Country Style Cooking Restaurant Chain Reports Third Quarter 2012 Financial Results

2012-11-13
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  • Healthy revenue growth and net income increase for the third quarter of 2012

    Country Style Cooking Restaurant Chain Co., Ltd. (NYSE: CCSC) ("Country Style Cooking" or the "Company"), a fast-growing quick service restaurant chain in China, announced its unaudited financial results for the third quarter of 2012.

    Third Quarter 2012 Financial Highlights


    • Revenues in the third quarter of 2012 were RMB327.0 million ($52.0 million), an increase of 12.6% from RMB290.3 million in the same quarter of 2011.
    • Comparable restaurant sales decreased by 5.3% from the same quarter of 2011. There were 146 restaurants in the comparison.
    • Restaurant level operating margin was 19.5%, an increase of 110 basis points from the same quarter of 2011.
    • Net income for the third quarter of 2012 was RMB31.9 million ($5.1 million), an increase of 117.4% from RMB14.7 million in the same quarter of 2011. Adjusted net income (non-GAAP), which excludes share-based compensation expenses, was RMB35.6 million ($5.7 million), an increase of 95.2% from RMB18.2 million in the same quarter of 2011.
    • Diluted net income per American depositary share ("ADS") was RMB1.22 ($0.19). Adjusted diluted net income per ADS (non-GAAP), which excludes share-based compensation expenses, was RMB1.36 ($0.22). Each ADS represents four ordinary shares of the Company.
    • Total number of restaurants increased by a net of 21 in the third quarter of 2012 to 238 restaurants as of September 30, 2012, covering 27 cities and up from 186 restaurants as of September 30, 2011.
    Ms. Hong Li, chairman and chief executive officer of Country Style Cooking, commented, "We are pleased to report healthy revenue growth and net income increase for the third quarter of 2012. Our operating margin continued to improve and showed both annual and sequential increases in the third quarter. During the period, we accelerated network expansion and added a net of 21 new restaurants. We expect to achieve our annual restaurant growth targets."

    Ms. Hong Li continued, "Throughout the third quarter, we carried out a trial run of 15 quick service, canteen-style restaurants under the Chinese brand name 'Dami Xiansheng' (which means 'Mr. Rice' in English). We located the Mr. Rice restaurants near large office buildings and in industrial parks in Chongqing and three other markets. The trial results have been encouraging, with customers offering positive remarks about the restaurant's friendly atmosphere and wide range of cuisine options. We believe that the Mr. Rice brand might offer a promising new stream of revenues for the Country Style Cooking restaurant network."

    Mr. Adam Zhao, chief financial officer of Country Style Cooking, added, "I am encouraged by the results of our cost control measures and increased operational profitability during the quarter, especially in today's inflationary environment. During our peak season, we succeeded in building customer traffic in order to create a stronger revenue base going forward. We are happy to have achieved record-high revenue in the third quarter but also want to see greater improvement with same store sales growth. Our efforts to boost same store sales performance include new initiatives covering brand enhancement, mobile-phone apps to facilitate orders and deliveries, and plans for a prepaid card program. "

    Third Quarter 2012 Financial Performances

    Revenues in the third quarter of 2012 increased by 12.6% to RMB327.0 million ($52.0 million) from RMB290.3 million in the same quarter of 2011. Revenue growth was primarily supported by the Company's expanding restaurant network. During the third quarter of 2012, Country Style Cooking added a net of 21 restaurants, bringing the total restaurant count to 238 as of September 30, 2012, compared to its total restaurant count of 186 as of September 30, 2011. Comparable restaurant sales decreased by 5.3% compared with the same quarter of 2011. There were 146 restaurants in the comparison.

    Costs of food and paper increased by 10.8% to RMB144.3 million ($23.0 million) in the third quarter of 2012 from RMB130.2 million in the same quarter of 2011, primarily as a result of restaurant expansion and, to a lesser degree, increased food costs. As a percentage of revenues, cost of food and paper decreased to 44.1% in the third quarter of 2012 from 44.9% in the same quarter of 2011. Since the first quarter of 2012, restaurant staff catering and welfare expenses have been reclassified from food and paper and other restaurant operating expense to the category of restaurant wages and related expenses. Prior period numbers have been reclassified accordingly to conform with the current means of data presentation. For details, please refer to note 1 in the Company's Condensed Consolidated Statements of Income.

    Restaurant wages and related expenses increased by 13.3% to RMB56.9 million ($9.1 million) in the third quarter of 2012 from RMB50.2 million in the same quarter of 2011. The increase was attributable to increased wage levels. As a percentage of revenues, restaurant wages and related expenses increased slightly to 17.4% in the third quarter of 2012 from 17.3% in the same quarter of 2011.

    Restaurant rent expenses increased by 17.9% to RMB30.3 million ($4.8 million) in the third quarter of 2012 from RMB25.7 million in the same quarter of 2011. As with other expense categories, the increase was primarily due to the expansion of the Company's restaurant network. As a percentage of revenues, restaurant rental expenses increased to 9.3% in the third quarter of 2012 from 8.9% in the third quarter of 2011.

    Restaurant utility expenses increased by 4.4% to RMB19.6 million ($3.1 million) in the third quarter of 2012 from RMB18.8 million in the same quarter of 2011. As a percentage of revenues, restaurant utility expenses were 6.0% in the third quarter of 2012, slightly down from 6.5% in the third quarter of 2011.

