Camtek(CAMT) - 2020 Q4 - Annual Report

Form 20-F Filing Information This section outlines Camtek Ltd.'s Form 20-F filing for fiscal year 2020, confirming its Israeli corporation status, Nasdaq listing, and U.S. GAAP compliance - Camtek Ltd. is an Israeli company, filing its Annual Report on Form 20-F for the fiscal year ended December 31, 2020[1][2] - The company's Ordinary Shares (CAMT) are registered on the Nasdaq Global Market[3] - Camtek is classified as an Accelerated Filer and prepares its financial statements in accordance with U.S. GAAP[10] - The company is not a well-known seasoned issuer and is not a shell company[4][5][11][12] - Camtek has filed all required reports during the preceding 12 months and has submitted electronically every Interactive Data File[6][7][8] PART I Item 1. Identity of Directors, Senior Management and Advisers. This item is not applicable to the company's filing Item 2. Offer Statistics and Expected Timetable. This item is not applicable to the company's filing Item 3. Key Information. This section provides essential information on Camtek, including selected financial data and a comprehensive overview of business, share, and Israeli operations risk factors A. Selected Consolidated Financial Data. This sub-section presents a five-year summary of selected consolidated financial data, including income statement and balance sheet data, prepared under U.S. GAAP - Selected Statement of Income Data (2016-2020, in thousands USD) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :-------------------------------- | :----- | :----- | :----- | :----- | :----- | | Revenues | 155,859 | 134,019 | 123,174 | 93,485 | 79,228 | | Gross profit | 73,231 | 64,784 | 60,796 | 45,519 | 32,490 | | Operating income (loss) | 22,624 | 21,972 | 20,033 | (3,037) | 2,019 | | Net income | 21,778 | 21,986 | 18,731 | 13,962 | 4,734 | | Basic net earnings per share | 0.55 | 0.58 | 0.52 | 0.40 | 0.13 | | Diluted net earnings per share | 0.54 | 0.57 | 0.51 | 0.39 | 0.13 | - Selected Balance Sheet Data (2016-2020, in thousands USD) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :-------------------------------- | :----- | :----- | :----- | :----- | :----- | | Cash and cash equivalents | 105,815 | 38,047 | 54,935 | 43,744 | 19,740 | | Short-term deposits | 72,000 | 51,500 | - | - | - | | Total assets | 287,908 | 170,369 | 141,547 | 113,036 | 105,558 | | Total liabilities | 60,644 | 34,067 | 40,140 | 28,735 | 32,193 | | Total shareholders' equity | 227,264 | 136,302 | 101,407 | 84,301 | 73,365 | - Revenues increased by 16.3% from $134,019 thousand in 2019 to $155,859 thousand in 2020[29] - Cash and cash equivalents significantly increased from $38,047 thousand in 2019 to $105,815 thousand in 2020[29] B. Capitalization and Indebtedness. This item is not applicable to the company's filing C. Reasons for the Offer and Use of Proceeds. This item is not applicable to the company's filing D. Risk Factors. This section identifies various risks that could materially affect the company's business, financial condition, and share price, including pandemic impacts, industry cyclicality, competition, supply chain, cybersecurity, and geopolitical factors Risks Relating to the COVID-19 Pandemic ("COVID-19") - The global COVID-19 pandemic may continue to negatively impact the global economy and adversely affect operating results due to macro-economic uncertainty and disruption[38][39] - Potential challenges include economic downturn, disruptions to production and installation, supply chain issues, increased shipment costs, disruptions to marketing and sales, lower work efficiency, and financial difficulties of major customers[40][41][42][43][44][45][47] Risk Factors Related to Our Business and Our Markets - Dependence on the cyclical semiconductor industry; unfavorable economic conditions or low capital expenditures may negatively impact operating results[49][50] - Highly competitive markets with dominant participants and rapidly evolving technology could adversely affect sales terms, profits, and lead to revenue loss[51][52][54][55] - A substantial majority (88% in 2020) of sales are to the Asia Pacific region, subjecting the company to additional risks from political/economic instability, natural disasters, and trade restrictions (e.g., U.S. policy towards China)[56][57] - Quarterly operating results vary significantly due to factors like global economic conditions, demand changes, order schedules, product introductions, and currency fluctuations[58][59][60][61] - Dependence on a limited number of suppliers and subcontractors for key components poses risks of delays, disruptions, quality control problems, increased costs, and potential order cancellations[65][66][68][69][70][71][72][73] - Increased cyber-attacks, data breaches, and evolving privacy laws (like GDPR) could result in liabilities, increased costs, damage to reputation, and adverse effects on business[75][76][77][78] - Fluctuations in currency exchange rates, particularly NIS relative to the U.S. Dollar, may increase costs or make products less competitive, negatively impacting profitability[79][80] - Inability to protect intellectual property (patents, copyrights, trade secrets) could affect competitive advantage and incur significant expenses, with past litigation history[84][85][86][87][88] - Failure to maintain effective internal control over financial reporting in accordance with Sarbanes-Oxley Act Section 404 could adversely affect operating results and investor confidence[98][99][100] Risks Relating to Our Ordinary Shares - Sales of ordinary shares, including those from option exercises, may depress the share price and impair the ability to raise capital[101] - Share price and trading volumes have been volatile and may continue to fluctuate due to global economic conditions, product attractiveness, financial performance, corporate transactions, and analyst estimates[102][103][104] - Principal shareholders (Priortech and Chroma) hold a controlling interest (39.23% combined) and