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May 09,2012

China Lodging Group, Limited Reports First Quarter of 2012 Financial Results

 

SHANGHAI, May 9, 2012 /PRNewswire-Asia-FirstCall/ -- China Lodging Group, Limited (NASDAQ: HTHT) ("China Lodging Group" or the "Company"), a leading and fast-growing limited service hotel chain operator in China, today announced its unaudited financial results for first quarter ended March 31, 2012.

  • Net Revenues increased 53.0% year-over-year for the first quarter of 2012, exceeding the guidance previously announced
  • Adjusted EBITDA from operating hotels (non-GAAP)(1) was RMB111.0 million (US$17.6 million)(2) for the first quarter
  • Net loss attributable to China Lodging Group, Limited was RMB9.4 million (US$1.5 million) for the first quarter. Diluted net loss per ADS(3) for the first quarter was RMB0.16 (US$0.02); adjusted diluted net loss per ADS (non-GAAP) for the first quarter was RMB0.10 (US$0.02).
  • RevPAR grew by 9% year-over-year and same-hotel RevPAR grew by 10% year-over-year in the first quarter
  • 36 net new hotels added in the quarter, bringing the total hotel count to 675
  • Full year new opening target increased to 260 to 270 hotels, with 140 to 150 new managed hotels

(1) The following non-GAAP financial measures is used in this press release: hotel operating costs excluding share-based compensation expenses, general and administrative expenses excluding share-based compensation expenses, selling and marketing expenses excluding share-based compensation expenses, adjusted income/(loss) from operations excluding share-based compensation expenses, adjusted net income/(loss) attributable to China Lodging Group, Limited excluding share-based compensation expenses, adjusted basic and diluted net earnings/(loss) per share and per ADS excluding share-based compensation expenses, EBITDA, adjusted EBITDA from operating hotels excluding pre-opening expenses and share-based compensation expenses, and hotel income. See "Use of Non-GAAP Financial Measures" and "Unaudited Reconciliation of GAAP and Non-GAAP Results" below for more information about the non-GAAP financial measures included in this release.

(2) The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6. 2975 on March 30, 2012 as set forth in the H.10 statistical release of the Federal Reserve Board.

(3) Each ADS represents four of the Company's ordinary shares.

First Quarter 2012 Operational Highlights

  • During the first quarter of 2012, the Company opened 36 net new hotels, including nine net new leased hotels (or "leased-and-operated hotels") and 27 net new managed hotels (or "franchised-and-managed hotels"). As of March 31, 2012, the Company had 675 hotels in operation, consisting of 353 leased hotels and 322 managed hotels. Hotels in operation covered 111 cities in China as of March 31, 2012. The Company had 24 Seasons Hotels and 29 Hi Inns in operation as of March 31, 2012.
  • As of March 31, 2012, the Company had a total pipeline of 336 hotels under development, including 107 leased hotels and 229 managed hotels.
  • The occupancy rate for all hotels in operation was 91% in the first quarter of 2012, compared with 82% in the first quarter of 2011, and 93% in the previous quarter. Occupancy improved 19 percentage points for the Company's hotels in Shanghai and seven percentage points for the Company's hotels outside of Shanghai year-over-year, mainly attributable to robust travel demand, the Company's successful seasonal promotions, a more mature hotel mix, and the rebound of the Shanghai market from post-Expo weakness experienced in the first quarter of 2011. The sequential decrease resulted mainly from seasonality.
  • The ADR, or average daily rate, for all hotels, was RMB172 in the first quarter of 2012, compared with RMB175 in the first quarter of 2011 and RMB179 in the previous quarter. The year-over-year decrease was mainly attributable to the city mix shift of the Company's hotels towards lower tier cities and the Company's seasonal promotions, partially offset by the same-hotel ADR appreciation. The sequential decrease resulted mainly from the Company's seasonal price adjustment and promotions.
  • RevPAR, defined as revenue per available room, was RMB156 in the first quarter of 2012, compared with RMB143 in the first quarter of 2011 and RMB167 in the previous quarter. The year-over-year improvement in RevPAR was a result of a higher occupancy slightly offset by a lower ADR. The sequential decrease was mainly due to seasonality.
  • For all the hotels which had been in operation for at least 18 months, the same-hotel RevPAR was RMB172 for the first quarter of 2012, a 10% increase from RMB157 for the first quarter of 2011. Outside of Shanghai, the same-hotel RevPAR increased by 8%, with a 3% increase in ADR and a 5% increase in occupancy.
  • As of March 31, 2012, HanTing Club had more than 5.0 million individual members, a 65% increase from a year ago. These individual members contributed 66% of room nights sold during the first quarter of 2012, remaining stable as in the first quarter of 2011. The Company's corporate members contributed an additional 8% of room nights sold. In addition to the HanTing Club program, the Company introduced the e-member program in 2010 to enhance brand awareness and to expand coverage of its customer loyalty program. E-members can register on the Company's website free of charge and can enjoy discounts on room rates for their on-line booking. As of March 31, 2012, the Company had approximately 0.8 million e-members, who contributed 2% of room nights sold during the first quarter. In the first quarter of 2012, 96% of room nights sold were sold through the Company's own channels.

