Home Inns Group Reports First Quarter 2014 Financial Results

Hotels in Operation Reached 2,241 in 297 Cities in China

Operating Margin Improved Year over Year for the Fifth Consecutive Quarter despite Continued Market Softness

May 12, 2014, 17:00 ET from Home Inns & Hotels Management Inc.

SHANGHAI, May 12, 2014 /PRNewswire/ -- Home Inns & Hotels Management Inc. (NASDAQ: HMIN) ("Home Inns Group" or "the Company"), a leading economy hotel chain in China, today announced its unaudited financial results for the first quarter ended March 31, 2014. 

First Quarter 2014 Financial Highlights

  • Total revenues increased 5.0% year over year to RMB 1.47 billion (US$236.9 million) for the first quarter of 2014, within the guidance range.
  • Net income attributable to ordinary shareholders was RMB 74.9 million (US$12.0 million) for the first quarter of 2014, compared with a net loss of RMB 19.4 million in the same period a year ago. Adjusted net income attributable to ordinary shareholders (non-GAAP) increased 210% year over year to RMB 32.1 million (US$5.2 million).
  • EBITDA (non-GAAP) was RMB 296.8 million (US$47.8 million) for the first quarter of 2014, compared with RMB 187.4 million in the same period a year ago..  Adjusted EBITDA (non-GAAP) increased 17.6% year over year to RMB 254.1 million (US$40.9 million) for the first quarter of 2014.

Key Financial Results

(RMB in Millions except RMB per ADS)

      1Q2014

     1Q2013

        V%

Total Revenues

1,472.5

1,402.2

5.0%

Income from Operations

42.4

12.1

250.7%

Adj. Income from Operations*

70.0

39.2

78.7%

Net Income

74.9

-19.4

F

Adj. Net Income*

32.1

10.3

210.3%

EBITDA*

296.8

187.4

58.4%

Adj. EBITDA*

254.1

216.1

17.6%

Diluted Earnings per ADS

0.11

-0.42

F

Adj. Diluted Earnings per ADS*

0.67

0.22

204.5%

"V%" represents year-over-year percentage change in amounts "F" denotes a favourable change when the prior period amount was negative * Indicates a non-GAAP financial measure (see commentary at the end of this earnings release for full details).

First Quarter 2014 Operational Highlights

  • Home Inns Group opened 69 new hotels in the first quarter 2014 and operated 2,241 hotels across 297 cities in China under its three brands as of March 31, 2014.  There were a total of 448 hotel projects in the development pipeline as of March 31, 2014, including 185 hotels contracted or under construction (165 of which were franchised-and-managed hotels) and 263 hotels under due diligence (all of which were franchised-and-managed hotels), demonstrating continued strong interest from franchise partners in the three hotel brands within Home Inns Group.

                           Hotels Count                        

Openings

Closures

Group

Home Inn

Motel 168

Yitel

1Q14

1Q14

Total Number of Hotels

2,241

1,841

381

19

69

8

Leased-and-Operated

876

*

698

164

14

6

1

Franchised-and-Managed

1,365

*

1,143

217

5

63

7

Contracted or under Construction

185

152

22

11

Leased-and-Operated

20

13

6

1

Franchised-and-Managed

165

139

16

10

Under Due Diligence

263

237

23

3

Leased-and-Operated

0

0

0

0

Franchised-and-Managed

263

237

23

3

* There was one transfer of leased-and-operated hotel to franchised-and-managed hotel under Home Inn brand during the first quarter of 2014.

  • As of March 31, 2014, Home Inns Group had a total of 18.2 million unique active non-corporate members under its frequent guests program.

Operating Metrics

1Q2014

4Q2013

1Q2013

Occupancy Rate

81.3%

84.0%

83.6%

Average Daily Rate (ADR, RMB)

156

163

156

Revenue per Available Room (RevPAR, RMB)

127

137

131

  • For the first quarter of 2014, occupancy rate decreased by 2.3% while ADR was flat year over year, resulting in a year-over-year decrease of 3.1% in RevPAR.  The decrease in occupancy rate was mainly due to soft market conditions in the first quarter of 2014.  Sequentially, RevPAR decreased by 7.3%, which was due to seasonality.

"Despite continued softness in macroeconomic conditions in the first quarter, we achieved revenues within our target range and are pleased to deliver the fifth consecutive quarter of year over year margin expansion," said Mr. David Sun, the Company's chief executive officer.  "While coping with the absence of a full market-wide recovery, we maintained relatively stable performance in our core mature hotels, further increased contributions from our franchised-and-managed operations, implemented further operational enhancements for Motel168, and continued effective cost control initiatives."

