Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16
OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of: May 2011
Commission File Number: 001-34656
China Lodging Group, Limited
(Exact name of registrant as specified in its charter)
No. 2266 Hongqiao Road
Changning District
Shanghai 200336
People’s Republic of China
(86) 21 6195-9595
(Address of principal executive offices)
Changning District
Shanghai 200336
People’s Republic of China
(86) 21 6195-9595
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form
20-F or Form 40-F.
Form 20-F þ Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(7): o
Indicate by check mark whether the registrant by furnishing the information contained in this Form
is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes o No þ
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with
Rule 12g3-2(b): 82-
TABLE OF CONTENTS
| SIGNATURES | ||||||||
| EXHIBIT INDEX | ||||||||
| EX-99.1 | ||||||||
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| China Lodging Group, Limited |
||||
| By: | /s/ Tuo (Matthew) Zhang | |||
| Name: | Tuo (Matthew) Zhang | |||
| Title: | Chief Executive Officer | |||
| Date: May 11, 2011 | ||||
2
Table of Contents
EXHIBIT INDEX
Exhibit Number
|
Description | |
Exhibit 99.1
|
China Lodging Group, Limited Reports First Quarter of 2011 Financial Results |
3
Exhibit 99.1
Contact Information
Ida Yu
Investor Relations Manager
Tel: 86 (21) 6195 9561
Email: ir@htinns.com
http://ir.htinns.com
Ida Yu
Investor Relations Manager
Tel: 86 (21) 6195 9561
Email: ir@htinns.com
http://ir.htinns.com
China Lodging Group, Limited Reports First Quarter of 2011 Financial Results
| • | Net Revenues increased 24.5% year-over-year for the first quarter to RMB424.4 million (US$64.8 million)1, within the guidance previously announced | |
| • | EBITDA from operating hotels (non-GAAP) increased 6.2% year-over-year for the first quarter to RMB70.2 million (US$10.7 million) | |
| • | Net loss attributable to China Lodging Group, Limited was RMB14.0 million (US$2.1 million) | |
| • | Diluted loss per ADS2 for the first quarter was RMB0.23 (US$0.04); excluding share-based compensation expenses, adjusted diluted loss per ADS (non-GAAP) for the quarter was RMB0.18 (US$0.03). | |
| • | 35 net new hotels were opened in the first quarter of 2011, increasing hotel count to 473 |
Shanghai, China, May 10, 2011 — China Lodging Group, Limited (NASDAQ: HTHT) (“China Lodging Group”
or the “Company”), a leading and high-growth economy hotel chain operator in China, today announced
its unaudited financial results for the first quarter ended March 31, 2011.
Operational Highlights
| • | During the first quarter of 2011, the Company opened 35 net new hotels, including 16 net leased-and-operated hotels and 19 franchised-and-managed hotels. As of March 31, 2011, the Company had 473 hotels in operation, consisting of 259 leased-and-operated hotels and 214 franchised-and-managed hotels. Our hotels in operation covered 71 cities in China as of March 31, 2011. |
| • | As of March 31, 2011, the Company had a total pipeline of 162 hotels under development, including 74 leased-and-operated hotels and 88 franchised-and-managed hotels. |
| 1 | The conversion of Renminbi (“RMB”) into United States dollars (“US$”) is based on the exchange rate of US$1.00=RMB6.5483 on March 31, 2011 as set forth in H.10 statistical release of the Federal Reserve Board. | |
| 2 | Each ADS represents 4 of the Company’s ordinary shares. |
1
| • | Our operational metrics for the first quarter of 2011 reflected the following factors. |
| — | Post-Expo impact in Shanghai. Since the Expo closed at the end of October 2010, our hotels in Shanghai experienced lower-than-normal RevPAR, defined as revenue per available room. | ||
| — | Seasonality. Our business is seasonal, with the first quarter being the lowest season, when the average daily rate (or “ADR”) and occupancy rate are lower, and new hotels’ ramp-up slower. In particular, in 2011 we experienced a prolonged low season in January and the first half of February. Starting from March 2011, our RevPAR tracked upward. | ||
| — | Higher percentage of hotels in the ramp-up stage. Due to our fast expansion, we had a higher percentage of hotels in the ramp-up stage during the first quarter of 2011 compared to the same period last year. The ramping-up hotels, as expected, had lower occupancy rate and RevPAR before becoming mature. In particular, the leased-and-operated hotels in the ramp-up stage would incur similar amount of operational expenses as those in the mature stage, despite of lower revenue contribution. In the first quarter of 2011, the leased-and-operated hotels in operation for less than six months contributed 20% of leased-and-operated hotels’ room nights available for sale, compared to 5% in the first quarter of 2010. |
