November 12, 2014

China Lodging Group, Limited Reports Third Quarter of 2014 Results

  • As of September 30, 2014, the Company had a total of 1,849 hotels or 197,674 hotel rooms in operation and 517 leased and manachised hotels in the pipeline.
  • Net revenues increased 21.0% year-over-yearto RMB1,387.5 million (US$226.1 million) for the third quarter, in line with the guidance previously announced.
  • EBITDA (non-GAAP) increased 20.6% year-over-year to RMB349.5 million (US$56.9 million)1for the third quarter.
  • Net income attributable to China Lodging Group, Limited was RMB149.6 million (US$24.4 million) for the third quarter, increasing 19.8% year-over-year. Excluding share-based compensation expenses, adjusted net income attributable to the Company (non-GAAP) was RMB165.5 million (US$27.0 million) for the third quarter of 2014, increasing 23.6% year-over-year.
  • Basic earnings per ADS2 were RMB2.40 (US$0.39) for the third quarter of 2014 and diluted earnings per ADS were RMB2.36 (US$0.38). Excluding share-based compensation expenses, adjusted basic earnings per ADS were RMB2.65 (US$0.43) and adjusted diluted earnings per ADS (non-GAAP) were RMB2.61 (US$0.43) for the third quarter of 2014.
  • The Company provided guidance for Q4 2014 net revenues growth of 15.5% to 17.5%.

SHANGHAI, China, Nov. 12, 2014 (GLOBE NEWSWIRE) -- China Lodging Group, Limited (Nasdaq:HTHT) ("China Lodging Group" or the "Company"), a leading and fast-growing multi-brand hotel group in China, today announced its unaudited financial results for the third quarter ended September 30, 2014.

Operational Highlights of Third Quarter 2014

  • During the third quarter of 2014, the Company opened 14 net leased ("leased-and-operated") hotels and 168 manachised ("franchised-and-managed") hotels. As of September 30, 2014, the Company had 604 leased hotels, 1,237 manachised hotels, and 8 franchised Starway hotels in operation in 282 cities. The leased and manachised hotel rooms in operation increased by 14% and 58%, respectively, from a year ago.
     
  • As of September 30, 2014, the Company had 32 leased hotels and 485 manachised hotels contracted or under construction.
     
  • The ADR, which is defined as the average daily rate for all hotels in operation (excluding franchised Starway hotels),was RMB187 in the third quarter of 2014, compared with RMB186 in the third quarter of 2013 and RMB180 in the previous quarter. The year-over-year increase of 1% was mainly attributable to a 2% increase in same-hotel ADR, partially offset by the city mix shifting toward lower-tier cities. The sequential increase mainly resulted from seasonality.
     
  • The occupancy rate for all hotels in operation (excluding franchised Starway hotels) was 92.5% in the third quarter of 2014, compared with 94.1% in the third quarter of 2013 and 91.2% in the previous quarter. The year-over-year decrease was mainly due to soft macro economy and an increasing portion of portfolio in lower-tier cities. The sequential increase resulted mainly from seasonality.
     
  • RevPAR, defined as revenue per available room for all hotels in operation (excluding franchised Starway hotels), was RMB173 in the third quarter of 2014, compared with RMB175 in the third quarter of 2013 and RMB164 in the previous quarter. The year-over-year decrease was a result of lower occupancy rate. The sequential increase resulted mainly from seasonality.
     
  • For all hotels which had been in operation for at least 18 months (excluding franchised Starway hotels), the same-hotel RevPAR was RMB183 for the third quarter of 2014, compared with RMB183 for the third quarter of 2013, with 2% increase in ADR and 2-percent-point decrease in occupancy rate. The midscale hotels registered a 9% same-hotel RevPAR improvement, thanks to the consumption upgrade trend.
     
