PDF - Somero Enterprises

Section 4Financial Statements: Somero Enterprises, Inc. and Subsidiaries13 Business and Credit ConcentrationThe Company’s line of business could be significantly impacted by, among other things, the state of the general economy, the Company’sability to continue to protect its intellectual property rights, and the potential future growth of foreign competitors. Any of the foregoingmay significantly affect management’s estimates and the Company’s performance. At 31 December 2005, and 31 December 2006, theCompany had receivables from two customers which represented approximately 25% and 16% of total accounts receivable, respectively.14 Commitments and ContingenciesThe Company has entered into employment agreements with certain members of senior management. The terms of these agreementsrange from six months to one year and include noncompete and nondisclosure provisions as well as providing for defined severancepayments in the event of termination.15 Income TaxesThe Company calculates current and deferred income tax expense and deferred income tax assets and liabilities in accordance withSFAS No. 109.The provision for income taxes at 31 December 2005 and 31 December 2006 includes the following:2005 2006US$ 000 US$ 000Current income taxFederal 507 2,314State 84 193Foreign (11) 323Total current income tax expense 580 2,830Deferred tax expenseFederal (28) 23State (4) 3Foreign 0 0Total deferred tax (benefit) expense (32) 26Total tax expense 548 2,856The components of the net deferred income tax asset at 31 December were as follows:2005 2006US$ 000 US$ 000Deferred tax asset (liability)Depreciation 38 28Intangibles (53) (195)Share-based compensation 0 21Other 47 152Net deferred tax asset (liability) 32 6Current 47 152Non-current (15) (146)32 641Somero Enterprises, Inc.Annual Report and Accounts 2006