Country Style Cooking Restaurant Chain Reports Unaudited Third Quarter 2014 Financial Results

CHONGQING, China, Nov. 13, 2014 /PRNewswire/ -- Country Style Cooking Restaurant Chain Co., Ltd. (NYSE: CCSC) ("Country Style Cooking" "CSC" or the "Company"), a fast-growing quick service restaurant chain in China, today announced its unaudited financial results for the third quarter of 2014.

Third Quarter 2014 Financial Highlights

• Revenues in the third quarter of 2014 were RMB409.1 million ($66.6 million), an increase of 4.7% from RMB390.6 million in the same quarter of 2013.
• Comparable restaurant sales decreased by 8.6% from the same quarter of 2013. There were 246 restaurants in the comparison.
• Income from operations decreased 33.9% to RMB19.3 million ($3.2 million) from RMB29.3 million in the same quarter of 2013.
• Adjusted EBITDA[1] was RMB45.8 million ($7.5 million) in the third quarter of 2014, a decrease of 13.4% from RMB52.9 million in the same quarter of 2013.
• Net income for the third quarter of 2014 was RMB18.6 million ($3.0 million), as compared to RMB27.0 million in the same quarter of 2013. Adjusted net income (non-GAAP) was RMB22.7 million ($3.7 million), as compared to RMB31.1 million in the same quarter of 2013.
• Diluted net income per American depositary share ("ADS") was RMB0.69 ($0.11). Adjusted diluted net income per ADS (non-GAAP) was RMB0.84 ($0.14). Each ADS represents four ordinary shares of the Company.
• Total number of restaurants increased by a net total of 15 in the third quarter of 2014 to 332 restaurants as of September 30, 2014, up from 276 restaurants as of September 30, 2013. Among the total 332 restaurants, 72 are "Mr. Rice" branded restaurants.

Ms. Hong Li, Chairman and Chief Executive Officer of Country Style Cooking, commented, "Our third quarter 2014 financial performance showed modest top line growth from our record-high third quarter 2013, primarily supported by our expanding restaurant network. By the end of the reporting quarter, we managed a total of 332 restaurants covering 30 cities in six provinces. Mr. Rice continued to drive incremental growth and network expansion. During the third quarter, we experienced a challenging combination of weaker revenue generation and cost inflation while keeping our prices relatively stable. However, we implemented effective control of selling, general and administrative expenses and improved our operating profit this quarter compared to the previous quarter."

Third Quarter 2014 Financial Performances

Revenues in the third quarter of 2014 increased by 4.7% to RMB409.1 million ($66.6 million) from RMB390.6 million in the same quarter of 2013. Revenue growth was primarily supported by the Company's expanding restaurant network, partially offset by a decline in comparable restaurant sales compared with the same quarter last year. During the third quarter of 2014, Country Style Cooking added a total of 17 restaurants and closed two restaurants, bringing the total restaurant count to 332 as of September 30, 2014, compared to its total restaurant count of 276 as of September 30, 2013. Restaurants opened in the third quarter included seven "Country Style Cooking" and 10 "Mr. Rice" restaurants. Comparable restaurant sales decreased by 8.6% compared with the same quarter of 2013. There were 246 restaurants in the comparison.

Costs of food and paper increased by 5.2% to RMB184.8 million ($30.1 million) in the third quarter of 2014 from RMB175.7 million in the same quarter of 2013, primarily due to the expansion of the Company's restaurant network. As a percentage of revenues, the cost of food and paper increased slightly to 45.2% in the third quarter of 2014 from 45.0% in the same quarter of 2013.

Restaurant wages and related expenses increased by 17.8% to RMB83.3 million ($13.6 million) in the third quarter of 2014 from RMB70.7 million in the same quarter of 2013. The increase was primarily due to increased total employee wages associated with increased number of employees. Share-based compensation expenses included in restaurant wages and related expenses stood roughly the same at RMB1.1 million ($0.2 million) in the third quarter of 2014. As a percentage of revenues, restaurant wages and related expenses increased to 20.4% in the third quarter of 2014 compared to 18.1% in the same quarter of 2013. 

Restaurant rent expenses increased by 10.0% to RMB37.2 million ($6.1 million) in the third quarter of 2014 from RMB33.8 million in the same quarter of 2013. The increase was primarily due to the expansion of the Company's restaurant network. As a percentage of revenues, restaurant rental expenses increased slightly to 9.1% in the third quarter of 2014 from 8.7% in the third quarter of 2013.

Restaurant utility expenses increased by 6.3% to RMB24.9 million ($4.1 million) in the third quarter of 2014 from RMB23.4 million in the same quarter of 2013. As a percentage of revenues, restaurant utility expenses stood at 6.1%.

Other restaurant operating expenses increased by 2.9% to RMB14.7 million ($2.4 million) in the third quarter of 2014 from RMB14.3 million in the same quarter of 2013. As a percentage of revenues, other restaurant operating expenses stood at 3.6%.

