Somero Regulatory News (SOM)

Somero Enterprises, Inc.

September 8, 2015

Interim Results for the six months ended June 30, 2015

Somero Enterprises, Inc.® is pleased to report its interim results for the six months ended June 30, 2015.

Financial Highlights

· Revenue increased 20% to US$ 35.3m (H1 2014: US$ 29.5m)

· Adjusted EBITDA increased 28% to US$ 9.5m (H1 2014: US$ 7.4m)(1,2)

· Pre-tax income increased 28% to US$ 8.2m (H1 2014: US$ 6.4m)

· Adjusted net income increased 24% to US$ 6.1m (2014: US$ 4.9m)(1,3)

· Adjusted Net Income Basic EPS grew 22% to US$ 0.11 (H1 2014: US$ 0.09)(1,2)

· Net cash at June 30, 2015 increased 36% to US$ 9.0m (December 31, 2014: US$ 6.6m)(4)

· 1.9 US cents per share dividend declared for payment in H2 2015, a 27% increase over prior year

Business Highlights

· Sales in North America remained strong increasing 27% to US$ 24.1m compared to H1 2014

· Sales in EMEA increased 25% compared to H1 2014 led by the Middle East which grew to US$ 1.9m in H1 2015 (H1 2014: US$ 0.2m)

· Large line new machine sales increased 47% to US$ 15.4m compared to H1 2014.

· New products contributed US$ 1.8m in H1 2015 revenue from sales of the S-485 Laser Screed® machine introduced in October 2014

Notes:

1. The Company uses non-US GAAP financial measures in order to provide supplemental information regarding the Company's operating performance. See further information regarding non-GAAP measures below.

2. Adjusted EBITDA as used herein is a calculation of the Company's net income excluding tax provision, interest expense, interest income, foreign exchange gain/(loss), other expense, depreciation, amortization, stock based compensation and the write-down of Goodwill, as applicable.

3. Adjusted net income as used herein is a calculation of net income plus amortization of intangibles and excluding special items.

4. Net Cash is defined as cash and cash equivalents less borrowings under bank obligations.

Commenting, Jack Cooney, President and Chief Executive Officer of Somero, said:

"Somero Enterprises, Inc. is pleased to announce the healthy trading momentum referred to in recent trading updates has continued. Revenues for H1 2015 increased 20% compared to H1 2014 driven by growth in our main regions and led by particularly strong activity levels in North America and the Middle East. We remain encouraged by trading early in H2 2015 and will continue to invest selectively in measures aimed at supporting growth into the medium and longer term. The Board is confident Somero will deliver another strong performance this year in line with latest market expectations."

For further information, please contact:

Canaccord Genuity Limited

Tel: +44 20 7523 8000

Piers Coombs

Chris Robinson

Mark Whitmore

About Somero®

Somero® designs, assembles, and sells patented, laser-guided equipment that automates the process of spreading, leveling and contouring volumes of concrete for commercial flooring and other horizontal surfaces such as paved parking lots. Somero's innovative, proprietary products include the large S-22E Laser Screed®, CopperHead®, Mini Screed™ C, S-840 Laser Screed®, S-15R Laser Screed®, STS-11m Spreader, and S-485 Laser Screed® machines which employ laser-guided proprietary technology to achieve a high level of precision in concrete surface flatness at a higher rate of efficiency than conventional methods. This results in the highest level of flat-floor precision attainable at less cost to the flooring contractor.

Somero's products have been sold to concrete contractors for non-residential construction projects in 93 countries and across every time zone around the globe. Laser Screed equipment has been specified for use in the construction of warehouses, assembly plants, retail centers, and other commercial construction projects that require extremely flat concrete-slab floors and by a variety of companies, such as Costco, Home Depot, B&Q, DaimlerChrysler, various Coca-Cola bottling companies, the United States Postal Service, Lowe's, Toys 'R' Us, and ProLogis.

Somero equipment is used to construct the concrete slab in all building types, as well as all floors in multi-story buildings. Our target customer is the commercial concrete flooring contractor, of any size, who is ready to move to the next level of profitability with their business. The keys to our success are the quality of our equipment, the unparalleled level of service we provide, and the investment we make in relationships with our customers. Somero equipment and service helps our customers achieve their business and profitability goals, creating the loyalty that maintains them as a customer for life.

Somero's Operations and Support Offices are located in Michigan, USA with Global Headquarters and Training Facilities in Florida, USA and an established Sales, Service and Training Facility in Shanghai, China. In addition, Somero maintains sales and service offices located in Chesterfield, England and New Delhi, India.

