China Lodging Group, Limited Reports Third Quarter Of 2017 Results

  • A total of 3,656 hotels or 372,464 hotel rooms in operation as of September 30, 2017.
  • Net revenues increased 33.8% year-over-year to RMB2,373.0 million (US$356.7 million) 1 for the third quarter of 2017, at the high-end of the guidance previously announced.
  • EBITDA (non-GAAP) increased 55.4% year-over-year to RMB849.6 million (US$127.7 million) for the third quarter of 2017.
  • Net income attributable to China Lodging Group, Limited increased 60.0% year-over-year to RMB470.1 million (US$70.7 million) for the third quarter of 2017.
  • Basic earnings per ADS 2 were RMB6.72 (US$1.01) and diluted earnings per ADS were RMB6.50 (US$0.98) for the third quarter of 2017. Excluding share-based compensation expenses, adjusted basic earnings per ADS (non-GAAP) were RMB6.94 (US$1.04) and adjusted diluted earnings per ADS (non-GAAP) were RMB6.71 (US$1.01) for the third quarter of 2017.
  • The Company expects the Q4 2017 net revenues growth of 29% to 32% year-over-year; and projects the full year 2017 net revenues growth of 24 % to 25 %

SHANGHAI, China, Nov. 28, 2017 (GLOBE NEWSWIRE) -- China Lodging Group, Limited (NASDAQ:HTHT) ("China Lodging Group", "Huazhu" or the "Company"), a leading and fast-growing multi-brand hotel group in China, today announced its unaudited financial results for the third quarter ended September 30, 2017.                                           Third Quarter of 2017 Operational Highlights

• During the third quarter of 2017, China Lodging Group opened 167 hotels, including 7 leased ("leased-and-operated") hotels and 160 manachised ("franchised-and-managed") hotels and franchised hotels.

The Company closed a total of 52 hotels, which included 9 leased hotels and 43 manachised and franchised hotels, during the third quarter of 2017. This was mainly due to:

   a) The Company's strategic focus to upgrade the quality of the product and service. The Company closed 13 hotels on a temporary basis for brand upgrade purposes and permanently removed 8 hotels from its network for their non-compliance with the brand and operating standards. These hotels were mainly related to the HanTing and Elan brands. By removing hotels of lower quality, the Company is able to provide a more consistent customer experience, which will help enhance both the brands and future profitability.     b) Property related issues, including rezoning and returning of military-owned properties, and expiry of leases, which accounted for the closure of 22 hotels.    c) Operating losses from hotels located mainly in selected 3 rd or lower tier cities which accounted for the closure of 9 hotels.

• As of September 30, 2017, the Company had 684 leased and owned hotels, 2,766 manachised hotels, and 206 franchised hotels in operation in 375 cities. The number of hotel rooms in operation totaled 372,464, an increase of 15.4% from a year ago. As of September 30, 2017, the Company had a total number of 606 hotels contracted or under construction, including 38 leased hotels and 568 manachised and franchised hotels.• The ADR, which is defined as the average daily rate for all hotels in operation, was RMB218 in the third quarter of 2017, compared with RMB194 in the third quarter of 2016 and RMB199 in the previous quarter. The year-over-year increase of 12.1% 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 93.1% in the third quarter of 2017, compared with 88.9% in the third quarter of 2016 and 90.1% in the previous quarter. The year-over-year increase of 4.2-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 RMB203 in the third quarter of 2017, compared with RMB173 in the third quarter of 2016 and RMB179 in the previous quarter. The year-over-year increase of 17.3% 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 RMB193 for the third quarter of 2017, representing a 9.5% increase from RMB177 for the third quarter of 2016, with a 4.5% increase in ADR and a 4.4-percentage-point increase in occupancy rate. The midscale and upscale hotels registered a 9.5% same-hotel RevPAR improvement, driven by a 5.2% increase in ADR and a 3.6-percentage-point increase in occupancy rate. The economy hotels also registered a 9.4% same-hotel RevPAR improvement, driven by a 4.3% increase in ADR and a 4.5-percentage-point increase in occupancy rate. Crystal Orange hotels 3 will not be counted in the same-hotel RevPAR sample until they are in Huazhu system for 18 months.• As of September 30, 2017, the Company's loyalty program had approximately 97 million members, who contributed approximately 76% of room nights sold during the third quarter of 2017. In the third quarter of 2017, approximately 86% of room nights were sold through the Company's own direct channels. The strong leisure travel demands as well as the expansion of our newly launched midscale brands attract increasing bookings from third party channels. "Fueled by strong domestic travel demand, our same-hotel RevPAR growth accelerated to 9.5% in the third quarter, the highest in the past five years. The consumption upgrade in China continued to benefit both our economy and midscale hotels. Our flagship economy brand, HanTing, recorded a same-hotel RevPAR growth of 9.8%, driven by upgraded HanTing hotels. In addition, we have also recently rolled-out new models for our other two economy hotel brands, Elan and Hi Inn. We expect our upgraded economy hotel brands will provide better customer experience." said Ms. Jenny Zhang, Chief Executive Officer of China Lodging Group."In September, we had completed the integration of Crystal Orange into Huazhu's platform, including operational and booking systems, membership program and back-office supports. In the third quarter, Crystal Orange hotels posted a 14.5% year-over-year growth in same-hotel RevPAR. At the end of the third quarter, midscale and upscale rooms accounted for 25% and 66% of our total room count in operation and in pipeline, respectively. " Ms. Zhang added.

