China Lodging Group, Limited Reports Fourth Quarter and Full Year 2010 Financial Results

-- Net Revenues increased 29.2% year-over-year for the fourth quarter and 38.0% for the full year of 2010, within the guidance previously announced

-- Net income attributable to China Lodging Group, Limited increased 76.0% year-over-year for the fourth quarter and 407.1% for the full year of 2010

-- Diluted earnings per ADS for the fourth quarter were RMB0.57 (US$0.09, Note 1); excluding share-based compensation expenses, adjusted diluted earnings per ADS (non-GAAP) for the quarter were RMB0.62 (US$0.09). Diluted earnings per ADS for the full year of 2010 were RMB3.68 (US$0.56); adjusted diluted earnings per ADS (non-GAAP) for the year were RMB3.90 (US$0.59).

-- 202 new hotels were opened in 2010, increasing hotel count to 438

-- The Company provided guidance for full year 2011 net revenues growth of 34% to 38%, with plan to open another 200 new hotels

Mar 09, 2011, 16:30 ET from China Lodging Group, Limited

SHANGHAI, March 9, 2011 /PRNewswire-Asia-FirstCall/ -- 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 fourth quarter and full year ended December 31, 2010.

Operational Highlights

  • During the fourth quarter of 2010, the Company opened 70 new hotels, including 43 leased-and-operated hotels and 27 franchised-and-managed hotels.
  • For the full year of 2010, the Company opened 202 new hotels in total, including 70 new leased-and-operated hotels, exceeding our guidance of 60, and 132 new franchised-and-managed hotels, within our guidance of 125 to 135. As of December 31, 2010, the Company had 438 hotels in operation, consisting of 243 leased-and-operated hotels and 195 franchised-and-managed hotels. Our hotels in operation covered 65 cities in China as of December 31, 2010, compared with 39 cities at the end of 2009.
  • As of December 31, 2010, the Company had a total pipeline of 162 hotels under development, including 69 leased-and-operated hotels and 93 franchised-and-managed hotels.
  • The ADR, or average daily rate, of our hotels, was RMB194 in the fourth quarter of 2010, compared with RMB177 in the fourth quarter of 2009 and RMB218 in the previous quarter. The 9.6% year-over-year increase was mainly attributable to our strengthening brand, successful yield management, and the Expo-driven price increase in Shanghai during October 2010. The sequential decrease resulted from the Company's seasonal and post-Expo price adjustment.
  • For the full year 2010, the ADR was RMB197, representing a 13% year-over-year growth from RMB174 in 2009.
  • The occupancy rate for all hotels in operation was 87% in the fourth quarter of 2010, compared with 95% in the fourth quarter of 2009, and 95% in the previous quarter. The year-over-year decrease was mainly attributable to increased percentage of new hotels in the ramp-up stage and decreased occupancy in Shanghai after the Expo. The sequential decrease resulted from seasonality, new hotels ramp-up and post-Expo impact in Shanghai.
  • For the full year 2010, the occupancy rate for all hotels in operation was 93%, compared with 94% in 2009.
  • RevPAR was RMB168 in the fourth quarter of 2010, compared with RMB168 in the fourth quarter of 2009 and RMB207 in the previous quarter. The stable year-over-year comparison was a mixed result of the higher ADR offset by decreased occupancy.
  • For the full year 2010, the RevPAR was RMB183, representing a 12% year-over-year growth from RMB163 in 2009.
  • RevPAR for the hotels which had been in operation for at least 18 months was RMB181 for the fourth quarter of 2010, a 5.7% increase from RMB171 for the fourth quarter of 2009 for the same group of hotels.  The improvement was driven by the higher ADR, as a result of our strengthening brand, successful yield management and the Expo-driven price increase in Shanghai.
  • For the full year of 2010, RevPAR for the hotels which had been in operation for at least 18 months increased 13.1% to RMB194 on a weighted average basis.
  • As of December 31, 2010, HanTing Club had more than 2.6 million individual members, a 75% increase from the end of 2009. The individual members contributed 61% of room nights sold during the full year of 2010, improving from 59% of room nights sold in 2009.

"2010 was a year of significant growth for China Lodging Group, achieving an 86% growth in the number of hotels. Our excellent yield management capability enabled us to achieve meaningful ADR increase across the chain. On average, the Company raised room rates by 62% in Shanghai during the Expo of six months' period. In the full year of 2010, outside of Shanghai, our hotels increased ADR by 6% on a like-for-like basis," said Mr. Matthew Zhang, Chief Executive Officer of China Lodging Group. "The Expo attracted guests all over China to Shanghai. With a strong presence in Shanghai, we benefit financially as well as in terms of brand awareness. We are pleased to see our loyalty program continuously expand. Our multi-brand strategy, we believe, will enable us to satisfy a wide range of customer needs and attract growing interest from franchisees."

