<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 25, 1996
--------------
EXTENDED STAY AMERICA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-27360 36-3996573
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)
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
--------------
================================================================================
<PAGE>
ITEM 2. ACQUISITION OF ASSETS.
On June 25, 1996, Extended Stay America, Inc. ("the Company") acquired
substantially all of the assets of Apartment Inn Partners/Gwinnett, L.P.
("Gwinnett"). Gwinnett owned and operated a 126-room economy extended-stay
lodging facility in Lawrenceville, Georgia which is similar in concept to the
Company's lodging facilities. The facility was operated as The Apartment Inn and
rights for the use of that name and certain other rights were controlled by
Apartment/Inn, L.P. The Company intends to continue to operate the acquired
facility in substantially its present form. In consideration for such
acquisition, the Company issued 172,100 shares of its common stock, par value
$.01 per share (the "Common Stock"), and paid an additional $23,000 in cash. The
terms of the acquisition, including the number of shares of Common Stock issued
as consideration, were determined through arm's-length negotiations, based on
past and projected levels of revenue and profitability of the acquired lodging
facility and the value of the assets acquired. The acquisition was accounted for
using the purchase method of accounting. Copies of the asset purchase agreement
and related agreements with respect to this acquisition are filed herewith as
Exhibit 2.1 and are incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The required financial statements of the business acquired are hereby
incorporated by reference to the Company's Post-Effective Amendment No. 4 to
Form S-1 Registration Statement (No. 333-102) dated July 3, 1996 (the
"Registration Statement") under the caption "Apartment Inn Partners/Gwinnett"
appearing on pages F-42 through F-47 of the Prospectus constituting part of the
Registration Statement (the "Prospectus").
(b) Pro Forma Financial Information.
The required pro forma financial information relating to the business
acquired is hereby incorporated by reference to the Registration Statement under
the caption "Pro Forma Financial Statements of Extended Stay America, Inc. and
Subsidiaries and Acquired Companies" on pages F-2 through F-4 of the Prospectus.
(c) Exhibits.
The exhibits to this report are listed in the Exhibit Index set forth
elsewhere herein.
<PAGE>
SIGNATURE
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 hereunto duly authorized.
EXTENDED STAY AMERICA, INC.
By: /s/ Robert A. Brannon
--------------------------
Robert A. Brannon
Senior Vice President and
Chief Financial Officer
Dated: July 10, 1996
<PAGE>
EXTENDED STAY AMERICA, INC.
---------------------------
Exhibit Index
-------------
Exhibit
Number Description of Exhibit
------- ----------------------
2.1 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 the Company's
Registration Statement on Form S-1 (Registration No. 333-102)).
2.2 Agreement dated July 10, 1996 by the Company to furnish
supplementally copies of omitted schedules.
99.1 Financial information incorporated by reference.
<PAGE>
EXHIBIT 2.2
AGREEMENT
Extended Stay America, Inc., (the "Company") hereby agrees to furnish
supplementally to the Securities and Exchange Commission, upon request, a copy
of any omitted exhibit to the Agreement to Purchase Hotel dated as of June 21,
1996 among the Company, ESA 0996, Inc., Apartment Inn Partners/Gwinnett, L.P.,
and Rosa Dziewienski Pajonk.
EXTENDED STAY AMERICA, INC.
By: /s/ Robert A. Brannon
_________________________
Robert A. Brannon
Senior Vice President and
Chief Financial Officer
Dated: July 10, 1996
<PAGE>
EXHIBIT 99.1
EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES
These unaudited pro forma consolidated statements of operations are presented
as if the acquisitions of the Acquired Facilities and the proposed acquisitions
of the KHEC Facility and the M & M Facilities and the related issuances of
shares of common stock had occurred at the beginning of the relevant period.
