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China Security & Surveillance Technology, Inc. Reports Fourth-Quarter and Full-Year 2010 Results

Strong Momentum in the Installation Segment, Expansion in Margins


SHENZHEN, China, Feb. 28, 2011 /PRNewswire-Asia-FirstCall/ --

  • Fourth-quarter revenues increased 17.1% to $214.01 million
  • Fourth-quarter gross margin increased to 28.6%
  • Fourth-quarter net income attributable to CSST increased 11.4% to $29.04 million and GAAP diluted EPS was $0.33
  • Full-year revenue increased 17.9% to $684.70 million
  • Full-year net income attributable to CSST increased 36.8% to $77.39 million and net margin increased to 11.3%
  • Full-year GAAP diluted EPS was $0.96
  • Full-year gross margin and operating margin up 310 basis points and 390 basis points year over year, respectively – the margin improvement reflected the growing large-scale government contracts and effective cost control measures

Note: CSST's fourth-quarter and full-year 2010 earnings conference call will be broadcast live via the Internet at 8 a.m. ET on Monday, February 28, 2011, at http://irpage.net/csct/index.html.

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 fourth-quarter and full-year 2010 results highlighted by revenue growth, increase in net income and encouraging margin improvement. These results were driven by continuing strong demand for surveillance and safety products and services in China, gains in large-scale government contracts and disciplined execution on cost initiatives.

CSST's full-year revenues totaled $684.70 million, net income attributable to the Company was $77.39 million and GAAP diluted EPS was $0.96. Gross margin, operating margin and net margin rose to 27.7%, 15.2% and 11.3% respectively.

"We had another strong quarter and a solid year," said Mr. Guoshen Tu, Chairman and Chief Executive Officer of CSST. "Our major growth drivers – large-scale government projects and security service business – continue to set the pace for the industry, and we're still early in the growth cycle of these areas. Progress across these growth drivers, combined with continued progress on our cost-improvement initiatives, makes us feel confident of our outlook."

Fourth-Quarter Financial Results

For the quarter ended December 31, 2010, CSST's revenues totaled $214.01 million, compared with $182.71 million in the year-earlier quarter.

Gross profit totaled $61.15 million, up 18.8% from $51.48 million in the year-earlier period. Gross margin increased to 28.6% from 28.2% for the same period in 2009, as a result of expanded profitability of the large-scale government contracts.

Net income attributable to CSST totaled $29.04 million, up 11.4% from $26.07 million in the year-earlier quarter. Net margin was 13.6%. GAAP diluted EPS was $0.33 in the fourth quarter of 2010, as compared with $0.38 in the fourth quarter of 2009.

Full-Year Financial Results

For the full year 2010, CSST's revenues totaled $684.70 million, up 17.9% versus $580.87 million in 2009. The growth reflected the strong demand for CSST's products and services, CSST's established brand awareness and extensive distribution network. Government customers accounted for 56% of total revenues, while corporate customers accounted for 44%. Organic revenues for 2010 totaled $683.88 million, or 99.9% of total revenues, compared with $543.89 million, or 93.6% of total revenues in 2009. Non-organic revenues totaled $0.82 million or 0.1% of total revenues.

Gross profit totaled $189.42 million, up 32.6% from $142.87 million in 2009. Gross margin was 27.7%, up 310 basis points from 24.6% last year. The increase was due to relatively higher margins from large-scale government projects in 2010.

Operating income increased 57.6% to $103.94 million while operating margin increased to 15.2%.

Net income attributable to CSST totaled $77.39 million, up 36.8% from $56.58 million in 2009; and net margin increased to 11.3% in 2010, compared with 9.7% in 2009. The increase of net income was mainly attributable to the gross margin expansion and continuous improvement of operational efficiencies.

GAAP diluted EPS totaled $0.96 versus $1.01 in 2009. The decrease was mainly due to the increase of share count. Weighted average diluted share count increased from 56.17 million shares in 2009 to 80.52 million shares in 2010.

As of December 31, 2010, CSST's backlog of sales contracts was $325.50 million, down from $412.56 million as of September 30, 2010.

Financial Outlook

For the full year 2011, CSST reaffirms its revenue projection of $870 to $890 million, net income of $104 to $106 million, and GAAP diluted EPS of $1.13 to $1.15.

"We aim to take our business to the next level in 2011," Mr. Tu said. "We're seeing continuing growth in industry demand in China. We have built and scaled solid growth platforms for the future. Our installation business is positioned for growth from future wins of large-scale government contracts and we also expect growth in our service business. CSST has led the surveillance and safety industry in China and we are well positioned to drive the industry's next waves of innovation and growth."

