================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 6-K
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REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
REPORT ON FORM 6-K DATED NOVEMBER 18, 2009
Commission File Number: 000-51183
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SHAMIR OPTICAL INDUSTRY LTD.
(Translation of Registrant's Name Into English)
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Kibbutz Shamir, Upper Galilee, 12135
(Address of principal executive offices)
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(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F).
Form 20-F [X] Form 40-F [_]
(Indicate by check whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934).
Yes [_] No [X]
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b);82-_______)
This report on Form 6-K is hereby incorporated by reference into the
registration statements on Form S-8 filed by the Registrant with the Securities
and Exchange Commission on September 28, 2006 (File No. 333-137628), on
September 10, 2007 (File No. 333-137628) and on September 10, 2008 (File No.
333-153396).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Shamir Optical Industry Ltd.
(Registrant)
Date: November 18, 2009
By: /s/ David Bar-Yosef
------------------------------
David Bar-Yosef, Advocate
General Counsel
SHAMIR OPTICAL INDUSTRY LTD.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2009
IN U.S. DOLLARS
UNAUDITED
INDEX
PAGE
----
INTERIM CONSOLIDATED BALANCE SHEETS 2 - 3
INTERIM CONSOLIDATED STATEMENTS OF INCOME 4
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 5
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS 6 - 8
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 9 - 18
SHAMIR OPTICAL INDUSTRY LTD.
INTERIM CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS
DECEMBER 31, JUNE 30,
2008 2009
-------- --------
UNAUDITED
--------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 18,276 $ 12,862
Short-term investments 7,187 14,499
Trade receivables (net of allowance for doubtful accounts of $ 2,066 and
$ 2,451 at December 31, 2008 and June 30, 2009, respectively) 30,331 34,469
Other accounts receivable and prepaid expenses 8,469 8,150
Inventory 26,063 25,395
-------- --------
TOTAL current assets 90,326 95,375
-------- --------
LONG-TERM INVESTMENTS:
Severance pay fund 2,584 2,703
Long-term receivables 813 417
Investments in affiliates and others 2,085 2,661
-------- --------
TOTAL long-term investments 5,482 5,781
-------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 38,617 36,518
-------- --------
OTHER ASSETS 5,902 5,334
-------- --------
GOODWILL 9,169 9,583
-------- --------
TOTAL assets $149,496 $152,591
======== ========
The accompanying notes are an integral part of the interim consolidated
financial statements.
2
SHAMIR OPTICAL INDUSTRY LTD.
INTERIM CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, JUNE 30,
2008 2009
--------- ---------
UNAUDITED
---------
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term bank credit and loans $ 11,597 $ 10,185
Current maturities of long-term loans and capital leases 10,403 6,398
Trade payables 8,876 11,984
Accrued expenses and other liabilities 11,680 13,158
--------- ---------
TOTAL current liabilities 42,556 41,725
--------- ---------
LONG-TERM LIABILITIES:
Long-term loans 9,800 7,270
Capital leases 3,393 2,846
Accrued severance pay 3,172 3,179
Other long-term liabilities 634 547
Deferred tax liabilities 1,922 1,754
--------- ---------
TOTAL long-term liabilities 18,921 15,596
--------- ---------
EQUITY:
Shamir Optical Industry Ltd.'s shareholders' equity:
Share capital -
Ordinary shares of NIS 0.01 par value -
Authorized: 100,000,000 shares at December 31, 2008 and June 30, 2009;
Issued and outstanding: 16,423,740 shares at December 31,2008
and June 30, 2009 37 37
Additional paid-in capital 67,362 67,674
Accumulated other comprehensive income (2,637) (1,890)
Retained earnings 22,007 27,825
--------- ---------
Total Shamir Optical Industry Ltd. shareholders' equity: 86,769 93,646
--------- ---------
Non-controlling interests 1,250 1,624
--------- ---------
TOTAL equity 88,019 95,270
--------- ---------
TOTAL liabilities and equity $ 149,496 $ 152,591
========= =========
The accompanying notes are an integral part of the interim consolidated
financial statements.