"We are pleased with our robust results in the first quarter of 2012, with 9% year-over-year increase in RevPAR across the whole chain and solid growth in hotel count. Our leading and high-quality brand has been well recognized in the market, which continuously attracts a growing number of customers and franchisees," said Mr. Qi Ji, founder, executive Chairman and Chief Executive Officer of China Lodging Group. "We remain confident in our rapid and high-quality expansion with focus on customer experience, which is sustainable and profitable in the long run."

First Quarter of 2012 Financial Results

Total revenues for the first quarter were RMB688.6 million (US$109.3 million), representing an increase of 52.9% year-over-year and coming in flat sequentially. The year-over-year increase was primarily due to the Company's continued expansion of its hotel network and an increase in RevPAR year-over-year. The flat sequential comparison was a result of increased number of hotels in operation offset by a lower RevPAR due to seasonality.

Total revenues from leased hotels for the first quarter of 2012 were RMB627.0 million (US$99.6 million), representing an increase of 52.8% year-over-year and coming in flat from the previous quarter.

Total revenues from managed hotels for the first quarter of 2012 were RMB61.5 million (US$9.8 million), representing a 53.9% year-over-year increase and a 2.6% decrease sequentially. The sequential decrease was mainly due to seasonality and a smaller number of new managed hotels opened in the first quart of 2012.

Net revenues for the first quarter of 2012 were RMB649.5 million (US$103.1 million), representing an increase of 53.0% year-over-year and coming in flat sequentially.

Hotel operating costs for the first quarter of 2012 were RMB549.4 million (US$87.2 million), compared to RMB361.3 million (US$55.2 million) for the first quarter of 2011 and RMB493.8 million (US$78.5 million) for the previous quarter, representing a 52.1% and 11.2% increase, respectively. The year-over-year increase in hotel operating costs was mainly driven by the Company's hotel network expansion, especially growth in leased hotels, whose room nights available for sale increased 39.3% year-over-year. On top of that, the year-over-year increase was also attributable to the higher occupancy in the first quarter of 2012, and the inflation in the costs such as salary, utility, and consumables, food and beverage. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) were RMB548.8 million (US$87.1 million), representing 84.5% of net revenues, compared to 85.0% for the first quarter in 2011 and 75.8% in the previous quarter. The year-over-year decrease in hotel operating costs as a percentage of net revenues was because the RevPAR growth outpaced the cost increase in the comparable periods. The sequential increase in hotel operating costs as a percentage of net revenues was mainly driven by seasonality. The first quarter of a year typically has lower RevPAR and higher utility cost.

Selling and marketing expenses for the first quarter of 2012 were RMB22.2 million (US$3.5 million), compared to RMB17.9 million (US$2.7 million) for the first quarter of 2011 and RMB29.3 million (US$4.7 million) for the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) were RMB21.9 million (US$3.5 million), or 3.4 % of net revenues, compared to 4.2% for the first quarter in 2011 and 4.5% for the previous quarter. The year-over-year decrease was mainly attributable to an enlarged revenue base. The sequential decrease was mainly due to less spending on advertising and other marketing programs.

General and administrative expenses for the first quarter of 2012 were RMB48.8 million (US$7.8 million), compared to RMB34.6 million (US$5.3 million) for the first quarter of 2011 and RMB43.8 million (US$7.0 million) for the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) were RMB46.4 million (US$7.4 million), representing 7.1% of the net revenues for the first quarter of 2012, compared with 7.5% of the net revenues for the first quarter of 2011 and 6.4% for the previous quarter. The year-over-year decrease in percentage was mainly due to an enlarged revenue base.

Pre-opening expenses for the first quarter of 2012 were RMB41.4 million (US$6.6 million), representing a year-over-year increase of 20.7% and a decrease of 16.4% sequentially. The pre-opening expenses were primarily driven by the number of leased hotels under construction during the period.

