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Home Inns Reports Fourth Quarter and Full Year 2011 Financial Results

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March 9, 2012

Home Inns Reports Fourth Quarter and Full Year 2011 Financial Results

Full Year Revenue Increased 25% Year over Year to RMB 3.96 billion

A Total of 1,426 Hotels in 212 Cities in China

Integration of Motel 168 Seeing Improvement Results

SHANGHAI,?March 8, 2012?/PRNewswire-Asia/ –?Home Inns & Hotels Management Inc. (NASDAQ:?HMIN), a leading economy hotel chain in?China,?today announced its unaudited financial results for the fourth quarter and full year ended?December 31, 2011.

Fourth Quarter 2011 Financial Highlights

  • Home Inns began to consolidate Motel 168 results starting?October 1, 2011.?Integration of Motel 168 is on track.
  • Total revenues increased 64.2% year over year to?RMB 1,309.9 million?(US$208.1 million).
  • Net income attributable to Home Inns’ shareholders was?RMB 32.7 million?(US$5.2 million) which includes a net loss ofRMB 17.5 million?(US$2.8 million) from Motel 168, compared to?RMB 33.0 million?in 2010.
  • Income from operations was?RMB 33.2 million?(US$5.3 million).?Adjusted income from operations was?RMB 78.5 million(US$12.5 million), compared to?RMB 116.1 million?in the same period of 2010.?The operating cost structure of the core business remained stable and profitability remained in line after taking into account the one-time benefit of Shanghai World Expo in 2010 and higher pre-opening expenses.
  • EBITDA (non-GAAP) increased to?RMB 229.2 million?(US$36.4 million) from?RMB 132.2 million?year over year.?Excluding non-operating items and one-time charges, adjusted EBITDA (non-GAAP) was?RMB 227.4 million?(US$36.1 million), compared to?RMB 201.3 million?in 2010 which was boosted by 2010 Shanghai World Expo.
  • Diluted losses per ADS for the fourth quarter of 2011 were?RMB 0.12?(US$0.02); adjusted diluted earnings per ADS (non-GAAP) for the current quarter were?RMB 0.73?(US$0.12).

Full Year 2011 Financial Highlights

  • Total revenues increased 25.0% year over year to?RMB 3.96 billion?(US$629.1 million), including revenues of?RMB 367.6 million?(US$58.4 million) from Motel 168 brand since?October 1, 2011.
  • Net income attributable to shareholders for the year was?RMB 351.5 million?(US$55.9 million), compared to?RMB 359.5 million?in 2010 which includes one-time benefit from the Shanghai World Expo.
  • Income from operations was?RMB 297.4 million?(US$47.3 million).? Adjusted income from operations (non-GAAP) wasRMB 457.3 million?(US$72.7 million), compared with?RMB 583.7 million?in 2010.
  • EBITDA (non-GAAP) for the full year increased to?RMB 949.0 million?(US$150.8 million) from 812.0 million in 2010. ?Excluding non-operating items and non-recurring charges, adjusted EBITDA (non-GAAP) was?RMB 900.2 million(US$143.0 million), compared to?RMB 918.8 million?in 2010.
  • Diluted earnings per ADS for the full year were?RMB 2.51?(US$0.40); adjusted diluted earnings per ADS (non-GAAP) for the full year were?RMB 6.92?(US$1.10).

“In 2011, Home Inns accomplished several important milestones. ?Not only did we build a portfolio of over 1,000 hotels by 2011, a goal we set 5 years ago, we exceeded our target of new hotel openings for the year with 306 new hotels, we launched and expanded our mid-scale Yitel brand, we furthered our multi-brand strategy and acquired Motel 168,” said Mr.?David Sun, Home Inns’ Chief Executive Officer. “Across a total of 1,426 hotels across 212 cities in?China, we delivered solid operating performance with consistent year-over-year revenue growth and maintained strong profitability even when the macroeconomic environment softened in the latter part of the year.”

