Home Inns Group Reports Second Quarter 2012 Financial Results
Home Inns Group Reports Second Quarter 2012 Financial Results
Revenues Increased 60% Year over Year to RMB 1.45 billion
Motel 168 Hotels Occupancy Rate Improved 6.2 Percentage Points Year over Year
SHANGHAI, Aug. 9, 2012 - 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, 2012.
Home Inns Group has acquired Motel 168 and consolidated Motel 168’s operating and financial results since October 1, 2011. Consolidated group numbers are presented in this earnings release unless specifically mentioned. 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.
Key Highlights for Second Quarter 2012
Financial Highlights
— Total revenues increased 60.2% year over year to RMB 1.45 billion
(US$228.2 million), in line with previously provided expectations for
total revenues of RMB 1.43 billion to RMB 1.46 billion.
— Income from operations was RMB 120.4 million (US$19.0 million).
Adjusted income from operations (non-GAAP) was RMB 170.4 million
(US$26.8 million), compared to RMB 158.8 million in the same period of
2011.
— Net income attributable to Home Inns Group’s shareholders was RMB 36.4
million (US$5.7 million), including a net loss of RMB 19.3 million
(US$3.0 million) from Motel 168, compared to net income attributable to
Home Inns Group’s shareholders of RMB 122.1 million in the second
quarter of 2011. Adjusted net income attributable to Home Inns Group’s
shareholders (non-GAAP) was RMB 108.5 million (US$17.1 million),
including adjusted net income (non-GAAP) of RMB 8.2 million (US$1.3
million) from Motel 168, compared to adjusted net income attributable to
Home Inns Group’s shareholders (non-GAAP) of RMB 119.2 million in the
same period of 2011.
— EBITDA(non-GAAP) was RMB 284.8 million (US$44.8 million), compared to
RMB 250.4 million in the same period of 2011. Adjusted EBITDA
(non-GAAP) increased to RMB 331.6 million (US$52.2 million) from RMB
247.5 million in the second quarter of 2011.
— Diluted earnings per ADS were RMB 0.75 (US$0.12); adjusted diluted
earnings per ADS (non-GAAP) were RMB 2.17 (US$0.34).
Operational Highlights
— During the second quarter of 2012, Home Inns Group opened 103 new
hotels, including 32 new leased-and-operated hotels and 71 new
franchised-and-managed hotels (including six new franchised-and-managed
Motel 168 hotels). One leased-and-operated hotel and one
franchised-and-managed hotel (Motel 168 hotel) were closed upon
expiration of the contracts.
— As of June 30, 2012, Home Inns Group operated across 233 cities in China
with a total of 1,580 hotels, of which 733 were leased-and-operated
hotels (including three Yitel hotels and 144 Motel 168 hotels) and 847
were franchised-and-managed hotels (including one Yitel hotel and 172
Motel 168 hotels). The average number of guest rooms per hotel was 122.
— Home Inns Group had another 247 hotels contracted or under construction
as of June 30, 2012, of which 75 were leased-and-operated hotels
(including three hotels under the Yitel brand and eight hotels under the
Motel 168 brand) and 172 were franchised-and-managed hotels (including
23 hotels under the Motel 168 brand).
— As of June 30, 2012, Home Inns Group had a total of 9.2 million unique
active non-corporate members.
— The occupancy rate for all hotels in operation was 89.2% in the second
quarter of 2012, compared to an occupancy rate of 94.0% in the second
quarter of 2011 and 80.7% in the first quarter of 2012. The decrease in
occupancy rate year over year was mainly due to overall market softness
and the lower occupancy rate of the Motel 168 brand, which is still
being integrated. The sequential increase in occupancy rate was mainly
attributable to seasonality. The occupancy rate for Motel 168 in the
second quarter of 2012 was 80.8%, increased from 74.6% in the second
quarter of 2011 and increased from 70.4% in the first quarter of 2012.
Integration efforts continue to benefit operational improvements.
— RevPAR, which is revenue per available room, was RMB 149 for the second
quarter of 2012, compared with RMB 163 in the same period of 2011 and
RMB 132 in the first quarter of 2012. The year-over-year RevPAR
decrease was mainly due to the lower occupancy rate described above as
well as the impact of the lower average daily rate at Motel 168. The
sequential increase in RevPAR was primarily attributable to seasonality.
