2014

Home Inns Group Reports Fourth Quarter and Full Year 2012 Financial Results Annual Revenues Increased 46% to RMB 5.77 billion

1,772 Hotels in 253 Cities in China at Year End


SHANGHAI, March 11, 2013 /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 fourth quarter and full year ended December 31, 2012.

Home Inns Group acquired Motel 168 and has consolidated Motel 168's operating and financial results since October 1, 2011. Consolidated group numbers are presented in this earnings release unless specifically noted. For the purpose of providing more context and comprehensive information to investors, Home Inns Group separately presents key financial data excluding Motel 168 in this earnings release in Appendix 1.

Fourth Quarter and Full Year 2012 Financial Highlights

  • Total revenues increased 11.9% to RMB 1.47 billion for the fourth quarter of 2012 and increased 45.7% to RMB 5.770 billion for the full year 2012, which was within the higher end of the guidance range of RMB 5.715 billion to RMB 5.810 billion.
  • Adjusted EBITDA (non-GAAP) increased 14.6% to RMB 260.5 million (US$41.8 million) for the fourth quarter of 2012 and increased 25.9% to RMB 1.13 billion (US$181.9 million) for the full year 2012 

Key Financial Results                           







(RMB Million except RMB per ADS)

4Q12

4Q11

V%

FY12

FY11

V%

Total Revenues

1,465.7

1,309.9

11.9%

5,769.7

3,959.7

45.7%

Income from Operations

36.3

33.2

9.3%

273.7

297.4

-8.0%

    Adj. Income from Operations*

79.2

78.5

0.9%

464.1

457.3

1.5%

Net Income/Loss

6.3

32.7

-80.7%

-26.8

351.5

-107.6%

   Adj. Net Income/Loss*

80.6

36.6

120.2%

300.3

326.1

-7.9%

EBITDA*

188.2

229.2

-17.9%

849.5

949.0

-10.5%

    Adj. EBITDA*

260.5

227.4

14.6%

1,133.4

900.2

25.9%

Diluted Earnings/Losses per ADS

0.14

-0.12

F

-0.59

2.51

UF

    Adj. Diluted Earnings/Losses per ADS*

1.74

0.73

F

6.62

6.92

           UF

 

Note: Consolidation of Motel 168 financial results started October 1, 2011 impacting comparability of full year results

*Indicates non-GAAP financial measures which exclude any applicable non-recurring items or items not directly impacting underlying business operations, mainly, share-based compensation expenses, acquisition and integration expenses, amortization on up-front fees of acquisition term loans and gain or loss on change in fair value of convertible notes. (see commentary at the end of this earnings release for further details)

Fourth Quarter and Full Year 2012 Operational Highlights

  • Home Inns Group opened 366 new hotels in 2012, exceeding the guidance range of 330 to 360. As of December 31, 2012, the Group operated 1,772 hotels across 253 cities in China under its three brands. There were a total of 241 hotels contracted or under construction at the end of 2012 including 170 franchised-and-managed hotels representing a strong pipe-line for this business model.

Hotels in Operations

Openings

Closures

As of December 31, 2012

Group

Home Inns

Motel 168

Yitel

4Q12

FY12

4Q12

FY12

Total number of Hotels

1,772

1,431

334

7

96

366

6

20

    Leased-and-Operated

803

646

151

6

33

109

1

5

    Franchised-and-Managed

969

785

183

1

63

257

5

15

Contracted or under Construction

241

211

26

4





    Leased-and-Operated

71

56

13

2





    Franchised-and-Managed

170

155

13

2





  • As of December 31, 2012, Home Inns Group had a total of 11.9 million unique active non-corporate members under its frequent guests programs.

Operating Metrics


4Q2012

3Q2012

4Q2011

FY2012

FY2011

Occupancy Rate

83.8%

90.3%

84.2%

86.1%

88.8%

Average Daily rate (ADR, RMB)

165

174

168

168

172

Revenue per Available Room (RevPAR, RMB)

138

157

141

144

152

  • The year-over-year decrease in RevPAR was mainly driven by continued market softness across China despite signs of improvements in certain macroeconomic indicators. In addition, relatively weaker economic conditions in lower tier cities further hindered hotels' normal ramp up progress towards maturity. This short-term set back does not change the Company's conviction in its strategic positioning in lower tier cities where long term growth prospects exist.
  • The year-over-year decrease in RevPAR for the full year of 2012 was also attributable to the full year dilutive impact from Motel 168 in 2012 with a lower overall RevPAR than the core organic business as integration continues.
  • Benefiting from continued integration efforts, both occupancy rate and ADR for Motel 168 for the fourth quarter of 2012 improved, to 77.4% and RMB 160 from 73.5% and RMB 154, respectively, resulting in a 9.7% improvements year-over-year in fourth quarter RevPAR to reach RMB 124 from RMB 113 a year ago. RevPAR for Motel 168 for the full year of 2012 was RMB 125. The integration of Motel 168 remains on track and further improvements in RevPAR are expected in 2013 as the integration proceeds in final stages.

