☐
|
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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☒
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
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☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report………………..
For the transition period from to
|
ISRAEL
|
(Jurisdiction of incorporation
or organization)
|
None
|
None
|
|
Title of each class
|
|
Name of each exchange on which registered
|
Ordinary Shares, NIS 0.01 nominal value per share
|
NASDAQ GLOBAL SELECT MARKET
|
Large accelerated filer ☐
|
|
Accelerated filer ☒
|
|
Non-accelerated filer ☐
|
|
7
|
|
|
7
|
|
|
7
|
|
7
|
||
A. Selected Financial Data
|
7
|
|
B. Capitalization and indebtedness
|
12
|
|
C. Reason for the offer and use of proceeds
|
12
|
|
D. Risk Factors
|
12
|
|
28
|
||
A. History and Development of the Company
|
28
|
|
B. Business Overview
|
30
|
|
Principal Markets
|
33
|
|
Manufacturing and Suppliers
|
34
|
|
Marketing Channels
|
36
|
|
Patents and Licenses
|
38
|
|
Competition
|
39
|
|
Governmental Regulation Affecting the Company
|
40
|
|
C. Organizational Structure
|
41
|
|
D. Property, Plant and Equipment
|
41
|
|
|
43
|
|
43
|
||
Critical Accounting Policies
|
43
|
|
A. Operating Results |
48
|
|
Impact of Inflation and Currency Fluctuations on Results of Operations, Liabilities and Assets
|
52
|
|
B. Liquidity and Capital Resources |
53
|
|
C. Research and development, patents and licenses, etc. |
54
|
|
D. Trend Information |
56
|
|
E. Off-Balance Sheet Arrangements |
57
|
|
F. Tabular disclosure of contractual obligations
|
58
|
|
59
|
||
A. Directors and Senior Management |
59
|
|
B. Compensation |
62
|
|
C. Board Practices |
65
|
|
Board of Directors
|
67
|
|
External Directors
|
67
|
|
Audit Committee
|
72
|
|
Compensation Committee
|
74
|
|
Internal Auditor
|
79
|
|
D. Employees |
79
|
|
E. Share Ownership
|
81
|
82
|
||
A. Major Shareholders |
82
|
|
B. Related Party Transactions
|
83
|
|
ITEM 8. FINANCIAL INFORMATION | 86 | |
A. Consolidated Statements and Other Financial Information | 86 | |
B. Significant Changes | 88 | |
88
|
||
A. Offer and listing details |
88
|
|
Markets and Share Price History
|
88
|
|
ITEM 10. ADDITIONAL INFORMATION | 91 | |
A. Share Capital | 91 | |
B. Memorandum and Articles of Association | 91 | |
C. Material Contracts | 101 | |
D. Exchange Controls | 102 | |
E. Taxation | 103 | |
F. Dividends and Paying Agents | 119 | |
G. Statement by experts | 119 | |
H. Documents on Display | 119 | |
I. Subsidiary Information | 120 | |
120
|
||
Interest Rate Risk
|
120
|
|
Foreign Currency Exchange Risk
|
121
|
|
|
122
|
|
|
122
|
|
|
122
|
|
|
122
|
|
123
|
||
Disclosure Controls and Procedures
|
123
|
|
Management's Annual Report on Internal Control over Financial Reporting
|
123
|
|
Inherent Limitations on Effectiveness of Controls
|
123
|
|
Changes in Internal Control over Financial Reporting
|
124
|
|
|
124
|
|
|
124
|
|
|
124
|
|
124
|
|
|
124
|
|
|
125
|
|
|
125
|
|
|
125
|
|
|
126
|
|
|
128
|
|
|
128
|
|
|
128
|
|
|
128
|
|
128
|
2012
|
2013
|
2014
|
2015
|
2016
|
||||||||||||||||
Sales
|
$
|
48,729
|
$
|
73,298
|
$
|
75,622
|
$
|
82,738
|
$
|
100,347
|
||||||||||
Cost of sales
|
28,849
|
43,865
|
44,835
|
48,659
|
61,796
|
|||||||||||||||
Gross profit
|
19,880
|
29,433
|
30,787
|
16.34,079
|
38,551
|
|||||||||||||||
Research and development costs
|
4,401
|
5,465
|
6,480
|
9,702
|
12,663
|
|||||||||||||||
Sales and marketing expenses
|
3,081
|
3,818
|
4,418
|
5,651
|
6,423
|
|||||||||||||||
General and administrative expenses
|
2,369
|
2,572
|
2,798
|
3,611
|
3,969
|
|||||||||||||||
Contingent consideration expense (benefit)
|
0
|
0
|
45
|
(3,090
|
)
|
(334
|
)
|
|||||||||||||
Total operating expenses
|
9,851
|
11,855
|
13,741
|
15,874
|
22,721
|
|||||||||||||||
Operating income
|
10,029
|
17,578
|
17,046
|
18,205
|
15,830
|
|||||||||||||||
Financial income, net
|
752
|
404
|
263
|
220
|
35
|
|||||||||||||||
Income before income taxes
|
10,781
|
17,982
|
17,309
|
18,425
|
15,865
|
|||||||||||||||
Income tax expenses
|
910
|
905
|
2,704
|
1,905
|
2,728
|
|||||||||||||||
Net income(1)
|
9,871
|
17,077
|
14,605
|
16,520
|
13,137
|
|||||||||||||||
Net income per share
|
||||||||||||||||||||
Basic income per ordinary share
|
$
|
1.424
|
$
|
2.404
|
$
|
2.033
|
$
|
2.273
|
$
|
1.789
|
||||||||||
Diluted income per ordinary share
|
$
|
1.417
|
$
|
2.357
|
$
|
1.996
|
$
|
2.242
|
$
|
1.767
|
||||||||||
Weighted average number of ordinary shares used to compute basic income per share (in thousands)
|
6,934
|
7,103
|
7,184
|
7,269
|
7,344
|
|||||||||||||||
Weighted average number of ordinary shares used to compute diluted income per share (in thousands)
|
6,968
|
7,246
|
7,319
|
7,368
|
7,435
|
2012
|
2013
|
2014
|
2015
|
2016
|
||||||||||||||||
Total assets
|
$
|
89,033
|
$
|
105,257
|
$
|
122,436
|
$
|
139,998
|
$
|
146,437
|
||||||||||
Total current liabilities
|
$
|
11,789
|
$
|
11,948
|
$
|
19,006
|
$
|
19,814
|
$
|
17,964
|
||||||||||
Long-term liability
|
$
|
2,278
|
$
|
2,618
|
$
|
2,698
|
$
|
7,350
|
$
|
7,081
|
||||||||||
Shareholders' equity
|
$
|
74,966
|
$
|
90,691
|
$
|
100,732
|
$
|
112,834
|
$
|
121,392
|
||||||||||
Capital stock
|
$
|
21
|
$
|
21
|
$
|
21
|
$
|
21
|
$
|
22
|
||||||||||
Number of ordinary shares issued(1)
|
7,022,397
|
7,154,984
|
7,233,604
|
7,299,315
|
7,396,584
|
NIS per U.S. $
|
||||||||||||||||
Year Ended December 31,
|
High
|
Low
|
Average
|
Period End
|
||||||||||||
2016
|
3.983
|
3.746
|
3.841
|
3.845
|
||||||||||||
2015
|
4.053
|
3.761
|
3.887
|
3.902
|
||||||||||||
2014
|
3.994
|
3.402
|
3.577
|
3.889
|
||||||||||||
2013
|
3.728
|
3.471
|
3.601
|
3.471
|
||||||||||||
2012
|
4.028
|
3.715
|
3.844
|
3.733
|
|
NIS per U.S. $ | |||||||||||||||
Month
|
High
|
Low
|
Average
|
Period End
|
||||||||||||
March 2017
|
3.693
|
3.614
|
3.649
|
3.623
|
||||||||||||
February 2017
|
3.768
|
3.707
|
3.740
|
3.710
|
||||||||||||
January 2017
|
3.860
|
3.769
|
3.818
|
3.769
|
||||||||||||
December 2016
|
3.867
|
3.787
|
3.829
|
3.845
|
||||||||||||
November 2016
|
3.876
|
3.799
|
3.843
|
3.839
|
||||||||||||
October 2016
|
3.856
|
3.778
|
3.821
|
3.811
|
· |
Substantial research and development and business development expenditures, which could divert funds from other corporate uses and/or have a significant negative effect on our short-term results;
|
· |
Diversion of management’s attention from our core business; and
|
· |
Entering markets in which we have little or no experience.
|
· |
Post-merger integration problems resulting from the combination of any acquired operations with our own operations or from the combination of two or more operations into a new merged entity;
|
· |
Diversion of management’s attention from our core business;
|
· |
Substantial expenditures, which could divert funds from other corporate uses;
|
· |
Entering markets in which we have little or no experience; and
|
· |
Loss of key employees of the acquired operations.
|
(i) |
Server network interface cards with and without bypass (Server Adapters);
|
(ii) |
Intelligent and programmable cards, with features such as encryption, acceleration, data compression, redirection, time stamping, network capture solutions, SD-WAN (Software-Defined Wide Area Network), FPGA based ultra-low latency solutions, other offload features and/or compute blades (Smart Cards); and
|
(iii) |
Stand-alone Products (including Bypass Switches, Intelligent Bypass Switches, the patented SETAC (Server To Appliance Converter) product family and the CPE/Edge/Low End Appliance Units.
|
(i) |
Network appliances, including WAN Optimization and SD-WAN, Internet Security, Cyber Security, Application Delivery, Traffic Management, Network Monitoring and Analytics, High Frequency Trading (HFT) for the financial service market and other mission-critical sectors;
|
(ii) |
Servers;
|
(iii) |
Data storage including Big Data;
|
(iv) |
The "Cloud" (virtualized data centers with and without SDN);
|
(v) |
Network CPE/EDGE/Low End appliances; and
|
(vi) |
IOT.
|
· |
We approach a potential customer or are approached by such customer.
|
· |
If the customer shows interest in the products and we believe that achievement of a business relationship with the customer is possible, we ship products for such customer’s evaluation.
|
· |
During the evaluation process the customer receives a few units of the relevant product for initial basic testing. If the evaluation process is successful, we ship products for qualification.
|
· |
During the qualification process the customer receives a larger amount of our products for more specific testing, which may include certain adaptations of our products to its specific needs.
|
· |
If the qualification process is successful, we enter into negotiations regarding the terms of a business relationship.
|
· |
In some cases, typically with the larger customers, the evaluation and qualification process may take 12 months or more.
|
· |
Silicom Connectivity Solutions, Inc. – a private company incorporated in the United States; and
|
· |
Silicom Denmark A/S (Fiberblaze A/S) – a private company incorporated in Denmark. On December 10, 2014, we entered into the Fiberblaze SPA for the purchase of the entire holdings in Fiberblaze, pursuant to which we became its sole shareholder. As part of the Fiberblaze SPA, we have also purchased Fiberblaze US LLC, a private company incorporated in the United States, being a 100% owned subsidiary of Fiberblaze. In October 2016 we commenced a voluntary liquidation process for the liquidation of Fiberblaze US LLC. As of the date of this report, the voluntary liquidation is still pending. In 2017 we changed the name of the company from Fiberblaze A/S to the company's current name – Silicom Denmark A/S (Fiberblaze A/S) and all the rights related to the company’s previous name remained ours. See "Item 10 – Additional Information – C. "Material Contracts" for additional information on the Fiberblaze SPA.
|
· |
Goodwill and other intangible assets - Goodwill reflects the excess of the purchase price of business acquired over the fair value of net assets acquired. Goodwill is not amortized but instead is tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
|
· |
Inventories – Inventories are stated at the lower of cost or market. Cost is determined using the "weighted average-cost" method. We write down obsolete or slow moving inventory to its market value.
|
· |
Marketable securities – We account for investments which we intend and are able to hold to maturity, that are classified as held-to-maturity investments as defined in ASC 320-10, "Accounting for Certain Investments in Debt and Equity Securities".
|
· |
Income Taxes – We account for income taxes under ASC 740-10, "Accounting for Income taxes". Under ASC 740-10, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred taxes assets to the amount expected to be realized. Valuation allowances in respect of deferred taxes were recorded in respect of the following matter:
|
§ |
Deferred tax assets that, as we believe, are more likely than not to be realized. In assessing the potential of realization of deferred tax assets, we consider projected future taxable income and tax planning strategies.
|
· |
Accounting for Stock-Based Compensation – The Company recognizes compensation expense in accordance with ASC topic 718, "Compensation – stock compensation" based on estimated grant date fair value using an option-pricing model. For our option grants granted after January 1, 2008 which include features that are not supported by the Black and Scholes valuation model, such as expiration of said awards if the closing price of our shares falls below 50% of the respective awards' exercise price, we recognize compensation expense based on estimated grant date fair value using the Monte Carlo option-pricing model or the Binomial option-pricing model. Where our option awards granted after January 1, 2008 do not include features that are not supported by the Black and Scholes valuation model, we recognize compensation expense based on estimated grant date fair value using the Black and Scholes model. For our RSU grants, we recognize compensation expenses based on the market value of our shares on the date of grant, less an estimate of dividends that will not accrue to RSU holders prior to vesting.
|
· |
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. We have not yet selected a transition method and we are evaluating the impact of adopting the standard on our ongoing financial reporting. Based on our assessment as of the date of these financial statements, the impact of adopting the new standard is not expected to be material.
|
· |
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.
|
· |
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. This ASU is effective for interim and annual periods in fiscal years beginning after December 15, 2016. Early adoption is permitted.
|
· |
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. This ASU is effective for interim and annual periods in fiscal years beginning after December 15, 2018. Early adoption is permitted.
|
· |
On March 30, 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which is intended to improve the accounting for share-based payment transactions as part of the FASB’s simplification initiative. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2016. Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.
|
· |
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which significantly changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for annual and interim periods in fiscal years beginning after December 15, 2018.
|
2014
|
2015
|
2016
|
||||||||||
Sales
|
100
|
%
|
100
|
%
|
100
|
%
|
||||||
Cost of sales
|
59.3
|
58.8
|
61.6
|
|||||||||
Gross profit
|
40.7
|
41.2
|
38.4
|
|||||||||
Research and development costs
|
8.6
|
11.7
|
12.6
|
|||||||||
Sales and marketing expenses
|
5.8
|
6.8
|
6.4
|
|||||||||
General and administrative expenses
|
3.7
|
4.4
|
3.9
|
|||||||||
Contingent consideration expense (benefit)
|
0.1
|
(3.7
|
)
|
(0.3
|
)
|
|||||||
Operating Income
|
22.5
|
22.0
|
15.8
|
|||||||||
Financial income, net
|
0.4
|
0.3
|
-
|
|||||||||
Income before income taxes
|
22.9
|
22.3
|
15.8
|
|||||||||
Income tax expenses
|
3.6
|
2.3
|
2.7
|
|||||||||
Net Income
|
19.3
|
20.0
|
13.1
|
Contractual Obligations
|
Payments due by period
|
||||
Total
|
Less than 1 year
|
1-3 years
|
3-5 years
|
More than 5 years
|
|
Operating Leases
|
$3,780
|
$1,481
|
$2,135
|
$164
|
|
Purchase Obligations
|
$14,190
|
$14,190
|
|||
Total
|
$17,970
|
$15,671
|
$2,135
|
$164
|
Name
|
Age
|
Position with Company
|
Avi Eizenman(1)
|
59
|
Active Chairman of the Board
|
Shaike Orbach(2)
|
65
|
President, Chief Executive Officer, Director
|
Ayelet Aya Hayak(3)
|
47
|
External Director
|
Ilan Erez(3)
|
49
|
External Director
|
Eli Doron(4)
|
64
|
Director
|
Eran Gilad
|
49
|
Chief Financial Officer and Company Secretary
|
(1) |
Was re-elected for an additional three-year term, commencing as of June 8, 2016.
|
(2) |
Was re-elected for an additional one-year term, commencing as of June 8, 2016.
|
(3) |
Was re-elected for an additional three-year term, commencing as of June 8, 2016.
|
(4) |
Was re-elected for an additional two-year term, commencing as of June 8, 2016.
|
Name and
Position
|
Salary and
Benefits(1)
|
Cash Bonus(2)
|
Equity-based Compensation(3)
|
Total
|
||||||||||||
Avi Eizenman – Active Chairman
|
553,563
|
263,246
|
389,883
|
1,206,692
|
||||||||||||
Yeshayahu ('Shaike') Orbach – CEO and President
|
351,707
|
263,246
|
389,883
|
1,004,836
|
||||||||||||
David Hendel – VP Research and Development
|
221,493
|
30,489
|
71,793
|
323,775
|
||||||||||||
Elad Blatt – VP Business Development and Sales North America
|
183,196
|
61,198
|
71,793
|
316,187
|
||||||||||||
David Castiel – VP Engineering
|
208,127
|
30,489
|
71,793
|
310,409
|
(1) |
"Salary and Benefits" include annual salary or service fees paid, payments to the National Insurance Institute, manager's insurance and pension funds, severance, advanced education funds, basic health insurance, vacation pay, recuperation pay, tax gross-up payments, automobile-related expenses, telephone expenses and benefits and perquisites as mandated by Israeli or applicable law.
|
(2) |
"Cash Bonus" includes bonus payments as recorded in our financial statements for the year ended December 31, 2016.
|
(3) |
"Equity-based Compensation" includes the expense recorded in our financial statements for the year ended December 31, 2016 with respect to equity-based compensation granted to the executive offices detailed above.
|
· |
An employment relationship;
|
· |
A business or professional relationship maintained on a regular basis;
|
· |
Control; and
|
· |
Service as an office holder.
|
· |
the majority includes at least a majority of the shares held by non-controlling and disinterested shareholders who are present and voting at the meeting; or
|
· |
the total number of shares held by non-controlling and disinterested shareholders that voted against the election of the director does not exceed two percent of the aggregate voting rights in the company.
|
· |
The chairman of the board of directors;
|
· |
Any director employed by or otherwise providing services to the company or to the "controlling shareholder" or entity under such controlling shareholder's control;
|
· |
Any director who derives his salary primarily from a controlling shareholder;
|
· |
A "controlling shareholder"; or
|
· |
Any relative of a "controlling shareholder".
|
· |
The chairman of the board of directors;
|
· |
Any director employed by or otherwise providing services to the company or to the controlling shareholder or entity under such controlling shareholder's control;
|
· |
Any director who derives his salary primarily from a "controlling shareholder";
|
· |
A "controlling shareholder"; or,
|
· |
Any relative of a "controlling shareholder".
|
1. |
To recommend to the Board of Directors as to a compensation policy for officers of the company, as well as to recommend, once every three years to extend the compensation policy subject to receipt of the required corporate approvals;
|
2. |
To recommend to the Board of Directors as to any updates to the compensation policy which may be required;
|
3. |
To review the implementation of the compensation policy by the company;
|
4. |
To approve transactions relating to terms of office and employment of certain company office holders, which require the approval of the compensation committee pursuant to the Companies Law; and
|
5. |
To exempt, under certain circumstances, a transaction relating to terms of office and employment from the requirement of approval of the shareholders meeting.
|
a. |
Advancement of the goals of the company, its working plan and its long term policy;
|
b. |
The creation of proper incentives for the office holders while taking into consideration, inter alia, the company’s risk management policies;
|
c. |
The company’s size and nature of its operations;
|
d. |
The contributions of the relevant office holders in achieving the goals of the company and profit in the long term in light of their positions;
|
e. |
The education, skills, expertise and achievements of the relevant office holders;
|
f. |
The role of the office holders, areas of their responsibilities and previous agreements with them;
|
g. |
The correlation of the proposed compensation with the compensation of other employees of the company, and the effect of such differences in compensation on the employment relations in the company; and
|
h. |
The long term performance of the office holder.
|
(i) |
The majority of the votes includes at least a majority of all the votes of shareholders who are not controlling shareholders of the company or who do not have a personal interest in the compensation policy and participating in the vote; abstentions shall not be included in the total of the votes of the aforesaid shareholders; or
|
(ii) |
The total of opposing votes from among the shareholders described in subsection (i) above does not exceed 2% of all the voting rights in the company.
|
As of December 31
|
2014
|
2015
|
2016
|
|||||||||
Total Employees
|
197
|
238
|
240
|
|||||||||
Marketing, Sales, Customer Services
|
22
|
26
|
24
|
|||||||||
Research & Development
|
66
|
81
|
79
|
|||||||||
Manufacturing
|
97
|
114
|
121
|
|||||||||
Corporate Operations and Administration
|
12
|
17
|
16
|
Name and Address
|
Number of Shares and Options Owned1
|
Percent of Outstanding Shares
|
||||||
Avi Eizenmann
|
247,618
|
3.34
|
%
|
|||||
Shaike Orbach
|
12,500
|
*
|
||||||
Eli Doron
|
*
|
*
|
||||||
Ayelet Aya Hayak
|
*
|
*
|
||||||
Ilan Erez
|
*
|
*
|
||||||
Eran Gilad
|
*
|
*
|
||||||
All directors and officers as a group
|
260,118
|
3.51
|
%
|
|||||
Name of Shareholder
|
Number of Shares and Options Owned1
|
Percentage of Outstanding Shares
|
||||||
Zohar Zisapel2
|
1,511,722
|
20.48
|
%
|
|||||
Dov Yelin/Yair Lapidot/Yelin Lapidot Holdings Management Ltd.3
|
440,171
|
5.96
|
%
|
|||||
Harel Insurance Investments & Financial Services Ltd.4
|
221,113
|
3.00
|
%
|
PERIOD
|
LOW
|
HIGH
|
||||||
LAST 6 CALENDAR MONTHS
|
||||||||
March 2017
|
37.35
|
50.00
|
||||||
February 2017
|
35.02
|
39.01
|
||||||
January 2017
|
34.86
|
41.50
|
||||||
December 2016
|
37.60
|
41.11
|
||||||
November 2016
|
34.46
|
41.20
|
||||||
October 2016
|
34.89
|
42.69
|
||||||
FINANCIAL QUARTERS DURING THE PAST TWO YEARS
|
||||||||
First Quarter 2017
|
34.86
|
50.00
|
||||||
Fourth Quarter 2016
|
34.46
|
42.69
|
||||||
Third Quarter 2016
|
27.06
|
44.00
|
||||||
Second Quarter 2016
|
25.48
|
34.35
|
||||||
First Quarter 2016
|
26.15
|
34.20
|
||||||
Fourth Quarter 2015
|
25.00
|
33.96
|
||||||
Third Quarter 2015
|
24.86
|
37.24
|
||||||
Second Quarter 2015
|
34.80
|
44.54
|
||||||
FIVE MOST RECENT FULL FINANCIAL YEARS
|
||||||||
2016
|
25.48
|
44.00
|
||||||
2015
|
24.86
|
48.43
|
||||||
2014
|
26.00
|
73.44
|
||||||
2013
|
17.97
|
46.15
|
||||||
2012
|
13.11
|
20.33
|
PERIOD
|
LOW
|
HIGH
|
||||||
FINANCIAL QUARTERS DURING THE PAST TWO YEARS
|
||||||||
First Quarter 20161
|
125.00
|
169.00
|
||||||
Fourth Quarter 2015
|
97.08
|
131.10
|
||||||
Third Quarter 2015
|
96.01
|
141.60
|
||||||
Second Quarter 2015
|
134.90
|
178.30
|
||||||
First Quarter 2015
|
125
|
189.60
|
||||||
FIVE MOST RECENT FULL FINANCIAL YEARS
|
||||||||
2015
|
96.01
|
189.60
|
||||||
2014
|
89.74
|
257.20
|
||||||
2013
|
66.50
|
166.60
|
||||||
2012
|
51.60
|
73.00
|
||||||
2011
|
44.16
|
80.64
|
||||||
· |
Appointment or termination of our auditors;
|
· |
Appointment and dismissal of external directors, unless the company elects to opt-in to the exemptions promulgated under the Amendment to the Relief Regulations as detailed above, under which there is no requirement to appoint external directors;
|
· |
Approval of interested party acts and transactions requiring general meeting approval as provided in sections 255 and 268 to 275 of the Israeli Companies Law;
|
· |
A merger as provided in section 320(a) of the Israeli Companies Law;
|
· |
The exercise of the powers of the board of directors, if the board of directors is unable to exercise its powers and the exercise of any of its powers is vital for our proper management, as provided in section 52(a) of the Israeli Companies Law;
|
· |
Amendments to our Articles; and
|
· |
Approval of an increase or decrease of the registered share capital.
|
· |
All of the directors are permitted to vote on the matter and attend the meeting in which the matter is considered; and
|
· |
The matter requires approval of the shareholders at a general meeting.
|
1. |
A private placement that meets all of the following conditions:
|
· |
The private placement will increase the relative holdings of a shareholder that holds five percent or more of the company’s outstanding share capital, assuming the exercise of all of the securities convertible into shares held by that person, or that will cause any person to become, as a result of the issuance, a holder of more than five percent of the company's outstanding share capital.
|
· |
20 percent or more of the voting rights in the company prior to such issuance are being offered.
|
· |
All or part of the consideration for the offering is not cash or registered securities, or the private placement is not being offered at market terms.
|
2. |
A private placement which results in anyone becoming a "controlling shareholder" of the public company.
|
· |
Any amendment to the articles of association;
|
· |
An increase of the company’s authorized share capital;
|
· |
A merger; or
|
· |
Approval of interested party acts and transactions that require general meeting approval as provided in sections 255 and 268 to 275 of the Israeli Companies Law.
|
· |
Code of Corporate Governance. Under the Sixteenth Amendment, a code of recommended corporate governance practices has been attached as an annex to the Companies Law. In the explanatory notes to the legislation, the Knesset noted that an "adopt or disclose non-adoption" regulation would be issued by the ISA with respect to such code. As of the date of this Annual Report, the ISA has issued reporting instructions with respect to this code which are applicable only to publicly traded companies whose securities are traded solely on the Tel Aviv Stock Exchange and which report solely to the ISA.
|
· |
Fines. The ISA shall be authorized to impose fines on any person or company performing a violation, in connection with a publicly traded company which reports to the ISA, and specifically designated as a violation under the Sixteenth Amendment.
|
· |
Distribution of annual and quarterly reports to shareholders – Under Israeli law we are not required to distribute annual and quarterly reports directly to shareholders and the generally accepted business practice in Israel is not to distribute such reports to shareholders. We do however make our audited financial statements available to our shareholders prior to our annual general meeting and furnish our quarterly and annual financial results with the SEC on Form 6-K.