Mr. Sun continued, "Looking ahead to the remainder of 2014, we are seeing some early signs of market stabilization but we remain cautious on the outlook for the overall travel market, especially in the business travel segment. Nevertheless, we have proven that our business model and operational structure are resilient under current market conditions. We are also confident that we are well positioned to benefit from any market improvements by executing our franchise and multi-brand development plans and maintaining a sensible expansion pace that will deliver modest but steady revenue growth, sustained margin expansion, and long-term value for our shareholders."

Detailed Overview of Financial Results for First Quarter 2014

Total Revenues

(RMB/USD in Millions)

                    First Quarter 2014                   

RMB

USD

V%

Leased-and-Operated Hotels

1,279.2

205.8

3.3%

Franchised-and-Managed Hotels

193.3

31.1

17.8%

Total Revenues

1,472.5

236.9

5.0%

Less: Business Taxes

-94.3

-15.2

7.2%

Net Revenues

1,378.2

221.7

4.9%

Note: "V%" represents year-over-year percentage change in amounts

  • The year-over-year increases in total revenues from both leased-and-operated and franchised-and-managed hotels in the first quarter 2014 were mainly driven by an increase in the number of hotels and hotel rooms in operation, partially offset by a decrease in RevPAR. Fewer new franchised-and-managed hotel openings in the first quarter of 2014 (63 opened) compared with same period a year ago (75 opened) also resulted in lower upfront franchise-and-management fee revenue recognition.

Total Operating Costs and Expenses / Total Operating Income

(RMB/USD in Millions)

First Quarter 2014                                                                            

Adjusted

GAAP Results

Reconciliation

Non-GAAP Results

RMB

USD

Vpts

RMB

USD

RMB

USD

Vpts

Leased-and-Operated Hotel Costs

1,211.7

194.9

 -2.7pts

4.2

0.7

1,207.5

194.2

-2.5pts

Franchised-and-Managed Hotel Personnel Costs

38.5

6.2

  0.6pts

3.8

0.6

34.7

5.6

  0.5pts

Sales and Marketing Expenses

25.0

4.0

  0.2pts

0.3

0.0

24.8

4.0

  0.2pts

General and Administrative Expenses

71.2

11.4

  -0.1pts

19.3

3.1

51.9

8.3

 -0.1pts

Total Operating Costs and Expenses

1,346.4

216.6

  -2.0pts

27.6

4.4

1,318.9

212.2

  -1.9pts

Total Operating Income

42.4

6.8

  2.0pts

27.6

4.4

70.0

11.3

  2.0pts

Note: "Vpts" represents year-over-year change in percentage points of total revenues

Total operating costs and expenses were RMB 1.35 billion (US$216.6 million) for the first quarter of 2014, representing 91.4% of total revenues for the quarter.  Total operating costs and expenses excluding any share-based compensation expenses and acquisition and integration costs (non-GAAP) for the first quarter of 2014 were 89.6% of total revenues, compared to 91.5% in the same period a year ago.

  • Total leased-and-operated hotel costs were RMB 1.21 billion (US$194.9 million) for the first quarter of 2014, representing 94.7% of the leased-and-operated hotel revenues for the quarter compared to 96.2% in the same period a year ago.  Total leased-and-operated hotel costs excluding any share-based compensation expenses and acquisition and integration costs (non-GAAP) were 94.4% of the leased-and-operated hotel revenues in the first quarter of 2014 compared to 95.7% in the same period a year ago.  The year-over-year decreases in total leased-and-operated hotel costs as a percentage of leased-and-operated hotel revenues were mainly due to lower pre-opening cost due to fewer new leased-and-operated hotels opened and under construction in the first quarter of 2014. Pre-opening cost was RMB 5.9 million (US$1.0 million) for the first quarter of 2014.
  • Franchised-and-managed hotels personnel costs were RMB 38.5 million (US$6.2 million) for the first quarter of 2014, representing 19.9% of the franchised-and-managed hotel revenues for the quarter, compared to 17.7% in the same period a year ago.  The increase in franchised-and-managed hotels personnel costs as a percentage of franchised-and-managed hotel revenues was mainly due to the lower mix of upfront franchise-and-management fees included in the franchised-and-managed hotel revenues in the first quarter of 2014 as a result of fewer new franchised-and-managed hotel openings compared with the same period a year ago. Franchised-and-managed hotels personnel costs excluding share-based compensation expenses (non-GAAP) were 18.0% of franchised-and-managed hotel revenues in the first quarter of 2014, compared to 15.9% in the same period of 2013. 
  • Sales and marketing expenses were RMB 25.0 million (US$4.0 million) for the first quarter of 2014, representing 1.7% of total revenues for the quarter compared to 1.5% in the same period a year ago. The increase was mainly due to spending on certain planned corporate branding initiatives during the quarter. Sales and marketing expenses excluding share-based compensation expenses (non-GAAP) were 1.7% of total revenues for the first of quarter 2014 compared to 1.5% in the same period of 2013. 
  • General and administrative expenses were RMB 71.2 million (US$11.4 million) for the first quarter of 2014, representing 4.8% of total revenues compared to 4.9% in the same period a year ago.  General and administrative expenses excluding any share-based compensation expenses, and acquisition and integration costs (non-GAAP) were 3.5% of total revenues for the quarter compared to 3.6% in the same period of 2013. 

