SEC Company Response from CAMTEK LTD (CAMT) (CIK 0001109138) (CAMT) — Jan 14, 2011
CAMTEK LTD (CAMT) (CIK 0001109138)
Date: Jan. 14, 2011 · CIK: 0001109138 · Accession: 0001178913-11-000131
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-30664
Letter
Division of Corporation Finance Attention: Mr. Brian Cascio, Accounting Branch Chief Camtek Ltd. Form 20-F for the fiscal year ended December 31, 2009 Filed June 7, 2010 File No. 000-30664
RE:
Dear Sir:
In connection with your letter, dated December 28, 2010, to Mira Rosenzweig, Chief Financial Officer of Camtek Ltd. (“Camtek” or the “Company”), we are providing the following responses to the comments made by the Staff of the Securities and Exchange Commission (the “Commission”). To assist you in your review, we have included the heading and comments from that letter in italics below followed by the Company’s responses in regular typeface.
Form 20-F for the Year Ended December 31, 2009.
Results of Operation, page 39
Revenues, page 39
1. In future filings please more fully describe the material factors contributing to significant changes in revenues each period. In that regard:
·
Please clarify the impact of the injunction associated with your Falcon systems in the United States as referred to in Item 3 – Key Information; and
·
Describe and quantify the impact on sales of the acquisitions of Printar and SELA as referred to on pages F-18 and F-19.
In general, the discussion of revenues should describe the underlying business reasons for factors cited as responsible for material changes in revenues, such as changes arising from varying demand, changing prices, new products, new markets and other significant matters. Please refer to Item 303(a)(3) of Regulation S-K and Securities Act Release 33-8350, Interpretation: Commission Guidance Regarding Management's Discussion and Analysis of Financial Condition and Results of Operations.
Response:
We note the Staff’s comment. In future filings, the Company will more fully describe the material factors contributing to significant changes in revenues in each period.
To the extent material, we will disclose the impact on revenues of the injunction associated with our Falcon systems in the United States. We note that we have been marketing in the United States a system having functions similar to the Falcon, but employing technologies which differ from those employed in the Falcon and not subject to the injunction.
We note that the 2009 revenues of both Printar and SELA are disclosed in Note 3 to the 2009 consolidated financial statements. SELA’s revenues will be classified as part of our revenues from microelectronics products and Printar’s revenues will be classified as revenues from the Printed Circuit Boards and IC substrates products. In future filings, in describing the material factors contributing to the significant changes in revenues, we will address the impact of these acquisitions.
Gross Profit, page 39
2. We see gross profit has declined each year from 52% in 2006 to 33% in 2009. In future filings, please describe the underlying business reasons for the decline in gross profit as a percentage of revenue. In general the discussion of results of operations should not only identify and quantify factors responsible for material changes in financial statement items, but also describe the underlying business reasons for factors cited.
Response:
We note the Staff’s comment. We refer to the discussion of gross profit on page 39 of the 2009 Form 20-F, which details the elements that went into the decrease in gross profit. Nevertheless, in future filings, the Company will consider describing in more detail the underlying business reasons for the factors responsible for material changes in financial statement items including gross profit, if material.
Selling, General and Administrative expenses, page 39
3. We see you have a liability for employee severance benefits of $8.8 million as of December 31, 2009 which did not exist as of December 31, 2008. Please tell us the impact of employee severance on operating expenses. In future filings please describe the underlying business reasons for the decrease in headcount and quantify the number of positions eliminated. Also, clarify the expected impact on your business.
- 2 -
Response:
Please note that the liability of $8.8 million as of December 31, 2009 was in respect of other long term liabilities and not employee severance benefits. See Note 14 of the 2009 consolidated financial statements, which discussed “other long term liabilities” in the amount of $8.8 million. In Note 13(3) of the 2009 consolidated financial statements, the Company noted that severance pay expenses in 2009 amounted to $712 thousand. In Note 13(2) of the 2009 consolidated financial statements, the Company noted that the liability for employee severance benefits as of December 31, 2009 amounted to $487 thousand. To the extent that future severance expenses are material, we will comply with the requested disclosures.
