China Security & Surveillance Technology Reports Fourth Quarter and Full Year 2007 Financial Results

SHENZHEN, China , March 10 /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...


SHENZHEN, China , March 10 /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 fourth quarter and full year ending December 31, 2007 .

Full Year 2007

The Company reported GAAP earnings per diluted share of $0.91 for the full year of 2007 compared to $0.85 in the full year 2006. GAAP results for the full year of 2007 include: (1) approximately $13.7 million, or $0.35 per diluted share, of non-cash expense related to the redemption accretion on convertible notes (as described below under the caption "Explanation of Redemption Accretion"); (2) approximately $5.0 million, or $0.13 per diluted share, of non-cash expense related to depreciation and amortization of long- lived assets due to our acquisition of subsidiaries, and (3) approximately $4.2 million, or $0.11 per diluted share, of non-cash expense related to employee stock compensation recognized pursuant to SFAS 123 (R). Additionally, the Company realized a one-time pre-tax gain of $13.63 million, or $0.30 per diluted share (after tax effect), related to the disposal of properties and land use rights during the year. Excluding these non-cash expenses and one- time gain, diluted earnings per share was $1.20, compared to $0.89 per diluted share in 2006 (see the "Reconciliation of GAAP to non-GAAP Measures" toward the end of this release). Diluted share count increased 44% in 2007 to 38.8 million from 26.9 million in 2006. Shares associated with the Company's convertible bond are not included in the GAAP fully diluted share count, as the corresponding increase in net income associated with the accruals would impact earnings per share in an anti-dilutive manner.

Revenue increased 124% to $240.2 million compared to $106.9 million in 2006. Revenue growth continues to be positively impacted by the increasing size of Safe City government contracts, as well as growth from smaller corporate contracts. Historically, the average contract size for safe city projects was $1-1.5 million. The Company is still receiving other contract awards sized well below that average, but recent contracts from Safe City projects have ranged from $5-8 million. These larger Safe City contracts tend to have longer time duration to fulfill -- in some cases as long as 22-25 weeks, versus historical durations of 6-12 weeks. Organic revenue during 2007 was approximately $190.7 million, or 79.4% or total revenue (which included the 2007 fourth quarter revenue contribution from Cheng Feng). Non-organic revenue, or revenue of acquired companies was approximately $49.5 million or 20.6% of total revenue in 2007 (which included the three quarters' revenue contribution from Cheng Feng). As a result, organic revenues grew during the year by $86.3 million, or 83% from $104.4 million in 2006.

Full year 2007 gross profits increased $38.5 million, or 124%, to $69.5 million from $31.0 million for 2006. Gross margin for the year was 28.9%, flat with 2006.

Income from operations in 2007 increased 68.8% to $42.7 million from $25.3 million in the prior year. Operating margin decreased to 17.7% from 23.6% in 2006. Such decrease was primarily due to the increase of our selling and marketing expenses as well as the general and administrative expenses. Net income in 2007 increased 54% to $35.3 million, up from $22.9 million in 2006. Net income per share was $0.91 versus $0.85 in 2006.

Fourth Quarter 2007

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