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China Lodging Group, Limited Reports Second Quarter of 2012
Financial Results
GlobeNewswire
2012-08-10
-- Net Revenues increased 45.7% year-over-year for the second quarter of
2012, exceeding the guidance previously announced
-- Adjusted EBITDA from operating hotels (non-GAAP)1 increased 48.5%
year-over-year to RMB230.2 million (US$36.2 million)2 for the second
quarter
-- Adjusted net income attributable to China Lodging Group, Limited
increased 68.5% year-over-year to RMB75.0 million (US$11.8 million) for
the second quarter. Diluted net earnings per ADS3 for the second quarter
was RMB1.14 (US$0.18); adjusted diluted net earnings per ADS (non-GAAP)
for the second quarter was RMB1.22 (US$0.19)
-- Excluding franchised Starway hotels, the Company's RevPAR grew by 4%
year-over-year and same-hotel RevPAR grew by 7% year-over-year for the
second quarter
-- The Company had a total of 863 hotels in operation and 377 hotels in
pipeline as of June 30, 2012
-- The Company raised guidance for full year net revenues growth to 38% to
41%, up from previously announced range of 34.5% to 37.5%
SHANGHAI, China, Aug. 9, 2012 (GLOBE NEWSWIRE) -- 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 the quarter ended
June 30, 2012.
Second Quarter 2012 Operational Highlights
-- As of June 30, 2012, the Company had 388 leased (or
"leased-and-operated") hotels and 365 manachised (or
"franchised-and-managed") hotels in operation, with 35 net new leased
and 43 net new manachised hotels opened in the second quarter of 2012.
In the second quarter of 2012, the Company completed the acquisition of
a majority stake in Starway Hotels (Hong Kong) Limited ("Starway"). The
acquisition of Starway added 110 franchised hotels to China Lodging
Group's portfolio and strengthened the Company's leadership position in
the mid-scale hotel market. Hotels in operation totaled 863 and covered
131 cities in China as of June 30, 2012.
-- As of June 30, 2012, the Company had a pipeline of 112 leased hotels and
265 manachised hotels.
-- The occupancy rate for all hotels in operation, excluding franchised
Starway hotels, was 97% in the second quarter of 2012, compared with 93%
in the second quarter of 2011, and 91% in the previous quarter. The
year-over-year occupancy improvement was mainly attributable to robust
travel demand and a more mature hotel mix. The sequential increase was
mainly due to seasonality.
-- The ADR, or average daily rate, for all hotels, excluding franchised
Starway hotels, was RMB181 in the second quarter of 2012, compared with
RMB182 in the second quarter of 2011 and RMB172 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, partially
offset by the increase in same-hotel ADR. The sequential increase was
mainly due to seasonality.
-- RevPAR, defined as revenue per available room, excluding franchised
Starway hotels, was RMB176 in the second quarter of 2012, compared with
RMB170 in the second quarter of 2011 and RMB156 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 increase was
mainly due to seasonality.
-- For all the hotels which had been in operation for at least 18 months,
excluding franchised Starway hotels, same-hotel RevPAR was RMB195 for
the second quarter of 2012, a 7% increase from RMB182 for the second
quarter of 2011, with a 3% increase in ADR and a 4% increase in
occupancy.
-- As of June 30, 2012, HanTing Club had more than 6 million members,
including individual members and e-members, and corporate members, who
contributed more than 80% of room nights sold during the second quarter
of 2012. In the second quarter of 2012, 96% of room nights sold were
sold through the Company's own channels.
"In the first half of 2012, we made solid progress in the
implementation of our multi-brand strategy. With the addition of
Starway, we now have two brands, Seasons and Starway, to cover the
mid-scale hotel market, and another two brands, HanTing Express and Hi
Inn, to address the economy hotel market. Distinctively positioned in
the marketplace, the four brands consist of both standardized,
performance-oriented brands such as Seasons and Hanting Express, and
variety-rich, design-oriented brands such as Starway and Hi Inn. Such a
portfolio opens us up to a wide range of customers and provides us
significant flexibility when consolidating various hotel assets in the
market," commented Mr. Qi Ji, founder, executive Chairman and Chief
Executive Officer of China Lodging Group.
