Home Inns Group Reports Second Quarter 2013 Financial Results

Total Revenues Increased 11% Year over Year to RMB 1.60 billion

Adjusted Net Income Increased 29% Year over Year to RMB 139.7 million

12 Aug, 2013, 17:00 ET from Home Inns & Hotels Management Inc.

SHANGHAI, Aug. 12, 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 second quarter ended June 30, 2013.

The Company 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 regarding Motel 168's integration, the Company has separately presented operating metrics and key financial data for Motel 168 hotels through the end of 2012. The Company will continue to provide Motel 168's operating metrics and revenues through the remaining integration period in 2013.

Second Quarter 2013 Financial Highlights

  • Total revenues were in line with guidance and increased 10.5% to RMB 1.60 billion (US$261.0 million).
  • Net income attributable to ordinary shareholders increased 160.2% year over year to RMB 94.8 million (US$15.4 million). Adjusted net income attributable to ordinary shareholders (non-GAAP) increased 28.8% year over year to RMB 139.7 million (US$22.8 million).
  • EBITDA (non-GAAP) increased 22.4% year over year to RMB 348.7 million (US$56.8 million). Adjusted EBITDA (non-GAAP) increased 18.7% to RMB 393.6 million (US$64.1 million) or 24.6% of total revenues compared to 22.9% in the second quarter of 2012.

Key Financial Results

(RMB in Millions except RMB per ADS)

2Q2013

2Q2012

 V%

Total Revenues

1,601.9

1,449.9

10.5%

Income from Operations

180.1

120.4

49.6%

Adj. Income from Operations*

208.2

170.4

22.2%

Net Income

94.8

36.4

160.2%

Adj. Net Income*

139.7

108.5

28.8%

EBITDA*

348.7

284.8

22.4%

Adj. EBITDA*

393.6

331.6

18.7%

Diluted Earnings per ADS

1.68

0.75

125.5%

Adj. Diluted Earnings per ADS*

2.89

2.17

33.3%

Note: Consolidation of Motel 168 financial results started on October 1, 2011 "V%" represents year-over-year change in percentage * Indicates a non-GAAP financial measure which excludes share-based compensation expenses, integration expenses, accelerated fee amortization on early extinguishment of Term Loan, gain or loss on change in fair value of convertible notes, gain on change in fair value of interest swap transaction and net foreign exchange gain (see commentary at the end of this earnings release for full details).

Second Quarter 2013 Operational Highlights

  • Home Inns Group opened 100 new hotels in the second quarter of 2013 and operated 1,953 hotels across 271 cities in China under its three brands as of June 30, 2013. There were a total of 206 hotels contracted or under construction, including 146 franchised-and-managed hotels. The pipeline of franchised-and-managed hotels remains strong given continued demand for this business model from existing and new potential franchisee partners.

 Hotel Count

Openings

Closures

Group

Home Inns

Motel 168

Yitel

Group

Group

In Operation

1,953

1,602

341

10

100

6

Leased-and-Operated

834

671

154

9

17

1

Franchised-and-Managed

1,119

931

187

1

83

5

Contracted or under Construction

206

163

35

8

Leased-and-Operated

60

41

14

5

Franchised-and-Managed

146

122

21

3

  • As of June 30, 2013, Home Inns Group had a total of 14.3 million unique active non-corporate members under its frequent guests programs.

Operating Metrics

2Q2013

1Q2013

2Q2012

Occupancy Rate

87.0%

83.6%

89.2%

Average Daily Rate (ADR, RMB)

167

156

167

Revenue per Available Room (RevPAR, RMB)

145

131

149

  • Occupancy rate decreased 2.2 percentage points year over year driven by continued overall market softness while ADR was flat to the same period last year. The resulting year-over-year decrease in RevPAR in the second quarter of 2013 was consistent with economy hotels' market performance.
  • For the second quarter of 2013, RevPAR for Motel 168 improved 2.3% year over year to RMB 132 from RMB 129 as Motel 168's integration continued to generate improved results. Approximately thirty Motel 168 hotels completed dual-brand conversions and commenced operations in the second quarter of 2013. Motel 168 occupancy rate increased to 82.1% from 80.8% and Motel 168 ADR increased to RMB 161 from RMB 159 from the same period last year.

