SHANGHAI, Aug. 12 /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 June 30th, 2008.
Second Quarter 2008 Financial Highlights
-- Total revenues for the quarter increased 93.0% year-over-year to RMB
448.1 million (US$ 65.3 million), including revenues of RMB 38.4
million (US$ 5.6 million) from our Top Star hotel chain which we
acquired last year.
-- EBITDA (non-GAAP) was RMB 63.0 million (US$ 9.2 million). Excluding
foreign exchange losses and share-based compensation expenses, adjusted
EBITDA (non-GAAP) was RMB 82.2 million (US$ 12.0 million), up 33.4%
year-over-year. Excluding the impact of Top Star, foreign exchange
losses and share-based compensation expenses, adjusted EBITDA (non-GAAP)
was RMB 78.7 million (US$ 11.5 million), up 27.8% year-over-year.
-- Income from operations was RMB 31.3 million (US$ 4.6 million). Income
from operations excluding share-based compensation expenses was RMB
36.7 million (US$ 5.4 million). Excluding the impact of Top Star,
income from operations excluding share-based compensation expenses was
RMB 39.0 million (US$ 5.7 million), a decrease of 6.7% year-over-year.
Income from operations was negatively impacted by the large number of
hotels under construction, a higher proportion of new hotels in our
hotel portfolio, the earthquake in western China, and the national
holiday schedule’s shift, which we will discuss more in the following
sections.
-- Adjusted net income (non-GAAP) was RMB 26.6 million (US$ 3.9 million),
excluding share-based compensation expenses of RMB 5.4 million (US$ 0.8
million) and foreign exchange losses of RMB 13.7 million (US$ 2.0
million). As a GAAP measure, net income was RMB 7.5 million (US$ 1.1
million).
-- Diluted earnings per ADS was RMB 0.21 (US$ 0.03). Non-GAAP adjusted
diluted earnings per ADS was RMB 0.72 (US$ 0.10). Excluding the impact
of Top Star, diluted earnings per ADS was RMB 0.24 (US$ 0.03), while
non-GAAP adjusted diluted earnings per ADS was RMB 0.77 (US$ 0.11).
Reconciliation between the adjusted diluted earnings per ADS versus US
GAAP figures is included at the end of this press release.
“During the second quarter we almost doubled our revenues year-on-year, and opened 67 of the 200 new hotels targeted for 2008,” remarked Mr. David Sun, Home Inns’ Chief Executive Officer. “Although accelerating our hotel conversion rate during the earlier part of the year resulted in higher
pre-opening expenses as well as a higher proportion of new hotels in our overall hotel mix, we believe that, even though this temporarily caused a negative impact on margins, it is an important step to take to maintain our leading position in China and position us for future growth and profitability.”
Operational Highlights
-- Hotel expansion accelerated with 67 net new hotels opened during the
quarter, consisting of 51 leased-and-operated hotels and a net of 16
franchised-and-managed hotels, compared with 26 net new hotels opened
in the second quarter of 2007, which consisted of 20 leased-and-
operated hotels and a net of 6 franchised-and-managed hotels. Home
Inns opened a net total of 100 hotels in the first half of 2008, or
half of its targeted total new opening number for this year. Last year,
only 28.0% of the new hotels scheduled for completion in 2007 were
completed in the first half of the year, a period during which the pace
of construction is typically slower due to the Chinese New Year and
winter weather. As of June 30, 2008, the Home Inns hotel chain
included 366 hotels in operation with an average of 120 rooms per hotel
in operation, covering 79 cities in China and consisting of 271 leased-
and-operated hotels and 95 franchised-and-managed hotels.
-- As of June 30, 2008, Home Inns had an additional 137 hotels contracted,
which consisted of 84 leased-and-operated hotels and 53 franchised-and-
managed hotels. As of June 30, 2007, Home Inns had 63 hotels
contracted, which consisted of 50 leased-and-operated hotels and 13
franchised-and-managed hotels.
-- The occupancy rate for the Home Inns hotel chain was 88.2% in the
second quarter of 2008 and 95.2% in the same period of 2007. Occupancy
rates for the quarter were negatively impacted largely by the severe
earthquake in central China during the quarter, higher mix of hotels
opened for less than six months, as well as lower occupancy rates at
our Top Star hotels. Excluding Top Star, the occupancy rate was 90.8%
in the second quarter of 2008.