4. As a related matter, we see on page 55 your disclosure that you did not record material costs relating to termination benefits to employees who ceased their employment due to workforce restrictions. Please reconcile this statement to the $8.8 million of employee severance benefits accrued as of December 31, 2009.
Response:
See our response to comment 3 above.
Liquidity and Capital Resources, page 40
5. We refer to your convertible loan from FIMI. We see in Note 12 to your financial statements that you were not in compliance with certain covenants as of December 31, 2009. In future filings please indicate the impact of covenant noncompliance on capital resources.
Response:
The outstanding balance of the convertible loan as of December 31, 2009 was presented as a short term liability and was repaid in August 2010 according to the original repayment schedule. Therefore, this loan was not part of our long term capital resources due to our plan to repay this loan as scheduled. In future filings, the Company will indicate the impact of any future covenant noncompliance on capital resources, if applicable.
Item 15T. Controls and Procedures
6. We note that you conduct substantially all of your operations outside of the United States. In order to enhance our understanding of how you prepare your financial statements and assess your internal control over financial reporting, we ask that you provide us with information that will help us answer the following questions:
- 3 -
a) Please tell us how you evaluate and assess internal control over financial reporting:
·
In connection with your process to determine whether your internal control over financial reporting was effective; please describe whether and how you considered controls to address financial reporting risks that are relevant to all locations where you have operations.
·
Please describe how your internal audit function impacted your evaluation of your internal control over financial reporting.
b) Please tell us how you maintain your books and records and prepare your financial statements:
·
If you maintain your books and records in accordance with U.S. GAAP, describe the controls you maintain to ensure that the activities you conduct and the transactions you consummate are recorded in accordance with U.S. GAAP.
·
If you do not maintain your books and records in accordance with U.S. GAAP, tell us what basis of accounting you use and describe the process you go through to convert your books and records to U.S. GAAP for SEC reporting. Describe the controls you maintain to ensure that you have made all necessary and appropriate adjustments in your conversions and disclosures.
c) Please tell us the background of the people involved in your financial reporting. We would like to understand more about the background of the people who are primarily responsible for preparing and supervising the preparation of your financial statements and evaluating the effectiveness of your internal control over financial reporting and their knowledge of U.S. GAAP and SEC rules and regulations. Do not identify people by name, but for each person, please tell us:
·
What role he or she takes in preparing your financial statements and evaluating the effectiveness of your internal control;
·
What relevant education and ongoing training he or she has had relating to U.S. GAAP;
·
The nature of his or her contractual relationship to you;
·
Whether he or she holds and maintains any professional designations such as Certified Public Accountant (U.S.) or Certified Management Accountant; and
·
About his or her professional experience, including experience in preparing and/or auditing financial statements prepared in accordance with U.S. GAAP and evaluating effectiveness of internal control over financial reporting.
- 4 -
d) If you retain an accounting firm or similar organization to prepare your financial statements or evaluate your internal control over financial reporting, please tell us:
The name and address of the accounting firm or organization;
·
The qualifications of their employees who perform the services for your company;
·
How and why they are qualified to prepare your financial statements or evaluate your internal control over financial reporting;
·
How many hours they spent last year performing these services for you; and
·
The total amount of fees you paid to each accounting firm or organization in connection with the preparation of your financial statements and in connection with the evaluation of internal control over financial reporting for the most recent financial year end.
e) If you retain individuals who are not your employees and are not employed by an accounting firm or other similar organization to prepare your financial statements or evaluate your internal control over financial reporting, do not provide us with their names, but please tell us:
·
Why you believe they are qualified to prepare your financial statements or evaluate your internal control over financial reporting;
·
How many hours they spent last year performing these services for you; and
·
The total amount of fees you paid to each individual in connection with the preparation of your financial statements and in connection with the evaluation of internal control over financial reporting for the most recent financial year end.
f) Please tell us if you have an audit committee financial expert:
·
Since you do not identify an audit committee financial expert in your filings, please describe the extent of the audit committee’s U.S. GAAP knowledge. If you do not have a separately created audit committee, please describe the extent of the Board of Directors’ knowledge of U.S. GAAP and internal control over financial reporting.