3
SHAMIR OPTICAL INDUSTRY LTD.
INTERIM CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2008 2009 2008 2009
----------- ----------- ----------- -----------
UNAUDITED
-------------------------------------------------------------
Revenues, net $ 37,055 $ 35,234 $ 75,053 $ 69,154
Cost of revenues 16,949 16,273 34,174 32,338
----------- ----------- ----------- -----------
Gross profit 20,106 18,961 40,879 36,816
----------- ----------- ----------- -----------
Operating expenses:
Research and development 865 789 1,739 1,530
Selling and marketing 11,388 10,283 23,055 20,148
General and administrative 4,593 3,815 8,575 7,195
----------- ----------- ----------- -----------
Total operating expenses 16,846 14,887 33,369 28,873
----------- ----------- ----------- -----------
Operating income 3,260 4,074 7,510 7,943
Financial income (expenses) and other, net (426) 931 (500) 98
----------- ----------- ----------- -----------
Income before taxes on income 2,834 5,005 7,010 8,041
Taxes on income 127 1,184 1,684 2,051
----------- ----------- ----------- -----------
Income after taxes on income 2,707 3,821 5,326 5,990
Equity in gains of affiliates, net 15 34 25 61
----------- ----------- ----------- -----------
Net income $ 2,722 $ 3,855 $ 5,351 $ 6,051
=========== =========== =========== ===========
Net income (loss) attributable to
non-controlling interests 101 159 (162) 233
----------- ----------- ----------- -----------
Net income attributable to Shamir Optical
Industry Ltd. $ 2,621 $ 3,696 $ 5,513 $ 5,818
=========== =========== =========== ===========
Net earnings per share:
Basic $ 0.16 $ 0.23 $ 0.34 $ 0.35
=========== =========== =========== ===========
Diluted $ 0.16 $ 0.22 $ 0.33 $ 0.35
=========== =========== =========== ===========
The accompanying notes are an integral part of the interim consolidated
financial statements.
4
SHAMIR OPTICAL INDUSTRY LTD.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)
ACCUMULATED
ADDITIONAL OTHER TOTAL
NUMBER SHARE PAID-IN COMPREHENSIVE RETAINED COMPREHENSIVE NON-CONTROLLING TOTAL
OF SHARES CAPITAL CAPITAL INCOME EARNINGS INCOME INTERESTS EQUITY
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
SIX MONTHS ENDED JUNE 30, 2008
Balance as of January 1, 2008 16,423,740 $ 37 $ 66,629 $*)1,628 $ 16,929 $ 800 $ 86,023
Stock based compensation related to options granted
to employees - - 548 - - - 548
Dividend declared and paid ($0.243 per share) - - - - (4,000) - (4,000)
Distribution of earnings to non-controlling interests - - - - - (25) (25)
Non-controlling interest related to the acquisition of
CIO - - - - - 702 702
Comprehensive income:
Foreign currency translation adjustments - - - 342 - $ 342 (201) 141
Unrealized gain on short-term investments, net
of tax - - - 6 - 6 - 6
Net income - - - - 5,513 5,513 (162) 5,351
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total comprehensive income $ 5,861
==========
Balance as of June 30, 2008 16,423,740 $ 37 $ 67,177 $*)1,976 $ 18,442 $ 1,114 $ 88,746
========== ========== ========== ========== ========== ========== ==========
ACCUMULATED
ADDITIONAL OTHER TOTAL
NUMBER SHARE PAID-IN COMPREHENSIVE RETAINED COMPREHENSIVE NON-CONTROLLING TOTAL
OF SHARES CAPITAL CAPITAL INCOME EARNINGS INCOME INTERESTS EQUITY
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
SIX MONTHS ENDED JUNE 30, 2009
Balance as of January 1, 2009 16,423,740 $ 37 $ 67,362 $*)(2,637) $ 22,007 $ 1,250 $ 88,019
Stock based compensation related to options granted
to employees - - 312 - - - 312
Distribution of earnings to non-controlling interests - - - - - (37) (37)
Comprehensive income:
Foreign currency translation adjustments - - - 695 - $ 695 178 873
Unrealized gain on short-term investments, net
of tax - - - 52 - 52 - 52
Net income - - - - 5,818 5,818 233 6,051
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total comprehensive income $ 6,565
==========
Balance as of June 30, 2009 16,423,740 $ 37 $ 67,674 $*)(1,890) $ 27,825 $ 1,624 $ 95,270
========== ========== ========== ========== ========== ========== ==========
*) Represent an amount of $ 1,597, $ 1,939, $ (2,633) and $ (1,939) foreign
currency translation adjustment as of January 1, 2008, June 30, 2008,
January 1, 2009 and June 30, 2009, respectively, and $ 31, $ 37, $ (4) and
$ 49 gain (loss) on short-term investment, net of tax, as of January 1,
2008, June 30, 2008, January 1, 2009 and June 30, 2009, respectively.