"Given sustained market challenges and increasing competition, we are reasonably pleased with our overall performance," said Mr. David Sun, the Company's chief executive officer. "We met our annual revenue expectations and exceeded our target for new hotel openings. Performance of mature hotels remained solid relative to market softness, the integration of Motel 168 continues to be on track, and we have finalized the Yitel brand design and financial blueprint."

"Our growth focus on low-capital-high-margin franchise-and-managed hotels is well supported by our strong brand, our well-run franchise programs and the increasing demand from our quality franchisee partners. We plan to conclude Motel 168 integration this year, and this second economy brand will then start to contribute positively to our bottom line. The impressive development trends of Yitel hotels in operations have proven concept and execution model, and we expect to scale up the Yitel portfolio accordingly," Mr. Sun continued. "Meaningful improvements may still be months ahead, and the Company is focused on sustainable profitable growth for the long run. We have built solid internal readiness including strong franchised-and-managed hotels growth momentum and continued cost control initiatives to take advantage of market recoveries when time comes and to capture long-term growth prospects of the Chinese economy."

Detailed Overview of Financial Results for Fourth Quarter and Full Year 2012

Total Revenues








Fourth Quarter 2012

Full Year 2012

(RMB/USD in Millions)

RMB

USD

V%

RMB

USD

V%

    Leased-and-Operated Hotels

1,305.0

209.5

10.5%

5,164.8

829.0

45.1%

    Franchised-and-Managed Hotels

160.7

25.8

24.8%

604.9

97.1

51.2%

Total Revenues

1,465.7

235.3

11.9%

5,769.7

926.1

45.7%

Less: Business Taxes and related surcharges

-90.1

-14.5

10.9%

-353.4

-56.7

41.8%

Net Revenues

1,375.5

220.8

12.0%

5,416.3

869.4

46.0%

  • Both year-over-year increases in total revenues from leased-and-operated hotels for the fourth quarter of 2012 and the full year of 2012 were mainly driven by an increase in the number of hotels in operation offsetting impact from market-driven decrease in RevPAR. The increase in the number of leased-and-operated hotels in operation for the full year was attributable in large part to acquisition of Motel 168 effective October 1, 2011.
  • Both year-over-year increases in total revenues from franchised-and-managed hotels for the fourth quarter of 2012 and the full year of 2012 were mainly driven by an increase in the number of such hotels in operation. The increase in the number of franchised-and-managed hotels in operation for the full year was attributable in large part to acquisition of Motel 168 effective October 1, 2011.
  • Revenues from Motel 168 included in total revenues were RMB 365.0 million (US$58.6 million) for the fourth quarter of 2012 and RMB 1.47 billion (US$235.7 million) for the full year of 2012. Revenues of Motel 168 fell slightly below its previous revenue guidance for the full year 2012 as a result of overall market weakness and significant elimination of unprofitable food and beverage business operations. Integration of Motel 168 remains on track and the Company expect to conclude the integration in 2013.

Total Operating Costs and Expenses / Total Operating Income















Fourth Quarter 2012





Share-Based

Integration

Adjusted



(RMB/USD in Millions                                              

GAAP Results

Compensation

Costs

Non-GAAP Results



Vpts - change in %pts of total revenues)

RMB

USD

  Vpts  

RMB

USD

  RMB  

  USD  

RMB

USD

  Vpts  



Leased-and-Operated Hotel Costs

1,208.8

194.0

1.0pts

-2.0

-0.3

-19.9

-3.2

1,186.9

190.5

0.8pts



Franchised-and-Managed Hotel Personnel Costs

24.6

3.9

0.1pts

-2.5

-0.4

-

-

22.1

3.5

0.1pts



Sales and Marketing Expenses

24.8

4.0

0.2pts

-0.4

-0.1

-

-

24.4

3.9

0.2pts



General and Administrative Expenses

83.4

13.4

-1.1pts

-17.6

-2.8

-0.6

-0.1

65.2

10.5

-0.3pts



Total Operating Costs and Expenses

1,341.6

215.3

0.3pts

-22.5

-3.6

-20.5

-3.3

1,298.6

208.4

0.8pts



Total Operating Income

36.3

5.8

-

-22.5

-3.6

-20.5

-3.3

79.2

12.7

-0.6pts






























Full Year 2012





Share-Based

Integration

Adjusted



(RMB/USD in Millions

GAAP Results

Compensation

Costs

Non-GAAP Results



Vpts - change in %pts of total revenues)