-- RevPAR, defined as revenue per available room, was RMB 153 in the
second quarter of 2008. RevPAR excluding Top Star was RMB 160 in the
second quarter of 2008, compared with RMB 174 in the same period in
2007. RevPAR was negatively impacted by the same factors that
negatively impacted occupancy rate, as discussed above.
-- RevPAR for Home Inns’ hotels which had been in operation for at least
18 months as of April 1, 2008 was RMB 193 in the second quarter of 2008,
compared to RevPAR of RMB 192 during the same period of 2007. This
demonstrates the continued strength in our more established hotels.
-- Top Star had a negative impact on the consolidated results as 20% of
the Top Star hotels are located in the regions directly impacted by the
earthquake. For the second quarter, our Top Star hotels had revenues
of RMB 38.4 million, a loss from operations of RMB 2.3 million, and
EBITDA (non-GAAP) of RMB 4.4 million. While the earthquake was a
setback, Top Star achieved positive EBITDA, and its ramping up resumed
in July with RevPAR recovering to RMB 100, compared to RevPAR of RMB 95
during the second quarter 2008.
“Despite the challenging quarter, during which we experienced one of the worst earthquakes in China’s history, we still achieved strong revenue growth and further expanded our hotel chain. As we move into the second half of the year I believe we now have reached a turning point -- our mature hotels continue to provide stable revenues, and, as our chain continues to expand, the cost of adding new hotels as a percentage of overall revenue is declining. Furthermore, we are seeing evidence that the larger, more established hotel chains like ours are gaining overall market share in China, and we believe that, with our nationwide coverage and strong brand recognition we are well positioned to benefit from this trend,” remarked Mr. David Sun.
Second Quarter 2008 Financial Results
For the second quarter of 2008, Home Inns had total revenues of RMB 448.1 million (US$ 65.3 million), representing a 93.0% increase year-over-year and a 25.5% increase sequentially. Excluding the impact of Top Star, total revenues were RMB 409.7 million (US$ 59.7 million), representing a 76.4% increase
year-over-year and a 24.6% increase sequentially.
Total revenues from leased-and-operated hotels for the second quarter of 2008 were RMB 424.6 million (US$ 61.9 million), representing a 91.4% increase year-over-year and a 24.7% increase sequentially. Excluding the impact of Top Star, total revenues from leased-and-operated hotels for the second quarter of 2008 were RMB 386.2 million (US$ 56.3 million), representing a 74.1% increase year-over-year and a 23.7% increase sequentially. Home Inns opened 51 new leased-and-operated hotels during the second quarter of 2008 to reach a total of 271 leased-and-operated hotels, including 26 Top Star hotels. Home Inns opened 20 new lease-and-operated hotels during the same period a year ago and ended the second quarter 2007 with 117 leased-and-operated hotels.
Total revenues from franchised-and-managed hotels for the second quarter of 2008 were RMB 23.5 million (US$ 3.4 million), representing a 125.5% increase year-over-year and a 42.0% increase sequentially. Home Inns opened 16 net new franchised-and-managed hotels during the second quarter of 2008 to reach a total of 95 such hotels. Home Inns opened 6 net new
franchised-and-managed hotels during the same period a year ago and ended the second quarter 2007 with 54 franchised-and-managed hotels.
The overall occupancy rate for the entire Home Inns hotel chain was 88.2% in the second quarter of 2008. Excluding the impact of Top Star, the occupancy rate for the Home Inns hotel chain was 90.8% for the quarter, compared with 95.2% in the same period in 2007 and 86.0% in the previous quarter. The decline year-over-year was caused primarily by the impact of the earthquake, changes made to China’s national holiday schedule in May, as well as the higher proportion new hotels (those opened for less than six months) in our overall hotel mix. The sequential increase in occupancy was a result of the second quarter being typically a seasonally stronger quarter.
