SOURCE: Sierra Monitor Corporation

Sierra Monitor Corporation

August 11, 2009 09:15 ET

Sierra Monitor Corporation Announces Financial Results for the Second Quarter Ended June 30, 2009

MILPITAS, CA--(Marketwire - August 11, 2009) - Sierra Monitor Corporation (OTCBB: SRMC), a cleantech focused company that designs, manufactures and sells electronic safety and environmental instrumentation, today announced financial results for the second quarter ended June 30, 2009.

Financial Highlights

--  Reports second quarter revenues of $2.9 million
--  Achieves 60% gross margin in the second quarter of 2009 compared to
    58% in the second quarter of the prior year
--  Generated year-to-date revenues of $6.2 million, a decrease of 6% year-
    over-year
--  Strong balance sheet with $1.2 million in cash and no bank borrowings
    

Second Quarter 2009 Business Highlights

--  Joined the Crestron Electronics Integrated Partner program to provide
    interoperability solutions when interfacing to other building automation
    and control networks and devices.
--  Shipped an order valued over $100,000 of FieldServer Protocol Bridges
    to enable OPC communications for a plant-wide fire detection system in a
    Brazilian steel and aluminum processing mill.
--  Supplied gas detection systems for the pilot plant of a biology based
    renewable energy research project.
--  Completed qualification and began shipping communications modules for
    integration of York air conditioning systems.
--  Deployed multiple FieldServers in an integration project for a major
    New York investment bank's data center.
    

Second Quarter and First Six Months of 2009 Financial Results

Net sales for the quarter ended June 30, 2009 were $2,936,722, a decrease of 15.3% from $3,466,426 reported for the same period of 2008. For the six months ended June 30, 2009, sales decreased 6% to $6,206,778, compared to $6,603,224 for the same period of 2008.

Sierra Monitor posted a GAAP net loss of $47,073, or $0.0 per share (basic and diluted), for the quarter ended June 30, 2009, compared to GAAP net income of $136,450, or $0.01 per share (basic and diluted), for the same period of 2008. Sierra Monitor posted a GAAP net loss of $43,010, or $0.0 per share (basic and diluted), for the six months ended June 30, 2009, compared to GAAP net income of $200,268, or $0.02 per share (basic and diluted), for the same period of 2008.

Sierra Monitor posted non-GAAP net income of $49,362 or $0.0 per share (basic and diluted), for the quarter ended June 30, 2009, compared to non-GAAP net income of $239,896, or $0.02 per share (basic and diluted), for the same period of 2008. Sierra Monitor posted non-GAAP net income of $138,423, or $0.01 per share (basic and diluted), for the six months ended June 30, 2009, compared to non-GAAP net income of $390,151, or $0.03 per share (basic and diluted), for the same period of 2008.

"While Sierra Monitor's second quarter operating results are disappointing, our cash flow was positive and our balance sheet remains strong. Our strategic decision to maintain capacities, avoid layoffs, and invest in critical engineering projects positions the company to continue meeting customer expectations and take advantage of future opportunities," said Gordon Arnold, chairman and chief executive officer. "Based on our current revenue forecast, we anticipate returning to profitability in the third quarter of 2009."

Cash Position

Sierra Monitor had $1,244,948 in cash at June 30, 2009 with no bank borrowings. Trade receivables at June 30, 2009 were $1,964,232. The Company's Days Sales Outstanding was 58 days during the quarter.

About Sierra Monitor Corporation

Sierra Monitor Corporation is a cleantech focused company that designs, manufactures and sells electronic safety and environmental instrumentation. The company's hazardous gas detection systems can be found in a broad range of applications including US Navy ships, waste water 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 unique protocol translator products 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 systems. The company's products improve the safety and comfort of workers while contributing to climate and natural resource protection. With almost 30 years experience, Sierra Monitor products can be found in more than 16,000 installations worldwide.

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.

Safe Harbor Statement

This release includes forward-looking statements that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those contemplated by the forward-looking statements. These forward-looking statements include, without limitation, statements relating to Sierra Monitor's expected return to profitability in the third quarter and ability to take advantage of future opportunities. Forward-looking statements in this release 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 such forward-looking statements, including, among others, the continuing 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, risks related to the introduction of new products and market acceptance of such products; customization and deployment delays or errors associated with Sierra Monitor's products; impact of long sales and implementation cycles for certain products; 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 described in Sierra Monitor's filings with the Securities and Exchange Commission, including, without limitation, Sierra Monitor's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. These filings are available on the web site maintained by the Securities and Exchange Commission at http://www.sec.gov. Sierra Monitor does not undertake any obligation to update forward-looking statements contained in this release.


