SOURCE: Sierra Monitor Corporation

August 06, 2008 10:00 ET

Sierra Monitor Corporation Announces Financial Results for the Second Quarter Ended June 30, 2008

Receives Single Largest Order for Gas and Fire Detection Devices in Company History; Achieves Twelfth Consecutive Quarter of Profitable Growth

MILPITAS, CA--(Marketwire - August 6, 2008) - Sierra Monitor Corporation (OTCBB: SRMC), a Cleantech focused company that delivers information technology for environment measurement and control by developing specialized embedded software deployed on proprietary hardware platforms, today announced financial results for the second quarter ended June 30, 2008.

Financial Highlights

--  Second quarter revenues of $3.5 million
--  Second quarter income from operations of $226,000 or 6.5% of sales
--  Second quarter net income of $136,000 or 4.0% of sales
--  Achieved twelfth consecutive quarter of profitability
--  Year-to-date revenues of $6.6 million, an increase of 6% year-over-
    year
--  Positive cash flow from operations for the quarter and year-to-date
    periods.
    

Second Quarter 2008 Business Highlights

--  Received an order valued at more than $750,000 to supply gas and fire
    detection devices for a large gas processing project in China.
--  Sales of ProtoCessor products Increased 83% year-over-year. Early
    adopter customers continued to increase their utilization of Sierra
    Monitor's unique connectivity solution while new customers began their
    initial consumption.
--  Completed an agreement to supply ProtoCessor products to another large
    US fire panel manufacturer.
--  Obtained American Bureau of Shipbuilders (ABS) approval for the
    Company's new series of gas detectors. ABS approval allows Sierra Monitor's
    products to be deployed in certain offshore platform applications.
    

Second Quarter and First Six Months of 2008 Financial Results

Total sales for the quarter ended June 30, 2008 were $3,466,426, an increase of 1% from $3,419,675 reported for the same period of 2007. For the six months ended June 30, 2008, sales increased 6% to $6,603,224, compared to $6,242,886 for the same period of 2007.

Sierra Monitor posted GAAP net income of $136,450, or $0.01 per share (basic and diluted), for the quarter ended June 30, 2008, compared to GAAP net income of $260,125, or $0.02 per share (basic and diluted), for the same period of 2007. Sierra Monitor posted GAAP net income of $200,268, or $0.02 per share (basic and diluted), for the six months ended June 30, 2008, compared to GAAP net income of $304,264, or $0.03 per share (basic and diluted), for the same period of 2007.

Sierra Monitor posted non-GAAP net income of $239,896, or $0.02 per share (basic and diluted), for the quarter ended June 30, 2008, compared to non-GAAP net income of $346,084, or $0.03 per share (basic and diluted), for the same period of 2007. Sierra Monitor posted non-GAAP net income of $395,514, or $0.04 per share (basic) and $0.03 per share (diluted), for the six months ended June 30, 2008, compared to non-GAAP net income of $428,193, or $0.04 per share (basic and diluted), for the same period of 2007.

"Our continued growth and profitability are encouraging indicators that we have put in place a great line of products and a strong sales team dedicated to expanding our market penetration. Although our expenses have increased as we grow our infrastructure and meet our compliance reporting obligations, our fundamental business structure is sound," said Gordon Arnold, President and Chief Executive Officer. "I am also pleased to note that we are currently processing the largest single order in our history for gas detection and fire devices in connection with a large gas processing project in China."

Cash Position

Sierra Monitor had $631,680 in cash at June 30, 2008 and no short or long term debt. Trade receivables at June 30, 2008 were $2,087,403. The Company's Days Sales Outstanding in Accounts Receivable (DSOs) was 54 days.

About Sierra Monitor Corporation

Sierra Monitor delivers information technology for environment measurement and control by developing specialized embedded software that is deployed on proprietary hardware platforms. Embedded software enables data transfer between subsystems using protocol and physical medium translation. Proprietary hardware platforms allow the Company to increase its value proposition while protecting intellectual property.

