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Schedule I
 12 Months Ended
Dec. 31, 2016
Condensed Financial Information of Parent Company Only Disclosure [Abstract]  
Schedule I
SCHEDULE I
EXTENDED STAY AMERICA, INC. (PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 2016 AND 2015
(In thousands, except share data)
 
December 31, 2016
 
December 31, 2015
ASSETS
 
 
 
CASH AND CASH EQUIVALENTS
$
2,750

 
$
85,641

OTHER ASSETS
42,712

 
23,042

LOAN RECEIVABLE FROM ESH HOSPITALITY, INC. (Note 4)
50,000

 
—

INVESTMENT IN SUBSIDIARIES
726,170

 
835,155

TOTAL ASSETS
$
821,632

 
$
943,838

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
LIABILITIES:
 
 
 
Accounts payable and accrued liabilities
$
5,598

 
$
42,963

Mandatorily redeemable preferred stock
21,202

 
21,202

Total liabilities
26,800

 
64,165

 
 
 
 
COMMITMENTS AND CONTINGENCIES (Note 8)
 
 
 
EQUITY:
 
 
 
Common stock - $0.01 par value, 3,500,000,000 shares authorized, 195,406,944 and 204,593,912 shares issued and outstanding
1,957

 
2,049

Additional paid in capital
774,811

 
784,194

Retained earnings
23,679

 
102,184

Accumulated other comprehensive loss
(5,615
)
 
(8,754
)
Total equity
794,832

 
879,673

TOTAL LIABILITIES AND EQUITY
$
821,632

 
$
943,838


See accompanying notes to condensed financial information.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(In thousands)
 
Year Ended
December 31, 2016
 
Year Ended
December 31, 2015
 
Year Ended
December 31, 2014
REVENUE
$
—

 
$
—

 
$
—

EXPENSES:
 
 
 
 
 
General and administrative expenses
18,001

 
16,680

 
12,482

Interest expense, net
1,124

 
2,994

 
5,795

Total expenses
19,125

 
19,674

 
18,277

LOSS BEFORE INCOME TAX EXPENSE AND EQUITY IN INCOME OF SUBSIDIARIES, NET OF TAX
(19,125
)
 
(19,674
)
 
(18,277
)
INCOME TAX EXPENSE
34,264

 
68,018

 
46,178

EQUITY IN INCOME OF SUBSIDIARIES, NET OF TAX
123,321

 
200,732

 
104,051

NET INCOME
$
69,932

 
$
113,040

 
$
39,596

EQUITY IN COMPREHENSIVE INCOME (LOSS) OF SUBSIDIARIES, NET OF TAX
3,139

 
(2,944
)
 
(1,742
)
COMPREHENSIVE INCOME
$
73,071

 
$
110,096

 
$
37,854


See accompanying notes to condensed financial information.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(In thousands)
 
Year Ended
December 31, 2016
 
Year Ended
December 31, 2015
 
Year Ended
December 31, 2014
OPERATING ACTIVITIES - Net cash used in operating activities
$
(81,622
)
 
$
(96,349
)
 
$
(33,740
)
INVESTING ACTIVITIES:
 
 
 
 
 
     Change in other assets (restricted cash)
(81
)
 
456

 
(21,644
)
     Distributions from subsidiaries, net
209,495

 
170,428

 
78,277

     Loan to ESH Hospitality, Inc.
(75,000
)
 
—

 
—

Repayment of loan to ESH Hospitality, Inc.
25,000

 
—

 
—

Net cash provided by investing activities
$
159,414

 
$
170,884

 
$
56,633

FINANCING ACTIVITIES:
 
 
 
 
 
     Payments of deferred financing costs
(310
)
 
—

 
—

     Distributions paid to common shareholders
(74,153
)
 
(12,278
)
 
—

     Common shares repurchased
(86,220
)
 
—

 
—

Net cash used in financing activities
$
(160,683
)
 
$
(12,278
)
 
$
—

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(82,891
)
 
62,257

 
22,893

Cash and cash equivalents - Beginning of period
85,641

 
23,384

 
491

Cash and cash equivalents - End of period
$
2,750

 
$
85,641

 
$
23,384

See accompanying notes to condensed financial information.
1.
EXTENDED STAY AMERICA, INC. AND BASIS OF PRESENTATION
Extended Stay America, Inc. was incorporated in the state of Delaware on July 8, 2013. Extended Stay America, Inc. conducts substantially all of its operations through subsidiaries. The accompanying condensed parent company only financial information includes the accounts of Extended Stay America, Inc. and, on an equity basis, its subsidiaries. The condensed parent company only financial information does not present the financial statements of Extended Stay America, Inc. and its subsidiaries on a consolidated basis. Under the equity method of accounting, investment in subsidiaries is stated at cost plus contributions and equity in undistributed income (loss) of subsidiaries, less distributions received since the date of acquisition. This condensed parent company only financial information should be read in conjunction with Extended Stay America, Inc.’s consolidated financial statements and notes thereto included elsewhere in this combined annual report on Form 10-K.
There are restrictions over Extended Stay America, Inc.’s ability to obtain funds from its subsidiaries through dividends, loans or advances as contained in certain of ESH Hospitality, Inc.’s debt agreements. The accompanying condensed parent company only financial information has been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X, since Extended Stay America, Inc.’s share of the restricted net assets of ESH Hospitality, Inc. exceeds 25 percent of Extended Stay America, Inc.'s consolidated net assets, excluding noncontrolling interests. As of December 31, 2016, ESH Hospitality, Inc.’s restricted net assets totaled approximately $441.5 million. See Note 7 to Extended Stay America, Inc.’s consolidated financial statements included elsewhere in this combined annual report on Form 10-K.
2.
DISTRIBUTIONS PAID TO COMMON SHAREHOLDERS
Below is as summary of distributions paid to common shareholders during the years ended December 31, 2016 and 2015 (in thousands, except per share data):
Declaration
Date
 