Loss from operations for the quarter was RMB12.3 million (US$2.0 million), compared to loss from operations of RMB23.6 million (US$3.6 million) for the first quarter of 2011 and income from operations of RMB34.4 million (US$5.5 million) for the previous quarter. Excluding share-based compensation expenses, adjusted loss from operations (non-GAAP) for the quarter was RMB9.0 million (US$1.4 million). Loss from operations for the first quarter was impacted by seasonality and the ramp-up of new leased hotels.

Net loss attributable to China Lodging Group, Limitedfor the first quarter was RMB9.4 million (US$1.5 million), compared to net loss attributable to China Lodging Group, Limited of RMB14.0 million (US$2.1 million) for the first quarter of 2011 and net income attributable to China Lodging Group, Limited of RMB30.3 million (US$4.8 million) for the previous quarter. Excluding share-based compensation expenses, adjusted net loss attributable to China Lodging Group, Limited (non-GAAP) for the first quarter of 2012 was RMB6.1 million (US$1.0 million), compared to adjusted net loss attributable to China Lodging Group, Limited of RMB10.6 million (US$1.6 million) for the first quarter of 2011 and adjusted net income attributable to China Lodging Group, Limited of RMB33.2 million (US$5.3 million) for the previous quarter.

Basic and diluted net loss per share/ADS. For the first quarter of 2012, basic net loss per share and diluted net loss per share were RMB0.04 (US$0.01); basic net loss per ADS and diluted net loss per ADS were RMB0.16 (US$0.02). Excluding share-based compensation expenses, adjusted basic net loss per share (non-GAAP) and adjusted diluted net loss per share (non-GAAP) for the first quarter of 2012 were RMB0.03 (US$0.01), and adjusted basic net loss per ADS (non-GAAP) and adjusted diluted net loss per ADS (non-GAAP) were RMB0.10 (US$0.02).

EBITDA (non-GAAP) for the first quarter of 2012 was RMB66.3 million (US$10.5 million), compared to RMB35.9 million (US$5.5 million) for the first quarter of 2011 and RMB112.0 million (US$17.8 million) for the previous quarter. Adjusted EBITDA from operating hotels (non-GAAP) for the first quarter of 2012 was RMB111.0 million (US$17.6 million), representing an increase of 50.8% from the first quarter of 2011 and a decrease of 32.5% sequentially. The year-over-year increase was mainly a result of the expansion of the Company's hotel network and improvement in operating margin, partially offset by lower interest income and the absence of foreign exchange gain. The sequential decrease was mainly due to seasonality.

Hotel income (non-GAAP), which is the difference between net revenues and hotel operating costs, was RMB100.1 million (US$15.9 million) for the first quarter of 2012, compared with RMB63.2 million (US$9.6 million) for the first quarter of 2011 and RMB156.9 million (US$24.9 million) for the previous quarter. The year-over-year increase of hotel income (non-GAAP) was mainly attributable to the enlarged managed hotel network and increased number of mature leased hotels in the portfolio. For leased hotels in operation for at least six months, hotel income (non-GAAP) was RMB78.7 million (US$12.5 million) during the first quarter of 2012, or 15% of net revenues derived from those hotels. Leased hotels in operation for less than six months, which accounted for 14% of leased room nights available for sale for the first quarter of 2012, derived a hotel loss (non-GAAP) of RMB22.7 million (US$3.6 million), or 36% of net revenues derived from those hotels for this quarter, mainly due to lower revenue achievement of those hotels during their ramp-up stage. For managed hotels, hotel income (non-GAAP) was RMB44.1 million (US$7.0 million), or 76% of net revenue derived from those hotels.

Cash flow. Net operating cash flow for the first quarter of 2012 was RMB101.0 million (US$16.0 million). Cash spent on the purchase of property and equipment, purchase of intangible assets and acquisitions, which are part of investing cash flow, was RMB254.9 million (US$40.5 million).

Cash and cash equivalents, restricted cash, and short-term investment. As of March 31, 2012, the Company had a total balance of cash and cash equivalents, restricted cash and short-term investment of RMB630.2 million (US$100.1 million).

In March 2012, the Company entered into a credit facility with the Industrial and Commercial Bank of China under which the Company can draw down up to RMB500.0 million by May 21, 2015. As of May 9, 2012, the Company had not drawn down this credit facility.

 

Business Outlook and Guidance for Second Quarter of 2012

"The continuous urbanization in China not only stimulates growing travel demand but also provides more opportunities of various properties for multiple-brand hotel chain operators like us. Our attractive brand positioning and solid performance lead to fast and quality expansion and a strong pipeline." commented Mr. Ji. "We started 2012 with record number of managed hotels under development. Thus, we increase our full year new openings to 260 to 270 hotels, with 120 leased hotels and 140 to 150 managed hotels."

