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Sierra Monitor Corporation Announces Financial Results for the First Quarter Ended March 31, 2013

MILPITAS, CA--(Marketwired - May 8, 2013) - 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 first quarter ended March 31, 2013.

Financial Highlights

  • First quarter sales of approximately $4.4 million
  • First quarter income from operations of approximately $0.3 million
  • First quarter net income was approximately $0.2 million or $0.02 per share (basic and diluted)
  • Ended first quarter with strong balance sheet and approximately $2.3 million of cash

Business Highlights

  • Completed delivery of a 400-instrument gas detection safety system valued at over $650,000 to monitor alternative fuel bus parking and maintenance facilities in Ohio. The system included 26 multichannel controllers each with FieldServer gateways that enable centralized graphical representation of the facility safety status.
  • Received orders for multiple gas detection systems to be installed in a power plant in Malaysia and a refinery in Pakistan.
  • Completed qualification and began initial shipments of application specific communication gateways to allow networking of sub-metering instruments, which enable high-resolution collection of electricity consumption data, by a large electrical component manufacturer.
  • Supplied 22 FieldServer gateways to expand the central fire panel-monitoring network at the King Abdul University for Science and Technology (KAUST) in Saudi Arabia. This order is complementary to a large FieldServer network supplied to KAUST by the Company over the past three years.
  • Capitalized on the ongoing trend for conversion of vehicle fleets to natural gas technologies by supplying a gas detection system for safety monitoring of a beverage delivery vehicle maintenance facility.
  • Completed engineering development of the hardware and software components enabling KNX and M-Bus interface on the FieldServer platform. KNX is a worldwide standard for home and building controls and M-Bus is a standard protocol for reading devices such as heating energy meters, water volume counters or electricity energy meters.

First Quarter 2013 Financial Results

Total sales for the quarter ended March 31, 2013 were $4,357,109, compared to $6,201,936 reported for the same period of 2012. Sierra Monitor posted GAAP net income of $197,558, or $0.02 per share (basic and diluted), compared to a net income of $573,056, or $0.06 per share (basic and diluted), for the quarter ended March 31, 2012.

Sierra Monitor posted non-GAAP net income of $308,669, or $0.03 per share (basic and diluted), compared to a net income of $682,214, or $0.07 per share (basic and diluted), for the quarter ended March 31, 2012. See Table C of this release for a reconciliation of GAAP to non-GAAP operating results.

The Company paid a quarterly dividend of $0.01 per share of common stock to shareholders of record on January 31, 2013.

"During the first quarter of 2013, our sales revenue returned to a more normalized run rate compared to the first quarter of 2012 where we had shipped the largest order for gas detection instrumentation in the Company's history valued at over $2 million," said Gordon R. Arnold, chairman and chief executive officer. "We are continuing to expand our international presence and increasing our presence in the alternative fuels market where we shipped an order for a gas detection system valued at over $650,000."

Cash Position
At March 31, 2013 Sierra Monitor had $2,275,910 cash on hand and net accounts receivable of $2,477,431. The Company's Days Sales Outstanding in Accounts Receivable (DSOs) was 50 days.

About Sierra Monitor Corporation

Sierra Monitor Corporation designs, manufactures and sells high reliability electronic communications, safety and environmental instrumentation. The company's unique protocol gateway 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's solutions enable 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 and flame 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 demands on resources and energy consumption.