Mr. Sun continued, “As we move into our tenth year of operation, we will continue to concentrate on growing a healthy portfolio and developing our multi-brand strategy.? The integration of Motel 168 is on track, and we are already seeing operational improvements. We are confident that Motel 168 will contribute significantly to the long-term performance of the company.? In 2012 we plan to open 330 to 360 new hotels spread across our three brands, while at the same time implementing initiatives to improve productivity and efficiency across our network of hotels. Overall, we are pleased with the evolution of the business and believe our clearly-defined growth strategy, proven execution and sound investments well position Home Inns to capture the growth opportunities in the Chinese travel industry in 2012 and beyond.”

Operational Highlights

  • During the fourth quarter of 2011, Home Inns opened 125 new hotels, including 54 new leased-and-operated hotels (including one new Yitel hotel) and 71 new franchised-and-managed hotels (including one new Yitel hotel and 10 Motel 168 hotels). ?Home Inns opened 306 new hotels under Home Inn and Yitel brands during 2011, adding 105 new leased-and-operated hotels and 201 new franchised-and-managed hotels.? Home Inns opened 10 new franchised-and-managed hotels under Motel 168 brand since?October 1, 2011.
  • As of?December 31, 2011, Home Inns operated across 212 cities in?China?with a total of 1,426 hotels, of which 698 were leased-and-operated hotels (including three Yitel Hotels and 144 Motel 168 hotels) and 728 were franchised-and-managed hotels (including one Yitel hotel and 163 Motel 168 hotels).?The average number of guest rooms per hotel was 124.
  • Home Inns is pleased with feedback from customers regarding the Yitel product and services, and will continue to refine, develop and expand the Yitel brand; Mr.?Winston Wong, a 20-year consumer industry veteran, joined Home Inns as a Senior Vice President in?February 2012, and will become the General Manager of Yitel Division in mid March to oversee Yitel brand’s increasing development and operational activities. Ms.?May Wu, the Chief Strategy Officer and current Yitel CEO will relinquish her daily responsibilities on Yitel at that time and remain as the Chief Strategy Officer to focus on the Company’s overall business planning and strategic initiatives, including continued involvement in Yitel’s development and expansion.
  • In addition, Home Inns had another 198 hotels contracted or under construction as of?December 31, 2011, of which, 55 were leased-and-operated hotels (including three hotels under Motel 168 brand) and 143 were franchised-and-managed hotels (including 25 hotels under Motel 168 brand).
  • As of?December 31, 2011, Home Inn brand had 5.1 million active non-corporate members, representing a 41% increase from 3.6 million as of?December 31, 2010. As of?December 31, 2011, Motel 168 brand had 2.5 million active non-corporate members.
  • The occupancy rate for all hotels in operation was 84.2% in the fourth quarter of 2011.?Excluding Motel 168, the occupancy rate was 88.4%, compared with 90.4% in the same period in 2010 and 94.1% in the third quarter of 2011.?The decrease in occupancy rate year over year was due to a slower economic growth as compared with the same period in 2010. The decrease in occupancy rate sequentially was primarily due to seasonality.?Occupancy for the full year 2011 was 88.8%, which included Motel 168 since?October 1, 2011.?Excluding Motel 168, occupancy for the full year 2011 was 90.3%, a decrease from 93.5% in 2010 mainly due to absence of the one-time benefit of the Shanghai World Expo in 2010 and weaker market conditions in the fourth quarter of 2011.
  • RevPAR, defined as revenue per available room, was?RMB 141?in the fourth quarter of 2011.?Excluding Motel 168, RevPAR was?RMB 153, compared with?RMB 156?in the same period in 2010 and?RMB 169?in the third quarter of 2011.?The year-over-year RevPAR decrease was attributed to a lower occupancy rate impacted by macro-economy conditions during the quarter.? The sequential decrease in RevPAR was primarily due to seasonality.?RevPAR for the full year 2011 was?RMB 152, which included Motel 168 since?October 1, 2011.?Excluding Motel 168, RevPAR for the full year 2011 was?RMB 156, compared with?RMB 164?in 2010, which benefited from the Shanghai World Expo.
  • Excluding Motel 168, RevPAR for Home Inns’ hotels that had been in operation for at least 18 months was?RMB 163?for the fourth quarter of 2011, compared to?RMB 162?for the same group of hotels in the fourth quarter of 2010.?Excluding Motel 168, RevPAR for Home Inns’ hotels located outside of?Shanghai?that had been in operation for at least 18 months during the fourth quarter of 2011 was?RMB 162?compared to?RMB 157?for the same group of hotels in the fourth quarter of 2010.?The RevPAR growth at mature hotels was attributed to a higher average daily rate.

