China Security & Surveillance Technology, Inc. Reports Second-Quarter 2011 Results
SHENZHEN, China, July 25, 2011 /PRNewswire-Asia/ --
- Second-quarter revenues decreased to $156.34 million, 7.1% down from the same quarter of last year due to structural change in the customer mix to include more higher margin and large-scale government installation projects which required a longer completion time; consequently fewer projects were completed during the quarter
- Approximately 88% of second-quarter revenues came from government customers, as compared with 55% in the second quarter of 2010, reflecting the Company's strategic focus on large-scale government installation projects
- Second-quarter gross margin increased 110 basis points year-over-year to 26.9% from 25.8% last year; while gross margin for the six months ended June 30, 2011 increased 370 basis points year-over-year to 28.8%, reflecting an increasing gross margin in system installation business and effective cost control measures
- Second-quarter net income attributable to CSST decreased to $5.97 million, mainly due to the decrease in revenues, the increase in expenses related to the proposed merger transaction and the Company's advertising promotions to support its business expansion efforts and the increase in interest expenses
- Second-quarter GAAP diluted EPS was $0.07, declining year-over-year from $0.23 for the second quarter of 2010, due to the fall in net income attributable to CSST and the increase in year-over-year weighted average diluted share count
- A positive cash flow of $78.59 million over the first six months of 2011, as compared with $53.59 over the same period of 2010
Note: CSST's second-quarter 2011 earnings conference call can be accessed at 1866 549 1292 (US Toll Free) or +852 3005 2050 (Toll International), with PIN number: 341229# at 8:00 a.m. ET. on July 25, 2011. Second-quarter 2011 earnings slides can be accessed at http://csst.todayir.com/html/index.php before the call.
China Security & Surveillance Technology, Inc. ("CSST" or the "Company") (NYSE: CSR), a leading integrated surveillance and safety solutions provider in the P.R.C., today reported its second-quarter 2011 results with an encouraging gross margin expansion and a positive cash flow despite a decrease in revenues and net income. The improved gross margin was driven by increasing gross margin in system installation business and disciplined execution of cost control initiatives.
CSST's second-quarter 2011 revenues totaled $156.34 million, net income attributable to the Company was $5.97 million and GAAP-diluted EPS was $0.07. Second-quarter gross margin rose to 26.9%, while operating margin fell to 9.4%.
"We just completed a quarter where the results of important strategic decisions were reflected in a gross margin expansion and a positive cash flow," said Mr. Guoshen Tu, Chairman and Chief Executive Officer of CSST. "Although our revenues were impacted by the structural change in our customer mix, we continue to see growth opportunities in the surveillance and safety industry in China, with favorable government support, as well as great potential in the security services segment. Large-scale projects and our proven execution and service capabilities continue to strengthen our competitive position in China."
Second-Quarter 2011 Financial Results
CSST's 2011 second-quarter revenues totaled $156.34 million, down 7.1% as compared with $168.35 million in the second quarter of 2010. The decrease was mainly due to structural change in the customer mix to include more higher margin and large-scale government installation projects which required a longer completion time; consequently fewer projects were completed during the quarter. Approximately 88% of the revenues came from government customers as compared with approximately 55% in the same quarter of last year. According to CSST's accounting policy, the Company only recognizes revenues upon completion. The Company hence expects to see an upturn in the revenues over the rest of the year.
Gross profit totaled $42.01 million, down 3.1% from $43.36 million in the second quarter of 2010. Gross margin increased to 26.9%, up from 25.8% in the second quarter of 2010. The increase was mainly driven by higher gross margin from large-scale installation projects and effective cost-control initiatives.
Operating income fell 40.4% year-over-year to $14.65 million while operating margin fell to 9.4% from 14.6% in the second quarter of 2010. The decrease was mainly due to the increase in expenses related to the proposed merger transaction and the Company's advertising promotions to support its business expansion efforts and hiring of additional staff.
Net income attributable to CSST totaled $5.97 million, down from $17.81 million in the second quarter of 2010. Net margin decreased to 3.9%, versus 10.6% in the second quarter of 2010. The drop was mainly due to the decrease in revenues, the increase in professional expenses related to the proposed merger transaction and the Company's advertising promotions to support its business expansion efforts and the increase in interest expenses in the second quarter of 2011.
GAAP diluted EPS was $0.07 versus $0.23 in the second quarter of 2010. The drop was mainly due to the decrease in net income attributable to the Company, and the fact that the Company's weighted average diluted share count increased 18.0% to 89.71 million shares in the second quarter of 2011, from 76.01 million shares in the same period of 2010.
As at June 30, 2011, the Company had a cash balance of $144.21 million of cash and cash equivalents, up from $65.63 million as at December 31, 2010 due to the cash inflow from financing to support the Company's large-scale project installations and business expansion.
Financial Outlook
"Mainland surveillance and safety industry growth opportunities continue to be robust, and CSST is strongly positioned to lead in this new era," said Mr. Tu. "Looking ahead, we are confident that we are able to continue to build on our strengths and accelerate the growth of our Company in 2011."
About China Security & Surveillance Technology, Inc.
