SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 2000
Commission File No. 000-28108
SUBURBAN LODGES OF AMERICA, INC.
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(Exact name of Registrant as specified in its charter)
Georgia
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(State or other jurisdiction of incorporation or organization)
581781184
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(I.R.S. Employer Identification No.)
300 Galleria Parkway, Suite 1200, Atlanta, Georgia 30339
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 799-5000
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share
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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 /_/
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10K. /X/
The aggregate market value of the voting stock held by non-affiliates
(which for purposes hereof are all holders other than executive officers and
directors) of the Registrant as of March 23, 2001 is $49,599,011 (based on $5.75
per share; the last sales price on the NASDAQ Stock Market on March 23, 2001).
At March 23, 2001 there were issued and outstanding 12,003,570 shares
of Common Stock, par value $0.01 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the 2001
Annual Meeting of Shareholders are incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS.
GENERAL
Suburban Lodges of America, Inc. and its subsidiaries (collectively the
"Company") was incorporated in Georgia in 1987. The Company develops, owns,
manages and franchises Suburban Lodge(R) hotels, which are limited service
extended stay hotels designed to appeal to value-conscious guests. In addition,
the Company franchises GuestHouse International(R) Inns, Hotels and Suites,
which are mid-market traditional nightly hotels. The Suburban Lodge brand has
been ranked as the 19th largest limited service hotel brand and the Company has
been ranked as the 34th largest hotel company in the world (based on number of
guest rooms and hotels, respectively).
Suburban Lodge guest rooms are fully furnished and include a
combination living room and bedroom, a bathroom and a fully-equipped
kitchenette. Weekly maid and linen services, access to cable or satellite
television and coin-operated laundromats are also provided to allow guests to
stay comfortably for extended periods. Suburban Lodge hotels offer clean,
comfortable and attractive accommodations to guests at substantially lower rates
than most traditional and other extended stay hotels. Although daily rates are
available, a majority of all guests pay the Company's weekly rates, which
currently range from approximately $149 to $339 for standard guest rooms and
from $169 to $359 for larger guest rooms.
Based upon the high occupancy rates of the Company's Suburban Lodge
hotels and its Suburban Lodge franchised hotels, published occupancy rates for
other participants in the extended stay market and industry sources, the Company
believes that demand for extended stay hotels compares favorably to the existing
supply of hotels in this segment of the market. The Company believes that
Suburban Lodge hotels appeal to an underserved and growing segment of guests in
the extended stay market. These guests include business travelers (particularly
those with limited or no expense accounts), individuals on temporary work
assignments, persons relocating or purchasing a home, tourists and other
value-conscious customers desiring low-cost, longer-term, quality accommodations
with fully equipped kitchenettes. The Company believes that the extended stay
market offers a number of attractive investment characteristics compared to
traditional hotels, including higher than industry average occupancy rates and
operating margins.
The Company believes that several features differentiate its Suburban
Lodge hotels from, and provide a competitive advantage over, traditional and
other extended stay lodging hotels, such as: (i) franchising opportunities; (ii)
its low weekly rates; (iii) guest rooms include fully-equipped kitchenettes;
(iv) marketing and pricing to appeal to longer guest stays; (v) higher occupancy
rates; (vi) operating efficiencies; (vii) standard design and low construction
costs; and (viii) attractive unit economics.
In June 1999, the Company added the GuestHouse International brand to
its portfolio, thereby extending the Company's ability to attract franchisees.
The Company now has a nightly stay brand and a brand that is not targeted
primarily at the economy segment of the market. The GuestHouse International
brand includes a diverse group of mid-market inns, hotels, and suite hotels,
many of which are two and three diamond AAA rated hotels. Although approximately
20 percent of GuestHouse International hotels are new construction, the brand's
focus is on the conversion of existing hotels.
GuestHouse International hotels are as unique in feel as they are alike
in their commitment to quality, safety and customer service. With the variety of
property types and locations, GuestHouse International appeals to a broad base
of guests, most of whom stay for one to three nights.
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The GuestHouse International concept is truly different from
traditionally one-sided franchise relationships. The brand was founded on the
ideas and needs of hotel owners, so it centers on providing fair treatment and
real value to franchisees. GuestHouse International offers a truly
owner-friendly license agreement featuring remarkably low flat fees that allow
owners to keep their increases in profit. The franchise agreements also feature
a short five-year term, designated areas of protection and lenient exit
requirements.
Although the Suburban Lodge and GuestHouse International brands operate
differently, the Company is able to combine resources to create efficiencies in
support services such as quality assurance, training, information technology and
franchise sales.
BUSINESS STRATEGY
Growth Strategy
With 65 Company owned and 54 franchise Suburban Lodge hotels operating
in 19 states as of December 31, 2000, Suburban Lodge has established itself as a
national provider of economy extended stay hotels. With its new GuestHouse
International brand operating 65 hotels in 20 states as of December 31, 2000,
the Company has also established itself as a leader in "owner friendly"
franchising. While the company continues to own and develop a select group of
Suburban Lodge properties each year, the Company is focused on becoming a
multi-brand, fee-based franchisor rather than a capital-intensive development
enterprise.
Franchising, Third Party Development and Management Activities. During
1999, the Company significantly expanded its franchise sales force to emphasize
franchising the Suburban Lodge and GuestHouse International systems on a
nationwide basis to independent developers and operators and to passive
investors who retain the Company to develop and manage their Suburban Lodge and
GuestHouse International hotels. The Company considers its franchisees to be an
integral component of its continued growth and believes its relationship with
its franchisees is good. Through franchising, the Company intends to accelerate
the growth of the Suburban Lodge and GuestHouse International systems, thereby
increasing its market presence and brand awareness in both new and existing
markets, while generating incremental revenues at an attractive margin. Suburban
believes that its existing infrastructure and experience in franchising will be
an important factor in executing its franchising strategy. At December 31, 2000,
54 franchised Suburban Lodge hotels were operating in 12 states and 65
GuestHouse International hotels were operating in 20 states.
The Company has formed the Suburban Lodge Franchise Advisory Committee
("SLFAC") with the following purposes: to promote communication between
franchisees and franchisor; to encourage growth of the Suburban Lodge community;
to develop innovative approaches to enhance the ownership, quality and
profitability of Suburban Lodge hotels; and to advise franchisor of matters of
interest to franchisees.
SLFAC has formed six subcommittees in the areas of Marketing and
Reservations, Information Technology, Quality Assurance,
Design/Construction/FF&E, Operations and Training. The Board of SLFAC is
compromised of six franchisees and three Company representatives. SLFAC meets
four times per year, with the fourth being the annual meeting that coincides
with the annual Franchise Owners' Convention.
The Company has also announced its intentions to form a GuestHouse
International Marketing Advisory Council in 2001.
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Company Owned Development. As the Company continues to focus its growth
on fee-based franchise revenues, Company development is being limited to select,
geographically diverse, strategic markets. In 2000 the Company opened three
hotels in Tampa-Brandon, Florida; Chicago-Villa Park, Illinois and
Denver-Sheridan, Colorado. The Company is presently developing two hotels in
Pittsburgh and Philadelphia, Pennsylvania.
Extel 2001. The Company has designed and introduced a new prototype
Suburban Lodge hotel that allows owners to take advantage of both extended stay
and transient markets. Extel 2001 has an expandable interior corridor that can
accommodate 61 to 150 guestrooms. The new prototype allows franchisees to
cost-effectively modify features to fit the needs of individual markets. The
lower development costs associated with the option of a lesser number of units
and the additional design flexibility to accommodate a broader range of markets,
provides a significant enhancement to the Company's franchising activities.
Strategic Opportunities. During 2000, the Company announced a strategic
alliance with HotelTools Inc., a private company. HotelTools has created
valuable, web-based Enterprise software for the hospitality industry. This
service centralizes all aspects of multi-property hotel operations, including
property, guest and rate management, along with reservations. The Company has
provided funding for HotelTool's operations in the form of secured loans. A more
thorough discussion of this topic is presented in item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Operating Strategies at Company-Owned Hotels
The Company's principal operating strategies are to (i) provide its
guests with clean, comfortable and attractive accommodations at weekly rates
substantially lower than those offered by most traditional and other extended
stay hotels; (ii) control the operating costs at each of its hotels and maintain
above industry average operating margins; and (iii) ensure guest satisfaction
through a commitment to customer service.
The Company believes that its high average occupancy rate (as described
in Management's Discussion and Analysis of Financial Condition and Results of
Operation) is primarily a result of the combination of its competitive weekly
rates, which appeal to a broad base of potential guests, and its guestroom
amenities. In addition, the Company seeks to minimize costs throughout its
operations. The Company is able to control its operating costs because it
operates each hotel with a staff of approximately six to nine full-time
employees, which is smaller than the staffs at most traditional hotels,
maintains limited office hours and provides weekly rather than daily
housekeeping. In addition, because the average guest stay is approximately three
to four weeks, longer guest stays reduce guest check-in traffic and
administrative costs.
Reservations are available to both Suburban Lodge and GuestHouse
International guests by voice, online, and through the Global Distribution
System (GDS). Live online reservations can be made at suburbanlodge.com and
guesthouseintl.com. Voice reservations can be made at 800-951-STAY for Suburban
Lodge and 800-21-GUEST for GuestHouse International. Most hotels for both brands
are also available to travel agents worldwide on the GDS through Lexington
Services Worldwide.
Each brand has established its own national marketing fund that
supports the marketing of its hotels to prospective guests. Suburban Lodge and
all participating GuestHouse International hotels contribute to their respective
funds. With the funds, the Company provides sales and telemarketing support.
OPERATING PRACTICES
The Company manages its own hotels. Each Suburban Lodge hotel has a
general manager, who resides on-site and is responsible for the overall
operation of the hotel, and an assistant manager. Managers are trained in all
aspects of hotel operations, with particular emphasis placed on customer
service, and are given broad authority to make day-to-day operating decisions.
Managers are supervised
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through the Company's management information systems and frequent on-site audits
by district managers. Incentive programs allow managers to earn bonuses based on
achievement of budgets. The Company provides on-going mandatory training for the
managers.
On-site transactions are processed through software licensed from
HotelTools. The software provides on-site Suburban Lodge management with updated
information on items such as available guest rooms, guest rooms needing cleaning
or repairs, room charges due and guest payment history. Each hotel is connected
by modem to the Company's corporate office in Atlanta, and operating results are
compiled and reviewed on a regular basis. The corporate office purchases
supplies, pays virtually all property expenses and prepares monthly financial
statements for all properties managed by the Company.
The Company maintains customer service and quality assurance
departments. The customer service function provides customers with property
information and resolves satisfaction problems and billing discrepancies. The
Company's quality assurance department inspects all hotels, both corporate and
franchise, to ensure compliance with quality guidelines and operational
standards.
FRANCHISE, DEVELOPMENT AND MANAGEMENT AGREEMENTS
Suburban Lodge Franchise Agreements
The Company enters into single unit franchise agreements for an initial
term of ten years and three months, with a ten-year renewal option subject to
certain conditions, such as a requirement to modernize the hotel and to pay a
renewal fee. The initial franchise fee for a single hotel is $30,000 or $225 per
guest room, whichever is greater. A monthly royalty fee of four percent of gross
revenues becomes payable after three months of operations. Agreements signed
prior to August 1, 1997 are subject to an initial fee of $25,000 or $190 per
room, whichever is greater, and a monthly royalty of three percent of gross
revenues. Currently, all franchisees are required to pay an advertising and
marketing fee of one percent of gross revenues (not to exceed two percent during
the initial term) and a reservations/referral program fee not to exceed one
percent of gross revenues, to cover the franchisee's share of the costs incurred
by Suburban in providing these services. As of March 1, 1999, the Company
initiated charges for advertising, and is collecting a relatively small monthly
referral fee to pay the costs of the 1-800 guest information line. The Company
may increase these fees under certain conditions.
The Company provides materials and services to assist each franchisee
in developing and operating a Suburban Lodge hotel, including development and
operating manuals, training, proprietary operating software, prototype
architectural plans and specifications, the 1-800 guest information line and
Website suburbanlodge.com, semi-annual inspections by Suburban's corporate staff
to ensure quality control and advertising materials and layouts.
Each franchised hotel's operating system is connected via modem to the
Company's central system, which allows the Company to download sales and other
operating information on a regular basis.
If a franchisee desires to sell an interest in the franchise agreement
or the hotel, the Company generally has the first right to buy it. In addition,
the current agreement provides that upon termination of a franchise agreement
for a breach by the franchisee, the Company may purchase the hotel at fair
market value less liquidated damages, attorney's fees and other amounts which
the franchisee may owe the Company. The franchisee has a limited right to
terminate the agreement. Many state franchise laws limit the ability of a
franchisor to terminate or refuse to renew a franchise.
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The Company does not anticipate that the termination of any single
franchise agreement would have a material adverse effect on its financial
condition or results of operations.
GuestHouse International Franchise Agreements
The Company enters into single unit franchise agreements for an initial
term of five years with no renewal options following the initial term. The
initial franchise fee is $30,000 or $300 per guestroom, whichever is greater. A
monthly operating fee of $1.50 per room per day through years 1 and 2 and $1.75
per room per day for years 3 through 5 is payable from the opening date of the
franchise hotel. Agreements signed between June 4, 1998 and June 1, 1999 are
subject to an initial fee of $15,000 and a monthly operating fee of $1.25 per
room per day. Between June 11, 1993 and June 4, 1998 no GuestHouse franchise
agreements were offered or signed, however, licenses were granted under
Cooperative Membership Agreements with initial fees ranging from $0-$10,000 and
monthly operating fees ranging from $.72 per room per day to $1.00 per room per
day. All Cooperative Membership Agreements and franchise agreements offered and
entered into prior to June 1, 1999 were entered into by Guesthouse International
LLC or its predecessors. Suburban Lodges of America, Inc. purchased the assets
of GuestHouse International LLC on June 1, 1999 and took an assignment of all
previously executed Cooperative Membership Agreements and franchise agreements.
Certain franchisees are also required to pay a marketing contribution currently
set at $.50 per room per day.
The Company provides materials and services to assist each franchisee
in operating a GuestHouse International Inn, Hotel, or Suites including
operating manuals, training, maintaining or subcontracting a reservation
service, general marketing services, conferences and periodic inspections by
corporate staff to ensure quality control.
If a franchisee desires to sell an interest in the franchise agreement
or the hotel, the Company has the right to disapprove such a sale in its sole
discretion. In addition, the current agreement provides that upon termination of
a franchise agreement for breach by a franchisee; that franchisee will pay $1.75
per room per day for 18 months if such termination occurs prior to two years
after the opening date, and after two years, the franchisee will pay fees
ranging from zero to $1.75 per day for 18 months depending on the hotel's
occupancy rate for the 12 months prior to such termination.
Many states' franchise laws limit the ability of a franchisor to
terminate or refuse to renew a franchise. The Company does not anticipate that
the termination of any single franchise agreement would have a material adverse
effect on its financial condition or results of operations.
