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 | |
For the fiscal year ended December 31, 2001 | ||
OR | ||
[ ] | Transition report pursuant to Section 15(d) of the Securities Exchange Act of 1934 | |
For the transition period from _______________ to _______________ | ||
Commission file number 001-13606 | ||
A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: | |
SOLA 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 INTERNATIONAL INC.
10590 WEST OCEAN AIR DRIVE
SUITE 300
SAN DIEGO, CA 92130
SOLA 401(k) Savings Plan
Financial Statements
December 31, 2001 and 2000
2
SOLA 401(k) SAVINGS PLAN
Financial Statements and Supplemental Schedules
December 31, 2001 and 2000
Table of Contents
Page | ||||
Independent Accountants Report |
4 | |||
Financial Statements: |
||||
Statements of Net Assets Available for Benefits |
5 | |||
Statements of Changes in Net Assets Available for Benefits |
6 | |||
Notes to Financial Statements |
7 | |||
Supplemental Schedules as of and for the year ended
December 31, 2001 |
12 | |||
Schedule of Assets Held for Investment Purposes | ||||
Schedule of Non-Exempt Transactions |
3
INDEPENDENT ACCOUNTANTS REPORT
To the Participants and
Plan Administrator of the
SOLA 401(k) Savings Plan
We have audited the financial statements of the SOLA 401(k) Savings Plan (the Plan) as of December 31, 2001 and 2000, and for the years then ended, as listed in the accompanying table of contents. These financial statements are the responsibility of the Plans management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 Plans management, as well as evaluating the overall financial statement presentation. We believe that our audits provide 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, 2001 and 2000, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules, as listed in the accompanying table of contents, are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plans management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.
By | /s/ Mohler, Nixon & Williams | |
|
||
MOHLER, NIXON & WILLIAMS Accountancy Corporation |
Campbell, California
June 18, 2002
4
SOLA 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, | |||||||||||
2001 | 2000 | ||||||||||
Assets: |
|||||||||||
Investments, at fair value |
$ | 35,572,660 | $ | 43,402,801 | |||||||
Participant loans |
1,353,551 | 2,523,283 | |||||||||
Assets held for investment purposes |
36,926,211 | 45,926,084 | |||||||||
Cash |
431 | ||||||||||
Participants contributions receivable |
67,468 | 102,037 | |||||||||
Employers contribution receivable |
380,872 | 468,299 | |||||||||
Net assets available for benefits |
$ | 37,374,551 | $ | 46,496,851 | |||||||
See notes to financial statements.
5
SOLA 401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Years ended December 31, | |||||||||||
2001 | 2000 | ||||||||||
Additions to net assets attributed to: |
|||||||||||
Investment income: |
|||||||||||
Dividends and interest |
$ | 898,761 | $ | 3,495,704 | |||||||
Net realized and unrealized depreciation in fair value of investments |
(2,814,834 | ) | (9,735,519 | ) | |||||||
(1,916,073 | ) | (6,239,815 | ) | ||||||||
Contributions: |
|||||||||||
Participants |
2,436,697 | 3,398,699 | |||||||||
Employers |
749,811 | 996,706 | |||||||||
3,186,508 | 4,395,405 | ||||||||||
Total additions |
1,270,435 | (1,844,410 | ) | ||||||||
Deductions from net assets attributed to: |
|||||||||||
Withdrawals and distributions |
10,386,041 | 9,901,166 | |||||||||
Administrative expenses |
6,694 | 15,460 | |||||||||
Total deductions |
10,392,735 | 9,916,626 | |||||||||
Net decrease in net assets |
(9,122,300 | ) | (11,761,036 | ) | |||||||
Net assets available for benefits: |
|||||||||||
Beginning of year |
46,496,851 | 58,257,887 | |||||||||
End of year |
$ | 37,374,551 | $ | 46,496,851 | |||||||
See notes to financial statements.