Based in Shenzhen, China, CSST designs, manufactures, sells, installs, services and monitors electronic surveillance and safety products and solutions, including related software, in China. Its customers are mainly comprised of government, commercial, industrial and education entities. 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 results for the reminder of 2011 and our ability to deliver such results, growth opportunities of surveillance and safety industry in China and our ability to capitalize on the anticipated growth in the surveillance and safety industry, expected growth in industry demand and our business, our future financial performance and strategic and operational plans, 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: |
|
Amy Tang |
|
China Security & Surveillance Technology, Inc. |
|
Tel: +86-755-8351-0888 ext.6138 |
|
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 |
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||
AS OF JUNE 30, 2011 (UNAUDITED) AND DECEMBER 31, 2010 |
|||||
Expressed in thousands of U.S. dollars |
|||||
(Except for share and per share amounts) |
|||||
ASSETS |
|||||
June 30, 2011 |
December 31, 2010 |
||||
Cash and cash equivalents |
$ |
144,205 |
$ |
65,626 |
|
Restricted cash |
22,472 |
-- |
|||
Accounts receivable, net |
491,369 |
433,986 |
|||
Inventories, net |
43,101 |
59,368 |
|||
Prepayments and deposits |
168,589 |
56,241 |
|||
Advances to suppliers and subcontractors |
154,760 |
88,360 |
|||
Other receivables |
48,568 |
47,116 |
|||
Total current assets |
1,073,064 |
750,697 |
|||
Deposits paid for business acquisitions, properties and intangible assets |
132,753 |
146,243 |
|||
Plant and equipment, net |
77,321 |
75,294 |
|||
Land use rights, net |
8,042 |
7,896 |
|||
Intangible assets, net |
45,799 |
48,692 |
|||
Goodwill |
79,519 |
79,516 |
|||
Deferred financing costs, net |
2,143 |
2,684 |
|||
TOTAL ASSETS |
$ |
1,418,641 |
$ |
1,111,022 |
|
CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2011 (UNAUDITED) AND DECEMBER 31, 2010 Expressed in thousands of U.S. dollars (Except for share and per share amounts) LIABILITIES AND EQUITY |
|||||||
June 30, 2011 |
December 31, 2010 |
||||||
CURRENT LIABILITIES |
|||||||
Notes payable – short term |
$ |
191,014 |
$ |
196,329 |
|||
Obligations under product financing arrangements – short term |
5,512 |
6,687 |
|||||
Guaranteed senior unsecured notes payable – short term |
22,168 |
37,408 |
|||||
Accounts and bills payable |
77,464 |
32,240 |
|||||
Accrued expenses |
60,919 |
49,421 |
|||||
Advances from customers |
18,722 |
15,216 |
|||||
Taxes payable |
29,438 |
28,648 |
|||||
Payable for acquisition of businesses |
3,763 |
3,763 |
|||||
Deferred income |
2,806 |
3,201 |
|||||
Total current liabilities |
411,806 |
372,913 |
|||||
LONG TERM LIABILITIES |
|||||||
Notes payable – long term |
299,945 |
60,570 |
|||||
Obligation under product financing arrangements – long term |
3,810 |
6,474 |
|||||
Guaranteed senior unsecured notes payable – long term |
3,324 |
6,580 |
|||||
Net deferred tax liabilities |
676 |
282 |
|||||
Total liabilities |
719,561 |
446,819 |
|||||
EQUITY |
|||||||
Preferred stock, $0.0001 par value; 10,000,000 shares authorized, no shares issued and outstanding |
|||||||
Common stock, $0.0001 par value; 290,000,000 shares authorized 89,703,773 (June 30, 2011) and 89,521,115 (December 31, 2010) shares issued and outstanding |
9 |
9 |
|||||
Additional paid-in capital |
384,981 |
374,417 |
|||||
Retained earnings |
251,016 |
243,371 |
|||||
Statutory surplus reserve fund |
804 |
804 |
|||||
Accumulated other comprehensive income |
62,287 |
45,619 |
|||||
Total equity of the Company |
699,097 |
664,220 |
|||||
Noncontrolling interest |
(17) |
(17) |
|||||
Total equity |
699,080 |
664,203 |
|||||
TOTAL LIABILITIES AND EQUITY |
$ |
1,418,641 |
$ |
1,111,022 |
|||
CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES |
|||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME |
|||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010 |
|||||||||
Expressed in thousands of U.S. dollars |
|||||||||
(Except for share and per share amounts) |
|||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||
2011 |
2010 |
2011 |
2010 |
||||||
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
||||||
Revenues |
$ |
156,339 |
$ |
168,354 |
$ |
255,393 |
$ |
288,544 |
|
Cost of goods sold (including depreciation and amortization for the three and six months ended June 30, 2011 and 2010 of $254, $513, $248 and $502, respectively) |
114,331 |
124,994 |