Second Quarter of 2012 Financial Results
Total revenues for the second quarter were RMB846.4 million (US$133.2
million), representing an increase of 45.7% year-over-year and 22.9%
sequentially. The year-over-year and sequential increase was primarily
due to the Company's continued expansion of its hotel network and an
increase in RevPAR.
Total revenues from leased hotels for the second quarter of 2012 were
RMB764.6 million (US$120.4 million), representing an increase of 44.3%
year-over-year and 21.9% sequentially.
Total revenues from manachised and franchised hotels for the second
quarter of 2012 were RMB81.8million (US$12.9 million), representing a
60.2% year-over-year increase and a 32.9% increase sequentially.
Net revenues for the second quarter of 2012 were RMB798.2 million
(US$125.6 million), representing an increase of 45.7% year-over-year
and 22.9% sequentially. The result was above the high end of our
previously announced guidance.
Hotel operating costs for the second quarter of 2012 were RMB580.4
million (US$91.4 million), compared to RMB395.7 million (US$61.2
million) for the second quarter of 2011 and RMB549.4 million (US$87.2
million) for the previous quarter, representing a 46.7% and 5.7%
increase, respectively. The year-over-year increase in hotel operating
costs was mainly driven by the Company's hotel network expansion,
higher occupancy, and cost inflation. Total hotel operating costs
excluding share-based compensation expenses (non-GAAP) were RMB579.8
million (US$91.3 million), representing 72.6% of net revenues, compared
to 72.1% for the second quarter in 2011 and 84.5% in the previous
quarter. The year-over-year increase was primarily due to significant
increase of personnel costs, driven by inflation and higher incentive
payout. The sequential decrease in hotel operating costs as a
percentage of net revenues was mainly due to seasonality.
Selling and marketing expenses for the second quarter of 2012 were
RMB27.3 million (US$4.3 million), compared to RMB22.7 million (US$3.5
million) for the second quarter of 2011 and RMB22.2 million (US$3.5
million) for the previous quarter. Selling and marketing expenses
excluding share-based compensation expenses (non-GAAP) were RMB27.0
million (US$4.3 million), or 3.4 % of net revenues, compared to 4.1%
for the second quarter in 2011 and 3.4% for the previous quarter. The
year-over-year decrease was mainly attributable to an enlarged revenue
base.
General and administrative expenses for the second quarter of 2012 were
RMB51.8 million (US$8.2 million), compared to RMB42.4 million (US$6.6
million) for the second quarter of 2011 and RMB48.8 million (US$7.8
million) for the previous quarter. General and administrative expenses
excluding share-based compensation expenses (non-GAAP) were RMB48.1
million (US$7.6 million), representing 6.0% of the net revenues for the
second quarter of 2012, compared with 7.1% of the net revenues for the
second quarter of 2011 and for the previous quarter. The year-over-year
and sequential decrease in percentage was mainly due to an enlarged
revenue base.
Pre-opening expenses for the second quarter of 2012 were RMB56.3
million (US$8.9 million), representing a year-over-year increase of
20.9% and a sequential increase of 36.1%. The increase in pre-opening
expenses was primarily driven by the increase in the number of leased
hotels under construction during the period. Pre-opening expenses as a
percentage of net revenues decreased to 7.0% in the second quarter of
2012 from 8.5% a year ago due to an enlarged mature hotel portfolio.
Income from operations for the quarter was RMB82.4 million (US$13.0
million), compared to income from operations of RMB40.5 million (US$6.3
million) for the second quarter of 2011 and loss from operations of
RMB12.3 million (US$2.0 million) for the previous quarter. Excluding
share-based compensation expenses, adjusted income from operations
(non-GAAP) for the quarter was RMB87.1 million (US$13.7 million),
representing 11.0% of net revenues, compared with 8.2% during the
second quarter of 2011.
