REG - Somero Enterprises - Interim Results
07/09/2022 07:00
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RNS Number : 5136Y Somero Enterprises Inc. 07 September 2022
Press Announcement
For immediate release
07 September 2022
Somero(®) Enterprises, Inc.
("Somero" or "the Company" or "the Group")
Interim Results for the six months ended June 30, 2022
Record H1 revenue driven by continued strength in the US market
Financial Highlights
· H1 2022 revenues were US$ 68.5m (H1 2021: US$64.4m), a record
level for H1
o Led by US revenues which were up 9% on H1 2021, reflecting a strong,
active non-residential construction market and the positive impact of 2022
price increases
o Three of the Company's five regions reported revenues up over H1 2021
including the US, with Australia and Latin America contributing a combined US$
1.9m to H1 2022 growth
· Record H1 revenue translated efficiently to strong profits and
operating cash flow
o US$ 24.1m in H1 2022 adjusted EBITDA (H1 2021: US$ 24.6m)
o US$ 12.8m in H1 2022 cash flow from operations (H1 2021: US$ 16.0m)
· Based on strong H1 2022 results and a positive H2 2022 outlook,
the Board anticipates the business to trade in line with expectations for 2022
revenues of approximately US$ 138.8m, EBITDA of approximately US$ 47.7m, and
year-end cash of approximately US$ 39.9m
H1 2022 H1 2021 % Change
US$ US$
Revenue $68.5m $ 64.4m 6%
Adjusted EBITDA((1,2)) $24.1m $ 24.6m -2%
Adjusted EBITDA margin((1,2)) 35.3% 38.2% -290bps
Profits before tax $22.4m $ 23.5m -5%
Adjusted net income((1,3)) $17.3m $ 18.2m -5%
Diluted adjusted net income per share((1,3)) $0.31 $ 0.32 -3%
Cash flow from operations $12.8m $ 16.0m -20%
Net cash((4)) $27.2m $ 32.8m -17%
Interim dividend per share $ 0.10 $ 0.09 11%
Operational Highlights
· Re-investing for sustainable long-term growth
o The US$ 9.5m expansion project for the Houghton, Michigan, Operations and
Support Offices remains on track for Q3 2022 completion
o The Company added a total of seventeen employees since June 30, 2021
primarily in sales, customer support and operational roles, with six employees
added in Europe and Australia combined
· Developing new products to expand the addressable market
and contribute to growth
o The SkyScreed® 36, S-PS50, SkyStrip(®) and Somero Broom+Cure(TM), all
launched since 2019 to target new market segments, combined to contribute US$
3.2m to H1 2022 revenues (H1 2021: US$ 1.4m)
o The customer-led product development process made substantial progress in
H1 2022 driven by a high volume of job site visits with customers and
innovation council events
Post-Period Highlights
· The Board has also declared a US$ 0.10 per share interim
dividend, an 11% increase compared to the 2021 interim dividend
Notes:
1. The Company uses non-US GAAP financial measures 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
loss, other expense, depreciation, amortization stock-based compensation and
non-cash lease expense.
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 exclusive of deferred financing costs.
Jack Cooney, CEO of Somero, said:
"The Company delivered record H1 2022 revenues thanks to the remarkable
performance by our talented and dedicated employees who managed to keep pace
with a highly active US market, delivering equipment to meet our customers'
needs and continuing to reinforce our reputation as reliable partners. Outside
of a very strong US market, we are pleased with the contribution to revenues
from our international regions, and in particular with the activity levels and
interest in our equipment, new and existing, that we continue to see in Europe
and Australia.
Equally impressive was the efficiency of our operations during this period.
The Company delivered a very healthy level of profit and generated a
high-level of cash from operations, providing the financial strength necessary
to fund investment in new employees and a major expansion of our Houghton
facility.
The Company also made good progress on executing its product development
growth strategy. New products contributed materially to H1 2022 revenues and
we took meaningful steps to enhance our product development pipeline.
Based on the success of the first half and current market conditions, we
confirm our guidance for 2022. We expect to deliver strong revenues, profits
and cash flow for our shareholders and, most importantly, we remain committed
to making sound strategic investments to deliver healthy profits and cash
flows to our shareholders in the years that follow."
For further information, please contact:
Enquiries:
Somero Enterprises,
Inc.
www.somero.com (http://www.somero.com)
Jack Cooney,
CEO
+1 239 210 6500
John Yuncza, President
Vincenzo LiCausi, CFO
Howard Hohmann, EVP Sales
finnCap Ltd (NOMAD and Broker)
Matt Goode /Seamus Fricker/Fergus Sullivan(Corporate Finance) +44 (0)20
7220 0500
Tim Redfern/Richard Chambers (ECM)
Alma PR (Financial PR Advisor)
somero@almapr.co.uk
David
Ison
+44 (0)20
3405 0205
Pippa Crabtree
The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU No.
596/2014) which is part of UK law by virtue of the European Union (Withdrawal)
Act 2018. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
Notes to Editors:
Somero Enterprises provides industry-leading concrete-levelling equipment,
training, education, and support to customers in over 90 countries. The
Company's cutting-edge technology allows its customers to install high-quality
horizontal concrete floors faster, flatter and with fewer people. Somero
equipment that incorporates laser-technology and wide-placement methods is
used to place and screed the concrete slab in all building types and has been
specified for use in a wide range of commercial construction projects for
numerous global blue-chip companies.
Somero pioneered the Laser Screed® market in 1986 and has maintained its
market-leading position by continuing to focus on bringing new products to
market and developing patent-protected proprietary designs. In addition to its
products, Somero offers customers unparalleled global service, technical
support, training, and education, reflecting the Company's emphasis on helping
its customers achieve their business and profitability goals, a key
differentiator to its peers.