181,898 |
216,205 |
|||||
Gross profit |
42,008 |
43,360 |
73,495 |
72,339 |
|||||
Selling and marketing |
3,116 |
3,131 |
5,812 |
5,845 |
|||||
General and administrative (including non-cash employee compensation for the three and six months ended June 30, 2011 and 2010 of $5,017, $10,564, $5,055 and $13,381, respectively) |
21,274 |
12,670 |
38,972 |
28,992 |
|||||
Depreciation and amortization |
2,971 |
3,005 |
5,939 |
5,985 |
|||||
Income from operations |
14,647 |
24,554 |
22,772 |
31,517 |
|||||
Interest income |
222 |
53 |
363 |
131 |
|||||
Interest expense |
(6,436) |
(3,064) |
(11,550) |
(5,359) |
|||||
Other income, net |
715 |
394 |
1,311 |
640 |
|||||
Income before income taxes |
9,148 |
21,937 |
12,896 |
26,929 |
|||||
Income taxes |
(3,182) |
(4,130) |
(5,251) |
(5,847) |
|||||
Net income |
5,966 |
17,807 |
7,645 |
21,082 |
|||||
Add: Net (income) attributable to the noncontrolling interest |
-- |
(4) |
-- |
(2) |
|||||
Net income attributable to the Company |
5,966 |
17,803 |
7,645 |
21,080 |
|||||
Foreign currency translation gain |
9,837 |
3,198 |
16,668 |
3,322 |
|||||
Comprehensive income attributable to the Company |
15,803 |
21,001 |
24,313 |
24,402 |
|||||
Comprehensive income attributable to the noncontrolling interest |
-- |
4 |
-- |
2 |
|||||
COMPREHENSIVE INCOME |
$ |
15,803 |
$ |
21,005 |
$ |
24,313 |
$ |
24,404 |
|
NET INCOME PER SHARE ATTRIBUTABLE TO THE COMPANY'S COMMON SHAREHOLDERS |
|||||||||
BASIC |
$ |
0.07 |
$ |
0.25 |
$ |
0.09 |
$ |
0.31 |
|
DILUTED |
$ |
0.07 |
$ |
0.23 |
$ |
0.09 |
$ |
0.29 |
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
|||||||||
BASIC |
84,833,000 |
71,480,000 |
84,835,000 |
67,993,000 |
|||||
DILUTED |
89,709,000 |
76,006,000 |
89,709,000 |
72,209,000 |
|||||
CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010 Expressed in thousands of U.S. dollars (Except for share and per share amounts) |
|||||
Six Months Ended June 30, |
|||||
2011 |
2010 |
||||
(Unaudited) |
(Unaudited) |
||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|||||
Net income |
$ |
7,645 |
$ |
21,082 |
|
Adjustments to reconcile net income to net cash used in operating activities: |
|||||
Depreciation and amortization |
6,452 |
6,487 |
|||
Provision for obsolete inventories |
(6) |
-- |
|||
Amortization of deferred financing cost |
1,707 |
563 |
|||
Non-cash compensation expense |
10,564 |
13,381 |
|||
Debt discount amortization |
824 |
1,681 |
|||
Deferred taxes |
388 |
(361) |
|||
Changes in operating assets and liabilities: |
|||||
Decrease (increase) in: |
|||||
Accounts receivable |
(47,251) |
(65,925) |
|||
Inventories |
17,659 |
(9,866) |
|||
Prepayments and deposits |
(111,035) |
(159) |
|||
Advances to suppliers and subcontractors |
(64,336) |
(31,947) |
|||
Other receivables |
(351) |
(4,070) |
|||
Increase (decrease) in: |
|||||
Accounts payable and accrued expenses |
54,815 |
(392) |
|||
Advances from customers |
3,151 |
3,953 |
|||
Taxes payable |
121 |
8,582 |
|||
Deferred income |
(470) |
529 |
|||
Net cash used in operating activities |
(120,123) |
(56,462) |
|||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||
Additions to plant and equipment |
(3,160) |
(846) |
|||
Additions to intangible assets, other than through business acquisitions |
(520) |
(807) |
|||
Deposits refunded (paid) for business acquisitions, properties and intangible assets, net |
16,905 |
(30,229) |
|||
Payments for business acquisitions |
-- |
(422) |
|||
Net cash provided by (used in) investing activities |
13,225 |
(32,304) |
|||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||||
Restricted cash |
(22,472) |
-- |
|||
Issue of common stock, net of financing expenses |
-- |
64,573 |
|||
Proceeds from borrowings, net of financing costs |
356,720 |
141,533 |
|||
Repayment of borrowings |
(128,440) |
(49,899) |
|||
Repayment of guaranteed senior unsecured notes payable |
(19,320) |
(19,320) |
|||
Proceeds from borrowings from obligations under product financing arrangements, net of financing costs |
-- |
6,293 |
|||
Repayment of obligation under product financing arrangements |
(4,450) |
(2,671) |
|||
Net cash provided by financing activities |
182,038 |
140,509 |
|||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
75,140 |
51,743 |
|||
Effect of exchange rate changes on cash and cash equivalents |
3,439 |
1,841 |
|||
Cash and cash equivalents, beginning of period |
65,626 |
154,483 |
|||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
144,205 |
$ |
208,067 |
|
SOURCE China Security & Surveillance Technology, Inc.
Share this article