Fourth Quarter and Full Year 2011 Financial Results

Home Inns’ total revenues for the fourth quarter of 2011 increased ?64.2% year over year to?RMB 1.31 billion?(US$208.1 million), including revenues from Motel 168 of?RMB 367.6 million?(US$58.4 million).? Excluding Motel 168, total revenues for the fourth quarter of 2011 were?RMB 942.3 million?(US$149.7 million), an increase of 18.1% year over year.

For the full year 2011, total revenues increased 25.0% year over year to?RMB 3.96 billion?(US$629.1 million), including revenues from Motel 168 of?RMB 367.6 million?(US$58.4 million).? Excluding Motel 168, total revenues for the full year 2011 were?RMB 3.59 billion?(US$570.7 million), an increase of 13.4% year over year.

  • Total revenues from leased-and-operated hotels for the fourth quarter of 2011 were?RMB 1.18 billion?(US$187.7 million), representing a 62.9% increase year over year and a 33.9% increase sequentially. ?Excluding Motel 168, total revenues from leased-and-operated hotels for the fourth quarter of 2011 were?RMB 829.8 million?(US$131.8 million), an increase of 14.5% year over year and a decrease of 5.9% sequentially.? Excluding Motel 168, the year-over-year increases were mainly driven by a greater number of hotels in operation and better RevPAR at mature hotels, while the sequential decrease was mainly due to seasonality.
  • For the full year 2011, total revenues from leased-and-operated hotels were?RMB 3.56 billion?(US$565.6 million), representing a 22.3% increase year over year. ?Excluding Motel 168, total revenues from leased-and-operated hotels for the full year were?RMB 3.21 billion?(US$509.8 million), an increase of 10.2% year over year.? Home Inns opened 105 new leased-and-operated hotels under Home Inn and Yitel brands during the year.
  • Total revenues from franchised-and-managed hotels for the fourth quarter of 2011 were?RMB 128.7 million?(US$20.5 million), representing a 76.3% increase year over year and a 21.5% increase sequentially. ?Excluding Motel 168, total revenues from franchised-and-managed hotels for the fourth quarter of 2011 were?RMB 112.5 million?(US$17.9 million), an increase of 54.0% year over year and an increase of 6.2% sequentially.? Excluding Motel 168, the year-over-year and sequential increases in revenues from franchised-and-managed hotels for the current quarter were mainly driven by a larger number of such hotels in operation.
  • For the full year 2011, total revenues from franchised-and-managed hotels were?RMB 400.0 million?(US$63.6 million), representing a 55.8% increase year over year driven by a greater number of such hotels in operations. ?Motel 168 had 163 franchised-and-managed hotels as of?December 31, 2011.? Excluding Motel 168, total revenues from franchised-and-managed hotels for the full year were?RMB 383.7 million?(US$61.0 million), an increase of 49.4% year over year.? Home Inns opened 201 new franchised-and-managed hotels under Home Inn and Yitel brands during the year 2011 and opened 10 new franchised-and-managed hotels under Motel 168 brand during the fourth quarter of 2011.

Total operating costs and expenses for the fourth quarter of 2011 were?RMB 1.20 billion?(US$189.9 million).?Total operating costs and expenses excluding share-based compensation expenses, acquisition expenses and integration cost (non-GAAP) for the current quarter increased from?RMB 633.2 million?in the same quarter a year ago to?RMB 1.15 billion?(US$182.7 million), representing 87.8% of total revenues, compared with 79.4% for the same quarter a year ago and 77.6% for the previous quarter of 2011.

