May 10, 2017

China Lodging Group, Limited Reports First Quarter of 2017 Results

  • A total of 3,336 hotels or 335,900 hotel rooms in operation as of March 31, 2017.
  • Net revenues increased 10.8% year-over-year to RMB1,593.1 million (US$231.4 million) 1 for the first quarter of 2017.
  • Adjusted EBITDA (non-GAAP) increased 35.5% year-over-year to RMB373.5 million (US$54.3 million) for the first quarter of 2017.
  • Net income attributable to China Lodging Group, Limited was RMB148.1 million (US$21.5 million) for the first quarter of 2017, compared with RMB69.4 million for the first quarter of 2016.
  • Basic earnings per ADS2 were RMB2.13 (US$0.31) and diluted earnings per ADS were RMB2.06 (US$0.30) for the first quarter of 2017. Excluding share-based compensation expenses, adjusted basic earnings per ADS (non-GAAP) were RMB2.35 (US$0.34) and adjusted diluted earnings per ADS (non-GAAP) were RMB2.28 (US$0.33) for the first quarter of 2017.
  • The Company provided guidance for Q2 2017 net revenues growth of 10% to 12%.

SHANGHAI, China, May 10, 2017 (GLOBE NEWSWIRE) -- China Lodging Group, Limited (NASDAQ:HTHT) ("China Lodging Group", "HuaZhu" or the "Company"), a leading and fast-growing multi-brand hotel group in China, today announced its unaudited financial results for the first quarter ended March 31, 2017.
                                          
Operational Highlights of First Quarter 2017

  • During the first quarter of 2017, the Company opened 5 leased and owned hotels and 84 manachised ("franchised-and-managed") and franchised hotels, and closed 9 leased and owned hotels and 13 manachised and franchised hotels.

  • The ADR, which is defined as the average daily rate for all hotels in operation, was RMB182 in the first quarter of 2017, compared with RMB172 in the first quarter of 2016 and RMB186 in the previous quarter. The year-over-year increase of 5.2% was due to more favorable brand mix with an increased proportion of midscale and upscale hotels. The sequential decrease mainly resulted from seasonality.

  • The occupancy rate for all hotels in operation was 83.9% in the first quarter of 2017, compared with 80.4% in the first quarter of 2016 and 84.7% in the previous quarter. The year-over-year increase was mainly due to the improvement of economy hotels. The sequential decrease resulted mainly from seasonality.

  • RevPAR, defined as revenue per available room for all hotels in operation, was RMB152 in the first quarter of 2017, compared with RMB139 in the first quarter of 2016 and RMB158 in the previous quarter. The year-over-year increase was attributable to both higher ADR and occupancy. The sequential decrease resulted mainly from seasonality.

  • For all hotels which had been in operation for at least 18 months, the same-hotel RevPAR was RMB151 for the first quarter of 2017, representing a 5.8% year-over-year increase, with a 1.8% increase in ADR and a 3.3-percentage-point increase in occupancy rate. The midscale and upscale hotels registered an 9.2% same-hotel RevPAR improvement, with a 6.9% increase in ADR and 1.7-percentage-point increase in occupancy rate.

  • As of March 31, 2017, the Company's loyalty program had approximately 81.4 million members, who contributed more than 77% of room nights sold during the first quarter of 2017. In the first quarter of 2017, approximately 86% of room nights were sold through the Company's own channels.

"We are pleased by our performance in the quarter across the board. Our blended RevPAR achieved 9.8% year-over-year growth while same-hotel RevPAR grew by 5.8% for the first quarter. This was mainly driven by our continuous upgrade to HanTing 2.0, coupled with continuously-growing demand for our midscale hotels." said Ms. Jenny Zhang, Chief Executive Officer of China Lodging Group.
    
First Quarter of 2017 Financial Results

(RMB in thousands)Q1 2016 Q4 2016 Q1 2017
Revenues:     
Leased and owned hotels 1,201,761   1,290,575  1,223,476
Manachised and franchised hotels  318,103    367,983   361,362
Others  628    11,365   8,268
Total revenues 1,520,492   1,669,923  1,593,106
Less: business tax and related taxes  (82,507)   -   -
Net revenues 1,437,985   1,669,923  1,593,106
Net revenues from leased and owned hotels 1,136,549   1,290,575  1,223,476
Net revenues from manachised and franchised hotels  300,842    367,983   361,362
Others  594    11,365   8,268
      
Note: Value-added tax ("VAT") has been implemented for hospitality industry to replace business tax in China, effective May 1, 2016. For comparison purpose, the business tax and related taxes in Q1 2016 are reallocated to reflect net revenues for each business.

