<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Form 8-K A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: September 27, 1996
Date of Earliest Event Reported: July 18, 1996
---------------
SERVICO, INC.
(Exact name of registrant as specified in its charter)
Florida 1-11342 65-0350241
--------------- ---------------- ---------------------------
(State or other (Commission File (I.R.S. Identification No.)
jurisdiction of Number)
incorporation )
1601 Belvedere Road,
West Palm Beach, FL 33406
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(561) 689-9970
----------------------------------------------------
(Registrant's telephone number, including area code)
1
<PAGE> 2
SERVICO, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Item 2. Acquisition or Disposition of Assets 6
Item 7. Financial Statements and Exhibits
a. Financial Statements of Businesses Acquired
Worcester Hospitality Associates, LP: 7
Report of Independent Certified Public Accountants 8
Balance Sheet as of April 30, 1996 9
Statement of Operations for the Period from
Inception (May 4, 1995) to April 30, 1996 10
Statement of Partners' Capital for the Period from
Inception (May 4, 1995) to April 30, 1996 11
Statement of Cash Flows for the Period from Inception
(May 4, 1995) to April 30, 1996 12
Notes to Financial Statements 13
Unaudited Condensed Balance Sheets as of June 30, 1996
and April 30, 1996 19
Unaudited Condensed Statements of Operations
for the Six Months Ended June 30, 1996 and for the
Period from Inception (May 4, 1995) to June 30, 1995 20
Unaudited Condensed Statements of Cash Flows for the
Six Months Ended June 30, 1996 and for the Period
from Inception (May 4, 1995) to June 30, 1995 21
Notes to Unaudited Condensed Financial Statements 22
</TABLE>
2
<PAGE> 3
SERVICO, INC.
INDEX (Continued)
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Fort Wayne Hospitality Associates, LP: 23
Report of Independent Certified Public Accountants 24
Balance Sheet as of August 31, 1995 25
Statement of Operations for the Period from
Inception (September 29, 1994) to August 31, 1995 26
Statement of Partners' Capital for the Period from Inception
(September 29, 1994) to August 31, 1995 27
Statement of Cash Flows for the Period from Inception
(September 29, 1994) to August 31, 1995 28
Notes to Financial Statements 30
Unaudited Condensed Balance Sheets as of June 30, 1996
and August 31, 1995 34
Unaudited Condensed Statements of Operations for the
Six Months Ended June 30, 1996 and 1995 35
Unaudited Condensed Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995 36
Notes to Unaudited Condensed Financial Statements 37
</TABLE>
3
<PAGE> 4
SERVICO, INC.
INDEX (Continued)
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Certain Seldin Affiliates: 38
Report of Independent Certified Public Accountants 39
Combined Balance Sheet as of December 31, 1995 40
Combined Statement of Income for the Year Ended
December 31, 1995 41
Combined Statement of Deficit for the Year Ended
December 31, 1995 42
Combined Statement of Cash Flows for the Year
Ended December 31, 1995 43
Notes to Combined Financial Statements 44
Unaudited Condensed Combined Balance Sheets as of
June 30, 1996 and December 31, 1995 49
Unaudited Condensed Combined Statements of Income
for the Six Months Ended June 30, 1996 and 1995 50
Unaudited Condensed Combined Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995 51
Notes to Unaudited Condensed Combined Financial Statements 52
</TABLE>
4
<PAGE> 5
SERVICO, INC.
INDEX (Continued)
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C> <C>
b. Pro Forma Financial Information
Introductory Note 53
Unaudited Pro Forma Condensed Consolidated
Balance Sheet as of June 30, 1996 54
Unaudited Pro Forma Condensed Consolidated
Statements of Income for the Year Ended
December 31, 1995 55
Unaudited Pro Forma Condensed Consolidated
Statements of Income for the
Six Months Ended June 30, 1996 56
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements 57
c. Exhibits 58
Signatures 59
</TABLE>
5
<PAGE> 6
Item 2. Acquisition or Disposition of Assets
As previously reported on Form 8-K dated August 2, 1996, Servico, Inc. and
Subsidiaries (the "Company"), through wholly-owned subsidiaries, acquired five
hotels on July 18, 1996, from affiliates of Seldin Properties, a Nebraska
general partnership. The hotels consist of: an 89 room Best Western Hotel,
Council Bluffs, Iowa; a 161 room Best Western Hotel, Des Moines, Iowa; a 213
room Best Western Hotel, Omaha, Nebraska; a 168 room Sheraton Inn, Omaha,
Nebraska; and a 152 room Holiday Inn, Wichita, Kansas. These hotels are
included in the financial statements of Certain Seldin Affiliates in Item 7 of
this Form 8-K A. The aggregate acquisition price for the properties was
$23,300,000 and was funded by a $16,840,000 loan from GMAC Commercial Mortgage
Corporation (secured by a first mortgage on each of the hotels) and cash of
$6,460,000.
In addition, on June 16, 1996, the Company acquired a 141 room Best Western
Hotel, Hilton Head Island, South Carolina from Ocean Walk Suites, L.P., a New
Jersey limited partnership. The acquisition price was $7,100,000 and was
funded by cash from the Company. On May 8, 1996, the Company acquired a 245
room Holiday Inn, Lansing, Michigan from Rado-Mat Holdings, U.S., Inc., a New
York corporation. The property was purchased for $7,700,000 and was funded by
a $5,687,000 loan from GMAC Commercial Mortgage Corporation (secured by a first
mortgage on the hotel) and cash of $2,013,000.
As of April 26, 1996, the Company increased its ownership interests in
partnerships which own a 208 room Holiday Inn, Fort Wayne, Indiana and a 243
room Crowne Plaza Hotel, Worcester, Massachusetts. These partnerships were
formed by the Company and affiliates of Energy Management Corporation, a
principal shareholder of the Company, in connection with the acquisition of the
hotels prior to December 31, 1995. The Company previously had a 25% interest
in the two partnerships. In connection with these transactions, the Energy
Management affiliates received an aggregate distribution of $2,950,000 and the
Company's interest in each of the partnerships increased to 51%.
On January 17, 1996, the Company acquired a 241 room Holiday Inn, Augusta,
Georgia; a 193 room Hilton Inn, Sioux City, Iowa; and a 219 room Holiday Inn,
Richfield, Ohio. The three hotels were acquired by Servico partnerships for
an aggregate purchase price of $16,950,000 from the Heartland Hotel Group. The
purchase price was funded by a $12,910,000 loan from GMAC Commercial Mortgage
Corporation (secured by a first mortgage on each of the hotels) and cash of
$4,040,000.
As a result of the July 1996 acquisition of the five hotels from affiliates of
Seldin Properties, the aggregate impact of the previously consummated
individually insignificant acquisitions since the date of the most recent
audited balance sheet of the Company (December 31, 1995) exceeded 20% of the
Company's total assets as of December 31, 1995. The audited financial
statements of certain of the properties included in Item 7 of this Form 8-K A
cover a substantial majority of the total acquisitions.
6
<PAGE> 7
<TABLE>
<S> <C>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
</TABLE>
Worcester Hospitality Associates, LP
Financial Statements
Period from Inception (May 4, 1995)
to April 30, 1996
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Report of Independent Certified Public Accountants................... 8
Audited Financial Statements
Balance Sheet........................................................ 9
Statement of Operations.............................................. 10
Statement of Partners' Capital....................................... 11
Statement of Cash Flows.............................................. 12
Notes to Financial Statements........................................ 13
</TABLE>
7
<PAGE> 8
Report of Independent Certified Public Accountants
Partners
Worcester Hospitality
Associates, LP
We have audited the accompanying balance sheet of Worcester Hospitality
Associates, LP (the Partnership) as of April 30, 1996 and the related
statements of operations, partners' capital and cash flows for the period from
inception (May 4, 1995) to April 30, 1996. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards required that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership as of April
30, 1996 and the results of its operations and its cash flows for the period
from inception (May 4, 1995) to April 30, 1996 in conformity with generally
accepted accounting principles.
