• A total of 3,541 hotels or 359,530 hotel rooms in operation as of June 30, 2017.
  • Net revenues increased 20.1% year-over-year to RMB1,989.2 million (US$293.4 million) 1 for the second quarter of 2017, above the previously-announced guidance without the acquisition of Crystal Orange
  • EBITDA (non-GAAP) increased 26.5% year-over-year to RMB703.1 million (US$103.7 million) for the second quarter of 2017, or 47.8% excluding investment gain.
  • Net income attributable to China Lodging Group, Limited increased 23.5% year-over-year to RMB389.6 million (US$57.5 million) for the second quarter of 2017, or 67.8% excluding investment gain.
  • Basic earnings per ADS 2 were RMB5.58 (US$0.82) and diluted earnings per ADS were RMB5.41 (US$0.80) for the second quarter of 2017. Excluding share-based compensation expenses, adjusted basic earnings per ADS (non-GAAP) were RMB5.81 (US$0.86) and adjusted diluted earnings per ADS (non-GAAP) were RMB5.63 (US$0.83) for the second quarter of 2017.
  • The Company expects the Q3 2017 net revenues growth of 30% to 34% (or 13% to 16% excluding the impact of Crystal Orange) year-over-year ; and revises up the full year 2017 net revenues growth to 23% to 26 % (or 12% to 15% excluding the impact of Crystal Orange, from 10% to 13%)

SHANGHAI, China, Aug. 17, 2017 (GLOBE NEWSWIRE) -- China Lodging Group, Limited (NASDAQ:HTHT) ("China Lodging Group" or the "Company"), a leading and fast-growing multi-brand hotel group in China, today announced its unaudited financial results for the second quarter ended June 30, 2017.

Second Quarter of 2017 Operational Highlights
  • During the second quarter of 2017, China Lodging Group opened 272 hotels, including 72 leased ("leased-and-operated") hotels and 200 manachised ("franchised-and-managed") hotels and franchised hotels. These newly-opened hotels included 140 hotels (69 leased and 71 manachised and franchised hotels) from Crystal Orange Hotel Holdings Limited ("Crystal Orange") 3. The Company closed 6 leased hotels and 61 manachised and franchised hotels during the quarter.The Company closed a total of 89 hotels during the first half of 2017, mainly due to:a)  As part of the Company's strategic focus to upgrade the products and services qualities, the Company removed 31 of the manachised and franchised hotels from the Company's network for incompliances with the brand and operating standards. These hotels mainly related to HanTing, Elan and Starway brand. By removing hotels with lower qualities, the Company is able to provide products with better qualities and consistent customer experiences, which will help enhance both the brands and profitability.b)  We also closed 28 hotels due to property related issues including rezoning and returning of military-owned properties and expiry of leases.c)  30 hotels located mainly in selected 3 rd or lower tier cities were closed due to operating losses. These loss making hotels were primarily under HanTing, Elan and Hi Inn brands with average RevPAR lower than RMB90 and therefore, the financial impact to the Company's financial is not significant.
  • As of June 30, 2017, the Company had 686 leased and owned hotels, 2,654 manachised hotels, and 201 franchised hotels in operation in 369 cities. The number of hotel rooms in operation totaled 359,530, an increase of 14.2% from a year ago. As of June 30, 2017, the Company had a total number of 612 hotels contracted or under construction, including 30 leased hotels and 582 manachised and franchised hotels.
  • The ADR, which is defined as the average daily rate for all hotels in operation, was RMB199 in the second quarter of 2017, compared with RMB184 in the second quarter of 2016 and RMB182 in the previous quarter. The year-over-year increase of 7.9% was due to both an increase in ADR of the mature hotels, as well as an increase in the proportion of midscale and upscale hotels with higher ADR in the Company's brand mix. The sequential increase resulted mainly from seasonality.
  • The occupancy rate for all hotels in operation was 90.1% in the second quarter of 2017, compared with 85.2% in the second quarter of 2016 and 83.9% in the previous quarter. The year-over-year increase of 4.9-percentage points due to improved performance across all brands as driven by strong travel demand and increasing popularity of the Company's brands. The sequential increase resulted mainly from seasonality.
  • RevPAR, defined as revenue per available room for all hotels in operation, was RMB179 in the second quarter of 2017, compared with RMB157 in the second quarter of 2016 and RMB152 in the previous quarter. The year-over-year increase of 14.0% was attributable to both higher ADR and occupancy. The sequential increase resulted mainly from seasonality.
  • For all hotels which had been in operation for at least 18 months, the same-hotel RevPAR was RMB175 for the second quarter of 2017, representing an 8.3% increase from RMB162 for the second quarter of 2016, with a 3.0% increase in ADR and a 4.5-percentage-point increase in occupancy rate. The midscale and upscale hotels registered a 9.9% same-hotel RevPAR improvement, driven by a 6.1% increase in ADR and a 3.1-percentage-point increase in occupancy rate. The economy hotels also registered a 7.7% same-hotel RevPAR improvement, driven by a 2.2% increase in ADR and a 4.8-percentage-point increase in occupancy rate.
  • As of June 30, 2017, the Company's loyalty program had approximately 88 million members, who contributed approximately 76% of room nights sold during the second quarter of 2017. In the second quarter of 2017, approximately 87% of room nights were sold through the Company's own channels. The strong leisure travel demands as well as the expansion of our newly launched midscale brands attract increasing bookings from third party channels.

