6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUERPURSUANT TO RULE 13a-16

OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of August, 2016

Commission File Number 000-23288

SILICOM LTD.

(Translation of Registrant’s name into English)

14 Atir Yeda St., Kfar-Sava 4464323, Israel

(Address of Principal Executive Offices)

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 ☒     Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):___

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):___

On August 8, 2016, the Registrant released its financial results for the three and six months ended June 30, 2016.

Attached hereto as Exhibit 99.1 are the unaudited, condensed interim consolidated financial statements of the registrant for the six months ended June 30, 2016 and 2015 (including the notes thereto).

Attached hereto as Exhibit 99.2 is the registrant’s review of its results of operations and financial condition for the six months ended June 30, 2016 and 2015.

This Form 6-K, including all exhibits hereto, is hereby incorporated by reference into all effective registration statements filed by the registrant under the Securities Act of 1933.

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, thereunto duly authorized.

	SILICOM LTD. (Registrant)
Date:  August 8, 2016	By	/s/ Eran Gilad
	Eran Gilad
	Chief Financial Officer

EX-99.1

Exhibit 99.1

Silicom Ltd.

and its Subsidiaries

Condensed Interim Consolidated

Financial Statements

As of June 30, 2016

(Unaudited)

Silicom Ltd. and its Subsidiaries

Condensed Interim Consolidated Financial Statements as of June 30, 2016 (unaudited)

Contents

	Page
Condensed Interim Consolidated Balance Sheets	3
Condensed Interim Consolidated Statements of Operations	5
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity	6
Condensed Interim Consolidated Statements of Cash Flows	7
Notes to the Condensed Interim Consolidated Financial Statements	8

2

Silicom Ltd. and its Subsidiaries
 

Condensed Interim Consolidated Balance Sheets (unaudited)  

			June 30,		December 31,
			2016		2015
	Note		US$ thousands		US$ thousands
Assets
Current assets
Cash and cash equivalents				10,969		18,178
Marketable securities		3		15,517		8,636
Accounts receivable:
Trade (net of provision for doubtful accounts of US$ 20
thousands as of June 30, 2016 and December 31, 2015)				21,378		23,768
Other				4,411		1,380
Inventories		4		38,367		26,321
Deferred tax assets				-		950
Total current assets				90,642		79,233
Marketable securities		3		13,629		24,246
Assets held for employees' severance benefits				1,407		1,374
Deferred tax assets				1,721		595
Property, plant and equipment ("PPE"), net				3,972		3,825
Intangible assets, net				4,331		5,164
Goodwill				25,741		25,561
Total assets				141,443		139,998

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

3

Silicom Ltd. and its Subsidiaries
 

Condensed Interim Consolidated Balance Sheets (unaudited) (Continued) 

			June 30,			December 31,
			2016			2015
	Note		US$ thousands			US$ thousands
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable				14,996			8,556
Other accounts payable and accrued expenses				6,040			11,147
Deferred tax liabilities				-			111
Total current liabilities				21,036			19,814
Long-term liability
Contingent consideration				4,991			4,942
Liability for employees' severance benefits				2,504			2,251
Deferred tax liabilities				438			157
Total liabilities				28,969			27,164
Shareholders' equity		5
Ordinary shares and additional paid-in capital				45,633			44,122
Treasury shares				(38	)		(38	)
Retained earnings				66,879			68,750
Total shareholders' equity				112,474			112,834
Total liabilities and shareholders’ equity				141,443			139,998

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

4

Silicom Ltd. and its Subsidiaries
 

Condensed Interim Consolidated Statements of Operations (unaudited)

			Three-month period				Six-month period
			ended June 30,				ended June 30,
			2016		2015		2016		2015
			US$ thousands				US$ thousands
			(Except for share and				(Except for share and
	Note		per share data)				per share data)
Sales		6		26,001		17,121		47,358		35,884
Cost of sales				16,150		10,075		29,575		20,967
Gross profit				9,851		7,046		17,783		14,917
Operating expenses
Research and development				2,869		2,283		5,897		4,581
Sales and marketing				1,648		1,396		3,175		2,689
General and administrative				986		749		2,001		1,505
Contingent consideration expense (benefit)				62		207		15		404
Total operating expenses				5,565		4,635		11,088		9,179
Operating income				4,286		2,411		6,695		5,738
Financial income, net				90		4		25		113
Income before income taxes				4,376		2,415		6,720		5,851
Income taxes				843		360		1,279		810
Net income				3,533		2,055		5,441		5,041
Income per share:
Basic income per ordinary share (US$)				0.482		0.282		0.744		0.694
Weighted average number of ordinary
shares used to compute basic income
per share (in thousands)				7,335		7,274		7,316		7,260
Diluted income per ordinary share (US$)				0.477		0.278		0.735		0.684
Weighted average number of ordinary
shares used to compute diluted income
per share (in thousands)				7,414		7,378		7,404		7,372

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

5

Silicom Ltd. and its Subsidiaries
 

Condensed Interim Consolidated Statements of Changes in Shareholders' Equity (unaudited)   

	Ordinary shares				Additional paid-in capital		Treasury shares			Retained earnings			Total shareholders’ Equity
	Number of shares(1)		US$ thousands
Balance at
January 1, 2015		7,218,633		21		41,245		(38	)		59,504			100,732
Exercise of options and RSUs(2)		65,711		*-		943		-			-			943
Share-based compensation		-		-		1,913		-			-			1,913
Dividend(US $1.00  per share)		-		-		-		-			(7,274	)		(7,274	)
Net income		-		-		-		-			16,520			16,520
Balance at
December 31, 2015		7,284,344		21		44,101		(38	)		68,750			112,834
Exercise of options and RSUs(2)		62,219		1		416		-			-			417
Share-based compensation		-		-		1,094		-			-			1,094
Dividend (US $1.00  per share)		-		-		-		-			(7,312	)		(7,312	)
Net income		-		-		-		-			5,441			5,441
Balance at
June 30, 2016		7,346,563		22		45,611		(38	)		66,879			112,474

(1)	Net of 14,971 shares held by Silicom Inc..
(2)	Restricted share units (hereinafter - "RSUs")
*	Less than 1 thousand.

