HOME INNS & HOTELS MANAGEMENT INC. SHANGHAI, Aug. 12, 2014 /PRNewswire/ -- Home Inns & Hotels Management Inc. (NASDAQ: HMIN) ("Home Inns Group" or "the Company"), a leading economy hotel chain in China, today announced its unaudited financial results for the second quarter ended June 30, 2014.
Second Quarter 2014 Financial Highlights
-- Total revenues increased 6.0% year over year to RMB 1.70 billion
(US$273.8 million) for the second quarter of 2014, within the guidance
range.
-- Net income attributable to ordinary shareholders was RMB 108.2 million
(US$17.4 million) for the second quarter of 2014, compared with RMB 94.8
million in the same period a year ago. Adjusted net income attributable
to ordinary shareholders (non-GAAP) increased 20.6% year over year to
RMB 168.4 million (US$27.1 million).
-- EBITDA (non-GAAP) was RMB 380.4 million (US$61.3 million) for the second
quarter of 2014, compared with RMB 348.7 million in the same period a
year ago. Adjusted EBITDA (non-GAAP) increased 12.0% year over year to
RMB 440.7 million (US$71.0 million) for the second quarter of 2014.
Key Financial Results
(RMB in Millions except RMB per ADS) 2Q2014 2Q2013 V%
----------------------------------- ------ ------ ---
Total Revenues 1,698.6 1,601.9 6.0%
Income from Operations 211.3 180.1 17.3%
Adj. Income from Operations* 236.4 208.2 13.5%
Net Income 108.2 94.8 14.2%
Adj. Net Income* 168.4 139.7 20.6%
EBITDA* 380.4 348.7 9.1%
Adj. EBITDA* 440.7 393.6 12.0%
Diluted Earnings per ADS 2.27 1.68 35.1%
Adj. Diluted Earnings per ADS* 3.38 2.89 17.0%
"V%" represents year-over-year percentage change in amounts
* Indicates a non-GAAP financial measure (see commentary at the end of this earnings release for full details).
Second Quarter 2014 Operational Highlights
-- Home Inns Group added a net of 133 hotels in the second quarter of 2014,
including the opening of 123 new hotels and 31 hotels from the
acquisition of Yunshang Siji which closed on May 1, 2014, partially
offset by the closure of 21 hotels. As of June 30, 2014, Home Inns Group
operated 2,374 hotels across 306 cities in China under four brands.
There were a total of 472 hotel projects in the development pipeline as
of June 30, 2014, including 213 hotels contracted or under construction
(182 of which were franchised-and-managed hotels) and 259 hotels under
due diligence (all of which were franchised-and-managed hotels),
demonstrating continued strong interest from franchise partners in all
of the Company's hotel brands within Home Inns Group.
Hotels in Operations Openings Closures
Group Home Motel Yunshang Yitel 2Q14 2Q14
168
Inn Siji
--- ----
Total Number of Hotels 2,374 1,938 383 31 22 123 21
Leased-and-Operated 897 695 164 24 14 0 3
Franchised-and-Managed 1,477 1,243 219 7 8 123 18
Contracted or under Construction 213 171 22 5 15
Leased-and-Operated 31 17 7 2 5
Franchised-and-Managed 182 154 15 3 10
Under Due Diligence 259 217 34 0 8
-- As of June 30, 2014, Home Inns Group had a total of 19.7 million unique
active non-corporate members under its frequent guests program.
Operating Metrics
2Q2014 1Q2014 2Q2013
------ ------ ------
Occupancy Rate 86.7% 81.3% 87.0%
Average Daily Rate (ADR, RMB) 164 156 167
Revenue per Available Room (RevPAR, RMB) 142 127 145
-- For the second quarter of 2014, occupancy rate decreased by 0.3
percentage points while ADR decreased by 1.8%, resulting in a
year-over-year decrease of 2.1% in RevPAR. The decrease in occupancy
rate was mainly due to a dilutive impact from newly opened hotels, as
well as a relatively soft macroeconomic condition in the second quarter
of 2014. The decrease in ADR was mainly due to the soft market
conditions and absence of pricing opportunities in the second quarter.
Sequentially, RevPAR increased by 11.8%, which was due to seasonality.
"We are pleased to report that revenues for the second quarter met our expectations and we achieved the sixth consecutive quarter of year over year margin improvement," said Mr. David Sun, the Company's chief executive officer. "While we have yet to see a full market rebound, we continued to achieve solid performance from our mature hotels, margin expansion driven by the increased mix of higher-margin revenue contribution from our franchised-and-managed hotels, successful execution of our Yitel development plan, and Motel 168 performance gain. All at the same time, we maintained our commitment to effective cost control initiatives and driving improvements in overall productivity. This has all worked together to keep us on track with our plans for the year."
