China Lodging Group, Limited Reports Third Quarter of 2010 Financial Results
Third Quarter of 2010 Operational Highlights
- During the third quarter of 2010, the Company opened 44 new hotels, including 13 net leased-and-operated hotels and 31 net franchised-and-managed hotels. As of
September 30, 2010, the Company had 368 hotels in operation, consisting of 200 leased-and-operated hotels and 168 franchised-and-managed hotels. Our hotels in operation covered 55 cities in China as of September 30, 2010, compared with 51 cities at the end of the previous quarter.
- As of
September 30, 2010, the Company had a total pipeline of 167 hotels under development, including 76 leased-and-operated hotels and 91 franchised-and-managed hotels.
- Shanghai World Expo (the "Expo"), held from
May 1st to October 31st, 2010, led to increased demand for hotels in Shanghai. As of September 30, 2010, 23% of the Company's hotel rooms were in Shanghai.
- The ADR, or average daily rate, was
RMB218 in the third quarter of 2010, compared with RMB174 in the third quarter of 2009 and RMB196 in the previous quarter. The 24.8% year-over-year increase was mainly attributable to increased price outside of Shanghai as a result of our strengthening brand, increased travel demand in China, and price increase in Shanghai driven by the Expo. The sequential increase was mainly due to longer exposure to the Expo in Shanghai and our continuous improvement on price outside of Shanghai.
- The occupancy rate for all hotels in operation was 95% in the third quarter of 2010, compared with 98% in the third quarter of 2009, and 98% in the previous quarter. The year-over-year and sequential decrease was mainly attributable to increased percentage of new hotels that were still in the ramp-up stage.
- RevPAR was
RMB207 in the third quarter of 2010, compared with RMB171 in the third quarter of 2009 and RMB192 in the previous quarter. The 21.4% year-over-year increase was attributable to the higher ADR, driven by improving economic conditions, our brand and the Expo. The sequential increase was mainly due to longer exposure to the Expo in Shanghai and our continuous improvement on ADR outside of Shanghai.
- RevPAR for the hotels which had been in operation for at least 18 months was
RMB220 for the third quarter of 2010, a 27.3% increase from RMB173 for the third quarter of 2009 for the same group of hotels. The improvement was caused by higher ADR, as we increased price outside of Shanghai by leveraging our strengthening brand, increased travel demand in China, and particularly in Shanghai during the Expo.
"We are pleased with our results this quarter as we continued to experience high growth in hotel expansion and achieved record RevPAR," said Mr.
Third Quarter of 2010 Financial Results
Total revenues for the quarter were
Total revenues from leased-and-operated hotels for the third quarter of 2010 were
Total revenues from franchised-and-managed hotels for the third quarter of 2010 were
Net revenues for the third quarter of 2010 were
Total operating costs and expenses for the third quarter of 2010 were
Hotel operating costs for the third quarter of 2010 were
Selling and marketing expenses for the third quarter of 2010 were
General and administrative expenses for the third quarter of 2010 were
Pre-opening expenses for the third quarter of 2010 were
Income from operations for the quarter was
Net income attributable to
Basic and diluted net earnings per share/ADS. For the third quarter of 2010, basic net earnings per share was
EBITDA (non-GAAP) for the third quarter of 2010 was
Cash flow. Net operating cash flow for the third quarter of 2010 was
Cash and cash equivalents. As of
Business Outlook and Guidance
"We are confident with our previously announced full year plan of 185-195 new hotel openings in 2010," commented CEO Mr. Zhang. "With a good acceptance of all three HanTing hotel products in the market, we expect to benefit from our multiple-brand strategy in the next couple of years, evidenced by expanding customer coverage and growing interest from hotel franchisees."
The Company expects to achieve net revenues in the range of
The above forecast reflects the Company's current and preliminary view, which is subject to change.
