China Security & Surveillance Technology, Inc. Reports Second-Quarter 2010 Financial Results
Significant Revenue and Net Income Growth, Robust Margin Expansion
SHENZHEN, China, July 26 /PRNewswire-Asia/ --
-- Second-quarter revenues increased 18.6% to $168.35 million versus the
second quarter of 2009, driven by the rapid growth of demand for CSST's
products and services in China.
-- Second-quarter net income increased 174.0% to $17.81 million and
diluted EPS increased 76.9% to $0.23 versus the second quarter of 2009.
-- Second-quarter gross margin and operating margin up by 390 basis points
and 570 basis points respectively, compared to the second quarter of
2009.
Note: CSST's second-quarter 2010 earnings conference call will be broadcast live via the Internet at 8 a.m. ET on Monday, July 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 strong second-quarter 2010 financial results highlighted by continued revenue and net income growth, driven mostly by large-scale government projects and improved margins.
CSST's second-quarter revenues totaled $168.35 million, net income was $17.81 million and diluted EPS was $0.23. Gross margin and operating margin rose to 25.8% and 14.6% respectively.
"Our results demonstrate the great strength of CSST's assets and our ability to execute with focus and discipline," said Mr. Guoshen Tu, Chairman and Chief Executive Officer of CSST. "Revenues and earnings growth continue to be solid, our margin improvement is encouraging, major growth and cost initiatives are on track, and we continue to execute on large-scale government projects from safe cities and e-cities in China."
"CSST has taken the lead in deploying and enhancing our industry-leading products and solutions for government and corporate customers, which are further complemented by our expansion in the Security Service business," Tu added. "We will continue to increase productivity by enhancing collaboration across our different operations, improving our strategic position and advancing our long-term growth potential."
Second-Quarter Financial Results
For the quarter ended June 30, 2010, CSST's revenues totaled $168.35 million versus $141.92 million in the second quarter of last year, driven by improvements across all segments and continued growth of industry demand for surveillance and safety products in China. Government customers accounted for 55% of total revenues, while corporate customers accounted for 45%. Second- quarter revenues were all organic as all subsidiaries have been acquired for more than one year. The organic revenues demonstrated a year-on-year increase of 32.2% compared with the same quarter of 2009.
Gross profit totaled $43.36 million, up 39.8% from $31.02 million in the second quarter of last year. Gross margin expanded 390 basis points to 25.8% in this quarter compared with 21.9% in the second quarter of last year. The increase was led by improved margins on sizeable government contracts in the Installation Segment in the quarter.
In concert with solid gross margin and effective management of operating expenses, income from operations saw a significant increase of 95.4% to $24.56 million for the second quarter of 2010 as compared to $12.57 million for the same period in 2009. Operating margin was 14.6% for the second quarter of 2010, up from 8.9% during the same period in 2009.
Net income grew 174.0% to $17.81 million in the second quarter of 2010, from $6.50 million in the same quarter in 2009; and diluted earnings per share totaled $0.23 versus $0.13 last year. The solid growth in net income and earnings per share reflected strong results across all business segments, good execution on margin improvement and company-wide cost initiatives, as well as a decrease in non-cash expenses as a result of the restructuring of Citadel convertible notes.
As at June 30, 2010, CSST's cash balance was $208.07 million, up from $142.29 million as at March 31, 2010 and $154.48 million as at December 31, 2009.
Financial Outlook
"Underneath the terrific industry demand for surveillance and safety products and services in China, we're optimistic about CSST's prospect to continue to lead the industry in China," said Mr. Tu. "We believe our market leadership extends across the industry's broadest portfolio of products and services in China. Our scale and reach in China will provide meaningful and sustainable competitive advantages for us to capitalize on in the years ahead. Together with our sharp focus on high-growth initiatives, we have a tremendous set of assets and an impressive record in terms of executing and delivering on targets. I am very confident in our ability to deliver strong results in 2010."
For the full year 2010, the Company reaffirms its revenue projection of $830 to $850 million. The Company also reaffirms diluted EPS projection of $1.12 to $1.16, based on an average share count on fully diluted basis of approximately 90 million.