  • As of September 30, 2014, the Company's loyalty program had about 25 million members, who contributed close to 90% of room nights sold during the third quarter of 2014. In the third quarter of 2014, more than 90% of room nights were sold through the Company's own channels.
Third Quarter of 2014 Financial Results
(RMB in thousands)Q3 2013Q2 2014Q3 2014
Revenues:      
Leased hotels  1,066,240  1,145,597  1,256,926
Manachised and franchised hotels  149,862  177,409  214,577
Total revenues  1,216,102  1,323,006  1,471,503
Less: business tax and related surcharges  (69,436)  (76,035)  (84,002)
Net revenues  1,146,666  1,246,971  1,387,501

Total revenues for the third quarter of 2014 were RMB1,471.5 million (US$239.7 million), representing a 21.0% year-over-year increase and an 11.2% sequential increase. The year-over-year increase was primarily due to our hotel network growth. The sequential increase was due to seasonality and the expansion of our hotel network.

Total revenues from leased hotels for the third quarter of 2014 were RMB1,256.9 million (US$204.8 million), representing a 17.9% year-over-year increase and a 9.7% sequential increase.

Total revenues from manachised and franchised hotels for the third quarter of 2014 were RMB214.6 million (US$35.0 million), representing a 43.2% year-over-year increase and a 21.0% sequential increase.

Net revenues for the third quarter of 2014 were RMB1,387.5 million (US$226.1 million), representing a 21.0% year-over-year increase and an 11.3% sequential increase.

(RMB in thousands)Q3 2013Q2 2014Q3 2014
Operating costs and expenses:      
Hotel operating costs  823,214  928,860  983,259
Selling and marketing expenses  37,280  37,252  53,610
General and administrative expenses   68,762  78,280  99,520
Pre-opening expenses  52,438  50,072  44,983
Total operating costs and expenses  981,694  1,094,464  1,181,372

Hotel operating costs for the third quarter of 2014 were RMB983.3 million (US$160.2 million), compared to RMB823.2 million (US$134.5 million) in the third quarter of 2013 and RMB928.9 million (US$149.7 million) in the previous quarter, representing a 19.4% year-over-year increase and a 5.9% sequential increase. The Company's hotel network expansion, especially the increased number of midscale leased hotels which incur a significant amount of rental and depreciation costs, was the main driver for the increase in hotel operating costs. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the third quarter of 2014 were RMB981.1 million (US$159.8 million), representing 70.7% of net revenues, compared to 71.7% for the third quarter in 2013 and 74.4% for the previous quarter. The year-over-year decrease in the percentage was mainly attributed to a higher portion of higher-margin manachised revenue. The sequential decrease in the percentage was mainly due to seasonality.

Selling and marketing expenses for the third quarter of 2014 were RMB53.6 million (US$8.7 million), compared to RMB37.3 million (US$6.1 million) in the third quarter of 2013 and RMB37.3 million (US$6.0 million) in the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the third quarter of 2014 were RMB53.3 million (US$8.7 million), or 3.9% of net revenues, compared to 3.2% for the third quarter of 2013 and 3.0% for the previous quarter. The year-over-year and sequential increase was mainly due to increased online marketing activities.

General and administrative expenses for the third quarter of 2014 were RMB99.5 million (US$16.2 million), compared to RMB68.8 million (US$11.2 million) in the third quarter of 2013 and RMB78.3 million (US$12.6 million) in the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the third quarter of 2014 were RMB86.1 million (US$14.0 million), representing 6.2% of net revenues, compared with 5.4% of net revenues in the third quarter of 2013 and 5.9% in the previous quarter. The year-over-year increase in the percentage was mainly attributable to the increased IT spending, including R&D expense to enhance guest experience and digital channels, and spending to enable us to provide comprehensive IT services to our hotels.

Pre-opening expenses for the third quarter of 2014 were RMB45.0 million (US$7.3 million), representing a 14.2% year-over-year decrease and a 10.2% sequential decrease. The decrease was mainly due to fewer leased hotels in the pipeline.

Income from operations for the third quarter of 2014 was RMB202.1 million (US$32.9 million), compared to RMB171.1 million (US$28.0 million) in the third quarter of 2013 and RMB158.3 million (US$25.5 million) in the previous quarter. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the third quarter of 2014 was RMB218.0 million (US$35.5 million), compared to adjusted income from operation (non-GAAP) of RMB180.0 million (US$29.4 million) for the third quarter of 2013 and RMB165.2 million (US$26.6 million) for the previous quarter. The adjusted operating margin for the third quarter of 2014 was 15.8%, compared with 15.7% in the third quarter of 2013 and 13.2% in the previous quarter.

