with commercial Israeli bank (the “Bank”) under which the Company has received an amount of approximately 296 million NIS (US$81.7 million) (the “Loan”) from the bank for a period of 5-years that bears an annual interest rate of prime rate (as of December 31, 2021,2023, the prime rate was 1.6%6.25%) + 0.53%. In December 2018 and March 2021, the Company early repaid to the bank in an early repayments amounts of approximately 30 and 20 million NIS respectively (US$8.0 and US$6.0 million, respectively).
•
Equity to total assets Ratio - The Ratio will not be less than 30%.
•
Total equity - Total equity will not be less than $15 million.
•
Net debt to EBITDA Ratio - The Ratio will not exceed 4.
•
EBITDA - EBITDA will not be less than $10 million.
• | Equity to total assets Ratio - The Ratio will not be less than 30%. |
• | Total equity - Total equity will not be less than $15 million. |
• | Net debt to EBITDA Ratio - The Ratio will not exceed 4. |
• | EBITDA - EBITDA will not be less than $10 million. |
C. | Maturity dates: |
US dollars | ||||
December 31, | ||||
(in thousands) |
| |||
|
| |||
First year |
355 | |||
Second year |
237 | |||
592 |
D. | Lines of credit: |
Unutilized short-term lines of credit of the GroupCompany as of December 31, 2021,2023, aggregated to US$ 0.91.5 million.
NOTE 11 - OTHER CURRENT LIABILITIES
Composition:
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
| ||||||||
Accrued expenses | 14,967 | 16,000 | ||||||
Accrued payroll and related taxes | 8,395 | 7,724 | ||||||
Government institutions | 7,513 | 6,379 | ||||||
Accrued dividend | 4,403 | 1,461 | ||||||
Operating lease liabilities, current | 2,940 | 2,856 | ||||||
Others | 2,549 | 3,257 | ||||||
40,767 | 37,677 | |||||||
NOTE 11 | - | OTHER CURRENT LIABILITIES |
Composition:
| ||||||||
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2023 | 2022 | ||||||
Accrued expenses | 15,746 | 11,937 | ||||||
Accrued payroll and related taxes | 9,591 | 8,359 | ||||||
Government institutions | 6,593 | 7,958 | ||||||
Accrued dividend | 6,087 | 4,179 | ||||||
Operating lease liabilities, current | 3,298 | 3,019 | ||||||
Others | 2,835 | 1,955 | ||||||
44,150 | 37,407 |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 12 - CONTINGENT LIABILITIES
A. Claims
1. During year 2016 Brazilian Federal Communication Agency – Anatel issued a tax assessment for FUST contribution (contribution on telecommunication services) levied on the monitoring services rendered by us and additional tax assessment for FUNTELL contribution (contribution to Fund for the Technological Development of Telecommunication) levied on the monitoring services rendered by us regarding all for the period 2007-2012.Total amounts of approximately R$21.7 million (US$ 3.9 million). as of December 2021, 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 defense against such claims. We are currently awaiting the Lower Court or Administrative decisions on all the aforementioned FUST and FUNTELL claims.
2. On July 13, 2015 the company received a purported class action lawsuit which was filed against the Company in the District Court of Central Region in Tel-Aviv, by one plaintiff who is a subscriber of the Company, alleging that the Company, which was declared a monopoly under the Israeli Antitrust Law, 1988, unlawfully abused its power as a monopoly and discriminated between its customers. The plaintiff claims that the alleged discrimination resulted from the Company charging higher monthly subscription fees from customers who are obliged by insurance company requirements to install location and recovery systems in their vehicles than the monthly subscription fees that are charged from customers who are not required by insurance companies to install location and recovery systems in their vehicles. In addition, the plaintiff claims that the Company offers to customers who are not required by insurance companies to install location and recovery systems in their vehicles, a discounted warranty service to their location and recovery systems. The plaintiff claims in addition to the above, that such actions raise additional causes of action against the Company such as negotiations without good faith, executing contract without good faith, breach of contract, unjust enrichment, breach of consumer protection laws, tort laws, and breach of statutory duty. The lawsuit is yet to be approved as a class action. The total amount claimed if the lawsuit is approved as a class action was estimated by the plaintiff to be approximately NIS 300 million (approximately US$ 96 million). Our defense against the approval of the class action lawsuit was filed on January 3, 2016. The plaintiff has responded to our defense on February 29, 2016. Hearing for first stage, i.e. whether claim will be approved as a class action are over and parties are filing their summaries. A class action lawsuit based on similar claims, against the Company, which was filed on form 6-K on March 22, 2011, was dismissed by the court on the request of both parties, on March 5, 2012 for a small compensation to the plaintiff and his attorneys, in a total amount of NIS 30,000 (approximately US$ 9,300). Such dismissal of a similar class action lawsuit may have a positive effect on the Company's defense against the current lawsuit. Based on the opinion of the company's legal counsels, the chances that the lawsuit will not be approved as a class action lawsuit are higher than it will be approved. if the company will not be successful in defending these claims, the company could be subject to significant costs, adversely affecting our results of operations.
3. Claims are filed against the Company and its subsidiaries from time to time during the ordinary course of business, usually with respect to civil, labor and commercial matters. The Company's management believes, based on its legal counsels' assessment, that the provision for contingencies recognized in the balance sheet is sufficient and that currently there are no claims (other than those described in this Note above) that are material, to the consolidated financial statements as a whole.
