RAE Systems Reports First Quarter 2006 Results; Company Reaffirms Revenue Guidance of $68 to $73 Million for Full Year 2006.SAN JOSE San Jose, city, United States San Jose (sănəzā`, săn hōzā`), city (1990 pop. 782,248), seat of Santa Clara co., W central Calif.; founded 1777, inc. 1850. , Calif. -- RAE Systems Inc. (AMEX AMEX See: American Stock Exchange :RAE), a leading global developer and manufacturer of rapidly-deployable, multi-sensor chemical and radiation detection monitors and networks for homeland security Noun 1. Homeland Security - the federal department that administers all matters relating to homeland security Department of Homeland Security executive department - a federal department in the executive branch of the government of the United States and industrial applications, today reported results for the first quarter of 2006. 2006 First Quarter Financials For the first quarter of 2006, RAE Systems reported revenue of $12.4 million as compared to revenue of $12.2 million for the same quarter in 2005. The growth in revenue reflects increased sales in both Europe and Asia, which were largely offset by a slow-down in U.S. Government orders. Europe and Asia grew at a combined rate of approximately 23 percent over the first quarter of 2005. Sales in the Americas declined by approximately 12 percent compared to the first quarter of 2005. Gross margin for the first quarter of 2006 was 54 percent as compared to 59 percent for the first quarter of 2005. The decrease was primarily attributable to a shift in sales in the Americas towards lower-margin portable products as well as from increased sales of lower-margin installation and distributor products in Asia. Net loss for the first quarter of 2006 was $896,000 or $0.02 per share compared to net income of $94,000 or $0.00 per share for the first quarter of 2005. The Company also received a one-time benefit of $139,000 in the first quarter of 2006 from a change in accounting principle in moving, as required, from Financial Accounting Standard 123 to 123R "Share-Based Payment." The Company ended the first quarter of 2006 with $28.3 million of cash and investments and $1.6 million of debt. That compares to $29.5 million of cash and investments and $1.6 million of debt as of December 31, 2005. "I am pleased that we were able to continue double-digit sales growth in our overseas markets in the first quarter of 2006, in what traditionally is a seasonally slow quarter," said Robert Chen Robert Chen (陳慕融) has been concertmaster of the Chicago Symphony Orchestra since 1999. His activities as a soloist include performances with the Los Angeles Philharmonic, Moscow Philharmonic, New Japan Philharmonic, National Symphony Orchestra of Taiwan, , RAE Systems CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "However, I am disappointed that we took a step back in the Americas where we experienced a slow-down in U.S. government orders. We believe our photoionization Photoionization The ejection of one or more electrons from an atom, molecule, or positive ion following the absorption of one or more photons. The process of electron ejection from matter following the absorption of electromagnetic radiation has been under and wireless products continue to lead the industry and we are confident that we will regain our momentum in the Americas. As a Company, we continue to pursue our goal of providing leading-edge technology to the security and industrial markets and we are continuing to invest in our vision of pervasive pervasive, adj indicates that a condition permeates the entire development of the individual. sensing. Finally, I would like to reaffirm re·af·firm tr.v. re·af·firmed, re·af·firm·ing, re·af·firms To affirm or assert again. re our full-year revenue guidance of $68 million to $73 million." First Quarter 2006 Business Highlights Americas --The Hampton Roads Hampton Roads, roadstead, 4 mi (6.4 km) long and 40 ft (12.2 m) deep, SE Va., through which the waters of the James, Nansemond, and Elizabeth rivers pass into Chesapeake Bay. Metropolitan Medical Response System (MMRS MMRS Metropolitan Medical Response System (formerly Metropolitan Medical Strike Team, MMST) MMRS Multispectral Medium Resolution Scanner MMRS Mississippi Management and Reporting System MMRS Montana Motorcycle Rider Safety ), under the Department of Homeland Security Noun 1. Department of Homeland Security - the federal department that administers all matters relating to homeland security Homeland Security executive department - a federal department in the executive branch of the government of the United States (DHS DHS Department of Homeland Security (USA) DHS Department of Human Services DHS Department of Health Services DHS Demographic and Health Surveys DHS Dirhams (Morocco national currency) ) Preparedness pre·par·ed·ness n. The state of being prepared, especially military readiness for combat. Noun 1. preparedness - the state of having been made ready or prepared for use or action (especially military action); "putting them Directorate, purchased over 600 of the GammaRAE II's as the radiation event response tool for the eastern Virginia Virginia, state, United States Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). region. --A major government proving ground purchased a network of wireless ppbRAEs to support chemical warfare chemical warfare, employment in