Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates, customer concentrations, and interest rates. We do not hold or issue financial instruments for trading purposes.
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Foreign Currency Exchange Risk
Approximately 48.7%, 52.2% and 54.3% of our revenues for the years ended December 31, 2019, 2020 and 2021, respectively, were earned in non U.S. dollar denominated currencies, principally the Euro. Our expenses are generally denominated in the currencies in which our operations are located, primarily the U.S. dollar and New Israeli Shekel ("NIS"), Euro, and to a lesser extent, the South Korean Won ("KRW"). Our NIS denominated expenses consist primarily of personnel and overhead costs. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. A hypothetical 10% change in foreign currency exchange rates between the Euro and the U.S. dollar would increase or decrease our net income by $68.1 million for the year ended December 31, 2021. A hypothetical 10% change in foreign currency exchange rates between the NIS and the U.S. dollar would increase or decrease our net income by $24.4 million for the year ended December 31, 2021. A hypothetical 10% change in foreign currency exchange rates during the year ended December 31, 2021, between the KRW and the U.S. dollar would increase or decrease our net income by $19.6 million for the year ended December 31, 2021.
For purposes of our consolidated financial statements, local currency assets and liabilities are translated at the rate of exchange to the U.S. dollar on the balance sheet date and local currency revenues and expenses are translated at the exchange rate as of the date of the transaction or at the average exchange rate to the U.S. dollar during the reporting period.
To date, we have used derivative financial instruments, specifically foreign currency forward contracts, to manage exposure to foreign currency risks by hedging portions of the anticipated payroll payments denominated in NIS. Our foreign currency forward contracts are expected to mitigate exchange rate changes related to the hedged assets. Those hedging contracts are designated as cash flow hedges.
In addition, we also entered into derivative instrument arrangements to hedge the Company’s exposure to currencies other than the U.S. dollar, mainly put and call options to sell Euro for U.S. dollars, forward contracts to sell AUD for U.S. dollars, forward contracts to sell Euro for U.S. dollars and forward contracts to sell U.S. dollars for KRW. These derivative instruments are not designated as cash flow hedges.
We had cash, cash equivalents and restricted cash of $827.1 million and $530.1 million at the end of the year ending December 31, 2020 and the year ended December 31, 2021, respectively, which was held for working capital purposes. We had available-for-sale marketable securities with an estimated fair value of 291.1 million and 650.0 million on December 31, 2020 and December 31, 2021, respectively. In addition, we had bank deposits of $60.1 million as of December 31, 2020. We had restricted bank deposits of $2.6 million and $1.9 million as of December 31, 2020 and December 31, 2021, respectively.
Additionally, our hedging activities may also contribute to increased losses as a result of volatility in foreign currency markets. If foreign exchange currency markets continue to be volatile, such fluctuations in foreign currency exchange rates could materially and adversely affect our profit margins and results of operations in future periods. Also, the volatility in the foreign currency markets may make it difficult to hedge our foreign currency exposures effectively.
Concentrations of Major Customers
Our trade accounts receivables potentially expose us to a concentration of credit risk with our major customers. For the year ended December 31, 2021, two major customers accounted for 30.9% of our total revenues, and as of December 31, 2021, two major customers accounted for approximately 39.3% of our consolidated trade receivables balance. For the year ended December 31, 2020, one major customer accounted for 14.8% of total revenues, and as of December 31, 2020, two major customers accounted for approximately 34.6% of our consolidated trade receivables balance. We currently do not foresee a credit risk associated with these receivables.
Commodity Price Risk
We are subject to risk from fluctuating market prices of certain commodity raw materials, including copper, which are used in our products. Prices of these raw materials may be affected by supply restrictions or other market factors from time to time, and we do not enter into hedging arrangements to mitigate commodity risk. Significant price changes for these raw materials could reduce our operating margins if we are unable to recover such increases from our customers, and could harm our business, financial condition, and results of operations.
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