Somero has approximately 174 employees, marketing and selling products through a direct sales force, external sales representatives, and independent dealers in the Americas, Europe, Middle East, South Africa, Asia, and Australia.

Somero is listed on the Alternative Investment Market (AIM) of the London Stock Exchange (LSE) and its trading symbol is SOM.L.

Chairman's and Chief Executive Officer's Statement

Overview

Somero is again delivering growth in 2015, ending the period with revenue of US$ 35.3m vs. US$ 29.5m for H1 2014. Key to our strong performance has been our continued efforts to seek improvement in our products, processes, services, and people.

People

Our employees are key drivers of our growth and we have added and trained additional staff and made key promotions in line with our expansion. We expect the remainder of 2015 to be another exciting year, continuing to offer career entry and advancement opportunities. The Board appreciates all of our employees and wishes to thank them for their hard work, dedication, and loyalty.

Markets

North America has made the largest absolute contribution to growth this period, with revenues of US$ 24.1m (H1 2014: US$ 19.0m). Our European market saw a good increase in revenues, up 36% to US$ 1.9m (H1 2014: US$ 1.4m). Southeast Asia has also experienced growth in H1 2015 to US$ 1.0m (H1 2014: US$ 0.4m). The Middle East is currently performing above expectation, generating US$ 1.9m of revenues this period, compared to US$ 0.2m in H1 2014. After a slow start in China, market conditions have stabilized but remain challenging for now. We continue to believe the prospects for our business in China are very good and we expect this market will become a significantly larger contributor to our growth in the future as we continue to develop and deepen our presence.

New product development

Product development continues to be a focus of our plans for 2015 as we are always working on new and innovative ideas to introduce to the industry.

In H2 2015, we expect to launch the S-10A. This machine is designed to benefit contractors with smaller to mid-sized slabs and ranging from the beginner to those ready to move to a higher level boom-out Laser Screed machine. The S-10A is affordable, easy to navigate, and most importantly, safe to operate while achieving a high quality finished product.

Liquidity

Somero ended June 30, 2015 with US$ 9.0m in net cash(1), an increase of US$2.4m during H1 2015, despite $2.2M in capital expenditures during the period primarily due to investment in the Houghton facility expansion and new Fort Myers Headquarters projects. The primary driver of the net cash increase was sales growth of 20% to US$ 35.3m compared to H1 2014, converting through to cash generation.

Dividend

The Board is pleased to declare an interim dividend for the six months ended June 30, 2015 of 1.9 US cents per share. This dividend will be payable on October 19, 2015 to shareholders on the register at October 2, 2015.

Expansion progress

Earlier this year, we announced plans for expansion of both the Operations and Support Offices in Houghton MI and the new Global Headquarters and Training Facilities in Fort Myers FL. Ground has been broken for the 20,000 square-foot expansion in Houghton, MI with an expected capital cost of US$ 1.3m and targeted completion in Q4 2015. Land has been purchased and the design completed for the new 14,000 square-foot facility in Fort Myers, FL with an expected capital cost of US$ 4.8m and targeted completion in Q2 2016.

Current trading and outlook

US sales momentum has carried forward into 2015 as a result of our new product introductions, such as the S-485, replacement demands on outdated technology, ongoing construction growth and project backlogs our customers are experiencing. This growth trajectory is expected to result in strong sales for 2015.

Particularly strong performance in the Middle East has positioned EMEA for growth compared to H1 2014, offsetting sluggishness in Russia and India. In addition, we are encouraged by improved activity in Europe.

Our markets in Southeast Asia experienced solid growth in H1 2015. However, China started the year slowly, resulting in trading in H1 2015 down in comparison to H1 2014. Somero continues to progress in developing brand awareness, providing education and training on the value of high-performance flat concrete floors, and finalizing third-party equipment financing options through the Bank of China. Our low penetration rate in China, combined with greater acceptance of flatness standards and customer willingness to use our products and services, indicates Somero has ample opportunity for growth going forward. In addition, we expect the planned launch of the Concrete College in Shanghai in Q4 2015 will play a key role to support growth in the region.

Growth is also anticipated in Latin America outside of Brazil, driven by increased activity in Mexico, attributed to the manufacturing sector. We are also seeing positive signs of improvement in other countries in this region and remain optimistic overall on the region.

We are very encouraged by the sound start to 2015 and the Board is confident Somero will deliver another strong performance this year in line with latest market expectations.