Average daily rate (ADR) for the quarter was RMB 173. Excluding the impact of Top Star, ADR for the Home Inns hotel chain was RMB 176 for the quarter, compared with RMB 183 in the same period in 2007 and RMB 174 in the previous quarter. The factors that impacted occupancy rates also affected ADR in a similar way. In addition, the ADR trend also reflects Home Inns’ increased presence in lower-tier cities where room rates are lower.
RevPAR for the quarter was RMB 153. Excluding the impact of Top Star, RevPAR for the quarter was RMB 160, compared with RevPAR of RMB 174 in the same period in 2007 and RMB 150 in the previous quarter.
Total operating costs and expenses for the second quarter of 2008 were RMB 390.5 million (US$ 56.9 million). Total operating costs and expenses excluding share-based compensation expenses (non-GAAP) for the quarter were RMB 385.0 million (US$ 56.1 million), or 85.9% of total revenues. Excluding the impact of Top Star, total operating costs and expenses for the quarter were RMB 351.8 million (US$ 51.3 million). Excluding the impact of Top Star, total operating costs and expenses excluding share-based compensation expenses (non-GAAP) for the quarter were RMB 346.4 million (US$ 50.5 million), or 84.6% of total revenues, compared to 76.1% in the same quarter 2007 and 90.5 % in the previous quarter.
Total leased-and-operated hotel costs for the second quarter of 2008 were RMB 348.7 million (US$ 50.8 million), representing 82.1 % of the leased-and-operated hotel revenues. Excluding the impact of Top Star, total leased-and-operated hotel costs were RMB 311.2 million (US$ 45.4 million), representing 80.6% of the leased-and-operated hotel revenues. Total leased-and-operated hotel costs represented 69.8% of the leased-and-operated hotel revenues for the same quarter in 2007 and 85.2% for the previous quarter excluding Top Star. Compared to a year ago, the large number of hotels under construction during the quarter led to higher rents and utilities and caused personnel costs and certain other costs to be a higher percentage of leased-and-operated hotel revenue for the quarter. Typically, once construction starts on a site, we begin to incur these costs, though we will not see revenue until the hotel is in operation. The costs associated with hotels under construction were RMB 26.7 million (US$ 3.9 million) in the second quarter of 2008, representing 6.3% of leased-and-operated hotel revenue. These costs were RMB 7.8 million in the second quarter of 2007, representing 3.5% of leased-and-operated hotel revenue.
Sales and marketing expenses for the second quarter were RMB 5.5 million (US$ 0.8 million), an increase of 24.6% year-over-year and an increase of 17.1% sequentially. Excluding the impact of Top Star, sales and marketing expenses were RMB 4.8 million (US$ 0.7 million), an increase of 9.7%
year-over-year and an increase of 10.0% sequentially.
General and administrative expenses for the second quarter were RMB 36.3 million (US$ 5.3 million). General and administrative expenses excluding share-based compensation expenses (non-GAAP) were RMB 30.9 million (US$ 4.5 million), or 6.9% of the total revenues. Excluding the impact of Top Star, general and administrative expenses were RMB 35.8 million (US$ 5.2 million). General and administrative expenses excluding Top Star and share-based compensation expenses (non-GAAP) were RMB 30.4 million (US$ 4.4 million), or 7.4% of the total revenues, compared with 7.5% of the total revenues in the same period of 2007 and 8.3% in the previous quarter.
Income from operations for the quarter was RMB 31.3 million (US$ 4.6 million). Income from operations excluding share-based compensation expenses (non-GAAP) was RMB 36.7 million (US$ 5.4 million). Excluding the impact of Top Star, income from operations for the quarter was RMB 33.6 million (US$ 4.9 million), and income from operations excluding share-based compensation expenses (non-GAAP) was RMB 39.0 million (US$ 5.7million) or 9.5% of total revenues, compared to 18.0% in the same period of 2007 and 3.2% in the previous quarter.
EBITDA (non-GAAP) for the second quarter of 2008 was RMB 63.0 million (US$ 9.2 million). Excluding foreign exchange losses and share-based compensation expenses, adjusted EBITDA (non-GAAP) was RMB 82.2 million (US$ 12.0 million), an increase of 33.4% year-over-year and up 103.8% from the previous quarter. Excluding the impact of Top Star, EBITDA (non-GAAP) for the quarter was RMB 58.6 million (US$ 8.5 million). Excluding the impact of Top Star, foreign exchange losses and share-based compensation expenses, adjusted EBITDA
(non-GAAP) was RMB 78.7 million (US$ 11.5 million), up 27.8% year-over-year and up 62.1% from the previous quarter.
