SHANGHAI, May 14 /Xinhua-PRNewswire/ -- Home Inns & Hotels Management Inc. (NASDAQ: HMIN), a leading economy hotel chain in China, today announced its unaudited financial results for the quarter ended March 31st, 2008.
First Quarter 2008 Financial Highlights
-- Total revenues for the quarter increased by 94.9% year-over-year to RMB
357.0 million (US$ 50.9 million), including revenues of RMB 28.2
million (US$ 4.0 million) from our recently acquired Top Star hotel
chain. Total revenues for the quarter exceeded the high end of our
previously provided guidance.
-- Negative EBITDA (non-GAAP) was RMB 13.7 million (US$ 2.0 million).
Excluding the impact of our acquisition of Top Star, foreign exchange
losses and share-based compensation expenses, adjusted EBITDA (non-GAAP)
was RMB 48.5 million (US$ 6.9 million), up 44.1% year-over-year. Due
to its accelerated growth, Home Inns incurred RMB 24.2 million (US$ 3.4
million) in rent and utilities, personnel, and other costs for leased-
and-operated hotels under construction during the quarter.
-- Loss from operations was RMB 7.8 million (US$ 1.1 million). Loss from
operations excluding share-based compensation expenses was RMB 3.8
million (US$ 0.5 million). Excluding the impact of Top Star, income
from operations excluding share-based compensation expenses was RMB
10.5 million (US$ 1.5 million). This again, includes the impact of
costs for leased-and-operated hotels under construction as mentioned
above.
-- Adjusted net profit (non-GAAP) was RMB 3.8 million (US$ 0.5 million),
excluding share-based compensation expenses of RMB 4.0 million (US$ 0.6
million), foreign exchange losses of RMB 50.0 million (US$ 7.1 million).
As a GAAP measure, net loss was RMB 50.3 million (US$ 7.2 million).
The GAAP and non-GAAP net profit/loss figures included loss from Top
Star totaling RMB 15.6 million (US$2.2 million).
-- Diluted loss per ADS was RMB 1.42 (US$ 0.20). Excluding share-based
compensation expenses and foreign exchange losses, non-GAAP adjusted
diluted earnings per ADS were RMB 0.10 (US$ 0.01). Excluding the
impact of Top Star, non-GAAP adjusted diluted earnings per ADS were RMB
0.51 (US$ 0.07). Each ADS equals to two ordinary shares.
Reconciliation between the adjusted diluted earnings per shares versus
US GAAP figures is included at the end of this press release.
“Home Inns demonstrated strong growth during the first quarter by almost doubling the total revenues year-over-year,” remarked Mr. David Sun, Home Inns’ Chief Executive Officer. “Although our financial results were impacted by non-operational accounting measures, including a significant foreign exchange loss, our business remains strong and we are successfully managing our rapid expansion into new cities without sacrificing our operational capabilities or the quality of our product offering. Our large portfolio of hotels under construction also pressured our margin for the quarter, but positions us well for better profitability later on for the year.”
Operational Highlights
-- Hotel expansion accelerated with 33 new hotels opened during the
quarter, consisting of 25 leased-and-operated hotels and 8 franchised-
and-managed hotels, compared with 11 new hotels opened in the first
quarter of 2007, which consisted of 3 leased-and-operated hotels and 8
franchised-and-managed hotels. As of March 31, 2008, the Home Inns
hotel chain included 299 hotels in operation with an average of 122
rooms per hotel in operation, covering 75 cities in China and consisted
of 220 leased-and-operated hotels and 79 franchised-and-managed hotels.
-- As of March 31, 2008, Home Inns had an additional 131 hotels under
development, which consisted of 86 leased-and-operated hotels and 45
franchised-and-managed hotels. As of March 31, 2007, Home Inns had 48
hotels under development, which consisted of 36 leased-and-operated
hotels and 12 franchised-and-managed hotels.
-- The occupancy rate for the Home Inns hotel chain was 81.4% in the first
quarter of 2008 and 85.9% in the first quarter of 2007, impacted by the
lower occupancy rate of the Top Star hotels. Excluding Top Star, the
occupancy rate was 86.0% in the first quarter of 2008, compared with
85.9% in the first quarter of 2007. Occupancy rate in the first
quarter is annually impacted by the Chinese New Year holiday.
-- RevPAR, defined as revenue per available room, was RMB 140 in the first
quarter of 2008. RevPAR excluding Top Star was RMB 150 in the first
quarter of 2008, compared with RMB 151 in the same period in 2007.
-- RevPAR for Home Inns’ hotels which have been in operation for at least
18 months as of January 1st, 2008 was RMB 182 in the first quarter of
2008, compared to RevPAR of RMB 177 during the same period of 2007.
This demonstrates the continued strength in our more established hotels.
-- For the seasonally slow first quarter, Top Star had a negative impact
on the consolidated results just as it did in the previous quarter.
