Home Inns Group Reports Third Quarter 2013 Financial Results

2,051 Hotels, 243,459 rooms in 278 Cities in China
Quarterly Operating Margin Increased 3.4 Percentage Points, the Third Consecutive Improvement
Net Income Increased 220% Year over Year to RMB 108 million

PR Newswire

SHANGHAI, Nov. 14, 2013 /PRNewswire/ -- Home Inns & Hotels Management Inc. (HMIN) ("Home Inns Group" or "the Company"), a leading economy hotel chain in China, today announced its unaudited financial results for the third quarter ended September 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 has substantially completed Motel 168's integration as of the third quarter of 2013 and will cease to present separate operating metrics and revenues for Motel 168 hotels in future reporting periods.

Third Quarter 2013 Financial Highlights

  • Total revenues increased 8.8% to RMB 1.74 billion (US$284.2 million), which was within the guidance range.
  • Net income attributable to ordinary shareholders increased 220.4% year over year to RMB 108.0 million (US$17.6 million). Adjusted net income attributable to ordinary shareholders (non-GAAP) increased 33.2% year over year to RMB 180.9 million (US$29.6 million).
  • EBITDA (non-GAAP) increased 32.2% year over year to RMB 374.7 million (US$61.2 million).  Adjusted EBITDA (non-GAAP) increased 19.2% to RMB 447.6 million (US$73.1 million) or 25.7% of total revenues compared to 23.5% in the third quarter of 2012.

Key Financial Results






(RMB in Millions except RMB per ADS)

      3Q2013


     3Q2012


        V%

Total Revenues

1,739.2


1,598.4


8.8%

Income from Operations

226.9


154.0


47.3%


Adj. Income from Operations*

251.1


204.7


22.7%

Net Income

108.0


33.7


220.4%


Adj. Net Income*

180.9


135.8


33.2%

EBITDA*

374.7


283.5


32.2%


Adj. EBITDA*

447.6


375.5


19.2%

Diluted earnings per ADS

2.31


0.73


216.8%


Adj. Diluted Earnings per ADS*

3.70


2.93


26.4%


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, upfront fee amortization of term loans, 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).

Third Quarter 2013 Operational Highlights

  • Home Inns Group opened 107 new hotels in the third quarter of 2013 and operated 2,051 hotels across 278 cities in China under its three brands as of September 30, 2013.  There were a total of 186 hotels contracted or under construction, including 144 franchised-and-managed hotels. Franchised-and-managed hotels continue to represent the majority of the new hotel pipeline given strong interest and demand from existing and new potential franchisee partners.


                               Hotels Count                    _                          


Openings

  Closures



Group

Home Inn

Motel 168

 Yitel


Group

Group

Total Number of Hotels

2,051


1,684


355


12


107

9


Leased-and-Operated

852


686


156


10


22

4


Franchised-and-Managed

1,199


998


199


2


85

5

Contracted/under Construction

186


148


30


8





Leased-and-Operated

42


27


11


4





Franchised-and-Managed

144


121


19


4

















  • As of September 30, 2013, Home Inns Group had a total of 15.6 million unique active non-corporate members under its frequent guests programs.

Operating Metrics





3Q2013

2Q2013

3Q2012

Occupancy Rate

89.4%

87.0%

90.3%

Average Daily Rate (ADR, RMB)

173

167

174

Revenue per Available Room (RevPAR, RMB)

154

145

157

  • Occupancy rate and ADR decreased by a 0.9 percentage point and a 0.6 percentage point year over year, respectively, given exposure to lower tier markets where economic conditions remained relatively soft. The resulting year-over-year decrease in RevPAR in the third quarter of 2013 was in-line with industry performance.  The sequential improvement in RevPAR was better than peer performances.
  • For the third quarter of 2013, Motel 168 occupancy rate increased to 85.1% from 82.7% and ADR increased to RMB 163 from RMB 162 from the same period last year.  RevPAR for Motel 168 improved 3.7% year over year to RMB 139 from RMB 134 as Motel 168 concluded its integration since acquisition in October 2011. 

