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 | PRESS RELEASE |
China Security & Surveillance Technology, Inc. Reports Fourth-Quarter and Full-Year 2009 Results
Highlighted by Encouraging Earnings Growth, Full-Year Solid and Positive Cash Flow, and Robust Growth in Revenues from Government Sector
SHENZHEN, China, March 2, 2010 (PRNewswire-Asia)
- Fourth-quarter revenues increased 27.3% to $182.71 million
- Fourth-quarter gross margin increased 610 basis points sequentially
- Fourth-quarter net income attributable to CSST increased 132.3% to $26.06 million and EPS increased 65.2% to $0.38
- Full-year revenue increased 35.9% to $580.87 million
- Full-year net income attributable to CSST increased 73.6% to $56.58 million and EPS increased 40.3% to $1.01
- $52.60 million full-year net cash from operating activities versus $39.10 million net cash used in operating activities in 2008 – the best-ever annual totals for CSST
- Fourth-quarter and full-year EPS reflected the growing demand for CSST’s products and services, success of convertible notes restructuring and effective cost control measures
- Robust growth in revenues from government sector in the full year 2009, driven by government’s accelerated efforts to promote safe city and e-city projects
Note: CSST’s fourth-quarter and full-year 2009 earnings conference call will be broadcast live via the Internet at 8 a.m. ET on Tuesday, March 2, 2010, at http://irpage.net/csct/index.html.
China Security & Surveillance Technology, Inc. ("CSST" or the "Company") (NYSE: CSR; Nasdaq Dubai: CSR), a leading provider of digital surveillance technology in the P.R.C., today reported fourth-quarter and full-year 2009 results highlighted by encouraging earnings growth, full-year solid and positive cash flow, and robust growth in revenues from government sector in China. Full-year 2009 EPS grew 40.3%, driven by the growing demand for CSST’s products and services, success of convertible notes restructuring, as well as solid execution of cost control initiatives.
Full-year 2009 revenues totaled $580.87 million; and net cash from operating activities totaled $52.60 million, versus $39.10 million net cash used in operating activities in 2008.
“Despite the economic environment, we had a solid 2009 and led the industry in many areas,” said Mr. Guoshen Tu, Chairman and Chief Executive Officer of CSST. “Our system installation business in government sector, particularly safe city and e-city projects, continues to ramp, improving our government revenue profile. We landed several major e-city projects in China, and we continued to see robust growth in the corporate sector.”
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“During the past year, we took major steps to improve CSST’s financial position for 2010 and beyond. The success of our convertible notes restructuring has improved our capital structure and strengthened our balance sheet. We also delivered our cost initiatives which yielded positive results for our earnings,” said Mr. Tu.
Fourth-Quarter Financial Results
To simplify its presentation, and in recognition of the completed restructuring of convertible notes, starting third quarter 2009, CSST no longer presents Non-GAAP results and instead presents reported results accompanied by details on key factors impacting results.
For the quarter ended December 31, 2009, CSST's revenues totaled $182.71 million, compared with $143.55 million in the year-earlier quarter and up 14.3% from the third quarter of 2009. This marked CSST’s third consecutive quarter with double-digital revenue growth.
Gross profit totaled $51.48 million, up 43.8% from $35.81 million in the year-earlier period. Gross margin increased to 28.2% from 24.9% for the same period in 2008. Sequentially, gross margin increased 610 basis points as a result of expanded profitability of the installation segment. Correspondingly, income from operations increased to $28.20 million, up 68.4% from the year-earlier quarter. Operating margin increased to 15.4%, compared with 11.7% in the year-earlier quarter and 10.8% in the third quarter of 2009.
Net income attributable to CSST totaled $26.06 million, up 132.3% compared with $11.22 million in the year-earlier quarter, and diluted earnings per share totaled $0.38, compared with $0.23 in the year-earlier quarter.
Full-Year Financial Results
For the full year 2009, CSST’s revenues totaled $580.87 million, up 35.9% versus $427.35 million in 2008. 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 52% of total revenues, while corporate customers accounted for 48%. Organic revenues for 2009 totaled $543.89 million, or 93.6% of total revenues, compared to $361.5 million or 84.6% in 2008. Non-organic revenues totaled $36.98 million or 6.4% of total revenues.
Gross profit totaled $142.87 million, up 18.5% from $120.54 million in 2008. Gross margin was 24.6%, down 360 basis points from 28.2% last year. The slight drop was due to the decrease of selling prices and relatively lower margin for smaller-scale projects. It was also a result of CSST’s efforts to maintain market share and expand customer base in China.
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Operating income increased 14.8% to $65.96 million while operating margin decreased to 11.3%, as a result of lower gross margin.