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

6

Silicom Ltd. and its Subsidiaries
 

Condensed Interim Consolidated Statements of Cash Flows (unaudited)

	Six-month period
	ended June 30,
	2016			2015
	US$ thousands
Cash flows from operating activities
Net income		5,441			5,041
Adjustments required to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		1,599			1,024
Write-down of obsolete inventory		693			123
Liability for employees' severance benefits, net		220			16
Discount on marketable securities,net		212			298
Share-based compensation expenses		864			734
Deferred taxes		(6	)		(359	)
Adjustments in relation to acquisition		(180	)		-
Changes in assets and liabilities:
Accounts receivable - trade		2,396			3,255
Accounts receivable - other		(3,112	)		(1,623	)
Inventories		(12,797	)		(5,951	)
Trade accounts payable		6,399			1,893
Other accounts payable and accrued expenses		(4,842	)		1,506
Contingent consideration adjustments		15			404
Net cash provided by (used in) operating activities		(3,098	)		6,361
Cash flows from investing activities
Proceeds from short term bank deposits, net		-			4,000
Sale of property, plant and equipment		-			49
Purchases of property, plant and equipment		(860	)		(1,791	)
Proceeds from maturity of marketable securities		3,625			10,200
Purchases of marketable securities		-			(12,935	)
Net cash provided by (used in) investing activities		2,765			(477	)
Cash flows from financing activities
Exercise of options		416			856
Dividend		(7,312	)		(7,274	)
Net cash used in financing activities		(6,896	)		(6,418	)
Effect of exchange rate changes on cash balances held		20			104
Decrease in cash and cash equivalents		(7,209	)		(430	)
Cash and cash equivalents at beginning of period		18,178			17,890
Cash and cash equivalents at end of period		10,969			17,460
Supplementary cash flow information
A. Non-cash transactions:
Investments in PPE		68			223
B. Cash paid during the period for:
Income taxes		2,444			990

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

7

Silicom Ltd. and its Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements (unaudited)

Note 1 - General

Silicom Ltd. is an Israeli corporation engaged in designing, manufacturing, marketing and supporting high performance networking and data infrastructure solutions for a broad range of servers, server based systems and communications devices.

The Company’s shares have been traded in the United States on the National Association of Securities Dealers Automated Quotation System ("NASDAQ”) since February 1994. Since January 2, 2014 the Company's shares have been traded on the NASDAQ Global Select Market (prior thereto they were traded on the NASDAQ Global Market).  The Company’s shares had been traded in Israel on the Tel Aviv Stock Exchange ("TASE"), since December 2005. Since June 16, 2013 the Company's shares had been included in the Tel-Aviv 100 Index. In January 28, 2016, the Company delisted from trading in the TASE.

Silicom markets its products directly, through Original Equipment Manufacturers (“OEMs”) which sell the Company’s connectivity products under their own private labels or incorporate the Company’s products into their products.

In these financial statements the terms "Company" or "Silicom" refer to Silicom Ltd. and its wholly owned subsidiaries, Silicom Connectivity Solutions, Inc. (hereinafter - "Silicom Inc.") and Fiberblaze A/S, (hereinafter - "Fiberblaze"), whereas the term "subsidiaries" refers to Silicom Inc. and Fiberblaze.

Note 2 - Summary of Significant Accounting Policies

A. Basis of presentation

The accompanying condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and contain all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial information included therein. It is suggested that these condensed interim consolidated financial statements be read in conjunction with the audited consolidated financial statements and related notes included in the Company's Annual Report on Form 20-F for the year ended December 31, 2015. Results for the interim period presented are not necessarily indicative of the results to be expected for the full year.

B. Estimates and assumptions

The preparation of the condensed interim consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of PPE, deferred tax assets, inventory, investments, goodwill, intangible assets, share-based compensation and other contingencies.

8

Silicom Ltd. and its Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements (unaudited)

Note 2 - Summary of Significant Accounting Policies (cont’d)

C. Fair Value Measurements

The Company's financial instruments consist mainly of cash and cash equivalents, short-term bank deposits, marketable securities, trade and other receivables and trade accounts payable. The carrying amounts of these financial instruments, except for marketable securities, approximate their fair value because of the short maturity of these investments. The fair value of marketable securities is presented in Note 3 to these condensed interim consolidated financial statements. Assets held for severance benefits are recorded at their current cash redemption value.

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

D. Recent Accounting Pronouncements

(1) In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The standard can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

9

Silicom Ltd. and its Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements (unaudited)

Note 2 - Summary of Significant Accounting Policies (cont’d)

D.       Recent Accounting Pronouncements (cont’d)

(2) In July 2015, the FASB issued ASU 2015-11, which, for entities that do not measure inventory using the last-in, first-out (LIFO) or retail inventory method, changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. The ASU also eliminates the requirement for these entities to consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory.

This ASU is effective in fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  This ASU is to be applied prospectively. Early adoption is permitted as of the beginning of an interim or annual period.