Excluding foreign exchange losses and share-based compensation expenses, adjusted net income (non-GAAP) for the second quarter of 2008 was RMB 26.6 million (US$ 3.9 million), a decrease of 33.3% year-over-year. GAAP net income for the quarter was RMB 7.5 million (US$ 1.1 million). Excluding the impact of Top Star, foreign exchange losses and share-based compensation expenses, adjusted net income (non-GAAP) was RMB 28.7 million (US$ 4.2 million), down 28.1% year-over-year. Excluding Top Star, GAAP net income for the quarter was RMB 8.7 million (US$ 1.3 million).
For the second quarter of 2008, excluding foreign exchange losses and share-based compensation expenses, adjusted basic and diluted earnings per share (non-GAAP) were RMB 0.38 (US$ 0.05) and RMB 0.36 (US$ 0.05), respectively. Adjusted basic and diluted earnings per ADS (non-GAAP) were RMB 0.75 (US$ 0.11) and RMB 0.72 (US$ 0.10), respectively. Basic and diluted earnings per share were RMB 0.11 (US$ 0.02) and RMB 0.10 (US$ 0.01), respectively. Basic and diluted earnings per ADS were both RMB 0.21 (US$ 0.03). For the second 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 0.41 (US$ 0.06) and RMB 0.38 (US$ 0.06), respectively, and adjusted basic and diluted earnings per ADS (non-GAAP) were RMB 0.81 (US$ 0.12) and RMB 0.77 (US$ 0.11), respectively.
Net operating cash flow for the second quarter of 2008 was RMB 107.7 million (US$ 15.7 million). Capital expenditures for the quarter were RMB 225.7 million (US$ 32.9 million).
As of June 30, 2008, Home Inns had cash and cash equivalents of RMB 1,153.0 million (US$ 168.1 million). We had convertible bonds outstanding of RMB 1.1 billion (US$ 162.3 million) including principal and accrued interest. These are zero coupon bonds with a maturity on or around December 10, 2012, with a yield of 0.50% per annum. The bonds can be converted into a total of 5,650,780 Home Inns’ ordinary shares at the option of the holders. The bonds have a non-call and non-put period of three years from the issuance date.
“Although the earthquake was a setback to our efforts to ramp up Top Star, we are confident that Top Star’s overall operating performance will continue to improve as it becomes more integrated into the Home Inns chain. With a number of the factors that have impacted profitability now behind us we are now better positioned than ever to cost-effectively manage our expansion in order to improve margins and achieve attractive top-line revenue growth,” remarked Ms. May Wu, Home Inns’ Chief Financial Officer.
Outlook for Third Quarter 2008
Home Inns continues to expect to open approximately 200 new hotels in 2008. Home Inns expects its total revenues in the third quarter of 2008 to be in the range of RMB 500 million (US$ 72.9 million) to RMB 520 million (US$ 75.8 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 August 11, 2008 U.S. Eastern Standard Time (9 AM on August 12, 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 (toll free): +1.800.299.8538
U.S. and International: +1.617.786.2902
Passcode for all regions: Home Inns
A replay of the conference call may be accessed by phone at the following number until 10 PM on August 18, 2008 U.S. Eastern Standard Time.
US toll free: +1.888.286.8010
International: +1.617.801.6888
Passcode: 87586758
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’ ADS’s, each of which represents two ordinary shares, are currently trading on the NASDAQ Global Market under the symbol “HMIN.” The Company filed its annual report on Form 20-F for the fiscal year ended December 31, 2007 with the Securities and Exchange Commission on April 18, 2008, a copy of which is also available on the Company’s website http://English.homeinns.com . The Company will provide a hard copy of its annual report on Form 20-F, free of charge, to its shareholders and ADS holders upon request.