For the first quarter, our Top Star hotels had revenues of RMB 28.2
million and a loss from operations of RMB 14.3 million. However, we
are seeing benefits from the integration efforts. In April of 2008,
Top Star hotels achieved occupancy rate of 71.9% and average room rates
of RMB 142, resulting in RevPAR of RMB 102, on track to reach
comparable metrics to Home Inns’ existing hotels in a six- to nine-
month timeframe from time of acquisition.
“With the addition of 33 hotels in operation to the Home Inns chain during the quarter and 131 hotels currently under development, our expansion plan is on target and we believe the market opportunity remains significant throughout China,” said Mr. Sun. “As we further solidify our position as China’s leading economy hotel chain, we are balancing the need to maximize profitability with the importance of rapidly expanding our market share. Even as we strive to deliver the best possible results for our shareholders, market share remains critical as market leadership enhances our brand recognition and generates long-term opportunities for enhanced profitability.”
First Quarter 2008 Financial Results
For the first quarter of 2008, Home Inns had total revenues of RMB 357.0 million (US$ 50.9 million), representing a 94.9% increase year-over-year and a 9.0% increase sequentially. Excluding the impact of Top Star, total revenues (non-GAAP) were RMB 328.8 million (US$ 46.9 million), representing a 79.5% increase year-over-year and a 6.8% increase sequentially.
Total revenues from leased-and-operated hotels for the first quarter of 2008 were RMB 340.4 million (US$ 48.5 million), representing a 94.9% increase year-over-year and a 9.0% increase sequentially. Excluding the impact of Top Star, total revenues from leased-and-operated hotels (non-GAAP) for the first quarter of 2008 were RMB 312.2 million (US$ 44.5 million), representing a 78.8% increase year-over-year and a 6.7% increase sequentially. Home Inns opened 25 new leased-and-operated hotels during the first quarter of 2008.
Total revenues from franchised-and-managed hotels for the first quarter of 2008 were RMB 16.6 million (US$ 2.4 million), representing a 94.9% increase year-over-year and a 9.3% increase sequentially. Home Inns opened 8 new franchised-and-managed hotels during the first quarter of 2008.
Occupancy rate for the entire Home Inns hotel chain was 81.4% in the first quarter of 2008. RevPAR, in the first quarter of 2008 was RMB 140. Excluding the impact of Top Star, the occupancy rate for the Home Inns hotel chain was 86.0% for the quarter, compared with 85.9% in the same period in 2007 and 91.6% in the previous quarter. RevPAR for the quarter was RMB 150, compared with RevPAR of RMB 151 in the same period in 2007 and RMB 164 in the previous quarter. The decline in occupancy rate compared with the previous quarter was primarily due to the decreased travel activity during the Chinese New Year and partially due to the severe snow storm during the quarter that impacted much of China.
Total operating costs and expenses for the first quarter of 2008 were RMB 342.7 million (US$ 48.9 million). Total operating costs and expenses excluding share-based compensation expenses (non-GAAP) for the quarter were RMB 338.6 million (US$ 48.3 million), or 94.9% of total revenues. Excluding the impact of Top Star, total operating costs and expenses for the quarter were RMB 301.6 million (US$ 43.0 million). Excluding the impact of Top Star, total operating costs and expenses excluding share-based compensation expenses (non-GAAP) for the quarter were RMB 297.6 million (US$ 42.4 million), or 90.5% of total revenues, compared to 84.6% in the same quarter 2007 and 83.4 % in the previous quarter.
Total leased-and-operated hotel costs for the first quarter of 2008 were RMB 303.4 million (US$ 43.3 million), representing 89.1 % of the leased-and-operated hotel revenues. Excluding the impact of Top Star, total leased-and-operated hotel costs (non-GAAP) were RMB 266.1 million (US$ 37.9 million), representing 85.2% of the leased-and-operated hotel revenues. Total leased-and-operated hotel costs represented 78.0% of the leased-and-operated hotel revenues for the same quarter in 2007 and 77.4% for the previous quarter excluding Top Star. The increase in percentage compared to the previous quarter was primarily due to the lower occupancy rate compared with the previous quarter as stated above. The large number of hotels under construction led to higher rent and utilities as well as personnel and certain other costs to be a higher percentage of the leased-and-operated hotel revenues for the quarter. Typically, once construction starts on a site, we begin to incur these costs, though we will not generate revenues until the hotel is in operation. The costs associated with hotels under construction were RMB 24.2 million in the first quarter of 2008, representing 7.1% of the leased-and-operated hotel revenues. These costs were RMB 5.6 million in the first quarter of 2007, representing 3.2% of the leased-and-operated hotel revenues.
