Extended Stay America, Inc. (NYSE: ESA) today reported the results of its operations for the three months and six months ended June 30, 1999.
Net income for the second quarter was $14.6 million or $0.15 per diluted share. Net income for the quarter includes a reduction in a previously established valuation allowance discussed below. Excluding the valuation allowance reduction, net income was $14.0 million or $0.14 per diluted share, an increase of 38% as compared to the second quarter of 1998. Net income for the six months ended June 30, 1999, excluding the valuation allowance reduction and the cumulative effect of an accounting change that was recorded in the first quarter of 1999 was $21.6 million or $0.22 per diluted share.
Revenue increased by 52% to $106.5 million as compared to $70.0 million for the second quarter last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) of $52.0 million (excluding the reduction in the valuation allowance), or $0.53 per diluted share, for the second quarter increased by 65% as compared to the same quarter of last year. Earnings before depreciation, amortization, and non-current deferred taxes (EBDADT) of $35.1 million (excluding the reduction in the valuation allowance), or $0.36 per diluted share, for the second quarter increased by 35% as compared to the same quarter of last year.
The results for the second quarter reflect the opening of 9 additional EXTENDED STAYAMERICA Efficiency Studios and 4 StudioPLUS Deluxe Studios during the quarter. A total of 13 properties were opened during the second quarter. During the quarter, 14 StudioPLUS Deluxe Studios were repositioned as EXTENDED STAYAMERICA Efficiency Studios. For purposes of the operating statistics discussed below, these repositioned properties have been included in the EXTENDED STAYAMERICA brand for the entire quarter.
Property operating results for the second quarter include 45 EXTENDED STAYAMERICA properties (20% of open properties), 15 StudioPLUS properties (17% of open properties) and 18 Crossland properties (46% 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 78 properties (22% of all opened properties), the Company realized average occupancies of 76% and average weekly room rates of $294 for the quarter. The 218 properties opened for at least one year at the beginning of the second quarter realized average occupancy rates of 80% and average weekly rates of $296.
Average occupancy rates for EXTENDED STAYAMERICA, StudioPLUS and Crossland were 78%, 74% and 68%, respectively, while average weekly rates were $297, $339, and $213, respectively, for the quarter. Facility level EBITDA was 59% of revenue or $62.4 million for the second quarter, including the 78 properties open for less than nine months at the end of the quarter. Facility level EBITDA does not include corporate operating and property management expenses of $10.4 million, which decreased as a percentage of revenue to 10% as compared to 14% for the second quarter of 1998.
In the quarter ended September 30, 1998, unfavorable capital market conditions resulted in a reduction in the Company`s development plans for 1999 and 2000. As a result, a valuation allowance of $12.0 million was established for the write-off of costs related to sites that would not be developed. The operating results for the quarter ended June 30, 1999 reflect the reversal of $1.1 million of this valuation allowance resulting from the renegotiation of the terms of a number of the optioned sites.
As of June 30, 1999, the Company had total borrowings of $790 million under its $1.0 billion available credit facilities and had cash balances of approximately $7.8 million.
George D. Johnson Jr., President and CEO, commented: “We are particularly pleased that the rate of growth in EBITDA was 25% higher than the rate of growth in revenue. This reflects primarily the leverage of our corporate operating and property management expenses over more units. We are also pleased with the consistent performance of our properties particularly in light of the large number of rooms added in our segment of the lodging industry over the past two years. We remain optimistic that we will continue to experience increases in market share as our properties mature and as we continue to develop more properties than our competitors.”
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.