For more information, visit www.somero.com (http://www.somero.com)
Chairman's and Chief Executive Officer's Statement
Overview
H1 2022 revenue totaled US$ 68.5m, growing 6% compared to H1 2021 to reach
record H1 revenues. North America drove the strong performance, reporting H1
2022 revenues of US$ 55.6m (H1 2021: US$ 50.9m) reflecting a robust US
non-residential construction market. Our international regions contributed
meaningfully to revenues in the period, led by Europe and Australia, which
contributed US$ 4.8m (H1 2021: US$ 6.4m) and US$ 4.0m (H1 2021: US$ 2.7m),
respectively. In addition to the strong H1 2022 trading, the Company made
substantial progress on its new product growth strategy, both in generating
revenues and developing the pipeline of new products.
Leveraging the H1 2022 revenue, the Company delivered strong profits and cash
generation during the period. H1 2022 adjusted EBITDA was US$ 24.1m (H1
2021: US$ 24.6m) reflecting an adjusted EBITDA margin of 35.3% (H1 2021:
38.2%). The Company mostly offset higher expenses compared to H1 2021 from a
higher headcount and cost inflation with 2022 price increases and improved
operational efficiency. H1 2022 profits benefitted from a strong gross
margin of 58.3% (H1 2021: 58.6%) as the aforementioned 2022 price increases
and operational efficiency gains mostly offset higher materials and logistics
costs. Operating cash flow in H1 2022 was US$ 12.8m (H1 2021: US$ 16.0m), a
healthy level that translated to a sizable June 30, 2022 cash balance of US$
27.2m, notwithstanding the payment of a substantial US$ 23.4m dividend in May
2022. The H1 2022 results highlight the scalability of operations to
efficiently meet high demand and the Company's commitment to add key talent to
execute its long-term growth plan.
Region and Product Reviews
North America
H1 2022 North American sales grew 9% from H1 2021 to US$ 55.6m as our US
customers continued work on a large volume of projects, including large
footprint manufacturing facilities and warehousing. During the period,
customers were able to manage through supply challenges, including
inconsistent availability of concrete, long-lead times from equipment
providers other than Somero, and the long-standing and worsening shortage of
skilled labor, challenges that remain in place as we enter H2 2022.
Europe
Europe reported sales of US$ 4.8m in H1 2022, down from US$ 6.4m in H1 2021.
Although trading fell below the prior year, activity was healthy along with
solid interest in our equipment during the period. The H1 2022 trading
result in Europe was impacted by temporary logistics delays that resulted in
shipment of certain orders getting pushed to H2 2022. We anticipate improved
trading in Europe in H2 2022 as these temporarily delays are resolved and with
the solid activity and interest levels expected to continue.
Europe is one of our target international markets where we see meaningful
opportunity for growth from sales of new and existing products. In H1 2022,
we took steps to execute our European growth strategy that included starting
the process to introduce the SkyScreed® 36 to the UK market, adding three
European-based sales and customer support employees including a direct sales
territory manager in Italy, and at the end of H1 2022 introducing a
competitively priced, entry-level ride-on screed, the EcoScreed, designed to
attract new customers to the Somero family.
Australia
Australia reported H1 2022 sales of US$ 4.0m, a 48% increase from the US$ 2.7m
in H1 2021. The higher sales were attributable to a direct sales team
focused on selling a broader range of our products, a direct support team
strengthening customer relationships and identifying sales opportunities, and
to favorable exchange rates. We are introducing the SkyScreed® 36 to the
Australian market in 2022 and excited by the opportunity to gain traction with
this product in an Australian structural high-rise market segment that has
similar characteristics to those in the US.
Australia is also a target international market where we see meaningful
opportunity for growth. The transition to a direct sales and support model
at the end of 2020 has provided the foundation for strong performance in H1
2022 and future growth, and we grew this team by adding three customer service
employees that will support new product launches, a higher volume of job site
demonstrations, and the introduction of the SkyScreed® 36 to the market.
Latin America
Latin America reported US$ 1.4m in H1 2022 sales, a US$ 0.6m increase compared
to H1 2021 with positive activity in the region's main market, Mexico. Latin
America remains a relatively small contributor to overall sales, and as such,
period to period results will be subject to a certain level of volatility due
to the small base of revenues.
Rest of World
Our Rest of World region, which includes China, the Middle East, India,
Southeast Asia, and Korea, reported H1 2022 sales of US$ 2.7m, representing a
US$ 0.9m decrease compared to H1 2021. The main contributors to H1 2022
revenues, as in past periods, were China, India, and the Middle East.
Excluding China, the Rest of World region reported H1 2022 revenues of US$
2.3m, an increase of US$ 0.4m compared to H1 2021. China reported H1 2022
revenues of US$ 0.4m (H1 2021: US$ 1.7m), down from the prior year period as
expected due to the previously announced downsizing of our local China team,
severe COVID-19 restrictions put in place by the Chinese government that
drastically limited activity across broad sections of the country, and to the
negative impact of a worsening environment for multi-national firms investing
in China-based building projects. India reported sales of US$ 1.5m in H1
2022, a US$ 0.4m increase compared to H1 2021. This was thanks to a strong
contribution from our local sales team despite the lingering effects of
COVID-19 restrictions, while the Middle East reported sales of US$ 0.5m
compared to US$ 0.2m in H1 2021, an encouraging improvement albeit off a small
base.