"Thanks to the better-than-expected hotel performance, our various efforts to improve the quality of our economic hotels, and midscale and upscale expansion strategy, we have once again achieved a historically high year-over-year growth in our same hotel RevPAR. "We are confident that the consumption upgrade in China will continue to feed into the growing demand for mid-and up- scale hotels. Midscale and upscale hotel rooms contribute 24% and 57% of our hotels in operation and in pipeline, respectively. We are well positioned to capture growth opportunity in consumption upgrade, and look forward to creating more value for our shareholders." said Ms. Jenny Zhang, Chief Executive Officer of China Lodging Group.

"As of May 25, 2017, we closed the acquisition of Crystal Orange, which further strengthens our leading position in the midscale hotel segment and also enriches our talent pool. The integration process on the reservation platform and operations have been progressing as planned.  Mr. Wu Hai, the founder and CEO of Crystal Orange added to his responsibilities the role of Executive Vice President of High-End Product Innovation in Huazhu. He will be responsible for the brand strategy and promotion, product design and development for our high-end brands," Ms. Zhang added.

Second Quarter of 2017 Financial Results
(RMB in thousands) Q2 2016   Q1 2017 Q2 2017
Revenues:      
Leased and owned hotels 1,329,736   1,223,476  1,543,117
Manachised and franchised hotels 351,831   361,362  435,552
Others 8,994   8,268  10,512
Total revenues 1,690,561   1,593,106  1,989,181
Less: business tax and related taxes (33,642 ) - -
Net revenues 1,656,919   1,593,106 1,989,181
Net revenues from leased and owned hotels  1,303,274   1,223,476  1,543,117
Net revenues from manachised and franchised hotels 344,830   361,362 435,552
Others  8,815   8,268  10,512
Note: Value-added tax ("VAT") has been implemented for hospitality industry to replace business tax in China, effective May 1, 2016. For comparison purpose, the business tax and related taxes in Q2 2016 are reallocated to reflect net revenues for each business.

Net revenues for the second quarter of 2017 were RMB1,989.2 million (US$293.4 million), representing a 20.1% year-over-year increase and a 24.9% sequential increase. The year-over-year increase was primarily due to the Company's hotel network expansion, improved blended RevPAR and the acquisition of Crystal Orange. Since the acquisition completion date May 25 until June 30, 2017, the net revenues consolidated from Crystal Orange were RMB119.1 million, contributing 7.2 percentage points to the year-over-year net revenues growth.

Net revenues from leased and owned hotels for the second quarter of 2017 were RMB1,543.1 million (US$227.6 million), representing an 18.4% year-over-year increase and a 26.1% sequential increase.

Net revenues from manachised and franchised hotels for the second quarter of 2017 were RMB435.6 million (US$64.2 million), representing a 26.3% year-over-year increase and a 20.5% sequential increase. Net revenues from manachised and franchised hotels accounted for 21.9% of the Company's net revenues in the second quarter of 2017, up from 20.8% a year ago.

Other revenues represent revenues generated from other than hotel businesses, which mainly include revenues from HuaZhu mall and the provision of IT products and services to outside customers, totaling RMB10.5 million (US$1.6 million) in the second quarter of 2017.
(RMB in thousands) Q2 2016   Q1 2017   Q2 2017
Operating costs and expenses:          
Hotel operating costs  1,217,412   1,198,962    1,348,270
Other operating costs  3,029   1,933    3,739
Selling and marketing expenses  36,064   34,268    45,262
General and administrative expenses  118,868   165,343    135,689
Pre-opening expenses  13,371   24,112    43,134
Total operating costs and expenses  1,388,744   1,424,618    1,576,094

Hotel operating costs for the second quarter of 2017 were RMB1,348.3 million (US$198.9 million), compared to RMB1,217.4 million in the second quarter of 2016 and RMB1,199.0 million in the previous quarter, representing a 10.7% year-over-year increase and a 12.5% sequential increase. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the second quarter of 2017 were RMB1,343.8 million (US$198.2 million), representing 67.6% of net revenues, compared to 73.3% for the second quarter in 2016 and 75.0% for the previous quarter. The year-over-year and  decrease in the percentage was mainly attributable to the improved blended RevPAR and increased portion of manachised-and-franchised revenue. The sequential decrease was mainly due to seasonality.

Selling and marketing expenses for the second quarter of 2017 were RMB45.3 million (US$6.7 million), compared to RMB36.1 million in the second quarter of 2016 and RMB34.3 million in the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the second quarter of 2017 were RMB44.9 million (US$6.6 million), or 2.3% of net revenues, compared to 2.2% for the second quarter of 2016 and for the previous quarter.  

General and administrative expenses for the second quarter of 2017 were RMB135.7 million (US$20.0 million), compared to RMB118.9 million in the second quarter of 2016 and RMB165.3 million in the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the second quarter of 2017 were RMB124.5 million (US$18.4 million), representing 6.2% of net revenues, compared with 6.4% of net revenues in the second quarter of 2016 and 9.7% in the previous quarter. The sequential decrease was mainly due to one-off Crystal Orange acquisition transaction costs amounting to RMB45.2 million in the previous quarter.