The Company expects to achieve net revenues in the range of RMB740 to 755 million in the second quarter of 2012, representing a 35% to 38% growth 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. EDT, Wednesday, May 9, 2012 (or 9 a.m. on Thursday, May 10, 2012 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 3051 2745 (for callers in Hong Kong) or +65 6723 9385 (for callers outside of the US, China Mainland, and Hong Kong) and entering pass code 7122 2557. 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 16, 2012. Please dial +1 (866) 214 5335 (for callers in the US) or +61 2 8235 5000 (for callers outside the US) and entering pass code 7122 2557.

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.htinns.com.

Annual Report

China Lodging Group filed its Annual Report on Form 20-F for the year ended December 31, 2011 with the Securities and Exchange Commission on April 12, 2012. The Annual Report on Form 20-F can be accessed through the "SEC Filings" page on the China Lodging Group investor relations website at http://ir.htinns.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 Securities and Exchange Commission: hotel operating costs excluding share-based compensation expenses, general and administrative expenses excluding share-based compensation expenses, selling and marketing expenses excluding share-based compensation expenses, adjusted income/(loss) from operations excluding share-based compensation expenses, adjusted net income/(loss) attributable to China Lodging Group, Limited excluding share-based compensation expenses,and adjusted basic and diluted net earnings/(loss) per share and per ADS excluding share-based compensation expenses, EBITDA, adjusted EBITDA from operating hotels excluding pre-opening expenses and share-based compensation expenses, and hotel income. 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 its performance by excluding share-based compensation expenses that may not be indicative of its operating performance. The Company 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 the Company's historical performance. The Company 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 the Company's business. The Company 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 also believes that EBITDA is a useful financial metric to assess its 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 comprises a significant portion of its 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 its 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 from operating hotels, which is defined as EBITDA before pre-opening expenses and share-based compensation expenses, to assess operating results of the hotels in operation. The Company believes that the exclusion of pre-openingexpenses, a portion of which is non-cash rental expenses, and share-based compensation expenses helps facilitate year-on-year comparison of its results of operations as the number of hotels in the development stage may vary significantly from year to yearand provides a proxy for the cash generation capability of the hotels in operation at their current level of maturity. Therefore, the Company believes adjusted EBITDA from operating hotels more closely reflects the performance capability of hotels currently in operation. The Company's calculation of EBITDA and adjusted EBITDA from operating hotels does not deduct interest incomeor foreign exchange gain or loss. The presentation of EBITDA and adjusted EBITDA from operating hotels should not be construed as an indication that the Company's future results will be unaffected by other charges and gains it considers to be outside the ordinary course ofits business.

The use of EBITDA and adjusted EBITDA from operating hotels has certain limitations. Depreciation and amortization expense for various long-term assets, income tax and interest expense have been and will be incurred and are not reflected in the presentation of EBITDA. Pre-opening expenses and share-based compensation expenses have been and will be incurred and are not reflected in the presentation of adjusted EBITDA from operating hotels. Each of these items should also be considered in the overall evaluation of the Company's results. Additionally, EBITDA or adjusted EBITDA from operating hotels does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. The Company compensates for these limitations by providing the relevant disclosure of its depreciation and amortization, interest expense, income tax expense, capital expenditures pre-opening expenses, share-based compensation expenses and other relevant items both in its reconciliations to the U.S. GAAP financial measures and in its consolidated financial statements, all of which should be considered when evaluating the performance of the Company.

The terms EBITDA and adjusted EBITDA from operating hotels are not defined under U.S. GAAP, and neither EBITDA nor adjusted EBITDA from operating hotels 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 performanceof the Company, investors should not consider this data in isolation or as a substitute for the Company's net income/(loss), operating income/(loss) or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company's EBITDA or adjusted EBITDA from operating hotels may not be comparable to EBITDA or adjusted EBITDA from operating hotels or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA or adjusted EBITDA from operating hotels in the same manner as the Company does.

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

About China Lodging Group, Limited

China Lodging Group, Limited is a leading and fast-growing limited service hotel chain operator in China with leased and managed models. Under the leased model, the Company directly operates hotels typically located on leased properties. Under the managed model, the Company manages franchised hotels and collects fees from franchisees. China Lodging Group provides business and leisure travelers with high-quality, and conveniently-located hotels. As of March 31, 2012, the Company had 675 hotels and 75,622 rooms in 111 cities across China.

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.