Ernst & Young, LLP
West Palm Beach, Florida
July 25, 1996
8
<PAGE> 9
<TABLE>
<CAPTION>
Worcester Hospitality Associates, LP
Balance Sheet
April 30, 1996
ASSETS
<S> <C>
Current assets:
Cash........................................................ $ 45,162
Accounts receivable, net of allowance
for doubtful accounts of $16,760........................... 250,823
Inventories................................................. 43,934
Other current assets........................................ 413,193
-----------
Total current assets........................................... 753,112
Property and equipment, net.................................... 12,261,316
Deposits for replacement reserve............................... 1,488,007
Other assets, net.............................................. 315,573
-----------
$14,818,008
===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable............................................ $ 445,938
Accrued liabilities......................................... 501,457
Due to related party........................................ 130,857
Current portion of long-term obligations.................... 61,880
-----------
Total current liabilities...................................... 1,140,132
Long-term obligations, less current portion.................... 7,796,941
Commitments and contingencies
Partners' capital.............................................. 5,880,935
-----------
$14,818,008
===========
</TABLE>
See accompanying notes.
9
<PAGE> 10
Worcester Hospitality Associates, LP
Statement of Operations
Period from Inception (May 4, 1995)
to April 30, 1996
<TABLE>
<S> <C>
Revenues:
Rooms...................................................... $ 3,401,008
Food....................................................... 1,618,763
Beverage................................................... 346,529
Other...................................................... 426,641
-----------
5,792,941
Operating expenses:
Direct:
Rooms..................................................... 1,049,468
Food...................................................... 1,463,424
Beverage.................................................. 137,349
General and administrative................................. 624,828
Advertising and promotion.................................. 268,499
Repairs and maintenance.................................... 318,777
Utilities.................................................. 368,835
Depreciation and amortization.............................. 575,202
Management fees............................................ 174,326
Insurance and property taxes............................... 365,624
Other...................................................... 306,198
---------
5,652,530
---------
Income from operations....................................... 140,411
Interest expense, net........................................ (680,275)
-----------
Net loss..................................................... $ (539,864)
===========
</TABLE>
See accompanying notes.
10
<PAGE> 11
Worcester Hospitality Associates, LP
Statement of
Partners' Capital
Period from Inception (May 4, 1995)
to April 30, 1996
<TABLE>
TOTAL
GENERAL LIMITED PARTNERS'
PARTNER PARTNERS CAPITAL
----------------------------------------------
<S> <C> <C> <C>
Contributions............. $ 1,605,200 $ 4,815,599 $6,420,799
Net loss.................. (134,966) (404,898) (539,864)
----------------------------------------------
Balance at April 30, 1996. $ 1,470,234 $ 4,410,701 $5,880,935
==============================================
</TABLE>
See accompanying notes.
11
<PAGE> 12
Worcester Hospitality Associates, LP
Statement of Cash Flows
Period from Inception (May 4, 1995)
to April 30, 1996
<TABLE>
<CAPTION>
OPERATING ACTIVITIES:
<S> <C>
Net loss............................................................... $ (539,864)
Adjustments to reconcile net loss to net cash provided by
operating activities net of effects of acquisition:
Depreciation and amortization..................................... 575,202
Provision for losses on receivables............................... 5,580
Changes in operating assets and liabilities:
Accounts receivable............................................. (256,403)
Inventories..................................................... (2,025)
Other assets.................................................... (543,344)
Accounts payable................................................ 445,938
Accrued liabilities............................................. 501,457
-----------
Net cash provided by operating activities.............................. 186,541
-----------
INVESTING ACTIVITIES:
Purchase of property and equipment..................................... (1,811,905)
Capital expenditures................................................... (3,386,522)
Net deposits for capital expenditures.................................. (1,488,007)
-----------
Net cash used in investing activities.................................. (6,686,434)
-----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term obligations........................ 242,485
Principal payments of long-term obligations............................ (63,664)
Proceeds from issuance of obligations to related party................. 130,857
Payments of deferred loan costs........................................ (185,422)
Contributions.......................................................... 6,420,799
-----------
Net cash provided by financing activities.............................. 6,545,055
-----------
Increase in cash and cash balance at April 30, 1996.................... $ 45,162
===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest during the period from inception
(May 4, 1995) to April 30, 1996................................... $ 601,023
===========
</TABLE>
See accompanying notes.
12
<PAGE> 13
Worcester Hospitality Associates, LP
Notes to Financial Statements
April 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements represent the accounts of Worcester Hospitality
Associates, LP, a limited partnership, (the "Partnership"). The Partnership was
formed on May 4, 1995, to purchase and operate a hotel located in Worcester,
Massachusetts (the "Hotel"). The general partner, Servico Worcester, Inc., is
a wholly-owned subsidiary of Servico, Inc., an owner/operator of hotels
nationwide.
INVENTORIES
Inventories consist primarily of food and beverage, linens, china, tableware
and glassware and are valued at the lower of cost (computed on the first-in,
first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. Property
under capital leases is amortized using the straight-line method over the
shorter of the estimated useful lives of the assets or the lease term.
DEFERRED COSTS
Deferred financing costs are stated at cost, net of accumulated amortization,
which is computed using the straight-line method, over the term of the
financing agreement. The straight-line method approximates the interest
method.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and long-term obligations approximate their fair
values.
13
<PAGE> 14
Worcester Hospitality Associates, LP
Notes to Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Concentration of credit risk associated with cash is considered low due to the
credit quality of the issuers of the financial instruments held by the
Partnership and due to their short duration to maturity. Accounts receivable
are primarily from major credit card companies, airlines and other travel
related entities. The Partnership performs ongoing evaluations of its
significant customers and generally does not require collateral. The
Partnership maintains an allowance for doubtful accounts at a level which
management believes is sufficient to cover potential credit losses.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INCOME TAXES
The Partnership operates as a limited partnership and, accordingly, its taxable
income or loss is included in the income tax returns of the individual
partners. Accordingly, no provision for income taxes has been made in the
accompanying financial statements.
ALLOCATIONS OF PROFITS AND LOSSES
In accordance with the partnership agreement, profits of the Partnership are
allocated to the partners based on tiers which take into consideration prior
allocations of losses and the respective partnership interests. Losses of the
Partnership are allocated to the partners in accordance with the respective
partnership interests.
14
<PAGE> 15
Worcester Hospitality Associates, LP
Notes to Financial Statements (continued)
2. OTHER CURRENT ASSETS
At April 30, 1996, other current assets consisted of the following:
<TABLE>
<S> <C>
Property tax escrow $ 198,994
Replacement reserve 100,820
Prepaid real estate taxes 99,894
Other 13,485
---------
$ 413,193
=========
</TABLE>
3. Property and Equipment
At April 30, 1996, property and equipment consisted of the following:
USEFUL
LIVES
(YEARS)
-------
<TABLE>
<S> <C> <C>
Land - $ 946,358
Buildings and improvements 30 7,825,400
Furnishings and equipment 3-10 3,080,120
------------
11,851,878
Less accumulated depreciation and amortization (575,202)
------------
11,276,676
Construction in progress 984,640
------------
$ 12,261,316
============
</TABLE>
On May 4, 1995, the Partnership purchased the Hotel for $9,430,277. The
purchase was funded by the delivery of a $7,680,000 purchase money mortgage and
note (see Note 5) and the payment of cash of $1,750,277. A replacement reserve
of $3,500,000 was established in connection with the financing agreement. Of
this amount, approximately $2,214,000 has been drawn as of April 30, 1996, to
fund project costs. In addition, the mortgage holder requires the Partnership
to deposit funds monthly equal to 4% of revenues.
15
<PAGE> 16
Worcester Hospitality Associates, LP
Notes to Financial Statements (continued)
4. ACCRUED LIABILITIES
At April 30, 1996, accrued liabilities consisted of the following:
<TABLE>
<S> <C>
Salaries and related costs $ 177,597
Property taxes 96,500
Interest 59,338
Advance deposits 50,411
Utilities 46,186
Other 71,425
---------
$ 501,457
=========
</TABLE>
5. LONG-TERM OBLIGATIONS
At April 30, 1996, long-term obligations consisted of the following:
<TABLE>
<S> <C>
First mortgage note payable with a variable interest rate of LIBOR plus
3.5%, with monthly payments of interest only through
July 1997. $ 7,680,000
Obligations under capital leases payable in monthly installments
through December 2001, net of interest imputed from 12% to 17.045%. 178,821
-----------
7,858,821
Less current portion of long-term obligations (61,880)
-----------
$ 7,796,941
===========
</TABLE>
The first mortgage note payable is subject to a six month extension based upon
the Hotel achieving certain operating results. The Partnership intends to
extend or refinance this mortgage note.
Substantially all of the Partnership's property and equipment are pledged as
collateral for long-term obligations.
