<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Period Ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE
For the transition period from to
----------------- ------------------
Commission File No. 1-11342
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SERVICO, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Florida 65-0350241
------- ----------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification No.)
1601 Belvedere Road, West Palm Beach, FL 33406
- - ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
</TABLE>
(Registrant's telephone number, including area code) 407 - 689-9970
--------------
Former name, former address and former fiscal year, if changed since last
report) Not applicable
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-----
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
<TABLE>
<S> <C>
Class Outstanding as of May 6, 1996
- - ----- -----------------------------
Common 9,289,305
</TABLE>
(This report contains 31 sequentially numbered pages.)
1
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SERVICO, INC. AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
March 31, 1996 and December 31, 1995 3
Condensed Consolidated Statements of
Income for the Three Months Ended
March 31, 1996 and 1995 4
Condensed Consolidated Statements of
Stockholders' Equity for the Three Months
Ended March 31, 1996 and for the Year
Ended December 31, 1995 5
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
March 31, 1996 and 1995 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
SERVICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,527 $ 11,401
Accounts receivable, net of allowances 9,074 6,652
Other current assets 8,353 7,380
-------- --------
Total current assets 33,954 25,433
Property and equipment, net 294,571 277,873
Investment in unconsolidated entities 3,046 3,591
Other assets, net 21,372 17,305
-------- --------
$352,943 $324,202
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,833 $ 5,723
Accrued liabilities 24,693 19,977
Current portion of long-term obligations 5,468 5,992
-------- --------
Total current liabilities 35,994 31,692
Long-term obligations, less current portion 226,812 210,242
Deferred income taxes 8,054 7,682
Commitments and contingencies
Minority interests 15,306 11,766
Stockholders' equity:
Common Stock, $.01 par value--25,000,000
shares authorized; 9,289,305 and 8,846,269
shares issued and outstanding at March 31, 1996
and December 31, 1995, respectively 93 88
Additional paid-in capital 53,140 51,424
Retained earnings 13,544 11,308
-------- --------
Total stockholders' equity 66,777 62,820
-------- --------
$352,943 $324,202
======== ========
</TABLE>
See accompanying notes
3
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SERVICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Revenues:
Rooms $ 35,097 $ 25,162
Food and beverage 14,391 11,652
Other 3,111 2,667
--------- ---------
52,599 39,481
--------- ---------
Operating expenses:
Direct:
Rooms 9,408 7,022
Food and beverage 11,252 9,283
General and administrative 2,560 2,321
Depreciation and amortization 4,026 2,772
Other 18,611 13,939
--------- ---------
45,857 35,337
--------- ---------
Income from operations 6,742 4,144
Other income (expenses):
Other income, net 3,820 214
Interest expense (6,001) (3,835)
Minority interests (835) (277)
--------- ---------
Income before income taxes 3,726 246
Provision for income taxes 1,490 98
--------- ---------
Net income $ 2,236 $ 148
========= =========
Income per common and common
equivalent share:
Primary $ .24 $ .02
========= =========
Fully diluted $ .24 $ .02
========= =========
</TABLE>
See accompanying notes.
4
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SERVICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Total
------------ Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
----------------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 8,110,172 $ 81 $ 39,260 $ 7,399 $ 46,740
Issuance of common stock 830,000 8 8,157 - 8,165
Shares retired (159,532) (2) 2 - -
401(k) Plan contribution 38,829 1 331 - 332
Exercise of stock options 26,800 - 107 - 107
Reduction of valuation allowance - - 3,567 - 3,567
Net income - - - 3,909 3,909
--------- ---- --------- -------- --------
Balance at December 31, 1995 8,846,269 88 51,424 11,308 62,820
401(k) Plan contributions 25,536 1 50 - 51
Exercise of stock options 417,500 4 1,666 - 1,670
Net income - - - 2,236 2,236
--------- ---- --------- -------- --------
Balance at March 31, 1996 9,289,305 $ 93 $ 53,140 $ 13,544 $ 66,777
========= ==== ========= ======== ========
</TABLE>
See accompanying notes.
5
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SERVICO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
CASH PROVIDED BY OPERATIONS $ 10,169 $ 1,466
INVESTING ACTIVITIES:
Acquisitions of property and equipment (17,241) -
Capital expenditures, net (3,483) (4,780)
Net deposits for capital expenditures (2,762) (2,044)
Notes receivable issued (1,200) -
Notes receivable issued to related parties (470) -
Decrease (increase) in investment in unconsolidated entities 448 (481)
Other 107 -
---------- ----------
Net cash used by investing activities (24,601) (7,305)
---------- ----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term obligations 30,299 64,969
Contributions from minority interests 2,705 -
Net proceeds from issuance of common stock 1,669 8,007
Principal payments on long-term obligations (14,253) (53,749)
Payments of deferred loan costs (862) (2,783)
---------- ----------
Net cash provided by financing activities 19,558 16,444
---------- ----------
Net increase in cash and cash equivalents 5,126 10,605
Cash and equivalents at beginning of period 11,401 12,972
---------- ----------
Cash and equivalents at end of period $ 16,527 $ 23,577
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amount capitalized $ 5,417 $ 3,515
========== ==========
Income taxes, net of refunds $ 363 $ 307
========== ==========
</TABLE>
See accompanying notes.
6
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SERVICO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The financial statements consolidate the accounts of Servico, Inc.
("Servico"), its wholly-owned subsidiaries (owning 35 hotels) and partnerships
(owning 11 hotels) in which Servico exercises control over the partnerships'
assets and operations (collectively, the "Company"). Unconsolidated entities
(owning 3 hotels) in which the Company exercises significant influence over
operating and financial policies are accounted for on the equity method. The
accounts of 9 hotels which the Company manages for third party owners are not
included in the consolidation, however, management fee income received from
these hotels is included in other revenues. All significant intercompany
accounts and transactions have been eliminated.