Sales and marketing expenses for the first quarter were RMB 4.7 million (US$ 0.7 million), an increase of 13.4% year-over-year and a decrease of 3.7% sequentially. Excluding the impact of Top Star, sales and marketing expenses (non-GAAP) were RMB 4.4 million (US$ 0.6 million), an increase of 6.2% year-over-year and a decrease of 4.6% sequentially.
General and administrative expenses for the first quarter were RMB 34.6 million (US$ 4.9 million). General and administrative expenses excluding share-based compensation expenses (non-GAAP) were RMB 30.5 million (US$ 4.4 million), or 8.6% of the total revenues. Excluding the impact of Top Star, general and administrative expenses (non-GAAP) were RMB 31.2 million (US$ 4.5 million). General and administrative expenses excluding Top Star and
share-based compensation expenses (non-GAAP) were RMB 27.2 million (US$ 3.9 million), or 8.3% of the total revenues, compared with 8.0% of the total revenues in the same period of 2007 and 8.4% in the previous quarter.
Loss from operations for the quarter was RMB 7.8 million (US$ 1.1 million). Loss from operations excluding share-based compensation expenses (non-GAAP) was RMB 3.8 million (US$ 0.5 million). Excluding the impact of Top Star, income from operations (non-GAAP) for the quarter was RMB 6.5 million (US$ 0.9 million), and income from operations excluding share-based compensation expenses (non-GAAP) was RMB 10.5 million (US$ 1.5 million) or 3.2% of total revenues, compared to 9.6% in the same period of 2007 and 10.3% in the previous quarter.
Negative EBITDA (non-GAAP) for the first quarter of 2008 was RMB 13.7 million (US$ 2.0 million). Excluding foreign exchange losses and share-based compensation expenses, adjusted EBITDA (non-GAAP) was RMB 40.3 million (US$ 5.7 million), increase 19.7% year-over-year and down 27.1% from the previous quarter. Excluding the impact of Top Star, Negative EBITDA (non-GAAP) for the quarter was RMB 4.8 million (US$ 0.7 million). Excluding the impact of Top Star, foreign exchange losses and share-based compensation expenses, adjusted EBITDA (non-GAAP) was RMB 48.5 million (US$ 6.9 million), up 44.1% year-over-year and down 20.0% from the previous quarter.
Excluding foreign exchange losses and share-based compensation expenses, adjusted net income (non-GAAP) for the first quarter of 2008 was RMB 3.8 million (US$ 0.5 million), a decrease of 77.7% year-over-year. GAAP net loss for the quarter was RMB 50.3 million (US$ 7.2 million). Excluding the impact of Top Star, foreign exchange losses and share-based compensation expenses, adjusted net income (non-GAAP) was RMB 18.6 million (US$ 2.7 million), up 9.9% year-over-year. Excluding Top Star, GAAP net loss for the quarter was RMB 34.7 million (US$ 4.9 million).
For the first quarter of 2008, excluding foreign exchange losses and share-based compensation expenses, adjusted basic and diluted earnings per share (non-GAAP) were both RMB 0.05 (US$ 0.01). Adjusted basic and diluted earnings per ADS (non-GAAP) were RMB 0.11 (US$ 0.02) and RMB 0.10 (US$ 0.01) respectively. Basic and diluted losses per share were both RMB 0.71 (US$ 0.10). Basic and diluted losses per ADS were RMB 1.42 (US$ 0.20). For the first quarter of 2008, excluding the impact of Top Star, foreign exchange losses and share-based compensation expenses, adjusted basic and diluted earnings per share (non-GAAP) were RMB 0.26 (US$0.04) and RMB 0.25 (US$ 0.04), respectively, and adjusted basic and diluted earnings per ADS (non-GAAP) were RMB 0.53 (US$ 0.08) and RMB 0.51 (US$ 0.07), respectively.
Net operating cash flow for the first quarter of 2008 was RMB 6.7 million (US$ 1.0 million), as we experienced losses from Top Star. Capital expenditures for the quarter were RMB 248.3 million (US$ 35.4 million).
As of March 31, 2008, Home Inns had cash and cash equivalents of RMB 1,121.0 million (US$ 159.9 million). We had convertible bonds outstanding of RMB 1.1 billion (US$ 158.5 million) including principal and accrued interest. These are zero coupon bonds with a maturity on December 10th, 2012, with a yield of 0.50% per annum. The bonds can be converted into 5,650,780 ordinary shares of Home Inns at the option of the holder. The bonds have a non-call and non-put period of three years from the issuance date.
“Our significant increase in revenue was offset by increased foreign exchange losses and continuing pressure from Top Star while it undergoes integration efforts, as well as our stepped up investments in our expansion,” remarked May Wu, Chief Financial Officer of Home Inns. “We are excited about our accelerated growth. We are taking steps to reduce our foreign exchange exposure over the coming quarters, and with the ongoing improvement of Top Star and more hotels being opened earlier during the year, we expect improved bottom line performance for the rest of 2008. We currently do not expect change in our operating margin outlook for the full year 2008 as we previously discussed during our previous earnings call for the 2007 year end results.”
