Home Inns Group Reports First Quarter 2014 Financial Results - WLOX.com - The News for South Mississippi

Home Inns Group Reports First Quarter 2014 Financial Results

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SOURCE Home Inns & Hotels Management Inc.

Hotels in Operation Reached 2,241 in 297 Cities in China

Operating Margin Improved Year over Year for the Fifth Consecutive Quarter despite Continued Market Softness

SHANGHAI, May 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 first quarter ended March 31, 2014. 

First Quarter 2014 Financial Highlights

  • Total revenues increased 5.0% year over year to RMB 1.47 billion (US$236.9 million) for the first quarter of 2014, within the guidance range.
  • Net income attributable to ordinary shareholders was RMB 74.9 million (US$12.0 million) for the first quarter of 2014, compared with a net loss of RMB 19.4 million in the same period a year ago. Adjusted net income attributable to ordinary shareholders (non-GAAP) increased 210% year over year to RMB 32.1 million (US$5.2 million).
  • EBITDA (non-GAAP) was RMB 296.8 million (US$47.8 million) for the first quarter of 2014, compared with RMB 187.4 million in the same period a year ago..  Adjusted EBITDA (non-GAAP) increased 17.6% year over year to RMB 254.1 million (US$40.9 million) for the first quarter of 2014.

Key Financial Results






(RMB in Millions except RMB per ADS)

      1Q2014


     1Q2013


        V%

Total Revenues

1,472.5


1,402.2


5.0%

Income from Operations

42.4


12.1


250.7%


Adj. Income from Operations*

70.0


39.2


78.7%

Net Income

74.9


-19.4


F


Adj. Net Income*

32.1


10.3


210.3%

EBITDA*

296.8


187.4


58.4%


Adj. EBITDA*

254.1


216.1


17.6%

Diluted Earnings per ADS

0.11


-0.42


F


Adj. Diluted Earnings per ADS*

0.67


0.22


204.5%








"V%" represents year-over-year percentage change in amounts
"F" denotes a favourable change when the prior period amount was negative
* Indicates a non-GAAP financial measure (see commentary at the end of this earnings release for full details).

First Quarter 2014 Operational Highlights

  • Home Inns Group opened 69 new hotels in the first quarter 2014 and operated 2,241 hotels across 297 cities in China under its three brands as of March 31, 2014.  There were a total of 448 hotel projects in the development pipeline as of March 31, 2014, including 185 hotels contracted or under construction (165 of which were franchised-and-managed hotels) and 263 hotels under due diligence (all of which were franchised-and-managed hotels), demonstrating continued strong interest from franchise partners in the three hotel brands within Home Inns Group.


                           Hotels Count                        


Openings


Closures



Group

Home Inn

Motel 168

Yitel


1Q14


1Q14

Total Number of Hotels

2,241


1,841


381


19


69


8


Leased-and-Operated

876

*

698


164


14


6


1


Franchised-and-Managed

1,365

*

1,143


217


5


63


7

Contracted or under Construction

185


152


22


11






Leased-and-Operated

20


13


6


1






Franchised-and-Managed

165


139


16


10





Under Due Diligence

263


237


23


3






Leased-and-Operated

0


0


0


0






Franchised-and-Managed

263


237


23


3



















* There was one transfer of leased-and-operated hotel to franchised-and-managed hotel under Home Inn brand during the first quarter of 2014.

  • As of March 31, 2014, Home Inns Group had a total of 18.2 million unique active non-corporate members under its frequent guests program.

Operating Metrics





1Q2014

4Q2013

1Q2013

Occupancy Rate

81.3%

84.0%

83.6%

Average Daily Rate (ADR, RMB)

156

163

156

Revenue per Available Room (RevPAR, RMB)

127

137

131

  • For the first quarter of 2014, occupancy rate decreased by 2.3% while ADR was flat year over year, resulting in a year-over-year decrease of 3.1% in RevPAR.  The decrease in occupancy rate was mainly due to soft market conditions in the first quarter of 2014.  Sequentially, RevPAR decreased by 7.3%, which was due to seasonality.

