Tower Semiconductor(TSEM) - 2021 Q4 - Annual Report

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM This section presents the independent auditor's report, including their opinion on the financial statements and identification of critical audit matters Opinion on the Financial Statements Independent auditors Brightman Almagor Zohar & Co. issued an unqualified opinion on Tower Semiconductor Ltd.'s consolidated financial statements for 2021 and 2020, affirming fair presentation in accordance with US GAAP - The auditors issued an unqualified opinion on the consolidated financial statements for the periods ended December 31, 2021, and December 31, 2020, confirming their fair presentation in all material respects in accordance with US GAAP[5] Critical Audit Matter The auditor identified management's determination of income tax provision as a critical audit matter due to significant judgment and estimation in cross-jurisdictional expense allocation and tax status considerations - The critical audit matter is the income tax provision, due to significant management judgment and estimation in allocating expenses across various tax jurisdictions and considering different tax statuses within a multinational tax environment[8][10][11] BALANCE SHEETS This section provides an overview of the company's consolidated balance sheets, highlighting changes in assets, liabilities, and shareholders' equity Consolidated Balance Sheets Overview As of December 31, 2021, total assets increased to $2,231,241 thousand, a 6.5% rise from 2020, while total liabilities slightly decreased and shareholders' equity significantly grew by 10.9% Consolidated Balance Sheets Key Data (As of December 31) | Indicator | 2021 (thousand USD) | 2020 (thousand USD) | Year-over-Year Change (%) | | :-------------------------------- | :------------------ | :------------------ | :------------- | | Total Assets | $2,231,241 | $2,094,149 | +6.5% | | Total Liabilities | $615,852 | $639,247 | -3.7% | | Total Shareholders' Equity | $1,615,389 | $1,454,902 | +10.9% | | Cash and Cash Equivalents | $210,930 | $211,683 | -0.4% | | Inventories | $234,512 | $199,126 | +17.8% | | Property and Equipment, Net | $876,683 | $839,171 | +4.5% | | Accumulated Deficit | $(315,448) | $(465,460) | Decrease of 150,012 | | Accumulated Share-Based Compensation | $149,906 | $124,762 | +20.1% | STATEMENTS OF OPERATIONS This section details the company's consolidated statements of operations, showing significant growth in revenue and net income for 2021 Consolidated Statements of Operations Overview In 2021, the company achieved significant revenue and profit growth, with revenue increasing by 19.1% to $1,508,166 thousand and net income attributable to the company doubling Consolidated Statements of Operations Key Data (For the Year Ended December 31) | Indicator | 2021 (thousand USD) | 2020 (thousand USD) | 2019 (thousand USD) | Year-over-Year Change (2021 vs 2020) | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------------------- | | Revenue | $1,508,166 | $1,265,684 | $1,234,003 | +19.1% | | Cost of Revenues | $1,179,048 | $1,032,366 | $1,004,332 | +14.2% | | Gross Profit | $329,118 | $233,318 | $229,671 | +41.1% | | Operating Income | $166,511 | $91,033 | $86,716 | +82.9% | | Net Income Attributable to the Company | $150,012 | $82,302 | $90,048 | +82.3% | | Basic Earnings Per Share | $1.39 | $0.77 | $0.85 | +80.5% | | Diluted Earnings Per Share | $1.37 | $0.76 | $0.84 | +80.3% | STATEMENTS OF COMPREHENSIVE INCOME This section presents the consolidated statements of comprehensive income, showing a substantial increase in comprehensive income attributable to the company in 2021 Consolidated Statements of Comprehensive Income Overview In 2021, comprehensive income attributable to the company significantly increased to $138,638 thousand, a 64.9% rise from $84,037 thousand in 2020, primarily driven by higher net income Consolidated Statements of Comprehensive Income Key Data (For the Year Ended December 31) | Indicator | 2021 (thousand USD) | 2020 (thousand USD) | 2019 (thousand USD) | Year-over-Year Change (2021 vs 2020) | | :------------------------------------- | :------------------ | :------------------ | :------------------ | :----------------------- | | Net Income | $154,075 | $83,289 | $88,073 | +85.0% | | Foreign Currency