China Security & Surveillance Technology Reports Third Quarter 2008 Financial Results

SHENZHEN, China , Oct. 28 /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 , Oct. 28 /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 third quarter ending September 30, 2008 .

Third Quarter 2008

For the third quarter 2008, the Company reported GAAP earnings per diluted share of $0.20 compared to $0.29 in the third quarter 2007. GAAP results for the third quarter of 2008 include: (1) approximately $5.36 million, or $0.12 per diluted share, of non-cash expense related to the accrual of amounts payable under outstanding convertible notes in the event that such notes are redeemed (as described below under the caption "Explanation of Redemption Accrual"); (2) approximately $2.51 million, or $0.05 per diluted share, of non-cash expense related to the depreciation and amortization of long lived assets and (3) approximately $3.60 million, or $0.08 per diluted share, of non-cash expense related to the accrual of performance-based employee compensation. The company also recorded a one-time gain of $5.52 million, or $0.14 per diluted share, in last year's third quarter which did not recur in the third quarter of 2008. Excluding these non-cash expenses and the one-time gain in 3Q07, diluted earnings per share was $0.45, compared to $0.32 per diluted share in the third quarter 2007 (see "About Non-GAAP Financial Measures" toward the end of this release). Diluted share count increased 19% in the third quarter 2008 to 46.15 million from 40.51 million in the third quarter of 2007.

Third quarter revenue increased 82.3% to $119.3 million compared to $65.4 million in the third quarter 2007. Organic revenue during the third quarter 2008 was approximately $106.21 million, or 89.0% of total revenue. As a result, organic revenue grew during the quarter by $56.75 million, or 114.7% from $49.46 million in the third quarter 2007. Non-organic revenue, or revenue of acquired companies was approximately $13.08 million or 11.0% of total revenue in the third quarter 2008.

In the third quarter gross profits increased $12.27 million, or 62.2%, to $32.01 million from $19.74 million for the same period last year. Gross margin for the third quarter was 26.8%, compared to 30.2% in the same period last year. Overall gross margin was impacted by the need for accelerated installations of security projects before and during the Olympics, which required the company to pay overtime and premium for outsourced labor.

Income from operations in the third quarter increased 17.8% to $15.33 million from $13.01 million in the prior year's third quarter. Operating margin decreased to 12.8% from 19.9% in the third quarter last year, primarily due to lower gross margins, increased non-cash expenses as well as higher selling, general and administrative expenses. Net income in the third quarter of 2008 decreased 21.8% year over year to $9.15 million from $11.70 million in the prior year's third quarter. It is important to note that the third quarter 2007 also included a gain from land disposal of $5.52 million, or $0.14 per share, which did not recur in the third quarter of this year. Net income per diluted share was $0.20, versus $0.29 in the third quarter 2007.

The company's cash position at the end of the quarter was $65.93 million, down from $88.60 million at the end of the second quarter 2008. Total debt at the end of the first quarter was $157.61, up from $137.81 million at the end of the second quarter 2008.

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