Pre-opening expenses for the second quarter of 2017 were RMB43.1 million (US$6.4 million), representing a 222.6% year-over-year increase and a 78.9% sequential increase. The year-over-year and sequential increases in percentage were mainly due to more midscale or upscale leased hotels were under construction in the second quarter of 2017.

Income from operations for the second quarter of 2017 was RMB442.7 million (US$65.3 million), compared to RMB263.4 million in the second quarter of 2016 and RMB167.3 million in the previous quarter. The operating margin, defined as income from operations as percentage of net revenues, for the second quarter of 2017 was 22.3%, compared with 15.9% in the second quarter of 2016 and 10.5% in the previous quarter. The improved year-over-year operating margin was mainly attributable to the improved blended RevPAR.

Net income attributable to China Lodging Group, Limited for the second quarter of 2017 was RMB389.6 million (US$57.5 million), as 19.6% of net revenues, compared to RMB315.5 million, as 19.0% of net revenues in the second quarter of 2016 and RMB148.1 million, as 9.3% of net revenues in the previous quarter. This demonstrated a 23.5% year-over-year increase and a 163.1% sequential increase. The year-over-year and sequential increases were mainly attributable to the Company's expanded hotel network, the improved blended RevPAR, and the acquisition of Crystal Orange. The net income in the second quarter of 2017 included an investment gain of RMB37.8 million, compared to RMB105.8 million during the same period in 2016. Excluding the investment gains, the increase would have been higher at 67.8% year-over-year.

Basic and diluted earnings per share/ADS. For the second quarter of 2017, basic earnings per share were RMB1.40 (US$0.21) and diluted earnings per share were RMB1.35 (US$0.20); basic earnings per ADS were RMB5.58 (US$0.82) and diluted earnings per ADS were RMB5.41 (US$0.80). For the second quarter of 2017, excluding share-based compensation expenses, adjusted basic earnings per share (non-GAAP) were RMB1.45 (US$0.21) and adjusted diluted earnings per share (non-GAAP) were RMB1.41 (US$0.21); adjusted basic earnings per ADS (non-GAAP) were RMB5.81 (US$0.86) and adjusted diluted earnings per ADS (non-GAAP) were RMB5.63 (US$0.83).

EBITDA (non-GAAP) for the second quarter of 2017 was RMB703.1 million (US$103.7 million), as 35.3% of net revenues, compared with RMB556.0 million, as 33.6% of net revenues in the second quarter of 2016 and RMB357.7 million, as 22.5% of net revenues in the previous quarter. This demonstrated a 26.5% year-over-year increase and a 96.6% sequential increase. Excluding the investment gains, the increase would have been higher at 47.8% year-over-year.

Cash flow. Operating cash inflow for the second quarter of 2017 was RMB806.0 million (US$118.9 million). Investing cash outflow for the second quarter of 2017 was RMB3,728.4 million (US$550.0 million).

Cash and cash equivalents and Restricted cash. As of June 30, 2017, the Company had a total balance of cash and cash equivalents and restricted cash of RMB3,447.9 million (US$508.6 million).

Debt financing. As of June 30, 2017, the Company had a total loan balance of RMB3,820.8 million (US$563.6 million), including a syndicated loan of US$500 million for the acquisition of Crystal Orange, which was drawn down in May 2017.

Guidance For the third quarter of 2017, the Company expects net revenues to grow 30% to 34% year-over-year. For the full year of 2017, the Company raises its net revenues growth range to 23% to 26%, given the consolidation of Crystal Orange and better-than-expected performance. Excluding the impact of the Crystal Orange acquisition, the net revenues is expected to grow 13%-16% and 12%-15% for the third quarter and the full year of 2017, respectively, up from the previous guidance of 10%-13% for the full year of 2017.

Considering the interest expense and amortization of intangible assets related to the acquisition, the financial impact from Crystal Orange is expected to be negligible in 2017, and will start to contribute to the bottom line in 2018.

The above forecast reflects the Company's current and preliminary view, which is subject to change.

Conference CallChina Lodging Group's management will host a conference call at 7 a.m. ET, Thursday, August 17, 2017 (or 7 p.m. on Thursday, August 17, 2017 in the Shanghai/Hong Kong time zone) following the announcement. To participate in the event by telephone, please dial +1 (855) 500 8701 (for callers in the US), +86 400 120 0654 (for callers in China Mainland), +852 3018 6776 (for callers in Hong Kong) or +65 6713 5440 (for callers outside of the US, China Mainland, and Hong Kong) and enter pass code 5760 9181.  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 August 24, 2017. Please dial +1 (855) 452 5696 (for callers in the US) or +61 2 9003 4211 (for callers outside the US) and entering pass code 5760 9181.