Net income attributable to China Lodging Group, Limited for the second
quarter was RMB70.3 million (US$11.1 million), compared to net income
attributable to China Lodging Group, Limited of RMB40.3 million (US$6.2
million) for the second quarter of 2011 and net loss attributable to
China Lodging Group, Limited of RMB9.4 million (US$1.5 million) for the
previous quarter. Excluding share-based compensation expenses, adjusted
net income attributable to China Lodging Group, Limited (non-GAAP) for
the second quarter of 2012 was RMB75.0 million (US$11.8 million),
compared to adjusted net income attributable to China Lodging Group,
Limited of RMB44.5 million (US$6.9 million) for the second quarter of
2011 and adjusted net loss attributable to China Lodging Group, Limited
of RMB6.1 million (US$1.0 million) for the previous quarter. The
year-over-year increase of 68.5% in adjusted net income was primarily
due to the expansion of the Company's hotel network and improvement in
operating margin.
Basic and diluted net earnings per share/ADS. For the second quarter of
2012, basic net earnings per share and diluted net earnings per share
were RMB0.29 (US$0.05); basic net earnings per ADS was RMB1.16
(US$0.18) and diluted net earnings per ADS was RMB1.14 (US$0.18).
Excluding share-based compensation expenses, adjusted basic net
earnings per share (non-GAAP) was RMB0.31 (US$0.05) and adjusted
diluted net earnings per share (non-GAAP) was RMB0.30 (US$0.05), and
adjusted basic net earnings per ADS (non-GAAP) was RMB1.23 (US$0.19)
and adjusted diluted net earnings per ADS (non-GAAP) was RMB1.22
(US$0.19).
EBITDA (non-GAAP) for the second quarter of 2012 was RMB169.3 million
(US$26.7 million), compared to RMB104.3 million (US$16.1 million) for
the second quarter of 2011 and RMB66.3 million (US$10.5 million) for
the previous quarter. Adjusted EBITDA from operating hotels (non-GAAP)
for the second quarter of 2012 was RMB230.2 million (US$36.2 million),
representing an increase of 48.5% from the second quarter of 2011 and
an increase of 107.5% sequentially.
Hotel income (non-GAAP), defined as the difference between net revenues
and hotel operating costs, was RMB217.8 million (US$34.3 million) for
the second quarter of 2012, compared with RMB152.1 million (US$23.5
million) for the second quarter of 2011 and RMB100.1 million (US$15.9
million) for the previous quarter. The year-over-year increase of hotel
income (non-GAAP) was mainly attributable to the enlarged manachised
and franchised hotel network and increased number of mature leased
hotels in the Company's portfolio. For leased hotels in operation for
at least six months, hotel income (non-GAAP) was RMB168.1 million
(US$26.5 million) during the second quarter of 2012, or 25% of net
revenues derived from those hotels. Leased hotels in operation for less
than six months, which accounted for 12% of leased room nights
available for sale for the second quarter of 2012, derived a hotel loss
(non-GAAP) of RMB13.1 million (US$2.1 million), or 22% of net revenues
derived from those hotels for this quarter, mainly due to lower revenue
achieved by those hotels during their ramp-up stage. For manachised
hotels, hotel income (non-GAAP) was RMB62.9 million (US$9.9 million),
or 82% of net revenue derived from those hotels.
Cash flow. Net operating cash flow for the second quarter of 2012 was
RMB180.6 million (US$28.4 million). Cash spent on the purchase of
property and equipment, purchase of intangible assets, long-term
investment and acquisitions, which was part of investing cash flow, was
RMB256.9 million (US$40.4 million).
Cash and cash equivalents and restricted cash. As of June 30, 2012, the
Company had a total balance of cash and cash equivalents and restricted
cash of RMB556.1 million (US$87.5 million).