The RevPAR for Motel 168 in the second quarter of 2012 was RMB 129, an
increase from RMB 111 in the first quarter of 2012.
“Despite the softened macroeconomic environment, we delivered solid year-over-year revenue growth during the second quarter, putting us in the higher end of previously stated revenue expectations,” said Mr. David Sun, the Company’s chief executive officer. “Our mature hotels excluding Motel 168 hotels maintained RevPAR year-over-year and delivered stable revenue performance, our three Yitel Hotels opened last year are ramping up according to expectations, and the Company continues to benefit from economies of scale. While Motel 168 hotels experienced stronger-than-expected headwinds due to their concentrated exposure to regions more adversely impacted by the macroeconomic environment, including areas surrounding the Yangtze River Delta, integration efforts continued to net positive improvement results.”
“As we move into the second half of 2012, we will continue to further our multi-brand development and integration, keep cost increases in check and improve operating efficiencies across the Company. Motel 168 integration is expected to be more results-driven after the initial foundational efforts and resource investments. We believe that our franchise business growth will continue its strong momentum leveraging a well-run franchise business platform and increasing brand value and recognition. We are confident in the long-term prospects of China’s travel and lodging industry and we have strategically positioned ourselves to capitalize on such opportunities and to achieve profitable growth in the future.”
Detailed Overview of Financial Results for Second Quarter 2012
Total Revenues for the second quarter of 2012 increased 60.2% year over year to RMB 1.45 billion (US$228.2 million), including revenues from Motel 168 of RMB 377.4 million (US$59.4 million). Motel 168 revenues fell short of its previous revenue guidance for the second quarter. While integration is largely on track, Motel 168 performance improvements were dampened by worse-than-expected market conditions in the Yangtze Delta region where the majority of Motel 168 hotels are located. Proactive restructuring of Motel 168’s food and beverage operations continued with reduced revenues and elimination of associated costs.
— Total revenues from leased-and-operated hotels for the second quarter of
2012 were RMB 1.30 billion (US$204.7 million), representing a 60.7%
increase year over year and a 15.3% increase sequentially.
— Total revenues from franchised-and-managed hotels for the second quarter
of 2012 were RMB 149.7 million (US$23.6 million), representing a 55..9%
increase year over year and a 17.1% increase sequentially.
Total Operating Costs and Expenses for the second quarter of 2012 were RMB 1.24 billion (US$195.9 million). Excluding any share-based compensation expenses and integration cost, total operating costs and expenses (non-GAAP) for the quarter were RMB 1.19 billion (US$188.1 million), representing 82.4% of total revenues, compared with 76.0% for the same quarter a year ago and 93.2% for the first quarter of 2012.
— Total leased-and-operated hotel costs for the second quarter of 2012
were RMB 1.12 billion (US$176.7 million), including share-based
compensation expenses of RMB 2.2 million (US$0.3 million) and
integration costs of RMB 23.9 million (US$3.8 million). Total
leased-and-operated hotel costs excluding share-based compensation
expenses and integration costs (non-GAAP) for the second quarter of 2012
were RMB 1.10 billion (US$172.6 million), representing 84.3% of the
leased-and-operated hotel revenues, compared to 77.5% of
leased-and-operated hotel revenues in the same period of 2011 and 95.8%
in the first quarter of 2012. This year-over-year increase in this
expense ratio was mainly driven by overall soft market conditions not
suitable for systematic price increases, higher cost ratio from Motel
168 hotels which are still being integrated, and increase in personnel
costs net of cost control initiatives. The sequential decrease in this
ratio was mainly driven by seasonality. The pre-opening cost was RMB
28.8 million (US$4.5 million) in the second quarter of 2012 compared to
RMB 26.9 million in the second quarter of 2011. Upon market conditions
returning to normal, Motel 168 further achieving integration results and
recently-implemented cost control initiatives generating benefits, the
Company expects the cost ratio to improve and consequently stabilize and
increase profitability of the Company.