For the year ended December 31, 1995, the statement also reflects the
acquisition of the Marietta Facility and estimated incremental expenses to
operate as a publicly held company as if it were publicly held on the date of
inception. Such pro forma information is based in part upon the consolidated
statements of operations of Extended Stay America, Inc. and subsidiaries and
the statements of operations of Welcome, Apartment/Inn, Hometown Inn, KHEC,
Gwinnett, and the M & M Facilities. They should be read in conjunction with the
financial statements listed in the index on page F-1 of this Prospectus. In
management's opinion, all adjustments necessary to reflect the effects of these
transactions have been made. The acquisition of the lodging facility from AATI
has not been included in these unaudited statements of operations because the
purchase price and the unaudited results of operations for the periods, when
measured in relation to the Company, did not meet certain materiality standards
and can be excluded as permitted by the rules and regulations of the Securities
and Exchange Commission.
These unaudited pro forma consolidated statements of operations are not
necessarily indicative of what the actual results of operations of the Company
would have been assuming such transactions had been completed as of the
beginning of the period, nor do they purport to represent the results of
operations for any future periods. Results of operations and the related
earnings or loss per share for future periods will be affected by a number of
factors, including but not limited to, the number of facilities opened and the
operating results therefrom, interest costs incurred on indebtedness (including
the amortization of the fees paid in cash and common stock to DLJ), corporate
operating and property management expenses, site selection costs and the number
of future shares issued.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 9, 1995 (INCEPTION)
THROUGH DECEMBER 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
COMPLETED COMPLETED PROPOSED
ACTUAL ACQUISITIONS ADJUSTMENTS ACQUISITIONS ACQUISITIONS ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Room revenue........... $ 817,133 $5,957,989 $ (135,614)(1) $6,639,508 $6,940,992 $ (152,131)(1) $13,428,369
Management fees........ 17,775 (17,775)(2)
Other revenue.......... 42,977 277,596 (6,398)(1) 314,175 431,323 (9,453)(1) 736,045
----------- ---------- ---------- ---------- ---------- ---------- -----------
Total revenue........ 877,885 6,235,585 (159,787) 6,953,683 7,372,315 (161,584) 14,164,414
----------- ---------- ---------- ---------- ---------- ---------- -----------
Costs and expenses:
Property operating
expenses.............. 332,523 2,655,610 (61,941)(1) 2,908,417 3,045,884 (66,759)(1) 5,887,542
(17,775)(2)
Corporate operating
and property
management expenses... 2,042,039 391,114 800,000 (3) 3,233,153 543,464 (58,093)(2) 3,718,524
Site selection costs... 512,529 512,529 512,529
Depreciation and
amortization.......... 146,726 623,721 263,067 (4) 1,033,514 737,220 422,780 (4) 2,193,514
----------- ---------- ---------- ---------- ---------- ---------- -----------
Total costs and
expenses............ 3,033,817 3,670,445 983,351 7,687,613 4,326,568 297,928 12,312,109
----------- ---------- ---------- ---------- ---------- ---------- -----------
Income (loss) from
operations.......... (2,155,932) 2,565,140 (1,143,138) (733,930) 3,045,747 (459,512) 1,852,305
Interest income
(expense).............. 848,510 (1,104,633) 1,104,633 (5) 848,510 (1,733,591) 1,689,591 (5) 804,510
----------- ---------- ---------- ---------- ---------- ---------- -----------
Income (loss) before
income taxes.......... (1,307,422) 1,460,507 (38,505) $ 114,580 $1,312,156 $1,230,079 $ 2,656,815
Provision for income
taxes................. (45,000)(6) (45,000) (991,000)(6) (1,036,000)
----------- ---------- ---------- ---------- ---------- ---------- -----------
