ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Securities registered or to be registered pursuant to Section 12(b) of the Act: | |
Title of Each Class | Name of Each Exchange on Which Registered |
Ordinary Shares, par value New Israeli Shekels 15.00 per share | NASDAQ Global Select Market |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None | |
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None |
Large accelerated filer ☐ | Accelerated filer ☒ | Non-accelerated filer ☐ |
Emerging growth company ☐ |
US GAAP ☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
PART I | 5 | ||
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ITEM 16H | 101 | ||
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102 |
Year Ended December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
Consolidated Statement of Operations Data: | ||||||||||||||||||||
Revenues | $ | 1,304,034 | $ | 1,387,310 | $ | 1,249,634 | $ | 960,561 | $ | 828,008 | ||||||||||
Cost of revenues | 1,011,087 | 1,033,005 | 946,534 | 755,196 | 764,220 | |||||||||||||||
Gross profit | 292,947 | 354,305 | 303,100 | 205,365 | 63,788 | |||||||||||||||
Research and development | 73,053 | 67,664 | 63,134 | 61,669 | 51,841 | |||||||||||||||
Marketing, general and administrative | 64,951 | 66,799 | 65,439 | 62,793 | 58,783 | |||||||||||||||
Nishiwaki Fab restructuring and impairment cost (income), net | -- | -- | (627 | ) | (991 | ) | 55,500 | |||||||||||||
Acquisition related costs | -- | -- | -- | -- | 1,229 | |||||||||||||||
Operating profit (loss) | 154,943 | 219,842 | 175,154 | 81,894 | (103,565 | ) | ||||||||||||||
Financing expense, net | (13,184 | ) | (15,447 | ) | (24,349 | ) | (123,109 | ) | (88,813 | ) | ||||||||||
Gain from acquisition, net | -- | -- | 50,471 | -- | 166,404 | |||||||||||||||
Other income (expense), net | (2,442 | ) | (2,627 | ) | 9,322 | (190 | ) | (140 | ) | |||||||||||
Profit (loss) before income tax | 139,317 | 201,768 | 210,598 | (41,405 | ) | (26,114 | ) | |||||||||||||
Income tax benefit (expense | (5,938 | ) | 99,888 | (1,432 | ) | 12,278 | 24,742 | |||||||||||||
Net Profit (loss) ……………………... | 133,379 | 301,656 | 209,166 | (29,127 | ) | (1,372 | ) | |||||||||||||
Net loss (income) attributable to non-controlling interest | 2,200 | (3,645 | ) | (5,242 | ) | (520 | ) | 5,635 | ||||||||||||
Net Profit (loss) attributable to the Company | $ | 135,579 | $ | 298,011 | $ | 203,924 | $ | (29,647 | ) | $ | 4,263 | |||||||||
Basic earnings (loss) per ordinary share | $ | 1.35 | $ | 3.08 | $ | 2.33 | $ | (0.40 | ) | $ | 0.08 | |||||||||
Diluted earnings per ordinary share | $ | 1.32 | $ | 2.90 | $ | 2.09 | $ | 0.07 | ||||||||||||
Other Financial Data: | ||||||||||||||||||||
Depreciation and amortization, including amortization of financing expenses and accretion | $ | 214,391 | $ | 208,411 | $ | 197,756 | $ | 256,005 | $ | 243,362 |
As of December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
(Dollars and share data in thousands) | ||||||||||||||||||||
Selected Balance Sheet Data: | ||||||||||||||||||||
Cash, cash equivalents and short-term interest-bearing deposits | $ | 505,170 | $ | 445,961 | $ | 389,377 | $ | 205,575 | $ | 187,167 | ||||||||||
Working capital | $ | 784,238 | $ | 571,959 | $ | 450,883 | $ | 235,608 | $ | 93,759 | ||||||||||
Total assets | $ | 1,789,977 | $ | 1,673,639 | $ | 1,379,884 | $ | 965,368 | $ | 884,146 | ||||||||||
Short-term bank debt and current maturities of loans, leases and debentures. | $ | 10,814 | $ | 105,958 | $ | 48,084 | $ | 33,259 | $ | 119,999 | ||||||||||
Loan from banks, net of current maturities | $ | 100,118 | $ | 87,533 | $ | 133,163 | $ | 210,538 | $ | 159,776 | ||||||||||
Debentures, net of current maturities | $ | 120,170 | $ | 128,368 | $ | 162,981 | $ | 45,481 | $ | 107,311 | ||||||||||
Capital leases, net of current maturities | $ | 36,381 | $ | 12,822 | $ | -- | $ | -- | $ | -- | ||||||||||
Shareholders’ equity | $ | 1,236,205 | $ | 1,029,706 | $ | 682,614 | $ | 385,586 | $ | 195,561 | ||||||||||
Number of shares outstanding as of December 31 of any year | 104,980 | 98,458 | 92,985 | 82,058 | 58,034 |
● | The cyclical nature of the semiconductor industry and the volatility of the markets served by our customers; |
● | Changes in the economic conditions of geographical regions where our customers and their markets are located; |
● | Inventory and supply chain management of our customers; |
● | The loss of a key customer, not attracting new designs from key customers, postponement of an order from a key customer or the rescheduling or cancellation of large orders; |
● | The occurrence of accounts receivable write-offs, failure of a key customer to pay accounts receivable in a timely manner, the financial condition of certain of our customers and the regulatory or other payment difficulties that may be imposed in a region in which customers reside, such as China; |
● | The occurrence of an unexpected event, such as environmental events or industrial accidents such as fire or explosions, electricity outage or misprocess, affecting the manufacturing process and our ability to recover the lost or damaged products and provide quality and timely production to our customers without charging them significant additional costs; |
● | Completing capacity expansions and recruitment of personnel in a timely manner to address product demands by our customers; |
● | Mergers and acquisitions in the semiconductor industry and their effect on our market share; | |
● | Our ability to satisfy our customers’ demand for quality and timely production; |
● | The timing and volume of orders relative to our available production capacity; |
● | Our ability to obtain raw materials and equipment on a timely and cost-effective basis; |
● | Price erosion in the industry and our ability to negotiate prices with our current and new customers; |
● | Our susceptibility to intellectual property rights’ disputes; |
● | Our dependency on export licenses and other permits required for our operations and the sale of our products; |
● | Our ability to maintain existing partners and to enter into new partnerships and technology and supply alliances on mutually beneficial terms; |
● | Interest, price index and currency rate fluctuations that were not hedged; |
● | Technological changes and short product life cycles; |
● | Timing for the design and qualification of new products; and |
● | Changes in accounting rules affecting our results. |
● | limiting our ability to fulfill our debt obligations and other liabilities; |
● | requiring the use of a substantial portion of our cash to service our indebtedness rather than investing our cash to fund our strategic growth opportunities and plans, working capital and capital expenditures; |
● | increasing our vulnerability to adverse economic and industry conditions; |
● | limiting our ability to obtain additional financing; |
● | limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; |
● | placing us at a competitive disadvantage with respect to less leveraged competitors and competitors that have better access to capital resources; |
● | volatility in our non-cash financing expenses due to increases in the fair value of our debt obligations; |
● | fluctuations of the payable amounts in USD of JP loans or other expenses which are denominated in JPY; |
● | potential enforcement by the lenders of their liens against our respective assets, as applicable, if an event of default occurs. |
● | We may fail to identify acquisitions that would enable us to execute our business strategy. |
● | Other foundries may bid against us to acquire potential targets. This competition may result in decreased availability of, or increased prices for, suitable acquisition candidates. |
● | We may not be able to obtain the necessary regulatory approvals, or we may not be able to obtain the necessary approvals from our lenders, and as a result, or for other reasons, we may fail to consummate certain acquisitions. |
● | Potential acquisitions and integration require the dedication of substantial management effort, time and resources which may divert management’s attention, focus and resources from our existing business operations or other strategic opportunities, which may have a negative adverse effect on our business. |
● | We may fail to integrate acquisitions successfully in accordance with our business strategy, achieve anticipated benefits depending in part on successfully consolidating functions and integrating operations, procedures and personnel in a timely and efficient manner, expected synergies, attract sufficient business to newly acquired facilities in a timely manner or realize the anticipated growth opportunities from integrating an acquired business into our existing business. |
● | We may not be able to retain experienced management and skilled employees from the businesses we acquire and, if we cannot retain such personnel, we may not be able to attract new skilled employees and experienced management to replace them. |
● | We may purchase a company with excessive unknown contingent liabilities, including, among others, patent infringement or product liability. |
● | We may not be able to obtain sufficient financing which could limit our ability to engage in certain acquisitions. |
● | The amount or terms of financing actually required before and after acquisition may vary from our expectations, resulting in a need for more funding that may not be available to us in order to finance the operations of the target acquisition, which may negatively impact our financial position and profitability. |
● | fluctuations in the level of revenues from our operating activities; |
● | fluctuations in the collection of receivables; |
● | timing and size of payables; |
● | the timing and size of capital expenditures; |
● | the net impact of JPY/ USD fluctuations on our JPY income and JPY expenses; |
● | the repayment schedules of our debt service obligations; |
● | our ability to fulfill our obligations and meet performance milestones under our agreements; |
● | fluctuations in the USD to NIS exchange rate. |
● | rapid technological developments; |
● | evolving industry standards; |
● | changes in customer and product end user requirements; |
● | frequent new product introductions and enhancements; and |
● | short product life cycles with declining prices as products mature. |
● | greater manufacturing capacity and /or availability of same; |
● | a more diverse and established customer base; |
● | greater financial, sales, marketing, distribution and other resources; |
● | governmental funding or support; |
● | a better cost structure; and/or |
● | better operational performance, including cycle time and yields. |
● | difficulties in upgrading or expanding existing facilities; |
● | unexpected breakdowns in our manufacturing equipment and/or related facility systems; |
● | unexpected events, such as an electricity outage or misprocess, affecting the manufacturing process; |
● | difficulties in changing or upgrading our process technologies; |
● | raw material shortages or impurities; |
● | delays in delivery or shortages of spare parts; and |
● | difficulties in maintenance and upgrade of our equipment. |
● | negotiating cross-license agreements; |
● | acquiring licenses to the allegedly infringed patents, which may not be available on commercially reasonable terms, if at all; |
● | discontinuing use of certain process technologies, architectures, or designs, which could cause us to stop manufacturing certain integrated circuits if we are unable to design around the allegedly infringed patents; |
● | litigating the matter in court, incurring substantial legal fees and paying substantial monetary damages in the event we lose; or |
● | developing non-infringing technologies, which may not be feasible. |
● | JPY fluctuations against the USD, see above risk factor “Our exposure to currency exchange and interest rate fluctuations may impact our costs and financial results”; |
● | the burden and cost of compliance with foreign government regulation, as well as compliance with a variety of foreign laws; |
● | impact of potential new legislation under the Trump administration; |
● | general geopolitical risks, such as political and economic instability, international terrorism, potential hostilities and changes in diplomatic and trade relationships; |
● | natural disasters affecting the countries in which we conduct our business; |
● | imposition of regulatory requirements, tariffs, import and export restrictions and other trade barriers and restrictions, including the timing and availability of export licenses and permits; |
● | adverse foreign and international tax rules and regulations, such as withholding taxes deducted from amounts due to us may not be refunded to us by the tax authorities since we are not entitled to foreign tax credit in Israel; |
● | weak protection of our intellectual property rights in certain foreign countries; |
● | delays in product shipments due to local customs’ restrictions; |
● | laws and business practices favoring local companies; |
● | difficulties in collecting accounts receivable; and |
● | difficulties and costs of staffing and managing foreign operations. |
Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which may prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.