"Despite continued softness in macroeconomic conditions in the first quarter, we achieved revenues within our target range and are pleased to deliver the fifth consecutive quarter of year over year margin expansion," said Mr. David Sun, the Company's chief executive officer.  "While coping with the absence of a full market-wide recovery, we maintained relatively stable performance in our core mature hotels, further increased contributions from our franchised-and-managed operations, implemented further operational enhancements for Motel168, and continued effective cost control initiatives."

Mr. Sun continued, "Looking ahead to the remainder of 2014, we are seeing some early signs of market stabilization but we remain cautious on the outlook for the overall travel market, especially in the business travel segment. Nevertheless, we have proven that our business model and operational structure are resilient under current market conditions. We are also confident that we are well positioned to benefit from any market improvements by executing our franchise and multi-brand development plans and maintaining a sensible expansion pace that will deliver modest but steady revenue growth, sustained margin expansion, and long-term value for our shareholders."

Detailed Overview of Financial Results for First Quarter 2014

Total Revenues




(RMB/USD in Millions)

                    First Quarter 2014                   




RMB

USD

V%


Leased-and-Operated Hotels

1,279.2

205.8

3.3%


Franchised-and-Managed Hotels

193.3

31.1

17.8%

Total Revenues

1,472.5

236.9

5.0%

Less: Business Taxes

-94.3

-15.2

7.2%

Net Revenues

1,378.2

221.7

4.9%







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 first 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. Fewer new franchised-and-managed hotel openings in the first quarter of 2014 (63 opened) compared with same period a year ago (75 opened) also resulted in lower upfront franchise-and-management fee revenue recognition.

Total Operating Costs and Expenses / Total Operating Income




(RMB/USD in Millions)

First Quarter 2014                                                                            






Adjusted


GAAP Results

Reconciliation

Non-GAAP Results


RMB

USD

Vpts

RMB

USD

RMB

USD

Vpts

Leased-and-Operated Hotel Costs

1,211.7

194.9

 -2.7pts

4.2

0.7

1,207.5

194.2

-2.5pts










Franchised-and-Managed Hotel Personnel Costs

38.5

6.2

  0.6pts

3.8

0.6

34.7

5.6

  0.5pts

Sales and Marketing Expenses

25.0

4.0

  0.2pts

0.3

0.0

24.8

4.0

  0.2pts

General and Administrative Expenses

71.2

11.4

  -0.1pts

19.3

3.1

51.9

8.3

 -0.1pts










Total Operating Costs and Expenses

1,346.4

216.6

  -2.0pts

27.6

4.4

1,318.9

212.2

  -1.9pts










Total Operating Income

42.4

6.8

  2.0pts

27.6

4.4

70.0

11.3

  2.0pts










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

Total operating costs and expenses were RMB 1.35 billion (US$216.6 million) for the first quarter of 2014, representing 91.4% 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 first quarter of 2014 were 89.6% of total revenues, compared to 91.5% in the same period a year ago.

  • Total leased-and-operated hotel costs were RMB 1.21 billion (US$194.9 million) for the first quarter of 2014, representing 94.7% of the leased-and-operated hotel revenues for the quarter compared to 96.2% in the same period a year ago.  Total leased-and-operated hotel costs excluding any share-based compensation expenses and acquisition and integration costs (non-GAAP) were 94.4% of the leased-and-operated hotel revenues in the first quarter of 2014 compared to 95.7% 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 due to fewer new leased-and-operated hotels opened and under construction in the first quarter of 2014. Pre-opening cost was RMB 5.9 million (US$1.0 million) for the first quarter of 2014.
  • Franchised-and-managed hotels personnel costs were RMB 38.5 million (US$6.2 million) for the first quarter of 2014, representing 19.9% of the franchised-and-managed hotel revenues for the quarter, compared to 17.7% 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 in the first quarter of 2014 as a result of fewer new franchised-and-managed hotel openings compared with the same period a year ago. Franchised-and-managed hotels personnel costs excluding share-based compensation expenses (non-GAAP) were 18.0% of franchised-and-managed hotel revenues in the first quarter of 2014, compared to 15.9% in the same period of 2013. 
  • Sales and marketing expenses were RMB 25.0 million (US$4.0 million) for the first quarter of 2014, representing 1.7% of total revenues for the quarter compared to 1.5% 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 1.7% of total revenues for the first of quarter 2014 compared to 1.5% in the same period of 2013. 
  • General and administrative expenses were RMB 71.2 million (US$11.4 million) for the first quarter of 2014, representing 4.8% of total revenues compared to 4.9% in the same period a year ago.  General and administrative expenses excluding any share-based compensation expenses, and acquisition and integration costs (non-GAAP) were 3.5% of total revenues for the quarter compared to 3.6% in the same period of 2013. 

