Home Inns Group Reports Third Quarter 2012 Financial Results
Home Inns Group Reports Third Quarter 2012 Financial Results
Revenues Increased 62% Year over Year to RMB 1.60 billion
Motel 168 Hotels Occupancy Rate Improved to 83%
PR Newswire
SHANGHAI, Nov. 13, 2012
SHANGHAI, Nov. 13, 2012 /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 third
quarter ended September 30, 2012.
Home Inns Group acquired Motel 168 and has consolidated Motel 168's operating
and financial results since October 1, 2011. Consolidated group numbers are
presented in this earnings release unless specifically 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 Third Quarter 2012
Financial Highlights
o Total revenues increased 61.8% year over year to RMB 1.60 billion
(US$254.3 million), exceeding guidance range of RMB 1.55 billion to RMB
1.58 billion.
o Income from operations was RMB 154.0 million (US$24.5 million). Adjusted
income from operations (non-GAAP) increased to RMB 204.7 million (US$32.6
million) from RMB 160.0 million in the same period of 2011.
o Net income attributable to Home Inns Group's shareholders was RMB 33.7
million (US$5.4 million), compared to RMB 164.3 million in the third
quarter of 2011. Adjusted net income attributable to Home Inns Group's
shareholders (non-GAAP) was RMB 135.8 million (US$21.6 million), compared
to adjusted net income (non-GAAP) of RMB 132.0 million in the same period
of 2011.
o EBITDA(non-GAAP) was RMB 283.5 million (US$45.1 million), compared to RMB
331.8 million in the same period of 2011. Adjusted EBITDA (non-GAAP)
increased to RMB 375.5 million (US$59.8 million) from RMB 272.9 million in
the third quarter of 2011.
o Diluted earnings per ADS were RMB 0.73 (US$0.12); adjusted diluted
earnings per ADS (non-GAAP) were RMB 2.93 (US$0.47).
Operational Highlights
o During the third quarter of 2012, Home Inns Group opened 108 new hotels,
including 39 new leased-and-operated hotels (including two Yitel hotels
and two Motel 168 hotels) and 69 new franchised-and-managed hotels
(including four Motel 168 hotels). Two leased-and-operated hotels and four
franchised-and-managed hotels (including one Motel 168 hotel) were closed
due to city rezoning, or expiration or termination of the contracts.
o As of September 30, 2012, Home Inns Group operated across 243 cities in
China with a total of 1,682 hotels, of which 770 were leased-and-operated
hotels (including five Yitel hotels and 146 Motel 168 hotels) and 912 were
franchised-and-managed hotels (including one Yitel hotel and 175 Motel 168
hotels). The average number of guest rooms per hotel was 122, as of
September 30, 2012.
o Home Inns Group had another 252 hotels contracted or under construction as
of September 30, 2012, of which 87 were leased-and-operated hotels
(including one hotel under the Yitel brand and nine hotels under the Motel
168 brand) and 165 were franchised-and-managed hotels (including one hotel
under the Yitel brand and 20 hotels under the Motel 168 brand).
o As of September 30, 2012, Home Inns Group had a total of 10.6 million
unique active non-corporate members under its frequent guests programs.
o The occupancy rate for all hotels in operation was 90.3% in the third
quarter of 2012, compared to an occupancy rate of 94.1% in the third
quarter of 2011 and 89.2% in the second 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 third
quarter of 2012 was 82.7%, increased from 80.8% in the second quarter of
2012.
o RevPAR, which is revenue per available room, was RMB 157 for the third
quarter of 2012, compared with RMB 169 in the same period of 2011 and RMB
149 in the second quarter of 2012. The year-over-year RevPAR decrease was
mainly due to weaker market conditions and lower RevPAR from Motel 168 as
it continued to improve its operating performances. The sequential
increase in RevPAR was primarily attributable to seasonality and
opportunistic pricing in selected markets. RevPAR for Motel 168 in the
third quarter of 2012 was RMB 134, an increase from RMB 129 in the second
quarter of 2012. Integration of Motel 168 remained on track.
"We are very pleased to report higher than expected revenue and solid overall
operating results for the third quarter," said Mr. David Sun, the Company's
chief executive officer. "Even though the overall macroeconomic market
conditions remained soft, we effectively maintained stable performance in our
core business and kept the integration of Motel 168 well on track for
continued operational improvements. Further, our new hotels have been ramping
up according to expectations and our productivity measures are generating
positive impact to protect margins despite limited price opportunities and
rising costs.
"There remains a level of uncertainty in the marketplace and we may not see
significant improvements for another six to nine months. However, we believe
China's travel and lodging industry will continue to provide growth and broad
opportunity for the strongest players. We will continue to further the
integration of Motel 168, leverage the strong growth momentum of our high
margin franchise business, fully establish a strong foundation for the Yitel
brand, and keep a vigilant control over our cost structure. We are confident
of achieving profitable growth and driving long-term value for our
shareholders."