The accompanying notes are an integral part of the interim consolidated financial statements.
5
SHAMIR OPTICAL INDUSTRY LTD.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)
SIX MONTHS ENDED JUNE 30,
----------------------
2008 2009
------- --------
UNAUDITED
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income, including income from the non-controlling interests $ 5,351 $ 6,051
Adjustments required to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 4,595 4,017
Stock based compensation 548 312
Increase (decrease) in accrued severance pay, net 282 (109)
Currency fluctuations of long-term loans 31 (6)
Increase in deferred tax assets, net (523) (233)
Equity in gains of affiliates, net (25) (61)
Changes in interest receivable on short-term investments 114 20
Foreign currency translation gains (159) (663)
Increase in trade receivables (1,560) (4,088)
Decrease (increase) in other receivables and prepaid expenses and long-term
receivables (1,203) 1,505
Decrease (increase) in inventory (3,226) 907
Increase in trade payables 2,653 3,040
Increase (decrease) in accrued expenses and other liabilities and other long-term
liabilities (463) 1,910
Others 56 (12)
------- --------
Net cash provided by operating activities 6,471 12,590
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans granted to affiliates - (65)
Investment in affiliates - (331)
Acquisition of CIO and Shalens (a) (2,687) -
Additional consideration on SII prior acquisitions (355) (357)
Purchase of intangible assets (100) (100)
Purchase of property, plant and equipment (3,801) (1,365)
Proceeds from sale of property and equipment 184 53
Repayment of loan by related party 45 -
Purchase of short-term investments - (12,374)
Proceeds from sale of short-term investments 7,830 5,112
------- --------
Net cash provided by (used in) investing activities 1,116 (9,427)
------- --------
The accompanying notes are an integral part of the interim consolidated
financial statements.
6
SHAMIR OPTICAL INDUSTRY LTD.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)
SIX MONTHS ENDED
JUNE 30,
----------------------
2008 2009
-------- --------
UNAUDITED
----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend paid (4,000) -
Short-term bank credit and loans, net 1,291 (1,452)
Receipt of long-term loans 1,469 -
Repayment of long-term loans (2,904) (6,162)
Repayment of long-term loans in capital lease (1,054) (1,142)
-------- --------
Net cash provided used in financing activities (5,198) (8,756)
-------- --------
Effect of exchange rate differences on cash and cash equivalents 272 179
-------- --------
Increase (decrease) in cash and cash equivalents 2,661 (5,414)
Cash and cash equivalents at beginning of year 18,953 18,276
-------- --------
Cash and cash equivalents at end of the period $ 21,614 $ 12,862
======== ========
SUPPLEMENTAL INFORMATION AND DISCLOSURES OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Purchase of property, plant and equipment in capital lease $ 720 $ -
======== ========
Consideration on SII additional acquisition $ 95 $ 99
======== ========
The accompanying notes are an integral part of the interim consolidated
financial statements.