The accounting policies followed for quarterly financial reporting are the same
as those disclosed in Note 1 of the Notes to Consolidated Financial Statements
included in the Company's annual report on Form 10-K for the year ended
December 31, 1995.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting
primarily of normal recurring adjustments, necessary to present fairly the
financial position of the Company as of March 31, 1996, and the results of
operations for the three months then ended. While management believes that the
disclosures presented are adequate to make the information not misleading,
these financial statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company's annual report
on Form 10-K for the year ended December 31, 1995.
The accompanying condensed consolidated balance sheet and statement of
stockholders' equity of the Company at March 31, 1996 and the condensed
consolidated statements of income and cash flows for the three months ended
March 31, 1996 and 1995 have been reviewed in accordance with standards
established by the American Institute of Certified Public Accountants, by Ernst
& Young LLP, Independent Certified Public Accountants, whose review report,
with respect thereto, is filed as Exhibit 15.1 in Item 6. (a) in this Form 10-
Q.
Certain amounts in the prior period condensed consolidated financial statements
have been reclassified to conform to the current period presentation.
2. PROPERTY AND EQUIPMENT
In January 1996, the Company entered into three partnerships which purchased
three hotels for $16,950,000 by the delivery of mortgage notes totaling
$12,910,000 and cash for the balance, of which $1,980,000 was contributed by
the minority partners. These hotels, located in Georgia, Iowa and Ohio,
contain 653 guest rooms, are operated under franchise agreements and are
managed by the Company.
7
<PAGE> 8
3. LONG-TERM OBLIGATIONS
During the three months ended March 31, 1996, the Company refinanced certain
long-term obligations on three of its hotels (two of which, totaling
$16,750,000, were financed on an interim basis). The Company issued
$25,072,000 in new variable rate mortgage notes, satisfied $20,995,000 of
existing obligations, paid $525,000 in fees and expenses, escrowed $336,000
for future use by the Company and generated $3,216,000 of net proceeds.
In April 1996, the Company concluded a series of transactions to refinance the
debt on 20 of its hotels including the two which were refinanced on an
interim basis during the three months ended March 31, 1996 (See Note 7 ).
4. COMMITMENTS AND CONTINGENCIES
Certain of the Company's hotels are operated under license agreements that
require the Company to make capital improvements in accordance with a specified
time schedule. Further, in connection with the refinancing and acquisition of
hotels, the Company has agreed to make certain capital improvements and, as of
March 31, 1996, has approximately $8,125,000 escrowed for such improvements.
The Company estimates its remaining obligations for all of the above
commitments to be approximately $18,850,000 of which approximately $13,250,000
will be spent in 1996, with the balance to be spent during the 1997-1999 time
period.
The Company 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 facts currently known by it and
discussion with counsel, have a material adverse effect on the Company's
financial condition or results of operations.
5. RELATED PARTIES
In 1994, the Company sold one million shares of its common stock to Energy
Management Corporation ("EMC") and in 1995 the Company sold an additional
800,000 shares to an affiliate of EMC. The Company has entered into seven
partnerships with affiliates of EMC, each of which has purchased a hotel. The
aggregate of the purchase prices and related mortgage debt of these hotels is
$54,205,000 and $38,010,000, respectively. The Company holds a 51% ownership
interest in each of these partnerships.
In addition, the Company has a 25% ownership interest in two partnerships with
affiliates of EMC in which the Company has invested approximately $2,100,000.
In April 1996, the Company entered into an agreement to increase its
ownership interests from 25% to 51% in both partnerships for approximately
$2,900,000.
8
<PAGE> 9
In March 1996, 117,500 shares of the Company's common stock was issued to
three officers of the Company upon their exercise of outstanding options under
the Company's stock option plan. The officers exercised the options by the
delivery of promissory notes payable to the Company in an amount equal to 100%
of the exercise price. These notes totaling $470,000 are secured by shares
of the Company's common stock and are included in other long-term assets at
March 31, 1996.
6. NON-RECURRING ITEMS
In January 1996, the Company entered into an agreement with its former Chief
Executive Officer in connection with his resignation from the Company and its
Board of Directors. This agreement provides for payments totaling
approximately $830,000 over a twenty-four month period, the cost of which is
included in other operating expenses for the three months ended March 31,
1996. Additionally, in accordance with the terms of the agreement, the former
Chief Executive Officer exercised stock options to acquire 300,000 shares of
the Company's common stock by delivery of a $1,200,000 promissory note payable
to the Company. This note is secured by shares of the Company's common stock
and is included in other current assets at March 31, 1996.
In March 1996, the Company received $3,900,000 in connection with the
settlement of a lawsuit brought on behalf of Servico, against a bank group and
law firm, based on alleged breaches prior to 1990 of their duties to the
Company. This amount, less $300,000 of associated expenses, is included in
other income for the three months ended March 31, 1996.
