-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R7y60vxkHjL/JTkN2W2HEp1QbDbDPg9ENrcY9VULfoY6/tFEV6f9Ai08omY/Dfbl UnRsf02Hq5AuLB/7xFbcpw== 0000950131-00-003164.txt : 20000510 0000950131-00-003164.hdr.sgml : 20000510 ACCESSION NUMBER: 0000950131-00-003164 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXTENDED STAY AMERICA INC CENTRAL INDEX KEY: 0001002579 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 363996573 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13125 FILM NUMBER: 623403 BUSINESS ADDRESS: STREET 1: 450 E LAS OLAS BLVD STREET 2: STE 1100 CITY: FORT LAUDERDALE STATE: FL ZIP: 33301 BUSINESS PHONE: 9547131600 MAIL ADDRESS: STREET 1: 450 E LAS OLAS BLVD STREET 2: STE 1100 CITY: FORT LAUDERDALE STATE: FL ZIP: 33301 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________ 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 March 31, 2000 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 _____________ 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) 450 EAST LAS OLAS BOULEVARD, FORT LAUDERDALE, FL 33301 (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 May 1, 2000, the registrant had issued and outstanding an aggregate of 95,263,984 shares of Common Stock. PART I FINANCIAL INFORMATION Item 1. Financial Statements EXTENDED STAY AMERICA, INC. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share data)
ASSETS ------ March 31, December 31, 2000 1999(1) ----------- ------------ Current assets: Cash and cash equivalents............................................................ $ 5,451 $ 6,449 Accounts receivable.................................................................. 6,054 6,094 Prepaid expenses..................................................................... 3,386 2,810 Deferred income taxes................................................................ 38,482 39,053 Other current assets................................................................. 27 27 ---------- ---------- Total current assets............................................................... 53,400 54,433 Property and equipment, net........................................................... 1,889,298 1,856,517 Deferred loan costs, net.............................................................. 14,797 15,746 Other assets.......................................................................... 714 553 ---------- ---------- $1,958,209 $1,927,249 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable..................................................................... $ 27,274 $ 34,020 Income taxes payable................................................................. 2,888 Accrued retainage.................................................................... 7,455 8,834 Accrued property taxes............................................................... 11,053 8,871 Accrued salaries and related expenses................................................ 2,225 2,633 Accrued interest..................................................................... 2,432 7,059 Other accrued expenses............................................................... 16,146 14,187 Current portion of long-term debt.................................................... 3,000 3,000 ---------- ---------- Total current liabilities.......................................................... 69,585 81,492 ---------- ---------- Deferred income taxes................................................................. 83,778 77,167 ---------- ---------- Long-term debt........................................................................ 882,000 853,000 ---------- ---------- Commitments Stockholders' equity: Preferred stock, $.01 par value, 10,000,000 shares authorized, no shares issued and outstanding........................................................................ Common stock, $.01 par value, 500,000,000 shares authorized, 95,429,084 and 95,996,884 shares issued and outstanding, respectively............................. 954 960 Additional paid-in capital........................................................... 824,704 828,724 Retained earnings.................................................................... 97,188 85,906 ---------- ---------- Total stockholders' equity............................................................ 922,846 915,590 ---------- ---------- $1,958,209 $1,927,249 ========== ==========
(1) Derived from audited financial statements See notes to the unaudited condensed consolidated financial statements 1 EXTENDED STAY AMERICA, INC. Condensed Consolidated Statements of Income (Unaudited) (In thousands, except per share data)