(3) In November 2015, the FASB issued ASU 2015-17, which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent.

The ASU is effective for interim and annual periods in fiscal years beginning after December 15, 2016. Early adoption is permitted.

(4) In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize most of their leases on balance sheet as a right-of-use asset and a lease liability.

The ASU is effective for interim and annual periods in fiscal years beginning after December 15, 2018. Early adoption is permitted.

10

Silicom Ltd. and its Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements (unaudited)

Note 3 - Marketable Securities

The Company's investment in marketable securities as of December 31, 2015 and June 30, 2016 are classified as “held-to-maturity” and consist of the following:

			Gross		Gross
			unrealized		unrealized
	Amortized		holding		holding			Aggregate
	cost basis**		gains		(losses)			fair value*
	US$ thousands
At June 30, 2016
Held to maturity:
Corporate debt securities and
government debt securities
Current		15,591		9		(52	)		15,548
Non-Current		13,710		18		(52	)		13,676
		29,301		27		(104	)		29,224
At December 31, 2015
Held to maturity:
Corporate debt securities
Current		8,720		-		(90	)		8,630
Non-Current		24,418		-		(255	)		24,163
		33,138		-		(345	)		32,793

*	Fair value is being determined using quoted market prices in active markets (Level 1).
**	Including accrued interest in the amount of US$ 256 thousands and US$ 155 thousands as of December 31, 2015 and June 30, 2016 respectively.

Activity in marketable securities in six month period ended in June 30, 2016:

	US$ thousands
Balance at January 1, 2016		33,138
Discount on marketable securities, net		(212	)
Proceeds from maturity of marketable securities		(3,625	)
Balance at June 30, 2016		29,301

11

 

Silicom Ltd. and its Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements (unaudited)

Note 3 - Marketable Securities (Cont’d)

The following table summarizes the gross unrealized losses on investment securities for which other-than-temporary impairments have not been recognized and the fair value of those securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2016:

	Less than 12 months				12 months or more					Total
	Unrealized Losses		Fair value		Unrealized Losses			Fair value		Unrealized Losses			Fair value
Held to maturity
Corporate debt securities		-		-		(104	)		20,418		(104	)		20,418

The unrealized losses on the investments were caused by changes in interest rate. The Company has the ability and intent to hold these investments until maturity and it is more likely than not that the Company will not be required to sell any of the securities before recovery; therefore these investments are not considered other than temporarily impaired.

Note 4 - Inventories

	June 30,		December 31,
	2016		2015
	US$ thousands
Raw materials and components		16,671		9,598
Products in process		14,258		9,013
Finished products		7,438		7,710
		38,367		26,321

12

Silicom Ltd. and its Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements (unaudited)

Note 5 - Share based compensation

On June 8, 2016, the Company granted, in the aggregate, 93,660 optionsto certain of its directors, employees and consultants under the 2013 Plan. In relation to this grant:

1. The exercise price for the options (per ordinary share) was US$ 28.38 and the Option expiration date was the earlier to occur of: (a) June 8, 2024; and (b) the closing price of the shares falling below US$ 14.19 at any time after the date of grant. The options vest and become exercisable on the second anniversary of the date of grant.

2. The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	1.58%
Expected dividend yield	2.42%
Average expected volatility  (b)	47.9%
Termination rate	9%
Suboptimal rate (c)	3.32%

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal rate represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal rate of the Company and similar companies.

3. Compensation expenses incurred during the six and three month periods ended June 30, 2016 in relation to this grant were approximately US$ 23 thousand. As at June 30, 2016, there were approximately US$ 754 thousand of unrecognized compensation costs related to this grant to be recognized over a weighted average period of 1.94 years.

13

Silicom Ltd. and its Subsidiaries

Notes to the Condensed Interim Consolidated Financial Statements (unaudited)

Note 6 - Sales

Sales to single customers exceeding 10% of sales:

	Six-month period ended June 30,
	2016		2015
	US$ thousands
Customer “A”		9,667		6,770
Customer “B”		6,382		*

14

EX-99.2

Exhibit 99.2

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The information contained in this section should be read in conjunction with (1) our unaudited condensed interim consolidated financial statements as of June 30, 2016 and for the six months then ended and related notes included in this report and (2) our audited consolidated financial statements and related notes included in our Annual Report on Form 20-F for the year ended December 31, 2015 and the other information contained in such annual report.

The following discussion includes certain “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934. The use of the words “believes” “projects,” “expects,” “may,” “plans” or “intends”, or words of similar import, identifies a statement as “forward-looking.” There can be no assurance, however, that actual results will not differ materially from our expectations or projections. Factors that could cause actual results to differ from our expectations or projections include the risks and uncertainties relating to our business described in our Annual Report on Form 20-F under the heading “Risk Factors.”

Results of Operations

The following table sets forth certain statement of operations data as a percentage of total sales for the periods indicated.

	Six Months Ended June 30,
	2015		2016
Sales		100%		100%
Cost of sales		58.43		62.45
Gross profit		41.57		37.55
Research and development costs		12.77		12.45
Selling and marketing expenses		7.49		6.70
General and administrative expenses		4.19		4.23
Contingent consideration expense (benefit)		1.13		0.03
Operating Income		15.99		14.14
Financial income, net		0.32		0.05
Income before income taxes		16.31		14.19
Income tax expenses		2.26		2.70
Net Income		14.05		11.49

Sales in the six months ended June 30, 2016 increased by 32.0% to $47,358 thousand compared to $35,884 thousand in the six months ended June 30, 2015. The increase in sales during the six months ended June 30, 2016 was mainly attributed to our continued success in our target markets including those driven by trends like Cyber security, Cloud Computing, SDN, NFV, Virtualization and other trends, and to our continued success in expanding our product offering and customer base.

