Strong Momentum in the Installation Segment, Robust Expansion in Margins

SHENZHEN, China, Oct. 26 /PRNewswire-Asia/ --

• Third-quarter revenues increased 14.0% year over year to $182.15 million.
• Third-quarter gross margin and operating margin up by 860 basis points and 850 basis points year over year, respectively.
• Third-quarter net income attributable to the Company increased 24.0% year over year to $27.27 million.
• Diluted EPS, including all non-cash expenses, was $0.31.
• Backlog increased 93.6% sequentially to $412.56 million.

Note: CSST's third-quarter 2010 earnings conference call will be broadcast live via the Internet at 8 a.m. ET on Tuesday, October 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 surveillance and safety solutions provider in the P.R.C., today reported solid third-quarter results highlighted by healthy earnings growth, an increase in revenues and improved margins. 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 third-quarter revenues totaled $182.15 million, net income attributable to the Company was $27.27 million and diluted EPS, including all non-cash expenses, was $0.31. Gross margin and operating margin rose to 30.7% and 19.3% respectively.

"We delivered another strong quarter, with improved revenue trends, continued double-digit earnings growth and significant margin expansion. These results add to our confidence in the future," said Mr. Guoshen Tu, Chairman and Chief Executive Officer of CSST.

"We continue to see positive signs of growth in large-scale government contracts, which speaks to our unparalleled one-stop solutions and our leadership in this area. Our service business also continues to garner favorable response from the customers. I am excited by the opportunities ahead."

Third-Quarter Financial Results

For the quarter ended September 30, 2010, CSST's revenues totaled $182.15 million versus $159.82 million in the third quarter of last year, as a result of the strong performance of CSST's Installation Segment, and continuing growth in industry demand for surveillance and safety products in China. Government customers accounted for 56% of total revenues, while corporate customers accounted for 44%. Third-quarter revenues were all organic as all subsidiaries have been acquired for more than one year.

Gross profit totaled $55.93 million, up 58.3% from $35.34 million in the third quarter of last year. Gross margin expanded 860 basis points to 30.7% in this quarter, a record high since 2009, compared to 22.1% in the third quarter of last year. The increase was the result of better margins in large-scale government contracts in the Installation Segment.

With solid gross margin expansion and effective management of operating expenses, income from operations saw a significant increase of 104.6% to $35.22 million for the third quarter of 2010 as compared to $17.21 million for the same period in 2009. Operating margin was 19.3% for the third quarter of 2010, up from 10.8% during the same period in 2009.

Third-quarter 2010 net income attributable to the Company totaled $27.27 million, up 24.0% from $22.00 million in the same quarter in 2009. The solid growth in net income was delivered through a combination of revenue growth, margin expansion and cost initiatives.

Diluted earnings per share totaled $0.31 versus $0.41 last year. CSST's net income and diluted earnings per share in the third quarter of 2009 were positively affected by a $9.32 million, or $0.17 per diluted share one-time non-cash gain from restructuring of convertible notes. Weighted average diluted share count was 88.0 million in the third quarter of 2010, up 64.5% from 53.5 million shares in the same period of 2009. The increase in the weighted average diluted share count was attributable to our completion of a public offering of 17,250,000 shares of common stock in May 2010.

During the third quarter of 2010, CSST recognized a total of non-cash expenses of $8.78 million, down from $11.86 million from the same period in 2009. Non-cash expenses for the third quarter included: (i) depreciation and amortization expense of $3.23 million, or $0.04 per diluted share, and (ii) non-cash employee compensation expense of $5.55 million, or $0.06 per diluted share.

As of September 30, 2010, CSST's backlog of sales contracts was $412.56 million, up from $213.12 million as of June 30, 2010.

Financial Outlook

"Surveillance and safety solutions have become ever more important to corporate and government bodies in China. This has generated unprecedented opportunities for CSST to reap the returns on our investments in recent years," said Mr. Tu. "CSST's established presence and network in China creates the underpinnings for surveillance and safety solutions that allow customers to protect their own assets. We've extended our established strengths in this space with a keen focus on the large-scale government projects and security service segment. We continue to deliver on our commitment to provide customers with the capabilities and solutions they need."

As a result of the strong momentum in higher margin large-scale government contracts in China, the Company anticipates that these projects will take a longer time to complete, hence impacting the revenue trends in the fiscal year of 2010. The Company revises its revenue projection to the range of $730 million to $750 million, representing a year-over-year growth of 26% to 29%.  Diluted earnings per share is projected to be in the range of $1.02 to $1.04, based on an average share count on fully-diluted basis of approximately 90 million.

In consideration of its strong backlog and improved margins mostly driven by installation projects in the government sector, the Company projects that 2011 revenue will be in the range of $870 million to $890 million, and net income will be in the range of $104 million to $106 million. EPS will be approximately $1.13 to $1.15.

"Despite the continuing challenges of relatively longer time to realize the revenues from large-scale government contracts, we believe that our leap into this high-margin business fits perfectly well with the Company's overall direction," said Mr. Tu. "We have already established sound financial facilities with local banks and expect to have sufficient working capital to fund our growth. Our job is to continue to execute and to deliver financial results for shareholders in the long run. This is the area where we will continue to focus on going forward."

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 2010 and 2011 and our ability to deliver such results, 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

SOURCE China Security & Surveillance Technology, Inc.

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