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China Lodging Group, Limited Reports First Quarter Of 2013 Financial Results

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

To monitor performance of hotels at different maturity level and of different form, the Company also tracks hotel income, which is the difference between net revenues and hotel operating costs.

Reconciliations of the Company's non-GAAP financial measures, including EBITDA, adjusted EBITDA from operating hotels, and hotel income, to the consolidated statement of comprehensive income (loss) information are included at the end of this press release.

About China Lodging Group, Limited

China Lodging Group, Limited is a leading and fast-growing multi-brand hotel group in China. The Company provides business and leisure travelers with high-quality and conveniently-located hotel products under four brands, namely, JI Hotel, Starway Hotel, HanTing Hotel, and Hi Inn. The Company plans to launch another brand, Joya Hotel, in the second half of 2013. For more information, please visit the Company's website: http://ir.htinns.com .

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

1 The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of US$1.00=RMB6.2108 on March 29, 2013 as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm. 

2 Defined as EBITDA before pre-opening expenses and share-based compensation expenses.

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

4 Calculated as the average of the number of leased hotels in operation at the beginning of the quarter and the number of leased hotels in operation at the end of the quarter. 

--Financial Tables and Operational Data Follow—

China Lodging Group, Limited 
Unaudited Condensed Consolidated Balance Sheets
  December 31, 2012 March 31, 2013
  RMB RMB US$
  (in thousands)
Assets      
Current assets:      
 Cash and cash equivalents  449,844  174,138  28,038
 Restricted cash  1,790  4,102  660
 Short-term Investment  8,074  8,074  1,300
 Accounts receivable, net  50,633  81,847  13,178
 Prepaid rent  321,305  343,615  55,325
 Inventories  37,971  32,466  5,227
 Income tax receivables  --   10,434  1,680
 Other current assets  83,058  67,292  10,835
 Deferred tax assets  44,231  44,231  7,122
 Total current assets  996,906  766,199  123,365
       
Property and equipment, net  2,951,509  3,032,899  488,327
Intangible assets, net  100,980  98,905  15,925
Long term investment  28,129  28,129  4,529
Goodwill  64,180  64,180  10,334
Other assets  133,536  166,156  26,752
Deferred tax assets  54,947  54,947  8,847
Total assets  4,330,187  4,211,415  678,079
       
Liabilities and equity      
Current liabilities:      
 Short-term loans  --   1,254  202
 Accounts payable  624,824  464,146  74,732
 Amount due to related parties  801  1,062  171
 Salary and welfare payable  117,980  78,517  12,642
 Deferred revenue  200,515  214,740  34,575
 Accrued expenses and other current liabilities  187,380  206,510  33,250
 Income tax payable  23,142  --   -- 
 Total current liabilities  1,154,642  966,229  155,572
       
Deferred rent  470,438  512,905  82,583
Deferred revenue  99,800  103,890  16,727
Other long-term liabilities  92,407  105,073  16,918
Deferred tax liabilities  22,335  22,335  3,596
Total liabilities  1,839,622  1,710,432  275,396
       
Equity      
 Ordinary shares  180  180  29
 Additional paid-in capital  2,243,403  2,253,236  362,793
 Retained earnings  260,014  260,083  41,876
 Accumulated other comprehensive loss  (38,408)  (38,622)  (6,218)
Total China Lodging Group, Limited equity  2,465,189  2,474,877  398,480
 Noncontrolling interest  25,376  26,106  4,203
Total equity  2,490,565  2,500,983  402,683
Total liabilities and equity  4,330,187  4,211,415  678,079
 
China Lodging Group, Limited 
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
  Quarter Ended
  March 31, 2012 December 31, 2012 March 31, 2013
  RMB RMB RMB US$
  (in thousands, except per share and per ADS data)
Revenues:        
Leased hotels  627,006  831,104  804,692  129,563
Manchised and franchised hotels  61,549  105,561  114,591  18,450
Total revenues  688,555  936,665  919,283  148,013
Less: business tax and related surcharges  (39,097)  (53,468)  (52,346)  (8,428)
Net revenues  649,458  883,197  866,937  139,585
         