Net revenues for the first quarter of 2017 were RMB1,593.1 million (US$231.4 million), representing a 10.8% year-over-year increase and a 4.6% sequential decrease. The year-over-year increase was primarily due to our hotel network expansion and improved blended RevPAR. The sequential decrease was due to seasonality.

Net revenues from leased and owned hotels for the first quarter of 2017 were RMB1,223.5 million (US$177.7 million), representing a 7.6% year-over-year increase and a 5.2% sequential decrease.

Net revenues from manachised and franchised hotels for the first quarter of 2017 were RMB361.4 million (US$52.5 million), representing a 20.1% year-over-year increase and a 1.8% sequential decrease. Net revenues from manachised and franchised hotels accounted for 22.7% of the Company's net revenues in the first quarter of 2017, up from 20.9% a year ago.

Other revenues represent revenues generated from other than hotel businesses, which mainly include revenues from HuaZhu mall and the provision of IT products and services to hotels, totalling RMB8.3 million (US$1.2 million) in the first quarter of 2017. 

(RMB in thousands)Q1 2016 Q4 2016 Q1 2017
Operating costs and expenses:     
Hotel operating costs 1,200,459  1,264,602  1,198,962
Other operating costs  -   2,319   1,933
Selling and marketing expenses  33,055   46,142   34,268
General and administrative expenses   106,607   143,434   165,343
Pre-opening expenses  22,019   19,747   24,112
Total operating costs and expenses 1,362,140  1,476,244  1,424,618

Hotel operating costs for the first quarter of 2017 were RMB1,199.0 million (US$174.2 million), compared to RMB1,200.5 million in the first quarter of 2016 and RMB1,264.6 million in the previous quarter, representing a 0.1% year-over-year decrease and a 5.2% sequential decrease. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the first quarter of 2017 were RMB1,194.3 million (US$173.5 million), representing 75.0% of net revenues, compared to 83.3% for the first quarter in 2016 and 75.5% for the previous quarter. The year-over-year and sequential decrease in the percentage was mainly attributable to the improved blended RevPAR and the maturity of our leased and owned hotels.

Selling and marketing expenses for the first quarter of 2017 were RMB34.3 million (US$5.0 million), compared to RMB33.1 million in the first quarter of 2016 and RMB46.1 million in the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the first quarter of 2017 were RMB34.0 million (US$4.9 million), or 2.2% of net revenues, compared to 2.3% for the first quarter of 2016 and 2.8% for the previous quarter. The sequential decrease was mainly attributable to the lower marketing spending in the first quarter of 2017.

General and administrative expenses for the first quarter of 2017 were RMB165.3 million (US$24.0 million), compared to RMB106.6 million in the first quarter of 2016 and RMB143.4 million in the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the first quarter of 2017 were RMB154.5 million (US$22.4 million), representing 9.7% of net revenues, compared with 6.6% of net revenues in the first quarter of 2016 and 8.1% in the previous quarter. The year-over-year and sequential increase was mainly due to one-off Crystal Orange Hotels acquisition transaction costs amounting to RMB45.2 million (US$6.6 million), representing 2.8% of net revenues.

Pre-opening expenses for the first quarter of 2017 were RMB24.1 million (US$3.5 million), representing a 9.5% year-over-year increase and a 22.1% sequential increase. The year-over-year and sequential increase in percentage were mainly due to more midscale or upscale leased and owned hotels were under construction in the first quarter of 2017.

Income from operations for the first quarter of 2017 was RMB167.3 million (US$24.3 million), compared to RMB70.8 million in the first quarter of 2016 and RMB185.7 million in the previous quarter. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the first quarter of 2017 was RMB183.1 million (US$26.6 million), compared to adjusted income from operation (non-GAAP) of RMB85.6 million for the first quarter of 2016 and RMB198.2 million for the previous quarter. The adjusted operating margin,defined as adjusted operating income (non-GAAP) as percentage of net revenues, for the first quarter of 2017 was 11.5%, compared with 5.9% in the first quarter of 2016 and 11.8% in the previous quarter. The improved year-over-year adjusted operating margin was mainly attributable to the improved blended RevPAR and VAT deductions.