The Company's vision is to capitalize on the expanding worldwide demand for Cleantech 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.

Sierra Monitor's hardware platforms include original equipment modules for installation in customer devices and controllers, gateway boxes generally used by integrators for machine to machine (M2M) protocol translation, and multi-component safety systems generally focused on gas and fire detection.

By providing an intelligent interface, the Company's products enable various machines, devices, systems and people to reliably communicate useful information for the measurement and control of various environments including buildings, plants, and factories. By delivering the data on various communications levels, including Ethernet, internet, LONworks, Profibus, and others, the Company's products make it possible for data to be accessed at more appropriate levels, such as network operations centers, control rooms or remote locations.

Sierra Monitor is an established supplier of safety and environmental instruments with more than 15,000 installations worldwide.

Table A
                        SIERRA MONITOR CORPORATION
                         Statements of Operations
                                (unaudited)


                           For the three months       For the six months
                              ended June 30,            ended June 30,
                         ------------------------  ------------------------
                             2008         2007         2008         2007
                         -----------  -----------  -----------  -----------
Net sales                $ 3,466,426  $ 3,419,675  $ 6,603,224  $ 6,242,886
Cost of goods sold         1,457,333    1,339,443    2,666,424    2,558,141
                         -----------  -----------  -----------  -----------
     Gross profit          2,009,093    2,080,232    3,936,800    3,684,745
                         -----------  -----------  -----------  -----------
Operating expenses
  Research and
   development               441,741      493,756      967,546    1,029,040
  Selling and
   marketing                 820,978      697,339    1,636,334    1,337,896
  General and
   administrative            520,215      452,631      977,254      807,300
                         -----------  -----------  -----------  -----------
                           1,782,934    1,643,726    3,581,134    3,174,236
                         -----------  -----------  -----------  -----------
     Income from
      operations             226,159      436,506      355,666      510,509
Interest expense                   -        2,965            -        3,403
                         -----------  -----------  -----------  -----------
     Income before
      income taxes           226,159      433,541      355,666      507,106

Income taxes                  89,709      173,416      155,398      202,842
                         -----------  -----------  -----------  -----------

     Net income          $   136,450  $   260,125  $   200,268  $   304,264
                         ===========  ===========  ===========  ===========
Net income per share:
  Basic                  $      0.01  $      0.02  $      0.02  $      0.03
                         -----------  -----------  -----------  -----------
  Diluted                $      0.01  $      0.02  $      0.02  $      0.03
                         -----------  -----------  -----------  -----------
Weighted-average number
 of shares used in per
 share computations:
  Basic                   11,295,192   11,075,192   11,225,192   11,066,859
                         -----------  -----------  -----------  -----------
  Diluted                 11,671,162   11,801,860   11,686,482   11,790,948
                         -----------  -----------  -----------  -----------




Table B
                       SIERRA MONITOR CORPORATION
                              Balance Sheet
                              June 30, 2008
                               (unaudited)


                                                (unaudited)   December 31,
                   Assets                      June 30, 2008      2007
Current assets:
  Cash                                         $     631,680  $     675,108
  Trade receivables, less allowance for
   doubtful accounts of approximately
   $110,000 and $86,000 respectively               2,087,403      2,036,050
  Inventories, net                                 1,987,053      2,050,395
  Prepaid expenses                                   200,433        132,872
  Income taxes deposit                                57,286              -
  Deferred income taxes                              286,743        284,185
                                               -------------  -------------
     Total current assets                          5,250,598      5,178,610

Property and equipment, net                          369,170        307,965
Deferred income taxes                                    981              -
Other assets                                         206,666        232,799
                                               -------------  -------------

     Total assets                              $   5,827,415  $   5,719,374
                                               =============  =============
     Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                             $     565,504  $     590,753
  Accrued compensation expenses                      393,427        321,445
  Other current liabilities                          193,472        388,542
                                               -------------  -------------
     Total current liabilities                     1,152,403      1,300,740