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

Use of Non-GAAP Financial MeasuresTo 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 and marketing expenses excluding share-based compensation expenses; adjusted income from operations excluding share-based compensation expenses;; adjusted net income attributable to China Lodging Group, Limited excluding share-based compensation expenses; adjusted basic and diluted earnings per share and per ADS excluding share-based compensation expenses; EBITDA; and adjusted EBITDA excluding share-based compensation expenses. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of GAAP and non-GAAP results" set forth at the end of this release. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding Company performance by excluding share-based compensation expenses that may not be indicative of Company operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Company performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance. The Company believes these non-GAAP financial measures are also useful to investors in allowing for greater transparency with respect to supplemental information used regularly by Company management in financial and operational decision-making. A limitation of using non-GAAP financial measures excluding share-based compensation expenses is that share-based compensation expenses have been - and will continue to be - a significant recurring expense in the Company's business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

The Company believes that EBITDA is a useful financial metric to assess the operating and financial performance before the impact of investing and financing transactions and income taxes, given the significant investments that the Company has made in leasehold improvements, depreciation and amortization expense that comprise a significant portion of the Company's cost structure. In addition, the Company believes that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of financial performance. The Company believes that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The Company also uses adjusted EBITDA, which is defined as EBITDA before share-based compensation expenses, to assess operating results of the hotels in operation. The Company believes that the exclusion of share-based compensation expenses helps facilitate year-on-year comparison of the results of operations as the share-based compensation expenses may not be indicative of Company operating performance. Therefore, the Company believes adjusted EBITDA more closely reflects the performance capability of hotels. The presentation of EBITDA and adjusted EBITDA should not be construed as an indication that the Company's future results will be unaffected by other charges and gains considered to be outside the ordinary course of business.

The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets (including land use rights), income tax, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Share-based compensation expenses have been and will be incurred and are not reflected in the presentation of adjusted EBITDA. Each of these items should also be considered in the overall evaluation of the results. The Company compensates for these limitations by providing the relevant disclosure of the depreciation and amortization, interest income, interest expense, income tax expense, share-based compensation expenses and other relevant items both in the reconciliations to the U.S. GAAP financial measures and in the consolidated financial statements, all of which should be considered when evaluating the performance of the Company.

The terms EBITDA and adjusted EBITDA are not defined under U.S. GAAP, and neither EBITDA nor adjusted EBITDA 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 may not be comparable to EBITDA or adjusted EBITDA - or similarly titled measures utilized by other companies - since such other companies may not calculate EBITDA or adjusted EBITDA in the same manner as the Company does.

Reconciliations of the Company's non-GAAP financial measures, including EBITDA and adjusted EBITDA, to the consolidated statement of operations information are included at the end of this press release.

About China Lodging Group, LimitedChina Lodging Group, Limited is a leading hotel operator and franchisor in China. As of June 30, 2017, the Company had 3,541 hotels or 359,530 rooms in operation in 369 cities. With a primary focus on economy and midscale hotel segments, China Lodging Group's brands include Hi Inn, HanTing Hotel, Elan Hotel, JI Hotel, Starway Hotel, Joya Hotel, CitiGo Hotel, VUE Hotel, Crystal Orange Hotel, Orange Hotel Select, Orange Hotel and Manxin Hotel. The Company also has the rights as master franchisee for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel, in Pan-China region.The Company's business includes leased and owned, manachised and franchised models. Under the lease and ownership model, the Company directly operates hotels typically located on leased or owned properties. Under the manachise model, the Company manages manachised hotels through the on-site hotel managers it appoints and collects fees from franchisees. Under the franchise model, the Company provides training, reservation and support services to the franchised hotels and collects fees from franchisees but does not appoint on-site hotel managers. The Company applies a consistent standard and platform across all of its hotels. The Company applies a consistent standard and platform across all of its hotels. As of June 30, 2017, China Lodging Group operates 24 percent of its hotel rooms under lease and ownership model, 76 percent under manachise and franchise models.

For more information, please visit the Company's website: http://ir.huazhu.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: The information in this release contains forward-looking statements which involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, which may be identified by terminology such as "may," "should," "will," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "forecast," "project," or "continue," the negative of such terms or other comparable terminology. Readers should not rely on forward-looking statements as predictions of future events or results. Any or all of the Company's forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions, risks and uncertainties and other factors which could cause actual events or results to be materially different from those expressed or implied in the forward-looking statements. In evaluating these statements, readers should consider various factors, including the anticipated growth strategies of the Company, the future results of operations and financial condition of the Company, the economic conditions of China, the regulatory environment in China, the Company's ability to attract customers and leverage its brands, 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=RMB6.7793 on June 30, 2017 as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm. 2 Each ADS represents four of the Company's ordinary shares.

3 As of June 30, 2017, the Company is still in the process of evaluating the purchase price allocation for Crystal Orange. Hence, the financial results for the second quarter of 2017 is based on the preliminary numbers and are subject to change upon finalization.