Gross profit in the six months ended June 30, 2016 was $17,783 thousand compared to $14,917 thousand in the six months ended June 30, 2015. Gross profit as a percentage of sales in the six months ended June 30, 2016 was 37.6%, compared to 41.6% in the six months ended June 30, 2015. Our gross profit is largely dependent on the mix of products we sell during a specific period. The lower gross profit percentage in the six months ended June 30, 2016 compared to the six months ended June 30, 2015 was primarily a result of changes to the mix of products we sold in the six months ended June 30, 2016 as well as a result of our decision to sell some of our offerings at lower margins. Gross profit is also affected, among other factors, by write-downs of inventory made with respect to any obsolete or slow moving inventory we can no longer use. The inventory write-downs as a percentage of sales in the six months ended June 30, 2016 increased to 1.5%, compared to 0.4% in the six months ended June 30, 2015.

Research and development costs in the six months ended June 30, 2016 increased by 28.7% to $5,897 thousand compared to $4,581 thousand in the six months ended June 30, 2015. This increase was mainly attributed to the increase in the number of our research and development employees required for our continued investment in new product development, enhancements to existing products and the development of new networking and connectivity technologies expanding our product offering to our target markets, which contributed approximately $888 thousand to such increase and to an increase in amortization of acquired intangible assets which amounted to approximately $664 thousand in the six months ended June 30, 2016, compared to $271 thousand in the six months ended June 30, 2015, and to a relative weakening of the US Dollar against the New Israeli Shekel (since a significant portion of our research and development expenses are incurred in New Israeli Shekels) which contributed approximately $35 thousand.

Selling and marketing expenses in the six months ended June 30, 2016 increased by 18.1% to $3,175 thousand compared to $2,689 thousand in the six months ended June 30, 2015. This increase was mainly attributed to our continued investment in the promotion of our server networking products to our target markets including those driven by trends like Cyber security, Cloud Computing, SDN, NFV, Virtualization and other trends, by, among others, our continued effort to expand exposure of our product offering and expanding our customer base, which contributed approximately $242 thousand to such increase and to an increase in amortization of acquired intangible assets which amounted to approximately $323 thousand in the six months ended June 30, 2016, compared to $90 thousand in the six months ended June 30, 2015, and to relative weakening of the US Dollar against the New Israeli Shekel (since a significant portion of our sales and marketing expenses are incurred in New Israeli Shekels) which contributed approximately $11 thousand.

General and administrative expenses in the six months ended June 30, 2016 increased by 33.0% to $2,001 thousand compared to $1,505 thousand in the six months ended June 30, 2015. This increase was mainly attributed to the growth in our activity, which contributed approximately $483 thousand to such increase, and to a relative weakening of the US Dollar against the New Israeli Shekel (since a significant portion of our General and administrative expenses are incurred in New Israeli Shekels) which contributed approximately $13 thousand.

In the six months ended June 30, 2016 we had contingent consideration expense in the amount of $15 thousand compared to an expense of $404 thousand in the six months ended June 30, 2015.

Financial income, net in the six months ended June 30, 2016 decreased by 77.9% to $25 thousand compared to $113 thousand in the six months ended June 30, 2015. The decrease was primarily caused by the relative weakening of the US dollar against the New Israeli Shekel (a significant portion of our balance sheet assets and obligations are denominated in New Israeli Shekels), which created a net financial expense in US dollars from exchange rate differences.

In the six months ended June 30, 2016 we recorded current income tax expenses of $1,252 thousand and deferred income tax expenses of $27 thousand compared to current income tax expenses of $1,169 thousand and deferred income tax benefit of $359 thousand in the six months ended June 30, 2015.

In the six months ended June 30, 2016 we recorded net income of $5,441 thousand compared to net income of $5,041 thousand in the six months ended June 30, 2015, a 7.9% increase. This increase was mainly due to the increase in our activity and sales.

Impact of Inflation and Currency Fluctuations on Results of Operations, Liabilities and Assets

Since the majority of our revenues are denominated and paid in U.S. dollars, we believe that inflation in Israel and in Denmarkand fluctuations in the U.S. dollar exchange rates do not have any material effect on our revenue. Inflation in Israel or Denmark and the Israeli and Danish currency as well as U.S. dollar exchange rate fluctuations, may however, have an effect on our expenses and, as a result, on our net income/loss. The cost of our Israeli and Danish operations, as expressed in U.S. dollars, is influenced by the extent to which any change in the rates of inflation in Israel or Denmark are not offset (or are offset on a lagging basis) by a change in valuation of the NIS or DKK in relation to the U.S. dollar.

We do not presently engage in any hedging or other transactions intended to manage the risks relating to foreign currency exchange rate or interest rate fluctuations. However, we may in the future undertake such transactions, if management determines that it is necessary to offset such risks.

Liquidity and Capital Resources

As of June 30, 2016, we had working capital of $69,606 thousand and our current ratio (current assets to current liabilities) was 4.31. Cash and cash equivalents as of June 30, 2016 decreased by $7,209 thousand to $10,969 thousand, compared to $18,178 thousand as of December 31, 2015. Short-term marketable securities increase by $6,881 thousand to $15,517 thousand as of June 30, 2016 and long-term marketable securities decrease by $10,617 thousand to $13,629 thousand between the same periods. The net decrease of $10,945 thousand in these three balance sheet items in the six months ended June 30, 2016 was mainly due to the dividend distribution in the amount of $7,312 thousand, and to the cash payment of contingent consideration to the Fiberblaze sellers in the amount of $1,317 thousand and to the payment of the first contingent consideration to the ADI sellers in the amount of $3,000 thousand, which was only partially offset by net cash provided by operating activities in the six months ended June 30, 2016.