Translation Adjustments | $(18,995) | $7,830 | $3,478 | Significant Decrease | | Comprehensive Income Attributable to the Company | $138,638 | $84,037 | $95,192 | +64.9% | STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY This section outlines the consolidated statements of changes in shareholders' equity, detailing the factors contributing to the increase in equity during 2021 Consolidated Statements of Changes in Shareholders' Equity Overview In 2021, the company's shareholders' equity increased from $1,454,902 thousand in 2020 to $1,615,389 thousand, primarily due to net income and employee share-based compensation Consolidated Statements of Changes in Shareholders' Equity Key Data (For the Year Ended December 31) | Indicator | 2021 (thousand USD) | 2020 (thousand USD) | 2019 (thousand USD) | | :----------------------------------- | :------------------ | :------------------ | :------------------ | | Beginning Balance | $1,454,902 | $1,346,723 | $1,236,205 | | Net Income Attributable to the Company | $150,012 | $82,302 | $90,048 | | Share-Based Compensation to Employees | $25,144 | $16,988 | $14,548 | | Accumulated Other Comprehensive Loss | $(27,471) | $(16,247) | $(20,150) | | Ending Balance | $1,615,389 | $1,454,902 | $1,346,723 | STATEMENTS OF CASH FLOWS This section presents the consolidated statements of cash flows, highlighting significant increases in cash from operating activities and stable cash and cash equivalents at period-end Consolidated Statements of Cash Flows Overview In 2021, net cash provided by operating activities surged by 52.3% to $421,293 thousand, driven by increased net income and working capital changes, while cash and cash equivalents remained stable Consolidated Statements of Cash Flows Key Data (For the Year Ended December 31) | Indicator | 2021 (thousand USD) | 2020 (thousand USD) | 2019 (thousand USD) | Year-over-Year Change (2021 vs 2020) | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :----------------------- | | Net Cash Provided by Operating Activities | $421,293 | $276,561 | $291,320 | +52.3% | | Net Cash Used in Investing Activities | $(338,944) | $(363,609) | $(305,094) | -6.7% | | Net Cash Used in Financing Activities | $(76,857) | $(61,187) | $(17,560) | +25.6% | | Decrease in Cash and Cash Equivalents | $(753) | $(143,878) | $(29,530) | Significant Decrease in Amount | | Cash and Cash Equivalents at End of Period | $210,930 | $211,683 | $355,561 | -0.4% | Non-Cash Activities and Supplemental Disclosure This section details non-cash investing activities, including a significant increase in property and equipment investment in 2021, and provides supplemental cash flow information Non-Cash Activities (For the Year Ended December 31) | Indicator | 2021 (thousand USD) | 2020 (thousand USD) | 2019 (thousand USD) | | :-------------------------- | :------------------ | :------------------ | :------------------ | | Investment in Property and Equipment | $65,634 | $35,271 | $39,184 | | Conversion of Notes to Equity | $0 | $0 | $22,600 | Supplemental Cash Flow Information (For the Year Ended December 31) | Indicator | 2021 (thousand USD) | 2020 (thousand USD) | 2019 (thousand USD) | | :------------------------------------------ | :------------------ | :------------------ | :------------------ | | Cash Interest Received During the Period | $5,590 | $10,524 | $14,436 | | Cash Interest Paid During the Period | $4,561 | $6,633 | $7,456 | | Net Cash Paid (Received) for Income Taxes During the Period | $8,288 | $(2,436) | $13,026 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS This section provides detailed notes supporting the consolidated financial statements, covering business operations, accounting policies, and specific financial line items NOTE 1: DESCRIPTION OF BUSINESS AND GENERAL Tower Semiconductor Ltd. is a leading global specialty foundry for integrated circuit manufacturing, offering diverse customizable process technologies across multiple global manufacturing facilities - The company is a leading global specialty foundry, offering a variety of customizable process technologies including SiGe, BiCMOS, mixed-signal/CMOS, RF CMOS, CMOS image sensors, integrated power management, and MEMS[33] - The company operates manufacturing facilities in Israel (150mm and 200mm), the U.S. (200mm), and Japan (through