Business Outlook and Guidance for Third Quarter of 2012
"Our strong performance in the first half of this year was mainly a
result of robust domestic travel demand, and the successful
implementation of our multi-brand strategy. Both Seasons and Hi Inn
achieved above-group-average growth in terms of same-hotel RevPAR. We
are confident that China's domestic travel market will continue to grow
strongly. We adjust up our full year revenue guidance to 38% to 41%, "
commented Mr. Ji.
The Company expects to achieve net revenues in the range of RMB845 to
865 million in the third 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 10 p.m.
EDT, Thursday, August 9, 2012 (or 10 a.m. on Friday, August 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 1059 5925. 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 August 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 1059 5925.
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 .
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 financial measures as defined 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, 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-opening expenses, 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
year and 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 income or 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 of its 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 performance of 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, manachised and
franchised models. Under the leased model, the Company directly
operates hotels typically located on leased properties. Under the
manachised model, the Company manages franchised hotels and collects
management fees from franchisees. Under the franchised model, the
Company licenses its brand name to, and collects license fees from,
franchisees, but does not directly manage the franchisees' hotels.
China Lodging Group provides business and leisure travelers with
high-quality, and conveniently-located hotels. As of June 30, 2012, the
Company had 863 hotels in 131 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 growth
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 following non-GAAP financial measures are 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$1.00=RMB6.353 on June 29, 2012 as
set forth in the H.10 statistical release of the Federal Reserve Board.
3 Each ADS represents four of the Company's ordinary shares.
--Financial Tables and Operational Data Follow--
China Lodging Group, Limited
Unaudited Condensed Consolidated Balance Sheets
December
31, 2011 June 30, 2012
---------- --------------------
RMB RMB US$
(in thousands)
Assets
Current assets:
Cash and cash equivalents 781,601 541,143 85,179
Restricted cash 1,500 14,955 2,354
Accounts receivable, net 37,416 50,871 8,007
Prepaid rent 228,087 256,894 40,437
Inventories 31,232 31,783 5,003
Income tax receivables -- 3,282 517
Other current assets 53,862 61,478 9,677
Deferred tax assets 40,119 40,119 6,315
---------- ---------- --------
Total current assets 1,173,817 1,000,525 157,489
Property and equipment,
net 2,095,794 2,448,027 385,334
Intangible assets, net 69,779 120,750 19,007
Long term investment 28,129 4,428
Goodwill 42,536 42,689 6,720
Other assets 102,056 118,803 18,699
Deferred tax assets 40,968 40,968 6,449
---------- ---------- --------
Total assets 3,524,950 3,799,891 598,126
========== ========== ========
Liabilities and equity
Current liabilities:
Long-term debt, current
portion -- 250 39
Accounts payable 417,605 471,839 74,270
Amount due to related
parties 1,030 1,417 223
Salary and welfare
payable 80,266 88,879 13,990