Excluding Motel 168, total operating costs and expenses for the fourth quarter of 2011 were?RMB 818.7 million?(US$130.1 million).? Excluding Motel 168, operating costs and expenses excluding share-based compensation expenses and acquisition expenses (non-GAAP) for the current quarter was?RMB 793.0 million?(US$126.0 million), representing 84.2% of total revenues. ?Excluding these items, the increase in total operating costs and expenses over total revenues was mainly driven by the absence of one-time benefit of Shanghai World Expo in 2010 and higher pre-opening costs and higher mix of new hotels in their ramp up stage where revenue lags behind costs.

For the full year 2011, total operating costs and expenses were?RMB 3.41 billion?(US$542.3 million). Total operating costs and expenses excluding share-based compensation expenses, acquisition expenses and integration cost (non-GAAP) were?RMB 3.25 billion?(US$516.9 million) or 82.2% of total revenues for 2011, compared with?RMB 2.39 billion?or 75.5% of total revenues for 2010.? Excluding these items, the increase in total operating costs and expenses over total revenues was mainly driven by the absence of Shanghai World Expo impact and an accelerated development plan which drove higher pre-opening costs and greater dilutive impact from hotels in their ramp up stages.

Excluding Motel 168, total operating costs and expenses for the full year 2011 were?RMB 3.04 billion?(US$482.4 million).? Excluding Motel 168, operating costs and expenses excluding share-based compensation expenses and acquisition expenses (non-GAAP) for the full year increased by 21.1% to?RMB 2.90 billion?(US$460.1 million), representing 80.6% of total revenues.