Income from Operations was RMB 42.4 million (US$6.8 million) for the first quarter of 2014.  Income from operations excluding share-based compensation expenses and integration costs (non-GAAP) for the first quarter of 2014 was RMB 70.0 million (US$11.3 million), or 4.8% of total revenues, compared to RMB 39.2 million, or 2.8% of total revenues, in the same period of 2013.  While the hotel level cost reduction and efficiency gains continued, their impact in the quarter was mitigated by the modest RevPAR decline. The year-over-year increases in the income from operations margin rate for the quarter were thus mainly driven by the increased mix of higher-margin revenue contribution from franchised-and-managed operations and reduced pre-opening costs due to fewer new leased-and-operated hotels opened and under construction in the first quarter of 2014.


EBITDA (non-GAAP)









(RMB/USD in Millions)

                   First Quarter 2014                 


First Quarter 2013



RMB

USD

%Rev

V%


RMB

USD

%Rev

EBITDA (Non-GAAP)

296.8

47.8

20.2%

58.4%


187.4

30.1

13.4%


Net Foreign Exchange Loss / (Gain)

15.2

2.4

1.0%



-2.6

-0.4

-0.2%


Share-Based Compensation Expenses

25.5

4.1

1.7%



22.9

3.7

1.6%


Integration Cost

2.1

0.3

0.1%



4.1

0.7

0.3%


Gain on Change in Fair Value of Interest Swap Transaction

-

-

-



-1.4

-0.2

-0.1%


(Gain) / Loss on Fair Value Change in Convertible Notes

-85.5

-13.8

-5.8%



5.7

0.9

0.4%

Adjusted EBITDA (Non-GAAP)

254.1

40.9

17.3%

17.6%


216.1

34.8

15.4%











Note:

"%Rev" represents amount as a percentage of total revenues
"V%" represents year-over-year percentage change in amounts
Adjusted EBITDA for the first quarter of 2014 was negatively impacted by subtracting a gain of RMB 85.5 million on fair value change in convertible notes. The fair value of the Notes decreased primarily due to decreased share price, offset partially by decrease of market interest rate for corporate bonds with similar credit features and the increase in volatility of the share price during the quarter

        

 

Consolidated Net Income Attributable to Home Inns Group's Shareholders




(RMB/USD in Millions)

First Quarter 2014


First Quarter 2013



RMB

USD

%Rev

V%


RMB

USD

%Rev

Net Income (GAAP)

74.9

12.0

5.1%

F


-19.4

-3.1

-1.4%


Net Foreign Exchange Loss / (Gain)

15.2

2.4

1.0%



-2.6

-0.4

-0.2%


Share-Based Compensation Expenses

25.5

4.1

1.7%



22.9

3.7

1.6%


Integration Cost

2.1

0.3

0.1%



4.1

0.7

0.3%


Upfront fee amortization of term loans

-

-

-



1.0

0.2

0.1%


Gain on change in fair value of interest swap transaction

-

-

-



-1.4

-0.2

-0.1%


Loss on Fair Value Change in Convertible Notes

-85.5

-13.8

-5.8%



5.7

0.9

0.4%

Adjusted Net Income (Non-GAAP)