7. SUBSEQUENT EVENTS
In April 1996, the Company completed a series of transactions with a lender for
the refinancing of certain long-term obligations on 20 of its hotels. The
Company issued a total of $123,185,000 in new variable rate mortgage notes
maturing in 3 years (the majority of which contain an option to extend the
maturity for an additional year). The interest rate is 350 basis points over
LIBOR with a minimum of 8% per annum. The new mortgage notes include
$38,850,000 of refinancing with an existing lender (covering eight hotels),
$16,750,000 of which is associated with two hotels refinanced in the quarter
ended March 31, 1996. The Company satisfied approximately $88,600,000 of
existing obligations, including the $38,850,000 mentioned above, paid
approximately $4,600,000 in fees and expenses, escrowed approximately
$1,000,000 for future use by the Company and generated approximately
$29,000,000 of net proceeds.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Occupancy levels and average daily room rates are important hospitality
performance measures. Occupancy levels and average daily rates at the
Company's hotels are impacted by a variety of factors including national,
regional and local economic conditions, the degree of competition with other
hotels in the area and, in the case of occupancy levels, changes in travel
patterns. The demand for accommodations is also affected by normally recurring
seasonal patterns and most Company properties experience lower occupancy in
the fall and winter (September through February) which may result in lower
revenues, less net income and less cash flow during these months.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 (THE "1996 QUARTER")
AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1995 (THE "1995 QUARTER")
During the 1996 Quarter, the Company owned or managed 58 hotels compared with
45 hotels during the 1995 Quarter. Occupancy levels for Company owned hotels
were 65.2% for the 1996 Quarter, an increase of 2.4% over the 1995 Quarter of
63.7%. Average daily rate for Company owned hotels was $69.63 for the 1996
Quarter, an increase of 2.4% over the 1995 Quarter of $67.97.
Revenues were $52.6 million for the 1996 Quarter, a 33.2% increase over $39.5
million for the 1995 Quarter. Revenues for hotels operated fully during both
periods increased by $2 million or 5.1% over the previous year. The balance of
the increase in revenues is attributable to hotels acquired after the 1995
Quarter (the "New Hotels"). The Company plans to continue to acquire hotel
properties during 1996. The increase for hotels operated fully during both
periods was primarily the result of renovations and changes in franchise
affiliations made at many of the Company's hotels since 1992, along with both
aggressive marketing strategies and a general improvement in the hospitality
industry. The Company is continuing its renovation program and is further
reviewing its franchise affiliations, primarily for the New Hotels.
Direct operating expenses were $20.7 million (41.7% of direct revenue) for the
1996 Quarter and $16.3 million (44.3% of direct revenue) for the 1995 Quarter.
Of this increase $3.7 million is attributable to the New Hotels. Other
operating expenses were $21.2 million for the 1996 Quarter (40.3% of total
revenue) and $16.3 million for the 1995 Quarter (41.3% of total revenue).
Included in this $4.9 million increase is $3.8 million associated with the New
Hotels, $.8 million related to a severance agreement with the Company's former
Chief Executive Officer as more fully discussed in Note 6 of the Notes to
Condensed Consolidated Financial Statements and $.3 million for hotels
operated fully during both periods. Depreciation and amortization expense was
$4 million for the 1996 Quarter and $2.8 million for the 1995 Quarter.
Included in this $1.2 million increase is $.8 million associated with the New
Hotels and the remaining increase related to the improvements made at
properties the Company operated fully during both periods.
10
<PAGE> 11
Income from operations was $6.7 million for the 1996 Quarter, a 63.4% increase
over $4.1 million for the 1995 Quarter.
Interest expense was $6 million for the 1996 Quarter, a $2.2 million increase
over the $3.8 million of interest expense for the 1995 Quarter. Included in
this $2.2 million increase is $1.6 million associated with the New Hotels and
the remaining $.6 million for properties operated fully during both periods
related to the refinancing of certain hotels (as more fully discussed under
Liquidity and Capital Resources) and new borrowings for equipment purchases.
Other income was $3.8 million for the 1996 Quarter and $.2 million for the 1995
Quarter. Included in the 1996 Quarter is a $3.6 million settlement received
by the Company as more fully discussed in Note 6 of the Notes to Consolidated
Financial Statements.
After a provision for income taxes of $1.5 million for the 1996 Quarter and $.1
million for the 1995 Quarter, the Company had net income of $2.2 million ($.24
per share) for the 1996 Quarter and $.1 million ($.02 per share) for the 1995
Quarter. Without consideration of the non-recurring $3.6 million income
received and the $.8 million severance agreement, the Company had net income
from recurring operations of $.5 million ($.06 per share) for the 1996 Quarter
and $.1 million ($.02 per share) for the 1995 Quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are existing cash balances and
future cash flow from operations. Net cash provided by operating activities
for the 1996 Quarter was $10.2 million, up from $1.5 million for the three
months ended March 31, 1995. In March 1996, the Company received a $3.9
million settlement in connection with a lawsuit brought on behalf of Servico,
against a bank group and law firm, based on alleged breaches prior to 1990 of
their duties to the Company.
At March 31, 1996, the Company had a working capital deficit of $2 million.
The Company's ratio of current assets to current liabilities at March 31, 1996
was .9:1. This compares to a working capital deficit of $6.3 million and a
ratio of current assets to current liabilities of .8:1 at December 31, 1995.
In January 1996, the Company entered into three partnerships which purchased
three hotels for $16.9 million by the delivery of mortgage notes totaling
$12.9 million and cash for the balance, of which approximately $2 million was
contributed by the minority partners. These hotels are located in Georgia,
Iowa and Ohio, contain 653 guest rooms, and are managed by the Company.
At March 1996, the Company's long-term obligations were $226.8 million compared
to $210.2 million at December 31, 1995. This increase is primarily the result
of the acquisition of the three hotels in January 1996 and the refinancing
of three mortgages. During the quarter ended March
11
<PAGE> 12
31, 1996, the Company executed $25 million in new mortgage notes, satisfied
approximately $21 million of existing obligations and generated in excess of
$3.2 million of net proceeds. In April 1996, the Company refinanced
approximately $123.2 million in debt on 20 hotels, generating in excess of $29
million in net proceeds (See Notes 3 and 7 to the Notes to Condensed
Consolidated Financial Statements). The foregoing description is qualified in
its entirety by reference to the form of Loan Agreement dated April 29, 1996
included as Exhibit 10.1 and incorporated herein by reference.