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. Among other things, the outlook for the third quarter of 2008 and quotations from management in this announcement, as well as Home Inns’ strategic and operational plans, 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 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 August 11, 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’ un-audited 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. 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, 2007 June 30, 2008
RMB ‘000 RMB ‘000 US$ ‘000
(audited) (unaudited)(unaudited)
ASSETS
Current assets:
Cash and cash equivalents 1,562,600 1,153,041 168,104
Restricted cash 173,849 68,591 10,000
Accounts receivable 16,913 22,717 3,312
Receivables from related parties 1,372 -- --
Consumables 18,992 27,003 3,937
Prepayments and other current assets 61,927 56,203 8,193
Deferred tax assets, current 16,574 37,584 5,479
Total current assets 1,852,227 1,365,139 199,025
Property and equipment, net 1,147,682 1,555,527 226,783
Goodwill 397,778 397,778 57,993
Intangible assets, net 46,739 46,751 6,816
Other assets 68,088 53,194 7,755
Deferred tax assets, non-current 49,024 61,107 8,909
Total assets 3,561,538 3,479,496 507,281
LIABILITIES
Current liabilities:
Accounts payable 13,007 20,205 2,946
Payables to related parties 6,651 5,715 833
Short-term borrowings 269,000 160,000 23,327
Salaries and welfare payable 48,260 50,694 7,391
Income tax payable 43,083 47,159 6,875
Other taxes payable 8,901 10,196 1,486
Deferred revenues 23,807 35,366 5,156
Provisions for customer reward
program 5,439 7,422 1,082
Other unpaid and accruals 36,570 43,082 6,281
Other payables 350,204 360,429 52,548
Total current liabilities 804,922 740,268 107,925
Deferred rental 94,226 113,733 16,581
Deferred revenues, non-current 14,031 16,188 2,360
Long-term loan 18,036 -- --
Unfavorable lease liability 19,894 19,096 2,784
Convertible bond 1,110,308 1,113,083 162,278
Deferred tax liability, non-current 13,637 14,794 2,157
Total liabilities 2,075,054 2,017,162 294,085
Minority interest 11,087 17,006 2,479
Commitments and contingencies
Shareholders’ equity
Ordinary shares (US$0.005 par value;
177,075,114 and 200,000,000 shares
authorized, 70,487,385 and
70,867,958 shares issued and
outstanding as of December 31, 2007
and June 30, 2008, respectively) 2,874 2,887 421
Additional paid-in capital 1,362,942 1,375,686 200,564
Statutory reserves 41,333 41,334 6,026
Retained earnings 68,248 25,421 3,706
Total shareholders’ equity 1,475,397 1,445,328 210,717
Total liabilities and shareholders’
equity 3,561,538 3,479,496 507,281
Note 1: The conversion of Renminbi (RMB) into United States dollars (US$)
is based on the noon buying rate of US$1.00=RMB6.8591 on June 30,
2008 in The City of New York for cable transfers of RMB as
certified for customs purpose by Federal Reserve Bank of New York.
Home Inns & Hotels Management Inc.
Consolidated Statement of Operations Information
Jun 30, Quarter Ended
2007 March 31, 2008
RMB RMB ‘000 US$ ‘000 RMB ‘000 RMB ‘000
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
Top Star excluding
Top Star
Revenues:
Leased-and
-operated
hotels 221,801 340,422 48,548 28,184 312,238
Franchised-
and-managed
hotels 10,429 16,561 2,362 -- 16,561
Total revenues 232,230 356,983 50,910 28,184 328,799
Less: Business
tax and related
surcharges (13,781) (22,136) (3,157) (1,461) (20,675)
Net revenues 218,449 334,847 47,753 26,723 308,124
Operating costs
and expenses:
Leased-and-
operated
hotel costs -
Rents and
utilities (61,301) (135,084) (19,265) (17,432) (117,652)
Personnel
costs* (35,058) (69,161) (9,863) (5,953) (63,208)
Depreciation
and