Fourth Quarter and full year of 2010 Financial Results

Total revenues for the quarter were RMB478.6 million (US$72.5 million), representing a 29.2% year-over-year increase and a 10.5% 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 Expo's closing at the end of October.

Total revenues for the year of 2010 were RMB1,838.4 million (US$278.5 million), representing an increase of 37.8% from the year of 2009.

Total revenues from leased-and-operated hotels for the fourth quarter of 2010 were RMB438.0 million (US$66.4 million), representing a 23.3% year-over-year increase and a 12.0% decrease sequentially.

For the year of 2010, total revenues from leased-and-operated hotels were RMB1,707.8 million (US$258.8 million), representing a 32.5% year-over-year increase. As of December 31, 2010, we had 243 leased-and-operated hotels in operation, compared with 173 at the end of 2009.

Total revenues from franchised-and-managed hotels for the fourth quarter of 2010 were RMB40.6 million (US$6.2 million), representing a 164.9% year-over-year increase and a 9.0% increase sequentially.  

For the year of 2010, total revenues from franchised-and-managed hotels were RMB130.6 million (US$19.8 million), representing a year-over-year increase of 190.4%. As of December 31, 2010, we had 195 franchised-and-managed hotels in operation, compared with 63 at the end of 2009.

Net revenues for the fourth quarter of 2010 were RMB452.6 million (US$68.6 million), representing a year-over-year increase of 29.2% year-over-year and a decrease of 10.6% sequentially.

Net revenues for the full year 2010 were RMB1,738.5 million (US$263.4 million), representing a year-over-year increase of 38.0%.

Total operating costs and expenses for the fourth quarter of 2010 were RMB421.8 million (US$63.9 million), compared to RMB317.1 million (US$46.5 million) in the fourth quarter of 2009 and RMB402.4 million (US$60.1 million) in the previous quarter.  Total operating costs and expenses excluding share-based compensation expenses (non-GAAP) for the quarter increased 33.3% year-over-year to RMB418.3 million (US$63.4 million).  

Total operating costs and expenses for the year of 2010 were RMB1,482.2 million (US$224.6 million). Total operating costs and expenses excluding share-based compensation expenses (non-GAAP) were RMB1,469.1 million (US$222.6 million), representing 84.6% of net revenues, or 24.9% of increase from the year of 2009.

Major components of operating costs and expenses are described and discussed in more details below.

Hotel operating costs for the fourth quarter of 2010 were RMB323.3 million (US$49.0 million), compared to RMB267.5million (US$39.2 million) in the fourth quarter of 2009 and RMB311.1million (US$46.5 million) in the previous quarter.  Total hotel operating costs excluding share-based compensation expenses (non-GAAP) were RMB322.8 million (US$48.9 million), representing 71.3% of net revenues, compared to 76.3 % for the fourth quarter in 2009 and 61.4% in the previous quarter.  The year-over-year decrease in hotel operating costs as a percentage of net revenues was mainly due to improvement of RevPAR and growth of the proportion of franchised-and-managed hotels in our hotel network. The sequential increase in percentage was primarily due to lower RevPAR in this quarter.

For the full year of 2010, total hotel operating costs were RMB1,180.2 million (US$178.8 million), compared to RMB1,004.5 million (US$147.2 million) in 2009. Excluding share-based compensation, the hotel operating costs (non-GAAP) were RMB1,178.6 million (US$178.6 million), representing 67.8% of net revenues, compared to 79.7% of net revenues in 2009. The decrease was mainly due to a higher RevPAR and increased weight of franchise revenue in 2010.

Selling and marketing expenses for the fourth quarter of 2010 were RMB19.2 million (US$2.9 million), compared to RMB14.1 million (US$2.1 million) in the fourth quarter of 2009 and RMB20.6 million (US$3.1 million) in the previous quarter.  Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) were RMB19.1 million (US$2.9 million), or 4.2 % of net revenues, compared to 4.0% for the fourth quarter in 2009 and 4.1% in the previous quarter.  

For the full year 2010, total selling and marketing expenses were RMB70.8 million (US$10.7 million), compared to RMB57.8 million (US$8.5 million) in 2009. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) were RMB70.0 million, representing 4.1% of net revenue, compared to 4.6% in 2009.

