Document_and_Entity_Informatio
Document and Entity Information | 12 Months Ended |
Dec. 31, 2014 | |
Document and Entity Information | |
Entity Registrant Name | China Lodging Group, Ltd |
Entity Central Index Key | 1483994 |
Document Type | 20-F |
Document Period End Date | 31-Dec-14 |
Amendment Flag | FALSE |
Current Fiscal Year End Date | -19 |
Entity Well-known Seasoned Issuer | No |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 250,747,255 |
Document Fiscal Year Focus | 2014 |
Document Fiscal Period Focus | FY |
Trading Symbol | HTHT |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | USD ($) | CNY | CNY |
Current assets: | |||
Cash and cash equivalents | $130,365 | 808,865 | 397,435 |
Restricted cash | 3,317 | ||
Short-term investments | 4,290 | 26,615 | |
Accounts receivable, net of allowance of RMB7,256 and RMB5,977 in 2013 and 2014, respectively | 14,384 | 89,243 | 74,646 |
Amounts due from related parties | 2,626 | 16,293 | 658 |
Prepaid rent | 62,076 | 385,158 | 363,581 |
Inventories | 4,816 | 29,882 | 34,013 |
Other current assets | 25,881 | 160,582 | 116,979 |
Deferred tax assets | 12,898 | 80,026 | 51,759 |
Total current assets | 257,336 | 1,596,664 | 1,042,388 |
Property and equipment, net | 629,749 | 3,907,343 | 3,634,039 |
Intangible assets, net | 16,848 | 104,537 | 101,845 |
Long-term investments | 36,909 | 229,005 | 90,517 |
Goodwill | 10,421 | 64,654 | 64,842 |
Other assets | 31,788 | 197,233 | 184,013 |
Deferred tax assets | 13,453 | 83,470 | 67,408 |
Total assets | 996,504 | 6,182,906 | 5,185,052 |
Current liabilities: | |||
Accounts payable | 103,261 | 640,691 | 677,305 |
Amounts due to a related party | 1,032 | 6,403 | 5,593 |
Salary and welfare payable | 29,986 | 186,051 | 147,238 |
Deferred revenue | 82,885 | 514,268 | 297,284 |
Accrued expenses and other current liabilities | 50,449 | 313,017 | 249,185 |
Income tax payable | 9,610 | 59,630 | 26,053 |
Deferred tax liabilities | 113 | 701 | 151 |
Total current liabilities | 277,336 | 1,720,761 | 1,402,809 |
Deferred rent | 133,838 | 830,414 | 653,831 |
Deferred revenue | 25,046 | 155,395 | 118,818 |
Amounts due to a related party | 658 | 4,083 | 8,167 |
Other long-term liabilities | 34,774 | 215,762 | 147,565 |
Deferred tax liabilities | 6,089 | 37,778 | 26,071 |
Total liabilities | 477,741 | 2,964,193 | 2,357,261 |
Commitments and contingencies (Note 18) | |||
Equity: | |||
Ordinary shares (US$0.0001 par value per share; 8,000,000,000 shares authorized; 247,551,999 and 250,747,255 shares issued and outstanding as of December 31, 2013 and 2014, respectively) | 30 | 184 | 182 |
Additional paid-in capital | 383,839 | 2,381,568 | 2,315,083 |
Retained earnings | 136,547 | 847,220 | 539,872 |
Accumulated other comprehensive loss | -1,935 | -12,008 | -39,384 |
Total China Lodging Group, Limited shareholders' equity | 518,481 | 3,216,964 | 2,815,753 |
Noncontrolling interest | 282 | 1,749 | 12,038 |
Total equity | 518,763 | 3,218,713 | 2,827,791 |
Total liabilities and equity | $996,504 | 6,182,906 | 5,185,052 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical)(CNY) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance (in CNY) | 5,977 | 7,256 |
Ordinary shares, shares authorized | 8,000,000,000 | 8,000,000,000 |
Ordinary shares, shares issued | 250,747,255 | 247,551,999 |
Ordinary shares, shares outstanding | 250,747,255 | 247,551,999 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | 12 Months Ended | |||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | |
Revenues: | ||||
Leased hotels | $728,884 | 4,522,431 | 3,870,887 | 3,069,431 |
Manachised and franchised hotels | 119,717 | 742,797 | 549,958 | 349,847 |
Total revenues | 848,601 | 5,265,228 | 4,420,845 | 3,419,278 |
Less: Business tax and related taxes | 48,432 | 300,500 | 252,216 | 194,751 |
Net revenues | 800,169 | 4,964,728 | 4,168,629 | 3,224,527 |
Operating costs and expenses: | ||||
Hotel operating costs | 625,025 | 3,878,027 | 3,181,666 | 2,453,902 |
Selling and marketing expenses | 30,209 | 187,435 | 138,129 | 102,814 |
General and administrative expenses | 55,141 | 342,128 | 284,756 | 224,111 |
Pre-opening expenses | 30,030 | 186,325 | 211,284 | 230,690 |
Total operating costs and expenses | 740,405 | 4,593,915 | 3,815,835 | 3,011,517 |
Other operating income, net | 2,990 | 18,551 | 27,750 | 6,723 |
Income from operations | 62,754 | 389,364 | 380,544 | 219,733 |
Interest income | 3,733 | 23,162 | 6,856 | 14,554 |
Interest expense | 247 | 1,533 | 813 | 822 |
Other income, net | 765 | 4,749 | 1,907 | 2,208 |
Foreign exchange gain (loss) | -39 | -246 | 21 | -2,000 |
Income before income taxes | 66,966 | 415,496 | 388,515 | 233,673 |
Income tax expense | 18,229 | 113,105 | 104,820 | 54,169 |
Net income | 48,737 | 302,391 | 283,695 | 179,504 |
Less: net income (loss) attributable to noncontrolling interest | -799 | -4,957 | 3,837 | 4,617 |
Net income attributable to China Lodging Group, Limited | 49,536 | 307,348 | 279,858 | 174,887 |
Other comprehensive income | ||||
Unrealized securities holding gains , net of tax of nil, nil and 9,485 for 2012, 2013 and 2014 | 4,587 | 28,458 | ||
Foreign currency translation adjustments, net of tax of nil for 2012, 2013 and 2014 | -175 | -1,082 | -976 | 758 |
Comprehensive income | 53,149 | 329,767 | 282,719 | 180,262 |
Comprehensive income (loss) attributable to the noncontrolling interest | -799 | -4,957 | 3,837 | 4,617 |
Comprehensive income attributable to China Lodging Group, Limited | $53,948 | 334,724 | 278,882 | 175,645 |
Earnings per share: | ||||
Basic (in RMB and dollars per share) | $0.20 | 1.23 | 1.14 | 0.72 |
Diluted (in RMB and dollars per share) | $0.20 | 1.21 | 1.12 | 0.71 |
Weighted average number of shares used in computation: | ||||
Basic (in shares) | 248,957,645 | 248,957,645 | 245,187,348 | 243,284,332 |
Diluted (in shares) | 253,004,204 | 253,004,204 | 249,486,284 | 246,981,001 |
CONSOLIDATED_STATEMENTS_OF_COM1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (CNY) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Unrealized securities holding gains, tax | 9,485 | 0 | 0 |
Foreign currency translation adjustments, tax | 0 | 0 | 0 |
CONSOLIDATED_STATEMENTS_OF_CHA
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | Ordinary Shares | Additional Paid-in Capital | Retained earnings (Accumulated Deficit) | Accumulated Other Comprehensive loss | Noncontrolling Interest | Total | Total |
In Thousands, except Share data, unless otherwise specified | CNY | CNY | CNY | CNY | CNY | USD ($) | CNY |
Balance at Dec. 31, 2011 | 179 | 2,199,954 | 85,127 | -39,166 | 9,790 | 2,255,884 | |
Balance (in shares) at Dec. 31, 2011 | 242,604,223 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Issuance of ordinary shares upon exercise of options | 1 | 18,310 | 18,311 | ||||
Issuance of ordinary shares upon exercise of options (in shares) | 1,889,872 | ||||||
Share-based compensation | 20,837 | 20,837 | |||||
Excess tax benefit from share-based compensation | 4,302 | 4,302 | |||||
Capital contribution from noncontrolling interest holders | 240 | 240 | |||||
Noncontrolling interest recognized in connection with acquisitions | 14,215 | 14,215 | |||||
Net income | 174,887 | 4,617 | 179,504 | ||||
Dividend paid to noncontrolling interest holders | -3,486 | -3,486 | |||||
Foreign currency translation adjustments | 758 | 758 | |||||
Balance at Dec. 31, 2012 | 180 | 2,243,403 | 260,014 | -38,408 | 25,376 | 2,490,565 | |
Balance (in shares) at Dec. 31, 2012 | 244,494,095 | ||||||
Increase (Decrease) in Stockholders' Equity | |||||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stock | 2 | 29,144 | 29,146 | ||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stock (in shares) | 3,057,904 | ||||||
Share-based compensation | 30,468 | 30,468 | |||||
Excess tax benefit from share-based compensation | 14,582 | 14,582 | |||||
Acquisitions of noncontrolling interest | -2,514 | -13,946 | -16,460 | ||||
Net income | 279,858 | 3,837 | 283,695 | ||||
Dividend paid to noncontrolling interest holders | -3,229 | -3,229 | |||||
Foreign currency translation adjustments | -976 | -976 | |||||
Balance at Dec. 31, 2013 | 182 | 2,315,083 | 539,872 | -39,384 | 12,038 | 2,827,791 | |
Balance (in shares) at Dec. 31, 2013 | 247,551,999 | 247,551,999 | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stock | 2 | 20,851 | 20,853 | ||||
Issuance of ordinary shares upon exercise of options and vesting of restricted stock (in shares) | 3,144,224 | ||||||
Issuance of ordinary shares in exchange of service | 2,000 | 2,000 | |||||
Issuance of ordinary shares in exchange of service (in shares) | 51,032 | ||||||
Share-based compensation | 31,937 | 31,937 | |||||
Excess tax benefit from share-based compensation | 11,697 | 11,697 | |||||
Noncontrolling interest recognized in connection with acquisitions | 25 | 25 | |||||
Net income | 307,348 | -4,957 | 48,737 | 302,391 | |||
Unrealized securities holding gains , net of tax | 28,458 | 4,587 | 28,458 | ||||
Dividend paid to noncontrolling interest holders | -5,357 | -5,357 | |||||
Foreign currency translation adjustments | -1,082 | -175 | -1,082 | ||||
Balance at Dec. 31, 2014 | 184 | 2,381,568 | 847,220 | -12,008 | 1,749 | $518,763 | 3,218,713 |
Balance (in shares) at Dec. 31, 2014 | 250,747,255 | 250,747,255 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS | 12 Months Ended | |||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | |
Operating activities: | ||||
Net income | $48,737 | 302,391 | 283,695 | 179,504 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Share-based compensation | 5,147 | 31,937 | 30,468 | 20,837 |
Depreciation and amortization | 91,984 | 570,722 | 463,146 | 347,575 |
Deferred taxes | -6,832 | -42,391 | -22,619 | -18,226 |
Bad debt expenses | 769 | 4,770 | 4,573 | 1,238 |
Deferred rent | 29,427 | 182,580 | 187,214 | 143,858 |
Loss (gain) from disposal of property and equipment | 129 | 803 | -10,734 | |
Impairment loss | 4,415 | 27,391 | 7,965 | 5,349 |
Investment loss (income) | -790 | -4,902 | 430 | |
Excess tax benefit from share-based compensation | -1,885 | -11,697 | -14,582 | -4,302 |
Changes in operating assets and liabilities, net of effect of acquisitions: | ||||
Accounts receivable | -3,026 | -18,773 | -28,270 | -12,336 |
Prepaid rent | -3,478 | -21,577 | -42,276 | -93,218 |
Inventories | 665 | 4,130 | 4,043 | -6,714 |
Amounts due from related parties | 41 | 256 | -658 | |
Other current assets | -6,829 | -42,369 | -26,400 | -29,404 |
Other assets | -2,131 | -13,220 | -50,228 | -31,482 |
Accounts payable | 2,904 | 18,016 | 3,605 | 3,390 |
Amounts due to a related party | 131 | 810 | 708 | -229 |
Salary and welfare payables | 6,256 | 38,813 | 28,768 | 36,809 |
Deferred revenue | 40,867 | 253,562 | 115,787 | 90,468 |
Accrued expenses and other current liabilities | 9,508 | 58,995 | 62,545 | 36,076 |
Income tax payable | 7,297 | 45,274 | 17,493 | 13,296 |
Other long-term liabilities | 11,039 | 68,494 | 55,496 | 33,231 |
Net cash provided by operating activities | 234,345 | 1,454,015 | 1,070,169 | 715,720 |
Investing activities: | ||||
Purchases of property and equipment for hotels in operation and headquarters | -45,525 | -282,467 | -170,481 | -127,056 |
Purchases of property and equipment for hotels under development | -104,512 | -648,455 | -902,166 | -870,994 |
Purchases of intangibles | -1,680 | -10,423 | -4,290 | -3,532 |
Amount received as a result of government zoning | 1,701 | 10,557 | 15,030 | |
Acquisitions, net of cash received | -2,587 | -16,050 | -34,070 | -30,055 |
Proceeds from disposal of subsidiary and branch | 2,979 | 18,484 | ||
Purchase of long-term investments | -30,794 | -191,064 | -54,744 | -28,129 |
Payment for shareholder loan to joint venture | -2,521 | -15,640 | ||
Proceeds from maturity/sale of long-term investments | 14,226 | 88,266 | ||
Purchase of short-term investments | -12,122 | -75,210 | -8,074 | |
Proceeds from sale of short-term investments | 8,945 | 55,499 | ||
Decrease (increase) in restricted cash | 535 | 3,317 | -1,527 | -290 |
Net cash used in investing activities | -171,355 | -1,063,186 | -1,152,248 | -1,068,130 |
Financing activities: | ||||
Net proceeds from issuance of ordinary shares upon exercise of option | 3,382 | 20,985 | 28,122 | 18,520 |
Proceeds from short-term debt | 48,351 | 300,000 | 105,796 | |
Repayment of short-term debt | -48,351 | -300,000 | -105,796 | |
Proceeds from long-term debt | 1,000 | |||
Repayment of long-term debt | -1,000 | |||
Funds advanced from noncontrolling interest holders | 1,945 | 3,000 | ||
Repayment of funds advanced from noncontrolling interest holders | -251 | -1,559 | -6,564 | -2,681 |
Acquisitions of noncontrolling interest | -658 | -4,083 | -4,210 | |
Contribution from noncontrolling interest holders | 240 | |||
Dividend paid to noncontrolling interest holders | -863 | -5,357 | -3,229 | -3,486 |
Excess tax benefit from share-based compensation | 1,885 | 11,697 | 14,582 | 4,302 |
Net cash provided by financing activities | 3,495 | 21,683 | 30,646 | 19,895 |
Effect of exchange rate changes on cash and cash equivalents | -175 | -1,082 | -976 | 758 |
Net increase (decrease) in cash and cash equivalents | 66,310 | 411,430 | -52,409 | -331,757 |
Cash and cash equivalents at the beginning of the year | 64,055 | 397,435 | 449,844 | 781,601 |
Cash and cash equivalents at the end of the year | 130,365 | 808,865 | 397,435 | 449,844 |
Supplemental disclosure of cash flow information: | ||||
Interest paid | 2,374 | 14,733 | 1,084 | 859 |
Income taxes paid | 17,765 | 110,222 | 99,065 | 69,980 |
Supplemental schedule of non-cash investing and financing activities: | ||||
Purchases of property and equipment included in payables | 94,304 | 585,119 | 639,749 | 590,873 |
Consideration payable for business acquisition | 1,218 | 7,560 | 8,939 | 10,506 |
Purchase of intangible assets included in payables | 1,399 | 8,682 | 9,660 | 10,584 |
Reimbursement of government zoning included in receivables | 161 | 1,000 | 6,042 | 3,042 |
Proceeds from disposal of subsidiary and branch included in receivables | 806 | 5,000 | ||
Proceeds from issuance of ordinary shares upon exercise of options included in receivables | 191 | 1,185 | 1,318 | 290 |
Acquisition of noncontrolling interest included in payables | $1,316 | 8,167 | 12,250 |
ORGANIZATION_AND_PRINCIPAL_ACT
ORGANIZATION AND PRINCIPAL ACTIVITIES | 12 Months Ended |
Dec. 31, 2014 | |
ORGANIZATION AND PRINCIPAL ACTIVITIES | |
ORGANIZATION AND PRINCIPAL ACTIVITIES | 1.ORGANIZATION AND PRINCIPAL ACTIVITIES |
China Lodging Group, Limited (the “Company”) was incorporated in the Cayman Islands under the laws of the Cayman Islands on January 4, 2007. The principal business activities of the Company and its subsidiaries (the “Group”) are to develop leased, manachised and franchised hotels under the “Joya Hotel”, “Manxin Hotels & Resorts “, “JI Hotel”, “Starway Hotel” , “HanTing Hotel”, “Elan Hotel” and “Hi Inn” brands in the People’s Republic of China (“PRC”). As of December 31, 2014, the Group does not own any hotel properties. | |
Leased hotels | |
The Group leases hotel properties from property owners and is responsible for all aspects of hotel operations and management, including hiring, training and supervising the managers and employees required to operate the hotels. In addition, the Group is responsible for hotel development and customization to conform to the standards of the Group brands at the beginning of the lease, as well as repairs and maintenance, operating expenses and management of properties over the term of the lease. | |
Under the lease arrangements, the Group typically receives rental holidays of two to six months and pays rent on a quarterly or biannual basis. Rent is typically subject to the fixed escalations of three to five percent every three to five years. The Group recognizes rental expense on a straight-line basis over the lease term. | |
As of December 31, 2013 and 2014, the Group had 565 and 611 leased hotels in operation, respectively. | |
Manachised and franchised hotels | |
Typically the Group enters into certain franchise and management arrangements with franchisees for which the Group is responsible for providing branding, quality assurance, training, reservation, hiring and appointing of the hotel general manager and various other support services relating to the hotel renovation and operation. Those hotels are classified as manachised hotels. Under typical franchise and management agreements, the franchisee is required to pay an initial franchise fee and ongoing franchise and management service fees, the majority of which are equal to a certain percentage of the revenues of the hotel. The franchisee is responsible for the costs of hotel development, renovation and the costs of its operations. The term of the franchise and management agreements are typically eight to ten years and are renewable upon mutual agreement between the Group and the franchisee. The Group also has a small number of franchised hotels in which cases the Group does not provide a hotel general manager. As of December 31, 2013 and 2014, the Group had 835 and 1,376 manachised hotels in operation and 25 and 8 franchised hotels in operation, respectively. | |
SUMMARY_OF_PRINCIPAL_ACCOUNTIN
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | ||||||||||||||
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | 2.SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | |||||||||||||
Basis of presentation | ||||||||||||||
The consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”). | ||||||||||||||
Basis of consolidation | ||||||||||||||
The consolidated financial statements include the financial statements of the Company and its majority-owned subsidiaries. All significant intercompany transactions and balances are eliminated on consolidation. | ||||||||||||||
The Group evaluates the need to consolidate certain variable interest entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. | ||||||||||||||
The Group is deemed as the primary beneficiary of and consolidates variable interest entities when the Group has the power to direct the activities that most significantly impact the economic success of the entities and effectively assumes the obligation to absorb losses and has the rights to receive benefits that are potentially significant to the entities. | ||||||||||||||
The Group evaluates its business activities and arrangements with the entities that operate the manachised and franchised hotels to identify potential variable interest entities. Generally, these entities qualify for the business scope exception, therefore consolidation is not appropriate under the variable interest entity consolidation guidance. | ||||||||||||||
Use of estimates | ||||||||||||||
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets, long lived assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group’s consolidated financial statements include the useful lives and impairment of property and equipment and intangible assets, valuation allowance of deferred tax assets, impairment of goodwill, share-based compensation and costs related to its customer loyalty program. | ||||||||||||||
Cash and cash equivalents | ||||||||||||||
Cash and cash equivalents consist of cash on hand and demand deposits, which are unrestricted as to withdrawal and use, and which have original maturities of three months or less when purchased. | ||||||||||||||
Restricted cash | ||||||||||||||
Restricted cash represents bank demand deposits collateralized for certain newly established subsidiaries pending capital verification procedures of relevant PRC government authority and deposits used as security against borrowings. The capital verification approval process typically takes between three to six months. | ||||||||||||||
Short-term investments | ||||||||||||||
Short-term investments represent held-to-maturity securities and are measured at amortized cost in the consolidated balance sheets. The Group classifies investments with maturities of more than three months and less than 12 months as short-term investments. | ||||||||||||||
Accounts receivable, net of allowance | ||||||||||||||
Trade receivables mainly consist of franchise fee receivables, amounts due from corporate customers, travel agents, hotel guests and credit card receivables, which are recognized and carried at the original invoice amount less an allowance for doubtful accounts. The Group establishes an allowance for doubtful accounts primarily based on the age of the receivables and factors surrounding the credit risk of specific customers. | ||||||||||||||
Inventories | ||||||||||||||
Inventories mainly consist of small appliances, bedding and daily consumables. Small appliances and bedding for new hotels opened are stated at cost, less accumulated amortization, and are amortized over their estimated useful lives, generally one year, from the time they are put into use. Daily consumables and beddings replacement are expensed when used. | ||||||||||||||
Property and equipment, net | ||||||||||||||
Property and equipment, net are stated at cost less accumulated depreciation and amortization. The renovations, betterments and interest cost incurred during construction are capitalized. Depreciation and amortization of property and equipment is provided using the straight line method over their expected useful lives. The expected useful lives are as follows: | ||||||||||||||
Leasehold improvements | Shorter of the lease term or their estimated useful lives | |||||||||||||
Buildings | 40 years | |||||||||||||
Furniture, fixtures and equipment | 3-5 years | |||||||||||||
Motor vehicles | 5 years | |||||||||||||
Construction in progress represents leasehold improvements under construction or being installed and is stated at cost. Cost comprises original cost of property and equipment, installation, construction and other direct costs. Construction in progress is transferred to leasehold improvements and depreciation commences when the asset is ready for its intended use. | ||||||||||||||
Expenditures for repairs and maintenance are expensed as incurred. Gain or loss on disposal of property and equipment, if any, is recognized in the consolidated statements of comprehensive income as the difference between the net sales proceeds and the carrying amount of the underlying asset. | ||||||||||||||
Intangible assets, net and unfavorable lease | ||||||||||||||
Intangible assets consist primarily of brand name, non-compete agreements, franchise agreements and favorable leases acquired in business combinations and purchased software. Intangible assets acquired through business combinations are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Intangible assets, including brand name, non-compete agreements, franchise agreements and favorable lease agreements acquired from business combination are recognized and measured at fair value upon acquisition. Non-compete agreements, franchise agreements and favorable lease agreements are amortized over the expected useful life, remaining franchise contract terms and remaining operating lease terms. Unfavorable lease agreements from business combination transactions are recognized as other long-term liabilities and are amortized over the remaining operating lease terms. Purchased software is stated at cost less accumulated amortization. | ||||||||||||||
Brand name is considered to have an indefinite life. The Group evaluates the brand name each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Impairment is tested annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group measures the impairment by comparing the fair value of brand name with its carrying amount. If the carrying amount of brand name exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. The Group measured the fair value of the brand name under the relief-from-royalty method. Management performs its annual brand name impairment test on November 30. | ||||||||||||||
Long-term investments | ||||||||||||||
Long-term investments include cost-method investment, equity-method investment, available-for-sale securities and held-to-maturity securities. | ||||||||||||||
