7 Days Group Holdings LTD

CIK:0001434220|SEC Filings

EARNINGS PER SHARE

12 Months Ended

Dec. 31, 2012

13	EARNINGS PER SHARE

	Year ended December 31,
	2010		2011		2012		2012
	RMB		RMB		RMB		US$

Numerator:
Net income attributable to 7 Days Group Holdings Limited ordinary shareholders		117,691		128,886		176,045		28,257

Denominator:
Weighted average number of ordinary shares		149,169,106		149,811,784		148,602,762		148,602,762
Plus dilutive effect of outstanding share options		1,164,647		1,661,282		542,624		542,624
Weighted average number of ordinary shares		150,333,753		151,473,066		149,145,386		149,145,386

Basic earnings per ordinary share		0.79		0.86		1.18		0.19

Diluted earnings per ordinary share		0.78		0.85		1.18		0.19

During the years ended December 31, 2010, 2011 and 2012, the Company's dilutive potential ordinary shares outstanding consisted of share options. The computation of diluted earnings per share for years ended December 31, 2010, 2011 and 2012 was based on net income attributable to ordinary shareholders of RMB117,691, RMB128,886 and RMB176,045 and included the potential dilutive effect of 2,566,411, 7,331,267 and 2,251,938 ordinary shares issuable upon exercise of employee share options by applying treasury stock method respectively. The Company excluded 3,667,760, nil and 5,511,651 ordinary shares issuable upon exercise of employee share option in the calculation of diluted earnings per share for the years ended December 31, 2010, 2011 and 2012, respectively, as their effect would be anti-dilutive.

CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands, unless otherwise specified

12 Months Ended

Dec. 31, 2012

USD ($)

Dec. 31, 2012

CNY

Dec. 31, 2011

USD ($)

Dec. 31, 2011

CNY

Dec. 31, 2010

USD ($)

Dec. 31, 2010

CNY

Cash flows from operating activities:

Net income

$ 25,550

159,178

113,983

119,248

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

51,927

323,508

245,415

180,763

Land use right expense

618

Loss on disposal of property and equipment

111

691

13,781

7,549

Impairment losses of property and equipment

1,846

11,500

13,060

5,471

Write-off of leasehold improvements

1,916

3,898

Deferred income tax benefit

(3,184)

(19,835)

(25,421)

(12,459)

Share-based compensation expense

4,354

27,127

43,483

15,517

Equity in loss (income) of an affiliate

(120)

Provisions for doubtful accounts

5,700

Unrealized gain on foreign exchange

(12)

(77)

(13,214)

(6,373)

Changes in operating assets and liabilities, net of effect of acquisitions:

Pledged bank deposits

2,634

16,409

(15,134)

682

Accounts receivable

(1,466)

(9,134)

(965)

(2,248)

Prepaid rent

(3,719)

(23,170)

(74,129)

(85,643)

Other prepaid expenses and current assets

(3,420)

(21,306)

(11,877)

(14,589)

Hotel supplies

(1,480)

(9,220)

(5,915)

(14,470)

Rental deposits

(2,962)

(18,455)

(16,143)

(15,421)

Accounts payable

2,086

12,995

4,592

24,702

Bills payable

(1,291)

(8,040)

7,562

(6,342)

Accrued expenses and other payables

9,684

60,334

105,415

85,460

Amounts due to related parties

364

2,268

333

(162)

Income taxes payable

(517)

(3,219)

12,550

13,638

Accrued lease payments

8,560

53,331

55,044

38,929

Refundable deposits

(156)

(973)

(2,127)

(6,300)

Deferred revenue

3,034

18,904

(1,174)

(3,102)

Deferred rebate income

(150)

(936)

217

6,446

Net cash provided by operating activities

91,892

572,498

457,450

335,263

Cash flows from investing activities:

Purchases of property and equipment

(87,675)

(546,222)

(566,811)

(425,639)

Purchases of land use rights

(24,713)

Payment for acquisitions of subsidiaries, net of cash acquired

(121,306)

Proceeds from disposal of property and equipment

12,120

Advances made to an affiliate

(51)

(770)