Management Agreements
The Company sometimes manages franchised Suburban Lodge hotels for its
franchisees. The Company generally offers a five-year management agreement with
automatic renewals. Under the agreement, the Company provides certain
pre-opening services, operates and manages the hotel and is responsible for all
personnel decisions, the negotiation of operating leases and contracts, the
preparation of advertising campaigns, the payment of taxes and the general
maintenance of the hotel. Suburban also maintains the right to determine all
operating policies affecting the appearance of the hotel, the maintenance of the
hotel and its standards of operation, the quality of services and other matters
affecting customer satisfaction. In addition to a fixed fee for pre-opening
services, The Company charges a management fee ranging from four to five percent
of the hotel's monthly gross revenues. As of December 31, 2000, the Company
managed 10 hotels for its franchisees.
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TRADEMARKS
Suburban Lodge
The service marks "Suburban Lodge" and "Lodge for Less" and the
corporate design logo are actively used and are significant to the Company's
business. All of these marks have been registered on the Principal Register of
the United States Patent and Trademark Office.
The term for the registration of the "Suburban Lodge" service mark
extends to November 2004 on the Principal Register, at which time it may be
renewed for successive ten-year periods. The term for the registration of the
corporate design logo extends to March 2009, at which time it may be renewed for
successive ten-year periods. The term for the registration of the service mark
"Lodge for Less" extends to July 2007, at which time it may be renewed for
successive ten-year periods.
GuestHouse International
The following service marks and corporate design logos are actively
used and are significant to the Company's business: "GH" and design logo; "GH
GuestHouse" and design logo; "GH GuestHouse International" and design logo; "GH
GuestHouse" and design logo with stylized "G"; "GuestHouse International"
(Block); GH GuestHouse Inns, Hotels, Suites" and design logo; "GuestHouse.net"
(Block), "GH GuestHouse Friends Club".
The "GH" service mark has been registered on the Principal Registry,
the term of the registration extends to January 30, 2006, and it may be renewed
for successive ten-year periods. The "GH GuestHouse" service mark has been
registered on the Principal Registry, the term of the registration extends to
August 13, 2006, and it may be renewed for successive ten-year periods. The "GH
International" service mark has been registered on the Principal Registry, the
term of the registration extends to October 22, 2006, and it may be renewed for
successive ten-year periods. The "GH GuestHouse" service mark with stylized "G"
design logo has been registered on the Principal Registry, the term of the
registration extends to March 4, 2007, and it may be renewed for successive
ten-year periods.
The "GuestHouse International" (Block) service mark has been
registered on the Supplemental Registry, the term of the registration extends to
September 16, 2007, and it may be renewed for successive ten-year periods. The
"GuestHouse Inns, Hotels, Suites" service mark has been registered on the
Principal Registry, the term of the registration extends to December 23, 2007,
and it may be renewed for successive ten-year periods. The "GuestHouse.net"
(Block) service mark has been registered on the Supplemental Registry, the term
of the registration extends to March 24, 2008, and it may be renewed for
successive ten-year periods. The "GH GuestHouse Friends Club" servicemark has
been registered on the Principal Registry, the term of the registration extends
to July 4, 2010, and it may be renewed for successive ten year periods.
SEASONALITY
Following their initial ramp-up, the Company's Suburban Lodge hotels
typically experience lower average occupancy rates and total revenues in the
first and fourth calendar quarters of each year. Because many of the Company
expenses do not fluctuate with occupancy, such declines in occupancy may cause
fluctuations or decreases in the Company's quarterly earnings.
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COMPETITION
The lodging industry is highly competitive. Competitive factors within
the industry include room rates, quality of accommodations, name recognition,
supply and availability of alternative lodging, including short-term lease
apartments, service levels, reputation, reservation systems and convenience of
location. Each of the existing hotels and hotels under construction is located,
and each of the hotels under development will be located, in a developed area
that includes competing hotels, including both traditional nightly and extended
stay hotels. The number of competitive hotels in a particular area could have a
material adverse effect on occupancy, average weekly rate and weekly room
revenue per available guest room of the existing hotels and the hotels under
construction or properties developed or acquired in the future.
The Company anticipates that competition within the extended stay and
traditional nightly lodging markets will continue to increase substantially in
the foreseeable future. The Company will compete for guests with other
established hotel companies which have greater financial resources than the
Company, and more extensive relationships with lenders, developers and the hotel
franchise community. These competitors may be able to accept more risk than the
Company can prudently manage. Further, new or existing competitors might modify
their franchise fees or reduce rates and offer greater convenience, services or
amenities or expand or improve hotels in markets in which the Company competes,
thereby adversely affecting the Company's business and results of operations.
At the present time, the Company's hotels are located principally in
the Southeast, Midwest and Southwest. In these regions, the Company competes
with both traditional hotels and other extended stay hotels, including
independent extended stay hotels and those owned and operated by competing
chains. The Company competes with these hotels by offering competitive weekly
rates, good customer service and convenient locations.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws and regulations, an owner
or operator of real estate may be liable for the costs of removal or remediation
of certain hazardous or toxic substances on such property. Such laws often
impose liability without regard to whether the owner knew of, or was responsible
for, the presence of hazardous or toxic substances. In connection with the
ownership and operation of its properties, the Company may be potentially liable
for any such costs. Any potential environmental liability the Company may have
solely as a franchisor is less clear; however, the Company's business and
results of operations could be adversely affected if a franchisee incurred
environmental liability. Suburban believes that the Company-owned Suburban Lodge
hotels are in compliance in all material respects with all federal, state and
local ordinances and regulations regarding hazardous or toxic substances and
other environmental matters. Neither the Company nor, to the knowledge of the
Company, any of the current owners of the franchised hotels has been notified by
any governmental authority of any material noncompliance, liability or claim
relating to hazardous or toxic substances or other environmental issues in
connection with any of its present or former properties. Moreover, no assurances
can be given that (i) future laws, ordinances or
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regulations will not impose any material environmental liability or costs of
compliance or (ii) the current environmental condition of the Company's existing
and future properties will not be affected by the condition of neighboring
properties (such as the presence of leaking underground storage tanks) or by
third parties unrelated to the Company.
GOVERNMENTAL REGULATION
The lodging industry is subject to numerous federal, state and local
government regulations including those relating to building and zoning
requirements and those regulating the licensing of lodging facilities by
requiring registration, disclosure statements and compliance with specific
standards of conduct. The Company believes that each of its hotels has the
necessary permits and approvals to operate its respective business, and the
Company intends to continue to obtain such permits and approvals for its new
hotels. Additionally, the Company is subject to laws governing its relationship
with employees, including minimum wage requirements, overtime, working
conditions and work permit requirements.
Under the Americans With Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. While the Company believes its existing
hotels and hotels under construction are substantially in compliance with these
requirements, a determination that the Company or one of its franchisees is not
in compliance with the ADA could result in the imposition of fines or an award
of damages to private litigants. In addition, changes in governmental rules and
regulations or enforcement policies affecting the use and operation of the
hotels, including changes to building codes and fire and life-safety codes, may
occur.
If the Company were required to make substantial modifications at its
hotels to comply with the ADA or other changes in governmental rules and
regulations, the Company's financial condition and ability to develop new hotels
could be materially adversely affected.
Effective May 1, 2000, all new Company employees were required to be tested
for drugs as a condition of hire, and employees who received medical treatment
after a work related injury were also to be tested. Several States have drug
free workplace certification programs which will allow employers to receive
significant discounts on worker's compensation insurance policy premiums. As
part of the requirements to become certified, formal supervisory training and
employee education must be provided on an annual basis. In 2000, Suburban took
the initial steps in this certification process by implementing a Drug Free
Workplace training program.
As a franchisor, the Company is subject to Federal Trade
Commission ("FTC") regulation and various state laws, which regulate the offer
and sale of franchises. State laws that regulate the franchisor-franchisee
relationship presently exist or are being considered in a substantial number of
states, and from time to time new legislation is proposed and bills are
introduced in Congress which would provide for federal regulation of certain
aspects of the franchisor-franchisee relationship. Many state laws impose
substantive requirements on franchise agreements, including limitations on
non-competition provisions and termination or nonrenewal of a franchise. Some
states require that certain materials be approved before franchises can be
offered or sold in that state. These current and proposed franchise relationship
laws may limit, among other things, the duration and scope of non-competition
provisions, the ability of a franchisor to terminate or refuse to renew a
franchise and the ability of a franchisor to designate sources of supply. The
failure to obtain approvals to sell franchises or an increase in the minimum
wage rate, employee benefit costs or other costs associated with employees could
materially adversely affect the Company.
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EMPLOYEES
As of December 31, 2000, the Company employed 760 persons. During the year
2000, the Company streamlined hotel operations by eliminating many area
managers, hotel assistant managers and desk clerk positions. Sales positions
were added in cities with multiple Suburban Lodge hotels. The Company also
managed fewer franchisee owned hotels at the end of the year. As a result of
these efficiencies and cost savings, the Company was operating with
approximately 90 fewer employees at the end of the year. The Company's employees
are not subject to any collective bargaining agreements. Management believes
that its relationship with its employees is good.
EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position
- ---- --- --------
David E. Krischer 52 Chairman of the Board and Chief Executive Officer
Dan J. Berman 36 Vice President - Franchising (Suburban Lodge Brand) and Director
Gregory C. Plank 54 President
Robert N. Wilson 49 Vice President - Franchising (GuestHouse International Brand)
Paul A. Criscillis, Jr. 51 Vice President and Chief Financial Officer
G. Hunter Hilliard 58 Vice President of Construction
Kevin R. Pfannes 46 Vice President, General Counsel and Secretary
Robert E. Schnelle 51 Vice President, Treasurer and Assistant Secretary
David E. Krischer. Mr. Krischer formed Suburban Lodges of America, Inc. in
1987 to develop a national chain of economy extended stay hotels and has served
as its CEO and Chairman since inception. A leader in the extended stay hotel
industry, Mr. Krischer served as the founding Chairman of the Extended Stay
Lodging Council, a division of the American Hotel Motel Association. He has over
19 years experience in real estate development and has been involved in the
hospitality industry for thirteen years. From 1974 to 1986, he was a partner
with two Atlanta law firms, Arrington, Rubin, Winter, Krischer & Goger and
Costanzo & Krischer, where his practice focused on general business law, real
estate law and real estate syndication. Mr. Krischer has a Juris Doctor of Law
Degree, with honors from Boston College Law School ('73) and a Bachelors degree
in Accounting from Brooklyn College.
Dan J. Berman. Mr. Berman joined the Company in September 1993 as its Vice
President - Franchising and has been a director since March 1996. Prior to
joining the Company, Mr. Berman practiced commercial law in New York City with
the firm Young and Young from September 1990 to May 1993. Mr. Berman received
the degrees of Juris Doctor and Master of Business Administration from Emory
University Law and Business Schools in 1990.
Robert N. Wilson. Mr. Wilson joined the Company in April, 2000 as its Vice
President of Franchising (GuestHouse International Brand). Prior to joining the
Company, Mr. Wilson held key development and management positions at Best
Western International and Ramada. He is a 25-year veteran of the hotel industry
who began his career operating franchised hotels. Mr. Wilson is a graduate of
Oklahoma City University with a bachelor of science degree in biology and
chemistry. Mr. Wilson has also served as President of the Arizona
Licensor/Franchisor Association and member of the Franchisee Relations Committee
of the International Franchise Association.
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Paul A. Criscillis, Jr. Mr. Criscillis joined the Company as Vice President
and Chief Financial Officer in August 1998. Prior to joining the Company, Mr.
Criscillis had, since 1985, served as Vice President and Chief Financial Officer
for Atlanta-based Crown Crafts, Inc., a manufacturer of textile home furnishings
products. Prior to joining Crown Crafts, Mr. Criscillis was associated with the
public accounting firm of Deloitte & Touche from 1971 to 1985, the last two
years as a partner in that firm's New York practice office. Mr. Criscillis
graduated, with honors, from the University of Kentucky in 1971 with a Bachelors
degree in Accounting.
G. Hunter Hilliard. Mr. Hilliard joined the Company in April 1987 as its
Vice President - Construction. In addition, since 1980, Mr. Hilliard has been
the sole shareholder and Secretary of Acreage Investment Corporation, a real
estate and construction consulting firm. He has over 27 years of experience in
the development and construction of single and multi-family housing, retail
centers and office space.
Kevin R. Pfannes. Mr. Pfannes joined the Company in January 1996 and was
elected Vice President - Development in February 1996. Since May 11, 2000, Mr.
Pfannes has served as Vice President, General Counsel and Secretary of the
Company. He has 22 years of legal and business experience in the development,
acquisition, leasing and financing of a broad range of commercial real estate
transactions. From July 1992 through January 1995, Mr. Pfannes served as
Director of Operations and Legal Services of General Innkeeping Acceptance
Corporation, a wholly-owned subsidiary of Holiday Inns, Inc., which provided
financing for Holiday Inn hotels. From January 1986 to July 1992, Mr. Pfannes
was a self-employed attorney, and his practice focused on hotel and other
commercial real estate matters. Mr. Pfannes served as Development and Real
Estate Counsel for Holiday Inns, Inc. from 1984 to 1986. From 1979 to 1984, Mr.
Pfannes worked for the Chicago law firm of Rooks, Pitts and Poust, where his
practice focused on real estate and lending matters.
Gregory C. Plank. Mr. Plank attended Cornell University School of Hotel
Administration, where he received his Bachelor of Science degree. Mr. Plank's
varied background in the hotel industry includes: marketing positions for the
advertising agency of Needham & Grohmann in New York from 1968 through 1969 the
Sheraton Corporation from 1969 to 1975, and from 1978 to 1986, Leonard, Call
Developers during 1975 and Ramada from 1989 to 1991. Mr. Plank has also served
as General Manger of a full-service Sheraton Inn in Florida, Vice President &
Regional Director of Operations for Sheraton Inns Incorporated, Executive Vice
President-Franchise for Forte Hotels from 1991 to 1996 overseeing Travelodge and
Thriftlodge in North and South America, and President of Country Hearth Inns
from June, 1996 to June, 1999. In June, 1999 Mr. Plank was appointed President
of Suburban Lodges of America, Inc. Mr. Plank is a past Chairmen of AH&MA's
Economy Lodging Council, serves on the Governmental Affairs Committee of AH&MA
and is a member of the Cornell Hotel Society.
Robert E. Schnelle. Mr. Schnelle joined the Company as Vice-President and
Treasurer in April 1999. From August 1991 to August 1998, he served as Treasurer
and from August 1998 to March 1999 he served as Vice President and Treasurer of
Crown Crafts, Inc., a manufacturer of textile home furnishings products. Prior
to that, Mr. Schnelle served as controller for the Memphis Publishing Company.
Mr. Schnelle graduated from Xavier University in 1972 with a Bachelors degree in
Accounting.