General and administrative expenses for the fourth quarter of 2010 were RMB33.4 million (US$5.1 million), compared to RMB27.9 million (US$4.1 million) in the fourth quarter of 2009 and RMB35.2 million (US$5.3 million) in the previous quarter.  General and administrative expenses excluding share-based compensation expenses (non-GAAP) were RMB30.5 million (US$4.6 million), representing 6.8% of the net revenues, compared with 7.2% of the net revenues in the fourth quarter of 2009 and 6.4% in the previous quarter.

General and administrative expenses were RMB120.0 million (US$18.2 million) for the year of 2010, compared to RMB83.7 million (US$12.3 million) in 2009. Excluding share-based compensation expenses, general and administrative expenses (non-GAAP) were RMB109.2 million (US$16.5 million), representing 6.3% of net revenues, compared to 6.0% in 2009. The year-over-year increase of general and administrative expenses was primarily due to our enlarged business network, and increased professional service fees associated with our becoming a public company.

Pre-opening expenses for the fourth quarter of 2010 were RMB45.9 million (US$7.0 million), representing a year-over-year increase of 502.2% and an increase of 29.2% sequentially.  The increase in pre-opening expenses was a result of more leased-and-operated hotels under construction during the fourth quarter. 43 leased-and-operated hotels were opened during this quarter and another 69 were in the pipeline at the end of the quarter, compared to seven opened and 21 in the pipeline during the same quarter in 2009, and 13 opened and 76 in the pipeline for the previous quarter.

Pre-opening expenses for the full year were RMB111.2 million (US$16.9 million), representing an increase of 194.0% year over year. The increase of pre-opening expenses was a result of our acceleration of leased-and-operated hotel opening from 28 in 2009 to 70 in 2010, and the leased-and-operated hotel pipeline expansion from 21 at the end of 2009 to 69 at the end of 2010.

Income from operations for the quarter was RMB30.9 million (US$4.7 million), compared to RMB33.1 million (US$4.9 million) in the fourth quarter of 2009 and RMB103.7 million (US$15.5 million) in the previous quarter.  Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the quarter was RMB 34.3 million (US$5.2 million), representing a 5.8% year-over-year increase and a 67.9% decrease sequentially. Income from operations for the fourth quarter was impacted by the significant pre-opening expenses, a cost incurred for opening new hotels. We believe those newly opened leased-and-operated hotels will contribute to our profit base in future years.

Income from operations for the year was RMB256.3 million (US$38.8 million), compared to RMB76.4 million (US$11.2 million) in 2009. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) was RMB269.4 million (US$40.8 million), representing a 219.3% increase compared to the year of 2009.

Net income attributable to China Lodging Group, Limited for the fourth quarter was RMB34.9 million (US$5.3 million), compared to RMB19.8 million (US$2.9 million) in the fourth quarter of 2009 and RMB88.7 million (US$13.3 million) in the previous quarter.  Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group, Limited (non-GAAP) for the fourth quarter increased 65.9% year-over-year to RMB38.4 million (US$5.8 million).

Net income attributable to China Lodging Group, Limited for the full year of 2010 was RMB215.8 million (US$32.7 million), compared to RMB42.5 million (US$6.2 million) in 2009. Excluding share-based compensation expenses, adjusted net income attributable to China Lodging Group, Limited (non-GAAP) was RMB228.9 million (US$34.7 million), increased 353.2% year over year. The year-over-year improvement on profit was mainly attributable to our enlarged hotel network, RevPAR appreciation and the favorable impact of the Expo.

Basic and diluted net earnings per share/ADS.  For the fourth quarter of 2010, basic net earnings per share and diluted net earnings per share were RMB0.14 (US$0.02); basic net earnings per ADS was RMB0.58 (US$0.09), while diluted net earnings per ADS was RMB0.57 (US$0.09).  Excluding share-based compensation expenses, adjusted basic net earnings per share (non-GAAP) and diluted net earnings per share (non-GAAP) for the fourth quarter of 2010 were RMB0.16 (US$0.02), and adjusted basic net earnings per ADS (non-GAAP) was RMB0.64 (US$0.10), while adjusted diluted net earnings per ADS (non-GAAP) was RMB0.62 (US$0.09).