Certain hotels which the Company owns are operated under license agreements
that require the Company to make certain capital improvements in accordance
with a specified time schedule. In addition, the acquisition and refinancing
of hotels requires the Company to agree to make certain capital improvements
and approximately $8.1 million has been escrowed for such improvements. The
Company believes its remaining obligations for all of the above commitments to
be approximately $18.9 million, of which approximately $13.3 million will be
spent in 1996, with the balance to be spent during the 1997-1999 time period.
The Company may require additional financing to continue its renovation
program, maintain current operations and achieve growth. There is no assurance
that such financing will be available in amounts required or on terms
satisfactory to the Company and the Company does not currently have any lines
of credit. The Company's financial position may, in the future, be
strengthened through the generation of revenues, the refinancing of its
properties or capital from equity or debt markets. There is no assurance the
Company will be successful in these efforts.
12
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Loan Agreement by and between Servico Ft. Pierce,
Inc. and Lehman Brothers Holdings Inc., dated
April 29, 1996. (form of loan agreement executed
in connection with a total refinancing of
$123,185,000 secured by 20 hotels).
11 Statement re: computation of per share earnings.
15.1 Independent Accountant's Review Report.
15.2 Letter from independent certified public
accountants relating to unaudited interim
financial information.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the Quarter ended
March 31, 1996.
13
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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: May 10, 1996 /s/ David Buddemeyer
----------------------------
David Buddemeyer
President and
Chief Executive Officer
DATE: May 10, 1996 /s/ Warren M. Knight
----------------------------
Warren M. Knight
Vice President-Finance and
Chief Financial Officer
14
<PAGE> 1
Exhibit 10.1
MORTGAGE NOTE
$1,000,000.00 April 29, 1996
Atlanta, Georgia
FOR VALUE RECEIVED SERVICO FT. PIERCE, INC., a Delaware corporation,
each having its principal place of business at c/o Servico, Inc., 1601
Belvedere Road, West Palm Beach, Florida 33406 ("Maker"), promises to pay to
the order of LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation ("Payee"),
at its principal place of business at 3 World Financial Center, New York, New
York 10285, or at such place as the holder hereof may from time to time
designate in writing, the principal sum of One Million and 00/100 Dollars (the
"Loan"), in lawful money of the United States of America, with interest thereon
to be computed on the unpaid principal balance from time to time outstanding at
the Applicable Interest Rate (as such term is defined in Section 2(d) hereof),
and to be paid in installments as follows:
(a) A payment of interest only on the first day of the first full
calendar month after the date hereof;
(b) Monthly payments of principal and interest in the amount
calculated from time to time in accordance with Section 3 hereof, on the first
day of each calendar month beginning with the second full calendar month after
the date hereof; and
(c) Upon the failure to achieve the DSC Ratio (as such term is defined
in Section 63 of that certain Loan Agreement dated as of the date hereof
between Maker and Payee (the "Loan Agreement")) on a scheduled determination
thereof, and for so long as such failure continues until achieved on a
scheduled determination thereof, monthly payments of principal in accordance
with and as more particularly set forth in such Section 63.
The entire outstanding principal balance, together with accrued and
unpaid interest and any other amounts due under this Note, shall be due and
payable on the Applicable Maturity Date (as such term is defined in Section
1(b) hereof).
1. Loan Term; Extension Right.
(a) The initial term of the Loan shall be two years and 360 days, and
shall mature on the day which is two years and 360 days after the date hereof
(the "Initial Maturity Date").
<PAGE> 2
(b) Maker shall have the option to extend the term of the Loan for an
additional 12-month period beginning on the first day following the Initial
Maturity Date (the "Extension Period") and, if so extended, the Loan shall
mature on the day which is three years and 360 days after the date hereof (the
"Extended Maturity Date"; the Initial Maturity Date or the Extended Maturity
Date, as applicable, the "Applicable Maturity Date"), subject to satisfaction
of the following conditions:
(i) Not less than 30 days prior to the Initial Maturity Date, Maker
shall give Payee written notice of its election to extend the term of the Loan
(the "Election Notice");
(ii) The Election Notice shall be accompanied by the payment of: (A) an
extension fee in the amount of one-half of one (0.50%) percent of the then
outstanding principal balance of the Loan, and (B) the Deferred Financing Fee
(as such term is defined in Section 4 hereof); and
(iii) At the time the Election Notice is given, no Event of Default
(as such term is defined in Section 7 hereof) shall have occurred and be
continuing, and no event which, with the passage of time or the giving of
notice, or both, would constitute an Event of Default, shall have occurred and
be continuing.
2. Applicable Interest Rate.
(a) Interest on the Loan shall accrue and be payable at LIBOR (as such
term is defined in subsection (b) of this Section) plus the applicable Spread
(as such term is defined in subsection (c) of this Section) as calculated from
time to time (the "LIBOR Rate").
(b) As used herein, the term "LIBOR", with respect to the relevant
Interest Period (as such term is defined in this subsection), shall mean the
rate per annum (rounded upwards, if necessary, to the nearest one-sixteenth
(1/16) of one (1%) percent) reported on the date two "Eurodollar Business Days"
(as such term is defined in this subsection) prior to the first day of such
Interest Period, as reported in The Wall Street Journal as the London Interbank
Offered Rate for U.S. dollar deposits having a term comparable to such Interest
Period and in an amount of $1,000,000.00 or more (or if The Wall Street Journal
shall cease to be publicly available or if the information contained in The
Wall Street
<PAGE> 3
Journal, in Payee's judgment, shall cease to accurately reflect such London
Interbank Offered Rate, then LIBOR shall be as reported by any publicly
available source of similar market data selected by Payee that, in Payee's sole
judgment, accurately reflects such London Interbank Offered Rate). The term
"Interest Period" shall mean the respective one-month term of a particular
LIBOR contract. The term "Eurodollar Business Day" shall mean any day that is
not a Saturday, a Sunday or a day on which banks in the City of London are
required or permitted to be closed for interbank or foreign exchange
transactions.