war of incendiaries, poison gases, and other chemical substances. Ancient armies attacking or defending fortified cities threw burning oil and fireballs. A primitive type of flamethrower was employed as early as the 5th cent. B.C. agent detection testing in the desert. --A global pharmaceutical firm in Tennessee Tennessee, state, United States Tennessee (tĕn`əsē', tĕn'əsē`), state in the south-central United States. installed a network of RAEGuard Fixed photoionization detector A photoionization detector or PID uses an ultraviolet (UV) lightsource to break molecules to positively charged ions that can easily be counted with a detector. Ionization occurs when a molecule absorbs high energy UV light, which excites the molecule, and results in (PID (1) (Process IDentifier) A temporary number assigned by the operating system to a process or service. (2) (Proportional-Integral-Derivative) The most common control methodology in process control. ) systems for worker safety in their production facility. Asia --The Tianjin Dagang Oil field selected RAE-KLH in a competition with several large international suppliers and purchased more than 450 RAE-KLH branded respirators. --The Jihua benzene benzene (bĕn`zēn, bĕnzēn`), colorless, flammable, toxic liquid with a pleasant aromatic odor. It boils at 80.1°C; and solidifies at 5.5°C;. Benzene is a hydrocarbon, with formula C6H6. factory in Hebei Province Noun 1. Hebei province - a populous province in northeastern China Hebei, Hopeh, Hopei Cathay, China, Communist China, mainland China, People's Republic of China, PRC, Red China - a communist nation that covers a vast territory in eastern Asia; the most purchased a network of fixed RAEGuard PIDs to support recovery and remediation efforts, following the explosion of two large benzene storage tanks. --The Thailand Department of Labor Protection made their largest ever purchase of gas detection units and choose EntryRAE, for its five-gas flexibility and ease of use. Europe --The Italian Fire Department received and deployed the newly released AreaRAE Responder for public venue protection at the Winter Olympics Olympics Sports medicine An international competition among (traditionally) nonprofessional athletes trained in a particular summer or winter sport, which is held every 4 yrs in a selected city. See Paralympics, Special Olympics, World Medical Games. in Torino, Italy. --Shell Oil and Gas in the Netherlands chose to standardize stan·dard·ize v. 1. To cause to conform to a standard. 2. To evaluate by comparing with a standard. in Europe on the UltraRAE for hazardous benzene detection. --AreaRAE Responder was chosen by the largest European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. catalyst replacement firm for its teams servicing refineries throughout Europe. About RAE Systems RAE Systems is a leading global developer and manufacturer of rapidly deployable, multi-sensor chemical detection monitors and networks for homeland security and industrial applications. In addition, RAE Systems offers a full line of portable single-sensor chemical and radiation detection products. RAE Systems' products enable the military and first responders first responder First response personnel Emergency medicine A person employed in the public sector–EMT, fire fighter, police, volunteer EMS–whose duties include provision of immediate medical care in the event of an emergency; FRs have basic emergency such as firefighters, law enforcement and other emergency management personnel to detect and provide early warning of weapons of mass destruction Weapons that are capable of a high order of destruction and/or of being used in such a manner as to destroy large numbers of people. Weapons of mass destruction can be high explosives or nuclear, biological, chemical, and radiological weapons, but exclude the means of transporting or and other hazardous materials. Industrial applications include the detection of toxic industrial chemicals, volatile organic compounds volatile organic compound Environment Any toxic cabon-based (organic) substance that easily become vapors or gases–eg, solvents–paint thinners, lacquer thinner, degreasers, dry cleaning fluids and petrochemicals. RAE Systems' products are used by many U.S. government agencies, including the Department of Homeland Security, the Department of Justice, and the Department of State, as well as all branches of the U.S. military, and by numerous city and state agencies. Our end users also include many of the world's leading corporations in the airline, automotive, computer and oil industries. Our products are used in civilian and government atmospheric atmospheric /at·mos·pher·ic/ (at?mos-fer´ik) of or pertaining to the atmosphere. atmospheric of or pertaining to the atmosphere. monitoring programs in over 50 countries. For more information about RAE Systems, please visit www.RAESystems.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 and receptiveness re·cep·tive adj. 1. Capable of or qualified for receiving. 2. Ready or willing to receive favorably: receptive to their proposals. 3. 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and Form 10-Q Form 10-Q See 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 here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" , and the company assumes no obligation to update such statements.
RAE Systems Inc.