7
SHAMIR OPTICAL INDUSTRY LTD.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)
SIX MONTHS ENDED
JUNE 30,
-------------------
2008 2009
------- -------
UNAUDITED
-------------------
(a) ACQUISITION OF CENTRO INTEGRAL OPTICO S.A. DE C.V.("CIO") AND SHALENS S.A.
DE C.V. ("SHALENS")
Fair value of assets acquired and liabilities assumed at the acquisition date:
Working capital (excluding cash and cash equivalents) $ 1,814
Long-term deferred tax assets 105
Property and equipment 2,144
Other intangible assets 2,208
Goodwill 2,865
Long-term loans and other long-term liabilities (2,076)
Long-term deferred tax liabilities (713)
-------
Net assets acquired 6,347
Investment in CIO and Shalens prior to acquisition that was accounted for by
the equity method and shareholder's loans (2,958)
Non-controlling interest (702)
-------
$ 2,687
=======
The accompanying notes are an integral part of the interim consolidated
financial statements.
8
SHAMIR OPTICAL INDUSTRY LTD.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NOTE 1:- GENERAL
The financial information in this interim report includes the results of
Shamir Optical Industry Ltd. (the "Company"), and its subsidiaries. The
Company was incorporated under the laws of the State of Israel in the early
1970s. The Company and its subsidiaries (collectively - "Shamir") design,
develop, manufacture and market optical lenses and molds. As of June 30,
2009, Shamir had 17 subsidiaries all over the world. Some of the
subsidiaries engage in production of Shamir products, some are optical
laboratories that process lenses for the opticians, and some engage in
marketing and distributing the products.
Most of the raw materials used in the manufacture of lenses, including
Shamir's products, are available from a limited number of suppliers. Shamir
purchases its raw materials from some of these suppliers. In addition, a
certain part of the production process of Shamir's lenses is supplied by a
limited number of world wide sub-contractors. The loss of any one of these
suppliers or sub-contractors, or a significant decrease in the supply of
glass blanks or monomers or services, would require Shamir to obtain these
raw materials or services elsewhere. If Shamir is unable to obtain glass
blanks monomers or services from its suppliers (or alternative suppliers)
or sub-contractors at acceptable prices, Shamir may realize lower margins
and experience difficulty in meeting its customers' requirements.
NOTE 2:- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include
all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included. Operating results for the three and
six months ended June 30, 2009, are not necessarily indicative of the
results that may be expected for the year ending December 31, 2009.
b. The interim consolidated financial statements incorporate the
financial statements of the Company and all of its subsidiaries. All
significant intercompany balances and transactions have been
eliminated on consolidation.
c. The significant accounting policies applied in the annual consolidated
financial statements of the Company as of December 31, 2008, contained
in the Company's Annual Report on Form 20-F filed with the Securities
and Exchange Commission on June 18, 2009, have been applied
consistently in these unaudited interim consolidated financial
statements.
d. The Company has evaluated all subsequent events after the balance
sheet date of June 30, 2009 through November 18, 2009, the date of
financial statement issuance.
9
SHAMIR OPTICAL INDUSTRY LTD.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NOTE 3:- ADOPTION OF NEW ACCOUNTING STANDARDS
In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" ("SFAS 141R"), which replaces SFAS No. 141. SFAS 141R
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any non-controlling interest in the acquiree and the
goodwill acquired. SFAS 141R also establishes disclosure requirements which
will enable users to evaluate the nature and financial effects of the
business combination. The company adopted SFAS 141R on January 1, 2009. The
Company believes that the adoption of SFAS 141R could have an impact on its
consolidated financial statements; however, the impact would depend on the
nature, terms and magnitude of future acquisitions.