Detailed Overview of Financial Results for Third Quarter 2012
Total Revenues for the third quarter of 2012 increased 61.8% year over year to
RMB 1.60 billion (US$254.3 million), including revenues from Motel 168 of RMB
398.9 million (US$63.5 million). Motel 168 achieved the higher end of its
revenue guidance for the third quarter.
o Total revenues from leased-and-operated hotels for the third quarter of
2012 were RMB 1.43 billion (US$227.8 million), representing a 62.3%
increase year over year and a 10.1% increase sequentially.
o Total revenues from franchised-and-managed hotels for the third quarter of
2012 were RMB 166.6 million (US$26.5 million), representing a 57.2%
increase year over year and an 11.3% increase sequentially.
Total Operating Costs and Expenses for the third quarter of 2012 were RMB 1.36
billion (US$215.6 million). Excluding any share-based compensation expenses
and acquisition and integration cost, total operating costs and expenses
(non-GAAP) for the quarter were RMB 1.30 billion (US$207.6 million),
representing 81.6% of total revenues, compared with 77.6% for the same quarter
a year ago and 82.4% for the second quarter of 2012.
o Total leased-and-operated hotel costs for the third quarter of 2012 were
RMB 1.21 billion (US$193.2 million), including share-based compensation
expenses of RMB 2.0 million (US$0.3 million) and integration costs of RMB
25.4 million (US$4.0 million). Total leased-and-operated hotel costs
excluding share-based compensation expenses and integration costs
(non-GAAP) for the third quarter of 2012 were RMB 1.19 billion (US$188.8
million), representing 82.9% of the leased-and-operated hotel revenues,
compared to 76.3% of leased-and-operated hotel revenues in the same period
of 2011 and 84.3% in the second 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 certain
nonrecurring charges to other operating costs and expenses. The sequential
decrease in this ratio was mainly driven by seasonality. The pre-opening
cost was RMB 28.8 million (US$4.6 million) in the third quarter of 2012
compared to RMB 31.2 million in the third quarter of 2011.
o Personnel costs of franchised-and-managed hotels for the third quarter of
2012 were RMB 45.0 million (US$7.2 million), including share-based
compensation expenses of RMB 2.4 million (US$0.4 million). Excluding
share-based compensation expenses, personnel costs of
franchised-and-managed hotels (non-GAAP) for the third quarter of 2012
were RMB 42.6 million (US$6.8 million), representing 25.6% of
franchised-and-managed hotel revenues. This compared to 22.4% for the same
quarter in 2011 and 20.2% for the second quarter of 2012. The
year-over-year increase in this ratio was mainly due to relatively lower
revenue performance by franchised-and-managed hotels at Motel 168. The
sequential increase in this ratio was mainly due to a higher bonus accrual
of performance-based bonus in the third quarter.
o Sales and marketing expenses for the third quarter of 2012 were RMB 18.4
million (US$2.9 million), including share-based compensation expenses of
RMB 0.4 million (US$0.1 million). Excluding share-based compensation
expenses, sales and marketing expenses (non-GAAP) for the third quarter of
2012 were RMB 17.9 million (US$2.9 million), representing 1.1% of total
revenues, compared to 1.6% of total revenues in the same period a year ago
and 1.0% of total revenues in the second quarter of 2012. The
year-over-year decrease in this ratio was mainly the result of tightly
controlled sales and marketing spending supporting a larger revenue base.
o General and administrative expenses for the third quarter of 2012 were RMB
77.9 million (US$12.4 million), including share-based compensation
expenses of RMB 19.2 million (US$3.1 million) and integration costs of RMB
1.2 million (US$0.2 million). General and administrative expenses
excluding share-based compensation expenses and acquisition and
integration cost(non-GAAP) were RMB 57.4 million (US$9.1 million), or 3.6%
of the total revenues, compared with 5.5% of the total revenues in the
same period of 2011 and 3.7% in the second quarter of 2012. The Company
continues to benefit from economies of scale.
Income from Operations for the third quarter of 2012 was RMB 154.0 million
(US$24.5 million). Income from operations excluding share-based compensation
expenses and integration cost (non-GAAP) for the third quarter of 2012 was RMB
204.7 million (US$32.6 million), or 12.8% of total revenues, compared to RMB
160.0 million, or 16.2% of total revenues, in the same period of 2011 and RMB
170.4 million, or 11.8% of total revenues, in the second quarter of 2012. The
year-over-year decrease in the ratio of income from operations excluding
share-based compensation expenses and acquisition and integration cost
(non-GAAP) over total revenues was mainly caused by the higher cost ratio at
Motel 168, absence of systematic selling price increases and one-time charges.
The sequential increase in this ratio was mainly due to seasonality.