Net income (loss)...... $(1,307,422) $1,460,507 $ (83,505) $ 69,580 $1,312,156 $ 239,079 $ 1,620,815
=========== ========== ========== ========== ========== ========== ===========
Net income (loss) per
common share(7)....... $ (0.10) $ 0.01 $ 0.11
=========== ========== ===========
Weighted average
number of common and
equivalent shares
outstanding during
the period(7)......... 12,652,110 13,849,898 15,260,204
=========== ========== ===========
</TABLE>
F-2
<PAGE>
EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
COMPLETED COMPLETED PROPOSED
ACTUAL ACQUISITIONS ADJUSTMENTS ACQUISITIONS ACQUISITIONS ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Room revenue........... $ 1,137,841 $778,821 $ $ 1,916,662 $1,827,570 $ $ 3,744,232
Other revenue.......... 32,988 30,016 63,004 97,123 160,127
----------- -------- ------- ----------- ---------- --------- -----------
Total revenue........ 1,170,829 808,837 1,979,666 1,924,693 3,904,359
Costs and expenses:
Property operating
expenses.............. 442,540 288,123 730,663 790,051 1,520,714
Corporate operating
and property
management expenses... 1,580,655 58,937 1,639,592 145,739 (11,260)(2) 1,774,071
Site selection costs... 823,733 823,733 823,733
Depreciation and
amortization.......... 203,343 73,199 20,238 (4) 296,780 186,215 103,785 (4) 586,780
----------- -------- ------- ----------- ---------- --------- -----------
Total costs and
expenses............ 3,050,271 420,259 20,238 3,490,768 1,122,005 92,525 4,705,298
Income (loss) from
operations.......... (1,879,442) 388,578 (20,238) (1,511,102) 802,688 (92,525) (800,939)
Interest income
(expense).............. 1,450,132 (64,151) 64,151 (5) 1,450,132 (424,570) 399,570 (5) 1,425,132
----------- -------- ------- ----------- ---------- --------- -----------
Income (loss) before
income taxes........... (429,310) 324,427 43,913 (60,970) 378,118 307,045 624,193
Provision for income
taxes.................. (243,000)(6) (243,000)
----------- -------- ------- ----------- ---------- --------- -----------
Net income (loss)....... $ (429,310) $324,427 $43,913 $ (60,970) $ 378,118 $ 64,045 $ 381,193
=========== ======== ======= =========== ========== ========= ===========
Net loss per common
share(7)............... $ (0.02) $ (0.00) $ 0.02
=========== =========== ===========
Weighted average number
of common and
equivalent shares
outstanding during the
period(7).............. 22,467,393 23,025,192 24,785,595
=========== =========== ===========
</TABLE>
- ---------------------
(1) To eliminate the estimated revenues and expenses for the Acquired
Facilities, the Marietta Facility, the KHEC Facility, and the M & M
Facilities for the period January 1, 1995 through January 8, 1995 in order
to present a period comparable to the historical period for the Company.
(2) To eliminate in consolidation management fees charged to the Marietta
Facility prior to being acquired by the Company and franchise fees incurred
by KHEC.
(3) Reflects estimated increases in: (i) salaries and benefits--$238,000; (ii)
state capital-based taxes--$150,000; (iii) audit and tax fees--$75,000;
(iv) legal expenses--$37,000; (v) directors' and officers' insurance--
$150,000; (vi) additional expenses--$150,000, as if the Company had been a
public company on the date of inception.
(4) To adjust depreciation and amortization expense to reflect the expense
based on the purchase price paid and to be paid by the Company for the
Acquired Facilities, the Marietta Facility, the KHEC Facility, and the M &
M Facilities for any period prior to acquisition.
(5) To eliminate non-continuing interest expense paid by the Acquired
Facilities, the Marietta Facility, the KHEC Facility, and the M & M
Facilities prior to acquisition, net of interest income earned by the
Company on the amount of cash used in the acquisitions.
(6) To provide for estimated income tax expense.
(7) See notes 2, 5 and 14 to the Company's consolidated financial statements.