6
SOLA 401(k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
NOTE 1 THE PLAN AND ITS SIGNIFICANT ACCOUNTING POLICIES
General The following description of the SOLA 401(k) Savings Plan (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plans provisions.
The Plan is a defined contribution plan that was established in 1996 by Sola Optical, USA, a division of Sola International Inc. to provide benefits to eligible employees, as defined in the Plan document. On December 20, 2001, the Plan was amended such that Sola International Inc. (the Company) became the employer, Plan sponsor and Plan administrator of the Plan. 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), as amended.
Effective December 20, 2001, the Plan was renamed the SOLA 401(k) Savings Plan. The Plan was formerly known as the Sola Optical 401(k) Savings Plan.
During 2000, the Company purchased Oracle Lens Manufacturing Corporation (Oracle). Effective January 1, 2001, the Plan document was amended to exclude employees of Oracle from participating in the Plan. The Plan was subsequently amended effective January 1, 2002 to allow former Oracle employees to participate in the Plan.
Effective January 1, 2002, the Plan document was amended and restated to incorporate provisions from federal laws passed since 1994 (commonly referred to as GUST) and certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).
Administration The Company has appointed an Administrative Committee (the Committee) to manage the operation and administration of the Plan. The Company has contracted with a third-party administrator who processes and maintains the records of participant data and an affiliate of the administrators, JP Morgan Chase Bank (Chase), to act as the trustee. Substantially all expenses incurred for administering the Plan are paid by the Company.
Estimates The preparation of 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 changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
7
Basis of accounting The financial statements of the Plan are prepared on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America.
Investments Investments of the Plan are held by Chase and various sub-custodians, and invested based solely upon instructions received from participants.
The Plans investments in mutual funds, individually managed accounts, the collective trust fund and Company stock 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.
Income taxes The Plan has been amended since receiving its latest favorable determination letter dated March 18, 1997. The Company believes that the Plan is operated in accordance with, and continues to qualify 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.
Risks and uncertainties The Plan provides for various investment options in any combination of investment securities offered by the Plan. 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.
NOTE 2 PARTICIPATION AND BENEFITS
Participant contributions Participants may elect to have the Company contribute from 1% to 20% of their eligible pre-tax compensation not to exceed 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 participants direction.
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 participants direction and the Plans provisions.
Employer contributions The Company is allowed to make matching contributions as defined in the Plan and as approved by the Board of Directors. In 2001 and 2000, the Company made semi-annual matching contributions equal to 50% of each eligible participants contribution up to a maximum of 3% of the participants eligible compensation.
Vesting Participants are immediately vested in their entire account balance.
8
Participant accounts Each participants account is credited with the participants contribution, Plan earnings or losses and an allocation of the Companys contribution. Company semi-annual matching contributions are allocated to the accounts of participants who are employed on the allocation date or have attained the age of 65, died or become disabled during the period ended on the allocation date. Allocation of the Companys contribution is based on eligible participants 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 participants interest in their account. The Plan allows for automatic lump sum distributions 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 the lesser of $50,000 or 50% of their account balance. The loans are secured by the participants balance. Such loans bear interest at 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 Plan administrator. Outstanding loans at December 31, 2001 carry interest rates which range from 5.0% to 9.5%.
NOTE 3 PLAN OBLIGATIONS
Included in net assets available for benefits at December 31, 2001 are benefits due to withdrawing participants for benefit claims which have been processed and approved for payment prior to year-end, but not yet paid, of approximately $311,000.
NOTE 4 NONEXEMPT TRANSACTIONS
Certain contributions of approximately $5,600 made by participants in 2001 were not deposited with the Plan custodian in accordance with Department of Labor regulations. As a consequence of the delay in the deposit of the participants contributions, these contributions are considered prohibited transactions under ERISA. The Company and Plan sponsor intend to make the necessary filings with the Internal Revenue Service.