EBITDA (non-GAAP) for the third quarter of 2012 was RMB 283.5 million (US$45.1
million). Excluding any share-based compensation expenses, foreign exchange
gain or loss, acquisition and integration cost, loss from fair value change of
convertible notes and interest rate swap contracts non-operating expenses,
adjusted EBITDA (non-GAAP) was RMB 375.5 million (US$59.8 million), or 23.5%
of total revenues, compared to RMB 272.9 million, or 27.6% of total revenues,
in the same period in 2011 and RMB 331.6 million, or 22.9% of total revenues,
in the second quarter of 2012.
Consolidated Net Income Attributable to Home Inns Group's Shareholders for the
third quarter of 2012 was RMB 33.7 million (US$5.4 million). Adjusted net
income attributable to Home Inns Group's shareholders (non-GAAP), which
excludes 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 rate swap
contracts, withholding tax for profit distribution of previous periods and
other non-operating expenses, was RMB 135.8 million (US$21.6 million) for the
third quarter of 2012, compared to adjusted net income (non-GAAP) of RMB 132.0
million in the same period of 2011 and adjusted net income (non-GAAP) of RMB
108.5 million in the second quarter of 2012.
Basic and Diluted Earnings Per Ordinary Share and Per ADS for the third
quarter of 2012: Basic earnings per share was RMB 0.37 (US$0.06), while
diluted earnings per share was also RMB 0.37 (US$0.06). Basic earnings per ADS
was RMB 0.74 (US$0.12), while diluted earnings per ADS was RMB 0.73 (US$0.12).
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 rate
swap contracts, withholding tax for profit distribution of previous periods
and other non-operating expenses, adjusted basic earnings per share (non-GAAP)
was RMB 1.50 (US$0.24), while adjusted diluted earnings per share (non-GAAP)
was RMB 1.47 (US$0.23). Adjusted basic earnings per ADS (non-GAAP) was RMB
2.99 (US$0.48), while adjusted diluted earnings per ADS (non-GAAP) was RMB
2.93 (US$0.47).
Cash Flow
Net operating cash flow for the third quarter of 2012 was RMB 239.9 million
(US$38.2 million), compared to RMB 276.9 million from the third quarter of
2011. Capitalized expenditures for the third quarter of 2012 were RMB 357.4
million (US$56.9 million), while related cash paid for capital expenditures
during the quarter was RMB 225.3 million (US$35.8 million).
Balance Sheet
As of September 30, 2012, the Company had cash and cash equivalents of RMB
752.5 million (US$119.7 million). The outstanding balance of convertible bonds
(issued in 2007) was RMB 113.5 million (US$18.1 million) including principal
and accrued interest. Financial liabilities of RMB 1.03 billion (US$164.1
million) consisted of the outstanding balance of long-term financial liability
for convertible notes (issued in December 2010) and interest swap contracts
(both measured at fair value). The balance of the Company's U.S.
dollar-denominated four-year term loan facility decreased to RMB 786.3 million
(US$125.1 million), as the Company paid down US$21 million during the third
quarter of 2012.
Outlook for the Full Year 2012
Home Inns Group is reiterating its expected revenue for the full year 2012.
Total revenues for Home Inns Group for the year are expected to be in the
range of RMB 5,715 million (US$909.3 million) to RMB 5,810 million (US$924.5
million).
Total revenues for the Motel 168 brand for the full year are expected to be in
the range of RMB 1,475 million (US$234.7 million) to RMB 1,500 million
(US$238.7 million).
Total revenues excluding Motel 168 brand for the full year of 2012 are
expected to be in the range of RMB 4,240 million (US$674.6 million) to RMB
4,310 million (US$685.8 million).
Driven by strong franchised-and-managed hotel development, the Company expects
to open no less than 360 new hotels in 2012 exceeding its guidance range of
330-360 hotel openings for the full year.
These forecasts reflect 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 RMB6.2848 to
US$1.00, the noon buying rate for September 28, 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 8:00 PM U.S. Eastern
Standard Time on November 13, 2012 (9:00 AM Beijing/Hong Kong Time on November
14, 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 November 21, 2012 U.S. Eastern Standard 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: 35531194
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 the Company commenced operations in 2002, it has built Home Inn
as one of the best-known economy hotel brands in China. In October of 2011,
Home Inns Group 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:
1. total operating costs and expenses excluding share-based compensation
expenses and acquisition and integration costs
2. total leased-and-operated hotel costs excluding share-based compensation
expenses and integration costs
3. personnel costs of franchised-and-managed hotels excluding share-based
compensation expenses
4. sales and marketing expenses excluding share-based compensation expenses
5. general and administrative expenses excluding share-based compensation
expenses and acquisition and integration costs
6. income from operations excluding share-based compensation expenses and
acquisition and integration costs
7. 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,
withholding tax for profit distribution of previous periods and other
non-operating expenses
8. 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
9. 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, 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 will provide separate financial data
for 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: zjruan@homeinns.com
Cara O'Brien
FTI Consulting
Tel: +852-3768-4537
Email: cara.obrien@fticonsulting.com
Appendix 1:
For the purpose of providing more context and comprehensive information to
investors, Home Inns Group separately presents key financial data excluding
Motel 168 below. Home Inns Group will continue to provide separate financial
data for Motel 168 through the integration period. All information outlined
below excludes Motel 168 results and Motel 168 integration costs unless
specifically mentioned.
