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Extended Stay America Reports Third Quarter 2017 Results

November 7, 2017 at 6:45 AM EST

-Net Income of $66.3 million, an increase of 16.1% over 3Q 2016
-Adjusted EBITDA1 of $180.3 million

CHARLOTTE, N.C., Nov. 07, 2017 (GLOBE NEWSWIRE) -- Extended Stay America, Inc. (NYSE:STAY) (the “Company”) today announced consolidated results for the three and nine months ended September 30, 2017.

Third Quarter 2017 Highlights

  • Comparable Hotel2Revenue Per Available Room (“RevPAR”) of $54.55
  • Net Income of $66.3 million
  • Adjusted EBITDA of $180.3 million
  • Adjusted Paired Share Income1 per diluted Paired Share of $0.35
  • Net Debt to Trailing Twelve Month Adjusted EBITDA ratio fell to 3.9x      

Nine Months 2017 Highlights

  • Comparable Hotel RevPAR grew 1.5% to $51.16
  • Net Income of $132.0 million
  • Adjusted EBITDA of $482.7 million
  • Adjusted Paired Share Income per diluted Paired Share of $0.81
  • Hotel Operating Margin1 expanded 60 basis points to 55.7%

The Company’s Chief Executive Officer, Gerry Lopez, commented, “Our third quarter financial performance was stable, with solid per-share metrics but still short of our expectations.  Strength in the South and Southeast was not enough to offset weakness in the West.  Nevertheless, we have already taken steps to improve performance, including key personnel changes, re-allocation of sales resources, rate re-mixing and targeted capital investments.”

Mr. Lopez continued, “Most notably, this quarter we continued to move forward on ESA 2.0, with late stage discussions to sell groups of hotels in 2018 and a growing pipeline of owned + operated new-builds that now stands at 3 units and 7 LOIs. We expect 2018 to be a pivotal year for Extended Stay America's estate.”

Financial and Operating Results

Total revenues for the three months ended September 30, 2017 decreased 1.0% over the same period in 2016 to $350.9 million due to 4 hotels sold in May 2017.  Total revenues for the nine months ended September 30, 2017 grew 0.5% to $980.2 million.

Comparable Hotel RevPAR for the three months ended September 30, 2017 was $54.55 compared to $54.53 in the same period in 2016, with an increased Average Daily Rate (“ADR”) of 0.4% offset by a decline of 40 basis points in occupancy to 79.0%. Comparable Hotel RevPAR for the nine months ended September 30, 2017 grew 1.5% to $51.16 driven by a 100 basis point increase in occupancy and a 0.3% increase in ADR compared to the same period in 2016.

Hotel Operating Marginfor the three months ended September 30, 2017 was 57.2% compared to 58.4% in the same period in 2016.   Hotel Operating Margin for the nine months ended September 30, 2017 expanded 60 basis points to 55.7%.

Net income for the three months ended September 30, 2017 was $66.3 million compared to $57.1 million in the same period in 2016. Income tax expense for the three months ended September 30, 2017 was $20.3 million compared to $15.9 million in the same period in 2016. Net income for the nine months ended September 30, 2017 was $132.0 million compared to $133.2 million in the same period in 2016. Income tax expense for the nine months ended September 30, 2017 was $40.7 million compared to $26.2 million in the same period in 2016.

Adjusted EBITDA for the three months ended September 30, 2017 declined 2.9% over the same period in 2016 to $180.3 million. Adjusted EBITDA, a non-GAAP measure, excludes equity-based compensation of $2.7 million and other net expenses of $2.0 million.  This quarterly result includes an estimated lost contribution of $2.0 million related to four hotels sold in early May 2017 compared to the prior year period. Adjusted EBITDA for the nine months ended September 30, 2017 increased 2.0% over the same period in 2016 to $482.7 million

Adjusted Funds From Operations (Adjusted “FFO”)1for the three months ended September 30, 2017 was $109.3 million, a decrease of 1.4% from the same period in 2016. Adjusted FFO per diluted Paired Share increased $0.02 to $0.57 for the three months ended September 30, 2017 compared to $0.55 in the same period in 2016. Adjusted FFO, a non-GAAP measure, represents FFO1, as adjusted, attributable to the consolidated enterprise, whose representative equity security is a Paired Share. A Paired Share entitles its holder to participate in 100% of the common equity and earnings of both Extended Stay America, Inc. and ESH Hospitality, Inc. Adjusted FFO for the nine months ended September 30, 2017 was $279.9 million compared to $278.8 million in the same period in 2016. Adjusted FFO per Paired Share for the nine months ended September 30, 2017 was $1.44 compared to $1.38 in the same period in 2016.

