-----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, SiwgMD+o9R+OuAeCqx9ObvR7NMM0hpkvOXEVys5/UUspCZ1MfPNi/vbiNkRf0Ny7 vFi3rt6Rxh4wZNITpArC1A== 0000950131-96-003231.txt : 19960711 0000950131-96-003231.hdr.sgml : 19960711 ACCESSION NUMBER: 0000950131-96-003231 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960625 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960710 SROS: NASD 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27360 FILM NUMBER: 96592962 BUSINESS ADDRESS: STREET 1: 500 E BROWARD BLVD STREET 2: STE 950 CITY: FORT LAUDERDALE STATE: FL ZIP: 33394 BUSINESS PHONE: 9547131600 MAIL ADDRESS: STREET 1: 500 E BROWARD BLVD STREET 2: STE 950 CITY: FORT LAUDERDALE STATE: FL ZIP: 33394 8-K 1 FORM 8-K ================================================================================ 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 -------------- ================================================================================ 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. 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 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. EX-2.2 2 AGREEMENT 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 EX-99.1 3 FINANCIAL INFORMATION INCORPORATED BY REFERENCE 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)
PRO FORMA COMPLETED COMPLETED PROPOSED ACTUAL ACQUISITIONS ADJUSTMENTS ACQUISITIONS ACQUISITIONS ADJUSTMENTS PRO FORMA 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 =========== ========== ===========
F-2 EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
PRO FORMA COMPLETED COMPLETED PROPOSED ACTUAL ACQUISITIONS ADJUSTMENTS ACQUISITIONS ACQUISITIONS ADJUSTMENTS PRO FORMA 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 =========== =========== ===========
- --------------------- (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 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.
ACQUISITIONS SUBSEQUENT TO MARCH 31, 1996 AND PROPOSED ACTUAL ACQUISITIONS ADJUSTMENTS PRO FORMA 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 ============ =========== ============ ============
- --------------------- (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 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 APARTMENT INN PARTNERS/GWINNETT, L.P. BALANCE SHEETS
DECEMBER 31, MARCH 31, 1995 1996 ASSETS ------------ ----------- (UNAUDITED) 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 ========== ========== LIABILITIES AND PARTNERS' CAPITAL 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 ========== ==========
The accompanying notes are an integral part of the financial statements. F-43 APARTMENT INN PARTNERS/GWINNETT, L.P. STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
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) 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 ========== ======== ========
The accompanying notes are an integral part of the financial statements. F-44 APARTMENT INN PARTNERS/GWINNETT, L.P. STATEMENTS OF CASH FLOWS
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) 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 ======== ======== ========
The accompanying notes are an integral part of the financial statements. F-45 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: Building and improvements........................................ 39 years Furniture, fixtures and equipment................................ 7 years
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 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: 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 ==========
3. LONG-TERM DEBT: Long-term debt consists of the following as of December 31, 1995: 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 ==========
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. F-47 -----END PRIVACY-ENHANCED MESSAGE-----