16
<PAGE> 17
Worcester Hospitality Associates, LP
Notes to Financial Statements (continued)
5. LONG-TERM OBLIGATIONS (CONTINUED)
Maturities of long-term obligations for each of the five years after April 30,
1996, are as follows:
<TABLE>
<S> <C>
1997 $ 61,880
1998 7,733,595
1999 30,691
2000 18,743
2001 13,912
-----------
$ 7,858,821
===========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Partnership has entered into a license agreement which requires annual
payments for license fees, reservation services and advertising fees. Payments
made in connection with this agreement totaled approximately $205,000 for the
period from inception (May 4, 1995) to April 30, 1996.
The license agreement is subject to cancellation in the event of a default,
including the failure to operate the Hotel in accordance with the quality
standards and specifications of the licensor. The license agreement, which
commenced in July 1995, has an original ten year term. The licensor may
require the Partnership to upgrade its facility at any time to comply with the
licensor's then current standards.
The Partnership also has annual maintenance agreements which resulted in
expenses of approximately $51,000 for the period from inception (May 4, 1995)
to April 30, 1996.
7. RELATED PARTY TRANSACTIONS
The Partnership pays fees to a related party for management and accounting
services in accordance with a management agreement. Management fees are based
on 3% of total revenues while accounting fees are based on the number of rooms
in the hotel. The aggregate fees for the period from inception (May 4, 1995)
to April 30, 1996, were approximately $206,000.
Additionally, the Hotel participates in a master insurance policy with other
affiliates of the general partner. This policy includes insurance coverages
such as workers' compensation, property, liability and automobile. The
insurance expense allocated to the Hotel for its proportionate share of the
total premiums for the period from inception (May 4, 1995) to April 30, 1996,
was approximately $168,000.
17
<PAGE> 18
Worcester Hospitality Associates, LP
Notes to Financial Statements (continued)
7. RELATED PARTY TRANSACTIONS (CONTINUED)
Certain expenses of the Hotel (primarily payroll related) are paid by an
affiliate of the general partner and are reimbursed by the Hotel. The net
result of these transactions, based on the timing of the transactions, is shown
by the Partnership as a due to or from related party. The balance in this
non-interest bearing account as of April 30, 1996, was $130,857.
18
<PAGE> 19
Worcester Hospitality Associates, LP
Condensed Balance Sheets
<TABLE>
<CAPTION>
June 30, April 30,
1996 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 292,491 $ 45,162
Accounts receivable, net........ 218,839 250,823
Other current assets............ 434,905 457,127
------------- ------------
Total current assets................. 946,235 753,112
Property and equipment, net.......... 12,500,852 12,261,316
Other assets, net.................... 1,048,882 1,803,580
------------- ------------
$ 14,495,969 $ 14,818,008
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable................ $ 293,258 $ 445,938
Accrued liabilities............. 296,339 501,457
Due to related party............ 33,703 130,857
Current portion of long-term
obliigations.................. 61,927 61,880
------------- ------------
Total current liabilities............ 685,227 1,140,132
Long-term obligations,
less current portion.......... 7,822,035 7,796,941
Partners' capital.................... 5,988,707 5,880,935
------------- ------------
$ 14,495,969 $ 14,818,008
============= ============
</TABLE>
See accompanying notes to unaudited condensed financial statements.
19
<PAGE> 20
Worcester Hospitality Associates, LP
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS INCEPTION
ENDED (MAY 4, 1995) TO
JUNE 30, JUNE 30,
1996 1995
---------- ----------------
<S> <C> <C>
Revenues:
Rooms..................................................... $1,970,518 $ 542,069
Food...................................................... 885,022 294,679
Beverage.................................................. 201,926 41,282
Other..................................................... 236,616 71,887
---------- -----------
3,294,082 949,917
Operating expenses:
Direct:
Rooms................................................... 546,960 161,927
Food.................................................... 775,009 237,986
Beverage................................................ 82,170 18,431
Other..................................................... 1,253,369 419,267
Depreciation and amortization............................. 369,910 82,168
---------- -----------
3,027,418 919,779
---------- -----------
Income from operations...................................... 266,664 30,138
Interest expense, net....................................... (420,991) (60,518)
---------- -----------
Net loss $ (154,327) $ (30,380)
========== ==+========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
20
<PAGE> 21
Worcester Hospitality Associates, LP
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION> PERIOD FROM
SIX MONTHS INCEPTION
ENDED (MAY 4, 1995) TO
JUNE 30, JUNE 30,
1996 1995
------------ ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.......................................................... $ (154,327) $ (30,380)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization................................. 369,910 82,168
(Recoveries on) provision for losses on receivables (13,421) 2,830
Changes in operating assets and liabilities:
Accounts receivable........................................ 101,521 (194,554)
Other assets............................................... 30,902 (806,971)
Accounts payable........................................... 80,280 145,797
Accrued liabilities........................................ (85,037) 521,868
----------- -----------
Net cash provided by (used in) operating activities............... 329,828 (279,242)
----------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment............................... - (1,811,905)
Capital expenditures............................................. (1,376,451) (80,471)
Net deposits for capital expenditures............................ 1,084,028 (3,500,000)
----------- -----------
Net cash used in investing activities............................ (292,423) (5,392,376)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term obligations.................. 54,339 99,149
Principal payments of long-term obligations...................... (45,591) (4,642)
Capital contributions by partners................................ - 6,420,799
----------- -----------
Net cash provided by financing activities........................ 8,748 6,515,306
----------- -----------
Net increase in cash and cash equivalents........................ 46,153 843,688
Cash and cash equivalents at beginning of period................. 246,338 -
----------- -----------
Cash and cash equivalents at end of period....................... $ 292,491 $ 843,688
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of amount capitalized.............. $ 363,302 $ 3,433
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
21
<PAGE> 22
Worcester Hospitality Associates, LP
Notes to Unaudited Condensed Financial Statements
for the Six Months Ended June 30, 1996 and for the Period from Inception
(May 4, 1995) to June 30, 1995
1. GENERAL
The accompanying unaudited condensed financial statements of Worcester
Hospitality Associates, LP ("the Partnership") are prepared on the same basis
as the audited financial statements of the Partnership for the period from
inception (May 4, 1995) to April 30, 1996, incorporated in Item 7 of this Form
8-K A.
In the opinion of the Partnership, the unaudited condensed financial statements
present fairly the financial position or the Partnership as of June 30, 1996,
and the results of its operations for the six months ended June 30, 1996, and
for the period from inception (May 4, 1995) to June 30, 1995.
2. SEASONALITY
The demand for accommodations is affected by normally recurring seasonal
patterns. The results of operations or cash flows for the six months ended
June 30, 1996, are not necessarily indicative of the results of operations or
cash flows which may be reported for the full fiscal year.
22
<PAGE> 23
Fort Wayne Hospitality Associates, LP
Financial Statements
Period from Inception (September 29, 1994)
to August 31, 1995
CONTENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants........................................... 24
Financial Statements
Balance Sheet................................................................................ 25
Statement of Operations...................................................................... 26
Statement of Partners' Capital............................................................... 27
Statement of Cash Flows...................................................................... 28
Notes to Financial Statements................................................................ 30
</TABLE>
23
<PAGE> 24
Report of Independent Certified Public Accountants
Partners
Fort Wayne Hospitality
Associates, LP
We have audited the accompanying balance sheet of Fort Wayne Hospitality
Associates, LP (the Partnership) as of August 31, 1995 and the related
statements of operations, partners' capital and cash flows for the period from
inception (September 29, 1994) to August 31, 1995. These financial statements
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards required that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership at August 31,
1995 and the results of its operations and its cash flows for the period from
inception (September 29, 1994) to August 31, 1995 in conformity with generally
accepted accounting principles.
Ernst & Young, LLP
West Palm Beach, Florida
October 24, 1995
24
<PAGE> 25
Fort Wayne Hospitality Associates, LP
Balance Sheet
August 31, 1995
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash................................................................ $ 292,738
Trade accounts receivable, net of allowance
for doubtful accounts of $5,623................................... 89,916
Inventories......................................................... 53,972
Other............................................................... 7,487
-----------
Total current assets.................................................. 444,113
Property and equipment, net........................................... 3,086,385
Other, net............................................................ 123,426
----------
$3,653,924
==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable, trade............................................. $ 373,247
Accrued liabilities................................................. 298,668
Current portion of long-term obligations............................ 77,549
----------
Total current liabilities............................................. 749,464
Due to Servico and its subsidiaries, net.............................. 27,291
Long-term obligations, less current portion........................... 599,215
Commitments and contingencies
Partners' capital..................................................... 2,277,954
----------
$3,653,924
==========
</TABLE>
See accompanying notes.