TPSCo, including two 200mm and one 300mm)[33] - In 2021, the company signed a cooperation agreement with ST Microelectronics S.r.l to share manufacturing capacity at a new 300mm wafer fab in Agrate, Italy, establishing a wholly-owned subsidiary, Tower Semiconductor Italy S.r.l[31] - As of now, the COVID-19 pandemic has not had a material adverse effect on the company's financial condition or stability[35] NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note details the company's accounting policies under US GAAP, covering financial statement preparation, estimates, consolidation, asset valuation, equity, and recent accounting pronouncements - The company's consolidated financial statements are presented in accordance with US GAAP[37] - Available-for-sale securities are measured at fair value, with unrealized gains and losses recognized in other comprehensive income[43] - The allowance for expected credit losses on trade receivables was $946 thousand and $1,065 thousand as of December 31, 2021, and December 31, 2020, respectively[49] - Inventories are measured at the lower of cost or net realizable value[50] - As of December 31, 2021, and December 31, 2020, the company identified no impairment of long-lived assets, intangible assets, or goodwill[61][62] - The functional currency for Tower, TSSA, and TSNB is the U.S. dollar, while for TPSCo, it is the Japanese Yen[68] - Share-based compensation cost is recognized based on the grant-date fair value using the graded vesting method[69] - Fair value measurements for financial instruments use a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[71][72][73][74] - Recently adopted accounting standards (ASU 2020-04 and ASU 2019-12) did not have a material impact on the company's financial position, results of operations, or cash flows[79][80] NOTE 3: INVENTORIES This note details the composition of the company's inventories, which totaled $234,512 thousand as of December 31, 2021, representing a 17.8% increase from 2020 Inventories Composition (As of December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | Year-over-Year Change (%) | | :-------------- | :------------------ | :------------------ | :------------- | | Raw Materials | $81,734 | $60,855 | +34.3% | | Work-in-Process | $146,840 | $133,144 | +10.3% | | Finished Goods | $5,938 | $5,127 | +15.8% | | Total | $234,512 | $199,126 | +17.8% | - Work-in-process and finished goods are net of write-downs to net realizable value of $2,775 thousand and $1,946 thousand as of December 31, 2021, and December 31, 2020, respectively[82] NOTE 4: OTHER CURRENT ASSETS This note outlines the composition of other current assets, which significantly increased by 77.9% to $54,817 thousand as of December 31, 2021, primarily due to a rise in prepaid expenses Other Current Assets Composition (As of December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | Year-over-Year Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :------------- | | Taxes Receivable | $5,540 | $5,019 | +10.4% | | Prepaid Expenses | $36,786 | $6,990 | +426.3% | | Receivable from Hedging Transactions | $10,322 | $11,609 | -11.2% | | Insurance Receivable | $0 | $5,949 | -100.0% | | Other Receivables | $2,169 | $1,243 | +74.5% | | Total | $54,817 | $30,810 | +77.9% | NOTE 5: LONG-TERM INVESTMENTS This note details the company's long-term investments, totaling $39,597 thousand as of December 31, 2021, a slight decrease of 2.7% from 2020, mainly due to reduced investments in non-public companies Long-Term Investments Composition (As of December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | Year-over-Year Change (%) | | :-------------------------------- | :------------------ | :------------------ | :------------- | | Severance Pay Fund | $11,942 | $10,472 | +14.0% | | Long-Term Bank Deposits | $12,500 | $12,500 | 0.0% | | Investments in Non-Public Companies | $15,155 | $17,727 | -14.4% | | Total | $39,597 | $40,699 | -2.7% | NOTE 6: PROPERTY AND EQUIPMENT, NET This note details property and equipment, net, which increased by 4.5% to $876,683 thousand as of December 31, 2021, driven by higher machinery and equipment original cost, partially offset by accumulated depreciation Property and Equipment, Net (As of December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | Year-over-Year Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :------------- | | Original