(c) As used in this Note, the term "Spread" shall mean the number of
basis points added to LIBOR to determine the LIBOR Rate from time to time. At
all times prior to the Applicable Maturity Date, the Spread shall be 350 basis
points (3.50%).
(d) As used in this Note the term "Applicable Interest Rate" shall
mean the greater of: (i) the LIBOR Rate as applicable from time to time; and
(ii) eight and one-half (8.50%) percent.
3. Calculation of Interest; Application of Payments.
(a) Interest on the outstanding principal balance of this Note shall
be calculated on the basis of a 360-day year composed of 12 months of 30 days
each, except that interest payable in respect of any period less than a full
calendar month shall be calculated by multiplying the actual number of days
elapsed in such period by a daily rate based on a 360-day year.
(b) The amount of principal and interest payable monthly shall be
recalculated at each LIBOR reset date on the basis of a 20-year amortization
schedule.
(c) The LIBOR Rate, and the amount of interest payable monthly, shall
be recalculated at each LIBOR reset date.
(d) Payments under this Note shall be applied in accordance with the
Loan Agreement. All amounts due under this Note shall be payable without
setoff, counterclaim or any other deduction whatsoever.
4. Deferred Financing Fee.
(a) Maker shall pay to Payee, in addition to any other amounts due
hereunder, a financing fee of six (6.0%) percent of the original principal
amount of the Loan (the "Deferred Financing Fee").
<PAGE> 4
(b) The Deferred Financing Fee shall accrue and be fully earned on the
date of closing and funding of the Loan, and shall be payable on the Initial
Maturity Date, or upon the earlier repayment of the Loan, at maturity, by
acceleration or otherwise.
5. Security for the Loan.
(a) This Note is secured by: (i) that certain Mortgage, Deed of Trust,
Assignment of Leases and Rents and Security Agreement dated as of the date
hereof from Maker to Payee (the "Mortgage") affecting the real property and
improvements known as Holiday Inn Express, 7151 Okeechobee Road, Ft. Pierce,
Florida (collectively, the "Mortgaged Property"); (ii) that certain Assignment
of Leases and Rents dated as of the date hereof from Maker to Payee (the
"Assignment"); (iii) an Environmental Indemnity Agreement dated as of the date
hereof among Payee, Maker and Servico, Inc. (the "Environmental Agreement");
and (iv) such other documents now or hereafter executed by Maker and/or others
and by or in favor of Payee, which wholly or partially secure or guarantee
payment of this Note including, without limitation, any collateral assignments
and reserve and/or escrow accounts (such other documents, collectively, the
"Other Security Documents").
(b) As used herein, the term "Loan Documents" means, collectively,
this Note, the Mortgage, the Loan Agreement, the Assignment, the Environmental
Agreement, the Other Security Documents and any and all other documents
executed in connection with the Loan.
6. Late Charge; Events of Default. (a) If any sum payable under
this Note is not paid prior to the tenth (10th) day after the date such payment
is due (but not including the payment of the principal balance due on the
Applicable Maturity Date), Maker shall pay to Payee on demand an additional
amount equal to five (5%) percent of such unpaid sum to defray the expenses
incurred by Payee in handling and processing such delinquent payment and to
compensate Payee for the loss of the use of such delinquent payment, and such
additional amount shall be secured by the Mortgage, the Assignment, the
Environmental Agreement and the Other Security Documents.
(b) The entire outstanding principal balance of this Note, together
with all accrued and unpaid interest thereon and all other sums due under the
Loan Documents including, without limitation, the Deferred Financing Fee (all
such sums, collectively, the
<PAGE> 5
"Debt"), or any portion thereof, shall without notice become immediately due
and payable at the option of Payee: (i) if any payment required in this Note is
not paid prior to the tenth (10th) day after the date when due or on the
Applicable Maturity Date; (ii) upon the occurrence of any other default under
this Note continuing beyond applicable notice and cure periods; or (iii) upon
the happening of any other Event of Default under and as defined in the Loan
Agreement (each of the foregoing, an "Event of Default"). In the event that
Payee retains counsel to collect the Debt (including on appeal), if Payee
prevails in such action, Maker shall pay on demand all costs of collection
incurred by Payee, including reasonable attorneys' fees for the services of
counsel whether or not suit be brought.
7. Default Rate Interest. Maker does hereby agree that upon the
occurrence of an Event of Default, including Maker's failure to pay the Debt in
full on the Applicable Maturity Date, Payee shall be entitled to receive, and
Maker shall pay, interest on the entire outstanding principal balance and any
other amounts due at the rate equal to the lesser of (a) the maximum rate
permitted by applicable law; and (b) the greater of (i) the Applicable Interest
Rate plus three (3%) percent or (ii) the Prime Rate (as hereinafter defined)
plus four (4%) percent (the lesser of such rates in (a) or (b), the "Default
Rate"); provided, however, that with respect to an Event of Default of the type
described in Section 24(a) of the Loan Agreement, such rate of interest shall
apply from and after the date on which any such payment is due, without any
period of grace or cure. The "Prime Rate" shall mean the annual rate of
interest publicly announced by Citibank, N.A. in New York, New York, as its
base rate, as such rate shall change from time to time. If Citibank N.A.
ceases to announce a base rate, Prime Rate shall mean the rate of interest
published in The Wall Street Journal from time to time as the Prime Rate. If
more than one Prime Rate is published in The Wall Street Journal for a day, the
average of the Prime Rates shall be used, and such average shall be rounded up
to the nearest one-quarter of one (1%) percent. Interest shall accrue and be
payable at the Default Rate from the occurrence of the Event of Default until
all such Events of Default have been fully cured. Interest at the Default Rate
shall be added to the Debt, and shall be deemed secured by the Mortgage. This
provision, however, shall not be construed as an agreement or privilege to
extend the date of the payment of the Debt, nor as a waiver of any other right
or remedy accruing to Payee by reason of the occurrence of any Event of
Default.