  • Total leased-and-operated hotel costs for the fourth quarter of 2011 were?RMB 1.07 billion?(US$169.5 million), representing 90.3% of the leased-and-operated hotel revenues. ?Excluding Motel 168, total leased-and-operated hotel costs for the fourth quarter of 2011 were?RMB 709.8 million?(US$112.8 million), representing 85.5% of the leased-and-operated hotel revenues.? This compared to 79.7% for the same quarter in 2010 and 76.5% for the previous quarter of 2011. ?Excluding Motel 168, the year-over-year increase in leased-and-operated hotel costs as a percentage of leased-and-operated hotel revenues was mainly due to the absence of one-time benefit from the Shanghai World Expo in 2010, a slower growth of the market and a higher pre-opening costs of?RMB 29.9 million?for hotels under construction.? The sequential increase was driven by seasonality.
  • For the full year 2011, total leased-and-operated hotel costs were?RMB 2.96 billion?(US$470.4 million). Leased-and-operated hotel costs as a percentage of leased-and-operated hotel revenues were 83.2%.? Excluding Motel 168, total leased-and-operated hotel costs were?RMB 2.60 billion?(US$413.7 million), representing 81.2% of the leased-and-operated hotel revenues, compared to 74.7% in 2010.? Excluding Motel 168, the increase in leased-and-operated hotel costs as a percentage of leased-and-operated hotel revenues was mainly due to the absence of one-time benefit from the Shanghai World Expo in 2010, dilutive impact from Motel 168 operating at a lower margin than Home Inns core business and a higher pre-opening costs of?RMB 102.3 million?for hotels under construction.
  • Personnel costs of franchised-and-managed hotels for the fourth quarter of 2011 were?RMB 20.1 million?(US$3.2 million), including share-based compensation expenses of?RMB1.7 million?(US$0.3 million), representing 15.6% of franchised-and-managed hotel revenues.? This compared to 16.5% for the same quarter in 2010 and 23.9% for the previous quarter of 2011.? Excluding Motel 168, personnel costs of franchised-and-managed hotels for the fourth quarter of 2011 wereRMB 17.7 million?(US$2.8 million) including share-based compensation expenses of?RMB1.7 million?(US$0.3 million), representing 15.8% of franchised-and-managed hotel revenues.
  • For the full year 2011, personnel costs of franchised-and-managed hotels were?RMB 72.0 million?(US$11.4 million), including share-based compensation expenses of?RMB 3.4 million?(US$0.5 million), representing 18.0% of franchised-and-managed hotel revenues.? This compared to 17.2% for the full year 2010.? Excluding Motel 168, personnel costs of franchised-and-managed hotels were?RMB 69.7 million?(US$11.1 million), including share-based compensation expenses of?RMB 3.4 million?(US$0.5 million), representing 18.2% of franchised-and-managed hotel revenues.
  • Sales and marketing expenses for the fourth quarter of 2011 were?RMB 19.6 million?(US$3.1 million), representing 1.5% of total revenues, compared to?RMB 7.3 million?or 0.9% of total revenues in the same period of 2010.? The increase in sales and marketing expenses as percentage of total revenues year over year was mainly due to a higher spending to enhance Home Inns’ on-line presence during the quarter.? Excluding Motel 168, sales and marketing expenses for the fourth quarter of 2011 were?RMB 16.0 million?(US$2.5 million), representing 1.7% of total revenues.? For the full year 2011, sales and marketing expenses were?RMB 44.5 million?(US$7.1 million), representing 1.1% of total revenues, compared with?RMB 33.3 million?or 1.1% of total revenues in 2010.? Excluding Motel 168, sales and marketing expenses for the full year 2011 were?RMB 40.9 million?(US$6.5 million), representing 1.1% of total revenues.? Prior to the second quarter of 2011, Home Inns did not apply any estimated redemption rate for accrual of estimated reward costs due to limited history in its customer rewards program.? Starting?April 2011, Home Inns began to apply an estimated redemption rate based on accumulated knowledge of redemption and expiration of the reward points.
  • General and administrative expenses for the fourth quarter of 2011 were?RMB 89.1 million?(US$14.2 million) which include share-based compensation expenses of?RMB 15.8 million?(US$2.5 million), acquisition expenses of?RMB 6.3 million?(US$1.0 million) and integration cost of?RMB 4.9 million?(US$0.8 million). ?General and administrative expenses excluding share-based compensation expenses, acquisition expenses and integration cost (non-GAAP) were?RMB 62.1 million?(US$9.9 million), or 4.7% of the total revenues, compared with 4.6% of the total revenues in the same period of 2010 and 5.5% in the previous quarter of 2011.? Excluding Motel 168, general and administrative expenses for the fourth quarter of 2011 were?RMB 75.2 million?(US$12.0 million) which include share-based compensation expenses of?RMB 15.8 million?(US$2.5 million) and acquisition expenses of?RMB 6.3 million?(US$1.0 million).
  • General and administrative expenses for the full year were?RMB 335.9 million?(US$53.4 million). General and administrative expenses excluding share-based compensation, acquisition expenses and integration cost (non-GAAP) were?RMB 198.0 million?(US$31.5 million) or 5.0% of total revenues, compared with 4.4% in 2010. ?Excluding Motel 168, general and administrative expenses for the full year 2011 were?RMB 322.0 million?(US$51.2 million) which include share-based compensation expenses of?RMB 69.3 million?(US$11.0 million) and acquisition expenses of?RMB 63.8 million?(US$10.1 million).

The above resulted in an income from operations for the fourth quarter of 2011 of?RMB 33.2 million?(US$5.3 million). ?Income from operations excluding share-based compensation expenses, acquisition expenses and integration cost (non-GAAP) for the fourth quarter of 2011 was?RMB 78.5 million?(US$12.5 million), or 6.0% of total revenues.? Excluding Motel 168, income from operations for the fourth quarter of 2011 was?RMB 63.5 million?(US$10.1 million).? Excluding Motel 168, income from operations excluding share-based compensation expenses and acquisition expenses (non-GAAP) for the fourth quarter of 2011 was?RMB 89.3 million?(US$14.2 million), or 9.5% of total revenues, compared to?RMB 116.1 million?or 14.5% of total revenues in the same period of 2010 and?RMB 160.0 million?or 16.2% of total revenues in the previous quarter of 2011.? The main reasons for the year-over-year decrease in income from operations were less revenue generation due to market condition in the fourth quarter of the year, higher pre-opening costs and the absence of the one-time benefit from the Shanghai World Expo in 2010.? The sequential decrease in income from operations was mainly due to seasonality.