Mr. Sun continued, "As we look forward to the back half of the year, we take comfort in the fact that the macroeconomic environment seems stable and we remain cautiously optimistic about the prospects for the overall travel and lodging market in China. We are confident that we will achieve our full-year target for new hotel openings with a main focus on our multi-brand strategy. As part of the implementation of this strategy, we recently rolled out certain updated corporate branding initiatives through both traditional and new media channels which we believe clearly communicate our brands' positioning and characters and help us effectively attract targeted customers. All in, we believe our solid underlying business and operational structure coupled with our growth initiatives and portfolio development strategies ensure that we maintain our leadership in this dynamic market place, and are well positioned to take advantage of any market recovery opportunities to deliver long-term and superior returns for our shareholders."
Detailed Overview of Financial Results for Second Quarter 2014
Total Revenues
(RMB/USD in Millions) Second Quarter 2014
--------------------- -------------------
RMB USD V%
--- --- ---
Leased-and-Operated Hotels 1,459.5 235.3 3.3%
Franchised-and-Managed Hotels 239.1 38.5 26.3%
----- ---- ----
Total Revenues 1,698.6 273.8 6.0%
Less: Business Taxes -104.6 -16.9 5.4%
------ ----- ---
Net Revenues 1,594.0 257.0 6.1%
======= ===== ===
Note: "V%" represents year-over-year percentage change in amounts
-- The year-over-year increases in total revenues from both
leased-and-operated and franchised-and-managed hotels in the second
quarter 2014 were mainly driven by an increase in the number of hotels
and hotel rooms in operation, partially offset by a decrease in RevPAR.
Total Operating Costs and Expenses / Total Operating Income
(RMB/USD in Millions) Second Quarter 2014
Adjusted
GAAP Results Reconciliation Non-GAAP Results
RMB USD Vpts RMB USD RMB USD Vpts
--- --- ---- --- --- --- --- ----
Leased-and-Operated Hotel Costs 1,216.7 196.1 -2.5pts 3.2 0.5 1,213.5 195.6 -2.2pts
Franchised-and-Managed Hotel Personnel Costs 57.3 9.2 0.8pts 3.2 0.5 54.1 8.7 0.7pts
Sales and Marketing Expenses 30.7 4.9 0.7pts 0.2 0.0 30.5 4.9 0.7pts
General and Administrative Expenses 82.0 13.2 0.0pts 18.6 3.0 63.4 10.2 0.1pts
---- ---- ------ ---- --- ---- ---- ------
Total Operating Costs and Expenses 1,386.7 223.5 -1.0pts 25.1 4.0 1,361.6 219.5 -0.7pts
Total Operating Income 211.3 34.1 1.2pts 25.1 4.0 236.4 38.1 0.9pts
===== ==== ====== ==== === ===== ==== ======
Note: "Vpts" represents year-over-year change in percentage points of total revenues
Total operating costs and expenses were RMB 1.39 billion (US$223.5 million) for the second quarter of 2014, representing 81.6% of total revenues for the quarter. Total operating costs and expenses excluding any share-based compensation expenses and acquisition and integration costs (non-GAAP) for the second quarter of 2014 were 80.2% of total revenues, compared to 80.9% in the same period a year ago.
-- Total leased-and-operated hotel costs were RMB 1.22 billion (US$196.1
million) for the second quarter of 2014, representing 83.4% of the
leased-and-operated hotel revenues for the quarter compared to 84.1% in
the same period a year ago. Total leased-and-operated hotel costs
excluding any share-based compensation expenses and integration costs
(non-GAAP) were 83.1% of the leased-and-operated hotel revenues in the
second quarter of 2014 compared to 83.5% in the same period a year ago.
The year-over-year decreases in total leased-and-operated hotel costs as
a percentage of leased-and-operated hotel revenues were mainly due to
lower pre-opening cost in the second quarter of 2014. Pre-opening cost
was RMB 6.8 million (US$1.1 million) for the second quarter of 2014.
-- Franchised-and-managed hotels personnel costs were RMB 57.3 million
(US$9.2 million) for the second quarter of 2014, representing 24.0% of
the franchised-and-managed hotel revenues for the quarter, compared to
22.4% in the same period a year ago. The increase in
franchised-and-managed hotels personnel costs as a percentage of
franchised-and-managed hotel revenues was mainly due to the lower mix of
upfront franchise-and-management fees included in the
franchised-and-managed hotel revenues. To a lesser extent, it was due to
the modest RevPAR decline resulting in lower revenue base per available
room in the second quarter of 2014, compared with the same period a year
ago. Franchised-and-managed hotels personnel costs excluding share-based
compensation expenses (non-GAAP) were 22.6% of franchised-and-managed
hotel revenues in the second quarter of 2014, compared to 21.0% in the
same period of 2013.