Income from Operations was RMB 42.4 million (US$6.8 million) for the first quarter of 2014.  Income from operations excluding share-based compensation expenses and integration costs (non-GAAP) for the first quarter of 2014 was RMB 70.0 million (US$11.3 million), or 4.8% of total revenues, compared to RMB 39.2 million, or 2.8% of total revenues, in the same period of 2013.  While the hotel level cost reduction and efficiency gains continued, their impact in the quarter was mitigated by the modest RevPAR decline. The year-over-year increases in the income from operations margin rate for the quarter were thus mainly driven by the increased mix of higher-margin revenue contribution from franchised-and-managed operations and reduced pre-opening costs due to fewer new leased-and-operated hotels opened and under construction in the first quarter of 2014.

EBITDA (non-GAAP)

(RMB/USD in Millions)

                   First Quarter 2014                 

First Quarter 2013

RMB

USD

%Rev

V%

RMB

USD

%Rev

EBITDA (Non-GAAP)

296.8

47.8

20.2%

58.4%

187.4

30.1

13.4%

Net Foreign Exchange Loss / (Gain)

15.2

2.4

1.0%

-2.6

-0.4

-0.2%

Share-Based Compensation Expenses

25.5

4.1

1.7%

22.9

3.7

1.6%

Integration Cost

2.1

0.3

0.1%

4.1

0.7

0.3%

Gain on Change in Fair Value of Interest Swap Transaction

-

-

-

-1.4

-0.2

-0.1%

(Gain) / Loss on Fair Value Change in Convertible Notes

-85.5

-13.8

-5.8%

5.7

0.9

0.4%

Adjusted EBITDA (Non-GAAP)

254.1

40.9

17.3%

17.6%

216.1

34.8

15.4%

Note:

"%Rev" represents amount as a percentage of total revenues "V%" represents year-over-year percentage change in amounts Adjusted EBITDA for the first quarter of 2014 was negatively impacted by subtracting a gain of RMB 85.5 million on fair value change in convertible notes. The fair value of the Notes decreased primarily due to decreased share price, offset partially by decrease of market interest rate for corporate bonds with similar credit features and the increase in volatility of the share price during the quarter

        

 

Consolidated Net Income Attributable to Home Inns Group's Shareholders

(RMB/USD in Millions)

First Quarter 2014

First Quarter 2013

RMB

USD

%Rev

V%

RMB

USD

%Rev

Net Income (GAAP)

74.9

12.0

5.1%

F

-19.4

-3.1

-1.4%

Net Foreign Exchange Loss / (Gain)

15.2

2.4

1.0%

-2.6

-0.4

-0.2%

Share-Based Compensation Expenses

25.5

4.1

1.7%

22.9

3.7

1.6%

Integration Cost

2.1

0.3

0.1%

4.1

0.7

0.3%

Upfront fee amortization of term loans

-

-

-

1.0

0.2

0.1%

Gain on change in fair value of interest swap transaction

-

-

-

-1.4

-0.2

-0.1%

Loss on Fair Value Change in Convertible Notes

-85.5

-13.8

-5.8%

5.7

0.9

0.4%

Adjusted Net Income (Non-GAAP)

32.1

5.2

2.2%

210.3%

10.3

1.7

0.7%

Note: "%Rev" represents amount as a percentage of total revenues

"V%" represents year-over-year percentage change in amounts

"F" denotes favourable changes when the prior period amount was negative

Basic and Diluted Earnings Per Ordinary Share and Per ADS

First Quarter 2014                            

Ordinary Share

ADS Share

RMB

USD

RMB

USD

Basic

0.79

0.13

1.58

0.25

Diluted

0.05

0.01

0.11

0.02

Adjusted Basic (Non-GAAP)

0.34

0.05

0.68

0.11

Adjusted Diluted (Non-GAAP)

0.34

0.05

0.67

0.11

Cash Flow

Net operating cash flow for the first quarter of 2014 was RMB 154.9 million (US$24.9 million), compared to RMB 63.0 million in the same period of 2013.  Capitalized expenditures for the first quarter of 2014 were RMB 103.2 million (US$16.6 million), while related cash paid for capital expenditures during the quarter was RMB 174.8 million (US$28.1 million).  

Balance Sheet

As of March 31, 2014, Home Inns Group had cash and cash equivalents of RMB 1.16 billion (US$187.0 million).  The outstanding balance of convertible notes issued in December 2010 (measured at fair value) was RMB 1.08 billion (US$174.1 million).  The outstanding balance of the U.S. dollar-denominated three-year term loan was RMB 719.8 million (US$115.8 million).