For the full year of 2010, basic net earnings per share was RMB1.05 (US$0.16), while diluted net earnings per share was RMB0.92 (US$0.14); basic net earnings per ADS was RMB4.19 (US$0.63), while diluted net earnings per ADS was RMB3.68 (US$0.56). Excluding share-based compensation expenses, adjusted basic net earnings per share (non-GAAP) for the full year of 2010 was RMB1.10 (US$0.17), while diluted net earnings per share (non-GAAP) was RMB0.98 (US$0.15), and adjusted net earnings per ADS (non-GAAP) was RMB4.41 (US$0.67), while adjusted diluted net earnings per ADS (non-GAAP) was RMB3.90 (US$0.59).

EBITDA (non-GAAP) for the fourth quarter of 2010 was RMB90.3 million (US$13.7 million), compared to RMB69.3 million (US$10.2 million) in the fourth quarter of 2009 and RMB155.0 million (US$23.2 million) in the previous quarter.  EBITDA from operating hotels (non-GAAP) for the fourth quarter of 2010 was RMB136.2 million (US$20.6 million), representing an increase of 77.1% from the fourth quarter of 2009 and a decrease of 28.5% sequentially.  The year-over-year increase was a result of enhanced profitability of mature hotels and the expansion of our network, while the sequential decrease was mainly due to the low season and the Expo's closing in October 2010.

EBITDA (non-GAAP) for the full year of 2010 was RMB444.7 million (US$67.4 million), compared to RMB214.9 million (US$31.5 million) in 2009. EBITDA from operating hotels (non-GAAP) for the full year of 2010 was RMB555.9 million (US$84.2 million), an increase of 120.0% from 2009.

Cash flow.  Net operating cash flow for the fourth quarter of 2010 was RMB74.5 million (US$11.3 million).  Cash spent on the purchase of property and equipment, which is part of investing cash flow, was RMB156.4 million (US$23.7 million).  

Net operating cash flow for the full year of 2010 was RMB469.1 million (US$71.1 million). Cash spent on the purchase of property and equipment was RMB397.3 million (US$60.2 million).

Cash and cash equivalents.  As of December 31, 2010, the Company had cash and cash equivalents of RMB1,060.1 million (US$160.6 million).

Expo Impact

Shanghai Expo, lasting for 6 months from May 1 to October 31, 2010, had a favorable impact on our ADR.  As of December 31, 2010, China Lodging Group had 85 hotels in operation in Shanghai, which constitute 19.4% of all hotels operated by the Company. By analyzing our internal operating metrics under normal business circumstances and comparing to the performance of our non-Shanghai hotels, the management of the Company estimated that the favorable impact from the Expo contributed 6.4%, to our net revenues in 2010. Compared with operational and financial results in the full year of 2009, excluding impact from Shanghai Expo, we estimate that our RevPAR improved by 4.0% for the overall portfolio and 7.0% on a like-for-like basis. While net revenues grew by 29.2%, net income attributable to the Company by 227.2%, EBITDA by 59.4%, and EBITDA from operating hotels by 79.5%, in 2010. The solid performance excluding the Expo impact reflected the strength of our brand and operation, which would form the basis for our high quality growth in the coming years.

The tables at the bottom of this release outline our management estimation on the Expo impact for the full year and the second to fourth quarter of 2010.

Business Outlook and Guidance for 2011

"China domestic consumption market continues to grow robustly. We remain positive on the growing trend of travelling demand. Our brand gains increasing recognition and loyalty among Chinese consumers. The fast growth of leading hotel chains like Hanting will drive gradual consolidation of the hotel industry," commented CEO Mr. Zhang. "2011 is a year of investment for us, as we plan to add about 200 hotels, with half being leased-and-operated hotels. We are confident that once completing their ramp-up cycle, those new hotels will contribute significant revenue and profit growth in 2012 and forward."

The Company expects to achieve net revenues in the range of RMB410 to 430 million in the first quarter of 2011, representing a 20% to 26% growth as compared to the first quarter of 2010. For the full year 2011, the Company expects net revenues to grow 34% to 38%.

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 8 p.m. EST, Wednesday, March 9, 2011 (or 9 a.m. on Thursday, March 10, 2011 in the Shanghai/Hong Kong time zone) following the announcement. To participate in the event by telephone, please dial +1 (888) 830 9551 (for callers in the US), +86 10 800 152 1039 (for callers in China Mainland), +852 3002 1675 (for callers in Hong Kong) or +1 (408) 961 6560 (for callers outside of the US, China Mainland, and Hong Kong) and entering pass code HTHT.  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 March 17, 2011. Please dial +1 877 482 6144 (for callers in the US) or +1 617 213 4164 (for callers outside the US) and entering pass code 604 301 40.

