Extended Stay America, Inc. (NYSE:ESA):
— Reports 49% EBITDA Margin — Expects to Increase Development Plans
Extended Stay America, Inc. (NYSE:ESA), a leading provider of extended stay lodging, today reported the results of its operations for the three months and nine months ended September 30, 2002.
Net income for the third quarter was $21.2 million or $0.22 per diluted share compared to $13.0 million or $0.14 per diluted share for the same period of last year. Results for the quarter reflect the continued impact on travel resulting from the weakened U. S. economy and the anniversary of the events of September 11, 2001. Net income for the same quarter last year, excluding the impact of costs related to the relocation of the Company`s headquarters and the write-off of unamortized debt issue costs, was $0.23 per diluted share.
Net income per diluted share for the nine months ended September 30, 2002 and 2001 was $0.51 in both periods. Adjusted net income for the nine months ended September 30, 2002 was $0.48 per diluted share compared with $0.64 per diluted share for the same period of last year. Adjusted net income for the nine months ended September 30, 2002 excludes the benefit of a reduction in the Company`s estimated annual effective income tax rate of approximately $3.0 million or $0.03 per diluted share which was recorded in the first quarter of 2002. Adjusted net income for the nine months ended September 30, 2001 excludes the impact of approximately $9.0 million in costs related to the relocation of the Company`s headquarters, the write-off of unamortized debt issue costs of approximately $5.9 million, net of income taxes, and the cumulative effect of a change in accounting of approximately $0.7 million, net of income taxes.
Revenue for the third quarter was $153.5 million compared to $145.7 million for the third quarter of 2001. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $74.8 million (49% of revenue) for the quarter. Property level EBITDA, including 46 hotels that were opened during the quarter or were open for less than one year at the beginning of the quarter, was 57% of revenue or $87.0 million for the quarter, compared to $85.8 million or 59% of revenue for the same quarter of the previous year. Property level EBITDA does not include corporate operating and site selection expenses of $12.2 million (7.9% of revenue) for the quarter compared to $12.0 million (8.2% of revenue) for the third quarter of 2001.
The Company opened 2 EXTENDED STAYAMERICA Efficiency Studios hotels during the quarter resulting in a total of 451 operating hotels (39 Crossland Economy Studios, 317 EXTENDED STAYAMERICA Efficiency Studios, and 95 StudioPLUS Deluxe Studios) as of September 30, 2002. In addition, the Company had 15 EXTENDED STAYAMERICA Efficiency Studios under construction as of September 30, 2002. The Company expects to open two hotels in the fourth quarter for a total of 22 hotels during the year with total costs of approximately $186 million.
The Company has requested an amendment to its credit facility which would increase the total leverage covenant through June 2004. The proposed amendment would provide the Company with the flexibility to accelerate the pace of construction starts. The Company expects to conclude the amendment process on October 31, 2002. Contingent upon a number of factors including the successful completion of the proposed amendment, improvements in the overall U. S. economy, improvements in demand for lodging products in the overall lodging industry, and improvements in demand for the Company`s extended stay lodging, the Company expects to increase the number of sites upon which it would commence construction during the fourth quarter from 9 to 16 sites, which would increase the total number of construction starts for 2002 from 24 to 31 sites with total development costs of approximately $250 million. In addition, the Company would plan to commence construction on 31 sites with total development costs of approximately $270 million in 2003 and has identified 10 additional sites with total development costs of approximately $86 million for which construction could commence in 2003. The Company will continue to seek the necessary approvals and permits for additional sites and may seek to increase the number of construction starts in the future.
As of September 30, 2002, the Company had invested approximately $2.6 billion in the 451 open hotels and had invested approximately $76 million in hotels under development. The Company had cash balances of approximately $32.5 million and had outstanding loans of $1.16 billion, leaving $200 million committed and available under its credit facilities at September 30, 2002.
The Company realized an overall decrease of 4.0% in REVPAR (revenue per available room) with average occupancies of 74% and average weekly room rates of $325 for the third quarter of 2002, as compared to average occupancies of 77% and average weekly room rates of $323 for the third quarter of 2001. Average occupancy rates for Crossland, EXTENDED STAYAMERICA, and StudioPLUS were 73%, 74%, and 74%, respectively, while average weekly room rates were $222, $338, and $332, respectively, for the third quarter of 2002.
For Full details - http://www.extendedstay.com.