25
<PAGE> 26
Fort Wayne Hospitality Associates, LP
Statement of Operations
Period from Inception (September 29, 1994)
to August 31, 1995
<TABLE>
<S> <C>
Revenues:
Rooms............................................................ $ 1,727,054
Food............................................................. 544,458
Beverage......................................................... 134,607
Other............................................................ 113,687
-----------
2,519,806
Operating expenses:
Direct:
Rooms.......................................................... 604,750
Food........................................................... 588,683
Beverage....................................................... 74,120
General and administrative....................................... 353,673
Advertising and promotion........................................ 157,637
Repairs and maintenance.......................................... 162,875
Utilities........................................................ 195,193
Depreciation and amortization.................................... 117,000
Management fees.................................................. 75,584
Insurance and property taxes..................................... 179,486
Other............................................................ 111,407
-----------
2,620,408
-----------
Loss from operations............................................... (100,602)
Interest expense................................................... 9,995
-----------
Net loss........................................................... $ (110,597)
===========
</TABLE>
See accompanying notes.
26
<PAGE> 27
Fort Wayne Hospitality Associates, LP
Statement of
Partners' Capital
Period from Inception (September 29, 1994)
to August 31, 1995
<TABLE>
<CAPTION>
TOTAL
GENERAL LIMITED PARTNERS'
PARTNER PARTNERS CAPITAL
--------------------------------------------------------
<S> <C> <C> <C>
Contributions............................. $ 47,771 $ 2,340,780 $ 2,388,551
Net loss.................................. (2,212) (108,385) (110,597)
--------------------------------------------------------
Balance at August 31, 1995................ $ 45,559 $ 2,232,395 $ 2,277,954
========================================================
</TABLE>
See accompanying notes.
27
<PAGE> 28
Fort Wayne Hospitality Associates, LP
Statement of Cash Flows
Period from Inception (September 29, 1994)
to August 31, 1995
<TABLE>
<CAPTION>
OPERATING ACTIVITIES:
<S> <C>
Net loss.............................................................. $ (110,597)
Adjustments to reconcile net loss to net cash provided
by operating activities, net of effects of acquisition:
Depreciation and amortization..................................... 117,000
Provision for losses on receivables.............................. 6,331
Changes in operating assets and liabilities:
Trade accounts receivable....................................... (90,931)
Inventories..................................................... (47,537)
Other assets.................................................... (126,052)
Accounts payable, trade......................................... 373,247
Accrued liabilities............................................. 144,254
-----------
Net cash provided by operating activities............................. 265,715
-----------
INVESTING ACTIVITIES:
Acquisition of property and equipment................................. (1,984,111)
Capital expenditures.................................................. (1,064,292)
-----------
Net cash used in investing activities................................. (3,048,403)
-----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term obligations....................... 660,559
Principal payments of long-term obligations........................... (975)
Due to Servico and its subsidiaries, net.............................. 27,291
Contributions by partners............................................. 2,388,551
-----------
Net cash provided by financing activities............................. 3,075,426
-----------
Increase in cash and cash balance at August 31, 1995.................. $ 292,738
===========
</TABLE>
28
<PAGE> 29
Fort Wayne Hospitality Associates, LP
Statement of Cash Flows
Period from Inception (September 29, 1994)
to August 31, 1995 (continued)
<TABLE>
<CAPTION>
SUPPLEMENTAL CASH FLOW INFORMATION:
<S> <C>
Cash paid for interest during the period from inception
(September 29, 1994) to August 31, 1995........................ $ 9,995
========
Non-cash capital lease obligation:
Addition to property & equipment............................... $ 17,180
========
Addition to long-term obligations.............................. $ 17,180
========
</TABLE>
See Note 3 for description of non-cash transaction.
See accompanying notes.
29
<PAGE> 30
Fort Wayne Hospitality Associates, LP
Notes to Financial Statements
August 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements represent the accounts of Fort Wayne Hospitality
Associates, LP, a limited partnership, (the "Partnership"). The Partnership was
formed on September 29, 1994, to purchase and operate a hotel located in Fort
Wayne, Indiana (the "Hotel"). One of the limited partners, Servico Ft. Wayne
II, Inc., is a wholly-owned subsidiary of Servico, Inc., an owner/operator of
hotels nationwide ("Servico").
INVENTORIES
Inventories consist primarily of food and beverage, linens, china, tableware
and glassware and are valued at the lower of cost (computed on the first-in,
first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. Property
under capital leases is amortized using the straight-line method over the
shorter of the estimated useful lives of the assets or the lease term.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, trade accounts receivable and long-term
obligations approximate their fair values.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Partnership maintains an allowance for doubtful accounts at a level which
management believes is sufficient to cover potential credit losses.
30
<PAGE> 31
Fort Wayne Hospitality Associates, LP
Notes to Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Partnership operates as a limited partnership and, accordingly, its taxable
income or loss is included in the income tax returns of the individual
partners. Accordingly, no provision for income taxes has been made in the
accompanying financial statements.
ALLOCATIONS OF PROFITS AND LOSSES
In accordance with the partnership agreement, profits of the Partnership are
allocated to the partners based on tiers which take into consideration prior
allocations of losses and preferential returns. Subsequent to the
consideration of these allocations, profits are allocated in accordance with
the respective partnership interests. Losses of the Partnership are allocated
to the partners in accordance with the respective partnership interests.
2. CONCENTRATION OF CREDIT RISK
Trade accounts receivable are primarily from major credit card companies,
airlines and other travel related companies. The Partnership performs ongoing
evaluations of its significant customers and generally does not require
collateral.
3. PROPERTY AND EQUIPMENT
At August 31, 1995, property and equipment consisted of the following:
<TABLE>
<CAPTION>
USEFUL
LIVES
(YEARS)
-------
<S> <C> <C>
Land - $ 216,516
Buildings and improvements 30 1,610,661
Furnishings and equipment 3-10 507,736
------------
2,334,913
Less accumulated depreciation and amortization (117,000)
------------
2,217,913
Construction-in-progress 868,472
------------
$ 3,086,385
============
</TABLE>
31
<PAGE> 32
Fort Wayne Hospitality Associates, LP
Notes to Financial Statements (continued)
3. PROPERTY AND EQUIPMENT (CONTINUED)
On September 29, 1994, the Partnership purchased the Hotel for $1,984,111. In
connection with the acquisition, the Partnership assumed liabilities in excess
of other assets of approximately $138,000. The purchase price was primarily
allocated to the hotel property that was acquired.
4. LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
At August 31, 1995, long-term obligations consisted of the following:
<S> <C>
First mortgage note payable under available line of credit of $1,500,000
with a fixed interest rate of 9.82%, payable in installments of principal
and interest through November 1997. $ 660,559
Obligations under a capital lease payable in monthly installments
through March 1, 2000, net of interest imputed at 12.001% 16,205
-----------
676,764
Less current portion of long-term obligations (77,549)
-----------
$ 599,215
===========
</TABLE>
Substantially all of the Partnership's property and equipment are pledged as
collateral for long-term obligations.
Maturities of long-term obligations for each of the five years after August 31,
1995, are as follows:
<TABLE>
<S> <C>
1996 $ 77,549
1997 102,872
1998 488,796
1999 3,647
2000 3,900
----------
$ 676,764
==========
</TABLE>
32
<PAGE> 33
Fort Wayne Hospitality Associates, LP
Notes to Financial Statements (continued)
5. COMMITMENTS AND CONTINGENCIES
The Partnership has entered into a license agreement which requires annual
payments for license fees, reservation services and advertising fees. Payments
made in connection with this agreement totaled approximately $170,000 for the
period from inception (September 29, 1994) to August 31, 1995.
The license agreement is subject to cancellation in the event of a default,
including the failure to operate the Hotel in accordance with the quality
standards and specifications of the licensor. The license agreement, which
commenced in October 1994, has an original ten year term. The licensor may
require the Partnership to upgrade its facility at any time to comply with the
licensor's then current standards.
The Partnership also has annual sign and maintenance agreements which resulted
in expenses of approximately $23,000 for the period from inception (September
29, 1994) to August 31, 1995.