A. | HISTORY AND DEVELOPMENT OF THE COMPANY |
B. | BUSINESS OVERVIEW |
· | technical evaluation; |
· | product design to our specifications, including integration of third party intellectual property; |
· | photomask - design and third party photomask manufacturing; |
· | silicon prototyping; |
· | assembly and test; |
· | validation and qualification; and |
· | production. |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
United States | 52 | % | 52 | % | 49 | % | ||||||
Japan | 34 | % | 32 | % | 36 | % | ||||||
Asia, excluding Japan* | 10 | % | 12 | % | 12 | % | ||||||
Europe | 4 | % | 4 | % | 3 | % | ||||||
Total | 100 | % | 100 | % | 100 | % |
· | technology offering and future roadmap; |
· | product performance; |
· | system level technical expertise; |
· | research and development capabilities; |
· | access to intellectual property; |
· | customer technical support; |
· | design services; |
· | product development kits (PDKs); |
· | manufacturing operational performance; |
· | quality systems; |
· | product quality; |
· | manufacturing yields; |
· | customer support and service; |
· | pricing; |
· | management expertise; |
· | strategic customer relationships; |
· | capacity availability; and |
· | stability and reliability of supply. |
C. | ORGANIZATIONAL STRUCTURE |
D. | PROPERTY, PLANTS AND EQUIPMENT |
A. | OPERATING RESULTS |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Statement of Operations Data: | ||||||||||||
Revenues | 100 | % | 100 | % | 100 | % | ||||||
Cost of revenues | 77.5 | 74.5 | 75.7 | |||||||||
Gross Profit | 22.5 | 25.5 | 24.3 | |||||||||
Research and development expense | 5.6 | 4.9 | 5.1 | |||||||||
Marketing, general and administrative expense | 5.0 | 4.8 | 5.2 | |||||||||
Nishiwaki Fab restructuring and impairment cost (income), net | -- | -- | (0.1 | ) | ||||||||
Operating profit | 11.9 | 15.8 | 14.1 | |||||||||
Financing expense, net | (1.0 | ) | (1.1 | ) | (1.9 | ) | ||||||
Gain from acquisition, net | -- | -- | 4.0 | |||||||||
Other income (expense), net | (0.2 | ) | (0.2 | ) | 0.7 | |||||||
Profit (loss) before tax | 10.7 | 14.5 | 16.9 | |||||||||
Income tax benefit (expense) | (0.5 | ) | 7.2 | (0.1 | ) | |||||||
Net profit | 10.2 | 21.7 | 16.8 | |||||||||
Net loss (income) attributable to non-controlling interest | 0.2 | (0.3 | ) | (0.4 | ) | |||||||
Net profit attributable to the Company | 10.4 | % | 21.4 | % | 16.4 | % |
Payment Due | ||||||||||||||||||||||||||||
Total | Less than 1 year | 2 Years | 3 Years | 4 Years | 5 Years | After 5 years | ||||||||||||||||||||||
(in thousands of dollars) | ||||||||||||||||||||||||||||
Contractual Obligations | ||||||||||||||||||||||||||||
Short term liabilities (mainly trade accounts payable) | 167,223 | 167,223 | -- | -- | -- | -- | -- | |||||||||||||||||||||
Loans, related interests and Capital leases | 169,520 | 13,611 | 13,371 | 41,043 | 37,654 | 29,807 | 34,034 | |||||||||||||||||||||
Debentures and related interest | 139,399 | 3,612 | 40,086 | 39,054 | 38,022 | 18,625 | -- | |||||||||||||||||||||
Operating leases (1) | 13,321 | 7,318 | 2,792 | 2,653 | 558 | -- | -- | |||||||||||||||||||||
Equipment purchase agreements(2) | 25,151 | 25,151 | -- | -- | -- | -- | -- | |||||||||||||||||||||
Other long-term liabilities | 3,974 | -- | -- | -- | -- | -- | 3,974 | |||||||||||||||||||||
Other Purchase obligations (3) | 97,122 | 69,826 | 19,614 | 3,182 | 2,500 | 2,000 | -- | |||||||||||||||||||||
Total contractual obligations | 615,710 | 286,741 | 75,863 | 85,932 | 78,734 | 50,432 | 38,008 |
(1) | Operating leases include among others (i) Jazz building lease commitment until the end of 2022. The lease may be extended until 2027 upon exercise of the option provided to Jazz, see note 14C to the consolidated financial statements. (ii) long term TPSCo building lease commitment with lease payments only for the next 3 months as future lease payments were not yet determined |
(2) | Equipment purchase agreements include amounts related to ordered equipment that has not yet been received. |
Officer | Senior Managements’ Name | Age | Title | |||
A | Russell C. Ellwanger | 64 | Chief Executive Officer and Director of Tower, and Chairman of the Board of Directors of its subsidiaries, Tower Semiconductor USA, Inc., Tower US Holdings, Inc., Jazz US Holdings, Inc., Jazz Semiconductor, Inc., TowerJazz Panasonic Semiconductor Co., Ltd. and TowerJazz Texas, Inc. | |||
B | Oren Shirazi | 49 | Chief Financial Officer, Senior Vice President of Finance | |||
C | Dr. Itzhak Edrei | 59 | President | |||
D | Rafi Mor | 55 | Chief Operating Officer | |||
E | Nati Somekh | 43 | Senior Vice President, Chief Legal Officer and Corporate Secretary | |||
F | Yossi Netzer | 55 | Senior Vice President of Corporate Planning | |||
G | Dalit Dahan | 50 | Senior Vice President of Human Resources and IT | |||
H | Ilan Rabinovich | 62 | Senior Vice President of Quality and Reliability and Fab 1 Manager | |||
I | Dr. Marco Racanelli | 52 | Newport Beach Site Manager and Senior Vice President and General Manager of Analog IC Business Unit | |||
J | Guy Eristoff | 56 | Chief Executive Officer of TowerJazz Panasonic Semiconductor Company (TPSCo) | |||
k | Dr. Avi Strum | 57 | Senior Vice President and General Manager of the CMOS Image Sensor Business Unit | |||
L | Zmira Shternfeld-Lavie | 53 | Senior Vice President and General Manager of Transfer, Optimization and Development Process Services Business Unit (TOPS) and Head of Process Engineering R&D | |||
M | Noit Levy | 35 | Vice President of Investor Relations and Corporate Communications |
Directors’ Name* | Age | Title | ||||
N | Amir Elstein | 63 | Chairman of the Board | |||
O | Kalman Kaufman | 73 | Director | |||
P | Alex Kornhauser | 72 | Director | |||
Q | Dana Gross | 51 | Director | |||
R | Ilan Flato | 62 | Director | |||
S | Rami Guzman | 80 | Director | |||
T | Yoav Z. Chelouche | 65 | Director | |||
U | Iris Avner | 54 | Director | |||
V | Jerry D. Neal �� | 74 | Director |
Guy Eristoff was appointed Chief Executive Officer of TowerJazz Panasonic Semiconductor Company Ltd. (TPSCo) at the time of its foundation in April 2014. Previously, he served as Vice President, Global Operational Excellence at Tower Semiconductor Ltd. Prior to this, he served in various positions in the semiconductor industry such as Director of 200mm Fabs Core Engineering at Global-Foundries (Technology Development, Marketing, Industrial Engineering & Central Engineering) for the 200mm Business Unit, (5 fabs), General Manager, Singapore and Asia Region at Intevac, Thin Films Section Manager, Thin Films Module Manager and Process Integration Deputy Director at Chartered Semiconductor and Process/Hardware Engineer and Field Service Manager at Applied Materials. Mr. Eristoff received his B.S. degree in Physics from Rensselaer Polytechnic Institute, (RPI) Troy New York. |
Dr. Avi Strum serves as our Senior Vice President and General Manager of the CMOS Image Sensor Business Unit. Previously, Dr. Strum was Vice President and General Manager of the Specialty Business Unit, Vice President of Europe Sales, Head of the Design Center in Netanya and Device and Integration Department Manager. Prior to joining Tower, Dr. Strum served as the President and COO of TransChip Inc. and from 1996 to 2001, he served in various positions with Intel Corp., both in Israel and the US. From 1990 to 1996, he was the R&D Manager of SCD and was in charge of all the Infrared Detectors development in SCD. Dr. Strum received his Ph.D. and B.Sc. in Electrical Engineering from the Technion - Israel Institute of Technology in 1990 and 1985 respectively. |
Zmira Shternfeld-Lavie serves as our Senior Vice President and General Manager of Transfer, Optimization and Development Process Services Business Unit (TOPS) and Head of Process Engineering R&D. Ms. Lavie has over 25 years’ experience with silicon processing technologies, fabrication management and research and development. She joined the R&D Group as Thin Film Section Manager when it was established in 1996. In her current position, she is also leading the R&D Process Group, MEMS and manages the process transfer activity. Previously, Ms. Lavie served at National Semiconductor as Thin Film Process Engineer. She has expertise in thin films metallization and process integration and has several patents within this area. Ms. Lavie received a B.Sc. in Chemical Engineering from the Technion - Israel Institute of Technology. |
1. | To recommend to the Board of Directors as to a compensation policy for officers, as well as to recommend, once every three years to extend the compensation policy subject to receipt of the required corporate approvals; |
2. | To recommend to the Board of Directors as to any updates to the compensation policy which may be required; |
3. | To review the implementation of the compensation policy by the Company; |
4. | To approve transactions relating to terms of office and employment of certain Company office holders, which require the approval of the Compensation Committee pursuant to the Companies Law; and |
5. | To exempt, under certain circumstances, a transaction relating to terms of office and employment from the requirement of approval of the shareholders meeting. |
a. | advancement of the goals of the Company, its working plan and its long term policy; |
b. | the creation of proper incentives for the office holders while taking into consideration, inter alia, the Company’s risk management policies; |
c. | the Company’s size and nature of its operations; |
d. | with respect to compensation paid to officers which includes variable components - the contributions of the relevant office holders in achieving the goals of the Company and profit in the long term in light of their positions; |
e. | the education, skills, expertise and achievements of the relevant office holders; |
f. | the role of the office holders, areas of their responsibilities and their previous agreements regarding salary; and |
g. | the correlation of the proposed compensation with the compensation of other employees of the Company, and the effect of such differences in compensation on the employment relations in the company. |
(i) | the majority of the votes includes at least a majority of all the votes of shareholders who are non-controlling shareholders of the company or who do not have a personal interest in the compensation policy and participating in the vote; abstentions shall not be included in the total of the votes of the aforesaid shareholders; or |
(ii) | the total of opposing votes from among the shareholders described in subsection (i) above does not exceed 2% of all the voting rights in the company. |
· | the educational background, professional experience and achievements of the officer or director; |
· | the officer or director's position, responsibilities and prior salary and compensation arrangements; |
· | compensation data for comparably situated executives at peer companies, including companies in the industry and/or geographic market; |
· | data of other senior executives of the Company; |
· | macroeconomic environment; |
· | Company's own performance; |
· | the officer or director's expected contribution to the Company’s future growth and profitability; |
· | global competition and environment in which the Company operates and recruits employees; |
· | the relationship between the compensation paid to the officer or director and the average and median compensation of the Company’s employees and contractors, as well as whether such variation has an effect on employment relations; and |
· | any other requirements prescribed by applicable law from time to time. |
o | To align the interests of the officers and directors of the Company with those of Tower and its shareholders in order to enhance shareholder value; |
o | To provide the officers and directors with a structured compensation package, including competitive salaries and performance-based cash and equity incentive programs; |
o | To maintain and increase the level of motivation and ambition; |
o | To provide appropriate awards for superior individual and corporate performance; |
o | To improve the business results and increase income and profitability over time; and |
o | To support the implementation of the Company's business strategy. |
· Base salary; |
· Benefits and perquisites; |
· Performance-based cash bonuses; |
· Equity based compensation; and |
· Retirement, termination and other arrangements. |
· | An annual fee which shall be capped at up to $60,000. |
· | Per meeting fee shall be capped at up to $2,000. |
· | Reasonable travel expenses. |
· | The company's shares are listed on a foreign securities exchange which is referenced in Section 5A(c) of the Regulations, which includes, among others, the NASDAQ Global Select Market; |
· | The Company does not have a controlling shareholder; and |
· | The Company complies with the requirements of the foreign securities laws and stock exchange regulations relating to appointment of independent directors and composition of audit and compensation committees as applicable to companies which are incorporated under the laws of such foreign countries. |
As of December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Process and product engineering, R&D and design | 1,065 | 1,054 | 1,015 | |||||||||
Manufacturing and operations | 3,860 | 3,917 | 3,895 | |||||||||
Manufacturing support | 394 | 399 | 370 | |||||||||
Sales and marketing, finance & administration | 267 | 271 | 272 | |||||||||
Total | 5,586 | 5,641 | 5,552 |
Identity of Person or Group | Percent of Class(1) | Percent of Class (Diluted)(2) | ||||||
Phoenix holdings (3) | 7.96 | % | 7.82 | % | ||||
Senvest Management, LLC (4) | 8.64 | % | 8.49 | % | ||||
Harel Insurance Investments & Financial Services (5) | 5.33 | % | 5.24 | % |
(1) | Assumes the holder’s beneficial ownership of all Tower ordinary shares and all securities that the holder has a right to purchase within 60 days. Also assumes that no other exercisable or convertible securities held by other shareholders has been exercised or converted into shares of the Company. |
(2) | Assumes that all currently outstanding securities to purchase ordinary shares, have been exercised by all holders. |
(3) | Based on information provided by Phoenix holdings as of March 31, 2019, it had approximately 8.5 million shares. The securities reported herein are beneficially owned by various subsidiaries of Phoenix Holding Ltd. Based on Phoenix holdings report, each of the Subsidiaries operates under independent management and makes its own independent voting and investment decisions. |
(4) | Based on information provided by Senvest Management as of March 31, 2019, it had approximately 9.2 million shares. |
(5) | Based on information provided by Harel Insurance Investments & Financial Services as of March 31, 2019, it had approximately 5.7 million shares. |
