Add
UTVG.OB to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| UTVG.OB > SEC Filings for UTVG.OB > Form 10-Q on 5-Nov-2008 | All Recent SEC Filings |
5-Nov-2008
Quarterly Report
Forward-Looking Statements: No Assurances Intended
In addition to historical information, this Quarterly Report contains forward-looking statements, which are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "plans to," "estimates," "projects," or similar expressions. These forward-looking statements represent Management's belief as to the future of Universal Travel Group. Whether those beliefs become reality will depend on many factors that are not under management's control. Many risks and uncertainties exist that could cause actual results to differ materially from those reflected in these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.
Business Overview
We are a travel services provider in the People's Republic of China and are engaged in providing reservation, booking, and domestic and international travel and tourism services throughout the People's Republic of China via the internet and through customer representatives.
Under the theme "Wings towards a more colorful life", our core services include tour packaging, booking services for air tickets and hotels as well as air cargo agency.
In 2007, we completed the acquisitions of Speedy Dragon, specializing in air cargo agency; Xi'an Golden Net, specializing in travel packaged tours; Shanghai LanBao, specializing in hotel reservations and Foshan Overseas International, a PRC-based company that handles both domestic and international travel inquiries.
Our goal is to become the foremost leading online travel services provider in all fields of the tourism industry including the aviation service, cargo agency, hotel booking and tour packaging segments in the People's Republic of China.
Major Factors Affecting the Travel Industry
A variety of factors affect the travel industry in the People's Republic of China, and we shall be discussing these together with analysis of our results of operations and financial condition.
Some of these factors include:
(i) Growth in the Overall Economy and Demand for Travel Services in the People's Republic of China.
We expect that our financial results will continue to be affected by the overall growth of the economy and demand for travel services in the People's Republic of China and the rest of the world.
According to the statistics from the website of National Bureau of Statistics of China, in February 2008, the People's Republic of China's gross domestic product (or "GDP") grew from US$1.7 trillion in 2003 to US$3.4 trillion in 2007, representing a compound annual growth rate of 16%. GDP per capita in the same period rose from US$1,273 to US$2,559, representing a 15% compound annual growth rate.
According to the statistics from the website of National Bureau of Statistics of China in February 2008, domestic tourism spending grew from US$41.6 billion in 2003 to US$106.5 billion in 2007, representing a compound annual growth of 23%.
According to the statistics from the website of Civil Aviation Administration of China:
· domestic passenger transportation volume grew 15.7% in 2007 compared to 2006;
· domestic cargo transportation volume grew 9.4% in 2007 compared to 2006;
· domestic passenger transportation volume grew 5.8% for the first half of 2008 compared to the same period of 2007;
· domestic cargo transportation volume grew 6.6% for the first half of 2008 compare to the same period of 2007.
The slower growth of the aviation industry for the first half of 2008 reflects the seasonality that the first half of the year, which is slower. This seasonality factor is further compounded by the increase in oil prices and the snowstorms during February of this year.
Subject to slight fluctuations, we believe that demand for travel services in the People's Republic of China will continue to increase in the foreseeable future as the economy in the People's Republic of China continues to grow. However, any adverse changes in economic conditions of the People's Republic of China and the rest of the world, such as a slow-down of the Chinese economy, could have a material and adverse effect on the travel industry in the People's Republic of China, which in turn would adversely affect our business.
(ii) Seasonality in the Travel Service Industry.
The travel service industry is characterized by seasonal fluctuations and accordingly our revenue may vary from quarter to quarter. To date, revenue generated during the summer season of each year generally is higher than those generated during the winter season, mainly because the summer season coincides with the domestic peak business and leisure travel season. By contrast, the winter season includes the Chinese New Year holiday, during which our customers reduce their business activities.
These seasonal trends are difficult to discern in our historical results because our revenue structure has changed due to our expansion over the years into more diversified fields and our revenue have grown substantially since inception.
However, the impact of seasonal fluctuations in the travel industry is likely to have a more apparent impact on our future results.
(iii) Disruptions in the Travel Industry.
