<PAGE>
SECURITIES AND EXHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-27360
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EXTENDED STAY AMERICA, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3996573
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 E. BROWARD BOULEVARD, FT. LAUDERDALE, FLORIDA 33394
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 713-1600
------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- --------
At July 31, 1996, the registrant had issued and outstanding an aggregate of
68,070,384 shares of Common Stock.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXTENDED STAY AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED) (1)
<S> <C> <C>
Current assets:
Cash and cash equivalents.............. $352,293,387 $123,357,510
Refundable deposits.................... 152,438 290,214
Supply inventories..................... 488,503 92,817
Prepaid expenses....................... 503,724 316,245
Other current assets................... 842,543 66,871
------------ ------------
Total current assets............... 354,280,595 124,123,657
------------ ------------
Property and equipment, at cost.......... 96,663,661 18,336,389
Less accumulated depreciation........ 662,047 130,852
------------ ------------
96,001,614 18,205,537
Site deposits and preacquisition costs... 6,215,227 1,931,215
Deferred loan costs...................... 8,712,102 5,293,119
Other assets............................. 247,831 62,825
------------ ------------
$465,457,369 $162,727,650
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 2,685,353 $ 668,412
Accrued salaries and related expenses.. 332,994 271,230
Due to related parties................. 79,770 133,149
Other accrued expenses................. 2,527,070 679,176
Deferred revenue....................... 561,769 11,941
Note payable........................... 630,200
------------ ------------
Total current liabilities.......... 6,186,956 2,394,108
------------ ------------
Commitments
Shareholders' equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized, no
shares issued and outstanding........
Common stock, $.01 par value,
200,000,000 shares authorized,
65,600,384 and 44,261,710 shares
issued and outstanding............... 656,004 442,617
Additional paid in capital............. 459,936,275 148,087,050
Accumulated deficit.................... (1,321,866) (1,307,422)
------------ ------------
Total shareholders' equity......... 459,270,413 147,222,245
------------ ------------
$465,457,369 $149,616,353
============ ============
</TABLE>
- -----------------
(1) Derived from audited financial statements
See notes to unaudited condensed consolidated financial statements
1
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EXTENDED STAY AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- -----------------------------
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Room revenue.......................... $ 2,253,785 $ 3,391,626
Other revenue......................... 77,823 110,811
Management fees....................... $ 10,064 $ 10,064
------------- ------------- ------------- -------------
Total revenue....................... 2,331,608 10,064 3,502,437 10,064
------------- ------------- ------------- -------------
Cost and expenses:
Property operating expenses.......... 896,075 1,338,615
Corporate operating and property
management expenses................ 2,801,562 521,363 5,205,950 769,964
Depreciation and amortization......... 342,669 2,779 546,012 2,779
------------- ------------- ------------- -------------
Total costs and expenses........... 4,040,306 524,142 7,090,577 772,743
------------- ------------- ------------- -------------
Loss from operations............... (1,708,698) (514,078) (3,588,140) (762,679)
Interest income......................... 2,123,564 3,573,696
------------- ------------- ------------- -------------
Net income (loss).................. $ 414,866 $ (514,078) $ (14,444) $ (762,679)
============= ============= ============= =============
Net income (loss) per common share $ 0.01 $ (0.02) $ (0.00) $ (0.03)
============= ============= ============= =============
Weighted average common shares
outstanding...................... 52,598,873 22,978,034 48,126,580 22,978,034
============= ============= ============= =============
</TABLE>
See notes to unaudited condensed consolidated financial statements
2
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EXTENDED STAY AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................... $ (14,444) $ (762,679)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization........... 546,012 2,779
Write-off of site deposits and
preacquisition costs.................. 382,950
Changes in operating assets and
liabilities........................... 767,458 291,299
----------- -----------
Net cash provided by (used in)
operating activities.............. 1,681,976 (468,601)
----------- -----------
Cash flows from investing activities:
Acquisition of extended stay properties..... (3,746,346)
Additions to property and equipment......... (49,175,779) (1,878,767)
Payment for site deposits and
preacquisition costs...................... (4,567,545) (568,890)
Payments for other assets................... (158,365) (28,036)
----------- -----------
Net cash used in investing activities... (57,648,035) (2,475,693)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock...... 289,023,856 2,000
Additions to deferred loan costs............ (3,439,686)
Additions to prepaid registration costs..... (52,034)
Proceeds from related party loans........... 4,183,196
Payments of related party loans............. (1,207,065)
Payment of note payable..................... (630,200)
----------- -----------
Net cash provided by financing activities. 284,901,936 2,978,131
----------- -----------
Increase in cash and cash equivalents......... 228,935,877 33,837
Cash and cash equivalents at beginning of
period...................................... 123,357,510
----------- -----------
Cash and cash equivalents at end of period.... $352,293,387 $ 33,837
============ ===========
Noncash investing and financing transactions:
Issuance of common stock for acquisition
of extended stay properties............... $ 22,422,120
============
Capitalized or deferred items included in
accounts payable and accrued liabilities.. $ 3,868,406 $ 974,868
============ ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements
3
<PAGE>
EXTENDED STAY AMERICA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1 -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited and
include the accounts of Extended Stay America, Inc. and subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
The condensed consolidated balance sheet data at December 31, 1995 was derived
from audited financial statements, but does not include all disclosures required
by generally accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month and six-month periods ended June 30, 1996
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
On May 9, 1996, the Board of Directors of the Company declared a 2-for-1 stock
split effected in the form of a stock dividend payable on July 19, 1996 to
shareholders of record as of the close of business on July 5, 1996.
Accordingly, Common Stock outstanding or issued, the weighted average number of
common and common equivalent shares and per share amounts have been
retroactively adjusted to give effect to the stock split.
Certain previously reported amounts have been reclassified to conform with the
current period's presentation.
NOTE 2 -- EARNINGS PER COMMON SHARE
The net income or net loss per common share amount in the statement of
operations for the three-month and six-month periods ended June 30, 1996 has
been computed in accordance with Accounting Principles Board Opinion (APB) No.
15. The net loss per common share amount for the three-month and six-month
periods ended June 30, 1995 has been computed in accordance with a Staff
Accounting Bulletin (SAB) of the Securities and Exchange Commission. According
to the SAB, equity securities, including stock, warrants, options and other
potentially dilutive securities, issued within a twelve-month period prior to an
initial public offering of Common Stock must be treated as Common Stock
equivalents when computing earnings per share for all periods presented if the
issue price of the Common Stock or the exercise price of the warrants, options
or other potentially dilutive securities is substantially less than the initial
public offering price, including loss years where the impact of the incremental
shares is anti-dilutive. As permitted by the SAB, the treasury stock method has
been used in determining the weighted average number of shares of Common Stock
outstanding during the period presented.
NOTE 3 -- ACQUISITION OF EXTENDED STAY PROPERTIES
On January 26, 1996, the Company acquired an existing extended stay property
from Apartment/Inn, L.P. for approximately $8,324,000 which was paid for by the
issuance of 587,258 shares of its Common Stock, par value $.01 per share
("Common Stock") plus the payment of related expenses of $106,000 in cash.
On February 23, 1996, the Company acquired two existing extended stay
properties from Hometown Inn I, LTD and Hometown Inn II, LTD for approximately
$9,603,000 which was paid for by the issuance of 857,216 shares of Common Stock
and $75,000 in cash plus the payment of related expenses of $175,000 in cash.
4
<PAGE>
On June 25, 1996, the Company acquired an existing extended stay property from
Apartment Inn Partners/Gwinnett, L.P. for approximately $5,100,000 which was
paid for by the issuance of 344,200 shares of Common Stock and approximately
$23,000 in cash.
These acquisitions were accounted for using the purchase method of accounting
and, accordingly, the results of operations of the properties are included in
the unaudited condensed consolidated statement of operations from the date of
acquisition.