NASDAQ Stock Market | Tel Aviv Stock Exchange | |||||||||||||||
High ($) | Low ($) | High (NIS) | Low (NIS) | |||||||||||||
Period | ||||||||||||||||
March 2019 | 18.39 | 16.10 | 66.00 | 58.34 | ||||||||||||
February 2019 | 19.03 | 14.36 | 68.87 | 52.00 | ||||||||||||
January 2019 | 15.19 | 13.57 | 55.54 | 50.41 | ||||||||||||
December 2018 | 17.21 | 13.56 | 64.10 | 50.41 | ||||||||||||
November 2018 | 16.58 | 13.78 | 60.12 | 51.53 | ||||||||||||
October 2018 | 22.41 | 13.87 | 80.17 | 54.01 | ||||||||||||
First quarter 2019 | 19.03 | 13.57 | 68.87 | 50.41 | ||||||||||||
Fourth quarter 2018 | 22.41 | 13.56 | 80.17 | 50.41 | ||||||||||||
Third quarter 2018 | 23.55 | 19.26 | 86.31 | 72.00 | ||||||||||||
Second quarter 2018 | 29.36 | 21.69 | 102.00 | 79.29 | ||||||||||||
First quarter 2018 | 36.08 | 26.52 | 124.00 | 91.60 | ||||||||||||
Fourth quarter 2017 | 36.69 | 30.40 | 128.00 | 106.40 | ||||||||||||
Third quarter 2017 | 30.91 | 23.38 | 109.90 | 82.70 | ||||||||||||
Second quarter 2017 | 25.89 | 20.60 | 92.14 | 76.46 | ||||||||||||
First quarter 2017 | 23.65 | 19.02 | 86.51 | 73.17 | ||||||||||||
2018 | 36.08 | 13.56 | 124.00 | 50.41 | ||||||||||||
2017 | 36.69 | 19.02 | 128.00 | 73.17 | ||||||||||||
2016 | 20.04 | 10.36 | 76.55 | 40.32 | ||||||||||||
2015 | 18.29 | 10.68 | 73.79 | 41.85 | ||||||||||||
2014 | 14.26 | 5.44 | 56.00 | 19.20 |
· | amendments to our Articles; |
· | appointment and termination of our independent auditors; |
· | appointment and dismissal of directors (except of external directors); |
· | approval of acts and transactions requiring general meeting approval under the Companies Law; |
· | increase or reduction of authorized share capital in accordance with the provisions of the Companies Law or the rights of shareholders or a class of shareholders; |
· | any merger as provided in section 320 of the Companies Law; and |
· | the exercise of the Board of Directors’ powers by the general meeting, if the Board of Directors is unable to exercise its powers and the exercise of any of its powers is essential for Tower’s proper management, as provided in section 52(a) of the Companies Law. |
· | A private placement that meets all of the following conditions: |
o | 20 percent or more of the voting rights in the company prior to such issuance are being offered; |
o | The private placement will increase the relative holdings of a shareholder that holds five percent or more of the company’s outstanding share capital (assuming the exercise of all of the securities convertible into shares held by that person), or that will cause any person to become, as a result of the issuance, a holder of five percent or more of the company’s outstanding share capital; and |
o | All or part of the consideration for the offering is not cash or registered securities, or the private placement is not being offered at market terms. |
· | A private placement which results in anyone becoming a controlling shareholder. |
· | any amendment to the Articles; |
· | an increase of the company’s authorized share capital; |
· | a merger; or |
· | approval of interested party transactions that require shareholder approval. |
· | We do not supply an annual report but make our audited financial statements available to our shareholders prior to our annual general meeting, as permitted by Israeli law. |
· | We currently comply and are required, under the relief provided under the Amendment to the Relief Regulations, to maintain compliance with the applicable NASDAQ Listing Rules and rules contained in the Exchange Act concerning the appointment of independent directors, following our determination to follow the exemption provided under the Amendment to the Relief Regulations (we are exempt from the requirement to appoint at least two external directors pursuant to the provisions of the Companies Law). |
· | Our Board has not adopted a policy of conducting regularly scheduled meetings at which only our independent directors are present, as permitted by Israeli law. |
· | Following our determination to follow the exemption provided under the Amendment to the Relief Regulations, the composition of our compensation committee is governed by the provisions of the NASDAQ Listing Rules and the Exchange Act governing the composition of the compensation committee applicable to U.S. domestic issuers. However, consideration and approval of compensation for our chief executive officer and other executive officers will be taken by the compensation committee, the board of directors and the shareholders as appropriate under the applicable rules under the Companies Law which may differ from those provided for in the NASDAQ Listing Rules. In accordance with the Companies Law, the compensation of directors, the chief executive officer and all other officers requires the approval of our compensation committee and board of directors, and under circumstances as detailed in this annual report, also requires the approval of our shareholders. Such compensation must either be consistent with our approved Compensation Policy or, in special circumstances, may deviate therefrom, taking into account certain considerations set forth in the Companies Law. We are required to seek shareholder approval for certain corporate actions requiring such approval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the Compensation Policy and for certain office holder compensation. |
· | The process under which director nominees are selected, or recommended for the Board’s selection may not be in full compliance with the applicable NASDAQ Listing Rules. Our directors are elected for terms of one year or until the following annual meeting, by a general meeting of our shareholders. The nominations for director which are presented to our shareholders are generally made by our board of directors. The process under which director nominees are selected, or recommended for the Board’s selection is in compliance with the Companies Law but is not necessarily in full compliance with the NASDAQ Listing Rules. |
· | Israeli law does not require the adoption of and our Board of Directors has not adopted a formal written charter or board resolution addressing the nomination process and such related matters as may be required under United States federal securities laws and pursuant to which certification is required by NASDAQ Listing Rules 5605 (e)(2). |
· | Although we have adopted a formal written audit committee charter, there is no requirement under the Companies Law to do so and the charter as adopted may not specify all the items enumerated in the NASDAQ Listing Rule 5605(c)(1). |
· | Although we have adopted a formal written compensation committee charter, there is no requirement under the Companies Law to do so and the charter as adopted may not specify all the items enumerated in the NASDAQ Listing Rule 5605(d)(1). |
· | Following our determination to follow the exemption provided under the Amendment to the Relief Regulations, the composition of our audit committee is governed by the provisions of the NASDAQ Listing Rules and the Exchange Act governing the composition of the audit committee applicable to U.S. domestic issuers. |
· | Under Israeli law, a company is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at a shareholders meeting. Our articles of association do not provide for a quorum of not less than 33 1/3% of the outstanding shares of our voting ordinary shares for meetings of our ordinary shareholders, as required by the NASDAQ Listing Rules. Our articles of association presently require a quorum consisting of two shareholders holding a combined 33% of our ordinary shares. |
· | We review and approve all related party transactions in accordance with the requirements and procedures for approval of interested party acts and transactions, set forth in sections 268 to 275 the Companies Law, which do not fully reflect the requirements of the NASDAQ Listing Rules. |
· | We seek shareholder approval for all corporate action requiring such approval, in accordance with the requirements of the Companies Law, which does not fully reflect the requirements of the NASDAQ Listing Rules. |
· | We do not necessarily seek shareholder approval for the establishment of, and amendments to, stock option or equity compensation plans (as set forth in NASDAQ Listing Rule 5635(c)), as such matters are not subject to shareholder approval under Israeli law. We will attempt to seek shareholder approval for our stock option or equity compensation plans (and the relevant annexes thereto) to the extent required in order to ensure they are tax qualified for our employees in the United States. However, even if such approval is not received, then the stock option or equity compensation plans will continue to be in effect, but the Company will be unable to grant options to its U.S. employees that qualify as Incentive Stock Options for U.S. federal tax purpose. Our stock option or other equity compensation plans are also available to our non-U.S. employees, and provide features necessary to comply with applicable non-U.S. tax laws. |
a. | if the recipient is a substantial shareholder of the corporation, |
b. | if the recipient is an affiliate of the issuer of the debentures, or |
c. | if the individual is an employee, supplier, or service provider of the company and the tax authorities have not been persuaded that the Payment was not affected by the relationship between the parties. |
· | Industrial companies meeting the criteria set out by the Investment Law for a “Preferred Income” of a “Preferred Enterprise” (as defined below) will be eligible for flat tax rates of 7.5% or 16% , with the actual tax rates determined by the location of the enterprise. The location of Tower's fabrication facilities in Israel entitles it to benefit from a tax rate of 7.5%. The tax incentives offered by the Investment Law are no longer dependent neither on minimum qualified investments nor on foreign ownership. |
· | A company can enjoy both government grants and tax benefits concurrently. Governmental grants will not necessarily be dependent on the extent of enterprise’s investment in assets and/or equipment. The approval of “Preferred Enterprise” status by either the Israeli Tax Authorities or the Investment Center will be accepted by the other. Therefore a Preferred Enterprise may be eligible to receive both tax incentives and government grants, under certain conditions. |
· | Under the transition provisions, any tax benefits obtained prior to 2011 shall continue to apply until expired, unless the company elects to apply the provisions of the new provisions to its income. |
● | an individual citizen or resident of the United States; |
● | a corporation 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; |
● | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
● | a trust if the trust has elected validly to be treated as a United States person for U.S. federal income tax purposes or if a U.S. court is able to exercise primary supervision over the trust’s administration and one or more United States persons have the authority to control all of the trust’s substantial decisions. |
● | insurance companies; |
● | dealers in stocks, securities or currencies; |
● | financial institutions and financial services entities; |
● | real estate investment trusts; |
● | regulated investment companies; |
● | 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 (other than Non-U.S. Holders) having a functional currency other than the U.S. dollar; and |
● | direct, indirect or constructive owners of 10% or more, by voting power or value, of us. |
(a) | the stock of that corporation with respect to which the dividends are paid is readily tradable on an established securities market in the U.S., or |
(b) | that corporation is eligible for benefits of a comprehensive income tax treaty with the U.S. which includes an information exchange program and is determined to be satisfactory by the U.S. Secretary of the Treasury. The Internal Revenue Service has determined that the U.S.-Israel Tax Treaty is satisfactory for this purpose. |
● | that gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States, or |
● | in the case of any gain realized by an individual Non-U.S. Holder, that holder is present in the United States for 183 days or more in the taxable year of the sale or exchange, and other conditions are met. |
(1) | a U.S. person; |
(2) | the government of the U.S. or the government of any state or political subdivision of any state (or any agency or instrumentality of any of these governmental units); |
(3) | a controlled foreign corporation; |
(4) | a foreign partnership that is either engaged in a U.S. trade or business or whose Untied States partners in the aggregate hold more than 50% of the income or capital interests in the partnership; |
(5) | a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the U.S.; or |
(6) | a U.S. branch of a foreign bank or insurance company. |
2018 | 2017 | |||||||
(US dollars In Thousands) | ||||||||
Audit Fees (1) | 809 | 790 | ||||||
Audit Related Fees (2) | 31 | 27 | ||||||
Tax Fees (3) | 18 | 26 | ||||||
Other (4) | -- | 26 | ||||||
858 | 869 |
(1) | Audit Fees consist of fees for professional services rendered for the audit of our financial statements and our subsidiaries financial statements. Services in connection with statutory and regulatory filings and engagements (including audit of our internal control over financial reporting) and reviews of our semi-annual financial results submitted on Form 6-K. |
(2) | Audit-related fees consist of assurance and related services by the auditors including, among others: due diligence services, accounting consultations and audits in connection with acquisitions, attest services related to financial reporting that are not required by statute or regulation and consultation concerning financial accounting, consent letters for our SEC filings and reporting standards. |
(i) | Consolidated Balance Sheets as of December 31, 2018 and 2017; |
(ii) | Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016; |
(iii) | Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2018, 2017 and 2016; |
(iv) | Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016; and |
(v) | Notes to Consolidated Financial Statements, tagged as blocks of text. |
TOWER SEMICONDUCTOR LTD. By: /s/ Russell C. Ellwanger Russell C. Ellwanger Chief Executive Officer |
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F-9-F-55 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Tower Semiconductor Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Tower Semiconductor Ltd. and subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2019, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Brightman Almagor Zohar & Co.