| • | The ADR of our hotels was RMB175 in the first quarter of 2011, compared with RMB173 in the first quarter of 2010 and RMB194 in the previous quarter. The 1.3% year-over-year increase was mainly attributable to successful yield management, partially diluted by the city mix shifting toward lower-tier cities. The higher ADR in the previous quarter was mainly a result of Shanghai Expo and seasonality. | |
| • | The occupancy rate for all hotels in operation was 82% in the first quarter of 2011, compared with 93% in the first quarter of 2010, and 87% in the previous quarter. The year-over-year decrease was mainly attributable to post-Expo impact to our Shanghai hotels, increased percentage of hotels in the ramp-up stage and prolonged low season. The sequential decrease resulted from seasonality and higher percentage of hotels in the ramp-up stage in the first quarter of 2011. | |
| • | RevPAR, was RMB143 in the first quarter of 2011, compared with RMB161 in the first quarter of 2010 and RMB168 in the previous quarter. The year-over-year decrease was a mixed result of decreased occupancy partially offset by higher ADR. The sequential decrease was due to lower ADR and lower occupancy. | |
| • | RevPAR for the hotels which had been in operation for at least 18 months was RMB161 for the first quarter of 2011, a 2.4% decrease from RMB165 for the first quarter of 2010 for the same group of hotels. ADR for those hotels increased 4.7% as a result of our yield management efforts, while occupancy decreased by 6.9%, due to prolonged low season and post-Expo impact in Shanghai. We observed signs of improvement in the latter part of the quarter. Outside of Shanghai, hotels in operation for at least 18 months showed a 1.2% increase of RevPAR in March, comparing to a 1.1% decrease for January and February combined, while in Shanghai, a 3.0% decrease of RevPAR in March comparing to a 9.1% decrease for January and February combined. | |
2
| • | As of March 31, 2011, HanTing Club had approximately 3.1 million individual members, an increase of 74% from March 31, 2010. The individual members contributed 65.7% of room nights sold during the first quarter of 2011, improving from 60% during the first quarter of 2010. | |
| “We continued our solid expansion in the first quarter of 2011 as we opened 35 net new hotels and entered into 6 new cities. Our yield management enabled us to achieve 4.7% ADR increase among mature hotels on a like-for-like basis,” said Mr. Matthew Zhang, Chief Executive Officer of China Lodging Group. “We are pleased to see the improved contribution from our loyalty program as a result of our effort to acquire new customers and a higher level of customer satisfaction, which will support our further penetration into new markets.” |
First Quarter of 2011 Financial Results
Total revenues for the quarter were RMB450.4 million (US$68.8 million), representing a 24.9%
year-over-year increase and a 5.9% decrease sequentially. The year-over-year increase was primarily
due to our increased number of hotels. The sequential decrease was mainly due to seasonality and
the absence of one-time benefit from Shanghai Expo which ended October 31, 2010.
Total revenues from leased-and-operated hotels for the first quarter of 2011 were RMB410.4 million
(US$62.7 million), representing a 21.0% year-over-year increase and a 6.3% decrease sequentially.
Total revenues from franchised-and-managed hotels for the first quarter of 2011 were RMB40.0
million (US$6.1 million), representing an 85.4% year-over-year increase and a 1.5% decrease
sequentially.
Net revenues for the first quarter of 2011 were RMB424.4 million (US$64.8 million), representing an
increase of 24.5% year-over-year and a decrease of 6.2% sequentially.
Total operating costs and expenses for the first quarter of 2011 were RMB448.0 million (US$68.4
million), compared to RMB323.7 million (US$47.4 million) in the first quarter of 2010 and RMB421.8
million (US$63.9 million) in the previous quarter. Total operating costs and expenses excluding
share-based compensation expenses (non-GAAP) for the quarter were RMB444.6 million (US$67.9
million), representing an increase of 38.8% year-over-year and 6.3% sequentially.
Major components of operating costs and expenses are described and discussed in more details below.
3
Hotel operating costs for the first quarter of 2011 were RMB361.3 million (US$55.2 million),
compared to RMB272.2 million (US$39.9 million) in the first quarter of 2010 and RMB323.3 million
(US$49.0 million) in the previous quarter, representing a 32.7% and 11.8% increase, respectively.
