SOURCE: RAE Systems

RAE Systems

May 05, 2010 16:02 ET

RAE Systems Announces First Quarter 2010 Results

Reports Revenue of $18.8 Million and Gross Margin of 54%

SAN JOSE, CA--(Marketwire - May 5, 2010) - RAE Systems Inc. (NYSE Amex: RAE), a leader in delivering innovative sensor solutions to serve industrial, energy, environmental, and government safety markets worldwide, reported financial results and business highlights for the first quarter ended March 31, 2010.

First Quarter 2010 Financial Results

For the first quarter of 2010, RAE Systems reported revenue of $18.8 million, compared with $19.1 million in the same quarter in 2009. For the first quarter of 2010, Americas contributed 44% of total revenue; Asia contributed 37%; and Europe contributed 19%. Gross margin for the first quarter of 2010 was 54%, compared with 49% for the first quarter of 2009, reflecting a favorable product mix that included an increase in the sales of multi-gas products, sensors and accessories. The net loss for the first quarter of 2010 was $364,000, or $0.01 per share, compared with a net loss of $988,000, or $0.02 per share, for the first quarter of 2009.

"We have positioned RAE Systems to be a leading innovator of safety and security products to deliver wireless real-time data enabling our customers to make better decisions faster," said Robert Chen, RAE Systems president and chief executive officer. "For example, we previewed ProRAE Guardian, an advanced generation virtual command center for intelligent wireless monitoring at a recent first responder trade show. We continue to expand our target market, and with our suite of wireless and compliance products we are well positioned to benefit from an improving global economy."

"We are encouraged by our first quarter performance. We achieved the second highest first quarter revenue in the company's history and our highest gross margin in the last four quarters. We are reaffirming our 2010 guidance for full year revenue to be in the range of $83 million to $85 million and we expect a small net loss for the year," concluded Chen.

First Quarter 2010 Business Highlights

--  Delivered orders for MultiRAE Plus to the U.S. military for aviation
    safety.
--  Sold single and multi-gas monitors into the Middle East for oil
    production operations.
--  First responders continued to purchase AreaRAE and AreaRAE Gamma Rapid
    Deployment Kits.
--  Several gas and electric utility companies standardized on QRAE II,
    4-gas monitors.
--  Continued to sell gas detection products to steel mills, petrochemical
    plants and for environmental remediation projects in China.
--  Deployed AreaRAE wireless monitors at key public events including the
    Super Bowl, NBA All Star Game and the Vancouver Winter Olympics.

About RAE Systems

RAE Systems is a leading global provider of rapidly deployable connected, intelligent gas detection systems that enable real-time safety and security threat detection. RAE Systems products are used in more than 95 countries by many of the world's leading corporations and government agencies.

RAE Systems offers a full line of wirelessly enabled solutions including personal, hand-held, transportable, and fixed instruments designed to meet the needs of any usage scenario. Applications include energy production, refining, industrial and environmental safety, public venue safety and government first responder markets.

For more information about RAE Systems, please visit raesystems.com.

Safe Harbor Statement

This press release may contain "forward-looking" statements, as that term is used in Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include, without limitation: expressions of "belief," "anticipation," or "expectations" of management; statements as to industry trends or future results of operations of RAE Systems and its subsidiaries; and other statements that are not historical fact. These types of statements address matters that are subject to risks and uncertainties, which could cause actual results to differ materially. Factors that could cause or contribute to such differences include, but are not limited to, the general economic and industry factors, the resolution of issues associated with the Company's Foreign Corrupt Practices Act, investigation and receptiveness of the market to RAE Systems and its products. In addition, our forward-looking statements should be considered in the context of other risk factors discussed in our filings with the Securities and Exchange Commission, including but not limited to our annual report on Form 10-K and Form 10-Q filings, available online at http://www.sec.gov. All forward-looking statements are based on information available to the company on the date hereof, and the company assumes no obligation to update such statements.

                             RAE Systems Inc.
                  Condensed Consolidated Balance Sheets
              (in thousands, except share and par value data)
                                (unaudited)

                                                    March 31,  December 31,
                                                       2010        2009
                                                    ----------  ----------
ASSETS
Current assets:
  Cash and cash equivalents                         $   18,351  $   18,528
  Restricted cash                                        2,146       2,146
  Trade notes receivable                                 1,998       2,039
  Accounts receivable, net of allowances of $5,413
   and $5,380, respectively                             17,762      19,428
  Accounts receivable from affiliate                       235         322
  Inventories                                           12,325      12,068
  Prepaid expenses and other current assets              3,778       3,983
  Income taxes receivable                                  659         659
                                                    ----------  ----------
      Total current assets                              57,254      59,173
                                                    ----------  ----------
Property and equipment, net                             16,022      15,590
Intangible assets, net                                   2,202       2,428
Investments in unconsolidated affiliates                   306         358
Other assets                                               552       1,325
                                                    ----------  ----------
  Total assets                                      $   76,336  $   78,874
                                                    ==========  ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                  $    5,842  $    6,454
  Accounts payable to affiliate                             47          92
  Bank lines of credit                                   4,020       4,026
  Accrued liabilities                                   14,388      15,753
  Notes payable to related parties, current                380         370
  Income taxes payable                                     310         199
  Deferred revenue, current                                492         603
                                                    ----------  ----------
      Total current liabilities                         25,479      27,497
                                                    ----------  ----------
Deferred revenue, non-current                              554         615
Deferred tax liabilities, non-current                      156         156
Long-term debt                                           1,463       1,463
Deferred gain on sale of real estate, non-current        4,285       4,444
Other long-term liabilities                                832         781
Notes payable to related parties, non-current              361         363
                                                    ----------  ----------
      Total liabilities                                 33,130      35,319
                                                    ----------  ----------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
  Common stock, $0.001 par value, 200,000,000 shares
   authorized; 59,438,328 and 59,438,328 shares
   issued and outstanding, respectively                     59          59
  Additional paid-in capital                            64,186      63,832
  Accumulated other comprehensive income                 6,549       6,844
  Accumulated deficit                                  (32,070)    (31,706)
                                                    ----------  ----------
      Total RAE Systems Inc. shareholders' equity       38,724      39,029
  Noncontrolling interest                                4,482       4,526
                                                    ----------  ----------
      Total shareholders' equity                        43,206      43,555
                                                    ----------  ----------
      Total liabilities and shareholders' equity    $   76,336  $   78,874
                                                    ==========  ==========