Third Quarter 2012 Operational and Financial Highlights for Home Inns and
Yitel Hotels
o The occupancy rate was 92.7% for the third quarter of 2012, compared with
94.1% in the same period in 2011 and 92.1% in the second quarter of 2012.
o RevPAR was RMB 164 for the third quarter of 2012, compared with RevPAR of
RMB 169 in the same period in 2011 and RMB 157 in the second quarter of
2012.
o RevPAR for mature hotels that had been in operation for at least 18 months
was RMB 177, flat in comparison with the same group of hotels in the third
quarter of 2011.
o Total revenues increased 21.4% year over year to RMB 1,199.5 million
(US$190.9 million) for the third quarter of 2012.
o Total revenues from leased-and-operated hotels for the third quarter
of 2012 were RMB 1050.7 million (US$167.2 million), an increase of
19.1% year over year and an increase of 11.7% sequentially.
o Total revenues from franchised-and-managed hotels for the third
quarter of 2012 were RMB 148.8 million (US$23.7 million), an increase
of 40.5% year over year and an increase of 12.7% sequentially.
o Total operating costs and expenses were RMB 967.9 million (US$154.0
million) for the third quarter of 2012. Total operating costs and expenses
excluding any share-based compensation expenses, and acquisition and
integration cost (non-GAAP) for the third quarter of 2012 were RMB 937.3
million (US$149.1 million), representing 78.1% of total revenues, compared
with 77.6% for the same quarter a year ago and 79.4% for the second
quarter of 2012.
o Total leased-and-operated hotel costs for the third quarter of 2012
were RMB 846.2 million (US$134.6 million). Total leased-and-operated
hotel costs excluding any share-based compensation expenses and
integration cost (non-GAAP) were RMB 836.7 million (US$133.1 million)
for the third quarter of 2012, representing 79.6% of the
leased-and-operated hotel revenues, compared to 76.3% for the same
quarter in 2011 and 81.8% for the second quarter of 2012. The
year-over-year increase in this expense ratio was mainly driven by
soft market condition resulting in lack of systematic price increase
and certain nonrecurring charges to other operating costs and
expenses. The sequential decrease in the ratio was mainly
attributable to seasonality.
o Personnel costs of franchised-and-managed hotels were RMB 37.2
million (US$5.9 million) for the third quarter of 2012. Personnel
costs of franchised-and-managed hotels excluding share-based
compensation expenses (non-GAAP) were RMB 35.1 million (US$5.6
million), representing 23.6% of franchised-and-managed hotel
revenues, compared to 22.4% for the third quarter of 2011 and 18.8%
for the second quarter of 2012. The sequential increase in this ratio
was mainly due to a higher bonus accrual of performance-based bonus
in the third quarter.
o Sales and marketing expenses were RMB 15.9 million (US$2.5 million)
for the third quarter of 2012. Sales and marketing expenses excluding
shared-based compensation expenses (non-GAAP) were RMB 15.5 million
(US$2.5 million), representing 1.3% of total revenues, compared to
1.6% of total revenues in the same period a year ago and 1.2% in the
second quarter of 2012. The year-over-year decrease in this ratio was
mainly due to effort to maximize return on investment in marketing
activities compared to the same period a year ago.
o General and administrative expenses were RMB 68.6 million (US$10.9
million) for the third quarter of 2012. General and administrative
expenses excluding share-based compensation expenses, and acquisition
and integration cost (non-GAAP) for the quarter were RMB 50.0 million
(US$8.0 million), or 4.2% of total revenues compared to 5.5% in the
same period a year ago and 4.1% in the previous quarter. The Company
continues to drive productivity gain and scalable operations.
o Income from operations was RMB 165.8 million (US$26.4 million). Income
from operations excluding share-based compensation expenses and
acquisition and integration cost (non-GAAP) was RMB 196.4 million (US$31.3
million), or 16.4% of total revenues, compared to RMB 160.0 million or
16.2% of total revenues in the same period of 2011 and RMB 158.9 million
or 14.8% of total revenues in the second quarter of 2012.
o EBITDA (non-GAAP) was RMB 250.6 million (US$39.9 million) for the third
quarter of 2012. Adjusted EBITDA (non-GAAP), which excludes any
share-based compensation expenses, foreign exchange loss, integration
cost, loss from fair value change of convertible notes and non-operating
expenses, was RMB 322.3 million (US$51.3 million), or 26.9% of total
revenues for the third quarter of 2012, compared to RMB 272.9 million or
27.6% of total revenues in the same period in 2011 and RMB 274.3 million
or 25.6% of total revenues for the second quarter of 2012.
o Net income attributable to Home Inns Group's shareholders was RMB 48.3
million (US$7.7 million) for the third quarter of 2012. Adjusted net
income attributable to Home Inns Group's shareholders (non-GAAP) 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 rate
swap contracts withholding tax for profit distribution of previous periods
and other non-operating expenses, was RMB 130.2 million (US$20.7 million)
for the third quarter of 2012, compared to that of RMB 132.0 million from
the same period in 2011 and RMB 100.2 million for the second quarter of
2012.