|
· |
Independence, Nomination and Compensation of Directors – A majority of our Board of Directors may not necessarily be comprised of independent directors as defined in NASDAQ Listing Rule 5605(a)(2). Our Board of Directors contains two external directors in accordance with the provisions of the Companies Law. Israeli law does not require, nor do our external directors conduct, regularly scheduled meetings at which only they are present. In addition, with the exception of our external directors, our directors are elected to our Board of Directors in accordance with the new directors voting mechanism approved by our shareholders on the Annual General Meeting which took place on June 8, 2016. According to said directors voting mechanism, directors are divided into three groups, Group A, Group B and Group C. Each group is brought for re-election once every three years, on a rotating basis, such that at each annual general meeting of the shareholders a given group of directors is brought for election, to serve on a continuous basis for a three-year term, until the third annual general meeting following the meeting on which such group was elected for service and until their respective successors are duly elected, at which point their term in office shall expire. At each annual general meeting, the annual general meeting shall be entitled to elect directors to replace the directors whose three-year term in office has expired, and so on ad infinitum, so that each year, the term in office of one group of directors shall expire. The nominations for director which are presented to our shareholders are generally made by our board of directors. One or more shareholders of a company holding at least one percent of the voting power of the company may nominate a currently serving external director for an additional three year term. Israeli law does not require the adoption of, and our board has not adopted, a formal written charter or board resolution addressing the nomination process and related matters. Compensation of our directors and other officers of the Company is determined in accordance with Israeli law.
|
· |
Audit Committee – Our Audit Committee does not meet with all the requirements of NASDAQ Listing Rule 5605. We are of the opinion that the members of our Audit Committee comply with the requirements of NASDAQ Listing Rule 5605(c)(3) and Rule 10A-3(b) of the general rules and regulations promulgated under the Securities Act of 1933 and all requirements under Israeli law. Our Audit Committee has not adopted a formal written audit committee charter specifying the items enumerated in NASDAQ Listing Rule 5605(c)(1).
|
· |
Compensation Committee - We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilities of our Compensation Committee, office holder compensation, and any required approval by the shareholders of such compensation. Israeli law, and our amended and restated Articles, do not require that a compensation committee composed solely of independent members of our board of directors determine (or recommend to the board of directors for determination) an executive officer’s compensation, as required under NASDAQ’s listing standards related to compensation committee independence and responsibilities; nor do they require that the Company adopt and file a compensation committee charter. Instead, our compensation committee has been established and conducts itself in accordance with provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law. Furthermore, the compensation of office holders is determined and approved by our Compensation Committee and our board of directors, and in certain circumstances by our shareholders, either in consistency with our previously approved Executive Compensation Policy or, in special circumstances in deviation therefrom, taking into account certain considerations set forth in the Companies Law. The requirements for shareholder approval of any office holder compensation, and the relevant majority or special majority for such approval, are all as set forth in the Companies Law. Thus, we will seek shareholder approval for all corporate actions with respect to office holder compensation requiring such approval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the Executive Compensation Policy and for certain office holder compensation, rather than seeking approval for such corporate actions in accordance with NASDAQ Listing Rules.
|
· |
Quorum – Under Israeli law a company is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at a shareholders meeting. Our Articles provide that a quorum of two or more shareholders, present in person or by proxy, holding shares conferring in the aggregate more than thirty three and a third (33 1/3 %) percent of the voting power of the Company is required for commencement of business at a general meeting.
|
· |
Approval of Related Party Transactions – All related party transactions are approved in accordance with the requirements and procedures for approval of interested party acts and transactions, set forth in sections 268 to 275 of the Companies Law.
|
· |
Shareholder Approval – We seek shareholder approval for all corporate action requiring such approval, in accordance with the requirements of the Companies Law.
|
· |
Equity Compensation Plans – We do not necessarily seek shareholder approval for the establishment of, and amendments to, stock option or equity compensation plans (as set forth in NASDAQ Listing Rule 5635(c)), as such matters are not subject to shareholder approval under Israeli law. We will attempt to seek shareholder approval for our stock option or equity compensation plans (and the relevant annexes thereto) to the extent required in order to ensure they are tax qualified for our employees in the United States. However, even if such approval is not received, then the stock option or equity compensation plans will continue to be in effect, but the Company will be unable to grant options to its U.S. employees that qualify as Incentive Stock Options for U.S. federal tax purpose. Our stock option or other equity compensation plans are also available to our non-U.S. employees, and provide features necessary to comply with applicable non-U.S. tax laws.
|
· |
Replacement of all future tax incentives under the existing law as amended by the First Amendment; as a result, commencing 2011, industrial companies that meet the conditions set out by the Second Amendment will no longer be entitled to the existing tax incentives provided under the First Amendment, such as the exemption from tax on undistributed profits and a reduced tax rate thereafter, but rather to the tax incentives under the Second Amendment;
|
· |
Under the transition provisions, any tax benefits obtained prior to 2011 shall continue to apply until expired, unless the company elects to apply the provisions of the Second Amendment to its income; and
|
· |
Pursuant to the second Amendment, a "Preferred Enterprise" is entitled to a reduced corporate flat tax rate of 15% with respect to its preferred income derived by its "Preferred Enterprise" in 2011-2012, unless the "Preferred Enterprise" is located in a certain development zone, in which case the rate will be 10%. Such corporate tax rates are 12.5% and 7% with respect to 2013,16% and 9% with respect to 2014, 16% and 9% with respect to 2015-2016 and 16% and 7.5% with respect to 2017 and thereafter. Income derived by a Preferred Company from a ‘Special Preferred Enterprise’ (as such term is defined in the Investment Law) would be entitled, during a benefits period of 10 years, to further reduced tax rates of 8%, or to 5% if the "Special Preferred Enterprise" is located in a certain development zone. Under the Second Amendment, the tax incentives offered by the Investment Law are no longer dependent neither on minimum qualified investments nor on foreign ownership. Companies will be able to enjoy both government grants and tax benefits concurrently. Governmental grants will not necessarily be dependent on the extent of enterprise’s investment in assets and/or equipment. Commencing 2011, the approval of "Preferred Enterprise" status by either the Israeli Tax Authorities or the appointed authority will be accepted by the other. Therefore a "Preferred Enterprise" will be eligible to receive both tax incentives and government grants, under certain conditions.
|
Source
|
% of
Dividend
|
Individual
Tax %
|
Corporations
Tax %
|
Foreign
Resident
Tax %
|
||||||||||||
|
Dividend Distributed on April 17, 2013
|
|||||||||||||||
Regular Income
|
34.6031
|
25
|
0
|
25
|
||||||||||||
Benefited Enterprise
|
65.3969
|
15
|
15
|
15
|
||||||||||||
|
Dividend Distributed on April 17, 2014
|
|||||||||||||||
Regular Income
|
52.9928
|
25
|
0
|
25
|
||||||||||||
Benefited Enterprise
|
47.0071
|
15
|
15
|
15
|
||||||||||||
Dividend Distributed on April 21, 2015
|
||||||||||||||||
Regular Income
|
5.5888
|
25
|
0
|
25
|
||||||||||||
Benefited Enterprise
|
12.7771
|
15
|
0
|
15
|
||||||||||||
Preferred Enterprise
|
81.6341
|
20
|
0
|
20
|
||||||||||||
Dividend Distributed on April 14, 2016
|
||||||||||||||||
Regular Income
|
0
|
25
|
0
|
25
|
||||||||||||
Preferred Enterprise
|
100.0000
|
20
|
0
|
20
|
||||||||||||
Dividend Distributed on April 5, 2017
|
||||||||||||||||
Regular Income
|
0
|
25
|
0
|
25
|
||||||||||||
Preferred Enterprise
|
100.0000
|
20
|
0
|
20
|
2016
|
2015
|
|||||||
Audit Fees(1)
|
$
|
120,000
|
$
|
110,000
|
||||
Audit-Related Fees(2)
|
--
|
$
|
22,000
|
|||||
Tax Fees(3)
|
$
|
55,000
|
$
|
37,500
|
· |
We are not required to distribute annual and quarterly reports directly to shareholders, but we do make our audited financial statements available to our shareholders prior to our annual general meeting and furnish our quarterly and annual financial results with the SEC on Form 6-K;
|
· |
A majority of our Board of Directors may not necessarily be comprised of independent directors as defined in the NASDAQ Listing Rules, but our Board of Directors contains two external directors in accordance with the Companies Law. Israeli law does not require, nor do our external directors conduct, regularly scheduled meetings at which only they are present. In addition, with the exception of our external directors, our directors are elected for terms of one year or until the following annual meeting, by a general meeting of our shareholders. The nominations for director which are presented to our shareholders are also generally made by our Board of Directors. Pursuant to the Companies Law, one or more shareholders of a company holding at least one percent of the voting power of the company may nominate a currently serving external director for an additional three year term. Israeli law does not require the adoption of and our board has not adopted a formal written charter or board resolution addressing the nomination process and related matters. Compensation of our directors and other officers of the Company is determined in accordance with Israeli Law;
|
· |
Our Audit Committee has not adopted a formal written audit committee charter specifying the items enumerated in NASDAQ Listing Rule 5605(c)(1). We believe that the members of our audit committee comply with the requirements of the Israeli law, as well as NASDAQ Listing Rule 5605(c)(3) and Rule 10A-3(b) of the general rules and regulations promulgated under the Securities Act of 1933. For a detailed discussion please refer to "Item 6 – Directors, Senior Management and Employees – Audit Committee";
|
· |
As opposed to NASDAQ Listing Rule 5620(c)(3), which sets forth a minimum quorum for a shareholders meeting, under Israeli law a company is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at a shareholders meeting. Our current Articles provide that a quorum of two or more shareholders, present in person or by proxy, holding shares conferring in the aggregate more than thirty three and a third (33 1/3 %) percent of the voting power of the Company is required;
|
· |
All related party transactions are approved in accordance with the requirements and procedures for approval of interested party acts and transactions set forth in the Companies Law, and are not subject to the review process set forth in NASDAQ Listing Rule 5630. For a detailed discussion please refer to "Item 10 – Additional Information – the Companies Law";
|
· |
We seek shareholder approval for all corporate action requiring such approval in accordance with the requirements of the Companies Law rather than under the requirements of the NASDAQ Marketplace Rules, including (but not limited to) the appointment or termination of auditors, appointment and dismissal of directors, approval of interested party acts and transactions requiring general meeting approval as discussed above and a merger;
|
· |
We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilities of our compensation committee, office holder compensation, and any required approval by the shareholders of such compensation. Israeli law, and our amended and restated Articles, do not require that a compensation committee composed solely of independent members of our Board of Directors determine (or recommend to the board of directors for determination) an executive officer’s compensation, as required under NASDAQ listing standards related to compensation committee independence and responsibilities; nor do they require that the Company adopt and file a compensation committee charter. Instead, our Compensation Committee has been established and conducts itself in accordance with provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law. Furthermore, the compensation of office holders is determined and approved by our Compensation Committee and our Board of Directors, and in certain circumstances by our shareholders, either in consistency with our previously approved Executive Compensation Policy or, in special circumstances in deviation therefrom, taking into account certain considerations set forth in the Companies Law. The requirements for approval by the shareholders for any office holder compensation, and the relevant majority or special majority for such approval, are all as set forth in the Companies Law. Thus, we will seek shareholder approval for all corporate actions with respect to office holder compensation requiring such approval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the Executive Compensation Policy and for certain office holder compensation, rather than seeking approval for such corporate actions in accordance with NASDAQ Listing Rules; and
|
· |
We do not necessarily seek shareholder approval for the establishment of, and amendments to, stock option or equity compensation plans (as set forth in NASDAQ Listing Rule 5635(c)), as such matters are not subject to shareholder approval under Israeli law. We will attempt to seek shareholder approval for our stock option or equity compensation plans (and the relevant annexes thereto) to the extent required in order to ensure they are tax qualified for our employees in the United States. However, if such approval is not received, then the stock option or equity compensation plans will continue to be in effect, but the Company will be unable to grant options to its U.S. employees that qualify as Incentive Stock Options for U.S. federal tax purpose. Our stock option or other equity compensation plans are also available to our non-U.S. employees, and provide features necessary to comply with applicable non-U.S. tax laws.
|
1.1 |
Amended and Restated Articles of Association, adopted on January 24, 2008, filed by us as an Exhibit to our registration statement on Form S-8, as filed with the Securities and Exchange Commission on February 11, 2008, and incorporated herein by reference.
|
1.2 |
Amendment to Articles of Association of the Registrant incorporated by reference to Proposal 5 found in Exhibit 2 to the Form 6-K as filed with the Securities and Exchange Commission on March 1, 2012, and incorporated herein by reference.
|
4.1 |
Lease between the Company, C.P.M Medical Equipment Ltd. and Klimotech Ltd., for premises in Kfar Sava, Israel, dated December 3, 2014. As this lease is written in Hebrew, a summary is included in the Exhibit.
|
4.2 |
Sublease Agreement between the Company and Lumenis Ltd. for the site of our manufacturing facility in Yokne'am, Israel, dated August 1, 2013, and an amendment dated November 21, 2013, filed by us as an Exhibit to our annual report on Form 20-F for the fiscal year ended December 31, 2013, as filed with the Securities and Exchange Commission on March 20, 2014, and incorporated herein by reference. As this sublease agreement and the amendment are written in Hebrew, a summary was included in the Exhibit.
|
4.3 |
Lease between the Company and Naji Ezekiel & Sons - Management and Maintenance Ltd., for office space in Yokne'am Illit, dated as of August15, 2016. As this lease is written in Hebrew, a summary is filed herewith. (*)
|
4.4 |
Lease between Silicom Connectivity Solutions, Inc. and RAD Data Communications Inc., for space in Mahwah, New Jersey, dated as of September 1, 1997, filed by us as an Exhibit to our annual report on Form 20-F for the fiscal year ended December 31, 2000, as filed with the Securities and Exchange Commission on June 30, 2001, and incorporated herein by reference.
|
4.5 |
Sublease Agreement between Silicom Connectivity Solutions, Inc. and Radcom Equipmet, Inc., for space in Paramus, New Jersey, dated as of February 1, 2004, filed by us as an Exhibit to our annual report on Form 20-F for the fiscal year ended December 31, 2003, as filed with the Securities and Exchange Commission on June 30, 2004, and incorporated herein by reference.
|
4.6 |
Lease agreement between Silicom Connectivity Solutions, Inc. and Zohar Zisapel Properties, Inc. and Yehuda Zisapel Properties, Inc., for space in Paramus, New Jersey, dated January 25, 2017. (*)
|
4.7 |
The Executive Compensation Policy of the Company approved by the Shareholders on July 31, 2013, filed by us as Annex A to Proposal 1 found in Exhibit 2 to the Form 6-K as filed with the Securities and Exchange Commission on June 26, 2013, and incorporated herein by reference.
|
4.8 |
Share Purchase Agreement by and among the Company, Fiberblaze A/S, Fiberblaze Holding APS, and Hilmer APS, dated December 10, 2014.
|
4.9 |
Asset Purchase Agreement by and among the Company, the Company's wholly owned subsidiary Silicom Connectivity Solutions, Inc., ADI Engineering, Inc., Steve Yates and Patricia Yates, dated September 30, 2015.
|
8. |
List of subsidiaries. (*)
|
11.1 |
Code of Ethics, filed by us as an Exhibit to our annual report on Form 20-F for the fiscal year ended December 31, 2007, as filed with the Securities and Exchange Commission on March 26, 2008, and incorporated herein by reference.
|
12.1 |
Certification by Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (*)
|
12.2 |
Certification by Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (*)
|
13.1 |
Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (*)
|
13.2 |
Certification by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (*)
|
15.1 |
Consent of Somekh Chaikin, Independent Registered Public Accounting Firm, a member firm of KPMG International. (*)
|
|
SILICOM LIMITED
By: /S/ Shaike Orbach
Shaike Orbach
Chief Executive Officer
|
Page
|
|
F - 3
|
|
F - 4
|
|
F - 6
|
|
F - 7
|
|
F - 8
|
|
F - 9
|
2015
|
2016
|
||||||||||
Note
|
US$ thousands
|
US$ thousands
|
|||||||||
Assets
|
|||||||||||
Current assets
|
|||||||||||
Cash and cash equivalents
|
4
|
18,178
|
11,917
|
||||||||
Marketable securities
|
2F, 5
|
8,636
|
16,263
|
||||||||
Accounts receivable:
|
|||||||||||
Trade, net
|
2G
|
|
23,295
|
27,305
|
|||||||
Other
|
1,380
|
3,113
|
|||||||||
Related parties
|
473
|
417
|
|||||||||
Inventories
|
6
|
26,321
|
44,280
|
||||||||
Total current assets
|
78,283
|
103,295
|
|||||||||
Marketable securities
|
2F, 5
|
24,246
|
7,769
|
||||||||
Assets held for employees' severance benefits
|
9
|
1,374
|
1,436
|
||||||||
Deferred tax assets
|
14G
|
|
1,545
|
1,537
|
|||||||
Property, plant and equipment ("PPE"), net
|
7
|
3,825
|
3,915
|
||||||||
Intangible assets, net
|
8B
|
|
5,164
|
2,924
|
|||||||
Goodwill
|
8A
|
|
25,561
|
25,561
|
|||||||
Total assets
|
139,998
|
146,437
|
Avi Eizenman
|
Shaike Orbach
|
Eran Gilad
|
||
Chairman of the Board of Directors
|
Chief Executive Officer
|
Chief Financial Officer
|
2015
|
2016
|
||||||||||
Note
|
US$ thousands
|
US$ thousands
|
|||||||||
Liabilities and shareholders' equity
|
|||||||||||
Current liabilities
|
|||||||||||
Trade accounts payable
|
8,544
|
10,476
|
|||||||||
Other accounts payable and accrued expenses
|
11,147
|
7,484
|
|||||||||
Related parties
|
12
|
4
|
|||||||||
Total current liabilities
|
19,703
|
17,964
|
|||||||||
Long-term liabilities
|
|||||||||||
Contingent consideration
|
3
|
4,942
|
4,642
|
||||||||
Liability for employees' severance benefits
|
9
|
2,251
|
2,439
|
||||||||
Deferred tax liabilities
|
14G
|
|
268
|
-
|
|||||||
Total liabilities
|
27,164
|
25,045
|
|||||||||
Commitments and contingencies
|
10
|
||||||||||
Shareholders' equity
|
11
|
||||||||||
Ordinary shares, ILS 0.01 par value; 10,000,000 shares
|
|||||||||||
authorized; 7,299,315 and 7,396,584 issued as at
|
|||||||||||
December 31, 2015 and 2016, respectively;
|
|||||||||||
7,284,344 and 7,381,613 outstanding as at
|
|||||||||||
December 31, 2015 and 2016, respectively
|
21
|
22
|
|||||||||
Additional paid-in capital
|
44,101
|
46,833
|
|||||||||
Treasury shares (at cost) - 14,971 ordinary shares as at
|
|||||||||||
December 31, 2015 and 2016
|
(38
|
)
|
(38
|
)
|
|||||||
Retained earnings
|
68,750
|
74,575
|
|||||||||
Total shareholders' equity
|
112,834
|
121,392
|
|||||||||
Total liabilities and shareholders' equity
|
139,998
|
146,437
|
2014
|
2015
|
2016
|
|||||||||||||
US$ thousands
|
|||||||||||||||
Note
|
Except for share and per share data
|
||||||||||||||
Sales*
|
12
|
75,622
|
82,738
|
100,347
|
|||||||||||
Cost of sales
|
44,835
|
48,659
|
61,796
|
||||||||||||
Gross profit
|
30,787
|
34,079
|
38,551
|
||||||||||||
Operating expenses
|
|||||||||||||||
Research and development**
|
6,480
|
9,702
|
12,663
|
||||||||||||
Sales and marketing
|
4,418
|
5,651
|
6,423
|
||||||||||||
General and administrative
|
2,798
|
3,611
|
3,969
|
||||||||||||
Contingent consideration expense (benefit)
|
3
|
45
|
(3,090
|
)
|
(334
|
)
|
|||||||||
Total operating expenses
|
13,741
|
15,874
|
22,721
|
||||||||||||
Operating income
|
17,046
|
18,205
|
15,830
|
||||||||||||
Financial income, net
|
13
|
263
|
220
|
35
|
|||||||||||
Income before income taxes
|
17,309
|
18,425
|
15,865
|
||||||||||||
Income taxes
|
14
|
2,704
|
1,905
|
2,728
|
|||||||||||
Net income
|
14,605
|
16,520
|
13,137
|
||||||||||||
Income per share:
|
|||||||||||||||
Basic income per ordinary share (US$)
|
2S
|
|
2.033
|
2.273
|
1.789
|
||||||||||
Diluted income per ordinary share (US$)
|
1.996
|
2.242
|
1.767
|
||||||||||||
Weighted average number of ordinary
|
|||||||||||||||
shares used to compute basic income
|
|||||||||||||||
per share (in thousands)
|
7,184
|
7,269
|
7,344
|
||||||||||||
Weighted average number of ordinary
|
|||||||||||||||
shares used to compute diluted income
|
|||||||||||||||
per share (in thousands)
|
7,319
|
7,368
|
7,435
|
Ordinary shares
|
Additional
paid-in capital
|
Treasury
shares
|
Retained
earnings
|
Total
shareholders'
equity
|
||||||||||||||||||||
Number
of shares(1)
|
US$ thousands
|
|||||||||||||||||||||||
Balance at
|
||||||||||||||||||||||||
January 1, 2014
|
7,140,013
|
21
|
38,626
|
(38
|
)
|
52,082
|
90,691
|
|||||||||||||||||
Exercise of options
|
78,620
|
*-
|
1,353
|
-
|
-
|
1,353
|
||||||||||||||||||
Share-based compensation
|
-
|
-
|
1,266
|
-
|
-
|
1,266
|
||||||||||||||||||
Dividend (US $1.00 per share)
|
-
|
-
|
-
|
-
|
(7,183
|
)
|
(7,183
|
)
|
||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
14,605
|
14,605
|
||||||||||||||||||
Balance at
|
||||||||||||||||||||||||
December 31, 2014
|
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)
|
97,269
|
1
|
951
|
-
|
-
|
952
|
||||||||||||||||||
Share-based compensation
|
-
|
-
|
1,781
|
-
|
-
|
1,781
|
||||||||||||||||||
Dividend (US $1.00 per share)
|
-
|
-
|
-
|
-
|
(7,312
|
)
|
(7,312
|
)
|
||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
13,137
|
13,137
|
||||||||||||||||||
Balance at
|
||||||||||||||||||||||||
December 31, 2016
|
7,381,613
|
22
|
46,833
|
(38
|
)
|
74,575
|
121,392
|
(1)
|
Net of 14,971 shares held by Silicom Inc.
|
|||||
(2)
|
Restricted share units (hereinafter - "RSUs")
|
|||||
*
|
Less than 1 thousand.
|
2014
|
2015
|
2016
|
||||||||||
US$ thousands
|
||||||||||||
Cash flows from operating activities
|
||||||||||||
Net income
|
14,605
|
16,520
|
13,137
|
|||||||||
Adjustments required to reconcile net income to
|
||||||||||||
net cash provided by (used in) operating activities:
|
||||||||||||
Depreciation and amortization
|
996
|
2,767
|
3,856
|
|||||||||
Write-down of obsolete inventory
|
1,029
|
219
|
3,170
|
|||||||||
Change in liability for employees' severance benefits, net
|
(86
|
)
|
(112
|
)
|
126
|
|||||||
Discount on marketable securities, net
|
758
|
561
|
358
|
|||||||||
Share-based compensation expense
|
1,266
|
1,998
|
1,550
|
|||||||||
Deferred taxes income
|
(219
|
)
|
(907
|
)
|
(260
|
)
|
||||||
Capital gain
|
-
|
(3
|
)
|
-
|
||||||||
Changes in assets and liabilities:
|
||||||||||||
Accounts receivable - trade
|
(3,248
|
)
|
(4,850
|
)
|
(4,007
|
)
|
||||||
Accounts receivable - other
|
188
|
127
|
(1,832
|
)
|
||||||||
Accounts receivable - related parties
|
(6
|
)
|
(83
|
)
|
56
|
|||||||
Inventories
|
3,416
|
(939
|
)
|
(21,426
|
)
|
|||||||
Trade accounts payable
|
1,321
|
234
|
1,809
|
|||||||||
Other accounts payable and accrued expenses
|
649
|
853
|
1,098
|
|||||||||
Contingent consideration adjustments
|
45
|
(3,090
|
)
|
(334
|
)
|
|||||||
Accounts payable - related parties
|
(30
|
)
|
(8
|
)
|
(8
|
)
|
||||||
Net cash provided by (used in) operating activities
|
20,684
|
13,287
|
(2,707
|
)
|
||||||||
Cash flows from investing activities
|
||||||||||||
Proceeds from (investments in) short term bank deposits, net
|
(1,000
|
)
|
4,000
|
-
|
||||||||
Sale of property, plant and equipment
|
-
|
19
|
-
|
|||||||||
Purchase of property, plant and equipment
|
(1,858
|
)
|
(2,984
|
)
|
(1,441
|
)
|
||||||
Investment in intangible assets
|
(100
|
)
|
-
|
-
|
||||||||
Proceeds from maturity of marketable securities
|
14,750
|
15,100
|
8,575
|
|||||||||
Purchases of marketable securities
|
(11,740
|
)
|
(12,935
|
)
|
-
|
|||||||
Business acquisition, net of acquired cash (see Note 3)
|
(10,048
|
)
|
(10,000
|
)
|
-
|
|||||||
Net cash provided by (used in) investing activities
|
(9,996
|
)
|
(6,800
|
)
|
7,134
|
|||||||
Cash flows from financing activities
|
||||||||||||
Exercise of options
|
1,353
|
943
|
952
|
|||||||||
Dividend
|
(7,183
|
)
|
(7,274
|
)
|
(7,312
|
)
|
||||||
Payment made in connection with contingent consideration
|
-
|
-
|
(4,463
|
)
|
||||||||
Net cash used in financing activities
|
(5,830
|
)
|
(6,331
|
)
|
(10,823
|
)
|
||||||
Effect of exchange rate changes on cash balances held
|
35
|
132
|
135
|
|||||||||
Increase (decrease) in cash and cash equivalents
|
4,893
|
288
|
(6,261
|
)
|
||||||||
Cash and cash equivalents at beginning of year
|
12,997
|
17,890
|
18,178
|
|||||||||
Cash and cash equivalents at end of year
|
17,890
|
18,178
|
11,917
|
|||||||||
Supplementary cash flow information
|
||||||||||||
A. Non-cash transactions:
|
||||||||||||
Investments in PPE and intangible assets
|
87
|
72
|
39
|
|||||||||
B. Cash paid during the year for:
|
||||||||||||
Income taxes
|
1,277
|
4,487
|
4,648
|
A. |
Financial statements in US dollars
|
B. |
Basis of presentation
|
C. |
Estimates and assumptions
|
D. |
Business combinations
|
E. |
Cash and cash equivalents
|
F. |
Marketable securities
|
F. |
Marketable securities (cont'd)
|
G. |
Trade accounts receivable, net
|
H. |
Inventories
|
I. |
Assets held for employees' severance benefits
|
J. |
Property, plant and equipment
|
%
|
||||
Machinery and equipment
|
15 - 33
|
|||
Office furniture and equipment
|
6 - 33
|
|||
Leasehold improvements
|
*
|
K. |
Goodwill and other intangible assets
|
K. |
Goodwill and other intangible assets (cont'd)
|
L. |
Impairment of Long-Lived Assets
|
M. |
Revenue recognition
|
N. |
Research and development costs
|
O. |
Allowance for product warranty
|
P. |
Treasury shares
|
Q. |
Income taxes
|
R. |
Share-based compensation
|
S. |
Basic and diluted earnings per share
|
S. |
Basic and diluted earnings per share (cont'd)
|
Year ended December 31
|
||||||||||||
2014
|
2015
|
2016
|
||||||||||
Net income attributable to ordinary shares
|
||||||||||||
(US$ thousands)
|
14,605
|
16,520
|
13,137
|
|||||||||
Weighted average number of ordinary shares outstanding
|
||||||||||||
used in basic income per ordinary share calculation
|
7,184,114
|
7,268,536
|
7,343,696
|
|||||||||
Add assumed exercise of outstanding dilutive potential
|
||||||||||||
ordinary shares
|
134,792
|
99,448
|
91,485
|
|||||||||
Weighted average number of ordinary shares outstanding
|
||||||||||||
used in diluted income per ordinary share calculation
|
7,318,906
|
7,367,984
|
7,435,181
|
|||||||||
Basic income per ordinary shares (US$)
|
2.033
|
2.273
|
1.789
|
|||||||||
Diluted income per ordinary shares (US$)
|
1.996
|
2.242
|
1.767
|
|||||||||
The weighted average number of shares related to options
|
||||||||||||
and RSUs excluded from the diluted earnings per share
|
||||||||||||
calculation because of anti-dilutive effect
|
37,304
|
43,181
|
9,633
|
T. |
Comprehensive Income
|
U. |
Fair Value Measurements
|
U. |
Fair Value Measurements (cont'd)
|
V. |
Concentrations of risks
|
W. |
Liabilities for loss contingencies
|
X. |
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 and is evaluating the impact of adopting the standard on its ongoing financial reporting. Based on the Company's assessment as of the date of these financial statements, the impact of adopting the new standard is not expected to be material.