Net income attributable to China Lodging Group, Limited for the first quarter of 2017 was RMB148.1 million (US$21.5 million), compared to RMB69.4 million in the first quarter of 2016 and RMB125.9 million in the previous quarter. Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group, Limited (non-GAAP) for the first quarter of 2017 was RMB163.9 million (US$23.8 million), representing a 94.5% year-over-year increase and a 18.4% sequential increase. The year-over-year increase was mainly attributable to our expanded hotel network, the improved blended RevPAR, and VAT deductions.

Basic and diluted earnings per share/ADS.  For the first quarter of 2017, basic earnings per share were RMB0.53 (US$0.08) and diluted earnings per share were RMB0.52 (US$0.07); basic earnings per ADS were RMB2.13 (US$0.31) and diluted earnings per ADS were RMB2.06 (US$0.30). For the first quarter of 2017, excluding share-based compensation expenses, adjusted basic earnings per share (non-GAAP) were RMB0.59 (US$0.09) and adjusted diluted earnings per share (non-GAAP) were RMB0.57 (US$0.08); adjusted basic earnings per ADS (non-GAAP) were RMB2.35 (US$0.34) and adjusted diluted earnings per ADS (non-GAAP) were RMB2.28 (US$0.33).

EBITDA (non-GAAP) for the first quarter of 2017 was RMB357.7 million (US$52.0 million), compared with RMB260.8 million in the first quarter of 2016 and RMB366.8 million in the previous quarter. Excluding share-based compensation expenses, adjusted EBITDA (non-GAAP) for the first quarter of 2017 was RMB373.5 million (US$54.3 million), compared with RMB275.7 million for the first quarter of 2016 and RMB379.3 million for the previous quarter.

Cash flow. Operating cash inflow for the first quarter of 2017 was RMB178.5 million (US$25.9 million). Investing cash outflow for the first quarter was RMB1,064.5 million (US$154.7 million), including a RMB700.0 million (US$101.7 million) deposit paid for the acquisition of Crystal Orange Hotels, which was recorded in other current assets.

Cash and cash equivalents and Restricted cash. As of March 31, 2017, the Company had a total balance of cash and cash equivalents and restricted cash of RMB2,376.0 million (US$345.2 million).

Debt financing. As of March 31, 2017, the Company had a short-term loan balance of RMB296.7 million (US$43.0 million) and the total credit facility available to the Company was RMB750.0 million.

Guidance for Second Quarter of 2017
For the second quarter of 2017, the Company expects net revenues to grow 10% to 12% year-over-year.

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

Conference Call
China Lodging Group's management will host a conference call at 9 p.m. ET, Wednesday, May 10, 2017 (or 9 a.m. on Thursday, May 11, 2017 in the Shanghai/Hong Kong time zone) following the announcement. To participate in the event by telephone, please dial +1 (855) 500 8701 (for callers in the US), +86 400 120 0654 (for callers in China Mainland), +852 3018 6776 (for callers in Hong Kong) or +65 6713 5440 (for callers outside of the US, China Mainland, and Hong Kong) and enter pass code 1174 2446.  Please dial in approximately 10 minutes before the scheduled time of the call.

A recording of the conference call will be available after the conclusion of the conference call through May 18, 2017. Please dial +1 (855) 452 5696 (for callers in the US) or +61 2 9003 4211 (for callers outside the US) and entering pass code 1174 2446.

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

Use of Non-GAAP Financial Measures
To supplement the Company's unaudited consolidated financial results presented in accordance with U.S. GAAP, the Company uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: hotel operating costs excluding share-based compensation expenses; general and administrative expenses excluding share-based compensation expenses; selling and marketing expenses excluding share-based compensation expenses; adjusted income from operations excluding share-based compensation expenses; adjusted operating margin excluding share-based compensation expenses; adjusted net income attributable to China Lodging Group, Limited excluding share-based compensation expenses; adjusted basic and diluted earnings per share and per ADS excluding share-based compensation expenses; EBITDA; and adjusted EBITDA excluding share-based compensation expenses. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of GAAP and non-GAAP results" set forth at the end of this release. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding Company performance by excluding share-based compensation expenses that may not be indicative of Company operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Company performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance. The Company believes these non-GAAP financial measures are also useful to investors in allowing for greater transparency with respect to supplemental information used regularly by Company management in financial and operational decision-making. A limitation of using non-GAAP financial measures excluding share-based compensation expenses is that share-based compensation expenses have been — and will continue to be — a significant recurring expense in the Company's business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

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

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

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

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

About China Lodging Group, Limited
China Lodging Group, Limited is a leading hotel operator and franchisor in China under 12 brand names. As of March 31, 2017, the Company had 3,336 hotels or 335,900 rooms in operation in 369 cities. With a primary focus on economy and midscale hotel segments, China Lodging Group's brands include Hi Inn, HanTing Hotel, Elan Hotel, JI Hotel, Starway Hotel, Joya Hotel, and Manxin Hotel. The Company also has the rights as master franchisee for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel, in Pan-China region.