Net income attributable to China Lodging Group, Limited for the third quarter of 2014 was RMB149.6 million (US$24.4 million), compared to RMB124.9 million (US$20.4 million) in the third quarter of 2013 and RMB124.2 million (US$20.0 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 2014 was RMB165.5 million (US$27.0 million), representing a 23.6% year-over-year increase and a 26.2% sequential increase.

Basic and diluted earnings per share/ADS. For the third quarter of 2014, basic earnings per share were RMB0.60 (US$0.10) and diluted earnings per share were RMB0.59 (US$0.10); basic earnings per ADS were RMB2.40 (US$0.39) and diluted earnings per ADS were RMB2.36 (US$0.38). For the third quarter of 2014, excluding share-based compensation expenses, adjusted basic earnings per share were RMB0.66 (US$0.11) and adjusted diluted earnings per share (non-GAAP) were RMB0.65 (US$0.11); adjusted basic earnings per ADS (non-GAAP) were RMB2.65 (US$0.43) and adjusted diluted earnings per ADS (non-GAAP) were RMB2.61 (US$0.43).

EBITDA (non-GAAP) for the third quarter of 2014 was RMB349.5 million (US$56.9 million), compared with RMB289.8 million (US$47.4 million) in the third quarter of 2013 and RMB304.3 million (US$49.1 million) in the previous quarter. Excluding pre-opening expenses and share-based compensation expenses, adjusted EBITDA from operating hotels (non-GAAP) for the third quarter of 2014 was RMB410.4 million (US$66.9 million), compared with RMB351.2 million (US$57.4 million) for the third quarter of 2013 and RMB361.3 million (US$58.2 million) for the previous quarter. The year-over-year increase was mainly due to the expansion of our hotel network. The sequential increase was mainly due to seasonality.

Hotel income (non-GAAP), which is the difference between net revenues and hotel operating costs, was RMB404.2 million (US$65.9million) for the third quarter of 2014, compared with RMB323.5 million (US$52.9 million) in the third quarter of 2013 and RMB318.1 million (US$51.3 million) in the previous quarter. The hotel income from the leased hotels was RMB245.4 million (US$40.0 million) during the third quarter of 2014. The hotel income from the manachised and franchised hotels was RMB158.8 million (US$25.9 million) during the third quarter of 2014, or accounting for approximately 40% of total hotel income.

Cash flow. Operating cash flow for the third quarter of 2014 was RMB439.0 million (US$71.5 million). Investing cash flow for the third quarter was RMB280.1 million (US$45.6 million).

Cash and cash equivalents and Restricted cash. As of September 30, 2014, the Company had a total balance of cash and cash equivalents, restricted cash of RMB849.5 million (US$138.4 million).

Loans and other debt financing

As of September 30, 2014, the Company had a short-term loan balance of RMB300.0 million. As of September 30, 2014, the total credit facility available to the Company was RMB889.6 million.

Business Outlook and Guidance

"Thanks to the growing popularity of our brand portfolio, we are pleased to see our hotel network and member base expansion accelerated against a slow macro-economic backdrop. To bolster our leadership in this competitive market, we will dedicate additional resources to technology, through open innovation platforms that strengthen our expertise. We believe this will lay a sound foundation for the Company to capture the huge growth opportunity in the coming years," commented Mr. Qi Ji, founder, executive Chairman and CEO of the Company.

The Company expects net revenues for the fourth quarter of 2014 to grow 15.5% to 17.5% growth year-over-year. Therefore, the Company expects net revenues for the full year of 2014 to grow 19% to 19.6%, slightly lower than the initial full year expectations the Company provided at the beginning of the year. The above forecast reflects the Company's current and preliminary view, which is subject to change.