Conference Call
A recording of the conference call will be available after the conclusion of the conference call through
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 measures defined as non-GAAP financial measures by the
The Company believes that EBITDA is a useful financial metric to assess the operating and financial performance before the impact of investing and financing transactions and income taxes. Given the significant investments that the Company has made in leasehold improvements, depreciation and amortization expense comprises a significant portion of the cost structure. In addition, the Company believes that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of financial performance. The Company believes that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The Company also uses EBITDA from operating hotels, which is defined as EBITDA before pre-opening expenses, to assess operating results of the hotels in operation. The Company believe that the exclusion of pre-opening expenses, a portion of which is non-cash rental expenses, helps facilitate year-on-year comparison of the results of operations as the number of hotels in the development stage may vary significantly from year to year. Therefore, the Company believes EBITDA from operating hotels more closely reflects the performance capability of hotels currently in operation. The calculation of EBITDA and EBITDA from operating hotels does not deduct interest income. The presentation of EBITDA and EBITDA from operating hotels should not be construed as an indication that our future results will be unaffected by other charges and gains considered to be outside the ordinary course of the business.
The use of EBITDA and 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 have been and will be incurred and are not reflected in the presentation of EBITDA from operating hotels. Each of these items should also be considered in the overall evaluation of the results. The Company compensates for these limitations by providing the relevant disclosure of the depreciation and amortization, interest expense, income tax expense, pre-opening expenses and other relevant items both in the reconciliations to the U.S. GAAP financial measures and in the consolidated financial statements, all of which should be considered when evaluating the performance.
The terms EBITDA and EBITDA from operating hotels are not defined under U.S. GAAP, and neither EBITDA nor EBITDA from operating hotels is a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing the operating and financial performance, you should not consider this data in isolation or as a substitute for our net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company's EBITDA or EBITDA from operating hotels may not be comparable to EBITDA or EBITDA from operating hotels or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA or EBITDA from operating hotels in the same manner as the Company does.
Reconciliations of the Company's non-GAAP financial measures, including EBITDA and EBITDA from operating hotels, to consolidated statement of operations information are included at the end of this press release.
About
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: The information in this release contains forward-looking statements which involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, which may be identified by terminology such as "may," "should," "will," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "forecast," "project," or "continue," the negative of such terms or other comparable terminology. Readers should not rely on forward-looking statements as predictions of future events or results. Any or all of the Company's forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions, risks and uncertainties and other factors which could cause actual events or results to be materially different from those expressed or implied in the forward-looking statements. In evaluating these statements, readers should consider various factors, including the risks described in "Risk Factors" beginning on page 13 and elsewhere in the Company's registration statement on Form F-1. These factors may cause the Company's actual results to differ materially from any forward-looking statement. In addition, new factors emerge from time to time and it is not possible for the Company to predict all factors that may cause actual results to differ materially from those contained in any forward-looking statements. Any projections in this release are based on limited information currently available to the Company, which is subject to change. The Company disclaims any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date of this document, except as required by applicable law.