Third Quarter of 2017 Financial Results
(RMB in thousands) Q3 2016 Q2 2017 Q3 2017
Revenues:      
Leased and owned hotels 1,390,334 1,543,117 1,857,846
Manachised and franchised hotels 373,239 435,552 506,720
Others 10,233 10,512 8,445
Net revenues 1,773,806 1,989,181 2,373,011

Net revenues for the third quarter of 2017 were RMB2,373.0 million (US$356.7 million), representing a 33.8% year-over-year increase and a 19.3% 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.

Net revenues from leased and owned hotels for the third quarter of 2017 were RMB1,857.8 million (US$279.2 million), representing an 33.6% year-over-year increase and a 20.4% sequential increase.

Net revenues from manachised and franchised hotels for the third quarter of 2017 were RMB506.7 million (US$76.2 million), representing a 35.8% year-over-year increase and a 16.3% sequential increase. Net revenues from manachised and franchised hotels accounted for 21.4% of the Company's net revenues in the third quarter of 2017, up from 21.0% 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 RMB8.4 million (US$1.3 million) in the third quarter of 2017.
(RMB in thousands) Q3 2016 Q2 2017 Q3 2017
Operating costs and expenses:      
Hotel operating costs 1,249,701 1,348,270 1,504,070
Other operating costs 2,258 3,739 4,816
Selling and marketing expenses 31,264 45,262 51,561
General and administrative expenses 123,233 135,689 153,725
Pre-opening expenses 16,710 43,134 67,632
Total operating costs and expenses 1,423,166 1,576,094 1,781,804

Hotel operating costs for the third quarter of 2017 were RMB1,504.1 million (US$226.1 million), compared to RMB1,249.7 million in the third quarter of 2016 and RMB1,348.3 million in the previous quarter, representing a 20.4% year-over-year increase and an 11.6% sequential increase. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the third quarter of 2017 were RMB1,499.6 million (US$225.4 million), representing 63.2% of net revenues, compared to 70.3% for the third quarter in 2016 and 67.6% for the previous quarter. The year-over-year 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 third quarter of 2017 were RMB51.6 million (US$7.8 million), compared to RMB31.3 million in the third quarter of 2016 and RMB45.3 million in the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the third quarter of 2017 were RMB51.2 million (US$7.7 million), or 2.2% of net revenues, compared to 1.8% for the third quarter of 2016 and 2.3% for the previous quarter. 

General and administrative expenses for the third quarter of 2017 were RMB153.7 million (US$23.1 million), compared to RMB123.2 million in the third quarter of 2016 and RMB135.7 million in the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the third quarter of 2017 were RMB143.2 million (US$21.5 million), representing 6.1% of net revenues, compared with 6.5% of net revenues in the third quarter of 2016 and 6.2% in the previous quarter.