-- Sales and marketing expenses were RMB 30.7 million (US$4.9 million) for
the second quarter of 2014, representing 1.8% of total revenues for the
quarter compared to 1.1% in the same period a year ago. The increase was
mainly due to spending on certain planned corporate branding initiatives
during the quarter. Sales and marketing expenses excluding share-based
compensation expenses (non-GAAP) were 1.8% of total revenues for the
second of quarter 2014 compared to 1.1% in the same period of 2013.
-- General and administrative expenses were RMB 82.0 million (US$13.2
million) for the second quarter of 2014, representing 4.8% of total
revenues compared to 4.8% in the same period a year ago. General and
administrative expenses excluding share-based compensation expenses and
acquisition and integration costs (non-GAAP) were 3.7% of total revenues
for the quarter compared to 3.7% in the same period of 2013.
Income from Operations was RMB 211.3 million (US$34.1 million) for the second quarter of 2014. Income from operations excluding share-based compensation expenses and acquisition and integration costs (non-GAAP) for the second quarter of 2014 was RMB 236.4 million (US$38.1 million), or 13.9% of total revenues, compared to RMB 208.2 million, or 13.0% of total revenues, in the same period of 2013. The year-over-year increases in income from operations margin rate for the quarter were mainly driven by the increased mix of higher-margin revenue contribution from franchised-and-managed operations and lower pre-opening costs in the second quarter of 2014.
EBITDA (non-GAAP)
(RMB/USD in Millions) Second Quarter 2014 Second Quarter 2013
------------------- -------------------
RMB USD %Rev V% RMB USD %Rev
--- --- ---- --- --- --- ----
EBITDA (Non-GAAP) 380.4 61.3 22.4% 9.1% 348.7 56.2 21.8%
Net Foreign Exchange (Gain) / Loss 0.1 0.0 0.0% -25.1 -4.0 -1.6%
Share-Based Compensation Expenses 22.8 3.7 1.3% 22.4 3.6 1.4%
Accelerated Fee Amortization on Early Extinguishment of Term Loan 41.9 6.7 2.6%
Acquisition Expenses 0.7 0.1 0.0% - - -
Integration Cost 1.6 0.3 0.1% 5.7 0.9 0.4%
Non-Operating (Income) / Expenses - - - 0.5 0.1 0.0%
Loss on Fair Value Change in Convertible Notes 35.0 5.6 2.1% -0.4 -0.1 0.0%
---- --- --- ---- ----
Adjusted EBITDA (Non-GAAP) 440.7 71.0 25.9% 12.0% 393.6 63.4 24.6%
===== ==== ==== ==== ===== ==== ====
Note: "%Rev" represents amount as a percentage of total revenues
"V%" represents year-over-year percentage change in amounts
Consolidated Net Income Attributable to Home Inns Group's Shareholders
(RMB/USD in Millions) Second Quarter 2014 Second Quarter 2013
------------------- -------------------
RMB USD %Rev V% RMB USD %Rev
--- --- ---- --- --- --- ----
Net Income (GAAP) 108.2 17.4 6.4% 14.2% 94.8 15.3 5.9%
Net Foreign Exchange Loss / (Gain) 0.1 0.0 0.0% -25.1 -4.0 -1.6%
Share-Based Compensation Expenses 22.8 3.7 1.3% 22.4 3.6 1.4%
Acquisition Expenses 0.7 0.1 0.0% - - -
Integration Cost 1.6 0.3 0.1% 5.7 0.9 0.4%
Accelerated Fee Amortization on Early Extinguishment of Term Loan - - - 41.9 6.7 2.6%
Non-operating income -- Gain on Change in Fair Value of Interest Swap Transaction - - - 0.5 0.1 0.0%
Loss on Fair Value Change in Convertible Notes 35.0 5.6 2.1% -0.4 -0.1 0.0%
---- --- --- ---- ----
Adjusted Net Income (Non-GAAP) 168.4 27.1 9.9% 20.6% 139.7 22.5 8.7%
===== ==== === ==== ===== ==== ===
Note: "%Rev" represents amount as a percentage of total revenues
"V%" represents year-over-year percentage change in amounts
Basic and Diluted Earnings Per Ordinary Share and Per ADS
Second Quarter 2014
-------------------
Ordinary Share ADS Share
RMB USD RMB USD
--- --- --- ---
Basic 1.14 0.18 2.27 0.37
Diluted 1.13 0.18 2.27 0.37
Adjusted Basic (Non-GAAP) 1.77 0.28 3.53 0.57
Adjusted Diluted (Non-GAAP) 1.69 0.27 3.38 0.55
Cash Flow
Net operating cash flow for the second quarter of 2014 was RMB 365.8 million (US$59.0 million), compared to RMB 388.8 million in the same period of 2013. The decrease in net operating cash flow year over year was mainly due to the decrease in accounts payable during the second quarter of 2014. Capitalized expenditures for the second quarter of 2014 were RMB 194.6 million (US$31.4 million), while related cash paid for capital expenditures during the quarter was RMB 85.1 million (US$13.7 million).