--Financial Tables and Operational Data Follow—
| China Lodging Group, Limited | |||
| Unaudited Consolidated Balance Sheets | |||
| December 31, 2009 | September 30, 2010 | ||
| RMB | RMB | US$ ( Note 1) | |
| (in thousands) | |||
| Assets | |||
| Current assets: | |||
| Cash and cash equivalents | 270,587 | 1,271,710 | 190,077 |
| Restricted cash | 500 | 12,275 | 1,835 |
| Accounts receivable, net | 15,158 | 22,212 | 3,320 |
| Amount due from related parties | 4,632 | 3,540 | 529 |
| Prepaid rent | 69,618 | 122,993 | 18,383 |
| Inventories | 8,883 | 10,535 | 1,575 |
| Other current assets | 28,976 | 27,585 | 4,123 |
| Deferred tax assets | 18,272 | 18,272 | 2,731 |
| Total current assets | 416,626 | 1,489,122 | 222,573 |
| Property and equipment, net | 1,028,267 | 1,212,064 | 181,162 |
| Intangible assets, net | 20,395 | 36,963 | 5,525 |
| Goodwill | 18,452 | 18,452 | 2,758 |
| Other assets | 61,170 | 76,806 | 11,479 |
| Deferred tax assets | 36,222 | 37,442 | 5,596 |
| Total assets | 1,581,132 | 2,870,849 | 429,093 |
| Liabilities, mezzanine equity and equity | |||
| Current liabilities: | |||
| Long-term debt, current portion | 57,000 | 24,000 | 3,587 |
| Accounts payable | 141,571 | 213,161 | 31,860 |
| Amount due to related parties | 928 | 1,579 | 236 |
| Salary and welfare payable | 29,597 | 39,275 | 5,870 |
| Deferred revenue | 43,203 | 58,925 | 8,807 |
| Accrued expenses and other current liabilities | 89,383 | 92,129 | 13,770 |
| Income tax payable | 3,869 | 37,360 | 5,584 |
| Total current liabilities | 365,551 | 466,429 | 69,714 |
| Long-term debt | 80,000 | -- | -- |
| Deferred rent | 174,775 | 222,848 | 33,308 |
| Deferred revenue | 31,558 | 50,137 | 7,494 |
| Other long-term liabilities | 20,453 | 38,297 | 5,724 |
| Deferred tax liabilities | 6,538 | 6,538 | 977 |
| Total liabilities | 678,875 | 784,249 | 117,217 |
| Mezzanine equity | |||
| Series B convertible redeemable preferred shares | 796,803 | -- | -- |
| Equity | |||
| Ordinary shares | 46 | 178 | 27 |
| Series A convertible preferred shares | 34 | -- | -- |
| Additional paid-in capital | 351,994 | 2,162,268 | 323,185 |
| Accumulated deficit | (245,457) | (64,625) | (9,659) |
| Accumulated other comprehensive loss | (12,528) | (18,712) | (2,797) |
| Total China Lodging Group, Limited shareholders' equity | 94,089 | 2,079,109 | 310,756 |
| Noncontrolling interest | 11,365 | 7,491 | 1,120 |
| Total equity | 105,454 | 2,086,600 | 311,876 |
| Total liabilities, mezzanine equity and equity | 1,581,132 | 2,870,849 | 429,093 |
| Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6.6905 on September 30, 2010 as set forth in H.10 statistical release of the Federal Reserve Board. | |||
| China Lodging Group, Limited | |||||
| Unaudited Consolidated Statements of Operations | |||||
| Quarter Ended | |||||
| September 30, 2009 | June 30, 2010 | September 30, 2010 | |||
| RMB | RMB | RMB | US$ ( Note 1) | ||
| (in thousands, except per share and per ADS data) | |||||
| Revenues: | |||||
| Leased-and-operated hotels | 349,788 | 432,880 | 497,742 | 74,395 | |
| Franchised-and-managed hotels | 11,325 | 31,142 | 37,250 | 5,568 | |
| Total revenues | 361,113 | 464,022 | 534,992 | 79,963 | |
