TIDMSOM
RNS Number : 0090J
Somero Enterprises Inc.
06 September 2016
Press Announcement
For immediate release
September 6, 2016
Somero Enterprises, Inc.(R)
("Somero" or "the Company" or "the Group")
Interim Results for the six months ended June 30, 2016
Somero Enterprises, Inc. is pleased to report its interim
results for the six months ended June 30, 2016.
Financial Highlights
H1 2016 H1 2015 % Increase
Revenue US$39.7m US$35.3m 12%
Adjusted EBITDA(1,2) US$12.1m US$9.5m 27%
Adjusted EBITDA Margin(1,2) 30% 27%
Operating Income US$10.3m US$8.3m 24%
Adjusted Net Income(1,3) US$7.3m US$6.0m 22%
Diluted Adjusted Net
Income Per Share(1,3,4) US$0.13 US$0.10 30%
-- Broad-based geographic growth led by core markets and strong demand for new products:
-- Revenue increased 12% to US$ 39.7m (H1 2015: US$ 35.3m)
-- Effective conversion of revenue growth into profit:
-- Adjusted EBITDA increased 27% to US$ 12.1m (H1 2015: US$ 9.5m)(1,2)
-- Adjusted EBITDA margin grew to 30% (H1 2015: 27%) (1,2)
-- Operating income increased 24% to US$ 10.3m (H1 2015: US$ 8.3m)
-- Adjusted net income increased 22% to US$ 7.3m (H1 2015: US$ 6.0m)(1,3)
-- Diluted adjusted net income per share grew 30% to US$ 0.13 (H1 2015: US$ 0.10) (1,3,4)
-- Net cash flow from operations was US$5.8m (H1 2015: US$7.3m)
with the change driven primarily by increased working capital
investment and timing of income tax payments
-- Balance sheet continues to strengthen and reflect long-term investment:
-- Investment in new Global Headquarters and Training Facility
in Fort Myers, Florida completed with US$ 3.3 spend in H1 2016
-- Strong net cash position at June 30, 2016 of US$ 11.1m
(December 31, 2015: US$ 12.6m) despite capital expenditures related
to construction and US $ 2.8M in dividend payments in H1 2016
(4)
-- Increased dividend payment to shareholders:
-- 2.5 US cents per share declared for payment in H2 2016; a 32% increase over last year
Business Highlights
-- Six of 11 regions delivered sales growth compared to H1 2015, led by core markets:
-- The North American market was very strong, with sales
increasing to US$ 29.8m, a 24% increase compared to H1 2015
-- EMEA sales increased 13% compared to H1 2015 led by Europe
which grew to US$ 2.6m in H1 2016 (H1 2015: US$ 1.9m)
-- Sales in China increased 15% to US$ 3.8m compared to H1 2015
-- Strong demand for new products - Mid line and Small line
machines, 3-D Profiler Systems, and growth in Other revenues were
significant contributors to the strong H1 2016 performance:
-- S-10A and S-940 Laser Screed machines contributed combined sales of US$ 5.1m in H1 2016
-- 3-D Profiler System sales increased to US$ 3.0m, up 50% from H1 2015
-- Other revenues increased to US$ 8.1m, up 45% from H1 2015,
driven by growth in sales of parts and services and the STS-11m
Spreader
-- Construction completed on new Global Headquarters and
Training Facility in Fort Myers, Florida
-- Building officially opened April 2016 on budget at a total project cost of US $ 4.8m
Notes:
1. The Company uses non-US GAAP financial measures in order to
provide supplemental information regarding the Company's operating
performance. See further information regarding non-GAAP measures
below.
2. Adjusted EBITDA as used herein is a calculation of the
Company's net income plus tax provision, interest expense, interest
income, foreign exchange gain/(loss), other expense, depreciation,
amortization, and stock based compensation.
3. Adjusted net income as used herein is a calculation of net
income plus amortization of intangibles and excluding the tax
impact of stock option and RSU settlements and other special
items.
4. Net cash is defined as cash and cash equivalents less
borrowings under bank obligations.
Commenting, Jack Cooney, President and Chief Executive Officer
of Somero, said:
"Somero Enterprises, Inc. is pleased to announce that the
healthy trading momentum referred to in the Company's 12 July 2016
trading update has continued. Revenue grew 12% and Operating Income
by 24% compared to H1 2015 with six of 11 regions reporting
increased sales, led by strong performance in the Company's core
North American, European and Chinese markets. On a product basis,
the strong H1 2016 performance was driven by robust demand for
recently launched new products - Mid line and Small line machines,
3-D Profiler Systems, and growth in Other revenues. Due to the
solid H1 2016 results and continued healthy trading environment,
the Board expects another successful year of growth in line with
current market expectations."
For further information, please contact:
Enquiries:
Somero Enterprises, Inc. www.somero.com
Jack Cooney, CEO +1 239 210 6500
John Yuncza, CFO
Howard Hohmann, EVP Sales
finnCap Ltd (NOMAD and Joint Broker)
Matt Goode (Corporate Finance) +44 (0)20 7220
0500
Carl Holmes (Corporate Finance)
Tim Redfern (Corporate Broking)
Canaccord Genuity Ltd (Joint Broker)
Bruce Garrow +44 (0)20 7523 8000
Piers Coombs
Redleaf Communications Ltd (Financial PR Advisor)
somero@redleafpr.com
Rebecca Sanders-Hewett +44 (0)20 7382 4730
David Ison
Susie Hudson
About Somero(R)
Somero designs and assembles laser-guided and technologically
innovative machinery used in horizontal concrete placement to
advance the productivity, concrete flatness and efficiency of the
jobsite.
Somero's innovative, proprietary products include the large
S-22E Laser Screed(R) , CopperHead(R) , Mini Screed(TM) C, S-840
Laser Screed(R) , S-15R Laser Screed(R) , STS-11m Spreader, S-485
Laser Screed(R) , S-940 Laser Screed(R) , and S-10A Laser Screed(R)
machines as well as the 3-D Profiler System(R) and Somero Floor
Levelness System(R) . This equipment employs laser-guided
proprietary technology to achieve a high level of precision in
concrete surface flatness at a higher rate of efficiency than
conventional methods and results in the highest level of flat-floor
precision attainable at less cost to the flooring contractor.
Somero has approximately 170 employees, marketing and selling
products through a direct sales force, external sales
representatives, and independent dealers in the Americas, Europe,
Middle East, South Africa, Asia, and Australia. Somero's Global
Headquarters and Training Facility is located in Fort Myers,
Florida and the Company's Operations and Support offices are
located in Houghton, Michigan. In addition, Somero maintains a
Sales, Service and Training Facility that is home to the Somero
Concrete College in Shanghai, China as well as sales and service
offices located in Chesterfield, England and New Delhi, India.