F - 34
NOTE 12 | - | CONTINGENT LIABILITIES |
A. | Claims |
1. | During year 2016 Brazilian Federal Communication Agency – Anatel issued a tax assessment for FUST contribution (contribution on telecommunication services) levied on the monitoring services rendered by us and additional tax assessment for FUNTELL contribution (contribution to Fund for the Technological Development of Telecommunication) levied on the monitoring services rendered by us regarding all for the period 2007-2012.Total amounts of approximately R$28.0 million (US$ 5.6 million). as of December 2023, 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. 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 defense against such claims. We are currently awaiting the Lower Court or Administrative decisions on all the aforementioned FUST and FUNTELL claims. |
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. |
C. | Commitments |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 12 - CONTINGENT LIABILITIES (cont.)
B.The Company was declared a monopoly under the Israeli Antitrust Law, 1988, in the market for the provision of systems for the location of vehicles in Israel. Under Israeli law, a monopoly is prohibited from taking certain actions, such as predatory pricing and the provision of loyalty discounts, which prohibitions do not apply to other companies. The Israeli Antitrust Authority may further declare that the Company has abused its position in the market. Any such declaration in any suit in which it is claimed that the Company engages in anticompetitive conduct may serve as prima facie evidence that the Company is either a monopoly or that it has engaged in anticompetitive behavior. Furthermore, it may be ordered to take or refrain from taking certain actions, such as setting maximum prices, in order to protect against unfair competition.
C.Commitments
As of December 31, 2021,2023, minimum future rentals under operating leases of buildings, vehicles and base station sites for periods were as follows: 20222024 – US$ 2.63.5 million, 20232025 – US$ 1.32.1 million, 20242026 US$ 0.41.4 million, and hereafter– US$ 0.82.6 million.
NOTE 13 ITURAN LOCATION AND CONTROL LTD.- STOCKHOLDERS’ EQUITY
A. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)Share capital:
1. Composition:
December 31, 2021 and 2020 | Registered | Issued and outstanding | ||||||
Ordinary shares of NIS 0.33⅓ each | 60,000,000 | 23,475,431 |
2.
NOTE 13 | - | STOCKHOLDERS’ EQUITY |
A. | Share capital: |
1. | Composition: |
December 31, 2023 and 2022 | Registered | Issued and outstanding | ||||||
Ordinary shares of NIS 0.33⅓ each | 60,000,000 | 23,475,431 |
2. | In September 2005, the Company registered its ordinary shares for trade in the United States. |
3. | The Ordinary shares of the Company confer upon their holders the right to receive notice to participate and vote in general meetings of the Company and the right to receive dividends, if and when, declared. |
4. | On July 21, 2021, the board of directors approved to continue the share buyback program that was approved on May 21, 2019 (total amount that was approved on May 21, 2019, was 25 million and the actual purchases until 2021 was only 6 million). |
3. The Ordinary shares of the Company confer upon their holders the right to receive notice to participate and vote in general meetings of the Company and the right to receive dividends, if and when, declared.
4. As of December 31, 2017, an amount of 2,507,314 ordinary shares representing 10.7% of the share capital of the Company were held by the Company as treasury shares.
As part of the Acquisition of Ituran Spain Holdings, the Company reissued, in September 2018, 373,489 ordinary shares to the previous shareholders of Road Track (as part of the consideration paid to the sellers), of which 300,472 were returned to the Company in April 2019 due to downward transaction price adjustment.
5. On May 21, 2019, the board of directors approved a share buyback program, which Ituran has commenced. Under which, the Company is able to repurchase Ituran shares in an amount up to $25 million by December 31, 2020.
6. During 2019, the Company's fully owned subsidiary had repurchased a total of 227,828 shares amounting to approximately $6.0 million. On July 21, 2021, the board of directors approved to continue the share buyback program that was approved on May 21, 2019 (total amount that was approved on May 21, 2019, was 25 million and the actual purchases until 2021 was only 6 million).
During 2021, thea Company's fully owned subsidiary had repurchased a total of 228,725 shares amounting to approximately $6.0 million.
7. Treasury stock have no voting rights. (3,299,207 shares as of December 31, 2022).
5. | Treasury stock have no voting rights. |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 13 - STOCKHOLDERS’ EQUITY (cont.)
B. Retained earnings
1. In determining the amount of retained earnings available for distribution as a dividend, the Israeli Companies Law stipulates that the cost of the Company’s shares acquired by the Company and its subsidiaries (presented as a separate item in the statement of changes in equity) must be deducted from the amount of retained earnings.
2. On February 27, 2017, the board of directors approved a change in the dividend policy. The new policy calls for a dividend of $5 million, at minimum per quarter. This new policy became effective starting from the dividend for the first quarter 2017.
3. Dividends are declared and paid in NIS. Dividends paid to stockholders outside Israel are converted into dollars on the basis of the exchange rate prevailing at the date of declaration.
4. During May 2020 (As part of the steps the Company did in order to deal with Covid-19), the Company's board of directors unanimously approved a freeze on the dividend distribution policy until further notice.
5. On March 3, 2021, the board of directors unanimously approved the unfreeze of the dividend policy and approved the distribution of a cash dividend in the amount of $0.48 per share, totaling approximately US$10 million. The Company paid the dividend on April 6, 2021.
6. On March 3, 2021, the board of directors also approved a dividend policy of $3 million, per quarter.
7. During the years ended December 31, 2021, 2020 and 2019, the Company declared dividends in the amount of US$ 0.9, US$ 0.24 and US$ 0.95, per share, totaling US$ 19.0, 5.0 and 20.0 million, respectively (including fourth quarter dividend declared and paid on the following month of January).