The Group accounts for the investment in an investee of which the Group owns less than 20% of the voting securities and does not have the ability to exercise significant influence over operating and financial policies of the entity as cost-method investment. The Group’s cost-method investment is carried at historical cost in its consolidated financial statements and measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the consolidated statements of comprehensive income equal to the excess of the investment’s cost over its fair value when the impairment is deemed other-than-temporary. | ||||||||||||||
The Group accounts for the investment in joint venture under equity-method accounting. Under this method, the Group’s pro rata share of income (loss) from investment is recognized in the consolidated statements of comprehensive income. Dividends received reduce the carrying amount of the investment. Equity-method investment is reviewed for impairment by assessing if the decline in market value of the investment below the carrying value is other-than-temporary. In making this determination, factors are evaluated in determining whether a loss in value should be recognized. These include consideration of the intent and ability of the Group to hold investment and the ability of the investee to sustain an earnings capacity, justifying the carrying amount of the investment. Impairment losses are recognized in other expense when a decline in value is deemed to be other-than-temporary. | ||||||||||||||
Investments in securities that have readily determinable fair values are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses recorded as a component of other comprehensive income or loss. Realized gains or losses are recognized in the consolidated statements of comprehensive income during the period in which the gains or losses are realized. If the Group determines that a decline in the fair value of the individual available-for-sale security is other-than-temporary, the cost basis of the security is written down to the fair value as a new cost basis and the amount of the write-down is accounted for as a realized loss. The new cost basis will not be changed for subsequent recoveries in fair value. The Group reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to: (1) the nature of the investment; (2) the cause and duration of the impairment; (3) the extent to which fair value is less than cost; (4) financial conditions and near term prospects of the issuers; and (5) the Group’s ability to hold the security for a period of time sufficient to allow for any anticipated recovery of its amortized cost or fair value. Available-for-sale securities not expected to be realized in cash or sold in the next normal operating cycle of the business are classified as long-term investments. | ||||||||||||||
Held-to-maturity securities are recorded in amortized cost. | ||||||||||||||
No event had occurred that indicated that an other-than-temporary impairment existed and therefore the Group did not record any impairment charges for these investments during 2012, 2013 or 2014. | ||||||||||||||
Impairment of long-lived assets | ||||||||||||||
The Group evaluates its long-lived assets and finite lived intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When these events occur, the Group measures impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group recognizes an impairment loss equal to the difference between the carrying amount and fair value of these assets. | ||||||||||||||
The Group performed a recoverability test of its long-lived assets associated with certain hotels due to the continue underperformance relative to the projected operating results, of which the carrying amount of the property and equipment exceed the future undiscounted net cash flows, and recognized an impairment loss of RMB5,349, RMB7,965 and RMB27,203 during the year ended December 31, 2012, 2013 and 2014, respectively. | ||||||||||||||
Fair value of the property and equipment was determined by the Group based on the income approach using the discounted cash flow associated with the underlying assets, which incorporated certain assumptions including projected hotels’ revenue, growth rates and projected operating costs based on current economic condition, expectation of management and projected trends of current operating results. | ||||||||||||||
Goodwill | ||||||||||||||
Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable assets less liabilities acquired. | ||||||||||||||
Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group completes a two-step goodwill impairment test. The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. Management performs its annual goodwill impairment test on November 30. | ||||||||||||||
The Group recognized goodwill impairment of nil, nil and RMB188 for years ended December 31, 2012, 2013 and 2014, respectively. | ||||||||||||||
Accruals for customer loyalty program | ||||||||||||||
The Group invites its customers to participate in a customer loyalty program. The membership has an unlimited life. Members enjoy favorable treatment such as more convenient check-out procedures and late check-out, discounts on room rates and accumulate membership points for their paid stays, which can be redeemed for room night awards and other gifts within two years after the points are earned. The estimated incremental costs to provide room night awards and other gifts are accrued and recorded as accruals for customer loyalty program as members accumulate points and are recognized as cost and expense in the accompanying consolidated statements of comprehensive income. As members redeem awards or their entitlements expire, the provision is reduced correspondingly. As of December 31, 2013 and 2014, the accruals for estimated liabilities under the customer loyalty program amounted to RMB15,061 and RMB71,475, respectively. | ||||||||||||||
Deferred revenue | ||||||||||||||
Deferred revenue generally consists of non-refundable advances received from customers for rental of rooms, cash received for membership fees and initial franchise fees received prior to the Group fulfilling its commitments to the franchisees. | ||||||||||||||
Revenue recognition | ||||||||||||||
Revenue from leased hotels is derived from hotel operations, mainly including the rental of rooms, food and beverage sales and souvenir sales. Revenue is recognized when rooms are occupied and food and beverages and souvenirs are sold. | ||||||||||||||
Revenues from manachised and franchised hotels are derived from franchise agreements where the franchisees are primarily required to pay (i) an initial one-time franchise fee, and (ii) continuing franchise fees, which mainly consist of (a) on-going management and service fees mainly based on a certain percentage of the room revenues of the franchised hotels, and (b) system maintenance, support fees and central reservation system usage fees. The one-time franchise fee is recognized when the manachised and franchised hotel opens for business, the fee becomes non-refundable, and the Group has fulfilled all its commitments and obligations, including the assistance to the franchisees in property design, leasehold improvement construction project management, systems installation and personnel recruiting and training. The ongoing management and service fees are recognized when the underlying service revenue is recognized by the franchisees’ operations. The system maintenance, support fee and central reservation system usage fee is recognized over the period when services are provided. | ||||||||||||||
In addition, the Group accounts for hotel manager fees related to the manachised hotels under the franchise program as revenues. Pursuant to the franchise agreements, the Group charges the franchisees fixed hotel manager fees to cover the manachised hotel managers’ payroll, social welfare benefits and certain other out-of-pocket expenses that the Group incurs on behalf of the manachised hotels. The hotel manager fee is recognized as revenue monthly. During the years ended December 31, 2012, 2013 and 2014, the hotel manager fees that were recognized as revenue were RMB72,061, RMB116,885 and RMB166,572, respectively. | ||||||||||||||
Membership fees from the Group’s customer loyalty program are earned and recognized on a straight-line basis over the expected membership duration of the different membership levels. Such duration is estimated based on the Group’s and management’s experience and is adjusted on a periodic basis to reflect changes in membership retention. The membership duration is estimated to be two to five years which reflects the expected membership retention. Revenues recognized from the customer loyalty program were RMB51,132, RMB74,715 and RMB107,737 for the years ended December 31, 2012, 2013 and 2014, respectively. | ||||||||||||||
Business tax and related taxes | ||||||||||||||
The Group is subject to business tax, education surtax and urban maintenance and construction tax, on the services provided in the PRC. Such taxes are primarily levied based on revenue at applicable rates and are recorded as a reduction of revenues. | ||||||||||||||
Advertising and promotional expenses | ||||||||||||||
Advertising related expenses, including promotion expenses and production costs of marketing materials, are charged to the consolidated statements of comprehensive income as incurred, and amounted to RMB30,053, RMB43,807 and RMB79,806 for the years ended December 31, 2012, 2013 and 2014, respectively. | ||||||||||||||
Government grants | ||||||||||||||
Unrestricted government subsidies from local governmental agencies allowing the Group full discretion to utilize the funds were RMB6,723, RMB17,016 and RMB19,657 for the years ended December 31, 2012, 2013 and 2014, respectively, which were recorded as other operating income. | ||||||||||||||
Leases | ||||||||||||||
A lease of which substantially all the benefits and risks incidental to ownership remain with the lessor is classified as an operating lease. All leases of the Group are currently classified as operating leases. When a lease contains rent holidays or requires fixed escalations of the minimum lease payments, the Group records the total rental expense on a straight-line basis over the initial lease term and the difference between the straight-line rental expense and cash payment under the lease is recorded as deferred rent. As of December 31, 2013 and 2014, deferred rent of RMB15,704 and RMB21,701 were recorded as other current liabilities and RMB653,831 and RMB830,414 were recorded as long-term liabilities, respectively. | ||||||||||||||
Capitalization of interest | ||||||||||||||
Interest cost incurred on funds used to construct leasehold improvements during the active construction period is capitalized. The interest capitalized is determined by applying the borrowing interest rate to the average amount of accumulated capital expenditures for the assets under construction during the period. The interest expense incurred for the years ended December 31, 2012, 2013 and 2014 were RMB859, RMB1,084 and RMB14,733, of which RMB37, RMB271 and RMB13,200 were capitalized as additions to assets under construction, respectively. | ||||||||||||||
Income taxes | ||||||||||||||
Current income taxes are provided for in accordance with the relevant statutory tax laws and regulations. | ||||||||||||||
Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Net operating losses are carried forward and credited by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of the Group, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on the characteristics of the underlying assets and liabilities, or the expected timing of their use when they do not relate to a specific asset or liability. | ||||||||||||||
Foreign currency translation | ||||||||||||||
The reporting currency of the Group is the Renminbi (“RMB”). The functional currency of the Company is the United States dollar (“US dollar”). Monetary assets and liabilities denominated in currencies other than the US dollar are translated into US dollar at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the US dollar during the year are converted into the US dollar at the applicable rates of exchange prevailing on the day transactions occurred. Transaction gains and losses are recognized in the statements of comprehensive income. Assets and liabilities are translated into RMB at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive loss in the consolidated statements of comprehensive income. | ||||||||||||||
The financial records of the Group’s subsidiaries are maintained in local currencies, RMB, which is the functional currency. | ||||||||||||||
Comprehensive income | ||||||||||||||
Comprehensive income includes all changes in equity except for those resulting from investments by owners and distributions to owners and is comprised of net income, foreign-currency translation adjustments and unrealized securities holding gains (losses). The consolidated financial statements have been adjusted for the retrospective application of the authoritative guidance regarding presentation of comprehensive income, which was adopted by the Group on January 1, 2012. | ||||||||||||||
Concentration of credit risk | ||||||||||||||
Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, short-term investments and accounts receivable. | ||||||||||||||
All of the Group’s cash and cash equivalents and restricted cash are held with financial institutions that Group management believes to be high credit quality. In addition, the Group’s investment policy limits its exposure to concentrations of credit risk and the Group’s short-term investments consist of corporate debt securities with high credit quality. The Group conducts credit evaluations on its group and agency customers and generally does not require collateral or other security from such customers. The Group periodically evaluates the creditworthiness of the existing customers in determining an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. | ||||||||||||||
Fair value | ||||||||||||||
The Group defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. | ||||||||||||||
The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs may be used to measure fair value include: | ||||||||||||||
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. | ||||||||||||||
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. | ||||||||||||||
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. | ||||||||||||||
The estimated fair value of the Group’s financial instruments, including cash, restricted cash, short-term investments, receivables, payables and accruals, approximates their carrying value due to their short-term nature. | ||||||||||||||
When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group measures fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates. | ||||||||||||||
As of December 31, 2014, information about inputs into the fair value measurements of the Group’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows: | ||||||||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||
Description | Year Ended | Quoted Prices | Significant | Significant | ||||||||||
December 31, | in Active | Other | Unobservable | |||||||||||
2014 | Markets for | Observable | Inputs | |||||||||||
Identical | Inputs | (Level 3) | ||||||||||||
Assets | (Level 2) | |||||||||||||
(Level 1) | ||||||||||||||
Available-for-sale securities | 137,943 | 137,943 | — | — | ||||||||||
The following table presents the Group’s assets measured at fair value on a non-recurring basis for the years ended December 31, 2012, 2013 and 2014: | ||||||||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||
Year Ended | Description | Fair value | Quoted | Significant | Significant | Total loss | ||||||||
December 31, | Prices | Other | Unobservable | |||||||||||
in Active | Observable | Inputs | ||||||||||||
Markets for | Inputs | (Level 3) | ||||||||||||
Identical | (Level 2) | |||||||||||||
Assets | ||||||||||||||
(Level 1) | ||||||||||||||
2012 | Property and equipment | 4,991 | — | — | 4,991 | 5,349 | ||||||||
2013 | Property and equipment | 5,382 | — | — | 5,382 | 7,965 | ||||||||
2014 | Property and equipment | 13,561 | — | — | 13,561 | 27,203 | ||||||||
2014 | Goodwill | — | — | — | — | 188 | ||||||||
As a result of reduced expectations of future cash flows from certain leased hotels, the Group determined that the hotels property and equipment with a carrying amount of RMB10,340, RMB13,347 and RMB40,764 was not fully recoverable and consequently recorded an impairment charge of RMB5,349, RMB7,965 and RMB27,203 for the years ended December 31, 2012, 2013 and 2014, respectively. The Company also determined that the goodwill amount with a carrying amount of RMB188 was impaired as a result of the impairment assessment. | ||||||||||||||
Fair value of the property and equipment as well as the reporting units was determined by the Group based on the income approach using the discounted cash flow associated with the underlying assets, which incorporated certain assumptions including projected hotels’ revenue, growth rates and projected operating costs based on current economic condition, expectation of management and projected trends of current operating results. As a result, the Group has determined that the majority of the inputs used to value its long-lived assets held and used and its reporting units are unobservable inputs that fall within Level 3 of the fair value hierarchy. The revenue growth rate and the discount rate were the significant unobservable input used in the fair value measurement, which are 4% and 15%, 4% and 20%, and 4% and 20% for the years ended December 31, 2012, 2013 and 2014, respectively. | ||||||||||||||
Share-based compensation | ||||||||||||||
The Group recognizes share-based compensation in the consolidated statements of comprehensive income based on the fair value of equity awards on the date of the grant, with compensation expenses recognized over the period in which the grantee is required to provide service to the Group in exchange for the equity award. The share-based compensation expenses have been categorized as either hotel operating costs, general and administrative expenses or selling and marketing expenses, depending on the job functions of the grantees. For the years ended December 31, 2012, 2013 and 2014, the Group recognized share-based compensation expenses of RMB20,837, RMB30,468 and RMB31,937, respectively, which was classified as follows: | ||||||||||||||
Year Ended December 31, | ||||||||||||||
2012 | 2013 | 2014 | ||||||||||||
Hotel operating costs | 2,592 | 4,948 | 6,830 | |||||||||||
Selling and marketing expenses | 1,031 | 973 | 939 | |||||||||||
General and administrative expenses | 17,214 | 24,547 | 24,168 | |||||||||||
Total | 20,837 | 30,468 | 31,937 | |||||||||||
Earnings per share | ||||||||||||||
Basic earnings per share is computed by dividing income attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares and is calculated using the treasury stock method for stock options and nonvested restricted stocks. | ||||||||||||||
Segment reporting | ||||||||||||||
The Group operates and manages its business as a single segment. The Group primarily generates its revenues from customers in the PRC. Accordingly, no geographical segments are presented. Substantially all of the Group’s long-lived assets are located in the PRC. | ||||||||||||||
Recently issued accounting pronouncements | ||||||||||||||
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which superseded the revenue recognition requirement in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, it also superseded the cost guidance in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and created new Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, which will be effective for annual reporting period beginning after December 15, 2016. The Group is still in the process of assessing the impact of this newly issued ASU on the Group’s consolidated financial statements. | ||||||||||||||
In August 2014, the FASB issued ASU No. 2014-15, Presentation of financial statements—going concern (Subtopic 205-40), which provided guidance on management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures so as to reduce the diversity in the timing and content of footnote disclosures. ASU 2014-15 will be effective for annual periods ending after December 15, 2016. The Group does not expect the adoption will have a material impact on the Group’s consolidated financial statements. | ||||||||||||||
Translation into United States Dollars | ||||||||||||||
The financial statements of the Group are stated in RMB. Translations of amounts from RMB into United States dollars are solely for the convenience of the reader and were calculated at the rate of US$1.00 =MB6.2046, on December 31, 2014, as set forth in H.10 statistical release of the Federal Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into United States dollars at that rate on December 31, 2014, or at any other rate. | ||||||||||||||
ACQUISITIONS
ACQUISITIONS | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
ACQUISITIONS | ||||||||||
ACQUISITIONS | 3.ACQUISITIONS | |||||||||
(i) During the year ended December 31, 2012, to enrich the Group’s brand and accelerate the Group’s expansion in the mid-scale market, the Group acquired 51% equity interest of Starway Hotels (Hong Kong) Limited (“Starway”), a franchised hotel chain from C-Travel International Limited (“C-Travel”), a wholly owned subsidiary of Ctrip.com International, Ltd. for total cash consideration of RMB17,292. C-Travel granted the Group a purchase right to acquire the remaining 49% equity interest of Starway at an amount in US$ equal to RMB16,460 within one year. The right may be exercised by the Group in its sole discretion. The business acquisition was accounted for under purchase accounting. | ||||||||||
The following is a summary of the fair values of the assets acquired and liabilities assumed: | ||||||||||
2012 | Amortization period | |||||||||
Current assets | 954 | |||||||||
Intangible assets | 299 | 5 years | ||||||||
Property and equipment | 667 | 5-10 years | ||||||||
Brand name | 28,600 | indefinite | ||||||||
Non-compete agreement | 400 | 10 years | ||||||||
Franchise agreements | 7,700 | remaining contract terms | ||||||||
Goodwill | 21,491 | |||||||||
Current liabilities | (19,430 | ) | ||||||||
Deferred tax liabilities | (9,174 | ) | ||||||||
Noncontrolling interest | (14,215 | ) | ||||||||
Total | 17,292 | |||||||||
Brand name represents the registered trademark of Starway which is well recognized brand in mid-scale hotel market in PRC. The useful life of brand name is indefinite. The Group measured the fair value of the brand name under the relief-from-royalty method. | ||||||||||
Goodwill was recognized as a result of expected synergies from combining operations of the Group and Starway and other intangible assets that do not qualify for separate recognition. Goodwill is not amortized and is not deductible for tax purpose. | ||||||||||
During the year ended December 31, 2013, the Group acquired the remaining 49% equity interest of Starway for cash consideration of RMB16,460, of which RMB4,210 and RMB 4,083 has been paid in 2013 and 2014, respectively, with the remaining amount of RMB8,167 to be paid in the next two years. The purchase of the remaining 49% noncontrolling interest is treated as an equity transaction. The difference between the purchase consideration and the related carrying value of the noncontrolling interests of RMB2,514 was recorded as a reduction of additional paid-in capital during the year ended December 31, 2013. | ||||||||||
(ii) During the years ended December 31, 2012, 2013 and 2014, the Group acquired one, nine and one individual hotels in the form of leased hotel for total cash consideration of RMB7,000, RMB33,423 and RMB12,975, respectively. The business acquisitions were accounted for under purchase accounting. | ||||||||||