Balance Sheet
As of June 30, 2014, Home Inns Group had cash and cash equivalents of RMB 1.34 billion (US$215.3 million). The outstanding balance of convertible notes issued in December 2010 (measured at fair value) was RMB 1.12 billion (US$180.1 million). The outstanding balance of the U.S. dollar-denominated three-year term loan was RMB 719.9 million (US$116.0 million), and the outstanding balance of the short term loan assumed from the Yunshang Siji acquisition was RMB 73.0 million (US$11.8 million).
Outlook for Third Quarter 2014
Home Inns Group continues to target opening no fewer than 450 new hotels in 2014. This total is expected to reflect approximately 50 new leased-and-operated hotels, including the recently acquired Yunshang Siji hotels. The balance is expected to consist of no fewer than 400 new franchised-and-managed hotels, highlighting continued strong franchise demand that is contributing a positive return to the business.
Home Inns Group expects total revenues for the group in the third quarter of 2014 to be in the range of RMB 1,875 million to RMB 1,895 million.
These forecasts reflect our current and preliminary views and are subject to change.
This announcement contains translations of certain RMB amounts into U.S. dollars solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB 6.2036 to US$1.00, the noon buying rate for June 30, 2014 set forth in the H.10 statistical release of the Federal Reserve Board.
Conference Call Information
Management will hold an earnings conference call at 9 PM U.S. Eastern Time on Tuesday, August 12, 2014 (9 AM Beijing/Hong Kong Time on Wednesday, August 13, 2014).
Dial-in details for the earnings conference call are as follows:
U.S. (toll free): 1.866.519.4004
U.S.: 1.845.675.0437
China Mainland: 800.819.0121 or 400.620.8038
Hong Kong (toll free): 800.930.346
Hong Kong: 852.2475.0994
U.K. (toll free): 080.8234.6646
U.K.: 44.2030.598.139
Australia: 61.290.090.733
Taiwan (toll free): 008.0112.6920
International: 65.6723.9381
Pass code for all regions: Home Inns
A replay of the conference call may be accessed by phone at the following numbers until 10 AM on Wednesday, August 20, 2014 U.S. Eastern Time.
U.S. (toll free): 1.855.452.5696
China (toll free): 800.870.0205 or 400.602.2065
Hong Kong (toll free): 800.963.117
International: 61.2.8199.0299
Conference ID number: 72562079
Live and archived webcasts of this conference call will be available at http://english.homeinns.com.
About Home Inns Group
Home Inns Group is a leading economy hotel chain in China based on number of hotels and hotel rooms as well as geographic coverage of the hotel chain. Since the Company commenced operations in 2002, it has built Home Inns as one of the best-known economy hotel brands in China. In October of 2011, the Company acquired Motel 168, another well-known hotel chain in China, as its second economy hotel brand. Home Inns Group aims to offer a consistent product and high-quality services to primarily serve the fast growing population of value-conscious individual business and leisure travelers who demand clean, comfortable and convenient lodging. Home Inns Group's ADSs, each of which represents two ordinary shares, are currently trading on the NASDAQ Global Select Market under the symbol "HMIN." For more information about Home Inns Group, please visit http://english.homeinns.com.
Safe Harbor
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Any statements in this press release that are not historical facts are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include our anticipated growth strategies; our future results of operations and financial condition; the economic conditions of China; the regulatory environment in China; our ability to attract customers and leverage our brand; trends and competition in the lodging industry; the expected growth of the lodging market in China; our expected successful consolidation and integration of Motel 168 with our existing operations; and other factors and risks detailed in our filings with the Securities and Exchange Commission. This press release also contains statements or projections that are based upon information available to the public, as well as other information from sources which management believes to be reliable, but it is not guaranteed by us to be accurate, nor does it purport to be complete. We undertake no obligation to update or revise to the public any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.
Non-GAAP Financial Measures
To supplement Home Inns Group's unaudited consolidated financial results presented in accordance with U.S. GAAP, Home Inns Group uses the following non-GAAP measures:
(a) total operating costs and expenses excluding share-based compensation expenses and acquisition and integration costs
(b) total leased-and-operated hotel costs excluding share-based compensation expenses and integration costs
(c) personnel costs of franchised-and-managed hotels excluding share-based compensation expenses
(d) sales and marketing expenses excluding share-based compensation expenses
(e) general and administrative expenses excluding share-based compensation expenses and acquisition and integration costs
(f) income from operations excluding share-based compensation expenses and acquisition and integration costs
(g) adjusted net income attributable to shareholders excluding any share-based compensation expenses, foreign exchange gain or loss, acquisition and integration cost, upfront fee amortization of term loan, gain or loss from fair value change of convertible notes and interest swap derivatives and other non-operating expenses
(h) adjusted basic and diluted earnings per ADS and per share excluding foreign exchange gain or loss, share-based compensation expenses, gain on buy-back of convertible bonds, issuance costs for convertible notes, gain or loss from fair value change of convertible notes, acquisition and integration cost, non-operating expenses and upfront fee amortization of term loan, and
(i) adjusted EBITDA excluding foreign exchange gain or loss, share-based compensation expenses, gain on buy-back of convertible bonds, issuance costs for convertible notes, gain or loss from fair value change of convertible notes, acquisition and integration costs, non-operating expenses and upfront fee amortization of term loan
The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of GAAP and non-GAAP results" set forth at the end of this press release.