Pre-opening expenses for the third quarter of 2017 were RMB67.6 million (US$10.2 million), representing a 304.7% year-over-year increase and a 56.8% sequential increase. The year-over-year and sequential increases were mainly because more midscale or upscale leased hotels and Crystal Orange hotels were under construction in the third quarter of 2017.

Income from operations for the third quarter of 2017 was RMB591.3 million (US$88.9 million), compared to RMB351.0 million in the third quarter of 2016 and RMB442.7 million in the previous quarter. The operating margin, defined as income from operations as percentage of net revenues, for the third quarter of 2017 was 24.9%, compared with 19.8% in the third quarter of 2016 and 22.3% 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 third quarter of 2017 was RMB470.1 million (US$70.7 million), as 19.8% of net revenues, compared to RMB293.9 million, as 16.6% of net revenues in the third quarter of 2016 and RMB389.6 million, as 19.6% of net revenues in the previous quarter. This demonstrated a 60.0% year-over-year increase and a 20.6% 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. 

Basic and diluted earnings per share/ADS. For the third quarter of 2017, basic earnings per share were RMB1.68 (US$0.25) and diluted earnings per share were RMB1.62 (US$0.24); basic earnings per ADS were RMB6.72 (US$1.01) and diluted earnings per ADS were RMB6.50 (US$0.98). For the third quarter of 2017, excluding share-based compensation expenses, adjusted basic earnings per share (non-GAAP) were RMB1.74 (US$0.26) and adjusted diluted earnings per share (non-GAAP) were RMB1.68 (US$0.25); adjusted basic earnings per ADS (non-GAAP) were RMB6.94 (US$1.04) and adjusted diluted earnings per ADS (non-GAAP) were RMB6.71 (US$1.01).

EBITDA (non-GAAP) for the third quarter of 2017 was RMB849.6 million (US$127.7 million), as 35.8% of net revenues, compared with RMB546.7 million, as 30.8% of net revenues in the third quarter of 2016 and RMB703.1 million, as 35.3% of net revenues in the previous quarter. This demonstrated a 55.4% year-over-year increase and a 20.8% sequential increase. 

Cash flow. Operating cash inflow for the third quarter of 2017 was RMB888.5 million (US$133.5 million). Investing cash outflow for the third quarter of 2017 was RMB519.9 million (US$78.1 million).

Cash and cash equivalents and Restricted cash. As of September 30, 2017, the Company had a total balance of cash and cash equivalents and restricted cash of RMB3,826.6 million (US$575.1 million).

Debt financing. As of September 30, 2017, the Company had a total loan balance of RMB3,716.7 million (US$558.6 million), including a syndicated loan of US$500.0 million for the acquisition of Crystal Orange, which was drawn down in May 2017.

Guidance For the fourth quarter of 2017, the Company expects net revenues to grow 29% to 32% year-over-year. For the full year of 2017, the Company projects net revenues growth in the range of 24% to 25%.

The Company reaffirms gross opening of approximately 500 hotels in 2017, on top of the 138 hotels added to its network through the Crystal Orange acquisition. The Company anticipates to increase the gross opening to 650-700 hotels in 2018, 60%-65% of which are midscale and upscale hotels. 

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 8 p.m. ET, Tuesday, November 28, 2017 (or 9 a.m. on Wednesday, November 29, 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 7888218.  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 December 6, 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 7888218.  

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.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 September 30, 2017, the Company had 3,656 hotels or 372,464 rooms in operation in 375 cities. With a primary focus on economy and midscale hotel segments, China Lodging Group's brands include Hi Inn, HanTing Hotel, Elan Hotel, HanTing Plus Hotel, JI Hotel, Starway Hotel, Manxin Hotel, Joya Hotel, Orange Hotel, Orange Hotel Select, Crystal Orange Hotel, and VUE 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 September 30, 2017, China Lodging Group operates 23 percent of its hotel rooms under lease and ownership model, 77 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=RMB6.6533 on September 29, 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 September 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 and third quarters of 2017 are based on the preliminary numbers for the purchase price allocation 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   September 30, 2017
  RMB   RMB     US$  
  (in thousands)
                 