The Company's business includes leased and owned, manachised and franchised models. Under the lease and ownership model, the Company directly operates hotels typically located on leased or owned properties. Under the manachise model, the Company manages manachised hotels through the on-site hotel managers it appoints and collects fees from franchisees. Under the franchise model, the Company provides training, reservation and support services to the franchised hotels and collects fees from franchisees but does not appoint on-site hotel managers. The Company applies a consistent standard and platform across all of its hotels. As of March 31, 2017, China Lodging Group operates 23 percent of its hotel rooms under lease and ownership model, 77 percent under manachise and franchise models.

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

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

1 The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6.8832 on March 31, 2017 as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm.

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

—Financial Tables and Operational Data Follow—

China Lodging Group, Limited 
Unaudited Condensed Consolidated Balance Sheets
 December 31, 2016 March 31, 2017
 RMB RMB US$
 (in thousands)
ASSETS     
Current assets:     
Cash and cash equivalents  3,235,007    2,375,492    345,114 
Restricted cash  500    500    73 
Accounts receivable, net  141,649    135,569    19,696 
Loan receivables  22,410    20,071    2,916 
Amounts due from related parties  98,453    171,256    24,880 
Prepaid rent  446,127    481,024    69,884 
Inventories  21,606    23,354    3,393 
Other current assets  208,929    916,022    133,080 
Total current assets  4,174,681    4,123,288    599,036 
      
Property and equipment, net  3,710,468    3,638,614    528,623 
Intangible assets, net  342,694    339,354    49,302 
Land use rights  145,521    144,178    20,946 
Long-term investments  1,064,321    1,135,342    164,944 
Goodwill  171,504    171,504    24,916 
Loan receivables  7,269    7,196    1,046 
Other assets  200,492    221,495    32,179 
Deferred tax assets  176,414    172,466    25,056 
Total assets  9,993,364    9,953,437    1,446,048 
      
LIABILITIES AND EQUITY     
Current liabilities:     
Short-term debt  298,291    296,670    43,101 
Accounts payable  584,731    459,979    66,826 
Amounts due to related parties  11,058    10,358    1,505 
Salary and welfare payables  274,259    169,507    24,626 
Deferred revenue  749,793    739,912    107,495 
Accrued expenses and other current liabilities  895,837    962,135    139,780 
Income tax payable  152,112    98,144    14,259 
Total current liabilities  2,966,081    2,736,705    397,592 
      
Deferred rent  1,023,843    1,037,099    150,671 
Deferred revenue  166,963    157,613    22,898 
Other long-term liabilities  323,991    332,542    48,312 
Deferred tax liabilities  96,329    97,327    14,140 
Total liabilities  4,577,207    4,361,286    633,613 
      
Equity:     
Ordinary shares  204    204    30 
Treasury shares  (107,331)   (107,331)   (15,593)
Additional paid-in capital  3,699,056    3,725,426    541,234 
Retained earnings  1,812,174    1,960,257    284,789 
Accumulated other comprehensive income (loss)  (4,503)   1,609    234 
Total China Lodging Group, Limited shareholders' equity  5,399,600    5,580,165    810,694 
Noncontrolling interest  16,557    11,986    1,741 
Total equity  5,416,157    5,592,151    812,435 
Total liabilities and equity  9,993,364    9,953,437    1,446,048 


China Lodging Group, Limited 
Unaudited Condensed Consolidated Statements of Comprehensive Income
 Quarter Ended 
 March 31, 2016 December 31, 2016 March 31, 2017 
 RMB RMB RMB US$ 
 (in thousands, except per share and per ADS data)
Revenues:        
Leased and owned hotels  1,201,761    1,290,575    1,223,476    177,748  
Manachised and franchised hotels  318,103    367,983    361,362    52,499  
Others  628    11,365    8,268    1,201  
Total revenues  1,520,492    1,669,923    1,593,106    231,448  
Less: business tax and related taxes  (82,507)   -     -     -   
Net revenues  1,437,985    1,669,923    1,593,106    231,448  
         