Home Inns Group believes that, used in conjunction with GAAP financial measures, these non-GAAP financial measures provide meaningful supplemental information regarding the Group's performance, and both management and investors benefit from referring to these non-GAAP financial measures in assessing the Group's performance and when planning and forecasting future periods. Management believes that EBITDA, defined as earnings before interest, income tax expense, depreciation and amortization, is a useful financial metric to assess Home Inns Group's operating and financial performance before the impact of investing and financing transactions and income taxes. In addition, management believes that EBITDA is widely used by other companies in the lodging industry and may be used as an analysis tool by both management and investors to measure and compare Home Inns Group's operational and financial performance with industry peers.
One of the limitations of using non-GAAP income from operations, EBITDA, adjusted EBITDA and non-GAAP net income attributable to shareholders is that they do not include all items that impact Home Inns Group's net income (loss) for the period. These non-GAAP measures exclude share-based compensation expenses, foreign exchange gain or loss and gain or loss from fair value change of convertible notes, which have been and will continue to be a significant recurring expense in Home Inns Group's business. In addition, Home Inns Group's EBITDA and adjusted EBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as Home Inns Group does. Management compensates for this and other limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. Home Inns Group computes the non-GAAP financial measures using the same consistent method from quarter to quarter. Reconciliations of GAAP and non-GAAP results are included at the end of this press release. The non-GAAP adjustment items do not include the tax impact.
The presentation of EBITDA and adjusted EBITDA should not be construed as an indication that Home Inns Group's future results will be unaffected by other charges and gains Home Inns Group considers to be outside the ordinary course of its business.
Home Inns Group completed its acquisition of 100% equity interest in Motel 168, and took control of Motel 168 effective on October 1, 2011. Home Inns Group has consolidated Motel 168's operating and financial results since October 1, 2011. Home Inns Group has presented certain separated financial data of Motel 168 in this earning release for the purpose of providing more information to investors. Home Inns Group had substantially completed Motel 168's integration as of the third quarter of 2013 and ceased to present separate operating metrics and revenues for Motel 168.
For investor and media inquiries, please contact:
Ethan Ruan
Home Inns & Hotels Management Inc.
Tel: +86-21-3337-3333*3872
Email: zjruan@homeinns.com
Cara O'Brien
FTI Consulting
Tel: +852-3768-4537
Email: cara.obrien@fticonsulting.com
Home Inns & Hotels Management Inc.
Unaudited Condensed Consolidated Balance Sheet
December 31, 2013 June 30, 2014
----------------- -------------
RMB '000 RMB '000 US$ '000
ASSETS
Current assets:
Cash and cash equivalents 1,156,743 1,335,344 215,253
Restricted cash 173,276 174,021 28,052
Accounts receivable, net 99,964 119,249 19,223
Receivables from related parties 5,509 3,634 586
Consumables 41,231 35,179 5,671
Prepayments and other current assets 181,232 184,389 29,723
Deferred tax assets 78,839 84,398 13,605
------ ------ ------
Total current assets 1,736,794 1,936,214 312,113
--------- --------- -------
Investment in a jointly controlled entity 5,833 5,711 921
Property and equipment, net 4,049,337 4,105,460 661,787
Goodwill 2,254,631 2,323,241 374,499
Intangible assets, net 1,112,499 1,149,440 185,286
Other assets 86,027 88,327 14,238
Non-current deferred tax assets 407,564 458,936 73,979
------- ------- ------
Total assets 9,652,685 10,067,329 1,622,823
========= ========== =========
LIABILITIES
Current liabilities:
Accounts payable 89,170 67,159 10,826
Payables to related parties 3,029 6,514 1,050
Short term loans - 73,000 11,767
Finance lease liabilities 1,376 337 54
Salaries and welfare payable 222,865 174,367 28,107
Income tax payable 88,551 88,142 14,208
Other taxes payable 31,344 33,918 5,467
Deferred revenues 202,949 229,571 37,006
Other unpaid and accruals 228,881 257,857 41,566
Other payables 911,642 989,289 159,475
Deferred tax liability 52,155 59,709 9,625
------ ------ -----
Total current liabilities 1,831,962 1,979,863 319,151
--------- --------- -------
Long term loans 713,337 719,878 116,042
Deferred rental 691,456 713,580 115,027
Deferred revenues 54,075 54,022 8,708
Deposits due to franchisees 115,351 133,349 21,495
Other long term payables 20,537 16,871 2,720
Unfavorable lease liabilities 337,627 349,451 56,330
Financial liabilities(2) 1,157,295 1,117,404 180,122
Deferred tax liabilities 283,522 290,795 46,875
------- ------- ------
Total liabilities 5,205,162 5,375,213 866,470
--------- --------- -------
Commitments and contingencies
Shareholders' equity
Ordinary shares (US$0.005 par value; 3,671 3,693 595
200,000,000 shares authorized, 94,814,866
and 95,544,308 shares issued and
outstanding as of December 31, 2013
and June 30 2014, respectively)
Additional paid-in capital 3,080,596 3,144,459 506,876
Statutory reserves 206,892 206,892 33,350
Retained earnings 1,140,252 1,323,283 213,309
--------- --------- -------
Total Home Inns shareholders' equity 4,431,411 4,678,327 754,130
--------- --------- -------
Noncontrolling interests 16,112 13,789 2,223
------ ------ -----
Total shareholders' equity 4,447,523 4,692,116 756,353
--------- --------- -------
Total liabilities and shareholders' equity 9,652,685 10,067,329 1,622,823
========= ========== =========
- - -
Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2036
on June 30, 2014, representing the certificated exchange rate published by the Federal Reserve Board.