The Partnership is a party to legal proceedings arising in the ordinary course
of its business, the impact of which would not, either individually or in the
aggregate, in management's opinion, based upon knowledge of facts and the
advice of counsel, have a material adverse effect on the Partnership's
financial condition or results of operations.
6. RELATED PARTY TRANSACTIONS
The Partnership pays fees to a related party for management, accounting, and
administrative services in accordance with a management agreement. Management
fees are based on 3% of total revenues while accounting and administrative fees
are based on the number of rooms in the Hotel. The aggregate fees for the
period from inception (September 29, 1994) to August 31, 1995, were
approximately $101,000.
Additionally, the Partnership's hotel is charged by a subsidiary of Servico
for arranging various insurance coverages such as workers' compensation, group
health, property, liability and automobile to the Hotel. The insurance expense
charged for the period from inception (September 29, 1994) to August 31, 1995,
was approximately $148,000.
The Partnership is part of a cash management system which includes other
subsidiaries of Servico. Under the cash management system, certain expenses of
the Hotel are paid by a subsidiary of Servico and are reimbursed by the Hotel
on a weekly basis. The net result of these transactions is shown by the
Partnership as a due to Servico and its subsidiaries. The balance in this non-
interest bearing account as of August 31, 1995, was $27,291.
33
<PAGE> 34
Fort Wayne Hospitality Associates, LP
Condensed Balance Sheets
<TABLE>
<CAPTION>
JUNE 30, AUGUST 31,
1996 1995
-------- ----------
(UNAUDITED)
<S> <C>
ASSETS
Current assets:
Cash........................................... $ 55,740 $ 292,738
Accounts receivable, net....................... 85,347 89,916
Other current assets........................... 83,878 61,459
---------- ----------
Total current assets............................. 224,965 444,113
Property and equipment, net...................... 4,676,179 3,086,385
Other assets, net................................ 126,823 123,426
---------- ----------
$5,027,967 $3,653,924
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable............................... $ 81,324 $ 373,247
Accrued liabilities............................ 317,665 298,668
Current portion of long-term obligations....... 205,303 77,549
---------- ----------
Total current liabilities........................ 604,292 749,464
Due to Servico and its subsidiaries, net......... 64,200 27,291
Long-term obligations, less current portion...... 1,853,454 599,215
Commitments and contingencies
Partners' capital................................ 2,506,021 2,277,954
---------- ----------
$5,027,967 $3,653,924
========== ==========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
34
<PAGE> 35
Fort Wayne Hospitality Associates, LP
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Rooms..................................... $1,038,368 $ 970,757
Food...................................... 358,846 318,564
Beverage.................................. 60,175 69,629
Other..................................... 67,197 68,573
---------- ----------
1,524,586 1,427,523
Operating expenses:
Direct:
Rooms................................... 340,843 330,182
Food.................................... 335,343 329,369
Beverage................................ 30,565 40,004
Other..................................... 656,181 668,525
Depreciation.............................. 156,876 58,966
---------- ----------
1,519,808 1,427,046
---------- ----------
Income from operations...................... 4,778 477
Interest (expense) income, net.............. (102,907) 3,314
---------- ----------
Net (loss) income........................... $ (98,129) $ 3,791
========== ==========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
35
<PAGE> 36
Fort Wayne Hospitality Associates, LP
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income................................................. $ (98,129) $ 3,791
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation.................................................. 156,876 58,966
Provision for losses on receivables........................... 1,588 2,390
Changes in operating assets and liabilities:
Accounts receivable......................................... (16,200) 1,114
Other assets................................................ (4,273) (4,968)
Accounts payable............................................ (123,018) (22,869)
Accrued liabilities......................................... (19,397) 51,895
--------- ---------
Net cash (used in) provided by operating activities............... (102,553) 90,319
--------- ---------
INVESTING ACTIVITY:
Capital expenditures.............................................. (404,043) (252,249)
--------- ---------
Net cash used in investing activity............................... (404,043) (252,249)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term obligations................... 553,012 17,180
Principal payments on long-term obligations....................... (79,605) (1,670)
--------- ---------
Net cash provided by financing activities......................... 473,407 15,510
--------- ---------
Net decrease in cash.............................................. (33,189) (146,420)
Cash at beginning of period....................................... 88,929 398,931
--------- ---------
Cash at end of period............................................. $ 55,740 $ 252,511
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of amount capitalized............... $ 99,477 $ 1,084
========= =========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
36
<PAGE> 37
Fort Wayne Hospitality Associates, LP
Notes to Unaudited Condensed Financial Statements
for the Six Months Ended June 30, 1996 and June 30, 1995
1. GENERAL
The accompanying unaudited condensed financial statements of Fort Wayne
Hospitality Associates, LP (the "Partnership") were prepared from the books and
records of the Partnership.
The accompanying unaudited condensed financial statements are prepared on the
same basis as the audited financial statements of the Partnership for the
period from inception (September 29, 1994) to August 31, 1995, incorporated in
Item 7 of this Form 8-K A.
In the opinion of the Partnership, the unaudited condensed financial statements
present fairly the financial position of Fort Wayne Hospitality Associates, LP
as of June 30, 1996, and the results of its operations for the six months ended
June 30, 1996 and June 30, 1995.
2. COMMITMENTS AND CONTINGENCIES
The Partnership is a party to legal proceedings arising in the ordinary course
of its business, the impact of which would not, either individually or in the
aggregate, in management's opinion, based upon knowledge of facts and the
advice of counsel, have a material adverse effect on the Partnership's
financial condition or results of operations.
3. SEASONALITY
The demand for accommodations is affected by normally recurring seasonal
patterns. The results of operations or cash flows for the six months ended
June 30, 1996, are not necessarily indicative of the results of operations or
cash flows which may be reported for the full fiscal year.
37
<PAGE> 38
Certain Seldin Affiliates
Combined Financial Statements
For the Year Ended December 31, 1995
CONTENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.......... 39
Combined Financial Statements
Combined Balance Sheet...................................... 40
Combined Statement of Income................................ 41
Combined Statement of Deficit............................... 42
Combined Statement of Cash Flows............................ 43
Notes to Combined Financial Statements...................... 44
</TABLE>
38
<PAGE> 39
Report of Independent Certified Public Accountants
Board of Directors
Servico, Inc.
We have audited the accompanying combined balance sheet of Certain Seldin
Affiliates (the Combined Group) as of December 31, 1995 and the related
combined statements of income, deficit and cash flows for the year then ended.
These financial statements are the responsibility of the Combined Group's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards required that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Certain Seldin
Affiliates at December 31, 1995 and the combined results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
Ernst & Young, LLP
West Palm Beach, Florida
August 16, 1996
39
<PAGE> 40
Certain Seldin Affiliates
Combined Balance Sheet
December 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash.................................... $ 183,214
Accounts receivable, net of allowance
for doubtful accounts of $15,008...... 387,710
Inventories............................. 379,731
Other current assets.................... 90,954
-----------
Total current assets....................... 1,041,609
Property and equipment, net................ 7,650,153
Other assets, net.......................... 18,729
-----------
$ 8,710,491
===========
LIABILITIES AND COMBINED DEFICIT
Current liabilities:
Accounts payable......................... $ 50,890
Accrued liabilities...................... 788,899
Current portion of long-term obligations. 1,589,749
-----------
Total current liabilities................... 2,429,538
Long-term obligations, less current portion 6,863,666
Commitments and contingencies
Combined deficit:
Common Stock.............................. 177,100
Additional paid-in capital................ 3,970,673
Accumulated deficit....................... (2,781,893)
Partners' capital......................... 1,126,597
Due from related party.................... (3,075,190)
-----------
Total combined deficit...................... (582,713)
-----------
$ 8,710,491
===========
</TABLE>
See accompanying notes.
40
<PAGE> 41
Certain Seldin Affiliates
Combined Statement of Income
For the Year Ended December 31, 1995
<TABLE>
<S> <C>
Revenues:
Rooms.......................... $10,200,794
Food........................... 2,436,358
Beverage....................... 471,040
Other ....................... 396,017
-----------
13,504,209
Operating expenses:
Direct:
Rooms....................... 2,643,401
Food ....................... 2,190,784
Beverage.................... 264,443
General and administrative.... 971,458
Advertising and promotion..... 1,126,102
Repairs and maintenance....... 616,136
Utilities..................... 808,039
Depreciation.................. 1,010,618
Management fees............... 495,937
Insurance and property taxes.. 722,442
Other......................... 477,880
-----------
11,327,240
-----------
Income from operations.......... 2,176,969
Interest expense................ (790,016)
-----------
Net income...................... $ 1,386,953
===========
</TABLE>
See accompanying notes.