    Other restaurant operating expenses increased by 3.5% to RMB12.2 million ($1.9 million) in the third quarter of 2012 from RMB11.8 million in the same quarter of 2011. As a percentage of revenues, other restaurant operating expenses decreased slightly to 3.7% in the third quarter of 2012 from 4.0% in the third quarter of 2011.

    Restaurant-level operating margin was 19.5% in the third quarter of 2012, an increase of 110 basis points over the same quarter of 2011. The increase was primarily due to effective cost control measures.

    Selling, general and administrative (SG&A) expenses remained consistent at RMB17.2 million ($2.7 million) in the third quarter of 2012, compared to RMB17.2 million in the same quarter of 2011, reflecting a combination of offsetting factors including expanded restaurant network, increased spending on administrative staff cost and effective cost control measures. Share-based compensation expenses included in SG&A was RMB2.6 million ($0.4 million) in the third quarter of 2012, compared to RMB2.8 million in the third quarter of 2011. As a percentage of revenues, SG&A expenses were 5.3% in the third quarter of 2012, slightly down from 5.9% in the third quarter of 2011.

    Pre-opening expense for the third quarter of 2012 was RMB3.2 million ($0.5 million), representing a decrease of 40.2% as compared to RMB5.3 million in the same quarter of 2011, primarily because of tighter cost controls as well as fewer new restaurants opened in the third quarter of 2012. As a percentage of revenues, pre-opening expense decreased to 1.0% in the third quarter of 2012 from 1.8% in the same quarter of 2011.

    Depreciation expense for the third quarter of 2012 was RMB15.6 million ($2.5 million), representing an increase of 58.2% as compared to RMB9.9 million in the same quarter of 2011, primarily because of the increase in total fixed assets as a result of restaurant network expansion. As a percentage of revenues, depreciation expense increased to 4.8% in the third quarter of 2012 from 3.4% in the same quarter of 2011.

    Impairment charges were RMB4.0 million ($0.6 million) in the third quarter of 2012, representing costs related to asset impairment with eight underperforming restaurants, two of which the Company plans to close.

    Income from operations for the third quarter of 2012 was RMB23.6 million ($3.8 million), representing an increase of 16.0% as compared to RMB20.3 million in the same quarter of 2011.

    Interest income for the third quarter of 2012 was RMB5.0 million ($0.8 million), representing a decrease of 11.0% as compared to RMB5.6 million in the same quarter of 2011.

    Foreign currency exchange gain for the third quarter of 2012 was RMB0.3 million ($44,000), as compared to a loss of RMB4.1 million in the same quarter of 2011.

    Other income for the third quarter of 2012 was RMB12.7 million ($2.0 million) mainly representing government subsidies received, as compared to RMB4.1 million in the same quarter of 2011.

    Income tax expense in the third quarter of 2012 was RMB9.7 million ($1.5 million), representing a decrease of 13.7% as compared to RMB11.2 million in the same quarter of 2011. As previously disclosed in the Company's press release on June 1, 2012, the Company's subsidiary in Chongqing was granted a preferential tax rate of 15% for the years 2011 to 2020. As a result, the Company's estimated effective tax rate saw a significant decrease from the same quarter last year.

    Net income was RMB31.9 million ($5.1 million), representing an increase of 117.4% from RMB14.7 million in the third quarter of 2011. Adjusted net income (non-GAAP), which excludes share-based compensation expenses, was RMB35.6 million ($5.7 million) in the third quarter of 2012, compared to RMB18.2 million in the third quarter of 2011.

    Diluted net income per ADS in the third quarter of 2012 was RMB1.22 ($0.19), compared to RMB0.56 in the third quarter of 2011. Adjusted diluted net income per ADS (non-GAAP), which excludes share-based compensation expenses, was RMB1.36 ($0.22) in the third quarter of 2012, compared to RMB0.68 in the third quarter of 2011. The Company had approximately 26.2 million weighted average diluted ADSs outstanding during the quarter ended September 30, 2012.

    EBITDA (non-GAAP), defined as net income before interest, income tax (benefit)/expense, depreciation and amortization, was RMB52.2 million ($8.3 million) in the third quarter of 2012, compared to RMB30.2 million from the same quarter of 2011. Adjusted EBITDA (non-GAAP), defined as EBITDA excluding foreign exchange gain/loss, other income, impairment charges and share-based compensation expenses, was RMB46.9 million ($7.5 million) in the third quarter of 2012, compared to RMB34.6 million in the same quarter of 2011.

    As of September 30, 2012, the Company had cash, cash equivalents and short-term investments of RMB547.4 million ($87.1 million), compared to RMB517.5 million as of December 31, 2011.

    Net cash provided by operating activities was RMB145.8 million ($23.2 million) for the nine months ended September 30, 2012, up from RMB68.9 million in the same period of 2011.

    Outlook

    For the fourth quarter of 2012, the Company currently estimates that its revenues will be between RMB300 million ($47.7 million) and RMB310 million ($49.3 million), representing year-over-year growth of between approximately 10% and 14%.

    For the full year of 2012, the Company expects revenues in the range of RMB1,192 million ($190 million) to RMB1,202 million ($191 million), representing year-over-year growth of between approximately 17% and 18%.

    These forecasts reflect the Company's current and preliminary view, which are subject to change.

     


    Logos, product and company names mentioned are the property of their respective owners.

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