In December 2007, the FASB issued SFAS 160, "Noncontrolling Interests in
Consolidated Financial Statements" ("SFAS 160"). SFAS 160 amends ARB 51,
"Consolidated Financial Statements", to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It also clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated
entity that should be reported as equity in the consolidated financial
statements. SFAS 160 also changes the way the consolidated income statement
is presented by requiring consolidated net income to be reported at amounts
that include the amounts attributable to both the parent and the
noncontrolling interest. It also requires disclosure, on the face of the
consolidated statement of income, of the amounts of consolidated net income
attributable to the parent and to the noncontrolling interest. SFAS 160
requires that a parent recognize a gain or loss in net income when a
subsidiary is deconsolidated and requires expanded disclosures in the
consolidated financial statements that clearly identify and distinguish
between the interests of the parent owners and the interests of the
noncontrolling owners of a subsidiary. The Company adopted SFAS 160 on
January 1, 2009. The adoption of SFAS 160 did not have a material effect on
accounting for current subsidiaries, but it did affect the disclosure in
the Company's consolidated financial statements.
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS
165"). SFAS 165 is intended to establish general standards of accounting
for, and disclosure of, events that occur after the balance sheet date but
before financial statements are issued or are available to be issued. It
requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for selecting that date, that is, whether
that date represents the date the financial statements were issued or were
available to be issued. The Company adopted SFAS on April 1, 2009. See Note
2d.
10
SHAMIR OPTICAL INDUSTRY LTD.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NOTE 4:- ACQUISITIONS
Acquisition of CIO and Shalens:
On August 15, 2006, a Share Acquisition Agreement was made, by and between
CIO and Shalens, Mexican sister companies, their shareholders and Shamir.
Shamir acquired a 26% stake in CIO and Shalens. In addition, as part of the
Share Acquisition Agreement, Shamir was granted an option to increase its
stake by an additional 25% to a total of 51%. On February 20, 2008, Shamir
exercised its option and acquired an additional stake of 25% in CIO and
Shalens for a consideration of $ 2,860.
The acquisition was accounted for by the purchase method and accordingly,
the purchase price had been allocated to the estimated fair value of the
assets acquired and liabilities assumed of CIO and Shalens, with the
remaining representing goodwill. The results of CIO and Shalens operations
have been included in the consolidated financial statements of Shamir
commencing February 20, 2008.
With the acquisition of CIO and Shalens, Shamir expanded its presence in
the Mexican optical market.
Based upon a valuation, the following table summarizes the fair values of
the assets acquired and liabilities assumed as of the acquisition date:
Current assets $ 3,991
Property and equipment 2,144
Long-term deferred tax assets 105
Customer relationships 2,208
Goodwill 2,865
--------
Total assets acquired 11,313
--------
Current liabilities (1,931)
Long-term loans and other liabilities (2,149)
Long-term deferred tax liability (713)
--------
Total liabilities assumed (4,793)
--------
Net assets acquired 6,520
--------
Investments in CIO and Shalens prior to acquisition that was accounted
for by the equity method and shareholder's loans (2,958)
Minority interests (702)
--------
Total Purchase Price $ 2,860
========
Customer relationships in the amount of $ 2,208 (including $ 1,081
amortized cost of customer relationships allocated at the acquisition of
the first 26% stake in CIO) with definite live are amortized using the
straight-line method at an average annual rate of approximately 10%.
Pro-forma information was not provided due to immateriality.
11
SHAMIR OPTICAL INDUSTRY LTD.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NOTE 5:- FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company adopted the provisions of SFAS No. 157, "Fair Value
Measurements" ("SFAS No. 157") effective January 1, 2008. Under this
standard, fair value is defined as the price that would be received upon
selling of an asset or paid to transfer a liability (i.e., the "exit
price") in an orderly transaction between market participants at the
measurement date.
In determining fair value, the Company uses various valuation approaches.
SFAS No. 157 establishes a hierarchy for inputs used in measuring fair
value that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring that the most observable inputs be used
when available. Observable inputs are inputs that market participants would
use in pricing the asset or liability developed based on market data
obtained from sources independent of the Company. Unobservable inputs are
inputs that reflect the Company's assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on
the best information available in the circumstances.