Our hotel network expansion, especially growth in leased-and-operated hotels, was the main driver
for hotel operating costs increase. The average number of leased-and-operated hotels in
operation3 during the first quarter of 2011 increased 43.0% from the same period of 2010
and 13.3% sequentially. Total hotel operating costs excluding share-based compensation expenses
(non-GAAP) were RMB360.8 million (US$55.1 million), representing 85.0% of net revenues, compared to
79.7% for the first quarter in 2010 and 71.3% in the previous quarter. The year-over-year and
sequential increase in hotel operating costs as a percentage of net revenues was mainly due to a
higher percentage of leased-and-operated hotels in ramp-up stage which generated relatively low
revenues while incurring similar level of costs compared to the mature hotels. Higher utility cost
in the first quarter also contributed to the sequential increase due to cold weather.
Selling and marketing expenses for the first quarter of 2011 were RMB17.9 million (US$2.7 million),
compared to RMB14.5 million (US$2.1 million) in the first quarter of 2010 and RMB19.2 million
(US$2.9 million) in the previous quarter. Selling and marketing expenses excluding share-based
compensation expenses (non-GAAP) were RMB17.7 million (US$2.7 million), or 4.2% of net revenues,
which was stable compared to 4.2% for the first quarter in 2010 and 4.2% for the previous quarter.
General and administrative expenses for the first quarter of 2011 were RMB34.6 million (US$5.3 million), compared to RMB25.8 million (US$3.8 million) in the first quarter of 2010 and
RMB33.4 million (US$5.1 million) in the previous quarter. General and administrative expenses
excluding share-based compensation expenses (non-GAAP) were RMB31.8 million (US$4.9 million),
representing 7.5% of the net revenues, compared with 6.8% of the net revenues in the first quarter
of 2010 and 6.8% in the previous quarter. The year-over-year increase in general and administrative
expenses was mainly driven by increased personnel cost as a result of network expansion, and
professional service fees associated with our becoming a public company.
Pre-opening expenses for the first quarter of 2011 were RMB34.3 million (US$5.2 million),
representing a year-over-year increase of 205.6% and a decrease of 25.3% sequentially. The
pre-opening expenses were primarily driven by the number of leased-and-operated hotels under
construction during the period. 16 leased-and-operated hotels were opened during this quarter and
another 74 were in the pipeline at the end of the quarter, compared to five opened and 32 in the
pipeline during the same quarter in 2010, and 43 opened and 69 in the pipeline for the previous
quarter.
| 3 | Calculated as (number of leased-and-operated hotels in operation at the beginning of the quarter + number of leased-and-operated hotels in operation at the end of the quarter)/2 |
4
Loss from operations for the quarter was RMB23.6 million (US$3.6 million), compared to income from
operations of RMB17.2 million (US$2.5 million) in the first quarter of 2010 and income from
operations of RMB30.9 million (US$4.7 million) in the previous quarter. Excluding share-based
compensation expenses, adjusted loss from operations (non-GAAP) for the quarter was RMB 20.2
million (US$3.1 million). Loss from operations for the first quarter was impacted by post-Expo
impact in Shanghai, seasonality, the ramp-up of new leased-and-operated hotels and significant
pre-opening expenses.
Net loss attributable to China Lodging Group, Limited for the first quarter was RMB14.0 million
(US$2.1 million), compared to net income attributable to China Lodging Group, Limited of RMB12.4
million (US$1.8 million) in the first quarter of 2010 and net income attributable to China Lodging
Group, Limited of RMB34.9 million (US$5.3 million) in the previous quarter. Excluding share-based
compensation expenses, adjusted net loss attributable to China Lodging Group, Limited (non-GAAP)
for the first quarter of 2011 was RMB10.6 million (US$1.6 million), compared to adjusted net income
attributable to China Lodging Group, Limited of RMB15.9 million (US$2.3 million) in the first
quarter of 2010 and RMB38.4 million (US$5.8 million) in the previous quarter.
Basic and diluted net loss per share/ADS. For the first quarter of 2011, basic net loss per share
and diluted net loss per share were RMB0.06 (US$0.01); basic net loss per ADS and diluted net loss
per ADS were RMB0.23 (US$0.04). Excluding share-based compensation expenses, adjusted basic net
loss per share (non-GAAP) and diluted net loss per share (non-GAAP) for the first quarter of 2011
were RMB0.04 (US$0.01), and adjusted basic net loss per ADS (non-GAAP) and adjusted diluted net
loss per ADS (non-GAAP) were RMB0.18 (US$0.03).
