May 11, 2016

China Lodging Group, Limited Reports First Quarter of 2016 Results

  • A total of 2,989 hotels or 304,428 hotel rooms in operation as of March 31, 2016.
  • Net revenues increased 18.8% year-over-year to RMB1,438.0 million (US$223.0 million)1 for the first quarter of 2016, exceeding the high end of the guidance.
  • Adjusted EBITDA (non-GAAP) increased 71.1% year-over-year to RMB275.7 million (US$42.8 million) for the first quarter of 2016.
  • Net income attributable to China Lodging Group, Limited was RMB69.4 million (US$10.8 million) for the first quarter of 2016, compared with net loss attributable to China Lodging Group, Limited of RMB7.0 million for the first quarter of 2015.
  • Basic earnings per ADS2 were RMB1.03 (US$0.16) and diluted earnings per ADS were RMB1.01 (US$0.16) for the first quarter of 2016. Excluding share-based compensation expenses, adjusted basic earnings per ADS (non-GAAP) were RMB1.25 (US$0.19) and adjusted diluted earnings per ADS (non-GAAP) were RMB1.22 (US$0.19) for the first quarter of 2016.
  • In first quarter of 2016, the Company paid cash dividend of $0.68 per ADS which was declared in December 2015.
  • The Company provided guidance for Q2 2016 net revenues growth of 12% to 15%

SHANGHAI, China, May 11, 2016 (GLOBE NEWSWIRE) -- China Lodging Group, Limited (NASDAQ:HTHT) ("China Lodging Group", "HuaZhu" or the "Company"), a leading and fast-growing multi-brand hotel group in China, today announced its unaudited financial results for the first quarter ended March 31, 2016.

Operational Highlights of First Quarter 2016

  • During the first quarter of 2016, the Company completed the transaction for strategic alliance with AccorHotels3. Pursuant to this transaction, 96 hotels were merged to HuaZhu's platform.

  • During the first quarter of 2016, including both organic growth and strategic alliance, the Company added 11 net leased ("leased-and-operated") and owned hotels, 215 net manachised ("franchised-and-managed") and franchised hotels. As of March 31, 2016, the Company had 627 leased and owned hotels, 2,189 manachised hotels, and 173 franchised hotels in operation in 356 cities. The number of hotel rooms in operation increased by 34% from a year ago.

  • As of March 31, 2016, the Company had 25 leased hotels and 607 manachised and franchised hotels contracted or under construction.

  • The ADR, which is defined as the average daily rate for all hotels in operation (excluding certain franchised Starway hotels), was RMB172 in the first quarter of 2016, compared with RMB168 in the first quarter of 2015 and RMB177 in the previous quarter. The year-over-year increase of 2.5% was due to more favorable brand mix with an increased proportion of midscale and upscale hotels. The sequential decrease mainly resulted from seasonality.

  • The occupancy rate for all hotels in operation (excluding certain franchised Starway hotels) was 80.4% in the first quarter of 2016, compared with 81.6% in the first quarter of 2015 and 84.3% in the previous quarter. The year-over-year decrease was mainly due to lower occupancy in lower-tier cities. The sequential decrease resulted mainly from seasonality.

  • RevPAR, defined as revenue per available room for all hotels in operation (excluding certain franchised Starway hotels), was RMB139 in the first quarter of 2016, compared with RMB137 in the first quarter of 2015 and RMB149 in the previous quarter.  The year-over-year increase was mainly attributable to the higher ADR. The sequential decrease resulted mainly from seasonality.

  • For all hotels which had been in operation for at least 18 months (excluding certain franchised Starway hotels), the same-hotel RevPAR was RMB142 for the first quarter of 2016, representing a 0.3% year-over-year decrease, with a 0.8% increase in ADR and a 0.9-percentage-point decrease in occupancy rate. The midscale and upscale hotels registered an 8.8% same-hotel RevPAR improvement, with a 5.0% increase in ADR and 2.8-percentage-point increase in occupancy rate.

  • As of March 31, 2016, the Company's loyalty program had approximately 55.3 million members, who contributed more than 85% of room nights sold during the first quarter of 2016. In the first quarter of 2016, approximately 87% of room nights were sold through the Company's own channels. The higher percentage of room nights sold through travel agents channels in the first quarter was due to increase utilization of lower costs OTA sales channels during the low season.

"We are pleased with our start to the year with a set of higher-than-expected results. Our net revenues achieved 18.8% year-over-year growth while adjusted EBITDA grew by 71.1% for the first quarter. This was mainly driven by increased contributions from JI Hotel, HanTing 2.0 and Hi Inn that recorded significant same hotel RevPAR increase of 10%, 8% and 6%, respectively." said Ms. Jenny Zhang, Chief Executive Officer of China Lodging Group.