Deferred revenue 138,148 163,931 25,804
Accrued expenses and
other current
liabilities 142,146 163,674 25,764
Income tax payable 14,148 -- --
---------- ---------- --------
Total current liabilities 793,343 889,990 140,090
Long-term debt -- 720 113
Deferred rent 329,774 389,687 61,339
Deferred revenue 71,698 85,977 13,533
Other long-term
liabilities 61,574 75,791 11,931
Deferred tax liabilities 12,677 12,677 1,995
---------- ---------- --------
Total liabilities 1,269,066 1,454,842 229,001
---------- ---------- --------
Equity
Ordinary shares 179 179 28
Additional paid-in
capital 2,199,954 2,212,607 348,278
Retained earnings 85,127 146,029 22,986
Accumulated other
comprehensive loss (39,166) (37,773) (5,946)
---------- ---------- --------
Total China Lodging Group,
Limited equity 2,246,094 2,321,042 365,346
Noncontrolling interest 9,790 24,007 3,779
---------- ---------- --------
Total equity 2,255,884 2,345,049 369,125
---------- ---------- --------
Total liabilities and
equity 3,524,950 3,799,891 598,126
========== ========== ========
China Lodging Group, Limited
Unaudited Condensed Consolidated Statements of Comprehensive Income
Quarter Ended
----------------------------------------------
June 30, March 31,
2011 2012 June 30, 2012
---------- ---------- ----------------------
RMB RMB RMB US$
(in thousands, except per share and per ADS
data)
Revenues:
Leased hotels 529,733 627,006 764,633 120,358
Manachised and franchised hotels 51,061 61,549 81,782 12,873
---------- ---------- ---------- ----------
Total revenues 580,794 688,555 846,415 133,231
Less: business tax and related
surcharges (33,054) (39,097) (48,181) (7,584)
---------- ---------- ---------- ----------
Net revenues 547,740 649,458 798,234 125,647
---------- ---------- ---------- ----------
Operating costs and expenses:
Hotel operating costs:
Rents (157,805) (205,397) (219,265) (34,514)
Utilities (28,669) (64,729) (39,532) (6,223)
Personnel costs (78,208) (105,771) (127,652) (20,093)
Depreciation and amortization (53,143) (74,166) (80,566) (12,682)
Consumables, food and
beverage (53,099) (67,633) (81,904) (12,892)
Others (24,749) (31,672) (31,517) (4,961)
---------- ---------- ---------- ----------
Total hotel operating costs (395,673) (549,368) (580,436) (91,365)
Selling and marketing expenses (22,693) (22,211) (27,327) (4,301)
General and administrative
expenses (42,361) (48,812) (51,798) (8,153)
Pre-opening expenses (46,548) (41,355) (56,269) (8,857)
---------- ---------- ---------- ----------
Total operating costs and
expenses (507,275) (661,746) (715,830) (112,676)
---------- ---------- ---------- ----------
Income/(Loss) from operations 40,465 (12,288) 82,404 12,971
Interest income 4,517 3,102 4,210 663
Interest expenses (232) (213) (209) (33)
Other income 410 375 1,082 170
Foreign exchange gain 4,369 (643) (1,463) (230)
---------- ---------- ---------- ----------
Income/(Loss) before income tax 49,529 (9,667) 86,024 13,541
Income tax expense/(benefit) (8,859) 967 (15,536) (2,446)
---------- ---------- ---------- ----------
Net income/(loss) 40,670 (8,700) 70,488 11,095
Net income attributable to
noncontrolling interests (359) (729) (157) (25)
---------- ---------- ---------- ----------
Net income/(loss) attributable
to China Lodging Group, Limited 40,311 (9,429) 70,331 11,070
========== ========== ========== ==========
Net earnings/(loss) per share
-- Basic 0.17 (0.04) 0.29 0.05
-- Diluted 0.16 (0.04) 0.29 0.05
Net earnings/(loss) per ADS
-- Basic 0.67 (0.16) 1.16 0.18
-- Diluted 0.65 (0.16) 1.14 0.18
Weighted average ordinary shares
outstanding
-- Basic 241,814 242,629 242,894 242,894