"We are pleased to report steady revenue growth and consistent margin expansion for the third quarter," said Mr. David Sun, the Company's chief executive officer. "Even though a market-wide recovery has yet to arrive, our core mature hotels maintained stable performance and Motel 168 generated further operating improvements as we completed all primary integration tasks.  Meanwhile, strong development of franchised-and-managed hotels and effective cost control initiatives at the hotel operational level resulted in margin expansion for the third consecutive quarter."

Mr. Sun continued, "We are optimistic about the stable and gradually-improving market conditions in 2014 and beyond.  We believe in the long-term prospects of China's travel and lodging industry and will maintain a suitable expansion pace furthering franchise-focused growth and multi-brand development in the next two to three years.  The proven ability in navigating through a challenging environment and executing sound strategies are our core strength which will enable us to further our leadership scale in the industry and to deliver steady profitability enhancements and increasing cash generations for years to come."

Detailed Financial Results for Third Quarter 2013

Total Revenues




(RMB/USD in Millions)

                       Third Quarter 2013            .                    



    RMB  

    USD   

    V% 


Leased-and-Operated Hotels

1535.1

250.8

7.2%


Franchised-and-Managed Hotels

204.1

33.3

22.5%

Total Revenues

1739.2

284.2

8.8%

Less: Business Taxes

-106.2

-17.3

9.4%

Net Revenues

1,633.0

266.8

8.8%





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 third 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 429.1 million (US$70.1 million) for the third quarter of 2013, in line with expectations.

Total Operating Costs and Expenses / Total Operating Income




(RMB/USD in Millions)

                                              Third Quarter 2013                                             






Adjusted


GAAP Results

  Reconciliation

Non-GAAP Results


RMB

USD

   Vpts

RMB

USD

RMB

USD

   Vpts

Leased-and-Operated Hotel Costs

1,242.4

203.0

-4.5pts

4.7

0.8

1,237.7

202.2

-3.0pts










Franchised-and-Managed Hotel   Personnel Costs

54.1

8.8

0.3pts

2.7

0.4

51.4

8.4

0.3pts

Sales and Marketing Expenses

24.2

4.0

0.3pts

0.3

0.1

23.9

3.9

0.3pts

General and Administrative Expenses

86.7

14.2

0.1pts

16.5

2.7

70.3

11.5

0.4pts










Total Operating Costs and Expenses

1,407.4

230.0

-3.9pts

24.2

4.0

1,383.2

226.0

-2.1pts










Total Operating Income

226.9

37.1

3.4pts

24.2

4.0

251.1

41.0

1.6pts










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



Total Operating Costs and Expenses were RMB 1.41 billion (US$230.0 million) for the third quarter of 2013, representing 80.9% of total revenues compared to RMB 1.36 billion or 84.8% of total revenues for the third quarter of 2012.  Total operating costs and expenses excluding any share-based compensation expenses and integration costs (non-GAAP) for the third quarter of 2013 were 79.5% of total revenues, compared to 81.6% in the same period a year ago.