RMB

USD

Vpts

RMB

USD

RMB

USD

RMB

USD

Vpts



Leased-and-Operated Hotel Costs

4,642.0

745.1

5.7pts

-8.2

-1.3

-83.7

-13.4

4,550.1

730.3

4.5pts



Franchised-and-Managed Hotel Personnel Costs

125.0

20.1

0.3pts

-9.6

-1.5

-

-

115.5

18.5

0.3pts



Sales and Marketing Expenses

76.9

12.3

0.2pts

-1.5

-0.2

-0.1

-

75.3

12.1

0.2pts



General and Administrative Expenses

315.2

50.6

-3.0pts

-74.1

-11.9

-13.2

-2.1

228.0

36.6

-1.0pts



Total Operating Costs and Expenses

5,159.1

828.1

3.2pts

-93.4

-15.0

-97.0

-15.6

4,968.8

797.6

4.0pts



Other Income

16.6

2.7

n/a





16.6

2.7

n/a



Total Operating Income

273.7

43.9

-2.8pts

-93.4

-15.0

-97.0

-15.6

464.1

74.5

-3.5pts
















Total operating costs and expenses were RMB 1.34 billion (US$215.3 million) for the fourth quarter of 2012, representing 91.5% of total revenues for the quarter, and RMB 5.16 billion (US$ 828.1 million) for the full year of 2012, representing 89.4% of total revenues for the year. Total operating costs and expenses excluding any share-based compensation expenses and acquisition and integration costs, (non-GAAP) for the fourth quarter of 2012 were 88.6% of total revenues, compared to 87.8% in the same period a year ago, and 86.1% for the full year of 2012 compared to 82.2% for the full year of 2011.

Both year-over-year increases in total operating costs and expenses as a percentage of total revenues for the fourth quarter and the full year of 2012 were mainly due to overall soft market conditions, lack of systematic price increases and rising operating costs net of productivity benefits from general and administrative cost. The increase in this ratio for the full year was also due to a higher cost ratio from Motel 168 with one quarter of results consolidated in 2011 compared to four quarters of results consolidated in 2012.

  • Total leased-and-operated hotel costs were RMB 1.21 billion (US$194.0 million) for the fourth quarter of 2012 and RMB 4.64 billion (US$745.1 million) for the full year of 2012. Total leased-and-operated hotel costs excluding any share-based compensation expenses and acquisition and integration costs (non-GAAP) were 91.0% of the leased-and-operated hotel revenue in the fourth quarter of 2012 compared to 88.9% in the same period a year ago, and 88.1% for the full year of 2012 compared to 82.7% for the full year of 2011. The year-over-year increases in this expense ratio were mainly due to weaker revenue base driven by market softness, the absence of systematic price increases, and rising operating costs including energy costs and personnel costs not fully absorbed by productivity initiatives. The year-over-year increase in this expense ratio for the full year was also driven by a higher cost ratio from Motel 168 hotels whose results were consolidated starting fourth quarter of 2011.

    Pre-opening cost was RMB 26.8 million (US$4.3 million) for the fourth quarter of 2012 and RMB 104.2 million (US$16.7 million) for the full year of 2012.
  • Personnel costs of franchised-and-managed hotels were RMB 24.6 million (US$3.9 million) for the fourth quarter of 2012 and RMB 125.0 million (US$20.1 million) for the full year of 2012. Personnel costs of franchised-and-managed hotels excluding share-based compensation expenses (non-GAAP) were 13.8% of franchised-and-managed hotel revenues in the fourth quarter of 2012, compared to 14.3% in the same period of 2011, and 19.1% for the full year of 2012 compared to 17.2% for the full year of 2011. The decrease in this expense ratio in the fourth quarter of 2012 was due to one-time adjustment in the fourth quarter of 2012. The year-over-year increase in this ratio was mainly due to relatively lower revenue performance by franchised-and-managed hotels at Motel 168 whose results were consolidated for the full year of 2012 and only the fourth quarter for the full year of 2011.
  • Sales and marketing expenses were RMB 24.8 million (US$4.0 million) for the fourth quarter of 2012, and 76.9 million (US$12.3 million) for the full year of 2012. Sales and marketing expenses excluding share-based compensation expenses (non-GAAP) were 1.7% of total revenues for the fourth of quarter 2012 compared to 1.5% in the same period of 2011, and 1.3% of total revenues for the full year of 2012 compared to 1.1% of total revenues in 2011. The year-over-year increase in this sales and marketing expenses as a percentage of total revenues for the fourth quarter was mainly due to non-recurring spending on marketing programs in the fourth quarter in support of Home Inns Group's multi-brand strategy. The sales and marketing expense ratio was 1.3% in the full year of 2011 after taking into consideration of the one-time catch-up adjustment resulted from the adoption of an estimated redemption rate for customer rewards during 2011. The Company continued to rely largely on basic and cost-effective sales and market practices in supporting its revenue growth.
  • General and administrative expenses were RMB 83.4 million (US$13.4 million) for the fourth quarter of 2012, and RMB 315.2 million (US$50.6 million) for the full year of 2012. General and administrative expenses excluding any share-based compensation expenses, acquisition and integration costs (non-GAAP) were 4.5% of total revenues for the quarter compared to 4.7% in the same period of 2012, and 4.0% of total revenue for the full year of 2012 compared to 5.0% for the full year of 2011. Both year-over-year decreases in general and administrative expenses as a percentage of total revenues in the fourth quarter and full year 2012 came as a result of effective cost control and productivity enhancements. The Company continued to benefit from cost discipline and economies of scale.

