Highlighted by Robust Revenue and Earnings Growth, and Strong Momentum in the Government Sector

    SHENZHEN, China, April 26 /PRNewswire-Asia/ --

    -- First-quarter revenues increased 24.7% to $120.19 million versus the
       first quarter of 2009, driven by the rapid growth of demand for CSST's
       products and services in China
    -- First-quarter net income increased 64.0% to $3.28 million and diluted
       EPS increased 25.0% to $0.05 versus the first quarter of 2009

Note: CSST's first-quarter 2010 earnings conference call will be broadcast live via the Internet at 8 a.m. ET on Monday, April 26, 2010, at http://irpage.net/csct/index.html .

China Security & Surveillance Technology, Inc. ("CSST" or the "Company") (NYSE: CSR; Nasdaq Dubai: CSR), a leading integrated security and surveillance solution provider in the P.R.C., today reported its first-quarter 2010 results highlighted by the rapid growth of demand for CSST's products and services in China.

CSST's first-quarter revenues totaled $120.19 million, net income was $3.28 million and diluted EPS was $0.05.

"We delivered a strong first quarter. Momentum in the installation business continues, and execution across the Company is solid," said Mr. Guoshen Tu, Chairman and Chief Executive Officer of CSST. "I am particularly pleased with our robust growth in the government sector, driven by the safe city and e-city projects.

Government expectations for security and surveillance products are on the rise. The opportunity for growth is substantial. CSST is well positioned to benefit from the growth of security and surveillance industry in China."

First-Quarter Financial Results

For the quarter ended March 31, 2010, CSST's revenues totaled $120.19 million versus $96.42 million in the first quarter of last year, driven by the strong growth of demand for CSST's products and services in China. Government customers accounted for 55% of total revenues, while corporate customers accounted for 45%. Organic revenues for the first quarter of 2010 totaled $119.37 million, or 99.3% of total revenues, compared with $87.10 million or 90.3% in the first quarter of 2009. Non-organic revenues totaled $0.82 million or 0.7% of total revenues

Gross profit totaled $28.98 million, up 15.8% from $25.03 million in the first quarter of last year. Gross margin was 24.1% compared with 26.0% for the same period in 2009. The slight drop in gross margin was due to the pricing pressure in the corporate sector related to our efforts to maintain market share and expand customer base in China.

"During the first quarter, we continued to experience pricing pressure from corporate customers. There were also quite a number of smaller-scale projects with a relatively lower margin. We believe that it is still vital for us to take on these projects to expand our market share, strengthen our leadership position, and broaden our customer base for ongoing security services," added Mr. Tu.

Correspondingly, income from operations was $6.97 million versus $7.98 million for the first quarter of last year. Operating margin was 5.8%, compared with 8.3% in the first quarter of 2009, as a result of a lower gross margin and higher general and administrative expenses, including non-cash employee compensation.

Net income totaled $3.28 million, up 64.0% from $2.00 million in the first quarter of 2009; and diluted earnings per share totaled $0.05 versus $0.04 last year. The increase was primarily due to the decrease of non-cash expenses related to the redemption accretion on our convertible notes as discussed below.

CSST recognized a total of non-cash items of $11.56 million, down from $12.66 million from the same period in 2009. The two main contributors to the Company's non-cash expenses included the depreciation and amortization of $3.23 million; and non-cash employee compensation expense of $8.33 million for the three months ended March 31, 2010. Expense for redemption accretion on convertible notes in this quarter was eliminated, due to the fact that we retired and restructured the $110 million principal amount of convertible notes into two new zero coupon interest notes on September 2, 2009.

As of March 31, 2010, CSST's accounts receivable was $300.25 million, up from $251.60 million at December 31, 2009. The increase in accounts receivable was due to the fact that a majority of the first quarter projects were completed and respective revenues were recognized towards the end of the quarter, as a result of late Chinese New Year holiday. Customer payments were delayed into the second quarter of 2010, which has caused the increase of accounts receivable.

"We will continue to monitor the accounts receivable closely. Our factoring facilities with local banks will help us to convert accounts receivable into cash as we continue to ramp up large government projects," commented Mr. Tu.

As of March 31, 2010, CSST's total backlog was $199.72 million, up from $86.87 million and $192.85 million at March 31, 2009 and December 31, 2009 respectively. The increase of backlog was attributable to growth in government contracts signed in the past years. CSST expects the majority of the total backlog to be realized within the next few quarters.