EBITDA (non-GAAP) for the first quarter of 2011 was RMB35.9 million (US$5.5 million), compared to
RMB54.9 million (US$8.0 million) in the first quarter of 2010 and RMB92.9 million (US$14.1 million)
in the previous quarter. EBITDA from operating hotels (non-GAAP) for the first quarter of 2011 was
RMB70.2 million (US$10.7 million), representing an increase of 6.2% from the first quarter of 2010
and a decrease of 49.4% sequentially. The year-over-year increase was a result of the expansion of
our network, while the sequential decrease was mainly due to post-Expo impact in Shanghai,
seasonality and the ramp-up of new leased-and-operated hotels.
Cash flow. Net operating cash flow for the first quarter of 2011 was RMB38.6 million (US$5.9 million). Cash spent on the purchase of property and equipment, which is part of investing
cash flow, was RMB157.0 million (US$24.0 million). Another RMB 40.3 million (US$6.1 million) was
paid in the first quarter of 2011, on top of the RMB 9.7 million (US$1.5 million) paid in the
fourth quarter of 2010, to acquire nine hotels, including a small hotel chain with six hotels.
5
Cash
and cash equivalents. As of March 31, 2011, the Company had cash and cash equivalents of
RMB902.0 million (US$137.7 million).
Outlook and Guidance for Second Quarter of 2011
“We are on track to open around 200 new hotels this year and to grow our revenue at a fast pace. As
we progress into the second quarter, certain factors that affected our first quarter performance,
such as prolonged low season and post-Expo impact in Shanghai, are now behind us,” commented CEO
Mr. Zhang. “We are confident that the outlook of the domestic travel market will continue to grow
fast. Our investment in leased-and-operated hotels will position us advantageously to capture the
growth opportunity. Despite of the near-term margin pressure, we remain confident that our
investment in 2011 will enable us to a strong revenue and profit growth in 2012 and forward.”
The Company expects to achieve net revenues in the range of RMB530 to RMB550 million in the second
quarter of 2011.
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. EDT, Tuesday, May 10, 2011
(or 9 a.m. on Wednesday, May 11, 2011 in the Shanghai/Hong Kong time zone) following the
announcement. To participate in the event by telephone, please dial +1 (866) 405 2350 (for callers
in the US), +86 10 800 361 0157 (for callers in China Mainland), +852 2561 8854 (for callers in
Hong Kong) or +65 6723 9388 (for callers outside of the US, China Mainland, and Hong Kong) and
entering pass code 6126 6857. 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 17, 2011. Please dial +1 (866) 214 5335 (for callers in the US) or +61 2 8235 5000 (for
callers outside the US) and entering pass code 6126 6857.
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.
Annual Report
China Lodging Group filed its Annual Report on Form 20-F for the year ended December 31, 2010 with
the Securities and Exchange Commission on April 7, 2011. The Annual Report on Form 20-F can be
accessed through the “SEC Filings” page on the China Lodging Group investor relations website at
http://ir.htinns.com.
Use of Non-GAAP Financial Measures
To supplement the Company’s unaudited consolidated financial results presented in accordance with
U.S. GAAP, the Company uses the following non-GAAP measures defined as non-GAAP financial measures
by the SEC: hotel operating costs
6
excluding share-based compensation expenses, general and
administrative expenses excluding share-based compensation expenses, selling expenses excluding
share-based compensation expenses, adjusted income/(loss) from operations excluding share-based compensation expenses, adjusted net
income/(loss) attributable to China Lodging Group, Limited excluding share-based compensation
expenses, adjusted basic and diluted net earnings/(loss) per share and per ADS excluding
share-based compensation expenses, EBITDA and EBITDA from operating hotels. The presentation of
these non-GAAP financial measures is not intended to be considered in isolation or as a substitute
for the financial information prepared and presented in accordance with U.S. GAAP. For more
information on these non-GAAP financial measures, please see the table captioned “Reconciliations
of GAAP and non-GAAP results” set forth at the end of this release. The Company believes that
these non-GAAP financial measures provide meaningful supplemental information regarding its
performance by excluding share-based expenses that may not be indicative of its operating
performance. The Company believes that both management and investors benefit from referring to
these non-GAAP financial measures in assessing its performance and when planning and forecasting
future periods. These non-GAAP financial measures also facilitate management’s internal
comparisons to the Company’s historical performance. The Company believes these non-GAAP financial
measures are useful to investors in allowing for greater transparency with respect to supplemental
information used by management in its financial and operational decision making. A limitation of
using non-GAAP financial measures excluding share-based compensation expenses is that share-based
compensation expenses have been and will continue to be a significant recurring expense in our
business. Management compensates for these limitations by providing specific information regarding
the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on
the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP
financial measures.