ASSETS                
Current assets:                
Cash and cash equivalents 3,235,007     3,333,108     500,971  
Restricted cash 500     493,512     74,176  
Short-term investments -     107,729     16,192  
Accounts receivable, net 141,649     171,536     25,782  
Loan receivables 22,410     86,691     13,030  
Amounts due from related parties 98,453     88,544     13,308  
Prepaid rent 446,127     528,381     79,416  
Inventories 21,606     27,712     4,164  
Other current assets 208,929     256,941     38,619  
Total current assets 4,174,681     5,094,154     765,658  
                 
Property and equipment, net 3,710,468     4,478,055     673,058  
Intangible assets, net 342,694     1,800,250     270,580  
Land use rights 145,521     141,467     21,263  
Long-term investments 1,064,321     1,485,610     223,289  
Goodwill 171,504     2,136,710     321,150  
Loan receivables 7,269     37,021     5,564  
Other assets 200,492     369,351     55,515  
Deferred tax assets 176,414     236,827     35,595  
Total assets 9,993,364     15,779,445     2,371,672  
                 
LIABILITIES AND EQUITY                
Current liabilities:                
Short-term debt 298,291     132,738     19,951  
Long-term debt, current portion -     133     20  
Accounts payable 584,731     656,553     98,681  
Amounts due to related parties 11,058     32,656     4,908  
Salary and welfare payables 274,259     203,486     30,584  
Deferred revenue 749,793     822,586     123,636  
Accrued expenses and other current liabilities 895,837     1,237,853     186,051  
Dividends payable -     300,000     45,090  
Income tax payable 152,112     232,722     34,979  
Total current liabilities 2,966,081     3,618,727     543,900  
                 
Long-term debt -     3,583,793     538,649  
Deferred rent 1,023,843     1,280,479     192,458  
Deferred revenue 166,963     167,349     25,153  
Other long-term liabilities 323,991     363,226     54,593  
Deferred tax liabilities 96,329     454,696     68,341  
Total liabilities 4,577,207     9,468,270     1,423,094  
                 
Equity:                
  Ordinary shares 204     205     31  
  Treasury shares (107,331 )   (107,331 )   (16,132 )
  Additional paid-in capital 3,699,056     3,779,065     567,999  
  Retained earnings 1,812,174     2,519,957     378,753  
  Accumulated other comprehensive income (loss) (4,503 )   98,063     14,739  
Total China Lodging Group, Limited shareholders' equity 5,399,600     6,289,959     945,390  
  Noncontrolling interest 16,557     21,216     3,188  
Total equity 5,416,157     6,311,175     948,578  
Total liabilities and equity 9,993,364     15,779,445     2,371,672  

 
China Lodging Group, Limited
Unaudited Condensed Consolidated Statements of Comprehensive Income
  Quarter Ended
  September 30, 2016   June 30, 2017   September 30, 2017
  RMB   RMB   RMB   US$
  (in thousands, except per share and per ADS data)
Revenues:                                      
Leased and owned hotels 1,390,334     1,543,117     1,857,846     279,237  
Manachised and franchised hotels 373,239     435,552     506,720     76,161  
Others 10,233     10,512     8,445     1,269  
Net revenues 1,773,806     1,989,181     2,373,011     356,667  
                                       