-- Diluted 246,470 242,629 245,900 245,900
Other comprehensive
income/(loss), net of tax
Foreign currency translation
adjustments (4,268) 231 1,162 183
---------- ---------- ---------- ----------
Comprehensive income/(loss) 36,402 (8,469) 71,650 11,278
Comprehensive income/(loss)
attributable to the
noncontrolling interest (359) (729) (157) (25)
---------- ---------- ---------- ----------
Comprehensive income/(loss)
attributable to China Lodging
Group, Limited 36,043 (9,198) 71,493 11,253
========== ========== ========== ==========
China Lodging Group, Limited
Unaudited Condensed Consolidated Statements of Cash Flows
Quarter Ended
---------------------------------------------
June 30, March 31,
2011 2011 June 30, 2012
---------- ---------- ---------------------
RMB RMB RMB US$
(in thousands)
Operating activities:
Net income 40,670 (8,700) 70,488 11,095
Adjustments to reconcile net income
to net cash provided by operating
activities:
Share-based compensation 4,186 3,288 4,657 733
Depreciation and amortization 54,885 76,512 83,238 13,102
Deferred taxes 16 -- -- --
Bad debt expenses 92 1,105 251 40
Deferred rent 27,154 25,496 34,948 5,501
Impairment loss -- -- 800 126
Excess tax benefit from share-based
compensation -- (352) (292) (46)
Changes in operating assets and
liabilities, net of effect of
acquisitions:
Accounts receivable 605 (5,540) (7,151) (1,126)
Prepaid rent (13,085) (3,578) (25,228) (3,971)
Inventories (906) 3,570 (4,095) (645)
Amount due from related parties 3,267 -- -- --
Other current assets 435 4,513 (14,227) (2,239)
Other assets (7,255) (5,016) (11,732) (1,847)
Accounts payable (1,658) 53 (381) (60)
Amount due to related parties 133 479 (92) (14)
Salary and welfare payables 15,379 (18,302) 26,008 4,094
Deferred revenue 15,105 17,964 22,097 3,478
Accrued expenses and other current
liabilities 24,721 20,695 (6,973) (1,098)
Income tax payable and receivable (5,584) (14,611) (2,791) (439)
Other long-term liabilities 3,033 3,397 11,038 1,737
---------- ---------- ---------- ---------
Net cash provided by operating
activities 161,193 100,973 180,563 28,421
---------- ---------- ---------- ---------
Investing activities:
Purchase of property and equipment (180,730) (250,065) (205,995) (32,425)
Purchases of intangibles (938) (215) (855) (135)
Acquisitions, net of cash received (4,290) (4,610) (21,895) (3,446)
Payment to acquire investment -- -- (28,129) (4,428)
Proceeds from sales of short-term
investments 100,000 -- -- --
Decrease (increase) in restricted
cash (531) (12,995) (460) (72)
---------- ---------- ---------- ---------
Net cash used in investing activities (86,489) (267,885) (257,334) (40,506)
---------- ---------- ---------- ---------
Financing activities:
Net proceeds from issuance of
ordinary shares upon exercise of
option 4,145 2,019 2,714 427
Proceeds from long-term bank loans -- -- 1,000 157
Repayment of long term debt -- -- (30) (5)
Funds advanced from noncontrolling
shareholders 1,485 -- -- --
Repayment of funds advanced from
noncontrolling interest holders (535) (810) (575) (91)
Contribution from noncontrolling
interest holders -- 5 -- --
Dividend paid to noncontrolling
interest holders (2,831) (804) (2,331) (367)
Excess tax benefit from share-based
compensation -- 352 292 46
---------- ---------- ---------- ---------
Net cash provided by (used in)
financing activities 2,264 762 1,070 167
---------- ---------- ---------- ---------
Effect of exchange rate changes on
cash and cash equivalents (4,269) 231 1,162 185
Net increase (decrease) in cash and
cash equivalents 72,699 (165,919) (74,539) (11,733)
Cash and cash equivalents, beginning