The Company believes that EBITDA is a useful financial metric to assess the operating and financial
performance before the impact of investing and financing transactions and income taxes. Given the
significant investments that the Company has made in leasehold improvements, depreciation and
amortization expense comprises a significant portion of the cost structure. In addition, the
Company believes that EBITDA is widely used by other companies in the lodging industry and may be
used by investors as a measure of financial performance. The Company believes that EBITDA will
provide investors with a useful tool for comparability between periods because it eliminates
depreciation and amortization expense attributable to capital expenditures. The Company also uses
EBITDA from operating hotels, which is defined as EBITDA before pre-opening expenses, to assess
operating results of the hotels in operation. The Company believes that the exclusion of
pre-opening expenses, a portion of which is non-cash rental expenses, helps facilitate year-on-year
comparison of the results of operations as the number of hotels in the development stage may vary
significantly from year to year. Therefore, the Company believes EBITDA from operating hotels more
closely reflects the
7
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 China Lodging Group, Limited
China Lodging Group, Limited (the “Company”) is a leading economy hotel chain operator in China.
The Company provides business and leisure travelers with high-quality, and conveniently-located
hotel products under three brands, namely, HanTing Seasons Hotel, HanTing Express Hotel, and
HanTing Hi Inn. As of March 31, 2011, the Company had 473 hotels and 54,160 rooms in 71 cities
across China.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: The information
in this release contains forward-looking statements which involve risks and uncertainties,
including statements regarding the Company’s capital needs, business strategy and expectations. Any
statements contained herein that are not statements of historical fact may be deemed to be
forward-looking statements, which may be identified by terminology such as “may,” “should,” “will,”
“expect,” “plan,”
8
“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—
9
China Lodging Group, Limited
Unaudited Consolidated Balance Sheets
Unaudited Consolidated Balance Sheets
| December 31, 2010 | March 31, 2011 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| (in thousands) | ||||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
1,060,067 | 902,002 | 137,746 | |||||||||
Restricted cash |
1,275 | 3,245 | 496 | |||||||||
Short-term Investment |
100,000 | 100,000 | 15,271 | |||||||||
Accounts receivable, net |
21,536 | 31,942 | 4,878 | |||||||||
Amount due from related parties |
3,267 | 3,267 | 499 | |||||||||
Prepaid rent |
152,267 | 154,964 | 23,665 | |||||||||
Inventories |
18,290 | 20,804 | 3,177 | |||||||||
Income tax receivables |
— | 2,339 | 357 | |||||||||
Other current assets |
40,177 | 36,525 | 5,577 | |||||||||
Deferred tax assets |
17,940 | 17,940 | 2,740 | |||||||||
Total current assets |
1,414,819 | 1,273,028 | 194,406 | |||||||||
Property and equipment, net |
1,422,432 | 1,485,005 | 226,777 | |||||||||
Intangible assets, net |
57,348 | 56,075 | 8,563 | |||||||||
Goodwill |
41,373 | 41,373 | 6,318 | |||||||||
Other assets |
79,953 | 82,263 | 12,563 | |||||||||
Deferred tax assets |
28,155 | 28,155 | 4,300 | |||||||||
Total assets |
3,044,080 | 2,965,899 | 452,927 | |||||||||
Liabilities, mezzanine equity and equity |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
283,203 | 243,487 | 37,183 | |||||||||
Amount due to related parties |
855 | 969 | 148 | |||||||||
Salary and welfare payable |
