Country Style Cooking Restaurant Chain Reports Third Quarter 2010 Financial Results
Mr. Roy Rong, chief financial officer of Country Style Cooking, added, “As demonstrated by our solid financial performance this quarter, we are very excited about the large growth opportunities ahead of us. With our solid cash on hand and growing operating cash flows, we are confident that we have enough capital to execute our expansion plans. We will continue to open new restaurants in our existing markets, while expanding our footprint across China. For the fourth quarter of 2010, we are on track to open more than 16 new restaurants by year-end, and we anticipate mid-to-high single digit comparable restaurant sales growth.”
Third Quarter 2010 Financial Performance
Revenues in the third quarter 2010 increased 46.9% to RMB209.2 million ($31.3 million) from RMB142.4 million in the same period of 2009. The revenue growth was driven by the increase of the number of restaurants, as well the comparable restaurant sales growth. During the quarter, the Company opened 13 new restaurants, bringing the total restaurant count to 114.
Costs of food and paper increased 46.1% to RMB97.3 million ($14.5 million) in the third quarter of 2010 from RMB66.6 million in the same quarter of 2009, primarily as a result of the expansion of the restaurant chain. As a percentage of the revenues, cost of food and paper decreased to 46.5% in the third quarter of 2010 from 46.8% in the third quarter of 2009.Restaurant wages and related expenses increased 47.5% to RMB32.7 million ($4.9 million) in the third quarter of 2010 from RMB22.2 million in the same quarter of 2009, primarily as a result of the increase in headcount due to the additional restaurant opened. As a percentage of the revenues, restaurant wages and related expenses remained relatively stable at 15.6% in the third quarter of 2010 and 2009. Restaurant rent expenses increased 65.7% to RMB16.9 million ($2.5 million) in the third quarter of 2010 from RMB10.2 million in the same quarter of 2009, primarily due to the expansion of the restaurant network. As a percentage of the revenues, restaurant rental expenses increased to 8.1% in the third quarter of 2010 from 7.2% in the third quarter of 2009. Restaurant utility expenses increased 51.5% to RMB13.7 million ($2.0 million) in the third quarter of 2010 from RMB9.0 million in the same quarter of 2009, mainly due to the increase in the number of restaurants. As a percentage of revenues, restaurant utility expenses increased to 6.6% in the third quarter of 2010 from 6.4% in the third quarter of 2009. Pre-opening expenses are expenses incurred prior to restaurant opening. Pre-opening expenses were RMB1.1 million ($0.2 million) in the third quarter of 2010. Management started to track these expenses during the third quarter of 2010, prior to which these expenses were recorded in other restaurant operating expenses. Other restaurant operating expenses were RMB7.8 million ($1.2 million) in the third quarter of 2010. As a percentage of the revenues, other restaurant operating expenses were 3.7% in the third quarter of 2010. Selling, general and administrative (SG&A) expenses increased 186.9% to RMB9.1 million ($1.4 million) in the third quarter of 2010 compared to RMB3.2 million in the same period of 2009, reflecting an increase in administrative staff costs, professional fees, as well as share-based compensation expenses. As a percentage of revenues, SG&A expenses increased to 4.3% in the third quarter 2010 from 2.2% in the same quarter of 2009. Depreciation expense for the third quarter 2010 amounted to RMB5.8 million ($0.9 million), representing an increase of 96.6% as compared to RMB3.0 million in the same quarter of 2009, primarily attributable to the increase in the total fixed assets as a result of the increase in the number of restaurants. As a percentage of revenues, depreciation expense increased to 2.8% in the third quarter 2010 from 2.1% in the same quarter of 2009. Income from operation for the third quarter 2010 increased to RMB24.7 million ($3.7 million) from RMB20.5 million in the same period in 2009. Operating margin in the third quarter of 2010 was 11.8%, compared to 14.4% in the same quarter of 2009. The decrease of the operating margin was mainly attributed to the increase in restaurant rent expense as well as the SG&A expenses discussed above. Income tax expenses in the third quarter of 2010 were RMB5.4 million ($0.8 million), representing an effective tax rate of 20.4%, increasing from 18.8% in the same period of 2009. Net income was RMB21.0 million ($3.1 million), an increase of 24.2% from RMB16.9 million in the comparable period of 2009. Non-GAAP net income, which excludes share-based compensation expenses, increased 34.9% to RMB22.8 million ($3.4 million) in the third quarter of 2010, from RMB16.9 million in the prior year’s third quarter. Diluted earnings per ADS increased to RMB1.00 ($0.15) in the third quarter of 2010 from RMB0.84 in the third quarter of 2009. Non-GAAP diluted earnings per ADS, which excludes share-based compensation expenses, increased to RMB1.09 ($0.16) in the third quarter of 2010 from RMB0.84 in the third quarter of 2009. The Company had approximately 20.9 million weighted average diluted ADSs outstanding during the quarter ended September 30, 2010. As of September 30, 2010, the Company had cash and cash equivalents of RMB61.8 million ($9.2 million), compared to RMB70.7 million as of December 31, 2009. Net cash provided by operating activities was RMB77.4 million ($11.6 million) in the nine months ended September 30, 2010, up 57.5% from RMB49.1 million in the nine months ended September 30, 2009. Initial Public Offering On September 28, 2010, Country Style Cooking’s ADSs began trading on the New York Stock Exchange under the ticker symbol “CCSC.” With over-allotment option fully exercised, the Company issued 5,750,000 ADSs representing 23,000,000 ordinary shares at a price of $16.50 per ADS and received a total offering gross proceeds of US$94.9 million.
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