  • Total leased-and-operated hotel costs were RMB 1.24 billion (US$203.0 million), or 80.9% of leased-and-operated hotel revenues for the third quarter of 2013, compared to RMB 1.21 billion,  or 84.8% of leased-and-operated hotel revenues for the third quarter of 2012.  Total leased-and-operated hotel costs excluding any share-based compensation expenses and integration costs (non-GAAP) were 80.6% of leased-and-operated hotel revenues in the third quarter of 2013, compared to 82.9% in the same period a year ago.  The year-over-year decrease in this expense ratio was mainly due to continued benefit from cost control initiatives and productivity enhancements at the hotel operational level. Pre-opening cost was RMB 18.1 million (US$3.0 million) for the third quarter of 2013 compared to RMB 28.8 million in the third quarter of 2012.
  • Personnel costs of franchised-and-managed hotels were RMB 54.1 million (US$8.8 million) for the third quarter of 2013.  Personnel costs of franchised-and-managed hotels excluding share-based compensation expenses (non-GAAP) were 25.2% of franchised-and-managed hotel revenues in the third quarter of 2013, compared to 25.6% in the same period of 2012. 
  • Sales and marketing expenses were RMB 24.2 million (US$4.0 million) for the third quarter of 2013 compared to RMB 18.4 million for the same period 2012.  Sales and marketing expenses excluding share-based compensation expenses (non-GAAP) were 1.4% of total revenues for the third quarter of 2013, compared to 1.1% in the same period of 2012.  The year-over-year increase in this expense ratio was mainly due to special project cost on corporate branding study and sponsorship for natural disaster recovery projects in China.  On-going sales and marketing spending remained low as a percentage of the total revenue and effective to support stable revenue growth.
  • General and administrative expenses were RMB 86.7 million (US$14.2 million) for the third quarter of 2013 compared to RMB 77.9 million for the third quarter of 2012.  General and administrative expenses excluding any share-based compensation expenses and integration costs (non-GAAP) were 4.0% of total revenues in the third quarter of 2013, compared to 3.6% from the same period of 2012.  Excluding catch-up bonus accruals during the third quarter of 2013, the year-over-year increase in general and administrative expenses was in-line with total revenue growth, demonstrating headquarter operation efficiency and leverage.

Income from Operations was RMB 226.9 million (US$37.1 million) for the third quarter of 2013 compared to RMB 154.0 million for the third quarter of 2012.  Income from operations excluding any share-based compensation expenses and integration costs (non-GAAP) for the third quarter of 2013 was RMB 251.1 million (US$41.0 million), or 14.4% of total revenues, compared to RMB 204.7 million, or 12.8% of total revenues, in the same period of 2012.  This year-over-year increase in the income from operations margin rate mainly resulted from increasing revenue from high-margin franchise-and-managed operations, meaningful improvements in Motel 168 performance and continued benefits from effective cost control and productivity enhancements at the hotel operational level. 

EBITDA (non-GAAP)








(RMB/USD in Millions)

Third Quarter 2013


Third Quarter 2012



  RMB  

  USD  

%Rev


  RMB  

  USD  

%Rev

EBITDA (Non-GAAP)

374.7

61.2

21.5%


283.5

46.3

17.7%


Net Foreign Exchange (Gain) / Loss

-8.6

-1.4

-0.5%


6.7

1.1

0.4%


Share-Based Compensation Expenses

21.1

3.4

1.2%


24.0

3.9

1.5%


Integration Costs

3.2

0.5

0.2%


26.6

4.4

1.7%


Non-Operating Expenses – Loss on Change in









Fair Value of Interest Swap Transaction

-

-

-


7.8

1.3

0.5%


Loss on Fair Value Change in Convertible Notes

57.3

9.4

3.3%


26.8

4.4

1.7%










Adjusted EBITDA (Non-GAAP)

447.6

73.1

25.7%


375.5

61.4

23.5%



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


 

 

Consolidated Net Income Attributable to Home Inns Group's Shareholders

(RMB/USD in Millions)

Third Quarter 2013 


Third Quarter 2012



  RMB  

  USD  

%Rev


  RMB  

  USD  

%Rev

Net Income (GAAP)

108.0

17.6

6.2%


33.7

5.5

2.1%


Net Foreign Exchange (Gain) / Loss

-8.6

-1.4

-0.5%


6.7

1.1

0.4%


Share-Based Compensation Expenses

21.1

3.4

1.2%


24.0

3.9

1.5%


Integration Cost

3.2

0.5

0.2%


26.6

4.4

1.7%


Amortization of Upfront Fees on Term Loan

-

-

-


10.1

1.7

0.6%


Non-Operating Expenses

-

-

-


7.8

1.3

0.5%


Loss on Fair Value Change in Convertible Notes

57.3

9.4

3.3%


26.8

4.4

1.7%










Adjusted Net Income (Non-GAAP)