Larry Horsch

Non-Executive Chairman

Jack Cooney

President and Chief Executive Officer

September 8, 2015

Notes:

1. Net Cash is defined as cash and cash equivalents less total borrowings under bank obligations.

Notes:

1. Adjusted EBITDA and Adjusted net income are not measurements of the Company's financial performance under US GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with US GAAP or as an alternative to US GAAP cash flow from operating activities as a measure of profitability or liquidity. Adjusted EBITDA and Adjusted net income are presented herein because management believes they are useful analytical tools for measuring the profitability and cash generation of the business. Adjusted EBITDA is also used to determine pricing and covenant compliance under the Company's credit facility and as a measurement for calculation of management incentive compensation. The Company understands that although Adjusted EBITDA is frequently used by securities analysts, lenders, and others in their evaluation of companies, its calculation of Adjusted EBITDA may not be comparable to other similarly titled measures reported by other companies.

2. Adjusted EBITDA as used herein is a calculation of its net income excluding tax provision, interest expense, interest income, foreign exchange gain/(loss), other expense, depreciation, amortization, and stock based compensation.

3. Adjusted net income as used herein is a calculation of net income plus amortization of intangibles and excluding 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.

Notes:

1. Adjusted EBITDA and Adjusted net income are not measurements of the Company's financial performance under US GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with US GAAP or as an alternative to US GAAP cash flow from operating activities as a measure of profitability or liquidity. Adjusted EBITDA and Adjusted net income are presented herein because management believes they are useful analytical tools for measuring the profitability and cash generation of the business. Adjusted EBITDA is also used to determine pricing and covenant compliance under the Company's credit facility and as a measurement for calculation of management incentive compensation. The Company understands that although Adjusted EBITDA is frequently used by securities analysts, lenders, and others in their evaluation of companies, its calculation of Adjusted EBITDA may not be comparable to other similarly titled measures reported by other companies.

2. Adjusted EBITDA as used herein is a calculation of its net income plus tax provision, interest expense, interest income, foreign exchange gain/(loss), other expense, depreciation, amortization, and stock based compensation.

3. Adjusted net income as used herein is a calculation of net income plus amortization of intangibles and excluding 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 20% to US$ 35.3m (H1 2014: US$ 29.5m). Company revenues consist primarily of sales from Large line products (the S22-E Large Laser Screed model and its predecessors), sales from Mid line products (the S-15R), sales from Small line products (the S-840, CopperHead, and the new S-485), Remanufactured machine sales, 3-D Profilers, and Other revenues, which consist of, among other things, revenue from sales of spare parts, Topping Spreaders, Mini Screeds, and accessories. The overall increase for the period was driven by Large line sales, Small line sales, Remanufactured sales, 3-D Profiler sales, and Other sales. The following table shows the breakdown during the six months ended 30 June 2015 and 2014:

Large line sales increased to US$ 15.4m (H1 2014: US$ 10.5m) as a result of an increase in volume to 44 units (H1 2014: 30 units), Mid line sales decreased to US$ 2.3m (H1 2014: US$ 3.4m) due to a decrease in volume to 12 units (H1 2014: 18), Small line sales increased to US$ 6.3m (H1 2014: US$ 5.7m) due to a slight increase in volume to 76 units (H1 2014: 70), Remanufactured sales increased to US$ 3.7m (H1 2014: US$ 3.1m) despite a decrease in units to 23 units (H1 2014: 26) due to higher average prices, 3-D Profiler sales increased to US$ 2.0 m (H1 2014: US$ 1.6m) due to a increase in units sold to 21 (H1 2014: 17).

Sales in North America totaled US$ 24.1m (H1 2014: US$ 19.0m) and represented 68% of total revenues (H1 2014: 64%), sales to customers in EMEA (Russia, Middle East, Europe, Scandinavia and India) contributed US$ 4.0m (H1 2014: US$ 3.2m) and sales to customers in RoW (China, Southeast Asia, Australia, Korea and Latin America) contributed US$ 7.2m (H1 2014: 7.3m).

Gross profit

Gross profit percentage improved to 55.0% compared to 54.8% in H1 2014 due to the positive impacts of price increases and productivity gains offset partly by higher product costs and product mix.

Operating expenses

Operating expenses excluding depreciation, amortization and stock based compensation for H1 2015 were US$ 10.2m (H1 2014: US$ 9.0m). The increase has been driven primarily by increased headcount, higher sales commissions and health insurance expenses. Total employment increased to 174 as compared to 165 at the end of 2014.

Debt

There were no material changes to the Company's credit facilities in H1 2015.

Provision/ (benefit) for income taxes

The provision for income taxes was US$ 2.8m compared to a benefit of US$ 1.8m in H1 2014 due to a reversal of a non-cash valuation allowance of US$ 4.1m in H1 2014.