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 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 net earnings 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 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 December 31, 2010, the Company had 438 hotels and 50,438 rooms in 65 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," "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.

Contact:

Ida Yu

Investor Relations Manager

Tel: 86 (21) 6195 9561

Email: ir@htinns.com

http://ir.htinns.com

--Financial Tables and Operational Data Follow--

China Lodging Group, Limited

Unaudited Consolidated Balance Sheets

 

December 31, 2009

 

September 30, 2010

 

December 31, 2010

 

RMB

 

RMB

 

RMB

 

US(Note 1)

(in thousands)

Assets

Current assets:

 Cash and cash equivalents

270,587

 

1,271,710

 

1,060,067

 

160,616

 Restricted cash

500

 

12,275

 

1,275

 

193

 Short-term Investment

-

 

-

 

100,000

 

15,152

 Accounts receivable, net

15,158

 

22,212

 

21,536

 

3,263

 Amount due from related parties

4,632

 

3,540

 

3,267

 

495

 Prepaid rent

69,618

 

122,993

 

152,267

 

23,071

 Inventories

8,883

 

10,535

 

18,290

 

2,771

 Other current assets

28,976

 

27,585

 

40,177

 

6,087

 Deferred tax assets

18,272

 

18,272

 

17,940

 

2,718

 Total current assets

416,626

 

1,489,122

 

1,414,819

 

214,366

Property and equipment, net

1,028,267

 

1,212,064

 

1,422,432

 

215,520

Intangible assets, net

20,395

 

36,963

 

57,348

 

8,689

Goodwill

18,452

 

18,452

 

41,373

 

6,269

Other assets

61,170

 

76,806

 

79,953

 

12,114

Deferred tax assets

36,222

 

37,442

 

28,155

 

4,266

Total assets

1,581,132

 

2,870,849

 

3,044,080

 

461,224

Liabilities, mezzanine equity and equity

Current liabilities:

 Long-term debt, current portion

57,000

 

24,000

 

-

 

-

 Accounts payable

141,571

 

213,161

 

283,203

 

42,910

 Amount due to related parties

928

 

1,579

 

855

 

130

 Salary and welfare payable

29,597

 

39,275

 

57,638

 

8,733

 Deferred revenue

43,203

 

58,925

 

68,599

 

10,394

 Accrued expenses and other current liabilities

89,383

 

92,129

 

148,926

 

22,564

 Income tax payable

3,869

 

37,360

 

15,121

 

2,291

 Total current liabilities

365,551

 

466,429

 

574,342

 

87,022

Long-term debt

80,000

 

-

 

-

 

-

Deferred rent

174,775

 

222,848

 

237,427

 

35,974

Deferred revenue

31,558

 

50,137

 

48,445

 

7,340

Other long-term liabilities

20,453

 

38,297

 

46,619

 

7,063

Deferred tax liabilities

6,538

 

6,538

 

11,937

 

1,809

Total liabilities

678,875

 

784,249

 

918,770

 

139,208

Mezzanine equity

 Series B convertible redeemable preferred shares

796,803

 

-

 

-

 

-

Equity

 Ordinary shares

46

 

178

 

178

 

27

 Series A convertible preferred shares

34

 

-

 

-

 

-

 Additional paid-in capital

351,994

 

2,162,268

 

2,168,364

 

328,540

 Accumulated deficit

(245,457)

 

(64,625)

 

(29,705)

 

(4,501)

 Accumulated other comprehensive loss

(12,528)

 

(18,712)

 

(22,703)

 

(3,440)

Total China Lodging Group, Limited shareholders' equity

94,089

 

2,079,109

 

2,116,134

 

320,626

 Noncontrolling interest

11,365

 

7,491

 

9,176

 

1,390

Total equity

105,454

 

2,086,600

 

2,125,310

 

322,016

Total liabilities, mezzanine equity and equity

1,581,132

 

2,870,849

 

3,044,080

 

461,224

Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6.6000 on December 31, 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

 

Year Ended

 

December 31, 2009

 

September 30, 2010

 

December 312010

 

December 31, 2009

 

December 312010

 

RMB

 

RMB

 

RMB

 

US(Note 1)

 

RMB

 

RMB

 

US(Note 1)

(in thousands, except per share and per ADS data)

Revenues:

Leased-and-operated hotels

355,100

 

497,742

 

437,989

 

66,362

 

1,288,898

 

1,707,771

 

258,753

Franchised-and-managed hotels

15,334

 

37,250

 

40,619

 

6,154

 

44,965

 

