omniture

China Security & Surveillance Technology, Inc. Reports First-Quarter 2011 Results with Encouraging Margins Expansion and a Positive Cash Flow

SHENZHEN, China, April 25, 2011 /PRNewswire-Asia/ --


  • First-quarter revenues decreased to $99.05 million due to seasonality impact of the Chinese New Year holiday and the fact that the Company secured more large-scale installation projects which required longer installation time to complete. Government customers accounted for 87.0% of total revenues in the first quarter of 2011
  • First-quarter gross profit grew 8.6% to $31.48 million despite a decrease in revenues
  • Gross margin and operating margin up 770 basis points and 250 basis points year over year to 31.8% and 8.3%, respectively. The margin improvement reflected the increasing gross margin in system installation business and effective cost control measures
  • First-quarter net income attributable to CSST decreased to $1.68 million and GAAP diluted EPS was $0.02. The drop was mainly attributable to the decrease in revenues, and an increase in income taxes and interest expenses
  • Cash increased $213.11 million to $278.74 million. This was mainly due to the improved operating cash flow condition and the proceeds from additional bank loans during the quarter

Note: CSST's first-quarter 2011 earnings conference call can be accessed at 1866 549 1292 (US Toll Free) or +852 3005 2050 (Toll International), with PIN number: 341229# at 8:00 a.m. ET. on April 25th, 2011. First-quarter 2011 earnings slides can be accessed at http://csst.todayir.com/html/index.php before the call.

China Security & Surveillance Technology, Inc. ("CSST" or the "Company") (NYSE: CSR; Nasdaq Dubai: CSR), a leading integrated surveillance and safety solutions provider in the P.R.C., today reported first-quarter 2011 results with encouraging margins expansion and a positive cash flow. The results were driven by an increasing gross margin in system installation business and disciplined execution of cost control initiatives.

CSST's first-quarter 2011 revenues totaled $99.05 million, net income attributable to the Company was $1.68 million and GAAP diluted EPS was $0.02. Gross margin and operating margin rose to 31.8% and 8.3%, respectively.

"We just completed a quarter with encouraging margins expansion and a positive cash flow," said Mr. Guoshen Tu, Chairman and Chief Executive Officer of CSST. "Despite the seasonality impacts on our revenues, we continue to look into growth opportunities in safety and surveillance industry in China, with a particular focus on large-scale government projects and security service business. These continue to be our growth platforms as we maintain our market leadership in China."

First-Quarter 2011 Financial Results

For the quarter ended March 31, 2011, CSST's revenues totaled $99.05 million, down 17.6% versus $120.19 million in the first quarter of 2010. The first quarter has generally been a slow quarter for CSST due to the Chinese New Year. Fewer large-scale government projects were undertaken by the Company during and around the Chinese New Year holiday. Additionally, as the Company succeeded in securing a greater number of large scale installation projects which generally required longer installation time, the Company completed a lesser number of installation projects in this quarter. Government customers accounted for 87.0% of total revenues, while corporate customers accounted for 13.0%. All revenues in the first quarter of 2011 were organic, compared with $119.37 million, or 99.3% of total revenues in the first quarter of 2010. However, as the first quarter has historically been our slowest quarter, the Company expects revenue to grow in the remainder of 2011.

Gross profit totaled $31.48 million, up 8.6% from $28.98 million in the first quarter of 2010. Gross margin was 31.8%, up 770 basis points from 24.1% in the first quarter of 2010. The increase was due to relatively higher margin from installation business in the first quarter of 2011.

Operating income increased 16.6% to $8.13 million while operating margin increased to 8.3%, up 250 basis points from 5.8% in the first quarter of 2010. The increase was mainly due to the increased gross margin and our concrete efforts in developing cost-effective operation processes.

Net income attributable to CSST totaled $1.68 million, down 48.8% from $3.28 million in the first quarter of 2010; and net margin decreased to 1.7% in the first quarter of 2011, compared with 2.8% in the first quarter of 2010. The drop in net income attributable to the Company was mainly due to the decrease in revenues, and an increase in income taxes and interest expenses. The Company's interest expenses recorded $5.11 million in the first quarter of 2011, as compared with $2.29 million in the first quarter of 2010.

GAAP diluted EPS was $0.02 versus $0.05 in the first quarter of 2010. The drop was mainly due to the decrease in net income and the fact that our weighted average diluted share count increased 31.2% to 89.70 million shares in the first quarter of 2011, from 68.37 million shares in the same period of 2010.