| Less: business tax and related surcharges | (20,004) | (25,159) | (28,936) | (4,325) | |
| Net revenues | 341,109 | 438,863 | 506,056 | 75,638 | |
| Operating costs and expenses: | |||||
| Hotel operating costs | (256,268) | (273,633) | (311,115) | (46,501) | |
| Selling and marketing expenses | (18,546) | (16,507) | (20,557) | (3,073) | |
| General and administrative expenses | (21,724) | (25,621) | (35,169) | (5,257) | |
| Pre-opening expenses | (7,518) | (18,564) | (35,528) | (5,310) | |
| Total operating costs and expenses | (304,056) | (334,325) | (402,369) | (60,141) | |
| Income from operations | 37,053 | 104,538 | 103,687 | 15,497 | |
| Interest income | 630 | 1,526 | 5,232 | 782 | |
| Interest expenses | (2,493) | (739) | (127) | (19) | |
| Other income | -- | 406 | 399 | 60 | |
| Foreign exchange gain/(loss) | 12 | (303) | 4,011 | 600 | |
| Income before income tax | 35,202 | 105,428 | 113,202 | 16,920 | |
| Income tax expense | (9,112) | (23,403) | (23,140) | (3,459) | |
| Net income | 26,090 | 82,025 | 90,062 | 13,461 | |
| Net income attributable to noncontrolling interests | (3,826) | (2,323) | (1,380) | (206) | |
| Net income attributable to China Lodging Group, Limited | 22,264 | 79,702 | 88,682 | 13,255 | |
| Net earnings per share | |||||
| — Basic | 0.12 | 0.33 | 0.37 | 0.05 | |
| — Diluted | 0.12 | 0.32 | 0.36 | 0.05 | |
| Net earnings per ADS | |||||
| — Basic | 0.49 | 1.32 | 1.47 | 0.22 | |
| — Diluted | 0.48 | 1.29 | 1.43 | 0.21 | |
| Weighted average ordinary shares outstanding | |||||
| — Basic | 59,555 | 241,018 | 241,019 | 241,019 | |
| — Diluted | 186,265 | 246,305 | 247,536 | 247,536 | |
| Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6.6905 on September 30, 2010 as set forth in H.10 statistical release of the Federal Reserve Board. | |||||
| China Lodging Group, Limited | |||||||||||
| Reconciliation of GAAP and Non-GAAP Results | |||||||||||
| Quarter Ended September 30, 2010 | |||||||||||
| GAAP Result | % of Net Revenues | Share-based Compensation | % of Net Revenues | Non-GAAP Result | % of Net Revenues | ||||||
| RMB | RMB | RMB | |||||||||
| (unaudited) | (unaudited) | (unaudited) | |||||||||
| (in thousands) | |||||||||||
| Hotel operating costs | 311,115 | 61.5% | 452 | 0.1% | 310,663 | 61.4% | |||||
| Selling and marketing expenses | 20,557 | 4.1% | 212 | 0.0% | 20,345 | 4.1% | |||||
| General and administrative expenses | 35,169 | 6.9% | 2,623 | 0.5% | 32,546 | 6.4% | |||||
| Pre-opening expenses | 35,528 | 7.0% | -- | 0.0% | 35,528 | 7.0% | |||||
| Total operating costs and expenses | 402,369 | 79.5% | 3,287 | 0.6% | 399,082 | 78.9% | |||||
| Income from operations | 103,687 | 20.5% | 3,287 | 0.6% | 106,974 | 21.1% | |||||
| Quarter Ended September 30, 2010 | |||||||||||
| GAAP Result | % of Net Revenues | Share-based Compensation | % of Net Revenues | Non-GAAP Result | % of Net Revenues | ||||||
| US$ ( Note 1) | US$ | US$ | |||||||||
| (unaudited) | (unaudited) | (unaudited) | |||||||||
| (in thousands) | |||||||||||
| Hotel operating costs | 46,501 | 61.5% | 68 | 0.1% | 46,433 | 61.4% | |||||
| Selling and marketing expenses | 3,073 | 4.1% | 32 | 0.0% | 3,041 | 4.1% | |||||
| General and administrative expenses | 5,257 | 6.9% | 392 | 0.5% | 4,865 | 6.4% | |||||