Somero is listed on the Alternative Investment Market (AIM) of
the London Stock Exchange (LSE) and its trading symbol is
SOM.L.
For more news and information on Somero, please visit
http://www.somero.com/.
Chairman's and Chief Executive Officer's Statement
Performance and Dividend
Somero is on track for another year of solid growth in 2016. H1
2016 revenues were US$ 39.7m, an increase of 12% compared to H1
2015. Growth came from a variety of geographies with sales in six
of our 11 markets increasing compared to H1 2015, highlighted by
particularly strong performance in the Company's core markets of
North America, Europe and China. On a product basis, sales of Mid
line and Small line machines, 3-D Profiler Systems, and Other
revenues grew 143%, 22%, 50%, and 45%, respectively, compared to H1
2015. Gains across multiple product categories highlight the broad
reach of Somero's product offering and ability to capture growth in
a variety of market segments. Continued focus on delivering
innovative new products with compelling value propositions was a
key driver of growth for Mid line and Small line machine sales. H1
2016 sales of the recently launched Mid line S-10A and Small line
S-940 Laser Screed machines totaled US$ 1.8m and US$ 3.3m,
respectively.
The strong top-line performance is only part of the story.
Disciplined management drove efficient translation of revenue
growth to profit and operating cash flow, providing the Company
with a strengthened balance sheet and the flexibility to make
long-term investments such as the newly constructed Global
Headquarters and Training Facility. Gross margins in H1 2016
improved to 56.2% from 55.0% in H1 2015 driven by the positive
impacts of price increases and productivity gains while Adjusted
EBITDA margin improved to a healthy 30% in H1 2016 compared to 27%
in H1 2015.(1,2)
Based on the strong performance in H1 2016 and the Board's
confidence in the Company's future, we are pleased to report that
the interim dividend for the six months ended June 30, 2016 of 2.5
US cents per share has been approved by the Board and will be
payable on October 19, 2016 to shareholders on the register at
September 30, 2016.
People
Somero's success is only made possible by the contribution of
each of our 170 employees around the globe. On behalf of the Board,
we would like to thank them for their dedication and hard work.
Without our employees' commitment and passion for our customers'
success, we could not deliver these extraordinary results for our
shareholders. The Board and management team remain committed to
providing our employees the opportunity to fully develop their
expertise, broaden their experience and foster innovation by
creating an environment that challenges our people, enables them to
do their best work, and rewards them for their performance.
Markets
Performance in the North American market remained strong
supported by a healthy non-residential construction environment.
North American revenues increased 24% to US$ 29.8m (H1 2015: US$
24.1m) driven in part by demand for new products. Sales in Europe
grew 37% to US$ 2.6m (H1 2015: US$ 1.9m) continuing a solid
recovery trend. Market conditions in China improved in H1 2016 as
sales grew to US$ 3.8m, up 15% from H1 2015, which was driven in
part by the positive impact of our long-term financing program for
customers that requires installation of our machine shut-off
payment protection tool. Our experience with the China long-term
financing program has been positive to date and in H1 2016,
approximately 35% of our sales in China were financed under this
program. In addition to solid performance in our core markets,
sales in Australia increased 38% to US$ 1.1m compared to H1 2015,
while India, Scandinavia, and Russia reported H1 2016 sales that
were modestly ahead of or on par with H1 2015. In the Latin
America, Southeast Asia, Korea and Middle East territories, while
H1 2016 sales were below previous year levels, the Company remains
encouraged by solid activity in these markets and expects
improvement over the rest of the year.
New product development
Our product development effort is a customer-driven process
focused on customer needs and value requirements. We are
continually looking for new and innovative ideas to introduce to
the industry and to each market we serve.
In H2 2016, we will launch the S-158C, an entry level Small line
machine designed exclusively for the China and India markets
primarily focused on the productivity improvement value
proposition. This machine is designed to benefit contractors with
smaller sized slab projects and targets customers who are not ready
to move to a higher level Small line or boom-out Laser Screed
machine. The S-158C will have a small footprint, will be
affordable, easy to use, highly productive, and importantly will
expand the number of customers utilizing Somero branded
equipment.
Cash flow and Balance Sheet
The Company generated US$ 5.8m in operating cash flow in H1
2016, down 21% from H1 2015 due primarily to increased working
capital investment and timing of federal and state tax payments in
H1 2016. Tax payments in H1 2016 totaled US$ 4.7m and included
final payment of amounts due for the tax year 2015 as well as an
increased level of estimated tax payments for 2016. The net
increase in working capital in H1 2016 of US$ 1.6m was driven by an
increase in accounts receivable of US$ 2.9m, primarily related to
the high volume of North American sales occurring late in June
2016, an increase in inventory of US$ 0.6m, offset partly by an
increase in accrued expenses and accounts payable of US$ 1.9m. We
ended June 30, 2016 with net cash of US$ 11.1m(1) , a US$ 1.6m
decrease from year-end 2015, due primarily to H1 2016 cash payments
for federal and state tax payments, US$ 2.8m in shareholder
dividends, and US$ 3.8m in capital expenditures primarily related
to the Global Headquarters construction project.
Expansion progress
In April 2016, we completed construction and officially opened
the new 14,000 square-foot Global Headquarters and Training
Facility in Fort Myers, Florida. The final project cost was US$
4.8m, of which US$ 3.3m was included in H1 2016 capital
expenditures. Due to increased demand for training and education on
concrete floor wide-placement and finishing best practices, we are
accelerating plans to design and construct a hands-on training
environment to be located at our Fort Myers facility. This
investment supports one of our key competitive advantages which is
the industry expertise, training and education we uniquely provide
to our customers. We expect the project will be completed in Q1
2017 at a total project cost of US $ 0.7m.
Current trading and outlook
Positive trading momentum in North America has continued into H2
2016 reflecting a healthy non-residential construction market in
the United States driven by demand for new products, replacement
equipment, fleet additions, and technology upgrades. The ongoing
construction growth and project backlogs our customers are
experiencing point to continued solid performance in the North
American market for the remainder of 2016.
Overall activity levels in EMEA were positive in H1 2016, with
Europe particularly active continuing a positive recovery trend. In
the Middle East, while H1 2016 revenues of US$ 1.4m were down
compared to H1 2015, we continue to be encouraged by activity
levels across numerous countries that comprise this territory.