NOTE 14 - FINANCING INCOME (EXPENSES), NET
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2021 | 2020 | 2019 | |||||||||
| ||||||||||||
Short-term interest expenses commissions and other | (1,367 | ) | (895 | ) | (944 | ) | ||||||
Gains (loss) in respect of marketable securities and other investments | (2,387 | ) | 4,375 | (241 | ) | |||||||
Interest expenses in respect of long-term loans | (883 | ) | (1,299 | ) | (1,666 | ) | ||||||
Interest income in respect of deposits | 538 | 302 | 500 | |||||||||
Income (expenses) related to taxes positions | 190 | (501 | ) | 203 | ||||||||
Exchange rate differences and others, net | (662 | ) | (1,350 | ) | (491 | ) | ||||||
Income (expenses) in respect of changes in obligation to purchase non-controlling interests (*) | (967 | ) | 848 | 3,215 | ||||||||
(5,538 | ) | 1,480 | 576 |
(*) See Note 1Y
NOTE 13 | - | STOCKHOLDERS’ EQUITY (cont.) |
B. | Retained earnings |
1. | In determining the amount of retained earnings available for distribution as a dividend, the Israeli Companies Law stipulates that the cost of the Company’s shares acquired 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. | During May 2020 (As part of the steps the Company did in order to cope with Covid-19), the Company's board of directors unanimously approved a freeze on the dividend distribution policy until further notice. |
4. | On March 3, 2021, the board of directors unanimously approved the unfreeze of the dividend policy and approved the distribution of a cash dividend in the amount of $0.48 per share, totaling approximately US$10 million. The Company paid the dividend on April 6, 2021. |
5. | On March 3, 2021, the board of directors also approved a dividend policy of $3 million, per quarter. |
6. | In November 2023 our Board decided to resume to a $5 million as dividend distributed quarterly and |
7. | In February 2024 the board of directors approved the increase of quarterly dividend to $8 million. |
8. | During the years ended December 31, 2023, 2022 and 2021, the Company declared dividends in the amount of US$ 0.68, US$ 0.56 and US$ 0.9, per share, totaling approximately US$ 14.0, 12.0 and 20.0 million, respectively (including fourth quarter dividend declared and paid on the following month of January). |
NOTE 14 | - | FINANCING EXPENSES, NET |
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2023 | 2022 | 2021 | |||||||||
Short-term interest expenses commissions and other | (1,585 | ) | (1,923 | ) | (1,367 | ) | ||||||
Loss in respect of marketable securities and other investments | (89 | ) | (3,860 | ) | (2,387 | ) | ||||||
Interest expenses in respect of long-term loans | (311 | ) | (654 | ) | (883 | ) | ||||||
Interest income in respect of deposits | 1,649 | 995 | 538 | |||||||||
Income related to taxes positions | 425 | 35 | 190 | |||||||||
Exchange rate differences and others, net | (1,641 | ) | (537 | ) | (662 | ) | ||||||
Expenses in respect of changes in obligation to purchase non-controlling interests (*) | - | - | (967 | ) | ||||||||
(1,552 | ) | (5,944 | ) | (5,538 | ) |
(*) | See Note 1Y |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 15 - INCOME TAX
NOTE 15 | - | INCOME TAX |
A. | Taxes on income included in the statements of income: |
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2023 | 2022 | 2021 | |||||||||
Income taxes (tax benefit): | ||||||||||||
Current taxes: | ||||||||||||
In Israel | 10,202 | 9,110 | 4,916 | |||||||||
Outside Israel | 5,997 | 4,711 | 6,954 | |||||||||
16,199 | 13,821 | 11,870 | ||||||||||
Deferred taxes: | ||||||||||||
In Israel | (995 | ) | (102 | ) | (300 | ) | ||||||
Outside Israel | (2,130 | ) | (634 | ) | (143 | ) | ||||||
(3,125 | ) | (736 | ) | (443 | ) | |||||||
Taxes in respect of prior years: | ||||||||||||
In Israel | 10 | (457 | ) | 339 | ||||||||
Outside Israel | 271 | 117 | 88 | |||||||||
281 | (340 | ) | 427 | |||||||||
13,355 | 12,745 | 11,854 |
B. | Measurement of results for tax purposes under the Income Tax (Inflationary Adjustments) Law, 1985 (the “Inflationary Adjustment Law”) |
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2021 | 2020 | 2019 | |||||||||
Income taxes (tax benefit): | ||||||||||||
Current taxes: | ||||||||||||
In Israel | 4,916 | 5,841 | 6,155 | |||||||||
Outside Israel | 6,954 | 4,341 | 7,674 | |||||||||
11,870 | 10,182 | 13,829 | ||||||||||
Deferred taxes: | ||||||||||||
In Israel | (300 | ) | (553 | ) | 299 | |||||||
Outside Israel | (143 | ) | (1,605 | ) | (2,545 | ) | ||||||
(443 | ) | (2,158 | ) | (2,246 | ) | |||||||
Taxes in respect of prior years: | ||||||||||||
In Israel | 339 | (*) 2,751 | 439 | |||||||||
Outside Israel | 88 | 81 | 212 | |||||||||
427 | 2,832 | 651 | ||||||||||
11,854 | 10,856 | 12,234 |
(*) During November 2020, the Company has received from the Israeli tax authority ("ITA") tax assessments for the years 2016-2018 amounting to approximately NIS 13 million (approximately US$ 4 million). An amount of approximately NIS 6 million (approximately US$ 2 million) due to the timing differences (out of this amount, approximately NIS 2 million were claim in the tax assessment for the year ended December 31, 2019) related to the deduction of certain expenses for tax purposes, which was agreed to be deducted in the coming years. Accordingly, the Company recorded an amount of NIS 9 million (approximately US$ 3 million) as tax expense related to prior periods and a deferred tax benefit in a similar amount. In addition, the Company was required to pay the ITA an amount of NIS 2 million (approximately US$ 0.5 million) as interest expense. Such amount was recognized as part of financing income, net.