Income from Operations was RMB 36.3 million (US$5.8 million) for the fourth quarter of 2012 and RMB 273.7 million (US$43.9 million) for the full year of 2012. Income from operations excluding share-based compensation expenses and integration cost (non-GAAP) for the fourth quarter of 2012 was RMB 79.2 million (US$12.7 million), or 5.4% of total revenues, compared to RMB 78.5 million, or 6.0% of total revenues, in the same period of 2011. Income from operations excluding share-based compensation expenses and integration cost (non-GAAP) for 2012 was RMB 464.1 million (US$74.5 million), or 8.0% of total revenues, compared to RMB 457.3 million, or 11.5% of total revenues, in 2011.

The year-over-year decrease in income from operations as a percentage of total revenue for the fourth quarter of 2012 and full year of 2012 was mainly due to weaker operating environment, and the absence of systematic price increases to offset rising hotel operating costs including utilities and personnel related costs. Consolidation of Motel 168 for the full year of 2012 with higher cost ratio as the business was still in the process of integration also contributed to the year over year decrease in the income ratio.

Provided that the market condition improves in the future, the Company is prepared to improve profitability through pricing, higher-mix of margin-rich franchise-and-managed hotels expansion focus, further productivity gains and headquarter costs leverage.

EBITDA (non-GAAP)









(RMB/USD in Millions)                                                    

Fourth Quarter 2012

Full Year 2012



(%Rev-% of Total Revenues)

RMB

USD

%Rev

RMB

USD

%Rev



EBITDA (Non-GAAP)

188.2

30.2

12.8%

849.5

136.4

14.7%



    Net Foreign Exchange Gain/Loss

-15.0

-2.4

-1.0%

-0.2

-0.0

-0.0%



    Share-Based Compensation Expenses

22.5

3.6

1.5%

93.4

15.0

6.4%



    Integration Cost

20.5

3.3

1.4%

97.0

15.5

6.6%



    Non-Operating Income/Expenses

-1.0

-0.2

-0.1%

6.7

1.1

0.5%



    Gain/Loss on Fair Value Change in Convertible Notes

45.4

7.3

3.1%

87.1

14.0

5.9%



Adjusted EBITDA (Non-GAAP)

260.5

41.8

17.8%

1,133.4

181.9

19.6%












Consolidated Net Income Attributable to Home Inns Group's Shareholders














(RMB/USD in Millions)                                                         

Fourth Quarter 2012

Full Year 2012



(%Rev-% of Total Revenues)

RMB

USD

%Rev

RMB

USD

%Rev



Net Income (GAAP)

6.3

1.0

0.4%

-26.8

-4.3

-0.5%



    Net Foreign Exchange Gain/Loss

-15.0

-2.4

-1.0%

-0.2

-0.0

-0.0%



    Share-Based Compensation Expenses

22.5

3.6

1.5%

93.4

15.0

1.6%



    Integration Cost

20.5

3.3

1.4%

97.0

15.6

1.7%



    Amortization of Upfront Fees on Term Loan

2.0

0.3

0.1%

43.3

6.9

0.7%



    Non-Operating Income/Expenses

-1.0

-0.2

-0.1%

6.7

1.1

0.1%



    Gain/Loss on Fair Value Change in Convertible Notes

45.4

7.3

3.1%

87.1

14.0

1.5%



Adjusted Net Income (Non-GAAP)

80.6

12.9

5.5%

300.3

48.2

5.2%












Basic and Diluted Earnings Per Ordinary Share and Per ADS















Fourth Quarter 2012

Full Year 2012


Ordinary Share

ADS Share

Ordinary Share

ADS Share


RMB

USD

RMB

USD

RMB

  USD  

  RMB  

  USD  

Basic

0.07

0.01

0.14

0.02

-0.29

-0.05

-0.59

-0.09

Diluted

0.07

0.01

0.14

0.02

-0.29

-0.05

-0.59

-0.09










Adjusted Basic (Non-GAAP)