Certified Public Accountants
A Member of Deloitte Touche Tohmatsu Limited
Tel Aviv. Israel
February 28, 2019
We have served as the Company’s auditor since 1993.
Tel Aviv - Main Office
1 Azrieli Center Tel Aviv, 6701101 P.O.B. 16593 Tel Aviv, 6116402 | Tel: +972 (3) 608 5555 | Fax: +972 (3) 609 4022 | info@deloitte.co.il
Jerusalem | Haifa | Beer Sheva | Eilat | Petah Tikva | Netanya |
3 Kiryat Ha’Mada | 5 Ma’aleh Hashichrur | 12 Alumot | The City Center | Deloitte Analytics | Seker - Deloitte |
Har Hotzvim Tower | P.O.B. 5648 | Omer Industrial park | P.O.B. 583 | 7 Hasivim | 7 Giborey Israel St. |
Jerusalem, 914510 | Haifa, 3105502 | P.O.B. 1369 | Eilat, 8810402 | P.O.B. 6712 | P.O.B. 8458 |
D. BOX 45396 | Omer, 8496500 | Petah Tikva, 4959368 | Netanya, 4250407 | ||
Tel: +972 (2) 501 8888 | Tel: +972 (4) 860 7333 | Tel: +972 (8) 690 9500 | Tel: +972 (8) 637 5676 | Tel: +972 (73) 399 4163 | Tel: +972 (9) 892 2444 |
Fax:+972 (2) 537 4173 | Fax:+972 (4) 867 2528 | Fax:+972 (8) 690 9600 | Fax:+972 (8) 637 1628 | Fax:+972 (3) 919 0372 | Fax: +972 (9) 892 2440 |
info-jer@deloitte.co.il | info-haifa@deloitte.co.il | info-beersheva@deloitte.co.il | info-eilat@deloitte.co.il | info@deloitte.co.il | info@deloitte.co.il |
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its networkof member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Tower Semiconductor Ltd.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Tower Semiconductor Ltd. and subsidiaries (the “Company”) as of December 31, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2018, of the Company and our report dated February 28, 2019, expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financing Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and arc required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company: (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company: and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Brightman Almagor Zohar & Co.
Certified Public Accountants
A Member of Deloitte Touche Tohmatsu Limited
Tel Aviv. Israel
February 28, 2019
Tel Aviv - Main Office
1 Azrieli Center Tel Aviv, 6701101 P.O.B. 16593 Tel Aviv, 6116402 | Tel: +972 (3) 608 5555 | Fax: +972 (3) 609 4022 | info@deloitte.co.il
Jerusalem | Haifa | Beer Sheva | Eilat | Petah Tikva | Netanya |
3 Kiryat Ha’Mada | 5 Ma’aleh Hashichrur | 12 Alumot | The City Center | Deloitte Analytics | Seker - Deloitte |
Har Hotzvim Tower | P.O.B. 5648 | Omer Industrial park | P.O.B. 583 | 7 Hasivim | 7 Giborey Israel St. |
Jerusalem, 914510 | Haifa, 3105502 | P.O.B. 1369 | Eilat, 8810402 | P.O.B. 6712 | P.O.B. 8458 |
D. BOX 45396 | Omer, 8496500 | Petah Tikva, 4959368 | Netanya, 4250407 | ||
Tel: +972 (2) 501 8888 | Tel: +972 (4) 860 7333 | Tel: +972 (8) 690 9500 | Tel: +972 (8) 637 5676 | Tel: +972 (73) 399 4163 | Tel: +972 (9) 892 2444 |
Fax:+972 (2) 537 4173 | Fax:+972 (4) 867 2528 | Fax:+972 (8) 690 9600 | Fax:+972 (8) 637 1628 | Fax:+972 (3) 919 0372 | Fax: +972 (9) 892 2440 |
info-jer@deloitte.co.il | info-haifa@deloitte.co.il | info-beersheva@deloitte.co.il | info-eilat@deloitte.co.il | info@deloitte.co.il | info@deloitte.co.il |
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its networkof member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES |
(dollars and shares in thousands) |
As of December 31, | ||||||||
2018 | 2017 | |||||||
A S S E T S | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 385,091 | $ | 445,961 | ||||
Short-term interest-bearing deposits | 120,079 | -- | ||||||
Marketable securities | 135,850 | 113,874 | ||||||
Trade accounts receivable | 153,409 | 149,666 | ||||||
Inventories | 170,778 | 143,315 | ||||||
Other current assets | 22,752 | 21,516 | ||||||
Total current assets | 987,959 | 874,332 | ||||||
LONG-TERM INVESTMENTS | 35,945 | 26,073 | ||||||
PROPERTY AND EQUIPMENT, NET | 657,234 | 635,124 | ||||||
INTANGIBLE ASSETS, NET | 13,435 | 19,841 | ||||||
GOODWILL | 7,000 | 7,000 | ||||||
DEFERRED TAX AND OTHER LONG-TERM ASSETS, NET | 88,404 | 111,269 | ||||||
TOTAL ASSETS | $ | 1,789,977 | $ | 1,673,639 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Current maturities of loans, leases and debentures | $ | 10,814 | $ | 105,958 | ||||
Trade accounts payable | 104,329 | 115,347 | ||||||
Deferred revenue and customers' advances | 20,711 | 14,338 | ||||||
Employee related liabilities | 50,750 | 50,844 | ||||||
Other current liabilities | 17,117 | 15,886 | ||||||
Total current liabilities | 203,721 | 302,373 | ||||||
LONG-TERM DEBT | ||||||||
Debentures | 120,170 | 128,368 | ||||||
Other long-term debt | 136,499 | 100,355 | ||||||
LONG-TERM CUSTOMERS' ADVANCES | 28,131 | 31,908 | ||||||
EMPLOYEE RELATED LIABILITIES | 13,898 | 14,662 | ||||||
DEFERRED TAX LIABILITY | 50,401 | 63,924 | ||||||
OTHER LONG-TERM LIABILITIES | 952 | 2,343 | ||||||
TOTAL LIABILITIES | 553,772 | 643,933 | ||||||
Ordinary shares of NIS 15 par value: | 418,492 | 391,727 | ||||||
150,000 authorized as of December 31, 2018 and 2017 | ||||||||
105,066 and 104,980 issued and outstanding, respectively, as of December 31, 2018 | ||||||||
98,544 and 98,458 issued and outstanding, respectively, as of December 31, 2017 | ||||||||
Additional paid-in capital | 1,380,396 | 1,347,866 | ||||||
Capital notes | 20,758 | 20,758 | ||||||
Cumulative stock based compensation | 93,226 | 80,565 | ||||||
Accumulated other comprehensive loss | (23,388 | ) | (22,759 | ) | ||||
Accumulated deficit | (637,446 | ) | (773,025 | ) | ||||
1,252,038 | 1,045,132 | |||||||
Treasury stock, at cost - 86 shares | (9,072 | ) | (9,072 | ) | ||||
THE COMPANY'S SHAREHOLDERS' EQUITY | 1,242,966 | 1,036,060 | ||||||
Non-controlling interest | (6,761 | ) | (6,354 | ) | ||||
TOTAL SHAREHOLDERS' EQUITY | 1,236,205 | 1,029,706 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,789,977 | $ | 1,673,639 |
See notes to consolidated financial statements. |
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES |
(dollars and shares in thousands, except per share data) |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
REVENUES | $ | 1,304,034 | $ | 1,387,310 | $ | 1,249,634 | ||||||
COST OF REVENUES | 1,011,087 | 1,033,005 | 946,534 | |||||||||
GROSS PROFIT | 292,947 | 354,305 | 303,100 | |||||||||
OPERATING COSTS AND EXPENSES: | ||||||||||||
Research and development | 73,053 | 67,664 | 63,134 | |||||||||
Marketing, general and administrative | 64,951 | 66,799 | 65,439 | |||||||||
Nishiwaki Fab restructuring and impairment cost (income), net | -- | -- | (627 | ) | ||||||||
138,004 | 134,463 | 127,946 | ||||||||||
OPERATING PROFIT | 154,943 | 219,842 | 175,154 | |||||||||
FINANCING EXPENSE, NET | (13,184 | ) | (15,447 | ) | (24,349 | ) | ||||||
GAIN FROM ACQUISITION, NET | -- | -- | 50,471 | |||||||||
OTHER INCOME (EXPENSE), NET | (2,442 | ) | (2,627 | ) | 9,322 | |||||||
PROFIT BEFORE INCOME TAX | 139,317 | 201,768 | 210,598 | |||||||||
INCOME TAX BENEFIT (EXPENSE), NET | (5,938 | ) | 99,888 | (1,432 | ) | |||||||
NET PROFIT | 133,379 | 301,656 | 209,166 | |||||||||
Net loss (income) attributable to non-controlling interest | 2,200 | (3,645 | ) | (5,242 | ) | |||||||
NET PROFIT ATTRIBUTABLE TO THE COMPANY | $ | 135,579 | $ | 298,011 | $ | 203,924 | ||||||
BASIC EARNINGS PER ORDINARY SHARE: | ||||||||||||
Earnings per share | $ | 1.35 | $ | 3.08 | $ | 2.33 | ||||||
Weighted average number of ordinary shares outstanding | 100,399 | 96,647 | 87,480 | |||||||||
DILUTED EARNINGS PER ORDINARY SHARE: | ||||||||||||
Earnings per share | $ | 1.32 | $ | 2.90 | $ | 2.09 | ||||||
Net profit used for diluted earnings per share | $ | 135,579 | $ | 306,905 | $ | 212,160 | ||||||
Weighted average number of ordinary shares outstanding | ||||||||||||
used for diluted earnings per share | 102,517 | 105,947 | 101,303 |
See notes to consolidated financial statements. |
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES |
(dollars in thousands) |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Net profit | $ | 133,379 | $ | 301,656 | $ | 209,166 | ||||||
Other comprehensive income, net of tax: | ||||||||||||
Foreign currency translation adjustment | 3,599 | 5,681 | 923 | |||||||||
Change in employees plan assets and benefit obligations, net of taxes in the amount of $81, $171 and $184 for the years ended December 31, 2018, 2017 and 2016, respectively | 269 | 511 | (546 | ) | ||||||||
Unrealized gain (loss) on derivatives | (2,704 | ) | 1,796 | 266 | ||||||||
Comprehensive income | 134,543 | 309,644 | 209,809 | |||||||||
Comprehensive loss (income) attributable to non-controlling interest | 407 | (6,565 | ) | (6,902 | ) | |||||||
Comprehensive income attributable to the Company | $ | 134,950 | $ | 303,079 | $ | 202,907 |
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES |
(dollars and share data in thousands) |
THE COMPANY'S SHAREHOLDERS' EQUITY | ||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | Foreign currency translation adjustments | |||||||||||||||||||||||||||||||||||||||||||||||
Ordinary | Ordinary | Additional | other | Non | ||||||||||||||||||||||||||||||||||||||||||||
shares | shares | paid-in | Capital | Unearned | comprehensive | Accumulated | Treasury | Comprehensive | controlling | |||||||||||||||||||||||||||||||||||||||
issued | amount | capital | notes | compensation | income (loss) | deficit | stock | income | interest | Total | ||||||||||||||||||||||||||||||||||||||