Condensed Consolidated Statement of Operations
======================================================================
Three Months Ended
March 31,
----------------------------
2006 2005
(Unaudited) (Unaudited)
-------------- -------------
Net Sales $ 12,426,000 $ 12,248,000
Cost of Sales 5,716,000 5,078,000
-------------- -------------
Gross Profit 6,710,000 7,170,000
-------------- -------------
Operating Expenses:
Sales and marketing 4,071,000 3,424,000
Research and development 1,273,000 1,097,000
General and administrative 2,969,000 2,455,000
Total Operating Expenses 8,313,000 6,976,000
-------------- -------------
(Loss) Income from Operations (1,603,000) 194,000
-------------- -------------
Other Income (Expense):
Interest income 174,000 99,000
Interest expense (21,000) (33,000)
Other, net 24,000 (37,000)
Equity in loss of unconsolidated
affiliate (64,000) (83,000)
-------------- -------------
Total Other Income (Expense) 113,000 (54,000)
-------------- -------------
(Loss) Income Before Income Taxes,
Minority Interest and Cumulative Effect
of Change in Accounting Principle (1,490,000) 140,000
Income tax (benefit) / expense (179,000) 106,000
-------------- -------------
(Loss) Income Before Minority Interest
and Cumulative Effect of Change in
Accounting Principle (1,311,000) 34,000
Minority interest in loss of consolidated
subsidiaries 276,000 60,000
-------------- -------------
(Loss) Income Before Cumulative Effect on
Change in Accounting Principle (1,035,000) 94,000
Cumulative effect of change in accounting
principle, net of tax effects 139,000 -
-------------- -------------
Net (Loss) Income $ (896,000) $ 94,000
============== =============
Basic (Loss) Earnings Per Common Share
(Loss) income before cumulative effect
of change in accounting principle $ (0.02) $ 0.00
Cumulative effect of change in
accounting principle 0.00 0.00
Basic (loss) income per common share $ (0.02) $ 0.00
============== =============
Diluted (Loss) Earnings Per Common Share
(Loss) income before cumulative effect
of change in accounting principle $ (0.02) $ 0.00
Cumulative effect of change in
accounting principle 0.00 0.00
Basic (loss) income per common share $ (0.02) $ 0.00
============== =============
Weighted-average common shares
outstanding 57,901,002 57,485,111
Stock options and warrants - 2,573,656
-------------- -------------
Diluted weighted-average common shares
outstanding 57,901,002 60,058,767
============== =============
RAE Systems Inc.
Condensed Consolidated Balance Sheets
======================================================================
March 31, December 31,
2006 2005
(Unaudited)
-------------- --------------
Assets
Current Assets:
Cash and cash equivalents $ 10,807,000 $ 13,524,000
Short-term investments 15,860,000 14,348,000
Trade notes receivable 1,390,000 1,087,000
Accounts receivable, net of allowance
for doubtful accounts of $842,000 and
$963,000, respectively 9,006,000 11,707,000
Accounts receivable from affiliate 100,000 84,000
Inventories, net 10,633,000 9,477,000
Prepaid expenses and other current
assets 3,095,000 2,773,000
Deferred tax assets 2,841,000 2,869,000
-------------- --------------
Total Current Assets 53,732,000 55,869,000
-------------- --------------
Property and Equipment, net 14,941,000 14,911,000
Long Term Investments 1,616,000 1,616,000
Intangible Assets, net 1,664,000 1,782,000
Goodwill 136,000 136,000
Long Term Deferred Tax Assets 461,000 634,000
Deposits and Other Assets 801,000 867,000
Investment in Unconsolidated Affiliate 385,000 449,000
-------------- --------------
Total Assets $ 73,736,000 $ 76,264,000
============== ==============
Liabilities, Minority Interest in
Consolidated Entities and Shareholders'
Equity
Current Liabilities:
Accounts payable $ 4,050,000 $ 3,979,000
Accrued liabilities 6,079,000 7,329,000
Notes payable - related parties 774,000 759,000
Income taxes payable 46,000 407,000
Current portion of deferred revenue 2,042,000 2,029,000
-------------- --------------
Total Current Liabilities 12,991,000 14,503,000
-------------- --------------
Deferred Revenue, net of current portion 306,000 296,000
Deferred Tax Liabilities 379,000 379,000
Other Long Term Liabilities 1,357,000 1,466,000
Long Term Notes Payable - Related
Parties 836,000 821,000
-------------- --------------
Total Liabilities 15,869,000 17,465,000
-------------- --------------
Commitments and Contingencies
Minority Interest in Consolidated
Entities 3,950,000 4,226,000
Shareholders' Equity:
Common stock, $0.001 par value;
200,000,000 shares authorized;
57,937,704 and 57,837,843 shares
issued and outstanding, respectively 58,000 58,000
Additional paid-in capital 56,709,000 56,629,000
Accumulated other comprehensive income 470,000 310,000
Accumulated deficit (3,320,000) (2,424,000)
-------------- --------------
Total Shareholders' Equity 53,917,000 54,573,000
-------------- --------------
Total Liabilities, Minority Interest in
Consolidated Entities and Shareholders'
Equity $ 73,736,000 $ 76,264,000
============== ==============
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