"Navigating through a persistently challenging business environment, the Company maintained steady revenue performance and delivered another quarter of margin expansion year over year," said Mr. David Sun, the Company's chief executive officer. "In spite of tough market conditions, Motel 168 hotels continued their trend of performance improvements as a result of solid execution of our integration plans. Our cost control and productivity measures have proven effective in generating sustainable benefits to protect margin. Meanwhile, the gradual increase of revenues from franchise operations will provide a steady support for profitability enhancements going forward."

"While prospects for long range growth remain positive for the travel industry in China, we expect the market to remain stable but to lack catalysts for dramatic improvements in macroeconomic conditions in the near term. Accordingly, we are adjusting the new leased-and-operated hotels target to 65 to 70 from the previous 80 to 90 but raising our total new hotel openings for the year to 400. This modification in our strategy will enable us to meet the strong demand for franchise development, to manage the pace of leased-and-operated hotel openings and to improve the effectiveness of our capital deployment. Even though we are lowering the revenue expectations for the year slightly, the impact of lower revenue is reasonably expected to be absorbed by a meaningful increase in our profitability," Mr. Sun continued. "We have executed rapid growth for nearly a decade and we have now established solid foundations for maintaining our leadership scale in the industry, improving profitability and increasing value-creation for our shareholders in this next stage of growth."

Detailed Financial Results for Second Quarter 2013

Total Revenues

(RMB/USD in Millions)

 Second Quarter 2013

RMB

USD

 V%

Leased-and-Operated Hotels

1,412.7

230.2

8.6%

Franchised-and-Managed Hotels

189.3

30.8

26.4%

Total Revenues

1,601.9

261.0

10.5%

Less: Business Taxes

-99.2

-16.2

11.1%

Net Revenues

1,502.7

244.8

10.4%

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

  • The year-over-year increase in total revenues from both leased-and-operated and franchised-and-managed hotels in the second quarter of 2013 was mainly driven by an increase in the number of hotels in operation.
  • Revenues from Motel 168 included in total revenues were RMB 393.2 million (US$64.1 million) for the second quarter of 2013.

Total Operating Costs and Expenses / Total Operating Income

(RMB/USD in Millions)

  Second Quarter 2013  

Adjusted

GAAP Results

 Reconciliation

Non-GAAP Results

RMB

USD

 Vpts

RMB

USD

RMB

USD

 Vpts

Leased-and-Operated Hotel Costs

1,187.5

193.5

-3.3pts

7.4

1.2

1,180.1

192.3

-1.9pts

Franchised-and-Managed Hotel Personnel Costs

42.3

6.9

0.3pts

2.7

0.4

39.7

6.5

0.4pts

Sales and Marketing Expenses

17.3

2.8

0.0pts

0.4

0.1

17.0

2.8

0.1pts

General and Administrative Expenses

76.7

12.5

-0.3pts

17.7

2.9

58.9

9.6

0.0pts

Total Operating Costs and Expenses

1,323.8

215.7

-3.2pts

28.1

4.6

1,295.7

211.1

-1.5pts

Total Operating Income

180.1

29.3

2.9pts

28.1

4.6

208.2

33.9

1.2pts

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

Total Operating Costs and Expenses were RMB 1.32 billion (US$215.7 million) for the second quarter of 2013, representing 82.6% of total revenues compared to RMB 1.24 billion or 85.8% of total revenues for the second quarter of 2012. Total operating costs and expenses excluding any share-based compensation expenses and integration costs (non-GAAP) for the second quarter of 2013 were 80.9% of total revenues, compared to 82.4% in the same period a year ago.