Net income attributable to CSST totaled $56.58 million, up 73.6% from $32.60 million in 2008; and diluted earnings per share totaled $1.01 versus $0.72 in 2008.
CSST recognized a total of non-cash items at $36.36 million, down from $42.97 million in 2008. There were three components for the non-cash expenses, which were $12.74 million, or $0.23 per diluted share related to depreciation and amortization; $18.09 million, or $0.32 per diluted share related to non-cash employee compensation; and $14.85 million, or $0.26 per diluted share from redemption accretion on convertible notes prior to the restructuring. CSST also recorded a one-time non-cash gain on modification of convertible notes of $9.32 million, or $0.17 per diluted share. Weighted average diluted share count increased to 56.17 million compared with 45.28 million in 2008.
CSST’s full-year net cash from operating activities totaled $52.60 million, versus $39.10 million net cash used in operating activities for 2008. As of December 31, 2009, CSST’s cash balance was $154.48 million, compared with $100.98 million at the end of the third quarter.
Financial Outlook
For the full year 2010, CSST reaffirms its revenue projection of $800 to $820 million and diluted earnings per share of $1.15 to $1.20.
“Looking ahead, mainland demand for our products and services continues to be strong, and we are well positioned at the center of this growth,” said Mr. Tu. “The announced acquisitions in 2009 will continue to provide us with a growth platform to expand our industry-leading capabilities in security and surveillance offerings. Our market leadership in China continues to set us apart as we roll out more products and services this year and expand security service capabilities in the years ahead.”
“We will further accelerate our efforts to secure sizeable government contracts and capitalize on the growing opportunities in safe city and e-city projects. We will continue cost-improvement initiatives to maintain a healthy margin for our business. Our fundamental outlook for the business is positive,” concluded Mr. Tu.
About China Security & Surveillance Technology, Inc.
Based in Shenzhen, China, CSST manufactures, distributes, installs and services surveillance and safety products and systems as well as develops surveillance and safety related software in China. Its customers are mainly comprised of commercial and government entities and non-profit organizations. 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 visithttp://www.csst.com
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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 athttp://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
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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, 2009 AND 2008
Expressed in thousands of U.S. dollars
(Except for share and per share amounts)
| | | Three Months Ended | |
| | | December 31 | |
| | | 2009 | | | 2008 | |
| | | (Unaudited) | | | (Unaudited) | |
| Revenues | $ | 182,719 | | $ | 143,548 | |
| Cost of goods sold | | 131,232 | | | 107,728 | |
| Gross profit | | 51,487 | | | 35,820 | |
| Selling and marketing | | 3,646 | | | 3,547 | |
| General and administrative | | 16,599 | | | 13,026 | |
| Depreciation and amortization | | 3,041 | | | 2,499 | |
| Income from operations | | 28,201 | | | 16,748 | |
| Interest income | | 88 | | | 47 | |
| Interest expense | | (1,939 | ) | | (6,167 | ) |
| Other income, net | | 830 | | | 1,069 | |
| Income before income taxes | | 27,180 | | | 11,697 | |
| Income taxes | | (1,125 | ) | | (476 | ) |
| Net income | | 26,055 | | | 11,221 | |
| Add: Net loss attributable to the noncontrolling interest | | 3 | | | 2 | |
| Net income attributable to the Company | | 26,058 | | | 11,223 | |
| | | | | | | |
| NET INCOME PER SHARE ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS | | | | |
| BASIC | $ | 0.41 | | $ | 0.24 | |
| DILUTED | $ | 0.38 | | $ | 0.23 | |
| | | | | | | |
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | | | | |
| BASIC | | 62,942,000 | | | 47,514,000 | |
| DILUTED | | 68,939,000 | | | 48,157,000 | |
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CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
Expressed in thousands of U.S. dollars
(Except for share and per share amounts)
| | | 2009 | | | 2008 | |
| | | (Unaudited) | | | | |