Recent Developments

On March 10, 2014, Home Inns Group announced that it had signed a legally binding memorandum of understanding to acquire 100% ownership of Yunshang Siji Hotel Management Company ("Yunshang Siji") from Kunming Department Store (Group) Co., Ltd., a publicly listed company in the domestic A-share market, for a cash purchase price of RMB 230 million, subject to satisfactory due diligence and customary purchase price adjustments.

On May 1, 2014, Home Inns Group completed the acquisition of Yunshang Siji for RMB 230 million cash purchase price, subject to customary adjustments.  Yunshang Siji operates an economy hotel chain consisting of 27 leased-and-operated hotels and eight franchised-and-managed hotels (with approximately 3,500 rooms in total) principally located in Yunnan Province. 

The transaction is consistent with the Company's investment and growth strategy to further penetrate key markets of China. Importantly, it enhances the value and geographic diversity of the Home Inns Group portfolio with the addition of a high-quality group of hotels in the Southwest region of China.

Outlook for Second Quarter 2014

Home Inns Group expects total revenues for the group in the second quarter of 2014 to be in the range of RMB 1,690 million to RMB 1,710 million.

These forecasts reflect our current and preliminary views and are subject to change.

This announcement contains translations of certain RMB amounts into U.S. dollars solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB 6.2164 to US$1.00, the noon buying rate for March 31, 2014 set forth in the H.10 statistical release of the Federal Reserve Board.

Conference Call Information

Management will hold an earnings conference call at 9 PM U.S. Eastern Time on Monday, May 12, 2014 (9 AM Beijing/Hong Kong Time on Tuesday, May 13, 2014).

Dial-in details for the earnings conference call are as follows:

U.S. (toll free):                    

1.866.519.4004

U.S.:                                    

1.845.675.0437

China Mainland:                 

800.819.0121 or 400.620.8038

Hong Kong (toll free):         

800.930.346

Hong Kong:                        

852.2475.0994 

U.K. (toll free):                   

080.8234.6646

U.K.:                                   

44.2030.598.139

Australia (toll free):             

1.800.457.076

Taiwan (toll free):               

008.0112.6920

International:                           

65.6723.9381

Pass code for all regions:        

Home Inns

A replay of the conference call may be accessed by phone at the following numbers until 10 AM on Tuesday, May 20, 2014 U.S. Eastern Time.

U.S. (toll free):                    

1.855.452.5696

China (toll free):                 

800.870.0205 or 400.602.2065  

Hong Kong (toll free):         

800.963.117

International:                       

61.2.8199.0299

Conference ID number:      

30980372

Live and archived webcasts of this conference call will be available at http://english.homeinns.com.

About Home Inns Group

Home Inns Group is a leading economy hotel chain in China based on number of hotels and hotel rooms as well as geographic coverage of the hotel chain. Since the Company commenced operations in 2002, it has built Home Inns as one of the best-known economy hotel brands in China. In October of 2011, the Company acquired Motel 168, another well-known hotel chain in China, as its second economy hotel brand. Home Inns Group aims to offer a consistent product and high-quality services to primarily serve the fast growing population of value-conscious individual business and leisure travelers who demand clean, comfortable and convenient lodging. Home Inns Group's ADSs, each of which represents two ordinary shares, are currently trading on the NASDAQ Global Select Market under the symbol "HMIN." For more information about Home Inns Group, please visit http://english.homeinns.com.

Safe Harbor

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. Any statements in this press release that are not historical facts are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include our anticipated growth strategies; our future results of operations and financial condition; the economic conditions of China; the regulatory environment in China; our ability to attract customers and leverage our brand; trends and competition in the lodging industry; the expected growth of the lodging market in China; our expected successful consolidation and integration of Motel 168 with our existing operations; and other factors and risks detailed in our filings with the Securities and Exchange Commission.  This press release also contains statements or projections that are based upon information available to the public, as well as other information from sources which management believes to be reliable, but it is not guaranteed by us to be accurate, nor does it purport to be complete. We undertake no obligation to update or revise to the public any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.

Non-GAAP Financial Measures

To supplement Home Inns Group's unaudited consolidated financial results presented in accordance with U.S. GAAP, Home Inns Group uses the following non-GAAP measures:

(a)    total operating costs and expenses excluding share-based compensation expenses and acquisition and integration costs

(b)   total leased-and-operated hotel costs excluding share-based compensation expenses and integration costs

(c)    personnel costs of franchised-and-managed hotels excluding share-based compensation expenses

(d)   sales and marketing expenses excluding share-based compensation expenses

(e)    general and administrative expenses excluding share-based compensation expenses and acquisition and integration costs

(f)    income from operations excluding share-based compensation expenses and acquisition and integration costs

(g)    adjusted net income attributable to shareholders excluding any share-based compensation expenses, foreign exchange gain or loss, acquisition and integration cost, upfront fee amortization of term loan, gain or loss from fair value change of convertible notes and interest swap derivatives and other non-operating expenses