Note 2: Financial liabilities represent convertible notes measured at fair value.
Home Inns & Hotels Management Inc.
Unaudited Condensed Consolidated Statement of Operations
Quarter Ended
-------------
June 30, 2013 March 31, 2014 June 30, 2014
------------- -------------- -------------
RMB '000 RMB '000 RMB '000 US$ '000
Revenues:
Leased-and-operated hotels 1,412,658 1,279,204 1,459,489 235,265
Franchised-and-managed hotels 189,252 193,254 239,113 38,544
------- ------- ------- ------
Total revenues 1,601,910 1,472,458 1,698,602 273,809
Less: Business tax and related surcharges (99,238) (94,264) (104,588) (16,859)
------- ------- -------- -------
Net revenues 1,502,672 1,378,194 1,594,014 256,950
--------- --------- --------- -------
Operating costs and expenses:
Leased-and-operated hotel costs -
Rents and utilities (491,097) (559,579) (509,722) (82,166)
Personnel costs (269,005) (270,666) (269,365) (43,421)
Depreciation and amortization (170,024) (180,145) (186,823) (30,115)
Consumables, food and beverage (89,198) (70,338) (85,765) (13,825)
Others (168,149) (130,978) (165,071) (26,609)
-------- -------- -------- -------
Total leased-and-operated hotel costs (1,187,473) (1,211,706) (1,216,746) (196,136)
Personnel costs of Franchised-and-managed hotels (42,347) (38,549) (57,284) (9,234)
Sales and marketing expenses (17,322) (25,035) (30,703) (4,949)
General and administrative expenses (76,653) (71,157) (81,968) (13,213)
------- ------- ------- -------
Total operating costs and expenses (1,323,795) (1,346,447) (1,386,701) (223,532)
---------- ---------- ---------- --------
Other income 1,224 10,639 3,967 639
Income from operations 180,101 42,386 211,280 34,057
------- ------ ------- ------
Interest income 1,394 977 1,677 270
Interest expenses (13,717) (11,981) (13,064) (2,106)
Accelerated fee amortization on early extinguishment of Term Loan (41,872) - - -
(Loss)/gain from equity investment (137) (310) 189 30
Gain/(loss) on change in fair value of convertible notes 402 85,508 (35,016) (5,644)
Non-operating income 9,334 - 13,266 2,138
Foreign exchange gain/(loss), net 25,124 (15,156) (109) (18)
------ ------- ---- ---
Income before income tax expenses and noncontrolling interests 160,629 101,424 178,223 28,727
------- ------- ------- ------
Income tax expense (66,101) (25,465) (68,410) (11,027)
Net income 94,528 75,959 109,813 17,700
------ ------ ------- ------
Less:Net loss/(income) attributable to noncontrolling interests 223 (1,094) (1,647) (265)
--- ------ ------ ----
Net income attributable to ordinary shareholders 94,751 74,865 108,166 17,435
====== ====== ======= ======
Earnings per share
- Basic 1.03 0.79 1.14 0.18
==== ==== ==== ====
- Diluted 0.84 0.05 1.13 0.18
==== ==== ==== ====
Weighted average ordinary shares outstanding
- Basic 92,217 94,873 95,285 95,285
====== ====== ====== ======
- Diluted 100,459 102,647 95,407 95,407
======= ======= ====== ======
Share-based compensation expense was included in the statement of operations as
follows:
Leased-and-operated hotel costs - Personnel costs 1,949 2,432 1,889 305
Personnel costs of Franchised-and-managed hotels 2,656 3,838 3,156 509
Sales and marketing expenses 354 253 154 25
General and administrative expenses 17,426 18,964 17,583 2,834
Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2036
on June 30, 2014, representing the certificated exchange rate published by the Federal Reserve Board.
