SOURCE: Sierra Monitor Corporation

Sierra Monitor Corporation

March 08, 2011 09:25 ET

Sierra Monitor Corporation Announces Financial Results for the Fourth Quarter and Twelve Months Ended December 31, 2010

Reports Record Sales for the Fourth Quarter and Twelve Months of 2010; Sales up 32% and 13%, Respectively; Achieves Record Net Income for the Fourth Quarter and Twelve Months of 2010

MILPITAS, CA--(Marketwire - March 8, 2011) - Sierra Monitor Corporation (OTCBB: SRMC), a company that designs, manufactures and sells electronic safety and environmental instrumentation, today announced financial results for the fourth quarter and twelve months ended December 31, 2010.

"With record sales and record net income in both the fourth quarter and the full year of 2010, Sierra Monitor Corporation continued its strong financial performance producing the fifth consecutive year of positive net income," said Gordon R. Arnold, chairman and chief executive officer. "Our products were installed in a number of high profile facilities including the World Cup soccer stadiums in South Africa; the Empire State building; KAUST University in Saudi Arabia; Kuwait Oil pipelines; and the roof tops of hundreds of major discount retailers such as Target and Walmart. We introduced new products in each of our product lines, repurchased and retired approximately thirteen percent of our outstanding shares and ended the year with a strong balance sheet and a healthy backlog. I am delighted with the team's progress and look forward to further successes in 2011."

Financial Highlights

--  Fourth quarter sales of over $4.2 million, an increase of 32% over the
    fourth quarter of 2009
--  Fourth quarter net income increased to $362,478 or $0.03 per share
    (basic and diluted), compared to net income of $123,093 or $0.01 per
    share (basic and diluted) in the same prior year period
--  Twelve month sales of approximately $14.4 million for the period ended
    December 31, 2010, an increase of 13% over the $12.7 million reported
    for the prior year
--  Twelve month net income increased to $674,930 or $0.06 per share
    (basic and diluted), compared to net income of $211,559 or $0.02 per
    share (basic and diluted) for the twelve months of the previous year
--  Ended the fourth quarter of 2010 with a strong balance sheet including
    over $1.6 million of cash on hand and no bank debt

Fourth Quarter Business Highlights

--  Shipped a significant order of gas and flame detection systems for a
    major pipeline project in Kuwait
--  Delivered follow-on orders for protocol interface devices for fire
    detection system integration at the $10 billion King Abdullah
    University of Science and Technology (KAUST), Saudi Arabia
--  Completed delivery of gas and flame detection systems for a crude
    oil pump station in Malaysia
--  Established ongoing relationship to supply gas detection systems to
    retrofit vessels supporting offshore oil operations in Saudi Arabia
--  Booked blanket orders that continue strong adoption of FieldServer
    gateways for lighting controls integration
--  Received a contract to supply gas safety monitoring systems for
    installation at the U.S. Consumer Products Safety Laboratories
--  Booked a large blanket order continuing the supply of FieldServer
    protocol gateways for toxic gas monitoring systems used in
    semiconductor tools

Fourth Quarter and Twelve Months of 2010 Financial Results

Net sales for the quarter ended December 31, 2010 were $4,220,890, an increase of 32% from $3,201,478 reported for the same period of 2009. For the twelve months ended December 31, 2010, sales increased 13% to $14,393,716 compared to $12,732,014 for the same period of 2009.

Sierra Monitor posted GAAP net income of $362,478, or $0.03 per share (basic and diluted), for the quarter ended December 31, 2010, compared to GAAP net income of $123,093, or $0.01 per share (basic and diluted), for the same period of 2009. Sierra Monitor posted GAAP net income of $674,930, or $0.06 per share (basic and diluted), for the twelve months ended December 31, 2010, compared to GAAP net income of $211,559, or $0.02 per share (basic and diluted), for the same period of 2009.

Sierra Monitor posted non-GAAP net income of $386,907 or $0.03 per share (basic and diluted), for the quarter ended December 31, 2010 compared to non-GAAP net income of $263,103 or $0.02 per share (basic and diluted), for the same period of 2009. Sierra Monitor posted non-GAAP net income of $977,413, or $0.09 per share (basic and diluted), for the twelve months ended December 31, 2010, compared to non-GAAP net income of $659,884, or $0.06 per share (basic and diluted), for the same period of 2009.

Cash Position

Sierra Monitor had $1,645,433 in cash at December, 2010 with no bank borrowings. Net trade receivables at December 31, 2010 were $1,708,886. At December 31, 2010, the Company's Days Sales Outstanding was 41 days.