Change of Board Member

China Lodging Group announced that the resignation of Mr. Yongjian Sun, a director of the Board, effective on October 30, 2014. Ms. Qionger Jiang has been appointed as a director, effective on October 30, 2014. Jiang has been acting as the CEO and artistic director of SHANG XIA since 2008 and she is an internationally renowned designer. SHANG XIA is the first international famous Chinese luxury brand, in partnership with Hermes. Jiang received a Bachelor of Arts degree at designing school of Shanghai Tongji University, and continued her studies of furniture and interior design at the École nationale supérieure des Arts Décoratifs in Paris. In 2013, she also received "chevalier des arts et lettres" decoration from French president.

Conference Call

China Lodging Group's management will host a conference call at 8 p.m. ET, Wednesday, November 12, 2014 (or 9 a.m. on Thursday, November 13, 2014 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 6723 9385 (for callers outside of the US, China Mainland, and Hong Kong) and entering pass code 2239 7667. 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 19, 2014. 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 2239 7667.

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

Use of Non-GAAP Financial Measures

To supplement the Company's unaudited consolidated financial results presented in accordance with U.S. GAAP, the Company uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: hotel operating costs excluding share-based compensation expenses; general and administrative expenses excluding share-based compensation expenses; selling expenses excluding share-based compensation expenses; adjusted income from operations excluding share-based compensation expenses; adjusted net income attributable to China Lodging Group, Limited excluding share-based compensation expenses; adjusted basic and diluted earnings per share and per ADS excluding share-based compensation expenses; EBITDA; adjusted EBITDA 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 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 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 and share-based compensation 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 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 considered to be outside the ordinary course of 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, interest income 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 income, 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 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, 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 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 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 and fast-growing multi-brand hotel group in China. The Company provides business and leisure travelers with high-quality, and conveniently-located hotel products under seven brands, namely, Joya Hotel, Manxin Hotels & Resorts, JI Hotel, Starway Hotel, HanTing Hotel, Elan Hotel, and Hi Inn. 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=RMB6.1380 on September 30, 2014 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.

 
China Lodging Group, Limited 
Unaudited Condensed Consolidated Balance Sheets
 December 31, 2013September 30, 2014 
 RMBRMBUS$
 (in thousands)    
ASSETS      
Current assets:      
 Cash and cash equivalents  397,435  849,522  138,404
 Restricted cash  3,317  --   -- 
 Short-term investments  --   60,900  9,921
 Accounts receivable, net  74,646  101,196  16,487
 Amounts due from related parties  658  15,560  2,535
 Prepaid rent  363,581  371,804  60,574
 Inventories  34,013  32,758  5,337
 Other current assets  116,979  171,339  27,914
 Deferred tax assets  51,759  51,759  8,433
 Total current assets  1,042,388  1,654,838  269,605
       
Property and equipment, net  3,634,039  3,860,165  628,896
Intangible assets, net  101,845  101,962  16,612
Long-term investments  90,517  242,325  39,480
Goodwill  64,842  64,842  10,564
Other assets  184,013  190,372  31,015
Deferred tax assets  67,408  67,408  10,982
Total assets  5,185,052  6,181,912  1,007,154
       
LIABILITIES AND EQUITY      
Current liabilities:      
 Short-term debt  --   300,000  48,876
 Accounts payable  677,305  641,216  104,466
 Amounts due to a related party  5,593  6,957  1,133
 Salary and welfare payable  147,238  102,610  16,717
 Deferred revenue  297,284  459,361  74,839
 Accrued expenses and other current liabilities  249,185  288,798  47,051
 Income tax payable  26,053  45,636  7,435
 Deferred tax liabilities  151  151  25
 Total current liabilities  1,402,809  1,844,729  300,542
       
Deferred rent  653,831  774,581  126,194
Deferred revenue  118,818  147,068  23,961
Amounts due to a related party  8,167  6,125  998
Other long-term liabilities  147,565  189,888  30,936
Deferred tax liabilities  26,071  26,071  4,248
Total liabilities  2,357,261  2,988,462  486,879
       
Equity:      
Ordinary shares  182  183  30
Additional paid-in capital  2,315,083  2,362,780  384,942
Retained earnings  539,872  800,380  130,398
Accumulated other comprehensive loss  (39,384)  20,543  3,347
Total China Lodging Group, Limited shareholders' equity  2,815,753  3,183,886  518,717
Noncontrolling interest  12,038  9,564  1,558
Total equity  2,827,791  3,193,450  520,275
Total liabilities and equity  5,185,052  6,181,912  1,007,154
 