Three Months Ended --------------------- March 31, March 31, 2000 1999 --------- --------- Revenue..................................................................... $113,940 $89,419 Property operating expenses................................................. 50,931 40,994 Corporate operating and property management expenses....................................................... 10,913 10,298 Depreciation and amortization............................................... 16,149 13,924 -------- ------- Total costs and expenses.............................................. 77,993 65,216 -------- ------- Income from operations before interest, income taxes and cumulative effect of accounting change...................................................... 35,947 24,203 Interest expense, net....................................................... 17,144 11,450 -------- ------- Income before income taxes and cumulative effect of accounting change....... 18,803 12,753 Provision for income taxes.................................................. 7,521 5,101 -------- ------- Net income before cumulative effect of accounting change.................... 11,282 7,652 Cumulative effect of change in accounting for start-up activities, net of income tax benefit of $520............................. (779) -------- ------- Net income.................................................................. $ 11,282 $ 6,873 ======== ======= Net income per common share -- Basic and Diluted: Net income before cumulative effect of accounting change................ $ 0.12 $ 0.08 Cumulative effect of accounting change.................................. (0.01) -------- ------- Net income.................................................................. $ 0.12 $ 0.07 ======== ======= Weighted average shares: Basic..................................................................... 95,632 95,974 Effect of dilutive options................................................ 446 643 -------- ------- Diluted................................................................... 96,078 96,617 ======== =======
See notes to the unaudited condensed consolidated financial statements 2 EXTENDED STAY AMERICA, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Three Months Ended ---------------------- March 31, March 31, 2000 1999 --------- --------- Cash flows from operating activities: Net income............................................................. $ 11,282 $ 6,873 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................................ 16,149 13,924 Amortization of deferred loan costs in interest expense.............. 965 965 Deferred income taxes................................................ 7,182 3,541 Cumulative effect of accounting change............................... 779 Changes in operating assets and liabilities.......................... (4,971) (17,965) -------- -------- Net cash provided by operating activities......................... 30,607 8,117 -------- -------- Cash flows from investing activities: Additions to property and equipment.................................... (56,402) (93,364) Other assets........................................................... (161) 53 -------- -------- Net cash used in investing activities.............................. (56,563) (93,311) -------- -------- Cash flows from financing activities: Proceeds from long-term debt........................................... 29,000 90,000 Proceeds from issuance of common stock................................. 16 Repurchases of Company common stock.................................... (4,026) Additions to deferred loan costs....................................... (16) (21) -------- -------- Net cash provided by financing activities.......................... 24,958 89,995 -------- -------- Increase (decrease) in cash and cash equivalents........................ (998) 4,801 Cash and cash equivalents at beginning of period........................ 6,449 623 -------- -------- Cash and cash equivalents at end of period.............................. $ 5,451 $ 5,424 ======== ======== Noncash investing and financing transactions: Capitalized or deferred items included in accounts payable and accrued liabilities.............................................. $ 20,752 $ 47,259 ======== ======== Supplemental cash flow disclosures: Cash paid for: Income taxes.......................................................... $ 3,935 $ 9,792 ======== ======== Interest expense, net of amounts capitalized.......................... $ 21,968 $ 15,736 ======== ========
See notes to the unaudited condensed consolidated financial statements 3 EXTENDED STAY AMERICA, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2000 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. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated balance sheet data at December 31, 1999 was derived from audited financial statements of the Company but does not include all disclosures required by generally accepted accounting principles. Operating results for the three-month period ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. 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, 1999. Pursuant to the Statement of Position 98-5, "Reporting on the Costs of Start- up Activities" issued by the Accounting Standards Executive Committee, effective January 1, 1999, the Company changed its method of accounting for start-up activities, including pre-opening and organizational costs, to expense them as they are incurred. Accordingly, the Company recorded an expense of $779,000, net of income tax benefit of $520,000, as the cumulative effect of this change in accounting. For the three months ended March 31, 2000 and 1999, the computation of diluted earnings per share does not include approximately 13,065,000 and 11,811,000 weighted average shares, respectively, of common stock represented by outstanding options because the exercise price of the options was greater than the average market price of common stock during the period. Certain previously reported amounts have been reclassified to conform with the current period's presentation. 4 NOTE 2 -- PROPERTY AND EQUIPMENT Property and equipment consist of the following:
(000's Omitted) March 31, December 31, 2000 1999 ---------- ------------ Operating Facilities: Land and improvements........................................ $ 442,571 $ 425,098 Buildings and improvements................................... 1,237,252 1,194,789 Furniture, fixtures, equipment and supplies.................. 243,576 237,218 ---------- ---------- Total Operating Facilities................................. 1,923,399 1,857,105 Office furniture, fixtures and equipment....................... 8,313 8,270 Facilities under development, including land and improvements.. 105,166 122,611 ---------- ---------- 2,036,878 1,987,986 Less: Accumulated depreciation................................ (147,580) (131,469) ---------- ---------- Total property and equipment................................... $1,889,298 $1,856,517 ========== ==========
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General We own and operate three brands in the extended stay lodging market-- StudioPLUS(TM) Deluxe Studios ("StudioPLUS"), EXTENDED STAYAMERICA Efficiency Studios ("EXTENDED STAY"), and Crossland Economy StudiosSM ("Crossland"). Each brand is designed to appeal to different price points below $500 per week. All three brands offer the same core components: a living/sleeping area; a fully- equipped kitchen or kitchenette; and a bathroom. StudioPLUS facilities serve the mid-price category and generally feature guest rooms that are larger than those in our other brands, an exercise facility, and a swimming pool. EXTENDED STAY rooms are designed to compete in the economy category. Crossland rooms are typically smaller than EXTENDED STAY rooms and are targeted for the budget category. In this Quarterly Report on Form 10-Q, the words "Extended Stay America", "Company", "we", "our", "ours", and "us" refer to Extended Stay America, Inc. and its subsidiaries unless the context suggests otherwise. During the quarter ended June 30, 1999, we repositioned 14 StudioPLUS properties as EXTENDED STAY properties. All operating statistics reflect the repositioning of these properties as EXTENDED STAY properties for the entire periods presented. The table below provides a summary of our selected development and operational results for the three months ended March 31, 2000 and 1999.
Three Months Ended March 31, ----------------- 2000 1999 ------ ------- Total Facilities Open (at period end).. 372 334 Total Facilities Opened................ 10 29 Average Occupancy Rate................. 73% 71% Average Weekly Room Rate............... $ 299 $ 284
Average occupancy rates are determined by dividing the rooms occupied on a daily basis by the total number of rooms. Due to our rapid expansion, our overall average occupancy rate has been negatively impacted by the lower occupancy typically experienced during the pre-stabilization period for newly- opened facilities. We expect the negative impact on overall average occupancy to decline as the ratio of newly-opened properties to total properties in operation declines. Average weekly room rates are determined by dividing room revenue by the number of rooms occupied on a daily basis for the applicable period and multiplying by seven. The average weekly room rates generally will be greater than standard room rates because of (i) stays of less than one week, which are charged at a higher nightly rate, (ii) higher weekly rates for rooms that are larger than the standard rooms, and (iii) additional charges for more than one person per room. We expect that our future occupancy and room rates will be impacted by a number of factors, including the number and geographic location of new facilities as well as the season in which we open those facilities. We also cannot assure you that we can maintain our occupancy and room rates. 5 At March 31, 2000, we had 372 operating facilities (39 Crossland, 242 EXTENDED STAY, and 91 StudioPLUS) and had 20 facilities under construction (18 EXTENDED STAY and 2 StudioPLUS). We expect to complete the construction of the facilities currently under construction generally within the next twelve months, however, we cannot assure you that we will complete construction within the time periods we have historically experienced. Our ability to complete construction may be materially impacted by various factors including final permitting and obtaining certificates of occupancy, as well as weather-induced construction delays. Results of Operations Property Operations The following is a summary of the number of properties in operation at the end of each period along with the related average occupancy rates and average weekly room rates during each period:
For the Three Months Ended ---------------------------------------------------------------------------------- March 31, 2000 March 31, 1999 ---------------------------------------- ---------------------------------------- Average Average Average Average Facilities Occupancy Weekly Room Facilities Occupancy Weekly Room Open Rate Rate Open Rate Rate ---------- --------------- ----------- ---------- --------------- ----------- Crossland...... 39 74% $213 39 61% $203 EXTENDED STAY.. 242 73 305 213 73 288 StudioPLUS..... 91 73 340 82 71 324 --- -- ---- --- -- ---- Total........ 372 73% $299 334 71% $284 === == ==== === == ====