The hierarchy is broken down into three levels based on the observability
of inputs as follows:
o Level 1 - Valuations based on quoted prices in active markets for
identical assets that the Company has the ability to access. Valuation
adjustments and block discounts are not applied to Level 1
instruments. Since valuations are based on quoted prices that are
readily and regularly available in an active market, valuation of
these products does not entail a significant degree of judgment
o Level 2 - Valuations based on one or more quoted prices in markets
that are not active or for which all significant inputs are
observable, either directly or indirectly.
o Level 3 - Valuations based on inputs that are unobservable and
significant to the overall fair value measurement.
The availability of observable inputs can vary from investment to
investment and is affected by a wide variety of factors, including, for
example, the type of investment, the liquidity of markets and other
characteristics particular to the transaction.
The Company's marketable securities are traded in markets that are not
considered to be active, but are valued based on quoted market prices,
broker or dealer quotations, or alternative pricing sources with reasonable
levels of price transparency and accordingly are categorized as Level 2.
Please refer to note 6 for additional information.
Foreign currency and interest rate derivative contracts are classified
within Level 2 as the valuation inputs are based on quoted prices and
market observable data of similar instruments. Please refer to note 7 for
additional information.
The following table presents the Company's assets and liabilities measured
at fair value on a recurring basis at June 30, 2009:
FAIR VALUE MEASUREMENTS USING INPUT TYPE
------------------------------------------------------
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------- -------- -------- --------
UNAUDITED
------------------------------------------------------
MARKETABLE SECURITIES:
Corporate debentures $ - $ 6,928 $ - $ 6,928
U.S. Treasury - 1,001 - 1,001
Non-U.S. governments bonds - 2,493 - 2,493
DERIVATIVES:
Foreign currencies assets - 352 - 352
Foreign currencies liabilities - (17) - (17)
Interest rates - (285) - (285)
-------- -------- -------- --------
Total $ - $ 10,472 $ - $ 10,472
======== ======== ======== ========
12
SHAMIR OPTICAL INDUSTRY LTD.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NOTE 5:- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONT.)
The carrying amounts of financial instruments carried at cost, including
cash and cash equivalents, short-term deposits, trade receivables, other
current assets, trade payables and other liabilities approximate their fair
value due to the short-term maturities of such instruments.
NOTE 6:- SHORT-TERM INVESTMENTS
a. The following is a summary of the Shamir's short-term investments:
DECEMBER 31, JUNE 30,
2008 2009
------- -------
UNAUDITED
-------
Matures in one year $ 1,000 $ 4,014
Matures after one year through five years 6,187 10,485
------- -------
Total $ 7,187 $14,499
======= =======
b. The following is a summary of the Shamir's investments in marketable
securities:
JUNE 30, 2009
-----------------------------------
NET FAIR
AMORTIZED UNREALIZED MARKET
COST GAIN VALUE
------- ------- -------
UNAUDITED
-----------------------------------
AVAILABLE-FOR-SALE:
Corporate debentures $ 6,881 $ 47 $ 6,928
U.S. treasury 1,000 1 1,001
Non-U.S. governments bonds 2,477 16 2,493
------- ------- -------
Total $10,358 $ 64 10,422
======= =======
Accrued interest 63
-------
$10,485
=======
As of June 30, 2009, the gross unrealized gains amounted to $ 83 and
the gross unrealized losses amounted to $ 19.
c. The amortized cost and fair value of marketable securities as of June
30, 2009, by contractual maturity, are shown below:
JUNE 30, 2009
---------------------
AMORTIZED FAIR
COST MARKET VALUE
------- -------
UNAUDITED
---------------------
Matures in one year $ 1,500 $ 1,508
Matures after one year through five years 8,858 8,914
------- -------
Total $10,358 $10,422
======= =======
13
SHAMIR OPTICAL INDUSTRY LTD.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NOTE 7:- DERIVATIVES
On January 1, 2009, Shamir adopted SFAS 161, Disclosures about Derivative
Instruments and Hedging Activities - An Amendment of FASB Statement No.