Operating costs and expenses:        
Hotel operating costs:        
Rents  (477,271)   (461,112)   (463,138)   (67,285) 
Utilities  (114,482)   (78,451)   (101,850)   (14,797) 
Personnel costs  (257,556)   (272,706)   (280,316)   (40,725) 
Depreciation and amortization   (165,870)   (169,350)   (169,567)   (24,635) 
Consumables, food and beverage   (115,037)   (127,864)   (108,602)   (15,778) 
Others  (70,243)   (155,119)   (75,489)   (10,967) 
Total hotel operating costs  (1,200,459)   (1,264,602)   (1,198,962)   (174,187) 
Other operating costs  -     (2,319)   (1,933)   (281) 
Selling and marketing expenses  (33,055)   (46,142)   (34,268)   (4,978) 
General and administrative expenses   (106,607)   (143,434)   (165,343)   (24,021) 
Pre-opening expenses  (22,019)   (19,747)   (24,112)   (3,503) 
Total operating costs and expenses  (1,362,140)   (1,476,244)   (1,424,618)   (206,970) 
Other operating expense, net  (5,091)   (7,961)   (1,145)   (166) 
Income from operations  70,754    185,718    167,343    24,312  
Interest income  9,801    22,939    18,332    2,663  
Interest expense  (3,067)   (2,289)   (2,358)   (343) 
Other income (loss)  15,661    (3,207)   27,049    3,930  
Foreign exchange gain (loss)  (1,586)   10,341    (5,378)   (781) 
Income before income taxes  91,563    213,502    204,988    29,781  
Income tax expense  (27,713)   (87,745)   (52,343)   (7,605) 
Income (loss) from equity method investments  3,291    3,734    (4,654)   (676) 
Net income  67,141    129,491    147,991    21,500  
Less: net  loss (income) attributable to noncontrolling interest  2,247    (3,633)   92    13  
Net income attributable to China Lodging Group, Limited  69,388    125,858    148,083    21,513  
Other comprehensive income        
Unrealized securities holding gains (losses), net of tax  (1,288)   3,278    8,736    1,269  
Reclassification adjustment of unrealized securities holding gains, net of tax, for gain included in net income  (12,903)   -     (3,737)   (543) 
Foreign currency translation adjustments, net of tax   1,834    (6,911)   1,113    162  
Comprehensive income  54,784    125,858    154,103    22,388  
Comprehensive loss (income) attributable to the noncontrolling interest  2,247    (3,633)   92    13  
Comprehensive income attributable to China Lodging Group, Limited  57,031    122,225    154,195    22,401  
         
Earnings per share:        
Basic  0.26    0.45    0.53    0.08  
Diluted  0.25    0.44    0.52    0.07  
         
Earnings per ADS:        
Basic  1.03    1.81    2.13    0.31  
Diluted  1.01    1.76    2.06    0.30  
         
Weighted average number of shares used in computation:        
Basic  269,131    277,473    278,472    278,472  
Diluted  275,949    285,887    287,313    287,313  


China Lodging Group, Limited  
Unaudited Condensed Consolidated Statements of Cash Flows 
 Quarter Ended 
 March 31, 2016 December 31, 2016 March 31, 2017 
 RMB RMB RMB US$ 
 (in thousands) 
Operating activities:        
Net income  67,141    129,491    147,991    21,500  
Adjustments to reconcile net income to net cash provided by operating activities:         
Share-based compensation  14,863    12,527    15,799    2,295  
Depreciation and amortization  170,478    173,826    173,204    25,163  
Deferred taxes  -     30,809    2,955    429  
Bad debt expenses  749    1,200    413    60  
Deferred rent  30,547    29,764    14,837    2,156  
Gain from disposal of property and equipment  -     1,240    4,291    623  
Impairment loss  6,393    62,669    -     -   
Loss (income) from equity method investments  (3,291)   (3,734)   4,654    676  
Investment gain  (12,903)   -     (27,016)   (3,925) 
Excess tax benefit from share-based compensation  (3,009)   (11,470)   (7,525)   (1,093) 
         
