SOURCE: Sierra Monitor Corporation

March 15, 2007 10:15 ET

Sierra Monitor Announces Financial Results for the Fourth Quarter and 12 Months Ended December 31, 2006

Sales Up 23% Year-Over-Year; Reports Sixth Consecutive Quarter of Profitability

MILPITAS, CA -- (MARKET WIRE) -- March 15, 2007 --Sierra Monitor Corporation (OTCBB: SRMC), a leading designer and manufacturer of product solutions that enhance safety, efficiency and communications capabilities in both process control and building automation industries, today announced financial results for the fourth quarter and 12 months ended December 31, 2006.

Financial Highlights

--  Increased 2006 sales by 23% year-over-year to $10.8 million
--  Achieved 2006 operating income of $779,647 and GAAP earnings per share
    of $0.04
--  Generated positive cash flow from operations for the full year and
    fourth quarter of 2006
--  Fourth quarter revenues were $ 3.0 million, an increase of 25% year-
    over-year
--  Fourth quarter operating income increased 75% to $200,192, compared to
    $114,512 in the prior year
--  Achieved sixth consecutive quarter of profitability
    
2006 Business Highlights
--  Significant sales increase of ProtoCessor, OEM products that enable
    network connectivity within building automation systems
--  Received independent third party certifications from Factory Mutual on
    two new, innovative gas detection instruments. Certifications are essential
    for sales to plants insured by Factory Mutual.
--  Began deployment of web server based multi-point gas monitoring
    systems
--  Introduced SlotServer ControlLogix interface module that allows data
    transfer between building automation systems and Allen Bradley industrial
    networks
    
Fourth Quarter and Full Year 2006 Financial Results

Total sales for the quarter ended December 31, 2006 were $3.0 million, an increase of 25% from the $2.4 million reported for the same period of 2005. For the full year ended December 31, 2006, sales increased 23% to $10.8 million, compared to $8.8 million for the same period of 2005.

Sierra Monitor posted GAAP net income of $128,229, or $0.01 per share (basic and diluted), for the quarter ended December 31, 2006, compared to GAAP net income of $47,479, or $0.00 per share (basic and diluted) for the same period of 2005. Sierra Monitor posted GAAP net income of $468,448, or $0.04 per share (basic and diluted), for the year ended December 31, 2006, compared to GAAP net loss of $230,679, or $(0.02) per share (basic and diluted) for the same period of 2005.

Sierra Monitor posted non-GAAP net income of $162,506, or $0.01 per share (basic and diluted), for the quarter ended December 31, 2006, compared to non-GAAP net income of $81,085, or $0.01 per share (basic and diluted) for the same period of 2005. Sierra Monitor posted non-GAAP net income of $646,088 or $0.06 per share (basic), or $0.05 per share (diluted), for the year ended December 31, 2006, compared to non-GAAP net loss of $(30,394), or $0.00 per share (basic and diluted) for the same period of 2005.

"I am delighted with the progress and the financial results the Sierra Monitor team achieved during the past year," said Gordon Arnold, Chairman and Chief Executive Officer. "Six consecutive profitable quarters have resulted in the elimination of our short term debt and we broadened and strengthen our product lines. Our team remains focused on further profitable growth and building our business for the long term."

Cash Position

Sierra Monitor had $446,000 in cash at December 31, 2006. Receivables at December 31, 2006 were $1.6 million. The Company's Days Sales Outstanding in Accounts Receivable (DSO's) was 51 days. Sierra Monitor eliminated its bank borrowings during the year.

About Sierra Monitor Corporation

Sierra Monitor Corporation is a leading designer and manufacturer of product solutions that enhance safety, efficiency and communications capabilities in both process control and building automation industries. The four primary product groups are:

--  Hazardous Gas Detection Systems -- used in a wide variety of
    industries, including chemical/petrochemical, waste water treatment,
    transportation and oil and gas industries. Sierra Monitor is widely known
    as a technological leader in gas detection systems.
--  Telecom Site Management Products -- used by telecommunications
    companies to monitor, manage and control HVAC, safety and security in
    remote environmental enclosures.
--  FieldServer -- protocol translator/gateways providing the
    interoperability desired in the process control and building automation
    industries.
--  ProtoCessor -- protocol coprocessor from FieldServer Technologies is
    an OEM solution for product designers to incorporate an embedded solution
    to provide output to widely accepted protocols.
    