(h)   adjusted basic and diluted earnings per ADS and per share excluding foreign exchange gain or loss, share-based compensation expenses, gain on buy-back of convertible bonds, issuance costs for convertible notes, gain or loss from fair value change of convertible notes, acquisition and integration cost, non-operating expenses and upfront fee amortization of term loan, and

(i)     adjusted EBITDA excluding foreign exchange gain or loss, share-based compensation expenses, gain on buy-back of convertible bonds, issuance costs for convertible notes, gain or loss from fair value change of convertible notes, acquisition and integration costs, non-operating expenses and upfront fee amortization of term loan 

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 U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of GAAP and non-GAAP results" set forth at the end of this press release.

Home Inns Group believes that, used in conjunction with GAAP financial measures, these non-GAAP financial measures provide meaningful supplemental information regarding the Group's performance, and both management and investors benefit from referring to these non-GAAP financial measures in assessing the Group's performance and when planning and forecasting future periods. Management believes that EBITDA, defined as earnings before interest, income tax expense, depreciation and amortization, is a useful financial metric to assess Home Inns Group's operating and financial performance before the impact of investing and financing transactions and income taxes.  In addition, management believes that EBITDA is widely used by other companies in the lodging industry and may be used as an analysis tool by both management and investors to measure and compare Home Inns Group's operational and financial performance with industry peers.

One of the limitations of using non-GAAP income from operations, EBITDA, adjusted EBITDA and non-GAAP net income attributable to shareholders is that they do not include all items that impact Home Inns Group's net income (loss) for the period.  These non-GAAP measures exclude share-based compensation expenses, foreign exchange gain or loss and gain or loss from fair value change of convertible notes, which have been and will continue to be a significant recurring expense in Home Inns Group's business. In addition, Home Inns Group's EBITDA and adjusted EBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as Home Inns Group does.  Management compensates for this and other limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure.  Home Inns Group computes the non-GAAP financial measures using the same consistent method from quarter to quarter. Reconciliations of GAAP and non-GAAP results are included at the end of this press release. The non-GAAP adjustment items do not include the tax impact.

The presentation of EBITDA and adjusted EBITDA should not be construed as an indication that Home Inns Group's future results will be unaffected by other charges and gains Home Inns Group considers to be outside the ordinary course of its business.

Home Inns Group completed its acquisition of 100% equity interest in Motel 168, and took control of Motel 168 effective on October 1, 2011.  Home Inns Group has consolidated Motel 168's operating and financial results since October 1, 2011.  Home Inns Group has presented certain separated financial data of Motel 168 in this earning release for the purpose of providing more information to investors.  Home Inns Group had substantially completed Motel 168's integration as of the third quarter of 2013 and ceased to present separate operating metrics and revenues for Motel 168.

For investor and media inquiries, please contact:

Johnny Wang Home Inns & Hotels Management Inc. Tel: +86-21-3337-3333*3870 Email: johnnywang@homeinns.com

Or

Ethan Ruan Home Inns & Hotels Management Inc. Tel: +86-21-3337-3333*3872 Email: zjruan@homeinns.com

Cara O'Brien FTI Consulting Tel: +852-3768-4537 Email: cara.obrien@fticonsulting.com

Home Inns & Hotels Management Inc.

Unaudited Condensed Consolidated Balance Sheet

December 31, 2013

March 31, 2014

RMB '000

RMB '000

US$ '000

ASSETS

Current assets:

Cash and cash equivalents

1,156,743

1,162,660

187,031

Restricted cash

173,276

163,632

26,323

Accounts receivable, net

99,964

116,927

18,809

Receivables from related parties

5,509

5,509

886

Consumables

41,231

33,835

5,443

Prepayments and other current assets

181,232

144,751

23,285

Deferred tax assets

78,839

82,322

13,243

Total current assets

1,736,794

1,709,636

275,020

Investment in a jointly controlled entity

5,833

5,522

888

Property and equipment, net

4,049,337

3,949,897

635,399

Goodwill

2,254,631

2,254,631

362,691

Intangible assets, net

1,112,499

1,101,811

177,243

Other assets

86,027

86,081

13,847

Non-current deferred tax assets

407,564

437,642

70,401

Total assets

9,652,685

9,545,220

1,535,489

LIABILITIES

Current liabilities:

Accounts payable

89,170

64,661

10,402

Payables to related parties

3,029

4,180

672

Finance lease liabilities

1,376

710

114

Salaries and welfare payable

222,865

115,121

18,519

Income tax payable

88,551

93,707

15,074

Other taxes payable

31,344

38,575

6,205

Deferred revenues

202,949

217,780

35,033

Other unpaid and accruals

228,881

251,730

40,494

Other payables

911,642

825,791

132,840

Deferred tax liability

52,155

54,009

8,688

Total current liabilities

1,831,962

1,666,264

268,041

Long term loans

713,337

719,796

115,790

Deferred rental

691,456

717,551

115,429

Deferred revenues

54,075

52,589

8,460

Deposits due to franchisees

115,351

122,962

19,780

Other long term payables

20,537

20,808

3,347

Unfavorable lease liabilities

337,627

329,397

52,988

Financial liabilities2

1,157,295

1,082,265

174,098

Deferred tax liabilities

283,522

281,086

45,217

Total liabilities

5,205,162

4,992,718

803,150

Commitments and contingencies

Shareholders' equity

Ordinary shares (US$0.005 par value; 200,000,000 shares authorized, 94,814,866 and 95,092,920 shares issued and outstanding as of December 31, 2013 and March 31 2014, respectively)

3,671

3,679

592

Additional paid-in capital

3,080,596

3,109,609

500,227

Statutory reserves

206,892

206,892

33,282

Retained earnings

1,140,252

1,215,117

195,470

Total Home Inns shareholders' equity

4,431,411

4,535,297

729,571

Noncontrolling interests

16,112

17,205

2,768

Total  shareholders' equity

4,447,523

4,552,502

732,339

Total liabilities and shareholders' equity

9,652,685

9,545,220

1,535,489

-

-

-

Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2164 on March 31, 2014, representing the certificated exchange rate published by the Federal Reserve Board.

Note 2:Financial liabilities represent convertible notes  measured at fair value.

 

 

Home Inns & Hotels Management Inc.

Unaudited Condensed Consolidated Statement of Operations

Quarter Ended

March 31, 2013

December 31, 2013

March 31, 2014

RMB '000

RMB '000

RMB '000

US$ '000

Revenues:

 Leased-and-operated hotels 

1,238,105

1,401,635

1,279,204

205,779

 Franchised-and-managed hotels 

164,113

208,048

193,254

31,088

 Total revenues 

1,402,218

1,609,683

1,472,458

236,867

 Less: Business tax and related surcharges 

(87,943)

(98,490)

(94,264)

(15,164)

 Net revenues 

1,314,275

1,511,193

1,378,194

221,703

 Operating costs and expenses: 

    Leased-and-operated hotel costs – 

 Rents and utilities 

(551,068)

(533,188)

(559,579)

(90,017)

 Personnel costs 

(275,184)

(256,064)

(270,666)

(43,541)

 Depreciation and amortization 

(169,500)

(180,503)

(180,145)

(28,979)

 Consumables, food and beverage 

(72,005)

(92,034)

(70,338)

(11,315)

 Others 

(123,339)

(184,221)

(130,978)

(21,070)

    Total leased-and-operated hotel costs 

(1,191,096)

(1,246,010)

(1,211,706)

(194,922)

    Personnel costs of Franchised-and-managed hotels 

(28,992)

(31,855)

(38,549)

(6,201)

    Sales and marketing expenses 

(21,380)

(47,040)

(25,035)

(4,027)

    General and administrative expenses 

(68,676)

(81,406)

(71,157)

(11,447)

 Total operating costs and expenses 

(1,310,144)

(1,406,311)

(1,346,447)

(216,597)

 Other income 

7,956

637

10,639

1,711

 Income from operations 

12,087

105,519

42,386

6,817

 Interest income 

340

2,331

977

157

 Interest expenses 

(15,787)

(11,958)

(11,981)

(1,927)

 Loss from equity investment 

(273)

(466)

(310)

(50)

 (Loss)/gain on change in fair value of convertible notes 

(5,661)

(70,870)

85,508

13,755

 Non-operating income 

4,431

20,879

-

-

 Foreign exchange gain/(loss), net 

2,579

13,551

(15,156)

(2,438)

 Income before income tax expenses and noncontrolling interests 

(2,284)

58,986

101,424

16,314

 Income tax expense 

(16,365)

(46,374)

(25,465)

(4,096)

 Net (loss)/income 

(18,649)

12,612

75,959

12,218

 Less:Net (income)/loss attributable to noncontrolling interests 

(736)

241

(1,094)

(176)

 Net (loss)/income attributable to ordinary shareholders 

(19,385)

12,853

74,865

12,042

Earnings per share

— Basic

(0.21)

0.14

0.79

0.13

— Diluted

(0.21)

0.14

0.05

0.01

Weighted average ordinary shares outstanding

— Basic

91,794

93,880

94,873

94,873

— Diluted

91,794

94,440

102,647

102,647

Share-based compensation expense was included in the statement of operations as follows:

Leased-and-operated hotel costs – Personnel costs

2,279

1,789

2,432

391

Personnel costs of Franchised-and-managed hotels

2,914

2,743

3,838

617

Sales and marketing expenses

386

431

253

41

General and administrative expenses

17,349

14,656

18,964

3,051

Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2164 on March 31, 2014, representing the certificated exchange rate published by the Federal Reserve Board.