Home Inns & Hotels Management Inc.
Unaudited Condensed Consolidated Balance Sheet
December 31, 2011 September 30,
2012
RMB '000 RMB '000 US$ '000
ASSETS
Current assets:
Cash and cash equivalents 1,786,038 752,454 119,726
Restricted cash 205,926 316,184 50,309
Accounts receivable, net 91,980 104,704 16,660
Receivables from related parties 6,379 5,838 929
Consumables 43,049 43,276 6,886
Prepayments and other current assets 137,887 177,989 28,321
Deferred tax assets 75,446 79,572 12,661
Total current assets 2,346,705 1,480,017 235,492
Investment in a jointly controlled 8,301 7,118 1,133
entity
Property and equipment, net 3,452,846 3,736,530 594,534
Goodwill 2,197,728 2,252,052 358,333
Intangible assets, net 1,174,452 1,157,165 184,121
Other assets 170,039 116,971 18,612
Non-current deferred tax assets 199,765 255,376 40,634
Total assets 9,549,836 9,005,229 1,432,859
LIABILITIES
Current liabilities:
Accounts payable 91,457 70,959 11,291
Payables to related parties 2,797 4,781 761
Short term loans 346,550 31,705 5,045
Finance lease liabilities 7,006 6,778 1,078
Salaries and welfare payable 178,032 211,039 33,579
Income tax payable 80,356 83,353 13,263
Other taxes payable 27,295 27,800 4,423
Deferred revenues 202,870 217,024 34,532
Convertible bonds 113,051 113,467 18,054
Other unpaid and accruals 154,498 164,615 26,193
Other payables 847,090 971,716 154,614
Deferred tax liability 38,313 23,843 3,794
Total current liabilities 2,089,315 1,927,080 306,627
Long term loans 1,165,666 754,579 120,064
Deferred rental 593,955 569,714 90,650
Deferred revenues 79,202 46,918 7,465
Finance lease liabilities 7,750 3,160 503
Deposits 63,472 85,932 13,673
Unfavorable lease liabilities 396,774 378,778 60,269
Financial liabilities* 979,008 1,031,389 164,108
Deferred tax liabilities 294,728 289,920 46,130
Total liabilities 5,669,870 5,087,470 809,489
Shareholders' equity
Ordinary shares (US$0.005 par value;
200,000,000 shares authorized,
90,659,882 and 90,806,820 shares 3,542 3,546 564
issued and outstanding as of December
31, 2011 and September 30 2012,
respectively)
Additional paid-in capital 2,683,923 2,758,594 438,931
Statutory reserves 125,863 125,722 20,004
Retained earnings 1,051,976 1,018,922 162,125
Total Home Inns shareholders' equity 3,865,304 3,906,784 621,624
Noncontrolling interests 14,662 10,975 1,746
Total shareholders' equity 3,879,966 3,917,759 623,370
Total liabilities and shareholders' 9,549,836 9,005,229 1,432,859
equity
Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$")
is based on rate of US$1.00=RMB6.2848
representing the certificated exchange rate published by the Federal Reserve
Board.
Note 2: Financial liabilities represent convertible notes measured at fair
value and interest swap transaction.
Home Inns & Hotels Management Inc.