can influence corporate matters, potentially creating conflicts of interest[106][107][109][110] - Classification as a Passive Foreign Investment Company (PFIC) could result in adverse U.S. tax consequences for U.S. shareholders[111] - Dual listing on Nasdaq and TASE may result in price variations due to different currencies, trading times, and market factors[112] Risks Relating to Our Operations in Israel - Operations are headquartered in Israel, making them susceptible to political, economic, and military conditions in the Middle East and Israel, including hostilities, trade interruptions, and military service obligations for employees[114][115][116][117] - Ability to take advantage of Israeli government programs and tax benefits may change, potentially increasing tax expenses or requiring refunds of past benefits[119] - Government grants for R&D from the Israel Innovation Authority (IIA) impose restrictions on utilization of funded know-how and may require royalty payments or increased royalties for transfers outside Israel[120][121][122] - As a foreign private issuer, the company is exempt from certain SEC requirements and Nasdaq Rules, which may result in less protection for investors compared to domestic issuers[126][127] - Provisions of Israeli law (corporate law, tender offer rules, tax considerations, competition law) may delay, prevent, or make undesirable an acquisition of the company[128][129][130] Item 4. Information on the Company. This section details Camtek's history, business overview, organizational structure, and assets, highlighting its evolution to high-end semiconductor inspection and metrology A. History and Development of the Company Camtek Ltd., incorporated in 1987, transitioned from PCB inspection to semiconductor inspection and metrology, consolidating products under the 'Eagle' platform and securing investment from Chroma ATE Inc - Incorporated in Israel in 1987, public since July 2000[134] - Sold PCB inspection business unit in 2017 for $32 million cash, plus an additional $1.257 million in 2019, to focus on semiconductor Inspection and Metrology[137] - Raised $64.3 million net from a public offering of 4,025,000 ordinary shares in November 2020[139] - Chroma ATE Inc. acquired 6,117,440 ordinary shares from Priortech and 1,700,000 new shares from Camtek in February 2019, resulting in Chroma holding 18.06% and Priortech 21.17% of ordinary shares as of March 9, 2021[140] - A Technological Cooperation Agreement was signed with Chroma, granting a license for triangulation technology for non-semiconductor applications[142] B. Business Overview. Camtek develops high-end semiconductor inspection and metrology equipment, enhancing yield across wafer production processes, driven by electronics demand, and maintains a global distribution network Our Business - Camtek is a developer and manufacturer of high-end inspection and metrology equipment for the semiconductor industry[144] - Systems inspect and measure IC features on wafers throughout the production process (front, mid, and back-end), enhancing end-product yield by sorting good dies[144][145][146] Our Markets - Semiconductor industry growth is driven by smartphones, IoT, cloud computing, 5G networks, AI, automotive, and industrial electronics[147] - Demand for inspection and metrology systems is fueled by increasing manufacturing volume and the need for higher reliability in applications such as automotive and mobile phones[147] - Focus on fast-growing advanced packaging (Fan Out Wafer Level Packaging, Heterogeneous Integration), High Bandwidth Memory (HBM), CMOS Image Sensors (CIS), and 5G mobile communications[149][150][151][152][153] - Penetrated front-end macro inspection for defect-free and high-yield wafer manufacturing with the Eagle platform[154] Product Lines - Systems consist of an electro-optical assembly, a precise movable table, and an electronic hardware unit with proprietary algorithms for image processing and defect analysis[155] - All semiconductor inspection and metrology products are consolidated under the 'Eagle' product lines (Eagle-i, Eagle-AP, Golden Eagle), phasing out older models[159][160] - Intends to offer software solutions like Automatic Defect Classification (ADC) utilizing deep learning techniques[160] Customers - Target customers include wafer manufacturers, outsourced semiconductor assembly and test (OSAT), integrated device manufacturers (IDM), and wafer level packaging subcontractors across Asia, Europe, and North America[161][162] - In 2020, no individual customer accounted for more than 10% of total revenues; in 2019, one customer accounted for 11%[162][761] - Installed base was approximately 1,200 systems as of December 31, 2020[162] - Revenues by Geographical Region (in thousands USD) | | 2020 | 2019 | 2018 | | :---------------- | :----- | :----- | :----- | | Asia Pacific | 137,555 | 115,925 | 98,468 | | United States | 9,847 | 10,388 | 13,227 | | Europe | 8,457 | 7,706 | 11,479 | | Total | 155,859 | 134,019 | 123,174 | Marketing and Customer Support - Maintains a global distribution and support network, primarily using its own employees, with a focus on the Asia Pacific region[165][166] - Offers a 12-month warranty and fee-based service/maintenance contracts[167] - Secures customer payments via letters of credit and advanced payments[168] Manufacturing - Manufacturing involves assembly and final integration of parts from third-party vendors and subcontractors, with the Eagle system manufactured by two Israeli contractors[169] - Relies on single/limited source suppliers for essential components and maintains several months of inventory[170] - Manufacturing facility located in Migdal Ha'Emek, Israel[171] Competition - Operates in a highly competitive market with main competitors including Onto Innovations, Skyverse, ATI Electronics, Cheng Mei Instrument Technology, ASTI Holding, Toray Industries, and KLA-Tencor[172] - Competitive advantages include R&D in image acquisition/processing, proprietary core