of period 902,002 781,601 615,682 96,912
---------- ---------- ---------- ---------
Cash and cash equivalents, end of
period 974,701 615,682 541,143 85,179
========== ========== ========== =========
China Lodging Group, Limited
Unaudited reconciliation of GAAP and Non-GAAP Results
Quarter Ended June 30, 2012
----------------------------------------------------------------
GAAP % of Net Share-based % of Net Non-GAAP % of Net
Result Revenues Compensation Revenues Result Revenues
---------- -------- ------------ -------- -------- --------
RMB RMB RMB
(in thousands)
Hotel operating costs 580,436 72.7% 629 0.1% 579,807 72.6%
Selling and marketing expenses 27,327 3.4% 309 0.0% 27,018 3.4%
General and administrative expenses 51,798 6.5% 3,719 0.5% 48,079 6.0%
Pre-opening expenses 56,269 -- 56,269
---------- 7.0% ------------ 0.0% -------- 7.0%
Total operating costs and expenses 715,830 4,657 711,173
========== 89.6% ============ 0.6% ======== 89.0%
Income from operations 82,404 4,657 87,061
========== 10.4% ============ 0.6% ======== 11.0%
Quarter Ended June 30, 2012
----------------------------------------------------------------
GAAP % of Net Share-based % of Net Non-GAAP % of Net
Result Revenues Compensation Revenues Result Revenues
---------- -------- ------------ -------- -------- --------
US$ US$ US$
(in thousands)
Hotel operating costs 91,365 72.7% 99 0.1% 91,266 72.6%
Selling and marketing expenses 4,301 3.4% 49 0.0% 4,252 3.4%
General and administrative expenses 8,153 6.5% 585 0.5% 7,568 6.0%
Pre-opening expenses 8,857 -- 8,857
---------- 7.0% ------------ 0.0% -------- 7.0%
Total operating costs and expenses 112,676 733 111,943
========== 89.6% ============ 0.6% ======== 89.0%
Income from operations 12,971 733 13,704
========== 10.4% ============ 0.6% ======== 11.0%
Quarter Ended March 31, 2012
----------------------------------------------------------------
GAAP % of Net Share-based % of Net Non-GAAP % of Net
Result Revenues Compensation Revenues Result Revenues
---------- -------- ------------ -------- -------- --------
RMB RMB RMB
(in thousands)
Hotel operating costs 549,368 84.6% 615 0.1% 548,753 84.5%
Selling and marketing expenses 22,211 3.4% 270 0.0% 21,941 3.4%
General and administrative expenses 48,812 7.5% 2,403 0.4% 46,409 7.1%
Pre-opening expenses 41,355 -- 41,355
---------- 6.4% ------------ 0.0% -------- 6.4%
Total operating costs and expenses 661,746 3,288 658,458
========== 101.9% ============ 0.5% ======== 101.4%
Income/(Loss) from operations (12,288) 3,288 (9,000)
========== -1.9% ============ 0.5% ======== -1.4%
Quarter Ended June 30, 2011
----------------------------------------------------------------
GAAP % of Net Share-based % of Net Non-GAAP % of Net
Result Revenues Compensation Revenues Result 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 -- 46,548
---------- 8.5% ------------ 0.0% -------- 8.5%
Total operating costs and expenses 507,275 4,186 503,089
========== 92.5% ============ 0.7% ======== 91.8%
Income from operations 40,465 4,186 44,651
========== 7.5% ============ 0.7% ======== 8.2%
China Lodging Group, Limited
Unaudited reconciliation of GAAP and Non-GAAP Results
Quarter Ended
---------------------------------------------
June 30, March 31,
2011 2012 June 30, 2012
---------- ---------- ---------------------
RMB RMB RMB US$
(in thousands, except per share and per ADS
data)
Net income/(loss)
attributable to China
Lodging Group, Limited
(GAAP) 40,311 (9,429) 70,331 11,070
Share-based compensation
expenses 4,186 3,288 4,657 733
---------- ---------- ---------- ---------
Adjusted net income/(loss)
attributable to China
Lodging Group, Limited