Products
Revenue from sales of Boomed screeds, Ride-on screeds, 3D Profiler Systems,
and Other revenues all increased compared to H1 2021, reflecting a healthy and
balanced range of construction projects in the market. There continues to
be healthy demand for our large Boomed screed equipment suitable for large
footprint projects such as warehousing and manufacturing facilities. There
also continues to be healthy demand for our Ride-on screeds suitable for
smaller footprint projects and smaller concrete slab pours necessitated by an
inconsistent supply of concrete. Sales of the 3D Profiler System contributed
US$ 5.3m to H1 2022 revenue, an increase of 15% over H1 2021, driven by
continued growth in concrete parking and loading areas around the perimeter of
buildings. Other revenues, primarily parts and accessories, grew 8% from H1
2021 to US$ 14.3m due to a larger installed base of equipment and a high-level
of equipment utilization in the market. The period over period comparisons
for other product lines were subject to typical fluctuation driven by customer
project types.
New products are a key driver of long-term growth. Products released since
2019, the SkyScreed® 36, S-PS50, SkyStrip® and the Somero Broom+Cure(TM),
that target entirely new market segments, combined to contribute US$ 3.2m in
H1 2022 revenues US$ 1.8m ahead of H1 2021, as we continue to build market
acceptance for these disruptive products. Our customer-led product
development process remained highly active in H1 2022 with extensive job-site
visits and innovation council events to advance new product ideas through our
multi-stage development process.
Our People
On behalf of the Board, we would like to thank all our global employees for
their remarkable performance in H1 2022. The effort of the entire Somero team
to overcome formidable challenges and deliver these outstanding results sets
us apart from other providers of equipment in our industry. In addition to
retaining our talented employees, we are pleased to have added a range of new
talent to the organization that will support our long-term growth strategy.
Since June 30, 2021, we have added seventeen employees to fill important
positions across our global operations. The Board and management team remain
as committed as ever to providing all our employees with a rewarding and
challenging working environment that is full of opportunity.
Facility Expansion
We made substantial progress on the project to expand our Houghton, Michigan,
Operations and Support Offices during H1 2022. The 50,000 square foot
expansion provides a 35% increase in operational capacity that will increase
operational efficiency, support future growth of our product portfolio, and
provide our engineering team with an expanded development and testing area.
The project remains in line with the US$ 9.5m budgeted cost and we
anticipate project completion in Q3 2022 with the new space fully operational
in Q4 2022.
Environmental, Social and Governance
The Board closely monitors material environmental, social and governance
topics that impact our stakeholders. These topics are routinely discussed at
the Board level to ensure Somero strikes the right balance between shareholder
expectations and the needs and concerns of our employees, customers,
communities, our impact on the environment, and that Somero is actively
engaging with stakeholders on these material topics. One material topic is
the environmental impact of the use of our equipment in the construction
process. In 2021, we commissioned an initial study with a university to
issue a white paper that outlines this impact. The study concluded that the
use of our laser screed machines in non-residential construction projects
provides a number of environment benefits including a reduction in concrete
required to install the concrete slab. In H2 2022, we will begin part two of
the study that will comprehensively assess the environmental impact from the
use of our equipment in the construction process. We anticipate the study
will be completed in H1 2023.
Dividend and share buyback program
Based on record results in H1 2022, our strong financial position and
confidence in the outlook for the remainder of 2022, we are pleased to report
that the Board has decided to declare an interim 2022 dividend of US$ 0.10 per
share, representing a 11% increase from the interim 2021 dividend as a step
toward more balanced payments of ordinary interim and final dividends. The
dividend, representing a total payment of approximately US$ 5.6m, will be
payable on October 21, 2022 to shareholders on the register as of September
23, 2022.
In H1 2022, the Company repurchased a total of 138,130 shares of common stock
under the Company's share buyback program put in place to offset dilution from
on-going equity award programs. Of the total common shares repurchased in H1
2022, 5,901 common shares were to complete the 2021 US$ 1.0m share buyback
authorization approved by the Board in February 2021, and 132,229 common
shares were repurchased pursuant to the US$ 2.0m share buyback authorization
approved by the Board in February 2022. The Company is on pace to complete
the majority of the US$ 2.0m share buyback by the end of 2022. Under the
buyback program, the maximum price paid per Ordinary Share is to be no more
than the higher of 105% of the average middle market closing price of an
ordinary share for the five business days preceding the date of any share
buyback, the price of the last independent trade and the highest current
independent purchase bid. It is intended that any shares repurchased will be
immediately cancelled and the Company will make further announcements to the
market as and when share purchases are made.
Current Trading and Outlook
H1 2022 was an outstanding start to the year and established a record level of
H1 revenue. Strong trading in North America, meaningful contributions from
international markets and new products, and the positive impact of 2022 price
increases translated to strong profits and operating cash flow that funded
re-investment in the business to expand our operational footprint and add key
new talent to the organization.
Favorable H1 2022 activity is carrying over into H2 2022, and our positive
outlook for H2 2022 is supported by a US non-residential construction market
that remains healthy with extended customer project backlogs and by
opportunities for growth in our international markets and from new products.
In Europe, we were pleased by the interest in our equipment during H1 2022 and
the level of non-residential construction taking place across the region. In
Australia, the positive momentum from strong H1 2022 trading is carrying over
to H2 2022, and we continue to see strong opportunities for growth from new
products, including the introduction of the SkyScreed® 36. In our Rest of
World regions, we expect to see opportunities for growth, with the exception
of China, where we expect revenues will decline from the prior year period due
to the downsizing of our operations there and limited near-term growth
opportunities in our targeted quality market segment.