— Personnel costs of franchised-and-managed hotels for the second quarter
of 2012 were RMB 32.8 million (US$5.2 million), including share-based
compensation expenses of RMB 2.5 million (US$0.4 million). Excluding
share-based compensation expenses, personnel costs of
franchised-and-managed hotels (non-GAAP) for the second quarter of 2012
were RMB 30.3 million (US$4.8 million), representing 20.2% of
franchised-and-managed hotel revenues. This compared to 17.0% for the
same quarter in 2011 and 16.0% for the first quarter of 2012. The
year-over-year increase in this ratio was mainly due to the impact of
Motel 168, as the revenue from franchised-and-managed hotels at Motel
168 was relatively low. The sequential increase in this ratio was
mainly due to the alignment of labor cost structures across different
brands, including implementing performance-based bonuses at Motel 168.
— Sales and marketing expenses for the second quarter of 2012 were RMB
15.6 million (US$2.4 million), including share-based compensation
expenses of RMB 0.4 million (US$0.1 million). Excluding share-based
compensation expenses and integration cost, sales and marketing expenses
(non-GAAP) for the second quarter of 2012 were RMB 15.1 million (US$2.4
million), representing 1.0% of total revenues, compared to 1.4% of total
revenues in the first period of 2012.
— General and administrative expenses for the second quarter of 2012 were
RMB 74.0 million (US$11.6 million), including share-based compensation
expenses of RMB 19.6 million (US$3.1 million) and integration costs of
RMB 1.3 million (US$0.2 million). General and administrative expenses
excluding share-based compensation expenses and integration
cost(non-GAAP) were RMB 53.1 million (US$8.4 million), or 3.7% of the
total revenues, compared with 5.1% of the total revenues in the same
period of 2011 and 4.2% in the first quarter of 2012. The Company
continues to benefit from economies of scale.
Income from Operations for the second quarter of 2012 was RMB 120.4 million (US$19.0 million). Income from operations excluding share-based compensation expenses and integration cost (non-GAAP) for the second quarter of 2012 was RMB 170.4 million (US$26.8 million), or 11.8% of total revenues, compared to RMB 158.8 million, or 17.5% of total revenues, in the same period of 2011 and RMB 9.7 million, or 0.8% of total revenues, in the first quarter of 2012. The year-over-year decrease in the ratio of income from operations excluding share-based compensation expenses and integration cost (non-GAAP) over total revenues was mainly caused by the higher cost ratio at Motel 168 and an increase in personnel costs, while relatively soft market conditions were not conducive to systematic selling price increase which would otherwise offset cost inflation. The sequential increase in this ratio was mainly due to seasonality.
EBITDA (non-GAAP) for the second quarter of 2012 was RMB 284.8 million (US$44.8 million). Excluding any share-based compensation expenses, foreign exchange loss, acquisition expenses, integration cost, gain on buy-back of convertible bonds, gain on fair value change of convertible notes and non-operating income, adjusted EBITDA (non-GAAP) was RMB 331.6 million (US$52.2 million), or 22.9% of total revenues, compared to RMB 247.5 million, or 27.3% of total revenues, in the same period in 2011 and RMB 165.9 million, or 13..2% of total revenues, in the first quarter of 2012. Integration cost refers to costs incurred by Motel 168 during its integration into the Company’s business.
Consolidated Net Income Attributable to Home Inns Group’s Shareholders for the second quarter of 2012 was RMB 36.4 million (US$5.7 million). Adjusted net income attributable to Home Inns Group’s shareholders (non-GAAP), which excludes any share-based compensation expenses, foreign exchange loss, acquisition expenses, integration cost, upfront fee amortization of term loan, gain on buy-back of convertible bonds, gain on fair value change of convertible notes and non-operating income, was RMB 108.5 million (US$17.1 million) for the second quarter of 2012, compared to adjusted net income (non-GAAP) of RMB 119.2 million in the same period of 2011 and adjusted net loss (non-GAAP) of RMB 24.6 million in the first quarter of 2012.