The following is a summary of the fair values of the assets acquired and liabilities assumed: | ||||||||||
2012 | 2013 | 2014 | Amortization period | |||||||
Current assets | 127 | 5,552 | 25 | |||||||
Property and equipment | 4,668 | 29,805 | 10,477 | 5-10 years | ||||||
Favorable leases | 2,470 | 6,422 | 3,330 | remaining lease terms | ||||||
Deferred tax assets | — | 6,628 | — | |||||||
Franchise agreements | 200 | — | — | remaining contracts terms | ||||||
Goodwill | 153 | 662 | — | |||||||
Current liabilities | — | (2,501 | ) | — | ||||||
Deferred tax liabilities | (618 | ) | (13,145 | ) | (832 | ) | ||||
Noncontrolling interest | — | — | (25 | ) | ||||||
Total | 7,000 | 33,423 | 12,975 | |||||||
PROPERTY_AND_EQUIPMENT_NET
PROPERTY AND EQUIPMENT, NET | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
PROPERTY AND EQUIPMENT, NET | ||||||
PROPERTY AND EQUIPMENT, NET | 4.PROPERTY AND EQUIPMENT, NET | |||||
Property and equipment, net consist of the following: | ||||||
As of December 31, | ||||||
2013 | 2014 | |||||
Cost: | ||||||
Buildings | 12,115 | 12,115 | ||||
Leasehold improvements | 4,190,693 | 4,916,270 | ||||
Furniture, fixtures and equipment | 619,200 | 742,682 | ||||
Motor vehicles | 820 | 820 | ||||
4,822,828 | 5,671,887 | |||||
Less: Accumulated depreciation | (1,463,547 | ) | (2,008,882 | ) | ||
3,359,281 | 3,663,005 | |||||
Construction in progress | 274,758 | 244,338 | ||||
Property and equipment, net | 3,634,039 | 3,907,343 | ||||
Depreciation expense was RMB337,511, RMB453,637 and RMB559,918 for the years ended December 31, 2012, 2013 and 2014, respectively. | ||||||
In 2012, the Group demolished one leased hotel due to local government zoning requirements. As a result, the Group wrote off property and equipment of RMB3,042 associated with this hotel, which has been recorded as receivable in other current assets as of December 31, 2012 and 2013. No gain or loss was recognized. RMB4,553 has been received in February 2014. | ||||||
In 2013, the Group demolished three leased hotels due to local government zoning requirements. As a result, the Group wrote off property and equipment of RMB7,296 associated with these hotels and recognized a gain of RMB10,734 as other operating income, which is net of RMB15,030 cash received and RMB3,000 receivable recorded in other current assets as of December 31, 2013. In March 2014, RMB2,000 has been received. | ||||||
In 2014, the Group demolished one leased hotels due to local government zoning requirements. As a result, the Group wrote off property and equipment of RMB3,971 associated with this hotel and recognized a gain of RMB33 as other operating income with RMB4,004 cash received. | ||||||
As of December 31, 2014, the Group has been formally notified by local government authorities that two additional leased hotels of the Group will likely be demolished due to local government zoning requirements. The aggregate carrying amount of property and equipment at the associated hotels was RMB10,075 as of December 31, 2014. Neither of the associated hotels has recorded intangible assets or goodwill. The Group has not recognized any impairment as expected cash flows from the hotels’ operations prior to demolition and expected amounts to be received as a result of the demolition will likely exceed the carrying value of such assets. The Group estimated amounts to be received based on the relevant PRC laws and regulations, terms of the lease agreements, and the prevailing market practice. | ||||||
INTANGIBLE_ASSETS_NET_AND_UNFA
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | ||||||||
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | 5.INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | |||||||
Intangible assets, net consist of the following: | ||||||||
As of December 31, | ||||||||
2013 | 2014 | |||||||
Brand name | 28,600 | 28,600 | ||||||
Franchise agreements | 7,700 | 7,700 | ||||||
Non-compete agreement | 400 | 400 | ||||||
Favorable lease agreements | 76,048 | 79,378 | ||||||
Purchased software | 24,835 | 35,298 | ||||||
Total | 137,583 | 151,376 | ||||||
Less: Accumulated amortization | (35,738 | ) | (46,839 | ) | ||||
Total | 101,845 | 104,537 | ||||||
Unfavorable lease | ||||||||
As of December 31, | ||||||||
2013 | 2014 | |||||||
Unfavorable lease agreements | 3,924 | 3,924 | ||||||
Less: Accumulated amortization | (2,307 | ) | (2,604 | ) | ||||
Unfavorable lease agreements, net | 1,617 | 1,320 | ||||||
The values of favorable lease agreements were determined based on the estimated present value of the amount the Group has avoided paying as a result of entering into the lease agreements. Unfavorable lease agreements were determined based on the estimated present value of the acquired lease that exceeded market prices and are recognized as other long-term liabilities. The value of favorable and unfavorable lease agreements is amortized using the straight-line method over the remaining lease term. | ||||||||
Amortization expense of intangible assets for the years ended December 31, 2012, 2013 and 2014 amounted to RMB10,501, RMB9,846 and RMB11,101, respectively. | ||||||||
The annual estimated amortization expense for the above intangible assets and unfavorable lease for the following years is as follows: | ||||||||
Amortization for | Amortization for | Net Amortization | ||||||
Intangible Assets | Unfavorable Lease | |||||||
2015 | 10,570 | (289 | ) | 10,281 | ||||
2016 | 10,076 | (209 | ) | 9,867 | ||||
2017 | 9,723 | (130 | ) | 9,593 | ||||
2018 | 8,619 | (130 | ) | 8,489 | ||||
2019 | 8,099 | (130 | ) | 7,969 | ||||
Thereafter | 28,850 | (432 | ) | 28,418 | ||||
75,937 | (1,320 | ) | 74,617 | |||||
LONG_TERM_INVESTMENTS
LONG TERM INVESTMENTS | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
LONG TERM INVESTMENTS | ||||||
LONG TERM INVESTMENTS | 6.LONG-TERM INVESTMENTS | |||||
The long-term investments as of December 31, 2013 and 2014 were as follows: | ||||||
As of December 31, | ||||||
2013 | 2014 | |||||
UBOX | 40,517 | 40,517 | ||||
Kangdu | 50,000 | — | ||||
Sheen Star | — | 20,990 | ||||
Yibang | — | 2,482 | ||||
Quanjude | — | 137,943 | ||||
Loan to franchisees | — | 5,140 | ||||
Campsort | — | 11,644 | ||||
GOOAGOO | — | 10,289 | ||||
Total | 90,517 | 229,005 | ||||
In June 2012, the Group purchased 46,200,000 Series A preferred shares of UBOX International Holdings Co., Limited (“UBOX”), a privately-held company, for the consideration of RMB28,129. | ||||||
In December 2012, the Group purchased convertible promissory note of RMB8,074 from UBOX. In December 2013, the Group converted the principal of the promissory note to 8,530,731 ordinary shares of UBOX. In August 2013, the Group purchased another convertible promissory note of RMB4,314 from UBOX. In August 2014, the Group converted the principal of the promissory note to 3,946,897 ordinary shares. As of December 31, 2014, the Group had approximately 3.7% of UBOX’s equity interest and the investments were accounted for using the cost method since the Group does not have the ability to exert significant influence over UBOX. As of December 31, 2014, there had been no identified events or changes in circumstances that had a significant adverse effect on the investments or other indicates of impairment. | ||||||
In November 2013, the Group entered into an investment agreement to inject RMB100,000 to Suzhou Kangdu Property Co., Limited (“Kangdu”), a real estate company, for 50% equity interest of Kangdu. According to the investment agreement, the Group will not participate in the operation of Kangdu, nor share the earnings. Concurrently the Group entered into the agreement with Kangdu to acquire the property developed by Kangdu for a purchase price of RMB175,000 and the property is scheduled to be completed and transferred to the Group in October 2015. In addition, the Group was granted a put option to require the other investors of Kangdu to repurchase its equity interest for RMB100,000 plus 8% interest at such time the property is scheduled to be transferred to the Group in October 2015. The Group had injected RMB50,000 in November 2013 and RMB30,000 in January 2014. The Group accounted for the investment as available-for-sale securities. In April 2014, the Group transferred its investment in Kangdu to Sheen Star Group Limited (“Sheen Star”), in which the Group owns minority interest (see the following paragraph for the equity structure of Sheen Star), for consideration of RMB82,785, and its rights and obligations associated with the property purchase agreement were transferred to Sheen Star contemporaneously. | ||||||
In April 2014, the Group set up Sheen Star together with Mr. Qi Ji, the founder, executive chairman and chief executive officer of the Group and a third party. Sheen Star is a real estate investment company which the Group contributed RMB20,990 and owned equity interest of 19.99%, and Mr. Qi Ji owned 50.01%. The Group accounted for the investment in Sheen Star under equity-method as the Group has the ability to exert significant influence. The unrealized gain (loss) was immaterial in 2014. | ||||||
In May 2013, the Group acquired 30% equity interest in Lijiang Yibang Changchunteng Hotel Co., Limited (“Yibang”) for consideration of RMB430. In April 2014, The Group acquired additional 20% equity interest in Yibang for consideration of RMB285. The Group accounted for the investment under equity-method because the Group has the ability to exert significant influence but does not have the control over Yibang. The Group recognized investment loss of RMB430 and investment income of RMB2,197 in 2013 and 2014, respectively, which was recorded in other income. | ||||||
From April to December 2014, the Group entered into entrusted loan agreements with franchisees to provide financial support to them. The terms of the entrusted loans are typically two to three years, and the interest rates are from 8% to 8.5%. The Group recognized RMB266 interest income for the loans in 2014. | ||||||
In June 2014, the Group purchased 7,241,131 ordinary shares of China Quanjude (Group) Co., Ltd. (“Quanjude”), a top restaurant brand listed in Shenzhen Stock Exchange in China, through a private placement. The purchase price was set at RMB13.81 per ordinary share and the total purchase cost was RMB100 million. Upon the closing of the transaction described above, the Group holds approximately 2.35% of Quanjude’s total outstanding shares. Given the level of investment, the Group accounts for its investment in Quanjude as “available-for-sale” and measured the fair value at every period end. Unrealized holding gains and losses for available-for-sale securities are reported in other comprehensive income until realized. The closing price of Quanjude as of December 31, 2014 was RMB19.05 per share. As of December 31, 2014, the Group recorded the investment in Quanjude at the fair value of RMB137,943, with RMB28,458 increase in fair value of the investment, net of tax, credited to other comprehensive income. | ||||||
In July 2014, the Group acquired 30% equity interest in Shanghai Campsort Travel Development Co., Ltd. (“Campsort”), a new resort hotel chain in China, for consideration of RMB15,000. In November 2014, the Group transferred 6% equity interest to Shanghai Homeinn Hotel Management Co., Ltd. (“Homeinn”) for consideration of RMB3,000. Therefore, the Group held 24% equity interest of Campsort and accounted for the investment under equity-method because the Group has the ability to exert significant influence over Campsort. The Group recognized investment loss of RMB356 in 2014. | ||||||
In November 2014, the Group purchased 8% equity interest in Beijing GOOAGOO Technology Service Co., Ltd. (“GOOAGOO”), a high-tech service provider for Offline-To-Online data processing and platform operation, for the consideration of RMB10,289. The Group accounted the investment under cost method since the Group does not have the ability to exert significant influence over GOOAGOO. | ||||||
GOODWILL
GOODWILL | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
GOODWILL | ||||||||
GOODWILL | 7.GOODWILL | |||||||
The changes in the carrying amount of goodwill for the years ended December 31, 2012, 2013 and 2014 were as follows: | ||||||||
Gross | Accumulated | Net | ||||||
Amount | Impairment Loss | Amount | ||||||
Balance at January 1, 2012 | 44,344 | (1,808 | ) | 42,536 | ||||
Increase in goodwill related to acquisitions | 21,644 | — | 21,644 | |||||
Balance at December 31, 2012 | 65,988 | (1,808 | ) | 64,180 | ||||
Increase in goodwill related to acquisitions | 662 | — | 662 | |||||
Balance at December 31, 2013 | 66,650 | (1,808 | ) | 64,842 | ||||
Impairment losses recognized | — | (188 | ) | (188 | ) | |||
Balance at December 31, 2014 | 66,650 | (1,996 | ) | 64,654 | ||||
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2014 | |
DEBT | |
DEBT | 8.DEBT |
In March 2012, the Group entered into a five-year bank credit facility under which the Group can borrow up to RMB500,000 by May 21, 2015, which is subject to bank’s reevaluation from time to time. The credit facility has a specified expiration schedule for draw down. The interest rate for each draw down is established on the draw-down date and is adjusted annually, based on the loan interest rate stipulated by the People’s Bank of China for the corresponding period. As of December 31, 2012, the Group had drawn down the credit facility of RMB1,000, repaid RMB1,000, and RMB100,000 of the credit facility has expired. In 2013 and 2014, the Group did not have any additional draw-down and credit facility of RMB399,000 was available for future borrowing as of December 31, 2014, which will expire on May 21, 2015. The weighted average interest rate for borrowings drawn under such credit facility was 6.9% for the year ended December 31, 2012. The credit facility is restricted to certain hotels’ renovation and the credit facility is not collateralized. | |
In September 2012, the Group entered into a three-year revolving bank credit facility under which the Group can draw-down up to RMB300,000 by October 9, 2015. As of December 31, 2012, 2013 and 2014, the Group has drawn down the credit facility of nil, RMB104,540 and nil and repaid nil, RMB104,540 and nil, respectively. The weighted average interest rate for borrowings drawn under such credit facility was 6.0% for the year ended December 31, 2013. In December 2013, the Group renewed the bank credit facility under which the Group can borrow up to RMB 500,000 by December 11, 2016. The interest rate for this credit facility was determined on the draw-down date and the credit facility was not collateralized. As of December 31, 2014, a letter of guarantee of RMB700 was issued under this credit facility, and RMB499,300 was available for future borrowing. | |
In December 2012, the Group entered into a thirty-month bank credit facility under which the Group can draw down up to US$10 million by April 5, 2013. The interest rate for each draw down is based on the twelve-month London Interbank Offered Rate (“Libor”) on draw-down date plus 2.7%. Each draw down will be guaranteed by letter of guarantee or stand-by letter of credit. As of December 31, 2013, the Group has drawn down US$200 thousand and repaid US$200 thousand and the facility has expired. The weighted average interest rate for borrowings drawn under such credit facility was 3.54% for the year ended December 31, 2013. | |
In December 2013, the Group signed a one-year entrusted loan contract with a subsidiary of Ctrip.com International, Ltd. under which the Group can borrow up to RMB 300,000 for the period from January 6, 2014 to January 5, 2015. The interest rate of this borrowing is 5.4%. According to the agreement, the Group shall settle the unpaid principal and interest with its ordinary shares if the loan is in default. In January 2014, the Group had drawn down RMB 300,000 under this contract and repaid RMB 300,000 in November 2014. | |
ACCRUED_EXPENSES_AND_OTHER_CUR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ||||||
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 9.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |||||
As of December 31, | ||||||
2013 | 2014 | |||||
Payable for business acquisitions | 6,398 | 5,745 | ||||
Business taxes and other surcharge payables | 48,557 | 58,887 | ||||
Accrual for customer loyalty program | 15,061 | 71,475 | ||||
Payable to noncontrolling interest holders | 7,112 | 5,552 | ||||
Other payables | 51,386 | 41,864 | ||||
Accrued rental | 41,517 | 44,125 | ||||
Accrued utilities | 38,336 | 37,320 | ||||
Other accrued expenses | 40,818 | 48,049 | ||||
Total | 249,185 | 313,017 | ||||
From time to time, the Group receives cash advances from noncontrolling interest holders of hotels that are not wholly owned by the Group. Such advances are non-interest bearing and are payable within one year. | ||||||
HOTEL_OPERATING_COSTS
HOTEL OPERATING COSTS | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
HOTEL OPERATING COSTS | ||||||||
HOTEL OPERATING COSTS | 10.HOTEL OPERATING COSTS | |||||||
Hotel operating costs include all direct costs incurred in the operation of the leased hotels, manachised and franchised hotels and consist of the following: | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Rents | 916,357 | 1,255,663 | 1,543,651 | |||||
Utilities | 215,768 | 273,314 | 323,837 | |||||
Personnel costs | 505,773 | 638,511 | 788,973 | |||||
Depreciation and amortization | 337,162 | 453,062 | 558,833 | |||||
Consumable, food and beverage | 333,245 | 391,715 | 454,795 | |||||
Others | 145,597 | 169,401 | 207,938 | |||||
Total | 2,453,902 | 3,181,666 | 3,878,027 | |||||
PREOPENING_EXPENSES
PRE-OPENING EXPENSES | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
PRE-OPENING EXPENSES | ||||||||
PRE-OPENING EXPENSES | 11.PRE-OPENING EXPENSES | |||||||
The Group expenses all costs incurred in connection with start-up activities, including pre-operating costs associated with new hotel facilities and costs incurred with the formation of the subsidiaries, such as organization costs. Pre-opening expenses primarily include rental expenses and employee costs incurred during the hotel pre-opening period. | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Rents | 191,538 | 186,656 | 163,155 | |||||
Personnel costs | 15,488 | 8,700 | 7,217 | |||||
Others | 23,664 | 15,928 | 15,953 | |||||
Total | 230,690 | 211,284 | 186,325 | |||||
SHAREBASED_COMPENSATION
SHARE-BASED COMPENSATION | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
SHARE-BASED COMPENSATION | ||||||||||
SHARE-BASED COMPENSATION | 12.SHARE-BASED COMPENSATION | |||||||||
In February 2007, the Group adopted the 2007 Global Share Plan which allows the Group to offer incentive awards to employees, officers, directors and consultants or advisors (the “Participants”). Under the 2007 Global Share Plan, the Group may issue incentive awards to the Participants to purchase not more than 10,000,000 ordinary shares. In June 2007, the Group adopted the 2008 Global Share Plan which allows the Group to offer incentive awards to Participants. Under the 2008 Global Share Plan, the Group may issue incentive awards to purchase up to 3,000,000 ordinary shares. In October 2008, the Group increased the maximum number of incentive awards available under the 2008 Global Share Plan to 7,000,000. In September 2009, the Group adopted the 2009 Share Incentive Plan which allows the Group to offer incentive awards to Participants. Under the 2009 Share Incentive Plan, the Group may issue incentive awards to purchase up to 3,000,000 ordinary shares. In July 2010, the Group increased the maximum number of incentive awards available under the 2009 Share Incentive Plan to 15,000,000. The 2007 and 2008 Global Share Plans and 2009 Share Incentive Plan (collectively, the “Incentive Award Plans”) contain the same terms and conditions. The incentive awards granted under the Incentive Award Plans typically have a maximum life of ten years and vest 50% on the second anniversary of the stated vesting commencement date with the remaining 50% vesting ratably over the following two years. As of December 31, 2014, the Group had granted 24,456,389 options and 5,613,738 nonvested restricted stocks. | ||||||||||
Share options | ||||||||||
In July 2012, the Group granted 1,475,366 options to executive officers that will vest 50% on the second anniversary of the stated vesting commencement date with the remaining 50% vesting ratably over the following two years and will become exercisable if the Group satisfies certain performance conditions for the three-year period ending December 31, 2014. The number of underlying shares that may become exercisable will range from 0% to 200% depending upon whether the performance conditions are achieved and, if achieved, to what level. The Group recognizes compensation expenses for the awards with performance conditions based upon the Group’s judgment of likely future performance and may be adjusted in future periods depending on actual performance. As of December 31, 2014, the Group has adjusted the number of options granted to 869,232 based on the actual performance. | ||||||||||
The weighted-average grant date fair value for options granted during the years ended December 31, 2012 and 2014 was RMB8.52 (US$1.35) and RMB15.79 (US$2.57), respectively, computed using the binomial option pricing model. The binomial model requires the input of subjective assumptions including the expected stock price volatility and the expected price multiple at which employees are likely to exercise stock options. The Group uses historical data to estimate forfeiture rate. Expected volatilities are based on the average volatility of the Group and comparable companies. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. | ||||||||||
The fair value of stock options was estimated using the following significant assumptions: | ||||||||||
2012 | 2014 | |||||||||
Suboptimal exercise factor | 7.45 to 7.66 | 4.4 | ||||||||
Risk-free interest rate | 0.81 to 1.19% | 1.89 to 1.99% | ||||||||
Volatility | 51.35 to 51.89% | 47.22 to 47.75% | ||||||||
Dividend yield | — | — | ||||||||
Life of option | 6 years | 6 years | ||||||||
The following table summarized the Group’s share option activity under the option plans: | ||||||||||
Number of | Weighted Average | Weighted Average | Aggregate Intrinsic | |||||||
Options | Exercise Price | Remaining | Value | |||||||
Contractual Life | ||||||||||
US$ | Years | US$’000 | ||||||||
Share options outstanding at January 1, 2014 | 6,825,784 | 2.12 | ||||||||
Granted | 319,480 | 5.48 | ||||||||
Adjustment based on actual performance | (606,134 | ) | 2.75 | |||||||
Forfeited | (26,128 | ) | 6.23 | |||||||
Exercised | (1,591,004 | ) | 2.14 | |||||||
Share options outstanding at December 31, 2014 | 4,921,998 | 2.23 | 4.01 | 21,344 | ||||||
Share options vested or expected to vest at December 31, 2014 | 4,842,378 | 2.2 | 4.04 | 21,153 | ||||||
Share options exercisable at December 31, 2014 | 3,827,558 | 1.9 | 4.03 | 17,873 | ||||||
As of December 31, 2014, there was RMB 10,515 in total unrecognized compensation expense related to unvested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 2.11 years. | ||||||||||
During the years ended December 31, 2012, 2013 and 2014, 1,889,872, 2,802,488 and 1,591,004 options were exercised having an aggregate intrinsic value of RMB32,562, RMB74,321 and RMB42,740, respectively. | ||||||||||
Nonvested restricted stocks | ||||||||||
The fair value of nonvested restricted stock with service conditions or performance conditions is based on the fair market value of the underlying ordinary shares on the date of grant. | ||||||||||