0.89

0.14

1.77

0.28

3.31

0.53

6.62

1.06

Adjusted Diluted (Non-GAAP)

0.87

0.14

1.74

0.28

3.31

0.53

6.62

1.06

Cash Flow

Net operating cash flow for the fourth quarter of 2012 was RMB 186.8 million (US$30.0 million), compared to RMB 139.5 million in the same period of 2011. Capitalized expenditures for the fourth quarter of 2012 were RMB 250.4 million (US$40.2 million), while related cash paid for capital expenditures during the quarter was RMB 305.6 million (US$49.0 million).

For the full year 2012, net operating cash flow was RMB 716.9 million (US$115.1 million), compared to RMB 726.1 million in 2011. Capitalized expenditures for 2012 were RMB 1.00 billion (US$160.9 million), while related cash paid for capital expenditures during the year was RMB 958.1 million (US$153.8 million).

Balance Sheet

As of December 31, 2012, Home Inns Group had cash and cash equivalents of RMB 663.2 million (US$106.4 million). Financial liabilities of RMB 1.07 billion (US$171.2 million) consisted of the outstanding balance of long-term financial liability for convertible notes (issued in December 2010) and interest swap contracts (both measured at fair value). The balance of the Company's U.S. dollar-denominated four-year term loan facility was RMB 748.0 million (US$120.1 million). The Company redeemed the outstanding convertible bonds issued in 2007 in the fourth quarter of 2012.

The Company plans to execute its future expansions with more franchised-and-managed hotels which do not require capital investments. The number of new lease-and-operated hotels openings will be reduced accordingly. With a strong underlying cash-generative hotel operations, the Company expects to improve its cash position in the near future.

Outlook for First Quarter and Full Year 2013

Home Inns Group targets to open 360 to 380 new hotels in 2013, including approximately 80 to 90 leased-and-operated hotels and 270 to 300 franchised-and-managed hotels.

Home Inns Group expects total revenues for the group for 2013 to be in the range of RMB 6,600 million (US$1,059.4 million) to RMB 6,800 million (US$1,091.5 million), representing a growth of 14.4% to 17.9% over 2012. Total revenues for the group in the first quarter of 2013 are expected to be in the range of RMB 1,385 million (US$222.3 million) to RMB 1,415 million (US$227.1 million).

Total revenues for Motel 168 brand for 2013 are expected to be in the range of RMB 1,650 million (US$264.8 million) to RMB 1,700 million (US$272.9 million). Total revenues for Motel 168 brand in the first quarter of 2013 are expected to be in the range of RMB 330 million (US$53.0 million) to RMB 340 million (US$54.6 million).

Excluding Motel 168, total revenues for 2013 are expected to be in the range of RMB 4,950 million (US$794.5 million) to RMB 5,100 million (US$818.6 million). Excluding Motel 168, total revenues in the first quarter of 2013 are expected to be in the range of RMB 1,055 million (US$169.3 million) to RMB 1,075 million (US$172.5 million).

These forecasts reflect the Company's current and preliminary view, which 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 6.2301 to US$1.00, the noon buying rate for December 31, 2012 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 Daylight Time on Monday, March 11, 2013 (9 AM Beijing/Hong Kong Time on Tuesday, March 12, 2013).

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

U.S. (toll free):

1.866.519.4004

U.S.:

1.718.354.1231

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 the end of Monday, March 18, 2013 U.S. Eastern Daylight Time.

U.S. toll free:

1.855.452.5696

China toll free:

400.120.0932 or 800.870.0205

Hong Kong toll free:

800.963.117

International:

61.2.8199.0299



Conference ID number:

96051138

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 the number of hotels and hotel rooms, as well as the geographic coverage of the hotel chain. Since the Company commenced operations in 2002, it has built Home Inn as one of the best-known economy hotel brands in China. In October of 2011, Home Inns Group 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, withholding tax for profit distribution of previous periods 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, withholding tax for profit distribution of previous periods, 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

Any financial data referring to "Excluding Motel 168" are also non-GAAP financial measures. 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 will provide separate financial data for Motel 168 through the integration period.

For investor and media inquiries, please contact:

Johnny Wang
Home Inns & Hotels Management Inc.
Tel: +86-21-3401-9898*2504
Email: johnnywang@homeinns.com

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

Appendix 1:

For the purpose of providing more context and comprehensive information to investors, Home Inns Group separately presents key financial data excluding Motel 168 below. Home Inns Group will continue to provide separate financial data for Motel 168 through the integration period. All information outlined below excludes Motel 168 results and Motel 168 integration costs unless specifically mentioned.