180.9

29.6

10.4%


135.8

22.2

8.5%





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




 

Basic and Diluted Earnings Per Ordinary Share and Per ADS


Third Quarter 2013


Ordinary Share

ADS Share


RMB

 USD 

                RMB

             USD

Basic

1.16

0.19

2.33

0.38

Diluted

1.16

0.19

2.31

0.38






Adjusted Basic (Non-GAAP)

1.95

0.32

3.90

0.64

Adjusted Diluted (Non-GAAP)

1.85

0.30

3.70

0.61

Cash Flow

Net operating cash flow for the third quarter of 2013 increased 90.4% year over year to RMB 456.9 million (US$74.7 million) from RMB 239.9 million.  Cash paid for capital expenditures during the quarter was RMB 198.3 million (US$32.4 million).

Capitalized expenditures for the third quarter of 2013 were RMB 214.2 million (US$35.0 million).  

Free cash flow for the third quarter of 2013 was RMB 242.7 million (US$39.7 million).

Balance Sheet

As of September 30, 2013, Home Inns Group had cash and cash equivalents of RMB 1.04 billion (US$169.7 million).  The outstanding balance of convertible notes issued in December 2010 (measured at fair value) was RMB 1.10 billion (US$179.0 million).  The outstanding balance of the U.S. dollar-denominated three-year term loan was RMB 719.3 million (US$117.5 million). 

Outlook for Full Year 2013

The Company continues to expect to open no less than 400 new hotels in 2013, including 65 to 70 leased-and-operated hotels.

The Company is also reiterating its expected revenue for the full year 2013.  Total revenues for Home Inns Group are expected 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.  

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 6.1200 to US$1.00, the noon buying rate for September 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 8 PM U.S. Eastern Standard Time on Thursday, November 14, 2013 (9 AM Beijing/Hong Kong Time on Friday, November 15, 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 Inns

A replay of the conference call may be accessed by phone at the following numbers until the end of Friday, November 22, 2013 U.S. Eastern Standard 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:         

87166276

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 non-operating expenses – 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 separate operating metrics and revenue data of Motel 168 in this earning release for the purpose of providing more information to investors.    The Company has substantially completed the integration of Motel 168's by the end of the third quarter of 2013 and will cease to present such separate information in future reporting periods.

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 has substantially completed Motel 168's integration as of the third quarter of 2013 and will cease to present separate operating metrics and revenues for Motel 168 hotels in future reporting periods.  

Third Quarter 2013 Operational and Revenues for Motel 168 Hotels

Operating Metrics





3Q2013

2Q2013

3Q2012

Occupancy Rate

85.1%

82.1%

82.7%

Average Daily rate (ADR, RMB)

163

161

162

Revenue per Available Room (RevPAR, RMB)

139

132

134

Total Revenues

(RMB in Millions)





3Q2013

3Q2012

     V%

Total Revenues

429.1

398.9

7.6%

Leased-and-Operated Hotels

406.4

381.1

6.6%

Franchised-and-Managed Hotels                

22.8

17.8

27.9%





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

 

 

Home Inns & Hotels Management Inc.

Unaudited Condensed Consolidated Balance Sheet

















December 31, 2012


September 30, 2013



RMB '000


RMB '000


US$ '000








ASSETS







Current assets:







Cash and cash equivalents


663,156


1,038,500


169,690

Restricted cash


205,739


197,665


32,298

Accounts receivable, net


98,176


104,962


17,151

Receivables from related parties


6,818


5,676


927

Consumables


41,600


39,344


6,429

Prepayments and other current assets


172,534


154,859


25,304

Deferred tax assets


80,369


80,976


13,231








Total current assets


1,268,392


1,621,982


265,030





























Investment in a jointly controlled entity


6,625


6,299


1,029

Property and equipment, net


3,846,835


3,923,068


641,024

Goodwill


2,254,631


2,254,631


368,404

Intangible assets, net


1,149,419


1,123,029


183,501

Other assets


117,350


75,943


12,409

Non-current deferred tax assets


310,762


372,665


60,893








Total assets


8,954,014


9,377,617


1,532,290








LIABILITIES







Current liabilities:







Accounts payable


76,825


62,026


10,135

Payables to related parties


3,798


5,449


890

Short term loans


12,571


-


-

Finance lease liabilities


6,660


2,842


464

Salaries and welfare payable


215,569


233,244


38,112

Income tax payable


76,382


92,782


15,160

Other taxes payable


27,761


30,840


5,039

Deferred revenues


202,874


204,349


33,390

Other unpaid and accruals


165,886


193,508


31,619

Other payables


925,134


907,291


148,252

Deferred tax liability


29,439


44,507


7,272















Total current liabilities


1,742,899


1,776,838


290,333








Long term loans


735,404


719,316


117,535

Deferred rental


631,618


664,283


108,543

Deferred revenues


45,089


55,987


9,148

Finance lease liabilities


1,620


302


49

Deposits due to franchisees


91,462


108,982


17,808

Other long term payables


10,620


20,556


3,359

Unfavorable lease liabilities


370,548


345,857


56,513

Financial liabilities*


1,066,771


1,095,531


179,008

Deferred tax liabilities


288,321


281,219


45,951








Total liabilities


4,984,352


5,068,871


828,247















Commitments and contingencies














Shareholders' equity







Ordinary shares (US$0.005 par value; 200,000,000 shares authorized, 91,672,320 and 93,545,510 shares issued and outstanding as of December 31, 2012 and September 30 2013, respectively)


3,574


3,632


593








Additional paid-in capital


2,802,905


2,951,394


482,254

Statutory reserves


158,417


158,417


25,885








Retained earnings


992,505


1,175,874


192,136








Total Home Inns shareholders' equity


3,957,401


4,289,317


700,868








Noncontrolling interests


12,261


19,429


3,175








Total  shareholders' equity


3,969,662


4,308,746


704,043








Total liabilities and shareholders' equity


8,954,014


9,377,617


1,532,290



-


-


-








Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.1200

on September 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



September 30, 2012


June 30, 2013


September 30, 2013



RMB '000


RMB '000


RMB '000


US$ '000



















Revenues:








 Leased-and-operated hotels 


1,431,786


1,412,658


1,535,082


250,830

 Franchised-and-managed hotels 


166,624


189,252


204,078


33,346









 Total revenues 


1,598,410


1,601,910


1,739,160


284,176

 Less: Business tax and related surcharges 


(97,003)


(99,238)


(106,150)


(17,345)









 Net revenues 


1,501,407


1,502,672


1,633,010


266,831









 Operating costs and expenses: 








    Leased-and-operated hotel costs – 








 Rents and utilities 


(496,559)


(491,097)


(533,571)


(87,185)

 Personnel costs 


(269,260)


(269,005)


(273,501)


(44,690)

 Depreciation and amortization 


(156,294)


(170,024)


(172,918)


(28,255)

 Consumables, food and beverage 


(96,555)


(89,198)


(89,792)


(14,672)

 Others 


(195,247)


(168,149)


(172,590)


(28,201)









    Total leased-and-operated hotel costs 


(1,213,915)


(1,187,473)


(1,242,372)


(203,003)









    Personnel costs of Franchised-and-managed hotels 


(45,046)


(42,347)


(54,120)


(8,843)

    Sales and marketing expenses 


(18,351)


(17,322)


(24,193)


(3,953)

    General and administrative expenses 


(77,850)


(76,653)


(86,745)


(14,174)









 Total operating costs and expenses 


(1,355,162)


(1,323,795)


(1,407,430)


(229,973)









 Other income 


7,742


1,224


1,272


208










 Income from operations 


153,987


180,101


226,852


37,066









 Interest income 


615


1,394


2,151


351

 Interest expenses 


(27,182)


(13,717)


(12,687)


(2,073)