Adjusted Paired Share Income for the three months ended September 30, 2017 was $67.8 million, or $0.35 per diluted Paired Share, compared to $71.5 million, or $0.36 per diluted Paired Share, in the same period in 2016.  Adjusted Paired Share Income, a non-GAAP measure, represents net income, as adjusted, attributable to the consolidated enterprise, whose representative equity security is a Paired Share. Adjusted Paired Share Income for the nine months ended September 30, 2017 was $156.8 million compared to $160.3 million in the same period in 2016 while Adjusted Paired Share Income per diluted Paired Share increased to $0.81 from $0.79 in the same period in 2016.

Capital Expenditures

The Company invested $39.8 million in capital expenditures during the three months ended September 30, 2017. For the nine months ended September 30, 2017, the Company invested $132.9 million in capital expenditures, including $31.6 million on renovations.  The Company’s outlook for 2017 for capital expenditures includes approximately $15 million in capital expenditures from hurricane damage, flood damage and other similar events compared to approximately $5 million in 2016. The Company expects to recover approximately $6 to $7 million in 2018 from these events, including approximately $1 million in business interruption and other cost reimbursement.

Distribution and Share Repurchases

On November 7, 2017, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. declared cash distributions totaling $0.21 per Paired Share for the third quarter of 2017.  The distribution is comprised of $0.11 per Extended Stay America, Inc. common share and $0.10 per ESH Hospitality, Inc. Class A and B common share. The distributions are payable on December 5, 2017 to shareholders of record as of November 21, 2017.  

During the quarter, the Company paid approximately $4.8 million to repurchase and retire approximately 0.2 million Paired Shares. For the first nine months of 2017, the Company paid approximately $58.8 million to repurchase and retire approximately 3.4 million Paired Shares. The Company had approximately $101.4 million remaining for repurchases under the combined Paired Share repurchase program as of September 30, 2017.

2017 Outlook

The Company’s outlook for 2017 is updated as follows:

                         
Full Year 2017         Updated Outlook       Previous Outlook      
in millions, except %       Low
          High
            Low
        High      
                                             
Total Revenues       $ 1,273             $ 1,279             $ 1,278           $ 1,303    
Comparable RevPAR % Δ         1.0 %              1.5 %             1.5 %           3.5 %  
Net Income       $ 155             $ 161           $ 161           $ 174    
Adjusted EBITDA       $ 610             $ 615           $ 620           $ 635    
Adjusted EBITDA % Δ         -0.9 %             -0.1 %               0.7 %           3.1 %  
Depreciation and Amortization       $ 230             $ 230           $ 233           $ 233
       
Net Interest Expense       $ 130             $ 130           $ 130           $ 130
       
Effective Tax Rate         23 %             24 %           23 %           24
%      
Capital Expenditures       $ 163             $ 178           $ 150           $ 180
       
                                                               

Webcast and Conference Call Details

The Company will host a conference call on November 7, 2017 at 8:30 a.m. Eastern Time.  The conference call will be webcast simultaneously in the Investor Relations section of the Company’s website at www.aboutstay.com.  A replay of the call will be available for 90 days following the webcast on the Company’s website.

Alternatively, the conference call can be accessed by dialing 1-877-705-6003 for domestic callers or 1-201-493-6725 for international callers.  A telephone replay will be available from shortly after the call until November 14, 2017, and can be accessed by dialing 1-844-512-2921 for domestic callers or 1-412-317-6671 for international callers.  The passcode for the replay is 13671866.