Cost: Land and Buildings | $432,069 | $430,258 | +0.4% | | Original Cost: Machinery and Equipment | $3,254,062 | $2,998,019 | +8.5% | | Accumulated Depreciation: Buildings | $(267,942) | $(255,353) | +4.9% | | Accumulated Depreciation: Machinery and Equipment | $(2,541,506) | $(2,333,753) | +8.9% | | Property and Equipment, Net | $876,683 | $839,171 | +4.5% | - Original cost includes right-of-use assets under capital leases of $211,790 thousand and $213,683 thousand as of December 31, 2021, and December 31, 2020, respectively[85] - Original cost of land, buildings, machinery, and equipment is net of investment grants of approximately $285,000 thousand as of December 31, 2021, and December 31, 2020[86] NOTE 7: INTANGIBLE ASSETS, NET This note details intangible assets, net, which increased by 7.8% to $11,820 thousand as of December 31, 2021, primarily driven by an increase in net technology assets Intangible Assets, Net (As of December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | Year-over-Year Change (%) | | :------------------------------ | :------------------ | :------------------ | :------------- | | Technology (Net) | $4,840 | $2,521 | +92.0% | | Facility Lease (Net) | $6,683 | $7,971 | -16.2% | | Customer Relationships (Net) | $297 | $470 | -36.8% | | Total Identifiable Intangible Assets | $11,820 | $10,962 | +7.8% | NOTE 8: DEFERRED TAX AND OTHER LONG-TERM ASSETS, NET This note details deferred tax and other long-term assets, net, which increased by 7.0% to $99,938 thousand as of December 31, 2021, primarily due to a significant rise in long-term prepaid expenses Deferred Tax and Other Long-Term Assets, Net (As of December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | Year-over-Year Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :------------- | | Deferred Tax Assets | $53,526 | $57,802 | -7.4% | | Right-of-Use Assets - Operating Leases | $14,113 | $18,990 | -25.7% | | Fair Value of Cross-Currency Interest Rate Swaps | $4,372 | $10,661 | -59.0% | | Long-Term Prepaid Land Lease, Net | $2,934 | $3,055 | -3.9% | | Long-Term Prepaid Expenses | $24,993 | $2,893 | +763.9% | | Total | $99,938 | $93,401 | +7.0% | NOTE 9: OTHER CURRENT LIABILITIES This note details other current liabilities, which significantly increased by 102.5% to $16,009 thousand as of December 31, 2021, primarily driven by higher taxes payable and payables from hedging transactions Other Current Liabilities Composition (As of December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | Year-over-Year Change (%) | | :-------------------------- | :------------------ | :------------------ | :------------- | | Taxes Payable | $10,272 | $4,935 | +108.1% | | Payable from Hedging Transactions | $3,040 | $0 | Not Applicable | | Accrued Interest on Debt | $588 | $868 | -32.3% | | Other | $2,109 | $2,102 | +0.3% | | Total | $16,009 | $7,905 | +102.5% | NOTE 10: SERIES G DEBENTURES This note details the Series G Debentures, with outstanding principal decreasing from approximately $104,000 thousand in 2020 to $64,000 thousand in 2021, and outlines their terms and repayment schedule Series G Debentures Outstanding Principal (As of December 31) | Year | Amount (thousand USD) | | :--- | :------------ | | 2021 | ~$64,000 | | 2020 | ~$104,000 | - Series G Debentures carry an annual interest rate of 2.79%, are denominated in NIS, and are hedged against exchange rate risk using cross-currency swaps[91] - As of December 31, 2021, the company was in compliance with all financial covenants[92] Series G Debentures Repayment Schedule (As of December 31, 2021) | Detail | 2022 (thousand USD) | 2023 (thousand USD) | Total (thousand USD) | | :------------------ | :------------------ | :------------------ | :------------ | | Series G Debentures | $42,996 | $21,495 | $64,491 | NOTE 11: OTHER LONG-TERM DEBT This note details other long-term debt, which decreased by 5.7% to $209,434 thousand as of December 31, 2021, net of current maturities, and describes various loan and lease agreements Other Long-Term Debt Composition (As of December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | Year-over-Year Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :------------- | | Long-Term JPY Loans - Principal | $95,572 | $106,719 | -10.4% | | Capital