 Accelerated fee amortization on early extinguishment of Term Loan 


-


(41,872)


-


-

 (Loss)/gain from equity investment 


(466)


(137)


84


14

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


(26,765)


402


(57,275)


(9,359)

 Non-operating income 


11,044


9,334


19,019


3,109

 Non-operating expenses 


(7,818)


-


(1,000)


(163)

 Foreign exchange (loss)/gain, net 


(6,748)


25,124


8,576


1,401









 Income before income tax expenses and noncontrolling interests 


96,667


160,629


185,720


30,346










 Income tax expense 


(62,255)


(66,101)


(78,157)


(12,771)









 Net income 


34,412


94,528


107,563


17,575









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


(703)


223


440


72


















 Net income attributable to ordinary shareholders 


33,709


94,751


108,003


17,647










Earnings per share








— Basic


0.37


1.03


1.16


0.19









— Diluted


0.37


0.84


1.16


0.19









Weighted average ordinary shares outstanding








— Basic


90,771


92,217


92,790


92,790









— Diluted


92,600


100,459


93,398


93,398









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








Leased-and-operated hotel costs – Personnel costs


2,025


1,949


1,887


308

Personnel costs of Franchised-and-managed hotels


2,410


2,656


2,700


441

Sales and marketing expenses


407


354


343


56

General and administrative expenses


19,195


17,426


16,153


2,639










Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.1200


on September 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 September 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


(1,242,372)


71.4%


1,887


2,818


0.3%


(1,237,667)


71.2%

Personnel costs of Franchised-and-managed hotels


(54,120)


3.1%


2,700


-


0.2%


(51,420)


3.0%

Sales and marketing expenses


(24,193)


1.4%


343


-


0.0%


(23,850)


1.4%

General and administrative expenses


(86,745)


5.0%


16,153


335


0.9%


(70,257)


4.0%















Total operating costs and expenses


(1,407,430)


80.9%


21,083


3,153


1.4%


(1,383,194)


79.5%















Income from operations


226,852


13.0%


21,083


3,153


1.4%


251,088


14.4%
















































Quarter Ended September 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


(203,003)


71.4%


308


460


0.3%


(202,235)


71.2%

Personnel costs of Franchised-and-managed hotels


(8,843)


3.1%


441


-


0.2%


(8,402)


3.0%

Sales and marketing expenses


(3,953)


1.4%


56


-


0.0%


(3,897)


1.4%

General and administrative expenses


(14,174)


5.0%


2,639


55


0.9%


(11,480)


4.0%















Total operating costs and expenses


(229,973)


80.9%


3,445


515


1.4%


(226,013)


79.5%















Income from operations


37,066


13.0%


3,445


515


1.4%


41,026


14.4%















































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 September 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


(1,213,915)


75.9%


2,025


25,406


1.7%


(1,186,484)


74.2%

Personnel costs of Franchised-and-managed hotels


(45,046)


2.8%


2,410


-


0.2%


(42,636)


2.7%

Sales and marketing expenses


(18,351)


1.1%


407


-


0.0%


(17,944)


1.1%

General and administrative expenses


(77,850)


4.9%


19,195


1,224


1.3%


(57,431)


3.6%















Total operating costs and expenses


(1,355,162)


84.8%


24,037


26,630


3.2%


(1,304,495)


81.6%















Income from operations


153,987


9.6%


24,037


26,630


3.2%


204,654


12.8%















Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.1200





on September 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



September 30, 2012


June 30, 2013


September 30, 2013



RMB '000


RMB '000


RMB '000


US$ '000



(unaudited)


(unaudited)


(unaudited)


(unaudited)



















Net income attributable to ordinary shareholders (GAAP)


33,709


94,751


108,003


17,647

Foreign exchange loss/(gain), net


6,748


(25,124)


(8,576)


(1,401)