With over 25 years of industry experience and more than 15,000 installations worldwide, Sierra Monitor is an industry leader.

Table A

                          SIERRA MONITOR CORPORATION
                           Statements of Operations


                    For the three months ended  For the twelve months ended
                           December 31,                December 31,
                    --------------------------  --------------------------
                        2006          2005          2006          2005
                    ------------  ------------  ------------  ------------
Net sales           $  2,991,135  $  2,394,581  $ 10,854,807  $  8,816,414
Cost of goods sold     1,291,062       916,665     4,379,916     3,540,438
                    ------------  ------------  ------------  ------------
    Gross profit       1,700,073     1,477,916     6,474,891     5,275,976
                    ------------  ------------  ------------  ------------
Operating expenses
  Research and
   development           474,286       406,536     1,810,637     1,694,977
  Selling and
   marketing             682,097       641,038     2,542,457     2,652,871
  General and
   administrative        343,498       315,830     1,342,150     1,275,894
                    ------------  ------------  ------------  ------------
                       1,499,881     1,363,404     5,695,244     5,623,742
                    ------------  ------------  ------------  ------------
    Income (loss)
     from
     operations          200,192       114,512       779,647      (347,766)
Interest income
 (expense)                (2,212)       (3,706)      (14,641)       (5,025)
                    ------------  ------------  ------------  ------------
    Income (loss)
     before income
     taxes               197,980       110,806       765,006      (352,791)

Income taxes
 (benefit)
 provision                69,751        63,327       296,558      (122,112)
                    ------------  ------------  ------------  ------------

    Net income
     (loss)         $    128,229  $     47,479  $    468,448  $   (230,679)
                    ============  ============  ============  ============
Net income (loss)
 per share:
  Basic             $       0.01  $       0.00  $       0.04  $      (0.02)
                    ============  ============  ============  ============
  Diluted           $       0.01  $       0.00  $       0.04  $      (0.02)
                    ============  ============  ============  ============
Weighted-average
 number of shares
 used in per share
 computations:
  Basic               11,055,192    11,019,879    11,050,539    11,009,724
                    ============  ============  ============  ============
  Diluted             11,542,367    11,473,069    11,604,478    11,009,724
                    ============  ============  ============  ============




Table B

                        SIERRA MONITOR CORPORATION
                              Balance Sheet
                            December 31, 2006

                    Assets
Current assets:
   Cash                                                         $   446,395
   Trade receivables, less allowance for doubtful
    accounts of approximately $64,000                             1,642,472
   Inventories, net                                               2,255,905
   Prepaid expenses                                                 146,290
   Deferred income taxes                                            244,933
                                                                -----------
       Total current assets                                       4,735,995

Property and equipment, net                                         135,019
Deferred income taxes                                                50,921
Other assets                                                        134,483
                                                                -----------

       Total assets                                             $ 5,056,418
                                                                ===========

        Liabilities and Shareholders' Equity
Current liabilities:
   Accounts payable                                             $   942,808
   Accrued compensation expenses                                    292,962
   Income taxes payable                                              17,028
   Other current liabilities                                         74,222
                                                                -----------
       Total current liabilities                                  1,327,020

Commitments and contingencies

Shareholders' equity:
   Common stock, $0.001 par value; 20,000,000 shares
    authorized;
     11,055,192 shares issued and outstanding                        11,055
   Additional paid-in capital                                     3,265,104
   Retained earnings                                                453,239
                                                                -----------
       Total shareholders' equity                                 3,729,398
                                                                -----------

       Total liabilities and shareholders' equity               $ 5,056,418
                                                                ===========

NON-GAAP FINANCIAL MEASURES

The accompanying news release dated March 15, 2007 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 (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 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 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.