Trade receivables decreased to $21,378 thousand as of June 30, 2016, compared to $23,768 thousand as of December 31, 2015. Other receivables increased to $4,411 thousand as of June 30, 2016, compared to $1,380 thousand as of December 31, 2015.

Trade payables increased to $14,996 thousand as of June 30, 2016, compared to $8,556 thousand as of December 31, 2015 due to increase in purchasing of inventory. Other payables and accrued liabilities decrease to $6,040 thousand as of June 30, 2016, compared to $11,147 thousand as of December 31, 2015 primarily due to payments of contingent considerations.

Cash used in operating activities in the six months ended June 30, 2016 amounted to $3,098 thousand compared to cash provided by operating activities in the amount of $6,361 thousand in the six months ended June 30, 2015. The cash used in operating activities in the six months ended June 30, 2016 was primarily the result of an increase in purchasing of inventory and payments of contingent considerations, offset by our positive operating income.

Inventories increased to $38,367 thousand as of June 30, 2016, compared to $26,321 thousand as of December 31, 2015.

Capital expenditures on property and equipment in the six months ended June 30, 2016 were $856 thousand, compared with $1,927 thousand in the six months ended June 30, 2015.

We have cash and cash equivalents that we believe are sufficient for our present requirements. Furthermore, our cash resources are sufficient to fund our operating needs for at least the next twelve months.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2016
Document And Entity Information
Entity Registrant Name	SILICOM LTD.
Entity Central Index Key	0000916793
Document Type	6-K
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2016

XML

Condensed Interim Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets
Cash and cash equivalents	$ 10,969	$ 18,178
Marketable securities	15,517	8,636
Accounts receivable:
Trade (net of provision for doubtful accounts of US$ 20 thousands as of June 30, 2016 and December 31, 2015)	21,378	23,768
Other	4,411	1,380
Inventories	38,367	26,321
Deferred tax assets		950
Total current assets	90,642	79,233
Marketable securities	13,629	24,246
Assets held for employees' severance benefits	1,407	1,374
Deferred tax assets	1,721	595
Property, plant and equipment ("PPE"), net	3,972	3,825
Intangible assets, net	4,331	5,164
Goodwill	25,741	25,561
Total assets	141,443	139,998
Current liabilities
Trade accounts payable	14,996	8,556
Other accounts payable and accrued expenses	6,040	11,147
Deferred tax liabilities		111
Total current liabilities	21,036	19,814
Long-term liability
Contingent consideration	4,991	4,942
Liability for employees' severance benefits	2,504	2,251
Deferred tax liabilities	438	157
Total liabilities	28,969	27,164
Shareholders' equity
Ordinary shares and additional paid-in capital	45,633	44,122
Treasury shares	(38)	(38)
Retained earnings	66,879	68,750
Total shareholders' equity	112,474	112,834
Total liabilities and shareholders' equity	$ 141,443	$ 139,998

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Condensed Interim Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Provision for doubtful accounts	$ 20	$ 20

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Condensed Interim Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Statement [Abstract]
Sales	$ 26,001	$ 17,121	$ 47,358	$ 35,884
Cost of sales	16,150	10,075	29,575	20,967
Gross profit	9,851	7,046	17,783	14,917
Operating expenses
Research and development	2,869	2,283	5,897	4,581
Sales and marketing	1,648	1,396	3,175	2,689
General and administrative	986	749	2,001	1,505
Contingent consideration expense (benefit)	62	207	15	404
Total operating expenses	5,565	4,635	11,088	9,179
Operating income	4,286	2,411	6,695	5,738
Financial income, net	90	4	25	113
Income before income taxes	4,376	2,415	6,720	5,851
Income taxes	843	360	1,279	810
Net income	$ 3,533	$ 2,055	$ 5,441	$ 5,041
Income per share:
Basic income per ordinary share (US$)	$ 0.482	$ 0.282	$ 0.744	$ 0.694
Weighted average number of ordinary shares used to compute basic income per share	7,335	7,274	7,316	7,260
Diluted income per ordinary share (US$)	$ 0.477	$ 0.278	$ 0.735	$ 0.684
Weighted average number of ordinary shares used to compute diluted income per share	7,414	7,378	7,404	7,372

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Condensed Interim Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands		Ordinary shares [Member]		Additional paid-in capital [Member]	Treasury shares [Member]	Retained earnings [Member]	Total
Balance at Dec. 31, 2014		$ 21		$ 41,245	$ (38)	$ 59,504	$ 100,732
Balance, shares at Dec. 31, 2014	[1]	7,218,633
Exercise of options and RSUs	[3]		[2]	943			943
Exercise of options and RSUs, shares	[3]	65,711
Share-based compensation				1,913			1,913
Dividend (US $1.00 per share)						(7,274)	(7,274)
Net income						16,520	16,520
Balance at Dec. 31, 2015		$ 21		44,101	(38)	68,750	112,834
Balance, shares at Dec. 31, 2015	[1]	7,284,344
Exercise of options and RSUs	[3]	$ 1		416			417
Exercise of options and RSUs, shares	[3]	62,219
Share-based compensation				1,094			1,094
Dividend (US $1.00 per share)						(7,312)	(7,312)
Net income						5,441	5,441
Balance at Jun. 30, 2016		$ 22		$ 45,611	$ (38)	$ 66,879	$ 112,474
Balance, shares at Jun. 30, 2016	[1]	7,346,563

[1] Net of 14,971 shares held by Silicom Inc..

