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      Universal Travel Group Announces Third Quarter 2011 Results


      News provided by

      Universal Travel Group

      Nov 15, 2011, 07:00 ET

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      SHENZHEN, China, Nov. 15, 2011 /PRNewswire-Asia-FirstCall/ -- Universal Travel Group (NYSE: UTA) ("Universal Travel Group" or the "Company"), a leading travel services provider in China offering package tours, air ticketing, and hotel reservation services online and via customer service representatives, today announced financial results for the three and nine months ended September 30, 2011.

      Third Quarter 2011 Highlights

      • Revenues decreased 8.1% year-over-year to $41.8 million.
      • Gross profit decreased 12.0% year-over-year to $10.1 million.
      • Gross margin was 24.2%, compared to 25.2% in the prior year same period.
      • Income from operations decreased 17.3% to $7.9 million.
      • Net income was $5.9 million or $0.30 per basic and diluted share, compared to $7.3 million or $0.37 per basic share and $0.36 per diluted share in the prior year same period, a year over year decrease of 18.9%.
      • Foreign currency translation adjustments were $1.3 million, compared to $0.9 million in the prior year same period, a year over year increase of 43.1%.
      • Total comprehensive income, including foreign currency translation adjustments, was $7.2 million, compared to $8.2 million in the prior year same period, a year over year decrease of 12.1%.

      Business in third quarter, compared to third quarter 2010 was impacted by a few factors. First, revenues in the third quarter 2010 were elevated, boosted by the Shanghai World Expo which fueled substantial growth in tourism. With no similar event this year, tourism demand was softer this quarter. Second, the Company shifted its hotel reservation business strategy to concentrate on direct sales and exit all hotel room wholesale operations as the former is substantially more profitable. Lastly, the Company tightened its credit risk management and terminated its business relationships with customers with deteriorating credit quality in both air ticketing and packaged tours. The Company is confident that these measures will deliver healthier and more sustainable growth in the future as the prospects for China's tourism industry remain very strong.

      Third Quarter 2011 Financial Results

      Revenues for the three months ended September 30, 2011, were $41.8 million compared to $45.5 million for the same period in 2010, a decrease of 8.1%. This slight decrease was due to a higher than normal sales for the same period in 2010 contributed by large exhibitions in the PRC, including the Shanghai World Expo.  

      Revenues from the air-ticketing segment were $5.5 million, compared to $5.7 million for the same period last year, a decrease of 4.5%. This slight decrease was due to lower air-ticket sales volume in the third quarter of 2011 than in the same quarter last year, when the Shanghai World Expo contributed significantly to higher air-ticket sales.

      Revenues from the hotel reservation segment were $2.9 million, compared to $4.4 million for the same period last year, a decrease of 33.2%. The decrease is associated with the transition of the Company's strategy in this segment. The Company ceased all hotel room wholesale operations, which were previously conducted through the China Booking Association platform. Instead, the Company focused its strategy on the more profitable direct sales of packaged hotel products. As a result, revenue fell during this transition period.

      Revenues from the packaged tour segment were $33.4 million compared to $35.4 million for the same period in 2010, a decrease of 5.6% from the same period last year. The slight decrease was a result of the Company's efforts to reduce its business with customers with bad credit in order to control the amount of uncollectable accounts receivables and reduce the balance of bad debt allowance.

      Gross profit was $10.1 million compared to $11.5 million for the same period last year, a decrease of 12.0%. This decrease was a result of decreased revenues in the third quarter this year than the same period last year when Company had higher revenues during the Shanghai World Expo. Gross profit margin was 24.2% compared to 25.2% for the same period last year. The stability in gross margin was mainly due to integration among segments and the Company's strategy to focus more on online development.

      Selling, general and administrative ("SG&A") expenses totaled $2.3 million compared to $2.0 million for the same period last year, an increase of 14.7%. The SG&A expenses were 5.6% of revenue compared to 4.5% for the same period last year. This increase was mainly due to extra professional fees and higher stock based compensation expenses related to options granted under the 2010 incentive stock plan issued in December 2010.

      Income from operations was $7.9 million compared to $9.5 million in the same period last year, a decrease of 17.3%.      

      Net income from continuing operations was $5.9 million, or $0.30 per basic and diluted share, compared to $7.3 million, or $0.37 per basic share and $0.36 per diluted share, for the same period last year, a decrease of 18.9%. The decrease in net income was mostly associated with decreased sales in the third quarter this year compared to the same quarter last year, which benefited from the Shanghai World Expo.