Unaudited Condensed Consolidated Statement of Operations
Quarter Ended
September 30, 2011 June 30, 2012 September 30, 2012
RMB '000 RMB '000 RMB '000 RMB '000 RMB '000 US$ '000 RMB '000 RMB '000
Group Group Motel 168 excluding Group Group Motel 168 excluding
Motel 168 Motel 168
Revenues:
Leased-and-operated 882,070 1,300,218 359,678 940,540 1,431,786 227,817 381,068 1,050,718
hotels
Franchised-and-managed 105,962 149,724 17,700 132,024 166,624 26,512 17,797 148,827
hotels
Total revenues 988,032 1,449,942 377,378 1,072,564 1,598,410 254,329 398,865 1,199,545
Less: Business
tax and related (61,686) (89,290) (22,538) (66,752) (97,003) (15,435) (23,683) (73,320)
surcharges
Net revenues 926,346 1,360,652 354,840 1,005,812 1,501,407 238,894 375,182 1,126,225
Operating costs and
expenses:
Leased-and-operated
hotel costs –
Rents and (269,017) (450,155) (149,278) (300,877) (496,559) (79,010) (165,845) (330,714)
utilities
Personnel costs (159,394) (267,645) (74,899) (192,746) (269,260) (42,843) (76,527) (192,733)
Depreciation (90,746) (148,524) (43,141) (105,383) (156,294) (24,869) (41,830) (114,464)
and amortization
Consumables, (57,176) (87,207) (25,433) (61,774) (96,555) (15,363) (25,258) (71,297)
food and beverage
Others (98,011) (168,848) (58,509) (110,339) (195,247) (31,067) (58,254) (136,993)
Total
leased-and-operated (674,344) (1,122,379) (351,261) (771,118) (1,213,915) (193,152) (367,715) (846,200)
hotel costs
Personnel costs of
Franchised-and-managed (25,370) (32,811) (5,987) (26,824) (45,046) (7,167) (7,894) (37,152)
hotels
Sales and (16,067) (15,559) (1,777) (13,782) (18,351) (2,920) (2,405) (15,946)
marketing expenses
General and
administrative (112,082) (74,005) (11,612) (62,393) (77,850) (12,387) (9,221) (68,629)
expenses
Total operating costs (827,863) (1,244,754) (370,637) (874,117) (1,355,162) (215,626) (387,235) (967,927)
and expenses
Other income - 4,528 92 4,436 7,742 1,232 239 7,503
Income/(loss) from 98,483 120,426 (15,705) 136,131 153,987 24,500 (11,814) 165,801
operations
Interest income 6,756 3,336 317 3,019 615 98 190 425
Interest expenses (6,007) (43,919) (202) (43,717) (27,182) (4,325) (177) (27,005)
Loss from equity - (843) (843) (466) (74) (467)
investment
Gain/(loss) on change
in fair value of 121,194 9,823 - 9,823 (26,765) (4,259) - (26,765)
convertible notes
Non-operating income 21,088 13,820 2,166 11,654 11,044 1,758 2,136 8,908
Non-operating - - - - (7,818) (1,244) - (7,818)
expenses
Foreign exchange (756) (10,263) (267) (9,996) (6,748) (1,074) (212) (6,536)
loss, net
Income/(loss) before
income tax expenses 240,758 92,380 (14,534) 106,914 96,667 15,380 (10,344) 107,010
and noncontrolling
interests
Income tax expense (75,162) (54,169) (4,766) (49,403) (62,255) (9,906) (4,239) (58,016)
Net income/(loss) 165,596 38,211 (19,300) 57,511 34,412 5,474 (14,583) 48,994
Less:Net income
attributable to (1,333) (1,800) - (1,800) (703) (112) - (703)
noncontrolling
interests
Net income/(loss)
attributable to Home 164,263 36,411 (19,300) 55,711 33,709 5,362 (14,583) 48,291
Inns Group's
shareholders
Earnings per share
— Basic 2.00 0.40 0.61 0.37 0.06 0.53
— Diluted 0.31 0.37 0.57 0.37 0.06 0.52
Weighted average
ordinary shares
outstanding
— Basic 82,311 90,753 90,753 90,771 90,771 90,771
— Diluted 92,276 100,045 100,045 92,600 92,600 92,600
Share-based
compensation expense
was included in the
statement of
operations as follows:
Leased-and-operated
hotel costs – 1,647 2,181 461 1,720 2,025 322 261 1,764
Personnel costs
Personnel costs of
Franchised-and-managed 1,660 2,529 550 1,979 2,410 383 313 2,097
hotels
Sales and marketing 339 400 - 400 407 65 - 407
expenses
General and
administrative 16,476 19,630 965 18,665 19,195 3,054 545 18,650
expenses
Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2848
on September 30, 2012, representing the certificated exchange rate published by the Federal Reserve Board.
Note 2: The Company started consolidation of the operating results of Motel 168 effective October 1,2011, therefore the
acquisition had no impact on the third quarter of 2011.
