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Nov 10,2011

China Lodging Group, Limited Reports Third Quarter of 2011 Financial Results

SHANGHAI, Nov. 10, 2011 /PRNewswire-Asia-FirstCall/ --

  • Net Revenues increased 23.8% year-over-year for the third quarter to RMB626.7 million (US$98.3 million)(1), exceeding the high end of the guidance previously announced
  • Adjusted EBITDA from operating hotels (non-GAAP) was RMB184.2 million (US$28.9 million) representing 29.4% of net revenue
  • Net income attributable to China Lodging Group, Limited was RMB58.2 million (US$9.1 million); adjusted net income attributable to China Lodging Group, Limited(non-GAAP) was RMB63.2 million (US$9.9 million)
  • Diluted earnings per ADS(2) for the quarter was RMB0.94 (US$0.15); adjusted diluted earnings per ADS (non-GAAP) was RMB1.03 (US$0.16)
  • 64 new hotels were opened in the third quarter of 2011, increasing hotel count to 580
 

China Lodging Group, Limited (NASDAQ: HTHT) ("China Lodging Group" or the "Company"), a leading and high-growth economy hotel chain operator in China, today announced its unaudited financial results for the third quarter ended September 30, 2011.

Operational Highlights

  • During the third quarter of 2011, the Company opened 64 new hotels, including 33 leased-and-operated hotels and 31 franchised-and-managed hotels. As of September 30, 2011, the Company had 580 hotels in operation, consisting of 314 leased-and-operated hotels and 266 franchised-and-managed hotels. Hotels in operation covered 92 cities in China as of September 30, 2011, increasing from 80 cities at the end of the previous quarter. As of September 30, 2011, the Company had 20 Seasons Hotels and 26 Hi Inns in operation.
 
  • As of September 30, 2011, the Company had a total pipeline of 233 hotels under development, including 88 leased-and-operated hotels and 145 franchised-and-managed hotels.
 
  • The ADR, or average daily rate, for all hotels was RMB183 in the third quarter of 2011, compared with RMB218 in the third quarter of 2010 and RMB182 in the previous quarter. In Shanghai, the ADR was RMB187 in the third quarter of 2011, decreasing from RMB333 in the third quarter of 2010 due to the absence of one-time benefit of Shanghai Expo. Outside of Shanghai, the ADR was RMB182 in the third quarter of 2011, remaining stable as compared to the third quarter of 2010, as price increase on the same-hotel basis was largely offset by the city mix shifting toward lower tier cities. The sequential increase in overall ADR was mainly due to price increase driven by strong travel demand, especially in tourism destinations during the summer.
 
  • The occupancy rate for all hotels in operation was 97% in the third quarter of 2011, compared with 95% in the third quarter of 2010 and 93% in the previous quarter. The year-over-year improvement was mainly attributable to our increased brand awareness and successful marketing programs. The sequential increase mainly resulted from increased portion of mature hotels in our portfolio and market rebound in Shanghai area.
 
  • RevPAR, defined as revenue per available room, was RMB177 in the third quarter of 2011, compared with RMB207 in the third quarter of 2010 and RMB170 in the previous quarter.
 
  • During the third quarter of 2011, our Shanghai hotels continued to rebound from the post-Expo market weakness. Compared to the same period of 2009, our Shanghai hotels showed 9% appreciation in RevPAR, with an increase of 2% in ADR and 6% in occupancy, despite of a higher percentage of new hotels in the ramping-up stage. As of September 30, 2011, our Shanghai hotels accounted for 17.4% of our total hotel count, compared with 21.7% a year ago
 
  • For all the hotels which had been in operation for at least 18 months, the same-hotel RevPAR was RMB193 for the third quarter of 2011, compared with RMB214 for the third quarter of 2010, mainly due to the absence of one-time benefit of the Shanghai Expo.  Outside of Shanghai, the same-hotel RevPAR increased 6%, with 3.3% increase in ADR and 2.5% increase in occupancy, as a result of our strengthening brand, expanding loyal customer base, and our successful yield management.
 
  • As of September 30, 2011, HanTing Club had approximately 3.9 million individual members, an increase of 69% from September 30, 2010. The individual members contributed 66% of room nights sold during the third quarter of 2011. Our corporate members contributed another 10% of room nights sold. During the third quarter of 2011, 96% of room nights were sold through our own channels.
 