The China market improved in H1 2016 due to positive market
conditions, traction with our market development activities, and
the positive impact of the long-term financing program. In H1 2016,
approximately 35% of our sales in China were financed under the
long-term financing program. Our low penetration rate combined with
greater acceptance of wide-placement theory and flatness standards
and customer willingness to use our products and services provides
Somero ample opportunity for growth going forward in this
market.
We are also seeing positive activity levels in Latin America and
expect meaningful improvement in H2 2016. In Southeast Asia and
Korea, while H1 2016 sales were below previous year levels, we
remain encouraged by solid opportunities in each of these
markets.
After significantly strong trading in June to finish H1 2016,
the solid activity levels from H1 2016 have carried over to July
and August as we continue to see significant opportunities across
our broad portfolio of markets.
We are very pleased with our performance in the first half of
2016 and remain confident in delivering another year of solid,
profitable growth for our shareholders in line with current market
expectations.
Larry Horsch
Non-Executive Chairman
Jack Cooney
President and Chief Executive Officer
September 6, 2016
Notes:
1. Net Cash is defined as cash and cash equivalents less total
borrowings under bank obligations.
Somero Enterprises Inc.
Business and Financial Review
For the six months
Summary of financial results ended June 30
* unaudited 2016 2015
US$ 000's US$ 000's
Except Except
per share per share
data data
----------- -----------
Revenue 39,711 35,333
Cost of sales 17,385 15,895
----------- -----------
Gross profit 22,326 19,438
Operating expenses
Selling expenses 3,972 3,616
Engineering expenses 538 540
General and administrative expenses 7,470 6,987
Total operating expenses 11,980 11,143
------------------------------------------- ----------- -----------
Operating income 10,346 8,295
Other income (expense)
Interest expense (43) (48)
Interest income 125 4
Foreign exchange loss (63) (29)
Income before income taxes 10,365 8,222
------------------------------------------- ----------- -----------
Provision for income taxes 3,658 2,849
Net income 6,707 5,373
-------------------------------------- --- ----------- -----------
Per Share Per Share
US$ US$
Basic earnings per share 0.12 0.10
Diluted earnings per share 0.12 0.09
Basic adjusted net income per
share (1,3,4) 0.13 0.11
Diluted adjusted net income
per share(1,3,4) 0.13 0.10
------------------------------------------- ----------- -----------
Other
data
Adjusted EBITDA(1,2,4) 12,052 9,512
Adjusted net income(1,3,4) 7,313 6,036
Depreciation expense 482 347
Amortization of intangibles 772 772
Capital expenditures 3,806 2,178
Notes:
1. Adjusted EBITDA and Adjusted net income are not measurements
of the Company's financial performance under US GAAP and should not
be considered as an alternative to net income, operating income or
any other performance measures derived in accordance with US GAAP
or as an alternative to US GAAP cash flow from operating activities
as a measure of profitability or liquidity. Adjusted EBITDA and
Adjusted net income are presented herein because management
believes they are useful analytical tools for measuring the
profitability and cash generation of the business. Adjusted EBITDA
is also used to determine pricing and covenant compliance under the
Company's credit facility and as a measurement for calculation of
management incentive compensation. The Company understands that
although Adjusted EBITDA is frequently used by securities analysts,
lenders, and others in their evaluation of companies, its
calculation of Adjusted EBITDA may not be comparable to other
similarly titled measures reported by other companies.
2. Adjusted EBITDA as used herein is a calculation of its net
income excluding tax provision, interest expense, interest income,
foreign exchange gain/(loss), other expense, depreciation,
amortization, and stock based compensation.
3. Adjusted net income as used herein is a calculation of net
income plus amortization of intangibles and excluding the tax
impact of stock option and RSU settlements and other special
items.
4. The Company uses non-US GAAP financial measures in order to
provide supplemental information regarding the Company's operating
performance. The non-US GAAP financial measures presented herein
should not be considered in isolation from, or as a substitute to,
financial measures calculated in accordance with US GAAP. Investors
are cautioned that there are inherent limitations associated with
the use of each non-US GAAP financial measure. In particular,
non-US GAAP financial measures are not based on a comprehensive set
of accounting rules or principles, and many of the adjustments to
the US GAAP financial measures reflect the exclusion of items that
may have a material effect on the Company's financial results
calculated in accordance with US GAAP.
Somero Enterprises, Inc.
Net income to adjusted EBITDA reconciliation
and Adjusted net income reconciliation
* unaudited Six months ended
June 30
2016 2015
US$ 000's US$ 000's
----------- -----------
Adjusted EBITDA reconciliation
Net income 6,707 5,373
Tax provision 3,658 2,849
Interest expense 43 48
Interest income (125) (4)
Foreign exchange loss 63 29
Depreciation 482 347
Amortization 772 772
Stock based compensation 452 98
------------------------------------------- ----------- -----------
Adjusted EBITDA(1,2,4) 12,052 9,512
------------------------------------------- ----------- -----------
Adjusted net income reconciliation
Net income 6,707 5,373
Amortization 772 772
Tax impact of stock option
& RSU settlements (166) (109)
------------------------------------------- ----------- -----------
Adjusted net income reconciliation(1,3,4) 7,313 6,036
------------------------------------------- ----------- -----------
Notes:
1. Adjusted EBITDA and Adjusted net income are not measurements
of the Company's financial performance under US GAAP and should not
be considered as an alternative to net income, operating income or
any other performance measures derived in accordance with US GAAP
or as an alternative to US GAAP cash flow from operating activities
as a measure of profitability or liquidity. Adjusted EBITDA and
Adjusted net income are presented herein because management
believes they are useful analytical tools for measuring the
profitability and cash generation of the business. Adjusted EBITDA
is also used to determine pricing and covenant compliance under the
Company's credit facility and as a measurement for calculation of
management incentive compensation. The Company understands that
although Adjusted EBITDA is frequently used by securities analysts,
lenders, and others in their evaluation of companies, its
calculation of Adjusted EBITDA may not be comparable to other
similarly titled measures reported by other companies.
2. Adjusted EBITDA as used herein is a calculation of its net
income plus tax provision, interest expense, interest income,
foreign exchange gain/(loss), other expense, depreciation,
amortization, and stock based compensation.
3. Adjusted net income as used herein is a calculation of net
income plus amortization of intangibles and excluding the tax
impact of stock option and RSU settlements and other special
items.
4. The Company uses non-US GAAP financial measures in order to
provide supplemental information regarding the Company's operating
performance. The non-US GAAP financial measures presented herein
should not be considered in isolation from, or as a substitute to,
financial measures calculated in accordance with US GAAP. Investors
are cautioned that there are inherent limitations associated with
the use of each non-US GAAP financial measure. In particular,
non-US GAAP financial measures are not based on a comprehensive set
of accounting rules or principles, and many of the adjustments to
the US GAAP financial measures reflect the exclusion of items that
may have a material effect on the Company's financial results
calculated in accordance with US GAAP.
