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8-K - FORM 8-K - RAE SYSTEMS INC | f58737e8vk.htm |
Exhibit 99.1
Company Contact:
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IR Agency Contact: | |
Investor Relations
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Becky Herrick | |
408-952-8449
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Lippert/Heilshorn & Associates, Inc. | |
investorrelations@raesystems.com
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415-433-3777 | |
bherrick@lhai.com |
RAE Systems Reports Fourth Quarter and Year-End 2010 Results
Reports Fourth Quarter 2010 Net Income from Continuing Operations of $1.9 Million, or $0.04 per
Basic and Fully Diluted Share
Basic and Fully Diluted Share
SAN JOSE, Calif. March 22, 2011 RAE Systems Inc. (NYSE AMEX: RAE), a leader in
delivering innovative sensor solutions to serve industrial, energy, environmental and government
safety markets worldwide, reported results for the fourth quarter and year-ended December 31, 2010.
Fourth Quarter 2010 Financial Results
For the fourth quarter of 2010, RAE Systems reported revenue from continuing operations of $23.3
million, compared with $21.1 million for fourth quarter of 2009. The Americas contributed 53
percent of total revenue, Asia contributed 29 percent and Europe contributed 18 percent. Gross
margin from continuing operations for the quarter was 61 percent, compared with 53 percent for the
same quarter of 2009. Total operating expenses for the fourth quarter 2010 were $13.3 million,
including legal and financial advisory expenses of approximately $1.5 million related to the
companys previously announced merger with a private equity firm, compared with $10.7 million for
the fourth quarter of 2009.
On January 13, 2011, the company announced that it had signed a definitive agreement to sell its
interest in its RAE Fushun joint venture. As a result, the company is accounting for RAE Fushun as
a discontinued operation in 2010. This transaction resulted in a net loss from discontinued
operations in the fourth quarter of $4.6 million, or $0.08 per basic and fully diluted share.
Income from continuing operations was $1.9 million, or $0.04 per basic and fully diluted share.
The consolidated net loss for the quarter was $2.7 million, or $0.04 per basic and fully diluted
share compared with net income of $968,000, or $0.01 per basic and fully diluted share in the
fourth quarter of 2009.
1
The net income from continuing operations in the fourth quarter of 2010 was primarily due to a
favorable income tax benefit of $1.1 million. The principal factors contributing to this benefit
were an increase in the companys China entities deferred tax assets due to a tax rate adjustment
in China and a decrease in the current tax provision related to passage of new U.S tax legislation
in the fourth quarter.
Full Year 2010 Financial Results
For the full year 2010, RAE Systems reported revenue from continuing operations of $87.1 million,
compared with $75.0 million in 2009. The Americas contributed 54 percent of total revenue, Asia
contributed 28 percent and Europe contributed 18 percent. For the full year 2010, gross margin
from continuing operations was 60 percent compared with 53 percent for 2009. Total operating
expenses for the full year 2010 were $46.3 million, including legal and financial advisory
expenses of approximately $3.1 million related to the companys previously announced merger with a
private equity firm, compared with $43.5 million for 2009.
The 2010 net loss for the full year included a $7.8 million loss, or $0.13 per basic and fully
diluted share from the discontinuation of the RAE Fushun joint venture. 2010 income from
continuing operations was $5.3 million, or $0.09 per basic and fully diluted share. The
consolidated net loss for the full year of 2010 was $2.6 million or $0.04 per basic and fully
diluted share, compared with a net loss of $5.8 million, or $0.10 per basic and fully diluted
share for the same period in 2009.
About RAE Systems
RAE Systems is a leading global provider of rapidly deployable sensor networks that enable
customers to identify safety and security threats in real time. Products include disposable
gas detection tubes, single gas personal monitors, multi-sensor chemical
detection monitors, photoionization (PID) monitors for volatile organic compounds (VOCs),
wireless gas detection systems, and radiation monitoring networks for energy
production and refining, industrial and environmental safety, and public and government first
responder security sectors. RAE Systems products are used in over 95 countries by many of the
worlds leading corporations and by many U.S. government agencies. For more information about RAE
Systems, please visit www.RAESystems.com.
2
Safe Harbor Statement
This press release may contain forward-looking statements, as that term is used in Section 21E of
the Securities Exchange Act of 1934. Forward-looking statements include, without limitation:
expressions of belief, anticipation, or expectations of management; statements as to industry
trends or future results of operations of RAE Systems and its subsidiaries; and other statements
that are not historical fact. These types of statements address matters that are subject to risks
and uncertainties, which could cause actual results to differ materially. Factors that could cause
or contribute to such differences include, but are not limited to, the general economic and
industry factors, investigation and receptiveness of the market to RAE Systems and its products.