"Our brands remain popular in the market. HanTing Hotel, our flagship brand, re-designed and upgraded in 2015, continues to be favored by our customers and franchisees. HanTing Hotel has a pipeline of 271 hotels and JI Hotel, a leading midscale hotel brand has 105 hotels in the pipeline. In the first quarter, we welcomed 5 brands ranging from economy to upscale segments through our strategic alliance with AccorHotels. We believe our strong capability in development and execution will further strengthen our leading position as an industry consolidator." Ms. Zhang added.

First Quarter of 2016 Financial Results

(RMB in thousands)Q1 2015 Q4 2015 Q1 2016
Revenues:     
Leased and owned hotels 1,055,541   1,287,714   1,201,761 
Manachised and franchised hotels 226,283   305,573   318,103 
Others -   -   628 
Total revenues 1,281,824   1,593,287   1,520,492 
Less: business tax and related surcharges (71,454)  (86,972)  (82,507)
Net revenues 1,210,370   1,506,315   1,437,985 
            

Total revenues for the first quarter of 2016 were RMB1,520.5 million (US$235.8 million), representing an 18.6% year-over-year increase and a 4.6% sequential decrease. The year-over-year increase was primarily due to our hotel network expansion through organic growth and strategic alliance. The sequential decrease was due to seasonality.

Total revenues from leased and owned hotels for the first quarter of 2016 were RMB1,201.8 million (US$186.4 million), representing a 13.9% year-over-year increase and a 6.7% sequential decrease.

Total revenues from manachised and franchised hotels for the first quarter of 2016 were RMB318.1 million (US$49.3 million), representing a 40.6% year-over-year increase and a 4.1% sequential increase. Total revenues from manachised and franchised hotels accounted for 20.9% of the Company's total revenues in the first quarter of 2016, up from 17.7% a year ago.

Other revenues represent revenues generated from businesses other than hotels, which mainly include revenues from HuaZhu mall.

Net revenues for the first quarter of 2016 were RMB1,438.0 million (US$223.0 million), representing an 18.8% year-over-year increase and a 4.5% sequential decrease.

(RMB in thousands)Q1 2015 Q4 2015 Q1 2016
Operating costs and expenses:     
Hotel operating costs1,058,624 1,198,604 1,200,459
Selling and marketing expenses45,828 46,791 33,055
General and administrative expenses77,942 128,233 106,607
Pre-opening expenses34,593 16,216 22,019
Total operating costs and expenses1,216,987 1,389,844 1,362,140
      

Hotel operating costs for the first quarter of 2016 were RMB1,200.5 million (US$186.2 million), compared to RMB1,058.6 million in the first quarter of 2015 and RMB1,198.6 million in the previous quarter, representing a 13.4% year-over-year increase and a 0.2% sequential increase. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the first quarter of 2016 were RMB1,197.7 million (US$185.8 million), representing 83.3% of net revenues, compared to 87.4% for the first quarter in 2015 and 79.4% for the previous quarter. The year-over-year decrease in the percentage was mainly attributable to the improved blended RevPAR, and the increased level of maturity of our leased hotels. The sequential increase in the percentage was mainly due to seasonality.

Selling and marketing expenses for the first quarter of 2016 were RMB33.1 million (US$5.1 million), compared to RMB45.8 million in the first quarter of 2015 and RMB46.8 million in the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the first quarter of 2016 were RMB32.8 million (US$5.1 million), or 2.3% of net revenues, compared to 3.8% for the first quarter of 2015 and 3.1% for the previous quarter. The year-over-year and sequential decrease was mainly attributable to the lower marketing spending as a result of timing issue in the first quarter of 2016.

General and administrative expenses for the first quarter of 2016 were RMB106.6 million (US$16.5 million), compared to RMB77.9 million in the first quarter of 2015 and RMB128.2 million in the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the first quarter of 2016 were RMB94.7 million (US$14.7 million), representing 6.6% of net revenues, compared with 5.5% of net revenues in the first quarter of 2015 and 7.7% in the previous quarter. The year-over-year increase was mainly due to increased personnel cost as a result of the Company's growth in scale and brand portfolio. The sequential decrease was mainly due to decreased professional fees.

Pre-opening expenses for the first quarter of 2016 were RMB22.0 million (US$3.4 million), representing a 36.3% year-over-year decrease and a 35.8% sequential increase. The year-over-year decrease was mainly due to fewer leased hotels opened and in the pipeline through our organic growth, and the sequential increase was mainly due to more leased hotels in the pipeline in the first quarter of 2016.

Income from operations for the first quarter of 2016 was RMB70.8 million (US$11.0 million), compared to loss from operations of RMB10.8 million in the first quarter of 2015 and income from operations of RMB130.6 million in the previous quarter. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the first quarter of 2016 was RMB85.6 million (US$13.3 million), compared to adjusted income from operation (non-GAAP) of RMB1.6 million for the first quarter of 2015 and RMB144.5 million for the previous quarter. The adjusted operating margin, defined as adjusted operating income (non-GAAP) as percentage of net revenues, for the first quarter of 2016 was 5.9%, compared with 0.1% in the first quarter of 2015 and 9.7% in the previous quarter. The improved year-over-year adjusted operating margin was mainly due to the improved blended RevPAR, and operating leverage. The sequential decrease in the margin was due to seasonality.