Revenues
The Company's consolidated revenues increased by 12% to US$
39.7m (H1 2015: US$ 35.3m). Company revenues consist primarily of
sales from Large line products (the S22-E Laser Screed machine),
sales from Mid line products (the S-15R and S-10A), sales from
Small line products (the S-840, S-940, S-485 and CopperHead),
Remanufactured machine sales, 3-D Profiler Systems, and Other
revenues, which consist of, among other things, revenue from sales
of spare parts and accessories, Topping Spreaders, Mini Screeds,
service revenues and freight charges. The overall increase for the
period was driven by sales of Mid line and Small line machines, 3-D
Profiler Systems, and Other revenues. The following table shows the
breakdown during the six months ended June 30, 2016 and 2015:
Six months ended:
June 30, 2016 June 30, 2015
Percentage Percentage
of of
US$ 000's Net sales US$ 000's Net sales
---------------- ---------- ----------- ---------- -----------
Large line
sales 12.4 31.2% 15.4 43.6%
Mid line
sales 5.6 14.1% 2.3 6.5%
Small line
sales 7.7 19.4% 6.3 17.8%
Remanufactured
sales 2.9 7.3% 3.7 10.5%
3-D Profiler
sales 3.0 7.6% 2.0 5.7%
Other 8.1 20.4% 5.6 15.9%
---------------- ---------- ----------- ---------- -----------
Total 39.7 100.0% 35.3 100.0%
---------------- ---------- ----------- ---------- -----------
Large line sales decreased to US$ 12.4m (H1 2015: US$ 15.4m)
primarily as a result of a decrease in volume to 34 units (H1 2015:
44 units), Mid line sales increased to US$ 5.6m (H1 2015: US$ 2.3m)
primarily due to an increase in volume to 30 units (H1 2015: 12),
Small line sales increased to US$ 7.7m (H1 2015: US$ 6.3m)
primarily due to an increase in volume to 89 units (H1 2015: 76),
Remanufactured sales decreased to US$ 2.9m (H1 2015: US$ 3.7m)
despite unit volume remaining flat at 23 units (H1 2015: 23) due
primarily to a change in mix, and 3-D Profiler System sales
increased to US$ 3.0m (H1 2015: US$ 2.0m) primarily due to an
increase in units sold to 30 (H1 2015: 21).
Revenue by product line and geography
North America EMEA RoW Total
---------------- ------------ ------------ ------------
US$ millions 2016 2015 2016 2015 2016 2015 2016 2015
------- ------- ----- ----- ----- ----- ----- -----
Large line 11.1 13.7 0.4 0.4 0.9 1.3 12.4 15.4
Mid line 2.8 0.6 2.2 0.8 0.6 0.9 5.6 2.3
Small line 5.8 3.8 0.9 1.5 1.0 1.0 7.7 6.3
Remanufactured 2.0 1.3 - 0.2 0.9 2.2 2.9 3.7
3-D Profiler
Systems 2.9 1.6 - 0.2 0.1 0.2 3.0 2.0
Other 5.2 3.1 1.0 0.9 1.9 1.6 8.1 5.6
---------------- ------- ------- ----- ----- ----- ----- ----- -----
Total 29.8 24.1 4.5 4.0 5.4 7.2 39.7 35.3
---------------- ------- ------- ----- ----- ----- ----- ----- -----
Units by product line Total
2016 2015
Large line 34 44
Mid line 30 12
Small line 89 76
Remanufactured 23 23
3-D Profiler Systems 30 21
----------------------- ----- -----
Total 206 176
----------------------- ----- -----
Sales in North America totaled US$ 29.8m (H1 2015: US$ 24.1m)
and represented 75% of total revenues (H1 2015: 68%), sales to
customers in EMEA (Russia, Middle East, Europe, Scandinavia and
India) contributed US$ 4.5m (H1 2015: US$ 4.0m) and sales to
customers in ROW (China, Southeast Asia, Australia, Korea and Latin
America) contributed US$ 5.4m (H1 2015: 7.2m).
Regional sales breakdown H1 2016 H1 2015
North America 29.8 24.1
ROW (China) 3.8 3.3
EMEA (Middle East) 1.4 1.9
EMEA (Europe) 2.6 1.9
ROW (Latin America) 0.2 1.4
ROW (Southeast Asia) 0.2 1.0
ROW (Australia) 1.1 0.8
ROW (Korea) 0.1 0.7
EMEA (Scandinavia) 0.3 0.1
EMEA (India) 0.1 0.1
EMEA (Russia) 0.1 -
-------------------------- -------- --------
Total 39.7 35.3
-------------------------- -------- --------
Gross profit
Gross profit percentage improved to 56.2% compared to 55.0% in
H1 2015 due to the positive impacts of price increases,
productivity gains, and product mix.
Operating expenses
Operating expenses excluding depreciation, amortization and
stock based compensation for H1 2016 were US$ 10.6m (H1 2015: US$
10.2m). The increase has been driven primarily by increased
personnel costs, sales commissions, marketing costs, professional
fees and insurance expenses. Total employment increased to 170 as
compared to 165 at the end of 2015.
Debt
In February 2016 the Company amended the US$ 5,000,000 secured
revolving line of credit set to expire in March 2016. Under the
amended terms, the line of credit was increased to US$ 10,000,000
and the maturity date extended to February 2021. There were no
changes to assets pledged as collateral under the credit facility
or to the terms of the US$ 1,447,000 Commercial Real Estate
Mortgage due in April 2018.
Provision for income taxes
The provision for income taxes increased to US$ 3.7m, at an
effective tax rate of 35%, compared to a provision of US$ 2.8m in
H1 2015, at an effective tax rate of 35%, due primarily to a higher
reported income during the period.
Earnings per share
Basic earnings per share represents income available to common
stockholders divided by the weighted average number of shares
outstanding during the period. Diluted earnings per share reflect
additional common shares that would have been outstanding if
dilutive potential common shares had been issued, as well as any
adjustments to income that would result from the assumed
issuance.