  • Total leased-and-operated hotel costs were RMB 1.19 billion (US$193.5 million), or 84.1% of leased-and-operated hotel revenues for the second quarter of 2013, compared to RMB 1.12 billion, or 86.3% of leased-and-operated hotel revenues for the second quarter of 2012. Total leased-and-operated hotel costs excluding any share-based compensation expenses and integration costs (non-GAAP) were 83.5% of leased-and-operated hotel revenues in the second quarter of 2013, compared to 84.3% in the same period a year ago. The year-over-year decrease in this expense ratio was mainly due to continued productivity and operational efficiency enhancements at the hotel operational level. Pre-opening cost was RMB 19.1 million (US$3.1 million) for the second quarter of 2013.
  • Personnel costs of franchised-and-managed hotels were RMB 42.3 million (US$6.9 million) for the second quarter of 2013. Personnel costs of franchised-and-managed hotels excluding share-based compensation expenses (non-GAAP) were 21.0% of franchised-and-managed hotel revenues in the second quarter of 2013, compared to 20.2% in the same period of 2012. The increase in personnel costs of franchised-and-managed hotels was consistent with the increase in the number of franchised-and-managed hotels in operation.
  • Sales and marketing expenses were RMB 17.3 million (US$2.8 million) for the second quarter of 2013 compared to RMB 15.6 million for the same period 2012. Sales and marketing expenses excluding share-based compensation expenses (non-GAAP) were 1.1% of total revenues for the second quarter of 2013, compared to 1.0% in the same period of 2012.
  • General and administrative expenses were RMB 76.7 million (US$12.5 million) for the second quarter of 2013 compared to RMB 74.0 million for the second quarter of 2012. General and administrative expenses excluding any share-based compensation expenses and integration costs (non-GAAP) were 3.7% of total revenues in the second quarter of 2013, compared to 3.7% from the same period of 2012. The cost structure for general and administrative expenses remained stable.

Income from Operations was RMB 180.1 million (US$29.3 million) for the second quarter of 2013 compared to RMB 120.4 million for the second quarter of 2012. Income from operations excluding any share-based compensation expenses and integration costs (non-GAAP) for the second quarter of 2013 was RMB 208.2 million (US$33.9 million), or 13.0% of total revenues, compared to RMB 170.4 million, or 11.8% of total revenues, in the same period of 2012. This year-over-year increase in the income from operations margin rate mainly resulted from continued productivity enhancement and efficiency gains at the hotel operational level.

EBITDA (non-GAAP)

(RMB/USD in Millions)

 Second Quarter 2013 

 Second Quarter 2012 

RMB

USD

%Rev

RMB

USD

%Rev

EBITDA (Non-GAAP)

348.7

56.8

21.8%

284.8

46.4

19.6%

Net Foreign Exchange (Gain) / Loss

-25.1

-4.1

-1.6%

10.3

1.7

0.7%

Share-Based Compensation Expenses

22.4

3.6

1.4%

24.7

4.0

1.7%

Accelerated Fee Amortization on Early Extinguishment of Term Loan

41.9

6.8

2.6%

-

-

-

Integration Costs

5.7

0.9

0.4%

25.3

4.1

1.7%

Non-Operating (Income) / Expenses

0.5

0.1

0.0%

-3.7

-0.6

-0.3%

Gain on Fair Value Change in Convertible Notes

-0.4

-0.1

0.0%

-9.8

-1.6

-0.7%

Adjusted EBITDA (Non-GAAP)

393.6

64.1

24.6%

331.6

54.0

22.9%

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

 

 

Consolidated Net Income Attributable to Home Inns Group's Shareholders

(RMB/USD in Millions)

 Second Quarter 2013

 Second Quarter 2012

RMB

USD

%Rev

RMB

USD

%Rev

Net Income (GAAP)

94.8

15.4

5.9%

36.4

5.9

2.5%

Net Foreign Exchange (Gain) / Loss

-25.1

-4.1

-1.6%

10.3

1.7

0.7%

Share-Based Compensation Expenses

22.4

3.6

1.4%

24.7

4.0

1.7%

Integration Cost

5.7

0.9

0.4%

25.3

4.1

1.7%

Amortization of Upfront Fees on Term Loan

-

-

-

25.3

4.1

1.7%

Accelerated Fee Amortization on Early Extinguishment of Term Loan

41.9

6.8

2.6%

-

-

-

Non-Operating (Income) / Expenses

0.5

0.1

0.0%

-3.7

-0.6

-0.3%

Gain on Fair Value Change in Convertible Notes

-0.4

-0.1

0.0%

-9.8

-1.6

-0.7%

Adjusted Net Income (Non-GAAP)

139.7

22.8

8.7%

108.5

17.7

7.5%

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

 

Basic and Diluted Earnings Per Ordinary Share and Per ADS

Second Quarter 2013   

 Ordinary Share

 ADS Share

RMB

USD

RMB

USD

Basic

1.03

0.17

2.05

0.33

Diluted

0.84

0.14

1.68

0.27

Adjusted Basic (Non-GAAP)

1.51

0.25

3.03

0.49

Adjusted Diluted (Non-GAAP)

1.45

0.24

2.89

0.47

Cash Flow

Net operating cash flow for the second quarter of 2013 increased 49.9% year over year to RMB 388.8 million (US$63.4 million) from RMB 259.3 million. Cash paid for capital expenditures during the quarter was RMB 188.8 million (US$30.8 million).