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results
Quarter Ended June 30, 2014
---------------------------
GAAP % of Total Share-based Acquisition Integration % of Total Non-GAAP Result % of Total
Result Revenue Compensation expenses cost Revenue Revenue
------ ------- ------------ -------- ---- ------- -------
RMB '000 RMB '000 RMB '000 RMB '000 RMB '000
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Leased-and-operated hotel costs (1,216,746) 71.6% 1,889 - 1,328 0.2% (1,213,529) 71.4%
Personnel costs of Franchised-and-managed hotels (57,284) 3.4% 3,156 - - 0.2% (54,128) 3.2%
Sales and marketing expenses (30,703) 1.8% 154 - - 0.0% (30,549) 1.8%
General and administrative expenses (81,968) 4.8% 17,583 691 317 1.1% (63,377) 3.7%
------- ------ --- --- -------
Total operating costs and expenses (1,386,701) 81.6% 22,782 691 1,645 1.5% (1,361,583) 80.2%
========== ====== === ===== ==========
Income from operations 211,280 12.4% 22,782 691 1,645 1.5% 236,398 13.9%
======= ====== === ===== =======
Quarter Ended June 30, 2014
---------------------------
GAAP % of Total Share-based Acquisition Integration % of Total Non-GAAP Result % of Total
Result Revenue Compensation expenses cost Revenue Revenue
------ ------- ------------ -------- ---- ------- -------
US$ '000 US$ '000 RMB '000 US$ '000 US$ '000
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Leased-and-operated hotel costs (196,136) 71.6% 305 - 214 0.2% (195,617) 71.4%
Personnel costs of Franchised-and-managed hotels (9,234) 3.4% 509 - - 0.2% (8,725) 3.2%
Sales and marketing expenses (4,949) 1.8% 25 - - 0.0% (4,924) 1.8%
General and administrative expenses (13,213) 4.8% 2,834 111 51 1.1% (10,217) 3.7%
------- ----- --- --- -------
Total operating costs and expenses (223,532) 81.6% 3,672 111 265 1.5% (219,484) 80.2%
======== ===== === === ========
Income from operations 34,057 12.4% 3,672 111 265 1.5% 38,105 13.9%
====== ===== === === ======
Quarter Ended March 31, 2014
----------------------------
GAAP % of Total Share-based Acquisition Integration % of Total Non-GAAP Result % of Total
Result Revenue Compensation expenses cost Revenue Revenue
------ ------- ------------ -------- ---- ------- -------
RMB '000 RMB '000 RMB '000 RMB '000 RMB '000
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Leased-and-operated hotel costs (1,211,706) 82.3% 2,432 - 1,784 0.3% (1,207,490) 82.0%
Personnel costs of Franchised-and-managed hotels (38,549) 2.6% 3,838 - - 0.3% (34,711) 2.4%
Sales and marketing expenses (25,035) 1.7% 253 - - 0.0% (24,782) 1.7%
General and administrative expenses (71,157) 4.8% 18,964 - 317 1.3% (51,876) 3.5%
------- ------ --- --- -------
Total operating costs and expenses (1,346,447) 91.4% 25,487 - 2,101 1.9% (1,318,859) 89.6%
========== ====== === ===== ==========
Income from operations 42,386 2.9% 25,487 - 2,101 1.9% 69,974 4.8%
====== ====== === ===== ======
Quarter Ended June 30, 2013
---------------------------
GAAP % of Total Share-based Acquisition Integration % of Total Non-GAAP Result % of Total
Result Revenue Compensation expenses cost Revenue Revenue
------ ------- ------------ -------- ---- ------- -------
RMB '000 RMB '000 RMB '000 RMB '000 RMB '000
(unaudited) (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%
======= ====== === ===== =======
Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2036
on June 30, 2014, representing the certificated exchange rate published by the Federal Reserve Board.