Because newly opened properties typically experience lower occupancies during their pre-stabilization period, average occupancy rates are impacted by the ratio of newly opened properties to total properties. The average occupancy rate in the first quarter of 2000 for the 305 properties we owned and operated as of December 31, 1998 was 74%. Similarly, the average occupancy rate in the first quarter of 1999 for the 185 properties we owned and operated as of December 31, 1997 was 75%. We believe that the decline in the average occupancy rate for properties open for at least one year at the beginning of the quarter of each year reflects general changes in the overall supply and demand for lodging products in various markets in which we operate. We expect that these factors will continue to impact our occupancies until incremental demand is sufficient to compensate for the supply of available rooms in these markets. The impact of these factors was offset by the impact of a decline in the ratio of newly opened properties to total properties for each of our brands, resulting in overall average occupancy rates of 73% for the first quarter of 2000 compared to 71% for the first quarter of 1999. The increase in overall average weekly room rates for the first quarter of 2000 compared to the first quarter of 1999 reflects the geographic dispersion of properties opened since March 31, 1999 and the higher standard weekly room rates in certain of those markets. The increase also is due in part to increases in rates charged in previously opened properties. The average weekly room rate for the 305 properties that we owned and operated throughout both periods increased by 3% in the first quarter of 2000. We recognized total revenue of $113.9 million for the first quarter of 2000 and $89.4 million for the first quarter of 1999. This is an increase of $24.5 million, or 27%. Approximately $18.7 million of the increased revenue was attributable to properties opened subsequent to December 31, 1998 and approximately $5.8 million was attributable to an increase in revenue for the 305 properties that we owned and operated throughout both periods. Property operating expenses, consisting of all expenses directly allocable to the operation of the facilities but excluding any allocation of corporate operating and property management expenses, depreciation, or interest were $50.9 million (45% of total revenue) for the first quarter of 2000, compared to $41.0 million (46% of total revenue) for the first quarter of 1999. We expect the ratio of property operating expenses to total revenue to generally fluctuate inversely relative to occupancy rate increases or decreases because the majority of these expenses do not vary based on occupancy. Our overall occupancy rates were 73% for the first quarter of 2000 and 71% for the first quarter of 1999 and our property operating margins were 55% for the first quarter of 2000 and 54% for the first quarter of 1999. 6 The provisions for depreciation and amortization for our lodging facilities were $15.8 million and $13.6 million for the first quarter of 2000 and 1999, respectively. These provisions were computed using the straight-line method over the estimated useful lives of the assets. These provisions reflect a pro rata allocation of the annual depreciation and amortization charge for the periods for which the facilities were in operation. Depreciation and amortization for the first quarter of 2000 increased as compared to the first quarter of 1999 because we operated 38 additional facilities in 2000 and we operated for a full quarter the 29 properties that were opened in the first quarter of 1999. Corporate Operations Corporate operating and property management expenses include all expenses not directly related to the development or operation of lodging facilities. These expenses consist primarily of personnel and certain marketing costs, as well as development costs that are not directly related to a site that we will develop. We incurred corporate operating and property management expenses of $10.9 million (10% of total revenue) in the first quarter of 2000 and $10.3 million (12% of total revenue) in the first quarter of 1999. The increase in the amount of these expenses for the first quarter of 2000 as compared to the same period in 1999 reflects the impact of additional personnel and related expenses in connection with the increased number of facilities we operated. We expect these expenses will continue to increase in total amount but decline moderately as a percentage of revenue as we develop and operate additional facilities in the future. Depreciation and amortization was $326,000 for the quarter ended March 31, 2000 and $305,000 for the comparable period in 1999. These provisions were computed using the straight-line method over the estimated useful lives of the assets for assets not directly related to the operation of our facilities. These assets were primarily office furniture and equipment. We realized $197,000 of interest income