41
<PAGE> 42
Certain Seldin Affiliates
Combined Statement of Deficit
<TABLE>
<CAPTION>
Balance at Balance at
December 31, Net December 31,
1994 Income Contribution Advances 1996
------------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Common Stock:
Shares....... 17,100 - - - 17,100
Amount....... $ 177,100 $ - $ - $ - $ 177,100
Additional
paid-in capital...... 3,970,673 - - - 3,970,673
Accumulated
deficit (3,137,836) 355,943 - - (2,781,893)
Partners'
capital (deficit).... (647,490) 1,031,010 743,077 - 1,126,597
Due from
related party........ (538,435) - - (2,536,755) (3,075,190)
------------- ---------- --------- ----------- ------------
Total................ $ (175,988) $1,386,953 $ 743,077 $(2,536,755) $ (582,713)
============= ========== ========= =========== ============
</TABLE>
See accompanying notes.
42
<PAGE> 43
Certain Seldin Affiliates
Statement of Cash Flows
For the Year Ended December 31, 1995
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net income....................................... $1,386,953
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation................................. 1,010,618
Provision for losses on receivables.......... 14,875
Changes in operating assets and liabilities:
Accounts receivable........................ (52,863)
Inventories................................ 5,185
Other assets............................... (24,670)
Accounts payable........................... 20,261
Accrued liabilities........................ 76,491
----------
Net cash provided by operating activities 2,436,850
----------
INVESTING ACTIVITY:
Capital expenditures............................. (396,522)
----------
Net cash used in investing activity.............. (396,522)
----------
FINANCING ACTIVITIES:
Net advance payments to related party.......... (2,536,755)
Principal payments of long-term obligations...... (348,243)
Contributions.................................... 743,077
----------
Net cash used in financing activities.......... (2,141,921)
----------
Net decrease in cash............................. (101,593)
Cash at beginning of year........................ 284,807
----------
Cash at end of year.............................. $ 183,214
==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest................... $ 790,016
==========
</TABLE>
See accompanying notes.
43
<PAGE> 44
Certain Seldin Affiliates
Notes to Combined Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF REPORTING
The financial statements represent the accounts of the entities described in
Note 3 (collectively the "Combined Group"). Each of the entities is a
Subchapter S Corporation and operates a hotel. In addition, the property and
equipment and associated mortgage debt of each hotel are carried on the books of
an affiliated partnership. These accounts have been carved out of the
affiliated partnership and included with the accounts of the Combined Group for
the purpose of presenting the combined financial statements. Each of the five
entities and the partnership are operated under common control by Seldin
Company. These financial statements have been presented on a combined basis for
the purpose of inclusion in a report on Form 8-K A to be filed by Servico, Inc.
("Servico").
INVENTORIES
Inventories consist primarily of food and beverage, linens, china, tableware and
glassware and are valued at the lower of cost (computed on the first-in,
first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. Property
under capital leases is amortized using the straight-line method over the
shorter of the estimated useful lives of the assets or the lease term.
Management periodically evaluates the Combined Group's property and equipment to
determine if there has been any other-than-temporary impairment in the carrying
value of the assets.
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of ("Statement 121"), which requires impairment losses to
be reported on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. Statement 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. The Combined Group adopted Statement 121 in 1995 and, based on current
circumstances, the adoption did not have any effect on the Combined Group's
financial position or results of operations.
44
<PAGE> 45
Certain Seldin Affiliates
Notes to Combined Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair value of the Combined Group's costs approximates its reported carrying
amount. The fair values of the Combined Group's long-term obligations are
estimated using discounted cash flow analyses, based on the Combined Group's
current incremental borrowing rate for similar types of borrowing arrangements.
In the opinion of management, the carrying value of these instruments
approximates their market value at December 31, 1995.
INCOME TAXES
The entities in the Combined Group operate as Subchapter S Corporations and,
accordingly, the taxable income or loss of the Combined Group is included in the
income tax returns of the individual shareholders. Accordingly, no provision
for income taxes has been made in the accompanying combined financial
statements.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the combined financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. SALE OF PROPERTIES
Servico, through wholly-owned subsidiaries, acquired the five hotels on July 18,
1996. The acquisition price was $23,300,000.
45
<PAGE> 46
Certain Seldin Affiliates
Notes to Combined Financial Statements (continued)
3. ENTITIES IN COMBINED GROUP
The combined financial statements consist of the following entities, each
operating a hotel. The location and franchise affiliation of each hotel is as
follows:
<TABLE>
<CAPTION>
Franchise
Entity Location Affiliation
- ------ -------- -----------
<S> <C> <C>
Northview Properties Omaha, NE Best Western
Southwest Hotel Company Omaha, NE Sheraton
Council Bluffs Downtown Center, Inc. Council Bluffs, IA Best Western
Capitol Properties Des Moines, IA Best Western
Wichita Airport Hotel, Inc. Wichita, KS Holiday Inn
</TABLE>
In addition, certain accounts relating to the property and equipment and related
mortgage debt of an affiliated partnership, Seldin Properties, have also been
included in the Combined Group.
4. CONCENTRATION OF CREDIT RISK
Concentration of credit risk associated with cash is considered low due to the
credit quality of the financial institutions holding the deposits. Accounts
receivable are primarily from major credit card companies, airlines and other
travel related entities. The Combined Group performs ongoing evaluations of its
significant customers and generally does not require collateral. The Combined
Group maintains an allowance for doubtful accounts at a level which management
believes is sufficient to cover potential credit losses.
5. PROPERTY AND EQUIPMENT
At December 31, 1995, property and equipment consisted of the following:
<TABLE>
<CAPTION>
USEFUL
LIVES
(YEARS)
<S> <C> <C>
Land - $ 713,744
Buildings and improvements 10-30 15,279,349
Furnishings and equipment 3-10 1,911,591
------------
17,904,684
Less accumulated depreciation (10,254,531)
------------
$ 7,650,153
============
</TABLE>
46
<PAGE> 47
Certain Seldin Affiliates
Notes to Combined Financial Statements (continued)
6. ACCRUED LIABILITIES
At December 31, 1995, accrued liabilities consisted of the following:
<TABLE>
<S> <C>
Salaries and related costs $ 99,489
Real estate taxes 231,445
Sales and use taxes 47,218
Advance deposits 12,362
Other 398,385
----------
$ 788,899
==========
</TABLE>
7. LONG-TERM OBLIGATIONS
The Combined Group has first mortgage notes payable with aggregate outstanding
balances of $8,453,415 that bear interest at variable rates ranging from Prime
(8.5% at December 31, 1995) plus 0% to 2% and fixed rates ranging from 8.5% to
10%. All notes require monthly payments of principal and interest and
maturities of the obligations range from July 1, 1996 to December 1, 2012. On
July 18, 1996, all obligations were repaid with proceeds from the sale of the
hotel properties (see Note 2).
Substantially all of the Combined Group's property and equipment are pledged as
collateral for long-term obligations. Certain of the first notes are subject
to a prepayment penalty if repaid prior to their maturity.
Maturities of long-term obligations for each of the five years after December
31, 1995 and thereafter, are as follows:
<TABLE>
<S> <C>
1996 $1,589,749
1997 365,949
1998 353,482
1999 294,456
2000 1,037,523
Thereafter 4,812,256
----------
$8,453,415
==========
</TABLE>
47
<PAGE> 48
Certain Seldin Affiliates
Notes to Combined Financial Statements (continued)
8. COMMITMENTS AND CONTINGENCIES
The Combined Group has entered into license agreements with various hotel
chains which require annual payments for license fees, reservation services and
advertising fees.
The Combined Group is a party to legal proceedings arising in the ordinary
course of its business, the impact of which would not, either individually or
in the aggregate, in management's opinion, based upon knowledge of facts, have
a material adverse effect on the Combined Groups' financial condition or
results of operations.
9. RELATED PARTY TRANSACTIONS
The Combined Group pays fees to an uncombined affiliate of Seldin Properties
for management services. Management fees are based on 3.6% of total revenues.