Collection of advances made to an affiliate

1,398

523

Advances made to related parties

^[1]

447

^[1]

1,242

^[1]

Collection of advances made to related parties

^[1]

(447)

^[1]

(1,242)

^[1]

Purchase of short-term investment

(10,000)

Proceeds from redemption of short-term investment

1,605

10,000

293,613

Net cash used in investing activities

(86,070)

(536,222)

(684,650)

(156,986)

Cash flows from financing activities:

Issuance costs of ordinary shares upon IPO

(881)

(17,291)

Proceeds from exercise of employee share options

593

3,696

5,667

3,918

Payment for purchase of ordinary shares

(10,716)

(66,759)

Proceeds from bank loans

52,438

326,691

362,686

Repayment of bank loans

(65,806)

(409,981)

(28,000)

(110,000)

Proceeds from borrowings from related parties

^[2]

3,222

^[2]

Repayment of borrowings from related parties

(102)

(636)

(2,891)

(2,176)

Acquisition of noncontrolling interest

(96)

(600)

(1,677)

(172)

Capital contributions to subsidiaries and VIEs from noncontrolling interest shareholders

113

708

2,200

2,326

Dividends paid by subsidiaries to noncontrolling interests shareholders

(460)

(2,867)

(3,347)

(2,005)

Net cash provided by (used in) financing activities

(24,036)

(149,748)

333,757

(122,178)

Effect of foreign currency exchange rate changes on cash

(156)

(975)

(2,096)

(8,674)

Net increase (decrease) in cash

(18,370)

(114,447)

104,461

47,425

Cash at beginning of year

79,173

493,256

388,795

341,370

Cash at end of year

60,803

378,809

79,173

493,256

388,795

Supplemental disclosures of cash flows information:

Interest paid, net of capitalized interest

3,553

22,137

6,006

1,842

Income taxes paid

14,542

90,594

49,130

34,654

Non-cash investing and financing activities:

Accounts payable for purchases of property and equipment at end of year

43,478

270,872

175,542

177,545

Bills payable for purchases of property and equipment at end of year

$ 563

3,506

3,245

[1]

During 2010 and 2011, the Group paid salary on behalf of Guangzhou Haoai Information Technology Co.,Ltd, ("Haoai"), a subsidiary of Guangzhou Chujian Culture Media Co., Ltd. ("Chujian",formerly named Guangzhou Dian Xing Culture Communication Co.,Ltd) which is controlled by Zheng Nanyan. All the payments made on behalf of Chujian were repaid in full in the current year. As of December 31, 2012, no advance was made to related parties.

[2]

Borrowings from related parties in 2010 consisted of debt borrowed from the noncontrolling interest shareholders of the Group's subsidiaries by the respective subsidiaries. Details of the noncontrolling interest shareholders for such borrowings are listed out below: Beijing Impression Hotel Management Co., Ltd. is the 30% noncontrolling interest shareholder of one of the Group's subsidiaries, Beijing 7 Days Impression Hotel Management Co., Ltd. Zhuang Qineng and Zhuang Shishi are the noncontrolling interest shareholders of one of the Group's subsidiaries, Shenzhen 7 Days Baoda. As of December 31, 2010, 2011 and 2012, Zhuang Qineng and Zhuang Shishi, in aggregate, owned 35% of the equity interest in Shenzhen 7 Days Baoda. Qise Tiandi (Beijing) Consulting Co., Ltd. is the 30% noncontrolling interest shareholder of one of the Group's subsidiaries, Beijing Four Seasons Hotel Management Co., Ltd. Zhang Shuhong is the 35% noncontrolling interest shareholder of one of the Group's subsidiaries, Ningbo Yiju Business Hotel Management Co., Ltd. Meng Huifen is the 20% noncontrolling interest shareholder of one of the Group's subsidiaries, Chengdu Four Seasons 7 Days Hotel Management Co., Ltd. The Group repaid RMB636 of the borrowings from related parties during 2012. As of December 31, 2012, the balance represents debt borrowed from Meng Huifeng of RMB752 (US$121). It is unsecured and interest free and it is not expected to be repaid within 12 months.