[2] Less than 1 thousand.

[3] Restricted share units (hereinafter - "RSUs")

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Condensed Interim Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Consolidated Statements Of Changes In Shareholders' Equity [Abstract]
Dividend per share	$ 1.00	$ 1.00
Shares held by Silicom, Inc.	14,971	14,971

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Condensed Interim Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities
Net income	$ 5,441	$ 5,041
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,599	1,024
Write-down of obsolete inventory	693	123
Liability for employees' severance benefits, net	220	16
Discount on marketable securities, net	212	298
Share-based compensation expense	864	734
Deferred taxes	(6)	(359)
Adjustments in relation to acquisition	(180)
Changes in assets and liabilities:
Accounts receivable - trade	2,396	3,255
Accounts receivable - other	(3,112)	(1,623)
Inventories	(12,797)	(5,951)
Trade accounts payable	6,399	1,893
Other accounts payable and accrued expenses	(4,842)	1,506
Contingent consideration adjustments	15	404
Net cash provided by (used in) operating activities	(3,098)	6,361
Cash flows from investing activities
Proceeds from short term bank deposits, net		4,000
Sale of property, plant and equipment		49
Purchases of property, plant and equipment	(860)	(1,791)
Proceeds from maturity of marketable securities	3,625	10,200
Purchases of marketable securities		(12,935)
Net cash provided by (used in) investing activities	2,765	(477)
Cash flows from financing activities
Exercise of options	416	856
Dividend	(7,312)	(7,274)
Net cash used in financing activities	(6,896)	(6,418)
Effect of exchange rate changes on cash balances held	20	104
Decrease in cash and cash equivalents	(7,209)	(430)
Cash and cash equivalents at beginning of period	18,178	17,890
Cash and cash equivalents at end of period	10,969	17,460
Supplementary cash flow information Non-cash transactions:
Investments in PPE	68	223
Supplementary cash flow information Cash paid during the period for:
Income taxes	$ 2,444	$ 990

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General

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

Note 1 - General

Silicom Ltd. is an Israeli corporation engaged in designing, manufacturing, marketing and supporting high performance networking and data infrastructure solutions for a broad range of servers, server based systems and communications devices.

The Company’s shares have been traded in the United States on the National Association of Securities Dealers Automated Quotation System ("NASDAQ”) since February 1994. Since January 2, 2014 the Company's shares have been traded on the NASDAQ Global Select Market (prior thereto they were traded on the NASDAQ Global Market).  The Company’s shares had been traded in Israel on the Tel Aviv Stock Exchange ("TASE"), since December 2005. Since June 16, 2013 the Company's shares had been included in the Tel-Aviv 100 Index. In January 28, 2016, the Company delisted from trading in the TASE.

Silicom markets its products directly, through Original Equipment Manufacturers (“OEMs”) which sell the Company’s connectivity products under their own private labels or incorporate the Company’s products into their products.

In these financial statements the terms "Company" or "Silicom" refer to Silicom Ltd. and its wholly owned subsidiaries, Silicom Connectivity Solutions, Inc. (hereinafter - "Silicom Inc.") and Fiberblaze A/S, (hereinafter - "Fiberblaze"), whereas the term "subsidiaries" refers to Silicom Inc. and Fiberblaze.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2 - Summary of Significant Accounting Policies

A. Basis of presentation

The accompanying condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and contain all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial information included therein. It is suggested that these condensed interim consolidated financial statements be read in conjunction with the audited consolidated financial statements and related notes included in the Company's Annual Report on Form 20-F for the year ended December 31, 2015. Results for the interim period presented are not necessarily indicative of the results to be expected for the full year.

B. Estimates and assumptions

The preparation of the condensed interim consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of PPE, deferred tax assets, inventory, investments, goodwill, intangible assets, share-based compensation and other contingencies.

C. Fair Value Measurements

The Company's financial instruments consist mainly of cash and cash equivalents, short-term bank deposits, marketable securities, trade and other receivables and trade accounts payable. The carrying amounts of these financial instruments, except for marketable securities, approximate their fair value because of the short maturity of these investments. The fair value of marketable securities is presented in Note 3 to these condensed interim consolidated financial statements. Assets held for severance benefits are recorded at their current cash redemption value.

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

D. Recent Accounting Pronouncements

(1) In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The standard can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

(2) In July 2015, the FASB issued ASU 2015-11, which, for entities that do not measure inventory using the last-in, first-out (LIFO) or retail inventory method, changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. The ASU also eliminates the requirement for these entities to consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory.

This ASU is effective in fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  This ASU is to be applied prospectively. Early adoption is permitted as of the beginning of an interim or annual period.

(3) In November 2015, the FASB issued ASU 2015-17, which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent.

The ASU is effective for interim and annual periods in fiscal years beginning after December 15, 2016. Early adoption is permitted.

(4) In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize most of their leases on balance sheet as a right-of-use asset and a lease liability.

The ASU is effective for interim and annual periods in fiscal years beginning after December 15, 2018. Early adoption is permitted.