Disclosure Regarding Non-GAAP Financial Measures

Hotel Operating Profit, Hotel Operating Margin, EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, Adjusted FFO per diluted Paired Share, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per diluted Paired Share (collectively, the “Non-GAAP Financial Measures”), which are detailed in the reconciliation tables that accompany this release, are used by the Company as supplemental performance measures. The Company believes these measures provide useful information to investors regarding our results of operations and allow investors to evaluate the ongoing operating performance of our hotels and facilitate comparisons between the Company and other lodging companies, hotel owners and capital-intensive companies, including those which include a REIT as part of their legal entity structure. The Non-GAAP Financial Measures are not recognized terms under U.S. GAAP.  These measures as presented may not be comparable to measures calculated by other companies. These measures should not be considered as alternative measures of, or superior to, operating profit, net income, net income per share or any other measure of the Company, Extended Stay America, Inc. or ESH Hospitality, Inc. calculated in accordance with U.S. GAAP.  The Company’s presentation of the Non-GAAP Financial Measures does not replace the presentation of the Company’s consolidated financial results and other disclosures prepared in accordance with U.S. GAAP.

Forward Looking Statements

This release contains forward-looking statements within the meaning of the federal securities laws. Statements related to, among other things, future financial performance, including our 2017 outlook, the expected timing, completion and effects of any proposed asset disposals, expected performance, free cash flow, debt reduction, distribution growth, franchised new builds, owned new builds and other growth opportunities, as such, involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results or performance to differ from those projected in the forward-looking statements, possibly materially. For a description of factors that may cause the Company’s actual results or performance to differ from projected results or performance implied by forward-looking statements, please review the information under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included in the Company’s combined annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 28, 2017 and other documents of the Company on file with or furnished to the SEC. Any forward-looking statements made in this release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, will have the expected consequences to, or effects on, the Company, its business or operations.  Except as required by law, the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. We caution you that actual results may differ materially from what is expressed, implied or forecasted by the Company’s forward-looking statements.

About Extended Stay America
Extended Stay America, Inc. (“ESA”) is the largest integrated hotel owner/operator in North America.  Its subsidiary, ESH Hospitality, Inc. (“ESH”), is the largest lodging REIT in North America by unit and room count, with over 620 hotels and approximately 68,000 rooms in the U.S. ESA manages all of ESH’s hotel properties, providing over 8,000 jobs at hotel properties and corporate headquarters. Extended Stay America® is the leading brand in the mid-priced extended stay segment, with approximately twice as many rooms as its nearest competitor. Visit www.esa.com for more information.

Contacts
Investors:                                                                           
Rob Ballew                                                                        
(980) 345-1546                                                                  
investorrelations@esa.com                                        

Media:
Terry Atkins 
(980) 345-1648
tatkins@esa.com 

   
  EXTENDED STAY AMERICA, INC. 
  CONSOLIDATED STATEMENTS OF OPERATIONS
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
  (In thousands, except per share data)
  (Unaudited)
                       
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2017     2016     % Variance     2017       2016     % Variance
            REVENUES:          
  $ 345,089     $ 349,076     (1.1 )% Room revenues $ 963,505     $ 960,046     0.4 %
    5,777       5,445     6.1 % Other hotel revenues   16,715       14,822     12.8 %
                       
    350,866       354,521     (1.0 )% Total revenues   980,220       974,868     0.5 %
                       
            OPERATING EXPENSES:          
    152,155       149,860     1.5 % Hotel operating expenses   442,726       444,498     (0.4 )%
    23,823       24,612     (3.2 )% General and administrative expenses   75,560       73,552     2.7 %
    57,314       55,955     2.4 % Depreciation and amortization   172,789       164,274     5.2 %
      -          2,756     n/a Impairment of long-lived assets   20,357       2,756     638.6 %
                       
    233,292       233,183     0.0 % Total operating expenses   711,432       685,080     3.8 %
                       