32.1

5.2

2.2%

210.3%


10.3

1.7

0.7%













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

"V%" represents year-over-year percentage change in amounts

"F" denotes favourable changes when the prior period amount was negative

Basic and Diluted Earnings Per Ordinary Share and Per ADS


First Quarter 2014                            


Ordinary Share

ADS Share


RMB

USD

RMB

USD

Basic

0.79

0.13

1.58

0.25

Diluted

0.05

0.01

0.11

0.02






Adjusted Basic (Non-GAAP)

0.34

0.05

0.68

0.11

Adjusted Diluted (Non-GAAP)

0.34

0.05

0.67

0.11

Cash Flow

Net operating cash flow for the first quarter of 2014 was RMB 154.9 million (US$24.9 million), compared to RMB 63.0 million in the same period of 2013.  Capitalized expenditures for the first quarter of 2014 were RMB 103.2 million (US$16.6 million), while related cash paid for capital expenditures during the quarter was RMB 174.8 million (US$28.1 million).  

Balance Sheet

As of March 31, 2014, Home Inns Group had cash and cash equivalents of RMB 1.16 billion (US$187.0 million).  The outstanding balance of convertible notes issued in December 2010 (measured at fair value) was RMB 1.08 billion (US$174.1 million).  The outstanding balance of the U.S. dollar-denominated three-year term loan was RMB 719.8 million (US$115.8 million).

Recent Developments

On March 10, 2014, Home Inns Group announced that it had signed a legally binding memorandum of understanding to acquire 100% ownership of Yunshang Siji Hotel Management Company ("Yunshang Siji") from Kunming Department Store (Group) Co., Ltd., a publicly listed company in the domestic A-share market, for a cash purchase price of RMB 230 million, subject to satisfactory due diligence and customary purchase price adjustments.

On May 1, 2014, Home Inns Group completed the acquisition of Yunshang Siji for RMB 230 million cash purchase price, subject to customary adjustments.  Yunshang Siji operates an economy hotel chain consisting of 27 leased-and-operated hotels and eight franchised-and-managed hotels (with approximately 3,500 rooms in total) principally located in Yunnan Province. 

The transaction is consistent with the Company's investment and growth strategy to further penetrate key markets of China. Importantly, it enhances the value and geographic diversity of the Home Inns Group portfolio with the addition of a high-quality group of hotels in the Southwest region of China.

Outlook for Second Quarter 2014

Home Inns Group expects total revenues for the group in the second quarter of 2014 to be in the range of RMB 1,690 million to RMB 1,710 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 6.2164 to US$1.00, the noon buying rate for March 31, 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 Monday, May 12, 2014 (9 AM Beijing/Hong Kong Time on Tuesday, May 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 (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 10 AM on Tuesday, May 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:      

30980372

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:

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

Or

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


March 31, 2014



RMB '000


RMB '000


US$ '000








ASSETS







Current assets:







Cash and cash equivalents


1,156,743


1,162,660


187,031

Restricted cash


173,276


163,632


26,323

Accounts receivable, net


99,964


116,927


18,809

Receivables from related parties


5,509


5,509


886

Consumables


41,231


33,835


5,443

Prepayments and other current assets


181,232


144,751


23,285

Deferred tax assets


78,839


82,322


13,243








Total current assets


1,736,794


1,709,636


275,020





























Investment in a jointly controlled entity


5,833


5,522


888

Property and equipment, net


4,049,337


3,949,897


635,399

Goodwill


2,254,631


2,254,631


362,691

Intangible assets, net


1,112,499


1,101,811


177,243

Other assets


86,027


86,081


13,847

Non-current deferred tax assets


407,564


437,642


70,401








Total assets


9,652,685


9,545,220


1,535,489








LIABILITIES







Current liabilities:







Accounts payable


89,170


64,661


10,402

Payables to related parties


3,029


4,180


672

Finance lease liabilities


1,376


710


114

Salaries and welfare payable


222,865


115,121


18,519

Income tax payable


88,551


93,707


15,074

Other taxes payable


31,344


38,575


6,205

Deferred revenues


202,949


217,780


35,033

Other unpaid and accruals


228,881


251,730


40,494

Other payables


911,642


825,791


132,840

Deferred tax liability


52,155


54,009


8,688















Total current liabilities


1,831,962


1,666,264


268,041








Long term loans


713,337


719,796


115,790

Deferred rental


691,456


717,551


115,429

Deferred revenues


54,075


52,589


8,460

Deposits due to franchisees


115,351


122,962


19,780

Other long term payables


20,537


20,808


3,347

Unfavorable lease liabilities


337,627


329,397


52,988

Financial liabilities2


1,157,295


1,082,265


174,098

Deferred tax liabilities


283,522


281,086


45,217








Total liabilities


5,205,162


4,992,718


803,150















Commitments and contingencies














Shareholders' equity







Ordinary shares (US$0.005 par value; 200,000,000 shares authorized, 94,814,866 and 95,092,920 shares issued and outstanding as of December 31, 2013 and March 31 2014, respectively)


3,671


3,679


592








Additional paid-in capital


3,080,596


3,109,609


500,227

Statutory reserves


206,892


206,892


33,282








Retained earnings


1,140,252


1,215,117


195,470








Total Home Inns shareholders' equity


4,431,411


4,535,297


729,571








Noncontrolling interests


16,112


17,205


2,768








Total  shareholders' equity


4,447,523


4,552,502


732,339








Total liabilities and shareholders' equity


9,652,685


9,545,220


1,535,489



-


-


-








Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2164 on March 31, 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



March 31, 2013


December 31, 2013


March 31, 2014



RMB '000


RMB '000


RMB '000


US$ '000



















Revenues:








 Leased-and-operated hotels 


1,238,105


1,401,635


1,279,204


205,779

 Franchised-and-managed hotels 


164,113


208,048


193,254


31,088









 Total revenues 


1,402,218


1,609,683


1,472,458


236,867

 Less: Business tax and related surcharges 


(87,943)


(98,490)


(94,264)


(15,164)









 Net revenues 


1,314,275


1,511,193


1,378,194


221,703









 Operating costs and expenses: 








    Leased-and-operated hotel costs – 








 Rents and utilities 


(551,068)


(533,188)


(559,579)


(90,017)

 Personnel costs 


(275,184)


(256,064)


(270,666)


(43,541)

 Depreciation and amortization 


(169,500)


(180,503)


(180,145)


(28,979)

 Consumables, food and beverage 


(72,005)


(92,034)


(70,338)


(11,315)

 Others 


(123,339)


(184,221)


(130,978)


(21,070)









    Total leased-and-operated hotel costs 


(1,191,096)


(1,246,010)


(1,211,706)


(194,922)









    Personnel costs of Franchised-and-managed
hotels 


(28,992)


(31,855)


(38,549)


(6,201)

    Sales and marketing expenses 


(21,380)


(47,040)


(25,035)


(4,027)

    General and administrative expenses 


(68,676)


(81,406)


(71,157)


(11,447)









 Total operating costs and expenses 


(1,310,144)


(1,406,311)


(1,346,447)


(216,597)









 Other income 


7,956


637


10,639


1,711










 Income from operations 


12,087


105,519


42,386


6,817









 Interest income 


340


2,331


977


157

 Interest expenses 


(15,787)


(11,958)


(11,981)


(1,927)

 Loss from equity investment 


(273)


(466)


(310)


(50)

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


(5,661)


(70,870)


85,508


13,755

 Non-operating income 


4,431


20,879


-


-

 Foreign exchange gain/(loss), net 


2,579


13,551


(15,156)


(2,438)









 Income before income tax expenses and noncontrolling interests 


(2,284)


58,986


101,424


16,314










 Income tax expense 


(16,365)


(46,374)


(25,465)


(4,096)