Because the travel industry is sensitive to the weather, events and seasons, travelers tend to modify their travel plans according to such factors.
Examples of some events which affected our travel industry this year are:
· the snow storms which affected the People's Republic of China during the Spring Festival this year;
· the Olympics in August which led to an increase in prices for hotels, airline and other travel-related costs and accordingly, a similar increase in travel products;
· the earthquakes in May 2008 which affected travel in the Sichuan area;
· the threat of terrorist attacks and increased security over international events, such as the the Olympics, which affect our cargo agency business; and
· a downturn in international economies such as in the United States.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
The following table presents certain consolidated statement of operations
information derived from the consolidated statements of income for three months
ended September 30, 2008 and same period 2007.
Revenue Segment Analysis
Three months ended Three months ended Increase /
September 30, 2008 September 30, 2007 (Decrease) Percentage
Revenues $ 22,903,643 $ 12,813,942 $ 10,089,701 78.7 %
Cost of services (15,047,932 ) (8,308,363 ) (6,739,569 ) 81.1 %
Gross Profit 7,855,711 4,505,579 3,350,132 74.4 %
SG&A (1,917,323 ) (812,464 ) (1,104,859 ) 136.0 %
Stock based compensation - - - N/A
Income from operations 5,938,388 3,693,115 2,245,273 60.8 %
Other income 1,485 - 1,485 N/A
Interest income 9,941 2,955 6,986 236.4 %
Interest expenses (13,521 ) (21,442 ) 7,921 -36.9 %
Provision for income taxes (1,307,966 ) (608,153 ) (699,813 ) 115.1 %
Net income $ 4,628,327 $ 3,066,475 $ 1,561,852 50.9 %
|
For the three months ended September 30, 2008:
Percentage Percentage Percentage Percentage
Air- of Revenue Cargo of Revenue of Revenue of Revenue
ticketing (%) Agency (%) Hotel (%) Travel (%) Total
Revenue $ 3,885,722 17.0 % $ 2,854,332 12.5 % $ 2,540,469 11.1 % $ 13,623,120 59.5 % $ 22,903,643
Cost of Services (196,454 ) 1.3 % (2,363,228 ) 15.7 % (944,149 ) 6.3 % (11,544,101 ) 76.7 % (15,047,932 )
Gross Profit $ 3,689,268 47.0 % $ 491,104 6.3 % $ 1,596,320 20.3 % $ 2,079,019 26.5 % $ 7,855,711
|
For the three months ended September 30, 2007:
Percentage Percentage Percentage Percentage
Air- of Revenue Cargo of Revenue of Revenue of Revenue
ticketing (%) Agency (%) Hotel (%) Travel (%) Total
Revenue $ 2,250,090 17.6 % $ 5,126,348 40.0 % $ 915,465 7.1 % $ 4,522,039 35.3 % $ 12,813,942
Cost of Services (115,204 ) 1.4 % (3,957,959 ) 47.6 % (297,940 ) 3.6 % (3,937,260 ) 47.4 % (8,308,363 )
Gross Profit $ 2,134,886 47.4 % $ 1,168,389 25.9 % $ 617,525 13.7 % $ 584,779 13.0 % $ 4,505,579
|
Revenue
Revenue for the three months ended September 30, 2008 were $22,903,643 compared to $12,813,942 for the same period 2007, an increase of approximately 78.7%. This increase is due to the company's strategic expansion into hotel reservation and packaged tours business via acquisitions of Xi'an Golden Net Travel Service Company Limited, Shanghai Lanbao Travel Service Company Limited and Foshan Overseas International Travel Service Co., Ltd.
Revenue from air-ticketing was $3,885,722 for the three months ended September 30, 2008 compared to $2,250,090 for the same period last year, an increase of approximately 72.7%. This increase is due to our efforts in constantly expanding our customer base and number of sales representatives and improving our commission rates through cooperation with first tier ticket vendors.
