Sierra Monitor Corporation Announces Financial Results for the First Quarter Ended March 31, 2012

Record First Quarter Sales of $6.2 Million; a 49% Increase Year Over Year; Earns Record First Quarter Net Income of $573,056 or $0.06 per Share

Marketwired

MILPITAS, CA--(Marketwire -05/02/12)- Sierra Monitor Corporation (SRMC.OB - News), a company that designs, manufactures and sells electronic safety and environmental instrumentation, today announced financial results for the first quarter ended March 31, 2012.

Financial Highlights

  • First quarter sales of $6.2 million, an increase of 49% over sales of $4.2 million in the first quarter of 2011
  • First quarter income from operations of $955,534, compared to income from operations of $527,413 in the same period of 2011
  • First quarter net income increased to $573,056 or $0.06 per share (basic and diluted), compared to net income of $316,623 or $0.03 per share (basic and diluted) in the same prior year period
  • Ended first quarter with a strong balance sheet with approximately $4.6 million of cash and current receivables

Business Highlights

  • Shipped largest order in Sierra Monitor's history. Valued at over $2.5 million, the order involved the supply of gas detection and flame detection modules, beam type gas monitors and numerous audible and visible alarm devices.
  • Qualified the company's infrared-based gas monitors to be deployed worldwide by the global leader in sterilization services for detection of leaks of highly toxic and flammable Ethylene Oxide in storage and process systems.
  • Received order valued at over $100,000 for gas and flame detection systems for a pipeline project in Peru.
  • Opened a Singapore sales office. Combined with our Middle East and Latin America offices this third international location expands the company's coverage in significant global gas detection markets.

First Quarter 2012 Financial Results
Total sales for the quarter ended March 31, 2012 were $6,201,936, an increase of 49%, compared to $4,168,417 reported for the same period of 2011.

Sierra Monitor posted GAAP net income of $573,056, or $0.06 per share (basic and diluted), compared to a net income of $316,623, or $0.03 per share (basic and diluted), for the quarter ended March 31, 2011.

Sierra Monitor posted non-GAAP net income of $682,214, or $0.07 per share (basic and diluted), compared to a net income of $426,276, or $0.04 per share (basic and diluted), for the quarter ended March 31, 2011.

"During the first quarter of 2012, the Sierra Monitor team manufactured and shipped the largest gas detection instrumentation order in the Company's history," said Gordon R. Arnold, chairman and chief executive officer. "As a result, we achieved record sales, up 49%, and record net income, up 81%, compared to the first quarter last year. We will continue strategic expansion of the team with a focus on increasing sales."

Cash Position

At March 31, 2012 Sierra Monitor had $513,391 cash on hand and net accounts receivable of $4,116,723 reflecting the impact of the large first quarter shipment. The Company's Days Sales Outstanding in Accounts Receivable (DSOs) was 44 days.

About Sierra Monitor Corporation

Sierra Monitor Corporation designs, manufactures and sells electronic safety and environmental instrumentation. The company's unique protocol translator product lines enable communication between disparate electronic systems overcoming protocol language barriers. By enabling communication between central building automation systems and many electronic subsystems, such as fire panels, chillers and air handlers, Sierra Monitor assists with the integration of energy saving building automation systems. The company's products improve the safety and comfort of workers while contributing to climate and natural resource protection. Sierra Monitor's intelligent hazardous gas detection systems can be found in a broad range of applications including US Navy ships, wastewater treatment facilities, refineries, offshore oil platforms, chemical plants, parking garages and underground telephone vaults providing 24/7 protection of personnel and facilities.

The Company's vision is to capitalize on the expanding worldwide demand for knowledge-based products and services that improve operational performance, productivity, efficiency and safety in building automation, industrial and military applications, while reducing demands on resources and energy consumption.

 



Table A

SIERRA MONITOR CORPORATION

Condensed Statements of Operations

(Unaudited)

For the three months ended
March 31,
2012 2011
------------- -------------
Net sales $ 6,201,936 $ 4,168,417
Cost of goods sold 3,042,578 1,659,274
------------- -------------
Gross profit 3,159,358 2,509,143
Operating expenses
Research and development 572,833 545,074
Selling and marketing 1,038,201 884,439
General and administrative 592,790 552,217
------------- -------------
2,203,824 1,981,730
------------- -------------
Income from operations 955,534 527,413
Interest income 58 292
------------- -------------
Income before income taxes 955,592 527,705
Income tax provision 382,536 211,082
------------- -------------
Net income $ 573,056 $ 316,623
============= =============
Net income available to common shareholders per
common share
Basic
$ 0.06 $ 0.03
============= =============
Diluted $ 0.06 $ 0.03
============= =============
Weighted average number of common shares used in
per share computations:
Basic 9,901,177 9,896,942
============= =============
Diluted 10,105,661 10,102,942
============= =============



Table B

SIERRA MONITOR CORPORATION

Balance Sheets

Assets March 31, December 31,
2012 2011
------------- -------------
(unaudited)
Current assets:
Cash and cash equivalents $ 513,391 $ 1,212,426
Trade receivables, less allowance for doubtful
accounts of approximately $66,000 and $65,000
respectively 4,116,723 1,647,948
Inventories, net 2,972,022 3,918,161
Prepaid expenses 206,701 232,362
Income tax deposit 10,655 10,655
Deferred income taxes - current 366,618 366,618
------------- -------------
Total current assets 8,186,110 7,379,170