Potential common shares that may be issued by the Company relate
to outstanding stock options and restricted stock units. Earnings
per common share has been computed based on the following:
Six months ended June 30
2016 2015
US$ 000's US$ 000's
---------------------------------- -----------
Income available to stockholders 6,707 5,373
Basic weighted shares outstanding 56,153,294 56,185,038
Net dilutive effect of stock
options and restricted stock
units 1,652,276 1,851,381
Diluted weighted average shares
outstanding 57,805,570 58,036,419
----------------------------------------------------- ---------------------------------- -----------
Per Share Per Share
US$ US$
Basic earnings per share 0.12 0.10
Diluted earnings per share 0.12 0.09
Basic adjusted net income per
share 0.13 0.11
Diluted adjusted net income per
share 0.13 0.10
Somero Enterprises, Inc.
Condensed Consolidated Balance Sheets
As of June 30, 2016 and December 31, 2015
* unaudited As of As of
December
June 30, 31,
2016 2015
US$ 000's US$ 000's
---------------------------------- -----------
Assets
Current assets:
Cash and cash equivalents 12,104 13,709
Accounts receivable - net 10,160 7,242
Inventories 9,035 8,479
Prepaid expenses and other assets 1,085 862
Deferred tax asset 327 410
----------------------------------------------------- ---------------------------------- -----------
Total current assets 32,711 30,702
----------------------------------------------------- ---------------------------------- -----------
Accounts receivable, non-current
- net 901 885
Property, plant, and equipment
- net 11,590 8,266
Intangible assets - net 1,723 2,495
Goodwill 2,878 2,878
Deferred tax asset 3,090 3,119
Other assets 18 26
----------------------------------------------------- ---------------------------------- -----------
Total assets 52,911 48,371
----------------------------------------------------- ---------------------------------- -----------
Liabilities and stockholders'
equity
Current liabilities:
Notes payable - current portion 48 48
Accounts payable 4,660 3,705
Accrued expenses 5,264 4,330
Income tax payable 46 1,044
----------------------------------------------------- ---------------------------------- -----------
Total current liabilities 10,018 9,127
----------------------------------------------------- ---------------------------------- -----------
Notes payable, net of current
portion (less deferred financing
costs of $54 as of June 30, 2016
and $70 as of December 31, 2015) 946 954
Other liabilities 113 84
Total liabilities 11,077 10,165
----------------------------------------------------- ---------------------------------- -----------
Stockholders' equity
Preferred stock, US$.001 par - -
value, 50,000,000 shares authorized,
no shares issued and outstanding
Common stock, US$.001 par value,
80,000,000 shares authorized,
56,425,598 shares issued at June
30, 2016 and December 31, 2015: 26 26
Less: treasury stock, 221,996
shares as of June 30, 2016 and
318,866 shares as of December
31, 2015, at cost (483) (614)
Additional paid in capital 21,839 22,008
Retained earnings 22,334 18,432
Other comprehensive loss (1,882) (1,646)
Total stockholders' equity 41,834 38,206
----------------------------------------------------- ---------------------------------- -----------
Total liabilities and stockholders'
equity 52,911 48,371
----------------------------------------------------- ---------------------------------- -----------
See notes to unaudited consolidated
financial statements.
Somero Enterprises, Inc.
Consolidated Statements of Comprehensive Income *
For the six months ended June 30, 2016 and 2015
* unaudited Six months ended June
30
2016
US$ 000's 2015
Except US$ 000's
per share Except per
data share data
----------------------- -----------
Revenue 39,711 35,333
Cost of sales 17,385 15,895
---------------------------------------------------------------- ----------------------- -----------
Gross profit 22,326 19,438
---------------------------------------------------------------- ----------------------- -----------
Operating expenses
Selling expenses 3,972 3,616
Engineering expenses 538 540
General and administrative expenses 7,470 6,987
Total operating expenses 11,980 11,143
---------------------------------------------------------------- ----------------------- -----------
Operating income 10,346 8,295
Other income (expense)
Interest expense (43) (48)
Interest income 125 4
Foreign exchange (loss) (63) (29)
Income before income taxes 10,365 8,222
---------------------------------------------------------------- ----------------------- -----------
Provision for income taxes 3,658 2,849
Net income 6,707 5,373
---------------------------------------------------------------- ----------------------- -----------
Other comprehensive income
Cumulative translation adjustment (227) (20)
Change in fair value of derivative
instruments - net of income taxes (9) (10)
---------------------------------------------------------------- ----------------------- -----------
Comprehensive income 6,471 5,343
---------------------------------------------------------------- ----------------------- -----------
Earnings per common share
Earnings per share - basic 0.12 0.10
Earnings per share - diluted 0.12 0.09
Weighted average number of common shares outstanding
Basic 56,153,294 56,185,038
Diluted 57,805,570 58,036,419
See notes to unaudited consolidated financial statements.
* US GAAP requires the previous Consolidated Statements
of Operations to now be called Statements of Comprehensive
Income
Somero Enterprises, Inc.
Consolidated Statements of Changes in Stockholders' Equity
For the six months ended June 30, 2016
* unaudited
Common stock Treasury stock
Other
Compre-
Additional Retained hensive
paid-in earnings/ income Total
Amount capital Amount (accumulated (loss) stockholder's
US$ US$ US$ deficit) US$ equity
Shares 000's 000's Shares 000's US$ 000's 000's US$ 000's
--------- ----------- -------- ------------- ----------- --------------
Balance -
December
31, 2015 56,425,598 26 22,008 318,866 (614) 18,432 (1,646) 38,206
---------------- ----------- --------- ----------- --------- -------- ------------- ----------- --------------
Cumulative
translation
adjustment - - - - - - (227) (227)
Change in
fair value
of derivative
instruments - - - - - - (9) (9)
Net income - - - - - 6,707 - 6,707
Stock based
compensation - - 452 - - - - 452
Dividend - - - - - (2,805) - (2,805)
Treasury
stock - - (131) (96,870) 131 - - -
RSUs settled
for cash - - (345) - - - - (345)
Stock options
settled for
cash - - (145) - - - - (145)
Balance -
June 30,
2016 56,425,598 26 21,839 221,996 (483) 22,334 (1,882) 41,834
---------------- ----------- --------- ----------- --------- -------- ------------- ----------- --------------
See notes to unaudited consolidated
financial statements.
Somero Enterprises, Inc.