130,579

 

19,785

Total revenues

370,434

 

534,992

 

478,608

 

72,516

 

1,333,863

 

1,838,350

 

278,538

Less: business tax and related surcharges

(20,184)

 

(28,936)

 

(25,977)

 

(3,936)

 

(73,672)

 

(99,857)

 

(15,130)

Net revenues

350,250

 

506,056

 

452,631

 

68,580

 

1,260,191

 

1,738,493

 

263,408

Operating costs and expenses:

 Hotel operating costs

(267,464)

 

(311,115)

 

(323,252)

 

(48,978)

 

(1,004,472)

 

(1,180,202)

 

(178,818)

 Selling and marketing expenses

(14,120)

 

(20,557)

 

(19,212)

 

(2,911)

 

(57,818)

 

(70,786)

 

(10,725)

 General and administrative expenses

(27,902)

 

(35,169)

 

(33,389)

 

(5,058)

 

(83,665)

 

(119,989)

 

(18,180)

 Pre-opening expenses

(7,622)

 

(35,528)

 

(45,901)

 

(6,955)

 

(37,821)

 

(111,210)

 

(16,850)

Total operating costs and expenses

(317,108)

 

(402,369)

 

(421,754)

 

(63,902)

 

(1,183,776)

 

(1,482,187)

 

(224,573)

Income from operations

33,142

 

103,687

 

30,877

 

4,678

 

76,415

 

256,306

 

38,835

Interest income

763

 

5,232

 

8,523

 

1,291

 

1,870

 

15,945

 

2,416

Interest expenses

(2,534)

 

(127)

 

(272)

 

(41)

 

(8,787)

 

(2,682)

 

(406)

Other income

-

 

399

 

1,758

 

266

 

-

 

2,564

 

388

Foreign exchange gain/(loss)

(77)

 

4,011

 

3,244

 

492

 

(60)

 

6,923

 

1,049

Income before income tax

31,294

 

113,202

 

44,130

 

6,686

 

69,438

 

279,056

 

42,282

Income tax expense

(8,377)

 

(23,140)

 

(8,093)

 

(1,226)

 

(17,990)

 

(57,262)

 

(8,676)

Net income

22,917

 

90,062

 

36,037

 

5,460

 

51,448

 

221,794

 

33,606

Net income attributable to noncontrolling interests

(3,076)

 

(1,380)

 

(1,117)

 

(169)

 

(8,903)

 

(6,043)

 

(916)

Net income attributable to China Lodging Group, Limited

19,841

 

88,682

 

34,920

 

5,291

 

42,545

 

215,751

 

32,690

Net earnings per share

— Basic

0.11

 

0.37

 

0.14

 

0.02

 

0.24

 

1.05

 

0.16

— Diluted

0.11

 

0.36

 

0.14

 

0.02

 

0.23

 

0.92

 

0.14

Net earnings per ADS

— Basic

0.43

 

1.47

 

0.58

 

0.09

 

0.95

 

4.19

 

0.63

— Diluted

0.42

 

1.43

 

0.57

 

0.09

 

0.93

 

3.68

 

0.56

Weighted average ordinary shares outstanding

— Basic

60,948

 

241,019

 

241,087

 

241,087

 

57,562

 

198,517

 

198,517

— Diluted

188,528

 

247,536

 

246,623

 

246,623

 

183,632

 

234,481

 

234,481

Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6.6000 on December 31, 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 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 December 31, 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

48,978

 

71.4%

 

64

 

0.1%

 

48,914

 

71.3%

Selling and marketing expenses

2,911

 

4.2%

 

21

 

0.0%

 

2,890

 

4.2%

General and administrative expenses

5,058

 

7.4%

 

435

 

0.6%

 

4,623

 

6.8%

Pre-opening expenses

6,955

 

10.1%

 

-

 

0.0%

 

6,955

 

10.1%

Total operating costs and expenses

63,902

 

93.1%

 

520

 

0.7%

 

63,382

 

92.4%

Income from operations

4,678

 

6.9%

 

520

 

0.7%

 

5,198

 

7.6%

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 December 31, 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

267,464

 

76.4%

 

334

 

0.1%

 

267,130

 

76.3%

Selling and marketing expenses

14,120

 

4.0%

 

207

 

0.0%

 

13,913

 

4.0%

General and administrative expenses

27,902

 

8.0%

 

2,741

 

0.8%

 

25,161

 

7.2%

Pre-opening expenses

7,622

 

2.2%

 

-

 

0.0%

 

7,622

 