- 5 -
Response:
a)
1.
The Company has engaged Brightman Almagor Zohar, a member firm of Deloitte Touche Tohmatsu Limited (“Deloitte”) to assist the Company in its evaluation and assessment of internal controls over financial reporting as required by section 404 of the Sarbanes Oxley Act of 2002, PCAOB Auditing Standard No. 5 and the SEC management guidance. The Company implements a top down, risk-based evaluation of its internal controls over financial reporting assisted by the proven methodology and experience of Deloitte. The risk-based evaluation allows management to focus its assessment on areas of financial reporting that pose the highest risks to reliable financial reporting and risk of material misstatement of the financial statements, and this is documented through a comprehensive risk assessment analysis including both quantitative and qualitative factors, including risk of fraud and management override of controls. Management relies on the results of the risk assessment in order to align the timing, extent and nature of evaluation of design and operating effectiveness of controls over financial reporting to the applicable identified risks. Through the risk assessment process management identifies the following:
a.
The locations that will be focused upon for the assessment of internal controls over financial reporting;
b.
The material accounts and transactions that will be evaluated for internal controls over financial reporting.
2.
Based on the risk assessment results and consultation with Deloitte and the Company's management, the Company finalizes the scope for the locations and processes to be evaluated and the extent and nature of the evaluation. This is documented in a scoping file wherein each of the locations and processes is assigned a risk level based on pre-determined quantitative and qualitative criteria. Assessment and documentation of the design of controls over financial reporting is performed for all processes within a selected location. Such assessment and documentation is performed by the Company except for documentation of information technology general controls and entity level controls, which are evaluated and documented by Deloitte. Testing of operating effectiveness of controls over financial reporting, in accordance with the aforementioned documentation, is adjusted to the assigned risk level of the process in question based on the above mentioned risk assessment results. All testing is performed by Deloitte and is documented in comprehensive testing worksheets which include the details of the testing samples and the results of the tests performed.
- 6 -
3.
For business processes selected in each of the significant locations, the Company, through its SOX compliance manager, identifies controls that adequately address financial reporting risks and documents the applicable controls in place through a process narrative and a control matrix which ensures coverage of control objectives and financial statement assertions for each significant account balance. In addition to process level controls, Deloitte identifies and documents controls that adequately address financial reporting risks at the entity level and information technology general controls. These controls are then reviewed by management and Deloitte and key controls are selected for testing. In selecting key controls to test for operating effectiveness, special attention is dedicated to ensuring that risks to adequate financial reporting are addressed and mitigated and that all financial statement assertions are covered by the controls in place. Controls evaluated for design and operating effectiveness are a combination of preventative and detective controls as well as manual or automated controls.
The results of the assessment of design and operating effectiveness of controls over financial reporting are evaluated for impact on adequate financial reporting by Deloitte, the SOX manager and the CFO. All deficiencies are evaluated individually and in combination to ensure that they do not lead to risk of material misstatement of the financial statements. Deficiencies in either design or operating effectiveness of controls over financial reporting are reported to the audit committee and executive management and provide the basis for expression of assessment of effectiveness of internal controls over financial reporting by management and disclosure about any material weaknesses, if applicable.
The Company’s internal auditor performs his audit according to the audit committee’s annual internal audit work plan, independent of the mandatory evaluation of internal control of financial reporting according to SOX. Any recommendations made by the internal auditor are implemented within the existing controls. The internal auditor’s report is submitted to the audit committee.
b) The Company has a process in place to prepare its consolidated financial statements according to U.S. GAAP. This process includes controls to ensure that activities and transactions are recorded in accordance with U.S. GAAP.