133. The standard supplements the required disclosures provided under SFAS
133, Accounting for Derivative Instruments and Hedging Activities, as
amended, with additional qualitative and quantitative information.
Shamir from time to time enters into forward contracts and option
strategies (together: "derivative instruments") intended to protect against
changes in foreign currencies. Shamir has also entered into interest rate
swaps. The derivative instruments were not qualified for hedge accounting
under SFAS No. 133. All the derivatives are recognized on the balance-sheet
at their fair value, with changes in the fair value carried to the
statements of income and included in financial and other expenses, net.
NOTE 8:- INVENTORY
Inventories are composed of the following:
DECEMBER 31, JUNE 30,
2008 2009
------- -------
UNAUDITED
-------
Raw materials $ 4,765 $ 4,802
Work-in-progress 815 234
Finished goods 20,483 20,359
------- -------
$26,063 $25,395
======= =======
NOTE 9:- GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA
a. Shamir manages its business on the basis of one reportable segment.
The data is presented in accordance with SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information". Total
revenues are attributed to geographic areas based on the location of
end customers.
b. The following table presents total revenues for the six months ended
June 30, 2008 and 2009, and long-lived assets as of December 31, 2008,
and June 30, 2009, as follows:
TOTAL REVENUES LONG LIVED ASSETS
--------------------- ---------------------
SIX MONTHS ENDED JUNE 30,
------- ------- DECEMBER 31, JUNE 30,
2008 2009 2008 2009
------- ------- ------- -------
Israel $ 1,342 $ 1,994 $19,344 $18,232
United States 21,533 20,902 5,387 5,291
Europe 38,899 33,644 21,254 20,233
Asia 5,382 4,905 - -
Others 7,897 7,709 5,851 6,018
------- ------- ------- -------
$75,053 $69,154 $51,836 $49,774
======= ======= ======= =======
14
SHAMIR OPTICAL INDUSTRY LTD.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NOTE 9:- GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA (CONT.)
c. Product lines:
Total revenues from external customers divided on the basis of
Shamir's product lines are as follows:
SIX MONTHS ENDED
JUNE 30,
---------------------
2008 2009
------- -------
Lenses $72,570 $66,938
Design services 2,483 2,216
------- -------
$75,053 $69,154
======= =======
d. Major customer data as a percentage of total revenues:
Customer A 13.4% 17.2%
======= =======
NOTE 10: NET EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net
earnings per share:
a. Numerator:
SIX MONTHS ENDED JUNE 30,
--------------------
2008 2009
------- -------
Numerator for basic and diluted net earnings per share -
Net income available to shareholders $ 5,513 $ 5,818
======= =======
b. Denominator (in thousands):
Denominator for basic net earnings per share -
Weighted average shares - Shareholders' equity 16,424 16,424
------- -------
Weighted average number of shares 16,424 16,424
------- -------
Effect of dilutive securities:
Add - Employee stock options 111 51
------- -------
Denominator for diluted net earnings per share - adjusted
weighted average shares 16,535 16,475
======= =======
15
SHAMIR OPTICAL INDUSTRY LTD.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NOTE 11:- CONTINGENCIES
Legal proceedings:
From time to time, Shamir may be involved in lawsuits, claims,
investigations or other legal or arbitral proceedings that arise in the
ordinary course of business. These proceedings may include general
commercial disputes and claims regarding intellectual property or labor
disputes with former employees. Shamir is involved in one dispute
concerning allegations of breach of third parties' patents, as described
below.
In September 2003, Shamir received a notice from a large lens manufacturer
regarding a claim of patent infringement relating to lens produced using
Shamir software. Shamir has denied any such infringement, and numerous
discussions between the companies (and counsel) ensued in order to resolve
the matter without resorting to litigation.
In January 2008, Shamir received a notice from a shareholder of one of its
subsidiaries claiming unlawful use of the subsidiaries' intellectual
property and unjust enrichment. Shamir denied any such infringement, and
numerous discussions between the parties (and counsel) ensued in order to
resolve the matter without resorting to litigation. Shamir currently cannot
predict the development or ultimate outcome of the discussions with regard
to these claims.