      -            -        n/a LOSS ON SALE OF HOTEL PROPERTIES     (1,897 )       -        n/a
                       
    344       2     17100.0 % OTHER INCOME   2,400       20     11,900.0 %
                       
    117,918       121,340     (2.8 )% INCOME FROM OPERATIONS   269,291       289,808     (7.1 )%
                       
    (278 )     (305 )   (8.9 )% OTHER NON-OPERATING INCOME   (426 )     (1,069 )   (60.1 )%
                       
    31,651       48,713     (35.0 )% INTEREST EXPENSE, NET   96,958       131,462     (26.2 )%
                       
    86,545       72,932     18.7 % INCOME BEFORE INCOME TAX EXPENSE   172,759       159,415     8.4 %
                       
    20,295       15,867     27.9 % INCOME TAX EXPENSE   40,721       26,211     55.4 %
                       
    66,250       57,065     16.1 % NET INCOME   132,038       133,204     (0.9 )%
                       
    (12,374 )     (10,509 )   17.7 % NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (1)   (3,286 )     (8,873 )   (63.0 )%
                       
  $ 53,876     $ 46,556     15.7 % NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. COMMON SHAREHOLDERS $ 128,752     $ 124,331     3.6 %
                       
                       
  $ 0.28     $ 0.23       NET INCOME PER EXTENDED STAY AMERICA, INC. COMMON SHARE - DILUTED $ 0.66     $ 0.61      
                       
    193,331       200,696       WEIGHTED-AVERAGE EXTENDED STAY AMERICA, INC. COMMON SHARES OUTSTANDING - DILUTED   194,001       202,252      
                       
  (1) Noncontrolling interests in Extended Stay America, Inc. include approximately 43% and 45% of ESH REIT's common equity as of September 30, 2017 and 2016, respectively.
 
                       
                       
            CONSOLIDATED BALANCE SHEET DATA          
            AS OF SEPTEMBER 30, 2017 AND DECEMBER 31, 2016          
            (In thousands)          
            (Unaudited)          
              September 30,   December 31,    
                2017       2016      
            Cash and cash equivalents $ 116,660     $ 84,158      
            Restricted cash $ 21,370     $ 21,614      
            Total assets $ 4,111,154     $   4,180,304      
            Total debt, net of unamortized deferred financing costs and debt discounts (2) $ 2,543,258     $   2,606,476      
            Total equity $ 1,348,415     $ 1,377,239      
                       
            (2)  Unamortized deferred financing costs and debt discounts totaled approximately $50.9 million and $56.5 million as of September 30, 2017 and December 31, 2016, respectively.    
               
                       

 

     
  EXTENDED STAY AMERICA, INC.   
  OPERATING METRICS  
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016  
  (Unaudited)  
                         
  Three Months Ended   Nine Months Ended  
  September 30,   September 30,  
    2017       2016     Variance     2017       2016     Variance  
    625       629     (4 ) Number of hotels (as of September 30)   625       629     (4 )  
    68,780       69,383     (603 ) Number of rooms (as of September 30)   68,780       69,383     (603 )  
    79.0 %     79.4 %   (40) bps Occupancy   76.1 %     75.2 %   90 bps  
  $ 69.01     $ 68.84     0.2 % ADR $ 67.15     $ 67.09     0.1 %  
  $ 54.55     $ 54.65     (0.2 )% RevPAR $ 51.13     $ 50.47     1.3 %  
                         
            Hotel Inventory (as of September 30):            
    625       547   (1 ) 78   Renovated Extended Stay America   625       547   (1 ) 78    
      -          82       (82 )   Unrenovated Extended Stay America and other     -          82       (82 )  
      625         629       (4 ) Total number of hotels     625         629       (4 )  
                         
            Renovation Displacement Data (in thousands, except percentages):            
    6,326       6,383     (57 ) Total available room nights   18,845       19,015     (170 )  
      4         64       (60 )   Room nights displaced from renovation     101         243       (142 )  
    0.1 %     1.0 %   (90) bps   % of available room nights displaced   0.5 %     1.3 %   (80) bps  
                         
                         
  COMPARABLE HOTEL OPERATING METRICS (2)  
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016  
  (Unaudited)  
                         
