2007'08.17.Fri
China Security & Surveillance Technology Reports Second Quarter 2007 Financial Results
August 14, 2007
- 2Q07 Revenue Increases 551.3% to $52.1 Million Compared
to 2Q06 --
- Company Provides Financial Outlook for 3Q07 --
SHENZHEN, China, Aug. 14 /Xinhua-PRNewswire/ -- China
Security & Surveillance Technology, Inc. ("China
Security" or the "Company") (OTC: CSCT), a
leading provider of digital surveillance technology in
China, today reported its financial results for the second
quarter ending June 30, 2007.
The Company reported GAAP earnings per diluted share of
$0.11 for the second quarter of 2007 compared to $0.10 in
second quarter of 2006. Results for the second quarter of
2007 include: (1)approximately $3.8 million, or $0.10 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 $1.1 million, or $0.03
per diluted share, of non- cash expense related to the
amortization of goodwill and (3) approximately $800,000, or
$0.02 per diluted share, of non-cash expense related to the
accrual of performance-based employee compensation.
Excluding these non-cash expenses, diluted earnings per
share was $0.26, compared to $0.10 per diluted share in the
second quarter of 2006 (see "About Non-GAAP Financial
Measures" toward the end of this release). Diluted
share count increased 58% in the second quarter of 2007 to
38.8 million from 24.6 million in the second quarter of
2006.
Revenue increased 551.3% to $52.1 million compared to
$8.0 million in the second quarter of 2006. Revenue
improved significantly as a result of increased demand
among both new and existing customers for security and
surveillance products within various industries and
organizations in China as well as the increase in
government-initiated programs to install security systems.
Second quarter 2007 revenue also benefited from an increase
in the visibility of the Company's brand in China, which
management believes led to new contract wins in the second
quarter. Organic revenue growth during the second quarter
of 2007 accounted for 78% of the Company's total revenues,
while recent acquisitions also contributed to revenue
growth.
Mr. Guo Shen Tu, Chief Executive Officer of China
Security, commented, "We are pleased with our
financial performance in the second quarter. During the
second quarter, we secured fifty-nine new contracts across
a wide array of private businesses as well as local and
city governments. We are seeing significant demand from
government Safe-City contracts, and importantly, several of
our customers are bypassing the pilot phase and moving
straight to longer-term, higher revenue-generating
projects."
Second quarter gross profit increased 397% to $14.9
million, compared to $3.0 million in the prior year. Gross
profit margin was 28.6% down from 37.5% year-over-year, but
up from 26.3% in the first quarter of 2007. The year-over-
year decline primarily reflects the Company's present
strategy to penetrate new markets and increase total market
share. The sequential increase in margin from the first
quarter of 2007 primarily reflects better economies of
scale and improved price strength.
Income from operations increased 300% to $9.6 million
from $2.4 million in the second quarter of 2006. Total
operating expenses increased to $5.2 million in the second
quarter of 2007 from $0.6 million in second quarter of
2006, primarily due to professional expenses related to the
costs of being a public reporting company as well as the
hiring of additional staff.
The Company recognized interest expense of $4.1 million
in the second quarter of 2007. Approximately $0.3 million
reflects interest payments on debt outstanding and
approximately $3.8 million reflects the non-cash accrual of
amounts payable under outstanding convertible notes, if such
notes are not converted into the Company's common stock
before their maturities and are redeemed as explained in
the Company's indenture with Citadel Equity Fund Ltd.
("Citadel"). China Security anticipates that its
annual non-cash accrual will be approximately $13 million
for 2007.
Net income in the second quarter of 2007 increased 72%
to $4.3 million or $0.11 per diluted share compared to $2.5
million or $0.10 per diluted share in the second quarter of
2006. As stated above, the net income performance includes
approximately $5.7 million of non-cash expense, or $0.15 on
a diluted share basis.
The Company's cash position in the second quarter of
2007 increased to $91.8 million compared to $71.9 million
at the end of the first quarter of 2007. This increase was
largely a result of the receipt of the net proceeds from
the $50 million convertible note financing with Citadel
that closed in April 2007, offset by the use of $30.3
million in connection with three acquisitions that closed
during the quarter.
Total debt at the end of the second quarter of 2007 was
$126.1, up from $67.1 million at the end of the first
quarter of 2007. Working capital at the end of the second
quarter of 2007 increased to $132.8 million compared to
$117.2 at the end of the first quarter of 2007.