|
(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. This ASU is effective for interim and annual periods in fiscal years beginning after December 15, 2016. Early adoption is permitted.
|
X. |
Recent Accounting Pronouncements (cont'd)
|
(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. This ASU is effective for interim and annual periods in fiscal years beginning after December 15, 2018. Early adoption is permitted.
|
(5) |
On March 30, 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which is intended to improve the accounting for share-based payment transactions as part of the FASB's simplification initiative. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2016. Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.
|
(6) |
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which significantly changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for annual and interim periods in fiscal years beginning after December 15, 2018.
|
A. |
ADI Engineering, Inc.
|
B. |
Fiberblaze
|
Note 4 - Cash and Cash Equivalents
|
December 31
|
||||||||
2015
|
2016
|
|||||||
US$ thousands
|
||||||||
Cash
|
12,329
|
5,858
|
||||||
Cash equivalents *
|
5,849
|
6,059
|
||||||
18,178
|
11,917
|
*
|
Comprised mainly of deposits in banks as at December 31, 2015 and 2016 carrying a weighted average interest rate of 0.11% and 0.30%, respectively.
|
Note 5 - Marketable Securities
|
Gross
|
Gross
|
|||||||||||||||
unrealized
|
unrealized
|
|||||||||||||||
Amortized
|
holding
|
holding
|
Aggregate
|
|||||||||||||
cost basis**
|
gains
|
(losses)
|
fair value*
|
|||||||||||||
US$ thousands
|
||||||||||||||||
At December 31, 2016
|
||||||||||||||||
Held to maturity:
|
||||||||||||||||
Corporate debt securities
|
||||||||||||||||
Current
|
16,390
|
-
|
(97
|
)
|
16,293
|
|||||||||||
Non-Current
|
7,815
|
-
|
(62
|
)
|
7,753
|
|||||||||||
24,205
|
-
|
(159
|
)
|
24,046
|
||||||||||||
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 thousand and US$ 173 thousand as of December 31, 2015 and 2016 respectively.
The accrued interest is presented as part of other account receivable on the balance sheet.
|
Activity in marketable securities in 2016
|
US$ thousands
|
|||
Balance at January 1, 2016
|
33,138
|
|||
Discount on marketable securities, net
|
(358
|
)
|
||
Proceeds from maturity of marketable securities
|
(8,575
|
)
|
||
Balance at December 31, 2016
|
24,205
|
Note 5 - Marketable Securities (Cont'd)
|
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
|
-
|
-
|
(159
|
)
|
24,046
|
(159
|
)
|
24,046
|
Note 6 - Inventories
|
December 31
|
||||||||
2015
|
2016
|
|||||||
US$ thousands
|
||||||||
Raw materials and components
|
9,598
|
16,435
|
||||||
Products in process
|
9,013
|
19,098
|
||||||
Finished products
|
7,710
|
8,747
|
||||||
26,321
|
44,280
|
Note 7 - Property, Plant and Equipment, Net
|
December 31
|
||||||||
2015
|
2016
|
|||||||
US$ thousands
|
||||||||
Machinery and equipment
|
6,906
|
8,507
|
||||||
Office furniture and equipment
|
608
|
634
|
||||||
Leasehold improvements
|
2,205
|
2,277
|
||||||
Property, plant and equipment
|
9,719
|
11,418
|
||||||
Accumulated depreciation
|
(5,894
|
)
|
(7,503
|
)
|
||||
Property, Plant and equipment, net
|
3,825
|
3,915
|
A.
|
Goodwill
|
December 31
|
||||||||
2015
|
2016
|
|||||||
US$ thousands
|
||||||||
Beginning of the year
|
12,242
|
25,561
|
||||||
Business acquisition (see Note 3A)
|
13,319
|
-
|
||||||
End of the year
|
25,561
|
25,561
|
B.
|
Other intangible assets
|
December 31
|
|||||||||||
2015
|
2016
|
||||||||||
Useful life
|
US$ thousands
|
||||||||||
Original cost:
|
|||||||||||
Intellectual property
|
3
|
200
|
200
|
||||||||
Current technology
|
3
|
3,833
|
3,833
|
||||||||
Customer relationships
|
3
|
1,937
|
1,937
|
||||||||
Backlog
|
0.4
|
487
|
487
|
||||||||
6,457
|
6,457
|
||||||||||
Accumulated amortization:
|
|||||||||||
Intellectual property
|
154
|
200
|
|||||||||
Current technology
|
654
|
1,930
|
|||||||||
Customer relationships
|
272
|
916
|
|||||||||
Backlog
|
213
|
487
|
|||||||||
1,293
|
3,533
|
||||||||||
Other intangible assets, Net:
|
|||||||||||
Intellectual property
|
46
|
-
|
|||||||||
Current technology
|
3,179
|
1,903
|
|||||||||
Customer relationships
|
1,665
|
1,021
|
|||||||||
Backlog
|
274
|
-
|
|||||||||
5,164
|
2,924
|
A. |
Under Israeli law and labor agreements, Silicom is required to make severance payments to retired or dismissed employees and to employees leaving employment in certain other circumstances.
|
B. |
According to Section 14 to the Severance Pay Law ("Section 14") the payment of monthly deposits by a company into recognized severance and pension funds or insurance policies releases it from any additional severance obligation to the employees that have entered into agreements with the company pursuant to such Section 14. Commencing July 1, 2008, the Company has entered into agreements with a majority of its employees in order to implement Section 14. Therefore, as of that date, the payment of monthly deposits by the Company into recognized severance and pension funds or insurance policies releases it from any additional severance obligation to those employees that have entered into such agreements and therefore the Company incurs no additional liability since that date with respect to such employees. Amounts accumulated in the pension funds or insurance policies pursuant to Section 14 are not supervised or administrated by the Company and therefore neither such amounts nor the corresponding accrual are reflected in the balance sheet.
|
C. |
Consequently, the assets held for employees' severance benefits reported on the balance sheet, in respect of deposits for those employees who have signed agreements pursuant to Section 14, represent the redemption value of deposits made through June 30, 2008. The liability for employee severance benefits, with respect to those employees, represents the liability of the Company for employees' severance benefits as of June 30, 2008.
|
D. |
Expenses recorded with respect to employees' severance payments for the years ended December 31, 2014, 2015 and 2016 were US$ 432 thousand, US$ 543 thousand and US$ 761 thousand, respectively.
|
Year ended December 31
|
US$ thousands
|
|||
2017
|
1,481
|
|||
2018
|
1,140
|
|||
2019 and on
|
1,159
|
A.
|
On July 21, 2004, the Board resolved, subject to shareholders' approval that was given on December 30, 2004, to adopt the Share Option Plan (2004) (the "2004 Plan"). Option grants to employees under the 2004 Plan, including terms of vesting and the exercise price, are subject to the Board of Directors' approval. Option grants to directors and certain other officers are generally subject to the approvals of the Compensation Committee as well as Board of Directors, and grants to directors or a CEO will also generally have to be approved by the Shareholders. The term of the options shall not exceed 10 years from the date that the option was granted.
|
B.
|
Options or RSUs granted to Israeli residents may be granted under Section 102 of the Israeli Income Tax Ordinance pursuant to which the awards of options, or the ordinary shares issued upon their exercise, must be deposited with a trustee for at least two years following the date of grant. Under Section 102, any tax payable by an employee from the grant or exercise of the awards is deferred until the transfer of the awards or ordinary shares by the trustee to the employee or upon the sale of the awards or ordinary shares.
|
C.
|
During 2014 and 2015, the Company granted 74,000 and 8,000 RSUs respectively to certain of its directors, employees and consultants under the 2013 Plan. In relation to those grants:
|
1. |
The vesting period of the RSUs ranges between 2 to 3 years from the date of grant.
|
2. |
The fair value of RSUs is estimated based on the market value of the Company's stock on the date of grant, less an estimate of dividends that will not accrue to RSUs holders prior to vesting.
|
3. |
The Company recognizes compensation expenses on these RSUs based on estimated grant date fair value, with the following assumptions:
|
2014
|
2015
|
|||||||
Expected dividend yield
|
2.06
|
%
|
3.22
|
%
|
||||
Termination rate
|
4.35
|
%
|
0
|
%
|
D.
|
On July 28, 2015, the Company granted, in the aggregate, 89,907 options to certain of its directors and employees under the 2013 Plan. In relation to this grant:
|
1. |
The exercise price for the options (per ordinary share) was US$ 26.91 and the Option expiration date was the earlier to occur of: (a) July 28, 2023; and (b) the closing price of the shares falling below US$ 13.46 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)
|
2.08
|
%
|
||
Expected dividend yield
|
2.09
|
%
|
||
Average expected volatility(b)
|
53.01
|
%
|
||
Termination rate
|
9
|
%
|
||
Suboptimal factor(c)
|
3.4
|
(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 factor 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 factor of the Company and similar companies.
|
E.
|
On June 8, 2016, the Company granted, in the aggregate, 93,660 options to certain of its directors and employees 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)
|
47.90
|
%
|
||
Termination rate
|
9
|
%
|
||
Suboptimal factor(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 factor 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 factor of the Company and similar companies.
|
Note 11- Shareholders' Equity (cont'd)
|
F.
|
The following table summarizes information regarding stock options as at December 31, 2016:
|
Options outstanding
|
Options exercisable
|
||||||||||||||||
Weighted average
|
Weighted average
|
||||||||||||||||
remaining
|
remaining
|
||||||||||||||||
Exercise price
|
Number
|
contractual life
|
Number
|
contractual life
|
|||||||||||||
US$
|
of options
|
(in years)
|
of options
|
(in years)
|
|||||||||||||
15.28
|
66,775
|
3.7
|
66,775
|
3.7
|
|||||||||||||
26.91
|
86,990
|
6.6
|
-
|
-
|
|||||||||||||
33.27
|
20,499
|
9.3
|
6,833
|
9.3
|
|||||||||||||
28.38
|
91,741
|
7.4
|
-
|
-
|
|||||||||||||
266,005
|
73,608
|
Note 11- Shareholders' Equity (cont'd)
|
G.
|
The stock option activity under the abovementioned plans is as follows:
|
Weighted
|
||||||||||||
Weighted
|
average
|
|||||||||||
Number
|
average
|
grant date
|
||||||||||
of options
|
exercise price
|
fair value
|
||||||||||
US$
|
US$
|
|||||||||||
Balance at January 1, 2014
|
272,750
|
|||||||||||
Exercised
|
(78,620
|
)
|
17.19
|
7.70
|
||||||||
Forfeited
|
(2,000
|
)
|
15.28
|
6.54
|
||||||||
Balance at December 31, 2014
|
192,130
|
|||||||||||
Granted
|
89,907
|
26.91
|
10.04
|
|||||||||
Exercised
|
(61,711
|
)
|
15.28
|
6.54
|
||||||||
Forfeited
|
(5,625
|
)
|
24.07
|
9.19
|
||||||||
Balance at December 31, 2015
|
214,701
|
|||||||||||
Granted*
|
116,455
|
29.34
|
10.96
|
|||||||||
Exercised
|
(62,269
|
)
|
15.28
|
6.54
|
||||||||
Forfeited
|
(2,882
|
)
|
29.71
|
11.79
|
||||||||
Balance at December 31, 2016
|
266,005
|
|||||||||||
Exercisable at December 31, 2016
|
73,608
|
*
|
In 2016 the Company granted in the aggregate, 116,455 options. Regarding the grant of 93,660 options, see Note 11E. Regarding the grant of 22,795 options, see Note 3B.
|
Note 11- Shareholders' Equity (cont'd)
|
H.
|
The Restricted Share Units activity under the abovementioned plans is as follows:
|
Weighted
|
||||||||
Number of
|
average
|
|||||||
Restricted
|
grant date
|
|||||||
Share Units
|
fair value
|
|||||||
US$
|
US$
|
|||||||
Balance at January 1, 2014
|
-
|
|||||||
Granted
|
74,000
|
46.07
|
||||||
Balance at December 31, 2014
|
74,000
|
|||||||
Granted
|
8,000
|
29.09
|
||||||
Vested
|
(4,000
|
)
|
46.07
|
|||||
Balance at December 31, 2015
|
78,000
|
|||||||
Vested
|
(35,000
|
)
|
46.54
|
|||||
Balance at December 31, 2016
|
43,000
|
Note 11- Shareholders' Equity (cont'd)
|
I.
|
During 2014, 2015 and 2016, the Company recorded share-based compensation expenses. The following summarizes the allocation of the stock-based compensation expenses:
|
Year ended December 31
|
||||||||||||
2014
|
2015
|
2016
|
||||||||||
US$ thousands
|
US$ thousands
|
US$ thousands
|
||||||||||
Cost of sales
|
124
|
150
|
180
|
|||||||||
Research and development costs
|
340
|
455
|
504
|
|||||||||
Selling and marketing expenses
|
366
|
502
|
366
|
|||||||||
General and administrative expenses
|
436
|
806
|
500
|
|||||||||
1,266
|
1,913
|
1,550
|
Note 12- Geographic areas and major customers
|
A.
|
Information on sales by geographic distribution:
|
Year ended December 31
|
||||||||||||
2014
|
2015
|
2016
|
||||||||||
US$ thousands
|
||||||||||||
North America
|
53,712
|
54,537
|
65,590
|
|||||||||
Europe
|
11,421
|
16,331
|
24,208
|
|||||||||
Asia-Pacific
|
10,489
|
11,870
|
10,549
|
|||||||||
75,622
|
82,738
|
100,347
|
B.
|
Sales to single customers exceeding 10% of sales (US$ thousands):
|
Year ended December 31
|
||||||||||||
2014
|
2015
|
2016
|
||||||||||
US$ thousands
|
||||||||||||
Customer "A"
|
18,083
|
16,320
|
17,366
|
|||||||||
Customer "B"
|
*
|
*
|
11,628
|
Note 12- Geographic areas and major customers (cont'd)
|
C.
|
Information on Long lived assets by geographic areas:
|
Year ended December 31
|
||||||||
2015
|
2016
|
|||||||
US$ thousands
|
||||||||
North America
|
22
|
16
|
||||||
Europe
|
13,588
|
12,945
|
||||||
Israel
|
20,894
|
19,439
|
||||||
Other
|
46
|
-
|
||||||
34,550
|
32,400
|
|||||||
Note 13- Financial Income (Expenses), Net
|
Year ended December 31
|
||||||||||||
2014
|
2015
|
2016
|
||||||||||
US$ thousands
|
||||||||||||
Interest income
|
1,266
|
1,026
|
751
|
|||||||||
Discount on marketable securities, net
|
(758
|
)
|
(561
|
)
|
(358
|
)
|
||||||
Exchange rate differences, net
|
(95
|
)
|
(148
|
)
|
(236
|
)
|
||||||
Bank charges
|
(150
|
)
|
(97
|
)
|
(122
|
)
|
||||||
263
|
220
|
35
|
A. |
Measurement of results for tax purposes under the Israeli Income Tax Regulations (Rules for Maintaining Accounting Records of Foreign Invested Companies and Certain Partnerships and Determining Their Taxable Income) - 1986
|
B. |
Corporate tax rate in Israel
|
C. |
Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter - the "Law")
|
1.
|
On December 29, 2010 the Knesset approved the Economic Policy Law for 2011-2012, which includes an amendment to the Law for the Encouragement of Capital Investments – 1959 (hereinafter – "the Amendment to the Law"). The Amendment to the Law is effective from January 1, 2011 and its provisions will apply to preferred income derived or accrued in 2011 and thereafter by a Preferred Company, per the definition of these terms in the Amendment to the Law.
|
C. |
Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter - the "Law") (cont'd)
|
2.
|
In the event of distribution by the Company of cash dividends out of its retained earnings that were generated prior to 2014 tax year and were tax exempt due to the "Approved Enterprise" or "Benefited Enterprise" status, the Company would be subjected to a maximum of 25% corporate tax on the amount distributed, and a further 15% withholding tax would be deducted from the amounts distributed to the shareholders.
|
1. |
The subsidiary Silicom Connectivity Solutions, Inc. files tax returns to US federal tax authorities and to state tax authorities in the states of New Jersey, California and Virginia.
|
2. |
The subsidiary Fiberblaze is taxed according to the tax laws in Denmark and its subsidiary files tax returns to US federal tax authorities, New York state tax authorities and to the city of New York tax authorities.
|
3. |
The Company has not provided for Israeli income and foreign withholding taxes on US$ 2,871 thousand of its non-Israeli subsidiaries' undistributed earnings as of December 31, 2016. The earnings could become subject to tax if earnings are remitted or deemed remitted as dividends or upon sale of a subsidiary.
|
4. |
As of December 31, 2016, the net operating loss carry-forwards of the Company's subsidiaries for tax purposes amounted to approximately US$ 1,500 thousand. These losses are available to offset any future taxable income.
|
Note 14- Taxes on Income (cont'd)
|
F.
|
Income before income taxes and income taxes expense (benefit) included in the consolidated statements of operations
|
Year ended December 31
|
||||||||||||
2014
|
2015
|
2016
|
||||||||||
US$ thousands
|
||||||||||||
Income (loss) before income taxes:
|
||||||||||||
Israel
|
16,522
|
19,486
|
15,541
|
|||||||||
Foreign jurisdiction
|
787
|
(1,061
|
)
|
324
|
||||||||
17,309
|
18,425
|
15,865
|
||||||||||
Current taxes:
|
||||||||||||
Israel
|
2,494
|
2,383
|
2,242
|
|||||||||
Foreign jurisdiction
|
409
|
465
|
720
|
|||||||||
2,903
|
2,848
|
2,962
|
||||||||||
Current tax (benefits) expenses relating to prior years:
|
||||||||||||
Israel
|
20
|
-
|
26
|
|||||||||
Foreign jurisdiction
|
-
|
(36
|
)
|
-
|
||||||||
20
|
(36
|
)
|
26
|
|||||||||
Deferred taxes:
|
||||||||||||
Israel
|
(200
|
)
|
(437
|
)
|
10
|
|||||||
Foreign jurisdiction
|
(19
|
)
|
(470
|
)
|
(270
|
)
|
||||||
(219
|
)
|
(907
|
)
|
(260
|
)
|
|||||||
Income tax expense
|
2,704
|
1,905
|
2,728
|
December 31
|
December 31
|
|||||||
2015
|
2016
|
|||||||
US$ thousands
|
US$ thousands
|
|||||||
Deferred tax assets:
|
||||||||
Accrued employee benefits
|
247
|
261
|
||||||
Research and development costs
|
679
|
921
|
||||||
Tax loss carryforwards
|
177
|
338
|
||||||
PPE
|
16
|
15
|
||||||
Inventory
|
160
|
-
|
||||||
Share based compensation
|
245
|
246
|
||||||
Intangible assets
|
-
|
107
|
||||||
Other
|
21
|
2
|
||||||
Total gross deferred tax assets
|
1,545
|
1,890
|
||||||
Deferred tax liabilities:
|
||||||||
Intangible assets
|
(243
|
)
|
(138
|
)
|
||||
Goodwill
|
(61
|
)
|
(215
|
)
|
||||
Other
|
36
|
-
|
||||||
Total gross deferred tax liabilities
|
(268
|
)
|
(353
|
)
|
||||
Net deferred tax assets
|
1,277
|
1,537
|
||||||
In Israel
|
1,348
|
1,338
|
||||||
Foreign jurisdictions
|
(71
|
)
|
199
|
|||||
Net deferred tax assets
|
1,277
|
1,537
|
||||||
Non-current deferred tax assets
|
1,545
|
1,537
|
||||||
Non-current deferred tax liabilities
|
(268
|
)
|
-
|
|||||
Net deferred tax assets
|
1,277
|
1,537
|
Note 14- Taxes on Income (cont'd)
|
H.
|
Reconciliation of the statutory tax expense to actual tax expense
|
Year ended December 31
|
||||||||||||
2014
|
2015
|
2016
|
||||||||||
US$ thousands
|
||||||||||||
Income before income taxes
|
17,309
|
18,425
|
15,865
|
|||||||||
Statutory tax rate in Israel
|
26.5
|
%
|
26.5
|
%
|
25.0
|
%
|
||||||
4,587
|
4,883
|
3,966
|
||||||||||
Increase (decrease) in taxes resulting from:
|
||||||||||||
Non-deductible operating expenses, net
|
476
|
209
|
228
|
|||||||||
Non-taxable income
|
-
|
(819
|
)
|
(84
|
)
|
|||||||
Prior year adjustments
|
20
|
(36
|
)
|
26
|
||||||||
Tax effect due to "Approved/Benefited/
|
||||||||||||
Preferred Enterprise" status
|
(2,588
|
)
|
(2,368
|
)
|
(1,924
|
)
|
||||||
Taxes related to foreign jurisdictions
|
181
|
250
|
324
|
|||||||||
Changes in tax rate
|
-
|
35
|
94
|
|||||||||
Creation of deferred taxes for tax losses and
|
||||||||||||
benefits from previous years for which deferred
|
||||||||||||
taxes were not created in the past
|
-
|
(252
|
)
|
-
|
||||||||
Other
|
28
|
3
|
98
|
|||||||||
Income tax expense
|
2,704
|
1,905
|
2,728
|
I.
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Accounting for uncertainty in income taxes
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(1) |
On March 15, 2017 Silicom's Board of Directors declared a dividend of US $1.00 per share payable on April 5, 2017 to shareholders of record as of March 27, 2017, and in the aggregate amount of approximately US $7.4 million for 2016.
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(2) |
In January 2017, the Company's compensation committee and board of directors, respectively, have approved the grant of a total of 119,925 options and 78,000 RSUs under the Global Share Incentive Plan (2013), of which options and RSUs granted to directors and office holders are subject to the approval of the Annual General Meeting, which is currently scheduled to convene no later than June 2017, as prescribed under the Israeli Companies Law, 1999 and the Company's Amended and Restated Articles of Association.
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1. |
ADDITIONAL RENT shall mean all sums in addition to Fixed Basic Rent payable by Lessee to Lessor pursuant to the provisions of the Lease.
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2. |
BASE PERIOD COSTS shall mean the following:
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A. |
Base Operating Costs: Those Operating Costs incurred during Calendar Year 2017.
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B. |
Base Real Estate Taxes: Those Real Estate Taxes incurred during Calendar Year 2017.
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C. |
Base Utility and Energy Costs: Those Utility and Energy Costs incurred during Calendar Year 2017.
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3. |
ELECTRIC ENERGY CHARGE shall mean the annual cost of providing electric current to the Premises, which shall be $1.75 per gross rentable square foot of the Premises, subject to Article 22 hereof.
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4. |
BUILDING shall mean 6 Forest Avenue, Paramus, New Jersey. “Office Building Area” shall be the Building and the land on which the Building is located.
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5. |
BUILDING HOURS shall be Monday through Friday, 7:00 a.m. to 6:00 p.m., but excluding all days observed by the state and federal governments as legal holidays, except that Common Facilities and lighting in the Building shall be maintained for such additional hours as, in Lessor’s sole judgment, is necessary or desirable to insure proper operating of the Building. Building Hours shall be subject to any limitation or restriction imposed by municipal ordinance or regulation. Lessee shall have access to the building twenty-four (24) hours per day, six (6) days per week, Monday through Saturday.
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6. |
COMMENCEMENT DATE shall be upon Substantial Completion of Lessor’s Work (as defined below) and shall for purposes hereof be subject to Article 42 of this Lease. Lessee and Landlord agrees that on or about the Commencement Date, they shall complete and sign and deliver to one another fully signed copies of a Certificate of Commencement of Lease in substantially the form attached to and made a part of this Lease as Exhibit G.
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7. |
DEMISED PREMISES OR PREMISES shall be deemed to be 2,514 gross rentable square feet (“GRSF”) on the first floor in the Building, as shown on Exhibit A hereto, which includes an allocable share of the Common Facilities as defined in Article 41(a). Lessor and Lessee acknowledge that there are multiple means of computing the gross rentable square footage, and they agree that for the purposes of this Lease, the gross rentable square footage of the Premises as set forth in this Preamble Section 7, and the rentable square footage of the Building as set forth in Preamble Section 12 shall be conclusively deemed to be correct.
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8. |
BROKER – NO BROKER FEE
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9. |
EXHIBITS shall be the following, attached to this Lease and incorporated herein and made a part hereof.
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10. |
EXPIRATION DATE shall be five (5) years and two (2) months from the Commencement Date unless the Renewal Option is exercised, in which case the Expiration Date will be the expiration of the Renewal Term.