"We are delighted to see that the travel market continued to grow quickly in China. Outside of Shanghai, our same-hotel RevPAR appreciation reached 6% for the third quarter of 2011. In Shanghai, our hotels in operation for at least 18 months achieved occupancy of 101%, an increase of 5% from the same period of 2010," said Mr. Matthew Zhang, Chief Executive Officer of China Lodging Group. "We remain confident that China's domestic travel will grow robustly, especially in the inland cities. Our penetration into these fast-growing cities well positions us to capture those profitable opportunities."

Third Quarter of 2011 Financial Results

Total revenues for the third quarter of 2011 were RMB664.5 million (US$104.2 million), representing a 24.2% year-over-year increase and a 14.4% sequential increase. The year-over-year increase was primarily due to our increased number of hotels, partially offset by the absence of one-time benefit from the Shanghai Expo. The sequential increase was mainly due to our expanded network and a higher RevPAR.

Total revenues from leased-and-operated hotels for the third quarter of 2011 were RMB606.1 million (US$95.0 million), representing a 21.8% year-over-year increase and a 14.4% sequential increase.

Total revenues from franchised-and-managed hotels for the third quarter of 2011 were RMB58.4 million (US$9.2 million), representing a 56.8% year-over-year increase and a 14.4% sequential increase.  

Net revenues for the third quarter of 2011 were RMB626.7 million (US$98.3 million), representing an increase of 23.8% year-over-year and an increase of 14.4% sequentially.

Hotel operating costs for the third quarter of 2011 were RMB452.6 million (US$71.0 million), compared to RMB311.1 million (US$46.5 million) in the third quarter of 2010 and RMB395.7 million (US$61.2 million) in the previous quarter, representing a 45.5% and 14.4% increase, respectively.  Our hotel network expansion, especially the growth in leased-and-operated hotels, was the main driver for the increase in hotel operating costs. The average number of leased-and-operated hotels in operation(3) during the third quarter of 2011 increased 53.7% from the same period of 2010 and 10.2% sequentially. Compared to the previous quarter, utility cost increased this quarter due to seasonality. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the third quarter of 2011 were RMB452.0 million (US$70.9 million), representing 72.1% of net revenues, compared to 61.4% for the third quarter in 2010 and 72.1% in the previous quarter. The year-over-year increase was mainly driven by the absence of one-time benefit from Shanghai Expo this year, with hotel operating cost per room night remaining largely stable.

Selling and marketing expenses for the third quarter of 2011 were RMB24.9 million (US$3.9 million), compared to RMB20.6 million (US$3.1 million) in the third quarter of 2010 and RMB22.7 million (US$3.5 million) in the previous quarter.  Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the third quarter of 2011 were RMB24.6 million (US$3.9 million), or 4.0% of net revenues, compared to 4.1% for the third quarter in 2010 and 4.1% for the previous quarter.  

General and administrative expenses for the third quarter of 2011 were RMB39.4 million (US$6.2 million), compared to RMB35.2 million (US$5.3 million) in the third quarter of 2010 and RMB42.4 million (US$6.6 million) in the previous quarter.  General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the third quarter of 2011 were RMB35.1 million (US$5.5 million), representing 5.6% of net revenues, compared with 6.4% of net revenues in the third quarter of 2010 and 7.1% in the previous quarter.

Pre-opening expenses for the third quarter of 2011 were RMB54.0 million (US$8.5 million), compared to RMB35.5 million (US$5.3 million) in the third quarter of 2010 and RMB46.5 million (US$7.2 million) in the previous quarter.  The pre-opening expenses were primarily driven by the number of leased-and-operated hotels under conversion during the period. 33 leased-and-operated hotels were opened during this quarter and another 88 were in the pipeline at the end of the quarter, compared to 13 opened and 76 in the pipeline during the same quarter in 2010, and 22 opened and 90 in the pipeline for the previous quarter.

Income from operations for the third quarter of 2011 was RMB55.9 million (US$8.8 million), compared to income from operations of RMB103.7 million (US$15.5 million) in the third quarter of 2010 and income from operations of RMB40.5 million (US$6.3 million) in the previous quarter.  Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the third quarter of 2011 was RMB60.9 million (US$9.6 million).