Fourth Quarter and Full Year 2012 Operational and Financial Highlights for Home Inns and Yitel Hotels


Operating Metrics                                             












4Q12


3Q12

4Q11


FY12

FY11




Occupancy Rate

85.6%


92.7%

88.4%


88.7%

90.3%




Average Daily rate (ADR RMB)

166


177

173


170

173




Revenue per Available Room (RevPAR RMB)

143


164

153


151

156















Total Revenues

4Q12

FY12





(Millions)

RMB

USD

V%

RMB

USD

V%





Total Revenues

1,100.6

176.7

16.8%

4,301.2

690.4

19.7%





Leased-and-Operated Hotels

959.7

154.0

15.7%

3,767.1

604.7

17.4%





Franchised-and-Managed Hotels

140.9

22.6

25.3%

534.1

85.7

39.2%
















Total Operating Costs and Expenses












Fourth Quarter 2012

(Millions)

GAAP Results

Share-based Comp.

Integration

Non-GAAP Results

(Vpts – change in %pts of total revenue)

RMB

USD

  Vpts  

RMB

USD

RMB

USD

RMB

USD

Vpts

Leased-and-Operated Hotel Costs

843.9

135.5

1.4pts

-1.8

-0.3

-0.1

-0.02

842.0

135.1

1.4pts

Franchised-and-Managed Hotel Personnel Costs

20.8

3.3

0.0pts

-2.2

-0.4

-

-

18.7

3.0

0.0pts

Sales and Marketing Expenses

21.0

3.4

0.2pts

-0.4

-0.06

-

-

20.7

3.3

0.2pts

General and Administrative Expenses

73.6

11.8

-1.3pts

-16.9

-2.7

-

-

56.6

9.1

-0.5pts

Total Operating Costs and Expenses

959.3

154.0

0.3pts

-21.3

-3.4

-0.1

-

937.9

150.5

1.1pts













Full Year 2012

(Millions)

GAAP Results

Share-based Comp.

Integration

Non-GAAP Results

(Vpts – change in %pts of total revenues)

RMB

USD

Vpts

RMB

USD

RMB

USD

RMB

USD

Vpts

Leased-and-Operated Hotel Costs

3,218.8

516.7

2.3pts

-7.2

-1.2

-7.8

-1.3

3,203.7

514.2

2.1pts

Franchised-and-Managed Hotel Personnel Costs

103.7

16.6

0.5pts

-8.4

-1.4

-

-

95.3

15.3

0.4pts

Sales and Marketing Expenses

65.6

10.5

0.4pts

-1.5

-0.2

-

-

64.0

10.3

0.4pts

General and Administrative Expenses

264.1

42.4

-2.8pts

-71.9

-11.5

-

-

192.2

30.9

-0.8pts

Total Operating Costs and Expenses

3,652.2

586.2

0.4pts

-89.1

-14.3

-7.8

-1.3

3,555.3

570.7

2.0pts












Profitability

Fourth Quarter 2012

(Millions)

GAAP Results


Reconciliation


Non-GAAP Results

(Vpts - change in %pts of total revenues)

RMB

USD

Vpts


RMB

USD


RMB

USD

Vpts

Income from Operations

74.6

12.0

1.2pts


21.4

3.4


96.0

15.4

0.7pts

Net Income

4.4

0.7

-4.9pts


53.3

8.6


57.7

9.3

2.4pts












EBITDA (Non-GAAP)

183.0

29.4

-2.7pts


51.3

8.2


234.3

37.6

4.9pts













Full Year 2012

(Millions)

GAAP Results


Reconciliation


Non-GAAP Results

(Vpts - change in %pts of total revenues)

RMB

USD

Vpts


RMB

USD


RMB

USD

Vpts

Income from Operations

397.6

63.8

1.9pts


1.0

0.2


494.5

79.4

0.7pts

Net Income

58.4

9.4

-8.6pts


233.3

37.4


291.7

46.8

-0.9pts












EBITDA (Non-GAAP)

794.3

127.5

-3.7pts


190.0

30.5


984.3

158.0

3.4pts

 

Home Inns & Hotels Management Inc.