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11. |
FIXED BASIC RENT shall commence two (2) months following the Commencement Date and shall mean: $18.25 per gross rentable square foot per annum, which is Three Hundred Twenty One Thousand Nine Hundred Thirty Dollars ($229,402.50) for the Initial Term, which Lessor agrees that for the convenience of Lessee may be paid as follows:
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A. | Yearly Rate: | $45,880.50 |
B. | Monthly Installment(s): | $3,823.375 |
12. |
LESSEE’S PERCENTAGE shall be 8.91%. The total gross rentable square footage of the Building is 28,220 square feet.
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13. |
PARKING SPACES shall mean a total of ten (10) unassigned parking spaces.
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14. |
PERMITTED USE shall be for a office space for business offices and storage and for no other purpose provided that Lessee shall ensure that the uses are in compliance with all applicable building and zoning codes.
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15. |
SECURITY DEPOSIT shall be $7,646.75.
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16. |
TERM shall mean ten (10) years from the Commencement Date, plus the number of days, if any, to have the Lease expire on the last day of a calendar month (“Initial Term”), unless the Renewal Option is exercised, in which event the Term shall mean the Initial Term plus the Renewal Term.
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17. |
CONDITION OF PREMISES: Lessee hereby accepts the Premises in its “AS-IS” condition, except for Lessor’s Work to be performed in accordance with Article and as described in Exhibit C, attached hereto.
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18. |
ADDRESSES FOR NOTICE AND PAYMENTS:
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A. | Lessor: |
Zisapel Properties 900 Corporate Drive
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cc: |
Kraemer Burns, P.A.
675 Morris Avenue
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B. | Lessee: |
Silicom Connectivity Solutions Inc
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cc: |
Silicom Connectivity Solutions Inc.
14 Atir Yeda
Kfar Sava, Israel 446323
Attn.: Eran Gilad
Email: erang@silicom.co.il
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C. | Checks Payable to: |
Zisapel Properties
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Mail Payments to: |
Real Estate Management Group, LLC.
155 North Dean Street
Englewood, NJ 07631
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19. |
RENEWAL OPTION(S). Lessee shall be granted one option to renew this Lease (“Renewal Option”) for one (1) term of five (5) years (“Renewal Term”). Notice of intent to exercise the Renewal Option must be given to Lessor in writing not less than nine (9) months prior to the expiration of the Initial Term (“Option Notice”) in accordance with the conditions set forth in Article 53.
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1. |
DESCRIPTION: Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises as defined in the Preamble which includes an allocable share of the Common Facilities, as shown on the plan or plans marked Exhibit A attached hereto and made part of this Lease in the Building as defined in the Preamble, together, with the right to use in common with other lessees of the Building, their invitees, customers and employees, those public areas of Common Facilities as hereinafter defined.
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2. |
TERM: The Premises are leased for a term to commence on the Commencement Date, and to end at 12:00 midnight on the Expiration Date, all as defined in the Preamble.
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3. |
BASIC RENT: The Lessee shall pay to the Lessor during the Term, the Fixed Basic Rent as defined in the Preamble payable in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. The Fixed Basic Rent shall accrue at the Yearly Rate as defined in the Preamble and shall be payable, in advance, on the first day of each calendar month during the Term at the Monthly Installments as defined in the Preamble, except that a proportionately lesser sum may be paid for the first and last months of the Term of this Lease, if the Term commences on a day other than the first day of the month, in accordance with the provisions of this Lease herein set forth. Lessee shall pay Fixed Basic Rent, and any Additional Rent as hereinafter provided, to Lessor at Lessor’s above stated address, or at such other place as Lessor may designate in writing, without demand and without counterclaim, deduction or set off.
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4. |
USE AND OCCUPANCY AND SIGNAGE: Lessee shall use and occupy the Premises for the Permitted Use as defined in the Preamble. Lessee shall not permit smoking by Lessee’s employees, agents and invitees in unauthorized areas of the Building or Common Facilities.
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5. |
CARE AND REPAIR OF PREMISES: Lessee shall commit no act of waste and shall take good care of the Premises and the fixtures and appurtenances therein, and shall, in the use and occupancy of the Premises, conform to all laws, orders and regulations of the federal, state and municipal governments or any of their departments affecting the Premises and with any and all environmental requirements resulting from the Lessee's use of the Premises, this covenant to survive the expiration or sooner termination of the Lease. Lessor shall, subject to the same being included in Operating Costs, make all necessary repairs to the Premises, Common Facilities and to the assigned parking areas, if any, except where the repair has been made necessary by misuse or neglect by the Lessee or Lessee’s agents, servants, visitors or licensees, in which event Lessor shall nevertheless make the repair but Lessee shall pay to Lessor, as Additional Rent, immediately upon demand, the costs therefor. All improvements made by Lessee to the Premises, which are so attached to the Premises, shall become the property of Lessor upon installation. Not later than the last day of the Term, Lessee shall, at Lessee’s expense, remove all Lessee’s personal property and those improvements made by Lessee which have not become the property of Lessor: including trade fixtures, cabinetwork movable paneling, partitions and the like; repair all injury done by or in connection with the installation or removal of said property and improvements; and surrender the Premises in as good condition as they were at the Commencement Date, reasonable wear, damage by fire, the elements, casualty or other cause not due to the misuse or neglect by Lessee, Lessee’s agents, servants, visitors or licensees excepted. All other property of Lessee remaining on the Premises after the last day of the Term of this Lease shall be conclusively deemed abandoned and may be removed by Lessor, and Lessee shall reimburse Lessor for the cost of such removal. Lessor may have any such property stored at Lessee's risk and expense.
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6. |
LESSOR’S WORK, ALTERATIONS, ADDITIONS OR IMPROVEMENTS:
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a. |
The Tenant has agreed to accept the Premises in its present “as is” condition, except for the Lessor’s Work, as described in Exhibit C, and to be performed by the Landlord in accordance with the architectural drawings to be prepared by the draftsman engaged by Lessor, the provisions of this Lease and applicable code standards.
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b. |
Lessor shall be responsible for the cost of Lessor’s Work, to the standards of applicable building codes, and up to the amount of the Cash Allowance, as defined in the following sentence. To the extent that the cost of Lessor’s Work, including the costs of permits, architectural services, engineering and all other expenses incurred in connection with Lessor’s Work, exceeds $37,710.00 ($15.00 PRSF x 2,514) (the “Cash Allowance”), Lessee agrees to pay, upon demand by Lessor, the amount by which the actual cost of Lessor’s Work exceeds the Cash Allowance (the “Surplus Payment”). Lessor shall notify Lessee prior to incurring costs that exceed the Cash Allowance and shall proceed upon Lessee’s approval. If Lessee has not responded with approval within three (3) business days, Lessee shall be deemed to have approved the Surplus Payment. The Surplus Payment shall be considered Additional Rent. In addition, Lessee agrees to pay to Lessor a construction management fee of three (3%) percent of the Surplus Payment, as Additional Rent.
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c. |
Substantial Completion of Lessor’s Work (as defined herein) is expected to be achieved on or about one hundred twenty (120) days from the date on which Lessor has obtained all necessary permits and approvals required to permit the Lessor to undertake Lessor’s Work (the “Required Approvals”). Lessor agrees that it will promptly apply for the Required Approvals upon receipt of a copy of this Lease signed by both parties and Lessee’s payment of all amounts due upon signing of this Lease. Substantial Completion of Lessor’s Work shall mean (i) delivery to Tenant of a permanent or temporary Certificate of Occupancy, Certificate of Approval, or similar approval from the municipality where the Premises is located, if and as required by the municipality, in order for Lessee to occupy the Premises for the Permitted Use; and (ii) delivery of the Premises to Lessee in broom- clean condition.
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d. |
Lessee shall not, without first obtaining the written consent of Lessor, make any alterations, additions or improvements in, to or about the Premises.
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7. |
ACTIVITIES INCREASING FIRE INSURANCE RATES: Lessee shall not do or suffer anything to be done on or about the Premises that will increase the rate of fire insurance on the Building.
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8. |
ASSIGNMENT AND SUBLEASE: Lessee may assign or sublease the within Lease to any party subject to the following:
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a. |
In the event Lessee desires to assign this Lease or sublease all or part of the Premises to any other party, the terms and conditions of such assignment or sublease shall be communicated to the Lessor in writing prior to the effective date of any such sublease or assignment, and, prior to such effective date, the Lessor shall have the option, exercisable in writing to the Lessee, to: (i) sublease such space from Lessee at the lower rate of (a) the rental rate per rentable square foot of Fixed Basic Rent and Additional Rent then payable pursuant to this Lease or (b) the terms set forth in the proposed sublease, (ii) recapture in the case of subletting, that portion of the Premises to be sublet or all of the Premises in the case of an assignment (“Recapture Space”) so that such prospective sublessee or assignee shall then become the sole Lessee of Lessor hereunder, or (iii) recapture the Recapture Space for Lessor’s own use and the within Lessee shall be fully released from any and all obligations hereunder with respect to the Recapture Space.
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b. |
In the event that the Lessor elects not to recapture the Lease as hereinabove provided, the Lessee may nevertheless assign this Lease or sublet the whole or any portion of the Premises, subject to the Lessor’s prior written consent, which consent shall not be unreasonably withheld, on the basis of the following terms and conditions:
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i. |
The Lessee shall provide to the Lessor the name and address of the assignee or sublessee.
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ii. |
The assignee or sublessee shall assume, by written instrument, the form of which shall be satisfactory to the Landlord, all of the obligations of this Lease, and a copy of such assumption agreement shall be furnished to the Lessor within ten (10) days of its execution. Any sublease shall expressly acknowledge that said sublessee’s rights against Lessor shall be no greater than those of Lessee. Lessee further agrees that, notwithstanding any such subletting, no other and further subletting of the Premises by Lessee or any person claiming through or under Lessee shall or will be made except upon compliance with and subject to the provisions of this Article 8.
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iii. |
Each sublease shall provide that it is subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and that in the event of default by Lessee under this Lease, Lessor may, at its option, take over all of the right, title and interest of Lessee, as sublessor, under such sublease, and such sublessee shall, at Lessor’s option, attorn to Lessor pursuant to the then executory provisions of such sublease, except that Lessor shall not (i) be liable for any previous act or omission of Lessee under such sublease or, (ii) be subject to any offset not expressly provided in such sublease which theretofore accrued to such sublease to which Lessor has not specifically consented in writing or by any preview prepayment of more than one month’s rent.
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iv. |
The Lessee and each assignee shall be and remain liable for the observance of all the covenants and provisions of this Lease, including, but not limited to, the payment of Fixed Basic Rent and Additional Rent reserved herein, through the entire Term of this Lease, as the same may be renewed, extended or otherwise modified.
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v. |
The Lessee and any assignee shall promptly pay to Lessor any consideration received for any assignment and/or all of the rent, as and when received, in excess of the Rent required to be paid by Lessee for the area sublet computed on the basis of an average square foot rent for the gross square footage Lessee has leased.
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vi. |
In any event, the acceptance by the Lessor of any rent from the assignee or from any of the subtenants or the failure of the Lessor to insist upon a strict performance of any of the terms, conditions and covenants herein shall not release the Lessee herein, nor any assignee assuming this Lease, from any and all of the obligations herein during and for the entire Term of this Lease.
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vii. |
Lessee shall pay ONE THOUSAND DOLLARS ($1,000.00) to cover Lessor’s handling charges for each request for consent to any sublet or assignment prior to Lessor’s consideration of the same. Lessee acknowledges that its sole remedy with respect to any assertion that Lessor’s failure to consent to any sublet or assignment is unreasonable shall be the remedy of specific performance and Lessee shall have no other claim or cause of action against Lessor as a result of Lessor’s actions in refusing to consent thereto.
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c. |
Notwithstanding anything to the contrary set forth herein, with the consent of Lessor, which consent shall not be unreasonably withheld or delayed, Tenant may assign this Lease or sublet all of any portion of the Premises to any successor by merger, consolidation, corporate reorganization, or to any entity which purchases all or substantially all of the assets of Lessee provided that any such entity has a net worth at the time of such purchase or merger equal to or greater than the net worth of Lessee immediately preceding such purchase or merger. Any other assignment or subletting of Lessee’s interest under this Lease shall be subject to Lessor’s approval, which approval shall not be unreasonably withheld or delayed.
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d. |
In the event that any or all of Lessee’s interest in the Premises and/or this Lease is transferred by operation of law to any trustee, receiver, or other representative or agent of Lessee, or to Lessee as a debtor in possession, and subsequently any or all of Lessee’s interest in the Premises and/or this Lease is offered or to be offered by Lessee or any trustee, receiver, or other representative or agent of Lessee as to its estate or property (such person, firm or entity being hereinafter referred to as the “Grantor”), for assignment, conveyance, lease, or other disposition to a person, firm or entity other than Lessor (each such transaction being hereinafter referred to as a “Disposition”), it is agreed that Lessor has and shall have a right of first refusal to purchase, take, or otherwise acquire, the same upon the same terms and conditions as the Grantor thereof shall accept upon such Disposition to such other person, firm, or entity; and as to each such Disposition the Grantor shall give written notice to Lessor in reasonable detail of all of the terms and conditions of such Disposition within twenty (20) days next following its determination to accept the same but prior to accepting the same, and Grantor shall not make the Disposition until and unless Lessor has failed or refused to accept such right of first refusal as to the Disposition, as set forth herein.
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e. |
Without limiting any of the provisions of Articles 12 and 13, if pursuant to the Federal Bankruptcy Code (herein referred to as the “Code”), or any similar law hereafter enacted having the same general purpose, Lessee is permitted to assign this Lease notwithstanding the restrictions contained in this Lease, adequate assurance of future performance by an assignee expressly permitted under such Code shall be deemed to mean the deposit of cash security in an amount equal to the sum of one year’s Fixed Basic Rent plus an amount equal to the Additional Rent for the calendar year preceding the year in which such assignment is intended to become effective, which deposit shall be held by Lessor for the balance of the Term, without interest, as security for the full performance of all of Lessee’s obligations under this Lease, to be held and applied in the manner specified for security in Article 16.
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f. |
Except as specifically set forth above, no portion of the Premises or of Lessee’s interest in this Lease may be acquired by any other person or entity, whether by assignment, mortgage, sublease, transfer, operation of law or act of the Lessee, nor shall Lessee pledge its interest in this Lease or in any security deposit required hereunder.
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9. |
COMPLIANCE WITH RULES AND REGULATIONS: Lessee shall observe and comply with the rules and regulations hereinafter set forth in Exhibit B attached hereto and made a part hereof and with such further reasonable rules and regulations as Lessor may prescribe, on written notice to the Lessee, for the safety, care and cleanliness of the Building and the comfort, quiet and convenience of other occupants of the Building. Lessor reserves the right to prescribe the weight and position of all safes, business machines and mechanical equipment. Such installations shall be placed and maintained by Lessee, at Lessee's expense, in settings sufficient, in Lessor’s judgment, to absorb and prevent vibration, noise and annoyance.
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10. |
DAMAGES TO BUILDING: If the Building is damaged by fire or any other cause to such extent the cost of restoration, as reasonably estimated by Lessor, will equal or exceed twenty-five percent (25%) of the replacement value of the Building (exclusive of foundations) just prior to the occurrence of the damage, then Lessor may, no later than the sixtieth (60th) day following the date of damage, give Lessee a notice of election to terminate this Lease, or if the cost of restoration will equal or exceed fifty percent (50%) of such replacement value and if the Premises shall not be reasonably usable for the purpose for which they are leased hereunder, then Lessee may, no later than the sixtieth (60th) day following the date of damage, give Lessor a notice of election to terminate this Lease. In either said event of election, this Lease shall be deemed to terminate on the thirtieth (30th) day after the giving of said notice, and Lessee shall surrender possession of the Premises within a reasonable time thereafter, and the Fixed Basic Rent, and any Additional Rent, shall be apportioned as of the date of said surrender and any Fixed Basic Rent or Additional Rent paid for any period beyond said date shall be repaid to Lessee. If the cost of restoration shall not entitle Lessor to terminate this Lease, or if, despite the cost, Lessor does not elect to terminate this Lease, Lessor shall restore the Building and the Premises with reasonable promptness, subject to Force Majeure, and Lessee shall have no right to terminate this Lease. Lessor need not restore fixtures and improvements owned by Lessee.
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11. |
EMINENT DOMAIN: If Lessee’s use of the Premises is materially affected due to the taking by eminent domain of (a) the Premises or any part thereof or any estate therein; or( b) any other part of the Building; then, in either event, this Lease shall terminate on the date when title vests pursuant to such taking. The Fixed Basic Rent, and any Additional Rent, shall be apportioned as of said termination date and any Fixed Basic Rent or Additional Rent paid for any period beyond said date, shall be repaid to Lessee. Lessee shall not be entitled to any part of the award for such taking or any payment in lieu thereof, but Lessee may file a separate claim for any taking of fixtures and improvements owned by Lessee which have not become the Lessor’s property, and for moving expenses, provided the same shall, in no way, affect or diminish Lessor’s award. In the event of a partial taking which does not effect a termination of this Lease but does deprive Lessee of the use of a portion of the Premises, there shall either be an abatement or an equitable reduction of the Fixed Basic Rent, and an equitable adjustment reducing the Base Period Costs as hereinafter defined depending on the period for which and the extent to which the Premises so taken are not reasonably usable for the purpose for which they are leased hereunder.
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12. |
INSOLVENCY OF LESSEE: Either (a) the appointment of a receiver to take possession of all or substantially all of the assets of Lessee, or, (b) a general assignment by Lessee for the benefit of creditors, or, (c) any action taken or suffered by Lessee under any insolvency or bankruptcy act, shall constitute a default of this Lease by Lessee, and Lessor may terminate this Lease forthwith and upon notice of such termination Lessee’s right to possession of the Premises shall cease, and Lessee shall then quit and surrender the Premises to Lessor but Lessee shall remain liable as hereinafter provided in Article 14 hereof.
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13. |
LESSOR'S REMEDIES ON DEFAULT: If Lessee defaults in the payment of Fixed Basic Rent, or any Additional Rent, or defaults in the performance of any of the other covenants and conditions hereof or permits the Premises to become deserted, abandoned or vacated, Lessor may give Lessee notice of such default, and if Lessee does not cure any Fixed Basic Rent or Additional Rent default within five (5) days or other default within fifteen (15) days after giving of such notice (or if such other default is of such nature that it cannot be completely cured within such period, and additional fifteen (15) days will be allowed up to a maximum of thirty (30) days after giving of such notice), then Lessor may terminate this Lease on not less than ten (10) days notice to Lessee, and on the date specified in said notice, Lessee’s right to possession of the Premises shall cease but Lessee shall remain liable as hereinafter provided. If this Lease shall have been so terminated by Lessor pursuant to Articles 12 or 13 hereof, Lessor may at any time thereafter resume possession of the Premises by any lawful means and remove Lessee or other occupants and their effects. Lessee shall pay to Lessor, on demand, such expenses as Lessor may incur, including, without limitation, court costs and reasonable attorney’s fees and disbursements, in enforcing the performance of any obligation of Lessee under this Lease.
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14. |
DEFICIENCY: In any case where Lessor has recovered possession of the Premises by reason of Lessee’s default, Lessor may, at Lessor’s option, occupy the Premises or cause the Premises to be redecorated, altered, divided, consolidated with other adjoining premises or otherwise changed or prepared for reletting, and may relet the Premises or any part thereof, as agent of Lessee or otherwise, for a term or terms to expire prior to, at the same time as or subsequent to, the original Expiration Date, at Lessor’s option and receive the rent therefor. Rent so received shall be applied first to the payment of such expenses as Lessor may have incurred in connection with the recovery of possession, redecorating, altering, dividing, consolidating with other adjoining premises, or otherwise changing or preparing for reletting, and the reletting, including brokerage and reasonable attorney’s fees, and then to the payment of damages in amounts equal to the Fixed Basic Rent and Additional Rent hereunder and to the costs and expenses of performance of the other covenants of Lesseeas herein provided. Lessee agrees, in any such case, whether or not Lessor has relet, to pay to Lessor damages equal to the Fixed Basic Rent and Additional Rent from the date of such default to the date of expiration of the term demised and other sums herein agreed to be paid by Lessee, less the net proceeds of the reletting, if any, received by Lessor during the remainder of the unexpired term of the Lease, as ascertained from time to time, and the same shall be payable by Lessee on the several rent days above specified. Lessee shall not be entitled to any surplus accruing as a result of any such reletting. In reletting the Premises as aforesaid, Lessor may grant rent concessions, and Lessee shall not be credited therewith. No such reletting shall constitute a surrender and acceptance or be deemed evidence thereof. If Lessor elects, pursuant hereto, actually to occupy and use the Premises or any part thereof during any part of the balance of the Term as originally fixed or since extended, there shall be allowed against Lessee’s obligation for rent or damages as herein defined, during the period of Lessor’s occupancy, the reasonable value of such occupancy, not to exceed, in any event, the Fixed Basic Rent and Additional Rent herein reserved and such occupancy shall not be construed as a release of Lessee’s liability hereunder.
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15. |
SUBORDINATION OF LEASE: This Lease shall, at Lessor’s option, or at the option of any holder of any mortgages or trust deed, be subject and subordinate to any such mortgages or trust deed which may now or hereafter affect the real property of which the Premises form a part, and also to all renewals, modifications, consolidations and replacements of said mortgages or trust deed. Although no instrument or act on the part of Lessee shall be necessary to effectuate such subordination, Lessee will, nevertheless, execute and deliver such further instruments confirming such subordination of this Lease as may be desired by the holders of said mortgages or trust deed. Lessee hereby appoints Lessor attorney-in-fact, irrevocably, to execute and deliver any such instrument for Lessee.
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16. |
SECURITY DEPOSIT: Lessee shall deposit with Lessor on the signing of this Lease, the Security Deposit as defined in the Preamble for the full and faithful performance of Lessee’s obligations under this Lease, including without limitation, the surrender of possession of the Premises to Lessor as herein provided. Lessor shall not be required to maintain the Security Deposit in a separate account. If Lessor applies any part of said Security Deposit to cure any default of Lessee, Lessee shall, on demand, deposit with Lessor the amount so applied so that Lessor shall have the full Security Deposit on hand at all times during the Term of this Lease. In the event a bona fide sale, subject to this Lease, Lessor shall have the right to transfer the Security Deposit to the vendee, and Lessor shall be considered released by Lessee from all liability for the return of the Security Deposit; and Lessee agrees to look solely to the new lessor for the return of the Security Deposit, and it is agreed that this shall apply to every transfer or assignment made of the Security Deposit to the new lessor. Provided this Lease is not in default, the Security Deposit (less any portions thereof used, applied or retained by Lessor in accordance with the provisions of this Article 16), shall be returned to Lessee within thirty (30) days after the expiration or sooner termination of this Lease and after delivery of the entire Premises to Lessor in accordance with the provisions of this Lease. Lessee covenants that it will not assign or encumber or attempt to assign or encumber the Security Deposit and Lessor shall not be bound by any such assignment, encumbrance or attempt thereof.
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17. |
RIGHT TO CURE LESSEE’S BREACH: If Lessee breaches any covenant or condition of this Lease, Lessor may, on reasonable notice to Lessee (except that no notice need be given in case of emergency), elect to cure such breach at the expense of Lessee and the reasonable amount of all expenses, including attorney's fees, incurred by Lessor in so doing (whether paid by Lessor or not) shall be deemed Additional Rent payable on demand. In no event shall this Article 17 be construed to require Lessor to cure any such breach.
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18. |
MECHANIC'S LIENS: Lessee shall not allow and/or permit any mechanic’s lien or other similar lien for materials or labor claimed to have been furnished to the Premises on Lessee’s behalf (“Mechanic’s Lien”) to be placed on the Building. Lessee shall, within thirty (30) days after notice from Lessor, discharge or satisfy by bonding or otherwise any Mechanic’s Lien filed against the Building.
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19. |
RIGHT TO INSPECT AND REPAIR: Lessor may enter the Premises but shall not be obligated to do so (except as required by any specific provision of this Lease) at any reasonable time on reasonable notice to Lessee (except that no notice need be given in case of emergency) for the purpose of inspection or the making of such repairs, replacement or additions in, to, on and about the Premises or the Building, as Lessor deems necessary or desirable. Lessee shall have no claims or cause of action against Lessor by reason thereof. In no event shall Lessee have any claim against Lessor for interruption of Lessee’s business, however occurring, including but not limited to that arising from the negligence of Lessor, its agents, servants or invitees, or from defects, errors or omissions in the construction or design of the Premises and/or the Building, including the structural and non-structural portions thereof.