Operating costs and expenses:        
 Hotel operating costs:        
 Rents  (205,397)  (255,967)  (283,875)  (45,707)
 Utilities  (64,729)  (58,166)  (80,066)  (12,891)
 Personnel costs  (105,771)  (143,511)  (147,578)  (23,762)
 Depreciation and amortization   (74,166)  (93,929)  (102,022)  (16,427)
 Consumables, food and beverage   (67,633)  (94,190)  (84,529)  (13,610)
 Others  (31,672)  (48,312)  (37,111)  (5,974)
 Total hotel operating costs  (549,368)  (694,075)  (735,181)  (118,371)
 Selling and marketing expenses  (22,211)  (28,959)  (23,813)  (3,834)
 General and administrative expenses   (48,812)  (61,044)  (58,900)  (9,484)
 Pre-opening expenses  (41,355)  (69,835)  (53,967)  (8,689)
Total operating costs and expenses  (661,746)  (853,913)  (871,861)  (140,378)
Income (Loss) from operations  (12,288)  29,284  (4,924)  (793)
Interest income  3,102  3,309  1,229  198
Interest expenses  (213)  (200)  (211)  (34)
Other income  375  374  373  60
Foreign exchange gain (loss)  (643)  354  (75)  (12)
Income (Loss) before income tax  (9,667)  33,121  (3,608)  (581)
Income tax benefit (expense)  967  (13,311)  4,551  733
Net income (loss)  (8,700)  19,810  943  152
Net income attributable to noncontrolling interests  (729)  (1,618)  (874)  (141)
Net income (loss) attributable to China Lodging Group, Limited  (9,429)  18,192  69  11
         
Net earnings (loss) per share        
— Basic  (0.04)  0.07  0.00  0.00
— Diluted  (0.04)  0.07  0.00  0.00
         
Net earnings (loss) per ADS        
— Basic  (0.16)  0.30  0.00  0.00
— Diluted  (0.16)  0.29  0.00  0.00
         
Weighted average ordinary shares outstanding        
— Basic  242,629  244,318  244,542  244,542
— Diluted  242,629  248,265  248,840  248,840
         
Other comprehensive income (loss), net of tax        
Foreign currency translation adjustments  231  (760)  (214)  (34)
Comprehensive income (loss)  (8,469)  19,050  729  118
Comprehensive income (loss) attributable to the noncontrolling interest  (729)  (1,618)  (874)  (141)
Comprehensive income (loss) attributable to China Lodging Group, Limited  (9,198)  17,432  (145)  (23)
 
China Lodging Group, Limited 
Unaudited Condensed Consolidated Statements of Cash Flows
  Quarter Ended
  March 31, 2012 December 31, 2012 March 31, 2013
  RMB RMB RMB US$
  (in thousands)      
Operating activities:        
Net income/(loss)  (8,700)  19,810  943  152
Adjustments to reconcile net income to net cash provided by operating activities:        
Share-based compensation  3,288  5,103  7,673  1,235
Depreciation and amortization  76,512  96,834  104,363  16,803
Deferred taxes  --   (18,226)  --   -- 
Bad debt expenses  1,105  (735)  2,589  417
Deferred rent  25,496  37,259  46,207  7,440
Impairment loss  --   4,549  --   -- 
Excess tax benefit from share-based compensation  (352)  (793)  (548)  (88)
         
Changes in operating assets and liabilities, net of effect of acquisitions:        
         
Accounts receivable  (5,540)  (1,773)  (33,803)  (5,443)
Prepaid rent  (3,578)  (43,029)  (22,311)  (3,592)
Inventories  3,570  (4,991)  5,505  886
Other current assets  4,513  (20,616)  15,824  2,546
Other assets  (5,016)  (7,030)  (32,619)  (5,252)
Accounts payable  53  5,493  (120)  (19)
Amount due to related parties  479  (366)  261  42
Salary and welfare payables  (18,302)  57,914  (39,463)  (6,354)
Deferred revenue  17,964  23,108  18,315  2,949
Accrued expenses and other current liabilities  20,695  7,425  18,501  2,979
Income tax payable and receivable  (14,611)  22,078  (33,028)  (5,318)
Other long-term liabilities  3,397  9,348  12,773  2,057
Net cash provided by operating activities   100,973  191,362  71,062  11,440
         
Investing activities:        
Purchase of property and equipment  (250,065)  (263,764)  (346,634)  (55,811)
Purchases of intangibles  (215)  (1,936)  (208)  (33)
Amount received as a result of government zoning  --   --   2,500  403
Acquisitions, net of cash received  (4,610)  (510)  (2,770)  (446)
Purchase of short term investment  --   (8,074)  --   -- 
Decrease (increase) in restricted cash  (12,995)  59,665  (2,312)  (372)
Net cash used in investing activities  (267,885)  (214,619)  (349,424)  (56,259)
         