The following unaudited pro forma condensed consolidated statements of
operations are presented as if the acquisition of the above properties and the
related issuances of shares of Common Stock had occurred on January 9, 1995 (the
date of inception of the Company). The statement for 1995 also is presented as
if the acquisition of the Marietta, Georgia extended stay lodging facility in
August 1995 had occurred on January 9, 1995 and reflects estimated incremental
expenses to operate as a publicly held company as if it were publicly held on
the date of inception.
<TABLE>
<CAPTION>
PRO FORMA FOR THE
PERIOD FROM
PRO FORMA FOR THE SIX JANUARY 9, 1995
MONTHS ENDED JUNE (INCEPTION) THROUGH
30, 1996 JUNE 30, 1995
--------------------- -------------------
<S> <C> <C>
Total revenue................ $ 4,628,629 $ 3,104,270
Total costs and expenses..... 7,716,276 3,179,544
----------- -----------
Loss from operations....... (3,087,647) (75,274)
Interest income.............. 3,573,696
----------- -----------
Net income (loss) before
income taxes............. 486,049 (75,274)
Provision for income taxes... 190,000
----------- -----------
Net income (loss).......... $ 296,049 $ (75,274)
=========== ===========
Net income (loss) per
common share............. $ 0.01 $ (0.00)
=========== ===========
Weighted average common
shares outstanding....... 48,337,656 25,345,170
=========== ===========
</TABLE>
NOTE 4 -- OTHER MATTERS
Subsequent to December 31, 1995, the Company entered into (i) a 10-year lease
for a suite at Joe Robbie Stadium for a base rental of $115,000 per year,
subject to certain additional charges and periodic escalation, and (ii) a 3-year
lease for a suite at Homestead Motor Sports Complex for a base rental of $53,250
per year, subject to certain additional charges. The Chairman of the Company's
Board of Directors owns Joe Robbie Stadium and has an approximately 50% interest
in Homestead Motor Sports Complex.
In May 1996 the Company executed a mortgage facility to provide up to $300
million in mortgage financing, subject to certain conditions and limitations,
for completed facilities. In connection with the establishment of this new
facility, a then-existing mortgage facility was reduced from $200 million to
$100 million.
On June 5, 1996 the Company completed the sale of 19,550,000 shares of Common
Stock in an underwritten public offering at a price to the public of $15.50 per
share. The net proceeds to the Company were approximately $290 million after
the deduction of underwriting discounts and commissions and other offering
expenses.
5
<PAGE>
NOTE 5 -- SUBSEQUENT EVENTS
On July 9, 1996, the Company acquired four extended stay properties from four
related sellers for approximately $34,000,000 which was paid for by the issuance
of 2,470,000 shares of Common Stock and approximately $500,000 in cash. The
Company also assumed liabilities aggregating approximately $470,000 under
certain leases for personal property.
On July 29, 1996, the Company acquired a traditional lodging facility from
Kipling Hospitality Enterprise Corporation for approximately $3,025,000 which
the Company intends to remodel and convert to the economy extended stay format.
In consideration for this facility, the Company issued 200,000 shares of Common
Stock and paid an additional $24,500 in cash.
These acquisitions will be accounted for using the purchase method of
accounting and, accordingly, the results of operations of the properties will be
included in the unaudited condensed consolidated statement of operations from
the date of acquisition.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company was organized in January 1995 to develop, own and manage extended
stay lodging facilities. The Company began construction of its first lodging
facility in Spartanburg, South Carolina on February 1, 1995. This facility was
completed and commenced operations in August 1995. The Company's activities
during the quarter and six months ended June 30, 1995 consisted primarily of
corporate organization, site selection, and site development. The Company did
not have operating facilities during the quarter or six months ended June 30,
1995. On May 1, 1995 the Company contracted to manage an extended stay facility
in Marietta, Georgia which was subsequently acquired by the Company on August
18, 1995.