In July 2012, the Group granted 1,059,977 nonvested restricted stocks to executive officers which will become exercisable if the Group satisfies certain performance conditions for the three-year period ending December 31, 2014, and 213,209 nonvested restricted stocks to executive officers which will become exercisable if the Group satisfies certain market condition for the three-year period ending December 31, 2014. These awards vest 50% on the second anniversary of the stated vesting commencement date with the remaining 50% vesting ratably over the following two years. The number of underlying shares that may become exercisable will range from 0% to 200% depending upon whether the performance conditions and market condition are achieved and, if achieved, to what level. The Group recognizes compensation expense for the awards with performance conditions based upon the Group’s judgment of likely future performance and may be adjusted in future periods depending on actual performance. The Group estimated the grant date fair value of the awards with market conditions using a Monte Carlo simulation. Compensation expenses for the awards with market conditions are recognized during the requisite service period, even if the market condition is never satisfied. The significant assumptions of the Monte Carlo simulation are the following: | ||||||||||
2012 | ||||||||||
Expected dividends | — | |||||||||
Risk-free interest rate | 0.29 | % | ||||||||
Expected volatility | 48.41 | % | ||||||||
As of December 31, 2014, the Group adjusted the number of nonvested restricted stocks granted to executive officers to 1,557,408 based on the three year performance. | ||||||||||
The following table summarized the Group’s nonvested restricted stock activity in 2014. | ||||||||||
Number of restricted stocks | Weighted average grant date | |||||||||
fair value | ||||||||||
US$ | ||||||||||
Nonvested restricted stocks outstanding at January 1, 2014 | 3,637,956 | 3.33 | ||||||||
Granted | 1,167,100 | 6.11 | ||||||||
Adjustment based on actual performance | 284,222 | 2.75 | ||||||||
Forfeited | (298,818 | ) | 5.11 | |||||||
Vested | (1,553,220 | ) | 3.04 | |||||||
Nonvested restricted stocks outstanding at December 31, 2014 | 3,237,240 | 4.25 | ||||||||
As of December 31, 2014, there was RMB61,063 in unrecognized compensation costs, net of estimated forfeitures, related to unvested restricted stocks, which is expected to be recognized over a weighted-average period of 2.67 years. | ||||||||||
The total fair value of nonvested restricted stocks vested in 2013 and 2014 was RMB 7,089 and RMB59,475. | ||||||||||
EARNINGS_PER_SHARE
EARNINGS PER SHARE | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
EARNINGS PER SHARE | ||||||||
EARNINGS PER SHARE | 13.EARNINGS PER SHARE | |||||||
The following table sets forth the computation of basic and diluted earnings per share for the years indicated: | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Net income attributable to ordinary shareholders — basic | 174,887 | 279,858 | 307,348 | |||||
Net income attributable to ordinary shareholders — diluted | 174,887 | 279,858 | 307,348 | |||||
Weighted average ordinary shares outstanding — basic | 243,284,332 | 245,187,348 | 248,957,645 | |||||
Incremental weighted-average ordinary shares from assumed exercise of share options and nonvested restricted stocks using the treasury stock method | 3,696,669 | 4,298,936 | 4,046,559 | |||||
Weighted average ordinary shares outstanding — diluted | 246,981,001 | 249,486,284 | 253,004,204 | |||||
Basic earnings per share | 0.72 | 1.14 | 1.23 | |||||
Diluted earnings per share | 0.71 | 1.12 | 1.21 | |||||
For the years ended December 31, 2012, 2013 and 2014, the Group had securities which could potentially dilute basic earnings per share in the future, but which were excluded from the computation of diluted earnings per share as their effects would have been anti-dilutive. Such outstanding securities consist of the following: | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Outstanding employee options and nonvested restricted stocks | 797,981 | — | 293,512 | |||||
INCOME_TAXES
INCOME TAXES | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
INCOME TAXES | ||||||||
INCOME TAXES | 14.INCOME TAXES | |||||||
Cayman Islands | ||||||||
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. | ||||||||
Hong Kong | ||||||||
China Lodging Holdings (HK) Limited and Starway Hotels (HongKong) Limited are subject to Hong Kong profit tax at a rate of 16.5% in 2012, 2013 and 2014. No Hong Kong profit tax has been provided as the Group has not had assessable profit that was earned in or derived from Hong Kong during the years presented. | ||||||||
Singapore | ||||||||
China Lodging Holdings Singapore Pte. Ltd. is subject to Singapore corporate income tax at a rate of 17% in 2012, 2013 and 2014. No Singapore profit tax has been provided as the Group has not had assessable profit that was earned in or derived from Singapore during the years presented. | ||||||||
PRC | ||||||||
Under the Law of the People’s Republic of China on Enterprise Income Tax (“EIT Law”), which was effective from January 1, 2008, domestically-owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%. | ||||||||
Hanting Technology (Suzhou) Co., Ltd, as a recognized software development entity located at Suzhou Industrial Park in Suzhou of PRC, is entitled to a two-year exemption and three-year 50% reduction starting from the first profit making year after absorbing all prior years’ tax losses. Hanting Suzhou has entered into the first tax profitable year for the year ended December 31, 2011. | ||||||||
Tax expense (benefit) is comprised of the following: | ||||||||
As of December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Current Tax | 72,395 | 127,439 | 155,496 | |||||
Deferred Tax | (18,226 | ) | (22,619 | ) | (42,391 | ) | ||
Total | 54,169 | 104,820 | 113,105 | |||||
A reconciliation between the effective income tax rate and the PRC statutory income tax rate is as follows: | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
PRC statutory tax rate | 25 | % | 25 | % | 25 | % | ||
Tax effect of other expenses that are not deductible in determining taxable profit | 3 | % | 3 | % | 2 | % | ||
Effect of different tax rate of group entities operating in other jurisdictions | 1 | % | (1 | )% | — | |||
Effect of change in valuation allowance | 6 | % | 3 | % | 3 | % | ||
Effect of tax holiday | (12 | )% | (3 | )% | (3 | )% | ||
Effective tax rate | 23 | % | 27 | % | 27 | % | ||
The aggregate amount and per share effect of the tax holidays are as follows: | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Aggregate amount | 28,139 | 12,721 | 9,131 | |||||
Per share effect—basic | 0.12 | 0.05 | 0.04 | |||||
Per share effect—diluted | 0.11 | 0.05 | 0.04 | |||||
The principal components of the Group’s deferred income tax assets and liabilities as of December 31, 2013 and 2014 are as follows: | ||||||||
As of December 31, | ||||||||
2013 | 2014 | |||||||
Deferred tax assets: | ||||||||
Net loss carryforward | 90,983 | 113,333 | ||||||
Pre-opening expenses | 393 | 306 | ||||||
Deferred revenue | 48,960 | 62,977 | ||||||
Deferred rent | 5,450 | 4,684 | ||||||
Unfavorable lease | 3,698 | 8,759 | ||||||
Bad debt provision | 1,892 | 1,494 | ||||||
Accrual for customer loyalty program | 3,765 | 17,869 | ||||||
Accrued payroll | 2,001 | 2,462 | ||||||
Other accrued expenses | — | 4,457 | ||||||
Share-based compensation | 12,267 | 9,745 | ||||||
Others | 1,354 | 278 | ||||||
Valuation allowance | (51,596 | ) | (62,868 | ) | ||||
Total deferred tax assets | 119,167 | 163,496 | ||||||
Deferred tax liabilities: | ||||||||
Favorable lease | 24,340 | 23,545 | ||||||
Capitalized interest | 1,601 | 4,410 | ||||||
Fair market value for investment | — | 9,485 | ||||||
Others | 281 | 1,039 | ||||||
Total deferred tax liabilities | 26,222 | 38,479 | ||||||
Deferred tax assets are analyzed as: | ||||||||
Current | 51,759 | 80,026 | ||||||
Non-Current | 67,408 | 83,470 | ||||||
119,167 | 163,496 | |||||||
Deferred tax liabilities are analyzed as: | ||||||||
Current | 151 | 701 | ||||||
Non-current | 26,071 | 37,778 | ||||||
26,222 | 38,479 | |||||||
For the years ended December 31, 2013 and 2014, valuation allowance of RMB22,158 and RMB29,693 were provided, respectively, and RMB9,984 and RMB18,421 were reversed, respectively. The additional valuation allowance of RMB3,139 was due to the acquisitions for the year ended December 31, 2013. The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, the Group’s experience with tax attributes expiring unused and tax planning alternatives. Valuation allowances have been established for deferred tax assets based on a more likely than not threshold. The Group’s ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carryforward periods provided for in the tax law. | ||||||||
As of December 31, 2014, the Group had tax loss carryforwards of RMB453,332 which will expire between 2015 and 2019 if not used. | ||||||||
The Group determines whether or not a tax position is “more-likely-than-not” of being sustained upon audit based solely on the technical merits of the position. At December 31, 2013 and 2014, the Group had recorded uncertain tax benefits of approximately RMB7,122 and RMB8,345 associated with the interests on intercompany loans, respectively. No interest or penalty expense was recorded for the years ended December 31, 2012, 2013 and 2014.The Group does not anticipate any significant changes to its liability for unrecognized tax benefits within the next 12 months. | ||||||||
The following table is a roll-forward of the unrecognized tax benefits: | ||||||||
As of December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Balance at January 1 | 1,494 | 4,148 | 7,122 | |||||
Addition for tax positions | 2,654 | 2,974 | 1,223 | |||||
Balance at December 31 | 4,148 | 7,122 | 8,345 | |||||
In accordance with the EIT Law, dividends, which arise from profits of foreign invested enterprises (“FIEs”) earned after January 1, 2008, are subject to a 10% withholding income tax. A lower withholding tax rate may be applied if there is a favorable tax treaty between mainland China and the jurisdiction of the foreign holding company. For example, holding companies in Hong Kong that are also tax residents in Hong Kong are eligible for a 5% withholding tax on dividends under the Tax Memorandum between China and the Hong Kong Special Administrative Region if the holding company is the beneficial owner of the dividends. Under applicable accounting principles, a deferred tax liability should be recorded for taxable temporary differences attributable to the excess of financial reporting basis over tax basis in a domestic subsidiary. The cumulated undistributed earnings of the Group’s PRC subsidiaries were RMB806,564 as of December 31, 2014. The Group intends to indefinitely reinvest the undistributed earnings of the Group’s PRC subsidiaries, therefore, no provision for PRC dividend withholding tax was provided. | ||||||||
According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of income taxes is due to computational errors made by the taxpayer. The statute of limitations will be extended to five years under special circumstances, which are not clearly defined, but an underpayment of income tax liability exceeding RMB100 is specifically listed as a special circumstance. In the case of a transfer pricing related adjustment, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. The Group’s PRC subsidiaries are therefore subject to examination by the PRC tax authorities from 2010 through 2014 on non-transfer pricing matters, and from the inception of the Group through 2014 on transfer pricing matters. | ||||||||
MAINLAND_CHINA_CONTRIBUTION_PL
MAINLAND CHINA CONTRIBUTION PLAN | 12 Months Ended |
Dec. 31, 2014 | |
MAINLAND CHINA CONTRIBUTION PLAN | |
MAINLAND CHINA CONTRIBUTION PLAN | 15.MAINLAND CHINA CONTRIBUTION PLAN |
Full time employees of the Group in the PRC participate in a government-mandated defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Group to accrue for these benefits based on a certain percentage of the employees’ salaries. The total contribution for such employee benefits were RMB93,178, RMB119,015 and RMB143,419 for the years ended December 31, 2012, 2013 and 2014, respectively. The Group has no ongoing obligation to its employees subsequent to its contributions to the PRC plan. | |
RESTRICTED_NET_ASSETS
RESTRICTED NET ASSETS | 12 Months Ended |
Dec. 31, 2014 | |
RESTRICTED NET ASSETS | |
RESTRICTED NET ASSETS | 16.RESTRICTED NET ASSETS |
Pursuant to laws applicable to entities incorporated in the PRC, the subsidiaries of the Group in the PRC must make appropriations from after-tax profit to non-distributable reserve funds. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires annual appropriation of 10% of after tax profit (as determined under accounting principles generally accepted in the PRC at each year-end) until the accumulative amount of such reserve fund reaches 50% of their registered capital; the other fund appropriations are at the subsidiaries’ discretion. These reserve funds can only be used for specific purposes of offsetting future losses, enterprise expansion and staff bonus and welfare and are not distributable as cash dividends and amounted to RMB49,626, RMB64,957 and RMB105,604 as of December 31 2012, 2013 and 2014, respectively. In addition, due to restrictions on the distribution of share capital from the Company’s PRC subsidiaries, the PRC subsidiaries share capital of RMB2,075,975 at December 31, 2014 is considered restricted. As a result of these PRC laws and regulations, as of December 31, 2014, approximately RMB2,181,579 is not available for distribution to the Company by its PRC subsidiaries in the form of dividends, loans or advances. | |
RELATED_PARTY_TRANSACTIONS_AND
RELATED PARTY TRANSACTIONS AND BALANCES | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
RELATED PARTY TRANSACTIONS AND BALANCES | ||||||||
RELATED PARTY TRANSACTIONS AND BALANCES | 17.RELATED PARTY TRANSACTIONS AND BALANCES | |||||||
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. | ||||||||
The following entities are considered to be related parties to the Group. The related parties only act as service providers, service recipients and lessors to the Group and there is no other relationship wherein the Group has the ability to exercise significant influence over the operating and financial policies of these parties. The Group is not obligated to provide any type of financial support to these related parties. | ||||||||
Related Party | Nature of the Party | Relationship with the Group | ||||||
Ctrip.com International, Ltd. (“Ctrip”) | Online travel services provider | Mr. Qi Ji is a director | ||||||
UBOX International Holdings Co Limited (“UBOX”) | Vending machine operator | Mr. Qi Ji is a director | ||||||
Lijiang Yibang Changchunteng Hotel Co Limited (“Yibang”) | Hotel | Joint venture of the Group | ||||||
Sheen Star Group Limited (“Sheen Star”)* | Investment holding company | Investee of the Group, controlled by Mr. Qi Ji | ||||||
*Sheen Star was established in April 2014 by Mr. Qi Ji, the Group and a third party whereby the Group owns equity interest of 19.99%, and Mr. Qi Ji owns 50.01%. | ||||||||
(a)Related party balances | ||||||||
Amounts due from related parties were comprised of the interest receivables derived from convertible bonds purchased in August, 2013 and service fee receivables from UBOX and shareholder loan to Yibang. | ||||||||
As of December 31, | ||||||||
2013 | 2014 | |||||||
UBOX | 256 | — | ||||||
Yibang | 402 | 16,293 | ||||||
Total | 658 | 16,293 | ||||||
Amounts due to a related party were comprised of commissions payable for reservation services and Starway acquisition payable to Ctrip. The commissions payable for reservation services were interest free and payable upon demand and the Starway acquisition payable was to be paid in the next two years. | ||||||||
As of December 31, | ||||||||
2013 | 2014 | |||||||
Ctrip | ||||||||
-Payables for hotel reservation services | 1,510 | 2,319 | ||||||
- Payables for Starway acquisition | 12,250 | 8,167 | ||||||
13,760 | 10,486 | |||||||
(b)Related party transactions | ||||||||
During the years ended December 31, 2012, 2013 and 2014, related party transactions consisted of the following: | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Commission expenses — Ctrip | 10,945 | 17,128 | 19,235 | |||||
Service fee — UBOX | — | 847 | 392 | |||||
Interest income — UBOX | — | 1,373 | 541 | |||||
Service fee — Yibang | — | 199 | 527 | |||||
In May 2012, the Group acquired a 51% equity interest of Starway Hotels (Hong Kong) Limited from C-Travel, a wholly-owned subsidiary of Ctrip. The acquisition price was RMB17,292 in cash. In December 2013, the Group acquired the remaining 49% equity interest at the consideration of RMB16,460. | ||||||||
In December 2012, the Group purchased convertible promissory note of RMB8,074 from UBOX. In December 2013, the Group converted the principal of promissory note to 8,530,731ordinary shares of UBOX. In August 2013, the Group purchased another convertible promissory note of RMB4,314 from UBOX. For the year ended December 31, 2014, the Group converted the convertible note to 3,946,897 ordinary shares of UBOX. | ||||||||
The Group transferred its investment in Kangdu to Sheen Star for consideration of RMB82,785, and its rights and obligations associated with the property purchase agreement was transferred to Sheen Star contemporaneously. | ||||||||
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended | |||
Dec. 31, 2014 | ||||
COMMITMENTS AND CONTINGENCIES | ||||
COMMITMENTS AND CONTINGENCIES | 18.COMMITMENTS AND CONTINGENCIES | |||
(a)Operating lease commitments | ||||
The Group has entered into lease agreements for certain hotels which it operates. Such leases are classified as operating leases. | ||||
Future minimum lease payments under non-cancellable operating lease agreements at December 31, 2014 were as follows: | ||||
Year Ending December 31, | ||||
2015 | 1,791,198 | |||
2016 | 1,845,430 | |||
2017 | 1,836,051 | |||
2018 | 1,792,665 | |||
2019 | 1,752,800 | |||
Thereafter | 11,206,521 | |||
Total | 20,224,665 | |||
(b)Purchase Commitments | ||||
As of December 31, 2014, the Group’s commitments related to leasehold improvements and installation of equipment for hotel operations was RMB114,649, which is expected to be incurred within one year. | ||||
(c)Contingencies | ||||
The Group is subject to periodic legal or administrative proceedings in the ordinary course of our business. The Group does not believe that any currently pending legal or administrative proceeding to which the Group is a party will have a material adverse effect on the financial statements. | ||||
SUBSEQUENT_EVENT
SUBSEQUENT EVENT | 12 Months Ended |
Dec. 31, 2014 | |
Subsequent event | |
Subsequent event | 19. SUBSEQUENT EVENT |
On December 14, 2014, the Group entered into binding documents with Accor S.A. (“Accor”) to join forces in the Pan-China region to develop Accor brands and to form an extensive and long-term alliance. Pursuant to the transaction, Accor’s economy and midscale platform will become part of the Group’s network. Brands under this platform include Grand Mercure, Novotel, Mercure, Ibis and Ibis Styles (collectively, the “MEB portfolio”), for which the Group receives the exclusive rights as a master franchisee in mainland China, Taiwan region and Mongolia. Accor will continue to lead in the operations and development of the luxury and upscale brands such as Sofitel, Pullman, M Gallery and The Sebel (collectively, the “LUB portfolio”), for which the Group will become a minority shareholder in the Pan-China region. Under the arrangement, the Group will issue up to 10% of its ordinary shares outstanding after issuance to Accor as the consideration. Closing of the transaction is conditional upon the completion of certain corporation restructure, receipt of antitrust approvals, which the Group has obtained in March 2015, and other customary closing conditions. | |
SCHEDULE_I_FINANCIAL_INFORMATI
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY | ||||||||||
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY | ||||||||||
ADDITIONAL FINANCIAL INFORMATION — FINANCIAL STATEMENTS SCHEDULE I | ||||||||||
CHINA LODGING GROUP, LIMITED | ||||||||||
FINANCIAL INFORMATION FOR PARENT COMPANY | ||||||||||
BALANCE SHEETS | ||||||||||
(Renminbi in thousands, except share data and per share data, unless otherwise stated) | ||||||||||
As of December 31, | ||||||||||
2013 | 2014 | 2014 | ||||||||
US$’000 | ||||||||||
(Note 2) | ||||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | 61,182 | 94,749 | 15,271 | |||||||
Other current assets | 3,639 | 4,185 | 675 | |||||||
Total current assets | 64,821 | 98,934 | 15,946 | |||||||
Other assets | 314 | 157 | 25 | |||||||
Investment in subsidiaries | 2,760,330 | 3,131,189 | 504,656 | |||||||
Total assets | 2,825,465 | 3,230,280 | 520,627 | |||||||
Liabilities and equity | ||||||||||
Current liabilities: | ||||||||||
Salary and welfare payable | — | 111 | 18 | |||||||
Deferred revenue | 1,451 | 364 | 59 | |||||||
Accrued expenses and other current liabilities | 7,898 | 12,841 | 2,069 | |||||||
Total current liabilities | 9,349 | 13,316 | 2,146 | |||||||
Deferred revenue | 363 | — | — | |||||||
Total liabilities | 9,712 | 13,316 | 2,146 | |||||||
Equity: | ||||||||||
Ordinary shares(US$0.0001 par value per share; 8,000,000,000 shares authorized; 247,551,999 and 250,747,255 shares issued and outstanding as of December 31, 2013 and 2014, respectively) | 182 | 184 | 30 | |||||||
Additional paid-in capital | 2,315,083 | 2,381,568 | 383,839 | |||||||
Retained earnings | 539,872 | 847,220 | 136,547 | |||||||
Accumulated other comprehensive loss | (39,384 | ) | (12,008 | ) | (1,935 | ) | ||||
Total equity | 2,815,753 | 3,216,964 | 518,481 | |||||||
Total liabilities and equity | 2,825,465 | 3,230,280 | 520,627 | |||||||
STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||
(Renminbi in thousands, unless otherwise stated) | ||||||||||
Year Ended December 31, | ||||||||||
2012 | 2013 | 2014 | 2014 | |||||||
US$’000 | ||||||||||
(Note 2) | ||||||||||
Operating costs and expenses: | ||||||||||
Selling and marketing expenses | 157 | 157 | 157 | 25 | ||||||
General and administrative expenses | 24,902 | 33,308 | 35,434 | 5,711 | ||||||
Total operating costs and expenses | 25,059 | 33,465 | 35,591 | 5,736 | ||||||
Loss from operations | (25,059 | ) | (33,465 | ) | (35,591 | ) | (5,736 | ) | ||
Interest income | 131 | 6 | 75 | 12 | ||||||
Foreign exchange loss | (141 | ) | — | — | — | |||||
Other income, net | 2,208 | 2,438 | 2,419 | 390 | ||||||
Income in investment in subsidiaries | 197,748 | 310,879 | 340,445 | 54,870 | ||||||
Net income attributable to China Lodging Group, Limited | 174,887 | 279,858 | 307,348 | 49,536 | ||||||
Other comprehensive income | ||||||||||
Unrealized securities holding gains , net of tax of nil, nil and 9,485 for 2012, 2013 and 2014 | — | — | 28,458 | 4,587 | ||||||
Foreign currency translation adjustments, net of tax of nil for 2012, 2013 and 2014 | 758 | (976 | ) | (1,082 | ) | (175 | ) | |||
Comprehensive income | 175,645 | 278,882 | 334,724 | 53,948 | ||||||
STATEMENTS OF CASH FLOWS | ||||||||||
(Renminbi in thousands, unless otherwise stated) | ||||||||||
Year Ended December 31, | ||||||||||
2012 | 2013 | 2014 | 2014 | |||||||
US$’000 | ||||||||||
(Note 2) | ||||||||||
Operating activities: | ||||||||||
Net income | 174,887 | 279,858 | 307,348 | 49,536 | ||||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||||
Share-based compensation | 20,837 | 30,468 | 31,937 | 5,147 | ||||||
Income in investment in subsidiaries | (197,748 | ) | (310,879 | ) | (340,445 | ) | (54,870 | ) | ||
Changes in operating assets and liabilities: | ||||||||||
Deferred revenue | (1,508 | ) | (1,552 | ) | (1,450 | ) | (234 | ) | ||
Other current assets | (2,412 | ) | 915 | 1,477 | 238 | |||||
Salary and welfare payable | — | — | 111 | 18 | ||||||
Accrued expenses and other current liabilities | 840 | 7,058 | 4,943 | 797 | ||||||
Net cash provided by (used in) operating activities | (5,104 | ) | 5,868 | 3,921 | 632 | |||||
Investing activities: | ||||||||||
Investment in subsidiaries | (35,227 | ) | — | — | — | |||||