FORWARD LOOKING STATEMENTS
This Annual Report contains statements concerning the Company's plans,
beliefs and expectations for future periods. These "forward-looking statements"
may be identified by the use of words such as "intends," "contemplates,"
"believes," "anticipates," "expects," "should," "could," "would" and words of
similar import. These forward-looking statements involve known and unknown risks
and uncertainties that could cause actual results to differ materially from the
expectations expressed or implied in such statements.
-10-
These risks and uncertainties include, but are not limited to: (i) changes
in economic conditions, (ii) reduced demand for and increased supply of extended
stay and other forms of lodging, and increased competition at all levels in the
hotel industry, (iii) the ability of the Company to achieve desired growth in
the number of franchised Suburban Lodge and GuestHouse International hotels,
(iv) various factors affecting the ability of the Company's franchisees (and to
a limited extent the Company as it phases out of hotel development) to build or
renovate additional hotels including the availability of adequate financing on
commercially acceptable terms, development risks and inefficiencies, weather
delays, zoning and other governmental and environmental approvals, (v) the
ability of the Company's operating and financial system to effectively manage
growth, (vi) dependence on senior management, and (vii) the Company's financial
condition and the uncertainties set forth in the Company's filings with the
Securities and Exchange Commission. Forward-looking statements concerning
HotelTools are subject to the foregoing risks and uncertainties and to
additional risks and uncertainties including, but not limited to: (i)
uncertainty as to the demand for its products and services, (ii) the ability of
HotelTools to complete market ready and viable products, (iii) the risk that
competitors will be able to develop and market products and services that
produce results similar to those produced by HotelTools' products, (iv) its
ability to obtain sufficient capital to complete the development of its products
and services and to successfully market them to the hotel industry, and (v) its
future profitability.
ITEM 2. DESCRIPTION OF HOTELS.
Suburban Lodge Hotels
At December 31, 2000, there were 119 existing Suburban Lodge hotels
located in 19 states. These hotels contain an aggregate of 16,018 guest rooms
and have an average of 135 guest rooms. A newly developed Suburban Lodge hotel
is built using either a two-story or three-story interior or exterior corridor
design. The two designs have similar architectural styles and guest room floor
plans. Each hotel includes guest rooms, a general manager's unit, an office and
a guest laundry room. Each guest room includes a combination living room and
bedroom, a fully-equipped kitchenette and access to satellite or cable
television. Each Suburban Lodge hotel also offers weekly housekeeping and linen
service.
The following tables set forth certain information (AS OF DECEMBER 31,
2000) with respect to both Company-owned and franchised existing hotels, hotels
under construction and hotels under development.
Date Number of
Existing Company Owned Hotels Opened Rooms (1)
----------------------------- ------ ---------
Atlanta (Forest Park), GA Mar-88 125
Atlanta (Fulton Industrial), GA Dec-88 106
Atlanta (Norcross), GA Jun-89 128
Birmingham (Oxmoor), AL Jul-90 151
Atlanta (Mableton), GA(2) Jun-93 78
Greenville (Mauldin Road), SC Sep-93 130
Charlotte (Matthews), NC Aug-95 139
Atlanta (Lilburn/Highway 78), GA Nov-95 132
Atlanta (Roswell), GA Jun-96 136
Atlanta (Douglasville), GA Jun-96 132
Louisville (Preston Highway), KY Aug-96 150
Atlanta (Tara Blvd.), GA Sep-96 138
Greenville (Wade Hampton Blvd.), SC Oct-96 126
Atlanta (Indian Trail/I-85), GA Nov-96 149
Knoxville (Kingston Pike), TN Dec-96 132
-11-
Existing Company Owned Hotels (Cont.)
-------------------------------------
Atlanta (Northside Drive), GA Jan-97 150
Chesapeake, VA Feb-97 132
Atlanta (Gwinnett Place), GA Feb-97 138
Charlotte (Pressley I-77), NC Mar-97 131
Charlotte (University Area), NC Apr-97 138
Memphis (Hickory Ridge), TN Jun-97 144
Newport News, VA Jul-97 134
Charleston (North Charleston), SC Aug-97 138
Virginia Beach, VA Oct-97 138
Dayton-South, OH Oct-97 129
Chattanooga, TN Oct-97 132
Indianapolis-NW, IN Nov-97 135
Mobile, AL Nov-97 132
St. Louis (Hazelwood), MO Nov-97 136
Cincinnati (Fairfield), OH Nov-97 131
Columbus (Eastland), OH Dec-97 139
St. Louis (St. Charles), OH Dec-97 130
Columbia-Broad River, SC Dec-97 132
Dallas-North Central, TX Dec-97 144
San Antonio-North, TX Dec-97 137
Arlington-South, TX(4) Dec-97 132
Jackson, MS Jan-98 132
Columbus-NW (Franklin), OH Jan-98 127
Columbus-Northland, OH Jan-98 135
Indianapolis-East, IN Jan-98 135
Arlington-North, TX(4) Mar-98 132
Chicago (Downers Grove), IL Apr-98 133
El Paso -Airport, TX Jun-98 138
Houston- FM1960, TX Jul-98 138
Houston -NASA, TX Jul-98 132
Dallas (Carrollton), TX Aug-98 138
Chicago- O'Hare-Airport, IL Aug-98 125
San Antonio-NE, TX Sep-98 138
Salt Lake City (Midvale), UT Oct-98 140
Minneapolis (Burnsville), MN Nov-98 135
Cincinnati (Colerain), OH Nov-98 133
Birmingham (Center Point), AL Nov-98 136
South Salt Lake, UT Jan-99 136
Albuquerque, NM Jan-99 135
Minneapolis, (Coon Rapids), MN Jan-99 135
Houston-NW 290, TX Jan-99 132
Tampa (Largo), FL Feb-99 132
Dallas-Market Center, TX Apr-99 134
San Antonio (Leon Valley), TX Apr-99 132
-12-
Existing Company Owned Hotels (Cont.)
-------------------------------------
Atlanta (Sandy Springs) GA "Extra"(6) May-99 71
Denver (Aurora), CO May-99 137
Richmond-Midlothian, VA Dec-99 137
Denver (Sheridan), CO Jan-00 135
Tampa (Brandon), FL May-00 150
Chicago (Villa Park), IL "Extra" Nov-00 80
-----
SUBTOTAL 8,597
-----
Existing Franchised Hotels
--------------------------
Birmingham (Riverchase/Pelham),AL Jun-92 122
Atlanta (Stone Mountain), GA Nov-92 132
Atlanta (Marietta), GA Aug-94 132
Birmingham (Inverness/Greystone), AL Sep-95 130
Savannah (Abercorn), GA Mar-96 130
Atlanta (Lawrenceville), GA Jun-96 132
Atlanta (Decatur), GA Oct-96 133
Louisville (Jeffersontown), KY Feb-97 144
Jacksonville (Bay Meadows), FL Apr-97 138
Atlanta (Woodstock), GA Jul-97 138
Cincinnati (Florence), KY Aug-97 144
Valdosta (Valdosta-Mall Area), GA Aug-97 138
Montgomery (Montgomery Mall), AL Sep-97 141
Nashville (Harding Place), TN Oct-97 126
Fayetteville (Bragg Blvd), NC Oct-97 143
Charlotte (Pineville), NC Oct-97 137
Raleigh-South, VA Feb-98 144
Augusta-West (Bobby Jones), GA Feb-98 138
Savannah-North, GA Apr-98 138
Eagle (Vail Valley, CO) "Extra" Jun-98 118
Atlanta (Stockbridge), GA Jun-98 150
Albany (Albany Mall), GA Jun-98 138
Jacksonville (Orange Park), FL Jun-98 144
Greensboro (Wendover I-40), NC Sep-98 144
Louisville-East (Westport Rd), KY Sep-98 128
Orlando (Central Park), FL Oct-98 144
Atlanta (Chamblee), GA Oct-98 150
Memphis (Bartlett), TN Nov-98 138
Phoenix (Gilbert), AZ Nov-98 138
Dothan (Ross Clark Circle), AL Dec-98 138
Richmond (Broad @ N. Parham), VA Jan-99 143
Daytona Beach, FL Feb-99 135
Houston (Cy Fair-1960), TX Feb-99 150
Nashville (Hermitage), TN Feb-99 127
Atlanta (Conyers), GA (5) Feb-99 138
-13-
Existing Franchised Hotels (Continued)
--------------------------------------
Atlanta (Thornton Rd.), GA Mar-99 150
Stuart, FL Mar-99 126
Melbourne, FL "Extra" Apr-99 132
Macon (Eisenhower Pkwy), GA Apr-99 150
Gautier, MS Apr-99 126
Athens (UGA), GA Apr-99 138
Orlando (Casselberry), FL May-99 144
Orlando (Universal Studios Escape), FL Sep-99 150
Pensacola-NAS, FL Sep-99 128
Tampa-Airport West, FL Oct-99 136
Atlanta (Gainesville),GA Feb-00 112
Jacksonville (St. John's Bluff), FL Feb-00 137
Charlotte (W T Harris/I-77), NC "Extra" Mar-00 127
Biloxi (D'Iberville), MS Mar-00 132
Sarasota, FL Apr-00 152
Hampton, FL May-00 141
Atlanta (Kennesaw), GA Jun-00 149
Hilton Head, SC Dec-00 150
Lakeland, FL Dec-00 138
SUBTOTAL
7,421
------
SYSTEM-WIDE TOTAL 16,018
======
Estimated Number of
Hotels Under Construction (1) Opening(3) Rooms(1)
----------------------------- ---------- --------
COMPANY OWNED
Pittsburgh-(North Hills) PA 2nd Quarter, 2001 124
------
SUBTOTAL 124
------
Estimated Number of
Franchise Opening(3) Rooms(1)
--------- ---------- --------
Huntsville, AL 1st Quarter, 2001 134
Myrtle Beach, SC 1st Quarter, 2001 132
Houston (Intercontinental Airport), TX 1st Quarter, 2001 149
Austin (South), TX 2nd Quarter, 2001 137
Destin, FL 2nd Quarter, 2001 100
Chesapeake (West), VA 3rd Quarter, 2001 90
------
SUBTOTAL 742
------
Total Under Construction 866
======
-14-
Company Owned Site Inventory (7)
--------------------------------
Austin-North, TX
Tampa-Dale Mabry, FL
Houston-Medical Center, TX
Kansas City (Lenexa), KS
Ft. Lauderdale (Oakland Park), FL
Phoenix (Tempe), AZ
Philadelphia-Franklin Mills, PA
Plano, TX
Detroit (Fraser), MI
Philadelphia (Valley Forge), PA
Denver - Tech Center, CO
Franchised Hotels Under Development
-----------------------------------
Fort Myers, FL 4th Quarter, 2001 120
Chester, VA 4th Quarter, 2001 124
Manassas, VA 4th Quarter, 2001 150
Houston (Dixie Farms), TX 4th Quarter, 2001 132
Raleigh, NC 4th Quarter, 2002 130
GuestHouse International Inns, Hotels and Suites.
- -------------------------------------------------
At December 31, 2000, there were 65 existing GuestHouse International
Inns, Hotels and Suites located in 20 states. These inns, hotels and suites
contain an aggregate of 4,883 guestrooms and have an average of 75 guestrooms.
GuestHouse International Inns, Hotels and Suites comprise a wide variety of
facilities offering overnight stays in the upper economy to mid- market segment.
The amenities and facilities offered through the GuestHouse International brand
are varied according to individual market needs with the underlying factor being
adherence to high-quality standards of cleanliness, safety and service. The
following tables set forth certain information as of December 31, 2000 with
respect to inns, hotel and suites that are open or under construction.
Existing Inns, Hotels and Suites Date Opened Number of Rooms
-------------------------------- ----------- ---------------
Little Rock, AR Mar-96 72
Chattanooga, TN Apr-96 31
St. Augustine, FL Aug-96 100
Nashville, TN Jan-97 108
Long Beach, CA Mar-97 143
Camden, TN Jul-97 40
Pageland, SC Aug-97 23
Santa Clara, CA Dec-97 70
Port Orchard, WA Mar-98 56
Bloomington, IL Mar-98 100
South Haven, MI Apr-98 54
Commerce, GA May-98 74
-15-
Existing Inns, Hotels and Suites (Continued) Date Opened Number of Rooms
-------------------------------------------- ----------- ---------------
Keystone, SD May-98 35
Warner Robins, GA Sep-98 50
Compton, CA Sep-98 40
Commerce, CA Oct-98 70
Santa Ana, CA Dec-98 73
Ft. Myers, FL Feb-99 34
Beverly Hills, CA Mar-99 35
Ft. Smith, AR Mar-99 63
Tumwater, WA Mar-99 60
Greenville, SC Apr-99 96
Huntsville, AL Apr-99 112
Opelika, AL Apr-99 56
Tulsa, OK Apr-99 135
Gulf Shores, AL Apr-99 90
Santa Cruz, CA Apr-99 36
Dillon, MT May-99 58
Kelso, WA May-99 59
Vicksburg, MS May-99 30
Buena Park, CA May-99 40
Mobile, AL May-99 112
San Luis Obispo, CA May-99 39
Savannah, GA Jul-99 56
Hawthorne, CA Aug-99 38
South Gate, CA Sep-99 49
Waukesha, WI Oct-99 91
Orlando, FL Dec-99 266
Glendora, CA Dec-99 38
Branson, MO Dec-99 180
Hollywood, CA Dec-99 28
Miles City, MT Feb-00 62
Charlotte, NC Feb-00 91
Los Angeles (Olympic Boulevard), CA Mar-00 49
Valdez, AK Mar-00 78
Aberdeen, WA May-00 60
Juneau, AK May-00 96
Bakersfield, CA Jun-00 64
Oceanside, CA Sep-00 80
Inglewood, CA Sep-00 29
Fullerton, CA Sep-00 43
Norco, CA Sep-00 36
Payson, AZ Sep-00 39
Iron Mountain, MI Sep-00 63
Perry, GA Sep-00 45
Saugatuck, MI Sep-00 29
Manning, SC Sep-00 58
Hazel Park, MI Oct-00 148
Montgomery, AL Dec-00 172
Augusta, GA Dec-00 110
-16-
Existing Inns, Hotels and Suites (Continued) Date Opened Number of Rooms
-------------------------------------------- ----------- ---------------
Bismark, ND Dec-00 224
Daly City, CA Dec-00 32
Hemet, CA Dec-00 65
Lake City, FL Dec-00 120
Tuscaloosa, AL Dec-00 150
-----
SYSTEM-WIDE TOTAL 4,883
======
Hotels Under Construction (1) Estimated Opening (3) Number of Rooms
--------------------------- --------------------- ---------------
Acworth, GA Mar-01 60
Dupont, WA Mar-01 59
Fairbanks, AK May-01 100
Fontana, CA 50
Harbor City, CA 40
Leeds, AL Apr-01 40
----
TOTAL UNDER CONSTRUCTION 349
====
Executed Agreements
-------------------
Anaheim, CA 66
Balwin Park, CA 70
Ft. Wayne, IN 60
Lavonia, GA 50
Mobile, AL 210
Omaha, NE 215
Pasadena, CA 70
----
TOTAL EXECUTED AGREEMENTS 741
====
(1) The number of guestrooms does not include the general manager's unit.