F-3
<PAGE>
EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(UNAUDITED)
This unaudited pro forma consolidated balance sheet is presented as if the
June 1996 Offering had been completed and the acquisition of the Gwinnett
Facility and the proposed acquisitions of the KHEC Facility and the M&M
Facilities had occurred on March 31, 1996. Such pro forma information is based
upon the consolidated balance sheet of the Company and the balance sheets of
Gwinnett, KHEC, and the M&M Facilities as of March 31, 1996. It should be read
in conjunction with the financial statements listed in the index on page F-1 of
this Prospectus. In management's opinion, all adjustments necessary to reflect
the effects of these transactions have been made.
This unaudited pro forma consolidated balance sheet is not necessarily
indicative of what the actual financial position would have been assuming such
transactions had been completed as of March 31, 1996, nor does it purport to
represent the future financial position of the Company.
<TABLE>
<CAPTION>
ACQUISITIONS
SUBSEQUENT
TO MARCH 31,
1996 AND
PROPOSED
ACTUAL ACQUISITIONS ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $104,010,918 $ 628,882 $ (3,098,882)(1) $391,358,418
289,817,500 (2)
Refundable deposits... 621,654 621,654
Supply inventories.... 291,266 88,050 281,950 (1) 661,266
Prepaid expenses...... 366,142 2,198 (2,198)(1) 366,142
Other current assets.. 56,768 180,808 (180,808)(1) 56,768
------------ ----------- ------------ ------------
Total current
assets............. 105,346,748 899,938 286,817,562 393,064,248
------------ ----------- ------------ ------------
Property and equipment,
net.................... 51,658,313 20,257,229 20,347,771 (1) 92,263,313
Site deposits and
preacquisition costs... 3,913,811 3,913,811
Deferred loan costs..... 5,294,114 8,327 (8,327)(1) 5,294,114
Other assets............ 156,741 102,532 (102,532)(1) 156,741
------------ ----------- ------------ ------------
$166,369,727 $21,268,026 $307,054,474 $494,692,227
============ =========== ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...... $ 925,504 $ 136,042 $ (136,042)(1) $ 925,504
Accrued salaries and
related expenses..... 67,855 22,177 (22,177)(1) 67,855
Due to related
parties.............. 71,845 211,334 (211,334)(1) 71,845
Other accrued
expenses............. 440,612 311,636 (891)(1) 751,357
Deferred revenue...... 330,856 19,087 (19,087)(1) 330,856
Current maturities of
long-term debt....... 6,335,578 (6,335,578)(1)
------------ ----------- ------------ ------------
Total current
liabilities........ 1,836,672 7,035,854 (6,725,109) 2,147,417
------------ ----------- ------------ ------------
Long-term debt.......... 13,564,248 (13,564,248)(1)
Shareholders' Equity:
Preferred stock, $.01
par value, 10,000,000
shares authorized, no
shares issued or
outstanding..........
Common stock, $.01 par
value, 200,000,000
shares authorized,
22,853,092 and
34,039,192 shares
issued and
outstanding for
Actual and Pro Forma,
respectively......... 228,531 226,733 (212,622)(1) 340,392
97,750 (2)
Additional paid in
capital.............. 166,041,256 30,270 38,149,874 (1) 493,941,150
289,719,750 (2)
Due from affiliated
companies and prepaid
services............. (521,395) 521,395 (1)
Accumulated
(deficit)/retained
earnings............. (1,736,732) 932,316 (932,316)(1) (1,736,732)
------------ ----------- ------------ ------------
Total shareholders'
equity............. 164,533,055 667,924 327,343,831 492,544,810
------------ ----------- ------------ ------------
$166,369,727 $21,268,026 $307,054,474 $494,692,227
============ =========== ============ ============
</TABLE>
- ---------------------
(1) To reflect the purchase adjustments relating to the acquisition of the
Gwinnett Facility for 172,100 shares of Common Stock and the proposed
acquisitions of the KHEC Facility and the M&M Facilities assuming the
acquisitions are completed through the issuance of approximately 101,000
and 1,138,000 shares, respectively, of Common Stock and to reflect the use
of $2,000,000 of the Company's cash representing the estimated costs to
remodel and to convert the KHEC property to an extended stay lodging
facility and the use of $470,000 of the Company's cash to retire debt of
the M&M Facilities assumed by the Company.