57,638 | 39,326 | 6,005 | |||||||||
Deferred revenue |
68,599 | 89,628 | 13,687 | |||||||||
Accrued expenses and other current liabilities |
148,926 | 115,701 | 17,670 | |||||||||
Income tax payable |
15,121 | — | — | |||||||||
Total current liabilities |
574,342 | 489,111 | 74,693 | |||||||||
Deferred rent |
237,427 | 249,686 | 38,130 | |||||||||
Deferred revenue |
48,445 | 52,353 | 7,995 | |||||||||
Other long-term liabilities |
46,619 | 50,087 | 7,649 | |||||||||
Deferred tax liabilities |
11,937 | 11,937 | 1,823 | |||||||||
Total liabilities |
918,770 | 853,174 | 130,290 | |||||||||
Equity |
||||||||||||
Ordinary shares |
178 | 178 | 27 | |||||||||
Additional paid-in capital |
2,168,364 | 2,172,241 | 331,726 | |||||||||
Accumulated deficit |
(29,705 | ) | (43,661 | ) | (6,667 | ) | ||||||
Accumulated other comprehensive loss |
(22,703 | ) | (26,041 | ) | (3,977 | ) | ||||||
Total China Lodging Group, Limited shareholders’ equity |
2,116,134 | 2,102,717 | 321,109 | |||||||||
Noncontrolling interest |
9,176 | 10,008 | 1,528 | |||||||||
Total equity |
2,125,310 | 2,112,725 | 322,637 | |||||||||
Total liabilities, mezzanine equity and equity |
3,044,080 | 2,965,899 | 452,927 | |||||||||
10
China Lodging Group, Limited
Unaudited Consolidated Statements of Operations
Unaudited Consolidated Statements of Operations
| Quarter Ended | ||||||||||||||||
| March 31, 2010 | December 31, 2010 | March 31, 2011 | ||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| (in thousands, except per share and per ADS data) | ||||||||||||||||
Revenues: |
||||||||||||||||
Leased-and-operated hotels |
339,161 | 437,989 | 410,390 | 62,671 | ||||||||||||
Franchised-and-managed hotels |
21,569 | 40,619 | 39,994 | 6,108 | ||||||||||||
Total revenues |
360,730 | 478,608 | 450,384 | 68,779 | ||||||||||||
Less: business tax and related surcharges |
(19,785 | ) | (25,977 | ) | (25,949 | ) | (3,963 | ) | ||||||||
Net revenues |
340,945 | 452,631 | 424,435 | 64,816 | ||||||||||||
Operating costs and expenses: |
||||||||||||||||
Hotel operating costs |
(272,202 | ) | (323,252 | ) | (361,267 | ) | (55,170 | ) | ||||||||
Selling and marketing expenses |
(14,511 | ) | (19,212 | ) | (17,897 | ) | (2,733 | ) | ||||||||
General and administrative expenses |
(25,808 | ) | (33,389 | ) | (34,551 | ) | (5,276 | ) | ||||||||
Pre-opening expenses |
(11,216 | ) | (45,901 | ) | (34,275 | ) | (5,234 | ) | ||||||||
Total operating costs and expenses |
(323,737 | ) | (421,754 | ) | (447,990 | ) | (68,413 | ) | ||||||||
Income/(Loss) from operations |
17,208 | 30,877 | (23,555 | ) | (3,597 | ) | ||||||||||
Interest income |
663 | 8,523 | 3,904 | 596 | ||||||||||||
Interest expenses |
(1,545 | ) | (272 | ) | (224 | ) | (34 | ) | ||||||||
Other income |
— | 1,758 | 1,059 | 162 | ||||||||||||
Foreign exchange gain/(loss) |
(29 | ) | 3,244 | 3,059 | 467 | |||||||||||
Income/(Loss) before income tax |
16,297 | 44,130 | (15,757 | ) | (2,406 | ) | ||||||||||
Income tax benefit/(expense) |
(2,626 | ) | (8,093 | ) | 2,409 | 368 | ||||||||||
Net income/(loss) |
13,671 | 36,037 | (13,348 | ) | (2,038 | ) | ||||||||||
Net income attributable to noncontrolling interests |
(1,223 | ) | (1,117 | ) | (607 | ) | (93 | ) | ||||||||
Net income/(loss) attributable to China Lodging Group, Limited |
12,448 | 34,920 | (13,955 | ) | (2,131 | ) | ||||||||||
Net earnings/(loss) per share |
||||||||||||||||
— Basic |
0.07 | 0.14 | (0.06 | ) | (0.01 | ) | ||||||||||
— Diluted |
0.06 | 0.14 | (0.06 | ) | (0.01 | ) | ||||||||||
Net earnings/(loss) per ADS |
||||||||||||||||
— Basic |
0.26 | 0.58 | (0.23 | ) | (0.04 | ) | ||||||||||
— Diluted |
0.25 | 0.57 | (0.23 | ) | (0.04 | ) | ||||||||||
Weighted average ordinary shares outstanding |
||||||||||||||||