(2) The Mableton hotel was acquired in June 1993 and converted into a Suburban
Lodge hotel in October 1994.
(3) The Company believes that each of the hotels under construction or
development will open during the period indicated. However, the Company
and its franchisees may not be able to complete the construction and
development of all of these hotels on schedule. See "Forward Looking
Statements."
(4) The Arlington-North, TX and Arlington-South, TX hotels were acquired from a
franchisee in July, 1998.
(5) The Company sold the Atlanta (Conyers) GA, Suburban Lodge hotel to a
franchisee on March 2, 1999.
(6) The Company acquired the Atlanta (Sandy Springs) GA, Suburban Lodge "Extra"
hotel effective January 1, 2000.
(7) The Company may elect to sell or transfer existing company owned sites to
other parties for development as Suburban Lodge or GuestHouse International
hotels or other purposes.
-17-
ITEM 3. LEGAL PROCEEDINGS.
Although the Company may be involved in certain claims and litigation
which are incidental to the ownership, operation, management and franchising of
hotels, such claims and litigation are not expected to have a material adverse
impact on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of the
Registrant during the fourth quarter of the fiscal year covered by this Report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is quoted on the Nasdaq Stock Market under
the symbol "SLAM". Although the Company had only approximately 115 shareholders
of record on March 9, 2001, it believes, based on information supplied by its
Transfer Agent, that the Company had approximately 1,400 beneficial owners of
its common stock on that date. The high and low transaction prices for the
common stock as reported on the Nasdaq Stock Market are set forth below.
Price Range
-----------
High Low
---- ---
Year Ending December 31, 2000
First Quarter ....................... $ 6.81 $ 5.00
Second Quarter ....................... 6.66 5.25
Third Quarter ....................... 7.75 5.50
Forth Quarter ....................... 7.00 5.00
Year Ending December 31, 1999
First Quarter ....................... $ 9.75 $ 5.31
Second Quarter ....................... 7.19 6.06
Third Quarter ....................... 6.88 5.50
Fourth Quarter ....................... 6.19 4.75
The Company has not paid cash dividends on its Common Stock since its
inception as a public company in May 1996.
ITEM 6. SELECTED FINANCIAL DATA
The accompanying selected financial and operating data is presented in
thousands, except for per share data, operating data and the number of hotels
open at the end of each period.
-18-
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
FOR THE YEAR:
Hotel revenues $ 70,672 $ 62,466 $ 44,756 $ 21,822 $ 8,349
Franchise and other revenue 4,611 3,446 1,702 1,373 917
-------- -------- -------- -------- --------
Total revenue 75,283 65,912 46,458 23,195 9,266
Hotel operating expenses 38,496 32,876 22,754 11,204 3,910
Income from operations 15,512 17,520 12,353 7,107 3,031
Net income (1) 5,263 8,045 2,562 6,724 2,385
Earnings per share:
Basic and diluted $ 0.41 $ 0.53 $ 0.17 $ 0.53
Pro forma (2) $ 0.31
Operating Data (3) :
Average Weekly Rate (4) $ 195.78 $ 191.18 $ 174.85 $ 157.27 $ 155.84
Weekly RevPAR (4) $ 155.66 $ 150.00 $ 142.60 $ 134.13 $ 138.92
AT YEAR END:
Total assets $337,626 $321,082 $307,298 $242,854 $131,000
Long-term debt 119,574 97,891 74,735 25,005 15,000
Cash dividends declared None None None None None
Number of hotels open:
Owned 65 61 53 39 14
Franchised 119 92 30 17 10
-------- -------- -------- -------- --------
System-wide 184 153 83 56 24
(1) Prior to the company's initial public offering on May 29, 1996, the
Company's hotels were owned by entities that were not subject to income
taxes. Accordingly, net income for a portion of 1996 does not reflect a
provision for income taxes with respect to earnings generated by the
Company's hotels.
(2) Prior to the Company's initial public offering on May 29, 1996, the number
of outstanding shares of the Company was substantially less than the number
of such shares outstanding after the initial public offering. Accordingly,
the Company believes that the presentation of historical per share
information for periods prior to 1997 is not meaningful. For comparative
purposes, pro forma earnings per share for the year ended December 31,
1996, have been calculated by dividing net income adjusted to provide for
income taxes assuming a 37.5% effective income tax rate by the weighted
number of shares of common stock deemed to have been outstanding during the
period.
(3) Data is for Company-owned hotels.
(4) Data is calculated starting on the first day of the calendar month
following the month in which the hotel was opened.
-19-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF THE YEAR ENDED DECEMBER 31, 2000 TO THE YEAR ENDED DECEMBER 31,
1999
Hotel revenues increased by $8.2 million, or 13%, from $62.5 million in 1999 to
$70.7 million in 2000. The largest portion ($4.0 million) of the increase was
attributed to the nine hotels that opened during 1999 and operated throughout
2000. Four hotels that opened or were acquired by the Company during 2000
accounted for $3.0 million of the increase. Fifty-two hotels that operated
throughout both 1999 and 2000 accounted for $1.4 million of the increase in
hotel revenues. These 52 hotels increased their combined Average Weekly Rate
(AWR) by 2%, from $189.83 to $193.05. Occupancies at these hotels declined
slightly from 79.8% to 79.4% while Weekly Revenue per Available Room (RevPAR)
increased 1% from $151.23 to $153.31. For all Company-owned hotels, AWR
increased to $195.78 in 2000 from $191.18 in 1999, occupancy increased to 79.5%
in 2000 from 78.6% in 1999, and RevPAR increased to $155.66 in 2000 from $150.00
in 1999.
The increases contributed by these three groups of hotels were offset by a $0.2
million decrease in hotel revenues in a hotel that was owned and operated by the
Company until sold to a franchisee in February 1999.
Franchise and other revenues increased by $1.2 million, or 34%, to $4.6 million
in 2000. The largest portion ($0.9 million) of the increase was attributed to
franchise fees and royalties for the GuestHouse International brand, which was
acquired on June 1, 1999. Franchise fees for the Suburban Lodge hotel brand
increased $0.4 million due to the larger number of franchised locations open
during 2000. At December 31, 2000, 54 franchised Suburban Lodge hotels were
operating as compared with 46 at December 31, 1999. At December 31, 2000,
independent franchisees owned and operated 65 GuestHouse International hotels
compared to 46 at December 31, 1999. Other revenues declined $0.1 million
primarily because the Company earned no development or construction revenue in
2000 compared to $64,000 earned in 1999. Management fees were flat in 2000
compared to 1999 despite a decline in the number of hotels being managed. The
Company was managing ten Suburban Lodge hotels for its franchisees at December
31, 2000, compared to twenty hotels at December 31, 1999. The decline in the
number of managed hotels was due to a decision by one franchise group to start a
management company to manage its four Suburban Lodge hotels and other
properties. In addition, two franchisees moved the management of three Suburban
Lodge hotels to independent management companies and one franchise group elected
to manage their two Suburban Lodge hotels themselves. One of the hotels managed
by the Company at December 31, 1999, was purchased by the Company in January
2000.
The increase in the number of hotels open and operated by franchisees at
December 31, 2000, and the reduced number of hotels opened by the Company during
2000 are the result of the Company substantially increasing its focus on
franchising activities in order to enable growth in a significantly less capital
intensive manner than had been the case in the past.
Hotel operating expenses increased approximately $5.6 million, or 17.1%, from
$32.9 million in 1999 to $38.5 million in 2000. The most significant portion
($2.4 million) of the increase was attributable to the 52 hotels that operated
the full year in both 1999 and 2000. The nine hotels that opened during 1999
accounted for $1.7 million of the increase in hotel operating expense, while the
four hotels that opened or were acquired by the Company in 2000 accounted for
$1.6 million of the increase.
The increases attributable to these three groups of hotels were offset by a $0.1
million decrease in hotel operating expenses in the hotel that was owned and
operated by the Company until sold to a franchisee in February 1999.
-20-
Corporate operating expenses increased $3.0 million, or 38.1%, from $8.0 million
in 1999 to $11.0 million in 2000. Of this increase, approximately $1.5 million
was attributable to the inclusion of a full year of operating expenses of
GuestHouse International. Additionally, the amount of corporate overhead that
was project-related, and is therefore capitalized as hotel-construction cost,
was $0.9 million less in 2000 than in 1999. Excluding the incremental impact on
reported operating expenses of GuestHouse International and lower capitalization
of project-related expenses, corporate operating expenses in 2000 increased by
8.0% over such amounts for 1999. The primary reasons for this increase are
additional staffing needed to support the growth of the Company's franchising
business and increased rent for the corporate headquarters.
Depreciation and amortization increased by $1.1 million, or 13.5%, from $8.5
million in 1999 to $9.6 million in 2000. Of this increase, $0.1 million was
attributable to leasehold improvements and equipment at the corporate
headquarters. Hotel properties accounted for $0.9 million of the increase. In
addition, $0.1 million was attributable to amortization of certain intangible
assets (franchise contract rights and goodwill) recognized in connection with
the GuestHouse International acquisition in 1999 and the acquisition of an
additional 50% interest in a hotel at the beginning of 2000.
The four hotels that opened or were acquired by the Company during 2000
accounted for $0.4 million of the increase in depreciation and amortization for
hotel properties. The nine hotels that were opened by the Company in 1999
accounted for $0.4 million of the increase and the 52 hotels that operated
throughout both 1999 and 2000 accounted for $0.1 million of the increase.
The impairment of long-lived assets recorded in the current year represents the
write-down of an undeveloped site to market value.
During 1999, the Company sold a hotel resulting in a pre-tax gain of
approximately $1,145,000. The hotel continues to operate as a Suburban Lodge
under agreements that generate franchise and management fee income for the
Company.
Interest income earned on excess funds invested during 2000 was $1.0 million
compared to $1.4 million for 1999. The decrease in interest income was due to
lower invested cash balances during 2000.
Interest expense, net of interest capitalized of $0.7 million and $1.9 million
in 2000 and 1999 respectively, was $8.9 million in 2000 and $6.4 million in
1999. The increase in total interest charges incurred was due to higher levels
of debt outstanding. See the "Liquidity and Capital Resources" section for a
discussion of the Company's debt strategy.
The proceeds from legal settlement of $842,000 recorded in 2000 represent
amounts received in settlement of a claim for lost profits associated with an
abandoned development project. The Company also received $315,000 as a part of
this settlement representing reimbursement of certain costs and expenses.
The effective income tax rate for 2000 was 38.0% compared to 36.9% in 1999. The
increase in 2000 was primarily due to higher effective state income tax rates
and a reduction in the amount of interest income that was exempt from federal
income tax.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1999 TO THE YEAR ENDED DECEMBER 31,
1998
Hotel revenues increased by $17.7 million, or 40%, from $44.8 million in 1998 to
$62.5 million in 1999. The largest portion ($10.4 million) of the increase was
attributed to the fourteen hotels that opened or were acquired by the Company
during 1998 and operated throughout 1999. Nine hotels that opened during 1999
accounted for $6.4 million of the increase. Thirty-eight hotels that operated
throughout both 1998 and 1999 accounted for $1.8 million of the increase in
-21-
hotel revenues. These thirty-eight hotels increased their combined Average
Weekly Rate (AWR) by 8%, from $172.05 to $185.35. Occupancies at these hotels
declined from 84.0% to 81.7% percent, while Weekly Revenue per Available Room
(RevPAR) increased 5.0%, from $144.68 to $151.39. For all company-owned hotels,
AWR increased to $191.18 in 1999 from $174.85 in 1998, occupancy declined to
78.6% in 1999 from 81.8% in 1998, and RevPAR increased to $150.00 in 1999 from
$142.60 in 1998.
The increases contributed by these three groups of hotels were offset by a $1.0
million decrease in hotel revenues in a hotel that was owned and operated by the
Company throughout 1998 and was sold to a franchisee in February 1999.
Franchise and other revenues increased by $1.7 million, or 102%, to $3.4 million
in 1999. The largest portion ($0.7 million) of the increase was attributed to
the larger number of franchisees for the Suburban Lodge hotel brand. At December
31, 1999, 46 franchised Suburban Lodge hotels were operating as compared with 30
at December 31, 1998. Another $0.7 million of the increase was the result of
increased management fees. At December 31, 1999, the Company managed 20 hotels
for its franchisees, including one hotel that was in the process of conversion
to a Suburban Lodge hotel. At December 31, 1998, the Company managed 11 hotels
for its franchisees. Revenues attributable to franchise fees and royalties for
the GuestHouse International brand, which was acquired on June 1, 1999, were
approximately $0.6 million. Development fees declined by approximately $0.2
million from 1998 to 1999.
Hotel operating expenses increased approximately $10.1 million, or 44.5%, from
$22.8 million in 1998 to $32.9 million in 1999. The most significant portion
($5.4 million) of the increase was attributable to the 14 hotels that opened or
were acquired by the Company during 1998 and operated a full year in 1999. The
nine hotels that opened during 1999 accounted for $3.6 million of the increase
in hotel operating expense, while the 38 hotels that operated the full year in
both 1998 and 1999 accounted for $1.5 million of the increase.
The increases attributable to these three groups of hotels were offset by a $0.4
million decrease in hotel operating expenses in the hotel that was owned and
operated by the Company throughout 1998 and was sold to a franchisee in February
1999.
Corporate operating expenses increased to $8.0 million, approximately double the
amount of such expenses for 1998. Of this increase, approximately $0.9 million
was attributable to operating expenses incurred by GuestHouse International
subsequent to its June 1, 1999, acquisition by the Company. Additionally, the
amount of corporate overhead that was project-related, and is therefore
capitalized as land-acquisition or hotel-construction cost, was $1.8 million
less in 1999 than in 1998. Excluding the incremental impact on reported
operating expenses of GuestHouse International and lower capitalization of
project-related expenses, corporate operating expenses in 1999 increased by
17.2% over such amounts for 1998. The primary reason for this increase is $1.3
million for additional staffing needed to support the growth of the business.
Depreciation and amortization increased by $3.0 million, or 54.2%, from $5.5
million in 1998 to $8.5 million in 1999. Of this increase, $0.3 million was
attributable to leasehold improvements and equipment at the corporate
headquarters. Hotel properties accounted for $2.5 million of the increase. In
addition, $0.2 million was attributable to amortization of certain intangible
assets (franchise contract rights and goodwill) recognized in connection with
the GuestHouse International acquisition.
The largest portion ($1.2 million) of the increase in depreciation and
amortization for hotel properties was attributable to the 14 hotels that opened
or were acquired by the Company in 1998. The nine hotels that opened during 1999
accounted for $1.0 million of the increase, and the 38 hotels that operated
throughout both 1998 and 1999 accounted for $0.4 million of the increase. These
-22-
increases were offset by a $0.1 million decrease in depreciation expense on the
hotel that was sold to a franchisee in February 1999.