(2) To reflect the estimated net proceeds of the June 1996 Offering.
F-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Extended Stay America, Inc.
Ft. Lauderdale, Florida
We have audited the accompanying balance sheet of Apartment Inn
Partners/Gwinnett, L.P. as of December 31, 1995 and the related statements of
operations and partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of the partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Apartment Inn
Partners/Gwinnett, L.P. at December 31, 1995 and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Spartanburg, South Carolina
June 25, 1996
F-42
<PAGE>
APARTMENT INN PARTNERS/GWINNETT, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
ASSETS ------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents. $ 238,871 $ 308,635
Accounts receivable....... 14,560 28,556
Supply inventories........ 32,950 32,950
Prepaid expenses.......... 2,198
---------- ----------
Total current assets.... 286,381 372,339
---------- ----------
Property and equipment, net. 2,651,717 2,631,082
Other assets................ 10,575 10,575
---------- ----------
$2,948,673 $3,013,996
========== ==========
<CAPTION>
LIABILITIES AND PARTNERS'
CAPITAL
<S> <C> <C>
Current liabilities:
Accounts payable.......... $ 5,666 $ 17,927
Accrued salaries and
related expenses......... 3,933 6,640
Other accrued expenses.... 24,601 28,496
Deferred revenue.......... 7,872 9,588
Current maturities of
long-term debt--related
party.................... 194,451 199,352
---------- ----------
Total current
liabilities............ 236,523 262,003
---------- ----------
Long-term debt--related
party...................... 2,387,119 2,335,405
---------- ----------
Total liabilities....... 2,623,642 2,597,408
---------- ----------
Partners' capital........... 325,031 416,588
---------- ----------
$2,948,673 $3,013,996
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-43
<PAGE>
APARTMENT INN PARTNERS/GWINNETT, L.P.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
YEAR ENDED THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31, MARCH 31,
1995 1995 1996
------------ ------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenue:
Room revenue.............. $1,231,786 $296,835 $320,753
Other revenue............. 62,187 18,465 14,050
---------- -------- --------
Total revenue........... 1,293,973 315,300 334,803
---------- -------- --------
Costs and expenses:
Property operating
expenses................. 588,760 143,286 135,319
Management fees expense... 88,662 9,439 19,976
Depreciation and
amortization............. 109,636 25,971 23,800
---------- -------- --------
Total costs and
expenses............... 787,058 178,696 179,095
---------- -------- --------
Income from operations...... 506,915 136,604 155,708
Other expense:
Interest expense--related
party.................... 267,836 68,589 64,151
---------- -------- --------
Net income.............. 239,079 68,015 91,557
Partners' capital, beginning
of period.................. 85,952 85,952 325,031
---------- -------- --------
Partners' capital, end of
period..................... $ 325,031 $153,967 $416,588
========== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-44
<PAGE>
APARTMENT INN PARTNERS/GWINNETT, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
YEAR ENDED THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31, MARCH 31,
1995 1995 1996
------------ ------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income................ $239,079 $ 68,015 $ 91,557
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization........... 109,636 25,971 23,800
Change in:
Accounts receivable.... (2,391) (11,560) (13,996)
Prepaid and other
current assets........ 1,216 (569) (2,198)
Accounts payable....... (1,724) 9,975 12,261
Accrued expenses....... (5,844) 12,175 8,318
-------- -------- --------
Net cash provided by
operating activities. 339,972 104,007 119,742
-------- -------- --------
Cash flows from investing
activities:
Purchases of property and
equipment................ (8,577) (2,451) (3,165)
-------- -------- --------
Net cash used in
investing activities. (8,577) (2,451) (3,165)
-------- -------- --------
Cash flows from financing
activities:
Principal payments on
long-term debt--related
party.................... (176,019) (42,535) (46,813)
-------- -------- --------
Net cash used in
financing activities. (176,019) (42,535) (46,813)
-------- -------- --------
Net increase in cash........ 155,376 59,021 69,764
Cash at beginning of period. 83,495 83,495 238,871
-------- -------- --------
Cash at end of period....... $238,871 $142,516 $308,635
======== ======== ========
Supplemental cash flow
disclosure, interest paid.. $267,836 $ 68,589 $ 64,151
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-45
<PAGE>
APARTMENT INN PARTNERS/GWINNETT, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business. Apartment Inn Partners/Gwinnett, L.P. (the
"Partnership") is a Georgia limited partnership that operates an extended stay
facility (known as the "Apartment Inn") in Lawrenceville, Georgia. On June 25,
1996, the Partnership's extended stay facility was acquired by Extended Stay
America, Inc.