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results
Quarter Ended September 30, 2012 Quarter Ended September 30, 2012(excluding Motel 168)
GAAP %of Share-based Acquisition Integration %of Non-GAAP %of GAAP %of Share-based Acquisition Integration %of Non-GAAP %of
Result Total Compensation expenses cost Total Result Total Result Total Compensation expenses cost Total Result Total
Rev Rev Rev Rev Rev Rev
RMB '000 RMB '000 RMB '000 RMB '000 RMB '000 RMB '000 RMB '000 RMB '000 RMB '000 RMB '000
Leased-and-operated (1,213,915) 75.9% 2,025 - 25,406 1.7% (1,186,484) 74.2% (846,200) 70.5% 1,764 - 7,714 0.8% (836,722) 69.8%
hotel costs
Personnel costs of
Franchised-and-managed (45,046) 2.8% 2,410 - - 0.2% (42,636) 2.7% (37,152) 3.1% 2,097 - - 0.2% (35,055) 2.9%
hotels
Sales and marketing (18,351) 1.1% 407 - - 0.0% (17,944) 1.1% (15,946) 1.3% 407 - - 0.0% (15,539) 1.3%
expenses
General and
administrative (77,850) 4.9% 19,195 - 1,224 1.3% (57,431) 3.6% (68,629) 5.7% 18,650 - - 1.6% (49,979) 4.2%
expenses
Total operating costs (1,355,162) 84.8% 24,037 - 26,630 3.2% (1,304,495) 81.6% (967,927) 80.7% 22,918 - 7,714 2.6% (937,295) 78.1%
and expenses
Income from operations 153,987 9.6% 24,037 - 26,630 3.2% 204,654 12.8% 165,801 13.8% 22,918 - 7,714 2.6% 196,433 16.4%
Quarter Ended September 30, 2012 Quarter Ended September 30, 2012(excluding Motel 168)
GAAP %of Share-based Acquisition Integration %of Non-GAAP %of GAAP %of Share-based Acquisition Integration %of Non-GAAP %of
Result Total Compensation expenses cost Total Result Total Result Total Compensation expenses cost Total Result Total
Rev Rev Rev Rev Rev Rev
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
Leased-and-operated (193,152) 75.9% 322 - 4,042 1.7% (188,788) 74.2% (134,642) 70.5% 281 - 1,227 0.8% (133,134) 69.8%
hotel costs
Personnel costs of
Franchised-and-managed (7,167) 2.8% 383 - - 0.2% (6,784) 2.7% (5,911) 3.1% 334 - - 0.2% (5,578) 2.9%
hotels
Sales and marketing (2,920) 1.1% 65 - - 0.0% (2,855) 1.1% (2,537) 1.3% 65 - - 0.0% (2,472) 1.3%
expenses
General and
administrative (12,387) 4.9% 3,054 - 195 1.3% (9,138) 3.6% (10,920) 5.7% 2,967 - - 1.6% (7,952) 4.2%
expenses
Total operating costs (215,626) 84.8% 3,824 - 4,237 3.2% (207,565) 81.6% (154,011) 80.7% 3,647 - 1,227 2.6% (149,137) 78.1%
and expenses
Income from operations 24,500 9.6% 3,824 - 4,237 3.2% 32,561 12.8% 26,381 13.8% 3,647 - 1,227 2.6% 31,255 16.4%
Quarter Ended June 30, 2012 Quarter Ended June 30, 2012(excluding Motel 168)
GAAP %of Share-based Acquisition Integration %of Non-GAAP %of GAAP %of Share-based Acquisition Integration %of Non-GAAP %of
Result Total Compensation expenses cost Total Result Total Result Total Compensation expenses cost Total Result Total
Rev Rev Rev Rev Rev Rev
RMB '000 RMB '000 RMB '000 RMB '000 RMB '000 RMB '000 RMB '000 RMB '000 RMB '000 RMB '000
Leased-and-operated (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%
hotel costs
Personnel costs of
Franchised-and-managed (32,811) 2.3% 2,529 - - 0.2% (30,282) 2.1% (26,824) 2.5% 1,979 - - 0.2% (24,845) 2.3%
hotels
Sales and marketing (15,559) 1.1% 400 - 48 0.0% (15,111) 1.0% (13,782) 1.3% 400 - - 0.0% (13,382) 1.2%
expenses
General and
administrative (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%
expenses
Total operating costs (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%
and expenses
Income from operations 120,426 8.3% 24,740 - 25,278 3.4% 170,444 11.8% 136,131 12.7% 22,764 - - 2.1% 158,895 14.8%
Quarter Ended September 30, 2011
GAAP %of Share-based Acquisition Integration %of Non-GAAP %of
Result Total Compensation expenses cost Total Result Total
Rev Rev Rev
RMB '000 RMB '000 RMB '000 RMB '000 RMB '000
Leased-and-operated (674,344) 68.3% 1,647 - - 0.2% (672,697) 68.1%
hotel costs
Personnel costs of
Franchised-and-managed (25,370) 2.6% 1,660 - - 0.2% (23,710) 2.4%
hotels
Sales and marketing (16,067) 1.6% 339 - - 0.0% (15,728) 1.6%
expenses
General and
administrative (112,082) 11.3% 16,476 41,392 - 5.9% (54,214) 5.5%
expenses
Total operating costs (827,863) 83.8% 20,122 41,392 - 6.2% (766,349) 77.6%
and expenses
Income from operations 98,483 10.0% 20,122 41,392 - 6.2% 159,997 16.2%
Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of US$1.00=RMB6.2848 on September 30, 2012, representing the certificated exchange rate published
by the Federal Reserve Board.