Financing activities:        
Net proceeds from issuance of ordinary shares upon exercise of option  2,019  6,017  1,553  250
Proceeds from short-term bank loans  --   --   45,796  7,374
Repayment of short term debt  --   --   (44,540)  (7,171)
Repayment of long term debt  --   (880)  --   -- 
Funds advanced from noncontrolling shareholders  --   3,000  --   -- 
Repayment of funds advanced from noncontrolling interest holders  (810)  (621)  (341)  (55)
Contribution from noncontrolling interest holders  5  25  --   -- 
Dividend paid to noncontrolling interest holders  (804)  (168)  (144)  (23)
Excess tax benefit from share-based compensation  352  793  548  88
Net cash provided by financing activities  762  8,166  2,872  463
Effect of exchange rate changes on cash and cash equivalents  231  (760)  (216)  (35)
Net decrease in cash and cash equivalents  (165,919)  (15,851)  (275,706)  (44,391)
Cash and cash equivalents, beginning of period  781,601  465,695  449,844  72,429
Cash and cash equivalents, end of period  615,682  449,844  174,138  28,038
 
China Lodging Group, Limited 
Unaudited reconciliation of GAAP and Non-GAAP Results
  Quarter Ended March 31, 2013
  GAAP Result % of Net Revenues Share-based Compensation % of Net Revenues Non-GAAP Result % of Net Revenues
  RMB   RMB   RMB  
  (in thousands)          
             
Hotel operating costs  735,181 84.8%  876 0.1%  734,305 84.7%
Selling and marketing expenses  23,813 2.7%  259 0.0%  23,554 2.7%
General and administrative expenses  58,900 6.8%  6,538 0.8%  52,362 6.0%
Pre-opening expenses  53,967 6.2%  --  0.0%  53,967 6.2%
Total operating costs and expenses  871,861 100.5%  7,673 0.9%  864,188 99.6%
Income (Loss) from operations  (4,924) -0.5%  7,673 0.9%  2,749 0.4%
             
  Quarter Ended March 31, 2013
  GAAP Result % of Net Revenues Share-based Compensation % of Net Revenues Non-GAAP Result % of Net Revenues
  US$    US$   US$  
  (in thousands)          
             
Hotel operating costs  118,371 84.8%  141 0.1%  118,230 84.7%
Selling and marketing expenses  3,834 2.7%  42 0.0%  3,792 2.7%
General and administrative expenses  9,484 6.8%  1,052 0.8%  8,432 6.0%
Pre-opening expenses  8,689 6.2%  --  0.0%  8,689 6.2%
Total operating costs and expenses  140,378 100.5%  1,235 0.9%  139,143 99.6%
Income (Loss) from operations  (793) -0.5%  1,235 0.9%  442 0.4%
             
  Quarter Ended December 31, 2012
  GAAP Result % of Net Revenues Share-based Compensation % of Net Revenues Non-GAAP Result % of Net Revenues
  RMB   RMB   RMB  
  (in thousands)          
             
Hotel operating costs  694,075 78.6%  318 0.0%  693,757 78.6%
Selling and marketing expenses  28,959 3.3%  164 0.0%  28,795 3.3%
General and administrative expenses  61,044 6.9%  4,621 0.5%  56,423 6.4%
Pre-opening expenses  69,835 7.9%  --  0.0%  69,835 7.9%
Total operating costs and expenses  853,913 96.7%  5,103 0.5%  848,810 96.2%
Income from operations  29,284 3.3%  5,103 0.5%  34,387 3.8%
             
  Quarter Ended March 31, 2012
  GAAP Result % of Net Revenues Share-based Compensation % of Net Revenues Non-GAAP Result % of Net Revenues
  RMB   RMB   RMB  
  (in thousands)          
             
Hotel operating costs  549,368 84.6%  615 0.1%  548,753 84.5%
Selling and marketing expenses  22,211 3.4%  270 0.0%  21,941 3.4%
General and administrative expenses  48,812 7.5%  2,403 0.4%  46,409 7.1%
Pre-opening expenses  41,355 6.4%  --  0.0%  41,355 6.4%
Total operating costs and expenses  661,746 101.9%  3,288 0.5%  658,458 101.4%
Loss from operations  (12,288) -1.9%  3,288 0.5%  (9,000) -1.4%
 
China Lodging Group, Limited 
Unaudited reconciliation of GAAP and Non-GAAP Results 
  Quarter Ended
  March 31, 2012 December 31, 2012 March 31, 2013
  RMB RMB RMB US$
  (in thousands, except per share and per ADS data)
         