Basic and Diluted Earnings Per Ordinary Share and Per ADS for the second quarter of 2012: Basic earnings per share was RMB 0.40 (US$0.06), while diluted earnings per share was RMB 0.37 (US$0.06). Basic earnings per ADS were RMB 0.80 (US$0.13), while diluted earnings per ADS were RMB 0.75 (US$0.12).. Excluding any share-based compensation expenses, foreign exchange loss, integration cost, upfront fee amortization of term loan, gain on fair value change of convertible notes and non-operating incomes, adjusted basic earnings per share (non-GAAP) were RMB 1.20 (US$0.19), while adjusted diluted earnings per share (non-GAAP) were RMB 1.08 (US$0.17). Adjusted basic earnings per ADS (non-GAAP) were RMB 2.39 (US$0.38), while adjusted diluted earnings per ADS were RMB 2.17 (US$0.34).
Cash Flow
Net operating cash flow for the second quarter of 2012 was RMB 259.3 million (US$40.8 million), compared to RMB 254.3 million from the second quarter of 2011. Capitalized expenditures for the second quarter of 2012 were RMB 224.5 million (US$35.3 million), while related cash paid for capital expenditures during the quarter was RMB 134.5 million (US$21.2 million).
Balance Sheet
As of June 30, 2012, the Company had cash and cash equivalents of RMB 1.01 billion (US$158.6 million). The outstanding balance of convertible bonds (issued in 2007) was RMB 113.3 million (US$17.8 million) including principal and accrued interest. Outstanding balance of long-term financial liability (measured at fair value) arose from the convertible notes issued in December 2010 was RMB 997.7 million (US$157.0 million). The balance of US Dollar-denominated four-year term loan facility decreased to RMB 917.1 million (US$144.4 million), as the Company paid down US$95 million during the second quarter of 2012.
Outlook for the Full Year and Third Quarter of 2012
Taking into consideration of Motel 168’s current performance trend in light of prevailing market conditions, the Company is revising its full year revenue guidance for Motel 168. Revenue guidance for the full year excluding Motel 168 remains unchanged.
Revised revenue guidance for full year 2012:
Total revenues for Home Inns Group for 2012 are expected to be in the range of RMB 5,715 million (US$899.6 million) to RMB 5,810 million (US$914.5 million). Previously guided total revenues for Home Inns Group were in the range of RMB 5,815 million to RMB 5,910 million.
Total revenues for the Motel 168 brand for the full year of 2012 are expected to be in the range of RMB 1,475 million (US$232.2 million) to RMB 1,500 million (US$236.1 million). Previously guided total revenues for Motel 168 were in the range of RMB 1,575 million to RMB 1,600 million.
Excluding Motel 168, total revenues for the full year of 2012 remains unchanged to be in the range of RMB 4,240 million (US$667.4 million) to RMB 4,310 million (US$678.4 million).
Revenue guidance for the third quarter of 2012:
The Home Inns Group expects its total revenues in the third quarter of 2012 to be in the range of RMB 1,545 million (US$243.2 million) to RMB 1,575 million (US$248.0 million).
Total revenues for the Motel 168 brand in the third quarter of 2012 are expected to be in the range of RMB 390 million (US$61.4 million) to RMB 400 million (US$63.0 million).
Excluding Motel 168, total revenues in the third quarter of 2012 are expected to be in the range of RMB 1,155 million (US$181.8 million) to RMB 1,175 million (US$185.0 million).
This forecast reflects Home Inns Group’s current and preliminary view, which is 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 RMB6.3530 to US$1.00, the noon buying rate for June 29, 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 9:00 PM U.S. Eastern Daylight Time on August 9, 2012 (9:00 AM Beijing/Hong Kong Time on August 10, 2012).
Dial-in details for the earnings conference call are as follows:
China Mainland: 800.819.0121 or 400.620.8038
Hong Kong (toll free): 800.930.346
Hong Kong: 852.2475.0994
U.S. (toll free): 1.866.519.4004
U.S.: 1.718.354.1231
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 August 17, 2012 U.S. Eastern Daylight Time.