For the full year 2011, income from operations was?RMB 297.4 million?(US$47.3 million). ?Income from operations excluding share-based compensation, acquisition expenses and integration cost (non-GAAP) for the full year was?RMB 457.3 million(US$72.7 million), or 11.5% of total revenues.? Excluding Motel 168, income from operations for the full year 2011 was?RMB 327.7 million?(US$52.1 million).? Excluding Motel 168, income from operations excluding share-based compensation expenses and acquisition expenses (non-GAAP) for the full year was?RMB 468.1 million?(US$74.4 million), or 13.0% of total revenues, compared with?RMB 583.7 million, or 18.4% for the previous year.? This margin decline was primarily due to the absence of one-time benefit from the Shanghai World Expo in 2010 and higher pre-opening costs driven by accelerated growth while the overall cost structure of the business remained stable.

EBITDA (non-GAAP) for the fourth quarter of 2011 was?RMB 229.2 million?(US$36.4 million). ?Excluding any share-based compensation expenses, foreign exchange gain, gain on fair value change of convertible notes, acquisition expenses, integration cost and non-operating expenses, adjusted EBITDA (non-GAAP) was?RMB 227.4 million?(US$36.1 million), or 17.4% of total revenues.? Excluding Motel 168, EBITDA (non-GAAP) for the fourth quarter of 2011 was?RMB 208.6 million(US$33.1 million). ?Excluding Motel 168, adjusted EBITDA (non-GAAP) excluding any share-based compensation expenses, foreign exchange gain, gain on fair value change of convertible notes, acquisition expenses and non-operating expenses, wasRMB 187.8 million?(US$29.8 million), or 19.9% of total revenues, compared to?RMB 201.3 million?or 25.2% of total revenue in the same period in 2010.

For the full year 2011, EBITDA (non-GAAP) was?RMB 949.0 million?(US$150.8 million). ?Excluding any share-based compensation expenses, foreign exchange gain, gain on buy-back of convertible bond, gain on fair value change of convertible bond, acquisition expenses, integration cost and non-operating expenses, adjusted EBITDA (non-GAAP) was?RMB 900.2 million?(US$143.0 million), or 22.7% of total revenues. ?Excluding Motel 168, EBITDA (non-GAAP) for the full year was?RMB 928.3 million?(US$147.5 million).? Excluding Motel 168, adjusted EBITDA (non-GAAP) excluding any share-based compensation expenses, foreign exchange gain, gain on buy-back of convertible bond, gain on fair value change of convertible notes, acquisition expenses and non-operating expenses, was?RMB 860.6 million?(US$136.7 million), or 24.0% of total revenues, compared to?RMB 918.8 million?or 29.0% of total revenues in the full year 2010.? The decrease in percentage of adjusted EBITDA (non-GAAP) over total revenues year over year was mainly due to the absence of the one-time benefit from Shanghai World Expo in 2010, and an accelerated hotel development in 2011 as discussed above.

Net income attributable to Home Inns’ shareholders for the fourth quarter of 2011 was?RMB 32.7 million?(US$5.2 million).? Adjusted net income attributable to Home Inns’ shareholders (non-GAAP), which excludes any share-based compensation expenses, foreign exchange gain, gain on fair value change of convertible notes, acquisition expenses, integration cost, non-operating expenses and upfront fee amortization of term loan, was?RMB 36.6 million?(US$5.8 million) for the fourth quarter of 2011.? Excluding Motel 168, net income attributable to Home Inns’ shareholders for the fourth quarter of 2011 was?RMB 50.2 million?(US$8.0 million).? Excluding Motel 168, adjusted net income attributable to Home Inns’ shareholders (non-GAAP) excluding any share-based compensation expenses, foreign exchange gain, gain on fair value change of convertible notes, acquisition expenses, non-operating expenses and amortization of upfront fee of the term loan borrowing, was?RMB 35.2 million?(US$5.6 million), compared to that of?RMB 102.2 million?from the same period in 2010 and?RMB 132.0 million?for the previous quarter of 2011.