Outlook for Second Quarter 2008
Home Inns now expects to open approximately 200 new hotels in 2008, up from the 160 to 180 it previously stated. Home Inns expects its total revenues in the second quarter of 2008 to be in the range of RMB 440 million (US$ 62.8 million) to RMB 460 million (US$ 65.7 million). This forecast reflects Home Inns’ current and preliminary view, which is subject to change.
Conference Call Information
Home Inns’ management will hold an earnings conference call at 9 PM on May 13th, 2008 U.S. Eastern Standard Time (9 AM on May 14th, 2008 Beijing/Hong Kong time).
Dial-in details for the earnings conference call are as follows:
China Mainland (toll free): 10.800.130.0399
Hong Kong: +852.3002.1672
U.S. and International: +1.617.614.3518
Pass code for all regions: Home Inns
A replay of the conference call may be accessed by phone at the following number until 9 PM on May 21st, 2008 U.S. Eastern Standard Time.
International: +1.617.801.6888
Pass code: 31487375
Additionally, a live and archived webcast of this conference call will be available at http://english.homeinns.com .
About Home Inns
Home Inns is a leading economy hotel chain in China based on the number of hotels and hotel rooms, as well as the geographic coverage of the hotel chain. Since Home Inns commenced operations in 2002, it has become one of the
best-known economy hotel brands in China. Home Inns offers a consistent product and high-quality services to primarily serve the fast growing population of value-conscious individual business and leisure travelers who demand clean, comfortable and convenient lodging. Home Inns’ ADSs, each of which represents two ordinary shares, are currently trading on the NASDAQ Global Market under the symbol “HMIN.” For more information about Home Inns, please visit http://english.homeinns.com .
Safe Harbor Statements
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. Among other things, the outlook for the second quarter of 2008 and quotations from management in this announcement, as well as Home Inns’ strategic and operational plans and anticipated improvements of the Top Star hotel chain, contain forward-looking statements. Home Inns may also make written or oral forward-looking statements in its periodic reports to the Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to first parties. Statements that are not historical facts, including statements about Home Inns’ beliefs and expectations, are forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our anticipated growth strategies; our future business development, results of operations and financial condition; expected changes in our revenues and certain cost or expense items; our ability to attract customers and leverage our brand; trends and competition in the lodging industry; our ability to successfully integrate the Top Star hotel chain and any other business we may acquire in the future; our ability to hire, train and retain qualified managerial and other employees; our ability to develop new hotels at desirable locations in a timely and cost-effective manner; the expected growth of the Chinese economy hotel market; and Chinese governmental policies relating to private managers and operators of hotels and applicable tax rates.
Further information regarding these and other risks is included in our annual report on Form 20-F and other documents filed with the SEC. Home Inns does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of May 14th, 2008, and Home Inns undertakes no duty to update such information, except as required under applicable law.
Non-GAAP Financial Measures
To supplement Home Inns’ unaudited consolidated financial results presented in accordance with U.S. GAAP, Home Inns uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: total operating expenses excluding share-based compensation expenses, general and administrative expenses excluding share-based compensation expenses, income from operations excluding share-based expenses, adjusted net income excluding foreign exchange losses and share-based compensation, adjusted basic and diluted earnings and ADS per share excluding foreign exchange losses and share-based compensation, EBITDA and adjusted EBITDA excluding foreign exchange losses and share-based compensation. Our presentations of financial measures that exclude the impact of the hotels we acquired from Top Star are also considered non-GAAP 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 release.
Home Inns believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses that may not be indicative of its operating performance from a cash perspective and by excluding foreign exchange losses which may not be indicative of its operating performance. Home Inns believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to Home Inns’ historical performance and liquidity. Home Inns computes its non-GAAP financial measures using the same consistent method from quarter to quarter. Home Inns believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using non-GAAP financial measures excluding share-based compensation expenses is that share-based compensation expenses have been and will continue to be a significant recurring expense in our business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.
Home Inns’ management also believes that EBITDA, defined as earnings before interest, income tax expense, depreciation and amortization is a useful financial metric to assess our operating and financial performance before the impact of investing and financing transactions and income taxes. In addition, Home Inns’ management believes that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of our financial performance. Given the significant investments that Home Inns has made in property, plant and equipment, depreciation and amortization expense comprises a meaningful portion of our cost structure. Home Inns’ management believes that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The presentation of EBITDA should not be construed as an indication that our future results will be unaffected by other charges and gains we consider to be outside the ordinary course of our business.