As of March 31, 2010, CSST's cash balance was $142.29 million, compared with $154.48 million at the end of 2009. CSST's net cash used in operating activities was $60.88 million for the first quarter of 2010, as compared with $21.44 million net cash provided by operating activities for the same period in 2009. The decrease of net cash from operating activities was mainly due to increase in accounts receivable and advance to suppliers. Net cash used in investing activities for the first quarter of 2010 was $7.66 million, which is an increase of $4.85 million from net cash used in investing activities of $2.81 million in the same period of 2009. Such increase was primarily due to increased deposits for acquisitions of subsidiaries in the first quarter of 2010. Net cash provided by financing activities for the first quarter of 2010 was $56.34 million, as compared with $5.95 million net cash provided by financing activities for the same period in 2009. Such increase was mainly attributable to the additional bank loans raised in the first quarter of 2010.

Operational Highlights

CSST's first-quarter growth was driven by the robust growth in the installation segment. Such momentum continued in the first quarter of 2010 and CSST secured several significant government agreements, notably in e-city projects. These agreements were key to propel the future growth of the Company. Highlights of key government agreements in the first quarter of 2010 included:

    -- Phase one framework agreement for the Tongling City E-city development,
       with a project valued at approximately RMB 77 million (approximately
       US$ 11.3 million).
    -- Phase one framework agreement for a major digitization project for the
       Dantu area of Zhenjiang City. As part of the Zhenjiang E-city
       development, the phase one project is valued at approximately RMB 250
       million (approximately US$ 36.6 million).
    -- Framework agreement for the Changchun City E-city development, with the
       total project valued at approximately RMB 1.5 billion (US$ 219.4
       million).
    -- E-city contract with Baotou City for RMB560 million (approximately US$
       82.0 million): The E-city solution will cover a number of areas,
       including city safety network, traffic management, public information
       management, emergency response and energy saving and emission reduction.

Revenues from the above projects are expected to be recognized within the next two years. Additionally, CSST continues to maintain working relationships with local banks to provide us with revolving financing facilities in order to handle working capital needs.

Financial Outlook

"Mainland's demand for security and surveillance products and services continues to be strong, we are keenly focused on cost improvement as well as ongoing leadership and expansion in key areas expected to drive future growth. We will move forward in enhancing our capabilities in the security service business and continue to look at sizable government contracts," said Mr. Tu.

"Our confidence flows from the belief that we offer the best products and services in the industry. We are confident and ready to capitalize on our financial strength, our market leadership and our disciplined cost control strategies. These are CSST's strengths, and the critical drivers that will lead our growth in 2010."

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 performance and strategic and operational plans, our future operating results, our expectations regarding the market for surveillance and safety products, 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:
     Terence Yap, Chief Financial Officer and Vice Chairman
     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
      CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
               FOR THE THREE MONTHS ENDED MARCH 31, 2010 and 2009
                     Expressed in thousands of U.S. dollars
                    (Except for share and per share amounts)

                                            Three Months Ended March 31
                                             2010                 2009
                                         (Unaudited)          (Unaudited)
    Revenues                               $120,190              $96,416
    Cost of goods sold (including
     depreciation and amortization
     for the three months ended March
     31, 2010 and 2009 of $254 and
     $241, respectively)                     91,211               71,390
    Gross profit                             28,979               25,026
    Selling and marketing                     2,714                2,714
    General and administrative               16,322               11,507
     (including non-cash employee
     compensation for the three
     months ended March 31, 2010
     and 2009 of $8,326 and $4,218,
     respectively)
    Depreciation and amortization             2,980                2,822
    Income from operations                    6,963                7,983
    Interest income                              78                   29
    Interest expense                         (2,295)              (6,037)
    Other income, net                           246                  229
    Income before income taxes                4,992                2,204
    Income taxes                             (1,717)                (202)
    Net income                                3,275                2,002
    Add: net loss attributable to
     the noncontrolling interest                  2                   11
     Net income attributable to the
     Company                                  3,277                2,013
    Foreign currency translation
     gain                                       124                   54
    Comprehensive income
     attributable to the Company              3,401                2,067
    Comprehensive loss attributable
     to the noncontrolling interest              (2)                 (11)

    Comprehensive Income                     $3,399               $2,056

    NET INCOME PER SHARE
    ATTRIBUTABLE TO THE COMPANY'S
     COMMON SHAREHOLDERS
      BASIC                                   $0.05                $0.04
      DILUTED                                 $0.05                $0.04
    WEIGHTED AVERAGE NUMBER OF
     SHARES OUTSTANDING
      BASIC                              63,961,000           45,041,000
      DILUTED                            68,369,000           49,362,000



         CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
             AS OF MARCH 31, 2010 (UNAUDITED) AND DECEMBER 31, 2009
                     Expressed in thousands of U.S. dollars
                    (Except for share and per share amounts)

                                     ASSETS

                                     March 31, 2010      December 31, 2009
    Cash and cash equivalents            $142,293               $154,483
    Accounts receivable, net              300,247                251,604
    Inventories, net                       73,469                 70,141
    Prepayments and deposits                4,755                  4,706
    Advances to suppliers                  54,044                 39,399
    Other receivables                      30,326                 26,692
    Deferred tax assets - current
     portion                                   10                     13
    Total current assets                  605,144                547,038