— Basic |
68,582 | 241,087 | 241,156 | 241,156 | ||||||||||||
— Diluted |
196,751 | 246,623 | 241,156 | 241,156 | ||||||||||||
11
China Lodging Group, Limited
Reconciliation of GAAP and Non-GAAP Results
Reconciliation of GAAP and Non-GAAP Results
| Quarter Ended March 31, 2011 | ||||||||||||||||||||||||
| 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 |
361,267 | 85.1 | % | 473 | 0.1 | % | 360,794 | 85.0 | % | |||||||||||||||
Selling and marketing expenses |
17,897 | 4.2 | % | 196 | 0.0 | % | 17,701 | 4.2 | % | |||||||||||||||
General and administrative expenses |
34,551 | 8.1 | % | 2,724 | 0.6 | % | 31,827 | 7.5 | % | |||||||||||||||
Pre-opening expenses |
34,275 | 8.1 | % | — | 0.0 | % | 34,275 | 8.1 | % | |||||||||||||||
Total operating costs and expenses |
447,990 | 105.5 | % | 3,393 | 0.7 | % | 444,597 | 104.8 | % | |||||||||||||||
Loss from operations |
(23,555 | ) | -5.5 | % | 3,393 | 0.7 | % | (20,162 | ) | -4.8 | % | |||||||||||||
| Quarter Ended March 31, 2011 | ||||||||||||||||||||||||
| GAAP Result | % of Net Revenues | Share-based Compensation | % of Net Revenues | Non-GAAP Result | % of Net Revenues | |||||||||||||||||||
| US$ | US$ | US$ | ||||||||||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
Hotel operating costs |
55,170 | 85.1 | % | 72 | 0.1 | % | 55,098 | 85.0 | % | |||||||||||||||
Selling and marketing expenses |
2,733 | 4.2 | % | 30 | 0.0 | % | 2,703 | 4.2 | % | |||||||||||||||
General and administrative expenses |
5,276 | 8.1 | % | 416 | 0.6 | % | 4,860 | 7.5 | % | |||||||||||||||
Pre-opening expenses |
5,234 | 8.1 | % | — | 0.0 | % | 5,234 | 8.1 | % | |||||||||||||||
Total operating costs and expenses |
68,413 | 105.5 | % | 518 | 0.7 | % | 67,895 | 104.8 | % | |||||||||||||||
Loss from operations |
(3,597 | ) | -5.5 | % | 518 | 0.7 | % | (3,079 | ) | -4.8 | % | |||||||||||||
| Quarter Ended December 31, 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 |
323,252 | 71.4 | % | 425 | 0.1 | % | 322,827 | 71.3 | % | |||||||||||||||
Selling and marketing expenses |
19,212 | 4.2 | % | 138 | 0.0 | % | 19,074 | 4.2 | % | |||||||||||||||
General and administrative expenses |
33,389 | 7.4 | % | 2,874 | 0.6 | % | 30,515 | 6.8 | % | |||||||||||||||
Pre-opening expenses |
45,901 | 10.1 | % | — | 0.0 | % | 45,901 | 10.1 | % | |||||||||||||||
Total operating costs and expenses |
421,754 | 93.1 | % | 3,437 | 0.7 | % | 418,317 | 92.4 | % | |||||||||||||||
Income from operations |
30,877 | 6.9 | % | 3,437 | 0.7 | % | 34,314 | 7.6 | % | |||||||||||||||
| Quarter Ended March 31, 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 |
272,202 | 79.8 | % | 341 | 0.1 | % | 271,861 | 79.7 | % | |||||||||||||||
Selling and marketing expenses |
14,511 | 4.3 | % | 218 | 0.1 | % | 14,293 | 4.2 | % | |||||||||||||||
General and administrative expenses |
25,808 | 7.6 | % | 2,846 | 0.8 | % | 22,962 | 6.8 | % | |||||||||||||||
Pre-opening expenses |
11,216 | 3.3 | % | — | 0.0 | % | 11,216 | 3.3 | % | |||||||||||||||
Total operating costs and expenses |
323,737 | 95.0 | % | 3,405 | 1.0 | % | 320,332 | 94.0 | % | |||||||||||||||
Income from operations |
17,208 | 5.0 | % | 3,405 | 1.0 | % | 20,613 | 6.0 | % | |||||||||||||||
| Quarter Ended | ||||||||||||||||
| March 31, 2010 | December 31, 2010 | March 31, 2011 | ||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| (in thousands, except per share and per ADS data) | ||||||||||||||||
Net income/(loss) attributable to China Lodging
Group, Limited (GAAP) |
12,448 | 34,920 | (13,955 | ) | (2,131 | ) | ||||||||||
Share-based compensation expenses |
3,405 | 3,437 | 3,393 | 518 | ||||||||||||
Adjusted net income/(loss) attributable to China
Lodging Group, Limited (non-GAAP) |
15,853 | 38,357 | (10,562 | ) | (1,613 | ) | ||||||||||
