China Security & Surveillance Technology Reports First Quarter 2008 Financial Results

SHENZHEN, China , May 5 /Xinhua-PRNewswire/ -- China Security & Surveillance Technology, Inc. ("China Security" or the ''Company'') (NYSE: CSR), a leading provider of digital surveillance technology in China , today reported its financial results...


SHENZHEN, China , May 5 /Xinhua-PRNewswire/ -- China Security & Surveillance Technology, Inc. ("China Security" or the ''Company'') (NYSE: CSR), a leading provider of digital surveillance technology in China , today reported its financial results for the first quarter ending March 31, 2008 .

First Quarter 2008

For the first quarter 2008, the Company reported GAAP earnings per diluted share of $0.11 compared to $0.13 in the first quarter 2007. GAAP results for the first quarter of 2008 include: (1) approximately $4.4 million, or $0.10 per diluted share, of non-cash expense related to the redemption accretion on convertible notes (as described below); (2) approximately $1.9 million, or $0.04 per diluted share, of non-cash expense related to depreciation and amortization of long lived assets; and (3) approximately $3.0 million, or $0.07 per diluted share, of non-cash employee stock compensation. Excluding these non-cash expenses, diluted earnings per share was $0.32, compared to $0.20 per diluted share in the first quarter 2007 (see ''About Non-GAAP Financial Measures'' toward the end of this release). Diluted share count increased 25% in the first quarter 2008 to 42.8 million from 34.3 million in the first quarter of 2007.

First quarter revenue increased 86.7% to $71.8 million compared to $38.4 million in the first quarter 2007. Organic revenue during the first quarter increased by $25.3 million, or 66%, from $38.4 million in the same period of 2007. Organic revenue totaled $63.7 million, or 89.0% of total revenue. Non-organic revenue, or revenue of acquired companies, totaled approximately $8.1 million, or 11.0% of total revenue in first quarter of 2008.

In the first quarter, gross profits increased $12.2 million, or 120%, to $22.3 million from $10.1 million for the same period last year. Gross margin for the first quarter was 31.0%, compared to 26.3% in the same period last year. Gross margin was also up sequentially from 29.3% in the fourth quarter 2007. The increase in gross margin was mainly driven by increased economies of scale, and the growing recognition of sales of some higher-margin Safe City projects.

Income from operations in the first quarter increased 72.4% to $11.1 million from $6.5 million in the prior year's first quarter. Operating margin decreased to 15.5% from 16.8% in the first quarter last year primarily due to the increase in non-cash expenses, as well as higher selling, general and administrative expense. Net income in the first quarter of 2008 decreased $0.03 million year over year to $4.5 million. Excluding non-cash expenses, adjusted net income increased 102.96% to $13.72 million from $6.76 million in the prior year's first quarter.

The Company's cash position at the end of the quarter was $77.1 million, down from $89.1 million at the end of the fourth quarter 2007. Total debt at the end of the first quarter was $140.6 million, up from $137.2 million at the end of the fourth quarter 2007.

Mr. Guo Shen Tu , Chief Executive Officer of China Security, commented, ''We are pleased to have performed at the high end of our expectations for the quarter, especially as the first quarter has historically been our slowest quarter due to the Chinese New Year . We continue to be encouraged by the growth in revenue from our system installation and manufacturing segments, as well as new revenue from our distribution segment, which was formed in March 2008 to capture increasing revenue associated with the distribution of security and surveillance products. We continue to benefit from the increasing demand for security in China , and from government programs such as Safe City. Our brand is becoming increasingly relevant in the security and surveillance market in China , and we look forward to integrating our acquisitions and generating revenue from our installation and manufacturing business, while capitalizing on the demand we're seeing in our distribution segment.''

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