Sierra Monitor Corporation Announces Financial Results for the Fourth Quarter and Year Ended December 31, 2013

Fourth Quarter Net Sales Increased 11% Year Over Year, Net Income up 46% in Fourth Quarter 2013

Marketwired

MILPITAS, CA--(Marketwired - Feb 25, 2014) - Sierra Monitor Corporation (OTCQB: SRMC), a company that designs, manufactures and sells high reliability electronic communications, safety and environmental instrumentation, today announced financial results for the fourth quarter and year ended December 31, 2013.

Financial Highlights

  • Annual sales of approximately $18.3 million for the period ended December 31, 2013, compared to approximately $18.8 million reported for the prior year
  • Annual net income increased 13% to approximately $1.4 million or $0.13 per share (basic and diluted), compared to net income of approximately $1.2 million or $0.12 per share (basic and diluted) for the previous year
  • Fourth quarter net sales were approximately $4.3 million compared to approximately $3.9 million in the prior year, an increase of 11%
  • Fourth quarter net income was $197,295 or $0.02 per share (basic and diluted), compared to net income of $135,503 or $0.01 per share (basic and diluted) in the same prior year period
  • Ended fourth quarter with cash on hand of over $3.4 million and no bank debt
  • Paid fifth consecutive quarterly cash dividend of $0.01 per share of common stock

Fourth Quarter Business Highlights

  • Provided ammonia gas sensor detection systems for measurement of nitric oxide gases for pollution control systems at a major power plant expansion.
  • Completed development and began shipment of FieldServer's ProtoCessor-based products, which connect to a wireless mesh network lighting control system and enable integration into a building automation system with multiple protocols, to a major lighting controls company.
  • Supplied multi-controller gas detection systems for combustible process gases for a perfume factory in Mexico.
  • Completed delivery of gas detection safety systems to monitor an alternative fuels bus maintenance facility in Rock Island, Illinois.
  • Made initial shipments of a multi-protocol embedded FieldServer gateway for a major manufacturer of ultrasonic flow meters.
  • Shipped flame detection systems for installation in an aircraft hangar upgrade in Southern California.

2013 Financial Results for Fourth Quarter and the Year
Net sales for the quarter ended December 31, 2013 were $4,267,857, an increase of 11% compared to $3,851,409 reported for the same period of 2012. For the year ended December 31, 2013, net sales were $18,345,179 compared to $18,759,030 for the same period of 2012.

Sierra Monitor posted a 46% increase in GAAP net income of $197,295, or $0.02 per share (basic and diluted), for the quarter ended December 31, 2013, compared to GAAP net income of $135,503, or $0.01 per share (basic and diluted), for the same period of 2012. Sierra Monitor posted a 13% increase in GAAP net income of $1,352,589, or $0.13 per share (basic and diluted), for the year ended December 31, 2013, compared to GAAP net income of $1,195,829, or $0.12 per share (basic and diluted), for the same period of 2012. 

Sierra Monitor posted non-GAAP net income of $276,303 or $0.03 per share (basic and diluted), for the quarter ended December 31, 2013 compared to non-GAAP net income of $265,860 or $0.03 per share (basic and diluted), for the same period of 2012. Sierra Monitor posted non-GAAP net income of $1,711,582 or $0.17 per share (basic and diluted), for the year ended December 31, 2013, compared to non-GAAP net income of $1,667,968, or $0.17 per share basic and $0.16 per share diluted for the same period of 2012.

See Table C of this release for a reconciliation of GAAP to non-GAAP operating results.

Cash Position
Sierra Monitor had $3,421,679 in cash at December 2013 with no bank borrowings. Net trade receivables at December 31, 2013 were $1,943,643. At December 31, 2013, the Company's days sales outstanding were 36 days.

"2013 was a year of progress for Sierra Monitor," said Gordon R. Arnold, president and chief executive officer. "We reported strong sales with record earnings and ended the year with approximately $3.4 million of cash on hand. We continued to invest in next generation products, releasing for shipment of two FieldServer-based products, three gas detection modules and numerous protocol drivers and enhancements. We also began a major initiative to expand and strengthen our sales team. The fourth quarter addition of a second sales manager in Dubai, followed by announcement of the appointment of Anders Axelsson as Vice President, Sales and Marketing, indicate our commitment to expanding sales investment for next year and beyond. Mr. Axelsson is a seasoned global executive leader and general manager with extensive experience in both sensors and controls and in networking products. With our strong product line and expanded sales team, I look forward to further successes in 2014," Mr. Arnold stated.

About Sierra Monitor Corporation
Sierra Monitor Corporation designs, manufactures and sells high reliability electronic communications, 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 alternate fuel vehicle maintenance facilities, 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 our customers' resource and energy consumption.