      Nine Months Results

      Revenues for the nine months ended September 30, 2011, were $108.5 million compared to $97.8 million for the same period in 2010, an increase of 10.9%. This increase was driven by business expansion, especially in the packaged tour segment, along with the strong demand for travel as a result of the recovery of the PRC economy, and the continuing effect of the PRC government's stimulus package, benefiting the whole industry.

      Revenues from the air-ticketing segment were $15.8 million, compared to $14.4 million for the same period last year, an increase of 9.1%. This increase was due to the increase in air-ticket sales volume and higher air-ticket prices. The Company attributed the higher air ticket sales to the booming tourism, and general inflation in the PRC economy, as well as reduced competition among airlines.

      Revenues from the hotel reservation segment were $9.3 million, compared to $10.9 million for the same period prior year, a decrease of 14.1%. The decrease was due to the Company's shift in strategy to focus on more profitable direct sales of packaged hotel products, resulting in a decrease in revenue but a slight increase in gross profit because of substantially reduced costs of services during this transition period.

      Revenues from the packaged tour segment were $83.4 million, compared to $72.5 million for the same quarter last year, an increase of 15.0%. This increase was associated with the Company's expansion in this segment. Subsidiaries acquired in 2010 in this segment contributed approximately $32.0 million for the nine months ended September 30, 2011, compared to $18.2 million for the same period prior year, when the revenues of the newly acquired subsidiaries before the acquisition were not included in the revenues for the nine months ended September 30, 2010.

      Gross profit was $27.7 million, compared to $26.5 million for the same period last year, an increase of 4.8%. Gross profit margin was 25.6%, compared to 27.1% for the same period last year.  

      Selling, general and administrative ("SG&A") expenses totaled $7.9 million, compared to $5.7 million for the same period last year, an increase of 38.7%. The SG&A expenses were 7.3% of revenue compared to 5.8% for the same period last year.  

      Income from operations was $19.9 million, compared to $20.8 million in the same period last year, a decrease of 4.5%.      

      Net income from continuing operations was $14.8 million, or $0.74 per basic share and $0.73 per diluted share, compared to $16.6 million, or $0.92 per basic share and $0.88 per diluted share, for the same period last year. Excluding the effect of the non-cash gain on change in fair value of derivative liabilities of $0.5 million, the non-cash charge related to stock-based compensation of $2.4 million and the $0.7 million one-time, non-cash gain on disposal of fixed assets, the Company's adjusted net income from continuing operations was $16.6 million, or $0.84 per basic share and $0.82 per diluted share, compared to $16.2 million, or $0.90 per basic share and $0.86 per diluted share, in the first nine months of 2010, a year-over-year growth of 2.5%.

      Financial Condition

      Cash and cash equivalents were $53.0 million as of September 30, 2011, compared to $39.6 million as of December 31, 2010. Current assets and current liabilities as of September 30, 2011, were $132.9 million and $11.7 million, respectively, yielding working capital of $121.3 million. The Company has no long-term debt.  For the nine months ended September 30, 2011, net cash provided by operating activities was $20.6 million.

      Use of Adjusted Financial Measures

      GAAP results for the nine months ended September 30, 2011 and 2010 include non-cash gains and losses related to the change in fair value of derivative liabilities, non-cash charges related to stock-based compensation and a one-time non-cash gain associated with the disposal of fixed assets.  To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided adjusted financial information excluding the impact of these items in this release. It is a departure of U.S. GAAP; however, the Company's management believes that this adjusted measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies.

      About Universal Travel Group

      Universal Travel Group Inc. (NYSE: UTA) is a leading China-based travel services provider, focusing on the domestic tourism market for leisure and corporate travel and offering packaged tours, air ticketing, and hotel reservation services. The Company targets geographic expansion in underpenetrated travel markets in central and western China; and it has established a second operation base in Chongqing. With the Chinese disposal income continuing to rise driving demand for domestic leisure services, the Company continues to benefit and dominate packaged tour businesses. The Company operates multi-channels sales with 24 hour call centers, online website, owned and franchised sales offices and various wholesale channels. For more information, please visit Universal Travel Group's website at us.cnutg.com

      Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

      This press release contains certain statements that may include "forward-looking statements" within the meaning of federal securities laws. All statements, other than statements of historical facts, included herein are "forward-looking statements". Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the Company's ability to successfully expand its market presence and those discussed in the Company's periodic reports that are filed with and available from the Securities and Exchange Commission. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