Leases and Other Long-Term Liabilities | $141,073 | $162,171 | -13.0% | | Operating Leases | $14,113 | $18,990 | -25.7% | | Less: Current Portion | $(41,324) | $(65,658) | -37.1% | | Total | $209,434 | $222,222 | -5.7% | - TPSCo refinanced existing loans in December 2021, securing a new asset-backed loan of JPY 11 billion (approximately $96,000 thousand) with a fixed annual interest rate of 1.95%, repayable in seven installments from December 2024 to December 2027[97] - As of December 31, 2021, the company's capital lease obligations for fixed assets totaled $139,037 thousand, with $36,282 thousand included in the current portion of long-term debt[102] - Operating lease costs were $7,535 thousand, $7,627 thousand, and $8,045 thousand for 2021, 2020, and 2019, respectively[104] - TSNB has a secured asset-backed revolving credit facility agreement with Wells Fargo for up to $70,000 thousand, maturing in 2023, with no outstanding borrowings as of December 31, 2021, and 2020[106][108] NOTE 12: FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS This note discloses the company's financial instruments, including derivatives, credit risk concentrations, and fair value measurements, categorizing them into a three-level hierarchy - Non-designated exchange rate transactions: a $2,134 thousand asset position for USD/NIS (notional value $67,500 thousand) and a $3,040 thousand liability position for USD/JPY (notional value $164,000 thousand) in 2021[112][114] - Credit risk is concentrated in cash, deposits, marketable securities, derivative instruments, and trade receivables, with an allowance for expected credit losses maintained[115][116] - Designated cash flow hedges for Series G Debentures (cross-currency swaps) generated an operating gain of $542 thousand in 2021, with a net asset fair value of $12,560 thousand[119][120] Fair Value Measurement Hierarchy (As of December 31, 2021) | Detail | Total (thousand USD) | Level 1 (thousand USD) | Level 2 (thousand USD) | Level 3 (thousand USD) | | :------------------------------------------ | :------------------- | :--------------------- | :--------------------- | :--------------------- | | Cross-Currency Swaps - Net Asset Position | $12,560 | $0 | $12,560 | $0 | | Investments in Non-Public Companies | $15,155 | $0 | $0 | $15,155 | | Available-for-Sale Securities | $190,068 | $190,068 | $0 | $0 | | Foreign Exchange Forwards and Options - Net Liability Position | $(906) | $0 | $(906) | $0 | | Total | $216,877 | $190,068 | $11,654 | $15,155 | Available-for-Sale Securities Amortized Cost and Fair Value (As of December 31, 2021) | Detail | Amortized Cost (thousand USD) | Estimated Fair Value (thousand USD) | | :------------------ | :---------------------------- | :-------------------------------- | | Corporate Bonds | $161,491 | $161,633 | | Government Bonds | $27,332 | $26,934 | | Municipal Bonds | $472 | $472 | | Certificates of Deposit | $248 | $253 | | Total | $189,543 | $189,292 | Available-for-Sale Securities Maturity Dates (As of December 31, 2021) | Detail | Amortized Cost (thousand USD) | Estimated Fair Value (thousand USD) | | :---------------- | :---------------------------- | :-------------------------------- | | Due in One Year | $22,547 | $22,637 | | Due in 2-5 Years | $127,576 | $126,510 | | Due After 5 Years | $39,420 | $40,145 | NOTE 13: EMPLOYEE RELATED LIABILITIES This note details employee-related liabilities, including severance pay obligations in Israel and Japan, and post-retirement medical and pension plans for TSNB, which saw actuarial gains in 2021 - Severance pay obligations for Israeli employees are primarily covered by monthly deposits to approved severance and pension funds or insurance policies, with $5,941 thousand paid in 2021[135][136] - TPSCo maintains a defined contribution retirement plan for employees, contributing approximately 8% and 9% of employees' basic salaries in 2021 and 2020, respectively, with total payments of $5,331 thousand in 2021[137] - The TSNB post-retirement medical plan generated a net actuarial gain in 2021 due to an increase in the discount rate from 2.80% to 3.00%[143] - The TSNB pension plan generated a net actuarial gain in 2021 due to an increase in the discount rate from 2.50% to 2.90%, with a funded status of $3,669 thousand at the end of 2021[147][148] - The TSNB