NOTE 12:- INVESTMENTS IN AFFILIATES AND OTHERS
a. Affiliated companies are as follows:
DECEMBER 31, JUNE 30,
2008 2009
------- -------
PERCENTAGE OF OWNERSHIP OF
OUTSTANDING SHARE CAPITAL
-------------------
Siam Optical Technology Company Ltd. ("SOT") *) 40.4% 40.4%
Optispeed Laboratory (PTY) Ltd, ("Optispeed") **) 25% 25%
Emerald Lens and Coating Technologies (PTY) Ltd,
("Emerald")***) - 28%
e-Vision LLC ****) ****)
*) On November 27, 2008, Shamir acquired additional 14.6% of SOT Ordinary
Shares and increased its holdings in SOT's Ordinary Shares to 40.4%.
Shamir paid a consideration of $ 134 in cash to the selling
shareholders. On July 1, 2009, Shamir increased its holdings to 49% in
SOT's Shares capital and to approximately 51% of the voting rights.
Shamir paid a consideration of $ 79 in cash.
**) On November 1, 2008, Shamir (through its subsidiary Spherical Optical
(PTY) Ltd. ("Spherical")) acquired 25% of the ownership interest and
the voting power in Optispeed, an optical laboratory in South Africa.
***) On June 19, 2009, Shamir (through its subsidiary Spherical) acquired
28% of the ownership interest and the voting power in Emerald, an
optical laboratory in South Africa.
****)Less than 20% ownership. Shamir does not exercise significant
influence over operating and financial policy of the affiliate. The
investment is accounted for according to the cost method.
16
SHAMIR OPTICAL INDUSTRY LTD.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NOTE 12:- INVESTMENTS IN AFFILIATES AND OTHERS (CONT.)
b. Composition of investments:
DECEMBER 31, JUNE 30,
2008 2009
------- -------
SOT $ 1,286 $ 1,353
Optispeed 123 165
Emerald - 467
e-Vision LLC 676 676
------- -------
$ 2,085 $ 2,661
======= =======
c. Additional information - investment in SOT and Emerald:
EMERALD SOT
------- -------
Investment in equity $ 402 $ 481
Long-term loans *) 65 872
------- -------
Total investments as of June 30, 2009 $ 467 $ 1,353
======= =======
*) The loans to SOT and Emerald bear no interest.
NOTE 13:- INCOME TAXES
A reconciliation of Shamir's effective tax rate to the statutory tax rate
in Israel is as follows:
SIX MONTHS ENDED
JUNE 30,
------------------------
2008 2009
------- -------
UNAUDITED UNAUDITED
------- -------
Income before taxes on income $ 7,010 $ 8,041
======= =======
Statutory tax rate in Israel 27% 26%
------- -------
Decrease in tax expenses resulting from:
"Approved Enterprise" benefits (2.4)% (0.2)%
Net operating losses and temporary differences which are
tax exempt or for which valuation allowance was created 12.3% 0.7%
Taxes in respect of prior years (19.5)% (3.5)%
Subsidiaries with a different tax rate 4.5% 1.4%
Others 2.1% 1.1%
------- -------
Effective tax rate 24.0% 25.5%
======= =======
17
SHAMIR OPTICAL INDUSTRY LTD.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NOTE 14:- SUBSEQUENT EVENTS
On November 1, 2009, a Share Acquisition Agreement was approved, by and
between Smyth & Perkins Pty Ltd. ("S&P"), an Australian optical laboratory,
their shareholders and Shamir. Following the transaction Shamir holds
66.67% of S&P's shares. Total transaction consideration amounted to 1,600
thousands AUD (approximately $ 1,450) of which 1,100 thousands AUD was paid
in cash and the remaining will be paid over the following two years. In
addition, a contingent cash payment be paid by Shamir subject to S&P
performances over the years 2010 through 2012 Shamir also has an option to
increase its holdings in S&P to 100% of the ordinary shares.
18