Operating costs and expenses:        
Hotel operating costs:        
Rents  (458,946 )   (502,353 )   (533,285 )   (80,153 )
Utilities  (85,953 )   (69,942 )   (104,284 )   (15,674 )
Personnel costs  (282,911 )   (329,025 )   (366,019 )   (55,013 )
Depreciation and amortization  (171,089 )   (185,419 )   (214,069 )   (32,175 )
Consumables, food and beverage  (122,071 )   (137,139 )   (150,458 )   (22,614 )
Others  (128,731 )   (124,392 )   (135,955 )   (20,434 )
Total hotel operating costs  (1,249,701 )   (1,348,270 )   (1,504,070 )   (226,063 )
Other operating costs  (2,258 )   (3,739 )   (4,816 )   (725 )
Selling and marketing expenses  (31,264 )   (45,262 )   (51,561 )   (7,750 )
General and administrative expenses  (123,233 )   (135,689 )   (153,725 )   (23,105 )
Pre-opening expenses  (16,710 )   (43,134 )   (67,632 )   (10,165 )
Total operating costs and expenses (1,423,166 )   (1,576,094 )   (1,781,804 )   (267,808 )
Other operating income (expense), net 399     29,619     137     21  
Income from operations 351,039     442,706     591,344     88,880  
Interest income  19,154     21,792     31,807     4,781  
Interest expense  (2,158 )   (15,870 )   (34,797 )   (5,230 )
Other income, net  11,577     74,312     51,123     7,684  
Foreign exchange gain (loss)  1,800     (4,577 )   (5,833 )   (877 )
Income before income taxes  381,412     518,363     633,644     95,238  
Income tax expense  (94,204 )   (130,183 )   (158,446 )   (23,815 )
Income (Loss) from equity method investments  2,277     (978 )   (3,279 )   (493 )
Net income  289,485     387,202     471,919     70,930  
Less: net loss (income) attributable to noncontrolling interest  4,384     2,437     (1,858 )   (279 )
Net income attributable to China Lodging Group, Limited  293,869     389,639     470,061     70,651  
                                       
Other comprehensive income        
Unrealized securities holding gains (losses), net of tax  10,395     (13,511 )   (5,757 )   (865 )
Reclassification of gains realized to net income, net of tax  -      (1,545 )   -     -  
Foreign currency translation adjustments, net of tax  (1,547 )   46,190     71,077     10,683  
Comprehensive income  298,333     418,336     537,239     80,748  
Comprehensive loss (income) attributable to noncontrolling interest  4,384     2,437     (1,858 )   (279 )
Comprehensive income attributable to China Lodging Group, Limited  302,717     420,773     535,381     80,469  
                                       
Earnings per share:        
Basic  1.06     1.40     1.68     0.25  
Diluted  1.03     1.35     1.62     0.24  
         
Earnings per ADS:        
Basic  4.24     5.58     6.72     1.01  
Diluted  4.12     5.41     6.50     0.98  
         
Weighted average number of shares used in computation:    
Basic  277,169     279,101     279,631     279,631  
Diluted  285,426     288,316     289,317     289,317  

 
China Lodging Group, Limited
Unaudited Condensed Consolidated Statements of Cash Flows
  Quarter Ended
  September 30, 2016   June 30, 2017   September 30, 2017
  RMB   RMB   RMB   US$
  (in thousands)
Operating activities:                              
Net income 289,485     387,202     471,919     70,930  
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation 11,813     16,021     15,302     2,300  
Depreciation and amortization 175,637     189,210     218,081     32,778  
Deferred taxes 6,426     (916 )   2,823     424  
Bad debt expenses (964 )   601     -     -  
Deferred rent 20,923     48,485     42,063     6,322  
Loss from disposal of property and equipment 1,252     11,388     -     -  
Impairment loss 51,457     44,439     32,294     4,854  
Loss (Income) from equity method investments (2,277 )   978     3,279     493  
Investment loss (gain) 1,989     (37,773 )   (50,781 )   (7,632 )
Excess tax benefit from share-based compensation (3,656 )   (8,200 )   (9,681 )   (1,455 )
Changes in operating assets and liabilities, net of effect of acquisitions:
  Accounts receivable (4,114 )   (4,904 )   (7,798 )   (1,172 )
  Prepaid rent (22,304 )   3,770     (25,934 )   (3,898 )
  Inventories (565 )   (4,697 )   5,527     830  
  Amounts due from related parties 1     (3,553 )   (6,465 )   (972 )
  Other current assets (21,681 )   4,362     (16,828 )   (2,529 )
  Other assets (6,451 )   (14,403 )   (23,696 )   (3,562 )
  Accounts payable (1,107 )   1,432     11,114     1,670  
  Amounts due to related parties 1,764     (752 )   311     47  
  Salary and welfare payables (27,150 )   57,289     (42,850 )   (6,440 )
  Deferred revenue (42,477 )   (14,048 )   23,457     3,526  
  Accrued expenses and other current liabilities 126,971     35,123     186,092     27,970  
  Income tax payable 54,895     83,089     47,266     7,104  
  Other long-term liabilities 10,319     11,886     12,984     1,952  
Net cash provided by operating activities 620,186     806,029     888,479     133,540  
                               