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, 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:
Stacy Yan

 

 

China Security & Surveillance Technology, Inc.
Tel:   +86-755-8351-5634
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

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED DECEMBER 31, 2010 AND 2009

Expressed in thousands of U.S. dollars

(Except for share and per share amounts)


 

 

 

 

(UNAUDITED)

2010 

 

 

 

(UNAUDITED)

 2009 

 

 

 

Revenues

 

$

 

214,011

 

 

$

 

182,719

 

 

 

Cost of goods sold

 

 

152,851

 

 

 

131,232

 

 

 

Gross profit

 

 

61,160

 

 

 

51,487

 

 

 

Selling and marketing

 

 

3,128

 

 

 

3,646

 

 

 

General and administrative

 

 

17,668

 

 

 

16,599

 

 

 

Depreciation and amortization

 

 

3,158

 

 

 

3,041

 

 

 

Income from operations

 

 

37,206

 

 

 

28,201

 

 

 

Interest income

 

 

159

 

 

 

88

 

 

 

Interest expense

 

 

(4,403)

 

 

 

(1,939)

 

 

 

Other income, net

 

 

733

 

 

 

830

 

 

 

Income before income taxes

 

 

33,695

 

 

 

27,180

 

 

 

Income taxes

 

 

(4,655)

 

 

 

(1,125)

 

 

 

Net income

 

 

29,040

 

 

 

26,055

 

 

 

Add: Net income (loss) attributable to the noncontrolling interest

 

 

--

 

 

 

3

 

 

 

Net income attributable to the Company

 

 

29,040

 

 

 

26,058

 

 

 

NET INCOME PER SHARE ATTRIBUTABLE TO THE COMPANY'S COMMON SHAREHOLDERS

 

 

 

 

 

 

 

 

          BASIC

 

$

 

0.35

 

 

$

 

0.41

 

 

 

          DILUTED

 

$

 

0.33

 

 

$

 

0.38

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

 

 

 

 

 

 

 

 

          BASIC

 

 

83,047,000

 

 

 

62,942,000

 

 

 

          DILUTED

 

 

89,411,000

 

 

 

68,939,000

 

 

 

 

 

 

 

 

 

 

 

 



CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

Expressed in thousands of U.S. dollars

(Except for share and per share amounts)


 

 

 

 

2010 

 

 

 

 2009 

 

 

 

Revenues

 

$

 

684,703

 

 

$

 

580,870

 

 

 

Cost of goods sold (including depreciation and amortization for the years ended December 31, 2010, 2009 and 2008 of $998, $1,009 and $762, respectively)        

 

 

495,280

 

 

 

438,005

 

 

 

Gross profit

 

 

189,423

 

 

 

142,865

 

 

 

Selling and marketing

 

 

11,821

 

 

 

12,496

 

 

 

General and administrative (including non-cash employee compensation for the years ended December 31, 2010, 2009 and 2008 of $24,739, $18,087 and $13,837, respectively)

 

 

61,526

 

 

 

52,677

 

 

 

Depreciation and amortization

 

 

12,135

 

 

 

11,731

 

 

 

Income from operations

 

 

103,941

 

 

 

65,961

 

 

 

Interest income

 

 

422

 

 

 

215

 

 

 

Gain on modification of convertible notes

 

 

--

 

 

 

9,315

 

 

 

Interest expense

 

 

(13,517)

 

 

 

(19,731)

 

 

 

Other income, net

 

 

1,684

 

 

 

2,500

 

 

 

Income before income taxes

 

 

92,530

 

 

 

58,260

 

 

 

Income taxes

 

 

(15,140)

 

 

 

(1,733)

 

 

 

Net income

 

 

77,390

 

 

 

56,527

 

 

 

Add: Net income (loss) attributable to the noncontrolling interest

 

 

(1)

 

 

 

50

 

 

 

Net income attributable to the Company

 

 

77,389

 

 

 

56,577

 

 

 

Foreign currency translation gain (loss)

 

 

18,054

 

 

 

(1,602)

 

 

 

Comprehensive income attributable to the Company

 

 

95,443

 

 

 

54,975

 

 

 

Comprehensive income (loss) attributable to the noncontrolling interest       

 

 

1

 

 

 

(50)

 

 

 

COMPREHENSIVE INCOME

 

$

 

95,444

 

 

$

 

54,925

 

 

 

NET INCOME PER SHARE ATTRIBUTABLE TO THE COMPANY'S COMMON SHAREHOLDERS

 