      For investor and media inquiries, please contact:

      Mr. Jing XIE, Secretary of Board & Interim Chief Financial Officer
      Universal Travel Group Inc.
      Tel: 86-755-86319549,
      Fax: 86-755-86319348,
      [email protected]
      Website: us.cnutg.com

      Christensen
      Kimberly Minarovich
      Tel: +1 212 618 1978
      [email protected]

      Jenny Wu
      Tel: +852 2232 3907
      [email protected]


      UNIVERSAL TRAVEL GROUP

      CONDENSED CONSOLIDATED BALANCE SHEETS

      SEPTEMBER 30, 2011 AND DECEMBER 31, 2010










      September 30,


      December 31,



      2011


      2010



      Unaudited




      ASSETS







      Cash and cash equivalents


      $

      53,007,049


      $

      39,618,988

      Restricted Cash



      1,186,507



      307,027

      Short term investments



      31,306,253



      19,681,308

      Accounts receivable, net



      36,052,088



      38,658,011

      Other receivables and deposits, net



      957,639



      780,400

      Trade deposit



      8,513,958



      8,173,426

      Prepayments



      1,924,736



      1,216,857

      Note receivable



      -



      2,314,259

      Total Current Assets



      132,948,230



      110,750,276








      Property & equipment, net



      1,551,522



      1,692,595

      Intangible assets, net



      2,582,847



      3,110,882

      Goodwill



      24,508,909



      24,508,909

      Total Noncurrent Assets



      28,643,278



      29,312,386

      Total Assets


      $

      161,591,508


      $

      140,062,662








      LIABILITIES AND STOCKHOLDERS' EQUITY







      Current Liabilities







      Accounts payable and accrued expenses


      $

      6,590,661


      $

      5,045,674

      Customer deposits



      2,654,645



      2,203,487

      Income tax payable



      2,413,347



      3,189,965

      Total Current Liabilities



      11,658,653



      10,439,126








      Warrants - derivative liability



      318,011



      810,929

      Deferred tax liability



      477,397



      477,397

      Long-term income tax payable



      30,804



      30,804

      Total Liabilities



      12,484,865



      11,758,256








      Stockholders' Equity







      Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively



      -




      Common stock, $.001 par value, 70,000,000 shares authorized, 19,898,235 issued and outstanding at September 30, 2011 and December 31, 2010, respectively



      19,898



      19,898

      Additional paid in capital



      66,553,890



      64,171,555

      Statutory reserve



      1,062,741



      1,062,741

      Retained earnings



      74,422,024



      59,624,186

      Accumulated other comprehensive income



      7,048,090



      3,426,026

      Total Stockholders' Equity



      149,106,643



      128,304,406

      Total Liabilities and Stockholders' Equity


      $

      161,591,508


      $

      140,062,662





      UNIVERSAL TRAVEL GROUP

      UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
















      For the nine months ended


      For the three months ended



      September 30,


      September 30,



      2011


      2010


      2011


      2010






      Restated





      Restated

      Revenues













      Air ticketing, net


      $

      15,759,318


      $

      14,439,187


      $

      5,478,545


      $

      5,736,699

      Hotel reservation, net



      9,330,719



      10,862,393



      2,940,988



      4,400,270

      Packaged tours, gross



      83,374,997



      72,507,188



      33,388,230



      35,379,897




      108,465,034



      97,808,768



      41,807,763



      45,516,866

      Cost of services













      Air ticketing, net



      5,973,132



      4,913,895



      2,139,745



      2,080,605

      Hotel reservation, net



      1,714,886



      3,533,764



      177,190



      1,554,191

      Packaged tours, gross



      73,115,397



      62,902,349



      29,394,177



      30,410,425




      80,744,015



      71,350,008



      31,711,112



      34,045,221














      Gross profit



      27,721,019



      26,458,760



      10,096,651



      11,471,645














      Selling, general, and administrative expenses



      (7,881,889)



      (5,681,325)



      (2,310,377)



      (2,038,141)

      Gain on disposal of fixed assets



      66,511



      65,853



      66,511



      65,853

      Income from operations



      19,905,641



      20,843,288



      7,852,785



      9,499,357














      Other income (expense)













      Other income (expense)



      (18,040)



      6,900



      (538)



      (17)