| Pre-opening expenses | 5,310 | 7.0% | -- | 0.0% | 5,310 | 7.0% | |||||
| Total operating costs and expenses | 60,141 | 79.5% | 492 | 0.6% | 59,649 | 78.9% | |||||
| Income from operations | 15,497 | 20.5% | 492 | 0.6% | 15,989 | 21.1% | |||||
| Quarter Ended June 30, 2010 | |||||||||||
| GAAP Result | % of Net Revenues | Share-based Compensation | % of Net Revenues | Non-GAAP Result | % of Net Revenues | ||||||
| RMB | RMB | RMB | |||||||||
| (unaudited) | (unaudited) | (unaudited) | |||||||||
| (in thousands) | |||||||||||
| Hotel operating costs | 273,633 | 62.4% | 337 | 0.1% | 273,296 | 62.3% | |||||
| Selling and marketing expenses | 16,507 | 3.8% | 210 | 0.0% | 16,297 | 3.7% | |||||
| General and administrative expenses | 25,621 | 5.8% | 2,437 | 0.6% | 23,184 | 5.3% | |||||
| Pre-opening expenses | 18,564 | 4.2% | -- | 0.0% | 18,564 | 4.2% | |||||
| Total operating costs and expenses | 334,325 | 76.2% | 2,984 | 0.7% | 331,341 | 75.5% | |||||
| Income from operations | 104,538 | 23.8% | 2,984 | 0.7% | 107,522 | 24.5% | |||||
| Quarter Ended September 30, 2009 | |||||||||||
| GAAP Result | % of Net Revenues | Share-based Compensation | % of Net Revenues | Non-GAAP Result | % of Net Revenues | ||||||
| RMB | RMB | RMB | |||||||||
| (unaudited) | (unaudited) | (unaudited) | |||||||||
| (in thousands) | |||||||||||
| Hotel operating costs | 256,268 | 75.1% | 103 | 0.0% | 256,165 | 75.1% | |||||
| Selling and marketing expenses | 18,546 | 5.4% | 155 | 0.0% | 18,391 | 5.4% | |||||
| General and administrative expenses | 21,724 | 6.4% | 1,900 | 0.6% | 19,824 | 5.8% | |||||
| Pre-opening expenses | 7,518 | 2.2% | -- | 0.0% | 7,518 | 2.2% | |||||
| Total operating costs and expenses | 304,056 | 89.1% | 2,158 | 0.6% | 301,898 | 88.5% | |||||
| Income from operations | 37,053 | 10.9% | 2,158 | 0.6% | 39,211 | 11.5% | |||||
| Quarter Ended | |||||||||||
| September 30, 2009 | June 30, 2010 |
September 30, 2010 |
|||||||||
| RMB | RMB | RMB | US$ ( Note 1) | ||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||
| (in thousands, except per share and per ADS data) | |||||||||||
| Net income attributable to China Lodging Group, Limited (GAAP) | 22,264 | 79,702 | 88,682 | 13,255 | |||||||
| Share-based compensation expenses | 2,158 | 2,984 | 3,287 | 492 | |||||||
| Adjusted net income attributable to China Lodging Group, Limited (non-GAAP) | 24,422 | 82,686 | 91,969 | 13,747 | |||||||
| Net earnings per share (GAAP) | |||||||||||
| — Basic | 0.12 | 0.33 | 0.37 | 0.05 | |||||||
| — Diluted | 0.12 | 0.32 | 0.36 | 0.05 | |||||||
| Net earnings per ADS (GAAP) | 0.49 | 1.32 | 1.47 | 0.22 | |||||||
| — Basic | 0.48 | 1.29 | 1.43 | 0.21 | |||||||
| — Diluted | |||||||||||
| Adjusted net earnings per share (non-GAAP) | |||||||||||
| — Basic | 0.13 | 0.34 | 0.38 | 0.06 | |||||||
| — Diluted | 0.13 | 0.34 | 0.37 | 0.06 | |||||||
| Adjusted net earnings per ADS (non-GAAP) | |||||||||||
| — Basic | 0.54 | 1.37 | 1.53 | 0.23 | |||||||
| — Diluted | 0.52 | 1.34 | 1.49 | 0.22 | |||||||
| Weighted average ordinary shares outstanding | |||||||||||
| — Basic | 59,555 | 241,018 | 241,019 | 241,019 | |||||||
| — Diluted | 186,265 | 246,305 | 247,536 | 247,536 | |||||||
| Quarter Ended | |||||||||||