B. Measurement of results for tax purposes under the Income Tax (Inflationary Adjustments) Law, 1985 (the “Inflationary Adjustment Law”)
Until December 31, 2007, the Company and its Israeli subsidiaries reported income for tax purposes in accordance with the provisions of the Inflationary Adjustments Law, whereby taxable income was measured in NIS, adjusted for changes in the Israeli Consumer Price Index where results of operations for tax purposes were measured in terms of earnings in NIS after adjustments for changes in the Israeli Consumer Price Index ("CPI"). Commencing January 1, 2008, this law became void, and in its place, there are transition provisions, whereby the results of operations for tax purposes are measured on a nominal basis.
C. The Law for the Encouragement of Capital Investments, 1959 (the "Investment Law")
1. On December 22, 2016, the Israeli parliament passed the Law for Economic Efficiency (Legislative Amendments for Achieving Budget Objectives in the Budget Years 2017 and 2018) – 2016 (hereinafter – the “Economic Efficiency Law”) and on December 29, 2016, the Law was publicized in the Official Gazette. The Economic Efficiency Law, among other things, reduced the tax rate applicable to a preferred enterprise located in Development Zone A from 9% to 7.5% (the tax rate applicable to a preferred enterprise located in areas other than Development Zone A. remained unchanged at 16%). The Economic Efficiency Law also outlined new benefit tracks for preferred technology enterprises.
2. As of December 31, 2021, one Israeli subsidiary (located in areas other than Development Zone A) is entitled to a "Preferred Company" status pursuant to the investment law and subject to 16% corporate tax rate.
C. | The Law for the Encouragement of Capital Investments, 1959 (the "Investment Law") |
1. | On December 22, 2016, the Israeli parliament passed the Law for Economic Efficiency (Legislative Amendments for Achieving Budget Objectives in the Budget Years 2017 and 2018) – 2016 (hereinafter – the “Economic Efficiency Law”) and on December 29, 2016, the Law was publicized in the Official Gazette. The Economic Efficiency Law, among other things, reduced the tax rate applicable to a preferred enterprise located in Development Zone A from 9% to 7.5% (the tax rate applicable to a preferred enterprise located in areas other than Development Zone A. remained unchanged at 16%). The Economic Efficiency Law also outlined new benefit tracks for preferred technology enterprises. |
2. | As of December 31, 2023, one Israeli subsidiary (located in areas other than Development Zone A) is entitled to a "Preferred Company " status pursuant to the investment law and subject to 16% corporate tax rate. |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 15 - INCOME TAX (cont.)
NOTE 15 | - | INCOME TAX (cont.) |
D. | The Law for the Encouragement of Capital Investments, 1959, under the 2016 amendment (the "Investment Law") |
1. | In December 2016 new legislation amended the Investments Law (the "2016 amendment"). Under the 2016 amendment a new status of "Technological Preferred Enterprise" was introduced to the Investment Law. Technological Preferred Enterprise – an enterprise which, amongst other condition, is part of a consolidated 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, 2023, two Israeli subsidiaries (located in areas other than Development Zone A) are entitled to a "Technological Preferred Enterprise" status pursuant to the investment (under the 2016 amendment) law and subject to 12% corporate tax rate. Income not eligible for Technological Preferred Enterprise is taxed at the regular corporate tax rate or at the preferred tax rate as mentioned in Note C1 above, as the case may be. |
E. | Israeli corporate tax rates |
1. In December 2016 new legislation amended the Investments Law (the "2016 amendment"). Under the 2016 amendment a new status of "Technological Preferred Enterprise" was introduced to the Investment Law.
Technological Preferred Enterprise – an enterprise which, amongst other condition, is part of a consolidated group with consolidated revenues of less than NIS 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, 2021, two Israeli subsidiaries (located in areas other than Development Zone A). are entitled to a "Technological Preferred Enterprise" status pursuant to the investment (under the 2016 amendment) law and subject to 12% corporate tax rate. Income not eligible for Technological Preferred Enterprise is taxed at the regular corporate tax rate or at the preferred tax rate as mention in Note C2 above, as the case may be.
E. Israeli corporate tax rates
Taxable income of the Company and its Israeli subsidiaries (that are not entitled to special tax rates as described above) is subject to a corporate tax rate of 23% in 2019, 20202021, 2022 and 2021.
2023.
F. | Non-Israeli subsidiaries |
Non-Israeli subsidiaries are taxed according to the tax laws and rates in their country of residence.
G. | Use of assumptions and judgments |
The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and can be ambiguous; the Company is, therefore, obliged to make many subjective assumptions and judgments regarding the application of such laws and regulations to its facts and circumstances. In addition, interpretations of and guidance surrounding income tax laws and regulations are subject to changes over time. Any changes in the Company's subjective assumptions and judgments could materially affect amounts recognized in its consolidated balance sheets and statements of income.
H. | Tax assessments |
The Company and certain Israeli subsidiary have received final tax assessments through the 2018, One of the subsidiaries in Brazil has received final tax assessments through the 2015 tax year. The other subsidiaries have not yet been assessed since incorporation.
I. | Carry forward foreign tax credits and tax losses |
As of December 31, 2021,2023, there isare no losses carried forward that are likely to usebe used in the near future.
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 15 - INCOME TAX (cont.)