Net income attributable to China Lodging Group, Limitedfor the third quarter of 2011 was RMB58.2 million (US$9.1 million), compared to net income attributable to China Lodging Group, Limited of RMB88.7 million (US$13.3 million) in the third quarter of 2010 and RMB40.3 million (US$6.2 million) in the previous quarter.  Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group, Limited (non-GAAP) for the third quarter of 2011 was RMB63.2 million (US$9.9 million), compared to adjusted net income attributable to China Lodging Group, Limited (non-GAAP) of RMB92.0 million (US$13.7 million) in the third quarter of 2010 and RMB44.5 million (US$6.9 million) in the previous quarter. The year-over-year decrease in net income was mainly due to the absence of one-time benefit of Shanghai Expo, higher pre-opening expenses and more leased-and-operated hotels in the ramp-up stage, as a result of our accelerated expansion. In the third quarter of 2011, our leased-and-operated hotels in operation less than 6 months contributed 16% of the leased-and-operated room nights available for sale, compared with 8% for the third quarter of 2010. The sequential improvement in net income was mainly attributable to increased number of mature leased-and-operated hotels in the portfolio and performance improvement in our Shanghai hotels, partially offset by higher pre-opening expenses.

Basic and diluted net earnings per share/ADS.  For the third quarter of 2011, basic net earnings per share and diluted net earnings per share were RMB0.24 (US$0.04); basic net earnings per ADS was RMB0.96 (US$0.15) and diluted net earnings per ADS was RMB0.94 (US$0.15).  Excluding share-based compensation expenses, adjusted basic net earnings per share (non-GAAP) and adjusted diluted net earnings per share (non-GAAP) for the third quarter of 2011 were RMB0.26 (US$0.04), adjusted basic net earnings per ADS (non-GAAP) was RMB1.04 (US$0.16) and adjusted diluted net earnings per ADS (non-GAAP) was RMB1.03 (US$0.16).

EBITDA (non-GAAP) for the third quarter of 2011 was RMB125.1 million (US$19.6 million), compared with RMB155.0 million (US$23.2 million) in the third quarter of 2010 and RMB104.3 million (US$16.1 million) in the previous quarter. The year-over-year decrease in EBITDA was mainly due to the absence of one-time benefit of Shanghai Expo, higher pre-opening expenses and more leased-and-operated hotels in the ramp-up stage as a result of our accelerated expansion. Excluding share-based compensation expenses and pre-opening expenses, adjusted EBITDA from operating hotels (non-GAAP) for the third quarter of 2011 was RMB184.2 million (US$28.9 million), compared with RMB193.8 (US$29.0 million) for the third quarter of 2010 and RMB155.0 million (US$24.0 million) for the previous quarter.  The slight year-over-year decrease was mainly a result of the absence of one-time benefit from Shanghai Expo and more leased-and-operated hotels in the ramp-up stage. The sequential increase was attributable to strong travel demand in the summer, performance improvement in our Shanghai hotels and increased number of mature leased-and-operated hotels in the portfolio.

Hotel income (non-GAAP), which is the difference between net revenues and hotel operating cost, was RMB174.1 million (US$27.3 million) for the third quarter of 2011, compared with RMB194.9 million (US$29.1 million) in the third quarter of 2010 and RMB152.1 million (US$23.5 million) in the previous quarter. The year-over-year decrease of hotel income was mainly attributable to the absence of one-time benefit from Shanghai Expo. For leased-and-operated hotels in operation for at least 6 months, the hotel income was RMB131.2 million (US$20.5 million) during the third quarter of 2011, or 26% of net revenues derived from those hotels. Leased-and-operated hotels in operation for less than 6 months accounted for 16% of leased-and-operated room nights available for sale in the third quarter of 2011. Those hotels derived a hotel loss of RMB3.0 million (US$0.5 million), or 5% of net revenues derived from those hotels this quarter, mainly due to lower revenue achievement of those hotels during their ramp-up stage. For franchised-and-managed hotels, the hotel income was RMB45.9 million (US$7.2 million), or 84% of net revenue derived from those hotels. As an increasing number of leased-and-operated hotels reach maturity and the franchised-and-managed hotel network grows, the Company expects the profit base to expand steadily.

