Sierra Monitor Corporation Announces Financial Results for the Second Quarter Ended June 30, 2012

Second Quarter Net Income up 47% on Sales Increase of 17% Year Over Year; First Half Net Income up 67% on Sales Increase of 33% Year Over Year

Marketwired

MILPITAS, CA--(Marketwire -07/23/12)- Sierra Monitor Corporation (SRMC), a company that designs, manufactures and sells electronic safety and environmental instrumentation, today announced financial results for the second quarter and six months ended June 30, 2012.

Financial Highlights

  • Achieved second quarter sales of $4.7 million, an increase of 17% over the second quarter of 2011
  • Reported second quarter net income of $334,875, up 47% compared to second quarter net income of $227,203 in the prior year
  • Increased cash balance to $2,132,296 at the end of the second quarter of 2012 with no bank debt
  • Recorded sales of $10.9 million for the six months ended June 30, 2012, an increase of 33% over the corresponding period in the previous year
  • Reported year-to-date net income of $907,931 compared to net income of $543,824 for the corresponding period in the previous year

Business Highlights

  • Commissioned the first deployment of new multi-channel gas detection system using FieldServer Technologies to provide webserver based data integration of geographical information to a centrally located touch screen computer.
  • Received order to supply gas detection systems to the recognized leader in sustainable farming that blends one of the nation's largest dairy operations with extensive production of potatoes and other crops. By doing so, the farm has created a harmonious, closed-loop system that yields high value-added agricultural products while recycling nearly all farm waste.
  • Supplied gas detection systems valued at over $100,000 to a major Mexico-based automation integrator supplying safety systems for gas pipeline compressor stations.
  • Opened an international sales office in Berlin, Germany, to develop and support FieldServer Technologies' customers in Europe.
  • Received order for FieldServer gateways to upgrade the energy management and control systems for a nationwide retailer. The upgrade is focused on improving the functionality of aging control systems by providing new 'front-end' communications while preserving their original capital investment and allowing monitoring from a centralized location.
  • Signed a partnership with Ontario-based Amika Mobile to use FieldServers to deliver fire and safety data to mass notification and messaging systems for a new US-Canada intelligent border project.

Second Quarter and First Six Months of 2012 Financial Results
Net sales for the quarter ended June 30, 2012 were $4,665,279, an increase of 17% from $3,984,361 reported for the same period of 2011. For the six months ended June 30, 2012, sales increased 33% to $10,867,215, compared to $8,152,778 for the same period of 2011.

Sierra Monitor posted GAAP net income of $334,875, or $0.03 per share (basic and diluted), for the quarter ended June 30, 2012, compared to GAAP net income of $227,203, or $0.02 per share (basic and diluted), for the same period of 2011. Sierra Monitor posted GAAP net income of $907,931, or $0.09 per share basic (basic and diluted), for the six months ended June 30, 2012, compared to GAAP net income of $543,824, or $0.05 per share (basic and diluted), for the same period of 2011.

Sierra Monitor posted non-GAAP net income of $447,102 or $0.05 per share basic and $0.04 per share diluted, for the quarter ended June 30, 2012 compared to non-GAAP net income of $326,494 or $0.03 per share (basic and diluted), for the same period of 2011. Sierra Monitor posted non-GAAP net income of $1,129,317 or $0.11 per share (basic and diluted), for the six months ended June 30, 2012, compared to non-GAAP net income of $752,769, or $0.08 per share basic and $0.07 per share diluted, for the same period of 2011.

"In the face of continuing weakness in the US economy our strategy has been to continue expansion of international sales channels," said Gordon R. Arnold, chairman and chief executive officer. "In the past six months we have opened sales offices in Europe and Asia, appointed a number of international channel partners, and invested in additional third party approvals to meet foreign country requirements. These actions have resulted in an increase in export sales from 15% last year to 36% of sales in the first half of 2012. It is a pleasure to report that our team produced record revenues, record income, positive cash flow and a strong balance sheet with no debt."

Cash Position
Sierra Monitor had $2,132,296 in cash at June 30, 2012 with no bank borrowings. Trade receivables at June 30, 2012 were $2,455,633. At June 30, 2012, the Company's Days Sales Outstanding was 46 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. For more information visit: http://www.sierramonitor.com/

 


Table A
SIERRA MONITOR CORPORATION

Statements of Operations

(Unaudited)