We maintain a positive outlook for the remainder of 2022 and anticipate
delivering strong revenues, profits, and cash flows to shareholders for the
year. We recognize risks associated with supply chain shortages that could
slow our ability to fulfill customer orders and the pace of customers' work on
their healthy backlog of projects. While these shortages can carry over and
negatively impact 2023 trading if continuing unimproved, based on the strong
H1 2022 results, confidence in the health of the non-residential construction
market, and with the benefit of unfilled orders carried over from H1 2022, the
Board is pleased to confirm 2022 results are anticipated to fall in line with
market expectations for revenues of approximately US$ 138.8m, EBITDA of
approximately US$ 47.7m, and year-end cash of approximately US$ 39.9m.
Larry Horsch
Non-Executive Chairman
Jack Cooney
Chief Executive Officer
September 7, 2022
FINANCIAL REVIEW
Summary of financial results For the six months ended June 30
* unaudited 2022 2021
US$ 000 US$ 000
Except per share data Except per share data
Revenue 68,473 64,384
Cost of sales 28,535 26,636
Gross profit 39,938 37,748
Operating expenses
Selling, marketing and customer support 7,391 6,053
Engineering and product development 1,203 1,066
General and administrative 8,747 7,426
Total operating expenses 17,341 14,545
Operating income 22,597 23,203
Other income (expense)
Interest expense (9) (24)
Interest income 38 97
Foreign exchange impact (242) 105
Other (3) 118
Income before income taxes 22,381 23,499
Provision for income taxes 4,891 5,200
Net income 17,490 18,299
Per Share
Per Share
US$ US$
Basic earnings per share 0.31 0.33
Diluted earnings per share 0.31 0.32
Basic adjusted net income per share ((1), (2), (4)) 0.31 0.32
Diluted adjusted net income per share ((1), (2), (4)) 0.31 0.32
Other data
Adjusted EBITDA ((1), (2), (4)) 24,141 24,564
Adjusted net income ((1), (3), (4)) 17,323 18,239
Depreciation expense 656 549
Amortization of intangibles 67 77
Capital expenditures 2,251 645
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 net income plus tax
provision, interest expense, interest income, foreign exchange gain (loss),
other expense, depreciation, amortization, stock-based compensation, and
non-cash lease expense.
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 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.
Net income to adjusted EBITDA reconciliation and
Adjusted net income reconciliation
* unaudited Six months ended June 30
2022 2021
US$ 000 US$ 000
Adjusted EBITDA reconciliation
Net income 17,490 18,299
Tax provision 4,891 5,200
Interest expense 9 24
Interest income (38) (97)
Foreign exchange impact 242 (105)
Other 3 (118)
Depreciation 656 549
Amortization 67 77
Non-cash lease expense 148 135
Stock-based compensation 673 600
Adjusted EBITDA 24,141 24,564
Adjusted net income reconciliation
Net income 17,490 18,299
Amortization 67 77
Tax impact of stock option & RSU settlements (234) (137)
Adjusted net income reconciliation 17,323 18,239
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 the Company's net income
plus tax provision, interest expense, interest income, foreign exchange gain
(loss), other expense, depreciation, amortization, stock-based compensation,
and non-cash lease expense.
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 6% to US$ 68.5 (H1 2021: US$
64.4--m). The Company's revenues consist primarily of sales from Boomed Screed
products, which include the S-28EZ, S22-EZ, S-15R, S-10A and SRS-4 Laser
Screed machines, sales from Ride-on Screed products, which are drive through
the concrete machines that include the S-485, S-940 and S-158C Laser Screed
machines, remanufactured machines sales, 3-D Profiler Systems, Somero Line
Dragon®, SkyScreed®, Broom+Cure(TM), S-PS50 and Other revenues which consist
of revenue from sales of parts and accessories, sales of other equipment,
service, training and shipping charges. The overall increase for the period
was primarily driven by higher pricing across most of our product portfolio,
including the newly launched S-28EZ versus its predecessor, elevated volume in
Ride-on Screed products, remanufactured machines and 3-D Profiler systems,
along with an increased take rate in our new product offerings.
Boomed Screed sales increased to US$ 32.9 (H1 2021: US$ 32.1--m) as price
increases offset unit volume decrease to 93 units (H1 2021: 105 units),
Ride-on screed sales increased to US$ 10.5m (H1 2021: US$ 9.9m) partly due
to price increases and an increase in volume to 90 units (H1 2021: 87),
remanufactured machine sales increased to US$ 3.2m (H1 2021: US$ 2.0m) as unit
volume increased to 14 units (H1 2021: 12), 3-D Profiler System sales
increased to US$ 5.3m (H1 2021: US$ 4.6m) as unit volume increased to 43
units (H1 2021: 39), Somero Line Dragon® sales decreased to US$ 1.2m (H1
2021: US$ 2.3m) as unit volume decreased to 29 units (H1 2021: 62),
SkyScreed® sales increased to US$ 1.1m (H1 2021: USD$ 0.2m), as unit volume
increased to 3 units (H1 2021: 1) and Other revenues increased to US$ 14.3 (H1
2021: US$ 13.3m) mostly due to the introduction of the S-PS50 in 2022, which
contributed revenue of US$ 0.8m. The following table shows the breakdown
during the six months ended June 30, 2022 and 2021:
Revenue breakdown by geography
North America EMEA((1)) ROW((2)) Total
US$ in millions US$ in millions US$ in millions US$ in millions
2022 2021
2022 2021 2022 2021 2022 2021 Net sales % of Net sales Net sales % of Net sales
Boomed screeds ((3)) 26.9 24.2 2.8 4.6 3.2 3.3 32.9 48.0% 32.1 49.9%
Ride-on screeds ((4)) 7.5 7.8 0.8 0.8 2.2 1.3 10.5 15.3% 9.9 15.4%
Remanufactured machines 2.9 2.0 0.3 - - - 3.2 4.7% 2.0 3.1%
3D Profiler System 5.0 4.2 - 0.1 0.3 0.3 5.3 7.7% 4.6 7.1%
Somero Line Dragon® 1.1 2.3 0.1 - - - 1.2 1.8% 2.3 3.5%
SkyScreed® 1.1 0.2 - - - - 1.1 1.6% 0.2 0.3%
Other ((5)) 11.1 10.2 1.4 1.2 1.8 1.9 14.3 20.9% 13.3 20.7%
Total 55.6 50.9 5.4 6.7 7.5 6.8 68.5 100% 64.4 100.0%
Notes:
1. EMEA includes the Europe, Middle East, and Scandinavia.
2. ROW includes Australia, Latin America, India, China, Korea, and Southeast
Asia
3. Boomed Screeds include the S-22EZ, S-28EZ, S-15R, S-10A and SRS-4.
4. Ride-on Screeds include the S-940, S-485, and S-158C.
5. Other includes parts, accessories, services, and freight, as well as other
equipment such as the Somero Broom+Cure(TM), STS-11M Topping Spreader,
Copperhead, Mini Screed C and S-PS50.
Units by product line H1 2022 H1 2021
Boomed screeds 93 105
Ride-on screeds 90 87
Remanufactured machines 14 12
3-D Profiler System 43 39
Somero Line Dragon® 29 62
SkyScreed® 3 1
Other ((1)) 28 25
Total 300 331
Notes:
1. Other includes equipment such as the Somero Broom+Cure(TM), STS-11M Topping
Spreader, Copperhead, Mini Screed C and S-PS50.
Sales to customers located in North America contributed 81% of total revenue
(H1 2021: 79%), sales to customers in EMEA (Europe, Middle East, and
Scandinavia) contributed 8% (H1 2021: 10%) and sales to customers in ROW
(Southeast Asia, Australia, Latin America, India and China) contributed 11%
(H1 2021: 11%).
Sales in North America totaled US$ 55.6m (H1 2021: US$ 50.9m) up 9%, primarily
driven by an increase in pricing across most of the product portfolio,
including the newly launched S-28EZ versus its predecessor, higher volumes of
the SRS-4, 3-D Profiler systems, the Somero Broom+Cure(TM), and Mini C,
and strong contribution from new products including the S-PS50, and the
SkyScreed, as well as parts and accessories. Sales to customers in EMEA were
US$ 5.4m (H1 2021: US$ 6.7m) which decreased 19% driven by supply chain and
logistical challenges in building up inventory levels in H1. Sales to
customers in ROW were US$ 7.5m (H1 2021: US$ 6.8m) increasing by 10% driven by
an increase in sales of Ride-on Screeds.
US$ in millions
Regional sales H1 2022 H1 2021
North America 55.6 50.9
Europe 4.8 6.4
Australia 4.0 2.7
Latin America 1.4 0.8
Rest of World((1)) 2.7 3.6
Total 68.5 64.4
Notes:
(1) Includes India, Middle East, China, Southeast Asia, and Korea.
Gross profit
Gross profit increased to US$ 39.9m (2021: US$ 37.7), with gross margins
decreasing slightly to 58.3% compared to 58.6% in H1 2021, reflecting price
increases partly offset by higher input costs.
Operating expenses
Operating expenses excluding depreciation, amortization and stock-based
compensation for H1 2022 were US$ 16.2m (H1 2021: US$ 13.3m), which is
reflective of increased staffing that includes investment in sales and support
staff in the US and abroad, as well as higher compensation, employee related
expenses and increased travel.
Debt
As of June 30, 2022, the Company had no outstanding debt and there were no
changes to the Company's US$ 10.0m secured revolving line of credit which will
mature in September 2024.
Provision for income taxes
The provision for income taxes decreased to US$ 4.9m, at an overall effective
tax rate of 22%, compared to a provision of US$ 5.2m in H1 2021, at an overall
effective tax rate of 22%.
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
2022 2021
US$ 000 US$ 000
Income available to stockholders 17,490 18,299
Basic weighted shares outstanding 56,038,690 56,159,229
Net dilutive effect of stock options and restricted stock units 661,282 694,625
Diluted weighted average shares outstanding 56,699,972 56,853,854
Per Share Per Share
US$ US$
Basic earnings per share 0.31 0.33
Diluted earnings per share 0.31 0.32
Basic adjusted net income per share 0.31 0.32
Diluted adjusted net income per share 0.31 0.32
Consolidated Balance Sheets
As of June 30, 2022 and December 31, 2021
As of As of
June 30, December 31,
2022 2021
* unaudited US$ 000
US$ 000
Assets
Current assets:
Cash and cash equivalents 27,176 42,146
Accounts receivable - net 6,576 7,691
Inventories - net 19,984 14,293
Prepaid expenses and other assets 2,458 1,590
Income tax receivable 2,720 2,376
Total current assets 58,914 68,096
Accounts receivable, non-current - net 305 461
Property, plant, and equipment - net 23,190 21,589
Financing lease right-of-use assets - net 315 383
Operating lease right-of-use assets - net 1,277 1,578
Intangible assets - net 1,325 1,392
Goodwill 3,294 3,294
Deferred tax asset 1,147 172
Other assets 238 394
Total assets 90,005 97,359
Liabilities and stockholders' equity
Current liabilities:
Accounts payable 7,410 7,111
Accrued expenses 10,376 10,291
Financing lease liability - current 163 183
Operating lease liability - current 320 360
Total current liabilities 18,269 17,945
Financing lease liability - long-term 98 127
Operating lease liability - long-term 993 1,255
Other liabilities 2,307 2,367
Total liabilities 21,667 21,694
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, 56,013,493 and 26 26
56,246,964 shares issued on June 30, 2022 and December 31, 2021, respectively,
and 55,957,147 and 56,039,924 shares outstanding on June 30, 2022 and
December 31, 2021, respectively
Less: treasury stock, 56,346 shares as of June 30, 2022 and 207,040 shares as (282) (848)
of December 31, 2021 at cost
Additional paid in capital 15,083 16,769
Retained earnings 56,280 62,187
Other comprehensive loss (2,769) (2,469)
Total stockholders' equity 68,338 75,665
Total liabilities and stockholders' equity 90,005 97,359
See Notes to unaudited consolidated financial statements.