Restaurant-level operating margin was 15.7% in the third quarter of 2014, a decrease of 290 basis points over the same quarter of 2013. The decrease in restaurant-level operating margin was primarily due to increased labor costs and raw material costs.

Selling, general and administrative (SG&A) expenses decreased by 12.0% to RMB19.5 million ($3.2 million) in the third quarter of 2014 from RMB22.2 million in the same quarter of 2013, mainly due to effective cost control. Share-based compensation expenses included in SG&A stood at RMB3.0 million ($0.5 million) in the third quarter of 2014. As a percentage of revenues, SG&A expenses were 4.8% in the third quarter of 2014, down from 5.7% in the third quarter of 2013.

Pre-opening expense for the third quarter of 2014 was RMB2.9 million ($0.5 million), as compared to RMB1.7 million in the same quarter of 2013, primarily because of more new store openings compared to the third quarter of 2013. As a percentage of revenues, pre-opening expense increased to 0.7% in the third quarter of 2014 from 0.4% in the same quarter of 2013.

Depreciation expense for the third quarter of 2014 was RMB20.1 million ($3.3 million), representing an increase of 13.0% as compared to RMB17.8 million in the same quarter of 2013, primarily because of the increase in total fixed assets as a result of restaurant network expansion. As a percentage of revenues, depreciation expense was 4.9% in the third quarter of 2014, compared to 4.6% in the same quarter of 2013.

Property and equipment impairment charges were RMB2.2 million ($0.4 million) in the third quarter of 2014, as compared to RMB1.7 million in the same quarter of 2013, representing costs related to asset impairment of 5 underperforming restaurants.

Income from operations for the third quarter of 2014 was RMB19.3 million ($3.2 million), representing a decrease of 33.9% from RMB29.3 million in the same quarter of 2013.

Interest income for the third quarter of 2014 was RMB6.8 million ($1.1 million), representing a decrease of 14.4% as compared to RMB7.9 million in the same quarter of 2013.

Foreign currency exchange loss for the third quarter of 2014 was RMB24,000 ($4,000), as compared to a loss of RMB1.0 million in the same quarter of 2013.

Other income for the third quarter of 2014 was RMB71,000 ($12,000), as compared to a loss of RMB98,000 in the same quarter of 2013.

Income before income taxes for the third quarter of 2014 was RMB26.1 million ($4.3 million), as compared to RMB36.1 million in the same quarter of 2013.

Income tax expense[2] in the third quarter of 2014 was RMB7.6 million ($1.2 million), compared to RMB9.1 million in the same quarter of 2013.

Net income was RMB18.6 million ($3.0 million), as compared to RMB27.0 million in the third quarter of 2014. Adjusted net income (non-GAAP), which excludes share-based compensation expenses, was RMB22.7 million ($3.7 million) in the third quarter of 2014, compared to RMB31.1 million in the third quarter of 2013.

Diluted net income per ADS in the third quarter of 2014 was RMB0.69 ($0.11), compared to RMB1.02 in the third quarter of 2013. Adjusted diluted net income per ADS (non-GAAP), which excludes share-based compensation expenses, was RMB0.84 ($0.14) in the third quarter of 2014, compared to RMB1.17 in the third quarter of 2013. The Company had approximately 27.0 million diluted weighted average ADSs outstanding during the quarter ended September 30, 2014.

EBITDA (non-GAAP), defined as net income before interest, income tax expense/(benefit), depreciation and amortization, was RMB39.5 million ($6.4 million) in the third quarter of 2014, compared to RMB46.0 million from the same quarter of 2013. Adjusted EBITDA (non-GAAP), defined as EBITDA excluding foreign exchange loss, other income/(loss), property and equipment impairment charges and share-based compensation expenses, was RMB45.8 million ($7.5 million) in the third quarter of 2014, compared to RMB52.9 million in the same quarter of 2013.

As of September 30, 2014, the Company had cash, cash equivalents and short-term investments of RMB614.3 million ($100.1 million), compared to RMB581.9 million as of December 31, 2013.

Net cash provided by operating activities was RMB129.0 million ($21.0 million) for the nine months ended September 30, 2014, down from RMB131.2 million in the same period of 2013.

Departure of Chief Financial Officer

The Company today announced that its Chief Financial Officer, Mr. Adam J. Zhao, is resigning from his position at the Company due to personal reasons, effective November 30, 2014.  The Company's board of directors has begun the search for a qualified successor to Mr. Zhao to fill the position.

Mr. Zhao joined the Company in February 2012 and has made significant contributions to the Company's growth and development, including enhancing the Company's financial systems and internal controls.

Ms. Hong Li, Chairman and Chief Executive Officer of Country Style Cooking, said, "I'd like to thank Adam for his significant contributions to the Company.  We wish him the best with his future endeavors."