Cash flow.  Net operating cash flow for the third quarter of 2011 was RMB124.0 million (US$19.4 million).  Cash spent on the purchase of property and equipment, purchase of intangible and acquisitions, which are part of investing cash flow, was RMB226.6 million (US$35.5 million).  

Cash and cash equivalents, Restricted cash, and Short-term investment. As of September 30, 2011, the Company had a total balance of cash and cash equivalents, restricted cash and short-term investment of RMB872.6 million (US$136.8 million).

Guidance for Fourth Quarter of 2011

"We are pleased to achieve 142 net new hotel openings in the first nine months of 2011, and remain confident in achieving our full year target of 200 new openings." commented CEO Mr. Zhang.

The Company expects to achieve net revenues in the range of RMB635 to RMB655 million in the fourth quarter of 2011, representing a 40% to 45% year-over-year growth

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

Corporate Presentation

The latest corporate presentation is available on China Lodging Group's investor relations website, http://ir.htinns.com/annuals.cfm .

Conference Call

The Company's management will host a conference call at 8 p.m. EST, Thursday, November 10, 2011 (or 9 a.m. on Friday, November 11, 2011 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 1788 8393.  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 November 17, 2011. 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 1788 8393.

The conference call will also be webcast live over the Internet and can be accessed by all interested parties at the Company's website, 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 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 net income attributable to China Lodging Group, Limited excluding share-based compensation expenses, adjusted basic and diluted net earnings per share and per ADS excluding share-based compensation expenses, EBITDA, adjusted EBITDA from operating hotels excluding share-based compensation expenses and pre-opening 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 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 our business.  Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure.  The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

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 comprises a significant portion of the 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 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-opening expenses, a portion of which is non-cash rental expenses, helps facilitate year-on-year comparison of the results of operations as the number of hotels in the development stage may vary significantly from year to year.  Therefore, the Company believes adjusted EBITDA from operating hotels more closely reflects the performance capability of hotels currently in operation.  The calculation of EBITDA and adjusted EBITDA from operating hotels does not deduct interest income.  The presentation of EBITDA and adjusted EBITDA from operating hotels should not be construed as an indication that our future results will be unaffected by other charges and gains considered to be outside the ordinary course of the 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 results.  The Company compensates for these limitations by providing the relevant disclosure of the depreciation and amortization, interest expense, income tax expense, pre-opening expenses, 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.

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 performance, you should not consider this data in isolation or as a substitute for our net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP.  In addition, 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.

To monitor performance of hotels at different maturity level and of different form, the Company also tracks hotel income, which is the difference between net revenues and hotel operating costs.

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 press release.

(1) The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6. 378 on September 30, 2011 as set forth in H.10 statistical release of the Federal Reserve Board.  

 

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

 

(3) Calculated as (number of leased-and-operated hotels in operation at the beginning of the quarter + number of leased-and-operated hotels in operation at the end of the quarter)/2

 
 

 

About China Lodging Group, Limited

China Lodging Group, Limited (the "Company") is a leading economy hotel chain operator in China. The Company provides business and leisure travelers with high-quality, and conveniently-located hotel products under three brands, namely, HanTing Seasons Hotel, HanTing Express Hotel, and HanTing Hi Inn. As of September 30, 2011, the Company had 580 hotels and 65,524 rooms in 92 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 risks described in "Risk Factors" in the Company's registration statement on Form 20-F. 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. 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

--Financial Tables and Operational Data Follow—

China Lodging Group, Limited

 

Unaudited Condensed Consolidated Balance Sheets

 
 

December 31, 2010

 

September 30, 2011

 
 

RMB

 

RMB

 

US$

 
 

(in thousands)

 

Assets

           

Current assets:

           

 Cash and cash equivalents

1,060,067

 

837,101

 

131,248

 

 Restricted cash

1,275

 

5,500

 

862

 

 Short-term Investment

100,000

 

30,000

 

4,704

 

 Accounts receivable, net

21,536

 

33,154

 

5,198

 

 Amount due from related parties

3,267

 

-

 

-

 

 Prepaid rent

152,267

 

193,646

 

30,361

 

 Inventories

18,290

 

26,347

 

4,131

 

 Income tax receivables

-

 

19,757

 

3,098

 