Contact Information

Ida Yu
Investor Relations Manager
Tel: 86 (21) 6195 9561
Email: ir@htinns.com
http://ir.htinns.com

 

China Lodging Group, Limited 

Unaudited Condensed Consolidated Balance Sheets

       
 

December 31, 2011

 

March 31, 2012

 

RMB

 

RMB

 

US$

 

(in thousands)

Assets

         

Current assets:

         

  Cash and cash equivalents

781,601

 

615,682

 

97,766

  Restricted cash

1,500

 

14,495

 

2,302

  Accounts receivable, net

37,416

 

41,851

 

6,646

  Prepaid rent

228,087

 

231,665

 

36,787

  Inventories

31,232

 

27,662

 

4,393

  Income tax receivables

-

 

816

 

130

  Other current assets

53,862

 

48,999

 

7,780

  Deferred tax assets

40,119

 

40,119

 

6,371

  Total current assets

1,173,817

 

1,021,289

 

162,175

           

Property and equipment, net

2,095,794

 

2,197,399

 

348,932

Intangible assets, net

69,779

 

67,700

 

10,750

Goodwill

42,536

 

42,536

 

6,754

Other assets

102,056

 

107,073

 

17,002

Deferred tax assets

40,968

 

40,968

 

6,505

Total assets

3,524,950

 

3,476,965

 

552,118

           

Liabilities and equity

         

Current liabilities:

         

  Accounts payable

417,605

 

343,526

 

54,550

  Amount due to related parties

1,030

 

1,508

 

240

  Salary and welfare payable

80,266

 

61,964

 

9,839

  Deferred revenue

138,148

 

150,317

 

23,869

  Accrued expenses and other current liabilities

142,146

 

157,591

 

25,024

  Income tax payable

14,148

 

-

 

-

  Total current liabilities

793,343

 

714,906

 

113,522

           

Deferred rent

329,774

 

355,102

 

56,388

Deferred revenue

71,698

 

77,494

 

12,305

Other long-term liabilities

61,574

 

64,862

 

10,300

Deferred tax liabilities

12,677

 

12,677

 

2,013

Total liabilities

1,269,066

 

1,225,041

 

194,528

           

Equity

         

  Ordinary shares

179

 

179

 

28

  Additional paid-in capital

2,199,954

 

2,205,262

 

350,181

  Retained earnings

85,127

 

75,698

 

12,020

  Accumulated other comprehensive loss

(39,166)

 

(38,935)

 

(6,183)

Total China Lodging Group, Limited equity

2,246,094

 

2,242,204

 

356,046

  Noncontrolling interest

9,790

 

9,720

 

1,544

Total equity

2,255,884

 

2,251,924

 

357,590

Total liabilities and equity

3,524,950

 

3,476,965

 

552,118

 

China Lodging Group, Limited 

Unaudited Condensed Consolidated Statements of Operations

   
 

Quarter Ended

 

March 31, 2011

 

December 31, 2011

 

March 31, 2012

 

RMB

 

RMB

 

RMB

 

US$

 

(in thousands, except per share and per ADS data)

Revenues:

             

Leased hotels

410,390

 

626,738

 

627,006

 

99,564

Managed hotels

39,994

 

63,183

 

61,549

 

9,774

Total revenues

450,384

 

689,921

 

688,555

 

109,338

Less: business tax and related surcharges

(25,949)

 

(39,184)

 

(39,097)

 

(6,208)

Net revenues

424,435

 

650,737

 

649,458

 

103,130

               

Operating costs and expenses:

             

  Hotel operating costs:

             

      Rents

(141,457)

 

(183,367)

 

(205,397)

 

(32,616)

      Utilities

(43,734)

 

(40,514)

 

(64,729)

 

(10,279)

      Personnel costs

(61,434)

 

(97,065)

 

(105,771)

 

(16,796)

      Depreciation and amortization 

(50,445)

 

(66,611)

 

(74,166)

 

(11,777)

      Consumables, food and beverage 

(41,764)

 

(70,341)

 

(67,633)

 

(10,740)

      Others

(22,433)

 

(35,921)

 

(31,672)

 

(5,028)

  Total hotel operating costs

(361,267)

 

(493,819)

 

(549,368)

 

(87,236)

  Selling and marketing expenses

(17,897)

 

(29,307)

 

(22,211)

 

(3,527)

  General and administrative expenses 

(34,551)

 

(43,792)

 

(48,812)

 

(7,751)

  Pre-opening expenses

(34,275)

 

(49,460)

 

(41,355)

 

(6,567)

Total operating costs and expenses

(447,990)

 

(616,378)

 

(661,746)

 

(105,081)

Income/(Loss) from operations

(23,555)

 

34,359

 

(12,288)

 

(1,951)

Interest income

3,904

 

5,199

 

3,102

 

493

Interest expenses

(224)

