TIDMSOM
RNS Number : 5136Y
Somero Enterprises Inc.
07 September 2022
Press Announcement
For immediate release
07 September 2022
Somero(R) 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(R) 36, S-PS50, SkyStrip (R) 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
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(R) 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
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(R) 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(R) 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(R) 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(R) 36, S-PS50, SkyStrip(R) 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(R) 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
For the six months ended
Summary of financial results June 30
* unaudited 2022 2021
US$ 000 US$ 000
Except per Except per
share data 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(R), SkyScreed(R), 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(R) sales decreased to US$ 1.2m
(H1 2021: US$ 2.3m) as unit volume decreased to 29 units (H1 2021:
62), SkyScreed(R) 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 US$ in millions US$ in US$ in millions
millions millions
2022 2021
%
% of of
Net Net Net Net
2022 2021 2022 2021 2022 2021 sales sales sales 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 (R) 1.1 2.3 0.1 - - - 1.2 1.8% 2.3 3.5%
SkyScreed
(R) 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 (R) 29 62
SkyScreed (R) 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
June 30, As of
2022 December 31,
* unaudited 2021
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 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 26 26
Less: treasury stock, 56,346 shares as
of June 30, 2022 and 207,040 shares as
of December 31, 2021 at cost (282) (848)
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 Except
per share per share
data 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
Additional
paid-in Retained Other Total
Amount capital Amount earnings Comprehensive Stockholders'
US$ US$ US$ US$ loss equity
Shares 000 000 Shares 000 000 US$ 000 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 55,353 - - - - - - -
issued
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
in active Significant Significant
markets other other
identical observable unobservable
assets inputs inputs
Level 1 Level 2 Level 3
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 December
30, 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 December
average June 30, 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 December
30, 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 Finance
Leases 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
Distribution amount: $0.10 cents per share
Ex-dividend date: 22 September 2022
-----------------------
Dividend record date: 23 September 2022
-----------------------
Final day for currency election: 7 October 2022
-----------------------
Payment date: 21 October 2022
-----------------------
All dividends have the option of being paid in either GBP or
USD. Payments in USD can be paid by Check or through Crest.
Payments in GBP can be paid via Check, Crest and BACS. The default
option if no election is made will be for a USD payment via check.
Should shareholders wish to change their current currency or
payment methods, forms are available through Computershare Investor
Services PLC at
https://www
uk.computershare.com/Investor/#Help/PrintableForms
If shares are held as Depositary Interests through a broker or
nominee, the holding company must be contacted and advised of the
payment preferences. Such requests are subject to the terms and
conditions of the broker or nominee.
Additional information on currency election and tax withholding
can be found at: https://investors.somero.com/aim-rule-26 .
Shareholders can also contact Computershare Investor Services PLC
by telephone at +44 (0370) 702 0000 or email via
webcorres@computershare.co.uk .
Line of Credit
In August 2022, the Company updated its credit facility to a US$
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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END
IR SSMFAMEESEIU
(END) Dow Jones Newswires
September 07, 2022 02:00 ET (06:00 GMT)
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