(non-GAAP) 44,497 (6,141) 74,988 11,803
========== ========== ========== =========
Net earnings/(loss) per share (GAAP)
-- Basic 0.17 (0.04) 0.29 0.05
-- Diluted 0.16 (0.04) 0.29 0.05
Net earnings/(loss) per ADS (GAAP)
-- Basic 0.67 (0.16) 1.16 0.18
-- Diluted 0.65 (0.16) 1.14 0.18
Adjusted net earnings/(loss) per share
(non-GAAP)
-- Basic 0.18 (0.03) 0.31 0.05
-- Diluted 0.18 (0.03) 0.30 0.05
Adjusted net earnings/(loss) per ADS
(non-GAAP)
-- Basic 0.74 (0.10) 1.23 0.19
-- Diluted 0.72 (0.10) 1.22 0.19
Weighted average ordinary shares
outstanding
-- Basic 241,814 242,629 242,894 242,894
-- Diluted 246,470 242,629 245,900 245,900
Quarter Ended
---------------------------------------------
June 30, March 31,
2011 2012 June 30, 2012
---------- ---------- ---------------------
RMB RMB RMB US$
(in thousands)
Net income/(loss)
attributable to China
Lodging Group, Limited
(GAAP) 40,311 (9,429) 70,331 11,070
Interest expenses 232 213 209 33
Income tax expense 8,859 (967) 15,536 2,446
Depreciation and amortization 54,885 76,512 83,238 13,102
---------- ---------- ---------- ---------
EBITDA (non-GAAP) 104,287 66,329 169,314 26,651
Pre-opening expenses 46,548 41,355 56,269 8,857
Share-based Compensation 4,186 3,288 4,657 733
---------- ---------- ---------- ---------
Adjusted EBITDA from
operating hotels (non-GAAP) 155,021 110,972 230,240 36,241
========== ========== ========== =========
Quarter Ended
---------------------------------------------
June 30, March 31,
2011 2012 June 30, 2012
---------- ---------- ---------------------
RMB RMB RMB US$
(in thousands)
Net revenues (GAAP) 547,740 649,458 798,234 125,647
Less: Hotel operating costs (395,673) (549,368) (580,436) (91,365)
---------- ---------- ---------- ---------
Hotel income (non-GAAP) 152,067 100,090 217,798 34,282
========== ========== ========== =========
China Lodging Group, Limited
Operating Data
As of
-------------------------
June March June
30, 31, 30,
2011 2012 2012
------- ------- -------
Total hotels in
operation: 516 675 863
Leased hotels 281 353 388
Manachised hotels 235 322 365
Franchised hotels* -- -- 110
Total hotel rooms in
operation 58,786 75,622 95,573
Leased hotels 33,677 42,057 46,083
Manachised hotels 25,109 33,565 38,045
Franchised hotels* -- -- 11,445
Number of cities 80 111 131
* refers to franchised Starway
hotels
Hotel breakdown by
brand As of
-------------------------
June March June
30, 31, 30,
2011 2012 2012
------- ------- -------
Total hotels in
operation: 516 675 863
Seasons Hotel 19 24 27
Hanting Express Hotel 475 622 696
Hi Inn 22 29 30
Starway Hotel -- -- 110
For the quarter ended
-------------------------
June March June
30, 31, 30,
2011 2012 2012
------- ------- -------
Occupancy rate (as a percentage)
Leased hotels 92% 90% 97%
Manachised hotels 95% 92% 98%
Blended 93% 91% 97%
Average daily room rate (in RMB)
Leased hotels 187 176 187
Manachised hotels 176 166 175
Blended 182 172 181
RevPAR (in RMB)
Leased hotels 172 158 181
Manachised hotels 168 153 171
Blended 170 156 176
Like-for-like performance for leased and
manachised hotels opened for at least 18 months
during the current quarter
As of and for
the quarter
ended
----------------
June 30,
2011 2012
------- -------
Total 428 428
Leased hotels 239 239
Manachised hotels 189 189
Total 49,875 49,875
Leased hotels 29,795 29,795
Manachised hotels 20,080 20,080
Occupancy rate (as a
percentage) 98% 102%
Average daily rate (in
RMB) 186 191
RevPAR (in RMB) 182 195
CONTACT: Ida Yu
Investor Relations Manager
Tel: 86 (21) 6195 9561
Email: ir@htinns.com
http://ir.htinns.com
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