| Revenues | $ | 580,870 | | $ | 427,354 | |
| Cost of goods sold (including depreciation and amortization for the years ended December 31, 2009 and 2008 of $1,009 and $762, respectively) | | 438,005 | | | 306,813 | |
| Gross profit | | 142,865 | | | 120,541 | |
| Selling and marketing | | 12,496 | | | 12,056 | |
| General and administrative (including non-cash employee compensation for the years ended December 31, 2009 and 2008 of $18,087 and $13,837, respectively) | | 52,677 | | | 42,295 | |
| Depreciation and amortization | | 11,731 | | | 8,729 | |
| Income from operations | | 65,961 | | | 57,461 | |
| Interest income | | 215 | | | 218 | |
| Gain on modification of convertible notes | | 9,315 | | | - | |
| Interest expense | | (19,731 | ) | | (21,765 | ) |
| Other income, net | | 2,500 | | | 2,236 | |
| Income before income taxes | | 58,260 | | | 38,150 | |
| Income taxes | | (1,733 | ) | | (5,580 | ) |
| Net income | | 56,527 | | | 32,570 | |
| Add: Net loss (income) attributable to the noncontrolling interest | | 50 | | | 33 | |
| Net income attributable to the Company | | 56,577 | | | 32,603 | |
| Foreign currency translation (loss) gain | | (1,602 | ) | | 17,294 | |
| Comprehensive income attributable to the Company | | 54,975 | | | 49,897 | |
| Comprehensive (loss) income attributable to the noncontrolling interest | | (50 | ) | | (33 | ) |
| COMPREHENSIVE INCOME | $ | 54,925 | | $ | 49,864 | |
| | | | | | | |
| NET INCOME PER SHARE ATTRIBUTABLE TO THE COMPANY’S COMMON SHAREHOLDERS | | | | |
| BASIC | $ | 1.10 | | $ | 0.73 | |
| DILUTED | $ | 1.01 | | $ | 0.72 | |
| | | | | | | |
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | | | | | | |
| BASIC | | 51,317,000 | | | 44,721,000 | |
| DILUTED | | 56,171,000 | | | 45,284,000 | |
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CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2009 AND 2008
Expressed in thousands of U.S. dollars
(Except for share and per share amounts)
| | | 2009 | | | 2008 | |
| | | (Unaudited) | | | | |
| ASSETS | |
| Cash and cash equivalents | $ | 154,483 | | $ | 47,779 | |
| Accounts receivable, net | | 251,604 | | | 148,205 | |
| Inventories, net | | 70,141 | | | 117,042 | |
| Prepayment and deposits | | 4,706 | | | 7,280 | |
| Advances to suppliers | | 39,399 | | | 17,120 | |
| Other receivables | | 26,692 | | | 14,065 | |
| Deferred tax assets - current portion | | 13 | | | 32 | |
| Total current assets | | 547,038 | | | 351,523 | |
| | | | | | | |
| Deposits paid for acquisition of subsidiaries, properties and intangible assets | | 7,199 | | | 7,855 | |
| Plant and equipment, net | | 75,447 | | | 74,523 | |
| Land use rights, net | | 7,733 | | | 7,675 | |
| Intangible assets | | 54,677 | | | 56,913 | |
| Contingently returnable acquisition consideration | | - | | | 1,176 | |
| Goodwill | | 79,511 | | | 73,216 | |
| Deferred financing cost | | 1,953 | | | 1,082 | |
| Deferred tax assets - non-current portion | | - | | | 253 | |
| TOTAL ASSETS | $ | 773,558 | | $ | 574,216 | |
| | | | | | | |
| LIABILITIES AND EQUITY | |
| CURRENT LIABILITIES | | | | | | |
| Notes payable – short term | $ | 57,116 | | $ | 10,242 | |
| Obligation under product financing arrangements – short term | | | | | | |
| | | 5,184 | | | 2,469 | |
| Guaranteed senior unsecured notes payable – short term | | | | | | |
| | | 35,701 | | | - | |
| Accounts and bills payable | | 68,817 | | | 50,756 | |
| Accrued expenses | | 26,762 | | | 10,263 | |
| Advances from customers | | 27,503 | | | 28,621 | |
| Taxes payable | | 14,835 | | | 4,115 | |
| Payable for acquisition of businesses, properties and land use rights | | 5,105 | | | 11,915 | |
| Deferred income | | 1,868 | | | 1,207 | |
| Total current liabilities | | 242,891 | | | 119,588 | |
| | | | | | | |
| LONG TERM LIABILITIES | | | | | | |
| Notes payable – long term | | - | | | 2,853 | |
| Obligation under product financing arrangements – long term | | | | | | |
| | | 6,541 | | | 4,214 | |
| Guaranteed senior unsecured notes payable – long term | | | | | | |
| | | 43,988 | | | - | |
| Net deferred tax liabilities | | 773 | | | - | |
| Convertible notes payable – long term | | - | | | 143,342 | |
| Total liabilities | | 294,193 | | | 269,997 | |
| | | | | | | |
| 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, 67,866,730 (2009) and 49,142,592 (2008) shares issued and outstanding | | 7 | | | 5 | |