Certain of the Combined Group's hotels are part of a cash management system
which includes other affiliates of Seldin Properties. Under the cash
management system, the hotels remit total receipts from operations to an
affiliate of Seldin Properties and all expenses of the hotels are paid by this
affiliate. The net result of these transactions is shown by the Combined Group
as a due from related party.
Additionally, an affiliate which owns the hotel property and equipment, charges
rent to each of the hotels in the Combined Group. The rent and all other
significant related party transactions have been eliminated in the combined
financial statements.
48
<PAGE> 49
Certain Seldin Affiliates
Condensed Combined Balance Sheets
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................... $ 262,167 $ 183,214
Accounts receivable, net.................. 523,634 387,710
Inventories............................... 378,258 379,731
Other current assets...................... 101,726 90,954
---------- -----------
Total current assets......................... 1,265,785 1,041,609
Property and equipment, net.................. 7,228,752 7,650,153
Other assets, net............................ 32,667 18,729
---------- -----------
$8,527,204 8,710,491
========== ===========
LIABILITIES AND COMBINED DEFICIT
Current liabilities:
Accounts payable........................... $ 32,435 $ 50,890
Accrued liabilities........................ 1,008,052 788,899
Current portion of long-term obligations... 1,607,223 1,589,749
---------- -----------
Total current liabilities.................... 2,647,710 2,429,538
Long-term obligations, less current portion.. 6,703,646 6,863,666
COMMITMENTS AND CONTINGENCIES
Combined deficit:
Common Stock............................... 177,100 177,100
Additional paid-in capital................. 3,970,673 3,970,673
Accumulated deficit........................ (2,161,334) (2,781,893)
Partners' capital.......................... 1,667,234 1,126,597
Due from related party..................... (4,477,825) (3,075,190)
---------- -----------
Total combined deficit....................... (824,152) (582,713)
---------- -----------
$8,527,204 $ 8,710,491
========== ===========
</TABLE>
See accompanying notes to unaudited condensed combined financial statements.
49
<PAGE> 50
Certain Seldin Affiliates
Condensed Combined Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995
---- ----
<S> <C> <C>
Revenues:
Rooms.................................. $5,049,260 $4,908,487
Food................................... 1,170,490 1,154,906
Beverage............................... 194,799 198,084
Other.................................. 214,677 234,884
---------- ----------
6,629,226 6,496,361
Operating expenses:
Direct:
Rooms................................ 1,455,892 1,434,376
Food................................. 1,058,376 1,086,697
Beverage............................. 132,470 124,848
Other.................................. 2,361,736 2,374,639
Depreciation........................... 618,363 496,469
---------- ----------
5,626,837 5,517,029
---------- ----------
Income from operations......................... 1,002,389 979,332
Interest expense............................... (381,830) (553,028)
---------- ----------
Net income..................................... $ 620,559 $ 426,304
========== ==========
</TABLE>
See accompanying notes to unaudited condensed combined financial statements.
50
<PAGE> 51
Certain Seldin Affiliates
Condensed Combined Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995
------ ------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................ $ 620,559 $ 426,773
Adjustments to reconcile net income to net cash.......
provided by operating activities:
Depreciation.......................................... 618,363 496,469
(Recoveries on) provision for losses on receivables... (601) 4,448
Changes in operating assets and liabilities:
Accounts receivable................................... (135,323) (290,416)
Inventories........................................... 1,473 (1,483)
Other assets.......................................... (24,710) (129,165)
Accounts payable...................................... (18,455) (10,900)
Accrued liabilities................................... 219,153 260,497
----------- ----------
Net cash provided by operating activities............. 1,280,459 756,223
----------- ----------
INVESTING ACTIVITY:
Capital expenditures.................................. (196,962) (344,322)
----------- ----------
Net cash used in investing activity................... (196,962) (344,322)
----------- ----------
FINANCING ACTIVITIES:
Principal payments on long-term obligations........... (142,546) (41,955)
Net advance payments to related parties............... (1,402,635) (543,725)
Contributions......................................... 540,637 135,462
----------- ----------
Net cash used in financing activities................. (1,004,544) (450,218)
----------- ----------
Net increase (decrease) in cash....................... 78,953 (38,317)
Cash at beginning of period........................... 183,214 284,807
----------- ----------
Cash at end of period................................. $ 262,167 $ 246,490
=========== ==========
Supplemental cash flow information:
Cash paid for interest........................ $ 381,830 $ 553,028
=========== ==========
</TABLE>
See accompanying notes to unaudited condensed combined financial statements.
51
<PAGE> 52
Certain Seldin Affiliates
Notes to Unaudited Condensed Combined Financial Statements
for the Six Months Ended June 30, 1996 and June 30, 1995
1. GENERAL
The accompanying unaudited condensed combined financial statements include the
combined balance sheets and operations of the Combined Group as derived from
unaudited financial information provided by the former owners.
In the opinion of Servico, Inc. (the "Company"), the accompanying unaudited
condensed combined financial statements are prepared on the same basis as the
audited combined financial statements of the Combined Group for the year ended
December 31, 1995, incorporated in Item 7 of this Form 8-K A.
In the opinion of the Company, the unaudited condensed combined financial
statements present fairly the financial position of the Combined Group as of
June 30, 1996, and the results of its operations for the six months ended June
30, 1996 and June 30, 1995.
2.
The Combined Group is a party to legal proceedings arising in the
ordinary course of its business, the impact of which would not, either
individually or in the aggregate, in management's opinion, based upon knowledge
of facts, have a material adverse effect on the Combined Groups' financial
condition or results of operations.
3. SEASONALITY
The demand for accommodations is affected by normally recurring seasonal
patterns. The results of operations or cash flows for the six months ended June
30, 1996, are not necessarily indicative of the results of operations or cash
flows which may be reported for the full fiscal year.
52
<PAGE> 53
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
INTRODUCTORY NOTE
The following unaudited pro forma condensed consolidated financial statements
include historical information of Servico, Inc. and Subsidiaries ("Servico").
The balance sheet as of June 30, 1996, and the statement of income for the six
months ended June 30, 1996, were derived from Servico's Form 10-Q for the period
ended June 30, 1996. The statement of income for the year ended December 31,
1995, was derived from Servico's Form 10-K for the period ended December 31,
1995.
For the purpose of preparing the pro forma financial statements, the financial
statements of Worcester Hospitality Associates, LP; Fort Wayne Hospitality
Associates, LP; and Certain Seldin Affiliates have been combined and are
collectively referred to as the "Combined Audited Acquired Businesses". The
unaudited financial statements of the Best Western Hotel, Hilton Head Island,
South Carolina; the Holiday Inn, Lansing, Michigan; the Holiday Inn, Augusta,
Georgia; the Hilton Inn, Sioux City, Iowa; and the Holiday Inn, Richfield, Ohio
have been combined and are collectively referred to as the "Combined Unaudited
Acquired Businesses". All of the above entities are collectively referred to as
the "Acquired Businesses". The historical statements of income of the Acquired
Businesses have been adjusted by Servico to reflect periods comparable to those
of Servico and do not necessarily conform to the audited periods of the entities
included in the combinations.
Certain of the entities included in the Acquired Businesses were acquired by
Servico prior to June 30, 1996, and are included in the historical consolidated
balance sheet of Servico at June 30, 1996, and the historical consolidated
statement of income for the six months ended June 30, 1996. Accordingly, the
pro forma financial information for such entities includes only that information
which is not reflected in the historical financial information.
The following tables set forth certain unaudited pro forma condensed
consolidated financial information for Servico, after giving effect to the
acquisitions of the Acquired Businesses, as discussed above, as if such
acquisitions had been consummated, with respect to the statements of income, as
of January 1, 1995, and with respect to the balance sheet, as of June 30, 1996.
The following tables are not necessarily indicative of the consolidated results
of income and financial position of Servico, as they may be in the future or as
they might have been had the acquisitions been consummated on the respective
dates assumed.
The unaudited pro forma condensed consolidated financial information reflects
various estimates and, accordingly, is subject to change based on actual results
of the Acquired Businesses. Historical financial information prior to
acquisition relating to the Acquired Businesses contained in the accompanying
unaudited pro forma financial information has been obtained from the respective
sellers of the properties.
This information should be read in conjunction with the historical consolidated
financial statements and accompanying notes of Servico contained in its Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, and its
Quarterly Report on Form 10-Q for the period ended June 30, 1996.