Stock-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
                            December 31, 2006


                    For the three months ended  For the twelve months ended
                           December 31,                 December 31,
                    --------------------------  --------------------------
                        2006          2005           2006          2005
                    ------------  ------------  ------------  ------------

Net sales            $ 2,991,135  $  2,394,581  $ 10,854,807  $  8,816,414
Cost of goods sold     1,291,062       916,665     4,379,912     3,540,438
                    ------------  ------------  ------------  ------------
    Gross profit       1,700,073     1,477,916     6,474,895     5,275,976
Operating expenses
  GAAP Operating
   Expenses            1,499,871     1,363,404     5,695,244     5,623,742
    Depreciation
     and
     amortization        (32,579)      (34,552)     (137,454)     (148,612)
    Provision for
     bad debt
     expense              (4,688)      (26,250)      (11,522)      (34,823)
    Provision for
     inventory
     losses                4,961        34,602        30,945        24,000
    Stock based
     compensation
     expense               2,459             -       (30,328)      (30,800)
                    ------------  ------------  ------------  ------------
  Non GAAP
   Operating
   Expenses            1,470,024     1,337,204     5,546,885     5,433,507
  Non GAAP Income
   (loss) from
   operations            230,049       140,702       928,010      (157,531)
Interest income
 (expense)                 2,212         3,706        14,641         5,025
                    ------------  ------------  ------------  ------------
  Non GAAP Income
   (loss) before
   income taxes          232,257       144,412       942,646      (152,506)
Income taxes
 (benefit)
 provision                69,751        63,327       296,558      (122,112)
                    ------------  ------------  ------------  ------------
  Non GAAP Net
   income (loss)    $    162,506  $     81,085  $    646,088  $    (30,394)
                    ============  ============  ============  ============
 Non GAAP Net income
 (loss) per share:
  Basic             $       0.01  $       0.01  $       0.06  $      (0.00)
                    ============  ============  ============  ============
  Diluted           $       0.01  $       0.01  $       0.05  $      (0.00)
                    ============  ============  ============  ============
Weighted-average
 number of shares
 used in per share
 computations
  Basic               11,055,192    11,019,879    11,050,539    11,009,724
                    ============  ============  ============  ============
  Diluted             11,542,367    11,473,069    11,604,478    11,009,724
                    ============  ============  ============  ============
Safe Harbor Statement

This news release includes "forward-looking statements" that are subject to risks, uncertainties and other factors that could cause actual results or outcomes to differ materially from those contemplated by the forward-looking statements. Forward-looking statements on this website are generally identified by words, such as "believes," "anticipates," "plans," "expects," "will," "would," "guidance," "projects" and similar expressions which are intended to identify forward-looking statements. There are a number of important factors that could cause the results of Sierra Monitor to differ materially from those indicated by these forward-looking statements, including, among others, potential difficulties in the assimilation of operations, strategies, technologies, personnel and products of acquired companies and technologies, the impact of perceived or actual weakening of economic conditions on customers' and prospective customers' spending on Sierra Monitor products and services; quarterly fluctuations in Sierra Monitor's revenues or other operating results; periodic fluctuations in product mix resulting in significant variation of profit margins, failure by Sierra Monitor to meet financial expectations of analysts and investors, including failure resulting from significant reductions in demand from earlier anticipated levels; risks related to market acceptance of Sierra Monitor's products; customization and deployment delays or errors associated with Sierra Monitor's products; impact of long sales and implementation cycles for certain products; activities by Sierra Monitor and others regarding protection of intellectual property; and competitors' release of competitive products and other actions. Further information on potential factors that could affect the financial results of Sierra Monitor are included in risks detailed from time to time in Sierra Monitor's Securities and Exchange Commission filings, including without limitation Sierra Monitor's Annual Report on Form 10-KSB and Quarterly Report on Form 10-QSB. These filings are available on a Web site maintained by the Securities and Exchange Commission at http://www.sec.gov. Sierra Monitor does not undertake an obligation to update forward-looking or other statements in this release.

Contact Information

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