Record
Date
 
Date Paid
 
Distribution per
Common
Share
 
Total
Distributions
4/30/2015
 
5/14/2015
 
5/28/2015
 
$
0.02

 
$
4,091

7/30/2015
 
8/13/2015
 
8/27/2015
 
$
0.02

 
$
4,091

10/27/2015
 
11/10/2015
 
11/24/2015
 
$
0.02

 
$
4,096

Total Distributions - Year ended December 31, 2015
 
$
12,278

 
 
 
 
 
 
 
 
 
12/10/2015
 
1/4/2016
 
1/18/2016
 
$
0.06

 
$
12,276

2/23/2016
 
3/8/2016
 
3/22/2016
 
$
0.02

 
$
4,122

4/26/2016
 
5/10/2016
 
5/24/2016
 
$
0.04

 
$
8,065

7/28/2016
 
8/11/2016
 
8/25/2016
 
$
0.09

 
$
18,047

10/25/2016
 
11/8/2016
 
11/22/2016
 
$
0.16

 
$
31,643

Total Distributions - Year ended December 31, 2016
 
$
74,153

3.
DISTRIBUTIONS RECEIVED FROM ESH HOSPITALITY, INC.
During the years ended December 31, 2016, 2015 and 2014, Extended Stay America, Inc., received cash distributions of approximately $155.3 million, $150.3 million and $132.7 million, respectively, from ESH Hospitality, Inc., in respect of the Class A common stock ESH Hospitality, Inc.
4.
LOAN RECEIVABLE FROM ESH HOSPITALITY, INC.
On August 30, 2016, Extended Stay America, Inc. and ESH Hospitality, Inc. entered into an unsecured intercompany credit facility (the "Unsecured Intercompany Facility"), under which ESH Hospitality, Inc. borrowed $75.0 million from Extended Stay America, Inc. upon the facility's closing. In December 2016, ESH Hospitality, Inc. repaid Extended Stay America, Inc. $25.0 million of the outstanding balance. Subject to certain conditions, the principal amount of the Unsecured Intercompany Facility may be increased up to an amount that shall not exceed the greater of (i) $300.0 million and (ii) an unlimited amount so long as the incremental loan-to-value ratio, determined on a pro-forma basis as of the last day of the most recently ended test period, as if any incremental loans available under such incremental commitments had been outstanding on the last day of such period, and, in each case, without netting the cash proceeds of any such incremental loans, does not exceed 5.0%. Loans under the facility bear interest at 5.00% per annum. There is no scheduled amortization under the facility and the facility matures on August 30, 2023. ESH Hospitality, Inc. has the option to voluntarily prepay outstanding loans at any time upon one business day’s prior written notice.
The Unsecured Intercompany Facility contains a number of restrictive covenants that, among other things and subject to certain exceptions, limit ESH Hospitality, Inc.’s ability and the ability of its subsidiaries to incur additional debt, modify existing debt, create certain liens, pay dividends or distributions, make certain investments and other restricted payments, enter into affiliate transactions, amend or modify certain material operating leases and management agreements, sell assets or merge, consolidate or transfer all or substantially all of their assets. The facility contains certain customary representations and warranties, affirmative covenants and events of default, including, but not limited to, cross-defaults to certain other indebtedness and certain material operating leases and management agreements. If an event of default occurs, Extended Stay America, Inc. is entitled to take various actions, including the acceleration of amounts due under the facility and all other actions that a creditor is permitted to take following a default. As of December 31, 2016, the counterparties were in compliance with all covenants under the Unsecured Intercompany Facility.
DEBT
For discussion of debt of Extended Stay America, Inc. and its subsidiaries', see Note 7 to Extended Stay America, Inc.’s consolidated financial statements and notes thereto included elsewhere in this combined annual report on Form 10-K.
6.
EQUITY AND EQUITY-BASED COMPENSATION
For discussion of equity of Extended Stay America, Inc. and its subsidiaries', see Notes 1 and 12 to Extended Stay America, Inc.’s consolidated financial statements and notes thereto included elsewhere in this combined annual report on Form 10-K.
For discussion of equity-based awards and compensation expense of Extended Stay America, Inc. and its subsidiaries, see Note 14 to Extended Stay America, Inc.’s consolidated financial statements and notes thereto included elsewhere in this combined annual report on Form 10-K.
7.
RELATED PARTY TRANSACTIONS
In addition to the loan receivable discussed in Note 4, accounts payable and accrued liabilities includes approximately $4.5 million and $7.8 million as of December 31, 2016 and 2015, respectively, due to ESH Hospitality, Inc. whose balances consist of ordinary working capital and equity awards payable settled in the normal course of business.
8.
COMMITMENTS AND CONTINGENCIES
For discussion of commitments and contingencies of Extended Stay America, Inc. and its subsidiaries, see Note 13 to Extended Stay America, Inc.’s consolidated financial statements and notes thereto included elsewhere in this combined annual report on Form 10-K.
9.
SUBSEQUENT EVENTS
Subsequent to December 31, 2016, and in connection with the combined share repurchase program described in Note 1 to Extended Stay America, Inc.’s consolidated financial statements and notes thereto included elsewhere in this combined annual report on Form 10-K, Extended Stay America, Inc. repurchased and retired approximately 0.6 million of its outstanding common shares for approximately $6.0 million.
On February 28, 2017, the Board of Directors of Extended Stay America, Inc. declared a cash distribution of $0.04 per share for the fourth quarter of 2016 on its common stock. This distribution is payable on March 28, 2017 to shareholders of record as of March 14, 2017.