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:

Notes to the Consolidated Financial Statements

1. Organization and description of business

Nature of business

Somero Enterprises, Inc.® (the "Company" or "Somero") designs, assembles, remanufactures, sells and distributes concrete leveling, contouring and placing equipment, related parts and accessories, and training services worldwide. Somero's Operations and Support Offices are located in Michigan, USA with Global Headquarters and Training Facilities in Florida, USA. Sales and service offices are located in Chesterfield, England; Shanghai, China; and New Delhi, India.

2. Summary of significant accounting policies

Basis of presentation

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America.

Principles of consolidation

The consolidated financial statements include the accounts of Somero Enterprises, Inc. and its subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

Cash and cash equivalents 

Cash includes cash on hand, cash in banks, and temporary investments with a maturity of three months or less when purchased. The Company maintains deposits primarily in one financial institution, which may at times exceed amounts covered by insurance provided by the US Federal Deposit Insurance Corporation ("FDIC"). The Company has not experienced any losses related to amounts in excess of FDIC limits.

Accounts receivable and allowances for doubtful accounts 

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. The Company's accounts receivable are derived from revenue earned from a diverse group of customers. The Company performs credit evaluations of its commercial customers and maintains an allowance for doubtful accounts receivable based upon the expected ability to collect accounts receivable. Allowances, if necessary, are established for amounts determined to be uncollectible based on specific identification and historical experience. As of June 30, 2015 and December 31, 2014, the allowance for doubtful accounts was approximately US$ 701,000 and US$ 324,000, respectively.

Inventories 

Inventories are stated at the lower of cost, using the first in, first out ("FIFO") method, or market. Provision for potentially obsolete or slow-moving inventory is made based on management's analysis of inventory levels and future sales forecasts.

Deferred financing costs

Deferred financing costs incurred in relation to long-term debt are reflected net of accumulated amortization and are amortized over the expected remaining term of the debt instrument. These financing costs are being amortized using the effective interest method.

Intangible assets and goodwill

Intangible assets consist primarily of customer relationships and patents, and are carried at their fair value when acquired, less accumulated amortization. Intangible assets are amortized using the straight-line method over a period of three to twelve years, which is their estimated period of economic benefit. Goodwill is not amortized but is subject to impairment tests on an annual basis, and the Company has chosen December 31 as its periodic assessment date. Goodwill represents the excess cost of the business combination over the Group's interest in the fair value of the identifiable assets and liabilities. Goodwill arose from the Company's prior sale from Dover Corporation to The Gores Group in 2005. The Company did not incur a goodwill impairment loss for the periods ended June 30, 2015 nor December 31, 2014.

The Company evaluates the carrying value of long-lived assets, excluding goodwill, whenever events and circumstances indicate the carrying amount of an asset may not be recoverable. For the periods ended June 30, 2015 and December 31, 2014, the Company tested its other intangible assets including customer relationships and technology for impairment and found no impairment. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flows from such asset (or asset group) are separately identifiable and less than the asset's (or asset group's) carrying value. In that event, a loss is recognized to the extent that the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved.

Revenue recognition 

The Company recognizes revenue on sales of equipment, parts and accessories when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. For product sales where shipping terms are FOB shipping point, revenue is recognized upon shipment. For arrangements which include FOB destination shipping terms, revenue is recognized upon delivery to the customer. Standard products do not have customer acceptance criteria. Revenues for training are deferred until the training is completed unless the training is deemed inconsequential or perfunctory.

Warranty liability 

The Company provides warranties on all equipment sales ranging from 60 days to three years, depending on the product. Warranty liabilities are estimated net of the warranty passed through to the Company from vendors, based on specific identification of issues and historical experience.

Property, plant, and equipment

Property, plant and equipment is stated at estimated market value based on an independent appraisal at the acquisition date or at cost for subsequent acquisitions, net of accumulated depreciation and amortization. Land is not depreciated. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is 31.5 to 40 years for buildings (depending on the nature of the building), 15 years for improvements, and 2 to 10 years for machinery and equipment.

Income taxes

The Company determines income taxes using the asset and liability approach. Tax laws require items to be included in tax filings at different times than the items reflected in the financial statements. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance, if necessary, to the extent that it appears more likely than not, that such assets will be unrecoverable.