| September 30, 2009 |
June 30, 2010 |
September 30, 2010 |
|||||||||
| RMB | RMB | RMB | US$ ( Note 1) | ||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||
| (in thousands) | |||||||||||
| Net income attributable to China Lodging Group, Limited (GAAP) | 22,264 | 79,702 | 88,682 | 13,255 | |||||||
| Interest expenses | 2,493 | 739 | 127 | 19 | |||||||
| Income tax expense | 9,112 | 23,403 | 23,140 | 3,459 | |||||||
| Depreciation and amortization | 38,115 | 40,624 | 43,081 | 6,439 | |||||||
| EBITDA (non-GAAP) | 71,984 | 144,468 | 155,030 | 23,172 | |||||||
| Pre-opening expenses | 7,518 | 18,564 | 35,528 | 5,310 | |||||||
| EBITDA from operating hotels (non-GAAP) | 79,502 | 163,032 | 190,558 | 28,482 | |||||||
| Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6.6905 on September 30, 2010 as set forth in H.10 statistical release of the Federal Reserve Board. | |||||||||||
| China Lodging Group, Limited | |||
| Operational Data | |||
| As of | |||
| September 30, 2009 |
June 30, 2010 |
September 30, 2010 |
|
| Total hotels in operation: | 216 | 324 | 368 |
| Lease-and-operated hotels | 166 | 187 | 200 |
| Franchised-and-managed hotels | 50 | 137 | 168 |
| Total Hotel rooms in operation | 26,475 | 37,782 | 42,750 |
| Lease-and-operated hotels | 20,906 | 23,331 | 24,938 |
| Franchised-and-managed hotels | 5,569 | 14,451 | 17,812 |
| Number of cities | 38 | 51 | 55 |
| For the quarter ended | |||
| September 30, 2009 |
June 30, 2010 |
September 30, 2010 |
|
| Occupancy rate (as a percentage) | |||
| Leased-and-operated hotels | 98% | 100% | 97% |
| Franchised-and-managed hotels | 95% | 94% | 93% |
| Total hotels in operation | 98% | 98% | 95% |
| Average daily room rate (in RMB) | |||
| Leased-and-operated hotels | 175 | 200 | 223 |
| Franchised-and-managed hotels | 171 | 189 | 210 |
| Total hotels in operation | 174 | 196 | 218 |
| RevPAR (in RMB) | |||
| Leased-and-operated hotels | 172 | 199 | 215 |
| Franchised-and-managed hotels | 163 | 179 | 195 |
| Total hotels in operation | 171 | 192 | 207 |
| Like-for-like performance for hotels opened for at least 18 months during the current quarter | |||
| As of and for the quarter ended | |||
| September 30, | |||
| 2009 | 2010 | ||
| Total hotels in operation: | 181 | 181 | |
| Leased-and-operated hotels | 152 | 152 | |
| Franchised-and-managed hotels | 29 | 29 | |
| Total Hotel rooms in operation | 22,734 | 22,734 | |
| Leased-and-operated hotels | 19,371 | 19,371 | |
| Franchised-and-managed hotels | 3,363 | 3,363 | |
| Occupancy rate (as a percentage) | 99% | 99% | |
| Lease-and-operated hotels | 99% | 99% | |
| Franchised-and-managed hotels | 98% | 100% | |
| Total hotels in operation | 99% | 99% | |
| Average daily rate (in RMB) | 175 | 221 | |
| Lease-and-operated hotels | 175 | 219 | |
| Franchised-and-managed hotels | 178 | 236 | |
| Total hotels in operation | 175 | 221 | |
| RevPAR (in RMB) | 173 | 220 | |
| Lease-and-operated hotels | 172 | 217 | |
| Franchised-and-managed hotels | 174 | 237 | |
| Total hotels in operation | 173 | 220 | |
CONTACT:China Lodging Group, Limited Ida Yu, Investor Relations Manager 86 (21) 5153 9463 ir@htinns.com http://ir.htinns.com
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