amortization (18,388) (38,970) (5,558) (5,992) (32,978)
Consumables,
food and
beverage (18,882) (27,685) (3,948) (2,879) (24,806)
Others (21,252) (32,532) (4,639) (5,113) (27,419)
Total leased-
and-operated
hotel costs (154,881) (303,432) (43,273) (37,369) (266,063)
Sales and
marketing
expenses (4,377) (4,660) (665) (296) (4,364)
General and
administrative
expenses* (21,881) (34,579) (4,931) (3,361) (31,217)
Total operating costs
and expenses (181,139) (342,671) (48,869) (41,026) (301,645)
Income from
operations 37,310 (7,824) (1,116) (14,303) 6,479
Interest income 10,499 15,614 2,227 14 15,600
Interest expense (2,241) (10,199) (1,455) (619) (9,580)
Other non-operating
income 3,114 4,453 635 78 4,375
Foreign exchange
gain or loss, net (12,752) (50,020) (7,133) (762) (49,258)
Income before income
tax expense,
minority interests
and share of
income of
affiliated
companies 35,930 (47,976) (6,842) (15,592) (32,384)
Income tax expense (11,036) (1,363) (194) -- (1,363)
Minority interests (2,153) (951) (136) -- (951)
Net income 22,741 (50,290) (7,172) (15,592) (34,698)
Amount allocated
to participating
preference
shareholders -- -- -- -- --
Net income available
to ordinary
shareholders 22,741 (50,290) (7,172) (15,592) (34,698)
Earnings per share
- Basic 0.33 -0.71 -0.10 -0.49
- Diluted 0.32 -0.71 -0.10 -0.49
Weighted average
ordinary shares
outstanding
- Basic 67,943 70,658 70,658 70,658
- Diluted 70,875 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 -- 3
General and
administrative
expenses 4,465 4,040 576 4,040
Quarter Ended
Jun 30, 2008
RMB ‘000 US$ ‘000 RMB ‘000 RMB ‘000
(unaudited)(unaudited)(unaudited)(unaudited)
Top Star excluding
Top Star
Revenues:
Leased-and-operated
hotels 424,569 61,899 38,408 386,161
Franchised-and-managed
hotels 23,521 3,429 -- 23,521
Total revenues 448,090 65,328 38,408 409,682
Less: Business tax and
related surcharges (26,359) (3,843) (2,076) (24,283)
Net revenues 421,731 61,485 36,332 385,399
Operating costs and expenses:
Leased-and-operated hotel
costs -
Rents and utilities (149,429) (21,786) (16,504) (132,925)
Personnel costs* (82,175) (11,980) (7,522) (74,653)
Depreciation and
Amortization (43,961) (6,409) (5,532) (38,429)
Consumables, food and
beverage (31,851) (4,644) (1,860) (29,991)
Others (41,274) (6,017) (6,082) (35,192)
Total leased-and-operated
hotel costs (348,690) (50,836) (37,500) (311,190)
Sales and marketing expenses (5,454) (795) (655) (4,799)
General and administrative
expenses* (36,307) (5,293) (461) (35,846)
Total operating costs and
expenses (390,451) (56,924) (38,616) (351,835)
Income from operations 31,280 4,561 (2,284) 33,564
Interest income 5,935 865 40 5,894
Interest expense (7,435) (1,084) (88) (7,347)
Other non-operating income 1,666 243 231 1,435
Foreign exchange gain or
loss, net (13,742) (2,003) 900 (14,642)
Income before income tax
expense, minority interests
and share of income of
affiliated companies 17,704 2,582 (1,201) 18,905
Income tax expense (8,954) (1,305) -- (8,954)
Minority interests (1,287) (188) -- (1,287)
Net income 7,463 1,089 (1,201) 8,664
Amount allocated to
participating preference
shareholders -- -- -- --
Net income available to ordinary
shareholders 7,463 1,089 (1,201) 8,664
Earnings per share
- Basic 0.11 0.02 0.12
- Diluted 0.10 0.01 0.12
Weighted average ordinary shares
outstanding
- Basic 70,821 70,821 70,821
- Diluted 72,743 72,743 72,743
* 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 5,432 792 5,432
Note 1: The conversion of Renminbi (RMB) into United States dollars (US$)
is based on the noon buying rate of US$1.00=RMB6.8591 on June 30,
2008 in The City of New York for cable transfers of RMB as
certified for customs purpose by Federal Reserve Bank of New York.