The Company evaluates tax positions that have been taken or are expected to be taken in its tax returns, and records a liability for uncertain tax positions. This involves a two-step approach to recognizing and measuring uncertain tax positions. First, tax positions are recognized if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon examination, including resolution of related appeals or litigation processes, if any. Second, the tax position is measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision/ (benefit) for income taxes in general and administrative expenses in the accompanying consolidated financial statements. The Company is subject to a three year statute of limitations by major tax jurisdictions.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision/ (benefit) for income taxes in general and administrative expenses in the accompanying consolidated financial statements, which there were none in 2015 and 2014. The Company is subject to a three year statute of limitations by major tax jurisdictions, and currently 2012 through 2014 remain open to investigation.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Stock based compensation

The Company recognizes the cost of employee services received in exchange for an award of equity instruments in the financial statements over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). The Company measures the cost of employee services in exchange for an award based on the grant-date fair value of the award. Compensation expense related to stock based payments was US$ 98,000 and US$ 142,000 for the six month periods ended 30 June 2015 and 2014, respectively. The Company settled US$ 110,000 and US$ 103,000 in stock options for cash during the six month periods ended June 30, 2015 and 2014, 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:

Fair value measurement

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities approximate fair value because of the short-term nature of these instruments. The carrying value of our long-term debt approximates fair value due to the variable nature of the interest rates under our Credit Facility.

The FASB has issued accounting guidance on fair value measurements. This guidance provides a common definition of fair value and a framework for measuring assets and liabilities at fair values when a particular standard prescribes it.

This guidance also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. These valuation techniques may be based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs create the following fair value hierarchy.

· Level 1 - Quoted prices for identical instruments in active markets.

· Level 2 - Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities.

· Level 3 -Unobservable inputs for the asset or liability which are supported by little or no market activity and reflect the Company's assumptions that a market participant would use in pricing the asset or liability.

New accounting pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance under US GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing US GAAP.

The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2018.

3. Inventories

Inventories consisted of the following:

4. Property, plant, and equipment

Property, plant, and equipment consisted of the following:

5. Notes payable

The Company's debt obligations consisted of the following:

The Company entered into an amended credit facility in March 2013. The agreement will mature between March 2016 and March 2018.

· US$ 5,000,000 March 2016 secured revolving line of credit

· US$ 6,000,000 March 2018 delayed draw term loan

· US$ 1,447,000 March 2018 Commercial Real Estate Mortgage

The interest rate on the commercial real estate loan was 2.94% as of June 30, 2015. The Company's loan facility is secured by substantially all of its business assets.

Future Payments

The future payments by year represent the remaining six months for 2015 and the full 12 months of each successive period for the Company's loan facility:

Interest

Interest expense on the credit facility for the six months ended 30 June 2015 and 2014 was approximately US$ 46,000 and USD$ 55,000 (includes amortized swap interest fees and amortized loan origination fees) respectively.

6. Operating leases

The Company leases property, vehicles, and office equipment under leases accounted for as operating leases without renewal options. Future minimum payments by year represent the remaining six months for 2015 and the full 12 months of each successive period as follows:

7. Capital leases

Interest rates on capital leases are variable and range from 4.5% to 7.3% at June 30, 2015. Future minimum payments by year represent the remaining six months for 2015 and the full 12 months of each successive period as follows:

8. Commitments and contingencies

The Company has entered into employment agreements with certain members of senior management. The terms of these are for renewable one year periods and include non-compete and nondisclosure provisions as well as provide for defined severance payments in the event of termination or change in control.

The Company is subject to various unresolved legal actions which arise in the normal course of its business. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible losses, the Company believes these unresolved legal actions will not have a material effect on its consolidated financial statements.

9. Income taxes

The Company's effective tax rate for the six months ended June 30, 2015 was 34.6% compared to the federal statutory rate of 34.0%. The effective tax rate is higher than the federal statutory rate primarily due to the effect of state and foreign income taxes.

The Company is subject to US federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company was formed in 2005. The statute of limitations for all federal, foreign and state income tax matters for tax years from 2012 forward is still open. The Company has no federal, foreign or state income tax returns currently under examination.

At June 30, 2015, the Company had US$ 489,000 in current net deferred tax assets and US$ 3,342,000 in non-current net deferred tax assets recorded on its balance sheet. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

10. Supplemental cash flow and non-cash financing disclosures

11. Goodwill and intangible assets

The following table reflects intangible assets:

Future amortization of intangible assets is expected by year represent the remaining six months for 2015 and the full 12 months of each successive period as follows:

12. Subsequent events

Dividend

The Board declared an interim dividend for the six months ended June 30, 2015 of 1.9 US cents per share. This dividend will be payable on October 19, 2015 to shareholders on the register at October 2, 2015.