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FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
ANNUAL REPORT
PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(X) Annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934
Commission file number 1-13606
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
SOLA OPTICAL 401(k) SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Sola Optical, USA
1500 Cader Lane
Petaluma, CA 94954
SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the administrator has duly caused this annual report to be signed on its behalf
by the undersigned hereunto duly authorized.
Sola Optical
401(k) Savings Plan
Date: June 26, 2000 By /s/Steven M. Neil
------------------------------
Executive Vice President, Finance
Chief Financial Officer, Secretary and
Treasurer
Page 1 of 13
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CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
on Form S-8 (No. 333-4489) of Sola Optical, USA of our report dated June 6,
2000, with respect to the financial statements of the Sola Optical 401(k)
Savings Plan included in this Annual Report on Form 11-K.
/s/Mohler, Nixon & Williams
--------------------------------
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
June 26, 2000
Page 2 of 13
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SOLA OPTICAL
401(k) SAVINGS PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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Page 3 of 13
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SOLA OPTICAL
401(k) SAVINGS PLAN
Financial Statements
Years ended December 31, 1999 and 1998
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<TABLE>
<CAPTION>
Table of Contents
<S> <C>
Independent Accountants' Report........................................... 5
Financial Statements:
Statements of Net Assets Available for Benefits........................... 6
Statements of Changes in Net Assets Available for Benefits................ 7
Notes to Financial Statements............................................. 8
</TABLE>
Page 4 of 13
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To the Participants and
Plan Administrator of the
Sola Optical
401(k) Savings Plan
INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
We have audited the financial statements of the Sola Optical 401(k) Savings
Plan (the Plan) as of December 31, 1999, and for the year then ended, as listed
in the accompanying table of contents. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit. Other auditors were
engaged to audit the financial statements of the Plan as of and for the year
ended December 31, 1998 and in their report dated May 17, 1999, they expressed
an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Plan's management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Plan as
of December 31, 1999, and the changes in net assets available for benefits for
the year then ended, in conformity with generally accepted accounting
principles.
/s/ Mohler, Nixon & Williams
-----------------------------
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
June 6, 2000
Page 5 of 13
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SOLA OPTICAL
401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
December 31,
--------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Investments at fair value $57,681,342 $44,421,209
Investments, at contract value 923,891
-------------- --------------
Assets held for investment purposes 57,681,342 45,345,100
Cash 2,250
Participants' contributions receivable 7,481 14,412
Employers' contribution receivable 569,064 518,576
-------------- --------------
Net assets available for benefits $58,257,887 $45,880,338
============== ==============
</TABLE>
See independent accountants' report and
accompanying notes to financial statements.
Page 6 of 13
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SOLA OPTICAL
401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
For the years ended
December 31,
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Additions to net assets attributed to:
Investment income
Dividends and interest $ 1,775,694 $ 2,528,255
Net realized and unrealized appreciation
in fair value of investments 8,935,154 5,744,650
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10,710,848 8,272,905
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Contributions:
Participants' 3,986,799 3,492,822
Employer's 1,158,805 1,122,295
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5,145,604 4,615,117
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Total additions 15,856,452 12,888,022
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Deductions from net assets attributed to:
Withdrawals and distributions 3,464,736 2,438,826
Administrative expenses 14,167 15,228
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Total deductions 3,478,903 2,454,054
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Net increase 12,377,549 10,433,968
Net assets available for benefits:
Beginning of year 45,880,338 35,446,370
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End of year $58,257,887 $45,880,338
=========== ===========
</TABLE>
See independent accountants' report and
accompanying notes to financial statements.
Page 7 of 13
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SOLA OPTICAL
401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
--------------------------
Note 1 - The Plan and its significant accounting policies:
The following description of the Sola Optical 401(k) Savings Plan (the
Plan) provides only general information. Participants should refer to the Plan
document for a more complete description of the Plan's provisions.
The Plan is a defined contribution plan that was established in 1996 by the
Company to provide benefits to eligible employees. The Plan covers all employees
of Sola Optical, USA or any other U.S. based employee of Sola International,
Inc. (collectively referred to as the Company) not otherwise covered by a
collective bargaining agreement.