Changes in operating assets and liabilities, net of effect of acquisitions:        
Accounts receivable  (22,211)   922    6,174    897  
Prepaid rent  6,549    (43,153)   (34,897)   (5,070) 
Inventories  2,731    167    (1,748)   (254) 
Amounts due from related parties  (824)   (4,537)   2,835    412  
Other current assets  4,544    (11,803)   (7,134)   (1,036) 
Other assets  (4,368)   5,362    (21,002)   (3,051) 
Accounts payable  (3,321)   39,690    (39,822)   (5,785) 
Amounts due to related parties  749    1,796    (700)   (102) 
Salary and welfare payables  (68,012)   111,005    (104,752)   (15,219) 
Deferred revenue  97,110    (89,742)   (19,232)   (2,794) 
Accrued expenses and other current liabilities  39,119    3,665    107,023    15,548  
Income tax payable  (13,905)   (11,563)   (46,442)   (6,747) 
Other long-term liabilities  15,766    14,339    8,583    1,247  
Net cash provided by operating activities   324,895    442,470    178,489    25,930  
         
Investing activities:        
Purchases of property and equipment  (179,440)   (109,231)   (185,116)   (26,894) 
Purchases of intangibles  (3,868)   (3,517)   (826)   (120) 
Amount received as a result of government zoning  2,099    -     -     -   
Acquisitions, net of cash received  3,762    (1,683)   (765,023)   (111,144) 
Purchase of long-term investments  (71,252)   (152,321)   (78,609)   (11,420) 
Proceeds from maturity/sale of long-term investments  10,288    -     38,613    5,610  
Payment for shareholder loan to joint venture  (34,650)   (1,214)   (75,980)   (11,038) 
Proceeds from sale of short-term investments  75,795    -     -     -   
Payment for the origination of loan receivables  (8,000)   -     (3,400)   (494) 
Proceeds from collection of loan receivables  8,886    25,622    5,812    844  
Decrease in restricted cash  -     1,657    -     -   
Net cash used in investing activities  (196,380)   (240,687)   (1,064,529)   (154,656) 
         
Financing activities:        
Net proceeds from issuance of ordinary shares upon exercise of options  4,251    3,668    2,190    318  
Proceeds from short-term debt  281,719    -     1,000    145  
Repayment of short-term debt  -     -     (1,000)   (145) 
Funds advanced from noncontrolling interest holders  4,000    7,453    22,739    3,304  
Repayment of funds advanced from noncontrolling interest holders  (100)   (400)   -     -   
Acquisition of noncontrolling interest  -     (4,083)   (3,750)   (545) 
Contribution from noncontrolling interest holders  34,059    10,500    310    45  
Dividend paid to noncontrolling interest holders  (890)   (612)   (650)   (94) 
Dividend paid  (276,262)   -     -     -   
Excess tax benefit from share-based compensation  3,009    11,470    7,525    1,093  
Net cash provided by financing activities  49,786    27,996    28,364    4,121  
         
Effect of exchange rate changes on cash and cash equivalents  (1,379)   3,397    (1,839)   (267) 
         
Net increase (decrease) in cash and cash equivalents  176,922    233,176    (859,515)   (124,872) 
Cash and cash equivalents at the beginning of the period  1,237,838    3,001,831    3,235,007    469,986  
Cash and cash equivalents at the end of the period  1,414,760    3,235,007    2,375,492    345,114  


China Lodging Group, Limited 
Unaudited Reconciliation of GAAP and Non-GAAP Results
 Quarter Ended March 31, 2017
 GAAP Result % of Net Revenues Share-based Compensation % of Net Revenues Non-GAAP Result % of Net Revenues
 RMB   RMB   RMB  
 (in thousands)
            
Hotel operating costs  1,198,962 75.3%   4,672 0.3%   1,194,290 75.0%
Other operating costs  1,933 0.1%   -  0.0%   1,933 0.1%
Selling and marketing expenses  34,268 2.2%   287 0.0%   33,981 2.2%
General and administrative expenses  165,343 10.4%   10,840 0.7%   154,503 9.7%
Pre-opening expenses  24,112 1.5%   -  0.0%   24,112 1.5%
Total operating costs and expenses  1,424,618 89.5%   15,799 1.0%   1,408,819 88.5%
Income from operations  167,343 10.5%   15,799 1.0%   183,142 11.5%
            