The Company completed construction of 2 properties, acquired 2 operating
properties, and commenced construction on 21 properties during the quarter ended
June 30, 1996. For the six months ended June 30, 1996, the Company completed
construction of 2 properties, acquired 5 operating properties, and commenced
construction on 29 properties. As of June 30, 1996 the Company had 9 operating
facilities, 36 facilities under construction and options to purchase 83 sites
for development in 31 states. The Company expects to complete the construction
of the facilities currently under construction at various dates during 1996 and
early 1997 and to commence construction on more than 30 of the sites under
option during 1996. There can be no assurances, however, that the Company will
complete the acquisition of the sites under option or, if acquired, commence
construction on them. The Company's ability to complete the acquisition of the
sites under option or commence construction may be materially impacted by
various factors including zoning, permitting, environmental due diligence issues
and weather-induced construction delays.
Although the Company expects that the construction and development of new
extended stay lodging facilities will be its primary means of expansion, the
Company has also made, and may continue making, acquisitions of existing
extended stay facilities or other properties that are suitable for conversion to
the extended stay concept.
As indicated above, the Company acquired two operating facilities during the
quarter ended June 30, 1996. On May 10, 1996, the Company acquired a 59-room
extended stay lodging facility and adjacent land on which the Company intends to
build a new 60-room economy extended stay lodging facility in Lenexa, Kansas,
for a purchase price of approximately $3.3 million in cash. On June 25, 1996,
the Company acquired a 126-room economy extended stay lodging facility in
Lawrenceville, Georgia for which the Company issued 344,200 shares of Common
Stock and paid an additional $23,000 in cash. These acquisitions were accounted
for using the purchase method of accounting.
On May 1, 1996, the Company entered into an agreement to acquire a 145-room
traditional lodging facility located in Lakewood, Colorado, which the Company
intends to remodel and convert to the economy extended stay format. The Company
closed on the purchase of this facility on July 29, 1996. In consideration for
this facility, the Company issued 200,000 shares of Common Stock and paid an
additional $24,500 in cash. On June 26, 1996, the Company entered into
agreements to acquire four extended stay lodging facilities in Las Vegas,
Nevada. The Company closed on the purchase of these facilities on July 9, 1996.
Each of the facilities is managed by M & M Development, with which the Company
entered into a two-year consulting agreement with a fee of $120,000 per year.
In consideration for these facilities, the Company issued 2,470,000 shares of
its Common Stock and paid an additional $500,000 in cash. The Company also
assumed liabilities aggregating approximately $470,000 under certain leases for
personal property. The Company will account for these acquisitions using the
purchase method of accounting.
RESULTS OF OPERATIONS
PROPERTY OPERATIONS
The Company did not have operating facilities during the quarter or six
months ended June 30, 1995. The Company began the quarter ended June 30, 1996
with five operating facilities. The Company completed construction and
commenced operations of 2 properties and acquired 2 operating properties during
the quarter ended June 30, 1996. The nine properties realized average occupancy
of 82% and average weekly room rates of $219 for the periods owned and operated
by the Company during the quarter ended June 30, 1996. For the six
7
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months ended June 30, 1996, the Company's operating properties realized average
occupancy of 85% and average weekly room rates of $212, for the periods owned
and operated by the Company. The decline in occupancy rates for the quarter
ended June 30, 1996 is primarily attributable to the addition of two new
properties which require a period of time to obtain stabilized occupancy. It is
expected that the Company's average occupancy will continue to decline for the
remainder of 1996 due to the addition of new properties. The increase in average
weekly room rates for the quarter ended June 30, 1996 was also primarily due to
the addition of new properties, both newly constructed and acquired, in markets
with higher standard weekly rates. Changes in average weekly rates for the
remainder of 1996 will depend primarily upon the geographic dispersion of
properties opened.
The operating properties recognized total revenue of $2,331,608 and $3,502,437
for the quarter and six months, respectively, ended June 30, 1996. Property
operating expenses, consisting of all expenses directly allocable to the
operation of the properties, but excluding any allocation of corporate operating
expenses and depreciation, were $896,075 (38.4% of total revenue) and $1,338,615
(38.2% of total revenue) for the quarter and six months, respectively, ended
June 30, 1996. Property operating expenses include, primarily, salaries and
wages, telephone, utilities, property taxes, insurance, maintenance and supply
costs.