The Plan was amended in 1999 as follows: 1) a participant who suspends
elective deferrals is prohibited from resuming elective deferrals until the
month following the date of such suspension; 2) the employer discretionary
matching contribution was revised effective January 1, 1999 to equal 50% of the
participant salary deferrals to a maximum of 6% of participant compensation, or
such amount determined by the Administrative Committee; and 3) an eligible
employee may enter the Plan on the first day of the month following completion
of 30 days of employment.
The Plan administrator believes that the Plan is currently designed and
operated in compliance with the applicable requirements of the Internal Revenue
Code and the provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
Administration -
The Company has appointed an Administrative Committee (the Committee) to
manage the operation and administration of the Plan. The Committee designated
American Century Services Corporation as the Plan's third-party administrator
who processes and maintains the records of participant data. The Company has
contracted with Chase Manhattan Bank, N.A. (Chase Manhattan) to act as trustee
of Plan investments. Substantially all expenses incurred for administering the
Plan are paid by the Company.
Page 8 of 13
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Basis of accounting -
The financial statements of the Plan are prepared on the accrual method of
accounting. Participant contributions are recorded in the period during which
the Company withholds payroll deductions from participant's earnings. Company
discretionary contributions are recorded in the period to which they relate.
Benefits are recorded when paid.
Investments -
Investments of the Plan are held by Chase Manhattan and various sub-
custodians, and invested based solely upon instructions received from
participants. Participants may elect to allocate their investment accounts among
four mutual funds, each with a different investment goal and level of risk, a
collective trust fund, the Sola International, Inc. Common Stock Fund (Sola
Stock Fund) or maintain an individually managed account in which they direct
their investments. Plan assets are valued at fair value as of the last day of
the Plan year, as measured by quoted market prices. Participant loans are valued
at cost, which approximates fair value.
An individual guaranteed investment contract previously purchased by the
Plan matured in 1999. The investment was reported at contract value, which
approximated fair value at December 31, 1998. The Barclays Global Investors
Equity Index Fund was replaced with the American Century Equity Index Fund
during 1999.
Income taxes -
The Plan has been amended since receiving its latest favorable
determination letter dated May 18, 1997. However, the Company believes that the
Plan is being operated in accordance with, and qualifies under, the applicable
requirements of the Internal Revenue Code and related state statutes, and that
the trust, which forms a part of the Plan, is exempt from federal income and
state franchise taxes.
Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
changes therein, and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
Page 9 of 13
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Reclassifications -
Certain reclassifications were made in the 1998 financial statements to
conform with the 1999 presentation.
Risks and uncertainties -
The Plan provides for various investment options in any combination of
stocks, bonds, fixed income securities, mutual funds and other investment
securities. Investment securities are exposed to various risks, such as interest
rate, market fluctuations and credit risks. Due to the level of risk associated
with certain investment securities, it is at least reasonably possible that
changes in risks in the near term would materially affect participants' account
balances and the amounts reported in the statements of net assets available for
benefits and the statements of changes in net assets available for benefits.
New accounting pronouncement -
In September 1999, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
(SOP) 99-3, "Accounting for and Reporting of Certain Defined Contribution
Benefit Plan Investments and Other Disclosure Matters." This SOP eliminates the
previous requirement for a defined contribution plan to disclose participant-
directed investment programs by fund. The Plan has adopted SOP 99-3 in its
financial statements for the years ended December 31, 1999 and 1998.
Note 2 - Participation and benefits:
Participant contributions -
Participants may elect to have the Company contribute a percentage, from 1%
to 20%, of their eligible pre-tax compensation up to the amount allowable under
current income tax regulations. Participants who elect to have the Company
contribute a portion of their compensation to the Plan agree to accept an
equivalent reduction in taxable compensation. Contributions withheld are
invested in accordance with the participant's direction and are allocated to
funds in 1% increments.
Participants are also allowed to make rollover contributions of amounts
received from other tax-qualified employer-sponsored retirement plans. Such
contributions are deposited in the appropriate investment funds in accordance
with the participant's direction and the Plan's provisions.