    Deposits paid for acquisition
     of subsidiaries, properties
     and intangible assets                 13,726                  7,199
    Plant and equipment, net               74,856                 75,447
    Land use rights, net                    7,716                  7,733
    Intangible assets                      53,242                 54,677
    Goodwill                               79,511                 79,511
    Deferred financing cost                 1,737                  1,953
    TOTAL ASSETS                         $835,932               $773,558



                             LIABILITIES AND EQUITY
                                   March 31, 2010      December 31, 2009
    CURRENT LIABILITIES
    Notes payable                        $134,040                $57,116
    Obligation under product
     financing arrangements -
     short term                             5,308                  5,184
    Guaranteed senior unsecured
     notes payable - short term            36,127                 35,701
    Accounts and bills payable             65,924                 68,817
    Accrued expenses                       15,836                 26,762
    Advances from customers                33,186                 27,503
    Taxes payable                          16,468                 14,835
    Payable for acquisition of
     businesses, properties and
     land use rights                        5,105                  5,105
    Deferred income                         2,028                  1,868
    Total current liabilities             314,022                242,891

    LONG TERM LIABILITIES
    Obligation under product
     financing arrangements -
     long term                              5,168                  6,541
    Guaranteed senior unsecured
     notes payable - long term             25,192                 43,988
    Net deferred tax liabilities              460                    773
    Total liabilities                     344,842                294,193

    EQUITY
    Preferred stock, $0.0001 par
     value; 10,000,000 shares
     authorized, 0 shares issued
     and outstanding
    Common stock, $0.0001 par                   7                      7
     value; 290,000,000 shares
     authorized 68,494,270 (March
     31, 2010) and 67,866,730
     (December 31, 2009) shares
     issued and outstanding
    Additional paid-in capital            293,351                285,025
    Retained earnings                     169,259                165,982
    Statutory surplus reserve fund            804                    804
    Accumulated other
     comprehensive income                  27,689                 27,565
    Total equity of the Company           491,110                479,383
    Noncontrolling interest                   (20)                   (18)
    Total equity                          491,090                479,365
    TOTAL LIABILITIES AND EQUITY         $835,932               $773,558



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

                                                Three Months Ended March 31
                                                   2010            2009
                                               (Unaudited)      (Unaudited)
    CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income                                   $3,275         $2,002
      Adjustments to reconcile net
       income to net cash (used in)
       provided by operating activities:
      Provision for doubtful accounts                  --          1,396
      Depreciation and amortization                 3,234          3,063
      Amortization of consultancy
       services                                        --             11
      Amortization of deferred
       financing cost                                 217            109
      Non-cash employee
       compensation                                 8,326          4,218
      Debt discount amortization                      950             --
      Redemption accretion on
       convertible notes                               --          5,375
      Deferred taxes                                 (310)            31
      Changes in operating assets
       and liabilities:
      (Increase) decrease in:
      Accounts receivable                         (48,573)        15,342
      Other receivables                            (3,626)         1,739
      Inventories                                  (3,308)        (9,441)
      Prepayments and deposits                        (46)           466
      Advances to suppliers                       (14,634)       (21,315)
      (Decrease) increase in:
      Accounts payable and accrued
       expenses                                   (13,846)        (2,222)
      Advances from customers                       5,675         23,195
      Taxes payable                                 1,629         (2,350)
      Deferred income                                 159           (184)
      Net cash (used in) provided
       by operating activities                    (60,878)        21,435
    CASH FLOWS FROM INVESTING ACTIVITIES:
      Additions to plant and equipment               (597)          (393)
      Additions to intangible assets                 (533)          (804)
      Deposits paid for acquisition
       of subsidiaries                             (6,526)            --
      Payments for business
       acquisitions                                    --         (1,881)
      Cash acquired in business
       acquisitions                                    --            273
      Net cash used in investing
       activities                                  (7,656)        (2,805)
    CASH FLOWS FROM FINANCING ACTIVITIES:
      New borrowings, net of issuing cost         109,137         13,166
      Repayment of borrowings                     (32,229)        (7,314)
      New borrowings from obligation under
       product financing arrangements                  --            891
      Repayment of obligation under
       product financing arrangements              (1,251)          (798)
      Repayment of guaranteed senior
       unsecured notes payable                    (19,320)            --
      Net cash provided by
     financing activities                          56,337          5,945
    NET (DECREASE) INCREASE IN CASH AND
     CASH EQUIVALENTS                             (12,197)        24,575
      Effect of exchange rate changes on cash           7            117
      Cash and cash equivalents,
       beginning of period                        154,483         47,779
    CASH AND CASH EQUIVALENTS, END OF
     PERIOD                                      $142,293        $72,471

SOURCE China Security & Surveillance Technology, Inc.

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