  Three Months Ended   Nine Months Ended  
  September 30,   September 30,  
    2017       2016     Variance     2017       2016     Variance  
    625       625       Number of hotels (as of September 30)   625       625        
    68,780       68,780       Number of rooms (as of September 30)   68,780       68,780        
    79.0 %     79.4 %   (40) bps Comparable Hotel Occupancy   76.2 %     75.2 %   100 bps  
  $ 69.01     $ 68.71     0.4 % Comparable Hotel ADR $ 67.15     $ 66.98     0.3 %  
  $ 54.55     $ 54.53     0.0 % Comparable Hotel RevPAR $ 51.16     $ 50.40     1.5 %  
                         
            Comparable Hotel Inventory (as of September 30):            
      625         544       81     Renovated Extended Stay America     625         544       81    
            81       (81 )   Unrenovated Extended Stay America           81       (81 )  
      625         625        Comparable Hotel number of hotels     625         625        
                         
            Comparable Hotel Renovation Displacement Data (in thousands, except percentages):            
    6,326       6,332     (6 ) Comparable Hotel available room nights   18,778       18,857     (79 )  
    4       64     (60 ) Comparable Hotel room nights displaced from renovation   101       243     (142 )  
    0.1 %     1.0 %   (90) bps % of Comparable Hotel available room nights displaced   0.5 %     1.3 %   (80) bps  
                         
                         
                         
  (1) Includes three Extended Stay Canada-branded hotels.            
                         
  (2) Comparable Hotel operating metrics include the results of 625 Extended Stay America hotels owned and operated during the full three and nine month periods ended September 30, 2017 and 2016.  

 

     
  EXTENDED STAY AMERICA, INC.  
  NON-GAAP RECONCILIATION OF ROOM REVENUES, OTHER HOTEL REVENUES AND   
   HOTEL OPERATING EXPENSES TO HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN 
 
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016  
  (In thousands)  
  (Unaudited)  
                         
  Three Months Ended    Nine Months Ended  
  September 30,   September 30,  
    2017       2016      Variance      2017       2016      Variance   
  $ 345,089     $ 349,076     (1.1 )% Room revenues $ 963,505     $ 960,046     0.4 %  
      5,777         5,445     6.1 % Other hotel revenues     16,715         14,822     12.8 %  
    350,866       354,521     (1.0 )% Total hotel revenues   980,220       974,868     0.5 %  
    150,108       147,605     1.7 % Hotel operating expenses(1)   434,661       437,242     (0.6 )%  
  $ 200,758     $ 206,916     (3.0 )% Hotel Operating Profit $ 545,559     $ 537,626     1.5 %  
    57.2 %     58.4 %   (120) bps Hotel Operating Margin   55.7 %     55.1 %   60 bps  
                         
                         
  (1)  Excludes loss on disposal of assets of approximately $2.1 million, $2.2 million, $8.1 million and $7.2 million, respectively.  
                         

 

     
  EXTENDED STAY AMERICA, INC.   
  NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA   
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016  
  (In thousands)  
  (Unaudited)  
                     
  Three Months Ended     Nine Months Ended    
  September 30,     September 30,    
    2017       2016         2017       2016      
  $ 66,250     $ 57,065     Net income $ 132,038     $ 133,204      
    31,651       48,713     Interest expense, net   96,958       131,462      
    20,295       15,867     Income tax expense    40,721       26,211      
    57,314       55,955     Depreciation and amortization    172,789       164,274      
    175,510       177,600     EBITDA    442,506       455,151      
    2,720       3,016     Equity-based compensation   9,049       8,635      
    (278 ) (1  )   (305 ) (2  ) Other non-operating income    (426 ) (3  )   (1,069 ) (4  )  
          2,756     Impairment of long-lived assets   20,357       2,756      
              Loss on sale of hotel properties   1,897            
    2,314   (5  )   2,666   (6  ) Other expenses   9,333   (7  )    7,718   (8  )  
  $ 180,266     $ 185,733     Adjusted EBITDA  $ 482,716     $ 473,191      
    (2.9 )%       % growth   2.0 %        
                     
                     
  (1) Includes foreign currency transaction gain of approximately $0.4 million and loss related to interest rate swap of approximately $0.1 million.
 