Interest income earned on excess funds invested during 1999 was $1.4 million
compared to $2.2 million for 1998. The decrease in interest income was due to
lower invested cash balances during 1999.
Interest expense, net of interest capitalized of $1.9 million and $3.9 million
in 1999 and 1998, respectively, was $6.4 million in 1999 and $0.2 million in
1998. The increase in total interest charges incurred was due to higher levels
of debt outstanding. See the "Liquidity and Capital Resources" section for a
discussion of the Company's debt strategy.
The effective income tax rate for 1999 was 36.9% compared to 31.8% in 1998. The
increase in 1999 was primarily due to higher effective state income tax rates
and a reduction in the amount of interest income that was exempt from federal
income tax.
SEASONALITY
Following their initial ramp-up, the Company's hotels typically experience lower
average occupancy rates and total revenues in the first and fourth calendar
quarters of each year. The Company believes that this seasonal trend mirrors the
trend in the lodging industry as a whole.
LIQUIDITY AND CAPITAL RESOURCES
From May 29, 1996, the date of the Company's initial public offering (the
"IPO"), through December 31, 1998, the Company pursued a strategy of growing
principally through hotel development. Accordingly, the number of Company-owned
hotels grew from eight at May 29, 1996, to 53 at December 31, 1998. Capital
spending during this period exceeded $200 million and the principal sources of
capital included the proceeds from the 1996 IPO and two subsequent public equity
offerings during 1997, borrowings under a bank credit facility and operating
cash flow.
During the latter portion of 1998, the Company revised its financing strategy to
emphasize traditional longer-term mortgages to fund the construction of hotels
rather than relying on bank lines of credit with shorter final maturities. The
Company plans to use its current bank revolving credit facility to fund special
projects, repurchase shares of its outstanding common stock and meet operating
cash needs as necessary.
On March 28, 2000, the Company completed a $2,660,000 mortgage loan agreement
with Empire Financial Services, Inc. with an initial interest rate of 9.25%. The
interest rate is adjustable at the end of each twelve-month period to rates
based on prime plus 50 basis points. During the initial twelve-month period, the
loan requires monthly payments of principal and interest totaling $24,362 based
on a principal amortization period of 20 years with a final maturity of March 1,
2007. One Company-owned hotel is pledged as collateral on this loan.
Effective September 27, 2000, the Company executed an amended and restated loan
agreement with SouthTrust Bank which replaced the line of credit agreement
executed on February 18, 2000. The agreement consists of a $10 million term loan
and a revolving line of credit facility for amounts up to $15 million. A total
of 10 Company-owned hotels are pledged as collateral on this loan agreement.
Borrowings under the line of credit facility will bear interest, at the
Company's option, at (i) the bank's prime rate or (ii) the Euro Rate plus 200
basis points. The line of credit facility expires on September 30, 2003. At
December 31, 2000, there were borrowings outstanding of $3.0 million under the
line of credit. The interest rate on the term loan was based on the Euro Rate
plus 175 basis points through December 31, 2000. Commencing January 1, 2001, the
interest rate is based on the Euro Rate plus 200 basis points. The term loan
-23-
requires monthly payments of interest only through September 30, 2001. Beginning
October 1, 2001, the term loan requires monthly payments of principal and
interest based on a 20 year amortization period with a final maturity of
September 30, 2008. Among other covenants, the agreement requires the Company to
maintain certain financial ratios and a minimum level of tangible net worth. The
agreement also places restrictions on the amount of loans and advances the
Company can make to third parties. At December 31, 2000, the Company was in
compliance with these requirements.
At December 31, 2000, the Company had approximately $121.1 million outstanding
under long-term mortgage loan arrangements, including the amounts due to
SouthTrust under the arrangements described in the preceding paragraph and
amounts classified as current maturities of long-term debt at that date. In the
aggregate, these loans require monthly principal and interest payments of
$1,019,000. The final maturity dates for these loans range from February 1, 2005
to July 1, 2009.
In the fall of 1999, the Company licensed to HotelTools, Inc. the use of its
proprietary hotel management and reservation systems, and at that time
HotelTools assumed the costs of the continued maintenance and development of
these systems. HotelTools intends to market the fully developed systems to hotel
owners and operators, including Suburban Lodges. The Chief Executive Officer and
sole shareholder of Hoteltools, Inc. is Seth Christian, the former Vice
President of Operations of Suburban Lodges of America, Inc.
To date, all funding for HotelTools' operations has been provided, in the form
of secured loans, by the Company and from the proceeds of an equipment
sale-lease back transaction. During 2000, the Company made loans of $8.7 million
to HotelTools, Inc., of which approximately $1.1 million was repaid from the
proceeds of the sale-leaseback. As of December 31, 2000, the Company had
outstanding loans to HotelTools, Inc. of approximately $8.0 million. The Company
anticipates that, in the absence of funding from third parties, it will continue
to make loans to HotelTools. Based on HotelTools' operating forecasts, which
have been reviewed with the Company, the total loans made during 2001 could be
as much as $7.0 million. The loans are payable on demand, and bear interest at
an annual rate of 7.0%. At the present time, HotelTools does not have the cash
available to pay interest or repay any portion of the loans; therefore, the
loans are accounted for on a cost recovery basis and interest income is not
recognized on such loans. In exchange for its financial support, the Company
received from HotelTools, Inc., a stock purchase warrant to purchase up to 20
million shares of the common stock of HotelTools at a nominal cost. Although
such shares would constitute in excess of 99% of the equity of HotelTools based
on its present capitalization, HotelTools is actively seeking equity investors,
and it is expected that the Company's potential ownership through the exercise
of its warrant will be reduced if such additional equity funding can be secured.
The Company has been authorized by its Board of Directors to repurchase up to
4,500,000 shares of its outstanding common stock. As of December 31, 2000, the
Company had purchased a total of 3,735,398 shares at a cost of $22,715,000.
At December 31, 2000, the Company had one hotel under construction which is
expected to open during the first half of 2001. The Company had also begun
development of another hotel which is expected to break ground in the second
quarter of 2001. The Company expects that the costs of constructing these hotels
will be substantially provided by proceeds of the term loan described above and
by a construction loan.
In the future, the Company expects its cash requirements to be met by funds
generated from operations, occasional sales of its hotel properties,
construction loans made to build out certain of its unimproved sites and
borrowings under its bank line of credit. The Company's net cash flow from
operating activities increased from $7.1 million in 1998 to $15.2 million in
1999 and to $17.3 million in 2000.
-24-
CERTAIN RISK FACTORS
In evaluating the Company and its prospects, certain risks, including those
described in this section and those listed under "Forward Looking Statements,"
should be considered. Such risks are not the only ones the Company faces.
Additionally, some risks that are not currently known and others that the
Company does not consider material could later turn out to be so.
During 1999, in the face of substantial tightening of public and private sources
of funding for hotel construction, the Company determined that it would focus
its growth plans on franchising. Prior to that time, the Company had focused on
developing and operating its own Suburban Lodge extended stay hotels. Because
the operating characteristics of these hotels were so strong, several
third-party developers and operators had also opened a total of 30 Suburban
Lodge extended stay hotels through December 31, 1998.
In order to enhance its franchising strategy, the Company acquired a
nightly-stay hotel brand (GuestHouse International) and increased its sales
force from one franchise sales director at May 31, 1999, to fifteen by the end
of 1999. During 2001, the Company intends to increase its franchise sales staff
to 22 sales directors.
The franchise business is highly competitive and, particularly with respect to
the Suburban Lodge brand which consists almost entirely of newly-constructed
hotels, is subject to the availability of substantial bank credit in the form of
construction loans that convert to permanent financing.
During 2000, nine Suburban Lodge hotels were opened by franchisees and three
were opened by the Company. Twenty-five GuestHouse International hotels were
opened by franchisees in 2000. This was the Company's best year with respect to
franchise openings. The Company expects to open approximately 51 franchised
hotels during 2001, six Suburban Lodge extended stay hotels and 45 GuestHouse
International hotels. The Company also expects to open one Company-owned
Suburban Lodge extended stay hotel in 2001 and break ground on one other. The
Company can provide no assurance that all of these hotels will be opened
by December 31, 2001.
The Company has determined that, when its franchising revenues have grown to a
more significant level, it will become more aggressive in its efforts to sell
its own operating hotels. The Company's ultimate objective is to own no real
estate, although this objective may take several years to accomplish. The
Company's present intent is to sell its hotels only to parties who are
interested in entering into a franchise agreement and operating the hotels under
the Suburban Lodge brand. Thirty-two of the Company's hotels have been grouped
into mortgage pools of five or six hotels each. The Company believes that these
hotels may be difficult to sell since, essentially, the pools must remain intact
and the debt must remain in place until December 31, 2008, or June 30, 2009,
depending on the pool. While the geographic dispersion of the hotels in each
group might make the pools unattractive to some franchisees, the Company
believes that the debt terms would be attractive to such franchisees.
To date, one sale of a Company-developed hotel has occurred. This was in
February 1999 and it resulted in a gain of $1.1 million dollars. Many factors
influence the selling price of real estate assets, the most important of which
are operating results for the most recent twelve-month period prior to the sale
and the current interest rate environment for hotel loans. Accordingly, the
Company cannot predict its ability to sell its hotels nor can it be assured that
future hotel sales will result in gains.
From time to time, the Company studies business and strategic opportunities to
determine if specific transactions would have the potential of enhancing
shareholder value. These activities have included the review of possible
-25-
acquisitions or other business combinations, some of which, if consummated,
could result in the discontinuance of the Company's loans to HotelTools. In such
event, unless other funding was available, HotelTools could cease operating and
be unable to repay its loans from the Company. In the event HotelTools is unable
to repay its loans from the Company, the Company could recognize a loss up to
the full amount of its loans; however, the Company would seek to minimize any
such loss by exercising its security rights against HotelTools' developed
software and its owned hardware. The software is currently in beta test and has
been installed in one Suburban Lodge hotel. There can be no assurance that
HotelTools' assets would have a substantial value to the Company if such events
were to transpire.
The Company is also a guarantor on the equipment financing lease for HotelTools.
The total amount of the lease obligation is $1.4 million.
RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 2001, the Company adopted the Statement of Financial Accounting
Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities" as amended in June 2000 by Statement of Financial Accounting
Standards No. 138 (SFAS 138), "Accounting for Certain Derivative Instruments
and Certain Hedging Activities (an amendment of FASB Statement No. 133)." SFAS
133, as amended by SFAS 138, requires companies to recognize all derivatives as
either assets or liabilities in the balance sheet and measure such instruments
at fair value. The adoption of these statements had no impact on the Company's
consolidated financial statements.
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements." The adoption of SAB 101 has had
no impact on the Company's consolidated financial statements. The Company will
continue to analyze the possible impact of SAB 101, including any amendents or
further interpretation, based upon the relevant facts and circumstances at the
time of future transactions.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in interest rates primarily as a result of its
borrowing activities.
At December 31, 2000, the Company had debt outstanding totaling $121.1 million.
Approximately $99.8 million of this amount was represented by fixed rate
mortgage loans. The interest rate on approximately $9.9 million of these
mortgage loans will adjust on April 1, 2002 and again on April 1, 2005 for $6.7
million of the loans. One loan of approximately $3.1 million matures on April 1,
2005. The interest rate on approximately $2.6 million of the loans is adjustable
every year on April 1.
Outstanding borrowings on three construction loans totaled $8.3 million at
December 31, 2000. The Company expects to draw an additional $4.1 million on
these loans by the end of the second quarter of 2001. One of the construction
loans with a balance of $3.1 million at December 31, 2000, has a fixed interest
rate that is adjustable on October 1, 2002, and again on October 1, 2005. The
other two loans are at variable interest rates. The remaining $13.0 million of
debt outstanding at December 31, 2000 consisted of a $10.0 million variable rate
term loan with SouthTrust Bank and $3.0 million borrowed under a line of credit
with SouthTrust Bank. The line of credit borrowings were repaid in January 2001.
The total amount of variable rate debt and fixed rate debt adjustable within one
year outstanding at December 31, 2000, plus the additional draws expected to be
made on these loans through the end of the second quarter of 2001, is
approximately $28.0 million. Accordingly, each one percent change in market
interest rates will change interest expense by approximately $280,000 on an
annual basis.
-26-
The Company's cash and cash equivalents are short-term and highly-liquid
investments with original maturities of three months or less. Accordingly, a
change in market interest rates has a nearly immediate effect on interest earned
by the Company on its invested cash. For the foreseeable future, the Company
reasonably expects that its average invested cash balance will approximate $4
million. Accordingly, each one percent change in market interest rates will
change interest income by approximately $40,000 on an annual basis.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item is included in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" under
the caption "Quantitative and Qualitative Disclosures About Market Risk."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Independent Auditors' Report, the Consolidated Financial Statements and
Notes to the Consolidated Financial Statements that appear on pages F-1 through
F-16 herein are incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the heading "Information about the
Nominees and the Continuing Directors" in the definitive Proxy Statement to be
used in connection with the solicitation of proxies for the Company's 2001
Annual Meeting of Shareholders, to be filed with the Commission, is incorporated
herein by reference. Pursuant to instruction 3 to paragraph (b) of Item 401 of
Regulation S-K, information relating to the executive officers of the Company is
included in Item 1 of this Report.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the heading "Executive Compensation" in
the definitive Proxy Statement to be used in connection with the solicitation of
proxies for the Company's 2001 Annual Meeting of Shareholders, to be filed with
the Commission, is incorporated herein by reference. In no event shall the
information contained in the Proxy Statement under the heading "Shareholder
Return Performance Graph" be deemed incorporated herein by such reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the heading "Beneficial Ownership of
Securities and Voting Rights-Voting Securities and Principal Holders" in the
definitive Proxy Statement to be used in connection with the solicitation of
proxies for the Company's 2001 Annual Meeting of Shareholders, to be filed with
the Commission, is incorporated herein by reference. For purposes of determining
the aggregate market value of the Company's voting stock held by nonaffiliates,
shares held by all directors and executive officers of the Company have been
excluded. The exclusion of such shares is not intended to, and shall not,
-27-
constitute a determination as to which persons or entities may be "affiliates"
of the Company as defined by the Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the heading "Certain Transactions" in
the definitive Proxy Statement to be used in connection with the solicitation of
proxies for the Company's Annual Meeting of Shareholders, to be filed with the
Commission, is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following financial statements and notes thereto are incorporated by
reference in Item 8 of this Report:
1. FINANCIAL STATEMENTS
Description
-----------
Independent Auditors' Report
Consolidated Balance Sheets at December 31, 2000 and 1999
Consolidated Statements of Operations for the years ended December 31,
2000, 1999 and 1998
Consolidated Statements of Changes in Shareholders' Equity for the
years ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
Schedule V - Valuation and Qualifying Accounts
All other schedules have been omitted since such information is either
included in the financial statements or notes or is not required.