Receipt of investment in subsidiaries | — | 12,320 | 8,876 | 1,431 | ||||||
Net cash provided by (used in) investing activities | (35,227 | ) | 12,320 | 8,876 | 1,431 | |||||
Financing activities: | ||||||||||
Net proceeds from issuance of ordinary shares upon exercise of option | 18,520 | 28,122 | 20,985 | 3,382 | ||||||
Net cash provided by financing activities | 18,520 | 28,122 | 20,985 | 3,382 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (305 | ) | (8,081 | ) | (215 | ) | (35 | ) | ||
Net increase(decrease) in cash and cash equivalents | (22,116 | ) | 38,229 | 33,567 | 5,410 | |||||
Cash and cash equivalents at the beginning of the year | 45,069 | 22,953 | 61,182 | 9,861 | ||||||
Cash and cash equivalents at the end of the year | 22,953 | 61,182 | 94,749 | 15,271 | ||||||
Supplemental schedule of non-cash investing and financing activities: | ||||||||||
Proceeds from issuance of ordinary shares upon exercise of option included in receivables | 290 | 1,318 | 1,185 | 191 | ||||||
The accompanying notes are an integral part of these consolidated financial statements | ||||||||||
ADDITIONAL FINANCIAL INFORMATION — FINANCIAL STATEMENTS SCHEDULE I | ||||||||||
CHINA LODGING GROUP, LIMITED | ||||||||||
FINANCIAL INFORMATION FOR PARENT COMPANY | ||||||||||
Note to Schedule I | ||||||||||
Schedule I has been provided pursuant to the requirements of Rule 12-04(a) and 5-04-(c) of Regulation S-X, which require condensed financial information as to the financial position, change in financial position and results of operations of a parent company as of the same dates and for the same periods for which audited consolidated financial statements have been presented when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. | ||||||||||
The condensed financial information has been prepared using the same accounting policies as set out in the accompanying consolidated financial statements except that the equity method has been used to account for investments in its subsidiaries. Such investments in subsidiaries are presented on the balance sheets as investment in subsidiaries and the profit of the subsidiaries is presented as income in investment in subsidiaries. | ||||||||||
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The footnote disclosures contain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the accompanying consolidated financial statements. | ||||||||||
As of December 31, 2014, there are no material contingencies, mandatory dividend, significant provision of long-term obligation or guarantee of the Company, except for those which have separately disclosed in the consolidated financial statements. | ||||||||||
SCHEDULE_II_VALUATION_AND_QUAL
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS | ||||||||||||||
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS | ||||||||||||||
ADDITION INFORMATION — FINANCIAL STATEMENTS SCHEDULE II | ||||||||||||||
CHINA LODGING GROUP, LIMITED | ||||||||||||||
This financial information has been prepared in conformity with accounting principles generally accepted in the United States. | ||||||||||||||
VALUATION AND QUALIFYING ACCOUNTS | ||||||||||||||
Balance at | Charge to Costs and | Addition due to | Charge Taken | Write off | Balance at | |||||||||
Beginning of | Expenses | acquisition | Against Allowance | end of Year | ||||||||||
Year | ||||||||||||||
(Renminbi in thousands) | ||||||||||||||
Allowance for doubtful accounts of accounts receivables and other receivables: | ||||||||||||||
December 31, 2012 | 2,945 | 1,238 | — | — | (1,000 | ) | 3,183 | |||||||
December 31, 2013 | 3,183 | 4,573 | — | — | — | 7,756 | ||||||||
December 31, 2014 | 7,756 | 4,770 | — | — | (6,049 | ) | 6,477 | |||||||
Valuation allowance for deferred tax assets | ||||||||||||||
December 31, 2012 | 21,552 | 18,792 | 1,597 | (5,658 | ) | — | 36,283 | |||||||
December 31, 2013 | 36,283 | 22,158 | 3,139 | (9,984 | ) | — | 51,596 | |||||||
December 31, 2014 | 51,596 | 29,693 | — | (18,421 | ) | — | 62,868 | |||||||
SUMMARY_OF_PRINCIPAL_ACCOUNTIN1
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Policies) | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | ||||||||||||||
Basis of presentation | ||||||||||||||
Basis of presentation | ||||||||||||||
The consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”). | ||||||||||||||
Basis of consolidation | Basis of consolidation | |||||||||||||
The consolidated financial statements include the financial statements of the Company and its majority-owned subsidiaries. All significant intercompany transactions and balances are eliminated on consolidation. | ||||||||||||||
The Group evaluates the need to consolidate certain variable interest entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. | ||||||||||||||
The Group is deemed as the primary beneficiary of and consolidates variable interest entities when the Group has the power to direct the activities that most significantly impact the economic success of the entities and effectively assumes the obligation to absorb losses and has the rights to receive benefits that are potentially significant to the entities. | ||||||||||||||
The Group evaluates its business activities and arrangements with the entities that operate the manachised and franchised hotels to identify potential variable interest entities. Generally, these entities qualify for the business scope exception, therefore consolidation is not appropriate under the variable interest entity consolidation guidance. | ||||||||||||||
Use of estimates | Use of estimates | |||||||||||||
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets, long lived assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group’s consolidated financial statements include the useful lives and impairment of property and equipment and intangible assets, valuation allowance of deferred tax assets, impairment of goodwill, share-based compensation and costs related to its customer loyalty program. | ||||||||||||||
Cash and cash equivalents | Cash and cash equivalents | |||||||||||||
Cash and cash equivalents consist of cash on hand and demand deposits, which are unrestricted as to withdrawal and use, and which have original maturities of three months or less when purchased. | ||||||||||||||
Restricted cash | Restricted cash | |||||||||||||
Restricted cash represents bank demand deposits collateralized for certain newly established subsidiaries pending capital verification procedures of relevant PRC government authority and deposits used as security against borrowings. The capital verification approval process typically takes between three to six months. | ||||||||||||||
Short-term investments | Short-term investments | |||||||||||||
Short-term investments represent held-to-maturity securities and are measured at amortized cost in the consolidated balance sheets. The Group classifies investments with maturities of more than three months and less than 12 months as short-term investments. | ||||||||||||||
Accounts receivable, net of allowance | Accounts receivable, net of allowance | |||||||||||||
Trade receivables mainly consist of franchise fee receivables, amounts due from corporate customers, travel agents, hotel guests and credit card receivables, which are recognized and carried at the original invoice amount less an allowance for doubtful accounts. The Group establishes an allowance for doubtful accounts primarily based on the age of the receivables and factors surrounding the credit risk of specific customers. | ||||||||||||||
Inventories | Inventories | |||||||||||||
Inventories mainly consist of small appliances, bedding and daily consumables. Small appliances and bedding for new hotels opened are stated at cost, less accumulated amortization, and are amortized over their estimated useful lives, generally one year, from the time they are put into use. Daily consumables and beddings replacement are expensed when used. | ||||||||||||||
Property and equipment, net | Property and equipment, net | |||||||||||||
Property and equipment, net are stated at cost less accumulated depreciation and amortization. The renovations, betterments and interest cost incurred during construction are capitalized. Depreciation and amortization of property and equipment is provided using the straight line method over their expected useful lives. The expected useful lives are as follows: | ||||||||||||||
Leasehold improvements | Shorter of the lease term or their estimated useful lives | |||||||||||||
Buildings | 40 years | |||||||||||||
Furniture, fixtures and equipment | 3-5 years | |||||||||||||
Motor vehicles | 5 years | |||||||||||||
Construction in progress represents leasehold improvements under construction or being installed and is stated at cost. Cost comprises original cost of property and equipment, installation, construction and other direct costs. Construction in progress is transferred to leasehold improvements and depreciation commences when the asset is ready for its intended use. | ||||||||||||||
Expenditures for repairs and maintenance are expensed as incurred. Gain or loss on disposal of property and equipment, if any, is recognized in the consolidated statements of comprehensive income as the difference between the net sales proceeds and the carrying amount of the underlying asset. | ||||||||||||||
Intangible assets, net and unfavorable lease | Intangible assets, net and unfavorable lease | |||||||||||||
Intangible assets consist primarily of brand name, non-compete agreements, franchise agreements and favorable leases acquired in business combinations and purchased software. Intangible assets acquired through business combinations are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Intangible assets, including brand name, non-compete agreements, franchise agreements and favorable lease agreements acquired from business combination are recognized and measured at fair value upon acquisition. Non-compete agreements, franchise agreements and favorable lease agreements are amortized over the expected useful life, remaining franchise contract terms and remaining operating lease terms. Unfavorable lease agreements from business combination transactions are recognized as other long-term liabilities and are amortized over the remaining operating lease terms. Purchased software is stated at cost less accumulated amortization. | ||||||||||||||
Brand name is considered to have an indefinite life. The Group evaluates the brand name each reporting period to determine whether events and circumstances continue to support an indefinite useful life. Impairment is tested annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group measures the impairment by comparing the fair value of brand name with its carrying amount. If the carrying amount of brand name exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. The Group measured the fair value of the brand name under the relief-from-royalty method. Management performs its annual brand name impairment test on November 30. | ||||||||||||||
Long-term investments | Long-term investments | |||||||||||||
Long-term investments include cost-method investment, equity-method investment, available-for-sale securities and held-to-maturity securities. | ||||||||||||||
The Group accounts for the investment in an investee of which the Group owns less than 20% of the voting securities and does not have the ability to exercise significant influence over operating and financial policies of the entity as cost-method investment. The Group’s cost-method investment is carried at historical cost in its consolidated financial statements and measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the consolidated statements of comprehensive income equal to the excess of the investment’s cost over its fair value when the impairment is deemed other-than-temporary. | ||||||||||||||
The Group accounts for the investment in joint venture under equity-method accounting. Under this method, the Group’s pro rata share of income (loss) from investment is recognized in the consolidated statements of comprehensive income. Dividends received reduce the carrying amount of the investment. Equity-method investment is reviewed for impairment by assessing if the decline in market value of the investment below the carrying value is other-than-temporary. In making this determination, factors are evaluated in determining whether a loss in value should be recognized. These include consideration of the intent and ability of the Group to hold investment and the ability of the investee to sustain an earnings capacity, justifying the carrying amount of the investment. Impairment losses are recognized in other expense when a decline in value is deemed to be other-than-temporary. | ||||||||||||||
Investments in securities that have readily determinable fair values are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses recorded as a component of other comprehensive income or loss. Realized gains or losses are recognized in the consolidated statements of comprehensive income during the period in which the gains or losses are realized. If the Group determines that a decline in the fair value of the individual available-for-sale security is other-than-temporary, the cost basis of the security is written down to the fair value as a new cost basis and the amount of the write-down is accounted for as a realized loss. The new cost basis will not be changed for subsequent recoveries in fair value. The Group reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to: (1) the nature of the investment; (2) the cause and duration of the impairment; (3) the extent to which fair value is less than cost; (4) financial conditions and near term prospects of the issuers; and (5) the Group’s ability to hold the security for a period of time sufficient to allow for any anticipated recovery of its amortized cost or fair value. Available-for-sale securities not expected to be realized in cash or sold in the next normal operating cycle of the business are classified as long-term investments. | ||||||||||||||
Held-to-maturity securities are recorded in amortized cost. | ||||||||||||||
No event had occurred that indicated that an other-than-temporary impairment existed and therefore the Group did not record any impairment charges for these investments during 2012, 2013 or 2014. | ||||||||||||||
Impairment of long-lived assets | Impairment of long-lived assets | |||||||||||||
The Group evaluates its long-lived assets and finite lived intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When these events occur, the Group measures impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group recognizes an impairment loss equal to the difference between the carrying amount and fair value of these assets. | ||||||||||||||
The Group performed a recoverability test of its long-lived assets associated with certain hotels due to the continue underperformance relative to the projected operating results, of which the carrying amount of the property and equipment exceed the future undiscounted net cash flows, and recognized an impairment loss of RMB5,349, RMB7,965 and RMB27,203 during the year ended December 31, 2012, 2013 and 2014, respectively. | ||||||||||||||
Fair value of the property and equipment was determined by the Group based on the income approach using the discounted cash flow associated with the underlying assets, which incorporated certain assumptions including projected hotels’ revenue, growth rates and projected operating costs based on current economic condition, expectation of management and projected trends of current operating results. | ||||||||||||||
Goodwill | Goodwill | |||||||||||||
Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable assets less liabilities acquired. | ||||||||||||||
Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. The Group completes a two-step goodwill impairment test. The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. Management performs its annual goodwill impairment test on November 30. | ||||||||||||||
The Group recognized goodwill impairment of nil, nil and RMB188 for years ended December 31, 2012, 2013 and 2014, respectively. | ||||||||||||||
Accruals for customer loyalty program | Accruals for customer loyalty program | |||||||||||||
The Group invites its customers to participate in a customer loyalty program. The membership has an unlimited life. Members enjoy favorable treatment such as more convenient check-out procedures and late check-out, discounts on room rates and accumulate membership points for their paid stays, which can be redeemed for room night awards and other gifts within two years after the points are earned. The estimated incremental costs to provide room night awards and other gifts are accrued and recorded as accruals for customer loyalty program as members accumulate points and are recognized as cost and expense in the accompanying consolidated statements of comprehensive income. As members redeem awards or their entitlements expire, the provision is reduced correspondingly. As of December 31, 2013 and 2014, the accruals for estimated liabilities under the customer loyalty program amounted to RMB15,061 and RMB71,475, respectively. | ||||||||||||||
Deferred revenue | Deferred revenue | |||||||||||||
Deferred revenue generally consists of non-refundable advances received from customers for rental of rooms, cash received for membership fees and initial franchise fees received prior to the Group fulfilling its commitments to the franchisees. | ||||||||||||||
Revenue recognition | Revenue recognition | |||||||||||||
Revenue from leased hotels is derived from hotel operations, mainly including the rental of rooms, food and beverage sales and souvenir sales. Revenue is recognized when rooms are occupied and food and beverages and souvenirs are sold. | ||||||||||||||
Revenues from manachised and franchised hotels are derived from franchise agreements where the franchisees are primarily required to pay (i) an initial one-time franchise fee, and (ii) continuing franchise fees, which mainly consist of (a) on-going management and service fees mainly based on a certain percentage of the room revenues of the franchised hotels, and (b) system maintenance, support fees and central reservation system usage fees. The one-time franchise fee is recognized when the manachised and franchised hotel opens for business, the fee becomes non-refundable, and the Group has fulfilled all its commitments and obligations, including the assistance to the franchisees in property design, leasehold improvement construction project management, systems installation and personnel recruiting and training. The ongoing management and service fees are recognized when the underlying service revenue is recognized by the franchisees’ operations. The system maintenance, support fee and central reservation system usage fee is recognized over the period when services are provided. | ||||||||||||||
In addition, the Group accounts for hotel manager fees related to the manachised hotels under the franchise program as revenues. Pursuant to the franchise agreements, the Group charges the franchisees fixed hotel manager fees to cover the manachised hotel managers’ payroll, social welfare benefits and certain other out-of-pocket expenses that the Group incurs on behalf of the manachised hotels. The hotel manager fee is recognized as revenue monthly. During the years ended December 31, 2012, 2013 and 2014, the hotel manager fees that were recognized as revenue were RMB72,061, RMB116,885 and RMB166,572, respectively. | ||||||||||||||
Membership fees from the Group’s customer loyalty program are earned and recognized on a straight-line basis over the expected membership duration of the different membership levels. Such duration is estimated based on the Group’s and management’s experience and is adjusted on a periodic basis to reflect changes in membership retention. The membership duration is estimated to be two to five years which reflects the expected membership retention. Revenues recognized from the customer loyalty program were RMB51,132, RMB74,715 and RMB107,737 for the years ended December 31, 2012, 2013 and 2014, respectively. | ||||||||||||||
Business tax and related taxes | Business tax and related taxes | |||||||||||||
The Group is subject to business tax, education surtax and urban maintenance and construction tax, on the services provided in the PRC. Such taxes are primarily levied based on revenue at applicable rates and are recorded as a reduction of revenues. | ||||||||||||||
Advertising and promotional expenses | Advertising and promotional expenses | |||||||||||||
Advertising related expenses, including promotion expenses and production costs of marketing materials, are charged to the consolidated statements of comprehensive income as incurred, and amounted to RMB30,053, RMB43,807 and RMB79,806 for the years ended December 31, 2012, 2013 and 2014, respectively. | ||||||||||||||
Government grants | Government grants | |||||||||||||
Unrestricted government subsidies from local governmental agencies allowing the Group full discretion to utilize the funds were RMB6,723, RMB17,016 and RMB19,657 for the years ended December 31, 2012, 2013 and 2014, respectively, which were recorded as other operating income. | ||||||||||||||
Leases | Leases | |||||||||||||
A lease of which substantially all the benefits and risks incidental to ownership remain with the lessor is classified as an operating lease. All leases of the Group are currently classified as operating leases. When a lease contains rent holidays or requires fixed escalations of the minimum lease payments, the Group records the total rental expense on a straight-line basis over the initial lease term and the difference between the straight-line rental expense and cash payment under the lease is recorded as deferred rent. As of December 31, 2013 and 2014, deferred rent of RMB15,704 and RMB21,701 were recorded as other current liabilities and RMB653,831 and RMB830,414 were recorded as long-term liabilities, respectively. | ||||||||||||||
Capitalization of interest | Capitalization of interest | |||||||||||||
Interest cost incurred on funds used to construct leasehold improvements during the active construction period is capitalized. The interest capitalized is determined by applying the borrowing interest rate to the average amount of accumulated capital expenditures for the assets under construction during the period. The interest expense incurred for the years ended December 31, 2012, 2013 and 2014 were RMB859, RMB1,084 and RMB14,733, of which RMB37, RMB271 and RMB13,200 were capitalized as additions to assets under construction, respectively. | ||||||||||||||
Income taxes | Income taxes | |||||||||||||
Current income taxes are provided for in accordance with the relevant statutory tax laws and regulations. | ||||||||||||||
Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Net operating losses are carried forward and credited by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of the Group, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on the characteristics of the underlying assets and liabilities, or the expected timing of their use when they do not relate to a specific asset or liability. | ||||||||||||||
Foreign currency translation | Foreign currency translation | |||||||||||||
The reporting currency of the Group is the Renminbi (“RMB”). The functional currency of the Company is the United States dollar (“US dollar”). Monetary assets and liabilities denominated in currencies other than the US dollar are translated into US dollar at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the US dollar during the year are converted into the US dollar at the applicable rates of exchange prevailing on the day transactions occurred. Transaction gains and losses are recognized in the statements of comprehensive income. Assets and liabilities are translated into RMB at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive loss in the consolidated statements of comprehensive income. | ||||||||||||||