2.2%

Total operating costs and expenses

317,108

 

90.6%

 

3,282

 

0.9%

 

313,826

 

89.7%

Income from operations

33,142

 

9.4%

 

3,282

 

0.9%

 

36,424

 

10.3%

Year 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

1,180,202

 

67.9%

 

1,555

 

0.1%

 

1,178,647

 

67.8%

Selling and marketing expenses

70,786

 

4.1%

 

778

 

0.0%

 

70,008

 

4.1%

General and administrative expenses

119,989

 

6.9%

 

10,780

 

0.6%

 

109,209

 

6.3%

Pre-opening expenses

111,210

 

6.4%

 

-

 

0.0%

 

111,210

 

6.4%

Total operating costs and expenses

1,482,187

 

85.3%

 

13,113

 

0.7%

 

1,469,074

 

84.6%

Income from operations

256,306

 

14.7%

 

13,113

 

0.7%

 

269,419

 

15.4%

Year Ended December 31, 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

178,818

 

67.9%

 

236

 

0.1%

 

178,582

 

67.8%

Selling and marketing expenses

10,725

 

4.1%

 

118

 

0.0%

 

10,607

 

4.1%

General and administrative expenses

18,180

 

6.9%

 

1,633

 

0.6%

 

16,547

 

6.3%

Pre-opening expenses

16,850

 

6.4%

 

-

 

0.0%

 

16,850

 

6.4%

Total operating costs and expenses

224,573

 

85.3%

 

1,987

 

0.7%

 

222,586

 

84.6%

Income from operations

38,835

 

14.7%

 

1,987

 

0.7%

 

40,822

 

15.4%

Year Ended December 31, 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

1,004,472

 

79.7%

 

523

 

0.0%

 

1,003,949

 

79.7%

Selling and marketing expenses

57,818

 

4.6%

 

465

 

0.0%

 

57,353

 

4.6%

General and administrative expenses

83,665

 

6.6%

 

6,967

 

0.6%

 

76,698

 

6.0%

Pre-opening expenses

37,821

 

3.0%

 

-

 

0.0%

 

37,821

 

3.0%

Total operating costs and expenses

1,183,776

 

93.9%

 

7,955

 

0.6%

 

1,175,821

 

93.3%

Income from operations

76,415

 

6.1%

 

7,955

 

0.6%

 

84,370

 

6.7%

Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6.6000 on December 31, 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

 

Year Ended

 

December 31, 2009

 

September 30, 2010

 

December 31, 2010

 

December 31, 2009

 

December 31, 2010

 

RMB

 

RMB

 

RMB

 

US(Note 1)

 

RMB

 

RMB

 

US(Note 1)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

(in thousands, except per share and per ADS data)

Net income attributable to China Lodging Group, Limited (GAAP)

19,841

 

88,682

 

34,920

 

5,291

 

42,545

-

215,751

 

32,690

Share-based compensation expenses

3,282

 

3,287

 

3,437

 

520

 

7,955

 

13,113

 

1,987

Adjusted net income attributable to China Lodging Group, Limited (non-GAAP)

23,123

 

91,969

 

38,357

 

5,811

 

50,500

 

228,864

 

34,677

Net earnings per share (GAAP)

— Basic

0.11

 

0.37

 

0.14

 

0.02

 

0.24

 

1.05

 

0.16

— Diluted

0.11

 

0.36

 

0.14

 

0.02

 

0.23

 

0.92

 

0.14

Net earnings per ADS (GAAP)

0.43

 

1.47

 

0.58

 

0.09

 

0.95

 

4.19

 

0.63

— Basic

0.42

 

1.43

 

0.57

 

0.09

 

0.93

 

3.68

 

0.56

— Diluted

Adjusted net earnings per share (non-GAAP)

— Basic

0.13

 

0.38

 

0.16

 

0.02

 

0.28

 

1.10

 

0.17

— Diluted

0.12

 

0.37

 

0.16

 

0.02

 

0.28

 

0.98

 

0.15

Adjusted net earnings per ADS (non-GAAP)

— Basic

0.51

 

1.53

 

0.64

 

0.10

 

1.12

 

4.41

 

0.67

— Diluted

0.49

 

1.49

 

0.62

 

0.09

 

1.10

 

3.90

 

0.59

Weighted average ordinary shares outstanding                    

— Basic

60,948

 

241,019

 

241,087

 

241,087

 

57,562

 

198,517

 

198,517

— Diluted

188,528

 

247,536

 

246,623

 

246,623

 