  (2) Includes foreign currency transaction gain of approximately $0.3 million.  
  (3) Includes foreign currency transaction gain of approximately $0.8 million and loss related to interest rate swap of approximately $0.4 million.
 
  (4) Includes foreign currency transaction gain of approximately $1.1 million.  
  (5) Includes loss on disposal of assets of approximately $2.1 million, transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of the three Canadian hotel properties in May 2017 and additional costs incurred in connection with the second quarter 2017 secondary offerings of approximately $0.1 million.  
   
  (6) Includes loss on disposal of assets of approximately $2.2 million and costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million.   
  (7) Includes loss on disposal of assets of approximately $8.1 million, costs incurred in connection with the second quarter 2017 secondary offerings of approximately $1.1 million and transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of the three Canadian hotel properties in May 2017.  
  (8)  Includes loss on disposal of assets of approximately $7.2 million, costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million and transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of 53 hotel properties in December 2015.  
     

 

     
  EXTENDED STAY AMERICA, INC.   
  NON-GAAP RECONCILIATION OF NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC.   
    COMMON SHAREHOLDERS TO FUNDS FROM OPERATIONS, ADJUSTED FUNDS FROM OPERATIONS  
    AND ADJUSTED FUNDS FROM OPERATIONS PER DILUTED PAIRED SHARE   
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016  
  (In thousands, expect per share and per Paired Share data)  
  (Unaudited)  
                     
  Three Months Ended     Nine Months Ended    
  September 30,     September 30,    
    2017       2016         2017       2016      
                     
  $ 0.28     $ 0.23     Net income per Extended Stay America, Inc. common share - diluted $ 0.66     $ 0.61      
                     
  $ 53,876     $ 46,556     Net income attributable to Extended Stay America, Inc. common shareholders $ 128,752     $ 124,331      
    12,370       10,505     Noncontrolling interests attributable to Class B
common shares of ESH REIT
  3,274       8,861      
    56,145       54,894     Real estate depreciation and amortization   169,327       161,012      
    -       2,756     Impairment of long-lived assets   20,357       2,756      
    -       -     Loss on sale of hotel properties   1,897       -      
    (13,138 )     (14,355 )   Tax effect of adjustments to net income attributable to Extended Stay America, Inc. common shareholders   (44,835 )     (38,063 )    
    109,253       100,356     Funds from Operations   278,772       258,897      
    -       14,058     Debt modification and extinguishment costs   1,168       26,161      
    103       -     Loss on interest rate swap   356       -      
    (24 )     (3,500 )   Tax effect of adjustments to Funds from Operations   (354 )     (6,272 )    
  $ 109,332     $ 110,914     Adjusted Funds from Operations $ 279,942     $ 278,786      
                     
  $   0.57     $   0.55     Adjusted Funds from Operations
per Paired Share – diluted 
$   1.44     $   1.38      
                     
      193,331         200,696     Weighted average Paired Shares
 outstanding – diluted 
    194,001         202,252      
                     

 

     
  EXTENDED STAY AMERICA, INC.  
  NON-GAAP RECONCILIATION OF NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC.  
   COMMON SHAREHOLDERS TO PAIRED SHARE INCOME, ADJUSTED PAIRED SHARE INCOME 
 
   AND ADJUSTED PAIRED SHARE INCOME PER DILUTED PAIRED SHARE  
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016  
  (In thousands, expect per share and per Paired Share data)  
  (Unaudited)  
                     
  Three Months Ended     Nine Months Ended    
  September 30,     September 30,    
    2017       2016         2017       2016      
                     
  $ 0.28     $ 0.23     Net income per Extended Stay America, Inc. common share - diluted $ 0.66     $ 0.61      
                     
