Unaudited Pro Forma Financial Information
The accompanying unaudited Pro Forma Condensed Combined Financial Statements are
presented as if the Company had completed the Acquisitions, along with the
acquisition of Welcome Inn America 89-1, L.P. ("Welcome") which occurred on
August 18, 1995, but excluding the acquisition of the assets of AATI
(collectively the "Significant Purchase Acquisitions") at January 9, 1995 (the
Company's date of inception) and as if the merger of Studio Plus had been
completed at January 1, 1993. The acquisition of AATI has been excluded from
Significant Purchase Acquisitions 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. This pro forma information is based in part upon the Consolidated
Financial Statements of the Company and Studio Plus and Statements of Operations
of Welcome and the Acquisitions, excluding AATI. In management's opinion, all
adjustments necessary to reflect the effects of these transactions have been
made.
The unaudited Pro Forma Condensed Combined Statements of Income 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 periods discussed above, 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 deferred loan costs), corporate operating and
property management expenses, site selection costs and the number of future
shares issued.
Certain data and notes normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. The accompanying unaudited Pro Forma Condensed Combined Financial
Statements and notes should be read in conjunction with the Consolidated
Financial Statements of the Company and Studio Plus included in their respective
1995 Form 10-K and Form 10-Q for the quarterly period ended September 30, 1996.
EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
as of September 30, 1996
(Unaudited)
(in thousands)
Studio
ASSETS Company Plus Merger Pro Forma
(Historical) (Historical) Adjustments Combined
------------------------------------------ ---------
Current assets:
Cash and cash equivalents $294,398 $ 31,663 $ $326,061
Securities available for sale 18,227 18,227
Accounts receivable, net 739 (739)
Refundable deposits 658 658
Supply inventories 1,239 60(a) 1,299
Prepaid expenses 232 262(a) 494
Other current assets 1,224 502 969(a) 2,695
------------------------------------------ ---------
Total current assets 297,751 51,131 552 349,434
------------------------------------------ ---------
Property and equipment, at cost 189,217 91,426 7,646(a) 288,289
Less accumulated depreciation (1,530) (8,766)(a) (10,296)
------------------------------------------ ---------
Property and equipment, net 187,687 91,426 (1,120) 277,993
------------------------------------------ ---------
Site deposits and preacquisition costs 8,430 1,120(a) 9,550
Deferred loan costs 9,005 383 9,388
Preopening costs, net 552 (552)(a)
Other assets 652 6 658
------------------------------------------ ---------
Total Assets $503,525 $ 143,498 $ $647,023
========================================== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,191 $ 3,544 $ 6,520(b) $ 10,985
Accrued salaries and related expenses 851 522 1,373
Due to related parties 85 85
Other accrued expenses 5,960 641 358(a) 6,959
Property taxes 512 (512)(a)
Income taxes payable 1,139 1,139
Deferred revenue 186 154(a) 340
------------------------------------------ ---------
Total current liabilities 8,273 6,358 6,250 20,881
Deferred income taxes 966 4,846 5,812
------------------------------------------ ---------
Total liabilities 9,239 11,204 6,250 26,693
------------------------------------------ ---------
Commitments
Shareholders' equity:
Preferred stock, $.01 value
Common stock, $.01 par value 683 125 28(c) 836
Additional paid in capital 492,632 127,207 (28)(c) 619,811
Unrealized gains on securities
available for sale, net 29 29
Retained earnings (deficit) 971 4,933 (6,250)(b) (346)
------------------------------------------ ---------
Total shareholders' equity 494,286 132,294 (6,250) 620,330
------------------------------------------ ---------
Total Liabilities & Shareholders' ------------------------------------------ ---------
Equity $503,525 $ 143,498 $ $647,023
========================================== =========
See accompanying notes to the unaudited pro forma condensed combined financial
statements.
EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
for the year ended December 31, 1993
(Unaudited)
(in thousands)
Studio Pro Forma Significant
Company Plus Merger Combined Purchase Pro Forma
(Historical) (Historical) Adjustments (Historical) Acquisitions Combined
Revenue:
Room revenue $ 9,985 $ 9,985 $ 9,985
324 324 324
Other revenue ---------- ---------- ---------- ---------- ---------- ----------
10,309 10,309 10,309
Total revenue ---------- ---------- ---------- ---------- ---------- ----------
Cost & expenses:
Property operating expenses (4,458) (4,458) (4,458)
Corporate operating expenses (792) (792) (792)
Depreciation and amortization (1,313) (1,313) (1,313)
---------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses (6,563) (6,563) (6,563)
---------- ---------- ---------- ---------- ---------- ----------
Income from operations 3,746 3,746 3,746
Interest expense (198) (198) (198)
---------- ---------- ---------- ---------- ---------- ----------
Income before third party investors interest 3,548 3,548 3,548
Third party investors interest (2,498) (2,498) (2,498)
---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 1,050 1,050 1,050
Provision for income taxes ---------- ---------- ---------- ---------- ---------- ----------
Net income $ 1,050 $ 1,050 $ 1,050
========== ========== ========== ========== ========== ==========
Pro forma income data:
Net income $ 1,050 $ 1,050 $ 1,050
Pro forma adjustment for income taxes (390) (390) (390)
---------- ---------- ----------
Pro forma net income $ 660 $ 660 $ 660
========== ========== ==========
See accompanying notes to the unaudited pro forma condensed combined financial
statements.
EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
for the year ended December 31, 1994
(Unaudited)
(in thousands)
Studio Pro Forma Significant
Company Plus Merger Combined Purchase Pro Forma
(Historical) (Historical) Adjustments (Historical) Acquisitions Combined
Revenue:
Room revenue $11,830 $11,830 $11,830
Other revenue 322 322 322
Total revenue ---------- ------- ---------- ------- --------- -------
12,152 12,152 12,152
---------- ------- ---------- ------- --------- -------
Cost & Expenses:
Property operating expenses (5,256) (5,256) (5,256)
Corporate operating expenses (881) (881) (881)
Depreciation and amortization (1,472) (1,472) (1,472)
---------- ------- ---------- ------- --------- -------
Total costs and expenses (7,609) (7,609) (7,609)
---------- ------- ---------- ------- --------- -------
Income from operations 4,543 4,543 4,543
Interest expense (2,532) (2,532) (2,532)
---------- ------- ---------- ------- --------- -------
Income before third party investors interest 2,011 2,011 2,011
Third party investors interest (358) (358) (358)
---------- ------- ---------- ------- --------- -------
Income before income taxes 1,653 1,653 1,653
Provision for income taxes
---------- ------- ---------- ------- --------- -------
Net income $ 1,653 $ 1,653 $ 1,653
========== ======= ========== ======= ========= =======
Pro forma income data:
Net income $ 1,653 $ 1,653 $ 1,653
Pro forma adjustment for income taxes (615) (615) (615)
-------- -------- --------
Pro forma net income $ 1,038 $ 1,038 $ 1,038
======= ======= =======
See accompanying notes to the unaudited pro forma condensed combined financial statements.
EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
for the year ended December 31, 1995
(Unaudited)
(in thousands except per share amounts)
Studio Pro Forma Significant
Company Plus Merger Combined Purchase Pro Forma
(Historical) (Historical) Adjustments (Historical) Acquisitions Combined
Revenue:
Room revenue $ 817 $ 15,309 $ $ 16,126 $ 12,612 (a) $ 28,738
Other revenue 61 581 642 675 (a) 1,317
---------- ---------- ---------- ---------- ---------- ----------
Total revenue 878 15,890 16,768 13,287 30,055
---------- ---------- ---------- ---------- ---------- ----------
Cost & expenses:
Property operating expenses (332) (6,374) (6,706) (5,555) (a) (12,261)
Corporate operating expenses (2,555) (2,114) (4,669) (876) (a) (5,545)
Depreciation and amortization (147) (1,912) (2,059) (2,047) (a) (4,106)
---------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses (3,034) (10,400) (13,434) (8,478) (21,912)
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from operations (2,156) 5,490 3,334 4,809 8,143
Interest income (expense) 849 (1,357) (508) (44) (a) (552)
---------- ---------- ---------- ---------- ---------- ----------
Income before third party investors interest (1,307) 4,133 2,826 4,765 7,591
Third party investors interest (141) (141) (141)
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes (1,307) 3,992 2,685 4,765 7,450
Provision for income taxes (1,670) 523(c) (1,147) (1,906) (a) (3,053)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) $ (1,307) $ 2,322 $ 523 $ 1,538 $ 2,859 $ 4,397
========== ========== ========== ========== ========== ==========
Net income (loss) per common share $ (0.05) $ (0.05) $ (0.12)
========== ========== ==========
Pro forma income data:
Net income $ 2,322 $ 1,538 $ 4,397
Pro forma adjustment for income taxes 176 176 176
---------- ---------- ----------
Pro forma net income $ 2,498 $ 1,714 $ 4,573
========== ========== ==========
Pro forma net income per share: $ 0.50 $ 0.05 $ 0.12
========== ========== ==========
Weighted average number of common and
equivalent shares outstanding during
the period 25,304 4,995 1,135(b) 31,434 5,216(a) $ 36,650
========== ========== ========== ========== ========== ==========
See accompanying notes to the unaudited pro forma condensed combined financial
statements.