                             RAE Systems Inc.
              Condensed Consolidated Statements of Operations
                    (in thousands, except share data)
                                (unaudited)

                                                      Three Months Ended
                                                           March 31,
                                                    ----------------------
                                                       2010        2009
                                                    ----------  ----------
Net sales                                           $   18,795  $   19,113
Cost of sales                                            8,606       9,783
                                                    ----------  ----------
Gross profit                                            10,189       9,330
                                                    ----------  ----------
Operating expenses:
  Sales and marketing                                    4,658       4,382
  Research and development                               1,687       1,595
  General and administrative                             4,098       4,413
                                                    ----------  ----------
       Total operating expenses                         10,443      10,390
                                                    ----------  ----------
Operating loss                                            (254)     (1,060)
Other income (expense):
  Interest income                                           23           9
  Interest expense                                         (51)       (145)
  Other, net                                                54         (61)
  Equity in loss of unconsolidated affiliate               (51)        (67)
                                                    ----------  ----------
Loss before income taxes                                  (279)     (1,324)
Income tax (expense) benefit                              (129)         41
                                                    ----------  ----------
Net loss                                                  (408)     (1,283)
  Net loss attributable to the noncontrolling
   interest                                                 44         295
                                                    ----------  ----------
Net loss attributable to RAE Systems Inc.           $     (364) $     (988)
                                                    ==========  ==========

Net loss per share-basic and diluted                $    (0.01) $    (0.02)
                                                    ==========  ==========
Weighted average common shares outstanding-basic
 and diluted                                            59,405      59,343
                                                    ==========  ==========



The following table sets forth the components of our Condensed Consolidated
Statements of Operations as a percentage of net sales:

                                                            Three Months
                                                           Ended March 31,
                                                          ----------------
                                                            2010     2009
                                                          -------  -------
Net sales                                                     100%     100%
Cost of sales                                                  46%      51%
                                                          -------  -------
Gross profit                                                   54%      49%
                                                          -------  -------
Operating expenses:
  Sales and marketing                                          24%      23%
  Research and development                                      9%       9%
  General and administrative                                   22%      23%
                                                          -------  -------
       Total operating expenses                                55%      55%
                                                          -------  -------
Operating loss                                                 -1%      -6%
Other income (expense):
  Interest income                                               0%       0%
  Interest expense                                              0%      -1%
  Other, net                                                    0%       0%
  Equity in loss of unconsolidated affiliate                    0%       0%
                                                          -------  -------
Loss before income taxes                                       -1%      -7%
Income tax (expense) benefit                                   -1%       0%
                                                          -------  -------
Net loss                                                       -2%      -7%
  Net loss attributable to the noncontrolling interest          0%       2%
                                                          -------  -------
Net loss attributable to RAE Systems Inc.                      -2%      -5%
                                                          =======  =======


                             RAE Systems Inc.
   Non-GAAP Information and Reconciliation to Comparable GAAP Financial
                                 Measures
                    (in thousands, except share data)
                                (unaudited)

                 Three Months Ended                  Year Ended
            ----------------------------  --------------------------------
              March 31,      March 31,      December 31,     December 31,
                2010           2009             2009             2008
            -------------  -------------  ---------------  ---------------
              Net            Net             Net            Net
            income Basic   income  Basic   income  Basic   income   Basic
            (loss)  EPS    (loss)   EPS    (loss)   EPS    (loss)    EPS
            -----  ------  -----  ------  -------  ------  -------  ------
GAAP
 measures   $(364) $(0.01) $(988) $(0.02) $(5,759) $(0.10) $(7,152) $(0.12)
 Item
  reconciling
  GAAP net
  income
  and EPS
  to Non-GAAP
  net income
  and EPS:
 Related to
  operating
  expenses:
  General and
   administrative:
   Non-recurring
    charge for
    proposed
    FCPA
    settle-
    ment        -       -      -       -    3,500    0.06        -       -
            -----  ------  -----  ------  -------  ------  -------  ------
Non-GAAP
 measures   $(364) $(0.01) $(988) $(0.02) $(2,259) $(0.04) $(7,152) $(0.12)
            -----  ------  -----  ------  -------  ------  -------  ------

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