Consolidated Statements of Comprehensive Income
For the six months ended June 30, 2022 and 2021
* unaudited Six months ended June 30
2022 2021
US$ 000 US$ 000
Except per share data Except per share data
Revenue 68,473 64,384
Cost of sales 28,535 26,636
Gross profit 39,938 37,748
Operating expenses
Sales, marketing, and customer support 7,391 6,053
Engineering and product development 1,203 1,066
General and administrative 8,747 7,426
Total operating expenses 17,341 14,545
Operating income 22,597 23,203
Other income (expense)
Interest expense (9) (24)
Interest income 38 97
Foreign exchange impact (242) 105
Other (3) 118
Income before income taxes 22,381 23,499
Provision for income taxes 4,891 5,200
Net income 17,490 18,299
Other comprehensive income
Cumulative translation adjustment (300) 169
Comprehensive income 17,190 18,468
Earnings per common share
Earnings per share - basic 0.31 0.33
Earnings per share - diluted 0.31 0.32
Weighted average number of common shares outstanding
Basic 56,038,690 56,159,229
Diluted 56,699,972 56,853,854
See Notes to unaudited consolidated financial statements.
Consolidated Statements of Changes in Stockholders' Equity
For the six months ended June 30, 2022
* unaudited
Common stock Treasury stock Other
Retained earnings Comprehensive
US$ 000 loss
US$ 000
Additional Total
paid-in Stockholders'
capital equity
US$ 000 US$ 000
Shares Amount Amount
US$ 000 Shares US$ 000
Balance - December 31, 2021 56,246,964 26 16,769 207,040 (848) 62,187 (2,469) 75,665
Cumulative translation adjustment - - - - - - (300) (300)
Net income - - - - - 17,490 - 17,490
Stock-based compensation - - 673 - - - - 673
Dividend - - - - - (23,397) - (23,397)
Treasury stock (288,824) - (1,287) (288,824) 1,287 - - -
RSUs settled for cash - - (1,072) - - - - (1,072)
Share buyback - - 138,130 (721) - - (721)
New shares issued 55,353 - - - - - - -
Balance - June 30, 2022 56,013,493 26 15,083 56,346 (282) 56,280 (2,769) 68,338
See Notes to unaudited consolidated financial statements.
Consolidated Statements of Cash Flows
For the six months ended June 30, 2022 and 2021
*unaudited Six months ended June 30
2022 2021
US$ 000 US$ 000
Cash flows from operating activities:
Net income 17,490 18,299
Adjustments to reconcile net income to net cash provided by operating
activities:
Deferred taxes (976) (1,061)
Depreciation and amortization 723 626
Non-cash lease expense 148 135
Bad debt 113 99
Stock-based compensation 673 600
Gain on disposal of property and equipment (46) (31)
Working capital changes:
Accounts receivable 1,159 (2,758)
Inventories (5,691) (3,130)
Prepaid expenses and other assets (868) (480)
Income taxes receivable (344) (1,316)
Other assets 156 (32)
Accounts payable, accrued expenses and other liabilities 297 5,080
Net cash provided by operating activities 12,834 16,031
Cash flows from investing activities:
Property and equipment purchases (2,251) (645)
Proceeds from sale of equipment 40 -
Net cash used in investing activities (2,211) (645)
Cash flows from financing activities:
Payment of dividend (23,397) (17,366)
RSUs settled for cash (1,072) (620)
Payments under financing capital leases (103) (99)
Share buy back (721) (41)
Net cash used in financing activities (25,293) (18,126)
Effect of exchange rates on cash and cash equivalents (300) 169
Net decrease in cash and cash equivalents (14,970) (2,571)
Cash and cash equivalents:
Beginning of period 42,146 35,388
End of period 27,176 32,817
See Notes to unaudited consolidated financial statements.
Notes to the Consolidated Financial Statements
As of June 30, 2022 and December 31, 2021
1. Organization and description of business
Nature of business
Somero Enterprises, Inc. (the "Company" or "Somero") designs, assembles,
remanufactures, sells, and distributes concrete levelling, 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 in Chesterfield, England; Shanghai, China; New Delhi,
India; and Melbourne, Australia.
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.
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 U.S. 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, 2022 and December
31, 2021, the allowance for doubtful accounts was approximately US$ 1,690,000
and US$ 1,637,000, respectively. Bad debt expense for the six months ended
June 30, 2022 and 2021, was US$ 113,000 and US$ 99,000, respectively.