Revenue generated from our cargo agency business for the three months ended September 30, 2008 was $2,854,332 compared to $5,126,348 for the same period 2007, a decrease of approximately 44.3%. This decrease is due to the increase in global oil prices as well as the increase security for imports and exports due to the Beijing Olympics.
Revenue generated from hotel reservations for the three months ended September 30, 2008 was $2,540,469 compared to $915,465 for the same period 2007, an increase of approximately 177.5%. This increase is attributable to the increase in reservations while the 2008 Beijing Olympics was being held in China and the traditional peak summer travel season.
Revenue generated from travel-related services and packages for the three months ended September 30, 2008 was $13,623,120 compared to $4,522,039 for the same period 2007, an increase of approximately 201.3%. This increase is due to the acquisition of Foshan Overseas International Travel Service Co., Ltd. the end of 2007 and the increase in travel as a result of the 2008 Beijing Olympics and the traditional peak travel season in the summer.
Gross Profit
Gross profit for three months ended September 30, 2008 was $7,855,711 compared to $4,505,579 for three months ended September 30, 2007, an increase of approximately 74.4%. The increase in gross profit reflects the company's strategic expansion into profitable hotel reservation and packaged tours business via acquisitions. The increase also reflects the results of an efficient management and control of our operations by an experienced management team.
Gross profit margin for three months ended September 30, 2008 was 34.3% compared to 35.2% for three months ended September 30, 2007. This decrease is primarily due to the acquisition of a lower gross margin businesses in 2007. Despite the short term decrease in gross profit margin, we believe that this strategic move will bring a higher long term value to guarantee stable and long term growth of our various business segments as a whole. We believe that our gross profit margins will improve as our four business segments begin to integrate.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for three months ended September 30, 2008 totaled $1,917,323 compared to $812,464 for three months ended September 30, 2007, an increase of approximately 136.0%.
Selling, general and administrative expenses were approximately 8.4% of revenue for three months ended September 30, 2008 as compared to 6.3% for three months ended September 30, 2007.
The increase in selling, general and administrative expenses reflects the increase in our expenses as a result of acquiring of Xi'an Golden Net Travel Service Company Limited, Shanghai Lanbao Travel Service Company Limited and Foshan Overseas International Travel Service Co., Ltd.
Stock based compensation reflects standard amount of options issued to U.S independent directors.
Interest expense for three months ended September 30, 2008 totaled $13,521 compared to $21,442 for three months ended September 30, 2007. The decrease in interest expense was the result of the repayment of all our outstanding bank loans in July 29, 2008.
Net Income
Net income was $4,628,327 or 20.2% of revenue for three months ended September 30, 2008, compared to $3,066,475 or 23.9% of revenue for three months ended September 30, 2007.
The increase in net income reflects the continued growth in our business and the income derived from the acquisitions of Xi'an Golden Net Travel Service Company Limited, Shanghai Lanbao Travel Service Company Limited and Foshan Overseas International Travel Service Co., Ltd.
The decrease in net income as a percentage of revenue in the result of the acquisitions of lower net income margin businesses. We believe that despite the short term decrease in net income margin, the acquisitions will bring a more stable and long term growth to our business as a whole. By integrating the different business segments and leveraging off the synergies between such segments, we believe that we will be able to improve our net income margin.
NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
The following table presents certain consolidated statement of operations
information derived from the consolidated statements of income for nine months
ended September 30, 2008 and same period 2007.