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results (continued)
Quarter Ended
September 30, 2011 June 30, 2012 September 30, 2012
RMB'000 RMB'000
RMB '000 RMB '000 (excluding RMB '000 US$ '000 (excluding
Motel 168) Motel 168)
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Net income
attributable to 164,263 36,411 55,711 33,709 5,362 48,291
Home Inns Group's
shareholders (GAAP)
Foreign exchange 756 10,263 9,996 6,748 1,074 6,536
loss, net
Share-based 20,122 24,740 22,764 24,037 3,824 22,918
compensation
Acquisition
expenses -- Motel 41,392 - - - - -
168
Integration cost - 25,278 - 26,630 4,237 7,714
Interest expenses
-- Upfront fee - 25,290 25,290 10,126 1,611 10,126
amortization of
term loans
Non-operating
(income)/expenses--
(Gain)/loss on - (3,689) (3,689) 7,818 1,244 7,818
change in fair
value of interest
swap contracts
(Gain)/loss on
change in fair (121,194) (9,823) (9,823) 26,765 4,259 26,765
value of
convertible notes
Withholding tax for
profit distribution 26,693 - - - - -
of previous periods
Adjusted net income
attributable to
Home Inns Group's 132,032 108,470 100,249 135,833 21,611 130,168
shareholders
(Non-GAAP)
Quarter Ended
September 30, 2011 June 30, 2012 September 30, 2012
RMB'000 RMB'000
RMB '000 RMB '000 (excluding RMB '000 US$ '000 (excluding
Motel 168) Motel 168)
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Earnings per share
(GAAP)
— Basic 2.00 0.40 0.61 0.37 0.06 0.53
— Diluted 0.31 0.37 0.57 0.37 0.06 0.52
Weighted average
ordinary shares
outstanding
— Basic 82,311 90,753 90,753 90,771 90,771 90,771
— Diluted 92,276 100,045 100,045 92,600 92,600 92,600
Adjusted earnings
per share
(Non-GAAP)
— Basic 1.60 1.20 1.10 1.50 0.24 1.43
— Diluted 1.43 1.08 1.00 1.47 0.23 1.41
Weighted average
ordinary shares
outstanding
— Basic 82,311 90,753 90,753 90,771 90,771 90,771
— Diluted 92,276 100,045 100,045 92,600 92,600 92,600
Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on rate of
US$1.00=RMB6.2848
on September 30, 2012, representing the certificated exchange rate published by the Federal Reserve
Board.
Note 2: The non-GAAP adjustment items do not include the tax impact.
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results (continued)
Quarter Ended
September 30, 2011 June 30, 2012 September 30, 2012
RMB'000 RMB'000
RMB '000 RMB '000 (excluding RMB '000 US$ '000 (excluding
Motel 168) Motel 168)
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Net income
attributable to 164,263 36,411 55,711 33,709 5,362 48,291
Home Inns Group's
shareholders
Interest income (6,756) (3,336) (3,019) (615) (98) (425)
Interest expenses 6,007 43,919 43,717 27,182 4,325 27,005
Income tax expense 75,162 54,169 49,403 62,255 9,906 58,016
Depreciation and 93,141 153,623 109,245 161,006 25,618 117,680
amortization
EBITDA (Non-GAAP) 331,817 284,786 255,057 283,537 45,113 250,567
Foreign exchange 756 10,263 9,996 6,748 1,074 6,536
loss, net
Share-based 20,122 24,740 22,764 24,037 3,824 22,918
compensation
Acquisition
expenses -- Motel 41,392 - - - - -
168
Integration cost - 25,278 - 26,630 4,237 7,714
Non-operating
(income)/expenses--
(Gain)/loss on - (3,689) (3,689) 7,818 1,244 7,818
change in fair
value of interest
swap contracts
(Gain)/loss on
change in fair (121,194) (9,823) (9,823) 26,765 4,259 26,765
value of
convertible notes
Adjusted EBITDA 272,893 331,555 274,305 375,535 59,751 322,318
(Non-GAAP)
%of total revenue 27.6% 22.9% 25.6% 23.5% 23.5% 26.9%
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
September 30, 2011 June 30, 2012 September 30, 2012
Excluding Motel Group Motel Excluding Group Motel Excluding
168 168 Motel 168 168 Motel 168
Total Hotels in 1,004 1,580 316 1,264 1,682 321 1,361
operation:
Leased-and-operated 500 733 144 589 770 146 624
hotels
Franchised-and-managed 504 847 172 675 912 175 737
hotels
Total rooms 114,792 193,105 48,358 144,747 204,678 48,619 156,059
Occupancy rate (as a 94.1% 89.2% 80.8% 92.1% 90.3% 82.7% 92.7%
percentage)
Average daily rate (in 180 167 159 170 174 162 177
RMB)
RevPAR (in RMB) 169 149 129 157 157 134 164
Like-for-like
performance for hotels
opened for at least 18
months during the
current quarter
As of and for the quarter ended
September 30, 2011 September 30, 2012
Excluding Motel Excluding Motel
168 168
Total Hotels in 833 833
operation:
Leased-and-operated 446 446
hotels
Franchised-and-managed 387 387
hotels
Total rooms 95,740 96,479
Occupancy rate (as a 97.7% 97.3%
percentage)
Average daily rate (in 181 182
RMB)
RevPAR (in RMB) 177 177
The Company did not participate in the operating of Motel 168 before the 4th quarter 2011, therefore the
above like-for-like performance figures do not include Motel 168 hotels.
* "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.
SOURCE Home Inns & Hotels Management Inc.
Website: http://english.homeinns.com
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