 Net (loss)/income 


(18,649)


12,612


75,959


12,218









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


(736)


241


(1,094)


(176)


















 Net (loss)/income attributable to ordinary shareholders 


(19,385)


12,853


74,865


12,042










Earnings per share








- Basic


(0.21)


0.14


0.79


0.13









- Diluted


(0.21)


0.14


0.05


0.01









Weighted average ordinary shares outstanding








- Basic


91,794


93,880


94,873


94,873









- Diluted


91,794


94,440


102,647


102,647









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








Leased-and-operated hotel costs – Personnel costs


2,279


1,789


2,432


391

Personnel costs of Franchised-and-managed hotels


2,914


2,743


3,838


617

Sales and marketing expenses


386


431


253


41

General and administrative expenses


17,349


14,656


18,964


3,051










Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2164 on March 31, 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 March 31, 2014



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


(1,211,706)


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 March 31, 2014



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


(194,922)


82.3%


391


287


0.3%


(194,244)


82.0%

Personnel costs of Franchised-and-managed hotels


(6,201)


2.6%


617


-


0.3%


(5,584)


2.4%

Sales and marketing expenses


(4,027)


1.7%


41


-


0.0%


(3,986)


1.7%

General and administrative expenses


(11,447)


4.8%


3,051


51


1.3%


(8,345)


3.5%















Total operating costs and expenses


(216,597)


91.4%


4,100


338


1.9%


(212,159)


89.6%















Income from operations


6,817


2.9%


4,100


338


1.9%


11,255


4.8%















































Quarter Ended December 31, 2013



GAAP
Result


%of Total
Revenue


Share-based
Compensation


 Integration
 cost


%of Total
Revenue


Non-GAAP Result


%of Total
Revenue



RMB '000




RMB '000


RMB '000




RMB '000





(unaudited)




(unaudited)


(unaudited)




(unaudited)


















Leased-and-operated hotel costs


(1,246,010)


77.4%


1,789


1,704


0.2%


(1,242,517)


77.2%

Personnel costs of Franchised-and-managed hotels


(31,855)


2.0%


2,743


-


0.2%


(29,112)


1.8%

Sales and marketing expenses


(47,040)


2.9%


431


-


0.0%


(46,609)


2.9%

General and administrative expenses


(81,406)


5.1%


14,656


317


0.9%


(66,433)


4.1%















Total operating costs and expenses


(1,406,311)


87.4%


19,619


2,021


1.3%


(1,384,671)


86.0%















Income from operations


105,519


6.6%


19,619


2,021


1.3%


127,159


7.9%
















































Quarter Ended March 31, 2013



GAAP
Result


%of Total
Revenue


Share-based
Compensation


 Integration
 cost


%of Total
Revenue


Non-GAAP Result


%of Total
Revenue



RMB '000




RMB '000


RMB '000




RMB '000





(unaudited)




(unaudited)


(unaudited)




(unaudited)


















Leased-and-operated hotel costs


(1,191,096)


84.9%


2,279


3,823


0.4%


(1,184,994)


84.5%

Personnel costs of Franchised-and-managed hotels


(28,992)


2.1%


2,914


-


0.2%


(26,078)


1.9%

Sales and marketing expenses


(21,380)


1.5%


386


-


0.0%


(20,994)


1.5%

General and administrative expenses


(68,676)


4.9%


17,349


317


1.3%


(51,010)


3.6%















Total operating costs and expenses


(1,310,144)


93.4%


22,928


4,140


1.9%


(1,283,076)


91.5%















Income from operations


12,087


0.9%


22,928


4,140


1.9%


39,155


2.8%













































Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2164 on March 31, 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



March 31, 2013


December 31, 2013


March 31, 2014



RMB '000


RMB '000


RMB '000


US$ '000



(unaudited)


(unaudited)


(unaudited)


(unaudited)



















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


(19,385)


12,853


74,865


12,042

Foreign exchange (gain)/loss, net


(2,579)


(13,551)