 

(213)

 

(213)

 

(34)

Other income

1,059

 

753

 

375

 

59

Foreign exchange gain/(loss)

3,059

 

2,734

 

(643)

 

(102)

Income/(Loss) before income tax

(15,757)

 

42,832

 

(9,667)

 

(1,535)

Income tax expense/(benefit)

2,409

 

(11,192)

 

967

 

154

Net income/(loss)

(13,348)

 

31,640

 

(8,700)

 

(1,381)

Net income attributable to noncontrolling interests

(607)

 

(1,340)

 

(729)

 

(116)

Net income/(loss) attributable to China Lodging Group, Limited

(13,955)

 

30,300

 

(9,429)

 

(1,497)

               

Net earnings/(loss) per share

             

Basic

(0.06)

 

0.12

 

(0.04)

 

(0.01)

— Diluted

(0.06)

 

0.12

 

(0.04)

 

(0.01)

               

Net earnings/(loss) per ADS

             

Basic

(0.23)

 

0.50

 

(0.16)

 

(0.02)

— Diluted

(0.23)

 

0.49

 

(0.16)

 

(0.02)

               

Weighted average ordinary shares outstanding

             

Basic

241,156

 

242,461

 

242,629

 

242,629

— Diluted

241,156

 

245,896

 

242,629

 

242,629

               

Other comprehensive income/(loss), net of tax

             

Foreign currency translation adjustments

(3,338)

 

(2,841)

 

231

 

37

Comprehensive income/(loss)

(16,686)

 

28,799

 

(8,469)

 

(1,344)

Comprehensive income/(loss) attributable to the noncontrolling interest

(607)

 

(1,340)

 

(729)

 

(116)

Comprehensive income/(loss) attributable to China Lodging Group, Limited

(17,293)

 

27,459

 

(9,198)

 

(1,460)

 

China Lodging Group, Limited 

Unaudited Condensed Consolidated Statements of Cash Flows

   
 

Quarter Ended

 

March 31, 2011

 

December 31, 2011

 

March 31, 2012

 

RMB

 

RMB

 

RMB

 

US$

 

(in thousands)

Operating activities:

             

Net income

(13,348)

 

31,640

 

(8,700)

 

(1,381)

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

             

Share-based compensation

3,393

 

2,858

 

3,288

 

522

Depreciation and amortization

52,061

 

70,328

 

76,512

 

12,150

Deferred taxes

(16)

 

(35,714)

 

-

 

-

Bad debt expenses

113

 

554

 

1,105

 

175

Deferred rent

12,259

 

27,966

 

25,496

 

4,049

Impairment loss

-

 

710

 

-

 

-

Excess tax benefit from share-based compensation

-

 

(8,324)

 

(352)

 

(56)

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

             

Accounts receivable

(10,520)

 

(4,669)

 

(5,540)

 

(880)

Prepaid rent

(2,698)

 

(34,442)

 

(3,578)

 

(568)

Inventories

(2,514)

 

(4,736)

 

3,570

 

567

Other current assets

(551)

 

(14,701)

 

4,513

 

717

Other assets

(2,310)

 

176

 

(5,016)

 

(797)

Accounts payable

1,465

 

(627)

 

53

 

8

Amount due to related parties

114

 

(290)

 

479

 

76

Salary and welfare payables

(18,313)

 

37,718

 

(18,302)

 

(2,906)

Deferred revenue

24,937

 

26,549

 

17,964

 

2,853

Accrued expenses and other current liabilities

8,276

 

169

 

20,695

 

3,286

Income tax payable and receivable

(17,304)

 

34,290

 

(14,611)

 

(2,320)

Other long-term liabilities

3,576

 

5,469

 

3,397

 

539

Net cash provided by operating activities 

38,620

 

134,924

 

100,973

 

16,034

Investing activities:

             

Purchase of property and equipment

(157,014)

 

(208,746)

 

(250,065)

 

(39,709)

Purchases of intangibles

(136)

 

(13,037)

 

(215)

 

(34)

Amount received as a result of government zoning

6,900

 

-

 

-

 

-

Acquisitions, net of cash received

(40,252)

 

(9,540)

 

(4,610)

 

(732)

Proceeds from sales of short-term investments

-

 

30,000

 

-

 

-

Decrease (increase) in restricted cash

(1,970)

 

4,000

 

(12,995)

 

(2,064)

Net cash used in investing activities

(192,472)

 

(197,323)

 

(267,885)

 

(42,539)

Financing activities:

             

Net proceeds from issuance of ordinary shares upon exercise of option

146

 

2,076

 

2,019

 