Financial Outlook
For the third quarter of 2007, the Company expects to
achieve revenues between $65 million and $70 million,
including revenues from completed acquisitions. The
acquisitions completed by the Company since the beginning
of fiscal 2007 are Shenzhen Hongtianzhi Electronics Co.,
Ltd., HiEasy Electronic Technology Development Co., Ltd.,
Changzhou Mingking Electronics Co., Ltd. and Hangzhou
Tsingvision Intelligence System Co., Ltd.. Excluding the
non-cash charges related to the redemption amount payable
on convertible notes and the accrual of performance-based
employee compensation, the Company expects to achieve an
adjusted net income of at least $12.0 million in the third
quarter of 2007.
The Company estimates that the non-cash interest
expenses associated with the redemption amount payable on
convertible notes, the accrual of performance-based
employee compensation and the amortization of intangible
expense related to the company's recent acquisitions for
the remaining two quarters will be approximately $4.1
million, $1.0 million and $1.5 million per quarter,
respectively.
Mr. Tu concluded, "We have put in place the
foundation to grow our security and surveillance company
and expect to continue to be a market leader in the
manufacturing, systems integration and operating services
markets. The overall market for security and surveillance
projects continues to expand in China and our market share
is growing. Our acquisition strategy -- combined with our
strong organic growth -- serves to strengthen our overall
competitive position, so that our brand will become
synonymous with premiere security solutions and our
customers will receive one solid solution for all their
security needs. This model has worked well for our
organization and we expect benefits will become even more
apparent over time. Our highly incentivized management team
remains focused on shareholder value and we plan to proceed
with our strategic plan with our shareholders foremost in
mind."
Explanation of Redemption Accrual
The Company raised $60 million and $50 million through
two guaranteed senior unsecured convertible note financings
with Citadel in February 2007 and April 2007, respectively.
These notes bear interest at a rate of 1% per annum and are
due in 2012. Under the indentures, if the notes are not
converted before their respectively maturities, the notes
are to be redeemed by the Company on the maturity date at a
redemption price equal to 100% of the principal amount of
the notes then outstanding plus an additional amount of 15%
per annum, calculated on a quarterly compounded basis, plus
any accrued and unpaid interest.
As of June 30th, the Company accrued $3.8 million as a
redemption amount payable under the notes, which was
included in interest expense in the second quarter of 2007.
Unlike the annual interest rate of 1% that the Company is
actually paying out to the note holders under the note on a
semi-annual basis, the Company would only pay the accrued
redemption amount under the notes if the notes are not
converted into the Company's common stock before their
respective maturities and are redeemed in accordance with
its terms. Nevertheless, the Company believes that it must
accrue the entire redemption amount under U.S. generally
accepted accounting principles. This accrual will result in
non-cash expense of approximately $17.1 million annually
beginning in 2008.
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 913-981-4911. A
live webcast of the conference call will be available at
www.viavid.net. A replay of the call will be available from
August 13, 2007 to August 20, 2007. Listeners may access the
replay by dialing 719-457-0820, passcode: 5643215.
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 a 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.
All amounts, other than for share and per share
amounts, in thousands of U.S. dollars
Three
Months Ended June 30,
2007
2006
GAAP Net Income $4,265
2,536
Addition:
Depreciation and amortization 1084
87
Non-cash employee compensation 801
-
Redemption accretion on convertible notes 3,810
-
Non-GAAP Net Income $9,960
2,623
GAAP DILUTED EPS 0.11
0.10
Addition:
Depreciation and amortization 0.03
0.00
Non-cash employee compensation 0.02
-
Redemption accretion on convertible notes 0.10
-
Adjusted EPS 0.26
0.10
Share used in computing new income
per share (diluted) 38,831,023
24,621,287
Safe 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,
2006, 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 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.