In addition, our forward-looking statements should be considered in the context of other risk
factors discussed in our filings with the Securities and Exchange Commission, including but not
limited to our annual report on Form 10-K and Form 10-Q filings, available online at
http://www.sec.gov. All forward-looking statements are based on information available to the
company on the date hereof, and the company assumes no obligation to update such statements.
[Tables to Follow]
3
RAE Systems Inc.
Consolidated Balance Sheets
(in thousands, except share and par value data)
(unaudited)
Consolidated Balance Sheets
(in thousands, except share and par value data)
(unaudited)
December 31, | December 31, | |||||||
2010 | 2009 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 16,296 | $ | 17,153 | ||||
Restricted cash |
2,000 | 2,000 | ||||||
Trade notes receivable |
2,018 | 1,527 | ||||||
Accounts receivable, net of allowances of
$3,539 and $2,675, respectively |
14,286 | 14,735 | ||||||
Accounts receivable from affiliate |
200 | 322 | ||||||
Inventories |
11,546 | 9,308 | ||||||
Prepaid expenses and other current assets |
4,557 | 3,339 | ||||||
Income taxes receivable |
130 | 659 | ||||||
Current assets of discontinued operation |
6,093 | 10,130 | ||||||
Total current assets |
57,126 | 59,173 | ||||||
Property and equipment, net |
10,730 | 7,582 | ||||||
Intangible assets, net |
196 | 544 | ||||||
Investments in unconsolidated affiliates |
184 | 358 | ||||||
Other assets |
393 | 1,325 | ||||||
Noncurrent assets of discontinued operation |
3,478 | 9,892 | ||||||
Total assets |
$ | 72,107 | $ | 78,874 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 5,475 | $ | 5,725 | ||||
Accounts payable to affiliate |
25 | 92 | ||||||
Bank lines of credit |
1,814 | 4,026 | ||||||
Accrued liabilities |
11,957 | 11,962 | ||||||
Notes payable to related parties, current |
278 | 370 | ||||||
Income taxes payable |
128 | | ||||||
Deferred revenue, current |
557 | 603 | ||||||
Current liabilities of discontinued operation |
5,790 | 4,719 | ||||||
Total current liabilities |
26,024 | 27,497 | ||||||
Deferred revenue, non-current |
776 | 615 | ||||||
Deferred tax liabilities, non-current |
141 | | ||||||
Deferred gain on sale of real estate |
3,809 | 4,444 | ||||||
Other long-term liabilities |
1,491 | 761 | ||||||
Notes payable to related parties, non-current |
| 363 | ||||||
Noncurrent liabilities of discontinued operation |
182 | 1,639 | ||||||
Total liabilities |
32,423 | 35,319 | ||||||
COMMITMENTS AND CONTINGENCIES |
||||||||
SHAREHOLDERS EQUITY: |
||||||||
Common stock, $0.001 par value, 200,000,000
shares authorized; 59,512,064 and 59,438,328
shares issued and outstanding, respectively |
59 | 59 | ||||||
Additional paid-in capital |
65,041 | 63,832 | ||||||
Accumulated other comprehensive income |
7,786 | 6,844 | ||||||
Accumulated deficit |
(34,311 | ) | (31,706 | ) | ||||
Total RAE Systems Inc. shareholders equity |
38,575 | 39,029 | ||||||
Noncontrolling interest |
1,109 | 4,526 | ||||||
Total shareholders equity |
39,684 | 43,555 | ||||||
Total liabilities and shareholders equity |
$ | 72,107 | $ | 78,874 | ||||
RAE Systems Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended | ||||||||||||||||
December 31, | Year Ended December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net sales |
$ | 23,341 | $ | 21,138 | $ | 87,053 | $ | 74,993 | ||||||||
Cost of sales |
9,137 | 10,000 | 34,752 | 35,415 | ||||||||||||
Gross profit |
14,204 | 11,138 | 52,301 | 39,578 | ||||||||||||
Operating expenses: |
||||||||||||||||
Sales and marketing |
5,333 | 4,617 | 19,494 | 16,354 | ||||||||||||
Research and development |
1,847 | 1,549 | 7,077 | 5,956 | ||||||||||||
General and administrative |
6,084 | 4,534 | 19,691 | 21,149 | ||||||||||||
Total operating expenses |
13,264 | 10,700 | 46,262 | 43,459 | ||||||||||||
Operating income (loss) from continuing operations |
940 | 438 | 6,039 | (3,881 | ) | |||||||||||
Other income (expense): |
||||||||||||||||
Interest income |
4 | 17 | 66 | 46 | ||||||||||||