321

Repayment of funds advanced from noncontrolling interest holders

(1,249)

 

(533)

 

(810)

 

(129)

Contribution from noncontrolling interest holders

225

 

-

 

5

 

1

Dividend paid to noncontrolling interest holders

-

 

(127)

 

(804)

 

(128)

Excess tax benefit from share-based compensation

-

 

8,324

 

352

 

56

Net cash provided by (used in)  financing activities

(878)

 

9,740

 

762

 

121

Effect of exchange rate changes on cash and cash equivalents

(3,335)

 

(2,841)

 

231

 

37

Net decrease in cash and cash equivalents

(158,065)

 

(55,500)

 

(165,919)

 

(26,347)

Cash and cash equivalents, beginning of period

1,060,067

 

837,101

 

781,601

 

124,113

Cash and cash equivalents, end of period

902,002

 

781,601

 

615,682

 

97,766

 

China Lodging Group, Limited 

Unaudited reconciliation of GAAP and Non-GAAP Results

   
 

Quarter Ended March 31, 2012

 

GAAP Result

 

% of Net Revenues

 

Share-based Compensation

 

% of Net Revenues

 

Non-GAAP Result

 

RMB

     

RMB

     

RMB

 

(in thousands)

                   

Hotel operating costs

549,368

 

84.6%

 

615

 

0.1%

 

548,753

Selling and marketing expenses

22,211

 

3.4%

 

270

 

0.0%

 

21,941

General and administrative expenses

48,812

 

7.5%

 

2,403

 

0.4%

 

46,409

Pre-opening expenses

41,355

 

6.4%

 

-

 

0.0%

 

41,355

Total operating costs and expenses

661,746

 

101.9%

 

3,288

 

0.5%

 

658,458

Loss from operations

(12,288)

 

-1.9%

 

3,288

 

0.5%

 

(9,000)

                   
 

Quarter Ended March 31, 2012

 

GAAP Result

 

% of Net Revenues

 

Share-based Compensation

 

% of Net Revenues

 

Non-GAAP Result

 

US$ 

     

US$

     

US$

 

(in thousands)

                   

Hotel operating costs

87,236

 

84.6%

 

98

 

0.1%

 

87,138

Selling and marketing expenses

3,527

 

3.4%

 

43

 

0.0%

 

3,484

General and administrative expenses

7,751

 

7.5%

 

382

 

0.4%

 

7,369

Pre-opening expenses

6,567

 

6.4%

 

-

 

0.0%

 

6,567

Total operating costs and expenses

105,081

 

101.9%

 

523

 

0.5%

 

104,558

Loss from operations

(1,951)

 

-1.9%

 

523

 

0.5%

 

(1,428)

                   
 

Quarter Ended December 31, 2011

 

GAAP Result

 

% of Net Revenues

 

Share-based Compensation

 

% of Net Revenues

 

Non-GAAP Result

 

RMB

     

RMB

     

RMB

 

(in thousands)

                   

Hotel operating costs

493,819

 

75.9%

 

536

 

0.1%

 

493,283

Selling and marketing expenses

29,307

 

4.5%

 

178

 

0.0%

 

29,129

General and administrative expenses

43,792

 

6.7%

 

2,144

 

0.3%

 

41,648

Pre-opening expenses

49,460

 

7.6%

 

-

 

0.0%

 

49,460

Total operating costs and expenses

616,378

 

94.7%

 

2,858

 

0.4%

 

613,520

Income from operations

34,359

 

5.3%

 

2,858

 

0.4%

 

37,217

                   
 

Quarter Ended March 31, 2011

 

GAAP Result

 

% of Net Revenues

 

Share-based Compensation

 

% of Net Revenues

 

Non-GAAP Result

 

RMB

     

RMB

     

RMB

 

(in thousands)

                   

Hotel operating costs

361,267

 

85.1%

 

473

 

0.1%

 

360,794

Selling and marketing expenses

17,897

 

4.2%

 

196

 

0.0%

 

17,701

General and administrative expenses

34,551

 

8.1%

 

2,724

 

0.6%

 

31,827

Pre-opening expenses

34,275

 

8.1%

 

-

 

0.0%

 

34,275

Total operating costs and expenses

447,990

 

105.5%

 

3,393

 

0.7%

 

444,597

Loss from operations

(23,555)

 

-5.5%

 

3,393

 

0.7%

 

(20,162)

 

China Lodging Group, Limited 

 Unaudited reconciliation of GAAP and Non-GAAP Results 

   
 

Quarter Ended

 

March 31, 2011

 

December 31, 2011

 

March 31, 2012

 

RMB

 

RMB

 

RMB

 