Net income (loss) attributable to China Lodging Group, Limited (GAAP)  (9,429)  18,192  69  11
Share-based compensation expenses  3,288  5,103  7,673  1,235
Adjusted net income (loss) attributable to China Lodging Group, Limited (non-GAAP)  (6,141)  23,295  7,742  1,246
         
Net earnings (loss) per share (GAAP)        
— Basic  (0.04)  0.07  0.00  0.00
— Diluted  (0.04)  0.07  0.00  0.00
         
Net earnings (loss) per ADS (GAAP)        
— Basic  (0.16)  0.30  0.00  0.00
— Diluted  (0.16)  0.29  0.00  0.00
         
Adjusted net earnings (loss) per share (non-GAAP)        
— Basic  (0.03)  0.10  0.03  0.01
— Diluted  (0.03)  0.09  0.03  0.01
         
Adjusted net earnings (loss) per ADS (non-GAAP)        
— Basic  (0.10)  0.38  0.13  0.02
— Diluted  (0.10)  0.38  0.12  0.02
         
Weighted average ordinary shares outstanding        
— Basic  242,629  244,318  244,542  244,542
— Diluted  242,629  248,265  248,840  248,840
         
  Quarter Ended
  March 31, 2012 December 31, 2012 March 31, 2013
  RMB RMB RMB US$
  (in thousands)
         
Net income (loss) attributable to China Lodging Group, Limited (GAAP)  (9,429)  18,192  69  11
Interest expenses  213  200  211  34
Income tax expense  (967)  13,311  (4,551)  (733)
Depreciation and amortization  76,512  96,834  104,363  16,803
EBITDA (non-GAAP)  66,329  128,537  100,092  16,115
Pre-opening expenses  41,355  69,835  53,967  8,689
Share-based Compensation  3,288  5,103  7,673  1,235
Adjusted EBITDA from operating hotels (non-GAAP)  110,972  203,475  161,732  26,039
         
  Quarter Ended
  March 31, 2012 December 31, 2012 March 31, 2013  
  RMB RMB RMB US$
  (in thousands)
         
Net revenues (GAAP)  649,458  883,197  866,937  139,585
Less: Hotel operating costs  (549,368)  (694,075)  (735,181)  (118,371)
Hotel income (non-GAAP)  100,090  189,122  131,756  21,214
 
China Lodging Group, Limited
Operating Data      
  As of 
  March 31, 2012 December 31, 2012 March 31, 2013
Total hotels in operation:  675  1,035  1,105
 Leased hotels  353  465  484
 Manachised hotels  322  516  586
 Franchised hotels*  --   54  35
Total hotel rooms in operation  75,622  113,650  120,560
 Leased hotels  42,057  54,694  56,778
 Manachised hotels  33,565  53,381  60,066
 Franchised hotels*  --   5,575  3,716
Number of cities  111  171  191
       
* refers to franchised Starway hotels      
       
Hotel breakdown by brand As of 
  March 31, 2012 December 31, 2012 March 31, 2013
Total hotels in operation:  675  1,035  1,105
JI Hotel   24 32 37
Hanting Hotel  622 898 976
Hi Inn  29 40 43
Starway Hotel  --  65 49
       
  For the quarter ended
  March 31, 2012 December 31, 2012 March 31, 2013
Occupancy rate (as a percentage)      
 Leased hotels 89.9% 91.8% 85.4%
 Manachised hotels 91.8% 92.2% 87.6%
 Blended 90.7% 92.1% 86.5%
Average daily room rate (in RMB)      
 Leased hotels 175.7 182.4 178.3
 Manachised hotels 166.4 169.9 167.0
 Blended 171.6 176.1 172.5
RevPAR (in RMB)      
 Leased hotels 158.0 167.4 152.3
 Manachised hotels 152.8 156.7 146.3
 Blended 155.7 162.2 149.2
       
       
Like-for-like performance for leased and manachised hotels opened for at least 18 months during the current quarter
       
  As of and for the quarter ended  
  March 31,   
  2012 2013  
Total   570  570  
 Leased hotels  308  308  
 Manachised hotels  262  262  
Total  65,910  65,910  
 Leased hotel rooms  37,676  37,676  
 Manachised hotel rooms  28,234  28,234  
Occupancy rate (as a percentage) 93.7% 91.8%  
Average daily rate (in RMB) 173.9 179.5  
RevPAR (in RMB) 163.0 164.8  
CONTACT: Ida Yu
         Investor Relations Manager
         Tel:  +86 (21) 6195 9561
         Email: ir@htinns.com
         http://ir.htinns.com

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