3. EXHIBITS
The exhibits set forth below are required to be filed with this Report
pursuant to Item 601 of Regulation S-K:
INCORPORATED BY EXHIBIT
REFERENCE TO NUMBER IN
EXHIBIT REGISTRATION OR FORM OF REPORT REPORT
NO. DESCRIPTION FILE NUMBER DATE OF REPORT
- ------------- -------------------------------------- -------------------- ------------------- -------------------- -----------
3.1 Amended and Restated Articles of the 333-2876 S-1 March 28, 1996** 3.1
Company
3.2 Amended and Restated By-laws of the 000-28108 10-K March 28,1997 3.2
Company, Amended as of March 17, 1997
4.1 Form of Common Stock Certificate of 333-2876 Amendment No. 1 May 7, 1996 4.1
the Company to S-1
10.1 Form of Acquisition Agreement and 333-2876 S-1 March 28, 1996 10.1
Plan of Merger (with accompanying
schedule)
10.2 Purchase and Sale Agreement by and 333-2876 S-1 March 28, 1996 10.2
between Suburban Holdings, L.P. and
Gulf Coast Associates, Ltd.
10.3 Purchase and Sale Agreement by and 333-2876 S-1 March 28, 1996 10.3
between Suburban Holdings, L.P. and
Omnicorp Resources, Inc.
10.4 Form of Agreement and Consent of 333-2876 S-1 March 28, 1996 10.4
Partners of each of the Affiliated
Entities and Third Party Sellers
10.5 Suburban Lodges of America, Inc. 333-2876 Amendment No. 1 May 7, 1996 10.5
Stock Option and Incentive Award Plan to S-1
10.6 Suburban Lodges of America, Inc. 333-2876 Amendment No. 1 May 7, 1996 10.6
Non-Employee Directors' Stock Option to S-1
and Fee Plan
10.7 Form of Indemnification Agreement 333-2876 S-1 March 28, 1996 10.7
between Suburban Lodges of America,
Inc. and its directors and officers
10.8 Registration Rights Agreement among 333-2876 S-1 March 28, 1996 10.8
Suburban Lodges of America, Inc. and
Certain Shareholders
10.9 Form of Franchise Agreement, as 333-35871 Amendment No. 2 October 9, 1997 10.9.a.
amended to S-3
10.10 Form of Development and 333-2876 S-1 March 28, 1996 10.10
Design/Building Agreement
10.11 Form of Management Agreement 333-2876 S-1 March 28, 1996 10.11
10.12 Management Agreement between 333-2876 S-1 March 28, 1996 10.12
Suburban Management, Inc. and Gulf
Coast Associates, Ltd.
10.13 Consulting Agreement with Legacy 333-2876 S-1 March 28, 1996 10.13
Securities Corp.
INCORPORATED BY EXHIBIT
REFERENCE TO NUMBER IN
EXHIBIT REGISTRATION OR FORM OF REPORT REPORT
NO. DESCRIPTION FILE NUMBER DATE OF REPORT
- ------------- -------------------------------------- -------------------- ------------------- -------------------- -----------
10.14 Acknowledgment and Agreement between 333-2876 S-1 March 28, 1996 10.14
Suburban Lodges of America, Inc. and
Young Consulting, Inc. re. Company's
proprietary computer software
10.15 Suburban Lodge 401(k) Savings Plan 333-2876 S-1 May 20, 1996 10.15
10.16 Rights Agreement 333-2876 Amendment No. 1 May 7, 1996 10.16
to S-1
10.17 Commitment Letter for the Line of 333-2876 Amendment No. 1 May 7, 1996 10.17
Credit to S-1
10.18 Preliminary Agreement for a License 000-28108 10-K March 28, 1997 10.18
to Develop a Suburban Lodge Unit
between Suburban Franchise Systems,
Inc. and E.E.B. Lodging Systems LLC
10.19 Preliminary Agreement for a License 000-28108 10-K March 28, 1997 10.19
to Develop a Suburban Lodge Unit
between Suburban-Franchise Systems,
Inc. and E.E.B. Lodging Systems LLC
II
10.20 Development and Design/Build 000-28108 10-K March 28, 1997 10.20
Agreement for Suburban Lodge of
Arlington South
10.21 Development and Design/Build 000-28108 10-K March 28, 1997 10.21
Agreement for Suburban Lodge of
Lewisville, Texas
10.22 Registration Rights Agreement among 000-28108 8-K March 17, 1997 10.19
the Registrant and Certain
Shareholders
10.23 Office Lease between the Registrant 333-35871 Amendment No. 2 October 9, 1997 10.20
and Massachusetts Mutual Life to S-3
Insurance Company
10.24 Deed to Secure Debt and Security 000-28108 10-K March 31, 1999 10.24
Agreement with Finova Realty Capital
Inc. and schedule of omitted
documents
10.25 Promissory Note to Finova Realty 000-28108 10-K March 31, 1999 10.25
Capital Inc. and schedule of omitted
documents
10.26 Security Agreement in favor of 000-28108 10-K March 31, 1999 10.26
Finova Realty Capital Inc. and
schedule of omitted documents
INCORPORATED BY EXHIBIT
REFERENCE TO NUMBER IN
EXHIBIT REGISTRATION OR FORM OF REPORT REPORT
NO. DESCRIPTION FILE NUMBER DATE OF REPORT
- ------------- -------------------------------------- -------------------- ------------------- -------------------- -----------
10.27 Assignment of Financial Agreements 000-28108 10-K March 31, 1999 10.27
and Franchisor's Consent and
Subordination of Franchise
Agreements in favor of Finova Realty
Capital Inc. and schedule of omitted
documents
10.28 Change of Control Agreement 000-28108 10-K March 31, 1999 10.28
10.29 8.375% Adjustable Rate Note of 000-28108 10-K March 30, 2000 10.29
Suburban Holdings, L.P. dated March
31, 1999 in the amount of
$4,000,000.00 in favor of Empire
Financial Services, Inc., guaranteed
by the Registrant, and schedule of
omitted similar documents
10.30 Unconditional Guaranty of Payment 000-28108 10-K March 30, 2000 10.30
and Performance to Empire Financial
Services, Inc. dated March 31, 1999
and schedule of omitted similar
documents
10.31 Line of Credit Note dated February 000-28108 10-K March 30, 2000 10.31
18, 2000 in the face amount of
$15,000,000 in favor of Southtrust
Bank, N.A.
10.32 Additional schedule of omitted 000-28108 10-K March 30, 2000 10.32
similar documents (filed herewith)
to Deed to Secure Debt and Security
Agreement with Finova Realty Capital
Inc. incorporated by reference to
Exhibit 10.24 to the Company's
Annual Report on Form 10-K for the
year ended December 31, 1998
10.33 Additional schedule of omitted 000-28108 10-K March 30, 2000 10.33
similar documents (filed herewith)
to Promissory Note to Finova Realty
Capital Inc. incorporated by
reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-K
for the year ended December 31, 1998
INCORPORATED BY EXHIBIT
REFERENCE TO NUMBER IN
EXHIBIT REGISTRATION OR FORM OF REPORT REPORT
NO. DESCRIPTION FILE NUMBER DATE OF REPORT
- ------------- -------------------------------------- -------------------- ------------------- -------------------- -----------
10.34 Additional schedule of omitted 000-28108 10-K March 30, 2000 10.34
similar documents (filed herewith)
to Security Agreement in favor of
Finova Realty Capital Inc.
incorporated by reference to Exhibit
10.26 to the Company's Annual Report
on Form 10-K for the year ended
December 31, 1998
10.35 Additional schedule of omitted 000-28108 10-K March 30, 2000 10.35
similar documents (filed herewith)
to Assignment of Franchise
Agreements and Franchisor's Consent
and Subordination of Franchise
Agreements in favor of Finova Realty
Capital Inc. incorporated by
reference to Exhibit 10.27 to the
Company's Annual Report on Form 10-K
for the year ended December 31, 1998
10.36 Area Development Agreement dated as 000-28108 10-K March 30, 2000 10.36
of March 3, 1998 between GuestHouse
International LLC and Western Steel,
Inc., together with the First
Amendment and the Montana Amendment
thereto
10.37 Amended and Restated Loan Agreement *
dated as of September 27, 2000
between Southtrust Bank, N.A.,
Suburban Lodges of America, Inc., et
al.
10.38 Non-Revolving Draw-Down Term Note, *
dated September 27, 2000
10.39 Amended and Restated Line of Credit *
Note, dated September 27, 2000
21.1 Subsidiaries of the Registrant 000028108 10-K March 31, 1999 21.1
23.1 Consent of Deloitte & Touche, L.L.P. *
* Filed herewith.
** Originally filed on the date set forth above and refiled pursuant to
Regulation S-T on May 7, 1996.
(b) No reports on Form 8-K have been filed during the last quarter covered by
this report.
Suburban Lodges of America, Inc.
Index to Financial Statements and
Consolidated Financial Statement Schedule
Index To Financial Statements and Consolidated Financial Statement Schedule F-1
Independent Auditors' Report F-2
Consolidated Balance Sheets at December 31, 2000 and 1999 F-3
Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999
and 1998 F-4
Consolidated Statements of Changes in Shareholders' Equity for the Years Ended
December 31, 2000, 1999 and 1998 F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999
and 1998 F-6
Notes to Consolidated Financial Statements F-7 to F-16
Schedule V- Valuation and Qualifying Accounts F-17
F-1
Independent Auditors' Report
BOARD OF DIRECTORS
Suburban Lodges of America, Inc.
We have audited the accompanying consolidated balance sheets of Suburban Lodges
of America, Inc. ("Suburban Lodges") as of December 31, 2000 and 1999, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for each of the three years in the period ended December 31,
2000. Our audits also included the financial statement schedule listed in the
Index to Consolidated Financial Statements and Consolidated Financial Statement
Schedule. These consolidated financial statements and the consolidated financial
statement schedule are the responsibility of Suburban Lodges' management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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
the significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Suburban Lodges as of December 31, 2000 and 1999, and the consolidated results
of its operations and cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the information set forth
therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 23, 2001
F-2
Suburban Lodges of America, Inc.
Consolidated Balance Sheets
(in thousands)
December 31,
-----------------------
2000 1999
-------- --------
Assets:
Current assets:
Cash and cash equivalents $ 10,856 $ 9,862
Accounts receivable, net of reserves of $327 (2000) and $191 (1999) 1,520 1,852
Hotel inventory and supplies 2,538 2,290
Prepaid and refundable income taxes 260 1,163
Deferred income taxes 469 448
Prepaid expenses and other current assets 2,081 1,511
-------- --------
Total current assets 17,724 17,126
Property and equipment, net of accumulated depreciation
and amortization of $27,863 (2000) and $18,600 (1999) 299,392 291,269
Notes receivable from HotelTools, Inc. 7,997 344
Other notes receivable 4,508 4,992
Acquired intangible assets 3,515 3,617
Deferred loan costs 2,097 1,721
Other assets 2,393 2,013
-------- --------
TOTAL ASSETS $337,626 $321,082
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Current portion of long-term debt $ 1,547 $ 1,228
Construction accounts payable 1,314 1,752
Trade accounts payable 3,161 3,207
Accrued property taxes 720 1,113
Accrued wages and benefits 703 507
Other accrued liabilities 1,504 615
Other current liabilities 648 591
-------- --------
Total current 9,597 9,013
liabilities
-------- --------
Long-term debt, excluding current portion 119,574 97,891
Deferred income taxes 3,958 2,333
Other liabilities 167 84
-------- --------
Total liabilities 133,296 109,321
-------- --------
Shareholders' equity:
Common stock, $0.01 par value per share, 100,000,000 shares authorized 157 157
Additional paid-in capital 202,280 202,250
Retained earnings 24,608 19,345
-------- --------
227,045 221,752
Less treasury stock, at cost 22,715 9,991
-------- --------
Shareholders' equity - net 204,330 211,761
-------- --------
Total liabilities and shareholders' equity $337,626 $321,082
======== ========
See notes to consolidated financial statements.
F-3
Suburban Lodges of America, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
Year Ended December 31,
-------------------------------------------
2000 1999 1998
-------- -------- --------
REVENUE:
Hotel revenues $ 70,672 $ 2,466 $ 44,756
Franchise and other revenue 4,611 3,446 1,702
-------- -------- --------
Total revenue 75,283 65,912 46,458
-------- -------- --------
OPERATING COSTS AND EXPENSES:
Hotel operating expenses 38,496 32,876 22,754
Corporate operating expenses 10,998 7,961 3,975
Lease termination costs 218
Site acquisition cancellation expense 113 1,960
Undeveloped site carrying costs 177 119
Depreciation and amortization 9,615 8,468 5,492
Impairment of long-lived assets 545
Gains realized on property sales (60) (1,145) (294)
-------- -------- --------
Operating costs and expenses - net 59,771 48,392 34,105
-------- -------- --------
INCOME FROM OPERATIONS 15,512 17,520 12,353
OTHER INCOME (EXPENSE):
Interest income 962 1,411 2,236
Interest expense (8,857) (6,399) (202)
Public debt transaction abandonment costs (10,633)
Proceeds from legal settlement 842
Other 24 208
Income before income taxes 8,483 12,740 3,754
Provision for income taxes 3,220 4,695 1,192
-------- -------- --------
NET INCOME $ 5,263 $ 8,045 $ 2,562
======== ======== ========
EARNINGS PER COMMON SHARE:
Basic $ 0.41 $ 0.53 $ 0.17
Diluted $ 0.41 $ 0.53 $ 0.17
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 12,905 15,136 15,430
Diluted 12,919 15,136 15,430
See notes to consolidated financial statements.
F-4
Suburban Lodges of America, Inc.