Share-based compensation


24,037


22,385


21,083


3,445

Integration cost


26,630


5,733


3,153


515

Interest expenses -- Upfront fee amortization of term loans


10,126


-


-


-

Accelerated fee amortization on early extinguishment of Term Loan


-


41,872


-


-

Non-operating expenses-- loss on change in fair value of interest swap transaction


7,818


468


-


-

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


26,765


(402)


57,275


9,359



















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


135,833


139,683


180,938


29,565






























Quarter Ended



September 30, 2012


June 30, 2013


September 30, 2013



RMB '000


RMB '000


RMB '000


US$ '000



(unaudited)


(unaudited)


(unaudited)


(unaudited)










Earnings per share (GAAP)








— Basic


0.37


1.03


1.16


0.19









— Diluted


0.37


0.84


1.16


0.19










Weighted average ordinary shares outstanding









— Basic


90,771


92,217


92,790


92,790










— Diluted


92,600


100,459


93,398


93,398

Adjusted earnings per share (Non-GAAP)








— Basic


1.50


1.51


1.95


0.32









— Diluted


1.47


1.45


1.85


0.30










Weighted average ordinary shares outstanding









— Basic


90,771


92,217


92,790


92,790










— Diluted


92,600


100,459


100,852


100,852




























Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.1200

on September 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



September 30, 2012


June 30, 2013


September 30, 2013



RMB '000


RMB '000


RMB '000


US$ '000



(unaudited)


(unaudited)


(unaudited)


(unaudited)



















Net income attributable to ordinary shareholders


33,709


94,751


108,003


17,647

Interest income


(615)


(1,394)


(2,151)


(351)

Interest expenses


27,182


13,717


12,687


2,073

Income tax expense


62,255


66,101


78,157


12,771

Depreciation and amortization


161,006


175,496


178,001


29,085










EBITDA (Non-GAAP)


283,537


348,671


374,697


61,225










Foreign exchange loss/(gain), net


6,748


(25,124)


(8,576)


(1,401)

Share-based compensation


24,037


22,385


21,083


3,445

Accelerated fee amortization on early extinguishment of Term Loan


-


41,872


-


-

Integration cost


26,630


5,733


3,153


515

Non-operating expenses-- loss on change in fair value of interest swap transaction


7,818


468


-


-

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


26,765


(402)


57,275


9,359










Adjusted EBITDA (Non-GAAP) 


375,535


393,603


447,632


73,143










%of total revenue


23.5%


24.6%


25.7%


25.7%










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



September 30, 2012


June 30, 2013


September 30, 2013



Group


Motel 168


excluding Motel 168


Group


Motel 168


excluding Motel 168


Group


Motel 168


excluding Motel 168

Total Hotels in operation:


1,682


321


1,361


1,953


341


1,612


2,051


355


1,696

      Leased-and-operated hotels


770


146


624


834


154


680


852


156


696

      Franchised-and-managed hotels


912


175


737


1,119


187


932


1,199


199


1,000




















Total rooms


204,678


48,619


156,059


232,905


49,637


183,268


243,459


50,874


192,585




















Occupancy rate (as a percentage)


90.3%


82.7%


92.7%


87.0%


82.1%


88.3%


89.4%


85.1%


90.5%




















Average daily rate (in RMB)


174


162


177


167


161


168


173


163


175




















RevPAR (in RMB)


157


134


164


145


132


149


154


139


159




















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















As of and for the quarter ended









September 30, 2012


September 30, 2013









Group


Motel 168


excluding Motel 168


Group


Motel 168


excluding Motel 168







Total Hotels in operation:


1,465


322


1,143


1,465


322


1,143







      Leased-and-operated hotels


718


170


548


719


171


548







      Franchised-and-managed hotels


747


152


595


746


151


595


























Total rooms


176,534


45,295


131,239


175,778


44,077


131,701


























Occupancy rate (as a percentage)


92.7%


83.9%


95.8%


92.1%


86.5%


94.0%


























Average daily rate (in RMB)


175


165


179


175


164


179


























RevPAR (in RMB)


162


138


171


161


142


168


























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.

 

 

 

 

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