SHENZHEN, China, Aug. 25 /PRNewswire-Asia/ -- 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 that it has filed its amended Quarterly Report on Form 10-Q for the period ended June 30, 2010.
Subsequent to filing its Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, on August 10, 2010, the Company discovered that it had erroneously placed cost of service of one of its subsidiaries from its air ticketing segment into its package tours segment. As such, the Company amended Note 13 and certain disclosures in its MD&A upon review and approval from its auditor. Other than the correction of the error described above, all other information in the Company's original Form 10-Q remains unchanged.
Air Ticketing Segment
For the three months ended June 30, 2010, revenue from the Company's air ticketing segment was $6.0 million, an 82.3% increase from $3.3 million in the prior year period. This increase was driven by the Company's success in
cross-marketing its products across its business segments, increased brand awareness from online sales and deployment of the Company's TRIPEASY kiosks. In addition, during the quarter the Company benefited from an increase in demand for air passenger transportation and higher ticket prices due to the growing tourism industry in China, general inflation in the Chinese economy, and airlines acting together on pricing.
Gross profit was $4.9 million, a 65.6% increase from $2.9 million in the prior year period. Gross margin was 81.2%, an 820 basis point decline from 89.4% in the prior year period. The decline in gross margin is primarily due to the establishment of the Company's second home base in Chongqing in June of 2009. The Chongqing subsidiary had a lower margin than the Company's main base of operations in Shenzhen because it is newer in its local market and smaller in size compared to the Shenzhen operations. The impact of the higher relative costs of the Chongqing subsidiary was greater in second quarter 2010 given it had a minimal impact for just a few days of the second quarter 2009.
Package Tour Segment
For the three months ended June 30, 2010, revenue from the Company's package tour segment was $27.7 million, a 123.6% increase from $12.4 million in the prior year period. Excluding the effect of the Company's five newly acquired subsidiaries, which was $11.6 million, the Company's revenues from this segment were $16.1 million, a 29.7% increase from $12.4 million in the prior year period. This increase was driven by the Company successful marketing programs and the PRC government's stimulus package.
Gross profit was $3.7 million, a 109.3% increase from $1.8 million in the prior year period. Gross margin was 13.4%, a 100 basis point decline from 14.4% in the prior year period. Excluding the effect of the Company's five newly acquired subsidiaries, which was $1.8 million, gross profit was $1.9 million, a 7% increase from $1.8 million in the prior year period. Gross margin was 11.9% for the existing package tour business, a 250 basis point decline from 14.4% in the prior year period. The decline in gross margin in the existing package tour business is primarily due to the fact that the Company established its Shenzhen Universal Travel Agency Co., Ltd. subsidiary in June 2009. This subsidiary is newer, does not yet benefit from the same economies of scale, and has a lower margin when compared to the Company's two more established package tours subsidiaries (Foshan Overseas International Travel Service Co., Ltd. and Xi'an Golden Net Travel Serve Service Company Ltd.) The impact from the results of the Shenzhen Universal Travel Agency Co., Ltd. subsidiary were minimal in the second quarter of 2009 but had a full quarter's impact in the second quarter of 2010. The Company expects the margin performance of this subsidiary to improve over time and its business to grow in scale and efficiency.
The gross margin of the Company's five newly acquired subsidiaries was 15.6% in the second quarter of 2010 and helped offset the decline in gross margin from the establishment of Shenzhen Universal Travel Agency Co., Ltd. Of the five newly acquired subsidiaries, Huangshan Holiday Travel Service Co., Ltd. has a higher gross margin than the Company's existing package tours business because Huangshan Holiday has a higher proportion of its revenues coming from do-it-yourself travel products and air ticket and hotel bookings, which are higher margin than more traditional packaged tours. The other four newly acquired subsidiaries have a lower margin when compared to the Company's existing package tours business. As these new acquisitions are integrated into the Company's platform, the Company expects to broaden the travel services offered to its customers, and improve the product mix, sales volume and operating efficiency of these businesses.
The Company continues to be optimistic about its business development as the Chinese tourism industry continues to enjoy high growth rates driven by the increase in per capita disposable income and the benefit of several major tourism events, such as the Shanghai World Expo and the upcoming Guangzhou Asian Games. Additionally, with the integration of the new acquisitions, the Company expects to improve its overall gross margin, especially in the package tour segment.
About Universal Travel Group
Universal Travel Group is a leading travel services provider in China offering package tours, air ticketing, and hotel reservation services via the Internet and customer service representatives. The Company also operates TRIPEASY Kiosks, which are placed in shopping malls, office buildings, residential apartment buildings, and tourist sites. These kiosks are designed for travel booking with credit and bank cards, and serve as an advertising platform for Universal Travel Group. The Company's headquarters and main base of operations is in Shenzhen in the Pearl River Delta region of China. More recently, Universal Travel Group has expanded its business into Western China, opening a second home base in the Chongqing Delta region, and other attractive, under-penetrated tier-two travel markets throughout the country. For more information on the Company, please visit http://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.