Revenue Segment Analysis
Nine months ended Nine months ended Increase /
September 30, 2008 September 30, 2007 (Decrease) Percentage
Revenues $ 47,324,686 $ 26,799,445 $ 20,525,241 76.6 %
Cost of services (32,465,680 ) (17,419,435 ) (15,046,245 ) 86.4 %
Gross Profit 14,859,006 9,380,010 5,478,996 58.4 %
SG&A (4,024,721 ) (2,222,407 ) (1,802,314 ) 81.1 %
Stock based compensation (155,802 ) (633,360 ) 477,558 -75.4 %
Income from operations 10,678,483 6,524,243 4,154,240 63.7 %
Other income 8,758 - 8,758 N/A
Interest income 21,881 17,783 4,098 23.0 %
Interest expenses (78,525 ) (42,724 ) (35,801 ) 83.8 %
Provision for income taxes (2,424,713 ) (1,127,306 ) (1,297,407 ) 115.1 %
Net income $ 8,205,884 $ 5,371,996 $ 2,833,888 52.8 %
|
For the nine months ended September 30, 2008:
Percentage Percentage Percentage Percentage
Air- of Revenue Cargo of Revenue of Revenue of Revenue
ticketing (%) Agency (%) Hotel (%) Travel (%) Total
Revenue $ 7,251,122 15.3 % $ 8,520,022 18.0 % $ 4,564,765 9.6 % $ 26,988,777 57.0 % $ 47,324,686
Cost of Services (369,567 ) 1.1 % (7,259,803 ) 22.4 % (1,643,809 ) 5.1 % (23,192,501 ) 71.4 % (32,465,680 )
Gross Profit $ 6,881,555 46.3 % $ 1,260,219 8.5 % $ 2,920,956 19.7 % $ 3,796,276 25.5 % $ 14,859,006
|
For the nine months ended September 30, 2007:
Percentage Percentage Percentage Percentage
Air- of Revenue Cargo of Revenue of Revenue of Revenue
ticketing (%) Agency (%) Hotel (%) Travel (%) Total
Revenue $ 5,755,908 21.5 % $ 15,606,033 58.2 % $ 915,465 3.4 % $ 4,522,039 16.9 % $ 26,799,445
Cost of Services (297,010 ) 1.7 % (12,887,225 ) 74.0 % (297,940 ) 1.7 % (3,937,260 ) 22.6 % (17,419,435 )
Gross Profit $ 5,458,898 58.2 % $ 2,718,808 29.0 % $ 617,525 6.6 % $ 584,779 6.2 % $ 9,380,010
|
Revenue
Revenue for the nine months ended September 30, 2008 was $47,324,686 compared to $26,799,445 for nine months ended September 30, 2007, an increase of approximately 76.6%. This increase is attributable to our organic growth as well as our expansion into the air cargo agency, packaged tours services and hotel booking services business through the acquisitions of Xi'an Golden Net Travel Service Company Limited, Shanghai Lanbao Travel Service Company Limited and Foshan Overseas International Travel Service Co., Ltd.
Gross Profit
Gross profit for the nine months ended September 30, 2008 was $14,859,006 compared to $9,380,010 for nine months ended September 30, 2007, an increase of approximately 58.4%. The increase in gross profit reflects our aggressive growth strategy as exemplified by continued growth in our traditional customer base and the acquisitions of Xi'an Golden Net Travel Service Company Limited, Shanghai Lanbao Travel Service Company Limited and Foshan Overseas International Travel Service Co., Ltd.
Gross profit margin for nine months ended September 30, 2008 was 31.4% compared to 35.0% for nine months ended September 30, 2007. This decrease is primarily due to the acquisition of a lower gross margin businesses in 2007. Despite the short term decrease in gross profit margin, we believe that this strategic move will bring a higher long term value to guarantee stable and long term growth of our various business segments as a whole. We believe that our gross profit margins will improve as our four business segments begin to integrate and leverage off the synergism of these various segments.
Selling, general and administrative expenses
Selling, general and administrative expenses for nine months ended September 30, 2008 totaled $4,024,721 compared to $2,222,407 for nine months ended September 30, 2007. Selling, general and administrative expenses was approximately 8.5% of revenue for nine months ended September 30, 2008 as compared to 8.3% for nine months ended September 30, 2007. The increase in selling, general and administrative expenses is a result acquiring Xi'an Golden Net Travel Service Company Limited, Shanghai Lanbao Travel Service Company Limited and Foshan Overseas International Travel Service Co., Ltd.
Stock-based compensation reflects standard amount of options issued to U.S independent directors.
Interest expense for nine months ended September 30, 2008 totaled $78,525 compared to $42,724 for nine months ended September 30, 2007, an increase of approximately 83.8%. The increase in interest expense is a result of the expenses incurred from short term bank loans to support our expansion while our market valuation was still low.