—Financial Tables and Operational Data Follow—

China Lodging Group, Limited
Unaudited Condensed Consolidated Balance Sheets
 
  December 31, 2016 June 30, 2017
  RMB RMB US$
  (in thousands)
   
ASSETS      
Current assets:      
Cash and cash equivalents 3,235,007   2,980,375   439,629  
Restricted cash 500   467,500   68,960  
Accounts receivable, net 141,649   163,737   24,152  
Loan receivables 22,410   65,885   9,719  
Amounts due from related parties 98,453   124,301   18,335  
Prepaid rent 446,127   502,447   74,115  
Inventories 21,606   33,239   4,903  
Other current assets 208,929   240,112   35,418  
Total current assets 4,174,681   4,577,596   675,231  
       
Property and equipment, net 3,710,468   4,462,948   658,320  
Intangible assets, net 342,694   1,806,383   266,456  
Land use rights 145,521   142,826   21,068  
Long-term investments 1,064,321   1,282,714   189,210  
Goodwill 171,504   2,136,710   315,181  
Loan receivables 7,269   6,856   1,011  
Other assets 200,492   345,655   50,988  
Deferred tax assets 176,414   241,795   35,667  
Total assets 9,993,364   15,003,483   2,213,132  
             
LIABILITIES AND EQUITY      
Current liabilities:      
Short-term debt 298,291   162,586   23,983  
Long-term debt, current portion -   135   20  
Accounts payable 584,731   600,330   88,553  
Amounts due to related parties 11,058   9,606   1,417  
Salary and welfare payables 274,259   246,335   36,336  
Deferred revenue 749,793   799,238   117,894  
Accrued expenses and other current liabilities 895,837   1,065,785   157,212  
Income tax payable 152,112   195,137   28,784  
Total current liabilities 2,966,081   3,079,152   454,199  
       
Long-term debt -   3,658,041   539,590  
Deferred rent 1,023,843   1,242,292   183,248  
Deferred revenue 166,963   167,241   24,669  
Other long-term liabilities 323,991   350,273   51,668  
Deferred tax liabilities 96,329   458,760   67,671  
Total liabilities 4,577,207   8,955,759   1,321,045  
           
Equity:      
Ordinary shares 204   204   30  
Treasury shares (107,331 ) (107,331 ) (15,832 )
Additional paid-in capital 3,699,056   3,753,504   553,671  
Retained earnings 1,812,174   2,349,896   346,628  
Accumulated other comprehensive income (loss) (4,503 ) 32,743   4,830  
Total China Lodging Group, Limited shareholders' equity 5,399,600   6,029,016   889,327  
Noncontrolling interest 16,557   18,708   2,760  
Total equity 5,416,157   6,047,724   892,087  
Total liabilities and equity 9,993,364   15,003,483   2,213,132  

China Lodging Group, Limited
Unaudited Condensed Consolidated Statements of Comprehensive Income
 
  Quarter Ended
  June 30, 2016 March 31, 2017 June 30, 2017
  RMB RMB RMB US$
  (in thousands, except per share and per ADS data)
Revenues:        
Leased and owned hotels 1,329,736     1,223,476     1,543,117     227,622  
Manachised and franchised hotels 351,831     361,362     435,552     64,247  
Others 8,994     8,268     10,512     1,551  
Total revenues 1,690,561     1,593,106     1,989,181     293,420  
Less: business tax and related taxes (33,642 )   -     -     -  
Net revenues 1,656,919     1,593,106     1,989,181     293,420  
Operating costs and expenses:                          
Hotel operating costs:        
Rents (473,549 )   (463,138 )   (502,353 )   (74,101 )
Utilities (66,730 )   (101,850 )   (69,942 )   (10,317 )
Personnel costs (275,206 )   (280,316 )   (329,025 )   (48,534 )
Depreciation and amortization (170,688 )   (169,567 )   (185,419 )   (27,351 )
Consumables, food and beverage (129,792 )   (108,602 )   (137,139 )   (20,229 )
Others (101,447 )   (75,489 )   (124,392 )   (18,349 )
Total hotel operating costs (1,217,412 )   (1,198,962 )   (1,348,270 )   (198,881 )
Other operating costs (3,029 )   (1,933 )   (3,739 )   (551 )
Selling and marketing expenses (36,064 )   (34,268 )   (45,262 )   (6,676 )
General and administrative expenses (118,868 )   (165,343 )   (135,689 )   (20,015 )
Pre-opening expenses (13,371 )   (24,112 )   (43,134 )   (6,363 )
Total operating costs and expenses (1,388,744 )   (1,424,618 )   (1,576,094 )   (232,486 )
Other operating income (expense), net (4,787 )   (1,145 )   29,619     4,369  
Income from operations 263,388     167,343     442,706     65,303  
Interest income 15,472     18,332     21,792     3,214  
Interest expense (3,541 )   (2,358 )   (15,870 )   (2,341 )
Other income, net 109,724     27,049     74,312     10,962  
Foreign exchange gain (loss) 5,926     (5,378 )   (4,577 )   (675 )
Income before income taxes 390,969     204,988     518,363     76,463  
Income tax expense (77,457 )   (52,343 )   (130,183 )   (19,203 )
Loss from equity method investments (3,146 )   (4,654 )   (978 )   (144 )
Net income 310,366     147,991     387,202     57,116  
Less: net loss attributable to noncontrolling interest 5,134     92     2,437     359  
Net income attributable to China Lodging Group, Limited 315,500     148,083     389,639     57,475  
                           