About Sierra Monitor Corporation

Sierra Monitor Corporation designs, manufactures and sells electronic 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 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
                         Statements of Operations
                                (unaudited)


                          For the three months      For the twelve months
                           ended December 31,        ended December 31,
                            2010         2009         2010         2009
                        ------------ ------------ ------------ ------------

Net sales               $  4,220,890 $  3,201,478 $ 14,393,716 $ 12,732,014
Cost of goods sold         1,787,855    1,213,811    5,970,921    5,108,929
                        ------------ ------------ ------------ ------------
    Gross profit           2,433,035    1,987,667    8,422,795    7,623,085
Operating expenses
  Research and
   development               495,304      466,537    1,978,507    1,967,009
  Selling and
   marketing                 800,888      782,338    3,322,568    3,309,142
  General and
   administrative            511,254      473,912    1,978,451    1,934,609
                        ------------ ------------ ------------ ------------
                           1,807,446    1,722,787    7,279,526    7,210,760
                        ------------ ------------ ------------ ------------
    Income from
     operations              625,589      264,880    1,143,269      412,325

Interest income                  965          949        4,039          949
                        ------------ ------------ ------------ ------------
    Income before
     income taxes            626,554      265,829    1,147,308      413,274

Income tax provision         264,076      142,736      472,378      201,714
                        ------------ ------------ ------------ ------------
    Net income          $    362,478 $    123,093 $    674,930 $    211,560
                        ============ ============ ============ ============

Net income available to
 common shareholders
 per common share
  Basic                 $       0.03 $       0.01 $       0.06 $       0.02
                        ============ ============ ============ ============
  Diluted               $       0.03 $       0.01 $       0.06 $       0.02
                        ============ ============ ============ ============
Weighted-average number
 of common shares used
 in per share
 computations:
  Basic                   11,187,887   11,438,212   11,389,972   11,434,045
                        ============ ============ ============ ============
  Diluted                 11,390,287   11,739,430   11,469,877   11,765,541
                        ============ ============ ============ ============





Table B

                        SIERRA MONITOR CORPORATION
                              Balance Sheet
                                (unaudited)


                                                December 31,  December 31,
                                                    2010          2009
                                                ------------- -------------
                 Assets
Current assets:
  Cash and cash equivalents                     $   1,645,433 $   2,203,018
  Trade receivables, less allowance for
   doubtful accounts of approximately $82,000
   in 2010 and $70,000 in 2009, respectively        1,708,886     1,354,775
  Inventories, net                                  2,115,003     1,892,313
  Prepaid expenses                                    178,819       240,204
  Income tax deposit                                        -             -
  Deferred income taxes - current                     298,410       259,855
                                                ------------- -------------
    Total current assets                            5,946,551     5,950,165

Property and equipment, net                           294,424       238,377
Other assets                                          154,816       167,615
                                                ------------- -------------
    Total assets                                $   6,395,791 $   6,356,157
                                                ============= =============

      Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                              $     704,539 $     523,763
  Accrued compensation expenses                       432,127       372,035
  Other current liabilities                            72,888        73,351
  Income taxes payable                                 20,879        34,251
                                                ------------- -------------
    Total current liabilities                       1,230,433     1,003,400

Deferred tax liability                                 54,095        14,575
                                                ------------- -------------
    Total liabilities                               1,284,528     1,017,975

Commitments and contingencies
Shareholders' equity:
  Common stock, $0.001 par value; 20,000,000
   shares authorized; 9,896,942 and 11,438,212
   shares issued and outstanding, respectively          9,897        11,438
  Additional paid-in capital                        2,694,894     3,595,202
  Retained earnings                                 2,406,472     1,731,542
                                                ------------- -------------
    Total shareholders' equity                      5,111,263     5,338,182
                                                ------------- -------------
    Total liabilities and shareholders'
     equity                                     $   6,395,791 $   6,356,157
                                                ============= =============


NON-GAAP FINANCIAL MEASURES

The accompanying news release dated March 8, 2011 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 income (loss) and basic and diluted non-GAAP net income (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, 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

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.

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 shares using the methods required by GAAP for both GAAP and non-GAAP diluted net income (loss) 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 Net Income
                                (Unaudited)


                             For the three months   For the twelve months
                              ended December 31,      ended December 31,
                               2010        2009        2010        2009
                            ----------  ----------- ----------  ----------

GAAP Net Income             $  362,478  $   123,093 $  674,930  $  211,559
  Depreciation and
   amortization                 58,468       67,965    237,822     282,631
  Provision for bad debt
   expense                       8,167        7,799     12,172      30,880
  Provision for inventory
   losses                      (27,107)           -     (7,107)     (8,000)
  Deferred income taxes        (38,555)      37,587    (38,555)     39,566
  Stock based compensation
   expense                      23,456       26,659     98,151     103,248
                            ----------  ----------- ----------  ----------
Total adjustments to GAAP
 net income                     24,429      140,010    302,483     448,325
Non-GAAP Net income         $  386,907  $   263,103 $  977,413  $  659,884
                            ==========  =========== ==========  ==========
Non-GAAP Net income per
 share:
  Basic                     $     0.03  $      0.02 $     0.09  $     0.06
                            ==========  =========== ==========  ==========
  Diluted                   $     0.03  $      0.02 $     0.09  $     0.06
                            ==========  =========== ==========  ==========
Weighted-average number of
 shares used in per share
 computations:
  Basic                     11,187,887   11,438,212 11,389,972  11,434,045
                            ==========  =========== ==========  ==========
  Diluted                   11,390,287   11,739,430 11,469,877  11,765,541
                            ==========  =========== ==========  ==========

Contact Information

  • Sierra Monitor Investor Relations Contact:
    Steve Polcyn
    408-262-6611 ext. 1341
    Email Contact