in the first quarter of 2000 and $179,000 in the first quarter of 1999. This interest income was primarily attributable to the temporary investment of funds drawn under our credit facilities. We incurred interest charges of $19.5 million during the first quarter of 2000 and $15.1 million during the first quarter of 1999. Of these amounts, $2.2 million in the first quarter of 2000 and $3.4 million in the first quarter of 1999 were capitalized and included in the cost of buildings and improvements. We recognized income tax expense of $7.5 million and $5.1 million (40% of income before income taxes and the cumulative effect of an accounting change, in both periods) for the first quarter of 2000 and 1999, respectively. Our income tax expense differs from the federal income tax rate of 35% primarily due to state and local income taxes. We expect our annualized effective income tax rate for 2000 will be approximately 40%. Cumulative Effect of a Change in Accounting Pursuant to the Statement of Position 98-5, "Reporting on the Costs of Start- up Activities" issued by the Accounting Standards Executive Committee, effective January 1, 1999, we changed our method of accounting for start-up activities, including pre-opening and organizational costs, to expense them as they are incurred. Accordingly, we recorded an expense of $779,000, net of income tax benefit of $520,000, as the cumulative effect of this change in accounting. Liquidity and Capital Resources We had net cash and cash equivalents of $5.5 million as of March 31, 2000 and $6.4 million as of December 31, 1999. At March 31, 2000 we had approximately $5.7 million invested and at December 31, 1999 we had approximately $45,000 invested in short-term demand notes having credit ratings of A1/P1 or the equivalent using domestic commercial banks and other financial institutions. We also deposited excess funds during these periods in an overnight sweep account with a commercial bank which in turn invested these funds in short-term, interest-bearing reverse repurchase agreements. Due to the short-term nature of these investments, we did not take possession of the securities, which were instead held by the financial institutions. The market value of the securities held pursuant to these arrangements approximates the carrying amount. Deposits in excess of $100,000 are not insured by the Federal Deposit Insurance Corporation. 7 Our operating activities generated cash of $30.6 million during the three months ended March 31, 2000 and $8.1 million during the three months ended March 31, 1999. We used $56.4 million to acquire land and develop and furnish a total of 30 sites opened or under construction in the three months ended March 31, 2000 and $93.4 million for 58 sites in the three months ended March 31, 1999. Our cost to develop a property varies significantly by brand and by geographic location due to differences in land and labor costs. Similarly, the average weekly rate charged and the resultant cash flow from these properties will vary significantly but generally are expected to be in proportion to the development costs. For the 329 properties we opened from January 1, 1996 through December 31, 1999, the average development cost was approximately $5.3 million with an average of 107 rooms. In 2000, we expect to open a number of properties in the Northeast and West where average development costs are higher. Accordingly, we expect our average development cost for 2000 to increase to approximately $8.3 million per property. We made open market repurchases of 567,800 shares of common stock for approximately $4.0 million in the three months ended March 31, 2000. In addition to our $200 million 9.15% Senior Subordinated Notes due 2008 (the "Notes"), we have an $800 million credit facility (the "Credit Facility") which provides for a $350 million revolving loan facility (the "Revolving Facility"), a $150 million term loan facility (the "Tranche A Facility"), a $198 million (net of scheduled principal repayments of $2 million in 1999) term loan facility (the "Tranche B Facility"), and a $100 million term loan facility (the "Tranche C Facility"). Loans under the Credit Facility bear interest, at our option, at either a variable prime-based rate or a variable LIBOR-based rate, plus an applicable margin. As of March 31, 2000, we had outstanding loans of $237 million under the Revolving Facility and $448 million under the term loans, leaving $113 million available and committed under the Credit Facility. Availability of the Revolving Facility is dependent, however, upon us satisfying certain financial ratios of debt and interest compared to earnings before interest, taxes, depreciation, and amortization, with these amounts being calculated pursuant to definitions contained in the Credit Facility. Our primary market risk exposures result from the variable nature of the interest rates on borrowings under the Credit Facility. We entered into the Credit Facility for purposes other than trading. We do not own derivative financial instruments or derivative commodity instruments. Based on the levels of borrowings under the Credit Facility at March 31, 2000, if interest rates changed by 1.0%, our annual cash flow and net income would change by $4.1 million. We manage our market risk