The financial records of the Group’s subsidiaries are maintained in local currencies, RMB, which is the functional currency. | ||||||||||||||
Comprehensive income | Comprehensive income | |||||||||||||
Comprehensive income includes all changes in equity except for those resulting from investments by owners and distributions to owners and is comprised of net income, foreign-currency translation adjustments and unrealized securities holding gains (losses). The consolidated financial statements have been adjusted for the retrospective application of the authoritative guidance regarding presentation of comprehensive income, which was adopted by the Group on January 1, 2012. | ||||||||||||||
Concentration of credit risk | Concentration of credit risk | |||||||||||||
Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, short-term investments and accounts receivable. | ||||||||||||||
All of the Group’s cash and cash equivalents and restricted cash are held with financial institutions that Group management believes to be high credit quality. In addition, the Group’s investment policy limits its exposure to concentrations of credit risk and the Group’s short-term investments consist of corporate debt securities with high credit quality. The Group conducts credit evaluations on its group and agency customers and generally does not require collateral or other security from such customers. The Group periodically evaluates the creditworthiness of the existing customers in determining an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. | ||||||||||||||
Fair value | Fair value | |||||||||||||
The Group defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. | ||||||||||||||
The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs may be used to measure fair value include: | ||||||||||||||
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. | ||||||||||||||
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. | ||||||||||||||
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. | ||||||||||||||
The estimated fair value of the Group’s financial instruments, including cash, restricted cash, short-term investments, receivables, payables and accruals, approximates their carrying value due to their short-term nature. | ||||||||||||||
When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group measures fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates. | ||||||||||||||
As of December 31, 2014, information about inputs into the fair value measurements of the Group’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows: | ||||||||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||
Description | Year Ended | Quoted Prices | Significant | Significant | ||||||||||
December 31, | in Active | Other | Unobservable | |||||||||||
2014 | Markets for | Observable | Inputs | |||||||||||
Identical | Inputs | (Level 3) | ||||||||||||
Assets | (Level 2) | |||||||||||||
(Level 1) | ||||||||||||||
Available-for-sale securities | 137,943 | 137,943 | — | — | ||||||||||
The following table presents the Group’s assets measured at fair value on a non-recurring basis for the years ended December 31, 2012, 2013 and 2014: | ||||||||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||
Year Ended | Description | Fair value | Quoted | Significant | Significant | Total loss | ||||||||
December 31, | Prices | Other | Unobservable | |||||||||||
in Active | Observable | Inputs | ||||||||||||
Markets for | Inputs | (Level 3) | ||||||||||||
Identical | (Level 2) | |||||||||||||
Assets | ||||||||||||||
(Level 1) | ||||||||||||||
2012 | Property and equipment | 4,991 | — | — | 4,991 | 5,349 | ||||||||
2013 | Property and equipment | 5,382 | — | — | 5,382 | 7,965 | ||||||||
2014 | Property and equipment | 13,561 | — | — | 13,561 | 27,203 | ||||||||
2014 | Goodwill | — | — | — | — | 188 | ||||||||
As a result of reduced expectations of future cash flows from certain leased hotels, the Group determined that the hotels property and equipment with a carrying amount of RMB10,340, RMB13,347 and RMB40,764 was not fully recoverable and consequently recorded an impairment charge of RMB5,349, RMB7,965 and RMB27,203 for the years ended December 31, 2012, 2013 and 2014, respectively. The Company also determined that the goodwill amount with a carrying amount of RMB188 was impaired as a result of the impairment assessment. | ||||||||||||||
Fair value of the property and equipment as well as the reporting units was determined by the Group based on the income approach using the discounted cash flow associated with the underlying assets, which incorporated certain assumptions including projected hotels’ revenue, growth rates and projected operating costs based on current economic condition, expectation of management and projected trends of current operating results. As a result, the Group has determined that the majority of the inputs used to value its long-lived assets held and used and its reporting units are unobservable inputs that fall within Level 3 of the fair value hierarchy. The revenue growth rate and the discount rate were the significant unobservable input used in the fair value measurement, which are 4% and 15%, 4% and 20%, and 4% and 20% for the years ended December 31, 2012, 2013 and 2014, respectively. | ||||||||||||||
Share-based compensation | Share-based compensation | |||||||||||||
The Group recognizes share-based compensation in the consolidated statements of comprehensive income based on the fair value of equity awards on the date of the grant, with compensation expenses recognized over the period in which the grantee is required to provide service to the Group in exchange for the equity award. The share-based compensation expenses have been categorized as either hotel operating costs, general and administrative expenses or selling and marketing expenses, depending on the job functions of the grantees. For the years ended December 31, 2012, 2013 and 2014, the Group recognized share-based compensation expenses of RMB20,837, RMB30,468 and RMB31,937, respectively, which was classified as follows: | ||||||||||||||
Year Ended December 31, | ||||||||||||||
2012 | 2013 | 2014 | ||||||||||||
Hotel operating costs | 2,592 | 4,948 | 6,830 | |||||||||||
Selling and marketing expenses | 1,031 | 973 | 939 | |||||||||||
General and administrative expenses | 17,214 | 24,547 | 24,168 | |||||||||||
Total | 20,837 | 30,468 | 31,937 | |||||||||||
Earnings per share | Earnings per share | |||||||||||||
Basic earnings per share is computed by dividing income attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares and is calculated using the treasury stock method for stock options and nonvested restricted stocks. | ||||||||||||||
Segment reporting | Segment reporting | |||||||||||||
The Group operates and manages its business as a single segment. The Group primarily generates its revenues from customers in the PRC. Accordingly, no geographical segments are presented. Substantially all of the Group’s long-lived assets are located in the PRC. | ||||||||||||||
Recently issued accounting pronouncements | Recently issued accounting pronouncements | |||||||||||||
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which superseded the revenue recognition requirement in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, it also superseded the cost guidance in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and created new Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, which will be effective for annual reporting period beginning after December 15, 2016. The Group is still in the process of assessing the impact of this newly issued ASU on the Group’s consolidated financial statements. | ||||||||||||||
In August 2014, the FASB issued ASU No. 2014-15, Presentation of financial statements—going concern (Subtopic 205-40), which provided guidance on management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures so as to reduce the diversity in the timing and content of footnote disclosures. ASU 2014-15 will be effective for annual periods ending after December 15, 2016. The Group does not expect the adoption will have a material impact on the Group’s consolidated financial statements. | ||||||||||||||
Translation into United States Dollars | Translation into United States Dollars | |||||||||||||
The financial statements of the Group are stated in RMB. Translations of amounts from RMB into United States dollars are solely for the convenience of the reader and were calculated at the rate of US$1.00 =MB6.2046, on December 31, 2014, as set forth in H.10 statistical release of the Federal Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into United States dollars at that rate on December 31, 2014, or at any other rate. | ||||||||||||||
SUMMARY_OF_PRINCIPAL_ACCOUNTIN2
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES | ||||||||||||||
Schedule of expected useful lives of property and equipment | ||||||||||||||
Leasehold improvements | Shorter of the lease term or their estimated useful lives | |||||||||||||
Buildings | 40 years | |||||||||||||
Furniture, fixtures and equipment | 3-5 years | |||||||||||||
Motor vehicles | 5 years | |||||||||||||
Schedule of information about inputs into the fair value measurements of the assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition | ||||||||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||
Description | Year Ended | Quoted Prices | Significant | Significant | ||||||||||
December 31, | in Active | Other | Unobservable | |||||||||||
2014 | Markets for | Observable | Inputs | |||||||||||
Identical | Inputs | (Level 3) | ||||||||||||
Assets | (Level 2) | |||||||||||||
(Level 1) | ||||||||||||||
Available-for-sale securities | 137,943 | 137,943 | — | — | ||||||||||
Assets measured at fair value on a non-recurring basis | ||||||||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||
Year Ended | Description | Fair value | Quoted | Significant | Significant | Total loss | ||||||||
December 31, | Prices | Other | Unobservable | |||||||||||
in Active | Observable | Inputs | ||||||||||||
Markets for | Inputs | (Level 3) | ||||||||||||
Identical | (Level 2) | |||||||||||||
Assets | ||||||||||||||
(Level 1) | ||||||||||||||
2012 | Property and equipment | 4,991 | — | — | 4,991 | 5,349 | ||||||||
2013 | Property and equipment | 5,382 | — | — | 5,382 | 7,965 | ||||||||
2014 | Property and equipment | 13,561 | — | — | 13,561 | 27,203 | ||||||||
2014 | Goodwill | — | — | — | — | 188 | ||||||||
Schedule of share-based compensation expense recognized | ||||||||||||||
Year Ended December 31, | ||||||||||||||
2012 | 2013 | 2014 | ||||||||||||
Hotel operating costs | 2,592 | 4,948 | 6,830 | |||||||||||
Selling and marketing expenses | 1,031 | 973 | 939 | |||||||||||
General and administrative expenses | 17,214 | 24,547 | 24,168 | |||||||||||
Total | 20,837 | 30,468 | 31,937 | |||||||||||
ACQUISITIONS_Tables
ACQUISITIONS (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
Starway | ||||||||||
Acquisitions | ||||||||||
Summary of fair values of the assets acquired and liabilities assumed | ||||||||||
2012 | Amortization period | |||||||||
Current assets | 954 | |||||||||
Intangible assets | 299 | 5 years | ||||||||
Property and equipment | 667 | 5-10 years | ||||||||
Brand name | 28,600 | indefinite | ||||||||
Non-compete agreement | 400 | 10 years | ||||||||
Franchise agreements | 7,700 | remaining contract terms | ||||||||
Goodwill | 21,491 | |||||||||
Current liabilities | (19,430 | ) | ||||||||
Deferred tax liabilities | (9,174 | ) | ||||||||
Noncontrolling interest | (14,215 | ) | ||||||||
Total | 17,292 | |||||||||
Individual hotels acquired | ||||||||||
Acquisitions | ||||||||||
Summary of fair values of the assets acquired and liabilities assumed | ||||||||||
2012 | 2013 | 2014 | Amortization period | |||||||
Current assets | 127 | 5,552 | 25 | |||||||
Property and equipment | 4,668 | 29,805 | 10,477 | 5-10 years | ||||||
Favorable leases | 2,470 | 6,422 | 3,330 | remaining lease terms | ||||||
Deferred tax assets | — | 6,628 | — | |||||||
Franchise agreements | 200 | — | — | remaining contracts terms | ||||||
Goodwill | 153 | 662 | — | |||||||
Current liabilities | — | (2,501 | ) | — | ||||||
Deferred tax liabilities | (618 | ) | (13,145 | ) | (832 | ) | ||||
Noncontrolling interest | — | — | (25 | ) | ||||||
Total | 7,000 | 33,423 | 12,975 | |||||||
PROPERTY_AND_EQUIPMENT_NET_Tab
PROPERTY AND EQUIPMENT, NET (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
PROPERTY AND EQUIPMENT, NET | ||||||
Schedule of property and equipment, net | ||||||
As of December 31, | ||||||
2013 | 2014 | |||||
Cost: | ||||||
Buildings | 12,115 | 12,115 | ||||
Leasehold improvements | 4,190,693 | 4,916,270 | ||||
Furniture, fixtures and equipment | 619,200 | 742,682 | ||||
Motor vehicles | 820 | 820 | ||||
4,822,828 | 5,671,887 | |||||
Less: Accumulated depreciation | (1,463,547 | ) | (2,008,882 | ) | ||
3,359,281 | 3,663,005 | |||||
Construction in progress | 274,758 | 244,338 | ||||
Property and equipment, net | 3,634,039 | 3,907,343 | ||||
INTANGIBLE_ASSETS_NET_AND_UNFA1
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE | ||||||||
Schedule of intangible assets, net | ||||||||
As of December 31, | ||||||||
2013 | 2014 | |||||||
Brand name | 28,600 | 28,600 | ||||||
Franchise agreements | 7,700 | 7,700 | ||||||
Non-compete agreement | 400 | 400 | ||||||
Favorable lease agreements | 76,048 | 79,378 | ||||||
Purchased software | 24,835 | 35,298 | ||||||
Total | 137,583 | 151,376 | ||||||
Less: Accumulated amortization | (35,738 | ) | (46,839 | ) | ||||
Total | 101,845 | 104,537 | ||||||
Unfavorable lease | ||||||||
As of December 31, | ||||||||
2013 | 2014 | |||||||
Unfavorable lease agreements | 3,924 | 3,924 | ||||||
Less: Accumulated amortization | (2,307 | ) | (2,604 | ) | ||||
Unfavorable lease agreements, net | 1,617 | 1,320 | ||||||
Schedule of annual estimated amortization expense for intangible assets and unfavorable lease | ||||||||
Amortization for | Amortization for | Net Amortization | ||||||
Intangible Assets | Unfavorable Lease | |||||||
2015 | 10,570 | (289 | ) | 10,281 | ||||
2016 | 10,076 | (209 | ) | 9,867 | ||||
2017 | 9,723 | (130 | ) | 9,593 | ||||
2018 | 8,619 | (130 | ) | 8,489 | ||||
2019 | 8,099 | (130 | ) | 7,969 | ||||
Thereafter | 28,850 | (432 | ) | 28,418 | ||||
75,937 | (1,320 | ) | 74,617 | |||||
LONG_TERM_INVESTMENTS_Tables
LONG TERM INVESTMENTS (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
LONG TERM INVESTMENTS | ||||||
Schedule of long term investment | ||||||
As of December 31, | ||||||
2013 | 2014 | |||||
UBOX | 40,517 | 40,517 | ||||
Kangdu | 50,000 | — | ||||
Sheen Star | — | 20,990 | ||||
Yibang | — | 2,482 | ||||
Quanjude | — | 137,943 | ||||
Loan to franchisees | — | 5,140 | ||||
Campsort | — | 11,644 | ||||
GOOAGOO | — | 10,289 | ||||
Total | 90,517 | 229,005 | ||||
GOODWILL_Tables
GOODWILL (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
GOODWILL | ||||||||
Schedule of changes in the carrying amount of goodwill | ||||||||
Gross | Accumulated | Net | ||||||
Amount | Impairment Loss | Amount | ||||||
Balance at January 1, 2012 | 44,344 | (1,808 | ) | 42,536 | ||||
Increase in goodwill related to acquisitions | 21,644 | — | 21,644 | |||||
Balance at December 31, 2012 | 65,988 | (1,808 | ) | 64,180 | ||||
Increase in goodwill related to acquisitions | 662 | — | 662 | |||||
Balance at December 31, 2013 | 66,650 | (1,808 | ) | 64,842 | ||||
Impairment losses recognized | — | (188 | ) | (188 | ) | |||
Balance at December 31, 2014 | 66,650 | (1,996 | ) | 64,654 | ||||
ACCRUED_EXPENSES_AND_OTHER_CUR1
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ||||||
Schedule of accrued expenses and other current liabilities | ||||||
As of December 31, | ||||||
2013 | 2014 | |||||
Payable for business acquisitions | 6,398 | 5,745 | ||||
Business taxes and other surcharge payables | 48,557 | 58,887 | ||||
Accrual for customer loyalty program | 15,061 | 71,475 | ||||
Payable to noncontrolling interest holders | 7,112 | 5,552 | ||||
Other payables | 51,386 | 41,864 | ||||
Accrued rental | 41,517 | 44,125 | ||||
Accrued utilities | 38,336 | 37,320 | ||||
Other accrued expenses | 40,818 | 48,049 | ||||
Total | 249,185 | 313,017 | ||||
HOTEL_OPERATING_COSTS_Tables
HOTEL OPERATING COSTS (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
HOTEL OPERATING COSTS | ||||||||
Schedule of hotel operating costs | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Rents | 916,357 | 1,255,663 | 1,543,651 | |||||
Utilities | 215,768 | 273,314 | 323,837 | |||||
Personnel costs | 505,773 | 638,511 | 788,973 | |||||
Depreciation and amortization | 337,162 | 453,062 | 558,833 | |||||
Consumable, food and beverage | 333,245 | 391,715 | 454,795 | |||||
Others | 145,597 | 169,401 | 207,938 | |||||
Total | 2,453,902 | 3,181,666 | 3,878,027 | |||||
PREOPENING_EXPENSES_Tables
PRE-OPENING EXPENSES (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
PRE-OPENING EXPENSES | ||||||||
Schedule of pre-opening expenses incurred during the hotel pre-opening period | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Rents | 191,538 | 186,656 | 163,155 | |||||
Personnel costs | 15,488 | 8,700 | 7,217 | |||||
Others | 23,664 | 15,928 | 15,953 | |||||
Total | 230,690 | 211,284 | 186,325 | |||||
SHAREBASED_COMPENSATION_Tables
SHARE-BASED COMPENSATION (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
SHARE-BASED COMPENSATION | ||||||||||
Significant assumptions used for estimating fair value of stock options | ||||||||||
2012 | 2014 | |||||||||
Suboptimal exercise factor | 7.45 to 7.66 | 4.4 | ||||||||
Risk-free interest rate | 0.81 to 1.19% | 1.89 to 1.99% | ||||||||
Volatility | 51.35 to 51.89% | 47.22 to 47.75% | ||||||||
Dividend yield | — | — | ||||||||
Life of option | 6 years | 6 years | ||||||||
Summary of the Group's share option activity under the option plans | ||||||||||
Number of | Weighted Average | Weighted Average | Aggregate Intrinsic | |||||||
Options | Exercise Price | Remaining | Value | |||||||
Contractual Life | ||||||||||
US$ | Years | US$’000 | ||||||||
Share options outstanding at January 1, 2014 | 6,825,784 | 2.12 | ||||||||
Granted | 319,480 | 5.48 | ||||||||
Adjustment based on actual performance | (606,134 | ) | 2.75 | |||||||
Forfeited | (26,128 | ) | 6.23 | |||||||
Exercised | (1,591,004 | ) | 2.14 | |||||||
Share options outstanding at December 31, 2014 | 4,921,998 | 2.23 | 4.01 | 21,344 | ||||||
Share options vested or expected to vest at December 31, 2014 | 4,842,378 | 2.2 | 4.04 | 21,153 | ||||||
Share options exercisable at December 31, 2014 | 3,827,558 | 1.9 | 4.03 | 17,873 | ||||||
Significant assumptions used for estimating fair value of nonvested restricted stock | ||||||||||
2012 | ||||||||||
Expected dividends | — | |||||||||
Risk-free interest rate | 0.29 | % | ||||||||
Expected volatility | 48.41 | % | ||||||||
Summary of the Group's nonvested restricted stock activity | ||||||||||
Number of restricted stocks | Weighted average grant date | |||||||||
fair value | ||||||||||
US$ | ||||||||||
Nonvested restricted stocks outstanding at January 1, 2014 | 3,637,956 | 3.33 | ||||||||
Granted | 1,167,100 | 6.11 | ||||||||
Adjustment based on actual performance | 284,222 | 2.75 | ||||||||
Forfeited | (298,818 | ) | 5.11 | |||||||
Vested | (1,553,220 | ) | 3.04 | |||||||
Nonvested restricted stocks outstanding at December 31, 2014 | 3,237,240 | 4.25 | ||||||||
EARNINGS_PER_SHARE_Tables
EARNINGS PER SHARE (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
EARNINGS PER SHARE | ||||||||
Schedule of computation of basic and diluted earnings per share | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Net income attributable to ordinary shareholders — basic | 174,887 | 279,858 | 307,348 | |||||
Net income attributable to ordinary shareholders — diluted | 174,887 | 279,858 | 307,348 | |||||
Weighted average ordinary shares outstanding — basic | 243,284,332 | 245,187,348 | 248,957,645 | |||||
Incremental weighted-average ordinary shares from assumed exercise of share options and nonvested restricted stocks using the treasury stock method | 3,696,669 | 4,298,936 | 4,046,559 | |||||
Weighted average ordinary shares outstanding — diluted | 246,981,001 | 249,486,284 | 253,004,204 | |||||
Basic earnings per share | 0.72 | 1.14 | 1.23 | |||||
Diluted earnings per share | 0.71 | 1.12 | 1.21 | |||||
Schedule of outstanding securities excluded from the computation of diluted earnings per share | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Outstanding employee options and nonvested restricted stocks | 797,981 | — | 293,512 | |||||
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
INCOME TAXES | ||||||||
Schedule of tax expense (benefit) | ||||||||
As of December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Current Tax | 72,395 | 127,439 | 155,496 | |||||
Deferred Tax | (18,226 | ) | (22,619 | ) | (42,391 | ) | ||
Total | 54,169 | 104,820 | 113,105 | |||||
Schedule of a reconciliation between the effective income tax rate and PRC statutory income tax rate | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
PRC statutory tax rate | 25 | % | 25 | % | 25 | % | ||
Tax effect of other expenses that are not deductible in determining taxable profit | 3 | % | 3 | % | 2 | % | ||
Effect of different tax rate of group entities operating in other jurisdictions | 1 | % | (1 | )% | — | |||
Effect of change in valuation allowance | 6 | % | 3 | % | 3 | % | ||
Effect of tax holiday | (12 | )% | (3 | )% | (3 | )% | ||
Effective tax rate | 23 | % | 27 | % | 27 | % | ||
Schedule of the aggregate amount and per share effect of the tax holidays | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Aggregate amount | 28,139 | 12,721 | 9,131 | |||||
Per share effect—basic | 0.12 | 0.05 | 0.04 | |||||
Per share effect—diluted | 0.11 | 0.05 | 0.04 | |||||
Schedule of the principal components of the Group's deferred income tax assets and liabilities | ||||||||
As of December 31, | ||||||||
2013 | 2014 | |||||||
Deferred tax assets: | ||||||||
Net loss carryforward | 90,983 | 113,333 | ||||||
Pre-opening expenses | 393 | 306 | ||||||
Deferred revenue | 48,960 | 62,977 | ||||||
Deferred rent | 5,450 | 4,684 | ||||||
Unfavorable lease | 3,698 | 8,759 | ||||||
Bad debt provision | 1,892 | 1,494 | ||||||
Accrual for customer loyalty program | 3,765 | 17,869 | ||||||
Accrued payroll | 2,001 | 2,462 | ||||||
Other accrued expenses | — | 4,457 | ||||||
Share-based compensation | 12,267 | 9,745 | ||||||
Others | 1,354 | 278 | ||||||
Valuation allowance | (51,596 | ) | (62,868 | ) | ||||
Total deferred tax assets | 119,167 | 163,496 | ||||||
Deferred tax liabilities: | ||||||||
Favorable lease | 24,340 | 23,545 | ||||||
Capitalized interest | 1,601 | 4,410 | ||||||
Fair market value for investment | — | 9,485 | ||||||
Others | 281 | 1,039 | ||||||
Total deferred tax liabilities | 26,222 | 38,479 | ||||||
Deferred tax assets are analyzed as: | ||||||||
Current | 51,759 | 80,026 | ||||||
Non-Current | 67,408 | 83,470 | ||||||
119,167 | 163,496 | |||||||
Deferred tax liabilities are analyzed as: | ||||||||
Current | 151 | 701 | ||||||
Non-current | 26,071 | 37,778 | ||||||
26,222 | 38,479 | |||||||
Schedule of unrecognized tax benefits | ||||||||
As of December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Balance at January 1 | 1,494 | 4,148 | 7,122 | |||||
Addition for tax positions | 2,654 | 2,974 | 1,223 | |||||
Balance at December 31 | 4,148 | 7,122 | 8,345 | |||||
RELATED_PARTY_TRANSACTIONS_AND1
RELATED PARTY TRANSACTIONS AND BALANCES (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
RELATED PARTY TRANSACTIONS AND BALANCES | ||||||||
Schedule of related parties | ||||||||
Related Party | Nature of the Party | Relationship with the Group | ||||||
Ctrip.com International, Ltd. (“Ctrip”) | Online travel services provider | Mr. Qi Ji is a director | ||||||
UBOX International Holdings Co Limited (“UBOX”) | Vending machine operator | Mr. Qi Ji is a director | ||||||
Lijiang Yibang Changchunteng Hotel Co Limited (“Yibang”) | Hotel | Joint venture of the Group | ||||||