Other comprehensive income        
Unrealized securities holding gains (losses), net of tax 4,064     8,736     (13,511 )   (1,993 )
Reclassification of gains realized to net income, net of tax (55,018 )   (3,737 )   (1,545 )   (228 )
Foreign currency translation adjustments, net of tax (6,003 )   1,113     46,190     6,813  
Comprehensive income 253,409     154,103     418,336     61,708  
Comprehensive loss attributable to noncontrolling interest 5,134     92     2,437     359  
Comprehensive income attributable to China Lodging Group, Limited 258,543     154,195     420,773     62,067  
                           
         
Earnings per share:        
Basic 1.14     0.53     1.40     0.21  
Diluted 1.11     0.52     1.35     0.20  
         
Earnings per ADS:        
Basic 4.56     2.13     5.58     0.82  
Diluted 4.44     2.06     5.41     0.80  
         
Weighted average number of shares used in computation:    
Basic 276,496     278,472     279,101     279,101  
Diluted 284,009     287,313     288,316     288,316  
         

China Lodging Group, Limited
Unaudited Condensed Consolidated Statements of Cash Flows
  Quarter Ended
  June 30, 2016 March 31, 2017 June 30, 2017
  RMB RMB RMB US$
  (in thousands)
Operating activities:        
Net income 310,366     147,991     387,202     57,116  
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation 16,232     15,799     16,021     2,363  
Depreciation and amortization 174,952     173,204     189,210     27,910  
Deferred taxes (3,789 )   2,955     (916 )   (135 )
Bad debt expenses 97     413     601     89  
Deferred rent 22,088     14,837     48,485     7,152  
Loss from disposal of property and equipment 6,841     4,291     11,388     1,680  
Impairment loss 33,222     -     44,439     6,555  
Loss from equity method investments 3,146     4,654     978     144  
Investment gain (105,849 )   (27,016 )   (37,773 )   (5,572 )
Excess tax benefit from share-based compensation (510 )   (7,525 )   (8,200 )   (1,210 )
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable (20,809 )   6,174     (4,904 )   (723 )
Prepaid rent 33,528     (34,897 )   3,770     556  
Inventories 1,590     (1,748 )   (4,697 )   (693 )
Amounts due from related parties (3,954 )   2,835     (3,553 )   (524 )
Other current assets (11,874 )   (7,134 )   4,362     643  
Other assets 410     (21,002 )   (14,403 )   (2,125 )
Accounts payable 23,867     (39,822 )   1,432     211  
Amounts due to related parties 3,180     (700 )   (752 )   (111 )
Salary and welfare payables 44,827     (104,752 )   57,289     8,451  
Deferred revenue 54,638     (19,232 )   (14,048 )   (2,072 )
Accrued expenses and other current liabilities 32,597     107,023     35,123     5,181  
Income tax payable 34,660     (46,442 )   83,089     12,256  
Other long-term liabilities 10,648     8,583     11,886     1,753  
Net cash provided by operating activities 660,104     178,489     806,029     118,895  
                           
Investing activities:        
Purchases of property and equipment (105,747 )   (185,116 )   (156,840 )   (23,135 )
Purchases of intangibles (1,049 )   (826 )   (247 )   (36 )
Acquisitions, net of cash received 132,348     (765,023 )   (2,980,236 )   (439,608 )
Proceeds from disposal of subsidiary and branch, net of cash disposed (20,667 )   -     -     -  
Purchase of long-term investments (52,422 )   (78,609 )   (216,917 )   (31,997 )
Proceeds from maturity/sale of long-term investments 5,009     38,613     87,593     12,921  
Payment for shareholder loan to joint venture (3,442 )   (75,980 )   (775 )   (114 )
Collection of shareholder loan from joint venture -     -     48,500     7,154  
Purchase of short-term investments (25,400 )   -     -     -  
Proceeds from maturity/sale of short-term investments 451,616     -     -     -  
Payment for the origination of loan receivables -     (3,400 )   (47,000 )   (6,933 )
Proceeds from collection of loan receivables -     5,812     4,526     668  
Increase in restricted cash -     -     (467,000 )   (68,886 )
Net cash provided by (used in) investing activities 380,246     (1,064,529 )   (3,728,396 )   (549,966 )
                           
Financing activities:        
Net proceeds from issuance of ordinary shares upon exercise of options 990     2,190     4,428     653  
Proceeds from short-term debt   1,000     135,488     19,986  
Repayment of short-term debt -     (1,000 )   (266,764 )   (39,350 )
Proceeds from long-term debt -     -     3,633,174     535,922  
Funds advanced from noncontrolling interest holders -     22,739     13,950     2,058  
Repayment of funds advanced from noncontrolling interest holders (100 )   -     (1,677 )   (247 )
Acquisition of noncontrolling interest -     (3,750 )   -     -  
Contribution from noncontrolling interest holders 245     310     6,631     978  
Dividends paid to noncontrolling interest holders (240 )   (650 )   (1,680 )   (248 )
Excess tax benefit from share-based compensation 510     7,525     8,200     1,210  
Net cash provided by financing activities 1,405     28,364     3,531,750     520,962  
                           
Effect of exchange rate changes on cash and cash equivalents 9,837     (1,839 )   (4,500 )   (666 )
Net increase (decrease) in cash and cash equivalents 1,051,592     (859,515 )   604,883     89,225  
Cash and cash equivalents at the beginning of the period 1,414,760     3,235,007     2,375,492     350,404  
Cash and cash equivalents at the end of the period 2,466,352     2,375,492     2,980,375     439,629  