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results
Quarter Ended June 30, 2008
Share-
% of based % of Non- % of
GAAP Total Compen- Total GAAP Total
Result Revenue sation Revenue Result Revenue
RMB ‘000 RMB ‘000 RMB ‘000
Leased-and-operated hotel
costs (348,690) 77.8% 3 0.0% (348,688) 77.8%
Sales and marketing
expenses (5,454) 1.2% -- 0.0% (5,454) 1.2%
General and administrative
expenses (36,307) 8.1% 5,432 1.2% (30,875) 6.9%
Total operating costs and
expenses (390,451) 87.1% 5,435 1.2% (385,017) 85.9%
Income from operations 31,280 7.0% 5,435 1.2% 36,714 8.2%
Quarter Ended June 30, 2008 (excluding Top Star)
Share-
% of based % of Non- % of
GAAP Total Compen- Total GAAP Total
Result Revenue sation Revenue Result Revenue
RMB ‘000 RMB ‘000 RMB ‘000
Leased-and-operated hotel
costs (311,190) 76.0% 3 0.0% (311,187) 76.0%
Sales and marketing
expenses (4,799) 1.2% -- 0.0% (4,799) 1.2%
General and administrative
expenses (35,846) 8.7% 5,432 1.3% (30,414) 7.4%
Total operating costs and
expenses (351,835) 85.9% 5,435 1.3% (346,400) 84.6%
Income from operations 33,564 8.2% 5,435 1.3% 38,999 9.5%
Quarter Ended June 30, 2008
Share-
% of based % of Non- % of
GAAP Total Compen- Total GAAP Total
Result Revenue sation Revenue Result Revenue
US$ ‘000 US$ ‘000 US$ ‘000
Leased-and-operated hotel
costs (50,836) 77.8% -- 0.0% (50,836) 77.8%
Sales and marketing expenses (795) 1.2% -- 0.0% (795) 1.2%
General and administrative
expenses (5,293) 8.1% 792 1.2% (4,501) 6.9%
Total operating costs and
expenses (56,924) 87.1% 792 1.2% (56,132) 85.9%
Income from operations 4,561 7.0% 792 1.2% 5,353 8.2%
Quarter Ended June 30, 2008 (excluding Top Star)
Share-
% of based % of Non- % of
GAAP Total Compen- Total GAAP Total
Result Revenue sation Revenue Result Revenue
US$ ‘000 US$ ‘000 US$ ‘000
Leased-and-operated hotel
costs (45,369) 76.0% -- 0.0% (45,369) 76.0%
Sales and marketing expenses (700) 1.2% -- 0.0% (700) 1.2%
General and administrative
expenses (5,226) 8.7% 792 1.3% (4,434) 7.4%
Total operating costs and
expenses (51,295) 85.9% 792 1.3% (50,503) 84.6%
Income from operations 4,893 8.2% 792 1.3% 5,685 9.5%
Quarter Ended March 31, 2008
Share-
% of based % of Non- % of
GAAP Total Compen- Total GAAP Total
Result Revenue sation Revenue Result Revenue
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)
Share-
% of based % of Non- % of
GAAP Total Compen- Total GAAP Total
Result Revenue sation Revenue Result Revenue
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 June 30, 2007
Share-
% of based % of Non- % of
GAAP Total Compen- Total GAAP Net
Result Revenue sation Revenue Result Revenue
RMB ‘000 RMB ‘000 RMB ‘000
Leased-and-operated hotel
costs (154,881) 66.7% 3 0.0% (154,878) 66.7%
Sales and marketing
expenses (4,377) 1.9% -- 0.0% (4,377) 1.9%
General and administrative
expenses (21,881) 9.4% 4,465 1.9% (17,415) 7.5%
Total operating costs and
expenses (181,138) 78.0% 4,468 1.9% (176,670) 76.1%
Income from operations 37,311 16.1% 4,468 1.9% 41,780 18.0%
Note 1: The conversion of Renminbi (RMB) into United States dollars (US$)
is based on the noon buying rate of US$1.00=RMB6.8591 on June 30,
2008 in The City of New York for cable transfers of RMB as
certified for customs purpose by Federal Reserve Bank of New York.