Investing activities:        
Purchases of property and equipment (108,719 )   (156,840 )   (210,235 )   (31,599 )
Purchases of intangibles (5,122 )   (247 )   (2,702 )   (406 )
Acquisitions, net of cash received (2,926 )   (2,980,236 )   -     -  
Purchase of long-term investments (17,130 )   (216,917 )   (175,300 )   (26,348 )
Proceeds from maturity/sale of long-terminvestments 4,553     87,593     110     17  
Payment for shareholder loan to joint venture (81 )   (775 )   (30,370 )   (4,565 )
Collection of shareholder loan from joint venture 9,285     48,500     71,355     10,725  
Purchase of short-term investments -     -     (95,802 )   (14,399 )
Payment for the origination of loan receivables (3,020 )   (47,000 )   (75,992 )   (11,422 )
Proceeds from collection of loan receivables 5,401     4,526     25,021     3,761  
Increase in restricted cash 358,343     (467,000 )   (26,012 )   (3,910 )
Net cash provided by (used in) investing activities 240,584     (3,728,396 )   (519,927 )   (78,146 )
                               
         
China Lodging Group, Limited 
Unaudited Condensed Consolidated Statements of Cash Flows 
  Quarter Ended
   September 30, 2016   June 30, 2017    September 30, 2017 
  RMB   RMB   RMB   US$
Financing activities:                              
Net proceeds from issuance of ordinary shares upon exercise of options 3,299     4,428     580     87  
Proceeds from short-term debt -     135,488     -     -  
Repayment of short-term debt (332,555 )   (266,764 )   (26,913 )   (4,045 )
Proceeds from long-term debt -     3,633,174     -     -  
Funds advanced from noncontrolling interestholders -     13,950     11,913     1,791  
Repayment of funds advanced fromnoncontrolling interest holders -     (1,677 )   (7,053 )   (1,060 )
Contribution from noncontrolling interest holders 800     6,631     890     134  
Dividends paid to noncontrolling interest holders (1,935 )   (1,680 )   (240 )   (36 )
Excess tax benefit from share-based compensation 3,656     8,200     9,681     1,455  
Net cash provided by (used in) financing activities (326,735 )   3,531,750     (11,142 )   (1,674 )
                               
Effect of exchange rate changes on cash and cashequivalents 1,444     (4,500 )   (4,677 )   (703 )
Net increase in cash and cash equivalents 535,479     604,883     352,733     53,017  
Cash and cash equivalents at the beginning of the period 2,466,352     2,375,492     2,980,375     447,954  
Cash and cash equivalents at the end of the period 3,001,831     2,980,375     3,333,108     500,971  

 
China Lodging Group, Limited
Unaudited Reconciliation of GAAP and Non-GAAP Results
  Quarter Ended September 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 1,504,070   63.4 %   4,460   0.2 %   1,499,610   63.2 %
Other operating costs 4,816   0.2 %   -   0.0 %   4,816   0.2 %
Selling and marketing expenses 51,561   2.2 %   321   0.0 %   51,240   2.2 %
General and administrative expenses 153,725   6.5 %   10,521   0.4 %   143,204   6.1 %
Pre-opening expenses 67,632   2.9 %   -   0.0 %   67,632   2.9 %
Total operating costs and expenses 1,781,804   75.2 %   15,302   0.6 %   1,766,502   74.6 %
Income from operations 591,344   24.9 %   15,302   0.6 %   606,646   25.5 %
                       