 

Home Inns & Hotels Management Inc.

Reconciliation of GAAP and Non-GAAP Results

Quarter Ended March 31, 2014

GAAP Result

%of Total Revenue

Share-based Compensation

 Integration  cost

%of Total Revenue

Non-GAAP Result

%of Total Revenue

RMB '000

RMB '000

RMB '000

RMB '000

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Leased-and-operated hotel costs

(1,211,706)

82.3%

2,432

1,784

0.3%

(1,207,490)

82.0%

Personnel costs of Franchised-and-managed hotels

(38,549)

2.6%

3,838

-

0.3%

(34,711)

2.4%

Sales and marketing expenses

(25,035)

1.7%

253

-

0.0%

(24,782)

1.7%

General and administrative expenses

(71,157)

4.8%

18,964

317

1.3%

(51,876)

3.5%

Total operating costs and expenses

(1,346,447)

91.4%

25,487

2,101

1.9%

(1,318,859)

89.6%

Income from operations

42,386

2.9%

25,487

2,101

1.9%

69,974

4.8%

Quarter Ended March 31, 2014

GAAP Result

%of Total Revenue

Share-based Compensation

 Integration  cost

%of Total Revenue

Non-GAAP Result

%of Total Revenue

US$ '000

US$ '000

US$ '000

US$ '000

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Leased-and-operated hotel costs

(194,922)

82.3%

391

287

0.3%

(194,244)

82.0%

Personnel costs of Franchised-and-managed hotels

(6,201)

2.6%

617

-

0.3%

(5,584)

2.4%

Sales and marketing expenses

(4,027)

1.7%

41

-

0.0%

(3,986)

1.7%

General and administrative expenses

(11,447)

4.8%

3,051

51

1.3%

(8,345)

3.5%

Total operating costs and expenses

(216,597)

91.4%

4,100

338

1.9%

(212,159)

89.6%

Income from operations

6,817

2.9%

4,100

338

1.9%

11,255

4.8%

Quarter Ended December 31, 2013

GAAP Result

%of Total Revenue

Share-based Compensation

 Integration  cost

%of Total Revenue

Non-GAAP Result

%of Total Revenue

RMB '000

RMB '000

RMB '000

RMB '000

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Leased-and-operated hotel costs

(1,246,010)

77.4%

1,789

1,704

0.2%

(1,242,517)

77.2%

Personnel costs of Franchised-and-managed hotels

(31,855)

2.0%

2,743

-

0.2%

(29,112)

1.8%

Sales and marketing expenses

(47,040)

2.9%

431

-

0.0%

(46,609)

2.9%

General and administrative expenses

(81,406)

5.1%

14,656

317

0.9%

(66,433)

4.1%

Total operating costs and expenses

(1,406,311)

87.4%

19,619

2,021

1.3%

(1,384,671)

86.0%

Income from operations

105,519

6.6%

19,619

2,021

1.3%

127,159

7.9%

Quarter Ended March 31, 2013

GAAP Result

%of Total Revenue

Share-based Compensation

 Integration  cost

%of Total Revenue

Non-GAAP Result

%of Total Revenue

RMB '000

RMB '000

RMB '000

RMB '000

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Leased-and-operated hotel costs

(1,191,096)

84.9%

2,279

3,823

0.4%

(1,184,994)

84.5%

Personnel costs of Franchised-and-managed hotels

(28,992)

2.1%

2,914

-

0.2%

(26,078)

1.9%

Sales and marketing expenses

(21,380)

1.5%

386

-

0.0%

(20,994)

1.5%

General and administrative expenses

(68,676)

4.9%

17,349

317

1.3%

(51,010)

3.6%

Total operating costs and expenses

(1,310,144)

93.4%

22,928

4,140

1.9%

(1,283,076)

91.5%

Income from operations

12,087

0.9%

22,928

4,140

1.9%

39,155

2.8%

Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2164 on March 31, 2014, representing the certificated exchange rate published by the Federal Reserve Board.

 

Home Inns & Hotels Management Inc.

Reconciliation of GAAP and Non-GAAP Results (continued)

Quarter Ended

March 31, 2013

December 31, 2013

March 31, 2014

RMB '000

RMB '000

RMB '000

US$ '000

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Net (loss)/income attributable to ordinary shareholders (GAAP)

(19,385)

12,853

74,865

12,042

Foreign exchange (gain)/loss, net

(2,579)

(13,551)

15,156

2,438

Share-based compensation

22,928

19,619

25,487

4,100

Integration cost

4,140

2,021

2,101

338

Interest expenses -- Upfront fee amortization of term loans

959

-

-

-

Non-operating income-- Gain on change in fair value of interest swap transaction

(1,380)

-

-

-

Loss/(gain) on change in fair value of convertible notes

5,661

70,870

(85,508)

(13,755)