Capitalized expenditures for the second quarter of 2013 were RMB 202.6 million (US$33.0 million).

Balance Sheet

As of June 30, 2013, Home Inns Group had cash and cash equivalents of RMB 706.3 million (US$115.1 million). The outstanding balance of convertible notes issued in December 2010 (measured at fair value) was RMB 1.04 billion (US$170.0 million).

The Company completed the refinancing of its U.S. dollar-denominated term loan ("Term Loan") on June 28, 2013. The outstanding balance of the Term Loan, which was borrowed in 2011 for the acquisition of Motel 168 and due in September 2015, was US$117.0 million. The new U.S. dollar-denominated term loan facility of US$117.0 million, due in June 2016, was sourced from the Industrial and Commercial Bank of China ("ICBC Loan") with an annual rate of 3-month LIBOR plus 295 basis points, inclusive of all financing fees and on-going interest charges. The outstanding balance of the ICBC Loan was RMB 722.9 million (US$117.8 million) as of June 30, 2013.

Upon extinguishment of the Term Loan, the unamortized issuance cost of RMB 41.9 million was recognized currently as accelerated fee amortization on early extinguishment of Term Loan and disclosed separately in the income statement in the second quarter of 2013. The interest rate swap contracts associated with the Term Loan were terminated, and the difference of RMB 0.5 million between the amount of cash paid-out and the interest rate swap's fair value as of March 31, 2013 was recorded as non-operating expenses in the second quarter of 2013. The guarantee fee of RMB 4.3 million related to ICBC Loan paid one year in advance was reflected in prepayments and other current assets as of June 30, 2013, which would be deferred and amortised over one year.

Outlook for Full Year and Third Quarter 2013

Home Inns Group has revised its hotel development plan and now plans to open 400 new hotels in 2013, including 65 to70 leased-and-operated hotels and 330 to 335 franchised-and-managed hotels.

The Company lowers its total revenues expectation for the group for 2013 to be in the range of RMB 6,350 million to RMB 6,500 million, representing a growth of 10.1% to 12.7% over 2012. Total revenues expected for the full year of 2013 includes RMB 1,550 million to RMB 1,600 million from the Motel 168 brand.

Total revenues for Home Inns Group in the third quarter of 2013 are expected to be in the range of RMB 1,735 million to RMB 1,765 million, including RMB 425 million to RMB 435 million from the Motel 168 brand.

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 6.1374 to US$1.00, the noon buying rate for June 30, 2013 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, August 12, 2013 (9 AM Beijing/Hong Kong Time on Tuesday, August 13, 2013).

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 Inn

A replay of the conference call may be accessed by phone at the following numbers until the end of Monday, August 19, 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:

15233651

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. The Company'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 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 integration costs

(f)

income from operations excluding share-based compensation expenses and integration costs

(g)

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

(h)

adjusted basic and diluted earnings per ADS and per share excluding foreign exchange gain or loss, share-based compensation expenses, gain or loss from fair value change of convertible notes, integration cost, gain or loss on change in fair value of interest swap transaction, and upfront fee amortization of term loan, and

(i)

adjusted EBITDA excluding foreign exchange gain or loss, share-based compensation expenses, gain or loss from fair value change of convertible notes, integration costs, and gain or loss on change in fair value of interest swap transaction

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 through the end of 2012. The Company will continue to provide Motel 168's operating metrics and revenues through the remaining integration period in 2013.

For investor and media inquiries, please contact:

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

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

Appendix 1:

Motel 168 operations have been integrated into the Group for management and measurement purposes since its acquisition on October 1, 2011. For the purpose of providing more context and comprehensive information to investors regarding Motel 168's integration, Home Inns Group has separately presented operating metrics and key financial data for Motel 168 hotels through the end of 2012. The Company will continue to provide Motel 168's operating metrics and revenues through the remaining integration period in 2013.

Second Quarter 2013 Operational and Revenues for Motel 168 Hotels

Operating Metrics

2Q2013

1Q2013

2Q2012

Occupancy Rate

82.1%

76.7%

80.8%

Average Daily Rate (ADR, RMB)

161

151

159

Revenue per Available Room (RevPAR, RMB)

132

116

129

Total Revenues

(RMB in Millions)

2Q2013

2Q2012

 V%

Total Revenues

393.2

377.4

4.2%

Leased-and-Operated Hotels

372.5

359.7

3.6%

Franchised-and-Managed Hotels

20.7

17.7

16.9%

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

 

 

Home Inns & Hotels Management Inc.