Consolidated Statements of Cash Flows
For the six months ended June 30, 2016 and 2015
*unaudited Six months ended
June 30
2016 2015
US$ 000's US$ 000's
----------- -----------
Cash flows from operating activities:
Net income 6,707 5,373
Adjustments to reconcile net
income to net cash provided
by operating activities:
Deferred taxes 112 (152)
Depreciation and amortization 1,254 1,119
Amortization of deferred financing
costs 16 16
Stock based compensation 452 98
Working capital changes:
Accounts receivable (2,934) (1,231)
Inventories (556) (306)
Prepaid expenses and other (223) -
assets
Other assets 9 6
Accounts payable, accrued expenses
and other liabilities 1,918 767
Income taxes payable (998) 1,649
Net cash provided by operating
activities 5,757 7,339
---------------------------------------- ----------- -----------
Cash flows from investing activities:
Property and equipment purchases (3,807) (2,178)
Net cash used in investing
activities (3,807) (2,178)
---------------------------------------- ----------- -----------
Cash flows from financing activities:
Payment of dividend (2,805) (2,246)
Payment of RSUs (345) (210)
Purchase of treasury stock - (197)
Stock options settled for cash (145) (110)
Repayment of notes payable (24) (242)
Net cash used in financing
activities (3,319) (3,005)
---------------------------------------- ----------- -----------
Effect of exchange rates on
cash and cash equivalents (236) (30)
Net (decrease) increase in
cash and cash equivalents (1,605) 2,126
---------------------------------------- ----------- -----------
Cash and cash equivalents:
Beginning of period 13,709 7,950
End of period 12,104 10,076
See notes to unaudited consolidated
financial statements.
Notes to the Consolidated Financial Statements
1. Organization and description of business
Nature of business
Somero Enterprises, Inc. (the "Company" or "Somero") designs,
assembles, remanufactures, sells and distributes concrete leveling,
contouring and placing equipment, related parts and accessories,
and training services worldwide. Somero's Operations and Support
Offices are located in Michigan, USA with Global Headquarters and
Training Facilities in Florida, USA. Sales and service offices are
located in Chesterfield, England; Shanghai, China; and New Delhi,
India.
2. Summary of significant accounting policies
Basis of presentation
The consolidated financial statements of the Company have been
prepared in accordance with accounting principles generally
accepted in the United States of America. We have reclassified
certain prior year amounts to conform to the current year
presentation.
Principles of consolidation
The consolidated financial statements include the accounts of
Somero Enterprises, Inc. and its subsidiaries. All significant
intercompany transactions and accounts have been eliminated in
consolidation.
Cash and cash equivalents
Cash includes cash on hand, cash in banks, and temporary
investments with a maturity of three months or less when purchased.
The Company maintains deposits primarily in one financial
institution, which may at times exceed amounts covered by insurance
provided by the US Federal Deposit Insurance Corporation ("FDIC").
The Company has not experienced any losses related to amounts in
excess of FDIC limits.
Accounts receivable and allowances for doubtful accounts
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of accounts
receivable. The Company's accounts receivable are derived from
revenue earned from a diverse group of customers. The Company
performs credit evaluations of its commercial customers and
maintains an allowance for doubtful accounts receivable based upon
the expected ability to collect accounts receivable. Allowances, if
necessary, are established for amounts determined to be
uncollectible based on specific identification and historical
experience. As of June 30, 2016 and December 31, 2015, the
allowance for doubtful accounts was approximately US$ 621,000 and
US$ 698,000, respectively.
Inventories
Inventories are stated at the lower of cost, using the first in,
first out ("FIFO") method, or market. Provision for potentially
obsolete or slow-moving inventory is made based on management's
analysis of inventory levels and future sales forecasts.
Deferred financing costs
Deferred financing costs incurred in relation to long-term debt
are reflected net of accumulated amortization and are amortized
over the expected remaining term of the debt instrument. These
financing costs are being amortized using the effective interest
method.
Intangible assets and goodwill
Intangible assets consist primarily of customer relationships
and patents, and are carried at their fair value when acquired,
less accumulated amortization. Intangible assets are amortized
using the straight-line method over a period of three to twelve
years, which is their estimated period of economic benefit.
Goodwill is not amortized but is subject to impairment tests on an
annual basis, and the Company has chosen December 31 as its
periodic assessment date. Goodwill represents the excess cost of
the business combination over the Group's interest in the fair
value of the identifiable assets and liabilities. Goodwill arose
from the Company's prior sale from Dover Corporation to The Gores
Group in 2005. The Company did not incur a goodwill impairment loss
for the periods ended June 30, 2016 nor December 31, 2015.
The Company evaluates the carrying value of long-lived assets,
excluding goodwill, whenever events and circumstances indicate the
carrying amount of an asset may not be recoverable. For the periods
ended June 30, 2016 and December 31, 2015, the Company tested its
other intangible assets including customer relationships and
technology for impairment and found no impairment. The carrying
value of a long-lived asset is considered impaired when the
anticipated undiscounted cash flows from such asset (or asset
group) are separately identifiable and less than the asset's (or
asset group's) carrying value. In that event, a loss is recognized
to the extent that the carrying value exceeds the fair value of the
long-lived asset. Fair value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the
risk involved.
Revenue recognition
The Company recognizes revenue on sales of equipment, parts and
accessories when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, the price is
fixed or determinable, and collectability is reasonably assured.
For product sales where shipping terms are FOB shipping point,
revenue is recognized upon shipment. For arrangements which include
FOB destination shipping terms, revenue is recognized upon delivery
to the customer. Standard products do not have customer acceptance
criteria. Revenues for training are deferred until the training is
completed unless the training is deemed inconsequential or
perfunctory.
Warranty liability
The Company provides warranties on all equipment sales ranging
from 60 days to three years, depending on the product. Warranty
liabilities are estimated net of the warranty passed through to the
Company from vendors, based on specific identification of issues
and historical experience.
Property, plant, and equipment
Property, plant and equipment is stated at estimated market
value based on an independent appraisal at the acquisition date or
at cost for subsequent acquisitions, net of accumulated
depreciation and amortization. Land is not depreciated.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, which is 31.5 to 40 years for
buildings (depending on the nature of the building), 15 years for
improvements, and 2 to 10 years for machinery and equipment.
Income taxes
The Company determines income taxes using the asset and
liability approach. Tax laws require items to be included in tax
filings at different times than the items reflected in the
financial statements. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
basis 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. Deferred tax assets are reduced by a valuation
allowance, if necessary, to the extent that it appears more likely
than not, that such assets will be unrecoverable.
The Company evaluates tax positions that have been taken or are
expected to be taken in its tax returns, and records a liability
for uncertain tax positions. This involves a two-step approach to
recognizing and measuring uncertain tax positions. First, tax
positions are recognized if the weight of available evidence
indicates that it is more likely than not that the position will be
sustained upon examination, including resolution of related appeals
or litigation processes, if any. Second, the tax position is
measured as the largest amount of tax benefit that has a greater
than 50% likelihood of being realized upon settlement. The Company
recognizes interest and penalties related to unrecognized tax
benefits in the provision/ (benefit) for income taxes in general
and administrative expenses in the accompanying consolidated
financial statements. The Company is subject to a three-year
statute of limitations by major tax jurisdictions.