 
Table A
SIERRA MONITOR CORPORATION
 
Statements of Operations
 
(Unaudited)
 
 
    For the three months ended
December 31,
  For the twelve months ended
December 31,
    2013   2012   2013   2012
Net sales   $ 4,267,857   $ 3,851,409   $ 18,345,179   $ 18,759,030
Cost of goods sold     1,873,171     1,615,132     7,629,338     8,318,419
    Gross profit     2,394,686     2,236,277     10,715,841     10,440,611
                         
Operating expenses                        
  Research and development     529,514     526,430     2,156,322     2,167,548
  Selling and marketing     967,421     980,359     4,094,819     4,081,745
  General and administrative     595,506     541,587     2,246,301     2,236,415
      2,092,441     2,048,376     8,497,442     8,485,708
                         
    Income from operations     302,245     187,901     2,218,399     1,954,903
                         
  Interest income     326     61     3,224     269
    Income before income taxes     302,571     187,962     2,221,623     1,955,172
Income tax provision     105,276     52,459     869,034     759,343
    Net income   $ 197,295   $ 135,503   $ 1,352,589   $ 1,195,829
Net income available to common shareholders per common share                        
    Basic   $ 0.02   $ 0.01   $ 0.13   $ 0.12
    Diluted   $ 0.02   $ 0.01   $ 0.13   $ 0.12
Weighted average number of common shares used in per share computations:                        
    Basic     10,104,311     10,004,311     10,095,978     9,926,961
    Diluted     10,241,809     10,168,529     10,152,270     10,139,431
                             
 
Table B
 
SIERRA MONITOR CORPORATION
 
Balance Sheet
 
Assets   December 31,   December 31,
    2013   2012
    Unaudited    
             
Current assets:            
  Cash and cash equivalents   $ 3,421,679   $ 2,306,258
  Trade receivables, less allowance for doubtful accounts of approximately $79,000 and $83,000 respectively     1,943,643     1,913,185
  Inventories, net     2,740,835     2,994,804
  Prepaid expenses     311,144     280,363
  Income tax deposit     106,859     120,796
  Deferred income taxes     307,938     335,730
      Total current assets     8,832,098     7,951,136
             
Property and equipment, net     390,755     289,505
Other assets     273,699     135,393
      Total assets   $ 9,496,552   $ 8,376,034
             
Liabilities and Shareholders' Equity            
Current liabilities:            
  Accounts payable   $ 689,014   $ 713,973
  Accrued compensation expenses     290,589     259,546
  Other current liabilities     71,729     89,989
      Total current liabilities     1,051,332     1,063,508
             
Deferred tax liability     84,438     59,419
      Total liabilities     1,135,770     1,122,927
             
Commitments and contingencies            
Shareholders' equity:            
  Common stock, $0.001 par value; 20,000,000 shares authorized; 10,104,311 and 10,004,311 shares issued and outstanding, respectively     10,104     10,004
  Additional paid-in capital     3,031,056     2,871,898
  Retained earnings     5,319,622     4,371,205
      Total shareholders' equity     8,360,782     7,253,107
      Total liabilities and shareholders' equity   $ 9,496,552   $ 8,376,034
                   

NON-GAAP FINANCIAL MEASURES
The accompanying news release dated February 25, 2014 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 net income and basic and diluted non-GAAP net income 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. There are no deferred income taxes reported in the current reporting periods.

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
December 31,
  For the twelve months ended
December 31,
    2013     2012   2013     2012
                             
GAAP Net Income   $ 197,295     $ 135,503   $ 1,352,589     $ 1,195,829
Adjustments:                            
  Depreciation and amortization     74,205       70,429     263,274       290,679
  Provision for bad debt expense     -       2,500     (3,479 )     17,934
  Provision for inventory losses     (51,917 )     929     (24,852 )     35,887
  Deferred income taxes     27,795       30,888     27,792       30,888
  Stock based compensation expense     28,925       25,611     96,258       96,751
Total adjustments to GAAP net income     79,008       130,357     358,993       472,139
Non-GAAP Net Income   $ 276,303     $ 265,860   $ 1,711,582     $ 1,667,968
                             
Non GAAP Net Income Per Share:                            
  Basic   $ 0.03     $ 0.03   $ 0.17     $ 0.17
  Diluted   $ 0.03     $ 0.03   $ 0.17     $ 0.16
                             
Weighted-average number of shares used in per share computations:                            
  Basic     10,104,311       10,004,311     10,095,978       9,926,961
  Diluted     10,241,809       10,168,529     10,152,270       10,139,431
                             
Contact:
Sierra Monitor Investor Relations
Steve Polcyn
408-262-6611 ext. 134
Email Contact
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