Sheen Star Group Limited (“Sheen Star”)* | Investment holding company | Investee of the Group, controlled by Mr. Qi Ji | ||||||
*Sheen Star was established in April 2014 by Mr. Qi Ji, the Group and a third party whereby the Group owns equity interest of 19.99%, and Mr. Qi Ji owns 50.01%. | ||||||||
Amounts due from related parties | ||||||||
As of December 31, | ||||||||
2013 | 2014 | |||||||
UBOX | 256 | — | ||||||
Yibang | 402 | 16,293 | ||||||
Total | 658 | 16,293 | ||||||
Amounts due to related party | ||||||||
As of December 31, | ||||||||
2013 | 2014 | |||||||
Ctrip | ||||||||
-Payables for hotel reservation services | 1,510 | 2,319 | ||||||
- Payables for Starway acquisition | 12,250 | 8,167 | ||||||
13,760 | 10,486 | |||||||
Related party transactions | ||||||||
Year Ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Commission expenses — Ctrip | 10,945 | 17,128 | 19,235 | |||||
Service fee — UBOX | — | 847 | 392 | |||||
Interest income — UBOX | — | 1,373 | 541 | |||||
Service fee — Yibang | — | 199 | 527 | |||||
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended | |||
Dec. 31, 2014 | ||||
COMMITMENTS AND CONTINGENCIES | ||||
Schedule of future minimum lease payments under non-cancellable operating lease agreements | ||||
Year Ending December 31, | ||||
2015 | 1,791,198 | |||
2016 | 1,845,430 | |||
2017 | 1,836,051 | |||
2018 | 1,792,665 | |||
2019 | 1,752,800 | |||
Thereafter | 11,206,521 | |||
Total | 20,224,665 | |||
ORGANIZATION_AND_PRINCIPAL_ACT1
ORGANIZATION AND PRINCIPAL ACTIVITIES (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
item | ||
Leased hotels | ||
Organization and presentation activities | ||
Number of hotels | 611 | 565 |
Manachised hotels | ||
Organization and presentation activities | ||
Number of hotels | 1,376 | 835 |
Franchised hotels | ||
Organization and presentation activities | ||
Number of hotels | 8 | 25 |
Minimum | ||
Organization and presentation activities | ||
Term of franchise and management agreement | 8 years | |
Minimum | Leased hotels | ||
Organization and presentation activities | ||
Lease rent holiday period | 2 months | |
Fixed escalation in rent (as a percent) | 3.00% | |
Period before rent escalations | 3 years | |
Maximum | ||
Organization and presentation activities | ||
Term of franchise and management agreement | 10 years | |
Maximum | Leased hotels | ||
Organization and presentation activities | ||
Lease rent holiday period | 6 months | |
Fixed escalation in rent (as a percent) | 5.00% | |
Period before rent escalations | 5 years |
SUMMARY_OF_PRINCIPAL_ACCOUNTIN3
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Inventories | |
Estimated useful life of small appliances and bedding | 1 year |
Minimum | |
Restricted cash | |
Period of capital verification approval process | 3 months |
Maximum | |
Restricted cash | |
Period of capital verification approval process | 6 months |
SUMMARY_OF_PRINCIPAL_ACCOUNTIN4
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Details 2) | 12 Months Ended |
Dec. 31, 2014 | |
Leasehold improvements | |
Property and equipment, net | |
Property and equipment, estimated useful life | Shorter of the lease term or their estimated useful lives |
Buildings | |
Property and equipment, net | |
Property and equipment, estimated useful life | 40 years |
Furniture, fixtures and equipment | Minimum | |
Property and equipment, net | |
Property and equipment, estimated useful life | 3 years |
Furniture, fixtures and equipment | Maximum | |
Property and equipment, net | |
Property and equipment, estimated useful life | 5 years |
Motor vehicles | |
Property and equipment, net | |
Property and equipment, estimated useful life | 5 years |
SUMMARY_OF_PRINCIPAL_ACCOUNTIN5
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Details 3) | 12 Months Ended | 12 Months Ended | ||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 |
CNY | CNY | CNY | USD ($) | Minimum | Maximum | |
Accounting policies | ||||||
Maximum ownership percentage owned to be counted as cost-method investment | 20.00% | |||||
Long-lived asset impairment loss | 27,203 | 7,965 | 5,349 | |||
Goodwill Impairment Loss | 188 | 0 | 0 | |||
Redemption period for points earned by members on paid stays | 2 years | |||||
Estimated liability accruals under customer loyalty program | 71,475 | 15,061 | ||||
Hotel manager fees recognized as revenue | 166,572 | 116,885 | 72,061 | |||
Estimated membership duration | 2 years | 5 years | ||||
Revenue recognized from customer loyalty program | 107,737 | 74,715 | 51,132 | |||
Advertising related expenses | 79,806 | 43,807 | 30,053 | |||
Unrestricted government subsidies from local governmental agencies | 19,657 | 17,016 | 6,723 | |||
Deferred rent current | 21,701 | 15,704 | ||||
Deferred rent long-term | 830,414 | 653,831 | 133,838 | |||
Interest cost incurred | 14,733 | 1,084 | 859 | |||
Interest cost capitalized | 13,200 | 271 | 37 |
SUMMARY_OF_PRINCIPAL_ACCOUNTIN6
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Details 4) (CNY) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Fair value | |||
Long-lived asset impairment loss | 27,203 | 7,965 | 5,349 |
Goodwill impairment loss | 188 | 0 | 0 |
Revenue growth rate used for level 3 measurement (as a percent) | 4.00% | 4.00% | 4.00% |
Discount rate used for level 3 measurement (as a percent) | 20.00% | 20.00% | 15.00% |
Recurring basis | Fair value | |||
Fair value | |||
Available-for-sale securities | 137,943 | ||
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | |||
Fair value | |||
Available-for-sale securities | 137,943 | ||
Non-recurring basis | |||
Fair value | |||
Long-lived asset impairment loss | 27,203 | 7,965 | 5,349 |
Goodwill impairment loss | 188 | ||
Non-recurring basis | Fair value | |||
Fair value | |||
Property and equipment | 13,561 | 5,382 | 4,991 |
Goodwill | 0 | ||
Non-recurring basis | Carrying value | |||
Fair value | |||
Property and equipment | 40,764 | 13,347 | 10,340 |
Goodwill | 188 | ||
Non-recurring basis | Significant Unobservable Inputs (Level 3) | |||
Fair value | |||
Property and equipment | 13,561 | 5,382 | 4,991 |
Goodwill | 0 |
SUMMARY_OF_PRINCIPAL_ACCOUNTIN7
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Details 5) (CNY) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Share-based compensation | |||
Recognized share-based compensation expenses | 31,937 | 30,468 | 20,837 |
Foreign exchange rate used to translate amounts denominated in RMB to US dollar | 6.2046 | ||
Hotel operating costs | |||
Share-based compensation | |||
Recognized share-based compensation expenses | 6,830 | 4,948 | 2,592 |
Selling and marketing expense | |||
Share-based compensation | |||
Recognized share-based compensation expenses | 939 | 973 | 1,031 |
General and administrative expenses | |||
Share-based compensation | |||
Recognized share-based compensation expenses | 24,168 | 24,547 | 17,214 |
ACQUISITIONS_Details
ACQUISITIONS (Details) | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | USD ($) | CNY | CNY | CNY | CNY | Starway | Starway | Starway | Starway | Starway | Starway | Starway | Starway | Starway | Starway |
CNY | CNY | CNY | Minimum | Maximum | Intangible assets | Non-compete agreement | Franchise agreements | Brand name | Within one year | ||||||
CNY | CNY | CNY | CNY | CNY | |||||||||||
Acquisitions | |||||||||||||||
Percentage of ownership interest acquired | 49.00% | 51.00% | 49.00% | ||||||||||||
Cash consideration for acquisition | 4,083 | 4,210 | 17,292 | ||||||||||||
Consideration for acquisition | 16,460 | 16,460 | |||||||||||||
Period within which to acquire remaining interest | 1 year | ||||||||||||||
Current assets | 954 | ||||||||||||||
Intangible assets | 299 | 400 | 7,700 | 28,600 | |||||||||||
Property and equipment | 667 | ||||||||||||||
Goodwill | 10,421 | 64,654 | 64,842 | 64,180 | 42,536 | 21,491 | |||||||||
Current liabilities | -19,430 | ||||||||||||||
Deferred tax liabilities | -9,174 | ||||||||||||||
Noncontrolling interest | -14,215 | ||||||||||||||
Total | 17,292 | ||||||||||||||
Amortization period of property and equipment | 5 years | 10 years | |||||||||||||
Amortization period of intangible assets | 5 years | 10 years | |||||||||||||
Payable for business acquisitions | 8,167 | ||||||||||||||
Period over which remaining cash consideration will be paid | 2 years | ||||||||||||||
Reduction of additional paid-in capital resulting from the difference between the purchase consideration and the related carrying value of the noncontrolling interests acquired | 2,514 |
ACQUISITIONS_Details_2
ACQUISITIONS (Details 2) | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | USD ($) | CNY | CNY | CNY | CNY | Individual hotels acquired | Individual hotels acquired | Individual hotels acquired | Individual hotels acquired | Individual hotels acquired | Individual hotels acquired | Individual hotels acquired | Individual hotels acquired | Individual hotels acquired | One Individual Hotel | One Individual Hotel | One Individual Hotel | Nine individual hotels | Nine individual hotels | One Individual Hotels Acquired in 2014 | One Individual Hotels Acquired in 2014 |
item | item | item | Minimum | Minimum | Minimum | Maximum | Maximum | Maximum | CNY | Favorable lease agreements | Franchise agreements | CNY | Favorable lease agreements | CNY | Favorable lease agreements | ||||||
CNY | CNY | CNY | CNY | ||||||||||||||||||
Acquisitions | |||||||||||||||||||||
Number of hotels in the form of leased hotel acquired | 1 | 9 | 1 | ||||||||||||||||||
Cash consideration for acquisition | 7,000 | 33,423 | 12,975 | ||||||||||||||||||
Current assets | 127 | 5,552 | 25 | ||||||||||||||||||
Intangible assets | 2,470 | 200 | 6,422 | 3,330 | |||||||||||||||||
Property and equipment | 4,668 | 29,805 | 10,477 | ||||||||||||||||||
Deferred tax assets | 6,628 | ||||||||||||||||||||
Goodwill | 10,421 | 64,654 | 64,842 | 64,180 | 42,536 | 153 | 662 | ||||||||||||||
Current liabilities | -2,501 | ||||||||||||||||||||
Deferred tax liabilities | -618 | -13,145 | -832 | ||||||||||||||||||
Noncontrolling interest | -25 | ||||||||||||||||||||
Total | 7,000 | 33,423 | 12,975 | ||||||||||||||||||
Amortization period of property and equipment | 5 years | 5 years | 5 years | 10 years | 10 years | 10 years |
PROPERTY_AND_EQUIPMENT_NET_Det
PROPERTY AND EQUIPMENT, NET (Details) | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | USD ($) | CNY | CNY | Buildings | Buildings | Leasehold improvements | Leasehold improvements | Furniture, fixtures and equipment | Furniture, fixtures and equipment | Motor vehicles | Motor vehicles |
CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | ||||
Cost: | |||||||||||
Property and equipment, gross | 5,671,887 | 4,822,828 | 12,115 | 12,115 | 4,916,270 | 4,190,693 | 742,682 | 619,200 | 820 | 820 | |
Less: Accumulated depreciation | -2,008,882 | -1,463,547 | |||||||||
Property and equipment net excluding construction in process | 3,663,005 | 3,359,281 | |||||||||
Construction in progress | 244,338 | 274,758 | |||||||||
Property and equipment, net | $629,749 | 3,907,343 | 3,634,039 |
PROPERTY_AND_EQUIPMENT_NET_Det1
PROPERTY AND EQUIPMENT, NET (Details 2) (CNY) | 12 Months Ended | ||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | Feb. 28, 2014 |
item | item | item | |||
PROPERTY AND EQUIPMENT, NET | |||||
Depreciation expense | 559,918 | 453,637 | 337,511 | ||
Number of hotels demolished | 1 | 3 | 1 | ||
Property and equipment written off | 3,971 | 7,296 | 3,042 | ||
Gain/loss on disposal of property and equipment | 33 | 10,734 | 0 | ||
Reimbursements receivable | 3,000 | ||||
Cash received from demolished leased hotel | 4,004 | 15,030 | 2,000 | 4,553 | |
Number of hotels likely to be demolished | 2 | ||||
Property and equipment aggregate carrying amount | 10,075 |
INTANGIBLE_ASSETS_NET_AND_UNFA2
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE (Details) | 12 Months Ended | |||||||||||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
CNY | CNY | CNY | USD ($) | Franchise agreements | Franchise agreements | Non-compete agreement | Non-compete agreement | Favorable lease agreements | Favorable lease agreements | Purchased software | Purchased software | Brand name | Brand name | |
CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | |||||
Intangible assets, net | ||||||||||||||
Intangible assets, gross | 151,376 | 137,583 | 7,700 | 7,700 | 400 | 400 | 79,378 | 76,048 | 35,298 | 24,835 | 28,600 | 28,600 | ||
Less: Accumulated amortization | -46,839 | -35,738 | ||||||||||||
Total | 104,537 | 101,845 | 16,848 | |||||||||||
Unfavorable lease | ||||||||||||||
Unfavorable lease agreements | 3,924 | 3,924 | ||||||||||||
Less: Accumulated amortization | -2,604 | -2,307 | ||||||||||||
Unfavorable lease agreements, net | 1,320 | 1,617 | ||||||||||||
Amortization expense of intangible assets | 11,101 | 9,846 | 10,501 |
INTANGIBLE_ASSETS_NET_AND_UNFA3
INTANGIBLE ASSETS, NET AND UNFAVORABLE LEASE (Details 2) (CNY) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Amortization for intangible assets | ||
2015 | 10,570 | |
2016 | 10,076 | |
2017 | 9,723 | |
2018 | 8,619 | |
2019 | 8,099 | |
Thereafter | 28,850 | |
Finite Lived Intangible Assets Amortization Expenses, Total | 75,937 | |
Amortization for unfavorable lease | ||
2015 | -289 | |
2016 | -209 | |
2017 | -130 | |
2018 | -130 | |
2019 | -130 | |
Thereafter | -432 | |
Unfavorable lease Amortization Income, Total | -1,320 | -1,617 |
Net amortization | ||
2015 | 10,281 | |
2016 | 9,867 | |
2017 | 9,593 | |
2018 | 8,489 | |
2019 | 7,969 | |
Thereafter | 28,418 | |
Net, Total | 74,617 |
LONG_TERM_INVESTMENTS_Details
LONG TERM INVESTMENTS (Details) | 12 Months Ended | 1 Months Ended | ||||||||||||||||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Jun. 30, 2012 | Aug. 31, 2013 | Dec. 31, 2012 | Aug. 31, 2014 | Dec. 31, 2013 |
USD ($) | CNY | CNY | CNY | UBOX | UBOX | Kangdu | Sheen Star | Yibang | Quanjude | Loan to franchisees | Campsort | GOOAGOO | Series A preferred shares | Convertible bonds | Convertible bonds | Ordinary Shares | Ordinary Shares | |
CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | UBOX | UBOX | UBOX | UBOX | UBOX | |||||
CNY | CNY | CNY | ||||||||||||||||
Long term investment | ||||||||||||||||||
Long term investment | $36,909 | 229,005 | 90,517 | 40,517 | 40,517 | 50,000 | 20,990 | 2,482 | 137,943 | 5,140 | 11,644 | 10,289 | ||||||
Shares purchased | 46,200,000 | |||||||||||||||||
Consideration for purchase of investments | 30,794 | 191,064 | 54,744 | 28,129 | 28,129 | 4,314 | ||||||||||||
Convertible promissory note purchased | $12,122 | 75,210 | 8,074 | 8,074 | ||||||||||||||
Conversion of promissory note to ordinary shares (in shares) | 3,946,897 | 8,530,731 | ||||||||||||||||
Equity interest percentage owned in cost method investment by the entity | 3.70% |
LONG_TERM_INVESTMENTS_Details_
LONG TERM INVESTMENTS (Details 2) | 12 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | 12 Months Ended | 9 Months Ended | 1 Months Ended | 12 Months Ended | 1 Months Ended | |||||||||||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Jan. 31, 2014 | Apr. 30, 2014 | Nov. 30, 2013 | Apr. 30, 2014 | 31-May-13 | Apr. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Jun. 30, 2014 | Nov. 30, 2014 | Jul. 31, 2014 | Dec. 31, 2014 | Nov. 30, 2014 |
USD ($) | CNY | CNY | CNY | Kangdu | Kangdu | Kangdu | Sheen Star | Yibang | Yibang | Yibang | Yibang | Loan to franchisees | Loan to franchisees | Loan to franchisees | Quanjude | Quanjude | Campsort | Campsort | Campsort | GOOAGOO | |
CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | Minimum | Maximum | CNY | CNY | CNY | CNY | CNY | CNY | |||||
Long term investment | |||||||||||||||||||||
Amount of investments | 100,000 | ||||||||||||||||||||
Percentage of equity interest to be acquired per investment agreement | 50.00% | ||||||||||||||||||||
Purchase price to be paid to acquire property developed by investee | 175,000 | ||||||||||||||||||||
Consideration at which Group was granted a put option that requires other investors of investee to repurchase equity interest | 100,000 | ||||||||||||||||||||
Percentage of interest rate payable by other investors of investee upon repurchase of equity interest | 8.00% | ||||||||||||||||||||
Amount injected/purchase cost | 30,000 | 50,000 | 100,000 | ||||||||||||||||||
Transfer of investment to a related party | 82,785 | ||||||||||||||||||||
Percentage of equity interest acquired | 30.00% | 20.00% | 2.35% | 30.00% | 8.00% | ||||||||||||||||
Investment income (loss) | 790 | 4,902 | -430 | 2,197 | -430 | -356 | |||||||||||||||
Consideration paid for acquisition of equity method investments | 20,990 | 430 | 285 | 15,000 | |||||||||||||||||
Equity interest percentage owned in equity method investment by the majority owner | 50.01% | ||||||||||||||||||||
Terms of the entrusted loan | 2 years | 3 years | |||||||||||||||||||
Interest rate | 8.00% | 8.50% | |||||||||||||||||||
Interest income | 3,733 | 23,162 | 6,856 | 14,554 | 266 | ||||||||||||||||
Ordinary shares acquired in investment of available-for-sale (in shares) | 7,241,131 | ||||||||||||||||||||
Price of investment (in RMB per share) | 19.05 | 13.81 | |||||||||||||||||||
Fair value | 137,943 | ||||||||||||||||||||
Unrealized securities holding gains , net of tax | 4,587 | 28,458 | 28,458 | ||||||||||||||||||
Percentage of equity interest transferred | 6.00% | ||||||||||||||||||||
Consideration for transfer of investment | 3,000 | ||||||||||||||||||||
Percentage of equity interest owned | 19.99% | 24.00% | |||||||||||||||||||
Consideration of cost method investment | 10,289 |
GOODWILL_Details
GOODWILL (Details) | 12 Months Ended | |||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 |
CNY | CNY | CNY | USD ($) | |
Changes in carrying amount of goodwill | ||||
Balance at the beginning of the period, Gross Amount | 66,650 | 65,988 | 44,344 | |
Balance at the beginning of the period, Accumulated Impairment Loss | -1,808 | -1,808 | -1,808 | |
Balance at the beginning of the period, Net Amount | 64,842 | 64,180 | 42,536 | 10,421 |
Increase in goodwill related to acquisitions | 662 | 21,644 | ||
Impairment losses recognized | -188 | 0 | 0 | |
Balance at the end of the period, Gross Amount | 66,650 | 66,650 | 65,988 | |
Balance at the end of the period, Accumulated Impairment Loss | -1,996 | -1,808 | -1,808 | |
Balance at the end of the period, Net Amount | 64,654 | 64,842 | 64,180 | $10,421 |
DEBT_Details
DEBT (Details) | 12 Months Ended | 1 Months Ended | 10 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | 1 Months Ended | |||||
In Thousands, unless otherwise specified | Dec. 31, 2012 | Mar. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2014 | Sep. 30, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2013 | Nov. 30, 2014 | Jan. 31, 2014 | Dec. 31, 2013 |
CNY | Five-year bank credit facility | Five-year bank credit facility | Five-year bank credit facility | Five-year bank credit facility | Three-year revolving bank credit facility | Three-year revolving bank credit facility | Three-year revolving bank credit facility | Three-year revolving bank credit facility | Thirty-month bank credit facility | Thirty-month bank credit facility | One-year entrusted loan | One-year entrusted loan | One-year entrusted loan | |
CNY | CNY | CNY | CNY | CNY | CNY | CNY | USD ($) | USD ($) | CNY | CNY | CNY | |||
Debt | ||||||||||||||
Term of debt instrument | 5 years | 3 years | 30 months | 1 year | ||||||||||
Line of credit facility maximum borrowing capacity | 500,000 | 300,000 | 500,000 | $10,000 | ||||||||||
Line of credit facility, letter of guarantee amount | 700 | |||||||||||||
Line of credit draw down amount | 1,000 | 1,000 | ||||||||||||
Line of credit draw down amount | 0 | 104,540 | 0 | 200 | 300,000 | |||||||||
Repayment of line of credit facility | 1,000 | 1,000 | ||||||||||||
Repayment of line of credit facility | 0 | 104,540 | 0 | 200 | 300,000 | |||||||||
Line of credit facility expired | 100,000 | |||||||||||||
Line of credit facility available for future borrowing | 399,000 | 499,300 | ||||||||||||
Line of credit facility weighted average interest rate (as a percent) | 6.90% | 6.00% | 3.54% | |||||||||||
Line of credit facility weighted average interest rate | twelve-month London Interbank Offered Rate | |||||||||||||
Percentage points added to the reference rate | 2.70% | |||||||||||||
Short term debt maximum borrowing capacity | 300,000 | |||||||||||||
Interest rate (as a percent) | 5.40% |
ACCRUED_EXPENSES_AND_OTHER_CUR2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | USD ($) | CNY | CNY |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |||
Payable for business acquisitions | 5,745 | 6,398 | |
Business taxes and other surcharge payables | 58,887 | 48,557 | |
Accrual for customer loyalty program | 71,475 | 15,061 | |
Payable to noncontrolling interest holders | 5,552 | 7,112 | |
Other payables | 41,864 | 51,386 | |
Accrued rental | 44,125 | 41,517 | |
Accrued utilities | 37,320 | 38,336 | |
Other accrued expenses | 48,049 | 40,818 | |
Total | $50,449 | 313,017 | 249,185 |
HOTEL_OPERATING_COSTS_Details
HOTEL OPERATING COSTS (Details) | 12 Months Ended | |||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | |
HOTEL OPERATING COSTS | ||||
Rents | 1,543,651 | 1,255,663 | 916,357 | |
Utilities | 323,837 | 273,314 | 215,768 | |
Personnel cost | 788,973 | 638,511 | 505,773 | |
Depreciation and amortization | 558,833 | 453,062 | 337,162 | |
Consumable, food and beverage | 454,795 | 391,715 | 333,245 | |
Others | 207,938 | 169,401 | 145,597 | |
Total | $625,025 | 3,878,027 | 3,181,666 | 2,453,902 |
PREOPENING_EXPENSES_Details
PRE-OPENING EXPENSES (Details) | 12 Months Ended | |||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | |
PRE-OPENING EXPENSES | ||||
Rents | 163,155 | 186,656 | 191,538 | |
Personnel costs | 7,217 | 8,700 | 15,488 | |
Others | 15,953 | 15,928 | 23,664 | |
Total | $30,030 | 186,325 | 211,284 | 230,690 |
SHAREBASED_COMPENSATION_Detail
SHARE-BASED COMPENSATION (Details) | 12 Months Ended | 0 Months Ended | 1 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | 12 Months Ended | |||||||||||||||
Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2012 | Dec. 31, 2012 | Jul. 31, 2012 | Jul. 31, 2012 | Dec. 31, 2014 | Jul. 31, 2012 | Jul. 31, 2012 | Jul. 31, 2012 | Jul. 31, 2012 | Jul. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Feb. 28, 2007 | Oct. 31, 2008 | Jun. 30, 2007 | Jul. 31, 2010 | Sep. 30, 2009 | |
Share options | Share options | Share options | Share options | Share options | Share options | Share options | Share options | Share options | Nonvested restricted stock | Second anniversary of the stated vesting commencement date | Vesting ratably over the following two years | Incentive Award Plans | Incentive Award Plans | Incentive Award Plans | Incentive Award Plans | Incentive Award Plans | 2007 Global Share Plan | 2008 Global Share Plan | 2008 Global Share Plan | 2009 Share Incentive Plan | 2009 Share Incentive Plan | |
USD ($) | CNY | USD ($) | CNY | Performance Condition | Performance Condition | Performance Condition | Performance Condition | Performance Condition | Performance Condition | Share options | Share options | Maximum | Share options | Nonvested restricted stock | Second anniversary of the stated vesting commencement date | Vesting ratably over the following two years | ||||||
Minimum | Maximum | Performance Condition | Performance Condition | |||||||||||||||||||
Share based compensation | ||||||||||||||||||||||
Share-based payment award, maximum number of incentive award available (in shares) | 10,000,000 | 7,000,000 | 3,000,000 | 15,000,000 | 3,000,000 | |||||||||||||||||
Share-based payment award, contractual term | 10 years | |||||||||||||||||||||
Share-based payment award, vesting percentage | 50.00% | 50.00% | 50.00% | 50.00% | ||||||||||||||||||
Period for remaining percentage vested | 2 years | 2 years | ||||||||||||||||||||
Share-based payment award, option granted (in shares) | 24,456,389 | |||||||||||||||||||||