BALANCE AS OF JANUARY 1, 2016 | 82,144 | $ | 326,572 | $ | 1,273,545 | $ | 48,553 | $ | 58,209 | $ | (264 | ) | $ | (26,546 | ) | $ | (1,273,654 | ) | $ | (9,072 | ) | $ | (11,757 | ) | $ | 385,586 | ||||||||||||||||||||||
Changes during the period: | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of shares | 3,297 | 12,504 | 27,496 | 40,000 | ||||||||||||||||||||||||||||||||||||||||||||
Conversion of debentures and exercise of warrants into share capital | 3,080 | 12,069 | 10,223 | 22,292 | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of options | 3,650 | 14,412 | 3,192 | 17,604 | ||||||||||||||||||||||||||||||||||||||||||||
Capital notes converted into share capital | 900 | 3,500 | 3,789 | (7,289 | ) | -- | ||||||||||||||||||||||||||||||||||||||||||
Employee stock-based compensation | 9,406 | 9,406 | ||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation related to the Facility Agreement with the Banks | 480 | 480 | ||||||||||||||||||||||||||||||||||||||||||||||
Dividend to Panasonic | (2,563 | ) | (2,563 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Accumulated amount due to adoption of ASU No. 2016-09, Compensation - | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock Compensation (Topic 718) | 1,306 | (1,306 | ) | -- | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||||||
Profit | 203,924 | $ | 203,924 | 5,242 | 209,166 | |||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | (737 | ) | (737 | ) | 1,660 | 923 | ||||||||||||||||||||||||||||||||||||||||||
Change in employees plan assets and benefit obligations | (546 | ) | (546 | ) | (546 | ) | ||||||||||||||||||||||||||||||||||||||||||
Unrealized gain on derivatives | 266 | 266 | 266 | |||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | $ | 202,907 | ||||||||||||||||||||||||||||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2016 | 93,071 | $ | 369,057 | $ | 1,318,725 | $ | 41,264 | $ | 68,921 | $ | (544 | ) | $ | (27,283 | ) | $ | (1,071,036 | ) | $ | (9,072 | ) | $ | (7,418 | ) | $ | 682,614 | ||||||||||||||||||||||
Changes during the period: | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of shares | 2,914 | 12,128 | 4,247 | 16,375 | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of options | 1,629 | 6,750 | 8,180 | 14,930 | ||||||||||||||||||||||||||||||||||||||||||||
Capital notes converted into share capital | 930 | 3,792 | 16,714 | (20,506 | ) | -- | ||||||||||||||||||||||||||||||||||||||||||
Employee stock-based compensation | 11,644 | 11,644 | ||||||||||||||||||||||||||||||||||||||||||||||
Dividend to Panasonic | (5,501 | ) | (5,501 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||||||
Profit | 298,011 | $ | 298,011 | 3,645 | 301,656 | |||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | 2,761 | 2,761 | 2,920 | 5,681 | ||||||||||||||||||||||||||||||||||||||||||||
Change in employees plan assets and benefit obligations | 511 | 511 | 511 | |||||||||||||||||||||||||||||||||||||||||||||
Unrealized gain on derivatives | 1,796 | 1,796 | 1,796 | |||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | $ | 303,079 | ||||||||||||||||||||||||||||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2017 | 98,544 | $ | 391,727 | $ | 1,347,866 | $ | 20,758 | $ | 80,565 | $ | 1,763 | $ | (24,522 | ) | $ | (773,025 | ) | $ | (9,072 | ) | $ | (6,354 | ) | $ | 1,029,706 | |||||||||||||||||||||||
Changes during the period: | ||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of notes into share capital | 5,790 | 23,722 | 34,864 | 58,586 | ||||||||||||||||||||||||||||||||||||||||||||
Exercise of options and RSUs | 732 | 3,043 | (2,334 | ) | 709 | |||||||||||||||||||||||||||||||||||||||||||
Employee stock-based compensation | 12,661 | 12,661 | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||||||
Profit | 135,579 | $ | 135,579 | (2,200 | ) | 133,379 | ||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | 1,806 | 1,806 | 1,793 | 3,599 | ||||||||||||||||||||||||||||||||||||||||||||
Change in employees plan assets and benefit obligations | 269 | 269 | 269 | |||||||||||||||||||||||||||||||||||||||||||||
Unrealized loss on derivatives | (2,704 | ) | (2,704 | ) | (2,704 | ) | ||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | $ | 134,950 | ||||||||||||||||||||||||||||||||||||||||||||||
BALANCE AS OF DECEMBER 31, 2018 | 105,066 | $ | 418,492 | $ | 1,380,396 | $ | 20,758 | $ | 93,226 | $ | (672 | ) | $ | (22,716 | ) | $ | (637,446 | ) | $ | (9,072 | ) | $ | (6,761 | ) | $ | 1,236,205 | ||||||||||||||||||||||
OUTSTANDING SHARES, NET OF TREASURY STOCK AS OF DECEMBER 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||
104,980 |
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES |
(dollars in thousands) |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
CASH FLOWS - OPERATING ACTIVITIES | ||||||||||||
Net profit | $ | 133,379 | $ | 301,656 | $ | 209,166 | ||||||
Adjustments to reconcile net profit for the period | ||||||||||||
to net cash provided by operating activities: | ||||||||||||
Income and expense items not involving cash flows: | ||||||||||||
Depreciation and amortization | 214,391 | 208,411 | 197,606 | |||||||||
Effect of indexation, translation and fair value measurement on debt | (9,791 | ) | 12,865 | 8,442 | ||||||||
Other expense (income), net | 2,442 | 2,627 | (9,322 | ) | ||||||||
Gain from acquisition, net | -- | -- | (50,471 | ) | ||||||||
Changes in assets and liabilities: | ||||||||||||
Trade accounts receivable | (3,096 | ) | (6,564 | ) | (30,104 | ) | ||||||
Other current assets | 11,260 | (8,321 | ) | (265 | ) | |||||||
Inventories | (26,344 | ) | (4,277 | ) | (22,069 | ) | ||||||
Trade accounts payable | (3,562 | ) | (8,649 | ) | 5,550 | |||||||
Deferred revenue and customers' advances | 2,625 | (21,803 | ) | 23,581 | ||||||||
Employee related liabilities and other current liabilities | (867 | ) | (8,219 | ) | (145 | ) | ||||||
Long-term employee related liabilities | (795 | ) | (3,247 | ) | (798 | ) | ||||||
Deferred tax, net | (5,354 | ) | (108,459 | ) | (4,564 | ) | ||||||
Other long-term liabilities | (1,391 | ) | (385 | ) | 861 | |||||||
Net cash provided by operating activities | 312,897 | 355,635 | 327,468 | |||||||||
CASH FLOWS - INVESTING ACTIVITIES | ||||||||||||
Investments in property and equipment | (210,192 | ) | (187,676 | ) | (217,496 | ) | ||||||
Proceeds related to sale of property and equipment | 40,451 | 20,038 | 7,872 | |||||||||
Investment grants received | -- | 2,921 | -- | |||||||||
Investments in other assets | (14,536 | ) | -- | -- | ||||||||
Deposits and marketable securities, net | (143,940 | ) | (80,643 | ) | (17,101 | ) | ||||||
Net cash used in investing activities | (328,217 | ) | (245,360 | ) | (226,725 | ) | ||||||
CASH FLOWS - FINANCING ACTIVITIES | ||||||||||||
Issuance of debentures, net | -- | -- | 113,149 | |||||||||
Exercise of warrants and options, net | 714 | 31,315 | 38,803 | |||||||||
Proceeds from loans, net | 98,990 | -- | 55,960 | |||||||||
Loans repayment | (142,285 | ) | (43,259 | ) | (132,018 | ) | ||||||
Principal payments on account of capital lease obligation | (5,554 | ) | (781 | ) | -- | |||||||
Debentures repayment | -- | (6,215 | ) | -- | ||||||||
Dividend paid to Panasonic | -- | (4,378 | ) | (2,563 | ) | |||||||
Net cash provided by (used in) financing activities | (48,135 | ) | (23,318 | ) | 73,331 | |||||||
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGE | 2,585 | 3,720 | 5,635 | |||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (60,870 | ) | 90,677 | 179,709 | ||||||||
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 445,961 | 355,284 | 175,575 | |||||||||
CASH AND CASH EQUIVALENTS - END OF PERIOD | 385,091 | $ | 445,961 | $ | 355,284 |
TOWER SEMICONDUCTOR LTD. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(dollars in thousands) |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
NON-CASH ACTIVITIES: | ||||||||||||
Investments in property and equipment | 28,052 | $ | 28,419 | $ | 25,256 | |||||||
Conversion of notes into share capital | 58,586 | $ | -- | $ | 611 | |||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||
Cash paid during the period for interest | 11,835 | $ | 14,068 | $ | 10,543 | |||||||
Cash received during the period from interest | 8,818 | $ | 3,870 | $ | 1,009 | |||||||
Cash paid during the period for income taxes, net | 5,768 | $ | 17,668 | $ | 3,485 |
See notes to consolidated financial statements. |
A. | Use of Estimates in Preparation of Financial Statements |
B. | Principles of Consolidation |
C. | Cash and Cash Equivalents |
D. | Short-Term Interest-Bearing Deposits |
E. | Marketable securities |
F. | Trade Accounts Receivables - Allowance for Doubtful Accounts |
G. | Inventories |
H. | Property and Equipment |
Buildings and building improvements, including facility infrastructure | 10-25 years |
Machinery and equipment, software and hardware | 3-15 years |
H. | Property and Equipment (Cont.) |
I. | Intangible Assets and Goodwill |
J. | Deferred Tax Asset and Other Long-Term Assets, Net |
K. | Debentures - Classification of Liabilities and Equity of Convertible Debentures |
L. | Revenue Recognition |
L. | Revenue Recognition (cont.) |
M. | Research and Development |
N. | Income Taxes |
N. | Income Taxes (cont.) |
O. | Earnings Per Ordinary Share |
P. | Comprehensive Income |
Q. | Functional Currency and Exchange Rate Income (Loss) |
R. | Stock-Based Compensation |
S. | Impairment of Assets |
S. | Impairment of Assets (cont.) |
T. | Fair value of Financial Instruments and Fair Value Measurements |