J.The following is reconciliation between the theoretical tax on pretax income, at the applicable Israeli tax rate, and the tax expense reported in the financial statements:
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2021 | 2020 | 2019 | |||||||||
Pretax income | 48,968 | 29,039 | 23,204 | |||||||||
Statutory tax rate | 23 | % | 23 | % | 23 | % | ||||||
Tax computed at the ordinary tax rate | 11,263 | 6,679 | 5,337 | |||||||||
Nondeductible expenses (income) | (282 | ) | 2,220 | 3,117 | ||||||||
Losses and timing differences in respect of which no deferred taxes assets were recognized | 446 | 423 | 297 | |||||||||
Tax adjustment in respect of different tax rates | 1,202 | 753 | 3,045 | |||||||||
Taxes in respect of withholding at the source from royalties and dividends | 0- | 0- | 725 | |||||||||
Adjustment in respect of tax rate deriving from “approved enterprises” | (1,874 | ) | (1,583 | ) | (128 | ) | ||||||
Tax related to previous years | 427 | 2,832 | 651 | |||||||||
Others | 672 | (468 | ) | (810 | ) | |||||||
11,854 | 10,856 | 12,234 | ||||||||||
K. Summary of deferred taxes
Composition:
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
Deferred taxes | ||||||||
Provision for vacation, recreation and bad debt | 1,697 | 1,894 | ||||||
Provision for other employee related obligations | 1,362 | 1,400 | ||||||
Provision for deferred revenues/expenses and other obligations | 3,963 | 4,292 | ||||||
Other temporary differences, net | 2,117 | 1,280 | ||||||
9,139 | 8,866 |
NOTE 15 | - | INCOME TAX (cont.) |
J. | The following is reconciliation between the theoretical tax on pretax income, at the applicable Israeli tax rate, and the tax expense reported in the financial statements: |
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
| ||||||||
Deferred income taxes included in long-term investments and other assets | 11,091 | 11,360 | ||||||
Deferred income taxes included in long-term liabilities | (1,952 | ) | (2,494 | ) | ||||
9,139 | 8,866 | |||||||
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2023 | 2022 | 2021 | |||||||||
Pretax income | 64,405 | 52,830 | 48,968 | |||||||||
Statutory tax rate | 23 | % | 23 | % | 23 | % | ||||||
Tax computed at the ordinary tax rate | 14,813 | 12,151 | 11,263 | |||||||||
Nondeductible expenses (income) | (284 | ) | 2,123 | (282 | ) | |||||||
Losses and timing differences in respect of which no deferred taxes assets were recognized | (557 | ) | 1,742 | 446 | ||||||||
Tax adjustment in respect of different tax rates | 1,087 | 499 | 1,202 | |||||||||
Adjustment in respect of tax rate deriving from “approved enterprises” | (3,133 | ) | (3,002 | ) | (1,874 | ) | ||||||
Tax related to previous years | 281 | (340 | ) | 427 | ||||||||
Others | 1,148 | (428 | ) | 672 | ||||||||
13,355 | 12,745 | 11,854 |
K. | Summary of deferred taxes |
US dollars | ||||||||
December 31, | ||||||||
(in thousands) | 2023 | 2022 | ||||||
Deferred income taxes included in long-term investments and other assets | 14,452 | 11,400 | ||||||
Deferred income taxes included in long-term liabilities | (1,116 | ) | (1,534 | ) | ||||
13,336 | 9,866 |
L. | Income before income taxes is composed as follows: |
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2023 | 2022 | 2021 | |||||||||
The Company and its Israeli subsidiaries | 55,316 | 51,562 | 39,594 | |||||||||
Non-Israeli subsidiaries | 9,089 | 1,268 | 9,374 | |||||||||
64,405 | 52,830 | 48,968 |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 15 - INCOME TAX (cont.)
L. Income before income taxes is composed as follows:
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2021 | 2020 | 2019 | |||||||||
The Company and its Israeli subsidiaries | 39,594 | 38,469 | 27,045 | |||||||||
Non-Israeli subsidiaries | 9,374 | (9,430 | ) | (3,841 | ) | |||||||
48,968 | 29,039 | 23,204 | ||||||||||
NOTE 16 | - | EARNINGS PER SHARE |
During the periods, there were no potential instruments that could be exercised or converted to ordinary shares. The net income and the weighted average number of shares used in computing basic and diluted earnings per share for the years ended December 31, 2021, 20202023, 2022 and 2019,2021, are as follows:
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2021 | 2020 | 2019 | |||||||||
Net income attributable to stockholder's used for the computation of basic and diluted earnings per share | 34,256 | 16,123 | 6,889 | |||||||||
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2023 | 2022 | 2021 | |||||||||
Net income attributable to stockholder's used for the computation of basic and diluted earnings per share | 48,137 | 37,103 | 34,256 |
Number of shares | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2023 | 2022 | 2021 | |||||||||
Weighted average number of shares used in the computation of basic and diluted earnings per share | 20,000 | 20,418 | 20,769 |
Number of shares | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2021 | 2020 | 2019 | |||||||||
Weighted average number of shares used in the computation of basic and diluted earnings per share | 20,769 | 20,813 | 21,037 | |||||||||
NOTE 17 | - | RELATED PARTIES |
A. | The Tzivtit Insurance Ltd. (“Tzivtit Insurance”), owned by a director of the Company, served as the Company’s insurance agent and provides the Company with elementary insurance and managers insurance. |
A.The Tzivtit Insurance Ltd. (“Tzivtit Insurance”), owned by a director of the Company, serves as the Company’s insurance agent and provides the Company with elementary insurance and managers insurance.
In respect of these insurance services, Tzivtit Insurance iswas entitled to receive commissions at various rates, paid by the insurance company (which is not considered a related party).
B.In accordance with an agreement with a related party (as amended), Prof. Yehuda Kahane, for financial consulting, thepolicies. The Company is required to pay the consultantpaid monthly consulting fees of NIS 15,000 (US$ 4,800) a month, linked to the Israeli Consumer Price Index.Index to Professor Kahane. The aggregate amount paid to Professor Kahane in each of the years 2021, 20202023, 2022 and 20192021 was approximately US$ 69,000,66,000, US$ 64,00070,000 and US$ 62,000,69,000, respectively.
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 17 - RELATED PARTIES (cont.)