Consolidated Statements of Changes in Shareholders' Equity
(dollars in thousands)
Common Stock Additional Treasury Stock
------------------------- Paid-in Retained ---------------------------
Shares Amount Capital Earnings Shares Cost
---------- ---------- ---------- ---------- --------- ----------
BALANCES - DECEMBER 31, 1997 15,429,227 $ 154 $ 200,160 $ 8,738
Issuance of common stock
to non-employee directors 1,845 30
Net income 2,562
---------- ---------- ---------- ----------
BALANCES - DECEMBER 31, 1998 15,431,072 154 200,190 11,300
Issuance of common stock
in acquisition 300,000 3 2,041
Issuance of common stock
to non-employee directors 3,000 19
Acquisition of treasury stock 1,781,400 $ 9,991
Net income 8,045
BALANCES - DECEMBER 31, 1999 15,734,072 157 202,250 19,345 1,781,400 9,991
---------- ---------- ---------- ---------- --------- ----------
Issuance of common stock
to non-employee directors 4,896 30
Acquisition of treasury stock 1,953,998 12,724
Net income 5,263
BALANCES - DECEMBER 31, 2000 15,738,968 $ 157 $ 202,280 $ 24,608 3,735,398 $ 22,715
========== ========== ========== ========== ========= ==========
F-5
Suburban Lodges of America, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
---------------------------------------------
2000 1999 1998
--------- --------- ---------
OPERATING ACTIVITIES:
Net income $ 5,263 $ 8,045 $ 2,562
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 9,615 8,468 5,492
Reserves for site acquisition cancellation (1,960) 1,960
Net change in deferred income tax assets and liabilities 1,618 1,763 (368)
Equity in loss of joint venture 11
Stock compensation 30 19 30
Gain on sale of property (60) (1,145) (294)
Impairment of long-lived assets 545
Changes in operating assets and liabilities:
Accounts receivable 379 180 (370)
Other current assets 147 770 (2,973)
Other assets (961) (1,384) 117
Trade accounts payable (107) 167 994
Other current liabilities 711 250 (87)
Other liabilities 83 (30) 33
--------- --------- ---------
Net cash provided by operating activities 17,263 15,154 7,096
--------- --------- ---------
INVESTING ACTIVITIES:
Additions to property and equipment (14,553) (28,812) (108,957)
Proceeds from sale of property 230 4,405 885
Increase (decrease) in construction accounts payable (438) (5,095) 2,236
Acquisitions, net of cash acquired (641) (1,481) (2,279)
Loans made to HotelTools, Inc. (8,726) (344)
Payment received from HotelTools, Inc. 1,073
Other loans made (2,660)
Payments received on other loans 484 463 5
Other (365) (431)
--------- --------- ---------
Net cash used by investing activities (22,571) (31,229) (111,201)
--------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from issuances of long-term debt 20,352 24,589 75,530
Principal payments on long-term debt (3,950) (7,670) (58)
Amounts borrowed under line of credit 10,000 40,000
Repayment of line of credit borrowings (7,000) (65,000)
Purchase of treasury stock (12,724) (9,991)
Decrease in restricted cash 11,000
Net additions to deferred loan costs (376) (169) (839)
--------- --------- ---------
Net cash provided by financing activities 6,302 6,759 60,633
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 994 (9,316) (43,472)
Cash and cash equivalents at beginning of period 9,862 19,178 62,650
--------- --------- ---------
Cash and cash equivalents at end of period $ 10,856 $ 9,862 $ 19,178
========= ========= =========
Supplemental cash flow disclosures:
Cash paid for income taxes, net of refunds $ 887 $ 1,658 $ 3,163
========= ========= =========
Cash paid for interest expense, net of amounts capitalized $ 8,493 $ 6,128 $ 195
========= ========= =========
See notes to consolidated financial statements.
F-6
Suburban Lodges of America, Inc.
Notes to Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS
Suburban Lodges of America, Inc. and its subsidiaries (collectively, the
"Company") own, operate, grant franchise rights to and manage for third parties
extended-stay hotels that operate under the Suburban Lodge(R) brand name. The
Company also franchises hotels that operate under the GuestHouse
International(R) brand name.
At December 31, 2000, 119 Suburban Lodge hotels were operating in 19 states. The
Company owned and operated 65 of these hotels and third parties owned the
remaining 54 hotels. The Company managed the operations of 10 of the third-party
hotels on behalf of the franchisees. At December 31, 2000 independent
franchisees owned and operated 65 GuestHouse International hotels located in 20
states. At December 31, 2000, an additional 61 Suburban Lodge hotels (two
Company-owned, 59 franchised) were under construction or development and an
additional 65 franchised GuestHouse International hotels were under
construction, conversion or development.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
The consolidated financial statements include the accounts and operations of
Suburban Lodges of America, Inc. and its wholly-owned subsidiaries. All
significant intercompany balances and transactions are eliminated in the
preparation of the consolidated financial statements.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts of assets and liabilities and
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.
Revenue Recognition
- -------------------
Hotel revenues are recognized as earned. Initial franchise fees are recognized
in income when the associated hotel has commenced operations. Development fees,
management fees and recurring franchise fees are recognized when earned.
Reserves are established for estimated unrecoverable amounts.
Pre-Opening Costs
- -----------------
Non-capital expenditures incurred prior to opening new hotels are expensed as
incurred.
Earnings per Common Share
- -------------------------
Earnings per common share have been computed under the provisions of Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." Identical net
income amounts are used in the calculations of basic and diluted earnings per
common share. Basic earnings per common share were computed using the weighted
average number of common shares outstanding. Diluted earnings per common share
include the dilutive effect of stock options. At December 31, 2000, stock
options under the Company's various stock option plans represented the only
securities that could potentially dilute earnings per common share in future
periods.
Property and Equipment
- ----------------------
Property and equipment is stated at cost. The cost of land includes the
contractual purchase price of the site, other costs incurred in connection with
its acquisition, such as engineering and environmental reports, and associated
overhead. The cost of hotels includes the direct costs of construction plus
capitalized interest and construction overhead through the date the hotel is
substantially complete and ready for its intended use.
Hotels are depreciated on a straight-line basis over an estimated useful life of
40 years. Corporate office leasehold improvements are amortized on a
straight-line basis over the life of the related lease. Furniture, fixtures and
equipment are depreciated on a straight-line basis over estimated useful lives
ranging from five to seven years. Maintenance and repairs are charged to
operations as incurred, and major renewals and betterments are capitalized.
F-7
Acquired Intangible Assets
- --------------------------
Acquired intangible assets consist of franchise rights and goodwill. Franchise
rights were recorded at their estimated fair value at the date of acquisition
and are being amortized on a straight-line basis over four years, the expected
period to be benefited. Goodwill represents the excess of cost over fair value
of net assets acquired and is being amortized on a straight-line basis over an
estimated useful life of 20 years.
Impairment of Long-lived Assets
- -------------------------------
The Company reviews the net carrying value of its hotels and other long-lived
assets if any facts and circumstances suggest that their recoverability may have
been impaired. The Company recorded a loss of $545,000 in the year ended
December 31, 2000, for impairment of an undeveloped site.
Deferred Loan Costs
- -------------------
Costs associated with obtaining and maintaining debt financing are capitalized
as deferred loan costs, and are amortized over the life of the related debt
instrument.
Stock-based Compensation
- ------------------------
The Company accounts for stock options using the intrinsic value method and
issues stock options only to employees and directors at exercise prices that are
equal to or more than the fair value of the underlying shares on the date of
each grant. Accordingly, no compensation expense is recorded in the accompanying
statements of earnings with respect to the grant of stock options.
Reclassifications
- -----------------
Certain reclassifications have been made to the December 31, 1999 and 1998,
financial statements to conform them to the December 31, 2000, presentation.
Recent Accounting Pronouncements
- --------------------------------
As of January 1, 2001, the Company adopted the Statement of Financial Accounting
Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities," as amended in June 2000 by Statement of Financial Accounting
Standards No. 138 (SFAS 138), "Accounting for Certain Derivative Instruments and
Certain Hedging Activities (an amendment of FASB Statement No. 133)." SFAS 133,
as amended by SFAS 138, requires companies to recognize all derivatives as
either assets or liabilities in the balance sheet and measure such instruments
at fair value. The adoption of these statements had no impact on the Company's
consolidated financial statements.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 (SAB 101),
"Revenue Recognition in Financial Statements". The adoption of SAB 101 has had
no impact on the Company's consolidated financial statements. The Company will
continue to analyze the possible impact of SAB 101, including any amendments or
further interpretation, based upon the relevant facts and circumstances at the
time of future transactions.
3. ACQUISITIONS
On January 1, 2000, the Company acquired the remaining 50% interest in a
Suburban Lodge hotel in Atlanta, Georgia (the "2000 Acquisition") owned by a
joint venture in which the Company held a 50% equity position. The total
purchase price of $3,260,000, including transaction related expenses, consisted
of cash of $660,000 and the assumption of a $2,600,000 mortgage note. The note
assumed in the acquisition was repaid on February 18, 2000.
On June 1, 1999, the Company acquired the assets of GuestHouse International,
LLC (the "1999 Acquisition"), a franchisor of mid-scale lodging facilities under
the names GuestHouse International Inns, Hotels and Suites. The total purchase
price of $3,525,000, including transaction-related expenses, consisted of cash
of $1,481,000 and 300,000 shares of the Company's common stock with a market
value of $2,044,000.
In addition to the price paid at closing, the purchase agreement provided for
contingent payments of $1,000,000 to be made as of each of three annual
anniversary dates based on GuestHouse International
achieving certain goals for the number of hotels open and the amount of revenue
collected. The first anniversary date was September 3, 2000, which passed with
no payment due.
F-8
Additionally, the purchase agreement requires that the Company maintain an
average of at least eight sales people actively engaged on a full-time basis in
the marketing and development of franchises during any six-month period
commencing September 30, 1999 through September 3, 2002, the third annual
anniversary date. The Company is currently and expects to remain in compliance
with this requirement.
On July 31, 1998, the Company acquired two companies (the "1998 Acquisitions"),
each of which operates a Suburban Lodge hotel in Arlington, Texas, for a total
purchase price of approximately $2.5 million in cash and the assumption of $6.6
million in notes payable. A director of the Company was a minority shareholder
in these two companies. A second director had an indirect family interest in the
two companies. Prior to the acquisitions, the Company's Board of Directors
(excluding those members of the Board with a direct or indirect interest in the
companies acquired) reviewed and approved the terms of the related Purchase
Agreements.
The acquisitions described in the preceding two paragraphs were treated as
purchases; accordingly, operations of the acquired companies are included in the
consolidated statements of operations commencing on the date of acquisition. The
Company's allocation of purchase price to assets acquired and liabilities
assumed, as adjusted, was as follows (in thousands):
The 2000 The 1999 The 1998
Acquisition Acquisition Acquisitions
----------- ----------- ------------
Property and equipment $ 3,550 $ 9,971
Acquired intangible assets 232 $ 3,650
Other assets 142 96 420
-------- -------- --------
Total assets 3,924 3,746 10,391
Notes payable (2,600) (6,597)
Other liabilities (83) (221) (1,289)
-------- -------- --------
Net assets acquired 1,241 3,525 2,505
Less:
Prior equity investment (581)
Cash received (19) (226)
-------- -------- --------
Purchase price, net of cash $ 641 $ 3,525 $ 2,279
======== ======== ========
Had the 1999 Acquisition occurred on January 1, 1998, the Company's reported
operating results would have been as follows (in thousands, except earnings per
share amounts):
Year Ended December 31,
------------------------
1999 1998
------- --------
Total revenue $66,382 $47,144
Net earnings 7,818 1,868
Primary and diluted earnings per share $ 0.52 $ 0.12
F-9
Results of operations for 1999 would not have differed materially from reported
results had the 2000 Acquisition occurred on January 1, 1999. Results of
operations for 1998 would not have differed materially from reported results had
the 1998 Acquisitions occurred on January 1, 1998.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
December 31,
------------------------
2000 1999
-------- --------
Land and improvements, including land under development $ 62,805 $ 61,596
Buildings and improvements 233,809 214,293
Furniture, fixtures and equipment 26,647 24,480
Construction in progress 3,994 9,500
-------- --------
Property and equipment, at cost $327,255 $309,869
======== ========
Additions to hotels for the years ended December 31, 2000, 1999 and 1998,
respectively, included $726,000, $1,881,000 and $3,885,000 of interest incurred
on funds borrowed to finance construction.
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
December 31,
------------------------
2000 1999
-------- --------
Term loan $ 10,000
Line of credit 3,000
8.25% fixed rate mortgage loans, due
January 1, 2009 73,749 $ 74,680
8.8% fixed rate mortgage loans, due
July 1, 2009 13,493 13,636
8.38% mortgage loans 9,885 10,103
9.25% mortgage loan, due March 1, 2007 2,626
Construction loans 8,331 639
Capital leases 37 61
-------- --------
121,121 99,119
Less current portion 1,547 1,228
-------- --------
Long-term debt, excluding current portion $119,574 $ 97,891
======== ========
Effective September 27, 2000, the Company executed an amended and restated loan
agreement with SouthTrust Bank. This agreement consists of a $10 million term
loan and a revolving line of credit facility for amounts up to $15 million. A
total of 10 Company-owned hotels are pledged as collateral under the loan
agreement. Borrowings under the line of credit facility will bear interest, at
the Company's option, at (i) the bank's prime rate or (ii) the Euro Rate plus
200 basis points. The line of credit facility expires on September 30, 2003. The
interest rate on the term loan was based on the Euro Rate plus 175 basis points
through December 31, 2000. Commencing January 1, 2001, the interest rate is
based on the Euro Rate plus 200 basis points. The term loan requires monthly
payments of interest only through September 2001. Beginning October 1, 2001 the
term loan requires monthly payments of principal and interest based on a 20-year
amortization period with a final maturity of September 30, 2008. Among other
covenants, the agreement requires the Company to maintain certain financial
ratios and a minimum level of tangible net worth. The agreement also places
restrictions on the amount of loans and advances the Company can make to third
parties. At December 31, 2000, the Company was in compliance with these
requirements.
The 8.25% and 8.8% mortgage loans require monthly payments of principal and
interest totaling approximately $709,000 based upon a 25-year amortization
schedule. A total of 32 Company-owned hotels are pledged as collateral on these
obligations.
F-10
The 8.38% mortgage loans consist of individual loans against three hotels. The
interest rates are adjustable at the end of each three-year period to rates
based on prime plus an average margin of 62.5 basis points. The loan repayments
aggregating $88,163 per month are based on a principal amortization period of 20
years with a final maturity of March 1, 2005, for one of the loans and March 1,
2008, for the other two loans.
The 9.25% mortgage loan on one Company-owned hotel bears interest at rates that
adjust at the end of each twelve-month period to rates based on prime plus 50
basis points. During the initial twelve-month period, the interest rate is 9.25%
and the loan requires monthly payments of principal and interest totaling
$24,362 based on a principal amortization period of 20 years.
As of December 31, 2000, the Company had outstanding borrowings on three
construction loans. The initial interest rate on one of the construction loans
is 8.75%. This rate will automatically adjust to 0.50% over the prime rate on
October 1, 2002 and again on October 1, 2005. This loan will mature on September
1, 2006. Interest on the second construction loan is based on a variable daily
rate equal to the prime rate plus 0.75%. On August 1, 2001, this loan will
convert to a fixed rate loan at an interest rate of 250 basis points in excess
of the weekly average yield on U.S. Treasury Securities adjusted to a constant
maturity of three years as of August 1, 2001. This loan will mature on February
1, 2005. Interest on the third construction loan is at a variable daily rate of
prime. On July 1, 2001, at the Company's option, the loan will convert to a
fixed rate loan based on The Federal Home Loan Bank rate on that date plus 250
basis points or a variable rate loan at the lender's prime rate. This loan will
mature on July 1, 2006.
The aggregate maturities of long-term debt for the five years subsequent to
December 31, 2000, are as follows (in thousands):
Year ended December 31,
2001 $ 1,514
2002 2,014
2003 2,193
2004 2,364
2005 5,298
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash equivalents, accounts receivable, accounts payable,
and accrued liabilities reflected in the financial statements approximates fair
value because of the short-term nature of these instruments. Based on interest
rates currently available to the Company for borrowings similar to those
reflected in the December 31, 2000, balance sheet, the Company estimates that
the fair value of its long-term debt was approximately $112.6 million.