9
NOTE 5 INVESTMENTS
The following table includes the fair values of investments and investment funds that represent 5% or more of the Plans net assets at December 31:
2001 | 2000 | ||||||||
Benham Stable Asset Fund |
$ | 9,940,975 | $ | 8,613,116 | |||||
American Century Ultra Investors Fund |
17,698,112 | 17,237,884 | |||||||
American Century Equity Growth Fund |
9,036,343 | ||||||||
American Century Equity Index Fund |
4,875,966 | 7,339,837 | |||||||
Sola International, Inc. Common Stock |
925,327 | 670,257 | |||||||
American Century Diversified Bond Fund |
2,010,419 | ||||||||
Other funds totaling less than 5% of net assets |
121,861 | 505,364 | |||||||
Participant loans |
1,353,551 | 2,523,283 | |||||||
Assets held for investment purposes |
$ | 36,926,211 | $ | 45,926,084 | |||||
The Plans investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows for the years ended December 31:
2001 | 2000 | |||||||
Common stock |
$ | 740,370 | ($630,612 | ) | ||||
Mutual funds |
(3,555,204 | ) | (9,104,907 | ) | ||||
($2,814,834 | ) | ($9,735,519 | ) | |||||
NOTE 6 PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments in American Century, an affiliate of Chase, mutual funds are managed by Chase, the trustee of the Plan. Any purchases and sales of these funds are performed in the open market at fair value and qualify as party-in-interest. Such transactions, while considered party-in-interest transactions under ERISA regulations, are permitted under the provisions of the Plan and are specifically exempt from the prohibition of party-in-interest transactions under ERISA.
10
As allowed by 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 at December 31, 2001 and 2000 was as follows:
Date | Number of shares | Fair value | Cost | |||||||||
2001 |
47,683 | $ | 925,327 | $ | 589,054 | |||||||
2000 |
162,487 | $ | 670,257 | $ | 1,438,997 |
NOTE 7 PLAN TERMINATION AND/OR MODIFICATION
The Company intends to continue the Plan indefinitely for the benefit of its participants; 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 8 SUBSEQUENT EVENT
As of July 18, 2002, the Dow Jones Industrial Average and Nasdaq Composite indices have decreased by approximately 3.1% and 20.9%, respectively, since December 31, 2001, and the Plans assets may have significantly decreased in value.
11
SUPPLEMENTAL SCHEDULES
12
SOLA 401(k) SAVINGS PLAN |
EIN: 94-3189941 PLAN #001 |
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 2001
Identity of issue, borrower, | Description of investment including maturity date, | Current | ||||||
lessor or similar party | rate of interest, collateral, par or maturity value | value | ||||||
Benham Stable Asset Fund |
Common/Collective Trust | $ | 9,940,975 | |||||
*American Century Ultra Investors Funds |
Mutual Fund | 17,698,112 | ||||||
*American Century Diversified Bond Fund |
Mutual Fund | 2,010,419 | ||||||
*American Century Equity Index Fund |
Mutual Fund | 4,875,966 | ||||||
*Sola International Inc. |
Common Stock (47,683 shares) | 925,327 | ||||||
Charles Schwab & Co. |
Self-Directed Account | 121,861 | ||||||
*Participant loans |
Loan Fund (interest rates ranging from 5.0% to 9.5%) | 1,353,551 | ||||||
Total | $ | 36,926,211 | ||||||
*Party-in-interest
13
SOLA 401(k) SAVINGS PLAN |
EIN: 94-3189941 PLAN #001 |
SCHEDULE OF NONEXEMPT TRANSACTIONS
YEAR ENDED DECEMBER 31, 2001
Identity of party involved | Relationship | Description | Amount | |||||||||
Sola International Inc. |
Plan Sponsor | Late deposit of employee deferrals | $ | 5,638 | ||||||||
14
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 INTERNATIONAL INC. | ||
| ||
Date: June 28, 2002 | By | /s/ Steven M. Neil |
Steven M. Neil Executive Vice President, Finance Chief Financial Officer, Secretary and Treasurer |
15