Net income attributable to China Lodging Group, Limited for the first quarter of 2016 was RMB69.4 million (US$10.8 million), compared to net loss attributable to China Lodging Group, Limited of RMB7.0 million in the first quarter of 2015 and net income attributable to China Lodging Group, Limited of RMB70.8 million in the previous quarter. Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group, Limited (non-GAAP) for the first quarter of 2016 was RMB84.3 million (US$13.1 million), representing a 1465.1% year-over-year increase and a 0.5% sequential decrease. The year-over-year increase was mainly due to the expanded hotel network, the improved blended RevPAR, the lower pre-opening expenses, and gain from partial disposal of Home Inns ADS in the first quarter of 2016.

Basic and diluted earnings per share/ADS.  For the first quarter of 2016, basic earnings per share were RMB0.26 (US$0.04) and diluted earnings per share were RMB0.25 (US$0.04); basic earnings per ADS were RMB1.03 (US$0.16) and diluted earnings per ADS were RMB1.01 (US$0.16). For the first quarter of 2016, excluding share-based compensation expenses, adjusted basic earnings per share (non-GAAP) and adjusted diluted earnings per share (non-GAAP) were RMB0.31 (US$0.05); adjusted basic earnings per ADS (non-GAAP) were RMB1.25 (US$0.19) and adjusted diluted earnings per ADS (non-GAAP) were RMB1.22 (US$0.19).

EBITDA (non-GAAP) for the first quarter of 2016 was RMB260.8 million (US$40.5 million), compared with RMB148.8 million in the first quarter of 2015 and RMB306.5 million in the previous quarter. Excluding share-based compensation expenses, adjusted EBITDA (non-GAAP) for the first quarter of 2016 was RMB275.7 million (US$42.8 million), compared with RMB161.2 million for the first quarter of 2015 and RMB320.4 million for the previous quarter.

Cash flow. Operating cash inflow for the first quarter of 2016 was RMB324.9 million (US$50.4 million). Investing cash outflow for the first quarter was RMB196.4 million (US$30.5 million).

Cash and cash equivalents and Restricted cash. As of March 31, 2016, the Company had a total balance of cash and cash equivalents, restricted cash of RMB1,775.3 million (US$275.3 million).

Debt financing. As of March 31, 2016, the Company had a short-term loan balance of RMB600.9 million and the total credit facility available to the Company was RMB499.3 million.

Guidance for Second Quarter of 2016
For the second quarter of 2016, the Company expects net revenues to grow 12% to 15% year-over-year.

The above forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call
China Lodging Group's management will host a conference call at 9 p.m. ET, Wednesday, May 11, 2016 (or 9 a.m. on Thursday, May 12, 2016 in the Shanghai/Hong Kong time zone) following the announcement. To participate in the event by telephone, please dial +1 (855) 500 8701 (for callers in the US), +86 400 120 0654 (for callers in China Mainland), +852 3018 6776 (for callers in Hong Kong) or +65 6713 5440 (for callers outside of the US, China Mainland, and Hong Kong) and enter pass code 9009 6815.  Please dial in approximately 10 minutes before the scheduled time of the call.

A recording of the conference call will be available after the conclusion of the conference call through May 18, 2016. Please dial +1 (855) 452 5696 (for callers in the US) or +61 2 9003 4211 (for callers outside the US) and entering pass code 9009 6815.

The conference call will also be webcast live over the Internet and can be accessed by all interested parties at the Company's Web site, http://ir.huazhu.com.

Use of Non-GAAP Financial Measures
To supplement the Company's unaudited consolidated financial results presented in accordance with U.S. GAAP, the Company uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: hotel operating costs excluding share-based compensation expenses; general and administrative expenses excluding share-based compensation expenses; selling expenses excluding share-based compensation expenses; adjusted income from operations excluding share-based compensation expenses; adjusted operating margin excluding share-based compensation expenses; adjusted net income attributable to China Lodging Group, Limited excluding share-based compensation expenses; adjusted basic and diluted earnings per share and per ADS excluding share-based compensation expenses; EBITDA; adjusted EBITDA excluding share-based compensation expenses; and adjusted EBITDA margin excluding share-based compensation expenses. 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. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding Company performance by excluding share-based compensation expenses that may not be indicative of Company operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Company performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance. The Company believes these non-GAAP financial measures are also useful to investors in allowing for greater transparency with respect to supplemental information used regularly by Company management in 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 the Company's 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.

The Company believes that EBITDA is a useful financial metric to assess the operating and financial performance before the impact of investing and financing transactions and income taxes, given the significant investments that the Company has made in leasehold improvements, depreciation and amortization expense that comprise a significant portion of the Company's cost structure. In addition, the Company believes that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of financial performance. The Company 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 Company also uses adjusted EBITDA, which is defined as EBITDA before share-based compensation expenses, to assess operating results of the hotels in operation. The Company believes that the exclusion of share-based compensation expenses helps facilitate year-on-year comparison of the results of operations as the share-based compensation expenses may not be indicative of Company operating performance. Therefore, the Company believes adjusted EBITDA more closely reflects the performance capability of hotels currently in operation. The presentation of EBITDA and adjusted EBITDA should not be construed as an indication that the Company's future results will be unaffected by other charges and gains considered to be outside the ordinary course of business.