CONSOLIDATED BALANCE SHEETS In Thousands, unless otherwise specified	Dec. 31, 2012 USD ($)	Dec. 31, 2012 CNY	Dec. 31, 2011 USD ($)	Dec. 31, 2011 CNY
Current assets:
Cash (includes cash of VIEs of RMB12,734 and RMB3,416(US$548) as of December 31, 2011 and 2012, respectively)	$ 60,803	378,809	$ 79,173	493,256
Pledged bank deposits	553	3,443		19,852
Accounts receivable (includes accounts receivable of VIEs of RMB950 and RMB951(US$153) as of December 31, 2011 and 2012, respectively)	2,731	17,015		7,881
Short-term investment				10,000
Prepaid rent	27,507	171,370		152,629
Other prepaid expenses and current assets (includes other prepaid expenses and current assets of VIEs of RMB18,290 and RMB11,448(US$1,838) as of December 31, 2011 and 2012, respectively)	12,471	77,695		52,550
Hotel supplies (includes hotel supplies of VIEs of RMB4,062 and RMB3,656(US$587) as of December 31, 2011 and 2012, respectively)	9,083	56,591		47,371
Deferred tax assets	4,209	26,222		19,842
Total current assets	117,357	731,145		803,381
Property and equipment, net (includes property and equipment of VIEs of RMB114,088 and RMB170,459(US$27,361) as of December 31, 2011 and 2012, respectively)	316,329	1,970,763		1,701,431
Rental deposits (includes rental deposits of VIEs of RMB5,445 and RMB4,042(US$649) as of December 31, 2011 and 2012, respectively)	14,578	90,824		69,861
Land use right	3,760	23,426		24,044
Intangible assets, net	4,209	26,221		30,426
Goodwill	9,798	61,041		61,041
Prepaid rent	11,410	71,088		73,419
Other non-current assets				500
Deferred tax assets	10,034	62,513		46,096
Total assets	487,475	3,037,021		2,810,199
Current liabilities:
Short-term bank loans	20,869	130,015		334,686
Accounts payable (includes accounts payable of VIEs without recourse to 7 Days Group of RMB48,297 and RMB36,516 (US$5,861) as of December 31, 2011 and 2012, respectively)	48,192	300,240		249,592
Bills payable	1,842	11,475		16,009
Accrued expenses and other payables (includes accrued expenses and other payables of VIEs without recourse to 7 Days Group of RMB5,834 and RMB4,756 (US$763) as of December 31, 2011 and 2012, respectively)	82,150	511,800		418,308
Amount due to related parties	417	2,601		333
Income taxes payable	4,112	25,617		25,509
Total current liabilities	157,582	981,748		1,044,437
Long-term bank loans	19,483	121,381
Borrowings from related parties	121	752		1,388
Accrued lease payments (includes accrued lease payments of VIEs without recourse to 7 Days Group of nil and RMB329 (US$53) as of December 31, 2011 and 2012, respectively)	41,167	256,472		206,113
Unfavorable lease contract liability	1,145	7,136		7,812
Refundable deposits	2,384	14,850		15,823
Deferred revenue				770
Deferred tax liabilities	1,208	7,527		4,565
Deferred rebate income	919	5,727		6,663
Income taxes payable	532	3,317		6,644
Total liabilities	224,541	1,398,910		1,294,215
Equity:
Ordinary shares: Par value: US$0.125 Authorized shares: 225,000,000; Issued and outstanding shares: 149,931,935 and 146,950,151 as of December 31, 2011 and 2012 respectively	22,683	141,317		141,080
Treasury stock, at cost nil and 3,283,002 shares as of December 31, 2011 and 2012, respectively	(10,776)	(67,137)
Additional paid-in capital	264,824	1,649,880		1,623,275
Accumulated other comprehensive income (loss)	(116)	(721)		330
Accumulated deficit	(10,001)	(62,303)		(238,348)
Total equity attributable to 7 Days Group Holdings Limited	266,614	1,661,036		1,526,337
Noncontrolling interests	(3,680)	(22,925)		(10,353)
Total equity	262,934	1,638,111		1,515,984
Commitments and contingencies
Total liabilities and equity	$ 487,475	3,037,021		2,810,199