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20. |
SERVICES TO BE PROVIDED BY LESSOR/LESSOR’S EXCULPATION: Subject to intervening laws, ordinances, regulations and executive orders, while Lessee is not in default under any of the provisions of this Lease, Lessor agrees to furnish, except on holidays:
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a. |
Cleaning services for the Demised Premises as described on Exhibit E (or substantially similar), provided the same are kept in reasonable order by Lessee. Lessee shall pay to Lessor the cost of removal from the Building of any of Lessee’s refuse and rubbish which exceeds the refuse and rubbish usually attendant upon the use of such premises as offices. Bills for the same shall be rendered by Lessor to Lessee and shall be due and payable when rendered, and the amount of such bills shall be deemed to be, and be paid, as Additional Rent. Alternatively, Lessee shall use Lessor’s contractors or employees, at the option of the Lessor, for the removal of such excess refuse and rubbish and Lessee agrees to pay reasonable charges therefor.
|
b. |
Heating, ventilating and air conditioning (herein “HVAC”) as appropriate for the season, and as set forth on Exhibit D, attached hereto and made a part hereof, together with Common Facilities lighting and electric energy all during Building Hours.
|
c. |
Cold and hot water for drinking and lavatory purposes.
|
d. |
Elevator service.
|
e. |
Restroom supplies in common area bathrooms and exterior window cleaning when reasonably required.
|
f. |
Lessor shall furnish and maintain fire extinguishers in the Building.
|
g. |
Notwithstanding the requirements of Exhibit D (as to HVAC) or any other provision of this Lease, Lessor shall not be liable for failure to furnish any of the aforesaid services when such failure is due to Force Majeure, as hereinafter defined. Lessor shall not be liable, under any circumstances, including, but not limited to, that arising from the negligence of Lessor, its agents, servants or invitees, or from defects, errors or omissions in the construction or design of the Premises and/or the Building, including the structural and non-structural portions thereof, for loss of or injury to Lessee or to property, however occurring, through or in connection with or incidental to the furnishings of, or failure to furnish, any of the aforesaid services or for any interruption to Lessee’s business, however occurring.
|
21. |
INTERRUPTION OF SERVICES OR USE: Interruption or curtailment of any service maintained in the Building or at the Office Building Area, if caused by Force Majeure, as hereinafter defined, shall not entitle Lessee to any claim against Lessor or to any abatement in rent, and shall not constitute a constructive or partial eviction, unless Lessor fails to take measures as may be reasonable under the circumstances to restore the service without undue delay. If the Premises are rendered untenantable in whole or in part, for a period of ten (10) consecutive business days, by the making of repairs, replacements or additions, other than those made with Lessee’s consent or caused by misuse or neglect by Lessee, or Lessee’s agents, servants, visitors or licensees, there shall be a proportionate abatement of Fixed Basic Rent from and after said tenth (10th) consecutive business day and continuing for the period of such untenantability. In no event, shall Lessee be entitled to claim a constructive eviction from the Premises unless Lessee shall first have notified Lessor in writing of the condition or conditions giving rise thereto, and if the complaints be justified, unless Lessor shall have failed, within a reasonable time after receipt of such notice, to remedy, or commence and proceed with due diligence to remedy such condition or conditions, all subject to Force Majeure as hereinafter defined.
|
22. |
BUILDING STANDARD OFFICE ELECTRICAL SERVICE: The cost of electric current which is supplied by the Lessor for use by the Lessee in the Premises, is included in Fixed Basic Rent as described under Electric Energy Charge in the Preamble and is subject to adjustment in accordance with the terms and conditions set forth below.
|
a. |
The Electric Energy Charge set forth in the Preamble to this Lease represents Lessor’s and Lessee’s agreed upon charges for the annual cost of providing electric current for the operation of lighting fixtures and electrical outlets initially installed in the Demised Premises. If Lessee’s electrical needs are in excess of the standard and customary usage for an office tenant, then such Electric Energy Charge may be subject to adjustments from time to time, based upon the determination by an electrical consultant selected by Lessor to make a survey of the electrical current and powerload requirements (existing as of the time of such survey) in the Demised Premises. The findings and determinations of the consultant as to the proper cost of electricity being consumed by Lessee in the Demised Premises shall be based upon the costs and charges for electrical current which Tenant would pay to the utility company supplying such current to Lessee as a direct consumer, and such findings and determinations shall be binding upon the parties provided, however, that in the event of any dispute between the parties with respect to such findings and determinations, the same shall be submitted to arbitration before the local office of the American Arbitration Association. The Electric Energy Charge shall be adjusted retroactively to the date of the survey to conform to the determination of the electrical consultant (or, to the determination under any arbitration). After such survey and determination shall have been made, Lessor shall deliver to Lessee a copy thereof (as the same may apply to the Lessee herein). Together with such survey and determination, Lessor shall send a statement to Lessee setting forth an adjustment, to be credited to or paid by Lessee, of an amount equal to the difference for such period. Any amount to which Lessee is entitled shall be deducted from the Fixed Rent installment payable for the month following delivery such statement or, in the event that any such amount shall be due to Lessee after the termination date of this Lease, such amount shall be promptly paid to Lessee. Any amount owed by Lessee shall be paid with the next installment of Fixed Rent due to Landlord hereunder.
|
b. |
In the event that there shall be an increase or decrease in the rate schedule (including surcharges or demand adjustments), of the public utility for the supply of Building Standard Office Electrical Service, or the imposition of any tax with respect to such service or increase in any such tax following the Commencement, Date, the Electric Energy Charge payable hereunder shall be adjusted equitably to reflect the increase or decrease in rate or imposition or increase in the aforesaid tax. All computations shall be made on the basis of Lessee’s surveyed usage as if a meter exclusively measuring such usage to the Premises was in place.
|
c. |
Lessee covenants that it shall notify Lessor immediately upon the introduction of any office equipment or lighting different from that on the Premises as of Lessor’s electrical survey or in addition to the aforesaid equipment or lighting on the Premises as of said survey. The introduction of any new or different equipment or lighting shall be cause for, at Lessor’s election, a resurveying of the Premises at Lessee’s expense. Lessor reserves the right to inspect the Premises to insure compliance with this provision.
|
d. |
Lessor shall not be liable in any way to Lessee for any loss, damage or expense which Lessee may sustain or incur as a result of any failure, defect or change in the quantity or character of electrical energy available for redistribution to the Premises pursuant to this Article 22 nor for any interruption in the supply, and Lessee agrees that such supply may be interrupted for inspection, repairs and replacement and in emergencies. In any event, the full measure of Lessor’s liability for any interruption in the supply due to Lessor’s acts or omissions shall be an abatement of Fixed Basic Rent and Additional Rent, unless Lessor fails to take such measures as may be reasonable under the circumstances to restore such service without undue delay. In no event shall Lessor be liable for any business interruption suffered by Lessee.
|
e. |
Lessor, at Lessee’s expense, shall furnish and install all replacement lighting tubes, lamps, ballasts and bulbs required in the Premises. Lessee, however, shall have the right to furnish and/or install any or all of the items mentioned in this Article 22(e).
|
f. |
Lessee’s use of electrical service as contemplated herein shall be during Building Hours, and any use in excess of said Building Hours shall result in an adjustment as set forth in Article 22(a) hereof to reflect such additional consumption.
|
23. |
ADDITIONAL RENT: It is expressly agreed that Lessee will pay in addition to the Fixed Basic Rent provided in Article 3 hereof, an Additional Rent to cover Lessee’s Percentage as defined in the Preamble, of the increased cost to Lessor, for each of the categories enumerated herein, over the “Base Period Costs”, as defined in the Preamble for said categories.
|
a. |
Operating Cost Escalation. If the Operating Costs incurred for the Building in which the Premises are located and Office Building Area for any Lease Year or Partial Lease Year during the Term shall be greater than the Base Operating Costs (adjusted proportionately for periods less than a Lease Year), then Lessee shall pay to Lessor, as Additional Rent, Lessee's Percentage of all such excess Operating Costs. Operating Costs shall include, by way of illustration and not of limitation: personal property taxes; management fees; labor, including all wages and salaries; social security taxes, and other taxes which may be levied against Lessor upon such wages and salaries; supplies; repairs and maintenance; maintenance and service contracts; painting; wall and window washing; laundry and towel service; tools and equipment (which are not required to be capitalized for federal income tax purposes); fire and other insurance; trash removal; lawn care; snow removal and all other items properly constituting direct operating costs according to standard accounting practices (collectively the “Operating Costs”), but not including depreciation of Building or equipment; interest; income or excess profits taxes; costs of maintaining the Lessor’s corporate existence; franchise taxes; any expenditures required to be capitalized for federal income tax purposes, unless said expenditures are for the purpose of reducing Operating Costs within the Building and Office Building Area, or those which under generally applied real estate practice are expensed or regarded as deferred expenses or are required under any governmental or quasi-governmental law, statute, ordinance, rule, order, requirements or regulation, in which event the costs thereof shall be included.
|
b. |
Fuel, Utilities and Electric Cost Escalation (hereinafter referred to as “Utility and Energy Costs”). If the Utility and Energy Costs, including any fuel surcharges or adjustments with respect thereto, incurred for water, sewer, gas, electric, other utilities and heating, ventilating and air conditioning for the Building, to include all leased and leasable areas (not separately billed or metered within the Building) and Common Facilities electric, lighting, water, sewer and other utilities for the Building and Office Building Area, for any Lease Year or Partial Lease Year, during the Term, shall be greater than the Base Utility and Energy Costs (adjusted proportionately for periods less than a Lease Year), then Lessee shall pay to Lessor as Additional Rent, Lessee’s Percentage as hereinafter defined, of all such excess Utility and Energy Costs. As used in this Article 23, the Base Utility and Energy Costs shall be as defined in the Preamble.
|
c. |
Tax Escalation. If the Real Estate Taxes for the Building for any Lease Year or Partial Lease Year, during the Term, shall be greater than the Base Real Estate Taxes (adjusted proportionately for periods less than a Lease Year), then Lessee shall pay to Lessor as Additional Rent, Lessee’s Percentage as hereinafter defined, of all such excess Real Estate Taxes.
|
d. |
Definitions. As used in this Article 23, the words and terms that follow mean and include the following:
|
i. |
“ Real Estate Taxes” shall mean the property taxes and assessments imposed upon the Building, or upon the rent, as such, payable to the Lessor, including, but not limited to, real estate, city, county, village, school and transit taxes, or taxes, assessments, or charges levied, imposed or assessed against the Building by any other taxing authority, whether general or specific, ordinary or extraordinary, foreseen or unforeseen. If due to a future change in the method of taxation, any franchise, income or profit tax shall be levied against Lessor in substitution for, or in lieu of, or in addition to, any tax which would otherwise constitute a Real Estate Tax, such franchise, income or profit tax shall be deemed to be a Real Estate Tax for the purposes hereof; conversely, any additional real estate tax hereafter imposed in substitution for, or in lieu of, any franchise, income or profit tax (which is not in substitution for, or in lieu of, or in addition to, a Real Estate Tax as hereinbefore provided) shall not be deemed a Real Estate Tax for the purposes hereof.
|
ii. |
“Lease Year” shall mean a calendar year. Any portion of the Term which is less than a Lease Year as hereinbefore defined, that is, from the Commencement Date through the following December 31, and from the last January 1, falling within the Term to the end of the Term, shall be deemed a “Partial Lease Year”. Any reference in this Lease to a Lease Year shall, unless the context clearly indicates otherwise, be deemed to be a reference to a Partial Lease Year if the period in question involves a Partial Lease Year.
|
e. |
Payment. At any time, and from time to time, after the establishment of the Base Period Costs for each of the categories referred to above, Lessor shall advise Lessee in writing of Lessee’s Percentage share with respect to each of the categories as estimated for the next twelve (12) month period (or proportionate part thereof if the last period prior to the Lease’s expiration is less than twelve (12) months) as then known to the Lessor, and thereafter, the Lessee shall pay as Additional Rent, Lessee’s Percentage share of these costs for the then current period affected by such advice (as the same may be periodically revised by Lessor as additional costs are incurred) in equal monthly installments, such new rates being applied to any months, for which the Fixed Basic Rent shall have already been paid which are affected by the Operating Cost Escalation and/or Utility and Energy Cost Escalation and/or Tax Escalation Costs above referred to, as well as the unexpired months of the current period, the adjustment for the then expired months to be made at the payment of the next succeeding monthly rental, all subject to final adjustment at the expiration of each Lease Year hereof (or Partial Lease Year if the last period prior to the Lease's termination is less than twelve (12) months). However, Lessor shall be reimbursed by Lessee monthly during the first year of the Term for additional Utility and Energy Cost Escalations resulting from an increase in the monthly rate over the Base Utility Rate. In the event the last period prior to the Lease’s termination is less than twelve (12) months, the Base Period Costs during said period shall be proportionately reduced to correspond to the duration of said final period.
|
f. |
Books and Reports. For the protection of Lessee, Lessor shall maintain books of account which shall be open to Lessee and its representatives at all reasonable times so that Lessee can determine that such Operating, Utility and Energy and Real Estate Tax Costs have, in fact, been paid or incurred. Lessee’s representatives shall mean only (i) Lessee’s employees or (ii) a Certified Public Accounting firm. At Lessor’s request, Lessee shall execute a confidentiality agreement reasonably acceptable to Lessor prior to any examination of Lessor’s books and records. In the event Lessee disputes any one or more of said charges, Lessee shall attempt to resolve such dispute with Lessor, provided that if such dispute shall not be satisfactorily settled between Lessor and Lessee, the dispute shall be referred by either party to an independent certified public accountant to be mutually agreed upon, and if such an accountant cannot be agreed upon, The American Arbitration Association may be asked by either party to select an arbitrator, whose decision on the dispute will be final and binding upon both parties, who shall jointly share any cost of such arbitration. Pending resolution of said dispute the Lessee shall pay to Lessor the sum so billed by Lessor subject to its ultimate resolution as aforesaid.
|
g. |
Right of Review. Once Lessor shall have finally determined said Operating, Utility and Energy or Real Estate Tax Costs at the expiration of a Lease Year, then as to the item so established, Lessee shall only be entitled to dispute said charge as finally established for a period of six (6) months after such charge is finally established, and Lessee specifically waives any right to dispute any such charge at the expiration of said six (6) month period.
|
24. |
LESSEE'S ESTOPPEL: Lessee shall, from time to time, on not less that ten(l0) days prior written request by Lessor, execute, acknowledge and deliver to Lessor a written statement certifying that the Lease is unmodified and in full force and effect, or that the Lease is in full force and effect as modified and listing the instruments of modification; the dates to which the rents and charges have been paid; and, to the best of Lessee’s knowledge, whether or not Lessor is in default hereunder, and if so, specifying the nature of the default. It is intended that any such statement delivered pursuant to this Article 24 may be relied on by a prospective purchaser of Lessor’s interest or mortgagee of Lessor’s interest or assignee of any mortgage of Lessor’s interest. Lessee shall also execute and deliver the form “Lessee Estoppel Certificate” attached hereto as Exhibit F.
|
25. |
HOLDOVER TENANCY: If Lessee holds possession of the Premises after the Term of this Lease, Lessee shall (i) become a tenant from month to month under the provisions herein provided, but at a monthly basic rental which is 200% of the then current Rent as provided for pursuant to N.J.S.A. 2A:42.6 and without the requirement for demand or notice by Lessor to Lessee demanding delivery of possession of said Premises (but Additional Rent shall continue as provided in this Lease), which sum shall be payable in advance on the first day of each month, and such tenancy shall continue until terminated by Lessor, or until Lessee shall have given to Lessor, at least sixty (60) days prior to the intended date of termination, a written notice of intent to terminate such tenancy, which termination date must be as of the end of a calendar month; and (ii) indemnify Lessor against loss or liability resulting from the delay by Lessee in so surrendering the premises including, without limitation, any claims made by any succeeding occupant founded on such delay. Lessee’s obligations under this section shall survive the expiration or sooner termination of the Term.
|
26. |
RIGHT TO SHOW PREMISES: Lessor may show the Premises to prospective purchasers and mortgagees; and during the nine (9) months prior to termination of this Lease, to prospective tenants, on reasonable notice to Lessee.
|
27. |
WAIVER OF TRIAL BY JURY: To the extent such waiver is permitted by law, the parties waive trial by jury in any action or proceeding brought in connection with this Lease or the Premises.
|
28. |
LATE CHARGE: Anything in this Lease to the contrary notwithstanding, at Lessor’s option, Lessee shall pay a “Late Charge” of eight percent (8%) of any installment of Fixed Basic Rent or Additional Rent paid more than five (5) days after the due date thereof, to cover the extra expense involved in handling delinquent payments, said Late Charge to be considered Additional Rent. The amount of the Late Charge to be paid by Lessee shall be reassessed and added to Lessee’s obligations for each successive monthly period until paid.
|
29. |
LESSEE’S INSURANCE:
|
a. |
Lessee covenants to provide at Lessee’s cost and expense on or before the earlier of (i) the Commencement Date, or (ii) Lessee’s taking actual possession for the purpose of completing any improvement work, and to keep in full force and effect during the entire Term and so long thereafter as Lessee, or anyone claiming by, through or under Lessee, shall occupy the Premises, insurance coverage as follows:
|
i. |
Commercial General Liability insurance with contractual liability endorsements with respect to the Premises and the business of Lessee in which Lessee shall be adequately covered under limits of liability of not less than TWO MILLION AND 00/100 DOLLARS (2,000,000) combined single limit per occurrence for bodily or personal injury (including death) and property damage. Such insurance may be carried (x) under a blanket policy covering the Premises and other locations of Lessee, if any, provided that each such policy shall in all respects comply with this Article and shall specify that the portion of the total coverage of such policy that is allocated to the Premises is in the amounts required pursuant to this Article 30 and (y) under a primary liability policy of not less than ONE MILLION AND 00/100 DOLLARS ($1,000,000) and the balance under an umbrella policy. Notwithstanding anything to the contrary contained in this Lease, the carrying of insurance by Lessee in compliance with this Article 29 shall not modify, reduce, limit or impair Lessee's obligations and liability under Article 32 hereof.
|
ii. |
Fire and Extended Coverage, Vandalism, Malicious Mischief, Sprinkler Leakage and Special Extended Coverage Insurance in an amount adequate to cover the cost of replacement of all personal property, decoration, trade fixtures, furnishings, equipment in the Premises and all contents therein. Lessor shall not be liable for any damage to such property of Lessee by fire or other peril includable in the coverage afforded by the standard form of fire insurance policy with extended coverage endorsement attached (whether or not such coverage is in effect), no matter how caused, it being understood that the Lessee will look solely to its insurer for reimbursement.
|
iii. |
Worker’s Compensation Insurance in the minimum statutory amount covering all persons employed by Lessee.
|
iv. |
Said limits shall be subject to periodic review and Lessor reserves the right to increase said coverage limits if, in the reasonable opinion of Lessor, said coverage becomes inadequate and is less than that commonly maintained by tenants in similar buildings in the area by tenants making similar uses. On or before the Commencement Date, and thereafter at Lessor’s request, Lessee shall provide Lessor evidence of the insurance coverage required herein in the form of an insurance certificate or copy of the insurance policy.
|
b. |
All of the aforesaid insurance shall (i) name Lessor and the management company as an additional insured; (ii) be written by one or more responsible insurance companies licensed in the State of New Jersey satisfactory to Lessor and in form satisfactory to Lessor; (iii) contain endorsements substantially as follows: “It is understood and agreed that the insurer will give to Lessor, or any successor lessor, thirty (30) days prior written notice of any material change in or cancellation of this policy.”; (iv) shall be written on an “occurrence” basis and not on a “claims made” basis.
|
c. |
Lessee shall be solely responsible for payment of premium and Lessor (or its designee) shall not be required to pay any premium for such insurance. Lessee shall deliver to Lessor at least fifteen(l5) days prior to the expiration of such policy, either a duplicate original or a certificate it being the intention of the parties hereto that the insurance required under the terms hereof shall be continuous during the entire Term and any other period of time during which pursuant to the Term hereof, said insurance is required. Any insurance carried by Lessee shall be in excess of and will not contribute with the insurance carried by Lessor for injuries or damage arising out of the Premises.
|
d. |
Lessee agrees, at its own cost and expense, to comply with all rules and regulations of the National Fire Protection Association (NFPA) National Fire Code. If, at any time or from time to time, as a result of or in connection with any failure by Lessee to comply with the foregoing sentence or any act or omission or commission by Lessee, its employees, agents, contractors or licensees, or a result of or in connection with the use to which the Premises are put (notwithstanding that such use may be for the purposes hereinbefore permitted or that such use may have been consented to by Lessor), the fire insurance rate(s) applicable to the Premises shall be higher than that which would be applicable for a business office legally permitted therein, Lessee agrees that it will pay to Lessor as Additional Rent, such portion of the premiums for all Lessor’s fire insurance policies in force with respect to the building and the contents of any occupant thereof as shall be attributable to such higher rate(s).
|
e. |
Lessor makes no representation that the limits of liability specified to be carried by Lessee or Lessor under the terms of this Lease are adequate to protect Lessee against Lessee’s undertaking under this Article 29, and in the event Lessee believes that any such insurance coverage called for under this Lease is insufficient, Lessee shall provide, at is own expense, such additional insurance as Lessee deems adequate.
|
f. |
In the event the Premises or its contents are damaged or destroyed by fire or other insured casualty, (i) Lessor, to the extent of the coverage of Lessor’s policies of fire insurance, hereby waives its rights, if any, against Lessee with respect to such damage or destruction, even if said fire or other casualty shall have been caused, in whole or in part, by the negligence of Lessee, and (ii) Lessee, to the extent of the coverage of Lessee’s policies of fire insurance with extended coverage, hereby waives its rights, if any, against Lessor with respect to such damage, or destruction, even if said fire or other casualty shall have been caused, in whole or in part, by the negligence of Lessor; provided, however, such waivers of subrogation shall only be effective with respect to loss or damage occurring during such time as Lessor’s or Lessee’s policies of fire insurance (as the case may be) shall contain a clause or endorsement providing in substance that the aforesaid waiver of subrogation shall not prejudice the type and amount of coverage under such policies or the right of Lessor or Lessee (as the case may be) to recover thereunder. If, at any time, Lessor’s or Lessee’s insurance carrier refuses to write insurance which contains a consent to the foregoing waiver of subrogation, Lessor or Lessee, as the case may be, shall notify the party thereof in writing, and upon the giving of such notice, the provisions of this Section shall be null and void as to any casualty which occurs after such notice. If Lessor’s or Lessee’s insurance carrier shall make a charge for the incorporation of the aforesaid waiver of subrogation in its policies, then the party requesting the waiver shall promptly pay such charge to the other party upon demand. In the event the party requesting their waiver fails to pay such charge upon demand, the other party shall be released of its obligation to supply such waiver.
|
g. |
Should Lessee fail to maintain the insurance coverage as set forth in this Article 29, then Lessee shall be in default hereunder and shall be deemed to have breached its covenants as set forth herein.
|
30. |
NO OTHER REPRESENTATIONS: No representations or promises shall be binding on the parties hereto except those representations and promises contained herein or in some future writing signed by the party making such representation(s) or promise(s).
|
31. |
QUIET ENJOYMENT: Lessor covenants that if, and so long as, Lessee pays Fixed Basic Rent, and any Additional Rent as herein provided, and performs Lessee’s covenants hereof, Lessor shall do nothing to affect Lessee’s right to peaceably and quietly have, hold and enjoy the Premises for the Term herein mentioned, subject to the provisions of this Lease .
|
32. |
INDEMNITY:Lessee shall defend, indemnify and save harmless Lessor and its agents against and from; (a) any and all claims (i) arising from (x) the conduct or management by Lessee, its subtenants, licensees, its or their employees, agents, contractors or invitees on the Premises or of any business therein, or (y) any work or thing whatsoever done, or any condition created (other than by Lessor for Lessor’s or Lessee’s account) in or about the Premises during the Term, or during the period of time, if any, prior to the Commencement Date that Lessee may have been given access to the Premises, (z) any default by Lessee under the terms, covenants and conditions of this Lease or (ii) arising from any negligent or otherwise wrongful act or omission of Lessee or any of its subtenants or licensees or its or their employees, agents, contractors or invitees, and (b) all costs, expenses and liabilities including reasonable attorneys fees and disbursements incurred in or in connection with each such claim, action or proceeding brought thereon. In case any action or proceeding be brought against Lessor by reason of any such claim, Lessee, upon notice from Lessor, shall resist and defend such action or proceeding.
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33. |
ARTICLE HEADINGS AND MISCELLANEOUS: The article headings in this Lease are intended for convenience only and shall not be taken into consideration in any construction or interpretation of this Lease or any of its provisions. This Lease shall be interpreted in accordance with its plain meaning and not against either party as the draftsman. This Lease may be signed in counterparts and an electronic or facsimile signature shall be deemed and treated as an original signature.
|
34. |
APPLICABILITY TO HEIRS AND ASSIGNS: The provisions of this Lease shall apply to, bind and inure to the benefit of Lessor and Lessee, and their respective heirs, successors, legal representatives and assigns. It is understood that the term “Lessor” as used in this Lease means only the owner, a mortgagee in possession or a term Lessee of the Building, so that in the event of any sale of the Building or of any lease thereof, or if a mortgagee shall take possession of the Premises, the Lessor herein shall be and hereby is entirely freed and relieved of all covenants and obligations of Lessor hereunder accruing thereafter, and it shall be deemed without further agreement that the purchaser, the term lessee of the Building, or the mortgagee in possession has assumed and agreed to carry out any and all covenants and obligations of Lessor hereunder.
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35. |
OUTSIDE PARKING SPACES: Lessee’s occupancy of the Premises shall include the use of the number of outside parking spaces as set forth in the Preamble, all of which will be unassigned. Lessor shall not be responsible for any damage or theft of any vehicle in the parking area and shall not be required to keep parking spaces clear of unauthorized vehicles or to otherwise supervise the use of the parking area. Lessee shall, upon request, promptly furnish to Lessor the license numbers of the cars operated by Lessee and its subtenants, licensees, invitees, concessionaires, officers and employees.
|
36. |
LESSOR'S LIABILITY FOR LOSS OF PROPERTY: Lessor shall not be liable for any loss of property from any cause whatsoever, including but not limited to theft or burglary from the Premises, and any such loss arising from the negligence of Lessor, its agents, servants or invitees, or from defects, errors or omissions in the construction or design of the Premises and/or the Building, including the structural and non-structural portions thereof, and Lessee covenants and agrees to make no claim for any such loss at any time.
|
37. |
PARTIAL INVALIDITY: If any of the provisions of this Lease, or the application thereof to any person or circumstances, shall to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such provision or provisions to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this Lease shall be valid and enforceable to the fullest extent permitted by law.
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38. |
BROKER(S): Canceled
|
39. |
PERSONAL LIABILITY: Notwithstanding anything to the contrary provided in this Lease, it is specifically understood and agreed, such agreement being a primary consideration for the execution of this Lease by Lessor, that there shall be absolutely no personal liability on the part of Lessor, its constituent members (to include but not be limited to, officers, directors, partners and trustees) their respective successors, assigns or any mortgagee in possession (for the purposes of this Article, collectively referred to as “Building Lessor”), with respect to any of the terms, covenants and conditions of this Lease, and that Lessee shall look solely to the equity of Building Lessor in the Building for the satisfaction of each and every remedy of Lessee in the event of any breach by Lessor of any of the terms, covenants and conditions of this Lease to be performed by Lessor, such exculpation of liability to be absolute and without any exceptions whatsoever.
|
40. |
NO OPTION: The submission of this Lease for examination does not constitute a reservation of, or option for, the Premises, and this Lease becomes effective only upon execution and delivery thereof by Lessor and Lessee.
|
41. |
DEFINITIONS:
|
a. |
Common Facilities. Common Facilities shall mean the non-assigned parking areas; lobby; elevator(s); fire stairs; public hallways; public lavatories; all other general Building facilities that service all Building tenants; air conditioning rooms; fan rooms; janitors’ closets; electrical closets; telephone closets; elevator shafts and machine rooms; flues; stacks; pipe shafts and vertical ducts with their enclosing walls. Lessor may at any time close temporarily any Common Facilities to make repairs or changes therein or to effect construction, repairs or changes within the Building, or to discourage non-tenant parking, and may do such other acts in and to the Common Facilities as in its judgment may be desirable to improve the convenience thereof, but shall always in connection therewith, endeavor to minimize any inconvenience to Lessee.
|
b. |
Force Majeure. Force Majeure shall mean and include those situations beyond Lessor's reasonable control, including by way of example and not by way of limitation, acts of God; acts of terrorism; acts of war; accidents; repairs; labor slow downs or strikes; shortages of labor, supplies or materials; inclement weather; or, where applicable, the passage of time while waiting for an adjustment or insurance proceeds. Any time limits required to be met by either party hereunder, whether specifically made subject to Force Majeure or not, except those related to the payment of Fixed Basic Rent or Additional Rent, shall, unless specifically stated to the contrary elsewhere in this Lease, be automatically extended by the number of days by which any performance called for is delayed due to Force Majeure.
|
42. |
LEASE COMMENCEMENT: Notwithstanding anything contained in this Lease to the contrary, if Lessor, for any reason whatsoever, cannot deliver possession of the Premises to Lessee as contemplated pursuant to Article 2, this Lease shall not be void or voidable, nor shall Lessor be liable to Lessee for any loss or damage resulting therefrom, but in that event, the Term shall be for the full term as specified above to commence from and after the date Lessor shall have delivered possession of the Premises to Lessee or from the date Lessor would have delivered possession of the Premises to Lessee but for any reason attributable to Lessee.
|
43. |
NOTICES: Any notice by either party to the other shall be in writing and shall be deemed to have been duly given only if (i) delivered personally or (ii) sent by registered mail or certified mail return receipt requested in a postage paid envelope addressed or (iii) sent by nationally recognized overnight delivery service to the respective address set forth in the Preamble to this Lease, or to either at such other address as Lessee or Lessor, respectively, may designate in writing. Notice shall be deemed to have been duly given, if delivered personally, on delivery thereof; if mailed, upon the third (3rd) day after the mailing thereof or if sent by overnight delivery service, the next business day. A copy of the Notice shall also be sent by email.
|
44. |
ACCORD AND SATISFACTION: No payment by Lessee or receipt by Lessor of a lesser amount than the Fixed Basic Rent and Additional Rent and charges payable hereunder shall be deemed to be other than a payment on account of the earliest stipulated Fixed Basic Rent and Additional Rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment for Fixed Basic Rent or Additional Rent be deemed an accord and satisfaction, and Lessor may accept such check or payment without prejudice to Lessor’s right to recover the balance of such Fixed Basic Rent and Additional Rent or pursue any other remedy provided herein or by law.
|
45. |
EFFECT OF WAIVERS: No failure by Lessor to insist upon the strict performance of any covenant, agreement, term or condition of this Lease, or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any such breach or of such covenant, agreement, term or condition. No consent, or waiver, express or implied, by Lessor to or of any breach of any covenant, condition or duty of Lessee shall be construed as a consent or waiver to or of any other breach of the same or any other covenant, condition or duty, unless in writing signed by Lessor. Lessor and Lessee each agree that they will not raise or assert as a defense to any obligation under this Lease or make any claim that this Lease is invalid or unenforceable due to any failure of this document to comply with ministerial requirements including, but not limited to, requirements for corporate seals, attestations, witnesses, notarizations, or other similar requirements, and each party hereby waives the right to assert any such defense or make any claim of invalidity or unenforceability due to any of the foregoing.