pension plan's asset allocation target is 90% debt securities and 10% equity securities[149] NOTE 14: COMMITMENTS AND CONTINGENCIES This note outlines the company's commitments and contingencies, including asset liens, contract renewals, intellectual property agreements, a lease dispute, a 2020 IT security incident, and a new 300mm wafer fab agreement in Italy - The Israeli government holds a floating lien on substantially all of Tower's assets under the Approved Enterprise status program[154] - TPSCo's business relationship with NTCJ (formerly PSCS) has been renewed for three years, and the Arai manufacturing facility in Japan will cease operations on July 1, 2022, with no impairment charges required as of December 31, 2021[155][156] - TSNB's landlord claims a material breach regarding noise abatement and seeks to terminate the lease agreement, which TSNB disputes[158] - An IT security system incident in September 2020 did not have a material impact on the company's financial condition, and the company received cyber insurance compensation[159][161] - TSIT signed a definitive agreement with ST Microelectronics in 2021 to share a new 300mm manufacturing wafer fab in Agrate, Italy, where the company will install its own equipment in one-third of the space[162] NOTE 15: SHAREHOLDERS' EQUITY This note details the company's common stock, share-based compensation plans, treasury stock, and dividend restrictions, including summaries of RSU and option grants and related expenses - As of December 31, 2021, the company had 150 million authorized ordinary shares, with approximately 109 million shares issued, each carrying equal voting rights[164] - The 2013 Share Incentive Plan grants options and RSUs to directors, officers, employees, and third-party service providers[166] RSU Grants (For the Year Ended December 31) | Detail | 2021 (Number of Shares) | 2020 (Number of Shares) | 2019 (Number of Shares) | | :-------------------------- | :-------------- | :-------------- | :-------------- | | Unexercised at Beginning of Year | 2,223,043 | 2,013,613 | 1,599,296 | | Granted | 1,002,275 | 1,105,155 | 1,159,881 | | Converted | (929,466) | (806,993) | (484,665) | | Forfeited | (84,752) | (88,732) | (260,899) | | Unexercised at End of Year | 2,211,100 | 2,223,043 | 2,013,613 | Share-Based Compensation Expense (For the Year Ended December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | 2019 (thousand USD) | | :-------------------------------- | :------------------ | :------------------ | :------------------ | | Cost of Revenues | $7,003 | $5,197 | $4,529 | | Research and Development Expenses, Net | $4,855 | $3,568 | $2,900 | | Selling, General and Administrative Expenses | $13,286 | $8,223 | $7,119 | | Total Share-Based Compensation Expense | $25,144 | $16,988 | $14,548 | - Dividend distributions are restricted under the Series G Debentures indenture, subject to meeting specific financial ratios[181] NOTE 16: INFORMATION ON GEOGRAPHIC AREAS AND MAJOR CUSTOMERS This note provides revenue and long-term asset information by geographic area and identifies major customers contributing significantly to net trade receivables and total revenue Revenue by Geographic Area (Percentage of Total Revenue, For the Year Ended December 31) | Detail | 2021 | 2020 | 2019 | | :-------------------- | :--- | :--- | :--- | | United States | 41% | 44% | 52% | | Japan | 22% | 28% | 29% | | Asia (excluding Japan) | 30% | 22% | 15% | | Europe | 7% | 6% | 4% | | Total | 100% | 100% | 100% | Long-Term Assets by Geographic Area (As of December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | Year-over-Year Change (%) | | :-------------- | :------------------ | :------------------ | :------------- | | Israel | $238,758 | $215,006 | +11.0% | | United States | $264,038 | $234,902 | +12.4% | | Japan | $373,887 | $389,263 | -3.9% | | Total | $876,683 | $839,171 | +4.5% | - As of December 31, 2021, one customer accounted for over 10% (14%) of net trade receivables; in 2020, two customers accounted for over 10% (13% and 12% respectively)[185] Major Customer Revenue (Percentage of Total Revenue, For the Year Ended December 31) | Detail | 2021 | 2020 | 2019 | | :---------- | :--- | :--- | :--- | | Customer A | 21% | 25% | 27% | | Customer B | 13% | 11% | 7% | | Other Customers | 20% | 24% | 26% | NOTE 17: FINANCING