"It has been a great experience working with Country Style Cooking and its management team," commented Mr. Zhao, who added, "I am leaving with well wishes for my colleagues and the future development of the company."

The Company noted that there were no disagreements between Mr. Zhao and CSC's Board of Directors or management and that his departure is not related to the Company's operations, policies, practices or any issues regarding the integrity of CSC's financial statements or accounting policies and practices.

Financial Outlook

For the fourth quarter of 2014, the Company currently estimates that its revenues will be between RMB355 million ($57.8 million) and RMB375 million ($61.1 million), representing a year-over-year growth of between approximately 5.5% and 11.5%.

For the full year of 2014, the Company expects its revenues will be between RMB1,456 million ($237.2 million) to RMB1,476 million ($240.5 million), representing year-over-year growth of between approximately 7.0% and 8.5%.

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

Definitions

The following definitions apply to these terms used throughout this release:

Comparable restaurants are defined as restaurants that were open throughout the periods under comparison. A restaurant is included in the comparison once it has been in operation for 12 full months before the start of the quarter. Comparable restaurants exclude (i) restaurants whose operational area has increased or decreased by more than 5% during the periods under comparison and (ii) restaurants that were closed for more than 5% of total days in any period under comparison.

Restaurant level operating margin represents total revenue less restaurant operating costs (including food and paper, restaurant wages and related expenses, restaurant rent expenses, restaurant utilities expenses and other restaurant operating expenses), expressed as a percentage of total revenues.

Exchange Rate

This announcement contains translations of certain Renminbi amounts into US dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to US dollars in this announcement were made at the noon buying rate of RMB6.1380 to US$1.00 on September 30, 2014 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York.

Conference Call

The Company will host a conference call at 7:30 am, Eastern Time on November 13, 2014, which is 8:30 pm, Beijing Time on November 13, 2014, to discuss third quarter 2014 results and answer questions from investors.  Listeners may access the call by dialing:

A telephone replay will be available one hour after the conclusion of the conference call through 9:30 am, Eastern Time on November 21, 2014. The dial-in details are:

A live and archived webcast of the conference call will be available at http://ir.csc100.com

About Country Style Cooking Restaurant Chain Co., Ltd.

Country Style Cooking Restaurant Chain Co., Ltd. (NYSE: CCSC) ("Country Style Cooking") is a fast-growing quick service restaurant chain in China, offering delicious, everyday Chinese food to customers who desire fast and affordable quality meals. Country Style Cooking directly operates all of its restaurants under brands of CSC and Mr. Rice and is the largest quick service restaurant chain in Chongqing municipality, home to Sichuan cuisine, one of the best-known Chinese regional cuisines. Additional information about Country Style Cooking can be found at http://ir.csc100.com.

Contact:

Country Style Cooking Restaurant Chain Co., Ltd.
Adam Zhao
Chief Financial Officer
Phone: +86-23-8866-8866
Email: [email protected]

ICR Inc.
Bill Zima
Phone: +86-10-6583-7511 or +1-646-328-2520
E-mail: [email protected]

Non-GAAP Disclosure

To supplement the unaudited consolidated financial information presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company uses the following measures defined as non-GAAP measures under Regulation G and Item 10(e) of Regulation S-K of SEC: adjusted net income, adjusted diluted earnings per ADS, EBITDA and adjusted EBITDA. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. We define adjusted net income as net income excluding share-based compensation expenses. We define adjusted diluted earnings per ADS as diluted earnings per ADS excluding share-based compensation expenses. We define EBITDA as earnings before interest, income tax expense, depreciation and amortization. We define adjusted EBITDA as EBITDA excluding foreign exchange gain or loss, other income or expense, property and equipment impairment charges, goodwill impairment and share-based compensation expenses. For more information on these non-GAAP financial measures, please see the tables captioned "Supplementary Metrics-Reconciliations of GAAP to non-GAAP Financial Measures" set forth at the end of this release.

The Company believes that in conjunction with GAAP financial measures, these non-GAAP financial measures provide meaningful supplemental information regarding its operating performance and liquidity. 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 these information to investors. Management also believes that these non-GAAP financial measures facilitate comparisons to the Company's historical performance. 

One of the limitations of using adjusted net income, adjusted diluted earnings per ADS, EBITDA and adjusted EBITDA is that they do not include all items that impact the Company's net income for the relevant periods. They exclude certain items including share-based compensation charges that have been and will continue to be for the foreseeable future a significant recurring expense in our business. In addition, the Company's EBITDA and adjusted EBITDA may not be comparable to EBITDA, adjusted EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA and adjusted EBITDA in the same manner as the Company does. 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 2014 and the full year 2014, 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. 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. 

SOURCE Country Style Cooking Restaurant Chain Co.,Ltd.

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