US$

 

(in thousands, except per share and per ADS data)

               

Net income/(loss) attributable to China Lodging Group, Limited (GAAP)

(13,955)

 

30,300

 

(9,429)

 

(1,497)

Share-based compensation expenses

3,393

 

2,858

 

3,288

 

523

Adjusted net income/(loss) attributable to China Lodging Group, Limited (non-GAAP)

(10,562)

 

33,158

 

(6,141)

 

(974)

               

Net earnings/(loss) per share (GAAP)

             

Basic

(0.06)

 

0.12

 

(0.04)

 

(0.01)

— Diluted

(0.06)

 

0.12

 

(0.04)

 

(0.01)

               

Net earnings/(loss) per ADS (GAAP)

             

Basic

(0.23)

 

0.50

 

(0.16)

 

(0.02)

— Diluted

(0.23)

 

0.49

 

(0.16)

 

(0.02)

               

Adjusted net earnings/(loss) per share (non-GAAP)

             

Basic

(0.04)

 

0.14

 

(0.03)

 

(0.01)

— Diluted

(0.04)

 

0.13

 

(0.03)

 

(0.01)

               

Adjusted net earnings/(loss) per ADS (non-GAAP)

             

Basic

(0.18)

 

0.55

 

(0.10)

 

(0.02)

— Diluted

(0.18)

 

0.54

 

(0.10)

 

(0.02)

               

Weighted average ordinary shares outstanding

             

Basic

241,156

 

242,461

 

242,629

 

242,629

— Diluted

241,156

 

245,896

 

242,629

 

242,629

               
 

Quarter Ended

 

March 31, 2011

 

December 31, 2011

 

March 31, 2012

 

RMB

 

RMB

 

RMB

 

US$

 

(in thousands)

               

Net income/(loss) attributable to China Lodging Group, Limited (GAAP)

(13,955)

 

30,300

 

(9,429)

 

(1,497)

Interest expenses

224

 

213

 

213

 

34

Income tax expense

(2,409)

 

11,192

 

(967)

 

(154)

Depreciation and amortization

52,061

 

70,328

 

76,512

 

12,150

EBITDA (non-GAAP)

35,921

 

112,033

 

66,329

 

10,533

Pre-opening expenses

34,275

 

49,460

 

41,355

 

6,567

Share-based Compensation

3,393

 

2,858

 

3,288

 

523

Adjusted EBITDA from operating hotels (non-GAAP)

73,589

 

164,351

 

110,972

 

17,623

               
 

Quarter Ended

 

March 31, 2011

 

December 31, 2011

 

March 31, 2012

 

RMB

 

RMB

 

RMB

 

US$

 

(in thousands)

               

Net revenues (GAAP)

424,435

 

650,737

 

649,458

 

103,130

Less:  Hotel operating costs

(361,267)

 

(493,819)

 

(549,368)

 

(87,236)

Hotel income (non-GAAP)

63,168

 

156,918

 

100,090

 

15,894

 

China Lodging Group, Limited

Operational Data

   
 

As of 

 

March 31,

December 31,

March 31,

 

2011

2011

2012

Total hotels in operation:

473

639

675

  Leased hotels

259

344

353

  Managed hotels

214

295

322

Total hotel rooms in operation

54,160

71,621

75,622

  Leased hotels

31,540

40,514

42,057

  Managed hotels

22,620

31,107

33,565

Number of cities

71

100

111

       
       
 

For the quarter ended

 

March 31,

December 31,

March 31,

 

2011

2011

2012

Occupancy rate (as a percentage)

     

  Leased hotels

80%

92%

90%

  Managed hotels

84%

95%

92%

  Total hotels in operation

82%

93%

91%

Average daily room rate (in RMB)

     

  Leased hotels

179

184

176

  Managed hotels

170

173

166

  Total hotels in operation

175

179

172

RevPAR (in RMB)

     

  Leased hotels

144

170

158

  Managed hotels

142

164

153

  Total hotels in operation

143

167

156

       
       

Like-for-like performance for hotels opened for at least 18 months during the current quarter

 
       
 

As of and for the quarter ended

 
 

March 31, 

 
 

2011

2012

 

Total hotels in operation:

362

362

 

  Leased hotels

199

199

 

  Managed hotels

163

163

 

Total hotel rooms in operation

42,013

42,013

 

  Leased hotels

24,787

24,787

 

  Managed hotels

17,226

17,226

 

Occupancy rate (as a percentage)

88%

96%

 

Average daily rate (in RMB)

178

180

 

RevPAR (in RMB)

157

172

 

 

 

SOURCE China Lodging Group, Limited

 

 

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