U.S. toll free: +1.866.214.5335
China toll free: 10.800.714.0386
Hong Kong toll free: 800.901.596
International: +61.2.8235.5000
Conference ID number: 10589412
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 Home Inns Group commenced operations in 2002, it has become one of the best-known economy hotel brands in China. Home Inns Group offers 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, trade 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 do we purport it 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: total operating costs and expenses excluding share-based compensation expenses, acquisition and integration costs, general and administrative expenses excluding share-based compensation expenses, acquisition and integration costs, income from operations excluding share-based compensation expenses, acquisition and integration costs, adjusted net income attributable to shareholders 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, withholding tax for profit distribution of previous periods, non-operating expenses and upfront fee amortization of term loan, 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 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 in conjunction with GAAP financial measures, these non-GAAP financial measures provide meaningful supplemental information regarding its performance, and both management and investors benefit from referring to these non-GAAP financial measures in assessing its 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 consolidated Motel 168’s operating and financial results since October 1, 2011. Home Inns Group 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 separated financial data of Motel 168 through the 2012 fiscal year.
For investor and media inquiries, please contact:
Ethan Ruan
Home Inns & Hotels Management Inc.
Tel: + 86-21-3401-9898*2004
Email: .(JavaScript must be enabled to view this email address)
Cara O’Brien
FTI Consulting
Tel: +852-3768-4537
Email: .(JavaScript must be enabled to view this email address)
Appendix 1:
For the purpose of providing more context and comprehensive information to investors, below Home Inns Group separately presents key financial data excluding Motel 168. Home Inns Group will continue to provide separated financial data through the integration period. All information outlined below excludes Motel 168 results and Motel 168 integration costs unless specifically mentioned.
Second Quarter 2012 Operational and Financial Highlights for Home Inns and Yitel Hotels
— The occupancy rate was 92.1% for the second quarter of 2012, compared
with 94.0% in the same period in 2011 and 84.4% in the first quarter of
2012.
— RevPAR was RMB 157 for the second quarter of 2012, compared with RevPAR
of RMB 163 in the same period of 2011 and RMB 139 in the first quarter
of 2012.
— RevPAR for mature hotels that had been in operation for at least 18
months was RMB 168, flat in comparison with the same group of hotels in
the second quarter of 2011.
— Total revenues increased 18.5% year over year to RMB 1,072.6 million
(US$168.8 million) for the second quarter of 2012.
— Total revenues from leased-and-operated hotels for the second
quarter of 2012 were RMB 940.5 million (US$148.0 million), an
increase of 16.2% year over year and an increase of 15.3%
sequentially.
— Total revenues from franchised-and-managed hotels for the second
quarter of 2012 were RMB 132.0 million (US$20.8 million), an
increase of 37.5% year over year and an increase of 17.5%
sequentially.
— Total operating costs and expenses were RMB 874.1 million (US$137.6
million) for the second quarter of 2012. Total operating costs and
expenses excluding any share-based compensation expenses (non-GAAP) for
the second quarter of 2012 were RMB 851.4 million (US$133.7 million),
representing 79.4% of total revenues, compared with 76.0% for the same
quarter a year ago and 89.3% for the first quarter of 2012.
— Total leased-and-operated hotel costs for the second quarter of 2012
were RMB 771.1 million (US$121.4 million). Total
leased-and-operated hotel costs excluding any share-based
compensation expenses (non-GAAP) were RMB 769.4 million (US$121..1
million) for the second quarter of 2012, representing 81.8% of the
leased-and-operated hotel revenues, compared to 77.5% for the same
quarter in 2011 and 92.6% for the first quarter of 2012. The
year-over-year increase in this expense ratio was mainly driven soft
market condition and personnel cost increases without systematic
price increase to offset such increases. The sequential decrease in
the ratio was mainly attributable to seasonality.
— Personnel costs of franchised-and-managed hotels were RMB 26.8
million (US$4.2 million) for the second quarter of 2012. Personnel
costs of franchised-and-managed hotels excluding share-based
compensation expenses (non-GAAP) were RMB 24.8 million (US$3.9
million), representing 18.8% of franchised-and-managed hotel
revenues, compared to 17.0% for the second quarter of 2011 and 14.9%
for the first quarter of 2012. The year-over-year and sequential
increases in this ratio were mainly driven by the higher mix of
hotels in their ramp-up stage as well as an increase in personnel
costs.