Net earnings/(loss) per share (GAAP) |
||||||||||||||||
— Basic |
0.07 | 0.14 | (0.06 | ) | (0.01 | ) | ||||||||||
— Diluted |
0.06 | 0.14 | (0.06 | ) | (0.01 | ) | ||||||||||
Net earnings/(loss) per ADS (GAAP) |
||||||||||||||||
— Basic |
0.26 | 0.58 | (0.23 | ) | (0.04 | ) | ||||||||||
— Diluted |
0.25 | 0.57 | (0.23 | ) | (0.04 | ) | ||||||||||
Adjusted net earnings/(loss) per share (non-GAAP) |
||||||||||||||||
— Basic |
0.08 | 0.16 | (0.04 | ) | (0.01 | ) | ||||||||||
— Diluted |
0.08 | 0.16 | (0.04 | ) | (0.01 | ) | ||||||||||
Adjusted net earnings/(loss) per ADS (non-GAAP) |
||||||||||||||||
— Basic |
0.33 | 0.64 | (0.18 | ) | (0.03 | ) | ||||||||||
— Diluted |
0.32 | 0.62 | (0.18 | ) | (0.03 | ) | ||||||||||
Weighted average ordinary shares outstanding |
||||||||||||||||
— Basic |
68,582 | 241,087 | 241,156 | 241,156 | ||||||||||||
— Diluted |
196,751 | 246,623 | 241,156 | 241,156 | ||||||||||||
| Quarter Ended | ||||||||||||||||
| March 31, 2010 | December 31, 2010 | March 31, 2011 | ||||||||||||||
| RMB | RMB | RMB | US$ | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| (in thousands) | ||||||||||||||||
Net income/(loss) attributable to China Lodging Group, Limited (GAAP) |
12,448 | 34,920 | (13,955 | ) | (2,131 | ) | ||||||||||
Interest expenses |
1,545 | 272 | 224 | 34 | ||||||||||||
Income tax expense/(benefit) |
2,626 | 8,093 | (2,409 | ) | (368 | ) | ||||||||||
Depreciation and amortization |
38,246 | 49,587 | 52,061 | 7,950 | ||||||||||||
EBITDA (non-GAAP) |
54,865 | 92,872 | 35,921 | 5,485 | ||||||||||||
Pre-opening expenses |
11,216 | 45,901 | 34,275 | 5,234 | ||||||||||||
EBITDA from operating hotels (non-GAAP) |
66,081 | 138,773 | 70,196 | 10,719 | ||||||||||||
12
China Lodging Group, Limited
Operational Data
| As of | ||||||||||||
| March 31, | December 31, | March 31, | ||||||||||
| 2010 | 2010 | 2011 | ||||||||||
Total hotels in operation: |
282 | 438 | 473 | |||||||||
Leased-and-operated hotels |
178 | 243 | 259 | |||||||||
Franchised-and-managed hotels |
104 | 195 | 214 | |||||||||
Total Hotel rooms in operation |
33,650 | 50,438 | 54,160 | |||||||||
Leased-and-operated hotels |
22,334 | 29,888 | 31,540 | |||||||||
Franchised-and-managed hotels |
11,316 | 20,550 | 22,620 | |||||||||
Number of cities |
47 | 65 | 71 | |||||||||
| For the quarter ended | ||||||||||||
| March 31, | December 31, | March 31, | ||||||||||
| 2010 | 2010 | 2011 | ||||||||||
Occupancy rate (as a percentage) |
||||||||||||
Leased-and-operated hotels |
95 | % | 87 | % | 80 | % | ||||||
Franchised-and-managed hotels |
88 | % | 86 | % | 84 | % | ||||||
Total hotels in operation |
93 | % | 87 | % | 82 | % | ||||||
Average daily room rate (in RMB) |
||||||||||||
Leased-and-operated hotels |
175 | 200 | 179 | |||||||||
Franchised-and-managed hotels |
167 | 186 | 170 | |||||||||
Total hotels in operation |
173 | 194 | 175 | |||||||||
RevPAR (in RMB) |
||||||||||||
Leased-and-operated hotels |
166 | 174 | 144 | |||||||||
Franchised-and-managed hotels |
147 | 160 | 142 | |||||||||
Total hotels in operation |
161 | 168 | 143 | |||||||||
Like-for-like performance for hotels opened for at least 18 months during the current quarter
| As of and for the quarter ended | ||||||||
| March 31, | ||||||||
| 2010 | 2011 | |||||||
Total hotels in operation: |
216 | 216 | ||||||
Leased-and-operated hotels |
167 | 167 | ||||||
Franchised-and-managed hotels |
49 | 49 | ||||||
Total Hotel rooms in operation |
26,542 | 26,542 | ||||||
Leased-and-operated hotels |
21,047 | 21,047 | ||||||
Franchised-and-managed hotels |
5,495 | 5,495 | ||||||
Occupancy rate (as a percentage) |
95 | % | 89 | % | ||||
Average daily rate (in RMB) |
173 | 182 | ||||||
RevPAR (in RMB) |
165 | 161 | ||||||
13