The Company recognizes interest and penalties related to
unrecognized tax benefits in the provision for income taxes in
general and administrative expenses in the accompanying
consolidated financial statements, which there were none in 2016
and 2015. The Company is subject to a three-year statute of
limitations by major tax jurisdictions, and currently 2012 through
2014 remain open to investigation.
Use of 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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Stock based compensation
The Company recognizes the cost of employee services received in
exchange for an award of equity instruments in the financial
statements over the period the employee is required to perform the
services in exchange for the award (presumptively the vesting
period). The Company measures the cost of employee services in
exchange for an award based on the grant-date fair value of the
award. Compensation expense related to stock based payments was US$
452,000 and US$ 98,000 for the six month periods ended June 30,
2016 and 2015, respectively. The Company settled US$ 145,000 and
US$ 110,000 in stock options for cash during the six month periods
ended June 30, 2016 and 2015, respectively. In addition, the
Company settled US$ 345,000 and US$ 210,000 in restricted stock
units for cash during the six month periods ended June 30, 2016 and
2015, respectively.
Transactions in and translation of foreign currency
The functional currency for the Company's subsidiaries outside
the United States is the applicable local currency. The preparation
of the consolidated financial statements requires the translation
of these financial statements to USD. Balance sheet amounts are
translated at period-end exchange rates and the statement of
comprehensive income accounts are translated at average rates. The
resulting gains or losses are charged directly to accumulated other
comprehensive income. The Company is also exposed to market risks
related to fluctuations in foreign exchange rates because some
sales transactions, and some assets and liabilities of its foreign
subsidiaries, are denominated in foreign currencies other than the
designated functional currency. Gains and losses from transactions
are included as foreign exchange gain in the accompanying
consolidated statements of comprehensive income.
Comprehensive income
Comprehensive income is the combination of reported net income
and other comprehensive income (OCI). OCI is changes in equity of a
business enterprise during a period from transactions and other
events and circumstances from non-owner sources not included in net
income.
Earnings per share
Basic earnings per share represents income available to common
stockholders divided by the weighted average number of common
shares outstanding during the year. Diluted earnings per share
reflect additional common shares that would have been outstanding
if dilutive potential common shares had been issued using the
treasury stock method. Potential common shares that may be issued
by the Company relate to outstanding stock options and restricted
stock units. Earnings per common share have been computed based on
the following:
Six months ended
June 30
2016 2015
US$ 000's US$ 000's
----------- -----------
Net income 6,707 5,373
Basic weighted shares outstanding 56,153,294 56,185,038
Net dilutive effect of stock
options and restricted stock
units 1,652,276 1,851,381
Diluted weighted average shares
outstanding 57,805,570 58,036,419
Fair value measurement
The carrying values of cash and cash equivalents, accounts
receivable, accounts payable, and other current assets and
liabilities approximate fair value because of the short-term nature
of these instruments. The carrying value of our long-term debt
approximates fair value due to the variable nature of the interest
rates under our Credit Facility.
The FASB has issued accounting guidance on fair value
measurements. This guidance provides a common definition of fair
value and a framework for measuring assets and liabilities at fair
values when a particular standard prescribes it.
This guidance also specifies a fair value hierarchy based upon
the observability of inputs used in valuation techniques. These
valuation techniques may be based upon observable and unobservable
inputs. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect the
Company's market assumptions. These two types of inputs create the
following fair value hierarchy.
-- Level 1 - Quoted prices for identical instruments in active markets.
-- Level 2 - Quoted prices for similar assets and liabilities in
active markets; quoted prices for identical or similar assets and
liabilities in markets that are not active; and model-derived other
inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets and
liabilities.
-- Level 3 -Unobservable inputs for the asset or liability which
are supported by little or no market activity and reflect the
Company's assumptions that a market participant would use in
pricing the asset or liability.
Quoted
prices
in active Significant Significant
markets other other
Identical observable unobservable
Assets inputs inputs
Level 1 Level 2 Level 3
US$ 000's US$ 000's US$ 000's US$ 000's
--------------- ---------- ----------- ------------ --------------
Year ended December
31, 2015
Asset:
Goodwill 2,878 2,878
Interest rate
swap (4) (4)
Six months ended
June 30, 2016
Asset:
Goodwill 2,878 2,878
Interest rate
swap (13) (13)
---------------- ---------- ----------- ------------ --------------
New accounting pronouncements
In May 2014, the FASB issued Accounting Standards Update No.
2014-09, Revenue from Contracts with Customers ("ASU 2014-09"),
which supersedes nearly all existing revenue recognition guidance
under US GAAP. The core principle of ASU 2014-09 is to recognize
revenues when promised goods or services are transferred to
customers in an amount that reflects the consideration to which an
entity expects to be entitled for those goods or services. ASU
2014-09 defines a five step process to achieve this core principle
and, in doing so, more judgment and estimates may be required
within the revenue recognition process than are required under
existing US GAAP.
The standard is effective for annual periods beginning after
December 15, 2018, and interim periods therein, using either of the
following transition methods: (i) a full retrospective approach
reflecting the application of the standard in each prior reporting
period with the option to elect certain practical expedients, or
(ii) a retrospective approach with the cumulative effect of
initially adopting ASU 2014-09 recognized at the date of adoption
(which includes additional footnote disclosures). We are currently
evaluating the impact of our pending adoption of ASU 2014-09 on our
consolidated financial statements and have not yet determined the
method by which we will adopt the standard in 2019.
In April 2015 the FASB released Accounting Standards Update No.
2015-03 - Interest - Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs. To simplify
the presentation of debt issuance costs, the update requires that
debt issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from the
carrying amount of that debt liability, consistent with debt
discounts.
The update is effective for financial statements issued for
fiscal years beginning after December 15, 2015 and interim periods
within fiscal years beginning after December 15, 2016. The Company
has applied the new guidance for the current period and prior
periods reflected on the balance sheet.
In March 2016 the FASB released Accounting Standards Update No.
2016-09, Improvements to Employee Share-Based Payment Accounting,
which amends ASC 718, Compensation - Stock Compensation. Under the
new guidance, because there will no longer be any excess tax
benefits from the exercise of stock options recognized in APIC,
when applying the treasury stock method for computing diluted EPS,
the assumed proceeds will not include such windfall tax
benefits.
The update is effective for annual periods beginning after
December 15, 2017, and interim periods within annual periods
beginning after December 15, 2018. The Company has chosen early
adoption. The diluted EPS information for the six months ended June
30, 2016 and 2015 reflect the adoption of this guidance.