Depreciation and amortization of the cost of the facilities and other assets
in the amounts of $332,882 and $525,913 for the quarter and six months,
respectively, ended June 30, 1996, was provided using the straight-line method
over the estimated useful lives of the assets. These provisions reflect a
prorata allocation of the annual depreciation and amortization charge for the
period for which the properties were in operation.
CORPORATE OPERATIONS
Corporate operating and property management expenses include all expenses not
directly related to the development or operation of facilities. Expenses of
$2,801,562 for the quarter ended June 30, 1996 and $521,363 for the quarter
ended June 30, 1995 consist primarily of personnel expenses, professional and
consulting fees, and related travel expenses, including costs that are not
directly related to a site that will be developed by the Company. The increase
in corporate operating and property management expenses for the quarter ended
June 30, 1996 as compared with the quarter ended June 30, 1995 reflects an
increase in personnel and related expenses in connection with the Company's
increased level of operating properties and site development. Similarly, these
expenses increased from $769,964 for the six months ended June 30, 1995 to
$5,205,950 for the six months ended June 30, 1996. The total amount of these
expenses will increase in the future with the development of additional
facilities.
The Company realized interest income of $2,123,564 and $3,573,696 for the
quarter and six months, respectively, ended June 30, 1996. This interest income
was primarily attributable to the short-term investment of funds received from
offerings of the Company's Common Stock in August 1995, December 1995 and May
1996. There were no funds held for investment by the Company during the quarter
and six months ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash balances of $352,293,387 as of June 30, 1996 compared to
$33,837 as of June 30, 1995. Substantially all of the cash balances as of June
30, 1996 were invested, utilizing domestic commercial banks, in commercial paper
with maturities of less than sixty days and with credit ratings of A1/P1 or
greater. The market value of the securities held approximates the carrying
amount. On May 9, 1996, the Board of Directors of the Company declared a 2-for-
1 stock split effected in the form of a stock dividend payable on July 19, 1996
to shareholders of record as of the close of business on July 5, 1996 (the
"Stock Split"). Accordingly, all shares and share prices included herein have
been retroactively adjusted to give effect to the Stock Split. On June 5, 1996,
the Company completed an underwritten public offering of its Common Stock,
consisting of 19,550,000 shares of Common Stock at a price to the public of
$15.50 per share. The net proceeds to the Company from this offering were
approximately $290 million after the deduction of underwriting discounts and
commissions and other offering expenses.
During the six months ended June 30, 1996, the Company acquired five extended
stay lodging properties, completed construction of two facilities and had 36
facilities under construction at June 30, 1996. In consideration for the five
acquired properties, the Company issued shares of its Common Stock valued at
$22,422,120 and paid cash of $3,746,346. During the six months ended June 30,
1996, a total of $49,175,779 was used for property and equipment for the two
completed facilities, the 36 facilities under construction and improvements to
the five
8
<PAGE>
acquired facilities. This compares to $1,878,767 used to develop one property
during the first six months of 1995. A total of $4,567,545 was used for site
deposits and preacquisition costs in the six months ended June 30, 1996 compared
to $568,890 used for such costs in the comparable period of 1995, reflecting the
increased level of development activity.
During the six months ended June 30, 1996, the Company received proceeds from
the issuance of its Common Stock aggregating $289,023,856 and made payments for
deferred loan costs of $3,439,686. In addition, the Company repaid outstanding
indebtedness of $630,200 under a note issued in connection with the purchase of
land for development. This note was due January 2, 1996 and was repaid from the
Company's cash balances. During the six months ended June 30, 1995, the Company
received proceeds from related party loans of $4,183,196 and made payments
against such loans of $1,207,065. These loans were used to fund the development
of one property and for working capital needs.