The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets, income tax expense, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Further, foreign exchange losses and share-based compensation expenses have been and will be incurred and are not reflected in the presentation of adjusted EBITDA. Each of these items should also be considered in the overall evaluation of our financial results. Additionally, EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. Home Inns compensates for these limitations by providing the relevant disclosure of our depreciation and amortization, interest expense and interest income, income tax expense, capital expenditures and other relevant items both in our reconciliations to the U.S. GAAP financial measures and in our consolidated financial statements, all of which should be considered when evaluating our performance. The term EBITDA or adjusted EBITDA is not defined under U.S. GAAP, and EBITDA or adjusted EBITDA is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing our operating and financial performance, you should not consider this data in isolation or as a substitute for our net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, our EBITDA and adjusted EDITDA 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 we do.
Reconciliations of Home Inns’ non-GAAP financial measures, including EBITDA and adjusted EBITDA, to consolidated statement of operations information are included at the end of this press release.
Home Inns & Hotels Management Inc.
Consolidated Balance Sheet Information
December 31, March 31,
2007 2008
RMB’000 RMB’000 US$’000
(audited) (unaudited)(unaudited)
ASSETS
Current assets:
Cash and cash equivalents 1,562,600 1,120,954 159,862
Restricted cash 173,849 235,838 33,633
Accounts receivable 16,913 20,627 2,942
Receivables from related parties 1,372 1,372 196
Consumables 18,992 17,599 2,510
Prepayments and other current assets 61,927 72,865 10,391
Deferred tax assets, current 16,574 17,568 2,505
Total current assets 1,852,227 1,486,823 212,039
Property and equipment, net 1,147,682 1,369,578 195,319
Goodwill 397,778 397,778 56,728
Intangible assets, net 46,739 45,870 6,542
Other assets 68,088 54,751 7,808
Deferred tax assets, non-current 49,024 64,214 9,158
Total assets 3,561,538 3,419,014 487,594
LIABILITIES
Current liabilities:
Accounts payable 13,007 13,207 1,883
Payables to related parties 6,651 5,226 745
Short-term borrowings 269,000 178,000 25,385
Current portion of long-term loan
from a related party -- -- --
Salaries and welfare payable 48,260 32,817 4,680
Income tax payable 43,083 45,337 6,466
Other taxes payable 8,901 10,359 1,477
Deferred revenues 23,807 28,987 4,134
Provisions for customer reward
program 5,439 6,054 863
Other unpaid and accruals 36,570 38,836 5,539
Other payables 350,204 324,184 46,232
Total current liabilities 804,922 683,007 97,404
Deferred rental 94,226 106,544 15,195
Deferred revenues, non-current 14,031 16,413 2,341
Long-term loan 18,036 18,036 2,572
Unfavorable lease liability 19,894 19,495 2,780
Convertible bond 1,110,308 1,111,696 158,542
Deferred tax liability, non-current 13,637 14,105 2,012
Total liabilities 2,075,054 1,969,296 280,846
Minority interest 11,087 17,788 2,537
Commitments and contingencies
Shareholders’ equity
Ordinary shares (US$0.005 par value;
177,075,114 and 200,000,000 shares
authorized, 70,487,385 and
70,817,064 shares issued and
outstanding as of December 31, 2007
and March 31, 2008, respectively) 2,874 2,885 411
Additional paid-in capital 1,362,942 1,369,752 195,344
Statutory reserves 41,333 41,334 5,895
Retained earnings 68,248 17,959 2,561
Total shareholders’ equity 1,475,397 1,431,930 204,211
Total liabilities and shareholders’
equity 3,561,538 3,419,014 487,594
Note 1: The conversion of Renminbi (RMB) into United States dollars (US$)
is based on the noon buying rate of US$1.00=RMB7.0120 on March 31,
2008 in The City of New York for cable transfers of RMB as
certified for customs purpose by Federal Reserve Bank of New York.
Home Inns & Hotels Management Inc.