 

 

 

 

 

 

 

          BASIC

 

$

 

1.02

 

 

$

 

1.10

 

 

 

          DILUTED

 

$

 

0.96

 

 

$

 

1.01

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

 

 

 

 

 

 

 

 

          BASIC

 

 

76,092,000

 

 

 

51,317,000

 

 

 

           DILUTED

 

 

80,522,000

 

 

 

56,171,000

 

 

 

 

 

 

 

 

 

 

 

 



CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2010 AND 2009

Expressed in thousands of U.S. dollars

(Except for share and per share amounts)


ASSETS


 

 

 

 

2010

 

 

 

2009

 

 

 

Cash and cash equivalents

 

$

 

65,626

 

 

$

 

154,483

 

 

 

Accounts receivable, net

 

 

433,986

 

 

 

251,604

 

 

 

Inventories, net

 

 

59,368

 

 

 

70,141

 

 

 

Prepayments and deposits

 

 

56,241

 

 

 

4,706

 

 

 

Advances to suppliers and subcontractors

 

 

88,360

 

 

 

39,399

 

 

 

Other receivables

 

 

47,116

 

 

 

26,692

 

 

 

Deferred tax assets

 

 

--

 

 

 

13

 

 

 

Total current assets

 

 

750,697

 

 

 

547,038

 

 

 

 

 

 

 

 

 

 

 

Deposits paid for business acquisitions, properties and intangible assets

 

 

146,243

 

 

 

7,199

 

 

 

Plant and equipment, net

 

 

75,294

 

 

 

75,447

 

 

 

Land use rights, net

 

 

7,896

 

 

 

7,733

 

 

 

Intangible assets, net

 

 

48,692

 

 

 

54,677

 

 

 

Goodwill

 

 

79,516

 

 

 

79,511

 

 

 

Deferred financing costs, net

 

 

2,684

 

 

 

1,953

 

 

 

                 TOTAL ASSETS

 

$

 

1,111,022

 

 

$

 

773,558

 

 

 

 

 

LIABILITIES AND EQUITY


 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Notes payable – short term

 

$

 

196,329

 

 

$

 

57,116

 

 

 

Obligations under product financing arrangements – short term

 

 

6,687

 

 

 

5,184

 

 

 

Guaranteed senior unsecured notes payable – short term

 

 

37,408

 

 

 

35,701

 

 

 

Accounts and bills payable

 

 

32,240

 

 

 

68,817

 

 

 

Accrued expenses

 

 

49,421

 

 

 

26,762

 

 

 

Advances from customers

 

 

15,216

 

 

 

27,503

 

 

 

Taxes payable

 

 

28,648

 

 

 

14,835

 

 

 

Payable for acquisition of businesses, properties and land use rights

 

 

3,763

 

 

 

5,105

 

 

 

Deferred income

 

 

3,201

 

 

 

1,868

 

 

 

Total current liabilities

 

 

372,913

 

 

 

242,891

 

 

 

 

 

 

 

 

 

 

 

LONG TERM LIABILITIES

 

 

 

 

 

 

 

 

Notes payable – long term

 

 

60,570

 

 

 

--

 

 

 

Obligations under product financing arrangements – long term

 

 

6,474

 

 

 

6,541

 

 

 

Guaranteed senior unsecured notes payable – long term

 

 

6,580

 

 

 

43,988

 

 

 

Net deferred tax liabilities

 

 

282

 

 

 

773

 

 

 

Total liabilities

 

 

446,819

 

 

 

294,193

 

 

 

 

 

 

 

 

 

 

 

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, 89,521,115 (2010) and 67,866,730 (2009) shares issued and outstanding

 

 

9

 

 

 

7

 

 

 

Additional paid-in capital

 

 

374,417

 

 

 

285,025

 

 

 

Retained earnings

 

 

243,371

 

 

 

165,982

 

 

 

Statutory surplus reserve fund

 

 

804

 

 

 

804

 

 

 

Accumulated other comprehensive income

 

 

45,619

 

 

 

27,565

 

 

 

Total equity of the Company

 

 

664,220

 

 

 

479,383

 

 

 

Noncontrolling interest

 

 

(17)

 

 

 

(18)

 

 

 

Total equity

 

 

664,203

 

 

 

479,365

 

 

 

         TOTAL LIABILITIES AND EQUITY

 

$

 

1,111,022

 

 

$

 

773,558

 

 

 

 

 

 

 

 

 

 



CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
Expressed in thousands of U.S. dollars
(Except for share amounts)


 

 

 

 

2010

 

 

 