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46. |
THIS SECTION HAS BEEN INTENTIONALLY OMOITTED
|
47. |
MORTGAGEE’S NOTICE AND OPPORTUNITY TO CURE: Lessee agrees to give any mortgagees and/or trust deed holders, by registered mail, a copy of any notice of default served upon Lessor. Lessee further agrees that, if Lessor shall have failed to cure such default within the time provided for in this Lease, then the mortgagees and/or trust deed holders shall have an additional thirty (30) days within which to cure such default, or if such default cannot be cured within that time, then such additional time as may be necessary, if within such thirty (30) days, any mortgagee and/or trust deed holder has commenced and is diligently pursuing the remedies necessary to cure such default (including but not limited to commencement of foreclosure proceedings if necessary to effect such cure), in which event this Lease shall not be terminated while such remedies are being so diligently pursued.
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48. |
LESSOR’S RESERVED RIGHT: Lessor and Lessee acknowledge that the Premises are in a Building which is not open to the general public. Access to the Building is restricted to Lessor, Lessee, their agents, employees and contractors and to their invited visitors. In the event of a labor dispute including a strike, picketing, informational or associational activities directed at Lessee or any other tenant, Lessor reserves the right unilaterally to alter Lessee’s ingress and egress to the Building or make any change in operating conditions to restrict pedestrian, vehicular or delivery ingress and egress to a particular location.
|
49. |
LESSOR’S REPRESENTATIONS: Lessor hereby warrants and represents to Lessee that:
|
a. |
Lessor has received no notice of any violation affecting the Premises or the Building, and Lessee shall not be responsible for any violations against the Premises, nor against the Building as of the Commencement of the Term, whether or not of record.
|
b. |
Lessor has no knowledge of the existence of any hazardous materials condition or of the use of any hazardous materials in the Building.
|
50. |
AFTER-HOURS USE: After hours use of the Premises shall be governed by Paragraph 5 of the Preamble.
|
51. |
CORPORATE AUTHORITY: If Lessee is a corporation or other registered entity, Lessee represents and warrants that this Lease has been duly authorized and approved by the corporation’s Board of Directors or the requisite authority of the entity. The undersigned officers and representatives of the corporation/entity represent and warrant that they are officers of the corporation/entity with authority to execute this Lease on behalf of the corporation/entity, and within fifteen (15) days of execution hereof, Lessee will provide Lessor with a corporate/entity resolution confirming the aforesaid.
|
52. |
BUILDING PERMIT: This Lease is expressly conditioned upon Lessor obtaining a building permit from the appropriate government official for Lessee’s Premises.
|
53. |
RENEWAL OPTION: Lessee is hereby granted the Renewal Options for the Renewal Terms, both as defined in the Preamble, upon the following terms and conditions:
|
a. |
At the time of the exercise of the Renewal Option and at the time of the said renewal, the Lessee shall not be in default in accordance with the terms and provisions of this Lease, and shall be in possession of the Premises pursuant to this Lease.
|
b. |
Notice of the exercise of a Renewal Option shall be sent to the Lessor in writing at least nine (9) months before the expiration of the then current Term of the Lease.
|
c. |
The renewal Term shall be for the term of five (5) years, to commence at the expiration of the Term of this Lease, and all of the terms and conditions of this Lease, other than the Fixed Basic Rent and Additional Rent, shall apply during any such renewal term.
|
d. |
The annual Basic Rent to be paid during the Renewal Term shall not be less than that paid for the Premises during the last year of the prior term of the Lease. However, if the fair rental value of the Premises at the commencement of the Renewal Term shall exceed the rent as established in the preceding sentence, the Lessee shall pay 95% of such fair rental value. In determining the fair rental value, the Lessor shall notify Lessee of the fair rental value as established by Lessor. Should Lessee dispute Lessor’s determination, then the Lessee shall be free to, at the Lessee’s sole cost and expense, employ, the services of an appraiser familiar with office buildings located within the Paramus, New Jersey area comparable to the Building, who shall be a member of MAI and who shall render an appraisal. If the Lessor and the Lessee’s appraiser cannot agree on the fair rental value, or in such case on an independent appraiser acceptable to both, either party may request the local office of the American Arbitration Association to appoint such independent appraiser who shall be a member of MAI familiar with office buildings in the area of the Building and in such event the judgment of a majority of the two appraisers and Lessor shall be final and binding upon the parties. The parties shall share equally in the cost of any such independent appraiser. Pending resolution of the issue of fair rental value, the Lessee shall pay the Lessor as of commencement of the Renewal Term, the Fixed Basic Rent as established by Lessor, subject to retroactive adjustment upon final determination of this issue.
|
54. |
HAZARDOUS MATERIALS AND COMPLIANCE WITH ENVIRONMENTAL LAWS:
|
a. |
Lessee shall not cause or permit any hazardous or toxic substance, except as otherwise provided in this paragraph, material or waste which is or becomes regulated by any local governmental authority, of the United States Government (“Hazardous Material”) to be brought upon, kept, or used in or about the Premises by Lessee, its agents, employees, contractors or invitees, without the prior written consent of Lessor (which demonstrates to Lessor’s reasonable satisfaction that such Hazardous Material is necessary or useful to Lessee’s business and will be used, kept and stored in a manner that complies with all laws regulating any such Hazardous Material so brought upon or used or kept in or about the Premises). If Lessee breaches the obligations stated in the preceding sentence, or if the presence of Hazardous Material on the Premises, the Building or the Office Building Area caused or permitted by Lessee results in contamination of the Premises, the Building, or the Office Building Area by Hazardous Material or otherwise occurs, for which Lessee is legally liable to Lessor for damage resulting therefrom, then Lessee shall indemnify, defend and hold Lessor harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities, expenses or losses (including, without limitation, diminution in value of the Premises, the Building, or the Office Building Area, damages for the loss or restriction on use of rentable or usable space or of any amenity of the Premises, the Building, or the Office Building Area, damages arising from any adverse impact on marketing of space, and sums paid in settlement of claims, attorney’s fees, consultant fees and expert fees) which arise during or after the Term as a result of such contamination. This indemnification of Lessor by Lessee includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal, or restoration work required by any federal, state or local governmental agency or political subdivision because of Hazardous Material present including in the soil or ground water on or under the Building. Without limiting the foregoing, if the presence of any Hazardous Material on the Premises, the Building, or the Office Building Area, caused or permitted by Lessee results in any contamination of the Premises, the Building, or the Office Building Area, Lessee shall promptly take all actions at its sole expense as are necessary to return the Premises and/or the Building, and/or the Office Building Area to the condition existing prior to the introduction of any such Hazardous Material to the Premises and/or the Building and/or the Office Building Area; provided that Lessor’s approval of such actions shall first be obtained, which approval shall not be unreasonably withheld so long as such actions would not potentially have any material adverse long-term or short-term effect on the Premises, the Building or the Office Building Area. Notwithstanding anything to the contrary provided herein, Lessor’s approval shall not be required for the lawful storage of materials regularly used in the ordinary course of Lessee’s business; provided, however, Lessee shall provide Lessor with a list of materials being stored. Subject to Lessee’s compliance with Environmental Laws, Lessor consents to the foregoing. Notwithstanding anything in this Lease to the contrary, Lessee herby declares, confirms and covenants that Lessee shall use the Premises for the Permitted Use only and shall not allow any Hazardous Material to be brought upon, kept, or used in or about the Premises by Lessee, its agents, employees, contractors or invitees
|
b. |
Lessee shall, at Lessee’s sole cost and expense, comply with the requirements of any Federal, state, county, municipal or other governmental law, ordinance, rule, regulation, requirement and/or directive pertaining to the environment (an “Environmental Law” or “Environmental Laws”) including, but not limited to, the New Jersey Spill Compensation and Control Act (N.J.S.A. 58:10-23.11 et seq.); the New Jersey Water Pollution Control Act (N.J.S.A. 58:10A-1 et seq.); the Worker and Community Right to Know Act (N.J.S.A. 34:5A-1 et seq.) the Resource Conservation and Comprehensive Environmental Response Compensation and Liability Act of 1980 42 U.S.C. Section 9601 et seq.); and the Industrial Site Recovery Act and the regulations promulgated thereunder (“ISRA”). In this regard, Lessee shall, at Lessee’s sole cost and expense, make all submissions to, provide all information to and comply with all requirements of any governmental authority. Should said governmental authority determine any spills or discharges by Lessee or dangerous or hazardous substances or wastes in and upon the Premises, the Building and/or the Office Building Area caused by Lessee or its agents, servants, employees, licensees, invitees and contractors and/or that a cleanup plan must be prepared and submitted, then and in that event, Lessee shall, at Lessee’s sole cost and expense, take any and all action required and carry out any and all approved plans. Lessee’s obligations pursuant to this section shall arise whenever required by any appropriate governmental agency, including, but not limited to, any closing, terminating or transferring of operations at the Premises.
|
c. |
Lessee shall, at Lessee’s sole cost and expense, comply with ISRA. Lessee shall, at Lessee’s sole cost and expense, make all submissions to, provide any information to, and comply with all requirements of, the Bureau of Industrial Site Evaluation (“the Bureau”) of the New Jersey Department of Environmental Protection (“NJDEP”) applicable to its use of the Premises. Should the Bureau or any other division of NJDEP determine that a cleanup plan be prepared and that a cleanup be undertaken because of any spills or discharges of hazardous substance or wastes at the Premises caused by Lessee or its agents, servants, employees, licensees, invitees and contractors which occur during the Term or any renewal thereof, as the case may be, then Lessee shall, at Lessee’s sole cost and expense, prepare and submit the required plans and financial assurances, and carry out the approved plans. Lessee’s obligations under this Article shall also arise if there is any closing, terminating or transferring of Lessee’s operations at the Premises subject to ISRA, including without limitation, a sale, transfer or conveyance of the Premises by Lessee, an assignment or subletting by Lessee, or the vacation of the Premises by Lessee for any reason whatsoever. At no expense to Lessor, Lessee shall promptly provide all information within its personal knowledge requested by Lessor for preparation of non-applicability affidavits and shall promptly sign such affidavits when requested by Lessor. Lessee shall indemnify, defend and hold harmless Lessor from all fines, suits, procedures, claims and actions of any kind arising out of or in any way connected with any spills or discharges of hazardous substances or wastes at the Premise which occur during the Term or any renewal thereof, as the case may be and which are caused by Lessee or its agents, servants, employees, licensees, invitees and contractors; and from all fines, suits, procedures, claims and actions of any kind arising out of Lessee’s failure to provide all information, make all submissions and take all actions required by the ISRA Bureau or any other division of NJDEP. Lessee’s failure to abide by the terms of this Article shall be enforceable in a court of law and subject to all equitable remedies. Lessee’s obligations hereunder shall survive the expiration or termination of this Lease. The provisions of this Section 54 will be deemed to supersede and replace Section 19 of Exhibit B.
|
By:
|
Ronen Ailon, CEO
|
By:
|
Mario Gamilo Manager– Silicom USA
|
By:
|
Eran Gilad, CFO– Silicom USA
|
1. |
OBSTRUCTION OF PASSAGEWAYS: The sidewalks, entrance, passages, courts, elevators, vestibules, stairways, corridors and public parts of the Building shall not be obstructed or encumbered by Lessee or used by Lessee for any purpose other than ingress and egress. If the Premises are situated on the ground floor with direct access to the street, then Lessor shall, at Lessor’s expense, keep the sidewalks and curbs directly in front of the Premises clean and free from ice, snow and refuse.
|
2. |
WINDOWS: Windows in the Premises shall not be covered or obstructed by Lessee. No bottles, parcels or other articles shall be placed on the window sills, in the halls, or in any other part of the Building other than the Premises. No article shall be thrown out of the doors or windows of the Premises.
|
3. |
PROJECTIONS FROM BUILDING: No awnings, air-conditioning units, or other fixtures shall be attached to the outside walls or the window sills of the Building or otherwise affixed so as to project from the Building, without prior written consent of Lessor.
|
4. |
SIGNS: No sign or lettering shall be affixed by Lessee to any part of the outside of the Premises, or any part of the inside of the Premises so as to be clearly visible from the outside of the Premises, without the prior written consent of Lessor. However, Lessee shall have the right to place its name on any door leading into the Premises the size, color and style thereof to be subject to the Lessor’s approval. Lessee shall not have the right to have additional names placed on the Building directory without Lessor’s prior written consent.
|
5. |
FLOOR COVERING: Lessee shall not lay linoleum or other similar floor covering so that the same shall come in direct contact with the floor of the Premises. if linoleum or other similar floor covering is desired to be used, an interlining of builder’s deadening felt shall first be fixed to the floor by a paste or other material that may easily be removed with water, the use of cement or other similar adhesive material being expressly prohibited.
|
6. |
INTERFERENCE WITH OCCUPANTS OF BUILDING: Lessee shall not make, or permit to be made, any unseemly or disturbing noises or odors and shall not interfere with other tenants or those having business with them. Lessee will keep all mechanical apparatus in the Premises free of vibration and noise which may be transmitted beyond the limits of the Premises.
|
7. |
LOCK KEYS: No additional locks or bolts of any kind shall be placed on any of the doors or windows by Lessee. Lessee shall, on the termination of Lessee’s tenancy, deliver to Lessor all keys to any space within the Building either furnished to or otherwise procured by Lessee, and in the event of the loss of any keys furnished, Lessee shall pay to Lessor the cost thereof. Lessee, before closing and leaving the Premises, shall ensure that all windows are closed and entrance doors locked. Nothing in this Paragraph 7 shall be deemed to prohibit Lessee from installing a burglar alarm within the Premises, provided:
|
8. |
CONTRACTORS: No contract of any kind with any supplier of towels, water, toilet articles, waxing, rug shampooing, venetian blind washing, furniture polishing, lamp servicing, cleaning of electrical fixtures, removal of waste paper, rubbish, garbage, or other like service shall be entered into by Lessee, nor shall any machine of any kind be installed in the Building or the Office Building Area without the prior written consent of the Lessor. Lessee shall not employ any persons other than Lessor’s janitors for the purpose of cleaning the Premises without prior written consent of Lessor. Lessor shall not be responsible to Lessee for any loss of property from the Premises however occurring, or for any damage to the effects of Lessee by such janitors or any of its employees, or by any other person or any other cause.
|
9. |
PROHIBITED ON PREMISES: Lessee shall not conduct, or permit any other person to conduct, any auction upon the Premises, manufacture or store goods, wares or merchandise upon the Premises without the prior written approval of Lessor, except the storage of usual supplies and inventory to be used by Lessee in the conduct of his business, permit the Premises to be used for gambling, make any unusual noises in the Building, permit any musical instrument to be played on the Premises, permit any radio to be played, or television, recorded or wired music in such loud manner as to disturb or annoy other tenants, or permit any unusual odors to be produced on the Premises. Lessee shall not permit any portion of the Premises to be occupied as an office for a public stenographer or typewriter, or for the storage, manufacture, or sale of intoxicating beverages, narcotics, tobacco in any form or as a barber or manicure shop. Canvassing, soliciting and peddling in the Building are prohibited and Lessee shall cooperate to prevent the same. No bicycles, vehicles or animals of any kind shall be brought into or kept in or about the Premises.
|
10. |
PLUMBING, ELECTRIC AND TELEPHONE WORK: Plumbing facilities shall not be used for any purpose other than those for which they were constructed; and no sweepings, rubbish, ashes, newspaper or other substances of any kind shall be thrown into them. When electric wiring of any kind is introduced, it must be connected as directed by Lessor, and no stringing or cutting of wires will be allowed, except by prior written consent of Lessor, and shall be done by contractors approved by Lessor. The number and locations of telephones, electrical appliances, call boxes, etc. shall be subject to Lessor’s approval.
|
11. |
MOVEMENT OF FURNITURE, FREIGHT OR BULKY MATTER: The carrying in or out of freight, furniture or bulky matter of any description must take place during such hours as Lessor may from time to time reasonably determine and only after advance notice to the superintendent of the Building. The persons employed by Lessee for such work must be reasonably acceptable to the Lessor. Lessee may, subject to these provisions, move freight, furniture, bulky matter, and other material into or out of the Premises on Saturdays between the hours of 9:00 a.m. and 1 :00 p.m., provided Lessee pays additional costs, if any, incurred by Lessor for elevator operators or security guards, and for any other expenses occasioned by such activity of Lessee. If, at least three (3) days prior to such activity, Lessor requests that Lessee deposit with Lessor, as security of Lessee’s obligations to pay such additional costs, a sum of which Lessor reasonably estimates to be the amount of such additional cost, the Lessee shall deposit such sum with Lessor as security of such cost. There shall not be used in the Building or Premises, either by Lessee or by others in the delivery or receipt of merchandise, any hand trucks except those equipped with rubber tires and side guards, and no hand trucks will be allowed in the elevators without the consent of the superintendent of the Building.
|
12. |
HEAVY EQUIPMENT: Lessor reserves the right to prescribe the weight and position of all heavy equipment so as to distribute properly the weight thereof and to prevent any unsafe condition from arising.
|
13. |
ADVERTISING: Lessor shall have the right to prohibit any advertising by Lessee which in Lessor's reasonable opinion tends to impair the reputation of the Building or its desirability as a building for offices, and upon written notice from Lessor, Lessee shall refrain from or discontinue such advertising.
|
14. |
NON-OBSERVANCE OR VIOLATION OF RULES BY OTHER TENANTS: Lessor shall not be responsible to Lessee for non-observance or violation of any of these rules and regulations by any other tenant.
|
15. |
AFTER HOURS USE: Lessee shall be issued a pass key or pass keys to the Building for use during afterhours periods of 6:00 p.m. through 7:00 a.m. and at all hours on Saturdays, Sundays and Building Holidays. Each Lessee shall be responsible for all persons for whom such a pass key is issued and shall be liable to Lessor for the actions of such persons.
|
16. |
PARKING: Lessee and its employees shall park their cars only in those portions of the parking area designated by Lessor.
|
17. |
LESSOR'S RESERVED RIGHTS: Lessor hereby reserves to itself any and all rights not granted to Lessee hereunder, including, but not limited to, the following rights which are reserved to Lessor for its purposes in operating the Building:
|
a) |
the exclusive right to the use of the name of the Building for all purposes, except that Lessee may use the name as its business address and for no other purposes; and
|
b) |
the right to change the name or address of the Building, without incurring any liability to Lessee for doing so; and
|
c) |
the right to install and maintain a sign on the exterior of the Building; and
|
d) |
the exclusive right to use or dispose of the use of the roof of the Building; and
|
e) |
the right to limit the space on the directory of the Building to be allotted to Lessee; and
|
f) |
the right to grant to anyone the right to conduct any particular business or undertaking in the Building.
|
18. |
HEALTH AND SAFETY: The Lessee shall be responsible for initiating, maintaining and supervising all health and safety precautions and/or programs required by Law in connection with the Lessee’s use and occupancy of the Premises.
|
19. |
HAZARDOUS MATERIALS: The Lessee shall not store, introduce or otherwise permit any material known to be hazardous within the Premises. Any material within the Premises which is determined to be hazardous shall be removed and properly disposed of by the Lessee at the Lessee’s sole expense.
|
1. |
During the normal heating season to maintain an average indoor dry bulb temperature of not less than 70 degrees F (21 degrees C) or more than 76 degrees (24.4 degrees C) when the outdoor dry bulb temperature is lower than 65 degrees F (18 degrees C) but net lower than O degrees F (-13 degrees C).
|
2. |
To maintain comfort cooling for an average indoor dry bulb temperature of not more than 78 degrees F when the outside dry bulb temperature is 95 degrees F (24 degrees C).
|
3. |
During the intermediate seasons, when the outside dry bulb temperature is below 55 degrees (13 degrees C), cooling will be provided by outside air usage in conjunction with operating of return air, outside air and exhaust air dampers.
|
4. |
To furnish not less than .10 cubic foot of fresh air per minute per square foot of rentable area, and between .20 and 1.0 cubic feet of total air per minute, per square foot of rentable occupied space.
|
5. |
Lessor will not be responsible for the failure of the air-conditioning system if such failure results from (i) the occupancy of the Premises with more than an average of one (i) person for each one hundred (100) usable square feet of floor area (ii) the installation or operation by Lessee of machines and appliances, the installed electrical load of which when combined with the load of all lighting fixtures exceeds five (5) watts per square foot of floor area and in any manner exceeding the aforementioned occupancy and electrical load criteria, or (iii) rearrangement of partitioning after the initial preparation of the Premises. if interference with normal operation of the air-conditioning system in the Premises results, necessitating changes in the air conditioning system servicing the Premises, such changes shall be made by Lessor upon written notice to Lessee at Lessee’s sole cost end expense. Lessee agrees to lower and close window coverings when necessary because of the sun’s position whenever the air conditioning system is in operation, and Lessee agrees at all times to cooperate fully with Lessor and to abide by all the Rules and Regulations attached hereto as well as reasonable rules and regulations which Lessor may hereafter prescribe involving the air-conditioning system.
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· |
Sweep all tiled floors in office space (kitchen, hallway, service closet)
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· |
Empty and clean all waste receptacles throughout the offices, replace liners
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· |
Clean entrance floor matts
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· |
Deep clean bathrooms (mirror, counter top, toilets, urinals, screens, doors)
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· |
Wipe down all glass walls, doors and glass inserts in office space
|
· |
Mop all tiled floors in kitchen, hallway and service closet with chemically treated environmental friendly cleaning tools
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· |
Deep Vacuum all carpet flooring throughout the office space
|
· |
Clean door jams and frames to remove smudge marks
|
· |
Clean light switches
|
· |
Dust all furniture (if cleared – desk must be cleared by tenant prior to cleaning – reminder notice will be sent to tenant via email)
|
1. |
The undersigned is the Lessee (Tenant) under that certain Lease dated by and between as Lessor (Landlord) and as Lessee, covering those certain premises commonly known and designated as r.s.f. on the ( ) floor of ,NJ.
|
2. |
The Lease has not been modified, changed, altered or amended in any respect (except as indicated following this sentence) and is the only Lease or agreement between the undersigned and the Lessor affecting said premises. If none, state “none”.
|
3. |
The undersigned has made no agreements with Lessor or its agents or employees concerning free rent, partial rent, rebate of rental payments or any other type of rental concession (except as indicated following this sentence). If none, state “none”.
|
4. |
The undersigned has accepted and now occupies the premises, and is and has been open for business since , . The Lease term began , 1 , and the rent for said premises has been paid to and including , in conformity with this Lease Agreement. No rent has been prepaid for more than two (2) months. The fixed minimum rent being paid as above is $ per month. If Lessee is not in full possession, whether Lessee has assigned the Lease, sublet all or any portion of the Premises, or otherwise transferred any interest in the Lease or the Premises, Lessee agrees to provide a copy of such assignment, sublease, or transfer upon request.
|
5. |
The Lease is not in default and is in full force and effect. As of the date hereof, the undersigned is entitled to no credit, no free rent and no offset or deduction in rent.
|
6. |
All alterations, improvements, additions, build-outs, or construction required to be performed under the Lease have been completed in accordance with the terms of the Work Letter attached to Lease as Exhibit C.
|
7. |
The Lease does not contain and the undersigned does not have any outstanding options or rights of first refusal to purchase the premises or any part thereof or the real property of which the Premises are a part.
|
8. |
No actions, whether voluntary or otherwise, are pending against the undersigned under the bankruptcy laws of the United States or any State thereof.
|
9. |
There are currently no valid defenses, counterclaims, off-sets, credits, deductions in rent, or claims against the enforcement of any of the agreements, terms, or conditions of the Lease.
|
10. |
The undersigned acknowledges that all the interest of Lessor in and to the above-mentioned Lease is being duly assigned to MORTGAGEE or one of its affiliates hereunder and that pursuant to the terms thereof (i) all rental payments under said Lease shall continue to be paid to Lessor in accordance with the terms of the Lease unless and until you are otherwise notified in writing by MORTGAGEE, or its successor or assigns and (ii) no modification, revision, or cancellation of the Lease or amendments thereto shall be effective unless a written consent thereto of such mortgagee is first obtained.
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11. |
The undersigned is authorized to execute this Tenant Estoppel Certificate on behalf of the Lessee.