Consolidated Statement of Operations Information
Quarter Ended
March 31, December 31, 2007
2007
RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)(unaudited)(unaudited)(unaudited)
Top Star excluding
Top Star
Revenues:
Leased-and-operated
hotels 174,640 312,428 19,775 292,653
Franchised-and-managed
hotels 8,499 15,158 -- 15,158
Total revenues 183,139 327,586 19,775 307,811
Less: Business tax and
related surcharges (10,556) (20,348) (1,037) (19,311)
Net revenues 172,583 307,238 18,738 288,500
Operating costs and expenses:
Leased-and-operated hotel
costs -
Rents and utilities (59,104) (105,659) (12,935) (92,724)
Personnel costs* (29,444) (51,425) (3,128) (48,297)
Depreciation and
amortization (16,693) (29,692) (2,828) (26,864)
Consumables, food and
beverage (13,564) (30,348) (3,837) (26,511)
Others (17,417) (34,533) (2,430) (32,103)
Total leased-and-operated
hotel costs (136,222) (251,657) (25,158) (226,499)
Sales and marketing expenses (4,109) (4,839) (264) (4,575)
General and administrative
expenses* (16,335) (36,809) (6,450) (30,359)
Total operating costs and
expenses (156,666) (293,305) (31,872) (261,433)
Income from operations 15,917 13,933 (13,134) 27,067
Interest income 7,055 5,552 12 5,540
Interest expense (2,541) (1,113) (366) (747)
Other non-operating income 238 2,767 324 2,443
Foreign exchange gain or loss, net (6,146) (24,083) -- (24,083)
Income before income tax expense,
minority interests and share of
income of affiliated companies 14,523 (2,944) (13,164) 10,220
Income tax expense (10,722) (10,760) -- (10,760)
Minority interests (844) (1,507) -- (1,507)
Net income 2,957 (15,211) (13,164) (2,047)
Amount allocated to participating
preference shareholders -- -- --
Net income available to ordinary
shareholders 2,957 (15,211) (13,164) (2,047)
Earnings per share
- Basic 0.05 -0.22 -0.03
- Diluted 0.04 -0.22 -0.03
Weighted average ordinary shares
outstanding
- Basic 65,829 70,169 70,169
- Diluted 68,980 70,169 70,169
* Share-based compensation expense
was included in the statement of
operations as follows:
Leased-and-operated hotel costs -
Personnel costs 3 3 3
General and administrative expenses 1,720 4,604 4,604
Quarter Ended
March 31, 2008
RMB’000 US$’000 RMB’000 RMB’000
(unaudited)(unaudited)(unaudited)(unaudited)
Top Star excluding
Top Star
Revenues:
Leased-and-operated
hotels 340,422 48,548 28,184 312,238
Franchised-and-managed
hotels 16,561 2,362 -- 16,561
Total revenues 356,983 50,910 28,184 328,799
Less: Business tax and
related surcharges (22,136) (3,157) (1,461) (20,675)
Net revenues 334,847 47,753 26,723 308,124
Operating costs and expenses:
Leased-and-operated hotel
costs -
Rents and utilities (135,084) (19,265) (17,432) (117,652)
Personnel costs* (69,161) (9,863) (5,953) (63,208)
Depreciation and
amortization (38,970) (5,558) (5,992) (32,978)
Consumables, food and
beverage (27,685) (3,948) (2,879) (24,806)
Others (32,532) (4,639) (5,113) (27,419)
Total leased-and-operated
hotel costs (303,432) (43,273) (37,369) (266,063)
Sales and marketing expenses (4,660) (665) (296) (4,364)
General and administrative
expenses* (34,579) (4,931) (3,361) (31,218)
Total operating costs and
expenses (342,671) (48,869) (41,026) (301,645)
Income from operations (7,824) (1,116) (14,303) 6,479
Interest income 15,614 2,227 14 15,600
Interest expense (10,199) (1,455) (619) (9,580)
Other non-operating income 4,453 635 78 4,375
Foreign exchange gain or loss,
net (50,020) (7,133) (762) (49,258)
Income before income tax
expense, minority interests
and share of income of
affiliated companies (47,976) (6,842) (15,592) (32,384)
Income tax expense (1,363) (194) -- (1,363)
Minority interests (951) (136) -- (951)
Net income (50,290) (7,172) (15,592) (34,698)
Amount allocated to
participating preference
shareholders -- -- --
Net income available to
ordinary shareholders (50,290) (7,172) (15,592) (34,698)
Earnings per share
- Basic -0.71 -0.10 -0.49
- Diluted -0.71 -0.10 -0.49
Weighted average ordinary shares
Outstanding
- Basic 70,658 70,658 70,658
- Diluted 70,658 70,658 70,658
* Share-based compensation
expense was included in the
statement of operations as
follows:
Leased-and-operated hotel
costs -
Personnel costs 3 -- 3
General and administrative
expenses 4,040 576 4,040
Note 1: The conversion of Renminbi (RMB) into United States dollars (US$)
is based on the noon buying rate of US$1.00=RMB7.0120 on March
31, 2008 in The City of New York for cable transfers of RMB’000
as certified for customs purpose by Federal Reserve Bank of New
York.