 Other current assets

40,177

 

37,659

 

5,905

 

 Deferred tax assets

17,940

 

17,940

 

2,813

 

 Total current assets

1,414,819

 

1,201,104

 

188,320

 
             

Property and equipment, net

1,422,432

 

1,811,416

 

284,010

 

Intangible assets, net

57,348

 

56,906

 

8,922

 

Goodwill

41,373

 

41,373

 

6,487

 

Other assets

79,953

 

102,231

 

16,029

 

Deferred tax assets

28,155

 

28,155

 

4,414

 

Total assets

3,044,080

 

3,241,185

 

508,182

 
             

Liabilities and equity

           

Current liabilities:

           

 Accounts payable

283,203

 

274,915

 

43,104

 

 Amount due to related parties

855

 

1,320

 

207

 

 Salary and welfare payable

57,638

 

42,549

 

6,671

 

 Deferred revenue

68,599

 

117,905

 

18,486

 

 Accrued expenses and other current liabilities

148,926

 

144,771

 

22,698

 

 Income tax payable

15,121

 

-

 

-

 

 Total current liabilities

574,342

 

581,460

 

91,166

 
             

Deferred rent

237,427

 

302,388

 

47,411

 

Deferred revenue

48,445

 

65,393

 

10,253

 

Other long-term liabilities

46,619

 

57,714

 

9,049

 

Deferred tax liabilities

11,937

 

11,937

 

1,872

 

Total liabilities

918,770

 

1,018,892

 

159,751

 
             

Equity

           

 Ordinary shares

178

 

179

 

28

 

 Additional paid-in capital

2,168,364

 

2,195,035

 

344,157

 

 Retained earnings (Accumulated deficit)

(29,705)

 

54,827

 

8,596

 

 Accumulated other comprehensive loss

(22,703)

 

(36,325)

 

(5,695)

 

Total China Lodging Group, Limited equity

2,116,134

 

2,213,716

 

347,086

 

 Noncontrolling interest

9,176

 

8,577

 

1,345

 

Total equity

2,125,310

 

2,222,293

 

348,431

 

Total liabilities and equity

3,044,080

 

3,241,185

 

508,182

 
           

 

China Lodging Group, Limited

 

Unaudited Condensed Consolidated Statements of Operations

 
 

Quarter Ended

 
 

September 30, 2010

 

June 30, 2011

 

September 302011

 
 

RMB

 

RMB

 

RMB

 

US$

 
 

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

 

Revenues:

               

Leased-and-operated hotels

497,742

 

529,733

 

606,073

 

95,026

 

Franchised-and-managed hotels

37,250

 

51,061

 

58,406

 

9,157

 

Total revenues

534,992

 

580,794

 

664,479

 

104,183

 

Less: business tax and related surcharges

(28,936)

 

(33,054)

 

(37,793)

 

(5,926)

 

Net revenues

506,056

 

547,740

 

626,686

 

98,257

 
                 

Operating costs and expenses:

               

 Hotel operating costs

(311,115)

 

(395,673)

 

(452,579)

 

(70,959)

 

 Selling and marketing expenses

(20,557)

 

(22,693)

 

(24,857)

 

(3,897)

 

 General and administrative expenses

(35,169)

 

(42,361)

 

(39,359)

 

(6,171)

 

 Pre-opening expenses

(35,528)

 

(46,548)

 

(54,015)

 

(8,469)

 

Total operating costs and expenses

(402,369)

 

(507,275)

 

(570,810)

 

(89,496)

 

Income from operations

103,687

 

40,465

 

55,876

 

8,761

 

Interest income

5,232

 

4,517

 

4,490

 

704

 

Interest expenses

(127)

 

(232)

 

(213)

 

(33)

 

Other income

399

 

410

 

427

 

67

 

Foreign exchange gain

4,011

 

4,369

 

5,770

 

905

 

Income before income tax

113,202

 

49,529

 

66,350

 

10,404

 

Income tax benefit/(expense)

(23,140)

 

(8,859)

 

(7,174)

 

(1,125)

 

Net income

90,062

 

40,670

 

59,176

 

9,279

 

Net income attributable to noncontrolling interests

(1,380)

 

(359)

 

(999)

 

(157)

 