Unaudited Condensed Consolidated Balance Sheet

December 31, 2012

June 30, 2013

RMB '000

RMB '000

US$ '000

ASSETS

Current assets:

Cash and cash equivalents

663,156

706,297

115,081

Restricted cash

205,739

172,258

28,067

Accounts receivable, net

98,176

128,102

20,872

Receivables from related parties

6,818

6,389

1,041

Consumables

41,600

41,601

6,778

Prepayments and other current assets

172,534

141,994

23,136

Deferred tax assets

80,369

79,900

13,019

Total current assets

1,268,392

1,276,541

207,994

Investment in a jointly controlled entity

6,625

6,215

1,013

Property and equipment, net

3,846,835

3,888,908

633,641

Goodwill

2,254,631

2,254,631

367,359

Intangible assets, net

1,149,419

1,133,362

184,665

Other assets

117,350

74,834

12,193

Non-current deferred tax assets

310,762

370,926

60,437

Total assets

8,954,014

9,005,417

1,467,302

LIABILITIES

Current liabilities:

Accounts payable

76,825

70,830

11,541

Payables to related parties

3,798

5,138

837

Short term loans

12,571

-

-

Finance lease liabilities

6,660

4,204

685

Salaries and welfare payable

215,569

172,539

28,113

Income tax payable

76,382

82,241

13,400

Other taxes payable

27,761

31,123

5,071

Deferred revenues

202,874

196,127

31,956

Other unpaid and accruals

165,886

173,321

28,240

Other payables

925,134

862,234

140,490

Deferred tax liability

29,439

36,009

5,867

Total current liabilities

1,742,899

1,633,766

266,200

Long term loans

735,404

722,908

117,787

Deferred rental

631,618

687,010

111,938

Deferred revenues

45,089

53,187

8,666

Finance lease liabilities

1,620

679

111

Deposits due to franchisees

91,462

104,838

17,082

Other long term payables

10,620

19,464

3,171

Unfavorable lease liabilities

370,548

354,088

57,693

Financial liabilities*

1,066,771

1,043,440

170,013

Deferred tax liabilities

288,321

283,612

46,210

Total liabilities

4,984,352

4,902,992

798,871

Commitments and contingencies

Shareholders' equity

Ordinary shares (US$0.005 par value; 200,000,000 shares authorized, 91,672,320 and 92,338,016  shares issued and outstanding as of December 31, 2012 and June 30 2013, respectively)

3,574

3,594

586

Additional paid-in capital

2,802,905

2,861,457

466,233

Statutory reserves

158,417

158,417

25,812

Retained earnings

992,505

1,067,871

173,994

Total Home Inns shareholders' equity

3,957,401

4,091,339

666,625

Noncontrolling interests

12,261

11,086

1,806

Total  shareholders' equity

3,969,662

4,102,425

668,431

Total liabilities and shareholders' equity

8,954,014

9,005,417

1,467,302

-

-

-

Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.1374 on June 30, 2013, 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

June 30, 2012

March 31, 2013

June 30, 2013

RMB '000

RMB '000

RMB '000

US$ '000

Revenues:

 Leased-and-operated hotels 

1,300,218

1,238,105

1,412,658

230,172

 Franchised-and-managed hotels 

149,724

164,113

189,252

30,836

 Total revenues 

1,449,942

1,402,218

1,601,910

261,008

 Less: Business tax and related surcharges 

(89,290)

(87,943)

(99,238)

(16,169)

 Net revenues 

1,360,652

1,314,275

1,502,672

244,839

 Operating costs and expenses: 

    Leased-and-operated hotel costs - 

 Rents and utilities 

(450,155)

(551,068)

(491,097)

(80,017)

 Personnel costs 

(267,645)

(275,184)

(269,005)

(43,830)

 Depreciation and amortization 

(148,524)

(169,500)

(170,024)

(27,703)

 Consumables, food and beverage 

(87,207)

(72,005)

(89,198)

(14,534)

 Others 

(168,848)

(123,339)

(168,149)

(27,397)

    Total leased-and-operated hotel costs 

(1,122,379)

(1,191,096)

(1,187,473)