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results
Quarter Ended March 31, 2008
GAAP % of Share- Restru- % of Non-GAAP % of
Result Total based cturing Total Result Total
Revenue Compen- costs Revenue Revenue
sation
RMB’000 RMB’000 RMB’000 RMB’000
Leased-and-operated
hotel costs (303,432) 85.0% 3 -- 0.0% (303,429) 85.0%
Sales and marketing
expenses (4,660) 1.3% -- -- 0.0% (4,660) 1.3%
General and
administrative
expenses (34,579) 9.7% 4,040 -- 1.1% (30,539) 8.6%
Total operating
costs and
expenses (342,671) 96.0% 4,043 -- 1.1% (338,628) 94.9%
Income from
operations (7,824) 2.2% 4,043 -- 1.1% (3,781) 1.1%
Quarter Ended March 31, 2008
(excluding Top Star)
GAAP % of Share- % of Non-GAAP % of
Result Total based Total Result Total
Revenue Compen- Revenue Revenue
sation
RMB’000 RMB’000 RMB’000
Leased-and-operated hotel
costs (266,063) 80.9% 3 0.0% (266,060) 80.9%
Sales and marketing
expenses (4,364) 1.3% -- 0.0% (4,364) 1.3%
General and administrative
expenses (31,218) 9.5% 4,040 1.2% (27,178) 8.3%
Total operating costs and
expenses (301,645) 91.7% 4,043 1.2% (297,602) 90.5%
Income from operations 6,479 2.0% 4,043 1.2% 10,522 3.2%
Quarter Ended March 31, 2008
GAAP % of Share- Restru- % of Non-GAAP % of
Result Total based cturing Total Result Total
Revenue Compen- costs Revenue Revenue
sation
US$’000 US$’000 US$’000 US$’000
Leased-and-operated
hotel costs (43,273) 85.0% -- -- 0.0% (43,273) 85.0%
Sales and marketing
expenses (665) 1.3% -- -- 0.0% (665) 1.3%
General and
administrative
expenses (4,931) 9.7% 576 -- 1.1% (4,355) 8.6%
Total operating
costs and expenses (48,869) 96.0% 576 -- 1.1% (48,293) 94.9%
Income from
operations (1,116) 2.2% 576 -- 1.1% (540) 1.1%
Quarter Ended March 31, 2008
(excluding Top Star)
GAAP % of Share- % of Non-GAAP % of
Result Total based Total Result Total
Revenue Compen- Revenue Revenue
sation
US$’000 US$’000 US$’000
Leased-and-operated hotel
costs (37,944) 80.9% -- 0.0% (37,944) 80.9%
Sales and marketing expenses (622) 1.3% -- 0.0% (622) 1.3%
General and administrative
expenses (4,452) 9.5% 576 1.2% (3,876) 8.3%
Total operating costs and
expenses (43,018) 91.7% 576 1.2% (42,442) 90.5%
Income from operations 924 2.0% 576 1.2% 1,500 3.2%
Quarter Ended December 31, 2007
GAAP % of Share- Restru- % of Non-GAAP % of
Result Total based cturing Total Result Total
Revenue Compen- costs Revenue Revenue
sation
RMB’000 RMB’000 RMB’000 RMB’000
Leased-and-operated
hotel costs (251,657) 76.8% 3 550 0.2% (251,104) 76.7%
Sales and marketing
expenses (4,839) 1.5% -- 0.0% (4,839) 1.5%
General and
administrative
expenses (36,809) 11.2% 4,604 4,076 2.6% (28,129) 8.6%
Total operating
costs and expenses (293,305) 89.5% 4,607 4,626 2.8% (284,072) 86.7%
Income from
operations 13,933 4.3% 4,607 4,626 2.8% 23,165 7.1%
Quarter Ended December 31, 2007
(excluding Top Star)
GAAP % of Share- % of Non-GAAP % of
Result Total based Total Result Total
Revenue Compen- Revenue Revenue
sation
RMB’000 RMB’000 RMB’000
Leased-and-operated hotel
costs (226,499) 73.6% 3 0.0% (226,496) 73.6%
Sales and marketing
expenses (4,575) 1.5% -- 0.0% (4,575) 1.5%
General and administrative
expenses (30,359) 9.9% 4,604 1.5% (25,755) 8.4%
Total operating costs and
expenses (261,433) 84.9% 4,607 1.5% (256,827) 83.4%
Income from operations 27,067 8.8% 4,607 1.5% 31,673 10.3%
Quarter Ended March 31, 2007
GAAP % of Share- Restru- % of Non-GAAP % of
Result Total based cturing Total Result Total
Revenue Compen- costs Revenue Revenue
sation
RMB’000 RMB’000 RMB’000 RMB’000
Leased-and-operated
hotel costs (136,222) 74.4% 3 -- 0.0% (136,219) 74.4%
Sales and marketing
expenses (4,109) 2.2% -- -- 0.0% (4,109) 2.2%
General and
administrative
expenses (16,335) 8.9% 1,720 -- 0.9% (14,615) 8.0%
Total operating
costs and expenses 156,666) 85.5% 1,723 -- 0.9% (154,943) 84.6%
Income from
operations 15,917 8.7% 1,723 -- 0.9% 17,640 9.6%
Note 1: The conversion of Renminbi (RMB) into United States dollars (US$)
is based on the noon buying rate of US$’1.00=7.0120RMB’ on March
31, 2008 in The City of New York for cable transfers of RMB as
certified for customs purpose by Federal Reserve Bank of New York.