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Marketable Securities

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

Note 3 - Marketable Securities

The Company's investment in marketable securities as of December 31, 2015 and June 30, 2016 are classified as “held-to-maturity” and consist of the following:

			Gross		Gross
			unrealized		unrealized
	Amortized		holding		holding			Aggregate
	cost basis**		gains		(losses)			fair value*
	US$ thousands
At June 30, 2016
Held to maturity:
Corporate debt securities and
government debt securities
Current		15,591		9		(52	)		15,548
Non-Current		13,710		18		(52	)		13,676
		29,301		27		(104	)		29,224
At December 31, 2015
Held to maturity:
Corporate debt securities
Current		8,720		-		(90	)		8,630
Non-Current		24,418		-		(255	)		24,163
		33,138		-		(345	)		32,793

*	Fair value is being determined using quoted market prices in active markets (Level 1).
**	Including accrued interest in the amount of US$ 256 thousands and US$ 155 thousands as of December 31, 2015 and June 30, 2016 respectively.

Activity in marketable securities in six month period ended in June 30, 2016:

	US$ thousands
Balance at January 1, 2016		33,138
Discount on marketable securities, net		(212	)
Proceeds from maturity of marketable securities		(3,625	)
Balance at June 30, 2016		29,301

The following table summarizes the gross unrealized losses on investment securities for which other-than-temporary impairments have not been recognized and the fair value of those securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2016:

	Less than 12 months				12 months or more					Total
	Unrealized Losses		Fair value		Unrealized Losses			Fair value		Unrealized Losses			Fair value
Held to maturity
Corporate debt securities		-		-		(104	)		20,418		(104	)		20,418

The unrealized losses on the investments were caused by changes in interest rate. The Company has the ability and intent to hold these investments until maturity and it is more likely than not that the Company will not be required to sell any of the securities before recovery; therefore these investments are not considered other than temporarily impaired.

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Inventories

6 Months Ended

Jun. 30, 2016

Inventory Disclosure [Abstract]

Inventories

Note 4 - Inventories

	June 30,		December 31,
	2016		2015
	US$ thousands
Raw materials and components		16,671		9,598
Products in process		14,258		9,013
Finished products		7,438		7,710
		38,367		26,321

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Share based compensation

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share based compensation

Note 5 - Share based compensation

On June 8, 2016, the Company granted, in the aggregate, 93,660 optionsto certain of its directors, employees and consultants under the 2013 Plan. In relation to this grant:

1. The exercise price for the options (per ordinary share) was US$ 28.38 and the Option expiration date was the earlier to occur of: (a) June 8, 2024; and (b) the closing price of the shares falling below US$ 14.19 at any time after the date of grant. The options vest and become exercisable on the second anniversary of the date of grant.

2. The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	1.58%
Expected dividend yield	2.42%
Average expected volatility  (b)	47.9%
Termination rate	9%
Suboptimal rate (c)	3.32%

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal rate represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal rate of the Company and similar companies.

3. Compensation expenses incurred during the six and three month periods ended June 30, 2016 in relation to this grant were approximately US$ 23 thousand. As at June 30, 2016, there were approximately US$ 754 thousand of unrecognized compensation costs related to this grant to be recognized over a weighted average period of 1.94 years.

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Sales

6 Months Ended

Jun. 30, 2016

Sales [Abstract]

Sales

Note 6 - Sales

Sales to single customers exceeding 10% of sales:

	Six-month period ended June 30,
	2016		2015
	US$ thousands
Customer “A”		9,667		6,770
Customer “B”		6,382		*

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Basis of presentation

A. Basis of presentation

The accompanying condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and contain all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial information included therein. It is suggested that these condensed interim consolidated financial statements be read in conjunction with the audited consolidated financial statements and related notes included in the Company's Annual Report on Form 20-F for the year ended December 31, 2015. Results for the interim period presented are not necessarily indicative of the results to be expected for the full year.

Estimates and assumptions

B. Estimates and assumptions

The preparation of the condensed interim consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of PPE, deferred tax assets, inventory, investments, goodwill, intangible assets, share-based compensation and other contingencies.

Fair Value Measurements

C. Fair Value Measurements

The Company's financial instruments consist mainly of cash and cash equivalents, short-term bank deposits, marketable securities, trade and other receivables and trade accounts payable. The carrying amounts of these financial instruments, except for marketable securities, approximate their fair value because of the short maturity of these investments. The fair value of marketable securities is presented in Note 3 to these condensed interim consolidated financial statements. Assets held for severance benefits are recorded at their current cash redemption value.

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

Recent Accounting Pronouncements

D. Recent Accounting Pronouncements

(1) In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The standard can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

(2) In July 2015, the FASB issued ASU 2015-11, which, for entities that do not measure inventory using the last-in, first-out (LIFO) or retail inventory method, changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. The ASU also eliminates the requirement for these entities to consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory.

This ASU is effective in fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  This ASU is to be applied prospectively. Early adoption is permitted as of the beginning of an interim or annual period.

(3) In November 2015, the FASB issued ASU 2015-17, which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent.

The ASU is effective for interim and annual periods in fiscal years beginning after December 15, 2016. Early adoption is permitted.

(4) In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize most of their leases on balance sheet as a right-of-use asset and a lease liability.

The ASU is effective for interim and annual periods in fiscal years beginning after December 15, 2018. Early adoption is permitted.

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Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Held-to-Maturity Securities

The Company's investment in marketable securities as of December 31, 2015 and June 30, 2016 are classified as “held-to-maturity” and consist of the following:

			Gross		Gross
			unrealized		unrealized
	Amortized		holding		holding			Aggregate
	cost basis**		gains		(losses)			fair value*
	US$ thousands
At June 30, 2016
Held to maturity:
Corporate debt securities and
government debt securities
Current		15,591		9		(52	)		15,548
Non-Current		13,710		18		(52	)		13,676
		29,301		27		(104	)		29,224
At December 31, 2015
Held to maturity:
Corporate debt securities
Current		8,720		-		(90	)		8,630
Non-Current		24,418		-		(255	)		24,163
		33,138		-		(345	)		32,793

*	Fair value is being determined using quoted market prices in active markets (Level 1).
**	Including accrued interest in the amount of US$ 256 thousands and US$ 155 thousands as of December 31, 2015 and June 30, 2016 respectively.