NOTE 17 | - | RELATED PARTIES (cont.) |
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 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 225,000, 175,000, 175,000243,000, 189,000, 189,000 and 125,000135,000 respectively plus VAT (US$72,000,66,000, US$56,000,51,000, US$56,00051,000 and US$40,00037,000 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, 20192022 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.
•
"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:
• | "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 | 20% | |
27,501-31,000 | 45% | |
31,001-35,000 | 75% | |
35,001-39,000 | 110% | |
Above 39,001 | 150% |
(*) Profit before tax target will not include adjustment of the value of assets and obligations to their fair value in accordance with accounting standards.
(*) | As of December 31, 2023, the estimated aggregate amortization of intangible assets for the next five years is as follows: 2024- US$ 4,707 thousand, 2025- US$ 3,688 thousand, 2026- US$ 1,311 thousand, 2027- US$ 517 thousand and 2028 – US$ 608 thousand. |
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 17 - RELATED PARTIES (cont.)
NOTE 17 | - | RELATED PARTIES (cont.) |
B. | (cont.) |
• | "Excess Return Cash Incentives" means that at the end of each calendar year, the Company shall examine the Company's Stock Yield since January 1 of such year or, with respect to the first year of such grant – since the date of its approval (an "Examined Period"), as compared to the benchmark Yield over such Examined Period; and to the extent that the Company's Stock Yield exceeds the benchmark 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. |
•
"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 – since the date of its approval (an "Examined Period"), as compared to the benchmark Yield over such Examined Period; and to the extent that the Company's Stock Yield exceeds the benchmark 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.
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 17 - RELATED PARTIES (cont.)
NOTE 17 | - | RELATED PARTIES (cont.) |
B. | (cont.) |
In 20212023, 2022 and 20202021 Executive Offices Holders were entitled to Target based cash incentives at the maximum rate of (150%).
Hereintable below is attached table regardssummarizes the aggregate amounts paid to the company's Executive OfficesOffice Holders:
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2021 |
| 2020 |
| 2019 |
| ||||||
Izzy Sheratzky | 3,412 | 1,096 | 2,136 | |||||||||
Eyal Sheratzky | 2,692 | 864 | 1,707 | |||||||||
Nir Sheratzky | 2,692 | 864 | 1,707 | |||||||||
Gil Sheratzky | 1,934 | 518 | 1,051 |
US dollars | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2023 | 2022 | 2021 | |||||||||
Izzy Sheratzky | 2,155 | 3,380 | 3,412 | |||||||||
Eyal Sheratzky | 1,727 | 2,679 | 2,692 | |||||||||
Nir Sheratzky | 1,727 | 2,679 | 2,692 | |||||||||
Gil Sheratzky | 1,227 | 1,841 | 1,934 |
NOTE 18 | - | SEGMENT REPORTING |
A. | General information: |
A. General information:
The operations of the GroupCompany are conducted through two different core activities: Location based services ("Telematics services") and Wireless communications products ("Telematics products"). These activities also represent the reportable segments of the Group.
Company.
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, 2021 | ||||||||||||
Revenues | 189,649 | 81,235 | 270,884 | |||||||||
Operating income | 48,072 | 6,543 | 54,615 | |||||||||
Assets | 79,535 | 38,312 | 117,847 | |||||||||
Goodwill | 34,216 | 5,783 | 39,999 | |||||||||
Expenditures for assets | 9,057 | 1,053 | 10,110 | |||||||||
Depreciation and amortization | 11,411 | 2,142 | 13,553 | |||||||||
Year ended December 31, 2020 | ||||||||||||
Revenues | 182,944 | 62,683 | 245,627 | |||||||||
Operating income (loss) | 28,666 | (835 | ) | 27,831 | ||||||||
Assets | 89,939 | 22,425 | 112,364 | |||||||||
Goodwill | 34,152 | 5,710 | 39,862 | |||||||||
Expenditures for assets | 6,116 | 1,142 | 7,258 | |||||||||
Depreciation and amortization | 12,471 | 2,008 | 14,479 | |||||||||
Impairment of goodwill | 9,479 | 1,029 | 10,508 | |||||||||
Impairment of intangible assets | 1,869 | 1,792 | 3,661 | |||||||||
Year ended December 31, 2019 | ||||||||||||
Revenues | 204,728 | 74,604 | 279,332 | |||||||||
Operating income (loss) | 26,092 | (3,438 | ) | 22,654 | ||||||||
Assets | 118,361 | 28,114 | 146,475 | |||||||||
Goodwill | 43,383 | 6,703 | 50,086 | |||||||||
Expenditures for assets | 11,050 | 1,890 | 12,940 | |||||||||
Depreciation and amortization | 14,671 | 2,483 | 17,154 | |||||||||
Impairment of goodwill | 11,088 | 1,204 | 12,292 | |||||||||
Impairment of intangible assets | 10,914 | 2,948 | 13,862 |
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, 2023 | ||||||||||||
Revenues | 234,541 | 85,437 | 319,978 | |||||||||
Operating income | 65,039 | 916 | 65,955 | |||||||||
Assets | 106,355 | 32,141 | 138,496 | |||||||||
Goodwill | 33,940 | 5,460 | 39,400 | |||||||||
Expenditures for assets | 8,837 | 488 | 9,325 | |||||||||
Depreciation and amortization | 13,346 | 1,433 | 14,779 | |||||||||
Year ended December 31, 2022 | ||||||||||||
Revenues | 209,558 | 83,514 | 293,072 | |||||||||
Operating income | 56,287 | 2,487 | 58,774 | |||||||||
Assets | 99,127 | 33,553 | 132,680 | |||||||||
Goodwill | 33,990 | 5,520 | 39,510 | |||||||||
Expenditures for assets | 19,024 | 1,001 | 20,025 | |||||||||
Depreciation and amortization | 13,030 | 1,608 | 14,638 | |||||||||
Year ended December 31, 2021 | ||||||||||||
Revenues | 189,649 | 81,235 | 270,884 | |||||||||
Operating income | 48,072 | 6,543 | 54,615 | |||||||||
Assets | 81,450 | 36,397 | 117,847 | |||||||||
Goodwill | 34,215 | 5,784 | 39,999 | |||||||||
Expenditures for assets | 9,404 | 706 | 10,110 | |||||||||
Depreciation and amortization | 11,650 | 1,903 | 13,553 |
C. | Information about reported segment profit or loss and assets: |
The evaluation of performance is based on the operating income of each of the two reportable segments.