 
China Lodging Group, Limited 
Unaudited Condensed Consolidated Statements of Comprehensive Income
 Quarter Ended
 September 30, 2013June 30, 2014September 30, 2014 
 RMBRMBRMBUS$
 (in thousands, except per share and per ADS data)
Revenues:        
Leased hotels  1,066,240  1,145,597  1,256,926  204,778
Manachised and franchised hotels  149,862  177,409  214,577  34,959
Total revenues  1,216,102  1,323,006  1,471,503  239,737
Less: business tax and related surcharges  (69,436)  (76,035)  (84,002)  (13,686)
Net revenues  1,146,666  1,246,971  1,387,501  226,051
         
Operating costs and expenses:        
Hotel operating costs:        
Rents  (320,902)  (380,711)  (382,417)  (62,303)
Utilities  (71,532)  (60,627)  (78,692)  (12,820)
Personnel costs  (166,141)  (189,653)  (206,731)  (33,680)
Depreciation and amortization   (117,688)  (134,206)  (142,767)  (23,260)
Consumables, food and beverage   (102,596)  (114,399)  (119,572)  (19,481)
Others  (44,355)  (49,264)  (53,080)  (8,648)
Total hotel operating costs  (823,214)  (928,860)  (983,259)  (160,192)
Selling and marketing expenses  (37,280)  (37,252)  (53,610)  (8,734)
General and administrative expenses   (68,762)  (78,280)  (99,520)  (16,214)
Pre-opening expenses  (52,438)  (50,072)  (44,983)  (7,329)
Total operating costs and expenses  (981,694)  (1,094,464)  (1,181,372)  (192,469)
Other operating income   6,101  5,743  (4,018)  (654)
Income from operations  171,073  158,250  202,111  32,928
Interest income  2,294  4,838  5,798  945
Interest expense  (198)  (320)  (631)  (103)
Other income (expense)  368  5,545  (316)  (52)
Foreign exchange gain (loss)  31  37  (25)  (4)
Income before income taxes  173,568  168,350  206,937  33,714
Income tax expense  (46,637)  (47,628)  (59,512)  (9,695)
Net income  126,931  120,722  147,425  24,019
Less: net loss (income) attributable to noncontrolling interests  (2,012)  3,522  2,174  354
Net income attributable to China Lodging Group, Limited  124,919  124,244  149,599  24,373
Other comprehensive income        
Unrealized securities holding gains , net of tax  --   27,082  32,223  5,250
Foreign currency translation adjustments, net of tax   (314)  48  (606)  (99)
Comprehensive income  126,617  147,852  179,042  29,170
Comprehensive loss (income) attributable to the noncontrolling interest  (2,012)  3,522  2,174  354
Comprehensive income attributable to China Lodging Group, Limited  124,605  151,374  181,216  29,524
         
Earnings per share:        
Basic  0.51  0.50  0.60  0.10
Diluted  0.50  0.49  0.59  0.10
         
Earnings per ADS:        
Basic  2.04  2.00  2.40  0.39
Diluted  2.00  1.97  2.36  0.38
         
Weighted average number of shares used in computation:        
Basic  245,222  248,339  249,552  249,552
Diluted  249,679  252,082  253,608  253,608
 
China Lodging Group, Limited 
Unaudited Condensed Consolidated Statements of Cash Flows
 Quarter Ended
 September 30, 2013June 30, 2014September 30, 2014
 RMBRMBRMBUS$
 (in thousands)
Operating activities:        
 Net income (loss)  126,931  120,722  147,425  24,019
 Adjustments to reconcile net income to net cash provided by operating activities:      
Share-based compensation  8,920  6,915  15,891  2,589
Depreciation and amortization  120,333  136,972  145,568  23,716
Bad debt expenses  82  867  754  123
Deferred rent  57,119  46,216  35,514  5,786
Gain from disposal of property and equipment  --   --   2,836  462
Impairment loss  --   2,703  10,820  1,763
Investment income (loss)  88  (6,895)  666  109
Excess tax benefit from share-based compensation  (2,075)  (206)  (3,305)  (538)
         