The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets, income tax, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. 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 the results. The Company compensates for these limitations by providing the relevant disclosure of the depreciation and amortization, interest income, interest expense, income tax expense, share-based compensation expenses and other relevant items both in the reconciliations to the U.S. GAAP financial measures and in the consolidated financial statements, all of which should be considered when evaluating the performance of the Company.

The terms EBITDA and adjusted EBITDA are not defined under U.S. GAAP, and neither EBITDA nor adjusted EBITDA is a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing the operating and financial performance, investors should not consider these data in isolation or as a substitute for the Company's net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company's EBITDA or adjusted EBITDA may not be comparable to EBITDA or adjusted EBITDA — or similarly titled measures utilized by other companies — since such other companies may not calculate EBITDA or adjusted EBITDA in the same manner as the Company does.

Reconciliations of the Company's non-GAAP financial measures, including EBITDA and adjusted EBITDA, to the consolidated statement of operations information are included at the end of this press release.

About China Lodging Group, Limited
China Lodging Group, Limited is a leading hotel operator and franchisor in China under 12 brand names. As of March 31, 2016, the Company had 2,989 hotels or 304,428 rooms in operation in 356 cities. With a primary focus on economy and midscale hotel segments, China Lodging Group's brands include Hi Inn, HanTing Hotel, Elan Hotel, JI Hotel, Starway Hotel, Joya Hotel, and Manxin Hotels & Resorts. The Company also has the rights as master franchisee for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel, in Pan-China region.

The Company's business includes leased, manachised and franchised models. Under the lease model, the Company directly operates hotels typically located on leased properties. Under the manachise model, the Company manages manachised hotels through the on-site hotel managers it appoints and collects fees from franchisees. Under the franchise model, the Company provides training, reservation and support services to the franchised hotels and collects fees from franchisees but does not appoint on-site hotel managers. The Company applies a consistent standard and platform across all of its hotels. As of March 31, 2016, China Lodging Group operates 25 percent of its hotel rooms under lease model, 75 percent under manachise and franchise models.

For more information, please visit the Company's website: http://ir.huazhu.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: The information in this release contains forward-looking statements which involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, which may be identified by terminology such as "may," "should," "will," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "forecast," "project," or "continue," the negative of such terms or other comparable terminology. Readers should not rely on forward-looking statements as predictions of future events or results. Any or all of the Company's forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions, risks and uncertainties and other factors which could cause actual events or results to be materially different from those expressed or implied in the forward-looking statements. In evaluating these statements, readers should consider various factors, including the anticipated growth strategies of the Company, the future results of operations and financial condition of the Company, the economic conditions of China, the regulatory environment in China, the Company's ability to attract customers and leverage its brand, trends and competition in the lodging industry, the expected growth of the lodging market in China and other factors and risks outlined in the Company's filings with the Securities and Exchange Commission, including its annual report on Form 20-F and other filings. These factors may cause the Company's actual results to differ materially from any forward-looking statement. In addition, new factors emerge from time to time and it is not possible for the Company to predict all factors that may cause actual results to differ materially from those contained in any forward-looking statements. Any projections in this release are based on limited information currently available to the Company, which is subject to change. This release also contains statements or projections that are based upon information available to the public, as well as other information from sources which the Company believes to be reliable, but it is not guaranteed by the Company to be accurate, nor does the Company purport it to be complete. The Company disclaims any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date of this document, except as required by applicable law.

1 The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6.4480 on March 31, 2016 as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm.

2 Each ADS represents four of the Company's ordinary shares.

3 As of March 31, 2016, the Company is still in the process of completing the valuation of the purchase price allocation, and goodwill of approximately RMB442.0 million was recorded based on the preliminary assessment.

—Financial Tables and Operational Data Follow—

 
China Lodging Group, Limited 
Unaudited Condensed Consolidated Balance Sheets
 December 31, 2015 March 31, 2016
 RMB RMB US$
 (in thousands)
ASSETS     
Current assets:     
Cash and cash equivalents 1,237,838   1,414,760   219,411 
Restricted cash 360,500   360,500   55,909 
Short-term investments 533,215   446,995   69,323 
Accounts receivable, net 93,956   119,179   18,483 
Amounts due from a related party 16,157   51,631   8,007 
Prepaid rent 429,588   423,039   65,608 
Inventories 24,529   22,627   3,509 
Other current assets 167,995   198,195   30,738 
Deferred tax assets 98,200   98,200   15,229 
Total current assets 2,961,978   3,135,126   486,217 
      