— Sales and marketing expenses were RMB 13.8 million (US$2.2 million)
for the second quarter of 2012. Sales and marketing expenses
excluding shared-based compensation expenses (non-GAAP) were RMB
13.4 million (US$2.1 million), representing 1.2% of total revenues,
compared to 1.6% of total revenues in the first quarter of 2012..
— General and administrative expenses were RMB 62.4 million (US$9..8
million) for the second quarter of 2012. General and administrative
expenses excluding share-based compensation expenses (non-GAAP) for
the quarter were RMB 43.7 million (US$6.9 million), or 4.1% of total
revenues compared to 5.1% same period a year ago and 4.5% in the
previous quarter.
— Income from operations was RMB 136.1 million (US$21.4 million). Income
from operations excluding share-based compensation expenses (non-GAAP)
was RMB 158.9 million (US$25.0 million), or 14.8% of total revenues,
compared to RMB 158.8 million or 17.5% of total revenues in the same
period of 2011 and RMB 43.2 million or 4.7% of total revenues in the
first quarter of 2012.
— EBITDA (non-GAAP) was RMB 255.1 million (US$40.1 million) for the second
quarter of 2012. Adjusted EBITDA (non-GAAP), which excludes any
share-based compensation expenses, foreign exchange loss, gain on fair
value change of convertible notes and non-operating incomes, was RMB
274.3 million (US$43.2 million), or 25.6% of total revenues for the
second quarter of 2012, compared to RMB 247.5 million or 27.3% of total
revenues in the same period in 2011 and RMB 153.4 million or 16.5% of
total revenues for the first quarter of 2012.
— Net income attributable to Home Inns Group’s shareholders was RMB 55.7
million (US$8.8 million) for the second quarter of 2012. Adjusted net
income attributable to Home Inns Group’s shareholders (non-GAAP)
excluding any share-based compensation expenses, foreign exchange loss,
upfront fee amortization of term loan, gain on fair value change of
convertible notes and non-operating income, was RMB 100.2 million
(US$15.8 million) for the second quarter of 2012, compared to that of
RMB 119.2 million from the same period in 2011 and RMB 3.6 million for
the first quarter of 2012.
Home Inns & Hotels Management Inc.
Unaudited Condensed Consolidated Balance Sheet
Dec 31, 2011 June 30, 2012
——- ———
RMB ‘000 RMB ‘000 US$ ‘000
ASSETS
Current assets:
Cash and cash equivalents 1,786,038 1,007,624 158,606
Restricted cash 205,926 211,693 33,322
Accounts receivable, net 91,980 106,150 16,709
Receivables from related parties 6,379 5,840 919
Consumables 43,049 39,039 6,145
Prepayments and other current
assets 137,887 127,470 20,065
Deferred tax assets 75,446 83,490 13,142
——— ——— ———
Total current assets 2,346,705 1,581,306 248,908
— —
Investment in a jointly
controlled entity 8,301 7,543 1,187
Property and equipment, net 3,452,846 3,539,498 557,138
Goodwill 2,197,728 2,197,728 345,935
Intangible assets, net 1,174,452 1,154,653 181,749
Other assets 170,039 149,263 23,495
Non-current deferred tax assets 199,765 239,530 37,703
———
Total assets 9,549,836 8,869,521 1,396,115
========= ========= =========
LIABILITIES
Current liabilities:
Accounts payable 91,457 73,149 11,514
Payables to related parties 2,797 5,192 817
Short term loans 346,550 132,823 20,907
Finance lease liabilities 7,006 6,892 1,085
Salaries and welfare payable 178,032 157,167 24,739
Income tax payable 80,356 81,359 12,806
Other taxes payable 27,295 26,908 4,235
Deferred revenues 202,870 209,998 33,055
Convertible bonds 113,051 113,327 17,838
Other unpaid and accruals 154,498 158,875 25,008
Other payables 847,090 818,686 128,868
Deferred tax liability 38,313 23,823 3,750
——— ——— ——-
Total current liabilities 2,089,315 1,808,199 284,622
— —
Long term loans 1,165,666 784,288 123,452
Deferred rental 593,955 606,155 95,412
Deferred revenues 79,202 57,037 8,978
Finance lease liabilities 7,750 4,677 736
Deposits 63,472 80,555 12,680
Unfavorable lease liabilities 396,774 380,778 59,937
Financial liability 979,008 997,703 157,044
Deferred tax liabilities 294,728 290,397 45,710
———
Total liabilities 5,669,870 5,009,789 788,571
— —
Shareholders’ equity
Ordinary shares (US$0.005 par
value; 200,000,000 shares
authorized, 90,659,882 and
90,757,946 shares issued and
outstanding as of December 31,
2011 and June 30 2012,
respectively) 3,542 3,545 558
Additional paid-in capital 2,683,923 2,733,602 430,285
Statutory reserves 125,863 125,722 19,789
Retained earnings 1,051,976 985,213 155,078
—
Total Home Inns Group
shareholders’ equity 3,865,304 3,848,082 605,710
— —
Noncontrolling interests 14,662 11,650 1,834
——— ——— ——-
Total shareholders’ equity 3,879,966 3,859,732 607,544
— —
Total liabilities and
shareholders’ equity 9,549,836 8,869,521 1,396,115
========= ========= =========
Note 1: The conversion of Renminbi (“RMB”) into United States dollars (“US$”) is based on rate of US$1.00=RMB6.3530 on June 30, 2012,
representing the certificated exchange rate published by the Federal Reserve Board.