(Financial Tables to Follow)
CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2007 AND
DECEMBER 31, 2006
ASSETS
June
30, December 31,
2007 2006
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents
$91,784 $30,980
Accounts receivable, net
37,466 26,754
Related party receivables
559 440
Inventories, net
38,982 19,721
Prepayments & deposits
6,136 3,533
Advances to suppliers
4,950 2,889
Other receivables
3,595 1,697
Deferred tax assets - current portion
38 41
Total current assets
183,510 86,055
Deposits for acquisition of subsidiaries
and properties
20,023 -
Property, plant and equipment, net
15,821 8,339
Land use rights, net
2,507 1,152
Intangible assets
28,996 9,997
Investment, at cost
13 12
Goodwill
43,512 8,426
Deferred financing cost
167 -
Deferred tax assets - non-current portion
473 462
TOTAL ASSETS
$295,022 $114,443
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - short term
$10,189 $2,272
Accounts payable
12,727 4,000
Accrued expenses
3,459 749
Advances from customers
2,223 5,432
Taxes payable
2,838 1,660
Payable for acquisition of business
18,468 7,500
Deferred income
826 831
Due to a director
- 76
Total current liabilities
50,730 22,520
LONG-TERM LIABILITIES
Notes payable - long term
906 2,010
Convertible notes payable
114,975 -
Total liabilities
166,611 24,530
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
144 94
SHAREHOLDERS' EQUITY
Common stock, $0.0001 par value;
100,000,000 shares authorized
37,771,488 (June 30, 2007) and
31,824,938 (December 31, 2006) shares
issued and outstanding
4 3
Additional paid-in capital
72,407 45,320
Retained earnings
50,281 41,483
Statutory reserves
804 804
Accumulated other comprehensive income
4,771 2,209
Total shareholders' equity
128,267 89,819
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$295,022 $114,443
CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30,
2007 AND 2006
Six Months Ended June 30 Three
Months Ended June 30
2007 2006
2007 2006
(Unaudited) (Unaudited)
(Unaudited) (Unaudited)
Revenues $90,576 $22,609
$52,125 $8,015
Cost of goods sold 65,565 15,175
37,232 4,978
Gross profit 25,011 7,434
14,893 3,037
Selling and marketing 1,458 293
855 171
General and administrative 5,559 673
3,308 378
(including non-cash
employee compensation
for the six months ended
and three months ended
June 30, 2007 and 2006 of
$1,066, $801, $0 and $0,
respectively)
Depreciation and
amortization 1,890 189
1,084 87
Income from operations 16,104 6,279
9,646 2,401
Rental income received
from related party 256 246
129 123
Interest income 225 -
143 -
Interest expense (5,424) -
(4,105) -
Other income, net 718 454
226 334
Income before income
taxes and minority
interest 11,879 6,979
6,039 2,858
Minority interest in
income of consolidated
subsidiaries 2 -
(7) -
Income taxes (3,083) (943)
(1,767) (322)
Net income 8,798 6,036
4,265 2,536
Foreign currency
translation gain 2,562 217
1,767 597
Comprehensive income $11,360 6,253
6,032 3,133
Net income per share
Basic $0.26 0.26
0.12 0.10
Diluted $0.24 0.26
0.11 0.10
Weighted average
number of shares
outstanding
Basic 34,429,780 23,046,766
35,770,742 24,436,755
Diluted 36,492,123 23,139,542
38,831,023 24,621,287
CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND
2006
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
(Unaudited) (Unaudited)
Net income
$8,798 $6,036
Adjustments to reconcile net income to
net cash (used in) provided by operating
activities:
Depreciation and amortization
1,890 189
Amortization of consultancy services
60 48
Amortization of deferred financing cost
9 0
Non-cash employee compensation
1,066 0
Redemption accretion on convertible notes
4,975 0
Deferred taxes
8 (643)
Minority interest
(2) 0
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable
(4,217) (3,556)
Related party receivables
(109) 2,891
Inventories
(7,602) (3,526)
Prepayments & deposits
(2,549) 0
Advances to suppliers
(1,176) (3,663)
Other receivables
(658) (1,736)
Deferred expenses
0 (12,150)
(Decrease) increase in:
Accounts payable and accrued expenses
(838) (720)
Advances from customers
(4,310) 0
Tax payable
856 (210)
Deferred income
16 16,959
Net cash (used in) operating activities
(3,783) (81)
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to plant and equipment
(1,528) (1)
Additions to intangible assets
(15) 0
Additions to land use rights
(565) 0
Deposit paid for acquisition of subsidiaries
(14,657) 0
Deposit paid for acquisition of properties
(5,366) 0
Net cash outflow for acquisition of subsidiaries
(30,275) 0
(including net of cash acquired from subsidiaries
for the six months ended June 30, 2007
and 2006 of $3,859 and nil)
Net cash (used in) provided by investing activities
(52,406) (1)
CASH FLOWS FROM FINANCING ACTIVITIES
Due to a director
(74) 1
Issuance of common stock, net of issuing expenses
2,318 7,359
New borrowings, net of issuing cost
116,291 0
Repayment of borrowings
(2,055) 0
Net cash provided by financing activities
116,480 7,360
NET INCREASE IN CASH AND CASH EQUIVALENTS
60,291 7,278
Effect of exchange rate changes on cash
513 63
Cash and cash equivalents, at beginning of period
30,980 2,277
CASH AND CASH EQUIVALENTS, END OF YEAR
$91,784 $9,618
For more information, please contact:
Terence Yap, Chief Financial Officer,
China Security & Surveillance Technology, Inc.
Tel: +1-646-713-4888
Email: terence.yap@csst.com;
Investors,
Bill Zima & Ashley Ammon MacFarlane
Tel: +1-203-682-8200
PR
Post your Comment
広告
ブログ内検索
アーカイブ
カウンター