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) | 2021 | 2020 | 2019 | |||||||||
| ||||||||||||
Total revenues of reportable segment and consolidated revenues | 270,884 | 245,627 | 279,332 | |||||||||
| ||||||||||||
Operating income | ||||||||||||
Total operating income for reportable segments | 54,615 | 27,831 | 22,654 | |||||||||
Unallocated amounts: | ||||||||||||
Financing income, net | (5,538 | ) | 1,480 | 576 | ||||||||
Other expense, net | (109 | ) | (272 | ) | (26 | ) | ||||||
Consolidated income before taxes on income | 48,968 | 29,039 | 23,204 | |||||||||
| ||||||||||||
Assets | ||||||||||||
Total assets for reportable segments (*) | 157,846 | 152,226 | 196,561 | |||||||||
Other unallocated amounts: | ||||||||||||
Current assets | 93,244 | 117,295 | 88,777 | |||||||||
Investments in affiliated and other companies | 2,751 | 2,171 | 4,926 | |||||||||
Property and equipment, net | 15,783 | 17,180 | 20,877 | |||||||||
Other unallocated amounts | 23,397 | 23,600 | 28,094 | |||||||||
Consolidated total assets (at year end) | 293,021 | 312,472 | 339,235 | |||||||||
| ||||||||||||
Other significant items | ||||||||||||
Total expenditures for assets of reportable segments | 10,110 | 7,258 | 12,940 | |||||||||
Unallocated amounts | 6,516 | 2,976 | 5,359 | |||||||||
Consolidated total expenditures for assets | 16,626 | 10,234 | 18,299 | |||||||||
| ||||||||||||
Total depreciation, amortization and impairment for reportable segments | 13,553 | 28,648 | 43,308 | |||||||||
Unallocated amounts | 4,543 | 4,352 | 5,689 | |||||||||
Consolidated total depreciation, amortization and impairment | 18,096 | 33,000 | 48,997 | |||||||||
(*) Including goodwill.
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) | 2023 | 2022 | 2021 | |||||||||
Total revenues of reportable segment and consolidated revenues | 319,978 | 293,072 | 270,884 | |||||||||
Operating income | ||||||||||||
Total operating income for reportable segments | 65,955 | 58,774 | 54,615 | |||||||||
Unallocated amounts: | ||||||||||||
Financing income, net | (1,552 | ) | (5,944 | ) | (5,538 | ) | ||||||
Other expense, net | 2 | - | (109 | ) | ||||||||
Consolidated income before taxes on income | 64,405 | 52,830 | 48,968 | |||||||||
Assets | ||||||||||||
Total assets for reportable segments (*) | 177,896 | 172,190 | 157,846 | |||||||||
Other unallocated amounts: | ||||||||||||
Current assets | 91,263 | 72,190 | 93,244 | |||||||||
Investments in affiliated and other companies | 2,927 | 2,967 | 2,751 | |||||||||
Property and equipment, net | 14,620 | 14,795 | 15,783 | |||||||||
Other unallocated amounts | 31,982 | 28,785 | 23,397 | |||||||||
Consolidated total assets (at year end) | 318,688 | 290,927 | 293,021 | |||||||||
Other significant items | ||||||||||||
Total expenditures for assets of reportable segments | 9,325 | 20,025 | 10,110 | |||||||||
Unallocated amounts | 4,918 | 6,480 | 6,516 | |||||||||
Consolidated total expenditures for assets | 14,243 | 26,505 | 16,626 | |||||||||
Total depreciation, amortization and impairment for reportable segments | 14,779 | 14,638 | 13,553 | |||||||||
Unallocated amounts | 6,289 | 5,496 | 4,543 | |||||||||
Consolidated total depreciation, amortization and impairment | 21,068 | 20,134 | 18,096 |
(*) | Including goodwill. |
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) | 2021 | 2020 | 2019 | |||||||||
| ||||||||||||
Israel | 140,569 | 120,515 | 110,102 | |||||||||
Brazil | 57,764 | 61,470 | 98,020 | |||||||||
Others | 72,551 | 63,642 | 71,210 | |||||||||
Total | 270,884 | 245,627 | 279,332 | |||||||||
NOTE 18 | - | SEGMENT REPORTING (cont.) |
Property and equipment, net | ||||||||||||
December 31, | ||||||||||||
(in thousands) | 2021 | 2020 | 2019 | |||||||||
| ||||||||||||
Israel | 14,524 | 13,784 | 14,967 | |||||||||
Brazil | 13,617 | 14,462 | 21,218 | |||||||||
Others | 7,511 | 9,407 | 9,715 | |||||||||
Total | 35,652 | 37,653 | 45,900 | |||||||||
-
E. | Geographic information |
Revenues | ||||||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2023 | 2022 | 2021 | |||||||||
Israel | 154,175 | 150,423 | 140,569 | |||||||||
Brazil | 85,622 | 69,091 | 57,764 | |||||||||
Others | 80,181 | 73,558 | 72,551 | |||||||||
Total | 319,978 | 293,072 | 270,884 |
Property and equipment, net | ||||||||||||
December 31, | ||||||||||||
(in thousands) | 2023 | 2022 | 2021 | |||||||||
Israel | 12,687 | 13,138 | 14,524 | |||||||||
Brazil | 20,644 | 23,488 | 13,617 | |||||||||
Others | 8,624 | 8,972 | 7,511 | |||||||||
Total | 41,955 | 45,598 | 35,652 |
- | Revenues were attributed to countries based on customer location. |
- |
|
F. | Major customers |
F. Major customers
During 2019, the Company had one costumer (global world vehicles manufacturer) which represent 15.8% of the Company's total sales.