<PAGE> 6
8. Prepayment. (a) The principal balance of this Note may be
prepaid: (i) in whole; or (ii) subject to the provisions of subsection (b) of
this Section, in part, upon:
(A) not less than 30 days prior written notice to Payee specifying the
date on which prepayment is to be made (the "Prepayment Date");
(B) payment of accrued interest to and including the Prepayment Date
(provided, however, that if such prepayment is received by Payee before 12:00
noon on the date of such prepayment, then the accrued interest payable in
respect thereof shall be calculated through and including the day prior to the
Prepayment Date); and
(C) payment of all other sums then due under this Note (including,
without limitation, the Deferred Financing Fee), and under the Loan Agreement,
the Mortgage, the Assignment and the Other Security Documents.
If any such notice of prepayment is given, the principal amount set
forth in such notice and the other sums required under this Section shall be
due and payable on the Prepayment Date.
(b) Provided that no Event of Default exists and is continuing and
subject to the conditions set forth in the next succeeding sentence, partial
prepayments of principal may be made in increments of $100,000.00, for which
not less than 30 days prior written notice to Payee shall be given, and
otherwise in accordance with subsection (a) of this Section. As a condition to
and accompanying any such partial prepayment, Maker shall pay to Payee a
prorata portion of the Deferred Financing Fee.
9. Limitations on Recourse. (a) Subject to the qualifications set
forth in this Section, Payee shall not enforce the liability and obligation of
Maker to perform and observe the obligations contained in the Note, the Loan
Agreement, the Mortgage, the Assignment or the Other Security Documents by an
action or proceeding wherein a money judgment shall be sought against Maker,
except that Payee may bring a foreclosure action, an action for specific
performance or any other appropriate action or proceeding to enable Payee to
enforce and realize upon this Note, the Mortgage, the Assignment, the Other
Security Documents, and the interests in the Mortgaged Property and any other
collateral given to Payee pursuant to the Mortgage, the Assignment and the
Other Security Documents; provided, however, that, except as specifically
provided in this
<PAGE> 7
Section, any judgment in any such action or proceeding shall be enforceable
against Maker only to the extent of Maker's interest in the Mortgaged Property
and in any other collateral given to Payee. Payee, by accepting this Note, the
Loan Agreement, the Assignment, the Mortgage and the Other Security Documents,
agrees that it shall not sue for, seek or demand any deficiency judgment
against Maker in any such action or proceeding, under, by reason of or in
connection with the Mortgage, the Loan Agreement, the Assignment, the Other
Security Documents or this Note. Except as may be expressly provided for
herein, the provisions of this Section shall not, however: (i) constitute a
waiver, release or impairment of any obligation evidenced or secured by the
Mortgage, the Loan Agreement, the Assignment, the Environmental Agreement or
the Other Security Documents or this Note; (ii) impair the right of Payee to
name Maker as a party defendant in any action or suit for foreclosure and sale
under the Mortgage; (iii) affect the validity or enforceability of any guaranty
or indemnity made in connection with the Mortgage, the Loan Agreement, this
Note, the Assignment or the Other Security Documents; (iv) impair the right of
Payee to obtain the appointment of a receiver; (v) impair the enforcement of
the Assignment; (vi) impair the right of Payee to bring suit with respect to
fraud or intentional misrepresentation by Maker or any other person or entity
in connection with the Mortgage, the Loan Agreement, this Note, the Assignment,
the Environmental Agreement or the Other Security Documents; or (vii) affect
the validity or enforceability of the Environmental Agreement or limit the
liability of Maker or any other party thereunder. Nothing herein shall impair
the right of Payee to obtain a deficiency judgment in any action or proceeding
in order to preserve its rights and remedies including, without limitation,
foreclosure, non-judicial foreclosure or the exercise of a power of sale, under
the Mortgage; provided, however, that Payee shall not enforce any such
deficiency judgment against Maker (or any partner thereof) or any assets of
Maker (or any partner thereof) other than the Mortgaged Property or in the
exercise of its rights and remedies under the Loan Documents.
(b) Nothing herein shall be deemed to be a waiver of any right which
Payee may have under Section 506(a), 506(b), 1111(b) or any other provisions of
the U.S. Bankruptcy Code to file a claim for the full amount of the Debt
secured by the Mortgage or to require that all collateral shall continue to
secure all of the debt owing to Payee in accordance with this Note, the Loan
Agreement, the Mortgage, the Assignment, the Environmental Agreement and the
Other Security
<PAGE> 8
Documents.