Net income attributable to China Lodging Group, Limited

88,682

 

40,311

 

58,177

 

9,122

 
                 

Net earnings per share

               

— Basic

0.37

 

0.17

 

0.24

 

0.04

 

— Diluted

0.36

 

0.16

 

0.24

 

0.04

 
                 

Net earnings per ADS

               

— Basic

1.47

 

0.67

 

0.96

 

0.15

 

— Diluted

1.43

 

0.65

 

0.94

 

0.15

 
                 

Weighted average ordinary shares outstanding

               

— Basic

241,019

 

241,814

 

242,264

 

242,264

 

— Diluted

247,536

 

246,470

 

246,272

 

246,272

 
               

 

China Lodging Group, Limited

 

Unaudited Condensed Consolidated Statements of Cash Flows

 
 

Quarter Ended

 
 

September 30, 2010

 

June 30, 2011

 

September 30, 2011

 
 

RMB

 

RMB

 

RMB

 

US$

 
 

(in thousands)

 

Operating activities:

               

Net income

90,062

 

40,670

 

59,176

 

9,279

 

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

               

Share-based compensation

3,327

 

4,186

 

5,046

 

791

 

Depreciation and amortization

43,081

 

54,885

 

59,583

 

9,342

 

Deferred taxes

-

 

16

 

-

 

-

 

Bad debt expenses

44

 

92

 

(92)

 

(14)

 

Deferred rent

25,186

 

27,154

 

25,548

 

4,006

 

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

               

Accounts receivable

1,918

 

605

 

(1,817)

 

(285)

 

Prepaid rent

(30,961)

 

(13,085)

 

(25,596)

 

(4,013)

 

Inventories

(2,672)

 

(906)

 

(4,637)

 

(727)

 

Amount due from related parties

546

 

3,267

 

-

 

-

 

Other current assets

(3,012)

 

435

 

(867)

 

(136)

 

Other assets

(5,494)

 

(7,255)

 

(12,713)

 

(1,993)

 

Accounts payable

3,286

 

(1,658)

 

4,255

 

667

 

Amount due to related parties

(217)

 

133

 

217

 

34

 

Salary and welfare payables

5,034

 

15,379

 

(12,156)

 

(1,907)

 

Deferred revenue

14,236

 

15,105

 

26,212

 

4,110

 

Accrued expenses and other current liabilities

4,499

 

24,721

 

1,082

 

170

 

Income tax payable/receivable

12,480

 

(5,584)

 

(4,052)

 

(635)

 

Other long-term liabilities

2,692

 

3,033

 

4,813

 

755

 

Net cash provided by operating activities

164,035

 

161,193

 

124,002

 

19,444

 
                 

Investing activities:

               

Purchase of property and equipment

(111,229)

 

(180,730)

 

(222,267)

 

(34,849)

 

Purchases of intangibles

(3,686)

 

(938)

 

(563)

 

(88)

 

Acquisitions, net of cash received

-

 

(4,290)

 

(3,740)

 

(586)

 

Purchase of short term investment

-

 

-

 

(30,000)

 

(4,704)

 

Proceeds from sales of short-term investments

-

 

100,000

 

-

 

-

 

Decrease (increase) in restricted cash

995

 

(531)

 

(1,724)

 

(270)

 

Net cash used in investing activities

(113,920)

 

(86,489)

 

(258,294)

 

(40,497)

 
                 

Financing activities:

               

Net proceeds from issuance of ordinary shares

(5)

 

-

 

-

 

-

 

Net proceeds from issuance of ordinary shares upon exercise of option

-

 

4,145

 

918

 

144

 

Repayment of long term debt

(45,000)

 

-

 

-

 

-

 

Funds advanced from noncontrolling shareholders

-

 

1,485

 

2,000

 

314

 

Repayment of funds advanced from noncontrolling interest holders

(4,135)

 

(535)

 

(252)

 

(40)

 

Acquisition of non controlling interests

(11,041)

 

-

 

-

 

-

 

Contribution from noncontrolling interest holders

5

 

-

 

234

 

37

 

Dividend paid to noncontrolling interest holders

813

 

(2,831)

 

(192)

 

(30)

 

Net cash provided by (used in)  financing activities

(59,363)

 

2,264

 

2,708

 

425

 