U. | Derivatives and hedging |
W. | Reclassification and Presentation |
Y. | Recently Issued Accounting Pronouncements |
Y. | Recently Issued Accounting Pronouncements (cont.) |
Y. | Recently Issued Accounting Pronouncements (cont.) |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Raw materials | $ | 72,144 | $ | 48,220 | ||||
Work in process | 92,047 | 92,764 | ||||||
Finished goods | 6,587 | 2,331 | ||||||
$ | 170,778 | $ | 143,315 |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Tax receivables | $ | 3,997 | $ | 9,144 | ||||
Prepaid expenses | 14,170 | 11,634 | ||||||
Interest on deposits and other receivables | 4,585 | 738 | ||||||
$ | 22,752 | $ | 21,516 |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Severance-pay funds, net | $ | 13,615 | $ | 13,317 | ||||
Long-term interest bearing bank deposit | 12,500 | 12,500 | ||||||
Others | 9,830 | 256 | ||||||
$ | 35,945 | $ | 26,073 |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Original cost: | ||||||||
Land and Buildings (including facility infrastructure) | $ | 347,798 | $ | 343,247 | ||||
Machinery and equipment | 2,482,609 | 2,282,042 | ||||||
$ | 2,830,407 | $ | 2,625,289 | |||||
Accumulated depreciation: | ||||||||
Buildings (including facility infrastructure) | $ | (224,796 | ) | $ | (215,515 | ) | ||
Machinery and equipment | (1,948,377 | ) | (1,774,650 | ) | ||||
$ | (2,173,173 | ) | $ | (1,990,165 | ) | |||
$ | 657,234 | $ | 635,124 |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Original cost - machinery and equipment | $ | 53,441 | $ | 16,630 | ||||
Accumulated depreciation - machinery and equipment | (5,500 | ) | (306 | ) | ||||
$ | 47,941 | $ | 16,324 |
Useful Life (years) | Cost | Accumulated Amortization | Net | |||||||||||||
Technologies | 4;5;9 | $ | 110,835 | $ | (108,888 | ) | $ | 1,947 | ||||||||
Facilities lease | 19 | 33,500 | (22,953 | ) | 10,547 | |||||||||||
Patents and other core technology rights | 9 | 15,100 | (15,100 | ) | -- | |||||||||||
Trade name | 9 | 7,671 | (7,547 | ) | 124 | |||||||||||
Customer relationships | 15 | 2,600 | (1,783 | ) | 817 | |||||||||||
Others | -- | 1,000 | (1,000 | ) | -- | |||||||||||
Total identifiable intangible assets | $ | 170,706 | $ | (157,271 | ) | $ | 13,435 |
Useful Life (years) | Cost | Accumulated Amortization | Net | |||||||||||||
Technologies | 4;5;9 | $ | 110,310 | $ | (103,897 | ) | $ | 6,413 | ||||||||
Facilities lease | 19 | 33,500 | (21,665 | ) | 11,835 | |||||||||||
Patents and other core technology rights | 9 | 15,100 | (15,100 | ) | -- | |||||||||||
Trade name | 9 | 7,612 | (7,009 | ) | 603 | |||||||||||
Customer relationships | 15 | 2,600 | (1,610 | ) | 990 | |||||||||||
Others | -- | 1,000 | (1,000 | ) | -- | |||||||||||
Total identifiable intangible assets | $ | 170,122 | $ | (150,281 | ) | $ | 19,841 |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Deferred tax asset (see Note 18) | $ | 73,460 | $ | 82,852 | ||||
Prepaid long-term land lease, net (see Note 14C) | 3,296 | 3,417 | ||||||
Fair value of cross currency interest rate swap (see Note 12D) | 6,722 | 18,005 | ||||||
Long-term prepaid expenses and others | 4,926 | 6,995 | ||||||
$ | 88,404 | $ | 111,269 |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Tax payables | $ | 12,096 | $ | 8,567 | ||||
Interest payable | 986 | 3,160 | ||||||
Others | 4,035 | 4,159 | ||||||
$ | 17,117 | $ | 15,886 |
A. | Composition by Repayment Schedule: |
As of December 31, 2018 | ||||||||||||||||||||||||||||
Interest rate | 2019 | 2020 | 2021 | 2022 | 2023 | Total | ||||||||||||||||||||||
Debentures Series G (see B below) | 2.79 | % | $ | -- | $ | 35,676 | $ | 35,676 | $ | 35,676 | $ | 17,839 | $ | 124,867 | ||||||||||||||
Total outstanding principal amounts of debentures | $ | -- | $ | 35,676 | $ | 35,676 | $ | 35,676 | $ | 17,839 | $ | 124,867 | ||||||||||||||||
Accretion of carrying amount to principal amount | (4,697 | ) | ||||||||||||||||||||||||||
Carrying amount | $ | 120,170 |
A. | Composition by Repayment Schedule (cont.) |
As of December 31, 2017 | ||||||||||||||||||||||||||||||||
Interest rate | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | Total | |||||||||||||||||||||||||
Debentures Series G (see B below) | 2.79 | % | $ | -- | $ | -- | $ | 38,568 | $ | 38,568 | $ | 38,568 | $ | 19,283 | $ | 134,987 | ||||||||||||||||
Jazz’s Notes (see C below) | 8 | % | 58,307 | -- | -- | -- | -- | -- | 58,307 | |||||||||||||||||||||||
Total outstanding principal amounts of debentures | $ | 58,307 | $ | -- | $ | 38,568 | $ | 38,568 | $ | 38,568 | $ | 19,283 | $ | 193,294 | ||||||||||||||||||
Accretion of carrying amount to principal amount | (11,629 | ) | ||||||||||||||||||||||||||||||
Carrying amount | $ | 181,665 |
B. | Debentures Series G |
C. | Jazz 2014 Notes |
A. | Composition: |
As of December 31, | ||||||||
2018 | 2017 | |||||||
In JPY, see also D below | $ | 100,118 | $ | 98,239 | ||||
In U.S. Dollars, see also E below | -- | 40,000 | ||||||
Total long-term loan - principal amount | 100,118 | 138,239 | ||||||
Deferred issuance costs | -- | (1,077 | ) | |||||
Total long-term loans | 100,118 | 137,162 | ||||||
Capital leases - see Note 14C | 47,195 | 15,854 | ||||||
Less - current maturities - see Note 14C | (10,814 | ) | (52,661 | ) | ||||
$ | 136,499 | $ | 100,355 |
B. | Composition by Repayment Schedule of Loans: |
As of December 31, 2018 | ||||||||||||||||||||||||||||
Interest rate | 2019 | 2020 | 2021 | 2022 | 2023 and on | Total | ||||||||||||||||||||||
In JPY | 1.95 | % | $ | -- | $ | -- | $ | 22,248 | $ | 22,248 | $ | 55,622 | $ | 100,118 | ||||||||||||||
Total outstanding principal amounts of loans | $ | -- | $ | -- | $ | 22,248 | $ | 22,248 | $ | 55,622 | $ | 100,118 |
As of December 31, 2017 | ||||||||||||||||||||||||
Interest rate | 2018 | 2019 | 2020 | 2021 | Total | |||||||||||||||||||
In U.S Dollars | Libor + 2.00% | $ | 5,714 | $ | 11,429 | $ | 11,429 | $ | 11,428 | $ | 40,000 | |||||||||||||
In JPY | Tibor + 1.65%-2.00% | 43,915 | 32,747 | 21,577 | -- | 98,239 | ||||||||||||||||||
Total outstanding principal amounts of loans | $ | 49,629 | $ | 44,176 | $ | 33,006 | $ | 11,428 | $ | 138,239 |
C. | Wells Fargo Credit Line |
D. | Loans to TPSCo from Japanese Financial Institutions |
D. | Loans to TPSCo from Japanese Financial Institutions (cont.) |
A. | Non-Designated Exchange Rate Transactions |
B. | Concentration of Credit Risks |
C. | Fair Value of Financial Instruments |
D. | Cash Flow Hedge Gains (Losses) |
E. | Fair Value Measurements |
E. | Fair Value Measurements (cont.) |
December 31, 2018 | Quoted prices in active market for identical liability (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||
Cross currency swap - asset, net position | $ | 4,951 | $ | -- | $ | 4,951 | $ | -- | ||||||||
Marketable securities held for sale | 135,227 | 135,227 | -- | -- | ||||||||||||
Foreign exchange forward and cylinders - liability position | (395 | ) | -- | (395 | ) | -- | ||||||||||
$ | 139,783 | $ | 135,227 | $ | 4,556 | $ | -- |
December 31, 2017 | Quoted prices in active market for identical liability (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||
Cross currency swap - asset, net position | $ | 16,455 | $ | -- | $ | 16,455 | $ | -- | ||||||||
Marketable securities held for sale | 113,168 | 113,168 | -- | -- | ||||||||||||
Foreign exchange forward and cylinders - liability position | (169 | ) | -- | (169 | ) | -- | ||||||||||
Foreign exchange forward and cylinders - asset position | 24 | -- | 24 | -- | ||||||||||||
$ | 129,478 | $ | 113,168 | $ | 16,310 | $ | -- |
Amortized cost | Gross unrealized gains | Gross Unrealized losses | Estimated fair value | |||||||||||||
Corporate bonds | $ | 111,639 | $ | 29 | $ | (2,029 | ) | $ | 109,639 | |||||||
U.S government bonds | 5,444 | 21 | -- | 5,465 | ||||||||||||
Non-U.S government bonds | 2,456 | -- | (33 | ) | 2,423 | |||||||||||
Municipal bonds | 2,248 | -- | (13 | ) | 2,235 | |||||||||||
Money market fund | 15,225 | -- | -- | 15,225 | ||||||||||||
Certificate of deposits | 248 | -- | (8 | ) | 240 | |||||||||||
$ | 137,260 | $ | 50 | $ | (2,083 | ) | $ | 135,227 |
Amortized cost | Estimated fair value | |||||||
Due within one year | $ | 16,686 | $ | 16,661 | ||||
Due after one year through five years | 120,574 | 118,566 | ||||||
$ | 137,260 | $ | 135,227 |
Amortized cost | Gross unrealized gains | Gross Unrealized losses | Estimated fair value | |||||||||||||
Corporate bonds | $ | 98,998 | $ | 25 | $ | (683 | ) | $ | 98,340 | |||||||
Non-U.S government bonds | 2,730 | -- | (19 | ) | 2,711 | |||||||||||
Municipal bonds | 11,950 | 15 | (96 | ) | 11,869 | |||||||||||
Certificate of deposits | 248 | -- | -- | 248 | ||||||||||||
$ | 113,926 | $ | 40 | $ | (798 | ) | $ | 113,168 |
Amortized cost | Estimated fair value | |||||||
Due within one year | $ | 7,688 | $ | 7,679 | ||||
Due after one year through five years | 106,238 | 105,489 | ||||||
$ | 113,926 | $ | 113,168 |
December 31, 2018 | ||||||||||||||||||||||||
Investment with continuous unrealized losses for less than 12 months | Investments with continuous unrealized losses for 12 months or greater | Total Investments with continuous unrealized losses | ||||||||||||||||||||||
Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | |||||||||||||||||||
Corporate debentures | $ | 19,716 | $ | (140 | ) | $ | 79,609 | $ | (1,889 | ) | $ | 99,325 | $ | (2,029 | ) | |||||||||