3. Inventories
Inventories consisted of the following:
December
June 30, 31,
2016 2015
US$ 000's US$ 000's
----------- -----------
Raw material 2,406 2,576
Finished goods and work
in process 3,675 2,259
Remanufactured 2,954 3,644
------------------------- ----------- -----------
Total 9,035 8,479
------------------------- ----------- -----------
4. Property, plant, and equipment
Property, plant, and equipment consisted of the following:
December
June 30, 31,
2016 2015
US$ 000's US$ 000's
----------- -----------
Land 864 864
Building and improvements 9,462 6,325
Machinery and equipment 5,268 4,599
-------------------------------- ----------- -----------
Sub-total 15,594 11,788
-------------------------------- ----------- -----------
Less: accumulated depreciation
and amortization (4,004) (3,522)
Total 11,590 8,266
-------------------------------- ----------- -----------
5. Notes payable
The Company's debt obligations consisted of the following:
December
June 30, 31,
2016 2015
US$ 000's US$ 000's
----------- -----------
February 2021 secured revolving - -
line of credit
April 2018 commercial real
estate mortgage 1,048 1,072
Deferred financing costs (54) (70)
--------------------------------- ----------- -----------
Total bank debt 994 1,002
--------------------------------- ----------- -----------
Less debt due within one
year (48) (48)
Obligations due after one
year 946 954
--------------------------------- ----------- -----------
The company has implemented Accounting Standards Update No.
2015-03-Interest-Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs for the periods
ended June 30, 2015 and 2016. This update requires that debt
issuance costs related to debt liability be presented in the
balance sheet as a direct reduction from the carrying amount of the
debt liability. The implementation of Subtopic 835-30 has moved
deferred financing costs from an asset to a direct reduction in
liability, as shown above.
The Company entered into an amended credit facility in February
2016. The agreement will mature between April 2018 and February
2021.
-- US$ 10,000,000 February 2021 secured revolving line of credit
-- US$ 1,447,000 April 2018 Commercial Real Estate Mortgage
The interest rate on the commercial real estate loan was 1.71%
as of June 30, 2016. The Company's loan facility is secured by
substantially all of its business assets.
Future Payments
The future payments by year represent the remaining six months
for 2016 and the full 12 months of each successive period for the
Company's loan facility:
US$ 000's
----------
2016 24
2017 48
2018 976
Thereafter -
------------ ----------
Total 1,048
------------ ----------
Interest
Interest expense on the credit facility for the six months ended
June 30, 2016 and 2015 was approximately US$ 41,000 and USD$
46,000, respectively, and includes amortized swap interest fees and
amortized loan origination fees.
6. Operating leases
The Company leases property, vehicles, and office equipment
under leases accounted for as operating leases without renewal
options. Future minimum payments by year represent the remaining
six months for 2016 and the full 12 months of each successive
period as follows:
US$ 000's
----------
2016 189
2017 320
2018 275
2019 129
Thereafter -
------------ ----------
Total 913
------------ ----------
7. Capital leases
Interest rates on capital leases are variable and range from
4.5% to 7.3% at June 30, 2016. Future minimum payments by year
represent the remaining six months for 2016 and the full 12 months
of each successive period as follows:
US$ 000's
----------
2016 12
2017 23
2018 15
2019 15
Thereafter 4
------------ ----------
Total 69
------------ ----------
8. Commitments and contingencies
The Company has entered into employment agreements with certain
members of senior management. The terms of these are for renewable
one year periods and include non-compete and nondisclosure
provisions as well as provide for defined severance payments in the
event of termination or change in control.
The Company is subject to various unresolved legal actions which
arise in the normal course of its business. Although it is not
possible to predict with certainty the outcome of these unresolved
legal actions or the range of possible losses, the Company believes
these unresolved legal actions will not have a material effect on
its consolidated financial statements.
9. Income taxes
The Company's effective tax rate for the six months ended June
30, 2016 was 35% compared to the federal statutory rate of 34%. The
effective tax rate is higher than the federal statutory rate
primarily due to the effect of state and foreign income taxes.
The Company is subject to US federal income tax as well as
income tax of multiple state and foreign jurisdictions. The Company
was formed in 2005. The statute of limitations for all federal,
foreign and state income tax matters for tax years from 2012
forward is still open. The Company has no federal, foreign or state
income tax returns currently under examination.
At June 30, 2016, the Company had US$ 327,000 in current net
deferred tax assets and US$ 3,090,000 in non-current net deferred
tax assets recorded on its balance sheet. In assessing the
realizability of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of the
deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary
differences become deductible.
10. Supplemental cash flow and non-cash financing
disclosures
Six months ended
June 30
2016 2015
US$ 000's US$ 000's
----------- -----------
Cash paid for interest 29 37
Cash paid for taxes 4,679 1,373
Non-cash financing activities
- change in fair value of derivative
instruments (9) 10
11. Goodwill and intangible assets
The following table reflects intangible assets:
Weighted December
average June 30, 31,
amortization 2016 2015
period US$ 000's US$ 000's
--------------- ----------- -----------
Capitalized cost
Patents 12 years 18,538 18,538
Intangible assets not
subject to amortization - 49 49
-------------------------- --------------- ----------- -----------
18,587 18,587
------------------------------------------ ----------- -----------
Accumulated amortization
Patents 12 years 16,864 16,092
Intangible assets not - - -
subject to amortization
-------------------------- --------------- ----------- -----------
16,864 16,092
------------------------------------------ ----------- -----------
Net carrying costs
Patents 12 years 1,674 2,446
Intangible assets not
subject to amortization - 49 49
-------------------------- --------------- ----------- -----------
1,723 2,495
------------------------------------------ ----------- -----------
Future amortization of intangible assets is expected by year
represent the remaining six months for 2016 and the full 12 months
of each successive period as follows:
US$ 000's
----------
2016 773
2017 901
Thereafter -
------------ ----------
Total 1,674
------------ ----------
12. Subsequent events
Dividend
The Board declared an interim dividend for the six months ended
June 30, 2016 of 2.5 US cents per share. This dividend will be
payable on October 19, 2016 to shareholders on the register at
September 30, 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SSSFMIFMSEIU
(END) Dow Jones Newswires
September 06, 2016 02:00 ET (06:00 GMT)
Somero Enterprise (LSE:SOM)
Historical Stock Chart
From Jun 2024 to Jul 2024
Somero Enterprise (LSE:SOM)
Historical Stock Chart
From Jul 2023 to Jul 2024