Property and equipment, net 398,974 399,558
Other assets 124,636 140,558
------------- -------------
Total assets $ 8,709,720 $ 7,919,286
============= =============

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 757,949 $ 918,706
Accrued compensation expenses 522,437 497,197
Other current liabilities 277,757 323,114
Income taxes payable 386,802 11,362
------------- -------------
Total current liabilities 1,944,945 1,750,379

Deferred tax liability 108,337 108,337
------------- -------------
Total liabilities $ 2,053,282 1,858,716

Commitments and contingencies
Shareholders' equity:

Common stock, $0.001 par value; 20,000,000
shares authorized; 9,901,177 shares issued
and outstanding 9,901 9,901

Additional paid-in capital 2,798,062 2,775,250
Retained earnings 3,848,475 3,275,419
------------- -------------
Total shareholders' equity 6,656,438 6,060,570
------------- -------------
Total liabilities and shareholders' equity $ 8,709,720 $ 7,919,286
============= =============



NON-GAAP FINANCIAL MEASURES

Sierra Monitor refers to these non-GAAP financial measures in evaluating and measuring the performance of our ongoing operations and for planning and forecasting in future periods. These non-GAAP financial measures also facilitate our internal comparisons to historical operating results. We are reporting non-GAAP financial measures because we believe that the inclusion of comparative numbers provides consistency in our financial reporting. We compute non-GAAP financial measures using the same consistent method from quarter to quarter and year to year.

However, the Company acknowledges that non-GAAP measures have significant limitations in that they do not reflect all of the amounts associated with Sierra Monitor's financial results as determined in accordance with GAAP and that these measures should only be used to evaluate Sierra Monitor's financial results in conjunction with the corresponding GAAP measures, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Because of these limitations, Sierra Monitor qualifies the use of non-GAAP financial information in a statement when non-GAAP information is presented. In addition, the exclusion of the charges and expenses indicated above from the non-GAAP financial measures presented does not indicate an expectation by Sierra Monitor management that similar charges and expenses will not be incurred in subsequent periods.

The accompanying news release dated May 2, 2012 contains non-GAAP financial measures. Table C reconciles the non-GAAP financial measures in that news release to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures include non-GAAP operating expenses, non-GAAP profit from operations and related non-GAAP profit as a percentage of revenue, non-GAAP net profit and basic and diluted non-GAAP net profit per share.

Sierra Monitor continues to provide all information required in accordance with GAAP and does not suggest or believe non-GAAP financial measures should be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Sierra Monitor believes that these non-GAAP financial measures provide meaningful supplemental information regarding its operating results primarily because they exclude amounts the Company does not consider part of ongoing operating results when assessing the Company's overall performance.

We believe that our non-GAAP financial measures facilitate the comparison of results for current periods with results for past periods. We exclude the following items from non-GAAP financial measures:

Depreciation and Amortization of Tangible and Intangible Assets

In accordance with GAAP, depreciation and amortization of tangible and intangible assets includes depreciation of purchased capital assets and amortization of intangible assets such as certifications obtained from Nationally Recognized Test Laboratories. We exclude these amounts from our internal measures for budget and planning purposes.

Provision for Bad Debt Expense

We maintain an allowance for doubtful accounts which is analyzed on a periodic basis to ensure that it is adequate to the best of management's knowledge. We exclude these amounts from our internal measures for budget and planning purposes.

Provision for Inventory Losses

We evaluate our inventories for excess or obsolescence on a quarterly basis. Inventories identified as slow moving or obsolete are determined based on historical experience and current product demand. The quarterly analysis is used to adjust the provision for inventory losses. We exclude the provision for inventory losses from our internal measures for budget and planning purposes.

Stock-Based Compensation Expense

Our non-GAAP financial measures exclude stock-based compensation expenses, which consist of expenses for stock options. While stock-based compensation is an expense affecting our results of operations, management excludes stock-based compensation from our budget and planning process. For these reasons we exclude stock-based compensation expenses from our non-GAAP financial measures. We compute weighted average diluted shares using the methods required by GAAP for both GAAP and non-GAAP diluted net income per share.

 



Table C
SIERRA MONITOR CORPORATION
Reconciliation of GAAP to Non-GAAP Operating Results
(Unaudited)

For the three months ended
March 31
2012 2011
------------- -------------

GAAP Net Income $ 573,056 $ 316,623
Depreciation and amortization 74,996 64,068
Provision for bad debt expense 1,350 3,000
Provision for inventory losses 10,000 15,000
Stock based compensation expense 22,812 27,585
------------- -------------
Total adjustments to GAAP net income 109,158 109,653
------------- -------------
Non-GAAP Net Income $ 682,214 $ 426,276
============= =============

Non GAAP Net Income Per Share:
Basic $ 0.07 $ 0.04
============= =============
Diluted $ 0.07 $ 0.04
============= =============
Weighted-average number of shares used in per
share computations:
Basic 9,901,177 9,896,942
============= =============
Diluted 10,105,661 10,102,942
============= =============

Contact:
Sierra Monitor Investor Relations
Steve Polcyn
408-262-6611 ext. 1341
Email Contact

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