Non-U.S government bonds | 963 | -- | 1,460 | (33 | ) | 2,423 | (33 | ) | ||||||||||||||||
Municipal bonds | 2,235 | (13 | ) | -- | -- | 2,235 | (13 | ) | ||||||||||||||||
Certificate of deposits | -- | -- | 240 | (8 | ) | 240 | (8 | ) | ||||||||||||||||
Total | $ | 22,914 | $ | (153 | ) | $ | 81,309 | $ | (1,930 | ) | $ | 104,223 | $ | (2,083 | ) |
December 31, 2017 | ||||||||||||||||||||||||
Investment with continuous unrealized losses for less than 12 months | Investments with continuous unrealized losses for 12 months or greater | Total Investments with continuous unrealized losses | ||||||||||||||||||||||
Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | |||||||||||||||||||
Corporate debentures | $ | 89,133 | $ | (683 | ) | $ | -- | $ | -- | $ | 89,133 | $ | (683 | ) | ||||||||||
Non-U.S government bonds | 2,711 | (19 | ) | -- | -- | 2,711 | (19 | ) | ||||||||||||||||
Municipal bonds | 8,837 | (96 | ) | -- | -- | 8,837 | (96 | ) | ||||||||||||||||
Total | $ | 100,681 | $ | (798 | ) | $ | -- | $ | -- | $ | 100,681 | $ | (798 | ) |
A. | Employee Termination Benefits |
B. | Jazz Employee Benefit Plans |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Net periodic benefit cost: | ||||||||||||
Service cost | $ | 10 | $ | 9 | $ | 12 | ||||||
Interest cost | 73 | 69 | 85 | |||||||||
Amortization of prior service costs | -- | -- | (12 | ) | ||||||||
Amortization of net loss (gain) | (262 | ) | (361 | ) | (333 | ) | ||||||
Total net periodic benefit cost | $ | (179 | ) | $ | (283 | ) | $ | (248 | ) | |||
Other changes in plan assets and benefits obligations recognized in other comprehensive income: | ||||||||||||
Prior service cost for the period | $ | -- | $ | -- | $ | -- | ||||||
Net loss (gain) for the period | (376 | ) | 317 | (316 | ) | |||||||
Amortization of prior service costs | -- | -- | 12 | |||||||||
Amortization of net gain (loss) | 262 | 361 | 333 | |||||||||
Total recognized in other comprehensive income (loss) | $ | (114 | ) | $ | 678 | $ | 29 | |||||
Total recognized in net periodic benefit cost and other comprehensive income (loss) | $ | (293 | ) | $ | 395 | $ | (219 | ) |
Weighted average assumptions used: | ||||||||||||
Discount rate | 3.80 | % | 4.50 | % | 4.80 | % | ||||||
Expected return on plan assets | N/A | N/A | N/A | |||||||||
Rate of compensation increases | N/A | N/A | N/A | |||||||||
Assumed health care cost trend rates: | ||||||||||||
Health care cost trend rate assumed for current year (Pre-65/Post-65) | 8.30%/11.10 | % | 7.20%/10.00 | % | 6.75%/10.00 | % | ||||||
Ultimate rate (Pre-65/Post-65) | 4.50%/4.50 | % | 4.50%/4.50 | % | 4.50%/5.00 | % | ||||||
Year the ultimate rate is reached (Pre-65/Post-65) | 2027/2027 | 2025/2025 | 2025/2022 | |||||||||
Measurement date | December 31, 2018 | December 31, 2017 | December 31, 2016 |
B. | Jazz Employee Benefit Plans (cont.) |
Increase | Decrease | |||||||
Effect on service cost and interest cost | $ | 4 | $ | (3 | ) | |||
Effect on post-retirement benefit obligation | $ | 40 | $ | (32 | ) |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Change in medical plan related benefit obligation: | ||||||||||||
Medical plan related benefit obligation at beginning of period | $ | 1,936 | $ | 1,550 | $ | 1,781 | ||||||
Service cost | 10 | 9 | 12 | |||||||||
Interest cost | 73 | 69 | 85 | |||||||||
Benefits paid | (15 | ) | (9 | ) | (12 | ) | ||||||
Change in medical plan provisions | -- | -- | -- | |||||||||
Actuarial loss (gain) | (376 | ) | 317 | (316 | ) | |||||||
Benefit medical plan related obligation end of period | $ | 1,628 | $ | 1,936 | $ | 1,550 | ||||||
Change in plan assets: | ||||||||||||
Fair value of plan assets at beginning of period | $ | -- | $ | -- | $ | -- | ||||||
Employer contribution | 15 | 9 | 12 | |||||||||
Benefits paid | (15 | ) | (9 | ) | (12 | ) | ||||||
Fair value of plan assets at end of period | $ | -- | $ | -- | $ | -- | ||||||
Medical plan related net funding | $ | (1,628 | ) | $ | (1,936 | ) | $ | (1,550 | ) |
As of December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Amounts recognized in statement of financial position: | ||||||||||||
Current liabilities | $ | (65 | ) | $ | (58 | ) | $ | (37 | ) | |||
Non-current liabilities | (1,563 | ) | (1,878 | ) | (1,513 | ) | ||||||
Net amount recognized | $ | (1,628 | ) | $ | (1,936 | ) | $ | (1,550 | ) | |||
Weighted average assumptions used: | ||||||||||||
Discount rate | 4.50 | % | 3.80 | % | 4.50 | % | ||||||
Rate of compensation increases | N/A | N/A | N/A | |||||||||
Assumed health care cost trend rates: | ||||||||||||
Health care cost trend rate assumed for next year (pre 65/ post 65 Medicare Advantage) | 6.90%/13.10 | % | 8.30%/11.10 | % | 7.20%/10.00 | % | ||||||
Health care cost trend rate assumed for next year (pre 65/ post 65 Non Medicare Advantage) | 6.90%/7.90 | % | 8.30%/11.10 | % | 7.20%/10.00 | % | ||||||
Ultimate rate (pre 65/ post 65) | 4.50%/4.50 | % | 4.50%/4.50 | % | 4.50%/4.50 | % | ||||||
Year the ultimate rate is reached (pre 65/ post 65) | 2029/2029 | 2027/2027 | 2025/2025 |
Fiscal Year | Other Benefits | |||
2019 | $ | 65 | ||
2020 | 64 | |||
2021 | 68 | |||
2022 | 66 | |||
2023 | 64 | |||
2024-2028 | $ | 395 |
B. | Jazz Employee Benefit Plans (cont.) |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Net periodic benefit cost: | ||||||||||||
Interest cost | $ | 749 | $ | 831 | $ | 841 | ||||||
Expected return on plan assets | (1,427 | ) | (1,236 | ) | (1,154 | ) | ||||||
Amortization of prior service costs | 3 | 3 | 3 | |||||||||
Amortization of net loss (gain) | -- | 55 | 34 | |||||||||
Total net periodic benefit cost | $ | (675 | ) | $ | (347 | ) | $ | (276 | ) | |||
Other changes in plan assets and benefits obligations recognized in other comprehensive income: | ||||||||||||
Prior service cost for the period | $ | -- | $ | -- | $ | -- | ||||||
Net loss (gain) for the period | (231 | ) | (1,303 | ) | 736 | |||||||
Amortization of prior service costs | (3 | ) | (3 | ) | (3 | ) | ||||||
Amortization of net gain (loss) | -- | (55 | ) | (34 | ) | |||||||
Total recognized in other comprehensive income (loss) | $ | (234 | ) | $ | (1,361 | ) | $ | 699 | ||||
Total recognized in net periodic benefit cost and other comprehensive income (loss) | $ | (909 | ) | $ | (1,708 | ) | $ | 423 | ||||
Weighted average assumptions used: | ||||||||||||
Discount rate | 3.70 | % | 4.30 | % | 4.60 | % | ||||||
Expected return on plan assets | 6.20 | % | 6.20 | % | 6.20 | % | ||||||
Rate of compensation increases | N/A | N/A | N/A |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Estimated amounts that will be amortized from accumulated other comprehensive income in the next fiscal year ending: | ||||||||||||
Prior service cost | $ | 3 | $ | 3 | $ | 3 | ||||||
Net actuarial loss | $ | -- | $ | -- | $ | 54 |
B. | Jazz Employee Benefit Plans (Cont.) |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Change in benefit obligation: | ||||||||||||
Benefit obligation at beginning of period | $ | 20,629 | $ | 19,672 | $ | 18,605 | ||||||
Interest cost | 749 | 831 | 841 | |||||||||
Benefits paid | (607 | ) | (548 | ) | (496 | ) | ||||||
Change in plan provisions | -- | -- | -- | |||||||||
Actuarial loss (gain) | (1,792 | ) | 674 | 722 | ||||||||
Benefit obligation end of period | $ | 18,979 | $ | 20,629 | $ | 19,672 | ||||||
Change in plan assets: | ||||||||||||
Fair value of plan assets at beginning of period | $ | 23,235 | $ | 19,871 | $ | 18,526 | ||||||
Actual return on plan assets | (133 | ) | 3,212 | 1,141 | ||||||||
Employer contribution | 175 | 700 | 700 | |||||||||
Benefits paid | (607 | ) | (548 | ) | (496 | ) | ||||||
Fair value of plan assets at end of period | $ | 22,670 | $ | 23,235 | $ | 19,871 | ||||||
Funded status | $ | 3,691 | $ | 2,606 | $ | 199 | ||||||
Amounts recognized in statement of financial position: | ||||||||||||
Non-current assets | $ | 3,691 | $ | 2,606 | $ | 199 | ||||||
Non-current liabilities | -- | -- | -- | |||||||||
Net amount recognized | $ | 3,691 | $ | 2,606 | $ | 199 | ||||||
Weighted average assumptions used: | ||||||||||||
Discount rate | 4.40 | % | 3.70 | % | 4.30 | % | ||||||
Rate of compensation increases | N/A | N/A | N/A |
Fiscal Year | Other Benefits | |||
2019 | $ | 823 | ||
2020 | 922 | |||
2021 | 988 | |||
2022 | 1,055 | |||
2023 | 1,118 | |||
2024-2028 | $ | 6,044 |
B. | Jazz Employee Benefit Plans (cont.) |
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in mutual funds | $ | -- | $ | 22,669 | $ | -- | ||||||
Total plan assets at fair value | $ | -- | $ | 22,669 | $ | -- |
The plan’s assets measured at fair value on a recurring basis consisted of the following as of as of December 31, 2017:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in mutual funds | $ | - | $ | 23,235 | $ | - | ||||||
Total plan assets at fair value | $ | - | $ | 23,235 | $ | - |
Asset Category | December 31, 2018 | Target allocation 2019 | ||||||
Equity securities | 19 | % | 20 | % | ||||
Debt securities | 81 | % | 80 | % | ||||
Total | 100 | % | 100 | % |
A. | Liens |
(1) | Loans, Bonds and Capital Leases |
(2) | Approved Enterprise Status |
B. | License Agreements |
C. | Leases |
C. | Leases (cont.) |
D. | Other Agreements |
E. | Environmental Affairs |
G. | Other Commitments |
H. | Dismissed Class Action |
H. | Dismissed Class Action (cont.) |
A. | Description of Ordinary Shares |
B. | Equity Incentive Plans |
(1) | General |
B. | Equity Incentive Plans (cont.) |
(2) | Tower’s 2013 Share Incentive Plan (the "2013 Plan") |