EXTENDED STAY AMERICA, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
for the nine months ended September 30, 1996
(Unaudited)
(In thousands except per share amounts)
Studio Pro Forma Significant
Company Plus Merger Combined Purchase Pro Forma
(Historical) (Historical) Adjustments (Historical) Acquisitions Combined
Revenue:
Room revenue $ 8,653 $ 16,087 $ 24,740 $ 5,172(a) $ 29,912
Other revenue 260 553 813 41(a) 854
---------- ---------- ---------- ---------- ---------- ----------
Total revenue 8,913 16,640 25,553 5,213 30,766
---------- ---------- ---------- ---------- ----------
Cost & expenses:
Property operating expenses (3,588) (6,862) (10,450) (416)(a) (10,866)
Corporate operating expenses (8,706) (2,766) (11,472) (1,397)(a) (12,869)
Depreciation and amortization (1,430) (2,312) (3,742) (783)(a) (4,525)
---------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses (13,724) (11,940) (25,664) (2,596) (28,260)
---------- ---------- ---------- ---------- ----------
Income (loss) from operations (4,811) 4,700 (111) 2,617 2,506
Interest income 8,056 (1,577) 9,633 9,633
---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 3,245 6,277 9,522 2,617 12,139
Provision for income taxes (966) (2,448) (300)(c) (3,714) (1,020)(a) (4,734)
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 2,279 $ 3,829 $ (300) $ 5,808 $ 1,597 $ 7,405
========== ========== ========== ========== ========== ==========
Net income per commom share $ 0.04 $ 0.34 $ 0.08 $ 0.10
========== ========== ========== ==========
Weighted average number of common and
equivalent shares outstanding during
the period 55,908 11,181 2,540(b) 69,629 2,515(a) 72,144
========== ========== ========== ========== ========== ==========
See accompanying notes to the unadited pro forma condensed combined financial
statements.
Extended Stay America, Inc. and Subsidiaries
Notes to Pro Forma Condensed Combined Financial Statements
(unaudited)
1. Basis of Presentation
Historical
The historical Condensed Consolidated Financial Statements of the Company and of
Studio Plus include the accounts of the Company and its subsidiaries and of
Studio Plus and its subsidiary, respectively. All significant intercompany
balances within each company have been eliminated. The Company was formed on
January 9, 1995. Studio Plus was formed on December 19, 1994 and on June 26,
1995 acquired through merger and exchange of partnership interests all of the
assets of Studio Plus, Inc. and the corporations and partnerships (collectively,
the "Predecessor Entities") which owned and operated StudioPLUS hotels. The
historical Condensed Consolidated Statements of Income of Studio Plus for the
years ended December 31, 1993, 1994 and 1995 reflect combined financial data for
the Predecessor Entities, accounted for as if the combination of the Predecessor
Entities were a pooling of interests. Income taxes on earnings were paid by
shareholders and partners of the Predecessor Entities. Accordingly, income taxes
are provided on a pro forma basis for the years ended December 31, 1993, 1994
and 1995.
The Merger
The Merger has been accounted for in the Pro Forma Condensed Combined Financial
Statements using the pooling of interests method of accounting whereby the
accounts of Extended Stay America, Inc. and subsidiaries are combined with the
accounts of Studio Plus as though both companies operated as one business for
the periods presented. The non-recurring costs associated with the Merger,
estimated to be $6.25 million, have been excluded from the Pro Forma Condensed
Combined Statements of Income to more accurately reflect the actual operation of
the companies. These costs will be expensed in the period that the Merger is
consummated.
Significant Purchase Acquisitions
The Pro Forma Condensed Combined Statements of Income reflect the results of the
operations for the Significant Purchase Acquisitions for the respective periods
as if they were acquired as of January 9, 1995 (the date of inception of the
Company). These acquisitions were accounted for using the purchase method of
accounting.
2. Earnings Per Share
Earnings per share have been calculated by dividing the net income by the
outstanding shares of Common Stock, adjusted to reflect the issuance of the
additional shares to be issued in the Merger at a ratio of 1.2272 shares per
share of Studio Plus Common Stock. Prior to June 26,1995 the assets of Studio
Plus were owned and operated by the Predecessor Entities. The outstanding shares
and other equity interests of the Predecessor Entities differ substantially from
the shares of Common Stock of Studio Plus outstanding after the initial public
offering by Studio Plus on June 26, 1995. Accordingly, Studio Plus has not
historically presented earnings per share information for the years ended
December 31, 1993 and 1994.
Extended Stay America, Inc. and Subsidiaries
Notes to Pro Forma Condensed Combined Financial Statements - (Continued)
(unaudited)
The weighted average number of common and equivalent shares outstanding during
the period and the related earnings per share data as reflected in the
historical Consolidated Statements of Operations for the year ending December
31, 1995 for both the Company and Studio Plus have been adjusted to give effect
to the stock splits occurring in 1996.
3. Pro Forma Adjustments
Pro Forma Balance Sheet
a) To reclassify certain assets and liabilities of Studio Plus to
conform with the Company's presentation.
b) To reflect the estimated costs associated with the Merger.
c) To reflect the issuance of 2,843,818 incremental shares of Common
Stock in the Merger and the elimination of a corresponding amount
of additional paid in capital.
Pro Forma Statements of Income
a) To reflect the results of operations of the Significant Purchase
Acquisitions for the respective periods as if they were acquired
as of January 9, 1995 (the date of inception of the Company).
b) To reflect the issuance of the incremental shares of Common Stock
of the Company in the Merger based on a ratio of 1.2272 shares
per share of Studio Plus Common Stock.
c) To reflect the adjustment in the provision for income taxes
resulting from the combination on a pro forma basis.