Page 10 of 13
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Employer contributions -
The Company is allowed to make discretionary matching contributions as
defined in the Plan and as approved by the Board of Directors. In 1999 and 1998,
the Company made semi-annual matching contributions equal to 50% of each
eligible participant's contributions during the preceding six-month period up to
a maximum of 6% and 3% of each participant's pre-tax compensation for 1999 and
1998, respectively.
Participant accounts -
Each participant's account is credited with the participant's contribution,
Plan earnings or losses and an allocation of the Company's contribution. Company
matching semi-annual contributions are allocated to the accounts of participants
who are employed on the allocation date, have attained the age of 65 or have
died or become disabled during the period ended on the allocation date.
Allocation of the Company's contribution is based on eligible participant's
contributions.
Payment of benefits -
Upon termination, the participant or beneficiary will receive the benefits
in a lump sum amount equal to the value of the participant's interest in his or
her account. The Plan allows for automatic lump sum distribution of participant
account balances that do not exceed $5,000.
Loans to participants -
The Plan allows participants to borrow not less than $1,000, and up to an
amount not exceeding the lesser of 50% of the present value of the participant's
account balance, or an amount which may be amortized by scheduled payments of
principal and interest that are not greater than 10% of the participant's gross
monthly salary, up to $50,000. The loans are secured by the participant's
balance. Such loans bear interest at the available market financing rates and
must be repaid to the Plan within a five-year period, unless the loan is used
for the purchase of a principal residence in which case the maximum repayment
period is ten years. The specific terms and conditions of such loans are
established by the Committee. Outstanding loans at December 31, 1999 carry
interest rates that range from 7.75% to 9.00%.
Vesting -
Participants are immediately 100% vested in their entire account balance.
Page 11 of 13
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Note 3 - Investments:
The following table includes the contract or fair values of investments and
investment funds that represent 5% or more of the Plan's net assets at December
31:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Benham Stable Asset Fund $ 9,421,462 $ 6,883,018
Twentieth Century Ultra Investors Fund 22,981,638 15,512,230
American Century Equity Growth Fund 12,630,023 10,575,264
American Century Equity Index Fund 8,951,856
Barclays Global Investors Equity Index Fund 7,686,200
Sola Common Stock 728,783 966,259
Other 449,952 1,568,661
Participant loans 2,517,628 2,153,468
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Assets held for investment
purposes $57,681,342 $45,345,100
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</TABLE>
The Plan's investments (including gains and losses on investments bought
and sold, as well as held during the year) appreciated (depreciated) in value as
follows:
<TABLE>
<CAPTION>
Years ended December 31,
1999 1998
---- ----
<S> <C> <C>
Common/Collective Trusts $1,070,219 $1,671,929
Common Stock (156,964) (162,979)
Mutual Funds 8,021,899 4,235,700
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$8,935,154 $5,744,650
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</TABLE>
Note 4 - Related party transactions:
Certain Plan investments in mutual funds are managed by American Century
Services Corporation. These transactions qualify as party-in-interest. Any
purchases and sales of these funds are open market transactions at fair market
value. Such transactions are permitted under the provisions of the Plan and are
exempt from the prohibition of party-in-interest transactions under ERISA and
applicable exemptions promulgated thereunder.
Page 12 of 13
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As allowed in the Plan, participants may elect to invest a portion of their
accounts in the common stock of the Company. Aggregate investment in Company
common stock was as follows at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Date Number of shares Fair value Cost
---- ---------------- ---------- ----
<S> <C> <C> <C>
1999 52,519 $728,783 $1,001,257
1998 55,809 966,259 1,100,979
</TABLE>
Note 5 - Plan termination and/or modification:
The Company intends to continue the Plan indefinitely for the benefit of
its employees; however, it reserves the right to terminate and/or modify the
Plan at any time by resolution of its Board of Directors and subject to the
provisions of ERISA.
Note 6 - Subsequent event:
Plan assets, as invested at December 31, 1999, would have decreased in
value as of June 6, 2000 by approximately $2,864,000 due to market fluctuations.