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 competitiveness and our ability to deliver expected financial results in 2010, 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: [email protected]
Investor and Media Contact:
Patrick Yu, Fleishman-Hillard Hong Kong
Tel: +852-2530-2577
Email: [email protected]
CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009
Expressed in thousands of U.S. dollars
(Except for share and per share amounts)
ASSETS
June 30, December 31,
2010 2009
Cash and cash equivalents $208,067 $154,483
Accounts receivable, net 318,912 251,604
Inventories, net 80,392 70,141
Prepayments and deposits 4,891 4,706
Advances to suppliers 71,562 39,399
Other receivables 30,908 26,692
Deferred tax assets - current portion 5 13
Total current assets 714,737 547,038
Deposits paid for acquisition of
subsidiaries, properties and
intangible assets 37,467 7,199
Plant and equipment, net 74,320 75,447
Land use rights, net 7,738 7,733
Intangible assets 51,786 54,677
Goodwill 79,511 79,511
Deferred financing cost 2,597 1,953
TOTAL ASSETS $968,156 $773,558
LIABILITIES AND EQUITY
June 30, December 31,
2010 2009
CURRENT LIABILITIES
Notes payable $149,464 $57,116
Obligations under product financing
arrangements - short term 7,723 5,184
Guaranteed senior unsecured notes
payable - short term 36,557 35,701
Accounts and bills payable 76,300 68,817
Accrued expenses 19,413 26,762
Advances from customers 31,607 27,503
Taxes payable 23,499 14,835
Payable for acquisition of
businesses, properties and land use
rights 4,683 5,105
Deferred income 2,407 1,868
Total current liabilities 351,653 242,891
LONG TERM LIABILITIES
Obligation under product financing
arrangements - long term 8,884 6,541
Guaranteed senior unsecured notes
payable - long term 25,493 43,988
Net deferred tax liabilities 403 773
Total liabilities 386,433 294,193
EQUITY
Preferred stock, $0.0001 par
value; 10,000,000 shares authorized,
0 shares issued and outstanding
Common stock, $0.0001 par
value; 290,000,000 shares
authorized 86,297,168 (June 30,
2010) and 67,866,730 (December 31,
2009) shares issued and outstanding 9 7
Additional paid-in capital 362,977 285,025
Retained earnings 187,062 165,982
Statutory surplus reserve fund 804 804
Accumulated other comprehensive
income 30,887 27,565
Total equity of the Company 581,739 479,383
Noncontrolling interest (16) (18)
Total equity 581,723 479,365
TOTAL LIABILITIES AND EQUITY $968,156 $773,558
CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
Expressed in thousands of U.S. dollars
(Except for share and per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2010 2009 2010 2009
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues $168,354 $141,915 $288,544 $238,331
Cost of goods sold
(including
depreciation and
amortization for the
three and six months
ended June 30, 2010
and 2009 of $248,
$502, $238 and $479,
respectively) 124,994 110,899 216,205 182,289
Gross profit 43,360 31,016 72,339 56,042
Selling and marketing 3,131 3,034 5,845 5,748
General and
administrative
(including non-cash
employee compensation
for the three and six
months ended June 30,
2010 and 2009 of
$5,055, $13,381,
$4,358 and $8,576,
respectively) 12,670 12,500 28,992 24,007
Depreciation and
amortization 3,005 2,910 5,985 5,732
Income from operations 24,554 12,572 31,517 20,555
Interest income 53 57 131 86
Interest expense (3,064) (6,580) (5,359) (12,617)
Other income, net 394 1,000 640 1,229
Income before income
taxes 21,937 7,049 26,929 9,253
Income taxes (4,130) (551) (5,847) (753)
Net income 17,807 6,498 21,082 8,500
Add: Net (income) loss
attributable to the
noncontrolling
interest (4) 3 (2) 14
Net income
attributable to the
Company 17,803 6,501 21,080 8,514
Foreign currency
translation gain
(loss) 3,198 (162) 3,322 (108)
Comprehensive income
attributable to the
Company 21,001 6,339 24,402 8,406
Comprehensive income
(loss) attributable
to the noncontrolling
interest 4 (3) 2 (14)
COMPREHENSIVE INCOME $21,005 $6,336 $24,404 $8,392
NET INCOME PER SHARE
ATTRIBUTABLE TO THE
COMPANY'S COMMON
SHAREHOLDERS
BASIC $0.25 $0.14 $0.31 $0.19
DILUTED $0.23 $0.13 $0.29 $0.17
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING
BASIC 71,480,000 45,455,000 67,993,000 45,411,000
DILUTED 76,006,000 50,022,000 72,209,000 49,694,000
CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (UNAUDITED)
Expressed in thousands of U.S. dollars
(Except for share and per share amounts)
Six Months Ended June 30,
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $21,082 $8,500
Adjustments to reconcile net
income to net cash (used in)
provided by operating activities:
Provision for doubtful accounts -- 1,396
Depreciation and amortization 6,487 6,211
Amortization of consultancy services -- 11
Amortization of deferred
financing cost 563 221
Non-cash employee compensation 13,381 8,576
Redemption accretion on
convertible notes -- 10,952
Debt discount amortization 1,681 --
Deferred taxes (361) 45
Changes in operating assets
and liabilities:
(Increase) decrease in:
Accounts receivable (65,925) (30,919)
Inventories (9,866) (2,733)
Prepayments and deposits (159) 910
Advances to suppliers (31,947) (19,685)
Other receivables (4,070) 4,104
(Decrease) increase in:
Accounts and bills payable,
and accrued expenses (392) (91)
Advances from customers 3,953 31,526
Taxes payable 8,582 (1,077)
Deferred income 529 (192)
Net cash (used in) provided by
operating activities (56,462) 17,755
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment (846) (2,698)
Additions to intangible assets (807) (1,402)
Deposits paid for acquisition
of subsidiaries (30,229) (250)
Payments for business acquisitions (422) (3,356)
Net cash inflow from
acquisition of subsidiaries -- 273
Net cash used in investing activities (32,304) (7,433)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issue of common stock, net of
issuing expenses 64,573 --
Proceeds from borrowings, net
of issuance costs 141,533 40,978
Repayment of borrowings (49,899) (8,774)
Repayment of guaranteed senior
unsecured notes payable (19,320) --
Proceeds from borrowings from
obligations under product financing
arrangements, net of issuance costs 6,293 891
Repayment of obligation under
product financing arrangements (2,671) (1,443)
Net cash provided by financing
activities 140,509 31,652
NET INCREASE IN CASH AND CASH EQUIVALENTS 51,743 41,974
Effect of exchange rate
changes on cash and cash equivalents 1,841 (284)
Cash and cash equivalents,
beginning of period 154,483 47,779
CASH AND CASH EQUIVALENTS, END OF PERIOD $208,067 $89,469
SOURCE China Security & Surveillance Technology, Inc.
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