SOURCE: Sierra Monitor Corporation

Sierra Monitor Corporation

August 05, 2014 09:30 ET

Sierra Monitor Corporation Announces Financial Results for the Second Quarter Ended June 30, 2014

Reinforces Leadership in Alternate Fuel Processing; Announces Largest Single Order for FieldServer Gateways in Company History

MILPITAS, CA--(Marketwired - Aug 5, 2014) - Sierra Monitor Corporation (OTCQB: SRMC), a leader in connectivity and life safety products for high reliability commercial and industrial applications, today announced financial results for the second quarter and six months ended June 30, 2014.

Financial Highlights

  • Achieved second quarter 2014 net sales of approximately $4.8 million, compared to approximately $4.8 million in the same period of 2013
  • Reported second quarter 2014 GAAP income per share of $0.01 and Non-GAAP income per share of $0.03 compared to second quarter 2013 GAAP income per share of $0.04 and Non-GAAP income per share of $0.05.
  • Ended second quarter 2014 with a cash balance of approximately $3.1 million and no bank debt
  • Paid seventh consecutive quarterly dividend of $0.01 per share on May 15, 2014

Business Highlights

  • Received the company's largest ever single order for FieldServer gateways to integrate thousands of fire alarm systems with the central Command Control Center over BACnet/IP at The King Abdullah University of Science and Technology (KAUST) campus in Saudi Arabia. The order, valued at more than $400,000 started to ship in the second quarter and is expected to be completed in the third quarter of 2014. The FieldServer-based integrated solution has the potential to serve as a model deployment for other "smart city" projects in the Middle East.
  • Implemented a full range of Sierra Monitor connectivity and life safety products as part of a multi-system, multi-protocol systems project at a solar panel manufacturing plant. In addition to shipping Sentry IT gas detection units that interfaced over MODBUS RTU to the plant's Emerson DeltaV SCADA system, Sierra Monitor's FieldServer gateways were used to integrate air handlers, humidifiers, VAV controllers, roof top units, generator sets, chillers, and process control computers from various leading companies to the DeltaV SCADA system using protocols such as BACnet MS/TP, Ethernet IP, and LonWorks.
  • Collaborated with a major controls company in Ohio to secure a $280K order with the City of Columbus Department of Public Works for a composite hazardous gas monitoring system designed to protect employees who maintain the city's diesel and compressed natural gas (CNG) vehicles.
  • Installed $85K of Sentry IT gas sensors at a maintenance facility that repairs heavy duty municipal vehicles in the North Hollywood area of Los Angeles. This is the latest in a series of projects that Sierra Monitor has executed for the City of Los Angeles involving the maintenance of natural gas vehicles, and along with the Columbus project, underscores Sierra Monitor's leadership in the rapidly growing Alternate Fuel Processing segment.
  • Appointed Varun Nagaraj as president, chief executive officer, and a member of the board of directors of Sierra Monitor Corporation, and named Gordon Arnold executive chairman of the board of directors effective July 7, 2014.

Second Quarter and First Six Months of 2014 Financial Results
Net sales for the quarter ended June 30, 2014 were $4,752,375 compared to $4,787,581 reported for the same period of 2013. For the six months ended June 30, 2014, sales were $8,853,633, compared to $9,144,690 for the same period of 2013.

Sierra Monitor posted GAAP net income of $125,630, or $0.01 per share (basic and diluted), for the quarter ended June 30, 2014, compared to GAAP net income of $436,237 or $0.04 per share basic and diluted, for the same period of 2013. Sierra Monitor posted GAAP net income of $132,331, or $0.01 per share basic and diluted, for the six months ended June 30, 2014, compared to GAAP net income of $633,795, or $0.06 per share basic and diluted, for the same period of 2013.

Sierra Monitor posted non-GAAP net income of $282,325 or $0.03 per share basic and diluted, for the quarter ended June 30, 2014 compared to non-GAAP net income of $537,280 or $0.05 per share basic and diluted, for the same period of 2013. Sierra Monitor posted non-GAAP net income of $431,205 or $0.04 per share basic and diluted, for the six months ended June 30, 2014, compared to non-GAAP net income of $845,949, or $0.08 per share basic and diluted, for the same period of 2013. See Table C of this release for a reconciliation of GAAP to non-GAAP operating results.

"Our second quarter results showed modest growth over the first quarter of 2014 with a substantial increase in bookings," said Gordon R. Arnold, executive chairman. "Our long-range strategic plan to implement a senior management transition program and strengthen our sales footprint has increased our sales and administrative expenses while preparing us to take advantage of trends in our target markets."

"On a personal note, I am very pleased that Varun Nagaraj has joined Sierra Monitor and look forward to working with and supporting him in growing the company's business, and as he develops a new vision and focus for our future," Mr. Arnold stated.

Cash Position
Sierra Monitor had $3,086,520 in cash at June 30, 2014 with no bank borrowings. Trade receivables at June 30, 2014 were $2,294,007. At June 30, 2014, the Company's Days Sales Outstanding was 46 days.