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results (continued)
Quarter Ended
June 30, March 31, 2008 June 30, 2008
2007 RMB ‘000 RMB ‘000
(excluding (excluding
RMB ‘000 RMB ‘000 Top Star) RMB ‘000 US$ ‘000 Top Star)
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
Net
income
(GAAP) 22,741 (50,290) (34,698) 7,463 1,089 8,664
Foreign
exchange
losses
(gains),
net 12,752 50,020 49,258 13,742 2,003 14,642
Share-
based
compen-
sation 4,468 4,043 4,043 5,435 792 5,435
Adjusted
net income
excluding
foreign
exchange
losses,
share-
based
compen-
sation 39,961 3,773 18,603 26,640 3,884 28,741
Quarter Ended
June 30, March 31, 2008 June 30, 2008
2007 RMB ‘000 RMB ‘000
(excluding (excluding
RMB ‘000 RMB ‘000 Top Star) RMB ‘000 US$ ‘000 Top Star)
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
Earnings
per share
(GAAP)
- Basic 0.33 -0.71 -0.49 0.11 0.02 0.12
- Diluted 0.32 -0.71 -0.49 0.10 0.01 0.12
Earnings
per share
excluding
foreign
exchange
losses,
share-
based
compen-
sation
- Basic 0.59 0.05 0.26 0.38 0.05 0.41
- Diluted 0.56 0.05 0.25 0.36 0.05 0.38
Weighted
average
ordinary
shares
outstanding
- Basic 67,943 70,658 70,658 70,821 70,821 70,821
- Diluted 70,875 72,840 78,491 78,394 78,394 78,394
Note 1: The conversion of Renminbi (RMB) into United States dollars (US$)
is based on the noon buying rate of US$1.00=RMB6.8591 on June 30,
2008 in The City of New York for cable transfers of RMB as
certified for customs purpose by Federal Reserve Bank of New York.
Home Inns & Hotels Management Inc.
Reconciliation of GAAP and Non-GAAP Results (continued)
Quarter Ended
June 30, March 31, 2008 June 30, 2008
2007 RMB ‘000 RMB ‘000
(excluding (excluding
RMB ‘000 RMB ‘000 Top Star) RMB ‘000 US$ ‘000 Top Star)
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
Net income
(GAAP) 22,741 (50,290) (34,698) 7,463 1,089 8,664
Interest
income (10,499) (15,614) (15,600) (5,935) (865) (5,894)
Interest
expenses 2,241 10,199 9,580 7,435 1,084 7,347
Income
tax
expense 11,036 1,363 1,363 8,954 1,305 8,954
Deprec-
iation
and
amortiz-
ation 18,854 40,593 34,601 45,080 6,572 39,548
EBITDA
(Non-GAAP) 44,373 (13,749) (4,754) 62,997 9,185 58,619
Foreign
exchange
losses
(gains),
net 12,752 50,020 49,258 13,742 2,003 14,642
Share-
based
compen-
sation 4,468 4,043 4,043 5,435 792 5,435
EBITDA
excluding
foreign
exchange
losses,
share-
based
compen-
sation 61,593 40,314 48,547 82,173 11,981 78,695
% of total
revenue 26.5% 11.3% 14.8% 18.3% 18.3% 19.2%
Home Inns & Hotels Management Inc.
Operating Data
As of and for the quarter ended
June 30, March 31, 2008 June 30, 2008
2007 excluding excluding
Top Top Top Top
Star Star Star Star
Total Hotels in
operation: 171 299 26 273 366 26 340
Lease-and
operated
hotels 117 220 26 194 271 26 245
Franchised-
and-managed
hotels 54 79 -- 79 95 -- 95
Total rooms 20,485 36,442 4,133 32,309 44,088 4,125 39,963
Occupancy rate (as
a percentage) 95.2% 81.4% 48.1% 86.0% 88.2% 66.8% 90.8%
Average daily rate
(in RMB) 183 172 143 174 173 142 176
RevPAR (in RMB) 174 140 69 150 153 95 160
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
June 30, 2007 June 30, 2008
Total Hotels in operation: 109 109
Lease-and-operated hotels 79 79
Franchised-and-managed hotels 30 30
Total rooms 13,194 13,194
Occupancy rate (as a percentage) 102.2% 100.3%
Average daily rate (in RMB) 189 193
RevPAR (in RMB) 192 193