- 7 -
The financial closing process for all localities starts with specific deadlines of activities fro
Show Raw Text
CORRESP
1
filename1.htm
zk1109309.htm
January 14, 2011
VIA ELECTRONIC TRANSMISSION
Division of Corporation Finance
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Attention: Mr. Brian Cascio, Accounting Branch Chief
RE:
Camtek Ltd.
Form 20-F for the fiscal year ended December 31, 2009
Filed June 7, 2010
File No. 000-30664
Dear Sir:
In connection with your letter, dated December 28, 2010, to Mira Rosenzweig, Chief Financial Officer of Camtek Ltd. (“Camtek” or the “Company”), we are providing the following responses to the comments made by the Staff of the Securities and Exchange Commission (the “Commission”). To assist you in your review, we have included the heading and comments from that letter in italics below followed by the Company’s responses in regular typeface.
Form 20-F for the Year Ended December 31, 2009.
Results of Operation, page 39
Revenues, page 39
1. In future filings please more fully describe the material factors contributing to significant changes in revenues each period. In that regard:
·
Please clarify the impact of the injunction associated with your Falcon systems in the United States as referred to in Item 3 – Key Information; and
·
Describe and quantify the impact on sales of the acquisitions of Printar and SELA as referred to on pages F-18 and F-19.
In general, the discussion of revenues should describe the underlying business reasons for factors cited as responsible for material changes in revenues, such as changes arising from varying demand, changing prices, new products, new markets and other significant matters. Please refer to Item 303(a)(3) of Regulation S-K and Securities Act Release 33-8350, Interpretation: Commission Guidance Regarding Management's Discussion and Analysis of Financial Condition and Results of Operations.
Response:
We note the Staff’s comment. In future filings, the Company will more fully describe the material factors contributing to significant changes in revenues in each period.
To the extent material, we will disclose the impact on revenues of the injunction associated with our Falcon systems in the United States. We note that we have been marketing in the United States a system having functions similar to the Falcon, but employing technologies which differ from those employed in the Falcon and not subject to the injunction.
We note that the 2009 revenues of both Printar and SELA are disclosed in Note 3 to the 2009 consolidated financial statements. SELA’s revenues will be classified as part of our revenues from microelectronics products and Printar’s revenues will be classified as revenues from the Printed Circuit Boards and IC substrates products. In future filings, in describing the material factors contributing to the significant changes in revenues, we will address the impact of these acquisitions.
Gross Profit, page 39
2. We see gross profit has declined each year from 52% in 2006 to 33% in 2009. In future filings, please describe the underlying business reasons for the decline in gross profit as a percentage of revenue. In general the discussion of results of operations should not only identify and quantify factors responsible for material changes in financial statement items, but also describe the underlying business reasons for factors cited.
Response:
We note the Staff’s comment. We refer to the discussion of gross profit on page 39 of the 2009 Form 20-F, which details the elements that went into the decrease in gross profit. Nevertheless, in future filings, the Company will consider describing in more detail the underlying business reasons for the factors responsible for material changes in financial statement items including gross profit, if material.
Selling, General and Administrative expenses, page 39
3. We see you have a liability for employee severance benefits of $8.8 million as of December 31, 2009 which did not exist as of December 31, 2008. Please tell us the impact of employee severance on operating expenses. In future filings please describe the underlying business reasons for the decrease in headcount and quantify the number of positions eliminated. Also, clarify the expected impact on your business.
- 2 -
Response:
Please note that the liability of $8.8 million as of December 31, 2009 was in respect of other long term liabilities and not employee severance benefits. See Note 14 of the 2009 consolidated financial statements, which discussed “other long term liabilities” in the amount of $8.8 million. In Note 13(3) of the 2009 consolidated financial statements, the Company noted that severance pay expenses in 2009 amounted to $712 thousand. In Note 13(2) of the 2009 consolidated financial statements, the Company noted that the liability for employee severance benefits as of December 31, 2009 amounted to $487 thousand. To the extent that future severance expenses are material, we will comply with the requested disclosures.