For the three months For the six months ended
ended June 30, June 30,
2012 2011 2012 2011
------------ ------------ ------------ ------------
Net sales $ 4,665,279 $ 3,984,361 $ 10,867,215 $ 8,152,778
Cost of goods sold 1,960,702 1,628,853 5,003,280 3,288,127
------------ ------------ ------------ ------------
Gross profit 2,704,577 2,355,508 5,863,935 4,864,651
Operating expenses
Research and
development 544,975 549,992 1,117,808 1,095,066
Selling and marketing 1,050,539 917,515 2,088,740 1,801,954
General and
administrative 551,466 509,643 1,144,256 1,061,860
------------ ------------ ------------ ------------
2,146,980 1,977,150 4,350,804 3,958,880
------------ ------------ ------------ ------------
Income from
operations 557,597 378,358 1,513,131 905,771
Interest income 31 312 89 602
------------ ------------ ------------ ------------
Income before income
taxes 557,628 378,670 1,513,220 906,373
Income tax provision 222,753 151,467 605,289 362,549
------------ ------------ ------------ ------------
Net income $ 334,875 $ 227,203 $ 907,931 $ 543,824
============ ============ ============ ============
Net income available to
common shareholders per
common share
Basic $ 0.03 $ 0.02 $ 0.09 $ 0.05
============ ============ ============ ============
Diluted $ 0.03 $ 0.02 $ 0.09 $ 0.05
============ ============ ============ ============
Weighted average number
of common shares used
in per share
computations:
Basic
9,901,177 9,896,942 9,901,177 9,896,942
============ ============ ============ ============
Diluted
10,118,965 10,141,609 10,117,771 10,134,794
============ ============ ============ ============




Table B

SIERRA MONITOR CORPORATION
Balance Sheet
Assets June 30, December 31,
2012 2011
------------- -------------
(unaudited)
Current assets:
Cash and cash equivalents $ 2,132,296 $ 1,212,426
Trade receivables, less allowance for doubtful
accounts of approximately $71,000 in 2012 and
$65,000 in 2011, respectively 2,455,633 1,647,948
Inventories, net 3,008,785 3,918,161
Prepaid expenses 232,319 223,362
Income tax deposit 172,883 10,655
Deferred income taxes - current 366,618 366,618
------------- -------------
Total current assets 8,368,534 7,379,170

Property and equipment, net 367,440 399,558
Other assets 113,718 140,558
------------- -------------
Total assets $ 8,849,692 $ 7,919,286
============= =============

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 1,097,247 $ 918,706
Accrued compensation expenses 532,253 497,197
Other current liabilities 99,709 323,114
Income taxes payable - 11,362
------------- -------------
Total current liabilities 1,729,209 1,750,379

Deferred tax liability 108,337 108,337
------------- -------------
Total liabilities 1,837,546 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 2,818,895 2,775,250
Retained earnings 4,183,350 3,275,419
------------- -------------
Total shareholders' equity 7,012,146 6,060,570
------------- -------------
Total liabilities and shareholders' equity $ 8,849,692 $ 7,919,286
============= =============


NON-GAAP FINANCIAL MEASURES

The accompanying news release dated July 23, 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 overall Company 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 including third party approval fees. 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.

Deferred Income Taxes

The effect of changes in deferred tax balances is non-cash and is not comparable across periods or with other companies. We exclude these amounts 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 dilutive stocks using the methods required by GAAP for both GAAP and non-GAAP diluted net income per share.

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.

Sierra Monitor believes 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.

 


Table C
SIERRA MONITOR CORPORATION

Reconciliation of GAAP to Non-GAAP Operating Results

(Unaudited)

For the three months ended For the six months ended
June 30, June 30,
2012 2011 2012 2011
------------- ------------- ------------ ------------
GAAP Net Income $ 334,875 $ 227,203 $ 907,931 $ 543,824
Depreciation and
amortization 73,038 74,310 148,034 138,378
Provision for bad
debt expense 5,000 8,157 6,350 11,157
Provision for
inventory losses 13,356 5,000 23,356 20,000
Stock based
compensation
expense 20,833 11,825 43,645 39,410
------------- ------------- ------------ ------------
Total adjustments to
GAAP net income 112,227 99,292 21,385 208,945
Non-GAAP Net Income $ 447,102 $ 326,495 $ 1,129,316 $ 752,769
============= ============= ============ ============

Non GAAP Net Income
Per Share:
Basic $ 0.05 $ 0.03 $ 0.11 $ 0.08
============= ============= ============ ============
Diluted $ 0.04 $ 0.03 $ 0.11 $ 0.07
============= ============= ============ ============
Weighted-average
number of shares used
in per share
computations:
Basic 9,901,177 9,896,942 9,901,177 9,896,942
============= ============= ============ ============
Diluted 10,118,965 10,141,609 10,117,771 10,134,794
============= ============= ============ ============


Contact:
Sierra Monitor Investor Relations
Steve Polcyn
408-262-6611 ext. 1341
Cell: 925-548-3516
Email Contact

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