Oct. 27, 1998—Extended Stay America, Inc. (NYSE:ESA) today reported the results of its operations for the three months and nine months ended September 30, 1998. Net income for the third quarter, excluding the non-recurring expenses discussed below, was $12.7 million or $0.13 per diluted share, an increase of 125% as compared to the third quarter of 1997. Net income for the nine months ended September 30, 1998, excluding the non-recurring expenses discussed below, was $27.6 million or $0.28 per diluted share.
Revenue increased by 109% to $81.0 million as compared to $38.8 million for the third quarter last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) of $38.4 million (excluding non-recurring expenses), or $0.40 per diluted share, for the third quarter increased by 190% as compared to the same quarter of last year. Earnings before depreciation, amortization, and non-current deferred taxes (EBDADT) of $27.9 million (excluding non-recurring expenses), or $0.29 per diluted share, for the third quarter increased by 102% as compared to the same quarter of last year.
The results for the third quarter reflect the opening of 15 additional EXTENDED STAYAMERICA Efficiency Studios, 8 StudioPLUS Deluxe Studios and 7 Crossland Economy Studios during the quarter. A total of 30 properties were opened during the third quarter.
Property operating results for the third quarter include 49 EXTENDED STAYAMERICA properties (30% of open properties), 20 StudioPLUS properties (24% of open properties) and 15 Crossland properties (71% of open properties), that were opened during the quarter or had been open for less than six months at the beginning of the quarter. Including these 84 properties (31% of all opened properties), the Company realized average occupancies of 78% and average weekly room rates of $290 for the quarter.
Average occupancy rates for EXTENDED STAYAMERICA, StudioPLUS and Crossland were 81%, 76% and 66%, respectively, while average weekly rates were $286, $328 and $198, respectively for the quarter. The 116 properties opened for at least one year at the beginning of the third quarter realized average occupancy rates of 85% and average weekly rates of $275.
Facility level EBITDA was 60% of revenue or $48.4 million for the third quarter, including the 84 properties open for less than nine months at the end of the quarter. Facility level EBITDA does not include corporate operating and site selection expenses of $10.0 million (excluding non-recurring expenses), which decreased as a percentage of revenue to 12% as compared to 21% for the third quarter of 1997.
The Company announced on September 11, 1998 that beginning in 1999 it plans to open 50 to 70 properties annually with total development costs of approximately $350 million per year. The Company expects to finance this development with internally generated cash flows and moderate increases in its debt facilities. In connection with this announcement, the Company also announced that it would establish a valuation allowance for the costs associated with certain sites under option that will not be developed in the future. The related non-recurring expense of $7.2 million, net of tax, was recorded during the period ended September 30, 1998. As a result, the Company reported net income of $5.5 million or $.06 per share for the three months ended September 30, 1998 and $20.4 million or $.21 per share for the nine months ended September 30, 1998.
As of September 30, 1998, the Company had total borrowings of $550 million under its $900 million available credit facilities and had cash balances of approximately $27 million.
George Dean Johnson, Jr., President and CEO, commented: “We are particularly pleased that we achieved operating margins of 60% when over 40% of our properties have been open for less than one year. We continue to be pleased with the demand for our products and their operating performance. We believe that we have a prudent development plan that will allow us to capitalize on this demand and expand our market share in the future.”
Certain statements and information included in this release constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied in such forward-looking statements. Additional discussion of factors that could cause actual results to differ materially from management`s projections, forecasts, estimates and expectations is contained in the Company`s SEC filings.