Inventories
Inventories are stated using the first in, first out ("FIFO") method, at the
lower of cost or net realizable value ("NRV"). Provision for potentially
obsolete or slow-moving inventory is made based on management's analysis of
inventory levels and future sales forecasts. As of June 30, 2022 and
December 31, 2021, the provision for obsolete and slow-moving inventory was
US$ 864,000 and US$ 1,212,000, respectively.
Intangible assets and goodwill
Intangible assets consist primarily of customer relationships, trademarks, 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 seventeen 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 Company'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 and the purchase of the Line Dragon,
LLC business assets in January 2019. The Company did not incur a goodwill
impairment loss for the periods ended June 30, 2022 nor December 31, 2021.
Revenue recognition
The Company generates revenue by selling equipment, parts, accessories,
service agreements and training. The Company recognizes revenue for equipment,
parts, and accessories when it satisfies the performance obligation of
transferring the control to the customer. 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. The Company recognizes the revenue
for service agreements and training once the service or training has occurred.
As of June 30, 2022 and December 31, 2021, there were US$ 571,000 and US$
507,000, respectively, of extended service agreement liabilities. During the
six months ended June 30, 2022 and 2021, US$ 308,000 and US$ 234,000,
respectively, of revenue was recognized related to the amounts recorded as
liabilities on the balance sheets in the prior year (deferred contract
revenue).
As of June 30, 2022 and December 31, 2021, there were US$ 3,392,000 and US$
4,009,000, respectively, in customer deposit liabilities for advance payments
received during the period for contracts expected to ship following the end of
the period. As of June 30, 2022 and December 31, 2021, there are no
significant contract costs such as sales commissions or costs deferred.
Interest income on financing arrangements is recognized as interest accrues,
using the effective interest method.
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.
US$ 000
Balance, January 1, 2021 (1,174)
Warranty charges 362
Accruals (1,174)
Balance, December 31, 2021 (1,986)
Balance, January 1, 2022 (1,986)
Warranty charges 293
Accruals (371)
Balance, June 30, 2022 (2,064)
Property, plant, and equipment
Property, plant, and equipment is stated at cost, 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 3 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 are 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.
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$
673,000 and US$ 600,000 for the six months ended June 30, 2022 and 2021,
respectively. In addition, the Company settled US$ 1,072,000 and US$ 620,000
in restricted stock units for cash during the six months ended June 30, 2022
and 2021, 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 (loss) 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
2022 2021
US$ 000 US$ 000
Net income 17,490 18,299
Basic weighted shares outstanding 56,038,690 56,159,229
Net dilutive effect of stock options and restricted stock units 661,282 694,625
Diluted weighted average shares outstanding 56,699,972 56,853,854
Fair value
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 Significant other Significant other
in active markets observable inputs unobservable inputs
identical assets Level 2 Level 3
Level 1
US$ 000 US$ 000 US$ 000 US$ 000
Year ended December 31, 2021
Asset: Non-recurring
Goodwill 3,294 3,294
Period ended June 30, 2022
Asset: Non-recurring
Goodwill 3,294 3,294
3. Inventories
Inventories consisted of the following:
June 30, December 31,
2022 2021
US$ 000 US$ 000
Raw material 10,931 8,679
Finished goods and work in process 6,995 3,462
Remanufactured 2,058 2,152
Total 19,984 14,293
4. Goodwill and intangible assets
Goodwill represents the excess of the cost of a business combination over the
fair value of the net assets acquired. The Company is required to test
goodwill for impairment, at the reporting unit level, annually and when events
or circumstances indicate the fair value of a unit may be below its carrying
value.
The following table reflects other intangible assets:
Weighted average June 30, December 31,
Amortization 2022 2021
Period US$ 000 US$ 000
Capitalized cost Patents 12 years 19,247
19,247
Intangible Assets 7,434 7,434
26,681 26,681
Accumulated amortization Patents 12 years 18,697 18,673
Intangible Assets 6,659 6,616
25,356 25,289
Net carrying costs Patents 12 years 550 574
Intangible Assets 775 818
1,325 1,392
Amortization expense associated with the intangible assets in each of the six
months ended June 30, 2022 and 2021 was approximately US$ 67,000 and US$
77,000, respectively. The amortization expense for each of the next 5 years
will be US$ 135,000 and the remaining amortization thereafter will be US$
650,000.
5. Property, plant, and equipment
Property, plant, and equipment consist of the following:
June 30, December 31,
2022 2021
US$ 000 US$ 000
Land 864 864
Building and improvements 22,100 20,191
Machinery and equipment 8,374 8,185
31,338 29,240
Less: accumulated depreciation and amortization (8,148) (7,650)
23,190 21,589
Depreciation expense for the six months ended June 30, 2022 and 2021 was
approximately US$ 656,000 and US$ 549,000, respectively.
6. Line of credit and note payable
In November 2020, the Company renewed its amended credit facility, which
consists of a US$ 10.0m secured revolving line of credit, extending the
maturity to September 2024. The interest rate on the revolving credit line
is based on the one-month LIBOR rate plus 1.25%. The Company's credit
facility is secured by substantially all its business assets. No amounts
were drawn under the secured revolving credit line as of June 30, 2022 and
December 31, 2021.
Interest expense for the six months ended June 30, 2022 and 2021 was
approximately US$ 9,300 and US$ 23,600, respectively, and relates primarily to
interest costs on leased vehicles.
7. Retirement program
The Company has a savings and retirement plan for its employees, which is
intended to qualify under Section 401(k) of the Internal Revenue Code ("IRC").
This savings and retirement plan provides for voluntary contributions by
participating employees, not to exceed maximum limits set forth by the IRC.