 Quarter Ended March 31, 2017
 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  174,187 75.3%   679 0.3%   173,508 75.0%
Other operating costs  281 0.1%   -  0.0%   281 0.1%
Selling and marketing expenses  4,978 2.2%   42 0.0%   4,936 2.2%
General and administrative expenses  24,021 10.4%   1,574 0.7%   22,447 9.7%
Pre-opening expenses  3,503 1.5%   -  0.0%   3,503 1.5%
Total operating costs and expenses  206,970 89.5%   2,295 1.0%   204,675 88.5%
Income from operations  24,312 10.5%   2,295 1.0%   26,607 11.5%
            
 Quarter Ended December 31, 2016
 GAAP Result % of Net Revenues Share-based Compensation % of Net Revenues Non-GAAP Result % of Net Revenues
 RMB   RMB   RMB  
 (in thousands)
            
Hotel operating costs  1,264,602 75.7%   3,738 0.2%   1,260,864 75.5%
Other operating costs  2,319 0.1%   -  0.0%   2,319 0.1%
Selling and marketing expenses  46,142 2.8%   52 0.0%   46,090 2.8%
General and administrative expenses  143,434 8.6%   8,737 0.5%   134,697 8.1%
Pre-opening expenses  19,747 1.2%   -  0.0%   19,747 1.2%
Total operating costs and expenses  1,476,244 88.4%   12,527 0.7%   1,463,717 87.7%
Income from operations  185,718 11.1%   12,527 0.7%   198,245 11.8%
            
 Quarter Ended March 31, 2016
 GAAP Result % of Net Revenues Share-based Compensation % of Net Revenues Non-GAAP Result % of Net Revenues
 RMB   RMB   RMB  
 (in thousands)
            
Hotel operating costs  1,200,459 83.5%   2,744 0.2%   1,197,715 83.3%
Other operating costs  -  0.0%   -  0.0%   -  0.0%
Selling and marketing expenses  33,055 2.3%   232 0.0%   32,823 2.3%
General and administrative expenses  106,607 7.4%   11,887 0.8%   94,720 6.6%
Pre-opening expenses  22,019 1.5%   -  0.0%   22,019 1.5%
Total operating costs and expenses  1,362,140 94.7%   14,863 1.0%   1,347,277 93.7%
Income from operations  70,754 4.9%   14,863 1.0%   85,617 5.9%

 

China Lodging Group, Limited 
 Unaudited Reconciliation of GAAP and Non-GAAP Results 
 Quarter Ended
 March 31, 2016 December 31, 2016 March 31, 2017
 RMB RMB RMB US$
 (in thousands, except per share and per ADS data)
 
Net income attributable to China Lodging Group, Limited (GAAP)  69,388    125,858    148,083    21,513 
Share-based compensation expenses  14,863    12,527    15,799    2,295 
Adjusted net income attributable to China Lodging Group, Limited (non-GAAP)  84,251    138,385    163,882    23,808 
 
Earnings per share (GAAP) 
  Basic  0.26    0.45    0.53    0.08 
  Diluted  0.25    0.44    0.52    0.07 
  
Earnings per ADS (GAAP) 
  Basic  1.03    1.81    2.13    0.31 
  Diluted  1.01    1.76    2.06    0.30 
  
Adjusted earnings per share (non-GAAP)  
  Basic  0.31    0.50    0.59    0.09 
  Diluted  0.31    0.48    0.57    0.08 
        
Adjusted earnings per ADS (non-GAAP)       
  Basic  1.25    1.99    2.35    0.34 
  Diluted  1.22    1.94    2.28    0.33 
        
Weighted average number of shares used in computation 
  Basic  269,131    277,473    278,472    278,472 
  Diluted  275,949    285,887    287,313    287,313 
 
 Quarter Ended
 March 31, 2016 December 31, 2016 March 31, 2017
 RMB RMB RMB US$
 (in thousands)
 
Net income attributable to China Lodging Group, Limited (GAAP)  69,388    125,858    148,083    21,513 
Interest income  (9,801)   (22,939)   (18,332)   (2,663)
Interest expense  3,067    2,289    2,358    343 
Income tax expense  27,713    87,745    52,343    7,605 
Depreciation and amortization  170,478    173,826    173,204    25,163 
EBITDA (non-GAAP)  260,845    366,779    357,656    51,961 
Share-based Compensation  14,863    12,527    15,799    2,295 
Adjusted EBITDA (non-GAAP)  275,708    379,306    373,455    54,256 


China Lodging Group, Limited
Operational Data    
 As of 
 March 31, December 31, March 31, 
 201620162017
Total hotels in operation:  2,989   3,269   3,336 
Leased and owned hotels (1)  627   624 620 
Manachised hotels  2,189   2,471   2,535 
Franchised hotels  173   174   181 
Total hotel rooms in operation  304,428   331,347   335,900 
Leased and owned hotels  77,263   78,160 78,012 
Manachised hotels  209,944   237,094 241,251 
Franchised hotels  17,221   16,093   16,637 
Number of cities356   367   369 
    
(1) including 7 owned hotels under ibis brand.   
    