  $ 53,876     $ 46,556     Net income attributable to Extended Stay America, Inc. common shareholders $ 128,752     $ 124,331      
    12,370       10,505     Noncontrolling interests attributable to Class B
common shares of ESH REIT
  3,274       8,861      
    66,246       57,061     Paired Share Income   132,026       133,192      
          14,058     Debt modification and extinguishment costs   1,168       26,161      
    (278 ) (1  )   (305 ) (2  ) Other non-operating income   (426 ) (3  )   (1,069 ) (4  )  
          2,756     Impairment of long-lived assets   20,357       2,756      
              Loss on sale of hotel properties   1,897            
    2,314   (5  )   2,666   (6  ) Other expenses   9,333   (7  )   7,718   (8  )  
    (477 )     (4,775 )   Tax effect of adjustments to Paired Share Income   (7,570 )     (8,505 )    
  $ 67,805     $ 71,461     Adjusted Paired Share Income $ 156,785     $ 160,253      
                     
  $   0.35     $   0.36     Adjusted Paired Share Income per Paired Share – diluted  $   0.81     $   0.79      
                     
      193,331         200,696     Weighted average Paired Shares outstanding – diluted      194,001         202,252      
                     
                     
  (1) Includes foreign currency transaction gain of approximately $0.4 million and loss related to interest rate swap of approximately $0.1 million.
 
  (2) Includes foreign currency transaction gain of approximately $0.3 million.  
  (3) Includes foreign currency transaction gain of approximately $0.8 million and loss related to interest rate swap of approximately $0.4 million.
 
  (4) Includes foreign currency transaction gain of approximately $1.1 million.  
  (5) Includes loss on disposal of assets of approximately $2.1 million, transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of the three Canadian hotel properties in May 2017 and additional costs incurred in connection with the second quarter 2017 secondary offerings of approximately $0.1 million.  
  (6) Includes loss on disposal of assets of approximately $2.2 million and costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million.   
  (7) Includes loss on disposal of assets of approximately $8.1 million, costs incurred in connection with the second quarter 2017 secondary offerings of approximately $1.1 million and transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of the three Canadian hotel properties in May 2017.  
  (8) Includes loss on disposal of assets of approximately $7.2 million, costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million and transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of 53 hotel properties in December 2015.  
                     

 

     
EXTENDED STAY AMERICA, INC.     
TOTAL REVENUES AND NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA    
FOR THE YEARS ENDED DECEMBER 31, 2016 (ACTUAL) AND 2017 (OUTLOOK)    
(In thousands)    
(Unaudited)    
                 
  Year Ended     Year Ending December 31, 2017    
  December 31, 2016     (Outlook)    
  (Actual)     Low   High    
  $ 1,270,593     Total revenues $ 1,273,000     $ 1,279,000      
                 
  $ 163,352     Net income  $ 154,959     $ 160,848      
    164,537     Interest expense, net   130,000       130,000      
    34,351     Income tax expense   48,935       48,046      
    221,309     Depreciation and amortization    229,500       229,500      
    583,549     EBITDA    563,394       568,394      
    12,000     Equity-based compensation   12,000       12,000      
    (1,576 )   Other non-operating income   (148 )     (148 )    
    9,828     Impairment of long-lived assets    20,357       20,357      
        Loss on sale of hotel properties   1,897       1,897      
    11,857   (1  ) Other expenses   12,500   (2  )   12,500   (2  )  
  $ 615,658     Adjusted EBITDA  $ 610,000     $ 615,000      
      % growth   -0.9 %     -0.1 %    
                 
                 
     
(1 ) Includes loss on disposal of assets of approximately $10.7 million, costs incurred in connection with the fourth quarter 2016 secondary offerings of approximately $1.1 million and transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of 53 hotel properties in December 2015.  
(2 ) Includes loss on disposal of assets and other non-operating transaction costs.  

_______________________________
1 See “Disclosure Regarding Non-GAAP Financial Measures” for an explanation of  non-GAAP measures included herein (i.e., Hotel Operating Profit, Hotel Operating Margin, EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, Adjusted FFO per diluted Paired Share, Paired Share Income,  Adjusted Paired Share Income and Adjusted Paired Share Income per diluted Paired Share).

2 Comparable Hotels include the 625 Extended Stay America hotels owned and operated during the full three and nine month periods ended September 30, 2017 and 2016.

Source: Extended Stay America, Inc.