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Company Name
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Country of Incorporation
|
|
Silicom Connectivity Solutions, Inc.
|
The United States
|
|
Silicom Denmark (Fiberblaze A/S)(1)
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Denmark
|
(1) |
Silicom Denmark (Fiberblaze A/S) fully owns Fiberblaze US LLC, a private company incorporated in the United States.
|
(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d) |
disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
|
(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
|
(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
|
|
/s/ Shaike Orbach
Shaike Orbach
Chief Executive Officer
|
(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d) |
disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and;
|
(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
|
(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
|
|
/s/ Eran Gilad
Eran Gilad
Chief Financial Officer
|
1)
|
The Report fully complies with the requirements of sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ Shaike Orbach
Shaike Orbach
Chief Executive Officer
|
1)
|
The Report fully complies with the requirements of sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ Shaike Orbach
Shaike Orbach
Chief Executive Officer
|
Document And Entity Information |
12 Months Ended |
---|---|
Dec. 31, 2016
shares
| |
Document And Entity Information [Abstract] | |
Document Type | 20-F |
Amendment Flag | false |
Document Period End Date | Dec. 31, 2016 |
Document Fiscal Period Focus | FY |
Document Fiscal Year Focus | 2016 |
Entity Registrant Name | SILICOM LTD. |
Entity Central Index Key | 0000916793 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Accelerated Filer |
Entity Common Stock, Shares Outstanding | 7,381,613 |
Entity Well-known Seasoned Issuer | No |
Entity Current Reporting Status | Yes |
Entity Voluntary Filers | No |
Consolidated Balance Sheets (Parenthetical) - ₪ / shares |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Ordinary shares, par value | ₪ 0.01 | ₪ 0.01 |
Ordinary shares, authorized | 10,000,000 | 10,000,000 |
Ordinary shares, issued | 7,396,584 | 7,299,315 |
Ordinary shares, outstanding | 7,381,613 | 7,284,344 |
Ordinary shares, treasury shares | 14,971 | 14,971 |
Consolidated Statements of Operations - USD ($) $ in Thousands |
12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
||||||
Income Statement [Abstract] | ||||||||
Sales | [1] | $ 100,347 | $ 82,738 | $ 75,622 | ||||
Cost of sales | 61,796 | 48,659 | 44,835 | |||||
Gross profit | 38,551 | 34,079 | 30,787 | |||||
Operating expenses | ||||||||
Research and development | [2] | 12,663 | 9,702 | 6,480 | ||||
Sales and marketing | 6,423 | 5,651 | 4,418 | |||||
General and administrative | 3,969 | 3,611 | 2,798 | |||||
Contingent consideration expense (benefit) | (334) | (3,090) | 45 | |||||
Total operating expenses | 22,721 | 15,874 | 13,741 | |||||
Operating income | 15,830 | 18,205 | 17,046 | |||||
Financial income, net | 35 | 220 | 263 | |||||
Income before income taxes | 15,865 | 18,425 | 17,309 | |||||
Income taxes | 2,728 | 1,905 | 2,704 | |||||
Net income | $ 13,137 | $ 16,520 | $ 14,605 | |||||
Income per share: | ||||||||
Basic income per ordinary share (US$) | $ 1.789 | $ 2.273 | $ 2.033 | |||||
Diluted income per ordinary share (US$) | $ 1.767 | $ 2.242 | $ 1.996 | |||||
Weighted average number of ordinary shares used to compute basic income per share (in thousands) | 7,343,696 | 7,268,536 | 7,184,114 | |||||
Weighted average number of ordinary shares used to compute diluted income per share (in thousands) | 7,435,181 | 7,367,984 | 7,318,906 | |||||
|
Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | ||
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Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Statement [Abstract] | |||
Sales to related parties | $ 762 | $ 1,154 | $ 1,041 |
Services from related parties | $ 351 | $ 285 | $ 243 |
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, 2013 | $ 21 | $ 38,626 | $ (38) | $ 52,082 | $ 90,691 | ||||||||
Balance, shares at Dec. 31, 2013 | [1] | 7,140,013 | |||||||||||
Exercise of options | [2] | 1,353 | 1,353 | ||||||||||
Exercise of options, shares | 78,620 | ||||||||||||
Share-based compensation | 1,266 | 1,266 | |||||||||||
Dividend | (7,183) | (7,183) | |||||||||||
Net income | 14,605 | 14,605 | |||||||||||
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 | (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 | 951 | 952 | |||||||||
Exercise of options and RSUs, shares | [3] | 97,269 | |||||||||||
Share-based compensation | 1,781 | 1,781 | |||||||||||
Dividend | (7,312) | (7,312) | |||||||||||
Net income | 13,137 | 13,137 | |||||||||||
Balance at Dec. 31, 2016 | $ 22 | $ 46,833 | $ (38) | $ 74,575 | $ 121,392 | ||||||||
Balance, shares at Dec. 31, 2016 | [1] | 7,381,613 | |||||||||||
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Consolidated Statements of Changes In Shareholders' Equity (Parenthetical) - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Consolidated Statements Of Changes In Shareholders' Equity [Abstract] | |||
Dividend per share | $ 1.00 | $ 1.00 | $ 1.00 |
Shares held by Silicom, Inc. | 14,971 | 14,971 | 14,971 |
General |
12 Months Ended |
---|---|
Dec. 31, 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 were traded in Israel on the Tel Aviv Stock Exchange ("TASE") from December 2005 through January 26, 2016, after which, on January 28, 2016, the Company delisted from trading on the TASE.
Silicom markets its products primarily 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. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies
The significant accounting policies, which are applied consistently throughout the periods presented, are as follows:
Substantially all sales of the Company are made outside of Israel (see Note 12A regarding geographical distribution), in US dollars ("dollars"). Most purchases of materials and components, and a significant part of the marketing costs are made or incurred, primarily in dollars. Therefore, the functional currency of the Company is the dollar.
Transactions and monetary balances in other currencies are translated into the functional currency using the current exchange rate.
All exchange gains and losses from remeasurement of monetary balance sheet items denominated in non-dollar currencies are reflected in earnings when they arise.
The accompanying consolidated financial statements have been prepared with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The preparation of the 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 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.
The Company accounts for business combination in accordance with ASC No. 805, "Business Combinations". ASC No. 805 requires recognition of assets acquired and liabilities assumed at the acquisition date, measured at their fair values as of that date. Any excess of the fair value of net assets acquired over purchase price and any subsequent changes in estimated contingencies are to be recorded in the consolidated statements of operations.
The Company considers highly liquid investments with original maturities of three months or less from the date of deposit to be cash equivalents.
The Company classifies its marketable securities as held-to-maturity as they are debt securities in which the Company has the intent and ability to hold to maturity. Held-to-maturity (HTM) debt securities are recorded at amortized cost adjusted for the amortization or accretion of premiums or discounts.
Premiums and discounts on debt securities are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective interest method.
Such amortization and accretion is included in the "Financial income, net" line item in the consolidated statements of operations.
When other-than-temporary impairment has occurred, the amount of the other-than-temporary impairment recognized in earnings depends on whether the Company intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss.
A decline in the market value of HTM security below cost that is deemed to be other than temporary results in an impairment to reduce the carrying amount to fair value. To determine whether an impairment is other than temporary, the Company considers all available information relevant to the collectibility of the security, including past events, current conditions, and reasonable and supportable forecasts when developing estimate of cash flows expected to be collected. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.
If the Company intends to sell the security or it is more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment is recognized in earnings equal to the entire difference between the investment's amortized cost basis and its fair value at the balance sheet date. If the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment is separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings.
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and its customers' financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns.
As of December 31, 2015 and 2016, the provision for doubtful accounts receivable amounted to US$ 20 thousand.
Inventories are stated at the lower of cost or market. Cost is determined using the "weighted average-cost" method.
The Company writes down obsolete or slow moving inventory to its market value, on a quarterly basis.
Assets held for employees' severance benefits represent contributions to severance pay funds and cash surrender value of insurance policies. The assets are recorded at their current cash redemption value.
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated on the straight-line basis over the estimated useful life of the assets at the following annual rates:
* Over the shorter term of the lease or the life of the asset
Goodwill reflects the excess of the purchase price of business acquired over the fair value of net assets acquired. Goodwill is not amortized but instead is tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
The Company operates in one operating segment and this segment comprises one reporting unit.
Goodwill is reviewed for impairment at least annually in accordance with ASU 2011-08, Testing Goodwill for Impairment. ASU 2011-08 provides an entity the option to perform a qualitative assessment to determine whether it is more likely than-not that the fair value of a reporting unit is less than its carrying amount prior to performing the two-step goodwill impairment test. If this is the case, the two-step goodwill impairment test is required. If it is more likely than-not that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required.
If the two-step goodwill impairment test is required, first, the fair value of the reporting unit is compared with its carrying amount (including goodwill). If the fair value of the reporting unit is less than its carrying amount, an indication of goodwill impairment exists for the reporting unit and the entity must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit's goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. If the fair value of the reporting unit exceeds its carrying amount, step two does not need to be performed. During the year ended December 31, 2016, no impairments were found and therefore no impairment losses were recorded.
Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives of up to 3 years. The acquired customer relationships, current technology, intellectual property and backlog are amortized over their estimated useful lives in proportion to the economic benefits realized. This accounting policy results in amortization of such intangible assets in the straight-line method.
In accordance with Impairment or Disposal of Long-Lived Assets Subsections of FASB ASC Subtopic 360-10, Property, Plant, and Equipment - Overall long-lived assets, such as property, plant, equipment and purchase intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or an asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third party independent appraisals, as considered necessary.
Revenues from sales of products are recognized upon delivery provided that the collection of the resulting receivable is reasonably assured, there is persuasive evidence of an arrangement, no significant obligations in respect of installation remain and the price is fixed or determinable.
Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from revenues in the consolidated statements of operations.
Research and development costs are expensed as incurred.
The Company grants service warranties related to certain products to end-users. The Company estimates its obligation for such warranties to be immaterial on the basis of historical experience. Accordingly, these financial statements do not include an accrual for warranty obligations.
Treasury shares are recorded at cost and presented as a reduction of shareholders' equity.
Deferred taxes are accounted for under the asset and liability method based on the estimated future tax effects of temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
The Company recognizes compensation expense based on estimated grant date fair value in accordance with ASC Topic 718, Compensation -Stock Compensation as follows:
When portions of an award vest in increments during the requisite service period (graded-vesting award), the Company's accounting policy is to recognize compensation cost for the award over the requisite service period for each separately vesting portion of the award.
Basic income per ordinary share is calculated by dividing the net income attributable to ordinary shares, by the weighted average number of ordinary shares outstanding. Diluted income per ordinary share calculation is similar to basic income per ordinary share except that the weighted average of common shares outstanding is increased to include outstanding potential common shares during the period if dilutive. Potential common shares arise from stock options and RSUs, and the dilutive effect is reflected by the application of the treasury stock method.
The following table summarizes information related to the computation of basic and diluted income per ordinary share for the years indicated.
For the years ended December 31, 2014, 2015 and 2016, comprehensive income equals net income.
The Company's financial instruments consist mainly of cash and cash equivalents, 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 5 to these 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.
(1) Credit risk
Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents, marketable securities, trade receivables and assets held for employees' severance benefits. Cash and cash equivalents balances of the Company, which are subject to credit risk, consist of cash accounts held with major financial institutions. Marketable securities consist of held to maturity marketable securities issued by highly rated corporations. As of December 31, 2015 and 2016, the ratings of the securities in the Company's portfolio was at least BBB+ and A respectively. Nonetheless, these investments are subject to general credit and counterparty risks (such as that the counterparty to a financial instrument fails to meet its contractual obligations). Concentrations of credit risk with respect to trade receivables are limited due to the Company's diverse customer base and their wide geographical dispersion. The Company closely monitors extensions of credit and has never experienced significant credit losses.
(2) Significant customers
The Company depends on a small amount of customers for its products. The Company's top three customers accounted for approximately 35% of its revenues in 2016. The Company expects that a small number of customers will continue to account for a significant portion of its revenues for the foreseeable future.
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.
The impact of adopting the new standard on 2016 total cost of sales and operating income is not expected to be material.
The Company elected to early adopt the new guidance retrospectively in the beginning of 2015. The impact of adopting the new standard on the balance sheet is reclassification of current deferred tax assets of US$ 950 thousand and US$ 1,118 thousand to noncurrent deferred tax assets in 2015 and 2016 respectively and reclassification of current deferred tax liabilities of US$ 111 thousand to noncurrent deferred tax liabilities in 2015.
The impact of adopting the new standard on the operating income is not expected to be material.
The impact of adopting the new standard on the operating income is not expected to be material.
The impact of adopting the new standard on the net income is not expected to be material. |
Acquisitions |
12 Months Ended | ||||||
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Dec. 31, 2016 | |||||||
Business Combinations [Abstract] | |||||||
Acquisitions | Note 3 - Acquisitions
On October 28, 2015 (hereinafter – "closing date") the Company acquired certain assets from ADI Engineering, Inc. (hereinafter – "ADI"), a privately-held, US-based provider of custom embedded communications and networking products, for an aggregate purchase price of US$ 10,000 thousand in cash and estimated contingent consideration of US$ 7,802 thousand in cash and in options to ordinary shares, payable in three yearly payments, after the closing, subject to the attainment of certain performance milestones until December 31, 2017. The fair value measurement of the contingent consideration is classified at level 2 and level 3 of the fair value hierarchy (see Note 2U). Of the total purchase price of US$ 17,802 thousand, US$ 222 thousand was attributed to tangible assets, US$ 4,261 thousand was attributed to intangible assets and US$ 13,319 thousand was attributed to goodwill. The goodwill is primarily attributable to the synergies expected to arise after the acquisition. The recognized goodwill is expected to be deductible for income tax purposes for 10 years.
In connection with the contingent consideration, during 2016 the Company paid ADI an amount of US$ 3,000 thousand.
In addition, the Company maintains a contingent liability of US$ 4,642 thousand on its balance sheet as of December 31, 2016, subject to the attainment of certain performance milestones until December 31, 2017.
On December 10, 2014 (hereinafter – "closing date"), the Company completed the acquisition of all of the outstanding shares and voting interests of Fiberblaze, a provider of high performance application acceleration solutions, for an aggregate purchase price of US$ 10,161 thousand in cash and estimated contingent consideration of US$ 4,683 thousand in cash and in options to ordinary shares, subject to the attainment of certain performance milestones until August 31, 2015. The fair value measurement of the contingent consideration is classified at level 3 of the fair value hierarchy (see Note 2U). Of the total estimated purchase price of US$ 14,844 thousand, US$ 2,022 thousand was attributed to tangible assets, US$ 1,996 thousand was attributed to intangible assets, US$ 12,242 thousand was attributed to goodwill and US$ 1,416 was attributed to liabilities assumed. The goodwill is primarily attributable to the synergies expected to arise after the acquisition. None of the recognized goodwill is expected to be deductible for income tax purposes.
In connection with the contingent consideration, during 2016 the Company paid to the Fiberblaze sellers an amount of US$ 1,463 thousand, of which 90% was paid in cash and 10% in options to ordinary shares of the Company.
In relation to this acquisition, on April 18, 2016, the Company granted, in the aggregate, 22,795 options to the Fiberblaze sellers and to the Fiberblaze employees (see Note 11G). |
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Marketable Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities |
The Company's investment in marketable securities as of December 31, 2015 and 2016 are classified as ''held-to-maturity'' and consist of the following:
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 December 31, 2016:
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. |
Inventories |
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Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
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Property, Plant and Equipment, Net |
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Property, Plant and Equipment, Net |
Depreciation expense for the years ended December 31, 2014, 2015 and 2016 were US$ 891 thousand, US$ 1,599 thousand and US$ 1,616 thousand, respectively. |
Goodwill and Other Intangible Assets |
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Goodwill and Other Intangible Assets | Note 8 - Goodwill and Other Intangible Assets
Changes in goodwill as of December 31, 2016 are as follows:
Net other intangible assets as of December 31, 2016 are as follows:
Amortization expense for the years ended December 31, 2014, 2015 and 2016 were US$ 105 thousand, US$ 1,168 thousand and US$ 2,240 thousand, respectively. |
Assets Held and Liability for Employees' Severance Benefits |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||
Assets Held and Liability for Employees' Severance Benefits | Note 9 - Assets Held and Liability for Employees' Severance Benefits
In respect of the liability to the employees, individual insurance policies are purchased and deposits are made with recognized severance pay funds.
The liability for severance pay is calculated on the basis of the latest salary paid to each employee multiplied by the number of years of employment. The liability is covered by the amounts deposited including accumulated income thereon as well as by the unfunded provision.
As a result of the implementation of Section 14, as described above, the liability with respect to those employees is calculated on the basis of number of years of employment as of June 30, 2008, multiplied by the latest salary paid. The liability is covered by the amounts deposited, including accumulated income thereon, as well as by the unfunded provision. Such liability will be removed, either upon termination of employment or retirement.
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||
Commitments and Contingencies | Note 10- Commitments and Contingencies
Lease commitments
The premises and facilities occupied by the Company are leased under various operating lease agreements. Furthermore, the Company has entered into several operating lease agreements for motor vehicles in Israel.
The agreements related to leases in Israel are in Israeli Shekel ("ILS") or in ILS, linked to the Israeli Consumer Price Index or to the US Dollars. The agreements related to leases in the USA are in US Dollars and the agreements related to leases in Denmark are in Danish Krone ("DKK").
The minimum future rental payments under the above leases at exchange rates in effect on December 31, 2016, are as follows:
Of the amounts above, US$ 50 thousand in 2017, relate to related parties.
Rental expenses under the lease agreements for the years ended December 31, 2014, 2015 and 2016 were US$ 1,243 thousand, US$ 1,403 thousand and US$ 1,563 thousand, respectively. |
Shareholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity | Note 11- Shareholders' Equity
Share based compensation
The 2004 Plan initially covered up to 282,750 options and subsequent to an amendment by the board in 2007 it covered up to 582,750 options. In August 2012, the Board of Directors increased the number of the ordinary shares available for issuance under the 2004 Plan by an additional 500,000. All options are at a conversion rate of 1:1.
On October 21, 2013 the Board resolved to adopt the Global Share Incentive Plan (2013) (the "2013 Plan") and to reserve up to 500,000 ordinary shares for issuance under the 2013 Plan to employees, directors, officers and consultants of the Company or of any subsidiary or affiliate of the Company. Grants under the 2013 Plan, whether as options, restricted stock units, restricted stock or other equity based awards, including their terms, are subject to the Board of Directors' approval. Grants to directors and certain other officers are generally subject to the approvals of the Compensation Committee as well as Board of Directors, and grants to directors or a CEO (and under certain circumstances certain other officers) will also have to be approved by the Shareholders.
Capital gains on awards granted under the plans are subjected to tax of 25% to be paid by the employee, and the Company is not entitled to a tax deduction.
Gains which are not capital gains on awards under the plans are subjected to regular tax rates on individuals, and the Company is entitled to a tax deduction for such gains.
The aggregate intrinsic value of options outstanding as of December 31, 2015 and 2016 is US$ 2,229 thousand and US$ 4,283 thousand, respectively.
The aggregate intrinsic value of options exercisable as of December 31, 2015 and 2016 is US$ 1,938 thousand and US$ 1,777 thousand, respectively.
The total intrinsic value of options exercised during the year ended December 31, 2015 and 2016, is US$ 1,785 thousand and US$ 1,166 thousand, respectively.
The intrinsic value of the options at the date of grant is zero.
The aggregate intrinsic value of RSUs outstanding as of December 31, 2015 and December 31, 2016 is US$ 2,363 thousand and US$ 1,767 thousand, respectively.
The aggregate intrinsic value of RSUs vested during the year ended December 31, 2016 is US$ 966 thousand.
As of December 31, 2016, there were US$ 1,059 thousand of unrecognized compensation costs related to outstanding stock options and RSUs to be recognized over a weighted average period of 1.04 years.
The total tax benefit recognized in the consolidated statements of operations related to share based compensation expenses amounted to US$ 80 thousand for the year ended December 31, 2016. |
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Geographic areas and major customers |
The Company has one operating segment.
Sales are attributed to geographic distribution based on the location of the customer.
* Less than 10% of sales.
The following table presents the locations of the Company's long lived assets as of December 31, 2015 and 2016:
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Financial Income (Expenses), Net |
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Financial Income (Expenses), Net |
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Taxes on Income |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxes on Income | Note 14- Taxes on Income
As a "foreign invested company" (as defined in the Israeli Law for the Encouragement of Capital Investments-1959), the Company's taxable income or loss is calculated in US Dollars.
Taxable income of Israeli companies is subject to tax at the rate of 26.5% in 2014 and 2015, and in January 2016, the regular tax rate in Israel was reduced to 25% as from 2016 and thereafter.
Furthermore, In December 2016, the regular tax rate in Israel was reduced to 23% in two steps. The first step will be to a rate of 24% as from 2017 and the second step will be to a rate of 23% as from 2018 and thereafter.
Companies can choose to not be included in the scope of the Amendment to the Law and to stay in the scope of the law before its amendment until the end of the benefits period.
Under the Amendment to the Law, which the Company started applying in 2014, upon an irrevocable election made by a company, a uniform corporate tax rate will apply to all preferred income of such company. Under the law, when the election is made, the uniform tax rate (for 2014 and on) will be 9% in areas in Israel designated as Development Zone A and 16% elsewhere in Israel. The profits of these Preferred Companies will be freely distributable as dividends, subject to a withholding tax of 20%.
In December 2016, under the Amendment to the Law, the uniform tax rate in areas in Israel designated as Development Zone A was reduced to 7.5% as from 2017 and thereafter. Therefore, the deferred tax balances as at December 31, 2016 were adjusted by the amount of US$ 94 thousand.
Should the Company derive income from sources other than the "Preferred Enterprise" during the relevant period of benefits, such income will be taxable at the regular corporate tax rates for the applicable year.
Out of the Company's retained earnings as of December 31, 2016 and 2015, approximately US$ 45,405 thousand and US$ 44,742 thousand respectively are tax-exempt, due to "Approved Enterprise" and "Benefited Enterprise" status. If such tax-exempt income is distributed by cash dividend (including a liquidation dividend), it would be taxed at the reduced corporate tax rate applicable to such profits (up to 25%) and an income tax liability of up to approximately US$ 11,351 thousand and US$ 11,186 thousand would be incurred as of December 31, 2016 and 2015, respectively. The Company anticipates that any future dividends distributed pursuant to its dividend policy, will be distributed from income sources which will not impose additional tax liabilities on the Company. The Company intends to reinvest the amount of its tax-exempt income. Accordingly, no deferred income taxes have been provided on income attributable to the Company's "Approved Enterprise" or "Benefited Enterprise". If the Company was to declare a dividend from its tax-exempt income, an income tax expense would be recognized in the period a dividend is declared.
D. Taxation of the subsidiaries
The Company currently has no plans to repatriate those funds and intends to indefinitely reinvest them in its non-Israeli operations. The unrecognized deferred tax liability associated with these temporary differences was approximately US$ 359 thousand at December 31, 2016.
E. Tax assessments
For the Israeli jurisdiction the Company has final tax assessments for all years up to and including the tax year ended December 31, 2012.
For the US Federal jurisdictions, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2012. For the New-Jersey and California state jurisdiction, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2011. For the Virginia state jurisdiction, Silicom Inc. has open tax assessments for 2015 through 2016.
For the Danish jurisdiction, Fiberblaze A/S has final tax assessments for all years up to and including the tax year ended August 31, 2012.
For the US Federal jurisdiction, New York State and New York City jurisdictions, Fiberblaze US LLC has open tax assessments for tax years ended August 31, 2013, August 31, 2014, for the four months ended December 31, 2014, for the tax year ended December 31, 2015 and for the tax year ended December 31, 2016.
G. Deferred income taxes
The tax effects of significant items comprising the Company's deferred tax assets are as follows:
ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. This standard prescribes a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. It also requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each tax position.
During 2014, 2015 and 2016 the Company and its subsidiaries did not have any significant unrecognized tax benefits and thus, no related interest and penalties were accrued.
In addition, the Company and its subsidiaries do not expect that the amount of unrecognized tax benefits will change significantly within the next twelve months. |
Subsequent Events |
12 Months Ended | ||||||
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Dec. 31, 2016 | |||||||
Subsequent Events [Abstract] | |||||||
Subsequent Events | Note 15- Subsequent Events
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Statements in US Dollars |
Substantially all sales of the Company are made outside of Israel (see Note 12A regarding geographical distribution), in US dollars ("dollars"). Most purchases of materials and components, and a significant part of the marketing costs are made or incurred, primarily in dollars. Therefore, the functional currency of the Company is the dollar.
Transactions and monetary balances in other currencies are translated into the functional currency using the current exchange rate.
All exchange gains and losses from remeasurement of monetary balance sheet items denominated in non-dollar currencies are reflected in earnings when they arise. |
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Basis of Presentation |
The accompanying consolidated financial statements have been prepared with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
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Estimates and Assumptions |
The preparation of the 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 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. |
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Business combinations |
The Company accounts for business combination in accordance with ASC No. 805, "Business Combinations". ASC No. 805 requires recognition of assets acquired and liabilities assumed at the acquisition date, measured at their fair values as of that date. Any excess of the fair value of net assets acquired over purchase price and any subsequent changes in estimated contingencies are to be recorded in the consolidated statements of operations. |
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Cash and cash equivalents |
The Company considers highly liquid investments with original maturities of three months or less from the date of deposit to be cash equivalents.
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Marketable securities |
The Company classifies its marketable securities as held-to-maturity as they are debt securities in which the Company has the intent and ability to hold to maturity. Held-to-maturity (HTM) debt securities are recorded at amortized cost adjusted for the amortization or accretion of premiums or discounts.
Premiums and discounts on debt securities are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective interest method.
Such amortization and accretion is included in the "Financial income, net" line item in the consolidated statements of operations.
When other-than-temporary impairment has occurred, the amount of the other-than-temporary impairment recognized in earnings depends on whether the Company intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss.
A decline in the market value of HTM security below cost that is deemed to be other than temporary results in an impairment to reduce the carrying amount to fair value. To determine whether an impairment is other than temporary, the Company considers all available information relevant to the collectibility of the security, including past events, current conditions, and reasonable and supportable forecasts when developing estimate of cash flows expected to be collected. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.
If the Company intends to sell the security or it is more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment is recognized in earnings equal to the entire difference between the investment's amortized cost basis and its fair value at the balance sheet date. If the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the other-than-temporary impairment is separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. |
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Trade accounts receivable, net |
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and its customers' financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns.
As of December 31, 2015 and 2016, the provision for doubtful accounts receivable amounted to US$ 20 thousand. |
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Inventories |
Inventories are stated at the lower of cost or market. Cost is determined using the "weighted average-cost" method.
