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 /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 the 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."
"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.
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 visit http://www.csst.com .
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 at http://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: [email protected]
Investor and Media Contact:
Patrick Yu, Fleishman-Hillard Hong Kong
Tel: +852-2530-2577
Email: [email protected]
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
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 (50) (33)
attributable to the noncontrolling
interest
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
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
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
SOURCE China Security & Surveillance Technology, Inc.
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