(193,481)

    Personnel costs of Franchised-and-managed hotels 

(32,811)

(28,992)

(42,347)

(6,900)

    Sales and marketing expenses 

(15,559)

(21,380)

(17,322)

(2,822)

    General and administrative expenses 

(74,005)

(68,676)

(76,653)

(12,489)

 Total operating costs and expenses 

(1,244,754)

(1,310,144)

(1,323,795)

(215,692)

 Other income 

4,528

7,956

1,224

199

 Income/(loss) from operations 

120,426

12,087

180,101

29,346

 Interest income 

3,336

340

1,394

227

 Interest expenses 

(43,919)

(15,787)

(13,717)

(2,235)

 Accelerated fee amortization on early extinguishment of Term Loan 

-

-

(41,872)

(6,822)

 Loss from equity investment 

(843)

(273)

(137)

(22)

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

9,823

(5,661)

402

66

 Non-operating income 

13,820

4,431

9,334

1,522

 Non-operating expenses 

-

-

-

-

 Foreign exchange (loss)/gain, net 

(10,263)

2,579

25,124

4,094

 Income/(loss) before income tax expenses and noncontrolling interests 

92,380

(2,284)

160,629

26,176

 Income tax expense 

(54,169)

(16,365)

(66,101)

(10,770)

 Net income/(loss) 

38,211

(18,649)

94,528

15,406

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

(1,800)

(736)

223

36

 Net income/(loss) attributable to ordinary shareholders 

36,411

(19,385)

94,751

15,442

Earnings/(loss) per share

- Basic

0.40

(0.21)

1.03

0.17

- Diluted

0.37

(0.21)

0.84

0.14

Weighted average ordinary shares outstanding

- Basic

90,753

91,794

92,217

92,217

- Diluted

100,045

91,794

100,459

100,459

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

Leased-and-operated hotel costs – Personnel costs

2,181

2,279

1,949

318

Personnel costs of Franchised-and-managed hotels

2,529

2,914

2,656

433

Sales and marketing expenses

400

386

354

58

General and administrative expenses

19,630

17,349

17,426

2,839

Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.1374 on June 30, 2013, 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 June 30, 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

(1,187,473)

74.1%

1,949

5,416

0.5%

(1,180,108)

73.7%

Personnel costs of Franchised-and-managed hotels

(42,347)

2.6%

2,656

-

0.2%

(39,691)

2.5%

Sales and marketing expenses

(17,322)

1.1%

354

-

0.0%

(16,968)

1.1%

General and administrative expenses

(76,653)

4.8%

17,426

317

1.1%

(58,910)

3.7%

Total operating costs and expenses

(1,323,795)

82.6%

22,385

5,733

1.8%

(1,295,677)

80.9%

Income from operations

180,101

11.2%

22,385

5,733

1.8%

208,219

13.0%

Quarter Ended June 30, 2013

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

(193,481)

74.1%

318

882

0.5%

(192,281)

73.7%

Personnel costs of Franchised-and-managed hotels

(6,900)

2.6%

433

-

0.2%

(6,467)

2.5%

Sales and marketing expenses

(2,822)

1.1%

58

-

0.0%

(2,764)

1.1%

General and administrative expenses

(12,489)

4.8%

2,839

52

1.1%

(9,598)

3.7%

Total operating costs and expenses

(215,692)

82.6%

3,647

934

1.8%

(211,111)

80.9%

Income from operations

29,346

11.2%

3,647

934

1.8%

33,927

13.0%

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%

Quarter Ended June 30, 2012

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

(1,122,379)

77.4%

2,181

23,942

1.8%

(1,096,256)

75.6%

Personnel costs of Franchised-and-managed hotels

(32,811)

2.3%

2,529

-

0.2%

(30,282)

2.1%

Sales and marketing expenses

(15,559)

1.1%

400

48

0.0%

(15,111)

1.0%

General and administrative expenses

(74,005)

5.1%

19,630

1,288

1.4%

(53,087)

3.7%

Total operating costs and expenses

(1,244,754)

85.8%

24,740

25,278

3.4%

(1,194,736)

82.4%

Income from operations

120,426

8.3%

24,740

25,278

3.4%

170,444

11.8%

Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.1374 on June 30, 2013, 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

June 30, 2012

March 31, 2013

June 30, 2013

RMB '000

RMB '000

RMB '000

US$ '000

(unaudited)

(unaudited)