Pervasiveness of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents. Cash and cash equivalents consist of cash on hand
and on deposit, and highly liquid instruments with maturities of three months
or less when purchased. The carrying amount of cash and cash equivalents is the
estimated fair value at December 31, 1995.
Supply Inventories. Supply inventories consist primarily of linen, cleaning
and other room supplies and are stated at the lower of cost or market.
Property and Equipment. Property and equipment is stated at cost.
Depreciation is computed using straight-line and accelerated methods over the
estimated useful lives of the assets. Maintenance and repairs are charged to
operations as incurred; major renewals and improvements are capitalized. The
gain or loss on the disposition of property and equipment is recorded in the
year of disposition.
The lives on the assets are as follows:
<TABLE>
<S> <C>
Building and improvements........................................ 39 years
Furniture, fixtures and equipment................................ 7 years
</TABLE>
Income Taxes. Any income taxes relating to income earned by the Partnership
are paid by the partners.
Revenue Recognition. Room revenue and other income are recognized when
earned.
Unaudited Interim Financial Statements. The unaudited interim financial
statements have been prepared pursuant to generally accepted accounting
principles applicable to interim financial statements and include all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. All such
adjustments are, in the opinion of management, of a normal recurring nature.
Results for the three months ended March 31, 1995 and 1996 are not necessarily
indicative of results to be expected for a full year. All data at March 31,
1996 and for each of the three-month periods ended March 31, 1995 and 1996 are
unaudited.
F-46
<PAGE>
APARTMENT INN PARTNERS/GWINNETT, L.P.
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31, 1995:
<TABLE>
<S> <C>
Land.......................................................... $ 451,800
Building and improvements..................................... 2,144,300
Furniture, fixtures and equipment............................. 192,627
----------
2,788,727
Less accumulated depreciation................................. 137,010
----------
$2,651,717
==========
</TABLE>
3. LONG-TERM DEBT:
Long-term debt consists of the following as of December 31, 1995:
<TABLE>
<S> <C>
Note payable, principal and interest payable to the general
partner of the Partnership at $36,988 monthly through
September 2004, interest at 10%.............................. $2,581,570
Less current maturities....................................... 194,451
----------
Long-term debt, net of current maturities..................... $2,387,119
==========
</TABLE>
The note payable is collateralized by substantially all of the Partnership's
property and equipment. Aggregate maturities of long-term debt are as follows:
1996--$194,451; 1997--$214,812; 1998--$237,305; 1999--$262,154; 2000--$289,606;
thereafter $1,383,242.
The Partnership believes that there is no material difference in the carrying
amount and estimated fair value of the long-term debt.
4. LITIGATION:
From time to time, the Partnership has been involved in various legal
proceedings. Management believes that all such litigation is routine in nature
and incidental to the conduct of its business, and that none of such
litigation, if determined adversely to the Partnership, would have a material
adverse effect on its financial condition.
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