technologies, competitive pricing, fast response to customer needs, product compatibility, and strong global pre/post-sale support[174][175] The Israel Innovation Authority - Receives government grants from the IIA for R&D, with an obligation to pay royalties (3-6% of revenues) up to 100% of the grant amount plus LIBOR interest[176][177] - Requires IIA approval for manufacturing products incorporating Financed Know-how outside Israel (subject to increased royalties up to 300% of grant) or transferring Financed Know-How to third parties (subject to payments up to six times the grant)[178][179] - Total unrepaid grants from IIA (including interest) were $7.6 million as of December 31, 2020[182] Capital Expenditures - Capital Expenditures in Fixed Assets (in thousands USD) | | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Machinery and equipment | 2,939 | 1,998 | 1,902 | | Right of use (ROU) assets | 831 | 904 | - | | Computer equipment and software | 631 | 305 | 604 | | Building and leasehold improvements | 273 | 154 | 1,327 | | Vehicles | 176 | - | - | | Office furniture and equipment | 168 | 97 | 96 | | Total | $5,018 | $3,458 | $3,929 | Material Effects of Governmental Regulations - Complies with EU directives (Machinery 2006/42/EC, EMC 2004/108/EC) and SEMI Standards (S-2, S-8) for the semiconductor fabrication industry[185] C. Organizational Structure Camtek Ltd. is jointly controlled by Priortech and Chroma via a voting agreement, operating through wholly-owned subsidiaries globally - Priortech holds 21.17% and Chroma holds 18.06% of outstanding ordinary shares, exercising joint control via a voting agreement[186][140] - Camtek Subsidiaries and Jurisdictions of Incorporation | Name of Subsidiary | Jurisdiction of Incorporation | | :--------------------------------- | :---------------------------- | | Camtek H.K. Ltd. | Hong Kong | | Camtek USA Inc. | New Jersey, USA | | Camtek (Europe) NV | Belgium | | Camtek Germany GmbH | Germany | | Camtek Inspection Technology (Suzhou) Ltd. | China | | Camtek Japan Ltd. | Japan | | Camtek Inspection Technology Limited | Taiwan | | Camtek South East Asia Pte Ltd. | Singapore | | Camtek Korea Ltd. | South Korea | D. Property, Plants and Equipment The company's main office, manufacturing, and R&D facilities are in Migdal Ha'Emek, Israel, with additional leased global sales and demonstration centers - Headquarters, manufacturing, and R&D facilities in Migdal Ha'Emek, Israel, cover 84,500 sq ft (16,000 sq ft for manufacturing)[189] - Global sales offices and demonstration centers occupy an aggregate of approximately 27,800 sq ft[190] Item 4A. Unresolved Staff Comments. There are no unresolved staff comments for the company Item 5. Operating and Financial Review and Prospects. This section analyzes Camtek's financial condition and operations, covering business overview, accounting policies, period-to-period results, liquidity, R&D, market trends, and obligations A. Operating Results Camtek's operating results show increased 2020 revenues and net income, driven by semiconductor inspection solutions, with a revenue recognition policy change and higher R&D and SG&A expenses General Overview - Camtek designs, develops, manufactures, and markets automated inspection and metrology solutions for the semiconductor fabrication industry[196] - 88% of total revenues in 2020 were from the Asia Pacific region (South Korea, China, Taiwan, South East Asia)[198] - Revenue from product sales is recognized upon transfer of control, generally upon shipment since October 2020 (previously upon installation), due to streamlined pre-shipment processes[203][676] - Service revenues from maintenance contracts are recognized ratably over the contract period[204][678] Critical Accounting Policies - Revenue Recognition: Policy changed in October 2020 from installation to shipment for product sales, due to streamlined pre-shipment processes[203][676] - Valuation of Inventory: Inventory write-offs amounted to $0.1 million in 2020 and $0.2 million in 2019. Long-term inventory (non-current) was $4.4 million as of December 31, 2020[210][707][708] - Leases: Adopted ASC Topic 842 on January 1, 2019, recognizing Right-of-Use (ROU) assets and lease liabilities[219][696] Comparison of Period-to-Period Results of Operations - Revenues increased by 16% to $155.9 million in 2020 from $134.0 million in 2019, primarily due to increased product unit sales[229] - Gross profit increased by 13% to $73.2 million in 2020 from $64.8 million in 2019. Gross margin decreased to 47.0% in 2020 from 48.3% in 2019, mainly due to product and sales mix[230] - Research and development costs increased to $19.6 million in 2020 from $16.3 million in 2019, due to higher investment in new products/technologies and increased headcount[231] - Selling, general and administrative expenses increased by 17% to $31.0 million in 2020 from $26.5 million in 2019, mainly due to increased commissions, salaries, and shipping expenses, offset by decreased travel[232] - Net income from continuing operations increased to $21.8 million in 2020 from $20.8 million in 2019, driven by increased revenues[234] B. Liquidity and Capital Resources Camtek's liquidity significantly improved in 2020 to $177.8 million cash and deposits, driven by a public offering and benefiting from Israeli 'Approved Enterprise' tax status - Cash and cash equivalents and short-term deposits totaled approximately $177.8 million at December 31, 2020, a significant increase from $89.5 million at December 31, 2019[235] - The increase in cash and cash equivalents mainly results from a successful public offering in November 2020, which raised $64.3 million net[235][236] - Working capital increased to approximately $204.5 million in 2020 from $116.1 million in 2019[238] - Cash Flow Summary (in thousands USD) | Cash Flow Activity | 2020 | 2019 | | :-------------------------------- | :----- | :----- | | Net cash provided by operating activities | 25,752 | 24,626 | | Net cash used in investing activities | (23,126) | (51,605) | | Net