4. As a related matter, we see on page 55 your disclosure that you did not record material costs relating to termination benefits to employees who ceased their employment due to workforce restrictions. Please reconcile this statement to the $8.8 million of employee severance benefits accrued as of December 31, 2009.
Response:
See our response to comment 3 above.
Liquidity and Capital Resources, page 40
5. We refer to your convertible loan from FIMI. We see in Note 12 to your financial statements that you were not in compliance with certain covenants as of December 31, 2009. In future filings please indicate the impact of covenant noncompliance on capital resources.
Response:
The outstanding balance of the convertible loan as of December 31, 2009 was presented as a short term liability and was repaid in August 2010 according to the original repayment schedule. Therefore, this loan was not part of our long term capital resources due to our plan to repay this loan as scheduled. In future filings, the Company will indicate the impact of any future covenant noncompliance on capital resources, if applicable.
Item 15T. Controls and Procedures
6. We note that you conduct substantially all of your operations outside of the United States. In order to enhance our understanding of how you prepare your financial statements and assess your internal control over financial reporting, we ask that you provide us with information that will help us answer the following questions:
- 3 -
a) Please tell us how you evaluate and assess internal control over financial reporting:
·
In connection with your process to determine whether your internal control over financial reporting was effective; please describe whether and how you considered controls to address financial reporting risks that are relevant to all locations where you have operations.
·
Please describe how your internal audit function impacted your evaluation of your internal control over financial reporting.
b) Please tell us how you maintain your books and records and prepare your financial statements:
·
If you maintain your books and records in accordance with U.S. GAAP, describe the controls you maintain to ensure that the activities you conduct and the transactions you consummate are recorded in accordance with U.S. GAAP.
·
If you do not maintain your books and records in accordance with U.S. GAAP, tell us what basis of accounting you use and describe the process you go through to convert your books and records to U.S. GAAP for SEC reporting. Describe the controls you maintain to ensure that you have made all necessary and appropriate adjustments in your conversions and disclosures.
c) Please tell us the background of the people involved in your financial reporting. We would like to understand more about the background of the people who are primarily responsible for preparing and supervising the preparation of your financial statements and evaluating the effectiveness of your internal control over financial reporting and their knowledge of U.S. GAAP and SEC rules and regulations. Do not identify people by name, but for each person, please tell us:
·
What role he or she takes in preparing your financial statements and evaluating the effectiveness of your internal control;
·
What relevant education and ongoing training he or she has had relating to U.S. GAAP;
·
The nature of his or her contractual relationship to you;
·
Whether he or she holds and maintains any professional designations such as Certified Public Accountant (U.S.) or Certified Management Accountant; and
·
About his or her professional experience, including experience in preparing and/or auditing financial statements prepared in accordance with U.S. GAAP and evaluating effectiveness of internal control over financial reporting.
- 4 -
d) If you retain an accounting firm or similar organization to prepare your financial statements or evaluate your internal control over financial reporting, please tell us:
The name and address of the accounting firm or organization;
·
The qualifications of their employees who perform the services for your company;
·
How and why they are qualified to prepare your financial statements or evaluate your internal control over financial reporting;
·
How many hours they spent last year performing these services for you; and
·
The total amount of fees you paid to each accounting firm or organization in connection with the preparation of your financial statements and in connection with the evaluation of internal control over financial reporting for the most recent financial year end.
e) If you retain individuals who are not your employees and are not employed by an accounting firm or other similar organization to prepare your financial statements or evaluate your internal control over financial reporting, do not provide us with their names, but please tell us:
·
Why you believe they are qualified to prepare your financial statements or evaluate your internal control over financial reporting;
·
How many hours they spent last year performing these services for you; and
·
The total amount of fees you paid to each individual in connection with the preparation of your financial statements and in connection with the evaluation of internal control over financial reporting for the most recent financial year end.
f) Please tell us if you have an audit committee financial expert:
·
Since you do not identify an audit committee financial expert in your filings, please describe the extent of the audit committee’s U.S. GAAP knowledge. If you do not have a separately created audit committee, please describe the extent of the Board of Directors’ knowledge of U.S. GAAP and internal control over financial reporting.