Effect of exchange rate changes on cash and cash equivalents

(4,472)

 

(4,269)

 

(6,016)

 

(946)

 

Net increase (decrease) in cash and cash equivalents

(13,720)

 

72,699

 

(137,600)

 

(21,574)

 

Cash and cash equivalents, beginning of period

1,285,430

 

902,002

 

974,701

 

152,822

 

Cash and cash equivalents, end of period

1,271,710

 

974,701

 

837,101

 

131,248

 
                 
               

 

China Lodging Group, Limited

 

Unaudited reconciliation of GAAP and Non-GAAP Results

 
 

Quarter Ended September 30, 2011

 
 

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

452,579

 

72.2%

 

549

 

0.1%

 

452,030

 

72.1%

 

Selling and marketing expenses

24,857

 

4.0%

 

216

 

0.0%

 

24,641

 

4.0%

 

General and administrative expenses

39,359

 

6.3%

 

4,282

 

0.7%

 

35,077

 

5.6%

 

Pre-opening expenses

54,015

 

8.6%

 

-

 

0.0%

 

54,015

 

8.6%

 

Total operating costs and expenses

570,810

 

91.1%

 

5,047

 

0.8%

 

565,763

 

90.3%

 

Income from operations

55,876

 

8.9%

 

5,047

 

0.8%

 

60,923

 

9.7%

 
                         
 

Quarter Ended September 30, 2011

 
 

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

70,959

 

72.2%

 

86

 

0.1%

 

70,873

 

72.1%

 

Selling and marketing expenses

3,897

 

4.0%

 

34

 

0.0%

 

3,863

 

4.0%

 

General and administrative expenses

6,171

 

6.3%

 

671

 

0.7%

 

5,500

 

5.6%

 

Pre-opening expenses

8,469

 

8.6%

 

-

 

0.0%

 

8,469

 

8.6%

 

Total operating costs and expenses

89,496

 

91.1%

 

791

 

0.8%

 

88,705

 

90.3%

 

Income from operations

8,761

 

8.9%

 

791

 

0.8%

 

9,552

 

9.7%

 
                         
 

Quarter Ended June 30, 2011

 
 

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

395,673

 

72.2%

 

557

 

0.1%

 

395,116

 

72.1%

 

Selling and marketing expenses

22,693

 

4.1%

 

194

 

0.0%

 

22,499

 

4.1%

 

General and administrative expenses

42,361

 

7.7%

 

3,435

 

0.6%

 

38,926

 

7.1%

 

Pre-opening expenses

46,548

 

8.5%

 

-

 

0.0%

 

46,548

 

8.5%

 

Total operating costs and expenses

507,275

 

92.5%

 

4,186

 

0.7%

 

503,089

 

91.8%

 

Income from operations

40,465

 

7.5%

 

4,186

 

0.7%

 

44,651

 

8.2%

 
                         
 

Quarter Ended September 30, 2010

 
 

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

311,115

 

61.5%

 

452

 

0.1%

 

310,663

 

61.4%

 

Selling and marketing expenses

20,557

 

4.1%

 

212

 

0.0%

 

20,345

 

4.1%

 

General and administrative expenses

35,169

 

6.9%

 

2,623

 

0.5%

 

32,546

 

6.4%

 

Pre-opening expenses

35,528

 

7.0%

 

-

 

0.0%

 

35,528

 

7.0%

 

Total operating costs and expenses

402,369

 

79.5%

 

3,287

 

0.6%

 

399,082

 

78.9%

 

Income from operations

103,687

 

20.5%

 

3,287

 

0.6%

 

106,974

 

21.1%

 
                       

 

China Lodging Group, Limited

 

Unaudited reconciliation of GAAP and Non-GAAP Results

 
 

Quarter Ended

 
 

September 30, 2010

 

June 30, 2011

 

September 30, 2011

 
 

RMB

 

RMB

 

RMB

 

US$

 
 

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

 
                 

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

88,682

 

40,311

 

58,177

 

9,122

 

Share-based compensation expenses

3,287

 

4,186

 

5,047

 

791

 

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

91,969

 

44,497

 

63,224

 

9,913

 
                 

Net earnings per share (GAAP)

               

— Basic

0.37

 

0.17

 

0.24

 

0.04

 