cash provided by financing activities | 64,917 | 10,017 | - The company benefits from 'Approved Enterprise' status in Israel, providing tax exemption for 10 years on income from approved enterprises in Zone 'A'[244] - As of December 31, 2020, approximately $22.3 million of prior year earnings were tax-exempt from Approved Enterprise and $3.4 million from Beneficiary Enterprise, which the company intends to indefinitely reinvest[250][252] C. Research and Development, Patents and Licenses. Camtek prioritizes intensive R&D for new products and improvements, supported by Israeli teams, and protects its intellectual property through 153 patents and other legal mechanisms - R&D is essential for business, focusing on improving defect detection, increasing throughput, providing unique solutions, and expanding market segments[255][256][257] - 93 employees engaged in R&D, all based in Israel, with subcontractors for hardware components[258] - R&D expenses were $19.6 million in 2020 (12.6% of total revenues) and $16.3 million in 2019 (12.2% of total revenues)[258] - Protects intellectual property through patents, copyrights, trade secrets, trademarks, and non-disclosure agreements[261] - Holds 153 issued and applied-for patents worldwide (99 registered) and 6 U.S. provisional applications[262] D. Trend Information The outlook for 2021 and beyond is positive, driven by semiconductor industry trends like AI and IoT, though the COVID-19 pandemic introduces unpredictable implications - Positive outlook for 2021 and beyond, as projected by VLSI Research and SEMI Organization[263] - Key drivers for future semiconductor demand include mobile devices, data centers, Artificial Intelligence, AR/VR, smart sensors, and IoT[263] - The global COVID-19 pandemic may impose unpredictable implications on the global economy and semiconductor industry[263] E. Off-Balance Sheet Arrangements. The company has no material off-balance sheet arrangements, only non-cancelable operating lease agreements for office space and vehicles - The company does not have any material off-balance sheet arrangements[264] - Minimum future rental payments under non-cancelable operating lease agreements were approximately $1.5 million as of December 31, 2020[265] F. Contractual Obligations and Other Commercial Commitments. As of December 31, 2020, Camtek had total contractual obligations of $42.2 million, primarily for inventory purchase commitments and other long-term obligations - Contractual Obligations as of December 31, 2020 (in thousands USD) | Obligation Type | Total | Less than 1 Year | 1 - 3 years | 3 - 5 years | More than 5 years | | :---------------------- | :---- | :--------------- | :---------- | :---------- | :---------------- | | Purchase obligations | 39,433 | 39,433 | - | - | - | | Severance obligation | 1,239 | - | - | - | 1,239 | | Other long-term obligations | 1,543 | 809 | 645 | 89 | - | | Total | 42,215 | 40,242 | 645 | 89 | 1,239 | - Purchase obligations mainly represent outstanding purchase commitments for inventory components ordered in the normal course of business[267] - Other long-term obligations include approximately $1.0 million for vehicle operating leases and $0.6 million for office space leases as of December 31, 2020[267] Item 6. Directors, Senior Management and Key Employees This section outlines the company's leadership, compensation, board practices, corporate governance, and employee and share ownership information A. Directors and Senior Management This section lists the names, ages, and positions of Camtek's directors and senior management, including CEO Rafi Amit and CFO Moshe Eisenberg, highlighting their experience - Directors and Senior Management | Name | Age | Title | | :--------------------- | :-- | :------------------------------------------------ | | Rafi Amit | 72 | Chief Executive Officer and Chairman of the Board of Directors | | Yotam Stern | 68 | Director | | Leo Huang | 69 | Director | | I-Shih Tseng | 59 | Director | | Yael Andorn | 50 | Director (External, Audit Committee Chairperson) | | Yosi Shacham-Diamand | 67 | Director (External) | | Moty Ben-Arie | 66 | Director | | Orit Stav | 50 | Director | | Moshe Eisenberg | 54 | Chief Financial Officer | | Ramy Langer | 67 | Chief Operating Officer | | Orit Geva Dvash | 49 | Vice President - Human Resources | - Ms. Yael Andorn and Prof. Yosi Shacham-Diamand serve as external directors[270] - No family relationships exist among the listed directors and senior management[286] B. Compensation Aggregate remuneration for directors and senior management in 2020 was approximately $3.2 million, including performance-based bonuses and equity compensation, aligned with long-term strategic objectives - Aggregate remuneration paid to all directors and senior management for 2020 was approximately $3,203,125, including $187,809 for pension, retirement, or similar benefits[287] - Executive officers are part of a performance-based bonus plan, with up to 50% qualitative objectives (CEO's qualitative portion capped at three monthly base salaries)[288] - Independent directors receive cash fees and equity-based compensation (share options or RSUs); directors representing Priortech and Chroma do not receive compensation for their board service[290] - Individual Compensation of Covered Office Holders (2020, in USD) | Name and Principal Position | Salary Cost | Bonus | Equity-Based Compensation | Other | Total | | :---------------------------------- | :---------- | :---- | :------------------------ | :---- | :------ | | Rafi Amit – Chief Executive Officer | 313,134 | 212,625 | 586,144 | 105,832 | 1,217,735 | | Ramy Langer - Chief Operating Officer | 348,689 | 89,840 | 333,572 | - | 772,101 | | Moshe Eisenberg - Chief Financial Officer | 309,474 | 87,340 | 318,917 | - | 715,731 | | Orit Geva-Dvash - Vice President, Human Resources | 169,155 | 39,464 | 163,265 | - | 371,884 | | Yael Andorn – Director, Chairwoman of the Audit Committee | - | - | 7,063 | 38,832 | 45,895 | | Total | 1,140,452 | 