The Company expects to finance the construction and development of its
lodging facilities principally with its cash balances and with loans under
mortgage facilities. At the beginning of the quarter ended June 30, 1996, the
Company had a credit facility agreement providing up to $200 million in mortgage
financing for completed facilities, subject to certain conditions and
limitations. On May 17, 1996, the Company entered into an additional credit
facility agreement which provides up to $300 million in mortgage financing,
subject to certain conditions and limitations, for completed facilities. On
May 24, 1996, the Company reduced the size of the original mortgage facility
from $200 million to $100 million. As a result of these transactions during the
quarter ended June 30, 1996, the Company has two credit facility agreements
which provide for a total of $400 million in mortgage financing. No advances
had been made under either facility as of June 30, 1996.
In the future, the Company may seek to increase the amount of its credit
facilities, negotiate additional credit facilities, or issue corporate debt
instruments. Any debt incurred or issued by the Company may be secured or
unsecured, with a fixed or variable interest rate, and may be subject to such
terms as the Board of Directors of the Company deems prudent. The Company
expects that it will need to procure additional financing over time, although
there can be no assurance that such financing will be available when needed.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
The statements contained in this Report on Form 10-Q that are not historical
facts are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. A number of important factors could
cause the Company's actual results for 1996 and beyond to differ materially from
those expressed in any forward-looking statements made by, or on behalf of, the
Company. These factors include, among other things, the Company's limited
operating history and uncertainty as to the Company's future profitability; the
ability to meet construction and development schedules and budgets; the ability
to develop and implement operational and financial systems to manage rapidly
growing operations; the uncertainty as to the consumer demand for economy
extended stay lodging; increasing competition in the extended stay lodging
market; the ability to integrate and successfully operate acquired properties
and the risks associated with such properties; the ability to obtain financing
on acceptable terms to finance the Company's growth strategy; and general
economic conditions as they may impact the overall lodging industry.
9
<PAGE>
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following summarizes the votes at the Annual Meeting of the Company's
shareholders held on May 9, 1996 and does not give effect to the 2-for-1 stock
split paid on July 19, 1996 to shareholders of record on July 5, 1996:
<TABLE>
<CAPTION>
Matter For Against Abstain Non-Vote Shares Voted
- ------ --- ------- ------- -------- ------------
<S> <C> <C> <C> <C> <C>
Election of Directors -
H. Wayne Huizenga 20,586,167 -- 4,145 -- 20,590,312
George D. Johnson, Jr. 20,586,217 -- 4,095 -- 20,590,312
Donald F. Flynn 20,586,117 -- 4,195 -- 20,590,312
Stewart H. Johnson 20,586,217 -- 4,095 -- 20,590,312
John J. Melk 20,586,217 -- 4,095 -- 20,590,312
Peer Pederson 20,586,217 -- 4,095 -- 20,590,312
Matter For Against Abstain Non-Vote Shares Voted
- ------ --- ------- ------- -------- ------------
Ratification of the
Appointment of Coopers &
Lybrand L.L.P as
Independent Auditors for
the Company for 1996 20,575,436 13,445 1,431 -- 20,590,312
Matter For Against Abstain Non-Vote Shares Voted
- ------ --- ------- ------- -------- ------------
Approval of the Extended
Stay America, Inc.
Amended and Restated 1996 18,453,781 358,805 7,946 1,769,780 20,590,312
Employee Stock Option Plan
</TABLE>
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
2.1 Agreement to Purchase Hotel and related agreements dated May 1, 1996
among ESA Properties, Inc., Kipling Hospitality Enterprises
Corporation, and J. Craig McBride (incorporated by reference to
Exhibit 2.4 to the Company's Report on Form 10-Q for the quarter
ended March 31, 1996)
2.2 Agreement to Purchase Hotel dated as of June 21, 1996 and related
agreements among the Company, ESA 0996, Inc., Apartment Inn
Partners/Gwinnett, L.P., and Rosa Dziewienski Pajonk (incorporated
by reference to Exhibit 2.5 of the Company's Registration Statement
on Form S-1 (Registration No. 333-102))
2.3 Agreements to Purchase Hotels dated as of June 25, 1996 and related
agreements among the Company, ESA Properties, Inc., Boulder Manor,
Inc., Melrose Suites, Inc., St. Louis Manor, Inc., and Michael J.