B. | Equity Incentive Plans (cont.) |
(2) | Tower’s 2013 Share Incentive Plan (the "2013 Plan") (cont.) |
(3) | Summary of the Status of all the Company’s Employees’ and Directors’ Share Incentive Plans |
2018 | 2017 | 2016 | ||||||||||||||||||||||
Number of share options | Weighted average exercise price | Number of share options | Weighted average exercise price | Number of share options | Weighted average exercise price | |||||||||||||||||||
Outstanding as of beginning of year | 580,185 | $ | 9.64 | 2,278,089 | $ | 9.92 | 5,878,270 | $ | 6.84 | |||||||||||||||
Granted | -- | -- | -- | -- | 207,890 | 12.19 | ||||||||||||||||||
Exercised | (70,271 | ) | 10.19 | (1,611,489 | ) | 9.27 | (3,649,754 | ) | 4.82 | |||||||||||||||
Terminated | (921 | ) | 9.82 | (77,292 | ) | 25.89 | (97,063 | ) | 21.34 | |||||||||||||||
Forfeited | (500 | ) | 4.42 | (9,123 | ) | 8.06 | (61,254 | ) | 7.25 | |||||||||||||||
Outstanding as of end of year | 508,493 | 9.58 | 580,185 | 9.64 | 2,278,089 | 9.92 | ||||||||||||||||||
Options exercisable as of end of year | 485,579 | $ | 9.46 | 459,662 | $ | 8.51 | 1,606,983 | $ | 10.19 |
2018 | 2017 | 2016 | ||||||||||||||||||||||
Number of RSU | Weighted Average Fair Value | Number of RSU | Weighted Average Fair Value | Number of RSU | Weighted Average Fair Value | |||||||||||||||||||
Outstanding as of beginning of year | 1,245,889 | $ | 21.29 | 1,009,184 | $ | 14.62 | 773,200 | $ | 15.11 | |||||||||||||||
Granted | 977,667 | 20.80 | �� | 818,856 | 24.88 | 359,643 | 12.83 | |||||||||||||||||
Converted | (602,423 | ) | 17.86 | (553,241 | ) | 14.71 | (86,847 | ) | 11.45 | |||||||||||||||
Forfeited | (21,837 | ) | 22.11 | (28,910 | ) | 16.42 | (36,812 | ) | 14.73 | |||||||||||||||
Outstanding as of end of year | 1,599,296 | $ | 22.27 | 1,245,889 | $ | 21.29 | 1,009,184 | $ | 14.62 |
B. | Equity Incentive Plans (cont.) |
(4) | Summary of Information about Employees’ Share Incentive Plans |
Outstanding | Exercisable | |||||||||||||||||||||
Range of exercise prices | Number outstanding | Weighted average remaining contractual life (in years) | Weighted average exercise price | Number exercisable | Weighted average exercise price | |||||||||||||||||
$ | 4.42 - 17.25 | 508,493 | 3.08 | $ | 9.58 | 485,579 | $ | 9.46 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
The intrinsic value of options exercised | $ | 1,416 | $ | 26,031 | $ | 40,314 | ||||||
The original fair value of options exercised | $ | 302 | $ | 7,202 | $ | 16,711 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
The intrinsic value of converted RSU's | $ | 15,840 | $ | 12,996 | $ | 1,177 | ||||||
The original fair value of converted RSU's | $ | 10,761 | $ | 8,138 | $ | 994 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Cost of goods | $ | 3,141 | $ | 3,084 | $ | 3,920 | ||||||
Research and development, net | 2,533 | 2,555 | 2,119 | |||||||||
Marketing, general and administrative | 6,987 | 6,010 | 3,367 | |||||||||
Total stock-based compensation expense | $ | 12,661 | $ | 11,649 | $ | 9,406 |
(5) | Weighted Average Grant-Date Fair Value of Options Granted to Employees |
B. | Equity Incentive Plans (cont.) |
(5) | Weighted Average Grant-Date Fair Value of Options Granted to Employees (cont.) The Company estimated the fair value, utilizing the following assumptions for the year 2016 (all in weighted averages): |
2016 | ||||
Risk-free interest rate | 0.9%-1.3% | |||
Expected life of options | 4.60 years | |||
Expected annual volatility | 47%-48% | |||
Expected dividend yield | None |
C. | Israeli Banks’ Capital Notes and Warrants |
D. | Treasury Stock |
E. | Dividend Restriction |
F. | Convertible Debentures |
A. | Revenues by Geographic Area - as Percentage of Total Revenue |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
USA | 52 | % | 52 | % | 49 | % | ||||||
Japan | 34 | 32 | 36 | |||||||||
Asia * | 10 | 12 | 12 | |||||||||
Europe | 4 | 4 | 3 | |||||||||
Total | 100 | % | 100 | % | 100 | % |
B. | Long-Lived Assets by Geographic Area |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Israel | $ | 215,419 | $ | 218,810 | ||||
United States | 239,462 | 214,393 | ||||||
Japan | 202,353 | 201,921 | ||||||
Total | $ | 657,234 | $ | 635,124 |
C. | Major Customers - as Percentage of Net Accounts Receivable Balance |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Customer A | 33 | % | 30 | % | 35 | % | ||||||
Customer B | 7 | 12 | 12 | |||||||||
Other customers * | 16 | 15 | 14 |
* | Represents sales to two customers accounted for 7% and 9% of sales during 2018, to two customers accounted for 7% and 8% of sales during 2017, and to two customers accounted for 5% and 9% of sales during 2016. |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Interest expense | $ | 10,610 | $ | 12,623 | $ | 13,146 | ||||||
Interest income | (10,762 | ) | (4,783 | ) | (1,289 | ) | ||||||
Jazz Notes amortization | 5,010 | 4,230 | 3,571 | |||||||||
Changes in fair value (total level 3 changes in fair value of bank loans) | -- | -- | 7,900 | |||||||||
Series G Debentures amortization, related rate differences and hedging results | 3,589 | 2,738 | 1,901 | |||||||||
Exchange rate differences | 1,064 | 6 | (3,768 | ) | ||||||||
Bank fees and others | 3,673 | 633 | 2,888 | |||||||||
$ | 13,184 | $ | 15,447 | $ | 24,349 |
A. | Tower Approved Enterprise Status and Statutory Income Rates |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Current tax expense: | ||||||||||||
Local | $ | 2,164 | $ | 3,622 | $ | -- | ||||||
Foreign (*) | 9,273 | 6,070 | 5,948 | |||||||||
Deferred tax expense (benefit): | ||||||||||||
Local (see F below) | 9,316 | (82,370 | ) | -- | ||||||||
Foreign(*) (see E below) | (14,815 | ) | (27,210 | ) | (4,516 | ) | ||||||
Income tax expense (benefit) | $ | 5,938 | $ | (99,888 | ) | $ | 1,432 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Profit before taxes: | ||||||||||||
Domestic | $ | 142,831 | $ | 198,008 | $ | 168,668 | ||||||
Foreign (*) | (3,514 | ) | 3,760 | 41,930 | ||||||||
Total profit before taxes | $ | 139,317 | $ | 201,768 | $ | 210,598 |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Deferred tax asset and liability - long-term: (**) | ||||||||
Deferred tax assets: | ||||||||
Net operating loss carryforward | $ | 87,325 | $ | 96,443 | ||||
Employees benefits and compensation | 4,914 | 4,891 | ||||||
Accruals and reserves | 4,738 | 3,546 | ||||||
Research and development | 12,292 | 10,528 | ||||||
Others | 3,615 | 2,935 | ||||||
112,884 | 118,343 | |||||||
Valuation allowance, see F below | (5,834 | ) | (5,807 | ) | ||||
Deferred tax assets | $ | 107,050 | $ | 112,536 | ||||
Deferred tax liabilities: | ||||||||
Depreciation and amortization | (82,001 | ) | (77,092 | ) | ||||
Gain on TPSCo acquisition | (1,240 | ) | (15,957 | ) | ||||
Others | (750 | ) | (559 | ) | ||||
Deferred tax liabilities | $ | (83,991 | ) | $ | (93,608 | ) | ||
Presented in long term deferred tax assets | $ | 73,460 | $ | 82,852 | ||||
Presented in long term deferred tax liabilities | $ | (50,401 | ) | $ | (63,924 | ) |
D. | Unrecognized Tax Benefit |
Unrecognized tax benefits | ||||
Balance at January 1, 2018 | $ | 15,286 | ||
Additions for tax positions of current year | 716 | |||
Reduction due to statute of limitation of prior years | (1,219 | ) | ||
Balance at December 31, 2018 | $ | 14,783 | ||
Unrecognized tax benefits | ||||
Balance at January 1, 2017 | $ | 8,969 | ||
Additions for tax positions | 8,753 | |||
Reduction of prior years’ provision | (2,436 | ) | ||
Balance at December 31, 2017 | $ | 15,286 | ||
Unrecognized tax benefits | ||||
Balance at January 1, 2016 | $ | 13,538 | ||
Additions for tax positions of current year | 157 | |||
Expiration of prior years’ provision due to TJP closure | (6,472 | ) | ||
Additions for tax positions of prior years | 779 | |||
Translation differences | 967 | |||
Balance at December 31, 2016 | $ | 8,969 |
E. | Effective Income Tax Rates |
E. | Effective Income Tax Rates (cont.) |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Tax expense computed at statutory rates, see (*) below | $ | 32,044 | $ | 48,433 | $ | 52,650 | ||||||
Effect of tax rate change on deferred tax liabilities, net(**) | (478 | ) | (16,078 | ) | -- | |||||||
Effect of different tax rates in different jurisdictions and Preferred Enterprise Benefit | (23,150 | ) | (33,298 | ) | (4,772 | ) | ||||||
Gain on acquisition | -- | -- | (10,450 | ) | ||||||||
Tax benefits for which deferred taxes were not recorded, see F below | -- | (15,103 | ) | (23,489 | ) | |||||||
Change in Valuation allowance, see F below | (962 | ) | (82,772 | ) | (6,212 | ) | ||||||
Permanent differences and other, net | (1,516 | ) | (1,070 | ) | (6,295 | ) | ||||||
Income tax expense (benefit) | $ | 5,938 | $ | (99,888 | ) | $ | 1,432 |
F. | Net Operating Loss Carryforward |
F. | Net Operating Loss Carryforward (cont.) |
G. | Final Tax Assessments |
A. | Balances |
The nature of the relationships involved | As of December 31, | ||||||||
2018 | 2017 | ||||||||
Long-term investment | Equity investment in a limited partnership | $ | 110 | $ | 66 |
B. | Transactions |
Year ended December 31, | |||||||||||||
Description of the transactions | 2018 | 2017 | 2016 | ||||||||||
General and Administrative expense | Directors’ fees and reimbursement to directors | $ | 736 | $ | 719 | $ | 639 | ||||||
Other income (expense) | Equity income (loss) from a limited Partnership | $ | 44 | $ | 29 | $ | (13 | ) |