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: |
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China Security & Surveillance Technology, Inc. |
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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; |
|||||||
Common stock, $0.0001 par value; |
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 |
|||||||
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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