429,269 | 1,408,961 | 144,664 | 3,123,346 | - Mr. Amit's employment agreement includes an annual base salary of $313,134 and an annual performance-based bonus, with a cash bonus of $212,625 for 2019 and a one-time special cash bonus of $100,000 in 2020[299] C. Board Practices Camtek's board practices adhere to Israeli corporate governance and Nasdaq Rules, with an eight-member Board, Audit and Nomination Committees, and a shareholder-approved compensation policy for Office Holders Corporate Governance Practices - As a foreign private issuer, Camtek follows Israeli corporate governance rules in lieu of certain Nasdaq Rules, except for audit committee composition and independence[302] General Board Practices - The Board of Directors consists of eight members, including two external directors and representatives from Priortech and Chroma[304][305] - The Board retains all powers in managing the company not specifically granted to shareholders and can appoint committees[306][308] Election, Terms and Skills of Directors - Directors, other than external directors, are elected annually by shareholders[310] - Candidates must submit a declaration confirming they possess the required skills and ability to devote appropriate time to the role[311] Independent Directors - Six of the eight Board members qualify as independent directors under Nasdaq Rules; four qualify under the Companies Law[316] External Directors - The company is required to appoint at least two external directors who must meet specific independence criteria and possess 'accounting and financial expertise' or 'professional qualifications'[317][318][329] - External directors are elected by a special majority shareholder vote and serve three-year terms, which may be extended for two additional three-year periods[321][325] - Ms. Yael Andorn (accounting and financial expertise) and Prof. Yosi Shacham-Diamand (professional qualifications) serve as external directors until October 2, 2021[331] Remuneration of Directors - Directors' remuneration must be consistent with the company's compensation policy and generally requires approval from the compensation committee, board of directors, and shareholders[332] - External and independent directors receive a fixed annual fee of NIS 70,000 (approx. $20,335), fixed participation fees for meetings, and reimbursement of expenses[336] - Messrs. Amit, Stern, Huang, and Tseng do not receive any compensation for their service as directors[337] Committees of the Board of Directors - The Audit Committee consists of Ms. Yael Andorn (Chairperson, financial expert), Mr. Moty Ben Arie, and Mr. Yosi Shacham-Diamand, all independent directors[345][592] - The Audit Committee also serves as the Compensation Committee, following Israeli practice as a foreign private issuer[351] - A Nomination Committee, comprised of the two external directors, is responsible for recommending director nominees[354] Approval of Office Holders Terms of Employment - Terms of employment for Office Holders (excluding directors and CEO) require approval from the compensation committee and board of directors, provided they align with the compensation policy[356] - Terms for directors, the CEO, or controlling shareholders require approval from the compensation committee, board, and a special majority of shareholders[357] Compensation Policy - A New Compensation Policy for Office Holders was approved by shareholders in July 2020, designed to balance incentives with long-term strategic performance[361][362] - Annual cash bonuses for executives (excluding CEO) are capped at 75% of annual base salary (100% for CEO), with actual payment capped at 150% of the on-target plan and a minimum Non-GAAP Net Profit threshold of $6 million[364][365] - Equity-based compensation is capped at 300% of annual base salary for the CEO and 250% for other executives, with at least 40% subject to performance-based vesting[367] - The D&O insurance coverage is capped at the higher of $30 million or 10% of market cap, with a premium cap of $1 million[370] Approval of Certain Transactions with Related Parties - Extraordinary transactions with controlling shareholders or transactions with Office Holders where they have a personal interest require audit/compensation committee, board, and often special majority shareholder approval[372][373] - Private placements of securities exceeding certain thresholds or resulting in a controlling shareholder also require multiple approvals[378] Duties of Office Holders and Shareholders - Office Holders have duties of care and loyalty, requiring them to act in good faith, avoid conflicts of interest, and disclose personal interests in company transactions[381][385] - Shareholders have a duty to act in good faith towards the company and other shareholders, and to refrain from abusing their power[387][388] Insurance, Indemnification and Exemption - The company may exempt Office Holders from liability for breach of duty of care (except for distributions) and indemnify/insure them for certain liabilities, subject to Companies Law provisions and board/shareholder approvals[389][390][393][395][396][398][399][400] - Currently holds directors' and officers' liability insurance policy for the benefit of its Office Holders, effective until November 30, 2021[401] Administrative Enforcement - Subject to administrative enforcement procedures by the Israeli Securities Authority (ISA) for breaches of Israeli Securities Law[403] - The CEO is required to supervise and take reasonable measures to prevent breaches, and the company has adopted an internal enforcement plan[403][406] D. Employees As of December 31, 2020, Camtek had 356 employees globally, with the majority in Israel, reporting good employee relations and no labor disputes - Number of Employees by Activity (2018-2020) | | 2020 | 2019 | 2018 | | :--------------------------- | :--- | :--- | :--- | | Executive management | 4 | 4 | 4 | | Research and development | 93 | 77 | 67 | | Sales support | 101 | 92 | 85 | | Sales and marketing | 37 | 35 | 33 | | Administration | 47 | 47 | 43 | | Operations | 74 | 67 | 63 | | Total | 356 | 322 | 295 | - Number of Employees by Geographic Region (2018-2020) | | 2020 | 2019 | 2018 | | :------- | :--- | :--- | :--- | | Israel | 222 | 200 | 181 | | Abroad | 134 | 122 | 114 | | Total | 356 | 322 | 295 | - The company considers its relationship with its employees to be good and has never experienced a labor dispute, strike, or work stoppage[408] E. Share Ownership. As of March 9, 2021, Priortech and Chroma are joint controlling shareholders with 21.17% and 18.06% ownership respectively, alongside other significant holders - Beneficial Ownership of Ordinary Shares by Major Shareholders (as of March 9, 2021) | Name | Number of Ordinary Shares Owned | Percentage of Total Outstanding Ordinary Shares | | :---------------------------------- | :------------------------------ | :---------------------------------------------- | | Priortech Ltd. | 9,163,633 | 21.17% | | Chroma ATE Inc. | 7,817,440 | 18.06% | | Migdal Insurance & Financial Holdings Ltd | 3,320,161 | 7.66% | | Federated Hermes, Inc. | 2,580,000 | 5.95% | - Priortech and Chroma are deemed joint controlling shareholders due to a voting agreement[412][428] - The company maintains the 2018 Share Incentive Plan for options, restricted shares, and RSUs to employees, officers, directors, and consultants[417][418][422] - As of December 31, 2020, 1,322,854 awards were outstanding under the 2018 Plan[421] - Total unrecognized compensation cost related to non-vested share-based compensation arrangements was $73 thousand as of December 31, 2020, expected to be recognized in less than one year[745] - Total compensation cost from RSUs recognized in 2020 amounted to $4,115 thousand, with $10,248 thousand unrecognized compensation to be recognized from 2021 to 2024[753] Item 7. Major Shareholders and Related Party Transactions. This section details major shareholders and significant related party transactions, including beneficial ownership, agreements with Priortech and Chroma, and the CEO's employment A. Major Shareholders. As of March 9, 2021, Priortech and Chroma are the largest shareholders, holding 21.17% and 18.06% respectively, and are deemed joint controlling shareholders - Beneficial Ownership of Ordinary Shares by Major Shareholders (as of March 9, 2021) | Name | Ordinary Shares* | Percentage | | :----------------------------------- | :--------------- | :--------- | | Priortech Ltd. | 9,163,633 | 21.17% | | Chroma ATE Inc. | 7,817,440 | 18.06% | | Migdal Insurance & Financial Holdings Ltd | 3,320,161 | 7.66% | | Federated Hermes, Inc. | 2,580,000 | 5.95% | - Priortech Ltd. and Chroma ATE Inc. are deemed joint controlling shareholders due to a voting agreement[428][429] - Rafi Amit and Yotam Stern may be deemed to control Priortech Ltd. due to a voting agreement[413][414][428] B. Related Party Transactions. The company has significant related party transactions and agreements, primarily with major shareholders Priortech and Chroma, including a technological cooperation agreement and CEO employment terms - Definitive agreements from the Chroma Transaction (February 2019) involved Chroma acquiring shares from Priortech and new shares from Camtek, leading to joint control[432][140] - A Second Amended and Restated Registration Rights Agreement grants Chroma similar registration rights as Priortech for their ordinary shares[437] - A Technological Cooperation Agreement with Chroma grants Chroma a license for an application under Camtek's triangulation technology platform for non-semiconductor uses[432][795] - The CEO, Rafi Amit, dedicates 10% of his time to providing consulting and management services for Priortech through its subsidiary, Amitec, as part of his employment agreement[438][796] C. Interests of Experts and Counsel. This item is not applicable to the company's filing Item 8. Financial Information. This section refers to consolidated financial statements in Item 18, notes no material legal proceedings, and details cash dividends declared in 2018 and 2019 A. Consolidated Statements and Other Financial Information. This sub-section refers to consolidated financial statements in Item 18, confirms no material legal proceedings, and details cash dividends declared in 2018 and 2019 - Consolidated financial statements are listed in Item 18[442] - The company is not a party to any material legal proceedings[443] - Cash Dividends Declared | Year | Dividend per Ordinary Share | Aggregate Distribution (approx.) | | :--- | :-------------------------- | :------------------------------- | | 2018 | $0.14 | $5 million | | 2019 | $0.17 | $6.5 million | B. Significant Changes. There are no significant changes to report Item 9. The Offer and Listing. This section details the company's ordinary shares, dual-listed on Nasdaq Global Market and TASE under 'CAMT', with other sub-items not applicable A. Offer and Listing Details. Camtek's ordinary shares are dual-listed and traded on the Nasdaq Global Market and TASE under 'CAMT', subject to Israeli securities legislation - Ordinary shares are traded on the Nasdaq Global Market and on TASE under the symbol 'CAMT'[448] - The company is subject to Israeli securities legislation applicable to dual-listed companies[448] B. Plan of distribution. This item is not applicable to the company's filing C. Markets. This item refers to the information provided in Item 9.A D. Selling Shareholders. This item is not applicable to the company's filing E. Dilution. This item is not applicable to the company's filing F. Expenses of the Issue. This item is not applicable to the company's filing Item 10. Additional Information. This section provides additional information on Camtek's share capital, articles of association, exchange controls, U.S. federal and Israeli tax considerations, and document availability A. Share Capital This item is not applicable to the company's filing B. Memorandum and Articles The company's share capital consists of 43,272,978 ordinary shares