Share-based payment award, nonvested restricted stocks (in shares) | 5,613,738 | |||||||||||||||||||||
Number of options, granted (in shares) | 319,480 | 319,480 | 1,475,366 | |||||||||||||||||||
Period with ending date of December 31, 2014, for assessment of performance or market conditions | 3 years | 3 years | ||||||||||||||||||||
Percentage of option exercisable | 0.00% | 200.00% | ||||||||||||||||||||
Number of options granted based on the actual performance | 869,232 | |||||||||||||||||||||
Weighted-average grant date fair value for options granted (in CNY or dollars per share) | $2.57 | 15.79 | $1.35 | 8.52 |
SHAREBASED_COMPENSATION_Detail1
SHARE-BASED COMPENSATION (Details 2) (Share options) | 12 Months Ended | |||||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | Minimum | Maximum | |
Share based compensation | ||||||
Suboptimal exercise factor | 4.4 | 4.4 | 7.45 | 7.66 | ||
Risk-free interest rate, minimum (as a percent) | 1.89% | 1.89% | 0.81% | |||
Risk-free interest rate, maximum (as a percent) | 1.99% | 1.99% | 1.19% | |||
Volatility, minimum (as a percent) | 47.22% | 47.22% | 51.35% | |||
Volatility, maximum (as a percent) | 47.75% | 47.75% | 51.89% | |||
Life of option | 6 years | 6 years | 6 years | |||
Share option activity under the option plans | ||||||
Share options outstanding at the beginning of the period (in shares) | 6,825,784 | 6,825,784 | ||||
Granted (in shares) | 319,480 | 319,480 | ||||
Adjusted based on actual performance (in shares) | -606,134 | -606,134 | ||||
Forfeited (in shares) | -26,128 | -26,128 | ||||
Exercised (in shares) | -1,591,004 | -1,591,004 | -2,802,488 | -1,889,872 | ||
Share options outstanding at the end of the period (in shares) | 4,921,998 | 4,921,998 | ||||
Share options vested or expected to vest (in shares) | 4,842,378 | 4,842,378 | ||||
Share options exercisable (in shares) | 3,827,558 | 3,827,558 | ||||
Weighted Average Exercise Price | ||||||
Share options outstanding at the beginning of the period (in dollars per shares) | $2.12 | |||||
Granted (in dollars per shares) | $5.48 | |||||
Adjusted based on actual performance (in dollars per share) | $2.75 | |||||
Forfeited (in dollars per shares) | $6.23 | |||||
Exercised (in dollars per shares) | $2.14 | |||||
Share options outstanding at the end of the period (in dollars per shares) | $2.23 | |||||
Share options vested or expected to vest (in dollars per shares) | $2.20 | |||||
Share options exercisable (in dollars per shares) | $1.90 | |||||
Weighted Average Remaining Contractual Life and Aggregate Intrinsic Value | ||||||
Share options outstanding, Weighted average remaining contractual life | 4 years 4 days | 4 years 4 days | ||||
Share options vested or expected to vest, Weighted average remaining contractual life | 4 years 15 days | 4 years 15 days | ||||
Share options exercisable, Weighted average remaining contractual life | 4 years 11 days | 4 years 11 days | ||||
Share options outstanding, Aggregate intrinsic value | $21,344 | |||||
Share options vested or expected to vest, Aggregate intrinsic value | 21,153 | |||||
Share options exercisable, Aggregate intrinsic value | 17,873 | |||||
Total unrecognized compensation expense | 10,515 | |||||
Weighted-average period for recognition of unrecognized compensation costs | 2 years 1 month 10 days | 2 years 1 month 10 days | ||||
Aggregate intrinsic value of options exercised | 42,740 | 74,321 | 32,562 |
SHAREBASED_COMPENSATION_Detail2
SHARE-BASED COMPENSATION (Details 3) (Nonvested restricted stock) | 12 Months Ended | 1 Months Ended | ||||||||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Jul. 31, 2012 | Jul. 31, 2012 | Jul. 31, 2012 | Jul. 31, 2012 | Jul. 31, 2012 | Jul. 31, 2012 |
USD ($) | CNY | CNY | Performance or market condition | Performance or market condition | Performance or market condition | Performance or market condition | Performance or market condition | Performance Condition | Market Condition | |
Minimum | Maximum | Second anniversary of the stated vesting commencement date | Vesting ratably over the following two years | |||||||
Share based compensation | ||||||||||
Period with ending date of December 31, 2014, for assessment of performance or market conditions | 3 years | 3 years | ||||||||
Share-based payment award, vesting percentage | 50.00% | 50.00% | ||||||||
Period for remaining percentage vested | 2 years | |||||||||
Percentage of option exercisable | 0.00% | 200.00% | ||||||||
Significant assumptions | ||||||||||
Risk-free interest rate | 0.29% | |||||||||
Expected volatility | 48.41% | |||||||||
Number of nonvested restricted stocks granted based on the performance | 1,557,408 | |||||||||
Nonvested restricted stock activity | ||||||||||
Nonvested restricted stocks outstanding at the beginning of the period (in shares) | 3,637,956 | 3,637,956 | ||||||||
Granted (in shares) | 1,167,100 | 1,167,100 | 1,059,977 | 213,209 | ||||||
Adjusted based on actual performance (in shares) | 284,222 | 284,222 | ||||||||
Forfeited (in shares) | -298,818 | -298,818 | ||||||||
Vested (in shares) | -1,553,220 | -1,553,220 | ||||||||
Nonvested restricted stocks outstanding at the end of the period (in shares) | 3,237,240 | 3,237,240 | ||||||||
Weighted average grant date fair value | ||||||||||
Nonvested restricted stocks outstanding at the beginning of the period (in dollars per shares) | $3.33 | |||||||||
Granted (in dollars per shares) | $6.11 | |||||||||
Adjusted based on acutal performance (in dollars per share) | $2.75 | |||||||||
Forfeited (in dollars per shares) | $5.11 | |||||||||
Vested (in dollars per shares) | $3.04 | |||||||||
Nonvested restricted stocks outstanding at the end of the period (in dollars per shares) | $4.25 | |||||||||
Total unrecognized compensation expense | 61,063 | |||||||||
Weighted-average period for recognition of unrecognized compensation costs | 2 years 8 months 1 day | 2 years 8 months 1 day | ||||||||
Total fair value of nonvested restricted stocks, vested | 59,475 | 7,089 |
EARNINGS_PER_SHARE_Details
EARNINGS PER SHARE (Details) | 12 Months Ended | |||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | |
EARNINGS PER SHARE | ||||
Net income attributable to ordinary shareholders - basic | 307,348 | 279,858 | 174,887 | |
Net income attributable to ordinary shareholders - diluted | 307,348 | 279,858 | 174,887 | |
Weighted average ordinary shares outstanding - basic | 248,957,645 | 248,957,645 | 245,187,348 | 243,284,332 |
Incremental weighted-average ordinary shares from assumed exercise of share options and nonvested restricted stocks using the treasury stock method | 4,046,559 | 4,046,559 | 4,298,936 | 3,696,669 |
Weighted average ordinary shares outstanding - diluted | 253,004,204 | 253,004,204 | 249,486,284 | 246,981,001 |
Basic earnings per share (in RMB and USD per share) | $0.20 | 1.23 | 1.14 | 0.72 |
Diluted earnings per share (in RMB and USD per share) | $0.20 | 1.21 | 1.12 | 0.71 |
Outstanding employee options and nonvested restricted stocks | 293,512 | 293,512 | 797,981 |
INCOME_TAXES_Details
INCOME TAXES (Details) | 12 Months Ended | ||||||||||||||||||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | Dec. 31, 2009 | Dec. 31, 2008 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 |
USD ($) | CNY | CNY | CNY | PRC | PRC | PRC | PRC | PRC | PRC | PRC | China Lodging Holdings (HK) Limited | China Lodging Holdings (HK) Limited | China Lodging Holdings (HK) Limited | Starway | Starway | Starway | China Lodging Holdings Singapore Pte. Ltd. | China Lodging Holdings Singapore Pte. Ltd. | China Lodging Holdings Singapore Pte. Ltd. | Hanting Technology (Suzhou) Co., Ltd | |
HONG KONG | HONG KONG | HONG KONG | HONG KONG | HONG KONG | HONG KONG | SINGAPORE | SINGAPORE | SINGAPORE | PRC | ||||||||||||
CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | |||||||||||||
Income tax | |||||||||||||||||||||
Tax rate (as a percent) | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 25.00% | 16.50% | 16.50% | 16.50% | 16.50% | 16.50% | 16.50% | 17.00% | 17.00% | 17.00% | |
Profit tax | $18,229 | 113,105 | 104,820 | 54,169 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||
Income tax exemption period | 2 years | ||||||||||||||||||||
Period of income tax rate reduction | 3 years | ||||||||||||||||||||
Percentage of tax reduction | 50.00% |
INCOME_TAXES_Details_2
INCOME TAXES (Details 2) | 12 Months Ended | |||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | |
Tax expense (benefit) | ||||
Current Tax | 155,496 | 127,439 | 72,395 | |
Deferred taxes | -6,832 | -42,391 | -22,619 | -18,226 |
Total | 18,229 | 113,105 | 104,820 | 54,169 |
Reconciliation between the effective income tax rate and the PRC statutory income tax rate | ||||
PRC statutory tax rate | 25.00% | 25.00% | 25.00% | 25.00% |
Tax effect of other expenses that are not deductible in determining taxable profit | 2.00% | 2.00% | 3.00% | 3.00% |
Effect of different tax rate of group entities operating in other jurisdictions | -1.00% | 1.00% | ||
Effect of change in valuation allowance | 3.00% | 3.00% | 3.00% | 6.00% |
Effect of tax holiday | -3.00% | -3.00% | -3.00% | -12.00% |
Effective tax rate | 27.00% | 27.00% | 27.00% | 23.00% |
Aggregate amount and per share effect of the tax holidays | ||||
Aggregate amount | 9,131 | 12,721 | 28,139 | |
Per share effect - basic (in RMB per share) | 0.04 | 0.05 | 0.12 | |
Per share effect - diluted (in RMB per share) | 0.04 | 0.05 | 0.11 |
INCOME_TAXES_Details_3
INCOME TAXES (Details 3) (CNY) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Deferred tax assets: | ||
Net loss carryforward | 113,333 | 90,983 |
Pre-opening expenses | 306 | 393 |
Deferred revenue | 62,977 | 48,960 |
Deferred rent | 4,684 | 5,450 |
Unfavorable lease | 8,759 | 3,698 |
Bad debt provision | 1,494 | 1,892 |
Accrual for customer loyalty program | 17,869 | 3,765 |
Accrued payroll | 2,462 | 2,001 |
Other accrued expenses | 4,457 | |
Share-based compensation | 9,745 | 12,267 |
Others | 278 | 1,354 |
Valuation allowance | -62,868 | -51,596 |
Total deferred tax assets | 163,496 | 119,167 |
Deferred tax liabilities: | ||
Favorable lease | 23,545 | 24,340 |
Capitalized interest | 4,410 | 1,601 |
Fair market value for investment | 9,485 | |
Others | 1,039 | 281 |
Total deferred tax liabilities | 38,479 | 26,222 |
Deferred tax assets are analyzed as: | ||
Current | 80,026 | 51,759 |
Non-Current | 83,470 | 67,408 |
Deferred tax liabilities are analyzed as: | ||
Current | 701 | 151 |
Non-current | 37,778 | 26,071 |
INCOME_TAXES_Details_4
INCOME TAXES (Details 4) (CNY) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Valuation allowance | |||
Loss carryforwards | 453,332 | ||
Uncertain tax benefits | |||
Interest or penalty expense | 0 | 0 | 0 |
Rollforward of the unrecognized tax benefits | |||
Beginning balance | 7,122 | 4,148 | 1,494 |
Addition for tax positions | 1,223 | 2,974 | 2,654 |
Ending balance | 8,345 | 7,122 | 4,148 |
Withholding income tax rate (as a percentage) | 10.00% | ||
Withholding income tax rate with Hong Kong as holding company (as a percentage) | 5.00% | ||
Cumulated undistributed earnings of the Group's PRC subsidiaries | 806,564 | ||
Provision for PRC dividend withholding tax | 0 | ||
Period of statute of limitations | 3 years | ||
Period of statute of limitations, if the underpayment is more than the specified amount | 5 years | ||
Minimum amount of underpayment of taxes for statute of limitations to be extended to five years | 100 | ||
Period of statute of limitations for transfer pricing issues | 10 years | ||
Valuation allowance for deferred tax assets | |||
Valuation allowance | |||
Charge to costs and expenses | 29,693 | 22,158 | 18,792 |
Charge taken against allowance | 18,421 | 9,984 | 5,658 |
Addition due to acquisition | 3,139 | 1,597 |
MAINLAND_CHINA_CONTRIBUTION_PL1
MAINLAND CHINA CONTRIBUTION PLAN (Details) (CNY) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
MAINLAND CHINA CONTRIBUTION PLAN | |||
Employee benefit contributions | 143,419 | 119,015 | 93,178 |
RESTRICTED_NET_ASSETS_Details
RESTRICTED NET ASSETS (Details) (CNY) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
RESTRICTED NET ASSETS | |||
Minimum required percentage of after tax profit appropriated to general reserve fund | 10.00% | ||
Threshold percentage of general reserve fund to registered capital | 50.00% | ||
Reserve funds not distributed as cash dividends | 105,604 | 64,957 | 49,626 |
Restricted share capital of PRC subsidiaries | 2,075,975 | ||
Restricted net assets not available for distribution to the Company in the form of dividends, loans or advances | 2,181,579 |
RELATED_PARTY_TRANSACTIONS_AND2
RELATED PARTY TRANSACTIONS AND BALANCES (Details) | 12 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | 12 Months Ended | |||||||||||||||||||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Apr. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Aug. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | 31-May-12 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 |
USD ($) | CNY | CNY | CNY | Sheen Star | Starway | Starway | Starway | UBOX | UBOX | UBOX | UBOX | UBOX | UBOX | Yibang | Yibang | Ctrip | Ctrip | Ctrip | Ctrip | Ctrip | Ctrip | Ctrip | Ctrip | Ctrip | Sheen Star | |
CNY | CNY | CNY | CNY | CNY | Convertible bonds | Convertible bonds | Ordinary Shares | Ordinary Shares | CNY | CNY | CNY | CNY | CNY | Starway | Starway | Hotel reservation services | Hotel reservation services | Starway acquisition | Starway acquisition | CNY | ||||||
CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | |||||||||||||||||||
Related party transaction | ||||||||||||||||||||||||||
Percentage of equity interest owned | 19.99% | |||||||||||||||||||||||||
Equity interest percentage owned in equity method investment by the majority owner | 50.01% | |||||||||||||||||||||||||
Amount due from related parties | $2,626 | 16,293 | 658 | 256 | 16,293 | 402 | ||||||||||||||||||||
Period over which acquisition payable to be paid | 2 years | 2 years | ||||||||||||||||||||||||
Due to related party | 10,486 | 13,760 | 2,319 | 1,510 | 8,167 | 12,250 | ||||||||||||||||||||
Related party transaction, expenses | 19,235 | 17,128 | 10,945 | |||||||||||||||||||||||
Service fee | 392 | 847 | 527 | 199 | ||||||||||||||||||||||
Interest income | 541 | 1,373 | ||||||||||||||||||||||||
Percentage of ownership interest acquired | 49.00% | 51.00% | 49.00% | 51.00% | ||||||||||||||||||||||
Acquisition price in cash | 4,083 | 4,210 | 17,292 | 17,292 | ||||||||||||||||||||||
Acquisition price | 16,460 | 16,460 | ||||||||||||||||||||||||
Convertible promissory note purchased from related party | 12,122 | 75,210 | 8,074 | 8,074 | ||||||||||||||||||||||
Conversion of promissory note to ordinary shares (in shares) | 8,530,731 | 3,946,897 | ||||||||||||||||||||||||
Additional convertible promissory note purchased | 30,794 | 191,064 | 54,744 | 28,129 | 4,314 | |||||||||||||||||||||
Transfer of investment to a related party | 82,785 |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES (Details) (CNY) | Dec. 31, 2014 |
In Thousands, unless otherwise specified | |
Operating lease commitments | |
2015 | 1,791,198 |
2016 | 1,845,430 |
2017 | 1,836,051 |
2018 | 1,792,665 |
2019 | 1,752,800 |
Thereafter | 11,206,521 |
Total | 20,224,665 |
Purchase commitments | |
Purchase commitments expected to be incurred within one year related to leasehold improvements and installation of equipment for hotel operations | 114,649 |
SUBSEQUENT_EVENT_Details
SUBSEQUENT EVENT (Details) (Subsequent Event, Accor) | 0 Months Ended |
Dec. 14, 2014 | |
Subsequent Event | Accor | |
Subsequent Event [Line Items] | |
Maximum percentage of outstanding shares to l be issued as consideration | 10.00% |
SCHEDULE_I_FINANCIAL_INFORMATI1
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY (Details) | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
In Thousands, unless otherwise specified | USD ($) | CNY | USD ($) | CNY | CNY | CNY | Parent Company | Parent Company | Parent Company | Parent Company | Parent Company | Parent Company |
USD ($) | CNY | USD ($) | CNY | CNY | CNY | |||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $130,365 | 808,865 | $64,055 | 397,435 | 449,844 | 781,601 | $15,271 | 94,749 | $9,861 | 61,182 | 22,953 | 45,069 |
Other current assets | 25,881 | 160,582 | 116,979 | 675 | 4,185 | 3,639 | ||||||
Total current assets | 257,336 | 1,596,664 | 1,042,388 | 15,946 | 98,934 | 64,821 | ||||||
Other assets | 31,788 | 197,233 | 184,013 | 25 | 157 | 314 | ||||||
Investment in subsidiaries | 504,656 | 3,131,189 | 2,760,330 | |||||||||
Total assets | 996,504 | 6,182,906 | 5,185,052 | 520,627 | 3,230,280 | 2,825,465 | ||||||
Current liabilities: | ||||||||||||
Salary and welfare payable | 29,986 | 186,051 | 147,238 | 18 | 111 | |||||||
Deferred revenue | 82,885 | 514,268 | 297,284 | 59 | 364 | 1,451 | ||||||
Accrued expenses and other current liabilities | 50,449 | 313,017 | 249,185 | 2,069 | 12,841 | 7,898 | ||||||
Total current liabilities | 277,336 | 1,720,761 | 1,402,809 | 2,146 | 13,316 | 9,349 | ||||||
Deferred revenue | 25,046 | 155,395 | 118,818 | 363 | ||||||||
Total liabilities | 477,741 | 2,964,193 | 2,357,261 | 2,146 | 13,316 | 9,712 | ||||||
Equity: | ||||||||||||
Ordinary shares (US$0.0001 par value per share; 8,000,000,000 shares authorized; 247,551,999 and 250,747,255 shares issued and outstanding as of December 31, 2013 and 2014, respectively) | 30 | 184 | 182 | 30 | 184 | 182 | ||||||
Additional paid-in capital | 383,839 | 2,381,568 | 2,315,083 | 383,839 | 2,381,568 | 2,315,083 | ||||||
Retained earnings | 136,547 | 847,220 | 539,872 | 136,547 | 847,220 | 539,872 | ||||||
Accumulated other comprehensive loss | -1,935 | -12,008 | -39,384 | -1,935 | -12,008 | -39,384 | ||||||
Total China Lodging Group, Limited shareholders' equity | 518,481 | 3,216,964 | 2,815,753 | 518,481 | 3,216,964 | 2,815,753 | ||||||
Total liabilities and equity | $996,504 | 6,182,906 | 5,185,052 | $520,627 | 3,230,280 | 2,825,465 |
SCHEDULE_I_FINANCIAL_INFORMATI2
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY (Details 2) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
BALANCE SHEETS | ||
Ordinary shares, par value (in dollars per share) | $0.00 | $0.00 |
Ordinary shares, shares authorized | 8,000,000,000 | 8,000,000,000 |
Ordinary shares, shares issued | 250,747,255 | 247,551,999 |
Ordinary shares, shares outstanding | 250,747,255 | 247,551,999 |
Parent Company | ||
BALANCE SHEETS | ||
Ordinary shares, par value (in dollars per share) | $0.00 | $0.00 |
Ordinary shares, shares authorized | 8,000,000,000 | 8,000,000,000 |
Ordinary shares, shares issued | 250,747,255 | 247,551,999 |
Ordinary shares, shares outstanding | 250,747,255 | 247,551,999 |
SCHEDULE_I_FINANCIAL_INFORMATI3
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY (Details 3) | 12 Months Ended | |||||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | Parent Company | Parent Company | Parent Company | Parent Company | |
USD ($) | CNY | CNY | CNY | |||||
Operating costs and expenses: | ||||||||
Selling and marketing expenses | $30,209 | 187,435 | 138,129 | 102,814 | $25 | 157 | 157 | 157 |
General and administrative expenses | 55,141 | 342,128 | 284,756 | 224,111 | 5,711 | 35,434 | 33,308 | 24,902 |
Total operating costs and expenses | 740,405 | 4,593,915 | 3,815,835 | 3,011,517 | 5,736 | 35,591 | 33,465 | 25,059 |
Income from operations | 62,754 | 389,364 | 380,544 | 219,733 | -5,736 | -35,591 | -33,465 | -25,059 |
Interest income | 3,733 | 23,162 | 6,856 | 14,554 | 12 | 75 | 6 | 131 |
Foreign exchange gain (loss) | -39 | -246 | 21 | -2,000 | -141 | |||
Other income, net | 390 | 2,419 | 2,438 | 2,208 | ||||
Income in investment in subsidiaries | 54,870 | 340,445 | 310,879 | 197,748 | ||||
Net income attributable to China Lodging Group, Limited | 49,536 | 307,348 | 279,858 | 174,887 | 49,536 | 307,348 | 279,858 | 174,887 |
Other comprehensive income | ||||||||
Unrealized securities holding gains , net of tax of nil, nil and 9,485 for 2012, 2013 and 2014 | 4,587 | 28,458 | 4,587 | 28,458 | ||||
Foreign currency translation adjustments, net of tax of nil for 2012,2013 and 2014 | -175 | -1,082 | -976 | 758 | ||||
Comprehensive income attributable to China Lodging Group, Limited | $53,948 | 334,724 | 278,882 | 175,645 | $53,948 | 334,724 | 278,882 | 175,645 |
SCHEDULE_I_FINANCIAL_INFORMATI4
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY (Details 4) (CNY) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
STATEMENTS OF COMPREHENSIVE INCOME | |||
Unrealized securities holding gains, tax | 9,485 | 0 | 0 |
Foreign currency translation adjustments, tax | 0 | 0 | 0 |
Parent Company | |||
STATEMENTS OF COMPREHENSIVE INCOME | |||
Unrealized securities holding gains, tax | 9,485 | 0 | 0 |
Foreign currency translation adjustments, tax | 0 | 0 | 0 |
SCHEDULE_I_FINANCIAL_INFORMATI5
SCHEDULE I FINANCIAL INFORMATION FOR PARENT COMPANY (Details 5) | 12 Months Ended | |||||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | Parent Company | Parent Company | Parent Company | Parent Company | |
USD ($) | CNY | CNY | CNY | |||||
Operating activities: | ||||||||
Net income | $48,737 | 302,391 | 283,695 | 179,504 | $49,536 | 307,348 | 279,858 | 174,887 |
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Share-based compensation | 5,147 | 31,937 | 30,468 | 20,837 | 5,147 | 31,937 | 30,468 | 20,837 |
Income in investment in subsidiaries | -54,870 | -340,445 | -310,879 | -197,748 | ||||
Changes in operating assets and liabilities: | ||||||||
Deferred revenue | 40,867 | 253,562 | 115,787 | 90,468 | -234 | -1,450 | -1,552 | -1,508 |
Other current assets | -6,829 | -42,369 | -26,400 | -29,404 | 238 | 1,477 | 915 | -2,412 |
Salary and welfare payables | 6,256 | 38,813 | 28,768 | 36,809 | 18 | 111 | ||
Accrued expenses and other current liabilities | 9,508 | 58,995 | 62,545 | 36,076 | 797 | 4,943 | 7,058 | 840 |
Net cash provided by operating activities | 234,345 | 1,454,015 | 1,070,169 | 715,720 | 632 | 3,921 | 5,868 | -5,104 |
Investing activities: | ||||||||
Investment in subsidiaries | -35,227 | |||||||
Receipt of investment in subsidiaries | 1,431 | 8,876 | 12,320 | |||||
Net cash used in investing activities | -171,355 | -1,063,186 | -1,152,248 | -1,068,130 | 1,431 | 8,876 | 12,320 | -35,227 |
Financing activities: | ||||||||
Net proceeds from issuance of ordinary shares upon exercise of option | 3,382 | 20,985 | 28,122 | 18,520 | 3,382 | 20,985 | 28,122 | 18,520 |
Net cash provided by financing activities | 3,495 | 21,683 | 30,646 | 19,895 | 3,382 | 20,985 | 28,122 | 18,520 |
Effect of exchange rate changes on cash and cash equivalents | -175 | -1,082 | -976 | 758 | -35 | -215 | -8,081 | -305 |
Net increase (decrease) in cash and cash equivalents | 66,310 | 411,430 | -52,409 | -331,757 | 5,410 | 33,567 | 38,229 | -22,116 |
Cash and cash equivalents at the beginning of the year | 64,055 | 397,435 | 449,844 | 781,601 | 9,861 | 61,182 | 22,953 | 45,069 |
Cash and cash equivalents at the end of the year | 130,365 | 808,865 | 397,435 | 449,844 | 15,271 | 94,749 | 61,182 | 22,953 |
Supplemental schedule of non-cash investing and financing activities: | ||||||||
Proceeds from issuance of ordinary shares upon exercise of options included in receivables | $191 | 1,185 | 1,318 | 290 | $191 | 1,185 | 1,318 | 290 |
SCHEDULE_II_VALUATION_AND_QUAL1
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (Details) (CNY) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Allowance for doubtful accounts of accounts receivables and other receivables: | |||
Valuation And Qualifying Accounts | |||
Balance at Beginning of Year | 7,756 | 3,183 | 2,945 |
Charge to Costs and Expenses | 4,770 | 4,573 | 1,238 |
Write off | -6,049 | -1,000 | |
Balance at end of Year | 6,477 | 7,756 | 3,183 |
Valuation allowance for deferred tax assets | |||
Valuation And Qualifying Accounts | |||
Balance at Beginning of Year | 51,596 | 36,283 | 21,552 |
Charge to Costs and Expenses | 29,693 | 22,158 | 18,792 |
Addition due to acquisition | 3,139 | 1,597 | |
Charge Taken Against Allowance | -18,421 | -9,984 | -5,658 |
Balance at end of Year | 62,868 | 51,596 | 36,283 |