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 company's
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.
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 company's 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 company's 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 world's leading
corporations and by many U.S. government agencies. For more
information about RAE Systems, please visit www.RAESystems.com.
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]
RAE Systems Inc.
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)
Three Months Ended Year Ended
December 31, 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 Year Ended
December 31, 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%
======== ======== ======== ========
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Company Contact: Investor Relations 408-952-8449
investorrelations@raesystems.com IR Agency Contact: Becky Herrick
Lippert/Heilshorn & Associates, Inc. 415-433-3777
bherrick@lhai.com
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