Unaudited Condensed Consolidated Balance Sheet





















December 31, 2011


December 31, 2012



RMB '000


RMB '000


US$ '000








ASSETS







Current assets:







Cash and cash equivalents


1,786,038


663,156


106,444

Restricted cash


205,926


205,739


33,023

Accounts receivable, net


91,980


98,176


15,758

Receivables from related parties


6,379


6,818


1,094

Consumables


43,049


41,600


6,677

Prepayments and other current assets


137,887


172,534


27,694

Deferred tax assets


75,446


80,369


12,900








Total current assets


2,346,705


1,268,392


203,590





























Investment in a jointly controlled entity


8,301


6,625


1,063

Property and equipment, net


3,452,846


3,846,835


617,460

Goodwill


2,197,728


2,254,631


361,893

Intangible assets, net


1,174,452


1,149,419


184,494

Other assets


170,039


117,350


18,836

Non-current deferred tax assets


199,765


310,762


49,881








Total assets


9,549,836


8,954,014


1,437,217








LIABILITIES







Current liabilities:







Accounts payable


91,457


76,825


12,331

Payables to related parties


2,797


3,798


610

Short term loans


346,550


12,571


2,018

Finance lease liabilities


7,006


6,660


1,069

Salaries and welfare payable


178,032


215,569


34,601

Income tax payable


80,356


76,382


12,260

Other taxes payable


27,295


27,761


4,456

Deferred revenues


202,870


202,874


32,564

Convertible bonds


113,051


-


-

Other unpaid and accruals


154,498


165,886


26,624

Other payables


847,090


925,134


148,494

Deferred tax liability


38,313


29,439


4,725















Total current liabilities


2,089,315


1,742,899


279,752








Long term loans


1,165,666


735,404


118,040

Deferred rental


593,955


631,618


101,382

Deferred revenues


79,202


45,089


7,237

Finance lease liabilities


7,750


1,620


260

Deposits


63,472


91,462


14,681

Other long term payables


-


10,620


1,705

Unfavorable lease liabilities


396,774


370,548


59,477

Financial liabilities*


979,008


1,066,771


171,229

Deferred tax liabilities


294,728


288,321


46,279








Total liabilities


5,669,870


4,984,352


800,042















Commitments and contingencies














Shareholders' equity







Ordinary shares (US$0.005 par value;
200,000,000 shares authorized, 90,659,882
and 91,672,320 shares issued and
outstanding as of December 31, 2011 and
December 31 2012, respectively)


3,542


3,574


574








Additional paid-in capital


2,683,923


2,802,905


449,897

Statutory reserves


125,863


158,417


25,428








Retained earnings


1,051,976


992,505


159,308








Total Home Inns shareholders' equity


3,865,304


3,957,401


635,207








Noncontrolling interests


14,662


12,261


1,968








Total shareholders' equity


3,879,966


3,969,662


637,175








Total liabilities and shareholders' equity


9,549,836


8,954,014


1,437,217



-


-


-








Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2301

on December 31, 2012, representing the certificated exchange rate published by the Federal Reserve Board.

Note 2:Financial liabilities represent convertible notes measured at fair value and interest swap transaction.

 

Home Inns & Hotels Management Inc.



































Unaudited Condensed Consolidated Statement of Operations









































































































Quarter Ended


Year Ended



December 31, 2011


September 30, 2012


December 31, 2012


December 31, 2011


December 31, 2012



RMB '000


RMB '000


RMB '000


RMB '000


RMB '000


RMB '000


RMB '000


US$ '000


RMB '000


RMB '000


RMB '000


RMB '000


RMB '000


RMB '000


US$ '000


RMB '000


RMB '000



Group


Motel 168


excluding
Motel 168


Group


Motel 168


excluding
Motel 168


Group


Group


Motel 168


excluding
Motel 168


Group


Motel 168


excluding
Motel 168


Group


Group


Motel 168


excluding
Motel 168




































Revenues:                                                                               


































Leased-and-operated hotels


1,181,157


351,380


829,777


1,431,786


381,068


1,050,718


1,304,958


209,460


345,233


959,725


3,559,740


351,380


3,208,360


5,164,799


829,007


1,397,734


3,767,065

Franchised-and-managed hotels


128,743


16,243


112,500


166,624


17,797


148,827


160,724


25,798


19,812


140,912


399,986


16,243


383,743


604,936


97,099


70,832


534,104



































Total revenues


1,309,900


367,623


942,277


1,598,410


398,865


1,199,545


1,465,682


235,258


365,045


1,100,637


3,959,726


367,623


3,592,103


5,769,735


926,106


1,468,566


4,301,169

Less: Business tax and related surcharges


(81,307)


(21,258)


(60,049)


(97,003)


(23,683)


(73,320)


(90,149)


(14,470)


(21,370)


(68,779)


(249,274)


(21,258)


(228,016)


(353,418)


(56,728)


(87,218)


(266,200)



































Net revenues


1,228,593


346,365


882,228


1,501,407


375,182


1,126,225


1,375,533


220,788


343,675


1,031,858


3,710,452


346,365


3,364,087


5,416,317


869,378


1,381,348


4,034,969



































Operating costs and expenses:


































Leased-and-operated hotel costs –


































Rents and utilities


(452,605)