The Company writes down obsolete or slow moving inventory to its market value, on a quarterly basis. |
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Assets held for employees' severance benefits |
Assets held for employees' severance benefits represent contributions to severance pay funds and cash surrender value of insurance policies. The assets are recorded at their current cash redemption value. |
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Property, plant and equipment |
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated on the straight-line basis over the estimated useful life of the assets at the following annual rates:
* Over the shorter term of the lease or the life of the asset |
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Goodwill and other intangible assets |
Goodwill reflects the excess of the purchase price of business acquired over the fair value of net assets acquired. Goodwill is not amortized but instead is tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
The Company operates in one operating segment and this segment comprises one reporting unit.
Goodwill is reviewed for impairment at least annually in accordance with ASU 2011-08, Testing Goodwill for Impairment. ASU 2011-08 provides an entity the option to perform a qualitative assessment to determine whether it is more likely than-not that the fair value of a reporting unit is less than its carrying amount prior to performing the two-step goodwill impairment test. If this is the case, the two-step goodwill impairment test is required. If it is more likely than-not that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required.
If the two-step goodwill impairment test is required, first, the fair value of the reporting unit is compared with its carrying amount (including goodwill). If the fair value of the reporting unit is less than its carrying amount, an indication of goodwill impairment exists for the reporting unit and the entity must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit's goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. If the fair value of the reporting unit exceeds its carrying amount, step two does not need to be performed. During the year ended December 31, 2016, no impairments were found and therefore no impairment losses were recorded.
Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives of up to 3 years. The acquired customer relationships, current technology, intellectual property and backlog are amortized over their estimated useful lives in proportion to the economic benefits realized. This accounting policy results in amortization of such intangible assets in the straight-line method. |
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Impairment of Long-Lived Assets |
In accordance with Impairment or Disposal of Long-Lived Assets Subsections of FASB ASC Subtopic 360-10, Property, Plant, and Equipment - Overall long-lived assets, such as property, plant, equipment and purchase intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or an asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third party independent appraisals, as considered necessary. |
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Revenue recognition |
Revenues from sales of products are recognized upon delivery provided that the collection of the resulting receivable is reasonably assured, there is persuasive evidence of an arrangement, no significant obligations in respect of installation remain and the price is fixed or determinable.
Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from revenues in the consolidated statements of operations. |
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Research and development costs |
Research and development costs are expensed as incurred. |
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Allowance for product warranty |
The Company grants service warranties related to certain products to end-users. The Company estimates its obligation for such warranties to be immaterial on the basis of historical experience. Accordingly, these financial statements do not include an accrual for warranty obligations. |
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Treasury shares |
Treasury shares are recorded at cost and presented as a reduction of shareholders' equity. |
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Income taxes |
Deferred taxes are accounted for under the asset and liability method based on the estimated future tax effects of temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
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Share-based compensation |
The Company recognizes compensation expense based on estimated grant date fair value in accordance with ASC Topic 718, Compensation -Stock Compensation as follows:
When portions of an award vest in increments during the requisite service period (graded-vesting award), the Company's accounting policy is to recognize compensation cost for the award over the requisite service period for each separately vesting portion of the award. |
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Basic and diluted earnings per share |
Basic income per ordinary share is calculated by dividing the net income attributable to ordinary shares, by the weighted average number of ordinary shares outstanding. Diluted income per ordinary share calculation is similar to basic income per ordinary share except that the weighted average of common shares outstanding is increased to include outstanding potential common shares during the period if dilutive. Potential common shares arise from stock options and RSUs, and the dilutive effect is reflected by the application of the treasury stock method.
The following table summarizes information related to the computation of basic and diluted income per ordinary share for the years indicated.
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Comprehensive Income |
For the years ended December 31, 2014, 2015 and 2016, comprehensive income equals net income. |
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Fair Value Measurements |
The Company's financial instruments consist mainly of cash and cash equivalents, 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 5 to these 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. |
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Concentrations of risks |
(1) Credit risk
Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents, marketable securities, trade receivables and assets held for employees' severance benefits. Cash and cash equivalents balances of the Company, which are subject to credit risk, consist of cash accounts held with major financial institutions. Marketable securities consist of held to maturity marketable securities issued by highly rated corporations. As of December 31, 2015 and 2016, the ratings of the securities in the Company's portfolio was at least BBB+ and A respectively. Nonetheless, these investments are subject to general credit and counterparty risks (such as that the counterparty to a financial instrument fails to meet its contractual obligations). Concentrations of credit risk with respect to trade receivables are limited due to the Company's diverse customer base and their wide geographical dispersion. The Company closely monitors extensions of credit and has never experienced significant credit losses.
(2) Significant customers
The Company depends on a small amount of customers for its products. The Company's top three customers accounted for approximately 35% of its revenues in 2016. The Company expects that a small number of customers will continue to account for a significant portion of its revenues for the foreseeable future. |
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Liabilities for loss contingencies |
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. |
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Recent Accounting Pronouncements |
The impact of adopting the new standard on 2016 total cost of sales and operating income is not expected to be material.
The Company elected to early adopt the new guidance retrospectively in the beginning of 2015. The impact of adopting the new standard on the balance sheet is reclassification of current deferred tax assets of US$ 950 thousand and US$ 1,118 thousand to noncurrent deferred tax assets in 2015 and 2016 respectively and reclassification of current deferred tax liabilities of US$ 111 thousand to noncurrent deferred tax liabilities in 2015.
The impact of adopting the new standard on the operating income is not expected to be material.
The impact of adopting the new standard on the operating income is not expected to be material.
The impact of adopting the new standard on the net income is not expected to be material. |
Summary of Significant Accounting Policies (Tables) |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation of Property, Plant and Equipment | Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated on the straight-line basis over the estimated useful life of the assets at the following annual rates:
* Over the shorter term of the lease or the life of the asset
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Computation of Basic and Diluted Income Per Ordinary Share | The following table summarizes information related to the computation of basic and diluted income per ordinary share for the years indicated.
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Cash and Cash Equivalents (Tables) |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash and Cash Equivalents |
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Marketable Securities (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Held-to-Maturity Securities | The Company's investment in marketable securities as of December 31, 2015 and 2016 are classified as ''held-to-maturity'' and consist of the following:
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Schedule of Reconciliation of Marketable Securities |
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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 December 31, 2016:
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Inventories (Tables) |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Inventories |
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Property, Plant and Equipment, Net (Tables) |
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Property, Plant and Equipment, Net |
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Goodwill and Other Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in goodwill | Changes in goodwill as of December 31, 2016 are as follows:
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Schedule of net other intangible assets | Net other intangible assets as of December 31, 2016 are as follows:
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Commitments and Contingencies (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||
Minimum Future Rental Payments | The minimum future rental payments under the above leases at exchange rates in effect on December 31, 2016, are as follows:
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Shareholders' Equity (Tables) |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assumptions used in estimation of grant date fair value of RSUs |
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Schedule of assumptions used in estimation of grant date fair value of options |
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Stock Option Summary |
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Stock Option Activity |
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Schedule of Restricted Share Units activity |
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Summary of Allocation of the Stock-Based Compensation Expenses |
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Geographic areas and major customers (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Geographic areas and major customers [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales by Geographic Region | Sales are attributed to geographic distribution based on the location of the customer.
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Sales to Single Customers Exceeding 10% of Sales |
* Less than 10% of sales. |
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Schedule of Locations of Company's Long Lived Assets | The following table presents the locations of the Company's long lived assets as of December 31, 2015 and 2016:
|
Financial Income (Expenses), Net (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Income (Expenses), Net |
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Taxes on Income (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Before Income Taxes and Income Taxes Expense (Benefit) Included in The Consolidated Statements of Operations |
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Deferred Income Taxes | The tax effects of significant items comprising the Company's deferred tax assets are as follows:
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Reconciliation of the Statutory Tax Expense to Actual Tax Expense |
|
Summary of Significant Accounting Policies (Narrative) (Details) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016
USD ($)
item
Customers
|
Dec. 31, 2015
USD ($)
|
|
Provision for doubtful accounts | $ 20 | $ 20 |
Number of major customers | Customers | 3 | |
Percentage of revenue contributed by major customers | 35.00% | |
Impairment of intangible assets | ||
Number of operating segments | item | 1 | |
Number of reporting units | item | 1 | |
Current deferred tax assets reclassified to noncurrent deferred tax assets, resulting from adoption of ASU 2015-17 | $ 1,118 | $ 950 |
Current deferred tax liabilities reclassified to noncurrent deferred tax liabilities, resulting from adoption of ASU 2015-17 | $ 111 | |
Maximum [Member] | ||
Estimated useful life | 3 years |
Summary of Significant Accounting Policies (Depreciation of Property, Plant and Equipment) (Details) |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2016 | ||||
Machinery and equipment [Member] | Minimum [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Straight-line depreciation rate | 15.00% | |||
Machinery and equipment [Member] | Maximum [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Straight-line depreciation rate | 33.00% | |||
Office Furniture and Equipment [Member] | Minimum [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Straight-line depreciation rate | 6.00% | |||
Office Furniture and Equipment [Member] | Maximum [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Straight-line depreciation rate | 33.00% | |||
Leasehold Improvements [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Straight-line depreciation rate | [1] | |||
|
Cash and Cash Equivalents (Details) - USD ($) $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|||
Cash and Cash Equivalents [Abstract] | ||||||
Cash | $ 5,858 | $ 12,329 | ||||
Cash equivalents | [1] | 6,059 | 5,849 | |||
Cash and cash equivalents | $ 11,917 | $ 18,178 | $ 17,890 | $ 12,997 | ||
Weighted average interest rate of cash on deposit | 0.30% | 0.11% | ||||
|
Marketable Securities (Held-To-Maturity Securities) (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
|||||
---|---|---|---|---|---|---|---|
Schedule of Held-to-maturity Securities [Line Items] | |||||||
Aggregate fair value | [1] | $ 24,046 | $ 32,793 | ||||
Gross unrealized holding gains | |||||||
Gross unrealized holding (losses) | (159) | (345) | |||||
Amortized cost basis | [2] | 24,205 | 33,138 | ||||
Accrued interest on securities | 173 | 256 | |||||
Current [Member] | |||||||
Schedule of Held-to-maturity Securities [Line Items] | |||||||
Aggregate fair value | [1] | 16,293 | 8,630 | ||||
Gross unrealized holding gains | |||||||
Gross unrealized holding (losses) | (97) | (90) | |||||
Amortized cost basis | [2] | 16,390 | 8,720 | ||||
Non Current [Member] | |||||||
Schedule of Held-to-maturity Securities [Line Items] | |||||||
Aggregate fair value | [1] | 7,753 | 24,163 | ||||
Gross unrealized holding gains | |||||||
Gross unrealized holding (losses) | (62) | (255) | |||||
Amortized cost basis | [2] | $ 7,815 | $ 24,418 | ||||
|
Marketable Securities (Schedule of Reconciliation of Marketable Securities) (Details) - USD ($) $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
||||
Investments, Debt and Equity Securities [Abstract] | ||||||
Balance | [1] | $ 33,138 | ||||
Discount on marketable securities, net | (358) | $ (561) | $ (758) | |||
Proceeds from maturity of marketable securities | (8,575) | (15,100) | $ (14,750) | |||
Balance | [1] | $ 24,205 | $ 33,138 | |||
|
Marketable Securities (Summary of Investment Securities in an Unrealized Loss Position) (Details) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
Investments, Debt and Equity Securities [Abstract] | |
Unrealized Losses, Less than 12 months | |
Unrealized Losses, 12 months or more | (159) |
Unrealized Losses, Total | (159) |
Fair value, Less than 12 months | |
Fair value, 12 months or more | 24,046 |
Fair value, Total | $ 24,046 |
Inventories (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials and components | $ 16,435 | $ 9,598 |
Products in process | 19,098 | 9,013 |
Finished products | 8,747 | 7,710 |
Inventories | $ 44,280 | $ 26,321 |
Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment | $ 11,418 | $ 9,719 | |
Accumulated depreciation | (7,503) | (5,894) | |
Property, Plant and equipment, net | 3,915 | 3,825 | |
Depreciation | 1,616 | 1,599 | $ 891 |
Machinery and equipment [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment | 8,507 | 6,906 | |
Office Furniture and Equipment [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment | 634 | 608 | |
Leasehold Improvements [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment | $ 2,277 | $ 2,205 |
Goodwill and Other Intangible Assets (Schedule of changes in goodwill) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Beginning balance | $ 25,561 | $ 12,242 |
Business acquisition | 13,319 | |
Ending balance | $ 25,561 | $ 25,561 |
Assets Held and Liability for Employees' Severance Benefits (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Compensation and Retirement Disclosure [Abstract] | |||
Severance costs | $ 761 | $ 543 | $ 432 |
Commitments and Contingencies (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Commitments and Contingencies Disclosure [Abstract] | |||
Rental expenses under the lease agreements | $ 1,563 | $ 1,403 | $ 1,243 |
Commitments and Contingencies (Minimum Future Rental Payments) (Details) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
Operating Leased Assets [Line Items] | |
2017 | $ 1,481 |
2018 | 1,140 |
2019 and on | 1,159 |
Related Party [Member] | |
Operating Leased Assets [Line Items] | |
2017 | $ 50 |
Shareholders' Equity (Share Option Plan) (Details) - shares |
1 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Aug. 31, 2012 |
Dec. 31, 2016 |
Oct. 31, 2013 |
Dec. 31, 2007 |
Jul. 31, 2004 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Capital gains tax | 25.00% | ||||
Share Option Plan (2004) [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Option expiration term | 10 years | ||||
Shares authorized | 582,750 | 282,750 | |||
Additional shares authorized | 500,000 | ||||
Conversion rate | 1:1
|
||||
Share Option Plan 2013 [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares authorized | 500,000 |
Shareholders' Equity (RSUs Granted in 2014 and 2015) (Narrative) (Details) - Restricted Share Units [Member] - shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
RSUs grant | 8,000 | 74,000 | |
Minimum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period from date of grant | 2 years | ||
Maximum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period from date of grant | 3 years |
Shareholders' Equity (Fair Value Assumptions) (Details) - item |
1 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 08, 2016 |
Jul. 28, 2015 |
Dec. 31, 2015 |
Dec. 31, 2014 |
||||||||
$26.91 [Member] | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Average risk-free interest rate | [1] | 2.08% | |||||||||
Expected dividend yield | 2.09% | ||||||||||
Average expected volatility | [2] | 53.01% | |||||||||
Termination rate | 9.00% | ||||||||||
Suboptimal factor | [3] | 3.4 | |||||||||
$28.38 [Member] | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Average risk-free interest rate | [1] | 1.58% | |||||||||
Expected dividend yield | 2.42% | ||||||||||
Average expected volatility | [2] | 47.90% | |||||||||
Termination rate | 9.00% | ||||||||||
Suboptimal factor | [3] | 3.32 | |||||||||
Restricted Share Units [Member] | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Expected dividend yield | 3.22% | 2.06% | |||||||||
Termination rate | 0.00% | 4.35% | |||||||||
|
Shareholders' Equity (Stock Option Summary) (Details) - $ / shares |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options outstanding, number of options | 266,005 | 214,701 | 192,130 | 272,750 |
Options exercisable, number of options | 73,608 | |||
$15.28 [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Exercise price US$ | $ 15.28 | |||
Options outstanding, number of options | 66,775 | |||
Options outstanding, weighted average remaining contractual life (in years) | 3 years 8 months 12 days | |||
Options exercisable, number of options | 66,775 | |||
Options exercisable, weighted average remaining contractual life (in years) | 3 years 8 months 12 days | |||
$26.91 [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Exercise price US$ | $ 26.91 | |||
Options outstanding, number of options | 86,990 | |||
Options outstanding, weighted average remaining contractual life (in years) | 6 years 7 months 6 days | |||
Options exercisable, number of options | ||||
Options exercisable, weighted average remaining contractual life (in years) | 0 years | |||
33.27 [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Exercise price US$ | $ 33.27 | |||
Options outstanding, number of options | 20,499 | |||
Options outstanding, weighted average remaining contractual life (in years) | 9 years 3 months 18 days | |||
Options exercisable, number of options | 6,833 | |||
Options exercisable, weighted average remaining contractual life (in years) | 9 years 3 months 18 days | |||
28.38 [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Exercise price US$ | $ 28.38 | |||
Options outstanding, number of options | 91,741 | |||
Options outstanding, weighted average remaining contractual life (in years) | 7 years 4 months 24 days | |||
Options exercisable, number of options | ||||
Options exercisable, weighted average remaining contractual life (in years) | 0 years |
Shareholders' Equity (Intrinsic Value of Stock Options) (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Stockholders' Equity Note [Abstract] | ||
Aggregate intrinsic value of options outstanding | $ 4,283 | $ 2,229 |
Aggregate intrinsic value of options exercisable | 1,777 | 1,938 |
Total intrinsic value of options exercised | $ 1,166 | $ 1,785 |
Intrinsic value of options at the date of grant |
Shareholders' Equity (Stock Option Activity) (Details) - $ / shares |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
||||
Stockholders' Equity Note [Abstract] | ||||||
Options, beginning balance | 214,701 | 192,130 | 272,750 | |||
Options, granted | 116,455 | [1] | 89,907 | |||
Options, exercised | (62,269) | (61,711) | (78,620) | |||
Options, forfeited | (2,882) | (5,625) | (2,000) | |||
Options, ending balance | 266,005 | 214,701 | 192,130 | |||
Options, exercisable | 73,608 | |||||
Weighted average exercise price, granted | $ 29.34 | [1] | $ 26.91 | |||
Weighted average exercise price, exercised | 15.28 | 15.28 | $ 17.19 | |||
Weighted average exercise price, forfeited | 29.71 | 24.07 | 15.28 | |||
Weighted average grant date fair value, granted | 10.96 | [1] | 10.04 | |||
Weighted average grant date fair value, exercised | 6.54 | 6.54 | 7.70 | |||
Weighted average grant date fair value, forfeited | $ 11.79 | $ 9.19 | $ 6.54 | |||
|
Shareholders' Equity (Schedule Of Restricted Share Units Activity) (Details) - Restricted Share Units [Member] - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Number of Restricted Share Units | |||
Restricted Share Units, beginning balance | 78,000 | 74,000 | |
Restricted Share Units, granted | 8,000 | 74,000 | |
Restricted Share Units, vested | (35,000) | (4,000) | |
Restricted Share Units, ending balance | 43,000 | 78,000 | 74,000 |
Weighted average grant date fair value | |||
Weighted average grant date fair value, granted | $ 29.09 | $ 46.07 | |
Weighted average grant date fair value, vested | $ 46.54 | $ 46.07 |
Shareholders' Equity (Intrinsic Value of Restricted Share Units) (Narrative) (Details) - Restricted Share Units [Member] - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Aggregate intrinsic value of RSUs outstanding | $ 1,767 | $ 2,363 |
Aggregate intrinsic value of RSUs vested | $ 966 |
Shareholders' Equity (Summary of Allocation of Stock-Based Compensation Expenses) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation expense | $ 1,550 | $ 1,913 | $ 1,266 |
Unrecognized compensation costs related to outstanding stock options and RSUs | $ 1,059 | ||
Unrecognized compensation costs related to outstanding stock options and RSUs, period for recognition | 1 year 15 days | ||
Tax benefit recognized in the consolidated statements of operations related to share based compensation expenses | $ 80 | ||
Cost Of Sales [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation expense | 180 | 150 | 124 |
Research And Development Expense [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation expense | 504 | 455 | 340 |
Selling And Marketing Expense [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation expense | 366 | 502 | 366 |
General And Administrative Expense [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation expense | $ 500 | $ 806 | $ 436 |
Geographic areas and major customers (Sales By Geographic Region) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Sales attributable based on geographic location | [1] | $ 100,347 | $ 82,738 | $ 75,622 | |
North America [Member] | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Sales attributable based on geographic location | 65,590 | 54,537 | 53,712 | ||
Europe [Member] | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Sales attributable based on geographic location | 24,208 | 16,331 | 11,421 | ||
Asia Pacific [Member] | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Sales attributable based on geographic location | $ 10,549 | $ 11,870 | $ 10,489 | ||
|
Geographic areas and major customers (Sales to Single Customers Exceeding 10% of Sales) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|||||||
Revenue, Major Customer [Line Items] | |||||||||
Sales | [1] | $ 100,347 | $ 82,738 | $ 75,622 | |||||
Customer A [Member] | |||||||||
Revenue, Major Customer [Line Items] | |||||||||
Sales | 17,366 | 16,320 | 18,083 | ||||||
Customer B [Member] | |||||||||
Revenue, Major Customer [Line Items] | |||||||||
Sales | $ 11,628 | [2] | [2] | ||||||
|
Geographic areas and major customers (Schedule of Locations of Company's Long Lived Assets) (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long lived assets | $ 32,400 | $ 34,550 |
North America [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long lived assets | 16 | 22 |
Europe [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long lived assets | 12,945 | 13,588 |
Israel [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long lived assets | 19,439 | 20,894 |
Other [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long lived assets | $ 46 |
Financial Income (Expenses), Net (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Other Income and Expenses [Abstract] | |||
Interest income | $ 751 | $ 1,026 | $ 1,266 |
Discount on marketable securities, net | (358) | (561) | (758) |
Exchange rate differences, net | (236) | (148) | (95) |
Bank charges | (122) | (97) | (150) |
Financial income, net | $ 35 | $ 220 | $ 263 |
Taxes on Income (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Tax Disclosure [Line Items] | |||
Tax rate | 25.00% | 26.50% | 26.50% |
Corporate tax on cash dividends distributed from exempted profits | 25.00% | ||
Withholding tax deduction from cash dividends distributed from benefited profits | 20.00% | 20.00% | 20.00% |
Non-Israeli subsidiaries' undistributed earnings for which Company has not provided for Israeli income and foreign withholding taxes | $ 2,871 | ||
Assumed deferred tax liability attributable to taxable temporary differences from non-Israeli subsidiaries'' undistributed earnings | 359 | ||
Adjustment to deferred tax balance due to reduction in Development Zone A tax rate | 94 | ||
Net operating loss carry-forwards | 1,500 | ||
Beneficial Enterprise [Member] | |||
Income Tax Disclosure [Line Items] | |||
Tax exemption | 45,405 | $ 44,742 | |
Assumed income tax liability | $ 11,351 | $ 11,186 | |
Israel Tax Reform [Member] | |||
Income Tax Disclosure [Line Items] | |||
Corporate statutory tax rate on 2018 and thereafter | 23.00% | ||
Corporate statutory tax rate on 2017 | 24.00% | ||
Corporate statutory tax rate on 2016 | 25.00% | ||
Preferred Enterprise [Member] | Development Area A [Member] | |||
Income Tax Disclosure [Line Items] | |||
Corporate statutory tax rate on 2017 and thereafter | 7.50% | ||
Corporate statutory tax rate on 2016 | 9.00% | ||
Preferred Enterprise [Member] | Rest Of Country [Member] | |||
Income Tax Disclosure [Line Items] | |||
Corporate statutory tax rate on 2016 and thereafter | 16.00% |
Taxes on Income (Income Before Income Taxes and Income Taxes Expense (Benefit) Included in the Consolidated Statements of Operations) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Tax Disclosure [Abstract] | |||
Income (loss) before income taxes, Israel | $ 15,541 | $ 19,486 | $ 16,522 |
Income (loss) before income taxes, foreign jurisdiction | 324 | (1,061) | 787 |
Income (loss) before income taxes | 15,865 | 18,425 | 17,309 |
Current taxes, Israel | 2,242 | 2,383 | 2,494 |
Current taxes, foreign jurisdiction | 720 | 465 | 409 |
Current taxes | 2,962 | 2,848 | 2,903 |
Current tax (benefits) expenses relating to prior years, Israel | 26 | 20 | |
Current tax (benefits) expenses relating to prior years, foreign jurisdiction | (36) | ||
Current tax (benefits) expenses relating to prior years | 26 | (36) | 20 |
Deferred taxes, Israel | 10 | (437) | (200) |
Deferred taxes, foreign jurisdiction | (270) | (470) | (19) |
Deferred taxes | (260) | (907) | (219) |
Income tax expense | $ 2,728 | $ 1,905 | $ 2,704 |
Taxes on Income (Deferred Income Taxes) (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Deferred tax assets: | ||
Accrued employee benefits | $ 261 | $ 247 |
Research and development costs | 921 | 679 |
Tax loss carryforwards | 338 | 177 |
PPE | 15 | 16 |
Inventory | 160 | |
Share based compensation | 246 | 245 |
Intangible assets | 107 | |
Other | 2 | 21 |
Total gross deferred tax assets | 1,890 | 1,545 |
Deferred tax liabilities: | ||
Intangible assets | (138) | (243) |
Goodwill | (215) | (61) |
Other | 36 | |
Total gross deferred tax liabilities | (353) | (268) |
Net deferred tax assets | 1,537 | 1,277 |
In Israel | 1,338 | 1,348 |
Foreign jurisdictions | 199 | (71) |
Non-current deferred tax assets | 1,537 | 1,545 |
Non-current deferred tax liabilities | (268) | |
Net deferred tax assets | $ 1,537 | $ 1,277 |
Taxes on Income (Reconciliation of Statutory Tax Expense To Actual Tax Expense) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Tax Disclosure [Abstract] | |||
Income before income taxes | $ 15,865 | $ 18,425 | $ 17,309 |
Statutory tax rate in Israel | 25.00% | 26.50% | 26.50% |
Computed expected tax | $ 3,966 | $ 4,883 | $ 4,587 |
Non-deductible operating expenses, net | 228 | 209 | 476 |
Non-taxable income | (84) | (819) | |
Prior year adjustments | 26 | (36) | 20 |
Tax effect due to "Approved/Benefited/ Preferred Enterprise" status | (1,924) | (2,368) | (2,588) |
Taxes related to foreign jurisdictions | 324 | 250 | 181 |
Changes in tax rate | 94 | 35 | |
Creation of deferred taxes for tax losses and benefits from previous years for which deferred taxes were not created in the past | (252) | ||
Other | 98 | 3 | 28 |
Income tax expense | $ 2,728 | $ 1,905 | $ 2,704 |
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Mar. 15, 2017 |
Jan. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
||||
Subsequent Event [Line Items] | ||||||||
Dividend declared aggregate amount | $ 7,312 | $ 7,274 | $ 7,183 | |||||
Options granted | 116,455 | [1] | 89,907 | |||||
Restricted Share Units [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Restricted Share Units, granted | 8,000 | 74,000 | ||||||
Subsequent Event [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Dividend declaration date | Mar. 15, 2017 | |||||||
Dividend declared aggregate amount | $ 7,400 | |||||||
Dividend declared per share | $ 1.00 | |||||||
Dividend, date payable | Apr. 05, 2017 | |||||||
Dividend payable, date of record | Mar. 27, 2017 | |||||||
Subsequent Event [Member] | Global Share Incentive Plan (2013) [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Options granted | 119,925 | |||||||
Subsequent Event [Member] | Global Share Incentive Plan (2013) [Member] | Restricted Share Units [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Restricted Share Units, granted | 78,000 | |||||||
|
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