outstanding, with shareholders having one vote per share, and the Board can declare dividends subject to solvency and Israeli law - Authorized share capital consists of 100,000,000 ordinary shares, par value NIS 0.01, with 43,272,978 shares outstanding and fully-paid as of December 31, 2020[465] - Ordinary shares do not have preemptive rights, and ownership/voting is not restricted except for citizens of countries at war with Israel[466][488] - The Board of Directors may declare dividends from retained earnings or earnings over the two most recent years, subject to solvency. In liquidation, assets are distributed proportionally to ordinary shareholders after creditors[469][470] - Shareholders have one vote for each ordinary share. Annual meetings must be held within 15 months of the last one, with a quorum of at least two shareholders representing 25% of voting power[473][475][476] - Israeli corporate law includes anti-takeover effects, regulating mergers and acquisitions and requiring tender offers for certain share acquisition thresholds[481][482][483][485] C. Material Contracts. There are no material contracts to report D. Exchange Controls There are no Israeli currency control restrictions on dividend payments or share sales proceeds, except for reporting obligations and restrictions for citizens of countries at war with Israel - No Israeli currency control restrictions on dividend payments or proceeds from share sales, except for reporting obligations for Israeli residents[487] - Ownership or voting of ordinary shares by non-residents of Israel is not restricted, except for citizens of countries in a state of war with Israel[488] E. Taxation This section provides an overview of U.S. federal and Israeli tax considerations for shareholders, including dividend and disposition taxation, PFIC implications, and Israeli corporate tax benefits U.S. Federal Income Tax Considerations - Distributions on ordinary shares are generally treated as dividend income to the extent of current and accumulated earnings and profits. Qualified dividends for non-corporate U.S. holders are taxed at long-term capital gains rates if certain conditions are met[496] - Upon disposition of ordinary shares, U.S. holders recognize capital gain or loss, which is long-term if held for more than one year, generally treated as U.S. source income or loss[501] - Non-corporate U.S. holders may be subject to an additional 3.8% surtax on net investment income[503] - If classified as a Passive Foreign Investment Company (PFIC), U.S. holders may be subject to complex tax rules under the QEF, mark-to-market, or excess distribution regimes, potentially leading to adverse tax consequences[504][505][507][510] - Non-U.S. holders are generally not subject to U.S. federal income or withholding tax on dividends or dispositions unless effectively connected with a U.S. trade or business[514] Israeli Taxation - The regular corporate tax rate in Israel is 23% for 2020 and 2021[521] - The company benefits from 'Approved Enterprise' status under the Investment Law, providing tax exemption for 10 years on income from approved enterprises in Zone 'A'[522] - For 2019 onwards, the company elected 'Preferred Enterprise' status, resulting in a 7.5% corporate tax rate for preferred income in Development Area A[533] - As of December 31, 2020, $22.3 million of prior year earnings were tax-exempt from Approved Enterprise and $3.4 million from Beneficiary Enterprise. If distributed, these would incur tax liabilities of approximately $5.6 million and $0.8 million, respectively[538][540] - Government grants from the Israel Innovation Authority (IIA) for R&D require royalty payments (3.5% of sales) up to 100% of grants plus LIBOR interest, contingent on actual sales[543][728] - Non-Israeli residents are generally exempt from Israeli capital gains tax on the sale of publicly traded shares, provided certain conditions are met, such as not holding shares through a permanent establishment in Israel[552][553] - Dividends paid to non-Israeli residents are generally subject to 25% Israeli withholding tax (30% for 'Substantial Shareholders'), with lower rates potentially available under applicable tax treaties like the U.S.-Israel Tax Treaty[557][561] F. Dividends and Paying Agents. This item is not applicable to the company's filing G. Statement by Experts. This item is not applicable to the company's filing H. Documents on Display. The company files annual reports and information with the SEC and makes it available on its website - SEC filings are available on the SEC's EDGAR system at http://www.sec.gov[568](index=568&type=chunk) - Information about the company is also available on its website at www.camtek.com[568](index=568&type=chunk) I. Subsidiary Information. This item is not applicable to the company's filing Item 11. Quantitative and Qualitative Disclosures about Market Risk Camtek's primary market risks stem from foreign currency fluctuations, particularly the U.S. Dollar/NIS exchange rate, impacting operational costs, with no significant interest rate risk - The company's exposure to market risk for changes in interest rates is not significant as it has no outstanding loans[571] - A major portion of Israeli operational costs are incurred in NIS, making the company exposed to fluctuations in the NIS/U.S. Dollar exchange rate. The U.S. Dollar weakened against the NIS by 7% in 2020[572] - As of December 31, 2020, the company had net liabilities of approximately $12.8 million denominated in NIS. A 1% fluctuation in the exchange rate would cause $128 thousand in expenses or income[574] - Product prices in certain territories (Europe and Japan) are denominated in local currencies, which could become less competitive if those currencies significantly devalue against the U.S. Dollar[575] Item 12. Description of Securities Other than Equity Securities. This item is not applicable to the company's filing PART II Item 13. Defaults, Dividend Arrearages and Delinquencies. This item is not applicable to the company's filing Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds. This item is not applicable to the company's filing Item 15. Controls and Procedures. Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with independent auditor attestation and no material changes - Management concluded that disclosure controls and procedures were effective as of December 31, 2020[583][584] - Management assessed the effectiveness of internal control over financial reporting based on the COSO (2013) framework and concluded it was effective as of December 31, 2020[587][588] - Somekh Chaikin, a member firm of KPMG International, audited and attested to the effectiveness of the company's internal control over financial reporting as of December 31, 2020[589][620] - No changes to internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the period[590] Item 16A. Audit Committee Financial Expert. The Board determined Ms. Yael Andorn qualifies as an 'audit committee financial expert' under Nasdaq Rules, with both Ms. Andorn and Mr. Yosi Shacham-Diamand serving as independent directors - Ms. Yael Andorn qualifies as an 'audit committee financial expert' for Nasdaq Rules purposes[592] - Both Ms. Andorn and Mr. Yosi Shacham-Diamand are independent directors[592] Item 16B. Code of Ethics. The company adopted a Code of Ethics applicable to all directors, officers, and employees, including principal executive, financial, and accounting officers, available on its website - A Code of Ethics has been adopted, applicable to all directors, officers, and employees, including principal executive, financial, and accounting officers[593] - A copy of the Code of Ethics is available on the company's website, www.camtek.com[593](index=593&type=chunk) Item 16C. Principal Accountant Fees and Services. The Audit Committee pre-approves audit and non-audit services by Somekh Chaikin (KPMG), with 2020 audit fees at $255,700 and audit-related services at $47,000 - The Audit Committee has a policy for pre-approval of all auditing and permitted non-audit services performed by the independent auditor[598] - Principal Accountant Fees (in US$) | Fee Category | For 2020 Services Rendered | For 2019 Services Rendered | | :----------------------- | :------------------------- | :------------------------- | | Audit Fees | 255,700 | 255,700 | | Tax Fees | 7,700 | 16,312 | | Audit Related Services | 47,000 | 0 | - Audit fees cover professional services for the integrated audit of financial statements and internal controls[596] - Audit Related Services in 2020 included consultancy and consents related to an underwritten public offering[597] Item 16D. Exemption From the Listing Standards for Audit Committees This item is not applicable to the company's filing Item 16E. Purchases of Equity Securities By the Issuer and Affiliated Purchasers This item is not applicable to the company's filing Item 16F. Change in Registrant's Certifying Accountant This item is not applicable to the company's filing Item 16G. Corporate Governance Camtek relies on home country practice for several Nasdaq Rules, including direct registration, compensation committee functions, stock option plan approvals, and annual meeting requirements - The company relies on home country practice for the eligibility of its securities for a direct registration program, as permitted by Nasdaq Rule 5255(a)[604] - The Audit Committee assumes the functions and responsibilities of a compensation committee, following Israeli practice in lieu of Nasdaq Rule 5605(d)[605] - The company has opted out of Nasdaq Rules 5635 and 5605(d) regarding shareholder approval of stock option plans, but Israeli law requires special shareholder voting for equity-based compensation of certain Office Holders[605] - The company follows Israeli law for annual meeting requirements (within 15 months of the last meeting) and quorum (at least two shareholders holding 25% of voting rights), in lieu of Nasdaq Rule 5620(a) and 5620(c)[606] - The company follows home country practice for furnishing annual reports to shareholders by filing Form 20-F with the SEC and posting a copy on its website, in lieu of Nasdaq Rule 5250(d)(1)[608] Item 16H. Mine Safety Disclosure. This item is not applicable to the company's filing PART III Item 17. Financial Statements. The company has furnished financial statements and related information as specified in Item 18 Item 18. Financial Statements. The consolidated financial statements and the independent auditor's report are incorporated into this Annual Report, including balance sheets, income statements, equity, cash flows, and notes - The consolidated financial statements and the report of the independent registered public accounting firm are incorporated into this Annual Report[613] - The financial statements include Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Shareholders' Equity, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[616] - The financial statements were audited by Somekh Chaikin, a member firm of KPMG International[619] Item 19. Exhibits. This section lists all exhibits filed as part of the Form 20-F, including corporate documents, share plans, agreements, subsidiary lists, and various certifications - The exhibits include the Memorandum of Association, Articles of Registrant, Description of Registrant's Securities, 2018 Share Incentive Plan, Form of Indemnification Agreement, Registration Rights Amended and Restated Agreement, Share Purchase Agreement, and Subsidiaries of the Registrant[799] - Certifications from the Chief Executive Officer and Chief Financial Officer, and the Consent of Somekh Chaikin (Independent Registered Public Accounting Firm) are filed[799] - XBRL (eXtensible Business Reporting Language) formatted financial information is included[799] SIGNATURES The company certifies compliance with Form 20-F filing requirements, with the report signed by CEO Rafi Amit on March 17, 2021 - The Annual Report on Form 20-F is signed by Rafi Amit, Chief Executive Officer, on March 17, 2021[803][804]