INCOME (EXPENSE), NET This note details financing income (expense), net, which shifted from a $2,870 thousand income in 2020 to a $12,873 thousand expense in 2021, primarily due to negative foreign exchange rate differences and increased bank fees Financing Income (Expense), Net (For the Year Ended December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | 2019 (thousand USD) | | :-------------------------------------------------- | :------------------ | :------------------ | :------------------ | | Interest Expense | $(7,312) | $(6,755) | $(6,823) | | Interest Income | $5,368 | $8,484 | $12,949 | | Amortization of Series G Debentures, Related Exchange Rate Differences and Hedging Results | $(1,773) | $(3,045) | $(3,299) | | Exchange Rate Differences and Related Hedging Results | $(7,092) | $5,509 | $(1,271) | | Bank Fees and Other | $(2,064) | $(1,323) | $(1,544) | | Total | $(12,873) | $2,870 | $12 | NOTE 18: RELATED PARTIES BALANCES AND TRANSACTIONS This note discloses related party balances and transactions, including long-term equity investments in limited partnerships and general and administrative expenses for directors' fees Related Party Balances (As of December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | | :---------------------- | :------------------ | :------------------ | | Long-Term Investments | $57 | $57 | Related Party Transactions (For the Year Ended December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | 2019 (thousand USD) | | :------------------------------------------ | :------------------ | :------------------ | :------------------ | | General and Administrative Expenses (Directors' Fees) | $771 | $787 | $783 | | Other Income (Expense), Net (Non-Controlling Interests) | $0 | $2 | $(55) | NOTE 19: INCOME TAXES This note details the company's income tax provisions, including statutory tax rates, deferred tax assets and liabilities, unrecognized tax benefits, effective tax rates, and net operating loss carryforwards - Under the Israeli Law for the Encouragement of Capital Investments, Tower's entire preferred income is subject to a 7.5% tax rate under the Preferred Enterprise regime[191] Income Tax Provision (For the Year Ended December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | 2019 (thousand USD) | | :-------------------------------- | :------------------ | :------------------ | :------------------ | | Current Tax Expense: Foreign | $13,504 | $2,232 | $1,013 | | Deferred Tax Expense (Benefit): Domestic | $2,518 | $8,481 | $7,098 | | Deferred Tax Expense (Benefit): Foreign | $(14,998) | $(5,314) | $(5,163) | | Income Tax Expense | $1,024 | $5,399 | $2,948 | Deferred Tax Assets and Liabilities Composition (As of December 31) | Detail | 2021 (thousand USD) | 2020 (thousand USD) | | :------------------------------------------ | :------------------ | :------------------ | | Deferred Tax Assets | $103,541 | $93,670 | | Deferred Tax Liabilities | $(73,792) | $(77,154) | | Presented as Long-Term Deferred Tax Assets | $53,526 | $57,802 | | Presented as Long-Term Deferred Tax Liabilities | $(23,777) | $(41,286) | - As of December 31, 2021, Tower has approximately $800,000 thousand in net operating losses that can be carried forward indefinitely[199] - As of December 31, 2021, Tower US Holdings has approximately $83,000 thousand in federal net operating loss carryforwards, with about $66,000 thousand having no expiration date but subject to an 80% taxable income limitation, and the remaining $17,000 thousand beginning to expire in 2022[202] - In 2020, Tower US Holdings received $2,100 thousand in federal net operating loss carryback refunds and $1,100 thousand in minimum tax credit refunds under the CARES Act[206] NOTE 20: SUBSEQUENT EVENTS This note describes subsequent events, specifically Intel Corporation's announcement on February 15, 2022, to acquire Tower for $53 per share in cash, pending regulatory and shareholder approvals - On February 15, 2022, Intel Corporation announced a definitive agreement to acquire all of Tower's approximately 109 million outstanding ordinary shares for a cash consideration of $53 per share[209] - The transaction has been approved by the boards of directors of both Intel and Tower but remains subject to customary closing conditions, including regulatory and Tower shareholder approvals[209]