Home Inns & Hotels Management Inc.
Unaudited Condensed Consolidated Statement of Operations
Quarter Ended
———
June 30, 2011 March 31, 2012 June 30, 2012
——— ———
RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000 US$ ‘000 RMB ‘000 RMB ‘000
Group Group Motel 168 excluding Group Group Motel 168 excluding
Motel 168 Motel 168
Revenues:
Leased-and-operated hotels 809,227 1,127,837 311,755 816,082 1,300,218 204,662 359,678 940,540
Franchised-and-managed hotels 96,019 127,864 15,523 112,341 149,724 23,567 17,700 132,024
——— ——— ——— ———
Total revenues 905,246 1,255,701 327,278 928,423 1,449,942 228,229 377,378 1,072,564
Less: Business tax and related
surcharges (58,118) (76,976) (19,627) (57,349) (89,290) (14,055) (22,538) (66,752)
Net revenues 847,128 1,178,725 307,651 871,074 1,360,652 214,174 354,840 1,005,812
— — —
Operating costs and expenses:
Leased-and-operated hotel costs -
Rents and utilities (242,298) (492,314) (157,632) (334,682) (450,155) (70,857) (149,278) (300,877)
Personnel costs (149,850) (254,558) (77,629) (176,929) (267,645) (42,129) (74,899) (192,746)
Depreciation and amortization (83,531) (149,893) (44,804) (105,089) (148,524) (23,379) (43,141) (105,383)
Consumables, food and beverage (53,816) (67,743) (16,207) (51,536) (87,207) (13,727) (25,433) (61,774)
Others (97,436) (132,354) (42,987) (89,367) (168,848) (26,578) (58,509) (110,339)
- - -
Total leased-and-operated hotel
costs (626,931) (1,096,862) (339,259) (757,603) (1,122,379) (176,670) (351,261) (771,118)
Personnel costs of Franchised-and-
managed hotels (16,294) (22,593) (3,676) (18,917) (32,811) (5,165) (5,987) (26,824)
Sales and marketing expenses 1,144 (18,175) (3,350) (14,825) (15,559) (2,449) (1,777) (13,782)
General and administrative expenses (70,767) (79,972) (20,484) (59,488) (74,005) (11,649) (11,612) (62,393)
Total operating costs and expenses (712,848) (1,217,602) (366,769) (850,833) (1,244,754) (195,933) (370,637) (874,117)
- —- - - —- - - -
Other income - 1,947 1,083 864 4,528 713 92 4,436
Income/(loss) from operations 134,280 (36,930) (58,035) 21,105 120,426 18,954 (15,705) 136,131
——— ———
Interest income 8,659 7,062 318 6,744 3,336 525 317 3,019
Interest expenses (6,284) (30,922) (229) (30,693) (43,919) (6,913) (202) (43,717)
Loss from equity investment - (502) (502) (843) (133) (843)
Gain/(loss) on change in fair value
of convertible notes 26,301 (24,800) - (24,800) 9,823 1,546 - 9,823
Gain on buy-back of convertible
bonds 1,521 - - - - - - -
Non-operating income 4,305 3,439 290 3,149 13,820 2,176 2,166 11,654
Non-operating expenses - (3,585) - (3,585) - - - -
Foreign exchange (loss)/gain, net (322) 2,254 (526) 2,780 (10,263) (1,615) (267) (9,996)
—— ——- —— ——- ——— —— ———
Income/(loss) before income tax
expenses and noncontrolling
interests 168,460 (83,984) (58,684) (25,300) 92,380 14,540 (14,534) 106,914
——— ———