As at March 31, 2011, the Company had a cash balance of $278.74 million, up $213.11 million from $65.63 million in the beginning of the quarter. This was mainly due to the improved operating cash flow condition, as well as the proceeds from additional bank loans in the first quarter of 2011.

Financial Outlook

"Our long-term future remains bright. We made the decision to concentrate CSST's strategic focus on the opportunities we saw flowing from large-scale government projects and security service business. Under the newly issued 12th five-year plan on security industry and the central government's spending plan in 2011, which landed a large increase of the government Safe City and E-city projects spending, we saw tremendous opportunities in the horizon," said Mr. Tu. "Looking ahead, we are confident that we are ready to capitalize on our solid fundamentals, market leadership and disciplined cost control strategy to accelerate the growth of our Company in 2011."

About China Security & Surveillance Technology, Inc.

Based in Shenzhen, China, CSST designs, manufactures, sells, installs, services and monitors electronic surveillance and safety products and solutions, including related software, in China. Its customers are mainly comprised of government, commercial, industrial and education entities. CSST has built a diversified customer base through its extensive sales and service network that includes branch offices and distribution points throughout China. To learn more about the Company visit http://www.csst.com

Safe Harbor Statement

This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. Such statements include, among others, those concerning our expected financial results in 2011 and our ability to deliver such results, the central government's spending plan and our ability to capitalize the anticipated growth in the surveillance and safe industry, expected growth in industry demand and our business, our expected financial performance and strategic and operational plans, our future operating results, our expectations regarding the market for surveillance and safety products and our ability to win large-scale government contracts, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Forward-looking statements can be identified by the use of forward-looking terminology such as 'will,' 'believes,' 'expects' or similar expressions. Such information is based upon expectations of our management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and based upon premises with respect to future business decisions, which are subject to change. We do not undertake to update the forward-looking statements contained in this press release. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ('SEC'), and our subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system at http://www.sec.gov

For more information, please contact:

 

 

 

 

Company Contact:

 

 

Amy Tang

 

 

China Security & Surveillance Technology, Inc.

 

 

Tel:   +86-755-8351-0888 ext. 6138

 

 

Email: ir@csst.com

 

 

 

 

Investor and Media Contact:

 

 

Patrick Yu, Fleishman-Hillard Hong Kong

 

 

Tel:   +852-2530-2577

 

 

Email: patrick.yu@fleishman.com

 

 

 




 

 

CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2011 (UNAUDITED) AND DECEMBER 31, 2010

Expressed in thousands of U.S. dollars

(Except for share and per share amounts)


 

 

ASSETS

 

 

 

 

 

 

March 31, 2011

 

 

 

December 31, 2010

 

 

 

Cash and cash equivalents

 

$

 

278,739

 

 

$

 

65,626

 

 

 

Restricted cash

 

 

20,000

 

 

 

--

 

 

 

Accounts receivable, net

 

 

417,966

 

 

 

433,986

 

 

 

Inventories, net

 

 

43,026

 

 

 

59,368

 

 

 

Prepayments and deposits

 

 

56,809

 

 

 

56,241

 

 

 

Advances to suppliers and subcontractors

 

 

103,701

 

 

 

88,360

 

 

 

Other receivables

 

 

61,011

 

 

 

47,116

 

 

 

Total current assets

 

 

981,252

 

 

 

750,697

 

 

 

 

 

 

 

 

 

 

 

Deposits paid for business acquisitions, properties and intangible assets

 

 

153,657

 

 

 

146,243

 

 

 

Plant and equipment, net

 

 

75,136

 

 

 

75,294

 

 

 

Land use rights, net

 

 

7,957

 

 

 

7,896

 

 

 

Intangible assets, net

 

 

47,346

 

 

 

48,692

 

 

 

Goodwill

 

 

79,516

 

 

 

79,516

 

 

 

Deferred financing costs, net

 

 

2,669

 

 

 

2,684

 

 

 

                 TOTAL ASSETS

 

$

 

1,347,533

 

 

$

 

1,111,022

 

 

 

 

 

 

 

 

 

 

 

 



CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

AS OF MARCH 31, 2011 (UNAUDITED) AND DECEMBER 31, 2010

Expressed in thousands of U.S. dollars

(Except for share and per share amounts)