183,632

 

234,481

 

234,481

 

Quarter Ended

 

Year Ended

 

December 31, 2009

 

September 30, 2010

 

December 31,  2010

 

December 31, 2009

 

December 31, 2010

 

RMB

 

RMB

 

RMB

 

US(Note 1)

 

RMB

 

RMB

 

US(Note 1)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

(in thousands)

Net income attributable to China Lodging Group, Limited (GAAP)

19,841

 

88,682

 

34,920

 

5,291

 

42,545

 

215,751

 

32,690

Interest expenses

2,534

 

127

 

272

 

41

 

8,787

 

2,682

 

406

Income tax expense

8,377

 

23,140

 

8,093

 

1,226

 

17,990

 

57,262

 

8,676

Depreciation and amortization

38,550

 

43,081

 

47,032

 

7,126

 

145,571

 

168,983

 

25,603

EBITDA (non-GAAP)

69,302

 

155,030

 

90,317

 

13,684

 

214,893

 

444,678

 

67,375

Pre-opening expenses

7,622

 

35,528

 

45,901

 

6,955

-

37,821

 

111,210

 

16,850

EBITDA from operating hotels (non-GAAP)

76,924

 

190,558

 

136,218

 

20,639

 

252,714

 

555,888

 

84,225

Note 1: The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6.6000 on December 31, 2010 as set  forth in H.10 statistical release of the Federal Reserve Board.  

China Lodging Group, Limited

Operational Data

As of

December 31,

September 30,

December 31,

2009

2010

2010

Total hotels in operation:

236

368

438

 Leased-and-operated hotels

173

200

243

 Franchised-and-managed hotels

63

168

195

Total Hotel rooms in operation

28,360

42,750

50,438

 Leased-and-operated hotels

21,658

24,938

29,888

 Franchised-and-managed hotels

6,702

17,812

20,550

Number of cities

39

55

65

For the quarter ended

December 31,

September 30,

December 31,

2009

2010

2010

Occupancy rate (as a percentage)

 Leased-and-operated hotels

96%

97%

87%

 Franchised-and-managed hotels

91%

93%

86%

 Total hotels in operation

95%

95%

87%

Average daily room rate (in RMB)

 Leased-and-operated hotels

178

223

200

 Franchised-and-managed hotels

173

210

186

 Total hotels in operation

177

218

194

RevPAR (in RMB)

 Leased-and-operated hotels

171

215

174

 Franchised-and-managed hotels

158

195

160

 Total hotels in operation

168

207

168

Like-for-like performance for hotels opened for at least 18 months during the current quarter

As of and for the quarter ended

December 31,

2009

2010

Total hotels in operation:

201

201

 Leased-and-operated hotels

162

162

 Franchised-and-managed hotels

39

39

Total hotel rooms in operation

25,003

25,003

 Leased-and-operated hotels

20,522

20,522

 Franchised-and-managed hotels

4,481

4,481

Occupancy rate (as a percentage)

97%

91%

Average daily rate (in RMB)

176

199

RevPAR (in RMB)

171

181

Expo Impact in 2010 and by quarter

 

2010 Q2

2010 Q3

2010 Q4

Full year 2010

 

Reported

Expo impact

Reported

Expo impact

Reported

Expo impact

Reported

Expo impact

 

(RMB)

(Percentage)

(RMB)

(Percentage)

(RMB)

(Percentage)

(RMB)

(Percentage)

RevPAR

 

 

 

 

 

Leased-and-operated hotels

199

8.0%

215

14.4%

174

2.9%

189

6.9%

Franchised-and-operated hotels

179

8.9%

195

13.3%

160

4.4%

172

7.6%

Total hotels in operation

192

8.3%

207

14.0%

168

3.6%

183

7.7%

 

 

 

 

 

 

 

 

RevPAR for hotels in operation for at least 18 months during the period

Total hotels in operation

205

6.8%

220

12.3%

181

3.3%

194

5.7%

 

 

 

 

 

 

 

 

Net Revenue (million)

438.9

7.2%

506.1

13.3%

452.6

2.6%

1738.5

6.4%

EBITDA from Operating Hotels (million)

163.0

17.7%

190.6

32.7%

136.2

8.1%

555.9

18.4%

EBITDA (million)

144.5

20.0%

155.0

40.1%

90.3

12.3%

444.7

23.0%

Net Income attributable to China Lodging Group (million)

79.7

27.2%

88.7

52.6%

34.9

23.8%

215.8

35.5%

SOURCE China Lodging Group, Limited



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