Income tax (expense)/benefit (44,778) (18,917) 5,483 (24,400) (54,169) (8,527) (4,766) (49,403)
Net income/(loss) 123,682 (102,901) (53,201) (49,700) 38,211 6,013 (19,300) 57,511
- ——— ——- ———
Less:Net income attributable to
noncontrolling interests (1,593) (273) - (273) (1,800) (283) - (1,800)
——— —— —- —— ——— —— —- ———
Net income/(loss) attributable to
Home Inns Group’s shareholders 122,089 (103,174) (53,201) (49,973) 36,411 5,730 (19,300) 55,711
======= ======== ======= ======= ====== ===== ======= ======
Earnings per share
- Basic 1.49 (1.14) (0.55) 0.40 0.06 0.61
==== ===== ===== ==== ==== ====
- Diluted 0.85 (1.14) (0.55) 0.37 0.06 0.57
==== ===== ===== ==== ==== ====
Weighted average ordinary shares outstanding
- Basic 82,093 90,666 90,666 90,753 90,753 90,753
====== ====== ====== ====== ====== ======
- Diluted 92,401 90,666 90,666 100,045 100,045 100,045
====== ====== ====== ======= ======= =======
Share-based compensation expense was included
in the statement of operations as follows:
Leased-and-operated hotel costs -
Personnel costs - 1,955 1,955 2,181 343 461 1,720
Personnel costs of Franchised-and-
managed hotels - 2,164 2,164 2,529 398 550 1,979
Sales and marketing expenses - 374 374 400 63 - 400
General and administrative expenses 19,929 17,619 17,619 19,630 3,090 965 18,665
Note 1: The conversion of Renminbi (“RMB”) into United States dollars (“US$”) is based on rate of US$1.00=RMB6.3530
on June 30, 2012, representing the certificated exchange rate published by the Federal Reserve Board.
Note 2: The Company started consolidation of the operating results of Motel 168 effective October 1,2011, therefore the acquisition had no impact on the second quarter of 2011.
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results
Quarter Ended June 30, 2012 Quarter Ended June 30, 2012(excluding Motel 168)
——— ——-
GAAP %of Ttl Rev Share-based Acquisition Integration %of Ttl Rev Non-GAAP Result %of Ttl Rev GAAP %of Ttl Rev Share-based Acquisition Integration %of Ttl Rev Non-GAAP Result %of Ttl Rev
Result Compensation expenses cost Result Compensation expenses cost
——— ——- - —— ——— ——- - ——
RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000
Leased-and-operated hotel costs (1,122,379) 77.4% 2,181 - 23,942 1.8% (1,096,256) 75.6% (771,118) 71.9% 1,720 - - 0.2% (769,398) 71.7%
Personnel costs of Franchised-
and-managed hotels (32,811) 2.3% 2,529 - - 0.2% (30,282) 2.1% (26,824) 2.5% 1,979 - - 0.2% (24,845) 2.3%
Sales and marketing expenses (15,559) 1.1% 400 - 48 0.0% (15,111) 1.0% (13,782) 1.3% 400 - - 0.0% (13,382) 1.2%
General and administrative
expenses (74,005) 5.1% 19,630 - 1,288 1.4% (53,087) 3.7% (62,393) 5.8% 18,665 - - 1.7% (43,728) 4.1%
——— —- ——- ——— —- —-
Total operating costs and
expenses (1,244,754) 85.8% 24,740 - 25,278 3.4% (1,194,736) 82.4% (874,117) 81.5% 22,764 - - 2.1% (851,353) 79.4%