TABLE A              SIERRA MONITOR CORPORATION
                      Statements of Operations
                            (unaudited)



                      For the three months ended  For the six months ended
                                 June 30,                  June 30,
                       -------------------------  -------------------------
                           2009         2008          2009         2008
                       -----------  ------------  -----------  ------------
Net sales              $ 2,936,722  $  3,466,426  $ 6,206,778  $  6,603,224
Cost of goods sold       1,186,272     1,457,333    2,605,741     2,666,424
                       -----------  ------------  -----------  ------------
     Gross profit        1,750,450     2,009,093    3,601,037     3,936,800
                       -----------  ------------  -----------  ------------
Operating expenses
  Research and
   development             503,175       441,741      983,677       967,546
  Selling and
   marketing               840,505       820,978    1,701,526     1,636,334
  General and
   administrative          485,225       520,215      987,517       977,254
                       -----------  ------------  -----------  ------------
                         1,828,905     1,782,934    3,672,720     3,581,134
                       -----------  ------------  -----------  ------------
     Income (loss)
      from operations      (78,455)      226,159      (71,683)      355,666

Income taxes (benefit)     (31,382)       89,709      (28,673)      155,398
                       -----------  ------------  -----------  ------------

     Net income        $   (47,073) $    136,450  $   (43,010) $    200,268
                       ===========  ============  ===========  ============
Net income per share:
  Basic                $       .00  $       0.01  $       .00  $       0.02
                       ===========  ============  ===========  ============
  Diluted              $       .00  $       0.01  $       .00  $       0.02
                       ===========  ============  ===========  ============
Weighted-average
 number of shares
 used in per share
 computations:
  Basic                 11,431,545    11,295,192   11,429,879    11,225,192
                       ===========  ============  ===========  ============
  Diluted               11,431,545    11,671,162   11,429,879    11,686,482
                       ===========  ============  ===========  ============





TABLE B               SIERRA MONITOR CORPORATION
                            Balance Sheet



                     Assets                          June 30,  December 31,
                                                       2009        2008
                                                    (unaudited)     (1)
                                                    ----------- -----------
Current assets:
  Cash                                              $ 1,244,948 $ 1,338,647
  Trade receivables, less allowance for doubtful
   accounts of approximately $85,000 and $110,000
   respectively                                       1,964,232   1,661,846
  Inventories, net                                    1,867,297   1,968,006
  Prepaid expenses                                      164,467     189,389
  Income taxes deposit                                   62,695      48,295
  Deferred income taxes                                 321,814     299,421
                                                    ----------- -----------
      Total current assets                            5,625,453   5,505,604

Property and equipment, net                             304,835     380,987
Other assets                                            166,291     185,015
                                                    ----------- -----------

      Total assets                                  $ 6,096,579 $ 6,071,606
                                                    =========== ===========

      Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                  $   523,466 $   521,823
  Accrued compensation expenses                         426,203     385,306
  Other current liabilities                              72,936     104,604
                                                    ----------- -----------
      Total current liabilities                        1,022,605  1,011,733


Deferred tax liability                                   42,498      42,498
                                                    ----------- -----------
      Total liabilities                                1,065,103  1,054,231


Commitments and contingencies

Shareholders' equity:
  Common stock, $0.001 par value; 20,000,000
   shares authorized; 11,438,212 and 11,428,212
   shares issued and outstanding, respectively           11,438      11,428
  Additional paid-in capital                          3,543,065   3,485,964
  Retained earnings                                   1,476,973   1,519,983
                                                    ----------- -----------
      Total shareholders' equity                      5,031,476   5,017,375
                                                    ----------- -----------

      Total liabilities and shareholders' equity    $ 6,096,579 $ 6,071,606
                                                    =========== ===========
(1) Derived from December 31, 2008 audited financial statements.

NON-GAAP FINANCIAL MEASURES

The accompanying news release dated August 11, 2009 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.

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 GAAP to Non-GAAP Net Income
                          (unaudited)




                             For the three months     For the six months
                                ended June 30,          ended June 30,
                           -----------------------  ----------------------
                              2009         2008        2009        2008
                           ----------  -----------  ----------  ----------
GAAP Net Income (loss)     $  (47,073) $   136,450  $  (43,010) $  200,268
  Depreciation and
   amortization                82,469       57,283     147,365     118,255
  Provision for bad debt
   expense                     10,850       20,681      13,350      23,681
  Provision for inventory
   losses                           -            -      (8,000)          -
  Deferred income taxes       (22,393)           -     (22,393)     (5,363)
  Stock based compensation
   expense                     25,509       25,482      51,111      53,310
                           ----------  -----------  ----------  ----------
Total adjustments to GAAP
 net income (loss)             96,435      103,446     181,433     189,883
                           ----------  -----------  ----------  ----------
Non GAAP Net income        $   49,362  $   239,896  $  138,423  $  390,151
                           ==========  ===========  ==========  ==========
Non GAAP Net income per
 share:
  Basic                    $      .00  $      0.02  $      .01  $     0.03
                           ==========  ===========  ==========  ==========
  Diluted                  $      .00  $      0.02  $      .01  $     0.03
                           ==========  ===========  ==========  ==========
Weighted-average number of
 shares used in per share
 computations
  Basic                    11,431,545   11,295,192  11,429,879  11,225,192
                           ==========  ===========  ==========  ==========
  Diluted                  11,431,545   11,671,162  11,429,879  11,686,482
                           ==========  ===========  ==========  ==========

Contact Information

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