Changes in operating assets and liabilities, net of effect of acquisitions:        
Accounts receivable  9,520  (1,986)  (10,057)  (1,638)
Prepaid rent  (16,375)  (11,765)  12,543  2,043
Inventories  3,284  1,584  (3,373)  (550)
Amounts due from related parties  --   3,397  --   -- 
Other current assets  (10,763)  (30,490)  (27,262)  (4,442)
Other assets  (9,023)  (7,052)  3,299  537
Accounts payable  (963)  1,739  11,243  1,832
Amounts due to a related party  (67)  316  514  84
Salary and welfare payables  (28,913)  28,101  (28,417)  (4,630)
Deferred revenue  45,549  78,325  72,265  11,773
Accrued expenses and other current liabilities  8,865  14,934  12,399  2,020
Income tax payable and receivable  25,467  28,845  23,778  3,874
Other long-term liabilities  12,318  14,052  15,946  2,598
Net cash provided by operating activities   350,297  427,294  439,047  71,530
         
Investing activities:        
Purchases of property and equipment  (266,179)  (153,575)  (225,314)  (36,708)
Purchases of intangibles  (591)  (929)  (1,513)  (246)
Amount received as a result of government zoning  --   --   4,004  652
Acquisitions, net of cash received  (31,030)  (8,458)  (460)  (75)
Proceeds from disposal of subsidiary and branch  --   --   17,484  2,848
Purchase of long-term investments  --   (126,275)  (20,000)  (3,258)
Payment for shareholder loan to joint venture  --   (14,207)  (699)  (114)
Proceeds from sale of long-term investments  --   82,785  1,135  185
Purchase of short-term investments  (4,314)  --   (55,499)  (9,042)
Increase in restricted cash  1,300  1,000  755  123
Net cash used in investing activities  (300,814)  (219,659)  (280,107)  (45,635)
         
Financing activities:        
Net proceeds from issuance of ordinary shares upon exercise of option  6,037  484  1,427  233
Proceeds from short-term debt  60,000  --   --   -- 
Repayment of short-term debt  (60,000)  --   --   -- 
Repayment of funds advanced from noncontrolling interest holders  (1,089)  (400)  (580)  (94)
Acquisition of noncontrolling interest  --   (2,042)  --   -- 
Contribution from noncontrolling interest holders  --   --   7,000  1,140
Repayment to noncontrolling interest holders  (200)  --   --   -- 
Dividend paid to noncontrolling interest holders  (165)  (369)  (2,813)  (458)
Excess tax benefit from share-based compensation  2,075  206  3,305  538
Net cash provided by (used in) financing activities  6,658  (2,121)  8,339  1,359
         
Effect of exchange rate changes on cash and cash equivalents  (322)  47  (29)  (5)
         
Net increase in cash and cash equivalents  55,819  205,561  167,250  27,249
Cash and cash equivalents at the beginning of the period  297,984  476,711  682,272  111,155
Cash and cash equivalents at the end of the period  353,803  682,272  849,522  138,404
 
China Lodging Group, Limited 
Unaudited reconciliation of GAAP and Non-GAAP Results
 Quarter Ended September 30, 2014
 GAAP Result% of Net RevenuesShare-based Compensation% of Net RevenuesNon-GAAP Result% of Net Revenues
 RMB  RMB  RMB  
 (in thousands)
             
Hotel operating costs  983,259 70.9%  2,142 0.2%  981,117 70.7%
Selling and marketing expenses  53,610 3.9%  286 0.0%  53,324 3.9%
General and administrative expenses  99,520 7.2%  13,463 1.0%  86,057 6.2%
Pre-opening expenses  44,983 3.2%  --  0.0%  44,983 3.2%
Total operating costs and expenses  1,181,372 85.2%  15,891 1.2%  1,165,481 84.0%
Income from operations  202,111 14.6%  15,891 1.2%  218,002 15.8%
             
 Quarter Ended September 30, 2014
 GAAP Result% of Net RevenuesShare-based Compensation% of Net RevenuesNon-GAAP Result% of Net Revenues
 US$   US$  US$  
 (in thousands)
             