For the full year 2011, net income attributable to Home Inns’ shareholders was?RMB 351.5 million?(US$55.9 million). ?Adjusted net income (non-GAAP), which excludes any share-based compensation expenses, foreign exchange gain, gain on buy-back of convertible bond, acquisition expenses, integration cost, gain on fair value change of convertible bond, withholding tax for profit distribution of previous periods, non-operating expenses and upfront fee amortization of term loan, was?RMB 326.1 million(US$51.8 million) for 2011, a decrease of 30.1% from the previous year.? Excluding Motel 168, net income attributable to Home Inns’ shareholders for the full year was?RMB 369.0 million?(US$58.6 million).? Excluding Motel 168, adjusted net income (non-GAAP), which excludes any share-based compensation expenses, foreign exchange gain, gain on buy-back of convertible bond, acquisition expenses, gain on fair value change of convertible bond, withholding tax for profit distribution of previous periods, non-operating expenses and amortization of upfront fees of the term loan borrowing, was?RMB 324.6 million?(US$51.6 million), a decrease of 30.4% from the previous year.

Basic earnings per share for the fourth quarter of 2011 were?RMB 0.36?(US$0.06), while diluted losses per share were?RMB 0.06?(US$0.01).? Basic earnings per ADS were?RMB 0.72?(US$0.11), while diluted losses per ADS were?RMB 0.12?(US$0.02). ?Excluding any share-based compensation expenses, foreign exchange gain, gain on fair value change of convertible notes, acquisition expenses, integration cost and non-operating expenses, adjusted basic earnings per share (non-GAAP) were?RMB 0.40?(US$0.06), while adjusted diluted earnings per share (non-GAAP) were?RMB 0.37?(US$0.06). ?Adjusted basic earnings per ADS (non-GAAP) were?RMB 0.81?(US$0.13)?while adjusted diluted earnings per ADS (non-GAAP) were?RMB 0.73?(US$0.12).

Excluding Motel 168, adjusted basic and diluted basic earnings per share (non-GAAP) for the fourth quarter of 2011, which excludes any share-based compensation expenses, foreign exchange gain, gain on fair value change of convertible notes, acquisition expenses and non-operating expenses, were?RMB 0.39?(US$0.06)?and?RMB 0.35?(US$0.06)?respectively, and adjusted basic and diluted earnings per ADS (non-GAAP) were?RMB 0.78?(US$0.12)?and?RMB 0.71?(US$0.11), respectively.

For the full year 2011, basic and diluted earnings per share amounted to?RMB 4.17?(US$0.66)?and?RMB 1.26?(US$0.20), respectively, and basic and diluted earnings per ADS were?RMB 8.35?(US$1.33)?and?RMB 2.51?(US$0.40), respectively. ?Excluding any share-based compensation expenses, foreign exchange gain, gain on buy-back of convertible bond, acquisition expenses, integration cost, gain on fair value change of convertible bond, withholding tax for profit distribution of previous periods and non-operating expenses, adjusted basic and diluted earnings per share (non-GAAP) were?RMB 3.87?(US$0.62)and?RMB 3.46?(US$0.55), respectively, and adjusted basic and diluted earnings per ADS (non-GAAP) were?RMB 7.74?(US$ 1.23)?and?RMB 6.92?(US$1.10), respectively.

Excluding Motel 168, adjusted basic and diluted earnings per share (non-GAAP) for the full year 2011, which excludes any share-based compensation expenses, foreign exchange gain, gain on buy-back of convertible bond, acquisition expenses, gain on fair value change of convertible bond, withholding tax for profit distribution of previous periods and non-operating expenses, were?RMB 3.85?(US$0.61)?and?RMB 3.44?(US$0.55)?respectively, and adjusted basic and diluted earnings per ADS (non-GAAP) were?RMB 7.71?(US$1.22)?and?RMB 6.89?(US$1.09), respectively.