- 5 -
Response:
a)
1.
The Company has engaged Brightman Almagor Zohar, a member firm of Deloitte Touche Tohmatsu Limited (“Deloitte”) to assist the Company in its evaluation and assessment of internal controls over financial reporting as required by section 404 of the Sarbanes Oxley Act of 2002, PCAOB Auditing Standard No. 5 and the SEC management guidance. The Company implements a top down, risk-based evaluation of its internal controls over financial reporting assisted by the proven methodology and experience of Deloitte. The risk-based evaluation allows management to focus its assessment on areas of financial reporting that pose the highest risks to reliable financial reporting and risk of material misstatement of the financial statements, and this is documented through a comprehensive risk assessment analysis including both quantitative and qualitative factors, including risk of fraud and management override of controls. Management relies on the results of the risk assessment in order to align the timing, extent and nature of evaluation of design and operating effectiveness of controls over financial reporting to the applicable identified risks. Through the risk assessment process management identifies the following:
a.
The locations that will be focused upon for the assessment of internal controls over financial reporting;
b.
The material accounts and transactions that will be evaluated for internal controls over financial reporting.
2.
Based on the risk assessment results and consultation with Deloitte and the Company's management, the Company finalizes the scope for the locations and processes to be evaluated and the extent and nature of the evaluation. This is documented in a scoping file wherein each of the locations and processes is assigned a risk level based on pre-determined quantitative and qualitative criteria. Assessment and documentation of the design of controls over financial reporting is performed for all processes within a selected location. Such assessment and documentation is performed by the Company except for documentation of information technology general controls and entity level controls, which are evaluated and documented by Deloitte. Testing of operating effectiveness of controls over financial reporting, in accordance with the aforementioned documentation, is adjusted to the assigned risk level of the process in question based on the above mentioned risk assessment results. All testing is performed by Deloitte and is documented in comprehensive testing worksheets which include the details of the testing samples and the results of the tests performed.
- 6 -
3.
For business processes selected in each of the significant locations, the Company, through its SOX compliance manager, identifies controls that adequately address financial reporting risks and documents the applicable controls in place through a process narrative and a control matrix which ensures coverage of control objectives and financial statement assertions for each significant account balance. In addition to process level controls, Deloitte identifies and documents controls that adequately address financial reporting risks at the entity level and information technology general controls. These controls are then reviewed by management and Deloitte and key controls are selected for testing. In selecting key controls to test for operating effectiveness, special attention is dedicated to ensuring that risks to adequate financial reporting are addressed and mitigated and that all financial statement assertions are covered by the controls in place. Controls evaluated for design and operating effectiveness are a combination of preventative and detective controls as well as manual or automated controls.
The results of the assessment of design and operating effectiveness of controls over financial reporting are evaluated for impact on adequate financial reporting by Deloitte, the SOX manager and the CFO. All deficiencies are evaluated individually and in combination to ensure that they do not lead to risk of material misstatement of the financial statements. Deficiencies in either design or operating effectiveness of controls over financial reporting are reported to the audit committee and executive management and provide the basis for expression of assessment of effectiveness of internal controls over financial reporting by management and disclosure about any material weaknesses, if applicable.
The Company’s internal auditor performs his audit according to the audit committee’s annual internal audit work plan, independent of the mandatory evaluation of internal control of financial reporting according to SOX. Any recommendations made by the internal auditor are implemented within the existing controls. The internal auditor’s report is submitted to the audit committee.
b) The Company has a process in place to prepare its consolidated financial statements according to U.S. GAAP. This process includes controls to ensure that activities and transactions are recorded in accordance with U.S. GAAP.
- 7 -
The financial closing process for all localities starts with specific deadlines of activities fro