Hotel operating costs  160,192 70.9%  349 0.2%  159,843 70.7%
Selling and marketing expenses  8,734 3.9%  47 0.0%  8,687 3.9%
General and administrative expenses  16,214 7.2%  2,193 1.0%  14,021 6.2%
Pre-opening expenses  7,329 3.2%  --  0.0%  7,329 3.2%
Total operating costs and expenses  192,469 85.2%  2,589 1.2%  189,880 84.0%
Income from operations  32,928 14.6%  2,589 1.2%  35,517 15.8%
             
 Quarter Ended June 30, 2014
 GAAP Result% of Net RevenuesShare-based Compensation% of Net RevenuesNon-GAAP Result% of Net Revenues
 RMB  RMB  RMB  
 (in thousands)
             
Hotel operating costs  928,860 74.5%  1,263 0.1%  927,597 74.4%
Selling and marketing expenses  37,252 3.0%  201 0.0%  37,051 3.0%
General and administrative expenses  78,280 6.3%  5,451 0.4%  72,829 5.9%
Pre-opening expenses  50,072 4.0%  --  0.0%  50,072 4.0%
Total operating costs and expenses  1,094,464 87.8%  6,915 0.5%  1,087,549 87.3%
Income from operations  158,250 12.7%  6,915 0.5%  165,165 13.2%
             
 Quarter Ended September 30, 2013
 GAAP Result% of Net RevenuesShare-based Compensation% of Net RevenuesNon-GAAP Result% of Net Revenues
 RMB  RMB  RMB  
 (in thousands)
             
Hotel operating costs  823,214 71.8%  1,713 0.1%  821,501 71.7%
Selling and marketing expenses  37,280 3.2%  251 0.0%  37,029 3.2%
General and administrative expenses  68,762 6.0%  6,956 0.6%  61,806 5.4%
Pre-opening expenses  52,438 4.6%  --  0.0%  52,438 4.6%
Total operating costs and expenses  981,694 85.6%  8,920 0.7%  972,774 84.9%
Income from operations  171,073 15.0%  8,920 0.7%  179,993 15.7%
 
 
China Lodging Group, Limited 
Unaudited reconciliation of GAAP and Non-GAAP Results 
 Quarter Ended
 September 30, 2013June 30, 2014September 30, 2014
 RMBRMBRMBUS$
  (in thousands, except per share and per ADS data)
         
Net income attributable to China Lodging Group, Limited (GAAP)  124,919  124,244  149,599  24,373
Share-based compensation expenses  8,920  6,915  15,891  2,589
Adjusted net income attributable to China Lodging Group, Limited (non-GAAP)  133,839  131,159  165,490  26,962
         
Earnings per share (GAAP)        
 Basic  0.51  0.50  0.60  0.10
 Diluted  0.50  0.49  0.59  0.10
         
Earnings per ADS (GAAP)        
 Basic  2.04  2.00  2.40  0.39
 Diluted  2.00  1.97  2.36  0.38
         
Adjusted earnings per share (non-GAAP)        
 Basic  0.55  0.53  0.66  0.11
 Diluted  0.54  0.52  0.65  0.11
         
Adjusted earnings per ADS (non-GAAP)        
 Basic  2.18  2.11  2.65  0.43
 Diluted  2.14  2.08  2.61  0.43
         
Weighted average number of shares used in computation        
 Basic  245,222  248,339  249,552  249,552
 Diluted  249,679  252,082  253,608  253,608
         
 Quarter Ended
 September 30, 2013June 30, 2014September 30, 2014
 RMBRMBRMBUS$
  (in thousands)
         
Net income attributable to China Lodging Group, Limited (GAAP)  124,919  124,244  149,599  24,373
Interest income  (2,294)  (4,838)  (5,798)  (945)
Interest expenses  198  320  631  103
Income tax expense  46,637  47,628  59,512  9,695
Depreciation and amortization  120,333  136,972  145,568  23,716
EBITDA (non-GAAP)  289,793  304,326  349,512  56,942
Pre-opening expenses  52,438  50,072  44,983  7,329
Share-based Compensation  8,920  6,915  15,891  2,589
Adjusted EBITDA from operating hotels (non-GAAP)  351,151  361,313  410,386  66,860
         