Property and equipment, net 3,805,886   3,884,909   602,498 
Intangible assets, net 144,812   220,016   34,122 
Long-term investments 356,578   815,505   126,474 
Goodwill 108,344   550,363   85,354 
Other assets 195,446   199,814   30,989 
Deferred tax assets 120,477   120,477   18,684 
Total assets 7,693,521   8,926,210   1,384,338 
      
LIABILITIES AND EQUITY     
Current liabilities:     
Short-term debt 324,680   600,892   93,190 
Accounts payable 585,347   470,243   72,929 
Amounts due to related parties 7,653   8,402   1,303 
Salary and welfare payable 210,955   145,431   22,555 
Deferred revenue 705,607   811,513   125,855 
Accrued expenses and other current liabilities 576,160   594,697   92,230 
Dividends payable 276,261   -   - 
Income tax payable 102,810   83,685   12,978 
Deferred tax liabilities 1,465   1,465   227 
Total current liabilities 2,790,938   2,716,328   421,267 
      
Deferred rent 945,192   982,196   152,326 
Deferred revenue 180,861   183,452   28,451 
Other long-term liabilities 275,954   291,649   45,231 
Deferred tax liabilities 59,828   59,828   9,278 
Total liabilities 4,252,773   4,233,453   656,553 
      
Equity:     
Ordinary shares 186   202   31 
Treasury shares (107,331)  (107,331)  (16,645)
Additional paid-in capital 2,470,099   3,634,139   563,607 
Retained earnings 1,007,559   1,076,947   167,020 
Accumulated other comprehensive income (loss) 59,596   47,239   7,326 
Total China Lodging Group, Limited shareholders' equity 3,430,109   4,651,196   721,339 
Noncontrolling interest 10,639   41,561   6,446 
Total equity 3,440,748   4,692,757   727,785 
Total liabilities and equity 7,693,521   8,926,210   1,384,338 
      

 

China Lodging Group, Limited 
Unaudited Condensed Consolidated Statements of Comprehensive Income
 Quarter Ended
 March 31, 2015 December 31, 2015 March 31, 2016
 RMB RMB RMB US$
 (in thousands, except per share and per ADS data)
Revenues:       
Leased and owned hotels 1,055,541   1,287,714   1,201,761   186,377 
Manachised and franchised hotels 226,283   305,573   318,103   49,334 
Others -   -   628   98 
Total revenues 1,281,824   1,593,287   1,520,492   235,809 
Less: business tax and related surcharges (71,454)  (86,972)  (82,507)  (12,796)
Net revenues 1,210,370   1,506,315   1,437,985   223,013 
        
Operating costs and expenses:       
Hotel operating costs:       
Rents (432,697)  (470,567)  (477,271)  (74,018)
Utilities (108,454)  (85,288)  (114,482)  (17,755)
Personnel costs (207,650)  (232,662)  (257,556)  (39,944)
Depreciation and amortization (156,417)  (164,890)  (165,870)  (25,724)
Consumables, food and beverage (105,675)  (130,017)  (115,037)  (17,841)
Others (47,731)  (115,180)  (70,243)  (10,894)
Total hotel operating costs (1,058,624)  (1,198,604)  (1,200,459)  (186,176)
Selling and marketing expenses (45,828)  (46,791)  (33,055)  (5,126)
General and administrative expenses (77,942)  (128,233)  (106,607)  (16,533)
Pre-opening expenses (34,593)  (16,216)  (22,019)  (3,415)
Total operating costs and expenses (1,216,987)  (1,389,844)  (1,362,140)  (211,250)
Other operating income (expense), net (4,152)  14,111   (5,091)  (790)
Income (Loss) from operations (10,769)  130,582   70,754   10,973 
Interest income 3,671   9,007   9,801   1,520 
Interest expense (173)  (1,606)  (3,067)  (476)
Other income 425   2,855   15,661   2,429 
Foreign exchange gain (loss) 151   4,533   (1,586)  (246)
Income (Loss) before income taxes (6,695)  145,371   91,563   14,200 
Income tax benefit (expense) 934   (73,742)  (27,713)  (4,297)
Income (Loss) from equity method investments (1,455)  (791)  3,291   510 
Net income (loss) (7,216)  70,838   67,141   10,413 
Less: net  loss (income) attributable to noncontrolling interests 223   (78)  2,247   348 
Net income (loss) attributable to China Lodging Group, Limited (6,993)  70,760   69,388   10,761 
Other comprehensive income       
Unrealized securities holding gains (losses), net of tax 22,429   106,600   (1,288)  (200)
Reclassification adjustment of unrealized securities holding gains, net of tax, for gain included in net income -   -   (12,903)  (2,001)
Foreign currency translation adjustments, net of tax (1,912)  3,342   1,834   284 
Comprehensive income 13,301   180,780   54,784   8,496 
Comprehensive loss (income) attributable to the noncontrolling interest 223   (78)  2,247   348 
Comprehensive income attributable to China Lodging Group, Limited 13,524   180,702   57,031   8,844 
        