 
 
Table A
SIERRA MONITOR CORPORATION
 
Condensed Statements of Operations
(Unaudited)
 
 
    For the three months ended March 31,
    2013   2012
Net sales   $ 4,357,109   $ 6,201,936
Cost of goods sold     1,904,945     3,042,578
    Gross profit     2,452,164     3,159,358
Operating expenses            
  Research and development     515,496     572,833
  Selling and marketing     1,064,544     1,038,201
  General and administrative     542,874     592,790
      2,122,914     2,203,824
    Income from operations     329,250     955,534
  Interest income     2,763     58
    Income before income taxes     332,013     955,592
Income tax provision     134,455     382,536
    Net income   $ 197,558   $ 573,056
Net income available to common shareholders per common share            
    Basic   $ 0.02   $ 0.06
    Diluted   $ 0.02   $ 0.06
Weighted average number of common shares used in per share computations:            
    Basic     10,070,978     9,901,177
    Diluted     10,131,166     10,105,661
             
             
             
Table B
 
SIERRA MONITOR CORPORATION
 
Balance Sheets
 
 
Assets   March 31,   December 31,
    2013   2012
    (unaudited)    
Current assets:            
  Cash and cash equivalents   $ 2,275,910   $ 2,306,258
  Trade receivables, less allowance for doubtful accounts of approximately $83,000 at March 31, 2013 and December 31, 2012, respectively.     2,477,431     1,913,185
  Inventories, net     2,724,107     2,994,804
  Prepaid expenses     370,222     280,363
  Income tax deposit     120,796     120,796
  Deferred income taxes - current     335,730     335,730
      Total current assets     8,304,196     7,951,136
             
Property and equipment, net     284,160     289,505
Other assets     228,209     135,393
      Total assets   $ 8,816,565   $ 8,376,034
             
Liabilities and Shareholders' Equity            
Current liabilities:            
  Accounts payable   $ 676,785   $ 713,973
  Accrued compensation expenses     425,686     259,546
  Income taxes payable     131,451     -
  Other current liabilities     87,531     89,989
      Total current liabilities     1,321,453     1,063,508
             
Deferred tax liability     59,419     59,419
      Total liabilities     1,380,872     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 at March 31, 2013 and December 31, 2012, respectively.     10,104     10,004
  Additional paid-in capital     2,957,869     2,871,898
  Retained earnings     4,467,720     4,371,205
      Total shareholders' equity     7,435,693     7,253,107
      Total liabilities and shareholders' equity   $ 8,816,565   $ 8,376,034
             
             

NON-GAAP FINANCIAL MEASURES

Sierra Monitor refers to certain non-GAAP operating results in evaluating and measuring the performance of our ongoing operations and for planning and forecasting future periods. These non-GAAP financial measures also facilitate internal comparisons to historical operating results. The Company presents these non-GAAP financial measures because it believes them to be important supplemental measures of performance that are used by security analysts, investors and other interested parties in the evaluation of companies in our industry. The Company presents these non-GAAP financial measures because it believes them to be important supplemental measures of performance that are used by security analysts, investors and other interested parties in the evaluation of companies in our industry.

These non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to net income, operating income, and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of the Company nor is it intended to be predictive of potential future results. Investors should not consider these non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP. Our management uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparison..

The accompanying news release dated May 8, 2013 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 profit and basic and diluted non-GAAP net profit per share.

We exclude the following items from our non-GAAP financial measures as we do not believe they are indicative of our ongoing operations and are excluded in our internal measures for budget and planning purposes:

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.

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. 

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. 

Stock-Based Compensation Expense
Our non-GAAP financial measures exclude stock-based compensation expenses, which consist of expenses for stock options. The Company excludes stock-based compensation because it is non-cash in nature. 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
    2013   2012
             
GAAP Net Income   $ 197,558   $ 573,056
  Depreciation and amortization     66,275     74,996
  Provision for bad debt expense     -     1,350
  Provision for inventory losses     21,765     10,000
  Stock based compensation expense     23,071     22,812
Total adjustments to GAAP net income     111,111     109,158
Non-GAAP Net Income   $ 308,669   $ 682,214
             
Non GAAP Net Income Per Share:            
  Basic   $ 0.03   $ 0.07
  Diluted   $ 0.03   $ 0.07
Weighted-average number of shares used in per share computations:            
  Basic     10,070,978     9,901,177
  Diluted     10,131,166     10,105,661