China Lodging Group, Limited
Unaudited Reconciliation of GAAP and Non-GAAP Results
  Quarter Ended June 30, 2017
  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 1,348,270 67.8 % 4,502 0.2 % 1,343,768 67.6 %
Other operating costs 3,739 0.2 % - 0.0 % 3,739 0.2 %
Selling and marketing expenses 45,262 2.3 % 371 0.0 % 44,891 2.3 %
General and administrative expenses 135,689 6.8 % 11,148 0.6 % 124,541 6.2 %
Pre-opening expenses 43,134 2.2 % - 0.0 % 43,134 2.2 %
Total operating costs and expenses 1,576,094 79.3 % 16,021 0.8 % 1,560,073 78.5 %
Income from operations 442,706 22.3 % 16,021 0.8 % 458,727 23.1 %
             
  Quarter Ended June 30, 2017
  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 198,881 67.8 % 664 0.2 % 198,217 67.6 %
Other operating costs 551 0.2 % - 0.0 % 551 0.2 %
Selling and marketing expenses 6,676 2.3 % 55 0.0 % 6,621 2.3 %
General and administrative expenses 20,015 6.8 % 1,644 0.6 % 18,371 6.2 %
Pre-opening expenses 6,363 2.2 % - 0.0 % 6,363 2.2 %
Total operating costs and expenses 232,486 79.3 % 2,363 0.8 % 230,123 78.5 %
Income from operations 65,303 22.3 % 2,363 0.8 % 67,666 23.1 %
                   
  Quarter Ended March 31, 2017
  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 1,198,962 75.3 % 4,672 0.3 % 1,194,290 75.0 %
Other operating costs 1,933 0.1 % - 0.0 % 1,933 0.1 %
Selling and marketing expenses 34,268 2.2 % 287 0.0 % 33,981 2.2 %
General and administrative expenses 165,343 10.4 % 10,840 0.7 % 154,503 9.7 %
Pre-opening expenses 24,112 1.5 % - 0.0 % 24,112 1.5 %
Total operating costs and expenses 1,424,618 89.5 % 15,799 1.0 % 1,408,819 88.5 %
Income from operations 167,343 10.5 % 15,799 1.0 % 183,142 11.5 %
                   
  Quarter Ended June 30, 2016
  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 1,217,412 73.5 % 3,254 0.2 % 1,214,158 73.3 %
Other operating costs 3,029 0.2 % - 0.0 % 3,029 0.2 %
Selling and marketing expenses 36,064 2.2 % 283 0.0 % 35,781 2.2 %
General and administrative expenses 118,868 7.2 % 12,695 0.8 % 106,173 6.4 %
Pre-opening expenses 13,371 0.8 % - 0.0 % 13,371 0.8 %
Total operating costs and expenses 1,388,744 83.9 % 16,232 1.0 % 1,372,512 82.9 %
Income from operations 263,388 15.9 % 16,232 1.0 % 279,620 16.9 %

China Lodging Group, Limited
Unaudited Reconciliation of GAAP and Non-GAAP Results
  Quarter Ended
  June 30, 2016 March 31, 2017 June 30, 2017
  RMB RMB RMB US$
  (in thousands, except per share and per ADS data)
Net income attributable to China Lodging Group, Limited (GAAP) 315,500   148,083   389,639   57,475  
Share-based compensation expenses 16,232   15,799   16,021   2,363  
Adjusted net income attributable to China Lodging Group, Limited (non-GAAP) 331,732   163,882   405,660   59,838  
                 
Earnings per share (GAAP)                
  Basic 1.14   0.53    1.40    0.21  
  Diluted 1.11   0.52    1.35    0.20  
         
Earnings per ADS (GAAP)        
  Basic 4.56   2.13    5.58    0.82  
  Diluted 4.44   2.06    5.41    0.80  
         
Adjusted earnings per share (non-GAAP)
  Basic 1.20   0.59    1.45    0.21  
  Diluted 1.17   0.57    1.41    0.21  
         
Adjusted earnings per ADS (non-GAAP)
  Basic 4.80   2.35    5.81    0.86  
  Diluted 4.67   2.28    5.63    0.83  
         
Weighted average number of shares used in computation
  Basic 276,496   278,472    279,101  279,101  
  Diluted 284,009   287,313    288,316  288,316  
         
  Quarter Ended
  June 30, 2016 March 31, 2017 June 30, 2017
  RMB RMB RMB US$
  (in thousands)
Net income attributable to China Lodging Group, Limited (GAAP) 315,500   148,083   389,639   57,475  
Interest income (15,472 ) (18,332 )  (21,792 )  (3,214 )
Interest expense 3,541   2,358    15,870    2,341  
Income tax expense 77,457   52,343   130,183    19,203  
Depreciation and amortization 174,952   173,204    189,210    27,910  
EBITDA (non-GAAP) 555,978   357,656     703,110      103,715   
Share-based Compensation 16,232   15,799    16,021    2,363  
Adjusted EBITDA (non-GAAP) 572,210   373,455   719,131     106,078   