During 2020, and 20212023 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, 20202022 and 2021:
US dollars | ||||||||||||||||||||||||
Reportable segments result of operations | ||||||||||||||||||||||||
(in thousands) | Year ended December 31, 2020 | Year ended December 31, 2021 | ||||||||||||||||||||||
Telematics services | Telematics products | Total | Telematics services | Telematics products | Total | |||||||||||||||||||
At a point of time | 0- | 60,953 | 60,953 | 0- | 78,947 | 78,947 | ||||||||||||||||||
Over a period of time | 182,944 | 1,730 | 184,674 | 189,649 | 2,288 | 191,937 | ||||||||||||||||||
182,944 | 62,683 | 245,627 | 189,649 | 81,235 | 270,884 |
F - 46
US dollars | ||||||||||||||||||||||||
Reportable segments result of operations | ||||||||||||||||||||||||
(in thousands) | Year ended December 31, 2022 | Year ended December 31, 2023 | ||||||||||||||||||||||
Telematics services | Telematics products | Total | Telematics services | Telematics products | Total | |||||||||||||||||||
At a point of time | - | 81,342 | 81,342 | - | 83,626 | 83,626 | ||||||||||||||||||
Over a period of time | 209,558 | 2,172 | 211,730 | 234,541 | 1,811 | 236,352 | ||||||||||||||||||
209,558 | 83,514 | 293,072 | 234,541 | 85,437 | 319,978 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 18 - SEGMENT REPORTING (cont.)
G.Major product lines and timing of revenue recognition (cont.)
In the following table, revenue is disaggregated by primary major product lines, and timing of revenue recognition for the year ended December 31, 2019:
US dollars | |||||||||
Reportable segments result of operations | |||||||||
(in thousands) | Year ended December 31, 2019 | ||||||||
Telematics services | Telematics products | Total | |||||||
At a point of time | 0- | 72,626 | 72,626 | ||||||
Over a period of time | 204,728 | 1,978 | 206,706 | ||||||
204,728 | 74,604 | 279,332 |
US dollars | ||||||||||||
Reportable segments result of operations | ||||||||||||
(in thousands) | Year ended December 31, 2021 | |||||||||||
Telematics services | Telematics products | Total | ||||||||||
At a point of time | - | 78,947 | 78,947 | |||||||||
Over a period of time | 189,649 | 2,288 | 191,937 | |||||||||
189,649 | 81,235 | 270,884 |
NOTE 19 - FINANCIAL INSTRUMENTSITURAN LOCATION AND RISKS MANAGEMENTCONTROL LTD.
A. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)Concentrations of credit risks
NOTE 19 | - | FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT |
A. | Concentrations of credit risks |
Regarding the activity in 2023 see B below.
B. | Foreign exchange risk management |
The GroupCompany 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.
group.
During the years 2021 and 2020 the company did not have hedging activity, and asAs of December 31, 2021,2023, 12 transactions that originated in 2023 remain outstanding.
ITURAN LOCATION AND CONTROL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 19 | - |
B. | Foreign exchange risk management (cont.) |
Assets derivatives | |||||
As of December 31, 2023 | Thousands of US dollars | ||||
Balance sheet location | Fair value | ||||
Derivatives designated as hedging instruments: | |||||
Foreign exchange contracts | Other current liabilities | 299 |
Derivatives designated as hedging instruments | Location of loss recognized in income | Amount of gain recognized in income | |||
Year ended December 31, 2023 | Thousands of US dollars | ||||
Foreign exchange contracts | Unrealized losses in respect of derivative financial instruments designated for cash flow hedge | 299 |
ITURAN LOCATION AND CONTROL LTD.
C. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)Fair value of financial instruments
NOTE 19 | - | FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT (cont.) |
C. | Fair value of financial instruments |
The fair value of the long-term liability (loans from bank institutions) approximates its fair value, as the loan carries variable interest rate.
The fair value of the Company's obligation to purchase non-controlling interests was based on the amount of cash that would be paid to settle the liability if settlement occurred at the balance sheet date. On September 22, 2021, the Company settled the obligation to purchase the remaining 18.7% of the shares of Ituran Spain Holdings for cash in the amount of $11.3 million. As a result, the balance of the obligation to purchase non-controlling interests was derecognized. See Note 1Y.
December 31, 2021 | ||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | |||||||||
| ||||||||||||
Trading securities | 4,405 | 0- | 0- | |||||||||
Total | 4,405 | 0- | 0- |
December 31, 2023 | ||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | |||||||||
Derivatives designated as hedging instruments | - | 299 | - | |||||||||
Trading securities | 119 | - | - | |||||||||
Total | 119 | 299 | - |
December 31, 2022 | ||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | |||||||||
Trading securities | 316 | - | - | |||||||||
Total | 316 | - | - |
December 31, 2020 | ||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | |||||||||
| ||||||||||||
Trading securities | 6,663 | 0- | 0- | |||||||||
Total | 6,663 | 0- | 0- |
F - 48
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
ITURAN LOCATION AND CONTROL LTD.
(Registrant)
|
| ||
|
| ||
|
Dated: April 26, 2022
80