  Quarter Ended September 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 226,063   63.4 %   670   0.2 %   225,393   63.2 %
Other operating costs 725   0.2 %   -   0.0 %   725   0.2 %
Selling and marketing expenses 7,750   2.2 %   48   0.0 %   7,702   2.2 %
General and administrative expenses 23,105   6.5 %   1,582   0.4 %   21,523   6.1 %
Pre-opening expenses 10,165   2.9 %   -   0.0 %   10,165   2.9 %
Total operating costs and expenses 267,808   75.2 %   2,300   0.6 %   265,508   74.6 %
Income from operations 88,880   24.9 %   2,300   0.6 %   91,180   25.5 %
                             
  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 September 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 1,249,701   70.5 %   3,866   0.2 %   1,245,835   70.3 %
Other operating costs 2,258   0.1 %   -   0.0 %    2,258   0.1 %
Selling and marketing expenses 31,264   1.8 %   244   0.0 %    31,020   1.8 %
General and administrative expenses 123,233   6.9 %   7,703   0.4 %    115,530   6.5 %
Pre-opening expenses 16,710   0.9 %   -   0.0 %    16,710   0.9 %
Total operating costs and expenses 1,423,166   80.2 %   11,813   0.6 %    1,411,353   79.6 %
Income from operations 351,039   19.8 %   11,813   0.6 %    362,852   20.4 %

 
China Lodging Group, Limited
Unaudited Reconciliation of GAAP and Non-GAAP Results
  Quarter Ended
  September 30, 2016   June 30, 2017   September 30, 2017
  RMB   RMB   RMB   US$
  (in thousands, except per share and per ADS data)
Net income attributable to China Lodging Group, Limited (GAAP) 293,869     389,639     470,061     70,651  
Share-based compensation expenses 11,813     16,021     15,302     2,300  
Adjusted net income attributable to China Lodging Group, Limited (non-GAAP) 305,682     405,660     485,363     72,951  
                               
Earnings per share (GAAP)                              
  Basic 1.06     1.40     1.68     0.25  
  Diluted 1.03     1.35     1.62     0.24  
                               
Earnings per ADS (GAAP)                              
  Basic 4.24     5.58     6.72     1.01  
  Diluted 4.12     5.41     6.50     0.98  
                               
Adjusted earnings per share (non-GAAP)                              
  Basic 1.10     1.45     1.74     0.26  
  Diluted 1.07     1.41     1.68     0.25  
                               
Adjusted earnings per ADS (non-GAAP)                              
  Basic 4.41     5.81     6.94     1.04  
  Diluted 4.28     5.63     6.71     1.01  
                               
Weighted average number of shares used in computation                              
  Basic 277,169     279,101     279,631     279,631  
  Diluted 285,426     288,316     289,317     289,317  
         
  Quarter Ended
  September 30, 2016   June 30, 2017   September 30, 2017
  RMB   RMB   RMB   US$
  (in thousands)
Net income attributable to China Lodging Group, Limited (GAAP) 293,869     389,639     470,061     70,651  
Interest income  (19,154 )    (21,792 )   (31,807 )   (4,781 )
Interest expense  2,158      15,870     34,797     5,230  
Income tax expense  94,204     130,183     158,446     23,815  
Depreciation and amortization  175,637      189,210     218,081     32,778  
EBITDA (non-GAAP)  546,714       703,110      849,578     127,693  
Share-based compensation  11,813      16,021     15,302     2,300  
Adjusted EBITDA (non-GAAP)  558,527     719,131     864,880     129,993  
                       

China Lodging Group, Limited  
Operational Data          
  As of    
  September 30,   June 30, September 30,  
  2016 2017 2017  
Total hotels in operation:   3,198     3,541     3,656    
  Leased and owned hotels   625     686     684    
  Manachised hotels   2,399     2,654     2,766    
  Franchised hotels   174     201     206    
Total hotel rooms in operation   322,785     359,530     372,464    
  Leased and owned hotels 77,158     86,232   86,568    
  Manachised hotels 229,565     253,469   265,701    
  Franchised hotels   16,062     19,829     20,195    
Number of cities   365   369   375    
         