Mona, Jr. and Dean O'Bannon (incorporated by reference to Exhibit
2.6 to the Company's Registration Statement on Form S-1
(Registration No. 333-102))
10.1(a) Commitment letter for a mortgage facility between the Company and CS
First Boston Mortgage Capital Corporation ("CSFBMC") (incorporated
by reference to Exhibit 10.15 to the Company's Report on Form 10-Q
for the quarter ended March 31, 1996)
10.1(b) Credit Facility Agreement dated May 24, 1996, between the Company and
CSFBMC (incorporated by reference to Rxhibit 10.15(b) to the
Company's Registration Statement on Form S-1 (Registration No.
333-102))
11.1 Statement re: Computation of Earnings Per Share
27.1 Financial Data Schedule (for EDGAR filings only)
</TABLE>
10
<PAGE>
(b) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K dated June 25, 1996 relating to the
consummation of the acquisition by the Company of the 126-room economy extended
stay lodging facility located in Lawrenceville, Georgia owned by Apartment Inn
Partners/Gwinnett, L.P. The Company incorporated by reference in such report
the financial statements of Apartment Inn Partners/Gwinnett, L.P. and the Pro
Forma Financial Statements of Extended Stay America, Inc. and Subsidiaries and
Acquired Companies contained in Post-Effective Amendment No. 4 to the Company's
Registration Statement on Form S-1 (No. 333-102).
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 12, 1996.
EXTENDED STAY AMERICA, INC.
/s/ Robert A. Brannon
----------------------------------------------------
Robert A. Brannon
Senior Vice President, Chief Financial Officer,
Secretary, and Treasurer
(Principal Financial Officer)
/s/ Gregory R. Moxley
----------------------------------------------------
Gregory R. Moxley
Vice President--Finance and Controller
(Principal Accounting Officer)
12
<PAGE>
EXTENDED STAY AMERICA INC.
EXHIBIT 11.1 -- Statement Re: Computation of Earnings Per Share
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED SIX MONTH PERIOD ENDED
---------------------------- ----------------------------
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
PRIMARY:
Average shares outstanding............................ 51,318,375 22,978,034 48,126,580 22,978,034
Net effect of dilutive stock options -- based on the
treasury stock method using the average market
price.............................................. 1,280,498
----------- ----------- ----------- -----------
TOTAL......................................... 52,598,873 22,978,034 48,126,580 22,978,034
=========== =========== =========== ===========
Net income (loss)..................................... $ 414,866 $ (514,078) $ (14,444) $ (762,679)
=========== =========== =========== ===========
Net income (loss) per share........................... $ 0.01 $ (0.02) $ (0.00) $ (0.03)
=========== =========== =========== ===========
FULLY DILUTED
Average shares outstanding............................ 51,318,375 22,978,034 48,126,580 22,978,034
Net effect of dilutive stock options -- based on the
treasury stock method using the greater of ending
or average market price............................ 1,446,488
----------- ----------- ----------- -----------
TOTAL......................................... 52,764,863 22,978,034 48,126,580 22,978,034
=========== =========== =========== ===========
Net income (loss)....................................... $ 414,866 $ (514,078) $ (14,444) $ (762,679)
=========== =========== =========== ===========
Net income (loss) per share............................. $ 0.01 $ (0.02) $ (0.00) $ (0.03)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 352,293,387
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 488,503
<CURRENT-ASSETS> 354,280,595
<PP&E> 96,663,661
<DEPRECIATION> 662,047
<TOTAL-ASSETS> 465,457,369
<CURRENT-LIABILITIES> 6,186,956
<BONDS> 0
<COMMON> 656,004
0
0
<OTHER-SE> 458,614,409
<TOTAL-LIABILITY-AND-EQUITY> 465,457,369
<SALES> 0
<TOTAL-REVENUES> 3,502,437
<CGS> 0
<TOTAL-COSTS> 7,090,577
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (14,444)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,444)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,444)
<EPS-PRIMARY> (.00)
<EPS-DILUTED> (.00)
</TABLE>