Net Income
Net income was $8,205,884 or 17.3% of revenue for the nine months ended September 30, 2008, compared to $5,371,996 or 20.0% of revenue for the nine months ended September 30, 2007. The increase in net income reflects the continued growth in our business and the additional income derived through Xi'an Golden Net Travel Service Company Limited, Shanghai Lanbao Travel Service Company Limited and Foshan Overseas International Travel Service Co., Ltd.
The decrease in net income as a percentage of revenues reflects the acquisitions of lower net income margin businesses. However, we believe that despite the short term decrease in net income margin, these acquisitions will bring a more stable and long term growth to our business as a whole. We anticipate improving our net income margins by integrating our four business segments and leveraging off the synergies created.
We believe a more meaningful comparison should be made for the third quarter ended September 30, 2008 to the second quarter ended June 30, 2008 because it will reveal the progress from quarter to quarter of all our business segments including our two new business segments, namely the hotel reservations and travel packaged services businesses.
THIRD QUARTER ENDED SEPTEMBER 30, 2008 AND THE SECOND QUARTER ENDED JUNE 30,
2008
The following table presents certain consolidated statement of operations
information derived from the consolidated statements of income for the three
months ended September 30, 2008 and June 30, 2008.
Revenue Segment Analysis
Three months ended Three months ended Increase /
September 30, 2008 June 30, 2008 (Decrease) Percentage
Revenues $ 22,903,643 $ 14,344,739 8,558,904 59.7 %
Cost of services (15,047,932 ) (10,184,990 ) (4,862,942 ) 47.7 %
Gross Profit 7,855,711 4,159,749 3,695,962 88.9 %
Selling, General and Administrative
Expenses (1,917,323 ) (1,251,876 ) (665,447 ) 53.2 %
Stock based compensation - (45,790 ) 45,790 -100.0 %
Income from operations 5,938,388 2,862,083 3,076,305 107.5 %
Other income 1,485 5,504 (4,019 ) -73.0 %
Interest income 9,941 10,525 (584 ) -5.5 %
Interest expenses (13,521 ) (28,297 ) 14,776 -52.2 %
Provision for income taxes (1,307,966 ) (736,122 ) (571,844 ) 77.7 %
Net income $ 4,628,327 $ 2,113,693 2,514,634 119.0 %
|
For the third quarter ended September 30, 2008
Percentage Percentage Percentage Percentage
of Revenue Cargo of Revenue of Revenue of Revenue
Air-ticketing (%) Agency (%) Hotel (%) Travel (%) Total
Revenue 3,885,722 17.0 % 2,854,332 12.5 % 2,540,469 11.1 % 13,623,120 59.5 % 22,903,643
Cost of Services (196,454 ) 1.3 % (2,363,228 ) 15.7 % (944,149 ) 6.3 % (11,544,101 ) 76.7 % (15,047,932 )
Gross Profit 3,689,268 47.0 % 491,104 6.3 % 1,596,320 20.3 % 2,079,019 26.5 % 7,855,711
|
For the second quarter ended June 30, 2008
Percentage Percentage Percentage Percentage
of Revenue Cargo of Revenue of Revenue of Revenue
Air-ticketing (%) Agency (%) Hotel (%) Travel (%) Total
Revenue 1,936,520 13.5 % 2,541,764 17.7 % 1,411,818 9.8 % 8,454,637 58.9 % 14,344,739
Cost of Services (99,612 ) 1.0 % (2,287,955 ) 22.5 % (504,988 ) 5.0 % (7,292,435 ) 71.6 % (10,184,990 )
Gross Profit 1,836,908 44.2 % 253,809 6.1 % 906,830 21.8 % 1,162,202 27.9 % 4,159,749
|
Revenue
Revenue for the three months ended September 30, 2008 was $22,903,643 compared to $14,344,739 for the three months ended June 30, 2008, an increase of approximately 59.7%. This increase is attributable primarily to the growth in tourism and travel and the seasonality of sales.
. . .
|
|