Commitments and contingencies

Shareholders' equity:
  Common stock, $0.001 par value; 20,000,000
   shares authorized; 11,423,212 and
   11,155,192 shares issued and outstanding
   respectively                                       11,423         11,155
  Additional paid-in capital                       3,429,044      3,373,202
  Retained earnings                                1,234,545      1,034,277
                                               -------------  -------------
     Total shareholders' equity                    4,675,012      4,418,634
                                               -------------  -------------
     Total liabilities and shareholders'
      equity                                   $   5,827,415  $   5,719,374
                                               =============  =============

NON-GAAP FINANCIAL MEASURES

The accompanying release dated August 6, 2008 contains non-GAAP financial measures. Table C reconciles the non-GAAP financial measures in that 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 (loss) from operations and related non-GAAP profit (loss) as a percentage of revenue, non-GAAP net profit (loss) and basic and diluted non-GAAP net profit (loss) per share.

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

Share-based Compensation Expense

Our non-GAAP financial measures exclude share-based compensation expenses, which consist of expenses for stock options. While share-based compensation is an expense affecting our results of operations, management excludes share-based compensation from our budget and planning process. For these reasons, we exclude share-based compensation expenses from our non-GAAP financial measures. We compute weighted average dilutive shares using the methods required by SFAS 128 and SFAS 123(R) for both GAAP and non-GAAP diluted net income per share.

Interest Expense

We evaluate our operating results in a manner that focuses on what management believes to be our ongoing business operations. Our non-GAAP financial measures exclude interest expense as it is not considered to be a part of operating expenses.

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. 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 Non-GAAP Financial Measures
            to Most Directly Comparable GAAP Financial Measures
                               June 30, 2008
                                (unaudited)


                           For the three months       For the six months
                              ended June 30,            ended June 30,
                         ------------------------  ------------------------
                             2008         2007         2008         2007
                         -----------  -----------  -----------  -----------
Net sales                $ 3,466,426  $ 3,419,675  $ 6,603,224  $ 6,242,886
Cost of goods sold         1,457,333    1,339,443    2,666,424    2,558,141
                         -----------  -----------  -----------  -----------
     Gross profit          2,009,093    2,080,232    3,936,800    3,684,745
Operating expenses
  GAAP Operating
   Expenses                1,782,934    1,643,726    3,581,134    3,174,236
     Depreciation and
      amortization            57,283       41,615      118,255       72,420
     Provision for bad
      debt expense            20,681       14,500       23,681       12,119
     Stock based
      compensation
      expense                 25,482       29,844       53,310       39,390
                         -----------  -----------  -----------  -----------
  Non GAAP Operating
   Expenses                1,679,488    1,557,767    3,385,888    3,050,307
  Non GGAP Income
   from operations           329,605      522,465      550,912      634,438
Interest expense                   -        2,965            -        3,403
                         -----------  -----------  -----------  -----------
  Non GAAP Income
   before income
   taxes                     329,605      519,500      550,912      631,035
Income taxes                  89,709      173,416      155,398      202,842
                         -----------  -----------  -----------  -----------
  Non GAAP Net income    $   239,896  $   346,084  $   395,514  $   428,193
                         -----------  -----------  -----------  -----------
    Non GAAP Net income
     per share:
  Basic                  $      0.02  $      0.03  $      0.04  $      0.04
                         -----------  -----------  -----------  -----------
  Diluted                $      0.02  $      0.03  $      0.03  $      0.04
                         -----------  -----------  -----------  -----------
Weighted-average number
 of shares used in per
 share computations
  Basic                   11,295,192   11,075,192   11,225,192   11,066,859
                         -----------  -----------  -----------  -----------
  Diluted                 11,671,162   11,801,860   11,686,482   11,790,948
                         -----------  -----------  -----------  -----------

Contact Information

  • Sierra Monitor Investor Relations Contact:
    Steve Polcyn
    (925) 548 3516
    Email Contact