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Country Style Cooking Restaurant Chain Reports Third Quarter 2010 Financial Results

The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding its operating performance by excluding share-based compensation expenses, which may not be indicative of its operating performance from a cash perspective. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to the Company’s historical performance and liquidity. Management uses both GAAP and non-GAAP information in evaluating and operating the business internally and therefore deems it important to provide all of this information to investors. Management also believes that these non-GAAP financial measures facilitate comparisons to the Company’s historical performance. A limitation of using these non-GAAP measures is that they exclude share-based compensation charge that has been and will continue to be for the foreseeable future a significant recurring expense in our business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the outlook for the fourth quarter of 2010 and quotations from management in this announcement, as well as Country Style Cooking’s strategic and operational plans, contain forward-looking statements. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: uncertainties regarding our ability to open and profitably operate new restaurants and manage our growth effectively and efficiently; risks associated with changing consumer taste and discretionary spending; uncertainties regarding our ability to maintain and enhance the attractiveness of our restaurants and our brand and image; risks related to instances of food-borne illnesses, health epidemics and other outbreaks; uncertainties regarding our ability to respond to competitive pressures; and uncertainties associated with factors typically affecting the consumer food services industry in general. Further information regarding these and other risks is included in the Company’s reports filed with, or furnished to the Securities and Exchange Commission. Country Style Cooking does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of the date of this press release, and Country Style Cooking undertakes no duty to update such information, except as required under applicable law.

 
 

Condensed Consolidated Balance Sheets

(Amounts in thousands, except shares)

(Unaudited)

             
As of December 31, 2009 As of September 30, 2010
RMB RMB US$
ASSETS
Current assets:
Cash and cash equivalents 70,695 61,849 9,244
Due from related parties 9,012 128 19
Inventories 14,929 22,479 3,360
Prepaid rent 3,857 5,092 761
Prepaid expenses and other current assets 6,902 5,957 890
Deferred income taxes-current 518 518 77
Total current assets 105,913 96,023 14,351
Property and equipment, net 95,961 155,212 23,199
Goodwill 6,286 6,286 940
Deferred income taxes—non current 959 959 143
Deposits for leases—non current 5,949 8,653 1,293
Total assets 215,068 267,133 39,926
 
Current liabilities:
Account payable 31,306 34,880 5,213
Deferred revenue 1,257 2,374 355
Due to related parties 11,031 320 48
Accrued Payroll 9,889 17,281 2,583
Income tax payable 7,691 7,359 1,100
Dividend payable 3,946 - -
Deferred rent-current 418 627 94
Prepaid subscription-current - 1,538 230
Accrued offering expenses 1,900 15,705 2,347
Other liabilities 14,755 15,925 2,379
Total current liabilities 82,193 96,009 14,349
Deferred rent—non current 5,108 7,689 1,149
Prepaid subscription—non current - 771 115
Total liabilities 87,301 104,469 15,613
 
Mezzanine Equity:

Series A convertible preferred shares, par value  $0.001, 24,000,000 shares issued and outstanding

96,949 - -
Equity:

Ordinary shares, $0.001 par value, 56,000,000 and 2,000,000,000 authorized, 56,000,000 and 103,032,000 issued and outstanding, respectively

420 736 110
Subscription receivables - (592,037) (88,489)
Additional paid-in capital 5,866 680,755 101,749
Accumulated other comprehensive loss (2,040) (2,076) (310)
Retained earning 26,572 75,286 11,253
Total equity 30,818 162,664 24,313
 
Total liabilities, mezzanine equity and equity 215,068 267,133 39,926
 
 

Condensed Consolidated Statements of Operations

(Amounts in thousands, except shares, per share and per ADS data)

(Unaudited)

             
Three months ended September 30
2009 2010
RMB RMB US$
 
Revenue—restaurant sales 142,427 209,213 31,270
Costs and expenses:
Food and paper 66,592 97,319 14,546

Restaurant wages and related expenses 1

22,170 32,704 4,888
Restaurant rent expense 10,198 16,899 2,526
Restaurant utilities expense 9,049 13,711 2,049
Pre-opening expense 2 - 1,127 168
Other restaurant operating expenses 7,817 7,798 1,166
Selling, general and administrative expenses 1 3,164 9,078 1,357
Depreciation 2,970 5,838 873
Total operating expenses 121,960 184,474 27,573
 
Income from operations 20,467 24,739 3,697
 
Interest income 184 141 21
Foreign exchange loss - 13 2
Other income 156 1,490 223
Income before income taxes 20,807 26,383 3,943
 
Income tax expense (3,908) (5,387) (805)
Net income 16,899 20,996 3,138
 
Basic net income per share 0.21 0.26 0.04
Diluted net income per share 0.21 0.25 0.04
Basic net income per ADS 0.84 1.04 0.16
Diluted net income per ADS 0.84 1.00 0.15
Basic weighted average ordinary shares outstanding 56,000,000 57,533,652 57,533,652
Diluted weighted average ordinary shares outstanding 80,000,000 83,425,655 83,425,655

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