Earnings (Loss) per share:       
Basic (0.03)  0.28   0.26   0.04 
Diluted (0.03)  0.28   0.25   0.04 
        
Earnings (Loss) per ADS:       
Basic (0.11)  1.13   1.03   0.16 
Diluted (0.11)  1.10   1.01   0.16 
        
Weighted average number of shares used in computation:       
Basic 251,042   249,674   269,131   269,131 
Diluted 251,042   256,546   275,949   275,949 
                

 

China Lodging Group, Limited 
Unaudited Condensed Consolidated Statements of Cash Flows
 Quarter Ended
 March 31, 2015 December 31, 2015 March 31, 2016
 RMB RMB RMB US$
 (in thousands)
Operating activities:       
Net income (loss) (7,216)  70,838   67,141   10,413 
Adjustments to reconcile net income to net cash provided by operating activities:       
Share-based compensation 12,376   13,909   14,863   2,306 
Depreciation and amortization 160,213   169,355   170,478   26,439 
Deferred taxes (7,476)  (42,673)  -   - 
Bad debt expenses 1,186   1,909   749   116 
Deferred rent 32,979   32,440   30,547   4,737 
Gain from disposal of property and equipment -   (5,519)  -   - 
Impairment loss -   50,368   6,393   992 
Loss (Income) from equity method investments 1,455   791   (3,291)  (510)
Gain from sale of investments -   (2,766)  (12,903)  (2,001)
Excess tax benefit from share-based compensation (1,197)  (7,833)  (3,009)  (467)
        
Changes in operating assets and liabilities, net of effect of acquisitions:       
Accounts receivable (2,232)  (5,419)  (22,211)  (3,445)
Prepaid rent (6,494)  21,191   6,549   1,016 
Inventories 795   1,888   2,731   424 
Amounts due from related parties -   -   (824)  (128)
Other current assets 6,458   (27,515)  4,544   705 
Other assets (5,748)  6,544   (4,368)  (677)
Accounts payable 21,390   8,187   (3,321)  (515)
Amounts due to related parties (155)  1,332   749   116 
Salary and welfare payables (70,396)  79,990   (68,012)  (10,548)
Deferred revenue 7,262   80,235   97,110   15,060 
Accrued expenses and other current liabilities 59,689   58,797   39,119   6,067 
Income tax payable and receivable (37,536)  58,255   (13,905)  (2,156)
Other long-term liabilities 19,588   13,968   15,766   2,445 
Net cash provided by operating activities 184,941   578,272   324,895   50,389 
        
Investing activities:       
Purchases of property and equipment (290,967)  (119,380)  (179,440)  (27,829)
Purchases of intangibles (3,384)  (1,182)  (3,868)  (600)
Amount received as a result of government zoning 1,000   5,721   2,099   326 
Acquisitions, net of cash received (13,316)  (3,633)  3,762   583 
Proceeds from disposal of subsidiary and branch -   2,500   -   - 
Purchase of long-term investments (16,500)  (36,168)  (79,252)  (12,291)
Proceeds from maturity/sale of long-term investments 2,513   19,007   14,727   2,284 
Payment for shareholder loan to joint venture (1,252)  (134)  (34,650)  (5,374)
Purchase of short-term investments (10,000)  -   -   - 
Proceeds from maturity/sale of short-term investments 1,001   28,109   80,242   12,444 
Decrease (increase) in restricted cash -   219,500   -   - 
Net cash provided by (used in) investing activities (330,905)  114,340   (196,380)  (30,457)
        
Financing activities:       
Net proceeds from issuance of ordinary shares upon exercise of option 2,000   10,970   4,251   659 
Proceeds from short-term debt -   -   281,719   43,691 
Repayment of short-term debt -   (269,424)  -   - 
Funds advanced from noncontrolling interest holders -   5,432   4,000   620 
Repayment of funds advanced from noncontrolling interest holders (240)  (120)  (100)  (16)
Acquisition of noncontrolling interest -   (2,042)  -   - 
Contribution from noncontrolling interest holders -   200   34,059   5,282 
Dividend paid to noncontrolling interest holders (796)  (120)  (890)  (138)
Dividend paid -   -   (276,262)  (42,845)
Excess tax benefit from share-based compensation 1,197   7,833   3,009   467 
Net cash provided by (used in) financing activities 2,161   (247,271)  49,786   7,720 
        
Effect of exchange rate changes on cash and cash equivalents (1,912)  (6,731)  (1,379)  (213)
        
Net increase (decrease) in cash and cash equivalents (145,715)  438,610   176,922   27,439 
Cash and cash equivalents at the beginning of the period 808,865   799,228   1,237,838   191,972 
Cash and cash equivalents at the end of the period 663,150   1,237,838   1,414,760   219,411 
        

 

China Lodging Group, Limited 
Unaudited Reconciliation of GAAP and Non-GAAP Results
 Quarter Ended March 31, 2016
 GAAP Result % of Net Revenues Share-based Compensation % of Net Revenues Non-GAAP Result % of Net Revenues
 RMB   RMB   RMB  
 (in thousands)
            