 

 

 

 

LIABILITIES AND EQUITY


 

 

 

 

March 31, 2011

 

 

 

December 31, 2010

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Notes payable  short term

 

$

 

182,657

 

 

$

 

196,329

 

 

 

Obligations under product financing 
  arrangements  short term

 

 

6,110

 

 

 

6,687

 

 

 

Guaranteed senior unsecured notes payable  
  short term

 

 

21,907

 

 

 

37,408

 

 

 

Accounts and bills payable

 

 

40,608

 

 

 

32,240

 

 

 

Accrued expenses

 

 

58,472

 

 

 

49,421

 

 

 

Advances from customers

 

 

17,738

 

 

 

15,216

 

 

 

Taxes payable

 

 

26,230

 

 

 

28,648

 

 

 

Payable for acquisition of businesses, 
  properties and land use rights

 

 

3,763

 

 

 

3,763

 

 

 

Deferred income

 

 

2,768

 

 

 

3,201

 

 

 

Total current liabilities

 

 

360,253

 

 

 

372,913

 

 

 

 

 

 

 

 

 

 

 

LONG TERM LIABILITIES

 

 

 

 

 

 

 

 

Notes payable  long term

 

 

299,903

 

 

 

60,570

 

 

 

Obligations under product financing 
  arrangements  long term

 

 

5,164

 

 

 

6,474

 

 

 

Guaranteed senior unsecured notes payable  
  long term

 

 

3,285

 

 

 

6,580

 

 

 

Net deferred tax liabilities

 

 

668

 

 

 

282

 

 

 

Total liabilities

 

 

669,273

 

 

 

446,819

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value;
  10,000,000 shares authorized, no shares issued 
  and outstanding

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value;
  290,000,000 shares authorized, 89,722,023 (March 31, 
  2011) and 89,521,115 (December 31, 2010) shares 
  issued and outstanding

 

 

9

 

 

 

9

 

 

 

Additional paid-in capital

 

 

379,964

 

 

 

374,417

 

 

 

Retained earnings

 

 

245,050

 

 

 

243,371

 

 

 

Statutory surplus reserve fund

 

 

804

 

 

 

804

 

 

 

Accumulated other comprehensive income

 

 

52,450

 

 

 

45,619

 

 

 

Total equity of the Company

 

 

678,277

 

 

 

664,220

 

 

 

Noncontrolling interest

 

 

(17)

 

 

 

(17)

 

 

 

Total equity

 

 

678,260

 

 

 

664,203

 

 

 

      TOTAL LIABILITIES AND EQUITY

 

$

 

1,347,533

 

 

$

 

1,111,022

 

 

 

 

 

 

 

 

 

 

 

 



CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010

Expressed in thousands of U.S. dollars

(Except for share and per share amounts)

 

 

 

 

Three Months Ended March 31

 

 

 

 

 

2011

 

 

 

2010

 

 

 

 

 

(Unaudited)

 

 

 

(Unaudited)

 

 

 

Revenues

 

$

 

99,054

 

 

$

 

120,190

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold (including depreciation and
 amortization for the three months ended March 31,
 2011 and 2010 of $259 and $254, respectively)

 

 

67,567

 

 

 

91,211

 

 

 

Gross profit

 

 

31,487

 

 

 

28,979

 

 

 

Selling and marketing

 

 

2,696

 

 

 

2,714

 

 

 

General and administrative (including non-cash
 employee compensation for the three months ended
 March 31, 2011 and 2010 of $5,547 and $8,326, respectively)

 

 

17,698

 

 

 

16,322

 

 

 

Depreciation and amortization

 

 

2,968

 

 

 

2,980

 

 

 

Income from operations

 

 

8,125

 

 

 

6,963

 

 

 

Interest income

 

 

141

 

 

 

78

 

 

 

Interest expense

 

 

(5,114)

 

 

 

(2,295)

 

 

 

Other income, net

 

 

596

 

 

 

246

 

 

 

Income before income taxes

 

 

3,748

 

 

 

4,992

 

 

 

Income taxes

 

 

(2,069)

 

 

 

(1,717)

 

 

 

Net income

 

 

1,679

 

 

 

3,275

 

 

 

 

 

 

 

 

 

 

 

Add: net loss attributable to the noncontrolling interest

 

 

--

 

 

 

2

 

 