(c) Notwithstanding the foregoing provisions of this Section or any
other provision in the Loan Documents, Maker shall be fully liable for and
shall indemnify Payee for any or all loss, cost, liability, judgment, claim,
damage or expense sustained, suffered or incurred by Payee (including, without
limitation, Payee's attorneys' fees (including on appeal)) arising out of or
attributable or relating to:
(i) fraud or misrepresentation by Maker in connection with the Loan;
(ii) the gross negligence or willful misconduct of Maker, its agents or
employees, or physical waste of the Mortgaged Property;
(iii) the breach of provisions in the Loan Agreement concerning
Environmental Laws, Hazardous Substances and Asbestos, and any indemnification
of Payee therein with respect to such Environmental Laws, Hazardous Substances
and Asbestos;
(iv) except as permitted in the Loan Agreement, the removal or disposal
of any portion of the Mortgaged Property after default under this Note, the
Mortgage, the Loan Agreement, the Assignment, the Environmental Agreement or
any Other Security Document;
(v) the misapplication or misappropriation by Maker of: (A) any
insurance proceeds paid by reason of any loss, damage or destruction to the
Mortgaged Property; (B) any awards or other amounts received in connection with
the condemnation of all or a portion of the Mortgaged Property; or (C) rents,
issues, profits, proceeds, accounts, or other amounts received by Maker (in the
case of clause (C) following an Event of Default under this Note, the Mortgage,
the Loan Agreement, the Assignment, the Environmental Agreement or the Other
Security Documents);
(vi) Maker's failure to pay taxes, assessments, charges for labor or
materials or other charges that results in liens on any portion of the
Mortgaged Property;
(vii) the deductible amount in respect of any earthquake hazard
insurance maintained in respect of the Mortgaged Property;
(viii) the costs incurred by Payee (including attorneys' fees
(including on appeal))
<PAGE> 9
in connection with the collection or enforcement of the Debt (if Payee prevails
in any such action or proceeding); and
(ix) any security deposits or advance deposits collected with respect
to the Mortgaged Property (except to the extent such deposits are required to
be returned or refunded to the depositor), which are not delivered to Payee
upon a foreclosure of the Mortgaged Property or action in lieu thereof.
(d) Notwithstanding the foregoing, the agreement of Payee not to
pursue recourse liability as set forth in subsection (a) above SHALL BECOME
NULL AND VOID and shall be of no further force or effect in the event of: (i)
Maker's failure (after prior notice and the expiration of applicable cure
periods) to permit on-site inspections of the Mortgaged Property or to provide
financial reports and information pertaining to the Mortgaged Property as
required by the Loan Agreement which failure continues, with respect to reports
required to be furnished monthly, for 15 days beyond otherwise applicable cure
periods, with respect to reports required to be furnished quarterly, for 30
days beyond otherwise applicable cure periods, and with respect to reports
required to be furnished annually, for 45 days beyond otherwise applicable cure
periods; (ii) any financial information concerning Maker or any guarantor of
the Loan proving to be fraudulent in any respect, containing any fraudulent
information or misrepresenting in any material respect the financial condition
of Maker or any guarantor of the Loan; (iii) Maker's failure to obtain Payee's
written consent to any subordinate financing not otherwise permitted under the
Loan Agreement; (iv) Maker's failure to obtain Payee's prior written consent to
any transfer of the Mortgaged Property or of any ownership interest in Maker
not otherwise permitted under the Loan Agreement; (v) the Mortgaged Property or
any part thereof becoming an asset in (A) a voluntary bankruptcy or insolvency
proceeding, or (B) an involuntary bankruptcy or insolvency proceeding which is
not dismissed within 90 days of filing; or (vi) the failure of Maker to comply
with the provisions of Section 11 (SINGLE PURPOSE ENTITY) of the Loan
Agreement.
10. No Usury. It is expressly stipulated and agreed to be the intent
of Maker and Payee at all times to comply with applicable state law or
applicable United States federal law (to the extent that it permits Payee to
contract for, charge, take, reserve, or receive a greater amount of interest
than under state law) and that this Section shall control every other covenant
and agreement in this Note
<PAGE> 10
and the other Loan Documents. If the applicable law (state or federal) is ever
judicially interpreted so as to render usurious any amount called for under
this Note or under any of the other Loan Documents, or contracted for, charged,
taken, reserved, or received with respect to the Debt, or if Payee's exercise
of the option to accelerate the maturity of this Note, or if any prepayment by
Maker results in Maker having paid any interest in excess of that permitted by
applicable law, then it is Maker's and Payee's express intent that all excess
amounts theretofore collected by Payee shall be credited on the principal
balance of this Note and all other Debt (or, if this Note and all other Debt
have been or would thereby be paid in full, refunded to Maker), and the
provisions of this Note and the other Loan Documents immediately be deemed
reformed and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new documents, so as to
comply with the applicable law and so as to permit the recovery of the fullest
amount otherwise called for hereunder or thereunder. All sums paid or agreed
to be paid to Payee for the use, forbearance, or detention of the Debt shall,
to the extent permitted by applicable law, be amortized, prorated, allocated,
and spread throughout the full stated term of the Debt until payment in full so
that the rate or amount of interest on account of the Debt does not exceed the
maximum lawful rate from time to time in effect and applicable to the Debt for
so long as the Debt is outstanding. Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, it is not the intention
of Payee to accelerate the maturity of any interest that has not accrued at the
time of such acceleration or to collect unearned interest at the time of such
acceleration.
11. Transfers Not Permitted. Without the prior written consent of
Payee, Maker shall not sell, convey, alienate, mortgage, encumber, pledge or
otherwise transfer, or permit the transfer of, directly or indirectly, the
Mortgaged Property or ownership interests of Maker, except as permitted in the
Loan Agreement.
12. Authority. Maker represents that Maker has full power, authority
and legal right to execute, deliver and perform its obligations pursuant to
this Note, the Mortgage and the other Loan Documents and that this Note, the
Mortgage and the other Loan Documents constitute valid and binding obligations
of Maker.
13. Notices. All notices or other communications required or
permitted to be given
<PAGE> 11
pursuant hereto shall be given in the manner specified in the Loan Agreement
directed to the parties at their respective addresses as provided therein.
14. WAIVER OF JURY TRIAL. MAKER HEREBY AGREES NOT TO ELECT A TRIAL BY
JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THIS NOTE, THE LOAN AGREEMENT, THE MORTGAGE, OR THE OTHER LOAN
DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY MAKER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE
AND EACH ISSUE AS TO WHICH THE RIGHT TO TRIAL BY JURY WOULD OTHERWISE ACCRUE.
PAYEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY MAKER.
15. Governing Law. The Note shall be governed by and construed in
accordance with the laws of the State of Florida and the applicable laws of the
United States of America.