(unaudited)

(unaudited)

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

36,411

(19,385)

94,751

15,442

Foreign exchange loss/(gain), net

10,263

(2,579)

(25,124)

(4,094)

Share-based compensation

24,740

22,928

22,385

3,647

Integration cost

25,278

4,140

5,733

934

Interest expenses -- Upfront fee amortization of term loans

25,290

959

-

-

Accelerated fee amortization on early extinguishment of Term Loan

-

-

41,872

6,822

Non-operating (income)/expenses -- (Gain)/loss on change in fair value of interest swap transaction

(3,689)

(1,380)

468

76

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

(9,823)

5,661

(402)

(66)

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

108,470

10,344

139,683

22,761

Quarter Ended

June 30, 2012

March 31, 2013

June 30, 2013

RMB '000

RMB '000

RMB '000

US$ '000

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Earnings/(loss) per share (GAAP)

- Basic

0.40

(0.21)

1.03

0.17

- Diluted

0.37

(0.21)

0.84

0.14

Weighted average ordinary shares outstanding

- Basic

90,753

91,794

92,217

92,217

- Diluted

100,045

91,794

100,459

100,459

Adjusted earnings per share (Non-GAAP)

- Basic

1.20

0.11

1.51

0.25

- Diluted

1.08

0.11

1.45

0.24

Weighted average ordinary shares outstanding

- Basic

90,753

91,794

92,217

92,217

- Diluted

100,045

92,804

100,459

100,459

Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.1374 on June 30, 2013, 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

June 30, 2012

March31, 2013

June 30, 2013

RMB '000

RMB '000

RMB '000

US$ '000

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Net income/(loss) attributable to ordinary shareholders

36,411

(19,385)

94,751

15,442

Interest income

(3,336)

(340)

(1,394)

(227)

Interest expenses

43,919

15,787

13,717

2,235

Income tax expense

54,169

16,365

66,101

10,770

Depreciation and amortization

153,623

174,924

175,496

28,595

EBITDA (Non-GAAP)

284,786

187,351

348,671

56,815

Foreign exchange loss/(gain), net

10,263

(2,579)

(25,124)

(4,094)

Share-based compensation

24,740

22,928

22,385

3,647

Accelerated fee amortization on early extinguishment of Term Loan

-

-

41,872

6,822

Integration cost

25,278

4,140

5,733

934

Non-operating (income)/expenses-- (Gain)/loss on change in fair value of interest swap transaction

(3,689)

(1,380)

468

76

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

(9,823)

5,661

(402)

(66)

Adjusted EBITDA (Non-GAAP) 

331,555

216,121

393,603

64,134

%of total revenue

22.9%

15.4%

24.6%

24.6%

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

June 30, 2012

March 31, 2013

June 30, 2013

Group

Motel 168

excluding Motel 168

Group

Motel 168

excluding Motel 168

Group

Motel 168

excluding Motel 168

Total Hotels in operation:

1,580

316

1,264

1,859

335

1,524

1,953

341

1,612

      Leased-and-operated hotels

733

144

589

818

150

668

834

154

680

      Franchised-and-managed hotels

847

172

675

1,041

185

856

1,119

187

932

Total rooms

193,105

48,358

144,747

222,841

49,205

173,636

232,905

49,637

183,268

Occupancy rate (as a percentage)

89.2%

80.8%

92.1%

83.6%

76.7%

85.6%

87.0%

82.1%

88.3%

Average daily rate (in RMB)

167

159

170

156

151

158

167

161

168

RevPAR (in RMB)

149

129

157

131

116

135

145

132

149

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

 

 

As of and for the quarter ended

June 30, 2012

June 30, 2013

Group

Motel 168

excluding Motel 168

Group

Motel 168

excluding Motel 168

Total Hotels in operation:

1,420

325

1,095

1,420

325

1,095

      Leased-and-operated hotels

718

172

546

719

173

546

      Franchised-and-managed hotels

702

153

549

701

152

549

Total rooms

171,989

46,096

125,893

171,440

45,075

126,365

Occupancy rate (as a percentage)

90.8%

81.0%

94.6%

89.6%

82.9%

92.1%

Average daily rate (in RMB)

170

162

173

171

162

174

RevPAR (in RMB)

154

132

163

153

135

160

One Motel 168 Franchised-and-managed hotel was legally converted into Leased-and-operated hotels in 2012.

*    "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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