Interest expense |
(51 | ) | (76 | ) | (185 | ) | (390 | ) | ||||||||
Other, net |
(42 | ) | 73 | (177 | ) | 277 | ||||||||||
Equity in gain (loss) of unconsolidated affiliates |
(60 | ) | 71 | (173 | ) | (109 | ) | |||||||||
Income (loss) from continuing operations before income taxes |
791 | 523 | 5,570 | (4,057 | ) | |||||||||||
Income tax (expense) benefit |
1,124 | 946 | (297 | ) | 800 | |||||||||||
Income (loss) from continuing operations |
1,915 | 1,469 | 5,273 | (3,257 | ) | |||||||||||
Discontinued operations: |
||||||||||||||||
Loss from discontinued operations, net of tax |
(7,331 | ) | (683 | ) | (11,178 | ) | (3,457 | ) | ||||||||
Net loss attributable to the noncontrolling interest |
2,721 | 178 | 3,342 | 952 | ||||||||||||
Loss from discontinued operations |
(4,610 | ) | (505 | ) | (7,836 | ) | (2,505 | ) | ||||||||
Net income (loss) |
(2,695 | ) | 964 | (2,563 | ) | (5,762 | ) | |||||||||
Net income (loss) attributable to the noncontrolling interest |
(42 | ) | 4 | (42 | ) | 3 | ||||||||||
Net income (loss) attributable to RAE Systems Inc. |
$ | (2,737 | ) | $ | 968 | $ | (2,605 | ) | $ | (5,759 | ) | |||||
Earnings per common share basic: |
||||||||||||||||
Continuing operations |
$ | 0.04 | $ | 0.02 | $ | 0.09 | $ | (0.06 | ) | |||||||
Discontinued operations |
(0.08 | ) | (0.01 | ) | (0.13 | ) | (0.04 | ) | ||||||||
Net loss per share basic and diluted |
$ | (0.04 | ) | $ | 0.01 | $ | (0.04 | ) | $ | (0.10 | ) | |||||
Diluted net loss per share |
||||||||||||||||
Continuing operations |
$ | 0.04 | $ | 0.02 | $ | 0.09 | $ | (0.06 | ) | |||||||
Discontinued operations |
(0.08 | ) | (0.01 | ) | (0.13 | ) | (0.04 | ) | ||||||||
Diluted net loss per share |
$ | (0.04 | ) | $ | 0.01 | $ | (0.04 | ) | $ | (0.10 | ) | |||||
Weighted average common shares outstanding Basic |
59,512 | 59,390 | 59,439 | 59,367 | ||||||||||||
Stock options |
477 | 179 | 136 | | ||||||||||||
Weighted average common shares outstanding Diluted |
59,989 | 59,569 | 59,575 | 59,367 | ||||||||||||
The following table sets forth the components of our Consolidated Statements of Operations as a
percentage of net sales:
Three Months | ||||||||||||||||
Ended December 31, | Year Ended December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net sales |
100 | % | 100 | % | 100 | % | 100 | % | ||||||||
Cost of sales |
39 | % | 47 | % | 40 | % | 47 | % | ||||||||
Gross profit |
61 | % | 53 | % | 60 | % | 53 | % | ||||||||
Operating expenses: |
||||||||||||||||
Sales and marketing |
23 | % | 22 | % | 23 | % | 22 | % | ||||||||
Research and development |
8 | % | 7 | % | 8 | % | 8 | % | ||||||||
General and administrative |
26 | % | 22 | % | 23 | % | 28 | % | ||||||||
Total operating expenses |
57 | % | 51 | % | 54 | % | 58 | % | ||||||||
Operating income (loss) from continuing operations |
4 | % | 2 | % | 6 | % | -5 | % | ||||||||
Other income (expense): |
||||||||||||||||
Interest income |
0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Interest expense |
0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Other, net |
0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Equity in gain (loss) of unconsolidated affiliates |
-1 | % | 0 | % | 0 | % | 0 | % | ||||||||
Income (loss) from continuing operations before income
taxes |
3 | % | 2 | % | 6 | % | -5 | % | ||||||||
Income tax (expense) benefit |
5 | % | 5 | % | 0 | % | 1 | % | ||||||||
Income (loss) from continuing operations |
8 | % | 7 | % | 6 | % | -4 | % | ||||||||
Discontinued operations: |
||||||||||||||||
Loss from discontinued operations, net of tax |
-32 | % | -3 | % | -13 | % | -5 | % | ||||||||
Net loss attributable to the noncontrolling interest |
12 | % | 1 | % | 4 | % | 1 | % | ||||||||
Loss from discontinued operations |
-20 | % | -2 | % | -9 | % | -4 | % | ||||||||
Net income (loss) |
-12 | % | 5 | % | -3 | % | -8 | % | ||||||||
Net (income) loss attributable to the
noncontrolling interest |
0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Net income (loss) attributable to RAE Systems Inc. |
-12 | % | 5 | % | -3 | % | -8 | % | ||||||||