         
  For the quarter ended  
  September 30, June 30,   September 30,  
  2016 2017 2017  
Occupancy rate (as a percentage)        
  Leased and owned hotels 90.0 % 90.8 % 92.8 %  
  Manachised hotels 89.3 % 90.8 % 94.1 %  
  Franchised hotels 74.1 % 74.4 % 78.9 %  
  Blended 88.9 % 90.1 % 93.1 %  
Average daily room rate (in RMB)        
  Leased and owned hotels 217   232   257    
  Manachised hotels 186   188   204    
  Franchised hotels 194   203   236    
  Blended 194   199   218    
RevPAR (in RMB)        
  Leased and owned hotels 195   211   238    
  Manachised hotels 166   171   192    
  Franchised hotels 144   151   186    
  Blended 173   179   203    
         
         
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    
  September 30,      
  2016 2017    
Total    2,603     2,603      
  Leased hotels   579     579      
  Manachised and franchised hotels   2,024     2,024      
Occupancy rate (as a percentage) 91 % 96 %    
Average daily room rate (in RMB) 194   202      
RevPAR (in RMB) 177   193      

               
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  
  September 30, September 30, yoy growth September 30, yoy growth September 30, yoy growth
  2016 2017 2016 2017 2016 2017 2016   2017  
Economy hotels 2,316 2,316 162 177 9.4 % 176 183 4.3 % 92 % 96 % 4.5 %
  Leased and owned hotels 498 498 169 185 9.6 % 186 196 5.3 % 91 % 94 % 3.6 %
  Manachised and franchised hotels 1,818 1,818 159 174 9.3 % 172 179 3.9 % 92 % 97 % 4.8 %
Midscale and upscale hotels 287 287 265 290 9.5 % 303 319 5.2 % 87 % 91 % 3.6 %
  Leased hotels 81 81 320 344 7.5 % 346 365 5.4 % 92 % 94 % 1.8 %
  Manachised and franchised hotels 206 206 233 259 11.0 % 276 291 5.3 % 84 % 89 % 4.6 %
Total 2,603 2,603 177 193 9.5 % 194 202 4.5 % 91 % 96 % 4.4 %
 

 
Hotel breakdown by segment      
     
  Number of hotels in operation  
  Net added   As of    
  in Q3 2017 September 30, 2017  
Economy hotels   46   2,939  
HanTing Hotel   19   2,232  
Leased hotels   (8)   465  
Manachised hotels   27   1,763  
Franchised hotels   -   4  
Hi Inn   (1)   394  
Leased hotels   (3)   32  
Manachised hotels   2   316  
Franchised hotels   -   46  
Elan Hotel   18   213  
Manachised hotels   18   180  
Franchised hotels   -   33  
ibis Hotel   11   91  
Leased and owned hotels   1   16  
Manachised hotels   11   29  
Franchised hotels   (1)   46  
Orange Hotel   (1)   9  
Leased hotels   (1)   7  
Manachised hotels   -   1  
Franchised hotels   -   1  
Midscale and upscale hotels   69   717  
JI Hotel   37   364  
Leased hotels   6   91  
Manachised hotels   31   270  
Franchised hotels   -   3  
Starway Hotel   14   162  
Leased hotels   -   2  
Manachised hotels   14   126  
Franchised hotels   -   34  
Joya Hotel   -   6  
Leased hotels   -   3  
Manachised hotels   -   3  
Manxin Hotels & Resorts   4   8  
Leased hotels   1   2  
Manachised hotels   1   3  
Franchised hotels   2   3  
HanTing Plus Hotel   1   1  
Manachised hotels   1   1  
ibis Styles Hotel   1   11  
Manachised hotels   1   7  
Franchised hotels   -   4  
Mercure Hotel   1   19  
Leased hotels   -   2  
Manachised hotels (1)   14  
Franchised hotels   2   3  
Novotel Hotel   2   4  
Manachised hotels   2   3  
Franchised hotels   -   1  
Grand Mercure   -   3  
Leased hotels   -   1  
Franchised hotels   -   2  
Orange Select   7   97  
Leased hotels   2   44  
Manachised hotels   3   35  
Franchised hotels   2   18  
Crystal Orange   2   42  
Leased hotels   -   19  
Manachised hotels   2   15  
Franchised hotels   -   8  
Total   115   3,656  
       

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