 Quarter Ended
 September 30, 2013June 30, 2014September 30, 2014
 RMBRMBRMBUS$
  (in thousands)
         
Net revenues (GAAP)  1,146,666  1,246,971  1,387,501  226,051
Less: Hotel operating costs  (823,214)  (928,860)  (983,259)  (160,192)
Hotel income (non-GAAP)  323,452  318,111  404,242  65,859
     
 China Lodging Group, Limited  
Operational Data       
 As of 
 September 30,June 30,September 30,
 201320142014
Total hotels in operation:  1,341  1,669  1,849
 Leased hotels  538  590  604
 Manachised hotels  777  1,069  1,237
 Franchised hotels*  26  10  8
Total hotel rooms in operation  144,494  179,186  197,674
 Leased hotels  62,964  69,900  71,999
 Manachised hotels  78,866  108,117  124,744
 Franchised hotels*  2,664  1,169  931
Number of cities  232  270  282
       
* refers to franchised Starway hotels      
       
 For the quarter ended
 September 30,June 30,September 30,
 201320142014
Occupancy rate (as a percentage)      
 Leased hotels 92.6% 91.1% 92.7%
 Manachised hotels 95.3% 91.2% 92.4%
 Blended 94.1% 91.2% 92.5%
Average daily room rate (in RMB)      
 Leased hotels 193 191 198
 Manachised hotels 180 173 180
 Blended 186 180 187
RevPAR (in RMB)      
 Leased hotels 179 174 184
 Manachised hotels 171 158 166
 Blended 175 164 173
       
       
Same-hotel Operational Data: 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  
 September 30,   
 20132014  
Total   1,049  1,049  
 Leased hotels  476  476  
 Manachised hotels  573  573  
Occupancy rate (as a percentage) 97.6% 96.1%  
Average daily room rate (in RMB) 188 191  
RevPAR (in RMB) 183 183  
 
Hotel breakdown by brand
     
 Number of hotels in operation
 Net added As of 
 in Q3 2014September 30, 2014
Economy hotels 157  1,687
 HanTing Hotel  132  1,547
 Leased hotels  7  496
 Manachised hotels  125  1,051
 Hi Inn  23  138
 Leased hotels  --   41
 Manachised hotels  23  97
 Elan Hotel  2  2
 Leased hotels  --  --
 Manachised hotels  2  2
Midscale and upscale hotels 23  162
 JI Hotel  15  111
 Leased hotels  5  61
 Manachised hotels  10  50
 Starway Hotel  6  47
 Leased hotels  1  3
 Manachised hotels  7  36
 Franchised hotels  (2)  8
 Joya Hotel  2  3
 Leased hotels  1  2
 Manachised hotels  1  1
 Manxin Hotels & Resorts  --   1
 Leased hotels    1
Total 180  1,849
 
Same-hotel operational data by segment
  Number of hotels in operation Same-hotel RevPAR   Same-hotel ADR   Same-hotel Occupancy  
 As ofFor the quarter ended  For the quarter ended For the quarter ended  
 September 30,September 30,  September 30,  September 30,  
 
2013

2014

2013

2014
 yoy
change

2013

2014
 yoy
change

2013

2014
 yoy
change
Economy hotels  1,001  1,001 179 178 -1% 183 185 1% 98% 96% -2%
 Leased hotels  450  450 178 177 -1% 185 186 0% 96% 95% -1%
 Manachised hotels  551  551 180 178 -1% 180 184 2% 100% 97% -3%
Midscale hotels  48  48 258 282 9% 281 300 7% 92% 94% 2%
 Leased hotels  26  26 279 310 11% 294 321 9% 95% 97% 2%
 Manachised hotels  22  22 217 228 5% 252 256 1% 86% 89% 3%
Total  1,049  1,049 183 183 0% 188 191 2% 98% 96% -2%
CONTACT: Ida Yu

         Sr. Manager of Investor Relations

         Tel: +86 (21) 6195 9561

         Email: ir@huazhu.com

         http://ir.huazhu.com


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