Hotel operating costs 1,200,459   83.5% 2,744  0.2% 1,197,715  83.3%
Other operating costs -   0.0% -  0.0% -  0.0%
Selling and marketing expenses 33,055   2.3% 232  0.0% 32,823  2.3%
General and administrative expenses 106,607   7.4% 11,887  0.8% 94,720  6.6%
Pre-opening expenses 22,019   1.5% -  0.0% 22,019  1.5%
Total operating costs and expenses 1,362,140   94.7% 14,863  1.0% 1,347,277  93.7%
Income (Loss) from operations 70,754   4.9% 14,863  1.0% 85,617  5.9%
            
 Quarter Ended March 31, 2016
 GAAP Result % of Net Revenues Share-based Compensation % of Net Revenues Non-GAAP Result % of Net Revenues
 US$    US$   US$  
 (in thousands)
            
Hotel operating costs 186,176   83.5% 426  0.2% 185,750  83.3%
Other operating costs -   0.0% -  0.0% -  0.0%
Selling and marketing expenses 5,126   2.3% 36  0.0% 5,090  2.3%
General and administrative expenses 16,533   7.4% 1,844  0.8% 14,689  6.6%
Pre-opening expenses 3,415   1.5% -  0.0% 3,415  1.5%
Total operating costs and expenses 211,250   94.7% 2,306  1.0% 208,944  93.7%
Income (Loss) from operations 10,973   4.9% 2,306  1.0% 13,279  5.9%
            
 Quarter Ended December 31, 2015
 GAAP Result % of Net Revenues Share-based Compensation % of Net Revenues Non-GAAP Result % of Net Revenues
 RMB   RMB   RMB  
 (in thousands)
            
Hotel operating costs 1,198,604   79.6% 2,352  0.2% 1,196,252  79.4%
Other operating costs -   0.0% -  0.0% -  0.0%
Selling and marketing expenses 46,791   3.1% 100  0.0% 46,691  3.1%
General and administrative expenses 128,233   8.5% 11,457  0.8% 116,776  7.7%
Pre-opening expenses 16,216   1.1% -  0.0% 16,216  1.1%
Total operating costs and expenses 1,389,844   92.3% 13,909  1.0% 1,375,935  91.3%
Income (Loss) from operations 130,582   8.7% 13,909  1.0% 144,491  9.7%
            
 Quarter Ended March 31, 2015
 GAAP Result % of Net Revenues Share-based Compensation % of Net Revenues Non-GAAP Result % of Net Revenues
 RMB   RMB   RMB  
 (in thousands)
            
Hotel operating costs 1,058,624   87.5% 1,675  0.1% 1,056,949  87.4%
Other operating costs -   0.0% -  0.0% -  0.0%
Selling and marketing expenses 45,828   3.8% 280  0.0% 45,548  3.8%
General and administrative expenses 77,942   6.4% 10,421  0.9% 67,521  5.5%
Pre-opening expenses 34,593   2.9% -  0.0% 34,593  2.9%
Total operating costs and expenses 1,216,987   100.6% 12,376  1.0% 1,204,611  99.6%
Income (Loss) from operations (10,769)  -0.9% 12,376  1.0% 1,607  0.1%
            


China Lodging Group, Limited 
 Unaudited Reconciliation of GAAP and Non-GAAP Results 
 Quarter Ended
 March 31, 2015 December 31, 2015 March 31, 2016
 RMB RMB RMB US$
 (in thousands, except per share and per ADS data)
        
Net income (loss) attributable to China Lodging Group, Limited (GAAP) (6,993)  70,760   69,388   10,761 
Share-based compensation expenses 12,376   13,909   14,863   2,306 
Adjusted net income attributable to China Lodging Group, Limited (non-GAAP) 5,383   84,669   84,251   13,067 
        
Earnings (Loss) per share (GAAP)       
Basic (0.03)  0.28   0.26   0.04 
Diluted (0.03)  0.28   0.25   0.04 
        
Earnings (Loss) per ADS (GAAP)       
Basic (0.11)  1.13   1.03   0.16 
Diluted (0.11)  1.10   1.01   0.16 
        
Adjusted earnings per share (non-GAAP)       
Basic 0.02   0.34   0.31   0.05 
Diluted 0.02   0.33   0.31   0.05 
        
Adjusted earnings per ADS (non-GAAP)       
Basic 0.09   1.36   1.25   0.19 
Diluted 0.09   1.32   1.22   0.19 
        
Weighted average number of shares used in computation       
Basic 251,042   249,674   269,131   269,131 
Diluted 251,042   256,546   275,949   275,949 
        
 Quarter Ended
 March 31, 2015 December 31, 2015 March 31, 2016
 RMB RMB RMB US$
 (in thousands)
        
