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
First quarter revenue increased 86.7% to
In the first quarter, gross profits increased
Income from operations in the first quarter increased 72.4% to
The Company's cash position at the end of the quarter was
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.''
Financial Outlook
For the second quarter of 2008, the Company expects to achieve revenues
between
The Company estimates that in the second quarter, non-cash interest
expenses associated with the redemption accretion on convertible notes, the
employee stock compensation, and the depreciation and amortization, will be
approximately
For the full year 2008, the Company is raising its previous guidance and
now expects to achieve revenues between
Mr. Tu concluded, ''We continue to be optimistic about the future growth of our business in China . We believe that we have put in place the strongest possible operating structure and management team -- supported by the strongest possible balance sheet -- to leverage the expanding opportunities for revenue growth associated with increased demand for security and surveillance products and services. This was recently evidenced by our notable contract win for a second phase Safe City project with the government of Qingzhou City in Shandong Province , following our implementation of phase one last year as well as by our awarded Safe City bid in Jining City, which was our largest project win to date. Our internal infrastructure, our reputation for premier service, and our recent and pending acquisitions and sound partnerships provide us with the optimal model to achieve our goal of becoming the market leader in security and surveillance manufacturing and equipment. We plan to continue to focus our efforts on developing all segments of our business. We continue to see demand for our products, our services and our security expertise growing, and it is our goal to be the logical choice for customers requiring security products and services.''
Explanation of Redemption Accretion on convertible notes
The Company raised
As of March 31, 2008 the Company accrued a cumulative
Conference Call
The Company will hold a conference call to discuss the financial results at 5:00 p.m. ET today. The Company invites you to join the call by dialing 913-312-1239. A live webcast of the conference call will be available at http://www.csst.com . A replay of the call will be available from May 5, 2008 to May 12, 2008 . Listeners may access the replay by dialing 719-457-0820, passcode: 6411406.
About China Security & Surveillance Technology, Inc.
Based in Shenzhen, China , China Security manufactures, distributes, installs and maintains security and surveillance systems throughout China . China Security has manufacturing facilities in China and an R&D facility which maintains an exclusive collaboration agreement with Beijing University. China Security has built a diversified customer base through its extensive sales and service network throughout China . To learn more about the Company visit http://www.csst.com .
About Non-GAAP Financial Measures
This press release contains non-GAAP financial measures for earnings that exclude the accrual for the redemption amount payable under certain outstanding convertible notes issued by the Company and certain other non-cash charges. China Security believes that these non-GAAP financial measures are useful to investors because they exclude non-cash charges that China Security's management excludes when it internally evaluates the performance of China Security's business and makes operating decisions, including internal budgeting, and performance measurement, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of China Security. Accordingly, management excludes the expense arising from the accrual of redemption amounts payable under its outstanding convertible notes and certain other non-cash charges when making operational decisions. China Security believes that providing the non-GAAP measures that management uses to its investors is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand China Security's financial performance in comparison to historical periods. In addition, it allows investors to evaluate China Security's performance using the same methodology and information as that used by China Security's management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, China Security's management compensates for these limitations by providing the relevant disclosure of the items excluded.
The following table provides the non-GAAP financial measure and the related GAAP measure, and provides a reconciliation of the non-GAAP measure to the equivalent GAAP measure.
Reconciliation of GAAP to non-GAAP Measures, Table 1 (Unaudited) Exclude non-cash items (All amounts in millions of U.S. dollars, except for per share figures) Three Months Ended Three Months Ended March 31, 2008 March 31, 2007 GAAP Net Income $4.50 $4.53 Add: Depreciation and amortization 1.90 0.81 Non-cash employee compensation 2.96 0.26 Redemption accretion on convertible notes 4.36 1.16 Adjusted Net Income (Excludes all non-cash items) $13.72 $6.76 GAAP Diluted EPS $0.11 $0.13 Add: Depreciation and amortization 0.04 0.02 Non-cash employee compensation 0.07 0.01 Redemption accretion on convertible notes 0.10 0.03 Adjusted Diluted EPS (Excludes all non-cash items) $0.32 $0.20 Diluted weighted average number of shares outstanding 42.80 34.27 Reconciliation of GAAP to non-GAAP Measures, Table 2 (Unaudited) Assuming conversion of Citadel notes (All amounts in millions of U.S. dollars, except for per share figures) Three Months Ended Three Months Ended March 31, 2008 March 31, 2007 GAAP Net Income $4.50 $4.53 Add: Redemption accretion on convertible notes 4.36 1.16 Adjusted Net Income (Assuming conversion of Citadel notes) $8.86 $5.69 Net Income Diluted EPS (Assuming conversion) 0.09 0.12 Add: Redemption accretion on convertible notes 0.09 0.03 Adjusted Diluted EPS (assuming conversion of Citadel notes) $0.18 $0.15 Diluted weighted average number of shares outstanding (assuming conversion of Citadel notes) 48.25 37.60Safe Harbor Statement
This press release includes 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 security and surveillance products, our expectations regarding the continued growth of the security and surveillance market, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause our actual results to differ materially from those anticipated, expressed or implied in the forward-looking statements. These risks and uncertainties include, but not limited to, the factors mentioned in the ''Risk Factors'' section of our Annual Report on Form 10-K for the year ended December 31, 2007 , and other risks mentioned in our other reports filed with the Securities Exchange Commission, or SEC. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system (EDGAR) at http://www.sec.gov . The words ''believe,'' ''expect,'' ''anticipate,'' ''project,'' ''targets,'' ''optimistic,'' ''intend,'' ''aim,'' ''will'' or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.
CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2008 and 2007 Expressed in thousands of U.S. dollars (Except for share and per share amounts) Three Months Ended March 31 2008 2007 (Unaudited) (Unaudited) Revenues $71,777 $38,451 Cost of goods sold (including depreciation and amortization for the three months ended March 31, 2008 and 2007 of $83 and $0, respectively) 49,521 28,333 Gross profit 22,256 10,118 Selling and marketing 2,142 603 General and administrative (including non-cash employee compensation for the three months ended March 31, 2008 and 2007 of $2,958 and $265, respectively) 7,162 2,251 Depreciation and amortization 1,817 806 Income from operations 11,135 6,458 Rental income received from related party -- 127 Interest income 55 82 Interest expense (4,863) (1,319) Other income, net 320 492 Income before income taxes and minority interest 6,647 5,840 Minority interest in loss of consolidated subsidiaries 25 9 Income taxes (2,176) (1,316) Net income 4,496 4,533 Foreign currency translation gain 8,504 795 COMPREHENSIVE INCOME $13,000 $5,328 CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2008 (UNAUDITED) AND DECEMBER 31, 2007 Expressed in thousands of U.S. dollars (Except for share and per share amounts) March 31, December 31, 2008 2007 (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $77,112 $89,071 Accounts receivable, net 78,174 63,206 Related party receivables 311 549 Inventories, net 38,019 40,606 Prepayments and deposits 4,238 3,225 Advances to suppliers 4,127 2,877 Other receivables 13,405 13,171 Tax refundable 42 92 Deferred tax assets - current portion 145 137 Total current assets 215,573 212,934 Deposits for acquisition of subsidiaries, intangible assets and properties 56,932 46,443 Plant and equipment, net 25,347 24,066 Land use rights, net 1,436 1,379 Intangible assets 43,775 39,800 Goodwill 52,375 52,369 Deferred financing cost 141 150 Deferred tax assets - non-current portion 270 262 TOTAL ASSETS $395,849 $377,403 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable - short term $12,509 $12,814 Accounts payable 22,076 21,864 Accrued expenses 4,716 5,108 Advances from customers 7,299 8,352 Taxes payable 2,128 4,153 Deferred income 1,005 915 Total current liabilities 49,733 53,206 LONG-TERM LIABILITIES Notes payable - long term -- 698 Convertible notes payable 128,064 123,701 Total liabilities 177,797 177,605 MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 39 61 SHAREHOLDERS' 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, 42,859,292 (March 31, 2008) and 42,506,150 (December 31, 2007) shares issued and outstanding 4 4 Additional paid-in capital 115,530 110,254 Retained earnings 81,298 76,802 Statutory reserves 804 804 Accumulated other comprehensive income 20,377 11,873 Total shareholders' equity 218,013 199,737 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $395,849 $377,403 CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2008 and 2007 Expressed in thousands of U.S. dollars (Except for share and per share amounts) Three Months Ended March 31 2008 2007 (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $4,496 $4,533 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 1,900 806 Amortization of consultancy services 33 30 Amortization of deferred financing cost 9 -- Non-cash employee compensation 2,958 265 Redemption accretion on convertible notes 4,363 1,163 Deferred taxes 1 12 Minority interest (25) (9) Changes in operating assets and liabilities: (Increase) decrease in: Accounts receivable (12,396) (3,370) Related party receivables 261 (192) Other receivables (3,077) (308) Inventories 4,239 (2,254) Prepayments and deposits 673 (4,977) Advances to suppliers (1,133) 101 (Decrease) increase in: Accounts payable and accrued expenses (1,277) 744 Advances from customers (1,393) 2,003 Tax payable (2,194) (65) Deferred income 53 (57) Net cash used in operating activities (2,509) (1,575) CASH FLOWS FROM INVESTING ACTIVITIES: Additions to plant and equipment (830) (215) Additions to intangible assets (543) (66) Deposits paid for acquisition of subsidiaries (12,944) (19,972) Deposits paid for acquisition of properties and intangible assets -- (646) Proceeds from disposal of land use rights and properties 3,379 -- Net cash used in investing activities (10,938) (20,899) CASH FLOWS FROM FINANCING ACTIVITIES: Cash received from (advanced to) directors -- (75) Warrants exercised 277 -- Issuance of common stock, net of issuing expenses -- 1,701 New borrowings, net of issuing cost 4,274 65,172 Repayment of borrowings (5,827) (3,468) Net cash (used in) provided by financing activities (1,276) 63,330 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (14,723) 40,856 Effect of exchange rate changes on cash 2,764 56 Cash and cash equivalents, beginning of period 89,071 30,980 CASH AND CASH EQUIVALENTS, END OF PERIOD 77,112 71,892SOURCE China Security & Surveillance Technology, Inc.