Adjusted net income attributable to ordinary shareholders (Non-GAAP)

10,344

91,812

32,101

5,163

Quarter Ended

March 31, 2013

December 31, 2013

March 31, 2014

RMB '000

RMB '000

RMB '000

US$ '000

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Earnings per share (GAAP)

— Basic

(0.21)

0.14

0.79

0.13

— Diluted

(0.21)

0.14

0.05

0.01

Weighted average ordinary shares outstanding

— Basic

91,794

93,880

94,873

94,873

— Diluted

91,794

94,440

102,647

102,647

Adjusted earnings per share (Non-GAAP)

— Basic

0.11

0.98

0.34

0.05

— Diluted

0.11

0.96

0.34

0.05

Weighted average ordinary shares outstanding

— Basic

91,794

93,880

94,873

94,873

— Diluted

92,804

101,894

95,193

95,193

Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2164 on March 31, 2014, representing the certificated exchange rate published by the Federal Reserve Board.

Note 2: The non-GAAP adjustment items do not include the tax impact.

 

Home Inns & Hotels Management Inc.

Reconciliation of GAAP and Non-GAAP Results (continued)

Quarter Ended

March 31, 2013

December 31, 2013

March 31, 2014

RMB '000

RMB '000

RMB '000

US$ '000

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Net (loss)/income attributable to ordinary shareholders

(19,385)

12,853

74,865

12,042

Interest income

(340)

(2,331)

(977)

(157)

Interest expenses

15,787

11,958

11,981

1,927

Income tax expense

16,365

46,374

25,465

4,096

Depreciation and amortization

174,924

186,061

185,507

29,842

EBITDA (Non-GAAP)

187,351

254,915

296,841

47,750

Foreign exchange (gain)/loss, net

(2,579)

(13,551)

15,156

2,438

Share-based compensation

22,928

19,619

25,487

4,100

Integration cost

4,140

2,021

2,101

338

Non-operating income-- Gain on change in fair value of interest swap transaction

(1,380)

-

-

-

Loss/(gain) on change in fair value of convertible notes

5,661

70,870

(85,508)

(13,755)

Adjusted EBITDA (Non-GAAP) 

216,121

333,874

254,077

40,871

%of total revenue

15.4%

20.7%

17.3%

17.3%

Note 1: The "Depreciation and amortization expense" includes the depreciation and amortization expenses of the Group. 

The depreciation and amortization expenses of all leased-and-operated hotels are included in "Operating costs and expenses". 

The depreciation and amortization expenses of administrative long-term assets are included in "General and administrative expenses".

 

Home Inns & Hotels Management Inc.

Operating Data

As of and for the quarter ended

March 31, 2013

December 31, 2013

March 31, 2014

Group

Motel 168

excluding Motel 168

Group

Motel 168

excluding Motel 168

Group

Motel 168

excluding Motel 168

Total Hotels in operation:

1,859

335

1,524

2,180

378

1,802

2,241

381

1,860

      Leased-and-operated hotels

818

150

668

872

163

709

876

164

712

      Franchised-and-managed hotels

1,041

185

856

1,308

215

1,093

1,365

214

1,148

Total rooms

222,841

49,205

173,636

256,555

52,889

203,666

262,321

53,040

209,281

Occupancy rate (as a percentage)

83.6%

76.7%

85.6%

84.0%

80.8%

84.8%

81.3%

76.7%

82.4%

Average daily rate (in RMB)

156

151

158

163

161

164

156

154

157

RevPAR (in RMB)

131

116

135

137

130

139

127

118

129

Like-for-like performance for hotels opened for at least 18 months during the current quarter

As of and for the quarter ended

March 31, 2013

March 31, 2014

Group

Motel 168

excluding Motel 168

Group

Motel 168

excluding Motel 168

Total Hotels in operation:

1,654

326

1,328

1,654

326

1,328

      Leased-and-operated hotels

782

172

610

781

172

609

      Franchised-and-managed hotels

872

154

718

873

154

719

Total rooms

198,688

46,739

151,949

196,589

44,004

152,585

Occupancy rate (as a percentage)

86.0%

77.9%

88.5%

83.9%

78.7%

85.5%

Average daily rate (in RMB)

157

152

158

157

154

158

RevPAR (in RMB)

135

119

140

132

122

135

One homeinn Leased-and-operated hotel was legally converted into Franchised-and-managed hotels in 2014.

*    "Occupancy rate" refers to the total number of occupied rooms divided by the total number of available rooms in a given period.

"Average daily rate" refers to total hotel room revenues divided by the total number of occupied rooms in a given period.

"RevPAR" represents revenue per available room, which is calculated by dividing total hotel room revenues by the total number of available rooms in a given period, or by multiplying average daily rates and occupancy rates in a given period.

The operating data of multi-brand conversion hotels were included in "Motel 168". 

 

SOURCE Home Inns & Hotels Management Inc.



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