| Additional paid-in capital | | 285,025 | | | 164,806 | |
| Retained earnings | | 165,982 | | | 109,405 | |
| Statutory surplus reserve fund | | 804 | | | 804 | |
| Accumulated other comprehensive income | | 27,565 | | | 29,167 | |
| Total equity of the Company | | 479,383 | | | 304,187 | |
| Noncontrolling interest | | (18 | ) | | 32 | |
| Total equity | | 479,365 | | | 304,219 | |
TOTAL LIABILITIES AND EQUITY | $ | 773,558 | | $ | 574,216 | |
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CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
Expressed in thousands of U.S. dollars
(Except for share and per share amounts)
| | | 2009 | | | 2008 | |
| | | (Unaudited) | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
| Net income | $ | 56,527 | | $ | 32,570 | |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | | | |
| Depreciation and amortization | | 12,740 | | | 9,491 | |
| Provision for doubtful accounts | | 2,432 | | | 401 | |
| Provision for obsolete inventories | | 348 | | | 14 | |
| Amortization of consultancy services | | 11 | | | 135 | |
| Non-cash compensation expense | | 18,087 | | | 13,837 | |
| Amortization of deferred financing cost | | 646 | | | 206 | |
| Redemption accretion on convertible notes | | 14,851 | | | 19,641 | |
| | | | | | | |
| Gain on modification of convertible notes | | (9,315 | ) | | - | |
| | | | | | | |
| Amortization of debt discount | | 1,249 | | | - | |
| Deferred taxes | | 1,045 | | | 142 | |
| | | | | | | |
| Changes in operating assets and liabilities: | | | | | | |
| (Increase) decrease in: | | | | | | |
| Accounts receivable | | (104,332 | ) | | (73,827 | ) |
| | | | | | | |
| Related party receivables | | - | | | 587 | |
| Other receivables | | (12,324 | ) | | (2,060 | ) |
| Inventories | | 47,313 | | | (63,306 | ) |
| Prepayment and deposits | | 2,793 | | | (2,381 | ) |
| Advances to suppliers | | (22,233 | ) | | (12,850 | ) |
| Increase (decrease) in: | | | | | | |
| Accounts and bills payable and accrued expenses | | 32,736 | | | 21,312 | |
| Advances from customers | | (1,156 | ) | | 17,077 | |
| Taxes payable | | 10,525 | | | (318 | ) |
| Deferred income | | 660 | | | 229 | |
| Net cash provided by (used in) operating activities | | 52,603 | | | (39,100 | ) |
| | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | |
| Additions to plant and equipment | | (4,143 | ) | | (6,129 | ) |
| Additions to intangible assets, other than through business acquisitions | | (2,585 | ) | | (2,320 | ) |
| Additions to land use rights, other than through business acquisitions | | (174 | ) | | (5,101 | ) |
| Deposits paid for acquisition of subsidiaries | | (3,259 | ) | | (3,790 | ) |
| Deposits refunded for acquisition of subsidiaries | | 1,904 | | | 1,943 | |
| | | | | | | |
| Deposits paid for acquisition of properties and intangible assets | | - | | | (357 | ) |
| Net cash outflow on acquisition of net assets of businesses acquired (net of cash acquired) | | 273 | | | (10,997 | ) |
| | | | | | | |
| Payments of payable for acquisition of businesses, properties and land use rights | | (11,077 | ) | | - | |
| | | | | | | |
| Payments of adjustment to cost of acquisitions related to resolved contingencies | | (425 | ) | | - | |
| | | | | | | |
| Proceeds from disposal of land use rights and properties | | - | | | 3,379 | |
| Net cash used in investing activities | | (19,486 | ) | | (23,372 | ) |
| | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | |
| New borrowings, net of issuance costs | | 65,874 | | | 17,401 | |
| Repayment of borrowings | | (21,865 | ) | | (19,386 | ) |
| New borrowings from obligation under product financing arrangements | | 8,362 | | | 6,687 | |
| Repayment of obligation under product financing arrangements | | (4,511 | ) | | (1,143 | ) |
| | | | | | | |
| Repayment of convertible notes payables | | (52,500 | ) | | - | |
| | | | | | | |
| Warrants exercised | | - | | | 277 | |
| Issue of common stock, net of issuing expenses | | 80,179 | | | 9,700 | |
| Net cash provided by financing activities | | 75,539 | | | 13,536 | |
| | | | | | | |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | 108,656 | | | (48,936 | ) |
| Effect of exchange rate changes on cash | | (1,952 | ) | | 7,644 | |
| | | | | | | |
| Cash and cash equivalents, beginning of year | | 47,779 | | | 89,071 | |
| CASH AND CASH EQUIVALENTS, END OF YEAR | $ | 154,483 | | $ | 47,779 | |