Net operating cash flow for the fourth quarter of 2011 was?RMB 211.8 million?(US$33.7 million), compared to?RMB 209.7 millionfrom the fourth quarter of 2010. ?Capitalized expenditures for the fourth quarter of 2011 were?RMB 238.1 million?(US$37.8 million), while related cash paid for capital expenditures during the quarter was?RMB 244.0 million?(US$38.9 million).

For the full year 2011, net operating cash flow was?RMB 798.5 million?(US$126.9 million). Capitalized expenditures for the full year of 2011 were?RMB 909.1 million?(US$144.4 million), while related cash paid for capital expenditures during the year wasRMB 739.9 million?(US$117.6 million).

As of?December 31, 2011, Home Inns had cash and cash equivalents of?RMB 1.79 billion?(US$283.8 million).? The outstanding balance of its convertible bonds (issued in 2007) was?RMB 113.1 million?(US$18.0 million) including principal and accrued interest.? Outstanding balance of long-term financial liability (measured at fair value) arose from the convertible notes issued inDecember 2010?was?RMB 971.7 million?(US$154.4 million).? The balance of its short-term and long-term loans together wasRMB 1.51 billion?(US$240.3 million).

In connection with the acquisition of Motel 168, Home Inns entered into a?US$240.0 million?US dollar denominated, 4-year term loan facility agreement in 2011.? After-tax profits from Home Inns’ subsidiaries in?China?will be distributed to its overseas holding company borrower in order to service the debt. ?Home Inns has recognized the relevant deferred tax liability of?RMB 38.3 million?(US$ 6.1 million) as of?December 31, 2011?in connection with cumulative distributable earnings since 2008 using a 5% dividend withholding tax rate provided as a preferential rate by the tax arrangement between PRC and Hong Kong.? Home Inns assessed that it will probably get approval on this preferential dividend tax rate of 5%. ?In case this preferential rate is not approved, a 10% dividend withholding tax rate will be applied.

This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of?RMB6.2939to?US$1.00, the noon buying rate for?December 31, 2011?set forth in the H.10 statistical release of the Federal Reserve Board.

Because of the dilutive impact, net income for diluted earnings per ADS calculation is adjusted to exclude interest expenses of convertible bonds issued in?December 2007?and convertible notes issued in 2010, foreign exchange gains from convertible notes, gain on fair value change of convertible notes and gain on buy-back of convertible bonds.? Adjusted diluted earnings per ADS (non-GAAP) exclude foreign exchange gain, share-based compensation expenses, merger and acquisition expenses, integration cost, gain on change in fair value of convertible notes, gain on buy-back of convertible bond and withholding tax for distributable earnings from previous periods since 2008 to 2010. ?Please refer to “Reconciliations of GAAP and Non-GAAP Results” at the end of this press release.

Outlook for First Quarter and Full Year 2012

Home Inns expects to open 330 to 360 new hotels in 2012, including approximately 105-125 leased-and-operated hotels (including three to five Motel 168 hotels) and 225-235 franchised-and-managed hotels (including 27 to 35 Motel 168 hotels).

Home Inns expects total revenues for the group for 2012 to be in the range of?RMB 5,815 million?(US$923.9 million) to RMB 5,910 million?(US$939.0 million), representing a growth of 46.9% to 49.3% over 2011.? Total revenues for the group in the first quarter of 2012 are expected to be in the range of?RMB 1,210 million?(US$192.2 million) to RMB 1,240 million?(US$197.0 million).

Total revenues for Motel 168 brand for 2012 are expected to be in the range of?RMB 1,575 million?(US$250.2 million) to 1,600 million?(US$254.2 million).? Total revenues for Motel 168 brand in the first quarter of 2012 are expected to be in the range ofRMB 320 million?(US$50.8 million) to RMB 330 million?(US$52.4 million).

Excluding Motel 168, total revenues for 2012 are expected to be in the range of?RMB 4,240 million?(US$673.7 million) to RMB 4,310 million?(US$684.8 million).? Excluding Motel 168, total revenues in the first quarter of 2012 are expected to be in the range of?RMB 890 million?(US$141.4 million) to RMB 910 million?(144.6 million).

This forecast reflects Home Inns’ current and preliminary view, which is subject to change.

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