— Diluted

0.36

 

0.16

 

0.24

 

0.04

 
                 

Net earnings per ADS (GAAP)

               

— Basic

1.47

 

0.67

 

0.96

 

0.15

 

— Diluted

1.43

 

0.65

 

0.94

 

0.15

 
                 

Adjusted net earnings per share (non-GAAP)

               

— Basic

0.38

 

0.18

 

0.26

 

0.04

 

— Diluted

0.37

 

0.18

 

0.26

 

0.04

 
                 

Adjusted net earnings per ADS (non-GAAP)

               

— Basic

1.53

 

0.74

 

1.04

 

0.16

 

— Diluted

1.49

 

0.72

 

1.03

 

0.16

 
                 

Weighted average ordinary shares outstanding

               

— Basic

241,019

 

241,814

 

242,264

 

242,264

 

— Diluted

247,536

 

246,470

 

246,272

 

246,272

 
                 
 

Quarter Ended

 
 

September 30, 2010

 

June 30, 2011

 

September 30, 2011

 
 

RMB

 

RMB

 

RMB

 

US$

 
 

(in thousands)

 
                 

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

88,682

 

40,311

 

58,177

 

9,122

 

Interest expenses

127

 

232

 

213

 

33

 

Income tax expense/(benefit)

23,140

 

8,859

 

7,174

 

1,125

 

Depreciation and amortization

43,081

 

54,885

 

59,583

 

9,342

 

EBITDA (non-GAAP)

155,030

 

104,287

 

125,147

 

19,622

 

Pre-opening expenses

35,528

 

46,548

 

54,015

 

8,469

 

Share-based Compensation

3,287

 

4,186

 

5,047

 

791

 

Adjusted EBITDA from operating hotels (non-GAAP)

193,845

 

155,021

 

184,209

 

28,882

 
                 
 

Quarter Ended

 
 

September 30, 2010

 

June 30, 2011

 

September 30, 2011

 
 

RMB

 

RMB

 

RMB

 

US$

 
 

(in thousands)

 
                 

Net revenues (GAAP)

506,056

 

547,740

 

626,686

 

98,257

 

Less:  Hotel operating costs

(311,115)

 

(395,673)

 

(452,579)

 

(70,959)

 

Hotel income (non-GAAP)

194,941

 

152,067

 

174,107

 

27,298

 
                 
               

 

China Lodging Group, Limited

 

Operational Data

       
 

As of

 
 

September 30,

June 30,

September 30,

 
 

2010

2011

2011

 

Total hotels in operation:

368

516

580

 

 Leased-and-operated hotels

200

281

314

 

 Franchised-and-managed hotels

168

235

266

 

Total Hotel rooms in operation

42,750

58,786

65,524

 

 Leased-and-operated hotels

24,938

33,677

37,229

 

 Franchised-and-managed hotels

17,812

25,109

28,295

 

Number of cities

55

80

92

 
         
         
         
 

For the quarter ended

 
 

September 30,

June 30,

September 30,

 
 

2010

2011

2011

 

Occupancy rate (as a percentage)

       

 Leased-and-operated hotels

97%

92%

95%

 

 Franchised-and-managed hotels

93%

95%

99%

 

 Total hotels in operation

95%

93%

97%

 

Average daily room rate (in RMB)

       

 Leased-and-operated hotels

223

187

187

 

 Franchised-and-managed hotels

210

176

178

 

 Total hotels in operation

218

182

183

 

RevPAR (in RMB)

       

 Leased-and-operated hotels

215

172

178

 

 Franchised-and-managed hotels

195

168

175

 

 Total hotels in operation

207

170

177

 
         
         

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

 
         
 

As of and for the quarter ended

   
 

September 30,

   
 

2010

2011

   

Total hotels in operation:

280

280

   

 Leased-and-operated hotels

178

178

   

 Franchised-and-managed hotels

102

102

   

Total Hotel rooms in operation

33,300

33,300

   

 Leased-and-operated hotels

22,148

22,148

   

 Franchised-and-managed hotels

11,152

11,152

   

Occupancy rate (as a percentage)

98%

101%

   

Average daily rate (in RMB)

219

191

   

RevPAR (in RMB)

214

193

   
       

 

SOURCE China Lodging Group, Limited

 

 

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