The Company's matching contributions vest immediately. The Company
contributed approximately US$ 579,000 and US$ 445,000 to the savings and
retirement plan during the six months ended June 30, 2022 and 2021,
respectively.
8. Leases
The Company leases property, vehicles, and equipment under leases accounted
for as operating and finance leases. The leases have remaining lease terms of
less than 1 year to 11 years, some of which include options for renewal. The
exercise of these renewal options is at the sole discretion of the Company.
The right-of-use assets and related liabilities presented on the Consolidated
Balance Sheets, reflect management's current expectations regarding the
exercise of renewal options.
The components for lease expense were as follows:
Six Months Ended
June 30, 2022
US$ 000
Operating lease cost 182
Finance lease cost:
Amortization of right-of-use assets 148
Interest on lease liabilities 6
Total finance lease cost 154
As of June 30, 2022, the weighted average remaining lease term for finance and
operating leases was 1.8 years and 7.2 years, respectively, and the weighted
average discount rate was 4.8% and 3.5%, respectively.
Maturities of lease liabilities represent the remaining six months for 2022
and the full 12 months of each successive period as follows:
Operating Leases Finance Leases
US$ 000 US$ 000
2022 182 105
2022 362 118
2023 215 38
2024 96 14
2025 96 -
Thereafter 576 -
Total 1,527 275
Less imputed interest (214) (14)
Total
1,313 261
9. Supplemental cash flow and non-cash financing disclosures
Six months ended June 30
2022 2021
US$ 000 US$ 000
Cash paid for interest 9 24
Cash paid for taxes 6,274 6,864
Finance lease liabilities arising from obtaining right-of-use assets (102) (4)
Operating lease liabilities arising from obtaining right-of-use assets (250) (538)
10. Business and credit concentration
The Company's line of business could be significantly impacted by, among other
things, the state of the general economy, the Company's ability to continue to
protect its intellectual property rights, and the potential future growth of
competitors. Any of the foregoing may significantly affect management's
estimates and the Company's performance. On June 30, 2022 and December 31,
2021, the Company had two customers which represented 20% and two customers
that represented 21% of total accounts receivable, respectively.
11. 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 non-disclosure provisions as well as provide for
defined severance payments in the event of termination or change in control.
The Company is also 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.
12. Income taxes
The Company's effective tax rate for the six months ended June 30, 2022 was
22% compared to the U.S. federal statutory rate of 21%. 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 2014 forward is still open. The Company has no federal, foreign, or
state income tax returns currently under examination.
On June 30, 2022, the Company had US$ 1,147,000 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 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.
13. Share buyback
In February 2022 and 2021, the Board authorized an on-market share buyback
program for such number of listed shares of common stock as are equal to US$
2,000,000 and US$ 1,000,000, respectively. The maximum price paid per Ordinary
Share was no more than the higher of 105 percent of the average middle market
closing price of an Ordinary Share for the five business days preceding the
date of the share buyback, the price of the last independent trade and the
highest current independent purchase bid. As of June 30, 2022, the Company
purchased 132,229 shares of common stock for an aggregate value of US$ 683,000
pursuant to the share buyback program authorized in 2022, and 5,901 shares of
common stock for an aggregate value of US$ 38,000, which completed the share
buyback program authorized in 2021. The company estimates the share buyback
program authorized in 2022 will be completed by the end of H2 2022. In
connection with the Company's share buyback programs authorized in 2022, 2021
and 2020, 288,824 shares held in treasury were cancelled in H1 2022.
14. Subsequent events
Dividend
The Board declared an interim dividend for the six months ended June 30, 2022
of 10.0 US cents per share. This dividend will be on October 21, 2022 to
shareholders on the register as of September 23, 2022.
All dividends, including both ordinary and supplemental, have the option of
being paid in two currencies, GBP, and USD. In addition, there is also the
option of being paid by Check or through Crest for either currency or
additionally via BACS for GBP payments. If no election is made, dividends
will be paid in USD and via Check. If shareholders wish to change their
current currency or payment methods, forms are available through Computershare
Investor Services PLC at
https://www-uk.computershare.com/Investor/#Help/PrintableForms
(https://www-uk.computershare.com/Investor/#Help/PrintableForms)
Distribution amount: $0.10 cents per share
Ex-dividend date: 22 September 2022
Dividend record date: 23 September 2022
Final day for currency election: 7 October 2022
Payment date: 21 October 2022
All dividends have the option of being paid in either GBP or USD. Payments
in USD can be paid by Check or through Crest. Payments in GBP can be paid via
Check, Crest and BACS. The default option if no election is made will be for
a USD payment via check. Should shareholders wish to change their current
currency or payment methods, forms are available through Computershare
Investor Services PLC at
https://www uk.computershare.com/Investor/#Help/PrintableForms
If shares are held as Depositary Interests through a broker or nominee, the
holding company must be contacted and advised of the payment preferences. Such
requests are subject to the terms and conditions of the broker or nominee.
Additional information on currency election and tax withholding can be found
at: https://investors.somero.com/aim-rule-26
(https://investors.somero.com/aim-rule-26) . Shareholders can also contact
Computershare Investor Services PLC by telephone at +44 (0370) 702 0000 or
email via webcorres@computershare.co.uk (mailto:webcorres@computershare.co.uk)
.
Line of Credit
In August 2022, the Company updated its credit facility to a US$ 25.0m secured
revolving line of credit, with a maturity date of August 2027. The interest
rate on the revolving credit line is based on the BSBY Index plus 1.25%. The
Company's credit facility is secured by substantially all its business assets.
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