(160,964)


(291,641)


(496,559)


(165,845)


(330,714)


(514,213)


(82,537)


(158,565)


(355,648)


(1,232,662)


(160,964)


(1,071,698)


(1,953,243)


(313,517)


(631,320)


(1,321,923)

Personnel costs


(224,501)


(65,606)


(158,895)


(269,260)


(76,527)


(192,733)


(245,909)


(39,471)


(67,833)


(178,076)


(657,155)


(65,606)


(591,549)


(1,037,371)


(166,510)


(296,889)


(740,482)

Depreciation and amortization


(139,023)


(46,012)


(93,011)


(156,294)


(41,830)


(114,464)


(158,078)


(25,373)


(39,707)


(118,371)


(398,914)


(46,012)


(352,902)


(612,789)


(98,359)


(169,482)


(443,307)

Consumables, food and beverage


(104,687)


(40,518)


(64,169)


(96,555)


(25,258)


(71,297)


(99,834)


(16,024)


(28,013)


(71,821)


(258,120)


(40,518)


(217,602)


(351,338)


(56,394)


(94,911)


(256,427)

Others


(145,826)


(43,783)


(102,043)


(195,247)


(58,254)


(136,993)


(190,804)


(30,626)


(70,846)


(119,958)


(413,815)


(43,783)


(370,032)


(687,254)


(110,312)


(230,597)


(456,657)



































Total leased-and-operated hotel costs


(1,066,642)


(356,883)


(709,759)


(1,213,915)


(367,715)


(846,200)


(1,208,838)


(194,031)


(364,964)


(843,874)


(2,960,666)


(356,883)


(2,603,783)


(4,641,995)


(745,092)


(1,423,199)


(3,218,796)



































Personnel costs of Franchised-and-managed
hotels


(20,083)


(2,335)


(17,748)


(45,046)


(7,894)


(37,152)


(24,581)


(3,946)


(3,746)


(20,835)


(72,009)


(2,335)


(69,674)


(125,031)


(20,069)


(21,303)


(103,728)

Sales and marketing expenses


(19,574)


(3,557)


(16,017)


(18,351)


(2,405)


(15,946)


(24,793)


(3,980)


(3,785)


(21,008)


(44,451)


(3,557)


(40,894)


(76,878)


(12,340)


(11,317)


(65,561)

General and administrative expenses


(89,088)


(13,858)


(75,230)


(77,850)


(9,221)


(68,629)


(83,408)


(13,388)


(9,828)


(73,580)


(335,888)


(13,858)


(322,030)


(315,235)


(50,599)


(51,145)


(264,090)



































Total operating costs and expenses


(1,195,387)


(376,633)


(818,754)


(1,355,162)


(387,235)


(967,927)


(1,341,620)


(215,345)


(382,323)


(959,297)


(3,413,014)


(376,633)


(3,036,381)


(5,159,139)


(828,100)


(1,506,964)


(3,652,175)



































Other income


-


-


-


7,742


239


7,503


2,341


376


299


2,042


-


-


-


16,558


2,658


1,713


14,845




































Income/(loss) from operations


33,206


(30,268)


63,474


153,987


(11,814)


165,801


36,254


5,819


(38,349)


74,603


297,438


(30,268)


327,706


273,736


43,936


(123,903)


397,639



































Interest income


11,497


1,773


9,724


615


190


425


861


138


176


685


31,996


1,773


30,223


11,874


1,906


1,001


10,873

Interest expenses


(28,313)


(630)


(27,683)


(27,182)


(177)


(27,005)


(17,393)


(2,792)


(150)


(17,243)


(46,868)


(630)


(46,238)


(119,416)


(19,168)


(758)


(118,658)

Loss from equity investment


-


-


-


(466)


(467)


-


(493)


(79)


(493)


-


-


-


-


(2,305)


(370)


(2,305)


-

Gain/(loss) on change in fair value of convertible notes


35,966


-


35,966


(26,765)


-


(26,765)


(45,356)


(7,280)


-


(45,356)


198,547


-


198,547


(87,099)


(13,980)


-


(87,099)

Gain on buy-back of convertible bonds


-


-


-


-


-


-


-


-


-


-


1,521


-


1,521


-


-


-


-

Non-operating income


4,895


2,927


1,968


11,044


2,136


8,908


19,683


3,160


2,113


17,570


35,899


2,927


32,972


47,986


7,702


6,705


41,281

Non-operating expenses


(7,315)


-


(7,315)


(7,818)


-


(7,818)


-


-


-


-


(7,315)


-


(7,315)


(11,403)


(1,830)


-


(11,403)

Foreign exchange gain/(loss), net


18,495


548


17,947


(6,748)


(212)