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results (continued)
Quarter Ended
March 31, December 31, March 31, 2008
2007 2007
RMB’000 RMB’000 RMB’000 RMB’000 US$’000 RMB’000
(excluding (excluding
Top Star) Top Star)
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
Net
income
(GAAP) 2,957 (15,211) (2,047) (50,290) (7,172) (34,698)
Foreign
exchange
losses
(gains),
net 6,146 24,083 24,083 50,020 7,133 49,258
Share-
based
compen-
sation 1,723 4,607 4,607 4,043 576 4,043
Non-
recurring
charge
for re-
measure-
ment of
net
deferred
tax
assets
(Note2) 6,097
Restruct-
uring
costs 4,626 -- --
Adjusted
net income
excluding
foreign
exchange
losses,
share-based
compensation,
non-recurring
provision
for deferred
tax assets
and
restruct-
uring
costs 16,923 18,104 26,643 3,773 537 18,603
Quarter Ended
March 31, December 31, March 31, 2008
2007 2007
RMB’000 RMB’000 RMB’000 RMB’000 US$’000 RMB’000
(excluding (excluding
Top Star) Top Star)
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
Earnings
per share
(GAAP)
- Basic 0.05 -0.22 -0.03 -0.71 -0.10 -0.49
- Diluted 0.04 -0.22 -0.03 -0.71 -0.10 -0.49
Earnings
per share
excluding
foreign
exchange
losses,
share-based
compensation,
non-recurring
provision for
deferred tax
assets and
restructuring
costs
- Basic 0.26 0.26 0.38 0.05 0.01 0.26
- Diluted 0.25 0.23 0.34 0.05 0.01 0.25
Weighted
average
ordinary
shares
outstand-
ing
- Basic 65,829 70,169 70,169 70,658 70,658 70,658
- Diluted 68,980 78,504 78,504 72,840 72,840 78,491
Note 1: The conversion of Renminbi (RMB) into United States dollars (US$)
is based on the noon buying rate of US$1.00=7.0120RMB on March
31, 2008 in The City of New York for cable transfers of RMB as
certified for customs purpose by Federal Reserve Bank of New York.
Note 2: For the quarter ended March 31, 2007, income tax expenses included
a non-recurring charge of RMB6,096,529 (US$789,379) for re-
measurement of net deferred tax assets recognised before January 1,
2007, which was resulted from the change of income tax rates for
most Chinese enterprises from 33% at the present to 25% effective
on January 1, 2008. (for the quarter ended March 31, 2008: Nil)
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results (continued)
Quarter Ended
March 31, December 31, March 31, 2008
2007 2007
RMB’000 RMB’000 RMB’000 RMB’000 US$’000 RMB’000
(excluding (excluding
Top Star) Top Star)
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
Net
income
(GAAP) 2,957 (15,211) (2,047) (50,290) (7,172) (34,698)
Interest
income (7,055) (5,552) (5,540) (15,614) (2,227) (15,600)
Interest
expenses 2,541 1,112 747 10,199 1,455 9,580
Income
tax
expense 10,722 10,760 10,760 1,363 194 1,363
Deprec-
iation
and
amortiz-
ation 16,653 30,880 28,052 40,593 5,789 34,601
EBITDA
(Non-GAAP) 25,818 21,989 31,972 (13,749) (1,961) (4,754)
Foreign
exchange
losses
(gains),
net 6,146 24,083 24,083 50,020 7,133 49,258
Share-
based
compen-
sation 1,723 4,607 4,607 4,043 576 4,043
Restruct-
uring
costs 4,626 -- --
EBITDA
excluding
foreign
exchange
losses,
share-
based
compen-
sation &
restruct-
uring
costs 33,687 55,305 60,662 40,314 5,748 48,547
% of
total
revenue 18.4% 16.9% 19.7% 11.3% 11.3% 14.8%
Home Inns & Hotels Management Inc.
Operating Data
As of and for the quarter ended
March 31, December 31, 2007 March 31, 2008
2007 Top excluding Top excluding
Star Top Star Star Top Star
Total Hotels in
operation: 145 266 25 241 299 26 273
Lease-and-
operated
hotels 97 195 25 170 220 26 194
Franchised-
and-managed
hotels 48 71 71 79 79
Total rooms 17,417 32,726 4,047 28,679 36,442 4,133 32,309
Occupancy rate (as
a percentage) 85.9% 88.3% 56.4% 91.6% 81.4% 48.1% 86.0%
Average daily rate
(in RMB) 176 176 128 179 172 143 174
RevPAR (in RMB) 151 155 72 164 140 69 150
Like-for-like performance for hotels opened for at least 18 months as of
the beginning of the current quarter
As of and for the quarter ended
March 31, 2007 March 31, 2008
Total Hotels in operation: 86 86
Lease-and-operated hotels 68 68
Franchised-and-managed hotels 18 18
Total rooms 10,312 10,312
Occupancy rate (as a percentage) 96.7% 95.5%
Average daily rate (in RMB) 183 191
RevPAR (in RMB) 177 182