16. Miscellaneous.
(a) No release of any security for the Debt or any person liable for
payment of the Debt, no extension of time for payment of this Note or any
installment hereof, and no alteration, amendment or waiver of any provision of
the Loan Documents made by agreement between Payee and any other person or
party shall release, modify, amend, waive, extend, change, discharge, terminate
or affect the liability of Maker, and any other person or party who might be or
become liable for the payment of all or any part of the Debt, under the Loan
Documents.
(b) Except as may be expressly provided for in the Loan Documents,
Maker and all others who may become liable for the payment of all or any part
of the Debt do hereby severally waive presentment and demand for payment,
notice of dishonor, protest, notice of protest, notice of non-payment, notice
of intent to accelerate the maturity hereof and of acceleration.
(c) This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Maker or Payee, but only by an agreement in writing signed by the party against
whom enforcement of any modification, amendment, waiver, extension, change,
discharge or termination is sought.
(d) Whenever used, the singular number shall include the plural, the
plural the singular, and the words "Payee" and "Maker" shall include their
respective successors, assigns, heirs, executors and administrators.
<PAGE> 12
(e) If Maker consists of more than one person or party, the
obligations and liabilities of each such person or party shall be joint and
several.
(f) Maker represents and warrants that the Loan is a commercial loan.
<PAGE> 13
IN WITNESS WHEREOF, Maker has duly executed this Note on the day and
year first above written.
MAKER:
SERVICO FT. PIERCE, INC.
By: /s/ Robert D. Ruffin (seal)
------------------------------
Robert D. Ruffin
Vice President
<PAGE> 14
STATE OF GEORGIA )
: ss.:
COUNTY OF FULTON )
The foregoing instrument was acknowledged before me this 26th day of
April, 1996, by Robert D. Ruffin, Vice President of SERVICO FT. PIERCE, INC., a
Delaware corporation, who is personally known to me or who produced his Florida
driver's license as identification and who did take oath, on behalf of the
corporation.
/s/ Lynn M. Swartz
-------------------
Notary Public
Print Name:
Lynn M. Swartz
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
PRIMARY
Weighted average common shares outstanding 9,119 8,243
Net effect of dilutive stock options -
based on the treasury stock method using
average market price 407 620
------- -------
Total 9,526 8,863
======= ======
Net income $ 2,236 $ 148
======= ======
Per share amount $ .24 $ .02
======= ======
FULLY DILUTED
Weighted average common shares outstanding 9,119 8,243
Net effect of dilutive stock options-
based on the treasury stock method
using the period-end market price,
if higher than average market price 407 621
------- -------
Total 9,526 8,864
======= ======
Net income $ 2,236 $ 148
======= ======
Per share amount $ .24 $ .02
======= ======
</TABLE>
<PAGE> 1
<TABLE>
<S> <C> <C>
[ERNST & YOUNG LLP LOGO] - CERTIFIED PUBLIC ACCOUNTANTS - Phone: 407 655 8500
Phillips Point, West Tower Fax: 407 838 4191
Suite 1200
777 South Flagler Drive
West Palm Beach, Florida 33401
</TABLE>
EXHIBIT 15.1
Independent Accountants' Review Report
Board of Directors and
Stockholders
Servico, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Servico, Inc. and subsidiaries as of March 31, 1996, and the related condensed
consolidated statements of income and cash flows for the three-month periods
ended March 31, 1996 and 1995, and the condensed consolidated statement of
stockholders' equity for the three-month period ended March 31, 1996. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Servico, Inc. and subsidiaries as
of December 31, 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for the year then ended not presented
herein and in our report dated February 12, 1996, except as to the last
paragraph of Note 5 as to which the date is March 18, 1996 and the last
paragraph of Note 11 as to which the date is March 12, 1996, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 1995, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ Ernst & Young LLP
April 22, 1996
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
<PAGE> 1
<TABLE>
<S> <C> <C>
[ERNST & YOUNG LLP LOGO] - Certified Public Accountants - Phone: 407 655 8500
Phillips Point, West Tower Fax: 407 838 4191
Suite 1200
777 South Flagler Drive
West Palm Beach, Florida 33401
</TABLE>
EXHIBIT 15.2
April 22, 1996
Board of Directors and
Stockholders
Servico, Inc.
We are aware of the incorporation by reference in the Registration Statements
(Form S-8 No. 33-60088, Form S-8 No. 33-60090, Form S-8 No. 33-81954, Form S-3
No. 33-78566 and Form S-3 No. 33-93658) of Servico, Inc. for the registration
of 1,000,000, 150,000, 250,000, 1,620,100 and 800,000 shares, respectively, of
its common stock of our report dated April 22, 1996 relating to the unaudited
condensed consolidated interim financial statements of Servico, Inc. and
subsidiaries which is included in its Form 10-Q for the quarter ended March 31,
1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statements prepared or certified by accountants within the
meaning of Section 7 or Section 11 of the Securities Act of 1933.
Very truly yours,
/s/ Ernst & Young LLP
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANIES CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996 AND CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
CONTAINED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDING MARCH 31, 1996
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 16,527
<SECURITIES> 0
<RECEIVABLES> 9,074
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 33,954
<PP&E> 294,571
<DEPRECIATION> 0
<TOTAL-ASSETS> 352,943
<CURRENT-LIABILITIES> 35,994
<BONDS> 226,812
0
0
<COMMON> 93
<OTHER-SE> 66,684
<TOTAL-LIABILITY-AND-EQUITY> 352,943
<SALES> 0
<TOTAL-REVENUES> 52,599
<CGS> 0
<TOTAL-COSTS> 45,857
<OTHER-EXPENSES> (2,985)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,001
<INCOME-PRETAX> 3,726
<INCOME-TAX> 1,490
<INCOME-CONTINUING> 2,236
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,236
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