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results (continued)
Quarter Ended
-------------
June 30, 2013 March 31, 2014 June 30, 2014
------------- -------------- -------------
RMB '000 RMB '000 RMB '000 US$ '000
(unaudited) (unaudited) (unaudited) (unaudited)
Net income attributable to ordinary shareholders (GAAP) 94,751 74,865 108,166 17,435
Foreign exchange (gain)/loss, net (25,124) 15,156 109 18
Share-based compensation 22,385 25,487 22,782 3,672
Acquisition expenses - - 691 111
Integration cost 5,733 2,101 1,645 265
Accelerated fee amortization on early extinguishment of Term Loan 41,872 - - -
Loss on change in fair value of interest swap transaction 468 - - -
(Gain)/loss on change in fair value of convertible notes (402) (85,508) 35,016 5,644
---- ------- ------ -----
Adjusted net income attributable to ordinary shareholders (Non-GAAP) 139,683 32,101 168,409 27,145
======= ====== ======= ======
Quarter Ended
-------------
June 30, 2013 March 31, 2014 June 30, 2014
------------- -------------- -------------
RMB '000 RMB '000 RMB '000 US$ '000
(unaudited) (unaudited) (unaudited) (unaudited)
Earnings per share (GAAP)
- Basic 1.03 0.79 1.14 0.18
==== ==== ==== ====
- Diluted 0.84 0.05 1.13 0.18
==== ==== ==== ====
Weighted average ordinary shares outstanding
- Basic 92,217 94,873 95,285 95,285
====== ====== ====== ======
- Diluted 100,459 102,647 95,407 95,407
======= ======= ====== ======
Adjusted earnings per share (Non-GAAP)
- Basic 1.51 0.34 1.77 0.28
==== ==== ==== ====
- Diluted 1.45 0.34 1.69 0.27
==== ==== ==== ====
Weighted average ordinary shares outstanding
- Basic 92,217 94,873 95,285 95,285
====== ====== ====== ======
- Diluted 100,459 95,193 102,862 102,862
======= ====== ======= =======
Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2036
on June 30, 2014, representing the certificated exchange rate published by the Federal Reserve Board.
Note 2: The non-GAAP adjustment items do not include the tax impact.
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results (continued)
Quarter Ended
-------------
June 30, 2013 March 31, 2014 June 30, 2014
------------- -------------- -------------
RMB '000 RMB '000 RMB '000 US$ '000
(unaudited) (unaudited) (unaudited) (unaudited)
Net income attributable to ordinary shareholders 94,751 74,865 108,166 17,435
Interest income (1,394) (977) (1,677) (270)
Interest expenses 13,717 11,981 13,064 2,106
Income tax expense 66,101 25,465 68,410 11,027
Depreciation and amortization 175,496 185,507 192,455 31,023
------- ------- ------- ------
EBITDA (Non-GAAP) 348,671 296,841 380,418 61,321
------- ------- ------- ------
Foreign exchange (gain)/loss, net (25,124) 15,156 109 18
Share-based compensation 22,385 25,487 22,782 3,672
Accelerated fee amortization on early extinguishment of Term Loan 41,872 - - -
Acquisition expenses - - 691 111
Integration cost 5,733 2,101 1,645 265
Loss on change in fair value of interest swap transaction 468 - - -
(Gain)/loss on change in fair value of convertible notes (402) (85,508) 35,016 5,644
---- ------- ------ -----
Adjusted EBITDA (Non-GAAP) 393,603 254,077 440,661 71,031
======= ======= ======= ======
% of total revenue 24.6% 17.3% 25.9% 25.9%
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, 2013 March 31, 2014 June 30, 2014
------------- -------------- -------------
Group Motel 168 excluding Motel 168 Group Motel 168 excluding Motel 168 Group Motel 168 excluding Motel 168
Total Hotels in operation: 1,953 341 1,612 2,241 381 1,860 2,374 383 1,991
Leased-and-operated hotels 834 154 680 876 164 712 897 164 733
Franchised-and-managed hotels 1,119 187 932 1,365 217 1,148 1,477 219 1,258
Total rooms 232,905 49,637 183,268 262,321 53,040 209,281 275,050 52,914 222,136
Occupancy rate (as a percentage) 87.0% 82.1% 88.3% 81.3% 76.7% 82.4% 86.7% 83.6% 87.7%
Average daily rate (in RMB) 167 161 168 156 154 157 164 162 165
RevPAR (in RMB) 145 132 149 127 118 129 142 135 145
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, 2013 June 30, 2014
------------- -------------
Group Motel 168 excluding Motel 168 Group Motel 168 excluding Motel 168
Total Hotels in operation: 1,732 328 1,404 1,732 328 1,404
Leased-and-operated hotels 812 173 639 810 173 637
Franchised-and-managed hotels 920 155 765 922 155 767
Total rooms 205,088 44,750 160,338 205,067 43,692 161,375
Occupancy rate (as a percentage) 89.0% 83.6% 90.5% 88.9% 85.3% 90.0%
Average daily rate (in RMB) 168 162 170 166 163 167
RevPAR (in RMB) 150 135 154 148 139 150
Two Home Inn Leased-and-operated hotel was legally converted into Franchised-and-managed hotels in 2014.
* "Occupancy rate" refers to the total number of occupied rooms divided by the total number of available rooms in a given period.
"Average daily rate" refers to total hotel room revenues divided by the total number of occupied rooms in a given period.
"RevPAR" represents revenue per available room, which is calculated by dividing total hotel room revenues by the total number of available rooms in a given period, or by multiplying average daily rates and occupancy rates in a given period.
The operating data of multi-brand conversion hotels were included in "Motel 168".
SOURCE Home Inns & Hotels Management Inc.