Net income (loss) attributable to China Lodging Group, Limited (GAAP) (6,993)  70,760   69,388   10,761 
Interest income (3,671)  (9,007)  (9,801)  (1,520)
Interest expenses 173   1,606   3,067   476 
Income tax expense (934)  73,742   27,713   4,297 
Depreciation and amortization 160,213   169,355   170,478   26,439 
EBITDA (non-GAAP) 148,788   306,456   260,845   40,453 
Share-based Compensation 12,376   13,909   14,863   2,306 
Adjusted EBITDA (non-GAAP) 161,164   320,365   275,708   42,759 
 

 

China Lodging Group, Limited
Operational Data       
  As of 
  March 31,  December 31,  March 31, 
  2015
 2015
 2016
Total hotels in operation:  2,177   2,763   2,989 
Leased and owned hotels (1)  617   616   627 
Manachised hotels  1,533   2,067   2,189 
Franchised hotels  27   80   173 
Total hotel rooms in operation  227,542   278,843   304,428 
Leased and owned hotels  74,180   75,436   77,263 
Manachised hotels  150,782   196,737   209,944 
Franchised hotels  2,580   6,670   17,221 
Number of cities  314   352   356 
       
(1) including 7 owned hotels under ibis brand.
       
       
  For the quarter ended
  March 31,  December 31,  March 31, 
  2015
 2015
 2016
Occupancy rate (as a percentage)      
Leased and owned hotels  82.7%  85.8%  82.2%
Manachised hotels  81.1%  84.2%  80.8%
Franchised hotels  66.1%  67.4%  61.9%
Blended  81.6%  84.3%  80.4%
Average daily room rate (in RMB)      
Leased and owned hotels  182   201   193 
Manachised hotels  161   167   165 
Franchised hotels  174   172   169 
Blended  168   177   172 
RevPAR (in RMB)      
Leased and owned hotels  150   172   159 
Manachised hotels  131   141   133 
Franchised hotels  115   116   105 
Blended  137   149   139 
       
       
Same-hotel Operational Data: like-for-like performance for hotels in operation for at least 18 months during the current quarter
       
  As of and for the quarter ended  
  March 31,
  
  2015
 2016
  
Total  1,783   1,783   
Leased hotels  584   584   
Manachised hotels  1,199   1,199   
Occupancy rate (as a percentage)  84.1%  83.2%  
Average daily room rate (in RMB)  169   171   
RevPAR (in RMB)  142   142   
           

 

Hotel breakdown by segment   
    
  Number of hotels in operation
  Net added As of 
  in Q1 2016March 31, 2016
Economy hotels    195    2,648
HanTing Hotel  56 2,059
Leased hotels  (2)493
Manachised hotels  58 1,566
Hi Inn  30 332
Leased hotels  - 38
Manachised hotels  13 264
Franchised hotels  17 30
Elan Hotel  21 169
Manachised hotels  14 142
Franchised hotels  7 27
ibis Hotel  82 82
Leased and owned hotels  12 12
Manachised hotels  9 9
Franchised hotels  61 61
ibis Styles Hotel  6 6
Manachised hotels  2 2
Franchised hotels  4 4
Midscale and upscale hotels    31    341
JI Hotel  16 202
Leased hotels  2 77
Manachised hotels  14 125
Starway Hotel  5 123
Leased hotels  (1)3
Manachised hotels  4 71
Franchised hotels  2 49
Joya Hotel  1 4
Leased hotels  - 2
Manachised hotels  1 2
Manxin Hotels & Resorts  - 2
Leased hotels  - 1
Manachised hotels  - 1
Mercure Hotel  7 8
Leased hotels  - 1
Manachised hotels  6 6
Franchised hotels  1 1
Novotel Hotel  1 1
Manachised hotels  1 1
Grand Mercure Hotel  1 1
Franchised hotels  1 1
Total    226    2,989
 

 

Same-hotel operational data by segment                 
  Number of hotels in operationSame-hotel RevPAR Same-hotel ADR  Same-hotel Occupancy  
  As ofFor the quarter ended  For the quarter ended  For the quarter ended  
  March 31,March 31, yoyMarch 31, yoyMarch 31, yoy
  2015 20162015 2016 change 2015 2016 change  2015   2016  change 
Economy hotels 1,637 1,637136 133  -1.9%160 160  -0.4% 85%  83%  -1.3%
Leased hotels 518 518138 135  -2.1%165 165  0.0% 84%  82%  -1.8%
Manachised and franchised hotels1,119 1,119134 132  -1.8%158 157  -0.5% 85%  84%  -1.1%
Midscale and upscale hotels 146 146203 221  8.8%256 269  5.0% 79%  82%  2.8%
Leased hotels 66 66225 252  12.1%276 293  6.3% 82%  86%  4.4%
Manachised and franchised hotels80 80178 184  3.4%232 237  2.2% 77%  78%  0.9%
Total 1,783 1,783142 142  -0.3%169 171  0.8% 84%  83%  -0.9%
                    


Contact Information
Ida Yu
Sr. Manager of Investor Relations
Tel:  +86 (21) 6195 9561
Email: ir@huazhu.com
http://ir.huazhu.com


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