exposures by periodic evaluation of such exposures relative to the costs of reducing the exposures by entering into interest rate swaps or by refinancing the underlying obligations with longer term fixed rate debt obligations. We plan to develop approximately 30 properties with total costs of approximately $250 million in 2000. We had commitments not reflected in our financial statements at March 31, 2000 totaling approximately $100 million to complete construction of those properties. We believe that the remaining availability under the Credit Facility, together with cash on hand and cash flows from operations, will provide sufficient funds to continue our expansion as presently planned and to fund our operating expenses through 2000. We may need additional capital depending on a number of factors, including the number of properties we construct or acquire, the timing of that development, and the cash flow generated by our properties. Also, if capital markets provide favorable opportunities, our plans or assumptions change or prove to be inaccurate, our existing sources of funds prove to be insufficient to fund our growth and operations, or if we consummate acquisitions, we may seek additional capital sooner than currently anticipated. In the event we obtain additional capital, we may seek to increase property openings in future years. Sources of capital may include public or private debt or equity financing. We cannot assure you that we will be able to obtain additional financing on acceptable terms, if at all. Our failure to raise additional capital could result in the delay or abandonment of some or all of our development and expansion plans, and could have a material adverse effect on us. 8 Seasonality and Inflation Based upon the operating history of our facilities, we believe that extended stay lodging facilities are not as seasonal in nature as the overall lodging industry. We do expect, however, that our occupancy rates and revenues will be lower than average during the first and fourth quarters of each calendar year. Because many of our expenses do not fluctuate with changes in occupancy rates, declines in occupancy rates may cause fluctuations or decreases in our quarterly earnings. The rate of inflation as measured by changes in the average consumer price index has not had a material effect on our revenue or operating results during any of the periods presented. We cannot assure you, however, that inflation will not affect our future operating or construction costs. Special Note on Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements. Words such as "expects", "intends", "plans", "projects", "believes", "estimates", and similar expressions are used to identify these forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. However, these forward-looking statements are subject to risks, uncertainties, assumptions, and other factors which may cause our actual results, performance, or achievements to be materially different. These factors include, among other things: . our limited operating history and uncertainty as to our future profitability; . our ability to meet construction and development schedules and budgets; . our ability to develop and implement the operational and financial systems needed to manage rapidly growing operations; . uncertainty as to the consumer demand for extended stay lodging; . increasing competition in the extended stay lodging market; . our ability to integrate and successfully operate acquired properties and the risks associated with such properties; . our ability to obtain financing on acceptable terms to finance our growth; and . our ability to operate within the limitations imposed by financing arrangements. Other matters set forth in this Quarterly Report may also cause our actual future results to differ materially from these forward-looking statements. We cannot assure you that our expectations will prove to be correct. In addition, all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements mentioned above. You should not place undue reliance on these forward-looking statements. All of these forward-looking statements are based on our expectations as of the date of this Quarterly Report. We do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Item 3. Quantitative and qualitative disclosures about market risk See Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." 9 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-k (a) Exhibits Exhibit Number Description of Exhibit ------ ---------------------- 27.1 Financial Data Schedule (for EDGAR filings only) (b) Reports on Form 8-K None 10 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 May 9, 2000. EXTENDED STAY AMERICA, INC. /s/ Gregory R. Moxley -------------------------------------------- Gregory R. Moxley Chief Financial Officer (Principal Financial Officer) /s/ Patricia K. Tatham -------------------------------------------- Patricia K. Tatham Vice President - Corporate Controller (Principal Accounting Officer) 11 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 5,451 0 6,054 0 0 53,400 2,036,878 147,580 1,958,209 69,585 882,000 0 0 954 921,892 1,958,209 0 113,940 0 50,931 27,062 0 17,144 18,803 7,521 11,282 0 0 0 11,282 0.12 0.12
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