7. INCOME TAXES
The provisions for income taxes are summarized as follows (in thousands):
Year Ended December 31,
-------------------------------------
2000 1999 1998
------- ------- -------
Current income tax provision $ 1,602 $ 2,932 $ 1,560
Deferred income tax provision (credit) 1,618 1,763 (368)
------- ------- -------
Total provision for income taxes $ 3,220 $ 4,695 $ 1,192
======= ======= =======
F-11
The tax effects of temporary differences that comprise the deferred tax
liabilities and assets are as follows (in thousands):
December 31,
--------------------
2000 1999
------ ------
Gross deferred income tax liability:
Property and equipment $4,029 $2,453
Other 80 82
------ ------
Total gross deferred income tax liabilities 4,109 2,535
------ ------
Gross deferred income tax assets:
Unearned franchise fees 163 130
Unearned guest income 134 110
Bad debts reserve 119 70
Net operating loss carryforward 20 253
Other 184 87
------ ------
Total gross deferred income tax assets 620 650
------ ------
Net deferred income tax liability $3,489 $1,885
====== ======
The following is a reconciliation of the statutory federal income tax rate to
the Company's effective tax rates:
Year Ended December 31,
--------------------------------
2000 1999 1998
------- ------- --------
Statutory federal income tax rate 34.0 % 34.0 % 34.0 %
State income taxes 3.5 2.4 0.7
Income not subject to tax (0.5) (4.4)
Other 0.5 1.0 1.5
------ ----- ------
Effective income tax rate 38.0 % 36.9 % 31.8 %
====== ====== ======
8. SEGMENT AND RELATED INFORMATION
The Company operates in three reportable business segments: hotel operations,
franchising operations and corporate and support services. The Company was
founded in 1987 as an owner-operator of economy extended-stay hotels, the first
of which opened in 1988. Since that date, the majority of the Company's revenues
have been derived from its hotel operations segment, primarily in the form of
room revenues. Since 1992, the Company has franchised the Suburban Lodge(R)
brand to third parties. In 1999, the franchising operations segment was expanded
when the GuestHouse International(R) brand was added through an acquisition. The
corporate and support services segment provides hotel management, site
development and construction management services to Company-owned and
independently franchised hotels. The corporate and support services segment also
provides general management, information technology and other services to the
other segments. For internal reporting purposes, the Company allocates
management fees to Company-owned hotels. Commencing in 1999, the Company began
charging franchise fees to Company-owned hotels. The management and franchise
fees appear as intersegment revenues under the appropriate segments in the table
below.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies.
The Company evaluates the performance of its operating segments based upon net
operating income, which is defined as income before income taxes, nonrecurring
items, interest income, interest expense, gains on sales of property and other
non-operating income.
F-12
Summarized financial information concerning the Company's reportable segments is
shown in the following table (in thousands):
Corporate
Hotel Franchising and Support
Operations Operations Services Total
---------- ---------- -------- -----
Year Ended December 31, 2000
Revenues from external customers $ 70,672 $ 3,525 $ 1,086 $ 75,283
Intersegment revenues 2,819 3,864 6,683
Depreciation and amortization 8,598 337 680 9,615
Net operating income (loss) 17,069 177 (1,249) 15,997
Total assets 307,265 4,440 25,921 337,626
Additions to property and equipment 14,322 31 200 14,553
Year Ended December 31, 1999
Revenues from external customers $ 62,466 $ 2,243 $ 1,203 $ 65,912
Intersegment revenues 2,493 3,117 5,610
Depreciation and amortization 7,731 205 532 8,468
Net operating income (loss) 16,133 1,176 (821) 16,488
Total assets 300,704 4,439 15,939 321,082
Additions to property and equipment 27,198 12 1,602 28,812
Year Ended December 31, 1998
Revenues from external customers $ 44,756 $ 1,079 $ 623 $ 46,458
Intersegment revenues 2,241 2,241
Depreciation and amortization 5,209 10 273 5,492
Net operating income (loss) 14,552 193 (508) 14,237
Total assets 285,252 867 21,179 307,298
Additions to property and equipment 107,721 17 1,219 108,957
The following table provides a reconciliation of total segment net operating
income to the Company's reported income before income taxes (in thousands):
Year Ended December 31, 2000 1999 1998
-------- -------- --------
Total segment net operating income $ 15,997 $ 16,488 $ 14,237
Interest income 962 1,411 2,236
Gains on sales of property and other non-operating income 84 1,353 294
Proceeds from legal settlement 842
Interest expense (8,857) (6,399) (202)
Impairment of long-lived assets (545)
Public debt transaction abandonment costs (10,633)
Site acquisition cancellation costs (113) (1,960)
Lease termination costs (218)
-------- -------- --------
Income before income taxes $ 8,483 $ 12,740 $ 3,754
======== ======== ========
All of the Company's revenues are derived in the United States of America. No
single customer accounts for ten percent or more of the Company's total revenue.
F-13
9. STOCK OPTION PLANS
The Company has three stock option plans that provide for the grant of stock
options to employees and non-employee directors. The Company's Stock Option and
Incentive Award Plan (the "1996 Plan") provides for the grant of up to 1,000,000
shares of the Company's common stock to officers and key employees. The
Company's Nonemployee Directors' Stock Option and Fee Plan (the "Directors'
Plan") provides for the grant of up to 100,000 shares to the Company's
nonemployee directors. The Company's Employee Stock Option Plan (the "1997
Plan") provides for the grant of up to 1,000,000 shares to all full-time
employees who are not participants in either the 1996 Plan or the Directors'
Plan. At December 31, 2000, 125,000, 77,500 and 520,152 shares, respectively,
were available for grant under the 1996 Plan, the Directors' Plan and the 1997
Plan. Options outstanding under these Plans were granted at prices that were
either equal to or greater than the market price of the stock on the date
granted, expire either five or ten years from the date granted and vest over
service periods that range from one to four years.
The following table summarizes stock option activity during each of the three
years ended December 31:
Number Exercise Price Weighted Avg.
of Shares per Share Exercise Price
--------------- ------------------------ -------------------
Outstanding, December 31, 1997 787,721 $13.00 - $27.38 $18.88
Granted 806,155 10.25 - 19.00 13.67
Canceled (428,486) 12.38 - 27.38 17.73
-----------
Outstanding, December 31, 1998 1,165,390 10.25 - 18.70 13.92
Granted 846,134 5.63 - 13.50 10.75
Canceled (483,711) 10.25 - 17.00 13.32
-----------
Outstanding, December 31, 1999 1,527,813 5.63 - 18.70 12.35
Granted 648,975 5.88 - 13.50 8.08
Canceled (799,440) 5.63 - 18.70 14.35
-----------
Outstanding, December 31, 2000 1,377,348 5.63 - 17.38 9.18
===========
On December 14, 1998, the Company's Board of Directors adopted a resolution
reducing to $13.50 per share the exercise price of stock options issued to
employees under the 1997 Plan with an original exercise price per share that was
greater than $13.50. As a result, 396,056 options with an average exercise price
of $18.75 per share were repriced. No options held by the Company's officers or
directors were affected by this repricing.
The number of stock options exercisable at December 31, 2000, 1999 and 1998 was
407,769, 438,573 and 232,963, respectively. A summary of stock options
outstanding and exercisable as of December 31, 2000, follows:
Options Outstanding Options Exercisable
-------------------------------------- ---------------------------
Average
Range of Number Remaining Average Number Average
Exercise of Life Exercise of Exercise
Prices Options (Years) Price Options Price
- -------------------------------- ------------ ------------- ----------- -------------- ------------
$ 5.63 - $ 6.50 638,125 9.4 $ 5.84 79,504 $ 5.67
$10.25 340,000 8.0 10.25 200,000 10.25
$12.56 - $13.50 385,723 8.1 13.49 114,765 13.48
$16.25 - $17.38 13,500 6.4 16.88 13,500 16.88
F-14
Had the Company recorded compensation expense for its stock option plans instead
of following the intrinsic value method, the Company's pro forma net income
would have been $4,304,000 ($0.33 per share) for the year ended December 31,
2000, $6,804,000 ($0.45 per share) for the year ended December 31, 1999, and
$1,675,000 ($0.11 per share) for the year ended December 31, 1998. The fair
value of each stock option grant used in the determination of these pro forma
amounts was determined using the Black-Scholes option pricing model with the
following weighted average assumptions:
2000 1999 1998
------------- ------------- -------------
Risk-free interest rate 5.7% 5.0% 5.0%
Expected dividend yield 0.0% 0.0% 0.0%
Expected life (in years) 4.5 4.5 4.5
Expected volatility 51.7% 59.1% 58.3%
Average fair value of each option granted $2.53 $ 2.40 $ 7.16
10. LEASES
The Company has operating leases covering its corporate headquarters and certain
satellite television equipment utilized at its hotels. At December 31, 2000, the
Company's future minimum annual rental payments under non-cancelable operating
leases, reduced by income from subleases, were as follows (in thousands):
Year ended December 31
2001 $ 1,960
2002 1,829
2003 1,587
2004 1,444
2005 1,372
--------
Next five years in total 8,192
Thereafter 3,460
--------
$ 11,652
========
Total rent expense was approximately $2,227,000, $1,517,000 and $862,000 for the
years ended December 31, 2000, 1999 and 1998, respectively.
11. RELATED PARTY TRANSACTIONS
HotelTools, Inc. was incorporated in November 1999 as a software development
company with the intent of developing property management system software that
utilizes the Internet to provide hotel owners and operators with immediate
access to real-time operating information. In the fall of 1999, the Company
licensed to HotelTools, Inc. the use of its own proprietary hotel management and
reservation systems, and HotelTools, Inc. concurrently assumed the costs of the
continued maintenance and development of these systems. HotelTools has sought,
and continues to seek, funding from venture capitalists. Through December 31,
2000, however, all funding of HotelTools' operations has been provided by the
Company in the form of interest-bearing loans. As of December 31, 2000, the
Company had notes receivable of $7,997,000 from HotelTools, Inc. for loans made
to HotelTools to fund their operations. The loans are payable on demand and bear
interest at a rate of 7% per annum. The loans are accounted for on the cost
recovery basis and interest income is not recognized on such loans. In exchange
for its financial support, the Company received from HotelTools, Inc., a stock
purchase warrant to purchase up to 20 million shares of HotelTools, Inc. common
stock at a nominal price. HotelsTools sole shareholder, CEO and President is
Seth Christian, who was an officer with the Company at the time HotelTools was
formed. He subsequently resigned his position with the Company in order to
devote his full efforts to HotelTools' operations. David E. Krischer, the
Company's Chief Executive Officer, is a member of the Board of Directors of
HotelTools, Inc.
F-15
The Company is a guarantor on an equipment financing lease for HotelTools, Inc.
The total amount of the lease obligation is $1.4 million.
During 1998, the Company entered into a venture to develop a Suburban Lodge
hotel in Atlanta, Georgia, investing $200,000 for a 25% equity position. A
non-employee director of the Company owned another 25% equity position in this
venture. In December 1998, the Company acquired an option to purchase the
director's interest for a total consideration of $300,000. On August 1, 1999,
the Company exercised its option to purchase the director's interest. The hotel
owned by the venture opened in May 1999. In January 2000, the Company purchased
the remaining 50% interest in this hotel from the unaffiliated owners. See Note
3 for more information regarding this purchase.
During certain periods in 1998, two franchise locations were partially owned by
two of the Company's directors or members of their immediate families. The
Company acquired both locations on July 31, 1998. Franchise and other revenue
recognized during 1998 for such locations prior to their acquisition by the
Company was approximately $97,000.
All such revenue was realized under terms and conditions that were essentially
the same as terms and conditions under which franchise revenues were recognized
under agreements with unrelated parties.
12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for the years ended December 31, 2000 and 1999 are as
follows (in thousands, except earnings per share amounts):
First Second Third Fourth
------------ ------------ ------------ ------------
Year ended December 31, 2000
Total revenue $ 17,095 $ 19,274 $ 20,200 $ 18,714
Operating income 2,679 4,422 4,870 3,541
Net income 555 2,106 1,814 788
Basic and diluted earnings per share 0.04 0.16 0.15 0.07
Weighted average shares outstanding:
Basic 13,870 13,335 12,428 12,004
Diluted 13,870 13,335 12,467 12,017
Year ended December 31, 1999
Total revenue $ 13,939 $ 16,810 $ 18,683 $ 16,480
Operating income 4,283 5,109 5,259 2,869
Net income 2,097 2,565 2,289 1,094
Basic and diluted earnings per share 0.14 0.17 0.15 0.08
Weighted average shares outstanding:
Basic 15,429 15,398 15,388 14,339
Diluted 15,429 15,398 15,388 14,339
F-16
Suburban Lodges of America, Inc.
Schedule V. Valuation and Qualifying Accounts
Column A Column B Column C Column D Column E
- ------------------------------------ ---------------- ------------------------------- ------------- -------------
Additions
-------------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
- ------------------------------------ ---------------- --------------- --------------- ------------- -------------
(amounts in thousands)
Reserve for Uncollectible
Accounts Receivable
Year Ended December 31, 1998 $ 51 $138 $ -- $ 90 $ 99
Year Ended December 31, 1999 99 197 -- 105 191
Year Ended December 31, 2000 191 283 -- 147 327
F-17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(a) 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 in the City of Atlanta,
State of Georgia, on the 30th day of March, 2001.
SUBURBAN LODGES OF AMERICA, INC.
By: /s/ David E. Krischer
David E. Krischer
Chairman of the Board, Chief Executive
Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Company in the capacities set forth and on the 30th day of March, 2001.
Signature Position
- --------- --------
/s/ David E. Kricher Chairman of the Board, Chief Executive Officer, and
- -------------------------------------------- Director (Principal Executive Officer)
David E. Krischer
/s/ Dan J. Berman Vice President of Franchising (Suburban Lodge Brand)
- -------------------------------------------- and Director
Dan J. Berman
/s/ Paul A. Criscillis, Jr. Vice President and Chief Financial Officer (Principal
- -------------------------------------------- Financial Officer)
Paul A. Criscillis, Jr.
/s/ Robert E. Schnells Vice President and Chief Accounting Officer (Principal
- -------------------------------------------- Accounting Officer
Robert E. Schnelle
/s/ James R. Kuse Director
- --------------------------------------------
James R. Kuse
/s/ Michael McGovern Director
- --------------------------------------------
Michael McGovern
/s/ John W. Spiegel Director
- --------------------------------------------
John W. Spiegel
EXHIBIT INDEX
Exhibit No. Decription
- ----------- ----------
10.37 Amended and Restated Loan Agreement
dated as of September 27, 2000
between Southtrust Bank, N.A.,
Suburban Lodges of America, Inc., et
al.
10.38 Non-Revolving Draw-Down Term Note,
dated September 27, 2000
10.39 Amended and Restated Line of Credit
Note, dated September 27, 2000
23.1 Consent of Deloitte & Touche, L.L.P.