53
<PAGE> 54
Servico, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 1996
(In Thousands)
<TABLE>
<CAPTION>
Historical
Historical Certain
Servico, Inc. and Seldin Pro Forma Pro Forma
Subsidiaries Affiliates (a) Adjustments (b) Consolidated
----------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 32,939 $ 262 $(10,489) $ 22,712
Accounts receivable, net 9,272 524 (465) 9,331
Other current assets 10,628 480 (325) 10,783
---------- -------- -------- ----------
Total current assets 52,839 1,266 (11,279) 42,826
Property and equipment, net 329,007 7,229 16,257 352,493
Investment in unconsolidated entities 916 - - 916
Other assets, net 34,386 32 3,353 37,771
---------- -------- -------- ----------
$ 417,148 $ 8,527 $ 8,331 $ 434,006
========== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,156 $ 32 $ (32) $ 6,156
Accrued liabilities 24,494 1,008 (990) 24,512
Current portion of
long-term obligations 7,059 1,607 (1,445) 7,221
---------- -------- -------- ----------
Total current liabilities 37,709 2,647 (2,467) 37,889
Long-term obligations,
less current portion 282,076 6,704 9,974 298,754
Deferred income taxes 8,562 - - 8,562
Commitments and contingencies
Minority interests 18,735 - - 18,735
Stockholders' equity:
Common Stock 93 - - 93
Additional paid-in capital 53,381 - - 53,381
Retained earnings 16,592 (824) 824 16,592
---------- -------- -------- ----------
Total stockholders' equity 70,066 (824) 824 70,066
---------- -------- -------- ----------
$ 417,148 $ 8,527 $ 8,331 $ 434,006
========== ======== ======== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated
financial information.
54
<PAGE> 55
Servico, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statements of Income
For the Year Ended December 31, 1995
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
-----------------------------------------
Historical Combined Combined Pro Forma
Servico, Inc. Audited Unaudited Adjustments
and Acquired Acquired Acquired Pro Forma
Subsidiaries Businesses(c) Businesses(c) Businesses Consolidated
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Rooms $ 113,902 $ 15,801 $ 11,945 $ - $ 141,648
Food and beverage 53,499 5,924 3,737 - 63,160
Other 11,079 901 678 - 12,658
-------- -------- -------- ------- --------
178,480 22,626 16,360 - 217,466
Operating expenses:
Direct:
Rooms 32,140 4,446 3,126 - 39,712
Food and beverage 41,474 4,951 2,720 - 49,145
General and administrative 8,977 - - - 8,977
Other 59,727 9,327 6,446 (620)(d) 74,880
Depreciation and amortization 12,370 1,512 - 2,107 (e) 15,989
-------- -------- -------- ------- --------
154,688 20,236 12,292 1,487 188,703
-------- -------- -------- ------- --------
Income from operations 23,792 2,390 4,068 (1,487) 28,763
Other income (expenses):
Other income 1,197 123 (122) - 1,198
Interest expense (17,903) (1,362) (295) (2,697)(f) (22,257)
Minority interests (572) - - 441 (g) (131)
-------- -------- -------- ------- --------
Income before income taxes 6,514 1,151 3,651 (3,743) 7,573
Provision for income taxes 2,605 - - 424 (h) 3,029
-------- -------- -------- ------- --------
Net income $ 3,909 $ 1,151 $ 3,651 $(4,167) $ 4,544
======== ======== ======== ======= ========
Per share information:
Net income $.42 $.49
==== ====
Weighted average common shares
outstanding 9,317 9,317
===== =====
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated
financial information.
55
<PAGE> 56
Servico, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statements of Income
Six Months Ended June 30, 1996
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------------------------
Historical Combined Combined Pro Forma
Servico, Inc. Audited Unaudited Adjustments
and Acquired Acquired Acquired Pro Forma
Subsidiaries Businesses(i) Businesses(i) Businesses Consolidated
--------- ------ ------ ------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Rooms $ 76,298 $ 6,842 $ 1,519 $ - $ 84,659
Food and beverage 32,737 2,276 292 - 35,305
Other 6,864 412 45 (107)(j) 7,214
--------- ------ ------ ------- --------
115,899 9,530 1,856 (107) 127,178
Operating expenses:
Direct:
Rooms 20,402 2,016 496 - 22,914
Food and beverage 24,992 1,954 187 - 27,133
General and administrative 4,876 - - - 4,876
Other 37,638 3,620 777 (422)(k) 41,613
Depreciation and amortization 8,480 959 - 193 (l) 9,632
--------- ------ ------ ------- --------
96,388 8,549 1,460 (229) 106,168
--------- ------ ------ ------- --------
Income from operations 19,511 981 396 122 21,010
Other income (expenses):
Other income, net 4,378 24 (50) - 4,352
Interest expense (13,155) (742) (136) (620)(m) (14,653)
Minority interests (1,591) - - 198 (n) (1,393)
--------- ------ ------ ------- --------
Income before income taxes and
extraordinary item 9,143 263 210 (300) 9,316
Provision for income taxes 3,657 - - 69 (o) 3,726
--------- ------ ------ ------- --------
Income before extraordinary item $ 5,486 $ 263 $ 210 $ (369) $ 5,590
========= ====== ====== ======= ========
Per share information:
Income before extraordinary item $.57 $.58
==== ====
Weighted average common shares
outstanding 9,668 9,668
===== =====
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated
financial information.
56
<PAGE> 57
Servico, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
The following pro forma adjustments have been made to the balance sheet (entries
a and b) as if the transaction took place on June 30, 1996, and to the
statements of income for the year ended December 31, 1995, (entries c-h) and the
six months ended June 30, 1996, (entries i-o) as if the transactions had taken
place on January 1, 1995.
a) To record the balance sheet of Certain Seldin Affiliates as
derived from its unaudited balance sheet as of June 30, 1996,
contained in Item 7 of this Form 8-K/A.
b) To eliminate the assets, liabilities and deficit of Certain Seldin
Affiliates not acquired by Servico and to record the purchase
of the five hotels.
c) To record the statements of income of the Acquired Businesses as
derived from the books and records of the respective sellers
for the year ended December 31, 1995.
d) To eliminate the management fee expense of $568,000 paid by the
Acquired Businesses to unrelated third parties and to reverse
Servico's equity in the loss of unconsolidated entities of $52,000
relating to two of the Acquired Businesses.
e) To adjust depreciation and amortization expense of the Acquired
Businesses for the year ended December 31, 1995, to reflect the
new cost basis.
f) To adjust interest expense of $2,415,000 and amortize loan costs
of $282,000 for the Acquired Businesses for the year ended
December 31, 1995, which reflects the debt associated with the
acquisitions.
g) To record minority interest for the Acquired Businesses which
were acquired in partnership with third parties.
h) To adjust the provision for income taxes relating to the above
pro forma entries for the year ended December 31, 1995.
i) To record the statements of income of the Acquired Businesses
prior to acquisition, as derived from the books and records of
the respective sellers for the six months ended June 30, 1996.
57
<PAGE> 58
Servico, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(Continued)
j) To eliminate management and accounting fee income for the six
months ended June 30, 1996, relating to two of the Acquired
Businesses which were accounted for on an equity method prior to
the acquisitions.
k) To eliminate the management fee expense of $332,000 paid by the
Acquired Businesses and to reverse Servico's equity in the loss
of unconsolidated entities of $90,000 relating to two of the
Acquired Businesses.
l) To adjust depreciation and amortization expense of the Acquired
Businesses for the year ended June 30, 1996, to reflect the new
cost basis.
m) To adjust interest expense of $571,000 and amortize loan costs
of $49,000 for the Acquired Businesses for the six months ended
June 30, 1996, which reflects the debt associated with the
acquisitions.
n) To record minority interest for the Acquired Businesses which
were acquired in partnership with third parties.
o) To adjust the provision for income taxes relating to the above
pro forma entries for the six months ended June 30, 1996.
Item 7. Financial Statements and Exhibits
(c) Exhibits
(1) 10.1 Purchase Agreement dated as of May 1, 1996, and 10.2
Amendment to Purchase Agreement dated June 18, 1996, were filed as
part of the Company's Form 8-K filed with the Securities and
Exchange Commission on August 2, 1996.
58
<PAGE> 59
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SERVICO, INC.
Registrant
DATE: September 27, 1996 /s/David Buddemeyer
--------------------------------
David Buddemeyer
President and
Chief Executive Officer
DATE: September 27, 1996 /s/Warren M. Knight
--------------------------------
Warren M. Knight
Vice President-Finance and
Chief Financial Officer
59