 

 

  China Lodging Group, Limited    
Operational Data          
  As of    
  June 30,   March 31,   June 30,  
  2016  2017  2017   
Total hotels in operation:   3,114     3,336     3,541    
  Leased and owned hotels 627     620     686    
  Manachised hotels   2,306     2,535     2,654    
  Franchised hotels   181     181     201    
Total hotel rooms in operation   314,811     335,900     359,530    
  Leased and owned hotels 77,123     78,012     86,232    
  Manachised hotels 220,456     241,251     253,469    
  Franchised hotels   17,232     16,637     19,829    
Number of cities   357     369   369    
         
         
         
         
  For the quarter ended  
  June 30,   March 31,   June 30,    
  2016  2017  2017   
Occupancy rate (as a percentage)        
  Leased and owned hotels 86.7 % 85.0 % 90.8 %  
  Manachised hotels 85.5 % 84.6 % 90.8 %  
  Franchised hotels 70.6 % 65.6 % 74.4 %  
  Blended 85.2 % 83.9 % 90.1 %  
Average daily room rate (in RMB)        
  Leased and owned hotels 210   204   232    
  Manachised hotels 175   174   188    
  Franchised hotels 181   180   203    
  Blended 184   182   199    
RevPAR (in RMB)        
  Leased and owned hotels 182   174   211    
  Manachised hotels 150   147   171    
  Franchised hotels 128   118   151    
  Blended 157   152   179    
         
         
Same-hotel Operational Data: like-for-like performance for hotels in operation for at least 18 months during the current quarter   
 
  As of and for the quarter ended    
  June 30,      
  2016  2017     
Total    2,513     2,513      
  Leased hotels   577     577      
  Manachised and franchised hotels   1,936     1,936      
Occupancy rate (as a percentage) 88.1 % 92.6 %    
Average daily room rate (in RMB) 183   189      
RevPAR (in RMB) 162   175      

Same-hotel operational data by segment                      
  Number of hotels in operation Same-hotel RevPAR   Same-hotel ADR   Same-hotel Occupancy    
  As of For the quarter ended   For the quarter ended   For the quarter ended    
  June 30, June 30, yoy change June 30, yoy change June 30, yoy change  
  2016 2017 2016 2017 2016 2017 2016   2017    
Economy hotels   2,250   2,250   148   160 7.7 %   168   172 2.2 % 88 % 93 % 4.8 %  
  Leased hotels   498   498   156   170 8.5 %   180   184 2.7 % 87 % 92 % 4.9 %  
  Manachised and franchised hotels   1,752   1,752   146   156 7.5 %   164   167 2.1 % 89 % 94 % 4.7 %  
Midscale and upscale hotels   263   263   247   272 9.9 %   288   306 6.1 % 86 % 89 % 3.1 %  
  Leased hotels   79   79   304   332 9.0 %   333   357 7.3 % 91 % 93 % 1.4 %  
  Manachised and franchised hotels   184   184   207   230 10.9 %   253   267 5.4 % 82 % 86 % 4.2 %  
Total   2,513   2,513   162   175 8.3 %   183   189 3.0 % 88 % 93 % 4.5 %  
                         

Hotel breakdown by segment
 
  Number of hotels in operation
  Net added  As of   
  in Q2 2017 June 30, 2017 
Economy hotels 41   2,893
HanTing Hotel 10   2,213
Leased hotels (5 ) 473
Manachised hotels 13   1,736
Franchised hotels 2   4
Hi Inn 8   395
Leased hotels (1 ) 35
Manachised hotels 8   314
Franchised hotels 1   46
Elan Hotel 7   195
Manachised hotels 11   162
Franchised hotels (4 ) 33
ibis Hotel 6   80
Leased hotels 1   15
Manachised hotels 6   18
Franchised hotels (1 ) 47
Orange Hotel 10   10
Leased hotels 8   8
Manachised hotels 1   1
Franchised hotels 1   1
Midscale and upscale hotels 164   648
JI Hotel 23   327
Leased hotels 1   85
Manachised hotels 22   239
Franchised hotels -   3
Starway Hotel 7   148
Leased hotels -   2
Manachised hotels 11   112
Franchised hotels (4 ) 34
Joya Hotel -   6
Leased hotels -   3
Manachised hotels -   3
Manxin Hotels & Resorts 1   4
Leased hotels 1   1
Manachised hotels -   2
Franchised hotels -   1
ibis Styles Hotel -   10
Manachised hotels -   6
Franchised hotels 4
Mercure Hotel 2   18
Leased hotels -   2
Manachised hotels 2   15
Franchised hotels -   1
Novotel Hotel -   2
Manachised hotels -   1
Franchised hotels -   1
Grand Mercure 1   3
Leased hotels -   1
Franchised hotels 1   2
Orange Select 90   90
Leased hotels 42   42
Manachised hotels 32   32
Franchised hotels 16   16
Crystal Orange 40   40
Leased hotels 19   19
Manachised hotels 13   13
Franchised hotels 8   8
Total 205   3,541
     
Contact InformationInvestor RelationsTel: +86 (21) 6195 9561Email: ir@huazhu.comhttp://ir.huazhu.com