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

SOURCE China Security & Surveillance Technology, Inc.