      Gain on change of fair value of derivative liabilities



      492,918



      1,253,181



      47,702



      304,177

      Interest income



      537,192



      56,434



      302,371



      17,723

      Total other income



      1,012,070



      1,316,515



      349,535



      321,883














      Income before income taxes



      20,917,711



      22,159,803



      8,202,320



      9,821,240














      Provision for income taxes



      6,119,873



      5,608,744



      2,301,785



      2,547,194

      Net income


      $

      14,797,838


      $

      16,551,059


      $

      5,900,535


      $

      7,274,046














      Comprehensive income













      Net income


      $

      14,797,838


      $

      16,551,059


      $

      5,900,535


      $

      7,274,046

      Foreign currency translation adjustments



      3,622,064



      442,984



      1,283,504



      897,063

      Total comprehensive income


      $

      18,419,902


      $

      16,994,043


      $

      7,184,039


      $

      8,171,109














      Net income per common share













      Basic


      $

      0.74


      $

      0.92


      $

      0.30


      $

      0.37

      Diluted


      $

      0.73


      $

      0.88


      $

      0.30


      $

      0.36














      Weighted average common shares outstanding













      Basic



      19,898,235



      18,020,554



      19,898,235



      19,898,235

      Diluted



      20,214,140



      18,792,520



      19,981,063



      20,373,536





      UNIVERSAL TRAVEL GROUP

      UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

      FOR THE NINE MONTHS ENDED SEPTEMBER 30,










      2011


      2010

      CASH FLOWS FROM OPERATING ACTIVITIES







      Net income


      $

      14,797,838


      $

      16,551,059

      Add:







      Adjustments to reconcile net income to net cash provided by operating activities:







      Depreciation and amortization



      925,383



      1,254,187

      Provision for doubtful accounts



      -



      59,578

      Stock based compensation



      2,382,335



      990,846

      (Gain)/Loss on change in fair value of derivative liabilities



      (492,918)



      (1,253,181)

      (Gain)/Loss on sales of fixed assets



      (66,511)



      (65,853)

      (Increase)/ decrease in assets:







      Restricted cash



      (855,372)



      (73,488)

      Accounts receivable



      3,896,226



      (7,730,724)

      Other receivable



      (147,652)



      924,561

      Due from related parties



      -



      (995,798)

      Advances



      -



      440,115

      Prepayments



      (655,102)



      (792,128)

      Trade deposits



      (53,998)



      2,118,139

      Increase/ (decrease) in current liabilities:







      Accounts payable and accrued expenses



      1,347,551



      3,605,152

      Customer deposits



      368,378



      308,915

      Income tax payable



      (874,444)



      658,821

      Net cash provided by operating activities



      20,571,714



      16,000,201








      CASH FLOWS FROM INVESTING ACTIVITIES







      Purchase of property & equipment



      (208,273)



      (2,779,988)

      Purchase of intangibles



      -



      (51,359)

      Proceeds from sale of fixed assets



      171,108



      5,599,590

      (Increase)/Decrease in short term investments



      (10,768,621)



      -

      (Increase)/Decrease in notes receivable



      2,358,273



      (3,028,571)

      Acquisition deposits



      -



      497,330

      Cash paid for acquisition - net of cash acquired



      -



      (15,782,799)

      Net cash (used in) investing activities



      (8,447,513)



      (15,545,797)








      CASH FLOWS FROM FINANCING ACTIVITIES







      Proceeds of equity financing



      -



      18,768,054

      Net cash provided by financing activities



      -



      18,768,054








      Effect of exchange rate changes on cash and cash equivalents



      1,263,860



      690,945








      Net change in cash and cash equivalents



      13,388,061



      19,913,403

      Cash and cash equivalents, beginning balance



      39,618,988



      36,574,741

      Cash and cash equivalents, ending balance



      53,007,049



      56,488,144








      SUPPLEMENTAL DISCLOSURES:







      Cash paid during the period for:







      Interest payments


      $

      -


      $

      -

      Income taxes


      $

      6,896,491


      $

      4,271,081








      Purchased goodwill


      $

      -


      $

      (14,612,639)

      Purchased intangible assets



      -



      (3,236,376)

      Fair value of assets purchased less cash acquired



      -



      (767,602)

      Acquisition financed with stock issuance



      -



      2,833,818

      Acquisition paid for with cash - net of acquired


      $

      -


      $

      (15,782,799)




      SOURCE Universal Travel Group

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