Schedule of Reconciliation of Marketable Securities

Activity in marketable securities in six month period ended in June 30, 2016:

	US$ thousands
Balance at January 1, 2016		33,138
Discount on marketable securities, net		(212	)
Proceeds from maturity of marketable securities		(3,625	)
Balance at June 30, 2016		29,301

Summary of Investment Securities in an Unrealized Loss Position

The following table summarizes the gross unrealized losses on investment securities for which other-than-temporary impairments have not been recognized and the fair value of those securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2016:

	Less than 12 months				12 months or more					Total
	Unrealized Losses		Fair value		Unrealized Losses			Fair value		Unrealized Losses			Fair value
Held to maturity
Corporate debt securities		-		-		(104	)		20,418		(104	)		20,418

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Inventories (Tables)

6 Months Ended

Jun. 30, 2016

Inventory Disclosure [Abstract]

Summary of Inventories

	June 30,		December 31,
	2016		2015
	US$ thousands
Raw materials and components		16,671		9,598
Products in process		14,258		9,013
Finished products		7,438		7,710
		38,367		26,321

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Share based compensation (Tables)

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Assumptions Used in Estimation of Grant Date Fair Value of Options

The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	1.58%
Expected dividend yield	2.42%
Average expected volatility  (b)	47.9%
Termination rate	9%
Suboptimal rate (c)	3.32%

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal rate represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal rate of the Company and similar companies.

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Sales (Tables)

6 Months Ended

Jun. 30, 2016

Sales [Abstract]

Sales to Single Customers Exceeding 10% of Sales

Sales to single customers exceeding 10% of sales:

	Six-month period ended June 30,
	2016		2015
	US$ thousands
Customer “A”		9,667		6,770
Customer “B”		6,382		*

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Marketable Securities (Held-To-Maturity Securities) (Details) - USD ($) $ in Thousands		Jun. 30, 2016	Dec. 31, 2015
Schedule of Held-to-maturity Securities [Line Items]
Amortized cost basis	[1]	$ 29,301	$ 33,138
Gross unrealized holding gains		27
Gross unrealized holding (losses)		(104)	(345)
Aggregate fair value	[2]	29,224	32,793
Accrued interest on securities		155	256
Current [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized cost basis	[1]	15,591	8,720
Gross unrealized holding gains		9
Gross unrealized holding (losses)		(52)	(90)
Aggregate fair value	[2]	15,548	8,630
Non Current [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized cost basis	[1]	13,710	24,418
Gross unrealized holding gains		18
Gross unrealized holding (losses)		(52)	(255)
Aggregate fair value	[2]	$ 13,676	$ 24,163

[1] Including accrued interest in the amount of US$ 256 thousands and US$ 155 thousands as of December 31, 2015 and June 30, 2016 respectively.

[2] Fair value is being determined using quoted market prices in active markets (Level 1).

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Marketable Securities (Schedule of Reconciliation of Marketable Securities) (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015
Investments, Debt and Equity Securities [Abstract]
Balance	[1]	$ 33,138
Discount on marketable securities, net		(212)	$ (298)
Proceeds from maturity of marketable securities		(3,625)	$ (10,200)
Balance	[1]	$ 29,301

[1] Including accrued interest in the amount of US$ 256 thousands and US$ 155 thousands as of December 31, 2015 and June 30, 2016 respectively.

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Marketable Securities (Summary of Investment Securities in an Unrealized Loss Position) (Details) $ in Thousands	Jun. 30, 2016 USD ($)
Investments, Debt and Equity Securities [Abstract]
Unrealized Losses, Less than 12 months
Unrealized Losses, 12 months or more	(104)
Unrealized Losses, Total	(104)
Fair value, Less than 12 months
Fair value, 12 months or more	20,418
Fair value, Total	$ 20,418

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Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials and components	$ 16,671	$ 9,598
Products in process	14,258	9,013
Finished products	7,438	7,710
Inventories	$ 38,367	$ 26,321

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Share based compensation (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended	6 Months Ended
	Jun. 08, 2016	Jun. 30, 2016	Jun. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expenses incurred related to options granted		$ 23	$ 23
Unrecognized compensation costs related to options granted		$ 754	$ 754
Options exercisable, weighted average contractual life (in years)			1 year 11 months 9 days
Share Option Plan 2013 [Member] | $28.38 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted	93,660
Exercise price of options	$ 28.38
Expiration date	Jun. 08, 2024
Closing price to determine expiration date	$ 14.19

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Share based compensation (Fair Value Assumptions) (Details) - Stock Option [Member]	Jun. 08, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average Risk-free interest rate	1.58%	[1]
Expected dividend yield	2.42%
Average expected volatility	47.90%	[2]
Termination rate	9.00%
Suboptimal rate	3.32%	[3]

[1] Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.

[2] Expected average volatility represents a weighted average standard deviation rate for the price of the Company's ordinary shares on the NASDAQ National Market.

[3] Suboptimal rate represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal rate of the Company and similar companies.

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Sales (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue, Major Customer [Line Items]
Sales	$ 26,001	$ 17,121	$ 47,358	$ 35,884
Customer A [Member]
Revenue, Major Customer [Line Items]
Sales			9,667	6,770
Customer B [Member]
Revenue, Major Customer [Line Items]
Sales			$ 6,382