    
 For the quarter ended
 March 31, December 31, March 31, 
 201620162017
Occupancy rate (as a percentage)   
Leased and owned hotels82.2%85.5%85.0%
Manachised hotels80.8%85.4%84.6%
Franchised hotels61.9%68.1%65.6%
Blended80.4%84.7%83.9%
Average daily room rate (in RMB)   
Leased and owned hotels193 211 204 
Manachised hotels165 178 174 
Franchised hotels169 180 180 
Blended172 186 182 
RevPAR (in RMB)   
Leased and owned hotels159 181 174 
Manachised hotels133 152 147 
Franchised hotels105 123 118 
Blended139 158 152 
    
    
Same-hotel Operational Data: like-for-like performance for hotels in operation for at least 18 months during the current quarter 
    
 As of and for the quarter ended 
 March 31,  
 20162017 
Total   2,380   2,380  
Leased and owned hotels  579   579  
Manachised and franchised hotels  1,801   1,801  
Occupancy rate (as a percentage)83.3%86.6% 
Average daily room rate (in RMB)172 175  
RevPAR (in RMB)143 151  

 

Hotel breakdown by segment   
   
 Number of hotels in operation 
 Net added As of  
 in Q1 2017March 31, 2017 
Economy hotels  39    2,852   
HanTing Hotel  22   2,203  
Leased and owned hotels  (8)  478  
Manachised hotels  29   1,723  
Franchised hotels  1   2  
Hi Inn  12   387  
Leased and owned hotels   36  
Manachised hotels  12   306  
Franchised hotels   45  
Elan Hotel  3   188  
Manachised hotels  2   151  
Franchised hotels  1   37  
ibis Hotel  2   74  
Leased and owned hotels   14  
Manachised hotels   12  
Franchised hotels  2   48  
Midscale and upscale hotels  28    484   
JI Hotel  20   304  
Leased and owned hotels  3   84  
Manachised hotels  16   217  
Franchised hotels  1   3  
Starway Hotel  5   141  
Leased and owned hotels   2  
Manachised hotels  5   101  
Franchised hotels   38  
Joya Hotel   6  
Leased and owned hotels   3  
Manachised hotels   3  
Manxin Hotels & Resorts  1   3  
Leased and owned hotels   
Manachised hotels   2  
Franchised hotels  1   1  
ibis Styles Hotel     10  
Manachised hotels (1  6  
Franchised hotels   1   4  
Mercure Hotel  1   16  
Leased and owned hotels   2  
Manachised hotels  1   13  
Franchised hotels   1  
Novotel Hotel   2  
Leased and owned hotels   
Manachised hotels   1  
Franchised hotels   1  
Grand Mercure   1   2  
Leased and owned hotels  1   1  
Franchised hotels   1  
Total  67    3,336   

 

Same-hotel operational data by segment          
 Number of hotels in operationSame-hotel RevPAR Same-hotel ADR Same-hotel Occupancy 
 As ofFor the quarter ended For the quarter ended For the quarter ended 
 March 31,March 31,yoy changeMarch 31,yoy changeMarch 31,yoy change
 2016201720162017201620172016 2017 
Economy hotels  2,144  2,144  133  1395.0%  159  1600.8%84%87%3.5%
Leased and owned hotels  503  503  139  1475.7%  167  1690.9%83%87%3.9%
Manachised and franchised hotels  1,641  1,641  130  1374.7%  155  1560.8%84%87%3.3%
Midscale and upscale hotels  236  236  214  2339.2%  265  2846.9%81%82%1.7%
Leased and owned hotels  76  76  257  2798.9%  298  3248.8%86%86%0.1%
Manachised and franchised hotels  160  160  182  2009.5%  239  2525.4%76%79%3.0%
Total  2,380  2,380  143  1515.8%  172  1751.8%83%87%3.3%


Contact Information
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Email: ir@huazhu.com
http://ir.huazhu.com


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