15,156


2,438

Share-based compensation


22,928


19,619


25,487


4,100

Integration cost


4,140


2,021


2,101


338

Interest expenses -- Upfront fee amortization of term loans


959


-


-


-

Non-operating income-- Gain on change in fair value of interest swap transaction


(1,380)


-


-


-

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


5,661


70,870


(85,508)


(13,755)



















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


10,344


91,812


32,101


5,163






























Quarter Ended



March 31, 2013


December 31, 2013


March 31, 2014



RMB '000


RMB '000


RMB '000


US$ '000



(unaudited)


(unaudited)


(unaudited)


(unaudited)










Earnings per share (GAAP)








- Basic


(0.21)


0.14


0.79


0.13









- Diluted


(0.21)


0.14


0.05


0.01










Weighted average ordinary shares outstanding









- Basic


91,794


93,880


94,873


94,873










- Diluted


91,794


94,440


102,647


102,647

Adjusted earnings per share (Non-GAAP)








- Basic


0.11


0.98


0.34


0.05









- Diluted


0.11


0.96


0.34


0.05










Weighted average ordinary shares outstanding









- Basic


91,794


93,880


94,873


94,873










- Diluted


92,804


101,894


95,193


95,193




























Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2164 on March 31, 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



March 31, 2013


December 31, 2013


March 31, 2014



RMB '000


RMB '000


RMB '000


US$ '000



(unaudited)


(unaudited)


(unaudited)


(unaudited)



















Net (loss)/income attributable to ordinary shareholders


(19,385)


12,853


74,865


12,042

Interest income


(340)


(2,331)


(977)


(157)

Interest expenses


15,787


11,958


11,981


1,927

Income tax expense


16,365


46,374


25,465


4,096

Depreciation and amortization


174,924


186,061


185,507


29,842










EBITDA (Non-GAAP)


187,351


254,915


296,841


47,750










Foreign exchange (gain)/loss, net


(2,579)


(13,551)


15,156


2,438

Share-based compensation


22,928


19,619


25,487


4,100

Integration cost


4,140


2,021


2,101


338

Non-operating income-- Gain on change in fair value of interest swap transaction


(1,380)


-


-


-

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


5,661


70,870


(85,508)


(13,755)










Adjusted EBITDA (Non-GAAP) 


216,121


333,874


254,077


40,871










%of total revenue


15.4%


20.7%


17.3%


17.3%










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



March 31, 2013


December 31, 2013


March 31, 2014



Group


Motel 168


excluding Motel 168


Group


Motel 168


excluding Motel 168


Group


Motel 168


excluding Motel 168

Total Hotels in operation:


1,859


335


1,524


2,180


378


1,802


2,241


381


1,860

      Leased-and-operated hotels


818


150


668


872


163


709


876


164


712

      Franchised-and-managed hotels


1,041


185


856


1,308


215


1,093


1,365


214


1,148




















Total rooms


222,841


49,205


173,636


256,555


52,889


203,666


262,321


53,040


209,281




















Occupancy rate (as a percentage)


83.6%


76.7%


85.6%


84.0%


80.8%


84.8%


81.3%


76.7%


82.4%




















Average daily rate (in RMB)


156


151


158


163


161


164


156


154


157




















RevPAR (in RMB)


131


116


135


137


130


139


127


118


129




















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















As of and for the quarter ended









March 31, 2013


March 31, 2014









Group


Motel 168


excluding Motel 168


Group


Motel 168


excluding Motel 168







Total Hotels in operation:


1,654


326


1,328


1,654


326


1,328







      Leased-and-operated hotels


782


172


610


781


172


609







      Franchised-and-managed hotels


872


154


718


873


154


719


























Total rooms


198,688


46,739


151,949


196,589


44,004


152,585


























Occupancy rate (as a percentage)


86.0%


77.9%


88.5%


83.9%


78.7%


85.5%


























Average daily rate (in RMB)


157


152


158


157


154


158


























RevPAR (in RMB)


135


119


140


132


122


135


























One homeinn 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". 






 

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