About Sierra Monitor Corporation
Sierra Monitor Corporation develops connectivity and life safety products for high reliability commercial and industrial applications. The company's connectivity products sold under the FieldServer brand act as protocol translators and connect disparate commercial and industrial control systems to save energy, improve operations, and enable analytical insights. The company's life safety products sold under the Sentry IT brand provide 24/7 protection of personnel and facilities in a broad range of work environments including alternate fuel vehicle maintenance facilities, US Navy ships, wastewater treatment facilities, refineries, offshore oil platforms, chemical plants, parking garages and underground telephone vaults.

For more information visit: http://www.sierramonitor.com/

 
Table A
SIERRA MONITOR CORPORATION
 
Statements of Operations
 
(Unaudited)
 
 
    For the three months ended
June 30,
  For the six months ended
June 30,
    2014   2013   2014   2013
Net sales   $ 4,752,375   $ 4,787,581   $ 8,853,633   $ 9,144,690
Cost of goods sold     2,005,498     1,935,866     3,632,602     3,840,811
    Gross profit     2,746,877     2,851,715     5,221,031     5,303,879
                         
Operating expenses                        
                         
  Research and development     579,895     563,159     1,139,499     1,078,655
                           
  Selling and marketing     1,250,713     1,022,537     2,495,279     2,087,081
                           
  General and administrative     706,917     548,238     1,365,772     1,091,112
                           
      2,537,525     2,133,934     5,000,550     4,256,848
    Income from operations     209,352     717,781     220,481     1,047,031
                             
Interest income     32     93     70     2,856
                         
    Income before income taxes     209,384     717,874     220,551     1,049,887
                             
Income tax provision     83,754     281,637     88,220     416,092
                         
    Net income   $ 125,630   $ 436,237   $ 132,331   $ 633,795
Net income available to common shareholders per common share                        
    Basic   $ 0.01   $ 0.04   $ 0.01   $ 0.06
    Diluted   $ 0.01   $ 0.04   $ 0.01   $ 0.06
Weighted average number of common shares used in per share computations:                        
                             
    Basic     10,114,311     10,104,311     10,110,978     10,020,978
                             
    Diluted     10,180,344     10,208,639     10,159,674     10,151,537
                             
                             
                             
Table B
 
SIERRA MONITOR CORPORATION
 
Balance Sheet
 
Assets   June 30,   December 31,
    2014   2013
    (unaudited)    
Current assets:            
  Cash   $ 3,086,520   $ 3,421,679
  Trade receivables, less allowance for doubtful accounts of approximately $72,000 in 2014 and 79,000 in 2013, respectively     2,294,007     1,943,643
  Inventories, net     3,370,460     2,740,835
  Prepaid expenses     429,626     311,144
  Income tax deposit     123,702     106,859
  Deferred income taxes - current     307,938     307,938
      Total current assets     9,612,253     8,832,098
             
Property and equipment, net     355,001     390,755
Other assets     274,274     273,699
      Total assets   $ 10,241,528   $ 9,496,552
             
Liabilities and Shareholders' Equity            
Current liabilities:            
  Accounts payable   $ 1,101,080   $ 689,014
  Accrued compensation expenses     551,100     290,589
  Other current liabilities     68,823     71,729
      Total current liabilities     1,721,003     1,051,332
             
Deferred tax liability     84,438     84,438
      Total liabilities     1,805,441     1,135,770
             
Commitments and contingencies            
Shareholders' equity:            
  Common stock, $0.001 par value; 20,000,000 shares authorized; 10,114,311 shares issued and outstanding     10,114     10,104
  Additional paid-in capital     3,176,206     3,031,056
  Retained earnings     5,249,767     5,319,622
      Total shareholders' equity     8,436,087     8,360,782
      Total liabilities and shareholders' equity   $ 10,241,528   $ 9,496,552
                   

NON-GAAP FINANCIAL MEASURES

The accompanying news release dated August 5, 2014 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 from operations and related non-GAAP profit as a percentage of revenue, non-GAAP net profit and basic and diluted non-GAAP net profit 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 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.

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 stocks using the methods required by GAAP 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, 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 Operating Results
 
(Unaudited)
 
    For the three months ended
June 30,
  For the six months ended
June 30,
    2014     2013   2014     2013
GAAP Net Income   $ 125,630     $
 436,237
  $ 132,331     $ 633,795
  Depreciation and amortization     79,551       57,177     156,300       123,452
  Provision for bad debt expense     (3,210 )     155     (6,817 )     155
  Provision for inventory losses     13,704       21,424     15,231       43,189
  Stock based compensation expense     66,650       22,287     134,160       45,358
Total adjustments to GAAP net income     156,695       101,043     298,874       212,154
                             
Non-GAAP Net Income   $ 282,325     $  537,280   $ 431,205     $ 845,949
                             
Non GAAP Net Income Per Share:                            
  Basic   $ 0.03     $ 0.05   $ 0.04     $ 0.08
  Diluted   $ 0.03     $ 0.05   $ 0.04     $ 0.08
                             
Weighted-average number of shares used in per share computations:                            
  Basic     10,114,311       10,104,311     10,110,978       10,020,978
  Diluted     10,180,344       10,208,639     10,159,674       10,151,537