2009

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

 

77,390

 

 

$

 

56,527

 

 

 

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

 

 

 

 

 

 

 

 

Provision for doubtful accounts

 

 

900

 

 

 

2,432

 

 

 

Depreciation and amortization

 

 

13,133

 

 

 

12,740

 

 

 

Provision for obsolete inventories

 

 

688

 

 

 

348

 

 

 

Amortization of consultancy services

 

 

--

 

 

 

11

 

 

 

Amortization of deferred financing costs

 

 

1,277

 

 

 

646

 

 

 

Non-cash compensation expense

 

 

24,739

 

 

 

18,087

 

 

 

Redemption accretion on convertible notes

 

 

--

 

 

 

14,851

 

 

 

Debt discount amortization

 

 

2,939

 

 

 

1,249

 

 

 

Gain on modification of convertible notes

 

 

--

 

 

 

(9,315)

 

 

 

Deferred tax (benefit) expense

 

 

(502)

 

 

 

1,045

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

(Increase) decrease in:

 

 

 

 

 

 

 

 

     Accounts receivable

 

 

(175,474)

 

 

 

(104,332)

 

 

 

     Inventories

 

 

12,262

 

 

 

47,313

 

 

 

     Prepayments and deposits

 

 

(51,389)

 

 

 

2,793

 

 

 

     Advances to suppliers and subcontractors

 

 

(47,739)

 

 

 

(22,233)

 

 

 

     Related party receivables

 

 

--

 

 

 

--

 

 

 

     Other receivables

 

 

(19,596)

 

 

 

(12,324)

 

 

 

Increase (decrease) in:

 

 

 

 

 

 

 

 

     Accounts and bills payable and accrued expenses

 

 

(16,885)

 

 

 

32,736

 

 

 

     Advances from customers

 

 

(13,140)

 

 

 

(1,156)

 

 

 

     Taxes payable

 

 

13,353

 

 

 

10,525

 

 

 

     Deferred income

 

 

1,275

 

 

 

660

 

 

 

Net cash (used in) provided by operating activities

 

 

(176,769)

 

 

 

52,603

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Additions to plant and equipment

 

 

(2,518)

 

 

 

(4,143)

 

 

 

Additions to intangible assets, other than through business acquisitions

 

 

(1,749)

 

 

 

(2,585)

 

 

 

Additions to land use rights, other than through business acquisitions

 

 

--

 

 

 

(174)

 

 

 

Deposits paid for business acquisitions, properties and intangible assets

 

 

(144,662)

 

 

 

(3,259)

 

 

 

Deposits refunded for acquisition of subsidiaries

 

 

7,825

 

 

 

1,904

 

 

 

Net cash outflow on acquisition of net assets of businesses acquired (net of cash acquired)

 

 

--

 

 

 

273

 

 

 

Payments of payables for acquisition of businesses, properties and land use rights

 

 

(1,341)

 

 

 

(11,077)

 

 

 

Payments of adjustments to cost of acquisitions related to resolved contingencies

 

 

--

 

 

 

(425)

 

 

 

Proceeds from sale of land use rights and property

 

 

--

 

 

 

--

 

 

 

Net cash used in investing activities

 

 

(142,445)

 

 

 

(19,486)

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of offering costs

 

 

64,573

 

 

 

80,179

 

 

 

Proceeds from borrowings, net of financing costs

 

 

340,148

 

 

 

65,874

 

 

 

Repayment of borrowings

 

 

(143,138)

 

 

 

(21,865)

 

 

 

Repayment of guaranteed senior unsecured notes payable

 

 

(38,640)

 

 

 

--

 

 

 

Proceeds from obligations under product financing arrangements, net of financing costs

 

 

6,271

 

 

 

8,362

 

 

 

Repayment of obligations under product financing arrangements

 

 

(6,363)

 

 

 

(4,511)

 

 

 

Repayment of convertible notes payable

 

 

--

 

 

 

(52,500)

 

 

 

Proceeds from exercise of warrants

 

 

82

 

 

 

--

 

 

 

Net cash provided by financing activities

 

 

222,933

 

 

 

75,539

 

 

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

(96,281)

 

 

 

108,656

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

7,424

 

 

 

(1,952)

 

 

 

Cash and cash equivalents, beginning of year

 

 

154,483

 

 

 

47,779

 

 

 

CASH AND CASH EQUIVALENTS, END OF YEAR

 

$

 

65,626

 

 

$

 

154,483

 

 

 

 

 

 

 

 

 

 

 

 
Source: China Security & Surveillance Technology, Inc.
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