 

Net income attributable to the Company

 

 

1,679

 

 

 

3,277

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain

 

 

6,831

 

 

 

124

 

 

 

Comprehensive income attributable to the Company

 

 

8,510

 

 

 

3,401

 

 

 

Comprehensive loss attributable to the noncontrolling
 interest

 

 

--

 

 

 

(2)

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME

 

$

 

8,510

 

 

$

 

3,399

 

 

 

 

 

 

 

 

 

 

 

NET INCOME PER SHARE

 

 

 

 

 

 

 

 

ATTRIBUTABLE TO THE COMPANY'S COMMON
 SHAREHOLDERS

 

 

 

 

 

 

 

 

    BASIC

 

$

 

0.02

 

 

$

 

0.05

 

 

 

    DILUTED

 

$

 

0.02

 

 

$

 

0.05

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES
 OUTSTANDING

 

 

 

 

 

 

 

 

   BASIC

 

 

84,310,000

 

 

 

63,961,000

 

 

 

   DILUTED

 

 

89,696,000

 

 

 

68,369,000

 

 

 

 

 

 

 

 

 

 

 

 



CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010

Expressed in thousands of U.S. dollars

(Except for share and per share amounts)

 

 

 

 

Three Months Ended March 31

 

 

 

 

 

2011

 

 

 

2010

 

 

 

 

 

(Unaudited)

 

 

 

(Unaudited)

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

 

1,679

 

 

$

 

3,275

 

 

 

Adjustments to reconcile net income to net cash provided by (used in) 
  operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,227

 

 

 

3,234

 

 

 

Provision for obsolete inventories

 

 

(6)

 

 

 

--

 

 

 

Amortization of deferred financing costs

 

 

833

 

 

 

217

 

 

 

Non-cash compensation expense

 

 

5,547

 

 

 

8,326

 

 

 

Debt discount amortization

 

 

524

 

 

 

950

 

 

 

Deferred taxes

 

 

383

 

 

 

(310)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Decrease (increase) in:

 

 

 

 

 

 

 

 

    Accounts receivable

 

 

20,408

 

 

 

(48,573)

 

 

 

    Inventories

 

 

16,947

 

 

 

(3,308)

 

 

 

    Prepayments and deposits

 

 

1

 

 

 

(46)

 

 

 

    Advances to suppliers and subcontractors

 

 

(14,447)

 

 

 

(14,634)

 

 

 

    Other receivables

 

 

(13,409)

 

 

 

(3,626)

 

 

 

Increase (decrease) in:

 

 

 

 

 

 

 

 

    Accounts payable and accrued expenses

 

 

16,289

 

 

 

(13,846)

 

 

 

    Advances from customers

 

 

2,369

 

 

 

5,675

 

 

 

    Taxes payable

 

 

(2,708)

 

 

 

1,629

 

 

 

    Deferred income

 

 

(465)

 

 

 

159

 

 

 

Net cash provided by (used in) operating activities

 

 

37,172

 

 

 

(60,878)

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Additions to plant and equipment

 

 

(519)

 

 

 

(597)

 

 

 

Additions to intangible assets, other than through business acquisitions

 

 

(276)

 

 

 

(533)

 

 

 

Deposits paid for business acquisitions, properties and intangible assets, net

 

 

(5,935)

 

 

 

(6,526)

 

 

 

Net cash used in investing activities

 

 

(6,730)

 

 

 

(7,656)

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Restricted cash

 

 

(20,000)

 

 

 

--

 

 

 

Proceeds from borrowings, net of financing costs

 

 

300,800

 

 

 

109,137

 

 

 

Repayment of borrowings

 

 

(77,992)

 

 

 

(32,229)

 

 

 

Repayment of guaranteed senior unsecured notes payable

 

 

(19,320)

 

 

 

(19,320)

 

 

 

Repayment of obligations under product financing arrangements

 

 

(1,716)

 

 

 

(1,251)

 

 

 

Net cash provided by financing activities

 

 

181,772

 

 

 

56,337

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

212,214

 

 

 

(12,197)

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

899

 

 

 

7

 

 

 

Cash and cash equivalents, beginning of period

 

 

65,626

 

 

 

154,483

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

 

278,739

 

 

$

 

142,293

 

 

 

 

 

 

 

 

 

 

 

 




Source: China Security & Surveillance Technology, Inc.
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